Transformation and
simplification
Iain Ross, CEO, Golar LNG,
said:
“Further progress has been made this quarter
toward the Company's goal of being the leading independent
developer of long-term LNG infrastructure. Significant progress has
been made on execution of the Company’s downstream LNG distribution
strategy and on strengthening the Company’s financial position.
Continued strong growth in LNG production around
the world and associated lower pricing together with customer’s
increased focus on their ESG responsibility is also accelerating
their appetite to switch from burning coal, fuel oil and diesel to
cheaper and cleaner LNG.
The recent award of Golar Power's second 25-year
gas to power project supports our strategy to transform Golar into
a world leading LNG infrastructure player delivering flexible
energy solutions that provide much needed stability to an energy
grid that has seen substantial renewable energy growth. The
Barcarena 605MW PPA award underpins the development of a second hub
terminal in Brazil. This project, together with progress on
downstream distribution of LNG using spare FSRU capacity,
transforms Golar Power from a single project company into a
business with significant and demonstrable growth potential.
This potential will be realized through the introduction of new and
more efficient technology that can be integrated in a user-friendly
way that makes it easier for customers to switch to LNG. This
approach will also facilitate bespoke solutions for smaller
customers allowing for demand aggregation, something larger LNG
producers have paid little attention to.
Increasing interest from oil majors and NOC's,
appreciative of our low cost and flexible FLNG solutions and
impressed by our flawless operational track record is also
encouraging. Part monetization of a current contract and use of a
shipyard able to offer more attractive payment terms provides the
potential to lift additional FLNG projects.
The proposed shipping spin-off in its planned
form, has, disappointingly for the Board, not yet been
completed. This is due to a misalignment between the founding
parties of the proposed newco causing Golar to withdraw from the
process. Golar remains committed to splitting the ships into a
separate vehicle and is revising the mechanism that it will use to
achieve this."
Financial Summary
|
(in thousands of $) |
3Q 2019 |
3Q 2018 |
2Q 2019 |
YTD 2019 |
YTD 2018 |
|
|
|
|
|
|
Total
operating revenues |
98,670 |
123,101 |
96,745 |
309,702 |
248,665 |
Net (loss)/income attributable to Golar LNG Limited |
(82,301) |
66,212 |
(112,682) |
(236,724) |
81,529 |
Adjusted
EBITDA1 |
58,932 |
83,528 |
39,663 |
161,492 |
96,928 |
Operating (loss)/income |
(13,666) |
132,470 |
(23,435) |
(8,237) |
217,304 |
Dividend
per share |
— |
0.150 |
— |
0.150 |
0.325 |
Adjusted net debt1 |
2,294,932 |
2,201,731 |
2,258,824 |
2,294,932 |
2,201,731 |
Financial Highlights
- Following the Barcarena power project award and increased
coverage on the shipping fleet, Contract Earnings Backlog1 (Golar
LNG Limited share) is expected to increase from $6.6 billion to
$7.0 billion once a Final Investment Decision (“FID”) for Barcarena
is taken.
- The Company’s liquidity position is substantially strengthened
as a result of the drawdown of the new $150 million facility, and
post quarter end, draw down of the $700 million FLNG Gimi facility
and the agreed release of $75 million of Hilli Episeyo restricted
cash.
Operational Highlights
Shipping:
- Time Charter Equivalent (“TCE”)1 earnings of $35,200 for 3Q
were negatively influenced by a weak start to the quarter and by
positioning and repositioning for 5 dry dockings.
- Three vessels commenced their dry dockings during 3Q - two of
these completed during the quarter and one concluded in
4Q.
FLNG:
- FLNG Hilli Episeyo - 100% commercial uptime maintained: 29
cargoes exported to date. Perenco are planning for a drilling
campaign in the Kribi area to prove up more reserves during 2020.
If successful, this may lead to further capacity utilization and/or
contract extension for FLNG Hilli Episeyo. The companies are also
in discussion regarding a smaller increase in production which will
utilize part of train 3 starting from 1Q 2020.
- FLNG Gimi - Conversion progressing according to schedule and
budget.
Golar Power:
- Gas has been introduced to Sergipe power station with hot
commissioning underway.
- Awarded a 25 year power purchase agreement (“PPA”) for the
construction of a 605MW combined cycle thermal power plant in
Barcarena, Brazil. This is also expected to include a 25 year FSRU
contract.
- Execution of Brazilian small scale downstream distribution
strategy progresses including signing up customers, purchase and
delivery of the first 12 isotainers and a commitment to charter in
small-scale LNG shipping capacity from Avenir.
Outlook 4Q 2019 and 2020
LNG ShippingThe last of Golar’s eight scheduled
2019 vessel dry docks commenced and concluded in 4Q. All vessels
have now completed their scheduled five-year dry docking. 4Q TFDE
TCE1 is anticipated to be in the range of $75,000 to $80,000 per
day, more than double 3Q. Inclusive of the two steam turbine
vessels, a full fleet 4Q TCE1 of $70,000 to $75,000 is expected.
The improved charter rates are the result of increasing LNG
production, which has created better market conditions allowing the
Company to increase contract coverage. 60% of available capacity
has been chartered at fixed rates with a further 30% fixed on index
related charters. We also anticipate good coverage into 1Q 2020.
This will likely support strong improvements in year-on-year
EBITDA1 and cash generation from the shipping fleet.
FLNGAs a result of the strong operational
performance of FLNG Hilli Episeyo and recent multi-year low LNG
prices, interest in low cost FLNG solutions is strong. Golar
continues to develop its FLNG pipeline with four major oil and
gas/national oil companies. These will however take time to mature.
Nearer term, outline interest from potential investors interested
in buying into existing FLNG contract backlog and supporting the
Company going forward has been received and is under evaluation.
Work with Asian yards to find ways to standardize their FLNG
production and design model to achieve lower costs and more
efficient financing, particularly between FID and COD, is
ongoing.
Golar Power Start-up of the Sergipe project is
on track for 1Q 2020 with gas now being supplied to the power
station from FSRU Nanook and hot commissioning underway. COD will
trigger acceptance of the Nanook FSRU contract as well as the PPA
agreements. Golar’s interest in these 25-year contracts is worth
approximately $99 million in annual EBITDA1 assuming an USD/BRL
rate of 3.7.
Further north, the recently awarded 25-year
605MW Barcarena combined cycle thermal power plant will be the
anchor customer and springboard for development of additional
downstream LNG distribution opportunities in Brazil. FSRU selection
and detailing of the terminal are underway with an anticipated FID
in 1H 2020.
Financial Review
Business Performance
|
2019 |
2019 |
|
Jul-Sep |
Apr-Jun |
(in thousands of $) |
Vessel and other operations |
FLNG |
Total |
Vessel and other operations |
FLNG |
Total |
Total operating revenues |
44,146 |
|
54,524 |
|
98,670 |
|
42,221 |
|
54,524 |
|
96,745 |
|
Vessel operating expenses |
(15,982 |
) |
(12,415 |
) |
(28,397 |
) |
(16,996 |
) |
(13,822 |
) |
(30,818 |
) |
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(5,603 |
) |
— |
|
(5,603 |
) |
(14,327 |
) |
(100 |
) |
(14,427 |
) |
Administrative expenses |
(12,162 |
) |
(470 |
) |
(12,632 |
) |
(14,676 |
) |
516 |
|
(14,160 |
) |
Project development expenses |
(831 |
) |
341 |
|
(490 |
) |
571 |
|
(448 |
) |
123 |
|
Realized gain on oil derivative instrument(2) |
— |
|
4,584 |
|
4,584 |
|
— |
|
5,162 |
|
5,162 |
|
Other operating (losses)/gains |
2,800 |
|
— |
|
2,800 |
|
— |
|
(2,962 |
) |
(2,962 |
) |
Adjusted EBITDA(1) |
12,368 |
|
46,564 |
|
58,932 |
|
(3,207 |
) |
42,870 |
|
39,663 |
|
|
|
|
|
|
|
|
Reconciliation to operating income (loss) |
|
|
|
|
|
|
Unrealized (loss)/gain on oil derivative instrument(2) |
— |
|
(44,170 |
) |
(44,170 |
) |
— |
|
(27,630 |
) |
(27,630 |
) |
Depreciation and amortization |
(16,435 |
) |
(11,993 |
) |
(28,428 |
) |
(16,070 |
) |
(12,051 |
) |
(28,121 |
) |
Impairment of long-lived assets |
— |
|
— |
|
— |
|
(7,347 |
) |
— |
|
(7,347 |
) |
Operating (loss)/income |
(4,067 |
) |
(9,599 |
) |
(13,666 |
) |
(26,624 |
) |
3,189 |
|
(23,435 |
) |
(2) The line item "Realized and unrealized gain
on oil derivative instrument" relating to income from the FLNG
Hilli Episeyo Liquefaction Tolling Agreement is split into,
"Realized gain on oil derivative instrument" and "Unrealized (loss)
gain on oil derivative instrument". The unrealized component
represents a mark-to-market loss of $44.2 million (June 30, 2019:
$27.6 million) on the oil embedded derivative, which represents the
estimate of expected receipts under the remainder of the Brent oil
linked clause of the Hilli Episeyo Liquefaction Tolling Agreement.
The realized component amounts to $4.6 million (June 30, 2019: $5.2
million) and represents the income in relation to the Hilli Episeyo
Liquefaction Tolling Agreement receivable in cash.
Golar reports today 3Q operating losses of $13.7
million compared to losses of $23.4 million in 2Q.
Total operating revenues increased from $96.7
million in 2Q to $98.7 million in 3Q and voyage, charterhire and
commission expenses decreased from $14.3 million to $5.6 million
both largely as a result of an improving shipping market.
Revenues from vessel and other operations,
including management fee income, was $44.1 million and, net of
voyage, charterhire and commission expenses, increased by $10.6
million to $38.5 million in 3Q. Assisted by multi-year low summer
LNG prices, contango in the gas market encouraged a number of
sellers to use vessels for floating storage ahead of the Northern
hemisphere winter. Vessel availability decreased and both sentiment
and spot rates increased toward the end of the quarter as a result.
Full fleet TCE1 earnings increased from $24,400 in 2Q to $35,200 in
3Q, although utilization at 65% was in line with the prior quarter.
Despite improving rates, revenue continued to be negatively
impacted by the positioning and scheduled dry docking of a further
three vessels during the quarter.
In line with prior quarters, FLNG Hilli Episeyo
generated operating revenues of $54.5 million including base
tolling fees and amortization of pre-acceptance amounts
recognized.
Vessel operating expenses at $28.4 million in 3Q
were $2.4 million lower than 2Q. Most of the decrease is
attributable to lower spare part purchases across the shipping
fleet and lower repair and maintenance and crew travel costs for
FLNG Hilli Episeyo.
At $12.6 million for the quarter, total
administrative expenses were $1.5 million lower than 2Q due to
lower legal and professional fees and other savings. Project
development expenses at $0.5 million began to normalize during the
quarter, 2Q having been reduced due to the reversal of previously
over accrued expenses.
The Brent oil linked component of Hilli
Episeyo's fees generates additional annual operating cash flows of
approximately $3 million for every dollar increase in Brent Crude
prices between $60.00 per barrel and the contractual ceiling.
Billing of this component is based on a three-month look-back at
average Brent Crude prices. Lower oil prices resulted in a $0.6
million decrease in the realized gain on the oil derivative
instrument, down from $5.2 million in 2Q to $4.6 million in 3Q.
The mark-to-market fair value of the derivative
asset decreased by $44.2 million during the quarter, with a
corresponding unrealized loss of the same amount recognized in the
income statement. The fair value decrease was driven by a downward
movement in the expected future market price for Brent Oil. The
spot price for Brent Oil decreased from $66.55 per barrel on June
30 to $60.78 on September 30.
Other operating gains and losses reported a $2.8
million gain in 3Q following receipt of proceeds from a 2018 loss
of hire claim for Golar Viking. This compared to a loss of $3.0
million in 2Q, representing unrecoverable receivables from
Schlumberger following the dissolution of OneLNG.
Depreciation and amortization at $28.4 million
in 3Q was in line with the prior quarter.
Net Income Summary
|
2019 |
2019 |
(in thousands of $) |
Sep-Oct |
Apr-Jun |
Operating income (loss) |
(13,666 |
) |
(23,435 |
) |
Interest income |
2,709 |
|
3,223 |
|
Interest expense |
(23,368 |
) |
(24,376 |
) |
Losses on derivative instruments |
(17,619 |
) |
(14,719 |
) |
Other financial items, net |
(978 |
) |
(1,932 |
) |
Income taxes |
(274 |
) |
(176 |
) |
Equity in net losses of affiliates |
(7,761 |
) |
(26,970 |
) |
Net income attributable to non-controlling interests |
(21,344 |
) |
(24,297 |
) |
Net loss attributable to Golar LNG Limited |
(82,301 |
) |
(112,682 |
) |
In 3Q, the Company generated a net loss of $82.3
million, compared to a 2Q net loss of $112.7 million. Key items
contributing to this are summarized as follows:
- An increase in capitalized interest in respect of FLNG Gimi
contributed to a $1.0 million reduction in 3Q interest
expense.
- 3Q recorded a $17.6 million loss on derivative instruments
compared to a 2Q loss of $14.7 million. Most of the $2.9
million increase in 3Q relative to 2Q is attributable to losses on
the three million Golar Total Return Swap ("TRS") shares.
- The $7.8 million 3Q equity in net losses of affiliates is
primarily comprised of the following:
- a $0.2 million gain in respect of Golar's 32% share in Golar
Partners;
- a $7.2 million loss in respect of Golar's 50% stake in Golar
Power; and
- a $0.8 million loss in respect of Golar's 22.5% stake in
Avenir.
Net income attributable to non-controlling
interests represents external interests in the Hilli Episeyo and
the finance lease variable interest entities ("VIEs").
Financing and Liquidity
Golar’s total cash position as at September 30
was $625.4 million (including long-term restricted cash), of which
$250.2 million was unrestricted. Included within restricted cash is
$104.5 million relating to lessor-owned VIEs, $108.9 million of
collateral in respect of the TRS and $151.9 million relating to the
Hilli Episeyo LC. During November Perenco and SNH agreed to a
reduction in the Hilli Episeyo LC requirement (with a proportionate
decrease in the Perenco and SNH security). This is expected to
result in the release of approximately $75 million of restricted
cash in November 2019.
As at September 30, $188 million of equity had
been invested in FLNG Gimi. Having satisfied the initial $300
million equity investment threshold during 4Q, the first drawdown
against the $700 million debt facility took place in November.
Based on the current payment schedule approximately $42 million is
expected to be paid by Golar in 2020.
As previously indicated, infrastructure funds
have approached Golar seeking to invest in existing long term FLNG
projects and provide capital for future projects. The Company is
now evaluating their proposals. As of today, Golar is a fully
funded company looking forward to substantial increases in
contracted earnings over the next three years as new committed
projects come on line. There is a strong focus on capital
allocation and any future surplus cash will be applied to the most
attractive use, for example further growth investments or share
buybacks.
Inclusive of the refinanced margin loan which is
now a revolving facility and a new $150 million debt facility
entered into during the quarter, Golar's contractual debt1
including 100% of Hilli Episeyo as at September 30 was $2.7
billion. Golar's adjusted net debt1 was $2.3 billion.
Included within the $975.0 million current
portion of long-term debt and short-term debt on the Balance Sheet
as at 30 September is $835.3 million relating to lessor-owned VIE
subsidiaries that Golar is currently required to consolidate in
connection with 8 sale and leaseback financed vessels, including
the Hilli Episeyo.
Corporate and Other Matters
As at September 30, 2019, there were 101.3
million shares outstanding, including the 3 million shares
underlying the TRS. There were also 3.5 million outstanding stock
options with an average price of $35.22 and 0.2 million Restricted
Stock Units in issue. During 4Q the Company agreed to purchase 1.5
million of the 3 million shares underlying the TRS. The cash cost
of these 1.5 million TRS shares will be $69.5 million. This
will be satisfied by $54.7 million of restricted cash already set
aside as collateral for these shares with the balance of $14.8
million funded out of unrestricted cash. The cash cost of
eliminating the remaining 1.5 million TRS shares will be similar.
Purchase of the remaining 1.5 million shares is scheduled to take
place during 1Q 2020. Thereafter there will be 98.3 million shares
outstanding.
At Golar's Annual General Meeting on September
27, 2019, Company Secretary Georgina Sousa was appointed as a
Director, replacing Michael Ashford who retired. Georgina returns
to Golar with a wealth of experience and a deep historical
understanding of the business having served Golar in a similar
capacity up until early 2015.
Commercial Review
LNG Shipping
The third quarter began with LNG trading at
multi-year low prices, at times below $4.00/mmbtu. A subdued
commodity price and the continued absence of arbitrage
opportunities kept a lid on spot shipping rates, which started the
quarter at around $55kpd for a TFDE vessel. Attracted by the
forward curve, European charterers then entered the market for
floating storage. The number of prompt available vessels halved
from around 11 at the end of July to 6 in early August as a result.
Longer than usual voyages (due to slow steaming and idling at sea)
continued to absorb shipping capacity, allowing spot rates to
increase. European LNG imports for the first 8 months of 2019
nearly doubled relative to the same period in 2018. An increase in
shipping requirements in the second half of September then sowed
the seeds for a sustained improvement in rates and chartering
opportunities. Seeking to reduce dependence on peak-season LNG
imports, Chinese demand also re-emerged in late September. Seasonal
tailwinds elsewhere and European storage at close to 100% capacity
necessitating ongoing floating storage further reduced vessel
availability to zero allowing TFDE rates to quickly breach $100kpd
in early October. Spot rates in excess of $100kpd continue to be
achieved to date.
New liquefaction facilities continue to
deliver. Cameron T1, Prelude, Freeport T1, Corpus Christi T2
and Elba Island have all commenced production and new liquefaction
is expected to start up and ramp up at the fastest pace on record
over the course of 2020. Ample new supply together with China's
efforts to smooth its demand profile mean that Asian LNG prices
have not however enjoyed their customary winter boost and the LNG
arbitrage window has remained closed. Much of this new US volume
has therefore ended up in Europe. Despite lower upward pressure on
ton mile demand, the structural shortage of vessels has
arrived. Charterers are increasingly keen to sign 1 year+
charters removing more vessels from the market and adding to upward
pressure on spot rates. Owners are increasingly requesting offers
rather than offering ships to charterers as a result.
Supported by low LNG prices, the LNG spot and
short term market continues to represent an ever increasing share
of global LNG trade. Dominated by US projects, 114mtpa of new
liquefaction capacity is slated to come on stream between 2020 and
2025. Based on current trading patterns the LNG order book of 109
vessels will not be sufficient to carry this. Newbuild orders have
slowed and the earliest delivery slot for a vessel ordered today is
2H 2022. With all of its 10 carriers recently dry docked, the Cool
Pool will have uninterrupted exposure to this market. Golar expects
shipping to be a positive earnings contributor from 4Q 2019
throughout 2020.
Golar Partners (a non-consolidated affiliate of
Golar LNG)
The fleet continued to perform well with 3Q
adjusted EBITDA1 in line with 2Q. A substantial reduction in
interest rate swap losses allowed the Partnership to report a $13.4
million increase in net income, up from a loss of $5.5 million in
2Q to income of $7.9 million in 3Q. Distribution coverage1
increased as expected, from 1.12 in 2Q to 1.18 in 3Q.
Although the spot market for steam turbine
vessels remained subdued for most of 3Q, a rapid tightening of the
shipping market from the end of September meant that these vessels
have since represented the only available tonnage on more than one
occasion. Both the Golar Maria and Golar Mazo will therefore
contribute additional earnings in 4Q with the Golar Maria securing
employment through to April 2020. A two year charter for the Golar
Maria starting in late 2020 has also been secured. The charter
includes options for the charterer to extend by a further 1+1+1
years. Between April and November 2020 the vessel will trade
in what is expected to be a strong spot market.
The Partnership has received notice from Kuwait
National Petroleum Co. ("KNPC") of a two year contract award for
the FSRU Golar Igloo. Pending contract finalization and signing,
the award provides Golar Partners with two years of continued LNG
storage and regasification services at the Mina Al-Ahmadi Refinery
in Kuwait for KNPC’s regasification seasons beginning in March
2020. The contract may be further extended by KNPC for an
additional year through to December 2022.
Collectively the two year Golar Maria and Golar
Igloo contracts are expected to add approximately $95 million of
additional revenue backlog1.
On October 1, Graham Robjohns re-assumed his
role as the Partnership’s Chief Executive Officer, replacing Brian
Tienzo.
FLNG
FLNG Hilli Episeyo continues to achieve 100%
commercial uptime. The vessel ended 3Q ahead of its delivery
targets and recently exported its 29th cargo. Perenco are
planning for a drilling campaign in the Kribi area to prove up more
reserves during 2020. If successful, this may lead to further
capacity utilization and/or contract extension for FLNG Hilli
Episeyo. The companies are also in discussion regarding a smaller
increase in production which will utilize part of train 3 starting
from 1Q 2020. The FLNG Gimi Conversion project continues on
target in Singapore. Two of Gimi’s five planned dry dockings are
now complete. Sponson fabrication continues as does extensive
detailed engineering and procurement by Keppel and topsides
contractor Black and Veatch. Around 80 Golar personnel and 1,500
Keppel employees are now working daily on the project, with overall
progress on schedule. Seventy percent owned FLNG Gimi will service
the 20-year contract with BP offshore Mauritania and Senegal,
commencing 4Q 2022.On July 30, Golar together with Noble Energy,
Delek Drilling and Ratio Oil entered into an Interim Project
Development Agreement to assess the viability of a Golar FLNG
solution to support future development phases of the Mediterranean
Leviathan project. Golar is assessing the feasibility of its
current approximately 3.5mtpa FLNG Front End Engineering and Design
study for this project. Golar and another oil major have also
executed an agreement to jointly assess the suitability of Golar's
FLNG solutions across a range of gas resource opportunities. Due
diligence is underway and term sheets are being negotiated. Further
project development discussions are progressing with another oil
major as well as term sheet negotiations with a national oil
company, both of whom have also been attracted by the Company's
industry leading technical and operational record.
Cognizant of balance sheet limitations, Golar is
working with infrastructure funds interested in investing in
existing FLNG projects as well as others currently under
discussion. Proceeds from a partial sell down of a contracted FLNG
at an attractive multiple, the use of alternative shipyards able to
offer more attractive payment terms during construction and the use
of Export Credit finance are being pursued in order to allow the
next FLNG project to be taken forward.
Golar Power (50/50 Golar/Stonepeak
Infrastructure Partners non-consolidated downstream joint
venture)
Hooked up and commissioned, the FSRU Nanook is
now sending gas ashore to the Sergipe power station allowing hot
commissioning to take place. Commercial operations are now expected
to commence within the next three months.
Golar Power's push into small scale distribution
continues with around 100 customers keen to move from MOUs to
binding agreements for quantity and price of LNG supply.
Golar Power has agreed to charter a small scale (7,500m3) LNG
carrier from affiliate company Avenir, commencing mid-2020.
In addition, 12 Iso Containers (for the transportation of LNG by
road or barge) have also been received in Brazil, along with
commitments for delivery of modular regasification and unloading
units.
On October 21 Golar Power was awarded a 25-year
power purchase agreement for the construction of a 605MW combined
cycle thermal power plant. Located in Barcarena, Para, on Brazil's
northern coast, this LNG-to-power project will be developed by a
special purpose company 50% owned by Golar Power. Due to commence
operations in 2025, power will be sold to nine different power
distribution companies via the Brazilian grid and evacuated via an
existing substation nearby. The power station will also be the
anchor tenant for a Golar Power FSRU. The intention is to ensure an
appropriate amount of spare FSRU capacity also remains available to
displace large volumes of diesel, coal, LPG and heavy fuel oil
consumption with LNG. Selection of the FSRU and FID are expected to
occur in 1H 2020. This would allow small scale LNG distribution to
customers to commence as soon as mid-2021, well ahead of the
January 2025 power station start-up date. Total capex for the power
project is estimated at $430 million, of which Golar's share,
payable between 2022 and 2025, equates to $107 million. Rapid
monetization of the terminal/FSRU and the Sergipe downstream
distribution business would allow Golar Power to fund the Barcarena
project without recourse to shareholders Golar and Stonepeak.
License approvals for another project in the
south of Brazil are also making good progress. In the State of
Santa Catarina, Golar Power has received key regulatory and
environmental licences for a third FSRU terminal developed by
Terminal Gas Sul, a project company wholly owned by Golar Power. An
oil major is expected to use most of the FSRU capacity to supply a
large scale power plant that Golar Power has the option to invest
in. In common with the Sergipe and Barcarena projects, Golar Power
will also seek to use spare FSRU capacity to pursue other local
downstream opportunities.
Golar Power has established a leading position
in Brazil's LNG revolution. As a country of approximately 210
million people with an existing fleet of 2.7 million diesel fueled
heavy vehicles, the addressable market for the transition to LNG is
substantial. Diesel prices over the last four years have translated
into an LNG equivalent of approximately $26/mmbtu. Cost
savings from switching to LNG are material and additional to the
environmental benefits that include reductions in Co2, NOX and
particulate emissions.
Founded by Golar, Stolt Nielsen and Hoegh,
Avenir LNG's experience with the construction of small scale ships
and the introduction of LNG to Sardinia via its 2020 commencing
HiGas terminal also provides additional experience.
The Board is excited about the position that
Golar Power has established in Brazil, and also about Avenir. It is
excited by the long term economic and environmental benefits that
Brazil stands to gain from its transition to LNG and how this will
translate into sustainable long term returns for Golar's
shareholders. The credibility derived from our leadership in
Brazil's energy transition creates a strong footing to use this
unique experience to develop similarly large gas to power and
transportation markets elsewhere.
Non-GAAP measures
In addition to disclosing financial results in
accordance with U.S. generally accepted accounting principles (US
GAAP), this earnings release and the associated investor
presentation contains references to the non-GAAP financial measures
which are included in the table below. We believe these non-GAAP
financial measures provide investors with useful supplemental
information about the financial performance of our business, enable
comparison of financial results between periods where certain items
may vary independent of business performance, and allow for greater
transparency with respect to key metrics used by management in
operating our business and measuring our performance.
These non-GAAP financial measures should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP. Non-GAAP measures are not
uniformly defined by all companies, and may not be comparable with
similar titles measures and disclosures used by other companies.
The reconciliations from these results should be carefully
evaluated.
Non-GAAP measure |
Closest equivalent US GAAP measure |
Adjustments to reconcile to primary financial statements
prepared under US GAAP |
Rationale for adjustments |
Performance measures |
Adjusted EBITDA |
Net (loss)/income attributable to Golar LNG Limited |
+/- Net financial expense + Other non-operating expenses +/- Income
taxes +/- Equity in net (losses) income of affiliates
+/- Net income attributable to non-controlling interests +/-
Unrealized loss/(gain) on oil derivative instrument + Depreciation
and amortisation + Impairment of long-term assets |
Increases the comparability of total business performance
from period to period and against the performance of other
companies by excluding the results of our equity investments,
removing the impact of unrealized movements on embedded derivatives
and removing the impact of depreciation, financing and taxation
policies. |
LTM (last twelve months) adjusted EBITDA |
Net (loss)/income attributable to Golar LNG Limited |
The sum of the last four quarters adjusted EBITDA (defined
above) |
Same as adjusted EBITDA. The 12 month trailing
metric removes the impact of seasonality on our results. |
LTM (last twelve months) further adjusted
EBITDA |
Net (loss)/income attributable to Golar LNG Limited |
Same as LTM Adjusted EBITDA+/- Non-recurring items- Golar
Partners’ share of Hilli adjusted EBITDA |
Same as LTM adjusted EBITDA. Material
non-recurring items excluded to further aid comparability of
financial performance. Removal of Golar LNG
Partners 50% interest in the Hilli Episeyo common
units, to show the amount of expected EBITDA that could be
converted into operating cash flows which we will retain. |
Average daily TCE |
Total Operating revenues |
- Voyage and commission expenses - Liquefaction services
revenue - Vessel and other management fees The above total
is then divided by calendar days less scheduled off-hire days. |
Measure of the average daily net revenue performance of a
vessel. Standard shipping industry performance measure
used primarily to compare period-to-period changes in the vessel’s
net revenue performance despite changes in the mix of charter types
(i.e. spot charters, time charters and bareboat charters) under
which the vessel may be employed between the periods.
Assists management in making decisions regarding the
deployment and utilization of its fleet and in evaluating financial
performance. |
Liquidity measures |
Contractual debt |
Total debt (current and non-current), net of deferred finance
charges |
+ VIE Consolidation Adjustment + Deferred Finance Charges |
We consolidate a number of lessor VIEs for our sale and
leaseback facilities. This means that on consolidation, our
contractual debt is eliminated and replaced with the lessor VIEs’
debt. Contractual debt represents our debt obligations
under our various financing arrangements before consolidating the
lessor VIEs. The measure enables investors and users
of our financial statements assess our liquidity and the split of
our debt (current and non-current) based on our underlying
contractual obligations. Furthermore, it aids comparability with
competitors. |
Adjusted net debt |
Net debt based on GAAP measures: Total debt (current
and non-current), net of deferred finance charges - Cash and
cash equivalents - Restricted cash and short-term deposits
(current and non-current) |
Net debt based on GAAP+ VIE Restricted cash+ VIE
consolidation adjustment+ Deferred finance charges+ TRS Restricted
Cash |
In consolidating the lessor VIEs, we also consolidate their
cash position.. We reflect the lessor VIEs’ cash as “restricted
cash” on our Consolidated Balance Sheet as we have no control or
ability to access this cash. In calculating our adjusted net debt
based on our contractual obligation, we remove the lessor VIEs’
restricted cash. We have elected an accounting policy to
show margin cash posted against our derivative positions separately
to the associated MTM liability. The most significant impact of
this accounting policy is the reflection of the TRS margin cash and
the MTM liability gross on our Consolidated Balance Sheet. We
remove the TRS restricted cash in calculating adjusted net debt as
this cash will be used to settle the MTM liability and therefore is
not cash that can be used to satisfy our contractual obligations or
used to elsewhere in the business. Management believe
that these adjustments enable investors and users of our financial
statements to assess our liquidity based on our underlying
contractual obligations and aids comparability with our
competitors. |
Reconciliations - Performance Measures (Adjusted
EBITDA)
|
2019 |
2019 |
2019 |
2018 |
2018 |
2018 |
2018 |
2017 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Jan-Mar |
Oct-Dec |
Jul-Sep |
Apr-Jun |
Jan-Mar |
Oct-Dec |
Net (loss)/income attributable to Golar LNG
Limited |
(82,301 |
) |
(112,682 |
) |
(41,741 |
) |
(312,957 |
) |
66,212 |
|
36,319 |
|
(21,002 |
) |
3,823 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Net
financial expense/(income) |
39,256 |
|
37,804 |
|
33,244 |
|
52,653 |
|
37,770 |
|
20,083 |
|
13,291 |
|
(19,088 |
) |
Other
non-operating expenses |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
189 |
|
Income taxes |
274 |
|
176 |
|
205 |
|
627 |
|
156 |
|
490 |
|
(6 |
) |
435 |
|
Equity in net losses/(gains) of affiliates |
7,761 |
|
26,970 |
|
12,899 |
|
154,089 |
|
(2,668 |
) |
4,674 |
|
1,541 |
|
6,348 |
|
Net income attributable to non-controlling interests |
21,344 |
|
24,297 |
|
24,257 |
|
2,770 |
|
31,000 |
|
16,839 |
|
12,605 |
|
11,092 |
|
Operating (loss)/income |
(13,666 |
) |
(23,435 |
) |
28,864 |
|
(102,818 |
) |
132,470 |
|
78,405 |
|
6,429 |
|
2,799 |
|
Adjusted
for: |
|
|
|
|
|
|
|
|
Unrealized loss/(gain) on oil derivative instrument |
44,170 |
|
27,630 |
|
(28,380 |
) |
195,740 |
|
(77,470 |
) |
(94,700 |
) |
(13,600 |
) |
(15,100 |
) |
Depreciation and amortization |
28,428 |
|
28,121 |
|
28,163 |
|
28,295 |
|
28,528 |
|
20,457 |
|
16,409 |
|
16,585 |
|
Impairment of long-term assets |
— |
|
7,347 |
|
34,250 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Adjusted EBITDA |
58,932 |
|
39,663 |
|
62,897 |
|
121,217 |
|
83,528 |
|
4,162 |
|
9,238 |
|
4,284 |
|
|
|
|
|
|
|
|
|
|
Year to date Q3 adjusted EBITDA |
161,492 |
|
— |
|
— |
|
— |
|
96,928 |
|
— |
|
— |
|
— |
|
Last
Twelve Months Adjusted EBITDA |
282,709 |
|
— |
|
— |
|
— |
|
101,212 |
|
— |
|
— |
|
— |
|
Last Twelve Months One-Off Gains |
(19,742 |
) |
— |
|
— |
|
— |
|
(23,278 |
) |
— |
|
— |
|
— |
|
Last
Twelve Months Golar Partners' share of Hilli Adjusted EBITDA |
(80,504 |
) |
— |
|
— |
|
— |
|
(16,969 |
) |
— |
|
— |
|
— |
|
Last Twelve Months Further Adjusted EBITDA |
182,463 |
|
— |
|
— |
|
— |
|
60,965 |
|
— |
|
— |
|
— |
|
Reconciliations - Performance Measures
(Average Daily TCE Rate)
|
2019 |
2019 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Total operating revenues |
98,670 |
|
96,745 |
|
Less: Liquefaction services revenue |
(54,524 |
) |
(54,524 |
) |
Less: Vessel and other management fees |
(5,345 |
) |
(5,141 |
) |
Time and voyage charter revenues |
38,801 |
|
37,080 |
|
Less: Voyage and commission expenses |
(5,603 |
) |
(14,327 |
) |
|
33,198 |
|
22,753 |
|
Calendar days less scheduled off-hire days |
943 |
|
933 |
|
Average daily TCE rate (to the closest $100) |
35,200 |
|
24,400 |
|
Reconciliations - Liquidity
Measures
(in thousands of $) |
September 30, 2019 |
September 30, 2018 |
June 30, 2019 |
Net debt as calculated by GAAP |
|
|
|
Total debt (current and non-current) net of deferred finance
charges |
2,554,392 |
|
2,619,580 |
|
2,467,508 |
|
Less |
|
|
|
Cash and cash equivalents |
(250,153 |
) |
(306,387 |
) |
(139,834 |
) |
Restricted cash and short-term deposits - current and non-current
portion |
(375,276 |
) |
(457,776 |
) |
(405,586 |
) |
Net debt as calculated by GAAP |
1,928,963 |
|
1,855,417 |
|
1,922,088 |
|
VIE consolidation adjustment |
139,841 |
|
71,416 |
|
111,977 |
|
VIE restricted cash |
104,461 |
|
188,434 |
|
114,976 |
|
Deferred finance charges |
12,747 |
|
17,081 |
|
13,020 |
|
TRS restricted cash (1) |
108,920 |
|
69,383 |
|
96,763 |
|
Adjusted Net Debt |
2,294,932 |
|
2,201,731 |
|
2,258,824 |
|
(1) Restricted cash relating to the share
repurchase forward swap refers to the collateral required by the
bank with whom we entered into a total return equity swap.
(in thousands of $) |
September 30, 2019 |
September 30, 2018 |
June 30, 2019 |
Total debt (current and non-current) net of deferred finance
charges |
2,554,392 |
|
2,619,580 |
|
2,467,508 |
|
VIE consolidation adjustments |
139,841 |
|
71,416 |
|
111,977 |
|
Deferred finance charges |
12,747 |
|
17,081 |
|
13,020 |
|
Golar’s Contractual Debt |
2,706,980 |
|
2,708,077 |
|
2,592,505 |
|
Please see Appendix A for a capital repayment
profile for Golar’s contractual debt.
Non-US GAAP Measures Used in
Forecasting
Contract Earnings Backlog:
Contract earnings backlog represents Golar's share of contracted
fee income for executed contracts less forecasted operating
expenses for these contracts. In calculating forecasted operating
expenditure, management has assumed that where there is an
Operating Services Agreement the amount receivable under the
services agreement will cover the associated operating costs. For
contracts which do not have a separate Operating Services
Agreement, management has made an assumption about operating costs
based on the current run rate. The only material application of
this methodology was to the Hilli Episeyo Earnings backlog where we
assumed operating costs of approximately $120,000 per day.
For consolidated subsidiaries where we do not
own 100% of the share capital, management has only included our
proportionate share of contract earnings. The material application
of this assumption was to Gimi (70% ownership) and Hilli Episeyo
(44.5% of the Common Unit entitlement). No contracted fee income
was included for Hilli T3 or the oil derivative.
For equity accounted investments (the
Partnership and Golar Power) we have included our proportionate
share of their contract earnings backlog under the same assumptions
that we have applied to our consolidated subsidiaries. In the
future when our contract earnings backlog actualizes, we will show
our share of their earnings net of interest and tax in one line in
the Income Statement "Equity in net earnings/(losses) of
affiliates". The Golar Power numbers are calculated based on an
exchange rate of 3.7BRL:1USD.
Management has not forecasted net income for
these initiatives as information to provide such a forward-looking
estimate is not available without unreasonable effort. Contract
earnings backlog is not intended to represent EBITDA or future
cashflows that will be generated from these projects nor is it
intended to represent the dividend income that will be payable to
Golar from our equity investments. This measure should be seen as a
supplement and not a substitute for our US GAAP measures of
performance.
Gross Contract Earnings
Backlog: Gross contract earnings backlog represents each
Golar entity's share of contracted fee income for executed
contracts less forecasted operating expenses for these contracts.
In calculating the forecasted operating expenditure, management has
applied the same methodology in preparing the "Contract Earnings
Backlog" measure above. Management has not forecasted net income
for these initiatives as information to provide such a
forward-looking estimate is not available without unreasonable
effort. Contract earnings backlog is not intended to represent
EBITDA or future cash flows that will be generated from these
projects nor is it intended to represent the dividend income that
will be payable to Golar from our equity investments. This measure
should be seen as a supplement and not a substitute for our US GAAP
measures of performance.
Distribution coverage: As
defined in Golar LNG Partners LP form 6-K, section "Appendix A -
Non-GAAP Financial Measures and Definitions".
Forward Looking StatementsThis
press release contains forward-looking statements (as defined in
Section 21E of the Securities Exchange Act of 1934, as amended)
which reflects management’s current expectations, estimates and
projections about its operations. All statements, other than
statements of historical facts, that address activities and events
that will, should, could or may occur in the future are
forward-looking statements. Words such as “may,” “could,” “should,”
“would,” "will," “expect,” “plan,” “anticipate,” “intend,”
“forecast,” “believe,” “estimate,” “predict,” “propose,”
“potential,” “continue,” or the negative of these terms and similar
expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
other factors, some of which are beyond our control and are
difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such
forward-looking statements. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. Unless legally required, Golar undertakes no
obligation to update publicly any forward-looking statements
whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to
differ materially from those in the forward-looking statements
are:
- our inability and that of our counterparty to meet our
respective obligations under the Lease and Operate agreement
entered into in connection with the BP Greater Tortue / Ahmeyim
Project (“Gimi GTA Project”);
- challenges by authorities to the tax benefits we previously
obtained under certain of our leasing agreements;
- changes in our ability to retrofit vessels as FSRUs or FLNGs
and in our ability to obtain financing for such conversions on
acceptable terms or at all;
- changes in our ability to obtain additional financing on
acceptable terms or at all;
- our inability to complete the shipping spin off;
- Golar Power's ability to successfully commission the Sergipe
power station project and related FSRU contract and to execute its
downstream LNG distribution plans;
- changes in our relationship with Golar Partners, Golar Power or
Avenir and the sustainability of any distributions they pay to
us;
- failure of our contract counterparties, including our joint
venture co-owners, to comply with their agreements with us or other
key project stakeholders;
- changes in liquefied natural gas, or LNG, carrier, floating
storage and regasification unit, or FSRU, or floating liquefaction
natural gas vessel, or FLNG, or small-scale LNG market trends,
including charter rates, vessel values or technological
advancements;
- our ability to close potential future sales of additional
equity interests in our vessels, including the Hilli Episeyo and
FLNG Gimi on a timely basis or at all and our ability to contract
the full utilization of the Hilli Episeyo or other vessels and the
benefits that may to accrue to us as the result of any such
modifications;
- changes in the supply of or demand for LNG carriers, FSRUs,
FLNGs or small-scale LNG infrastructure;
- a material decline or prolonged weakness in rates for LNG
carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
- changes in the performance of the pool in which certain of our
vessels operate and the performance of our joint ventures;
- changes in trading patterns that affect the opportunities for
the profitable operation of LNG carriers, FSRUs, FLNGs or
small-scale LNG infrastructure;
- changes in the supply of or demand for LNG or LNG carried by
sea;
- changes in commodity prices;
- changes in the supply of or demand for natural gas generally or
in particular regions;
- changes in our relationships with our counterparties, including
our major chartering parties;
- a decline or continuing weakness in the global financial
markets;
- changes in general domestic and international political
conditions, particularly where we operate;
- changes in the availability of vessels to purchase and in the
time it takes to construct new vessels;
- failures of shipyards to comply with delivery schedules or
performance specifications on a timely basis or at all;
- our ability to integrate and realize the benefits of
acquisitions;
- changes in our ability to sell vessels to Golar Partners or
Golar Power;
- changes to rules and regulations applicable to LNG carriers,
FSRUs, FLNGs or other parts of the LNG supply chain;
- our inability to achieve successful utilization of our expanded
fleet or inability to expand beyond the carriage of LNG and
provision of FSRUs, FLNGs, and small-scale LNG infrastructure
particularly through our innovative FLNG strategy and our joint
ventures;
- actions taken by regulatory authorities that may prohibit the
access of LNG carriers, FSRUs, FLNGs or small-scale LNG vessels to
various ports;
- increases in costs, including, among other things, wages,
insurance, provisions, repairs and maintenance; and
- other factors listed from time to time in registration
statements, reports or other materials that we have filed with or
furnished to the Securities and Exchange Commission, or the
Commission, including our most recent annual report on Form
20-F.
As a result, you are cautioned not to rely on
any forward-looking statements. Actual results may differ
materially from those expressed or implied by such forward-looking
statements. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise unless required by
law.
November 26, 2019The Board of DirectorsGolar LNG
LimitedHamilton, Bermuda
Investor questions:Iain Ross -
Chief Executive Officer +44 207 063 7900Graham Robjohns - Chief
Financial Officer and Deputy Chief Executive Officer +44 207 063
7900Stuart Buchanan - Head of Investor Relations +44 207 063
7900
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