NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Golar LNG Limited (the "Company" or "Golar") was incorporated in Hamilton, Bermuda on May 10, 2001 for the purpose of acquiring the liquefied natural gas ("LNG") shipping interests of Osprey Maritime Limited, which was owned by World Shipholding Limited.
As of December 31, 2020, our fleet comprises of ten LNG carriers, one Floating Storage Regasification Unit ("FSRU") and two Floating Liquefaction Natural Gas vessels ("FLNGs") (including one vessel under conversion to a FLNG). We also operate, under management agreements, Golar LNG Partners LP's ("Golar Partners" or the "Partnership") fleet of ten vessels and Hygo Energy Transition Ltd.’s (“Hygo”) (formerly known as Golar Power Limited) fleet of three vessels.
We are listed on the Nasdaq under the symbol: "GLNG".
As used herein and unless otherwise required by the context, the terms "Golar", the "Company", "we", "our" and words of similar import refer to Golar or anyone or more of its consolidated subsidiaries, or to all such entities.
Going Concern
The financial statements have been prepared on a going concern basis.
To ensure we have the necessary liquidity to satisfy our anticipated capital expenditures, scheduled repayments of long and short-term debts, debt facilities’ written put options, financing costs and working capital requirements over the next 12 months, we are in ongoing discussions with various financial institutions. The main items that management considered from a liquidity standpoint were:
• our ability to monetize assets, including but not limited to, the 18.6 million shares of owned NFE common stock and the risk of fluctuations in the NFE share price;
•the $107.6 million Golar Tundra Facility's put option due to expire in June 2021;
•the $100.0 million Revolving Credit Facility due in December 2021;
• the $98.9 million Golar Seal Facility's put option due to expire in January 2022; and
• the $402.5 million 2017 Convertible Bonds due in February 2022.
While we believe it is probable that we will be able to obtain the necessary funds and have a track record of successfully refinancing our existing debt requirements, obtaining put option extensions, monetizing existing assets and sourcing new funding, primarily as a result of the strong fundamentals in relation to our assets (including contracted cash flows and existing leverage ratios), we cannot be certain that these will be executed in time or at all. Global financial markets and economic conditions have been and continue to be volatile, particularly with the COVID-19 pandemic. In this context, we continue to have productive discussions with financiers, and believe that these developments are not likely to have a material adverse effect on our ability to refinance existing debt requirements, obtain put option extensions, monetize existing assets and source new funding
Further, if market and economic conditions were to be favorable, we may also consider in conjunction with the refinancing of existing loans, further issuances of corporate debt or equity to increase liquidity to meet maturing obligations. To this aim, sources of funding for our medium and long-term obligations are continually reviewed by management and include a combination of new loans, refinancing of existing arrangements, public and private debt or equity offerings, and potential asset sales.
Accordingly, we believe that based on our plans, as outlined above, we will have sufficient resources to satisfy our obligations in the ordinary course of business for the 12-month period from the date these consolidated financial statements were issued. To gauge our liquidity headroom, including our ability to continue to comply with relevant covenants, we have performed stress testing with respect to forecasted cash positions under various scenarios, which include using assumptions such as significantly reduced revenue contributions from our fleet for uncontracted periods without commensurate reduction in operating costs, and accordingly are confident in our ability to meet our obligations when falling due.
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2.
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BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
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Basis of preparation
These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
The accounting policies set out below have been applied consistently to all periods in these consolidated financial statements, except for accounting policy that changed as a result of adopting the requirements of Accounting Standards Updates ("ASU") 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments (Topic 326). The impact of these changes in accounting policies on the consolidated financial statements is disclosed in note 3.
Principles of consolidation
A variable interest entity ("VIE") is defined by the accounting standard as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity's residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. A party that is a variable interest holder is required to consolidate a VIE if the holder has both (a) the power to direct the activities that most significantly impact the entity's economic performance and (b) the obligation to absorb losses that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
The accompanying consolidated financial statements include the financial statements of the entities listed in notes 4 and 5.
Investments in entities in which we directly or indirectly hold more than 50% of the voting control are consolidated in the financial statements, as well as certain variable interest entities in which the Company is deemed to be subject to a majority of the risk of loss from the VIE's activities or entitled to receive a majority of the entity's residual returns, or both. All inter-company balances and transactions are eliminated. The non-controlling interests of the above-mentioned subsidiaries were included in the consolidated balance sheets and statements of operations as "Non-controlling interests".
Changes in our ownership interest while we retain a controlling financial interest in a subsidiary are accounted for as equity transactions. The carrying amount of the non-controlling interest is adjusted to reflect our changed ownership interest, with any difference between the fair value of consideration and the amount of the adjusted non-controlling interest being recognized in equity.
We recognize a gain or loss when a subsidiary issues its stock to third parties at a price per share in excess or below its carrying value resulting in a reduction in our ownership interest in the subsidiary. The gain or loss is recorded in the line "Additional paid-in capital" within the statement of changes in equity.
When a consolidated subsidiary issues preferred stock, they are classified as equity. Preferred stock issued by a consolidated subsidiary to non-controlling interests are recorded as non-controlling interests for the amount of the proceeds received upon issuance.
Foreign currencies
Our functional currency is the U.S. dollar as the majority of the revenues are received in U.S. dollars and a majority of our expenditures are incurred in U.S. dollars. Our reporting currency is U.S. dollars. Transactions in foreign currencies during the year are translated into U.S. dollars at the exchange rates in effect at the date of the transaction. Monetary assets and liabilities are translated using exchange rates at the balance sheet date. Non-monetary assets and liabilities are translated using historical exchange rates. Foreign currency transaction and translation gains or losses are included in the consolidated balance sheets and consolidated statements of operations.
Use of estimates
The preparation of financial statements in accordance with US GAAP requires that management make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In assessing the recoverability of our vessels’ carrying amounts, we make assumptions regarding estimated future cash flows, estimates in respect of residual or scrap value, charter rates, ship operating expenses and drydocking requirements.
In relation to the oil derivative instrument (see note 24), the fair value was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the liquefaction tolling agreement ("LTA"). Significant inputs used in the valuation of the oil derivative instrument include management’s estimate of an appropriate discount rate and the length of time to blend the long-term and the short-term oil prices obtained from quoted prices in active markets. The changes in fair value of our oil derivative instrument is recognized in each period in current earnings in "Realized and unrealized gain on oil derivative instrument" as part of the consolidated statement of income.
The realized and unrealized (loss)/ gain on the oil derivative instrument is as follows:
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(in thousands of $)
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Year Ended December 31,
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2020
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2019
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2018
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Realized gain on oil derivative instrument
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2,539
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13,089
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26,737
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Unrealized loss on oil derivative instrument
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(45,100)
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(39,090)
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(9,970)
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(42,561)
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(26,001)
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16,767
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The unrealized loss/gain results from movement in oil prices above a contractual floor price over term of the LTA; the realized gain results from monthly billings above the base tolling fee under the LTA.
Fair value measurements
We account for fair value measurement in accordance with the accounting standards guidance using fair value to measure assets and liabilities. The guidance provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.
Lease accounting versus revenue accounting
Contracts relating to our LNG carriers, FSRUs and FLNG asset can take the form of operating leases, finance leases, tolling agreements and management agreements. In addition, we contract a portion of our vessels in the spot market through our "Cool Pool" arrangement. Although the substance of these contracts is similar (they allow our customers to hire our assets and to avail themselves of Golar's management services for a specified day rate), the accounting treatment varies.
To determine whether a contract conveys a lease agreement for a period of time, the Company has assessed whether, throughout the period of use, the customer has both of the following:
•the right to obtain substantially all of the economic benefits from the use of the identified asset; and
•the right to direct the use of that identified asset.
If a contract relating to an asset fails to give the customer both of the above rights, we account for the agreement as a revenue contract. A contract relating to an asset will generally be accounted for as a revenue contract if the customer does not contract for substantially all of the capacity of the asset (i.e. another third party could contract for a meaningful amount of the asset capacity).
In situations where we provide management services unrelated to an asset contract, we account for the contract as a revenue contract.
Lease accounting
When a contract is designated as a lease, we make an assessment on whether the contract is an operating lease or a finance lease. An agreement will be a finance lease if any of the following conditions are met:
•ownership of the asset is transferred at the end of the lease term;
•the contract contains an option to purchase the asset which is reasonably certain to be exercised;
•the lease term is for a major part of the remaining useful life of the contract, although contracts entered into the last 25% of the asset's useful life are not subject to this criterion;
•the discounted value of the fixed payments under the lease represent substantially all of the fair value of the asset; or
•the asset is heavily customized such that it could not be used for another charter at the end of the term.
Lessor accounting
In making the classification assessment, we estimate the residual value of the underlying asset at the end of the lease term with reference to broker valuations. None of our lease contracts contain residual value guarantees and any purchase options are disclosed in note 11. Agreements which include renewal and termination options are included in the lease term if we believe they are "reasonably certain" to be exercised by the lessee or if controlled by the lessor. The determination of whether lessee extension clauses are reasonably certain depends on whether the option contains an economic incentive.
Generally, lease accounting commences when the asset is made available to the customer, however, where the contract contains specific customer acceptance testing conditions, lease accounting will not commence until the asset has successfully passed the acceptance test. We assess a lease under the modification guidance when there is a change to the terms and conditions of the contract that results in a change in the scope or the consideration of the lease.
Costs directly associated with the execution of the lease or costs incurred after lease inception (the execution of the contract) but prior to the commencement of the lease that directly relates to preparing the asset for the contract (for example bunker costs), are capitalized and amortized to the consolidated statement of income over the lease term. We also defer upfront net revenue payments (for example positioning fees) to the consolidated balance sheet and amortize to the consolidated statement of income over the lease term.
Fixed revenue from operating leases is accounted for on a straight-line basis over the life of the lease; while variable revenue is accounted for as incurred in the relevant period. Fixed revenue includes fixed payments and variable payments based on a rate or index. For our operating leases, we have elected the practical expedient to combine our service revenue and operating lease income as both the timing and the pattern of transfer of the components are the same.
Time charter agreements
Revenues include minimum lease payments under time charters, fees for positioning and repositioning vessels, and gross pool revenues. Revenues generated from time charters, which we generally classify as operating leases, are recorded over the term of the charter as service is provided. However, we do not recognize revenue if a charter has not been contractually committed to by a customer and ourselves, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage. Initial direct costs (those directly related to the negotiation and consummation of the lease) are deferred and allocated to earnings over the lease term. Rental income and expense are amortized over the lease term on a straight-line basis.
Repositioning fees (included in time and voyage charter revenues) received in respect of time charters are recognized at the end of the charter when the fee becomes fixed and determinable. However, where there is a fixed amount specified in the charter, which is not dependent upon redelivery location, the fee will be recognized evenly over the term of the charter.
Under time charters, voyage expenses are generally paid by our customers. Voyage related expenses, principally fuel, may also be incurred when positioning or repositioning the vessel before or after the period of time charter and during periods when the vessel is not under charter or is off-hire, for example when the vessel is undergoing repairs. These expenses are recognized as incurred.
Vessel operating expenses, which are recognized when incurred, include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses and third-party management fees. Bunkers consumption represents mainly bunkers consumed during unemployment and off-hire.
Cool Pool
Pool revenues and expenses under the Cool Pool arrangement are accounted for in accordance with the guidance for collaborative arrangements when two (or more) parties are active participants in the activity and exposed to significant risk and rewards dependent on the commercial success of the activity. Active participation is deemed to be when participating on the Cool Pool steering committee.
When applying a collaborative arrangement, we present our share of net income earned under the Cool Pool across a number of lines in the Income Statement. Net revenue and expenses incurred specifically to Golar vessels and for which we are deemed to be the principal, are presented gross on the face of the Income Statement in the line items “Time and voyage and charter revenues” and “Voyage, charter hire and commission expenses.” Pool net revenues generated by the other participants in the pooling arrangement, will be presented separately in revenue and expenses from collaborative arrangements. Each participants’ share of the net pool revenues is based on the number of days such vessels participated in the pool. Refer to note 25 for an analysis of the income statement effect for the pooling arrangement.
When no collaborative arrangement is applied, we present our gross share of income earned and costs incurred under the Cool Pool on the face of the Income Statement in the line items “Time and voyage and charter revenues” and “Voyage, charter hire and commission expenses” respectively. For pool net revenues and expenses generated by the other participants in the pooling arrangement, we analogize to the cost of obtaining a contract and expense these costs as incurred and presented within the line item “Voyage, charter hire and commission expenses.”
Revenue and related expense recognition
Contracts within the scope of revenue accounting include our liquefaction services contract relating to the Hilli asset and our management fee services provided predominantly to our affiliates.
Liquefaction services revenue
For liquefaction services revenue, the provision of liquefaction services capacity is considered a single performance obligation recognized evenly over time. We consider our services (the receipt of customer's gas, treatment and temporary storage on board our FLNG and delivery of LNG to waiting carriers) to be a series of distinct services that are substantially the same and have the same pattern of transfer to our customer. We recognize revenue when obligations under the terms of our contract are satisfied. We have applied the practical expedient to recognize liquefaction services revenue in proportion to the amount we have the right to invoice.
Contractual payment terms for liquefaction services is monthly in arrears. Contract liabilities arise when the customer makes payments in advance of receiving services. The period between when invoicing and when payment is due is not significant.
Management fees
Management fees are generated from vessel management which includes commercial and technical vessel-related services and administrative services. The management services we provide are considered a single performance obligation recognized evenly over time as our services are rendered. We consider our services as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. We recognize revenue when obligations under the terms of our contracts with our customers are satisfied. We have applied the practical expedient to recognize management fee revenue in proportion to the amount that we have the right to invoice.
Our contracts generally have an initial term of one year or less, after which the arrangement continues until the end of the contract, ranging from 30 to 120 days. Contract assets arise when we render management services in advance of entitlement to payment from our customers.
Insurance claims
The Group has two main types of insurance policies, being ‘hull and machinery’ ("H&M") and ‘loss of hire’ ("LOH") coverage. LOH indemnifications aim at providing us coverage for loss of revenue for our insured vessels and related claims are considered gain contingencies, which are recognized when the proceeds from our insurance syndication are realized or deemed realizable, net of any deductions where applicable. LOH is recognized on the face of the Income Statement in the line item "Other operating income".
H&M policy covers any damage we incur in relation to our property, plant and equipment. The insurance policy is considered loss recoveries, meaning that the timing of recognition of a claim for an insured damage occurs at the time such loss impacts the Income Statement, when deemed probable of being recovered from the counterparty and for an amount net of any deductions that may apply. H&M is recognized on the face of the Income Statement in the line item "Vessel operating expenses".
Cash and cash equivalents
We consider all demand and time deposits and highly liquid investments with original maturities of three months or less to be equivalent to cash. Amounts are presented net of allowances for credit losses, which are assessed based on consideration of whether the balances have short-term maturities and whether the counterparty has an investment grade credit rating, limiting any credit exposure.
Restricted cash and short-term deposits
Restricted cash consists of bank deposits which may only be used to settle certain pre-arranged loans, bid bonds in respect of tenders for projects we have entered into, cash collateral required for certain swaps, and other contracts which require us to restrict cash.
Short-term deposits represent highly liquid deposits placed with financial institutions, primarily from our consolidated VIEs, which are readily convertible into known amounts of cash with original maturities of less than 12 months.
Amounts are presented net of allowances for credit losses, which are assessed based on consideration of whether the balances have short-term maturities and whether the counterparty has an investment grade credit rating, limiting any credit exposure.
Trade accounts receivables
Trade receivables are presented net of allowances of expected credit losses. At each balance sheet date, all potentially uncollectible accounts are assessed individually for the purpose of determining the appropriate allowance for expected credit loss. The expected credit loss allowance is calculated using a loss rate applied against an aging matrix, with assets pooled based on the segment that generated the underlying revenue (Shipping, FLNG, Power and Corporate and other), which reflects similar credit risk characteristics. Our trade receivables have short maturities so we have considered that forecasted changes to economic conditions will have an insignificant effect on the estimate of the allowance, except in extraordinary circumstances.
Allowance for credit losses
Financial assets recorded at amortized cost and off-balance sheet credit exposures not accounted for as insurance (including financial guarantees) reflect an allowance for current expected credit losses ("credit losses") over the lifetime of the instrument. The allowance for credit losses reflects a deduction to the net amount expected to be collected on the financial asset. Amounts are written off against the allowance when management believes the un-collectability of a balance is confirmed or certain. Expected recoveries will not exceed the amounts previously written-off or current credit loss allowance by financial asset category. We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We have elected to calculate expected credit losses on the combined balance of both the amortized cost and accrued interest from the unpaid principal balance. Specific calculation of our credit allowances is included in the respective accounting policies included herein; all other financial assets are assessed on an individual basis calculated using the method we consider most appropriate for each asset.
Inventories
Inventories, which are comprised principally of fuel, are stated at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis.
Investments in affiliates
Affiliates are entities over which we generally have between 20% and 50% of the voting rights, or over which we have significant influence, but over which we do not exercise control or have the power to control the financial and operational policies. Investments in these entities are accounted for by the equity method of accounting. This also extends to entities in which we hold a majority ownership interest, but we do not control, due to the other parties' participating rights. Under this method, we record our investment in the affiliate at cost (or fair value if a consequence of deconsolidation), and adjust the carrying amount for our share of the earnings or losses of the affiliate subsequent to the date of the investment and report the recognized earnings or losses in income. Dividends received from an affiliate reduce the carrying amount of the investment. The excess, if any, of the purchase price over book value of our investments in equity method affiliates, or basis difference, is included in the consolidated balance sheets as "Investments in affiliates". We allocate the basis difference across the assets and liabilities of the affiliate, with the residual assigned to goodwill. Any negative goodwill is recognized immediately in the income statement as a gain on bargain purchase. The basis difference will then be amortized through the consolidated statements of operations as part of the equity method of accounting. When our share of losses in an affiliate equals or exceeds its interest, we do not recognize further losses, unless we have incurred obligations or made payments on behalf of the affiliate.
We recognize gains and losses in earnings for the issuance of shares by our affiliates, provided that the issuance of such shares qualifies as a sale of such shares.
Vessels and equipment
Vessels and equipment are stated at cost less accumulated depreciation. The cost of vessels and equipment, less the estimated residual value, is depreciated on a straight-line basis over the assets' remaining useful economic lives. Management estimates the residual values of our vessels based on broker scrap value cost of steel and aluminum times the weight of the ship noted in lightweight ton. Residual values are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons.
The cost of building mooring equipment is capitalized and depreciated over the initial lease term of the related agreement.
Refurbishment costs incurred during the period are capitalized as part of vessels and equipment and depreciated over the vessels' remaining useful economic lives. Refurbishment costs are costs that appreciably increase the capacity, or improve the efficiency or safety of vessels and equipment.
Drydocking expenditures are capitalized when incurred and amortized over the period until the next anticipated drydocking, which is generally five years. For vessels that are newly built or acquired, we have adopted the "built-in overhaul" method of accounting. The built-in overhaul method is based on the segregation of vessel costs into those that should be depreciated over the useful life of the vessel and those that require drydocking at periodic intervals to reflect the different useful lives of the components of the assets. The estimated cost of the drydocking component is amortized until the date of the first drydocking following acquisition, upon which the cost is capitalized and the process is repeated. When a vessel is disposed of, any unamortized drydocking expenditure is charged against income in the period of disposal.
Vessel reactivation costs incurred on vessels leaving lay-up include costs of both a capital and expense nature. The capital costs include the addition of new equipment or modifications to the vessel which enhance or increase the operational efficiency and functionality of the vessel. These expenditures are capitalized and depreciated over the remaining useful life of the vessel. Expenditures of a routine repairs and maintenance nature that do not improve the operating efficiency or extend the useful lives of the vessels are expensed as incurred as mobilization costs.
Useful lives applied in depreciation are as follows:
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Vessels (excluding converted FSRU and FLNG)
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40 years
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Vessels - converted FSRU
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20 years from conversion date
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Vessels - FLNG
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30 years from conversion date
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Drydocking expenditure
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5 years
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Deferred drydocking expenditure - FLNG
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20 years
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Mooring equipment - FLNG
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8 years
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Office equipment and fittings
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3 to 6 years
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Asset under development
An asset is classified as an asset under development when there is a firm commitment from us to proceed with the construction of the asset and the likelihood of conversion is virtually certain to occur. An asset under development is classified as non-current and is stated at cost. All costs incurred during the construction of the asset, including conversion installment payments, interest, supervision and technical costs are capitalized. Interest costs directly attributable to construction of the asset are added to the cost of the asset. Capitalization ceases, and depreciation commences, once the asset is completed and available for its intended use.
Interest costs capitalized
Interest is capitalized on all qualifying assets that require a period of time to get them ready for their intended use. Qualifying assets consist of vessels under construction, assets under development and vessels undergoing conversion into FSRUs or FLNGs for our own use. In addition, certain equity method investments may be considered qualifying assets prior to commencement of their planned principal operation. The interest capitalized is calculated using the rate of interest on the loan to fund the expenditure or our weighted average cost of borrowings, where appropriate, from commencement of the asset development until substantially all the activities necessary to prepare the assets for its intended use are complete.
If our financing plans associate a specific borrowing with a qualifying asset, we use the rate on that borrowing as the capitalization rate to be applied to that portion of the average accumulated expenditures for the asset provided that does not exceed the amount of that borrowing. We do not capitalize amounts beyond the actual interest expense incurred in the period.
Asset retirement obligation
An asset retirement obligation, or ARO, is a liability associated with the eventual retirement of a fixed asset.
The fair value of an ARO is recorded as a liability in the period when the obligation arises. The fair value of the ARO is measured using expected future discounted cash outflows. When the liability is recognized, we also capitalize the related ARO cost by adding it to the carrying amount of the related fixed asset. Each period, the liability is increased for the change in its present value. Changes in the amount or timing of the estimated ARO are recorded as an adjustment to the related liability and asset.
Held-for-sale assets and disposal group
Individual assets or subsidiaries to be disposed of, by sale or otherwise in a single transaction, are classified as held-for-sale if all of the following criteria are met at the period end:
•Management, having the authority to approve the action, commits to a plan to sell the assets or subsidiaries;
•The asset or subsidiaries are available for immediate sale in its (their) present condition subject only to terms that are usual and customary for such sales;
•An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;
•The sale is probable; and
•The transfer is expected to qualify for recognition as a completed sale, within one year.
The term probable refers to a future sale that is likely to occur, the asset or subsidiaries (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
A disposal group is classified as discontinued operations if the following criteria are met: (1) a component of an entity or group of components that has been disposed of by sale, disposed of other than by sale or is classified as held-for-sale that represents a strategic shift that has or will have a major effect on our financial results and operations, or (2) an acquired business or non-profit activity (the entity to be sold) that is classified as held-for-sale on the date of the acquisition.
Assets or subsidiaries held-for-sale are carried at the lower of their carrying amount and fair value less costs to sell. Interest and other expenses attributable to the liabilities of a disposal group classified as held-for-sale shall continue to be accrued. Upon classification as held-for-sale, the assets are no longer depreciated.
If, at any time, the criteria for held-for-sale is no longer met, then the asset or disposal group will be reclassified to held and used. The asset or disposal group will be valued at the lower of the carrying amount before the asset or disposal group was classified as held-for-sale (as adjusted for any subsequent depreciation and amortization), and its fair value. Any adjustment to the value is shown in consolidated statements of operations for the period in which the criterion for held-for-sale was not met.
Impairment of long-lived assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. In assessing the recoverability of our vessels’ carrying amounts, we make assumptions regarding estimated future cash flows, estimates in respect of residual or scrap value and whether the vessel is in substance under development. Management performs an annual impairment assessment and when such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over their respective fair value.
Other-than-temporary impairment of investments
Where there are indicators that fair value is below carrying value of our investments, we will evaluate these for other-than-temporary impairment. Consideration will be given to (1) the length of time and the extent to which fair value is below carrying value, (2) the financial condition and near-term prospects of the investee, and (3) our intent and ability to hold the investment until any anticipated recovery. Where determined to be other-than-temporary impairment, we will recognize an impairment loss in the period in the line item "Equity in net (losses) earnings of affiliates" the consolidated statements of operations.
Deferred charges
Costs associated with long-term financing, including debt arrangement fees, are deferred and amortized over the term of the relevant loan under the effective interest method. Amortization of debt issuance costs is included in interest expense. These costs are presented as a deduction from the corresponding liability, consistent with debt discounts.
Derivatives
We use derivatives to reduce market risks associated with our operations. We use interest rate swaps for the management of interest rate risk exposure. The interest rate swaps effectively convert a portion of our debt from a floating to a fixed rate over the life of the transactions without an exchange of underlying principal.
We seek to reduce our exposure to fluctuations in foreign exchange rates through the use of foreign currency forward contracts.
From time to time, we enter into equity swaps. Under these facilities, we swap with our counterparty (usually a major bank) the risk of fluctuations in our share price and the benefit of any dividends, for a fixed payment of LIBOR plus margin. The counterparty may acquire shares in the Company to hedge its own position.
All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying consolidated balance sheets and subsequently remeasured to fair value, regardless of the purpose or intent for holding the derivative. Where the fair value of a derivative instrument is a net liability, the derivative instrument is classified in "Other current liabilities"
in the consolidated balance sheets. Where the fair value of a derivative instrument is a net asset, the derivative instrument is classified in "Other current assets" and "Other non-current assets" in the consolidated balance sheets, depending on its maturity. The changes in fair value of derivative financial instruments (excluding the oil derivative instrument) are recognized each period in current earnings in "(Losses)/gains on derivative instruments" in the consolidated statements of operations. We do not apply hedge accounting.
The fair value of the oil derivative instrument was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the LTA. Significant inputs used in the valuation of the oil derivative instrument include management’s estimate of an appropriate discount rate and the length of time to blend the long-term and the short-term oil prices obtained from quoted prices in active markets. The changes in fair value of our oil derivative instrument is recognized in each period in current earnings in "Realized and unrealized gain on oil derivative instrument".
Convertible bonds
We account for debt instruments with convertible features in accordance with the details and substance of the instruments at the time of their issuance. For convertible debt instruments issued at a substantial premium to equivalent instruments without conversion features, or those that may be settled in cash upon conversion, it is presumed that the premium or cash conversion option represents an equity component.
Accordingly, we determine the carrying amounts of the liability and equity components of such convertible debt instruments by first determining the carrying amount of the liability component by measuring the fair value of a similar liability that does not have an equity component. The carrying amount of the equity component representing the embedded conversion option is then determined by deducting the fair value of the liability component from the total proceeds from the issue. The resulting equity component is recorded, with a corresponding offset to debt discount which is subsequently amortized to interest cost using the effective interest method over the period the debt is expected to be outstanding as an additional non-cash interest expense. Transaction costs associated with the instrument are allocated pro-rata between the debt and equity components.
For conventional convertible bonds which do not have a cash conversion option or where no substantial premium is received on issuance, it may not be appropriate to separate the bond into the liability and equity components.
Provisions
In the ordinary course of business, we are subject to various claims, lawsuits and complaints. Management, in consultation with internal and external advisers, will provide for a contingent loss in the financial statements if the contingency had occurred at the date of the financial statements and the likelihood of loss was probable and the amount can be reasonably estimated. If we determine that the reasonable estimate of the loss is a range and there is no best estimate within the range, we will provide the lower amount within the range.
Pensions
Defined benefit pension costs, assets and liabilities requires the significant actuarial assumptions to be adjusted annually to reflect current market and economic conditions. Our accounting policy states that full recognition of the funded status of defined benefit pension plans is to be included within our consolidated balance sheets. The pension benefit obligation is calculated by using a projected unit credit method.
Defined contribution pension costs represent the contributions payable to the scheme in respect of the accounting period and are recorded in the consolidated statements of operations.
Guarantees
Guarantees issued by us, excluding those that are guaranteeing our own performance, are recognized at fair value at the time that the guarantees are issued, or upon the deconsolidation of a subsidiary, and reported in "Other current liabilities" and "Other non-current liabilities". A liability is recognized to the fair value of the obligation undertaken in issuing the guarantee. If it becomes probable that we will have to perform under a guarantee, we will recognize an additional liability if (and when) the amount of the loss can be reasonably estimated. The recognition of fair value is not required for certain guarantees such as the parent's guarantee of a subsidiary's debt to a third party. For those guarantees excluded from the above guidance requiring the fair value recognition provision of the liability, financial statement disclosures of such items are made.
Financial guarantees are assessed for credit losses and any allowance is presented as a liability for off-balance sheet credit exposures where the balance exceeds the collateral provided over the remaining instrument life. The allowance is assessed at the individual guarantee level, calculated by multiplying the balance exposed on default by the probability of default and loss given default over the term of the guarantee.
Treasury shares
Treasury shares are recognized as a separate component of equity at an amount corresponding to the purchase consideration transferred to repurchase its shares. Upon subsequent disposal of treasury shares, any consideration is recognized directly in equity.
Stock-based compensation
Our stock-based compensation includes both stock options and restricted stock units ("RSUs").
We expense the fair value of stock-based compensation issued to employees and non-employees over the period the stock options or RSUs vest. We amortize stock-based compensation for awards on a straight-line basis over the period during which the individuals are required to provide service in exchange for the reward - the requisite service (vesting) period. No compensation cost is recognized for stock-based compensation for which the individuals do not render the requisite service. The fair value of stock options is estimated using the Black-Scholes option pricing model. The fair value of RSUs is estimated using the market price of the Company's common stock at grant date.
Earnings per share
Basic earnings per share ("EPS") is computed based on the income available to common stockholders and the weighted average number of shares outstanding for basic EPS. Treasury shares are not included in the calculation. Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments. Such potentially dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share.
Income taxes
Income taxes are based on a separate return basis. The guidance on "Income Taxes" prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Penalties and interest related to uncertain tax positions are recognized in “Income taxes” in the consolidated statements of operations.
Deferred taxes
Deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the deferred income tax asset is dependent on generating sufficient taxable income in future years.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet
date. Income tax relating to items recognized directly in the statement of comprehensive income is recognized in the statement of changes in equity and not in the consolidated statements of operations.
Business combinations
When the assets acquired and liabilities assumed constitute a business, then the acquisition is a business combination. If substantially all of the fair value of the gross asset acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset is not considered a business. Business combinations are accounted for under the acquisition method. On acquisition, the identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. In instances where the cost of acquisition is lower than the fair values of the identifiable net assets acquired (i.e. bargain purchase), the difference is credited to the statement of operations in the period of acquisition. The consideration transferred for an acquisition is measured at fair value of the consideration given. Acquisition related costs are expensed as incurred. The results of operations of acquired businesses are included from the date of acquisition.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, we will recognize a measurement-period adjustment during the period in which we determine the amount of the adjustment, including the effect on earnings of any amounts we would have recorded in previous periods if the accounting had been completed at the acquisition date.
Related parties
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also related if they are subject to common control or significant influence. Amounts due from related parties are presented net of allowances for credit losses, which are calculated using a loss rate applied against an aging matrix.
Segment reporting
A segment is a distinguishable component of the business that is engaged in business activities from which we earn revenues and incur expenses whose operating results are regularly reviewed by the chief operating decision maker ("CODM"), and which are subject to risks and rewards that are different from those of other segments. We have identified four reportable industry segments: Shipping, FLNG, Power and Corporate and other.
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3.
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RECENTLY ISSUED ACCOUNTING STANDARDS
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Adoption of new accounting standards
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments, including ASU 2018-19, ASU 2019-04 and ASU 2019-11: Codification Improvements to Topic 326 ‘‘Financial Instruments-Credit Losses”. Topic 326 replaces the incurred loss impairment methodology with a requirement to recognize lifetime expected credit losses (measured over the contractual life of the instrument) immediately, based on information about past events, current conditions and forecasts of future economic conditions. This will reflect the net amount expected to be collected from the financial asset and is referred to as the current expected credit loss or "CECL" methodology, with measurement applicable to financial assets measured at amortized cost as well as off-balance sheet credit exposures not accounted for as insurance (including financial guarantees). Topic 326 also makes changes to the accounting for available-for-sale debt securities and purchased credit deteriorated financial assets, however, no such financial assets existed on date of adoption or in the reporting periods covered by these consolidated financial statements.
Using the modified retrospective method, reporting periods beginning after January 1, 2020 are presented under Topic 326 while comparative periods continue to be reported in accordance with previously applicable GAAP and have not been restated. The adoption of Topic 326 did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU remove some disclosure requirements relating to transfers between Level 1 and Level 2 of the fair value hierarchy and introduce new disclosure requirements for Level 3 measurements. We adopted the disclosure improvements prospectively on January 1, 2020, but this amendment has not
had a material impact on our disclosure requirements as we do not have any transfers between Level 1 and Level 2 and we have no Level 3 measurements as of December 31, 2020.
In October 2018, the FASB issued ASU 2018-17 Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest Entities. The amendments in this ASU specify that for the purposes of determining whether a decision-making fee is a variable interest, a company is now required to consider indirect interests held through related parties under common control on a proportionate basis as opposed to as a direct investment. We are required to adopt the codification improvements retrospectively using a cumulative-effect method to retained earnings of the earliest period presented herein, but the amendment had no impact on historic consolidation assessments or retained earnings, as of January 1, 2020.
In March 2020, the FASB issued ASU 2020-03 Financial Instruments (Topic 825) - Codification Improvements. The amendments in this ASU propose seven clarifications to improve the understandability of existing guidance, including that fees between debtor and creditor and third-party costs directly related to exchanges or modifications of debt instruments include line-of-credit or revolving debt arrangements. We adopted the codification improvements that were effective on issuance from January 1, 2020 under the specified transition approach connected with each of the codification improvements. This amendment has not had a material impact on our consolidated financial statements or related disclosures, including retained earnings, as of January 1, 2020.
Accounting pronouncements that have been issued but not yet adopted
The following table provides a brief description of other recent accounting standards that have been issued but not yet adopted:
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Standard
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Description
|
Date of Adoption
|
Effect on our Consolidated Financial Statements or Other Significant Matters
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ASU 2018-14 Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.
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Removes some disclosure requirements that are not expected to materially change Golar’s existing note. Introduces new disclosure requirements including an explanation of the reasons for significant gains and losses relating to changes in the projected benefit obligation.
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January 1, 2021
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No material impact expected on disclosure requirements.
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ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.
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The amendment removes certain exceptions previously available and provides some additional calculation rules to help simplify the accounting for income taxes.
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January 1, 2021
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No impacts are expected as a result of the adoption of this ASU.
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ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting; and
ASU 2021-01 Reference Rate Reform (Topic 848): Scope.
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The amendments provide temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The applicable expedients for us are in relation to modifications of contracts within the scope of Topic 310, Receivables, Topic 470, Debt, and Topic 842, Leases. This optional guidance may be applied prospectively from any date beginning March 12, 2020 and cannot be applied to modifications that occur after December 31, 2022.
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Under evaluation
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Under evaluation
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Standard
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Description
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Date of Adoption
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Effect on our Consolidated Financial Statements or Other Significant Matters
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ASU 2020-06 Debt – Debt with Equity and Other Options (Topic 470) and Contracts in Entity’s Own Equity (Topic 815).
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The amendments simplify the issuer’s accounting for convertible instruments and its application of the equity classification guidance. The new guidance eliminates some of the existing models for assessing convertible instruments, which results in more instruments being recognized as a single unit of account on the balance sheet and expands disclosure requirements. The new guidance simplifies the assessment of contracts in an entity’s own equity and existing EPS guidance in ASC 260. This optional guidance is effective on a modified retrospective basis on January 1, 2022.
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Under evaluation
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Under evaluation
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The following table lists our significant subsidiaries and their purpose as at December 31, 2020. Unless otherwise indicated, we own a 100% ownership interest in each of the following subsidiaries.
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Name
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Jurisdiction of Incorporation
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Purpose
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Golar GP LLC – Limited Liability Company
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Marshall Islands
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Holding company
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Gimi Holding Company Limited (a)
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Bermuda
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Holding company
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Golar Shoreline LNG Limited
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Bermuda
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Holding company
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Golar Hilli LLC (b)
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Marshall Islands
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Holding company
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Golar LNG Energy Limited
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Bermuda
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Holding company
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Golar Hull M2022 Corporation
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Marshall Islands
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Leases Golar Crystal*
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Golar LNG NB10 Corporation
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Marshall Islands
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Leases Golar Glacier*
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Golar Hull M2048 Corporation
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Marshall Islands
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Leases Golar Ice*
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Golar LNG NB11 Corporation
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Marshall Islands
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Leases Golar Kelvin*
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Golar Hull M2021 Corporation
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Marshall Islands
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Leases Golar Seal*
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Golar Hull M2047 Corporation
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Marshall Islands
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Leases Golar Snow*
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Golar LNG NB13 Corporation
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Marshall Islands
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Leases Golar Tundra*
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Golar LNG 2216 Corporation
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Marshall Islands
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Owns and operates Golar Arctic
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Golar Hull M2027 Corporation
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Marshall Islands
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Owns and operates Golar Bear
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Golar LNG NB12 Corporation
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Marshall Islands
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Owns and operates Golar Frost
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Golar Gandria N.V.
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Curaçao
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Owns and operates Golar Gandria
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Gimi MS Corporation (c)
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Marshall Islands
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Owns Gimi
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Golar Hilli Corp. (b)
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Marshall Islands
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Owns Hilli Episeyo ("Hilli")
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Golar Management (Bermuda) Limited
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Bermuda
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Management company
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Golar Management Limited
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United Kingdom
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Management company
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Golar Management Norway AS
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Norway
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Vessel management company
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Golar Management Malaysia SDN. BHD.
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Malaysia
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Vessel management company
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Golar Management D.O.O
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Croatia
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Vessel management company
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(a) In July 2019, Gimi Holding Company Limited was incorporated and is wholly owned by Golar LNG. In October 2019, Golar LNG transferred its ownership in Gimi MS Corporation to Gimi Holding Company Limited.
(b) In February 2018, Golar Hilli LLC was incorporated with Golar LNG as sole member. In July 2018, shares in Golar Hilli Corp. (a 89% owned subsidiary of Golar Hilli LLC) were exchanged for Hilli Common Units, Series A Special Units and Series B Special Units. See note 5 for further details.
(c) In November 2018, Gimi MS Corporation ("Gimi MS Corp") was incorporated with Golar LNG as sole shareholder. In February 2019, the Gimi was transferred to Gimi MS Corp from Golar Gimi Corporation. In April 2019, First FLNG Holdings Pte. Ltd. ("First FLNG Holdings"), an indirect wholly-owned subsidiary of Keppel Capital, acquired a 30% share in Gimi MS Corp. See note 5 for further details.
* The above table excludes mention of the lessor variable interest entities (''lessor VIEs'') that we have leased vessels from under finance leases. The lessor VIEs are wholly-owned, newly formed special purpose vehicles ("SPVs") of financial institutions. While we do not hold any equity investments in these SPVs, we have concluded that we are the primary beneficiary of these lessor VIEs and accordingly have consolidated these entities into our financial results. See note 5 for further details.
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5.
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VARIABLE INTEREST ENTITIES ("VIEs")
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As of December 31, 2020, we leased nine vessels (December 31, 2019: eight vessels) from VIEs as part of sale and leaseback agreements, of which four were with ICBC Finance Leasing Co. Ltd (“ICBCL”) entities, one with a China Merchants Bank Co. Ltd (“CMBL”) entity, one with a CCB Financial Leasing Corporation Limited (“CCBFL”) entity, one with a COSCO Shipping entity, one with a China State Shipbuilding Corporation entity (“CSSC”) entity and one with a AVIC International Leasing Company Limited (“AVIC”) entity. Each of the ICBCL, CMBL, CCBFL, COSCO Shipping. CSSC and AVIC entities are wholly-owned, newly formed special purpose vehicles (“Lessor SPV”). In each of these transactions, we sold our vessel and then subsequently leased back the vessel on a bareboat charter for a term of seven to ten years. We have options to repurchase each vessel at fixed predetermined amounts during their respective charter periods and an obligation to repurchase each vessel at the end of each vessel's respective lease period.
While we do not hold any equity investments in the above SPVs, we have determined that we have a variable interest in these SPVs and that these lessor entities, that own the vessels, are VIEs. Based on our evaluation of the agreements, we have concluded that we are the primary beneficiary of these VIEs and, accordingly, these lessor VIEs are consolidated into our financial results. We did not record any gains or losses from the sale of these vessels as they continued to be reported as vessels at their original costs in our consolidated financial statements at the time of each transaction. Similarly, the effect of the bareboat charter arrangement is eliminated upon consolidation of the lessor SPV. The equity attributable to the respective lessor VIEs are included in non-controlling interests in our consolidated financial statements. As of December 31, 2020 and 2019, the respective vessels are reported under “Vessels and equipment, net” or “Asset under development” in our consolidated balance sheets.
During the year ended December 31, 2020, we entered into a 1 year sale and leaseback arrangement with CSSC for LNG Croatia (formerly known as Golar Viking) with a sale value of $145.0 million for the funding of the conversion of the LNG carrier. Concurrent with the sale of the vessel to LNG Hrvatska d.o.o. on December 22, 2020, we have repurchased the vessel and terminated the sale and leaseback arrangement with CSSC (note 15 and 18). Consequently it resulted in the deconsolidation of the lessor VIE reflected against non-controlling interest of $4.8 million on our consolidated balance sheet.
The following table gives a summary of the sale and leaseback arrangements, including repurchase options and obligations as of December 31, 2020:
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Vessel
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Effective from
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Lessor
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Sales value (in $ millions)
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Lease duration
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First repurchase option (in $ millions)
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Date of first repurchase option
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Net repurchase obligation at end of lease term (in $ millions)
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End of lease term
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Golar Glacier
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October 2014
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ICBCL
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204.0
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10 years
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173.8
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October 2019 (1)
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116.7
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October 2024
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Golar Kelvin
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January 2015
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ICBCL
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204.0
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10 years
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173.8
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January 2020 (1)
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116.7
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January 2025
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Golar Snow
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January 2015
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ICBCL
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204.0
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10 years
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173.8
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January 2020 (1)
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116.7
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January 2025
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Golar Ice
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February 2015
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ICBCL
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204.0
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10 years
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173.8
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February 2020 (1)
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116.7
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February 2025
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Golar Tundra
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November 2015
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CMBL
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254.6
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10 years
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168.7
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November 2018 (1)
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51.3
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November 2025
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Golar Seal
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March 2016
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CCBFL
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203.0
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10 years
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132.8
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March 2018(1)
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63.4
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March 2026
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Golar Crystal
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March 2017
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COSCO
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187.0
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10 years
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97.3
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March 2020 (1)
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50.0
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March 2027
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Hilli
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June 2018
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CSSC
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1,200.0
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10 years
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633.2
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June 2023
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300.0
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June 2028
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Golar Bear
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June 2020
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AVIC
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160.0
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7 years
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100.7
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June 2021
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45.0
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June 2027
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(1) We did not exercise the first repurchase option.
A summary of our payment obligations (excluding repurchase options and obligations) under the bareboat charters with the lessor VIEs as of December 31, 2020, are shown below:
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(in thousands of $)
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2021
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2022
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2023
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2024
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2025
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2026+
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Golar Glacier
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17,100
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17,100
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17,100
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12,884
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—
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—
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Golar Kelvin
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17,100
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17,100
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17,100
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15,695
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—
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—
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Golar Snow
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17,100
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17,100
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17,100
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15,695
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—
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—
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Golar Ice
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17,100
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17,100
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17,100
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17,147
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1,452
|
—
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Golar Tundra (1)(2)
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80,203
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—
|
—
|
—
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—
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—
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Golar Seal (2)
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—
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68,621
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—
|
—
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—
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—
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Golar Crystal (1)
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9,903
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9,932
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9,951
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9,979
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9,982
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12,499
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Hilli (1)
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102,874
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99,645
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96,416
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93,265
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89,958
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190,590
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Golar Bear (1)
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13,923
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13,490
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13,058
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12,635
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12,193
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14,081
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(1) The payment obligations relating to the Golar Tundra, Golar Crystal, Hilli and Golar Bear above includes variable rental payments due under the lease based on assumed LIBOR plus a margin.
(2) The payment obligations relating to the Golar Tundra and Golar Seal have been presented in 2021 and 2022 even though the maturities of the lease obligations are in November 2025 and March 2026, due to the call option and put option maturing in June 2021 and January 2022, respectively (note 18).
The assets and liabilities of the lessor VIEs that most significantly impact our consolidated balance sheets as of December 31, 2020 and 2019, are as follows:
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(in thousands of $)
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Golar Glacier
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Golar Kelvin
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Golar Snow
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Golar Ice
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Golar Tundra
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Golar Seal
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Golar Crystal
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Hilli
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Golar Bear
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2020
|
2019
|
Assets
|
|
|
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Total
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Total
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Restricted cash and short-term deposits (note 12)
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69
|
|
11
|
|
1,467
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|
1,521
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|
—
|
|
3,432
|
|
4,990
|
|
16,670
|
|
8,715
|
|
36,875
|
|
34,947
|
|
|
|
|
|
|
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|
|
|
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|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and short-term debt (1)
|
(110,625)
|
|
(128,563)
|
|
(111,108)
|
|
(83,857)
|
|
(10,215)
|
|
—
|
|
(8,220)
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|
(413,394)
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|
—
|
|
(865,982)
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|
(963,005)
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|
Long-term interest bearing debt - non-current portion (1)
|
—
|
|
—
|
|
—
|
|
—
|
|
(79,235)
|
|
(89,752)
|
|
(74,984)
|
|
(277,487)
|
|
(103,661)
|
|
(625,119)
|
|
(617,124)
|
|
|
(110,625)
|
|
(128,563)
|
|
(111,108)
|
|
(83,857)
|
|
(89,450)
|
|
(89,752)
|
|
(83,204)
|
|
(690,881)
|
|
(103,661)
|
|
(1,491,101)
|
|
(1,580,129)
|
|
(1) Where applicable, these balances are net of deferred finance charges (note 18).
The most significant impact of the lessor VIE's operations on our consolidated statements of operations and consolidated statements of cash flows, for the years ended December 31, 2020, 2019 and 2018 are as follows:
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|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
2018
|
Statement of income
|
|
|
|
Interest expense
|
34,733
|
|
69,373
|
|
61,502
|
|
|
|
|
|
Statement of cash flows
|
|
|
|
Net debt repayments
|
(550,663)
|
|
(410,737)
|
|
(299,776)
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|
Net debt receipts
|
459,707
|
|
144,278
|
|
1,061,000
|
|
In 2018, we and affiliates of Keppel Shipyard Limited (“Keppel”) and Black & Veatch Corporation (“B&V”) (together, the “Sellers"), completed the sale (“Hilli Disposal”) to Golar Partners of common units (the “Hilli Common Unit”) in our consolidated subsidiary Golar Hilli LLC (“Hilli LLC”), which owns Golar Hilli Corp. (“Hilli Corp”), the disponent owner of the Hilli for $658 million, less 50% of our net lease obligations.
The Hilli Disposal resulted in the following changes to our ownership interest in our consolidated subsidiary Hilli LLC in our equity:
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|
|
|
|
|
(in thousands of $)
|
December 31, 2018
|
|
Net loss attributable to stockholders of Golar LNG Limited
|
(231,428)
|
|
|
Transfer to the non-controlling interests: increase in Golar LNG Limited’s paid-in capital for sale of 1096 Hilli Common Units in July 2018
|
304,468
|
|
|
Changes from net loss attributable to stockholders of Golar LNG Limited and transfers to non-controlling interests
|
73,040
|
|
|
Concurrently with the closing of the Hilli Disposal, we entered into the Amended and Restated Limited Liability Company Agreement of Hilli LLC (the “LLC Agreement”) on July 12, 2018. The ownership interests in Hilli LLC are represented by three classes of units: the Hilli Common Units, the Series A Special Units and the Series B Special Units. After the Hilli Disposal, the ownership structure of Hilli LLC is as follows:
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|
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|
|
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|
|
|
Percentage ownership interest
|
|
Common Units
|
Series A Special Units
|
Series B Special Units
|
Golar LNG Limited
|
44.6
|
%
|
89.1
|
%
|
89.1
|
%
|
Golar Partners
|
50.0
|
%
|
—
|
%
|
—
|
%
|
Keppel
|
5.0
|
%
|
10.0
|
%
|
10.0
|
%
|
B&V
|
0.4
|
%
|
0.9
|
%
|
0.9
|
%
|
We are the managing member of Hilli LLC and are responsible for all operational, management and administrative decisions relating to Hilli LLC’s business. We have retained sole control over the most significant activities and the greatest exposure to variability in residual returns and expected losses from the Hilli and, as a result, management has concluded that Hilli LLC is a VIE and that we are the primary beneficiary. As such, we continue to consolidate both Hilli LLC and Hilli Corp.
All three classes of ownership interests in Hilli LLC have certain participating and protective rights. We reflect Keppel and B&V’s ownership in Hilli LLC’s Series A Special Units and Series B Special Units as non-controlling interests in our financial statements.
The LLC Agreement provides that within 60 days after the end of each quarter (commencing with the quarter ending September 30, 2018), we, in our capacity as the managing member of Hilli LLC, shall determine the amount of Hilli LLC’s available cash and appropriate reserves (including cash reserves for future maintenance capital expenditures, working capital and other matters), and Hilli LLC shall make a distribution to the unitholders of Hilli LLC (the “Hilli Unitholders”) of the available cash, subject to such reserves. Hilli LLC shall make distributions to the Hilli Unitholders when, as and if declared by us; provided, however, that no distributions may be made on the Hilli Common Units on any distribution date unless Series A Distributions (defined below) and Series B Distributions (defined below) for the most recently ended quarter and any accumulated Series A Distributions and Series B Distributions in arrears for any past quarter have been or contemporaneously are being paid or provided for.
Series A Special Units:
The Series A Special Units rank senior to the Hilli Common Units and on par with the Series B Special Units. Upon termination of the LTA, Hilli LLC has a right to redeem the Series A Special Units from legally available funds at a redemption price of $1 (per Series A Special Unit) plus any unpaid distributions. There are no conversion features on the Series A Special Units. “Series A Distributions” reflect all incremental cash receipts by Hilli Corp during such quarter when Brent Crude prices rise above $60 per barrel with contractually defined adjustments.
Series B Special Units:
The Series B Special Units rank senior to the Hilli Common Units and on par with the Series A Special Units. There are no conversion or redemption features on the Series B Special Units. Incremental returns generated from future vessel expansion capacity (currently uncontracted and excluding the exercise of additional capacity under the existing LTA) include cash receipts and contractually defined adjustments. Of such vessel expansion capacity distributions (“Series B Distributions”):
•holders of Series B Special Units are entitled to 95% of these distributions, and
•holders of Hilli Common Units are entitled to 5% of these distributions.
Hilli Common Units:
Distributions attributable to Hilli Common Unitholders are not declared until any accumulated Series A Special Units and Series B Special Units distributions have been paid. As discussed above, Hilli Common Unitholders are entitled to receive a pro rata share of 5% of the vessel expansion capacity distributions.
Impact of partial disposal:
Hilli LLC is an entity where the economic results are allocated based on the LLC Agreement rather than relative ownership percentages. This is due to the different classes of equity within the Hilli LLC entity, as discussed above (Hilli Common Units, Series A Special Units, Series B Special Units). As the LLC Agreement is a substantive contractual arrangement that specifies the allocation of cash proceeds, management has allocated the results of the Hilli LLC entity based on this.
The main assumption made in the above exercise was to make certain assumptions about the allocation of non-cash components. Specifically, the unrealized mark-to-market movement in the oil derivative instrument is allocated to the Series A Special Unit holders only as they are the only unit holders who benefit from the oil-linked revenues, and the cost of the Hilli asset is allocated between the Hilli Common Unit holders and the Series B Special Unit holders. This split follows the allocation of cash revenues associated with the capacity of the asset to the Hilli Common Unit holders and the Series B Special Unit holders.
Summarized financial information of Hilli LLC
The assets and liabilities of Hilli LLC(1) that most significantly impacted our consolidated balance sheet as of December 31, 2020 and 2019, are as follows:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Balance sheet
|
|
|
Current assets
|
65,629
|
|
64,507
|
|
Non-current assets
|
1,203,805
|
|
1,300,065
|
|
Current liabilities
|
(447,701)
|
|
(496,029)
|
|
Non-current liabilities
|
(345,058)
|
|
(418,578)
|
|
(1) As Hilli LLC is the primary beneficiary of the Hilli Lessor VIE (see above) the Hilli LLC balances include the Hilli Lessor VIE.
The most significant impacts of Hilli LLC VIE's operations on our consolidated statements of operations and consolidated statements of cash flows, as of December 31, 2020 and 2019, are as follows:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Statement of income
|
|
|
Liquefaction services revenue
|
226,061
|
|
218,096
|
|
Realized and unrealized losses on the oil derivative instrument
|
(42,561)
|
|
(26,001)
|
|
|
|
|
Statement of cash flows
|
|
|
Net debt repayments
|
(322,304)
|
|
(243,513)
|
|
Net debt receipts
|
230,721
|
|
129,454
|
|
In April 2019, Gimi MS Corporation (“Gimi MS”) entered into a Subscription Agreement with First FLNG Holdings Pte. Ltd. (“First FLNG Holdings”), an indirect wholly-owned subsidiary of Keppel Capital, in respect to First FLNG Holdings' participation in a 30% share of FLNG Gimi. Gimi MS will construct, own and operate FLNG Gimi and First FLNG Holdings subscribed for 30% of the total issued ordinary share capital of Gimi MS for a subscription price equivalent to 30% of the estimated project cost. Under the Subscription Agreement, Gimi MS may call for cash from the shareholders for any future funding requirements and shareholders are required to contribute to such cash calls up to a defined cash call contribution.
Concurrent with the closing of the sale of the common units, we have determined that (i) Gimi MS is a VIE, (ii) we are the primary beneficiary and retain sole control over the most significant activities and the greatest exposure to variability in residual returns and expected losses from the Gimi. Thus, Gimi MS continues to be consolidated into our financial statements.
Summarized financial information of Gimi MS
The assets and liabilities of Gimi MS that most significantly impacted our consolidated balance sheet as of December 31, 2020 and 2019, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
Notes
|
2020
|
2019
|
Balance sheet
|
|
|
|
Current assets
|
|
15,505
|
|
24,894
|
|
Non-current assets
|
15
|
658,247
|
|
434,248
|
|
Current liabilities
|
|
(33,844)
|
|
(9,697)
|
|
Non-current liabilities
|
|
(277,932)
|
|
(107,902)
|
|
The most significant impacts of Gimi MS VIE's operations on our consolidated statement of cash flows, as of December 31, 2020 and 2019, are as follows:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Statement of cash flows
|
|
|
Additions to asset under development
|
217,590
|
|
376,276
|
|
Financing costs paid
|
(11,302)
|
|
(20,938)
|
|
Net debt receipts
|
170,000
|
|
130,000
|
|
Proceeds from subscription of equity interest
|
11,081
|
|
115,246
|
|
In 2020, we changed the way in which we report and measure our reportable segments. The main driver of the change is the alignment of presentation and contents of financial information provided to our chief operating decision maker (our Board of Directors), required to allocate resources, evaluate and manage both our standalone operating segments and our overall business performance. The key impacts of the changes are:
•The profitability of our reportable segments is now measured based on “Adjusted EBITDA”. Previously, our reportable segments profit measure was “Operating Income”. We believe that Adjusted EBITDA assists management's and our investors' decision making by increasing the comparability of our performance from period to period and against the performance of other companies in our industry.
•Our “Vessel operations” segment is separated into “Shipping” and “Corporate and other” segments. Our “Shipping” segment is based on the business activities of the transportation of LNG carriers while “Corporate and other” segment captures our business of vessel management and administrative services predominantly to our affiliates, Golar Partners and Hygo plus our corporate overhead costs.
•Management has therefore determined that the volatility and risks of our “Shipping” business differ significantly from Corporate and other segment and that both business operations are distinguishable components of our overall business which are regularly reviewed and monitored by the chief operating decision maker.
Management has therefore concluded that we provide four distinct services and operate in the following four reportable segments:
•Shipping – This segment is based on the business activities of the transportation of LNG carriers. We operate and subsequently charter out LNG carriers on fixed terms to customers.
•FLNG – This segment is based on the business activities of FLNG vessels or projects. We convert LNG carriers into FLNG vessels and subsequently charter them out to customers. We currently have one operational FLNG, the Hilli, one undergoing conversion, the Gimi (note 15), and one LNG carrier earmarked for conversion, the Gandria.
•Power – This segment is based on the business activities of power generation infrastructure. We have a 50/50 joint venture, Hygo, with private equity firm Stonepeak. Hygo offers integrated LNG based downstream solutions, through the ownership and operation of FSRUs and associated terminal and power generation infrastructure.
•Corporate and other – This segment is based on the business activities of vessel management and administrative services and our corporate overhead costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
(in thousands of $)
|
Shipping
|
FLNG
|
Power
|
Corporate and other (1)
|
Total
|
Statement of Operations:
|
|
|
|
|
|
Total operating revenues
|
191,881
|
|
226,061
|
|
—
|
|
20,695
|
|
438,637
|
|
Vessel operating expenses
|
(57,326)
|
|
(52,104)
|
|
—
|
|
504
|
|
(108,926)
|
|
Voyage, charterhire and commission expenses
|
(12,634)
|
|
—
|
|
—
|
|
—
|
|
(12,634)
|
|
Administrative expenses
|
(2,211)
|
|
(1,672)
|
|
—
|
|
(31,428)
|
|
(35,311)
|
|
Project development expenses
|
(112)
|
|
(2,793)
|
|
—
|
|
(5,986)
|
|
(8,891)
|
|
Realized gains on oil derivative instrument (note 2)
|
—
|
|
2,539
|
|
—
|
|
—
|
|
2,539
|
|
Other operating income
|
3,262
|
|
—
|
|
—
|
|
—
|
|
3,262
|
|
Adjusted EBITDA
|
122,860
|
|
172,031
|
|
—
|
|
(16,215)
|
|
278,676
|
|
|
|
|
|
|
|
Equity in net losses of affiliates
|
—
|
|
—
|
|
(39,158)
|
|
(137,369)
|
|
(176,527)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
(in thousands of $)
|
Shipping
|
FLNG
|
Power
|
Corporate and other (1)
|
Total
|
Statement of Operations:
|
|
|
|
|
|
Total operating revenues
|
208,766
|
|
218,096
|
|
—
|
|
21,888
|
|
448,750
|
|
Vessel operating expenses
|
(66,502)
|
|
(55,284)
|
|
—
|
|
496
|
|
(121,290)
|
|
Voyage, charterhire and commission expenses (including expenses from collaborative arrangement)
|
(38,053)
|
|
(788)
|
|
—
|
|
—
|
|
(38,841)
|
|
Administrative expenses
|
(2,220)
|
|
(1,526)
|
|
—
|
|
(48,425)
|
|
(52,171)
|
|
Project development expenses
|
(964)
|
|
(3,173)
|
|
—
|
|
(853)
|
|
(4,990)
|
|
Realized gains on oil derivative instrument (note 2)
|
—
|
|
13,089
|
|
—
|
|
—
|
|
13,089
|
|
Other operating income/(losses)
|
13,295
|
|
(2,962)
|
|
—
|
|
—
|
|
10,333
|
|
Adjusted EBITDA
|
114,322
|
|
167,452
|
|
—
|
|
(26,894)
|
|
254,880
|
|
|
|
|
|
|
|
Equity in net losses of affiliates
|
—
|
|
—
|
|
(23,234)
|
|
(22,565)
|
|
(45,799)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
(in thousands of $)
|
Shipping
|
FLNG
|
Power
|
Corporate and other (1)
|
Total
|
Statement of Operations:
|
|
|
|
|
|
Total operating revenues
|
278,770
|
|
127,625
|
|
—
|
|
24,209
|
|
430,604
|
|
Vessel operating expenses
|
(67,897)
|
|
(29,363)
|
|
—
|
|
400
|
|
(96,860)
|
|
Voyage, charterhire and commission expenses (including expenses from collaborative arrangement)
|
(104,397)
|
|
(1,429)
|
|
—
|
|
—
|
|
(105,826)
|
|
Administrative expenses
|
(2,221)
|
|
(140)
|
|
—
|
|
(49,181)
|
|
(51,542)
|
|
Project development expenses
|
—
|
|
(16,570)
|
|
—
|
|
(5,120)
|
|
(21,690)
|
|
Realized gains on oil derivative instrument (note 2)
|
—
|
|
26,737
|
|
—
|
|
—
|
|
26,737
|
|
Other operating income/(losses)
|
50,740
|
|
(14,018)
|
|
—
|
|
—
|
|
36,722
|
|
Adjusted EBITDA
|
154,995
|
|
92,842
|
|
—
|
|
(29,692)
|
|
218,145
|
|
|
|
|
|
|
|
Equity in net losses of affiliates
|
—
|
|
(2,047)
|
|
(16,913)
|
|
(138,676)
|
|
(157,636)
|
|
(1) Includes inter-segment eliminations arising from vessel and administrative management fees revenue between segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
(in thousands of $)
|
Shipping
|
FLNG
|
Power
|
Corporate and other (1)
|
Total
|
Balance sheet:
|
|
|
|
|
|
Total assets
|
1,870,819
|
|
1,933,677
|
|
200,337
|
|
309,396
|
|
4,314,229
|
|
Investment in affiliates
|
—
|
|
—
|
|
200,337
|
|
111,814
|
|
312,151
|
|
Capital expenditures
|
101,380
|
|
223,999
|
|
—
|
|
—
|
|
325,379
|
|
(1) During the year ended December 31, 2020, we recognized an impairment of $135.9 million against our investment in Golar Partners, presented in "Investments in affiliates" in our consolidated balance sheet. See note 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
(in thousands of $)
|
Shipping (1)
|
FLNG
|
Power
|
Corporate and other
|
Total
|
Balance sheet:
|
|
|
|
|
|
Total assets
|
2,016,427
|
|
1,814,588
|
|
261,693
|
|
539,436
|
|
4,632,144
|
|
Investment in affiliates
|
—
|
|
—
|
|
261,693
|
|
247,112
|
|
508,805
|
|
Capital expenditures
|
35,984
|
|
383,200
|
|
—
|
|
—
|
|
419,184
|
|
(1) During the year ended December 31, 2019, we impaired the LNG Croatia by $34.3 million presented in "Vessels and equipment, net" in our consolidated balance sheet. See note 16.
Revenues from external customers
On July 8, 2019, following the exit of GasLog from the Cool Pool, we consolidated the Cool Pool. From the point of consolidation, the Cool Pool ceased to be an external customer, and we no longer use a collaborative arrangement accounting. Consequently, we account for the gross revenue and voyage expenses relating to our vessels in the Cool Pool under "Time and voyage charter revenues" and "Voyage, charterhire and commission expenses", respectively.
In the years ended December 31, 2020, 2019 and 2018, revenues from the following customers accounted for over 10% of our consolidated time and voyage charter and liquefaction revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
The Cool Pool (1)
|
—
|
|
|
—
|
%
|
|
66,691
|
|
|
16
|
%
|
|
251,070
|
|
|
62
|
%
|
Perenco and SNH (2)
|
226,061
|
|
|
54
|
%
|
|
218,096
|
|
|
51
|
%
|
|
127,625
|
|
|
31
|
%
|
An international major trading house
|
46,090
|
|
|
11
|
%
|
|
25,371
|
|
|
6
|
%
|
|
—
|
|
|
—
|
%
|
A European major trading house
|
43,536
|
|
|
10
|
%
|
|
8,908
|
|
|
2
|
%
|
|
—
|
|
|
—
|
%
|
(1) The 2019 Cool Pool revenue of $66.7 million includes revenue of $23.4 million that is separately disclosed in the consolidated statements of operations as from a collaborative arrangement. The balance of $43.3 million was derived from Golar vessels operating within the Cool Pool, and is included within the caption "Time and voyage charter revenues" in the consolidated statements of operations. See note 25.
(2) LTA with Perenco Cameroon S.A. ("Perenco") and Société Nationale des Hydrocarbures ("SNH"), (together, the "Customer") in relation to the Hilli. See note 7.
The above revenues exclude vessel and other management fees from Golar Partners, Hygo and other related parties (note 25).
Geographic data
The following geographical data presents our revenues from customers and total assets with respect only to our FLNG, while operating under the LTA, in Cameroon. In time and voyage charters for LNG carriers (or our FSRU, operating as a LNG carrier), the charterer, not us, controls the routes of our vessels. These routes can be worldwide as determined by the charterers. Accordingly, the chief operating decision makers do not evaluate our performance either according to customer or geographical region.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
Cameroon
|
|
|
|
|
|
Liquefaction services revenue
|
226,061
|
|
|
218,096
|
|
|
127,625
|
|
Total assets
|
1,264,085
|
|
|
1,333,779
|
|
|
1,535,389
|
|
Contract assets arise when we render services in advance of receiving payment from our customers. Contract liabilities arise when the customer makes payments in advance of receiving the services. Changes in our contract balances during the period are as follows:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
Contract assets (1)
|
Contract liabilities (2)
|
Opening balance on January 1, 2020
|
18,656
|
|
(27,076)
|
|
Payments received for services billed in prior period
|
(17,776)
|
|
—
|
|
Services provided and billed in current period
|
233,161
|
|
—
|
|
Payments received for services billed in current period
|
(207,261)
|
|
—
|
|
Deferred commissioning period revenue
|
—
|
|
4,220
|
|
Closing balance on December 31, 2020
|
26,780
|
|
(22,856)
|
|
(1) Relates to management fee revenue and liquefaction services revenue, see a) and b) below.
(2) Relates to liquefaction services revenue, see b) below.
a) Management fee revenue:
By virtue of an agreement to offset intercompany balances entered into between us and our related parties, of our total contract asset balances above:
•$1.0 million is included in balance sheet line item "Amounts due from related parties" ($1.4 million at December 31, 2019), and
•$0.6 million is included in "Amounts due to related parties" ($0.2 million at December 31, 2019).
Refer to note 25 for further details of our management fee revenue and contract terms.
b) Liquefaction services revenue:
The Hilli is moored in close proximity to the Customer’s gasfields, providing liquefaction service capacity over the term of the LTA. Liquefaction services revenue recognized comprises the following amounts:
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
(in thousands of $)
|
2020
|
2019
|
Base tolling fee (1)
|
204,501
|
|
204,501
|
|
Amortization of deferred commissioning period revenue (2)
|
4,220
|
|
4,220
|
|
Amortization of Day 1 gain (3)
|
9,950
|
|
9,950
|
|
Overproduction revenue (4)
|
7,965
|
|
—
|
|
Other
|
(575)
|
|
(575)
|
|
Total
|
226,061
|
|
218,096
|
|
(1) The LTA bills at a base rate in periods when the oil price is $60 or less per barrel (included in "Liquefaction services revenue" in the consolidated statements of operations), and at an increased rate when the oil price is greater than $60 per barrel (recognized as a derivative and included in "Realized and unrealized gain on oil derivative instrument" in the consolidated statements of operations, excluded from revenue and from the transaction price).
(2) Customer billing during the commissioning period, prior to vessel acceptance and commencement of the contract term, of $33.8 million is considered an upfront payment for services. These amounts billed were deferred (included in "Other current liabilities" and "Other non-current liabilities" in the consolidated balance sheets) and recognized as part of "Liquefaction services revenue" in the consolidated statements of operations evenly over the contract term.
(3) The Day 1 gain was established when the oil derivative instrument was initially recognized in December 2017 for $79.6 million (recognized in "Other current liabilities" and "Other non-current liabilities" in the consolidated balance sheets). This amount is amortized and recognized as part of "Liquefaction services revenue" in the consolidated statements of operations evenly over the contract term.
(4) During the year ended December 31, 2020, we entered into an addendum to the LTA with our Customer, to be compensated for any production in excess of the base capacity set out in the LTA. This resulted in the recognition of overproduction revenue of $8.0 million included in "Liquefaction services revenue" in the consolidated statements of operations for the overproduction for the years ended December 31, 2020 and 2019.
We expect to recognize liquefaction services revenue related to the partially unsatisfied performance obligation at the reporting date evenly over the remaining contract term of less than eight years, including the components of transaction price described above.
|
|
|
|
|
|
8.
|
(LOSSES)/GAINS ON DERIVATIVE INSTRUMENTS AND OTHER FINANCIAL ITEMS, NET
|
(Losses)/gains on derivative instruments comprise of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
Mark-to-market adjustment for interest rate swap derivatives (note 24)
|
(38,601)
|
|
|
(16,485)
|
|
|
604
|
|
Interest (expense)/income on undesignated interest rate swaps (note 24)
|
(6,215)
|
|
|
6,351
|
|
|
8,069
|
|
Mark-to-market adjustment for equity derivatives (note 24)
|
(5,051)
|
|
|
(30,478)
|
|
|
(30,663)
|
|
Mark-to-market adjustment for foreign exchange swap derivatives
|
(2,556)
|
|
|
2,568
|
|
|
(1,151)
|
|
Unrealized mark-to-market losses on Earn-Out Units (note 14)
|
—
|
|
|
—
|
|
|
(7,400)
|
|
|
(52,423)
|
|
|
(38,044)
|
|
|
(30,541)
|
|
Other financial items, net comprise of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
Foreign exchange loss on operations
|
(3,221)
|
|
|
(902)
|
|
|
(1,997)
|
|
Financing arrangement fees and other costs
|
(2,138)
|
|
|
(5,735)
|
|
|
(244)
|
|
Amortization of debt guarantee (note 25)
|
4,111
|
|
|
1,242
|
|
|
861
|
|
Other
|
(304)
|
|
|
(127)
|
|
|
(101)
|
|
|
(1,552)
|
|
|
(5,522)
|
|
|
(1,481)
|
|
The components of income tax expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense
|
809
|
|
|
906
|
|
|
836
|
|
Deferred tax expense
|
172
|
|
|
118
|
|
|
431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
981
|
|
|
1,024
|
|
|
1,267
|
|
The income taxes for the years ended December 31, 2020, 2019 and 2018 differed from the amount computed by applying the Bermuda statutory income tax rate of 0% as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
Effect of movement in deferred tax balances
|
172
|
|
|
118
|
|
|
431
|
|
Effect of adjustments in respect of current tax in prior periods
|
37
|
|
|
86
|
|
|
(369)
|
|
Effect of taxable income in various countries
|
772
|
|
|
820
|
|
|
1,205
|
|
Total tax expense
|
981
|
|
|
1,024
|
|
|
1,267
|
|
Jurisdictions open to examination
The earliest tax years that remain subject to examination by the major taxable jurisdictions in which we operate are: 2019 (UK) and 2016 (Norway).
Deferred taxes
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and pensions.
As of December 31, 2020, we have a deferred tax liability of $0.6 million (2019: $1.7 million)
Basic loss per share (“EPS”) is calculated with reference to the weighted average number of common shares outstanding during the year.
The components of the numerator for the calculation of basic and diluted EPS are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
Net loss attributable to Golar LNG Ltd stockholders - basic and diluted
|
(273,557)
|
|
|
(211,956)
|
|
|
(231,428)
|
|
The components of the denominator for the calculation of basic and diluted EPS are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
2020
|
|
2019
|
|
2018
|
Basic and diluted loss per share:
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
96,983
|
|
|
100,659
|
|
|
100,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Loss per share are as follows:
|
|
|
|
|
|
Basic and diluted
|
$
|
(2.82)
|
|
|
$
|
(2.11)
|
|
|
$
|
(2.30)
|
|
The effects of stock awards and convertible bonds have been excluded from the calculation of diluted EPS for each of the years ended December 31, 2020, 2019 and 2018 because the effects were anti-dilutive.
Rental income
The minimum contractual future revenues to be received on time charters in respect of our vessels as of December 31, 2020, were as follows:
|
|
|
|
|
|
Year ending December 31
|
|
(in thousands of $)
|
|
2021
|
120,077
|
|
2022
|
58,696
|
|
2023
|
21,591
|
|
2024
|
11,024
|
|
Total minimum contractual future revenues
|
211,388
|
|
The Golar Bear charterer extended its charter period to November 2021 from the original charter termination date of June 28, 2021. We have exercised our substitution rights for the Golar Seal to service the remaining committed chartering period of the Golar Penguin from March 8, 2021.
The cost and accumulated depreciation of vessels leased to third parties at December 31, 2020 and 2019 were $2,149.1 million and $2,156.1 million; and $356.0 million and $331.5 million, respectively.
With the exception of the Hilli which has a carrying value of $1,166.4 million as of December 31, 2020, management's intention is that all owned vessels are available to be used by customers under operating lease arrangements.
The components of operating lease income were as follows:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Operating lease income(1)
|
186,706
|
|
123,292
|
|
Variable lease income (2)
|
5,175
|
|
18,783
|
|
Total operating lease income
|
191,881
|
|
142,075
|
|
(1) Total operating lease income is included in the income statement line-item “Time and voyage charter revenues”. During the year ended December 31, 2020, we chartered in an external vessel and recognized $4.6 million of operating lease income.
(2) “Variable lease income” is excluded from lease payments that comprise the minimum contractual future revenues from non-cancellable operating leases.
Rental expense
We lease certain office premises, equipment on-board our fleet of vessels and service boats supporting the Hilli under operating leases. Many lease agreements include one or more options to renew. We will include these renewal options when we are reasonably certain that we will exercise the option. The exercise of these lease renewal options is at our discretion.
Variable lease cost relates to certain of our lease agreements which include payments that vary. These are primarily generated from service charges related to our usage of office premises, usage charges for equipment on-board our fleet of vessels, adjustments for inflation, and fuel consumption for the rental of service boats supporting the Hilli.
The components of operating lease cost were as follows:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Operating lease cost (1)
|
8,951
|
|
5,603
|
|
Variable lease cost (2)
|
4,000
|
|
2,983
|
|
Total operating lease cost
|
12,951
|
|
8,586
|
|
(1) "Operating lease cost" includes short-term lease cost. During the year ended December 31, 2020, we sub-chartered out an external vessel and recognized $3.8 million of operating lease income cost in the income statement line-item "Voyage, charterhire and commission expenses".
(2) "Variable lease cost" is excluded from lease payments that comprise the operating lease liability.
Total operating lease cost is included in income statement line-items “Vessel operating expenses” and “Administrative expenses”.
As of December 31, 2020, the right-of-use assets recognized as a lessee in operating leases amounted to $14.6 million (see note 17).
Our weighted average remaining lease term for our operating leases is 5.3 years. Our weighted-average discount rate applied for the majority of our operating leases is 5.3%.
The maturity of our lease liabilities is as follows:
|
|
|
|
|
|
Year ending December 31
|
|
(in thousands of $)
|
|
2021
|
4,821
|
|
2022
|
2,967
|
|
2023
|
2,042
|
|
2024
|
1,581
|
|
2025 and thereafter
|
4,228
|
|
Total minimum lease payments
|
15,639
|
|
Total rental expense for operating leases was $13.0 million, $8.6 million and $8.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
|
|
|
|
|
|
12.
|
RESTRICTED CASH AND SHORT-TERM DEPOSITS
|
Our restricted cash and short-term deposits balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Restricted cash in relation to the Hilli (1)
|
77,212
|
|
|
75,968
|
|
Restricted cash and short-term deposits held by lessor VIEs (2)
|
36,875
|
|
|
34,947
|
|
Restricted cash relating to sale of LNG Croatia (3)
|
36,747
|
|
|
—
|
|
Restricted cash relating to interest rate swaps (4)
|
8,864
|
|
|
—
|
|
Restricted cash relating to the $1.125 billion debt facility (5)
|
2,615
|
|
|
10,975
|
|
Restricted cash relating to office lease
|
868
|
|
|
826
|
|
Restricted cash relating to the total return equity swap (6)
|
—
|
|
|
55,573
|
|
Collateral on the Margin Loan facility (7)
|
—
|
|
|
10,000
|
|
Total restricted cash and short-term deposits
|
163,181
|
|
|
188,289
|
|
Less: Amounts included in current restricted cash and short-term deposits
|
(100,361)
|
|
|
(111,545)
|
|
Long-term restricted cash
|
62,820
|
|
|
76,744
|
|
(1) In November 2015, in connection with the issuance of a $400 million letter of credit by a financial institution to our project partner involved in the Hilli FLNG project, we posted an initial cash collateral sum of $305.0 million to support the performance guarantee.
Under the provisions of the $400 million letter of credit, the terms allow for a stepped reduction in the value of the guarantee over time and thus, conversely, a reduction in the cash collateral requirements. In 2017, the $400 million letter of credit and the cash collateral requirement was reduced to $300 million and $174.6 million, respectively, with no further reduction in 2018. In 2019, the letter of credit was reduced to $250.0 million and a contractual amendment further reduced the letter of credit to $125.0 million and the cash collateral to $76.0 million. The next contractual reduction is expected to occur in 2021.
In November 2016, after certain conditions precedent were satisfied by the Company, the letter of credit required in accordance with the signed LTA was re-issued and, with an initial expiry date of December 31, 2018, the letter of credit automatically extends, on an annual basis, until the tenth anniversary of the acceptance date of the Hilli by the charterer, unless the bank should exercise its option to exit from this arrangement by giving three months' notice prior to the annual renewal date.
(2) These are amounts held by lessor VIE entities that we are required to consolidate under U.S. GAAP into our financial statements as VIEs (note 5).
(3) In December 2020, as part of the sale of LNG Croatia, $36.7 million (€30.0 million) was required to be held in an escrow account and will be lifted within 30 days post-acceptance of the vessel (note 15). The collateral was fully released in January 2021.
(4) This refers to the collateral required by certain banks for some of our interest rate swaps that have a credit arrangement which requires us to provide cash collateral when the market value of the instrument falls below a specified threshold.
(5) This refers to cash deposits required under the $1.125 billion debt facility, In June 2020, we refinanced the refinanced the proportion of the debt facility relating to Golar Bear ahead of its maturity and that resulted in $6.0 million restricted cash being released (note 18). The covenant requires that, on the second anniversary of drawdown under the facility, where we fall below a prescribed EBITDA to debt service ratio, additional cash deposits with the financial institution are required to be made or maintained.
(6) This refers to the collateral required by the bank with whom we entered into a total return equity swap. Collateral of 20% of the total purchase price is required and this is subsequently adjusted with reference to the Company's share price. In November 2019 and February 2020, we purchased 1.5 million of our shares and 1.5 million of our shares and 107,000 of Golar Partners' units underlying the total return swap, respectively that resulted in $59.3 million restricted cash being released (note 24).
(7) Collateral held against the Margin Loan facility is required to satisfy one of the mandatory prepayment events within the facility, with this having been triggered when the closing price of the Golar Partners common units pledged by us as security for the obligations under the facility fell below a defined threshold. In December 2020, the Margin Loan facility was fully repaid that resulted in the release of the associated restricted cash (note 18).
Restricted cash does not include minimum consolidated cash balances of $50.0 million (note 18) required to be maintained as part of the financial covenants for our loan facilities, as these amounts are included in “Cash and cash equivalents”.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Prepaid expenses
|
2,391
|
|
|
4,031
|
|
Other receivables
|
6,291
|
|
|
5,249
|
|
|
8,682
|
|
|
9,280
|
|
|
|
|
|
|
|
14.
|
INVESTMENTS IN AFFILIATES
|
At December 31, 2020 and 2019, we have the following participation in investments that are recorded using the equity method:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Golar Partners (1)
|
32.8
|
%
|
|
32.0
|
%
|
Egyptian Company for Gas Services S.A.E (“ECGS”)
|
50.0
|
%
|
|
50.0
|
%
|
Hygo
|
50.0
|
%
|
|
50.0
|
%
|
Avenir LNG Limited (“Avenir”)
|
23.1
|
%
|
|
22.5
|
%
|
(1) As of December 31, 2020, we held a 32.8% (2019: 32.0%) ownership interest in Golar Partners (including our 2% general partner interest) and 100% of the IDRs.
The carrying amounts of our investments in our equity method investments as at December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Golar Partners
|
67,429
|
|
|
214,296
|
|
Hygo
|
200,337
|
|
|
261,693
|
|
Avenir
|
39,984
|
|
|
28,101
|
|
ECGS
|
4,401
|
|
|
4,715
|
|
Equity in net assets of affiliates
|
312,151
|
|
|
508,805
|
|
The components of equity in net assets of non-consolidated affiliates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Balance as of January 1,
|
508,805
|
|
|
571,782
|
|
Additions
|
5,419
|
|
|
7,348
|
|
Capitalized interest
|
2,718
|
|
|
15,996
|
|
Dividends
|
(10,584)
|
|
|
(36,726)
|
|
Equity in net losses of affiliates
|
(40,644)
|
|
|
(45,799)
|
|
Impairment of investment in affiliate (1)
|
(135,883)
|
|
|
(500)
|
|
Share of other comprehensive income of affiliates
|
(17,680)
|
|
|
(3,296)
|
|
Balance as at December 31,
|
312,151
|
|
508,805
|
(1) In 2018, we entered into an agreement to form the Cool Company Limited, (“Cool Co”) with the intention to spin-off our LNG shipping fleet. Under the shareholders' agreement, we contributed $0.5 million representing 49.5% of the Cool Co. In 2019, due to misalignment of interests between the founding parties, we withdrew from the process. Subsequently, in December 2019, we acquired the remaining shareholding in Cool Co. and recognized an impairment charge of $0.5 million.
Quoted market prices for ECGS and Hygo are not available because these companies are not publicly traded.
Golar Partners
Golar Partners is an owner and operator of FSRUs and LNG carriers and was listed on the NASDAQ under the symbol GMLP until the closing of the GMLP Merger. Since the deconsolidation date of Golar Partners in December 2012, we have accounted for all our investments (Common Units, GP Units and IDRs) in Golar Partners under the equity method. The initial carrying value of our investments in Golar Partners was based on the fair value on the deconsolidation date. Subsequently the day one value was adjusted for our share of Golar Partners earnings and distributions received.
In February 2020, we purchased 107,000 of Golar Partners' units underlying the total return swap at fair consideration of $0.5 million (note 24). In June 2020, as a result of the continued suppression of Golar Partners' unit price and the significant difference between the carrying value of our investment in Golar Partners and its fair value, we believed that the decline in Golar Partners’ unit price was no longer temporary. Consequently, we recognized an impairment charge of $135.9 million presented in "Equity in net losses of affiliates" in our consolidated statements of operations. The fair value of our investment in Golar Partners is categorized within level 2 of the fair value hierarchy. We used Golar Partners’ unit price as at June 30, 2020, to estimate the total equity value of our investment. As of December 31, 2020, we believe that there is no further other than temporary impairment of the carrying value for our equity accounted investment (note 27).
On January 13, 2021, Golar Partners entered into Agreement and Plan of Merger (the “GMLP Merger Agreement”) with NFE, Golar GP LLC, the general partner of Golar Partners (the “General Partner”), Lobos Acquisition LLC, a limited liability company and a wholly-owned subsidiary of NFE (“GMLP Merger Sub”), and NFE International Holdings Limited, a private limited company and a wholly-owned subsidiary of NFE (“GP Buyer”), pursuant to which, on April 15, 2021, GMLP Merger Sub merged with and into Golar Partners (the “GMLP Merger”), with Golar Partners surviving the GMLP Merger as a wholly-owned subsidiary of NFE.
Under the GMLP Merger Agreement, on April 15, 2021, NFE acquired all of the outstanding common units of Golar Partners for $3.55 per common unit in cash, a 27% premium to the closing price of Golar Partners’ common units of $2.79 per common unit on January 12, 2021 (note 27). Upon the closing of the GMLP Merger, we received $75.7 million in cash for the 21,333,586 Golar Partners common units owned by us immediately prior to the completion of the GMLP Merger. Concurrently with the consummation of the GMLP merger, the incentive distribution rights (“IDRs”) of Golar Partners owned by us were cancelled and ceased to exist, and no consideration was paid to us in respect thereof. Concurrently with the completion of the GMLP Merger, GP Buyer purchased from us all of the outstanding membership interests in the General Partner for which we received consideration of $5.1 million, which is equivalent to $3.55 per general partner unit of Golar Partners.
ECGS
In December 2005, we entered into an agreement with the Egyptian Natural Gas Holding Company and HK Petroleum Services to establish a jointly owned company, ECGS, to develop operations in Egypt, particularly in hydrocarbon and LNG related areas.
In March 2006, we acquired 0.5 million common shares in ECGS at a subscription price of $1 per share. This represents a 50% interest in the voting rights of ECGS and, in December 2011, ECGS called up its remaining share capital amounting to $7.5 million. Of this, we paid $3.75 million to maintain our 50% equity interest.
As ECGS is jointly owned and operated together with other third parties, we have adopted the equity method of accounting for our 50% investment in ECGS, as we consider we have joint control.
Hygo
In July 2016, we entered into certain agreements forming a 50/50 joint venture, Hygo, with private equity firm Stonepeak. Under the terms of the shareholders' agreement in relation to the formation of the joint venture company, we disposed of the entities that own and operate Golar Penguin, Golar Celsius, newbuild Golar Nanook and Sergipe project to Hygo. Hygo has a 50% interest in Centrais Eléctricas de Sergipe S.A. (“CELSE”), which was formed for the purpose of constructing and operating the Sergipe Power Plant, which commenced operations in March 2020. The Golar Nanook also commenced its 25-year charter with CELSE under a sales-type lease in March 2020. As a result, Hygo and its subsidiaries have been considered as our affiliates and not as controlled subsidiaries of the Company. Accordingly, with effect from July 6, 2016, our investment in Hygo has been accounted for under the equity method of accounting.
Under the shareholders' agreement, we and Stonepeak agreed to contribute additional funding to Hygo on a pro rata basis. During the years ended December 31, 2020 and 2019, we contributed $nil and $5.0 million, respectively, to Hygo as a result of this agreement. In addition, interest costs capitalized on the investment in Hygo for the years ended December 31, 2020 and 2019, were $1.9 million and $14.7 million, respectively.
In August 2020, Hygo filed a Registration Statement on Form F-1 with the U.S. SEC Commission in connection with an IPO of its common shares which was subsequently placed on hold. Following the aborted IPO, a number of strategic partners expressed interests in investing in or purchasing Hygo.
On January 13, 2021, we entered into an Agreement and Plan of Merger (the “Hygo Merger Agreement”) with NFE, Hygo, Stonepeak Infrastructure Fund II Cayman (G) Ltd., a fund managed by Stonepeak, and Lobos Acquisition Ltd., a wholly-owned subsidiary of NFE (“Hygo Merger Sub”), pursuant to which, on April 15, 2021, Hygo Merger Sub merged with and into Hygo (the “Hygo Merger”), with Hygo surviving the Hygo Merger as a wholly owned subsidiary of NFE.
Under the terms of the Hygo Merger Agreement, on April 15, 2021, NFE acquired all of the outstanding shares of Hygo for 31,372,549 shares of NFE’s Class A common stock and $580 million in cash (see note 27). Upon the consummation of the Hygo Merger, we received 18,627,451 shares of NFE common stock and $50 million in cash, and Stonepeak received 12,745,098 shares of NFE common stock and $530 million in cash, which included a cash settlement of its preferred equity tranche of $180 million.
Avenir
In October 2018, Avenir issued a private placement of 99 million shares at a par price of $1 per share, which was successfully completed at a subscription price of $1 per share. Of the 99 million shares placed, we subscribed for 24.8 million shares, representing an investment of $24.8 million, or 25%. The investment is part of a combined commitment of up to $182.0 million from Stolt-Nielsen Limited (“Stolt-Nielsen”) (an entity affiliated with our director Niels Stolt Nielsen), Höegh LNG Holdings Limited (“Höegh”) and Golar for the pursuit of opportunities in small-scale LNG, including the delivery of LNG to areas of stranded gas demand, the development of LNG bunkering services and supply to the transportation sector. The consideration of $24.8 million, was deemed less than our proportionate share of net assets acquired in Avenir, at fair value and we had recognized negative goodwill of $3.8 million in equity in net losses of affiliates to reflect our bargain purchase.
In November 2018, Avenir placed a further 11 million shares, also at a subscription price of $1 per share, with a group of institutional and other professional investors and, subsequent to this placement, Stolt-Nielsen, Höegh and Golar have a 45%, 22.5% and 22.5% participation in Avenir, respectively. Avenir's shares were listed on the N-OTC with effect from November 14, 2018.
In March 2020, Avenir issued an Equity Shortfall Offering to its shareholders, requiring funding of an equity shortfall by means of a total equity contribution to be funded on a pro rata basis. As of December 31, 2020, we have subscribed 9,375,000 additional shares at $1.00 par value and paid $9.4 million in cash. We are obligated to subscribe a further 1,875,000 of additional shares at $1.00 par value, or $1.9 million and have recognized this as liability under “Other current liabilities” in our consolidated balance sheet.
Interest costs capitalized on the investment in Avenir for the years ended December 31, 2020 and 2019, were $0.9 million and $1.3 million respectively.
Summarized financial information of the affiliated undertakings shown on a 100% basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
December 31, 2020
|
|
ECGS
|
Golar Partners
|
Hygo
|
Avenir
|
Balance Sheet
|
|
|
|
|
Current assets
|
26,589
|
|
146,821
|
|
109,596
|
|
18,275
|
|
Non-current assets
|
88
|
|
1,880,840
|
|
917,976
|
|
151,940
|
|
Current liabilities
|
(15,925)
|
|
(832,277)
|
|
(97,245)
|
|
(18,950)
|
|
Non-current liabilities
|
(931)
|
|
(570,063)
|
|
(453,278)
|
|
(26,744)
|
|
Non-controlling interests
|
—
|
|
82,112
|
|
13,557
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
December 31, 2020
|
|
ECGS
|
Golar Partners
|
Hygo
|
Avenir
|
Statement of Operations
|
|
|
|
|
Revenue
|
31,441
|
|
284,734
|
|
47,295
|
|
2,340
|
|
Net (loss)/income
|
(486)
|
|
18,077
|
|
(61,859)
|
|
(6,006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
December 31, 2019
|
|
ECGS
|
Golar Partners
|
Hygo
|
Avenir
|
Balance Sheet
|
|
|
|
|
Current assets
|
27,719
|
|
133,299
|
|
126,406
|
|
26,198
|
|
Non-current assets
|
95
|
|
1,972,313
|
|
1,028,386
|
|
71,742
|
|
Current liabilities
|
(16,024)
|
|
(309,154)
|
|
(232,200)
|
|
(3,641)
|
|
Non-current liabilities
|
(1,203)
|
|
(1,143,764)
|
|
(338,351)
|
|
(4,830)
|
|
Non-controlling interests
|
—
|
|
83,231
|
|
7,090
|
|
—
|
|
|
|
|
|
|
Statement of Operations
|
|
|
|
|
Revenue
|
32,052
|
|
299,652
|
|
45,223
|
|
1,058
|
|
Net income/(loss)
|
297
|
|
21,134
|
|
(6,928)
|
|
(7,878)
|
|
|
|
|
|
|
|
15.
|
ASSET UNDER DEVELOPMENT
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
As of January 1
|
434,248
|
|
20,000
|
|
Additions
|
283,927
|
|
372,849
|
|
Transfer from vessels and equipment, net (note 16)
|
77,172
|
|
—
|
|
Transfer from other non-current assets (note 17)
|
16,213
|
|
31,048
|
|
Interest costs capitalized
|
34,296
|
|
10,351
|
|
Disposal of LNG Croatia
|
(187,609)
|
|
—
|
|
As of December 31
|
658,247
|
|
434,248
|
|
Gimi conversion
In February 2019, we entered into an agreement with BP for the employment of a FLNG unit, Gimi, after conversion for 20-years. In April 2019, we completed the sale of 30% of the total issued ordinary share capital of Gimi MS to First FLNG Holdings. In October 2020, we announced that we had confirmed a revised project schedule with BP for the Gimi GTA Project which will result in the target connection date for the Gimi, previously scheduled for 2022, as set out in the LOA, being extended by 11 months to 2023. Notice has been given and received by us and BP that no FM event (as defined in the LOA) is ongoing. Except for the target connection date extension, the terms of the LOA remain unchanged. We have concluded discussions with both engineering, procurement and construction contractors and lending banks regarding the adjustment of the related construction and financing schedule, respectively, for the Gimi GTA Project to reflect these changes in the respective agreements. The conversion cost including financing cost is approximately $1.5 billion of which $700 million is funded by the Gimi facility (note 18).
As of December 31, 2020, the estimated timing of the outstanding payments in connection with the Gimi conversion are as follows:
|
|
|
|
|
|
(in thousands of $)
|
|
Period ending December 31,
|
|
2021
|
295,038
|
|
2022
|
265,539
|
|
2023
|
249,565
|
|
2024
|
50,672
|
|
|
860,814
|
|
LNG Croatia conversion
In March 2019, we entered into agreements with LNG Hrvatska relating to the conversion and subsequent sale of the converted carrier LNG Croatia into a FSRU. In addition to the sale and purchase contract, the parties also entered into an O&M Agreement in relation to this FSRU for a minimum of 10 years following its sale with renewal options. In January 2020, LNG Croatia entered the yard for conversion. Concurrently, we entered into a sale and leaseback agreement with CSSC to fund the conversion and had drawn down $124.7 million during 2020. In December 2020, upon acceptance of the converted FSRU LNG Croatia, we repurchased the vessel and settled in full our sale and leaseback obligations with CSSC.
The table below shows the gain on disposal of the LNG Croatia recognized in the consolidated statements of operations under “Other non-operating income”:
|
|
|
|
|
|
(in thousands of $)
|
2020
|
Cash consideration received
|
193,291
|
|
Carrying value of converted FSRU, LNG Croatia
|
(187,609)
|
|
Gain on disposal
|
5,682
|
|
|
|
|
|
|
|
16.
|
VESSELS AND EQUIPMENT, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
(in thousands of $)
|
Vessels and equipment
|
Mooring equipment
|
Drydocking expenditure
|
Office equipment
|
Total
|
Cost
|
|
|
|
|
|
As of January 1
|
3,429,317
|
|
45,771
|
|
140,738
|
|
8,398
|
|
3,624,224
|
|
Additions
|
3,282
|
|
—
|
|
3,713
|
|
161
|
|
7,156
|
|
Transfer to asset under development (1)
|
(127,620)
|
|
—
|
|
—
|
|
—
|
|
(127,620)
|
|
Write-offs (2)
|
(6,125)
|
|
—
|
|
(6,500)
|
|
(393)
|
|
(13,018)
|
|
As of December 31
|
3,298,854
|
|
45,771
|
|
137,951
|
|
8,166
|
|
3,490,742
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment
|
|
|
|
|
|
As of January 1
|
(434,396)
|
|
(9,106)
|
|
(16,434)
|
|
(3,739)
|
|
(463,675)
|
|
Charge for the year (3)
|
(87,383)
|
|
(5,714)
|
|
(13,080)
|
|
(1,283)
|
|
(107,460)
|
|
Transfer to asset under development (1)
|
50,448
|
|
—
|
|
—
|
|
|
50,448
|
|
Write-offs (2)
|
6,125
|
|
—
|
|
6,500
|
|
393
|
|
13,018
|
|
As of December 31
|
(465,206)
|
|
(14,820)
|
|
(23,014)
|
|
(4,629)
|
|
(507,669)
|
|
|
|
|
|
|
|
Net book value as at December 31, 2020
|
2,833,648
|
|
30,951
|
|
114,937
|
|
3,537
|
|
2,983,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
(in thousands of $)
|
Vessels and equipment
|
Mooring equipment
|
Drydocking expenditure
|
Office equipment
|
Total
|
Cost
|
|
|
|
|
|
As of January 1
|
3,447,464
|
|
45,771
|
|
133,316
|
|
11,497
|
|
3,638,048
|
|
Additions
|
6,268
|
|
—
|
|
29,557
|
|
159
|
|
35,984
|
|
Write-offs (2)
|
(24,415)
|
|
—
|
|
(22,135)
|
|
(3,258)
|
|
(49,808)
|
|
As of December 31
|
3,429,317
|
|
45,771
|
|
140,738
|
|
8,398
|
|
3,624,224
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment
|
|
|
|
|
|
As of January 1
|
(331,477)
|
|
(3,392)
|
|
(26,039)
|
|
(5,761)
|
|
(366,669)
|
|
Charge for the year (3)
|
(93,084)
|
|
(5,714)
|
|
(12,530)
|
|
(1,236)
|
|
(112,564)
|
|
Impairment (4)
|
(34,250)
|
|
—
|
|
—
|
|
—
|
|
(34,250)
|
|
Write-offs (2)
|
24,415
|
|
—
|
|
22,135
|
|
3,258
|
|
49,808
|
|
As of December 31
|
(434,396)
|
|
(9,106)
|
|
(16,434)
|
|
(3,739)
|
|
(463,675)
|
|
|
|
|
|
|
|
Net book value as at December 31, 2019
|
2,994,921
|
|
36,665
|
|
124,304
|
|
4,659
|
|
3,160,549
|
|
(1) Upon LNG Croatia's entry to the shipyard in January 2020 for her conversion to a FSRU, we have reclassified the carrying value of the vessel and its associated accumulated depreciation to “Asset under development” (note 15)
(2) Write-offs relates to fully depreciated and amortized assets.
(3) Depreciation and amortization charge for the years ended December 31, 2020 and 2019, excludes $0.5 million and, $0.5 million respectively, of amortization charged to non-current assets in relation to the Cameroon License fee.
(4) In March 2019, we entered into a number of contracts relating to the conversion and subsequent disposal of the LNG Croatia (note 15), which triggered an impairment assessment as it was considered probable to be disposed of significantly before the end of its useful economic life. This resulted in an impairment charge of $34.3 million.
The following table presents the market values and carrying values of our vessels that we have determined to have market values that are less than their carrying values as of December 31, 2020. However, based on the estimated future undiscounted cash flows of these vessels, which are significantly greater than the respective carrying values, no impairment was recognized.
(in millions of $)
|
|
|
|
|
|
|
|
|
|
|
|
Vessel
|
2020 Market value (1)
|
2020 Carrying value
|
Deficit
|
Golar Arctic
|
47.5
|
129.8
|
(82.3)
|
Golar Bear
|
160.0
|
178.4
|
(18.4)
|
Golar Crystal
|
159.0
|
173.2
|
(14.2)
|
Golar Frost
|
160.5
|
181.4
|
(20.9)
|
Golar Glacier
|
155.7
|
177.4
|
(21.7)
|
Golar Ice
|
159.5
|
184.6
|
(25.1)
|
Golar Kelvin
|
160.0
|
178.9
|
(18.9)
|
Golar Seal
|
156.3
|
168.2
|
(11.9)
|
Golar Snow
|
159.8
|
184.8
|
(25.0)
|
(1) Market values are determined using reference to average broker values provided by independent brokers. Broker values are considered an estimate of the market value for the purpose of determining whether an impairment trigger exists. Broker values are commonly used and accepted by our lenders in relation to determining compliance with relevant covenants in applicable credit facilities for the purpose of assessing security quality.
Since vessel values can be volatile, our estimates of market value may not be indicative of either the current or future prices we could obtain if we sold any of the vessels. In addition, the determination of estimated market values may involve considerable judgment, given the illiquidity of the second-hand markets for these types of vessels.
|
|
|
|
|
|
17.
|
OTHER NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Operating lease right-of-use-assets (1)
|
14,642
|
|
|
9,847
|
|
Oil derivative instrument (note 24)
|
540
|
|
|
45,640
|
|
Foreign exchange swap (note 24)
|
—
|
|
|
214
|
|
Mark-to-market interest rate swaps valuation (note 24)
|
—
|
|
|
8
|
|
Other non-current assets (2)
|
12,729
|
|
|
24,700
|
|
|
27,911
|
|
|
80,409
|
|
(1) Operating lease right-of-use-assets mainly comprise of our office leases.
(2) "Other non-current assets" as of December 31, 2019 included payments made for long lead items ordered in preparation for the conversion of the LNG Croatia into an FSRU. Upon entering the shipyard in January 2020, the LNG Croatia was classified as an asset under development and the aggregated long lead items of $16.2 million were reclassified to "Assets under development" (note 15).
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
|
|
|
Total long-term and short-term debt
|
2,350,782
|
|
|
2,535,827
|
|
Less: current portion of long-term debt and short-term debt
|
(982,845)
|
|
|
(1,241,108)
|
|
Long-term debt
|
1,367,937
|
|
|
1,294,719
|
|
The outstanding gross debt as of December 31, 2020 is repayable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31
|
Golar debt
|
|
VIE debt (1)
|
|
Total debt
|
(in thousands of $)
|
|
|
|
|
|
2021 (2)
|
118,236
|
|
|
945,509
|
|
|
1,063,745
|
|
2022
|
401,976
|
|
|
158,456
|
|
|
560,432
|
|
2023
|
18,236
|
|
|
173,085
|
|
|
191,321
|
|
2024
|
73,672
|
|
|
68,279
|
|
|
141,951
|
|
2025
|
67,079
|
|
|
68,279
|
|
|
135,358
|
|
2026 and thereafter
|
206,661
|
|
|
80,063
|
|
|
286,724
|
|
Total
|
885,860
|
|
|
1,493,671
|
|
|
2,379,531
|
|
Deferred finance charges
|
(26,179)
|
|
|
(2,570)
|
|
|
(28,749)
|
|
Total
|
859,681
|
|
|
1,491,101
|
|
|
2,350,782
|
|
(1) These amounts relate to certain lessor entities (for which legal ownership resides with financial institutions) that we are required to consolidate under U.S. GAAP into our financial statements as variable interest entities (note 5).
(2) As of December 31, 2020, we have presented the maturities for the Golar Tundra facility and Golar Seal facilities as 2021 and 2022 in the table above, due to the call and put options maturing in June 2021 and January 2022, respectively. As the put/call options which are future covenants have not been breached as of December 31, 2020, we have classified the Golar Seal and Golar Tundra facilities as long-term debt, in line with the maturities of their loan facilities related to our lessor VIEs.
At December 31, 2020 and 2019, our debt was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Maturity date
|
Golar Arctic facility
|
36,472
|
|
43,767
|
|
2024
|
Golar Viking facility
|
—
|
|
41,667
|
|
2020
|
2017 Convertible bonds
|
383,739
|
|
368,133
|
|
2022
|
Term Facility
|
—
|
|
150,000
|
|
2020
|
Margin Loan
|
—
|
|
100,000
|
|
2020
|
Revolving Credit Facility
|
100,000
|
|
—
|
|
2021
|
Gimi Facility
|
300,000
|
|
130,000
|
|
2030
|
$1.125 billion facility:
|
|
|
|
- Golar Bear facility
|
—
|
|
75,425
|
|
|
- Golar Frost facility
|
65,649
|
|
76,590
|
|
2024/2026(1)
|
Subtotal (excluding lessor VIE loans)
|
885,860
|
|
985,582
|
|
|
ICBCL VIE loans:
|
|
|
|
- Golar Glacier facility
|
110,625
|
|
127,579
|
|
Repayable on demand
|
- Golar Snow facility
|
111,108
|
|
128,112
|
|
- Golar Kelvin facility
|
128,562
|
|
147,025
|
|
- Golar Ice facility
|
83,857
|
|
100,799
|
|
CMBL VIE loan:
|
|
|
|
- Golar Tundra facility
|
89,450
|
|
104,884
|
|
2021
|
CCBFL VIE loan:
|
|
|
|
- Golar Seal facility
|
90,178
|
|
100,424
|
|
2022
|
COSCO VIE loan:
|
|
|
|
- Golar Crystal facility
|
83,596
|
|
91,275
|
|
2027
|
CSSC VIE loan:
|
|
|
|
- Hilli facility
|
691,488
|
|
783,071
|
|
Repayable on demand/2026
|
AVIC VIE loan:
|
|
|
|
Golar Bear facility
|
104,807
|
|
—
|
|
2023 (2)
|
Total debt (gross)
|
2,379,531
|
|
2,568,751
|
|
|
Deferred finance charges
|
(28,749)
|
|
(32,924)
|
|
|
Total debt
|
2,350,782
|
|
2,535,827
|
|
|
(1) The commercial loan tranche matures at the earlier of the two dates, with the remaining balance maturing at the latter date. However, in the event that the commercial tranche is not refinanced within five years, the lenders have the option to demand repayment. In October 2018, the maturity of the commercial tranche, and consequently the option to the lenders, was extended by five years, to 2024.
(2) The Golar Bear facility was refinanced in 2020 before the maturity date, see below for more information.
Golar Arctic facility
In December 2014, we entered into a secured loan facility for $87.5 million for the purpose of refinancing the Golar Arctic. The Golar Arctic facility bore interest at LIBOR plus a margin of 2.25% and was repayable in quarterly installments over a term of five years with a final balloon payment of $52.8 million due in December 2019.
In October 2019, we entered into an agreement with the existing lenders to extend the maturity of our Golar Arctic Facility. The extended facility matures 5 years from execution, is repayable in quarterly installments and has a final balloon of $9.1 million in October 2024. The margin has been adjusted from 2.25% to 2.75%.
Golar Viking facility
In December 2015, we entered into a $62.5 million secured loan facility, with certain lenders, to finance the LNG Croatia upon repossession of the vessel from Equinox. The facility is repayable in quarterly installments over a term of five years with a final balloon payment of $37.8 million due in December 2020. This facility bears interest at LIBOR plus a margin of 2.5%.
In January 2020, we refinanced the Golar Viking facility before the maturity date and concurrently entered into an agreement to bareboat charter the vessel with CSSC for a year to fund the conversion of the vessel into a FSRU and drawdown $56.0 million. During the year we drawdown a further $68.7 million from the $75.0 million conversion tranche facility. In December 2020, concurrent with the disposal of the vessel to LNG Hrvatska d.o.o., we repaid the loan facility related to the lessor VIE and terminated the bareboat charter agreement with CSSC (see note 5 and 15).
2017 Convertible bonds
On February 17, 2017, we closed a $402.5 million aggregate principal amount of 2.75% convertible senior unsecured notes due 2022. The conversion rate for the bonds was initially equal to 26.5308 common shares per $1,000 principal amount of the bonds. This is equivalent to an initial conversion price of $37.69 per common share, or a 35% premium on the February 13, 2017 closing share price of $27.92. The conversion price is subject to adjustment for dividends paid. To mitigate the dilution risk of conversion to common equity, we also entered into capped call transactions costing approximately $31.2 million. The capped call transactions cover approximately 10,678,647 common shares, have an initial strike price of $37.69, and an initial cap price of $48.86. The cap price of $48.86, which is a proxy for the revised conversion price, represents a 75% premium on the February 13, 2017 closing share price of $27.92. Including the $31.2 million cost of the capped call, the all-in cost of the bond is approximately 4.3%. Bond proceeds, net of fees and the cost of the capped call, amounted to $360.2 million. On inception, we recognized a liability of $320.3 million and an equity portion of $39.9 million.
During 2020 and 2019, the quarterly dividends of the following quarter results exceeded the dividend threshold and resulted in an adjustment to the initial conversion rate.
|
|
|
|
|
|
|
|
|
|
|
|
In $, except conversion rate
|
|
|
|
|
Distribution declared per share
|
Conversion rate
|
Conversion price
|
First quarter, 2019
|
0.150
|
|
26.993
|
|
37.05
|
|
Term loan facility and Revolving Credit Facility
In August 2019, we entered into a $150 million term loan facility with a total term of fifteen months. The term loan facility is secured by a pledge against our shares in Hygo. The non-amortizing term facility has a stepped margin arrangement, in a range of LIBOR plus 1.50% - 2.75%.
In December 2020, we repaid $50.0 million and refinanced the remaining balance of the Term loan facility into a $100.0 million Revolving Credit Facility which bore interest at LIBOR plus a margin of 5% and was secured by a pledge against our shares in Hygo. The facility has a term of 366 days with two 366-day extension options available at the lenders’ discretion. Please see note 27.
Margin Loan
We entered into a loan agreement, dated March 3, 2017, among one of our wholly-owned subsidiaries, as borrower, Golar LNG Limited, as guarantor, Citibank, N.A., as administrative agent, initial collateral agent and calculation agent, and Citibank, N.A., as lender. We refer to this as the Margin Loan facility. Pursuant to the Margin Loan facility, Citibank N.A. provided a loan in the amount of $150 million. The Margin Loan facility had a term of three years, an interest rate of LIBOR plus a margin of 3.95% and was secured by our Golar Partners common units and their associated distributions, and in certain cases, cash or cash equivalents. The Margin Loan facility contained conditions, representations and warranties, covenants (including loan to value requirements), mandatory prepayment events, facility adjustment events, events of default and other provisions customary for a facility of this nature. The loan was primarily used to pay a portion of the amounts due under our 3.75% convertible senior secured bonds due March 2017, or the Prior Convertible Bonds. Concurrently with the repayment of the Prior Convertible Bonds, the trustee for these bonds released our Golar Partners common units that had been pledged to secure them. In connection with the entry into the Margin Loan facility, we pledged 20,852,291 Golar Partners common units as security for the obligations under the facility. This was increased to 21,226,586 as part of the amendments to the facility in 2018.
In July 2018, amendments to the existing Margin Loan facility were completed. Although most of the existing terms remain substantially unchanged, the facility would no longer amortize, remaining at $100 million until maturity in March 2020. Previously the dividend cash received from the pledged Partnership shares was first used to service the interest on the loan, and any excess cash was then used to prepay a portion of the principal. Under the modified agreement, any excess cash after servicing the interest will be returned to Golar.
In August 2019, we entered into an agreement with a group of lenders to refinance our existing Margin Loan facility. The new Margin Loan facility introduces a revolving element, increases the principal amount available to draw to $110.0 million and has a maturity of one year from execution. The new Margin Loan facility bears interest at LIBOR plus a margin of 2.75% and continues to be secured by a pledge against our common units in Golar Partners.
In March 2020, the unit price of Golar Partners common units which we own and which are pledged as security for the Margin Loan facility, fell below a defined threshold and triggered a mandatory prepayment option for the Lenders. The lenders agreed to amend the existing terms of the Margin Loan rather than exercise that option. We prepaid the facility reducing the principal to $30.0 million from $100.0 million, the margin increased to 2.95% and the mandatory prepayment clause was removed. In December 2020, the Margin Loan facility was fully repaid that resulted in the release of restricted cash of $10.0 million and the pledged Golar Partner's common units (note 12).
Gimi facility
In October 2019, we entered into a $700 million facility agreement with a group of lenders to finance the conversion and operations of the Gimi. The facility is available for drawdown during the Gimi conversion and amortizes from the commencement of commercial operations, with a final balloon payment of $350.0 million in 2030. The facility bears interest at LIBOR plus a margin of 4.0% during the conversion phase, reducing to LIBOR plus a margin of 3.0% post commencement of commercial operations. As of December 31, 2020, we had drawn $300.0 million of the available funds. Subsequent drawdowns are dependent upon reaching further conversion milestones relating to project spend. A commitment fee is chargeable on any undrawn portion of this facility.
$1.125 billion facility
In July 2013, we entered into a $1.125 billion facility to initially fund eight of our newbuildings. The facility bears interest at LIBOR plus a margin. The facility is divided into three tranches, with the following general terms:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tranche
|
|
Proportion of facility
|
Term of loan from date of drawdown
|
Repayment terms
|
K-Sure
|
|
40%
|
12 years
|
Six-monthly installments
|
KEXIM
|
|
40%
|
12 years
|
Six-monthly installments
|
Commercial
|
|
20%
|
5 years
|
Six-monthly installments, unpaid balance to be refinanced after 5 years
|
The facility bears interest at LIBOR plus a margin of 2.10% for the K-Sure tranche of the facility and 2.75% for both the KEXIM and commercial tranche of the loan.
The K-Sure tranche is funded by a consortium of lenders, of which 95% is guaranteed by a Korean Trade Insurance Corporation (or K-Sure) policy; the KEXIM tranche is funded by the Export Import Bank of Korea (or KEXIM). Repayments under the K-Sure and KEXIM tranches are due semi-annually with a 12 year repayment profile. The commercial tranche is funded by a syndicate of banks and is for a term of five years from date of drawdown with a final balloon payment depending on drawdown dates for each respective vessel. In the event the commercial tranche is not refinanced prior to the end of the five years, both K-Sure and KEXIM have an option to demand repayment of the balances outstanding under their respective tranches. In October 2018, the term of the commercial tranche, and consequently the option to K-Sure and KEXIM, was extended by 5 years. The facility is further divided into vessel-specific tranches dependent upon delivery and drawdown, with each borrower being the subsidiary owning the respective vessel.
In June 2020, we refinanced the proportion of the debt facility relating to Golar Bear ahead of its maturity and the cash collateral pledged against the Golar Bear facility of $6.0 million was released. Concurrently we entered into an agreement to bareboat charter the vessel with AVIC for $110.0 million (see Lessor VIE debt below for more information). At December 31,
2020, the aggregate balance of the facility was $65.6 million and relates to the Golar Frost, with a cash collateral of $2.6 million (note 12).
Lessor VIE debt
The following loans relate to our lessor VIE entities, including ICBCL, CMBL, CCBFL, COSCO, CSSC and AVIC that we consolidate as variable interest entities ("VIEs"). Although we have no control over the funding arrangements of these entities, we consider ourselves the primary beneficiary of these VIEs and we are therefore required to consolidate these loan facilities into our financial results. See note 5 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
|
Effective from
|
SPV
|
Loan counterparty
|
Loan facility at inception (in $ millions)
|
Loan facility at December 31, 2020 (in $ millions)
|
Loan duration/maturity
|
Interest
|
Golar Glacier
|
October 2014
|
Hai Jiao 1401 Limited
|
ICBCIL Finance Co.(1)
|
184.8
|
110.6
|
Repayable on demand
|
2.65% - 6.00%
|
Golar Snow
|
January 2015
|
Hai Jiao 1402 Limited
|
ICBCIL Finance Co.(1)
|
182.6
|
111.1
|
Repayable on demand
|
2.65% - 6.00%
|
Golar Kelvin
|
January 2015
|
Hai Jiao 1405 Limited
|
ICBCIL Finance Co.(1)
|
182.5
|
128.6
|
Repayable on demand
|
2.65% - 3.89%
|
Golar Ice
|
February 2015
|
Hai Jiao 1406 Limited
|
ICBCIL Finance Co.(1)
|
172.0
|
83.9
|
Repayable on demand
|
2.65% - 3.89%
|
Golar Tundra(2)
|
November 2015
|
Sea 24 Leasing Co Ltd
|
CMBL
|
205.1
|
89.5
|
2021
|
LIBOR plus margin
|
Golar Seal(3)
|
March 2016
|
Compass Shipping 1 Corporation Limited
|
CCBFL
|
162.4
|
90.2
|
2022
|
3.5%
|
Golar Crystal
|
March 2017
|
Oriental Fleet LNG 01 Limited
|
COSCO Shipping
|
101.0
|
83.6
|
10 years
|
LIBOR plus margin
|
Hilli(4)
|
June 2018
|
Fortune Lianjing Shipping S.A.
|
CSSC
|
840.0
|
353.0
|
8 years non-recourse
|
LIBOR plus margin
|
120.0
|
338.5
|
Repayable on demand
|
Nil
|
Golar Bear (5)
|
June 2020
|
Cool Bear Shipping Limited
|
AVIC
|
110.0
|
104.8
|
2023
|
4.0%
|
The vessels in the table above are secured as collateral against the long-term loans (note 26).
(1) ICBCIL Finance Co. is a related party of ICBCL.
(2) A precondition of the Golar Tundra lease financing with CMBL is for the FSRU to be employed under an effective charter. By virtue of our prior termination of the WAGL charter, we were required to find a replacement charter by June 30, 2019 or we could be required to refinance the vessel. In May 2019, the June 2019 call option date was extended to June 2021. As of December 31, 2020, the call option which is a future covenant had not been breached, thus we have classified the Golar Tundra facility as a long-term debt. We presented the maturity of the loan facility to be in June 2021 even though the maturity of the sale and leaseback arrangement is in November 2025 as the maturity date of the call option is the earlier of the two.
(3) The Golar Seal facility includes a put option that if exercised requires us to repay the facility if an appropriate long-term charter of 4 years or more is not entered into by January 2021. In November 2020, we agreed and executed an extension with CCBFL to extend such put option by one year. As of December 31, 2020, the put option which is a future covenant had not been breached, thus we have classified the Golar Seal facility as a long-term debt. We presented the maturity of the loan facility to be in January 2022 even though the maturity of the sale and leaseback arrangement is in March 2026 as the maturity date of the call option is the earlier of the two.
(4) In July 2019, the SPV, Fortune Lianjiang Shipping S.A., repaid $150.0 million to the interest bearing facility and subsequently drew down $150.0 million from the internal loan with CSSC. In March, 2020, the SPV, Fortune Lianjiang Shipping S.A., repaid $215.2 million to the interest bearing facility and subsequently drew down $223.0 million from the internal loan with CSSC.
(5) In June 2020, we refinanced the Golar Bear facility and concurrently entered into an agreement to bareboat charter the vessel with AVIC for $110.0 million and drawdown $100.0 million. The sale and leaseback arrangement has a term of seven years and bears a interest rate of LIBOR plus margin of 4.00%. However, the loan facility between Cool Bear Shipping Limited and AVIC has a term of three years and bears a fixed interest rate of 4.0%.
Debt restrictions
Certain of our debts are collateralized by vessel liens and, in the case of some debt, pledges of shares by each guarantor subsidiary. The existing financing agreements impose operating and financing restrictions which may significantly limit or prohibit, among other things, our ability to incur additional indebtedness, create liens, sell capital shares of subsidiaries, make certain investments, engage in mergers and acquisitions, purchase and sell vessels, enter into time or consecutive voyage charters or distribute dividends in relation to the term loan facility. In addition, lenders may accelerate the maturity of indebtedness under financing agreements and foreclose upon the collateral securing the indebtedness upon the occurrence of certain events of default, including a failure to comply with any of the covenants contained in the financing agreements. Many of our debt agreements contain certain covenants, which require compliance with certain financial ratios. Such ratios include current assets: liabilities and minimum net worth and minimum free cash restrictions. With regards to cash restrictions, we have covenanted to retain at least $50.0 million of cash and cash equivalents on a consolidated group basis. In addition, as of December 31, 2020 there are cross default provisions in certain of our and Golar Partners' and Hygo's loan and lease agreements. In addition to lien security, some of our debt is also collateralized through pledges of equity shares by our guarantor subsidiaries.
As of December 31, 2020, we were in compliance with all our covenants under our various loan agreements.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Interest expense
|
(52,600)
|
|
|
(44,150)
|
|
Vessel operating and drydocking expenses
|
(23,334)
|
|
|
(24,457)
|
|
Administrative expenses
|
(13,078)
|
|
|
(11,713)
|
|
Current tax payable
|
(345)
|
|
|
(720)
|
|
|
(89,357)
|
|
|
(81,040)
|
|
Vessel operating and drydocking expense related accruals comprised of vessel operating expenses such as crew wages, vessel supplies, routine repairs, maintenance, drydocking, lubricating oils and insurances.
Administrative expenses related accruals comprised of general overhead including personnel costs, legal and professional fees, costs associated with project development, property costs and other general expenses.
|
|
|
|
|
|
20.
|
OTHER CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Mark-to-market interest rate swaps valuation (note 24)
|
(44,315)
|
|
|
(5,798)
|
|
Deferred operating cost and charterhire revenue
|
(12,330)
|
|
|
(20,719)
|
|
Day 1 gain deferred revenue - current portion (note 21)
|
(9,950)
|
|
|
(9,950)
|
|
Current portion of operating lease liability (note 11)
|
(5,005)
|
|
|
(3,582)
|
|
Mark-to-market foreign exchange swaps valuation (note 24)
|
(1,310)
|
|
|
—
|
|
Mark-to-market equity swaps valuation (note 24)
|
—
|
|
|
(50,407)
|
|
Other(1)
|
(12,509)
|
|
|
(5,625)
|
|
|
(85,419)
|
|
|
(96,081)
|
|
(1) Included in "Other" is dividend payable for lessor VIE of $7.5 million at December 31, 2020.
|
|
|
|
|
|
21.
|
OTHER NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Day 1 gain deferred revenue (1)
|
(43,934)
|
|
|
(53,884)
|
|
Pension obligations (note 22)
|
(37,258)
|
|
|
(34,720)
|
|
Deferred commissioning period revenue (2)
|
(18,635)
|
|
|
(22,855)
|
|
Guarantees issued to Golar Partners and Hygo (note 25)
|
(19,545)
|
|
|
(16,417)
|
|
Non-current portion of operating lease liabilities (note 11)
|
(10,634)
|
|
|
(6,481)
|
|
Other (3)
|
(5,433)
|
|
|
(8,293)
|
|
|
(135,439)
|
|
|
(142,650)
|
|
(1) This represents the corresponding liability upon recognition of the LTA derivative asset. This deferred gain is amortized and recognized as part of "Liquefaction services revenue" in the consolidated statements of operations evenly over the LTA contract term, with this commencing on the customer's acceptance of the Hilli. The initial amount recognized was $79.6 million, of which $43.9 million is non-current at December 31, 2020. The current portion of the Day 1 gain deferred revenue is included in "Other current liabilities" (note 20).
(2) This represents customer billing during the commissioning period, prior to vessel acceptance and commencement of the contract term, which is considered an upfront payment for services. These amounts billed are recognized as part of "Liquefaction services revenue" in the consolidated statements of operations evenly over the LTA contract term, with this commencing on the customer's acceptance of the Hilli. The initial amount recognized was $33.8 million, of which $18.6 million is non-current at December 31, 2020. The current portion of Deferred commissioning period billing is included in "Other current liabilities" (note 20).
(3) Included in "Other" is an asset retirement obligation of $5.0 million and $4.7 million for the years ended December 31, 2020 and 2019, respectively. The corresponding asset of $4.7 million is recorded within vessels and equipment, net (note 16).
Defined contribution scheme
We operate a defined contribution scheme. The pension cost for the period represents contributions payable by us to the scheme. The charge to net income for the years ended December 31, 2020, 2019 and 2018 was $2.1 million, $2.4 million and $1.9 million, respectively.
Defined benefit schemes
We have two defined benefit pension plans both of which are closed to new entrants but still cover certain of our employees. Benefits are based on the employee's years of service and compensation. Net periodic pension plan costs are determined using the Projected Unit Credit Cost method. Our plans are funded by us in conformity with the funding requirements of the applicable government regulations. Plan assets consist of both fixed income and equity funds managed by professional fund managers.
We use December 31 as a measurement date for our pension plans.
The components of net periodic benefit costs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
Service cost
|
155
|
|
|
162
|
|
|
250
|
|
Interest cost
|
1,271
|
|
|
1,740
|
|
|
1,687
|
|
Expected return on plan assets
|
(318)
|
|
|
(375)
|
|
|
(926)
|
|
Recognized actuarial loss
|
848
|
|
|
777
|
|
|
1,392
|
|
Net periodic benefit cost
|
1,956
|
|
|
2,304
|
|
|
2,403
|
|
The components of net periodic benefit costs are recognized in the income statement within administrative expenses and vessel operating expenses.
The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic pension benefit cost during the year ended December 31, 2020 is $0.8 million (2019: $0.8 million).
The change in projected benefit obligation and plan assets and reconciliation of funded status as of December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Reconciliation of benefit obligation:
|
|
|
|
Benefit obligation at January 1
|
49,943
|
|
|
46,093
|
|
Service cost
|
155
|
|
|
162
|
|
Interest cost
|
1,271
|
|
|
1,740
|
|
Actuarial loss
|
5,458
|
|
|
4,581
|
|
Foreign currency exchange rate changes
|
372
|
|
|
433
|
|
Benefit payments
|
(3,077)
|
|
|
(3,066)
|
|
Benefit obligation at December 31
|
54,122
|
|
|
49,943
|
|
The accumulated benefit obligation at December 31, 2020 and 2019 was $53.4 million and $49.2 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Reconciliation of fair value of plan assets:
|
|
|
|
Fair value of plan assets at January 1
|
15,223
|
|
|
13,121
|
|
Actual return on plan assets
|
1,355
|
|
|
1,216
|
|
Employer contributions
|
2,900
|
|
|
3,411
|
|
Foreign currency exchange rate changes
|
463
|
|
|
541
|
|
Benefit payments
|
(3,077)
|
|
|
(3,066)
|
|
Fair value of plan assets at December 31
|
16,864
|
|
|
15,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Fair value of benefit obligation
|
(54,122)
|
|
|
(49,943)
|
|
Fair value of plan assets
|
16,864
|
|
|
15,223
|
|
Unfunded status (1)
|
(37,258)
|
|
|
(34,720)
|
|
Employer contributions and benefits paid under the pension plans include $2.9 million paid from employer assets for the year ended December 31, 2020 (2019: $3.4 million).
(1) Our plan comprises two schemes. The details of these schemes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
(in thousands of $)
|
UK Scheme
|
|
Marine Scheme
|
|
Total
|
|
UK Scheme
|
|
Marine Scheme
|
|
Total
|
Fair value of benefit obligation
|
(12,727)
|
|
|
(41,395)
|
|
|
(54,122)
|
|
|
(11,479)
|
|
|
(38,464)
|
|
|
(49,943)
|
|
Fair value of plan assets
|
15,822
|
|
|
1,042
|
|
|
16,864
|
|
|
14,323
|
|
|
900
|
|
|
15,223
|
|
Funded (unfunded) status at end of year
|
3,095
|
|
|
(40,353)
|
|
|
(37,258)
|
|
|
2,844
|
|
|
(37,564)
|
|
|
(34,720)
|
|
The fair value of our plan assets, by category, as of December 31, 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Equity securities
|
15,822
|
|
|
14,323
|
|
|
|
|
|
Cash
|
1,042
|
|
|
900
|
|
|
16,864
|
|
|
15,223
|
|
The amounts recognized in accumulated other comprehensive income, as of December 31, 2020 and 2019, is $15.9 million and $12.2 million, respectively.
The actuarial loss recognized in other comprehensive income is net of tax of $0.6 million, $0.5 million, and $0.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The asset allocation for our Marine scheme at December 31, 2020 and 2019, by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine scheme
|
|
|
2020 (%)
|
|
2019 (%)
|
Cash
|
|
|
100
|
|
|
100
|
|
Total
|
|
|
100
|
|
|
100
|
|
The asset allocation for our UK scheme at December 31, 2020 and 2019, by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK scheme
|
|
|
2020 (%)
|
|
2019 (%)
|
Equity
|
|
|
100
|
|
|
100
|
|
Total
|
|
|
100
|
|
|
100
|
|
Our investment strategy is to balance risk and reward through the selection of professional investment managers and investing in pooled funds.
We are expected to make the following contributions to the schemes during the year ended December 31, 2021, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
UK scheme
|
|
Marine scheme
|
Employer contributions
|
—
|
|
|
2,900
|
|
We are expected to make the following pension disbursements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
UK scheme
|
|
Marine scheme
|
2021
|
590
|
|
|
2,700
|
|
2022
|
370
|
|
|
2,600
|
|
2023
|
380
|
|
|
2,500
|
|
2024
|
420
|
|
|
2,400
|
|
2025
|
660
|
|
|
2,300
|
|
2026 - 2030
|
2,350
|
|
|
11,000
|
|
The weighted average assumptions used to determine the benefit obligation for our plans for the years ended December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Discount rate
|
1.68
|
%
|
|
2.61
|
%
|
Rate of compensation increase
|
2.29
|
%
|
|
2.15
|
%
|
The weighted average assumptions used to determine the net periodic benefit cost for our plans for the years ended December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Discount rate
|
1.69
|
%
|
|
2.63
|
%
|
Expected return on plan assets
|
2.06
|
%
|
|
2.81
|
%
|
Rate of compensation increase
|
2.31
|
%
|
|
2.20
|
%
|
The overall expected long-term rate of return on assets assumption used to determine the net periodic benefit cost for our plans for the years ended December 31, 2020 and 2019 is based on the weighted average of various returns on assets using the asset allocation as at the beginning of 2020 and 2019. For equities and other asset classes, we have applied an equity risk premium over ten year governmental bonds.
|
|
|
|
|
|
23.
|
SHARE CAPITAL AND SHARE BASED COMPENSATION
|
Our common shares are listed on the Nasdaq Stock Exchange.
As at December 31, 2020 and 2019, our authorized and issued share capital is as follows:
Authorized share capital:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $, except per share data)
|
2020
|
|
2019
|
150,000,000 (2019: 150,000,000) common shares of $1.00 each
|
150,000
|
|
|
150,000
|
|
Issued share capital:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $, except per share data)
|
2020
|
|
2019
|
109,943,594 (2019: 101,302,404) outstanding issued common shares of $1.00 each
|
109,944
|
|
|
101,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(number of shares)
|
2020
|
|
2019
|
As at January 1
|
101,302,404
|
|
|
101,302,404
|
|
Repurchase and cancellation of treasury shares (1)
|
(3,500,000)
|
|
|
—
|
|
Issuance of shares (2)
|
12,067,789
|
|
|
—
|
|
Vesting of RSUs
|
73,401
|
|
|
—
|
|
As at December 31
|
109,943,594
|
|
|
101,302,404
|
|
(1) In February 2020, we purchased 1.5 million shares for a consideration of $70.4 million and cancelled all our 3.5 million treasury shares, that we repurchased in the current and prior years.
(2) In December 2020, we closed a registered equity offering of 12,067,789 of our common shares, at par value of $1.00 per share. We raised proceeds, net of the underwriter's discount and offering fees, of approximately $100 million, which we used to partially repay the Term Loan facility, fully repay Margin Loan Facility and for general corporate purposes.
Contributed surplus
As at December 31, 2020 and 2019 we had contributed surplus of $200 million. Contributed surplus is capital that can be returned to stockholders without the need to reduce share capital, thereby giving Golar greater flexibility when it comes to declaring dividends.
Share options
In February 2002, our board of directors approved the Golar LNG Limited Share Option Scheme ("Golar Scheme"). The Golar Scheme permits the board of directors, at its discretion, to grant options and to acquire shares in the Company to employees, non-employees and directors of the Company or its subsidiaries. Options granted under the scheme will vest at a date determined by the board at the date of the grant. The options granted under the plan to date have five year terms and vest equally over a period of three to four years. There is no maximum number of shares authorized for awards of equity share options, and either authorized unissued shares or treasury shares in the Company may be used to satisfy exercised options.
The Golar LNG Limited Long Term Incentive Plan ("LTIP") was adopted by our board of directors, effective as of October 24, 2017. The maximum aggregate number of common shares that may be delivered pursuant to any and all awards under the Company’s LTIP shall not exceed 3,000,000 common shares, subject to adjustment due to recapitalization or reorganization as provided under the LTIP. The LTIP allows for grants of (i) share options, (ii) share appreciation rights, (iii) restricted share awards (iv) share awards, (v) other share-based awards, (vi) cash awards, (vii) dividend equivalent rights, (viii) substitute awards and (ix) performance-based awards, or any combination of the foregoing as determined by the board of directors or nominated committee in its sole discretion. Either authorized unissued shares or treasury shares (if there are any) in the Company may be used to satisfy exercised options.
During 2020 and 2019, the Company granted individuals nil share options.
As at December 31, 2020, 2019 and 2018, the number of options outstanding in respect of Golar shares was 1.8 million, 2.7 million and 3.8 million, respectively.
The fair value of each option award is estimated on the grant date or modification date using the Black-Scholes option pricing model. The weighted average assumptions as at grant date are noted in the table below:
|
|
|
|
|
|
|
|
|
|
|
2018
|
Risk free interest rate
|
|
2.5
|
%
|
Expected volatility of common stock
|
|
62.5
|
%
|
Expected dividend yield
|
|
0.0
|
%
|
Expected term of options (in years)
|
|
3.6 years
|
The assumption for expected future volatility is based primarily on an analysis of historical volatility of our common stock.
Where the criteria for using the simplified method are met, we have used this method to estimate the expected term of options based on the vesting period of the award that represents the period of time options granted are expected to be outstanding. Under the simplified method, the mid-point between the vesting date and the maximum contractual expiration date is used as the expected term. Where the criteria for using the simplified method are not met, we used the contractual term of the options of five years.
The dividend yield has been estimated at 0.0% as the exercise price of the options are reduced by the value of dividends, declared and paid on a per share basis.
A summary of the share option activity for the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $, except per share data)
|
Shares
(in '000s)
|
|
Weighted average exercise price
|
|
Weighted average remaining contractual term
(years)
|
Options outstanding at December 31, 2019
|
2,680
|
|
|
$
|
30.23
|
|
|
1.9
|
Forfeited during the year
|
(376)
|
|
|
$
|
26.69
|
|
|
|
Lapsed during the year
|
(463)
|
|
|
$
|
55.45
|
|
|
|
Options outstanding at December 31, 2020
|
1,841
|
|
|
$
|
24.62
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable at:
|
|
|
|
|
|
December 31, 2020
|
1,717
|
|
|
$
|
24.46
|
|
|
1.2
|
December 31, 2019
|
2,221
|
|
|
$
|
30.74
|
|
|
1.7
|
December 31, 2018
|
2,320
|
|
|
$
|
39.02
|
|
|
2.0
|
The exercise price of all options is reduced by the amount of dividends declared and paid. The above figures for options granted, exercised and forfeited show the average of the prices at the time of granting, exercising and forfeiting of the options, and for options outstanding at the beginning and end of the year, the average of the reduced option prices is shown.
As of December 31, 2020, 2019 and 2018, the aggregate intrinsic value of share options that were both outstanding and exercisable was $nil as the exercise price was higher than the market value of the share options at year end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
In $'000
|
2020
|
|
2019
|
|
2018
|
Intrinsic value of share options exercised
|
—
|
|
|
—
|
|
|
2,621
|
|
Total fair value of share options fully vested in the year
|
3,175
|
|
|
8,967
|
|
|
16,623
|
|
|
|
|
|
|
|
Compensation cost recognized in the consolidated statement of income
|
2,274
|
|
|
7,148
|
|
|
11,748
|
|
Share options cost capitalized*
|
110
|
|
|
608
|
|
|
421
|
|
*Relates to capitalized costs on share options awarded to employees directly involved in certain vessel conversion projects.
As of December 31, 2020, the total unrecognized compensation cost amounting to $0.2 million relating to options outstanding is expected to be recognized over a weighted average period of two months.
Restricted Stock Units (RSU)
Time-based RSUs
Pursuant to the LTIP, the Company granted certain individuals 0.7 million and 0.2 million of RSUs during the years ended December 31, 2020 and 2019, respectively. The RSUs vest equally over a period of 3 years.
The fair value of the RSU award is estimated using the market price of our common stock at grant date with expense recognized over the three-year vesting period.
A summary of time-based RSU activities for the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $, except per share data)
|
Shares
(in '000s)
|
|
Weighted average grant date fair value per share
|
|
Weighted average remaining contractual term
(years)
|
Non-vested RSUs at December 31, 2019
|
223
|
|
|
20.61
|
|
2.40
|
Granted during the year
|
667
|
|
|
7.51
|
|
|
Vested during the year
|
(73)
|
|
|
20.61
|
|
|
Forfeited during the year
|
(69)
|
|
|
7.87
|
|
|
Non-vested RSUs at December 31, 2020
|
748
|
|
|
10.02
|
|
2.00
|
Performance-based RSUs
In March 2020, the Company also granted certain individuals RSUs that are subject to the achievement of a total shareholder return (TSR) performance condition relative to the TSR of a predetermined group of peer companies over a three-year performance period ending December 31, 2022. The maximum number of RSUs that may be earned under the award is 159,430. Payouts of the performance-based RSUs will range from 0% to 100% of the target awards based on the Company’s TSR ranking within the peer group. This award will vest in March 2023.
The fair value of this award is estimated on the grant date using the Monte Carlo simulation model. The weighted average assumptions as of grant date are noted in the table below:
|
|
|
|
|
|
|
|
|
|
|
2020
|
Remaining performance period
|
|
2.8 years
|
Contractual term
|
|
3.0 years
|
Expected dividend yield
|
|
0.0
|
%
|
Risk fee interest rate
|
|
0.42
|
%
|
Golar volatility
|
|
84
|
%
|
Share price at grant date
|
|
$
|
7.49
|
|
The assumption for expected future volatility is based primarily on an analysis of historical volatility of our common stock with an implied volatility factored in for the last 0.9 years of the performance period.
A summary of performance-based RSU activity for the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $, except per share data)
|
Shares
(in '000s)
|
|
Weighted average grant date fair value per share
|
|
Weighted average remaining contractual term
(years)
|
Granted during the year
|
159
|
|
|
6.25
|
|
|
Non-vested performance based RSUs at December 31, 2020
|
159
|
|
|
6.25
|
|
2.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
In $'000
|
2020
|
|
2019
|
|
2018
|
Compensation cost recognized in the consolidated statement of income
|
2,739
|
|
|
1,124
|
|
|
—
|
|
RSU cost capitalized*
|
295
|
|
|
—
|
|
|
—
|
|
*Relates to capitalized costs on RSUs awarded to employees directly involved in certain vessel conversion projects.
As of December 31, 2020, the total unrecognized compensation cost of $5.9 million relating to both time-based and performance based RSUs outstanding is expected to be recognized over a weighted average period of 1.9 years.
|
|
|
|
|
|
24.
|
FINANCIAL INSTRUMENTS
|
Interest rate risk management
In certain situations, we may enter into financial instruments to reduce the risk associated with fluctuations in interest rates. We have entered into swaps that convert floating rate interest obligations to fixed rates, which from an economic perspective, hedge the interest rate exposure. We do not hold or issue instruments for speculative or trading purposes. The counterparties to such contracts are major banking and financial institutions. Credit risk exists to the extent that the counterparties are unable to perform under the contracts; however we do not anticipate non-performance by any of our counterparties.
We manage our debt portfolio with interest rate swap agreements in U.S. dollars to achieve an overall desired position of fixed and floating interest rates. Since 2015, we have ceased hedge accounting for any of our derivatives.
As of December 31, 2020 and 2019, we were party to the following interest rate swap transactions involving the payment of fixed rates in exchange for LIBOR as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
(in thousands of $)
|
|
Year end
|
|
Notional value
|
|
Maturity dates
|
|
Fixed interest rates
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
Receiving floating, pay fixed
|
|
2020
|
|
597,500
|
|
|
2021/2029
|
|
1.69% to 2.37%
|
Receiving floating, pay fixed
|
|
2019
|
|
737,500
|
|
|
2020/2029
|
|
1.68% to 2.37%
|
Foreign currency risk
The majority of the vessels' gross earnings are receivable in U.S. dollars. The majority of our transactions, assets and liabilities are denominated in U.S. dollars, our functional currency. However, we incur certain expenditure in other currencies. There is a risk that currency fluctuations will have a negative effect on the value of our cash flows.
Commodity price risk
A derivative asset, representing the fair value of the estimated discounted cash flows of payments due as a result of the Brent Crude price moving above the contractual floor of $60.00 per barrel over the contract term, was recognized in December 2017 following the effectiveness of the LTA. Golar bears no downside risk should the Brent Crude price move below $60.00.
Equity price risk
Our Board of Directors has approved a share repurchase program, which is being partly financed through the use of total return swap or equity swap facilities with third party banks, indexed to our own shares. We carry the risk of fluctuations in the share price of those acquired shares. The banks are compensated at their cost of funding plus a margin. In November 2019, we purchased 1.5 million shares underlying the total return swap, at fair consideration of $69.5 million, of which $54.7 million restricted cash was released at repurchase, with $50.9 million to settle the derivative liability fair value and $18.6 million relating to the fair value of the treasury shares. As at December 31, 2019, the counterparty to the equity swap transactions has 1.5 million outstanding notional shares and 107,000 of Golar Partner's unit underlying the total return swap in the Company at an average price of $46.93 and $21.41, respectively.
In February 2020, we purchased the remaining 1.5 million of our shares and 107,000 of Golar Partners' units underlying the total return swap, at an average price of $46.91 and $21.40, respectively at a fair consideration of $72.7 million, of which $59.3 million restricted cash was released at repurchase, with $55.5 million to settle the derivative liability fair value (note 12) and $17.2 million relating to the fair value of the shares and units underlying the total return swap. In February 2020, we cancelled all our treasury shares that we repurchased in the current and previous periods amounting to 3.5 million shares. The effect of our total return swap facilities in our consolidated statement of operation as at December 31, 2020 was a loss of $5.1 million.
Fair values of financial instruments
We recognize our fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on reliability of inputs used to determine fair value as follows:
Level 1: Quoted market prices in active markets for identical assets and liabilities;
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data; and
Level 3: Unobservable inputs that are not corroborated by market data.
There have been no transfers between different levels in the fair value hierarchy during the year.
The carrying value and fair value of our financial instruments at December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2020
|
2019
|
2019
|
(in thousands of $)
|
Fair value hierarchy
|
Carrying value
|
Fair value
|
Carrying value
|
Fair value
|
|
|
|
|
|
|
Non-derivatives:
|
|
|
|
|
|
Cash and cash equivalents
|
Level 1
|
127,691
|
|
127,691
|
|
222,123
|
|
222,123
|
|
Restricted cash and short-term deposits
|
Level 1
|
163,181
|
|
163,181
|
|
188,289
|
|
188,289
|
|
Current portion of long-term debt and short-term debt (1)
|
Level 2
|
(984,510)
|
|
(984,510)
|
|
(1,244,599)
|
|
(1,244,599)
|
|
Long-term debt – convertible bonds (2)
|
Level 2
|
(383,740)
|
|
(366,581)
|
|
(368,134)
|
|
(355,943)
|
|
Long-term debt (1)
|
Level 2
|
(1,011,281)
|
|
(1,011,281)
|
|
(956,018)
|
|
(956,018)
|
|
Derivatives:
|
|
|
|
|
|
Oil derivative instrument
|
Level 2
|
540
|
|
540
|
|
45,640
|
|
45,640
|
|
Interest rate swaps asset (2)
|
Level 2
|
—
|
|
—
|
|
84
|
|
84
|
|
Interest rate swaps liability (2)
|
Level 2
|
(44,315)
|
|
(44,315)
|
|
(5,798)
|
|
(5,798)
|
|
Foreign exchange swaps asset (2)
|
Level 2
|
—
|
|
—
|
|
1,246
|
|
1,246
|
|
Foreign exchange swaps liability (2)
|
Level 2
|
(1,310)
|
|
(1,310)
|
|
—
|
|
—
|
|
Total return equity swap liability (2) (3)
|
Level 2
|
—
|
|
—
|
|
(50,407)
|
|
(50,407)
|
|
|
|
|
|
|
|
(1) Our debt obligations are recorded at amortized cost in the consolidated balance sheets. The amounts presented in the table, are gross of the deferred charges amounting to $28.7 million and $32.9 million at December 31, 2020 and December 31, 2019, respectively.
(2) The fair value of certain derivative instruments is the estimated amount that we would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, foreign exchange rates, closing quoted market prices and our creditworthiness and that of our counterparties.
(3) The fair value of our total return equity swap is calculated using the closing prices of the underlying listed shares and units, dividends paid since inception and the interest rate charged by the counterparty.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
•The carrying values of loans receivables, trade accounts receivable, trade accounts payable, accrued liabilities and working capital facilities approximate fair values because of the near term maturity of these instruments.
•The carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value.
•The carrying value of restricted cash and short-term deposits is considered to be equal to the estimated fair value because of their near term maturity.
•The estimated fair value for the liability component of the unsecured convertible bonds is based on the quoted market price as at the balance sheet date.
•The estimated fair values for both the floating long-term debt and short-term debt to a related party are considered to be equal to the carrying value since they bear variable interest rates, which are adjusted on a quarterly or six-monthly basis.
•The fair value measurement of a liability must reflect the non-performance of the entity. Therefore, the impact of our credit worthiness has also been factored into the fair value measurement of the derivative instruments in a liability position.
•The fair value of the oil derivative instrument was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the LTA. Significant inputs used in the valuation of the oil derivative instrument include management’s estimate of an appropriate discount rate and the length of time to blend the long-term and the short-term oil prices obtained from quoted prices in active markets.
•The credit exposure of interest rate swap agreements is represented by the fair value of contracts with a positive value at the end of each period, reduced by the effects of master netting arrangements. It is our policy to enter into master netting agreements with counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of the amounts owed to the counterparty by offsetting them against amounts that the counterparty owes to us.
•Our pension plan assets are primarily invested in funds holding equity and debt securities, which are valued at quoted market price. These plan assets are classified within Level 1 of the fair value hierarchy (note 22).
The following table summarizes the fair value of our derivative instruments on a gross basis (none of which have been designated as hedges) recorded in our consolidated balance sheets as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet classification
|
2020
|
|
2019
|
(in thousands of $)
|
|
|
|
|
Asset derivatives
|
|
|
|
|
Oil derivative instrument
|
Other non-current assets
|
540
|
|
|
45,640
|
|
Foreign exchange swaps
|
Other current and non-current assets
|
—
|
|
|
1,246
|
|
Interest rate swaps
|
Other current and non-current assets
|
—
|
|
|
84
|
|
Total asset derivatives
|
|
540
|
|
|
46,970
|
|
Liability derivatives
|
|
|
|
|
Total return equity swap
|
Other current liabilities
|
—
|
|
|
(50,407)
|
|
Interest rate swaps
|
Other current liabilities
|
(44,315)
|
|
|
(5,798)
|
|
Foreign exchange swaps
|
Other current liabilities
|
(1,310)
|
|
|
—
|
|
Total liability derivatives
|
|
(45,625)
|
|
|
(56,205)
|
|
We have elected not to offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable master netting arrangements. However, if we were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in our consolidated balance sheets as of December 31, 2020 and 2019 would be adjusted as detailed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
|
Gross amounts presented in the consolidated balance sheet
|
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
|
Net amount
|
Gross amounts presented in the consolidated balance sheet
|
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
|
Net amount
|
(in thousands of $)
|
|
|
|
|
|
|
Total asset derivatives
|
—
|
|
—
|
|
—
|
|
84
|
|
(52)
|
|
32
|
|
Total liability derivatives
|
44,315
|
|
—
|
|
44,315
|
|
5,798
|
|
(52)
|
|
5,746
|
|
Some of our interest rate swaps have a credit arrangement that requires us to provide cash collateral when the market value of
the instrument falls below a specified threshold. As of December 31, 2020 and December 31, 2019, cash collateral amounting to $8.9 million and $nil has been provided (note 12).
The total return equity swap has a credit arrangement that requires us to provide cash collateral equaling 20% of the initial purchase price and to subsequently post additional cash collateral that corresponds to any further unrealized loss. As of December 31, 2020 and December 31, 2019, cash collateral amounting to $nil and $55.6 million, respectively has been provided (see note 12).
Concentrations of risk
There is a concentration of credit risk with respect to cash and cash equivalents and restricted cash to the extent that substantially all of the amounts are carried with Nordea Bank of Finland PLC, DNB Bank ASA, Citibank, Standard Chartered and Danske Bank. However, we believe this risk is remote, as they are established and reputable establishments with no prior history of default.
There is a concentration of financing risk with respect to our long-term debt to the extent that a substantial amount of our long-term debt is carried with Citibank, K-Sure, KEXIM and commercial lenders of our $1.125 billion facility, as well as with ICBCL, CMBL, CCBFL, COSCO, CSSC and AVIC in regards to our sale and leaseback arrangements (note 5). We believe these counterparties to be sound financial institutions, with investment grade credit ratings. Therefore, we believe this risk is remote.
We have a substantial equity investment in our former subsidiary, Golar Partners, that from December 13, 2012 is considered as our affiliate and not our controlled subsidiary. As of December 31, 2020, our ownership interest was 32.8% and the aggregate carrying value of the investments recorded in our balance sheet as of December 31, 2020 was $67.4 million, being the total of our ownership interest (common and general partner interests) plus IDRs. Accordingly, the value of our investments and the income generated from Golar Partners is subject to specific risks associated with its business.
We also have a substantial equity investment in our joint venture and affiliate, Hygo and Avenir, as of December 31, 2020, our ownership interests were 50% and 23.1% and the aggregate carrying value of the investment recorded in our balance sheet as of December 31, 2020 was $200.3 million and $40.0 million, respectively. Accordingly, the value of our investment and the income generated from Hygo and Avenir are subject to specific risks associated with its business. In the event the decline in the fair value of the investment falls below the carrying value and it was determined to be other-than-temporary, we would be required to recognize an impairment loss.
A further concentration of supplier risk exists in relation to the Gimi undergoing FLNG conversion with Keppel and B&V. However, we believe this risk is remote as Keppel are global leaders in the shipbuilding and vessel conversion sectors while B&V is a global engineering, procurement and construction company.
|
|
|
|
|
|
25.
|
RELATED PARTY TRANSACTIONS
|
a) Transactions with Golar Partners and subsidiaries:
Income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
2018
|
Management and administrative services revenue (i)
|
7,941
|
|
9,645
|
|
9,809
|
|
Ship management fees revenue (ii)
|
5,263
|
|
4,460
|
|
5,200
|
|
Interest income on short-term loan (iii)
|
(317)
|
|
(109)
|
|
—
|
|
Interest expense on deposits payable (iv)
|
—
|
|
—
|
|
(4,779)
|
|
Total
|
12,887
|
|
13,996
|
|
10,230
|
|
Receivables (payables): The balances with Golar Partners and subsidiaries as of December 31, 2020 and 2019 consisted of the
following:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Balances due (to)/from Golar Partners and its subsidiaries (iii)
|
(1,133)
|
|
(2,708)
|
|
Methane Princess lease security deposit movements (v)
|
349
|
|
(2,253)
|
|
Total
|
(784)
|
|
(4,961)
|
|
(i) Management and administrative services revenue - On March 30, 2011, Golar Partners entered into a management and administrative services agreement with Golar Management Limited ("Golar Management"), a wholly-owned subsidiary of Golar, pursuant to which Golar Management will provide to Golar Partners certain management and administrative services. The services provided by Golar Management are charged at cost plus a management fee equal to 5% of Golar Management’s costs and expenses incurred in connection with providing these services. Golar Partners may terminate the agreement by providing 120 days written notice.
(ii) Ship management fees - Golar and certain of its affiliates charge ship management fees to Golar Partners for the provision of technical and commercial management of Golar Partners' vessels. Each of Golar Partners’ vessels is subject to management agreements pursuant to which certain commercial and technical management services are provided by Golar Management. Golar Partners may terminate these agreements by providing 30 days written notice.
(iii) Interest income on short-term loan, balances due(to)/from Golar Partners and its subsidiaries - Receivables and payables with Golar Partners and its subsidiaries are comprised primarily of unpaid management fees and expenses for management, advisory and administrative services, dividends in respect of the Hilli Common Units and other related party arrangements including the short term loan and Hilli disposal. In addition, certain receivables and payables arise when we pay an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Balances owing to or due from Golar Partners and its subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business.
During the year ended December 31, 2020, we loaned a total of $45.0 million with interest of LIBOR plus a margin of 5.0% to Golar Partners. The loan was fully repaid, including interest of $0.3 million during the year ended December 31, 2020.
In November 2019, we loaned $15.0 million to Golar Partners, with interest of LIBOR plus 5.0%. The loan was fully repaid, including interest of $0.1 million, in December 2019.
(iv) Interest expense on deposits payable
In May 2017, Golar Partners exercised the Tundra Put Right which required us to repurchase Tundra Corp at a price equal to the original purchase price of $107.2 million (the "Deferred Purchase Price") plus an additional amount equal to 5% per annum of the Deferred Purchase Price (the "Additional Amount"). In August 2017, we entered into the Hilli Sale Agreement with Golar Partners for the Hilli Disposal, from the Sellers of the Hilli Common Units in Hilli LLC. Concurrent with the execution of the Hilli Sale Agreement, we received a further $70 million deposit from Golar Partners, upon which we paid interest at a rate of 5% per annum. We have accounted for $4.8 million as interest expense for the year ended December 31, 2018. The Deferred Purchase Price, the Additional Amount and the deposit received were applied to the net sale price of the Hilli Disposal on July 12, 2018.
(v) Methane Princess lease security deposit movements - This represents net advances from Golar Partners since its IPO, which correspond with the net release of funds from the security deposits held relating to a lease for the Methane Princess. This is in connection with the Methane Princess tax lease indemnity provided to Golar Partners under the Omnibus Agreement. Accordingly, these amounts will be settled as part of the eventual termination of the Methane Princess lease.
Other transactions:
Golar Partners distributions to us - Golar Partners has declared and paid quarterly distributions totaling $10.5 million, $36.8 million, and $48.4 million to us for each of the years ended December 31, 2020, 2019 and 2018, respectively.
During the years ended December 31, 2020, 2019 and 2018, Hilli LLC declared quarterly distributions totaling $19.4 million $17.5 million and $5.6 million, respectively, in respect of the Hilli Common Units owned by Golar Partners. As of December 31, 2020, 2019 and 2018, we have a dividend payable of $nil $4.5 million and $3.6 million, respectively, to Golar Partners.
Indemnifications and guarantees:
a) Tax lease indemnifications: Under the Omnibus Agreement, we have agreed to indemnify Golar Partners in the event of any tax liabilities in excess of scheduled or final settlement amounts arising from the Methane Princess leasing arrangement and the termination thereof. As of December 31, 2020, the lessor of the Methane Princess has a second priority security interest in the Methane Princess, the Golar Spirit, the Golar Grand and the Golar Tundra.
In addition, to the extent Golar Partners incurs any liabilities as a consequence of a successful challenge by the UK Tax Authorities with regard to the initial tax basis of the transactions relating to any of the UK tax leases or in relation to the lease restructuring terminations in 2010, we have agreed to indemnify Golar Partners (note 26).
The maximum possible amount in respect of the tax lease indemnification is not known as the determination of this amount is dependent on our intention of terminating this lease and the various market factors present at the point of termination. As of December 31, 2020 and 2019 we recognized a liability of $11.5 million in respect of the tax lease indemnification to Golar Partners representing the fair value at deconsolidation in December 2012.
b) Performance guarantees: We issued performance guarantees to third party charterers in connection with the Time Charter Party agreements entered into with the vessel operating entities who are now subsidiaries of Golar Partners. These performance guarantees relate to the Methane Princess, Golar Winter, Eskimo and NR Satu. The maximum potential exposure in respect of the performance guarantees issued by the Company is not known as these matters cannot be absolutely determined. The likelihood of triggering the performance guarantees is remote based on the past performance of both our and Golar Partners' combined fleets.
c) Golar Tundra financing related guarantees: In November 2015, we sold the Golar Tundra to a subsidiary of CMBL (note 5) and subsequently leased back the vessel under a bareboat charter (the “Tundra Lease”). In connection with the Tundra Lease, we are a party to a guarantee in favor of Tundra SPV, pursuant to which, in the event that Tundra Corp (our subsidiary) is in default of its obligations under the Tundra Lease, we, as the primary guarantor, will settle any liabilities due within five business days. In addition, Golar Partners has also provided a further guarantee, pursuant to which, in the event we are unable to satisfy our obligations as the primary guarantor, Tundra SPV may recover this from Golar Partners, as the deficiency guarantor. Under a separate side agreement, we have agreed to indemnify Golar Partners for any costs incurred in its capacity as the deficiency guarantor.
d) Hilli guarantees (in connection with the Hilli Disposal)
(i) Debt
In connection with the closing of the Hilli Disposal, Golar Partners agreed to provide a several guarantee (the “Partnership Guarantee”) of 50% of the outstanding principal and interest amounts payable by Hilli Corp under the Hilli Facility (note 18) pursuant to a Deed of Amendment, Restatement and Accession relating to a guarantee between us, Fortune and Golar Partners (note 5).
(ii) Letter of credit
On November 28, 2018, Golar Partners entered into an agreement to guarantee (the “LOC Guarantee”) the letter of credit issued by a financial institution in the event of Hilli Corp’s underperformance or non-performance under the LTA. Under the LOC Guarantee, Golar Partners are severally liable for any outstanding amounts that are payable, based on the percentage ownership that we hold in Golar Partners, multiplied by Golar Partners percentage ownership in Hilli Common Units.
(iii) Cost indemnification: We (as one of the Sellers) have agreed to indemnify Golar Partners for certain costs incurred in Hilli operations until August 14, 2025, when these costs exceed a contractual ceiling, capped at $20 million. Costs indemnified include vessel operating expenses, taxes, maintenance expenses, employee compensation and benefits, and capital expenditures. Included within the Hilli distributions for the year ended December 31, 2020 and 2019 is $0.4 million and $2.2 million of reimbursements from us for vessel operating expenses.
Omnibus Agreement
In connection with the IPO of Golar Partners, we entered into an Omnibus Agreement with Golar Partners governing, among other things, when we and Golar Partners may compete against each other as well as rights of first offer on certain FSRUs and LNG carriers. Under the Omnibus Agreement, Golar Partners and its subsidiaries agreed to grant a right of first offer on any proposed sale, transfer or other disposition of any vessel it may own. Likewise, we agreed to grant a similar right of first offer to Golar Partners for any vessel under a charter for five or more years that we may own. These rights of first offer will not apply to a (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any current or future charter or other agreement with a charter party or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third-party. In addition, the Omnibus Agreement provides for certain indemnities to Golar Partners in connection with the assets transferred from us.
b) Transactions with Hygo and affiliates:
Net revenues: The transactions with Hygo and its affiliates for the years ended December 31, 2020, 2019 and 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
2018
|
Management and administrative services revenue
|
5,281
|
|
5,904
|
|
6,167
|
|
Ship management fees income
|
1,780
|
|
1,210
|
|
1,400
|
|
Debt guarantee compensation (i)
|
3,826
|
|
693
|
|
861
|
|
Other (ii)
|
—
|
|
(2)
|
|
(247)
|
|
Total
|
10,887
|
|
7,805
|
|
8,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables: The balances with Hygo and its affiliates as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
|
Balances due to Hygo and affiliates (ii)
|
(11,222)
|
|
(6,829)
|
|
|
|
|
|
|
|
|
|
|
(i) Debt guarantee compensation - In connection with the closing of the Hygo and Stonepeak transaction, Hygo entered into agreements to compensate Golar in relation to certain debt guarantees (as further described under the subheading "Guarantees and other") relating to Hygo and subsidiaries. The compensation amounted to $3.8 million and $0.7 million income for the year ended December 31, 2020 and 2019 respectively.
(ii) Balances due to Hygo and affiliates - Receivables and payables with Hygo and its subsidiaries are comprised primarily of unpaid management fees, advisory and administrative services. In addition, certain receivables and payables arise when we pay an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Balances owing to or due from Hygo and its subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business. In December 2019, we loaned $7.0 million to Hygo, with interest of LIBOR plus 5.0%. The loan was fully repaid, including interest, in December 2019.
Guarantees:
a) Debt guarantees - As described in (i) above, we receive compensation from Hygo in relation to our provision of guarantees on certain of its long term debt. In January 2020, the Golar Celsius was refinanced and we provided a debt guarantee to third party bank in respect of the secured debt facility maturing on March 2027. We have also agreed to provide a debt guarantee on the Golar Nanook to third party bank in respect of the secured debt facility maturing on September 2030. In December 2019, the Golar Penguin was refinanced, with a cross-default provision on the Golar Crystal. A cross-default provision means that if we or Hygo default on one loan or lease, we would then default on our other loans containing such cross-default provision. These debt facilities are secured against specific vessels. The liability which is recorded in “Other current liabilities” and “Other non-current liabilities” is being amortized over the remaining term of the respective debt facilities with the credit being recognized in "Other financial items". As of December 31, 2020 and 2019, we have guaranteed $422.3 million and $396.6 million, respectively of Hygo's gross long-term debt obligations.
Other transactions:
Net Cool Pool expenses/income - Net expenses/income relating to the other pool participants are presented in our consolidated Statement of Operation in the line item “Voyage, charter hire and commission expenses” for the year ended December 31, 2020 and 2019 amounted to $2.1 million of net expenses and $1.6 million of net income, respectively.
c) Transactions with OneLNG and subsidiaries:
Net revenues: The transactions with OneLNG and its subsidiaries for the year ended December 31, 2020, 2019 and 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
2018
|
Management and administrative services revenue
|
—
|
|
—
|
|
1,399
|
|
|
|
|
|
Receivables: The balances with OneLNG and its subsidiaries as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
Balances due from OneLNG (i)
|
64
|
|
707
|
|
(i) Balances due from OneLNG - Receivables with One LNG and its subsidiaries comprise primarily of unpaid management fees, advisory, administrative services and payment on behalf of a related party. Balances due from OneLNG are unsecured and interest free.
Subsequent to the decision to dissolve OneLNG, we have written off $nil and $3.0 million of the trading balance with OneLNG for the years ended December 31, 2020 and 2019, respectively, to 'Other operating income' in our consolidated statements of operations as we deem it to be no longer recoverable. During the year ended December 31, 2020 and 2019, we received $0.6 million and $4.5 million from OneLNG.
d) Transaction with other related parties:
Net revenues/(expenses): The transactions with other related parties for the years ended December 31, 2020, 2019 and 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
|
2018
|
The Cool Pool (i)
|
—
|
|
|
39,666
|
|
|
151,152
|
|
Magni Partners (ii)
|
(606)
|
|
|
(858)
|
|
|
(375)
|
|
Borr Drilling (iii)
|
384
|
|
|
542
|
|
|
—
|
|
2020 Bulkers (iv)
|
45
|
|
|
265
|
|
|
—
|
|
Avenir LNG (v)
|
980
|
|
|
—
|
|
|
—
|
|
Total
|
803
|
|
|
39,615
|
|
|
150,777
|
|
Receivables: The balances with other related parties as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
2019
|
|
|
|
Magni Partners (ii)
|
81
|
|
88
|
|
Borr Drilling (iii)
|
936
|
|
542
|
|
2020 Bulkers (iv)
|
51
|
|
265
|
|
Avenir LNG (v)
|
980
|
|
—
|
|
Total
|
2,048
|
|
895
|
|
(i) The Cool Pool - On July 8, 2019 GasLog's vessel charter contracts had concluded and withdrew their participation from the Cool Pool. Following Gaslog's departure, we assumed sole responsibility for the management of the Cool Pool and consolidate the Cool Pool. From the point of consolidation, the Cool Pool ceased to be a related party.
The table below summarizes our net earnings (impacting each line item in our consolidated statement of operation) generated from our participation in the Cool Pool:
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
|
2019
|
2018
|
Time and voyage charter revenues
|
|
43,332
|
|
177,139
|
|
Time charter revenues - collaborative arrangement
|
|
23,359
|
|
73,931
|
|
Voyage, charterhire expenses and commission expenses
|
|
(8,092)
|
|
(16,717)
|
|
Voyage, charterhire and commission expenses - collaborative arrangement
|
|
(18,933)
|
|
(83,201)
|
|
Net income from the Cool Pool
|
|
39,666
|
|
151,152
|
|
(ii) Magni Partners - Tor Olav Trøim is the founder of, and partner in, Magni Partners (Bermuda) Limited, a privately held Bermuda company, and is the ultimate beneficial owner of the company. Receivables and payables from Magni Partners comprise primarily of the cost (without mark-up) or part cost of personnel employed by Magni Partners who have provided advisory and management services to Golar. These costs do not include any payment for any services provided by Tor Olav Trøim himself.
(iii) Borr Drilling - Tor Olav Trøim is the founder, and director of Borr Drilling, a Bermuda company listed on the Oslo and NASDAQ stock exchanges. Receivables comprise primarily of management and administrative services provided by our Bermuda corporate office.
(iv) 2020 Bulkers - 2020 Bulkers is a related party by virtue of common directorships. Receivables comprise primarily of management and administrative services provided by our Bermuda corporate office.
(v) Avenir LNG - Avenir LNG entered into an agreement to compensate Golar in relation to the provision of certain debt guarantees issued to third party banks. Receivables comprise primarily of debt guarantee compensation to Golar.
|
|
|
|
|
|
26.
|
COMMITMENTS AND CONTINGENCIES
|
Assets pledged
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of $)
|
2020
|
|
2019
|
Book value of vessels secured against long-term loans(1)
|
2,959,535
|
|
|
3,135,891
|
|
(1) This excludes the Gimi which is classified as "Assets under development" (see note 11) and secured against its specific debt facility (note 14).
As at December 31, 2020, the Revolving Credit Facility is secured by a pledge against our shares in Hygo (note 18). As at December 31, 2019, the Term Loan Facility was secured by a pledge against our shares in Hygo which had been partially refinanced into the Revolving Credit Facility during the year ended December 31, 2020 (note 18).
As at December 31, 2019, 21,226,586 Golar Partners common units were pledged as security for the obligations under the Margin Loan facility which had repaid during the year ended December 31, 2020 and pledged security released (note 18).
Capital Commitments
Gandria
We have agreed contract terms for the conversion of the Gandria to a FLNG. The Gandria is currently in lay-up awaiting delivery to Keppel for conversion. The conversion agreement is subject to certain payments and lodging of a full Notice to Proceed. We have also provided a guarantee to cover the sub-contractor's obligations in connection with the conversion of the vessel.
Other contractual commitments and contingencies
UK tax lease benefits
During 2003 we entered into six UK tax leases. Under the terms of the leasing arrangements, the benefits are derived primarily from the tax depreciation assumed to be available to the lessors as a result of their investment in the vessels. As is typical in these leasing arrangements, as the lessee we are obligated to maintain the lessor’s after-tax margin. Accordingly, in the event of
any adverse tax changes or a successful challenge by the UK Tax Authorities (''HMRC'') with regard to the initial tax basis of the transactions, or in relation to the 2010 lease restructurings, or in the event of an early termination of the Methane Princess lease, we may be required to make additional payments principally to the UK vessel lessor, which could adversely affect our earnings or financial position. We would be required to return all, or a portion of, or in certain circumstances significantly more than, the upfront cash benefits that we received in respect of our lease financing transactions, including the 2010 restructurings and subsequent termination transactions. The gross cash benefit we received upfront on these leases amounted to approximately £41 million ($56.0 million) (before deduction of fees).
Of these six leases, we have since terminated five, with one lease remaining as at December 31, 2020, the Methane Princess lease. Pursuant to the deconsolidation of Golar Partners in 2012, Golar Partners is no longer considered a controlled entity but an affiliate and therefore as at December 31, 2020, the capital lease obligation relating to this remaining UK tax lease is not included on our consolidated balance sheet. However, under the indemnity provisions of the Omnibus Agreement or the respective share purchase agreements, we have agreed to indemnify Golar Partners in the event of any tax liabilities in excess of scheduled or final scheduled amounts arising from the Methane Princess leasing arrangements and termination thereof. As of December 31, 2020, the lessor of the Methane Princess has a second priority security interest in the Methane Princess, the Golar Spirit, the Golar Grand and the Golar Tundra.
HMRC has been challenging the use of similar lease structures and has been engaged in litigation of a test case for some years. In August 2015, following an appeal to the Court of Appeal by the HMRC which set aside previous judgments in favor of the tax payer, the First Tier Tribunal (“FTT or the UK court”) ruled in favor of HMRC. The tax payer in this particular ruling has the election to appeal the courts’ decision, but no appeal has been filed. The judgments of the FTT do not create binding precedent for other UK court decisions and therefore the ruling in favor of HMRC is not binding in the context of our structures. Further, we consider there are differences in the fact pattern and structure between this case and our 2003 leasing arrangements and therefore is not necessarily indicative of any outcome. HMRC have written to our lessor to indicate that they believe our lease may be similar to the case noted above. We have reviewed the details of the case and the basis of the judgment with our legal and tax advisers to ascertain what impact, if any, the judgment may have on us and the possible range of exposure has been estimated at approximately £nil to £121.4 million ($nil to $166.0 million). In December 2019, in conjunction with our lessor, Golar obtained supplementary legal advice confirming our position. Golar's discussions with HMRC on this matter have concluded without agreement and, in January 2020 we received a closure notice to the inquiry stating the basis of HMRC's position. Consequently, a notice of appeal against the closure notice was submitted to HMRC. In December 2020, notice of appeal was submitted to the FTT. We remain confident of our position, however given the complexity of these discussions it is impossible to quantify the reasonably possible loss, and we continue to estimate the possible range of exposures as set out above.
Class Action Lawsuit
On September 24, 2020, a purported Golar shareholder filed a putative class action lawsuit against us, our Chief Executive Officer, Iain Ross, and Hygo’s former Chief Executive Officer, Eduardo Antonello, in the United States District Court for the Southern District of New York (Case No. 1-20-cv-07926). The complaint purports to be brought on behalf of shareholders who purchased common shares of Golar between April 30, 2020 and September 24, 2020. The complaint generally alleges that the defendants violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements regarding, among other matters, Golar’s business operations and prospects in relation to the implication of Hygo’s former Chief Executive Officer in certain allegations by federal prosecutors in Brazil. The complaint seeks unspecified damages, attorneys’ fees and other costs. On December 9, 2020, the putative class action lawsuit was dismissed, and the Court therefore ordered that the case be terminated.
Legal proceedings and claims
We may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. A provision will be recognized in the financial statements only where we believe that a liability will be probable and for which the amounts are reasonably estimable, based upon the facts known prior to the issuance of the financial statements.
We are party to a shareholders’ agreement with a consortium of investors to fund the development of pipeline infrastructure and a FSRU which are intended to supply two power plants in the Ivory Coast. The project is currently in the initial design phase. Negotiations are underway with third party lenders for the financing of construction costs in the event a positive investment decision is made. During the initial phase of the project, our remaining contractual commitments for this project are estimated to around €1.1 million. In the event a positive FID is taken on the project, this could increase up to approximately €15 million. This figure is dependent upon a variety of factors such as whether third party financing is obtained for a portion of the construction costs. The timing of this range of payments is dependent on whether and when FID is made, progress of negotiations with lenders for non-investor financing, and the progress of eventual construction work. The nature of payments to the project could be made in a combination of capital contributions or interest-bearing shareholder loans.
In relation to our investment in small-scale LNG services provider Avenir (note 14), we are party to a combined commitment of up to $182.0 million from initial Avenir shareholders Stolt-Nielsen, Höegh and us. In November 2018, Avenir was capitalized with the placement of 110,000,000 new shares at a par price of US$1.00 per share. Following the initial equity offering, the founding partners are committed to fund $72.0 million of which Golar is committed to $18.0 million. As discussed in note 14, following Avenir's issuance of the Equity Shortfall Offering to its shareholders, we subscribed to 9,375,000 additional shares at $1.00 par value and paid $9.4 million during the year ended December 31, 2020 and recognized $1.9 million of deferred consideration payable following the Equity Shortfall Offering. As of December 31, 2020, the remaining commitment including the Equity Shortfall Offering deferred consideration is $8.6 million.
In 2017, we commenced arbitration proceedings arising from the delays and the termination of the Golar Tundra time charter with a former charterer. For the years ended December 31, 2020, 2019 and 2018, we recovered $nil, $9.3 million and $50.7 million, respectively, in charter earnings, recognized in 'Other operating income' in the consolidated statements of operations. The amount recovered in 2019 represents the final installment settlement.
For the year ended December 31, 2020 and 2019 we recognized $3.3 million and $4.0 million in relation to loss of hire insurance claims on the Golar Bear and Golar Ice and the LNG Croatia, respectively. The above is recognized in 'Other operating income' of our consolidated statement of operations.
Sale of Golar Partners
On January 13, 2021, Golar Partners entered into the GMLP Merger Agreement pursuant to which, on April 15, 2021, GMLP Merger Sub merged with and into Golar Partners, with Golar Partners surviving the GMLP Merger as a wholly-owned subsidiary of NFE.
Under the GMLP Merger Agreement, on April 15, 2021, NFE acquired all of the outstanding common units of Golar Partners for $3.55 per common unit in cash, a 27% premium to the closing price of Golar Partners’ common units of $2.79 per common unit on January 12, 2021. Upon closing of the GMLP Merger, we received $75.7 million in cash for the 21,333,586 Golar Partners common units owned by us immediately prior to the completion of the GMLP Merger. Concurrently with the consummation of the GMLP Merger, the IDRs of Golar Partners owned by us were cancelled and ceased to exist, and no consideration was paid to us in respect thereof. Concurrently with the completion of the GMLP Merger, GP Buyer purchased from us all of the outstanding membership interests in the General Partner for which we received a consideration of $5.1 million, which is equivalent to $3.55 per general partner unit of Golar Partners. The Golar Partners’ Series A preferred units remain outstanding and unaffected by the GMLP Merger.
Although NFE’s purchase price of Golar Partner’s common units and GP units was fixed at $3.55, the final determination of the gain on disposal of our equity investment in Golar Partners cannot be reasonably determined at this stage as its dependent upon the carrying value of our equity investment on April 15, 2021 (which will depart from its book value at December 31, 2020).
Sale of Hygo
On January 13, 2021, we entered into the Hygo Merger Agreement, pursuant to which, on April 15, 2021, Hygo Merger Sub merged with and into Hygo, with Hygo surviving the Hygo Merger as a wholly owned subsidiary of NFE.
Under the terms of the Hygo Merger Agreement, on April 15, 2021, NFE acquired all of the outstanding shares of Hygo for 31,372,549 shares of NFE’s Class A common stock and $580 million in cash. Upon consummation of the Hygo Merger, we received 18,627,451 shares of NFE common stock and $50 million in cash, and Stonepeak received 12,745,098 shares of NFE common stock and $530 million in cash, which included a cash settlement of its preferred equity tranche of $180 million.
Similarly, the gain on disposal of our investment in Hygo cannot be reasonably determined as it depends on (i) the carrying of our equity accounted investment at the date of its derecognition, and (ii) the value of the consideration transferred by NFE upon consummation of the transaction which will be determined based on the closing price of NFE common stock on April 15, 2021.
Share Repurchase Program
Supported by increased financial flexibility and a continuing disparity between the Company’s common share price and the underlying value of its business, in February 2021, the Company’s board of directors approved a program to repurchase up to $50.0 million of common shares. Repurchases may be made from time to time at prevailing prices on the open market or in privately negotiated transactions, as permitted by securities laws and other legal requirements. The program is authorized to commence following the filing of the Company’s Form 20-F for the year ended December 31, 2020 and conclude by April 30, 2022. The repurchase program does not obligate the Company to acquire any, or any specific number of, shares and may be discontinued at any time.