Highlights
- Net income improved from a loss of $23.9 million in 3Q to a
loss of $13.7 million in 4Q. EBITDA* and Operating Loss in
the quarter reported a loss of $15.9 million and $32.7 million
respectively compared to a 3Q loss of $11.3 million and $28.3
million.
- Ophir and OneLNG agreed to form a joint venture to
commercialise the 2.6Tcf Fortuna reserves in Equatorial Guinea
using FLNG technology.
- Golar Power reached a Final Investment Decision ("FID") on its
Sergipe power project, signed a 25-year FSRU agreement and entered
into a long-term sale and purchase agreement for the supply of
LNG.
- The Incentive Distribution Rights ("IDRs") in Golar LNG
Partners ("Golar Partners" or "the Partnership") were reset. Golar
LNG received 3.8 million new units including earn-out units as
consideration.
- Raised $170 million net of fees in new equity through the issue
of 7.5 million new shares and received commitment for a $150
million margin loan. March 2017 maturing convertible bond
fully funded.
Subsequent Events
- Fortuna joint venture secures signed financing term-sheet and
makes substantial progress toward obtaining necessary governmental
approvals.
- Issued a $402.5 million 2.75% 5-year unsecured convertible bond
with a capped call that gives an effective conversion price of
$48.86.
Financial Review
Business Performance
|
2016 |
2016 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Total operating revenues |
23,063 |
|
22,267 |
|
Vessel operating expenses |
(11,424 |
) |
(12,102 |
) |
Voyage, charterhire & commission expenses |
(7,918 |
) |
(8,031 |
) |
Voyage, charterhire & commission expenses - collaborative
arrangements |
(4,715 |
) |
(3,621 |
) |
Administrative expenses |
(14,887 |
) |
(9,808 |
) |
EBITDA* |
(15,881 |
) |
(11,295 |
) |
Depreciation and amortization |
(16,826 |
) |
(16,997 |
) |
Operating loss |
(32,707 |
) |
(28,292 |
) |
* EBITDA is defined as operating loss before
interest, tax, depreciation and amortization. EBITDA is a non-GAAP
financial measure. A non-GAAP financial measure is generally
defined by the Securities and Exchange Commission as one that
purports to measure historical or future financial performance,
financial position or cash flows, but excludes or includes amounts
that would not be so adjusted in the most comparable U.S. GAAP
measure. We have presented EBITDA as we believe it provides useful
information to investors because it is a basis upon which we
measure our operations and efficiency. EBITDA is not a measure of
our financial performance under U.S. GAAP and should not be
construed as an alternative to net income (loss) or other financial
measures presented in accordance with U.S. GAAP.
Golar reports today a 4Q 2016 operating loss of
$32.7 million as compared to a 3Q loss of $28.3 million. As
stated in the 3Q report, the observed improvements in shipping
rates and activity levels during the final weeks of 4Q will not
translate into improved net revenues until 1Q 2017.
Utilisation and voyage expenses during 4Q remained relatively
stable at 39% and $12.6 million respectively (versus 37% and $11.7
million in 3Q). Included in voyage, charter-hire and commission
expenses is $4.9 million in respect of the cost of chartering the
Golar Grand from Golar Partners.
Vessel operating expenses decreased a further
$0.7 million to $11.4 million in 4Q following settlement of a 2014
insurance claim in respect of the Golar Viking. Administration
costs on the other hand reflected a $5.1 million increase over 3Q
to $14.9 million in 4Q. Increases in non-cash share option
charges following the awards made in November 2016 and project
costs due to increased project development activity make up the
majority of the movement from 3Q. Depreciation and
amortisation at $16.8 million is in line with 3Q.
Relative to 3Q the above resulted in a $4.6
million increase in EBITDA* losses from a loss of $11.3 million in
3Q to a loss of $15.9 million in 4Q and a $4.4 million increase in
operating losses from a loss of $28.3 million in 3Q to a loss of
$32.7 million in 4Q.
Net Income Summary
|
2016 |
2016 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Operating loss |
(32,707 |
) |
(28,292 |
) |
Interest income |
528 |
|
436 |
|
Interest expense |
(15,455 |
) |
(15,564 |
) |
Other financial items |
20,832 |
|
22,772 |
|
Loss on disposal |
3,701 |
|
(12,184 |
) |
Other non-operating expenses |
(132 |
) |
- |
|
Taxes |
(450 |
) |
(246 |
) |
Equity in net earnings of affiliates |
15,457 |
|
15,681 |
|
Net income attributable to non-controlling interests |
(5,453 |
) |
(6,546 |
) |
Net loss attributable to Golar LNG Ltd |
(13,679 |
) |
(23,943 |
) |
In 4Q the Company generated a net loss of $13.7
million. Notable contributors to this are summarised as
follows:
- Interest income, expense and other financial items are each in
line with the prior quarter.
- A $3.7 million adjustment was made in 4Q to reduce the
provisional 3Q $12.2 million non-cash loss recognised on disposal
of Golar Power.
- Golar accounts for its interests in Golar Partners and Golar
Power using the equity method of accounting and reports their
contribution under equity in net earnings of affiliates. The $15.5
million 4Q equity in net earnings of affiliates is primarily
comprised of a $9.1 million loss in respect of Golar's 50% share in
Golar Power and net earnings of $25.0 million from the Company's
stake in Golar Partners. Distributions received from the
Partnership amounted to $15.1 million during the quarter.
The reported financial results contained herein
for the fourth quarter of 2016 are preliminary in particular in
relation to two outstanding items as explained further below
Golar Power -Status of affiliate's valuation
exercise
In October 2016, the Company's affiliate, Golar
Power elected to buy out the project developer's, Genpower, 50%
equity interest in the entity which holds the investment in the
Sergipe project company. Accordingly, Golar Power has accounted for
this step acquisition as a business combination. The initial
accounting requires a valuation exercise to be performed in order
to reflect all identifiable assets and liabilities acquired at fair
value. This valuation exercise is in progress and is expected to be
finalized by the time the Company's Form 20-F is filed. Adjustments
arising from this valuation, which are expected to result in a
gain, will impact the following line items in the financial
statements, "investments in affiliate" and "Equity in net earnings
in affiliates" in the Company's balance sheet and income statement,
respectively. There will be no impact on the Company's
reported net cashflows. The Company's preliminary fourth quarter
results presented herein exclude all fair value adjustments arising
from this transaction and the valuation exercise.
IDR Reset
In October 2016, the Company received 3.7
million common units and 0.1 million general partner units
(inclusive of 0.8 million earn-out units) in exchange for enabling
Golar Partners to reset its IDRs. The accounting for this
transaction is complex. As a result the Company is still in
the process of completing its assessment as to the appropriate
accounting treatment under US GAAP for this transaction. With
regard to the Company's preliminary fourth quarter results, no gain
or loss has been recognized in the Company's statement of income in
respect of this transaction and the Company has presented all
interests exchanged in Golar Partners on a historical carrying
value basis. The alternative accounting treatment would be to
recognize this transaction on a fair value basis. Accordingly, the
potential impact, once the final accounting has been determined may
be quantitatively material to the Company's income statement and
balance sheet. However, this would not impact the Company's
reported net cash flows. Any adjustment to reflect the final
conclusion will be made in the financial statements included when
the form 20-F is filed.
Commercial Review
LNG Shipping
LNG chartering activity was light for the first
half of the quarter. Into December fixing activity increased
as stronger Asian demand coincided with supply outages at Gorgon T1
and Brunei. Asian LNG prices quickly responded rising steeply
toward $10mmbtu. This widened the export spread for US cargoes,
many of which were redirected from their more proximate markets of
South America, Europe, the Middle East and India toward the Far
East. The resultant increase in ton miles combined with thin
tonnage availability resulted in a step-up in rates for available
Atlantic based vessels. The increase in ton miles was also
sufficient to negate the negative impact of supply outages in the
Pacific basin where rates also responded to firming
expectations.
Into January, a cold snap in Europe saw European
LNG prices ramp up to equalise with Eastern indices.
Inter-basin arbitrage opportunities closed and spot LNG prices in
both basins subsequently declined in lock-step as Gorgon production
resumed and European temperatures rose. Vessel rate
expectations have since eased back.
Seasonal fluctuations and supply outages aside,
new production continues to deliver with T9 of Malaysia LNG,
Petronas FLNG1 and train 2 operations of Gorgon and Sabine Pass now
in ramp-up mode. Gorgon T3 and Sabine Pass T3 & 4 together with
Wheatstone are all on track for start-up this year. Consensus
estimates indicate that approximately 35 million tons of new LNG
will reach the market in 2017, more than twice the new production
delivered in 2016. It is however important to note that a material
portion (approximately 24 million tons) of the new 2017 production
is due to commence in the second half of the year and that this
will not therefore influence the shipping balance until the end of
the year. All in, approximately 125 million tonnes of new
production equivalent to 47% of current LNG production is expected
to deliver between now and 1Q 2021.
Although the market remains long, prompt
available shipping is approximately half what it was in January
2016. Increased activity in the market for short to medium
term charter arrangements from the major operators has been
noted.
Golar Partners
The existing fleet of six operating FSRUs, all
of which reside within Golar Partners but are managed by the
Company, have maintained operational excellence achieving 100%
availability during scheduled 4Q operations.
On December 23, Golar Partners received notice
of Petrobras' intention to terminate the FSRU Golar Spirit charter
in June 2017, 14 months ahead of schedule. Current rainfall
is supporting reliable hydro power in Brazil which in turn has
facilitated Petrobras' inclusion of its nearest expiring FSRU
contract in its cost savings program. The Partnership will
receive a termination fee approximately equivalent to 62% of
EBITDA* which would have otherwise been earned between June 2017
and August 2018. Golar Spirit is now being actively marketed
for new opportunities with particular focus on smaller scale
developments.
The FSRU Golar Tundra remains at anchor off the
coast of Ghana. Charterer, West Africa Gas Limited ("WAGL")
received parliamentary approval for their gas sales agreement in
October and have commenced some works but the major construction
works of a connecting pipeline, jetty and breakwater are yet to be
completed. Until this infrastructure is in place the FSRU
cannot commence operations. While Golar remains in dialogue with
WAGL regarding an alteration of the existing charter agreement,
including a later start-up and an extension of the charter period,
we are actively protecting our legal right with regard to
collection of amounts due under the charter. In order
to mitigate the consequences of non-payment, Golar has requested
and awaits WAGLs permission to trade the ship in the short term
market.
Golar Partners right to put the vessel back to
Golar expires in late May. In view of the current situation,
if a mutually agreeable alternative arrangement cannot be found
there is a risk that the vessel will be put back. This
being the case, the Company will assume legal ownership of the
vessel and repay approximately $107 million to the Partnership.
Downstream - Golar Power
On October 17, CELSE, a project company 50%
owned by Golar Power and 50% by Ebrasil, reached a FID on its 25
year Brazilian FSRU-to-power project. CELSE subsequently
entered into two agreements:
1) A lump-sum turn-key EPC agreement with
General Electric to build, maintain and operate a 1.5GW combined
cycle power station, and
2) A flexible Sale and Purchase Agreement with
Ocean LNG Limited, an affiliate of Qatar Petroleum and ExxonMobil
to provide the power station with LNG.
All-in capital expenditure for the power station
and supporting infrastructure is expected to be BRL4.3 billion.
After deducting the cost of chartering in the FSRU and assuming no
dispatch of power, the Sergipe project is expected to generate a
projected annual EBITDA* of BRL1.1 billion. Additional
returns can be earned if the power station is called upon to
dispatch.
Good development progress is now being made and
the project remains on track to distribute power to its 26
committed off takers from January 2020. Site groundworks and
offshore engineering together with procurement, licencing, logistic
and permitting activities necessary to bring the 90+ large modules
to site and import the new build FSRU Nanook are all underway.
When called upon to dispatch, the FSRU Nanook
will be approximately 35% utilised. Remaining capacity can be used
for an expansion of the Sergipe power complex. This is
actively being developed to be offered into future energy auctions.
Structures for commercialising the remaining FSRU capacity via its
integration into the Brazilian grid are also being independently
pursued by Golar Power and CELSE. Any returns generated from
this will be additional to the FSRUs 25-year $39 million annual
EBITDA*, all of which accrues to Golar Power.
Long-lead items for Golar Power's first FSRU
conversion were ordered in January. This enables Golar Power to
commit to provide an FSRU for a project start-up as early as May
2018. Several commercial leads with the potential to
crystallise into time charters by mid-2017 are in the pipeline.
LNG prices remain competitive on a burn parity
basis even after seasonal uplifts. The scale of new production soon
to arrive can be expected to place a de-facto lid on LNG prices
until new markets have been opened up to absorb the uncontracted
length. Inexpensive LNG can therefore be expected to remain
very supportive of the FSRU business for at least the next
2-3-years. Golar Power is actively pursuing several specific
integrated LNG to power opportunities globally.
FLNG
The FLNG Hilli conversion is proceeding to plan
and remains under budget. During recent months approximately 4,500
contractors have been working on the vessel. Testing and
pre-commissioning has commenced and will continue in Singapore
until the vessel is scheduled for redelivery from the yard in
May. Commissioning and production are scheduled to start by
the end of September. Perenco are on track with their scope
of works in Cameroon and SNH are firmly committed to their stake in
the project. The Government is also supportive of
opportunities to draw upon neighbouring stranded gas reserves to
increase utilisation of the FLNG Hilli, recently renamed Hilli
Episeyo.
Upstream - OneLNG
On November 10, OneLNG signed a binding
Shareholders Agreement with Ophir Holdings and Ventures Limited to
establish a joint venture to commercialise Ophir's 2.6Tcf Fortuna
gas reserves, offshore Equatorial Guinea. The joint venture, 66.2%
and 33.8% owned by OneLNG and Ophir respectively, will own both
Ophir's share of the Block R licence and the FLNG vessel Gandria
which are collectively expected to produce between 2.2-2.5mtpa of
LNG over 15-20 years.
A signed term-sheet with a syndicate of Far
Eastern banks has been received and documentation is now
progressing. Good progress toward securing the requisite
governmental approvals has also been made. As previously
communicated, FID is expected to be taken within the first half of
2017 and the Gandria is now positioning to Keppel shipyard where
refurbishment work will be initiated.
Including upstream and midstream development
CAPEX, the project is expected to cost $2.0 billion to develop. Of
this, approximately $1.5 billion will be used to convert the FLNG
Gandria and $0.5 billion will cover upstream work necessary to
bring gas from ground to vessel. After Ophir's injection of up to
$150 million and assuming debt of $1.2 billion, OneLNG will be
expected to contribute approximately $650 million. With respect to
its $332 million share, Golar can expect to receive credit for the
LNG carrier Gandria and associated down payments already made to
Keppel. Any credit receivable with respect to the Company's
intellectual property contribution and guarantees provided will
likely be reflected in a greater than 51% share of OneLNG's 66.2%
stake in the joint venture accruing to Golar. The national gas
company of Equatorial Guinea, Sonagas, has also expressed interest
in taking a stake in the midstream FLNG Gandria. Although this
would not change the ownership structure of the joint venture, it
would reduce its stake in the FLNG Gandria. Investment by
Sonagas would further improve stakeholder alignment and reduce the
above equity contributions required from OneLNG and Ophir.
OneLNG is working actively on 4-5 additional
projects, each involving 1 or more FLNG unit. The structures of
these opportunities range from fully integrated projects where
OneLNG will also be reserve holders to projects where FLNG units
are rented on a tariff basis to major gas companies.
Financing Review
Liquidity
Golar's unrestricted cash position as at
December 31, 2016 was $224.2 million. Subsequent to February's
convertible bond issue, the cash position is approximately $543
million today. Of the outstanding $250 million March maturing
convertible bond, $30 million was purchased prior to year-end. The
$220 million balance will be serviced by the undrawn $150 million
margin loan and proceeds raised from other financing
activities.
FLNG Hilli Episeyo financing
As at December 31, 2016, $678 million has been
spent on the Hilli Episeyo conversion ($732 million including
capitalised interest) and $250 million has been drawn against the
$960 million CSSCL facility. A further $34.5 million of restricted
cash associated with the Perenco Letter of Credit was released to
liquidity in 4Q reducing the restricted cash tied up in this
facility to $232 million as at December 31.
Convertible financing
On February 17 the Company closed a new $402.5
million senior unsecured 5-year 2.75% convertible bond. The
conversion rate for the bonds will initially equal 26.5308 common
shares per $1,000 principle 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 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, the
Company 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 to the February 13 closing price.
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 amount to $360.2 million.
Proceeds from the convertible bond will be used
to fund the Company's initial equity participation in the Fortuna
FLNG project, to meet its commitments to Golar Power and for
general corporate purposes.
Concluding the new convertible bond affords
Golar the flexibility to manage timing differences between
investment commitments and the release of other identified sources
of funding without being exposed to the risk of delays,
unsupportive market conditions or working capital shortfalls.
The Company anticipates that significant cash
will be released during the first year following start-up of Hilli
Episeyo. Major components of this include $160 million equity
released from the final loan draw-down, $87 million released from
the letter or credit in favour of Perenco and $170 million in
expected EBITDA* from operations.
Corporate and Other Matters
As at December 31 there are 101 million shares
outstanding including 3.0 million Total Return Swap ("TRS") shares
that have an average price of $42.03 per share. There are also 3.8
million outstanding stock options in issue.
The dividend will remain unchanged at $0.05 per
share for the quarter.
Outlook
The Company now has access to the capital it
needs to support its legacy shipping business, deliver FLNG Hilli
Episeyo, meet its share of Golar Power's equity contribution to the
Sergipe project and take a Final Investment Decision on the Fortuna
FLNG project without further recourse to equity markets. Having
recovered its 'equity currency', the Partnership successfully
completed in February an underwritten public offering raising gross
proceeds of approximately $119.4 million. Golar Partners now has
the capital it needs to contemplate the acquisition of a share of
the FLNG Hilli Episeyo. A further $107 million will be
available to Golar Partners should the FSRU Tundra be put back at
the end of May. This share in Hilli Episeyo could therefore be
increased. Golar and the Partnership are continuing their
discussions with regard to the Hilli deal structure and valuation
and expect to make a decision later this year.
The results of the shipping business are
expected to show some improvement in Q1 2017 relative to Q4 2016.
Any major improvement in shipping rates should not however be
expected before 2H 2017 when a further 24 million tons of new LNG
are expected to reach the market.
Although the immediate priority of Golar is
firmly on delivering and commissioning the FLNG Hilli Episeyo on
time and on budget, the Board is pleased that the Company is now on
track to become a fully integrated clean energy well to grid
company in 2020.
Forward Looking Statements
This press release contains forward-looking
statements (as defined in Section 21E of the Securities Exchange
Act of 1934, as amended) which reflects management's current
expectations, estimates and projections about its operations.
All statements, other than statements of historical facts, that
address activities and events that will, should, could or may occur
in the future are forward-looking statements. Words such as
"may," "could," "should," "would," "expect," "plan," "anticipate,"
"intend," "forecast," "believe," "estimate," "predict," "propose,"
"potential," "continue," or the negative of these terms and similar
expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
other factors, some of which are beyond our control and are
difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in such
forward-looking statements. You should not place undue
reliance on these forward-looking statements, which speak only as
of the date of this press release. Unless legally required,
Golar undertakes no obligation to update publicly any
forward-looking statements whether as a result of new information,
future events or otherwise.
Among the important factors that could cause
actual results to differ materially from those in the
forward-looking statements are: changes in LNG carriers, FSRU
and floating LNG vessel market trends, including charter
rates, ship values and technological advancements; changes in the
supply and demand for LNG; changes in trading patterns that affect
the opportunities for the profitable operation of LNG carriers,
FSRUs; and floating LNG vessels; changes in Golar's ability to
retrofit vessels as FSRUs and floating LNG vessels, Golar's ability
to obtain financing for such retrofitting on acceptable terms or at
all and the timing of the delivery and acceptance of such
retrofitted vessels; increases in costs; changes in the
availability of vessels to purchase, the time it takes to construct
new vessels, or the vessels' useful lives; changes in the ability
of Golar to obtain additional financing; changes in Golar's
relationships with major chartering parties; changes in Golar's
ability to sell vessels to Golar LNG Partners LP; Golar's ability
to integrate and realize the benefits of acquisitions; changes in
rules and regulations applicable to LNG carriers, FSRUs and
floating LNG vessels; changes in domestic and international
political conditions, particularly where Golar operates; accounting
adjustments relating to Golar's ownership in Golar Power;
accounting adjustments relating to the accounting treatment of
general partner units Golar holds in Golar LNG Partners LP; as well
as other factors discussed in Golar's most recent Form 20-F filed
with the Securities and Exchange Commission. In particular, there
is no guarantee that any expectations set forth in "Golar Power -
Status of affiliate's valuation exercise" and "IDR Reset" will have
the impact on our balance sheet or income statement described
therein. Unpredictable or unknown factors also could have material
adverse effects on forward-looking statements.
As a result, you are cautioned not to rely on
any forward-looking statements. Actual results may differ
materially from those expressed or implied by such forward-looking
statements. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise unless required by
law.
February 28, 2017
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed to:
Golar Management Limited - +44 207 063 7900
Oscar Spieler - Chief Executive Officer
Brian Tienzo - Chief Financial Officer
Stuart Buchanan - Head of Investor Relations
Attachments:
http://www.globenewswire.com/NewsRoom/AttachmentNg/6d6215ae-740d-4a79-9e41-08f004c3ce08
Golar LNG (NASDAQ:GLNG)
Historical Stock Chart
From Apr 2024 to May 2024
Golar LNG (NASDAQ:GLNG)
Historical Stock Chart
From May 2023 to May 2024