Highlights
- Gross contract earnings backlog1 increased from $7.3
billion to $10.3 billion.
- Golar's ("Golar" or "the Company") total operating revenues
decreased from $181.9 million in 4Q 2018 to $114.3 million in 1Q
2019.
- Adjusted EBITDA1 decreased from $121.2 million in 4Q 2018
to $62.9 million in 1Q 2019.
- After recognition of $28.4 million of unrealized Brent oil
linked mark-to-market derivative instrument gains and a $34.3
million impairment charge in relation to the Golar
Viking, Golar reported operating income of $28.9 million for
1Q 2019.
- Golar and BP executed contracts for the provision of an
FLNG vessel to service the Greater Tortue/Ahmeyim project offshore
Mauritania and Senegal for 20 years.
- Golar received a Final Notice to Proceed with the conversion,
sale and subsequent operation of Golar Viking as a FSRU
in Croatia. The sale is expected to generate net positive cash of
approximately $40 million in 2020.
- The shipping fleet recorded Time Charter
Equivalent1 ("TCE") earnings of $39,300 per day ($39,100 for
spot TFDE vessels).
- FSRU Golar Nanook loaded first Sergipe commissioning
cargo from FLNG Hilli Episeyo.
- Net of financing expenses, equity in net losses of affiliates,
taxes and net income attributable to non-controlling interests,
Golar reported a 1Q 2019 net loss of $41.7 million.
Subsequent Events
- Gimi MS Corporation ("Gimi MS") received a firm $700 million
underwritten financing commitment for the FLNG Gimi.
- As intended, First FLNG Holdings Pte. Ltd, an indirect wholly
owned subsidiary of Keppel Corporation Limited held through Keppel
Capital Holdings Pte Ltd. subscribed to 30% of the issued ordinary
share capital of Gimi MS.
- Gimi MS issued Keppel Shipyard with a Final Notice to Proceed
with FLNG Gimi conversion works.
- A 2-year extension to the Golar Tundra sale and
leaseback facility was agreed and a 5-year restated and amended
facility in respect of the Golar Arctic was credit
approved.
- Dividend of $0.15 cents per share declared for quarter.
- At a recent meeting in Bermuda, the Board decided to proceed
with a spin-off of the Company's Trifuel Diesel Electric ("TFDE")
LNG carrier business, subject to satisfactory market conditions,
and to focus the Company's future activities primarily around FLNG
and downstream assets. This will allow LNG shipping investors more
direct exposure to the LNG shipping market and reposition Golar's
core business toward LNG infrastructure on long-term
contracts.
Financial Review
Business Performance
|
2019 |
2018 |
|
Jan-Mar |
Oct-Dec |
(in thousands of $) |
Vessel andotheroperations |
FLNG |
Total |
Vessel andotheroperations |
FLNG |
Total |
Total operating revenues |
59,763 |
|
54,524 |
|
114,287 |
|
127,415 |
|
54,524 |
|
181,939 |
|
Vessel operating expenses |
(18,176 |
) |
(13,072 |
) |
(31,248 |
) |
(18,407 |
) |
(10,692 |
) |
(29,099 |
) |
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(16,140 |
) |
(360 |
) |
(16,500 |
) |
(40,690 |
) |
605 |
|
(40,085 |
) |
Administrative expenses |
(12,893 |
) |
(652 |
) |
(13,545 |
) |
(12,902 |
) |
227 |
|
(12,675 |
) |
Project development expenses |
(668 |
) |
(922 |
) |
(1,590 |
) |
(928 |
) |
(3,798 |
) |
(4,726 |
) |
Realized gain on oil derivative instrument(2) |
- |
|
2,233 |
|
2,233 |
|
- |
|
12,419 |
|
12,419 |
|
Other operating gains (losses) |
9,260 |
|
- |
|
9,260 |
|
14,740 |
|
(1,296 |
) |
13,444 |
|
Adjusted EBITDA(1) |
21,146 |
|
41,751 |
|
62,897 |
|
69,228 |
|
51,989 |
|
121,217 |
|
|
|
|
|
|
|
|
Reconciliation to operating income (loss) |
|
|
|
|
|
|
Unrealized gain (loss) on oil derivative instrument(2) |
- |
|
28,380 |
|
28,380 |
|
- |
|
(195,740 |
) |
(195,740 |
) |
Depreciation and amortization |
(16,112 |
) |
(12,051 |
) |
(28,163 |
) |
(16,244 |
) |
(12,051 |
) |
(28,295 |
) |
Impairment of long-lived assets |
(34,250 |
) |
- |
|
(34,250 |
) |
- |
|
- |
|
- |
|
Operating income/(loss) |
(29,216 |
) |
58,080 |
|
28,864 |
|
52,984 |
|
(155,802 |
) |
(102,818 |
) |
(2) With effect from the quarter ended September 30, 2018, we
have split the line item "Realized and unrealized gain on oil
derivative instrument" relating to income from the FLNG Hilli
Episeyo Liquefaction Tolling Agreement into two line items,
"Realized gain on oil derivative instrument" and "Unrealized (loss)
gain on oil derivative instrument". The unrealized component
represents a mark-to-market gain of $28.4 million (December 31,
2018: loss of $195.7 million) on the oil embedded derivative, which
represents the estimate of expected receipts under the remainder of
the Brent oil linked clause of the Hilli
Episeyo Liquefaction Tolling Agreement. The realized component
amounts to $2.2 million (December 31, 2018: $12.4 million) and
represents the income in relation to the Hilli
Episeyo Liquefaction Tolling Agreement receivable in cash.
This presentation change has been retrospectively adjusted in prior
periods.
Golar reports today 1Q 2019 ("1Q") operating income of $28.9
million compared to a $102.8 million loss in 4Q 2018
("4Q").
Total operating revenues net of voyage, charterhire and
commission expenses decreased from $141.9 million in 4Q to $97.8
million in 1Q. Of the 1Q total, $43.6 million is derived from
vessel and other operations and $54.2 million is from FLNG
operations.
Revenues from vessel and other operations, including management
fee income, net of voyage, charterhire and commission expenses
decreased by $43.1 million to $43.6 million in 1Q. China's decision
to pull LNG purchases forward into 4Q18 to avoid gas shortages
together with a mild winter in Asia resulted in elevated LNG
inventory levels into 1Q19. Asian LNG prices dropped,
Inter-basin trading opportunities disappeared and ton-miles,
utilization and rates fell as a result. Fleet utilization decreased
from 93% in 4Q to 51% in 1Q. Full fleet TCE1 earnings
decreased from $77,600 in 4Q to $39,300 in 1Q.
In line with prior quarters, FLNG Hilli
Episeyo generated operating revenues of $54.5 million
including base tolling fees and amortization of pre-acceptance
amounts recognized.
Vessel operating expenses at $31.2 million in 1Q were $2.1
million higher than 4Q. Most of the increase is attributable
to FLNG Hilli Episeyo due to increased crew tax costs as
well as additional repairs and maintenance.
At $13.5 million for the quarter, total administrative expenses
were $0.9 million higher than 4Q.
Capitalization of costs incurred in relation to the BP-Kosmos
FLNG project from the point of FID in December 2018 resulted in a
$3.1 million reduction in project expenses from $4.7 million in 4Q
to $1.6 million in 1Q.
The Brent oil linked component of Hilli Episeyo's fees
generates additional annual operating cash flows of approximately
$3 million for every dollar increase in Brent Crude prices between
$60.00 per barrel and the contractual ceiling. Billing of this
component is based on a three-month look-back at average Brent
Crude prices. Amounting to $2.2 million in 1Q, the realized gain on
the oil derivative instrument was down $10.2 million on 4Q. The
decrease in this hire component is the result of lower oil prices,
particularly during December and January.
The mark-to-market fair value of the derivative asset increased
by $28.4 million during the quarter, with a corresponding
unrealized gain of the same amount recognized in the income
statement. The fair value increase was driven by an upward movement
in the expected future market price for Brent Oil. The spot price
for Brent Oil increased from $50.57 per barrel on December 31 to
$68.39 on March 31 and has recovered further, to $71.97 per barrel
on May 20.
Other operating gains and losses within vessel and other
operations reported a 1Q gain of $9.3 million, representing a final
settlement from the terminated contract for the Golar
Tundra.
Depreciation and amortization at $28.2 million in 1Q was in line
with the prior quarter.
On the 29th March, Golar signed contracts with LNG Hrvtska
d.o.o. relating to the conversion and subsequent sale of the
converted carrier Golar Viking. Although the sale is not
expected to close until 4Q 2020, the transaction triggered an
immediate impairment test. As the current carrying value of the
vessel exceeds the price a market participant would pay for it as a
carrier today, a non-cash impairment charge of $34.3 million has
been recognized. The sale is expected to generate net positive cash
of approximately $40 million.
Net Income Summary
|
2019 |
|
2018 |
|
(in thousands of $) |
Jan-Mar |
|
Oct-Dec |
|
Operating income (loss) |
28,864 |
|
(102,818 |
) |
Interest income |
3,214 |
|
2,983 |
|
Interest expense |
(29,352 |
) |
(31,251 |
) |
Losses on derivative instruments |
(5,699 |
) |
(23,605 |
) |
Other financial items, net |
(1,407 |
) |
(780 |
) |
Income taxes |
(205 |
) |
(627 |
) |
Equity in net losses of affiliates |
(12,899 |
) |
(154,089 |
) |
Net income attributable to non-controlling interests |
(24,257 |
) |
(2,770 |
) |
Net loss attributable to Golar LNG Limited |
(41,741 |
) |
(312,957 |
) |
|
|
|
|
|
In 1Q, the Company generated a net loss of $41.7 million. Key
items contributing to this are summarized as follows:
- A small reduction in LIBOR, 2 fewer days in the period and a
$0.4m increase in capitalized interest in respect of
FLNG Gimi resulted in a $1.9 million reduction in 1Q
interest expense.
- 1Q recorded a $5.7 million loss on derivative instruments
compared to a 4Q loss of $23.6 million. Most of the $17.9
million reduction in 1Q relative to 4Q is attributable to a smaller
loss on the Golar shares Total Return Swap ("TRS").
- The $12.9 million 1Q equity in net losses of affiliates is
primarily comprised of the following:-- a $4.0 million loss in
respect of Golar's 50% share in Golar Power;-- a $7.7 million loss
in respect of Golar's 32% stake in Golar Partners; and-- a $0.4
million loss in respect of Golar's 22.5% stake in Avenir.The 4Q
loss in respect of Golar's stake in Golar Partners was
substantially higher at $157.9 million following a $149.4 million
impairment of the carrying value of Golar's interest in the
Partnership. Further losses on interest rate swaps, which are a
part of the Partnership's interest hedging program, were a major
contributor to the Partnership's 1Q net loss.
Net income attributable to non-controlling interests represents
external interests in the Hilli Episeyo and the finance
lease variable interest entities ("VIEs").
Commercial Review
LNG Shipping
Golar recorded a 1Q TCE1 of $39,300 per day, up 9% on the
$35,900 per day achieved in 1Q 2018 but down 49% on the $77,600
achieved in 4Q. This is comprised of a TCE1 of $39,100 in
respect of its total TFDE fleet, and $40,100 for its two steam
("ST") vessels.
The 1Q LNG shipping market declined from strong 4Q levels in
line with historic seasonality. LNG demand growth in China
and other SE Asian countries was largely offset by declines in
Japan and Korea due to a combination of a milder than expected
winter and the re-start of several nuclear facilities.
Chinese 1Q demand was up 20% up on 1Q 2018. During the quarter LNG
prices reached 3-year lows, which eliminated inter-basin trading
opportunities. At quarter end, LNG was trading at around 6%
of Brent, well below energy parity. Atlantic basin cargoes
from the US and Russia into Europe doubled by volume compared to 1Q
2018. With these additional volumes remaining in Europe,
ton-miles and shipping rates continued to fall throughout the
quarter, with spot TFDE and ST rates reaching $40,000 and $24,000
respectively by the end of March. The recently introduced tariffs
for US LNG into China have also limited US export volumes into
China.
Shipping rates achieved so far in 2Q 2019 have been weaker than
1Q but rates and activity have now commenced their seasonal
recovery. The strong contango in the gas market with forward prices
of $9mmbtu being quoted for December 2019 give solid support to an
improved shipping market. The 2019 vessel demand growth of 15% is
expected against supply growth of 9%. Further vessel demand
growth of 14% is expected in 2020 with supply growth again lagging
at 9%. This reinforces our belief that LNG shipping will
enter a period of structural shortage for the next few
years.
Leading brokers continue to forecast a 10+ vessel shortfall at
the end of 2019, increasing to more than 20 at the end of 2020.
Rates are expected to reflect this from 2H 2019 and remain strong
for the next two years. This has resulted in an increase in
requests for medium to long-term charterers. Golar has recently
concluded several charters with oil and gas majors and large LNG
charterers. These charters are based on index-linked rates and
secure full utilization of the chartered vessels.
At its recent meeting in Bermuda, the Board made a decision to
proceed with a spin-off of the Company's TFDE LNG carrier business,
subject to satisfactory market conditions, and to focus the
Company's future activities primarily around FLNG and downstream
assets. This will allow LNG shipping investors more direct exposure
to the LNG shipping market and reposition Golar's core business
toward LNG infrastructure on long-term contracts. Golar are in
talks with other owners of similar tonnage to join the new shipping
company and have discussed with Golar Power exchanging one of their
LNG carriers for the FSRU Golar Tundra. Management of
Golar's vessels will remain with Golar Management Norway AS.
Assuming the joint structure proceeds as planned, Golar's direct
exposure to the carrier market will then be limited to one modern
steam turbine vessel, Golar Arctic, with Golar
Viking contracted to be sold in 2020 post FSRU conversion.
Golar Partners (a non-consolidated affiliate of Golar LNG)
The Partnership reported a 1Q net loss of $15.0 million as a
result of further mark-to-market interest rate swap losses,
scheduled winter downtime for the FSRU Igloo and
additional idle time for the spot traded LNG carrier Golar
Mazo, partly offset by commissioning hire billed in respect of
the FSRU Golar Freeze from 11 January.
The FSRU Golar Igloo completed its scheduled 5-year
drydock during the Kuwait winter downtime period ahead of
commencing its 6th annual regas season on February 25. The vessel
will remain in service until December 31 with potential for a
further contract extension later in the year via a tendering
process.
With respect to the Partnership's ships, charterers of the
carrier Golar Grand exercised the first of their one-year
extension options. The option rate between May 2019 and May 2020
will represent a material improvement on the initial 2-year
rate. This will be partly offset by reduced utilization of
the Golar Maria and Golar Mazo in the spot
market.
By virtue of its 50% interest in Hilli
Episeyo's common units, the Partnership is entitled to 50% of
the net earnings of Hilli Episeyo attributable to common
unit holders. The Partnership received a dividend in 1Q amounted to
$3.0 million.
Distribution coverage1 for 1Q each year is typically low as
a result of the scheduled Golar Igloo winter downtime.
This remains the case for 2019 where distribution
coverage1 fell from 1.2 in 4Q to 1.01 in 1Q. A full
quarter's contribution to adjusted EBITDA1 from both
FSRU Golar Igloo and FSRU Golar Freeze partly
offset by more volatile near-term earnings in respect of
carriers Golar Maria and Golar Mazo is expected
to result in a solid improvement to 2Q 2019 distribution
coverage.
FLNG
FLNG Hilli Episeyo continues to achieve 100%
commercial uptime. By early May Hilli Episeyo had
satisfied its first 1.2 million tons of production, which is
expected to result in the release of approximately $29.0 million of
letter of credit ("LC") cash to 2Q 2019 liquidity. Detailed
discussions continue with field operator Perenco with respect to
the logistics and timing of increasing both the vessel's
utilization and potentially materially increasing the overall
duration of the contract term. These discussions remain on
track to conclude before the end of this year.
On February 26, a 100% owned Golar subsidiary, Gimi MS entered
into an agreement with BP for the charter of an FLNG
unit, Gimi, for a 20-year period expected to commence in 2022.
On April 16, Keppel subscribed to 30% of the ordinary share capital
of Gimi MS. Total conversion works for FLNG Gimi are
expected to cost approximately $1.3 billion, excluding financing
costs. Annual contracted revenues less forecasted operating costs
of approximately $215 million are expected, equivalent to a total
forecasted Contract Earnings Backlog1 of $4.3 billion, of
which Golar's 70% share is expected to be $3.0 billion.
The Gimi chartering contract with BP has been signed
and the conversion contract with Keppel Shipyard is now effective.
Financing has been secured, the first yard installment has been
paid and the project is proceeding according to schedule.
A term sheet expected to form the basis of a shareholders
agreement has also been agreed with respect to the US Gulf of
Mexico "Delfin LNG" project. Discussions with potential
off-takers continue.
The successful commencement of Hilli Episeyo has led
to a significant pipeline of new FLNG opportunities. Investors
should however be cognizant of the time it takes to execute FLNG
opportunities. In most cases FLNG projects include large upstream
development processes and material governmental interaction linked
to permits, taxation and government participation. The strong
cashflows from these projects makes them attractive financing
prospects after commencement of operations however pre-delivery
construction financing remains capital intensive.
Golar is working actively with yards, equipment providers and
financial institutions to develop a design, reduce the capital
requirements and to identify a commercial model where our FLNG
business becomes more scalable. These developments are all based on
the successful technical experience we have gained from
the Hilli and Gimi projects.
Golar Power (50/50 Golar/Stonepeak Infrastructure Partners
non-consolidated downstream joint venture)
Construction of the Sergipe power plant remains on track for
commencement of operations on January 1, 2020. The power station is
now nearing mechanical completion and pre-commissioning of selected
systems has commenced in anticipation of first firing of the gas
turbines in early July. Transmission lines from the substation to
the grid were connected on May 3 and the FSRU Nanook with
its commissioning cargo is ready for hook-up to the mooring.
Golar's share of expected annual contracted revenues less
forecasted operating expenses from the fully financed Sergipe power
project and Golar Nanook FSRU is around $99 million
assuming a BRL/USD exchange rate of 3.7, regardless of whether
power is dispatched or not.
As indicated in February, Golar Power commenced a strategic
review during the quarter. Following the initial phase of
this review, the Board of Golar Power has deferred any decision on
a potential IPO until 2020. Golar Power will now capitalize on its
local presence by focusing on the downstream small-scale LNG market
in Brazil. Successful development of these opportunities can
generate a material contribution to Golar Power's earnings in 2020
and 2021. The main focus of the small-scale distribution model is
to replace diesel, LPG and fuel-oil with LNG. The market in Brazil
is large with diesel consumption equivalent to approximately 40mtpa
of LNG demand.
The excess capacity of Golar Nanook is key to
developing these opportunities. Nanook has excess
throughput capacity of up to approximately 200 million mmbtu per
annum over and above what must be reserved for full dispatch at the
power station. This represents approximately two thirds of
the vessels capacity.
Assuming a spread of USD $1.00 p/mmbtu can be captured for this
open capacity, this would lead to approximately USD $100 million in
additional adjusted EBITDA per annum1 for Golar Power. By
integrating further downstream this margin can be materially
increased. Golar Power has received a number of expressions of
interest from potential customers and the level of interest has
provided the confidence to move ahead. In the event that not all
the capacity is used by small-scale development, there is still the
potential for Sergipe expansion. The downstream distribution model
created by virtue of Golar Power's interest in
FSRU Nanook is characterized by capital
expenditure/adjusted EBITDA1 multiples of around 2-3 times,
and also by a short period between investment and commencement of
cashflow.
The Government of Brazil has made a clear strategic commitment
to use LNG as a cheaper and cleaner energy source. The diesel riots
of 2018 and a consequent desire to reduce dependence on diesel are
a key driver behind this.
This model can be repeated at other locations in Brazil
including Barcarena and Santa Catarina where Golar Power has
already received initial licenses for the establishment of
terminals and FSRUs. The fact that Golar has prompt FSRUs available
increases its ability to capitalize on these opportunities in the
short term. Noteworthy is the fact that neither of these
initiatives are dependent on Golar Power securing further power
provision capacity.
Avenir (22.5% interest in LNG small-scale venture, a
non-consolidated affiliate)
Good progress is being made with Avenir's HIGAS terminal in
Sardinia. Tank bases are complete, tank construction is underway
and commissioning is scheduled for August 2020. Evidence of
physical progress is generating interest from potential local
customers. Avenir is also working on a significant demand for a new
industrial plant in the south of the island starting up at the end
of 2020. Further afield, active customer interest in bunkering and
small-scale power has also been noted.
As a result of better functionality and cost, two 7,500cbm
shipbuilding contracts with Sinopacific were recently signed to
replace Avenir's contract for two similar vessels at Keppel.
Although there have been several requests to charter Avenir's
vessels at attractive rates these assets are viewed more as
strategic tools that allow it to become an integrated LNG
distributer. Opportunities to this end are preferred.
The value of Golar's Avenir shares has, since the offering last
year, increased by 75%.
Financing Review
Golar's total current cash position as at March 31 was $690.3
million (including long-term restricted cash), of which $212.7
million was unrestricted. Included within restricted cash is $174.8
million relating to lessor-owned VIEs and $175.0 million relating
to the Hilli Episeyo LC. Of the $175.0 million restricted
cash securing the Hilli Episeyo LC, approximately $29.0
million is expected to be released to free cash in 2Q 2019. Sale of
the converted Golar Viking is expected to add a further
$40 million to liquidity in 2020. A further $85 million is expected
to be released from the Hilli LC in 2021.
On April 16, Gimi MS, a 70% owned subsidiary of Golar, received
a firm $700 million underwritten financing commitment for the
FLNG Gimi. Available during construction, the financing
has a tenor of 7-years post commercial operation date ("COD") and a
12-year amortization profile. Interest payable on the facility will
be the aggregate of LIBOR plus a margin of 400bps during
construction, reducing to LIBOR plus 300bps post COD.
A 2-year extension to the Golar Tundra sale and
leaseback facility has been agreed and a 5-year restated and
amended facility in respect of the Golar Arctic has been
credit approved.
Golar's contractual debt1 including 100% of Hilli
Episeyo as at March 31 was $2.6 billion. Golar's adjusted net
debt1 was $2.2 billion.
Included within the $924.5 million current portion of long-term
debt and short-term debt on the Balance Sheet is $745.3 million
relating to lessor-owned VIE subsidiaries that Golar is required to
consolidate in connection with 8 sale and leaseback financed
vessels, including the Hilli Episeyo.
Corporate and Other Matters
As at March 31, 2019, there were 101.3 million shares
outstanding, including 3.0 million TRS shares that had an average
price of $45.49 per share. The TRS, which is fully collateralized,
was marked-to-market as of March 31, 2019 when the closing price
was $21.09 per share. The cash collateral posted against the swap
is included within the restricted cash balance on the Balance
Sheet. There were also 3.8 million outstanding stock options in
issue with an average price of $36.03.
The Board has approved a dividend of $0.15 for the quarter.
Profitable growth through delivery of Cleaner and
Cheaper Energy
Golar believes that natural gas has a critical role to play in
providing cleaner energy for many years to come. Our
pioneering infrastructure assets provide safe, competitive and
sustainable ways of liquefying, transporting and turning gas into
energy around the world. Illustrating the business potential, the
consumption of diesel and heavy fuel in the transportation, power
and shipping markets today amounts to approximately 30 million
barrels per day, while the total LNG market by comparison is
equivalent to only 7.4 million barrels per day.
LNG prices have historically been linked to oil prices.
Long-term prices were supported by an energy content equilibrium of
around 16% of Brent. The lower production cost of gas
relative to oil combined with increased LNG volumes from Qatar,
Australia and the US has reduced long-term LNG prices by
approximately 30%. Long-term LNG contracts today trade at around
10-11% of Brent. The spot Brent price is currently around USD
$70 per barrel, while spot LNG prices in Europe and Asia are
currently trading between USD $4-5 per mmbtu, equivalent to 6-7% of
Brent.
The significant cost advantages of current LNG prices creates
new opportunities. A 14,000 TEU container ship fueled by LNG,
will, based on today's spot prices, have a pre-tax operating bunker
benefit of approximately $40,000 per day compared to an oil-fueled
vessel. An LNG truck in Brazil could reduce its annual
pre-tax fuel cost by approximately USD $19,000 relative to a diesel
truck.
Current diesel prices along the main trucking routes in Brazil
are in excess of USD $25.0 mmbtu equivalent gas cost. There are two
million heavy vehicles in Brazil. The potential market for a diesel
to LNG conversion is therefore substantial.
Additional to the financial savings as a result of converting to
LNG are the equally important environmental benefits. A conversion
from diesel to LNG reduces C02 emissions by approximately 30%, SOX
by close to 100%, NOX by 33% and particle PM10 pollution by a
little over 66%.
Outlook
Golar has been transformed since 2013. Significant investment
has been injected into FLNG projects, the power project in Sergipe
and the development and permitting of further downstream assets.
The company has been transformed from an LNG shipping company into
an integrated LNG energy company.
The initial focus in 2019 has been to take FID on
the Gimi (BP FLNG) and Viking (LNG Hrvatska
FSRU) projects, secure project finance and award contracts for
these projects. With those tasks completed, the main focus
will be to streamline the company and increase the utilization of
existing assets. The intention is to significantly increase the
return on investment ("ROI") without committing major capital. As
noted above, the Board has, as a part of the new strategy,
concluded that it would be right to spin off the TFDE shipping
fleet into a separate entity, subject to market conditions. This
will materially reduce the company's net debt and highlight the
strength of the strong long-term cash flow coming from the
remaining assets.
Shipping: With the LNG carrier market showing signs of
seasonal recovery and edging into a time-frame where a structural
shortage of ships appears inevitable, Golar expects that the new
LNG shipping company will be an attractive pure play vehicle for
investors to participate in the strong growth and cyclical recovery
of the LNG shipping market.
This will allow us to reposition Golar LNG and focus primarily
on two business lines:
FLNG: Our project teams will work diligently to safely
deliver the Gimi project on time and on budget.
Golar will also work with Perenco to conclude an agreement to
increase utilization and provide a meaningful potential extension
to the charter duration for FLNG Hilli Episeyo by the end
of 2019. For future FLNG projects, Golar will continue to
drive home its competitive advantage and unique FLNG operating
experience. Development of the robust FLNG pipeline, finance
permitting, will add further long-term contract earnings
backlog1 to the $3.7 billion (Golar share) already
secured.
Golar Power: We expect commissioning of the Sergipe power
station to complete in 2H19 ahead of the January 1, 2020 COD. At
COD, the combination of Sergipe and Nanook will initiate
the realization of approximately $2.5 billion of contract earnings
backlog1 attributable to Golar. Golar Power will now develop
the downstream small-scale market in Brazil, which can create
significant earnings as early as 2020/21.
The Board of Directors is pleased with the work done to date in
underpinning the business with key projects. The Board is however
humble to the fact that these achievements have not yet been
positively reflected in the Company's share price. We believe that
separation of the company's assets into two entities will better
position both companies. A stock price that reflects the true
strategic and contracted value of the underlying assets is a key
condition to be able to grow a company. After a period of
rapid expansion and significant capital investment to build the
foundation, it is time to reap the $10.3 billion gross contract
earnings backlog1 and implement stronger capital discipline
with full focus on ROI. We see substantial potential for cash
flow improvement through increased utilization of existing
assets.
In repositioning Golar as a solid long-term cashflow business
from projects that create large cost and environmental benefits for
our customers the Company expects to materially broaden investor
interest. With an LNG growth rate of approximately 10% pa, a gross
contract earnings backlog1 of $10.3 billion, strong growth in
contracted earnings, a well-financed balance sheet, a unique market
leading position in FLNG, integrated power projects and a solid
pipeline of opportunities, the Board is increasingly optimistic
about the future.
Non-GAAP measures
Adjusted EBITDA: Adjusted EBITDA is
calculated by taking net income before interest, tax, unrealized
mark-to-market movements on the oil derivative instrument,
depreciation and amortization. We believe that the exclusion of
these items enables investors and other users of our financial
information to assess our sequential and year over year performance
and operating trends on a more comparable basis and is consistent
with management's own evaluation of business performance. Adjusted
EBITDA is a non-GAAP financial measure and should not be considered
as an alternative to net (loss) income or any other indicator of
Golar's performance calculated in accordance with US GAAP. The
table below reconciles net (loss) income, the most directly
comparable US GAAP measure, to adjusted EBITDA.
|
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
|
2018 |
|
2018 |
|
(in thousands of $) |
Jan-Mar |
|
Oct-Dec |
|
Jan-Mar |
|
Jan-Dec |
|
Net (loss) attributable to Golar LNG Limited |
(41,741 |
) |
(312,957 |
) |
(21,002 |
) |
(231,428 |
) |
Adjusted
for: |
|
|
|
|
Interest
income |
(3,214 |
) |
(2,983 |
) |
(1,944 |
) |
(10,133 |
) |
Interest
expense |
29,352 |
|
31,251 |
|
13,998 |
|
101,908 |
|
Losses on
derivative instruments |
5,699 |
|
23,605 |
|
874 |
|
30,541 |
|
Other financial
items, net |
1,407 |
|
780 |
|
363 |
|
1,481 |
|
Income taxes |
205 |
|
627 |
|
(6 |
) |
1,267 |
|
Equity in net
losses of affiliates |
12,899 |
|
154,089 |
|
1,541 |
|
157,636 |
|
Net income
attributable to non-controlling interests |
24,257 |
|
2,770 |
|
12,605 |
|
63,214 |
|
Operating
income/(loss) |
28,864 |
|
(102,818 |
) |
6,429 |
|
114,486 |
|
Adjusted for: |
|
|
|
|
Unrealized
(gain)/loss on oil derivative instrument |
(28,380 |
) |
195,740 |
|
(13,600 |
) |
9,970 |
|
Depreciation and
amortization |
28,163 |
|
28,295 |
|
16,409 |
|
93,689 |
|
Impairment of long-lived assets |
34,250 |
|
- |
|
- |
|
- |
|
Adjusted EBITDA |
62,897 |
|
121,217 |
|
9,238 |
|
218,145 |
|
|
|
|
|
|
|
|
|
|
In the Golar Power section of the commercial review, we refer to
an additional adjusted EBITDA of $100 million. Nameplate capacity
of the FSRU Nanook is 5.8 MTPA, approximately 1.7 MTPA will be tied
up to Sergipe at 100% dispatch, hence 4.1 MTPA of the Nanook's
capacity is spare capacity available. 4.1 MTPA is equivalent to 205
million MMBTU. Assuming $1.00 p/MMBTU would amount to $102.5m
EBITDA ($1 x 205 million MMBTU x 50%). This is a forecasted number.
Management has not forecasted net income as information to do so is
not available without unreasonable effort. Additional adjusted
EBITDA is not intended to represent future cashflows.
Adjusted net debt: The Company
consolidates a number of lessor VIEs, which means that on
consolidation, Golar's contractual debt under various sale and
leaseback facilities are eliminated and replaced with the lessor
VIE's debt. Adjusted net debt is calculated by taking net debt
defined by GAAP line items and reversing out the lessor VIE debt
and restricted cash balances and replacing it with Golar's
contractual debt under the sale and leaseback facilities. We
believe that the exclusion of the lessor VIE's debt enables
investors and users of our financial information to assess our
liquidity based on our underlying debt obligations and aids
comparability with our competitors. This presentation is consistent
with management's view of the business. Adjusted net debt is a
non-GAAP financial measure and should not be considered as an
alternative to net debt or any other indicator of Golar's
performance calculated in accordance with US GAAP. The table below
reconciles net debt based to adjusted net debt:
|
|
|
|
|
(in thousands of $) |
March 31, 2019 |
|
December 31, 2018 |
|
Net debt as calculated by GAAP |
|
|
Total debt (current and non-current) net of deferred finance
charges |
2,513,190 |
|
2,565,359 |
|
Less |
|
|
Cash and cash equivalents |
(212,673 |
) |
(217,835 |
) |
Restricted cash and short-term deposits - current and non-current
portion |
(477,598 |
) |
(486,426 |
) |
Net debt as calculated by GAAP |
1,822,919 |
|
1,861,098 |
|
VIE Consolidation Adjustment |
98,543 |
|
87,045 |
|
VIE Restricted Cash |
174,816 |
|
176,428 |
|
Deferred Finance Charges |
15,056 |
|
21,546 |
|
TRS Restricted Cash (1) |
86,050 |
|
82,863 |
|
Adjusted Net Debt |
2,197,384 |
|
2,228,980 |
|
(1) Restricted
cash relating to the share repurchase forward swap refers to the
collateral required by the bank with whom we entered into a total
return equity swap. |
|
|
|
(in thousands of $) |
March 31, 2019 |
|
December 31, 2018 |
|
Total debt (current and non-current) net of deferred finance
charges |
2,513,190 |
|
2,565,359 |
|
VIE
Consolidation Adjustments |
98,543 |
|
87,045 |
|
Deferred
Finance Charges |
15,056 |
|
21,546 |
|
Golar's Contractual Debt |
2,626,789 |
|
2,673,950 |
|
|
|
|
|
|
Please see Appendix A for a capital repayment profile for
Golar's contractual debt.
TCE: The average daily TCE rate of our
fleet is a measure of the average daily revenue performance of a
vessel. TCE is calculated only in relation to our vessel
operations. For time charters, TCE is calculated by dividing total
operating revenues (including revenue from the Cool Pool, but
excluding vessel and other management fees and liquefaction
services revenue), less any voyage expenses, by the number of
calendar days minus days for scheduled off-hire. Under a time
charter, the charterer pays substantially all of the vessel voyage
related expenses. However, we may incur voyage related expenses
when positioning or repositioning vessels before or after the
period of a time charter, during periods of commercial waiting time
or while off-hire during dry-docking. TCE rate is a standard
shipping industry performance measure used primarily to compare
period-to-period changes in an entity's performance despite changes
in the mix of charter types (i.e. spot charters, time charters and
bareboat charters) under which the vessels may be employed between
the periods. We include average daily TCE, a non-GAAP measure, as
we believe it provides additional meaningful information in
conjunction with total operating revenues, the most directly
comparable US GAAP measure, because it assists our management in
making decisions regarding the deployment and use of its vessels
and in evaluating their financial performance. Our calculation of
average daily TCE may not be comparable to that reported by other
entities. The following table reconciles our total operating
revenues, the most directly comparable US GAAP measure, to the
average daily TCE rate.
|
|
|
2019 |
|
Jan-Mar |
(in thousands of $) |
ST |
|
TFDE |
|
Total
operating revenues |
8,074 |
|
46,235 |
|
Less: Voyage and commission expenses |
(1,612 |
) |
(14,527 |
) |
|
(1,612 |
) |
(14,527 |
) |
Calendar
days less scheduled off-hire days |
161 |
|
810 |
|
Average daily TCE rate (to the closest $100) |
40,100 |
|
39,100 |
|
|
|
|
|
2019 |
|
2018 |
|
(in thousands of $) |
Jan-Mar |
|
Oct-Dec |
|
Total operating revenues |
114,287 |
|
181,939 |
|
Less:
Liquefaction services revenue |
(54,524 |
) |
(54,524 |
) |
Less: Vessel and other management fees |
(5,453 |
) |
(8,241 |
) |
Time and
voyage charter revenues |
54,310 |
|
119,174 |
|
Less: Voyage and commission expenses |
(16,140 |
) |
(40,690 |
) |
|
38,170 |
|
78,484 |
|
Calendar
days less scheduled off-hire days |
971 |
|
1,012 |
|
Average daily TCE rate (to the closest $100) |
39,300 |
|
77,600 |
|
|
|
|
|
|
Contract Earnings Backlog: Contract
earnings backlog represents Golar's share of contracted fee income
for executed contracts less forecasted operating expenses for these
contracts. In calculating forecasted operating expenditure,
management has assumed that where there is an Operating Services
Agreement the amount receivable under the services agreement will
cover the associated operating costs. For contracts which do not
have a separate Operating Services Agreement, management has made
an assumption about operating costs based on the current run rate.
The only material application of this methodology was to
the Hilli Episeyo Earnings backlog where we assumed
operating costs of approximately $120,000 per day.
For consolidated subsidiaries where we do not own 100% of the
share capital, management has only included our proportionate share
of contract earnings. The material application of this
assumption was to Gimi (70% ownership) and Hilli
Episeyo (44.5% of the Common Unit entitlement). No contracted
fee income was included for Hilli T3 or the oil
derivative.
For equity accounted investments (the Partnership and Golar
Power) we have included our proportionate share of their contract
earnings backlog under the same assumptions that we have applied to
our consolidated subsidiaries. In the future when our contract
earnings backlog actualizes, we will show our share of their
earnings net of interest and tax in one line in the Income
Statement "Equity in net earnings/(losses) of affiliates". The
Golar Power numbers are calculated based on an exchange rate of
3.7BRL:1USD.
Management has not forecasted net income for these initiatives
as information to provide such a forward-looking estimate is not
available without unreasonable effort. Contract earnings backlog is
not intended to represent EBITDA or future cashflows that will be
generated from these projects nor is it intended to represent the
dividend income that will be payable to Golar from our equity
investments. This measure should be seen as a supplement and not a
substitute for our US GAAP measures of performance.
Gross Contract Earnings Backlog: Gross
contract earnings backlog represents each Golar entity's share of
contracted fee income for executed contracts less forecasted
operating expenses for these contracts. In calculating the
forecasted operating expenditure, management has applied the same
methodology in preparing the "Contract Earnings Backlog" measure
above. Management has not forecasted net income for these
initiatives as information to provide such a forward-looking
estimate is not available without unreasonable effort.
Contract earnings backlog is not intended to represent EBITDA or
future cash flows that will be generated from these projects nor is
it intended to represent the dividend income that will be payable
to Golar from our equity investments. This measure should be seen
as a supplement and not a substitute for our US GAAP measures of
performance.
Distribution coverage: As defined in Golar
LNG Partners LP form 6-K, section "Appendix A - Non-GAAP Financial
Measures and Definitions".
Forward Looking 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," "will," "expect," "plan," "anticipate," "intend,"
"forecast," "believe," "estimate," "predict," "propose,"
"potential," "continue," or the negative of these terms and similar
expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
other factors, some of which are beyond our control and are
difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such
forward-looking statements. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. Unless legally required, Golar undertakes no
obligation to update publicly any forward-looking statements
whether as a result of new information, future events or
otherwise.
Among the important factors that could cause actual results to
differ materially from those in the forward-looking statements
are:
- our inability and that of our counterparty to meet our
respective obligations under the Lease and Operate agreement
entered into in connection with the BP Greater Tortue / Ahmeyim
Project;
- changes in liquefied natural gas, or LNG, carrier, floating
storage and regasification unit, or FSRU, or floating liquefaction
natural gas vessel, or FLNG, or small-scale LNG market trends,
including charter rates, vessel values or technological
advancements;
- Golar Power's ability to successfully complete and start up the
Sergipe power station project and related FSRU contract;
- the ability of Golar to increase the utilization under, and
term of, the liquefaction tolling agreement for the Hilli
Episeyo and the benefits that may to accrue to us as the
result of any such modifications;
- changes in our ability to retrofit vessels as FSRUs or FLNGs
and in our ability to obtain financing for such conversions on
acceptable terms or at all;
- our ability to close potential future sales of additional
equity interests in Golar Hilli LLC on a timely basis or at
all;
- changes in the supply of or demand for LNG carriers, FSRUs,
FLNGs or small-scale LNG infrastructure;
- a material decline or prolonged weakness in rates for LNG
carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
- changes in the performance of the pool in which certain of our
vessels operate and the performance of our joint ventures;
- changes in trading patterns that affect the opportunities for
the profitable operation of LNG carriers, FSRUs, FLNGs or
small-scale LNG infrastructure;
- changes in the supply of or demand for LNG or LNG carried by
sea;
- changes in commodity prices;
- changes in the supply of or demand for natural gas generally or
in particular regions;
- failure of our contract counterparties, including our joint
venture co-owners, to comply with their agreements with us;
- changes in our relationships with our counterparties, including
our major chartering parties;
- challenges by authorities to the tax benefits we previously
obtained under certain of our leasing agreements;
- a decline or continuing weakness in the global financial
markets;
- changes in general domestic and international political
conditions, particularly where we operate;
- changes in the availability of vessels to purchase and in the
time it takes to construct new vessels;
- failures of shipyards to comply with delivery schedules or
performance specifications on a timely basis or at all;
- our ability to integrate and realize the benefits of
acquisitions;
- changes in our ability to sell vessels to Golar Partners or
Golar Power;
- changes in our relationship with Golar Partners, Golar Power or
Avenir and the sustainability of any distributions they pay to
us;
- changes to rules and regulations applicable to LNG carriers,
FSRUs, FLNGs or other parts of the LNG supply chain;
- our inability to achieve successful utilization of our expanded
fleet or inability to expand beyond the carriage of LNG and
provision of FSRUs, FLNGs, and small-scale LNG infrastructure
particularly through our innovative FLNG strategy and our joint
ventures;
- actions taken by regulatory authorities that may prohibit the
access of LNG carriers, FSRUs, FLNGs or small-scale LNG vessels to
various ports;
- changes in our ability to obtain additional financing on
acceptable terms or at all;
- increases in costs, including, among other things, wages,
insurance, provisions, repairs and maintenance; and
- other factors listed from time to time in registration
statements, reports or other materials that we have filed with or
furnished to the Securities and Exchange Commission, or the
Commission, including our most recent annual report on Form
20-F.
As a result, you are cautioned not to rely on any
forward-looking statements. Actual results may differ materially
from those expressed or implied by such forward-looking statements.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise unless required by law.
May 21, 2019The Board of DirectorsGolar LNG LimitedHamilton,
Bermuda
Questions should be directed to:Golar Management Limited +44 207
063 7900Iain Ross - Chief Executive OfficerGraham Robjohns - Chief
Financial Officer and Deputy Chief Executive OfficerStuart Buchanan
- Head of Investor Relations
1. Refer to section "Non-GAAP measures" for definition and
reconciliation to the most comparable US GAAP measure.
A PDF accompanying this announcement is available
at http://ml.globenewswire.com/Resource/Download/e4cc73db-2fac-43ba-b9b3-d7264d5a49cb
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