Highlights
- Exclusive of its interest in FLNG Hilli Episeyo, Golar LNG
Partners LP (“Golar Partners” or “the Partnership”) generated
operating income of $35.9 million for the third quarter of
2019.
- After accounting for $10.9 million of interest rate swap
losses, the Partnership reported net income attributable to unit
holders of $7.9 million for the third quarter.
- Generated distributable cash flow1 of $33.6 million for the
third quarter resulting in a distribution coverage ratio1 of
1.18.
Subsequent Events
- Secured a two-year charter for LNG carrier Golar Maria
commencing November 2020.
- Received notice of contract award for a two-year FSRU Golar
Igloo charter commencing March 2020.
- Declared a distribution for the third quarter of $0.4042 per
unit.
Financial Results Overview
Golar Partners reports net income attributable
to unit holders of $7.9 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $35.9 million for the third quarter of 2019
(“the third quarter” or “3Q”), as compared to a net loss
attributable to unit holders of $5.5 million and operating income
of $36.2 million for the second quarter of 2019 (“the second
quarter” or “2Q”) and net income attributable to unit holders of
$49.0 million and operating income of $62.0 million for 3Q
2018.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q3 2019 |
Q2 2019 |
Q3 2018 |
Total Operating Revenue |
75,818 |
|
77,361 |
|
108,232 |
|
Vessel Operating Expenses |
(14,740 |
) |
(14,913 |
) |
(16,372 |
) |
Voyage and Commission Expenses |
(1,685 |
) |
(1,621 |
) |
(2,312 |
) |
Administrative Expenses |
(3,110 |
) |
(3,251 |
) |
(2,944 |
) |
Operating Income |
35,903 |
|
36,208 |
|
62,011 |
|
Interest income |
4,990 |
|
2,409 |
|
1,177 |
|
Interest Expense |
(19,764 |
) |
(20,695 |
) |
(20,062 |
) |
(Losses)/Gains on Derivative Instruments |
(9,937 |
) |
(24,502 |
) |
11,338 |
|
Net Income/(Loss) attributable to Golar LNG Partners LP
Owners |
7,924 |
|
(5,516 |
) |
48,964 |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q3 2019 |
Q2 2019 |
Q3 2018 |
Adjusted Interest Income |
925 |
|
1,050 |
|
1,177 |
|
Adjusted Net Debt |
1,551,154 |
|
1,574,079 |
|
1,579,441 |
|
Segment Information2 |
|
Q3 2019 |
Q2 2019 |
Q3 2018 |
(in
thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
Total Operating Revenues |
63,490 |
|
12,328 |
|
26,018 |
|
101,836 |
|
64,824 |
|
12,537 |
|
26,018 |
|
103,379 |
|
96,836 |
|
11,396 |
|
23,736 |
|
131,968 |
|
Amount invoiced under sales-type lease |
4,600 |
|
— |
|
— |
|
4,600 |
|
2,300 |
|
— |
|
— |
|
2,300 |
|
— |
|
— |
|
— |
|
— |
|
Adjusted Operating Revenues 1 |
68,090 |
|
12,328 |
|
26,018 |
|
106,436 |
|
67,124 |
|
12,537 |
|
26,018 |
|
105,679 |
|
96,836 |
|
11,396 |
|
23,736 |
|
131,968 |
|
Voyage and Commission Expenses |
(1,002 |
) |
(683 |
) |
— |
|
(1,685 |
) |
(1,109 |
) |
(512 |
) |
(50 |
) |
(1,671 |
) |
(1,146 |
) |
(1,166 |
) |
(655 |
) |
(2,967 |
) |
Vessel Operating Expenses |
(9,542 |
) |
(5,198 |
) |
(5,686 |
) |
(20,426 |
) |
(10,070 |
) |
(4,843 |
) |
(6,163 |
) |
(21,076 |
) |
(10,317 |
) |
(6,055 |
) |
(5,049 |
) |
(21,421 |
) |
Administrative Expenses |
(1,870 |
) |
(1,240 |
) |
(223 |
) |
(3,333 |
) |
(1,947 |
) |
(1,304 |
) |
(198 |
) |
(3,449 |
) |
(1,810 |
) |
(1,134 |
) |
(1,063 |
) |
(4,007 |
) |
Adjusted EBITDA1 |
55,676 |
|
5,207 |
|
20,109 |
|
80,992 |
|
53,998 |
|
5,878 |
|
19,607 |
|
79,483 |
|
83,563 |
|
3,041 |
|
16,969 |
|
103,573 |
|
* Indirect administrative expenses are allocated to the FSRU and
LNG carrier segments based on the number of vessels.** Relates to
the attributable earnings of our investment in Golar Hilli LLC
(“Hilli LLC”) had we consolidated its 50% of the Hilli common
units.
On May 15, 2019, a modification of the FSRU
Golar Freeze charter agreement led to a reassessment of the
contract under lease accounting rules. This modification resulted
in the contract changing from an operating lease to a sales-type
lease ("Golar Freeze Finance Lease"). In order to compare the
performance of the Golar Freeze with our wider business, management
has determined that it will measure the performance of the Golar
Freeze Finance Lease based on Adjusted EBITDA (EBITDA as adjusted
for the amount invoiced under sales-type lease in the period). This
approach allows the Partnership to compare the Golar Freeze charter
agreement with its wider business.
As a result of one additional day in the
quarter, Adjusted Operating Revenues1, including amounts invoiced
under the Golar Freeze Finance Lease and the Partnership's
effective share of operating revenues from FLNG Hilli Episeyo,
increased $0.7 million from $105.7 million in 2Q to $106.4 million
in 3Q. Voyage and commission expenses were in line with the prior
quarter.
Vessel operating costs decreased by $0.7 million
from $21.1 million in 2Q to $20.4 million in 3Q. Recovery of
prior period repair costs incurred in respect of the Golar Igloo
and covered by supplier guarantee accounted for most of the
reduction.
Administrative expenses and adjusted interest
income1 at $3.3 million and $0.9 million respectively were in line
with the prior quarter. Primarily due to a decrease in LIBOR,
interest expense at $19.8 million in 3Q was $0.9 million lower than
2Q.
Although smaller than prior periods, further
decreases in interest rate swap rates during the quarter
contributed to a $9.9 million 3Q loss on derivative instruments,
compared to a 2Q loss of $24.5 million. As of September 30, 2019,
the average fixed interest rate of swaps related to bank debt,
including the Partnership's effective share in respect of Hilli
Episeyo was approximately 2.2%.
As a result of the foregoing, 3Q distributable
cash flow1 increased $1.6 million to $33.6 million compared to
$32.0 million in 2Q. The distribution coverage ratio1 increased
from 1.12 in 2Q to 1.18 in 3Q.
Commercial Review
Although the spot market for steam turbine
vessels remained subdued for most of 3Q, a rapid tightening of the
shipping market in late September meant that these vessels have
since represented the only available tonnage on more than one
occasion. The Golar Maria secured close to full utilization in 3Q
and the Golar Grand enjoyed operating under its time charter at a
higher average daily rate whilst the Golar Mazo remained idle
throughout the quarter. Collectively, the 3Q Average Daily TCE1
achieved by these three carriers at $18,200 was approximately 9%
lower than 2Q.
The third quarter began with LNG trading at
multi-year low prices, at times below $4.00/mmbtu. A subdued
commodity price and the continued absence of arbitrage
opportunities kept a lid on spot shipping rates. Attracted by the
forward curve, European charterers then entered the market for
floating storage. The number of prompt available vessels
halved from around 11 at the end of July to 6 in early August as a
result. Longer than usual voyages to deliver cargoes and idling at
sea continued to absorb shipping capacity allowing spot rates to
increase. A flood of cargo tenders and associated shipping
requirements in the second half of September then sowed the seeds
for a sustained improvement in rates and chartering opportunities.
Dominated by steam turbine vessels, prompt vessel availability
reduced to 3. Seeking to reduce dependence on peak-season LNG
imports, Chinese demand also re-emerged in late September. Seasonal
tailwinds elsewhere and European storage at close to 100% capacity
necessitating ongoing floating storage further reduced vessel
availability to zero allowing rates to quickly increase in early
October.
New liquefaction facilities continue to deliver.
Cameron T1, Prelude, Freeport T1 Corpus Christi T2 and Elba Island
have all commenced production and new liquefaction is expected to
start up and ramp up at the fastest pace on record over the course
of 2020. Ample new supply together with China's efforts to
smooth its demand profile mean that Asian LNG prices have not
however enjoyed their customary winter boost and the LNG arbitrage
window has remained closed. Much of this new US volume has
therefore ended up in Europe. Despite lower upward pressure on ton
mile demand, the structural shortage of vessels has arrived.
Charterers are increasingly keen to sign 1 year+ charters removing
more vessels from the market and adding to upward pressure on spot
rates.
Both the Golar Maria and Golar Mazo will
contribute additional earnings in 4Q with the Golar Maria securing
employment through to April 2020. A two year charter for the
Golar Maria starting in late 2020 has also been secured. The
charter includes options for the charterer to extend by a further
1+1+1 years. Between April and November 2020 the vessel will
trade in what is expected to be a strong spot market.
The Partnership has received notice from Kuwait
National Petroleum Co. ("KNPC") of a two year contract award for
the FSRU Golar Igloo. Pending contract finalization and signing,
the award provides the Partnership with two years of continued LNG
storage and regasification services at the Mina Al-Ahmadi Refinery
in Kuwait for KNPC’s regasification seasons beginning in March
2020. The contract may be further extended by KNPC for an
additional year through to December 2022. KNPC will not however
require the vessel for regasification services in December which
will negatively impact 4Q 2019 earnings. During December Golar
Igloo will proceed to a yard where previously initiated
modifications necessary to increase its regas capacity will be
completed ahead of the 2020 regas season, scheduled to start on
March 1.
Collectively, the two-year Golar Maria and Golar
Igloo contracts are expected to add close to $95 million of
additional revenue backlog1.
Operational Review
No vessels were drydocked during 3Q and fleet
utilization at 88% was in line with the prior quarter.
FSRU Golar Eskimo is currently undergoing an
in-water class renewal, akin to a drydock. As this is taking place
during a scheduled maintenance window no off-hire is expected.
Golar Mazo is scheduled to be drydocked in early 2020.
Financing and Liquidity
As of September 30, 2019, Golar Partners had
cash and cash equivalents of $52.0 million. Including the
Partnership's $430.5 million share of debt in respect of FLNG Hilli
Episeyo, Adjusted Net Debt1 as at September 30, 2019 was $1,551.2
million. 3Q 2019 Adjusted EBITDA1 amounts to $81.0 million. Based
on the above, the 3Q Adjusted Net Debt1 to Annualized Adjusted
EBITDA1 ratio was 4.8. As of September 30, 2019, exclusive of a
$100 million forward start swap, Golar Partners had interest rate
swaps with a notional outstanding value of approximately $1,623
million (including swaps with a notional value of $400.0 million in
connection with the Partnership’s bonds and $430.5 million in
respect of Hilli Episeyo), representing approximately 98% of total
debt and capital lease obligations, including assumed debt in
respect of Hilli Episeyo, net of long-term restricted cash.
The average fixed interest rate of swaps related
to bank debt, including the Partnership's effective share in
respect of Hilli Episeyo is approximately 2.2% with an average
remaining period to maturity of approximately 3.3 years as of
September 30, 2019.
Inclusive of Hilli Episeyo related debt,
outstanding bank debt as of September 30, 2019 was $1,274.7
million, which had average margins, in addition to LIBOR, of
approximately 2.19%. The Partnership also has a May 2020 maturing
$150.0 million Norwegian USD bond with a swapped all-in rate of
6.275% and a 2021 maturing $250 million Norwegian USD bond with a
swapped all-in rate of 8.194%. Conversion of the notice of contract
award for the 2-year FSRU tender in Kuwait into an executed
contract for the Golar Igloo is expected conclude before year end.
This together with the two year contract executed in respect of the
Golar Maria will remove significant re-contracting risk and place
the Partnership on a strong footing to refinance the $150 million
high yield bond.
Corporate and Other Matters
During the third quarter 153,728 common units
were purchased in the open market at an average price of $10.19 per
unit under the Partnership’s $50 million authorised common unit
repurchase program. These units were then cancelled. As of
September 30, 2019, there were 70,738,027 common and general
partner units outstanding in the Partnership. Of these, 22,662,977,
including 1,436,391 general partner units, were owned by Golar,
representing a 32% interest in the Partnership.
On October 28, 2019, Golar Partners declared a
distribution for the third quarter of $0.4042 per unit. This
distribution was paid on November 14, 2019 to common and general
partner unitholders of record on November 8, 2019.
A cash distribution of $0.546875 per Series A
preferred unit for the period covering 15 August through to 14
November was also declared. This was paid on November 15, 2019 to
all Series A preferred unitholders of record on November 8,
2019.
Total outstanding options as at September 30,
2019 were 99,000.
At the Partnership's Annual General Meeting on
September 27, Alf Thorkildsen was elected as a Class I Director. On
October 1, Graham Robjohns re-assumed his role as the Partnerships
Chief Executive Officer, replacing Brian Tienzo who has been
retained as an advisor to the wider group of Golar companies. The
Partnership's General Partner also appointed Ms. Georgina Sousa as
a replacement for Michael Ashford as one of the General Partner’s
three appointed Directors. Mr. Ashford retired as Company Secretary
and this position has also been assumed by Ms. Sousa.
Outlook
Fourth quarter distribution coverage ratio1 and
Adjusted Net Debt1 to Annualized Adjusted EBITDA1 ratios are both
expected to be approximately in line with 3Q levels. Further
ahead, new business for the Golar Maria and the FSRU Golar Igloo
reduces re-contracting risk and adds to revenue backlog1, which now
stands at $2.1 billion as at 30 September, 2019. The Partnership
continues to pursue opportunities to redeploy the Golar Spirit and
Golar Mazo.
FORWARD LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning future events and Golar
Partners’ operations, performance and financial condition.
Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words
“believe,” “anticipate,” “expect,” “estimate,” “project,” “will
be,” “will continue,” “will likely result,” “plan,” “intend” or
words or phrases of similar meanings. These statements involve
known and unknown risks and are based upon a number of assumptions
and estimates that are inherently subject to significant
uncertainties and contingencies, many of which are beyond Golar
Partners’ control. Actual results may differ materially from those
expressed or implied by such forward-looking statements. Important
factors that could cause actual results to differ materially
include, but are not limited to:
- the ability of Golar LNG Partners LP (“Golar Partners,” “we,”
“us” and “our”) to enter into long-term time charters, including
our ability to re-charter floating storage and regasification units
(“FSRUs”) and liquefied natural gas (“LNG”) carriers following the
termination or expiration of their time charters;
- our ability to maximize the use of our vessels, including the
re-deployment or disposition of vessels no longer under long-term
time charter;
- our ability to maintain cash distributions on our units and the
amount of any such distributions;
- the repayment of debt and settling of interest rate swaps;
- our and Golar LNG Limited (“Golar”) ability to make additional
borrowings and to access debt and equity markets;
- market trends in the FSRU, LNG carrier and floating liquefied
natural gas vessel (“FLNG”) industries, including charter rates,
vessel values, factors affecting supply and demand, and
opportunities for the profitable operations of FSRUs, LNG carriers
and FLNGs;
- the ability of Golar and us to retrofit vessels as FSRUs or
FLNGs and the timing of the delivery and acceptance of any such
retrofitted vessels by their respective charterers;
- our ability to integrate and realize the expected benefits from
acquisitions and potential acquisitions:
- the future share of earnings relating to the Hilli, which is
accounted for under the equity method;
- our anticipated growth strategies;
- the effect of a worldwide economic slowdown;
- turmoil in the global financial markets;
- fluctuations in currencies and interest rates;
- changes in commodity prices;
- the liquidity and creditworthiness of our charterers;
- changes in our operating expenses, including dry-docking and
insurance costs and bunker prices;
- our future financial condition or results of operations and
future revenues and expenses;
- planned capital expenditures and availability of capital
resources to fund capital expenditures;
- the exercise of purchase options by our charters;
- our ability to maintain long-term relationships with major LNG
traders;
- our ability to leverage the relationships and reputation of
Golar and Golar Power Limited (“Golar Power”) in the LNG
industry;
- the ability of Golar Power and us to work together to develop
projects requiring our FSRUs;
- our ability to purchase vessels from Golar and Golar Power in
the future;
- timely purchases and deliveries of newbuilding vessels;
- future purchase prices of newbuildings and secondhand
vessels;
- our ability to compete successfully for future chartering and
newbuilding opportunities;
- acceptance of a vessel by its charterer;
- termination dates and extensions of charters;
- the expected cost of, and our ability to comply with,
governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by its
charterers applicable to our business;
- economic substance laws and regulations adopted or considered
by various jurisdictions of formation of us and certain of our
subsidiaries;
- availability of skilled labor, vessel crews and
management;
- our general and administrative expenses and our fees and
expenses payable under the fleet management agreements and the
management and administrative services agreement;
- the anticipated taxation of our partnership and distributions
to our unitholders;
- challenges by authorities to the tax benefits we previously
obtained;
- estimated future maintenance and replacement capital
expenditures;
- our and Golar's ability to retain key employees;
- customers’ increasing emphasis on environmental and safety
concerns;
- potential liability from any pending or future litigation;
- potential disruption of shipping routes due to accidents,
political events, piracy or acts by terrorists;
- our business strategy and other plans and objectives for future
operations; and
- other factors listed from time to time in the reports and other
documents that we file with the U.S. Securities and Exchange
Commission (the “SEC”).
Factors may cause actual results to be
materially different from those contained in any forward-looking
statement. Golar Partners does not intend to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in Golar Partners’ expectations with
respect thereto or any change in events, conditions or
circumstances on which any such statement is based.
November 26, 2019Golar LNG Partners
L.P.Hamilton, BermudaQuestions should be directed to:c/o Golar
Management Ltd - +44 207 063 7900Graham Robjohns - Chief Executive
OfficerStuart Buchanan - Head of Investor Relations
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
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