Highlights
·
EBITDA* in the quarter reported a loss of $5.9 million compared to
2Q loss of $25.3 million.
· Board
maintains dividend at $0.45 per share for the quarter.
·
Golar, Perenco and SNH sign and execute all contracts for the
GoFLNG Hilli Project - vessel to commence operations in Q2 2017
with a minimum annual expected EBITDA** of $170m for
50% capacity utilisation for its initial 8-year contract.
·
Placed order for an additional FSRU newbuild with Samsung.
· Golar
Partners reported a record 3Q EBITDA of $94.9 million. Golar
owns 30.4% (plus IDRs) of Golar LNG Partners. We only
recognise $6.8 million contribution from Golar Partners in 3Q
results.
Subsequent events
·
Gazprom, Perenco and SNH sign a firm 8-year Sale and Purchase
contract for LNG from GoFLNG Hilli.
· Golar
Hilli Corporation received a $500 million guarantee from Perenco
and SNH for their performance under the GoFLNG Hilli contract and
has in return issued a $400 million guarantee to Perenco and
SNH.
· The
LNG carrier pool "The Cool Pool" successfully commenced
operations.
·
Executed a firm 5-year contract with West Africa Gas Limited and
received financing for FSRU Golar Tundra.
Financial Review
Business Performance
|
2015 |
2015 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Time and voyage charter revenues |
24,252
|
16,922 |
Vessel and other management fees |
3,126
|
3,222 |
Vessel operating expenses |
(13,519) |
(14,801) |
Voyage and commission expenses |
(12,384) |
(21,424) |
Administrative expenses |
(7,339) |
(9,214) |
Depreciation and amortization |
(18,376) |
(18,118) |
|
|
|
Total Adjusted Operating
Losses*** |
(24,240) |
(43,413) |
Add back
|
|
|
Depreciation and amortization |
18,376 |
18,118 |
EBITDA* |
(5,864) |
(25,295) |
Golar LNG Limited ("Golar" or "the
Company") reported today a 3Q operating loss of $24.2 million as
compared to $43.4 million in 2Q. In line with expectations,
3Q reported an improvement in vessel utilisation, albeit from a
very low level in 2Q. Although headline charter rates
remained relatively constant across the quarters, the increase in
utilisation from 33% in 2Q to 43% in 3Q together with improved
round trip economics resulted in an increase in time charter
revenues from $16.9 million in 2Q to $24.3 million in 3Q.
With the exception of the Golar Penguin, all of the carriers
recorded utilisation at or above prior quarter levels.
3Q voyage costs decreased $9.0
million from $21.4 million in 2Q to $12.4 million. The
obligation to charter back the Golar Eskimo from Golar Partners in
the period prior to delivery in Jordan finished at the end of
2Q. Savings in payments to Golar Partners net of revenues
received for the Eskimo account for $6.5 million of this $9.0
million reduction. Reduced bunkers as a result of improved
vessel utilisation accounted for most of the remaining $2.5 million
decrease. Of the $12.4 million 3Q voyage and commission
expenses, $6.7 million represents the cost of chartering in the
Golar Grand from Golar Partners. The remaining $5.7 million is
predominantly bunker and positioning costs.
Vessel operating expenses
decreased $1.3 million to $13.5 million in 3Q. Administration
costs decreased $1.9 million over 2Q to $7.3 million in 3Q with
reductions in legal and non-cash share option related expenses
accounting for most of the decrease.
Collectively the above resulted in
a $19.4 million increase in EBITDA from a loss of $25.3 million in
2Q to a loss of $5.9 million in 3Q.
Net Income
Summary
(in thousands of $) |
2015 |
2015 |
|
Jul-Sep |
Apr-Jun |
Total Adjusted Operating Loss*** |
(24,240) |
(43,413) |
Net gain on disposals (includes amortization of deferred
gains) |
127 |
126 |
Impairment
on asset held for sale |
- |
(1,032) |
Dividend
income |
3,914 |
3,914 |
Net
interest expense |
(16,077) |
(15,722) |
Other
financial items |
(110,412) |
50,802 |
Taxes |
760 |
742 |
Equity in
net earnings of affiliates |
2,908 |
4,406 |
Net (loss) / income |
(143,020) |
(177) |
In 3Q the Company generated a
substantial net loss of $143.0 million. A material portion of this
loss is the result of non-cash items including:
In addition, a loan impairment has
been recognised in 3Q for a transaction expected to take place
during 4Q:
The Company has received $13.1
million in cash in respect of its common units, subordinated units,
GP and IDRs in Golar Partners. The Partnership contributed a
positive $6.8 million to the Company's 3Q result (represented by
$3.9 million in dividend income and $2.9 million in equity in net
earnings of affiliates). The difference has been booked
against the balance sheet under Investment in Affiliates.
Net interest expense increased
from $15.7 million in 2Q to $16.1 million in 3Q. Included in the
other financial items of $110.4 million is a non-cash loss of $89.5
million, mainly related to derivative movements as noted above.
The equity TRS loss as at September 30 was marked-to-market
using a share price of $27.88.
Anticipated short-haul cabotage
trade opportunities in Indonesia, ideally suited to the Salju, have
failed to materialise as expected. Golar, acting as the main
lender to this vessel, has therefore agreed to the repossession of
Salju from P.T. Equinox based on a vessel valuation of $125 million
which is in line with current market valuations. This will be
satisfied by extinguishing a loan to the vessel owning company and
therefore no cash will actually be paid. As the vessel
valuation is lower than the $138.6 million loan and working capital
advances receivable by Golar from P.T. Equinox and the equity
injected by P.T. Equinox has been exhausted, a non-cash impairment
of $15.0 million (net of associated repossession costs) has been
recognised. The vessel has no mortgage debt other than what is due
to Golar LNG.
Commercial
Review
LNG Shipping and
FSRU Performance
Overall 3Q LNG Carrier activity
levels were a little higher than 2Q with utilisation of our spot
fleet increasing from 33% in 2Q to 43% 3Q. Average 3Q charter rates
for the spot fleet were in the range of $35,000 per day.
Spot charters have typically been for much shorter voyages
than seen in recent years as intra-basin trade has become the
norm. This has increased both activity levels and vessel
availability.
To date, Middle East demand has
been the main driver of LNG carrier spot fixtures. Fixing
activity in the Middle East and Atlantic regions has been higher
than in the Pacific. Both Egypt and Jordan have
recently concluded tenders to buy 56 and 19 cargoes respectively
through to the end of 2016. Activity levels in 4Q have continued to
improve, particularly for European reloads heading into the new
terminals in the Middle East, and in the Atlantic in general.
The "Cool Pool" formation
comprising Golar (8 carriers contributed), Gaslog (3 carriers) and
Dynagas (3 carriers) was completed and commenced operations on
October 1. The Pool has been very well received by the
market. Of the 17 spot voyage charters concluded globally
during October, 10 were with the Cool Pool. Improved
scheduling ability including the ability to fix forward and reduced
positioning costs and cost efficiencies as a result of the common
marketing of vessels are expected to result in continuing
improvements in vessel utilisation and further reductions to voyage
costs in 4Q.
Gladstone LNG initiated operations
during October and Australia Pacific LNG is expected to commence
operations before year-end. Indonesia's Senora-Donggi project
and the second train of BG's Queensland Curtis project also
continue to ramp up LNG production rates. Cheniere have
indicated that Sabine Pass will load its first cargo in early
2016. Demand for shipping, particularly in the over-provided
for Pacific basin is therefore expected to gradually improve over
the coming quarters.
Golar's existing fleet of 6
operating FSRUs, all of which reside within Golar Partners,
continue to operate reliably with 100% availability (excluding 3
days scheduled drydocking).
Investment
Review
Conversion
Contracts
GoFLNG Hilli conversion progress
remains on schedule with the project's contingency budget remaining
substantially untapped. During the quarter the vessel
re-entered Keppel drydock and prefabricated sponsons are now in the
process of being attached to the hull. This work will continue for
the remainder of this year. Pre fabrication of the process top side
modules and pipe racks has now commenced with most major equipment
items for the conversion now delivered to the shipyard.
Golar continues to work
constructively with Keppel Corp with respect to the scheduling of
the conversion of Gandria and Gimi. The total commitment to
these two ships remains at $50 million. Both contracts allow for
their termination after deduction of a set cancellation fee. In
view of the prevailing uncertainty in the energy markets, Golar
does not intend to accelerate these conversions before satisfactory
financing and firm client contracts are in place. The ordering of
long-lead items for these two vessels does however preserve Golar's
ability to meet clients 2018 and 2019 production schedules.
FSRU
Newbuild
On July 17 Golar placed an order
with Samsung Heavy Industries for an additional FSRU
newbuild. Delivering in November 2017, this FSRU is timed to
meet the requirements of a number of specific FSRU opportunities
that Golar is currently pursuing. Buoyed by attractively
priced and available LNG supply, current demand for FSRUs is
strong. On November 25 the Company took delivery of its
7th FSRU, the
newbuild Golar Tundra. Golar Tundra will shortly proceed to
Keppel where the vessel will undergo some minor modifications
required to make the FSRU compatible with receiving facilities
currently being constructed in the port of Tema, Ghana.
Business Development
Review
FSRU
activities
On November 4, Golar and West
African Gas Limited ("WAGL") executed a firm contract for the
provision of the FSRU Golar Tundra to support their LNG import
operations in Ghana. A strong counterparty, WAGL is jointly owned
by subsidiaries of the Nigerian National Petroleum Corporation
(60%) and Sahara Energy Resource Limited (40%). The FSRU
Tundra will be moored inside the port of Tema at a jetty currently
being modified by WAGL who have also now sourced the required LNG
supply. The FSRU contract will be for an initial period of
five years with the option to extend for a further five years on
the same terms. Annual EBITDA** from this project is expected
to be $44 million. As this is a five year charter, the FSRU
will be offered for purchase to Golar Partners.
Before 2018 approximately 115
million tonnes of new LNG production capacity is expected to come
on stream, equivalent to a 45% increase on the world's current LNG
production capacity. This will not only result in an increase in
the utilisation of existing regasification capacity, but also
create a need for additional capacity with the opening of new
markets for LNG. Based upon current customer inquiries the Company
is very confident that the available uncontracted FSRU capacity
will be absorbed shortly.
GoFLNG - Business
Development Progress
All contracts for the GoFLNG Hilli
project have now been signed and the project has taken FID. A Sale
and Purchase Agreement for the LNG off-take has also been executed
by Perenco, SNH and Gazprom.
The GoFLNG Hilli is expected to
deliver an EBITDA for Golar in the first full year of operation,
based on the utilisation of 2 of the available 4 liquefaction
trains, in the range of a minimum of $170 million to maximum of
$300 million. The vessel tariff is floored and capped indexed
to Brent in the range of $60/bbl to $102/bbl. GoFLNG Hilli
will commence operations in Cameroon in Q2 2017 and the contract
has a duration of 8 years. The field has reserves to support
more than the current two train commitment and Golar will work to
increase utilisation of the vessel. Increasing production to
3 trains is expected to increase EBITDA to between $240 million and
$430 million without increasing capital costs.
Ophir's Fortuna project in
Equatorial Guinea where GoFLNG Gandria will be deployed from
1H-2019 has taken credible steps forward including substantial
progress on LNG HoA's with buyer interest oversubscribed.
Additionally, material progress has been made by Ophir on
full field development. Golar expects to make the conversion
agreement effective and issue the notice to proceed to Keppel for
the Gandria conversion by mid-2016, coincident with the project
taking FID. Project economics recently presented by Ophir
demonstrate very healthy project economics and robust options for
financing.
New GoFLNG business development
activity remains focused on maturing projects that have the
potential to commence operations in 2018 with good progress
recorded against a number of potential projects. It is however
acknowledged that the window for securing a 2018 start-up GoFLNG
project is now narrowing.
Golar is pleased to report that
good progress has been made with the Brazilian "Sergipe" greenfield
power project, with solid steps made by the joint venture on EPC
contracts for the power station and associated infrastructure and
progression of SPA discussions with potential suppliers of LNG to
the project. The project remains on track to sign binding PPA
agreements within the first half 2016. Total committed capital as
of today is $5 million in cash and $24 million in guarantees. It
remains Golar's intention to spin off the on shore investment in
Sergipe.
Financing and Liquidity
Review
FSRU financing
On October 23 Golar received an
underwritten financing commitment for the FSRU newbuild, Golar
Tundra. On delivery of the Tundra on November 25, $205
million was drawn down. On November 25, Golar Partners repaid
the $100 million Golar Eskimo vendor financing facility provided by
Golar.
FLNG
financing
As at September 30, including the
value of the original vessel, Golar has invested $436 million in
the Hilli conversion project. Today this investment sits at $452
million. Having executed the Tolling Agreement and the
Midstream Gas Convention with Perenco, the GoFLNG Hilli financing
facility is now available. All remaining conversion and site
specific costs for the GoFLNG Hilli are expected to be satisfied by
this facility.
The Company is progressing with
the financing for FLNG number 2. Several banks have given
indications and the Company expects to have a committed facility in
place before the end of Q1.
Liquidity
The cash balance at the end of 3Q
was $222.8 million. Financing of the Golar Tundra
and repayment by Golar Partners of the $100 million Eskimo vendor
loan have added $150 million to liquidity since September 30. The
Board has focused on efforts to further improve the Company's
liquidity position and reduce risk levels. On the back of this, the
Company has decided and agreed to delay the effective dates for the
Gandria and Gimi conversion projects until employment contracts for
these assets are further advanced. The ordering of long lead items
has already secured Golar's ability to deliver according to the
clients' production schedules for 2018 and 2019. This strategic
adjustment substantially reduces the company's risk while retaining
full upside.
In connection with the final
signatures on the GoFLNG Hilli project approval, the contracting
parties agreed to exchange mutual Letters of Credit. Golar Hilli
Corporation received a $500 million guarantee from Perenco and SNH
and has, as of November 27, posted a $400 million guarantee to the
upstream partners. Golar Hilli Corporation had, as of execution
date, initially posted $305 million to support this guarantee, but
expects part of this to be returned to the Company as the guarantee
bank progresses with its syndication process.
The Company has received agreeable
terms for financing facilities in relation to existing vessels
which could increase the liquidity position and provide growth
capital for the FLNG business of approximately $190 million over
and above the aforementioned $150 million from Tundra and Eskimo
and drawdown against the GoFLNG Hilli financing facility that is
expected to amount to approximately $50 million by year end.
Corporate and
other matters
Changes to the
Board
On August 27, Dan Rabun assumed
the role of Chairman of the Board. Formerly Chairman of Ensco
plc until May 2015, Mr Rabun has a strong energy background from
Ensco and as managing partner in Baker McKenzie's Dallas
office. He is also currently a Board member of Apache
Corporation.
Niels Stolt-Nielsen was appointed
to the Board at the Annual General Meeting on September 23. Mr
Stolt-Nielsen is a major owner and Chairman of the world's leading
chemical carrier company, Stolt Nielsen. He is also the Chairman
and founding investor of the LPG Company, Avance Gas.
Share and
Convertible Bond Buybacks
As at September 30, 2015, Golar
had forward contracts to repurchase 3.5 million of its own shares
at an average price of $27.88 per share. On August 4, Golar
also announced that it had approved a unit purchase program under
which the Company may purchase up to $25 million worth of publicly
held Golar Partners common units. To date 240,000 shares have been
purchased outright at a cost of $5.0 million.
Shares and
options
As at September 30, 2015, the
total number of shares outstanding in Golar including the 3.5
million shares repurchased by the Company is 93.5 million.
Additionally, there are currently 1.8 million outstanding stock
options in issue with an average strike price of approximately
$56.70 per share.
Dividend
The Board has maintained the
dividend at $0.45 per share for 3Q. The record date for the
dividend will be December 10, the ex-dividend date is December 8
and the dividend will be paid on or about January 6,
2016.
In order to support the company's
growth prospects the Board has evaluated the Company's dividend
policy. The dividend was maintained in 3Q however the Board may
consider reducing the dividend level in the coming six quarters
until the GoFLNG Hilli project commences. The target will be to
free up additional capital to fund growth within the FLNG segment.
The Board continues to see a regular dividend as a key part of the
investment return for shareholders and expects that the long term
cashflow generated by the FLNG contracts can provide a good basis
for stable dividends when these contracts commence.
Outlook
The company has passed a very
significant milestone in the roll out of its FLNG strategy. The
recent FID of the Cameroon GoFLNG Hilli project fully validates
both the technical and commercial aspects of the Company's approach
to FLNG projects. That the project has reached FID and signing of
the final LNG SPA in accordance with the original schedule proves
the strong economics for all parties and confirms the robustness of
the GoFLNG business model. The materialisation of the GoFLNG Hilli
project is expected to secure the Company a solid base cash flow
with significant upside potential related to higher utilisation and
commodity prices. Good progress by Ophir and Golar on the GoFLNG
Gandria project and a maturing and growing portfolio of FLNG
opportunities, with counterparties ranging from junior explorers to
the larger IOC's, is also encouraging.
The LNG carrier spot market is now
showing the first real signs of recovery on the back of new
production capacity starting up and the very welcome acceptance by
the market of the Cool Pool. The speed of this recovery will in
part be a function of how trade patterns evolve over the coming
months.
The market for FSRU's has clearly
entered into a new phase. Whereas, previously, potential new FSRU
projects were frustrated by the inability to secure LNG supply, we
now find holders of uncontracted LNG supply motivated to accelerate
FSRU projects in an effort to reduce their exposure. Based
upon current customer inquiries the Company is very confident that
the available uncontracted FSRU capacity will be absorbed
shortly.
The Board's main target is to
strengthen Golar's ability to execute further FLNG projects within
the framework of the Company's current balance sheet. In
order to do so the Board is considering the release of some of the
equity currently tied up in shipping activities and using this to
grow the Company's FLNG activities. This can include leveraging
unencumbered assets, re-leveraging existing debt facilities as well
as being open to strategic transactions within the shipping
segment.
The Board is disappointed in the
Golar Partners unit price performance in 2015, which has mainly
been driven by the negative sentiment in the MLP market. However,
the Board is pleased to see that the underlying business in Golar
Partners is performing well and continues to be supported by long
term contracts. Annual Golar Partners EBITDA* now exceeds $350
million. Golar's 30.4% ownership of Golar Partners, was, as
of September 30, valued at $280 million and currently generates an
expected annual dividend income of $43.7 million. Additionally,
Golar is the owner of 100 % of the general partner interest which
owns all of the Incentive Distribution Rights. These
currently produce dividends of $8.7 million per annum at a
distribution of $2.31 per unit. This distribution level is at the
beginning of the 50% threshold and further growth in dividends will
augment disproportionately, Golar's share of dividends from Golar
Partners.
The company expects operating
earnings to improve in the coming quarters, driven by an improved
shipping market and Golar Tundra commencing operations in 2Q 2016.
The Board also expects positive outcomes from the ongoing contract
discussions in the FLNG business within the next six months and see
significant opportunities to build a solid long term contract
backlog and cashflow from this business.
The Board is further encouraged to
see that the GoFLNG concept, confirmed by the Perenco transaction
and progress with Ophir, provides strong economics to our customers
even at oil prices around $40 per barrel, and gas prices around
$5-6 mmbtu. If energy prices stay at these levels there may be
material Coal to Gas switching and strong growth in LNG demand over
the years to come. At the same time these price levels do not
support Greenfield LNG developments. Such a high growth scenario
driven by low energy prices may lead to improved market balances in
the LNG shipping and FSRU markets and create good opportunities for
low cost FLNG production.
Non-Gaap
Measures:
* EBITDA is defined as earnings before interest,
depreciation and amortization, impairments and non-recurring
items.
** Expected annual EBITDA is based on certain
assumptions that management believes are accurate but because of
factors described under the heading "Forward Looking Statements"
actual results may differ materially.
*** Adjusted Operating Losses exclude gains and
losses on disposals and impairments of assets.
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; as well as
other factors discussed in Golar's most recent Form 20-F filed with
the Securities and Exchange Commission. Unpredictable or
unknown factors also could have material adverse effects on
forward-looking statements.
November 30, 2015
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed
to:
Golar Management Limited - +44 207
063 7900
Gary Smith - Chief Executive
Officer
Brian Tienzo - Chief Financial
Officer
Stuart Buchanan - Investor
Relations
Interim Results for the Period
Ended September 30 2015
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Golar LNG via Globenewswire
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