Highlights
·
Operating Loss and
EBITDA* in the quarter reported a loss of $22.9 million and $5.5
million, respectively, compared to a 2Q 2017 loss of $24.0 million
and $6.6 million, respectively.
·
Committed to sell an interest in the FLNG Hilli
Episeyo ("Hilli") to Golar LNG Partners
("Golar Partners").
· Iain
Ross appointed as CEO.
Subsequent Events
-
Golar Partners closes a Series A
Preferred Unit offering raising net proceeds of $134 million.
-
Golar Partners issues first 50% of
Incentive Distribution Right reset Earn-Out Units to Golar.
-
LNG shipping market shows solid signs
of recovery in 4Q.
-
FLNG Hilli on site
in Cameroon with production expected to commence shortly.
Financial Review
Business Performance
|
2017 |
2017 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Total operating revenues (including revenue from
collaborative arrangement) |
32,432 |
|
28,408 |
|
Vessel operating expenses |
(13,827 |
) |
(12,099 |
) |
Voyage, charterhire & commission expenses (including
expenses from collaborative arrangement) |
(13,091 |
) |
(11,808 |
) |
Administrative expenses |
(11,025 |
) |
(11,105 |
) |
EBITDA* |
(5,511 |
) |
(6,604 |
) |
Depreciation and amortization |
(17,385 |
) |
(17,366 |
) |
Operating loss |
(22,896 |
) |
(23,970 |
) |
* EBITDA is defined as operating
loss before interest, tax, depreciation and amortization. EBITDA is
a non-GAAP financial measure. A non-GAAP financial measure is
generally defined by the Securities and Exchange Commission as one
that purports to measure historical or future financial
performance, financial position or cash flows, but excludes or
includes amounts that would not be so adjusted in the most
comparable U.S. GAAP measure. We have presented EBITDA as we
believe it provides useful information to investors because it is a
basis upon which we measure our operations and efficiency. EBITDA
is not a measure of our financial performance under U.S. GAAP and
should not be construed as an alternative to net income (loss) or
other financial measures presented in accordance with U.S.
GAAP.
Golar reports today a 3Q 2017
operating loss of $22.9 million as compared to a 2Q 2017 loss of
$24.0 million. A pick-up in utilization toward the end of the
quarter resulted in a small rise in time charter revenues which
increased $1.0 million to $25.0 million in 3Q 2017. Voyage expenses
increased from $11.8 million in 2Q 2017 to $13.1 million in 3Q
2017, with the increase largely attributable to repositioning and
cool-down costs for the Golar Tundra which
departed Ghana in September and prepared for service as an LNG
carrier.
As a result of higher fleet
management and general vessel maintenance costs, vessel operating
expenses increased $1.7 million to $13.8 million in 3Q 2017.
Administration and depreciation and amortization costs at $11.0
million and $17.4 million, respectively, were in line with 2Q
2017.
Net Income
Summary
|
2017 |
2017 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Operating loss |
(22,896 |
) |
(23,970 |
) |
Interest
income |
1,792 |
|
1,888 |
|
Interest
expense |
(13,375 |
) |
(20,453 |
) |
Other
financial items, net |
4,433 |
|
(22,384 |
) |
Other
non-operating (loss) income |
(98 |
) |
144 |
|
Taxes |
(423 |
) |
(458 |
) |
Equity in
net (losses) earnings of affiliates |
(5,907 |
) |
704 |
|
Net income
attributable to non-controlling interests |
(7,401 |
) |
(9,279 |
) |
Net loss attributable to Golar LNG Limited |
(43,875 |
) |
(73,808 |
) |
In 3Q 2017 the Company generated a
net loss of $43.9 million. Notable contributors to this are
summarized as follows:
·
The $7.1 million
decrease in interest expense is the result of an adjustment to
reflect capitalization of deemed interest of $7.4 million in
connection with Golar's equity investment in Golar Power. This has
been partly offset by additional interest charges as a result of an
increase in LIBOR.
·
Other financial items
reported 3Q 2017 income of $4.4 million. This non-cash income was
derived from a mark-to-market gain on the three million Total
Return Swap ("TRS") shares following a $0.36 quarter-on-quarter
increase in the Company's share price, an increase in swap rates
resulting in mark-to-market interest rate swap gains and a $2.5
million mark-to-market gain on the IDR Earn-Out Units
derivative.
·
The $5.9 million 3Q 2017
equity in net losses of affiliates is primarily comprised of the
following:
-
a $5.0 million loss in respect of
Golar's 50% share in Golar Power;
-
a $2.1 million loss in respect of
Golar's 51% share in OneLNG; and
-
income of $1.1 million in respect of
Golar's stake in Golar Partners.
Golar Partners reported a
substantial drop in 3Q 2017 net income, primarily due to
recognition of the Golar Spirit termination
fee in 2Q 2017 and the loss of earnings from this FSRU post June
23, 2017. Golar's $8.4 million 3Q 2017 share of net earnings in the
Partnership is offset by amortization, principally of the fair
value gain on deconsolidation of Golar Partners, currently
equivalent to $7.3 million. At $12.9 million, the quarterly cash
distribution received from the Partnership is in line with prior
quarters.
Commercial
Review
LNG
Shipping
The shipping market recovery is
underway. Shipping demand has exceeded supply growth for the first
time since 2013. Demand growth has been supported by a combination
of additional liquefaction volumes and rising ton miles. Eight
liquefaction trains with nameplate capacity of 34 million tons that
commenced operations in 2016 continue to ramp up. A further six
trains including Sabine Pass T4 and Wheatstone and Yamal T1 with a
collective nameplate capacity of 28 million tons have commenced
operations during 2017 to date. Start-up of the 5 million ton Cove
Point facility is anticipated around year-end. After four years of
declining ton miles, the advent of US volumes and the commencement
of contracts with their Far Eastern off-takers are also
contributing to rising sailing distances. Year to September 2017
ton miles increased 10% relative to 2016. This upward trajectory
should continue given that new 2018-2021 liquefaction will be
dominated by US volumes.
During September vessels began to
pull out of the spot market to service dedicated volumes. Rising
LNG prices in the East in response to significant demand from China
and Korea also resulted in additional arbitrage opportunities and
ton miles as more US volumes headed further eastward. Approximately
1.9 vessels are required to carry US volumes to Asia, more than
twice the number required to deliver Australian volumes. Spot rates
have steadily increased from 2-year highs in early October to
3-year highs today with sentiment continuing to improve as we move
into peak winter gas demand. LNG prices have also surprised to the
upside. Current JKM prices at around $9.80 per mmbtu compare to
$7.10 this time last year. Similarly, European prices of $7.70
compare to $5.90 last year. The increase in Asia has, to a large
extent, been driven by very strong Chinese demand where year to
October imports are up approximately 48%, to 29 million tons.
Looking to 2018, around 45 vessels
are scheduled for delivery, equivalent to 10% of the current fleet.
This compares to more than 12% expected production growth for the
year. Growth in ton miles is expected to further tighten the market
and this sentiment is translating into a notable increase in
enquiries for term charters.
Golar
Partners
On August 15, 2017, Golar entered
into a Purchase and Sale Agreement ("PSA") with Golar Partners for
the sale of equity interests in the Hilli. The
sold interests represent the equivalent of 50% of the two
liquefaction trains, out of four, that have been contracted to
Perenco Cameroon SA ("Perenco") and Societe Nationale Des
Hydrocarbures ("SNH") for an eight-year term. The sold interest
includes a 5% stake in any future incremental earnings generated by
the currently uncontracted expansion capacity, but does not include
exposure to the oil linked component of Hilli's current revenue stream. The agreed sale price
was $658 million less net lease obligations under the vessel
financing facility that are expected to be between $468 and $480
million, which represents 50% of the Hilli
post-delivery facility. Concurrent with execution of the PSA, the
Partnership paid a $70 million deposit to Golar, on which the
Partnership receives interest at a rate of 5% per annum. Closing of
the sale is expected to take place on or before April 30, 2018.
On October 24, 2017, the
Partnership priced a 4.8 million $25.0 per unit 8.75% Series A
Preferred Unit offering. After exercise of the Underwriters Option
for a further 0.72 million units, net proceeds received at closing
on October 31, 2017 amounted to approximately $134 million. This
capital raising positions the Partnership to acquire additional
assets from Golar.
On October 31, 2017, Golar's
obligation to sub-charter the Golar Grand from
the Partnership expired. From November 1, 2017, all daily hire from
the vessel's oil major charterer accrues to the Partnership.
Having paid the minimum quarterly
distribution in respect of each of the four preceding quarters
ended September 30, 2017, the Incentive Distribution Right ("IDR")
Exchange Agreement required that the Partnership issue to Golar 50%
of the Earn-Out Units withheld at the time of the IDR reset in
October 2016. Accordingly, on November 16, 2017, Golar
Partners issued to Golar 374,295 common units and 7,639 General
Partner units. The agreement also required the Partnership to pay
Golar the distributions that it would have been entitled to receive
on these units in respect of each of those four preceding quarters.
Therefore, concurrent with the issuance of the above Earn-Out
Units, Golar also received $0.9 million in cash. The Partnership
will issue the remaining 50% of the Earn-Out Units in 4Q 2018,
provided that it has paid a distribution equivalent to $0.5775 for
each of the four quarters up to September 30, 2018. As of today,
Golar owns 21,226,586 common units and 1,420,870 General Partner
units in the Partnership which in total have a current market value
of approximately $470 million.
FLNG
The Hilli
conversion and pre-commissioning is now complete. The vessel
departed Keppel Shipyard on October 1, 2017 and left Singapore for
Cameroon with 108 crew on board on October 12, 2017. The Hilli arrived in Cameroon on November 20, 2017 and
hook-up and connection to risers and umbilicals is now
underway. The next period will see tendering of a Notice of
Readiness, which triggers commissioning rate toll fees. A
ship-to-ship transfer of LNG for commissioning purposes will be
undertaken followed by commencement of the full commissioning
process. As part of this process, Golar anticipates production of
first commercial LNG to take place around year end. Final
commissioning is expected to complete during the second half of 1Q
2018 and the project remains well within budget.
The Mark II FEED study, a key
pre-requisite to reaching a Final Investment Decision ("FID") on
the four 3.2mtpa FLNG unit US Gulf Coast Delfin LNG project is
continuing on schedule and is on track to complete at the end of 1Q
2018.
OneLNG (51/49
Golar/Schlumberger upstream joint venture)
On August 21, 2017, the Fortuna
project participants agreed the LNG sales structure and selected
Gunvor Group Ltd. ("Gunvor") as preferred off-taker. Principal
commercial terms have been agreed with Gunvor for a sale and
purchase agreement covering 1.1mtpa of LNG over a 10-year term. The
LNG will be sold on a Brent-linked FOB basis. For two years
immediately following FID the LNG offtake structure also permits
the Fortuna project participants to market the remaining 1.1mtpa to
higher priced gas markets. The sellers also have the option to
put up to 1.1mtpa to Gunvor at a price lower than the firm price,
exercisable during the two year period following FID.
On October 2, 2017, Fortuna
project partner Ophir awarded an upstream construction contract to
Subsea Integration Alliance, a partnership between OneSubsea, a
Schlumberger company, and Subsea 7. The award is structured as an
engineering, procurement, construction, installation and
commissioning ("EPCIC") contract for the sub-sea umbilicals, risers
and flowlines and for the sub-sea production systems scope of work.
The EPCIC schedule is consistent with the planned delivery of first
gas in 2021, and work will commence after FID.
With the Umbrella Agreement
approved, a preferred off-taker and offtake structure agreed, and
EPC and EPCIC contracts for midstream and upstream infrastructure
now in place, the critical outstanding requirement for full FID
remains financing. Progress has been made on bank and alternative
financing approaches over the last month. Based on the solid
economics of this project, the Board expects to approve a FID in
the first part of 2018.
OneLNG is making very good
progress with its remaining portfolio of FLNG projects and expects
further projects to be concluded during 2018.
Golar Power
(50/50 Golar/Stonepeak Infrastructure Partners downstream joint
venture)
Development of the power project
in Sergipe is progressing according to plan. A full financing
package for the project is on track to close in 1Q 2018. There are
now more than 1,200 workers on the ground with civil and earthworks
nearing completion. Turbine, transformer and heat recovery steam
generation modules are scheduled for delivery to site during 1Q
2018. Sapura Energy have been engaged in an EPCI contract for
offshore works.
Golar Power's agreement to provide
the Sergipe project with an FSRU for 25-years has also been
formalized in the form of a Time Charter Party and Operating
Services Agreement for the Golar Nanook, the
effectiveness of each being subject to financial close. The vessel
remains on track for a September 2018 yard delivery ahead of
commencement of commissioning activities offshore Sergipe in
early-mid 2019.
Several projects have been
targeted for the FSRU conversion candidate Golar
Celsius and yards are being shortlisted for the conversion
project. The standalone FSRU market remains highly competitive and
challenging. Golar is therefore focusing on more profitable
integrated gas to power projects where barriers to entry are
higher.
Financing Review
FLNG Hilli
Episeyo financing
The Hilli
remains well within budget. As at September 30, 2017, $912.1
million has been incurred ($1,032.1 million including the original
vessel and capitalised interest). As of today, $525 million has
been drawn against the CSSCL debt facility. A further $175 million
is available to draw to meet remaining pre-acceptance costs and up
to a further $260 million can be used for remaining bills and to
augment liquidity after acceptance. Drawdown of this facility is
likely to significantly improve Golar's liquidity and investment
capacity. An agreement has also been reached with Perenco and SNH
to reduce the LC from $400 million to $300 million and this too is
expected to release additional liquidity.
Liquidity
Golar's unrestricted cash position
as at September 30, 2017 was $286.6 million. Discussions have been
initiated with Golar Partners with respect to the possible dropdown
of the second 50% of Hilli's contracted
capacity. The Partnership is financially well positioned for this
following completion of its Series A Preferred Unit offering.
Included within the $1,102.6
million current portion of long-term debt is $702.1 million
relating to lessor-owned subsidiaries that Golar is required to
consolidate in connection with seven sale and leaseback financed
vessels. The Company's underlying exposure is therefore $400.5
million. Of this, the majority relates to the Hilli CSSCL facility, which will be replaced by the
pre-arranged $960 million sale and leaseback facility after vessel
acceptance.
Corporate and
Other Matters
On September 21, 2017, Iain Ross
was appointed to replace interim CEO Oscar Spieler, who remains
available in an advisory capacity to support the Hilli project. Iain joins Golar from project delivery
firm WorleyParsons where he has held a wide range of Executive
positions, most notable amongst them, responsibility for their
global hydrocarbons, power, infrastructure and mining sectors.
At Golar's Annual General Meeting
on September 27, 2017, Tor Olav Trøim was appointed Chairman,
replacing Dan Rabun. Dan remains a Director of Golar. Michael
Ashford, Golar's Company Secretary, was also appointed as a
Director, replacing Andrew Whalley.
As at September 30, 2017, there
were 101 million shares outstanding, including 3.0 million TRS
shares that had an average price of $42.94 per share. There were
also 4.2 million outstanding stock options in issue. The dividend
will remain unchanged at $0.05 per share for the quarter.
Outlook
The Board is pleased with the
transformation the company has undertaken since ordering FLNG
Hilli in June 2014. Golar is currently going
through a process that will see it transition from a mid-stream
shipping company into a fully integrated gas to wire energy
company.
Key building blocks to this
transformation are as follows:
-
The delivery and start-up of FLNG
Hilli, a vessel that will generate base
operating cashflows under its tolling agreement of approximately
$164 million per year over the coming 8 years. Trains 3 and 4, yet
to be contracted, represent further potential upside. Trains 1 and
2 also have Brent-linked upside which can generate additional
annual operating cash flows of approximately $3 million for every
dollar increase in Brent prices between $60 and $102;
-
The project development of the Fortuna
field, organized through the OneLNG joint venture with Schlumberger
and Ophir, is expected to reach FID in the first part of 2018. With
its particularly robust field economics, this project will give
Golar direct access to reserves in the ground;
-
The development of the power project in
Sergipe is progressing according to plan. Commencing in January
2020, this project is expected to generate annual operating cash
flows of approximately $330 million based on current exchange
rates. Of this, 50% is controlled by Golar Power, in which Golar
has a 50% interest. The project infrastructure attractively
positions Golar Power for further expansion opportunities at a low
incremental cost;
-
The FSRU Golar
Nanook is committed to the Sergipe project for
25 years with annual operating cash flows of approximately $39
million accruing to Golar Power. Further FSRU opportunities in the
final stages of negotiation are expected to yield additional
business for Golar Power and Golar Partners;
-
The shipping market is showing strong
signs of improving. As of today, the effective time charter rates
being achieved in 4Q are more than twice that recorded in 3Q. An
improving trend is expected to continue into 2018-2019 when
shipping supply should lag demand created by increased production.
At full utilization, every $10,000 increase in shipping rates
equates to approximately $40 million additional annual operating
cash flows across the entire fleet;
-
The outlook for Golar Partners has
improved having taken steps to secure its current distribution by
way of its initial acquired interest in FLNG Hilli. Improving spot rates for its ships also provide
a more supportive backdrop for their re-contracting; and
-
Supported by the successful execution
of existing projects and contributions from key joint venture
partners OneLNG and Golar Power, the project portfolio for the
Golar group of companies continues to grow. This unique combination
provides a differentiated and competitive value proposition in the
gas to wire energy sector.
As a result of the above, Golar is
a company likely to increase its earnings significantly over the
coming three years. These results will be underpinned by secured
contracts currently in execution, further augmented by a
strengthening shipping market and a solid portfolio of projects
that are expected to translate into new contracts. The company
looks forward to providing confirmation of the above over the
forthcoming quarters.
The Board recognizes the hard work
invested in transforming Golar LNG into a fully integrated and
uniquely positioned energy company, driven by a strong focus on
technology and execution. The Board expects that this effort will
translate into significant shareholder value as the various
projects commence over the years ahead.
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 liquefied natural gas, or
LNG, carrier, floating storage and regasification unit, or FSRU, or
floating liquefaction natural gas vessel, or FLNG, market trends,
including charter rates, vessel values or technological
advancements;
-
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;
-
changes in the timeliness of the
Hilli Episeyo (the "Hilli") commissioning;
-
changes in the supply of or demand for
LNG carriers, FSRUs or FLNGs;
-
a material decline or prolonged
weakness in rates for LNG carriers, FSRUs or FLNGs;
-
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 or FLNGs;
-
changes in the supply of or demand for
LNG or LNG carried by sea;
-
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;
-
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 close
the sale of the equity interests in Hilli on a
timely basis or at all;
-
changes in our ability to sell vessels
to Golar Partners, or our joint venture Golar Power Limited ("Golar
Power");
-
changes in our relationship with Golar
Partners, Golar Power or our joint venture OneLNG S.A;
-
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 provisions of FSRUs particularly through our
innovative FLNG strategy and our JVs;
-
actions taken by regulatory authorities
that may prohibit the access of LNG carriers, FSRUs or FLNGs to
various ports;
-
our inability to achieve successful
utilization of our expanded fleet or inability to expand beyond the
carriage of LNG and provision of FSRUs, particularly through our
innovative FLNG strategy, or FLNG, and our joint ventures;
-
changes in our ability to obtain
additional financing on acceptable terms or at all;
-
our ability to make additional equity
funding payments to Golar Power and OneLNG to meet our obligations
under each of the respective shareholders' agreements;
-
increases in costs, including, among
other things, crew wages, insurance, provisions, repairs and
maintenance;
-
changes in general domestic and
international political conditions, particularly where we
operate;
-
a decline or continuing weakness in the
global financial markets;
-
challenges by authorities to the tax
benefits we previously obtained under certain of our leasing
agreements; 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.
November 30, 2017
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed
to:
Golar Management Limited +44 207
063 7900
Iain Ross - Chief Executive
Officer
Brian Tienzo - Chief Financial
Officer
Stuart Buchanan - Head of Investor
Relations
Interim results for the period
ended 30 September 2017
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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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