Highlights
- EBITDA* and Operating Loss in the quarter reported a loss of
$11.3 million and $28.3 million compared to a 2Q loss of $17.5
million and $37.2 million, respectively.
- Golar LNG Limited ("Golar" or "the Company") and Schlumberger
formed OneLNG, a joint venture that will offer an integrated
upstream and midstream solution for the development of low cost gas
reserves to LNG.
- Closed Golar Power transaction with Stonepeak to capitalise on
downstream opportunities.
- Shipping market shows positive signs with improving
utilisation, rates and the re-appearance of round-trip
economics.
Subsequent Events
- Ophir and OneLNG agreed to form a Joint Operating Company to
develop the 2.6Tcf Fortuna reserves in Equatorial Guinea using FLNG
technology.
- Golar Power reached a Final Investment Decision ("FID") on
Sergipe power project, signed a 25-year FSRU agreement and entered
into a long-term sale and purchase agreement for the supply of
LNG.
- The Incentive Distribution Rights ("IDRs") in Golar LNG
Partners ("Golar Partners" or "the Partnership") were reset. Golar
LNG received 3.8 million new units as consideration.
- Raised $176 million in new equity through issue of 7.5 million
new shares.
Financial Review
Business Performance
|
2016 |
2016 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Total operating revenues |
22,267 |
|
18,370 |
|
Vessel operating expenses |
(12,102 |
) |
(14,064 |
) |
Voyage, charterhire & commission expenses |
(8,031 |
) |
(9,826 |
) |
Voyage, charterhire & commission expenses - collaborative
arrangements |
(3,621 |
) |
(2,331 |
) |
Administrative expenses |
(9,808 |
) |
(9,689 |
) |
EBITDA* |
(11,295 |
) |
(17,540 |
) |
Depreciation and amortization |
(16,997 |
) |
(19,705 |
) |
Operating loss |
(28,292 |
) |
(37,245 |
) |
* 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.
The Golar Power transaction closed on July 6.
Effective from this date, the results of the LNG carriers, Golar
Penguin and Golar Celsius, together with the Company's interest in
the 2017 delivering FSRU new-build Nanook and the Company's
investment in the Sergipe power project have been deconsolidated.
The Company will use equity accounting for Golar Power from July 6
and results of this business unit are included within Equity in net
earnings of affiliates in the Statement of Income discussed
below.
Golar reported today a 3Q operating loss of
$28.3 million as compared to a loss of $37.2 million in 2Q 2016.
Both shipping rates and utilisation improved during the quarter
with utilisation increasing from 31% in 2Q to 37% in 3Q and rates
for TFDE tonnage approaching and in cases exceeding $40k/day. Total
operating revenues increased from $18.4 million in 2Q to $22.3
million in 3Q. Voyage, charter-hire and commission expenses
including those from the Cool Pool collaboration recorded a slight
decrease from $12.2 million in 2Q to $11.7 million this quarter
reflecting the small increase in utilisation. As in prior quarters,
included in voyage, net charter-hire and commission expenses is
$5.8 million in respect of the cost of chartering the Golar
Grand.
Vessel operating expenses decreased $2.0 million
to $12.1 million. Deconsolidation of post July 6 costs in
respect of the Celsius and Penguin accounts for most of the
reduction however lower insurance costs across the fleet also
contributed positively in 3Q. Administration costs at $9.8 million
were in line with 2Q. Depreciation and amortisation decreased
$2.7 million to $17.0 million in 3Q, again due to deconsolidation
of Golar Penguin and Celsius.
Relative to 2Q the above resulted in a $6.2
million decrease in EBITDA* losses from a loss of $17.5 million in
2Q to a loss of $11.3 million in 3Q and an $8.9 million decrease in
Operating losses from a loss of $37.2 million in 2Q to a loss of
$28.3 million in 3Q.
Net Income Summary
|
2016 |
2016 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Operating loss |
(28,292 |
) |
(37,245 |
) |
Interest income |
436 |
|
196 |
|
Interest expense |
(15,564 |
) |
(13,331 |
) |
Other financial items |
22,772 |
|
(27,471 |
) |
Loss
on disposal |
(12,184 |
) |
- |
|
Taxes |
(246 |
) |
609 |
|
Equity in net earnings of affiliates |
15,681 |
|
2,053 |
|
Net
income attributable to non-controlling interests |
(6,546 |
) |
(9,412 |
) |
Net loss attributable to Golar LNG Ltd |
(23,943 |
) |
(84,601 |
) |
In 3Q the Company generated a net loss of $23.9
million. Notable contributors to this are summarised as
follows:
- After stripping out Golar Power assets, consolidated Variable
Interest Entities in respect of the six sale and leaseback financed
vessels and non-cash capitalised interest adjustments, underlying
3Q interest expense is consistent with 2Q.
- Other Financial Items report a gain of $22.8 million compared
to a $27.5 million charge in 2Q. A 2Q mark to market loss on
the Company's Total Return Swap became a $16.5 million gain in 3Q
following an increase in Golar's share price from $15.50 on June 30
to $21.20 on September 30. Increases in long-term swap rates also
converted a 2Q $5.9 million mark-to-market loss on the valuation of
interest rate swaps into a 3Q gain of $10.7 million.
- A $12.2 million non-cash loss was recognised on disposal of
Golar Power, of which approximately half is expected to be
recovered upon finalisation of the purchase price adjustment. This
loss is based on estimates and is thus subject to change.
- Following a change in accounting treatment of the Company's
stake in Golar Partners, Golar now accounts for its Common Units,
General Partner Units and IDRs in the same way it has previously
accounted for its Subordinated Units under the equity method of
accounting. The Partnerships 3Q 2016 contribution to Golar's
results is included together with the Company's 50% share of Golar
Power in equity in net earnings of affiliates. The $15.7 million 3Q
equity in net earnings of affiliates is comprised of a $2.7 million
loss in respect of Golar's 50% share in Golar Power and net
earnings of $18.3 million from the Company's stake in Golar
Partners. However, the change in accounting treatment of the
various units does not impact the distributions receivable by the
Company so that its receipt of $13.2 million in cash distributions
in respect of its investment in Golar Partners is consistent with
recent quarters.
Commercial Review
LNG Shipping
The third quarter began in much the same way as
the first half of the year with excess tonnage weighing heavily on
rates. This was followed by increased activity in August that
resulted in a step up in rates and utilisation, particularly for
owners with open tonnage in the Atlantic basin where spot rates in
excess of $40k/day were achieved. Both chartering activity and
rates have since eased but levels remain well above the lows
reached in the first half of 2016. The Pacific market continued to
be typified by higher liquidity with an abundance of available
shipping as well as spot demand from projects, utilities and
traders. Spot charters have typically been for short durations,
maintaining liquidity but limiting significant rate increases.
Atlantic activity on the other hand has been more sporadic with
thin tonnage availability and limited demand occasionally
interrupted by sudden waves of requirements that clear out this
available tonnage and result in improved rates.
New production continues to deliver with T9 of
Malaysia LNG, Petronas FLNG1 and train 2 operations of Gorgon and
Sabine Pass set to start during 4Q. Looking to 2017, significant
additional production is expected from Gorgon and Sabine Pass
together with new production from Whetstone. The FLNG Hilli is also
set to start producing. All in, approximately 135 million tonnes of
new production equivalent to 52% of current LNG production is
expected to deliver between now and 1Q 2021. During recent months a
number of market participants have chosen to take shipping coverage
for 2017. Up to 16 vessels in the global spot fleet have been fixed
for periods of 6-18 months starting between September and February.
Golar believes that this tightens the outlook for structural
availability into 2017. As new LNG arrives and prompt availability
of shipping tonnage declines, charterer interest in period
contracts is expected to grow bringing the shipping business ever
closer to its inflection point.
Discipline among ship owners continues to be
maintained with only 6 LNG carriers (approximately 1% of the global
fleet) ordered this year to date.
FSRUs
Golar's existing fleet of six operating FSRUs,
all of which reside within Golar Partners but are managed by the
Company, have maintained operational excellence achieving 99.3%
availability during scheduled 3Q operations.
The FSRU Golar Tundra remains at anchor off the
coast of Ghana. On October 19, Charterer, West Africa Gas Limited
("WAGL") received parliamentary approval for their 10-year gas
sales agreement with the government of Ghana. Golar has commenced
legal proceedings in order to collect amounts due under the
charter. The Company does however maintain dialogue with WAGL to
find a mutually agreeable way forward that bridges the original and
later start date required and on November 29 the Company received
its first payment from WAGL for amounts outstanding under the
charter. The Company has not recognised any revenue from the
WAGL charter in its 3Q Income Statement.
Downstream - Golar Power
On October 17, Golar Power reached a FID on its
first integrated FSRU-to-power project. Together with
joint venture partners Ebrasil, Golar Power have formed a project
company, CELSE, which has entered into a lump-sum turn-key EPC
agreement with General Electric who will build, maintain and
operate a 1.5GW combined cycle power station in Sergipe, Brazil.
The power station will provide power to 26 committed off-takers for
25 years commencing January 2020. All-in capital expenditure for
the power station and supporting infrastructure is estimated to be
BRL4.3 billion. After deducting the cost of chartering in the FSRU
and assuming no dispatch of power, the Sergipe project is expected
to generate a projected annual EBITDA* of BRL1.1 billion.
Additional returns can be earned if the power station is called
upon to dispatch and CELSE has entered into a flexible long-term
LNG Sale and Purchase Agreement with an affiliate of Qatar
Petroleum and ExxonMobil to support this.
In connection with FID, Golar Power
has also elected to buy out project developer Genpower. This will
increase its ownership in the Sergipe Project from 25% to 50%.
Golar Power had previously committed to finance Genpower's equity
contribution to the project so acquisition of this stake should not
increase Golar Power's equity contribution beyond the previously
anticipated $165 million, a small portion of which has already been
invested.
Golar Power has nominated its 2017 delivering
FSRU newbuild, Nanook, to service the Sergipe project and has
entered into a 25-year agreement to charter the FSRU to CELSE. This
agreement affords the flexibility to switch to an FSRU conversion
candidate ahead of start-up to accommodate other Golar Power
business opportunities as required. Annual EBITDA* generated by the
FSRU is projected to be $39.0 million (100% for the account of
Golar Power) starting January 1, 2020. When called upon to
dispatch, the Sergipe power station will utilise approximately 35%
of the FSRUs regas capacity. Golar Power will therefore look to
augment this $39 million EBITDA* by seeking out other proximate
users or integrate a project into the Brazilian gas grid.
Other FSRU projects are currently being actively
pursued. These require a range of solutions from large new-build
FSRUs to small, modern and new-build carrier conversions. Golar has
recently agreed to participate in a Total led consortium developing
an integrated FSRU-to-power project in the Ivory Coast.
Although LNG prices have increased in recent
months, they remain extremely competitive on a burn parity basis
and by historical standards. The Company believes that this
together with an expectation that LNG prices will remain low is
driving demand growth that is supporting FSRU opportunities. China
and India continue to report high double digit demand growth with
an estimated 40-50 mtpa of incremental demand being filled by these
two markets alone. Other emerging markets are currently expected to
fill a further 30-40mtpa of incremental demand, much of it via
FSRUs.
FLNG
The FLNG Hilli conversion project continues
apace and remains on schedule, within budget and on track to
deliver within its stipulated delivery window. Virtually all heavy
equipment is on-board and over 4,000 contractors are now working on
the vessel on a daily basis. The mooring system is on schedule and
limited testing of systems has started. The Company is
encouraged by two recent developments in the FLNG business,
namely:
- Commencement of operations on the worlds first FLNG vessel, the
PFLNG Satu in Malaysia.
- Black & Veatch successfully commissioning, in a marine
environment, an Exmar designed FLNG barge with a small-scale
version of the same liquefaction technology used on FLNG
Hilli.
There are significant other stranded gas
reserves in the area neighbouring the Kribi field in Cameroon as
well as additional reserves within the field itself. Golar is
currently having discussions with the Government and Perenco and is
soliciting interest from independent third parties with the target
of increasing utilisation of the FLNG Hilli. The Company remains
cautiously optimistic that further utilisation will be achieved
after start-up.
Upstream - OneLNG
On July 25 Golar and Schlumberger formalised
their co-operation by announcing the creation of OneLNG, a joint
venture 51% owned by Golar and 49% by Schlumberger that will
combine the respective strengths of each shareholder to offer gas
resource holders a faster and lower cost LNG development
solution. OneLNG will have first right of refusal for all
gas-to-LNG projects that draw upon services provided by
Schlumberger and FLNG expertise provided by Golar. The joint
venture also contemplates an equitable contribution mechanism that
takes account of Golar's FLNG intellectual property. Any
credit that Golar receives for this intellectual property will be
agreed on a case-by-case basis. Jeff Goodrich, formerly Chief
Operating Officer at Perenco has been appointed CEO of OneLNG and
key resources from both Golar and Schlumberger have been seconded
to the venture which now operates out of a shared London
office.
On November 10, OneLNG signed a binding
Shareholders Agreement with Ophir Holdings and Ventures Limited to
establish a Joint Operating Company ("JOC") to develop Ophir's
2.6Tcf Fortuna gas reserves, in Block R, offshore Equatorial
Guinea. The JOC, 66.2% and 33.8% owned by OneLNG and Ophir
respectively, will own Ophir's share of the Block R licence and the
FLNG vessel Gandria which are collectively expected to produce
between 2.2-2.5mtpa of LNG over 15-20 years. The shareholders
agreement and a Final Investment Decision are contingent on 3 key
milestones - namely, agreement of final terms and execution of
documentation for project debt financing, approval by the
shareholders of Ophir Energy plc, and, approval by the government
of Equatorial Guinea. OneLNG is responsible for concluding the
project debt financing and Ophir is responsible for securing
requisite government and shareholder approvals.
As well as aligning interests, the JOC structure
allows the project to offer both its FLNG unit and its stake in the
gas field as security to lenders. This additional security together
with shareholder support is expected to facilitate the drawdown of
up to $1.2 billion of debt from FID to commencement of operations.
Including both upstream and midstream development the project is
expected to cost $2.0 billion to develop and is currently expected
to generate an annual EBITDA* of $560 million assuming a $6.0mmbtu
free on-board gas price.
After Ophir's injection of up to $150 million
and assuming debt of $1.2 billion, OneLNG will be expected to
contribute approximately $650 million. Golar has a range of funding
options available to meet its share of this OneLNG equity in the
2017-2020 period. Credit can be expected for both the intellectual
property and the LNG carrier Gandria contributed by Golar. The
Company is also looking to agree payment profiles with key
contractors Keppel and Black & Veatch to help accommodate the
gap between release of up to $160 million of post operational
equity from the Hilli and milestone payments required for the
Gandria conversion. Other potential sources of funding during
this three-year period include cash generated from the operation of
FLNG Hilli, potential proceeds from a sale of a tranche of the FLNG
Hilli to Golar Partners for which discussions have commenced,
leveraging of further Common units in Golar Partners and the 2018
release of approximately $110 million of cash tied up in the FLNG
Hilli cash-collateralised letter of credit. Delay of the Fortuna
FID to 1H 2017 also reduces the gap between equity requirements for
the project and equity released from the FLNG Hilli.
In addition to the Fortuna Project, OneLNG is
reviewing a comprehensive list of other projects that suit its
offering. Whilst there remains a West African bias to the
current shortlist, OneLNG is also working on several projects in
other parts of the world. The Company believes that there is
additional demand for its FLNG solutions and is encouraged by the
way OneLNG has been received by the market.
Financing Review
Liquidity
Golar's total cash position as at September 30
was $137.9 million.
FLNG Hilli financing
As at September 30, 2016, $600 million has been
spent on the FLNG Hilli conversion ($695 million including the
vessel and capitalised interest) and $200 million had been drawn
against the $960 million CSSCL FLNG Hilli facility. As the project
remains well within its $1.2 billion budget, all remaining
conversion and site specific costs for the FLNG Hilli are expected
to be satisfied by this facility. After a bank syndication
exercise and a reduction in mark-to-market swaps a further $13.9
million of the $280 million cash backed Letter of Credit ("LC") to
Perenco was released to 3Q liquidity. As at September 30,
restricted cash tied up in this LC stood at $266.1 million. A
further $34.8 million of this LC restricted cash has been released
to liquidity so far in 4Q.
In addition to the above the following have been
concluded:
- Golar Power transaction closed - released $103 million of
cash.
- IDR Reset - received 3.7 million new Common units and 0.1
million General Partner units in Golar Partners (including 0.8
million earn-out units).
- Margin Loan - secured $150 million commitment from Citibank to
be secured by certain Golar Partners units.
- Equity Issue - raised $170 million net of fees following the
issue of 7.5 million new shares.
Corporate and Other Matters
After the recent offering there are 101 million
shares outstanding including 3.0 million Total Return Swap ("TRS")
shares that have an average price of $41.10 per share. There are
also 3.9 million outstanding stock options in issue with current
strike prices ranging from $1.48 to $57.00 per share.
The dividend will remain unchanged at $0.05 per
share for the quarter.
Outlook
A total of around 300 spot fixtures are expected
to be concluded in 2016, a significant step up from around 190
voyages in 2015. New LNG supply trains are delivering on an almost
quarterly basis, gradually eroding the overcapacity in the shipping
market. There are clear signs of tightening in the spot market and
this improvement is encouraging charterer interest in longer term
contracts. Based on fixture activity thus far, 4Q shipping results
are expected to be approximately in line with 3Q. The current
market strengthening is already pushing 1Q 2017 utilisation toward
3Q 2016 levels. Shareholders can therefore expect a positive
improvement in1Q revenues.
Both Golar Power and OneLNG, have, within
6-months of their formation, identified and taken substantial steps
to advance their first project opportunities. FID has been taken on
the Sergipe project. Key service companies have been engaged for
Golar Power's first 25-year integrated FSRU-to-power project. The
main ground-work permit was received on November 28 and ground
preparations are now underway. Similarly, OneLNG has signed a
shareholder agreement with Ophir that makes both the financing and
development of this world class gas resource manifestly more
digestible. Both of these projects are long-term (20-25 years),
show good profitability and are expected to add material EBITDA*
backlog to the Golar group, assuming successful execution of the
two projects. Golar's share in the currently expected EBITDA*
backlog will be in excess of $6.0 billion over the life of the
projects based on current forward prices. This creates a
solid long-term foundation for the Company.
From a financing perspective, Golar is pleased
to have delivered a solution to the March maturing convertible bond
and to have strengthened the Company's liquidity position.
Attention is now focused on concluding the financing of the FLNG
Gandria which is progressing well.
Based on Golar's experience with the first
converted FSRU, successful execution of the Hilli project is likely
to increase interest in the Company's FLNG solutions. FLNG Hilli
continues to progress on budget and is scheduled to commence
operations in Cameroon in ten months. A key objective of the
Company will be to monetise the equity investment in, and the
cashflow generated by, FLNG Hilli, in the best possible way and use
this to create profitable growth going forward. Formation of OneLNG
and Golar Power, recruitment of personnel and the deals already
concluded have strengthened the Company's ability to execute large
projects. When combined with the positive trend we now see in
the shipping market, the Company's strategic and financial position
today is considered to be considerably better relative to the same
time last year.
Forward Looking Statements
This press release contains certain
forward-looking statements that reflect management's current
expectations, estimates and projections. Forward-looking
statements include any statement that may predict, forecast,
indicate or imply future results, performance or
achievements. Words such as "anticipate," "believe,"
"estimate," "expect, " "forecast," "intend," "may," "pending,"
"plan," "predict," "project," "potential," "should" and similar
expressions identify forward-looking statements. These
statements are not guarantees of future performance and are based
upon assumptions and estimates that are inherently subject to
significant known and unknown risks, uncertainties and other
factors, many of which are beyond the Company's 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.
Among the important factors that could cause
actual outcomes and results to differ materially from those in the
forward-looking statements are: changes in LNG carriers, FSRU
or FLNG market trends, including charter rates, vessel values and
technological advancements; changes in the Company's ability to
retrofit vessels as FSRUs or FLNGs and in the Company's ability to
obtain financing for such conversions or its joint ventures on
acceptable terms or at all; 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 the Company's vessels
operate and the performance of the Company's 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; the failure of the Company's contract counterparties,
including its joint venture co-owners, to comply with their
agreements with the Company; changes in the Company's relationships
with its counterparties, including its major chartering parties;
changes in the availability of vessels to purchase and in the time
it takes to construct new vessels; failure of shipyards to
comply with delivery schedules or performance specifications on a
timely basis or at all; the Company's ability to integrate and
realize the benefits of acquisitions; changes in the Company's
ability to sell vessels to Golar Partners or Golar Power Limited;
changes in the Company's relationship with Golar Partners, Golar
Power Limited OneLNG S.A.; the Company's inability to achieve
successful utilization of its expanded fleet or inability to expand
beyond the carriage of LNG and provision of FSRUs, particularly
through its innovative FLNG strategy and its joint ventures;
changes in the Company's ability to obtain additional financing on
acceptable terms or at all; as well as other factors discussed in
the Company'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.
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, 2016
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed to:
Golar Management Limited - +44 207 063 7900
Oscar Spieler - Chief Executive Officer
Brian Tienzo - Chief Financial Officer
Stuart Buchanan - Head of Investor Relations
Attachments:
http://www.globenewswire.com/NewsRoom/AttachmentNg/0018419a-b3d3-4ae9-af39-10295539ea99
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