Highlights
·
Exclusive of its
interest in FLNG Hilli Episeyo, Golar LNG
Partners LP ("Golar Partners" or "the Partnership") generated
operating income of $31.8 million for the fourth quarter of
2018.
·
After accounting for
$27.5 million of non-cash interest rate swap losses, the
Partnership reported a net loss attributable to unit holders of
$19.0 million for the fourth quarter.
·
Generated distributable
cash flow1 of $34.4
million for the fourth quarter resulting in a distribution coverage
ratio1 of 1.20.
·
Completed dry-dock and
modifications of FSRU Golar Freeze and
repositioned vessel to new contract location in Jamaica.
·
Achieved 100%
utilization of carrier Golar Mazo.
·
Methane
Princess completed dry-dock and recommenced its charter to
Shell.
Subsequent
Events
·
Charterers of FSRU
Golar Igloo exercised option to extend charter
for 1-year.
·
Charterers of the LNG
carrier Golar Grand exercised option to extend
charter by 1-year.
·
Declared a distribution
for the fourth quarter of $0.4042 per unit.
Financial Results
Overview
Golar Partners reports a net loss
attributable to unit holders of $19.0 million and operating income
(which excludes its share of Hilli Episeyo
which is accounted for under the equity method) of $31.8 million for the fourth quarter of 2018 ("the
fourth quarter" or "4Q"), as compared to net income attributable to
unit holders of $49.0 million and operating income of $62.0 million
for the third quarter of 2018 ("the third quarter" or "3Q") and net
income attributable to unit holders of $25.4 million and operating
income of $40.5 million for 4Q 2017.
Consolidated GAAP Financial
Information |
(USD '000) |
Q4 2018 |
Q3 2018 |
Q4 2017 |
Total Operating Revenue |
80,003 |
|
108,232 |
|
90,113 |
|
Vessel Operating Expenses |
(15,869 |
) |
(16,372 |
) |
(15,384 |
) |
Voyage and Commission Expenses |
(3,981 |
) |
(2,312 |
) |
(2,220 |
) |
Administrative Expenses |
(4,669 |
) |
(2,944 |
) |
(5,456 |
) |
Operating Income |
31,843 |
|
62,011 |
|
40,497 |
|
(Losses) / Gains on Derivative Instruments |
(26,168 |
) |
11,338 |
|
9,930 |
|
Net (Loss) / Income attributable to Golar
LNG Partners LP Owners |
(18,969 |
) |
48,964 |
|
25,355 |
|
Non-GAAP Financial Information1 |
(USD '000) |
Q4 2018 |
Q3 2018 |
Q4 2017 |
Interest Income |
1,257 |
|
1,622 |
|
3,079 |
|
Interest Expense |
(29,670 |
) |
(27,465 |
) |
(18,446 |
) |
|
|
|
|
Adjusted Net Debt |
1,578,191 |
|
1,579,441 |
|
1,069,228 |
|
Segment Information2 |
|
Q4 2018 |
Q3 2018 |
Q4 2017 |
(in thousands)
|
FSRU** |
LNG Carrier** |
FLNG* |
Total |
FSRU** |
LNG Carrier** |
FLNG* |
Total |
FSRU** |
LNG Carrier** |
|
Total |
Total Operating Revenues |
62 ,519 |
|
17 ,484 |
|
26 ,018 |
|
106 ,021 |
|
96 ,836 |
|
11 ,396 |
|
23 ,736 |
|
131 ,968 |
|
64 ,137 |
|
25 ,976 |
|
|
|
90 ,113 |
|
Voyage and Commission Expenses |
(3 ,240 |
) |
(741 |
) |
221 |
|
(3 ,760 |
) |
(1 ,146 |
) |
(1 ,166 |
) |
(655 |
) |
(2 ,967 |
) |
(1 ,692 |
) |
(528 |
) |
|
|
(2 ,220 |
) |
Vessel Operating Expenses |
(9 ,981 |
) |
(5 ,888 |
) |
(4 ,785 |
) |
(20 ,654 |
) |
(10 ,317 |
) |
(6 ,055 |
) |
(5 ,049 |
) |
(21 ,421 |
) |
(10 ,627 |
) |
(4 ,757 |
) |
|
|
(15 ,384 |
) |
Administrative Expenses |
(2 ,905 |
) |
(1 ,764 |
) |
(243 |
) |
(4 ,912 |
) |
(1 ,810 |
) |
(1 ,134 |
) |
(1 ,063 |
) |
(4 ,007 |
) |
(3 ,548 |
) |
(1 ,908 |
) |
|
|
(5 ,456 |
) |
EBITDA |
46 ,393 |
|
9 ,091 |
|
21 ,211 |
|
76 ,695 |
|
83 ,563 |
|
3 ,041 |
|
16 ,969 |
|
103 ,573 |
|
48 ,270 |
|
18 ,783 |
|
|
|
67 ,053 |
|
** Administrative expenses are allocated to
the FRSU and LNG carrier segment based on the number of vessels.*
Relates to the attributable earnings of our investment in Hilli LLC
had we consolidated its 50% of the Hilli common units.
Total operating revenues including
the Partnership's effective share of operating revenues from FLNG
Hilli Episeyo decreased from $132.0 million in
3Q to $106.0 million in 4Q. Of the $26.0 million decrease, $35.6
million is related to a reduction in revenues recognized in respect
of a prior contract for the Golar Freeze.
Although October 2018 - April 2019 revenues in respect of this
contract were recognized in 3Q, cash payments will continue to be
received through to April 2019. Mitigating the reduction in
recognized revenue for Golar Freeze was an
additional $5.2 million earned by the Golar
Mazo which was on hire throughout the quarter, a further $2.3
million in respect of the Partnership's interest in FLNG Hilli Episeyo which was owned for a full quarter, and
$1.2 million additional revenue in respect of the Methane Princess which spent a smaller portion of the
quarter completing a dry-dock that commenced in 3Q.
Of the $0.8 million increase in 4Q
voyage and commission expenses, $1.5 million is attributable to
bunkers consumed whilst positioning the Golar
Freeze from dry-dock to her new contract location in Jamaica.
This was offset by $0.9 million of savings in fuel consumption as a
result of improvements in the operational efficiency of Hilli Episeyo.
Savings across each of the
Partnership's three business segments resulted in 4Q vessel
operating expenses decreasing $0.8 million to $20.7 million whilst
finalization of annual management fees was a key driver behind a
$0.9 million increase in 4Q Administrative expenses to $4.9
million.
Interest income at $1.3 million in
4Q is $0.4 million lower than 3Q, as interest income on the $177.2
million prepayment in respect of Hilli Episeyo
ceased to be receivable after closing of the acquisition on July
12. Inclusive of the Partnership's share of interest expense
relating to Hilli Episeyo, interest expense
increased $2.2 million to $29.7 million in 4Q. Interest on $50
million drawn against a revolving credit facility during the
quarter together with an additional 12 days interest on the
Partnership's share of Hilli Episeyo debt
account for the increase.
Non-cash interest rate swap losses
following a decrease in 2-5 year interest swap rates contributed to
a $27.5 million 4Q loss on derivative instruments, compared to a 3Q
gain of $10.4 million.
As a result of the foregoing, 4Q
distributable cash flow1 increased
$5.1 million to $34.4 million compared to $29.3 million in
3Q. As anticipated the distribution coverage ratio1
increased, from 1.02 in 3Q to 1.20 in 4Q.
Commercial
Review
Lessons learned from gas shortages
and last minute buying at the end of 2017 meant that China entered
the winter buying market earlier in 2018. Milder than expected
temperatures subsequently resulted in a slower than anticipated
inventory drawdown with high or full North Eastern terminals
delaying a number of vessel discharges and requiring that others
slow steam. The resultant increase in congestion together with a
steady stream of new cargoes quickly absorbed all available ships,
driving LNG carrier rates to all-time high levels in November.
Drawdown of LNG as a result of cooling December temperatures then
allowed vessels to discharge and speed up, adding some slack to the
tight shipping availability. Despite record December LNG imports
into Northeast Asia, falling Brent prices, strong European gas
prices and milder weather prevented the arbitrage window from
opening. The shipping balance lengthened and both rates and
utilization subsequently declined as a result. Rates have continued
to soften into 1Q 2019 when around half of the 2019 newbuild
vessels are scheduled to deliver.
The Partnership's forward view of
the market remains bullish despite current volatility. Vessel
deliveries are expected to slow by approximately 20% from record
levels of around 49 in 2018 to around 39 in 2019. Of the 2019
deliveries, most are scheduled to deliver in the first half of the
year and only 5 are uncontracted. At the same time, new
liquefaction capacity ramps up at close to its fastest pace in
history with approximately 35mtpa of new LNG scheduled to come on
line in 2019 versus 30mtpa in 2018. Most of this new liquefaction
will originate from the US, close to doubling their current
nameplate export capacity and further increasing ton-miles. Around
35 vessels and a further 20mtpa of new, predominantly US-source,
LNG is scheduled to deliver in 2020. Leading brokers are
forecasting a 10+ vessel shortfall at the end of 2019, increasing
to more than 20 at the end of 2020.
Both Golar
Maria and Golar Mazo reported 100%
utilization for 4Q. Golar Maria's 10-month
charter will expire in early 3Q 2019. The Golar
Mazo completed its most recent charter in mid-February.
Although the carrier market is expected to tighten and strengthen
significantly over the course of 2019-2020, periods of volatility
and seasonality can be expected to persist. Despite this the
backdrop remains positive for all vessel classes and a number of
interesting opportunities that require modern steam vessels have
emerged. These include potential sales, FSU, FSRU conversions
and multi-vessel long-term carrier requirements.
The FSRU Golar
Freeze arrived offshore Jamaica on December 11. Hire at the
full rate under the vessel's 15-year charter is expected to
commence early in 2Q and generate annual contracted revenues less
forecasted operating costs of between $18 and $22 million.
Kuwait National Petroleum Company
("KNPC"), charterers of the FSRU Golar Igloo,
extended the 2018 regas season to include December and subsequently
elected to exercise their option to extend the charter by a further
year, covering the 2019 regas season. After its scheduled five-year
dry-dock, the vessel returned to Kuwait in late February to
commence its 6th regas season. Annual EBITDA from this
contract is expected to be in line with the prior year.
Charterers of the Golar Grand, cognizant of the strong underlying
shipping market, have also exercised the first of their one-year
extension options. The option rate between May 2019 and May 2020
will represent a material improvement on the initial 2-year
rate.
Operational
Review
Two of the Partnership's vessels
completed scheduled dry-dockings during 4Q. On October 20,
modifications and works to allow the FSRU Golar
Freeze to remain in service for up to 15 years in Jamaica
without dry-dock were completed. The vessel then slow steamed to
Jamaica, arriving on December 11. Hire payments from the
vessel's former charterer continued to be received throughout the
quarter. Dry-dock of the LNG carrier Methane
Princess, initiated in 3Q, was also completed during
October. After allowing for gas up/cool down, 20 days
off-hire was recorded in 4Q.
Having recognized all remaining
hire during 3Q in respect of Golar Freeze's
former contract, the vessel was treated as being off-hire for the
purposes of calculating 4Q utilization. Taking this and the
dry-dock of Methane Princess into account,
utilization of 86% was recorded for 4Q. This compares to 74%
in 3Q.
Financing and
Liquidity
As of December 31, 2018, Golar
Partners had cash and cash equivalents of $96.6 million. The
Partnership also has a $25.0 million undrawn credit facility.
Including the Partnership's $455.3 million share of debt in respect
of FLNG Hilli Episeyo, total Adjusted Net
Debt1 as at
December 31, 2018 was $1,578.2 million. 4Q 2018 EBITDA1, including
$21.2 million in respect of FLNG Hilli
Episeyo, amounts to $76.7 million. Based on the above Adjusted
Net Debt1 amount and
annualized1 4Q 2018
EBITDA1, Golar
Partners' Adjusted Net Debt1 to
EBITDA1 ratio was
5.1. As of December 31, 2018, Golar Partners had interest rate
swaps with a notional outstanding value of approximately $1,783
million (including swaps with a notional value of $400.0 million in
connection with the Partnership's bonds and $455.3 million in
respect of Hilli Episeyo) representing
approximately 104% 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 4.6 years as of December 31, 2018.
Inclusive of Hilli Episeyo related debt, outstanding bank debt as of
December 31, 2018 was $1,338.4 million, which had average margins,
in addition to LIBOR, of approximately 2.19%. The Partnership also
has a 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%. The 2020
maturing $150.0 million Norwegian USD bond, which currently trades
close to par represents the Partnership's next scheduled debt
maturity.
Corporate and
Other Matters
During the quarter, Golar Partners
repurchased and subsequently cancelled 395,094 units at a cost of
$4.5 million under its $50 million unit repurchase program.
As of December 31, 2018, there were 70,891,755 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 January 31, 2019, Golar
Partners declared an unchanged distribution for the fourth quarter
of $0.4042 per unit. This distribution was paid on February 14,
2019 to common and general partner unitholders of record on
February 11, 2019. The distribution was paid on total units of
70,891,755.
A cash distribution of $0.546875
per Series A preferred unit for the period covering 15 November
through to 14 February was also declared. This was paid on February
15, 2019 to all Series A preferred unitholders of record on
February 12, 2019.
Total outstanding options as at
December 31, 2018 were 99,000.
Outlook
Distribution coverage for 1Q 2019
will be negatively impacted by the scheduled two months seasonal
downtime of FSRU Golar Igloo, some idle time
in respect of Golar Mazo and normalized fuel
consumption costs in respect of the FLNG Hilli
Episeyo.
FSRU Golar
Igloo's strong operating performance, having maintained 100%
uptime for the duration of its initial 5-year contract, will have
reflected positively on Golar Partners and likely contributed to
KNPC's decision to exercise their option to extend the contract to
the end of 2019. This contract extension is now commencing. The
Partnership looks forward to maintaining this positive relationship
and to participating in tenders for future short-term contract
extensions in Kuwait.
The new distribution level is
based on conservative assumptions for vessels without long-term
contracts and the balance sheet remains strong. Opportunities
to grow the distribution without acquisition exist in the event
that new employment is secured for the FSRU Golar
Spirit or if long-term shipping rates outperform the
Partnership's modest assumptions.
The underlying LNG market growth
story remains robust with annual demand growth of close to 10%,
driven mainly by consumers wish for cheaper and cleaner
energy. A significant portion of this demand is expected to
be satisfied through the substitution of oil and coal by gas.
This demand case is generating additional commercial enquiries to
Golar LNG, which in turn can be expected to translate into more
long-term contracts that create a solid line of investment
prospects for the Partnership. However, even with a balanced
capital structure the Partnership will continue to depend on a
stronger equity currency for future acquisitions to be
accretive.
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:
·
our continued ability to
enter into long-term time charters, including our ability to
re-charter FSRUs and 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 and the amount of any such
distributions;
·
market trends in the
floating storage and regasification unit (or FSRU), liquefied
natural gas (or LNG) carrier and floating liquefied natural gas
vessel (or FLNG) industries, including charter rates, factors
affecting supply and demand, and opportunities for the profitable
operations of FSRUs, LNG carriers and FLNGs;
·
the ability of Golar LNG
Partners LP ("Golar Partners," "we," "us" and "our") and Golar LNG
Limited ("Golar") 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 realize the expected benefits from the Jamaica FSRU
Project;
· our
ability to consummate the potential acquisition of additional
common units in Golar Hilli LLC, the disponent owner of the
Hilli Episeyo, or the FSRU Golar Nanook;
· our
ability to integrate and realize the expected benefits from
acquisitions and potential acquisitions:
· the
future share of earnings relating to the Hilli
Episeyo, 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;
·
general market conditions, including fluctuations in charter hire
rates and vessel values;
·
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;
· the
repayment of debt and settling of interest rate swaps;
· our
and Golar's ability to make additional borrowings and to access
debt and equity markets;
·
planned capital expenditures and availability of capital resources
to fund capital expenditures;
· 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 (or Golar Power) in the LNG industry;
· 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;
·
availability of skilled labor, vessel crews and management;
·
our general and
administrative expenses and its 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.
February 27, 2019
Golar LNG Partners L.P.
Hamilton, Bermuda
Questions should be directed
to:
c/o Golar Management Ltd - +44 207
063 7900
Brian Tienzo - Chief Executive and
Chief Financial Officer
Stuart Buchanan - Head of Investor
Relations
This information is subject
of the disclosure requirements pursuant to section 5-12 of the
Norwegian Securities Trading Act.