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.
- Preliminary fourth quarter and financial year 2018
results.pdf
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