Highlights
-
Exclusive of its interest in FLNG
Hilli Episeyo, Golar LNG Partners LP ("Golar
Partners" or "the Partnership") generated operating income of $25.9
million for the first quarter of 2019.
-
After accounting for $16.5 million of
non-cash interest rate swap losses, the Partnership reported a net
loss attributable to unit holders of $15.0 million for the first
quarter.
-
Generated distributable cash
flow1 of $28.8
million for the first quarter resulting in a distribution coverage
ratio1 of
1.01.
-
Charterers of FSRU Golar Igloo exercised their option to extend charter
for 1-year.
-
Charterers of the LNG carrier Golar Grand exercised their option to extend charter by
1-year.
-
Commenced commissioning of FSRU
Golar Freeze offshore Jamaica.
Subsequent
Events
Financial Results
Overview
Golar Partners reports a net loss
attributable to unit holders of $15.0 million and operating income
(which excludes its share of Hilli Episeyo
which is accounted for under the equity method) of $25.9 million for the first quarter of 2019 ("the
first quarter" or "1Q"), as compared to a net loss attributable to
unit holders of $19.0 million and operating income of $31.8 million
for the fourth quarter of 2018 ("the fourth quarter" or "4Q") and
net income attributable to unit holders of $14.8 million and
operating income of $26.1 million for 1Q 2018.
Consolidated GAAP Financial
Information |
(in thousands of $) |
Q1 2019 |
Q4 2018 |
Q1 2018 |
Total Operating Revenue |
69,910 |
|
80,003 |
|
74,214 |
|
Vessel Operating Expenses |
(16,810 |
) |
(15,869 |
) |
(16,360 |
) |
Voyage and Commission Expenses |
(1,858 |
) |
(3,981 |
) |
(2,887 |
) |
Administrative Expenses |
(3,866 |
) |
(4,669 |
) |
(3,252 |
) |
Operating Income |
25,936 |
|
31,843 |
|
26,066 |
|
(Losses)/Gains on Derivative Instruments |
(13,967 |
) |
(26,168 |
) |
10,235 |
|
Net (Loss)/Income attributable to Golar
LNG Partners LP Owners |
(14,998 |
) |
(18,969 |
) |
14,755 |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q1 2019 |
Q4 2018 |
Q1 2018 |
Interest Income |
1,323 |
|
1,257 |
|
3,482 |
|
Interest Expense |
(28,992 |
) |
(29,670 |
) |
(20,314 |
) |
|
|
|
|
Adjusted Net Debt |
1,588,162 |
|
1,578,191 |
|
1,084,532 |
|
Segment Information2 |
|
Q1 2019 |
Q4 2018 |
Q1 2018 |
(in thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
Total |
Total Operating Revenues |
53,405 |
|
16,505 |
|
26,018 |
|
95,928 |
|
62,519 |
|
17,484 |
|
26,018 |
|
106,021 |
|
62,547 |
|
11,667 |
|
74,214 |
|
Voyage and
Commission
Expenses |
(1,124 |
) |
(734 |
) |
(180 |
) |
(2,038 |
) |
(3,240 |
) |
(741 |
) |
221 |
|
(3,760 |
) |
(1,517 |
) |
(1,370 |
) |
(2,887 |
) |
Vessel
Operating
Expenses |
(11,793 |
) |
(5,017 |
) |
(5,953 |
) |
(22,763 |
) |
(9,981 |
) |
(5,888 |
) |
(4,785 |
) |
(20,654 |
) |
(11,080 |
) |
(5,280 |
) |
(16,360 |
) |
Adminis-
trative
Expenses |
(2,377 |
) |
(1,489 |
) |
(308 |
) |
(4,174 |
) |
(2,905 |
) |
(1,764 |
) |
(243 |
) |
(4,912 |
) |
(2,001 |
) |
(1,251 |
) |
(3,252 |
) |
EBITDA |
38,111 |
|
9,265 |
|
19,577 |
|
66,953 |
|
46,393 |
|
9,091 |
|
21,211 |
|
76,695 |
|
47,949 |
|
3,766 |
|
51,715 |
|
* Administrative expenses are allocated to the
FSRU and LNG carrier segment based on the number of vessels.
** Relates to the attributable earnings of our
investment in Golar Hilli LLC ("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 $106.0 million in
4Q to $95.9 million in 1Q. Of the $10.1 million decrease, $9.3
million is related to a reduction in revenue recognized in respect
of the FSRU Golar Igloo as a result of its
scheduled winter downtime. Utilization of the LNG carrier Golar Mazo also fell from 100% in 4Q to 56% in 1Q.
Together with lower charter rates, this contributed to a $1.9
million reduction in revenues from this vessel. Two fewer
days in the quarter also negatively impacted revenue.
Mitigating these reductions was $2.0 million of commissioning hire
billed from January 11 in respect of the FSRU Golar Freeze and an additional $1.4 million of revenue
in respect of Methane Princess which was on
hire throughout the quarter, having spent 20 days of 4Q in
scheduled drydock.
Voyage and commission expenses
decreased by $1.7 million, $1.9 million of which is attributable to
reduced bunker consumption from the Golar
Freeze which repositioned from Dubai to Jamaica during
4Q. Partly offsetting this was additional bunker consumption
incurred by the Golar Mazo during idle waiting
time and by FSRU Golar Igloo during its 5-year
scheduled drydock.
Vessel operating costs increased
by $2.1 million from $20.7 million in 4Q to $22.8 million in 1Q as
a result of post drydock storing up of the FSRU Golar Igloo together with additional crew taxes and
repairs and maintenance in respect of FLNG Hilli
Episeyo. A true-up of management fee recharges in the previous
quarter resulted in a $0.7 million reduction in administrative
expenses from $4.9 million in 4Q to $4.2 million in 1Q.
Both interest income and interest
expense were in line with 4Q.
Interest rate swap losses
following a further decrease in 2-5 year interest swap rates
contributed to a $14.0 million 1Q loss on derivative instruments,
compared to a 4Q loss of $26.2 million.
As a result of the foregoing, 1Q
distributable cash flow1 decreased
$5.6 million to $28.8 million compared to $34.4 million in 4Q. As
anticipated, the distribution coverage ratio1
decreased, from 1.20 in 4Q to 1.01 in 1Q.
Commercial
Review
China's decision to pull LNG
purchases forward into 4Q18 to avoid gas shortages together with a
mild winter in Asia resulted in elevated LNG inventory levels in
key Asian markets into 1Q19. Together with the ramping up of new
LNG supply, this suppressed global LNG prices which reached 3-year
lows, and eliminated inter-basin trading opportunities. At quarter
end, LNG was trading at around 6% of Brent oil, well below energy
parity. In the absence of trading opportunities, a smaller
proportion of US volumes ended up in Asia and Yamal volumes stayed
in Europe. Ton-miles and rates fell as a result. The decline in
vessel rates that began in December 2018 therefore continued
throughout 1Q, with spot steam turbine vessel rates reaching
$24,000 by the end of March.
Low LNG prices have once again
made coal-to-gas switching economically attractive with prices
appearing to find solid support in the low-to-mid $4/mmbtu range.
Shipping rates achieved so far in 2Q 2019 have been weaker than 1Q
however near-term sentiment is improving and rates and activity
have commenced their seasonal recovery. The strong contango in the
gas market with forward prices of $9/mmbtu being quoted for
December also supports a strong shipping recovery. 2019
vessel demand growth of 15% is expected against supply growth of
9%. Further vessel demand growth of 14% is expected in 2020 with
supply growth again lagging at 9%. Leading brokers continue to
forecast a 10+ vessel shortfall at the end of 2019, increasing to
more than 20 at the end of 2020. Rates are expected to reflect this
from 2H 2019 and remain strong for the next two years. This has
resulted in a significant increase in requests for medium to
long-term coverage from charterers.
Charterers of the carrier
Golar Grand 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. Offsetting this will be more volatile near-term
earnings in respect of carriers Golar Maria
and Golar Mazo. Golar
Maria completed her charter in early May and is now employed on
a short-term voyage charter. Golar Mazo, which
completed a voyage charter during the quarter subsequent to its
multi-month employment, is now in commercial waiting time.
FSRU Golar
Freeze arrived offshore Jamaica on December 11. Commissioning
hire accrued from 11 January and hire at the full FSRU rate under
its new 15-year charter commenced in April, coinciding with the end
of charterhire receipts in respect of the vessel's prior
contract.
The FSRU Golar
Igloo completed its scheduled 5-year drydock during the Kuwait
winter downtime period ahead of commencing its 6th annual regas
season on February 25. The vessel will remain in service until
December 31. Charterers, KNPC, have previously indicated that
further contract extensions will be subject to a competitive
bidding process and as such, the Partnership looks forward to
bidding for a further contract extension later in the year.
Operational
Review
FSRU Golar
Igloo used the scheduled winter downtime period to complete its
5-year scheduled drydock. Modifications were also initiated
to increase the nameplate capacity of the FSRU from 750MMscf/day to
900MMscf/day with additional redundancy that will allow over
1bcf/day. These will be completed in early 2020. Six days of
off-hire was also incurred during 1Q in respect of the Golar Maria for a scheduled interim survey.
The only outstanding drydock
scheduled for 2019 is for Golar Mazo. In
addition to routine drydock works, certain modifications that would
make the vessel compatible with more terminals are being
considered.
In line with 4Q, fleet utilization
of 86% was recorded for 1Q.
Financing and
Liquidity
As of March 31, 2019 Golar
Partners had cash and cash equivalents of $74.4 million. Including
the Partnership's $447 million share of debt in respect of FLNG
Hilli Episeyo, total Adjusted Net
Debt1 as at March
31, 2019 was $1,588.2 million. 1Q 2019 EBITDA1,
including $19.6 million in respect of FLNG Hilli
Episeyo, amounts to $67.0 million. Based on the above Adjusted
Net Debt1 amount and
annualized1 1Q 2019
EBITDA1, Golar
Partners' Adjusted Net Debt1 to
EBITDA1 ratio was
5.9. As of March 31, 2019, Golar Partners had interest rate swaps
with a notional outstanding value of approximately $1,763 million
(including swaps with a notional value of $400.0 million in
connection with the Partnership's bonds and $447 million in respect
of Hilli Episeyo) representing approximately
103% 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 4.4 years as of March 31, 2019.
Inclusive of Hilli Episeyo related debt, outstanding bank debt as of
March 31, 2019 was $1,333.8 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 represents the Partnership's next
scheduled debt maturity and extensive work has been initiated to
refinance this.
Corporate and
Other Matters
As of March 31, 2019, 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 April 24, 2019, Golar Partners
declared a distribution for the first quarter of $0.4042 per unit.
This distribution was paid on May 14, 2019 to common and general
partner unitholders of record on May 7, 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 February
through to 14 May was also declared. This was paid on May 15, 2019
to all Series A preferred unitholders of record on May 8, 2019.
Total outstanding options as at
March 31, 2019 were 99,000.
Outlook
Distribution coverage1
for 1Q each year is typically low as a result of the scheduled
Golar Igloo winter downtime. Despite
more volatile near-term earnings in respect of carriers Golar Maria and Golar Mazo, a full
quarter's contribution to EBITDA1 from both
FSRU Golar Igloo and FSRU Golar Freeze is expected to result in solid
improvements to both 2Q distribution coverage and the Adjusted Net
Debt1 to
EBITDA1 ratio. Golar
Partners' May 2020 maturing $150 million bond continues to trade at
close to par. Subject to market conditions it is the Partnership's
ambition to refinance this before the debt is reported as current.
With a view to reducing the amount of refinancing required in 2021,
work to extend some of the 2021 maturing debt has also been
initiated.
FSRU Golar
Freeze is now earning revenue at an FSRU rate, initially
expected to generate annual EBITDA1 of
approximately $18 million. The Partnership is confident that the
charterer will secure additional customers in the region over time
that will utilize additional regas capacity that will in turn allow
the FSRU to command a higher daily rate. Modification works
initiated in 1Q to increase the regas capacity of the FSRU
Golar Igloo to meet increasing peak demand in
Kuwait are scheduled to complete during the next winter downtime
period. The Partnership believes that this investment will place it
in a strong position to bid for further contract extensions with
KNPC.
From April the world's third
largest market for LNG, Korea, has lowered import taxes on LNG used
for power production by 75% whilst simultaneously increasing taxes
on thermal coal by 28%. The level of interest in new LNG offtake
agreements despite current low prices also demonstrates the
confidence in gas as a transition fuel that will replace more
polluting fuels including coal, diesel and heavy fuel oil. New LNG
infrastructure including floating liquefaction, FSRUs and shipping
will therefore be in high demand over the years ahead. Golar,
having carved out a unique niche within the FLNG and LNG to power
sectors is well placed to add additional 20+ year contracts to
those it already has. Although these represent ideal candidates for
dropdown to an MLP, it remains the case that even with a balanced
capital structure the Partnership will continue to depend on a
stronger equity currency for such acquisitions to be accretive.
Organic growth is however
possible. Golar Power is making good progress on a number of
Brazilian projects, one of which could potentially utilize the
Golar Spirit. Golar Power and the Partnership
will work to jointly develop projects that require an FSRU
currently owned by the Partnership. The Partnership's current
distribution level assumes no contribution from this laid up
FSRU. Golar is also in discussions with field operator
Perenco with respect to the logistics and timing of increasing both
utilization and potentially materially increasing the overall
duration of FLNG Hilli Episeyo's contract
term. The contemplated increase in term would materially benefit
the Partnership. In the event that both trains are fully
utilized without accelerating production of the existing resource,
Golar Partners will also receive 5% of any additional earnings,
reducing to 2.5% of additional earnings in the event that only
train 3 is contracted. Growth of the Partnership is not
therefore dependent on acquisitions alone.
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:
-
the ability of Golar LNG Partners LP
("Golar Partners," "we," "us" and "our") to enter into long-term
time charters, including our ability to re-charter floating storage
and regasification units ("FSRUs") and liquefied natural gas
("LNG") 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 on our units and the amount of any such
distributions;
-
market trends in the FSRU, LNG carrier
and floating liquefied natural gas vessel ("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 Limited
("Golar") and us 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 integrate and realize
the expected benefits from acquisitions and potential
acquisitions:
-
the future share of earnings relating
to the Hilli, which is accounted for under the
equity method;
-
the ability of Golar to increase the
utilization under, and term of, the liquefaction tolling agreement
for the Hilli Episeyo and the benefits that may accrue to us as the
result of any such modifications;
-
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;
-
the exercise of purchase options by our
charters;
-
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
("Golar Power") in the LNG industry;
-
the ability of Golar Power and us to
work together to develop projects requiring our FSRUs;
-
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 our 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.
Golar LNG Partners L.P.