Highlights
- Exclusive of its interest in FLNG Hilli Episeyo, Golar LNG
Partners LP (“Golar Partners” or “the Partnership”) generated
operating income of $36.3 million for the fourth quarter of
2019.
- After accounting for $10.1 million of interest rate swap gains,
the Partnership reported net income attributable to unit holders of
$30.4 million for the fourth quarter.
- Generated distributable cash flow1 of $34.6 million for the
fourth quarter resulting in a distribution coverage ratio1 of
1.21.
- Secured a two-year charter for LNG carrier Golar Maria
commencing November 2020.
- Secured a two-year charter for FSRU Golar Igloo commencing 1Q
2020.
Subsequent Events
- Declared a distribution for the fourth quarter of $0.4042 per
unit.
- Agreed to extend Golar Grand charter for a further year.
Financial Results Overview
Golar Partners reports net income attributable
to unit holders of $30.4 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $36.3 million for the fourth quarter of 2019
(“the fourth quarter” or “4Q”), as compared to net income
attributable to unit holders of $7.9 million and operating income
of $35.9 million for the third quarter of 2019 (“the third quarter”
or “3Q”) and a net loss attributable to unit holders of $19.0
million and operating income of $31.8 million for 4Q 2018.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q4 2019 |
Q3 2019 |
Q4 2018 |
Total Operating Revenue |
76,563 |
|
75,818 |
|
80,003 |
|
Vessel Operating Expenses |
(14,495) |
|
(14,740) |
|
(15,869) |
|
Voyage and Commission Expenses |
(2,484) |
|
(1,685) |
|
(3,981) |
|
Administrative Expenses |
(3,185) |
|
(3,110) |
|
(4,669) |
|
Operating Income |
36,348 |
|
35,903 |
|
31,843 |
|
Interest Income |
4,804 |
|
4,990 |
|
991 |
|
Interest Expense |
(18,555) |
|
(19,764) |
|
(20,971) |
|
Gains/(Losses) on Derivative Instruments |
9,610 |
|
(9,937) |
|
(26,168) |
|
Net Income/(Loss) attributable to Golar LNG Partners LP
Owners |
30,395 |
|
7,924 |
|
(18,969) |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q4 2019 |
Q3 2019 |
Q4 2018 |
Adjusted Interest Income |
758 |
|
925 |
|
991 |
|
Adjusted Net Debt |
1,532,040 |
|
1,551,154 |
|
1,578,191 |
|
Segment Information2 |
|
Q4 2019 |
Q3 2019 |
Q4 2018 |
(in
thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
Total Operating Revenues |
58,975 |
|
17,588 |
|
26,018 |
|
102,581 |
|
63,490 |
|
12,328 |
|
26,018 |
|
101,836 |
|
62,519 |
|
17,484 |
|
26,018 |
|
106,021 |
|
Amount invoiced under sales-type lease |
4,600 |
|
— |
|
— |
|
4,600 |
|
4,600 |
|
— |
|
— |
|
4,600 |
|
— |
|
— |
|
— |
|
— |
|
Adjusted Operating Revenues 1 |
63,575 |
|
17,588 |
|
26,018 |
|
107,181 |
|
68,090 |
|
12,328 |
|
26,018 |
|
106,436 |
|
62,519 |
|
17,484 |
|
26,018 |
|
106,021 |
|
Voyage and Commission Expenses |
(1,231) |
|
(1,253) |
|
— |
|
(2,484) |
|
(1,002) |
|
(683) |
|
— |
|
(1,685) |
|
(3,240) |
|
(741) |
|
221 |
|
(3,760) |
|
Vessel Operating Expenses |
(9,574) |
|
(4,921) |
|
(5,240) |
|
(19,735) |
|
(9,542) |
|
(5,198) |
|
(5,686) |
|
(20,426) |
|
(9,981) |
|
(5,888) |
|
(4,785) |
|
(20,654) |
|
Administrative Expenses |
(1,896) |
|
(1,289) |
|
(363) |
|
(3,548) |
|
(1,870) |
|
(1,240) |
|
(223) |
|
(3,333) |
|
(2,905) |
|
(1,764) |
|
(243) |
|
(4,912) |
|
Total Adjusted EBITDA1 |
50,874 |
|
10,125 |
|
20,415 |
|
81,414 |
|
55,676 |
|
5,207 |
|
20,109 |
|
80,992 |
|
46,393 |
|
9,091 |
|
21,211 |
|
76,695 |
|
* Indirect administrative expenses are allocated to the FSRU and
LNG carrier segments 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.
In May 2019, a modification of the FSRU Golar
Freeze charter agreement led to a reassessment of the contract
under lease accounting rules. This modification resulted in the
contract changing from an operating lease to a sales-type lease
("Golar Freeze Finance Lease"). In order to compare the performance
of the Golar Freeze with our wider business, management has
determined that it will measure the performance of the Golar Freeze
Finance Lease based on Adjusted EBITDA (EBITDA as adjusted for the
amount invoiced under sales-type lease in the period). This
approach allows the Partnership to compare the Golar Freeze charter
agreement with its wider business.
Despite the scheduled December downtime of FSRU
Golar Igloo and aided by an improvement in the performance from LNG
carriers Golar Maria and Golar Mazo, 4Q Adjusted Operating
Revenues1 including amounts invoiced under the Golar Freeze Finance
Lease and the Partnership's effective share of operating revenues
from FLNG Hilli Episeyo, increased $0.7 million to $107.2 million.
Bunker costs incurred in connection Golar Mazo's removal from layup
and positioning for a voyage charter resulted in a $0.8 million
increase in 4Q voyage and commission expenses.
Pursuant to the Hilli Purchase Agreement, Golar
Partners is indemnified for FLNG Hilli Episeyo operating costs over
and above an agreed threshold. A bi-annual true-up of Hilli
operating costs resulted in a $1.5 million 4Q reimbursement to the
Partnership. This contributed to a $0.7 million reduction in
operating expenses from $20.4 million in 3Q to $19.7 million in 4Q.
Administrative expenses at $3.5 million for the quarter were in
line with 3Q.
The impact of a further decrease in LIBOR and
ongoing debt repayment contributed to a $1.2 million reduction in
interest expense, from $19.8 million in 3Q to $18.6 million in
4Q.
An increase in interest rate swap rates during
the quarter contributed to a $9.6 million 4Q gain on derivative
instruments, compared to a 3Q loss of $9.9 million. As of December
31, 2019, the average fixed interest rate of swaps related to bank
debt, including the Partnership's effective share in respect of
Hilli Episeyo was approximately 2.4%.
As a result of the foregoing, 4Q distributable
cash flow1 increased $1.0 million to $34.6 million. The
distribution coverage ratio1 increased from 1.18 in 3Q to 1.21 in
4Q.
Commercial Review
A rapid tightening of the shipping market from
the end of September meant that steam turbine vessels represented
the only available tonnage on more than one occasion during 4Q.
This enabled the Golar Maria to be fixed for several months at a
higher rate, securing full utilization of the vessel throughout the
quarter, and the Golar Mazo to be withdrawn from warm layup for a
voyage charter. Collectively, the 4Q Average Daily TCE1
achieved by these two carriers at $32,800 compares favorably to
3Q's $7,300. The quarter commenced with LNG prices at around
$5.40/mmbtu, quoted steam turbine spot rates of around $49k per
day, and an expectation that new LNG supply and a smoother Chinese
demand profile would dampen the customary increase in winter LNG
prices. Supported by the start-up of new liquefaction trains,
sanctions on a vessel owner, inventory building and contango, rates
strengthened with prompt available vessels falling to zero in late
October and steam turbine vessel spot rates reaching a 2019 peak of
$95k per day. Mild winter temperatures then began to mute the
forces of market tightening by making it less likely that spot LNG
prices would reach even the small gains implied by the forward
curve. Limited remaining storage in Europe and pushback from buyers
in Japan and China did, however, continue to absorb tonnage as
vessels idled, diverted and slow steamed while waiting to
discharge. As vessels began to discharge over the course of
December, vessel availability then increased and rates
softened. The year ended with spot steam turbine rates at
$72k per day and LNG prices where they started on October 1.
During 4Q the Elba Island facility entered
commercial service and the first commissioning cargo was shipped
from Freeport T2, where commercial operations have since commenced.
Based on the ramp-up profile of recently started facilities
together with new facilities scheduled to commence, 30mtpa of
additional liquefaction capacity is expected in 2020. Equating to
vessel demand growth of approximately 17%, this is expected to
outpace vessel supply growth of 8%. Although Covid-19 has
negatively impacted near-term Chinese LNG demand, prices and vessel
spot rates, new demand into the shoulder season is expected from
Korea and Japan where coal and nuclear facilities will be taken out
of service.
The Golar Maria will be available in the spot
and short-term market from 2Q through to late 4Q when the vessel
will commence a two-year charter. This charter includes
options to extend by a further 1+1+1 years. During February,
a 1-year extension to the May 2020 expiring Golar Grand charter was
also agreed, at a rate similar to the current level. Golar Mazo is
currently idle and will be placed into layup shortly.
Beyond 2020, 147mtpa of new liquefaction
capacity is slated to come on stream between 2021 and 2027. Based
on current trading patterns, the LNG order book of 116 vessels will
not be sufficient to carry this. At approximately 8% of the global
fleet, the 35 carriers ordered in 2019 is slightly below the
10-year average. The implications of IMO 2050, principally the
implied cap on the useful life of any LNG carrier ordered today, is
also starting to feature in the decision-making process for some
owners. This emerging caution is welcomed, and should, if
maintained in future, result in more controlled ordering and better
utilization of the existing global fleet. Near-term, low LNG
prices driven by new LNG supply outstripping demand, not helped by
Covid-19, is however a concern for the shipping business.
Historically cheap LNG prices are nevertheless a significant boost
to downstream activity and the Partnership, which has exposure to
this business, is positive about FSRU and downstream project
development.
During 4Q Kuwait National Petroleum Co. ("KNPC")
awarded the Partnership a two-year contract for the FSRU Golar
Igloo. Now signed, the contract provides for two years of continued
LNG storage and regasification services in Kuwait for KNPC’s
regasification seasons beginning in March 2020. This contract may
be further extended by KNPC for a further year through to December
2022.
Operational Review
In line with 3Q, fleet utilization of 88% was
achieved in the fourth quarter.
Modifications necessary to increase both the
regas capacity and operational efficiency of FSRU Golar Igloo were
completed in February. The vessel is now in Kuwait where its
new regas season commenced six days ahead of schedule on February
24. Golar Igloo has been fitted with a proprietary hydro
energy system, that, subject to confirmation by trial, can
produce up to 1.2MW of clean energy, equivalent to a 7% system
efficiency improvement or savings of around 5 tons of fuel per day
when operating at full load. Golar Igloo frequently operates
at full load, so this represents an attractive potential fuel
saving for the vessel charterer.
Completed within budget and without incurring
off-hire, Golar's first in-water class renewal (akin to a dry-dock)
of a vessel, the FSRU Golar Eskimo, also commenced in 4Q and
completed in 1Q 2020. Two vessels, Golar Maria and Golar
Mazo, may also dry-dock in 2020. Dry-dock of Golar Maria is
currently scheduled for April 2021 but may be brought forward to 4Q
2020 if more practical and economic. Dry-dock of Golar Mazo will be
subject to the vessel securing a charter during the year that
justifies the cost. Until then Golar Mazo will be placed into
cold layup.
Financing and Liquidity
As of December 31, 2019, Golar Partners had cash
and cash equivalents of $47.7 million. Including the Partnership's
$422.3 million share of debt in respect of FLNG Hilli Episeyo,
Adjusted Net Debt1 as at December 31, 2019 was $1,532.0 million. 4Q
2019 Total Adjusted EBITDA1 amounts to $81.4 million. Based on the
above, the 4Q Adjusted Net Debt1 to Annualized Adjusted EBITDA1
ratio was 4.7. As of December 31, 2019, exclusive of a $100 million
forward start swap, Golar Partners had interest rate swaps with a
notional outstanding value of approximately $1,457.8 million
(including swaps with a notional value of $400.0 million in
connection with the Partnership’s bonds and $422.3 million in
respect of Hilli Episeyo), representing approximately 95% of total
debt and capital lease obligations, including assumed debt in
respect of Hilli Episeyo, net of 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 2.4% with an average
remaining period to maturity of approximately 4.1 years as of
December 31, 2019.
Inclusive of Hilli Episeyo related debt,
outstanding bank debt as of December 31, 2019 was $1,245.2 million,
which had average margins, in addition to LIBOR, of approximately
2.19%. The Partnership also has a May 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 Partnership is preparing for a refinancing of the
May 2020 bond in advance of its maturity date.
On January 28, 2020, Golar Partners entered into
an At The Market ("ATM") sales agreement with a sales agent,
relating to the Partnership's 8.75% Series A Cumulative Redeemable
Preferred Units ("units") representing limited partner interests,
at $25.0 per unit. Although the ATM has not yet been
utilized, the Partnership may, through the sales agent, offer and
sell these units from time to time up to an aggregate value of
$120.0 million.
Corporate and Other Matters
As of December 31, 2019, there were 70,738,027
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 28, 2020, Golar Partners declared a
distribution for the fourth quarter of $0.4042 per unit. This
distribution was paid on February 14, 2020 to common and general
partner unit holders of record on February 7, 2020.
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 also paid on February 14, 2020
to all Series A preferred unit holders of record on February 7,
2020.
Total outstanding and exercisable options as at
December 31, 2019 were 99,000.
Outlook
The 4Q award of the two-year Kuwait FSRU
contract for Golar Igloo and the two-year contract for Golar Maria,
together with the more recent agreement to extend the Golar Grand
charter by one year, collectively removes significant
re-contracting risk for the Partnership.
First quarter results will be negatively
impacted by the customary two month Golar Igloo winter downtime and
will not benefit from a contribution to earnings by Golar
Mazo. The focus of the Partnership during the quarter will be
on the evaluation of its structure and strategy in order to
maximize long-term shareholder value whilst also ensuring that it
is appropriately debt financed. This evaluation includes
potential structured transactions to grow the Partnership, bond and
bank debt refinancing and the ongoing pursuit of opportunities to
redeploy the FSRU Golar Spirit and carrier Golar Mazo. As
previously indicated, future distribution levels will be determined
by the relative success of the above as well as the level and terms
of new financing and growth capital requirements.
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:
- 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;
- the repayment of debt and settling of interest rate swaps;
- our and Golar LNG Limited (“Golar”) ability to make additional
borrowings and to access debt and equity markets;
- the length and severity of the recent Covid-19 virus outbreak,
including its impacts across our business on demand, operations in
China and the Far East and knock-on impacts to our global
operations;
- market trends in the FSRU, LNG carrier and floating liquefied
natural gas vessel (“FLNG”) industries, including fluctuations in
charter hire rates, vessel values, factors affecting supply and
demand, and opportunities for the profitable operations of FSRUs,
LNG carriers and FLNGs;
- the ability of 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;
- challenges by authorities to the tax benefits we previously
obtained
- our ability to integrate and realize the expected benefits from
acquisitions and potential acquisitions:
- the future share of earnings relating to the FLNG, Hilli
Episeyo ("Hilli"), 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;
- 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;
- planned capital expenditures and availability of capital
resources to fund capital expenditures;
- the exercise of purchase options by our charterers;
- 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;
- 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;
- economic substance laws and regulations adopted or considered
by various jurisdictions of formation of us and certain of our
subsidiaries;
- 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;
- 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;
- future sales of our securities in the public market;
- 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 25, 2020Golar LNG Partners
L.P.Hamilton, BermudaQuestions should be directed to:c/o Golar
Management Ltd - +44 207 063 7900Graham Robjohns - Chief Executive
OfficerStuart Buchanan - Head of Investor Relations
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
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