Total operating revenues of $139 million
for Q4 2019, cash generation ramping up
Iain Ross, CEO, Golar LNG,
said:
"We are pleased to announce a strong 4Q result,
with total operating revenue generation up $40.4 million to $139.0
million. Comprising revenue from FLNG Hilli Episeyo, which
delivered yet another quarter of 100% uptime, and shipping, which
achieved a fleet Average daily TCE1 of $77,000 per day, the 41%
improvement in operating revenues was driven by a seasonal upturn
in shipping rates as well as an increased focus on charter coverage
across the fleet. Through a combination of fixed and floating
rate charters, Golar has secured charter coverage for 62% of its
2020 available shipping days.
The 1.55GW Sergipe power plant in Brazil, now in
the final stages of hot commissioning, is on track, with scheduled
commencement of operations towards the end of 1Q 2020. All
three turbines have been successfully tested and the plant is
currently producing and selling power to the grid.
The wave of new liquefaction coming on stream
has caused LNG prices to soften further. Together with its
environmental advantages, this has further strengthened the
attractiveness of LNG relative to other energy sources. Golar
Power is actively pursuing opportunities to capture this advantage
through its downstream initiatives, including:
- Production of merchant power through the Sergipe power plant in
non-dispatch periods.
- Utilization of the spare capacity on FSRU Golar Nanook.
- Its award and development of the 605MW Barcarena power plant
and LNG import terminal.
- Roll-out of small-scale LNG distribution using small-scale
shipping and ISO containers.
- The recently announced partnership with BR Distribuidora.
These initiatives are significant beneficiaries
of low LNG prices. Most require minimal levels of capex, but have
the potential to materially increase Golar's short-to-medium term
earnings.
Golar is now fully funded. Further strong
growth in revenues can be expected as key infrastructure assets in
Golar Power and the FLNG Gimi become operational. Additional upside
can be achieved by releasing invested equity through optimized
post-delivery financing. By integrating the LNG value chain, Golar
is in a unique position to allocate capital to that part of the
chain that is best positioned to generate the highest return in the
prevailing LNG price environment. The company is committed to
capital discipline, to the simplification of its corporate
structure, and to using its $6.6 billion of committed contract
earnings backlog1 and unique strategic position to maximize
shareholder returns."
Financial Summary
(in thousands of $) |
4Q 2019 |
4Q 2018 |
3Q 2019 |
YTD 2019 |
YTD 2018 |
|
|
|
|
|
|
Total
operating revenues |
139,048 |
181,939 |
98,670 |
448,750 |
430,604 |
Net
income/(loss) attributable to Golar LNG Limited |
24,768 |
(312,957) |
(82,301) |
(211,956) |
(231,428) |
Adjusted
EBITDA1 |
93,388 |
121,217 |
58,932 |
254,880 |
218,145 |
Operating income/(loss) |
68,896 |
(102,818) |
(13,666) |
60,659 |
114,486 |
Dividend
per share |
— |
0.150 |
— |
— |
0.475 |
Adjusted net debt1 |
2,474,947 |
2,228,980 |
2,294,932 |
2,474,947 |
2,228,980 |
Recent Highlights
Golar Power:
- Sergipe power plant commissioning reaches advanced stage, on
target for an end of 1Q start-up, with no significant issues
identified.
- FSRU Nanook performing well with first ship-to-ship cargo
transfer completed.
- Awarded a 25-year power purchase agreement (“PPA”) for the
construction of a 605MW combined cycle thermal power plant in
Barcarena.
- Entered into a partnership with Petrobras Distribuidora S.A.
("BR Distribuidora") to facilitate a nationwide rollout of
small-scale LNG supply to Brazil's transportation and industrial
sectors using their 95 distribution centers and 7,600+ fuel
stations.
FLNG:
- FLNG Hilli Episeyo: 100% commercial uptime maintained with 34
cargoes exported to date.
- FLNG Gimi: Fully financed conversion progressing to schedule
and budget.
Shipping:
- 4Q 2019 Average Daily Time Charter Equivalent (“TCE”)1 earnings
of $77,000, negatively influenced by positioning and repositioning
costs for final two TFDE vessel dry-dockings.
- Fixed 62% of available 2020 revenue days through a combination
of fixed and floating rate charters, securing utilization and $172
million of revenue backlog1.
Financial:
- Completed first drawdown against $700 million FLNG Gimi debt
facility.
- $75 million of Hilli Episeyo restricted cash released to free
cash.
- Purchased 1.5 million of the 3 million shares underlying the
Total Return Swap ("TRS") in November, with the remaining 1.5
million shares purchased during February.
- New Golar Viking debt facility and FSRU conversion facility
executed upon vessel yard entry in January 2020.
Outlook
Golar Power: The Sergipe power station
Commercial Operations Date is expected before the end of 1Q,
triggering acceptance of the Nanook FSRU contract as well as the
PPA agreements. Golar’s interest in these 25-year contracts is
worth approximately $99 million in annual forecast Adjusted
EBITDA1. The Barcarena power plant and terminal project is
also progressing well, with significant progress made on FSRU
selection and power plant financing. A Final Investment Decision
("FID") for the Barcarena project is expected this year.
Near-record low LNG prices continue to add
momentum to downstream distribution discussions with customers
around Sergipe, Barcarena and a third terminal currently in the
advanced stages of permitting. The partnership with BR
Distribuidora will accelerate access to infrastructure and
licenses, allowing for the installation of LNG-specific
distribution plant and equipment to service downstream
customers.
FLNG: Low spot LNG prices, an increasing focus
on the environment, and our industry leading operational track
record are attracting oil major and national oil company project
developers to our low cost, small footprint FLNG solutions. Work on
a standardized newbuild FLNG solution to be built in an Asian yard
is progressing well.
LNG Shipping:Golar has fixed most of its fleet
on charters that will run throughout the low season. Based on
fixtures to date, 1Q 2020 TCE1 is anticipated to be around $60,000
per day, substantially higher than the $39,300 achieved for 1Q
2019. Except for the FSRU Tundra, currently trading as an LNGC, all
TFDE vessels have now completed their scheduled five-year
dry-dockings and all are currently on charter. Relative to
2019, when eight vessels were dry-docked, 2020 will see only one
vessel dry-dock, increasing potential 2020 vessel earning capacity
by more than 250 days. New demand for LNG in 2020 is likely
to come from Korea, which is shutting multiple coal fired power
stations, Japan where a number of nuclear plants are scheduled to
be taken offline for modifications and from ongoing global
coal-to-gas switching and small-scale LNG distribution
projects.
Despite the market uncertainties associated with
Covid-19, US-China trade discussions and normal seasonality
fluctuations, Golar remains focused on fleet utilization and
longer-term relationships with charterers.
Financial Review
Business Performance:
|
2019 |
2019 |
|
Oct-Dec |
Jul-Sep |
(in thousands of $) |
Vessel and other operations |
FLNG |
Total |
Vessel and other operations |
FLNG |
Total |
Total operating revenues |
84,524 |
|
54,524 |
|
139,048 |
|
44,146 |
|
54,524 |
|
98,670 |
|
Vessel operating expenses |
(16,447) |
|
(14,380) |
|
(30,827) |
|
(15,982) |
|
(12,415) |
|
(28,397) |
|
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(2,311) |
|
— |
|
(2,311) |
|
(5,603) |
|
— |
|
(5,603) |
|
Administrative expenses |
(11,070) |
|
(764) |
|
(11,834) |
|
(12,162) |
|
(470) |
|
(12,632) |
|
Project development expenses |
(55) |
|
(2,978) |
|
(3,033) |
|
(831) |
|
341 |
|
(490) |
|
Realized gain on oil derivative instrument(2) |
— |
|
1,110 |
|
1,110 |
|
— |
|
4,584 |
|
4,584 |
|
Other operating gains |
1,235 |
|
— |
|
1,235 |
|
2,800 |
|
— |
|
2,800 |
|
Adjusted EBITDA(1) |
55,876 |
|
37,512 |
|
93,388 |
|
12,368 |
|
46,564 |
|
58,932 |
|
|
|
|
|
|
|
|
Reconciliation to operating income/(loss) |
|
|
|
|
|
|
Unrealized gain/(loss) on oil derivative instrument(2) |
— |
|
4,330 |
|
4,330 |
|
— |
|
(44,170) |
|
(44,170) |
|
Depreciation and amortization |
(16,328) |
|
(11,993) |
|
(28,321) |
|
(16,435) |
|
(11,993) |
|
(28,428) |
|
Impairment of long-lived assets |
(501) |
|
— |
|
(501) |
|
— |
|
— |
|
— |
|
Operating income/(loss) |
39,047 |
|
29,849 |
|
68,896 |
|
(4,067) |
|
(9,599) |
|
(13,666) |
|
(2) The line item "Realized and unrealized gain
on oil derivative instrument" relating to income from the FLNG
Hilli Episeyo Liquefaction Tolling Agreement is split into,
"Realized gain on oil derivative instrument" and "Unrealized
gain/(loss) on oil derivative instrument". The unrealized component
represents a mark-to-market gain of $4.3 million (September 30,
2019: $44.2 million loss) on the oil embedded derivative, which
represents the estimate of expected receipts under the remainder of
the Brent oil linked clause of the Hilli Episeyo Liquefaction
Tolling Agreement. The realized component amounts to $1.1 million
(September 30, 2019: $4.6 million) and represents the income in
relation to the Hilli Episeyo Liquefaction Tolling Agreement
receivable in cash.
Golar reports today 4Q operating income of $68.9
million compared to losses of $13.7 million in 3Q.
Total operating revenues increased from $98.7
million in 3Q to $139.0 million in 4Q, while voyage, charterhire
and commission expenses decreased from $5.6 million to $2.3
million. The improvement in both was largely the result of a
stronger shipping market, but also due to fewer vessel dry-docks
and associated positioning off-hire days.
Revenues from vessel and other operations,
including management fee income, was $84.5 million and, net of
voyage, charterhire and commission expenses, increased by $43.7
million to $82.2 million in 4Q. Assisted by the start-up of new
liquefaction trains, US sanctions on a vessel owner, inventory
building and use of vessels for floating storage, rates continued
to strengthen throughout the first half of the quarter. By late
October, there were no prompt available vessels and TFDE spot rates
peaked at around $130k per day. Rates then trended down with LNG
prices, and the year ended with spot TFDE rates at around $90k per
day. Utilization increased from 65% in 3Q to 90% in 4Q, with full
fleet TCE1 earnings increasing accordingly from $35,200 in 3Q to
$77,000 in 4Q. Despite improving rates, revenue continued to
be negatively impacted by positioning and scheduled dry-docking of
the last two of eight TFDE carriers.
Once again, FLNG Hilli Episeyo generated
operating revenues of $54.5 million, including base tolling fees
and amortization of pre-acceptance amounts recognized.
Vessel operating expenses at $30.8 million in 4Q
were $2.4 million higher than 3Q. Most of the increase is
attributable to costs incurred during one of 2019's two scheduled
FLNG Hilli Episeyo maintenance windows.
At $11.8 million for the quarter, total
administrative expenses were $0.8 million lower than 3Q due to
lower departmental and share option costs.
The Brent Oil linked component of Hilli
Episeyo's fees generates additional annual operating cash flows of
approximately $3 million for every dollar increase in Brent Crude
prices between $60.00 per barrel and the contractual ceiling.
Billing of this component is based on a three-month look-back at
average Brent Crude prices. Lower oil prices led to a $3.5 million
decrease in the realized gain on the oil derivative instrument,
down from $4.6 million in 3Q to $1.1 million in 4Q.
The mark-to-market fair value of the derivative
asset increased by $4.3 million during the quarter, with a
corresponding unrealized gain of the same amount recognized in the
income statement. The fair value increase was driven by an upward
movement in the expected future market price for Brent Oil. The
spot price for Brent Oil increased from $60.78 per barrel on
September 30 to $66.00 on December 31.
Other operating gains and losses included a $1.2
million gain in 4Q following the receipt of further proceeds from a
2018 loss-of-hire claim for Golar Viking (compared to a gain of
$2.8 million in 3Q in respect of the same claim).
Depreciation and amortization at $28.3 million
in 4Q was in line with the previous quarter.
Net Income Summary:
|
2019 |
2019 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Operating income/(loss) |
68,896 |
|
(13,666) |
|
Interest
income |
1,333 |
|
2,709 |
|
Interest
expense |
(14,140) |
|
(23,368) |
|
Losses
on derivative instruments |
(6) |
|
(17,619) |
|
Other
financial items, net |
(1,206) |
|
(978) |
|
Income
taxes |
(369) |
|
(274) |
|
Equity
in net earnings/(losses) of affiliates |
1,831 |
|
(7,761) |
|
Net
income attributable to non-controlling interests |
(31,571) |
|
(21,344) |
|
Net income/(loss) attributable to Golar LNG
Limited |
24,768 |
|
(82,301) |
|
In 4Q, the group generated net income of $24.8
million, compared to a 3Q net loss of $82.3 million. Key items
contributing to this are:
- A reduction in VIE interest expense due to capitalization of
deferred finance charges previously expensed accounts for most of
the $9.2 million decrease in interest expense.
- A loss on the 1.5 million TRS shares repurchased during 4Q was
offset by a gain on the remaining 1.5 million shares due to an
increase in the share price. During 3Q, a loss of $17.6 million was
recorded in respect of the 3.0 million TRS shares outstanding as at
September 30.
- The $1.8 million 4Q equity in net earnings of affiliates
primarily comprised the following:
- A $7.4 million earnings in respect of Golar's 32% share in
Golar Partners;
- A $5.1 million loss in respect of Golar's 50% stake in Golar
Power; and
- A $0.7 million loss in respect of Golar's 22.5% stake in
Avenir.
Net income attributable to non-controlling
interests represents external interests in the Hilli Episeyo and
the finance lease variable interest entities ("VIEs").
Financing and Liquidity:
Golar’s total cash position as at December 31
was $440.6 million (including restricted cash), of which $222.1
million was unrestricted. Included within restricted cash is $65.1
million relating to lessor-owned VIEs, $55.6 million of collateral
in respect of the TRS and $76.0 million relating to the Hilli
Episeyo LC. During the quarter, Perenco and SNH agreed to a
reduction in the Hilli Episeyo LC requirement (with a proportionate
decrease in the Perenco and SNH security). This resulted in the
release of $75 million of restricted cash in November 2019.
During January 2020, the LNG carrier Golar
Viking entered Hudong shipyard for FSRU conversion works.
Upon yard entry, the existing $41.7 million vessel debt facility
was refinanced by a CSSCFL facility that will also be available to
cover conversion costs.
As at December 31, $434 million had been
invested in FLNG Gimi, on a 100% basis. Having satisfied the
initial equity investment threshold during 4Q, drawdowns against
the $700 million debt facility have now commenced. As at 31
December, $130 million had been drawn down. Based on the current
payment schedule, approximately $59 million is expected to be paid
by Golar in 2020.
Included within the $1,070.5 million current
portion of long-term debt and short-term debt on the Balance Sheet
as at December 31 is $793.8 million relating to lessor-owned VIE
subsidiaries that Golar is currently required to consolidate in
connection with 8 sale and leaseback financed vessels, including
the Hilli Episeyo.
Golar has now financed all of its projects under
development and looks forward to substantial increases in
contracted earnings over the next three years. Surplus cash
will be applied to the most attractive use including further growth
investments or share buybacks.
Corporate and Other Matters:
As at December 31, 2019, there were 99.3 million
shares outstanding, excluding the remaining 1.5 million shares
underlying the TRS and a further 0.5 million TRS shares purchased
in January 2016 but not cancelled until February 2020. There were
also 2.7 million outstanding stock options with an average price of
$30.23 and 0.2 million Restricted Stock Units in issue. During 4Q,
the Company purchased 1.5 million of the 3 million shares
underlying the TRS. At a cash cost of $69.5 million, the purchase
was satisfied by $54.7 million of restricted cash set aside as
collateral and $14.8 million of unrestricted cash. The remaining
1.5 million TRS shares were purchased during February. Costing
$70.5 million, $55.6 million was satisfied by the remaining
restricted cash set aside as collateral, with the balance of $14.9
million funded out of unrestricted cash. Thereafter there will be
97.8 million shares outstanding.
Commercial Review
Golar Power (50/50 Golar/Stonepeak
Infrastructure Partners non-consolidated downstream joint
venture):
Barring any unforeseen issues, the Sergipe power
plant is expected to commence commercial operations by the end of
1Q. There have been no significant problems to date, with any
minor issues resolved quickly after identification.
Commissioned and ready for service, the supporting FSRU Nanook is
maintaining 100 bar pressure on the CNG line and the first ship to
ship cargo transfer has been successfully completed. Current
prices for LNG delivered into Brazil are below $3.0/mmbtu. At
this price, power produced by the Sergipe powerplant costs
approximately $22MWh. This creates significant potential for
Golar Power to generate incremental earnings through sale of
merchant power during non-dispatch periods.
Having been awarded a 25-year power purchase
agreement for the construction of a 605MW combined cycle thermal
power plant in Barcarena, efforts are now being made to secure
additional industrial and small-scale users nearby. While the power
project will be the anchor tenant for the FSRU, the economics of
the project will be materially enhanced with additional
users. FSRU selection and FID are expected to take place this
year when many of these discussions should have concluded, allowing
small-scale LNG distribution operations to commence in 2021, well
ahead of the January 2025 power station start-up date. Golar's
share of total capex for the power station, payable between 2022
and 2025, equates to $107 million.
In the State of Santa Catarina, Golar Power has
received key regulatory and environmental licenses for a third FSRU
terminal. An oil major developing a 600MW power plant is expected
to be the anchor tenant, and Golar Power has the option to invest
in the plant. There is also the ability to connect to and market
gas to end users on the Bolivia-Brazil pipeline. Subject to the
receipt of a few remaining licenses and permits, FID is expected by
the end of 2020, and operations will potentially be able to
commence in 2022. Rapid monetization of the Brazil downstream
distribution business together with the reinvestment of cash
generated by the Sergipe project would allow both projects to be
taken forward without recourse to shareholders Golar and
Stonepeak.
Golar Power continues to develop its small-scale
distribution business and has in excess of 100 customers looking to
move from MOUs to binding agreements for quantity and price of LNG
supply. These customers will be supplied from spare capacity on the
FSRU Nanook, capacity on the yet-to-be specified FSRUs expected to
support the Barcarena and Santa Catarina projects and other
terminal agreements currently under discussion. The supply chain to
connect terminals to customers is now being assembled. Golar Power
has agreed to charter a 7,500m3 LNG carrier from affiliate company
Avenir, taken delivery of Iso Containers (for the transportation of
LNG by road or barge) and is now implementing a mobile filling
station concept that will supply LNG-fueled trucks.
On February 18, 2020, Golar Power and BR
Distribuidora announced the formation of a partnership to develop
an LNG distribution business in Brazil. A highly regarded
brand with a nationwide presence serviced via a network of more
than 7,600 fuel stations and 95 bases of supply, operation and
distribution, BR Distribuidora can legitimately claim to be
Brazil's leading fuel distribution company. As with Golar Power, BR
Distribuidora believes that LNG is an innovative and potentially
disruptive solution for the transportation sector in Brazil that
delivers both environmental benefits and important economic gains
for customers seeking cheaper, cleaner and more efficient
alternatives to the fuels currently available. The partnership
between Golar Power and BR Distribuidora foresees the use of the 95
supply, operation and distribution bases to initiate the rollout of
LNG supply to Brazil's transportation and industrial sectors
followed by use of the 7,600 fuel stations to increase coverage
thereafter. A major user of road transport itself, BR
Distribuidora also intends to replace its hired fleet of 5,000
trucks with vehicles that run on LNG.
Golar Power has established a leading position
in Brazil's LNG revolution. As a country of approximately 210
million people with an existing fleet of 2.7 million diesel-fueled
heavy vehicles, the addressable market for the transition to LNG is
substantial.
FLNG:
FLNG Hilli Episeyo continues to achieve 100%
commercial uptime and recently exported its 34th cargo.
The fully funded FLNG Gimi Conversion project
continues in Singapore, where the vessel recently entered its third
of five planned dry-dockings. Approximately 85 Golar personnel and
in excess of 1,500 Keppel employees are now working daily on the
project. While Covid-19 does have the potential to impact the
supply chain, yard operations in Singapore are capably managing the
situation and progress remains on target. Seventy percent
owned FLNG Gimi will service the 20-year contract with BP offshore
Mauritania and Senegal, commencing 4Q 2022.
Project development discussions continue to
progress with other oil majors and national oil companies attracted
by Golar's industry-leading technical and operational track record.
Mindful of the long lead time to FID, followed by a four-year
construction and commissioning period, the quickest a new FLNG
would deliver new LNG to market is around five years from now.
As previously indicated, Golar has evaluated
specific proposals from infrastructure funds for direct investments
in its FLNG assets that would highlight the value created in FLNG
projects. The company has however decided not to pursue these
offers due to a combination of its improved financial position,
long-term cash flow from FLNG projects and the opportunity to
extract additional value and lower-cost financing
post-delivery.
LNG Shipping:
The quarter commenced with LNG prices at around
$5.40/mmbtu, quoted TFDE spot rates of around $100k 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 TFDE rates reaching a 2019 peak of $130k per day in late
October. 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 rates at levels similar to the
start of 2019 ($90k 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 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 are being taken out of
service. Supported by low LNG prices and the waning influence of
destination clauses, the LNG spot and short-term market should also
continue to grow faster than the total market. This, together with
already secured coverage, means that Golar continues to expect
solid results from its shipping operations.
Golar Partners (a non-consolidated affiliate of
Golar LNG):
Aided by an improved performance from LNG
carriers Golar Maria and Golar Mazo, the fleet continued to perform
well, with 4Q adjusted EBITDA1 marginally higher than 3Q despite
the scheduled December downtime of the FSRU Golar Igloo. Further
interest rate swap gains allowed the Partnership to report a $22.5
million increase in net income, up from $7.9 million in 3Q to $30.4
million in 4Q. Distribution coverage1 increased, from 1.18 in
3Q to 1.21 in 4Q.
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 and the Golar Mazo to be withdrawn from warm layup for
a voyage charter. A further two-year charter for the Golar Maria
starting in late 2020 was also secured. The charter includes
options for the charterer to extend by a further 1+1+1 years.
During February, current charterers of the Golar Grand agreed to
extend their May maturing charter by a further year.
During 4Q, Kuwait National Petroleum Co.
("KNPC") awarded the Partnership a two-year contract for the FSRU
Golar Igloo. The contract provides for two years of continued LNG
storage and regasification services in Kuwait for KNPC’s
regasification seasons, the first of which commenced on February
24, 2020. This contract may be further extended by KNPC for a
further year through to December 2022. Modifications
necessary to increase both the regas capacity and operational
efficiency of FSRU Golar Igloo are now complete. 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 KNPC.
Lower global LNG prices have increased the
relative attractiveness of FSRUs, enabling new markets to
participate in the LNG fuel arbitrage and lower their cost of
energy. This is expected to have a positive impact on future
demand for FSRUs.
The Partnership continues to evaluate its
structure and strategy in order to maximize long-term shareholder
value while 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. 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.
Non-GAAP measures
In addition to disclosing financial results in
accordance with U.S. generally accepted accounting principles (US
GAAP), this earnings release and the associated investor
presentation contains references to the non-GAAP financial measures
which are included in the table below. We believe these non-GAAP
financial measures provide investors with useful supplemental
information about the financial performance of our business, enable
comparison of financial results between periods where certain items
may vary independent of business performance, and allow for greater
transparency with respect to key metrics used by management in
operating our business and measuring our performance.
These non-GAAP financial measures should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP. Non-GAAP measures are not
uniformly defined by all companies, and may not be comparable with
similarly titled measures and disclosures used by other companies.
The reconciliations from these results should be carefully
evaluated.
Non-GAAP measure |
Closest equivalent US GAAP measure |
Adjustments to reconcile to primary financial statements
prepared under US GAAP |
Rationale for adjustments |
Performance measures |
Adjusted EBITDA |
Net (loss)/income attributable to Golar LNG Limited |
+/- Net financial expense + Other non-operating expenses +/- Income
taxes +/- Equity in net (losses) income of affiliates +/- Net
income attributable to non-controlling interests +/- Unrealized
loss/(gain) on oil derivative instrument + Depreciation and
amortisation + Impairment of long-term assets |
Increases the comparability of total business performance
from period to period and against the performance of other
companies by excluding the results of our equity investments,
removing the impact of unrealized movements on embedded derivatives
and removing the impact of depreciation, financing and tax
items. |
LTM (last twelve months) adjusted EBITDA |
Net (loss)/income attributable to Golar LNG Limited |
The sum of the last four quarters adjusted EBITDA (defined
above) |
Same as adjusted EBITDA. The 12 month trailing metric
removes the impact of seasonality on our results. |
LTM (last twelve months) further adjusted
EBITDA |
Net (loss)/income attributable to Golar LNG Limited |
Same as LTM Adjusted EBITDA +/- Non-recurring items - Golar
Partners’ share of Hilli adjusted EBITDA |
Same as LTM adjusted EBITDA. Material
non-recurring items excluded to further aid comparability of
financial performance. Removal of Golar LNG
Partners 50% interest in the Hilli Episeyo common
units, to show the amount of expected EBITDA that could be
converted into operating cash flows which we will retain. |
Average daily TCE |
Total Operating revenues |
-Liquefaction services revenue -Vessel and other management fees
-Voyage and commission expenses The above total is then divided by
calendar days less scheduled off-hire days. |
Measure of the average daily net revenue performance of a
vessel. Standard shipping industry performance measure used
primarily to compare period-to-period changes in the vessel’s net
revenue performance despite changes in the mix of charter types
(i.e. spot charters, time charters and bareboat charters) under
which the vessel may be employed between the periods. Assists
management in making decisions regarding the deployment and
utilization of its fleet and in evaluating financial
performance. |
Liquidity measures |
Contractual debt |
Total debt (current and non-current), net of deferred finance
charges |
+ VIE Consolidation Adjustment + Deferred Finance Charges |
We consolidate a number of lessor VIEs for our sale and
leaseback facilities. This means that on consolidation, our
contractual debt is eliminated and replaced with the lessor VIEs’
debt. Contractual debt represents our debt obligations under
our various financing arrangements before consolidating the lessor
VIEs. The measure enables investors and users of our
financial statements to assess our liquidity and the split of our
debt (current and non-current) based on our underlying contractual
obligations. Furthermore, it aids comparability with
competitors. |
Adjusted net debt |
Net debt based on GAAP measures: Total debt (current and
non-current), net of deferred finance charges - Cash and cash
equivalents - Restricted cash and short-term deposits (current and
non-current) |
Net debt based on GAAP measures + VIE Restricted cash + VIE
consolidation adjustment + Deferred finance charges + TRS
Restricted Cash |
In consolidating the lessor VIEs, we also consolidate their
cash position. We reflect the lessor VIEs’ cash as “restricted
cash” on our Consolidated Balance Sheet as we have no control or
ability to access this cash. In calculating our adjusted net debt
based on our contractual obligation, we remove the lessor VIEs’
restricted cash. We have elected an accounting policy to show
margin cash posted against our derivative positions separately to
the associated MTM liability. The most significant impact of this
accounting policy is the reflection of the TRS margin cash and the
MTM liability gross on our Consolidated Balance Sheet. We remove
the TRS restricted cash in calculating adjusted net debt as this
cash will be used to settle the MTM liability and therefore is not
cash that can be used to satisfy our contractual obligations or
used elsewhere in the business. Management believe that
these adjustments enable investors and users of our financial
statements to assess our liquidity based on our underlying
contractual obligations and aids comparability with our
competitors. |
Reconciliations - Performance Measures
(Adjusted EBITDA)
|
2019 |
2019 |
2019 |
2019 |
2018 |
2018 |
2018 |
2018 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Apr-Jun |
Jan-Mar |
Oct-Dec |
Jul-Sep |
Apr-Jun |
Jan-Mar |
Net income/(loss) attributable to Golar LNG
Limited |
24,768 |
|
(82,301) |
|
(112,682) |
|
(41,741) |
|
(312,957) |
|
66,212 |
|
36,319 |
|
(21,002) |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Net financial expense |
14,019 |
|
39,256 |
|
37,804 |
|
33,244 |
|
52,653 |
|
37,770 |
|
20,083 |
|
13,291 |
|
Income taxes |
369 |
|
274 |
|
176 |
|
205 |
|
627 |
|
156 |
|
490 |
|
(6) |
|
Equity in net (gains)/losses of affiliates |
(1,831) |
|
7,761 |
|
26,970 |
|
12,899 |
|
154,089 |
|
(2,668) |
|
4,674 |
|
1,541 |
|
Net income attributable to non-controlling interests |
31,571 |
|
21,344 |
|
24,297 |
|
24,257 |
|
2,770 |
|
31,000 |
|
16,839 |
|
12,605 |
|
Operating income/(loss) |
68,896 |
|
(13,666) |
|
(23,435) |
|
28,864 |
|
(102,818) |
|
132,470 |
|
78,405 |
|
6,429 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Unrealized (gain)/loss on oil derivative instrument |
(4,330) |
|
44,170 |
|
27,630 |
|
(28,380) |
|
195,740 |
|
(77,470) |
|
(94,700) |
|
(13,600) |
|
Depreciation and amortization |
28,321 |
|
28,428 |
|
28,121 |
|
28,163 |
|
28,295 |
|
28,528 |
|
20,457 |
|
16,409 |
|
Impairment of long-term assets |
501 |
|
— |
|
7,347 |
|
34,250 |
|
— |
|
— |
|
— |
|
— |
|
Adjusted EBITDA |
93,388 |
|
58,932 |
|
39,663 |
|
62,897 |
|
121,217 |
|
83,528 |
|
4,162 |
|
9,238 |
|
|
|
|
|
|
|
|
|
|
Last Twelve Months Adjusted EBITDA |
254,880 |
|
— |
|
— |
|
— |
|
218,145 |
|
— |
|
— |
|
— |
|
Last Twelve Months One-Off Gains and Losses |
(6,298) |
|
— |
|
— |
|
— |
|
(36,722) |
|
— |
|
— |
|
— |
|
Last Twelve Months Golar Partners' share of Hilli Adjusted
EBITDA |
(79,708) |
|
— |
|
— |
|
— |
|
(38,180) |
|
— |
|
— |
|
— |
|
Last Twelve Months Further Adjusted EBITDA |
168,874 |
|
— |
|
— |
|
— |
|
143,243 |
|
— |
|
— |
|
— |
|
Reconciliations - Performance Measures
(Average Daily TCE Rate)
|
2019 |
2019 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Total operating revenues |
139,048 |
|
98,670 |
|
Less: Liquefaction services revenue |
(54,524) |
|
(54,524) |
|
Less: Vessel and other management fees |
(5,949) |
|
(5,345) |
|
Time and voyage charter revenues |
78,575 |
|
38,801 |
|
Less: Voyage and commission expenses |
(2,311) |
|
(5,603) |
|
|
76,264 |
|
33,198 |
|
Calendar days less scheduled off-hire days |
991 |
|
943 |
|
Average daily TCE rate (to the closest $100) |
77,000 |
|
35,200 |
|
Reconciliations - Liquidity
Measures
(in thousands of $) |
December 31, 2019 |
December 31, 2018 |
September 30, 2019 |
Net debt as calculated by GAAP |
|
|
|
Total debt (current and non-current) net of deferred finance
charges |
2,559,882 |
|
2,565,359 |
|
2,554,392 |
|
Less |
|
|
|
Cash and cash equivalents |
(222,123) |
|
(217,835) |
|
(250,153) |
|
Restricted cash and short-term deposits - current and non-current
portion |
(218,440) |
|
(486,426) |
|
(375,276) |
|
Net debt as calculated by GAAP |
2,119,319 |
|
1,861,098 |
|
1,928,963 |
|
VIE consolidation adjustment |
195,937 |
|
87,045 |
|
139,841 |
|
VIE restricted cash |
65,098 |
|
176,428 |
|
104,461 |
|
Deferred finance charges |
39,020 |
|
21,546 |
|
12,747 |
|
TRS restricted cash (1) |
55,573 |
|
82,863 |
|
108,920 |
|
Total Adjusted Net Debt |
2,474,947 |
|
2,228,980 |
|
2,294,932 |
|
Less: Golar Partners' share of the Hilli debt |
(391,961) |
|
(448,990) |
|
(411,494) |
|
Less: Keppel's share of the Gimi debt |
(39,000) |
|
— |
|
— |
|
GLNG's share of Adjusted Net Debt |
2,043,986 |
|
1,779,990 |
|
1,883,438 |
|
(1) Restricted cash relating to the share
repurchase forward swap refers to the collateral required by the
bank with whom we entered into a total return equity swap.
(in thousands of $) |
December 31, 2019 |
December 31, 2018 |
September 30, 2019 |
Total debt (current and non-current) net of deferred finance
charges |
2,559,882 |
|
2,565,359 |
|
2,554,392 |
|
VIE consolidation adjustments |
195,937 |
|
87,045 |
|
139,841 |
|
Deferred finance charges |
39,020 |
|
21,546 |
|
12,747 |
|
Total Contractual Debt |
2,794,839 |
|
2,673,950 |
|
2,706,980 |
|
Less: Golar Partners' share of the Hilli debt |
(422,250) |
|
(455,250) |
|
(430,500) |
|
Less: Keppel's share of the Gimi debt |
(39,000) |
|
— |
|
— |
|
GLNG's share of Contractual Debt |
2,333,589 |
|
2,218,700 |
|
2,276,480 |
|
Please see Appendix A for a capital repayment
profile for Golar’s contractual debt.
Non-US GAAP Measures Used in
Forecasting
Contract Earnings Backlog:
Contract earnings backlog represents Golar's share of contracted
fee income for executed contracts less forecasted operating
expenses for these contracts. In calculating forecasted operating
expenditure, management has assumed that where there is an
Operating Services Agreement the amount receivable under the
services agreement will cover the associated operating costs. For
contracts which do not have a separate Operating Services
Agreement, management has made an assumption about operating costs
based on the current run rate. The only material application of
this methodology was to the Hilli Episeyo Earnings backlog where we
assumed operating costs of approximately $120,000 per day.
For consolidated subsidiaries where we do not
own 100% of the share capital, management has only included our
proportionate share of contract earnings. The material application
of this assumption was to Gimi (70% ownership) and Hilli Episeyo
(44.6% of the Common Unit entitlement). No contracted fee income
was included for Hilli T3 or the oil derivative.
For equity accounted investments (the
Partnership and Golar Power) we have included our proportionate
share of their contract earnings backlog under the same assumptions
that we have applied to our consolidated subsidiaries. In the
future when our contract earnings backlog actualizes, we will show
our share of their earnings net of interest and tax in one line in
the Income Statement "Equity in net earnings/(losses) of
affiliates". The Golar Power numbers are calculated based on an
exchange rate of 3.7BRL:1USD.
Management has not forecasted net income for
these aforementioned initiatives as information to provide such a
forward-looking estimate is not available without unreasonable
effort. Contract earnings backlog is not intended to represent
EBITDA or future cashflows that will be generated from these
projects nor is it intended to represent the dividend income that
will be payable to Golar from our equity investments. This measure
should be seen as a supplement to and not a substitute for our US
GAAP measures of performance.
Gross Contract Earnings
Backlog: Gross contract earnings backlog represents each
Golar entity's share of contracted fee income for executed
contracts less forecasted operating expenses for these contracts.
In calculating the forecasted operating expenditure, management has
applied the same methodology in preparing the "Contract Earnings
Backlog" measure above. Management has not forecasted net income
for these initiatives as information to provide such a
forward-looking estimate is not available without unreasonable
effort. Contract earnings backlog is not intended to represent
EBITDA or future cash flows that will be generated from these
projects nor is it intended to represent the dividend income that
will be payable to Golar from our equity investments. This measure
should be seen as a supplement to and not a substitute for our US
GAAP measures of performance.
Distribution coverage: As
defined in Golar LNG Partners LP most recent quarterly earnings
release (Form 6-K), section "Appendix A - Non-GAAP Financial
Measures and Definitions".
Revenue Backlog: Revenue
Backlog is defined as the contracted daily charter rate for each
vessel multiplied by the number of scheduled hire days for the
remaining contract term. Revenue backlog is not intended to
represent EBITDA or future cashflows that will be generated from
these contracts. This measure should be seen as a supplement and
not a substitute for our US GAAP measures of performance.
Forward Looking Statements
This press release contains forward-looking
statements (as defined in Section 21E of the Securities Exchange
Act of 1934, as amended) which reflects management’s current
expectations, estimates and projections about its operations. All
statements, other than statements of historical facts, that address
activities and events that will, should, could or may occur in the
future are forward-looking statements. Words such as “may,”
“could,” “should,” “would,” "will," “expect,” “plan,” “anticipate,”
“intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,”
“potential,” “continue,” or the negative of these terms and similar
expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
other factors, some of which are beyond our 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. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. Unless legally required, Golar undertakes no
obligation to update publicly any forward-looking statements
whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to
differ materially from those in the forward-looking statements
are:
- our inability and that of our counterparty to meet our
respective obligations under the Lease and Operate agreement
entered into in connection with the BP Greater Tortue / Ahmeyim
Project (“Gimi GTA Project”);
- challenges by authorities to the tax benefits we previously
obtained under certain of our leasing agreements;
- changes in our ability to retrofit vessels as FSRUs or FLNGs
and in our ability to obtain financing for such conversions on
acceptable terms or at all;
- changes in our ability to obtain additional financing on
acceptable terms or at all;
- our inability to complete the shipping spin off;
- 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;
- Golar Power's ability to successfully commission the Sergipe
power station project and related FSRU contract and to execute its
downstream LNG distribution plans;
- changes in our relationship with Golar Partners, Golar Power or
Avenir and the sustainability of any distributions they pay to
us;
- failure of our contract counterparties, including our joint
venture co-owners, to comply with their agreements with us or other
key project stakeholders;
- changes in liquefied natural gas ("LNG"), carrier, floating
storage and regasification unit ("FSRU"), or floating liquefaction
natural gas vessel ("FLNG"), or small-scale LNG market trends,
including charter rates, vessel values or technological
advancements;
- our ability to close potential future sales of additional
equity interests in our vessels, including the Hilli Episeyo and
FLNG Gimi on a timely basis or at all and our ability to contract
the full utilization of the Hilli Episeyo or other vessels and the
benefits that may to accrue to us as the result of any such
modifications;
- changes in the supply of or demand for LNG carriers, FSRUs,
FLNGs or small-scale LNG infrastructure;
- a material decline or prolonged weakness in rates for LNG
carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
- changes in the performance of the pool in which certain of our
vessels operate and the performance of our joint ventures;
- changes in trading patterns that affect the opportunities for
the profitable operation of LNG carriers, FSRUs, FLNGs or
small-scale LNG infrastructure;
- changes in the supply of or demand for LNG or LNG carried by
sea;
- changes in commodity prices;
- changes in the supply of or demand for natural gas generally or
in particular regions;
- changes in our relationships with our counterparties, including
our major chartering parties;
- a decline or continuing weakness in the global financial
markets;
- changes in general domestic and international political
conditions, particularly where we operate;
- changes in the availability of vessels to purchase and in the
time it takes to construct new vessels;
- failures of shipyards to comply with delivery schedules or
performance specifications on a timely basis or at all;
- our ability to integrate and realize the benefits of
acquisitions;
- changes in our ability to sell vessels to Golar Partners or
Golar Power;
- changes to rules and regulations applicable to LNG carriers,
FSRUs, FLNGs or other parts of the LNG supply chain;
- our inability to achieve successful utilization of our expanded
fleet or inability to expand beyond the carriage of LNG and
provision of FSRUs, FLNGs, and small-scale LNG infrastructure
particularly through our innovative FLNG strategy and our joint
ventures;
- actions taken by regulatory authorities that may prohibit the
access of LNG carriers, FSRUs, FLNGs or small-scale LNG vessels to
various ports;
- increases in costs, including, among other things, wages,
insurance, provisions, repairs and maintenance; and
- other factors listed from time to time in registration
statements, reports or other materials that we have filed with or
furnished to the Securities and Exchange Commission, or the
Commission, including our most recent annual report on Form
20-F.
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.
February 25, 2020The Board of DirectorsGolar LNG
LimitedHamilton, Bermuda
Investor Questions: +44 207 063
7900Iain Ross - CEOGraham Robjohns - CFO and Deputy
CEOStuart Buchanan - Head of Investor Relations
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