Energia
Interim results for the period ended September 30, 2022
FLNG operations: Distributable Adjusted EBITDA from FLNG Hilli increased by $1.9 million from $92.5 million in Q2 2022 to $94.4 million in Q3, of which Golar's share was $64.1 million, compared to $62.5 million in Q2. FLNG Hilli's scheduled maintenance window during the quarter was extended by several days as a result of unscheduled maintenance work. Accruals for overproduction during Q1 and Q2 2022 amounting to $14.4 million were reversed and an estimated $0.9 million of revenue reduction due to demurrage delays was incurred in Q3. After receiving instruction that FLNG Hilli should continue to produce 0.2MTPA of TTF linked production from 2023 until the end of the current contract in July 2026, Golar entered into three swap transactions collectively securing, subject to vessel availability, around $250 million of incremental earnings attributable to Golar:
Including the Brent oil forward curve for 2023 ($88/bbl), the hedged TTF exposure, and the fixed tariff, Golar's share of Distributable Adjusted EBITDA from FLNG Hilli is expected to be approximately $295 million in 2023. Golar's share of forecast 2023 total annual debt service for FLNG Hilli's contractual debt is approximately $50 million (debt amortization of approximately $29 million and interest of approximately $21 million). This should therefore generate free cash to Golar of approximately $245 million.
FLNG Gimi construction: Conversion of FLNG Gimi for its 20-year contract with BP scheduled to commence in Q4 2023 was 90% technically complete on November 15, 2022, on track for a 1H 2023 sail away. Pre-commissioning of equipment has commenced. Once commissioned and delivered to the customer in Q4 2023, FLNG Gimi is expected to unlock around $3 billion of Earnings Backlog to Golar, equivalent to $151 million in annual Adjusted EBITDA .
FLNG business development: Golar continues to experience strong customer engagement for new FLNG projects. This includes working with an upstream company for a potential integrated FLNG project, and paid development agreements, one with a supermajor that is exploring FLNG for a proven large gas reserve, and another with an independent E&P company. Under the development agreements both parties commit to deliver a defined scope of work within set deadlines to progress potential new FLNG opportunities and agree on key steps to reach Final Investment Decisions.
We believe that securing attractive delivery of our next FLNG unit will increase Golar's ability to drive value with prospective FLNG clients.
On the back of a growing opportunity set for new FLNG growth projects, and noting the premium available to providers for early delivery of liquefaction solutions, Golar has placed orders for long-lead items targeted for a 3.5MTPA Mark II FLNG, that can also be interchangeably used on our other FLNG designs. Representing a total commitment of approximately $300 million, ordering of these long-lead items, primarily comprised of compressors, gas turbines, cold boxes and heat recovery steam generators, puts Golar in a position to deliver an FLNG during 2025.
FSRU: Following the sale of FSRU Tundra to Snam in May 2022, Golar agreed to charter the vessel back from Snam until November 2022. Hire received from sub-chartering the vessel to a third party, net of operating costs and hire paid to Snam, amounted to $3.1 million in Q3, recorded under Net income from discontinued operations. Golar also entered into a services agreement to assist Snam with drydocking, site commissioning and hook-up. The total scope of the upgrades to Tundra is expected to amount to $23.5 million between Q3 2022 and 1H 2023, including an administrative fee to Golar. $5.1 million of the total services amount was recognized in Q3.
Prior to receipt of a Notice-to-Proceed to convert the Golar Arctic into a FSRU followed by its sale to Snam as a converted FSRU, the vessel remains under Golar's ownership and continues to trade as a carrier. During the quarter Golar secured a 12-month charter commencing mid-September which is expected to generate around $16.0 million of annual Adjusted EBITDA .
Financial Summary
Q3 Highlights and recent events
Financial and corporate:
FLNG:
Financial Review
Business Performance:
(2) The line item “Realized and unrealized gain on oil and gas derivative instruments” in the Condensed Consolidated Statements of Operations relates to income from the Hilli Liquefaction Tolling Agreement (“LTA”) and the natural gas derivative which is split into: “Realized gain on oil and gas derivative instruments” and “Unrealized gain/(loss) on oil and gas derivative instruments”.
The realized component comprised (i) Brent oil linked fees of $32.8 million (June 30, 2022: $32.6 million), (ii) TTF-linked proceeds of $45.2 million (June 30, 2022: $29.4 million) and (iii) commodity swap expense of $20.9 million (June 30, 2022: $7.0 million) and represents the contracted amounts in relation to the Hilli LTA receivable in cash.
(3) The line item "Other operating income/(losses)” in the Condensed Consolidated Statements of Operations relates to accrued billing in relation to overproduction of the contracted liquefaction tonnage of 1.4 million tons. This includes a $13.8 million expense (June 30, 2022: $10.2 million income) as a result of Hilli's production not expected to exceed the contracted liquefaction tonnage due to its extended maintenance window.
Golar reports today Q3 net income attributable to Golar of $141.1 million and Adjusted EBITDA of $85.2 million.
The Brent oil linked component of FLNG Hilli's fees generates additional annual operating cash flows of approximately $3.1 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. A $32.8 million realized gain on the oil derivative instrument was recorded in Q3, in line with the $32.6 million realized in Q2. Golar has an effective 89.1% interest in these earnings. A Q3 realized gain of $45.2 million was also recognized in respect of fees for the TTF linked production, up from the $29.4 million realized in Q2. Golar has an effective 86.9% interest in these earnings. Offsetting this was a $20.9 million Q3 realized loss (100% of which is attributable to Golar) on the hedged component of the quarter's TTF linked earnings, up on the $7.0 million realized loss recorded in Q2. Collectively a $57.0 million Q3 realized gain on oil and gas derivative instruments was recognized as a result.
The mark-to-market fair value of the FLNG Hilli Brent oil linked derivative asset decreased by $133.1 million during the quarter, with a corresponding unrealized loss of the same amount recognized in the income statement. The mark-to-market fair value of the FLNG Hilli TTF natural gas derivative asset increased by $114.7 million during the quarter with a corresponding unrealized gain of the same amount recognized in the income statement. A $30.7 million unrealized gain in respect of the hedged portion of Q3 2022 TTF linked FLNG Hilli production was also recognized during the quarter. Collectively this therefore resulted in a $12.4 million Q3 unrealized gain on oil and gas derivative instruments.
Following an extended maintenance window during the quarter and upstream infrastructure limits to the amount of feedgas that can be made available for overproduction in Q4, FLNG Hilli's 2022 production is not expected to exceed 1.4 million tons of LNG. As a result, fees accrued for overproduction during Q1 and Q2 amounting to $14.4 million were reversed in Q3. Of this, $13.8 million is classified under Other operating losses, with the remaining $0.6 million charged to Liquefaction services revenue. An estimated $0.9 million of revenue reduction due to demurrage delays was also incurred in Q3 as a result.
An increase in the NFE share price between July 1 and September 30 resulted in the recognition of a Q3 unrealized mark-to-market gain of $51.4 million on Golar's 12.4 million NFE shares in Other non-operating income. The fair value of these shares was $43.71 per share as of September 30, 2022. Together with $1.2 million of dividend income from NFE, this collectively contributed to most of the $52.7 million of Other non-operating income during the quarter. Subsequent to the quarter end, Golar sold 6.3 million of its NFE shares. This is expected to result in a Q4 2022 realized mark-to-market gain on listed equity securities of approximately $56.7 million. Sale of the 8.0 million CoolCo shares on November 2, 2022 is expected to generate a gain of approximately $7.0 million, excluding fees.
Balance Sheet and Liquidity:
As of September 30, 2022 Golar had $498.2 million of cash and cash equivalents and $130.9 million of restricted cash, with the quarterly decrease in cash and cash equivalents and increase in restricted cash largely attributable to $38.5 million of collateral posted for guarantees in respect of the Golar Arctic FSRU conversion contract with Snam. Of the $130.9 million of restricted cash, $17.5 million is also attributable to the FLNG Hilli lessor-owned VIE. Total Golar Cash therefore amounts to $611.6 million, comprised of $498.2 million of cash and cash equivalents and $113.4 million of restricted cash attributable to Golar. Assuming this remains unchanged from September 30, 2022 and the $430.0 million of net proceeds from the subsequent sale of listed securities is taken into consideration, Total Golar Cash increases to $1.04 billion on November 15, 2022. Golar has cancelled the existing undrawn $200.0 million Revolving Credit Facility that was secured by our NFE shares.
Within the $354.3 million current portion of long-term debt and short-term debt as at September 30, 2022 is $347.1 million in respect of the FLNG Hilli lessor-owned VIE subsidiary that Golar is required to consolidate. Golar's share of Contractual Debt amounts to $993.1 million. Net of Total Golar Cash of $611.6 million, this falls to around $381.5 million. Inclusive of the $430.0 million of net proceeds from listed securities sold subsequent to the quarter end, this becomes net cash of $48.5 million. If the value of remaining listed securities held as of November 15, 2022 is taken into consideration Golar has net cash of around $451.5 million.
Inclusive of $14.2 million of capitalized interest, $40.1 million was invested in FLNG
Gimi during the quarter, increasing the total FLNG Gimi Asset under development balance as at September 30, 2022 to $1.108 billion. Of this, $535.0 million had been drawn against the $700 million debt facility. Both the investment and debt drawn to date are reported on a 100% basis. Golar's share of remaining capital expenditure to be funded out of equity and cash from commissioning hire and operations, net of the Company's share of remaining undrawn debt amounts to $205.3 million.
Corporate and Other Matters:
As at September 30, 2022, Golar had 107.5 million shares issued and outstanding. There were also 1.0 million outstanding stock options with an average price of $15.41, 0.2 million unvested restricted stock units, and 0.1 million unvested performance stock units awarded. Of the initial $50.0 million approved share buyback scheme, $5.2 million remains available for further repurchases. The Annual General Meeting was held on August 10, 2022.
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.
Definitions:
FSRU: Floating Storage Regasification Unit
FLNG: Floating Liquefaction Natural Gas
Reconciliations - Liquidity Measures
Contractual Debt
Please see Appendix A for a capital repayment profile for Golar's contractual debt.
Total Golar Cash
Total Golar Cash and Listed Securities
Non-US GAAP Measures Used in Forecasting
Earnings Backlog: Earnings backlog represents the 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, therefore revenue from operating services agreements is excluded.
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 “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “will,” “may,” “should,” “expect,” “could,” “would,” “predict,” “propose,” “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:
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.
Responsibility Statement
We confirm that, to the best of our knowledge, the interim consolidated financial statements for the nine months ended September 30, 2022, which have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) give a true and fair view of the Company's consolidated assets, liabilities, financial position and results of operations. To the best of our knowledge, the interim report for the nine months ended September 30, 2022 includes a fair review of important events that have occurred during the period and their impact on the interim consolidated financial statements, the principal risks and uncertainties for the remaining period of 2022, and major related party transactions.
November 16, 2022
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Investor Questions: +44 207 063 7900
Karl Fredrik Staubo - CEO
Eduardo Maranhão - CFO
Stuart Buchanan - Head of Investor Relations
Tor Olav Trøim (Chairman of the Board)
Dan Rabun (Director)
Thorleif Egeli (Director)
Carl Steen (Director)
Niels Stolt-Nielsen (Director)
Lori Wheeler Naess (Director)
Georgina Sousa (Director)
This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act
Attachment
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