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Norway's Golar LNG Limited $GLNG reported better than expected third quarter earnings Monday. Fleet utilization increased from 62% in 2Q to 86% in the quarter as LNG production increased.


Golar FLNG Hilli

Golar LNG carrier Hilli floating liquefaction vessel (FLNGV). in Singapore Habour

This is just the world's second floating LNG project. The trading arm of Russia’s Gazprom has purchased the entire 1.2 million ton per annum output from Golar’s FLNG platform, the Hilli Episeyo, for eight years.

Golar LNG Limited NASDAQ: $GLNG Reported Earnings Before Open Monday

 Net Income of $66.2 Million on Revenue of $123.10 Million

Golar LNG (NASDAQ: GLNG) reported Q3 earnings with revenue of $123.1 million ahead of the consensus estimate of $89.63 million with net income of $66.2 million. Adjusted EBITDA was $83.5 million excluding $77.5 million of unrealized Brent oil linked mark-to-market derivative instrument income. Net financial expenses of $37.8 million including mark-to-market derivatives related to interest and equity swaps of $10.7 million.

Golar LNG Limited NASDAQ: $GLNG

Market Reaction > Lunch $29.00 ▲ 0.35 (+1.22%)

Highlights

  • Completed the sale of initial equity interest in Golar Hilli LLC to Golar LNG Partners LP ("Golar Partners" or the "Partnership").
  • Joint venture Golar Power Limited ("Golar Power") closed $235.5 million financing facility for FSRU Golar Nanook and took delivery of vessel.
  • Shipping market improvement continues. Expected 4Q 2018 TCE1 based on fixtures to date in range of $70,000 - $80,000 for all ships and $85,000 - $95,000 for TFDE vessels.
  • The Board approved an increase in the quarterly dividend to $0.15 cents per share in light of a solid cash position, a significantly improved shipping market and the successful startup of Hilli Episeyo.
  • The shipping fleet records Time Charter Equivalent1 ("TCE") earnings of $41,200 per day ($48,100 for TFDE vessels and $11,000 for steam vessels).
  • Rising LNG production and ton miles together with a seasonal increase in trading activity absorbed vessels resulting in improving utilization and increasing charter rates.
  • Fleet utilization increased from 62% in 2Q to 86% in 3Q.
  • Daily TCE1 earnings increased from $19,600 in 2Q to $41,200 in 3Q.
  • FLNG Hilli Episeyo completed its first full quarter of operations. Operating revenues of $54.5 million include base tolling fees and amortization of pre-acceptance amounts recognized.
  • Assuming uninterrupted operations, future quarterly operating revenues should be consistent at around the $54 million level recorded in 3Q.

Outlook

FLNG Hilli Episeyo, operational for its first full quarter, delivered consolidated Adjusted EBITDA1 exclusive of unrealized oil derivative related income of $52.3 million. Charterers Perenco and SNH are pleased with the vessel's performance and discussions have commenced with Perenco on the utilization of the vessel's spare capacity. 4

Golar anticipates being able to have some clarity of when the additional capacity will be taken up around the end of 4Q 2018. The Company also remains focused on being able to support BP on their Tortue project, and developing its pipeline of other FLNG opportunities. Illustrative economics of shipping rate scenarios that only a few months ago may have appeared ambitious are beginning to materialize. 4

Third quarter Adjusted EBITDA1 from vessel and other operations amounted to $38.7 million. For every $10,000 increase in TCE, Adjusted EBITDA1 from ships trading in the spot market will increase by approximately $40 million on an annual basis. 4Q TCE1 in the range of $70,000 - $80,000 is expected based on current fixtures which includes TFDE vessels in the range of $85,000 - $95,000. A strengthening market together with the resumption of trading by the Golar Viking during December are expected to result in further improvements to Adjusted EBITDA1 and net cash generation in 1Q 2019.

Golar Power is now less than 14 months away from commencing regas and power generation operations at its Sergipe power plant. Upon commencement in January 2020 and assuming no dispatch, this is expected to generate approximately $99 million in annual run rate Adjusted EBITDA1 based on a BRL/USD rate of 3.7, and approximately $45 million after the deduction of debt service. 

The Board is particularly pleased with the way management is executing complex projects using new technology in a cost effective and efficient manner. The strong operational track record from these projects gives Golar unique credibility and a market leading position in the fast growing integrated LNG market. 

A prolonged period of investment of around $4 billion worth of LNG infrastructure, including carriers, FSRUs, Hilli Episeyo and the Sergipe project is drawing to a close. Although it has been a challenge in the low oil price environment to carry this through without dilution to equity holders, concepts and investments are finally being transformed into operations and cash flows.

Commencement of Hilli Episeyo, a resurgent shipping market and the pending start-up of Sergipe have transformed Golar into a fully financed cash generative company. It is the Board's intention to use part of the cash flow to grow the Company further, and to increase the distribution to the Company's shareholders.

Hill Episeyo First Production

In Q42017 Golar LNG confirmed first production of LNG had successfully commenced from Hilli Episeyo offshore Cameroon and that the Golar Gandria has been removed from layup and is now at Keppel Shipyard in Singapore.  The deal was agreed in late 2015 between Golar, Gazprom Marketing and Trading, Cameroon’s state-run Societe Nationale des Hydrocarbures and Perenco Cameroon. First LNG deliveries were initially targeted for the second half of 2017. FLNG Hilli Episeyo maintains 100% commercial uptime following acceptance. Export of the vessel's 10th LNG cargo currently in progress.

The first ever FLNG project came on stream in Malaysia last year, developed by Petronas, but the project has operated at a fraction of its production capacity

FLNG

FLNG Hilli Episeyo arrived in Cameroon in late November 2017. Customs clearance, positioning, mooring hook-up and connection to the riser and umbilicals followed shortly thereafter. In early December 2017, a Notice of Readiness, which triggers the commissioning process, was tendered to Perenco and SNH. A ship-to-ship transfer of cool down LNG with the Golar Bear was completed in mid-December 2017, followed by the introduction of feed gas from the onshore processing plant.

Full commissioning of the gas treatment systems is now substantially complete and they are running satisfactorily. Commissioning of the refrigerant trains continued through to February 2018 and first LNG production commenced on March 11 2018. Although Golar reiterates the importance of taking the time it needs to safely commission the vessel, at this time final commissioning, followed by acceptance testing, remains on track for mid-April 2018. Vessel acceptance will trigger the final drawdown against the $960 million CSSCL facility. Commissioning hire at a reduced toll rate began to accrue from January 4, 2018: $9.8 million has now been received in respect of January 2018 and a further $11.1 million will shortly be billed in respect of February 2018.

Source: Criterion Research, Golar LNG

From The TradersCommunity News Desk

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