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Norway's Golar LNG Limited reported first quarter earnings Tuesday.with higher revenue than expected. $GLNG sees higher fleet utilization  ahead as LNG production increases. The company is proceeding with the TFDE LNG Carrier Spinoff.


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 Tuesday

Net Income of $28.9 Million on Revenue of $114.3M Beat $107.85 Million Expected

Golar LNG (NASDAQ: GLNG) reported Q1 earnings whereby adjusted EBITDA decreased from $121.2 million in 4Q 2018 to $62.9 million in 1Q 2019. After recognition of $28.4 million of unrealized Brent oil linked mark-to-market derivative instrument gains and a $34.3 million impairment charge in relation to the Golar Viking, Golar reported operating income of $28.9 million for 1Q 2019.

Analysts were predicting Golar LNG to report a loss of 14 cents per share on revenue of $107.85 million. Golar LNG EPS in the same period a year ago was a loss of 21 cents. Revenue was $66.19 million.  

Total operating revenues decreased from $181.9 million in 4Q 2018 to $114.3 million in 1Q 2019. Net of financing expenses, equity in net losses of affiliates, taxes and net income attributable to non-controlling interests, Golar reported a 1Q 2019 net loss of $41.7 million.

Golar LNG Limited NASDAQ: $GLNG

Market Reaction > Lunch $19.94 +0.87 (+4.56%)

Highlights

  • Gross contract earnings backlog1 increased from $7.3 billion to $10.3 billion.
  • Golar and BP executed contracts for the provision of an FLNG vessel to service the Greater Tortue/Ahmeyim project offshore Mauritania and Senegal for 20 years.
  • Golar received a Final Notice to Proceed with the conversion, sale and subsequent operation of Golar Viking as a FSRU in Croatia.
  • The sale is expected to generate net positive cash of approximately $40 million in 2020. 
  • The shipping fleet recorded Time Charter Equivalent1 ("TCE") earnings of $39,300 per day ($39,100 for spot TFDE vessels). FSRU Golar Nanook loaded first Sergipe commissioning cargo from FLNG Hilli Episeyo.

LNG Shipping

The Board has decided to proceed with a spin-off of the Company’s TFDE LNG carrier business, subject to satisfactory market conditions, and to focus the Company’s future activities primarily around FLNG and downstream assets. This will allow LNG shipping investors more direct exposure to the LNG shipping market and reposition Golar’s core business toward LNG infrastructure on long-term contracts.

Golar are in talks with other owners of similar tonnage to join the new shipping company. Management of Golar’s vessels will remain with Golar Management Norway AS. Assuming the joint structure proceeds as planned, Golar's direct exposure to the carrier market will then be limited to one modern steam turbine vessel, Golar Arctic, with Golar Viking contracted to be sold in 2020 post FSRU conversion.

Outlook

The initial focus in 2019 has been to take FID on the Gimi (BP FLNG) and Viking (LNG Hrvatska FSRU) projects, secure project finance and award contracts for those projects. With those tasks completed, the main focus will be to streamline the company and increase the utilization of existing assets. The intention is to significantly increase the return on investment ("ROI") without committing major capital. Shipping:

With the LNG carrier market showing signs of seasonal recovery and edging into a time-frame where a structural shortage of ships appears inevitable, Golar expects that the new LNG shipping company will be an attractive pure play vehicle for investors to participate in the strong growth and cyclical recovery of the LNG shipping market. This will allow us to reposition Golar and focus primarily on two business lines: FLNG:

Our project teams will work diligently to safely deliver the Gimi project on time and on budget. Golar will also work with Perenco to conclude an agreement to increase utilization and provide a meaningful potential extension to the charter duration for FLNG Hilli Episeyo by the end of 2019.

Development of the robust FLNG pipeline, finance permitting, will add further long-term contract earnings backlog. Golar Power: Golar Power will now develop the downstream small-scale market in Brazil, which can create significant earnings as early as 2020/21. In repositioning Golar as a solid long-term cashflow business from projects that create large cost and environmental benefits for our customers the Company expects to materially broaden investor interest.

With an LNG growth rate of approximately 10% pa, a gross contract earnings backlog1 of $10.3 billion, strong growth in contracted earnings, a well-financed balance sheet, a unique market leading position in FLNG, integrated power projects and a solid pipeline of opportunities, the Board is increasingly optimistic about the future. FLNG Hilli Episeyo is operational, cash-flow generative and constructive progress is being made with respect to utilization of its spare capacity;

The underlying recovery in the shipping market; Golar Power's Sergipe power project and FSRU Nanook are fully financed and less than 11 months from start-up; The award by BP of a 20-year FLNG contract that is expected to deliver annual contracted revenues less forecasted operating costs of approximately $215 million.

Total Contract Earnings Backlog including our proportionate share from equity investments of $6.6 billion, comprised of $2.5 billion from Golar Power, $0.6 billion from Golar Partners and $3.5 billion from Golar. The underlying LNG market growth story remains robust with annual expected demand growth of close to 10% driven mainly by consumers wish for cheaper and cleaner energy.

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

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