SOURCE: Golar LNG

November 27, 2009 03:15 ET

GOLAR LNG LIMITED 3RD QUARTER 2009 RESULTS

LONDON, NORWAY--(Marketwire - November 27, 2009) - Highlights

* Golar LNG reports a consolidated net loss of $1.0 million and
  operating income of $3.6 million.
* Golar Winter successfully completes commissioning in Brazil
* Golar Freeze commences conversion at Keppel shipyard
* Improvement in the market for spot trading vessels
* Completion of equity offering in respect of Golar LNG Energy
  raising $117 million
* Golar LNG Energy listed on Oslo stock exchange on October 8, 2009.


Financial Review

Golar LNG Limited ("Golar" or the "Company") reports a net loss of $1.0 million but improved operating income of $3.6 million for the three months ended September 30, 2009 on a consolidated basis (the "third quarter").

Revenues in the third quarter were $50.3 million representing an increase from $46.8 million for the second quarter of 2009 (the "second quarter"). The increase is as a result of the contribution from the Golar Winter, which went on hire in early September, following its FSRU conversion in addition to a general improvement in earnings from spot traded vessels; both Ebisu and Golar Arctic commenced new charters during the quarter. This improvement is partly offset by the Golar Freeze not earning during the quarter as the vessel entered the shipyard for FSRU conversion. Average utilisation increased to 80% in the third quarter of 2009 from 69% in the previous quarter. Third quarter average daily time charter equivalent rates ("TCEs") in 2009 increased to $44,140 per day as compared to $37,600 per day for the second quarter of 2009.

Voyage expenses decreased from $11.3 million in the second quarter of 2009 to $9.6 million for the third quarter due to better utilisation of spot trading vessels resulting in lower fuel costs paid for by the Company and as a result of reduced charter hire expenses due to the redelivery of the Golar Frost to its owners, OLT-O. Vessel operating expenses were higher at $15.7 million for the third quarter compared to $14.0 million for the second quarter, mainly as a result higher costs associated with the operation of FSRU's.

Administrative expenses for the third quarter increased to $5.5 million compared to $4.5 million in the second quarter, largely as a result of increased project development costs.

Net interest expense at $12.5 million for the third quarter is increased from $11.5 million for the second quarter due to an increased level of debt and average cost associated with the loan from World Shipholding Limited (the Company's main shareholder) and a reduction in the amount of capitalised interest associated with vessels undergoing FSRU conversion offset by a reduction in floating rate LIBOR.

Other financial items have decreased in the current quarter from a gain of $24.8 million in the second quarter to a gain of $10.5 million in the third quarter. This fall is largely as a result of a significant decrease in mark-to-market valuation gains on interest rate swaps booked in the third quarter, from a gain of $10.7 million in the second quarter to a loss in the third quarter of $2.3 million, as a result of declining long-term interest rates. Other financial items remain a gain in the quarter however, mainly as a result of the realised gain arising on the termination of the Company's equity swap in respect of Arrow energy which resulted in a net gain in the quarter of approximately $7.8 million. The balance of the other financial items gain relates to the retranslation of foreign currency balances and the mark-to-market valuation of foreign currency forward contracts.

Financing, corporate and other matters

The restructuring of Golar LNG by way of the transfer of assets not on long-term contracts and associated liabilities together with certain investments and projects to its newly formed subsidiary, Golar LNG Energy Limited ("Golar Energy"), was completed during the third quarter. Golar Energy's private placement of 60 million new shares, at a subscription price of $2 per share raised approximately $117 million. At the same time Golar Energy issued 12 million warrants to subscribe for further shares on 15 December 2010 at $2 per share. Subsequent to the private placement Golar Energy's shares were listed on the Oslo Axess stock exchange on October 8, 2009.

On October 5, 2009 Mr. Tor Olav Troim resigned as a director of the Company as a consequence of his appointment as Chairman of the Board of Golar LNG Energy Limited. The Board is pleased to advise that Graham Robjohns has assumed the role of CEO of Golar Management for Golar LNG. Mr. Robjohns will also continue in his role as CFO for Golar Energy with CEO Oscar Spieler.

Subsequent to the quarter ended September 30, 2009 the Company issued 250,000 new share options with a strike price of $11.80 and also cancelled 1,037,083 options; additionally 200,000 options were exercised that had a strike price of $9.89. After this new issue, cancellation and exercise the remaining outstanding options amount to 1,546,834. Golar Energy has also issued share options to directors and employees totalling 3,940,000 at a strike price $2.20. All options vest over a period of two years and eight months.

In November 2009, the Company terminated an equity swap in 300,000 of its own shares, originally priced at Nok41, and concurrently bought 300,000 at the market price of Nok73 (approximately $13.04). The total transaction realised a gain of approximately $1.7 million of which approximately $0.5 million will be booked in the fourth quarter. After this transaction Golar holds a total of 450,000 of its own shares.

In November 2009, Golar Energy sold a block of 9.6 million LNG Limited shares which reduces its shareholding to approximately 6.3% of LNG Limited's issued share capital. Golar Energy remains strongly committed to the Gladstone LNG Fisherman's Landing project and continues to invest directly in the project in terms of significant technical and commercial resources including the secondment of personnel to the project. The Gladstone LNG Fisherman's Landing project remains an important part of Golar Energy's strategy and portfolio. The sale will realise funds of approximately USD 11 million and result in an accounting profit of approximately USD 8 million.

With Golar Winter commencing its FSRU charter in September and Golar Freeze scheduled for commencement in the second quarter of 2010, Golar LNG's long-term contracted vessels are set to increase significantly. Based on realistic assumptions around financing of Golar Freeze, Golar LNG's five long-term contracted ships will generate approximately $75 million per annum in free cash after debt service and net of minority interests once the Golar Freeze commences its charter. The Company intends to distribute close to 100 % of this free operating cash flow after debt service.

The Board expects that the cash dividends will commence from the second quarter of 2010. In order to confirm the commitment to dividends and also to increase the liquidity in the trading of the Golar LNG Energy shares the Board has decided to propose a stock dividend for the third quarter. A total of 10 million shares in Golar Energy will be distributed to the shareholders in Golar LNG Limited. Dates for this dividend will be announced separately but will be as soon as practicable.


Operational Review

In September 2009 Golar Winter successfully completed testing and commissioning at Petrobras's Rio terminal. The vessel collected a cargo of LNG en-route to Brazil as well as transporting a part cargo between Pecem and Rio during the commissioning period. The vessel was finally delivered and accepted on September 7, 2009.

Golar LNG Energy

Shipping The spot LNG shipping market will continue to face some challenges in the short term due to a limited oversupply of vessels. The order book as at the end of 2010 is limited to 3% of the total fleet. The vast majority of new vessels will be delivered into specific projects. Trading performance of the Company's vessels operating in the spot/short term market improved over the quarter. Rates and utilisation are still unsatisfactory but improvement continues into the fourth quarter. Available tonnage in the Atlantic has tightened over the quarter with very few vessels available cold for the recent tenders. Several majors have recently been in the market chartering in medium term tonnage Charter arrangements are now becoming more balanced and exhibiting less multiple options and lower flexibility in charterer's favour than has been evident throughout the year. There are clear signs that an improved supply demand balance in the years to come will lead to a much needed improvement in charter rates. However the current weak demand for natural gas is negatively influencing the short to medium term demand for LNG.

Regasification

Floating storage and regasification market inquiry is firming. As reported in the second quarter regasification developers are launching new LNG import projects based on the employment of a floating storage and regasification solution. Developers, in addition to recognizing the numerous benefits of floating storage and regasification projects, recognize an excellent window of opportunity to launch new projects as near / mid term LNG supply is available. Various formal invitations (prequalification documents, solicitations of interest, request for proposals) have recently been issued or are expected from countries including Israel, Indonesia, Uruguay and Jamaica.

In addition to these formal invitations, Golar Energy is discussing numerous other projects directly with interested parties. While inquiry is worldwide, Asia continues to represent areas of increasing activity. This formal FSRU market inquiry is testament to the increasing level of interest and Golar's track record; focus on developing long term relationships and delivering tailored low cost solutions should provide a solid foundation for delivering further FSRU contracts.

Golar Freeze entered Keppel Shipyard on September 5, 2009 to undergo its FSRU conversion prior to its delivery to Dubai Supply Authority (DUSUP) under a 10 year charter. The construction of the regas-skids is completed and they are currently being transported to Singapore for installation onboard Golar Freeze. A majority of the other main components for the conversion are already at site, and the conversion is progressing according to schedule.

Liquefaction

The Gladstone LNG Project continues to move forward positively with several milestones achieved during the period under review. In early October 2009, agreement was reached with Gladstone Port Corporation (GPC) for the project to commence its ground improvement and early site works programme. The current ground improvement and early site works will assist in reducing future capital costs and shorten the overall construction schedule to allow for the Project's first LNG shipment in 2012. In September 2009, Golar Energy entered into a HOA with Toyota Tsusho Corporation (part of the Toyota Group) as the end buyer of the entire first LNG train production of 1.5 mtpa. During the quarter the project appointed BNP Paribas as the Project's financial advisor. BNP Paribas will participate in the review and structuring of all key components of the Project, to ensure the Project conforms to accepted project debt financing principles and parameters. In addition CB&I have been appointed as "Project Management Consultant". The depth of LNG project experience within the CB&I group will substantially augment the project team, which in itself has been materially bolstered by the selective recruitment of LNG industry experienced personnel.

The PTTEP/Coogee project is progressing and will complete the concept phase by the end of the year. The midstream (FLNG unit) study work is being done in Oslo with several project engineers from PTTEP on the project team, while the upstream studies are being done in Perth. The Company has gained valuable knowledge and experience throughout the cooperation with PTTEP.

Market The LNG industry is experiencing additional growth as more liquefaction projects come on stream to meet long term global demand growth. Qatar expects to double annual capacity this year to 62 million tonnes and be in a position to export 77 MTPA by 2011. This year has also seen further LNG production capacity additions in Russia (Sakhalin), Indonesia (Tangguh) and Yemen as well as more import capacity, added or about to be added, in Kuwait (Al Ahmadi), Italy, Brazil, Dubai and Argentina. The addition of new production capacity and LNG import facilities, some of which are located in previously inaccessible markets exhibiting a counter-cyclical demand requirement, offers a greater interaction between, not only Atlantic and Pacific Basin locations, but also greater diversity between northern and southern hemispheres. Gas price volatility and arbitrage between regions will create additional trading opportunities which will require flexible shipping arrangements to cater for market developments. Additionally the market is being tested for more flexible LNG SPA's in long term contracts in terms of destination flexibility and upward and downward buyer volume flexibility. This additional flexibility will also require further flexible shipping arrangements (and optimisation within shipping portfolios) which hitherto charterers have been reluctant to recognise in terms of pricing for shipping.

The depressed spot gas and LNG prices during 2009 can be explained by a number of different factors:

- The new LNG production projects finally starting up, particularly in
Qatar, has significantly increased supply.
- In the US, shale gas can be produced more cheaply than had been
anticipated, which has transformed the marginal cost of supply in the US,
driven prices down and means that LNG has to compete at lower prices than
had been anticipated.
- There has been a global economic downturn, depressing gas demand, so that
Asian LNG buyers have minimized volumes under their term contracts, forcing
some producers to sell to the West or India.
- There has been a glut of LNG shipping so that, despite low prices, LNG
producers have still been able to secure positive netbacks, so the LNG has
kept flowing.

Outlook

The Company believes that in the medium to long term the gas/LNG market looks attractive. Gas/LNG is likely to increase its share of the energy market due to shortage of oil, the increased demand for energy and the fact gas is a cleaner energy than oil and coal. The price attractiveness of Gas which in the US today is selling at a discount to oil of approximately 70 % measured on an energy content basis is further strengthening the case. In order to develop the LNG market further and increase its market share the Company believes there will be an increased demand for floating regas solutions and floating LNG projects. With Golar Energy's fleet, expertise and the track record, the Board believes that the Company is in a very good position to take advantage of this opportunity. By utilizing existing LNG vessels for conversions the Company believes that it is able to create the most cost effective solutions for customers and partners.

Golar LNG Energy has a platform for growth within the mid-stream of the LNG supply chain and plans to aggressively pursue the development of its regasification and liquefaction projects as well as shipping and trading opportunities.

Golar LNG Limited is, with its five ship core fleet with long term contracts, well positioned to become a high paying dividend stock, with significant upside linked to ownership of Golar LNG Energy.

The operating results for the fourth quarter are likely to show a steady improvement from Q3 and will see a significantly improved contribution from Golar Winter with a full quarter's trading as an FSRU. One vessel will be drydocked in the quarter. Net income in the fourth quarter will further benefit from an approximate $8 million gain on the sale of part of Golar Energy's shareholding in LNG Limited.

Forward Looking Statements

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of Golar LNG. Although Golar LNG believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, Golar LNG cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Included among the factors that, in the Company's view, could cause actual results to differ materially from the forward looking statements contained in this press release are the following: inability of the Company to obtain financing for the new building vessels at all or on favourable terms; changes in demand; a material decline or prolonged weakness in rates for LNG carriers; political events affecting production in areas in which natural gas is produced and demand for natural gas in areas to which our vessels deliver; changes in demand for natural gas generally or in particular regions; changes in the financial stability of our major customers; adoption of new rules and regulations applicable to LNG carriers and FSRU's; actions taken by regulatory authorities that may prohibit the access of LNG carriers or FSRU's to various ports; our inability to achieve successful utilisation of our expanded fleet and inability to expand beyond the carriage of LNG; increases in costs including: crew wages, insurance, provisions, repairs and maintenance; changes in general domestic and international political conditions; the current turmoil in the global financial markets and deterioration thereof; changes in applicable maintenance or regulatory standards that could affect our anticipated dry-docking or maintenance and repair costs; our ability to timely complete our FSRU conversions; failure of shipyards to comply with delivery schedules on a timely basis and other factors listed from time to time in registration statements and reports that we have filed with or furnished to the Securities and Exchange Commission, including our Registration Statement on Form 20-F and subsequent announcements and reports. Nothing contained in this press release shall constitute an offer of any securities for sale.

November 26, 2009 The Board of Directors Golar LNG Limited Hamilton, Bermuda



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Contact Information

  • Questions should be directed to:
    Golar Management Ltd - +44 207 063 7900
    Graham Robjohns