Golar LNG
oslo : GOL

August 18, 2011 03:05 ET

Golar LNG Q2 Results 2011

HAMILTON, BERMUDA--(Marketwire - Aug 18, 2011) -



INTERIM RESULTS FOR THE PERIOD ENDED JUNE 30, 2011


Highlights

  * Golar LNG reports consolidated operating income of $21.3 million for
    the second quarter of 2011 and a net loss of $0.6 million after
    interest rate swap valuation losses of $5.7 million
  * Golar LNG increases its cash dividend to $0.275 cents per share
  * Golar's total order book increased to 8 LNG carriers and 1 newbuild
    FSRU
  * Significant improvement in TCE rates for the quarter due to all
    modern vessels on charter
  * Golar reports weak results from trading operation and will reduce this
    activity
  * Spot and short-term LNG shipping market continue to improve
  * Successful acquisition of 100% of Golar LNG Energy Limited shares
    through transactions involving raising $352 million in new Golar LNG
    equity

Financial Review

Golar LNG Limited ("Golar" or the "Company") reports consolidated net loss of $0.6 million and consolidated operating income of $21.3 million for the three months ended June 30, 2011 (the "second quarter").

Revenues in the second quarter were $74.0 million as compared to $67.5 million for the first quarter of 2011 (the "first quarter"). The improvement reflects the fact that the Company's four modern vessels were all fully employed during the quarter at improved rates, partly offset by the effect of Golar Maria being in drydock. These vessels will now continue under their current charters through the balance of 2011 until the charters cease during 2012. Vessel utilization for the second quarter increased to 97% as compared to 91% for the first quarter. Average daily time charter equivalent rates ("TCEs") for the second quarter increased to $91,666 from $80,694 in the first quarter as a result of improved utilisation.

Voyage expenses decreased during the second quarter to $0.8 million as compared to $3.8 million in the first quarter. Vessel operating expenses were however higher at $16.2 million for the second quarter compared to $14.0 million for the first quarter, mainly due to the reactivation costs incurred for the Gimi prior to the vessel entering the charter market. Operating costs have also increased though as a function of the US dollar weakening against the Euro and thereby increasing the cost of crew remunerated in Euro's.

The total loss for Golar Commodities in the second quarter amounts to $11.7 million, of which $2.5 million is included in administrative expenses, $0.5 million in financial expenses and $0.1 million in depreciation. The remaining $8.7 million represents trading losses, inclusive of unrealised mark-to- market valuation losses, as at the end of the quarter. All trades entered into to date have now been delivered and a gain of approximately $5.0 million is expected to be recognised so far in the third quarter.

Net interest expense for the second quarter at $6.7 million is slightly down from $6.9 million in the first quarter due to a slight reduction in LIBOR.

Other financial items have increased to a loss of $9.0 million for the second quarter from a small loss in the first quarter. The increase is largely a result of increased losses on the mark-to-market valuation of interest rate swaps of $5.7 million due to the reduction in longer term interest rates. The Company will however, due to its floating interest rate exposure show improved long term results as a function of the lower interest.

The Company reports operating revenues of $141.4 million, operating income of $41.8 million and a net income of $16.4 million for the six months ended June 30, 2011. This compares to operating revenues of $109.0 million, operating income of $23.7 million and a net loss of $8.5 million for the six months ended June 30, 2010.

Financing, corporate and other matters

Dividends

The Board has decided to increase the quarterly dividend to $0.275 per share. The increase is a reflection of the solid improvement in the LNG shipping market over the last nine months. The Board has also taken account of the Company's large capital spend obligations when evaluating this increase in dividend. The record date for the dividend is September 13, 2011, ex-dividend date is September 9, 2011 and the dividend will be paid on or about September 27, 2011.

Acquisition of Golar LNG Energy ("Golar Energy")

As previously announced, the company increased its ownership of Golar Energy during the quarter from 61.1% to 99.6%. On June 3, 2011 a compulsory offer was made to acquire the remaining 0.4% resulting in the delisting of Golar Energy from Oslo Axess on July 4, 2011. Of the 92,333,112 Golar Energy shares acquired 70,315,792, were exchanged for newly issued Golar LNG shares where the seller received one newly-issued Golar LNG share for every 6.06 Golar Energy shares, increasing the Company's share capital by 11,603,253. The new Golar LNG shares were effectively issued for $30.30 per share and the total amount of new equity was correspondingly $352 million. The remaining Golar Energy shares were acquired at a price of approximately $5 per share.

Golar LNG Partners LP ("Golar Partners")

As previously announced, in April 2011, the Company completed a public offering of 13.8 million common units (including 1.8 million units issued in respect of an over-allotment option) of its subsidiary, Golar Partners, which is listed on the NASDAQ stock exchange under the symbol "GMLP". As a result of the offering the Company's ownership of Golar Partners was reduced to approximately 65%. Golar Partners owns and operates a fleet of two LNG carriers and two FSRUs each under long-term charters. The 13.8 million units were priced at $22.50 per unit resulting in gross proceeds of $310.5 million. As part of the transaction the Company has agreed to offer to Golar Partners the right to acquire all its LNG carrier and FSRU assets that in the future obtain contracts of greater than 5 years. The Company expects to sell Golar Freeze and Khannur (both FSRU's with long-term contracts) to Golar Partners during 2011 and 2012 respectively as well as others assets as new long-term contracts are secured. Golar LNG owns as of August 17, 2011 26,074,577 Golar LNG Partners units which is unchanged from the initial public offering. The value of these shares as of August 16, 2011 was $674 million.

Newbuilding

As previously announced, the Company has entered into firm contracts to build six 160,000 m(3) LNG carriers with Samsung Heavy Industries Co Ltd. Four vessels are to be delivered in 2013 and two in early 2014. The Company is also announcing that it has now added to its newbuilding programme with orders for two further LNG 160,000 m(3) carriers and a 170,000 m(3 )FSRU, withal from Samsung. The LNG carriers will be delivered in 2014 and the FSRU in September of 2013. Proceeds from the Golar LNG Partners IPO and expected sale of Golar Freeze and Khannur to that entity will go towards financing the Company's newbuilding programme. The vessels contracting prices are seen as favourable in the current market. The total cost of all nine newbuildings amounts to approximately $1.8 billion. In line with the Company's other recently ordered vessels, these newbuilding contracts have been acquired from a Company affiliated to Golar's main shareholder, World Shipholding, based on the original contract price.

Financing

The payments of the newbuilding program are significantly back ended. The Board anticipates that a combination of new long-term charters and long-term debt financing combined with likely drop downs to Golar LNG Partners will minimise the need for new equity for the newbuilding programme. The increase of dividend illustrates the Boards confidence in the Company's ability to finance its existing commitments.

In April 2011, the Company entered into a new $80 million revolving credit facility with a company related to its major shareholder, World Shipholding. This facility is now fully drawn and is scheduled to be repaid within the next 18 months.

Shares and options

In line with the share swap noted above, 897,360 Golar LNG options were issued in the quarter. One Golar LNG option was issued for 6.06 Golar Energy option held by directors and employees at a strike price calculated to give the same intrinsic value to holders. Also during the quarter a total of 145,778 Golar LNG options were exercised. In connection with this, the Company issued 145,778 new shares. The total number of remaining Golar LNG options is 1,151,582. The total number of shares outstanding in Golar excluding options is 79,947,731.

Gimi

The Gimi, which was previously in lay-up, commenced its re-activation in June and is expected to become available for chartering towards the end of August. The vessel is going through an extensive refitting programme and is expected to be available for chartering by the beginning of September. The expenditure on the vessel has increased to $20 million. Part of this increase is related to increasing the longevity of the vessel and its ability to perform under long- term charters. The Company is currently in specific discussions with regard to both short and long-term employment for the vessel and is hopeful that a conclusion can be reached shortly.

The Board has observed a modest increase in operating and administrative expenses. Part of this has been linked to the set up of Golar Commodities and Golar Partners. The Board has implemented action to closely monitor and seek to reverse this trend and is hopeful that such action will show improvements already in the second half of the year.

Shipping

During the quarter, there has remained strong demand for available modern LNG carriers. Charterers continue to secure forward available tonnage both well in advance of the commencement of their actual need (1-2 years) and for longer durations than the market had witnessed previously (5-10 years). Structural need for shipping continues to outstrip supply of tonnage, either forcing prospective Charterers to adjust their requirements, or leave many potential chartering opportunities uncovered. Small windows of availability will continue to exist in the form of backhaul and short intra-regional voyages; however, the market is expected to remain structurally tight for the foreseeable future.

Throughout the quarter, charter rates remained strong, pushing beyond $90,000 per day, on a round trip basis, for modern steam vessels tonnage. The anticipated structural tightness during 2012-2014 is expected to allow Owners to continue to demand improved freight economics.

The worldwide LNG fleet currently stands at 359 vessels including FSRUs with a further 61 on order; 39 vessels have been ordered since January 1, 2011. There is today very limited shipyard capacity available before the last quarter of 2014 and diminishing availability for 2015. In the period 2014 to 2015, substantial new LNG supply is anticipated from Australia and the Middle East, which will require significant and as yet unsecured additional shipping capacity. Additional shipping capacity will also be needed to support the development of new liquefaction capacity, as well as the growing short term / spot LNG trading business (which accounts for, on average, between 18-22% of the overall LNG trade). The development of potential U.S. LNG export capacity will further increase the demand for tonnage.

Golar currently has four existing modern vessels and eight newbuildings available for employment over the next three years. With fundamental evidence of a structural deficit in the supply of LNG carriers in this same time period, the Board believes that the Company is advantageously positioned to lock in solid long term returns. The Company has already entered into specific discussions with regards to chartering its open tonnage and expects that a large part of this open position will be covered with charters by year end.

Additional demand for tonnage is to a large extent being driven by the large arbitrage opportunities in the existing market. These arbitrages support longer voyages and therefore increased shipping requirement. Golar's vessels will be delivered with historically low boil off rates and will have in all material respects have superior operating performance relative to the existing fleet.

Regasification

Work is continuing on schedule on the Company's FSRU project in West Java, Indonesia. The vessel Khannur is undergoing conversion operations in the Jurong yard in Singapore and the construction of the mooring facility for the vessel is also underway. The conversion project is progressing in accordance with the cost and time budget and the Company expects the terminal to be operational during the first quarter of 2012.

Market interest for the Company to provide floating regasification solutions remains strong. Golar is involved in four bidding/offer processes and expects another three processes to commence in the near term. Although the process is not completely finalised, we do not anticipate to be successful in the tender for the third FSRU in Brazil due to a lower bid. The Board is obviously disappointed but is hopeful that its decision to build a modern 170,000 m3 FSRU on a speculative basis will give the Company a competitive timing advantage in future tender processes. The Board is currently considering an option to convert one of the existing 160,000 m3 LNG carrier newbuildings into a further FSRU.

Golar Commodities

The Board is clearly disappointed with the performance of Golar Commodities since its start up. Part of the reason for the under-performance is linked to the dramatic change in trading which has occurred as a function of the tightening shipping market. Golar has further not been successful in integrating the Golar commodity team based in Tulsa fully into the Golar organisation.

The Board will, as a result of the lack of performance and the strengthening of the shipping market, reduce the trading activities until market opportunities open up again.

LNG Market

Incremental LNG supplies remained available in the market but were limited primarily to West African and Middle East supply sources.

Japan's appetite for incremental supply remained strong throughout the quarter as a result of the shutdown in nuclear production capacity. Supplied largely through divertible volumes from Qatar, Japanese longer term demand for supplies were largely addressed through a series of agreements with producers.

South American markets were very active with considerable supply moving into both Argentina and Brazil on the back of high season peak demand loads. Re- export opportunities out of the United States and Europe remained modest with only 14 cargoes exported thus far in 2011.

New projects slated to come on line in the coming quarters have been delayed. Woodside announced a further delay in the start up of their Pluto Project Train 1 to end first quarter 2012 while the developing project in Angola, slated to come on line in February 2012, has indicated a delay into the 2(nd) quarter and possibly later. This new production together with debottlenecking projects and the ramp up of the significant number of new projects that have recently started up could add up to 47 million tonnes of LNG (or approximately 21% of total current production) to the market by the end of 2012. The fleet will in the same timeframe is expected to increase with only 10 ships or 3% of the existing fleet.

Outlook

The focus of the Company in the near term will be to leverage its open LNG carrier and FSRU positions into high value long-term contracted employment. On the back of natural gas and LNG taking an ever prominent role in the evolving global energy industry, market fundamentals are very supportive of the ability to lock in long term relationships with LNG players in need of reliable LNG carrier capacity to support their growing trade requirements. With the addition of a newbuild FSRU vessel, the Company has increased its commitment to this market space where Golar is already a leader. Successful operational track records on our three existing FSRU's and a positive outlook for delivery of the next vessel in Indonesia creates a solid platform in a fast expanding industry. The outlook for the Company's FSRU business remains strong and we believe that next committed project will be realized prior to the end of 2011 or early 2012.

The Company will, as stated above, reduce its LNG trading activity until markets change or a more successful trading model has been established.

Operating income in the third quarter is expected to increase as a function of already realised gains from commodity trades. The results from vessel operations in the second half of the year should be positively impacted by the addition of Gimi. Results for 2012 are likely to improve as a function of the four existing modern vessels timecharters that come up for re-contracting in 2012. The commencement of the Khannur Charter in the first quarter of 2012 is likely to increase operating income, before depreciation and amortisation, by in excess of $40 million per annum.

The Board is pleased with the large investments the Company has been able to execute in the recent months. The development in the market shows a strong trend which is likely to continue for at least the next few years. With its shipping exposure and the organisational and corporate set up Golar is well positioned to convert this opportunity into long term value for shareholders.

Shareholders should expect strong growth in operating income over the next four quarters.

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.


August 17, 2011
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.



Golar LNG Q2 Results 2011: http://hugin.info/133076/R/1539237/470346.pdf




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Source: Golar LNG via Thomson Reuters ONE

[HUG#1539237]

Contact Information

  • Questions should be directed to:
    Golar Management Limited
    +44 207 063 7900

    Doug Arnell
    Chief Executive Officer
    Brian Tienzo
    Chief Financial Officer