Golar LNG Partners LP: Preliminary Fourth Quarter And Financial Year 2011 Results
(Thomson Reuters ONE) -
Highlights
* Golar LNG Partners reports net income attributable to unit holders of $23.1
million and operating income of $33.7 million for the fourth quarter of 2011
* Improved operating income as a result of the contribution from new
acquisition Golar Freeze
* Generated distributable cash flow of $20.5 million for the fourth quarter of
2011
* Dividend increased from $0.40 to $0.43 per unit for the fourth quarter
following acquisition of Golar Freeze
* Golar Winter modifications and charter with Petrobras extended to 2024
Financial Results Overview
Golar LNG Partners L.P ("Golar Partners" or the "Partnership") reports net
income attributable to unit holders of $23.1 million and operating income of
$33.7 million for the fourth quarter of 2011, as compared to $22.9 million and
$28.8 million for the fourth quarter of 2010.
As required by US GAAP, following the acquisition of the floating storage and
regasification unit ("FSRU") Golar Freeze from Golar LNG Limited ("Golar"), the
results for the fourth quarter of 2011 and comparative numbers for the fourth
quarter of 2010 assume that the Golar Freeze was wholly owned by the Partnership
for the entire period that the vessel has been under the common control of
Golar. These results therefore include the historical carved out results of the
Golar Freeze.
Operating results were improved due to increased revenue as a result of
inflation escalators within the Petrobras charters and also as a result of lower
operating expenses. All vessels operated well throughout the quarter with 100
percent utilisation.
The acquisition of the Golar Freeze for $330 million from Golar was funded by
the Partnership assuming debt of $108 million and $222 million of vendor
financing provided by Golar. This has resulted in the Partnership's net interest
expenses increasing to $6.9 million for the fourth quarter, compared to $4.4
million for the same period last year.
Other financial items were a loss of $0.5 million for the fourth quarter as
compared to a gain of $0.9 million for the same period in the prior year. The
variance mainly relates to the changes in non-cash mark-to-market valuations of
financial derivative instruments, principally interest rate swaps and currency
swaps.
The Partnership has accounted for the acquisition of the Golar Freeze as a
transfer under common control. Under this method the carrying book value of the
net assets acquired are recognised on the Partnership's balance sheet. The
excess of proceeds paid by the Partnership over Golar's historical cost is
accounted for as an equity distribution to Golar.
The Partnership's Distributable Cash Flow[1] for the fourth quarter at $20.5
million is an improvement from $18.4 million in the third quarter of 2011.
Golar Partners declared a dividend for the fourth quarter of $0.43 per unit,
representing a 7.5% increase from the previous quarter's distribution. The
dividend was paid on February 15, 2012.
Golar Winter Modifications and Charter Extension
As announced on January 19, 2012, Golar Partners has reached agreement with
Petrobras to make certain modifications to the Golar Winter FSRU and to extend
the term of the contract by 5 years to 2024.
Petrobras have taken the decision to move the Golar Winter FSRU from its present
site in Rio de Janeiro to Bahia and as a consequence the vessel will require
certain modifications including the addition of LNG loading arms. Golar Partners
has agreed to make these modifications and Petrobras have agreed to an increase
in the charter rate in return for the upgrades to be made to the vessel.
In addition to the 5 year extension, Golar Partners will receive, in nominal
terms, approximately $24 million in additional revenue over the term of the
contract before the effect of rate escalation as provided for in the time
charter.
The vessel is due to be delivered at its new site in the third quarter 2013 at
which point the new charter rate will commence. The vessel is expected to incur
offhire time of approximately the same amount as would be incurred during its
normal five yearly drydocking, which will be undertaken at the same time. Golar
Partners will enter into an agreement with Golar under which Golar will
undertake the modification work.
Golar Partners will finance the modification work with cash and undrawn credit
facilities but may also take the commitment into account in future debt or
equity transactions.
The contract extension means the average contract length in the Partnership is
increased to approximately 9.2 years and total contracted revenue is improved
significantly to approximately $1.9 billion.
As a result of the above there are no longer purchase options in respect of both
the Golar Winter or the Golar Spirit.
Golar LNG Limited's Newbuilding Programme
Golar recently announced that it has entered into contracts with Hyundai Heavy
Industries to build two LNG carriers for delivery in 2014. This increases
Golar's newbuild programme to eleven vessels consisting of nine LNG carriers and
two FSRUs. Five of the newbuilds are due for delivery in 2013 with the rest in
2014. Given the positive outlook for the LNG market, Golar's expanded
newbuilding program is extremely positive for the future growth potential of the
Partnership.
Golar Freeze Acquisition
The Partnership successfully acquired the Golar Freeze from Golar in October
2011. The purchase price was $330 million and was financed by assuming the
existing debt on the FSRU and $222 million of vendor financing from Golar. The
Golar Freeze is expected to contribute approximately $46 million in additional
revenues during the remaining contract period of 8.5 years.
As a result of the Golar Freeze acquisition the Partnership has increased its
dividend from $0.385 per quarter at IPO to $0.43 per quarter.
Financing and Liquidity
As at December 31, 2011 the Partnership had cash and cash equivalents of $46.0
million and undrawn revolving credit facilities of $20 million. Total debt and
capital lease obligations net of restricted cash was $726.2 million as of
December 31, 2011.
Based on the above debt amount and annualised fourth quarter EBITDA Golar
Partners has a debt to EBITDA multiple of 4.3 times, which leaves significant
flexibility to finance further growth given debt covenant requirements of 6.5
times.
As noted above GAAP requires that the Golar Freeze be recorded on the
Partnership's balance sheet at the historical book value in Golar's books. The
excess of the purchase price over this carrying value, which amounted to $165
million, is treated as a distribution to Golar and has therefore reduced book
equity.
As at December 31, 2011, Golar Partners had interest rate swaps with a notional
outstanding value of $466 million representing approximately 92% of senior bank
debt and capital lease obligations, net of restricted cash. The average fixed
interest rate of these swaps is approximately 2.7%. Average margins paid on
outstanding debt, including the Golar Freeze debt in addition to the interest
rate are approximately 1.5%. The fixed rate of interest paid on the Golar LNG
loan is 6.75%.
Outlook
The acquisition of the Golar Freeze marked the first step in the Partnership's
growth strategy. The transaction has given rise to a quarterly distribution
increase from $0.385 per unit to $0.43 per unit which represents an 11.7%
increase from the minimum quarterly distribution set at the initial public
offering in April 2011.
The agreements with Petrobras in connection with the Golar Winter are also very
positive for the Partnership. In addition to increased revenue following the
modifications to the vessel, the extension of the contract by 5 years to 2024,
for a contract that has inflation escalation built into it, provides significant
future cash flow stability with some growth. This is also positive for the
Partnership's debt financing ability because financing banks will give
significant credit to the extended contracted cash flow. The extension is also
evidence of the recognition of the Partnership and Golar as an operator of
FSRU's.
Growth for 2012 is expected to come from Golar Partners option to acquire the
FSRU Khannur, which is contracted under an 11 year charter to Nusantara Regas (a
joint venture between Pertamina and Indonesian gas distributor PGN) as well as
the potential dropdown from Golar of additional LNG carriers. Golar Partners has
the right to acquire any of Golar's LNG carriers and FSRUs that in the future
obtain charters of greater than five years. In addition to the Khannur, Golar's
current fleet consists of four modern LNG carriers, three older LNG carriers,
nine newbuilding LNG carriers ordered and two newbuilding FSRUs ordered.
The fundamental outlook for the LNG industry over the coming years continues to
be positive. LNG supply and demand are forecasted to grow strongly and this will
require additional infrastructure including LNG carriers and FSRU's.
Particularly positive for LNG shipping is the development of LNG exports from
the US which will likely have a high shipping requirement given that much of the
output is likely to be shipped to Asia. The growth in LNG supply improves the
ability of new markets to access LNG, which is leading to the continued strong
interest in FSRU solutions.
The Board therefore believes that Golar Partners has outstanding potential and
opportunity to increase quarterly cash distributions and to be one of the
fastest growing MLP structures in the years to come.
February 21, 2012
Golar LNG Partners L.P.
Hamilton, Bermuda.
Questions should be directed to:
C/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo or Graham Robjohns
--------------------------------------------------------------------------------
[1] Distributable cash flow is a non-GAAP financial measure used by investors to
measure the performance of master limited partnerships. Please see Appendix A
for a reconciliation to the most directly comparable GAAP financial measure.
Golar LNG Partners LP Q4 Results 2011:
http://hugin.info/147317/R/1587861/498139.pdf
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Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Golar LNG Partners L.P. via Thomson Reuters ONE
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