Golar LNG Q2 2009 Results
(Thomson Reuters ONE) - Highlights* Golar LNG reports net income of $11.9 million and operating income of $1.9 million* Spot traded vessel earnings weak as anticipated, some signs of improvement now appearing* Restructuring and equity offering in respect of Golar LNG Energy completed post quarter end* Golar LNG and PTTEP sign agreements to jointly enter FEED studies in respect of an FLNG project located offshore North West Australia* Gladstone LNG project and various FSRU discussions continue to progressFinancial ReviewGolar LNG Limited ("Golar" or the "Company") reports a net income of$11.9 million and operating income of $1.9 million for the threemonths ended June 30, 2009 (the "second quarter"). Net income hasbeen positively impacted by other financial items gain of $24.8million largely relating to non-cash interest rate and equity swapvaluation gains.Operating income is decreased from the first quarter of 2009 (the"first quarter") mainly as a result of reduced revenue due to GolarArctic and Ebisu being idle for virtually the entire quarter, offsetto some extent by reduced operating expenses. Net income for thesecond quarter at $11.9 million is improved from the first quarterloss of $5.1 million largely as a result of other financial itemsgain of $24.8 million as noted above.Results for the three months to June 30, 2009Revenues in the second quarter were $46.8 million decreased from$52.5 million for the second quarter of 2008. Average utilisationdecreased to 69% in the second quarter of 2009 from 78% for the samequarter in 2008. Second quarter average daily time charter equivalentrates ("TCEs") in 2009 fell to $37,600 per day as compared to $39,900per day for the second quarter of 2008. The Golar Spirit was on hirefor the whole of the second quarter of 2009 but not for the secondquarter of 2008 and the Khannur was drydocked in the second quarterof 2008 and there were no drydockings in the second quarter of 2009.However, these improvements in revenue in the second quarter of 2009have been offset by the fact that; Golar Winter was not on hire forthe second quarter of 2009, Golar Arctic was idle in 2009 but similarto Golar Winter on hire in 2008, the Golar Freeze completed itslong-term charter at the end of May 2009 and a general decrease inearnings from vessels trading in the spot market in the secondquarter of 2009 as compared to the second quarter of 2008.Voyage expenses increased marginally from $10.4 million in the secondquarter of 2008 to $11.3 million for the second quarter. Vesseloperating expenses were lower at $14.0 million for the second quarterin 2009 as compared to $15.8 million for the second quarter of 2008whilst administrative expenses for the second quarter in 2009remained in line with the same quarter in the prior year at $4.5million.Net interest expense of $11.5 million for the quarter to June 30,2009 is down from $12.8 million for the second quarter of 2008. Thedecrease is as a result of the reduction of interest rates in respectof floating rate debt not swapped to a fixed rate and due to slightlylower levels of debt.Other financial items show a considerable gain in the second quarterof 2009 of $24.8 as opposed to $19.5 million for the same period in2008. The increase is mainly attributable to increased gains inrespect of mark-to-market gains on equity swaps, some of which werenot in place for the second quarter of 2008. In addition gains inrespect of foreign currency retranslations and mark-to-market gainson foreign currency forward contracts were increased partly offset byreduced interest rate swap mark-to-market gains.Results for the six months to June 30, 2009Golar reports net income of $6.8 million and operating income of $8.6million for the six months ended June 30, 2009.Revenues in the first six months were $100.7 million as compared to$111.2 million for the first six months of 2008. The average dailytime charter equivalent rates ("TCEs") also declined to $41,274 perday for the first six months of 2009 from $46,550 per day for thesimilar period in 2008 with the average utilisation of 74% and 85%respectively.Voyage expenses increased to $22.7 million for the first six monthsof 2009 from $11.9 million for the first six months of 2008, largelydue to the charter in expense related to Golar Frost and Ebisu. Ebisuwas chartered in September 2008 and Golar Frost was sold andchartered back in July 2008.Vessel operating expenses at $30.0 million for the first six monthshave decreased from $31.3 million for the same period in 2008.Administrative expenses were slightly less at $8.7 million ascompared to $8.9 million for the first half of 2008.Net interest expense for the first six months was $21.9 million downfrom $27.3 million for the first six months of 2008 quarter as aresult of lower Libor interest rate in respect of floating rate debt.Other financial items were a gain of $26.7 million in the first sixmonths of 2009 as compared to a loss of $1.95 million for the sameperiod of 2008. The gain resulted primarily from the non-cash gain oninterest rate swap valuations.Financing, corporate and other mattersIn June 2009, the Company entered into a revolving credit facilitywith World Shipholding, the Company's major shareholder, to provideshort-term bridge financing, please refer to note 3 for furtherinformation.Consistent with the announcement made in Golar's first quarter reportthe Company recently announced that it had incorporated Golar LNGEnergy Limited ("Energy") in Bermuda for the purpose of transferringthe part of its asset portfolio not employed on long term charters.The transfer included the following assets and activities:* the ownership of 4 modern LNG carriers ("Gracilis", "Grandis", "Granosa" and "Golar Arctic")* the ownership of 3 1970's built LNG carriers ("Khannur", "Gimi" and "Hilli")* a 50 % ownership interest in another 1970's build LNG carrier ("Gandria")* a 13,6 % ownership interest in the Australian listed company LNG Ltd.* Golar's current project portfolio* certain financial obligations, notably swap arrangements.In addition, Energy has acquired the subsidiary owning the 1970 builtLNG carrier "Golar Freeze" which is scheduled to be converted to anFSRU vessel. The purchase of the "Golar Freeze" was financed by wayof a seller's credit. Golar has been granted an option to reacquire"Golar Freeze" from Energy when its conversion to FSRU vessel iscompleted. Energy will have an identical option to sell "GolarFreeze" to Golar. The price to be paid by Golar in this transactionshall equal the aggregate of the seller's credit and the conversioncost of the vessel.Subsequent to the restructure Golar was pleased to announce thatEnergy had completed an equity offering. A total of 55 million shares(USD 110 million) were issued mainly to International and Norwegianinstitutional investors. Attached to the offering is a 'green shoe'option. The managers were therefore granted an over allotment option,exercisable for 30 days for an additional 5 million shares (USD 10million). Energy shares are currently trading on the Oslo OTC market,but the process to move to a full listing on the Oslo Stock Exchangeis well underway.The underlying rationale for the restructuring was to create anaggressive, well funded high growth, mid stream LNG Company with afocus on regasification projects, liquefaction and transport andtrading of LNG.The remaining Golar LNG business will have a low risk profile with afocus on long term charters. Golar will have a fleet of 5 LNGcarriers (including "Golar Freeze") and a controlling interest inEnergyWhen Golar Freeze commences its charter in Q2 2010, assuming Golareffects its option to reacquire Golar Freeze, the Company will havefive vessels ("LNGC's" and "FSRU's") on long term charter agreementsat attractive rates. The total contract value of these charters isapproximately $1.9 billion and the five vessels will, when GolarFreeze commences its charter in 2010 have an EBITDA of approximately$155[1] million per annum.Based on current debt amortisation plus an assumed increase in debtassociated with Golar Freeze to a level of approximately $125 milliontogether with assumed rates of interest, the five ships will generateapproximately $75 million[2] per annum in free cash after debtservice and net of minority interests once the Golar Freeze is onhire, which is expected to be in the second quarter of 2010.It is the Company's intention to distribute the significant majorityof its cash generation to shareholders by way of dividend. As notedabove when Golar Freeze commences its charter in the second quarterof 2010, the five vessels will generate approximately $75 million infree cash flow after debt service. In 2013 the debt in respect ofGolar Mazo will be fully paid down and the increase in free cash flowwill be approximately $15 million p.a. (after minority interests). The Company expects dividend payments to commence from no later thanthe second quarter of 2010. The commencement of dividend paymentswill however be dependant, in particular, upon raising the requireddebt financing in respect of the Golar Freeze. Golar intends, inaddition, to distribute some of its shares in Energy as a specialdividend to shareholders in second half of 2009.Operational ReviewShippingTrading performance of the Company's vessels operating in thespot/short term market weakened over the quarter as was expected.Rates have been depressed due to a reduction in demand for LNG(especially in the Far East) and an oversupply of LNG Shippingtonnage due to project delays and LNG plant outages.However, there are some demonstrable signs of improvement with anumber of FOB cargoes soaking up spot market tonnage in the Atlanticbasin, new LNG production ramping-up or coming to market over thenext few months and increasing use of floating storage. This shouldease the vessel over-supply, especially the growing disparity indemand for shipping between the East & West markets which has becomeevident over the last month or two. With an already limited amountof tradable tonnage in the West any vessels employed to load AtlanticBasin cargoes will change the scenery of the market and shouldprovide (along with Terminal compatibility issues and an increasedneed for economic and efficient vessels due to eroding commoditymargins) an upward price push as we move into the Autumn and Winterperiod.Indeed, two of the Company's vessels, Golar Arctic and Ebisu, haverecently been fixed on short-term charters from mid-August afterprolonged periods of idle time at rates above those seen in thesecond quarter.The longer term LNG Shipping market is becoming interesting withAustralian developments on both East and West coast leading the wayand BG currently in the market for up to two vessels for between 2and 8 years. Additionally there have been no orders so far this yearfor LNG tankers (and only six placed in 2008). Furthermore, only twotankers are scheduled for delivery in 2012 and there are indicationsare that some new supply projects are also considering employingexisting tonnage rather than ordering new vessels.RegasificationPositive progress continues on Golar's strategy to be a world leaderin floating regasification solutions and the recent restructuring ofthe Company and establishment of Golar LNG Energy creates theplatform to grow this business. Golar LNG Energy places a highpriority on securing additional floating regasification commitments.OutlookGlobal market inquiry for new floating regasification projectsremains strong, particularly in non-OECD countries. During 2Q09,Israel issued an Prequalification Document ("PQ") to be followed byan Invitation to Bid in 1Q10 for an offshore LNG Receiving Terminal.Additionally, market reports suggest Indonesia and Uruguay ITBs willfollow in the coming months. In addition to formal tenders, Golar LNGEnergy is developing numerous other projects directly with interestedparties.Golar LNG Energy is aggressively pursuing new business and is wellpositioned to deliver 'fast track' projects to market. With newliquefaction plants now coming on-stream against weaker short andmid-term pricing fundamentals, new developers should have a 'windowof opportunity' to fast track their projects.Current projectsAfter departure from Keppel shipyard in Singapore Golar Wintercollected a cargo of LNG in Trinidad en-route to Petrobras's PecemTerminal, Brazil. Initial commissioning and testing commenced inPecem before the vessel departed for Petrobras's Rio Terminal for afurther period of testing. The vessel then left Rio and together withGolar Spirit has split load a full cargo brought to Pecem by anotherLNG carrier. Golar Winter is now returning to Rio to complete testingand commissioning in September. During the testing period some minormodification work has been required to the vessel and the vessel isexpected to commence its long term charter agreement in September.Detailed engineering for the Golar Freeze FSRU project is now welladvanced and the site team are now being mobilised to supervise thevessel conversion process at Keppel Shipyard. Construction of theregas-skids is well underway, and Keppel have commencedprefabrication for the conversion. Golar Freeze will enter theshipyard early September and is scheduled to commence operations withthe Dubai Supply Authority in the second quarter of 2010.LiquefactionGladstone ProjectGood progress continues to be made on the Gladstone LNG project. Inaddition to the milestones reported in last quarter's report theCompany is encouraged by positive results from technical reviewscarried out by Foster Wheeler and SK Engineering of the technology tobe used in the project; good progress on final FEED; acceptance ofthe membrane tank technology by the Queensland approving authoritiesand progress towards the selection of an LNG industryexperienced/proven Project Management Consultant.Golar has in parallel with the project development activity continueda dialogue with prospective LNG buyers. Discussions with the shortlisted buyers are progressing positively and the Company anticipatesthe satisfactory conclusion of an HOA in the fourth quarter.PTTEP Floating LNG ProjectsGolar recently announced that it had signed agreements to jointlyenter into FEED ("Front End Engineering and Design") with PTTEP inrelation to developing a floating LNG project offshore North WesternAustralia in respect of the Coogee Resources oil and gas fieldsrecently acquired by PTTEP. Golar's agreement with PTTEP provides foran option for Golar to farm into the gas reserves held by PTTEPresulting from its acquisition of Coogee Resources on a 50:50 basis.The FEED study will involve the complete scope of the projectincluding the development of the upstream gas fields as well as thefloating liquefaction unit ("FLNG unit"). Both new buildings andconversion of existing assets will be considered for the FLNG unit.The FEED studies have commenced and the next milestone will be thecompletion of the PRE FEED studies in the first half of 2010.In addition to the Coogee project Golar and PTTEP are also looking atother potential FLNG opportunities.MarketThe first half of 2009 has seen a significant amount of liquefactionplant outages. Although outages are a normal part of thecommissioning process at new LNG trains, most of this year's closureshave been unscheduled and extended.Recent closures have been seen at Sakhalin-T2, Tangguh T1 andQatargas-2 T4. Snohvit is also planning another three-month outagefrom mid-August at the end of which the plant will be operating atfull capacity. North West Shelf and Atlantic LNG also planmaintenance this quarter. The security situation continues to hamperoutput from Nigeria and in Algeria exports have also been reduced dueto feed-gas supply problemsNonetheless confidence remains high that these plants will resumecapacity production in the near term and with new start-ups, furtherfloating storage, new trade routes and diversions, which should allbe positive for LNG Shipping and trading.Additionally new start-ups continue to bring more product to themarket with Sakhalin-2's 4.8 MTPA T2 now producing. The second 3.8MTPA Tangguh train will begin operating in September and Yemen LNG's3.35 MTPA Train 1 is undergoing commissioning. Further, Qatar'sRasgas Train 6 officially started production in mid August andanother 15 MTPA from Qatargas-2 T 5 and RasGas T7 is also due on lineby end-year.OutlookFollowing the creation of Golar LNG Energy the mission of Golar LNGLimited's has been reduced to the following objectives:* Operate its five vessels in a safe, professional and cost efficient way.* Be an active shareholder and maximize the value of the Company's share holding in Golar LNG Energy* Organize the Company's financing with the purpose of optimising cash flow in order to be able to sustain the highest possible long-term dividend payment to shareholders.Whilst the short-term LNG shipping sector has been depressed duringthe first half of 2009 there are discernable signs of improvement andthe overall outlook for the LNG sector looks positive. Spot vesselearnings are expected to be somewhat improved in the third quarter.It is further anticipated that the utilisation of the LNG fleet willimprove over the next three to five year period. Increased LNGproduction, lower vessel supply growth and a focus on clean cheapenergy will be the major contributors.The results for Q3 will influenced by a termination of the Company'sequity swap in respect of Arrow Energy realising income ofapproximately $9 million, of which approximately $7.8 million will bebooked as income in the third quarter of 2009.The creation of Golar LNG Energy provides a platform for growthwithin the mid-stream of the LNG supply chain and Energy plans toaggressively pursue the development of its regasification andliquefaction projects as well as shipping and trading opportunities.The creation of Energy has also paved the way for the transformationof Golar LNG Ltd, into a high paying dividend stock with significantgrowth opportunity linked to its investment as major shareholder inGolar LNG Energy.Forward Looking StatementsThis press release contains forward looking statements. Thesestatements are based upon various assumptions, many of which arebased, in turn, upon further assumptions, including examination ofhistorical operating trends made by the management of Golar LNG.Although Golar LNG believes that these assumptions were reasonablewhen made, because assumptions are inherently subject to significantuncertainties and contingencies, which are difficult or impossible topredict and are beyond its control, Golar LNG cannot give assurancethat it will achieve or accomplish these expectations, beliefs orintentions.Included among the factors that, in the Company's view, could causeactual results to differ materially from the forward lookingstatements contained in this press release are the following:inability of the Company to obtain financing for the new buildingvessels at all or on favourable terms; changes in demand; a materialdecline or prolonged weakness in rates for LNG carriers; politicalevents affecting production in areas in which natural gas is producedand 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; adoptionof new rules and regulations applicable to LNG carriers and FSRU's;actions taken by regulatory authorities that may prohibit the accessof LNG carriers or FSRU's to various ports; our inability to achievesuccessful utilisation of our expanded fleet and inability to expandbeyond the carriage of LNG; our ability to complete on ourrestructuring plans; increases in costs including: crew wages,insurance, provisions, repairs and maintenance; changes in generaldomestic and international political conditions; the current turmoilin the global financial markets and deterioration thereof; changes inapplicable maintenance or regulatory standards that could affect ouranticipated dry-docking or maintenance and repair costs; our abilityto timely complete our FSRU conversions; failure of shipyards tocomply with delivery schedules on a timely basis and other factorslisted from time to time in registration statements and reports thatwe have filed with or furnished to the Securities and ExchangeCommission, including our Registration Statement on Form 20-F andsubsequent announcements and reports.Nothing contained in this press release shall constitute an offer ofany securities for sale.August 28, 2009The Board of DirectorsGolar LNG LimitedHamilton, BermudaQuestions should be directed to:Golar Management Ltd - +44 207 063 7900:Graham Robjohns: Chief Financial Officer[1] Based on current operating cost expectations[2] Based on current interest rate swap rates and an assumed rate forlibor of 3.5%http://hugin.info/133076/R/1337848/318968.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 28.08.2009 - 08:41 Uhr
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