Golar LNG Q2 Results 2011
(Thomson Reuters ONE) -
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.
Questions should be directed to:
Golar Management Limited - +44 207 063 7900
Doug Arnell - Chief Executive Officer
Brian Tienzo - Chief Financial Officer
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
This announcement is distributed by Thomson Reuters on behalf of
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 via Thomson Reuters ONE
[HUG#1539237]
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Datum: 18.08.2011 - 08:50 Uhr
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