FLNG growth prospects boost Golar’s forecasts

Thursday, 24 November 2022
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Golar LNG Limited has reported net income of $141.1 mill and adjusted EBITDA of $85.2 mill for the third quarter of this year. 

The company revealed it had strong customer development for FLNG growth projects, including working with an upstream company for potential integrated FLNG project, and paid development agreements with a super major and an independent E&P company for new FLNG opportunities.

In 3Q22, FLNG ’Hilli’ customer exercised 0.2 mill tonnes per annum pursuant to its 2023 plus capacity option, which will result in 2023 to July, 2026 TTF linked production volumes continuing at 2022 levels.

Golar also said that based on the strong global interest for increased LNG production, the company believed that securing an attractive delivery slot for a Mk II FLNG improves potential commercial terms for FLNG growth contracts.

Therefore, around $300 mill of long lead items have been ordered to secure delivery of a new 3.5 mill tonnes per annum unit in 2025.

Conversion of FLNG ’Gimi’ for her 20-year contract with bp scheduled to commence in 4Q23 was 90% technically complete on 15th November, 2022, on track for a 1H23 sail away.

Pre-commissioning of equipment has commenced. Once commissioned and delivered to the customer, FLNG ’Gimi’ is expected to unlock around $3 bill of earnings backlog to Golar, equivalent to $151 mill in annual adjusted EBITDA.

Distributable adjusted EBITDA from FLNG ’Hilli’ increased by $1.9 mill from $92.5 mill in 2Q22 to $94.4 mill in 3Q22, of which Golar's share was $64.1 mill, compared to $62.5 mill in the previous quarter.

FLNG ’Hilli's’ scheduled 3Q22 maintenance window was extended by several days as a result of unscheduled maintenance work.

After receiving instructions that FLNG ’Hilli’ should continue to produce 0.2 mill tonnes per annum of TTF linked production from 2023 until the end of the current contract in July, 2026, Golar entered into three swap transactions collectively securing, subject to vessel availability, around $250 mill of incremental earnings.

“We believe that securing attractive delivery of our next FLNG unit will increase Golar’s ability to drive value with prospective FLNG clients. On the back of a growing opportunity set for new FLNG growth projects, and noting the premium available to providers for early delivery of liquefaction solutions, Golar has placed orders for long-lead items targeted for a 3.5 mill tonnes per annum Mark II FLNG, that can also be interchangeably used on our other FLNG designs.

“Representing a total commitment of approximately $300 mill, ordering of these long-lead items, primarily comprised of compressors, gas turbines, cold boxes and heat recovery steam generators, puts Golar in a position to deliver an FLNG during 2025,” the company said.

‘Tundra’ charter

Following the sale of FSRU ’Tundra’ to Snam in May, 2022, Golar agreed to charter the vessel back until November, 2022. Hire received from sub-chartering the vessel to a third party, net of operating costs and hire paid to Snam, amounted to $3.1 mill in 3Q22. Golar also signed a services agreement to assist Snam with drydocking, site commissioning and hook-up.

The ‘Tundra’ upgrades are expected to amount to $23.5 mill between 3Q22 and 1H23, including an administrative fee to Golar.

Prior to the receipt of a Notice-to-Proceed to convert the ’Golar Arctic’ into an FSRU followed by its sale to Snam as a converted FSRU, the vessel remains under Golar's ownership and continues to trade as an LNGC.

During the quarter, Golar secured a 12-month charter commencing mid-September, which is expected to generate around $16 mill of annual adjusted EBITDA.

As of September 30, 2022 Golar had $498.2 mill of cash and cash equivalents and $130.9 mill of restricted cash, with the quarterly decrease in cash and cash equivalents and increase in restricted cash largely attributable to $38.5 mill of collateral posted for guarantees in respect of the ’Golar Arctic’ FSRU conversion contract with Snam.

Of the $130.9 mill of restricted cash, $17.5 mill is also attributable to the FLNG ’Hilli’ lessor-owned VIE. 

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