Golar LNG Limited reports a Q1 2023 Adjusted EBITDA of $84 million and a Net Loss attributable to Golar of $102 million, inclusive of non-cash mark-to-market charges1 of $188 million.

Total Golar Cash1 of $1 billion, inclusive of $113 million of restricted cash.

Based on strong balance sheet position and a solid operational cash flow outlook, Golar reinstates quarterly dividend and will distribute $0.25 per share for Q1 2023.

Approved share buyback program of up to $150 million.

Exited Cool Company Ltd. (“CoolCo”) investment by selling remaining 4.5 million shares raising net proceeds of $56 million.

Reacquired New Fortress Energy Inc. (“NFE”) interest in Golar Hilli LLC for 4.1 million NFE shares and $100 million in cash and exited NFE investment by selling our remaining 1.2 million NFE shares for net proceeds of $46 million.

Credit approval to improve terms of existing Hilli debt facility, reducing debt service cost.

High-graded FLNG conversion candidate by agreeing to sell 1977 built LNG carrier Gandria for net proceeds of $15 million and exercising option to acquire 2004 built LNG carrier Fuji LNG targeted for conversion to a 3.5mtpa MKII FLNG.

Signed Memorandum of Understanding (“MOU”) with Nigeria National Petroleum Corporation (“NNPC”) for joint development of potential FLNG opportunities.

Repurchased $20 million of 2025 maturing Unsecured Bonds and secured approval for amendments to bond terms that increase financial flexibility.

FLNG Hilli maintained its strong operational performance with 100% economic uptime throughout the quarter. On March 15, 2023, Golar completed the repurchase of NFE’s interest in the FLNG Hilli, increasing Golar’s annual run-rate Distributable Adjusted EBITDA1 by approximately $70 million per year between January 1, 2023 and July 2026, and increasing our exposure to an anticipated re-contracting upside in the world’s best performing FLNG. Due to lower Brent oil and Dutch Title Transfer Facility (“TTF”) prices, Q1 2023 Distributable Adjusted EBITDA1 from FLNG Hilli decreased by $20 million from $114 million in Q4 2022 to $94 million in Q1 2023, of which Golar’s increased share was $88 million, compared to $86 million in Q4 2022.

In January 2023, Golar effectively unwound its 2023 and 2024 TTF hedges, locking in approximately $140 million of TTF hedged Distributable Adjusted EBITDA1 and re-gaining full market exposure to its TTF linked production. For the remainder of 2023 and 2024, the locked in TTF Distributable Adjusted EBITDA1, which will be additional to Golar’s share of tolling fees and market linked Brent oil and TTF fee exposure, will be allocated as follows:

• April-December 2023: 100% of TTF linked production unwound securing approximately $68 million of Distributable Adjusted EBITDA1 equivalent to approximately $23 million for each of quarters 2, 3 and 4; and
• Full year 2024: 50% of TTF linked production unwound securing approximately $49 million of Distributable Adjusted EBITDA1 equivalent to approximately $12 million per quarter in 2024.

The FLNG Hilli sale and leaseback facility lenders have agreed to reduce the facility margin and extend the amortization profile and duration. Following the credit approved changes, FLNG Hilli’s annual debt service cost will reduce from a current 2023 level of around $126 million to around $93 million. Golar’s 94.6% share of this amounts to $88 million, of which $40 million is principal and $48 million is interest. The new terms extend the facility maturity from 2028 to 2033, increasing financial flexibility in connection with re-contracting of the existing July 2026 expiring contract with Perenco. Subject to execution of customary documentation, the new terms are expected to become effective in Q3 2023.

FLNG Gimi: FLNG Gimi is now 94% technically complete. The yard departure date for FLNG Gimi has been postponed from 1H 2023 to Q3 2023 to allow for vessel completion and testing and a greater proportion of commissioning work to be performed in Singapore where requisite skills and resources are more accessible. The updated sail away timing is not expected to impact first feed gas on the Tortue project. As a result of project delays, pre-commissioning contractual cash flows under the Lease and Operate Agreement (“LOA”) have started. A LOA contract interpretation dispute regarding parts of these pre-commissioning contractual cash flows currently exists between Golar and BP, regarding payments due from BP to Golar as a result of the delays previously announced in 2020 related to force majeure claims. The dispute does not impact wider execution of the 20-year project that is expected to unlock around $3 billion of Adjusted EBITDA Backlog1 to Golar, equivalent to Annual Adjusted EBITDA1 of around $151 million.

FLNG business development: Golar signed a MOU with NNPC for joint development of FLNG opportunities in Nigeria. Following the signing of the MOU, both parties have allocated significant resources to initially develop a named gas field for a potential FLNG project. Material technical and commercial progress has been made. The MOU has a 5-year duration, with both parties’ ambition to explore potential for multiple FLNG projects to be deployed on proven stranded and associated gas fields in Nigeria.

NNPC is Africa’s largest oil producer and Nigeria’s most important energy stakeholder with a strategy to expand gas exports. Nigeria’s gas specifications and met-ocean conditions are ideally suited to Golar’s FLNG solutions.

Recent months have seen a significant increase in interest and momentum for re-contracting alternatives for FLNG Hilli. Several promising projects that have more attractive economics than the current contract are now being discussed. Golar continues to target commercial structures aligned with gas resource owners, focusing on attractive break-even production costs relative to competing global LNG export projects, with upside in commodity price linkage. With its leading operational track record and near-term availability, FLNG Hilli is uniquely positioned to monetize gas reserves. A fully utilized FLNG Hilli has annual revenue potential in excess of $1 billion based on current LNG forward curves, to be shared between gas resource owners and Golar. Concluding a new charter for FLNG Hilli is therefore a commercial priority for the company.

As a result of increasing momentum for new FLNG opportunities, Golar high-graded its FLNG conversion candidate by selling the Gandria and exercising its option to acquire the 148,000cbm moss design carrier Fuji LNG targeted for the MKII FLNG conversion project. Sale of the Gandria for net proceeds of $15 million is subject to the satisfaction of customary closing conditions and is expected to complete in the second half of 2023. Of the $73 million purchase price balance for Fuji LNG, $11 million will be paid in Q2 2023 with the remainder in early 2024, when Golar will take delivery of the vessel. With key long-lead items on order, focus is now on a yard EPC contract and financing. A final investment decision on the MKII project is linked to securing attractive finance and further visibility on a charter, with strong progress on both fronts during the quarter.

FSRU: Fees earned in respect of the Development Agreement to assist Snam with FSRU Tundra’s drydocking, site commissioning and hook-up amounted to $7 million in Q1 2023. Costs associated with the above are recognized as incurred and amounted to $18 million in Q1 2023, included in project development expenses.

Golar reports today a Q1 2023 net loss attributable to Golar of $102 million, inclusive of non-cash mark-to-market charges1 of $188 million, comprised of:

• TTF and Brent oil of $115 million;
• Listed equity securities of $62 million; and
• Interest rate swaps of $11 million.

The Brent oil linked component of FLNG Hilli’s fees generates additional annual cash of approximately $3.1 million for every dollar increase in Brent Crude prices between $60 per barrel and the contractual ceiling. Billing of this component is based on a three-month look-back at average Brent Crude prices. A $20 million realized gain on the oil derivative instrument was recorded in Q1 2023. Golar has an effective 89.1% interest in these earnings. A Q1 2023 realized gain of $18 million was also recognized in respect of fees for the TTF linked production. Golar has an effective 89.4% interest in these earnings. A $19 million realized gain (100% of which is attributable to Golar) on the hedged component of the quarter’s TTF linked earnings was also recognized during the quarter.

Collectively a $57 million Q1 2023 realized gain on oil and gas derivative instruments was recognized as a result.

The mark-to-market fair value of the FLNG Hilli Brent oil linked derivative asset decreased by $41 million during the quarter, with a corresponding unrealized loss of the same amount recognized in the unaudited consolidated statement of operations. The mark-to-market fair value of the FLNG Hilli TTF natural gas derivative asset decreased by $74 million during the quarter with a corresponding unrealized loss of the same amount recognized in the unaudited statement of operations. A $1 million unrealized loss in respect of the hedged portion of the Q1 2023 TTF linked FLNG Hilli production was also recognized during the quarter. Collectively this resulted in a $115 million Q1 2023 unrealized loss on oil and gas derivative instruments.

During Q1 2023 Golar sold 1.2 million of its 5.3 million NFE shares and repurchased NFE’s interest in FLNG Hilli using its remaining 4.1 million NFE shares as part of the purchase price consideration. A decrease in the NFE share price between January 1, 2023 and March 15, 2023, when Golar’s re-acquisition of NFE’s interest in FLNG Hilli closed, resulted in the recognition of a Q1 2023 realized mark to market loss of $62 million. The fair value of these shares had decreased from $42.42 per share as of December 31, 2022 to $28.51 on March 15, 2023. Together with $11 million of dividend income from NFE, this collectively amounted to $51 million of other non-operating losses for the quarter.

Balance Sheet and Liquidity:

As of March 31, 2023, Total Golar Cash1 was $1.0 billion, comprised of $889 million of cash and cash equivalents and $113 million of restricted cash. Of the $131 million of restricted cash, $18 million is attributable to the FLNG Hilli consolidated lessor-owned VIE.

Within the $344 million current portion of long-term debt and short-term debt as at March 31, 2023 is $321 million in respect of the FLNG Hilli lessor-owned VIE subsidiary that Golar is required to consolidate. Having closed the repurchase of NFE’s interest in FLNG Hilli and assumed NFE’s share of Hilli debt, Golar’s share of Contractual Debt1 has increased to $1,152 million as of March 31, 2023. Deducting Total Golar Cash1 of $1.0 billion from Golar’s share of Contractual Debt1 of $1,152 million leaves debt of $152 million.

During Q1 2023, Golar repurchased $4 million of the $300 million Unsecured Bonds, reducing the outstanding balance to $155 million as of March 31, 2023. In April, a further $16 million of the Unsecured Bonds were repurchased, reducing the outstanding balance to $139 million. On May 25, 2023, in return for a 3.75% fee, the remaining bondholders agreed to amend certain bond terms in order to allow for the earlier payment of dividends and for additional share buybacks.

Inclusive of $16 million of capitalized interest, $42 million was invested in FLNG Gimi during the quarter, with the total FLNG Gimi Asset under development balance as at March 31, 2023 amounting to $1.2 billion. Of this, $545 million was drawn against the $700 million debt facility secured by FLNG Gimi. Both the investment and debt drawn to date are reported on a 100% basis. Golar’s share of remaining capital expenditure to be funded out of equity, net of the Company’s share of remaining undrawn debt amounts to $181 million. Subsequent to the quarter end, a further $75 million was drawn down on the debt facility which now stands at $620 million.

Expenditure on long-lead items and engineering services for the MKII FLNG amounted to $75 million as of March 31, 2023, and is included in other non-current assets.

Corporate and Other Matters:

As at March 31, 2023, Golar had 107.4 million shares issued and outstanding. There were also 1.4 million outstanding stock options with an average price of $15.74, 0.2 million unvested restricted stock units, and 0.04 million unvested performance stock units awarded.

The Board of Directors has authorized a new share repurchase program under which the Company may repurchase up to $150 million of Golar’s outstanding stock. The Company intends to opportunistically repurchase shares from time to time for cash in open market transactions or in privately-negotiated transactions in accordance with applicable federal securities laws. Share repurchases will be executed only during periods where the executive team and the Board of Directors are not aware of material inside information that would likely affect a seller’s decision to sell, with the timing and the amount of any repurchases being determined by an evaluation of market conditions, capital allocation alternatives, and other factors.

Golar’s Board of Directors has also approved a total dividend of $0.25 per share in respect of Q1 2023 to be paid on June 16, 2023. The record date will be June 12, 2023. The dividend has been set at a sustainable level that allows for potential for growth after Gimi has reached COD.

Source: Golar LNG