Business Context and Reporting Period
Company: Golar LNG Limited (Golar)
Filing Type: Form 6-K (Unaudited Interim Financial Report)
Reporting Period: Three months ended March 31, 2022
Business Overview: Golar designs, builds, owns, and operates marine infrastructure for LNG liquefaction and regasification. Following the disposal of investments in former affiliates (Golar Partners and Hygo) and the separation of eight LNG carriers into Cool Co in April 2022, the Company has narrowed its strategic focus to Floating Liquefied Natural Gas (FLNG) projects. As of March 31, 2022, the fleet consisted of one LNG carrier, one FSRU, and three FLNGs (including one under conversion).
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2022 | Q1 2021 |
|---|---|---|
| Total Operating Revenues | $79,688 | $77,456 |
| Net Income | $410,014 | $63,104 |
| Net Income Attributable to Stockholders | $345,182 | $25,364 |
| Adjusted EBITDA | $93,446 | $43,470 |
| Cash and Cash Equivalents (Total) | $344,924 | $241,608 |
| Total Debt (Net of Deferred Costs) | $1,641,631 | $1,778,978 |
| Basic EPS (Continuing Ops) | $5.20 | $0.19 |
Liquidity: As of March 31, 2022, total cash and cash equivalents (including restricted cash) were $344.9 million. Restricted cash totaled $135.9 million, primarily related to the Hilli project performance guarantee and legacy UK tax lease liabilities.
Material Changes vs. Prior Period
- Net Income Surge: Net income increased by 550% to $410.0 million, driven primarily by non-operating items rather than core operational growth.
- Non-Operating Gains:
- Derivative Gains: Unrealized gains on oil and gas derivative instruments increased by $157.5 million to $168.1 million due to favorable movements in Brent oil and TTF gas price curves.
- Equity Investment Gains: Other non-operating income included a $344.0 million unrealized mark-to-market gain on the Company's investment in New Fortress Energy (NFE) common stock.
- Discontinued Operations: The Company reported a net loss of $209.2 million from discontinued operations, primarily due to a $218.3 million impairment charge related to LNG carriers classified as held-for-sale for the Cool Co disposal.
- Segment Performance:
- FLNG Segment: Adjusted EBITDA grew 124% to $93.6 million, boosted by $42.6 million in realized gains on oil and gas derivatives and increased capacity utilization.
- Shipping Segment: Adjusted EBITDA remained relatively flat at $4.3 million, with revenues down 31% due to lower charter rates and utilization (97% vs 100% in 2021).
Guidance, Outlook, and Risks
Recent Developments (Post-March 31, 2022):
- NFE Sale: Sold 6.2 million NFE shares in April 2022 for net proceeds of $253.0 million; remaining holding is 12.4 million shares (~6.0%).
- Debt Repayment: Repaid the $131.0 million drawn amount from the Corporate Revolving Credit Facility (RCF) in May 2022.
- Tax Settlement: Settled UK tax lease liability with HMRC in April 2022 for $63.5 million, releasing security interests on the Gandria, Golar Tundra, and Golar Frost.
- Vessel Transactions:
- Completed sale of remaining four LNG carriers to Cool Co in April 2022; Golar retains a 31.25% interest.
- Agreed to convert and sell the Golar Arctic to Snam as an FSRU for $288.0 million (conversion cost est. $160.0 million).
- Sold the Golar Tundra (FSRU) to Snam for $350 million in May 2022.
- Investment: Invested $2.4 million in Aqualung Carbon Capture (4.6% interest) in May 2022.
Risks and Contingencies:
- Project Execution: Risks related to the Gimi GTA Project (BP Greater Tortue/Ahmeyim) and potential force majeure claims.
- Market Volatility: Exposure to fluctuations in LNG carrier rates, commodity prices, and the value of the NFE equity holding.
- Counterparty Risk: Dependence on counterparties (e.g., Hygo, Golar Partners, NFE) to meet indemnification and payment obligations.
- Geopolitical: Impacts from the conflict in Ukraine on supply chains and global energy demand.
Investor Verification Checklist
- Quality of Earnings: Verify the sustainability of the $410M net income, noting that ~$512M of the gain is derived from unrealized mark-to-market movements on derivatives and NFE equity, not core operations.
- Discontinued Operations: Confirm the final accounting treatment and cash proceeds from the Cool Co disposal, including the $218M impairment charge.
- Liquidity Position: Monitor the utilization of the $253M NFE sale proceeds and the status of the $200M Corporate RCF (currently undrawn after May repayment).
- Project Timelines: Track the Notice-to-Proceed status for the Golar Arctic conversion and the Gimi FLNG project, as delays could impact future revenue recognition.
- Debt Covenants: Review compliance with financial ratios (working capital, tangible net worth) given the significant debt load ($1.64B) and recent asset sales.