Business Context and Reporting Period
Company: Golar LNG Limited (Golar)
Filing Type: Form 6-K (Unaudited Interim Financial Report)
Reporting Period: Six months ended June 30, 2021
Business Overview: Golar provides infrastructure for the liquefaction, transportation, regasification, and downstream distribution of LNG. The company operates three reportable segments: Shipping, FLNG (Floating Liquefied Natural Gas), and Corporate and other. Following the April 15, 2021, disposal of Golar LNG Partners LP and Hygo Energy Transition Ltd to New Fortress Energy (NFE), the "Power" segment is no longer reported.
Key Financial Metrics
| Metric (in thousands USD) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 |
|---|---|---|
| Total Operating Revenues | $230,114 | $224,801 |
| Adjusted EBITDA | $144,638 | $143,358 |
| Net Income (Loss) | $570,439 | $(214,676) |
| Net Income from Continuing Operations | $2,275 | $(37,636) |
| Net Income from Discontinued Operations | $568,164 | $(177,040) |
| Cash and Cash Equivalents (Total) | $338,540 | $265,196 |
| Total Debt (Net of Deferred Costs) | $(2,379,581) | $(2,350,782) |
| Net Cash Provided by Operating Activities | $110,650 | $45,878 |
Material Changes vs. Prior Period
- Discontinued Operations: The primary driver of the net income turnaround was a $575.1 million gain on the disposal of Golar Partners and Hygo to NFE, compared to a loss in the prior year. This transaction resulted in the reclassification of these entities as discontinued operations.
- Operating Revenues: Total operating revenues increased by 2.4% ($5.3 million) to $230.1 million. The FLNG segment saw a 1% increase due to overproduction revenue, while the Shipping segment revenues decreased slightly by 1% due to lower daily charterhire rates, despite improved fleet utilization (98% vs. 94%).
- Derivative Gains: The company recorded an unrealized gain of $81.2 million on its oil derivative instrument (linked to the Hilli FLNG project), compared to a loss of $39.6 million in the prior year, driven by recovering oil prices.
- Contingencies: A $73.3 million liability was recorded for a UK tax lease settlement with HMRC, classified as a non-operating loss.
- Interest Expense: Decreased by 24% ($9.0 million) to $29.0 million, primarily due to refinancing activities and repayments of specific facilities in the prior year.
Guidance, Outlook, and Risks
- Outlook & Developments:
- Hilli Capacity: Agreements signed to increase Hilli FLNG utilization by 200,000 tons annually starting January 2022, with an option to increase further to 1.6 million tons annually from 2023.
- UK Tax Settlement: Management is confident in a potential settlement with HMRC regarding UK tax leases, with the $73.3 million liability recorded as a financing cash outflow.
- Debt Refinancing: The Golar Tundra put option maturity was extended to January 2022, contingent on the refinancing of 2017 Convertible Bonds.
- Risks & Contingencies:
- Liquidity: Significant debt maturities and put options are due in late 2021 and early 2022 (including $402.5 million in Convertible Bonds and various facility put options). Management is actively discussing refinancing and asset monetization (specifically NFE shares) to meet obligations.
- Market Volatility: Risks include fluctuations in LNG charter rates, oil prices, and the impact of the COVID-19 pandemic on demand and project timelines.
- Project Execution: Risks related to the Gimi FLNG conversion schedule and the ability to secure financing for future conversions.
Investor Verification Checklist
- Debt Maturity Profile: Verify the company's ability to refinance the $402.5 million 2017 Convertible Bonds due in February 2022 and the various vessel facility put options maturing in early 2022.
- NFE Share Valuation: Assess the fair value and liquidity of the 18.6 million NFE shares held as consideration for the Hygo/Golar Partners disposal, noting the mark-to-market loss of $86.7 million recorded in the period.
- UK Tax Liability: Confirm the final settlement terms with HMRC regarding the $73.3 million liability and its classification as a financing outflow.
- Continuing Operations Profitability: Analyze the underlying profitability of continuing operations (Adjusted EBITDA of $144.6 million vs. Net Income from Continuing Operations of $2.3 million) to understand the impact of non-cash items and interest expenses.
- FLNG Project Costs: Monitor capital expenditures for the Gimi conversion, with $168.4 million added to assets under development in the first half of 2021.