Business Context and Reporting Period
Company: Golar LNG Limited
Filing Type: Form 6-K (Interim Results)
Reporting Period: Quarter ended March 31, 2021 (Q1 2021)
Key Event: On April 15, 2021, Golar closed the sale of its interests in Golar LNG Partners LP ("GMLP") and Hygo Energy Transition Ltd. ("Hygo") to New Fortress Energy ("NFE"). This transaction simplified the corporate structure, crystallized asset value, and strengthened the balance sheet. The company also appointed Karl Fredrik Staubo as CEO and Eduardo Maranhao as CFO.
Key Financial Metrics
| Metric (in thousands) | Q1 2021 | Q1 2020 | Q4 2020 |
|---|---|---|---|
| Total Operating Revenues | $125,827 | $122,559 | $118,684 |
| Adjusted EBITDA | $77,612 | $76,208 | $78,031 |
| Net Income Attributable to Golar | $25,364 | ($104,247) | $8,126 |
| Contractual Net Debt (Golar's Share) | $2,062,580 | $2,202,108 | $2,065,826 |
| Cash Position (Total) | $298,895 | N/A | $290,872 |
| Unrestricted Cash | $149,936 | N/A | $127,691 |
Shipping Performance: Full fleet average daily Time Charter Equivalent (TCE) was $61,700. TFDE fleet TCE was $65,100. Fleet utilization reached 97%.
Material Changes vs. Prior Periods
- Profitability: Net income swung from a loss of $104.2 million in Q1 2020 to a profit of $25.4 million in Q1 2021. This improvement was driven by a $23.4 million gain on derivative instruments (vs. $2.1 million in Q4) and the absence of significant losses from affiliates previously held.
- Revenue: Total operating revenues increased 3% year-over-year and 6% sequentially. Shipping revenue net of voyage expenses increased by $10.6 million quarter-over-quarter due to improved performance, partially offset by a decrease in FLNG revenue as Hilli reverted to normalized levels after Q4 overproduction billing.
- Debt Reduction: Golar's share of contractual net debt decreased 6% year-over-year to $2.06 billion. The company agreed to a $60 million one-off debt payment across four LNG carriers, resulting in $42 million in cash flow savings and a $102 million reduction in remaining debt principal.
- Derivative Gains: A $10.6 million unrealized gain on the Hilli Brent oil link derivative was recognized due to rising Brent oil prices (from $51.80 to $63.54 per barrel).
Guidance, Outlook, and Risks
Outlook and Management Commentary
- Q2 Shipping Guidance: Golar expects a Q2 TFDE TCE of approximately $50,500 per day, inclusive of an upward adjustment for a loss of hire claim.
- Market View: Management cites strong shipping rates despite seasonality, limited newbuild capacity until 2024, and growing LNG trade (4% CAGR) as supportive of long-term earnings.
- FLNG Growth: The company is pursuing growth in FLNG projects, including tolling and gas molecule ownership. The FLNG Gimi conversion is 69% complete and on budget. Incremental production from Hilli is anticipated to start in Q1 2022.
- Capital Allocation: Following the NFE transaction, Golar holds 18.6 million NFE shares (valued at $780 million as of May 19). These shares may be used for debt optimization, funding growth, or returning value to shareholders. The company continues its share buyback program ($36.3 million remaining).
Risks and Contingencies
- Project Execution: Risks related to the Gimi GTA Project, including potential force majeure claims and counterparty obligations.
- Regulatory: Potential impact of EEXI regulations on steam turbine carriers and changes in emissions rules requiring slower steaming.
- Market Volatility: Exposure to commodity price fluctuations (LNG, Brent Oil) and charter rate volatility.
- Financing: Ability to obtain financing for conversions and refinance maturing debt (e.g., $100 million credit facility maturing Dec 2021, $387.7 million convertible bond maturing Feb 2022).
Investor Verification Checklist
- NFE Transaction Impact: Verify the accounting treatment of the $650 million+ estimated gain on disposal of GMLP and Hygo and the subsequent removal of these affiliates from the balance sheet.
- Debt Maturities: Confirm refinancing plans for the $100 million revolving credit facility (Dec 2021) and the $387.7 million convertible bond (Feb 2022).
- FLNG Gimi Progress: Monitor the $164 million expected remaining contribution for the Gimi conversion and the timeline for commissioning hire in 2023.
- Derivative Exposure: Assess the sustainability of the $10.6 million unrealized gain on the Hilli Brent oil derivative and its sensitivity to oil price fluctuations.
- Share Buyback: Track the utilization of the remaining $36.3 million buyback authorization and the potential use of NFE shares for shareholder returns.