Business Context and Reporting Period
Company: Golar LNG Limited (Golar)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 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 approval of mergers involving affiliates Golar Partners and Hygo, the "Power" segment was reclassified as discontinued operations.
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2021 | Q1 2020 |
|---|---|---|
| Total Operating Revenues | $125,827 | $122,559 |
| Adjusted EBITDA | $77,612 | $76,208 |
| Net Income (Loss) | $63,104 | $(91,251) |
| Net Income Attributable to Stockholders | $25,364 | $(104,247) |
| EPS (Basic & Diluted) - Continuing Ops | $0.29 | $(0.67) |
| Cash and Cash Equivalents (Total) | $298,895 | $303,356 |
| Restricted Cash | $148,959 | $163,181 |
| Total Debt (Net of Deferred Costs) | $(2,373,882) | $(2,350,782) |
| Net Cash Provided by Operating Activities | $46,104 | $6,153 |
Material Changes vs. Prior Period
- Profitability Turnaround: The company reported a net income of $63.1 million in Q1 2021, a significant improvement from a net loss of $91.3 million in Q1 2020. This was driven largely by a $78.1 million swing in gains/losses on derivative instruments (from a $54.7M loss to a $23.4M gain) and a reduction in losses from discontinued operations.
- Revenue Growth: Total operating revenues increased by 2.7% to $125.8 million. The "Corporate and other" segment saw a 70% revenue increase to $8.6 million, primarily due to new vessel management fees from the LNG Croatia O&M agreement.
- Segment Performance:
- Shipping: Adjusted EBITDA decreased slightly by 4% to $39.5 million. Average daily Time Charter Equivalent (TCE) remained stable at $61,700.
- FLNG: Adjusted EBITDA remained flat at $41.8 million. Revenue was stable, but the company lost $2.5 million in realized gains on oil derivatives compared to the prior year due to lower Brent crude prices.
- Discontinued Operations: Losses from discontinued operations (primarily Hygo and Golar Partners) improved significantly, decreasing from a $37.9 million loss in 2020 to a $6.2 million loss in 2021.
Guidance, Outlook, and Risks
Management Commentary and Recent Developments
- Mergers Completed: On April 15, 2021, Golar completed the merger of Golar Partners and Hygo with New Fortress Energy (NFE). Golar received $75.7 million in cash and NFE stock for its Golar Partners stake, and $50 million in cash plus NFE stock for its Hygo stake. An estimated aggregate gain of $650-$660 million is expected from these disposals.
- Leadership Changes: In April 2021, Iain Ross resigned as CEO. Karl Fredrik Staubo was appointed CEO, and Eduardo Maranhao was appointed CFO.
- Share Repurchase: The board approved a $50 million share repurchase program. As of May 6, 2021, $13.7 million had been spent to repurchase 1.2 million shares.
- Financing Amendments: Amendments to sale and leaseback facilities for four vessels (Golar Ice, Kelvin, Glacier, Snow) require a $60 million prepayment in July 2021 but result in $42 million in total savings.
Risks and Contingencies
- Going Concern: Management is in ongoing discussions with financial institutions to ensure liquidity for upcoming debt maturities, including the Golar Tundra put option (June 2021) and 2017 Convertible Bonds (February 2022).
- UK Tax Lease Challenge: HMRC is challenging the tax benefits of certain UK tax leases. The potential exposure is estimated between $0 and $167.3 million. Golar has submitted an appeal and remains confident in its position.
- Project Delays: The Gimi FLNG conversion target connection date was extended to 2023.
- Market Volatility: Risks include fluctuations in LNG charter rates, vessel values, and the impact of the COVID-19 pandemic on global demand.
Investor Verification Checklist
- Merger Proceeds: Verify the final valuation and settlement of the Golar Partners and Hygo mergers with NFE, specifically the value of NFE stock received versus cash.
- Liquidity Position: Confirm the company's ability to meet the $60 million prepayment due in July 2021 and the upcoming debt maturities (Golar Tundra, Convertible Bonds) given the restricted cash balance of ~$149 million.
- Derivative Exposure: Review the sensitivity of the "Realized and unrealized gain/loss on oil derivative instrument" to future Brent crude oil price movements, as this significantly impacts reported net income.
- UK Tax Litigation: Monitor the status of the HMRC appeal regarding the UK tax lease structures and any potential cash outflows required.
- Share Repurchase Execution: Track the remaining $36.3 million authorization under the share repurchase program and its impact on share count and liquidity.