Business Context and Reporting Period
This Form 6-K filing by Golar LNG Limited covers recent developments as of February 2017, with financial data referencing the period ending December 31, 2016, and capitalization data as of September 30, 2016. The Company is a foreign private issuer incorporated in Bermuda, engaged in the liquefied natural gas (LNG) shipping and floating liquefaction (FLNG) sectors. Key operational updates include the conversion of the Hilli and Gimi vessels to FLNGs, the Fortuna Project in Equatorial Guinea, and the Sergipe power project in Brazil.
Key Financial Metrics
Liquidity and Cash Position:
- As of Dec 31, 2016 (Preliminary): Expected cash, cash equivalents, restricted cash, and short-term receivables total $442.1 million (excluding long-term restricted cash).
- As of Sep 30, 2016 (Actual): Total cash and equivalents were $340.9 million.
- As of Sep 30, 2016 (As Adjusted): Adjusted for recent transactions, total cash and equivalents were $461.1 million.
Debt and Capitalization (As of Sep 30, 2016, As Adjusted):
- Total Debt: $1,978.2 million (includes short and long-term debt and related party debt).
- Total Shareholders' Equity: $1,894.4 million.
- Total Capitalization: $3,872.6 million.
Revenue and Profit:
- Fourth Quarter 2016 financial results are preliminary and not finalized.
- Management expects Q4 2016 revenues to be lower than Q3 2016 due to decreased vessel utilization, despite improving time charter rates.
- Operating costs are expected to be broadly in line with Q3 2016, while administrative expenses are expected to be higher due to increased staffing and business development.
Material Changes and Developments
- Margin Loan Facility: Secured a commitment from Citibank N.A. for a new $150.0 million term loan facility to fund the redemption of convertible bonds maturing in March 2017. The facility carries an interest rate of LIBOR plus 3.95% and is secured by Golar Partners common units.
- Convertible Bonds: Repurchased $30.3 million of secured convertible bonds as of December 31, 2016. The remaining bonds are to be settled using cash on hand and proceeds from the Margin Loan Facility.
- Equity Offering: Closed a registered offering of 7.5 million common shares in November 2016, generating net proceeds of $170.4 million.
- FLNG Conversions:
- Hilli: Conversion is approximately 95% complete; delivery expected in Q2 2017.
- Gimi: Contract extended to December 31, 2017; $30 million payment made to Keppel. Final notice to proceed and $95 million payment required by December 30, 2017.
- Gandria: Original contract lapsed; a new contract is negotiated with a March 31, 2017 deadline for the final notice to proceed.
- OneLNG Fortuna Project: Signed a Shareholders' Agreement with Ophir Holdings to develop a gas concession in Equatorial Guinea. Projected cost is $2 billion with first gas expected in H1 2020. Approximately $1.2 billion in project debt financing terms have been agreed with Chinese lenders.
- Golar Power Sergipe Project: Final investment decision approved for a 1,515 MW power plant in Brazil. Golar Power increased its ownership stake from 25% to 50%. Capital contributions of approximately $20 million each were made by Golar LNG and Stonepeak Infrastructure Partners in January 2017.
Guidance, Outlook, and Risks
Outlook:
- Hilli delivery is targeted for Q2 2017, with commissioning starting September 2017.
- Final investment decisions for the Fortuna Project are expected in H1 2017.
- Q4 2016 results are preliminary; actual consolidated results may differ materially upon finalization of the financial closing process.
Risks and Contingencies:
- Contract Deadlines: The new Gandria conversion agreement will automatically terminate on April 1, 2017, if the final notice to proceed is not issued by March 31, 2017.
- Financing Conditions: The Margin Loan Facility and Fortuna Project debt financing are subject to the execution of operative documents and satisfaction of customary conditions.
- Market Conditions: Revenue is sensitive to vessel utilization rates, which decreased in Q4 2016 despite rate improvements.
- Regulatory Approval: Progress on the Fortuna Project depends on ongoing discussions and approvals from the government of Equatorial Guinea.
Investor Verification Checklist
- Verify the execution of the operative documents for the $150 million Margin Loan Facility and the $1.2 billion Fortuna Project debt financing.
- Confirm the issuance of the final notice to proceed for the Gandria conversion by the March 31, 2017 deadline to avoid contract termination.
- Monitor the finalization of Q4 2016 financial results for material adjustments to the preliminary revenue and expense figures provided.
- Track the status of the Final Investment Decision (FID) for the Fortuna Project, expected in H1 2017.
- Review the final settlement of the convertible bonds maturing in March 2017.