Business Context and Reporting Period
Company: Golar LNG Limited (Golar)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six months ended June 30, 2012
Business Overview: Golar is a mid-stream LNG company engaged in the transportation, regasification, liquefaction, and trading of LNG. As of June 30, 2012, the company operated a fleet of 13 vessels (nine LNG carriers and four Floating Storage Regasification Units or FSRUs). The company has firm contracts for 13 newbuilding vessels scheduled for delivery between 2013 and 2015.
Key Financial Metrics
| Metric (in thousands USD) | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 |
|---|---|---|
| Operating Revenue | $190,061 | $141,455 |
| Net Income | $69,191 | $20,120 |
| Net Income Attributable to Golar | $50,592 | $15,727 |
| Earnings Per Share (Basic & Diluted) | $0.63 | $0.22 |
| Operating Cash Flow | $67,608 | $26,055 |
| Investing Cash Flow | ($191,115) | ($172,088) |
| Financing Cash Flow | $134,083 | $130,213 |
| Cash and Cash Equivalents (End of Period) | $77,489 | $148,897 |
| Total Restricted Cash | $224,232 | $213,282 |
| Long-Term Debt | $972,800 | $771,500 |
| Capital Lease Obligations | $405,800 | $405,800 |
| Average Daily TCE (Non-GAAP) | $94,100 | $86,200 |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenue increased 34% to $190.1 million, driven by higher spot market charter rates and the commencement of new charters for the Gimi and NR Satu.
- Profitability Surge: Net income attributable to Golar increased 222% to $50.6 million. This was significantly aided by a $4.1 million gain on the acquisition of the remaining 50% interest in Bluewater Gandria.
- Expense Increases: Vessel operating expenses rose 51% to $45.7 million, primarily due to $13.5 million in reactivation costs for the Hilli and Gandria. Depreciation increased 19% due to new assets and capitalized reactivation costs.
- Trading Segment: The LNG trading segment reduced its net loss from $18.0 million in 2011 to $1.2 million in 2012 following a strategic decision to reduce trading activities in late 2011.
- Debt Levels: Long-term debt increased by approximately $201 million, reflecting the issuance of $250 million in convertible bonds in March 2012.
Guidance, Outlook, and Material Events
- Subsequent Equity Offering: In July 2012, Golar Partners (a subsidiary) completed a public offering of 6.325 million common units, raising approximately $188 million in net proceeds.
- Asset Sale: On July 19, 2012, Golar sold the FSRU NR Satu to Golar Partners for $385 million. Proceeds are intended to fund newbuilding commitments.
- New Contract Award: In July 2012, Golar was awarded the Gas Atacama FSRU project in Chile, a potential 15-20 year lease subject to conditions. If conditions are met, a newbuild LNG carrier will be converted to an FSRU.
- Delisting: Golar shares were delisted from the Oslo Bors on August 30, 2012, following shareholder approval.
- Dividends: A cash dividend of $0.40 per share was declared for the quarter ended June 30, 2012. Golar Partners declared a distribution of $0.44 per unit.
- Risks: Key risks include the inability to secure financing for newbuilds, declines in LNG carrier rates, regulatory changes, and shipyard delivery delays.
Investor Verification Checklist
- Newbuilding Commitments: Verify the status of the $2.4 billion in outstanding newbuilding commitments and the company's ability to secure long-term financing for deliveries in 2013-2015.
- Gas Atacama Conditions: Monitor the satisfaction of conditions for the Gas Atacama FSRU contract by the end of 2012 to confirm the conversion of the newbuild vessel.
- Refinancing of Vendor Financing: Track the refinancing of the $155 million vendor financing provided to Golar Partners for the NR Satu purchase.
- Spot Market Exposure: Assess the impact of fluctuating spot market rates on future TCE performance, given the company's reliance on spot charters for revenue growth.
- Convertible Bond Conversion: Review the terms of the $250 million convertible bonds (3.75% coupon, $55 conversion price) and potential dilution upon conversion.