Business Context and Reporting Period
Company: Golar LNG Limited (Bermuda-based foreign private issuer)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2011.
Business Overview: The Company operates in two primary segments: Vessel Operations (chartering LNG carriers and FSRUs) and LNG Trading (physical and financial risk management). The filing incorporates an Operating and Financial Review and unaudited financial statements.
Key Financial Metrics
| Metric (in thousands USD) | 3 Months Ended June 30, 2011 |
6 Months Ended June 30, 2011 |
|---|---|---|
| Operating Revenue | $73,968 | $141,455 |
| Net Income (Loss) | $6,304 | $20,120 |
| Net Income Attributable to Golar LNG Ltd | $(621) | $15,727 |
| Operating Cash Flow | $1,755 | $26,055 |
| Investing Cash Flow | $(151,656) | $(172,088) |
| Financing Cash Flow | $170,107 | $130,213 |
| Cash and Cash Equivalents (End of Period) | $148,897 | |
| Total Debt (Short + Long Term) | $781,341 | |
| Capital Lease Obligations | $416,900 | |
| Average Daily TCE (Non-GAAP) | $91,666 | $86,742 |
Material Changes vs. Prior Period
- Revenue Growth: Operating revenue increased 33% year-over-year for the quarter ($74.0M vs. $55.7M) and 30% for the six-month period ($141.5M vs. $109.0M). This was driven by the full quarter revenue recognition from the Golar Freeze FSRU charter with DUSUP and improved spot market rates.
- Profitability Turnaround: The Company reported a net income of $6.3M for the quarter compared to a net loss of $5.5M in the prior year quarter. For the six months, net income was $20.1M versus a loss of $9.6M.
- Expense Reductions: Voyage expenses decreased significantly by 92% in the quarter ($0.8M vs. $10.0M) and 77% for the six months ($4.7M vs. $20.6M) due to vessels being on time charters rather than off-hire.
- Trading Segment Losses: The new LNG Trading segment (Golar Commodities) reported a net loss of $11.7M for the quarter and $18.0M for the six months, primarily due to unrealized mark-to-market valuation losses on trading positions.
- Interest Expense: Interest expense decreased 16% in the quarter and 12% for the six months, largely due to the settlement of a five-ship lease obligation in late 2010.
Guidance, Outlook, and Management Commentary
- Dividend Increase: The Board increased the quarterly dividend to $0.275 per share, reflecting solid market improvement. The ex-dividend date was September 9, 2011.
- Strategic Transactions:
- Golar Energy Acquisition: Increased ownership of Golar LNG Energy from 61.1% to 99.6%, resulting in its delisting from the Oslo Axess. This involved a share swap and cash payment, eliminating $129.4M in non-controlling interest.
- Golar Partners IPO: Completed a public offering of 13.8 million units of Golar LNG Partners LP (GMLP), raising $310.5M gross proceeds. Golar LNG's ownership in the subsidiary was reduced to approximately 65%.
- Newbuilding Program: Expanded the fleet expansion program with orders for nine new vessels (seven LNG carriers and two FSRUs) from Samsung Heavy Industries at a total cost of approximately $1.8 billion. Deliveries are scheduled between 2013 and 2014.
- Financing Strategy: The Company entered into an $80M revolving credit facility with a related party (World Shipholding), which was fully drawn. Management anticipates financing the newbuilding program through a combination of long-term charters, debt, and asset "drop-downs" to Golar Partners.
- Risks: Key risks include the inability to obtain financing for newbuilds, declines in LNG carrier rates, political events affecting gas production/demand, and the financial stability of major customers (Petrobras, DUSUP, Pertamina).
Investor Verification Checklist
- Trading Segment Viability: Verify the sustainability of the LNG Trading segment, which incurred significant mark-to-market losses ($12.3M for the six months) despite all trades being delivered.
- Newbuilding Execution: Confirm the ability to secure long-term charters for the nine new vessels ordered at a cost of $1.8B before delivery dates (2013-2014).
- Customer Concentration: Assess the risk associated with top customers (Petrobras, DUSUP, Pertamina) which collectively accounted for over 60% of revenue in the six-month period.
- Related Party Financing: Review the terms and repayment schedule of the $80M revolving credit facility with World Shipholding, a related party controlled by the Chairman's family trusts.
- Asset Drop-Downs: Monitor the timeline for selling the Golar Freeze and Khannur to Golar Partners LP to fund the newbuilding program as planned.