GLNG

Business Context and Reporting Period

This Form 6-K filing by Golar LNG Limited, dated June 27, 2011, reports consolidated results for the first quarter ended March 31, 2011. Golar is a global provider of LNG shipping and floating regasification services. The period was characterized by strong demand for modern LNG carriers, the successful IPO of its subsidiary Golar LNG Partners, and significant strategic acquisitions to consolidate its fleet operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 4.5% quarter-over-quarter, driven by improved performance from modern LNG carriers, partially offset by the Golar Grand being in drydock.
• Profitability Surge: Operating income rose 36% to $20.4 million. This improvement was aided by the absence of the $4.5 million impairment charge recorded in Q4 2010 related to the TORP LNG AS investment.
• Expense Management: Vessel operating expenses decreased to $14.0 million from $15.2 million, while voyage expenses increased slightly to $3.8 million.
• Financial Items: Other financial items improved by $8.3 million compared to Q4, primarily due to the absence of non-recurring termination costs and write-offs of deferred charges totaling approximately $13 million recognized in the prior quarter.
• Trading Segment Loss: The LNG Trading segment reported an operating loss of $6.3 million, attributed to costs and mark-to-market valuations on physical cargo trades and derivatives, with gains expected to be realized in Q2 2011.

Guidance, Outlook, and Strategic Developments

Strategic Transactions

• Golar LNG Partners IPO: Completed a public offering raising $310.5 million. Golar's ownership in the subsidiary was reduced to approximately 65%. The company expects to receive minimum quarterly cash dividends of $10 million from this entity.
• Acquisition of Golar Energy: Increased ownership in subsidiary Golar LNG Energy Limited from 61.1% to 99.4% via share swaps and cash purchases, initiating a compulsory acquisition to fully consolidate the subsidiary.
• Newbuilding Orders: Ordered six new 160,000 m3 LNG carriers from Samsung Heavy Industries for a total cost of approximately $1.2 billion, with deliveries scheduled for 2013 and 2014.
• FSRU Expansion: Executed an 11-year time charter for the West Java FSRU Project with PT Nusantara Regas, valued at approximately $500 million.

Outlook and Risks

• Market Conditions: Management anticipates a tight shipping market for the next 2-3 years due to limited vessel availability and increased demand, particularly following the shutdown of nuclear facilities in Japan.
• Dividend Policy: The Board maintained the quarterly cash dividend at $0.25 per share.
• Management Changes: Effective June 1, 2011, Doug Arnell replaced Graham Robjohns as CEO of Golar Management Ltd, while Robjohns remains CEO of Golar LNG Partners.
• Risks: Key risks include the inability to secure financing for newbuilds, volatility in charter rates, regulatory changes, and the impact of global political events on LNG demand.

Investor Verification Checklist

• Verify the timing and terms of the expected sale of the Golar Freeze and Khannur FSRUs to Golar LNG Partners.
• Monitor the realization of gains from Golar Commodities' physical cargo trades expected in Q2 2011.
• Confirm the financing structure and progress of the $1.2 billion newbuilding program with Samsung Heavy Industries.
• Track the completion of the compulsory acquisition of remaining Golar LNG Energy shares.
• Assess the impact of the $10 million upgrade cost for the reactivation of the Gimi vessel on future cash flows.