GLNG

Business Context and Reporting Period

Golar LNG Limited, a Bermuda-based foreign issuer, filed this Form 6-K on November 29, 2006, reporting its Third Quarter Interim Results for the period ended September 30, 2006. The Company operates in the LNG shipping sector, managing a fleet of carriers and developing mid-stream projects including liquefaction, trading, and regasification.

Key Financial Metrics

Additional Metrics: Average daily Time Charter Equivalent (TCE) rates were $52,000 for Q3 2006. Vessel operating expenses were $11.2 million. Net interest expense was $16.4 million.

Material Changes vs. Prior Period

• Net Loss vs. Profit: The Company reported a net loss of $5.9 million in Q3 2006, a significant reversal from the $17.3 million net income in Q2 2006. This swing is primarily attributed to a $11.7 million mark-to-market charge on interest rate swaps due to declining long-term interest rates, compared to an $8.3 million gain in the prior quarter.
• Revenue Growth: Operating revenues increased 4% quarter-over-quarter to $55.9 million, driven by improved spot vessel earnings and the addition of the Granosa to the fleet in June 2006.
• Expense Increases: Vessel operating expenses rose to $11.2 million from $10.0 million due to the new vessel. Net interest expense increased to $16.4 million from $14.1 million, reflecting a full quarter of charges on the $120 million Granosa facility and floating rate debt costs.
• Investee Earnings: Equity in net earnings of investees (Korea Line and LNG Ltd) improved to $1.6 million from $0.1 million, with the market value of the Korea Line investment rising to $79 million.

Guidance, Outlook, and Risks

Outlook: Management anticipates continued improvement in earnings for Q4 2006 from spot vessels and Shell charters as the winter season approaches. The Board expects the spot market to remain volatile but generally balanced, favoring ship owners slightly. The Company is optimistic about its project portfolio covering the full LNG mid-stream value chain.

Corporate Developments:

• Agreement signed to acquire 20% of the Livorno LNG regas terminal (OLT Offshore LNG Toscana S.p.A), with an intention to sell the Golar Frost to the project.
• Progress on the 1.8 mtpa Padang LNG project in Indonesia, with final environmental approval received.
• The Floating Power Generation Plant (FPGP) in Cyprus is progressing, with licenses expected by end of 2006.
• The Golar Spirit will trade in the spot market after its charter to Pertamina expires in Q4 2006 while FSRU conversion plans are finalized.

Risks and Contingencies:

• Market Volatility: Earnings are highly sensitive to global gas prices, geographical price differentials, and seasonal demand.
• Interest Rate Sensitivity: While lower rates improve floating debt costs, they negatively impact the valuation of interest rate swaps used for hedging.
• Project Execution: Risks include delays in construction, inability to secure financing for newbuildings, and regulatory hurdles for new projects.
• Operational Risks: Potential for vessel offhire, dry-docking cost increases, and political events affecting gas production or demand.

Investor Verification Checklist

• Verify the sustainability of the $52,000/day TCE rates in the spot market as winter demand peaks.
• Confirm the final decision on gas supply for the Padang LNG project and the timeline for the Livorno terminal acquisition.
• Monitor the impact of interest rate movements on the Company's swap valuations versus the benefit to floating rate debt.
• Assess the utilization rates of the fleet, specifically the Golar Spirit and Golar Winter, in the current storage-heavy market environment.
• Review the progress of the FSRU conversion project and the potential for the Golar Spirit to be redeployed to that project versus remaining in the spot market.