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, 2023
Business Overview: Golar focuses on floating liquefaction (FLNG) operations, owning and operating marine infrastructure for natural gas liquefaction. Key assets include the operational FLNG Hilli and the Gimi, which is undergoing conversion to FLNG. The company also operates LNG carriers and provides vessel management services.
Key Financial Metrics
| Metric (in thousands USD) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |
|---|---|---|
| Total Operating Revenues | $151,498 | $140,165 |
| Net (Loss)/Income | $(85,659) | $696,552 |
| Adjusted EBITDA | $166,963 | $190,575 |
| Cash and Cash Equivalents (Total) | $902,786 | $620,078 |
| Total Debt (Net of Deferred Costs) | $(1,189,278) | $(1,189,324) |
| Net Cash Provided by Continuing Operations | $85,998 | $58,078 |
Note: Net loss in 2023 was significantly impacted by unrealized losses on derivative instruments and mark-to-market losses on equity securities, while 2022 included significant gains from discontinued operations and equity securities.
Material Changes vs. Prior Period
- Net Income Decline: The company reported a net loss of $85.7 million in 2023 compared to a net income of $696.6 million in 2022. This reversal is primarily due to:
- Derivative Losses: An unrealized loss of $191.7 million on oil and gas derivative instruments (vs. a gain of $349.6 million in 2022) driven by volatility in TTF gas and Brent oil price curves.
- Equity Securities: A realized/unrealized loss of $62.3 million on New Fortress Energy (NFE) shares (vs. a gain of $295.0 million in 2022) following the disposal of remaining NFE shares.
- Discontinued Operations: A significant reduction in income from discontinued operations ($0.3 million in 2023 vs. $82.4 million in 2022) following the completion of the CoolCo and TundraCo disposals in 2022.
- Revenue Growth: Total operating revenues increased by $11.3 million (8.1%) to $151.5 million, driven by higher charter rates and full utilization of the Golar Arctic and revenue from the Golar Tundra development agreement.
- Impairment Charges: Impairment of long-lived assets decreased to $5.0 million (related to the Gandria) from $76.2 million in 2022 (related to the Golar Arctic).
- Interest Income: Increased by $22.4 million to $23.3 million due to higher short-term money market deposits ($668.7 million vs. $420.2 million in 2022).
Guidance, Outlook, Risks, and Unusual Items
Management Commentary and Outlook
- FLNG Projects: The Gimi is 95% technically complete with yard departure postponed to Q3 2023. The company expects to produce 2023 contract year capacity under the Liquefaction Tolling Agreement (LTA) for FLNG Hilli.
- Business Development: In August 2023, Golar agreed on a contractual framework with Nigeria National Petroleum Corporation (NNPC) for potential FLNG projects utilizing FLNG Hilli post-2026 or a new MKII FLNG.
- Dividends: Declared a dividend of $0.25 per share for the quarter ended June 30, 2023.
Risks and Contingencies
- Arbitration Proceedings: In August 2023, Golar initiated arbitration against BP Mauritania Investments Limited regarding pre-commissioning contractual prepayments (Project Delay Payments) totaling approximately $22.1 million. Resolution is uncertain and could take months or years.
- Commodity Price Volatility: Significant exposure to TTF gas and Brent oil prices affects derivative valuations and realized earnings.
- Project Delays: Delays in the Greater Tortue/Ahmeyim (GTA) Project infrastructure deliveries could result in incremental costs and delay commissioning.
- Contractual Obligations: Risks related to the ability to meet obligations under the LTA for FLNG Hilli and the LOA for FLNG Gimi.
Key Facts for Investor Verification
- Derivative Exposure: Verify the impact of future TTF and Brent price movements on the $191.7 million unrealized loss and the $103.9 million realized gain on derivatives.
- Arbitration Outcome: Monitor the resolution of the $22.1 million dispute with BP regarding the Gimi LOA prepayments.
- FLNG Hilli Capacity: Confirm the company's ability to meet the 2023 contracted capacity to avoid underutilization penalties.
- Debt Covenants: Review compliance with financial covenants, specifically the requirement to maintain at least $50.0 million in consolidated cash and cash equivalents.
- Asset Sales: Track the completion of the sale and recycling of the LNG carrier Gandria (expected by October 31, 2023).