Business Context and Reporting Period
Company: Golar LNG Limited (Golar)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2021
Business Overview: Golar provides infrastructure for the liquefaction, transportation, regasification, and downstream distribution of LNG. The company operates three reportable segments: Shipping, FLNG (Floating Liquefied Natural Gas), and Corporate and other. Following the April 15, 2021, disposal of Golar LNG Partners LP and Hygo Energy Transition Ltd to New Fortress Energy (NFE), the "Power" segment was reclassified as discontinued operations.
Key Financial Metrics
| Metric (in thousands USD) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 |
|---|---|---|
| Total Operating Revenues | $336,717 | $319,953 |
| Net Profit/(Loss) | $514,804 | $(206,572) |
| Net Income from Discontinued Operations | $568,047 | $(180,469) |
| Net Loss from Continuing Operations | $(53,243) | $(26,103) |
| Adjusted EBITDA | $219,127 | $200,645 |
| Cash and Cash Equivalents (Total) | $268,170 | $238,895 |
| Restricted Cash | $144,480 | $163,181 |
| Total Debt (Net of Deferred Costs) | $(2,281,721) | $(2,350,782) |
| Net Cash Provided by Operating Activities | $169,086 | $86,399 |
Material Changes vs. Prior Period
- Profitability: The company reported a net profit of $514.8 million in 2021 compared to a net loss of $206.6 million in 2020. This swing is primarily driven by a $574.9 million gain on the disposal of Golar Partners and Hygo (discontinued operations) and a $145.3 million unrealized gain on oil and gas derivative instruments.
- Continuing Operations: Excluding discontinued operations, the company incurred a net loss of $53.2 million in 2021, compared to a loss of $26.1 million in 2020. This deterioration was largely due to a $244.2 million unrealized mark-to-market loss on NFE shares received as merger consideration and a $71.4 million liability recognized for a UK tax lease settlement.
- Revenue Growth: Total operating revenues increased 5% to $336.7 million. The Shipping segment saw a 7% revenue increase due to higher charter rates and improved fleet utilization (98% vs. 89% in 2020). The FLNG segment revenue increased 1% due to overproduction revenue.
- Adjusted EBITDA: Adjusted EBITDA for continuing operations increased 9% to $219.1 million, driven by higher realized gains on oil derivatives and improved shipping performance.
Guidance, Outlook, Risks, and Unusual Items
Recent Developments and Liquidity
- Financing: In October 2021, Golar closed $300 million in senior unsecured Norwegian Bonds (7.00% interest, maturing 2025). Proceeds were used to redeem $85.2 million of 2017 Convertible Bonds and fully repay the $100 million Revolving Credit Facility (RCF).
- Margin Loan: In November 2021, a new $200 million Margin Loan was executed, secured by 18.6 million NFE shares.
- Debt Management: The Golar Seal put option maturity was extended from January 2022 to January 2025.
Risks and Contingencies
- UK Tax Lease Inquiry: A $71.4 million liability was recorded for a potential settlement with UK Tax Authorities (HMRC) regarding historical tax lease benefits. The company expects this to be a financing cash outflow.
- NFE Share Volatility: The company holds 18.6 million NFE shares (valued at $501.2 million as of Sep 30, 2021). A significant unrealized loss of $244.2 million was recognized due to the decline in NFE share price. These shares are pledged as collateral for the 2021 Margin Loan.
- Going Concern: Management asserts sufficient liquidity for the next 12 months based on the Norwegian Bonds, margin loan, and asset monetization plans, though they note uncertainty regarding refinancing the remaining $317.3 million of Convertible Bonds due in February 2022.
- Project Delays: The Gimi FLNG conversion target connection date was extended to 2023.
Investor Verification Checklist
- Debt Maturity Wall: Verify the status of refinancing plans for the remaining $317.3 million of 2017 Convertible Bonds maturing in February 2022.
- NFE Share Valuation: Monitor the market price of New Fortress Energy (NFE) shares, as fluctuations directly impact the company's balance sheet (unrealized gains/losses) and the loan-to-value ratio of the $200 million Margin Loan.
- UK Tax Settlement: Confirm the final terms and cash outflow timing of the $71.4 million UK tax lease settlement.
- Continuing Operations Performance: Analyze the underlying operational performance of the Shipping and FLNG segments excluding the one-time gain from discontinued operations and derivative mark-to-market movements.
- Restricted Cash: Note that over 50% of total cash ($144.5 million) is restricted, limiting immediate liquidity for general corporate purposes.