GLNG

Business Context and Reporting Period

This Form 6-K filing by Golar LNG Limited (Golar) reports preliminary fourth-quarter and full-year 2010 results, dated March 31, 2011. Golar is a Bermuda-based company engaged in LNG shipping, floating storage and regasification units (FSRU), and LNG trading. The reporting period covers the three months ended December 31, 2010, and the twelve months ended December 31, 2010.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Q4 revenues decreased to $64.6 million from $70.4 million in Q3, primarily due to the expiration of charters for the Gimi and Khannur vessels in Q3. This was partially offset by improved performance in the spot market.
• Operating Efficiency: Fleet utilization improved significantly to 95% in Q4 from 83% in Q3. Average daily time charter equivalents (TCEs) rose to $74,206 from $63,110.
• Expense Variance: Voyage expenses decreased by $5.4 million due to the redelivery of the Ebisu. Operating expenses increased by $2.6 million, partly due to one-off costs for changing crewing managers. Other operating expenses included $2.9 million in realized losses on physical cargo trades and derivatives.
• Impairments: A $4.5 million impairment charge was recorded for long-term investments (TORP LNG AS) and FSRU equipment.
• Balance Sheet Restructuring: The company restructured lease arrangements for five vessels (Freeze, Spirit, Hilli, Gimi, Khannur) by acquiring the leasing entities. This removed approximately $366 million in lease obligations and related restricted cash from the balance sheet, resulting in an expected net cash benefit of $15 million.
• Full Year Performance: Full-year 2010 operating income ($60.2 million) nearly doubled compared to 2009 ($31.4 million), driven by increased revenues from long-term contracted vessels. However, full-year net income dropped significantly to $0.4 million from $23.1 million in 2009 due to financial items and impairments.

Guidance, Outlook, and Risks

• Dividends: The Board declared a regular cash dividend of $0.25 per share and an extraordinary dividend of $0.05 per share for Q4 2010. Management expects the $0.25 quarterly rate to be sustainable with potential for growth.
• FSRU Projects: The West Java FSRU project (approx. $500 million contract value) is progressing well with detailed engineering underway. Golar is shortlisted for additional projects in Indonesia and Bahrain and expects to secure at least one further FSRU contract in the next 12 months.
• Market Outlook: The LNG shipping market is described as tight with rates improving. Golar Energy has chartered out four vessels at attractive rates for 12-18 months, expected to generate approximately $80 million in annualized EBITDA.
• Growth Strategy: Golar is evaluating organic growth and acquisition strategies to increase company size, with a decision targeted for the first half of 2011.
• Risks: Key risks include the inability to secure financing, declines in LNG carrier rates, political instability in production/demand regions, regulatory changes, and the illiquidity of LNG trading. The company notes that forward-looking statements are subject to significant uncertainties.

Investor Verification Checklist

• Verify the sustainability of the $0.25 quarterly dividend given the full-year net income of only $0.4 million.
• Confirm the timeline and financial terms of the West Java FSRU project and the status of other shortlisted FSRU tenders.
• Assess the impact of the lease restructuring on future cash flows and the amortization of the deferred tax benefit.
• Monitor the performance of Golar Commodities, which reported limited activity and realized losses in Q4.
• Review the valuation of the investment in Golar Energy, which increased to $462 million as of February 25, 2011, and its contribution to consolidated earnings.