Business Context and Reporting Period
This Form 6-K filing by Golar LNG Limited reports preliminary fourth quarter and full-year 2013 results, filed on February 28, 2014. The Company operates a fleet of LNG carriers and Floating Storage and Regasification Units (FSRUs). Following the deconsolidation of Golar LNG Partners (Golar Partners) in December 2012, the Company's standalone operating results reflect only seven vessels, including two newbuilds delivered in October 2013 (Golar Seal and Golar Celsius). The Company maintains a 41.4% ownership interest in Golar Partners.
Key Financial Metrics
| Metric | Q4 2013 | Q3 2013 | Full Year 2013 |
|---|---|---|---|
| Net Income | $4.3 million | $(13.1) million | $135.7 million |
| Operating Revenue | $17.3 million | $17.0 million | $97.4 million |
| Adjusted EBITDA | $(5.5) million | Not explicitly stated | Not explicitly stated |
| Operating Loss | $(16.5) million | $(11.9) million | $47.1 million |
| Dividend Income (from Partners) | $8.0 million | $7.8 million | $31.0 million |
| Cash and Equivalents | $125.3 million | $56.0 million | $125.3 million |
| Total Debt (Current + Long-term) | $667.0 million | Not explicitly stated | $667.0 million |
Note: Net income includes a non-cash gain of $13.2 million on interest rate swaps. Group-wide results (including Golar Partners) show Q4 2013 revenue of $103.9 million and operating income of $38.7 million.
Material Changes vs. Prior Period
- Operating Performance: Standalone operating revenue remained flat at $17.3 million compared to $17.0 million in Q3. However, the Company reported a negative Adjusted EBITDA of $5.5 million, driven by increased vessel operating costs ($12.1 million vs. $9.8 million) and depreciation ($10.6 million vs. $8.6 million) due to the addition of two new vessels.
- Market Conditions: The spot and short-term chartering market weakened significantly due to production shutdowns and increased vessel availability. Group-wide Time Charter Equivalent (TCE) earnings fell from $96,220 per day in Q3 to $84,773 per day in Q4.
- Asset Movements: The Company took delivery of the Golar Seal and Golar Celsius in October. The Golar Igloo FSRU was delivered in February 2014. The older vessel Gimi was laid up in the Far East.
- Financing: The Company drew down $256.4 million from its newbuilding facility. It also executed a four-vessel sale and leaseback transaction with ICBC Financial Leasing to fund remaining newbuilds.
Guidance, Outlook, and Risks
- Outlook: Management expects weak results for the first half of 2014 due to a soft spot market and limited chartering activity. An improvement in spot earnings is anticipated in the second half of 2014 and into 2015 as new LNG production capacity comes online.
- Dividend: Despite disappointing trading results for newbuilds, the Board maintained the quarterly dividend at $0.45 per share, citing stress tests that support liquidity under low-earnings scenarios.
- Strategic Projects:
- FSRU: Golar Igloo is under a five-year charter with Kuwait National Petroleum Company (KNPC), commencing March 1, 2014. The Company expects to sell its interest in Igloo to Golar Partners for $310 million, recognizing a gain of over $40 million in Q1 2014.
- FLNG: Negotiations for the conversion of the Golar Hilli to a Floating Liquefaction (FLNG) vessel are in final stages, with a target investment decision in Q2 2014.
- Risks: Key risks include prolonged weakness in charter rates, inability to secure long-term charters for newbuilds, delays in shipyard deliveries, and the uncertainty of finalizing strategic partnerships for FLNG projects.
Investor Verification Checklist
- Non-Cash Gains: Verify the impact of the $13.2 million non-cash gain on interest rate swaps on the reported net income of $4.3 million.
- Liquidity Position: Confirm the utilization of the $1.125 billion newbuilding facility and the status of the $310 million Igloo sale to Golar Partners.
- Spot Market Exposure: Assess the duration of the layup for the Golar Celsius and the chartering status of the Golar Seal and Golar Viking.
- FLNG Timeline: Monitor the Q2 2014 target for the final investment decision on the Golar Hilli FLNG conversion.
- Dividend Sustainability: Review the Board's stress testing assumptions regarding liquidity under continued low spot rates.