Business Context and Reporting Period
Company: Golar LNG Limited (Golar)
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2009
Filing Date: March 1, 2010
Golar LNG Limited is a Bermuda-based company engaged in the shipping of liquefied natural gas (LNG) and the development of floating regasification and liquefaction projects. The filing includes a press release and unaudited condensed consolidated interim financial statements.
Key Financial Metrics
| Metric (in millions) | Q4 2009 | Q3 2009 | Full Year 2009 | Full Year 2008 |
|---|---|---|---|---|
| Operating Revenues | $65.5 | $50.3 | $216.5 | $228.8 |
| Operating Income | $19.2 | $3.6 | $31.4 | $132.4 |
| Net Income | $17.4 | $(1.0) | $23.1 | $(10.0) |
| Net Interest Expense | $11.7 | $12.5 | $57.9 | $96.5 |
| Cash and Equivalents | $122.2 | $154.6 | $122.2 (Year End) | $56.1 (Year End) |
| Long-Term Debt | $707.7 | $751.7 | $707.7 (Year End) | $737.2 (Year End) |
| Utilization Rate | 93% | 80% | N/A | N/A |
| Avg. Daily TCE | $62,471 | $44,142 | N/A | N/A |
Material Changes vs. Prior Period
- Quarter-over-Quarter (Q4 vs. Q3 2009):
- Revenues increased 30% to $65.5 million, driven by a full quarter of contribution from the vessel Golar Winter and improved spot market performance.
- Operating income surged from $3.6 million to $19.2 million.
- Net income turned positive at $17.4 million compared to a loss of $1.0 million in Q3.
- Voyage expenses decreased to $7.2 million from $9.6 million due to better vessel utilization.
- Year-over-Year (2009 vs. 2008):
- Operating income decreased significantly to $31.4 million from $132.4 million, primarily due to a $78 million reduction in gains from the sale of assets in 2009.
- Net income improved to a profit of $23.1 million from a loss of $10.0 million. This turnaround was driven by a swing in "other financial items" from an $82 million loss in 2008 to a $44 million gain in 2009, largely due to mark-to-market gains on interest rate swaps and currency derivatives.
Guidance, Outlook, and Management Commentary
- Dividend Policy: The Board expects to commence a cash dividend in the second quarter of 2010, supported by projected free cash flow of $72–$75 million annually from five long-term chartered vessels. A second stock dividend of Golar Energy shares (1 for 7) was proposed for Q4 2009.
- Market Outlook: Management anticipates challenging conditions for the first part of 2010 due to seasonal declines in spot market utilization. However, they expect shipping rates and utilization to improve over the next 12–18 months as fleet growth slows and demand recovers.
- Project Updates:
- Gladstone LNG: The Fisherman's Landing project was restructured. Golar Energy exited the upstream development role to Arrow, retaining a role in shipping and marketing with a royalty-based revenue model. This removes capital risk but lowers potential absolute cash returns.
- FSRU Pipeline: Strong interest in floating regasification projects in Indonesia, Jamaica, Israel, and Uruguay. The Golar Freeze conversion is on schedule for delivery in Q2 2010.
- FLNG Strategy: Terminated joint development with PTTEP; shifting focus to low capital cost, rapid deployment floating liquefaction concepts.
- Financing: The company holds $10 million outstanding on an $80 million revolving credit facility. Management is confident in securing financing for the Golar Freeze transfer.
Investor Verification Checklist
- Dividend Timing: Verify the actual commencement of the cash dividend in Q2 2010 as projected by management.
- Spot Market Volatility: Monitor Q1 2010 results for the anticipated negative impact of seasonal spot market declines on utilization and rates.
- Project Execution: Track the successful conclusion of the LNG Sales and Purchase Agreement (SPA) required for the restructured Gladstone LNG project to ensure Golar secures its shipping and marketing role.
- Debt Refinancing: Confirm the finalization of financing terms for the Golar Freeze vessel transfer to Dubai Supply Authority.
- Derivative Valuations: Review future quarters for continued volatility in "other financial items" driven by mark-to-market valuations of interest rate and currency swaps.