28 Feb 2023
• Golar LNG Limited ("Golar" or "the Company") reports 2022 annual net income attributable to Golar of $788 million, record total book value of equity of $2.9 billion and Total Golar Cash1 of $991 million, inclusive of $112 million of restricted cash.
• Q4 2022 ("Q4" or "the quarter") net income of $71 million and Adjusted EBITDA1 of $87 million.
• Exited New Fortress Energy Inc. ("NFE") investment, by selling 8.3 million shares in NFE for net proceeds of $418 million, and by agreeing to acquire NFE's interest in Golar Hilli LLC for our remaining 4.1 million NFE shares and $100 million in cash ("the Hilli transaction"), increasing Golar's run-rate Adjusted EBITDA1 by approximately $70 million.
• Exited Cool Company Ltd. ("CoolCo") investment, by selling 8 million shares in Q4 raising net proceeds of $98 million, and a further 4.5 million shares on February 28, 2023 that are expected to raise net proceeds of around $56 million.
• Secured an LNG carrier intended for conversion to a 3.5MTPA Mark II FLNG.
• Unwound 2023 and 2024 Dutch Title Transfer Facility natural gas ("TTF") hedges locking in approximately $140 million of Distributable Adjusted EBITDA1.
• Repurchased $141 million of $300 million 2025 maturing unsecured bonds at par.
Golar's streamlined focus on FLNG positions the company to take advantage of the most profitable segment of the LNG value chain. The recently announced Hilli transaction, the upcoming commencement of the 20-year Gimi contract, and cash flows locked in through the TTF hedges secure strong growth in free cash flow from operations. A strong balance sheet position, low leverage and strong cash flow from operations allow for expansion of the FLNG business and return of value to shareholders. The board and management are exploring alternatives to commence a dividend and/or a new share buyback program.
FLNG Hilli: Distributable Adjusted EBITDA1 from FLNG Hilli increased by $20 million from $94 million in Q3 2022 to $114 million in Q4 2022, of which Golar's share was $86 million, compared to $64 million in Q3 2022. Due to a combination of upstream technical issues and FLNG Hilli maintenance, 2022 LNG production was 3.5% below the annual contracted 1.4MTPA and a $36 million accounting liability was recognized. The issues that resulted in the reduced production were resolved in Q4 2022 and FLNG Hilli has been producing to schedule since. Subject to customary documentation, Golar and the customer agree that the $36 million 2022 production shortfall will be compensated through overproduction in 2023, where we expect to recognize an additional 2023 Adjusted EBITDA1 of $36 million, offsetting the 2022 underutilization liability with no expected net cash impact to Golar.
In January 2023, Golar effectively unwound its 2023 and 2024 TTF hedges, locking in approximately $140 million of TTF hedged Distributable Adjusted EBITDA1 whilst re-gaining full market exposure to its TTF linked production:
• January-February 2023: Distributable Adjusted EBITDA1 of approximately $25 million, which includes Golar's share of TTF invoices for the same period (approximately $12 million generated from the hedged price);
• March-December 2023:100% of TTF linked production unwound securing approximately $76 million of Distributable Adjusted EBITDA1 that will be received in equal monthly installments between March-December 2023; and
• Full year 2024: 50% of TTF linked production unwound securing approximately $49 million of Distributable Adjusted EBITDA1 that will be received in twelve equal monthly installments through 2024.
On February 6, 2023, Golar agreed to acquire NFE's interest in the FLNG Hilli. Subject to the Hilli transaction closing as planned, Golar's interest in the currently contracted FLNG Hilli fees from January 1, 2023, will be as follows:
• 94.6% of Common Units that receive tolling fees from trains 1 and 2, and 5% of TTF fees,
• 89.1% of Series A units that receive Brent oil linked fees, and
• 89.1% of Series B units that receive 95% of TTF linked fees.
Golar's share of annual Distributable Adjusted EBITDA1 from FLNG Hilli is expected to increase by approximately $70.0 million through to the current Liquefaction Tolling Agreement ("LTA") conclusion in July 2026.
Assuming the Hilli transaction with NFE closes and TTF and Brent oil forward prices of $16.6/MMBtu and $81.3/bbl respectively, 2023 Distributable Adjusted EBITDA1 from FLNG Hilli is expected to be around $335 million. This comprises:
• $138 million of net tolling fees
• $101 million of TTF fees locked in for Jan and Feb and from unwinding the March - Dec hedge
• $37 million of TTF fees from March - Dec exposure (+/- 1$/MMBtu = $2.6 million)
• $59 million of Brent oil fees (+/- $1/bbl = $2.7 million between $60 floor and contractual ceiling)
For 2024, assuming the Hilli transaction closes and TTF and Brent oil forward prices of $17.9/MMBtu and $77.3/bbl respectively, Distributable Adjusted EBITDA1 from FLNG Hilli is expected to be around $283 million. This comprises:
• $138 million of net tolling fees
• $49 million of TTF fees locked in from unwinding the Jan - Dec hedge
• $48 million of TTF fees from Jan - Dec exposure (+/- 1$/MMBtu = $3.2 million)
• $48 million of Brent oil fees (+/- $1/bbl = $2.7 million between $60 floor and contractual ceiling)
With significant remaining useful life beyond FLNG Hilli's initial contract ending July 2026, Golar sees substantial upside in re-contracting at higher capacity and increased tariff.
FLNG Gimi construction: Conversion of FLNG Gimi for its 20-year contract with BP was 92% technically complete on February 12, 2023, still on track for a H1 2023 sail away. The BP owned floating production, storage and offloading vessel ("FPSO") which needs to be commissioned ahead of Gimi's commissioning is now in Singapore and is expected to arrive on site in Q2 2023. FLNG Gimi is expected to unlock around $3 billion of Earnings Backlog1 to Golar, equivalent to approximately $151 million in annual Adjusted EBITDA (1).
FLNG business development: Golar has seen increasing engagement with prospective clients for a potential redeployment of FLNG Hilli once her current contract ends. Golar's re-contracting focus is on integrated opportunities together with upstream partners.
Golar has also secured an option to acquire a 148,000 cbm moss design LNG carrier for a MKII FLNG conversion. A non-refundable payment of $5 million was made in February 2023, which, subject to the option being exercised in Q2 2023, will be deducted from the agreed $78 million purchase price. Significant progress has been made with the conversion shipyard, procurement of long lead items and financing. Strong client engagement also continues for potential deployment, and economics are attractive for both integrated and tolling fee opportunities. Securing attractive delivery for this future FLNG unit increases Golar's ability to drive value with prospective FLNG clients.
Contracting at current gas prices would result in full payback, including upstream capex, in less than two years for typical integrated FLNG projects.
FSRU: Hire received from sub-chartering the FSRU Tundra to a third party until November 2022, net of operating costs and hire paid to Snam Group ("Snam"), amounted to $2 million in Q4, recorded under Net income from discontinued operations. Fees recognized in respect of the services agreement to assist Snam with FSRU Tundra's drydocking, site commissioning and hook-up amounted to $9 million in Q4.
Golar LNG Limited press release