Highlights
* Golar reports operating income of $7.3 million and net income of
$11.7 million, including a gain of $17.8 million on interest rate
swap valuations
* Difficult quarter for ships trading in spot/short term market, some
signs of improvement are now appearing
* Golar Spirit conversion to a FSRU completed and vessel delivered to
Petrobras
* Golar Frost sale to OLT Offshore finalised and vessel chartered
back on a bareboat basis until June 2009
* Golar acquires Hoegh Gandria in joint venture with Bluewater Energy
Services and vessel offered to PetroSA in South African tender for
FSRU
* Orders being placed for long lead delivery time items for Hilli
FSRU conversion
* Good progress being made in progressing Floating LNG opportunities
* Golar announces cash dividend of $0.25 per share
Results
Golar LNG Limited ("Golar") reports net income of $11.7 million and
operating income of $7.3 million for the three months ended June
30, 2008 (the "second quarter"). Net income has been positively
impacted by unrealised non-cash gains on interest rate swap
mark-to-market valuations totalling $17.8 million.
Revenues in the second quarter were $52.5 million as compared to
$58.8 million for the first quarter of 2008. Spot charter rates
have been lower but also utilization has decreased from 94% last
quarter to 74% this quarter. The decrease in the number of days on
hire for the fleet is largely due to vessel waiting time and
positioning, during which time the Company pays for fuel costs.
Voyage expenses, which mainly relate to fuel costs, have therefore
increased significantly from $1.5 million in the first quarter to
$10.4 million for the second quarter, not helped by rising fuel
costs. Second quarter average daily time charter equivalent rates
(TCE's) were $39,890 per day compared to $53,068 per day during the
first quarter.
The vessel Khannur drydocked during the quarter and the Methane
Princess and the Granatina will drydock during the third quarter of
2008. The Hilli and the Gandria are not expected to have earnings
during the third quarter and steps have been taken to reduce
operating costs on these vessels until charter opportunities arise.
The Golar Spirit left the shipyard on June 11, collected a cargo in
Trinidad and then proceeded to Pecem, Brazil tendering notice of
readiness on July 22. Testing of the vessel will not commence until
the end of August whilst Petrobras finalise the shore side
receiving facility.
Vessel operating expenses were slightly higher at $15.8 million for
the second quarter as compared to $15.5 million for the first
quarter.
Net interest expense for the second quarter was $12.8 million, down
from $14.6 million for the first quarter. The decrease in interest
expense is driven by lower interest rates on floating rate debt.
Other financial items were a gain of $19.5 million in the second
quarter compared to a loss of $21.4 million for the first quarter.
This has primarily resulted from unrealised interest rate swap
valuation gains of $18.6 million (before minority interest) as
compared to a loss of $15.1 million in the first quarter. The gains
are due to the rise in long term interest rates. As at June 30,
2008 approximately 73% of the Company's debt and capital lease
obligations was effectively swapped to a fixed rate at an average
rate of 4.5% excluding margin and with an average period to
maturity of 5.3 years.
Net income per share for the second quarter was $0.17 as compared
to a loss per share of $0.23 for the first quarter.
Based on results for the quarter end ended June 30, 2008 and taking
into consideration expectations for the balance of the year, the
Board has declared a dividend of $0.25 per share for the quarter,
which is in line with the dividend for the fourth quarter of 2007
and the first quarter of 2008. A gain on the sale of the Golar
Frost of approximately $78 million will be recognised in the third
quarter and this, together with capital expenditure requirements
and investment opportunities will be taken into account when the
Board sets dividend levels going forward.
The Board will seek to optimise the capital structure of the
Company to endeavour to achieve the highest possible long-term
return on equity invested.
The record date for the dividend is August 26, 2008, ex dividend
date is August 22, 2008 and the dividend will be paid on or about
September 10, 2008.
Corporate and Other Matters
Conversion of Golar Spirit was completed during the quarter with
the ship leaving Keppel ship yard in Singapore on June 11 against a
target completion of May 31. The vessel loaded a commissioning
cargo in Trinidad en route to Pecem Brasil and delivered to
Petrobras under the long term time charter party on July 22. The
vessel is currently standing off Pecem waiting for final completion
of the shore side facilities before final commissioning and testing
can be completed. The delivery of Golar Spirit marks a significant
milestone in the delivery of the Company's strategy to develop its
midstream business activities. It also marks the world's first
converted FSRU in a growing market for FSRU's.
Following on the from the two FSRU charters with Petrobras and as
previously announced, Golar signed a further 10 year FSRU charter
this quarter with the Dubai Supply Authority for the Golar Freeze
as a converted FSRU. This contract is a further demonstration of
the Company's strategic development.
The sale of Golar Frost to the OLT Offshore ("OLT-O") joint venture
(Livorno project) was completed on July 2 with the vessel
immediately chartered back to Golar on a competitive bareboat
basis. The vessel was subsequently sub-chartered out on a 140 day
time charter. The vessel will continue to trade in the spot market
until June 2009 when the vessel will redeliver to OLT-O in advance
of its conversion to a FSRU. The sale of Golar Frost and the
previously advised signing of the EPC contract with Saipem for the
conversion of the vessel and other associated works represent a
significant milestone in what has been a long and at times
challenging project development phase. This achievement has been a
clear indication of the continuous commitment by the joint venture
to deliver this project and confidence in the selected technology.
With the recent takeover of Endesa Europa by E.ON. Ruhrgas the
OLT-O joint venture sees E.ON. Ruhrgas take over the position once
held by Endesa Europa.
Golar has agreed to partner with Bluewater for the purposes of
bidding for an offshore LNG FSRU opportunity with South Africa's
national oil company, PetroSA. Golar and Bluewater will be equal
partners in a joint venture formed specifically for this
opportunity. Additionally, and in conjunction with this bid, Golar
and Bluewater have agreed to acquire the 1977 built Moss type
126,000 m3 LNG Carrier, Hoegh Gandria. The vessel is intended to be
used as the converted offshore FSRU. Bluewater are providing their
proprietary LNG tandem loading system which forms an important part
of the offer to PetroSA.
Golar is now placing orders for the long lead delivery items for
the Hilli FSRU conversion project thereby securing the ability to
deliver this vessel as a FSRU within 2010. Encouraged by the
success of speculatively commencing the conversion of Golar Spirit
the Company believes securing the earliest possible delivery of the
vessel as a FSRU along with the growing interest around the world
to adopting floating terminals as a means of quickly and
efficiently accessing LNG places the Company in a strong position
to secure the next available FSRU opportunity.
The Company is encouraged by the progress being made by LNG Ltd. in
its pursuit of the Gladstone LNG project with an Engineering and
Construction Service Contract recently awarded to SK Engineering
and Construction for the FEED phase of the project. The final
investment decision for the project remains targeted for early
2009. The Company views this project as an excellent opportunity to
further develop an integrated position in the midstream of the LNG
supply chain. Along with many others in the industry Golar views
coal-bed methane as a significant potential area of development for
LNG in general.
Market
Notwithstanding operational difficulties being experienced by
several LNG producers in recent months, LNG supply rose by 1.4
bcf/d in June year-on-year.
* Asian imports rose 1.8 bcf/d year-on-year with Japan (+0.8
bcf/d) leading the way and South Korea (+0.7 bcf/d) close
behind
* European imports rose 0.9 bcf/d led by Spain (+0.5 bcf/d) and
Italy (+0.1 bcf/d)
* The entire shortfall was absorbed by the US with imports down
1.7 bcf/d year-on-year.
This is against a background of natural gas price increases in the
US of more than double, with Henry Hub prices increasing from $5.59
in September 2007 to $13.11 in July 2008 before falling away again
in August. The strong pull of European and Eastern markets is
expected to continue for some time to come.
In the run up to the northern winter there is again evidence of
rising gas storage outside of the US by traders, producers and
consumers in anticipation of higher winter prices. We believe
several spot cargos are being lined up to load in Q3 with discharge
expected to be in the Far East this winter to take advantage of the
steep contango on the NBP forward strip.
There are 5 new liquefaction projects coming on stream over the
next 9 months which have the potential to loosen the current tight
LNG market. If these projects all come on stream at the forecast
date, they will add 3.8 bcf/d of additional LNG supplies by summer
of 2009. On the demand side, there are at least 3 new importers
which will be importing an additional 0.7 - 0.9 bcf/d in summer
2009. What is less clear is the potential for further delays as
each of these projects moves into the final phases of construction
and start commissioning. Overall it is expected that these
developments will have a positive impact on the forward market for
short term LNG shipping and signs are starting to appear of an
improvement in the market.
The world LNG tanker fleet stood at 270 by the end of June with the
order book for new vessels now standing at 112 and 3 small older
vessels are reported to have been scrapped this year. Qatar's
shipping company Nakilat, named its first QMax vessel at Samsungs
yard in Korea in July. The vessel is the first of 14 QMax vessels
ordered by Nakilat.
The interest in floating midstream solutions by all industry
participants continues to be strong with a healthy level of enquiry
in FSRU, SRV and FLNG opportunities being experienced by Golar and
others looking to position themselves in this sector.
Outlook
The Board remains encouraged by the Company's strengthening
position in the LNG midstream supply chain and the sale of Golar
Frost to OLT-O and the purchase of Gandria and the associated bid
to PetroSA for a FSRU further demonstrate this. Good progress is
also being made toward positioning the Company to develop floating
LNG projects, which is a further strong signal of the growing
importance to the Company of activity in these areas.
The Company is well advanced with its plans to restructure Golar
LNG with the separation of long term charters from other business
opportunities and the end of third quarter or beginning of the
fourth quarter of 2008 currently remains a target date.
The Board is disappointed with the development of the LNG carrier
spot market which has been softer than anticipated, mainly because
of delays in the startup of LNG production projects. The Board
expects this situation to improve as more capacity comes on stream
over the next 1 to 3 years. However, the Board is pleased with the
strategic moves made into FSRU's and FLNG and expects improved
overall margins as a result moving forward.
The Board anticipates that earnings from the Company's spot market
vessels will show some improvement in the third quarter but will
remain unsatisfactory. The return of the Golar Spirit to hire after
an extended period of off hire during the vessels conversion will
however have a positive impact on the third quarter. The third
quarter will also benefit from the gain on sale of the Golar Frost
which will be approximately $78 million.
Forward Looking Statements
This press release contains forward looking statements. These
statements are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including examination of
historical operating trends made by the management of Golar LNG.
Although Golar LNG believes that these assumptions were reasonable
when made, because assumptions are inherently subject to
significant uncertainties and contingencies, which are difficult or
impossible to predict and are beyond its control, Golar LNG cannot
give assurance that it will achieve or accomplish these
expectations, beliefs or intentions.
Included among the factors that, in the Company's view, could cause
actual results to differ materially from the forward looking
statements contained in this press release are the following:
inability of the Company to obtain financing for the new building
vessels at all or on favourable terms; changes in demand; a
material decline or prolonged weakness in rates for LNG carriers;
political events affecting production in areas in which natural gas
is produced and demand for natural gas in areas to which our
vessels deliver; changes in demand for natural gas generally or in
particular regions; changes in the financial stability of our major
customers; adoption of new rules and regulations applicable to LNG
carriers and FSRU's; actions taken by regulatory authorities that
may prohibit the access of LNG carriers or FSRU's to various ports;
our inability to achieve successful utilisation of our expanded
fleet and inability to expand beyond the carriage of LNG; our
ability to complete on our restructuring plans; increases in costs
including: crew wages, insurance, provisions, repairs and
maintenance; changes in general domestic and international
political conditions; changes in applicable maintenance or
regulatory standards that could affect our anticipated dry-docking
or maintenance and repair costs; our ability to timely complete our
FSRU conversions; failure of shipyards to comply with delivery
schedules on a timely basis and other factors listed from time to
time in registration statements and reports that we have filed with
or furnished to the Securities and Exchange Commission, including
our Registration Statement on Form 20-F and subsequent
announcements and reports.
Nothing contained in this press release shall constitute an offer
of any securities for sale.
August 14, 2008
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed to:
Golar Management (UK) Ltd - +44 207 517 8600:
Gary Smith: Chief Executive Officer
Graham Robjohns: Chief Financial Officer
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)
Golar LNG Q2 2008 Results.pdf