Q2 2020 Golar LNG Ltd Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the basis.
Gee limited second quarter 2020 results sensation at this time all participants are in listen only mode. After the speaker presentation. There will be a question answer session. I see question you will need to press star one of the telephone also must advise you. This conference is being recorded today 13th of August.
2020, I know you overreach are first speaker you can Ross.
Thank you operator, good morning, good afternoon, everyone welcome to the Golar LNG Q2, Twentytwenty results presentation. My name is even Ross and I'm the CEO Golar LNG.
Today I'm joined on the line by CFO capital budget Thompson I, just you do you kind of the head of Investor Relations.
Also pleased to have Eduardo Martin our CFO Golar power <unk> light to participate in today's call.
I'd like to draw your attention to the forward looking statement on slide one and if we turn to slide four let me give you some highlights before calendar takes us through the numbers in more detail.
Today, we reported an adjusted EBITDA of $67 million on revenue of 102 million for the quarter, which is driven by.
So what that LNG performance and that does.
Also in shipping.
Again, we came out the effort Oh team and keeping the business running remotely.
Our offices and writings on board to cope with longer works up cycles, a normal dealing with all sorts of restrictions and constraints and doing a jobs and I am pleased to report further improvements in our ability to crude change what's most about people not having been change that.
And shipping our time charter Routings at 45, <unk> Jude represents an 88% rise over the same to you had last year, we continue to de risk our shipping portfolio and ended the quarter, what the shipping revenue backlog <unk>.
5 million.
Our LNG operations maintained 100% commercial fight through the quarter with a 4% to 6% reduction in operating costs compared to first quarter and stable EBITDA generation.
And it does stream golar power seafood capacity could payment payments on a says sheep and Nick with gold <unk> share of that equating to $19 billion all revenue less operating costs.
Oh skill rollout was boosted by the signing of a partnership with Galileo and they will use signing with Norske Joe for the provision of LNG and re gas capacity into the other naughty alumina refinery in Brazil will reduce the refinery CEO to buy some 600000 tons p. it that's equivalent.
The carbon capture of around 10 million tree seedlings planted grown for 10 years, it's a great U.S.G. story.
More details on these segments later, let me now hand over to calibrate <unk> numbers.
Thank you and good morning, everybody. If you turn to page five second quarter Twentytwenty financial results shown in more detail here.
You had mentioned be under 3 million net operating revenue.
You can see that in the blue color that is.
14% beat on the consensus.
90 million for the quarter and is achieved with the stability of the 55 million to that Gee, you had mentioned given Italy stability that is very stable and well performing assets and then secondly, 48 million of operating revenues from shipping and corporate.
Which is down to typical seasonality that two in PC rights.
But as an improvement over Q2.
In 2019.
That change is largely driven by.
The reduction in Tc rates, partially offset by some additional improvement so that's what management, which I'll go to suck.
[noise] that produced a net loss for the quarter of 156 million that net loss is largely driven by the hundred 35.9 million impairment that we took on gosh I think <unk>. If you remember we own approximately 33% business.
The U.S. GAAP requires the set up the point that we feel much a drop in the stock price. It's anything other than temporary then we need to take that impairment.
In the business down to the current market level, which is again the U.S. right got requirement, that's something we're happy to.
The that revenue performance of 103 million generated the adjusted EBITDA or 67 million that out. It that you had referred to that in itself is a 23% beats. That's it's a nice that EBITDA consensus for the period and that 23% Pete is.
Based off the 14% improve beat on revenues plus some cost cutting that we've managed to achieve.
I'll go to on the next slide in the second.
That's 67 million is broken down by 41 million out to that GE again stable over the quarters stability that he had referred to by 32 million from shipping.
Which is down to the seasonality on Q1.
As an improvement on second quarter, two to try to 19.
Final point Tonight on this page is our cash position I think we can make it to you at its got caught one too many during quarter one to manage the cash position that you could set liquidity in keeping with many companies in the code that 19 crisis.
We're pleased to see what creates to show that broadly speaking our cash position is stable.
And that is largely be to cheat extra cash generation in the business plus the refinancing managed to achieve a one of which ahead of schedule, which we will go into the multi teledesic.
<unk> adjusted EBITDA of 67, 23% beat consensus the ability of that LNG that seasonality and shipping.
Partially offset by Costco.
If you turn to page to page six adjusted EBITDA developments over the last 12 months, you'll see the variation on the courts that Q1 on the left hand side would reflect to the reduction in T. He writes down to the 45000 and that is the impact that you set out on page you can see had read at the 20.
And then working your way down the page you will see the decreases in expenses that Iris chip to get us back to partially upset that seasonality.
It's important to note.
Not expense reduction, it's a function of two factors, but it's a it's a good work by the team in terms of company expenses, but it also relate.
The impact to code at 19 ads with many other businesses. So we're still working our way through how much. It once was the global pandemic <unk> ease and business returned to normal how much of expenses will come back. So you should not see water that expense reduction that's been a reduction in through cycle run right, but possibly stuff.
It's also important to note when the rights outside of this page that our LTM adjusted EBITDA is broadly stable, okay. That's cost 12.
Yes.
If you know I promise to talk about cash and liquidity in more detail. If you turn your attention to the next page page seven liquidity development Twentytwenty.
The bars on the top replay to you what happened in Q1, you'll remember from Q1, our cash balance at the end of the then to study festive March was 275 million that shut in grade in the middle of the page and then the movements from that got imports to the statutes of choosing the 225 million balance and carton.
Yep.
It's setup.
Actually operating cash flow.
As a tick less than in.
Q1, reflecting the seasonality just discussed partially offset by some capex that said this is stable.
It's about a movement and then the battery try that.
We've committed in Q1, but like Q3, we would a refund that's a three vessels.
And we've achieved that early that is a refinancing that's given US 14 million of additional liquidity gross which is you'll sit in the bullets below is effectively 38 million Oh.
Cash reconciliation between the two weeks later, but broadly speaking very some of the debt service associated with it that included in the a 2 million that's about it.
Shot on the bunch of.
What's the outlook for the rest of the yet [laughter] as no real change given what we said two in Q1 again, reflecting off.
Our plans that stability when the persistent refinancing the 150 million bilateral loan which is due in November 20, and 30 million outstanding launch in late July August last September 20, we had committed to put in place revolving credit facility with a number of backs discussions that are very well that's all.
Positive.
Well when they'll finish we had said that we would have that done in Q3, and we feel that that is very much on track.
In addition, we'd have to routine refinances, which would commit to to the frost, which had the field. The seal will not generate any additional liquidity that since we said previously it's just the removal of the put option for the current Chinese next year.
Trust will generate additional liquidity I would that that's what I feel we have time sheets broadly agree.
We're working our way through due diligence and all the items. So that naturally that refinancing is obviously subject to market conditions that as we sit here today, we feel broadly probably just about that.
Good with comfortable unhappy to repeat or the last bullet points on the page that we mentioned that in.
In the previous results, where we said based on the cheated lease now three previously it was for these financings we feel between that the anticipated capex, that's having an operating cash flow you feel that is sufficient broadening the remainder 2020 again, no real change so stable cash balances.
The bad refinancing achieves a one quarter, but.
With that let me tell you back to get to take you through shipping and Monty.
Thanks, Kim if we turn to slide nine and shipping second quarter. So continued declining TFT spot rates to arrive at about 30000, a day for much of the TV before starting to slow recovery post quarter. These lower rates resulted from a combination of seasonal LNG demand decline.
And lower overall global economic activity, resulting from the covert pandemic for the U.S. cancellations kept ton miles low during the quarter, but we still expect a degree of slow steaming and storage to March towards the end of the year boosting rates over the northern went up before overall volumes pick up again.
2021.
Our shipping strategy continues to contribute well towards that Tc protecting the downside Sui shoulder season, which is clearly illustrated in the graph on slide nine if you compared to last three quarters. So Q4, 19, SUTA Q2, 20 with a prior corresponding so most quarters Q.
Or 18 student she Q2 90, we're generating significantly more adjusted EBITDA and that's largely driven through the commercial shipping strategy I had a associated increased utilization of the fleet.
Slide 10.
She reached offset some of that seasonal decline in rates through the trees toss. This column showed you, albeit some of these operating cost reductions will be in card later in the year as we implement some deferred maintenance, but we have implemented permanent cost reductions and we'll continue to seek more.
Despite the brunt of the backlog during the quarter, our backlog remains very strong compared to 12 months ago and you can see a the picture on the right side with about half of the backlog on fixed rates and the other half on some form of market related or floating rate structure.
We're focusing on building backlog and managing our costs and at this stage, we expect Q3 Tc he could be around $35000 today.
While these lower LNG prices are not great for the current shipping market, we believe that lower LNG prices will continue to continue to stimulate LNG demand as an alternative and cleaner fuel compared to coal and other more polluting fossil fuels lower pricing of had a team that will accelerate and used to LNG is a try.
So should fuel for the next 10 plus years, leading to increased demand for liquefaction LNG producers will be looking to develop liquefaction projects at a lower costs and with his associated increase in LNG volumes being produced.
This will in turn.
<unk> increased demand for shipping in the future.
Cool is unique outside the oil and gas majors, and then overseas and participating in both the mid stream production of LNG.
The downstream distribution of LNG, she local gas and electricity customers.
Turning now to the production of LNG in our case LNG slide 12.
Alright, LNG unit and the Epicel offshore Cameron has delivered another study performance in quarterly earnings is column explained you Buffalo did 42, cargos, maintaining 100% commercial uptime and have produced over 2.5 million tons of LNG since he came on stream and 2080.
We continue to have an ongoing dialogue with perenco, our customer on the potential for increased through on heavy but nothing for that sort of port this quarter in terms of concrete agreements.
We continue to receive incoming interest for the use of heavy post the perenco contract that runs for the next six years.
Turning to slide 13, as previously advised BPR customer for the 20, you I feel that GE give me lease operating agreement so going live with it at that delayed notice as a result with the tool that pandemic and has subsequently maintains its claimed estimate that delay is being around 12 months one change over the last call.
Order has been the impact of the Singapore circuit breaker as a countries could 19 responses no and extend the which that shut that has temporarily impacted the keppel shipyard, our contractor and Singapore.
And effectively reopened last month I capitals, not wrapping up the workforce in compliance with the government restrictions with it right 500 workers currently back on the project in accordance with the restart flat. So my three brief points to make couldn't give me this quarter. Our firstly, we continued to be an active and constructive discussion with BP.
Partners I find that shows up in fact is on the matter secondly, the reschedule program that takes into account the delays caused by the Singapore shut that.
Thirdly, well, it's not finalized we anticipate satisfactory closure on this in due course, and we don't expect to have material increase and the total project budget and the overall delay and the project of around 12 months driven by B piece timeline will correspondingly improve our near term cash flow through delayed equity in check.
The project.
Yeah, I understand that specific details of these discussions do remain confidential this time.
Briefly on the Viking FSRU conversion project the project team and contractors are working hard to mitigate any corporate related challenges, we're not planning for the vessel to depart from China to your late September with vessel delivery upon commissioning and completion by the yearend. According to the original plan.
And on the excellent GE pipeline.
We've extended our collaboration agreement with one I don't see to explore applications for LNG in their portfolio and our March three new build continues to make progress and both are finding that design and identifying real deployment opportunities. We believe that are simple process configuration combined with a design one build many mindset will set.
<unk> costs that shed deals short payment terms achievable and importantly, we also believe that our energy management system delivers superior efficiency compared to many onshore facilities, resulting in competitively low carbon emissions on a like for like basis.
Turning now to downstream and gold apart golar power progress over the quarter.
Turning to development progress was made a number of fronts, which you can see on slide 15 was further details on slide 16.
I think it whenever you with Norske, Joe will evolve gold at par delivering gas to the other naughty alumina refinery and bucket right that this is a fantastic example of Golar power, bringing a cost effective solution to a customer that will not only pay less money for fuel that will significantly improve at Sidoti emissions this commercial customer to.
Together with the previously discussed 605 megawatt P.P.A. Award underpins go up Pars investment and the FSRU terminal that bucket right now.
Why do you anticipate it around the end to the <unk>.
The terminal will then be a subsequent foundation for the rule out small scale distribution across the state of Panera and F.I.D. for the power station is anticipated in the middle of next year.
The signing of an agreement with Galileo Galileo's, a producer both land based gas and buying anything from landfills well accelerate the development of the small scale rollout and the Brazilian states of by a in Sao Paulo Operation is expected to commence later this year.
This agreement links and nicely with the development of the previously announced partnership agreement with B R and that we can use bio me, saying sourced LNG to distribute as a few through the be our network across Brazil. In addition to the previously described sources from our terminals and their facilities.
The permitting process continues for FX you to be located at the new terminal at Swati northeast, Brazil. The first ISO containers have been delivered into the region. The terminal F.I.D. is expected around yeah.
Key regulatory and environmental license licenses and be the obtained for the Santa Catarina terminal and development planning on that continues to progress.
Does it continue to look at a number of international locations that may be suitable to replicate this model currently what kind of exactly 15 separate opportunities to internationalizing business.
So some more detail in the small scale rollout slide 17.
The volumes available for small scale distribution can be seen in the graph on the bottom left set aside as a slide with his staff increasing the size is a great column and not 2020 choose that's reflecting the increased volumes available for distribution once the button right. The FSRU use in place with it.
Our stations and also in this case, it but right now other nor to deal underpinning the development of the terminal a commitment to the FSRU say this graph illustrates the upside potential of these vessels really well and turning volumes into dollars. If we managed to sell half of the spare capacity of these epicel use and get a margin of say 50 cents.
Maybe to you that would equate to additional profit of $115 billion and Twentytwenty too.
As a reminder, access FSRU capacity that we can how do we have can be utilized for three things one power plant expansions and production parts. So she basically an example, and I'll talk a little bit more by the SEC gas marketing. So the sale of natural gas is third parties Norske drawn Eleanor is an example of that and the third is breaking Vulcan.
Small scale as we've discussed before sets using the FSRU is a vessel for LNG storage, we take the gas as LNG and not as reclassified me said, we continue to make progress on converting expressions of interest on the small scale like committed contracts whether for the two executed in the quarter two more and the third quarter so far.
On slide 18, and just detailing out the merchant power opportunity. It says GP and some more detail the graph on the left side of the slides shows the average electricity spot prices and realized per megawatt hour from December and I took the 16 to the end of 29.
They clearly shows the seasonality during each year, that's driven by a combination of Demod I'd rainfall and the rental determines whether the hydro base load is adequate or whether the fossil fuel plants need to be told to dispatch and overlaid on that to lives.
So why the Blue one is associate dispatch breakeven cost and that line implies that city plants can be coal to dispatch whenever the prevailing spot price is above that way and the lower Green line represents the merchant breakeven cost the running the plant independently from the <unk>.
The purchase price of LNG influences the position that the slide here, we have it with an LNG purchase price all $3 per MBT, which is conservatively high against today's prices.
The team to go upon a back test of the opportunistic merchant part income that could have been made based on the available much dispatch windows over the last three years and this analysis shows that goal a share of that additional profit could have been around $70 million.
That's the Golar.
LNG share.
This translates to write $16 million to $18 million net profit for burning a fool cargo of the newco over a two week period and remember that we've got 60 days notice for any dispatch under the P. D.
I mentioned at the start we've got at water on the cold today as I know that are an increasing amount of is an increasing amount of interest and golar pottery power development stories that answer some questions. You turn now to slide 20, highlighting some of our E.S.G. projects, which cover our five focus areas I think food safety management engagement campaigns in both.
The vessels and active engagement with a engine manufacturers to understand key drivers at me things slip what we can do about improving performance mental mental health support of our people, especially as a result, a proven 19 on the right hand side of the slide there's some pictures showing the results of placing a golar designed hydro part turbine engine.
Hello, and the sea water discharge and the Regus system and using that to generate energy to part of the system. The simple design provides the FSRU with a 7% saving in fuel efficiency and importantly, an estimated savings of 5000 tons. This year two per year. So just some examples of what we're doing in the space of U.S.G.
Summarizing our priorities on slide 22.
We will continue to de risk shipping and focus on backlog growth and that's LNG. Our focus is to conclude the position not give me and continue to progress discussions for its potential expansion extension of Haley.
Of course, the development Oh, the new build March three add future opportunities and that street will continue to push the build out of small scale developed terminals that bucket right not SWEPI.
We'll focus on concluding the refinancing activities that Kevin discussed and of course will continue to push for a sustainable reduction in G., a name and simplification of the Golar group structure.
With that I'd like to hand, you back to the operator for today.
Thank you ladies gentlemen, I will now begin the question answer session.
A reminder, if you wish to ask your question. Please press star one and it's on the phone and we have into question limits for person. Please stand by will be compiled acuity Q minimum take a few moments if you wish to cancel your requests. Please press the hashing once again for questions. Please press star one.
Your first question.
From the mine of Randy given Sir. Please go ahead. Your line is now open.
Hey, Randy.
On the surrender Gibbons. Please press star one again, I think I'm not sure. He he disconnected, but we'll just take the mix question, it's coming from John Chanel. Please go ahead.
Thank you good morning, and good afternoon guys.
Unfortunately.
First one for you is this strategic so the press release says the their strategic reviews been concluded boards approved range of specific options.
But if I look at US last slide you had it seems like every kind of near term priority.
Maybe blocking and tackling within the silo. So as we think about maybe and then a breakup of the company and the three different business lines, which do you view is kind of standalone at this point, a with the ability to kind of self financing cells, and which maybe need to be together as are there different stages of of the.
Solution.
Oh, I, let Kevin I cannot comment in a second but rather than commenting specifically on your question because I got really refer you to the overall strategic plan. So what's the GE LNG Board is approved examination of a range of strategic options that management that were not developing disease strategic options mature.
Potentially become actionable, we're going to take them back to the board for consideration if approved for execution will announce something at that time, but can't you want to I'd anymore color on.
So John.
Yeah. So I mean, John York Your point about blocking tackling is right. That's what were no. We have two jobs, we have the blocking and tackling which we could set out in real detail, which we thought she is what we're doing what you can expect from us.
That's very different from the.
Strategic review and.
The structure of the great. So that's why it's not on not on the page. The other reason why not on the page and if you remember from Q1 I think we've got broad alignment from the group that will fall from we've got approval from the bullet to target for like.
FSRU LNG shipping the governor Palin and simplified and put the group.
Into those who like and ensure that each one of them would stand alone.
HM So that's what we got board approval for we then went the being back to the board and this cool to see you can say here the roots to achieve that so not the destination, but the journey to get the here. The steps, we think we need to take implement.
And we gave the broader range of options, which were cut in the press release on the board has collected some for us to that of course, you in more detail to see if we can get them across the line execute them and that's what we're doing a once we've reached Reight point, where we think that executable. We would go back to the board to say.
Here's what we've done.
I do approved and then we'd be in a position to make an announcement and then they go back to your question there too but to your question what was sort of I think there was a silicon assumption in your question, which I think probably takes its got to fall, which as you said as you think about the eminent breakup with agree I don't think we we don't see it could be the imminent Noah.
Full breakup for the group. So let me sort of pick you up on that if I might come into broad picture with full standalone likes is where we're going and then.
Secondly, teal your question about Standalone financing, which is one he is being more or less or more or less mature I think everybody would say that.
Shifting business, it's a business that in seeing seasonality right now, perhaps not as poor.
It's not being the same seasonality that once had in previous years, I think we've seen that and the results of ourselves than others.
But certainly the shipping businesses.
One of so ones, where that is probably less homosexual financing whereas.
Pick any one of the other businesses that probably equally satellite so hope that it was a lot in your question, but I'd say that that's covered it.
Yeah. That's super helpful. Thank you so procedural approval, maybe not execution approval. So on the follow up then clearly you spent a lot of timing made a lot of headway in Brazil.
Maybe not quite a success story, yet, but the clearly a path towards that the interesting commentary about replicating it in other regions I guess the question there is without even naming regions or the opportunity sets similar and other economies of scale in the procedures that you've taken to penetrate.
Brazilian market that you could be much quicker to market some kind of start to finish in somebody's other regions you're contemplating.
Hi, guys a great question for Eduardo.
Yeah sure John.
Actually meet your end I'm happy to answer that.
Well I think when we look at our global ambitions for Golar Paula we definitely will try to replicate what we have been doing in Brazil, We really see Brazil was a stepping stone for on a global business plan.
I think one of the key fundamental shredder she's a wallet.
Elements will be to try to partner with experienced good local players such as the ones that we have identified in Brazil indicators of Oh, So she paying the kids of our of small scale LNG distribution.
Partnership would be aren't so we are actively discussing with a number of.
Potential partners and some other geographies equate to highlight just a few key areas I would say southeast Asia is definitely want one region that we definitely see as it pertains show.
Airport development, the large strategy as well as out some other countries.
In West Africa, as well or some other countries in Latin America I think on those are the their brands, which we believe we have very strong position as of today.
Okay. Thank you in Florida, Thanks column and then.
Sure.
Thank you. Your next question comes from the line of Ben Nolan. Please go ahead. Your line is now open.
Yeah, Thank you and maybe I'll.
<unk> followed you obviously I think as John mentioned, a lot going on with Golar power at the moment and what I'm, hoping that you might be able to do just maybe put a bow on it a little better or.
Take all of the moving pieces and codified them into.
A few simple number specifically sort of based on what you have line of sight on.
I I meant including a lot of the smaller thing how much is sort of the capex requirements going forward and then also again, maybe not even including any merchant power, but it's sort of as you do include a lot of the a smaller scale and and.
Yeah incremental development, where do you see it sort of be.
Potential for for cash flow generation on an annual basis.
Let's say, Brazil, specifically, but.
That being a proxy for Golar power down.
Okay, No hi, Ben I think up when you look at the future developments of our worst future projects a tick it's important to highlight the fact that though we are yet to pick up quite a bit on on certain projects. So.
Those detailed complex Fieger's, Israel was a full EBITDA projections will be announced by that point in time, but what we can say is that the ability to generate for example merchant power will not require any further incremental profits from what they have a place today. So the golar nano control it connected to that.
Power plants, which is able to generate power during the times of the year when it's not generating under the PPA. So there's definitely something that is incremental whenever we are able to run the plant.
The important point is with regards to their small scale strategy, which is highly modular no way that's hard to coppedge will be.
Our proportionate to the number of contracts that were able to secure so we're not going to go speculative space.
It's been a substantial amount of money without having the corresponded cone picture blocks six so I think that that role goes hand in hand, with the commercial developments with regards to the for the contract.
Offtake contracts that were able to secure.
Well when we look at bought cut in though I think they have announced Daniel you Norske, though which is very.
Very important milestone.
So what's our effort.
Which we believe will be in a position to take a final investment decision. The next four to six months. So lets say, that's all with regard to too.
Capex plans, there will be more detailed in the future as soon as we take a fund investment decisions when those projects.
Okay.
All right.
And I'll leave it at that I guess, but another thing that maybe jumping over I guess for my second question over to the.
Yeah for LNG side, obviously, it's been pretty slow going for a while I'm curious first of all if there's been a any change and the pace of conversations.
Maybe also I know that Youre selected as one of the potential participants for a possible deal in a in the Mediterranean and Chevron moving in there whether anything has happened but that.
But but maybe just a little bit more of a sort of.
A pace of progress.
With respect to conversations and discussions on their projects.
So Brian I described the pace of conversations is steady so it hasn't it hasn't disappeared and it hasn't really and accelerated and I think that's to be expected with all the turmoil in the world is going on I guess, a good thing that despite the fact that we'd go lower LNG prices, we're still having uptick active.
Hi, logs with potential customers as I mentioned, we had one arrangement with a one of a.
Because I see that expired and they must extend that for another year to continue looking at possible applications of our technology to the development. So I think it's that and as I've said many times before on the call.
I was the supply demand lines cross in the future I'm more LNG needs to be built today, we believe we'll be at the front in the queue. Because we are the cheapest and fastest liquefaction projects that can get to market. Oh, we don't have any is a issues the onshore based facilities have around.
Ladies and.
You know ticking on line and dealing with local labor issues and all that kind of stuff. So we think we're super competitive on I'm very pleased with the development in the March three work, that's being done because that setting up at this stage to look like it's just as competitive dollars per ton as as a the Ark one the smaller facilities and we can.
Do up to 5 million tons of those vessels, so really looking forward to continuing the discussions with potential customers on that.
Okay and on the Mediterranean side.
Oh, no not nothing's changed you said, you seen and use them and I don't expect Ensign will have until that deal with Chevron closes I would imagine any any movement that will happen, but that's really something to.
Just noble.
Okay, great appreciate it.
Thank you. Your next question comes from the line of Randy Givins. Please go ahead. Your line is now open.
Oh, the gentleman, yeah, sorry, my call dropped earlier I think Chapelle a cut my phone line, but back here [laughter] now a first congrats obviously on the Golden Bear refinancing I'm doing what you said you were going to there's good now what is the LTV of that 420 million say on east.
Back end, where the terms of the financing and I guess following that you know if you plan on dropping your Dan and to each entity what happens with the converts.
[noise], who.
Good question, so it's not going to disclose publicly what he.
LTV is on the back so no. The times you look think of the times is being broadly similar.
Two previous find that.
Maybe a touch lung injury, maybe a bit longer in duration. So we we when we look at that we think its commercially attractive business for us because it is both increased leverage but increase and get that could it be but increases duration. So we think that is good.
Sorry that I'm not.
I'm not going on steel Ltd question, but that's something that's who we can be lockett sensibility dependent on each Linda.
To your question about the restructuring of the business and putting the this the businesses on a standalone basis.
Yes, we do yes, we do want to do that but that in on a through cycle basis will still generate free cash flow.
Equity up to the group and one of the things that we feel confident about two by having these full legs that increases I find it seems like a financial flexibility.
Matches, we've discussed in the park.
Investor appetite risk return profile with.
The risk return profile of the different businesses and that that's something that's very important to us and I think it's important to our investors as well.
Got it lightly no onto your question or what are our plans to combat because.
We will announce anything where are we to have something to announce and when I've been asked about when we'd be not the dot com. That's in the policy said, yeah, that's clear given the state of the combat market.
There is a clear and sensible refinancing for.
Hey, El en route for the Columbus, but we're prioritizing liquidity somebody.
And that sort of commitment we've made and that's one of the reasons why customers.
Okay give me for not giving it a little bit detailed the as you can see how we think of it.
Sure.
Understandable. So it sounds like you don't necessarily have to refinance the convert.
If you do style or the other debt into the other entities, but.
No no right I guess you know.
Yeah, that's there.
My second question, turning to Golar power and those contracts and the ammo use you know I guess, what specific hurdles are maybe required to convert some of those contracts and take that positive Bunkering F.I.D. and the next I think you said four to six months and released.
Sure Eduardo would you like to color.
Yeah sure high Randy I'm happy to answer that one would think that the final investment decision on what to cut and there's not necessarily links to the rollout of the small scale contracts I think they doing some way they are complementary in their strategies, but we view them as a separate the kind of up business developments. So I think what brought in.
It's much more a a matter of <unk> progressing with though with the required the permits and regulatory approvals to two to be in a position to take a final investment decision. We have been awarded the P.A. backing the polar auction that took place in October last year, and now with the recently announced them or your with more skewed we believe that one.
All those oh permits and approvals are met.
We'll be in a position to take I, probably equal but.
When it comes for the small scale contracts I think as you can see there're a number of <unk> contracts in discussions between being taken with a number of customers and those customers. They range from small customers in some cases, two very large industrial customers, which despite the.
The relatively small volumes or the conversion to LNG requires some time.
A final commercial decision to move ahead to switch to LNG in some cases, a it does take a bit over time.
But it's just a matter of for me to those customers grid.
That's in there and there are no approval processes to being a position to fully committed under the contract. So I think we have given a breakdown of fish that was off for the different but commercial initiatives that they have to date.
Got it to provide a sense so far how those discussions are progressing what we can say is that despite the challenging you bought them. It's due to cold it or we have me a bit to secure additional contracts.
We have being able to container reengage with all of the crush Missy.
Yeah, well wait.
And we believe that this easy it is that the strongest before dependent so we'd be really believe and we are extremely constant that saw that business and will be will be achievable. According to the 12 expectations.
Well, thanks for all that color I get finally, just on that is there an expiration date, where they have to kind of a secure convert those and will use or contracts or is it just kind of whenever they are ready.
No there's no specific all hard deadline.
Oh on both specific animal you're Gonna lies so as I said, it's a matter off in some cases, some commercial aspects and some others. Some technical requirements that stick a little bit longer for the customers to two to pick a a decision to commit to LNG.
Got it.
Well that's it for me glad to see Golar back above a double digits. So keep it going no sorry.
[noise]. Thank you. Your next question comes from the line of Mike Webber. Please go ahead. Your line is now open.
Hey, good morning, guys how are you.
Hey, Mike Okay.
So.
First question is on on the strategic review and just to kind of follow up on on John So.
For.
I guess for those of us, they're going to falling goal or for a few for several years.
You know you can feel you feel a little bit like window dressing.
In terms of you know the technicalities of.
Do you, putting a strategic review and putting it to the board I mean this this review in effect has been going on for several years.
At this point.
So I'm curious.
As you stand now you know what are the major hurdles.
And are you.
Is there you any more or less likely to involve third party capital today.
Then youre say a year year and have to go.
Went towards the earlier innings of this review.
HM.
Let me.
Let me tackle that doesn't feel.
That one is where do we want to go we did that lost cozza core leg.
Two was identified the roots to get that that that this quarter.
Well, it's approved the approved us to move those were getting them executed that depends on agreements that needs to be struck.
And.
Plan put in place that involves other people.
And so that puts that Yep go ahead and have those conversations.
That organized in some cases in other cases it doesn't.
And we're getting that all lined up and then as soon as we've got that lined out because that's the board and so he goes and then they'll have to say, yes, so not.
So that's the sort of that's the clip policy I called draw a conclusion from the possible pool.
Lisa.
I got here to your question about involving some kati capital.
[laughter].
I I now speak constantly I think the benefit of having I think we didn't know quite clearly the benefit of having four legs is that it does as you said in the past it allows us to a line.
The business the risk a ton of each one of those businesses to the risk return of different tests indexes. So I think there is a.
There's a benefit there doing that wouldn't see could get aligned like this if it wasn't to make it easier said I came back to comment.
So now I'm sort of answer your question, Mike and that's why we're doing it so that does that make so that's that makes little sense from a well what I call until its pre jajah aboard decision on market conditions. All in tracks from everybody else because that's outside my control for the purposes.
But getting agreement to line up and those four columns is to make it easier and the agreement and that and the debate with the board is to identify the cost to get that.
Sure that sort of getting <unk>, yeah, you'd be angle, Mike Yeah. No. The angle. My question is is that this in one form or another let's put it. This way. This review has been going on for several years right and so there are number solutions.
On the it's not an easy it's not an easy equation. This all four but there are number solutions would have been on the table some of which I'm sure involved third party your private equity some of which the don't I guess, what I'm asking is as we are now further into I guess this iteration of the streets strategic review.
It is it's fair to say, it's less likely to involves third party capital.
And and or is it something that you think would be done I'm in a series of transactions or you know maybe as a group of kind of a bundled a bundled transaction, where we come in one day and we see a released it clearly lays out what the new new go our structural would look like.
It is clear in my mind, Mike what it needs to be the I'm.
I'm wondering on part of the T. night insights about getting that organized.
That's not a lack of something on my side at least not a lack of.
But the second I want to have to build a piece it together and get everything that is a lot of bits and pieces that need to moving parts that need to us that <unk>. That's how I said to your question about.
Did that series is that it's a bundle that depends on the crop. The boat shoes is and different is that sort of better folks would be my view.
I'm asking whether we're hearing about asking whether ones more likely are not now you know at this they know that were a few years into into it I guess a multiple iterations of this just trying to say other processes change and what we should expect without all the Jewish specific answer there's a bit more color on that in terms of in terms of what the most likely scenarios going in a book more.
Yeah, I'm going to I'm gonna toss that one if I kind of like I'm, sorry, because it it does it requires agreements to be struck with other people on it because boards approval and all kinds of different status right and that would be wrong with me to give you guidance on that now when those pieces and off in place unclear whether pieces, it's a move but until late news I really shouldn't.
You know I shouldn't I would been beaten my job right. If I gave you the detail that I have in my head about what I think.
So I'm sorry.
We need to wait so that's sort of agreement to be struck in the board's who approval or not.
Yes, no we've been waiting I guess im just looking for like any indication of what how it's progressing but I can I can take that offline.
Eduardo on the on the downstream the.
You know part of what makes for power. So unique in what has made it so successful relative to its peers has been really.
Got a thoughtful and deliberate strategy to kind of surround Brazil.
So when you've got a lot of competitors kind of swinging a missing and feeling like there stretch stretched a bit on the global on like a global scale you guys have had success really going to being all in on Brazil. So you know within the context of expanding that elsewhere.
Curious.
Is that.
To what degree is that a function of maybe having fix the majority of the low hanging fruit you think or there is there in Brazil.
And.
To what degree is that a function of looking at markets with maybe more amicable power auctions or.
Sure I'm, just trying to get get to get a bit of context around you know.
The how realistic it would be for you to go all in on another geography, I guess Im why considering the degree success, you're having there.
Okay, Hi, Mike how are you doing.
So I think when we're looking to bridge do I think it. So it's important to note that we have been developing as a percentage before over the past five years no that was when we were awarded <unk>. So shape. It back in April 2015, So what we did say that we had gone Olin.
From day, one I think that our exposure to Brazil, which has grown over time I think it. So the more we have been getting to know the markets <unk> being exposed to the opportunity that said, we increased our presence in the country I think what was actually extremely important to our current status for Oh.
The market wasn't effect that we were able to identify very strategic.
Partners indicates a falling so she too we teamed up with what we thought you, Brazil, our indicator, but there's more scale developed between teamed up with the August we brought on a golar has been working with federal brush.
A number of years since 2007, so I think that will help to position ourselves where we are today.
The Brazilian market you know you know I think that particularly because that's markets.
Everything that is going on with regards to their opening up the gas market.
It's extremely positive toward teasers, and Israel will help to accelerate the.
The development of our strategy across the whole concrete, but when we go and when we look at the global growth strategy I think it's important to highlight.
That.
One of the key pillars of our strategy is to build the strategic hubs from which we are able to not only.
Paul we're.
Able not only the shale gas where are you able not only to show in June.
We're able to do some number of different activities, which as we build up those incremental revenues they'd become extremely attractive. So in some cases, we'll be able to under theme investments in a given terminal with relatively low rate return, but as we grow and as we establish the presence I think that are the most public.
I am extremely attractive Oh, we use it to say that in certain countries. Whoever comes first will be the last one could come because it takes a long time to establish a on LNG terminal from a regulatory point of view from our environmental a point of view and from a commercial point of view as well.
So I would say that's a different countries will require a different shred. It is one of the key.
Or what are the key ways that we believe that would be but to be successful in that will be to find the right partner the right month.
Sure well would it wouldn't be fair to assume.
The lessons learned over but in terms of kind of laying the groundwork for one of those strategic hubs.
Is that something where you would want have boots on the ground.
And kind of the liver or kind of develop some degree of local expertise, while you're sourcing that partner and is that something you'd you'd do we see noticeable.
A capex if you will know even if it's on the smaller side.
As you look at kind of build out that presence in a in a specific up.
Absolutely I would not say Oh, I'm very relevant topics in the beginning but for sure we.
We increased our presence or even good strategic markets by having boots and having a dedicated team.
Certain strategic location, but that's a key fundamental strategy for.
Who achieved that goal.
Got you, Okay, I'll turn it over thanks for talking about.
Sure.
[laughter].
Thank you. Your next question comes from the line of Joe Ritchie <unk>. Please go ahead. Your line is now open.
Oh, hi, jumping on how are Ya.
Hey, Joe good.
So tell them first some financing and liquidity that you refinance the bear and set up do you expect within the coming quarters to refinance troughs in shale as well as the loan secured against the act within power and the marginal and can you provide any details around how much cash you expect to release or at least.
Refinancings.
Yes, nothing or zero cash release on the field, that's about removing the put sort of cuts in January or at least addressing the protocols in January.
For the Frost I think we had guided previously lost cool to we've said that you're expecting to generate between 60 and $90 million of additional liquidity across the full of vessels.
Note that we've just done the bad that generates school too. So I think for the cross you should expect us to make good on that commitment and generate something in the region that the balance needed to achieve that so.
Probably around another 30 or 40.
That is that takes care of the vessels when it comes to the Oh yeah.
I think the additional liquidity from that will be minimal we would expect that refinancing a 30.
Million and a 150 million and we've said that we were looking at a C. F in that region of 207, though.
So you should you should assume that.
The addition of liquidity from that is small.
Thanks.
And then regarding power or you have announced several partnerships and downstream developments in power recently and in my opinion Kelly capitalizing on the presses in Brazil, and that's Eduardo is pointing out you could also be able to replicate submissions rolling other regions My question.
Yes, yes portraits and engineering.
The company involved and terminal and downstream operations in other regions. You consider data continues to be a relevant care for golar power and given the metrics and also at the stuff is that 70% to share is that something you're monitoring in order to consider potential listing Oh power.
Hi, Joe Good talk to you.
Oh I would say that's all.
If you look at our businesses.
We do have some some.
Complementary and some similar activities in business line, just new fortress industry, I think that we view the market on which we are most exposed which is Brazil as a market that.
Big enough for us to dedicate most of our assignments, we have been doing over the past four years since the foundation of Golar power and we believe that as we have said earlier today that there was really the stepping stone for our global growth ambitions, you could get it right in Brazil.
During the call that we'll be able to replicate.
In some way not necessarily with the same strategy, but we'll be able to replicate hub strategy no other countries.
When you look at.
All the work that on your fortress is doing.
In the countries they operate.
Todays call.
No way there are some similarities to what they're doing but we believe that Oh, we're all were businesses and all the activities that were pursuing in Brazil. They are no way a broader into says that we are able to generate power were able to capture the upsides and incremental revenues from merchant power we.
Youre talking to downstream sector, we are positioned with our small scale LNG distributions and we are positioned ourselves.
In a way to capture the dish bridge between the substitution now for more expensive than more pollutant.
Fuels, such as diesel LPG heavy fuel oil or.
For LNG, so I would say that saw.
The range of activities that we are developing.
And we are currently operating.
The way why that had been been walks they are currently doing.
Thanks for explaining I think that's a that's it for me.
Having do on.
Thanks, Joe Thanks, Joe you too.
Thank you. Your next question your it's coming from the line of Chris Wetherbee. Please go ahead. Your line is now open.
Hey, guys. Good morning. Good afternoon. This is James on for Chris.
Just wanted to touch on the small scale distribution detail you provided how should we really think about sort of but what should we really expect from otherwise and then conversions to.
Executed contracts and that sort of like EBITDA per contract on average just trying to get a sense is like what should we should expect from that you're in the near term or maybe a few years out.
No no.
Sure.
Hi, much talk to you I think that thought when we look at the pace of development for four hours Mosco strategy as it said despite of the Colgate the environment has been able to continue to execute thing to continue to engage with customers. We believe that we'll be able to accelerate the pace of conversion from Ela wise to actually foreign countries.
Yes.
Well good the fashion over the next few quarters I think it's important that we bring full line you ought to swim and those that we are developing such as the swap it terminal, which is a one initiative that we are extremely excited with and we believe that we'll be in a position to some points next year to commence operations.
Thermal and I think there's always a bit of a chicken and egg situation than reached some customers. They want to see the commencement into real spark objective is to Reengage sledging imagine, it's a habit sizeable all industrial operation.
Campaign that ish.
The energy supply is a critical component of <unk> or your operation. So it's not something that they can switch from one day to be order without.
100% sure that saw.
What we are promising will be delivered to them.
In accordance to all these facts into the the level of reliability that is required so where did that once operations are starts.
The pace of conversion from L. wise to actual 0.6 real we work some of it.
Got it and then any color on how to think about the average EBITDA or maybe ranges period. These executed contract.
Well a current that's and we're just disclosing the number of actual cost, which as you can imagine those contracts they vary.
Quite a bit in terms of volume.
And also in terms of margin I I don't think it will be.
Okay, even onyx specific.
Or specific on average volume is off to that I think we.
As soon as we commenced operations to be able to disclose.
Oh gosh those information.
[noise] I got to actually I'm, just before I hand, it over just.
Maybe to follow up on the is can you just maybe give a sense of the direction, possibly will you imagine to stay relatively stable or should it just move it take a step function higher at selling point as.
The project ransom further.
And why that's that's set for the <unk> question on the small scale ramp up.
Yes, so well.
As I was saying, we believe that once operations or start we'll be able to further accelerate the pace of conversions.
No the point on which we are extremely Oh hopeful that we're going to have a great development dish with regards floor partnership with the artistically border.
As it was announced we entered into commercial partnership with yard, which can expand its a school.
So before mobile appropriate partnership.
And we continue pretty close bylaw being a very close engagement youre all multiple tried to develop multiple tonnage, which we believe it's the greater supports and its bets. It has a when you're looking to the Brazilian markets I think that's really the markets with over 2.7 million trucks.
With the consumption of all LNG equivalent volume close to 35 million tones of LNG.
And were able to have baked into that market. It's a it's a market that change.
Substantially big window attractive for us so the pursuit.
We're very excited with.
The flush picked up that's an opportunity in the believed that VR is the right partner can get right country.
Got it thanks, I'll turn it over.
Okay.
Thank you. Your next question comes from the line of Monday Romano. Please go ahead. Your line is now open.
Hello, Mandarin lot. Your line is now open.
Oh, sorry, I got yet hi, guys I.
I think this the already got money among this Sunday going from Bank of America.
Maybe.
Just some color on the on the state of the capacity in the LNG market I think in your Prime mentioned.
But there were about 27 vessels scheduled in 20 to be delivered and about 75 and 21 to 22. So maybe just the expectations on on a lot and whether that's changed it pretty pretty part of the post code on some color on it would be helpful.
I think I think the they [noise].
It's just two things happening one is of course, we've got new capacity coming on stream, particularly out of.
The U.S., so that's being delayed we for the whole pilot cargo is delayed and as we got vessels plan for delivery.
As a an anticipation or an expectation that some of these will be put back by by a a number of months to try and align themselves and most on I forget the forgive me I forget the exact number but most of the majority of those vessels. So certainly over half our already linked into some of these new contracts coming on so you've got I saw linkage there.
And then obviously, there's some vessels coming into the spot market. What's also interesting is that we have a number of steam turbines and the fleet in the global fleet due to come off charter over the next to see for five years and they're coming off in a regular a number of part per year and the interesting thing for those of us.
So this will stay some of the may be completely debt free they have a very relatively high oh, a low operating efficiency and for that a high operational costs and it'll be interesting to see just how many of those can survive in the spot market and therefore do we see the start of the first wave of.
Of LNG carriers being scrapped <unk> dynamic is changing over the next few years, yes. This new builds and I think there's some deferral of newbuilds happening, but equally we've got some long term charters coming to the end I'm question about what will happen to those vessels and then what does that do as a knock on effect in concert.
Once to the rest of the fleet.
Let me that's helpful. In terms of percentages would you be able to talk maybe about the percentage of those long term Todd is coming coming to the end of that you're actually there is there a split that.
And in terms of the number of vessels I I mean, it make it up I can get that afterwards, he could textured afterwards, we'll give you the detail.
Sure that's helpful.
And maybe just to talk through the development of the month three maybe just provided some color on the timeline, there and perhaps the different cost economics.
Typically I think in the release it was mentioned that you'd be you know one of the lowest cost.
On LNG solutions, such as Greenfields, and maybe just color on that would be helpful.
Just two ways to look at it isnt this the cost per ton.
We'd be public in stating that we can do haley cost per tonne olay for less than $500 to par and that compares extremely favorably with.
Even the brownfield LNG developments around the world. So that's the kind of a finger in their number on what we're seeing is with the newbuilds coming through the cost to us is over similar nature and what that means as you translate as soon as the tolling agreement that we can offer customers on our lease arrangements is very competitive.
In terms of dollars trend might be to you to give us a a required return on the project over the lifetime of that project. So what we're seeing is with as we've gone through the March three design I think surprisingly to some of our people is that they the costs that were able to come out with and keeping the design symbol and I keep saying simple designed I think you said.
Very very important part of what we're trying to do you.
Keep the design simple repeatable and the smart some going into what's what's the sort of the basic design to start with of both the whole and top sides and as we start to push the envelope on capacity what should we see the economy of scale kicking in per.
Cost per ton.
And those those vessels looking like they're going to be very competitive.
I didn't mention in the prepared remarks, we're also seeing our carbon footprint of those on a like for like basis being globally competitive as well. So we're pleased with the progress and still pushing.
Sure that's helpful and maybe the timeline on the mock three.
Hi, my own the March three we've completed our feet. So client specific activities were ready you know where it went advanced discussions with the yards are right and what he PC cost would be what we need as a customer this preferred to stand up and do this with us and we'll be ready to go and I think the you know you're talking about you know for years.
Cycle from start to finish from the point, which I guess I'd.
Topic now that's all for me I suppose.
Thanks.
Operator, just an interest of time can we make this a less question. Please.
Oh sure I'm. Your next question. Its your last question comes from the line of Jason.
Siebel Man. Please go ahead your line is now.
Yeah. Thanks for squeezing me in and taking my question I wanted to ask on Golar power and the cash flow that its kicking back up goal. Our right now following surgery pay start up are you getting any distributions from Golar power and how do you see that up.
Then over the next few years, given the projects that you've laid out to execute within Golar power. Thanks.
Hi, Jane and good morning, I think when we look at a future.
Cash flow distributions from Golar power Bush stated before that we intend to use that excess cash flows to fund our existing growth plans. So no way we are self funding our growth strategy and we believe that's a with the cash flows from so sheep and from the NAND look.
We'll be able to be in a position to fully fund the developments of our operations in the small scale and all the projects.
Okay. So is that just adjust no cash flow coming up to the parent right now we're in the next couple of years.
In the near term, we don't expect to two we believe that will be in a better positioned to fund.
The existing growth opportunities that we have enough for them to distributes the excess cash flows to the shareholders.
Shareholders.
Got it and if I could just has a quick question on the restructuring efforts.
You're talking about entering new territories, and ER and building out store jobs that could do multiple activities and I Wonder if you do go forward breaking up.
Come company do you get into a scenario where.
You're now bidding.
Against.
Competitors for some of those other activities that you're trying to.
Build out from the hub for example, if you're building a power project and you want to do it with an FSRU, but the FSRU isn't a separate company then the power project. Ken are you then opening.
Your stuff up to potential competitors to bid on that project as well. Thanks, I'll, Let me take take that when guys. So the beauty of of the exercise that columns explained I.
I think very well that.
It creates the opportunity for investable companies that are split by asset classes, so shipping par.
FSRU and the the.
LNG company, the beauty of working across the good.
Is that we have the opportunity to collaborate and I think if you talk about the FSRU Power example, I think there's a big difference between responding to a tender in the market to do a bareboat charter for an FSRU.
And then taking of an FSRU and is that why those described putting that through a development into hub to create a very strategic asset that multiple downstream businesses coned can.
Develop from I think they having that structure, having the assets in one particular part of a a group of companies if you want to call it.
It actually makes it easier for us to do and the company deals and arrangements and I don't see that an FSRU alone company will have the ability to do what for example, golar power steering and vice versa, I don't think Golar power IC appetite to simply.
Sponsor tenders for the provision of an FSRU, where they can make so much more business out of taking that FSRU and putting it to work so to the country, we actually see great synergies between the groups and the restructuring that we've talked about as heavy as we try to make that go forward will create simplicity in the business and facilitate that color.
Aberration and a far easier way.
Great. Thanks for the fall.
Thank you operator.
Thanks, everyone for your participation and your interest and Golar.
Please stay safe and these covert times and we look forward to sharing our progress with you next quarter OSAT Goodbye.
Thank you ladies gentlemen that this included a conference call. Thank you for participating you may now disconnect.
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