Q4 2020 Golar LNG Ltd Earnings Call
[music].
Gentlemen, thank you for standard right.
And what I can kick on LNG.
Ltd for Q2, and you try and do your results presentation. At this time all participants are in India.
And all day.
After the Speakers' presentation that will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
I must advise you that this conference is being recorded today.
Now that you're doing the conference over to your Speaker, Ian Ross T E E.
Thank you operator, good morning, and good afternoon, everyone and welcome to the Golar LNG Q4, 2020 results presentation. My name is Ian Ross and I'm. The CEO of Golar LNG today I'm joined on the line by CFO. Carl Stubble. We're also pleased to have tour Ola <unk> chairman of Golar.
With us today, and Stuart Buchanan head of Investor Relations.
Before we start I'd like to draw your attention to forward looking statements on slide one.
And clearly there's a lot to cover this quarter, including the transformative deals with NFC for the sale of a 100 per cent of HEICO and Golar share of the Golar partners business, which incidentally was approved by the MLP unit holders yesterday, let me kick off by giving you some outcomes for Golar from these deals and some quarterly highlights before Carl takes you.
The numbers in more detail.
I'd like to explain three related themes, firstly, why the hydro deal crystallizes value for Golar Secondly, how these transactions will financially strengthen the company and thirdly. This is the first major step along our journey to simplify the group.
If we turn to slide four and look at the value created for shareholders. It's a good story in 2016 Golar invested 290 million ended the HEICO JV was known as Golar power in those days.
The company built Latin America's largest combined cycle gas fired power station that says ebay supplied by gas from the Golar Nanook, and then built a repeatable downstream business around that structure.
When the deal with new fortress complete Golar will book of profitable gain of $760 million based on today's closing price of NFC shares, which translates to three times two times invested equity.
Turning to slide five and looking at our strengthened financial position and just going through the recent activities. We successfully completed the public offering of 12 million shares raising just over $100 million in December last year.
Also in December our Fsrus LNG, Croatia conversion project was commissioned excepted and subsequently sold to our customer LNG her about Scott releasing total liquidity of $51 $7 million after repayment of $113 million in debt to.
To bring this project in on time and within budget. During 2020 is a strong performance and I'd like to acknowledge the efforts of everyone involved.
We repaid the $150 million bilateral facility and $30 million margin loan and then executed a new $100 million credit facility and the agreements to sell both HEICO and our shareholding in Golar partners to new fortress energy will deliver a further $131 million in cash together with 18.
6 million shares of new fortress. So this summary of all of that is that post post book NFC deal closings, we will add $204 million in cash to the company and that's after paying down a total of $193 million in debt.
The third element is simplification.
And you can see from slide six that the ownership structure is more streamlined we will continue to provide operations and maintenance services to the N F E floating assets that they've acquired and we are and we are left with three well defined business activities on.
On slide seven post transaction, we will have an F LNG business with a contracted adjusted EBITDA run rate that clearly ramps up to $224 million per year for F. LNG give me comes online in 2020 for a shipping business with an adjusted EBITDA run rate over the last 12 months of 120.
3 million, representing an average TCE of around $50000 per day, and the ownership of eight 9% of new fortress energy, which is focused on the downstream part of the gas value chain.
We see adjusted EBITDA book value and net debt of each segment. Later this clearly we feel that the underlying equity value becomes more apparent.
Turning now to page nine and a run through of our Q4 2020 highlights today. We report an adjusted EBITDA of $78 million on revenue of $118 million for the quarter, which is driven by a further solid LNG performance and an improved result from shipping and shipping we achieved adjusted.
Time charter earnings of $52000 per day, which is in line with guidance with a T. F. D E and F. Just under 54000 per day. After adjustments we ended the quarter with a shipping revenue backlog was $193 million compared to 172 at the end of Q4.
19.
If LNG operations maintained 100% commercial uptime through the quarter with an additional $8 million in revenue recognized as a result of overproduction on hilli up to the end of 2020.
And the conditional agreement has been entered into with Perenco, which may pay the pave the way for drilling to commence this quarter as LNG Guinea remains on budget and tracking to the new schedule hydro generated $38 million of adjusted EBITDA during the quarter, which as you can see from the graphic is largely in line with the last couple of quarters, So more deep.
On the business segments to follow let me now hand, you over to Carl to take you through the numbers in more detail on financing.
Thank you Ian.
Turning to slide 10 in the fourth quarter trying to try and see for.
Actual results, we reported operating revenue of $118 million for the quarter up from $96 million in Q3, driven by a seasonal increase in our achieving shipping T Z E, which came in at 52000 for the quarter.
<unk> $7000 increase from Q3.
Yeah for Lindsay He Lee continued its solid and stable operations, we did mentioned 100% utilization.
Although in the Q3 announced revised agreement with Perenco, where we win.
500 Bcf production kept we havent built for Ensco $8 million from incremental revenue for overproduction on the Hilli during 2019 and 21 day.
Adjusted EBITDA for the quarter came in at $78 million of beef against consensus of $70 7 million.
Driven by the mentioned higher shipping rates and the Healy overproduction of invoice.
We reported positive net income for the quarter of $9 million.
Our net debt position was reduced by $243 million to 2.62 points <unk> 6 billion as a result of repayments for the $80 million under corporate debt facilities secured against quite go in MLP shareholdings.
Repayments of $112 million on the LNG Croatia.
And an increase in our cash position of $101 million from our December equity offering.
This was all day offset by $75 million from debt drawn on the give me a project.
Our cash position at quarter end book $254 million of which 128 million in unrestricted cash and $126 million in restricted cash debt.
Increase in restricted cash relates to receivables in conjunction with the delivery of the LNG, Croatia, which will be received during Q1.
We expect a further strengthening of our cash cash position following the closing of the NFC transactions.
Turning to slide 11.
Golar is transitioning from capex to cash flow as our infrastructure assets on long term contracts are delivered from the yards. This is coupled with improving shipping rates and reduced shipping book ex.
For sure through our revised shipping chartering strategy.
We haven't seen a clear trend in our EBITDA over the last five years moving from negative in 2016, and 17 to a stable growth of EBITDA performance during 2018 to 2020.
We expect our EBITDA development to continue to build as we take delivery of in 2023, as well as potential increased utilization and oily related revenue from there for Lindsay.
Turning to the NFC transactions and explaining them on slide 13.
There is a therapeutic golar announced two transactions, where we're selling both playgirl LNG MLP to Nir for presenting a day.
The two transactions are independent of each other but it was announced on the same day involving the same counterparts.
Starting with the hydro transaction on the less stone peak in Golar have agreed to sell if I go.
Golar will receive $50 million in cash and $18 6 million shares from new fortress energy for its 50 per cent shareholding in hydro.
Based on the closing price of N V. Yesterday. This represents a $760 million getting to Golar and 3.2 times equity return over the five years, we've been invested in high growth.
Earlier described by Ian.
On the MLP transaction Golar agreed to sell its 38% common unit interest in D. M O P as well as its two per cent general partner interest for $3.55 per unit.
The bid price represented a 27 per cent premium for the closing price of the MLP on January 12, and a 37.5% premium to the 20 day.
Veeva pre announcements.
Golar will receive $81 million in cash proceeds for its common and general partner units.
Yesterday, the common unitholders of the MLP voted in favor of the transaction.
Both transactions are scheduled to close during first half of 'twenty 'twenty, one and all parties are working to close as efficiently as possible within that appointment.
Turning to slide 14 in EBITDA.
So now as to why we decided to do the transaction.
Both transactions again, starting on the left with HEICO.
And it's even hard to grow share ambition, then they bring cheaper and cleaner energy to emerging markets.
Once we find our ethanol and later retracted the IPO, we had several suitors or around the company, but for US it's important to team up with someone that share our vision, especially given that we maintain equity exposure in the combined entity.
We think price double since he wasn't attractive both from a price and execution risk versus an IPO alternative.
The transaction crystallizes the value I'm, probably most of the LNG shareholders, whilst maintaining exposure to the attractive LNG downstream rollouts.
We believe an industry call it consolidation and this will create the leading LNG and downstream company globally.
We also see a significant advantages in a larger entity with better access to growth capital and a more diversified.
Graphical exposure.
Turning to MLP on the right hand side, we believe the price as mentioned represent them in your debt uplift to equity holders, but also saw significant benefits to other stakeholders, including unsecured bondholders in the MLP.
By selling MLP remove the refinancing and the re contracting risk of the MLP asset portfolio.
This is execution of the announced strategic alternatives, where we were looking to better find strategic alternatives for the MLP contract backlog and asset base.
We had a unanimous board representation.
For the.
The bids and we also have I'd recommendations from investment independent investment bank as well as Brooks said lessors.
Yeah.
With that I'll turn it back over to you Ian two turns for shipping.
Thanks, Karl if we turn to shipping on slide 16, the quarter commenced with J P. M. Orion $5 15 for M. N V to you and coated T. F. D E headline spot rates of around 59000, a day the combination of rapid resumption of U S cargoes strong winter demand from Asia and then some.
Unplanned plant outages push J P M up to $15.
Dallas, which in turn drove T FTE spot rates around 160 per day by the end of the quarter.
Cold winter conditions, So Jay can break $30 from N V to you and lack of promptly available ships created a further spike in the rates North of 250000, a day in early January before dropping back below 100000 per day by the end of the month by end of last week. The T. F. D E rates have dropped back into the fourth.
<unk>.
A key for utilization of 77% was disappointingly low due to increased commercial waiting time between two spot charters and mechanical failure and the residual dry dock time on ton drive that we mentioned last quarter, but despite those challenges and the fact that we fixed the majority of the T. F. D zone term business and we did manage to enjoy a couple of higher.
<unk> charters that will also help lift the Q1 TCE.
Our shipping strategy continues to prioritize long term utilization over short term opportunities and you can see from the table on the bottom right of the slide that our annual TCE continues to improve the T. F. D. E fleet achieved a 2020 full year figure of 50000 per day for the first time with a similar annual high of 90 per.
<unk> fleet utilization.
On slide 17, you can see what debt, we expect utilization to rebound to around 90% in Q1, 'twenty, one which was the backlog of $193 million in place at the start of this year and the fixtures that we have in place to date is indicating a T. S. E. T. C E O of around 60000 per day for the next quarter.
The higher LNG pricing over the last few months has moved the industry momentum back to upstream. So let's have a look at floating LNG production in slide 19.
As you've mentioned Hilli performed well, 100% commercial uptime and recently Offloaded. The 57 caught fifty-second cargo as Carl mentioned.
Brent currently above $60 per barrel the oil linkage kicks in and if you remember that means that for every one dollar above $60. This equates to 3 million in additional profit over the course of the year.
Our discussions with Perenco on a potential LNG production volume increase within the remaining term of the contract are progressing positively should we conclude these discussions successfully there's likely to be a new risk aligned tariff payment for the additional volumes. The next step is to finalize the agreement between Golar Perenco SNA.
And the current trading is one or two off take her which would allow for drilling and testing campaign to convince in the next few months any change to the production agreement will likely see the increased volumes in 2022.
Turning to slide 20, and give me project in Singapore, where we're engaging in construction work force of around 2500 people on a fairly consistent basis per day that is we've worked over 7 million man hours on the project to date with a strong safety record. The force dry dock was completed without incident and you can see for.
The pictures, we've now attached to stern most sponsors to the Hull work continues on outfitting the remaining sponsors which will be attached at the fifth dry dock planned to commence around the end of this quarter well nice LNG business development, we continue to respond to new tolling inquiries and are developing the most prospective of these with customers.
We're carrying out some more engineering work in order to tune, our pricing and delivery for the logic capacity Newbuild 5 million tonnes per annum, Mark three concurrent with examining possible redeployment of Hilli post 2026, or a potential mark from conversion of Andrea.
We are reinvestigating, both integrated upstream solutions and also the potential to use smaller units with a shorter production lead time to access associated gas, that's being re injected or fled turning west African undeveloped gas into useful power via LNG is very much part of the energy transition and we think is also a <unk>.
Good business. By example, if you look at the graph at the bottom left of Slide 21, which was the price spread between West Africa and F. O B LNG deliver that say $3 and the forecast LNG pricing at six then the important thing here is that every $1 gas price spread translates to about $250 million in operating.
Margin, so for 5 million ton per annum facility, a $3 spread as shown here equates to illustrate the operating margin of $750 million per year. So there's three different development fronts, Mark one conversion Mark III Newbuild and taking another look at integrated solutions with <unk>.
Lots of potential across.
All of these fronts.
Moving to slide 23 here, we summarized some of the initiatives being considered to capture the value spread between our share price and the book value I'll leave it to tour to comment on share buybacks and distribution of ads B shares as they are board matters, but let me highlight that we do intend improving debt financing if LNG LNG.
Give me project as we approach C O D.
We believe we can get debt financing at five to six times EBITDA.
Between one and $1 3 billion.
We will examine the potential to crystallize value in net LNG assets through one or more structural transactions and we plan to refinance the convertible bonds. During the second half of this year and we will consider using exchangeable bonds against the fortress shares rather than G. LNG.
So summarizing our key initiatives to create value on slide 24 on shipping will continue to maximize full year TCE and will continue to explore separation of the assets what F. LNG will focus on completing that Gimme projects safely on time and on budget will continue to progress the hilli volume expansion and two <unk>.
On March three newbuild in seat deployment for but most both.
Both the March three and the one conversions finally on ethylene G will work on integrated upstream LNG developments.
We already have a good relationship with new fortress, and we will work to create revenue synergies and collaboration and downstream.
And of course, we will look to we will continue to examine the various pathways towards further group simplification, specifically through splitting the shipping and F LNG businesses.
I'm pleased to now hand, you over to G. LNG Chairman total up Troy him to take you through his thoughts prior to Q&A.
And for content.
The other day.
You may recall, the other day basketball to take the true net starts and then I'll come back for their final comments on that.
Okay.
Okay.
Okay I'll go straight into the risk I'm, sorry for this level of confusion.
What we have learned over the last seven day, Eric is that this business is pretty predictable you don't know where prices growth I think we have been through the last seven day or if you have seen oil price above a 137 just in the last day or if you have seen gas prices their own $75 per member per year.
The number of voluntary five so expect the unexpected wherever it's pretty hard to plan for it.
They're both a total Patrick Berard rent up this week and said that hydrogen market. It looks like the LNG market look 40 years ago, promising, but it's going to take time.
Felt the pain of rented for 15 years for LNG related to enter into this market 20 years ago.
Probably 15 yesterday earlier since the major control the production Unkept LNG prices linked to Brent burned priority and he fell 16% per Brent.
Volume came from Qatar, Australia, and the U S. The majors couldn't analog for control of the prices.
It's been from current at or around 10% per Brent today, so affecting the gaseous today, 30% for you put on crude and around 50% cheaper from these.
And not only for cheaper it's all for cleaner.
There is one thing, but sox Nox and other particle that's probably kicks in more people on Seo to you for the time being.
If we start to work on an integrated flow in 2015 of an oil price collapse.
To your first starting from LNG and they started to Golar power.
Sadly one of our partner in Brazil, and Israel, Berger withdraw and other capital to do it I know it was tough times to make moment in the upstream business since that time, we have developed for I don't see him activities together with strong pick invested approximately $600 million.
The biggest province station in Latin America.
Underpinned.
Which was underpinned by the very good people.
Develop some super attractive terminal permits for snow coming into play and we have no cookies complain to answer for you.
Making for your other half times from Omi Inbox I've been a very tough in the day market, but the merger of hydro into NFA, if not to say what we are doing other large share other than NFC is to create a real powerhouse for downstream LNG activities. While all the majors talk about electrodes are what they are going to do new.
For Chris it's not the only talking they're doing it because if you can't beat them join them and that's what they decided to do.
The share of clear wish you hadn't been amount is spent on board of energy to deliver cheap frankly in there and interest in emerging market gas and LNG. If you do the cost structure other motor insurance like them to trade at significant discount to <unk> for the foreseeable future.
Over in order to feed these terms driven activity, if indeed molecules if youre going to buy from the majors are going to give them. The money, let's look a little bit from the gas part of that developed over the last six months.
You will see you on the next slide you affect lithium became from a price which is the blue line.
A little bit less than five five and a half dollar went all the way down to two and are up and more than six again the scrap ships.
The Black line is the current for Brent and similar so there you see affecting the price measured at Ameren beta here in the spread between Brent and <unk>.
Gas Youll see it in the summer there was tremendous upstream Martin, but it was negative.
Tremendous downstream margin been negative absolute margin. When you look forward for next year do you have and then put the forward curve for Brent forward curve for oil.
And you will see our price indicate for gas parity around 11 borrowing down to around 99, and a half overtime for gas curve for LNG. It flopped around $6. So there you see effectively the appropriate adjusted tell you. How these different colors are backed up the bone dollar if growth do you need.
In order to develop the upstream reserved for in Africa growing Internet for LNG vessels.
Including return to dollar is what it takes to liquefy that didn't return the.
The green door, if the spread you have after the sales profit of LNG.
The large pretty on top of that which is a dollar is affecting the shipping cost to bring it around the world and a large screen. If all three of them can take off in the downstream market.
First priority on crude there is more to be taken opened up market because diesel is of course much more expensive than crude and this leads to a large extent probably competing with with LNG.
Uh huh.
Sure.
Yes.
Sure.
But are you also done for you on the S curve as the curve is pretty flat around six stoller, which is an interesting observation not and if you've followed the market is for the last week or two weeks ago. The Qatar has decided to go ahead for the biggest investment over the LNG trains ever in the world.
To produce and it seems like their target is to deliver LNG around $6.
Thanks for the thereby made all development in the U S more or less.
Yes.
Uneconomical.
It's a very interesting strive for their very different from Saturday, who left oil price rise and effectively opened up for Shane I think it looks like the Qataris have gone and said we can supply this market with a very very healthy profit at the level of our U S cannot be developed.
If you look.
At the summer there was a negative profit and producing LNG in the region, while never felt no. It's bound to get enough as you can see on the second graph today, you'll see that the theoretical spread in the upstream today, it's around $3 eight day one.
Don't.
Don't dream spread yesterday at $3 20 desktop two credit improved and then there's an additional talk on that.
So a whole current takeout this spread.
Let me go onto the next page.
Being golar have spent 10 years working with a Korean shipyard to develop a 5 million I'm talking about.
At this stage for this.
It's more debt completed you'll see you're drawing over there.
Let me also note we have received a proposal for a turnkey contract from them.
Such a vessel is likely to cost around $500 million part production tons for affecting their altogether to your other half billion underwrite installed and in order to field structure are absolutely in the interest of our base of approximately five tcf for 20 years and they're going to stay there for 20 years.
It's my opinion that proven gas reserves is from other most underpriced assets into a growth market you can buy them for cents per barrel.
I guess, if so far for most of their problem, it's either flick re injector lifted the growth because no one had the technology to develop it.
<unk> expense 15 billion to build prelude and it does for our total charge offs delivered a handful of cargo it's been a catastrophe golar and Golar fantastic people have cracked the nut, we divested across the one 3 billion we have not.
We delivered 52 car growth, even if you only produce 50% of our capacity.
I'm proud to say that in other team have delivered 100% commercial uptime. Since we've started this thing youre not been deducted one dollar and no fire. It is a very different story.
If you look at the numbers for what we can take out with such a 5 million ton vessels today, you will effectively see you.
Use that and take out the spread on three eight that vessel can make achieved a profit of 950 million. Then you have already incurred as a pure photographs led sales in the upstream activity. If you then pumped up into the end of for your pipeline I would take off the tree at all on provision profit there is no other 800.
To be taken out.
For the one seven.
Billions of alert can be made in bone year by taking off the spread against the real production cost and what they can sell this for in the market today.
Both best even for Us a new for kids and the board of Golar are extremely excited about this thing I'd be able to move fast we want to leverage the unique position Manhattan.
The other ways, we are in process of putting together the wrong Island D I D.
Which we haven't been north price for oil I'll start I'll make the company more integrated that doesn't mean that all the fed up to happen in one company I think we already have the downstream activity.
It might CNS for an NDA comprehensive credit up and there might be a shipping company that together, but we will work together to take out the breast ongoing basis and they might do it in the way we do it with Perenco, where we effectively have oil price upside for <unk>.
You can make more money at a higher enterprises' growth or we can do it on a split tariff basis for every effect lose share is for the producers.
It's been a challenging year, we have to bear.
But I'm looking forward I'm excited.
I am excited when I see there is felt which cannot be present for their from 2015, you see the trend in the EBITDA, which is increasing dramatically and you'll also see that that trend will continue in the years to come.
Fix the balance sheet with the two transactions in both the equity raise and the phase III.
The fee.
There are clear signs that the LNG carrier market its strength in the extra crum with very limited lately delivery is coming in <unk> and no longer trades.
No I'm afraid we have together.
<unk> is the leading platform for distribution of LNG.
LNG demand coming in two years' time or there are effectively.
In addition to that he labor day talking about additional production coming from train three and they also have the oil derivatives coming in which they will give up from only at current prices at 67, which we are today, that's another $21 million if it stayed like that.
Interest in fastener every day almost for people at all for your life or proven epic LNG technology.
Either fixed long term contracts or or for us to take a risk and participate in that $1 7 billion profit.
With Florida.
I again, I apologize to our shareholders in the most humble way for the performance to last years.
It's been a tough market and then this tough market, we have not been delivered delivered share price. However, we have.
Breast in Indiana for your transaction creates significant value for shareholders and I think the build and a unique platform for making more net interest.
For the transition.
Hmm.
We don't have to wait.
No.
In total the fifth 40 years for hydrogen to happen gas if the natural substitute for a grid for had been more and more <unk> I mean I can.
I'm talking about but I think cash tomorrow instead are in 40 years.
I hope that simple.
It's a vacation which have been all have gone through.
It's appreciated.
It can help us take out that value GAAP, which effectively in stock you're about to see a share price trading around 11 and to see book value have trended to be significant extra value in.
In definitely decide triggered the book to start the buyback program for the start to affect the Ltd.
Just after the completion of the transaction.
But most of all we want to build a company with a much leaner cost structure and a much quicker response time.
The big majors.
<unk> made they are notorious for slow on the aircraft, it's a massive amount of spread.
Good for you happened to all the different tools together.
To take off for them from the gas grid in the meantime shareholder should expect.
A significant increase in the EBITDA based on the order backlog that we have it today under contracts coming on I'm excited and I hope that you again, you can look at Golar has a positive investment volume.
Which is very well positioned for that and the defensive from with regarding to Baxter.
Backed by hard cash book prior leadership.
Thank you.
I'd like to now hand back to the operator for questions. Please.
Okay.
We will now begin the question.
Okay.
As a reminder.
Please go ahead with your question please.
Jonathan.
Like for your name to be announced.
Yes.
Cash.
Thank you Lee.
Joey class piece.
Yes.
Thank you ladies and gentlemen, please go ahead.
If you wish to ask questions.
Our first question comes from the line of.
From that.
Please go ahead.
Yes.
Hey, great good morning.
Thank you for the great details a lot to unpack.
So Ian maybe I can start off with just the general you're you.
Kind of talked about the three new breakdowns in and looking at the things.
But one of them is now holding NFC and the downstream maybe you can talk about your your view on the future I mean, you've already detailed the desire to sell that.
The LNG carriers or maybe reorganize that into its own structure and that's been something you've worked on for a few years, but maybe talk about your thoughts on the downstream exposure now with <unk> holdings.
I think.
The way to think about it first of all is our investment thesis right now. There's this fundamental disconnect between the current equity value of the company and to some other parts of the business. So we're still on this journey to simplify the business and realize value from these individual parts of the business as you create overall value for shareholders I think what we try to lay out today.
The fact that we've got.
Simplification in three businesses net exposure with LNG.
Mark one on Mark <unk> and his tour.
They're enthusiastic for that line for US we are revisiting this integrated operations because of the spreads that are available. It was something that when I joined the company nearly four years ago. I was always very excited about it and start to see that part of the business Golar I'm very enthused about the potential for that to come back. So that's ex LNG and shipping.
What we've done is we've stabilized the downside if you look back over the previous years, we kind of hung out for the big numbers as they came through but the cost of utilization during the leaner months in what we've put in place as a shipping strategy that will allow us to put a floor on the on the loss if you like from ships.
Depending on how you look at it and allow us to play on the upside for two avenues. One is we have some index linked contracts. So when the rates go up we can participate there and we do have a couple of.
Ships available to play in the spot market now and shipping we're pretty well covered for the course of this year, depending on who you listen to 2022 can be a very interesting year for shipping in terms of the relative tightness and I think we're extremely well positioned to make a call on that.
Parkway to three quarters away through this year as we look to our.
Shipping strategy for the years coming so that shipping and I think that flexibility of the shipping strategy will give us choices on what we do with ships whether they are in the company out of the company because I mean I don't think we are in a position to comment at all on how we do that split because LNG could see.
External investments and as <unk> said, we may set of LNG go in which case shipping less or we could do it the other way right I think what were trying to outline is the flexibility and downstream and what we have is a collaboration with new fortress, we will be operating and maintaining the vessels that they would go and if you think about two things. One is that we currently we have a share holding.
It's 9%.
New fortress, so we really want them to do well were encouraging in that but secondly, as that business grows and they want to take on new vessels is an opportunity for us to participate that for.
<unk> some of those vessels.
So I think what Tau was explaining is that as you look at that spread there is enough business and what the ramp there for it to be shared around people that are prepared to go after it and realize that value and that's where we're focused without the particularly definitive definitive on that at this stage and what it will actually look like it's a bit for long.
And so again, hopefully that kind of the point across.
No. It's helpful, especially given how much you have going on and what you've just accomplished with the and congrats on getting the HEICO and G MLP sales.
I guess, Mike for my final follow up and final question would be kind of you talked a lot about the.
The LNG developments, maybe talk about the what happens after the next one right. What's the timing or are you still in discussions or progress on the third one.
And given without LNG rates.
Have tracked what what are your thoughts on the timeframe for that.
So my thoughts things progressed, well in active work with various people in various stages of development and this is if you think I guess the point I'm trying to make we've got two parallel strategies, we got our tried and tested strategy that on the back of Hilli. We realized we had to have a counterparty for a tolling.
F LNG.
It really has to be a super major with decent balance sheet that can support the financing and offtake. The other two critical things. The technical part is for me is as straightforward as getting the project up from an off take and finance point of view so that requires a supermajor what we're talking about now is going back to <unk>.
Not necessarily totaling book participating more actively in the integrated environment.
As we were trying to do within the one LNG days and worked out a position whereby we can participate in that.
Which will move faster and it won't require necessarily the same degree.
Degree of complexity around offtake, and therefore finance, so whether that'd be more specific than that we've got two two active areas. We've got mark watermark free in our tolling Arena and then was the same time, we've got this integrated ideas Reinvestigating right now.
Yes.
Wonderful Thanks gene.
Next question comes from the line of Sean Morgan from Africa.
Hi.
Yes.
Hey, Ian.
So we think about current go.
It's a little bit black box for for us as to how they're making their decisions in terms of increasing development of that field you have the overproduction.
Cap removed.
I guess one question is how much higher can you go in terms of overproduction.
On the existing two trains and then also what sense do you get in terms of what Franco's reservations are what kind of oil prices. They are looking at to sort of make that investment and activate the other two trains just what other information do you have that you can share.
So on your first question day, the $8 million of leaf and voice for overproduction nuts from the commencement of operations to December of last year.
Just a simple for.
Factor of dynamics in production, what what I would say that the relationship we got with Branco from the operational point of view is very good and if they've got excess gas or we want to meet the cargo and the timing changes we ended up going up and down a little bit. So that is I think it's just nice acknowledgement of the over production, we're not getting paid for it which I think.
In the absence of any other agreement would continue something in the order of the same amount, but in terms of the deal with Perenco. There's a couple of things to understand one its perenco and SMH in Cameroon, but we have to seek.
Seek agreement on these discussions do take time, secondly that I think the momentum.
Momentum has changed and if you look back a year at the gas pricing and the ability to get an off take agreement structured that's attractive it was very hard to do that on the on the lower gas pricing I think time is with us nice to get that our momentum and the pricing is with us now to get that done and these discussions just.
Take a bit of time and all I can report is positive progress and when the deal is done we will be the first to let everybody know moving very happy about that until that deal is done and there's not really an awful lot more I can say.
Yes.
Is that.
So all in all from conditional agreements within several other part.
For Mike.
Mike.
It's a good likelihood that we will see drilling and there is there are pretty quickly.
Okay.
They drilled the production rather needed to bring more capacity therefore.
Nothing is have to install them for that.
I think they've made significant progress over the losses.
Yeah and.
And so my second question also sort of relates to the Hilli and the LNG business and I actually like that slide 23, where you kind of point out what I think.
A lot of people are thinking that there's the valuation GAAP and so one of the things that people are trying to get their head around as they we talked to investors is the value on the existing assets. So the hilli what are the outs that perenco would have at the end of the life of the contract because it's obviously not in most of those models, but people kind of.
And in terms of the of the underlying value of that business like that already exists. So.
What would have to happen for you to either move the asset or re contract with Perenco and sort of maybe just a little bit of visibility on what like the end life of that contract looks like.
So that contract expires in the middle of 2026 is an eight year 500 Bcf gas contract, which if you remember we took day volume capital fit because of the oil production is now an eight year contract. So that contract will end at that stage.
We've got plenty of these other opportunities that we've been talking about are looking at and particularly the integrated opportunity. It would be an ideal fit for hilli. So we're not focused necessarily on extending that contract with Brent but at this stage, but what we are focused on is maximizing the value.
Deploying hilli wherever that may be so for it to stay in Cameroon, but obviously it has to be a pretty decent deal for us to consider doing that.
For the other than for Gregg for that we are leaving in July 2026.
We later extended their contract.
So because we have a much better alternative elsewhere zone.
If they have more gas and they have to come back to us. They have got protraction of obligated right whatsoever other than option or contractual to extend this day after day life threatening.
Okay. So if you were going to move it you'd probably announce a new location.
Maybe 24 months or before the deadline.
It takes two to three years to develop but I think for now.
This is almost the same deliberate time out of your building right now.
And it has improved with rent growth, but so from that point of view from the more valuable to other new Youre building. So I think we are.
This vessel is.
Pulp relative as vessels today.
That's the lead time it takes.
Yes.
Okay. Thanks for.
Thanks, Sean.
The next question comes from the line of credit.
From K broad areas.
Thank you Scott.
Okay.
Good morning, Thanks for the disclosures and congratulations on the progress.
Hey, Craig.
I've got kind of three quick ones here.
Should the Frankel upsizing come to pass for the remainder of it your contract what other prospects for favorably refinancing hilli.
Can you elaborate on potential for securing improved shipyard on financing terms should you go down the route of Cookie cutter to $5 billion, Mark III projects versus you know Hilli and give me a style conversions.
And finally it.
If you do go down the route of the integrated F. LNG model you've shared how do you think about the debt equity mix there.
Karl do you want to have a go at that first please.
Yeah sure so when it comes to potential refi.
Yes.
Youre right Greg that.
Obviously, we haven't quite seen from amortization under the existing financing and we think if you increase the EBIT draw on the units from the backlog itself, we should be able to improve the financing to more favorable terms I also think the more clarity we can give to any potential financing ers about alternatives.
For he led posted for anchor contract that's for instance.
Well.
Ill health pulse in terming out the amortization profile, so it's hard for us.
For a quick answer shortly yes, we think we can refinance the units.
The and capacity one thing is of course E EBIT.
EBITDA generation for the reminder of the Perenco contract.
Important is.
Derisking or alternatives after the existing perenco contract and with the gas the current gas price and the gas forward price, we see a lot from support for search Derisking.
And that should help us in terming out debt facility.
Ian do you want to comment on demand yard financing.
I think I'm, just repeating what I said in the prepared remarks I mean, we believe is give me heads towards COPD there is.
Opportunity to refinance that vessel of five to six times EBITDA.
$250 million EBITDA, that's one for $1 3 billion.
Favorable terms and will I think we will progress our work on that again these things take time to put in place, but I think that would then.
It put us in a good position on with give me certainly around COPD, maybe before or maybe slightly after but we think that that's perfectly viable.
For the confidante new buildings at the whole value from RV gone to Korea, instead of Singapore is that the Korean government to support our businesses.
On the Singapore.
If you do a turnkey contract.
Korea, I think youre going to probably end up with payment terms not far from book to ship business step for shipping.
Three times 10, 9700 by delivery and of course for same store cash flow dramatically compared to for out of yard to debt.
And I guess to the last question when it comes to integrated project and the capital structure on how we're looking for price I think we will review that from a case by case.
Basis.
Some of the early discussions we're in on that front involves partners. So it has to do with the specific project the geography and the interest of all of the partners that we would develop with.
In some of these instances we are also talking about.
Liquefied.
So say it did yes.
In such projects they have all.
All of their partners that they are willing to take the old Beth and you're basically taking care of a problem for them because today, they're either flaring are reinjecting, the gas and without being able to monetize. It. So this is very much back to sort of one LNG for process and what people want to try to utilize.
Okay.
Alright, thank you.
Our next question comes from the line of Ryan <unk>.
Okay.
For example.
Thank you operator, Howdy gentlemen, how's it going.
Good.
Hey, now following the completion of the sale of high go to NSE.
You know I guess, assuming the deal closes in April and let's call. It a windows your lockup period expire and can you give a little more details or timeline for decisions on what to do with the entity shares selling them, taking a margin loan against them kind of in in a larger block.
Dividend ing them out what are some options there.
Hey around it. So this is Scott, yes, we have in mind.
From the closing of the transaction so whenever it's closest plus 90 days and then we are free to do whatever we want to do after those mine today.
We are exploring alternatives and I think it's fair to say that we receive a lot of inbound proposals for.
From investment banks and other finance years.
I'll turn it saves for that ownership block, which is worth around $1 billion for close to $10 per golar share mm is.
We could either margin lend against it.
Margin loans, you can typically see proceeds of at least 60% LTV.
We are looking.
Alternatives to refinancing the CEB involving the NFU shares, which may or may not include an exchangeable. So instead of doing a convertible to deal in D. C to an exchangeable to any fee shares.
We are also looking at.
Other alternatives, but our primary focus for US is we've outlined on slide 23 closing the valuation GAAP and we will push forward initiatives.
The GAAP and that will very likely include distribution of parts or and if you're holding to day LNG shareholders.
Got it and then a quick kind of a.
A detailed question if you were to sell the shares prior to let's call. It next April would there be any kind of short term capital gains on that or how would that work in terms of your ownership.
The shares is it once you collect them or have you had them historically how would that work.
There are no.
Org structure in Bermuda, there will be no tax let's say.
And I think it's important to say that.
Tend to be parked.
And then for your normal term.
The important part to build out the integrated model we have.
We view either direct or indirect can be long term shareholders and NFC. After cash in that billion you really believe in both NFC yesterday particular weighted carbon for close to 500 million OSB are injected into the company that EBITDA or no.
They all have a fantastic platform for growth for universities.
Successfully started with high blood.
Thanks for it started in Italy, I think access to financing net.
No with unsecured debt and middle market capital of $10 billion.
The dark for a little bit for that.
The aim is to make this at the billion dollar revenue come from it.
But the deduct a little bit from February they believe they have a unique parties together for them if they want to be partners.
You will not see a block sale or a billion or oftentimes, they're all day since that's what theories asking for it.
[laughter] not as directly but okay noted.
And then last question Slide 24, you mentioned you are seeking industry consolidation for the LNG carriers now clearly they are buyers for LNG carriers is most recently seen with the Blackrock taking.
Taking gaslog private so I guess what are your plans for the LNG carriers is to spin off still on the table in the near term.
Or are you pivoting to maybe be a buyer to further consolidate the industry.
I can kick it off from in the Indian can chime in as we go along but.
We have communicated to the market previously we have been looking at alternatives to consolidate the market from an operational standpoint, we've previously seen the industrial benefits from having a larger fleet through the cool pool, which we havent together with Gaslog and biogas.
And as you can see and from from the shipping Chris. We've also been involved with with different sort of consolidation efforts that has not yet materialized.
We are happy to see.
The start of some consolidation with with Blackrock stepping into GAAP snug.
And I think the combination of that transaction and the N F E N Golar transactions. There's there's now some movement in what's been a very rigid.
Corporate costs for them within the different LNG shipping companies and we are looking at and discussing with potential partners. We don't rule out any alternatives for us what we believe is that over time shifting in that for Lindy, most likely does not belong in the same emphasis and we would look to further simple.
For our corporate structure.
For one to create pure exposures to shareholders and again with the key motivation to unlock the valuation GAAP.
You covered it well I have nothing more to that so that's good.
Notice nicely dunhill, thanks again good quarter.
As Randy.
Thank you.
From the line of Ben Nolan from.
Please go ahead.
Yes.
Thanks.
I wanted to dig in a little bit more on that.
The potential for incremental LNG.
Mark One day, Mark three now you're you've also sort of outlined the possibility of doing a smaller maybe more expedited version.
It's sort of two parts of this first of all.
And in terms of.
Either sort of the integrated model or the tolling model.
Does there seem to be.
I, a favorite or something that is.
Interesting at the moment too.
And to your counterparts, and then and then secondarily, especially maybe with the with the integrated model of a smaller scale model Youre looking to do more on an expedited basis. How quickly can you is it realistic to think that you know.
Something could get off the ground in a manner.
More speedy way there.
So maybe I'll take the second one first the way the secret with the integrated.
Are the smaller model is to get a hold of the long lead equipment and if we can see a strength of opportunities ahead of us and it allows us to engage with the supply chain directly.
Yes.
<unk>.
Production slots in place for the main equipment such as the.
The main cryogenic heat extraordinary refrigerant compressive strength and alike. So I think that's one of the things that we're looking at the second thing is what type of facility do you put it onto we're examining different models around that and I think as we put all that together for me. It's a case of going ahead with that supply chain.
Management, and ordering or pre ordering or getting a position where we can get.
Without necessarily putting down a lot of money.
And ensuring the supply chain about that that's a string of opportunities going forward. So that's how you do that in a shorter period of time. The actual construction time will depend on the thing that it's sitting on.
So we're not kind of concluded on that yet, but certainly adopting that cookie cutter approach and doing repeat orders allows us to advance.
Do the design once repeated and then not have to go through that for a protracted procurement process put in place supply agreements in Brazil of repeat so that's how you do that and then on the second one I don't think I'm going to comment on.
Favorites, but what I would say on the on the Mark one and minus three and we keep saying it is that the amount of interest coming through the door is increasing and we've been saying for the last probably 18 months NAV that is LNG prices increase we will get further entry interest for our products because a there.
Proven and B they are cheapest fastest.
Fastest to market and importantly, their carbon footprint is proving to be very competitive so without answering your question directly we've got we've got more and the interesting thing is that this number that we're looking at it changes and rotates as is.
As customer.
Processes ebb and flow in time, I think we got it to some extent do at their pace, which is why you know towards frustration with that as a one big one of the other reasons, we're kind of re launching the day. So the integrated idea when we can set our own pace.
Right.
Okay, and then just do.
Pivot a little bit.
To the downstream side, obviously with.
Hi go in F <unk>.
And everything that you sort of.
Still involved but less directly.
Although you still have the tundra and Thats really where my question is how should we think about that going forward.
Or are you likely to be participating in tenders for MSR you contracts or.
Is that sort of aveva.
Available or sort of spoken for as it relates to the consolidated HEICO NFC or.
What are your plans for tundra I guess.
So the tundra as you know is operating in the queue for right now as a carrier.
My my views of tundra.
Again this is very consistent with what we've been saying for the last months if not years the value of Fsrus to us is not just to the right onto charter.
As in Fsrus, earning a marginal return the value for us is to somehow gather into that integrated downstream.
Gas value chain and that's what we'll look to do.
Haven't really made any progress on that yet I think we will let the two deals with NFC.
Consolidated close and then we can sort of pick our heads up and start to think about some of the other things and what we do with tundra will obviously be one of those.
Okay.
What's important to know where of course the relationship to other fees.
For further back we've other people who delivered effectively.
As you for them and it started in Jamaica, we are the people who also due to the free for them in Jamaica today.
In the last couple of months. After this deal ever for Nam drove you are on the phone today as far as kind of a couple of times a day and half of it is of course to close the transaction for the rest of it is to develop business together, we want to do business together and I think if they see an opportunity to picture interest. So we've worked together.
Other income on that for us for smart away their own 10% of the company to the truth of the way on the charter rates with some of our competitors are offering. These tests will give us a good return at all.
Right Okay. Thanks.
Our next question comes from the line of him back from B Riley.
Got it.
Okay.
The execution on Hilli in terms of performance has been for very strong you've got give me coming through plus the the two mark projects.
Have you seen any competitive response in terms of other alternatives to some of your proposed projects as you go forward.
No.
[laughter].
So.
You talked to the biggest player in the.
And the other kind of them.
So side yesterday, and they have plans for <unk> EBITDA I think they pay for.
For much given up on it on a book probably the most serious competitor we have.
I think.
There are plenty of people that are looking to do it.
I think there's one thing building Nf LNG unit Theres, another thing building, it and safely and reliably operating it for two to three years and the knowledge that we've gained and that operations phase is quite unique and I think very valuable from Golar point of view.
Okay.
You have monetize your assets for harvest nice returns.
LNG.
The Hilli is a nice example of high return projects.
How do you map out the balance between harvesting and reinvesting at high returns.
As the company unfolds over the next few years.
I think one of the challenges with LNG that we've talked about is the time it takes from the final.
A final investment decision to actually generating cash and so what we've been doing with the downstream business is looking at ways to supplement that.
And with LNG, what we're trying to do is.
So let me fast forward, where we have several of these projects on tolling agreements with Supermajors on 20, or 25 year contracts generally generating hundreds of millions of dollars of EBITDA that is a very very attractive investment proposition for infrastructure funds and other and other people.
Free steady terms that are generally completely ambivalent to commodity prices because they are linked on tolling.
In order to get there.
You have to go through that cycle. So what we're looking at is how we can supplement that with some of if you like our own business rather than tolling business, where we can participate more directly are more quickly. So if you take the long term view then I would see this company is having a tolling business and supplementing that with an integrated business.
And we got to take the opportunities as they come.
I don't know, which one goes faster.
But essentially that's how I see the LNG business unfolding.
Great. Thank you very much.
Our next question comes from the line of Greg from BPI.
Yes.
Yes.
Good morning, and good afternoon everybody.
A lot has been covered on strategy. So.
I guess I'll just ask.
Clearly, there's a long term partnership in the making with new fortress energy. It seems like theyre going to be with their infrastructure network I guess combined with what you have it seems like theyre going to be an active player in the LNG Bunkering market I know you're still I believe you still have that small miners.
Already stake in Avenir.
How do we kind of square those or how do we kind of how should we think about that.
So in terms of in terms of what can you just.
In theory, yes, sure is that is that when you are going to be kind of competing with new partners.
Is that two different bunkering companies is there any issue around that or not really.
No I wouldn't think so I think the whole thing is likely to be highly collaborative and I haven't even has gone.
Small vessels, which if you remember.
Golar power high go because contracted one of the avenues, seven and a half as in cube vessels and so that vessel contract will flip over to you for two so there'll be there's already a working relationship and they're making that.
The way to think about moving these cargo is around is it going to be done by lots of different ways.
<unk> got some other ideas on moving ISO containers directly on barges they will be adding these type small vessels I think the way to think about it is as that business grows the need for different and innovative ways to move LNG around the cost for the various countries will probably be driving the <unk>.
<unk> of those vessels rather than the other way around so I think it's a pool rather than a push.
Okay per perfect for me. Thank you very much super helpful.
Thanks, Amy we have time for one last question operator.
Our next question comes from the line of Lukas.
<unk> from <unk>. Please go ahead.
Okay.
Thank you Hi, guys I was just wondering last time on the quarter.
Quarterly call you mentioned you were.
I'm looking into ammonia and hydrogen doing some preliminary studies there.
Per day, it seems to me that.
You are back to your roots, which is LNG.
Is that correctly interpreted.
I think they are quite quite parallel really.
I didn't talk to but he was in the LNG for 15 years ago and he just wanted to wait for 50 years for hydrogen I think theres a couple of things. The first is that we are an LNG company per share and we're going to develop and push we've tried to lay out a little bit more of the strategy as we saw a deconsolidation of some of the assets under.
Under the group structure and focus on LNG and shipping and what to do with that.
Again, primarily to create value for shareholders through bridging that gap that we've discussed quite a bit today in terms of ammonia in carbon there are two things that we're focusing on the first is LNG as a process is quiet carbon intensive and we already have a bit of an advantage with the way we use heat recovery on.
Our floating LNG units and we have a relatively strong carbon footprint as it is.
Good carbon footprint in this highly competitive against many of the onshore facilities. So one of the things that we're looking at through technology is how we can bring additional carbon sequestration into our LNG facilities, particularly the mark III, but its big deck space, It's got room for modular COC sequestration.
From the main cryogenic.
To the turbine strength the compressive strength, that's the biggest source of Sidoti. So that's one area. We're looking at linked to that and looking at the hydrogen economy.
We're doing some studies in the background that says okay. We can do floating LNG. Our view my personal view is that the way that the world will move hydrogen around for the hydrogen economy is in the form of ammonia because it's got a higher energy density it's easier to move and if there is already a proven industry and moving it around so.
All we're looking at there is saying okay. If you can do LNG Len can you do floating ammonia production in <unk>.
The supply chain, there again look at what new fortress of singing their downstream they have.
Our commitment through time to progressively change the few their facilities are burning to hydrogen isn't simple format that hydrogen will be and it could well be ammonia and I think we will find again as a personal view that many of these.
Engines and turbines will be convertible to ammonia.
So we can't ignore it it is important it's important for the World and society and looking at hydrogen and I think we've got some of the capability to do it but it's a long way out and it's not going to turn cash tomorrow, but.
But we still have to talk about the fact that we.
We're progressing it so yes, we're an LNG company, we can improve the carbon footprint of Sidoti and the natural successor to LNG and other energy transition is ammonia.
That's not I see sort of the rationale for your corporate thing, but the NSE.
Each sort of corporation and projects.
Do you sort of see that dependent on you owning a big stake in the company.
Not necessarily I, just think it's a great perfect alignment if you on a shareholding in the company not necessarily a massive one view of the shareholding of company a shared future share alignment then you run.
In my experience the best relationships with business work when both companies benefit from the co creation of something that individually.
There's bigger than two parties working on their own as well as working together I think that's all we're trying to say is that we've got a good relationship with the fortress, we want to develop it and look for any revenue synergies along the way and to keep us aligned as our chairman has said is that we intend to keep.
Some for mistaken that company.
No that's good for us as well, we will benefit as they grow and are successful.
Okay, and then in terms of tourist.
It's your vision on the LNG.
I guess.
Oh, well received so in the sort of industry circles.
But I guess so towards the investors he would immediately be standard off the methane slip.
The issue was.
Just wondering what is sort of your thoughts around this topic that.
It's definitely on the mind of investors.
So the methane slip is something that we're looking at and we will talk a little bit about that when we publish our ESG report right.
At the same times of 20-F or slightly after that later in the year.
The thing with methane slip as you've gotta get in collaboration with the LNG carriers. For example, it's the engine that create most methane for industry is learning is that there is a relationship between the amount of methane slip and how hard the engines are working and this is a direct correlation then between how much.
Boil off gas.
Much.
Tuesday method. So this is getting more complicated how much do you have to submit it depending on how fast your hedges are going so there is a sweet spot and an optimum optimum position in there, where we minimize sidoti and we minimized methane slip through speed the industry I believe needs to work on this collectively and we are participating in that and for.
Discussions with the manufacturers and do what we can so we are actively involved I think it's an industry collective problem to solve and I think the industry will get there.
But if you're going for.
Thanks Deborah.
I mean, you're talking about high for John you should have in mind that for each of our hydro guard from are done market today, it's actually bigger than the LNG market and it all goes into the refinery industry.
Average value of hardware revenue produced today, you produce 8.2 kilo of C. O two so got it.
If you just start to clean up the world, It's nice to start with the hydrogen industry.
One other way.
Produce their own CEO too.
But we take your point and I think we are going after everything from slipping of amgen's too.
The comment from the holiday weekend.
Do you have the speech talked about tortillas too early.
Their main focus is not to reduce the meat centrally pitch on LNG.
For the production carbon capturing and those kind of things are probably more sensible short term long term trend to be talking to you.
Have to focus on not wanting for them having vehicles over the last 20 years, nobody vulgar above the earnings coming five to 10 years out everybody wrong. This earnings from tomorrow or do they offer.
I agree.
It seems to be an important issue in the capital markets or I guess, having an address.
B would be sort of a good.
Good stuff that you from your side, that's all I'm sorry for getting there.
Hello.
From a producing papers together blocking interest you can find on our homepage.
First pay price already I'll never be more papers coming.
I will deal with part of what you're now talking about as well and we think we think our contribution to this.
The whole environmental and emissions side of it very seriously and that's why we embarked on our ESG publication journey. Some 18 to 24 months ago I don't mean to cut you off but we are absolutely out of this time.
Thank you for listening everybody and for your questions. Please stay safe and we look forward to sharing our progress with you next quarter, we'll end it there on the back to you operator, thanks and goodbye.
Skincare that conference for today. Thank you for participating you may now.
Okay.
[music].