Q2 2021 Golar LNG Ltd Earnings Call

August 9, 2021

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They also at the center of the core recently related to Rio Grande.

By no means the legal experts.

Okay.

For the retroactively for me.

And in looking at for batteries for greenhouse gas plans on how you guys are obviously pursuing responsibly sourced gas, but it may be a risk of the project that can take on.

All of again anything we should be concerned about there.

Not much.

Operator.

I don't think the slowing separate there.

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Police went out of the cold.

No.

Hello.

Hello, Good day.

I think I hear your supply shifting especially true test.

Hello.

The operator on the line please.

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I worked for Macau and Friday on put options.

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Operator.

The stricter Carl for Asia.

The supportive.

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Hello.

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[music].

Good day, and taking the first filing by well come to the Golar LNG limited Q2, the 2021of the Salt presentation Guy for his skull. Currently all participants are in a listen only mode out there to speak up presentation. There will be a question and answer session and to ask the question Judy discretion, you really depressed.

The start and 1 on your telephone I would now like on the call France on what the your speaker today car Frederique Gustavo. Thank you. Please go ahead.

Hi, everyone and thank you for bearing results on some interesting conference call of coordination there anyhow, we would like to welcome you to Golar LNG <unk> second quarter earnings results presentation.

I'd like to thank you again for taking the time the Darling.

My name is called Frederick Stobo, the CEO of Golar LNG.

I'm accompanied today by our CFO of board of mono, 2% this quarter's results.

Before we get the into the quarterly results. Please note the forward looking statements on slide 2.

Turning to slide 3 we are delighted to announce Golar best Evercore for you to net income of $471 million increasing of the gain on disposal of hydro energy transition and Golar LNG partners L. P to new fortress energy.

The gain on disposal proves that there is significantly embedded value in our asset portfolio.

EBIT for for the quarter came in at $67 million.

Turning to the segments should lay continues to deliver 100% of time with its 15 net L. M D of cargo Offloaded.

In July we conclude concluded an agreement to increase the cash kept off of utilization of Hilli.

The increased production will deliver near term cash flow at low additional capex, the golar as well as the live bring on our targets to increase commodity projects brochure for LNG prices.

We will explain this increase in further detail later in the presentation.

In addition to the newly acquired gas exposure. We are currently generating Brent linked revenue from Healy of operation.

Gaming remains on schedule and is currently 72 per cent technically complete and the construction in Singapore.

Turning to shipping our shipping portfolio achieved the time charter equivalent of 46700 for the quarter.

We have been increasing counter seasonal strengthening of LNG of freight rates in the quarter and recently fixed 1 of our carriers on a 5 year charter increasing our shipping revenue backlog for $259 million.

We continue to see strengthening near and long term fundamentals for our shipping segment in upward pressure, both on rates and asset values.

Turning to corporate following the close of the sale of how you go on G. M O P E and F E, which closed on April 15th we have because the big gain of $575 million.

The big gain records or 18.6 million share holding in N F E at the an.

And if the share price of 35.38.

Following the proceeds from the entity of transaction, we now have cash and marketable securities of approximately $1 billion.

The cash balance for the quarter ended at $287 million and we're currently in discussion with key relationship bank for new and re financing term sheets.

The in excess of 500 millions of dollars. The if completed would release more than $250 million in additional liquidity the golar.

I'll now turn the call over to Eduardo to take us through the second quarter results.

Sure.

Thank you Carl and good morning, everybody I'm Super excited to provide an update on our financial results for the second quarter of 2021.

This has been a fantastic quarter for us as we have managed to close both the hydro and the GM LP transactions on April 15, but we have also continued to observe great commercial and operational performance from O F LNG segment.

If we turn to slide number 5 we can see that the group had a very solid performance from Q2.

Total operating revenues this quarter were $104 million for approximately 2% of Boulevard in the second quarter of 2020 of.

The greatest portion of our revenue came from out of ethylene <unk> segment, where operating revenues from the Hilli, which includes the basic based tolling fees increased it from $54 million in Q1 to $56 million in Q2.

This could be resulted as of.

This could be attributed to a result of of overproduction in the quarter.

This number does not include the the Brent oil linked component, which further enhanced the sugar by another $3 million in the quarter and we will continue to record of those games as a realized gain on derivative instruments.

Revenues from shipping, we're at 42 million, which was down from the $63 million, which will absorb it on Q1, but in line with the numbers of the same quarter of last year.

This has been a result of the seasonality in the market, which has pushed overall time charter equivalent rates down from the previous quarter.

Overall adjusted EBITDA for the group was 6% to $7 million and in line with the same number of the last quarter of the same quarter of 2020.

The main contributor to debt has been the ethylene juice segment with $45 million from the Hilli.

<unk> shipping added 27 million the owners to debt figure.

Continuing on the segments corporate and orders, which includes our business activities of vessel management and all the corporate overheads costs recorded of slightly higher number this quarter with $5 million.

It was the result of 1 of redundancy costs following the sale of hydro in GMP.

S alluded by Carl before we recorded a record net income of $470 million in this quarter compared to $25 million in Q1.

Total gain on disposal from the sale of hydro and GMO P. Twin of fee contributed to $574 million and unrealized gains from the Hilli Brent oil derivative added another $71 million the debt figure.

That has been further offset by provision of tax liabilities, which we have accounted in this quarter and also unrealized mark to market losses from O N E shares.

As of the end of June the carrying value of already in the fish stake was equivalent to 35.

<unk> 38 cents per share.

So as explained by Carl before.

We ended the quarter with the total net debt of $2 billion and from a liquidity point of view, we had total cash reserves of $287 million.

Out of which 207 was unrestricted cash we have.

<unk> also continued to to.

To receive term sheets from key relationship lenders for new and replacement of debt facilities in excess of $500 million.

If we continue the presentation and turning over to slide number 7 we will give you further information the.

Related to the performance of Def LNG Hilli.

So the hill it delivers continues to deliver on amazing performance with 100% of commercial at the time.

She has completed its 59th cargo during this quarter.

It contributed in total of $45 million in EBITDA in Q2 with further upside to be captured our oil link of cheap benefits from a high Brent price and our expectation is to generate an additional $9 million into next quarter, which is up from the $3 million, we recorded EQ true.

We have also agreed with pet income to increase utilization of production in 2020 true by 200000 tons with the option to further increase it by 400000 from 2023 to 2026.

I will now turn the call back to Karl So he can talk in more details of both of these arrangements.

Thank you Eduardo.

Turning to slide 8.

1 of the more exciting developments during the quarter was our announced capacity increase for helium.

Healy happens daily of breathing contracted for 1.2 million tons per year of its total 2.4 million tons per year of liquefaction capacity.

The amount of increase in capacity.

We'll see volumes increase for next year by 17% for point to millions of pounds per year to a total of $1.4 million tonnes.

In addition, pairing of course committed to a drilling campaign of 2 to 3 wells have been good.

On an option to declare an additional point 4 million pumps every air from 23 per 26.

Increasing total annual production in that period to $1.6 million tons per year.

The tariff on the incremental production.

<unk> on the above the existing $1.2 million tonnes will be linked to the TPS.

Delivering on Golar expressed target to increase gas price exposure and there will be low changes to the tariff on the existing $1.2 million tonnes.

Golar will incur low capital expenditure to facilitate the capacity increase and only minor adjustments to opex, hence the majority of cash roseville flow to free cash flow on which Golar has an economic interest of approximately 89% in the on derivative and at the 7% in the green increased capacity production.

Hence the built in EBIDTA growth for the late between 22 and 26 consists of our Brent linked revenue.

Which can add.

The $40 million on current forward curves.

If you however believe that the current Brent price will prevail the same lumber increases to $155 million.

The increased production world based on T F forward curves of around $113 million.

But if you instead believe that the current CTX will prevail that can increase to 373 million.

So but to put those numbers into perspective, the base remaining EBIT for helix is $751 million.

On the forward curves, we will see an increase of around $153 million or on current rates for the same volumes you will see an increase of $528 million.

Significant embedded upside.

The explaining that there's been some more granularity on slide 9.

Both oil M. T T F gas prices are currently in backwardation, where the forward pricing lower than current spot prices.

On the next you can see the sensitivity where the hildebrandt link as mentioned disbursed for Jay on the forward price on 155 on current Brent around $71 per barrel.

The sensitivity to be aware of hair is that of dollar change in Brent price equals $3 million change in EBITDA per Haley on the annual basis.

On the right.

You can see the Tcf price on the same sensitivity.

For 2022 of them on the forward curve.

Well, the brick and incremental learning of $26 million.

If current spot pervade the same number is for 10 line for.

For 'twenty 3 to 'twenty 6.

This have been versus 324.

So the point is that for a significant embedded upside in our existing assets.

Turning to slide 10 give me is now 7% to 2% technically complete on track and on budget.

We have $10.7 million man hours and the shift of final dry dock is now complete.

We are actually been on the long expected the stayed away from Singapore during first quarter of 'twenty 'twenty, 3 and we will start to the commissioning revenues from the second quarter of 'twenty 3 before we start the full contract for 20 years with BP with the total backlog of 4.3.

Billions of dollars in Q4.2023.

Turning to page 11, we continue to view the underlying macro is highly supportive of our strategy to move further into the upstream.

The combination of economically attractive gasoline on our low cost debt for LNG solution produces the backdrop, where we create the attractive risk reward range, considering where LNG price prices are trading today on where they have been trading historically.

Further progress has been made on our announced initiative to increase our guests our exposure.

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We have added to all of our upstream LNG team with very experienced personnel from N O V and the shell.

We're currently exploring several fields already producing associated as well the stranded gas opportunities I mean, the upset the market when we're making further progress on these projects.

On the total inside of our LNG business, we continue to work with existing and prospective clients on attractive growth projects and we havent seen specific commercial and technical discussions.

With an existing client for use of of $5 million on March 3 new building designs.

Okay.

Turning to page 13, I'm switching gears for shipping.

I've mentioned, our shipping TCE for the quarter came in at 46000, $700000 a day and we expect Q3 to be more or less in line at $47000.

This is the result of taking too much charter coverage into 2021, but we are seeing an increasing spot exposure. Both for the reminder of the 'twenty, 1 and significantly increased in 2022.

As mentioned, we used the counter cyclical strength the fixed 1 of our ships on a 5 year charter during the quarter, increasing our backlog at the $259 million.

Yeah.

Also as the amount during Q1, we repaid $60 million in upfront debt repayments in return for a total debt.

The reduction of $102 million on for all of our ships.

Turning to slide 14, the LNG market both of the commodity itself and shipping freight grades has witnessed the real upturn in the first half of the air.

From a shipping perspective, China's considerable growth in imports.

As well as higher prices in Asia is pulling tonnage demand higher as witnessed by the 15% growth in 12 months compared for the first half of 2020.

Although the LNG prices remained high it's been somewhat volatile benefiting an active trading environment, which again benefits shipping.

Another interesting factor, we're paying attention to is the steep price and asset values as steel prices and reduced the shipyard availability start to reflect on LNG new building quotations.

LNG carriers was quoted that the round $180 million in Newbuild price around 12 months ago, and it's now up to around 222 under the $10 million for new orders placed today.

We see early signs of this trends all sort of creeping across the secondhand values across the LNG shipping.

Yeah.

Turning to page 15, we don't only see the market being strong at the moment, we see that we have some of the mental support for continued strength of LNG of freight rates.

From a volume perspective, we see the geographical imbalance between growth and surprise, which is primarily taking place on the Atlantic and growth in demand, which is still focused in the Asia Pacific and <unk>.

The only see that the continuing to materialize over the next 5 years driving Tom Meyers.

As we have previously alluded to the shipping market is also likely to face.

Capacity constraint.

Can you.

Regulations.

That will impact in particular, the older part of the fleet on.

On steam propulsion.

The increased obsolescence of Thomas built in the mines in line tests on the earlier, coupled with limited additional orders should together with the next bonding LNG trade translate into tight shipping market balance going forward.

Based on the current positive market outlook for LNG carriers, we have re engaged initiatives to.

A refinance of our shipping fleet non recourse to Golar and the evaluate alternatives for a separation of our shipping segment.

Turning again.

2 of the last section of the presentation of today corporate and strategic focus.

On slide 17, we've laid out the earnings power of Golar existing asset portfolio.

To start up on the top line you can see that our last 12 months of adjusted EBITDA for shipping is of $119 million. This assumes $48400 and average TCE.

The $10000 change in the TCE across our shipping segment.

The increase or decrease EBITDA by $32 million.

Hence if you mark to market the fleet to the current well near T C.

There's 100 them for $10 million upsides to the EBITDA generation of our shipping fleet, which for them could see come in at around $262 million.

On the Hilli.

Our per raw thought last 12 months EBITDA was $84 million.

As we have spent some time on on the presentation today, we have significant oil oxide currently generating cash for.

First of the agreed the train III production with Perenco has been around $70 million of incremental EBITDA.

Based on current ETF and current Brent pricing.

Couple of them increase our pro rata EBITDA from around 84 to 154.

Give me remains on track to start <unk> contract in.

In October 2023, and will them of pro rata EBITDA of $151 million.

Net thing of corporate investments, we will then see an EBITDA based on the last 12 months per cluster.

The EBIT thought of at.

At the round 300 for 10 million.

But with the embedded upside include that in our asset portfolio. We can easily see this increase by more than $200 million.

2 way into the 500 million.

If you compare that to our contractual debt position of around $2.2 billion remaining capex of around 400, and cash and liquid assets of around the volume.

And then the market cap of $1.2 billion you will see that we're currently trading on the EV EBITDA to last 12 months adjusted EBITDA of 8 times.

For 5 times if you include the.

Embedded upside in the asset portfolio.

We believe trading between private and the 8 clients is a significant discount to where we can monetize.

<unk> 20 of our cash flows.

To.

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And also this is also of before pricing and the growth across Golar platforms.

So we remain optimistic and encouraged by the supporting fundamentals across shifting Nf LNG and we believe we are now at the very healthy.

Capital structure with the significant capital buffer of around $1 billion.

Turning to slide 18 for a summary and outlook.

As announced we have increased the capacity utilization for Hilli, which all day.

Anywhere between $113 million in EBITDA backlog on current Tcf for $373 million on the current price for.

Progressing with an existing customer for the.

On the contract over $5 million Mark 3 new buildings.

And we have expanded our excellent and the team and are currently evaluating several integrated ethylene day projects.

On the shipping side, we see term rates higher than spot rates supporting further fundamental strength.

We have an increasing spot exposure across our asset portfolio and we see asset values rising on the back of the stronger freight market and higher new building prices.

On corporate and investment our adjusted EBITDA came in at the $7 million or net income.

Following the sale of NFC of $471 million.

Which equates to a book equity of $17 per share.

The strong cash and liquid asset position of approximately $1 billion.

And we will focus our efforts on the refinancing our upcoming convertible bond maturity of further group's simplification by separating ethyl Indian shipping.

That concludes the prepared remarks on today's call and I would like to hand, it over to the operator for any questions.

As a reminder to ask the question you read the press the star and 1 and your telephone.

Our first question comes from the line of Ben All on the from Stifel. Your line of cell phones. Please ask your question.

Hey, good morning.

So.

I'll start I guess.

Oh Boy Theres, a few things.

Start with the the <unk>.

3 of that you talked about and the potential.

Our development there.

Can you maybe frame in.

How far of those conversations are at the moment or.

Or when you were the thing is a natural progression towards something more definitive.

Sure So I think.

There's a couple of things when you talk about these types of things it's always the penguins on on the chart for taking a binary sort of yes, no decision at the end of the day by day.

There are a number of factors support thing why.

The chart for Us on every other stakeholder in the project would see benefits in progressing this as quickly as possible I think number 1 and the most important the driver right now is of course of the gas price.

There's a lot of money left on the table for every day you wait.

Second it's the cost of building.

Building on March 3 and when you see steel prices going the way it is Boeing.

Yard activity and the sourcing significant orders for fairly large complicate the vessels like large container orders and the.

And then waiting 1 day with an investment decision is more than 1 day of delay due to the lack of yard capacity.

Lastly, I think in the search for alternative liquefaction solutions I think we have proven that the cost point the carbon footprint.

On the operational track record of all of our <unk> technology is more competitive than all of their situations.

And we are confident that searched on this hum.

I have now been concluded on the therefore can open up for.

The next phase, which then should be in everybody's interest to move ahead as quickly as possible.

Okay. So.

Hmm.

Is this something that I guess, obviously it maybe it's somewhat out of your control, but is it something that you see as a 2022 kind of event is that a fair.

Framework.

Yeah.

I'd say within the next the 6 to 12 months, maybe the 6 months for more than 12 months. There, we should be able to see some significant progress and be able to update the market on the significant progress.

Perfect. Thanks for outside of the and then my second question.

It relates to the 5 year contract I'm really actually just contracting in general.

First I guess any context on the have the kind of rate that you can get on a on a 5 year contract and then of is this something that youre looking to do on the other ships specifically the 1 I was thinking of is the the tundra.

Is there any room for that to be contracted as of as in FSC argue on the long term basis.

Sure.

So there's a couple of things and a lot of questions. So when it comes to the cargo charter to be specific that is for a carrier and not towards the end of drugs on fsrus.

1 of the reasons why we decided to do at the start when you have a meaningful shipping fleet. It's helpful to tie in some of the ships, especially if you can do it way above or well above all in cash breakeven.

Doing of 5 year term on volume ship also helps with our discussions with the bank in where and how you can potentially refinance the shipping creates the non recourse to golar to prepare the shipping free for our separation from our India business.

So the driver of the wide, we decided to fix the wells that we could and health refinancing is what's left on the attractive rates compared to what we have made on the ships historically.

And we are generating.

Decent free cash flow to record the on the charter.

When it comes to the tune of dry.

We are increasingly confident that we will find work for her as a assets argue there are several projects where the specifics of timber.

The interesting thing.

How's the very high throughput.

170, <unk> storage instead of 1.6 day sort of she's very well suited for certain projects and if we work to do the shipping spin that would likely include tinder, but we will.

To keep the tender until we have fixed her and then look at the alternatives for that time with it.

Perfect Alright, thank you.

And so I'm, sorry reminder of just limit your questions to ask your next question comes from the line of Christian <unk> from Rattler of research. Your line is open. Please ask your question.

Christian Your line is open please ask hey, guys. Good morning. This is Mike Webber actually on for Chris How're you doing.

Hey, Hi, Mike.

The good.

So just wanted to follow up on on on the carrier spend specifically so refinancing.

The carriers, presumably the idea there to just get them under a single facility to make it easier to spend but you've been delevering as carriers for a while.

The leverage levels, we would assume to be relatively flat all things considered on a on a refinance basis.

Yeah, I think that's a fair assumption and we're down to around 1 on rate and debt per per DSD. Yeah. I think if you went on to the leasing market you could probably get proceed slightly above that if you go for a normal bank financing, it's slightly below that but its variations of roundup number.

So it's really up to the the sort of final structure that we see most suitable whether it sort of makes sense to do of bank package or whether you go with the combination of bank lease or police.

So dependent on exactly what the structure of it could look like there could be fairly minimal.

Further deleveraging you did but on the Standalone basis, we can refinance the fleet non recourse without any further cash injection.

Okay. That's helpful.

And so I mean, that's always been on 1 of the.

1 of the complicating kind of impediments to the spending of carriers.

Given idea.

All else equal what kind of timeline you would be looking at to do that.

Well I think moving.

The the Arizona business seemed quite a lot of changes across the company portfolio with the and if he of transactions concluded.

I think we're all sort of freed up time to to take a thorough look at this again and to be fair I think we it's always quite public that we were very close to solve this.

Around 2 years ago, it's been been sort of parsed park for a bit but now we will reengage them and the animals such discussions.

To be fair, there's a lot of corporate activity that's happened across the LNG space with Gaslog.

But the private the largest corporate transaction and selling of how you go into the MLP. So we're encouraged to see that the cross LNG.

And we believe that there are some opportunities worth exploring them with the rates, where they are it's difficult to for investors to obtain pure play shifting exposure.

You can of course by flex, but that's already gone on more than 3 times, we're encouraged to see that because that makes way for.

We think more shipping exposure pure play of shipping as broker.

Sure.

Acknowledging that you have a number of options. In this regard is the idea or are you still primarily pursuing scenarios that involve the specific counterparty involved in the carrier fleet or just something where it could be spun out of the public markets.

But it could easily be the latter I don't think it will be up.

Exploring a couple of alternatives on what we think would be the best solution, but the.

The loan without any all of the ring ballpark minutes of the partnership certainly on the table as well.

Sure and then my follow up on on.

On the Hilli.

You did.

A good job of laying out the the different scenarios for.

For adding additional volume there in the deck.

Just curious in terms of the term I know of my.

And any of the has always been of volume based contract to begin with you guys are kind of playing with the volume of all of it now, but I know some of that is contingent on Franco's inland.

And in country, I guess drilling activity.

Is there been any conversations or substantive conversations around extending the term of that of the.

The underlying contract on that asset the please for the base the baseline volumes or is that something you would expect to be more relevant after you figure of route toggling.

To utilize more of trains 3 and for.

I think the fair thing to say there is that we have been extremely clear with the market them equally clear, we'd put and call that we are not talking about the extension before we see the expansion.

So there is only 1 of our starting within E that we have been open to the Gulf.

We concluded the expansion now in the July.

So up until now that's completely off the table for us I think from here onwards.

It's obviously the the door is more open than it has been in terms of all of the extension.

Back to you in the slide that we presented in the deck and how we see Epsilon the economics on on slide 11.

All of our primary target would be to deploy he lay on the gas filled up the control ourselves.

But certainly the open to find solutions with partners in general and we'd like to work with brain cause of that could be an option as well, but the test it needs to come down to 2 of the contract structure looks like look like.

We are of course encouraged up heading for rollout.

And all of their 2 to 3 wells because you know dependent on the gas flow on the reserves on those wells I think there are some additional conversation of stuff very quickly we'll start to the.

But I think we also tried to mentioned during the call that we've made some we think very good hires and strengthening our upstream team.

And we're already seeing.

Some of the benefits of that and there are some quite interesting features that we think we can read the broad helium as well.

Got you Okay I'll save my follow up thanks, guys I appreciate that.

Thank you.

And your next question comes from the line of credit so that there'd be from T. T line Sop Anthos ask your question.

Yeah.

Hey, guys James on for Chris just wanted to follow up on.

There's a line of questioning around the free spin how does the essentially the new regulation sort of play.

To that attorney.

So any timing aspect around that or milestones, we should be aware of or is essentially all out there or is it just something you are just the non shneur.

And just progressed.

As you see fit just kind of want to understand if there is anything to be aware of there.

Sure. So the new regulation will come effective from first the Jan 'twenty 3 we see that mainly affecting our steam carriers, which means he has the big benefits because they represent just over 40% of the fleet on the Walter.

The 40% of either obsolete the need the slowdown will have very positive supply of effects.

We only have 1 steam or less in our fleet, which is the Arctic although the end up during the T ftes, which which should.

So it would be far less affected all of the 3 positive simple.

For for rates.

So we are welcoming the change I'm looking forward to it.

I think in terms of pretty gears, we haven't previously Nick could do of shipping expense with partners and I think it's fair to say the if we do it again, we will be open to do it with partners, but people not to expose ourselves to a situation, where we're reliant on them and when the debt.

On the.

Net level per ship is down to the level we're at now.

We believe it's truly doable to do this on the Standalone basis should be wished ended up as well.

Got it but given the strength of that catalyst is it possible.

Do you think it might make sense to wait a little bit of wait till the back half of 'twenty 2 or maybe.

Even in the 23 or is it just something where you don't think of it actually.

Do you expect sort of whatever you're going to get for it to reflect that and it shouldn't be much of a concern 1 way or the other just trying to understand the view for the outlook versus the timing of the spin timing.

We agree that the shareholder holding the LNG shipping into that time period is probably 1 of the more interesting that's been through the history of LNG carriers. However, we don't necessarily see a spin of society as long as you spend at the maintain the equity.

Then we think that's truly durable. So if you want to think about the today your own volume Golar LNG share, which has that for Lindy exposure on shipping exposure. What we see is that we've struggled to get the efficient pricing.

Because people that want the shaping of exposure don't necessarily won't there for Lindsay and vice versa, Hence for us what we're considering is just to pick the.

ZIP and click into a separate the exposure and then potentially on the handout the share in the shipping venture and then instead of holding 1 for them.

N D share with 2 exposures, you'll have 1 day LNG share, which is an excellent company and then on all of their share which is the shipping company.

Got it alright.

The sort of.

Separate tight on I'm, just understanding how you might possibly structure. Another ethanol LNG deal you guys of sort of benefited a lot from the flexibility provided by the liquidity of gained.

So potentially like how would you think about funding.

The Nf LNG project would you take on the partner initially wood wood.

Would you think about some other source just trying out.

Understand how youre thinking about the structure of the potential deal whenever it does come about.

Yeah.

Oh, there you need the distinguish between the tolling arrangements.

The other similar to B P. So if we were to do a.

Instead of a repeat of it gave me of building against the long term contract.

Like you do and you build the and would expect to get yard financing. So the equity requirement during construction would be significantly lower than the sort of pay as you go with structure that we have on the minerals. So have the on the list.

And we think we have sufficient.

The cash and marketable securities from our share of of.

Such a project when it comes to integrated.

If you work to the purpose built on that for Lindy, we would likely require partners are the.

In 2026, when it turns out for its existing contract and then of course, the capex have been taken on we've already amortized.

A very large portion of the debt by that time.

So.

Then it should be a very limited.

They need in order to redeploy for almost separate the empathy on we also think we can do that from our own balance sheet. So that's how we think about this at the moment.

Great. Thank you.

Thanks.

And next question comes from the line of for Andy events from Jefferies. Your line's open. Please ask your question.

Hi, gentlemen, how's it going.

Hey around the.

A question on the the.

The term sheets, you received for the new refinancing facilities in excess of $500 million.

Liquidity release of 250 million there I guess, what assets will be used for collateral and what are the hurdles are or maybe timing to get this closed.

Sure. So we have been looking at some alternatives on how we can free up additional liquidity I'll tell ya attractive terms on what do you believe we have some some under levered assets.

So on on those term sheets that relates in part to the tune of drugs, which currently has around 1 of those have them of debt.

The rehab so letter of credits, which our cashback that's could be released.

And we are also having a very sort of under levered position in FTE, where we have $100 million against our share holding there. So that's some of the venues that we are exploring in addition to those I think it's fair to say that.

Give me.

They're levered, we have the $700 million of debt.

Against the $4.3 billion dollar backlog of project.

I think as we have seen increased capacity utilization of hidden they need their tame for train 3 or the oil derivatives.

Has any leverage against it and neither does our avenir share holding so those are some of the venue of stuff. We are exploring we are of course are price sensitive when discussing the alternatives are but.

We do see the need.

Or we should see the benefits in and.

The racing some extra liquidity if you can do it at the attractive terms now that there.

There is significant potential growth pipeline across F of Lindy and in particular in the integrated upstream alternatives.

Okay, and then I guess, if that does conclude would that be the way to repay the converts without selling the NFC shares at these relatively low prices.

Yes, so as to be right in the report we are we try to be very consistent on this seems to be honest the of transaction was announced.

We will we're not out of the low cost up expired on July 15.

We've always felt that we will be sensitive to golar share price and if the share price of near term funding needs of golar when deciding on what to do with our.

Our shareholding in NSE.

And at current levels, we find the best to the.

Top of this alternative sources to address the upcoming convertible bonds as opposed to having to do anything with the holding.

Got it on.

And I guess the last question on slides 8 and 9 there's pretty significant upside or downside to the train 3 EBITDA contribution.

So it looks like it's entirely linked to TTM for you going to hedge any of this or do you have of floor EBITDA contribution that you expect for next year.

I think it's fair when it is linked to the T. D F. Neither us nor for anchor with except to do that that the loss. So the.

The the contract is structured in a way where we can lose some momentum the incrementals of production on the debt.

But we both want them to be aligned and we have for a long time as you know if I said to increase the end.

Capacity utilization of the Hilli, but also to increase the gas exposure.

So yes, there is the floor, it's impossible to lose money on that but there is significant upside we don't have any current plans the hedge it out because we liked the dynamic of what you're seeing in the.

In the LNG market, then if you look at the hedging pair of it so backward dated up you're probably better off staying spots.

Got it.

That is it for me thanks, so much.

Thanks.

And your next question comes from the line of Sean more of going from Evercore. Your line is open. Please ask your question.

Hey, guys. So it looks like the priority right now in terms of the additional developments on the iPhone side will be a you know mark 3 Newbuild does this have any implications for the gander and the future of of the Gander is or is there of kind of a market preference for kind of buzz the spoke builds for for specific projects or do you think that the conversion for the.

Andrea would would still make sense given the rate of project.

I mean, it certainly makes sense I think what we're trying to say in this report that we're making progress both on like we've tried to set up the separate RF will indeed, the way, we think about that for LNG in tolling and then integrate that.

On the tolling side, the most advanced and most likely in their term discussion is the newbuild Mark III and in the up you're absolutely correct.

We are absolutely, making progress when it comes to integrate that as well and for integrating the gondola is a solution that could be deployed.

There are some of them benefit are you of singled out we obviously have.

Very large studies done on her in relation to the <unk>.

For 2 years, all discussion back in the 1 LNG day.

She's could be somewhat quicker to deploy given the the whole of this already there.

But we would remain open for both the.

If you have to ask about timeline I would say that the mark 3 is significantly more like clear near term than anything we had gone down.

Currently on guys sitting outside of Singapore and has no debt against her in the probably the scrap value of around 20 million. Let me think a worth of the sourcing of the Mark III designs I'm, sorry, Mark Bolton design significantly more of it enough.

Okay, and what would the the capacity the for the Gander. If you were to do the conversion compared to the Mark 3 I think that's 5 for the Mercury is with the smaller there'll be a smaller solution some of the hilli.

A copy of the Hilli on game Master of Oh.

Yeah.

Okay. Thanks, a lot.

Thank you.

Thank you and your next question comes from the line of Ken <unk> from Bank of America. Your line's open day.

Ask your question.

Great. Good afternoon, good morning.

Just on the Hilli the hundred percent upside congrats on keeping that fully running and operating is there any scheduled dry docking we should be aware of or anything that slows performance and then the agreement on the third train it how did the progression of the discussions progress on the the for training and the potential to get that up and running.

Let me just stop there thanks.

Okay. So just to start off on the laughter.

For so per ankle is proven.

Proving our drilling off of.

The.

2 to 3 wells.

They have an option from 23 at the 26 on doing and the other point 4 million pumps, but you know it really depends on the gas flow on the reserves for those incremental wells currently we do not expect.

Utilization of train for during the current contract period, just on the back of a well known to be the reserves are the.

Currently the case for him he left the.

That could obviously change when you do actual drilling and see the flow and can measure the reserves. So I think for that 1 I would say it's unlikely that we can do trends for during the existing contract period, but it's subject to the outcome of the brand because of drilling campaign, that's now coming up.

Sorry on the the other half of your question was.

Oh, just the simple 1 is that you know you you've had the 59 loads of is there anything that disrupts that going forward any scheduled dry docking of that has to occur on the downside.

There's no current the there will be no dry docking for the remainder of the contract period. There are some scheduled maintenance windows.

And every time moves the shutdown to do those and ramp back up the gum, it's been done successfully.

Either the the of sort of Virginia, the time or quicker.

We are.

Very happy without them, we don't foresee on a and shutdowns of our downtime, which is not scheduled and there are certainly no drydocks.

Yeah.

Perfect and then for the the Gimme.

Is there any impact in that you've had on on Covid on construction on on downtime and all of the are there I guess any constraints on or penalties on delivering late or anything just on on the timing of that delivery.

I think it feels like the 11 months of F. N. B was it wasn't enough for Covid the effect on on that for them.

So that's certainly the felt the but on the on.

On a slightly more serious note.

The.

We obviously keep monitoring the situation and I think the the fifth and final Drydock is now complete we booked around $10.7 million of the working hours.

To date.

On the project is progressing according to the timeline.

The only sensitive the COVID-19 sensitivity going forward is the availability of sourcing some.

Workers or non Singaporean workers, and you need to get those into the Singapore, if the situation worsens or became more problematic in Singapore, we need alternative plans to.

The source such workers and we are working with careful keep in mind kept low capital as of 30% shareholder hair. So we were aligned with keppel to find solutions to source such workers are elsewhere.

So I would say the situation is pretty much on the control to the extent the can keep the COVID-19 situation on on the large construction.

The project under control and there's around 2 and a half thousands of people working on the vessel every day and for now we haven't had on their significant COVID-19 outbreaks across the workforce.

Great color and Eduardo is of great rundown of great slides on on running through the the updates on each of the different parts of the simplification of it and just 1 last 1 for me just you mentioned the monetizing of the potential of monetizing of the on a few stake is there. It sounds like you don't have any plans I mean, we pass the July 15th day. It sounds like you you want to keep that maybe just give us your.

Thoughts on given the simple simplification of the structure of what of your thoughts on on the stake there.

I can start on the amount of law can chime in because he's obviously intimately familiar with with hydro but.

We when we sold the.

The MLP and the hydro 2 and F E M.

In itself index around half of billions dollars of EBITDA in the 2 NFC around 3 under the which generated from the MLP and how you go in and sharp growth with significant terminal.

On the construction or in.

Relevant in Brazil, which will see a significant ramp up of volumes over the coming.

Mom and.

The quarters.

So what we see is that if you add the the tools for trade if you like from the MLP the embedded growth of.

How do you go and talk to that with the existing asset portfolio.

On the NSE, we think that it's an extremely attractive play.

We are of course disappointed by how the share price has evolved them.

Since the transaction was announced on January 13th.

We remain encouraged to M a C.

See that the industrial and the strategically important terminals the benefits building will get into fruition. If you add the fault the LNG solution, where we're working together with them. We think if they can obtain the integrated local there is some very significant potential.

The share and that's why we're encouraged to keep it but more on the island knows far more about the the Brazilian terminals on the east.

And I'll put up but then either.

Yeah, if I may just add a couple of words here on the on how.

Do we see their performance from the recent the terminal developments I think we remain extremely confident on their ability to deliver on the on their business plan.

Special with the continuation of the projects that we had the ongoing in Brazil, I think of the various terminals from defense.

We have seen significant.

Since we announced of the transaction and we remain in close dialogue and as I said, it really confident on it if he has the ability to deliver on debt. So having said that we really believe that the.

The market does not fully value.

Everything that the and if he has been delivering so far and we have been addressing alternative ways to further provide the ample liquidity to golar to address some of it becoming a refinancing needs as we have explained it in the presentation.

Great I appreciate the time thanks, guys.

Yes.

And your next question comes from the line of Lee of break from B Riley Your line's open for us to ask your question Hi, Karl hard word of how are you.

Hi, Liam.

The other.

Carl could you go back to the Mark free and how you envision the.

Contract pricing of the project it would be tied to the T. T F for us of tolling or is it a combination of the 2.

On the on the <unk> 3 the currently discussing of the contract arrangement of there's a sort of a fixed price holding similar to what we have on the gay man.

When it comes to the pricing of the Mark to me itself. So the capital expenditure, we expect the fixed price EPC contract.

Okay great.

And.

The returns of the attractiveness of these projects or the F. LNG projects are pretty nice see see any competition on on a lower cost alternative of a lower price alternatives here.

Yes.

I think it's fair to say that there is like 3 for people that are done for Lindy its a shell prelude of.

On the X months, Hungary, the throw of nausea, and that's on you have us I don't know of course on if he is working on there.

Paul for LNG solution I think if you take.

If you exclude the Murphy for a minute, but on the cost per liquefaction are I think we're highly competitive if not the most competitive.

When it comes to operational track record, we have a better track record of any of the walls mentioned with the 100% uptime since delivery.

And from an Opex point of view, that's also attractive so I think at the end of the day. If you look at their full Engie economics again as highlighted on slide 11 in the deck.

You will see the it's far more important well we are compared to if they were all of these parameters, but the most important thing is that you have of rely on service you are able to capture.

The upsides when gas prices are as they are now or even better if they are like the word of last winter.

So at the end of the day, I think our price points and our operational track record as the real attractiveness and when it comes to the NFC I don't think they have an ambition to produce the LNG.

LNG.

For others, but for all of their use there for their own take so we don't see the Mexican peso on holding business.

Thank you Carl.

And sorry, no for a good question at this time for its convenience.

Thank you all for dialing into the call again, sorry for the life and sort of a bit of a mess with the conference call of Darden off the get go here, but the but the we're glad that you could all stay on and thanks for relevant questions on that speak to them.

Thank you.

Yeah.

And this concludes today's conference call. Thank you for participating you may now disconnect.

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Hi, everyone and thank you for bearing with the songs from interesting conference call of coordination there anyhow, we would like to welcome you to Golar LNG is second quarter earnings results presentation, we would like.

The thank you again for taking the time to dial in.

My name is Carl Fredric Stahl of both the CEO of Golar LNG.

I'm accompanied today by our CFO of Eduardo more on Yahoo to present this quarters results.

Before we get the into the quarterly results. Please note the forward looking statements on slide 2.

Turning to slide 3 we are delighted to announce golar best ever quarterly net income of $471 million inclusive of the gain on disposal of hydro energy transition and Golar LNG partners L. P continue.

For the energy.

The gain on disposal proves that there is significantly embedded value in our asset portfolio.

EBIT for for the quarter came in at $67 million.

Turning to the segments. He Lee continues to deliver a 100% of time, what is 15.9 LNG cargo offloaded.

In July we conclude concluded an agreement to increase the cash kept up with utilization of Hilli.

The increased production will deliver near term cash flow at no additional capex the golar as well as the live bring on our targets to increase commodity price exposure to LNG prices.

We'll explain this increase in further detail later in the presentation.

In addition to the newly acquired gas exposure. We are currently generating Brent linked revenue from Heelys operation.

Give me remains on schedule and is currently 72% technically complete under construction in Singapore.

Turning to shipping our shipping portfolio achieved the time charter equivalent of 46700 for the quarter.

We have seen increasing pounds, you see of small strengthening of LNG of freight rates in the quarter and recently fixed 1 of our carriers on a 5 year charter increasing our shipping revenue backlog for $259 million.

We continue to see strengthening near and long term fundamentals for our shipping segment on upward pressure, both on rates and asset values.

Turning to corporate following the close of the sale of how you go LNG MLP to NFC, which closed on April 15, we have booked a gain of $575 million.

The Big gain records are $18.6 million shareholding in NSE at the end.

And if the share price of 35.38.

Following the proceeds from the entity of transaction, we now have cash and marketable securities of approximately $1 billion.

The cash balance for the quarter ended up $287 million.

Currently in discussion with key relationship banks for.

New and re financing term sheets.

The in excess of 500 millions of dollars. The if computed would release more than $250 million in additional liquidity at the Golar.

I'll now turn the call over to Eduardo to take us through the second quarter results.

Yes.

Thank you Carl and good morning, everybody I'm Super excited to provide an update on our financial results for the second quarter of 2021 day.

There's just been a fantastic quarter for us as we have managed to close both the hydro and the GM LP transactions on April 15, but we have also continued to observe great commercial and operational performance from O F LNG segments.

If we turn to slide number 5 we can see that the group had a very solid performance from Q2.

Total operating revenues this quarter were $104 million for approximately 2% of boulevard in the second quarter of 2020 the.

This could be resulted as of.

This can be attributed to a result of the over production in the quarter.

This number does not include the the brain for oil linked component, which further enhanced the sugar by another $3 million in the quarter and.

And we will continue to record of those gains as the realized gain on derivative instruments.

Revenues from shipping we're at $4.2 million, which was down from the $63 million for which we observe it on Q1, but in line with the numbers of the same quarter of last year. The issue has been a result of the seasonality of the market, which have pushed overall time charter equivalent rates down from the previous quarter.

Overall adjusted EBITDA for the group was 6% to $7 million and in line with the same number of the net.

Of the same quarter of 2020 the.

The main contributor to debt has been there for <unk> segment with $45 million from the Hilli.

<unk> shipping added $27 million net figure.

Continuing on the segments corporate and the others, which includes all of our business activities of vessel management and the other corporate overhead costs recorded of slightly higher number this quarter with $5 million.

It was the result of 1 of redundancy costs following the sale of hydro in GMP.

As alluded by Carl before we recorded a record net income of $470 million in this quarter compared to $25 million in Q1.

Total gain on disposal from the sale of hydro and GM LP twin of fee contributed to $574 million and the unrealized gains from the Healy Brent oil derivative added another $71 million to debt figure.

This has been further offset by the provision of tax liabilities, which we have accounted in this quarter and also the unrealized mark to market losses from OE in the few shares.

As of the end of June the carrying value of Orient the fish stake was equivalent to <unk> 35.

<unk> 38 cents per share.

So as explained by Carl before.

We ended the quarter with the total net debt of $2 billion.

And from a liquidity point of view.

The total cash reserves of $287 million.

Out of which 207 was unrestricted cash.

<unk> also continued to to.

To receive term sheets from key relationship lenders for new and replacement of debt facilities in excess of $500 million.

If we continue the presentation and turning over to slide number 7.

Give you further information related.

Related to the performance of the LNG Healy.

So the Hilli the livers continues to deliver on an amazing performance with 100% of commercial at the time.

She has completed its 59 cargo during this quarter.

It contributed in total of $45 million in EBITDA in Q2 with further upsides could be captured over the oil linked could see benefits from our high Brent price and our expectation is to generate an additional $9 million into the next quarter, which is up from the $3 million we recorded in Q2.

We have also agreed with good income to increase utilization of production in 2022 by 200000 tons with the option to further increase it by 400000 from 2023 to 2020 seats.

I will now turn the call back to Carlos So he can talk in more details of both of these arrangements.

Thank you Eduardo.

Turning to slide 8.

1 of the more exciting developments during the quarter was our announced capacity increase for helium.

He has instilled the breathing contracted for 1.2 million tons per year of its total to 4 million tons per year of liquefaction capacity.

The increase in capacity the we'll see volume increase for next year by 17% or point to millions of tonnes per year to a total of $1.4 million tonnes.

In addition, pairing of course committed to a drilling campaign of 2 to 3 wells have been.

Been given an option to declare an additional point 4 million pumps every air from 23%. The 26, increasing total annual production in the period to $1.6 million tons per year.

The tariff on the incremental production over on above the existing $1.2 million tonnes will be linked to the T. P F.

They bring on Golar expressed target to increase gas price exposure and there will be low changes to the tariff on the existing $1.2 million tonnes.

Golar will incur low capital expenditure to facilitate the kept off the increase and only minor adjustments to opex. Hence the majority of cash flows will flow to free cash flow on which Golar has an economic interest of approximately 89% in the oil derivatives and at the 7% in the green increased capacity of production.

Hence the built in EBIDTA growth for the link between 2020.6.

First of all of our Brent linked revenue.

Which can add.

For $10 million on cash.

Current forward curves.

If you however believe that the current Brent price will prevail the same number increases to $155 million.

The increased production world based on T F forward curves of around $113 million.

But if you instead believe that the current Cts will prevail that can increase to 373 million.

So but to put those numbers into perspective, the base remaining EBIT for he is $751 million.

On forward curves, we will see an increase of around $153 million or on current rates for the same volumes you will see an increase of $528 million.

Inefficient embedded upsides.

Explaining that there's been some more granularity on slide 9 both oil MTT F gas prices are currently in backwardation, where the forward pricing lower than current spot prices.

On the left you can see the sensitivity, where the hillebrand Blink and I've mentioned, it's worth 40 on the forward price of 155 on current Brent around $71 per barrel.

For the sensitivity to be aware of hair is the dollar change in Brent price equals $3 million change in EBITDA for Hilli on the annual basis.

On the right.

You can see the T T F price on the same sensitivity.

For 2022 of them.

On the forward curve.

Well, there can incremental learning of $26 million.

Current spot pervade the same number is for 10 line.

For 23 to 26.

This have been versus 302004.

So the point is the first significant embedded upside in our existing assets.

Turning to slide 10 give me is now 7% to 2% technically complete on track and on budget.

The $10.7 million man hours on the fifth and final dry dock is now complete.

We are actually been on the long expected the stayed away from Singapore during first quarter of 'twenty to 'twenty, 3 and we will start to the commissioning revenues from the second quarter of 'twenty 3.

Before we start the full contract for 20 years with BP with the total backlog of $4.3 million in Q4 'twenty to 'twenty 3.

Turning to page 11, we continue to view the underlying macro is highly supportive of all of our strategy to move further into the upstream.

The combination of economically attractive gas fields, and our low cost debt for LNG solution produces the backdrop, where we create the attractive risk reward range, considering where LNG price prices are trading today, and where they have been trading historically.

Further progress has been made on our announced initiative to increase our guests our exposure.

Hmm.

We have added to all of our upstream LNG team with very experienced personnel from N O V and the shell.

We're currently exploring several fields already producing associated gas, that's where all of the stranded gas opportunities and we will update the market when we're making further progress on these projects.

On the total inside of our LNG business, we continue to work with existing and prospective clients on the attractive growth projects and we havent seen specific commercial and technical discussions.

With an existing client for use of of $5 million on March 3 new building goes on.

Yeah.

Turning to page 13, I'm switching gears for shipping.

I've mentioned, our shipping TCE for the quarter came in at 46000, $700000 a day and we expect Q3 to be more or less in line at $47000.

This is the result of taking too much charter coverage into 'twenty or 'twenty, 1, but we are seeing an increasing spot exposure. Both for the reminder of the 'twenty, 1 and significantly increased into 2022.

As mentioned, we used the counter cyclical strength the fixed 1 of our ships on a 5 year charter during the quarter, increasing our backlog to $259 million.

Yeah.

Also of the mountain during Q1, we repaid $60 million in upfront debt repayments and return for the total debt reduction.

The reduction of $102 million on 4 of our ships.

Turning to slide 14, the LNG market, both of the commodity itself and shipping freight grades.

The real upturn in the first half of the air.

From a shipping perspective, China's considerable growth in imports.

As well as higher prices in Asia is pulling tonnage demand higher as witnessed by the 15% growth in total margin compared to the first half of 2020.

Although the LNG prices remained high it's been somewhat volatile benefiting an active trading environment, which again benefits shipping.

Another interesting factor, we're paying attention to is the steep price and asset values of steel prices and reduced shipyard availability start to reflect on LNG new building quotations.

LNG carriers was quoted at around $180 million Newbuild price around 12 months ago, and it's now up to around 222 under the $10 million for new orders placed today.

We see early signs of this trends all sort of creeping across the secondhand values across the LNG shipping.

Yeah.

Turning to page 15, we don't only see the market being strong at the moment, we see that we have some of the mental support for continued strength of LNG freight rates.

And we only see that the continuing to materialize over the next 5 years driving from mice.

As we have previously under the 2 of the shipping market is all sort of likely to face capacity constraints you can use a M.

Emission regulations.

That will impact in particular, the older part of the fleet.

On steam propulsion.

The increased <unk> of tall much built in the mines in line tests on the earlier, coupled with limited additional orders should together with the next bonding LNG trade translate into tight shipping market balance going forward.

Based on the current positive market outlook for LNG carriers, we have re engaged initiatives to.

Refinance of our shipping fleet non recourse to Golar and evaluate alternatives for a separation of our shipping segment.

Turning again.

2 of the last section of the presentation of today corporate and strategic focus.

On slide 17, we've laid out the earnings power of Golar existing asset portfolio.

To start up on the top line you can see that our last 12 months of adjusted EBITDA for shipping is 100 of $19 million. This assumes $48400 in average TCE.

The $10000 change in the TCE across our shipping segment.

The increase or decrease EBITDA by $32 million.

Hence if you mark to market the fleet to the current well near T C.

There's 100 him for $10 million upsides to the EBITDA generation of our shipping fleet, which for them could see come in at around $262 million.

On the link.

On a per raw thought last 12 months EBITDA was $84 million.

We have spent some time on on the presentation today, we have significant oil oxide currently of generating cash flow.

Most of the agreed the train III production with Perenco huddling around $70 million of incremental EBITDA.

Based on current ETF and current Brent pricing.

Couple of them increase our pro rata EBITDA from around 84 to 154.

Give me remains on track to start <unk> contract in October 2023, and will them of pro rata EBITDA of $151 million.

Net thing of corporate investments, we will then see an EBIT thought based on the last 12 months plus the contracted EBIT thought of doing that.

At the round 340 million.

But with the embedded upside include that in our asset portfolio. We can easily see this increase by more than 200 millions of dollars.

To weigh into the 500 million.

If you compare the up to our contractual debt position of around $2.2 billion remaining capex of around 400, and cash and liquid assets of around the BLM.

And then the market cap of $1.2 billion you will see the currently trading on the EV EBITDA to last 12 months adjusted EBITDA of 8 times.

For 5 times if you include the.

Embedded upside in the asset portfolio.

We believe trading between private and the 8 clients is a significant discount to where we can monetize.

<unk> 20 of our cash flows.

2 of our VP.

And also this is also before pricing and the growth across Golar platforms.

So we remain optimistic and encouraged by the supporting fundamentals across shipping NFL LNG and we believe we are now at the very healthy.

Capital structure with the significant capital buffer of around $1 billion.

Turning to slide 18 for a summary and outlook.

And as announced we have increased the capacity utilization for Hilli.

Which 1 of them and.

Anywhere between $113 million in EBITDA backlog on current ETF or $373 million on the current price.

We're progressing with an existing customer for.

The contract over 5 million, Paul Mark 3 new buildings.

And we have expanded our ethylene and the team and are currently evaluating several integrated ethylene projects.

On the shipping side, we see term rates higher than spot rates supporting further fundamental strength.

We have an increasing spot exposure across our asset portfolio and we see asset values rising on the back of the stronger freight market and higher new building prices.

On corporate and investment our adjusted EBITDA came in I think the $7 million or net income.

Following the sale of the NFC was $471 million.

Which equates to a book equity of $17 per share.

The strong cash and liquid asset position of approximately $1 billion.

And we will focus our efforts on the refinancing our upcoming convertible bond maturity of further group's simplification by separating it for Lindsay and shipping.

That concludes the prepared remarks on today's call and I would like to hand, it over to the operator for any questions.

As a reminder to ask the question do we need the press the star and long and your telephone.

Our first question comes from the line of band all on the from Stifel. Your line of cell phone. Please ask your question.

Yeah good morning.

So.

I'll start I guess.

Oh Boy Theres, a few things.

Let me start with the the Mark 3 of that you talked about and the potential.

The development there.

Can you maybe frame in.

How far of those conversations are at the moment or.

The or when you would thing is the natural progression towards something more definitive.

Sure.

There's a couple of things when you talk about these types of things, it's always depends on the phone on the chalker taking of binary sort of yes, no decision at the end of the day.

Think there are a number of the support thing why.

There's a lot of them on the left on the table for every day you wait.

Second it's the cost of.

The building of Mark 3 mm when you see steel prices going the way its Boeing and yard activity and the sourcing significant orders for per day.

The orange complicate the vessels like large container orders and.

Then waiting 1 day with an investment decision is more than 1 day of delay due to the lack of yard capacity.

Lastly, I think in the search for alternative for liquefaction solutions I think we have proven that the cost point the carbon footprint.

On the operational track record of on RF LNG technology is more competitive the other solutions.

And we are confident that touched on this.

Having now been computed on the therefore, it can open up for.

The next phase.

Each of them should be in everybody's interest to move ahead as quickly as possible.

Okay. So.

Hmm.

Is this something that I guess, obviously it.

Maybe it's somewhat out of your control, but is it something that you see is a 'twenty 'twenty 2 kind of event is that a fair framework.

Yeah, I would say within the next 6 to 12 months, maybe the 6 months for more than 12 months, we should be able to see some significant progress and be able to update the market on the significant progress.

Perfect. Thanks, Sean and then my second question.

Relates to the 5 year contract I'm really actually just contracting in general.

First I guess any context on the of that kind of rate that you can get on a on a 5 year contract and then of is this something that youre looking to do on other ships specifically the 1 I was thinking of is the the tundra.

Is there any room for that to be contracted as of as in FSC argue on the long term basis.

Sure.

So there's a couple of things and a lot of questions. So when it comes to the cargo charter to be specific that is for a carrier and look towards the end draws on fsrus.

Doing of 5 year term on volume ship also helps with our discussions with the bank in where and how you can potentially refinance the shape of increased non recourse to golar to prepare the shipping free for a separation from our India business. So the driver of why we decided to fix.

Was that we could the.

And the health re financing is what's left on the attractive rates compared to what we have made on the ship historically.

And we are generating.

Decent free cash flow to the accurate on the charter.

When it comes to the tune of drugs.

We are increasingly confident that we will find work for her as a assets argue there are several projects where the specifics of timber.

The interesting Tinder has the very high throughput.

170, <unk> storage instead of 1.6 day. So she is very well suited for certain projects and if we work to do of shipping spin that would likely include tinder.

To keep the tender on until we have a fixed her and then look at the alternatives for that type of with it.

Perfect Alright, thank you.

And so it's a reminder of just limit your questions to ask your next question comes from the line of Christian from Rattler Research. Your line is open. Please ask your question.

Christian Your line is open please ask the Shanghai <unk>.

This is Mike Webber actually on for Chris How're you doing.

Hey, Mike.

Hey, good.

So just wanted to follow up on on on the carrier spin specifically so refinancing.

The carriers, presumably the idea there to just get them under a single facility to make it easier to spend but you've been delevering as carriers for a while.

Leverage levels, we would assume to be relatively flat all things considered on a on a refinance basis.

Yeah, I think that's a pair of assumption number down to around 1 on rates and debt per perky. If the year I think if you went on to the leasing market you can probably get proceed slightly above that if you go for a normal bank financing, it's slightly below that but its variations of roundup number.

So it's really up to the sort of final structure. It up we see most suitable whether it sort of makes sense to do of bank package or whether you go with the combination of bank lease or police.

So dependent on exactly what the structure of it could look like there could be fairly minimal.

Further deleveraging you did but on the Standalone basis, we can refinance the fleet non recourse without any further cash injection.

Okay. That's helpful.

And so I mean, that's always been 1 of the.

1 of the complicating kind of impediments, just the spending the carriers.

Given the idea.

All else equal what kind of timeline you would be looking at to do that.

Well I think.

The Arizona business seemed quite a lot of changes across the company portfolio with the <unk> and a few transactions completed the.

I think with all of a sort of free time to to take a thorough look at this again and to be fair I think we it's also quite public that we were very close to solve this.

2 years ago, it's been been sort of parsed park for a bit but now we will reengage.

And the animals such discussions.

To be fair nurse of lots of corporate activity, that's happened across the LNG space with Gaslog, probably the third.

Private you know the largest corporate transaction and selling of how you go into the MLP. So we're encouraged to see that the cros and LNG.

And we believe that there are some opportunities worth exploring them with the rates, where they are it's difficult for investors to obtain pure play shifting exposure.

You can of course by flex, but that's already going on more than 3 times, we're encouraged to see that because that makes way for.

When you think more shaping exposure per player shipping exposure.

Sure.

Acknowledging that you have a number of options. In this regard is the idea are you still primarily pursuing scenarios that involve the specific counterparty.

Balls on the carrier fleet, or just something where it could be spun out of the public markets.

But it could easily be the latter I don't think it will be.

Exploring a couple of alternatives on what we think would be the best solution, but the low without any all the ring ballpark minutes of the park nursery of certainly on the table as well.

Sure.

And then my follow up on on.

On the Hilli and <unk>.

You did.

A good job of laying out the the different scenarios for.

For adding additional volume there in the deck.

Just curious in terms of the term.

My understanding of the has always been of volume based contract to begin with you guys are kind of playing with the volume of all of it now and I know some of that is contingent on current goes inland inland in country I guess drilling activity.

Is there been any conversation so our assumption of conversations around extending the term of that of of the in the underlying.

Lying contract on that asset at least for the base the baseline volumes or is that something you would expect to be more relevant after you figure out toggling to to utilize more of trains 3 and for.

I think the the fair thing to say there is that we have been extremely clear with the market them equally clear, we'd put and call that we are not talking about the extension before we see the expansion.

So there is only 1 of our starting within either we have been open to the Gulf.

We conclude the the expansion now in the July.

So up until now that's completely off the table for us I think from here onwards.

It's obviously the the door is more open than it has been in terms of all of the extension.

Back to the slide that we presented in the deck and how we see it pulling the economics on on slide 11.

Of our primary target would be to deploy he lay on the GAAP filled up the control.

Ourselves.

But certainly the open to find solutions with partners in general and we'd like to work with brain cause of that could be an option as well, but the test it needs to come down to what the contract structure looks like look like.

We are of course encouraged on putting rollout of another 2 to 3 wells because you know it.

It depends on the on the gas snow on the reserves on those wells I think there are some additional conversation on stuff very quickly we'll start to finish.

The estimate but I think we also tried to mentioned during the call that we've made some we think very good hires and strengthening our upstream team and we are already seeing.

Some of the benefits of that and there are some quite interesting features that we think we can redeploy helium as well.

Got you Okay I'll save my follow up thanks, guys I appreciate that.

Thank you.

And your next question comes from the line of credit for that there'd be from TBE lines Sop emphasized for your question.

Yeah.

Hey, guys James on for Chris just wanted to follow up on.

So the line of questioning around the free spin out of the essentially the new regulation sort of.

Of that attorney.

So any timing aspect around that or milestones, we should be aware of or is this essentially all out there or is it just something that you're just the none shneur.

And just progress.

As you see fit just kind of want to understand if there is anything to be aware of there.

Sure. So the new regulation will come effective from first the Jan 23, we see that mainly affecting steam carriers, which means he has the big benefits because they represent just over 40 per cent of the fleet on the water and.

And the 40% of either obsolete the need to slow down that's the will have very positive effects.

We only have 1 steam or less in our fleet, which is the Arctic all of them that we're in the Tia if the east, which which are the.

The far less affected all of the phase 3 positive.

Support for for rates. So we are welcoming the change and looking forward to it.

I think in terms of pretty gears, we haven't previously Nick could do of shipping expense with partners and I think it's fair to say that for you.

Do it again, we will be open to do it been partners, but people not to expose ourselves to a situation, where we're reliant on them on.

When the debt.

The debt.

The level per ship is down to the level we're at now.

We believe it's truly doable to do this on the Standalone basis should be wished ended up as well.

Got it but given the strength of that catalyst is the possible.

Do you think it might make sense to wait a little bit of wait till the back half of 'twenty, 2 where maybe.

Even into 'twenty 3 or is it just something where you don't think of don't actually.

Do you expect sort of whatever you're going to get for it to reflect that and it shouldn't be much of a concern 1 way or the other just trying to understand the review for the outlook versus the timing of the spin timing.

Well, we agree that the shareholder holding the LNG shipping even for that time period, that's probably 1 of the more interesting that's been through the history of LNG carriers. However, we don't necessarily see of spin at the society.

As long as you spend the maintain the equity.

Then we think that's really doable. So if you want to think about the today your own volume Golar LNG share, which has that for Lindy exposure on shipping exposure. What we see is that we struggled to get the efficient pricing.

Because people don't want the shaping of exposure don't necessarily won't there for Lindsay and vice versa, Hence for us what we're considering is best to put the <unk>.

ZIP and click the interest tech growth exposure and then potentially on the handout the share in the shipping venture and then instead of holding 1 for them.

N D share with 2 exposures, you'll have won the LNG share, which is an excellent company and then on all of their share which is the shipping company.

Got it alright.

Sort of of.

Separate item just understanding how you might possibly structure. Another ethanol LNG deal you guys of sort of benefited a lot from the flexibility provided by the liquidity of gained.

So potentially like how would you think about funding.

The net LNG project would you take on the partner initially wood wood.

Would you think about some other source I'm just trying to understand how youre thinking about the structure of the potential deal whenever it does come about.

Oh, there you need the distinguish between tolling arrangements.

Similar to B P. So if we were to do a.

Instead of a repeat of gave me building against the long term contract.

Like you do and you build the and would expect to get yard financing. So the equity requirement during construction would be significantly lower than the sort of pay as you go the structure that we have on the minerals so had on the land.

And we think we have sufficient.

The cash and marketable securities from the our share of them.

Such a project when it comes to integrated.

If you work to the purpose built on that for Lindy, we would likely require partners.

Are all sort of looking into alternatives for redeployment of the heap Leach.

In 2026, when it turns off of its existing contract and then of course, the capex have been taken on we've already amortized.

A very large portion of the debt by that time.

So then it should be a very limited.

They need in order to read the pillar her on a separate than the Tam. We also think we can do that from our own balance sheet. So that's how we think about this at the moment.

Great. Thank you.

Thanks.

And next question comes from the line of Randy the events from Jefferies. Your line's open. Please ask your question.

Hi, gentlemen, how's it going.

Hey, Ron the.

A question on the.

The term sheets, you received for the new refinancing facilities in excess of $500 million.

Liquidity release of 250 million there I guess, what assets will be used for collateral and what are the hurdles or maybe timing to get this closed.

Sure. So we have been looking at some alternatives on how we can free up additional liquidity at fairly attractive terms and we do believe we have some sort of under levered assets.

So on on those term sheets that relates in part to a 10 day, which currently has around 1 of them have them of that.

The we have some letter of credits, which our cashback Ah that's.

That could be released.

And we are also having a very sort of under levered position and an F. For you, where we have $100 million again, our share holding there. So that's some of the venues that we are exploring in addition to those I think it's fair to say that.

Give me.

They're levered, we have the $700 million of debt against the $4.3 billion dollar backlog of projects.

I think as we have seen increased capacity utilization of the hidden they need their tame for train 3 or the oil derivatives.

How is there any leverage against it and neither does our avenir share holding so those are some of the venues that we are exploring we are of course are price sensitive when discussing these alternatives.

The.

We do see the need.

Or we should see the benefits in and.

Racing some extra liquidity if you can do it at the attractive terms now that there.

There is significant potential growth pipeline of accruals and.

For Lindy and in particular in the integrated upstream alternatives.

Okay, and then I guess, just if that does conclude would that be the way to repay the converts without selling and if the shares at these relatively low prices.

Yes, so that's the right in the report we are on them. We tried to be very consistent on this seems to be honest the of transaction was announced.

We will we're not out of the lock up expired on July 15.

We've always felt that we will be sensitive to golar share price.

If your share price of near term funding needs of Golar when deciding on what to do.

With our.

Our shareholding in NSE.

And at current levels, we find the best too.

Part of this alternative sources to address the upcoming convertible bonds as opposed to having to do anything with the holding.

Got it on I guess, the last question on slides 8 and 9 there's pretty significant upside or downside to the train 3 EBITDA contribution. So it looks like it's entirely linked to TTM for you going to hedge any of this or do you have of floor EBITDA contribution that you expect for next year.

I think it's fair when it is linked to the T. D F. Neither all slaw per ankle with except to do that that the loss. So.

The the contract is structured in a way where we can lose some momentum the incrementals of production on the tariffs.

But we both want them to be aligned we have for a long time as you know for it to increase the.

Capacity utilization of the Hilli, but also to increase the gas exposure.

So yes, there is the floor, it's impossible to lose money on that.

But there is significant upside we don't have any current plans the hedge it out because we liked the dynamic of what you're seeing in the.

In the LNG market, then if you look at the hedging pair of it so backward dated up you're probably better off staying spokes.

Got it.

That is it for me thanks, so much.

Thanks.

And your next question comes from the line of Sean more of gun from Evercore. Your line is open. Please ask your question.

Hey, guys. So it looks like the priority right now in terms of additional developments on the iPhone side will be like you know Mark 3 Newbuild does this have any implications for the gander and the future of of the Gander is there of kind of a market preference for kind of the spoke builds for for specific projects or do you think that the conversion for the.

Andrea would would still make sense given the right project.

I mean, it certainly makes sense I think what we're trying to say in this report is that we're making progress both on like you tried to say that we separate the RF will indeed, the way, we think about that for LNG in pulling and then integrate the.

On the total inside the most advanced and most likely near term discussion is the Newbuild Mark III and in the up you're absolutely correct.

We are absolutely making progress when it comes to integrate the Israel and for integrated gone there is a solution that could be deployed.

There are some of them benefit.

The you singled out we obviously have.

Hmm.

The very large studies done on her in relation to the.

For 2 years, all discussion back in the 1 LNG day.

She's could be somewhat quicker to deploy given the the whole of this already there.

But we would remain open for both the if you have to ask about private funding I would say that the March 3 is significantly more likely near term than anything with.

And currently on guys sitting outside of Singapore and has no debt against <unk> and the probably the scrap value of around 20 million net.

Do you think a worth is the sourcing of the Mark III designs.

1 of the time significantly more of it enough.

Okay, what would the the capacity be for the Gander. If you were to do the conversion compared to the Mark 3 I think that's 5 for the Mark the reasons with the smaller there'll be a smaller solution some of the hilli.

A copy of our Hilton gave me Uh huh.

Okay. Thanks, a lot.

Thank you.

Thank you and your next question comes from the line of Ken Hawks share from Bank of America. Your line is open. Please ask your question.

Great. Good afternoon, good morning.

Just on the Hilli, the 100% upside congrats on keeping that fully running and operating is there any scheduled dry docking, we should be aware of or anything that slows performance.

And then the agreement on the third train.

How did the progression of the discussions progress on the the for training and the potential to get that up and running.

Let me just stop there thanks.

Okay. So just to start off on the laughter trained for.

So per ankle is.

Proving our drilling off of.

The.

2 to 3 wells.

They have an option from 23 to 26 on doing and the other point 4 million pumps, but you know it really depends on the gas flow on the reserves per dose increments wells currently we do not expect.

Utilization of train for during the current contract period, just on the back of whoops known to be the reserves the.

Currently the case for or he left.

But that could obviously change when you do actual drilling and see the flow and can measure the reserves. So I think for that 1 I would say it's unlikely that we can do trends for during the existing contract period, but it's subject to the outcome of the brand because of drilling campaign.

Now coming up.

Sorry on the the other half of your question was.

Oh, just the simple 1 is that you've had the 59 loads of is there anything that disrupts that going forward any scheduled dry docking of that has to occur on the downside.

There is no current or there will be no dry docking for the remainder of the contract period. There are some scheduled maintenance windows.

And every time moves the shutdown to do those and ramp back up the gum, it's been done successfully.

Either the the sort of bridging the time or quicker.

We are.

Very happy without them, we don't foresee on a and shutdowns for downtime, which was not scheduled and they're certainly not all of those.

Yeah.

Perfect and then for the the Gimme.

Is there any impact in that you've had on on Covid on construction on on downtime and the other are there I guess any constraints on or penalties on delivering late or anything just on on the timing of that delivery.

I think it feels like the 11 months of F. N. B was it wasn't enough for Covid the effect on on that for them.

So that certainly the felt the but on the almost likely a more serious note.

The.

We obviously keep monitoring the situation and I think the the fifth and final Drydock is now complete we booked around $10.7 million of the working hours a day and the project is progressing according to the timeline.

The only sensitive the COVID-19 sensitivity going forward is the availability.

The of sourcing Hum.

Workers or non Singaporean workers, and you need to get those into the Singapore, if the situation worsens or became more problematic in Singapore, we need alternative plans.

Of course, such workers and we are working with Keppel keep in mind kept low capital as of 30% shareholder hair. So we were aligned with keppel to find solutions to sort of such workers are elsewhere.

So I would say the situation is pretty much all of the control to the extent of you can keep the COVID-19 situation on on the large construction.

The project under control and there is around 2 and a half thousands of people working on the vessel every day and for now we haven't had on their significant COVID-19 outbreaks across the workforce.

It sounds like you don't have any plans I mean, we pass the July 15th day. It sounds like you you want to keep that maybe just give us your thoughts on.

The simple simplification of the structure of what of your thoughts on on the stake there.

I can start on the Manuel can chime in because he's obviously intimately familiar with with hydro but.

We when we sold.

On the MLP and the hydro too and that in itself index around half of billions dollars of EBITDA.

On the 2 NFC around 3 under the which generated from the MLP and how you go in and sharp growth with significant terminal.

On the construction or in the.

The development in Brazil, which will see a significant ramp up of volume over the coming.

The months and quarters.

So what we see is that if you add the the tools for trade if you like from the MLP the embedded growth of hydro and talk that with the existing asset portfolio.

Oh man I E. We think that it's an extremely attractive play we are of course disappointed by how the share price has evolved them.

Since the transaction was announced on January 13th.

We remain encouraged to.

See that the industrial and strategically important terminals the benefits building will get into fruition if you're on.

The pulp LNG solution, where we're working together with them. We think if they can obtain the integrated local there is some very significant potential in the share and that's why we're encouraged to keep it.

But more on the island knows far more about the the Brazilian terminals on the ins and outs of that but then either.

Yeah, if I may just add a couple of words here on the on her.

We see their performance from the recent the terminal developments I think we remain extremely confident on their ability to deliver on the on their business plan.

Especially with the continuation of the projects that we had ongoing in Brazil, I think of the vendors on conditions.

We have seen significant progress since we announced of the transaction and we remain in close dialogue and as I said really confident on in a few of the ability to deliver on debt. So having said that we really believe that the.

The market does not fully value.

Everything that the end if he has been delivering so far and we have been addressing alternative ways to further provide ample liquidity to golar to address some of it becoming a refinancing needs as we have explained it in the presentation.

Great I appreciate the time the thoughts thanks guys.

Yes.

And your next question comes from the line of Lee of break from B Riley your lifestyle centers to ask your question Hi, Karl hard word of how are you.

Hey.

On the other.

Carl could you go back to the Mark free and how you envision the.

Contract pricing of the project it would be tied to T. T F for as the tolling or is it a combination of the 2.

On the on the <unk> 3 the currently discussing of the contract arrangement with the sort of fixed price holding similar to what we have on on demand.

When it comes to the pricing of the Mark to me itself. So the capital expenditure, we expect the fixed price EPC contract.

Okay great.

And.

The returns of the attractiveness of these projects or the F. LNG projects are pretty nice. So you see any competition on on lower cost alternative of a lower price alternatives here.

Yes.

I think it's fair to say that there is like 3 for people that are done for Lindsay It's a shell produced.

On the X month hungry for throw them out for you and that's and you have us on.

No no of course on if he is working on there.

The pulse LNG solution I think if you take.

If you exclude the Murphy for a minute, but on the call.

Per liquefaction are I think we're highly competitive if not the most competitive.

When it comes to operational track record, we have a better track record of any of the walls mentioned with the 100% uptime since delivery.

And from an Opex point of view, that's also attractive so I think at the end of the day. If you look at that for LNG economics again as highlighted on slide 11 in the deck.

I know you will see that it's.

It's far more important well we are competitive of all of these parameters, but the most important thing is that you have of rely on service you are able to capture.

The upsides were them.

House prices are they are now or even better if there are like the word of last winter.

So at the end of the day, I think our price points and our operational track record as the real attractiveness and when it comes to the NFC I don't think they have an ambition to produce the LNG.

For others, but for all of their use there for their own take so we don't see the mass of competitive there on holding true.

Thank you Carl.

And as there are no for a good question at this time for me it's convenient.

Thank you all for dialing into the call again, sorry for some of the lace and.

Sort of a bit of a mess with the conference call of Darden forget the go here, but the but the we're glad that you could all stay on and thanks for relevant question and let that speak to them.

Thank you.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2021 Golar LNG Ltd Earnings Call

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