Q3 2021 Golar LNG Ltd Earnings Call
[music].
Okay.
Good afternoon, ladies and gentlemen, and welcome to the Golar LNG Limited third quarter 2021 conference call. At this time all participants are in decent only mode until we conduct a question and answer session on the food and under what just to remind you on this call is being recorded.
I'd like to hand over to Mr. Carlos Turbo. Please begin your meeting.
Hello, and welcome to Golar Lng's Q3 earnings results presentation, we would like to thank you for taking time to dial in my name is called Fredric Stahl go the CEO of Golar LNG.
Before we get into the quarterly results. Please note the forward looking statements on slide two.
I'm accompanied today by our CFO, Mr. Eduardo Mariano to present this quarters result.
Turning to slide three in Q3 highlights.
Our reported revenue for the quarter of $107 million, a year over year increase of 12% and an adjusted EBITDA of $74 million.
30% year over year.
We expect to continue to see a strong growth in our earnings across both our ethylene D segment on shipping and we will get into the detail. So rich throughout this presentation.
Starting off on Apple Lindy, we continued to deliver 100% uptime on Hilli, which now has delivered its 16th third LNG cargo more than any older If lindsay globally.
Furthermore, we hedged 50% of our ETF linked commodity exposure for Q1, 'twenty two at $28 per Btu.
Employing a Q1 earnings for Mark train III production.
The $1 $2 million for the quarter.
We also see increasing contributions from our Brent linked earnings and to get the commodity linked to production from Hilli is expected to more than double Golar protocol. The earnings from here late in 2022 versus the last 12 months earnings.
Excellent.
It is now 75% technically complete and scheduled to start its 20 year contract for BP in just about two years.
This will unlock an EBIT saw backlog to golar of $3 billion.
We also experienced increased momentum for potential new LNG project, we continue constructive discussions with an existing customer for use of a 5 million ton Mark three newbuild.
And we're also making rapid progress on potential integrated projects.
We have also seen an increase in the amount of prospective <unk> customers in the quarter across different geographies.
Turning to shipping our shipping portfolio achieved a TCE of 49500, a day for the quarter up 26% year over year.
We expect to see increased earnings also from this segment going forward due to increased spot exposure of our fleet opening up through 2022.
We recently contracted one of our ships for one year time charter at about $100000 a day.
Increasing our revenue backlog Protos shipping segment to $267 million.
We see continued strengthening for LNG shipping with increasing interest for three to five year charters, increasing asset values, driven by new building prices increasing day rates.
On corporate and investment we secured $682 million in new financings during the quarter.
Proceeds from these financings will be used to refinance our upcoming convertible bond maturity as well as extend maturity of other vessel financings.
We now have no material debt maturities until all 30 of LNG, given the diverse and increased financial flexibility to fund attractive ethylene D growth projects.
I will now turn the call over to Eduardo to take us through the second quarter, the third quarter results.
Thanks, Carl and good morning, everybody I'm very pleased to provide an update on our financial results for the third quarter of 2021 to.
So turning to slide number five.
We can see that the group had a very solid performance in the third quarter.
Total operating revenues increased to $170 million in Q3 this.
This was an increase of 13% from the same quarter of last year operational.
Operational performance was really strong and adjusted EBITDA came in at $74 million this quarter up 30% year on year.
This quarter, we recorded a net loss of $91 million.
Was mainly driven by a noncash mark to market adjustment of $157 million to the value of our new fortress energy shareholdings at the end of September this was partially offset by realized and unrealized gains on our oil and gas derivatives of $73 million I will talk more about his views in this presentation.
The increase in total operating revenues can be attributed to a strong and improving shipping performance.
See earnings across our shipping fleet increases to $49500 per day in Q3 up 13% in Q2.
And 27% more than last year's Q3 numbers, we expect it will continue to increase as the shipping fleet, we will be re contracted at higher expected range.
Total operating revenues from our ethylene <unk> Healy, including base tolling fees were $55 million in Q3 in line with $55 million in Q3 last year. This number was further enhanced when including the Brent linked revenues.
As oil linked component of healing generates additional operational cash flows of approximately $3 $1 million for every dollar increase in Brent crude prices above $60 per barrel as a result of rising prices on $8 9 million.
Realized gain on the oil derivative instrument was recorded in Q3 up from $3 million, we realized in Q2.
Adjusted EBITDA from shipping was $30 million this quarter, an increase of 58% when compared to Q3 2020.
<unk> contributed with $49 million. This quarter also reflecting an important increase of 20% when compared to the same period of last year.
We expect adjusted EBITDA generation from our <unk> segment to grow four times from current levels over the next two to three years on the back of contracted earnings from gaming and increased earnings from our commodity exposure on Hilli.
Our balance sheet continues to strengthen at the end of Q3, our total contractual debt was $2 1 billion down 11% from the same period of last year at the same time, our total cash position has increased by 15% year on year to $203 million.
So moving on to slide number six.
As Carl mentioned before we have secured up to $682 million of new financing facilities, which includes a new four year $300 million unsecured bonds, which we priced in October.
The refinancing of our Fsrus golar tundra for up to $182 million.
Our new three year corporate <unk> of $200 million.
And we have also obtained approval to extend the maturity of one of our vessels in this case the Golar seal for another three years from January 2022 to January 2025.
So the combination of those facilities.
All of this to extend our key debt maturity at the same time as reducing the interest cost on existing facilities. More importantly, these initiatives have enabled us to address the refinancing of our convertible bond on favorable terms and substantially improved our balance sheet flexibility.
Between now and the expected delivery of a vessel LNG <unk> in 2023, there are no material debt maturities. While there are some shipping related maturity maturities in the next few years.
Remain extremely confident on our ability to address these refinancings based on the low loan to value levels of search message.
So moving on now to slide number eight.
I would like to talk a little bit more about the incredible performance of RF LNG Hilli.
In Q3, she achieved another quarter of a 100% commercial uptime and generated more than $50 million and adjusted EBITDA to Golar.
This quarter, we had the 6% to third cargo recently offloaded producing more LNG than any other floating liquefaction unit in the world.
Tailwind from increased oil and gas prices will provide meaningful earnings upsides with no additional capex, we expect to generate approximately $13 million from our Brent linked fees in Q4 and based on forward market prices, we are increasingly optimistic for the future contributions in 2022.
We have also agreed to increase 20 vintage show production by 200000 tons. An important feature of this agreement is that it allows us to benefit from exposure to tcf gas prices for that incremental production and.
And speaking of gas prices, we have recently hedged part of our Q1 'twenty chew exposure at a price of 28 million $28 per million Btu.
That implies a net income to golar for the first quarter of next year of approximately $21 million just from that incremental production alone.
Lastly, this incremental production can be even further extended based on a potential three year option, which we have agreed with.
The customer, which could potentially increase production by up to 400000 tons to one 6 million tons per year from 2023 to 2026.
I'll now turn the call back over to Carl.
Thank you Eduardo turning to slide nine and diving into some more of the detail of what this incremental increases in production could equate to in dollars.
So hilli was originally contracted for half of its installed capacity or one 2 million tons of the $2 4 million tons of installed capacity.
Golar share of the EBITA generation of this initial 50% of utilization is $74 million of fixed annual tolling fee.
Plus the oil derivatives, where golar makes $2 $7 million of EBITDA for every dollar Brent is above 60.
In July we are in.
And increased capacity utilization.
Increased production from first of January $2022, 2 million tons or from 50% to 58% in capacity utilization.
The tolling fee for this 8% incremental production is linked to the Tcf gas price.
On current Tcf prices the improvement for 2022 revenue generation from the increased production is $85 million to golar.
A $1 change in the Tcf price corresponds to $2 $8 million change in EBITDA.
Have any differently about the Tcf price you can run your own sensitivity.
Sure the more will be grounded perenco. The charterer of he led a one time three year option to increase production from Hilli from 2023.
End of its current contract in July 'twenty 'twenty six.
The increase for those three years would be $4 4 million pumps or from 50% to 66% capacity utilization.
The 16% optional volume has the tariff equivalent to the increased capacity utilization for 'twenty two linked to the Tcf price.
Again at current ETF prices that would equate to $164 million in annual EBITDA for Golar.
Again, a sensitivity here would say that the dollar change in the Tcf price would correspond to a $6 5 million change in EBITDA.
Putting coal needs to clear the auction for the 'twenty three to 'twenty six production during the first half 2022.
They are currently.
Having a drilling program to tie in more reserves to the units and we expect the auction could be declared showed the results of the ongoing drilling campaign be successful.
Important to highlight is that Golar will incur no capital expenditures to facilitate the capacity increases hence all EBITA generated will flow straight to net income.
Turning to slide 10, and then update on the construction.
Give me is now 75% technically complete with more than 13 million man hours worked to date.
Engineering work and procurement of all critical components are now more than 99% complete and remaining work mainly construction and commissioning.
We're about two years from full contract startup, which will start cash flow generation from Golar currently invested capital of $540 million.
Unlocking and Neil EBITA generation to Golar of 151 million every year for 20 years.
Turning to slide 11.
We believe golar is uniquely positioned for attractive vessel LNG growth and we will now increase our focus on integrated projects.
We are increasingly encouraged by the ethylene market opportunity and we will explain why.
Starting on the top left.
This is an illustrative value chain for ethylene D projects.
Lifting the gap from the reservoir to surface cost around $1 <unk>.
<unk> pulling arrangements typically range from two to $3, depending on duration and credit quality of the counterparty.
You don't need to ship the LNG end user and that's current shipping rates that's around another dollar face there, Brian and I'll get to you.
That means that you can deliver a gap in Asia with a breakeven of around $5 per annum.
Comparing that to current gas prices.
$32 per Btu leave some margin of around $28 per btu.
This equates to an EBITA generation of <unk>.
$3 3 billion for a $2 5 million partner for Lindsay.
Or and almost $7 billion margin for 5 million Telenet for LNG.
These margin or what's driving the increased interest from prospective charterers for new U S LNG project and.
And also explains all of our desire to seek increased commodity linked LNG contracts.
Obviously, the current gas price.
The environment is very high so taking a look at this in an historical context on the top right.
You can see the green line would be the cash breakeven over five dollar Lambda gaps.
In Asia.
You can see that compared to your historical gas prices is an extremely attractive risk reward. It's extremely few scenarios, where you do not make money.
And for the most part you make extremely healthy margins.
Lastly, we believe the strong.
Demand pull on LNG suggests that LNG prices should be stronger for the next 10 years versus the previous 10 years, which further Furthermore supports this strategy.
On the bottom half of the page, we have compared the carbon footprint of RF will then do your technology to other land base and offshore gas liquefaction plants.
Our technology ranked best in class and we experience that this is an increasingly important attribute for RF LNG technology, when new charters consider could take investment decisions for new gas developments.
Hence we continue to view the underlying macro as highly.
It's supportive of our initiatives.
Initiatives to build out.
Integrate that ethylene projects.
Turning to slide 12, we tried to shed some more light on where we see the most interesting <unk> opportunities arising.
As mentioned, we have seen an increasing amount of new project in new geographies, considering <unk> for proven gas reserves.
The most active developments remain in West Africa, and the Middle East, where there are abundant gas resources of high quality low cost natural gas reserves.
We are currently in discussions for both folding based and integrated projects in these regions.
Turning our attention to shipping on slide 14.
We also expect to see continued strengthening earnings from our shipping segment.
Gordon mentioned, our shipping TCE for the quarter came in at $49500 a day and we expect Q4 'twenty one TCE at around $53500 a day.
We are confident that we will see an increased earnings from this segment, we've tried to illustrate that.
The dark blue bars on the left hand side, which represents the number of vessel days on charter.
The light blue coloring represent spot exposed vessel days.
Hence you can see that the fleet will develop from the current 100% fixed date.
To about 50% spot exposure in Q4 of 2022.
The staple Red line represents our last 12 months EBITDA of $50900 a day.
That is significantly lower than where we concluded a five year charter this summer.
I'm a lot lower than where we recently fixed one of our ships on a wall near charter of around $100000 a day.
Last 12 month, EBITDA was $130 million or $10000 change across our shipping fleet corresponds to $32 million change to EBITDA.
We're encouraged by the longer term outlook for LNG shipping on the back of increasing charter interest for three to five year charter coverage.
Increasing asset values as a result of higher new building pricer prices on increased earnings.
These factors together with deleveraging of Golar shipping fleet has created a healthy equity value in our shipping segment.
And we will remain optimistic optimistic and are evaluating alternatives for further group simplification, but potentially separating this part of our business into a separate vehicle.
Turning to slide 15.
The shipping market has strengthened as expected with the main driver being a widening of the arbitrage between Europe, and Asia, adding long haul trades to an already tight market.
Broker quotes are in excess of $200000 a day and rates are generally up year over year across the entire.
Every single month.
On the right hand side. The current geographical arbitrage is in LNG prices support support continued strong rates through 2022.
From 'twenty to 'twenty three we will also see the full impact of new environmental regulations impacting the effective available supply creating longer term support for rates, which in turn explains why charterers are out to fix longer term coverage in the current markets.
On slide 16, we have highlighted some other key.
So probably on the amount of events that are affecting LNG carrier markets and the LNG.
<unk> prices.
Across the board on.
On the demand side, we see the higher frequency of extreme weather conditions, causing higher peaks and heating and cooling demand.
We see a broad rebound in Asian, LNG demand, which is 10% up year to date with Chinese LNG demand up above.
20%.
We see stable demand in Europe.
So renewable output.
We see high demand for LNG in South America, especially due to the drop in limited supply from hydropower in Brazil, where LNG imports are up 600% year to date.
On the supply side, we see reduced volumes from Russia Central Europe limiting flows to northwest Europe.
We see reduced supply from a number of producers, including train adult Nigeria in Peru.
European storage levels are below the five year average.
The hurricane season impacting the ability of U S supply.
So all in all this extreme impact the market.
Higher volatility, which at the end of the day, we think benefits our business model and shipping in particular.
Turning to slide <unk>.
<unk>, we continue our efforts to reduce our carbon emissions have an express targets to reduce our fleet wide carbon intensity by 25% within 2013 versus 2019 levels.
We have also evaluated our entire fleet. According to the new <unk> EMC II environment can regulations, we are where we are well within all emission standards for our entire fleet with the exception of the Golar Arctic.
Arctic is the only remaining steam carrier in our fleet and we are exploring commercial alternatives for her.
New regulations, becoming effective first of January 'twenty 'twenty three.
We're committed to continue their work to cut emissions on our shipping as we see increasing focus from the industry to push the boundary and enable <unk> to be part of the path towards net zero.
Turning to the last section corporate and strategic focus on slide 19.
We believe LNG will continue to play a vital role in the intrastate transition towards cleaner sources of energy.
We have included here slide by BP presented in the World energy outlook for transatlantic.
The world today consumes around 260 million barrels of oil equivalent of energy demand per day.
Today, This is service, 60% by oil and coal.
The 40% quite older sources of energy.
<unk> expects that by 2030 World energy demand will increase by 8% to 280 million barrels of oil equivalent per day.
In this time.
The same time period oil and coal is assumed to reduce its market share from 60% to 49% of the global energy mix.
Hence in order to meet this increased demand offset the reduced energy supply from oil and coal VP expect LNG and natural gas to be the second fastest growing source of energy after renewables.
LNG is attribute is the cleanest alternative of hydrocarbon fears and it's flexible nature and creating backup baseload energy supply enables rollout over in to you both.
LNG power plants worked as a buffer at times, where there's not sufficient some wind or rain to produce from renewable energy sources.
This gives us comfort that we operate in a global growth market and supports our view that gas demand and gas prices will likely be higher. The next 10 years versus the previous 10 years supporting ethylene knee growth project.
Slide 20.
Summarized golar embedded earnings power in one slide.
If we then go segment by segment on shipping we made an EBITDA of $130 million last 12 months.
As explained we expect to see a significant increase in EBITDA generation at current market rates for LNG carriers is significantly higher that would sort of charters that are rolling off.
Again, a $10000 change across our shipping fleet equates to $32 million change to EBITDA.
If you were to mark to market the entire shipping fleet, you could see rates more than double.
And go all the way up to $287 million in the course of the next one to two years.
Turning to helix, we made $92 million last 12 months, which comprised of $74 million of six tolling fee and $18 million of oil linked revenues.
We expect to see strong growth in EBITA development from first of January next year on the back of increasing Brent linked revenues as well as startup of the Tcf linked volumes all generated with no incremental capex to golar.
Turning to <unk>.
Units currently under construction, which will start its 20 year contract with BP from Q4 2003.
This unit will generate $151 million to Golar every African peers.
You mean, if the only unit in our portfolio are there any remaining capex.
$426 million of total Capex were 203 will be covered by debt and $223 million by equity.
If we net of DNA with arrive at the last 12 months EBITDA of $206 million.
I think the fixed EBITA contribution from give me this will increase EBITDA generation to about $360 million.
Further, adding commodity linked <unk> revenues and increased shipping rates could see EBITA developing closer to $500 million to $600 million within the next two to three years.
And this is before adding any growth project.
Our contractual debt stands at $2 1 billion.
Remaining capex of $1 4 billion in cash and marketable securities at <unk> 7 billion.
This suggests.
Including remaining Capex of $1 8 billion.
Turning to the last slide summary, and outlook.
On <unk>, we expect EBITDA generation from our <unk> segment to quadruple during the next two to three years.
Driven by commodity linked revenues for heelys.
And give me coming on stream.
Our market, leading operational track record.
Prison low cost this time.
Industry, leading carbon footprint realizations golar to capitalize on increased demand for LNG project supported by stronger LNG prices.
As alluded to we see increased momentum for new tolling fee and integrated projects.
We also expect to see increased earnings from our shipping segment as we increase market exposure just stronger rates than those rolling off.
Lastly, corporate with $682 million of Nu and refinancings facilities secured we have no material debt maturities until you gave me delivers.
We see increased financial flexibility and strengthening market fundamentals, enabling funding of ethylene <unk> growth projects and potential further group simplification.
We are optimistic about the direction of our business and believe Golar is well positioned to capitalize on the current macro tailwind benefiting our operational and financial leverage going into 2022.
That concludes Golar Q3, 2021 earnings presentation. Thank you all again for dialing into the call.
Ill turn the call over to the operator for any questions.
Thank you if you have a question at this time you can press star one on your telephone keypad to cancel your question you can press the hassle upon key once again Thats Star one to register your question.
Sure Keith to cancel all my.
Our first question comes from the line of Randy given from Jefferies. Please go ahead your question.
Howdy, Carl and Eduardo How's it going.
Hey, Ross.
Hey, So first obviously congrats on the increased throughput for Hilli train three I know, it's been a long time coming so a few questions around this can more of that 200000 tons in 2020 to be pulled into the first quarter to kind of take advantage of the elevated LNG prices.
Or is it capped basically at 50000 tons per quarter throughout next year and then secondly on that any reason this can't start before January 1st or is there some.
Specific deadline or start date, there and then lastly, any hurdles or timeline around the further expansion of this obviously, it's franco's option here in the first half of next year.
Yeah sure so.
For now the point 2 million tons is equally equally distributed throughout next there. So think of it that's 500000, a 50000 a quarter.
Yes.
As we have with the current production there is there room for some over production that can be fine tuned into each quarter.
But that's equally dependent on gas flows and gas prices. So it's a it's not very easy to move all of that into the high gas prices of Q1.
When it comes to.
Further expansion they are currently.
Going a drilling program they need to declare the option during the first half of next year.
They originally committed to drilling one well.
We have been made aware that they are now drilling four wells to secured incremental production.
It was likely that they've declared the option with one well we think it is four times as likely that they will do it before well.
And with this gas price on the stable operation, we think it's in everybody's interest to the Caribbean.
Current pool rolled in from 'twenty to 'twenty, six and we remain very optimistic that they will.
Got it and then the other quick part of that question any way to turn that on a little earlier than January one to get some <unk> upside.
We believe it will happen from January one.
The contractual obligations.
Got it alright, and then kind of turning to your balance sheet clearly in great shape, there no debt maturities till 2020 for minimal capex really even including Jimmy So I guess two questions around that first on the converts and just the timing of redemption do you expect that here in the fourth quarter are waiting until February.
And then secondly kind of what's the next use of this additional liquidity.
There any maybe share repurchase authorization you your shares are kind of stubbornly trading at $13 $14 or the focus be on further reducing the debt on the LNG carriers.
They want to take that one Alberta, yes, sure. So hi, Randy so when it comes to the to the redemption of the convertible bonds.
Connection with the issuance of the unsecured we have.
Paid $85 million out of the $400 million.
So we remain with 317, which will mature in February and we plan to redeem those bonds. Upon maturity. So we have no plans to further repay.
Any other bonds before that date.
Okay.
But $85 million has already been prepaid.
In connection with the bond issuance.
And when it comes to the to the share repurchase repurchases, we still have as approved by the board up to $25 million of an allowance to complete our share buyback program.
But we have no further plans to no intentions to do it in the near term.
Okay.
Alright.
That's it for me I'll, let someone else ask about the LNG spend potential. Thanks, so much.
Thank you ladies.
Ladies and gentlemen, I can't even remember I remind you to limit yourself to two questions per person. Thank you. Our next question comes from the line of Ken <unk> from Bank of America. Please go ahead your question.
Great Hey, Carlos Eduardo.
Can you talk about the progress of the LNG discussions are they more in March three as anything popping up on the <unk>, maybe just provide us it sounds like you're accelerating some of those discussions we heard that a lot from golar over the past I just want to see what stage do you think they are at and how far they are progressing.
Yeah, Hi, Kevin So I think we got the same question in July on the Q2 call and at that time, we said.
We think that they will be material.
Indianness within six to 12 months.
At that time, we said more likely six and 12 and I think we would stand by that.
And that was in August.
So that gives you some perspective on where we see timing.
When it comes to.
Projects.
We are making progress on both pulling base and integrated contract.
So I.
I think if you listen to Cosmos.
Quarterly call yesterday.
They did.
<unk>.
Phase two FY need assessment for the torque to FID during 2022.
And on the Hep C. All of the infrastructure apart from the Esol Lindsay is built to accommodate LNG production of 5 million pounds.
And we have two and a half today.
Hum integrated project.
That could be done.
It might go up and drill but also some of the all direct lending solutions. So I would say that on the tolling fee I think it's more likely that we will go to Mark three 5 million from Ralph.
And on the integration projects, they would probably utilize smaller volumes.
Mark Walnut Mark through the fund.
Great sounds like something is coming fairly in the next couple of months I look forward to that thank you.
And then the increase in production.
Maybe just a little bit more following the range of questions, but is that on the first two trains as this all on the third train or are you do you still have any access to grow that potential the fourth.
Train and maybe the timeframe when they have to give you that answer in 'twenty two is it.
Mentioned is over the next couple of months that were looking for an answer and scale and size.
Yeah sure so just to be clear.
He lives got four trends and we produce from all four trends today, we interchange which trains we produce from <unk>.
Think of it as buying a new car, even if it's a new car you don't let it sit still in your garage for four years some of them go and try to start it. So you want to make sure that.
It's kept up to speed them on sort of works.
It's supposed to do.
So we keep them into changing which trains we produce from but you are right that we only produce 50% of our utilization and if you want to equate that into train starts train one and two.
The incremental production is.
We're 22, an increase of 8%.
Potentially from 73% to 616% all of that can be satisfied from train three even if we interchange between all the four train and they need the declared during the first six months of 2022.
Well before the end of the summer.
No.
Absolutely.
Alright, and then the incremental you mentioned just comes from that.
Any incremental it comes within those three.
Trains Youre still not looking at upscaling into the fourth yet.
Even with the antigen.
That has to do with the gas resource that we're producing from and the amount of gas flowed out.
Okay and allow themselves to extract while still toughest following the offtake agreements that they have entered into until July 26.
Perfect.
I appreciate the time, thanks, Karl Thanks, Ron Thanks, Thank you.
Our next question comes from the line of Ben Nolan from Stifel. Please go ahead with your question.
Yeah, Great. This is Frank galanti on for Ben Thanks for taking our question.
I wanted to follow up on the Hilli kind of thinking longer term.
Can you walk through the potential options for the Hilli and Franco.
Looking out past 2026.
In other words is it.
At the end of the contract as it just sign a new longer term contracts with more volume.
Nothing or are there other options that can provide that additional gas needed.
Yes sure.
So I think we have all along said that we are not going to talk about the extension before we get paid for the current capacity utilization of the units and we think.
The increased production from personal down there is one step in that direction.
Further increase potential increase from 10 to three different effects as the mother stepping up directionally should that be declared.
We could be open to discuss the branco until it is declared or not.
But with proven track record.
On the current gas price.
He lives in increasingly attractive unit two.
Several potential charterers and our target is to deploy her on an integrated contract, where we get more of the upside.
Okay. That's helpful and then I guess for my second question.
Thinking about stranded gas or more specifically.
Gas is currently flared.
Providing an opportunity to monetize that is clearly an obvious solution.
But those deals.
Has sort of been hard to materialize.
Could you talk through some of the challenges on.
That type of.
Gas sourcing.
And kind of.
What the expectations are.
From your perspective on being able to solve those problems.
I think the key factor as to why the Epsilon.
These have been.
Slower than I believe golar originally anticipated that's purely been the gas prices.
So if you look at where the gas price well over the course of the north for five years. It has mainly been driving downstream, which is why we kind of shifted focus for bit them built golar power.
Nathan <unk> named HEICO, and then sold to entity now that the gas price curve.
In filmed spots, but also on forward curves back inland territory that supports upstream investment.
We think that's the key driver.
Nothing new and deeper so first and foremost.
By both current but equally important.
Word picture of LNG prices, that's the key.
Driver.
Alder.
Call it something else that you need to close is to have all of the regulatory permits in this specific field to be allowed to use.
LNG exports, which includes.
Some time consuming governmental approval.
Okay very helpful. Thanks very much.
Our next question comes from the line of Mike Webber from Webber Research. Please go ahead with your question.
Hey, good morning, guys how are you.
Hey, Mike well thanks.
Good.
I, just wonder has already been parsed over but.
Looking at the deck.
It looks like you guys put some energy into kind of re carving it a little bit and then showing it a bit differently, which is appreciated it looks good.
But the one thing is a little bit absent here is I think Randy even.
References at the end of his time.
Theres not a lot of color on the strategic review and what you plan to do with the LNG carriers I know Thats theres only so much you are going be able to get into there but.
Particularly as it pertains to your ability to go out and chase additional F LNG business and your ability to finance that attractively.
Having the volatility, especially the LNG carriers on the balance sheet has.
Been an issue for Golar historically, so I'm curious.
Do you think youll.
Do you think it's likely that you end up executing or on a spin or finding the right strategic solutions for the LNG carrier fleet before you would consider pursuing formerly.
RFID in Nf L. LNG project that would likely run you $1 billion to $2 billion and put you back into the financing market.
We do not see the shipping space and that is a requirement to do new ethylene D project Apple.
Absolutely not an issue the way with it.
As we have highlighted in the past right now.
Very much like the outlook, both for <unk> and shipping.
But we have to admit that we think our uniqueness mainly.
In the <unk> segment, because that's where we have a unique competitive edge.
As much as we like both segments, we think that it could be that we could better extract the value from the two segments. If they were separately listed vehicles and we will continue to be opportunistic in pursuing search.
Search venues and once we have something to update the market with them I'm pretty convinced we will.
Got you and just to just to.
Dig into that a little bit.
If youre looking at our Mark III.
<unk> PTA youre likely going to be building that somewhere where you can get export financing I was just going to be a larger endeavor. If youre looking at placing a second half LNG asset and toward two to your point earlier, it's likely a mark Warner Mark too.
I would assume then the presumption is you would be doing that in.
And China Korea, not and I'm not in Singapore, not from a financing availability perspective, but.
Yeah.
If I think about the if I prioritize the projects that youre looking at I know you've made a big shift to look at look at the Mark three and.
Five ton market.
Do you think it's more likely you look at something that large as your next project or are you going to be back into that two 5 million ton market for tier two it sounds like towards two it seems like it's been the front runner for quite a long time.
But I just want make sure we're clear on that because obviously that has implications on the importance of spinning the carriers of the way you can kind of address your balance sheet.
We have cash and marketable securities so north of $700 million.
Today.
I think one of the key things that's changed peripheral indeed.
Citizens.
The initial healy.
This was not the premium concept and no one knew if this would actually work in practice.
And that is now operated with a 100% utilization since 2018, it's a proven concept and bps ordered similar unit.
It's starting to become more of a generic assets and smoked like an F. P. S. O. That's custom made to the field, it's a generic assets.
So we do see financing availability for this year and that's very different from when we originally contracted Haley and also gave man.
But you are right that four new <unk> projects, we will likely target structures that will allow us to have a significantly reduced equity contribution during the construction phase.
Right.
I guess, what sticks out in my mind is Equatorial Guinea, alright, which would've been post hilli, which had a contracts which wasn't able to see your financing I know that was in part because of where it was being built but you also had the complicating factor that the LNG market in turn and you're burning 100 million Bucks a year in that space. So obviously, that's not a concern right now given where the market is and the outlook, but who knows where we are too.
Three years from now so I think that's fair.
Avoid a repeat cycle of what we have seen a couple of times that goal over the past decade, as kind of the angle with which I'm asking.
Yes.
At the end of the day that resource is still there it's still a very large resource it's still got a very high quality.
The gas and it is natural to assume that we're evaluating that alongside any other integrated project, but as you say.
We know what kind on that project last time around so if we're going back in we need to ensure that that will not happen. This time.
But.
That's very far from the only integrated project, we're looking at so there's several currently under discussion.
Okay.
Right, Okay, I can take that offline. Thanks for time guys appreciate it.
Thank you.
Yeah.
Once again, ladies and gentlemen to register your question on the telephone you can press star one on your telephone keypad and as a kind reminder, please limit yourself to two questions per person.
Question comes from the line of Sean Margaret <unk>.
Sean Morgan from Evercore. Please go ahead with your question.
Hey, guys. Thanks for taking my question. So just to kind of follow up a little bit on some of them we've discussed on LNG, but.
I look at the slide on 11.
I see we kind of are pretty widespread up to the 32 range for.
Which I think sort of indicates spot activity in Asia for for the integrated model and so for that integrated model.
Is there any need you mentioned it would be a smaller one of the smaller builds for the <unk> is there any need to sort of.
Backstop that the.
The cost to produce the.
The asset with SBA is and if you were to sign SBA is there are you seeing.
Interest in the market for for TTS, and Jay can base pricing based on the recent volatility we've seen in those kind of Asian and European spot prices or you think it's maybe a little bit more interest towards the Brent.
If in fact, you actually need to sign Sba's in order to finance the project.
Yeah sure so unnatural mobile for the integrated the stuff you're trying to create.
Asymmetric risk risk profile and in doing so it could be interesting for half of the wall. They are more similar.
Basis, whether that's linked to TTM for Jay Kim back or whether it's linked to Brent.
It depends on.
Well, if we can negotiate with the with the end user and then you said make it on the other half and be exposed to the market.
But it could be interesting to some parts of such projects with an SBA and.
Well at the end of the day, what searching that data looks like depends on.
On the negotiations.
Okay, and so in terms of <unk>.
Signing up the financing with whether it's an export finance facility or or more.
A more traditional bank facility you think that there is a route that you could go where you're essentially doing an integrated project without having to rely on the SBA market at all.
It depends on.
Whether you use an existing unit or a new units I think it's a bit of a premature question and it's a.
It's a very directly into the business developments of the company, but we would obviously not enter into Nf LNG project without something sort of hunting is one of the key attributes from the build the project.
Yes.
Okay. Thanks, a lot.
Thanks.
Okay.
And our next question comes from the line of Craig Shere from Tuohy.
A question.
Good morning, our time on.
<unk> on the good quarter.
Yeah.
One question about the.
Focus on the integrated approach.
We've seen in recent months.
Uh huh.
The break in the log jam that's been there for two to three years.
Long term large scale land based LNG contracting.
Some some new <unk> are certainly being teed off.
In the next couple of quarters on top of the Qatari mid decade supply.
As we think about the perenco contract coming off in 2026 with Lilly.
Are you still as committed as ever to.
Going this route.
On more commodity exposure, even into mid and late decade.
Okay.
Yeah, I think if you go back to the slide 19 that we showed in the deck here.
LNG is expected to grow by 50% from 360 million pounds to 550 million homes.
We need to see a significant ramp up of new liquefaction projects. If we are to meet anywhere close to that development.
So the short answer is yes, we would be interested to take commodity exposure.
But again as the previous question, we would probably link that to fix the sba's for at least half the volume to reduce any downside risks can have.
Significant upside exposure.
Okay.