Q1 2022 Golar LNG Ltd Earnings Call
[music].
Good day and thank you for standing by welcome to the Golar LNG Limited Q1, 'twenty two inches to conference call. At this time all participants are in a listen.
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I'd like to hand, the conference over to your Speaker today cars total CEO . Please go ahead.
Thank you and welcome to Golar Lng's Q1 earnings results presentation.
Thank you for taking time to dial in my name is Karl Fredrik Steinberg CEO of Golar LNG.
Before we get into the presentation. Please note the forward looking statements on slide two.
I'm accompanied today by our CFO , Mr. Eduardo Miron, Oh, 2% this quarter's results.
On slide four we have outlined the company overview.
Golar today owns two ethylene geez, the golar hilli and operation in Cameroon.
The Golar give me under construction to start the 20 year contract with BP from Q4 over the next year.
Furthermore, we own in L. A N D steam carriers, the Golar Arctic wherever you announced last week that we have agreed with snap to forward till the ship as they convert to Fsrus.
Lastly, we own the Golar tundra, the most modern promptly available fsrus globally currently operating as an LNG carrier.
We have developed three ethylene do you define that formed the basis for our growth.
All three of the sites are based on the same proven liquefaction technology and we will highlight some of the key characteristics of the different capacities of the units later in the presentation.
Yeah.
The result of significant corporate transactions over the last 12 months, we have three listed shareholdings.
We own 6% of new fortress energy valued up $558 million on yesterday's close.
We own about 31% of cool company limited the shipping spin off we established during Q1 of this year.
We own around 24% of Avenir L. N D. A small scale LNG shipping and terminal business.
The total value of these investments amounted to approximately $720 million.
Golar celebrates its 75th year of operation this year.
There, which we've been actively involved with L. M D maritime infrastructure assets.
Golar has through its history pioneered some of the key developments in the sector.
Clothing, the industry's first if it's are you.
The first insulin D as well as the first ever integrated if it's are you two power plant projects.
We have a market leading operations and have achieved 100% as commercial uptime since the start up or he late in 2018.
We're focusing the company for excellent growth opportunities.
Okay.
Turning to slide five and again as a result of the M&A activities over the last 12 months with a total enterprise value.
$6.2 billion at the time of Osage.
We have significantly strengthened our balance sheet.
We currently have $1 $4 billion of cash and listed securities.
Whereabouts is cash and have it listed securities.
We currently have a net cash position.
Adjusting for the remaining Capex on the <unk> you mean, we have a total net debt position after delivery of give me a $300 million.
That number excludes operating profits between now and give them a delivery. So we anticipate that that number will be lower.
Based on increased capacity utilization of Hilli humbled.
But the upsides on the tolling fee.
Startup of game in Q4 of next year, we expect EBITA generation to quadruple in 2024 versus 2021 levels.
We've also refined corporate associated with this and we currently have no debt maturities until 'twenty three 'twenty five.
I'll now hand, the call over to Eduardo 2% for Q1 results.
Thanks, Carl and good morning, everybody I'm very pleased to provide an update on our group results for the first quarter of 2020 to.
Turning over to slide number seven I wanted to show some of the highlights of this quarter.
And with our LNG units, our first vessel Hilli continues to operate with a very solid performance delivering a 100% uptime.
<unk> linked kicker in our contract generated an incremental EBITDA of $16 million this quarter or 36% up when compared to Q4 of last year.
Since the first of January we have started to realize our TTS linked to production from train III, which added an incremental EBITDA of $22 million I would explain those different elements in more detail further in this presentation.
Construction of our second <unk> unit, the gaming containers in Singapore and is now 83% technically complete.
We continue to make substantial progress on commercial discussions with future LNG units and we have a strong pipeline of opportunities for growth projects.
So moving on to shipping and Fsrus. The formation of coal company were successfully completed in this quarter, we've raised $275 million in a private placement in January followed by the list of its shares and the Euronext exchange in notional.
In connection with that co company acquired eight of our <unk> vessels.
In May we announced the award of two of our 269 million euros contract, which NIM for the conversion of the Golar Arctic into an <unk>.
Due to the current geopolitical situation in Europe , we continue to see a very active fsrus are working and have received inquiries from multiple European counterparts for the deployment of our last unit the Golar tundra.
We continue to strengthen our balance sheet and since the start of this year, we have released $470 million in cash proceeds from the cool company should be enough.
Also the sale of a portion of our NFU snake.
In February we have repaid $317 million of our outstanding convertible bonds and also entered into a new bilateral corporate facility of $250 million.
We've continued our share buyback program and so far we have repurchased.
400, approximately 400000 shares this quarter, leaving 108 million shares after debt outstanding.
So moving on to slide number eight.
This quarter, we recorded an adjusted EBITDA of $93 million.
This result is inclusive of Hilli Arctic and tundra.
It excludes the Ht FTE vessels that were sold to cool company.
When compared on a like for like basis to the previous quarter. This represented an increase of 55%.
Net income attributable to Golar was $345 million in this quarter and that includes 168 million noncash gain which was recognized on our Healey Brent oil in TTS linked derivatives and also a 344 million also noncash.
Market to market gain recognized on the inefficiencies, but based on our March 31st position, which carried the value of $42 61 per share.
Our share of contractual debt at the end of the quarter stood at $1 $7 billion. However, half a billion of debt relates to 40 FTE vessels that were sold to cool company April so that leaves us with a one point to $2 billion of contractual debt post the completion of the eight vessel sale.
Total cash at the end of Q1 was $329 million.
When we consider the various subsequent events that took place since the end of the quarter, including for example, the $253 million of for sale benefits shares our total cash position, including access to revolving credit facility stood at around $870 million further to that when we.
Taking to account to the value of our listed securities in NFC Cool Company an Avenue, we have a liquidity position of just close to one $4 billion. We estimate that this amount could allow us to fund two new U S LNG growth projects.
Moving on to slide number 10.
Okay.
I wanted to provide a bit more color on the breakdown of our share of the distributable earnings from helium.
As a result of the higher brands and TGF prices our share of Hilli is EBITDA almost doubled from the previous quarter, reaching $57 million in Q1 of 2022.
Interesting to note that this increase of almost three and a half times when compared to Q1 of 2021 came at no additional capex to Golar.
While the base status has stood in line with the previous quarters, we recorded an incremental $16 million from break linked revenues and close to $23 million from TTS linked earnings.
Already net of the interest of disruption we have answered.
When we assumed the forward commodity prices our share of the 2022 adjusted EBITDA from Healy remains on track to reach around $245 million in 'twenty to 'twenty two.
I will now hand over to Carl who can talk a bit more about that forward looking.
This estimate.
Thank you Eduardo turning to slide 11, which elaborates on the embedded upside on the commodity exposure of helix parish.
As you can see during 2021 golar its pro rata share of helix EBITA was $99 million.
This is expected to grow by two and a half times for 2022 on the back of higher Brent linked earnings where golar generates $2.7 million of EBIDTA forever at dollar rent is above 60.
This is expected to generate about 90 $91 million of EBIDTA for 2022.
Furthermore, the start up of the incremental point 2 million pounds of ethylene production that commenced in January .
The other trend that you pointed to $6 million in Golar share of Hilli Q1 EBITDA.
For the full year that you'd see ethylene production is expected to add $81 million in incremental revenue, where the tcf gas price exposure for Q2, and Q3 has been hedged at $25.38 per M B too.
We remain open for Q4, Tcf gas price exposure.
Putting the charter of the unit has a one time three year option to declare operative point 4 million tons of increased production from 'twenty to 'twenty three until end of the contract in July 26 on the same ETF linked tariffs as they occur.
Seven point to produce this year.
The option is the careful but in the end of July and we see it is increasingly likely that perenco will take up the option on the back of strong gas prices, but subject to the final outcome of the drilling program to tie in more reserves daily.
We do not expect to take up the auction until closer to the expiry of the option in July .
The commodity exposure on Hilli and they block that's in that field and do you provide there to charge significantly higher tolling fees for traditional long term tolling arrangements.
As you can see from the boxes on the slide.
<unk> tolling fee for he lived during 2021 was $3 for them would be to you.
This has increased to an effective tolling fees of $13 per M. B to you during 2022.
Hence the commodity exposure of our F O M G contracts, both existing and the ones, we will target going forward, we see an extremely compelling risk reward.
And we will continue to target similar type of structures.
Turning to slide 12, and then update on the construction of the ethylene do you give me.
She is now 83% technically complete for a conversion at Keppel shipyard in Singapore.
We have currently worst over 19 million man hours on the conversion.
The reminder of the Bill is mainly around construction installation and testing of equipment ahead of her 2023 sail away.
Q4, 'twenty three startup.
In light of the recent resurgence of Covid in certain parts of Asia. We continue to closely monitor and take precautions for any potential COVID-19 impact is for the three and a half thousand workers on site.
We currently have.
No material impact on site and again this is a situation that we're monitoring closely and we feel comfortable with the situation where it stands today.
Yes.
Turning to slide 13, and as promised earlier in the presentation elaborating on the different I felt indeed, the science we have available.
We have developed three different designs all based on the generic design, meaning that they will not be tailor made just specific fields.
It can be redeployed or interchanged, increasing operational flexibility and reducing residual value risk.
They're also based on the same proven liquefaction topside and an extension of Golar proven operational track Records.
The market has a liquefaction capacity of up to $2 7 million tons, a year and it's suitable for stranded in associated gas resources.
Both he and give me or Mark wanted to sign epilepsies that are based on conversion of existing LNG most carriers.
The Golar tundra remains golar own conversion candidates for potential future incremental Mark one units.
The Mark to the time, it's also a conversion of an existing LNG carrier into an F O M D.
However, instead of adding liquefaction equipment to the width of the ship March two places to liquefaction topside on the new ship mid section added to an existing carrier.
This allows for larger liquefaction capacities up to three 5 million tonnes.
And reduces the conversion construction time.
Yeah.
Hence this is a false truck solution for somewhat larger production projects done for Mark Wong.
Lastly, our mark three newbuild assign it won't we have worked to develop for more than a decade.
March three has a liquefaction capacity of up to 5 million tons and its competitive also to larger shore base liquefaction solutions.
There's no word capex per ton lower carbon footprint, even compared to land based solutions make the mark III, a more economical false or to deploy liquefaction solution for large liquefaction projects globally.
The Newbuild hole also allows for increased storage index space.
So our primary focus going forward is to develop projects that suit one of these three the sign alternatives.
Yeah.
On page 14, we outline why we mainly focus on floating African LNG projects, when we look at our growth pipeline.
When considering it for Lindy a growth project. There are three key input factors that drive the delivered cost for LNG.
Those are sourced guests.
Liquefaction cost and mostly the shipping distance or shipping costs from production sites to the end user.
We believe that you can develop a stable source gas price of between one to $3 per MB to you depending on the size of the fielding question if your target African yes.
This compares to current spot prices for Henry hub source gas in the U S, where most of incremental liquefaction projects, our plants will be around $9 per Mb to you today.
Secondly, as we are building a fit for purpose efficient liquefaction design in Asia gold large capex per ton compared to other floating offshore based liquefaction solutions, it's very competitive.
Lastly, African gas from a geographical point of view has a shorter sailing distance to end users whether they are in Europe or in Asia compared to U S liquefaction projects.
Hence if you have a lower input costs and lower capex per ton and a shorter shipping distance you should have a compelling competitive advantage.
Looking at the economics of incremental growth projects.
Right.
Elaborating on that on slide 15 again this is a familiar slide.
For some set up earlier occasions, but it gives us a strong picture of the LNG value chain and the economics of enough LNG project.
With source gas in Africa around the dollar for them a bit to you.
Liquefaction cost on a tolling fee basis similar to what we charged b P. On the give me.
Between two to $3 per M b to you.
And shipping cost over on $1.50.
African filling D projects can today deliver L. N D to end users for about $5 primarily due.
If you compare that to current gas prices. These projects have a repayment of less them both in the air in the current market environment.
This backdrop drives our ethylene <unk> project pipeline for potential charterers and also explain why Golar is focused on projects, where we can get the exposure to commodity prices driving the effective tolling fees significantly higher than for long term tolling fees as proven by the F O N V Healy.
This business model doesn't only work in a high gas price environment on the right hand side, we haven't highlighted the five dollar M. N V to U of landed LNG price versus historical LNG prices.
This business model makes money and most historical LNG price scenarios.
However, we are strong believers that the energy and gas prices. The next 10 years will be significantly higher than the previous 10 years.
S will indeed should be an even better business going forward than what we have seen historically.
In terms of industrial type economics, a tolling fee based on a large mark three 5 million pumps, if LNG units and a $3 tolling fee.
We can generate an EBITA of such a unit of around $750 million. They are versus the capex of around two and a half million for such a large unit.
Integrated projects, however, using a two and a half million tonne Mark one of the Sun as an example, and the Lambda gas price of $25 per M. B to you.
And current gas price environment that would create an annual EBITDA of two and a half a billion dollars to the project owners like we would target to be split between the upstream provider and the ethylene be owner.
So whether you go integrated or tolling is an attractive business, but if you believe us when we do they'll be we'll see higher energy prices you want to focus on integrated exposures.
Yes.
Turning to her intention to fsrus and the development that we have seen in Europe year to date, we have highlighted.
Sir your market has significantly changed on slide 17.
Entering into 2020 to Europe , how the total Oh 32 important facilities, where 29 are down base and three artifice or use.
Year to date, we haven't seen 20 twos potential fsrus projects surfacing.
We're eight has already secured in Fsrus and 14 remains on the planning stage.
This compares to a global SSR you flip a 46 units and then estimate the availability of another three to five units in total between now and 'twenty 'twenty five.
So the way we see it the three to five units available to service up to 14, all incrementally planned exits or your projects.
Hmm.
Golar have received strong interest from several European countries for our open modern fsrus the Golar tundra.
Turning to slide 18, you can see that the gas price fundamentals keep on strengthening its keep on providing length.
Starting on the far left you can see the forward prices are in May last year in January of this year.
On the 20th of Mei.
Point being is one thing is that the front month is constantly lifting but we're encouraged to see the future gas price also listing providing further visibility for potential Oh, Indeed charterers.
On the mid side, you can see the expected liquefaction projects to come on between now and.
2028.
These are essentially pre I would call it pre Ukraine, Russia situation liquefaction projects.
And this will seem to be needed to meet a balanced LNG market going forward.
On the far right, we've taken some statistics to show how meaningful the impact of the Ukraine, Russia situation may be older need for liquefaction going forward.
The global LNG market was lost are 400 million tons.
Russian pipeline gas exports to Europe was last year about 115 million tonnes or 25% of the global LNG market.
Hence if European countries art can make real their ambitions to replace Russian gas with international L. N D. We need to see a significant ramp up not only a re gas terminals, which key focus is on right now but gas sourcing Keith.
Keep in mind that the gas price in December was significantly higher than what it is today, even in the midst of the current situation.
So this is a fundamentally tight market pre geopolitical shocks that after we expect it to be significantly stronger for longer.
Yeah.
Turning to slide 19, and a bit further background on last week's announced a forward sale of the Golar Arctic.
Golar Arctic is the only remaining.
In LNG carrier in our fleets by along the less competitive assets, we have in our fleet.
We entered into an agreement.
With snow.
Where they will pursue a development of a virtual pipeline into started in them.
Slam is listed in Italy, and has a market cap of around $18 7 billion euros.
Yes.
The transaction, it's a forward sale or.
The art thick up 269 million euros payable in installments as defined milestones.
Our estimated conversion and Capex is $160 million, excluding contingencies and vessel costs.
Hence, we think that by doing this measure.
We have significant play in high grade that the value of the ship.
We've found a long term use first theme carrier and we leverage on their learning effects. We did from a recent and similar conversion of the Golar Viking which was sold to LNG Croatia.
Turning to corporate on Slide 21, Golar recently announced our 2021 ESG report available on our website.
We continue a very strong safety record.
We improved our lost time injuries.
We high graded our E R data.
And we're proud to say that throughout the pandemic, we have maintained a very high retention.
We have more than 70% of that's still employed with us and for senior officers, we have our retention of more than 94%.
No problem, if that's important to keep high quality of operations. It's also important to cater for future growth, especially in light of the LNG new buildings coming on stream going forward.
Okay.
Turning to slide 22 highlights the earnings potential from our existing asset portfolio.
But all told months, we made $148 million of EBITDA.
To the contractual EBITA Oh demand starting in Q4 of next year.
The commodity upside on the commodity linked production from Healy, we expect our run rate EBITDA to be more than $400 million from 'twenty to 'twenty four onwards.
Pencil.
The Levered basis, we trade at an EBITDA or just shy of seven plants with capacity to help at least another two excellent <unk> growth project just from our current balance sheet position.
Yeah.
To summarize on slide 23, we are a <unk>.
Leading owner and operator of pioneering maritime LNG infrastructure.
We expect our EBITDA to quadruple in 2024 versus 2021 levels.
We have cash in listed securities of $1 4 billion and net fruit of the different methods of less than $300 million.
We haven't booked value.
Standing for about $3 $54 billion and we are very focused on our F. O M D growth pipeline going forward.
That concludes our Q1 presentation.
Now I'll hand, it over to the operator for questions.
Yeah.
Okay.
We'll now begin the question and answer session.
If you wish to ask questions.
Press Star one on your telephone.
One.
To withdraw your question please.
<unk> please.
Please.
Does it limit of two questions per person.
Yes.
On the first question comes from the line of Cree.
Research. Please go ahead.
Yes.
Hi, good afternoon call them to Eduardo how are you.
Hey, Chris.
Hey.
Thanks for the question.
Can you can you provide some color on the decision not to you.
Okay.
The tundra was it based on price or timing of the preliminary crashed preference by Golar. So all of those.
The vessel.
This is a project that we have developed with them over a long time it's.
Predate the did you political situation in Europe , I think the backstroke for their decision is the success of the LNG, Croatia and the capacity needs and certainly now.
This would be a cheaper alternative than to more modern tonnage for that specific project.
I see alright, thanks and.
Just on just a follow up for that trip.
Can we think of the difference between the sale price at 269 million euros and distribution costs.
Is that the associates.
What do you think of it.
Sorry, you're breaking up a bit you said the difference between.
The 269 million euros and the conversion cost is that.
Effectively like the vessel sale price.
Yeah. That's first of all maybe you can put that so if you take the difference between the data and that sort of outstanding depth of around $30 million. So you get to the the equity balance.
Understood Alright, great.
Okay. Thanks, and just one last quick one just towards the of the three designs to market. Once you went through which ones could be deployed the fastest.
I think we're encouraged.
Okay.
We're currently working on on projects on the tolling fee basis for Mark three on an integrated basis.
We are balancing the decision between Mark wanted to so.
It's difficult to say, which one comes first currently tempting to say Mark one or two.
Okay. Thanks, I'll turn it over thanks guys.
Thank you.
Thank you next question.
From Evercore. Please go ahead.
Hey, Carl and Eduardo.
Western on a potential conversions.
New <unk> New F LNG as you said that.
Net cash balances obviously our.
Our net debt net debt balance is actually quite low so you could potentially finance. These out of out of cash would you would you want to do that or would you look at a more balanced approach to incorporate more debt or do you kind of look at that.
Potential expansion of alcohol and Gs as a way to sort of deleverage as you grow.
I think first and foremost we have.
Cash than they've been secured there's a $1 $4 billion on the company's free cash flow positive every quarter going forward based on the current performance of the group. So that means that all that money can be an approach to growth.
It is already in cash for.
So I think we can from the walnuts LNG project just out of available cash the way, we see it right now and should we get more done wrong.
And for Lindsay projects makes it picked up.
Listed securities position or re lever them on Hilli and gave me which on average has.
Very low leverage.
All of them.
Okay and then another question, we get a lot of it's sort of difficult to gauge as in terms of counterparty is off the coast of background and you talked about the low the low price to extract the gas reserves from that region, but when you when you think about.
Contracting of new App LNG do you go to just sort of the nation state that controls the oilfield or is there like a series of E&P partners that you would kind of be negotiating with first and how does that process work in terms of converting.
Converting a an idea into it.
Actual LNG project.
If you think about it we've worked for beef well, we're about to start to work for BP In Africa, we are working them for Franco in Africa. So on both of those not explains to you who the counterparties are and in that context, it's maybe and Perenco and they are the once interfacing.
With the local government.
And to some extent, they're a good representation or.
The different set of opportunities that one of them on the fixed tolling fees for solid counterpart for a long time and one of them with more commodity exposure.
So the way we're working this is mainly with partners with a significant presence in country.
But it also explains some of the reasoning why it's a bit difficult from a time to guide on that.
Wyoming wind projects will be sanctioned because we can won't jumped on it yesterday and so can the charter that you are reliant on governmental ball this environmental sign off.
Upstream to be in place and that's really what's driving.
The claim run more than the interest from either ordered sharper.
Okay, Yeah, and so beyond your two existing Counterparties, though is there like a five to six other e&ps that are working in that region or is it more limited scope of potential partners.
That's a fair statement that you'll have the several other gossip berthing and that there really isn't a whole lot of proven and associates in gas reserves and in this market that's a waste of the resource.
Okay, alright, thanks Carl.
Thank you. Thank you.
Our next question comes from the line of Ben Nolan.
From Stifel. Please go ahead.
Yeah. Thanks so.
Yeah.
I guess I'll start again on the LNG side, you know there's been a you guys have been working on this for a while and maybe could you just characterize what the conversations are like today with your customers versus maybe a year ago.
There's obviously been some thought that there would be some positive developments, but there haven't been any major incremental ones.
And the last number of years. So so how do you think now is different I guess is the question.
I think what's happened but.
This is mainly currently a driver of the gap some demand pull from the fact that the gas price gas market is tight.
You just see the amount of interest when the gas price is high the economics for these projects are significantly better and that's what drove the incremental increase in interest the first six well up until call. It the Russia, Ukraine situation.
After the Russia, Ukraine situation, you can see them first the massive scramble from Europe to secure Fsrus.
Oh, they're slowly moving into the LNG carrier market and you can see term rates almost didn't move up a spot rate even as we enter into the soft part of the year.
Of course, Europe is scrambling to secure energy security.
And then ultimately they now understand that the market was tight.
They haven't created the import terminals, but they haven't got their hands on the hydrocarbons.
So you see a lot of these countries leading the way in <unk>.
<unk> seen the likes of Germany first go to cap, our sense of U S and yesterday, they announced that they think they stopped breaking houses a significant part of Europeans.
Europe's entity solution.
So.
That's coming and with the European countries, you can more easily secure offtake financing then you could pre the Russia Ukraine situation.
Okay. So.
But people seem to be more serious is that is that sort of the.
The takeaway here.
The economics are better.
The financing and offtake or more available than ever.
And then for my second question I might slip in a twofer on this one but so you you talk primarily about Africa and you gave the illustrations about Africa.
In the past you guys have talked about other regions like the middle east to the Mediterranean and different other places Oh.
Are those still on the table first of all are or are they substantially behind it and then for part number two you talked about to being able to fund two incremental units, but mark three <unk>. The cost is substantially different than our mark one so is that assuming like one mark three or more one mark one or how should we think about how youre thinking about two units.
First quarter was there soon this yes. It's also all the geography, the sundry costs. That's why we say mainly African gas because we see the attractions of the input them the distance, but there are other areas for example in the middle East where the gas is essentially free.
So that's.
That's obviously still part of the projects under consideration or development.
But we are.
Focused mainly on African but there are other projects as well.
Both are in the middle East and elsewhere.
I'm sorry.
Sorry, the second part so just how to think about when you say you can internally fund two projects Mark one of our smart two or a combination.
If you take the Capex on these you have of course, you can source that funding. So if you take the example of <unk>.
Healey for example, we had when we built out for them. It was a $1 4 billion dollar capex of about $160 million that's available.
So that's Oh, there's 500 million lower equity check them.
And with the one 4 billion dollar capsule missed the securities balance and the free cash flow to act with the pulse width of operation, We can fund it through our balance sheet.
When it comes to the larger assets you can typically get yard financing, which it can look as easily get poor conversion.
Okay. So so when you talk about self funding two of these it's one of each that how to think about it.
We will take the projects that we think makes it.
Well that makes it that's to your mark juice or Walmart three of them Mark Wong remains to be seen when we announced the project.
But just to in general that's that's the capacity is the takeaway.
Okay.
Thank you everybody come through from the current balance sheet and the rest is a timing thing and so.
You'll be able to generate cash flow pretty much every day. So it depends on the timing of when further units beyond those two but I think if.
We doubled their for Lindsay if need be we can we can look at the situation at that point, but for now the focus is on getting through the next two.
Yeah, absolutely alright, I appreciate it thank you.
Thank you.
Thank you next question comes from the line of Credit Suisse.
Yeah.
Yeah. Thank you and good afternoon everybody.
Hi, Greg.
I was hoping you could comment a little bit on the ongoing drilling.
Drilling campaign, you highlighted in the press release and the well testing that's going on in West Africa, and really what I'm curious about it.
And maybe it's a little bit of both as it is.
Is the driver or the the customers doing those drilling campaigns.
Is that going to potentially lead to more volumes for the hilli or is it potentially going to.
Late lead to maybe an extension on the Hilli and with Perenco.
[laughter], it's a good question and it's kind of yes to both.
The primary.
The purpose of the drilling campaign, we understand it's too coy in more proven reserves. So that you increase the gas flow and enable the point 4 million and increased production.
Well, we have very clear they publicly stated both to the market and of course to put and call and it's an H the governmental loved it.
Is that we will not enter into extension discussions until they declared up point for cause.
Currently we of course have paid for equipment that helps really with loss and every incremental production is straight through to nothing called more free cash flow to equity if you like and we don't want to be working on any extensions until we better utilize the equipment already in place.
But you know.
So gas that could lead to.
Extension discussions as well, but for us instead of you'll have to tackle one loves to go out to find them for us. It's the increased production that's the key driver right now.
Perfect. Thank you for that and then you know.
Realizing that we were selling the steam the art deck.
Obviously, youre, highlighting the tundra and the opportunities to the tundra.
I guess a two part question there one is.
As we think about the path forward for the tundra.
Is that more around an asset sale or because.
Could we potentially just see that be.
The contracted in and remain a core part of the fleet and just piggybacking on that question.
Are there opportunities for golar to expand its fsrus footprints.
Okay.
First part of your question.
At the beginning of this year there were several episodes of your projects being work none of them in Europe , I think with what's happened and the geopolitical situation as we tried to highlight on this slide.
The incremental increase in new assets or do you project out of Europe is unprecedented.
On the balance we are very confident about the unit will end up in Europe and elsewhere.
If you look at what was communicated by the various governments in Europe . Some of them are target thing and.
Chartering.
This and some of them are targeting acquisition of units I think cross we remain agnostic, whether we sell or charter.
We will do what we think the case for the best risk adjusted Economics.
Hum.
And that's our target and with the amount of.
All the interest and the specification of 10 dropped we feel very comfortable about that situation.
When it comes to the second part of your question, what we want to focus on going forward is that something the project because we think we have a unique competitive edge.
We still think that the economics of the project is the most compelling in the LNG value chain.
At least for the next decade or so.
However, we have no non competes with any of the corporate transactions like we have gone through that over the last 12 months and should there be an attractive fsrus project coming up.
No reason why we should not take it though however, I would highlight some of our focus is therefore R&D growth, but we remain open to anyone who wants to talk about or any attractive.
LNG infrastructure business.
Perfect. Thank you for the color everybody have a great day.
Thank you.
Thank you.
The next question comes from the line of Craig Shere from Tuohy Brothers. Please go ahead.
Yeah.
Hi.
Thanks for taking the questions.
So besides the d'andrea that you already have.
How do you see availability of vessels.
For acquisition for additional Mark one or mark to conversions.
And do you have any thoughts about timing and announcement of a full 2.4 MTA deployment of the Hilli post your mid 2026 correct.
Franco contract exploration.
Okay, Hi, Greg so when.
When you talk about source vessels or Mark Warner Mark to those will most likely be based on the most this high end carrier so the woman with the with the bolt on pulp.
Those carriers are mainly even carriers that will face a significant.
Operational challenges due to the new environmental regulations from first of January so basically the new E X MTR regulation.
Hence these ships will be less suitable for.
Two our breath of LNG carriers and more suitable.
Cold storage jobs or as conversion candidates, whether for excess or U R. F N b.
Because of the amount or those ships that will become less competitive for shipping and therefore need to find alternative works with the statement that the Mount of companies with a track record of successfully.
Redeploying a retiring rising those type of ships.
Confident that there will be a bump.
Vessels available for conversion candidates.
To the second part of your question when it comes to him that I think we always try to do.
A before but to be before we get to see and so forth and for US the next step.
Is to secure the <unk> 4 million homes in July of this year.
After that I think.
It's of course her in and putting on Cameroon government to try to find solutions to keep up unit in concrete.
It's port for both of them. This has been a massive economical success.
And we think both of them have an interest in keeping the units in country.
The other hand, I think the operational track record and the fact that the unit has no construction risk and La Smith very soon the quickest ethylene D. You can get their hands on internationally, we think that in this gas price environment her attractiveness for.
Potential work outside of Cameroon is increasingly attractive by the day so.
To try to give some guidance on when we think we have there.
Element there, we would say it's hard to probably up to 12 months. After the point for so probably summer next year or so in that time period.
Great and one last question and LNG negotiations for new projects.
I think we all understand that the upstream producers are your counterparties.
How many upstream producers have.
In Africa have set in stone relationships as far as.
Royalties profit sharing what have you with the host governments.
And to the degree there's a major upsizing of a play with with say Europe LNG.
Does that reopen these things and make very complicated discussions where obviously the host governments want to get as much.
Sal you from the current market as possible.
But that's an extremely qualified the question and I think you're touching upon.
Parts of the core of why the reason some of these projects.
It's a bit difficult to guide on exactly when they will happen I think it's fair to say that.
Neither us nor.
Any upstream partners would enter into such projects with all very.
Very clear agreements with host governments on on the specific points that you touched on like the agreements on how things should be shared flexibility I'm hopeful. This is basically the key gating item in terms of timeline for the new if ideas.
I think the flip side of the argument is that these are stranded gas reserves that are proven and more of them has the technology to monetize both fields.
That's what we came through for them today, we don't see anyone else doing excellent D or floating liquefaction as a service.
With a proven track record at least so therefore.
We are the solution in terms of monetizing the units and its a matter of finding a fair a framework that works for the government.
The upstream partner umbrella.
Okay.
Great. Thank you.
Thank you.
Question comes from the line of Robert Jones from Jefferies. Please go ahead.
Hey, good morning, Karl Thanks for taking my question I apologize in advance a little mundane but.
On the NFL shares how are you guys thinking about those in terms of are you just wanting to hold them until you need to monetize ahead of a new F LNG project or what's the thinking there.
And that's a good question, Chris So I think.
You know, we got 18 6 million shares in total consideration when we sold our.
Well the share component of the consideration.
Earlier in May we sold one third Oh, that's holding.
Hum.
Freeing up $253 million, we liked the development of NFC, we'd like the direction. They are taking the company. However, we have no lockup and load boards. Since then no access to any non public information.
So we're pretty much free to do what we want with without share holding the way we see it now it's far better to say and if he them to save cash and we have significant balance sheet flexibility at least well not when do they fall into your project without.
Touching that facility Oh, I'm, sorry that the that both shares and for now we are holders of the ninth.
Okay.
Is there any room for I guess, a greater partnership with new fortress now that theyre getting into some floating LNG with the offshore rigs.
Any expertise that you could offer or discussions there.
I think I've disclosed boy N S C.
Eaton's on his earnings call them, we are as Golar working together with them, helping them out to develop they're volatile and the solution. Both on the engineering side and also on the operational side keep in mind Golar still operates all of the maritime assets.
Like the ships in the airports are used.
We.
Sold to NFC. So we have a good working.
Working relationship.
On sort of all levels of the organizations.
There's currently no specific plans, but I think we would certainly be open to working together.
When the right opportunities arise.
Got it yeah I appreciate the time and thanks for the thoughts on that Karl.
Thank you.
Thank you next question comes from the line of Nick Linnane from system. Please go ahead.
Hi, Thanks, Thanks for taking my question.
How many yards are there that you think can do quite a lot to conversions and how many do you think could do mark three new builds and do you have any guaranteed.
Slots, but either of those types of work and if so like when do you have options on those slots until because it seems like the odds of getting quite busy.
[laughter], that's a very correct observation. They are in fact getting extremely busy so to some extent that's a bit of an unusual situation before I think anyone in the maritime space, we haven't seen that since 2006 to 2000, a nice cycle, but.
But then again the yard capacity has been built down significantly since then and then the resurgence in activity to ask close longer lead times and obviously, the the general surprise squeeze globally, but.
So to answer your question on March three and we.
Think it's essentially one shipyard that we are but we think it is up to the parts.
And on that one we are in detailed discussion about securing slots the way. The shipyards think about things is that they are of course selling most of the capacities to fairly aggressive.
<unk> LNG carrier and container orders, but they are savings home space for what they call large offshore infrastructure projects.
They have learned overtime as most other people.
Shipping markets are cyclical.
And it's not twice of them to build down engineering and offshore capabilities. Because you never know when they are in the mountains and when that ramps up activity.
So they are saving some slots for larger projects, but it is a limit to how long they hold the slope given the pressure on container.
And LNG carrier orders that said I think we have long standing relationships with the key yards in question and we are currently working to secure slot options for Mark <unk>.
Comes to Mark once we have built a simple in Singapore, and we think that's the best shipyards to build Mark once we haven't not exploring others that we have no intention to explore others for mark loans either.
When it comes to March choose that's sitting there to be done.
A different shipyard from both Mark Williamson marks meats. So basically we have one select shipyard, we had been working with for quite some time on March two and three and we're already having a very established relationship with capital a mark ones.
Okay. Okay. Thanks, Thanks for the detailed answer.
Thank you there are no more.
Questions at this time I would like to hand back over to.
Cause.
Our remarks.
Thank you all for listening in and for good questions and we look forward to connecting with you next quarter have a great day.
That does conclude our conference for today. Thank you for participating you may all disconnect.
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