Q2 2022 Golar LNG Ltd Earnings Call
The conference will begin shortly.
Raise your hand during Q&A, you can dial star one one.
[music].
Okay.
Welcome to the Golar LNG limited Q2 2022 results presentation.
After the slide presentation by C E O call Frederick's the boat and CFO Eduardo Marvin Yeah, there will be a question and answer session information on the high to ask a question will be provided then.
This time all participants are in a listen only mode I would now pass the floor to call Fredericks Cabo called please go ahead.
Thank you and welcome to Golar Lng's Q2 earnings results presentation.
My name is Karl Fredrik <unk>, the 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 Maria Al 2% this quarter's results.
Turning to slide four this provides an overview of golar today.
Following a group simplification and sales of about $6 $8 billion of assets. During the last 18 months. We are now a focused effort on the owner and operator.
We own two LNG vessels.
The Hilli, which it has been in operation since 2018 under a contract with Perenco in Cameroon.
She is the best performing epilepsy globally, with 100% operational utilization and delivery.
Secondly, we have therefore lindsay.
Currently 86% complete on the construction at Keppel shipyard in Singapore.
She will start 'twenty are contract for BP on the tour to field located offshore Mauritania, and Senegal, and will unlock an EBIT or earnings backlog of $3 billion to golar or $151 million of EBITA annually from next year and until 'twenty for phase III.
We are focusing our efforts on <unk> growth projects and have developed three different excellently defiance.
All three of the funds are based on the same proven liquefaction technology and maritime interface.
However, they differ in liquefaction capacity and shipyard location.
The market one has a liquefaction capacity of up to $2 7 million tonnes per annum.
Both our existing units.
Our Mark loan design set for LNG.
And they are based on conversion of existing LNG most centers.
The Golar tundra remains of Golar owned commercial candidate for potential future incremental Mark one units.
The Mark to design has a liquefaction capacity of up to three 5 million tonnes. Mark II is also based on converting an existing LNG carrier, but instead of adding liquefaction equipment to the width of the ship Mark two places the liquefaction side when you shipped mid section.
<unk> added to an existing carrier.
This allows for larger liquefaction capacity and reduces the conversion construction plan.
Lastly, our Mark three Newbuild is fine as long as we have worked to develop for more than a decade.
Mark III has a liquefaction capacity of up to 5 million tons.
And it's based on a newbuild hull, which allows for increased storage and dock space.
As a result of the corporate simplification, we've undertaken in the last 18 months, we also own three significant listed possessions.
We currently own about 6% of new fortress energy valued at around $700 million of yesterday's close.
We own 31% of core company the shipping spin off we established during Q1 of this year.
And we own about 24% of Avenir LNG, a small scale LNG shipping and terminal business.
The total value of these investments amounted to over $850 million.
Turning to slide five as a result of the corporate simplification and excellent concentration, we now have a balance sheet position for LNG growth.
At quarter end, we have the cash position of $602 million.
Two that are listed securities that we just went through we have a total liquidity of around $1 5 billion.
Or approximately $14 per golar share.
Our net debt position was reduced from $1 7 billion last quarter.
<unk> built them up.
Quarter end Q2.
This is a result of the vessel disposals and scheduled amortization hence.
Hence we currently have a cash net cash position of $500 million.
We expect EBITDA generation from our existing <unk> portfolio to quadruple from 2021 levels into 2024.
This could meaningfully increase further.
Additional F&B growth projects are announced.
We now have cash and debt capacity to facilitate excellent growth from internal resources, which will be the key focus for our next phase of the company.
Lastly, we have no debt refinancings until 2025 and expect to generate significant quarterly cash flow to equity from operations going forward.
I'll now hand, it over to Eduardo to present, our Q2 numbers.
Thanks, Carl and good morning, everybody very pleased to provide an update on our group results for the second quarter of.
2000 to Institute Tony.
Turning over to slide number seven I wanted to show some of the highlights of this quarter.
Starting with our <unk> units, our first vessel Hilli continues to operate with an excellent performance delivering 100% of time in this quarter.
We continued to benefit from strong tailwind from high brand in TTS prices, which generate incremental earnings to our commodity linked tariffs at no incremental opex to us.
As a result of that our share of English distributable adjusted EBITDA has increased considerably to $62 million. This quarter, an increase of close to 150% on year over year basis.
We're also very pleased to announce that perenco exercise of its option to increase production for an incremental 2 million tonnes of tcf linked to production from 'twenty to 'twenty three until 2026.
Construction of a second <unk> unit. The gaming continues in Singapore and is now 86% technically complete.
We have agreed initiatives Keppel shipyard to safeguard sail away of the units within the first half of 2023.
We have also advanced a number of initiatives towards the development of a new Mark Chu units capable of producing three 5 million tonnes of LNG and which could be delivered as early as 2025, we will talk a bit more about that on this presentation.
We reiterate our target to announce a new LNG project within 2022.
Moving on to shipping the last steps of the spinoff of our Cfd fleet were completed this quarter.
Last four vessels were sold to co company and the transfer of our shipping and Fsrus management organization is now complete in.
In line with our simplification efforts and to focus our business on ethylene.
Has been awarded a conversion contract for Golar Arctic for 269 million euros and sold our Fsrus tundra for $350 million to NIM.
All of those initiatives and divestments released net cash proceeds of close to half a billion dollars this quarter and allowed us to reduce our contractual debt from $1 7 billion to $1 billion at the end of the quarter.
We have also continued our share buyback program repurchasing 2 million shares this quarter and now have 107 8 million shares outstanding after that.
Moving on to slide number eight.
So due to strong commodity prices and incremental earnings from Healy, our total LNG tariffs have almost doubled to $108 million this quarter compared to $55 million in Q1 of last year.
This quarter, we recorded an adjusted EBITDA of $101 million.
When compared on a year on year basis. This represented an increase of $153 million compared to Q2 2021.
We recorded net income of $230 million in this quarter, including $122 million gain from discontinued operations, including the sale of the Golar tundra tours, NIM and remaining vessels close management companies to co company.
$182 million gain on CTF linked to derivatives and swaps.
The $76 million impairment of Golar Arctic.
$49 million loss on NFS shares valued at $39 57 in Q1 2022 versus $42 61.
In Q1, 2021 hour.
Our balance sheet continues to strengthen and deleverage our share of contractual debt at the end of Q2 was $1 billion <unk>.
A significant reduction of more than 54% when compared to the same quarter last year, when we had $2 $2 billion of debt.
Total cash at the end of Q2 was $604 million.
Further to that when considering the value of our listed shares in NFC Co company an Avenue, we have a total liquidity position of close to $1 $5 billion and our net cash position of half a billion dollars when deducting our share of contractual debt.
We estimate that this could allow us to fund two new LNG growth projects.
Moving on to slide number 10.
We would like to provide a bit more color into the breakdown of our earnings from Hilliard.
<unk> continued its perfect operational track record since delivery in 2018.
Market, leading for ethylene <unk> operations globally.
Healy tariffs comprises of three components fixed tariffs are Brent linked tariff and a tcf linked tariffs that started up on first of January this year.
Due to increase in commodity prices continued to see a strong increase in heat is EBITDA generation up to five times year on year or nine 5% quarter on quarter.
And we expect it to continue into 'twenty two 'twenty three.
Which will be further explained on slide number 11.
Interesting to note that these increasing earnings came with no additional opex to us.
While the base tariff stood in line with previous quarters, we recorded $29 million from Brent linked revenues and close to $20 million from CTF linked revenues in Q2.
I'll now hand over the call to call, which we'll talk a bit more about that.
Thank you Eduardo and turning to slide 11.
As Gordon mentioned, Frank or exercised their option to produce the 2 million tons from 23 to 26.
<unk> will continue with three components to it as EBITDA generation.
In 2021, Golar share of JV EBITDA amounted to $95 million.
For 'twenty, two we expect golar shares to come in at around $270 million.
The earnings increase is caused by higher Brent prices and the startup of the <unk> production.
For 'twenty, two we have hedged the PBS price exposure for Q3 at $25 and 37 per MB tier generating $19 million of Tcf link EBITDA to Golar Arctic worker.
We remain open for Q4 2000 tier at current Q4 forward process, we expect to make an EBITDA of around $4 7 million for Q4 alone.
For 2023, we have just entered into TTS price swaps for 50% of the Tcf exposure at $49 $5, Brent and this year.
That's the entity equivalent accrued Brent prices at $291 a barrel.
With Tcf at 49, and a half 423, this will generate approximately $160 million.
And EBITDA for Golar.
50% of that is now secure in terms of locked in the price.
Combined with the Brent forward price for 'twenty, three which currently stands at $88 per barrel, we expect to generate $305 million and while our share of EBITDA next year.
Total debt service for Golar share of <unk> 60.
$50 million.
<unk> alone will generate free cash flow to equity of $255 million for 2023.
Our $2 35.
Per golar share.
Turning to slide 12, and give me.
You may now, 86% technically complete for its conversion in <unk> at Keppel shipyard in Singapore.
We are currently works over 22 million man hours on the conversion with a daily construction team currently amounting to 4200 workers.
The remainder of the build is mainly around construction installation and testing of equipment ahead of the 2023 tailed away.
Unlock.
$151 million in annual EBITDAR to Golar for 10 years.
During the quarter Golar and careful capital together are the owners have agreed to a $50 million incentive payments to capital shipyard for initiatives to safe Harbor sand away within the first half of 'twenty three.
Incentive payment is payable at certain milestone and part of the amount is retractable if margins are not met on a green dates.
Since Golar has a 70% shareholder.
Perfect.
Of the $50 million incentive payments will be covered by golar.
<unk> is on track to sail away from the shipyard during the first half and for contract startup during the second half of 'twenty three.
Turning to slide 13, and some of them most.
Interesting developments, that's happened to golar during the quarter.
We have seen a significant pickup in interest from new clients investigating <unk> solution for gas field developments.
Current and forward gas commodity prices combined with energy shortage seem stuff fueled efficiencies in gas field development decisions.
This is also reflected in our existing pipeline of LNG growth projects that have seen a very strong progression during the quarter, both portfolio and integrated project.
On the back of this we have taken active steps to confirm yard availability and updated capex pricing for our three different technology design.
We received confirmed price and yard availability for both Mark and Mark III designs.
And we are now in discussions with the Mark III shipyard for price and availability.
<unk> eight 5 million from new build.
Despite this the shipyards in an inflationary cost environment, we are happy to announce that we candidly <unk>. During 2025, if we commit to a project during the second half of this year.
The capex numbers receive havent seen inflation, but remain within the $5 million to $600 million on capex per ton of liquefaction capacity, which we think is hardly attractive compared to other maritime and shore based liquefaction solutions.
This also compares very well to <unk>.
Our recent announcement to acquire the <unk> X smart Congo for unemployed price of between 950 million to $1 $1 billion per ton of liquefaction capacity. So.
Approximately exactly double or where we will have a capex.
Furthermore, with the acquisition of the <unk> combo Golar is now the only service provider or vessel in this with a proven track record globally.
We've also received financing term sheets for construction and long term lease financing for potential fund universe from an existing relationship lease counterparts.
As <unk> alluded to we maintain our target for <unk> project announcements within 2022.
And we believe our organization and balance sheet are set up to execute up to two to three LNG projects in parallel.
Subject to the details of each project.
Turning to slide 14, and further elaborating on actions taken in the quarter.
On the back of the growing pipeline of LNG growth projects, we are ramping up both engineering activities.
And plan to order long lead items for a mark to <unk> within the second half of this year to safeguard their 2025 vessel delivery.
The majority of the long lead items and discussion can also be deployed to our other <unk> solutions.
The Mark to design has a liquefaction capacity of up to three and a half million tons and described is based on a conversion of an existing carrier.
We have identified and inspected a suitable candidate for that conversion. The yard selection is concluded and the financing term sheet has been received.
That term sheet is also not dependent on a charter or long term offtake use it as an integrated project.
We're excited about the progress made on the Mark II project and the attractive delivery window that we have gotten confirmation.
Together with interest from charters, which includes ongoing discussions for an integrated field development projects and multiple clients for charter alternatives.
We're confident that proceeding with Mark is the right way for the company going forward.
Elaborating on the delivery timeline and why we think early is important.
You can see on slide 15.
As discussed on previous quarterly calls the gas market was tight before the geopolitical situation in Europe .
In Q4 of last year, we saw LNG prices above $50, Brent and with you.
LNG demand is expected to continue at the world is looking to source stable sources of entities with attractive environmental attributes.
There is very limited new liquefaction capacity coming on for the first half of this decade.
While most of the incremental production comes on from late 'twenty five onwards.
Hence early delivery of an LNG project is increasingly attractive both from a demand and LNG price point of view.
New liquefaction capacity from 2021 to 2013 currently stands at 130 million tons of FY <unk> our projects under construction.
And then additional 42 million tons of liquefaction projects are needed between now and 2030. If we are can meet the estimated demand growth for the period.
That's before taking into the account the possible effects of Europe or other regions, reducing dependency on single source Russian gas exports.
Interestingly, if you breakdown the anticipated 130 million tons of new liquefaction projects coming online further.
About 12 million tons of that volume is expected to be sourced from Russia or.
What are the geopolitical situation is likely to add pressure to project execution and five months.
Furthermore, 65 million tons of the 130 million pumping total is expected to come online from U S exports.
Source cost in the U S is currently at eight and a half dollars per Mb tier.
And long term forward prices suggest four to $5 and gas source cost before liquefaction.
In addition to that most of the U S volumes are sold on long term offtake contracts.
Turning to slide 16, we are encouraged by this development and were Furthermore, encouraged by it.
The lack of liquefaction projects from what we think is the cheapest gas resource in the world.
We mainly focus on African proven our strength in gas reserves as we see very favorable characteristics of the three key components driving delivered cost of LNG.
Thats source cost liquefaction costs and the shipping distance to the end user.
We believe that you can develop a stable source gas price of anywhere between one to $3 indistinct costs, depending on the size of the field.
That's significantly cheaper and current and long term Henry hub prices.
Secondly, golar liquefaction technology has a lower capex per ton compared to other floating onshore based liquefaction solutions.
North African gas is.
Physically shorter sailing distances to end users whether the clients are in Europe or Asia.
And so if you have lower input costs on the three key cost drivers of LNG.
We see that as a compelling compelling competitive advantage.
Can you elaborate that into numbers, so I'm turning to slide 17. This is again a familiar slide that we presented earlier occasions.
But this time, we've adjusted it to describe possible mark to LNG growth projects.
If you assume a source gas.
<unk> projects are in dollar per MBT <unk>.
A tolling fee similar to what we are charging VP ranging between two to $3 per <unk>.
And shipping cost at $1 50.
You can deliver LNG to end users at around $5.
If you compare that to both historical and current gas prices. This is a very solid economic proposition.
And then the specific sample we have highlighted some mark to tolling fee scenarios.
Ranging from $2 <unk> in the low end, which is lower than for most the most recent U S store base liquefaction project yet.
Yes, they would give golar or capex to EBITDA overall hard times on capital employed so 20% Unlevered return.
If we can achieve tolling rates similar to that of <unk>.
At current commodity prices, the capex to EBITDA multiple reduces to two times capital input.
If you further.
Well closer to the hydrocarbons and work on integrated projects.
Current gas prices you currently have a payback in less than six months.
So you cannot understand our focus on early delivery and growing through works the integrated section.
We think you can hedge out a lot of the volatility of hydrocarbon prices through forward price fixtures similar to what we have done on our PCF exposure on Hilli.
Shifting gears and for the last time, giving an update on our Fsrus business on slide 19, we have highlighted due to asset disposals that was concluded during the quarter.
First we agreed to sell our steam LNG carrier Golar, Arctic 294, 269 million euros.
The transaction and sales that Golar will undertake the vessel conversion and delivered the fsrus in Italy.
The estimated conversion cost per unit is around $160 million before the cost of the vessel and contingencies.
We expect <unk> to give final notice to proceed towards the end of this year or early next year.
This project is very similar to the previous vessel to Fsrus conversion when we converted the Golar Viking and sold her to LNG Croatia.
The second transaction, we announced with <unk> with the sale of the Fsrus and dropped for $350 million.
The transaction was announced and closed on may 31st raising net proceeds to golar of $193 million.
We have agreed to charter Kendra backs from the acquisition date until mid November and we expect to make an additional positive cash contribution from in this period.
We're also in the final stages of entering into a development agreement, where Golar will assist <unk> in minor vessel of credits before the unit is expected to start <unk> operations in the first half of next year.
This development agreements will likely add further value to golar.
Okay.
Turning now to corporate and the earnings potential from our existing asset portfolio.
Again, a familiar slides, but increasingly simplified as we're selling off the non core assets.
Our 2021, adjusted EBITDA from price, Don Healey earnings less DNA, giving us an EBITDA of $74 million.
Could that become more duty applied on brands and TTS linked production from Hilli.
We expect earnings for her to increase by $220 million on 2023 over 2021 levels.
Add to that the contracted EBITDA from demand from spark hooked in second half of next year.
We expect to have a run rate EBITDA of.
North of $400 million and subject to commodity prices ranging between four to 500.
Our net debt position.
So we have a net cash position or half a billion dollars.
Hence we think the company is in very good shape both of them.
Cash flow basis, net basis, and liquidity basis to be positioned for growth.
So finally to summarize the company highlights on slide 22, our key focus is on <unk> growth and we are targeting NFL and the announcements within 2002.
Before growth, we expect our EBIT or earnings to quadruple from 24 over from 21% before.
We have cash and listed securities of $1 5 billion targeted to fund.
<unk> growth projects and have significant free cash flow to equity generation in the interim.
Our book value stands at three 7 billion.
Again expected to continue to increase as we are free cash flow to equity positive.
Golar has a proud history celebrating 75 years of exit this year 50 of which in LNG, where we have been a proven market <unk> being a first mover on fsrus <unk> and integrated Fsrus to power projects.
This concludes our Q2 earnings presentation. Thank you for taking time to listen in and we will now hand, it over to the operator for any questions.
Thank you we will now begin the question and answer session. If you wish to ask a question you will need to press star one.
On your kind of thing.
Fuel name to be announced.
We ask you to limit your questions to two per person. Please.
Please standby, while we compile the Q&A roster.
We will take our first question.
And your question comes from the line of Chris.
From Weber Research and advisory please ask your question.
Hi, good afternoon.
How are you.
Thanks Pierre.
Okay.
I wanted to touch on.
Yes.
Yes.
Youre breaking any chance you can trust to speak closer to the speaker.
Is this better yes. Please.
Yes, sorry, I was saying we've seen the charge of <unk> <unk> slide from Q1, 'twenty three to first half of 'twenty three now with the $50 million.
Ken.
In the first half.
Can you provide some color.
And B would be further delayed.
Sounds like months or quarters.
I think if you've listened to Christmas earnings call.
On the eighth earlier this week I think they also provided some updates on where they are.
Both on the <unk> progress.
Yeah.
From a plane, but reiterated the contract startup date.
So I think the combination of.
Answer. The question. This is a combination of making sure we build the best quality units and to align the schedule.
BP.
We do not expect any further delays.
As we have been highlighting on several of our previous quarterly calls we've taken very active steps to ensure.
The current timeline, which is basically the driver of the $50 million cost increase.
Which then safeguards that timeline and we are very happy with the progress were making basically on a daily basis and feel very comfortable with the current.
Delivered it.
Great. Thanks.
Was it something down systemic <unk> conversion project one.
One off and aligning schedules customer.
Yes.
Okay and.
So my second question last one when would you need to reserve slots for at the yards with Mark wanted to okay.
Who would you.
Losing it.
Yogurt in place this year.
I think what we have.
Confirmed on the call today is that we have.
<unk> agreements in place with.
The shipyard up and construct the mark on and Mark too.
Where we have.
<unk> secured the available slots space.
And as we highlighted a few times, we are targeting to make.
The announcement within the second half of this year I think it's possible to look into slots for somewhat longer than just this year, but.
If you delay a day you also delay.
Delivery and for US early delivery is going to be important going forward.
Sure. Thanks, Rob for the color I'll take a minute here.
Thank you.
Thank you.
We will take our next question.
Your.
Comes from the line of Ben Nolan from Stifel. Please ask your question.
Operator.
Hi, Coldwater, So I wanted to ask first just to make sure that I understand.
With risk.
Thank you.
During.
Or conversion.
Am I right in understanding that you guys would be willing to order conversion on spec or without a contract.
The implication here.
Yes, this would be similar to how we would view.
He lived when she was first order she was marked ordered.
Against the contract with a clear view as to where the unit would likely end up at that time that was a bigger risk because it wasn't unproven technology.
We see now with the scramble to secure new liquefaction.
At least by the move by Eni to acquire.
Ivy.
<unk> at the very high price.
The point is the key attribute of.
The market then also all of the chartering discussions we have and we think negotiating power with slightly moved trough.
Have them as vessels, but we have a very clear view of where it will end up.
Okay.
Whether the contract is secured.
Before simultaneously or in the not too distant timing just after.
We feel very confident about where we sit right now.
Yes.
That's helpful.
And I'm going to.
I'd try to squeeze two into one here so.
As it relates to sort of those contract negotiations and then one other thing is that you have called out as wanting to have some element of commodity.
Exposure similar to what you have on the Hilli, but less so than the give me.
Firstly I guess is that.
Thing that.
Yeah.
Our gas owners are willing to do or increasingly willing to do versus where we might have been earlier and and then sort of connected with that you call out specifically, a mark too, but I know that you already own. The Gander is there is there a reason why it seems like there's a little bit more of a mark to focus versus a mark.
One that might be.
A little bit more burden hand.
Okay.
But.
Wanted to first part, yes, we think that it's easier to have commodity linked production discretions model of them earlier.
Yeah.
The gas fields that we are targeting are either stranded or associated gas.
We don't think that the owners of those resources have many if any alternatives to use plus.
Both pits, hence during that <unk> or its not monetizing the unit and with the amount of pressure to secure nearly perfection right now.
We think that it is.
An easier environment to have those negotiations.
I think it's also fair to say that the.
The more oil major you go under longer duration yugo.
The less incentive one thing to give commodity.
Exposure.
But we think we can obtain attractive commodity exposure to solid counterparts.
The second part of your question I think.
As we highlighted we have.
Have a confirmed price and yard availability for both Mark one and two.
What we see as a key attraction of the Mark to is the fact that you have somewhat higher liquefaction capacity somewhat higher storage capacity and due to the way the vessel is converted a quicker.
<unk> time.
We also have.
Fairly good view of the.
Absolutely growth pipeline and were confident that ordering and mark to present.
Very attractive risk reward and Thats why we want to proceed that saying that we would not rule out building another mark Wong with the starting point from guardrail, but the contract is not suited for our market.
Alright.
Appreciate it.
Taking both.
Somewhat different question.
Good point.
Thank you we.
We will take our next question.
Please standby.
And your question comes from the line of Craig Shere from Tuohy Brothers. Please ask your question.
Hi.
Good morning, New York time.
Okay.
So.
As far as future capital availability and liquidity.
Our first question is it reasonable to assume that you could cash out over a $5 billion combined and low cost refinancings for both the Hilli and Jimmy.
And then could you opine.
The.
Timing and size of liquidity needed for an initially.
Spec build versus one that's contracted upfront.
To answer the first part yes, we can I think we can expect more than half a billion things revert to refinance.
Give me today.
I think the way we see it is that we have a healthy.
Cash listed securities position.
We think we can further optimize the debt from those two units once construction risk is taken out of EMEA and <unk>.
Re contracting risk is taking out the hilli. That's why we are not pushing forward on that right now.
We have a sufficient.
Cash at hand, together with the term sheets received for both Mark watermark tuning builds to proceed with respect build without having to use anything both our cash position.
A manageable credit or receive term sheets for potential new credit facilities.
So even if you build on spec the shipyard will let you kind of put it in your equity over time. So you don't have a media.
<unk>.
Issues as far as meeting more liquidity.
That's correct.
Thank you.
Thank you.
We'll take our next question.
And your question comes from the line of Sean Morgan from Evercore. Please ask your question.
Hey, Carl so.
As we step up in terms of the volumes for a mark to Mark III with the five M. Tpa is that going to require I.
I guess preceding offtake or work or do you think that the E&P partner that you select a further development of that project would be able to basically take full offtake at five a M tpa.
Just to confirm we will not do a march three one on spec because that's a large volume.
Bigger impact though.
On those you would typically that's more towards tolling arranged contracts.
Where we would expect that the off taker would lock in some of the production volume.
Okay, and then you talked about in the presentation about the kind of low cost of the assay development off of the West Coast of Africa, and the proximity to Europe .
<unk>.
Kate that Europe is the primary market for these projects so.
Have you been surprised at all kind of the slowness of Europe to some.
Long term SBA is on sort of the percentage of Skus and signed in 'twenty two since the war started relative to say Asia. You think is that carbon driving that or whats, what's causing sort of the delay in and heavy European contracting.
I'm not surprised by it because we know what it takes to.
Kitchen ethylene <unk> project of Divine Offtake is only part of the puzzle I. Thank you for your security Offtake, you still need to have the development plan the regulatory approvals.
Everything that's needed.
To produce the gas.
I think so.
Some extent to the contrary I think.
European countries have been very swift to move on Fsrus fairly swift.
On the LNG carriers, and I think right now they're actively working on how to crack increased gas production I think a further testimony to that is when Senegal is invited to <unk> have been at least Las Palmas in the previous meeting Senegal welcome to invite them to <unk> seven so I think they are starting to get whats going.
On her.
Don't think it's really down to just the offtake.
You have to sort of embrace the full project to hold the scope severity and Marc just thank the tying up offtake solve the problem.
And I know that several European countries are lifting up offtake financing to help lift some of these projects.
You also need a stable geopolitical environments in the country that you won't talk Brexit. If you are to put billions of dollars of infrastructure there.
Our advantage of course is that Nf L. Lindsey is floating so.
Infrastructure is mainly upstream the unit can always be redeployed and we are as you know a generic asset. So we are not customized to the specific feed but we think that our technology suite as well for those type of projects.
Alright, Thanks, Karl I appreciate it thank.
Thank you.
Okay.
We will take our next question.
Our next question comes from the line of Wayne Cooperman, who is an individual investor. Please ask your question.
Hi, guys.
Two quick questions.
Kelly.
Perenco didn't take all the amount. They wanted is there any chance that you can get more volume from somebody else or is that really you have to wait until their contract expires.
And secondly.
Since you sold a third of the NFC at a lower price I mean is that the plan to continue to monetize that especially now that their stock has gone up a lot.
Thank you I think for the first part of the question.
D. As you know the production on the incremental volume is linked to the deaths.
If you could take us ETF cargo undelivered popped into Europe . Today, you are looking at a fairly steep discount that somewhere between half to $10.
Hence.
In the interest of the off taker from putting go to meaningfully increase volumes.
Agreed tariffs.
And there was no incentive from either Golar, nor perenco to go to the negotiating table to increase volumes beyond the two <unk> mentor renegotiating of the Tcf linked tariff.
I think the way we have.
This is less.
Let's just see what happens through the option that was declared a <unk>.
I think there is scope to increase production further but that would likely be at the tariff to be negotiated theoretically there is capacity to sell it the way from the current off taker practically that's going to be very difficult. So.
I think the solution to this is that the offtake or putting <unk> needs to sit around the table and see if there is a solution that works for all three parties.
If not.
The currency tariff prices take care of the earnings credit limit and I think everyone is an alliance to see if the rates, where we can be a step further.
When it comes to the second part of your question.
It's correct that we sold a third of our NFS holding I think with further said that we will draw the NFC than cash.
I think to date that's been.
The right decision.
We like the progress of NFC.
Currently we have plenty of cash and available liquidity to execute our ambitions.
So for now that position remains the same that we obviously keep a close eye on the development of the company.
They have been.
Very successful executing large.
Improvements to the company just in the last quarter. So we like the development currently.
Alright. Thank you congratulations thank.
Thank you.
Sure.
Thank you we will take our next question.
The question comes from the line of Barry Haimes from Sage asset management. Please ask your question.
Thanks, so much and congrats on all the progress.
My question is you talked about having enough funding.
For two additional swings.
Would that include the <unk>.
Mark to Anna Mark III could you fund <unk> III.
And maybe just talk about the relative costs of.
One versus two versus three.
Because those numbers were not on that one slide where you laid out the differences. Thanks so much.
I think if you take the liquefaction capacity and multiplied by the Guy that's $5 million to $600 million of Tom I think you get to the price.
Hum.
That's your price.
<unk>.
It's very helpful.
Rest of the question could you could you fund a mark to <unk> III.
With the existing.
Yeah.
Basically the answer to that depends on.
The project so for some of these projects take a long term off take you get very attractive financing and then you can easily do both.
For some of the long term contracts, we know that the charterer would also like to take equity participation in the unit, especially if it's contracted for the life of the unit.
And hence that would enable.
<unk>.
Oster lift those two projects, but I think for now the most likely ones to proceed as mark too and we have a significant backlog of interested parties across all three designs.
In pulp we can run two to three of them. So it's a matter of prioritizing the ones that have the most attractive economics.
Effective pulpwood scope.
Thanks, so much thank.
Thank you.
Thank you we will take our next question.
Okay.
Our next question comes from the line of Mark <unk> from Clarksons. Please ask your question.
Thank you.
Okay.
Yes, just a question on.
X more so.
Tango Sandeep last.
Last week.
Sure.
Pretty good prices.
That is of course, thats, a barge I need to get smaller.
So maybe if you could just compare.
If it's.
So just like extrapolate to that two and a half million tons.
Congressional.
Candidates.
Okay.
He asked me quite compelling valuation practices.
Curious if you can help.
Talk about the differences.
And I think if you look at the announcements theyre, saying theyre going to pay between $572 $694 million subject to performance of the unit and Thats the point 6 million tonnes.
Hence your $950 million grew 11501 of our fixed to the specifics.
On price, if you compared us to a mark one let's say that.
That means that you can pay between two four and $2 $9 billion per unit or approximately exactly twice. The capex that we are guiding on between five to 600.
Youre also right that.
Tom It's a smaller unit with less liquefaction capacity and significantly less storage compared to RF R&D technology and also with the.
Not with the same.
Operational track record and indeed of course operate.
For IPF in Argentina, but system.
For some time after that.
Perfect. Thanks.
That's good color there could be quiet.
Significant upside potential.
Thank you.
Thank you we do have a follow up question are you happy to take that question. Please.
Kieran mainland please.
Do you have a follow up question from the line of Ben Nolan from Stifel. Please ask your question.
Yes, thanks, and thanks for taking the follow up.
Get quite enough head of my two and a half questions last time.
I was a little bit more on.
The potential.
Potential opportunity to expand in Mauritania and Senegal.
Just to be clear are.
My understanding was that was likely to be a mark III designs do you have any further color on sort of the direction that that might be headed.
I think.
We don't normally.
Comment on specific projects that we would leave them on the quarterly earnings call, but cosmos held.
This week, where they said that they are targeting concept select for the growth of the tour to face.
Within Q3 of this year.
<unk>.
It's interesting that last time the concept select ended on <unk>, which is the gaming.
And with the Capex per ton liquefied and the carbon footprint per tons liquefy that RF RMB technology can provide.
We struggled to see how there are alternative protection solutions that can be deployed on that site that will be competitive on those two parameters.
And so.
We're looking forward to that conflict.
So I think thats, what we would say and weather day.
We want to grow.
From two and a half which is <unk> to five.
Two smartphones over the next 1000, Mark III I think its a question better directed to Kosmos and BP, but we did note that Kosmos was talking about both phase two and three.
I'll talk to you within 2024.
Yes.
That's helpful. And then again sort of a I'm doing to an unrelated topic you guys did buyback some shares a little bit of shares in the quarter.
Maybe just thinking about capital allocation as I recall, youre, so youre, a little bit limited on your ability to pay dividends until the delivery of the Jimmy.
First of all is that still the case and.
How are you thinking about sort of.
In the intermediate term capital allocation as it relates to shareholder returns.
And you are correct. The only debt facility, we have with touch restriction is that $300 million unsecured bonds, which prevents us from paying a cash dividend.
Until given the diverse.
We are however allowed to do an incremental $15 million of buyback for Meredith and today. We are also allowed to.
Dividend out either 51%.
The tofu.
With the value.
Our selling coal company.
Either through shares our cash so since we sold two thirds for cash and remain one third share holding the entire cocoa position could either be monetized and disc.
Distribute it in cash or distributions and shares.
When it comes to capital allocation, we are generating a healthy free cash flow.
Every quarter from now onwards.
I think we're having active discussions with the board to introduce cash dividends from Gwen.
The diverse.
Currently there are no plans to ask for an amendment to the unsecured bonds or otherwise bring that dividend forward. As we think are key focus should be on <unk> growth.
But subject to how that materializes over the next.
Six to nine months that could change.
Alright, perfect I appreciate you taking the follow up call.
I think we have a hard stop now in May.
Now in one minute. So thank you all for dialing independent won't have further follow up questions. Please do not hesitate to reach out to us. Thank you for listening to US This morning and have a great day.
That does conclude our conference.
That does conclude our conference for today you may now disconnect speakers. Please standby.
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