Q3 2023 Golar LNG Ltd Earnings Call
[music].
Yeah.
[music].
Yeah.
Welcome to the Golar LNG limited <unk> 2023 presentation after the slide presentation by sea.
Called Fredric Stahl bet and C. S. I Edgewater, Maryland, Yeah that will be a question and answer session information on how to ask a question will be provided at this time all participants are in listen only mode.
I'll now pass you over to Carl Fredric Stahl by Carl Please go ahead.
Thank you operator, and good day to all of you welcome.
Welcome to Golar Lng's Q3, 2023 earnings results presentation. My name is Karl Fredrik Stowell CEO of Golar, LNG and I'm accompanied today by our CFO, Mr. Eduardo Miron, our 2% to this quarter's results.
Before we get into the presentation. Please note the forward looking statements on slide two.
Turning to slide three and an overview of Golar today.
We own and operate two ethylene juice.
The helix operating for Perenco in Cameroon, and they give me, which delivered from Ctrip shipyard in Singapore now on Sunday and it's currently sailing towards Mauritania, Senegal, just started 20 year contract for BP.
In Q1 next year, we expect to take delivery of the LNG carrier Fuji, which we acquired in May and intend to convert into three five M. Tpa March U S LNG vessel.
We also own one LNG carrier Artic, which has just been through its five year class.
Arctic Cat's a membrane storage system and is therefore not suitable for LNG conversion.
And we are therefore currently considering alternatives for the vessel, including chartering or sale.
We remain committed to F LNG growth and have in addition to the market one F LNG design of Hilli and gaming.
Spent considerable time and resources to develop two incremental designs.
Mark Chu with three 5 million tons of new liquefaction capacity.
At March three with 5 million tons of new liquefaction capacity.
We will elaborate more on our growth ambitions later in the presentation.
We also have two investments in Macau energies, a land based liquefaction company targeting monetization of flare guests are focused on operations and then in the Americas.
And I've been air LNG, a small scale LNG company owning five small scale LNG carriers servicing local distribution credits.
And the growing maritime LNG Bunkering markets.
Well as an LNG terminal installed in Italy.
Turning to slide four we're pleased to announce that give me has completed its construction at Ctrip shipyard in Singapore and is currently on its way to the GTA field offshore Senegal and Mauritania.
The construction of enough LNG is a major milestone for golar.
We have highlighted some key statistics to give some perspective on the scale of the conversion work now complete.
During the conversion we've added 44000 tons of steel equivalent to 3650 double Decker buses.
The liquefaction topside requires 215 megawatts of power equivalent to the output of 150 wind turbines sufficient to power 80000 homes.
We've added 1500 kilometres of cabling, which is almost eight times around Singapore, where the vessel is being constructed.
The conversion itself has taken 37 million man hours or 18500 working ers.
Through adding sponsors we've added the equivalent of 20 basketball courts of that space to fit all the topside equipment needed to liquefied natural gas.
This construction was undertaking in the midst of Covid, which caused significant challenges to the conversion project.
However, we are now very pleased with the outcome of the vessel and look forward to the guests get the vessel in preparation for BP under a 20 year contract on the GTA.
Okay.
Turning to slide five and another milestone for the quarter.
<unk> delivered its cargo numbers 100 on the 16th of October at the first Alpha LNG in the world to meet this milestone.
The unit continues to deliver and just offloaded its cargo 102.
Or more than 7 million tons since production started up in 2018.
The stable operations of helix and starter.
Presented on the right hand side of the slide speaks to the testimony of the quality of the sign and operational performance of the Golar team and execution model.
We're seeing increased interest for re chartering of Hilli upon current contract expiring in July 26 <unk>.
Including detailed commercial discussion for three different re contracting opportunities at higher capacity utilization compared to today's contract and with more compelling economics.
Turning to slide six with an overview of the global LNG fleets.
Golar owns the largest fleet of ethylene in the world measured by millions tons of installed capacity and at par with Petronas and Eni in terms of number of F. <unk>.
Golar power <unk> concept with the construction and delivery of helix.
And I've also demonstrated the lowest capex per ton of liquefaction capacity.
We are today, the only provider of ethylene as a service.
All the other owners of vessel and GE tarnish tonnage utilize <unk> technology for owned or controlled gas reserves.
Or to service their own portfolio of downstream demand for LNG.
Golar <unk> position as the only service provider of maritime liquefaction enables us to offer a unique value proposition to owners of stranded and associated gas reserves.
We offered gas monetization through targeted integrated approach.
Where golar align its commercial model with the gas resource owner in a partnership.
We ensure aligned economics through the commodity cycles and price volatility.
It's worth to note the relative size of the company's controlling excellently assets for example by market cap.
Golar market cap is around $2 3 billion.
Compared to NFC, and Petronas of $7 billion to $8 billion.
And I have 55 billion and sell at $215 billion.
We're not suggesting that ethylene devaluation alone justifies the value of these companies, but this gives us.
Insights into the relative scale of the players involved in maritime liquefaction.
Turning to slide seven and rationale for why we believe <unk> developments in Africa are attractively positioned for F. LNG exports.
Africa has 620 Tcf of proven maritime gas reserves.
The energy equivalent of 110 billion barrels of oil.
They are either stranded flared or re injected.
A significant portion of these reserves are best monetized through <unk> technology.
Golar has proven market, leading capex per ton compared to other liquefaction solutions, including short based developments set for attractive cost of production.
Africa is closer proximity to key LNG markets in Europe, and Asia compared to U S export projects reduce shipping costs.
Hence if you have a business with three cost drivers and African ethylene projects are cheaper on all three inputs.
We believe the ingredients for an attractive business model is present.
Golar <unk> position as the only proven service provider of LNG as a service is well positioned to take an active role in further expanding African gas exports.
Okay.
Turning now to slide nine and a business update.
He left as referred to continued its market leading operational track record and have now delivered its cargo number hundred too.
Give me sail from Singapore on Sunday on their way to the GTA field for commencement over 20 are contracts.
On business development, we continue to target an integrated model, where we align excellent economics with the upstream partner to have shared exposure to LNG offtake prices.
On Hilli, we continue to target commitment on re chartering of the vessels within 2024.
Current discussions include detailed terms for three different redeployment opportunities.
On March two we continue to progress the sign long lead items and donor vessel delivery expected in Q1 24.
The next step is to obtain commitment on commercialization projects before proceeding with the final investment decision.
On corporate and other adjusted EBITA for the quarter came in at $75 million.
Golar cash position is about $840 million and north of $920 million inclusive of the Tcf swap receivable.
We finalized the sale of the LNG carrier gone down in the quarter for a net consideration of $15 million.
We also continue our focus on shareholder returns and declared dividend for the quarter of 25.
We continued our buyback program acquiring one 2 million shares in the quarter with total shares outstanding at $105 9 million shares.
Our fully owned subsidiary Macau energies acquired a majority stake in logos and established natural gas distribution company in Brazil.
Macau remain on track to deliver its first flare to LNG pilots in the U S within 2024.
Turning to slide 10.
With game of delivery, we now expect a transition from capex to cash flow.
We look forward to get started on operations.
And to see <unk> go from cash outflow through Capex to cash inflow through earnings.
As construction risk is now taken out of the project, we will focus on that optimization for the units.
We will target an increase in facility size.
A reduction in that margin.
And extended repayment profile and duration compared to the current facility.
We are in discussions with potential lenders and have received term sheets with improved terms for potential new vessel debt.
We also see further earnings upside upon Hilli re contracting at limited incremental capex extracting the full value of the installed liquefaction capacity in our portfolio.
Turning to slide 11, and elaborating on the next steps towards contract startup forgive me.
<unk> is now selling under one propulsion assisted by one tug.
To stop perverse in Mauritius, and Namibia is planned to undertake refueling and crew changes.
The total voyage until we're on site is expected to take about 60 days, but can be shorter or longer subject to weather conditions.
Once we reach sites, we will notify BP that we're ready for mooring and physical connection of <unk>.
We will then start upstream the project will start upstream.
<unk> and supplier of gas to the <unk>.
Once first gas is introduced to the <unk>. We then target a commissioning period, which originally scheduled to take six months, but we're actively working with the GTA partners to make further efficiencies on the commissioning period.
Once commissioning is complete we will reach commercial operations date, and the start of the 20th contract at the GTA field.
Turning to slide 12, and progress on our Mark to <unk>.
Major longing long lead items have been orders and are under construction.
So you can see from the picture on the right hand side.
All of the equipment is now taking shape.
This combined with more than 250000 engineering hours to date allow for fast track project execution.
Which will reduce execution risk and shorten construction time by about 12 months.
From when we take FID.
We expect the Fuji LNG to be delivered to us in Q1 'twenty for the vessel is intended as the donor vessel for the project.
EPC contract negotiations in engineering have advanced significantly in March two is ready for execution.
Soon as we have commitments on commercialization of our units.
We continue to see increasing interest for marketshare and several work streams are ongoing for project specific applications.
Turning to slide 13, and Macau entities.
As explained the company is on track to have the first flare to LNG liquefaction pilot available in the U S. In Q1 of next year.
We also recently teamed up with pilot gas.
Provide the first LNG to EV charging.
We expected to take place in Q2.
Operational startup of midstream course commercialization platform in Brazil is expected to start up now in Q4.
We're also actively looking at further expanding the asset portfolio of Macau.
And this could include a potential separately sting.
All of Macau in entities into a standalone entity during 2024.
I'll now hand, the call over to Eduardo to take us through group results.
Good morning, everyone and thank you Carl.
To share an overview of <unk> financial performance during Q3.
This quarter has been marked by significant milestones, including the delivery of gaming and the continued exit operational excellence of helium.
Turning over to slide 15, I wanted to show some of the financial highlights of this quarter.
Total operating revenues amounted to $67 million.
With total F LNG tariffs, reaching $95 million.
And for LNG tariff is a critical non-GAAP metric, which reflects a comprehensive approach to liquefaction revenues, including realized gains on oil and gas derivatives.
Spite, our marginal debt compared to Q2 this robust performance underscores the resilience of our commercial model.
Adjusted EBITDA came in at $75 million.
Affected by lower realized contributions from commodity linked fees.
However, we anticipate a positive reversal in Q4, driven by higher Brent in CTF prices.
Important to note that these fees are calculated on a rolling average basis of the previous three months for Brent and one month of hedge pricing for TTS.
This quarter, we had a net income of $114 million.
A significant improvement compared to Q2 <unk>.
This figure includes a total of $39 million noncash items, such as $34 million unrealized gains from oil and gas derivatives and $5 million boost from unrealized gains on our interest rate swaps.
Our liquidity position remains robust.
It's close to $1 billion win includes cash on hand, and other receivables from the unwinding of our DTF hedges earlier this year.
With total contractual debt just under $1 2 billion, our net debt position was 251 million.
Now moving to slide 16.
We can see how <unk> performance compared to previous quarters when.
When looking on a year on year basis, Healy generated $73 million in Q3, which is 14% greater than during the same quarter of last year.
When we break down these numbers in comparison to Q2, we maintain consistency with the fix it totally tariff of $32 million.
Brent linked fees are slightly decreased to 13 million from 15 last quarter and TGF linked fees of $28 million were down from $30 million last quarter.
As I explained on the previous slide we see lots of tailings from these variable fees and.
The positive impact from higher oil and gas prices driving increases tariffs for the rest of 2023.
Moving on to slide 17.
We can see that we remain exposed to TTS prices for the remainder of 2023 and 2024.
While at the same time, we expect to benefit from locking gains from our previous swaps.
The locked in TTS gains, resulting from the effective unwinding of our hedges will be allocated in addition to our fixed tolling fees and variable Brent Mttf revenues.
So between now or between into Q4 of 2023, we expect to recognize approximately $23 million in EBITDA from those marketing gains and for the full year of <unk> 24, we expect approximately $49 million of EBITDA secured.
Or approximately $12 million per quarter.
To illustrate how this can improve our earnings for every dollar per million Btu change in TTS, we expect to make $3 $2 million per year.
So based on forward prices for next year, we should make around $39 million just from dish.
In addition to that when it comes to Brent.
Incremental contribution is $2 $7 million for every dollar per barrel movement above $60. So when we look at forward 24 prices. The total contribution next year should be around $5 million to $6 million.
As previously announced in Q2, we managed to improve certain terms of the existing healy financing, including lower margins and extended repayment profile as a result of that and based on current forward prices Healy alone is expected to generate an impressive $650 million of free cash flow to equity.
Between 2022 and 'twenty 'twenty four as you can see on this slide.
Now moving to slide 18, our balance sheet remains strong and we have a great level of flexibility to fund increased shareholder returns and at the same time back of our growth ambitions.
Current liquidity position, including cash receivable from TTS hedges amounts to just under $1 billion.
And fully supports the development and equity requirements for the construction of new LNG units as described by Carl on the market you slide.
We continue to explore alternatives that could further enhance liquidity in the near term, including the optimization and refinancing of forgive me now that she has left the yard and construction is complete potential asset sales such as Arctic another year, the spinoff of Macau.
And further optimization and refinancing of Healy upon a new contract among other initiatives.
This quarter, we declared a dividend of <unk> 25, a share with a record date of December 1st and payment on or about December 11th.
We have repurchased 2 million shares this quarter, leaving $105 9 million shares outstanding.
Out of the $150 million approved share buyback program of 117 remains available for further repurchases, which will continue to be opportunistic pursuit.
He has a strong free cash flow generation will continue to provide the backbone and support the current dividend and buyback program on top of that game is expected to start up next year will pave the way for increasing shareholder returns.
Now I will hand over to Karl for some closing remarks.
Thanks, Eduardo and turning to slide 20 for summary, and next steps.
Hilli has diversified revenues from its base brand and Tcf linked earn.
Earnings as just described by Eduardo.
Secondly, with give me about startup contract will.
We will double the amount of ethylene this making cash flow.
We see increased interest for re chartering of Hilli on July 26, and we are in detailed commercial discussion for three different opportunities with several other parties interested in the ship.
Long lead items are well progressed for a mark to <unk> the yard contract design and engineering are ready and our focus is now on the charter commitments.
We continue to target integrated projects with exposure to commodity prices.
Potential startup of operations could be in 2027.
As Eduardo explained we have around $900 million in liquidity.
With the delivery of Gimme, we now allow for debt optimization.
There is further potential liquidity in potential asset sales of noncore assets.
And we are targeting a spinoff of Macau entities within 2024.
There is upside to the dividend.
Following the startup of <unk> give me cash flow.
There is potential further liquidity boost by debt refinancings and debt optimization.
And we also have continued capacity under the existing share buyback program to continue to return value to shareholders through share buybacks.
That concludes the prepared remarks for the Q3 presentation.
Thank you all for dialing in I'll I'll hand, the call over to the operator for any questions.
Thank you to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw your question Press Star one and one again to ensure everyone has the opportunity to ask a question today.
<unk> are limited to two per person. Please standby, while we compile the Q&A queue.
Our first question comes from the line of Ben Nolan from Stifel. Please go ahead.
Great.
Thank you.
Carload water first congrats on that.
Getting the give me out.
I'm sure. It is a welcome relief to see the.
Leaving the yard.
As it relates to the gaming could you maybe just help me think through what.
What the revenue and the cash flow looks like until the commissioning period, how how.
I know you get some payments but.
Maybe any color as to sort of what those should look like prior to commissioning.
Hi, Ben and thanks for the question so.
The commissioning revenue only starts upon commissioning.
At which point, we make a fixed contribution per day.
A tolling fee for any LNG actually produced in the commissioning period.
As alluded to the commissioning periods period is targeted to take six months, but as also explained we're targeting to reduce the commissioning period and working with the GTA partners to shorten that timeframe and get into the earlier.
As you correctly point out there are also contract mechanisms that would provide golar will further day rates. In addition to commissioning revenue.
Those day rates are.
The contract mechanisms that we currently are in a discussion with BP.
On the relevance of and given that we are in these discussions.
We will disclose the details of those at a later point in time.
Okay.
Alright, well I guess I'll just wait for that and then for my second question I am curious about the refinancing of the game.
Is that something that you can do or anticipate being able to do prior to the final commissioning and then you mentioned maybe.
Using some of the proceeds.
For capital return just just curious.
It would seem to me that a buyback is overwhelmingly the easier option relative to a dividend, but maybe maybe how you think about that.
So to answer the first part of the question, Yes, we think refinancing is doable before commissioning is complete.
As we have explained on several previous quarterly calls.
We have looked at different alternatives for refinancing the vessel for some time, but.
But it has been important to us to take the construction risk element out of the equation in seeking to get the best terms available.
Now that the vessel of Fame.
Our increasing focus on these refinancing alternatives and as we have explained we have already received term sheets, which we find attractive.
For refinancing of the vessel.
Our primary focus is to return operating cash flow to shareholders and use of the liquidity for attractive growth.
Expanding our <unk> portfolio.
Okay thinking between dividend versus buyback.
At the end of the day, that's a board decision, but we still have around $117 million worth of buyback program under the existing allowance.
And we're currently paying out less than half of free cash flow.
To shareholders. So we.
We think that there should be capacity to continue to do both and as long as the share is trading.
At the discount to where we think fair value of the companies we think buybacks.
Simple way of continuing parts of shareholder returns.
Alright I appreciate it thank you Carl.
Thank you Ben.
Thank you.
We'll now move on to our next question.
Yeah.
Our next question comes from the line of Greg Lewis from BT IAG. Please go ahead.
Yes, Thank you and good afternoon, and thanks for taking my questions.
Yes.
Maybe this is for Eduardo.
We think about.
Daily expense of the Jimmy.
Any kind of variance versus what it's costing to run the Hilli and Arthur is there <unk>.
Contract language that differs much in terms of the operating cost side.
So hi, Greg So when we look at the forecasted operating expenses for gaming.
Pretty much the same as we have in Healy.
The bulk of the expenses are related to crew.
According to our contract arrangements with BP.
All of the operating expenses are basically passed through under the contract.
So they should follow that arrangement once we start operations.
Okay and is it I guess, it's I mean, realizing the vessel the vessel is still sailing I guess, it's safe to assume during the commissioning process at a minimum we're going to we're going to be able to pass that through where we're going to realize a revenue number higher than that.
During the commissioning phase that's correct, we will be able to pass through the operating expenses to our customers.
Great and then my other question is related to.
Thank you for the detail on the.
The active discussions with the Hilli perpetual re chartering.
I guess, it's a two part question one is.
There is as we think about these conversations.
Is there potential for any of those conversations.
Spillover into the Mark pill, if the Hilli gets contracted and that and then really broadly speaking.
Just given the fact that the Jimmy is more of a tolling arrangement.
Is it safe to say going forward, we're not interested in that type of work.
Okay.
Hi, Greg This is Carl.
To answer the first part of the question.
For all of the commercial opportunities that were in discussions with.
There are spillovers between helium mark too.
Some of them is better suited for one some of them is better suited for the other but many projects can do either.
Obviously.
Different capex involved different slices involved so for us, it's really about gas flow and the size of the reserve and to some extent the level of pretreatment.
For the gas enters the LNG.
Because mark to you would be built.
From from.
We have more space to deal with pretreatment than what we would have on hilli hence.
Hence gas quality gas flow and reserve size is basically what the sides between the two.
But yes, there are spillovers.
If you think of.
The history of Golar <unk> Hilli.
He was ordered on spec and the Perenco contract.
<unk> was down even if the unit wasn't fully utilized to prove the concept.
The give me contract was entered into with BP, It's well known in the industry that after the Macondo incident BP probably has the highest operational standards for maritime equipment globally.
Hence if our technology is sufficient to meet BP operating standards.
A significant proof of concepts on using the same technology for basically any other potential ethylene the chartering prospects.
That's also why we accepted a tolling fee to BP.
<unk>.
And you are correctly pointing out that going forward, we would not be looking for tolling fees, but mainly more integrated solutions.
Given the very attractive risk reward that we see for that type of contract structure and also because we are the only service provider <unk> that can monetize these assets.
Super helpful call. Thank you very much.
Talk to you soon.
Thanks, Greg.
Thanks Keith.
We will now move on to our next question.
Our next question comes from the line of Chris Robertson from Deutsche Bank. Please go ahead.
Hey, good morning, good afternoon, Carl and Eduardo Thank you for taking my questions.
Hey, guys. This question just relates to slide 10 on the adjusted EBITDA guidance looking at 2024, just hoping you can provide clarification around kind of the delta between last quarter's update in this update is the difference in the 2000 core level related to timing.
Timing around me give me startup or what.
What goes into that number that's changed since last time.
You and I have to go with Laura Yes, sure. So I think the main difference when it comes to 'twenty to 'twenty. Four is we have updated those figures with the current forward curves for both brands in CTF.
I think those will largely drive the variable fees on Hilli and <unk>.
That's where the bulk of the difference can be can be justified.
Okay, that's clear.
Just looking at the as Kelly when the current contract and what type of downtime.
And maybe range of Capex requirements do you think would be required to prepare it for its next contract I know there's questions around.
Where it will go in the type of project, but are you thinking about maybe a range of.
Capex required at this time.
Hi, Chris.
The range is basically.
Well it really depends on location and duration of the next contract, but assuming we go for a 10% to 20 our contract upon re contracting.
And a relocation to another geography than Cameroon, we would likely look at anywhere between six and 12 months downtime, which would include.
The transportation legs to the new site.
And any potential vessel upgrades.
And capex could be anywhere from I guess in the very low end $50 million to $200 million.
Okay got it that's clear and then just following up on Capex guidance here can you remind us what's been invested to date on the long lead items on the Marc two project and kind of what the total projected capex remaining would be upon.
Decision.
Eduardo.
Yes, sure. So to date, we have committed around $300 million and long lead items out of which.
Approximately 50% of that there are $155 million has been spent to date.
We have an agreed payments scheduled with all of those respective suppliers and that should basically be paid over the.
The next quarters and going even further.
Beyond the end of 2024, so we have an agreed price and the price fall has an agreed schedule.
And then the incremental $100 million is basically related to the ship and engineering costs.
It takes the full commitments our current commitment on March two to around $400 million.
And then the Incrementals. It makes upon that Friday will then be approximately $1 6 billion, bringing total capex to around 2 billion.
All right that's clear thank you guys.
Thank you.
We will now move on to our next question.
Our next question comes from the line of Christian Wetherbee from Citigroup. Please go ahead.
Hey, guys. This is Matt on for Chris Thanks for taking my question.
I wanted to follow up on some of the details on the timelines and so whats currently in route to arrive at the GTA have around that in mid to late December timeline that is still the expectation correct.
And then just to gain a little bit further clarity on when we could potentially see first gas begin flowing and ultimately realize that full production rate.
Understanding everything correctly in the press release.
Conversations today that will take approximately six months right.
Yeah.
Give me a lives.
On site at GTA.
Thanks, Laura next.
Next year.
See that full realization just trying to get some further clarity on that because I was on.
Under the impression that that.
That was.
Could potentially occur.
First quarter 'twenty four.
So any details there would be great. Thank you.
Yes, Hi, Matt so.
The transit is expected to take around six to this from today. So we're looking.
Late December early Jan there is possible to do it quicker, it's really subject to where they are going around the Cape which is the key sensitivity.
But six today's includes four four weather window.
Then subject to the project being available to send those gas we would then hookup and start gas flowing into the <unk>.
As we are on site and we will then.
Take up to six months for commissioning and as just explained in.
Greg's earlier question.
We will then make a commissioning fixed day rate plus a tolling fee based on actual liquefaction concluded in the commissioning period.
And again, we're working with the GTA partners to shorten that timeframe.
In the event.
The project is not available to send those gas.
There are some other contract mechanism that then kicks in which is effectively a standby day rates.
We are paid to be onsite.
Until the project is available to Sandoz gas.
And commissioning starting up the standby day rates is the staircase that starts off.
Relatively low covering opex in a little bit more.
And then.
Increasing as the potential time of being on standby day rates.
Extend but.
And the GTA partners clear ambition is to get gas flowing and get too.
Commercial operations date as soon as possible.
Yes.
Great really appreciate that detail.
That is very helpful. And then just as a follow up could you just touch a little bit more on sort of the.
Further contracting.
Say re contracting opportunities for Kelly.
I see.
Now 2024 potential commitment on the horizon.
Which appears to be a development since last quarter, just any details there just fully understand the situation.
The commitment is fully materializing.
There's always a trade off between what we think industrially maximizes the return on the assets and what the financial markets want in terms of visibility and we're trying to balance the two but at the end of the day. This is.
The only <unk>.
Available for gas monetization at Endo 2006 early 'twenty seven.
And we think that the commercial value of that is very attractive and that's further confirmed by the commercial discussions we're in.
As we alluded to we are in detailed commercial discussions.
With three opportunities and there are several other gas resource owners doing technical work on the feasibility of vessel and the monetization of their resources.
Once we reached commercial.
Agreement, which frankly is not the most challenging part of <unk> commercial transaction.
We then need to get together with the upstream partner all of the regulatory approvals that need that's needed.
So some chip subject to geographic that has anything to do from.
PSC terms fiscal regime environmental fine off.
Confirmation of mooring location.
In this.
Call it steps that's required for <unk>.
So commercially we think we will have a line of sight significantly earlier than when we would formally.
Have a firm commitment. So we are now actively working to finalize commercial terms and to develop a clear timeline together with the upstream partner and the local regulators.
On where the ship would work and for now we see the competitive tension on the interest on the vessel working in our favor and that's what we're trying to balance together with the financial market anxiety or is that a.
Need or want to see and clarity on re contracting.
Very helpful really appreciate the detail I'll turn it over on that.
Yes.
Thank you once again to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw your question Press Star one and one again.
To ensure everyone has the opportunity to ask a question today questions are limited to two per person.
Yeah.
We will now move on to our next question.
Our next question comes from the line of Craig Shere from Tuohy Brothers. Please go ahead.
Good morning, New York time.
So congratulations on all the progress.
On the clarification on the answer to Ben's question.
Give me a refi it sounded like.
Your operating cash flow is intended for return of capital to <unk>.
Shareholders.
One time.
Asset sales are cash outs likely give me a refi are intended for future growth investment.
So my question is how much do you expect to be needed.
For a mark three RFID.
In terms of cash on hand, and if you have notably more liquidity after giving a refi what do you see that merely helping bridge hilli redeployment period or are you already something beyond the Fuji conversion.
Okay. So the way we see it.
Operating cash flow can be returned to shareholders through a combination of buybacks and dividends at the moment, we think the cash.
Cash at hand can be used for.
Helium redeployment FY.
Mark too.
Subject to the timing of which potentially further <unk> beyond that.
In terms of the money required for a mark.
We think the Capex would be.
Plus or minus $2 billion, we think that that available in the construction period should be anywhere between.
Call It plus minus one to one two so we are estimated around <unk>.
<unk> hundred.
Given that we're currently.
Also retaining some of the.
Operating cash flow, we think we have ample liquidity to deal with <unk>.
The redeployment of Hilli and then some.
And when we do asset disposals that there'll be up to the board.
On how that capital is allocated but mainly our thinking as operating cash flow should be a sustainable dividend.
And then other cash should be used for attractive growth projects.
Gotcha and.
Once you re contract.
For redeployment of the Hilli.
Yes.
Maybe to start off.
At our new location, possibly the beginning of 2007.
Are you in a position dramatically.
More attractive.
Some higher locked in cash flows with some some upside kickers.
You're in a position to the refi on that as well and cash out.
The short answer is yes.
So today the unit is utilized around one four to 144 million tonnes per annum versus installed capacity of $2 four.
We would typically discount.
Committed volumes under a new contract to anywhere between two and $2 2 million tonnes.
Which will drive the majority of the earnings increase versus the current contract just the fact that your increased capacity utilization.
That combined with also targeting higher or more attractive economics in the new contract should boost earnings from <unk>, So both capacity utilization and improved earnings.
Earnings and yes that should trigger refinancing really.
And as the thoughts about what to do with affiliate Refis similar to what you've already shared on the Jimmy or is that just extra gravy and maybe can go towards.
Return of capital.
Well it should be.
I guess, that's up to that point in time, if we don't see the same attractiveness of <unk> growth projects, but the way we see the outlook right now.
We would still do.
The product <unk> growth, because we think the market opportunity is very significant and significantly more than one two or even three units.
Thank you.
Yeah.
<unk>.
Thank you.
This concludes today's question and answer session. So I will hand, the call back to call stopper for closing remarks.
Well. Thank you all for dialing in Q3 was a notable quarter in Golar history, both with the operational milestone of 100th cargo on Hilli and importantly, the deliver of <unk>.
We look forward to the next steps.
Speak to you all in the next quarter.
Thanks for dialing in.
Bye.
This concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.
[music].
Okay.
[music].
Yes.
[music].
Okay.
[music].
Yes.
[music].
Yes.
[music].
Sure.
Okay.
[music].
Yes.
Yes.
[music].
Okay.
[music].
Yes.
[music].
Okay.
[music].
Okay.
Okay.
[music].
Yes.
Yes.
Thanks.
Yes.
Sure.
Yes.
Yes.
[music].
Yes.
[music].
Yes.
Yes.
Yes.
Thanks.
Okay.
Okay.
Thank you.
Yes.
Okay.
Thank you.
Yes.
Yes.
Okay.
Okay.
[music].
Okay.
Yes.
Okay.
Okay.
[music].
Yeah.
[music].
Okay.
Okay.
[music].
Okay.
Okay.
[music].
Okay.
[music].
Sure.
Yes.
Okay.
[music].
Thanks.
Yes.
Okay.
[music].
Yes.
Okay.
Okay.
Sure.
[music].
Okay.
[music].
Yes.
[music].
Okay.
[music].