Q4 2024 Golar LNG Ltd Earnings Call
Karl Staubo: Karl Staubo was a famous guitarist and composer. He was born in Munich, Germany. He was born in Munich, Germany. He was born in Munich, Germany. He was born in Munich, Germany.
Speaker Change: The man who killed Karl Staubo Karl Staubo Karl Staubo Karl Staubo Karl Staubo Karl Staubo
Speaker Change: Welcome to the GOLAR LNG Limited 4Q 2024 presentation. After the slide presentation by CEO Karl Frederik Staubo and CFO Eduardo Maranhao, there will be a question and answer session. Information on how to ask a question will be provided then.
At this time, all participants are in listen-only mode.
Speaker Change: I will now pass you over to Karl Frederik Staubo. Karl, please go ahead.
Speaker Change: Thank you, operator, and welcome to GoLRLG's Q4 earnings results presentation.
Speaker Change: My name is Karl Staubo. I'm the CEO of GoLRLNG and I'm accompanied today by our CFO Eduardo Maranhao.
Speaker Change: We're happy to be dialing in from Buenos Aires where we've been meeting with our coming partners for the FOMG Healing.
Speaker Change: Before we get into the presentation, please note the forward-looking statements on slide 2.
Speaker Change: We start at slide 3 and an overview of rollout today.
Speaker Change: During the quarter, we finalized our transition into a pure FL&G company through the sale of Avonair LNG Angola Arctic.
Speaker Change: The sale of Arctic marks the end of Golar's 60-year presence in the LNG shipping market.
Speaker Change: Our assets now include the hilly, which is currently under a contract for Florenco Offshore Cameroon until contract expiry in July, 2026.
Speaker Change: Thereafter, the vessel will be redeployed here to Argentina for a 20-year contract, establishing Argentina as an LNG exporter.
Speaker Change: The GIMME is currently under commissioning to start a 20-year contract for BP Offshore Senegal and Mauritania.
Speaker Change: The LNG carrier Fuji was delivered to C&C Raffles Shipyard in Yangtai, China during the quarter and the conversion of the mark to FLNG is progressing according to schedule.
Speaker Change: Inclusive of the Healey Re contract here in Argentina, our EBITDA backlog stands at $11 billion before commodity exposure.
Speaker Change: We expect our backlog to continue to increase and provide further earnings visibility once the MkII FL&E secures a long-term target.
Turning to slide four.
Speaker Change: We continue to focus on capital allocation towards SLGs and agree to acquire all remaining minority interests in the SLG Hilly during the quarter.
Speaker Change: On Christmas Eve, we announced that we acquired approximately 8% of the total vessel capacity from Cetrium Shipyard and Blackham Beach.
Speaker Change: We paid $90 million for the shareholding, of which $30 million in assumed debt, and $60 million of equity.
Speaker Change: The equity portion matches that of the sale of our non-core investments in Avenir LNG and the Golar Arctic.
Speaker Change: reduced volatility of earnings due to the long-term infrastructure cash flow profile of FL&G projects
versus more volatile and shorter-dated cash flows of L&D shipping.
Speaker Change: This is also an important exit from L&D shipping after 50 years of operations and a concentration on strengthening our market-leading L&D presence.
Speaker Change: That leads us to slide 5, where we remain the largest FLND olerant operator, controlling a total liquefaction capacity of 8.6 million tons per annum.
Speaker Change: Golar is the only proven provider of FLNG as a service, providing charters with natural gas liquefaction without requiring any ownership to the gas reserves.
Time to market.
Outsourcing of engineering?
Speaker Change: no capital commitments to the charter until they receive cash flow from production and access to Golar's market-leading operational uptime.
Speaker Change: We expect to continue our market-leading position and have engaged conversations with capable shipyards for a fourth FLNG unit that we will seek to order once we have secured a charter for the Mark II under construction.
Speaker Change: Turning to business updates and the highlights of the quarter on slide 7.
Speaker Change: Healey continued its market-leading operational track record and has now delivered 128 cargoes since start-up in 2018.
Speaker Change: CP satisfaction for HILIS recontracting in Argentina is going according to schedule and we expect all CPs to be fulfilled within the second quarter of this year.
Speaker Change: In January 25, we received gas. The gas from the accelerated commissioning was replaced by feed gas from the BP-operated FPSO, which allowed full commissioning to commence of the FLNG gimmick.
Speaker Change: This milestone triggered the final upward adjustment to the commissioning rate under the commercial reset.
Speaker Change: L&D is now being produced and subject to receipt of sufficient feed gas, we expect the first L&D cargo to be exported within Q1.
Speaker Change: We thereafter assume the full commercial operations date to be triggered during the second quarter.
Speaker Change: This will formally mark the start of the 20-year lease and operating agreement that unlocks approximately $3 billion of EBITDA backlog, Golar's share.
Speaker Change: On the back of these developments, the contemplated refinancing of the FOMG GIMME is in the final stages and Eduardo will elaborate on that later in the call.
The Mk2 FL&D under construction is
Speaker Change: The key financial figures for the quarter include adjusted EBITDA of $241 million for the full year of 2024.
Speaker Change: Our cash position stands at around 700 million dollars and we declared a dividend of 25 cents for the quarter.
Speaker Change: We see very strong momentum on commercial opportunities for our FLNG service offering and we will elaborate on this later on in the presentation.
Turning to slide 8.
We're pleased with the continued economic uptime for Hilly.
Speaker Change: As a result of acquiring the 8% remaining minority stakes in Gili,
We see immediate cash flow accretion.
Speaker Change: driven by an increase in the fixed tariff component of approximately 7 million dollars per year?
Speaker Change: An increase to the Brent-linked tariff component, which will increase by approximately $400,000 for every dollar the Brent is above 60.
Speaker Change: and an increase in the TTF-linked tariff component, which will increase by approximately $500,000 for every dollar of TTF price measured on an MMBTU basis.
Speaker Change: In addition to these immediate cash flow accretions, our EBITDA backlog will increase by approximately half a billion dollars on the back of the 20-year redeployment contract in Argentina.
Turning to slide nine.
Speaker Change: Since we entered into the definitive agreement for the redeployment of Hille in July last year, we have actively worked together with Pan American Energy to attract additional Argentinian gas resource owners to the project.
Speaker Change: We're pleased to see that three of the leading gas producers have now joined.
Pompa and Aria joined with a 20% shareholding
Speaker Change: Harbor Energy with a 15% shareholding and YPF also with a 15% shareholding.
Speaker Change: The addition of these companies further strengthened the project and increased the credit quality of Southern Energy, which is our counterpart in the project.
Speaker Change: With Argentina's vast proven gas reserves and the level of interest for the project supports the economic solidity of establishing Argentina as an LNG exporter and thereby potential further FLNG deployments by GOLAR in Argentina.
Speaker Change: As mentioned, the CP fulfilment are going according to schedule and deal completion is expected within the second quarter of this year.
Following the end of the current Franco contract
Speaker Change: Vessel upgrades and relocation to Argentina. We expect operations here to commence in 2027.
Turning to slide 10 and an update on the GIME.
Speaker Change: As you can see from the picture on the top left here, you can see GIMME to the right and then an LNG carrier to your left.
Speaker Change: Accelerated commissioning activities commenced in mid-October, utilizing a cargo from that LNG carrier.
Speaker Change: That gas stream was replaced during January with first field gas received from the GTA field.
Speaker Change: This resulted in the final upward adjustment to the commissioning day rate ahead of final COD.
Speaker Change: The first LNG commissioning cargo is expected within this quarter and the full contract startup within Q2.
Speaker Change: Again, we're in the final stages of the contemplated refinancing of the vessel.
Turning to slide 11 and a Mark 2 construction update.
Speaker Change: Again, as you can see from the pictures, the conversion is well underway and tracking according to schedule.
Speaker Change: The donor vessel Fuji entered the shipyard on February 14th after completing its service as an LNG carrier.
Speaker Change: Several longlead items are now complete and delivered to the shipyard for installation onto the Fuji.
Speaker Change: The vessel will be the earliest available FLNG globally, with delivery in N27.
Speaker Change: To date, we've spent around $600 million in CapEx on the project, fully equity-funded. And the total CapEx budget is around $2.2 billion, fully delivered to sites.
Speaker Change: We're currently in advanced discussions for deployment of the vessel and expect to secure asset-level debt on the vessel after a charter has been secured.
Speaker Change: We also have an option for a further MkII FLNG at CMC Shipyard with delivery within 28th if we order in 25th.
Turning to slide 12 for an update on business development.
Speaker Change: Our position as the only proven service provider of LNG globally
Speaker Change: Our market-leading Capex Breton and proven operational uptime combined with having the earliest available FL&D capacity globally continues to drive interest in our FL&D solutions.
We see strong progress on FL&E commercial development.
Speaker Change: We continue to focus on FL&D opportunities where we have an attractive base tariff and commodity upside participation.
Speaker Change: So we lock in a base and we participate on off-take prices.
increase.
Speaker Change: We're therefore focused on identifying projects that are competitive in the international scene.
We're in advanced commercial discussions for MkII FLNG deployment.
Speaker Change: and we are also discussing projects with potential for multiple FLNG deployments.
Speaker Change: On the back of these developments, we have advanced discussions with shipyards for potential fourth FL&D unit development.
Speaker Change: We, as previously disclosed, are not planning to order such vessel until we've secured a vessel for the Mark II, but we want to be ready to go with the fourth unit as soon as that's concluded.
Turning to slide 13 on the LNG market outlook
We continue to see strong demand for LNG globally.
Speaker Change: In the recently published Shell LNG Outlook, the LNG demand forecast for 2040 has increased by 10% only since the 2024 report.
Speaker Change: Demand is driven by increased adoption of LNG globally, driven by LNG's favourable flexibility, environmental attributes and cost competitiveness.
Speaker Change: China today has more than 2 million LNG fuel cracks on the roads
Speaker Change: NLNG fuelled trucks make up more than a 50% market share of new truck sales.
Speaker Change: We see further upside potential to LNG demand, subject to the relative price of LNG versus other fuels.
Speaker Change: This development calls for increased L&D production, and the cost-competitiveness for FL&D development drives the strong demand that we currently see for our FL&D projects.
Speaker Change: I'll now hand the call over to Eduardo to present our Q4 results.
Eduardo Maranhao: Thank you Karl and good morning everyone. I'm pleased to provide an overview of Golosh financial performance for the fourth quarter of 2024.
Speaker Change: Moving to slide 15, let's go through some of the key financial highlights of the quarter.
Speaker Change: Total FL&G tariff reached 350 million dollars for the full year of 2024.
Speaker Change: We look at this tariff to be the most accurate measure of all realized liquefaction revenues, including gains from our oil and gas linked fees from hilly operations.
Speaker Change: Toto Ibida reached 59 million dollars in Q4, which is in line with the previous quarter.
Speaker Change: Total EBITDA for the full year of 2024 was $241 million.
Speaker Change: This quarter will report a net income of 15 million dollars.
Speaker Change: changes to our interest rate swaps and an impairment charge upon the sale of Dollar Arctic.
Speaker Change: Total net income for the full year of 2024 reached 81 million dollars, a significant improvement from 2023.
Speaker Change: Our liquidity remains strong, with approximately $700 million of cash on hand at quarter end. I'll talk more about this and our initiatives on the financing front in the next slides.
Speaker Change: Lastly, we are pleased to declare a dividend of 25 cents per share this quarter, with a record date of March 11 and payment scheduled for March 18.
Turning to slide 16.
Speaker Change: He continues to perform, achieving 100% economic uptime and reinforcing its market-leading operational track record.
Speaker Change: When we look at Q4, Haley generated approximately $45 million in free cash flow to equity.
Total free cash flow generation in 2024 was $170 million.
Speaker Change: Looking ahead, we expect to have a total debt service for 2025 of around 80 million dollars on the asset level financing that we have on here.
Speaker Change: I would like to highlight that we remain exposed to both Brent and CTF prices.
If this crisis continues to improve,
Speaker Change: Following the acquisition of the remaining shareholding of Healing, we have also increased our exposure to TTF and Brand.
Speaker Change: And now, for every dollar per barrel of Brent, above prices of 60 dollars per barrel, we generate 3.1 million dollars of incremental EBITDA per year.
Speaker Change: Similarly, the sensitivity of TTF prices have also changed and we now make 3.7 million dollars for every dollar of TTF price movement on an annual basis.
So moving to slide 17.
Speaker Change: We can see that our total gross debt position at the end of the quarter stood at $1.5 billion.
Speaker Change: When considering our cash position of $700 million, that leaves us with a net debt position of just over $800 million at year-end of last year.
Speaker Change: So, following the execution of 20 years' agreement with Southern Energy, we now have a total EBITDA backlog of over $11 billion.
Speaker Change: This figure doesn't include any further commodity upside and also further inflation adjustments embedded in the contract.
Speaker Change: That leaves us with ample room to optimize our debt structure and potentially re-leverage our asset level financings for both Guinea, Gili and soon to our Mark Gilles vessel, which has been fully equity funded until now.
Speaker Change: We continue to be actively engaged in the advanced discussions with potential lenders and credit approvals have been received for the refinancing of Gini.
Speaker Change: The deal is now subject to customary closing conditions and third-party stakeholder approval.
Speaker Change: Both the donor vessel and all related equipment that we have purchased are currently unencumbered and we see room to secure asset-level debt for this vessel once the charter is secured. In this case, we would be targeting a financing amount that could equal approximately four to six times its contracted EBITDA.
Speaker Change: We see ourselves in a strong position to support our growth ambitions.
Speaker Change: We have the flexibility to optimize our capital structure, unlock further value, and accelerate growth with the development of our SL&G fleet.
Karl Staubo: With that, I'll hand the call back over to Karl for his closing remarks.
Karl Staubo: Thanks Eduardo. Turning to the final slide of the deck on slide 19.
Speaker Change: In 2024, we saw several key milestones, and we are happy with the development of the company.
Speaker Change: We signed definitive agreements for a 20-year charter with Southern Energy.
with an adjusted backlog of $6 billion before commodity upset.
Speaker Change: We issued $300 million of unsecured bonds in September. We FYD-ed the Mark II FOMG shortly thereafter.
Speaker Change: and we ended the year by selling, no sorry, acquiring the minority stakes in Gili and selling non-core assets in Avenir and Golo Arctic.
The first milestone is the refinancing of GIME.
Speaker Change: We thereafter conclude the conditions precedent on the 20-year Southern Energy Contract in Argentina.
Speaker Change: We want them target to secure a charter for the Mark II, FLND and the construction.
Speaker Change: target asset level financing of the Mark II and optimize the debt on HILI as I just explained by Eduardo
before targeting additional FL&E growth through a fourth FL&E order.
Speaker Change: That concludes the presentation today and we will hand it over to the operator for any questions.
Speaker Change: Thank you. If you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, you can press star 1 and 1 again.
Speaker Change: Please be reminded there is a limit of two questions per person.
Speaker Change: Thank you. We will now start with our first question and this is from Ben Nolan from Stiefel. Please go ahead.
Speaker Change: I appreciate it. Good morning, I guess it is there, Carolina Eduardo. I wanted to first ask about the Mark II and specifically with respect to the fourth vessel, just trying to understand how you're thinking about the option versus looking at a
Speaker Change: an alternative yard and just wanted to make sure that I understand is would an alternative yard be instead of exercising the option or are we talking about a unit in addition to the option that you have?
Speaker Change: Basically, the way we see it is that the commercial developments are progressing on multiple fronts.
Speaker Change: And the reason for the comment that way is that some of those projects are for where Mark I would be more suitable, i.e. returning to order most likely than at Citroën.
Speaker Change: We obviously have the option for Mark 2 at CIMC, and we're also progressing projects for the Mark 3, which we've spent considerable time and effort developing, which is obviously
Speaker Change: a 5 million tonne unit, which would be by quite a long stretch the largest FLNG in the world.
Speaker Change: and therefore it's the fourth FLND may or may not be the Mark II but subject to the commercial development either a Mark I or even a Mark III, that's how we see it. But we obviously are not ruling out that it could be a Mark II as well.
Speaker Change: It's just that the commercial development dictates the size of the forest ecology.
Speaker Change: Sure, and it could be, it's not mutually exclusive, you could do a Mark II and a Mark I, just at a different shipyard. Is that sort of the implication there?
Speaker Change: Correct, but as we alluded to earlier on, we don't plan to have more than one open but you can obviously build against contracts.
Speaker Change: the previous nameplate capacity, which I think was, for your 70%, 151 million. But correct me if I'm wrong, I think that's only on 2.4.
Speaker Change: maybe 2.45 million tons of capacity. Can you maybe walk through you know how that extra bit works and if it does operate at 2.7, is that something that you would be able to realize soon if there's upside on that?
Speaker Change: Hi, Ben Eduardo here. So I think the way it works is that for incremental production above the base capacity of 2.4 MTPA per year, we would then get a proportionate payment which is in line with the $215 million annual EBITDA.
Speaker Change: So, for incremental production above the base capacity, that would go proportionate to the $250 million that we make every year. For the 90% depletion, yeah.
Speaker Change: Right, and is that a practical assumption? How should we think about how we model it?
Speaker Change: If we were to run the numbers here, so let's assume for example that we were to run with 100% utilization, so beyond the base capacity of 2.4.
Speaker Change: So, in that case, instead of a $215 million of annual EBITDA, we would be earning $241 million of annual EBITDA, assuming 100% utilization of the 2.7 MTPA nameplate capacity.
Speaker Change: Got it. Okay. I wish I could go more, but I'm going to try to stick to my two, so I appreciate it. Thank you, guys.
Speaker Change: Thank you. We'll now take our next question. This is from Chris Robertson from Deutsche Bank. Please go ahead.
Chris Robertson: Hey, good morning guys. Thank you for taking my questions. I know in the past that you had talked a bit about having to spend on certain long lead items during Q1 to stay on track to exercise the option for the second Mark 2. Could you just clarify whether or not you've spent during the first quarter to date or plan to for the rest of the quarter?
We have not.
Chris Robertson: It's something we continue to monitor, we're obviously in conversations with all of the
Chris Robertson: critical suppliers given that we're ordering or just have placed order there for the Mark 2. So we monitored the situation both on lead times and costs. So we haven't, we currently do not expect to do that within Q1 but it's something we monitor very closely.
Chris Robertson: Okay, and then turning to slide 7, you had made a comment here. I don't know if you addressed it during the prepared remarks, but It says on schedule for the for the mark 2 SLNG contract amendment. Can you just clarify what you mean by On schedule and kind of give a bigger picture of what what that means for expectations
Chris Robertson: I think what we previously communicated that we target to charter the vessel within 25 and that's what that refers to, so that we have...
Chris Robertson: Fixed that ship within this year, which will then enable us for the fourth unit.
Okay, all right, I'll turn it over. Thank you.
Thanks Chris. Thank you.
Speaker Change: Our next question is from the line of Alexander Bidwell from Weber Research and Advisory. Please go ahead.
Alexander Bidwell: Good morning, Karl, Eduardo. Thanks for the time. So, on the fourth FONV vessel, have you guys started identifying conversion candidates if you were to do a Mark I or Mark II, and what would be the timeline for a conversion candidate acquisition?
Speaker Change: There are available vessels that would be suitable to our conversion ambitions. Some of them are direct sisters of the Fuji, others have different characteristics that we may deem beneficial.
Speaker Change: Given the price dynamics in the market, we don't feel a rush to do it, but it's something we keep a very close eye on.
Speaker Change: All right. Thank you. That's all for me. I'll turn it back over.
Thank you
Speaker Change: The next question is from Greg Lewis from BTIG. Please go ahead.
Greg Lewis: Yeah, hey, thank you and good afternoon and thanks for taking my questions.
Speaker Change: You know Karl Eduardo, I was hoping you could provide maybe a little color around Argentina, you know, yeah, I know that it's been discussed that to kind of put a second unit there You know, there's some infrastructure needs to go in and really my question is around
Speaker Change: you know, we roughly know that the infrastructure needs to go in. Has there been like an official feed study? Do we have kind of, as we kind of look forward, do we have an, you know, are we starting to get real timelines of the project or is it something where we just know it needs to be done before they can increase their ability to export more natural gas?
Greg Lewis: Hi Greg, that's a very relevant question obviously, so for the benefit of everyone on the call, HILI will utilise the spare capacity of the existing pipeline network in Atena. If you go beyond the HILI, you need a designated pipeline from the Vakamvarte resource.
Speaker Change: down to the San Matias Gulf where the vessels will be placed.
Thank you. Bye.
Speaker Change: Late last year, there was an FID of an oil pipeline that goes exactly the same direction from the Guacamalte to the same site.
Speaker Change: That FID then creates the right of way to put the gas pipelines next to it.
Speaker Change: The construction timeline of a gas pipeline would be far shorter than the delivery window of the Mk2.
if that were to come to Argentina.
Speaker Change: So, the pipeline investment, FID or feed study, is currently not a gating item for the start-up of a potential contract for Mark II in Argentina.
Speaker Change: The fact that during the quarter we saw three of the major gas producers in Argentina, in Tampa, Harbour and YPF,
joining the Southern Energy Project alongside Pan American.
Speaker Change: We see as a strong testimony to the economic attractiveness of establishing Argentina as an LNG exporter.
Speaker Change: The details of the pipeline is something you need to ask the gas producers about. We are an FL&D company and we provide FL&D infrastructure. That's our business.
Speaker Change: monitoring the development. There is no pipeline without further liquid fraction capacity and there's no pipeline without volume commitment from the gas producers. So it's all sort of co-dependent.
Okay, okay, great. And then.
Speaker Change: I'll just change gears here and you know we're just kind of curious you know obviously you're you're looking at building the portfolio I mean it seems like we have a good line of sight on on a couple new ones you mentioned you know the ability to maybe go to Korea to build a you know a larger FLNG you know my question has been around you know as as
Speaker Change: as the new administration has come into the U.S. and you know they want to be a massive they want to I guess increase their LNG exports but of course there's tariffs you know has that you know realizing
Speaker Change: You know, usually when we're talking, we're talking about areas outside of North America for Golar's solution. Has that kind of changed any of your conversations with any of your customers, or is, you know, the natural gas market, it's a global market, and not really garnering much attention?
Speaker Change: It's obviously a focus. If you have someone saying that they're going to boost supplies, it's obviously part of the discussions that we are taking part of in any way.
Speaker Change: I think if you do increase production in the U.S., it will likely have an impact on the land you have over time. In addition to that, we see a significant inflationary pressure on the capex per ton, in particular for land-based solutions, well, for any FLED plant, but in particular for land-based solutions in the U.S.
Speaker Change: So, the way we see it, it's something that's part of discussions, but all of the projects we are discussing for should be very competitive.
Speaker Change: to LNG exports because of the cost of the gas elsewhere, our competitive capex per tonne and the way we structure the contract with a fixed base tariff to Golar and upside sharing.
Speaker Change: So, all in all, the project will be competitive to any project out of the U.S. And it's not a massive driver. We also see that...
Speaker Change: Off-takers, i.e. the demand, are looking for diversified sources of energy. Different places have different shipping advantages.
Speaker Change: and you can there's currently no outlet for significant LNG exports in South America. So to develop local LNG consumption there's a massive advantage to be closer to end-users and that's another thing that for example the Helio project will bring to the market.
Super helpful. Thanks, Karl. Thanks, Eduardo.
Thanks. Thank you.
We'll now take our next question.
Speaker Change: This is from Peter Haugen from ABG Sandal Collier. Please go ahead.
Peter Haugen: Thank you for taking my questions. Firstly, on the yachts capable of building FLNGs, you're
Speaker Change: Could you shed some light on what the upside would be to go to another yard and to the extent that could take CAPEX for a fourth unit down?
Speaker Change: liquefaction. So we don't expect prices to be any lower than we had secured for the MkII on the construction.
Speaker Change: To the contrary, there is inflationary pressure. We see that both on CapEx and on tolling rates, so at least they go hand in hand, so that's a good thing. For us, the decision is solely down to the commercial opportunities that we're currently in discussions with, so it's...
Speaker Change: You need to build the right vessel for the right purpose.
Okay, understood.
Speaker Change: and to sort of another element in this, there are of course great uncertainties on well the future of energy markets at large, but perhaps...
Speaker Change: It could be argued that a reversal of sanctions in Europe and potentially then also gas coming back to Europe from Russia could put downward pressure on sort of near-term and medium-term prices here.
to sort of elevate the question to this.
Speaker Change: Is there a global LNG price in which the FLNG business case is making more sense than in others and more specifically if we come to sort of a oversupplied gas market?
Speaker Change: To what extent would you find that to carry risk into FLNG units being delivered over the next couple of years?
Speaker Change: I thought there's a need just to say higher gas prices is better so if you have higher revenue it's obviously better for the project but that's kind of goes without saying. As I alluded to in the previous question raised by Greg we want all of the projects to be competitive to the marginal producers
Speaker Change: The way we structure our contracts, we have a base tariff and commodity exposure or upside.
Speaker Change: So, for us, we try to lock in what we deem to be an attractive base tariff that secures the investment.
Speaker Change: and then over time we then grasp the optionality of the LNG price development globally through the upside sharing. That creates alignment and obviously potential excess profits for the investments we make.
Speaker Change: So for us, it's all about making sure that the base tariff and thereby the cash break even of the export project is lower than for the incremental producers.
Speaker Change: We feel confident that the projects we are in today and that we're discussing for development have those characteristics and therefore, obviously we would like to see higher gas prices but that's not a criteria for our business model.
Speaker Change: What we do see, though, is that there is significant demand elasticity subject to the relative price of LNG versus other fuels.
Speaker Change: So, as you're aware, a very large part of new ships' order are dual-fueled.
Speaker Change: Many of them are currently not going on LNG, but the minute LNG is price competitive to, let's say, low sulfur fuel, there's a massive demand just there. We now see the same on trucking and many other industrial appliances of LNG.
Speaker Change: So the price elasticity there, so over time I don't think that one source of energy will price completely out of parity with the alternatives.
That was a good also, Karl. Thank you.
Thank you.
and we'll now take our next question
Frederick Deepwood: This is from Frederick Deepwood from Fernley Securities. Please go ahead.
Frederick Deepwood: Are you able to provide some more further color on the prospective fields for the Mark II prospective contracts? By that I mean, what kind of hallmarks do you look at and size of the fields, etc.?
Okay, so we should have at least 40 CFO reserve.
and then sufficient gas flow to feed the SLNV.
Frederick Deepwood: There are projects today where you have associated production or stranded reserves that can easily be deployed. The key gating item is obviously that the lead time of developing the resource needs to be at par, if not shorter, than the delivery window of MkII.
That said...
Frederick Deepwood: We think that there is significant, very strong opportunities alongside existing projects either were in or will be in, in addition to new locations.
Frederick Deepwood: There are several countries with significant stranded and flared reserves that are seeking to monetize those reserves.
Frederick Deepwood: fiscal regimes are now falling into place so we see the the theme for ecology development gaining traction and we're obviously planning to take our share in that development.
Speaker Change: Yeah, thank you. That's highly valuable, Kalle. That's all for me. Thank you.
Speaker Change: Thank you and we have no other questions at this time so I will now hand the conference back to the speakers for any closing comments.
Speaker Change: Thanks for dialing in and for listening to us today and we look forward to what the rest of 25 will bring and look forward to speak to you on the next quarterly presentation.
Have a good day and thank you all.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.
Father and Daughter