Highlights and subsequent
events
- Exclusive of its interest in FLNG Hilli Episeyo, Golar LNG
Partners LP (“Golar Partners” or “the Partnership”) generated
operating income of $32.8 million for the second quarter of
2020.
- After accounting for $4.5 million of non-cash mark-to-market
interest rate swap losses, the Partnership reported net income
attributable to unit holders of $14.3 million for the second
quarter.
- The Partnership generated distributable cash flow1 of $28.7
million for the second quarter resulting in a distribution coverage
ratio1 of 20.09.
- Bondholders approved 18-month extensions to the May 2020 and
May 2021 maturing high yield bonds.
- LNGC Golar Maria secured a multi-month charter giving Q2
utilization of 81% for this vessel and 92% for the fleet.
- The partnership declared a distribution for the second quarter
of $0.0202 per unit.
Financial Results Overview
Golar Partners reports a net income attributable
to unit holders of $14.3 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $32.8 million for the second quarter of 2020
(“the second quarter” or “Q2”), as compared to a net loss
attributable to unit holders of $33.1 million and operating income
of $27.7 million for the first quarter of 2020 (“the first quarter”
or “Q1”) and a net loss attributable to unit holders of $5.5
million and operating income of $36.2 million for Q2 2019.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q2 2020 |
Q1 2020 |
Q2 2019 |
Total Operating Revenue |
72,114 |
|
69,815 |
|
77,361 |
|
Vessel Operating Expenses |
(12,991) |
|
(16,212) |
|
(14,913) |
|
Voyage and Commission Expenses |
(2,359) |
|
(2,184) |
|
(1,621) |
|
Administrative Expenses |
(3,913) |
|
(3,717) |
|
(3,251) |
|
Operating Income |
32,805 |
|
27,739 |
|
36,208 |
|
Interest Income |
4,615 |
|
4,490 |
|
2,409 |
|
Interest Expense |
(17,115) |
|
(17,495) |
|
(20,695) |
|
Losses on Derivative Instruments |
(4,472) |
|
(46,835) |
|
(24,502) |
|
Net Income/(Loss) attributable to Golar LNG Partners LP
Owners |
14,264 |
|
(33,144) |
|
(5,516) |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q2 2020 |
Q1 2020 |
Q2 2019 |
Adjusted Interest Income |
416 |
|
549 |
|
1,050 |
|
Adjusted Net Debt |
1,483,319 |
|
1,513,004 |
|
1,574,079 |
|
Segment Information2 |
|
Q2 2020 |
Q1 2020 |
Q2 2019 |
(in
thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
Total Operating Revenues |
59,033 |
|
13,081 |
|
26,018 |
|
98,132 |
|
53,441 |
|
16,374 |
|
26,018 |
|
95,833 |
|
64,824 |
|
12,537 |
|
26,018 |
|
103,379 |
|
Amount invoiced under sales-type lease |
4,550 |
|
— |
|
— |
|
4,550 |
|
4,550 |
|
— |
|
— |
|
4,550 |
|
2,300 |
|
— |
|
— |
|
2,300 |
|
Adjusted Operating Revenues 1 |
63,583 |
|
13,081 |
|
26,018 |
|
102,682 |
|
57,991 |
|
16,374 |
|
26,018 |
|
100,383 |
|
67,124 |
|
12,537 |
|
26,018 |
|
105,679 |
|
Voyage and Commission Expenses |
(935) |
|
(1,424) |
|
— |
|
(2,359) |
|
(1,313) |
|
(871) |
|
— |
|
(2,184) |
|
(1,109) |
|
(512) |
|
(50) |
|
(1,671) |
|
Vessel Operating Expenses |
(8,525) |
|
(4,466) |
|
(5,611) |
|
(18,602) |
|
(11,495) |
|
(4,717) |
|
(6,003) |
|
(22,215) |
|
(10,070) |
|
(4,843) |
|
(6,163) |
|
(21,076) |
|
Administrative Expenses |
(2,469) |
|
(1,444) |
|
(122) |
|
(4,035) |
|
(2,364) |
|
(1,353) |
|
(130) |
|
(3,847) |
|
(1,947) |
|
(1,304) |
|
(198) |
|
(3,449) |
|
Total Adjusted EBITDA1 |
51,654 |
|
5,747 |
|
20,285 |
|
77,686 |
|
42,819 |
|
9,433 |
|
19,885 |
|
72,137 |
|
53,998 |
|
5,878 |
|
19,607 |
|
79,483 |
|
* Indirect administrative expenses are allocated to the FSRU and
LNG carrier segments based on the number of vessels.** Relates to
effective share of revenues and expenses attributable to our
investment in Golar Hilli LLC (“Hilli LLC”) had we consolidated its
50% of the Hilli common units.
In order to incorporate the economic performance
of the FSRU Golar Freeze into total company performance, management
has determined that it will measure the performance of the Golar
Freeze sales-type lease based on Adjusted EBITDA1 (EBITDA as
adjusted for the amount invoiced under sales-type lease in the
period).
As is customary, the Partnership's Q2 Adjusted
Operating Revenues1 including amounts invoiced under the Golar
Freeze sales-type lease and the Partnership's effective share of
operating revenues from FLNG Hilli Episeyo, increased relative to
Q1. The increase from $100.4 million to $102.7 million reflected an
additional 54 days hire in respect of the FSRU Golar Igloo, which
commenced its 2020 regasification season on February 24, but was
partially mitigated by reduced revenue in respect of the Golar
Maria which was on hire for fewer days during the quarter and at a
lower daily rate. Voyage, charter hire and commission costs at $2.4
million were in line with the prior quarter. Fleet wide average
daily time charter earnings1 ("TCE") increased from $93,500 in Q1
to $96,300 in Q2.
Vessel operating expenses were down quarter on
quarter as Q1 costs were affected by planned maintenance during
FSRU Golar Igloo’s scheduled winter downtime and costs of storing
up ahead of its 10-month 2020 regasification season. Reduced
expenditure in respect of the FSRU Golar Igloo in Q2 together with
a general fleet-wide deferral of repairs and maintenance due to
COVID-related movement restrictions, resulted in a $3.6 million
reduction in operating costs, from $22.2 million in Q1 to $18.6
million in Q2. At $4.0 million for the quarter, administrative
expenses were in line with the prior quarter.
Interest expense decreased $0.4 million from
$17.5 million in Q1 to $17.1 million in Q2. The impact of a further
decrease in LIBOR and ongoing debt repayments was substantially
offset by higher margin costs and a quarterly recognition of a
potential 5% premium payable at maturity in respect of the two May
20, 2020 amended high yield bonds.
A relatively small decrease in interest rate
swap rates during the quarter contributed to a smaller $4.5 million
Q2 loss on derivative instruments, compared to a Q1 loss of $46.8
million. As of June 30, 2020, the average fixed interest rate of
swaps related to bank debt, including the Partnership's effective
share in respect of Hilli Episeyo was approximately 2.4%.
As a result of the foregoing, Q2 distributable
cash flow1 increased $3.3 million to $28.7 million. The
distribution coverage ratio1 increased accordingly, from 17.79 in
Q1 to 20.09 in Q2.
Operational Review
Utilization increased during the quarter, from
82% in Q1 to 92% in Q2. This was driven by a full quarter's
employment of the Golar Igloo, partially offset by a small decrease
in utilization of the Golar Maria as a result of idle days between
charters.
COVID related restrictions meant that the crew
of Golar Mazo, which had been prepared for layup during Q1, did not
disembark until mid-May. As a result, operating costs for this
vessel, although lower in Q2, will not be down to customary layup
levels until Q3. All other vessels continue to operate normally,
including the FSRU Nusantara Regas Satu which recently received its
250th LNG cargo, and the FLNG Hilli Episeyo, which exported it’s
2.5 millionth ton of LNG during the quarter and recently offloaded
its 42nd cargo.
Postponement of several scheduled maintenance
tasks contributed to reduced operating costs for the quarter.
Logistics permitting, these are now expected to take place during
late Q3 and into Q4. As a result, despite reduced costs in respect
of Golar Mazo, operating costs are expected to increase slightly
over this period.
Financing and Liquidity
As of June 30, 2020, Golar Partners had
cash and cash equivalents of $32.8 million. A limited number of
slow paying customers seeking to preserve liquidity during the
COVID outbreak contributed to a $9.5 million increase in accounts
receivable during the quarter. Subsequent to June 30, $13.1 million
of outstanding charter hire has been collected. Including the
Partnership's $405.8 million share of debt in respect of FLNG Hilli
Episeyo, Adjusted Net Debt1 as at June 30, 2020 was $1,483.3
million. Q2 2020 Total Adjusted EBITDA1 amounts to $77.7 million.
Based on the above, the Q2 Adjusted Net Debt1 to Annualized
Adjusted EBITDA1 ratio was 4.8x. As of June 30, 2020, exclusive of
a $100.0 million forward start swap, Golar Partners had interest
rate swaps with a notional outstanding value of approximately
$1,270.8 million (including swaps with a notional value of $250.0
million in connection with the Partnership’s bonds and $405.8
million in respect of Hilli Episeyo), representing approximately
84% of total debt and finance lease obligations, including assumed
debt in respect of Hilli Episeyo, net of restricted cash.
The average fixed interest rate of swaps related
to bank debt, including the Partnership's effective share in
respect of Hilli Episeyo is approximately 2.4% with an average
remaining period to maturity of approximately 3.6 years as of June
30, 2020.
Inclusive of Hilli Episeyo related debt,
outstanding bank debt as of June 30, 2020, was $1,186.2 million,
which had average margins, in addition to LIBOR, of approximately
2.19%. As at June 30, 2020, the Partnership also had a November
2021 maturing $150.0 million amortizing Norwegian USD bond with a
coupon of LIBOR plus 6.25% and a November 2022 maturing $250
million amortizing Norwegian USD bond with a coupon of LIBOR plus
8.1%. Both bonds have call options at 100% of par until May 2021
and at 105% until maturity thereafter. Given the low interest rate
environment, coupled with over hedging of the $250 million
amortizing bond and plans to refinance both bonds ahead of their
new maturity dates, the Partnership has refrained from entering
into new contracts to replace those bond related swaps that matured
during the quarter or to extend the duration of those that
remain.
Corporate and Other Matters
As of June 30, 2020, there were 70,738,027
common and general partner units outstanding in the Partnership. Of
these, 22,769,977, including 1,436,391 general partner units, were
owned by Golar, representing a 32.2% interest in the Partnership.
On July 29, 2020, Golar Partners declared a
distribution for the second quarter of $0.0202 per unit. This
distribution will be paid on August 14, 2020 to common and general
partner unit holders of record as at August 7, 2020.
A cash distribution of $0.546875 per Series A
preferred unit for the period covering May 15, 2020 through to
August 14, 2020 was also declared. This will be paid on August 14,
2020 to all Series A preferred unit holders of record as at August
7, 2020.
Total outstanding and exercisable options as at
June 30, 2020 were 99,000. A further 70,752 Restricted Stock Units
were also issued in Q2, which will vest over three years.
The Partnership's Annual General Meeting is
scheduled for September 24, 2020 in Bermuda and the record date for
voting was July 29.
On August 5, Class 1 Director, Audit and
Conflicts Committee member Alf Thorkildsen resigned his position.
The Partnership thanks him for his service. At the time of the
Partnership’s forthcoming Annual General Meeting, the elected
Directors on the Partnership’s Board intend to appoint Neil Glass
to replace Mr. Thorkildsen. Mr. Glass has served as a director of
Borr Drilling Limited since December 2019 and he also serves as an
Audit Committee Member. Mr. Glass was also appointed to the Board
of 2020 Bulkers Ltd., on July 1, 2020 where he also serves as an
Audit Committee Member. Mr. Glass worked for Ernst & Young for
11 years: seven years from their Edmonton, Canada office and four
years with their Bermuda office. In 1994, he became General Manager
and in 1997 the sole owner of WW Management Limited, tasked with
overseeing the day-to-day operations of several international
companies. Mr. Glass has over 20 years' experience as both an
executive director and as an independent non-executive director of
international companies. Mr. Glass is a member of both the
Chartered Professional Accountants of Bermuda and of Alberta,
Canada, and is a Chartered Director and Fellow of the Institute of
Directors. Mr. Glass graduated from the University of Alberta in
1983 with a degree in Business.
LNG Market Review
The quarter commenced with LNG prices at around
$2.26/mmbtu and quoted steam turbine (”ST”) spot rates of around
$40,000/day. During April, Japan Korea Marker ("JKM") continued to
soften, with prices below $2.00/mmbtu by month-end. Henry Hub
futures for June exceeded Title Transfer Facility ("TTF") for the
first time in a decade, and on May 5 exceeded JKM for the first
time ever. At this level, there were negative economics in shipping
US LNG to both Europe and Asia. In response, around 130 US cargoes
scheduled for loading over the summer months are believed to have
been canceled during the quarter. The number of vessels carrying US
cargoes peaked at around 74 in January, falling to 50 in May and
then fell to a 16-month low of 31 in June. LNG export reductions
that occurred elsewhere, including from Malaysia and Egypt, and
other scheduled maintenance of liquefaction plants also removed LNG
from the market that otherwise would have required shipping. Global
liquefaction capacity utilization fell from around 90% in April to
around 75% at the end of June. Prompt available tonnage throughout
the quarter typically hovered between 10-15 mainly steam turbine
vessels (out of a global fleet of 555 LNG carriers), pointing to a
relatively liquid chartering market that kept vessels moving.
Despite this underlying tightness, quoted spot ST shipping rates
from early May through to the end of the quarter rarely exceeded
$20,000/day.
With the completion of Freeport and Cameron T3
and Elba Island T9 ready for service, the roll-out of the first
wave of US liquefaction is concluding. Originally poised for global
production additions of around 30mtpa, COVID-related market turmoil
and resultant shut-ins will likely see 2020 growth limited to
between 5 and 10mtpa. The un-utilized 20-25mtpa of production
capacity is expected to ramp up from 2021. Between now and 2023,
new nameplate capacity due to complete and become operational will
be around 30mtpa. From 2024, a new wave of projects with a combined
nameplate capacity of around 100mtpa are then scheduled to start-up
in phases, completing in 2027. On the back of these market
developments there has been a significant reduction in vessel new
build orders year to date.
Despite entering Q3 with soft gas prices (JKM at
$2.15/mmbtu), narrow price spreads and high inventory levels, there
has been an emerging optimism among market players who expect a
stronger rate environment heading into the autumn and seasonally
stronger winter. Key Asian markets are showing signs of recovering
demand. This is beginning to erode the LNG supply overhang,
resulting in fewer US cargo cancellations for September, and should
support stronger prices over the coming months. This is shown by
JKM recovering to its current level of $3.60/mmbtu with March 2021
JKM paper trading at around $5/mmbtu. The current gas price
contango also supports this sentiment. A step up in inquiries for
multi-month charters typically commencing in September/October and
ending in February/March has been noted.
Analysts forecast further substantial increases
in LNG prices over the 2020 - 23 period. Rising prices are expected
to facilitate a re-emergence of regional price differentials,
inter-basin trading and rising ton miles, all of which will support
improving levels of vessel utilization without compromising LNG’s
price competitiveness relative to other less environmentally
friendly energy sources. Low oil prices and lower LNG spot prices
should therefore continue to support the shift from coal to gas
fired power production bolstering demand for LNG, its freight, and
for FSRUs.
Outlook
The Partnership will focus on refinancing its
7-vessel $800 million bank facility before year end. As at June 30,
2020, $542 million was outstanding under this facility, and at
maturity in April 2021, $503 million is scheduled to be
outstanding. At maturity, the vessels that secure this facility are
expected to have a revenue backlog1 of $680 million. Total Adjusted
EBITDA1 attributable to those vessels over the next 12-months
amounts to around $130 million. A modest upsizing of the facility
is therefore likely, with any liquidity released to be used to pay
down bond debt, thereby reducing interest costs. Having refinanced
the secured debt, management will then focus on refinancing the two
outstanding unsecured bonds totaling $400 million. The intention is
to complete this prior to May 2021 when the call option increases
from 100% to 105% of par.
From a commercial standpoint, management will
focus on securing maximum possible utilization of the Golar Maria
prior to her term charter that commences in Q4. Although the market
is expected to improve materially from current levels, rates are
unlikely to be attractive enough to support re-activating and
drydocking the Golar Mazo ahead of the winter trading period.
Historically low gas prices, and an expectation
that they will remain structurally low for the foreseeable future,
continues to allow LNG to compete with coal on both an
environmental and an economic level. Golar Partners, in partnership
with Golar Power in certain cases, will continue to focus on
matching these new markets for low cost LNG with appropriately
sized FSRU solutions.
Strategic alternatives to better use the
Partnership’s $1.9 billion of revenue backlog1 to maximize
long-term shareholder value continue to be evaluated and are being
narrowed down. In the meantime, despite the potential for a small
drop in revenue and an increase in operating costs, Q3 Total
Adjusted EBITDA1 is expected to be broadly similar to
Q2.
FORWARD LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning future events and Golar
Partners’ operations, performance and financial condition.
Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words
“believe,” “anticipate,” “expect,” “estimate,” “project,” “will
be,” “will continue,” “will likely result,” “plan,” “intend” or
words or phrases of similar meanings. These statements involve
known and unknown risks and are based upon a number of assumptions
and estimates that are inherently subject to significant
uncertainties and contingencies, many of which are beyond Golar
Partners’ control. Actual results may differ materially from those
expressed or implied by such forward-looking statements. Important
factors that could cause actual results to differ materially
include, but are not limited to:
- the ability of Golar LNG Partners LP (“Golar Partners,” “we,”
“us” and “our”) and Golar LNG Limited' (“Golar”) to make additional
borrowings and to access debt and equity markets;
- our ability to repay our debt when due and to settle our
interest rate swaps;
- our ability to enter into long-term time charters, including
our ability to re-charter floating storage and regasification units
(“FSRUs”), liquefied natural gas (“LNG”) carriers and floating
liquefied natural gas units (“FLNGs”) following the termination or
expiration of their time charters;
- our ability to maximize the use of our vessels, including the
re-deployment or disposal of vessels no longer under long-term time
charter;
- the length and severity of outbreaks of pandemics, including
the recent worldwide outbreak of the novel coronavirus ("COVID-19")
and its impact on demand for LNG and natural gas, the operations of
our charterers, our global operations and our business in
general;
- the liquidity and creditworthiness of our charterers;
- the effect of a worldwide economic slowdown;
- changes in commodity prices;
- turmoil in the global financial markets;
- fluctuations in currencies and interest rates;
- market trends in the FSRU, LNG carrier and FLNG industries,
including fluctuations in charter hire rates, vessel values,
factors affecting supply and demand, and opportunities for the
profitable operations of FSRUs, LNG carriers and FLNGs;
- availability of skilled labor, vessel crews and management,
including possible disruptions caused by the COVID-19
outbreak;
- our vessel values and any future impairment charges we may
incur;
- our anticipated growth strategies;
- our ability to integrate and realize the expected benefits from
acquisitions and potential acquisitions:
- the future share of earnings relating to the FLNG, Hilli
Episeyo ("Hilli"), which is accounted for under the equity
method;
- our ability to make cash distributions on our units and the
amount of any such distributions;
- changes in our operating expenses, including dry-docking and
insurance costs and bunker prices;
- estimated future maintenance and replacement capital
expenditures;
- our future financial condition or results of operations and
future revenues and expenses;
- planned capital expenditures and availability of capital
resources to fund capital expenditures;
- the exercise of purchase options by our charterers;
- our ability to maintain long-term relationships with major LNG
traders;
- our ability to leverage the relationships and reputation of
Golar and Golar Power Limited ("Golar Power") in the LNG
industry;
- the ability of Golar and us to retrofit vessels as FSRUs or
FLNGs and the timing of the delivery and acceptance of any such
retrofitted vessels by their respective charterers;
- our ability to purchase vessels from Golar and Golar Power in
the future;
- timely purchases and deliveries of new build vessels;
- future purchase prices of new build and secondhand
vessels;
- our ability to compete successfully for future chartering and
newbuilding opportunities;
- acceptance of a vessel by its charterer;
- termination dates and extensions of charters;
- the expected cost of, and our ability to comply with,
governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by our
charterers applicable to our business;
- our general and administrative expenses and our fees and
expenses payable under the fleet management agreements and the
management and administrative services agreement between us and
Golar Management (or the “Management and Administrative Services
Agreement”);
- challenges by authorities to the tax benefits we previously
obtained;
- the anticipated taxation of our partnership and distributions
to our unitholders;
- economic substance laws and regulations adopted or considered
by various jurisdictions of formation or incorporation of us and
certain of our subsidiaries;
- our and Golar's ability to retain key employees;
- customers’ increasing emphasis on environmental and safety
concerns;
- potential liability from any pending or future litigation;
- potential disruption of shipping routes due to accidents,
political events, piracy or acts by terrorists;
- future sales of our securities in the public market;
- our business strategy and other plans and objectives for future
operations; and
- other factors listed from time to time in the reports and other
documents that we file with the U.S. Securities and Exchange
Commission (the “SEC”).
Factors may cause actual results to be
materially different from those contained in any forward-looking
statement. Golar Partners does not intend to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in Golar Partners’ expectations with
respect thereto or any change in events, conditions or
circumstances on which any such statement is based.
August 13, 2020Golar LNG Partners L.P.Hamilton,
BermudaQuestions should be directed to:c/o Golar Management Ltd -
+44 207 063 7900Karl Fredrik Staubo - Chief Executive OfficerStuart
Buchanan - Head of Investor Relations
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
- Interim results for the period ended 30 June 2020
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