Highlights and subsequent
events
- Golar LNG Partners LP (“Golar Partners” or “the Partnership”)
generated operating income of $32.1 million for the third quarter
of 2020, exclusive of its interest in FLNG Hilli Episeyo.
- After accounting for $1.1 million of non-cash mark-to-market
interest rate swap losses, the Partnership reported net income
attributable to unit holders of $17.4 million for the third
quarter.
- The Partnership generated distributable cash flow1 of $20.7
million for the third quarter resulting in a distribution coverage
ratio1 of 14.50.
- The Partnership entered into a cooperation agreement with Hygo
Energy Transition Limited ("Hygo"), formerly known as Golar Power
Limited, to develop terminals using Golar Partners' asset
portfolio.
- Increased utilization of the carrier Golar Maria helped lift
the Partnership's overall fleet utilization to 98% for the
quarter.
- The Partnership declared a distribution for the third quarter
of $0.0202 per unit.
Financial Results Overview
Golar Partners reports net income attributable
to unit holders of $17.4 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $32.1 million for the third quarter of 2020
(“the third quarter” or “Q3”), as compared to net income
attributable to unit holders of $14.3 million and operating income
of $32.8 million for the second quarter of 2020 (“the second
quarter” or “Q2”) and net income attributable to unit holders of
$7.9 million and operating income of $35.9 million for Q3 2019.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q3 2020 |
Q2 2020 |
Q3 2019 |
Total Operating Revenue |
71,113 |
|
72,114 |
|
75,818 |
|
Vessel Operating Expenses |
(14,015) |
|
(12,991) |
|
(14,740) |
|
Voyage and Commission Expenses |
(1,571) |
|
(2,359) |
|
(1,685) |
|
Administrative Expenses |
(3,427) |
|
(3,913) |
|
(3,110) |
|
Operating Income |
32,117 |
|
32,805 |
|
35,903 |
|
Interest Income |
4,203 |
|
4,615 |
|
4,990 |
|
Interest Expense |
(17,805) |
|
(17,115) |
|
(19,764) |
|
Losses on Derivative Instruments, net |
(1,051) |
|
(4,472) |
|
(9,937) |
|
Net income attributable to Golar LNG Partners LP
Owners |
17,360 |
|
14,264 |
|
7,924 |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q3 2020 |
Q2 2020 |
Q3 2019 |
Adjusted Interest Income |
114 |
|
416 |
|
925 |
|
Adjusted Net Debt |
1,438,258 |
|
1,483,319 |
|
1,551,154 |
|
Segment Information2 |
|
Q3 2020 |
Q2 2020 |
Q3 2019 |
(in thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
Total Operating Revenues |
58,276 |
|
12,837 |
|
26,018 |
|
97,131 |
|
59,033 |
|
13,081 |
|
26,018 |
|
98,132 |
|
63,490 |
|
12,328 |
|
26,018 |
|
101,836 |
|
Amount invoiced under sales-type lease |
4,600 |
|
— |
|
— |
|
4,600 |
|
4,550 |
|
— |
|
— |
|
4,550 |
|
4,600 |
|
— |
|
— |
|
4,600 |
|
Adjusted Operating Revenues 1 |
62,876 |
|
12,837 |
|
26,018 |
|
101,731 |
|
63,583 |
|
13,081 |
|
26,018 |
|
102,682 |
|
68,090 |
|
12,328 |
|
26,018 |
|
106,436 |
|
Voyage and Commission Expenses |
(1,450) |
|
(121) |
|
— |
|
(1,571) |
|
(935) |
|
(1,424) |
|
— |
|
(2,359) |
|
(1,002) |
|
(683) |
|
— |
|
(1,685) |
|
Vessel Operating Expenses |
(9,627) |
|
(4,388) |
|
(6,048) |
|
(20,063) |
|
(8,525) |
|
(4,466) |
|
(5,611) |
|
(18,602) |
|
(9,542) |
|
(5,198) |
|
(5,686) |
|
(20,426) |
|
Administrative Expenses |
(2,093) |
|
(1,334) |
|
(121) |
|
(3,548) |
|
(2,469) |
|
(1,444) |
|
(122) |
|
(4,035) |
|
(1,870) |
|
(1,240) |
|
(223) |
|
(3,333) |
|
Total Adjusted EBITDA1 |
49,706 |
|
6,994 |
|
19,849 |
|
76,549 |
|
51,654 |
|
5,747 |
|
20,285 |
|
77,686 |
|
55,676 |
|
5,207 |
|
20,109 |
|
80,992 |
|
* 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 our
50% ownership 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).
The Partnership's Q3 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, decreased by $1.0 million
relative to Q2. The decrease from $102.7 million to $101.7 million
was primarily the result of a scheduled step down in the daily rate
earned for one of the Partnership's FSRUs after passing a five-year
service milestone. Voyage and commission expenses at $1.6 million
decreased by $0.8 million relative to the second quarter. Reduced
bunker consumption by the Golar Maria which experienced less idle
time during the quarter accounts for much of this decrease. Having
spent a full quarter in layup, Golar Mazo was not included in
utilization or fleet wide average daily time charter earnings1
("TCE") calculations in Q3. As a result, both utilization and TCE1
improved. Utilization increased from 92% in Q2 to 98% in Q3 whilst
TCE1 increased from $96,300 in Q2 to $100,700 in Q3.
Vessel operating expenses increased by $1.5
million from $18.6 million in Q2 to $20.1 million in Q3. Additional
crew costs continue to be incurred as a result of the complex
logistics associated with crew changes during the COVID outbreak.
In anticipation of the FLNG Hilli Episeyo's annual maintenance
window in early October, additional spares were also purchased
during the quarter. Lower legal and professional fees account for
much of the $0.5 million decrease in administrative expenses, which
reduced from $4.0 million in Q2 to $3.5 million in Q3.
Interest expense increased $0.7 million from
$17.1 million in Q2 to $17.8 million in Q3. A full quarter's
interest expense on the two May 20, 2020 amended high yield bonds
at a higher margin and recognition of a potential 5% premium
payable at maturity on each bond was partially offset by the impact
of a decrease in LIBOR and ongoing debt principal repayments.
Losses on derivative instruments reduced by $3.4
million from $4.5 million in Q2 to $1.1 million in Q3 due to a
small increase in longer-term swap rates during the quarter that
resulted in a mark-to-market gain on interest rate swaps. As of
September 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 2.3%.
Declaration of the third quarter dividend in
respect of FLNG Hilli Episeyo was delayed until costs associated
with its scheduled early October maintenance window had been
accurately estimated. The Partnership received its third quarter
dividend in October. Q3 distributable cash flow1 and the
distribution coverage ratio1 decreased accordingly, to $20.7
million and 14.5 respectively.
Operational Review
Utilization increased during the quarter, from
92% in Q2 to 98% in Q3, driven by a full quarter in layup for the
Golar Mazo and fewer idle days for the Golar Maria.
FLNG Hilli Episeyo, which completed its
scheduled maintenance window in October, on time and without issue,
continues to maintain 100% commercial uptime. It recently offloaded
its 47th cargo and continues to reliably deliver quarterly LNG
tolling revenues, less operating costs, of around $40 million; 50%
of which is for GMLP's account.
Although some of the tasks postponed as a result
of COVID related movement restrictions have been carried out, it
has not been possible to do everything planned. Operating costs did
not therefore increase to the extent expected in Q3 and ongoing
restrictions mean that some tasks will be further deferred,
possibly to the spring of 2021. Despite the additional challenges
posted by the current operating environment, the Partnership was
pleased to note that the FSRU Golar Winter recently completed four
consecutive years with zero lost time incidents ("LTI"), equivalent
to 1.2 million LTI free exposure hours. Following the recent launch
of an energy management initiative, fuel performance for the
carrier fleet under Golar's management has also improved
significantly, saving our customers money, and, more importantly,
helping the environment in the process.
Financing and Liquidity
As of September 30, 2020, Golar Partners
had cash and cash equivalents of $42.3 million. Including the
Partnership's $397.5 million share of debt in respect of FLNG Hilli
Episeyo, Adjusted Net Debt1 as at September 30, 2020 was
$1,438.3 million. Q3 2020 Total Adjusted EBITDA1 amounts to $76.5
million. Based on the above, the Q3 Adjusted Net Debt1 to
Annualized Adjusted EBITDA1 ratio was 4.7x. As of September 30,
2020, exclusive of a $100.0 million forward start swap, Golar
Partners had interest rate swaps with a notional outstanding value
of approximately $1,152.3 million (including swaps with a notional
value of $250.0 million in connection with the Partnership’s bonds
and $397.5 million in respect of Hilli Episeyo), representing
approximately 78% 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 2.3% with an average
remaining period to maturity of approximately 3.1 years as of
September 30, 2020.
Inclusive of Hilli Episeyo related debt,
outstanding bank debt as of September 30, 2020, was $1,157.0
million, which had average margins, in addition to LIBOR, of
approximately 2.19%. As at September 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. Inclusive of
the accumulated accretion of the potential 5% premium payable at
maturity and net of amounts repaid, $146.5 million was outstanding
in respect of the November 2021 maturing bond and $246.6 million
was outstanding in respect of the November 2022 maturing bond, as
at September 30, 2020. Given the low interest rate environment 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 Q2 or to
extend the duration of those that remain.
The Partnership has now obtained credit approval
from lead banks in connection with the refinancing of the 7-vessel
$800 million facility, of which, as at September 30, 2020, $529
million was outstanding. Expectations are this could be increased
after a syndication exercise.
Corporate and Other Matters
As of September 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 October 27, 2020, Golar Partners declared a
distribution for the second quarter of $0.0202 per unit. This
distribution was paid on November 13, 2020 to common and general
partner unit holders of record as at November 6, 2020.
A cash distribution of $0.546875 per Series A
preferred unit for the period covering August 15, 2020 through to
November 14, 2020 was also declared. This was paid on November 16,
2020 to all Series A preferred unit holders of record as at
November 9, 2020.
Total outstanding and exercisable options as at
September 30, 2020 were 24,000. A further 58,960 Restricted Stock
Units are in issue which will vest over three years.
At the Partnership's Annual General Meeting on
September 24, Neil Glass was elected as a Class I Director and Carl
Steen was elected as a Class II Director. Neil Glass has also been
appointed to the Partnership's Audit Committee.
LNG Market Review
The quarter commenced with JKM at around
$2.15/mmbtu and quoted steam turbine ("ST") headline spot rates of
around $20k/day. Further US cargo cancellations over the summer
months and higher than normal European storage levels resulted in a
slower seasonal recovery in shipping rates. Hurricane related
interruptions also cut US supply in early September and contributed
to a buildup of tonnage in the Atlantic. This temporarily halted
carrier rate increases being seen from late August and further
boosted LNG prices that were increasing as a result of earlier
supply re-balancing. As production resumed, a widening of the
west-east arbitrage quickly absorbed available vessels and freight
rates resumed their upward seasonal trajectory. The quarter ended
with JKM at around $5.15/mmbtu and quoted ST headline spot rates of
around $43k/day.
Full utilization of available US export capacity
and increasingly long haul trades are currently supported by strong
winter demand in key Asian markets and supply outages elsewhere,
leading to higher LNG prices and widening regional price
differentials into Q4. The LNG Carrier, Golar Maria is expected to
achieve around 80% utilization for Q4 and record a TCE1 similar to
that achieved in Q3. Her term contract is scheduled to commence
around the end of this year.
Up to 20-25 million tons of unutilized
liquefaction capacity may return to the market in 2021. Growing
underlying demand and limited new nameplate capacity additions
through to 2023 are expected to result in LNG prices that do not
compromise its competitiveness relative to other less
environmentally friendly fuels but do support a more sustained
increase in US-Asia trade and ton-mile demand for shipping.
Golar Partners agreed with Hygo on August 31 to
terminate the existing omnibus agreement between the two parties
and to replace that with a new cooperation agreement. The intention
of the cooperation agreement is that both parties will work
together to develop hub-spoke LNG terminal solutions utilizing
Golar Partners’ available asset portfolio, where those assets are
suitable. The terms and structure of the commercial cooperation
will be worked on a project by project basis given the customized
nature of each potential terminal. As well as leveraging the
expertise of the Hygo team to develop FSRU terminals and parcel
regasification demand, this agreement will, alongside normal FSRU
tendering activity, increase the Partnership’s re-contracting
options, and provide an opportunity to potentially earn higher
returns than those typically available from standard FSRU contracts
in the current market.
Outlook
Golar Partners will, together with the Hygo
team, commence work on assessments of the addressable markets for
small scale LNG distribution and fuel switching opportunities for
larger industrial users in the regions around the Partnership's
FSRUs.
As expected, LNG carrier spot rates have
improved substantially in recent months in line with seasonality.
This will have little impact on the Partnership's expected total
adjusted EBITDA1 for Q4 which is expected to be broadly similar to
Q3, however it does reflect a firming underlying demand for LNG and
a gradual return to more traditional trading patterns. This can
create upward pressure on ton miles over the coming years resulting
in a more supportive backdrop for re-contracting or extending the
current Golar Grand charter in May 2021.
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;
- disruption of shipping routes due to accidents, political
events, piracy or acts by terrorists;
- future sales of our securities in the public market;
- our anticipated growth strategies;
- the future share of earnings relating to the FLNG, Hilli
Episeyo ("Hilli"), which is accounted for under the equity
method;
- our ability to integrate and realize the expected benefits from
acquisitions and potential acquisitions;
- 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 Hygo Energy Transition Ltd. (“Hygo”), formerly known as
Golar Power Limited, 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 Hygo 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;
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.
November 30, 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 September 2020
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