Highlights
- Exclusive of its interest in FLNG Hilli Episeyo, Golar LNG
Partners LP (“Golar Partners” or “the Partnership”) generated
operating income of $27.7 million for the first quarter of
2020.
- After accounting for $46.8 million of non-cash mark-to-market
interest rate swap losses, the Partnership reported a net loss
attributable to unit holders of $33.1 million for the first
quarter.
- Generated distributable cash flow1 of $25.4 million for the
first quarter resulting in a distribution coverage ratio1 of
17.79.
- Agreed to extend the LNGC Golar Grand charter for a further
year.
Subsequent Events
- Declared a distribution for the first quarter of $0.0202 per
unit.
- Karl Fredrik Staubo appointed to succeed Graham Robjohns as
CEO.
- Bondholders approved 18-month extensions to the May 2020 and
May 2021 maturing high yield bonds.
- LNGC Golar Maria secured coverage for the majority of its
available hire days between April 2020 and commencement of its term
charter in Q4 2020, assuming exercise of a charterer option.
Financial Results Overview
Golar Partners reports a net loss attributable
to unit holders of $33.1 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $27.7 million for the first quarter of 2020
(“the first quarter” or “Q1”), as compared to net income
attributable to unit holders of $30.4 million and operating income
of $36.3 million for the fourth quarter of 2019 (“the fourth
quarter” or “Q4”) and a net loss attributable to unit holders of
$15.0 million and operating income of $25.9 million for Q1
2019.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q1 2020 |
Q4 2019 |
Q1 2019 |
Total Operating Revenue |
69,815 |
|
76,563 |
|
69,910 |
|
Vessel Operating Expenses |
(16,212) |
|
(14,495) |
|
(16,810) |
|
Voyage and Commission Expenses |
(2,184) |
|
(2,484) |
|
(1,858) |
|
Administrative Expenses |
(3,717) |
|
(3,185) |
|
(3,866) |
|
Operating Income |
27,739 |
|
36,348 |
|
25,936 |
|
Interest Income |
4,490 |
|
4,804 |
|
1,075 |
|
Interest Expense |
(17,495) |
|
(18,555) |
|
(20,777) |
|
(Losses)/Gains on Derivative Instruments |
(46,835) |
|
9,610 |
|
(13,967) |
|
Net (Loss)/Income attributable to Golar LNG Partners LP
Owners |
(33,144) |
|
30,395 |
|
(14,998) |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q1 2020 |
Q4 2019 |
Q1 2019 |
Adjusted Interest Income |
549 |
|
758 |
|
1,075 |
|
Adjusted Net Debt |
1,513,004 |
|
1,532,040 |
|
1,588,162 |
|
Segment Information2 |
|
Q1 2020 |
Q4 2019 |
Q1 2019 |
(in
thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
Total Operating Revenues |
53,441 |
|
16,374 |
|
26,018 |
|
95,833 |
|
58,975 |
|
17,588 |
|
26,018 |
|
102,581 |
|
53,405 |
|
16,505 |
|
26,018 |
|
95,928 |
|
Amount invoiced under sales-type lease |
4,550 |
|
— |
|
— |
|
4,550 |
|
4,600 |
|
— |
|
— |
|
4,600 |
|
— |
|
— |
|
— |
|
— |
|
Adjusted Operating Revenues 1 |
57,991 |
|
16,374 |
|
26,018 |
|
100,383 |
|
63,575 |
|
17,588 |
|
26,018 |
|
107,181 |
|
53,405 |
|
16,505 |
|
26,018 |
|
95,928 |
|
Voyage and Commission Expenses |
(1,313) |
|
(871) |
|
— |
|
(2,184) |
|
(1,231) |
|
(1,253) |
|
— |
|
(2,484) |
|
(1,124) |
|
(734) |
|
(180) |
|
(2,038) |
|
Vessel Operating Expenses |
(11,495) |
|
(4,717) |
|
(6,003) |
|
(22,215) |
|
(9,574) |
|
(4,921) |
|
(5,240) |
|
(19,735) |
|
(11,793) |
|
(5,017) |
|
(5,953) |
|
(22,763) |
|
Administrative Expenses |
(2,364) |
|
(1,353) |
|
(130) |
|
(3,847) |
|
(1,896) |
|
(1,289) |
|
(363) |
|
(3,548) |
|
(2,377) |
|
(1,489) |
|
(308) |
|
(4,174) |
|
Total Adjusted EBITDA1 |
42,819 |
|
9,433 |
|
19,885 |
|
72,137 |
|
50,874 |
|
10,125 |
|
20,415 |
|
81,414 |
|
38,111 |
|
9,265 |
|
19,577 |
|
66,953 |
|
* 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 compare the performance of the FSRU
Golar Freeze with our wider business, 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 Q1 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, declined relative to
Q4. The decline from $107.2 million to $100.4 million was
largely a result of the scheduled winter down time of the FSRU
Golar Igloo, which commenced its 2020 regas season on February 24,
at a lower contract rate, as well as a reduction in revenue in
respect of the LNGC Golar Mazo which commenced layup preparations
during the quarter. Reduced broker commissions in respect of the
Golar Igloo and lower bunker costs for the Golar Mazo contributed
to a $0.3 million reduction in Q1 voyage, charterhire and
commission costs. Fleet wide average daily time charter earnings1
("TCE") decreased from $95,000 in Q4 to $93,500 in Q1.
The 54 days of scheduled Q1 winter down time for
the Golar Igloo was used to complete planned maintenance and store
up the vessel ahead of its 10-month 2020 regas season. These costs
account for most of the $2.5 million increase in vessel operating
expenses, up from $19.7 million in Q4 to $22.2 million in Q1. At
$3.8 million for the quarter, administrative expenses were $0.3
million higher than Q4. Professional fees incurred in respect
of a strategic review account for most of this.
The impact of a further decrease in LIBOR and
ongoing debt repayment contributed to a $1.1 million reduction in
interest expense, down from $18.6 million in Q4 to $17.5 million in
Q1.
A significant decrease in interest rate swap
rates during the quarter contributed to a $46.8 million Q1 non-cash
mark-to-market loss on derivative instruments, compared to a Q4
gain of $9.6 million. As of March 31, 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, Q1 distributable
cash flow1 decreased $9.2 million to $25.4 million. A 95% reduction
in the quarterly distribution, from $0.4042 per common and general
partner unit, to $0.0202, contributed to a significant increase in
the distribution coverage ratio1 from 1.21 in Q4 to 17.79 in
Q1.
Commercial Review
The quarter commenced with LNG prices at around
$5.30/mmbtu and quoted steam turbine ("ST") spot rates of around
$72k per day. Increases in US LNG supply combined with a mild
winter continued to feed a counter-cyclical drop in international
gas and LNG prices. Covid-19 lockdowns in the Far East and Europe
added to negative sentiment. During February 2020, LNG pricing made
it unprofitable to send US LNG to Europe. At this point, it was
decided to place the carrier Golar Mazo, which had been idle
throughout the quarter to date, into cold layup. LNG prices in the
Far East then rebounded as those markets emerged from lockdown
whilst prices in Europe sank as its lockdown started. Resultant
arbitrage trading from Europe to the Far East briefly increased ton
miles. Floating storage due to port delays, tank tops and contango
pricing also supported longer voyages and vessel demand. Spot rates
responded accordingly, briefly increasing in late-March, before
declining once again as India entered lockdown and JKM dropped
below $2/mmbtu. The quarter ended with LNG at approximately
$2.35/mmbtu and quoted spot ST rates of around $40k/day. Despite an
overall increase in global fleet utilization and steady vessel
demand, spot charter rates followed the downward trajectory in LNG
prices, accentuated by the emerging reality of US cargo
cancellations.
During Q1, Freeport and Cameron T2 entered
commercial operations and the Elba Island facility continued to
ramp up. Commissioning of Cameron T3 commenced in April 2020, with
commercial operations due to commence in Q3 2020, and Freeport T3
commenced commercial operations during Q2 2020.
Subsequently, during Q2 2020 LNG prices have
dipped below $2/mmbtu for a more sustained period as a result of
high inventories in Europe and Asia following a mild winter,
further softening of demand in the wake of Covid-19, and a wave of
supply tenders. In response, over 60 US cargoes scheduled for
loading over the summer months are believed to have been cancelled.
Prior to this the US was understood to be exporting 60-70 cargoes
per month. Although these developments have negatively impacted the
rates achieved by the Golar Maria since completing a multi-month
charter at the end of March, the vessel has successfully secured
further charters. Assuming options are exercised on the current
charter, the vessel will have secured utilization for the majority
of its available days between April 2020 and its term charter that
begins in late Q4 2020.
For the remainder of the year, Covid-19 related
demand uncertainty continues to weigh on LNG prices raising the
prospect of additional US cargo cancellations. Pre-Covid-19
expectations that 2020 would see 30mtpa of additional LNG
production are therefore no longer appropriate. An increasingly
unpredictable inter-basin trade also makes ton miles difficult to
model, however they are expected to increase in the second half of
the year. Although the market remains highly volatile, leading
industry analysts expect 2020 LNG production to be in the region of
1-3% above 2019 levels. Low near-term LNG prices, high summer
inventories and expectations of rising US gas prices on the back of
reduced oil production are currently expected to pave the way for a
contango and stronger carrier rates into the winter months. As a
result, the Partnership is confident that the current charterer of
the Golar Maria will exercise their option to retain the vessel
until late Q4 2020. Importantly, low oil prices and
lower LNG spot prices should also facilitate a significant shift to
gas fired power production bolstering demand for LNG, its freight,
and for FSRUs.
During February 2020, a one year extension to
the May 2020 expiring Golar Grand charter was agreed, at a rate
similar to the current level. The Golar Igloo also commenced its
new two-year charter in Kuwait. This contract may be further
extended by charterer, Kuwait National Petroleum Co., for an
additional year through to December 2022.
Operational Review
Idle time for the Golar Mazo together with the
scheduled winter downtime of Golar Igloo both contributed to a fall
in fleet utilization, down from 88% in Q4 to 82% in Q1.
Mechanical modifications to the Golar Igloo that
provide additional peak send-out redundancy were completed in
February 2020, ahead of commencing the FSRUs 2020 regas season on
February 24. Golar's proprietary hydro energy system that can
produce up to 1.2MW of clean energy, equivalent to a 7% system
efficiency improvement or savings of around five tons of fuel per
day when operating at full load, was also installed on board.
Trials are going well with energy savings of around 1MW and
improvements to the hydraulic performance of the vessel's sea water
system being observed. Completed within budget and without
incurring off-hire, Golar's first in-water class renewal (akin to a
dry-dock) of a vessel, the FSRU Golar Eskimo, also completed in Q1
2020.
Having commenced layup preparations in late
February 2020, it is now unlikely that the Golar Mazo will be dry
docked this year. Although both boilers have been switched off and
preservation works are complete, Covid-19 prevented the vessel's
crew from disembarking until mid-May. As a result, operating costs
for this vessel, although lower, will not be down to customary
layup levels until later in Q2. Golar Maria will now be dry-docked
in Q2 2021, having secured business in the months between April
2020 and its term charter commencing in late Q4 2020.
Financing and Liquidity
As of March 31, 2020, Golar Partners had cash
and cash equivalents of $35.1 million. Including the Partnership's
$414.0 million share of debt in respect of FLNG Hilli Episeyo,
Adjusted Net Debt1 as at March 31, 2020 was $1,513.0 million. Q1
2020 Total Adjusted EBITDA1 amounts to $72.1 million. Based on the
above, the Q1 Adjusted Net Debt1 to Annualized Adjusted EBITDA1
ratio was 5.2. As of March 31, 2020, exclusive of a $100.0 million
forward start swap, Golar Partners had interest rate swaps with a
notional outstanding value of approximately $1,439.3 million
(including swaps with a notional value of $400.0 million in
connection with the Partnership’s bonds and $414.0 million in
respect of Hilli Episeyo), representing approximately 93% 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 3.9 years as of March
31, 2020.
Inclusive of Hilli Episeyo related debt,
outstanding bank debt as of March 31, 2020, was $1,215.6 million,
which had average margins, in addition to LIBOR, of approximately
2.19%. As at March 31, 2020, the Partnership also had a May 2020
maturing $150.0 million Norwegian USD bond with a swapped all-in
rate of 6.275% and a May 2021 maturing $250 million Norwegian USD
bond with a swapped all-in rate of 8.194%. Preparations for a
refinancing of the $150 million bond were at an advanced stage in
late February however a rapid Covid-19 induced deterioration in the
capital markets prevented these from being completed. Consultations
with a group of bondholders in late March 2020 concluded that the
Partnership should seek to amend and extend both the May 2020
maturing $150 million bond and the May 2021 maturing $250 million
bond. Following a period of negotiation, a meeting was held on May
5, 2020 where both sets of bondholders approved the amendment
proposal, which included an 18-month extension to the original
maturity dates for each of the bond issues.
Other than the 18-month extensions, key
amendments common to both bonds include a 185 basis points
margin increase from May 2020, amortization payments that commence
on September 30, 2020 and continue on interest payment dates
through to maturity, call options at 100% of par until May 2021 and
at 105% until maturity thereafter, a cap on distributions to common
and general partner unit holders ($0.0808 per annum) and
restrictions on the assumption of additional debt until both
facilities have been repaid. Given the low interest rate
environment, over hedging of the $250 million bond following the
introduction of an amortization profile, and plans to refinance
both bonds ahead of their new maturity dates, the Partnership has,
to date, chosen not to enter into new swap contracts for any
unhedged period as a result of these extensions.
Corporate and Other Matters
As of March 31, 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.
During the quarter, as part of its ongoing simplification exercise,
Golar LNG Limited repurchased 107,000 units underlying a small
Total Return Swap that it had in the Partnership. These units were
then transferred from public ownership to Golar LNG.
On the back of a rapid deterioration in capital
market conditions caused by Covid-19 and the implications of this
for the planned refinancing of the May 2020 maturing bond, the
Company decided on April 1 to reduce the quarterly common and
general partner unit distribution to $0.0202 per unit (from $0.4042
per unit in the previous quarter). The Partnership will, as a
consequence, retain approximately $109 million annually, allowing
the Partnership to focus its capital allocation on debt reduction,
including amortization of its two bonds, thus strengthening its
balance sheet while providing enhanced financial flexibility to
consider capital allocation priorities over time.
On April 27, 2020, Golar Partners declared a
distribution for the first quarter of $0.0202 per unit. This
distribution was paid on May 14, 2020 to common and general partner
unit holders of record as at May 7, 2020.
A cash distribution of $0.546875 per Series A
preferred unit for the period covering February 15, 2020 through to
May 14, 2020 was also declared. This was paid on May 15, 2020 to
all Series A preferred unit holders of record as at May 8,
2020.
Total outstanding and exercisable options as at
March 31, 2020 were 99,000.
On May 1,2020, the Partnership appointed Mr.
Karl Fredrik Staubo as its Chief Executive Officer, succeeding
Graham Robjohns. Mr. Staubo has ten years of experience advising
and investing in Shipping, Energy and Infrastructure companies from
Magni Partners Ltd. and Clarksons Platou Securities. At Clarksons
Platou Securities, he worked in the Corporate Finance division, the
last three years as Head of Shipping. During his time with Magni
Partners, Mr. Staubo worked as an advisor to the Golar group and
was extensively involved in the amend and extension solution for
the Partnership's two Norwegian bonds.
Outlook
Covid-19 has added significant downward pressure
to LNG prices, resulting in intra-basin LNG trade over inter-basin
trade. Although this has been negative for the overall shipping
balance, this trade pattern is better suited to the Golar Maria and
Golar Grand and will have contributed to their high utilization
levels, despite the challenging market. Current LNG prices compare
favourably to other sources of energy, including pipeline gas,
coal, heavy fuel oil and diesel. This is expected to result in
increased utilization levels on FSRUs that might normally only be
used as backup for, or to supplement, other energy sources.
These same historically low gas prices are
introducing new buyers and creating new markets for LNG - markets
that have, in some cases, recently had their first taste of clean
air in a generation. FSRUs are a quick delivering, low-cost,
flexible alternative infrastructure solution that can meet the
needs of these markets. Together with other opportunities being
developed by Golar Power Limited, the Partnership is therefore
highly confident that it will re-contract its currently contracted
FSRU fleet once their contracts start to expire in 2022/3.
Having extended the bond maturities, attention
will return once again to the review of the Partnership's strategic
alternatives including structure and strategy to better use the
$2.0 billion of revenue backlog1 to maximize long-term
shareholder value. This could include the sale of assets, for which
unsolicited offers have been received. In the meantime, second
quarter results will be positively impacted by a full quarter's
contribution from the Golar Igloo, partly mitigated by reduced
rates achieved in respect of the Golar Maria
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”) to enter into long-term time charters, including
our ability to re-charter floating storage and regasification units
(“FSRUs”) and liquefied natural gas (“LNG”) carriers 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;
- our and Golar LNG Limited (“Golar”) ability 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;
- 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;
- market trends in the FSRU, LNG carrier and floating liquefied
natural gas vessel (“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;
- our vessel values and any future impairment charges we may
incur;
- our ability to maintain cash distributions on our units and the
amount of any such distributions;
- 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;
- challenges by authorities to the tax benefits we previously
obtained;
- 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 anticipated growth strategies;
- the effect of a worldwide economic slowdown;
- turmoil in the global financial markets;
- fluctuations in currencies and interest rates;
- changes in commodity prices;
- the liquidity and creditworthiness of our charterers;
- changes in our operating expenses, including dry-docking and
insurance costs and bunker prices;
- 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;
- 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;
- economic substance laws and regulations adopted or considered
by various jurisdictions of formation of us and certain of our
subsidiaries;
- 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;
- availability of skilled labor, vessel crews and management,
including possible disruptions caused by the COVID-19
outbreak;
- 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”);
- the anticipated taxation of our partnership and distributions
to our unitholders;
- estimated future maintenance and replacement capital
expenditures;
- 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.
May 28, 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 31 March 2020
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