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Monday, 30 November 2015

Golar: Investment Review

Conversion Contracts

GoFLNG Hilli conversion progress remains on schedule with the project's contingency budget remaining substantially untapped.  During the quarter the vessel re-entered Keppel drydock and prefabricated sponsons are now in the process of being attached to the hull. This work will continue for the remainder of this year. Pre fabrication of the process top side modules and pipe racks has now commenced with most major equipment items for the conversion now delivered to the shipyard. 

Golar continues to work constructively with Keppel Corp with respect to the scheduling of the conversion of Gandria and Gimi.  The total commitment to these two ships remains at $50 million. 

Both contracts allow for their termination after deduction of a set cancellation fee. In view of the prevailing uncertainty in the energy markets, Golar does not intend to accelerate these conversions before satisfactory financing and firm client contracts are in place. 

The ordering of long-lead items for these two vessels does however preserve Golar's ability to meet clients 2018 and 2019 production schedules.

FSRU Newbuild

On July 17 Golar placed an order with Samsung Heavy Industries for an additional FSRU newbuild.  Delivering in November 2017, this FSRU is timed to meet the requirements of a number of specific FSRU opportunities that Golar is currently pursuing.  Buoyed by attractively priced and available LNG supply, current demand for FSRUs is strong.  On November 25 the Company took delivery of its 7th FSRU, the newbuild Golar Tundra.  Golar Tundra will shortly proceed to Keppel where the vessel will undergo some minor modifications required to make the FSRU compatible with receiving facilities currently being constructed in the port of Tema, Ghana. 

GoFLNG - Business Development Progress

All contracts for the GoFLNG Hilli project have now been signed and the project has taken FID. A Sale and Purchase Agreement for the LNG off-take has also been executed by Perenco, SNH and Gazprom.

The GoFLNG Hilli is expected to deliver an EBITDA for Golar in the first full year of operation, based on the utilisation of 2 of the available 4 liquefaction trains, in the range of a minimum of $170 million to maximum of $300 million.  The vessel tariff is floored and capped indexed to Brent in the range of $60/bbl to $102/bbl.  GoFLNG Hilli will commence operations in Cameroon in Q2 2017 and the contract has a duration of 8 years.  The field has reserves to support more than the current two train commitment and Golar will work to increase utilisation of the vessel.  Increasing production to 3 trains is expected to increase EBITDA to between $240 million and $430 million without increasing capital costs. 

Ophir's Fortuna project in Equatorial Guinea where GoFLNG Gandria will be deployed from 1H-2019 has taken credible steps forward including substantial progress on LNG HoA's with buyer interest oversubscribed.  Additionally, material progress has been made by Ophir on full field development. Golar expects to make the conversion agreement effective and issue the notice to proceed to Keppel for the Gandria conversion by mid-2016, coincident with the project taking FID. Project economics recently presented by Ophir demonstrate very healthy project economics and robust options for financing.

New GoFLNG business development activity remains focused on maturing projects that have the potential to commence operations in 2018 with good progress recorded against a number of potential projects. It is however acknowledged that the window for securing a 2018 start-up GoFLNG project is now narrowing.

Golar is pleased to report that good progress has been made with the Brazilian "Sergipe" greenfield power project, with solid steps made by the joint venture on EPC contracts for the power station and associated infrastructure and progression of SPA discussions with potential suppliers of LNG to the project. The project remains on track to sign binding PPA agreements within the first half 2016. Total committed capital as of today is $5 million in cash and $24 million in guarantees. It remains Golar's intention to spin off the on shore investment in Sergipe.


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