Golar LNG Limited

Welcome to the GOLA LNG Limited Q1 2023 results presentation. After the slide presentation by CEO Karl Fredrik 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. I will now pass you over to Karl Fredrik Staubo. Karl, please go ahead.

Thank you, operator, and welcome to Goal RLNG's Q1 2023 earnings results presentation. My name is Karl Fredrik Staubo, CEO of Goal RLNG, and I'm accompanied today by our CFO, Mr. Eduardo Maranhao, to present this quarter's results. Before we get into the presentation, please note the forward-looking statement on slide two. On slide three, we present our company overview. During the quarter, we exited our investments in Cool Company Limited as well as New Fortress Energy. We also reacquired New Fortress equity stake in the FLNG Healy. We also sold the LNG carrier Golar Gundra and acquired the LNG carrier Fuji LNG intended for FLNG conversions. Hence, our key assets continue to be the FLNG Hilly, operating for Perenco in Cameroon, and the FLNG Gimmi, delivering later this year to start a 20-year contract for BP on the Tor 2 field offshore Mauritania and Senegal. With the acquisition of Fuji LNG, we are advancing the potential ordering of our third FLNG, which we intend to be a mark two FLNG with an annual liquefaction capacity of 3.5 MTBA. Turning to slide four and highlights for the quarter. On the left-hand side, starting with Hylli, as previously announced, we reacquired NFE's equity stake in Hylli for a total consideration of $100 million plus our remaining 4.1 million NFE shares and taking over $323 million of debt associated with New Fortress Energy's stake in the unit. We also unbound our TTF hedges, locking in a total of $140 million of operating cash flow on the hedges, whilst maintaining exposure to TTF-linked production. We also agreed to compensate the 0.04 tons of underproduction in 2022 with a similar amount of overproduction during 2023. We're also pleased to announce that we have agreed and received credit approval for improved terms under our existing debt financing on HILI. This will lower our debt margin and increase our free cash flow to equity from that unit. Eduardo will explain the amendments in further detail later in the presentation. GIMI is now 94% technically complete. Our sail away dates have been pushed from first half this year until Q3 this year to allow for time to fully complete the vessel, conduct increased testing at the yard and align with the overall schedule for the project. Under business development, we have over the recent months seen significant increasing interest for our FLNG solutions, and especially for re-contracting of the FLNG Hilly, given her second half 26 availability and proven operational track record. We're currently in discussion with several gas resource owners. This includes signing of a memorandum of understanding with NMPC during the quarter, to explore FLNG deployment on specific NMPC-controlled proven gas resources in Nigeria. On the back of increasing commercial interaction for FLNG deployment, we have advanced yard and financing discussions for a Mark II FLNG and acquired the Fuji LNG as already described. Turning to the right-hand side and corporate and others, Q1 financial highlights include a cash position of more than $1 billion, adjusted EBITDA for the quarter of $84 million, net cash proceeds from exit of NFT and pool company of $102 million. We bought back $20 million of our unsecured bonds at par and agreed to amend the bonds to increase financial flexibility. Following the bond amendment, we have reinstated dividend payments and have approved to pay 25 cents per share for Q1. Our target is to declare a stable and over time increasing quarterly dividend, and we will address our dividend outlook ambition in further detail later in the presentation. We have also approved a $150 million share buyback program. Turning to business development and slide 6 and some further detail on GIMI. The majority of remaining works are piping, system testings and pre-commissioning. As mentioned, expected sail away has shifted from first half until Q3 2023. The updated sail away timing is not expected to impact first seed gas on the Torque View project. Due to overall project and FLNG delays, pre-commissioning contractual cash flows have started. Parts of these contractual cash flows from BP to Golar is currently disputed and we are now working to resolve the matter. The updated sale away date and pre-commissioning cash flow dispute will have no impact on the wider execution of the 20-year project that is expected to unlock around $3 billion of adjusted EBITDA backlog to GOLAR, equivalent to an annual adjusted EBITDA of just around $150 million. Turning to slide 7 and FLNG business development, which is the most exciting area of our business. We experience increased interest from gas resource owners for our FLNG solution. We're currently in discussion with five to six gas resource owners for potential FLNG deployments. Our key priority is to secure a charter for Hylli at the end of the current contract expiring in July 26, to secure increased cash flow visibility, increased shareholder distribution, before taking FID on a Mark II FLNG. Several of the potential clients in discussions have resources sufficient to accommodate either HILI or a Mark II FLNG. We continue to target commercial structures where we, together with the gas resource owner, focus on attractive cash break-even liquefaction of stranded or associated gas fields and share upside through commodity price offtake. A fully utilized HILI based on current LNG forward prices has an annual revenue potential in excess of $1 billion. This will then be shared between the gas resource owner and Golar as the liquefaction provider. In April, we signed a memorandum of understanding with NMPC, which is one of the five to six gas resource owners described earlier. NMPC is Africa's largest domestic energy company. Nigeria is currently producing 33 million tons of LNG annually, but this compares to more than 4 billion tons of proven gas reserve, and there is significant capacity and ambition to grow monetization of these volumes. Since signing of the MOU, both parties have allocated significant resources to develop a named gas field for a potential FLNG project. We've made material, technical, and commercial progress. Overall, the MOU has a five-year duration, and both parties have an ambition to explore the potential for multiple FLNG projects to be deployed on proven and stranded gas fields in Nigeria. But we find it best to start with one named one as opposed to try to tackle all at once. Continued progress is also made with other gas export opportunities, both in West Africa and South America. Turning to slide eight, on the back of this increased charter interest, we decided to high-grade our FLNG conversion candidate. We decided to sell Gandria and declare our option to acquire the LNG carrier, Fuji. The key advantages with the enhanced FLNG conversion candidate includes younger age and better sailing condition, increased cargo capacity, larger deck space, and lower boil-off. We continue to advance yard EPC discussions as well as progressing a deck facility for a Mark II FLNG project. The final investment decision will be linked to charter visibility on re-contracting of HILI and or a Mark II FLNG. Turning to slide 9 to further highlight the earnings potential from integrated FLNG projects. We continue to see very healthy margins for FLNG projects. We believe gas prices have reverted to a more sustainable level at the cost advantage to more polluting sources of energy, supported by long-term visibility in the commodity forward markets. As described in previous quarterly presentation, we believe stranded or associated gas upstream opportunities can be developed between $1 to $3 per MNBTU in upstream costs. FLNG OPEX including fuel cost equate to about 60 cents per MMVTU. Add shipping cost to end users in Europe or Asia and you have a delivered cash break even of between 3 to 5 dollars per MMVTU. This compares the forward prices of north of 10 dollars per MMVTU indicating annual e-data for a fully utilized tilling of $550 million or $875 million for a Mark II SLNG. We continue to believe in our business model where the majority of incremental supply over the next 5 to 10 years will be sourced from the U.S. Hence, if you have a business with three key cost components, namely gas source cost, liquefaction cost, and shipping cost, and you're cheaper on all three components, we believe that's an attractive competitive situation. As you can see in the top right corner, this business model has an attractive risk reward in an historical context with limited downside and significant outside potential. Current forward curves are significantly higher than that of historical LNG price. Turning to slide 10, the world needs more and cheaper sources of LNG. Looking at gas prices over the past year, it has become clear that the world needs more LNG from a wider range of suppliers at both competitive levels. While LNG may previously have been considered a transition fuel, the events unfolding in 2022 underpins LNG and natural gas. as a critical part of long-term solutions to ensure energy security. However, existing production and current build-out of LNG plants will not be sufficient to cover the expected demand growth in the coming decade. According to S&P Global, LNG demand is set to increase from around 400 million tons in 2023 to approximately 630 million tons by 2035. This is equivalent to a compound annual growth rate of 3.5%. Turning to the right-hand side of the slide, we are shown the estimated capex for liquefaction projects currently under construction. The steep cost inflation recently witnessed is pushing costs higher, leading to the supply cost shifting higher. You can see from the majority of the US liquefaction projects, you're talking CapEx per ton of liquefaction capacity way in excess of a billion dollars. While there are several factors impacting the ultimate economics of a liquefaction project, keeping liquefaction CapEx contained is one of the three cost drivers of an LNG export project. And the key aspect of success which makes us continued confident in Golar's FLNG solutions. Turning to slide 11 and an update on Macau Energies. Macau Energies is a startup entity replicating Golar's model in treating and liquefying flared and stranded gas, but on the shore side. Macau was founded by the same team that created Golar Power, which was later renamed Hygo. Golar Power started with an initial investment of $5 million and grew through a joint venture between Golar and Stonepeak and was sold five years after inception at three to four times the invested capital. Golar has committed up to $25 million for the team to concentrate its efforts on constructing a proprietary modularized small-scale liquefaction unit, as well as partnering with complementary small-scale LNG businesses to develop LNG to EV charging in areas of high flaring activity, significant prepping demand, and a grid currently not capable of supercharging of EV trucks. This will include areas like the Permian in the US and several stranded gas resources in South America. Subject to the continued development of Macau, the Macau management team and Golar will explore a spin-off of Macau Energies at a later point in time. It's a business we believe in. It's a team that has proven to deliver to us previously. and the model that's replicating what we are doing at larger scale offshore. But this will not be a significant CapEx requirement funded by GOLAR balance sheet. It will then be lifted out of the balance sheet for capital markets to fund it. I will now hand the call over to Eduardo to present our Q1 results.

Thanks, Karl, and good morning, everyone. I'm very pleased to provide an update on our group results for the first quarter of 2023.