Golar LNG Limited

Welcome to the GOLA LNG Limited 3Q2023 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 good day to all of you. Welcome to Golar LNG's Q3 2023 earnings result presentation. My name is Karl Fredrik Staubo, CEO of Golar LNG, 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 statements on slide two. Turning to slide three and an overview of Golar today. We own and operate two FLNGs, the Hilly operating for Perenco in Cameroon and the Gimmi which delivered from Citrium Shipyard in Singapore now on Sunday and is currently sailing towards Mauritania, Senegal to start its 20-year contract for BP. In Q1 next year, we expect to take delivery of the LNG carrier Fuji, which we acquired in May and intend to convert into a 3.5 MTPA Mark II FLNG vessel. We also own one LNG carrier, Arctic, which has just been through its five-year class. Arctic has a membrane storage system and is therefore not suitable for FLNG conversion, and we're therefore currently considering alternatives for the vessel, including chartering or sale. We remain committed to FLNG growth and have in addition to the Mark 1 FLNG design of Hilly and Gimmi spent considerable time and resources to develop two incremental designs. Mark 2 with 3.5 million tons of annual liquefaction capacity and Mark 3 with 5 million tons of annual liquefaction capacity. We'll elaborate more on our growth ambitions later in the presentation. We also have two investments in Macau Energies, a land-based liquefaction company targeting monetization of flare gas and focused on operations in the Americas. And Avenir LNG, a small-scale LNG company owning five small-scale LNG carriers servicing local distribution trades. and the growing maritime LNG bunkering market, as well as an LNG terminal in Sardinia, Italy. Turning to slide four, we're pleased to announce that GIMMI has completed its construction at Citrium Shipyard in Singapore and is currently on its way to the GTA field offshore Senegal and Mauritania. The construction of an FLNG is a major milestone for GOLAR. We have highlighted some key statistics to give some perspective on the scale of the conversion work now complete. During the conversion, we've added 44,000 tons of steel, equivalent to 3,650 double decker buses. The liquefaction topside requires 215 megawatts of power, equivalent to the output of 150 wind turbines, sufficient to power 80,000 homes. We've added 1500 kilometers of cabling, which is almost eight times around Singapore where the vessel has been constructed. The conversion itself has taken 37 million man hours or 18,500 working years. Through adding sponsons, we've added the equivalent of 20 basketball courts of deck space to fit all the topside equipment needed to liquefy natural gas. This construction was undertaken in the midst of COVID, which caused significant challenges to the conversion project. However, we are now very pleased with the outcome of the vessel and look forward to get the vessel into operation for BP under a 20-year contract on the GTA field. Turning to slide five and another milestone for the quarter. Hilly delivered its cargo number 100 on the 16th of October at the first FLNG in the world to meet this milestone. The unit continues to deliver and just offloaded its cargo 102 or more than 7 million tons since production started up in 2018. The stable operations of Hilly since startup as represented on the right hand side of the slide speaks to the testimony of the quality of design and operational performance of the GOLAR team and execution model. We're seeing increased interest for rechartering of HILI upon current contract expiry in July 26, including detailed commercial discussion for three different recontracting opportunities at higher capacity utilization compared to today's contract and with more compelling economics. Turning to slide 6 with an overview of the global FLNG fleet. Golar owns the largest fleet of FLNGs in the world, measured by million tons of installed capacity, and at par with Petronas and ENI in terms of number of FLNGs. Golar pioneered the FLNG concept with the construction and delivery of Hilly, and have also demonstrated the lowest capex per ton of liquefaction capacity. We are today the only provider of FLNG as a service. All the other owners of FLNG tonnage utilize FLNG technology for owned or controlled gas reserves or to service their own portfolio of downstream demand for LNG. Golar's position as the only service provider of maritime liquefaction enables us to offer a unique value proposition to owners of stranded and associated gas reserves. We offer gas monetization through a targeted, integrated approach, where Golar aligns its commercial model with the gas resource owner in a partnership. We ensure aligned economics through the commodity cycles and price volatility. It's worth to know the relative size of the companies controlling FLNG assets, for example by market cap. Golar market cap is around 2.3 billion, compared to NFE and Petronas of seven to eight billion, ENI of 55 billion, and Shell at $215 billion. We're not suggesting that FLNG valuation alone justifies the value of these companies, but this gives insight into the relative scale of the players involved in maritime liquefaction. Turning to slide seven. and rationale for why we believe FLNG developments in Africa are attractively positioned for FLNG exports. Africa has 620 TCF of proven maritime gas reserves, the energy equivalent of 110 billion barrels of oil that today are either stranded, flared or re-injected. A significant portion of these reserves are best monetized through FLNG technology. Golar's proven market leading capex per ton, compared to other liquefaction solutions, including shore-based developments, set for attractive cost of production. Africa's closer proximity to key LNG markets in Europe and Asia, compared to US export projects, reduce shipping costs. Hence, if you have a business with three cost drivers, then African FLNG projects are cheaper on all three inputs, We believe the ingredients for an attractive business model is present. Golar's position as the only proven service provider of LNG as a service is well positioned to take an active role in further expanding African gas exports. Turning now to slide 9 and a business update. Hilly, as referred to, continued its market leading operational track record and have now delivered its cargo number 102. Gimmi sailed from Singapore on Sunday on our way to the GTA field for commencement of our 20-year contract. On business development, we continue to target an integrated model where we align FLNG Economics with the upstream partner to have shared exposure to LNG offtake prices. On Hilly, we continue to target commitment on rechartering of the vessel within 2024. Current discussions include detailed terms for three different redeployment opportunities. On March 2, we continue to progress the sign long lead items and donor vessel delivery expected in Q124. The next step is to obtain commitment on commercialization projects before proceeding with the final investment decision. On corporate and other Adjusted EBITDA for the quarter came in at $75 million. Goal or cash position is about $840 million, and north of $920 million, including of the TTF swap receivable. We finalized the sale of the LNG carrier Gandria in the quarter for a net consideration of $15 million. We also continue our focus on shareholder returns. and declared a dividend for the quarter of 25 cents and continued our buyback program, acquiring 0.2 million shares in the quarter, with total shares now outstanding at 105.9 million shares. Our fully-owned subsidiary, Macau Energies, acquired a majority stake in Logas, an established natural gas distribution company in Brazil. Macau remained on track to deliver its first Flair to LNG Pilot in the US within 2024. Turning to slide 10, with GIME delivery, we now expect a transition from capex to cash flow. We look forward to get started on operations and to see GIME go from cash outflow through capex to cash inflow through earnings. As construction risk is now taken out of the project, we will focus on debt optimization for the unit. We will target an increase in facility size, a reduction in debt margin, an extended repayment profile, and duration compared to the current facility. We are in discussions with potential lenders and have received term sheets with improved terms for potential new vessel debt. We also see further earnings upside upon Healy re-contracting at limited incremental capex, extracting the full value of the installed liquefaction capacity in our portfolio. Turning to slide 11 and elaborating on the next steps towards contract startup for GIMI. GIMI is now sailing under own propulsion assisted by OneTug. Two stopovers in Mauritius and Namibia is planned to undertake refueling and crew changes. The total voyage until we're on site is expected to take about 60 days, but can be shorter or longer subject to weather conditions. Once we reach site, we will notify BP that we're ready for mooring and physical connection of FLNG. We will then The project will start upstream commissioning and supply of gas to the FLNG. Once first gas is introduced to the FLNG, we then target a commissioning period which originally is scheduled to take six months, but we're actively working with the GTA partners to make further efficiencies on the commissioning period. Once commissioning is complete, We will reach commercial operations date and the start of the 20-year contract at the GTA field. Turning to slide 12 and progress on our Mark 2 FLNG. Major long lead items have been ordered and are under construction. So you can see from the picture on the right hand side, several of the equipment is now taking shape. This combined with more than 250,000 engineering hours to date allow for fast-track project execution, which will reduce execution risk and shorten construction time by about 12 months from when we take FID. We expect the Fuji LNG to be delivered to us in Q124. The vessel is intended as the donor vessel for the project. EPC contract negotiations and engineering have advanced significantly and Mark 2 is ready for execution as soon as we have commitment on commercialization of a unit. We continue to see increasing interest for Mark 2 and several work streams are ongoing for project specific applications. Turning to slide 13 and Macao energies. As explained, the company is on track to have the first FLIR to LNG liquefaction pilot available in the US in Q1 of next year. We also recently teamed up with Pilot Gas to provide the first LNG to EV charging expected to take place in Q2. Operational startup of midstream commercialization platform in Brazil is expected to start up now in Q4. We're also actively looking at further expanding the asset portfolio of Macau, and this could include a potential separate listing of Macau energies into a standalone entity during 2024. I'll now hand the call over to Eduardo to take us through group results. Good morning, everyone, and thank you, Karl.

I'm glad to share an overview of Goaler's financial performance during Q3. This quarter has been marked by significant milestones, including the delivery of Gimi and the continued operational excellence of Healy. Turning over to slide 15, I wanted to show some of the financial highlights of this quarter. Total operating revenues amounted to $67 million. with total FLNG tariffs reaching $95 million. FLNG tariff is a critical non-GAAP metric, which reflects a comprehensive approach to liquefaction revenues, including realized gains on oil and gas derivatives. Despite a marginal dip compared to Q2, this robust performance underscores the resilience of our commercial model. Adjusted EBITDA came in at $75 million, affected by lower realized contributions from commodity-linked fees. However, we anticipate a positive reversal in Q4, driven by higher Brent and TTF prices. Important to note that these fees are calculated on a rolling average basis of the previous three months for Brent and one month ahead pricing for TTF. This quarter we had a net income of $114 million, a significant improvement compared to Q2. This figure includes a total of 39 million non-cash items, such as 34 million unrealized gains from oil and gas derivatives, and $5 million boost from unrealized gains in our interest rate swaps. Our liquidity position remains robust, standing at close to $1 billion when it includes cash on hand and other receivables from the unwinding of our TTF hedges earlier this year. With total contractual debt just under $1.2 billion, our net debt position was $251 million. Now moving to slide 16, we can see how HILI's performance compared to previous quarters. When looking on a year-on-year basis, Healy generated $73 million in Q3, which is 14% greater than during the same quarter of last year. When we break down these numbers in comparison to Q2, we maintain consistency with a fixed tolling tariff of $32 million. Brent linked fees slightly decreased to 13 million from 15 last quarter, and TTF linked fees of $28 million were down from $30 million last quarter. As I explained on the previous slide, we see lots of tailwinds from these variable fees and expect a positive impact from higher oil and gas prices, driving increased tariffs for the rest of 2023. Moving on to slide 17, We can see that we remain exposed to TTF prices for the remainder of 2023 and 2024, while at the same time we expect to benefit from lock-in gains from our previous swaps. The lock-in TTF gains resulting from the effective unwinding of our hedges will be allocated in addition to our fixed tolling fees and variable Brent and TTF revenues. So between now or between in the Q4 of 2023, We expect to recognize approximately $23 million in EBITDA from those locked-in gains. And for the full year of 2024, we expect approximately $49 million of EBITDA secured or approximately $12 million per quarter. To illustrate how this can improve our earnings, For every dollar per million BTU change in TTF, we expect to make $3.2 million per year. So based on forward prices for next year, we should make around $39 million just from this. In addition to that, when it comes to Brent, the incremental contribution is $2.7 million for every dollar per barrel movement above $60. So when we look at forward 24 prices, the total contribution next year should be around $56 million. As previously announced in Q2, we managed to improve certain terms of the existing Healy financing, including lower margins and extended repayment profile. As a result of that, and based on current forward prices, Healy alone is expected to generate an impressive $650 million of free cash flow to equity between 2022 and 2024, as you can see on this slide. Now moving to slide 18. Our balance sheet remains strong and we have a great level of flexibility to fund increased shareholder returns and at the same time back our growth ambitions. Current liquidity position, including cash receivables from TTF hedges, amounts to just under a billion dollars and fully supports the development and equity requirements for the construction of new LNG units, as described by Karl on the Mark 2 slide. We continue to explore alternatives that could further enhance liquidity in the near term, including the optimization and refinancing of Gimi, now that she's left the yard and construction is complete, potential asset sales, such as Arctic and Avenir, the spin-off of Macau, and further optimization and refinancing of Healy upon a new contract, among other initiatives. This quarter we declared a dividend of 25 cents a share with a record date of December 1st and payment on or about December 11th. We have repurchased 0.2 million shares this quarter, leaving 105.9 million shares outstanding. Out of the $150 million approved share buyback program, 117 remains available for further repurchases, which will continue to be opportunistically pursued. Hilli's strong free cash flow generation will continue to provide the backbone and support of the current dividend and buyback program. On top of that, GIM is expected to start up next year. We'll pave the way for increasing shareholder returns. Now I'll hand over to Karl for some closing remarks.