Golar LNG Limited

Welcome to the GOLAR LNG Limited Q2 2024 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 GOLAR's second quarter 2024 results. 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. We start at slide three and the overview of GOLAR today. We have two existing FLNG assets, Dehilly, which is the world's first FLNG with a market-leading operational track record, and the GIMI about to commence a 20-year charter for BP offshore Senegal and Mauritania. We are closing in on ordering our third FLNG, a Mark II with an annual liquefaction capacity of 3.5 million tons per annum. The Mark II FLNG will utilize the LNG carrier Fuji as its donor vessel for the FLNG conversion. Our financial investments include a 23.5% shareholding in Avenir LNG and the fully owned subsidiary Macao Energies, which is a startup focused on onshore FLIR II LNG liquefaction. We're encouraged by the development in both of these companies. Avenir is a leading small-scale LNG shipping company, and we see favorable supply-demand characteristics of small-scale LNG shipping translate into strong charter rates with up to five-year durations to very solid counterparts. We're very encouraged on the outlook for this business. On Macau, we have now deployed the first F2X, which is the FLIR-2 LNG liquefaction unit, at the Lai Well in Texas, U.S. Macau are currently working on tuning the operations to facilitate for fluctuations in the gas composition from the flare gas well. Other key statistics highlighted on the page includes our market cap, currently standing at around 3.5 billion, net debt of just under 600 million, and an EBITDA backlog of around $11 billion, inclusive of the Pan American Energy Contemporary. LNG Contract in Argentina, which we announced in July. Turning to slide four, Golar is the world's largest owner and operator of FLNGs and the only proven provider of FLNG as a service. Our two existing units are at par with ENI and Petronas in number of units, but market leading measured by liquefaction capacity. Our focus on designing standardized designs that can be redeployed at moderate capex have enabled us to construct the units at market leading construction costs measured by capex per ton and obtain market leading operational track record. The other existing FLNG players are focused on utilizing their floating units for gas they control or where they target to be the off-taker of the gas for their downstream LNG portfolio. Hence, the only proven provider of FLNG as a service is Golar, and this position allows us to offer gas resource owners a monetization venue whilst maintaining meaningful ownership and exposure to their resources. Turning to slide five, we have laid out our growth ambition based on our existing asset base and secured yard slots. We have inbuilt cash generation growth from our existing assets through the startup of GIMMI expected to commence commissioning within this quarter and full operations next year. We see further earnings growth from increased capacity utilization on Hilly when redeploying from her existing charter, which ends in July 26, to the announced 20-year charter in Argentina with an estimated startup in Q1 2027. Once on their 20-year charters, these two existing assets are estimated to generate an aggregate annual EBITDA of approximately $515 million before commodity exposure. On the back of our focused business model, strong balance sheet and demand for our FLNG services, we're now looking to grow our fleet with a target to more than double our operating FLNG capacity by 2030 to just over 12 million tons per annum. We have secured a yard slot for a Mark 2 3.5 MTPA conversion with delivery in 2027 and the further yard option for a second MKII 3.5 MTPA FLNG with delivery within 2028. We are targeting to order the first of these MKII FLNGs within this quarter. Each MKII FLNG has a capacity of 3.5 million tons or about 180 TBTU per annum. Assuming a tariff in line with the recently announced FLNG project in Argentina, and Mark T could generate an EBITDA of approximately $500 million before commodity exposure. Hence, based on our existing assets and the identified growth ambitions, Golar may be in a position to generate an annual EBITDA of around $1.5 billion once the expansion program has expanded from two to four units and the liquefaction capacity has increased from five to 12 MTPA This is all expected to be fully operational within 2030. On slide 6, we see continued need for further LNG supplied projects to come online. Due to depletion of existing gas fields and strong underlying growth in natural gas and LNG demand, mainly driven by the Far East and Europe, incremental gas supply is needed to balance the market. Based on market research, the incremental supply required to meet the forecasted demand has a landed cost of more than $10 per MMBTU, supporting long-term pricing of LNG. Golar's FLNG technology enables monetization of stranded or associated gas fields with a significantly lower cash break-even compared to the majority of these incremental LNG gas export projects. The spread between where we can generate gas exports and other incremental supply provides for an attractive price spread to be shared between gas resource owners and Golar as the FLNG provider. Forward pricing of LNG still supports oil to gas substitution in addition to the favorable environmental savings. We see this market balance as a very supportive to our mentioned growth ambitions. Turning to business update at slide 8. Hille continued her market leading operational track record during the quarter and is currently in the midst of offloading cargo 117 or more than 8 million tons of LNG exports since contract startup in 2018. A key milestone for the quarter was to conclude a commercial reset with BP resolving all contract disagreements and aligning economic compensation from GIMI's arrival in country on January 10th until COD. This commercial reset also unlocks our target to refinance GIMI at improved terms versus the existing facility and to provide a liquidity release that we intend to utilize for our mentioned FLNG growth ambitions. Significant progress has been made on Mark 2 during the quarter, and we're now targeting contracting within the quarter as mentioned. And we've also secured the slot for the option. The key milestone of the quarter was signing a 20-year definitive agreement for deployment of an FLNG in Argentina. The contract envisaged to utilize HILI at the end of our current charter, but GOLAR has for a period pre-final investment decision, and a Mark 2 FLNG. We will elaborate on this later in the presentation. We see continued strong development of our FLNG growth pipeline and we've increased our FLNG commercial team with two senior resources to assist in evaluating and developing project opportunities. We're currently in discussion for FLNG deployment opportunities in West Africa, South America, Middle East and Southeast Asia. Q2 financial highlights include an adjusted EBITDA for the quarter of 59 million and the liquidity position of just around 600 million. Eduardo will provide further insight into this quarter's financial performance later in the presentation. Turning to slide nine, we've laid out some of the contract highlights on the Pan American FLNG Charter in Argentina. We have entered into agreements for a 20-year LNG export project in Argentina. The project, as explained several times now, intends to utilize HILI. However, we have swapping rights to instead utilize a Mark II FLNG before final FID is made, which is expected to occur later this year. The annual adjusted EBITDA based on utilization of the HILI is approximately 300 million before commodity exposure. The project will utilize gas from the Vaca Muerte field onshore Argentina. Vaca Muerte is the second largest shale gas discovery in the world, with estimated resources of around 300 TCF. Target startup of the project is in Q127, enabling potential redeployment, upgrades, and hookup of Hilly after the end of her current charter in July 26. As part of the transaction, Golar will become a 10% shareholder in South American logistics. This will provide further commodity exposure in addition to the commodity element of the FLNG tariff. The charter is subject to customary closing condition, including regulatory and environmental approvals. As alluded to, this is expected to be satisfied within year-end. Further information on the project can be found on slide 10. Site selection for the FLNG has been selected as San Matias Gulf in the Rio Negro province in Argentina. The project intends to utilize spare capacity in the existing pipeline system and therefore requires very limited incremental infrastructure to be operational. However, the project aims to secure a dedicated pipeline of about 600 kilometers in order to expand beyond one FLNG unit. The counterpart to the agreement are Pan American Energy, one of South America's leading energy companies. Pan American is owned 50% by BP and 50% by Breda's Energy Corp. which in turn is a 50-50 joint venture between CNOC of China and Bridas Energy, which is an Argentinian holding company on behalf of an Argentinian family. Pan American employs around 21,000 employees. They're Argentina's second largest oil and gas producer, and at year-end 23, the company controlled total assets of around 17 billion with book equity of around 12 billion. We're extremely pleased with the mutual benefits the project enables, both to Pan American as a gas resource owner and reestablishing Argentina as a gas exporter, creating an outlet for the vast resources of the vacuum variety field to benefit global gas demand. Turning to slide 11, we continue to see strong developments for further FLNG deployments, already as mentioned further potential deployments in Argentina but also elsewhere. We're currently in discussion for potential deployment opportunities in West Africa, South America, Middle East and Southeast Asia and these projects are at various stages of development. We continue to develop projects in Nigeria and in June we signed a project development agreement with NMPC. to further expand on the existing agreements between GOLAR and NNPC. As mentioned, we have recently further strengthened our commercial team with two senior resources to assist in the development of these growth projects. We remain encouraged by the relative attractiveness of our FLNG growth projects, both when comparing them to alternative monetization solutions for the gas resource owners and the cost competitiveness for these projects versus other LNG export projects. Turning to slide 12 to give some further detail on the commercial reset agreement reached with BP. The commercial reset resolves all previous disputes related to payment mechanisms for pre-COD contractual cash flows between GOLA and BP. Golar is now contractually entitled to receive daily payments from January 10th this year until commercial operations date. The daily payments have step-up mechanisms based on project milestones up to COD and are also secured by long stop dates. Golar will also be entitled to certain lump sum bonus payments subject to achievement of certain project milestones. In sum, these new arrangements and based on the operator's latest timeline, Goal are expected to receive approximately $220 million in payments across 2024 and 2025, pre-COD compensation, inclusive of milestone bonuses, of which approximately $130 million will be invoiced in 2024 and the reminder in 2025. The $110 million that Golar has paid BP up until January 10th this year in liquidated damages will remain with BP. In addition, an accelerated commissioning plan has been agreed where the operators BP and Cosmos have procured an LNG cargo expected to deliver to the hub later this month. The commissioning cargo enable parallel commissioning activities of both the hub FPSO and the GIMI FLNG. Together, this will shorten or target to shorten the time to COD. The commercial reset is also an important milestone that enables refinancing of GIMI. We are targeting a debt facility with significantly better terms on interest and amortization compared to the existing facility and right sized for the strong cash flow visibility of the project. And we expect to release up to $500 million of liquidity of this refinancing alone. Turning to slide 13 and an operational overview of our two existing assets. As explained, Hyli continued its market-leading operational track record, and we're now offloading cargo number 117. The existing contract runs until July 26, and the vessel is thereafter intended to be moved to Pan American and the contract in Argentina at an increased capacity utilization. Hyli is on-site. on the hub offshore Senegal and Mauritania and preparing to start commissioning activities to the mentioned accelerated commissioning plan later this month. First gas from the FPSO is expected in Q4 and full COD in 25. The COD will start the 20-year contract duration, unlocking Golar's share of the 3 billion EBITDA backlog. Turning to slide 11. and our Mark II growth plans. We are now the final stages of the Yard EPC contract. Confirmed delivery of the first contemplated Mark II FLNG will be within 2027 at an all-in FLNG price at an industry-leading $600 million per ton. We have spent to date, including the acquisition of the intended donor vessel Fuji LNG, around $277 million on the project, which are all equity funded. The long lead items ordered to date are now 63% complete, and you can see some of those examples on the bottom right of the slide. We target to order the first Mark II within Q3 this year, so this quarter. and as part of the art agreements we've secured an option for a second chip with delivery within 28. On slide 15 we turn again to Macau. Our pilot unit was completed in early Q2 this year. The unit has proven that the technology works both through nitrogen leak testing and proven LNG production from pipeline quality gas entering the facility near its construction factory. The unit has now been deployed to a live well in Texas, US. We are currently working on tuning the operations to facilitate for fluctuation in the gas composition from flare gas. which is obviously different to a stable gas quality stream from a pipeline quality gas inlet. As previously announced, we will consider strategic alternatives for the Macau growth phase once the unit has proven stable operations on live well production. I'll now hand the call over to Eduardo to present our Q2 results.

Good morning everyone and thanks Karl. I'm very happy to share an overview on Goaler's financial performance during Q2 2024. Turning over to slide 17, I wanted to go through some of the highlights of this quarter. Total operating revenues amounted to $65 million, with total FLNG tariffs reaching $88 million, up from $86 million recorded in Q1. This increase can be attributed to higher realized Brent and TTF linked earnings when compared to the previous quarter. We always look at FLNG tariff as the appropriate metric which reflects all realized liquefaction revenues, including gains on our oil and gas linked fees from HILI. We report a total net income of $35 million in Q1. When adjusting for other non-controlling interests, the net income attributable to GOLAR was $26 million. This figure represents a significant improvement on a year-on-year basis when compared to Q2 2023. Adjusted EBITDA came in at $59 million, slightly down when compared to last quarter, mainly because of the recognition of pre-operational expenses associated to pre-commissioning activities of FLNG gaming. Our liquidity position remains strong, with approximately $630 million of cash on hand and expected receivables from our TTF hedges. Based on that, our net debt position at quarter end stood at $569 million, As alluded by Karl, we reached a significant milestone with PP with the execution of the commercial reset for our FLNG GIME. We are now able to refinance our existing debt facility of $700 million, out of which only $630 million has been drawn to date. We are in advanced discussions with potential lenders, and a new facility is now in the credit approval process. This potential new facility offers improved terms with lower financing costs and improved repayment profile versus the current one. We expect to release up to $500 million of additional liquidity net to us upon closing of this new facility. And lastly, this quarter we are declaring a dividend of $0.25 a share with a record date on the 26th of August and payment on or around the 3rd of September. Now moving to slide 18. So Healy maintained 100% economic uptime and its market leading operational track record. Here we can see the evolution of Healy's EBITDA contribution over the last quarter. When looking on a quarterly basis, Healy generated $64 million in Q2. This number is inclusive of $29 million from base tolling fees and around $35 million from Brent and TTF linked fees. We have recently seen higher Brent and TTF prices, so it's important to reiterate that we continue to be exposed to Brent and TTF. So should prices continue to improve in the coming quarters, we should expect increased distributions from Healy until the end of its current contract. Moving on to slide 19. So based on current forward prices, Heal is expected to generate an adjusted EBITDA net to us of approximately $275 million this year. I wanted to highlight that this figure is higher than the amount seen in 2022, when we had higher contributions from Brent and TTF because of higher global energy prices. The 2024 asset level debt service, including principal amortization, is expected to come down to $88 million this year, resulting in total free cash flow net to Golar of approximately $190 million in 2024. At the end of Q2, the total debt outstanding for Healy stood at $577 million. Another great feature from the announcement of our contract with Pan American is that it could also enable refinancing of this existing facility, which could release significant liquidity to us and provide even more flexibility for our balance sheet. Let me now hand the call over to Karl for some closing remarks.