Golar LNG Limited

Good day and thank you for standing by. Welcome to the GOLA LNG Limited third quarter 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 pass you over to Karl Fredrik Staubo. Karl, please go ahead.

Thank you. Hello and good morning, and welcome to Golar LNG's Q3 2024 earnings results presentation. My name is Karl Fredrik Staubo, the 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 on slide three and an overview of Golar. During Q3, we ordered our third FLNG, and Mark II FLNG with an annual liquefaction capacity of 3.5 million tons per annum. This represents a 70% increase to Golar's own liquefaction capacity and the Mark II FLNG will deliver within 2027. This will be the first available FLNG for a charter globally. We will provide further information on the value proposition of the Mark II FLNG later in the presentation. We've also seen positive progress for our two existing FLNGs on the water. Healy continued her market-leading operational performance during the quarter, and positive progress had been made on the conditions precedent for her redeployment under a new 20-year charter in Argentina, following expiry of her existing contract in Cameroon, ending in July 26. During the quarter, we agreed a commercial reset of pre-COD contractual arrangements for the FLNG GIMI under her 20-year contract with BP. An accelerated commissioning has now started, and based on the latest schedule from BP, we anticipate commercial operations date starting the full cash flow from the 20-year contract to occur in Q2 next year. We maintain two LNG carriers in the fleet, One is the Golar Arctic, which is our legacy asset that we consider for long-term charter or sale. The second carrier, the Fuji, is currently on charter until Q1 2025, and following that charter, she will enter CIMC's shipyard in China for conversion to the Mark II FLNG. Our financial investments include a 23.5% shareholding in Avenir LNG, and Macao Energies, which is a fully-owned Golar-founded startup focused on onshore FLIR to LNG liquefaction. Our key figures as of Q3 includes a market cap of just around $4 billion, a cash position of just over $800 million, net debt of around $650 million, and an EBITDA backlog of approximately $11 billion, inclusive of the Pan American Energy contract in Argentina. and excluding commodity exposures that we have inbuilt in the HILI contracts. Turning to slide four and the key milestone of the quarter, the ordering of the Mark II. The Mark II represents the next phase of Golar's growth, now as a pure play FLNG company. The Mark II will increase our own liquefaction capacity by 70%. with the potential to double our EBITDA generation at the project cost, which is approximately 50% of our current EV. So at the 50% increase, we can increase liquefaction capacity by 70% and EBITDA generation by 100, so by definition, accretive. Total project cost for the FLNG conversion and delivery to our operational site will be approximately 2.2 billion, which equates to a market-leading cost of just over $600 million per ton of liquefaction capacity. Delivery of the vessel is expected in Q4-27, and she will thereby be the first available FLNG capacity globally, delivering at least two to three years before any competitive FLNG deliveries could be available. The Mark II FLNG is an evolution of the same liquefaction technology as we have deployed on the HILI and the GIMI. The combination of the unit being the earliest available FLNG capacity in the world, our market leading construction cost per ton, and building upon the technology that has delivered market leading operational performance since we started FLNG operations in 2018, We believe these three factors will drive value to Golar in the contracting of the Mk2. We are currently in discussions with several potential FLNG opportunities for the vessel deployment and target to charter the vessel within 2025. As part of the yard agreement, we have secured an option for a second Mk2 FLNG with delivery within 2028. Slide 5 provides an overview of the global FLNG fleet. GOLAR retains its position as the market leader for FLNGs at par with ENI and Petronas in number of assets and market leading by liquefaction capacity. The most important takeaway from this overview is GOLAR's position as the only proven provider of FLNG as a service. The other existing FLNG players are focused on utilizing their floating liquefaction units for gas they control or where the target to be the off-taker of the gas for their downstream LNG portfolio. Another important takeaway is that the FLNG market is growing. We now have four units on the construction versus eight units on the water. The FLNG technology, pioneered by Golar, is now gaining acceptance in the market as the most economical technology to monetize stranded and associated gas reserves globally. Furthermore, the only open capacity of the total FLNG fleet is our recently ordered Mark II FLNG. As explained, this provides potential charters with gas monetization two to three years ahead versus ordering an alternative FLNG solution today. This was made possible by our significant commitment to the engineering and placing long lead items in anticipation of this FID of approximately $300 million, which started more than 18 months ago. That's what enables the delivery within 27. Turning to slide six, we have laid out our growth ambitions based on our existing asset base and secured yards loss. We expect to see strong cash flow growth from organic growth through increased capacity utilization of our existing FLNGs on the water and through our Mark II growth units. The organic growth includes the startup of GIMMI, expected to, well, she's already started accelerated commissioning now, but we expect first gas from the FPSO late Q4 and full operations in Q2 of next year. The second phase of the organic growth is the increased capacity utilization of the HILI when redeploying from her existing charter in Cameroon ending in July 26 to the announced 20-year charter in Argentina with an estimated startup within 27. 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. Through the Mark II on order for delivery within 27 and another option for a Mark II FLNG to potentially deliver within 28, we see the potential to more than double our liquefaction capacity to more than 12 million tons per annum and triple our potential EBITDA generation. Assuming that the Mark II FLNG is chartered on terms similar to the definitive agreements under the Pan-American contract in Argentina entered into in July, each Mark II FLNG could generate approximately $500 million in EBITDA per year before commodity exposure. Hence, with HILI and GIMI on their respective 20-year contracts and a Mark II on charter at similar terms, GOLAR could generate $1 billion of run rate EBITDA from 2028. If you add to that a second mark two, we could see a run rate of $1.5 billion of run rate EBITDA by 2030. Turning to the business update and slide eight. Hilly continued her market-leading operational track record and is currently offloading her cargo number 122, with more than 8 million tons of LNG exported since contract startup in 2018. As explained, Pan American Energy served as a reservation notice in October to utilize the FLNG Hilly for the 20-year definitive agreements with startup in 2027. We continue to make strong progress to fulfill the conditions precedence within these definitive agreements and expect all subjects to be lifted within Q1 of next year. A key milestone for the quarter was to conclude the commercial reset with BP, resolving all contract disagreements and aligning economic compensation for GIMIs arrival in country on January 10th, 2024 until COD. This commercial reset also unlocks our target to refinance GIMI at improved terms versus the existing facility and to provide the liquidity release that we intend to utilize for our FLNG growth projects. On the back of the commercial reset, BP and Cosmos have secured an LNG cargo that enables accelerated commissioning whilst we wait to receive gas from the BP-owned FPSO. Gas was introduced from the accelerated commissioning cargo to GIMI in October, starting the accelerated commissioning. As alluded to, the major milestone for the quarter was the ordering of the Mark II FLNG to be converted at CIMC Raffles Shipyard in China. We also secured an option for a second Mark II delivering in 2028, as long as we order within 2025. We see continued strong development of our FLNG growth pipeline, led by activities in South America and West Africa. We expect to conclude a charter for the recently ordered Mark II FLNG within 2025. Q3 financial highlights include adjusted EBITDA for the quarter of 59 million, unsecured bond issue of $300 million, and a cash position of over 800 million. Eduardo will provide further insight into this quarter's financial performance later on in the presentation. Macau Energies have now produced and sold its first ISO containers produced from flare gas in Texas, US to industrial clients. We continue to fine tune operations to adjust for the gas quality variability from associated US shale gas production. Turning to slide nine and the highlights of the Pan American Energy Charter in Argentina. In July, we entered into agreements for a 20-year LNG export project. In October, we received a reservation notice reserving the hilly at the FLNG to be utilized under the 20-year definitive agreements. The annual adjusted EBITDA based on the hilly will be $300 million before commodity exposure. The project will utilize gas from the Vaca Muerte field onshore Argentina, The Vaca Marte is the second largest shale gas discovery in the world, with an estimated resource of around 300 GCF of gas. The target startup is within 27, which enables us to upgrade and hook up of the Hilly in between charters ending in July 26 and startup in 27. As part of the transaction, Golar will become a 10% shareholder in South American Logistics, South American will be the off-taker and gas marketing arm of the structure, and this will provide further commodity exposure in addition to the commodity element of the FLNG tariff. As explained, the charter is subject to customary closing conditions, including regulatory and environmental approvals. We continue to make strong progress in meeting these conditions, and we expect deal completion within first quarter of next year. We're also together with Pan American in advanced discussions to bring additional local and international partners into the project to further enable potential expansion. The HILI will initially utilize spare capacity in Argentina's existing pipeline network. Work to construct a dedicated pipeline connecting the FLNG terminal directly to the Vaca Martes Shale Formation has also been pursued. This could support a multi-FLNG vessel project in Argentina, including opportunities for the Mark II on order. Turning to slide 10 and an operational overview of our two existing assets. Starting with Hilly, she continued her market-leading operational track record and are in the process of offloading cargo number 122. The existing contract with Perenco Offshore Cameroon runs until July 26 and the vessel will thereafter transit to the Pan American contract in Argentina with increased capacity utilization following a planned maintenance to enable 20 air continuous operations onsite in Argentina. Jimmy is on site and have started commissioning activities through an accelerated commissioning plan and gas was now introduced in October. All of the ongoing commissioning activities are according to plan and design specifications. Based on the latest guidance from BP, first gas from the BP-owned FPSO is now expected in Q4 this year and full COD in Q2 next year. COD, which is commencement of operations date, will be the start of the 20-year contract duration, starting Golar's share of the $3 billion of EBITDA backlogs. Turning to slide 11, we see strong positive progress for new FLNG opportunities. We continue to progress these opportunities, including commercial and technical work, mainly in the Americas, West Africa, Middle East and Southeast Asia. As explained earlier in the presentation, we see the most active areas being South America and West Africa at the moment. Increasing project development is driven by Golar's position as the only proven provider of SLNG as a service, our market leading operational performance, our competitive construction cost advantage, and the fact that we have the first available FLNG globally. We remain encouraged by the relative attractiveness of these FLNG growth projects compared to alternative monetization solutions for gas resource owners and the cost competitiveness of these projects versus other LNG export projects out there. And again, we are targeting to fix the Mark II FLNG within 2025. I'll now hand the call over to Eduardo to present our Q3 results.

Thank you, Karl, and good morning, everyone. I'm pleased to provide an overview of Golosh financial performance for the third quarter of 2024. Moving to slide 13, I would like to walk you through some of the key financial highlights for the quarter. We achieved total operating revenues of $65 million, with FLNG tariffs reaching $89 million, a slight increase from $88 million in Q2. This growth reflects highly realized variable earnings linked to Brent and TTF prices. We consider FLNG tariffs to be the most accurate measure of all realized liquefaction revenues, including gains from our oil and gas linked fees from Healy operations. Total adjusted EBITDA reached $59 million, remaining largely consistent with last quarter. Despite the recognition of some pre-operational expenses associated to commissioning activities of GIME, as we progress towards COD. This quarter, we report a net loss of $35 million, primarily due to non-cash adjustments in the value of embedded TTF and Brent derivatives within the HILI contract, reflecting lower oil and gas prices compared to Q2. These movements accounted for approximately $90 million. Additionally, mark-to-market changes in our interest rate swap portfolio impacted results by about $16 million. While these factors affected our quarterly results, we remain strategically well positioned to benefit from future market improvements and continue to focus on building our strong long-term earnings backlog. Following the issuance of our $300 million bonds in September, our share of contractual gross debt reached just under $1.5 billion at quarter end. Despite substantial commitments to the Mark II project, which has been fully equity funded until today, With around $400 million invested so far, our liquidity position remains robust with approximately $807 million of cash on hand. Based on that, our net debt position at the end of the quarter stood at $646 million. This gives us significant flexibility to advance our growth initiatives and drive future value creation. Lastly, we're pleased to declare a dividend of 25 cents per share this quarter with a record date of November 25 and payments scheduled for on or around December 2nd. Turning to slide 14, Healy continued its exceptional performance, achieving 100% economic uptime and reinforcing its market leading operational track record. Here we show the evolution of Healy's EBITDA contribution over the last quarters. Q3 was an excellent quarter for Healy. delivering a total EBITDA of just over $68 million, which includes $33 million from base tolling fees and approximately $35 million from variable realized Brent and TTF linked fees. I wanted to highlight that we remain positively exposed to Brent and TTF prices. So if these prices continue to improve in the coming quarters, we can expect an increase in distributions from Healy through the duration of its current contract. Moving on to slide 15, Healy's operational track record has been outstanding. Since 2018, we have successfully produced over 8 million tons of LNG, delivering just over 122 cargoes as of today. On the right-hand side of the slide, we can see how commodity prices can impact our earnings from Healy. So based on forward Brent and TTF prices, Healy is expected to generate an adjusted EBITDA net to us of approximately $273 million this year and a total free cash flow of $185 million. Going forward, 2025 debt service, including principal amortization, is expected to come down to $80 million, resulting in total free cash flow net to us of approximately $126 million from Healy alone. Turning to slide 16. This quarter we reached a significant milestone in our GME contract, with the execution of the commercial reset with BP. This contract amendment settled all existing disputes and greatly simplified the contractual cash flows during the commissioning phase. We now expect to receive approximately $220 million in pre-COD compensation, inclusive of milestone bonuses, of which approximately $130 million will be invoiced in 2024. Of this amount, $78 million has been received in 2024 until today. Thanks to this commercial reset, we're also able to advance the refinancing of the existing GIME debt facility, potentially unlocking up to $500 million in liquidity to us, which I'll discuss further on the next slide. Our balance sheet remains strong, with ample flexibility to support our growth initiatives. After the $300 million bond issuance in September, were well positioned to manage our upcoming bond maturity next year with no significant debt repayments expected beyond our asset level debt until 2029. The significant existing backlog of $4.3 billion from GIMI support further debt optimization beyond our currently $700 million facility. We're actively engaged in advanced discussions with potential lenders and are making solid progress towards securing credit approvals and finalizing contract negotiations. Similarly, with Healy's backlog approaching $7 billion, we see a strong potential to unlock significant liquidity from it. Currently, the asset level debt stands at approximately $570 million, providing us with also ample room for optimization. When we look at the Mark II project, we have fully equity funded approximately $400 million today. We have also received indicative financing terms for around $1.2 billion of asset level debt for the Mark II. However, we believe that once a charter is secured, we're confident in our ability to raise a significantly larger amount at even improved terms, potentially targeting a financing amount equal to four to six times its contracted EBITDA. So in summary, our strong backlog of over $11 billion from Gimi and Healy, combined with the potential for significant liquidity release based on ongoing discussions for additional debt financing, gives us significant financial flexibility. This positions ourselves very well to optimize our capital structure, and continue to support our growth initiatives moving forward. With that, I'll hand the call over to Karl for his closing remarks. Thanks, Eduardo.