Golar LNG Limited

Welcome to the GOLOR LNG Limited First Quarter 2025 presentation. After the slide presentation by the CEO, Karl Fredrik Staubo, CFO, Eduardo Maranhao, CTO, Morten Skjong, and Chairman, Tor Olav Triom, 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 a listen-only mode. I will now post you over to Karl Fredrik Staubo. Karl, please go ahead.

Thank you, operator, and welcome to Goal RLNG's Q1 2025 earnings results presentation. My name is Karl Fredrik Staubo, CEO of Goal RLNG, and I'm very pleased to be accompanied today by our chairman, Mr. Tor Olav Tre, our CFO, Eduardo Maranhao, and our chief technical officer, Mr. Morten Skjong, to present this quarter's results. Before we get into the presentation, please note the forward-looking statements on slide two. As normal, we start on slide three with an overview of Golar today. Golar is now a focused FLNG company. We own three units, of which two is underwater and one is under conversion. The key event of the quarter was securing of two 20-year charters one for our FLNG Hilly, following the end of our current charter in Cameroon in July next year, as well as entering into definitive agreements for a 20-year charter for our Mark 2 FLNG under construction. As announced on our Q4 call, we have now fully exited LNG shipping with the sale of the Golar Arctic and our sale of the equity stake in Avenir LNG. We currently have a market cap of around $4 billion, a total net debt of shy of $800 million, and a fully delivered net debt to EBITDA of around 2.8 times. Our strong cash flow visibility, solid balance sheet, and market leading position as the only proven provider of FLNG as a service sets the company up for continued attractive FLNG growth. We have three FLNG designs available for growth and we will elaborate on our growth ambitions as we go through today's presentation. Turning to slide four and a focus on Hilly, which is still the best performing FLNG globally. Hilly continued her market leading 100% operational uptime during the quarter. Hilly has now delivered 132 cargoes since contract commencement in 2018 or more than 9.2 million tons of LNG produced. On May 2nd, all CPs for her 20-year redeployment in Argentina was concluded and final investment decision was given. This secures $5.7 billion of EBITDA backlog before commodity upside. We have now designated a dedicated team of project and operations people to the redeployment scope for HILI's planned vessel upgrades and transit from Cameroon to Argentina to facilitate for 20 years of on-site operations. On slide five, we focus on our second FLNG, the GIMMI, which is in her final stage of commissioning and to start her 20-year charter for BP, offshore Mauritania and Senegal. The commencement of operations date will activate the vessel on our P&L statement. Golar's share of the contractual EBITDA is $151 million based on 90% capacity utilization. Any production above such level will translate into a pro-rata increase in Golar's shares of EBITDA generation by GIMI. Following the commercial reset announced in August last year, Golar has invoiced $196 million in pre-COD payments from the GTA upstream partners. This amount is recognized on our balance sheet and will be amortized over the contract duration. We have now successfully offloaded two LNG cargoes and expect COD to remain on track within this quarter. That should mark the start of the 20-year contract period. The picture on the bottom left is from Thursday last week, where we attended an official state visit by the presidents of Senegal and Mauritania to the GTA hub, together with senior management from BP, Cosmos, SMH and Petrosen, marking the introduction of Senegal and Mauritania as LNG exporting countries. Turning to slide six for an update on our Mark II FLNG conversion. The conversion of the LNG carrier Fuji into a 3.5 million tons per annum Mark II FLNG is well into construction. During Q1, the Fuji arrived at the shipyard in China. The vessel has now been divided in two and skidded onshore. The liquefaction plant that will be built on a new midship section is well underway and a significant portion of our long lead items have arrived at the shipyard ready for installation. The project remains on schedule for delivery by year end 2027. On May 2nd, simultaneous with the final investment decision for the FLMG Hilly Charter in Argentina, We entered into definitive agreements for a 20-year charter for the Mark II to operate alongside Hilly in Argentina. The contract is subject to the same CPs as for the Hilly when we entered into her definitive agreements in July last year. These CPs include environmental assessment, export license, RIGI protection, and final investment decision by the partners. All the CPs are expected to be lifted within 2025, and we expect the relevant approvals to benefit from the recent HILI process. The capex to EBITDA for the Mark II is around 5.5 times before commodity upside for a 20-year charter period, with a further 5-year extension option in the Charter's favor. On slide seven, we have visualized these substantial charter developments on a slide. Our contract backlog now stands at more than 60 years of combined contract backlog across our three FLNGs. Or in dollar terms, we have an EBITDA backlog of approximately $17 billion before commodity exposure. The existing fleet is now fully contracted and we are progressing towards our express target to transform into a market leading infrastructure company with attractive commodity offsites. In the next section, we will elaborate further on the key attributes of our FLNG charters in Argentina. Turning to the next section and slide number nine. We illustrate the LNG value chain and Southern Energy's role in introducing Argentina as an LNG exporting nation. As part of the Argentina deal, Southern Energy has secured fixed price gas sales agreements for 20 years from the upstream partners of CESA to provide the project with natural gas sourced from the Vaca Muerte onshore field in Argentina. CESA will be responsible to facilitate for a dedicated pipeline to bring the natural gas from the Vakamvarte to the FLNG location in the Gulf of San Matias, a distance of about 500 kilometers. This will equate into a fixed pipeline fee to CESA. CESA will then be responsible for chartering and operating the FLNGs, as well as marketing of the gas. Hence CESA's responsibilities include all activities to be taken from the Vakamvarte until LNG is produced and ready for export. The export point price is referred to as free on board. The difference between free on board prices and the LNG prices you typically recognize on your screen is the shipping costs from the production site to its destination of consumption. The destination price is referred to as delivery X ship or death pricing as highlighted on the slide. As part of the charters, Golar will receive 25% of all achieved LNG prices above $8 per MMBTU in FOB price. Hence, when considering the upside element, the applicable methodology is to consider death prices less $1 to $2 per MMBTU in shipping costs. In the current market, TTF and JKM spot prices are trading around $12. Hence today, there's a $2 to $3 upside above the $8 threshold if the project was producing today. Turning to slide 10 and some of the contract highlights. Both vessels have a 20-year contract term. Healy will have an annual EBITDA of $285 million and $400 million for the Mark II. OPEX is passed through for both vessels. Both EBITDA tariffs are subject to a CPI adjustment equivalent to 30% of US CPI from year 6. Both vessels have the same upside element of 25% above $8 FOB. and combined the two contracts provide GOLAR with an EBITDA backlog of $13.7 billion before the mentioned CPI adjustment and the commodity upside. Turning to slide 11 and further elaborating on the commodity upside element of the charters. As explained, GOLAR will have a 25% upside above 8. For every dollar above, we have an annual EBITDA of around $70 million. Over the contract lifetime, that would equivalent to $1.4 billion of EBITDA backlog for every dollar achieved pricing is above it. Importantly, this calculation is based on monthly achieved prices. We have also introduced a limited downside element where Golar give a temporary discount should annual average FOB prices be below seven and a half and down to six dollars. This is capped at a total exposure of 105 million dollars over two years which is equivalent of 210 million dollars. Hence the total commodity exposure for the contract has a maximum downside of $210 million in return for no cap on the upside. If this contract was in place over the course of the last five years, you can see in the table on the bottom right that we would have meaningful additional EBITDA above the contracted amounts. If you take the extreme example of 2022, the commodity element alone would contribute $1.7 to $2.1 billion of additional EBITDA to Golar if the contracts were in place at that time. Even today, if the contracts were operational today, we would see an additional contribution above the contracted amount of an additional $250 million. So to summarize this simplistically, for every dollar FOB prices are above eight, GOLAR makes an additional $70 million of annual EBITDA. Turning to slide 12 and the further commodity exposure that's inbuilt into the contracts. GOLAR is a 10% shareholder in Southern Energy alongside our upstream partners, Pan American YPF, Pampa Energia, and Harbor Energy. Hence, Golar makes an additional 10% of commodity exposure. This has no downside cap or upside cap, so the true, fully aligned shareholder, where a $1 change in the gas price impacts Golar's EBITDA generation by around $28 million. Hence, if you combine the $70 million upside tariff and the $28 million equity ownership, one dollar change provides Golar with approximately $100 million of EBITDA upside. This is further illustrated on page 13, where you can see our EBITDA build-up. Hilly has a base tariff of 285, Mark II of 400, Combined, that's 685. The downside element we have is linked to our equity ownership in CESA, and the rest is upside. Every dollar above eight equates to around $100 million. Every dollar below is a downside of around 28. We see this as a highly attractive risk reward, and also in light of current and future LNG prices, we expect meaningful additional EBITDA contribution from the commodity element. Turning to slide 14, contracting in Argentina has historically not been fully without risk and we have have gone to great extent to look at risk mitigation both regulatory and legally in the framework supporting the charters. Some of the highlights include English law for all charters. All payments are made in US dollars. The Millet-led government of Argentina has introduced several regulatory frameworks to boost domestic investment in Argentina and we are pleased to have received the support of both the state and local authorities to achieve the first ever 30-year non-interruptible LNG export license in the case of FLNG Hilly. and we have also been accepted to the large investment incentive scheme under the Rigi protection which was a law introduced last year. The important highlights of the Rigi includes certainty and regulatory stability for the duration of the project. We cannot be subject to any new national, provincial or municipal taxes. and we have full freedom to repatriate profits, dividends and capital during the life of the contract term. These are the same protections that are the CPs that we will meet for the Mark II Charter. Turning to slide 15 and looking at the global LNG market and how our CESA contracts are placed in the wider scheme of the market. When entering this year, the LNG market stood at around 430 million tons, where the USA is the largest current producer with a 23% market share. More importantly, the significant expected growth in the coming years is driven by volumes out of the US. Hence, we want to identify ourselves with projects that are highly competitive versus US exports. as the marginal producer. If you look on the cost curve on the right-hand side, you can see that the delivered price of U.S. export projects is north of $10 per MMBTU. If we then further elaborate on slide 16, how the recently announced Argentina GOLAR contracts stack up versus U.S. liquefaction projects, there are some interesting data points to note. First and foremost, the gross tariff that we have achieved is significantly higher than that of recently entered into U.S. liquefaction projects. The EBITDA tariff you typically see in the U.S. is net of OPEX and maintenance costs hovering around $2, whilst we have secured around $2.45. The capex per ton is currently sitting of around $1 billion for U.S. liquefaction projects versus $600 million in the case of the Mark II. Inflation adjustment is typically hovering between 20 and 30% in the U.S., 30% for our contract in Argentina. In addition, there's no commodity upside for U.S. liquefaction tolling arrangements, whilst we have the mentioned 25% above $8 of FOB. Hence, what does these characteristics mean? Well, if you have a higher EBITDA tariff and a lower capex per ton, you have a higher return on capital employed. Our commodity upside within the tariff provides us with strong upside participation without spot cargo risk. The fixed price gas sales agreement for 20 years provides CESA with a call option on international LNG off-take prices for 20 years. I think no one knows exactly where the gas price is, but you know it will be volatile and we are there to capture 25% of monthly volatility. The OPEX pass-through combined with our 30% CPI adjustment provide for improved inflation protection versus U.S. liquefaction projects. Hence, all in all, we believe we compare very favorably to the alternative infrastructure investments within LNG liquefaction. This is further illustrated on slide 17. Starting off with the graph on the far left, you want to have as low as possible capex per ton and as high as possible average tariff in dollars per MMBTU basis. And compared to some of the listed US liquefaction alternatives, we compare favorable on both measures. Then you want long-term cash flow visibility. We now have 20-year across all of our three assets, hence that's the remaining average life of our contract. Lastly, to the far right, we've looked at capital markets pricing on a liquefaction capacity basis. If you take total EV and divide over liquefaction capacity in operation, you can see that Golar is trading at just north of a billion dollars per ton, whilst our US colleagues are trading more favorably. If you were to include a fairly significant You can see that the capital markets pricing further reduces in the case of Golar to shy of 900 million dollars per ton whilst comparing to our US listed pairs have a significantly higher pricing. If you were to put that pricing into Golar share price that would be a very meaningful pickup from our current capital markets pricing. Moving on and turning to business updates on slide 19. The highlights of the quarter across the BD department is obviously the final investment decision for Hilly, the definitive agreements for the Mark II. However, we continue to see strong progress on further FLNG commercial development. There are very few yard slots that can deliver within the 2020s. and we now see increased attention from the projects that lost out on the Hille and the Mark II. We continue to target opportunities with competitive wellhead gas to secure an attractive base tariff with commodity upside participation. We are in detailed commercial conversations across our different vessels designs, Mark I, II and III, and some of these discussions include projects where the Charter may want an equity participation in the FLNG. I'll now hand the call over to our Chief Technical Officer, Mr. Morten Skjong, to further elaborate on our service offering and the different designs available for growth.

Good morning, good afternoon. In GOLAR, we have three different FLNG designs, the Mark 1, the Mark 2 and the Mark 3. These range in LNG liquefaction capacity from around 2 million tonnes per annum up to a maximum of 5.4 million tonnes per annum. This depends on FLNG configuration, feed gas properties and ambient conditions at the site. The Mark 1 at Seatrum is a highly successful design with two units on the water and a stellar track record for the hilly during its contract in Cameroon for Perenco. Meanwhile, our first Mark II conversion is progressing well at CMC Raffles, and the EPC contract contains an option agreement for a second vessel. Our Mark III reflects years of innovative engineering and Samsung's world-leading FLNG track record. Common to all three designs is Black & Veatch Preco liquefaction technology, enabling Golar to harvest vital lessons learned between FLNG designs. The most important commonality is however the input and leadership from GOLAR's world-class projects and operations teams. With HILI's FID and the signing of definitive agreements for the Mk2 in Argentina, we are now advancing work with our contractors to confirm updated price and schedule for our LNG designs. We have also completed ship inspections for potential donor vessels for either a Mk1 or a Mk2 and we are confident that we can secure a conversion candidate with Fuji's LNG storage capacity or higher at an attractive price. Furthermore, we are in discussions with long lead equipment suppliers for slot reservations or pre-orders to ensure that lead times for critical equipment will support the overall schedule for our next project. The work we are doing now will enable us to proceed with at least one FLNG EPC award this year and whatever design we choose within the 2020s. With that, I'll hand over to our CFO, Mr. Eduardo Maranhao, for the Q1 group results.