Golar LNG Limited (GLNG)
NasdaqGS - NasdaqGS Real Time Price. Currency in USD
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Advancing a team of engineers, and planning long lead item purchases for a MarkII 3.5 unit build, with conversion candidate for the vessel. No FID at this time, but all indications in the earnings release says this will occur in 2H2022. This does not appear to be BP/Tortue linked.
Mark III 5.0 unit is still a candidate of interest, which appears to be a BP interest.
GLNG is net cash positive $500M, given recent sales and the appreciation of their 12M share NFE stake since late June to today of over $200M
Also, agreed to a $50M incentive for Keppel Shipyard to deliver the Gimmi on time. It nice when you have cash!
Just finished listening to conference call.
Much better than last quarter. Feel much better about torture 2.
Maybe the most interesting question was on perenco. Why such low production and why. So it turns out one of the parties did not get favorable compensation to increase it. No one expected lng to be this high when contract was signed. Maybe this party has a point. Why can't the 3 parties sit down and make a deal?
It is very investing this is exactly what my analysis said, and I got many thumbs down
Nfe stock price is on fire. Why not sell and fund the flng with it. The risk rewards probably favor this. If market crashed for lng, nfe would sink in value and would be accountable for much building debt.
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FLASH NOTE
First Look: Golar 2Q22 Results SummaryGolar reported an adjusted EPS of $0.18, lower than our estimate of $0.26 and consensus of $0.22. Frankly, there are so many movingparts and one-time items, the exact results are somewhat opaque. Importantly EBITDA performance was better than our and consensusexpectations. During the quartered the company hedged half of 2023 volume at a TTF price of $49.50/MMBtu, which we expect the marketis likely to really like as it locks in $80 million of EBITDA for next year on just that portion. Importantly, Golar is still firm that they will havea new FLNG contract this year (not surprising given commentary from Kosmos), but it also sounds as though the company will order anadditional Mark II vessel perhaps on spec for delivery in 2025, which we expect they could contract in short order. We expect shares totrade up on good news.
General administrative expenses: they have moved from 52 m USD in 2019 to 35 m USD in 2021. In 2022 the company is even more streamlined, as vessels being given to CoolCo and Tundra/Arctic being sold in 2022. Administrative Expense should be under 30 m USD. However, they will be allocated to the (remaining but very successfull ) FLNG assets. The Administrative cost are most likely not included in the EBITDA figure of Hilli of 245 m USD published by management in context with 1st quarter reporting and not included in my previous posting.
Derivatives: The company had realized gains of derivatives of 13 m USD in 2019, 2.5 m USD in 2020 and 24.7 m USD in 2021. In the first quarter reporting of 2022 they reported realized gains of derivatives of 43 m USD. They reported in 1st quarter reporting UNREALIZED gains of derivatives of 168 m USD (!!!). Unrealized gains of derivatives are not included in the 245 m EBITDA of Hilli mentioned earlier.
Mark-to market evaluations NFE: GOLAR is owning 6% of NFE. The value of the shares was reported to be 558 m USD (source: 1st quarter reporting 2022). However, the shareprice of NFE has been 39.57 USD on June 30 2022. With 207.56 m shares outstanding, the value of the 12.45 m shares went down to 492,8 m USD. The difference of - 65,2 m USD will be GAAP effective. Most likely management will eliminate this effect, non-GAAP, as it’s not being realized. Per today, the shareprice of NFE equals 50.61 USD. So the 12.45 m shares represent as of today a value of 630 m USD or an increase of 72 m USD, compared to the status of 1st quarter reporting. The value of COOLco is relatively stable around 114 m USD.
GANDRIA: didn’t find anything about it. Depreciation charges and some operating expenses are not included in my calculations. Maybe P can help; my understanding is, that GANDRIA project is on hold, as no contract could be negotiated.
GIMI: conversion cost are being described with 1.5 bn USD, compared to 1 bn conversion cost of Hilli. So the depreciation charge will be higher. Status 31.12. 2021 to be realized/ and paid for completion of Hilli in 2024: 57.3 m USD, in 2023 285 m USD and in 2022 373 m USD. Once Hilli is going operative, central administrative expenses will go up. Financing costs are not clear, as the company cashed in for ARCTIC and TUNDRA and smaller amount for COOLCO. However, as P mentioned, stronger Cashflow plus proceeds will enable GOLAR to be almost self financed.
Will come with a final resume later: although the company is much more streamlined and transparent, certain volatilities remain. The underlying business case for my taste is very strong and multiples for a disruptive technology like LNG are very low.
GLTA
https://www.oedigital.com/news/498544-eni-buys-exmar-s-tango-flng-for-use-in-the-congo
We are a couple weeks to a couple months away from new flng. Just like the beginning of year, and we are likely to get a couple of them, and at least one the bigger ships.
Wish we could be more like nfe at this point, and let more info get leaked before the FID happens.
Rather frustrating report attached: they say revenue will go down year-on-year, seem that they don’t understand that business structure looks completely different (basically ,only‘ flng assets left). So revenues per se are not comparable. Last year 2nd quarter revenue of flng was 56 m USD. Im quite sure that revenue of flng will go direction 70 m USD IN THE 2nd quarter of 2022. So in fact it will go up double-digit percentage.
They say, EPS should be 0,26 USD without mentioning on what basis (GAAP, non-GAAP, Basis adjusted EBITDA ?). However, with 108 m shares outstanding, it should be a result of 28 m USD for the quarter. NFE Mark to mark evaluation (as it’s not realized should be eliminated in non GAAP) will cost for 2nd quarter. Realized gains on derivates also unclear, but 28 m USD should be achieved easily.
Management in their publications never use earnings per share…think it’s a big mistake as benchmarking is quite difficult on basis adjusted EBITDA.
GLTA… I think it will be a good day tomorrow!!!
Q2 PRO-FORMA BALANCE SHEET:
ITEM TOTAL (USDm)
Cash (as at Q1) 418
Cash from Corp Bilateral Facility 250
NFE Shares at USD 49.23 613
CoolCo Shares at NOK 92 117
Avenir Shares at $47m 47
Arctic Net Proceeds (as at Q2) 115
Tundra Net Proceeds (as at Q2) 350
TOTAL LIQUID ASSETS 1,910
LESS
ITEM TOTAL (USDm)
Hilli Contractual Debt (310)
Gimi Contractual Debt (340)
Gimi Remaining Capex (363)
Arctic & Tundra Debt (183)
Corporate Level Debt (549)
TOTAL DEBT (1,745)
Taken together, this implies Golar would have net cash of $165m including the completion of Golar Gimi.
Now let's estimate how much free cash flow to equity can be generated by the time Gimi is up and running at the end of 2023.
Q2-Q4 2022E CASH FLOW
ITEM TOTAL (USDm) NOTES
Hilli T1-T2 Fixed 55 44.5% of $164m for 3 quarters
Brent Link 70 89.1% for every $3 Brent is >$60, capped at $100 Brent. Assume $95 Brent
TTF Link 70 86.9% of TTF. Assume $20m for Q2, Q3, and $30m for Q4
Corp Costs (11) Assumed Corp Costs reduced 25% following CoolCo spin. For 3 Quarters
Interest (62) Took total debt less Gimi Capex and assumed 6% blended interest rate
Capital Repayments (23) Hilli Capital Repayment for 3 quarters
TOTAL EST. FCF TO EQUITY 99
2023E CASH FLOW
ITEM TOTAL (USD) NOTES
Hilli T1-T2 Fixed 73 44.5% of $164m
Brent Link 40 89.1% of every $3 Brent is >$60, capped at $100 Brent. Assume $80 Brent
TTF Link 80 86.9% of TTF. Assume $20m per quarter
Corp Costs (15) Assumed Corp Costs reduced 25% following CoolCo spin.
Interest (105) Took total debt including Gimi Capex and assumed 6% blended interest rate
Capital Repayments (30) Hilli Capital Repayment
TOTAL EST. FCF TO EQUITY 43
END OF 2023 CASH POSITION $308m ($165+99+43, rounded)
And starting 2024, Golar will have $73m in fixed EBITDA from Hilli, $151m in fixed EBITDA from Gimi, plus the variable income from Brent and TTF. Even if we HALF what those contribute today ($207m today), to $103m, that makes $73+151+103=327m. I assume that Hilli gets extended for another 12 years, which is very very very likely.
So, in this very easy to do model, you have a company with (1) no debt, (2) $308m cash that will earn (3) $327m per year for next 15ish years on average.
Today, CQP (a Golar LNG analogue) pays 7.3% dividend yield as of yesterday. It has a superior backlog (more counterparts), but also a lot of debt. Flex LNG pays 9.4%, but it's a shipping company with a lot of leverage and a far inferior backlog in an industry with low barriers to entry. Let's say Golar LNG would command an 8.5% dividend yield, that would imply a stock price of:
(($327m / 0.085)+$308m cash)/108m shares=$38.47 / share.........with zero growth......except for a Hilli extension in 2026.
Management has stripped everything out of the company except two very powerful revenue generators - Hilli and GIMMI.
They are virtually debt neutral, have no preferred or other debt, and their future cash flow allows the, to be virtually self funding for growth projects.
The problem from the public market trading place is the long development timelines for projects: generally 4-6 yrs.
If private equity swooped in, they isn’t do so after a bear-raid on the shares, or some other stress event. GLNG managements seems to have propensity for getting itself into such situations, and it is possible that the Hilli off-take complexity might offer that in coming months.
Even if not, they surely could look at the low risk of snatching up $2.5B in market equity for a company almost certain to generate $400M in annual EBITDA, and holding zero net-debt.
Gains of derivatives is good and bad at the same time. Gains of derivatives realized in 2022 of 43 m USD represent 18% of the adjusted EBITDA of 245 m USD. As the revenue model of GOLAR also by definition is volatile, results become difficult to predict, which is poison for investors. However, in times of increasing prices for LNG this represents more chances then risks. Last but not least, the mark to market evaluation of GOLARs ownership of shares will lead to differences between GAAP and non GAAP figures, especially when it comes to NFE. Unless operative advantages do exist, GOLAR should sell the shares (hopefully at the right moment), if the company wants to concentrate on FLNG business. Speculations, as GOLAR looks like a Holding more then an operator, will not help the shareprice. However, based on current environment, on basis EBT the earnings per share will move dramatically, share price should move much higher. Hope that management puts focus on further transparency…GLTA