Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Golar LNG Ltd (GLNG, Financial) has a strong market position as the world's largest owner and operator of FLNGs, with a proven track record.
- The company is closing in on ordering its third FLNG unit, Mark II, which will significantly increase its liquefaction capacity.
- Golar LNG Ltd (GLNG) has secured a 20-year charter for the Gimi FLNG unit with BP offshore Senegal and Mauritania, ensuring long-term revenue.
- The company has a robust financial position with a market cap of around $3.5 billion and a net debt of just under $600 million.
- Golar LNG Ltd (GLNG) has a strong EBITDA backlog of around $11 billion, providing visibility into future earnings.
Negative Points
- The company faces significant capital expenditure for the construction and deployment of new FLNG units.
- There are risks associated with the commissioning and operational startup of new FLNG units, such as the Gimi and Mark II.
- Golar LNG Ltd (GLNG) is exposed to fluctuations in Brent and TTF prices, which can impact its earnings.
- The company has ongoing discussions and potential regulatory hurdles for new projects, such as the 20-year LNG export project in Argentina.
- There is competition in the FLNG market, and other companies are pursuing similar projects, which could impact Golar LNG Ltd (GLNG)'s market share.
Q & A Highlights
Q: Karl, I just wanted to circle back on your comments around the potential swap option for Mark II in Argentina. Should we think about the expected annual EBITDA contribution then on a pro forma basis for a larger asset of being over $400 million if you decide to do that?
A: Yes. That would then be pro rata for the size, yes.
Q: Could you give us an idea of just how many potential counterparties you are in discussions with?
A: The number of counterparts is still concentrated around both West Africa and South America. There are fewer clients in the Middle East and Southeast Asia, but the quality of discussions in those locations is strong. The concentration of magnitude is in West Africa and South America.
Q: How do you think about the overall opportunity set in Argentina and how Golar will play in that development?
A: The gas resources in Vaca Muerta are plentiful, with 300 TCF compared to other large discoveries like Greater Tortue's 25 TCF. The market opportunity for Argentinian gas exports is massive, likely beyond what Golar alone can deliver. Our role is to be the first enabler for Argentina's gas exports, leveraging proven assets and tangible delivery timelines.
Q: Would you need a bigger pipeline for Mark II versus the Hilli?
A: For the first unit, you could utilize either Hilli or Mark II with the existing infrastructure. Beyond one unit, i.e., beyond 3.5 mtpa, you would need to look into expanding the pipeline infrastructure.
Q: How quickly could you secure a Hilli refinancing? Could that be a first half 2025 event?
A: That can certainly be a 2025 event. Once all subjects and FID on the project are taken, expected later this year, it would be natural to look at refinancing initiatives into next year.
Q: Do you have a second Mark II sold for conversion identified? And when would you have to issue FID for a second Mark II to meet that 2028 delivery?
A: We have identified several suitable Moss design ships in the market. FID for the second Mark II would have to be based on current positions around Q1 2025.
Q: Are you seeing any other companies stepping up and trying to provide FLNG as a service?
A: There is one project, Cedar LNG, backed by Pembina for LNG export in Canada. Other than that, we see initiatives but no other contenders with the in-house engineering, operational, or financial balance sheet capability to lift such projects.
Q: How are you balancing future FLNG projects versus some of your outside projects like Macaw and Avenir?
A: Golar's focus is to grow on FLNG. Avenir LNG is a legacy investment with strong supply-demand dynamics, and we are not planning to deploy incremental capital into it. Macaw aims to replicate our maritime environment success onshore, but Golar's focus remains on FLNG growth.
Q: Could you provide more color on what infrastructure is required for the Argentina project?
A: The key requirements are mooring, covered by South American Logistics, and a short pipeline from the existing grid to the site.
Q: Is there any potential to license out Macaw's technology rather than undertaking it yourself?
A: Once proof-of-concept is achieved, we will look at strategic alternatives for Macaw's growth phase. Golar is not intending to have Macaw compete for our balance sheet resources and is open to any structure that benefits the technology without compromising our FLNG growth ambitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
