Golar LNG's Results for 1H, 2014
Highlights
*Golar LNG reports a second quarter 2014 net loss of USD $24.2 million (including a non-cash loss of $13.6 million on interest rate swaps).
*EBITDA* generated in the quarter amounts to $1.1 million.
*Total pro-forma EBITDA** on a group-wide basis (including consolidation of Golar Partners) is $84.3 million.
*Golar takes delivery of the LNG carrier Golar Crystal ("Crystal") on May 15.
*On June 30 Golar raises $661 million net of fees following the successful follow-on issue of 12,650,000 shares of its common stock (including underwriters' options). Subscription price was USD $54.0.
*Spot and short-term chartering market remains challenging due to negative growth in LNG production caused by underperformance of certain existing production facilities.
*Board maintains dividend at $0.45 per share for the quarter.
(Adjusted EBITDA is defined as earnings before interest, depreciation and amortization equal to operating income plus depreciation and amortization.
Proforma adjusted EBITDA is defined as *above but includes the consolidation of Golar Partners. Refer to Appendix A for the reconciliation of Group-wide results Subsequent events)
*On July 2 the Company executed and made effective key agreements for conversion of the 125,000 m3 LNG carrier Hilli to a floating liquefaction vessel (an "FLNGV").
Far East spot LNG prices fall below $11 creating strong contango and making storage plays more attractive for traders.
*Utilisation of Golar fleet improves in August as a result.
Financial Review
Golar LNG Limited Results
The Company's second quarter results show EBITDA of $1.1 million. Operating revenue at $21.1 million was consistent with first quarter 2014 operating revenue of $21.0 million. The loss of earnings following the sale of the Golar Igloo to Golar LNG Partners LP was offset by improved earnings in respect of the Golar Viking and the Golar Seal, both of which experienced improved utilisation. Despite costs associated with positioning and then idling the newly delivered Crystal, voyage costs decreased from $6.1 million in the first quarter to $3.2 million in the second quarter.
Most of the savings were concentrated on the Viking and the Igloo. Vessel operating costs decreased by $2.0 million from $13.8 million in the first quarter to $11.8 million in the second quarter. Following the rescheduling of the newbuild delivery program during the first quarter, the Company has been able to optimise the build-up of crewing levels and substantial savings in operating costs have been achieved as a result. Savings have also been made in respect of the Gimi which spent the entire quarter in layup versus operating without charter commitments in part of the first quarter. No operating costs were incurred in respect of the FSRU Igloo which was not part of the Golar fleet in the second quarter, compared to 51 days in the first quarter.
These were partially offset by 46 days of additional operating expenses in respect of the newly delivered Crystal.
Administrative expenses decreased from $4.9 million in the first quarter to $4.5 million in the second quarter. Depreciation and amortization at $12.1 million is in line with the first quarter. While there is no second quarter depreciation in respect of the Igloo following its dropdown to the Partnership in the first quarter, Golar Crystal was added to the fleet in May 2014.
The contribution to the Company's net income from operations includes dividend income derived from the Company's share of common units, its general partner stake and incentive distribution rights ("IDRs"), in Golar Partners, which, consistent with the first quarter, collectively totalled $6.4 million for the second quarter. Of this, $1.1 million was generated by the IDRs.
Additionally, the Company receives a dividend of $8.4 million in respect of the Company's ownership of the Partnership's subordinated units, which is accounted for in accordance with the equity method of accounting. The Company has accounted for its share of the Partnership's second quarter earnings (based on its ownership interest in the subordinated units only) through the Equity in net earnings of affiliates line item in the income statement. When all classes of ownership are taken into account, the aggregate underlying cash dividend received from the Partnership during the second quarter of 2014 is $14.8 million. This too is consistent with the first quarter cash receipt.
Interest expense decreased from $2.2 million in the first quarter to $1.4 million in the second quarter, mainly as a result of a decrease in LIBOR rates. Medium to long-term interest rates also followed this trend which resulted in non-cash losses on interest rate swaps of $13.6 million that are reflected in Other Financial Items of $22.0 million for the second quarter.
