Golar LNG Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 28, 2024

There are 8 speakers on the call.

Operator

Welcome to the Golar LNG Limited Quarter 1 2024 Presentation. After the slide presentation by CEO, Karl Frederic Stabo and CFO, Eduardo Marinhel, there will be a question and answer session. Information on how to ask a question will be provided then. I will now pass you over to Karl Friedrich Starbo. Karl, please go ahead.

Speaker 1

Thank you, operator, and welcome to Golar LNG's Q1 2024 Earnings Results Presentation. My name is Karl Friedrich Staubow, CEO, Golar LNG, and I'm accompanied today by our CFO, Eduardo Marniau, to present this quarter's results. Before we get into the presentation, please note the forward looking statements on Slide 2. We start at Slide 3 and an overview of Golar today. We own 2 FLNG assets: Hilli, the world's 1st FLNG with a market leading operational track record of 100 percent economic uptime since operations start up in 2018 And the FLNG Gimi recently delivered to the GT Hub GTA Hub Offshore Senegal Mauritania to start a 20 year contract for BP.

Speaker 1

We are contemplating to order our 3rd FLNG, a Mark II with an annual liquefaction capacity of 3.5 Mtpa. During the Q1, we took delivery of the FLNG conversion candidate, the LNG carrier Fuji LNG. We also own a legacy shipping LNG carrier, the Golar Arctic, which we are now considering for long term charter or an opportunistic sale of the vessel. We have 2 financial investments, Macau Energies, a small scale land based solution for capturing and monetization of flare gas as well as a small scale LNG carrier company called Avenir LNG, where Golar was a founding shareholder together with Stolt Nielsen and Hoegh LNG. On the right hand side of the slide, we've summarized some of the key stats of Golar.

Speaker 1

We have a strong financial position with a market cap of SEK 2,800,000,000, a cash position of approximately SEK 700,000,000 net debt of SEK 550,000,000 and significant financial flexibility in debt optimization of existing assets. For 2023, we had an EBITDA of SEK 356,000,000 and this is before the start up of Gimi under her 20 year charter with BP expected to add approximately $150,000,000 of EBITDA to Golar on an annual basis. We have meaningful cash flow visibility with an EBITDA backlog standing at about $5,000,000,000 with further upside once we recontract Hilli and move ahead with a contemplated FID on our Mark II FLNG project. We have a strong focus on shareholder returns. Last year, we reintroduced a quarterly dividend and accelerated a share buyback program.

Speaker 1

We're very enthusiastic about the state of the business and the progress made on attractive FLNG growth prospects during the quarter. Turning to Slide 4, Golar remains the only provider of FLNG as a service, and we own the largest FLNG fleet by production capacity. This is relevant as gas resource owners of proven reserves, either stranded, re injected or flared gas, look to monetize proven reserves whilst maintaining meaningful ownership and exposure to these resources. Golar's position as the only proven service provider of maritime liquefactions enables us to offer a unique value proposition to these gas resource owners and governments. We own and operate the largest fleet by number of units at par with E and I and Petronas and largest in the world by liquefaction capacity.

Speaker 1

Golar pioneered the FLNG concept with the construction and delivery of Hilli and we've also demonstrated the lowest CapEx per tonne of liquefaction capacity and market leading operational track record. Based on current yard discussion for the contemplated Mark II FLNG project, we expect to maintain this attractive CapEx per tonne of around $600,000,000 per MTPA of production capacity. Turning to Slide 5. Demand for LNG remains strong with a healthy outlook. We continue to be constructive on the LNG market as demand outlook remains robust with an expectation of close to 70% growth in traded volumes between 2023 2,040.

Speaker 1

LNG is the 2nd fastest growing source of energy after renewables. From a geographical perspective, Asian nations drive LNG demand and make up more than 85% of expected demand growth through 2,040. LNG demand is driven by decarbonization efforts in energy intensive industries such as steel, cement and fertilizer. LNG is favored due to its emission and flexibility benefits over other fossil fuels And coal and oil switch to LNG and natural gas is an important driver of the target reduction in energy related emissions towards 2,050. This supports long term offtake demand for our FLNG units.

Speaker 1

Moreover, the focus on data centers and AI is increasing, pushing energy demand in both the Eastern and Western Hemisphere and offsetting some of the reduced energy demand from increased efficiency of other energy consumers. We also see an overall growth in power consumption in developing nations, witnessing expansion in industrial production as outsourced overseas productions moves from China to other low cost regions. Countries such as Thailand and Bangladesh rapidly boost LNG consumption with anticipated demand growth from 20,000,000 to 60,000,000 tonnes through 2,040. Turning to Slide 7 and the highlights for the quarter. Hilli continued her operational excellence, having now delivered 112 cargoes in start up and more than 7,000,000 tonnes of LNG produced.

Speaker 1

Gimi is more to the GTA hub and ready to commence operations. The GTA FPSO remains on critical path for FLNG for LNG production on this mega project. We have progressed the contemplated Mark II growth project closer to FID with strong progress across the 3 parameters for FID to be fulfilled. Those 3 are a final yard EPC contract, construction financing that Eduardo will elaborate on later on and commercial opportunities for FLNG deployments. If we FID the Mark II within 2024, we expect to take delivery of the FLNG within the second half of twenty twenty seven.

Speaker 1

The framework agreement for potential FLNG deployment announced during Q4 has now progressed to detailed document negotiations for an up to 20 year potential FLNG charter with a 2027 startup. We'll elaborate on that later on in the presentation. On corporate and other, I'll let Eduardo cover the quarterly results later on. For Macau Energies, we have now successfully developed the pilot LNG production unit named F2X. The F2X unit has already produced LNG during testing and is currently being mobilized to a flare gas site in Texas for live testing and commercial use.

Speaker 1

Once the Macau technology is fully proven, we will evaluate alternatives to separate list Macau into a separate entity and build up a portfolio of F2X units. Turning to Slide 8 and an update on the FLNG Gimi. On the right hand side of the slide, you can see Gimi moored to the GTA hub. The vessel sits behind a 1.2 kilometer breakwater and is moored to the steel infrastructure, which makes up the hub itself. On the right hand side, you can see the BP owned FPSO departing tariff on our way to our offshore location.

Speaker 1

The hookup and commissioning of the FPSO are now on critical path to 1st gas and expected to occur in Q3 2024. Whilst we wait for 1st gas, Golar has now started to receive standby day rate. We're also pleased to announce that we made positive progress with the GTA operators, BP and Kosmos, to resolve the disputed pre COD contractual mechanisms as well as the aligned interest and cooperation to work up alternatives to shorten the scheduled 6 month commissioning period. We continue to build on the constructive cooperation between the partners to optimize time to COD. Slide 9 further highlights the key steps for Gimi and the GTA field to reach COD.

Speaker 1

As you can see, the first two milestones have been concluded, and we're waiting to embark on LNG production. As explained, the commissioning period is expected to be approximately 6 months with commercial operations anticipated thereafter. As explained, we now receive a standby day rates and daily commissioning payments ahead of COD. COD triggers the start of a 20 year lease and operate agreement that unlocks the equivalent of around SEK 3,000,000,000 of adjusted EBITDA backlog to Golar or about $150,000,000 per year. Changing to Slide 10 and Hilli.

Speaker 1

Hilli continued their market leading operational performance with another quarter of 100 percent economic uptime. In addition to the economic benefits to Hilli stakeholders, including the host government, upstream partners and Golar shareholders, our FLNG operations have significant environmental benefits to the areas we operate in, especially if the source gas is being flared. We also serve the communities where we operate through a series of initiatives, including local purchasing, hiring of domestic staff. On Hilli today, we have 90% of onshore support staff and 40% of offshore staff being Cameroonians. We have local education programs and infrastructure support projects such as water wells, street slides and other initiatives that benefit the communities we operate in far beyond the contract duration of FLNG operations.

Speaker 1

Healy enabled Cameroon to become the world's 20th LNG exporting country upon startup of operations in 2018 and remains the only LNG facility in the country. Today, there are several nations with proven or associated gas reserves that would like to access these benefits and currently drive demand for Hilli recontracting at the end of our current charter in July 2026. Turning to Slide 11 and Mark II. We continue to develop Mark II towards FID. As previously guided, we have committed more than $400,000,000 to our planned next FLNG vessel, where $266,000,000 have been spent to date, all of which is currently covered by equity.

Speaker 1

Long lead items are now 58% complete. During the quarter, we have continued to work with the topside provider and the shipyard to reconfirm the yard slots and pricing. We still expect an all in FLNG price to be in the industry leading range of around $600,000,000 per MTPA of production capacity. Should we order the vessel within the summer of 2024, we expect sail away in the second half of twenty twenty seven. Turning to Slide 12 and Business Development Update.

Speaker 1

Our focus remains on redeploying the FLNG Hilli following the end of our current charter in July 26 and thereafter order and secure commercial terms for a contemplated Mark II FLNG. We are very positive to the developments of the framework agreement announced in our Q4 2023 earnings release that has now progressed to detailed contract negotiations from up to 20 air FLNG deployments. We see strong alignment with the potential charter, host government and site selection for the deployment of FLNG production. In addition to that specific opportunity, we continue to advance additional FLNG developments, where most of the activity remains in West Africa and South America, but we're also pleased to see other geographies actively pursuing FLNG developments. On the back of this increased FLNG business development activity, we have now recruited a Chief Commercial Officer, Federico Peterson and the further 2 highly experienced maritime and upstream development colleagues.

Speaker 1

And combined, the 3 of them have more than 70 years of business development experience, and we're very pleased to have them on the team, and we already see benefits in terms of building the FLNG pipeline. We expect to continue to update the market once we have material news on this front. On Page 13, switching gears to Macau Energies. On the top right, you can see the F2X units mounted outside of the factory where the unit is constructed in Texas, U. S.

Speaker 1

This is a modularized system that enables capturing and monetization of flare gas for land wealth, specifically targeting markets in the U. S, South America and Middle East. We're pleased to say that the first unit was delivered on time and budget and has proven to already produce LNG from natural gas inputs. The unit is currently being mobilized to a site in Texas for commercial demonstration of the technology. We see the business opportunity as very attractive time from CapEx to cash flow.

Speaker 1

We're approximately 10 to 12 months to build 1 unit. Based on the current planned commercial model, we see a CapEx to EBITDA of around 3 to 4x based on the existing commercial opportunities that we have identified. We currently have several large potential clients of Macau and the F2X technology doing due diligence on the company, and some of them have expressed interest for offtake of multiple units. As explained earlier in the presentation, we will consider to separate out Macau in a stand alone entity during 2024 to roll out the business model and build a portfolio of F2X units. Turning to Slide 14.

Speaker 1

Earlier today, Golar released its 2023 ESG report. The ESG report highlights some of the key achievements conducted over the course of the last 12 months, including the completion of Gimi with 38,000,000 man hours worked without any lost time incidents, the derisking of Golar from a single asset FLNG company to 2 FLNGs in operation with a further third unit contemplated. We elaborate on the benefits of the F2X system in Macau and some of the developments on our carbon capture investments in Aqualung. We expand on some of the initiatives already mentioned under the Hilli section that we have conducted in Cameroon, and we would encourage all of you to enter our website to further learn about Golar's ESG performance over the course of the last 12 months. I'll now hand it over to Eduardo to take us through the Q1 group results.

Speaker 2

Good morning, everyone, and thanks, Karl. I'm pleased to share an overview on Golar's financial performance during Q1. Turning over to Slide 16, I wanted to show some of the highlights of this quarter. Total operating revenues amounted to CHF 65,000,000 with total FLNG tariffs reaching CAD86 1,000,000 down from CAD110 1,000,000 recorded in the same quarter last year. This reduction can be attributed to lower realized Brent and TTF linked earnings when compared to last year.

Speaker 2

We always look at FLNG tariff as the appropriate metric, which reflects all realized liquefaction revenues, including gains on our oil and gas linked fees. We had a net income of $66,000,000 in Q1. This figure represents a significant improvement on a year on year basis. Adjusted EBITDA came in at $64,000,000 down 24% when compared to the same quarter in 2023 as a result of lower Brent and TTF prices, which ultimately impacted Hilli's earnings. Our liquidity position remains strong with approximately $700,000,000 of cash on hand and expected receivables from our closed TTF hedges.

Speaker 2

Based on that, our net debt at the quarter end stood at $550,000,000 We continue to execute on our share buyback program this quarter, which reduced the number of outstanding shares to 104,000,000 at the end of the quarter. So now moving on to Slide 17. Hilli maintained 100 percent economic uptime in its market leading operational track record. Here we can see the evolution of Hilli's EBITDA contribution over the last quarters. We're looking on a year on year basis, Hilli generated $64,000,000 in Q1.

Speaker 2

This number includes $31,000,000 from base tolling fees. Brent and TTF linked fees were down to $15,000,000 $18,000,000 respectively. We retain exposure to Brent and TTF. So should prices continue to improve in the coming quarters, we should expect increased distributions from Hilli until the end of its current contract. Moving on to Slide 18, You can see that we remain exposed to oil and gas prices for the remainder of 2024, while at the same time expect to benefit from marketing gains from our previous TTS launch.

Speaker 2

Based on current forward prices, FIL is expected to generate approximately $274,000,000 this year, while debt service, including principal amortization is expected to come down to $87,000,000 in 2024, resulting in total free cash flow to equity of just under $200,000,000 per year. So moving on to Slide 19. We remain committed to shareholder returns and executing on our share buyback program.

Speaker 1

As you

Speaker 2

can see, in 2020 3, we paid over $168,000,000 in dividends and share buybacks. With the recently announced dividend of $0.25 this quarter, the total amount of dividends and buybacks in 2024 will exceed $40,000,000 We've bought back approximately 700,000 shares this quarter, leaving 104,000,000 shares outstanding at the end of the quarter. Out of the $150,000,000 which was approved last year, dollars 74,000,000 remain available for further repurchases, which we will continue to opportunistically pursue. This quarter, we are declaring a dividend of $0.25 a share with a record date on the 10th June and payment on the 17th June. Now turning over to Slide 20.

Speaker 2

As we approach the start up of the 20 year Gimi contract with BP, we have the opportunity to improve our current debt structure and release a significant amount of equity, which is tied to that project. We have been in close dialogue with various lenders and have recently executed term sheets for refinancing alternatives ranging from around $1,000,000,000 to up to $1,400,000,000 As of today, we have drawn $630,000,000 under the existing $700,000,000 facility. So when running the numbers based on our 70% stake, a potential refinancing could unlock more than $500,000,000 net to Golar. This is another stepping stone towards our funding plan for the Mark II project. We have been actively negotiating a new long term financing package for the Mark II of approximately $1,200,000,000 So when considering the expected net proceeds from a potential Gimi refinancing plus around $300,000,000 which Carl mentioned earlier today, which has been fully equity funded until now, which includes the purchases of long lead equipment and the acquisition of the donor vessel, the LNGC Fuji.

Speaker 2

This proposed financing will support our funding strategy to move ahead with the Mark II project FID in the coming quarters. I'll now hand over the call to Karl for some closing remarks.

Speaker 1

Thanks, Eduardo. I'll now turn to Slide 22 to outline the summary and the next steps. So on Hilli, our utmost focus is to maintain the market leading operational track record and focus on recontracting the vessel at the end of current charter. We're very pleased with the developments of the potential 20 year charter, which we are currently in detailed negotiations for. On Gimi, our ambition is to conclude the pre COD cash flow mechanisms with BP and continue the very positive progress to COD.

Speaker 1

As Eduardo just explained, we are also focusing on the debt optimization through a potential refinancing of this vessel. Turning to Mark 2. We have spent $270,000,000 to date with targets FID subject to final yard contract, a construction facility being available and charter visibility on either Hilli or Demark 2. As explained earlier in the presentation, we have gotten reconfirmation of a CapEx per tonne of SEK 600,000,000 per MTPA and a target 2027 delivery if ordered this summer. Under corporate and investments, we are targeting a separate listing of Macau Energies, a sale or long term charter of Golar Arctic, And we remain committed to strong shareholder returns, supported by current strong cash flow generation with significant upside both from recontracting of Hilli and ordering and contracting of Mark II.

Speaker 1

We have significant financial flexibility in debt optimization and continued capacity under the existing share buyback program. That concludes the prepared remarks, and we're happy to open up for any questions.

Operator

Thank you. Your first question comes from the line of Ben Nolan from Stifel.

Speaker 3

So my first question, as you've made progress on this framework agreement and there's a little bit left to be done, but seems like it's likely to move forward. Hopefully, that's not an overstatement. I was hoping that you maybe can give a little bit more color on a few things. First of all, is it for MARQ II? Is that how we should think about it?

Speaker 3

And then along with that, could it potentially encompass more than 1 unit?

Speaker 1

Hi, Ben. Yes, it could potentially encompass more than 1 unit over time. And initially, both us and the client are working on whether Hilli ORMARK2 should be the first one out.

Speaker 3

Okay. All right. I appreciate that. And then on the Hilli, it comes off contract in the middle of 2026. Is there any potential or is there a way at which it could start a new contract that same year?

Speaker 3

Just is there need to be a little downtime for upgrades and so forth?

Speaker 1

That's 100% dependent on the location in which we recontract. Of course, if we were to stay on-site in Cameroon, we obviously do not need to go to shipyard. If we go to one of the neighboring countries, subject to water depth, we might not need to go for any vessel upgrades. But it's also linked to the duration of recontracting. And if you're looking for close to 20 hour operations, we believe it would be beneficial to have a relatively short yard stay to ensure continuous operation in the 20 year period and don't have any need to go for maintenance at that time.

Speaker 3

Okay. All right. I appreciate it. Thank you.

Operator

Thank you. We will take our next question. And your next question comes from the line of Alexander Bidwell from Weather Research and Advisory. Please go ahead. Your line is open.

Speaker 4

Good morning. This is Alex on for Greg Wazikowski this quarter. Thank you for taking my questions. Just a quick one here on Hilli. So what could you give us a sense of the I guess the general timeline you'd be looking at for redeployment?

Speaker 4

I'd like a little bit more color on when she comes off in July, what's the, I guess, the path to first gas at whatever the new project is? You mentioned before that you're looking at potentially bringing her into a yard to do some maintenance and some refit work. But are we expecting sort of similar type commissioning timeline once she gets on-site that you'd see on Gimi?

Speaker 1

Hi, Alex. So provided she does not stay in country, what you would have to do is to decommission the vessel from its existing site. We would likely then sail to a yard. The yard we do not need to go to a dry dock at all. So that is most likely to be either to buy dry docks, Tenerife or similar.

Speaker 1

The primary reason to do it is life extension for a longer term contract. We expect the yard stay to take plusminus3 months and then you then sail down to location of operation. We do not expect a 6 month commissioning period once we're on-site. We had a significantly shorter than 6 months commissioning period of Hilli when we first started operation in Cameroon. And given that the vessel has been producing for 8 years, we know that all of the systems, pumps, generators and so forth are working well.

Speaker 1

So we expect a significantly shorter commissioning period. We would expect more in the tune of 1 to 2 months. But through commissioning period, you are producing LNG. So it's not like commissioning period is without revenue.

Speaker 4

All right. Thank you very much. And one quick question on Mark 2. So what sort of lessons learned have you guys been applying from your Mark I designs on this new design? And do you guys expect to see, say, optimized design for ease of maintenance or lowering your maintenance costs on the facility?

Speaker 1

That's a very good question. So dependent on how detailed we should go, in this call, I suggest we keep it relatively high level. But the key benefit of Mark 2 over Mark 1 is that the entire liquefaction plant is built on an entire new midsection. So if you look at the illustrations here, you can see that all of the liquefaction is built on a new unit, which is 80 meters long and 60 meters wide. That means that we could modularize the whole construction of the liquefaction plant and then add the storage being the ship.

Speaker 1

That's the benefit of Mark II. On Mark I, we have the liquefaction on one side of the ship and support vessels on the other. That means that it's far more stick building in a Mark I than a Mark II. Hence, on Mark II, it's quicker, easier to operate, less space restriction and enables modularized build, which is to a larger extent than Mark 1 repeatable. So yes, there's significant learning effects, more space, but the same technology.

Speaker 4

All righty. Thank you very much. That's all from my side.

Speaker 1

Thanks, Alex.

Operator

Thank you. We will take our next question. And your next question comes from the line of Chris Robertson from Deutsche Bank. Please go ahead. Your line is open.

Speaker 3

Hey, thank you for taking

Speaker 5

my questions. Good morning or afternoon, Carlin and Eduardo. My question is just centered maybe around more theoretical scenarios here in terms of how you're looking at ideal contract terms, let's say, for a re contracting of the Hilli? I mean, it's a given that you would potentially want the full utilization of the asset. But as we're thinking here about the choices kind of with the pricing outlook for LNG here, how much would in your mind to be ideal for the base tolling arrangement versus commodity price exposure as it relates to just capacity?

Speaker 1

Chris, that's an interesting trade off. So I think it's fair to say that the higher base you ask for, obviously, the less carry you get on the upside and vice versa. What we tend to see is that the potential charter or upstream partners are far more open to share on the upside as opposed to cover on the downside. So on the balance, what we want to cover is debt service and sort of a minimal return to equity on the fixed tolling and then have an attractive breakeven on where we share the upside from.

Speaker 5

Okay. That's fair. I guess, Carl, you had mentioned some other geographies pursuing FLNG beyond the 2 focus regions that you've typically looked at in West Africa and South America. Can you go into a little bit more detail on where you're seeing that?

Speaker 1

Other geographies includes further north in the Americas and Middle East.

Speaker 5

Okay, got it. And then last question follow-up, as you brought in your new commercial officer here as well as development personnel, you said that you've realized some gain so far or at least some help there. Can you go into a little bit more detail on exactly the either what they bring to the table in terms of their network or expertise? Or how are they driving the process forward from a day to day perspective?

Speaker 1

So with reference to your question on sort of the upside sharing, people with in-depth experience from Upstream Business Development is very helpful to our commercial team because we have further insights into where and how much we can share of the Upstream. And obviously, with the combined 70 years of successful industry experience, they have significant relationships to potential upstream partners. So it's both the benefits of in-depth knowledge of the upstream part of the value chain and the relationships.

Speaker 5

Got it. That's great color. Thank you very much for the time. I'll turn it over.

Operator

Thank you. Thank you. We will take our next question. And your next question comes from the line of Liam Burke from B. Riley Financial.

Operator

Please go ahead. Your line is open.

Speaker 6

Thank you. Hi, Karl. Hi, Eduardo. How are you?

Speaker 3

Well, Liam.

Speaker 6

Karl, in your discussions or in the negotiations on the Mark II, are you talking with multiple parties or is this competition on the other side for the access to the 1st Mark II? Or is it one potential charterer looking at multiple projects?

Speaker 1

From the chartering side, it's more than one for sure. There are several different we're talking to on Mark II. What we see both across Hilli and Mark II and in this market in general is time to cash flow is important. And therefore, we think it's important to safeguard delivery. Obviously, it's clear to the whole market from when Hilli is available, that's from July 26 onwards.

Speaker 1

And we think it's important to safeguard a 27 delivery for Mark II because that's far ahead of where we think others could introduce liquefaction capacity. We also see a constraint on yard availability in general for maritime assets. And locking in the yard slot, we think, is an important step in also securing attractive commercial results.

Speaker 6

Great. Thank you. And on Avenir, I mean, you mentioned it, but are you satisfied with the progress there? Or is that a source of cash that you can reinvest in other projects?

Speaker 1

It's fair to say that Avenir was more core to us when we ungolar power or later renamed the HyGo. But we like the investment. Avenir recently added another 2 new builds to the fleet. So we currently have a fleet of 5 vessels on the water and 2 new builds under construction. We see that the supplydemand balance for small scale LNG ships is highly attractive with a large part of the commercial fleet ranging from cruise liners, container vessels, dry bulk carriers, tankers and so forth now being ordered with LNG dual fuel, but very limited LNG bunkering infrastructure.

Speaker 1

That combined with small scale distribution of LNG, we think is provides a very attractive backdrop for small scale LNG. But you're right to say that the investment is less strategic to us than what it used to be when we were more involved on the downstream side.

Speaker 6

Great. Thank you, Karl.

Speaker 1

Thank you.

Operator

Thank you. We will take our next question. Your next question comes from the line of Greg Lewis from BTIG. Please go ahead. Your line is open.

Speaker 7

Hey, thanks and good afternoon everybody. Hey, Carl, I was hoping to get a little bit more clarity on the in the press release or in the prepared remarks, in the presentation you talked about the advanced negotiations. Realizing when we did the LE, I guess about a decade ago, we really just wanted proof of concept and therefore, hey, we had a unit that maybe only had 2 trains working. Obviously, you did a great job and scaled it up to 3. Is there any way to kind of think about from lessons learned, if we're going to move forward with a new project, would we even contemplate doing something where the vessel maybe wasn't fully max fully utilized on a unit like the Heli making sure that, that 4th train was up and running?

Speaker 1

Obviously, if we build more units, the plan is to fully utilize them for sure. But at the end of the day, as long as the client pays for it, we can utilize whatever they want to use. But for sure, the target is to fully utilize. I think part of the reason for the current contract structure of Hilli was that it's the first FLNG deployment in the world, and it was a proof of concept. And at the time of entering into the facility, the gas reserve and the flow rates from the existing wells did not allow for a higher production.

Speaker 1

Obviously, we are targeting full utilization of all of our units on all commercial discussions.

Speaker 7

Okay. And then I know it's kind of been touched on between the puts and takes between in any negotiation. Do you want a higher base rate? Do you want a higher tolling? What kind of upside?

Speaker 7

Is there any reason why just given that the unit is basically we can borrow against it. As we think about maybe borrowing against it, is there any kind of floor levels we should be thinking about in terms of EBITDA generation for the Heli just if we think about being able to borrow against it to then go after the next project?

Speaker 1

So our focus is obviously to maximize economic returns based on the resources available to us, and that's our target for all of our projects. And we recognize that with a higher firm base, you get more attractive debt financing versus a lower base and more earnings. So we're obviously looking at equity returns in what we think are likely gas price scenarios. And that's how we manage that side. When you say guiding on base, we have a base today, which is based on 57% or 58% utilization.

Speaker 1

And we wouldn't talk to a new contract if it was less than at least 90% utilization. So I think it's fair to assume that you will have at least the pro rata increase in the base

Speaker 5

rates that you see today.

Speaker 7

Okay, great to hear. Thank you very much for the thoughts.

Speaker 1

Thanks, Greg.

Operator

Thank you. There are no further questions. I would like to hand back for closing remarks.

Speaker 1

Thank you all for dialing in. We hope you found the update interesting. We're certainly very pleased with the developments of the company. We look forward to speak to you all soon and have a great day.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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