Golar LNG NASDAQ: GLNG reported higher second-quarter earnings as its floating liquefied natural gas fleet continued to perform above contracted levels, while the company announced a firm order for a fourth FLNG conversion unit expected to be available in 2029.
Chief Executive Officer Karl Fredrik Staubo said the company signed an order for another Mark II FLNG unit at CIMC Raffles in China, the same shipyard constructing the FLNG Esperanza. The fourth unit is expected to deliver in 2029 and, according to Golar, will represent the earliest available global FLNG capacity.
The order follows interest from prospective charterers and is consistent with Golar's policy of adding capacity after securing long-term commitments for its existing fleet, Staubo said. While the company has not yet announced a charter for the new unit, management said it is in advanced discussions with potential customers across several regions.
Second-Quarter Financial Results
Chief Financial Officer Eduardo Maranhão said total operating revenue was $130 million in the second quarter. EBITDA increased about 20% sequentially to $127 million, from $106 million in the first quarter, primarily due to higher commodity-linked earnings from the Hilli FLNG.
Hilli generated $37 million in commodity-linked earnings during the quarter, compared with $10 million in the prior quarter. Net income was $56 million, bringing year-to-date net income to $158 million.
Golar declared a quarterly dividend of $0.25 per share. At quarter-end, the company had approximately $900 million in cash and about $1.8 billion of net interest-bearing debt. In July, Golar closed a $600 million revolving credit facility that remained undrawn, bringing available liquidity to approximately $1.5 billion.
Maranhão said Golar has funded about $1.3 billion of equity toward the Esperanza conversion project. He added that potential financing of Hilli and Esperanza could release approximately $2.3 billion of additional liquidity, with discussions on those financings advancing.
Fleet Performance and Argentina Redeployment
Golar said the Gimi FLNG produced 15% above its contracted capacity during the second quarter. Staubo said the unit's performance occurred despite the higher temperatures of the summer period, which can affect liquefaction plants. Management expects high temperatures to continue affecting performance in the third quarter, but said Gimi is still expected to produce meaningfully above its contractual capacity for the year.
The Hilli completed its eight-year contract with Perenco Offshore Cameroon, delivering 100% economic uptime over the life of the contract and 156 cargoes. Its final cargo under the Cameroon contract was delivered July 26.
Hilli is now traveling to Singapore for modifications before beginning a 20-year contract in Argentina during the second half of 2027. Golar expects Hilli to generate annual EBITDA of $285 million before additional commodity-related upside once it begins operations in Argentina. Staubo said the refurbishment and redeployment budget is approximately $350 million from its departure from Cameroon through commissioning in Argentina.
Meanwhile, the FLNG Esperanza conversion was 74% complete, with more than 15 million man-hours worked without lost-time incidents. The project remains on schedule and on budget, with sail-away targeted by the end of 2027 and operations in Argentina expected to begin in the second half of 2028.
Golar said the total six-million-tonne LNG marketing program associated with Argentina is progressing. The first two million tonnes have been sold to Securing Energy for Europe, while multiple offtakers are bidding for the remaining four million tonnes, with additional agreements expected before year-end.
Growth Plans and Fourth FLNG Economics
The fourth FLNG unit will increase Golar-controlled liquefaction capacity by 41%, from 8.6 million tonnes to more than 12 million tonnes on a fully delivered basis. The company said its existing Hilli, Gimi and Esperanza contracts provide an EBITDA backlog of $17 billion through 2045, before commodity upside and inflation adjustments.
The fourth unit has a capital expenditure budget of approximately $2.45 billion, compared with approximately $2.2 billion for Esperanza. Staubo said the roughly 10% increase reflects inflation in long-lead equipment, steel prices and currency fluctuations. He said the budget represents an all-in delivered cost, including shipyard EPC work, crew training, bunkering, transportation to the contract site and anticipated mooring systems.
Management said it expects synergies from repeating the Mark II design and constructing overlapping units at the same yard. Golar has secured a donor vessel for the fourth conversion and has also obtained an option for an additional Mark II FLNG at CIMC Raffles.
In addition, Golar signed a letter of intent with Seatrium in Singapore for shipyard slots that could support Mark I or Mark II FLNG conversions. Management said these arrangements could establish a pathway to a fleet of more than seven units, although the company will maintain its policy of having no more than one uncontracted FLNG unit at a time.
Staubo said Golar will not order a fifth unit until it has clear visibility on a long-term charter for the fourth. He described the typical commercial process as progressing from a term sheet or framework agreement to a definitive contract, followed by satisfaction of conditions precedent such as regulatory approvals, export licenses, environmental permits and, in some cases, tax-regime clarification.
Contracted Earnings and Commodity Exposure
Maranhão said Golar expects annual run-rate EBITDA of approximately $800 million by 2028 once Gimi, Hilli and Esperanza are operating, excluding commodity upside and inflation adjustments. If the fourth FLNG secures terms broadly comparable to Esperanza, annual EBITDA could rise by about 50% to more than $1.2 billion by 2030, he said.
Under the Hilli and Esperanza charters in Argentina, Golar receives a commodity-linked fee equal to 25% of free-on-board LNG prices above $8 per MMBtu. Golar also owns a 10% interest in Southern Energy S.A., or SESA, providing further commodity exposure.
Maranhão said each $1 per MMBtu above $8 could generate up to approximately $100 million of incremental annual earnings for Golar. Based on current and forward pricing, the company estimates that commodity exposure could add up to $500 million annually during the first three years of SESA operations.
Management said it continues to conduct its previously announced strategic review but will not provide details on its potential outcome or timing unless there is material information to disclose or the board ends the process.
About Golar LNG (NASDAQ:GLNG)
Golar LNG Ltd. is a leading owner and operator of liquefied natural gas (LNG) carriers and floating infrastructure. The company specializes in the transportation of LNG on long-term and spot charters for major energy firms around the world. In addition to shipping, Golar LNG has broadened its services to include project development and the conversion of existing carriers into Floating Liquefied Natural Gas (FLNG) and Floating Storage and Regasification Unit (FSRU) vessels.
Since pioneering the first purpose-built FLNG conversion project, Golar LNG has been at the forefront of offshore gas monetization.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider Golar LNG, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Golar LNG wasn't on the list.
While Golar LNG currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Looking to profit from the electric vehicle mega-trend? Click the link to see our list of which EV stocks show the most long-term potential.
Get This Free Report
