Golar LNG FY22 results
Golar LNG achieved a record FY22 results. Net Income of $788MM, up 90% YoY. 4Q22 Net income was $71MM and AEBITDA $87 MM.
Golar has fully completed its business structure transformation by exiting its holdings both in New Fortress Energy and Coolco. It sold 8.3 MM NFE’shares for $418 MM. and some days ago, it exchange the rest of its NFE ownership to acquire NFE’s interest in Golar Hilli (plus $100MM in cash). Golar also sold its remaining shares of Coolco, 8 MM shares in Q4 raising $98 MM, and a further 4.5 MM shares this morning rising around $56 MM.
On the corporate part, Golar repurchased $141 MM out of the $300 MM 2025 maturing unsecured bonds at par and 0.2MM shares during 4Q22
The management also commented that they are considering initiating a dividend policy or expanding their buybacks (as they mentioned in the CC, depending on the share price). However, there are still $159MM of unsecured bonds with a covenant that prohibits the distribution of dividends until April 2024. Golar says they are negotiating this part. Our impression is that dividends will be distributed, but we do not see it in the immediate future.
Operations – Golar Hilli
FLNG Hilli’s AEBITDA increased by $20 MM in Q4 2022 compared to Q3 2022, with Golar’s share at $86 MM. Although the 2022 LNG production was 3.5% below the annual contracted 1.4MTPA due to technical issues and maintenance, which resulted in a $36 million accounting liability. This will be compensated through overproduction in 2023, with no net cash impact to Golar.
Golar effectively unwound its 2023 and 2024 TTF hedges in January 2023, locking in approximately $140MM of TTF hedged EBITDA whilst re-gaining full market exposure to its TTF linked production.
Three weeks ago, Golar agreed to acquire NFE’s interest in the FLNG Hilli. Consequently and starting in 2023, Golar Hilli’s annual EBITDA is expected to increase by approximately $70.0 MM
For 2023, EBITDA from FLNG Hilli is expected to be around $335MM, comprising $138 MM of net tolling fees, $101 MM of TTF fees, $37 MM of TTF fees from March – Dec exposure, and $59 MM of Brent oil fees. For 2024, EBITDA is expected to be around $283 MM.
Golar’s management has been very confident in obtaining a contract with greater utilization and better conditions for Hilli starting in July 2026 (in fact, they have to be in order to make the purchase of the New Fortress part they announced 3 weeks ago).
Growth (New FLNG projects)
As always when we talk about new FLNG projects from Golar, things move forward but very slowly. However, it seems that this time the definitive steps are being taken for what could be an FID of a 3.5MTPA Mark II capacity in 2Q23. At least they have secured the option to purchase a Moss technology LNGC and have made great progress on the spot at the shipyard for delivery in 4Q25.
They have also reported that there is a lot of interest in financing the project (which would not be surprising given how well Hilli is working and Golar’s completely deleveraged situation). Additionally, after what appears to be the definitive breakup of Tortue Phase II with BP and Kosmos, Golar has been very convincing that it would be an integrated project. And we really like this a lot because although there is greater risk, the upside is much greater. The Capex of this project would be in the range of $1.8-2Bn.
Due to the characteristics of the Mark II, the liquefaction part is dealt with first, which is critical (which is why they have spent $320MM to ensure they have this and already have 200 engineers working on the project), and then the ship is cut in half and this liquefaction part is inserted in the middle. So, as long as the ship is at the shipyard by early 2024, it is sufficient to meet the 4Q25 deadline.
Our takeaway about Golar LNG
After two years of absolute transformation for Golar, where it has sold Hygo and the Shipping part, in addition to signing excellent contracts linked to TTF, Golar finds itself in a privileged financial situation, with more than $1 billion in cash that should be enough to finance the new project and distribute dividends and buybacks. Let’s not forget that in just a few months Gimi will start production and Golar will obtain $151MM EBITDA for 20 years. The new FLNG seems closer than ever, but the market will only believe it once the agreement is signed. In the meantime, we are going to be making a lot of money and with spot exposure to TTF, which we believe can bring us some joy again, and the truth is that we are more comfortable than ever with our position in Golar.
Disclaimer: We have direct long exposure to Golar LNG shares
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