Q3 2024 Earnings Summary
- Golar LNG is experiencing strong demand for its FLNG units, with multiple potential projects requiring more than one unit, including in Argentina. This demand supports their growth ambitions and indicates a robust pipeline of opportunities.
- The Hilli FLNG is definitively deploying to Argentina, utilizing the vast Vaca Muerta shale gas reserve, the second largest in the world, and will be the first to enable LNG exports from Argentina, opening up significant growth prospects for Golar LNG in the region.
- Golar LNG is progressing on refinancing and capital allocation plans, aiming to increase dividend payments as projects like Gimi reach commercial operation, and has the financial capacity to fund further growth, including developing a second Mark II FLNG unit.
- Delays in securing new FLNG contracts, particularly in Nigeria. The CEO stated that it is unlikely that the Nigerian projects will move forward within this year, making it less likely to see a Nigerian LNG project sanctioned by year-end. This delay could impact the company's growth prospects.
- Dependence on new infrastructure in Argentina could delay expansion plans. The expansion of FLNG capacity in Argentina requires the construction of a new dedicated pipeline from the Vaca Muerta field to the FLNG location, which is estimated to take around 2 years to complete. This creates a "chicken and egg" situation, potentially delaying the deployment of additional FLNG units.
- Significant capital expenditures required for FLNG redeployment and investments. The company estimates $200 million to $300 million in costs to move and upgrade the Hilli FLNG unit for its redeployment from Cameroon to Argentina. Additionally, Golar's 10% stake in South American Logistics comes with expected CapEx commitments of $50 million to $100 million, which could impact the company's cash flow and financial flexibility.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EBITDA (Hilli) | FY 2024 | $275 million | No current guidance | no current guidance |
Free Cash Flow (Hilli) | FY 2024 | $190 million | No current guidance | no current guidance |
Debt & Liquidity | FY 2024 | Up to $500 million | No current guidance | no current guidance |
Adjusted EBITDA (Hilli) | FY 2025 | No prior guidance | $273 million | no prior guidance |
Free Cash Flow (Hilli) | FY 2025 | No prior guidance | $126 million | no prior guidance |
Hilli Redeployment cost | FY 2025 | No prior guidance | $200 million to $300 million | no prior guidance |
Southern Energy CapEx | FY 2025 | No prior guidance | $50 million to $100 million | no prior guidance |
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Capital Allocation and Dividends
Q: How will you allocate capital from upcoming financings?
A: Golar is progressing on refinancing the Gimi project, targeting $1.4 billion in total financing. For the Mark II FLNG, we expect financing of between 4 to 6 times contracted EBITDA, potentially exceeding the cost of the project. We plan to maintain our current dividend policy and anticipate increasing dividend payments as we de-risk existing projects like the Gimi. Our ambition is also to grow our FLNG portfolio, including a potential second Mark II unit. -
Argentina LNG Development and Hilli Deployment
Q: Is Hilli definitively moving to Argentina, and how do you see Argentina LNG development?
A: Yes, Hilli is definitively moving to Argentina; a reservation notice has been given. Argentina's Vaca Muerta shale discovery holds 300 Tcf of gas, with local consumption around 1 Tcf per year, leaving ample capacity for exports. The Pan American contract utilizing Hilli will be the first outlet for Argentinian LNG exports. We welcome other gas resource owners to partake in the project to provide further gas supplies and support FLNG growth. -
Second Mark II FLNG Option
Q: When does the option for a second Mark II expire, and what is needed to proceed?
A: We need to commit to some long-lead items starting within Q1 to secure an attractive delivery slot without taking on full EPC risk before securing a charter. There's flexibility in the EPC contract beyond Q1, but critical long-lead items require commitment within Q1. If we secure a charter for the first Mark II, we can proceed with the second unit. -
Tortue Phase 2 and FLNG Potential
Q: Are you discussing FLNG solutions with Tortue partners for Phase 2 development?
A: We don't comment on specific projects, but for the first phase, BP and Kosmos found FLNG to be the most economical option. With the growing acceptance of FLNG technology, it's natural that FLNG is one of the options they consider for Phase 2. There are benefits in utilizing the same operator, including synergies in offloading, crewing, and spare parts. -
CapEx for Hilli and Southern Energy
Q: What are the CapEx expectations for Hilli's move and your stake in Southern Energy?
A: The total cost of moving Hilli to Argentina is estimated at $200 million to $300 million, covering disconnecting in Cameroon, upgrades for 20-year operation, and sailing to Argentina. Regarding Southern Energy, we estimate an amount between $50 million to $100 million in CapEx commitments attributable to our 10% stake. -
Mark III Newbuild FLNG Plans
Q: What are your plans for the Mark III newbuild unit?
A: The Mark III is a 5 million tonnes per annum unit, a newbuild from scratch with longer construction time and higher CapEx per tonne. We are unlikely to order a Mark III on speculation and would only proceed against a firm contract. Based on shipyard capacity, delivery would be in late 2029 or early 2030 if ordered today. -
Macaw's Separate Listing Plans
Q: What are your plans for Macaw's separate listing in 2025?
A: Macaw has sold its first ISO containers from flare gas production, but we're tweaking the unit to better handle changes in gas quality flows. Once it's in a more stable state, we'll revisit the idea of a separate listing, now considered a 2025 event. We've had industrial interests on site expressing interest in the technology and business. -
FLNG Expansion and Market Demand
Q: What does the backlog of potential inquiries look like for further FLNGs?
A: There are plenty of stranded gas reserves worldwide, and several projects we're discussing may require more than one unit. Once projects reach first gas, expansion opportunities arise. The growing acceptance of FLNG technology supports our growth ambitions, offering cost advantages over incremental capacity in the U.S.. -
Nigerian LNG Project with NMPC
Q: What's the status of the FLNG agreement with NMPC in Nigeria?
A: We signed a development agreement with NMPC aiming for FID by year-end, but it's less likely to move forward within this year. We see it as unlikely to happen within '24, but NMPC remains a contender as we aim to have the unit contracted within '25. -
Infrastructure Needs for Argentina FLNG Expansion
Q: What infrastructure is needed for Argentina to handle a second FLNG unit?
A: A designated pipeline from Vaca Muerta to the FLNG location is needed, as there's insufficient spare capacity in the existing network. Work on such a pipeline has started, with construction estimated at around 2 years. The plan is to build the pipeline alongside an existing oil pipeline under completion. Pipeline development needs to occur in tandem with incremental FLNGs.