Q4 2024 Earnings Summary
- GLNG is on track to secure a charter for the Mark II FLNG unit within 2025, which will enable them to proceed with a fourth FLNG unit, indicating a clear growth pipeline and strong demand for their FLNG solutions.
- Potential EBITDA upside from the Gimi FLNG unit: if production exceeds the base capacity of 2.4 million tons per annum (MTPA) and reaches its nameplate capacity of 2.7 MTPA, annual EBITDA could increase from $215 million to $241 million, demonstrating operational leverage and profitability potential.
- GLNG is developing plans for a Mark III FLNG unit with a capacity of 5 million tons, potentially making it the largest FLNG in the world, showcasing their industry leadership and significant growth potential.
- Inflationary pressures may lead to increased capital expenditures (CapEx): Golar LNG acknowledges that there are inflationary pressures on all critical components for liquefaction, and they do not expect prices to be any lower than for the Mark II under construction. This could result in higher CapEx for new FLNG units, potentially impacting profitability.
- Uncertainty in securing contracts for new FLNG units: The company has not yet secured a charter for the Mark II FLNG under construction and is monitoring the situation closely. This may lead to delays or underutilization of assets, which could negatively affect future revenues.
- Potential impact from increased LNG supply and lower gas prices: Discussions around increased LNG exports from the U.S. and the potential for lower global LNG prices could affect demand for Golar LNG's FLNG services. If LNG prices decline due to oversupply, it may impact the profitability and competitiveness of their FLNG projects.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Debt Service for 2025 | Q4 2024 | no prior guidance | $80 million | no prior guidance |
Sensitivity to Brent Price | Q4 2024 | no prior guidance | $3.1 million incremental EBITDA per $1 above $60 | no prior guidance |
Sensitivity to TTF Price | Q4 2024 | no prior guidance | $3.7 million incremental EBITDA per $1 change | no prior guidance |
Mark II FLNG Charter | Q4 2024 | no prior guidance | Target securing charter within 2025 | no prior guidance |
Hilli Recontracting in Argentina | Q4 2024 | no prior guidance | CPs expected to be fulfilled by Q2 2025 | no prior guidance |
Gimi FLNG – First LNG Cargo | Q4 2024 | no prior guidance | Expected export in Q1 2025 | no prior guidance |
Gimi FLNG – Full Commercial Operations | Q4 2024 | no prior guidance | Commence in Q2 2025 | no prior guidance |
EBITDA Backlog – Total | Q4 2024 | no prior guidance | Over $11 billion | no prior guidance |
EBITDA Backlog – Gimi FLNG | Q4 2024 | no prior guidance | Approximately $3 billion | no prior guidance |
Mark II FLNG Construction | Q4 2024 | no prior guidance | Progressing according to schedule | no prior guidance |
Adjusted EBITDA from Hilli (2025) | FY 2025 | $273 million | no current guidance | no current guidance |
Free Cash Flow from Hilli (2025) | FY 2025 | $126 million free cash flow after $80 million debt service | no current guidance | no current guidance |
Gimi Contract – COD | FY 2025 | COD expected in Q2 2025 | no current guidance | no current guidance |
Gimi Contract – Pre-COD Compensation | FY 2025 | Approximately $220 million; $130 million invoiced in 2024 and $78 million received | no current guidance | no current guidance |
Mark II FLNG – Delivery | FY 2025 | Delivery expected in Q4 2027 | no current guidance | no current guidance |
Mark II FLNG Charter | FY 2025 | Target to secure charter within 2025 | no current guidance | no current guidance |
Southern Energy CapEx | FY 2025 | $50–$100 million | no current guidance | no current guidance |
Macaw Energies | FY 2025 | Considered a 2025 event for potential business separation or listing | no current guidance | no current guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Mark II FLNG | Q1 discussions focused on progressing toward FID with target delivery in 2027 and securing charters, Q2 updates detailed 63% completion of long lead items and options for a second unit, Q3 emphasized its “first available” capacity and commercial advantages. | Q4 highlights continued progress with advanced commercial discussions, ~$600 million CapEx already expended, and expectation of securing a charter in 2025 despite residual contract uncertainties. | Consistent focus with steady operational progress; sentiment remains positive with ongoing but manageable uncertainties. |
FLNG Hilli | Q1 focused on recontracting efforts and plans for the 20‑year charter, Q2 reaffirmed its market-leading performance and re‑deployment plans to Argentina, and Q3 stressed the secure 20‑year charter with Pan American Energy including receipt of a reservation notice. | Q4 confirms current contract with Perenco until July 2026, followed by redeployment to Argentina with Conditions Precedent on track, reinforcing its strong operational performance. | Repeated positive operational performance with a clear commercial path; sentiment remains consistently upbeat. |
Mark III FLNG | Not mentioned in Q1 and Q2 earnings calls. | Q3 introduced the concept of a 5‑million‑tonne unit and Q4 continued discussing it as a potential larger capacity project contingent on firm contracts and commercial developments. | New topic that has emerged later; cautious sentiment with potential for significant future impact if conditions are met. |
EBITDA Upside Strategy | Q1 mentioned the Gimi FLNG’s imminent operations with a fixed EBITDA contribution from long‑term contracts, Q2 detailed how Gimi would unlock a multi‑billion‑dollar EBITDA backlog, and Q3 expanded on pre‑COD compensation and refinancing to enhance liquidity. | Q4 continues to leverage the Gimi FLNG’s commodity-linked incremental payments to boost annual EBITDA, reinforcing long‑term upside alongside stable base earnings. | Consistent and positive outlook; strategy to enhance earnings through a mix of fixed and variable components remains a key strength. |
Inflationary Pressures & CapEx Challenges | Q1 and Q2 discussions focused on competitive cost structures for the Mark II project without explicit mention of inflation, while Q3 noted differences in CapEx between Mark II and a potential Mark III. | Q4 explicitly calls out significant inflationary pressure on critical components and rising CapEx per tonne, highlighting cost challenges for future deployments. | Increased emphasis in Q4 indicating a growing concern over rising costs; sentiment becomes more cautious regarding future project economics. |
Geopolitical, Regional & Infrastructure Dependencies | Q1 provided minimal explicit detail, Q2 referenced Argentina’s pipeline needs with modest infrastructure investments, and Q3 offered a broad view including Argentina’s dedicated pipeline, Nigeria’s project delays, and West Africa opportunities. | Q4 concentrates primarily on Argentina’s pipeline requirements while omitting Nigeria and only briefly addressing regional issues, maintaining focus on critical infrastructure dependency. | Consistent strategic risk focus that has narrowed from a broader regional discussion to a concentrated emphasis on Argentina’s infrastructure challenges. |
Asset Utilization & Revenue Generation | Q1 highlighted efforts to improve utilization from initial lower rates and target 90% capacity, Q2 and Q3 showcased 100% economic uptime and strong EBITDA generation from assets like Hilli. | Q4 reinforces the narrative with no concerns over underutilization, citing robust asset performance, 100% uptime, and a significant EBITDA backlog. | Steady, positive performance across periods; focus remains on maximizing utilization and renewals of long‐term contracts. |
Commodity Price Exposure & Contract Trade-offs | Q1 detailed the trade-offs between fixed base tolling and upside from commodity exposure, with reliance on Brent and TTF prices, Q2 echoed this exposure while balancing fixed and variable earnings. | Q4 continues to manage exposure to Brent and TTF prices through a blend of fixed and variable contract components, preserving potential earnings upside amid price fluctuations. | Consistent trade‑off strategy with persistent exposure to commodity price movements; risk and reward balance are maintained across periods. |
Refinancing & Capital Allocation | Q1 discussed debt optimization including refinancing for Gimi and Mark II, Q2 emphasized active refinancing to unlock liquidity for Gimi and Hilli, and Q3 underscored strong liquidity and progress on financing initiatives. | Q4 confirms that refinancing remains a prominent focus with final-stage Gimi refinancing and ongoing capital allocation for FLNG projects supported by a robust cash balance. | No reduced emphasis observed; refinancing and capital allocation continue to be key strategic priorities, reflecting a stable focus across periods. |
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Gimi Capacity and EBITDA Upside
Q: How does increased utilization of Gimi impact EBITDA?
A: If Gimi operates at 100% utilization of 2.7 MTPA, annual EBITDA would increase from $215 million to $241 million, assuming production beyond the base capacity of 2.4 MTPA. This incremental production yields proportionate payments in line with existing EBITDA. -
Fourth FLNG Unit Decision
Q: Will the fourth FLNG be Mark I, II, or III?
A: The fourth FLNG may be a Mark I, II, or III, depending on commercial developments. The choice depends on project size and requirements, and we're not ruling out any option. -
Inflation Impact on CapEx
Q: Can switching shipyards reduce CapEx for the fourth unit?
A: We see inflationary pressure on critical liquefaction components, so we don't expect prices lower than the Mark II under construction. CapEx and tolling rates are increasing, but they go hand in hand. Our decision on shipyard is driven by commercial opportunities, not cost savings. -
Impact of U.S. LNG Exports
Q: Does increased U.S. LNG export affect FLNG projects?
A: While increased U.S. LNG production is considered, our projects remain competitive due to lower gas costs elsewhere, competitive CapEx per ton, and contract structures with fixed base tariffs and upside sharing. Off-takers seek diversified sources, and being close to end users offers advantages, as seen with the Hilli project. -
Argentina Project and Infrastructure
Q: What's the status of infrastructure for a second unit in Argentina?
A: Hilli will use existing pipeline capacity. A dedicated pipeline from Vaca Muerta to Sardinia Gulf is needed beyond that. An oil pipeline FID provides right of way for a gas pipeline, whose construction timeline is shorter than Mark II delivery. Pipeline FEED study isn't a gating item now. Major gas producers joining the Southern Energy project indicates strong support. -
Market Oversupply Risks
Q: Does potential LNG oversupply pose risks to FLNG projects?
A: Higher gas prices are preferable, but our projects are designed to be competitive with marginal producers. We secure investments with attractive base tariffs and benefit from price upside sharing. Demand elasticity exists as LNG becomes price competitive with other fuels, mitigating oversupply risks. -
Criteria for Mark II Prospective Fields
Q: What are the requirements for fields for Mark II contracts?
A: We look for fields with at least 4 Tcf of reserves and sufficient gas flow to feed the FLNG. Resource development lead time must match or be shorter than Mark II delivery. Opportunities exist in several countries with stranded and flared reserves. -
Conversion Candidates for FLNG Units
Q: Have you identified conversion candidates for Mark I or II?
A: Yes, we've started and inspected vessels suitable for conversion. LNG carrier prices are under downward pressure, so we don't feel rushed to acquire but monitor the market closely. Some candidates are direct sisters of the Fuji. -
Spending on Long Lead Items
Q: Have you spent on long lead items for Mark II option in Q1?
A: We have not spent on long lead items during Q1 and don't expect to within the quarter. We continue to monitor lead times and costs closely. -
Schedule for Mark II Contract
Q: What does "on schedule for Mark II FLNG contract commitment" mean?
A: We aim to charter the vessel within 2025, fixing the ship this year to enable the fourth unit. This keeps us on track with our previous communication.