(GLOBE NEWSWIRE via COMTEX) -- Highlights
- Exclusive of its interest in FLNG Hilli Episeyo, Golar LNG Partners LP ("Golar Partners" or "the Partnership") generated operating income of $35.9 million for the third quarter of 2019.
- After accounting for $10.9 million of interest rate swap losses, the Partnership reported net income attributable to unit holders of $7.9 million for the third quarter.
- Generated distributable cash flow1 of $33.6 million for the third quarter resulting in a distribution coverage ratio1 of 1.18.
- Secured a two-year charter for LNG carrier Golar Maria commencing November 2020.
- Received notice of contract award for a two-year FSRU Golar Igloo charter commencing March 2020.
- Declared a distribution for the third quarter of $0.4042 per unit.
Financial Results Overview
Golar Partners reports net income attributable to unit holders of $7.9 million and operating income (which excludes its share of Hilli Episeyo which is accounted for under the equity method) of $35.9 million for the third quarter of 2019 ("the third quarter" or "3Q"), as compared to a net loss attributable to unit holders of $5.5 million and operating income of $36.2 million for the second quarter of 2019 ("the second quarter" or "2Q") and net income attributable to unit holders of $49.0 million and operating income of $62.0 million for 3Q 2018.
Consolidated GAAP Financial Information (in thousands of $) Q3 2019 Q2 2019 Q3 2018 Total Operating Revenue 75,818 77,361 108,232 Vessel Operating Expenses (14,740 ) (14,913 ) (16,372 ) Voyage and Commission Expenses (1,685 ) (1,621 ) (2,312 ) Administrative Expenses (3,110 ) (3,251 ) (2,944 ) Operating Income 35,903 36,208 62,011 Interest income 4,990 2,409 1,177 Interest Expense (19,764 ) (20,695 ) (20,062 ) (Losses)/Gains on Derivative Instruments (9,937 ) (24,502 ) 11,338 Net Income/(Loss) attributable to Golar LNG Partners LP Owners 7,924 (5,516 ) 48,964
Non-GAAP Financial Information1 (in thousands of $) Q3 2019 Q2 2019 Q3 2018 Adjusted Interest Income 925 1,050 1,177 Adjusted Net Debt 1,551,154 1,574,079 1,579,441
Segment Information2 Q3 2019 Q2 2019 Q3 2018 (in thousands of $) FSRU* LNG Carrier* FLNG** Total FSRU* LNG Carrier* FLNG** Total FSRU* LNG Carrier* FLNG** Total Total Operating Revenues 63,490 12,328 26,018 101,836 64,824 12,537 26,018 103,379 96,836 11,396 23,736 131,968 Amount invoiced under sales-type lease 4,600 -- -- 4,600 2,300 -- -- 2,300 -- -- -- -- Adjusted Operating Revenues 1 68,090 12,328 26,018 106,436 67,124 12,537 26,018 105,679 96,836 11,396 23,736 131,968 Voyage and Commission Expenses (1,002 ) (683 ) -- (1,685 ) (1,109 ) (512 ) (50 ) (1,671 ) (1,146 ) (1,166 ) (655 ) (2,967 ) Vessel Operating Expenses (9,542 ) (5,198 ) (5,686 ) (20,426 ) (10,070 ) (4,843 ) (6,163 ) (21,076 ) (10,317 ) (6,055 ) (5,049 ) (21,421 ) Administrative Expenses (1,870 ) (1,240 ) (223 ) (3,333 ) (1,947 ) (1,304 ) (198 ) (3,449 ) (1,810 ) (1,134 ) (1,063 ) (4,007 ) Adjusted EBITDA1 55,676 5,207 20,109 80,992 53,998 5,878 19,607 79,483 83,563 3,041 16,969 103,573
* Indirect administrative expenses are allocated to the FSRU and LNG carrier segments based on the number of vessels.
** Relates to the attributable earnings of our investment in Golar Hilli LLC ("Hilli LLC") had we consolidated its 50% of the Hilli common units.
On May 15, 2019, a modification of the FSRU Golar Freeze charter agreement led to a reassessment of the contract under lease accounting rules. This modification resulted in the contract changing from an operating lease to a sales-type lease ("Golar Freeze Finance Lease"). In order to compare the performance of the Golar Freeze with our wider business, management has determined that it will measure the performance of the Golar Freeze Finance Lease based on Adjusted EBITDA (EBITDA as adjusted for the amount invoiced under sales-type lease in the period). This approach allows the Partnership to compare the Golar Freeze charter agreement with its wider business.
As a result of one additional day in the quarter, Adjusted Operating Revenues1, including amounts invoiced under the Golar Freeze Finance Lease and the Partnership's effective share of operating revenues from FLNG Hilli Episeyo, increased $0.7 million from $105.7 million in 2Q to $106.4 million in 3Q. Voyage and commission expenses were in line with the prior quarter.
Vessel operating costs decreased by $0.7 million from $21.1 million in 2Q to $20.4 million in 3Q. Recovery of prior period repair costs incurred in respect of the Golar Igloo and covered by supplier guarantee accounted for most of the reduction.
Administrative expenses and adjusted interest income1 at $3.3 million and $0.9 million respectively were in line with the prior quarter. Primarily due to a decrease in LIBOR, interest expense at $19.8 million in 3Q was $0.9 million lower than 2Q.
Although smaller than prior periods, further decreases in interest rate swap rates during the quarter contributed to a $9.9 million 3Q loss on derivative instruments, compared to a 2Q loss of $24.5 million. As of September 30, 2019, the average fixed interest rate of swaps related to bank debt, including the Partnership's effective share in respect of Hilli Episeyo was approximately 2.2%.
As a result of the foregoing, 3Q distributable cash flow1 increased $1.6 million to $33.6 million compared to $32.0 million in 2Q. The distribution coverage ratio1 increased from 1.12 in 2Q to 1.18 in 3Q.
Although the spot market for steam turbine vessels remained subdued for most of 3Q, a rapid tightening of the shipping market in late September meant that these vessels have since represented the only available tonnage on more than one occasion. The Golar Maria secured close to full utilization in 3Q and the Golar Grand enjoyed operating under its time charter at a higher average daily rate whilst the Golar Mazo remained idle throughout the quarter. Collectively, the 3Q Average Daily TCE1 achieved by these three carriers at $18,200 was approximately 9% lower than 2Q.
The third quarter began with LNG trading at multi-year low prices, at times below $4.00/mmbtu. A subdued commodity price and the continued absence of arbitrage opportunities kept a lid on spot shipping rates. Attracted by the forward curve, European charterers then entered the market for floating storage. The number of prompt available vessels halved from around 11 at the end of July to 6 in early August as a result. Longer than usual voyages to deliver cargoes and idling at sea continued to absorb shipping capacity allowing spot rates to increase. A flood of cargo tenders and associated shipping requirements in the second half of September then sowed the seeds for a sustained improvement in rates and chartering opportunities. Dominated by steam turbine vessels, prompt vessel availability reduced to 3. Seeking to reduce dependence on peak-season LNG imports, Chinese demand also re-emerged in late September. Seasonal tailwinds elsewhere and European storage at close to 100% capacity necessitating ongoing floating storage further reduced vessel availability to zero allowing rates to quickly increase in early October.
New liquefaction facilities continue to deliver. Cameron T1, Prelude, Freeport T1 Corpus Christi T2 and Elba Island have all commenced production and new liquefaction is expected to start up and ramp up at the fastest pace on record over the course of 2020. Ample new supply together with China's efforts to smooth its demand profile mean that Asian LNG prices have not however enjoyed their customary winter boost and the LNG arbitrage window has remained closed. Much of this new US volume has therefore ended up in Europe. Despite lower upward pressure on ton mile demand, the structural shortage of vessels has arrived. Charterers are increasingly keen to sign 1 year+ charters removing more vessels from the market and adding to upward pressure on spot rates.
Both the Golar Maria and Golar Mazo will contribute additional earnings in 4Q with the Golar Maria securing employment through to April 2020. A two year charter for the Golar Maria starting in late 2020 has also been secured. The charter includes options for the charterer to extend by a further 1+1+1 years. Between April and November 2020 the vessel will trade in what is expected to be a strong spot market.
The Partnership has received notice from Kuwait National Petroleum Co. ("KNPC") of a two year contract award for the FSRU Golar Igloo. Pending contract finalization and signing, the award provides the Partnership with two years of continued LNG storage and regasification services at the Mina Al-Ahmadi Refinery in Kuwait for KNPC's regasification seasons beginning in March 2020. The contract may be further extended by KNPC for an additional year through to December 2022. KNPC will not however require the vessel for regasification services in December which will negatively impact 4Q 2019 earnings. During December Golar Igloo will proceed to a yard where previously initiated modifications necessary to increase its regas capacity will be completed ahead of the 2020 regas season, scheduled to start on March 1.
Collectively, the two-year Golar Maria and Golar Igloo contracts are expected to add close to $95 million of additional revenue backlog1.
No vessels were drydocked during 3Q and fleet utilization at 88% was in line with the prior quarter.
FSRU Golar Eskimo is currently undergoing an in-water class renewal, akin to a drydock. As this is taking place during a scheduled maintenance window no off-hire is expected. Golar Mazo is scheduled to be drydocked in early 2020.
Financing and Liquidity
As of September 30, 2019, Golar Partners had cash and cash equivalents of $52.0 million. Including the Partnership's $430.5 million share of debt in respect of FLNG Hilli Episeyo, Adjusted Net Debt1 as at September 30, 2019 was $1,551.2 million. 3Q 2019 Adjusted EBITDA1 amounts to $81.0 million. Based on the above, the 3Q Adjusted Net Debt1 to Annualized Adjusted EBITDA1 ratio was 4.8. As of September 30, 2019, exclusive of a $100 million forward start swap, Golar Partners had interest rate swaps with a notional outstanding value of approximately $1,623 million (including swaps with a notional value of $400.0 million in connection with the Partnership's bonds and $430.5 million in respect of Hilli Episeyo), representing approximately 98% of total debt and capital lease obligations, including assumed debt in respect of Hilli Episeyo, net of long-term restricted cash.
The average fixed interest rate of swaps related to bank debt, including the Partnership's effective share in respect of Hilli Episeyo is approximately 2.2% with an average remaining period to maturity of approximately 3.3 years as of September 30, 2019.
Inclusive of Hilli Episeyo related debt, outstanding bank debt as of September 30, 2019 was $1,274.7 million, which had average margins, in addition to LIBOR, of approximately 2.19%. The Partnership also has a May 2020 maturing $150.0 million Norwegian USD bond with a swapped all-in rate of 6.275% and a 2021 maturing $250 million Norwegian USD bond with a swapped all-in rate of 8.194%. Conversion of the notice of contract award for the 2-year FSRU tender in Kuwait into an executed contract for the Golar Igloo is expected conclude before year end. This together with the two year contract executed in respect of the Golar Maria will remove significant re-contracting risk and place the Partnership on a strong footing to refinance the $150 million high yield bond.
Corporate and Other Matters
During the third quarter 153,728 common units were purchased in the open market at an average price of $10.19 per unit under the Partnership's $50 million authorised common unit repurchase program. These units were then cancelled. As of September 30, 2019, there were 70,738,027 common and general partner units outstanding in the Partnership. Of these, 22,662,977, including 1,436,391 general partner units, were owned by Golar, representing a 32% interest in the Partnership.
On October 28, 2019, Golar Partners declared a distribution for the third quarter of $0.4042 per unit. This distribution was paid on November 14, 2019 to common and general partner unitholders of record on November 8, 2019.
A cash distribution of $0.546875 per Series A preferred unit for the period covering 15 August through to 14 November was also declared. This was paid on November 15, 2019 to all Series A preferred unitholders of record on November 8, 2019.
Total outstanding options as at September 30, 2019 were 99,000.
At the Partnership's Annual General Meeting on September 27, Alf Thorkildsen was elected as a Class I Director. On October 1, Graham Robjohns re-assumed his role as the Partnerships Chief Executive Officer, replacing Brian Tienzo who has been retained as an advisor to the wider group of Golar companies. The Partnership's General Partner also appointed Ms. Georgina Sousa as a replacement for Michael Ashford as one of the General Partner's three appointed Directors. Mr. Ashford retired as Company Secretary and this position has also been assumed by Ms. Sousa.
Fourth quarter distribution coverage ratio1 and Adjusted Net Debt1 to Annualized Adjusted EBITDA1 ratios are both expected to be approximately in line with 3Q levels. Further ahead, new business for the Golar Maria and the FSRU Golar Igloo reduces re-contracting risk and adds to revenue backlog1, which now stands at $2.1 billion as at 30 September, 2019. The Partnership continues to pursue opportunities to redeploy the Golar Spirit and Golar Mazo.
FORWARD LOOKING STATEMENTS
This press release contains certain forward-looking statements concerning future events and Golar Partners' operations, performance and financial condition. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," "plan," "intend" or words or phrases of similar meanings. These statements involve known and unknown risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond Golar Partners' control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to:
- the ability of Golar LNG Partners LP ("Golar Partners," "we," "us" and "our") to enter into long-term time charters, including our ability to re-charter floating storage and regasification units ("FSRUs") and liquefied natural gas ("LNG") carriers following the termination or expiration of their time charters;