Liquefied natural gas (LNG) shipping company Golar LNG Limited reported today a 3Q operating loss of USD 24.2 million as compared to USD 43.4 million in 2Q.
In line with the company’s expectations, 3Q reported an improvement in vessel utilisation, albeit from a very low level in 2Q.
Although headline charter rates remained relatively constant across the quarters, the increase in utilisation from 33% in 2Q to 43% in 3Q together with improved round trip economics resulted in an increase in time charter revenues from USD 16.9 million in 2Q to USD 24.3 million in 3Q. With the exception of the Golar Penguin, all of the carriers recorded utilisation at or above prior quarter levels.
According to Golar, Middle East demand has been the main driver of LNG carrier spot fixtures. Fixing activity in the Middle East and Atlantic regions has been higher than in the Pacific.
Both Egypt and Jordan have recently concluded tenders to buy 56 and 19 cargoes respectively through to the end of 2016. Activity levels in 4Q have continued to improve, particularly for European reloads heading into the new terminals in the Middle East, and in the Atlantic in general.
On November 25, Golar took delivery of its 7th FSRU, the newbuild Golar Tundra. Golar Tundra will shortly proceed to Keppel where the vessel will undergo some minor modifications required to make the FSRU compatible with receiving facilities currently being constructed in the port of Tema, Ghana.
Golar received an underwritten financing commitment for the Golar Tundra and following its delivery a total of USD 205 million was drawn down. Golar Tundra is to commence operations in 2Q 2016 inside the port of Tema under a five-year FSRU contract.
“The company is progressing with the financing for FLNG number 2. Several banks have given indications and the company expects to have a committed facility in place before the end of Q1,” Golar added.
The cash balance at the end of 3Q was USD 222.8 million. Financing of the Golar Tundra and repayment by Golar Partners of the USD 100 million Eskimo vendor loan have added USD 150 million to liquidity since September 30.
The company has decided and agreed to delay the effective dates for the Gandria and Gimi conversion projects until employment contracts for these assets are further advanced.
In addition, Golar said that it has agreed to the repossession of Salju LNG tanker from P.T. Equinox based on a vessel valuation of USD 125 million which is in line with current market valuations.
“This will be satisfied by extinguishing a loan to the vessel owning company and therefore no cash will actually be paid. As the vessel valuation is lower than the USD 138.6 million loan and working capital advances receivable by Golar from P.T. Equinox and the equity injected by P.T. Equinox has been exhausted, a non-cash impairment of USD 15 million (net of associated repossession costs) has been recognised,” the company explained.
With respect to market, the company said that the LNG carrier spot market is now showing the first real signs of recovery on the back of new production capacity starting up and the very welcome acceptance by the market of the Cool Pool, adding that the market for FSRU’s has clearly entered into a new phase.
“Whereas, previously, potential new FSRU projects were frustrated by the inability to secure LNG supply, we now find holders of uncontracted LNG supply motivated to accelerate FSRU projects in an effort to reduce their exposure. Based upon current customer inquiries the Company is very confident that the available uncontracted FSRU capacity will be absorbed shortly,” the company anticipates.
The company said that it was considering the release of some of the equity currently tied up in shipping activities and using this to grow the company’s FLNG activities.
“This can include leveraging unencumbered assets, re-leveraging existing debt facilities as well as being open to strategic transactions within the shipping segment,” Golar said.
“The company expects operating earnings to improve in the coming quarters, driven by an improved shipping market and Golar Tundra commencing operations in 2Q 2016. The Board also expects positive outcomes from the ongoing contract discussions in the FLNG business within the next six months and see significant opportunities to build a solid long term contract backlog and cashflow from this business,” the company concluded.