- Golar LNG Partners LP ("Golar Partners" or the "Partnership") reports net income attributable to unit holders of $35.4 million and operating income of $55.8 million for the third quarter of 2013
- Generated distributable cash flow of $38.9 million for the third quarter of 2013 with a coverage ratio of 1.25
- Declared distribution of $0.5225 per unit for the third quarter of 2013, an increase of 1.5% over the prior quarter
- Golar Winter drydocking and modification works completed and vessel delivered to new location in Brazil. Uplifted hire rate of approximately $2.2 million per annum takes effect
- Golar LNG Limited ("Golar") secures two FSRU contracts that represent attractive near and medium term acquisition prospects
- Entered into $100 million interest rate swaps with a tenor of 5 years
Financial Results Overview
Golar Partners reports net income attributable to unit holders of $35.4 million and operating income of $55.8 million for the third quarter of 2013 ("the third quarter"), as compared to net income attributable to unit holders of $28.0 million and operating income of $44.4 million for the second quarter of 2013 ("the second quarter") and net income attributable to unit holders of $34.6 million and operating income of $52.0 million for the third quarter of 20121.
Improved operating results for the third quarter of 2013 compared to the same period in 2012 are due in part to a biennial uplift to the capital component of the Golar Spirit and Golar Winter time charter rates that took effect in the second quarter of 2013 coupled with a further increase in the Golar Winter rate that took effect mid-way through the third quarter to compensate for the modification works recently completed. Most of the improvement in operating results, however, reflects the contribution from the Golar Maria. Comparable results for 2012 do not reflect the contribution of Golar Maria as this vessel was not under the common control of Golar at the time of her acquisition by the Partnership in the first quarter of 2013. The improved results are partially offset by increased depreciation and amortisation reflecting the additional investment in the Golar Winter modifications and four vessel drydocks over the intervening 12 months.
1Following the acquisition of the Golar Grand and NR Satu from Golar, the comparative results for the third quarter ended 2012 assume that the Golar Grand and NR Satu were wholly owned by the Partnership for the entire period that the vessels were under the common control of Golar.
An absence of any drydocks since June 2013 has meant that operating results for the third quarter constitute a significant improvement over the second quarter when one LNG carrier, the Methane Princess, and one FSRU, the Golar Winter were in drydock incurring both offhire and positioning costs. Cumulative second quarter offhire in respect of these two vessels amounted to approximately 10 weeks. A third vessel, the Golar Mazo, also drydocked during the second quarter, however, the impact of this was limited to a relatively modest positioning cost. No such offhire or positioning costs were incurred in respect of any vessel during the third quarter. Additional revenue receivable in respect of the Golar Winter modifications commenced in early August.
Net interest expenses increased to $11.1 million for the third quarter of 2013 compared to $10.3 million for the second quarter. This is largely due to the impact of the new $275 million facility, secured by the Golar Winter and the Golar Grand, entered into at the end of the second quarter. The facility is larger and accrues interest at a higher rate than the two leases it replaces, whilst the benefit of the cash discount on termination of the two leases has been reflected in full in the prior period. The facility is split into two tranches, a $225 million term loan and a further $50 million revolver, of which $45 million remains undrawn as of September 30, 2013.
Other financial items for the third quarter of 2013 recorded a loss of $4.1 million compared with a small loss of $0.1 million in the second quarter. Non-cash mark-to-market valuation losses on interest rate swaps of $0.2 million in the third quarter compared to a gain of $4.8 million in the second quarter. This gain however was substantially offset by the write off of deferred financing fees associated with the June refinancing of the Golar Winter and Golar Grand leases.
The Partnership`s Distributable Cash Flow2 for the third quarter of 2013 was $38.9 million as compared to $26.4 million in the second quarter and the coverage ratio was 1.25 as compared to 0.86 for the second quarter as a result of the improved operating results.
On October 24, 2013, Golar Partners declared a distribution for the second quarter of 2013 of $0.5225 per unit, representing a 1.5% increase from the second quarter, which was paid on November 14, 2013.
2Distributable cash flow is a non-GAAP financial measure used by investors to measure the performance of master limited partnerships. Please see Appendix A for a reconciliation to the most directly comparable GAAP financial measure.
Financing and Liquidity
As of September 30, 2013 the Partnership had cash and cash equivalents of $49.8 million and undrawn revolving credit facilities of $65 million. Total debt and capital lease obligations net of restricted cash was $986.6 million as of September 30, 2013.
Based on the above debt amount and annualized3 third quarter 2013 adjusted EBITDA4 Golar Partners has a debt to adjusted EBITDA multiple of 3.4 times.
As of September 30, 2013, Golar Partners had interest rate swaps with a notional outstanding value of approximately $993.7 million (including swaps of notional amount of $227.2 million in connection with the Partnership`s bonds) representing approximately 101% of total debt and capital lease obligations, net of restricted cash. The average fixed interest rate of swaps related to bank debt is approximately 2.4% with average maturity of approximately 3.1 years as of September 30, 2013.
Subsequent to the quarter end the Partnership entered into a $100 million seven year swap at a fixed rate of 2.206% and a further $100 million of forward start swaps with a five year duration, a start date of October 1, 2015 and a fixed rate of 2.955%. These swaps were entered into to cover maturing swaps. As of September 30, 2013 the Partnership had outstanding bank debt of $764.5 million with average margins, in addition to LIBOR or fixed swap rates, of approximately 2.3%. In addition, the Partnership has bonds of $216.1 million with a fixed rate of 6.485%.
3Annualized means the figure for the quarter multiplied by 4.
4Adjusted EBITDA: Earnings before interest, other financial items, taxes, non-controlling interest, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure used by investors to measure our performance. Please see Appendix A for a reconciliation to the most directly comparable GAAP financial measure.
The announcement during the quarter by Golar that it had contracted the FSRU vessels Golar Igloo and Golar Eskimo for periods of 5 years or more provides Golar Partners its first two potential acquisitions from Golar`s fleet of 13 newbuildings.
The Golar Igloo is scheduled to deliver from the yard on time in December 2013 and is contracted to Kuwait National Petroleum Company ("KNPC") for an initial period of 5 years. The contract comprises the provision of portside FSRU services for an anticipated nine months of the year together with a three month window where the vessel is free to pursue spot carrier and other short term business opportunities. Winter scheduling of the three month stand-down period together with favourable positioning mean that the vessel should have realistic trading prospects. The contract is set to commence in March 2014.
The Golar Eskimo has been contracted to the Government of Jordan and will be moored at a purpose built structure that is to be constructed by the Aqaba Development Corporation off the Red Sea port of Aqaba. The FSRU is scheduled to be ready for service in the latter part of the fourth quarter 2014 and its ten year contract is due to commence during the first quarter of 2015.
As expected, following the recent completion of a series of 4 drydockings, operating results in the third quarter have improved significantly from the second quarter. Operating results for the fourth quarter of 2013 are also expected to be strong and approximately in line with the third quarter.
The Partnerships` coverage ratio for the third quarter stands at 1.25 times and leverage as at the end of the third quarter at 3.4 times adjusted EBITDA is decreased from 3.8 times at the same time last year.
The Partnership has performed better than it anticipated at the time of its IPO and distributions have increased by 36%. The increased coverage ratio and reduce net debt to adjusted EBITDA ratio has increased the Partnerships financial flexibility for future acquisitions and distribution growth.
With this solid financial position and with the recent FSRU contract announcements by Golar LNG together with its remaining newbuild fleet of 11 as yet uncontracted vessels, the Board is increasingly confident that Golar Partners can continue to strongly grow its earnings and distributions over the longer term.
November 27, 2013
Golar LNG Partners L.P.
Questions should be directed to:
C/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo or Graham Robjohns
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Source: Golar LNG Partners L.P. via GlobeNewswire