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Golar LNG Limited (GLNG)

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11.33+0.09 (+0.80%)
At close: 4:00PM EDT
11.24 -0.09 (-0.79%)
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  • W
    Winston
    This came out today...Global LNG demand is expected to grow by 53% to 560 million tonnes per annum (mtpa) between 2020 and 2030, consultancy Wood Mackenzie said.
  • W
    Winston
    There was a reason that GLNG was in the $13 range and moving up before the correction in energy stocks took place. This is just one tidbit from the interim results for the period ended March 31, 2021...
    Our FLNG segment has a contract earnings backlog of $3.4 billion (Golar's share), an unparalleled
    operational record and attractive growth prospects. In order to capture hidden value in this segment and
    to potentially accelerate FLNG growth projects we will consider partnerships at either a project, asset or
    business level.
  • W
    Winston
    YAOUNDE, Cameroon--Cameroon's state-run National Hydrocarbons Corp., or SNH, said it has reached an agreement with French energy company Perenco and gas processor Golar LNG Ltd.(GLNG) aimed at increasing the country's liquefied-natural-gas output by 17% next year.

    As a result of the deal, Cameroon's LNG production is expected to rise from a current 1.2 million metric tons to 1.4 million tons in 2022, said SNH, which manages the West African nation's oil-and-gas industry.

    The increase means the LNG output from Golar's Hilli Episeyo floating LNG facility, located off the coast of the town of Kribi, will see an additional production of 200,000 tons by 2022, SNH said.

    "We are pleased to announce increased capacity utilization of our FLNG Hilli, unlocking embedded value to our shareholders by utilizing more of Hilli's 2.4 million tons of liquefaction capacity," the SNH quoted Golar Chief Executive Karl Fredrik Staubo as saying.
  • m
    martin
    Some color on Hilli from Stifel...their analyst has been rabid long for years, and only sees pearls where others see swine in GLnG...

    ———-
    Golar announced an extension with upstream partners in Africa, Perenco and SNH, for its FLNG, the Hilli Episeyo. Perenco will utilize an additional 0.2 mtpa of the Hilli starting in 2022 taking utilization to 1.4 mtpa. That additional offtake will be linked to TTF, which at current forward rates should generate an additional $26.1m of adjusted EBITDA in 2022 and an option for another 0.2 mtpa in 2023. With almost no incremental capex, that should all fall to the bottom line and still leave more than 1/3 of the capacity for future sales. The contract was less volume than we were expecting, but given the years of delays to get to this point, we still see it as a strategic and financial win for company.

    Key Points

    •The Deal. Perenco and SNH are currently contracted to use 1.2 mtpa of Hilli Episeyo capacity into 2026. The new deal will utilize an additional 0.2 mtpa of the 2.4 mtpa of total capacity starting in
    2022 through the end of the current contract. That LNG production will be linked to TTF gas prices with a floor. At current forward rates of $8.70/mmbtu, Golar should earn an additional $26.1m of Adjusted EBITDA in 2022. For every $1.00/mmbtu move in TTF, Golar's Adjusted EBITDA should move $3.7m. In addition, SNH has an option to increase utilization by an additional 0.2 mtpa to 1.6 mtpa starting in 2023. While short of the full train which we had hoped (and subsequently why we are reducing our estimates), this new contract is long overdue, Golar will not have to spend any capital and will need virtually no operating expense to generate the additional cash flows.

    •The Hilli. Golar has been in a challenging position. Only half of the capacity of the Hilli is being used and while still very profitable, if it were fully utilized they make significantly more given the
    first two trains cover interest and depreciation. The challenge is the vessel is committed to remain on-site for five more years and the counterparties have all the leverage. If they want to increase their drilling program, they can and increase throughput, but Golar has no other customers for the capacity as long as it remains in the current location. As a result, Perenco and SNH have been patient, avoided drilling capital, and waiting for market conditions to strengthen while Golar simply under earned. As the contract conclusion begins to come into view, Golar will have increased leverage as they could move the unit to a new location leaving Perenco with stranded gas and reserves they cannot monetize. Ultimately, we expect Perenco will sign a contract for at least a full third train (3.6 mtpa total) for a much longer duration which would enable Golar to refinance debt and provide capital for additional units.
  • m
    martin
    The NFE investor presentation yesterday was rather a bust. No specifics, nothing new, and only far-flung promises of higher stock valuation. It should always concerns an investor when the CEO touts a future stock price, rather than their current and future business plan (though that too was discussed, in fairness)

    Barclays cut their view to Neutral/$38.

    Why does this matter to GLNG? They are one of the company's largest shareholders. They sold out to them at a NFE market value of almost $1B. Today, their equity portion of the buyout has lost $400M, and the street is dimming on the prospects for NFE shares.

    Now what, GLNG?

    GLNG said they weren't interesting in being a holding company of NFE shares? Well, do you sell now with shares 40% off? Do you believe the story cast by CEO Edens of NFE that they believe a valuation based on 2023 revenues is $80 - $120/sh? If you believe the CEO, then selling before then makes no sense.

    But GLNG needs cash, and they can only borrow against a $30/sh company (today's price) not a $120/sh company (CEO EDEN's price).

    If Edens believes his own tales, then GLNG would do well to request that NFE buyout their 18M share stake for a meager $55/sh, in cash.
  • m
    martin
    The hit to NFE margins with the rise in LNG prices, and the slowing of FIDs on new projects by NFE owing to the surge in LNG costs, will be a drag on NFE share price. GLNG is being its NFE investment shrink daily, but hopefully they were able to hedge their position of 18.6M shares.

    GLNG's focus on upstream LNG was timely, but the lead time for new projects is so long that investment here is very difficult, especially w/o an dividend to tide an investor over till better days.

    It was said by analysts after the last cc, that announcement of the Perenco deal to utilize T3 would be imminent. That seems hyperbole now, and maybe something will be stated in their upcoming Q2 call.
  • J
    Joe
    Today Fearnley's published that 1 yr T/C for TFDE of 90 K and spot at 55-73k. . During a recent video with FLNG and Golar CEOs', FLNG acknowledge they locked in too early and Golar advised they would be benefiting since they have a bit of spot exposure. Not thrilled with Golar's vessels, but based on their spot exposure, I finally bought some. Martin's summary spooked me a bit but hoping NFE rises and Golar executes better.
  • G
    Gary
    @Winston.Glng pays no.distribution .All lng stocks pay cash flow.Why do you own the one that does not ?
  • m
    martin
    Some Headwinds for GLNG:

    1- Their LNGC fleet is locked on mediocre contracts through 2021. They have not materially benefited from the strong market. The market strength cold be fleeting, since 2021 is seeing the greatest infusion of Newbuilds. The high spot rates are due to mostly temporary factors that have led to increased ton miles as more US LNG is sourced to Asia compared to proximate LNG supplies that are offline. If these factors abet, as is expected in coming quarters, LNGC shipping may actually have seen a counter-seasonal high, and GLNG will have lost this window. A weakening in LNGC rates, should that arise later this year, would undermine their IPO effects for the fleet spin.

    2- No news on Hilli T3/T4. This negotiation has been interminable, and GLNG is lossing significant opportunity given the high LNG prices today. Its remarkable how poorly the Perenco charterer situation has evolved, despite the remarkable track record of T1/T2 performance.

    3- Kosmos news last week indicates some delay in Tortue, associated with supplies and costs. GLNG can ill afford any further delays in that venture, especially given their already 11-month push back negotiated with BP.

    4- Risk of an oil price war in OPEC greatly increased this week, and would be seen as a negative on upstream developers of energy (like GLNG), and swiftly undercut their Hilli oil-linked revenue source that just recently began.

    5- Their stake in NFE has decline in value by $300M since the deal was announced in January. With their lock-up expiring shortly on their 18.6M shares, their leverage to that equity has fallen greatly and affects growth plans.

    6- Refinance of their $400M debt coming due in a few quarters is going to take much of their focus, and the NFE stake slid makes life a bit more complicated that earlier assumed,

    Those are the drags, and of course paints a negative view - things can just a swiftly turn rosey again
  • W
    Winston
    Much of the value of GLNG is tied up in NFE. Yet GLNG stock continues its ascent even while NFE stock is under pressure. I believe I have an explanation. The bigger players know that the current dip in NFE stock is the institutions playing with the retail investors. Therefore it is being ignored by the institutions investing in GLNG. In addition GLNG will be selling its ships by the first quarter of 2022 at the latest which will bring GLNG a large cash infusion. This doesn't even count probable progress on other fronts for GLNG. There are numerous catalysts that are likely to happen with the next 9 months that could, and probably will, catapult GLNG stock to the upper teens within the next 9 months (IMHO).
  • W
    Winston
    Most of GLNG's value today is based on its investment in NFE. NFE's operational performance has been stellar. Its stock price will follow. I now have approximately equal positions in both companies but I feel that it will be NFE's stock ascension that will pull GLNG along in the near term, though GLNG has, without question, numerous catalysts waiting that will eventually materialize.
  • G
    Gary
    400 million debt due this year..Any idea how they will pay?Probably sale all Nfe in 20s
  • m
    martin
    So what is a reasonable valuation for the LNGC business?

    In their January 2021 corporate update (post-HYGO), their 10 vessels (one being an FSRU currently working as a carrier) was estimate to have a asset value $2.1B.

    They indicated contractual debt on the fleet was $1.1B.

    Implied is a net equity of $1B in their fleet.

    In other words, a spin-off to realize the value in their fleet, of say 50M shares, would price at $20/sh.

    But that is unlikely. FLNG, for,instance, continues to trade at about 85%of their net equity value for their 13 vessels. The gap is closely quickly, however, as the dividend capacity for the vessels is becoming apparent.

    Therein lies the challenge for GLNG management - to secure their existing fleet on lucarative long-term (greater than 3 yrs on average) so as to secure a revenue stream that also secures a solid div payout.

    So, it their cash flow break even were $45K, and if they secured $70K/day multiyr charters (on average), their free cash flow would be nearly $100M annually. That would be $2/sh, assuming a 50M share issuance in the IPO.

    A pricing at $10/sh would seem easily supported under such a scenario.
  • m
    martin
    Kosmos updates Tortue project...while progress is solid, they appear to have pushed
    first gas out an additional quarter, to Q32023. Not sure how much that impacts GLNG...

    _______________
    July 6 (LNGJ) - Kosmos Energy, the Dallas-based company developing a natural gas and FLNG joint venture with UK major BP offshore Mauritania and Senegal in West Africa, has given an operational update on the project with a delay expected for first gas.

    “In Mauritania and Senegal, the Greater Tortue-Ahmeyim project continued to make steady progress during the quarter with key milestones achieved across all major workstreams,” said Andrew G. Inglis, Chairman and Chief Executive of Kosmos. “However, we are seeing cost inflation and supplier delays in the current environment together with some scope growth and, as a result, we are updating our estimates, with first gas now expected in the third quarter of 2023. Tortue is the right project at the right time with Phases 1 and 2 expected to deliver attractive returns in a strengthening LNG market,” Inglis added.
  • m
    martin
    Announcement on Hilli Increased Utilization this morning.

    This is a rather paltry addition, being less than 1/2 of T3 capacity. Incremental EBITDA is also low at only about $26M annual. Hard to see this meeting the expectations. Beyond 2023, there is talk of further increased utilization, but that depends on more drilling programs, and who knows if that ever occurs. This additional programs would barely lead to full T3 use, if successful. Hilli T4 is likely to stay mothballed throughout the contract with Perenco, it seems.
    ______________

    Golar LNG Limited (“Golar” or “the Company”) announces today that it has agreed with Perenco Cameroon (“Perenco”) and Société Nationale des Hydrocarbures (“SNH”) to increase utilisation of the FLNG Hilli Episeyo (“Hilli”) (the “Agreement”).

    Commencing 2022 the capacity utilisation of Hilli will increase by 200,000 tons of LNG, bringing total utilisation in 2022 to 1.4 million tons. The tolling fee for the 2022 incremental capacity is linked to European gas prices at the Dutch Title Transfer Facility (“TTF”). At current average 2022 TTF gas prices (avg. $8.70/MMBTU for 2022) the increased capacity utilization represents an expected US$26.1m in incremental Adjusted EBITDA. For each US$1.00/mmBtu change in TTF, this Adjusted EBITDA will increase (or decrease) by US$3.7m.

    In addition to the 2022 capacity increase, Perenco and SNH intend to drill and appraise 2 to 3 incremental natural gas wells during 2021, and subsequently upgrade upstream facilities in 2022 to support further sustained increases in production from 2023 onward.

    Under the Agreement, Perenco and SNH are granted an option (“Option”) to increase capacity utilisation of Hilli by up to 400,000 tons of LNG per year from January 2023 through to the end of the current contract term in 2026. This has the potential to increase total annual LNG production from Hilli to 1.6 million tons from January 2023 onwards.
  • m
    martin
    Hard to escape the notion that HYGO/GMLP were bought with inflated currency.

    Mark-to-market, GLNG value of its buyout (NFE share stake) has declined $400M from deal announcement date.

    Some will augur patience and claim that time will heal. True, perhaps.

    GLNG doesn't have the time, however, They have a $400M debt due in a few months, and their use of NFE as collateral is looking more iffy by the day.
  • m
    martin
    Fearnley’s reports today that 1-YR LNGC rates for modern tonnage rose to $82,000/day.

    Also, even larger increases in spot rates.

    Their fleet of 10 LNGC is looking more valuable by the day. With new build vessel prices rising, given surging steel costs, and with overall strong shipping rates, the market value of the existing fleet is probably 20% higher than just a year ago.

    There effective equity in the fleet has grown, as has the fleet’s earnings power. It will be interesting to see if there is an effort (and a market) by management to secure 3-5 yr charters as current contracts unwind in 2H2021.

    Look at the response of FLNG in recent weeks as they began locking their fleet of 13 (latest Generation) vessels.

    There may very well be an appetite for a LNGC shipping spinoff, and perhaps even before end of 2021.
  • m
    martin
    Brent at $74/brl today.

    The price could well hold or even rise from here over the next months and through 2022.

    The Q2 Brent avg is going to be about $68/brl....which would bring an additional $6M in quarterly revenue form the Hilli oil-index link.

    If Q3 averages $75/brl, there would be $12M in additional quarterly revenue from Hilli contract.
  • W
    Winston
    GLNG needs to decide what to do with its NFE stock and when. However, NFE may also decide what to do with its minority shareholder. I would not be surprised to see a stock for stock merger, maybe with a bit of cash thrown in, where NFE absorbs GLNG. I do not see it in the near term with NFE stock at current levels but if NFE stock moves up faster than GLNG stock I see it as a distinct possibility. This may be an insurance policy for GLNG shareholders if the market does not recognize GLNG's value, though that does not seem to be a problem presently.
  • m
    martin
    GLNG shares sliding also because their oil-linked contract on HILLI will cease to be triggered if Brent falls below $60, which seems increasingly likely sooner rather than later.