Golar LNG Ltd (GLNG) 0 Q0 法說會逐字稿

Okay, good afternoon everybody. My name is Graham Robjohns and I'm joined as usual today by Charlie Peile, our Executive Vice President. He is not here physically. He is traveling. But he is on the call with us.

We’re very pleased, of course, to be able to present Golar LNG’s Q4 2005 results. We’ll follow a similar agenda to previous quarters as we set out on page two, just moving past forward-looking statements on page 1.

Okay then, so moving on to the now familiar slide, the Golar portfolio, on page three of the presentation. The long-term chartered vessels are, of course, unchanged. I think the main point to note here is the spot vessels utilization improvement. In Q3 we saw 50% utilization and in Q4 we've seen 75% utilization and we expect that to improve further moving into Q1 ’06.

On specific ships, the Golar Winter has committed employment until mid 2006. The Frost is working in the spot market. And of course the Viking, Grandis and new building hull 2234, once she is delivered, have been chartered to Shell. And the first few months of this agreement have been very encouraging in terms of utilization and rates.

The Frost is also, of course, earmarked to be the vessel to be converted into the floating terminal for the Livorno Project, which we shall talk about a little bit later.

Moving over then to page four, we've had pretty busy quarter. However, I've set out here the main Q4 earnings issues and main recent events. As I've just said, I think, and as with the last quarter, we've seen a progressive improvement with the spot vessels earnings from Q2. Q3 was improved on Q2. Q4 was improved on Q3. And as I say, we expect to see some improvement in Q1 ’06 as well.

Korea Line made a profit this quarter as against last quarter’s loss. Our share of their net earnings we've booked to this quarter to this $1.8m.

As a result of a steady increase in long-term interest rates this quarter we again have interest rate swap gains created by the mark to market valuations at the period end. This quarter the net gain after minority interest is $4.8m, although this is not as large as last quarter’s $8.8m.

As we reported last quarter back in October, in fact we've entered into an equity swap. The bank that we did the swap with, Scotia Bank, have required 600,000 shares Golar LNG shares at an average price of $11. And at the year-end, the mark to market gain on that swap was $1.3m, which has been booked and taken to other financial items.

In terms of recent events, we're of course very pleased to have been able to report the three five year charters with Shell during Q4. The charters are market related and therefore variable. But as I say, the Q1 indications are very encouraging.

We’re also obviously very pleased to be able to report finally that the Decree has been issued approving the Livorno floating terminal project, which is obviously an important milestone for this project. Work will now continue with the other project participants – Endesa and Amga – on the logistical and commercial aspects.

Another announcement in Q4 was our contract with Keppel for the conversion of an LNG carrier into a floating storage and regas unit.

And generally, I think as we describe more fully in the results announcement, our project portfolio is developing very well.

So turning over to page five, the income statement. I think Q4 as in Q3 the main driver of the underlying results has been the increase in the spot ships revenue contribution with revenues $2.4m up this quarter from $42.8m last quarter to $45.2m this quarter.

Operating expenses were down slightly from last quarter, but admin costs were increased mainly as a result of expenditure on project development of $1.4m.

Overall operating expenditure, including depreciation, was up this quarter by about $1.5m.

Below the operating income line the main variances to last quarter are a reduction in the net gain in other financial items of $3m, as I mentioned earlier. Mainly driven by lower interest rate, swap gains of course and the net gain from Korea Line this quarter as opposed to a small loss last quarter.

Looking at the whole of 2005, although revenue has increased from 2004 due to the additional ships that we've taken delivery of part way through ’04 and at the beginning of ’05, the low levels of utilization, low charter rates has meant that the costs of the spot market vessels, including depreciation, interest costs and OpEx obviously, have been far higher than earnings. Although this has been offset, to some extent, by increased gains within other financial items and an increased contribution from Korea Line.

Moving over to page six, we have the usual illustration of financial expenses, which just sets out the interest to expense and income related to lease obligations related to debt. And the component parts of other financial items.

If we move over to page seven, we have the balance sheet asset side. Nothing too much to say there.

On page eight the balance sheet liabilities. We paid -- repaid $21m of debt during the quarter and then on January 1, 2006 we incurred $103m of additional lease obligations in respect of the delivery of hull 2226, which is now called the Grandis, of course. So on January 2 of 2006 we had $1b worth of debt and net capital lease obligations of which $630m, or 62%, is effectively fixed interest. That’s with the interest rate swaps that we have.

We also expect to incur a further $120m of debt when we take delivery of our next new building in May of 2006.

Moving over to page nine, we have cash flow. Again, not too much to say here other than the fact that we’re obviously maintaining a good level of operating cash flow.

Okay, I shall now hand over to Charlie to take you through the commercial overview within the presentation.

Good morning, or good afternoon, everybody. I would like to start off with a review of the, or an overview of the spot market, which has certainly changed in character since our previous conversation due to increasing [pounds worth] vessels. The main thing that has happened is that the spare capacity which we saw keeping the rates down for the first half really last year has now consolidated in [pounds] of major players. This is partially the result of some of the projects coming on stream and coming into full operation, which is Egypt, Trinidad and the Atlantic projects have now come on stream and soaked up most of the vessels.

And of course, our current charter to Shell also reflects the same thing, which means that the spare vessels, or the vessels that are now in the hands of a few major players. The charterers in the game such as Shell, Gas de France, Sonatrach and even Excelerate have covered their shipping requirements with medium-term positions reflecting this.

As I say, the spot shipping part is now met from within project schedules. And although spot sellers, the product sellers, still are taking the lion’s share of the deals, there has been some increased and new trader involvement. They’ve been taking particularly Egyptian cargos and reselling in Europe and the US, which is a tradition and encourages the trade pattern.

With the apparent vessel shortage, or rather the move into the larger groupings, rates have improved a lot. The daily rates for spot fixtures have moved up by more than double in some cases. Although that doesn’t reflect obviously actual earnings because now that the ships are being operated from within big groups on time charter or under a long-term contracts, it means that those companies are now having to absorb ballast weighting and other associated trading costs, which before we've had to do that ourselves as owners.

The result for us has resulted in increased rates and also much better utilization. We are seeing much better revenue.

If we move on to 11, I would like to concentrate this month a little bit on the fleet development in the LNG transportation bucket. This graph graphically illustrates the development of the fleet with the red bars showing just how much the fleet is going to grow over the next few years.

What I find particularly interesting is that the yellow bars at the top of the red are the ships that are being delivered that are not attributed to any long-term contracts. And obviously these are our ships. [Dynacom] ships, charcoal ships, the [TNT] ships. Really a total of 12 [serially] unfitted vessels if you like. Ours is a fleet, if you move to slide 12, is getting much bigger as a result. There is only 2% of the fleet existing or on order is currently unemployed, which is a relatively insignificant amount and is reducing as the fleet gets bigger.

I've excluded from the ships unfixed floating. The Shell vessels are not included in this 12 which are on five year time charter.

The Golar Frost, which is committed to Livorno, which as you’ve heard has had a big boost since the Italian authorities have signed off on the deal. And I haven’t excluded the Excelerate vessels apart from Excalibur which I have included as she is only on a 12 charter.

As I say, we believe that the unfixed vessels are not a significant proportion of the whole fleet in terms of an effect on rates, especially as most of the other free ships are now within projects and sold by the major groups.

We then see that with the building price being as high as it is, we believe it is unlikely that any further speculative vessels will be built and damage this position further.

What it does mean is that there will be very few independent ship owners operating in a spot market. Although the number of spot cargos will probably increase, it will not be a spot market as we see in the tanker division as it’s just very few groups controlling all these free ships.

With a background of that fleet development, I should say that the balance of all the other vessels are controlled by project.

If we move to slide 13, you can see the slide which demonstrates the growth in supply. Sorry, this is the growth in LNG demand and the projects that will be coming on.

The listing on slide 14 is the projects -- the ones at the top now are pretty much in place and the LNG 2, Atlantic LNG in Trinidad and in Oman are all now on line. The [Rasgas 2] is shortly coming. So the development of production is really continuing as planned.

If we move to slide 15 we see in the project development there are some uncertainties in Qatar, Iran, India, Nigeria. Some for political, but also markets.

The gas price volatility has raised very slow demand questions in the US and Europe. But that doesn’t mean -- I think this will only delay some of the projects rather than any serial problem with the development of the projects.

Turning to the shipyard situation, with supplier vessels over and above what's already on order or required there is substantial continuing future demand for the project although this may conceal a long-term over capacity. When the projects finally have their position satisfied, you still have 50 ship a year capacity.

The position has tightened up enough that yards are actively [indiscernible] as being the next available slot with very few available for 2005.

The now standard 155,000 cubic meter vessel with dual fuel electric engines are $215m, $220m cost.

The future demand growth and therefore the demand for the vessels is still assured and speed of development is the issue as we see there are some uncertainties are leaving, which is fairly typical of the LNG.

Turning to our technology base thrust, Livorno has obviously had a big boost from the permits now being in place. In terms of the demand side, we are working very closely now on two specific projects in the Mediterranean for floating regasification. And we are looking at a US site.

Similarly, floating regas with the power generation combination, there is increasing interest for this and we have hopes for that over the next 12 to 18 months.

Back to the swaps, there are still strategic opportunities for our vessels which will come free towards mid year and I think that they will be not only for spot cargos, but for [inaudible] in the long-term, that is three to five year, or longer opportunities at the new improved rate.

It’s certainly the trend for the charterers to move [inaudible].

Thank you very much.

Okay, can we open the call now for questions and answers please?

[OPERATOR INSTRUCTIONS]. The first question is from Mr. Dodge, Stanford Group.

Yes good afternoon. How is everybody? I just have a question on the Livorno project. How much more detail can you give us in terms of the time involved in putting the project together and getting the gas actually flowing and whether there are other partners involved that you're talking to besides Endesa and Amga?

I think the Endesa position is working as hard as they can now to develop their positions. They have gas contracts. Gas purchase contracts in Algeria and I understand also in the Middle East. These are matched by Amga who is the Italian partner. They have sales contracts which they are working up to firm up as well.

As far as a timescale is concerned, I think it has all become a little firmer, but I would still hesitate to say or commit them to any particular date at the moment.

You have the full group in place to get done what needs to be done?

Sorry?

You have the group in place with Endesa and Amga in terms of what--?

Yes. I mean I think this is Endesa’s and Amga’s affairs and they are as I understand it, they are firming up the structure now.

Where are they in the process of doing this month or the next couple of months?

I would hope so, but I can't comment specifically on what they're doing at this minute.

Okay.

They’ve been working on it. They haven’t been idle while we've been waiting for these permits. So I mean I hope they're a fair way down the line.

Phil I think it’s two things. It’s one of the TV commercial aspects of gas sales and supply and it’s also looking at the, which obviously involves ourselves, the shipping logistics of transporting the gas to the terminal.

[Inaudible] where that gas is sourced from. So we have to wait and see a bit later a little bit how that pans out.

Do you think that lining up the supplies is the major time consumer?

Supply of gas at the moment certainly is most peoples’ preoccupation that’s for sure. But as I say, I understand that Endesa are a substantial company that do have contracts -- some contracts in place already.

Okay, thank you.

[OPERATOR INSTRUCTIONS]. No further questions.

Okay, if there are no further questions, thank you all very much for listening again and we’ll look forward to talking to you again.

Hello, we also have one more question from Mr. [inaudible]. Go ahead please.

If it is okay with you.

Yes sure.

I was just wondering what kind of a spot rate you are seeing for your assets in Q1? What kind of utilization? I don’t know if you touched upon that.

The spot trading in which sorry?

Over the last quarter. To much passed in Q4 -- in Q1.

In the third quarter?

At the moment we don’t have any. We have no spot availability before May of this year.

Okay.

So all the ships are out, so a very good start. We are seeing there may be some mid year seasonal decline. But the signs we have that there is business that will carry through the year and so we would hope to have much more substantial utilization than last year.

So 100% utilization in Q1 basically?

Sorry?

100% utilization in Q1:

Well certainly between 75 and 100%.

Okay, great. Thank you.

There are no further questions.

Okay. Well thank you again for listening everybody and as I say, we look forward to talking to you again next quarter.