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Operator
Good day. And welcome to the Golar 2008 Results Presentation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Gary Smith. Please go ahead, sir.
Gary Smith - CEO
Thank you, and good day to everybody, and welcome to the Golar Q1 results presentation. The format will be a familiar format, where we will run you through the Q1 highlights. I will hand over to Graham, who will run through the financial results. And then Graham will hand the call back to me. I'll give an overview of where the market is, both LNG and shipping, talk about our portfolio, some highlights from the fleet, and then finish up with some comments on the various projects that we're progressing.
Graham and I are actually sitting in opposite ends of the globe at the moment. So if we appear a little bit disjointed, please forgive us.
In terms of highlights for the quarter, turning to slide four, we took delivery of the Granatina. She was the vessel we announced purchase from Shell late last year. She is now chartered back to Shell for the balance of this year, but now owned by Golar. We announced a little earlier in this quarter the time charter of the Golar Freeze to the Dubai Supply Authority for 10-year period as an FSRU.
The earnings from the spot and short-term vessels have been somewhat weaker through quarter one. And that weakening, we expect to continue throughout quarter two. And [most of] the earnings have been a little bit weaker in Q1. The utilization I'm pleased to report at least has been good.
Today, we are announcing the conversion of Hilli. She's a vessel who has recently been returned to us from BG. Our intention is to immediately begin the process of converting her into an FSRU.
We're announcing today a cash dividend of $0.25 a share. And Graham will discuss I'm sure in a moment the non-cash interest rate swap valuation loss, which we're also reporting today. At that point, I'll hand to Graham. And I'll come back and talk a little bit in a moment.
Graham Robjohns - CFO
Thank you, Gary. And good afternoon, everybody. I'll start with a revenue slide on page five of the presentation with what has been a reasonably good quarter in terms of revenue. Utilization, as Gary has just said, is good, 94% for the quarter as compared to 95% last quarter. Granatina has contributed to revenue this quarter. However, spot and short-term rates have been lower in Q1 versus Q4 of 2007, which is the reason why total revenue is lower and TCE rates are down.
Looking forward to the second quarter, we expect utilization to be down, as we have said, particularly as a result of the Hilli and the Frost having completed short-term charter -- well, the Frost completed a short-term charter at the end of the quarter, and of course, the Hilli redelivering from her long-term charter from BG right at the end of the first quarter. And we also expect spot rates will be lower in Q2.
There's also going to be one vessel or has been one vessel dry docking during the second quarter. The Golden Spirit has been in the shipyard throughout the quarter. But she will be leaving soon. And she is expected to deliver to Petrobras to start her 10-year charter as an FSRU at the end of the second quarter.
Turning over to page six of the presentation, the key financials, revenue, of course, I've just talked about. Revenue and EBITDA are both slightly down on Q4 2007. Net financial expenses considerably up this quarter, of course, as a result of non-cash valuation losses of some $19.8 million, which has obviously had a serious negative impact on net income -- not on cash, we must stress, but on net income. And we'll look a little bit more at the analysis of that in a moment.
However, having said that, in relation to the interest rate swap element of those losses, long-term interest rates have recovered more than 50% of their decline that occurred in Q1, as at today. And so if we assumed no further movements in long-term rates between now and the end of the second quarter, we would expect to see a significant gain. Of course, there's no guarantee quite what is going to happen to long-term rates between now and the 30th of June.
Vessel numbers are up to 13 vessels, as we have taken delivery of the Granatina on the 14th of January 2008. TCEs are down, as I've just discussed. And OpEx today is up, largely as a result of continuing crew cost pressure but also as a result of some one-off charges.
Turning over to page seven and the income statement, OpEx, as I've just said, is up due to the reasons I've just mentioned but also because of the addition of the Granatina to the fleet. This has also, of course, impacted interest expense line, although the increase caused by the new $120 million Granatina facility has more than been offset by lower interest cost on floating-rate debt as short-term U.S. dollar interest rates have fallen.
Moving over to the balance sheet assets on page eight of the presentation, the cash reduction is, of course, due to the acquisition of the Granatina. We should note that in current assets or short-term assets this quarter, there is a balance of $153 million described as fixed asset available for sale, which represents the Golar Frost, which is due, of course, to be sold at the end of the second quarter, by which, of course, you can deduce the approximate gain that will occur when the sale goes through based on sale proceeds of $231 million.
Turning over to page nine of the presentation, balance sheet liabilities, the debt associated with the Frost has also been moved to short term and the current portion of long-term debt. The only -- the other thing to say here I guess is that we have taken advantage of lower long-term interest rates, which have been hitting us on the interest rate swap valuations, to fix out additional debt at low rates.
So we fixed an additional $200 million in the first quarter of 2008, which takes the percentage of our debt on which we pay a fixed rate of interest to 68%. And that fixed rate interest has an average rate exclusive of margin of approximately 4.5%.
Moving over to page 10 and statement of cash flows, operating cash flow is understandably a little bit down on last quarter, but it's still relatively strong at $27 million. In investing activities, obviously, the major part of the additions to new buildings, vessels, and equipment is the Granatina acquisition. And on the financing activities, the most part, which has been, of course, reduced by some debt repayments under proceeds of repayment, proceeds from and repayment of long-term debt and capital lease obligations is the $120 million Granatina debt facility.
And of course, our cash position will be significantly strengthened once the Golar Frost sale goes through to the tune of approximately $130 million, which is the $231 million proceeds left, the approximate amount of debt remaining on the vessel.
Turning to slide 11, financial expenses, in particular I guess this analyzes the losses that we've -- non-cash losses that we've had on financial instrument valuations. Interest rate topped $15.8 million. FX losses, in particular in relation to lease balances, which again is a non-cash movement of $3 million and an equity swap loss as our share price dipped to about DKK92 around the -- as on the 31st of March. And that was a $2.3 million loss.
Okay. With that brief summary of the financials for the quarter, I'll hand back to Gary as we move over to slide 12.
Gary Smith - CEO
Thanks, Graham. And as Graham said, I'll pick up from slide 12 -- two or three slides just touching on the market, both for liquefaction and shipping. Starting with liquefaction, it's becoming a bit of a track record I'm afraid, but we are still plagued by existing plants having several operational problems, which are causing them to operate at less than their full nameplate capacity. In some cases, it's been equipment failures. In the case of Snohvit, it's been having trouble achieving stable operation. And Nigeria LNG Train 6 is still ramping up to full production.
So amongst the existing established producers, there's been a shortage of cargos, which has obviously a negative impact on the fleet. But also compounding that has been continuing delays on the start up of plants currently under construction. But whilst there is a lot of new capacity currently being built in various parts of the world, almost invariably, all those projects are suffering delays due to just the heated market that the construction world is experiencing, both in terms of materials and people.
Not withstanding all of that, the ships that have been on order continue to deliver on time. And that's adding some length to the fleet and making it challenging to secure and maintain profitable business with the short-term trading ships.
We still see new projects being announces this quarter. We've seen ExxonMobil announce feed of a project in Papua New Guinea. There's been quite some activity in the northeast of Australia, where several projects are looking to liquefy coal bed methane. And through our share holding in LNG Ltd have exposure to that group of projects through the Gladstone LNG project. And I think that's one we certainly are paying close attention to at the moment and confident and hopeful that might lend itself into a project around the end of this year, early next year.
In terms of shipping, turning to slide 13, as at the end of April, 271 ships trading, some 20 new buildings delivered so far this year. This year was always going to be the year where the fleet grew significantly. And as I said, 127 ships of sort of larger slides, and that excludes the four floating LNG vessels ordered by Flex. It's also I guess worthy to note that the new build orders are drying up significantly now as projects are delaying. So year to date, we've only seen another three shipbuilding contracts added to the list of 127 ships count we have on order.
Moving to slide 14 and just talking about the freight market, as summer has approached, we've seen the diversion of cargos to the Far East reduce. That's becoming quite a regular unpredictable season or pattern. We are certainly seeing it this summer. Perhaps more interesting is the declining cargos into the United States. A lot of the Atlantic Basin cargos are finding its way into Europe at the expense of the U.S. market.
A lot of the spot shipping activity this quarter has been around commissioning of a number of new re-gas facilities, a lot of them in the U.S., Costa Azul on the West Coast, Sabine Pass, Freeport also being commissioned in the Gulf of Mexico. And there's also been commissioning cargo into the buoy of Boston, so-called Northeast Gateway. There are quite some specialized one-off charges to get these new facilities up and running.
But I guess not surprising, given all that I've just said, that the spot market has continued to soften. And we will see that continuing throughout the summer I predict and quite some tonnage sitting idle waiting for opportunities. We've done reasonably well in what has been a soft market, at least in terms of keeping the vessels moving.
I think it's going to be toward year end before we see some improvements as these new projects currently under construction start to take commissioning cargos and then come on stream and start producing cargos themselves. And as the winter approaches, we start to see the trend of cargos moving east, starting to soak up ships as the ton-mile equation gets bigger.
Moving to slide 15 and now moving on and talking about the portfolio, we've rearranged this slide, for those of you who tune in regularly on a quarterly basis, to help I guess describe the restructuring that we are about to embark on. And so you can see we have grouped the long-term time charters at the top of the chart with the shorter term deployment toward the bottom.
And not only have we rearranged the cosmetics of the chart, some of the bars themselves have changed. So if I just deal with those specifically, the Golar Freeze, second vessel from the top will now go into charter to the Dubai Supply Authority early in 2010. We've been able to agree with BG to extend Golar Freeze until such time as she goes into the yard for conversion. So she will basically have a seamless employment up to the point where she goes for conversion and then straight out of the yard on hire to Dubai.
In return for extending Freeze, we have agreed to take Hilli back earlier than schedule. So those two vessels have swapped in terms of the program of BG. So that's been certainly one addition. The other is Hilli is now back with us. And as we've announced, we will as soon as we are able start the conversion process on her.
And then finally, as Graham has indicated, we are now approaching the point where Golar Frost will be sold into the Livorno joint venture project, although it's anticipated that we will then charter her back for a period of time until such time as she goes for conversion. I think for the rest of that chart, it remains unchanged.
Moving to slide 16, some highlights from the fleet -- Q1 has been a relatively stable period on the operational side. We've had no dry dockings, so no interruptions with the employment of the vessels. We do have a vessel in dry dock right now. Khannur is in Sobrena, expected to sail sometime next week in fact.
Utilization has been good, as Graham has said, 94% overall fleet utilization end of the year [off-hire] if we exclude Golar Spirit who has been in the yard for conversion for Petrobras for the whole quarter. But apart from that, the only off-hire has been commercial waiting time.
The Hilli has redelivered from BG on April 18th. And then finally, I think also as Graham has indicated, we are experiencing like everybody else in this industry quite some pressure on operating costs. We have now a number of strategies to address both crew retention and management of costs. And we're quite pleased with the way those programs are rolling out.
Moving onto slide 17, the sort of high-level Golar strategy if you will, showing that we are really trying to grow up and down the supply chain for LNG, so starting from our transportation roots, looking to move into regasification and storage. And we have now I think quite a healthy portfolio of projects in that space and now getting quite active also on the liquefaction side of things. And I mentioned just a moment about the Gladstone LNG project is one project which we are taking an increased interest in.
Slide 18 is really an attempt to summarize the various FSRU projects and their current status on a single slide. So I will just quickly run down the page to update where the various projects are at. Golar Spirit is in the final stages of conversion. I have to actually be onboard here today. She will deliver very soon. We're just lining up now the actual delivery voyage with Petrobras. And she will go on hire early in quarter three.
Golar Winter is currently on hire to Shell. She will come off hire in Q3 and then deliver directly into the yard for her conversion. The detailed engineering on that project is now at a very advanced stage. And the yard team will have a small break before they then start work on this conversion process.
Golar Frost we are getting ready now for the actual execution of the sale of Golar Frost into the Livorno project, targeting end of Q2. And during the quarter, the EPC contract for her conversion was awarded to Saipem.
Golar Freeze has been I guess the big announcement for us on the last month or so. And I'll talk a little bit more about her on the next slide. But FID was taken on that project in April 2008. And we're now well into the start of the detailed engineering for her.
And then finally, Hilli, which we're announcing today the intent to start conversion of her. We don't yet have firm employment for Hilli. But we do have a number of interested parties who are all expressing an interest for early delivery of FSRU. And so we've taken the decision to act on those signals and start the conversion as early as we can.
Moving onto slide 19, a slide which deals more specifically with the Dubai project, the project is based on the Golar Freeze. The term of the charter with Dubai Supply Authority is 10 years with options to extend for a further five years beyond the 10-year term. The [CC] income for the 10-year period inclusive of OpEx is of the order of $450 million.
The hire is scheduled to start Q2 2010 with the conversion scheduled to start in October 2009. And as I said previously, she will remain on hire for BG up until approximately when she goes into the yard with just a delivery window to accommodate.
Her re-gas capacity is very similar to the Golar Winter conversion, so 400 million CF per day. Technically, she's a little bit different to the two Petrobras projects. As you can see in the artist's impression at the bottom of the slide, we actually have the two vessels side by side transferring LNG from shuttle vessel onto the FSRU, whereas in the two Petrobras vessels, the transfer of LNG is actually across the jetty.
So this means we have loading arms on the vessel as part of the project scope. There have been other enhancements and differences particular to Dubai's requirement, which differentiates the two conversions between the two Petrobras vessels and this vessel.
The project has been done under the technical eye of Shell. So Shell has been engaged by Dubai Supply Authority to act as their technical advisor and to verify and approve our design processes. And so, of course, that's been a challenging process I would say. It's also been pleasing that we've been able to satisfy their requirements in developing the design for this particular project.
The final slide, slide 20 is really an attempt to try and give investors a better appreciation as to the revenue and cost impact of the three FSRU projects. So the three projects that this slide deals with are the first two Petrobras projects, the Golar Spirit and the Golar Winter, and then also the Dubai project, Golar Freeze.
And what it shows is starting from a base case of operating revenues in 2007, so the zero line is the actual 2007 revenues of $224.7 million, looking at the incremental impact of each of those charters as the progressively come on hire over the next four years. So you can see in 2008 the contribution that Spirit will make in the remainder of this year when she goes on hire. Then in 2009, you'll have the full impact of Spirit for a year plus the incremental impact of Golar Winter for a bit over half of the year.
2010, you'll see the full hire of Spirit and Winter plus a part year of Golar Freeze. And then 2011, you'll see the full revenue impact of all three vessels compared to the base year of 2007.
And then down the bottom, we've also given the remaining CapEx phasing for each of the projects for 2008, '09, and '10. So at last, we're not able to disclose due to the requirements of confidentiality the details of the charter. Our hope is that this should give you some better insight into the impact of these contracts on the Company. That ends the formal part of our presentation. I'd be very happy now to take questions.
Operator
Thank you, Mr. Smith. (OPERATOR INSTRUCTIONS). We will now take our first question from [Zach Hallen] from [Pan-European]. Please go ahead.
Zach Hallen - Analyst
Can you hear me all right?
Graham Robjohns - CFO
Yes, fine.
Gary Smith - CEO
Yes, fine.
Zach Hallen - Analyst
Do any of your FSRU conversions include processing of gas liquids?
Gary Smith - CEO
By gas liquids, you mean condensate or LPG?
Zach Hallen - Analyst
Yes, yes, and propane, butane, and higher.
Gary Smith - CEO
No. So what we -- the function of the FSRU is to receive LNG, so basically natural gas, methane, and then basically convert that from a liquid state into a gaseous state. So there's no heavier hydrocarbons and/or other than what you would expect to find in small components in the LNG itself.
Zach Hallen - Analyst
Okay. Thank you.
Operator
We will now take a question from [Andy Rosenlund] from [ABGSC]. Please go ahead.
Andy Rosenlund - Analyst
Thank you. The Hilli conversion, can you give an indication when that will take places?
Gary Smith - CEO
We're not being specific on that yet. We have some work to do to actually detail how long it will take. But to give you some guidance, most of these projects are taking in the order of two years from announcing or agreeing to conversion to when the vessel actually delivers. So in the order of three years plus or minus I guess a few months either side of that, which will be subject to conformation of orders and the specifics of the conversion that we choose to execute.
Andy Rosenlund - Analyst
And but you made a comment that it's a fast-track project. Is it still two years?
Gary Smith - CEO
Yes. I mean, fast track has the potential to save some months of that. But I mean, obviously, we will leverage off the design work we've done on the earlier projects. So we can now go straight into ordering a lot of the [long lead] hardware items that we need for the conversion. So it could save us months. But we haven't sort of detailed that out just yet.
Andy Rosenlund - Analyst
Okay. And the [Desu] is not in your fleet overview. Is there a reason for that?
Gary Smith - CEO
Not really. I mean, the fleet overview there shows actually the vessels we own.
Andy Rosenlund - Analyst
Okay.
Gary Smith - CEO
The Desu is a charter in. And so I guess for that reason she's dropped off. But she's still being chartered in.
Andy Rosenlund - Analyst
Okay. And on the slide that you showed on the revenue impact from the different FSRUs --
Gary Smith - CEO
Yes.
Andy Rosenlund - Analyst
-- I didn't -- I don't know if I quite catch what you said. But is that -- that's just revenues. But what about the cost increase effect? Could you quantify that?
Gary Smith - CEO
Well, down the bottom of the slide is the CapEx costs.
Andy Rosenlund - Analyst
But operating expenses.
Gary Smith - CEO
Well, that's included in the revenue.
Graham Robjohns - CFO
Well, can I -- sorry, can I just butt in there if you don't mind? This is purely -- it's revenue increase. The operating expenses are -- I mean, obviously, we're incurring operating expenses on the three vessels at the moment. Operating expenses will be slightly higher as FSRUs, but not dramatically higher.
Andy Rosenlund - Analyst
Okay. But is that adjusted for in this chart? Or is it not adjusted for?
Graham Robjohns - CFO
No, no, no, no this is just headline revenue number.
Andy Rosenlund - Analyst
Yes, but could you quantify what the increase in operating expenses are as well roughly?
Graham Robjohns - CFO
It's going to be in the order of $2,000 to $3,000 per day per ship.
Andy Rosenlund - Analyst
Okay. Great. Thank you.
Operator
We will move to Ole Stenhagen from SEB. Please go ahead.
Ole Stenhagen - Analyst
Yes, hi. Just very quickly, Brazil, the [timber] in Brazil, what is the current promise or projected award time? And are you still in there, or -- ?
Gary Smith - CEO
Yes, we're still in there and Petrobras extending by another couple of weeks their decision. So we are like everybody else waiting for the announcement. But it's still probably a couple of weeks away.
Ole Stenhagen - Analyst
Okay. But think in terms of late June and imminent.
Gary Smith - CEO
I think sort of first half June.
Ole Stenhagen - Analyst
Okay. Thank you.
Gary Smith - CEO
That's at their discretion.
Ole Stenhagen - Analyst
Yes, sure, sure. But we're going to have something to look for.
Gary Smith - CEO
Yes.
Ole Stenhagen - Analyst
Thanks.
Gary Smith - CEO
We, too.
Operator
(OPERATOR INSTRUCTIONS). We will now take a question from Jeffrey Schwarz from Metropolitan Capital. Please go ahead.
Jeffrey Schwarz - Analyst
Good morning, gentlemen. Congratulations on the progress you're making. Question for you -- you seem to indicate that we're getting closer to the restructuring transaction. I'm wondering if you are willing at this point to begin to give us a little better sense of what the restructured entities might look like.
Graham Robjohns - CFO
We're not able to give too many details away. I mean, what we can say is that it is designed to hold the vessels with long-term contracts. But that I'm afraid is really about all we can say until we reach a position when we can release more details.
Jeffrey Schwarz - Analyst
Would the entity that will be holding those long-term contracts, would you imagine that it would be distributing most of its cash flow in distribution?
Graham Robjohns - CFO
I can't really comment specifically. But I mean, I would say that, I mean, Golar as a company has a policy of distributing cash that is not otherwise invested in the business.
Jeffrey Schwarz - Analyst
Well, we'll eagerly await more details then. Thank you.
Graham Robjohns - CFO
Sorry I can't be more helpful than that.
Operator
We will now take a question from Zach Hallen from Pan-European. Please go ahead.
Zach Hallen - Analyst
Yes, I'm just a little puzzled by a comment you made about Europe taking deliveries at the expense of deliveries to the U.S. We're not seeing that except for Spain. Were you just referring to Spain?
Gary Smith - CEO
Yes, primarily. I mean, Spain I think has experienced some shortage in hydropower. And so that has been sucking up quite some cargos. But certainly, the flow of LNG into the U.S. has not tracked what expectation might've been. So a lot of cargos that might've gone to the U.S. are going to Europe. And then some of the cargos that might've gone from the Middle East into Europe are then flowing east. So the trade pattern has moved east.
Zach Hallen - Analyst
Yes, we don't see much change in that pattern for the rest of the year for the U.S. Thank you very much.
Gary Smith - CEO
Okay.
Operator
We will move to Andy Rosenlund from ABGSC. Please go ahead.
Andy Rosenlund - Analyst
Thank you. Is the time schedule of the restructuring of the company dependent on progress on additional FSRU tenders?
Graham Robjohns - CFO
No, no, I don't think so.
Andy Rosenlund - Analyst
Okay. Thank you.
Operator
(OPERATOR INSTRUCTIONS)
Gary Smith - CEO
I would add -- sorry, if I could just add that I think the securing of the Dubai FSRU tender just strengthens the restructuring case.
Operator
Thank you. (OPERATOR INSTRUCTIONS). As we have no further questions, I would like to turn the call back over to you, Mr. Smith, for any additional or closing remarks.
Gary Smith - CEO
Okay. We thank everyone for taking the time to dial in. And we look forward to reporting again to you in three months from now. Thank you very much.
Graham Robjohns - CFO
Thank you. Goodbye.
Operator
This will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.