Golar LNG Ltd (GLNG) 2009 Q1 法說會逐字稿

Good day and welcome to the Golar Q1 results presentation conference call.

Today's conference is being recorded.

At this time I would like to turn the conference over to Graham Robjohns and Gary Smith.

Please go ahead.

Thank you very much.

This is Gary Smith, and welcome to the Golar Q1 2009 results presentation.

I will begin on the slide deck on page 3 of the presentation with the agenda for the call this afternoon.

We will follow what is now a fairly familiar agenda, with a summary of the highlights for the quarter; Graham will then lead us through the Q1 financial results.

I will come back and revisit the Golar portfolio; some highlights from the fleet over the past quarter; some comments on the market overview; some comments also on our business development activities in the last quarter; and then finally wrapping up with some comment on proposed restructuring of the Company.

So I'll move to slide 4 and deal with highlights for Q1 2009.

As we foreshadowed in the Q4 results presentation, earnings did decline during the quarter from our spot trading business in particular.

This is in line with the general decline in the market.

Unfortunately, we see this trend continuing at least through quarter 2, with some upside perhaps as we move towards the end of the year.

On a more positive note, we can make comment that our Gladstone LNG project, where we are liquefying coalbed methane to produce LNG in Gladstone, has made some very significant material progress in the last quarter with some fairly major milestones achieved.

We continue to work closely with PTTEP on our Floating LNG opportunities and particularly focusing in on the Coogee opportunity in Northwestern Australia.

Golar Spirit, our first FSRU project, has been busy during the quarter, in particular commissioning the new facilities in Rio de Janeiro in anticipation of the arrival of Golar Winter.

In that regard, Golar Winter set sail from Singapore last week, some week or so ahead of our scheduled sailing date; and we are very pleased that she is now on her way.

Within the last week also Golar Frost has delivered to the Livorno project, with the net impact of a reduction of one vessel on the spot market and, moreover, reducing our exposure to that spot market by one vessel.

Finally, we have been dusting off our restructuring proposals of some 12, 18 months ago with a view to providing investors with a more transparent cash flow and also providing us with a vehicle to finance our future project growth opportunities.

We will come back and talk a little bit more about that later on in the call.

At this juncture, I'll hand the call over to Graham, who will take us through the financials.

Thank you, Gary, and good afternoon, everybody.

Turning over to slide 5, financial highlights, as Gary said it's been a difficult start to 2009 in respect of spot vessel trading.

And this has been reflected in reduced net revenues and the EBITDA numbers, at $42.5 million and $22.1 million respectively.

We also expect, as Gary again said, that the second quarter of 2009 should show some further declines as rates and utilization is expected to be lower, but before an expected improvement in the spot market in the second half of 2009.

Also and significantly, Golar Winter will start earning in earnest from the third quarter, and that will add significantly to EBITDA moving forward.

We will of course then have two operational and fully earning FSRUs in service.

As you can see, there has been a significant reduction in net financial expenses, largely due to a modest gain on interest rate swap valuations this quarter, as opposed to a huge loss last quarter.

Long-term interest rates declined significantly in the fourth quarter of 2008, giving rise to a large loss on mark-to-market valuation of interest rate swaps.

Since the year-end, long-term interest rates have increased moderately to the end of the first quarter resulting, as I said, in a modest gain and have continued to increase into the second quarter of 2009.

Also however and perhaps more importantly, actual cash interest expenses declined due to lower floating interest rates on the elements of our debt that is not swapped to a fixed rate.

All of the above gives rise to a net loss for the first quarter of 2009 of $5.1 million as opposed to a loss of $57.7 million last quarter.

Predictably, given the movement in net operating revenues, TCE rates were down from $50,300 last quarter to $45,000 this quarter on an average basis for the fleet.

This calculation -- or both these calculations exclude the Golar Winter, who is obviously in the shipyard undergoing conversion, and the Hilli, while she is in layup.

Utilization is also down from 91% last quarter to 80%.

Those calculations also exclude the Winter and the Hilli.

Ship operation expenses are up slightly this quarter, on average of $13,700 a day.

Moving over to slide 6, it just gives a graphical representation of historical net revenue and EBITDA over 2007, 2008, and first quarter of 2009.

You can see the obvious reductions in Q1 '09.

On slide 7 we have the detailed income statement, most of which I have already talked to.

You can see our vessel operating expense is pretty much in line with last quarter.

Voyage expense is slightly up; and admin cost and depreciation pretty much in line with last quarter as well.

Moving swiftly on to the balance sheet, assets -- not particularly much to say there; again, not a huge change from last quarter.

(inaudible) over to balance sheet liabilities, a couple of things to say here.

Firstly just a point of note really.

In other current liabilities, the number there of $175 million, $120 million of that relates to interest rates, lease, FX, swap, and other derivative valuations that are sort of effectively non-cash items.

You can see 76% of our debt is currently fixed to a long-term rate.

I should also just say a few words here whilst we are on the debt side of the balance sheet in respect of the Golar Freeze financing.

As we said in the press release -- and we have been talking about this for this quarter and last quarter -- we have some unfinanced capital commitment in respect of the Golar Freeze.

We've been talking to banks for some time about a new credit facility.

This has been a slow and difficult process given current financial credit markets, and there is some risk that we will not be able to agree on attractive terms with banks.

Therefore, the Board has been considering alternative sources of short-term financing, in some ways in conjunction with some of the restructuring work that we've mentioned and we are going to talk about in a little bit later.

Should the Freeze financing not be done at this time with commercial banks, then the Board believes there will be alternative sources of short-term financing.

This may well include short-term assistance from Golar's major shareholder.

Moving over to slide 10, statement of cash flows.

On operating activities, net cash provided by operating activities is understandably down from $17.1 million to $12.8 million.

Investing -- obviously the major number there is additions to newbuildings, vessels, and equipment, which represents our investment in our FSRU conversion projects.

Then turning over to slide 11, which gives the financing activities section of the cash flow statement, you can see we drew down $35 million, which was the final drawdown in respect of our revolving credit facility.

And we repaid around $12.5 million in debt during the quarter.

On slide 12, we have showed an analysis of financial expenses.

You see lease interest income and lease interest expense are both significantly down.

That is a function of the fact that both those balances are denominated in British pounds, and British pound LIBOR has fallen significantly from the fourth quarter of 2008.

Debt interest expense, which is the dollar debt, is also down as I said earlier, from declining rates on our floating-rate debt.

So it's down from $10.2 million to $8 million.

Then in the analysis of other financial items you can see the small gain on interest rate swaps.

That is offset by some small losses on FX and equity swaps and other smaller financial items.

Okay, so that is the brief overview of the financials and I will now hand back to Gary to carry on with the presentation.

Thanks, Graham, and I will continue on, on slide 13, which is the familiar Golar portfolio slide.

Not a lot to really comment on here versus last quarter.

We have changed the colors to better indicate those vessels which are remarked for conversion; they are marked in green.

As we have previously commented, Golar Frost has now returned to the joint venture Livorno project company, and we cease to have any exposure on that vessel in terms of utilization.

Moving on to slide 14, and again this was introduced to the call last quarter.

It's a pictorial representation of our strategy, which is now clearly gaining traction, building on our strength in shipping.

We have now clear leadership, I would argue, in the floating regas arena and significant progress being made on the liquefaction projects.

So moving on to slide 15 and talking a little bit more about the highlights within the fleet.

Golar Winter, as we commented in the highlights, completed its conversion activities in Keppel shipyard in Singapore and actually sailed away from the yard on May 23.

She sat at anchor off Singapore for about three days while we went through a process of commissioning and testing, in particular in relation to some high-capacity seawater pumps which are part of the regasification skid.

All of that went as expected, and the vessel up-anchored and set sail on May 26.

It's intended that she will collect a cargo en route for Brazil; and within the next quarter -- or within the next month, probably, we will engage in commissioning activities to put her into full FSRU duty.

So another significant milestone project that was I think very well executed, and it was very pleasing to see the vessel deliver within schedule.

Whilst Golar Winter has been concluding, Golar Spirit has also been busy.

She sailed from Pecem in the north of Brazil down to Rio de Janeiro during the quarter and then facilitated the commissioning of the newly constructed LNG receiving and regasification facilities built by Petrobras in Guanabara Bay.

During that process, she received the cargo transferred from another LNG carrier onboard the Spirit, and then regassified that cargo and sent that cargo ashore as high-pressure gas into the Rio de Janeiro gas reticulation system.

During that period, Golar Spirit was also able to run at full capacity for a period and basically complete all the testing which we weren't able to complete in Pecem due to some physical restrictions at Pecem at that time.

With Winter now sailing, the next focus moves on to Golar Freeze, where we are pretty much at the end or drawing to the end of the detailed engineering phase.

We are preparing for the vessel to go into the yard.

We're expecting the vessel to be redelivered from BG within the next month, and then she will sail to the shipyard to start conversion in September of this year for a scheduled delivery into Dubai Q2 of 2010.

Like Graham commented, fleet utilization excluding Winter and Hilli during the quarter decreased from 91% down to 80%, which is an indication of the softness in the spot market.

It's also pleasing to comment that the fleet generally continues to operate reliably and without incident.

Moving on to slide 16, I just included this picture because I think it's important to appreciate the significance of the FSRU project that we are developing and the significance that those projects have to the countries and the economies into which they serve.

This is a reception held onboard the Golar Spirit while she was in Rio de Janeiro.

It was a reception attended by the president of Brazil, President Lula; the head of Petrobras, Mr.

Gabrielli; and the director responsible for LNG gas and power in Petrobras, and this is Gracas Foster.

So a very senior and distinguished reception held onboard the vessel, and I think it's indicative of the importance that these projects play within the regions where we are seeking to do business.

Also I think it shows and indicates the strong relationship that has developed between Petrobras and Golar as we have executed these projects.

Moving on to slide 17 and a few comments about the market more generally, starting initially with the LNG supply story.

It's sort of been a long time coming, I know; but the supply length is starting to get longer on the supply side, a somewhat marked turnaround from where we were only 12 months ago.

We've had Sakhalin start up successfully during the quarter, and the operators of Sakhalin are confidently predicting that that project will reach full nameplate capacity of 9.6 million ton per annum within the year.

We also see imminently now the startup of Tangguh in Indonesia of Yemen and the first of several large projects coming onstream in Qatar.

So the market is continuing to go along and we'll see -- sorry.

Supply is going longer as the market is going soft, particularly in the Far East.

That is coupled with diverse gas prices and I guess more generally energy prices globally.

All this is resulting in an increasing importance for the Atlantic basin in terms of placing incremental LNG supply.

The impact on that on the shipping market is continuing softening in the market at least through the first half.

But as diversions of cargoes are now starting to flow and we are seeing cargoes -- and indeed Golar ships -- heading from East to West, the ton-mile or the LNG equivalent of ton-miles is certainly lengthening.

Traders are now starting to actively engage in discussions at this time on our floating storage plays as we come into the summer.

Lower market prices as we commented last quarter are making our voyage costs and our positioning options a little bit more affordable.

But the output of all of this is, as we said previously, a sort of bearish outlook for at least through until the end of the Q2 and then a gradual, but not steep, improvement in the position as we move through the second-half, as the projects come onstream and projects get withdrawn out of the market.

Moving on to slide 18, which talks specifically on our business development activities.

In this arena, it's been an extremely busy quarter for the Company.

Dealing with the areas in turn, starting with Gladstone, the LNG Limited and the Gladstone project in particular have made I think very good progress in recent months in progressing this project.

The Environmental Impact Statement was lodged and deemed acceptable by the authorities in Queensland in Northeast Australia.

We started building up the capability of the project team in anticipation of FID.

We now have, I would argue, a very experienced team of construction, operational, and development engineers building out within the project, all of them with significant LNG projects experience from other LNG projects.

We have completed or nearly complete the shipping simulations to our model, with transiting of LNG carriers into the port and to our berth; and that has gone as we had hoped.

Then finally we've committed a small sum of money,, admittedly, to start soil improvement activities on the site to ensure that we get off to a quick start on construction when FID comes around.

So very significant and encouraging progress made in Gladstone.

Similarly with our Floating LNG activities with PTTEP, it's been an extremely busy quarter.

We've had quite some dialog now with PTTEP on three main areas.

One is developing our technical concept of the project, particularly the Coogee project.

Discussions around project execution and establishing our project team strength.

And then finally, the commercial concepts for the development of the project.

We continue to make good progress in regard to those projects.

Then finally, but certainly not least, our continuing activity on developing future FSRU projects.

Inquiry levels have been strong and continue to be strong.

It's been quite pleasing to have Golar Winter in the shipyard over the last quarter, and we've hosted several visits from our prospective charterers to Golar Winter to give them a sort of hands-on experience as to what is involved in converting these projects and help them in their deliberations as they progress these projects.

We continue to feel confident and progress the previously announced speculative conversion of the Hilli.

Engineering work and equipment have been ordered to ensure that we can match the earliest possible delivery once we secure the next FSRU project.

Moving on to slide 19, we tried to indicate on this map where interest is greatest.

It's not, certainly, the only areas of interest; but certainly the sort of Asian, South American, and Mediterranean Rim are the areas of most activity.

The countries where FSRUs are are mostly just characterized by those countries with the developing economies, or economies wishing to switch to gas.

Those economies, particularly in the Mediterranean Rim, where energy security has become an issue of late, and those countries or economies are looking to diversify their source of gas.

Then finally the lengthening LNG supply story, which I touched previously under the markets slide.

We are helping countries to take more confidence on securing LNG supply, which is facilitating discussions on FSRUs in several opportunities.

Then finally, I want to move to slide 20, where I want to touch on the restructuring that we announced in the press release earlier today.

Some of you will recall, no doubt, that we went through a period of potential restructuring, some talk (inaudible) months ago.

The intention at that time was to put some of our long-term stable earning assets into an MLP and list that in the US.

At the time the markets started to deteriorate, and it ceased to be attractive to us.

But the process has always been in our mind, and we're at the point now where we think it is appropriate to revisit the whole restructuring discussion, albeit probably in a different form than the form we originally anticipated.

What we are seeking to do is to secure the cash flow from our long-term contracted vessels -- specifically the Golar Spirit, the Mazo, the Princess, the Golar Winter, and the Golar Freeze following the conversion -- into an entity where the dividend stream is transparent and secure and long-term.

Then for the -- and the long-term contracted revenue for those projects going forward is on the order of $1.9 billion.

We feel sufficient confidence now in the FSRUs that that becomes a very attractive vehicle for shareholders.

We also in concert with this want to structure a new entity where we have the short-term or spot-traded vessels and also the project development activities that we've been discussing -- so the Gladstone project, the Floating LNG projects, and prospective FSRU conversions.

Now, this project vehicle will give significant exposure to growth and upside as we pursue the strategy for the Company going forward, and does so in a way where we can raise capital without impacting or affecting the cash flow and the dividend stream from the long-term contracted assets.

We are quite excited about this opportunity.

It gives us a platform to fund our fairly ambitious growth targets and new projects and do so in a way which we think will enhance shareholders' returns.

Our intention is to have this restructuring in place in short order and certainly well before any of the major investment decisions which are facing us -- in particular the Gladstone project investment decision.

So I think at that point, I will halt the presentation and get questions from those on the call.

(Operator Instructions) Urs Dur, Lazard Capital Markets.

Good morning, guys.

Can you hear me?

Yes, loud and clear.

Great.

So, Gary, you're going back to Australia?

Yes, I am.

I was going to make some comment at the end of the call; but yes, seven years in the UK for me, so I am going to head home.

We wish you the best of luck and a good future.

You're staying on as a director, right?

Yes, my linkage with Golar is not broken.

I'm very grateful that John and Tor Olav have invited me to join the Board, which I'm very pleased to do, and in that capacity will take a close interest as we continue to pursue the strategy.

Well, it's a personal comment, but really we wish you the best of luck in the future.

And I think that's good that you are still staying on.

Thank you.

Graham, maybe I didn't hear it all perfectly or see it perfectly in the presentation, but can you walk us through again your negotiations with the banks on getting a new facility?

What precisely you really need the facility for, because really the CapEx you indicated before that you had was predominantly funded and then backed up by good contracts.

Can you give us any more color on how that's going?

Then you also mentioned, Mr.

Fredriksen may (multiple speakers).

I mean the CapEx which we talked about last quarter relates to the Golar Freeze conversion.

The Golar Spirit and the Golar Winter conversions have been fully financed.

Yes.

The Golar Freeze conversion, there is effectively $80 million of unfinanced CapEx.

In the time that we started initial discussions on this, obviously the whole world economy blew up back in the autumn of 2008, and we sort of sat back and put that on (technical difficulty) for a few months.

Then again as I said, I think we talked about last quarter, we started up discussions with banks earlier this year.

Obviously, credit markets are still difficult, still defensive, terms are still tough, and processes -- these processes take a long time.

Banks are being extremely conservative.

So I think just what we are flagging here is that it may well be the case that we are not in a position to reach agreement with banks on terms that we think are appropriate or attractive.

And therefore we will need some short-term financing to bridge this relatively small gap, given the context of the Company, until the Golar Freeze delivers next year.

The Board fully believes that we will be able to secure short-term financing.

I mean at the end of the day, the Company has some very strong, very visible cash flows that are coming in the future.

Obviously the Winter, as I mentioned, is starting up the beginning of Q3; and obviously the Golar Freeze is there for next year as well.

But on top of that, our major shareholder is fully supportive of the Company and we believe if necessary he will be there to support us.

Good.

So just to clarify -- and thank you, that was very helpful.

But just to clarify, at this time it's really a decision on behalf of the Company that financing terms at this time are unattractive, may become more attractive as time goes on; and that in the near term you're confident that you're covered for your near-term financing needs?

Well, I think -- I mean we haven't reached a conclusion on that subject.

We felt we couldn't go past this quarter without raising the fact that this may become an issue.

Okay.

No, I appreciate that very much.

Thank you.

Then I guess on the restructuring, it's old news, new news.

But I do appreciate to the detail in which you went into it; I think that was very helpful.

Can you give us any sort of timing at all beyond what you wrote down?

Probably not.

But I mean, I presume second-half this year?

I would say so, yes.

I think we do want to get it done quickly.

We've got some big FID decisions coming up.

We need to do it before then.

In some sense it is one of the reasons we put a significant amount of details in.

We want to get some momentum on this and get it going and get it done.

Okay.

I appreciate that.

Thank you very much for your time, gentlemen.

[Asalt Al Abbas] from AGH Capital.

Good morning, gentlemen.

Can you please comment on the increasing competition in the industry, especially with the new startups like Qatar Gas Transport Company coming up with new technology, with new type of vessels, and with their long-term contracts that are backed by the government?

Thank you very much.

Yes, I assume your question relates to the shipping side of the business.

Indeed, over the last few years, we have seen growing competition within the LNG shipping business, with new companies entering the business and projects driving some pretty hard deals.

In part, that is what has driven Golar to seek participation in other areas of the LNG midstream.

So we see opportunities in regasification and liquefaction which are still relatively quite attractive.

It's not to say that we are walking away from our roots, which is LNG shipping.

But in the short term at least the returns have not been attractive for us to chase.

Ultimately, though, in terms of the oversupply of ships that you mentioned, that will rebalance.

At the moment, we have a sort of delay in the startup of new liquefaction projects; and that is causing an overhang in the supply of ships, which we -- I think as I alluded to on the call -- see rebalancing and redressing as projects come onstream over the course of this year.

The other part of your question was to sort of emerging new technologies, particularly within LNG shipping.

I think that's a particularly interesting question, but perhaps a little bit premature to answer.

Golar has been I think quite conservative in its approach to new technologies, and we have not stepped out into anything that is particularly novel or new.

Some of our competitors have, and I think time will tell as to which of the technologies will prove attractive on a long-term basis and in terms of increasing size, and different propulsions, and different containment systems, and which will not.

But we are very comfortable with our approach to the technology and we think we're in pretty supple shape.

Thank you.

All right, thank you very much.

Jeffrey Schwarz, Metropolitan Capital.

Good morning or good afternoon, gentlemen.

Gary, we're going to miss you.

My question is about -- within the restructured entity, it reads as if all of the ships that are in the spot market as well as some of the ships, like the Hilli, that are primarily -- where their primary value is as potential raw material for FSRUs, it seems like they will all be in the project part of the Company.

And I'm a little surprised about that.

I would have thought that the potential for a conversion at the very least of the Hilli would make that more suitable for the long-term business.

Given the difficulty in obtaining financing in these markets, I'm not quite sure what the strategy is going to be for getting FSRU projects financed in that project vehicle, since this doesn't seem like an optimal time to be trying to IPO that piece.

So could you help us understand the thinking of putting all those ships into the project vehicle?

Yes, thanks, Jeff.

It's a point we've discussed and thought about.

I think whilst we haven't finalized, the way we see this happening is that the projects -- in particular the FSRU conversions -- will be executed within the new vehicle, the project vehicle, with a mechanism to transfer those assets into the long-term stable cash flow Golar at a particular juncture.

The mechanism for doing that we have had some initial thoughts on, but it's still evolving.

But the intention is clear that once those contracts are executed and basically the execution risk is taken away, then the stable cash flow should sit within the long-term asset company.

Yes?

I don't know, Graham, if you wanted to (multiple speakers).

Yes, I think it's a relevant point, Jeff, you make about the financing.

But the financing of these projects, be they FSRU or FLNG, tend to be very much done on a sort of project finance basis.

So whilst the (technical difficulty) the sort of long-term cash flow it's not been significant for the banks, the quality of the counterparty in the contracts is equally if not more important.

Okay, well, I have confidence in you, gentlemen, so I guess we will look forward to seeing how that plays out.

Once again, Gary, we are going to miss you, but look forward to being able to benefit from your wisdom as a member of the Board.

Thanks, Jeff.

(Operator Instructions) Anders Rosenlund, ABG SC.

Thank you.

To the extent that you are bidding for FSRU contracts, could you give some sort of indications on where the internal rate of return for such projects will be in the future?

Are you noticing significant margin pressure (inaudible)?

Thank you, Anders.

The sort of project development or project business development of FSRU projects tends to follow two routes.

One is competitive tender, which is the process which was used to secure the business we have with Petrobras.

Or secondly by direct negotiation, which was the process which we adopted in Dubai.

Since Petrobras, there hasn't been a concluded tender, although there has been tenders initiated.

But as of now, no additional contract has been signed; and so it's difficult to be definitive about whether there is pressure is coming on markets due to competitive pressure.

Our experience has been, in the discussions that we've been having, is that the counterparty focuses much more on the capability of the organization to deliver the project and its technical robustness of the solution, given the importance of the project to the country or the economy where we're providing the FSRU.

And focuses at least initially and during the stages where we tend to be at the moment, much more about technical due diligence and the capability of the organization to deliver than the commercial rate.

Invariably we get onto a rate; and in some areas, that is about where we are approaching at the moment.

We have been able to use the projects already executed, either by competitive tender or by direct negotiation, as a benchmark for setting rates going forward.

Our hope is that the position we have been able to establish for the Company should allow us to protect those margins in the business going forward.

At some point in time I guess it's reasonable to expect that the competition will start to erode those margins.

But really, there isn't a serious competitor to exactly what we do, which is basically providing fixed long-term assets -- fixed long-term floating assets to regassify LNG.

As long as we're reasonable in those discussions, which is our nature, then we are finding that we can continue to do business where we have done so.

Indeed, the Dubai experience was very much done based on the benchmark established with Petrobras; and we would like to continue to roll that model forward.

Okay, great.

I have a couple of other questions if I may as well.

You referred to the unfunded CapEx on the Freeze.

But the $80 million, that is the total remaining CapEx, isn't it?

Yes, effectively, yes.

Okay.

That's not the total CapEx of the project, no.

No, but it's the total remaining CapEx?

Yes.

A [book holding] question here.

In the Q4 presentation you write that the rate in Q4 was $46,400; and in this report you write that the Q4 rate was $50,300.

What's the difference?

Yes.

No, the reason for that -- we put it in a little footnote; perhaps it wasn't clear enough.

It was that we took the decision that quoting an average TCE rate for the fleet that included the Hilli -- the offhire of the Hilli when the vessel is clearly in layup pending conversion -- wasn't sort of particularly helpful, because it took away information from the overall number.

So we have just extracted the Hilli from both calculations.

So the comparison is the same; it's just the absolute numbers have moved up a bit.

Okay, that makes sense.

My final question is, in the report you write that the value -- or you indicate that you received value assessments of the vessels without firm long-term contracts.

Yes.

Of around $175 million per vessel.

And some of these vessels are more than 30 years old.

No, no, no, no, no.

That is for the new vessels.

I think we said the new vessels.

Okay, so it's just the newest vessels.

Okay, great.

Perfect.

Thank you very much.

(Operator Instructions) Jeffrey Schwarz, Metropolitan Capital.

Guys, didn't want to let you go so quickly, so two other quickies.

What would your expectation be in terms of the time that it would take to bring the Hilli from where it is at to a fully converted status, if you were to get a contract?

How much is the advance work that you have done on it been able to accelerate the process?

Secondly, I noticed there was a termination of some equity swaps during the quarter.

Graham, can you just explain a little bit more about that?

Yes, sure, I'll touch on that one first before Gary follows up on the Hilli question.

It wasn't -- we just rolled a swap.

We have an equity swap on a small chunk of Golar shares; it's about 300,000 shares.

And we just rolled that forward for six months.

I see.

Then just coming on to your question on Hilli, the conversion of Hilli is based on an assumed carbon copy of Golar Spirit.

So to the extent that a prospective charterer doesn't want to alter too far away from that sort of technical spec, then from a standing start we would normally say two years from commitment to delivery of the vessel.

Typically, the last six months of that two-year period is in the shipyard undergoing physical conversion.

The front 18 months of that is in progressing the detailed engineering, which for Spirit is essentially complete, and ordering the long-lead items.

We are in the area of sort of six to nine months down that two-year time frame from when we ordered the long-lead items.

And specifically the LNG pumps and the high-pressure booster pumps, which are the longest lead items for the conversion process.

We also have access to some other bits of kit based on the very original Spirit conversion scope, which allows us to alter the eventual Golar Spirit scope without having to go and order different pieces of equipment.

So we have some flexibility around scope, but the basic starting block is a look-alike to Golar Spirit.

So if we had a charterer ready to sign within the next month, then we would be talking Q3, potentially next year for a vessel going on a hire.

And that fit's reasonably well with the Golar Freeze conversion, which will conclude Q2, which would allow us to continue [to put all three] straight onto the Hilli conversion.

Great.

Thanks very much.

(Operator Instructions) As we have no further questions, I would like to turn the call back over for any addition additional or closing remarks.

Yes, thanks very much.

Thanks for your participation in the call.

For me, obviously, this will be the last chance I have to participate on this call, so I just want to express my thanks to particularly the Board of Golar and the staff of Golar, the people we do our business with, and most importantly the investors in the Company.

It's a great Company.

I think it's got a great future, and I'm very happy to stay associated with the Company by joining the Board going forward.

So again, thanks, and I guess you'll be hosted by someone else next time around.

Cheers.

Just before you go, this isn't meant to be a backslapping exercise, but I would also like to -- on behalf of John and Tor Olav and the rest of the Board, and personally -- express our thanks to Gary over his efforts over the last three years.

He has certainly taken us forward in great strides over the last three years.

His boots will be big ones to fill, but he will be indeed helping the Board with that process over the next few months.

And of course, we're delighted that he is staying on as a nonexecutive director, and we will be able to continue to call on his advice and guidance.

So thank you very much, Gary.

Cheers.

Thank you, everyone, and speak to you next quarter.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.