Golar LNG Ltd (GLNG) 2009 Q3 法說會逐字稿

Good day, and welcome to the Golar LNG Limited results presentation.

Today's conference is being recorded.

At this time I would like to turn the conference over to Mr.

Graham Robjohns.

Please go ahead, sir.

Thank you very much, and good afternoon, everybody.

I'm delighted to be here today presenting two companies rather than the usual one.

Of course Golar LNG Energy was listed on the Oslo Stock exchange on October 8.

And we present here today Golar LNG Limited's consolidated results for the third quarter and Golar LNG Energy's results.

I'm also joined by Oscar Spieler, Golar LNG Energy's CEO.

The format for the presentation today will be a presentation on Golar LNG Limited, and then we will take questions and answers followed by a short break for about a minute, and then we will come back and do a presentation on Golar LNG Energy, again, followed by questions and answers.

So turning first to Golar LNG Limited, and I'm looking on slide 3 of that presentation, which is the agenda, where we will cover Q3 highlights and look at Q3 financial results and then we will have a quick look at the Golar vessel portfolio before moving on to Golar Energy after questions and answers in relation to Golar Energy Limited.

So turning to slide 4, the highlights for the third quarter of 2009, we have seen some improved earnings in the quarter, resulting from an improving spot market and, in addition, an improved contribution from the Golar Winter, which commenced its FSRU time charter in September.

That was partially offset by a reduction in contribution in earnings from the Golar Freeze that was on hire as an LNG carrier in the second quarter of 2009 but, of course, went into conversion into an FSRU in the third quarter.

The Golar Winter has now successfully completed its commissioning in Brazil and becomes the Company's second operational FSRU.

In relation to the spot market, both the Golar Arctic and the Ebisu were fixed on short-term charters in mid-August after having extended periods of off hire idle time.

And the expectation for Q4 spot vessel utilization and rates is some improvement, although, there is one spot vessel which will be dry docked during the Q4, which will, obviously, have a negative impact.

The Company terminated its equity swap in Arrow Energy during the quarter and booked a net gain of $7.8 million.

The total gain on that transaction was $9 million.

Of course, as I'm sure you all know, the completion of the equity offering in respect of Golar LNG Energy completed in August of 2009, raising $117 million in net proceeds.

And as we promised at the time, Golar LNG Energy was listed on the Oslo Axess Exchange on October 8, 2009.

As I've just mentioned the Golar Freeze commenced its conversion process to an FSRU at Keppel Shipyard during the quarter, and that process is ongoing and progressing well.

As we announced in the -- well as we discussed in the presentation results last quarter and as we confirmed in the press release of results this quarter the Board has proposed a distribution of 10 million Golar LNG Energy shares to shareholders of Golar LNG Limited, which would approximate one Energy share for every 7 Golar LNG Limited shares held.

The dates and times of that distribution will be the subject of a separate release, which will go out as soon as practicable.

Turning on to page 5, then, coming specifically to Golar LNG Limited's business, which once the Golar Freeze reverts back to LNG Limited, which is the intention once she has finished her FSRU conversion, Golar Energy Limited have an option to reacquire the Golar Freeze.

Golar Energy Limited will have five long-term contracted LNG carriers and FSRUs, which will create a strong cash flow entity that will be primarily dividend orientated and distributing close to all of its free cash flow.

Those five long-term contracted vessels, the Golar Spirit, the Mazo, the Methane Princess, the Golar Winter and the Golar Freeze.

Those contracts represent approximately $1.9 billion in contracted revenue.

And once the Freeze is delivered and on hire on its FSRU time charter in April 2010, those vessels will generate approximately $160 million in EBITDA annually and $75 million in free cash flow.

And of course there is some significant upside in the ownership of the project company, Golar LNG Energy that LNG Limited holds.

Moving on to slide 6, we come to the financial highlights for Golar LNG Limited.

I will point out of course these results are on a consolidated basis and so are directly comparable with the previous quarter, other than in respect of the minority interest in relation to the new shareholders in Golar LNG Limited's 74% subsidiary, Golar LNG Energy.

So as you can see, net operating revenues were up at $40.7 million for the quarter, up from $35.5 million last quarter.

I would point out that that is net of voyage operating expenses, which principally relates to fuel, which we net off operating revenue to arrive at the number that we use to calculate TCE, or time charter equivalent rate.

EBITDA, as you see, is also slightly up at $19.5 million.

Net financial expenses have increased this quarter, principally in relation to mark-to-market movements but also some FX retranslations, and I will come on to describe those in a little bit more detail later.

That gives rise to a loss for the quarter of $1 million.

Vessel numbers at 14 was actually 13 if you exclude the Gandria, which of course is only 50% owned.

Time charter equivalent rates improvement this quarter to $44,140 and ship operating expenses are up to $13,750.

That primarily relates to the increased operating costs associated with FSRUs.

On the next slide, slide 7, we have a graphical presentation of the historical development of revenue and EBITDA.

As you can see in Q3 '09, we have the slight improvement that I have just run through.

On slide 8, we have the full income statement, which operating revenues you can see at $50,309,000.

The difference between that and net operating revenues, as I mentioned, is the deduction of voyage expenses at $9,593,000.

Again, the main movement in financial expenses is of the item of other financial items, which is a gain of $10.5 million this quarter as against a gain of $24.7 million last quarter.

And I will discuss that a little bit more later, as I've said.

One item to note is that the net income attributable to non-controlling interests or minority interests, that includes the minority interest in respect of Golar LNG Energy.

Moving on to slide 9 on the balance sheet assets, you will see the main movement there.

This is consolidated as the increase in the cash balance that relates to the equity raised at the Golar LNG Energy level.

And then just moving over to slide 10, the other current liabilities item is a large number; it was a large number at the end of 2008 as well.

The reason for that is that there are marked-to-market valuations of interest rate swaps and forward currency contracts.

And then the other movement on the balance sheet liabilities side is that of non-controlling interests, which again is the minority interest in Golar LNG Energy.

On a consolidated basis approximately 78% of Golar Energy Limited's debt is swapped to a fixed rate.

Moving on to slide 11, a statement of cash flows, we actually had a negative cash used or provided by operating activities, primarily driven by other changes in operating assets and liabilities.

And of course the small loss for the quarter.

In investing activities, the $21.9 million additions to newbuildings and vessels and equipment, is primarily expenditure on the Golar Freeze.

And the proceeds from termination of equity swap, $9.5 million, that relates to the termination of the Arrow Energy swap that I mentioned earlier.

Moving over to slide 12, continuation of cash flows and financing activities, the $10 million proceeds from long-term debt represents the drawdown of a further $10 million in the quarter from World Shipholding, which is the Company's main shareholder.

That gave a total balance of that loan of $30 million, of which $20 million has been repaid subsequent to the quarter end.

The proceeds of issuance of equity in subsidiaries of course is obviously Golar LNG Energy.

Moving over to slide 13, financial expenses, the net interest expense, interest income is $14.8 million; is a slight increase from the prior quarter.

We have had declining floating-rate LIBOR in the quarter, although, as I have said, the 78% of our debt is swapped at a fixed rate anyway.

The slight increase really results from the increased debt and cost of debt related to the World Shipholding loan.

On the other financial items, long-term interest rates declined in the quarter, giving rise to a loss of $2.3 million on interest rate swaps.

Currency gains arose as a result of a weakening dollar on retranslation of currency balances, which mainly relate to the Company's leases and also on forward currency contracts.

And then the gain in equity swaps of $8.8 million relates principally to the Arrow Energy swap that was terminated and realized in the quarter, as I mentioned; but also in relation to a swap that Golar has on its own shares -- they have an equity swap on 300,000 shares during the quarter.

That as we mentioned in the results press release was terminated subsequent to the quarter end.

And then finally in terms of Golar LNG Limited, we turn over to slide 14 on the vessel portfolio.

Here is a slide I'm sure you've seen many times before.

We have split the vessels up between Golar LNG Group or Golar LNG Limited at the top, which represents the five long-term contracted assets.

The Golar Freeze, of course, currently sits within Energy but there is an intention to exercise the option to acquire that vessel upon delivery from her conversion.

And then down at the bottom we have the Golar LNG Energy Group.

Two of the vessels, the Khannur and the Gimi, are on hire to BG through most of next year.

The Hilli and the Gandria are currently in layup.

Gracilis, Grandis and Granosa are all on charter to Shell, at charter rates, again, as I'm sure you well know, that are spot market related.

The Golar Arctic is operating in the spot market and successfully so through this quarter, as I mentioned.

And the Gandria, as I said, which is a 50% owned vessel, which is currently also in layup awaiting FSRU conversion projects.

The next part of Golar LNG Limited's consolidated presentation, of course, relates to Golar LNG Energy, and that will be taken after we have taken questions at this juncture and will follow on immediately after this question and answer session.

So if I could ask the operator just to step in now and take questions thus far in the presentation.

Thank you.

(Operator Instructions).

Anders Rosenlund, ABG SC.

Can you give us an indication of the interest costs in 2010?

I don't know if you mentioned it in the press release.

I have not seen it but what kind of average interest rate should we be expecting in 2010 given the swap structure?

Well, the average swap rate is approximately around 4% to 4.25%.

Then if you add on top of that the average margin, which is around a little over 1%, 1.25%.

And then we take 22% at expected LIBOR rates.

22% of the debt, sorry, if you understand what I mean.

Yes, I understand.

And does that have effect in the whole forward -- does that have an impact -- does that have a significant impact in 2011 as well?

Do you mean do the swaps run to 2011?

Yes, or do you say 78% are currently swapped but how long is the 78% swapped?

Okay.

Well, assuming we don't add any more swaps that would steadily decline over the next three to four years.

Okay.

Thank you.

David Bhatti, Nordea Markets.

Yes, hi.

I have two questions here relating to the dividends that are distributed today in relation to Golar LNG Energy shares.

Do you intend to continue to distribute dividends with those shares?

No firm decision has been made on that at this point.

I think what we said at the time is the equity offering that we would distribute out some Golar LNG Energy shares, as we have said, partly to improve some of the liquidity in Golar LNG Energy.

But also I think that shareholders in LNG Limited should assume that the holding in Energy would dilute somewhat over time.

And that will come through some dividends and also, possibly, if Energy is successful with some projects and is in the market raising additional equity in the future, then it could come from dilution from that as well.

But at this point there is no firm commitment to distribute further than the $10 million that we have announced today.

So that is not to say that there won't be further.

Okay, thank you.

Because that was actually my second question, if you intend to participate in any possible equity offerings in Golar Energy, should they be successful; so, thanks.

(Operator Instructions).

Jeffrey Schwarz, Metropolitan Capital.

I just have a couple of questions.

I would like to start with Dubai.

I don't know -- it may be premature to inquire about whether you folks have had any conversations with them in the last few days.

I'm wondering where things stand on their end, in terms of progressing the infrastructure they will need to be able to receive the Freeze hopefully in the second quarter.

And of course any conversations that you might have had subsequent to the Dubai World request for a standstill.

Yes, sure.

The dialogue with our counterparty, Dubai Supply Authority, has been extremely active over the last few weeks.

And obviously the vessel is in the shipyard.

DUSUP has hired Shell as their technical advisor.

We have had numerous meetings at the yard in Dubai and in London, in Oslo, dealing with the progression of the project.

There is a sort of continuing emphasis that the importance of the project to DUSUP.

Obviously, the news recently in connection with Dubai World is not at all comforting, although I think everybody has known that Dubai has had some issues ongoing for some time.

We have not had any very recent contact with DUSUP, although there is no indication to us that any of the sort of recent news affects them.

That is partly because of course it is Eid holidays at the moment.

So I think there is a lot of sensational news out there at the minute, and we just need to see how things settle down over the next few days.

But as I said as far as we are concerned with our counterparty everything is progressing as normal.

And indeed we know that the contractor who have been contracted to build the jetty for DUSUP are going at full pace and indeed are being encouraged by DUSUP to increase that pace.

Okay, thanks, Graham.

A related question on the Freeze.

Just wondering how much CapEx is left at quarter end?

Left to spend?

Yes.

It is approximately in the region of $60 million to $70 million.

Have you reopened conversations with banks about what a permanent facility or a takeout facility might look like, whether to take out the World Shipping (sic - see press release) loan if that may remains in place or to take out -- to enable the parent to pay Golar Energy if Golar Energy has been financing the CapEx; have you had conversations and is what you are hearing more attractive than what you had been hearing in the late spring when you decided to put that on hold?

Yes, we have; yes.

Things in the banking market have quieted down a bit.

We have been having a lot of discussions over the past month or so.

We have engaged discussion with an export credit agency, as well, and those discussions have been progressing reasonably well.

And I think we would be hopeful to conclude on that -- the caveat being I suppose that we just need to see what comes out of the recent news with regard to Dubai World.

What would you hope -- I understand completely we'll bracket the Dubai World issue.

Any sense of what you would hope to be the time frame to put something in place?

Is that a first quarter 2010 --?

Yes, it is.

I think our expectation is that we would -- our plan was to sign up a loan agreement in the first quarter to be ready to draw down at or close to delivery of the vessel.

I will step out of the queue now, and hope to be able to come back with some more questions after other folks get an opportunity.

Anders Rosenlund, ABG SC.

The Golar Mazo, the 40% stake there, is there any discussions or willingness to buy the minority stake in that vessel?

Have you looked at it?

Have you had tentative negotiations, or is it not likely to happen?

It has not particularly been discussed.

I think it is at this point unlikely.

I think of the CPC, the 40% holders are the gas buyers, the gas that the Mazo transports, and I think they quite like to have that position in the ship, is to bring gas to them.

I mean it is not totally out of the question but it is not something that is really on the agenda at the moment.

(Operator Instructions).

Jonathon Luft, Eagle Capital.

How are you doing today?

Hi, Jonathon.

You are the second caller with Jeff from the other side of the Atlantic.

I guess we must apologize for spoiling your Thanksgiving holiday.

No problem.

It is good to speak to you.

I was wondering -- I was thinking about this Dubai World situation.

What is a worst-case scenario?

I mean if they decide they can't fund the project, what is the likelihood of you being able to put the Freeze with someone else?

Help me understand what happens in a worst-case scenario.

I think it is a little bit premature to start thinking about that.

That is not to say that we don't think about those things because it would be naive to not think about it in all -- with any sort of counterparty or contract.

I think what we must not forget here is that Dubai is part of the United Arab Emirates.

It's not a stand-alone country.

And that has been very clearly communicated from Dubai and Abu Dhabi.

But listen, you know, if we assume the Armageddon scenario in Dubai, which as I say I have to say we don't believe, then, as we will come on to talk about in the Energy presentation, there is lots of interest and inquiries going on at the moment in respect of FSRU.

It is a growing market and actually having a completed FSRU might be quite attractive.

So there are contingency plans that are possible but it is not something that we are taking too seriously at the moment.

Okay, that is helpful.

And as far as the prospective market, maybe you can help me understand who is part of that?

Who would want this?

Who -- I mean who else is there?

Well, we're kind of jumping ahead a little bit, speaking from the Energy presentation.

But there are -- there is interest from across the world I mean particularly in Asia.

But if you run through the areas you have got -- these are areas where we have had discussions or there are formal solicitations of interests or requests for proposals out in the marketplace.

So you have got New Zealand, you have got a couple in Indonesia, you have got Vietnam, you have got China, a couple in India, a couple in Pakistan, Lebanon, Israel, Cyprus, Croatia, Greece, South Africa, Jamaica, Uruguay, Holland, I think as well, and possibly one or two that I have not thought of.

So there is quite a lot of activity and interest.

That's helpful.

Thanks so much.

(Operator Instructions).

At the moment, we have no further questions in the queue, Mr.

Robjohns.

Okay, thank you, operator.

We will now, everybody, just pause for a very short time, probably about a minute, where we'll go back onto music and then we will come back and run through the Golar LNG Energy presentation.

Thank you.

Ladies and gentlemen, we are taking a little interval.

You will be listening to music until the call resumes.

Thank you for your patience and please continue to hold.

The conference will resume.

Please go ahead.

Thank you.

And good afternoon, everybody, and good afternoon to anybody that has just joined us for the Golar LNG Energy presentation.

My name is Graham Robjohns, and I'm joined by Golar Energy's CEO, Oscar Spieler.

Going straight into the presentation, if you turn to slide 3, we have the agenda, where we will run through or I will run through Q3 highlights and financials.

I'll have a very quick recap on Golar LNG Energy's strategy and look quickly at business development, LNG shipping, floating regasification, and then we will have some closing remarks before we move into question and answers.

So turning over to slide 4, Q3 2009 highlights.

Apologies here to anybody who has just listened to the LNG Limited presentation, which I guess may be a few of you.

There may be some repetition, but I will go through it all in case there are people that have just joined purely for Energy.

As of course you are obviously all aware that there was a successful completion of the equity offering, including a green shoe option, which raised $117 million in new equity for Golar LNG Energy.

And we successfully listed the Company on the Oslo Axess on October 8 of this year.

This listing and new equity, together with Golar Energy's assets, investments, project portfolio and the experience and track record that the Company has, we believe, provides an excellent platform for growth within the midstream LNG supply chain.

Although there are, I think it's probably fair to say, still some challenges ahead in the LNG shipping spot market, spot vessels' earnings have been steadily improving with better utilization and rates.

Indeed, the Golar Arctic went on hire in mid August and will continue on hire through most of the fourth quarter.

We do, however, have one vessel, the Gracilis, that is on charter to Shell, that will dry dock at the end of Q4 in December.

Golar Energy has sold part of its shareholding in LNG Limited subsequent to the quarter end, realizing $11 million in cash and approximately $8 million in accounting profit that we have booked in the fourth quarter.

The Company continues to own 6.3% after the sale.

The Gladstone LNG project, which LNG Limited is of course the developer of, continues to make good progress and the Company is strongly committed to the project.

And the above sale of shares should in no way seem to reflect on the Company's commitment to the project.

And, indeed, it is expected that the cash rate on that sale will hopefully ultimately end up being reinvested into the Gladstone project.

There are many FSRU discussions that continue to progress with various parties.

And what we have seen which we alluded to I think on the call with Golar LNG Limited last quarter that there have been a number of formal invitations that have actually come out into the marketplace, notably, from Israel, Indonesia and Jamaica, with one from Uruguay expected.

And these have been in the form of pre-qualification documents, solicitations of interest and requests for proposals.

Moving on to slide 4, the financial highlights for LNG Energy.

I think the most important thing to point out here is that of course Golar LNG Energy was incorporated on the 22nd of June, 2009, but was effectively dormant until the 12th of August, when the restructuring and equity offering transaction completed.

And, therefore, these results only reflect the 49 days of trading between the 12th of August and the 30th of September.

So during that period we have net operating revenues after deducting voyage expenses of $10.5 million, which gives us an EBITDA of $5 million and net financial expenses of $2.9 million, which resulted in a loss for the period of $3.2 million.

The vessel numbers in the period were seven, which excludes the Gandria, which is a 50% owned vessel, and also excludes the Freeze, which is obviously on -- has entered conversion during the quarter.

The time charter equivalent rate, $35,600 during that period and ship operating per day, that is, and ship operating expenses, $11,030.

Moving on to the income statement on slide 4, again, you can see the operating revenues, gross, $11.2 million.

The net revenues arrived at after deducting voyage expenses.

I think the other point to point out here in relation to the net loss for the period, obviously, which has been driven by the relatively weak LNG spot market at the moment, which as I said, we are seeing some improvement moving into the fourth quarter and actually moving into 2010 as well.

But there is a significant amount of project development expenditure that is going on, which is including two areas, firstly, in administrative expenses; and, secondly, in equity and net earnings of associates, which that is our share of LNG Limited's loss for the period, which represents the expenditure that LNG Limited is making on the Gladstone LNG project.

On the balance sheet side you can see the movement from the position at 30 June, 2009, which is, I should point out on what the accountants call a carve-out basis, which is effectively taking the assets and liabilities of Energy as they were recorded in LNG Limited's books and creating a historical balance sheet.

Obviously, the increase in cash and cash equivalents is the biggest movement there, which relates to the new equity coming in.

Moving over to slide 4, liabilities, similarly, to Golar LNG Limited, there is a rather a large other current liabilities item.

Around $58 million of that relates to firstly the seller's credit, that at the time of the restructuring, was left within the Golar Energy balance sheet and represents the net assets and liabilities of the Golar Freeze.

And when the Golar Freeze is transferred back to Golar LNG Limited, that seller's credit will be extinguished in consideration of that transfer.

Another large part of it relates to interest rate swap liabilities that, of course, will, assuming we don't break interest rate swaps, will never be a cash liability.

They will just run down until the maturity of the interest rate swap.

Now the percentage of debt that is fixed through swaps to a fixed rate within Golar LNG Energy is approximately 48%.

On slide 10 we have the start of the cash flow.

Again this represents purely cash flow movements between the 12th of August and the 30th of September.

And the additions to newbuildings and vessels and equipment represents expenditure in that period on the Golar Freeze.

And then move over to the second page of the cash flow on slide 11.

One item to note there is the $20 million borrowings to holding company.

In connection with the Golar Freeze there is an arrangement between Limited and Energy, whereby Limited funds the expenditure -- sorry, when I refer to Limited, I'm referring to Golar LNG Limited, the parent company -- funds the expenditure in respect of the Golar Freeze.

And there is then arrangement between Golar Energy Limited and Golar LNG Energy that Limited can borrow money from Energy but at commercial terms, and that is what that $20 million represents.

Of course, when the Freeze is transferred back to Golar LNG Limited, once she delivers, those balances will be repaid straight but extinguished.

Now moving over to slide 16, a quick recap on the strategy of Golar LNG Energy, which really fits into three segments.

Trading -- shipping and trading, regasification and production and liquefaction.

On shipping and trading, our strategy is obviously to trade our spot ships successfully but also to try and develop a platform to take advantage of LNG trading and storage plays, which will not only help us increase profitability but will also help to maximize the utilization of our spot-related vessels.

And we would also look to seek long-term employment for vessels within integrated LNG projects that we would develop over time.

On the regasification side, the key item that is important to us is to capitalize on the Company's track record of FSRU conversions, and now operations, by targeting similar types of contracts for the Company's four older Moss type LNG carriers, the Hilli, Gimi, Khannur and the 50% stake in the Gandria.

We would also look to develop additional FSRU solutions and could also consider participation in land-based terminals to add to this trading platform.

On the production and liquefaction side, we are looking at taking equity positions in the development of floating and land-based liquefaction projects.

Obviously, Gladstone being a particular one in relation to the land-based.

And that participation would include positions in LNG offtake and possibly in non-operating exposure to upstream assets as well.

Specifically on the energy strategy in those three segments, on production and liquefaction side, we have a couple of liquefaction projects.

Gladstone and floating liquefaction in the cooperation with PTTEP.

Transportation we have four modern-built vessels.

Three of those are on contract to Shell.

And on the regasification side, as I mentioned, we have four 1970's built Moss type vessels, which are ideal candidates for FSRU conversion.

Two of those are currently on long-term charters, LNG carriers, to BG.

And these assets enable the Company to bid for FSRU projects firstly, with a relatively short lead time but it also gives us a significant cost advantage over newbuildings.

Moving over to slide 14, quickly on business development.

With Gladstone project in Australia, there has been quite a bit of progress during the period and much activity.

Following port approval, ground improvement and early site work has commenced at the site during the quarter.

Golar LNG Energy signed an HOA with LNG end buyer, Toyota Tsusho.

The project appointed BNP Paribas as financial advisor.

And also the project appointed CB&I, Chicago Bridge & Iron, as a project management consultant.

On FLNG and the PTTEP cooperation, the technical concept study work that we're doing in conjunction with PTTEP is ongoing.

And on FSRUs, as I mentioned in the highlights, has continued very strong inquiry.

We are of course aggressively pursuing as many projects as we possibly can.

It is pleasing to see that a number of formal invitations of interest and proposals are now in the market again as I mentioned earlier in the highlights.

So some of those opportunities are actually coming out in public into the marketplace.

And we believe that the increasing LNG supply availability that has come about over the last year or so plus the lower pricing fundamentals creates an improved opportunity for FSRUs, where LNG becomes more accessible for markets that don't currently have LNG.

Just one slide on the LNG shipping.

We have talked a little bit about improving fundamentals in the market over the next few years.

And we think one of the reasons for that is the fact that newbuilding deliveries are falling dramatically from the end of this year.

And indeed if you look from the end of 2010 there are only -- is only the newbuilding orders that are on the book represent only about 3% of the remaining fleet.

So this is on -- I've lost the page.

It was slide 15, I think.

On the right-hand side of that table we have the LNG capacity that is coming onstream over the next few years.

And the light blue segment is LNG production that is onstream at the moment.

The dark blue segment represents capacity coming to the market over the next few years.

As we said in the results announcement we have seen Sakhalin, Tangguh and Yemen coming onstream in addition to of course the huge additional quantities coming from Qatar.

And all that additional liquefaction is soaking up the ships that have been delivered earlier, the production in the graph on the left-hand side.

And then turning over to the final slide, floating re-gas projects, I think this map captures well the developing market for floating regasification.

In 2004, there were only two floating re-gas projects in the world.

By 2009, seven projects were operational and a further four had been formally sanctioned, and many more have been proposed.

And of the operational projects, there are only really basically three operated -- ourselves, Excelerate and GDF SUEZ, who work in conjunction with Hoegh LNG.

As you can see there the dotted circled shaded areas are where projects have been proposed and/or there are discussions going on.

As I mentioned in answer to a question on the Golar LNG Limited call, there are a couple in Indonesia; New Zealand; as you can see, Vietnam.

There are some in China which actually are not highlighted there.

There are I think one or two in India.

There are two in Pakistan.

There is Israel, Lebanon, Cyprus, Greece, Croatia; in the Caribbean, Jamaica, Uruguay and South Africa, as well.

So we really see this as an expanding market, one which we have an element of first-mover advantage, having been the first company to convert an LNG carrier for FSRU service.

And we really plan to take advantage of our position and develop this business going forward.

Okay, that comes to the end of the slides but I'll now just like to hand over to Oscar Spieler, our CEO, for just some closing remarks before we move into questions and answers.

Thank you, Graham.

Thank you very much.

As we see it, I mean the whole world economy has been very volatile in the last year and so has the LNG market and the gas market.

But of course with increased demand in the future and the fact that LNG is -- there is quite a lot of reserves when it comes to LNG that we believe that this will firm up and I believe that we will see in the long term that we will see a parity to oil price, when it comes to oil and gas -- LNG and gas price.

In many ways with the growing LNG market, in many ways, the LNG market is quite immature I would say.

There is a lot of infrastructure which needs to be developed.

You need to develop production.

You need to develop storage facilities.

We need to develop free gas, maybe power barges directly from LNG vessels.

It could be trucking directly from LNG vessels.

So I think there is a lot of opportunities in this market.

Where will Golar Energy focus?

Yes, we will focus on where we really have our strengths.

And I think where we have shown in the past our strength is of course that we manage to think quite unconventional and make tailor-made solutions for our customers, which has been highly appreciated.

And I think there is a lot of other areas where we can do the same.

We have also specialized on utilizing all tonnage for this type of [conversions] which creates a lot of value for the shareholders in the long run.

Of course as a part of The Fredrickson Group, we have also been quite successful on raising capital when we need it, which is crucial in this market.

Especially when it comes to potential future floating LNG project, you will need a lot of capital and you need to have the trust in the market which we feel we have.

In order for us to really take advantage of these opportunities and utilize them we will take -- we are about to take a few steps and we will strengthen the organization, both commercially and technically.

We will employ one Deputy CEO, which will focus on commercially.

And we will also employ more people on the technical side in order to be -- even improve our ability to create these types of situations where we actually manage to help the customer to build their market.

The re-gas business is our major -- or is our first priority.

And as Graham already mentioned, we see there is a lot of interest there, and we believe we will be able to secure a project within six or 12 months.

It is always difficult to say.

We said this, it was probably a year ago, but of course then you had the financial crisis, which did a lot of projects on hold.

But as we see it now and with a lot of the old projects now, they have started up and we're taking out tenders and so forth we believe that that is achievable.

The good thing with re-gas that is of course is a relatively low risk, both when it comes to conversion and when it comes to time.

How fast we manage to get the vessels out and starting from the moment from we get the contract until we get it out we will --- [between] 18 and 24 months, the fairly low risk.

What one challenge we face in the market is that a lot of our competitors with newer membrane vessels, they criticize that and they try to use that in the market that we are using old vessels.

But as we say, Moss tankers do not leak and there has never been a crack in a Moss tanker while, a lot of the other container systems have faced problems.

And that is what we really like that we did.

And if you go back in the oil industry they used these old tankers and they still do, actually, old tankers to convert it into FPSO units, and that has been very successful.

And we believe that when we convert our vessel into a re-gas vessel, it can last for 20 to 40 years.

It depends on how you maintain it and of course you have to upgrade it on the way.

So that was the re-gas part.

And the good thing about using these old vessels we also believe that we will really manage to be a competitive area because of the lower ship price compared to a newbuilding.

On shipping, you have also seen that we have improved our utilization of the vessels, and that is something we have high focus on, that we will really keep these vessels trading.

We don't want to have annual fire, and that is something that we will continue and have a high focus on.

On liquefaction, there is a lot of floating liquefaction projects in the loop.

And of course Shell has announced that they have started off feeds on their project.

And we have started off floating an LNG project, the PTTEP, and also a liquefaction project on the Gladstone project.

We have really got a lot of experience here and also are quite -- I mean --- a bit of concern but of course we have seen that most of the liquefaction projects ashore have got big cost overruns and big delays and also technical startup problems.

And that is, of course, a challenge which we see is important to have focus on.

And in many ways we will see -- we will mostly likely not go for the big projects, alone, at least.

We will try to find projects where we have relatively low risk and good return, where we can use our old vessels or our old vessels, first of all.

But also we will be -- have an opportunistic view on using new vessels, our new vessel, again focusing on cost-effective solutions.

And what we have looked into now, if we look to compare ourselves to our competitor, we have seen that by using old vessels we will be able to develop the float [or sell] without the topside for more or less half the price of what our competitors are quoting in the press.

And that vessel will have more or less the same capacity as our competitors, both when it comes to volume and expense.

As we have already mentioned we have been hit by the financial turmoil in the way that the [fadi] has been delayed on the re-gas project.

And with the volatile gas price, and uncertainty around financing or robustness of LNG project becomes bigger.

However, we believe that this market, both on the re-gas, on trading and on the liquefaction there is a future, and we will increase our effort on the commercial side.

We will seek new technical solutions, and we will utilize our old vessels for this.

And we will also start to look more actively on expansion through merger and acquisitions.

So by that I think we will just go over to the Q&A session.

(Operator Instructions).

Jeffrey Schwarz, Metropolitan Capital.

Hello, again, Graham and Oscar.

I hope to see you over here in America sometime soon.

We are looking forward to seeing Graham this week.

On a couple of questions starting with Gladstone, I'm just wondering when do you expect to be at final investment decision?

And when would you hope to sign binding contracts?

From my perspective I see at this point the biggest risk being that somehow that Arrow Energy winds up not controlling their destiny and if someone comes along to bid for them; and while it is certainly possible that there might be other sources of supply given how far along in this process we are, it would be -- it would certainly be much more appealing for Arrow to be able to be our partner here.

So when do you think we will be at FID and sign binding contracts?

If I can just say a couple of things quickly, and then I will hand over to Oscar to add to that.

But I should just point out if we appear to be slightly disjointed that is because Oscar is currently sitting in Singapore and I'm sitting in London.

But just quickly, I don't know, Jeff, whether you were alluding to, I think there was something in the press recently about rumors of Arrow takeover, and that is certainly not anything that we picked up through discussions with Arrow.

And I think they have rebutted that quite strongly.

Arrow are sort of fully behind this project, and certainly our indications is that they are sticking with it and being in there and not being taken out.

In terms of FID, obviously, there are a lot of moving parts in this project.

It's something coordinating the combination of all those into one point in time; it's something that is being worked through at the moment.

But I think what we fully can say is that FID is not going to be before -- certainly not going to be before April, 2010.

Oscar, did you want to add --?

Yes, I think that is right, you know.

And there are close contacts between all the three parties.

And my feeling is that everybody is very committed to the project and are really working to find solutions to go forward.

And I'm pretty sure that that will be found.

And the FID will most probably be taken in Q1 or Q2 in 2010.

And LNG Limited has done a fantastic job as far as we see.

We have our technical people down there in Australia and on the liquefaction and the site work; that is going fine.

They have started up the work.

Arrow, they are working on their part and on the pipeline.

And I think that will hold the environmental permit.

And on the production they are working on that to get the environmental permit as well.

That can take some time, I believe.

But we believe we will -- we can FID in Q1, Q2.

And then a question on the timing of the PTTEP farm-in.

If I remember it correctly we are in the process of doing I guess some technical work as well as analyzing the particular resource that -- the Coogee resource.

And I had thought that there was an expectation on needing to make a decision on the farm-in sometime in the early part of 2010.

Given the problems that PTTEP has had in Australia with their oil leak in the Timor Sea, I'm nervous about their ability to move forward with what would be a groundbreaking project.

And then, therefore, I'm a little bit nervous about us putting up a bunch of capital for a project that probably has -- will have higher environmental permitting hurdles today than it would have when we had signed the agreement -- I guess the preliminary agreement or heads of agreement, whatever it was, with them, in July.

Could you comment on that?

Yes.

I think -- I was up in Bangkok yesterday discussing this with them, and this is of course a concern for everybody.

But I don't think it will be a major issue.

I mean Australia would definitely like to have this produced as well.

We are, as we have discussed before, we are doing the concept phase now.

There are three people from PTTEP here, and they will be taking some decision after we have completed the concept phase.

But of course this issue that you bring up will definitely be a part of our decision if we go -- if we take the next step.

In terms of the timing on that, Oscar, when would you -- when do you think --?

Q1.

Q1.

Okay.

Thank you.

Frederik Lunde, Carnegie.

Quite exciting times, it sounds like, on the FSRU side.

Can you give some more indication on the timeframe and also which specific regions you see the most potential near-term price, actual contracts?

Is it in Indonesia (multiple speakers) seen some media reports in Indonesia I think quite aggressive.

We don't want to go too much into detail.

But in the Far East and on the ECI, it's definitely one of the real hotspots for the moment.

We have Pakistan.

There are Uruguay, and I think that is the really hot spots for the moment.

When it comes to timing I mean your guess is as good as mine I will say.

And regarding the size, is this the same as -- I mean is it a small one or a large one compared to the ones you have done so far?

They are -- it is a mixture.

But we will most probably be able to utilize our old vessels in this.

What we have seen on the re-gas side is that some of these people they try to a turnkey project, and that means that they want the contract to do both, the FLNG and the terminal ashore.

But of course they tried to explain to them that this is not beneficial for them.

Because if you want to take a turnkey project, you are not a specialist on the facilities ashore.

And will not be able to price it right and get a lot of contingency bear.

But these are things which we are discussing all the time.

And on the Gandria, which you own 50% of it with [Vivetry].

Is there any news regarding that vessel?

It seems like Vivetry would potentially have a difficulty financing any conversions?

No.

I mean there are -- we have not discussed this with them in detail.

I mean they own 50% and if that becomes a challenge, we will solve it.

So we should of that vessel as more as a spot vessel for the foreseeable future?

Is that fair?

A spot vessel?

Yes, trading as a tanker.

No; I think it is very difficult to trade these old vessels as a spot market.

So it will be there as a conversion candidate.

And, of course, the advantage with the Gandria which is a sister vessel of the Freeze, so that means we can just do a [coping] and reduce the conversion cost quite dramatically -- well not dramatically but at least we can reduce the conversion cost because we don't have so much engineering.

Martin Korsvold, Pareto.

Can you give us an idea of where you think, on the FSRU rates firstly and costs, secondly, what that would look like, which are actually going for the next contract?

I mean should I start with that one, Oscar?

I think, Martin, on CapEx, it depends very much on the requirement and the capability of the specific FSRU.

The ones, the three, that we have at the moment vary quite significantly in terms of specifications, in terms of through-put, in terms of siting of loading arms, etc.

etc.

And the CapEx for those three ranges between the $70 million and $130 million -- $125 million, $130-type-million range.

But in terms of rates you know --

The good thing about the rates is that our competitors have vessels which cost $250 million to $300 million.

So of course there is a rate there which is a market rate, and then we will most probably be able to be in a quite good position in that respect.

Okay.

And you also mentioned there is currently just four of you out there competing for these FSRU contracts.

Did you see more, given the returns that you are able to book in this segment, more people moving into -- more companies moving into the FSRU commercial vessels?

Yes, that might happen definitely.

But of course [the tressel] to move into -- to re-gas is a bit higher because of the requirements from the oil majors on LNG tankers.

It is not impossible, and most probably some people will do it.

But this is really one of our competitive edges that we very often manage to do this conversion at a very competitive price and find quite good solutions.

So yes, there will be competition but the market is not that big either, so I'm not sure whether people have that appetite.

We will see.

(Operator Instructions).

Anders Rosenlund, ABG SC.

First, what is the cost of stacking these vessels?

The two vessels which are currently stacked?

The layup, you mean?

Yes.

They cost about in the region of sort of $3,000 a day.

Okay.

And the second question is what kind of internal rates of return are you happy with when you bid for projects?

That is a good question.

I mean in this industry there are so many different factors which affect the project.

And it is ever -- I mean you can also ask what type of price do you base the LNG price on if you go for an FLNG.

But it is very much based on risk, and I don't know what type of rate you have used in the past, Graham.

Well, I mean, Oscar is absolutely right.

It is very much dependent upon project risk, counterparty risk and technical difficulty etc., etc.

Typically on FSRUs, we have been sort of in the 12, maybe 15% range, that sort of area.

I think the right answer on the FSRUs, I mean the market is the market.

And we will -- as I said earlier -- the competitors, they have vessels which are most probably have a CapEx which is more or less double price.

So the market is the market there.

Okay.

That's fair.

And my final question is, the sale of the LNG Limited shares, could you explain a bit more about the reason for selling not everything?

Well, I think the reasons for selling not everything is, as we said, we are still very committed to the project.

I mean we originally invested in LNG Limited back in 2006 with a view to then developing a project/[owns] Gladstone.

They have now developed that project.

Gladstone is the project that we are interested in.

We want to -- wanted to remain with some shareholding in LNG Limited but our main focus is on Gladstone.

So we took the opportunity of rebalancing the investment portfolio, took some cash out.

As we move forward and get more involved in Gladstone then possibly the shareholding of LNG Limited might reduce in the future.

But right at this minute we are comfortable with the position that we have.

Okay.

Thank you very much.

David Bhatti, Nordea Markets.

It was mentioned here that Arrow Energy might not control their destiny.

But in the event they do they are also planning a 16-tonne plant with Shell quite close to Gladstone.

And do you have any idea on whether they will have the resource base to provide both you and the other project with gas?

Well their contingent reserves are something like 70 TCF.

That is sort of 1p, 2p and 3p, and that can more than cover ours and the Shell project.

And obviously they are using gas for other things and they have got some power plants and things as well.

But they have a huge reserve base.

And I think it would obviously be -- the challenge is getting the gas out of the ground, out of the coal beds and delivering it.

And I suppose it is difficult for us to comment on that.

Okay.

And the guess, feed gas, contract that you have with Arrow Energy, how is that priced?

Is that a variable price?

Can you just explain a bit on that?

Well, the contract itself is between Arrow and the LNG Limited project company.

So it is not directly with Golar LNG Energy.

But in any event, obviously, we are in a sort of quite a commercially sensitive time in the development of the projects.

And it is not really something I'm afraid we can go into right at this time.

Okay.

I think there is a justifiable question here on the Gladstone project because as I understand you are purchasing the LNG from the Gladstone project, and then selling it off to Toyota Tsusho on a 12-year contract.

And what margins do you expect to have on that trade?

Well, again, at this moment in the development of the project it is commercially sensitive information and I'm afraid it's not really something that we can give out right at this time.

Sorry I cannot be more helpful.

Jeffrey Schwarz, Metropolitan Capital.

I'm wondering about the speculative investment to advance the potential FSRU project.

I think at one point you had mentioned that you would order some long lead-time items for potential conversion of the Hilli.

Is there any thought being given to trying to progress a project more fully than that?

And as a related question, I think Oscar had mentioned that the Gandria is a sister ship to the Freeze.

I think the Gandria and the Hilli are relatively, probably relatively, similar in terms of their age and capacity.

Any potential for striking a deal that would enable us to perhaps swap out of -- swap our 50% of the Hilli to get full ownership of the Gandria, which seems like it would be an optimal ship to do a speculative conversion on, given that all the engineering work has been done?

I will just jump in quickly and answer the last part of that, Jeff, and then I will hand back to Oscar.

I think at the end of the day, if we have found something sensible to do with the Gandria given its sister ship relationship with the Golar Freeze, then there is a solution to be had in terms of acquiring Bluewater's half from them.

And in terms of the Hilli conversion I will let Oscar answer that one.

Yes.

The first part of your question really was just speculative.

We are considering this all the time, but the problem here is of course that you have also to develop the infrastructure.

So it is not that much to gain on that actually.

When it comes to Hilli, even if Hilli and Gandria is quite similar they are quite different as well.

So more or less you have to do everything over again.

Yes, I did not suggest that -- I was actually thinking that the advantage to the Gandria being the speculative conversion is its similarity to the Freeze.

Have we spent -- how much money have we spent so far in these long lead-time items on the Hilli?

Yes, we have committed to a couple of million dollars on some of the very long lead items.

And I think there was some particular -- I think LNG pumps in particular I think that have very long lead times.

I think the Gandria problem -- or the challenge will be -- I mean that is just a [conversional] discussion we have to have with --

With Bluewater.

With Bluewater at that time.

(Operator Instructions).

Jeffrey Schwarz, Metropolitan Capital.

I was wondering about the cash at the -- that is reported on a consolidated basis.

I think it is roughly $155 million.

How does that break out between the parent and Golar Energy?

And then a related question I guess would be -- and I apologize for not asking this during the Golar call.

But I'm wondering -- I did notice that subsequent to quarter-end, the World Shipping (sic - see press release) loan was from -- that Golar had -- was paid down about $20 million.

I'm assuming that that is with money that is advanced from Golar Energy.

It seems as if, given how low the return on riskless cash assets are it would be very much advantageous for Golar Energy to advance as much money as possible to Golar.

And it would also seem that it would be advantageous for Golar to borrow as much as possible from Golar Energy rather than World Shipping (sic - see press release).

What is the vision that you folks have for how to handle, between now and the time that the Freeze is delivered, those sorts of intracompany issues?

And I'm sure, Jeff -- in actual fact the World Shipholding loan was paid by Golar Energy Limited principally as of the cash that emanated as of the closure of the Arrow swap that gave rise to that $9 million in cash profit but also released some restricted cash from collateral that was placed for the swap.

But in terms of the funding, the arrangement between the two companies is that -- in actual legal affect what happened is that Golar Energy Limited lends money to Golar Energy to complete the Golar Freeze conversion, and Golar Energy lends money to Energy for the purpose of LNG Limited lending it back.

Now I know that sounds rather circular.

But effectively what is happening is that LNG is using its money to spend on the CapEx for the Freeze and Golar Energy Limited is paying commercial terms for that funding.

So you are absolutely right, funding -- and there is also an ability in the loan agreement for Golar LNG Limited to borrow a little bit more as well.

The principal reason for it is for the funding of the Golar Freeze conversion.

But you're absolutely right, it is beneficial to Golar LNG Limited, and its beneficial to Golar LNG Energy because they are earning some return on that cash rather than it sitting earning absolutely nothing.

At quarter-end, Graham, how would that --?

I beg your pardon.

Yes, at quarter-end, yes, there was about -- it is roughly $112 million was Energy.

And the balance, which is about $43 million, $44 million, was the rest of the group.

And it appeared as if there was $20 million of --?

Yes; that was the initial $20 million drawn from Energy by LNG Limited.

I think it is coincidental that that is $20 million and the repayment of the World Shipholding loan was $20 million.

So, in effect, the $112 million -- does that mean that Golar Energy has $112 million of cash and, in addition, has also lent $20 million by the end of the quarter to Golar?

Yes, it has but it has also borrowed money from Golar.

I see.

So essentially that is (multiple speakers)

And (multiple speakers) yes.

Okay, so I should be looking at its cash assets at $112 million.

And then additionally it will have gotten another roughly $11 million in the fourth quarter on the sale of its partial stake in LNG Limited?

Yes.

But the funding to Limited will go up a bit as CapEx on the Freeze goes on during Q4.

I also think that the Q4 balance sheet and cash flow will be a bit clearer.

This quarter because it is sort of a part period and it is from completion to transaction it is slightly confusing.

Okay.

Well, thanks for helping me understand.

No problem.

Thank you.

As we have no further questions, I would like to turn the call back over to you, gentlemen, for any additional or closing remarks.

Okay.

Well I would just like to close by thanking you all for attending the presentations of both companies today.

Apologies, again, to our friends across the other side of the Atlantic for ruining their Thanksgiving holiday.

And we look forward to seeing you all again in three months' time.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.