Golar LNG Ltd (GLNG) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Golar LNG and Golar LNG Energy third-quarter results presentation conference call.

For your information, today's conference is being recorded.

At this time I would like to turn the conference over to your host today, Mr.

Graham Robjohns.

Please go ahead, sir.

Thank you very much and good afternoon, everybody.

I am joined here today by a few people.

We have Oscar Spieler, Golar LNG Energy's CEO.

Also on the line is Blake Herndon, the head of Golar Commodities division.

I also have Ian Walker, who is our Senior Vice President of Chartering.

I'm also delighted to introduce Doug Arnell who is -- recently joined us as Chief Commercial Officer and Deputy CEO of Golar LNG Energy.

Doug has spent many years in the natural gas and LNG business, most luckily with BG for the last six or so years.

The format for the presentation will be as generally, as per usual.

I will go through the Golar LNG Limited presentation at the start.

We won't pause for questions and answers; I will think we will take all the questions at the end.

I will then cover the financial -- the highlights and the financials of the Golar LNG Energy presentation, and then I will hand over to Oscar to cover the commercial slide under the Golar LNG Energy presentation.

Okay, so moving on, if we move to slide 4, the Q3 2010 highlights.

It's been a pretty good three months since we last were last here, presenting the second-quarter results.

We've had the Golar Freeze of course commencing operations.

We've seen a substantial improvement in the LNG spot market.

And of course Golar LNG Energy has been awarded the West Javan FSRU project.

It's of course pleasing to see Golar LNG return to profitability after losses in the first two quarters of 2010.

We have operating revenues up 27%; EBITDA up 31%.

That is mainly due to a full quarter's contribution from the Golar Freeze and, as I said, significantly improved earnings from spot trading vessels.

The Golar Freeze FSRU loaded its first cargo in Qatar then traveled back to Jebel Ali in Dubai and is currently undergoing commissioning and startup testing.

Golar Commodities are up and running.

They've traded two physical cargoes in the third quarter.

Somewhat disappointingly operated at a net cost for the quarter, but the outlook I think for their business and also with the synergies with the rest of the Company looked positive.

And Blake will say a little bit more about that later.

Golar LNG Energy as I said was selected as the successful bidder for the West Javan project and has also signed a letter of intent with the charterer Nusantara Regas to enable the commencement of engineering and procurement of long-lead items to make sure that we maintain a good schedule.

Finally of course we're delighted to be declaring a cash dividend of $0.25 per share this quarter, which was guided last quarter and has been our target dividend rate once all five long-term contracted ships were up and running and operational.

Turning over to the next slide, the financial number highlights.

You can see net operating revenues, which is after the deduction of voyage expenses, increased from $45.6 million to $61.9 million.

EBITDA up from $29.2 million to $38.2 million.

And as I said, very pleasingly a net income of $4.1 million as compared to losses in the previous two quarters.

The vessel numbers have declined from 14 to 13.

That represents the Ebisu, which was a chartered-in vessel at the Golar LNG Limited level, which went back to owners on September 22.

That earnings improvement of course has been reflected in the average time charter equivalent rates, up from $47,332 per day to $63,111 (sic - see slide 5) per day.

Ship operating expenses on an average daily basis at $11,272 are slightly up on the second quarter, but have certainly been trending downward since Golar took over the management of all vessels towards the latter part of 2009.

Now, of course with the setup of Golar Wilhelmsen, where we're bringing all our vessels under the same management umbrella, we believe we will be able to gain further control over those costs.

Moving up to the next slide, it's the usual presentation of historical development of revenue and EBITDA.

Obviously in the third-quarter 2010 we have a highest quarterly revenue for some time and close to the highest EBITDA level as well.

Turning over to the next slide, the details income statements.

A couple of things to highlight here.

Firstly, the administrative costs increased.

The problem here was as a result of some administrative setup costs related to Golar Commodities, and also of course there will be some ongoing increased administrative costs related to Golar Commodities.

The other operating expenses/income -- just below total operating expenses -- of negative $3.4 million is the mark-to-market trading loss on physical cargoes and financial traded positions in relation to Golar Commodities of course.

Then within financial expenses, we made note in the results announcement that in line with current guidance we have changed the analysis of interest related to interest rate swaps.

Basically interest expense physically paid on interest rate swaps valued at -- periodic net settlements of interest rate swaps was all put through the interest expense line.

That has been changed so that interest rate swaps that are hedge accounted for, and for which the mark-to-market valuation adjustments go through other financial income, that interest expense remains in the interest expense line.

But interest rate swaps that are not hedge accounted for -- so-called undesignated swaps -- the interest payments on those swaps now goes through other financial items and are netted off the quarterly mark-to-market valuations of those swaps.

You will see the detail of that a little bit later on a separate slide.

Turning over to slide 8 and the balance sheet, you see there is a reasonably significant reduction in cash this quarter.

That is primarily as a result of approximately $36 million that we paid out in cash security prior to getting in place the trade finance facility that we got in place shortly after the quarter-end.

That $36 million is reflected in an equal increase in other current assets.

Post-quarter-end that $36 million was refinanced by the facility and/or has since been repaid.

Turning over to the next slide, balance sheet liabilities, not seeing many changes there.

The percentage of fixed interest debt remains around the 60% level on a Group basis, just below, sort of 59%.

And the average rate on those interest rate swaps before margins is approximately 4%.

Turning over to slide 10, the statement of cash flows.

In operating activities you can see we have used $14.5 million in cash.

Again that primarily is a result of that $36 million that was paid out and is reflected in other changes in operating assets and liabilities.

Moving over to the next slide, slide 11, the other main constituent of cash movement is the repayment of long-term debt of $18 million.

Also a payment of some dividends.

So you can see that, together with $36 million and the net income result leaves us at $87 million cash at the end of the period.

Turning over to the next slide, financial expense analysis.

This is a slide that you will recognize from previous quarters.

As I was saying earlier, you can now see where we have interest income of total $1.5 million; interest expense, including lease interest expense; and debt interest, which includes designated interest rate swap expense at $9.2 million.

Then under other financial items we have the interest rate swap gain/loss on fair value changes.

That is the mark-to-market of interest-rate swaps, undesignated interest rate swaps.

The related interest expense of those swaps is now included in the same line rather than within interest expense.

Okay, moving over to slide 13 we have the Golar vessel portfolio.

The Ebisu as I mentioned earlier, the sixth vessel under the Golar LNG Group at the top, that has as I said gone back to owners on the September 22.

Of course the other major change is the bar showing the Nusantara Regas project; that time charter is currently under negotiation.

Okay, slide 14, which is the last one on the Golar LNG Limited section, is an excellent picture of the Golar Freeze as she has arrived at the jetty just outside Jebel Ali Port.

Commenced commissioning during October; the first gas flowed on the November 1; and she is continuing to regas LNG since then and continue her commissioning and testing process.

Okay, so that brings us over to the Golar LNG Energy presentation.

Now we move through the forward-looking statements.

Let's pause at the agenda.

So I will cover as I said earlier the highlights and financial results, and then I will hand over to Oscar to cover LNG shipping and floating regas.

Then Blake will say a few words about Golar Commodities before Oscar wraps up.

So turning over to the next slide, the Q3 highlights.

Net revenue -- net revenue, as net of voyage costs rather than headline revenue -- number was up 37% on the second quarter due to a much improved performance from the spot trading vessels.

Still not satisfactory returns in the third quarter, but improving as we move into the fourth quarter.

The revenue also benefited from the termination of the Khannur charter.

The Gimi time charter came to an end during the third quarter and the Khannur charter was ended at the same time; it had a little bit longer to run than the Gimi.

So at the time of the termination all hire due up to the end of the contract on the Khannur was paid during the third quarter.

As I said a couple times before the spot market improvement has continued into the fourth quarter.

We're expecting a significant improvement in utilization and rate.

Indeed, rates are now well above cash breakeven, which are currently for the more modern vessels within Golar LNG Energy fleet approximately $33,000 a day, including debt amortization and interest.

As we said or as I have said, Golar LNG was of course selected as successful bidder for the West Javan project.

The vessel, the Khannur, has been selected as the vessel for conversion for that project, and we have been -- had several discussions with various banks in terms of financing the project, which is of course very, extremely important part of this project and our future growth strategy.

We've had a pretty good response to that, I have to say.

Expectations of a good percentage of the total project costs that we believe we'll be able to get financed.

By total project cost I mean the cost of the vessel as well as the conversion costs and financing costs.

Therefore as far as we are clearly injecting the vessel in, when you look at the total percentage of the project costs, that debt amount will -- or should cover a very high proportion of the conversion CapEx required for the project.

Golar Commodities fully operational, as I mentioned earlier.

And as I say Blake will have a bit more about that later.

Finally we continue to see some excellent prospects all over the world for new floating storage and regas projects.

Again, Oscar will say a little more about that later.

Turning over to slide 5, financial highlights.

Net operating revenues are up, which is good, although the EBITDA has fallen.

That is primarily due to the cost associated with Golar Commodities.

Time charter equivalent rates up from the previous quarter and ship operating expenses down a little.

Ship operating expenses look fairly low.

That is that margin because of having to actually combine them.

But of course the older vessels that are not active, the Gimi and Khannur, have a pretty low operating cost in the region of $2,000 to $2,500 a day.

Moving over to the more detailed income statement, not too much to add there.

We talked about the impact of Golar Commodities.

Of course whilst as I said earlier, whilst there was a significant improvement in the earnings of the spot vessels, the first half of the quarter was particularly disappointing.

Therefore rates and earnings were still not at a sort of satisfactory level.

So with the impact of Golar Commodities we still ended up with an increased loss over this; this is actually the second quarter.

Moving into the fourth quarter we do expect the utilization, as I said earlier, and rates to increase and improve those earnings.

Turning over to the balance sheet, assets.

Applies for Golar Energy, the same comment I would make here as I made for the Group balance sheet, that the cash reduction has primarily resulted from the $36 million prepayment on critical cargoes.

You can see the corresponding increase in other current assets from $14.6 million to $56 million.

Turning over to the liabilities side of the balance sheet for Energy, Golar Energy also had some interest-rate swaps.

Round about 50% fixed, just a little above that, and a similar average interest rate of around 4%.

Statement of cash flows for Golar Energy, again most of the items we covered already.

The $36 million in operating activities, which gives the negative -- well, it is the reason for the negative number of $37,456,000,

Turning over to the next part of the cash flows again; not too much to say.

So that wraps up the presentation of financial numbers and I will now hand over to Oscar to carry on with the commercial slides.

Thank you very much, Graham.

Happy to see that our forecasts from Q2 presentation have shown to be fairly accurate, even if the results is slightly under our expectation.

The increase in utilization on rates is a function of a new LNG capacity coming onstream and an increased number of FOB spot cargoes on account of this new market in South America and Middle East.

Based on the fact that additional LNG supply is coming onstream also in Q4 and Q1, and that we are going into the winter market, we believe that the market could tighten even further.

The shale gas in the US has led to less import of LNG into the US, and this LNG has to be redirected.

We believe that the size of our LNG vessels should be ideal in that respect, fitting into most terminals around the world, giving the charterers a lot of flexibility.

It's important.

We also see an increased activity in the short-term and mid-term time charter markets.

At the right price, we will fix out some of our vessels.

On the contrary to other shipping segments, like container bulk and tank, the newbuilding book for LNG vessels are very small.

They are only a growth of 2.7% in 2011 and total 26 vessels on order of an existing fleet of 360.

Around 50 vessels of the existing LNG fleet are built in the '70s.

We believe that these vessels will be extremely difficult to trade in the future and will be mostly probably phased out or used for conversion over the near future.

This will actually result in a reduced effective fleet compared to those -- not all the 360 vessels will actually be affected.

Going over to the next slide, this slide shows the spot rates for LNG vessels in the blue line and also the availability of spot vessels shown by the gray lines for the segment 138,000 to 155,000 cubic meters, which is our vessels, over the last five years.

As can be clearly seen, the availability of the vessels has gone down over Q3 to levels we saw back in 2006.

We believe that it could be even tighter in Q4 and Q1 going into the winter market, which we hope will be very cold and long.

We have over the last few weeks seen an increase in LNG prices in [Atlantic], a bold spot on future prices, and the weather has at the same time become colder.

We are quite bullish on the LNG demand going forward based on the firm GDP growth for a number of countries around the world like China, Brazil, India, Indonesia, and you name it.

As a rule of thumb you can say that a 1% increase in GDP results in a 1.3% result in increased power demand -- and in certain countries even higher.

This will result in increased demand of LNG.

For many countries this will mean import of LNG; in other words, more shipping and more FSRU projects.

The cash breakeven for our modern LNG vessels are now down to $33,000 per day and due to repayment of debt, lower interest rate, and not least lower operating cost, as Graham mentioned.

The change from external management to internal manage, we definitely believe that we are going to improve our costs but also the quality of the fleet.

We will come back -- we will discuss that closer next quarter.

Going over to the next slide on the FSRUs and its many potential floating regas projects around the world.

However, the FSRU business development is a slow-moving process and we just have to be patient to let the developer move ahead in their pace.

We believe that there will be taken FID on one or two more projects over the next 12 months, and that we are in a good position to win one of them.

The most prosperous area for Golar is another project in Indonesia.

They have proven to be the most competitive both on absolute price and a cost per million Btu regas cost.

The fact that we have already developed four projects puts us in a good position.

I think we're particularly well positioned in projects where capacity is less than 3 million tonnes per year, which will have to be developed carefully when it comes to CapEx.

And that improves our competitiveness versus our competitor, which mostly has standardized vessels at a capacity 3 million to 4 million tonnes.

Moving over to slide 28.

We have previously delivered two projects and are now about complete the commissioning in Dubai on the third.

Golar is the only company who so far has delivered FSRU based on a conversion basis.

It has been proven that our concept is working and has been accepted by major clients like Petrobras, DUSUP, Shell, Nusantara Regas, Pertamina, and PGM.

I believe you are pretty familiar with the three previous projects.

Two of the projects have been conversion of '70s-built vessels, and Winter was a conversion of a modern vessel.

All three projects have been delivered on time and on cost.

All-in cost for a conversion is varying between $80 million to $180 million, while a newbuild will cost in the region of $250 million to $300 million plus any specific requirements from charterer.

This clearly proves our competitiveness in the FSRU market.

We believe that we won our fourth FSRU contract in competition with Hoegh, Excelerate, and MOL based on price and experience and the fact that we tailor-make the vessels to our clients' needs.

Going over to slide number 29.

The Nusantara Regas contract is between Golar LNG Energy and Nusantara Regas, a company owned 60/40 between Pertamina and PGN, which is the state-owned distribution company in Indonesia.

We have entered into an LOI on November 4, enabling us to start ordering long-lead items.

They will use one of our old ladies, the Khannur, built in 1977, which we have owned since newbuilding and know very well.

We expect that the vessel will be at the conversion yard first half of 2011.

The vessel will be moved and operated 50 kilometers offshore outside Jakarta.

Nusantara Regas will be responsible for piping and LNG supply.

The contract is for approximately 11 years and the contract value is around $500 million.

We are now entering into the time charter part of discussions with the charterer and expect to have that finalized at end of the year.

On the next slide, on slide 30, you see a picture of the old Khannur in Boston Harbor.

She is presently in Norway and will be moved to the conversion yard early next year.

Then Blake, I'll give the word over to you before I summarize.

Great, thanks, Oscar.

Golar Commodities is happy to report that we are continuing to ramp up our operations.

We are nearly fully operational and active in nearly all parts of the globe.

While we are disappointed in our financial results this quarter, we continue to be very positive about our outlook and see the continued development of the spot market as we expected.

During quarter three we moved two physical cargoes.

One was a re-export out of the US; and then we also delivered one in the Far East.

Significant accomplishments include the establishment of our $150 million credit facility which is fully operational and has been utilized.

We have continued to develop our staff and systems, which we expect to be completed in Q4 or Q1.

We have been very active in pursuing opportunities to leverage existing Golar LNG Energy assets and future assets to find new ways to add value to those positions.

We are very excited about those possibilities.

Included in that is evaluating some term charter positions.

We see the market tightening significantly in shipping over the last six months, particular the last three months.

As part of our strategy we are looking to potentially charter-in a vessel to enhance our trading efforts; and that may include chartering a Golar vessel.

We are engaged in negotiations on a number of term cargo supply and offtake transactions that have varying likelihood of success.

But we are very active in a number of transactions, and those range from short-term transactions to even longer-term transactions.

We are also in a number of discussions around the world in providing risk management and asset optimization services for assets around the world with a number of parties.

We look forward to hopefully announcing some of those in the near future.

And that is it for me, Oscar; back to you.

Thank you, Blake.

Going over to the last slide, as you can see on the slide we have a bit more control over the bull this time than the last time, and hopefully even better next time.

The shipping market has tightened and we believe it will tighten further going forward.

We believe that we will have a positive result in Q4 2010, improving in Q1 2011.

Floating regas market is firmer, and we believe it will have another contract over the next 12 months.

We are progressing on the power ship study, and first phase has been completed.

We will continue into a detailed FEED study.

During our concept study we have confirmed that the concept is feasible and we do not see major issues from technical point of view.

They have also verified that we could deliver power at competitive prices compared to onshore power plant.

We are now working on finding a business model and a partner for the project.

There also exist opportunities to develop logistics services around an FSRU.

In other words, a trading hub.

This is something we are developing in cooperation with Golar Commodities.

We see huge synergies between our traditional business area and Golar Commodities.

We believe the combination our shipping and LNG trading will give us opportunities which we would otherwise not be able to pursue.

We remain confident that Golar Commodities will make profits the first year of operation.

So, all in all, we are very bullish going forward in all areas including shipping, FSRU, power ship, and trading.

So, operator, we can go over to the Q&A session.

(Operator Instructions) Martin Korsvold, Pareto.

Could you give us more color on your older vessels?

With the current tightening of the market, is it possible that the two you have in layup might come out in the trading market again?

We have been working on that for quite a while, and we are investigating.

And that's potential, possible; yes.

To bring these old vessels out from layup has certain costs, and we also have to check whether these will be approved by the oil majors and so forth.

But that is something which we are working on and have been working on for (technical difficulty) months.

(technical difficulty)

Okay.

With the two that you have on the water at the moment, what sort of discount do these get on the spot trades compared to a brand-new modern vessel trading in the spot markets?

It is difficult to say because the economy of trading these old vessels compared to a new vessel is quite big.

There are -- you need to give quite a big discount.

I don't know, Ian, do you have any idea around it?

No, it really depends upon the nature of the trade.

It tends to be rule of thumb that the longer is the tonne-miles, then the bigger the differential between the modern tonnage and the older tonnage.

So it really is trade specific.

Okay.

Secondly, if you could give us some idea what you're thinking with regards of your modern membrane vessels coming off charter with Shell.

Will you extend trade or spots?

If you are looking for long-term, what kind of rates can you lock in?

If you could give us some color there.

We are in discussion with Shell of extending the agreement.

As we have said, we see an improvement of the market.

As you saw in the figure if you look at the availability of vessels now compared to 2006, the market should be substantially higher.

I think we can easily see a spot market around $50,000 to $60,000 per day.

I think that is also most probably the level which we see on the short- and medium-term contracts.

Okay.

Lastly on the FSRU side, looking back to the last quarter at least, I have the impression that we might see one or two more tenders come out by the first-quarter 2011.

Now you say that you are looking for a final investment decision on one to two projects over the next 12 months.

Have things been pushed back?

No, no, no.

There are a number of projects around the globe, and there are prequalification in Bahrain, there are prequalification in Indonesia, there are prequalification in Uruguay and Argentina.

But I am trying to give you a realistic view on that.

I mean, we see that -- as I said it takes time to develop these type of things.

When we start discussions with our clients they can hardly spell LNG.

So it is a long process.

But I believe that there are four or five prequalifications out now, and that will increase.

But it will take time for them to take FID.

Okay, thanks so much.

Jeffrey Schwarz, Metropolitan Capital.

Good morning or good afternoon, gentlemen, depending where you are at; and congratulations on the forward progress you are making.

A couple of quick questions here.

One as to the financing of the Khannur conversion, when you were doing the conversion of the Freeze the bank market was such that I think the conclusion was it made more sense to have the conversion be financed by the cash that Golar LNG Energy had, and with the knowledge that the Fredriksen Group was a potential backstop, and that a more desirable bank facility could be put in place once the vessel went on contract.

Assuming that the cash that wound up being laid out for Golar Commodities comes back this quarter, because the financing for Golar Commodities is in place, do you think it is feasible to be once again using Golar Energy's cash to finance that conversion?

Or has the bank market healed sufficiently that the financing that you were talking about, Graham, is sufficiently attractive to warrant entering into a financing deal prior to delivering the ship?

Yes, hi, Jeffrey.

Yes, I think definitely the bank market has moved significantly from where we were when we started looking at the financing for the Golar Freeze.

Of course at that time not only did we have the general financial crisis, we also had general concerns around Dubai.

Of course those have eased an awful lot in recent months.

So I think -- I mean certainly the responses we are getting are much more positive.

There is a lot more interest.

There is appetite.

There is certainly appetite for predelivery financing.

You know, of course pricing has gone up from where it was three years ago; but that is just the way the world is now.

Yes, we will be putting in our equity share into the project, which will include the value of the ship and some cash.

But we will be looking and now are looking at predelivery financing for the project, which we would hope to get in place not too long after actually the charter is signed.

If the charter is signed by the end of the year then based on the progress we have made to date and we would pay another month, two months after that, I think we should be in reasonable shape to put something in place.

And that -- reasonable terms given the market.

Great, excellent news.

Leaves us with more financial firepower for doing other things.

Just also a quick one for Oscar and perhaps Blake as well.

On the power ship concept, Oscar, you referred to perhaps looking for a partner for that.

I am wondering, what might the right type of partner be?

What would they bring to the table?

And also there was I think some -- a very brief mention of the potential of a trading hub and an FSRU as part of that.

I am wondering if you could elaborate a little further on what you are thinking.

What is our specialty is we are trading vessels, we are fit-out conversions, and delivering equipment to the customer at the right time.

We are not specialists in the power market.

And in order to be able to really market this vessel, most probably we could benefit from partnering up with a power supplier, a utility company who finds this project interesting.

Saying that, it doesn't say that we have decided to partner up with anybody, but we are investigating to partner up with somebody.

As you also mentioned, if you think about a power ship or an FSRU you can use that as a trading hub in addition to being a power on FSRU.

And you can maybe also increase the storage volume by adding another FSRU and thereby be able to store LNG without any losses.

So, we have been working on this for quite a while, but I mean it is still early stages at least on FSRU.

We have come further on the power ship.

Blake, do you have any comments from a trading point of view?

I would add as far as the trading hub concept, I think we see the LNG market as a little bit different in some respects operationally than other commodity markets such as crude and products, natural gas.

LNG and FSRU could provide some flexibility that doesn't -- that may not exist in the value chain as much as it does in other markets.

There is relatively little flexibility, including storage capacity of LNG in the market, relative to crude and products.

There is crude and product storage all over the world; there is relatively little storage of LNG around the world.

There is also a need for services such as cooldown.

Vessels have to be cooled down.

A hub like this could provide cooldown services for vessels, which is hard to find sometimes and can be costly.

So little services like that that can be provided on the margin could be really a significant value adder for some of these assets.

So it's those types of services that we are looking at.

That was very interesting.

Looking forward to seeing what you guys develop.

Best of luck going forward.

Tatiana Vasilyev, Lazard.

Hello, guys; it is Tatiana calling for Urs.

I have quite a first few questions, so you just stop me if it is too much.

First is, you have possible contracts for Viking and Grand.

As far as I understand they expire end of this year, and one is expiring maybe first quarter next year.

So can you give any updates on possible contracts or how you plan to operate them?

No, I really can't give any possible update on that.

That is things which is -- we are negotiating now, and I think it's -- we can't really give any details around it.

Okay.

I can also (technical difficulty)

Okay.

What about current trade?

How is the fourth quarter shaping up?

And if you would be comparing possible rates for the fourth quarter or first quarter, what would be the factors in play maybe seasonally and how the rate might go?

I will try that one.

I think you are asking -- sorry; the line is not overly clear.

But I think you were asking what the outlook for the fourth quarter was for rates, or for generally?

Yes -- for the spot market and beginning of the year possibly, what seasonably might be playing out?

I think we said that the improvement that we have seen in the spot market in the third quarter has continued into the fourth quarter.

We expect utilization to be significantly improved in the fourth quarter from the third quarter.

And rates have also increased from the third quarter into the fourth quarter.

At the moment we expect that improvement to be sustained through the first quarter of 2011.

So what kind of utilization would you guys have?

I know you report the total number; what kind of utilization do you have for the Energy part for you to have the 80% type utilization?

Well, we don't tend to give out what we expect the precise utilization rate to be, other than just to guide that we think it's going to be a significant improvement.

Okay.

Just generally going forward maybe next year, do think you guys might see rates closer to $70,000 a day?

What would it take the market to get there?

That's very, very difficult to say.

I mean historically there have been rates at that level; but it really depends on lots of dynamics.

Not just the availability of ships, but the profit available within cargo trades, et cetera, et cetera.

So it is possible, but we couldn't say whether that is going to happen or not.

Okay.

Just a quick question.

I know last time you talked about your restrictions on stock buybacks.

Can you guys talk about what kind of restrictions do you have?

Is it a specific price move that you can go and buy stocks, or is the quantity?

To buy what?

You said something about something buyback?

Did you mean the stock buyback?

Yes, you talked last time on the call about your restrictions on the stock buyback.

Can you explain what kind of restrictions you have that would prevent you from buying back?

Well, we had a share buyback program that we launched in the summer.

We bought a few back; not that many, about 500,000 shares.

The restriction relates to the amount of shares that you can actually buy your own shares in the market on the Oslo Stock Exchange.

So, you can't buy a price higher than the last traded market price, and you can only take up a certain percentage of the volume on any particular day.

Oh, okay.

Okay, got you.

Just really a last one on your cash flow statement.

What is the $40,000 working capital change from last quarter?

Yes, I think I explained that on the call.

It is a $36 million payment that we made to secure some LNG cargoes prior to the signing of our trade finance facility.

Okay.

Sorry if I missed that.

Okay, thank you.

That was all for me.

(Operator Instructions) Ole Stenhagen, SEB.

Good afternoon.

I just wanted to see if you could give some amplification or maybe expansion.

There is a paragraph that starts -- while merchant LNG trading continues to develop.

It seems to me what you are saying is that is that there is not enough capacity.

So there is enough LNG and there is enough receiving capacity and the buying interest, but is transportation lacking?

And are you hinting that you are going to charter ships to be sure that you always have ships?

Or -- I don't quite get where this was going.

Do want to take that one, Blake?

Yes.

Yes, I mean it's -- the shipping market has tightened and in order to provide the flexibility that we need to be able to enhance our trading activity, we are considering chartering-in a vessel on a term basis relative to rather than just chartering on a spot basis.

So, it is possible.

But we have got to do that at the right price and time, and so that is what we are evaluating.

Okay, thank you.

Marius Magelie, ABG Sundal.

Yes, hello.

Of the 360 vessels in the fleet, on the global fleet, how much is currently in layup of some sort?

It's probably about 10 to 12 vessels in layup at the moment.

All right, thanks.

Jeffrey Schwarz, Metropolitan Capital.

Yes, guys, I was thinking about Golar Energy which is I think a terrific investment story, and was just taking a look at its average daily trading volume, which is something on the order of $275,000 a day.

Not really significant enough to give a typical institutional investor an opportunity for this to be a way for them to play the growth in the LNG market and opportunities for value creation there.

Given that Golar LNG currently owns something north of 60%, you still have some room for dividending out Energy shares as a means of potentially increasing the free float and thereby I think making it a potentially more attractive vehicle for institutional investors.

Is that something that might be on the horizon?

Jeffrey, I think the fundamental point with regards to the fact that Golar LNG owns a significant portion of Energy -- and although I think liquidity has improved a little bit over the last month or so, take your point that it is not fantastic.

I mean, that is well noted.

It was obviously the idea at the IPO to have a greater separation than we have currently and therefore Golar LNG having less of a stake.

As you know we have had a few stock dividends.

There are -- stock dividending is not necessarily the best way to go.

We don't have any current plans about exactly what we will do.

But there is a overriding intention that there will be a greater separation of the Energy business from the long-term contracted vessels.

Great.

We will look forward to that happening.

I think that will provide an opportunity for -- as you know, I have often thought that the right type of shareholder for the long-term contracts isn't necessarily the right type of shareholder for Golar Energy.

I am glad to hear that that is one of the items on the agenda for consideration.

Yes, yes.

Well, that is also an important point, as you well say, the structuring not only of Energy but also Golar LNG's five assets to get the best value for shareholders at the end of the day.

(Operator Instructions) Martin Korsvold, Pareto.

I just have a follow-up.

In light of the incredible economics of this FSRU or this latest FSRU contract you are getting, do you think it is likely that we will see more players move into this market?

And how difficult is it to get in?

Competition in Indonesia started off with nine companies going in.

Four was prequalified.

Three was passed into technical bid.

People think this is a simple business to go into.

I think, yes, a of players in the market have recognized that a lot of the FBSU contracts around the world have -- most of them are over budget and on delay.

There are delays ruining the economics of a project.

We see that there are a existing LNG player who wants to come into this business.

Entrance is not so easy.

In order to undertake a fast-track project and to be able to keep the CapEx, you need to have really have a certain type of qualifications.

We have -- Excelerate Hoegh, they are in the market.

They have a completely different concept than us.

You have a company like MOL, the Japanese company who wants to go into this.

You have Bergesen.

You have all the companies who could take a part of that.

So far we have not really seen any real threat, to say it like that, at least on the conversion part of the business.

If you are talking about newbuilding, everybody can do it I think.

Okay.

Last question here in terms of the values -- and particularly to differentiate between the old and the new assets -- where have values moved since the IPO in terms of the values you are getting for your banks?

Can you repeat?

I really didn't catch your question.

I was asking in terms of values on the vessels and if you could differentiate between your old vessels and the new LNG vessels, where values have moved since the IPO?

Oh, yes.

Graham, can you take it?

I would say the newer vessels probably moved down a little bit towards the -- in the first half of 2010.

I mean to be honest, we haven't had done any valuations recently.

I suspect with what's happening in the spot market those have moved back up again, probably haven't moved too much.

The older vessels of course are very difficult to value.

If you have to go out and -- there is a wide gap between if you have to go out and sell a vessel in a distressed situation, between that and the value to us for example of having that asset to put it into a project like West Java.

You know, a dramatic value difference.

The value to us at the IPO and the value to us now is having those assets to -- with vessels, as Oscar mentioned on the call earlier, that have been built and owned by Gotaas-Larsen back in the 1970s, we know them inside and out.

And they are available for us to bid on projects.

Okay, thanks.

As we have no further questions at this time I would like to hand the call back over to your hosts for any additional or closing remarks.

Thank you.

Yes, thank you very much, and thank you to everybody for joining the call this quarter.

I should say -- to extend apologies to our friends on the other side of the Atlantic; we interrupted their holiday season.

Wish them a very happy Thanksgiving.

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

Thank you very much.

Ladies and gentlemen, that will conclude today's conference call.

Thank you for your participation.

You may now disconnect.