Golar LNG Ltd (GLNG) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter results presentation conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Graham Robjohns.

Please go ahead, Sir.

Thank you and good afternoon, everybody, and welcome to the Golar results presentation call for Golar LNG Ltd.

and Golar LNG Energy.

I am joined here today by our outgoing CEO for Golar Energy, Oscar Spieler, if you've seen the announcement in our press release, and joined also by our incoming CEO for Golar LNG, Doug Arnell.

We also have Blake Herndon on the line, who heads up Golar Commodities.

The format of the presentation will follow the usual process.

I will run through Golar LNG Ltd., the highlights and financial results.

I will then pass over to Doug, who will take us through the highlights of Golar LNG Energy.

I'll cover off the financial aspects of the Golar LNG Energy presentation, then hand back to Doug for a run-through of the commercial and business slides.

And then, we will have a question-and-answer session.

So turning over to slide three, the agenda just sets out what I've just said.

Turning over to slide four, the fourth-quarter 2010 highlights for Golar LNG Ltd.

consolidated group.

Net revenues were in line with the previous quarter.

There, operating income before impairments was slightly down.

With Golar LNG Energy's four modern stop vessels delivering into their new 1 plus year ton charters during the first quarter of 2011, we do however expect to see some improvement in operating results in the first quarter.

The Golar Freeze loaded its first cargo, actually three in total, since it arrived in Dubai around November of 2010.

It is now operational, having gone through its commissioning process.

There is some final tests outstanding, due to be done in April.

And those are just waiting for the downstream facilities to be in a position to accept maximum send out.

All five of Golar LNG Ltd.'s long-term contracted vessels, three FSRUs and two LNG carriers, are now operational and generating cash in excess of $1 per share.

From Golar LNG Energy's perspective, the West Java FSRU project is making good progress, and we will say a little bit more about that later.

Golar LNG Energy is also chartered out its four modern LNG carriers and for periods of between 12 and 18 months at pretty attractive rates.

As an investment for Golar Energy Ltd.

on the back of the good news flow in connection with West Java and the significant improvement in the LNG shipping market, the LNG -- Golar LNG share price has risen significantly since September 2010 and has continued that rise through to current day.

So Golar LNG Ltd.

share holding has risen in value from $310 million as of 31/12/2010 to $462 million as at -- of February 2011.

That comes, of course, value in addition to the $1 per share dividend that was generated out of a long-term contract [as used].

Cash dividend of $0.25 per share, which obviously one quarter of the $1 per share dividend, together with actually an extraordinary dividend of $0.05 per share this quarter, reflecting fairly solid financial position of the Company.

Turning over to slide five, the financial highlights.

You can see if we compare the first and second column Q4 2007 Q3 2010, operating revenues as I said earlier are slightly down on the previous quarter.

That is net operating revenues, obviously, we arrived at by taking gross revenues and deducting voyage expenses.

EBITDA is slightly down.

Net tonnage expenses, slight improvement -- in the overall position is a slight improvement in net income.

Time charter equivalent rates, largely due to the improving LNG spot market are up significantly.

Ship operating expenses on a daily basis increased this quarter, some of that is (inaudible) one-off costs associated with changing, particularly in relation to changing cruise when we've moved from one crew managed to the other -- to another.

Now all Golar vessels are managed by a joint venture company, Golar Wilhelmsen.

Looking at the year-to-date numbers on the far right-hand sides columns, you can see there is a significant improvement in net revenues from $177 million to $212 million.

That is largely on the back of the Golar Winter becoming fully operational towards the end of 2009, as well as the Golar Freeze becoming operational, starting a time charter in the middle of 2010.

Obviously, that's had a very positive impact on EBITDA.

Conversely, net financial expense is significantly higher than for the 12 months in 2009.

That's largely due to the swing in other financial items, relating most particularly to the valuation of interest rate swaps to mark to markets and non-cash mark to market valuation movements and interest rate swaps as a result of the fall in long-term interest rates.

Turning over to slide six, we have the usual historical graphical presentation of revenue and EBITDA.

Again, the last two quarters have seen record revenue, net revenue.

And as I said we would like to see those numbers a little better in the first quarter of 2011.

On the income statement, detailed income statement, that is again two columns operating revenues of $64,615 this quarter as compared to $70,426.

We arrive at the number we refer to as net revenue by deducting voyage expenses of $3,172 for 2010 and $8,545 for the third quarter of 2010.

The impairment item of $4.5 million relates to two items.

One is our investment of $3 million investment in TORP LNG that we wrote down at the end of the year, and the other item, $1.5 million, relates to a part impairment in respect of parts that were acquired at the time of the speculative FSRU conversion in relation to the Golar Freeze prize of winning the Petrobras contract.

Some of those parts we still hold, and we've taken a slight impairment -- a small impairment charge.

The other operating expenses relate to losses -- operating losses in respect of Golar Commodities, for new cargoes that we hadn't discussed on the previous quarter's call.

Those costs all relate to the cargoes contract entered into in the third quarter.

Gain on sale of available sales securities relates to the final disposition of our interest in LNG Ltd., with a gain of $2.4 million.

And then, other financial items is actually a reduction from the previous quarter's $8.3 million losses expense as opposed to $10.8 million.

And I will say a little bit more about the constituent parts when we come to the financial expenses a little bit later on.

In terms of interest income and interest expense, both of those down from the previous quarter.

That's largely as a result of the ending of certain leasing relations -- arrangements in respect of the Hilli, Gimi Khannur, Freeze and the Golar Spirit.

So those lease obligations had an obligation in the corresponding restricted cash deposits.

So the effect of the ending of those arrangements is the repayment of the obligation with restricted cash and the consequent reduction in interest income and interest expense.

And the results of that foregoing, as I mentioned earlier, is a slight increase in net income on a consolidated basis for the fourth quarter of 2010.

Turning over to slide eight in the balance sheet, as you can see, there's a significant increase in cash and cash equivalents from $87.186 million to $164.7 million.

That has three constituent parts.

One relates to Golar Commodities, where last in the previous quarter, we had put out some $30 odd million in cash as cash security.

And that was subject to -- in other current assets last quarter, so you can see it corresponding full in other current assets from 63.6 to 17.8 million.

It also relates to cash received as a result of the ending of the leasing arrangements that I mentioned earlier, where we have received or expect to receive an effective net cash benefit of some $15 million.

And it also relates to the cash received as a result of the issue of warrants within Golar LNG Energy in December 2010.

The long-term assets on restricted cash again has a significant reduction that relates to the ending of the leasing arrangements, as I mentioned earlier with the release of restricted cash to go to pay leasing obligations.

And we turn over to slide nine, the corresponding entry to that is halfway down the page, long-term capital lease obligations as $400 million and $771 million to $406 million.

In terms of the advantage of our debt on a consolidated basis, that is swaps of fixed rates, that's approximately 6%, and that interest expense exclusive of margin is approximately 4%.

Turning over to slide 10, we have statement of cash flows starting with operating activities.

The biggest movement there, which the largest constituent part relates to the $30 odd million that I mentioned that was Golar Commodities related cash that was put out as security and then received back in cash, and that is as I say, the main constituent part in the movement in other changes in operating assets and liabilities.

And yet again with these -- the ending of the lease arrangements, investment activities, you can see the $394 million in restricted cash coming back onto the balance sheet.

And over the page on slide 11 you can see repayments of long-term debt and lease obligations of $366 million.

A little bit further down on the page, proceeds arising from exercise of warrants $18.7 million.

That of course as I said was in respect of Golar LNG Energy's warrants exercised in December 2010.

So all of that adds up to an increase in the cash balance from $87.2 million last quarter to $164.7 million this quarter.

Turning over to slide 10 -- sorry, 12 -- we have the analysis of financial expenses.

At the top, we have lease related interest and the income -- sorry, lease related interest income and other interest income, which has fallen because of the ending of the arrangements, and similarly lease interest expense has fallen again, debt interest is pretty much in line with the prior quarter.

We had, this quarter, interest rate swap gains due to an increase in longer term interest rates at $6.5 million valuation gains.

These are non-cash movements, I have to stress the interest rate swap movements.

The only time this would actually result in a cash effect is if we were to terminate the swap, which we don't do.

The next line, $3.3 million, I think we mentioned this last quarter.

The interest expense that we pay in respect of interest rate swaps is a physical cash movement, which we used to show as part of debt interest expense, is now split out and shown as a separate number within other financial items.

And then, that, the interest rate swap [gain/loss sale] obviously partly by the interest paid on interest rate swaps is fully offset by the lease termination costs write-off of deferred charges of $13.2 million, which ended up in a net loss of -- or net charge of $8.3 million for other financial items.

I should point out that the ending of the lease arrangements actually gave rise to a net cash benefit which we expect will end up being approximately $15 million.

However, the accounting required that the costs in termination and the write-off of charges gets booked to the P&L as a charge.

But the gains arising from the transaction get put to the balance sheet and amortized over time, which is why we have a P&L hit because the benefit or the gains going to from the balance sheet.

Turning over to slide 13, the vessel portfolio slide.

Not to, nothing has really changed in respect of the Golar LNG Group, except the fact I guess, the Ebisu, the chartering vessel that was redelivered to owners in September, is no longer on the slide.

Within Golar LNG Energy of course, though, we now have the Khannur, which is scheduled to become the FSRU for this entire re-gas project.

That CCP time charter party is currently under negotiation right now.

The vessel is on way to the shipyard for conversion.

Hilli, Gimi -- the Gimi, Hilli and Gandria are being also earmarked for conversion projects.

And then the four modern vessels, the Viking, Grande, Maria and Arctic, now have contracted term-contracted charters stretching out as you can see between sort of 12 and -- 12 and 18 months, which effectively fixes our annual revenue for 2011.

As I think we made mention in the press release, the annualized EBITDA, the approximate annualized EBITDA, generated from those contracts is approximately $18 million on the basis of assumed operating costs.

And on slide 14, we just have some interesting photographs of the Golar Freeze operations.

In the top left-hand corner you can see an LNG carrier positioning for discharge, the top right-hand photograph is actually Qflex vessel alongside the Golar Freeze on the right discharging.

And then you can see the LNG transfer arms in between the LNG carrier and the FSRU in the bottom left.

And finally gas transfer operations beyond [striking] gas out of the re-gas skid and a way into the pipe network to shore.

That concludes the Golar LNG Energy presentation.

I'll now hand over to Doug Arnell.

I'd like on my behalf and behalf of the Company to welcome him to the helm.

Just a little bit of background, Doug, he's an engineer by training.

He's spent the last 21 years working in the natural gas and LNG industry, most recently in various senior roles with BG, for the last six years since 2003 in natural gas marketing upstream exploration and development as well.

And prior to that he was Managing Director for El Paso's European Natural Gas Division and also Senior Business Development Director for Enron's international LNG business.

So with that I'll pass on to Doug to start off the Golar LNG Energy presentation.

Thank you for those kind words, Graham.

Before we get into the presentation I would first like to comment on how excited I am to be chosen as the next CEO for Golar.

We have an extremely hard-working talented and hard-working team aboard that is very committed to growing the enterprise in the business space with significant opportunities.

I very much support working with Golar to build on the already impressive track record.

I'd also like to thank Oscar for his contribution to Golar in his role as CEO over the past two years.

And his (inaudible) support to me since I joined the organization.

Oscar has achieved a great deal in a short time, most notably the recent success on the West Java FSRU tender and the consolidation of our ship management operations under the Golar Wilhelmsen partnership.

I'm very happy to confirm that Oscar will continue to work on a part-time basis with Golar as a senior advisor to our management team and Golar Board.

Now I'd like to turn back to the results presentation for Golar energy on page -- [for the slide 19].

Financial highlights for the quarter include net revenue down 10% on Q3 due to the ending of the [Gandria] charters.

This was offset by a significantly improved contribution from the spot traded vessel.

Certainly a very notable development was the transformation and the shipping supply demand balance as availability of open tonnage became increasingly tight.

This led to the opportunity for Golar Energy to fix out its four modern vessels on very attractive commercial terms.

On the flip side, the tight shipping market did create additional challenges for Golar Commodities, but over spot LNG market activity does continue to develop in the industry and we are confident of being able to capitalize.

In our FSRU business, operations continued with very good results in Brazil and Dubai.

We made significant progress on our West Java project and a list of potential new projects being backed by credible counterparties was in very good shape.

More on all that later, but now I'd like to turn it back over to Graham to go through the detail of our fourth-quarter financial results.

Thanks, Doug.

I'm moving over to slide five.

As Doug mentioned, the net operating revenues are down slightly from the previous quarter.

That's largely due to the ending of the Gimi and Khannur charter in the fourth quarter, offset by improved contribution from the spot vessels.

That's also led to a slight reduction in EBITDA, with financial expenses slightly reduced from the previous quarter.

We ended up with a slightly increased loss from the previous quarter.

Ton charter at current rates were up from Q1 at [29,819] and as I mentioned earlier in the Golar LNG Ltd.

presentation we expect those to increase further into Q1 of 2011, and likely further still into the second quarter when all the four vessels will have been trading on their contracted -- one year past contracts for a full quarter.

Ship operating expenses on an average daily basis of $8,400 a day is low mainly because, included in that, the operating expenses of the vessels in layup.

The -- if you split that out you'd see the layup vessel OpEx around about $2,500 a day, and the OpEx for the operating modern vessels are around $11,500 a day.

Turning over to slide six, the detailed income statements.

Just a couple of points here on underneath total operating expenses, you have the gain authorizing on the transfer added to parent net, this relates to the sort of final entry to close out the Golar Freeze which, if you remember, originally came across to Energy during it conversion period and then transferred back to Golar LNG.

The final part of that unwind happened with the ending of the leasing arrangements.

It is a loss but is a non-cash item.

In effect it is the reversal of previously amortized deferred lease benefits at the energy income statement over the last few quarters.

So it's not a cash item.

Other operating expenses related again, as I said earlier, with the Golar LNG presentation to the Golar Commodities loss for the fourth quarter.

The gain on sale of available securities is the sale of the positioned LNG Ltd.

and the impairment investments of $3 million related to TORP LNG writedown.

Over to slide seven, the balance sheet's -- balance sheet assets.

Energy, in common with Golar Energy Ltd., has seen an increase in its cash balance.

That largely results, as I mentioned earlier, as a result of cash coming back from a security position with Golar Commodities, and you can see a corresponding reduction in other current assets.

Again, in common with Golar LNG, the leasing arrangements for the Hilli, Gimi, Khannur come to an end within Golar LNG Energy so we have a reduction, significant reduction in long-term restricted cash counterbalance by -- over the page on slide eight, a significant reduction in long-term capital lease obligations.

Percentage of fixed income rate debt, the Golar LNG Energy level is approximately 53%.

Turning over to slide nine, statement of cash flows.

Again, I guess the most specific items in our investing activities and financing activities was the invest in activities we have relative restricted tax to pay off the leasing obligation and then over the page, on slide 10, we have the repayment of capital lease obligations.

And finally, of course the proceeds received from the exercise of warrants that, again, I referred to earlier within Golar LNG and Energy giving rise to $18.7 million additional cash and equity.

Okay, so that's the end of the Golar LNG Energy financials.

So, I'll now hand back to Doug to carry on with the remainder of the slides.

Let's turn to slide 11.

I'd like to start off this part of the presentation with a discussion around the changing fundamentals we've seen in the LNG shipping market as it is certainly the most relevant factor in the projected near-term improvement in Golar Energy's results.

This was the highlight of our Q3 2010 presentation and as we moved into the fourth quarter and continued through into early 2011, the impact of this change began to take hold.

Ship owners, including ourselves, began to see a fairly dramatic improvement in achievable charter rates as well as key commercial terms that influence the overall economic performance of our fleet.

The pendulum, at least for now, has swung to the other side as some recent market increase for FLV holdings remain unfulfilled due to a lack of available tonnage.

This is in sharp contrast to the last several years, where the oversupply of available vessels in the short-term market resulted in both charter and utilization rates dropping to levels below that which required a sustained and viable shipping market.

There are a few factors that have influenced this evolution.

First and foremost, the total quantity of LNG being produced globally has increased.

Second, regional gas markets have influenced total shipping demand by forcing changes in supply routes.

Depressed natural gas prices in North America have drawn cargoes away from that market and towards demand locations that require longer journeys.

And finally, the increase in market outputs facilitated by floating re-gas projects has provided additional demand for the industry to supply, oftentimes requiring incremental shipping capacity.

The impact of all these factors has resulted in the number of current LNG investments available for charter, dropping to levels not seen for several years, and rates climbing to levels not seen since 2007.

Turning to slide 12, we were very pleased to be able to announce that we have chartered out our four modern vessels, the Golar Viking, Maria, Grand and Arctic, to major industry players at very attractive rates and commercial terms.

As I mentioned earlier, the past several years has seen both depressed charter rates but, equally critical, very low utilization rates.

Total operating costs or unutilized LNG carriers are significantly higher than in other shipping markets, due to high fuel consumption during idling, cooldown requirements and repositioning costs.

Fixing the vessels under these period charters will stabilize our cash flow at attractive levels, giving us greater predictability of results and the flexibility to better manage other aspects of the business.

As Graham has mentioned, the annualized EBITDA contribution of these charters equals a total of approximately $80 million.

We have timed the charters so that all four vessels will come off [hire] during 2012.

We believe that same factor that led to improve conditions in 2010 may increase ship owners' leverage even further by 2012.

And that this will be an optimum time to reenter the market.

We will continue to follow a flexible strategy regarding chartering decisions with these vessels to maximize economic performance.

In view of the improved market situation, as we mentioned in our press release, we've started an evaluation of different growth strategies.

This evaluation will include organic growth, acquisition of additional capacity and the potential to reactivate vessels and layup as conversion candidates for trading carriers.

A decision on implication of this strategy is targeted for the first half of this year.

Turning to slide 13, I would now like to update you on the progress of our West Java FSRU project which we, of course, are still very excited about.

Shortly after being chosen as the successful bidder in October of last year, we signed a preliminary agreement with our counterpart, PT Nusantara Regas, to kick off the project.

Since then we've been primarily focused on advancing detailed engineering works and preparing orders for key long lead items, most of which have now been placed.

The vessels that will be converted for this project is the Golar Khannur, which is now being repositioned to Asia for delivery to the conversion shipyard.

We are at the final stages of negotiation on both the shipyard contract for the conversion and the final charter party agreement and expect to announce the conclusion of both in the very near term.

Along with the critical piece of infrastructure that will be relied upon to serve Indonesia's energy needs for many years to come, the delivery of the FSRU is also time-critical, and as you would expect, the Indonesian market demands cost-effectiveness.

We believe it is a testament to Golar's execution model that we are able to construct a purpose-built floating LNG storage and regasfacility in such a short period of time at a cost that was proven to be the most competitive under the bid process for the project.

As we turn to slide 14, we think it's fair to say that Golar has certainly established itself as a leader in delivering incremental floating storage and regas capacity at low cost and with high reliability.

Our two operating vessels in Brazil have between them now taken delivery of 46 cargoes of LNG and are sending out natural gas with a reliability of over 99%.

This is no small matter as we are well aware that in Brazil, Dubai or Indonesia, our clients require our vessels to serve an essential components of their in-country economies.

Speaking of Dubai, we announced the successfully completed the commissioning phase of the Golar Freeze and thus our operating fleet of operating FSRUs has risen to three.

Through close cooperation with our counterpart, the Dubai Supply Authority, and an on-time delivery of the FSRU, Golar has quickly become a key contributor to Dubai's natural gas supply needs.

Although we may not have believed it could happen, the level of inquiries we are receiving already at a rapid pace through most of 2010 has actually increased.

We are confident this is merely due to the fact that project developers in a large number of markets are appreciating more and more the central benefit of utilizing floating technology for LNG storage and regas applications.

That central benefit is simple in that a floating solution greatly eases the complexity in creating new market assets for LNG Supply.

And most often does so with greater cost-efficiency.

This allows for the possibility of supplying LNG to markets that never would've had such an opportunity if they were relying on a land-based solution.

Providing LNG buyers and sellers with the remains to remove one of the key hurdles in the challenging task of putting together new LNG supply chains is proving to sell very well in the market.

We are currently working with and supporting an extensive list of credible project developers and feel that there's every chance that we could see further contracts for FSRUs in both 2011 and 2012.

The next generation of floating midstream solutions for Golar Energy will be floating storage and floating power.

We are actively pursuing several live opportunities to deploy our vessels as floating storage and at the same time are continuing to develop the detailed rollout plan for floating power.

Both of these initiatives will ramp up significantly in 2011.

Turning over to the next slide, I will turn the line over to Blake Herndon who's going to talk about Golar Commodities.

Golar Commodities continues to see the market in spot and term transactions with cargoes, in LNG, to evolve.

The nature of the market has changed a bit in the last several months, as Graham and Doug alluded to and the tightening shipping has changed the nature of transactions of that.

We are still very encouraged though that the market is evolving.

There's been a number of long-term contracts that have expired in the industry that is leading to a breakup and an unbundling of long-term contractual positions that are leading to a bit more flexibility to transact spot and term, term being two- to five-year type of transactions.

We're very encouraged by that.

The tightening of shipping has led us to take a bit more of a cautious approach to ramping up our operations.

We are taking particular care to find the opportunities with the most attractive risk reward characteristics and necessary flexibility to ensure that the firm is able to perform on its obligations.

In doing so, we've focused our efforts on certain geographic niches and leveraging off the existing and future opportunities with the rest of Golar's assets and Golar's relationships.

We're very encouraged by this.

The potential ramp up of the FSRU business, FSU business, power, floating power concepts, all lead to tremendous opportunities for potential supply and offtake arrangements with -- around those assets.

We are working on a number of term transactions today.

We've executed a couple, and look forward to talking about those next quarter.

But we certainly expect 2011 to be a more active year as we continue to ramp up and look forward to talking about that next quarter.

Thanks.

So, move on to the final slide of the presentation, just to conclude for Golar Energy.

The shipping market has undergone a structural transformation that we've already capitalized on with the chartering out of our four modern vessels.

We believe the market may look even better in 2012 when those same vessels come off their charters, and in the interim we will be evaluating other opportunities to grow the business.

Our FSRU franchise is moving along at pace and we are optimistic about the potential for new contracts in 2011 and 2012.

Finally, we continue to believe in the earning potential of our Golar Commodities business and the potential to leverage that with our asset-based activities.

In summary, we believe the outlook for Golar Energy is very positive.

With that, that concludes our presentation for today.

I'll turn it back over to the moderator for questions.

(Operator Instructions).

Urs Dur, Lazard Capital Markets.

Good morning, afternoon.

Good morning, Urs.

A bunch of questions.

Can we expect any earnings whatsoever on the older ships that are now earmarked for conversion in the spot market?

Not likely, Q1.

As we said in the press release, one of the options that we are looking at is the possibility of bringing those vessels out of layup and putting them into the spot load market along with obviously what's earmarked for FSRU projects, possible sort of FSU's floating power projects as well.

So it is something that's under consideration, but it won't impact the first quarter.

Okay.

That's great, just wanted to know with the better spot market what that was about.

But yes, you mentioned.

So obviously we're going to be looking at a much lower voyage expense rate going forward, since the rest are on contract at this point in time, correct?

That's right.

Yes.

And then I know you just started going Golar Commodities, you just went through that slide.

I almost know the answer I'm going to get.

Is there anything we can model looking at revenue-wise for Golar commodities in the year?

Is there anything to expect or is that just too early to tell?

I guess the finance guy will jump in and -- it's obviously difficult to say and difficult to -- I appreciate difficult to model.

But I would say we're more positive on the future than where we have come from.

If there is any reasonable expectation, it's just always helpful but I totally understand it's a new business, so -- and very hard to model for anybody.

Finally, on the Khannur, this has been asked before and I know you don't have an omnibus agreement, but is there any chance down the road that Energy would sell it to LNG to add to distributable cash flow next year once it comes online?

It's certainly a possibility, yes.

Definitely.

At the end of the day, Energy's business model is to create value and develop projects and LNG's model is to produce a yield.

So it ought to make imminent sense for both companies.

Okay, that's very helpful.

Thank you, guys.

Martin Korsvold from Pareto.

Good afternoon.

Just a question pertaining to this, I guess [one is I saw] the article in Tradewinds speculating about new building orders.

I know you can't really comment on that but could you say a little bit about the rationale for doing a new building versus going out and buying secondhand?

And secondly, what sort of prices are we looking at forwarding a new building at the moments?

It's Doug.

I guess it won't surprise you to hear that we didn't put that article in Tradewinds.

New buildings is just one of the options that we are looking at to expand the operating fleet.

We really can't comment on prices of what we are seeing, and certainly the other options to expand such as acquisitions, getting the laid-up vessels back into service will all be evaluated together and at some point in the first half of 2011, we will make a decision on what we're doing.

Okay.

Second question, a follow-up on what Urs was asking about.

If you were to spend FSRU up into Golar, can we assume that the $1 annualized dividend is safe and that they will find other ways of funding potential new acquisition on the Golar Ltd.

level?

Yes.

I would say so.

Yes.

(multiple speakers) but the expectation will be that we will be growing the dividend, not making it smaller.

Secondly, if you could tell us a little bit about this TORP, right, almost written down to zero.

And if you could just talk a bit about you have this three investment [TROP, ECGS and OLTO], is anything happening there?

Yes.

TORP LNG was an investment Golar made back in 2000 -- pre-2006.

I can't remember the exact year.

It's an LNG receiving technology, sort of a newly built technology that's based on the same sort of high-low technology, I don't know if you would say in the oil industry.

I think one of them has just been recently tested whereby the LNG carrier -- the sort of thing floats in the sea, the LNG [carry] comes along and attaches itself to it and discharges the cargo into the unit, which pumps it away to a subsea pipeline.

Talk has been for several years trying to develop a terminal project in the US Gulf.

They are looking at other possibilities around the world, but with obviously the development of re-gas opportunities in the US Gulf, together with the fact that they had some shareholder loans which got converted to equity, so ownership has been significantly diluted.

We got it at the right time to write that investment down.

OLTO is investing in the [Border] LNG re-gas terminal project.

Major shareholders there, [Eon and a company called Ariday], who is a local Italian gas utility.

That project is well on course to be delivered, the vessel, the Golar Frost, which we actually sold into the project is currently being converted in Dubai docks.

We own a small percentage, about 2.7%, I think, which once the project gets up and running will give a small cash stream.

ECGS is our joint venture company with EGAS in Egypt.

They have been doing a little bit of activity on some supply vessels, vessels, some upstream studies, have a small office with some engineers and a few people in there.

Obviously the longer term goal with that is to secure some kind of LNG-related business, but that is one for the future.

Something we'll work on over time.

Last question before I pass on the line, you mentioned at the (inaudible) pre-call 54 to potentially FSRU project in Bahrain and Indonesia.

Could you say a little bit about the timeline there in terms of when the official tender is and what other specific opportunities might materialize on the FSRU side in 2011?

Both the [Meden] project and the Bahrain project tender process have been going in by the end of March.

So it's quite near-term.

Won't try and predict how quickly they'll process those bids, so we'll just see how it goes after that.

Other opportunities in 2011, we don't like to get too specific about them.

There is virtually, in every corner of the globe, there is developers working on projects that potentially could use one of our FSRUs.

Some of them are well developed, some of them are quite nascent.

But I think the thing that gives us a good feeling about it is, it's just the sheer number of projects that have credible developers attached to them and actual natural gas needs.

So that's what creates our optimism for opportunities going into 2011.

Okay, thanks very much.

Marius Magelie.

ABG.

Hello.

[You've added recently] in the shipping exposure to Golar Commodities.

Can you elaborate a bit more on this topic?

I'm sorry, could you say that one again?

You write in the report that you have added the shipping exposure to Golar Commodities.

Can you say something more about this?

I'll let Blake add on to this, seeing as how Blake alluded to there, looking at some cargoes and have --.

Well, I can't say too much more than secured shipping position in order to move those cargoes.

I'm not sure we are in a position to say what, why, or where.

Okay, thank you.

Ole Stenhagen.

SEB.

Hi.

Just a very quick question on the older vessels.

In the event you should decide to reactivate them, are they seriously mothballed or they with the crew, or how much would it cost to reactivate them?

The reactivation costs would be in the order of sort of a drydock cost, which is kind of sort of $4 million to $6 million, something like that.

Per vessel.

So you'd been looking for some period of renewed service in the night you did that?

Yes, exactly.

Okay, thank you by the way.

Did you see the thing in the Wall Street Journal with Brit Petrobras planning a third terminal?

Okay, yes, we were aware of it, yes.

Just more and more with credible developers, as you said.

They are certainly credible.

Thank you very much.

Nathan Weiss, Unit Economics.

Good morning.

A quick question on the 70s era vessels again.

What are the market prospects, how willing are people to accept a 70s era tanker?

Of course it partially depends on how tight the market is.

But is there a big discount or big unwillingness to move those vessels into an existing facility?

I don't think it's that.

There's first-generation vessels out there that are being used and have been used very recently.

I think for us it's just more of analyzing all the different options we have to bring extra shipping capacity into the market.

That's just one of them.

And as Graham alluded -- or Graham described there's a cost to doing it.

And we just might feel that there is other options that are more attractive to us at any point in time.

I think all I can really say about it now is we are looking at it, it is possible, it is feasible but it's just one on the list of things we are looking at doing in the first half of the year here.

(multiple speakers).

That the charter rate that you can get on the older vessel will be certainly lower than you would on a modern vessel because they're less efficient.

Can you quantify that at all?

It's a little bit ballpark, so don't take it as gospel.

But you are in the sort of $20,000 a day range.

And would the operating expenses on a per day basis be significantly higher than a modern vessel?

No.

A little bit.

Maybe $1,000.

Okay, very helpful.

Thank you.

Erik Stavseth.

Arctic Securities.

Just a quick question on the strength of the LNG market that you show in slide 11.

There's been significant increase in rates from mid-2011, but there's also been a sort of seasonal pattern over the past couple of years.

Do you expect to see that also in 2011?

I mean, we can't predict exactly what's going to happen with rates, but I'd be -- we don't know of any reason why you wouldn't get some sort of seasonal affect driven by different trade patterns that exist.

Those are going to -- those different trade patterns should be there again this year, maybe the impact will be a bit muted this year.

We don't know.

It's hard to say.

There is -- as Doug said there tends to be more demand in the colder northern hemisphere months of our winter.

Having said that, you can also get -- if you get these big contangos in gas prices you can get a lot of vessels snapped up in sort of May, June time, where they start storing for delivery into winter.

But that's a sort of another factor that's a delay on top of sort of possible seasonal movements.

All right, thank you.

[Alessio Pacces], Maximum Group.

Thank you very much.

Just a couple of questions, I wanted to follow up on the -- I am going to call it the FSRU.

Without mentioning specific locations, could you give us some color on future regions where you see opportunities for that marker?

And the second question is, also, on the LNG tightening, how much do you expect this tightening to continue in 2011 in the LNG shipping market?

Sort of what would move the needle of supply and demand balance going forward?

As far as FSRU's regions of the world, you name it.

Certainly a lot of activity in Asia.

We're expecting more activity in the Middle East, even in addition to the Bahrain tender.

There's activity in South America, Central America, Caribbean, India.

So it really is almost everywhere.

Now this is LNG, so a lot of these projects will take a long time and some of them will just not go forward.

But it literally is in every part of the globe.

In terms of structural changes to the -- that would impact shipping rates, that's a hard one to say.

There were some obvious things coming into 2011, more Qatari volume coming onto the market, North American gas prices being depressed, that had a big impact on shipping requirements.

I think there is some incremental supply coming on in the next year, in various locations.

And that is the big thing we are kind of pointing to when we say that, by 2012, some of these factors that are soaking up LNG shipping will maybe become a little more extreme even.

That's why we want to be sitting with our ships in the market at that time.

(multiple speakers).

The other point is just to kind of the possible obvious point is if you look in that slide with the rates and the available ships, in that period -- '09, '10 -- was the period where all the new buildings, a draft of new buildings that were constructed for new LNG projects coming onstream in '09 and '10 were all delivered on time.

But all the projects were delayed, which is why you have the sort of big surface of ships.

And those have now have been and are being soaked up into projects.

Thank you very much.

One last final question, more of an industry-related.

In the event that there is an approval to export natural gas out of the US in the midterm or certain timing, how do you see yourself positioned in that market and what kind of locations do you see these natural gas coming out of the US being shipped to?

That's probably a Golar Commodities question, Blake.

Blake, do you want to take that one?

Sure.

I would look at this and we're well aware of the project.

I think there's an argument for both sides whether that will happen or not.

But we are certainly evaluating opportunities around that and think that that could be a role for us.

We -- Golar Commodities has been very active in the Gulf Coast anyway, so we've exported part of that in the US, of previously imported LNG.

And it will just be more attractive to export it if it were actually produced in the US.

So we will evaluate those opportunities as they evolve.

Jeffrey Schwarz.

Metropolitan Capital.

Good afternoon, gentlemen.

And Oscar, I want to wish you the best of luck.

I'd like to -- Graham, anything that you can tell us on progress on financing for the West Java prospect?

I think you had previously mentioned that, unlike the Freeze, this is one where you would expect to have permanent financing in place and perhaps even some sort of construction financing to be taken out with permanent financing.

Sure.

Nothing firm I can tell you other than the fact that we have been working with a couple of banks for quite some time.

We've had a bank actively involved in the time charter party negotiations to make sure that we definitely end up with a bankable time charter and a bankable pre-delivery period as well.

As you said, with the Golar, in fact all the Spirit, Winter, and the Golar Freeze will effectively finance upon delivery.

With this one, we do expect to be able to finance predelivery in the construction period, obviously an element of our equity goes in first and we start drawing down on predelivery financing arrangements.

Last -- that could be done one of two ways.

One would be sort of to get sort of full project financing in place or shortly after the time charter party signed, obviously that's the catalyst to move (inaudible) to get the time charter party signed and agreed.

Or it could be a bridging finance that would take it to a full project financing a little bit later, a little bit later down the path.

But either way, we are reasonably confident of getting some predelivery financing in place.

When you guys have said that the Khannur is positioning to head into the shipyard, when is the expectation for that to reach the yard and for work to begin?

I think she is arriving April time.

So would it be fair to be hoping for something in the second quarter for some more information on financing?

Yes.

I mean, we are not going to have sort of be hit with sort of big upfront costs when she goes into the yard, so it's -- we're not totally time-critical on that respect.

But I think you should get the time charter signed and sort of a month or so, a couple of months maybe after that.

So yes, Q2.

Q2 time.

And one other question.

The powershift concept which sounds like a really interesting one and one that you folks have floated as a possibility for the last couple of quarters.

Could you tell us anything about how that might progress?

Is this something where you have authorized spending some money on design and engineering?

Is it a matter of first finding a commercial counterparty?

How might we see some progress on this one?

What we've done so far is conceptual engineering and layup plans and things like that for potential configurations that we might use.

I would say right now what we're doing is a little bit of what you described, finding commercial counterpart, but also more trying to sift through which markets we think are best suited for the powershift.

And then based on that, do a little bit more technical work on to get something that's a little bit more fully developed to take out to potential customers.

We think that we can talk about conceptual designs now, that's fine, and we can have a certain discussion about that.

But we feel like the project needs to be progressed a little bit further before we have serious discussions with potential counterparties.

And that, we are in the midst of doing that now.

Certainly by middle of the year we will be looking to roll out a full-fledged marketing effort on powershift.

Great, thanks very much.

Wish you guys lots of luck.

Thank you, gentlemen.

There are no further questions in the queue.

Well, thank you, everybody, for dialing in today.

And we look forward to talking to you in three months' time.

Thank you and goodbye.

Thank you, ladies and gentlemen.

This will conclude today's conference call.

Thank you for your participation.

You may now disconnect.