Golar LNG Ltd (GLNG) 2011 Q1 法說會逐字稿

Thank you very much and good afternoon, everybody.

My name is Graham Robjohns, and I am joined here today by Doug Arnell, Brian Tienzo and Blake Herndon.

And a very warm welcome to the Golar LNG and Golar LNG Energy results presentation.

As you will have seen from the press release, this will -- somewhat sadly for me, as I have done a few of these over the years -- be my last webcast for Golar LNG, as we now have a combined group effectively Golar LNG.

And having acquired Golar LNG Energy, Doug Arnell will be taking over as CEO.

I will also be stepping down as CFO and our long-serving Group Financial Controller, Brian Tienzo, will be taking over the role of CFO of Golar LNG.

However, I will be continuing as CEO of the newly-formed Golar LNG Partners, and I look forward to working with Doug and Brian to make a successful future for both companies, as we have, in our view, some exciting times ahead of us as part of The Golar Group.

Turning over to slide 3, the agenda.

As I say, we effectively have a combined company now.

We are going to go through this presentation in one go rather than splitting it into two presentations.

We will start with the Q1 highlights, which I will run through.

And then we have a slide on the new group structure.

And then after that, we will move into the Q1 financial results, which I will hand over to Brian to take you through.

And then finally, Doug will follow on with a business update.

So turning over to the next slide, the highlights.

Consolidated net income for this quarter of $16.3 million and consolidated operating income of $20.4 million, both of which were improved from the fourth quarter of 2010.

And we expect to see further improvement on that in the second quarter, particularly as a result of our four new LNG carriers all being employed throughout the second quarter on their new time charters.

We have seen a significant improvement in charter rates during the quarter.

And indeed, earlier on in the quarter, we chartered out our existing four modern carriers on time charters of periods varying between 12 and 18 months, which will give rise to an annualized EBITDA -- over a 12-month period, that is -- of some $80 million per annum.

The Time Charter Party was finalized in connection with the West Java project.

That was executed and signed shortly after the quarter-end.

Also shortly after the quarter-end, we had an extremely successful launch of Golar LNG Partners, with gross proceeds of $310 million.

The IPO priced above the range of $22.50, and we were very much oversubscribed for the transaction.

It was all in all a very successful transaction, and has set up a good structure from which to take us forward, which I will come to talk about in a little while.

The proceeds from that IPO, we have reinvested some of the proceeds; we have taken and used as a deposit on the firm commitment of six newbuild LNG carriers, together with two options vessels as well.

And we have also, obviously, taken a step to reacquire the outstanding shares of Golar LNG Energy.

So at the beginning of the quarter, Golar held 64% of Golar Energy.

Currently, we hold 99.4% of Golar LNG Energy.

Following that reacquisition, a voluntary offer has been made for Golar LNG Energy.

That is now closed, and we will now proceed to a compulsory acquisition of the remaining shares, following which we will delist Energy from the Oslo Stock exchange.

And finally, Golar LNG Limited announces a cash dividend of $0.25 per share for the quarter, which is a dividend rate we are continuing to target moving into the future.

Moving over to the next slide, we have set out here a revised group structure following the combination and the spinoff that I have talked about.

On the right-hand side, we have the newly-combined group of Golar LNG and Golar LNG Energy.

That group owns 65.4% of our [new listed] company, Golar LNG Partners.

Golar LNG Partners is an ideal vehicle for long-term contracted assets that have stable cash flows, which is one of the main reasons that we set the vehicle up, and into which we have put initially four of our long-term contracted assets -- the Golar Mazo, the Methane Princess, LNG carriers, and the Golar Spirit and the Golar Winter, both FSRUs.

The vehicle gives investors the opportunity to invest solely in the stable cash flow side of our business, and it also provides Golar LNG with an excellent source of equity where yields are particularly low.

As part of the structure, Golar LNG has agreed to offer any contracted asset that obtains a contract of greater than five years for LNG carriers or FSRUs to Golar LNG Partners for sale.

And in return, Golar LNG Partners has given Golar LNG incentive distribution rights.

And the incentive distribution might effectively mean that as the partnership grows via acquisitions from its parent, Golar LNG Limited, an increasing share of the additional distributable cash flow from the asset contributed is paid up to Golar LNG Limited, thereby giving it an incentive to grow the partnership.

So it is designed to be a win-win partnership.

And indeed, the first two assets that we expect to be dropped down or sold down into the partnership are the Golar Freeze, which we expect to happen in the near future, and then the Khannur, which we expect to happen in 2012, following its completion of the conversion process and delivery to its charter.

Moving on from that, of course, then Golar LNG Limited has an excellent asset site with which to add additional assets to the partnership, firstly in the form of its four existing newbuilding carriers, which if they were to gain contracted grosses of five years, will be offered for sale down.

Secondly, in connection with the remaining three older vessels, which are conversion candidates for FSRU projects.

And lastly in connection with the six newbuildings that we have recently ordered, should they also acquire -- or should we also win long-term contracted for those assets as well.

In turn, of course, as those assets get sold down into the partnership, the equity -- or a large share of equity will be released [to] the partnership, paid back up to Golar LNG Limited, and then used to invest in further growth.

It is therefore an excellent structure for growth on the one side and for yields on the other side, in terms of the partnership.

So with that, I will hand over to Brian to run through the financial highlights.

Thank you, Graham, and good afternoon or morning, as the case may be wherever you are.

Turning on to financial highlights on page 6, net operating revenue for the quarter is higher than Q4 2010 at $63.6 million.

This is due to improved spot rates, as Graham mentioned earlier, and of course, our modern LNG carriers commenced their charters between February and April during the quarter.

These revenues are unfortunately negatively impacted by the Grand drydocking in January.

However, we believe that Q2 2011 will be improved as four modern LNG carriers will then be in charter throughout the quarter.

Those factors led to TC improvements of $80,694 per day, compared to Q4 2010 of $74,206 a day.

Ship operating expenses are also lower than in Q4 2010 at $12,737 a day.

All of those factors led to an improvement in EBITDA from $35.9 million in Q4 2010 to $41.4 million this quarter.

Next financial expenses, halfway down the page, is an improvement from $15.4 million in Q4 2010 to the quarter's $6.9 million.

All of the above factors led us to an improved net income for the quarter of $16.3 million compared to Q4 2010 of $4.7 million.

We turn now over the page to page 7, to look at the graph of net revenue and EBITDA.

As you can see, the last three quarters have been improvements from previous years, both in net revenue and EBITDA.

As I mentioned earlier, we expect Q2 2011 to also an improvement, as all of our modern LNG carriers will have been in charter for most of the quarter.

If we now turn to page 8 to go through the detailed income statement.

Operating revenues (inaudible) $67 million (inaudible) $7.5 million is an improvement from the previous quarter's $64.6 million.

And compared that -- the voyage expenses was fairly consistent with last quarter.

The two together make up the net operating revenues, as mentioned earlier.

And the improvement in net operating revenues, part from improved spot rates during Q1, and of course, the four modern LNG carriers are now commencing their charters.

The charters range from between 12 to 18 months, with a (inaudible) of approximately 57 months for the four carriers.

Assuming a level of operating expense, the annualized EBITDA for the four carriers will be approximately $80 million for the year.

Halfway through the page, we look at the other operating expense, which relates to (inaudible) commodities.

These are costs and mark-to-market valuations of trades which were entered into in Q1.

However, we expect gains when these trades are delivered and settled in Q2.

Moving on to net interest income and expense, these are fairly consistent.

And other financial items, which we will look at in more detail later, is a drop -- is an improvement from $8.3 million negative in Q4 2010 to just below $40,000 in Q1.

All of the above lead us to a net gain of $6.3 million (sic -- see slides) this quarter compared to Q4 2010 of $4.7 million, and an improvement in EPS of $0.24 this quarter compared to $0.07 in Q4 2010.

If we now move to page 9, takes us to the first half of the balance sheet.

All of the numbers here are fairly consistent.

The main point to note here is the movement in current assets from $17.8 million in December 2010 to now $57 million at the end of March.

And the main factor there being the LNG stock inventory we have as a result of the trades we entered into in Q1.

Moving on to the following page, again, most of the numbers here are fairly consistent with December 2010.

Two points to note here.

The current portion of long-term debt has dropped from $105 million to $92 million, the main reason being that we repaid the World Shipholding loan in March of this year.

And similarly, other current liabilities has increased from $135 million to $174 million, mainly being as a result of costs for (inaudible), which we now start to incur.

Of course, the balance sheet for Golar LNG Limited will be dramatically changed from next quarter, given that we have invested in six newbuildings, we have started the share buyback for Energy, and of course, the successful listing of LNG Partners.

All of those impacts will be absorbed in the June 2011 balance sheet.

If we now turn to page 11, the first half of the cash flow; again, not much activity here during Q1.

A point to note being the biggest cost cut going out will be -- is the expenditure on Khannur, which is $14.9 million for the quarter.

And then the bottom half of the cash flow, which is in page 12, again, not much movement compared to Q4 2010, and again, the main movement being the repayment of long-term debt and obligations.

Of course in Q4 2010, there was the termination of the leases, which led to big numbers both in investing activities of $395 million and also in financing activities of $366 million.

We will now turn our attention to page 13, going through the financial expense analysis.

Q1 2011 is fairly inactive compared to Q4; again, the main movement being that in Q4 2010, we had to write off the lease termination costs and deferred charges as a result of the termination of the leases, which were, of course, absent in Q1.

We now turn to page 14 to go through Golar LNG Energy's financial highlights.

Net operating revenues are increased from $12.9 million to $15 million this quarter.

And then in the next line, you have got other operating expenses, [which are made] mostly of commodities.

And as I mentioned earlier, those are costs relating to trades entered into during Q1, trades which we expect to settle and deliver in Q2, and where we expect some gains.

EBITDA during the quarter is slight improvement, albeit still negative of $1.1 million.

And net financial expenses, fairly consistent at $1.8 million compared to $1.7 million in Q4 2010, which leads us to a loss of $12.6 million compared to a loss of $14.6 million in Q4 2010.

That concludes the financial results for Golar LNG and Energy, and I will now turn your attention to Doug, who will go through the business prospects of the Company.

Thanks, Brian.

As Brian says, I am going to take us through a business update.

We've had an extremely active first part of 2011.

We expect the rest of the year to look much the same, as the industry enters into a period of high growth.

The first slide that I will talk to, slide 15, is our vessel portfolio, which forms the heart of our business, obviously.

And the characteristics of that portfolio are why we are so optimistic about the future going forward for Golar.

The first four vessels on that list, the Princess, Winter, Spirit and Mazo, are the vessels that have been sold down into the Golar LNG Partnership successfully earlier this year, as Graham talked about.

The Golar Freeze, currently operating in Dubai on long-term charter to DUSUP.

I will talk more about that vessel later, but that will also be proposed to drop down into the partnership in the near term.

The Khannur, committed to a long-term charter with Nusantara Regas in Indonesia, will start operating in 2012.

And again, a drop-down candidate for the MLP.

We have three further vessels, the Gimi, Hilli, and Gandria, which are candidates for conversion.

Two of those, we own 100%; the Gandria, we own 50% share of that vessel.

I will also be talking about -- a little bit later about our announcement as part of our press release that we have determined to reactivate Gimi as a carrier, although she will still remain available for conversion projects.

And finally, the four modern steam turbine vessels we have been talking about who are on term charters until next year -- the Viking, Grand, Maria and Arctic are listed there.

Of course, what is not listed specifically, although we have noted it, are the six newbuild vessels which we have committed in a firm manner, which will clearly create a fundamental change to that vessel portfolio.

Turning to slide 16, we have got two graphics there that we are using to describe why we are so optimistic, along with many others in the industry, about growth prospects for LNG in general going forward.

Natural gas, and thus LNG, has obvious benefits in relation to other energy sources, such as crude oil being very expensive and the nuclear concerns that have risen of late.

We believe that the LNG projections going forward for absolute supply on the market are potentially even underestimated at this time and may exceed current projections.

But in terms of shipping supply, you can see from a short-term basis in the top graphic that the lack of supply in the shipping market is becoming extreme.

The near-term tightness, which has been accentuated by the unfortunate events in Japan, has driven charter rates now to in excess of $90,000 a day.

The demand -- on the demand side in the near-term, the increase in supply is being primarily driven by increased exports and fleet renewal programs.

We believe that the increase in ton mile requirements for the industry in the next two to three years is likely to outstrip the fleet's ability to grow.

Longer-term, starting in 2014, 2015, we see a real structural gap between supply and demand on the LNG carrier side.

This is largely due to several new LNG supply projects that have been committed to and are under construction, notably in Australia, which have created a gap in the supply/demand balance for LNG shipping that must be filled.

Turning to slide 17.

Against that backdrop, I am going to talk about why we think Golar is uniquely positioned to take advantage of that market fundamental.

We have responded in a way which we believe is aggressive, yet prudent, with our newbuilding program.

And related to that, we will have no less than 10 modern carriers available for spot and long-term charters in the period up to 2014.

What is unique about our portfolio is that not only do we have with the newbuild program the ability to add shipping capacity in the 2014 and beyond timeframe, we also have near-term tonnage available with our four modern vessels coming off charter in 2012, which will be available for rechartering.

This gives us the ability to satisfy near-term needs for charters, and a lot of those same charters require long-term shipping for new projects that they are supporting.

We believe this provides us a strategic position to create valuable and profitable relationships with key LNG industry players.

Related to our Samsung agreement for the six newbuilds, obviously, we have talked about the two option vessels, which are firm options.

We also have an agreement with Samsung, which is long-term in nature, to add vessels to the fleet from 2015 and beyond.

Notably, on the newbuild vessels -- and this is a big improvement, we feel, for the Golar fleet -- is that we have options on some of the vessels to include regasification equipment.

This allows us to compete in the floating regas sector in areas where a newbuild vessel is the appropriate solution.

And that will be a first for us with the newbuild program.

We retain the three older vessels, which are available for conversion projects.

I will talk a little bit more later about the growth of the floating regas sector.

But I would also like to focus a bit on the Gimi, who we have made a decision to reactivate for carrier service.

The Gimi is a vessel that successfully operated through the 2000s, on charter up until 2009.

She has been in layup since that time, but we believe the fundamentals of the market have changed such that reactivating the vessel is a good decision at this point.

She will go through an extensive refurbishment program, costing about $10 million, after which around August timeframe of this year, she will be available for charter, and of course, still available for conversion projects.

I would like to note that the Gimi, along with the other older vessels, operates at a somewhat less efficient rate than a brand-new multi-fuel LNG vessel, and as such, we expect that charter rates for a vessel of the type of Gimi will garner rates that could be $40,000 to $50,000 per day less than a dual-fuel diesel electric vessel.

However, we still think that in today's market that will be a profitable business for us.

And finally, we continue to work on the next wave of infrastructure options.

Floating storage, floating power, small-scale LNG are all business sectors which we continue to focus on.

And we expect that at least one of those sectors, we will see some firm business in before the end of this year.

Slide 18, a little bit more detail on our newbuild program.

Six new carriers, as we've said, all from Samsung Heavy Industries.

The deliveries are in the third and fourth quarters of 2013 and early in 2014.

We have firm options to order a further two carriers, and, again, as I referenced, a long-term supply agreement with Samsung for vessels to be delivered 2015 and onwards.

The vessels have options to include winterization and ice classing, as well as, critically, the regas option.

The vessels are 160,000-cubic-meter vessels, state-of-the-art multi-fuel diesel engines.

And also, notably, a 0.1% boil-off rate, which we think will be extremely attractive to charters going forward.

Turning to slide 19, just an update on our floating regas business.

The Golar Freeze, operating in Dubai, operating successfully.

We recently completed the acceptance test program.

We believe that the acceptance certificate will be signed off by our counterparty in the very near term.

And again, that will make her available to drop down into the MLP.

After a lot of hard work, the West Java Time Charter Party was executed on April 20.

That is an 11-year deal which will commence near the end of January in 2012.

The Khannur is currently in the shipyard in Singapore with Jurong, with the conversion activities underway and on schedule, and all long-lead items for that project have been ordered and are on their way.

The floating regas market in general for new projects continues to accelerate.

We are tracking somewhere around 25 to 30 new floating regas projects that exist globally.

In the first part of 2011 to date, we have submitted three firm bids for FSRU business, and we expect that potentially there could be four more before the year is out.

So we are quite optimistic that we are going to add to our floating regas inventory before the year is out.

I would note that although Asia has been a big focus for floating regas in the last month, the Americas certainly has turned up as an active location for new floating regas projects.

As anyone could see who is following the press around floating regas, there is a lot of new would-be entrants talking about breaking into the sector.

We do expect to see increased competition from new entrants.

However, we remain the only company to have successfully converted an existing vessel into FSRU business.

We have delivered our projects on time, operating successfully, with very high uptimes, and that just gives us a very high dependability rate and high credibility out there in the market.

So we think that as we continue to focus on this market, we will maintain our industry-leading position.

Slide 20 is a review of our Golar commodities business, and I am going to turn over to Blake Herndon to take us through that.

Blake?

Thank you, Doug.

Golar commodities losses recognized in Q1 are partly due to timing differences between repositioning costs on vessels targeted for loadings in the Atlantic basin and the associated sales revenues from these cargoes later loaded and delivered in Q2.

Gains from these cargoes loaded and delivered during Q2 are expected to be recognized and realized at that time.

At the end of Q1 Golar commodities was prepared to execute the first ever LNG cargo reload out of the Cameron LNG terminal in the US Gulf Coast.

This makes it the third terminal on which the team has led a terminal's inaugural reloading.

In an industry that has significant liquidity constraints the Gulf Coast region, albeit on a very limited scale, has become a source for fiscal liquidity and flexibility for the Atlantic basin and beyond.

In addition to chartering a modern vessel for a single voyage, Golar commodities chartered in two first-generation vessels in the first quarter and has subsequently obtained certain key ratings and port approvals on these vessels.

These approvals are expected to greatly improve the vessel's trade ability in the increasingly tightening shipping market.

The charter terms for both vessels include a firm period with options to extend.

Of course the story of the quarter in the LNG market was the devastating Japanese earthquake and tsunami that has forced the shutdown of nuclear units in the country.

This in turn has resulted in a significant increase in LNG demand in order to fire thermal plants to supplement the country's power needs.

We estimate an additional demand of 10 to 12 LNG cargoes per month for an extended period a time into the Japanese market which will tighten the spot market considerably.

Cargoes previously offered into the spot market are increasingly moving to the Far East.

The additional pull on cargoes from Japan has also had the effect of lengthening supply lines which effectively increase ton miles and further constrain the shipping market.

Rates are reflecting this tightening.

Golar Commodities has also made progress on term risk management and optimization opportunities that could potentially be executed in 2011.

Some of these are maybe closely tied with the rest of Golar's business development activities and we're excited about that.

That's the summary of Golar Commodities and so I'll turn it back over to you, Doug.

Thanks, Blake.

Just to finish off on final slide, I guess in summary we see a market that is in a high growth cycle in the midstream sector.

For us that means an improved carrier market and continued opportunities for floating marine LNG-related infrastructure.

We think we're responding appropriately and aggressively to the improved fundamentals in the market and we've created a portfolio that is unique.

It's unique in its ability to offer short-term tonnage to the industry and provide a long-term solution for the carrier requirements going forward as LNG supply increases globally.

In the coming quarters we will continue to look for further investment in new opportunities to accelerate Golar's growth.

We believe there are several opportunities that exist and we will be pursuing those and we expect to be successful on some of them.

We believe going forward that our earnings will improve.

This was related to a strengthening of the overall market.

Our fleet expansion program where we've garnered excellent terms on price and payment terms and excellent option structure.

The re-chartering of our existing vessels we expect to be at higher rates than current.

We will add to our earnings next year the Khannur when she goes into operation in West Java and then, of course, we fully expect to add new conversion projects to our portfolio.

As Blake has alluded to, we will continue with the vision for Golar of creating integrated solutions in the LNG midstream and we see good progress on those coming through in several places in Golar's world.

And with that, that ends the formal part of our presentation and we'll turn it back over to the moderator for our Q&A session.

(Operator Instructions).

Urs Dur, Lazard Capital Markets.

Good morning, good afternoon.

I got on the call a couple minutes late, but you guys talked about the FSRU market and how attractive it looks with 25 to 30 projects out there.

And you've bid on three and then bidding on three to four more.

Could you give any indication of what you expect your success rate is on those bids and then some broad sense on timing?

Are you going to win 50% of them and we're going to hear about it this year?

Well, I think it's difficult to project.

LNG projects often are plagued by timings that aren't what everyone expected them to be.

And to some extent on these projects we're not sitting in the role of project developer, we're an FSRU provider; that sometimes is outside of our control.

But I think you could see two to three announcements this year with FSRUs that would go into service late 2012 and during 2013.

So that's when the new projects would kind of come on stream.

We like our competitive position.

I mean there are really only three operators of floating regas projects out there right now.

As I alluded to, there are some would-be new entrants and it's hard to evaluate how they're going to behave.

But we still think we bring more to the table than most others, I suppose all others especially in the conversion market where we're the only ones that have done it so we can provide a lot of price certainty to clients.

So I guess I'd answer your question about how many we'll win is I think we'll win more than our fair share.

Okay.

I mean I know it's sort of a silly question, but I just wanted to get an idea of what the odds are and percentages in terms of baseball term batting average expectations.

The older ships, the Gimi, Hilli, Gandria, you mentioned were being reactivated for carrier service.

Did you -- I think you may have mentioned it, but I didn't write it down -- what's the reactivation expense, CapEx?

Well, first of all, we've only made a decision on one of the vessels to reactivate and that's Golar Gimi.

(multiple speakers) the Gimi?

And the reactivation expense for the vessels would be different on a case-by-case basis.

But our estimate, and we've been working on it for a couple months now so we're feeling pretty good about the estimate, it will cost about $10 million to reactivate Gimi.

Gimi.

All right.

And you mentioned that trading is going to be profitable in 2Q which is great -- or expectations that it will be.

Have you given out any broader ideas on EBITDA expectations we could use to model or is that probably something you're not going to talk about?

Not specific EBITDA numbers.

I mean we've guided that we expect to see some significant improvement in EBITDA related principally to the fact that all four of the modern vessels will be on their new charters pretty much throughout the second quarter while one of the vessels in the first quarter remains on its existing charter in Q1.

So we'll see some significant improvement there.

But we haven't given specific numbers.

No, I meant on the training arm itself, are there any ideas there?

Well, similarly, I think what we've guided, I mean obviously the second quarter isn't over yet and the trading business is a pretty dynamic one, so things can happen.

But what we've said is that, listen, there's a lot that we've recorded in the first quarter that relates to a number of trades.

We can see that when those trades unwind that associated with those trades there will be some gains that will be recognized in the second quarter.

We haven't specifically said how we think that will translate into an overall number for the second quarter, but looking more positive than the Q number loss looks.

Okay.

And then finally, it's great that you have newbuild orders, but are there acquisitions out there that make any sense at all for the Golar platform?

I mean, just as an idea looking at the (inaudible) ships for example.

Is there any second hand knowledge that would be useful to you guys?

Yes, there are, without commenting on who or when it might happen, there, we believe, are opportunities for consolidation in the LNG carrier sector.

We expect that we'll be a leader in that effort and we're looking at several opportunities.

But I can't -- again, I can't give you any odds on whether we'll -- or how many of those opportunities will come to fruition.

Obviously we will only acquire vessels or fleets of vessels from other companies if the numbers make sense.

But we do want to indicate that it's something we are looking at doing and looking to invest further in fleet expansion.

All right, thanks, guys.

Martin Korsvold, Pareto Securities.

Hi, good afternoon.

On the FSRU projects, I guess I know a couple of them, but could you identify which ones you have bids on and which ones you believe will be coming up shortly?

And secondly, if you could talk a bit about where you think returns are going on these.

Is it going to be in line with the Khannur, is it going up or is it going down?

A lot of the projects we don't get very specific about where they are and what ones we're specifically working on because that just -- we don't necessarily want to assist our competitors if they're not paying close attention.

I would say that, again, a lot of the activity that's coming along is in the Americas, but Asia is still there with active projects and we're pursuing many of those.

I think a couple that we can talk about which are well-known and we're in the hunt are the next project in Indonesia which is called the Medan Project and also the next floating regas project in Brazil for DP3 as they refer to it.

So I think that's a summary where the next projects are.

Returns wise, all these projects have different characteristics.

I mean Khannur being placed into service in Indonesia with pretty good counterparties in Pertamina in PGN garnered a certain level of return.

Other projects with different counterparties we would price differently.

So I think that will be on a case-by-case basis.

We would call the returns on Khannur successful and attractive and we would look to achieve similar returns on projects going forward.

Okay.

On the utilization in Golar Energy, you were commenting about 80%.

Is that only driven by the dry-docking on the ground or did you have some idle time?

And should we think about going into the second quarter?

Do you think -- obviously I guess all your vessels are employed now.

Will it be delivered back to back to the new charters?

Martin, there's not solely the dry dock.

We had obviously the changeover from old charter to new charters during the first quarter which gave rise to a little bit of downtime, and then one vessel in particular; the Golar Viking was on hire to Shell throughout the first quarter.

And that had a reasonable amount of commercial waiting time during the first quarter.

So moving into the second quarter, apart from the dry dock of another vessel in the second quarter, they should be fully (inaudible) throughout the quarter under their new charters.

Okay.

And lastly just in terms of rates, firstly for modern (inaudible) you mentioned in your report that rates are at about 90 while we hear like Stena talking about seeing well above 100,000 for a modern vessel.

Secondly, on the Gimi you guide 40 to 50 below a modern vessel, whereas I think you previously were talking about maybe 25 to 30 below.

Could you talk a bit about the rates and outlook and how you see that?

I think -- it isn't for us to comment on what Stena think they may or may not get for their vessels.

The rates we quoted in the press release were sort of current spot market rates for a modern vessel -- the market available today on a spot basis, that's kind of where we've seen it for (inaudible).

Right now we don't have any modern vessels available in the spot market.

On the Gimi reduction, the 40 to 50 a day, that was really in comparison to the sort of new generation dual-fuel diesel electric which is low boil off rates.

One of those (inaudible) in comparison to the Gimi.

Obviously dual-fuel diesel electric, the most modern ones are slightly more efficient than a modern steam vessel as well.

Okay, thanks very much.

Ole Slorer, Morgan Stanley.

Yes, thank you very much.

I just noticed that you have been a pioneer in exporting LNG out of the US.

Could you talk a little bit about your longer-term thoughts about US becoming an LNG exporter?

Do you think that the permits will come forward?

I mean we've seen with interest the announcement from Cheniere and also what's going on the dominion of (inaudible) point.

So what are your latest thoughts on the larger scale LNG exports out of the US market?

Blake, do you want to take that one?

Sure.

Yes, as you know, there have been some announcements about some other companies getting authorization to export.

It appears that there's a real possibility that the US regulatory bodies are going to allow this and so that's encouraging.

And it's a significant step change in the market; it could ever pretty significant impact on the market.

We're acutely aware of it and looking at opportunities there.

I think there are certain challenges around projects as far as financing and size and contracts, but it is encouraging and we're looking at those types of activities.

What are the main remaining hurdles to watch for in your view?

Is it, I mean, we've gotten DOE approval, is it FERC?

What is it that's the next sort of step to watch for?

Yes, effectively it appears that the status is that these projects are moving forward from a commercial standpoint.

They've gotten authorization from the commercial side, DOE authorization to export.

The remaining significant hurdle is FERC approval which is more of an operational approval.

It's a permitting process for the operations of these terminals and that involves environmental issues.

But the impact on these terminals is not as great as the original permits received on these terminals, so it's somewhat encouraging and reasonable that this could happen.

So would we be talking about 2015 then say as a sort of first year or is it later than that?

I think it's difficult to say.

It varies on the projects, depends on the projects.

Some are much bigger than others and so it's really hard for me to comment on other people's projects.

But it could take a period of time.

But do you agree that the kind of volumes that are being talked about could have a very serious impact on the global LNG trade?

I mean I think any one project probably wouldn't.

I think cumulative, if there are multiple projects approved and if they come to fruition, then certainly it could over time, yes, absolutely, it could have a pretty significant impact on -- over a decade.

When it comes to the regas markets, you mentioned America, so I understand you don't want the flag every single project you're looking at, but I think everyone is aware of Brazil.

Other than Argentina, are there any other markets in the Americas that could open up for LNG imports?

Yes, if you look at the Americas there's probably four or five other markets that are potential for floating regas projects.

Do you think Mexico could become an importer of LNG?

Well, Mexico is an importer of LNG (multiple speakers).

Sure, but it's a new FSRU project?

I don't know of any floating regas projects being proposed in Mexico.

That doesn't mean there aren't any, but we're not focused on them.

I mean, the other ones down there, which I think are also publicly known, are the Chilean, the Uruguayan project and Argentina is expanding as well.

Okay, thank you very much.

Sorry, just before the next questioner, just coming back on the previous question.

Martin was asking about the rates; we sort of quoted current rates of 190 and he was talking about Stena's comment.

Of course 90 is kind of where we're pushing at now, but as we move into the winter and into 2012 we can see that going well above the 90.

Sorry, next question.

Edouard Baldini, Goldman Sachs.

Yes, good morning, good afternoon.

Just one question for me is how high you think LNG shipping rates can go in the next three years and do you think there are any reasons why they cannot go back to the peak of $130,000 or even $150,000 a day given that it seems the market has never been as tight as it's likely to be in the cycle?

Yes, I mean where the rates will eventually peak out; to be honest we don't spend a lot of time thinking about.

We're more optimistic that rates in the long term or for long-term chartering and will provide very good returns on the investment we're making in the new builds.

And also returns on capital that we have employed in the existing modern steam vessels.

So if rates were to stay where they are, close to where they are the spot rate today of 90 for the long-term I think that would create quite a bit of business for us.

Spot rates will go up and down as the LNG shipping goes through cycles and we could hit peaks of 130.

I don't see why not.

But it would certainly be -- I don't know that rates at that level are sustainable and anybody should count on them being at that level for any period of time.

Depending of course on what happens to natural gas and LNG prices.

I mean obviously, I mean LNG is trading at a significant discount on an energy parity basis to oil, whereas in theory on a sort of environmental scale it should be trading at a premium.

Agreed.

Eliecer Palacios, Maxim Group.

Thank you very much.

Another question for Blake regarding the US export permit.

What would you think would be your ability to engage in long-term contracts with a US natural gas supplier and find yourself as a holder of these long-term contracts?

And second question would be regarding the newbuilds, you have options for two newbuilds.

Can you comment on the timing of these exercise and the option for 2015 onwards, how many vessels you have on that option?

Thank you.

I'll take the first part of that.

As far as long-term gas contracts, there are a number of firms that sell gas forward physically in the US.

So that really isn't that difficult to do.

However, the construct of the US market really doesn't require that people do that because there are very deep derivative markets that can be used to hedge and manage financial risk such that forward -- that you could buy the forward curve and buy basis differentials to actually lock in economics and then buy physical gas on a daily basis to back up those types of supply contracts for export projects.

So it's really not necessary to absolutely lock in.

There are some quality issues that have to be considered, but generally speaking that's not a major strain for these projects.

So you don't see a price advantage negotiating with, let's say, the Chesapeakes of the world for some sort of agreed price and quantity that will be below the market?

Not below the market.

No, I mean you can certainly lock-up those types of physical contracts, but the market is fairly well known, it's fairly well understood and the price at which you could transact is -- I think everybody understands what that is.

Certainly Chesapeake does.

Okay, thank you.

Nathan Weiss, Unit Economics.

Good morning.

A question, one of your recent competitors has talked about receiving phone calls from oil majors offering kind of two year charters in the 105,000, 110,000 level.

I was wondering if you had heard similar reports and your thoughts around that.

And then second, understanding the structure with GMLP where you're kind of targeting a five-year charter to be able to drop an asset down, which would obviously be very accretive, how do you think about that market developing and how likely do you think you'll be to be able to drop in a couple of assets over the next couple years with some attractive five-year charters?

Okay, I think we missed -- I'm just going to quickly go back to the previous question and I'll come on to those because we kind of didn't answer the question about the options.

Just quickly, we don't disclose what the option periods are, that's commercially sensitive.

But those two firm options that we got from Samsung are both for vessel deliveries in 2014.

In terms of short-term rates or prop rates that people are offering for two- and three-year charters, I don't think -- I don't know what the number you quoted, $105,000 a day, I don't think that's really out of line depending on the vessel for a two- or three-year deal.

One of the reasons we're so optimistic is that we're fielding many calls including from oil majors looking for tonnage over the next two to three years.

A lot of those same companies are also looking to fill their kind of structural gap that they have in their fleet availability for new projects.

So I think those kinds of rates for a two- to three-year charter are not out of line with what we're seeing.

As you'd expect, as you start going for charters with longer terms that the rates come down a bit, but I don't think that's too out of line.

And then moving on to your second question, which I think the gist of which was how likely that we're going to have enough five-year plus contracts and assets to put down to the MLP.

I think -- I can't see us -- I think the problem will be having too many, to be frank.

If you think about it, just in what we have now, we have 10 -- four existing and six coming -- modern LNG carriers of 10.

We have three conversion candidates and we have two existing FSRUs which you've already said that we're going to drop down this year and next year.

It's eminently foreseeable that we could end up with 10 long-term contracts on the newbuilds, three converted -- additional converted FSRUs, past acquisitions plus newbuilds -- the possibilities are pretty exciting over the next few years.

So I think our view would be that having enough business to drop into the MLP is not going to be one of the biggest problems we have over the next two years.

I look forward to it.

Erik Stavseth, Arctic Securities.

Hi, guys.

Just a few questions.

First one, you said Gimi is going into the dock to be prepared for trading.

When will that be sort of estimated ready for trading?

Early August she'll be out and ready to trade.

Okay, thanks.

Second thing I was thinking about, you mentioned that the DFDE vessels have favorable economics for the charters.

Wouldn't that imply that you could technically ask for higher rates?

I mean if you have $40,000 less cost per day you could say that, okay, we can charter it for $30,000 more and the charter will still make money out of it?

That's a good point actually because it kind of goes back to an earlier question on how high rates can go.

Of course, to the charter it's the overall cost -- the cost of chartering the vessel and the fuel.

And if the fuel cost is going down, I mean obviously what guides -- what is a sustainable charter rate is how much money is being made on carrying and delivering and trading the cargo.

So if your overall cost goes -- sorry, if your fuel cost goes down then your overall cost could stay the same, it could still be supported by the LNG trade, which means you could have a higher charter rate.

Right, okay.

Thanks (multiple speakers).

And you'd expect to see a higher charter rate for the new generation DFDE vessels.

Okay.

Second -- sort of last question would be then in terms of, I mean it's been touched already, but in terms of newbuilding orders, you have two options now and the way I understand it is you have a rolling two-option agreement with Samsung and you're also talking about maybe buying vessels in the market from other players.

Are you sort of -- are you aiming to go in say five more vessels, 10 more vessels?

Could you give us some color on that?

Well, it's a little bit difficult on the rolling newbuild program to give it a gauge because I think when those opportunities come up we would look at the fleet size against demand, what the order book is looking like at the time.

So it's a little hard for us to comment.

In terms of acquiring existing vessels, I don't think there's a real target or cap.

We have a pretty interesting financial and corporate structure which we can utilize to add value to fleet additions.

And as long as there were good opportunities that were accretive to our business and positive to our business we would continue to pursue those.

Okay, thanks.

[Mahesh Joshi], [Spin-Off Advisors].

Hi.

You said that the vessel Gimi is going to be reactivated sometime in August.

So can you just comment on what kind of rates do you expect to fetch for that vessel?

I guess what we're not exactly sure of is coming out in August is probably a much more active chartering period than present.

So we're expecting that there definitely could be some uplift in short- and spot-term rates in that time period.

Rates for normal modern vessels are sitting around $90,000 a day, as we've said.

Gimi will be $40,000 to $50,000 a day less efficient than those vessels, so sort of you can do the math as well as us.

It's going to be around that $40,000 to $50,000 a day range hopefully.

But again, we'll see what the market is doing in August when a lot of charters are looking to fill their winter 2011-12 requirements.

The other aspect about the Gimi reactivation is a lot of the -- or a portion of that budget we're spending on reactivation, the $10 million would have been spent anyway when we lock down a conversion project for her.

So a lot of it is pre-investment in a future conversion project for the vessel.

Okay, thank you.

(Operator Instructions).

Eliecer Palacios, Maxim Group.

Thank you, just to follow up on my earlier question on options, to make sure I understand.

For 2015 can you comment on the number of vessels that you will have available or the number of options that you'll have available if possible?

And just a follow-up, the Gimi, will you have pricing of new vessels?

Will we be able to earn a vessel pricing $90,000 a day following the refurbishing or will it be more of the other vessel pricing?

Thanks.

I think we prefer not to comment on the number of options contained in that deal.

I don't want to be glib; it's at least one option per year starting in 2015.

Again on Gimi rates, we would expect a deduct to account for the efficiency of the vessel of $40,000 to $50,000 a day against modern vessel rates.

Okay, thank you very much.

Erik Stavseth, Arctic Securities.

Hi guys.

Just a question on -- I mean there have been a lot of newbuilding orders placed lately and you guys were a bit ahead of the curve.

Are you concerned about all the new orders and particularly those independent owners ordering vessels, not the project that will be needing the vessels?

I don't think we're concerned.

We anticipated that once Golar entered the newbuild market that there would be others following.

We think with our delivery timings, our commercial structure that we've achieved with Samsung and our overall corporate structure and (inaudible) funds that we'll be extremely competitive against the market.

And even with the newbuild announcements that have come along we still see a structural gap in the fleet in those years of 2014-15.

Now obviously the shipyards and owners can react, but there is very little capacity left in that critical time period when charters are going to be wanting to look for firm commitments to cover their vessel requirements.

How early do you see the projects like Australian coming out to secure tonnage?

Did you say when will they?

Yes, sort of I mean (multiple speakers).

Sorry?

They're out -- they're making their plans and talking to vessel owners now including us.

Okay, thank you.

That will conclude today's question-and-answer session.

I would now like to turn the call back to you, gentlemen, for any additional or closing remarks.

Thank you and thank you, everybody, for listening to our results presentation today.

As I said at the beginning, this is my last one for Golar LNG Limited.

I look forward to speaking with you all on similar calls for Golar LNG Partners.

But I hope you got flavor from our results presentation and our results press release.

We believe there are some pretty exciting times ahead for the Golar Group over the next two years and we look forward to sharing that with you all in the coming quarters.

Thank you very much and goodbye.