Golar LNG Ltd (GLNG) 2011 Q2 法說會逐字稿

Good day and welcome to the Golar LNG Q2 2011 results presentation conference call.

Today's conference is being recorded.

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

Brian Tienzo.

Please go ahead, sir.

Thank you.

Good afternoon, everyone, and good morning to our colleagues in the US.

My name is Brian Tienzo.

Welcome all to Golar LNG's second-quarter 2011 results presentation.

And to start let's all turn to page three for the agenda.

So I will go through the Q2 highlights with you and then go through the highlights of our group structure.

I will then go through the main points in our Q2 financial results for the second quarter.

I will then hand over the presentation to our CEO, Doug Arnell, to go through both the business update, summary, and outlook.

If we could all turn to page four for the Q2 2011 highlights, Golar LNG Ltd.

reports consolidated operating income of $21.3 million for the second quarter of 2011.

This is an improvement from Q1 and has been helped by improved TCE and utilization of our vessels.

We have increased our dividend to $0.275 per share, and this reflects the Board's confidence in the development of the LNG markets.

We had disappointing results from trading operations and we will be looking to reduce this activity.

To date our total order book increased to 8 LNG carriers and 1 new build FSRU after today's announcement of 2 additional LNG carriers and 1 FSRU.

We continue to see an improvement in LNG markets, which for us will benefit the shipping outlook.

Similarly, we see strong interests for floating regasification solutions and, finally, we would just like to highlight the successful IPO of Golar LNG Partners in April, which resulted to gross proceeds of $310 million, helping to fund our newbuild installments and buy back of Golar LNG.

If we can now turn to slide five, our group structure.

So as you can see there we now have two listed companies within Golar LNG.

We have got Golar LNG Ltd., which is listed both in NASDAQ and in Oslo, and Golar LNG Partners, which IPO'd in April and is listed in NASDAQ only.

We have two efficient vehicles, Golar Energy Ltd.

being the project development company of the group.

It will concentrate on spot short-term markets and take on the opportunities that we see ahead of us.

And it's very much a growth oriented vehicle, looking at both acquisitions of newbuilds, existing capacities, and existing businesses.

Golar LNG Partners, on the other hand, is deal oriented.

It concentrates on having long-term contracts.

Currently it has $1.25 billion in firm revenues and its main aim is to have stable cash flows for stable dividends.

Golar LNG Partners has options to buy in long-term assets, long-term charters from Golar LNG Ltd.

and, as of today, it has two potential assets for dropdowns.

We are looking to dropdown Golar Freeze sometime this year and Khannur, which is due to start its charter with (inaudible) during Q1 of 2012.

That will also be dropped down in 2012.

So what we have here is an efficient way of monetizing long-term charters for Golar LNG Ltd.

At the same time this structure provides a growth vehicle for LNG Partners, but perhaps more importantly, is an effective way of financing Golar's future projects.

If we now turn to page six for the financial highlights.

We have got some numbers highlighted there and it's just the main items which have moved from first quarter.

So net operating revenues have improved dramatically from Q1 to $73.1 million in Q2 and this is as a result of better utilization on our vessels.

All of our modern vessels are now -- were on charter throughout Q2.

Slightly impacted by the drydocking of Maria in June when it incurred approximately 30 days of off-hire.

We have been slightly impacted this quarter by mark-to-market losses on interest rate swaps; hence, our financial expenses have increased to $15.7 million compared to $6.9 million in Q1.

As a result of much better revenue in the quarter, our time charter equivalents has jumped from $80,694 per day to $91,666 per day.

Our ship operating expenses this quarter is slightly higher than Q1, but we are taking actions to make sure that that is improved during the second half of 2011.

Let's now turn to page seven to go through some more highlights in detail.

So as I mentioned earlier, our operating revenue this quarter is $73.9 million, $74 million as a result of all of our modern vessels on charter throughout Q2, and those vessels are now expected to be on charter for at least another quarter.

It's also obviously -- the revenues obviously improved as well because of the inflationary uplift for Golar Winter and Golar Spirit which started in April this year.

We have other operating gains and losses of $8.7 million, that is the second red box there, and that represents the loss we made on our trading activities.

And as I mentioned earlier, we will be looking to reduce those activities going forward.

Let's now turn to page eight for net revenue and EBITDA growth.

So from Q3 2010 onwards we are seeing a steady improvement in net revenue and also some improvement in EBITDA, and we expect that that will continue to be the case over the next coming quarters.

Going now to page nine for the financial expense analysis and really the main movement here from Q1 to Q2 is interest rate swaps.

As a result of medium- to long-term swaps falling slightly during the quarter, the gain of $3.6 million of mark-to-market in Q1 has become a loss of $5.7 million in Q2.

As a result of that our net financial expenses for the quarter has jumped from $6.9 million in Q1 to $15.7 million in Q2.

Let's now go to page 10 for the first half of our balance sheet.

The first line that is highlighted there is our cash and cash equivalents, and the main increase is really represented by the successful IPO of Golar LNG Partners in April.

The majority of the process obviously helps us pay for the newbuild installments and also for the buyback of Golar LNG.

The second highlighted box there is just the newbuilding installments that we paid during the quarter.

Turning over to page 11, the box there is actually misplaced.

That should be one line lower so that it highlights other current liabilities.

Basically the increase in current liabilities from March to June is the [stock on our] commodities trade which hadn't yet closed out in Q2.

Those are obviously all now closed.

We turn to page 12 for the first half of our cash flow.

The main box highlighted there is really just to show the amount of payments we made as far as newbuildings are concerned and, of course, the continuing conversion of the Khannur.

Hence, it's a much higher number compared to Q1.

Over the page to page 13.

As I mentioned earlier, the IPO of proceeds received in April helped to pay for the buyback of Golar LNG shares, which is shown as $107 million in Q2, and the proceeds we received net of all costs for the IPO is shown in the second box at $288 million approximately.

That ends the discussion on our financial results for Q2.

I am now turning the presentation to our CEO, Doug Arnell, to go through business updates.

Thanks, Brian.

I would like to start my section of the presentation today talking about Golar Commodities.

As you will have seen from our press release and you have heard from Brian just now, we have experienced an $8.7 million Q2 trade loss which is clearly disappointing and warrants some discussion here today.

The initial justification for adding a commodity trading unit to the Golar Group we still believe in.

The opportunity for us to leverage our substantial infrastructure position into gaining value from the underlying commodity trades in the LNG business is clearly still there and we will continue to work in that direction.

However, just to give you another data point, we, to date including all expenses, trades, gains, and losses, we are at a net cost of $23 million for that enterprise.

A couple other data points about the quarterly results in this regard.

You do get some -- especially when you are in a nascent position during a small number of trades, you do get some distortions across quarters when the underlying trades open up in one quarter and close in the next.

And that is the case again for us in this quarter where the final trades that were done during the quarter close out actually in Q3, and we expect to see a $5 million gain in Q3 from the closeout of the existing trades.

The other aspect here is tied to market dynamics.

The same good news that we see on the LNG shipping side, which we are going to talk about in a moment, tends to hinder our ability to get pure spot and short-term LNG trading going.

So it's a countercyclical situation which we are seeing on the commodity side seeing a negative result.

In that regard, going forward till market opportunities improve or until we find a way to leverage our infrastructure position into more term-like positions for commodity tradings where we can trade around and optimize, we will be reducing our activities on the trading side.

Turning to page 15 is a slide we show every quarter, our existing portfolio.

We have got both the Golar LNG Partner vessels on here as well as Golar LNG Ltd.

Again the Golar LNG Partner vessels all under long-term charter.

Just some of the top names in the industry -- BG Group, Petrobras for 2 FSRUs and the Golar Mazo to Pertamina.

On the Golar LNG Ltd.

side we have got the two coming dropdowns for Golar LNG Ltd.; they are listed first.

Both are already under longer-term contracts, the Freeze in Dubai and the Khannur, which is eventually headed for Indonesia.

She is currently in the yard being converted and will start operations in early January.

A little bit more on that later.

The Gimi we also talked about in our press release today.

We were listed there as a conversion with a note about reacting for carrier service.

She is currently in drydock, just about completed her reactivation.

Actually, she will be out next week.

We are talking to a number of counterparties about short-term and long-term service, both on the carrier at side and FSRU side, and we are very optimistic about finding work for her going forward.

The next two vessels, the Hilli and Gandria, both in layup, both excellent conversion candidates, and we will be talking about our FSRU opportunities a little bit later.

Then the next four vessels -- Viking, Grand, Maria, and Arctic.

Those are our four existing modern vessels currently on charter.

They come off-charter next year where we expect to see a good market waiting for them there.

Turning to page 16, we have today along with the earnings announcement also announced two additional newbuild LNG carriers and our first newbuild FSRU.

All of them ordered from Samsung Heavy Industries.

The two carriers are actually tied to the options that were negotiated as part of the original LNG carrier order of six vessels, so the outstanding price and delivery terms we achieved on our first newbuild order is also carried through to those two carriers.

The FSRU that we have ordered is 170,000 cubic meter vessel.

It will have the ability to send out gas at between 500 and 750 million cubic feet a day, which we think fits well into a lot of the markets that we are targeting for FSRU projects, and will allow us to respond in a prompt manner on a short-term basis to market opportunities in that space.

The carriers will, as our six original newbuild orders did, have options for us to install regasification equipment and be modified for ice class and winterization.

We have got some time to make some decisions on those options and as we look at the market we will make a determination whether to do so.

In terms of delivery timing for the whole order book, now we have got five vessels including the FSRU coming into service in 2013 and four of the carriers have delivery in 2014.

We have talked about it before but just a reminder; we also have a long-term supply agreement for future LNG carriers with Samsung which will allow us to grow the fleet in an efficient manner as we see the market warrant it.

We have got some details there about the vessels.

I think the one thing I would like to point out is that these vessels have quite an improved boil-off performance at 0.1%, which we think will be very attractive to potential charterers.

Page 17.

A little bit of discussion on the underlying fundamentals we see going forward that impact our shipping fleet.

There seems to be a fairly industry-wide consensus that the growth in new LNG supply is quite dramatic in this decade.

We have shown a graphic there that starts from 2011 going out to 2016.

We like to show that timeframe because those supplies, the majority of those supplies that are coming on in that timeframe are connected with new projects that are substantially committed to by their sponsors.

So this is a growth cycle that is visible.

We have an inset graph there which is also interesting, which covers the period of 2010 through 2012 for the large quantity of LNG that potentially will be coming on related to debottlenecking and ramping up operations at existing plants.

So bottom line, by 2016, just in the new projects we are seeing, up to 75 million tons a year of new LNG from new projects and by the end of 2012 in that 2010 to 2012 another 35 million to 40 million tons per year of LNG.

So a dramatic increase.

The graph below is where we see the real story for us.

The result of a very, very quiet order book prior to several months ago when Golar entered with its first newbuilds has resulted in a short shipping market for the next several years.

Obviously this is what we have been looking at when determining the level of our commitment to newbuild LNG carriers.

So the bottom line and where our near-term focus is as we turn to page 18 is that we have got a large number of open positions ready to set against that very positive market outlook.

Including the FSRU, you will see 14 open positions there which we are ready to put against a market that is badly in need of shipping capacity starting with the Gimi, as I said coming out of the yard next week.

I will say on Gimi that the reactivation cost for her -- we eventually will spend approximately $20 million on that reactivation where we had given previous guidance of $10 million.

We made decisions along the way through the reactivation process to ensure Gimi's longevity to operate either as a carrier are going into an FSRU service.

So we expect to start receiving charter proceeds from Gimi certainly in the fourth quarter of this year and hopefully in September as well.

Following onto that is our four existing vessels; two of them come off-charter in early in 2012, another two later in 2012.

We think the market is extremely tight next year and we will be leveraging those ships into high value.

Then following on that is the LNG carriers and the single FSRU you will see there we have had excellent, to be honest, interest from major LNG players in chartering our vessels and we expect to conclude charters on several of the vessels before the end of the year.

Moving to page 19.

The great story on our LNG carrier side does not negate our attention on FSRU where we continue, we believe, to be in an industry-leading position in a market space that continues to grow.

Our existing conversion project, the Khannur, which will go into the Nusantara, West Java, Indonesia project in first quarter of 2012.

The ship is at the Jurong yard in Singapore right now, the conversion is going well.

We expect to be on time and on budget on the conversion and deliver as per our commitments to our charter.

The other FSRUs, two operating in Brazil and one operating in Dubai, are operating very well.

Very little off-hire or downtime on those FSRUs, and that is a big part of our story to the market with our solid operating experience on FSRUs.

As Brian alluded to, Freeze which reported -- we reported last quarter has come through acceptance tests well.

That kind of clears the way for us to drop Freeze down into the MLP and use that corporate structure to the benefit of Golar.

We do have some news on Brazil.

There is no formal announcement as of yet, but we would like to give guidance that we are unlikely to be the provider of the third FSRU in Brazil.

We believe we have lost to a lower-priced bid from one of our competitors, which is obviously disappointing, but we price our FSRU bids into these projects at return levels which we believe is appropriate for the risk that we are taking on the project and the underlying contract.

We were very comfortable with our approach on the Brazil project, but in the end we believe we will be unsuccessful.

However, we strongly believe that with our conversion skill and competency, operational competency, and especially now that we have committed to the market with a newbuild FSRU which will allow us to respond in a very timely manner, we are still very, very optimistic about our FSRU franchise.

Turning to our last slide on the summary and outlook.

What we really are going to be focusing on in the next months is leveraging the position we have created with our LNG carriers and our FSRU positions into locking in high value through our chartering activities.

We will be focused on, for the time being, on the first set of charters on longer-term employment which allows us to use our corporate structure to its maximum benefit.

We have increased our commitment to the FSRU market with our first newbuild order, but on the commodity side we will be reducing that activity pending market improvement or, as I say, our ability to leverage our infrastructure position into a more term-based commodity position.

Finally, we see great upside in our projected earnings.

We have talked about the strong overall market and following on with that we will reactivate the Gimi which we expect to receive charter payments in the upcoming months.

Next year we will be rechartering our existing carriers and we expect higher rates than they are currently on.

2012 we will start to receive charter hire payments on Khannur.

Of course, we have got future conversions with our conversion candidates still in the portfolio and then our long list of potential newbuild charters.

That concludes our presentation part of our conference call today.

I would now turn it over to the moderator for question and answers.

(Operator Instructions) Urs Dur, Lazard Capital Markets.

Good afternoon.

Great top-line result.

Can you tell us, though -- I am just reading through the release here.

What were the non-cash -- as you mentioned, there are some unrealized losses in this $8.7 million.

What is the non-cash portion of that or is that all in cash loss?

We can't go into specific details, Urs, but obviously some of that is non-cash.

But as we said earlier, I think the important thing is that all the volume trades have now been concluded during Q3 and that we will see a gain of approximately $5 million in the third quarter.

Okay, that is fair enough.

It's just when you say reduce people are still going to think you are going to keep going with this and there are going to be other quarters that are going to be wildcards.

And the stock is getting sort of beaten up on this right now, but everybody is so it's really not much to do with you.

Also, the interest rate swaps, that non-cash mark-to-market was $5.7 million?

Is that correct in the --?

That is correct.

Okay, good.

On the Gimi, she's an old ship and I think it's fantastic that you are putting her back into service, but is she going to get a discount to current market rates due to the age?

I think we gave an indication last quarter that because of the vessel's size and age, plus also given the fact that rates have improved, we would probably see a discount of approximately $45,000 to $50,000 from a prime LNG carrier.

Okay.

I think that is sort of -- I must have that in my model anyway so that helps.

Thank you.

Finally, and maybe we can do this off-line, can you give me an approximate total CapEx number for 3Q, 4Q of next year?

We can't give you that because we have not really talked about a specific profile of -- specifically our newbuilds because really those will be the ones that will are big determinants as far as our capital expenditures are concerned.

Okay.

I am just trying to get it modeled properly.

I think we gave indication that all of our newbuilds they are very much backended.

And obviously, as you already know, we will have paid some installments as far as -- as soon as we sign the contracts.

So I think it's fair to say that the majority of what is outstanding will be towards the delivery periods.

Excellent, very helpful.

I think it's very clear on the market outlook.

Thanks for your time, guys.

Martin Korsvold, Pareto Securities.

You mentioned in your report that you have on your nine newbuildings a CapEx of $1.8 billion.

Now this calculates to about $200 million per vessel and given that one of the vessels is an FSRU that seems low in comparison to what [Sirc] is paying for their FSRU, about $270 million.

Can you comment on that?

Well, we can't obviously on specific pricing of the vessels, but I think it's fair to say that when we started talking to the yards about our newbuilds it was pre-Japan, it was pre the sudden improvement in LNG carriers, so I think you can assume that we got a good pricing as far as the initial wave of carrier orders that we put through.

So I think on a par level, we can't give specific numbers on FSRU but, as I said, there will have been some discounts on our initial orders.

Okay.

Also a question on that number.

Would that be including follow-up costs or is that a clean yard cost of $1.8 billion?

That is the delivered cost.

Okay.

Also, in your report you mentioned that there is very limited delivery capacity at the yards into 2014 and 2015 even, and that is a quite interesting issue.

Would you have a thought or an idea how many slots are available still for those three years?

Well, 2004 (sic) it's limited and 2015 it's a little bit better.

I don't think we want to talk about exactly how many slots we figure available.

That takes some work and it's quite good information to -- quite competitive information to track.

Our base belief is that for those years, if you make assumptions about new LNG coming out and the amount of LNG that could be traded in the LNG trading space, there is not enough yard capacity to keep up with all the ships that could be deployed in that time.

Okay.

Also a question on the same notes but on the liquefaction side.

You have this graph showing the liquefaction capacity coming on in a timeframe 2010 to 2012.

Now do you have an idea of how much of that liquefaction capacity is in fact operational already in order to get a sense how much is coming for the remainder of 2011 and 2012, also factoring in the utilization rates?

So your question is how much of this capacity is already (multiple speakers)?

Operational.

Yes, if you do factor in from the lower utilization at the beginning of start up?

Yes.

So these numbers would take into account a view on how the production would ramp up at the various facilities.

So when Poten puts this graph together they take a view on not just putting the exact capacity but they take a view on what the ramp up profile looks like.

That is why you see this separate inset graph where that is sort of considered in a separate way.

Okay.

Lastly, in terms of drydocking schedule you said that the Maria went into drydock in June.

Is she going to spill over into July and what is the cost and schedule for drydocking of the other vessels?

No, she is -- her drydock completed -- is now completed.

All of our new vessels will drydock every 5 years and the older ones will be 2.5 to 3 years.

So essentially a majority of the vessels we had in operation at the moment will drydock every 5 years.

Okay, thanks so much.

Eliecer Palacios, Maxim Group.

Thank you very much.

Good morning, everybody.

Just pre-commentary on the Brazil bid.

Did you expect any more projects or any more offerings out of the Brazilian market in the near term, whether it's this year or next year?

You had mentioned that there is -- you are participating in a couple of bids.

Would be great to get some color on that.

The second question will be you mentioned you might convert one of your newbuild LNG carriers into an FSRU.

Just curious about when will these be, when this conversion will take place, and what kind of drivers would you seek in the FSRU market to make that decision?

Thank you.

Okay.

I will take the second one first.

I think either I misspoke or something; we don't have any firm plans to convert one of our modern existing vessels into an FSRU.

While that certainly is a feasible and potential idea out in the future, the FSRU we were discussing today is a newbuild vessel that will be delivered by Samsung.

In terms of Brazil, we do see the potential for further FSRU projects in Brazil.

I don't think it will happen this year or next year, even in terms of getting a bid process or something going for them.

But what I would say is there will be several other projects looked at in the Americas alone before the next Brazil project comes along.

So the Americas as a region we are still pretty optimistic on.

A lot of the projects are taking some time to solidify, but some of the projects have good fundamental underpinnings, which is something we like to see before we pay a lot of attention to them.

So we are pretty optimistic about the Americas in general.

Okay, thank you very much.

(Operator Instructions) Erik Stavseth, Arctic Securities.

My question relates -- a couple of questions.

The first one is what kind of vessel types do you see competing for yard space with LNG carriers, specifically in South Korea?

The second one is are you afraid that Australian projects might go ahead and order vessels for those projects that are predominately coming on in 2015 and 2016?

And thirdly, could you give us some color on how you look at pricing, transfer pricing on the assets from Golar LNG to the MLP?

Erik, what did you mean in terms of type of vessels?

Well, I am thinking -- I assume that LNG carriers, being slightly difficult to build, would compete with drill ships and potentially with container ships as they are quite long, whereas bulkers and tankers are not necessarily in the same kind of dock space.

Yes, I don't think we would be really good at projecting exactly how the LNG slots will be impacted by drill ships or other types of vessels that would use similar yard space.

We tend to track it by finding out as much as we can looking forward in terms of general yard availability, so I don't think we would be very good at commenting on your first question.

In terms of the Australia projects, there is always attention, not just in Australia -- any LNG projects have major oil and gas producers somewhere in the mix sponsoring them and so you always have this tension for them of build versus charter.

I would say that Australia and other places we do believe that there will be some build decisions taken by some of those players.

We also believe that some of those players have with this growth cycle, not just in LNG, but this growth cycle in offshore oil and gas development, capital intensive projects we see that a lot of companies will look for the opportunity to charter in order to preserve capital for other investments that are more the core of their business.

That is not to say that the LNG suppliers will exclusively charter, but we see that balance as not impacting the positive outlook for the fleet.

I will let Brian take your third question.

Thanks, Doug.

Erik, I think on the MLP question I guess the most sensible answer to that would be to say that it will be dropped down at market value, but I think we all know that on certain FSRUs there isn't such thing as a market price for them.

So in that respect, I think we would lean very much on some form of an EBITDA multiple but in getting to a number we do have a conflicts [committee] to make sure that that number is fair to both LNG Partners and too Limited.

As I mentioned, there is sort of a tendency to put sort of higher EBITDA multiples on assets that are going to LNG Partners, so certainly that is something that we should be seeing from both Freeze and Khannur when they eventually drop down.

Okay, thanks.

Then just one final question.

On slide 17 you showed the LNG vessel tonnage availability; is that based on a static order book today or is this Poten & Partners make some projections on the new orders coming in?

No, that is static order book.

That is as of today.

Okay, thank you.

Eliecer Palacios, Maxim Group.

Thank you.

Just a quick follow-up regarding your Golar Commodities unit.

Curious if you can share any views regarding your peers that also involving in this kind of business and if they have extremes of [similar] P&L patterns or if you think this is particularly attributed to Golar?

And what kind of timing will you prefer to come back into the market?

What kind of drivers do you expect to see in terms of improvement in order to ramp up again that venture?

Thanks.

Obviously we can't comment on the specific financial performance of similar operators.

I think it's important to remember that we started that enterprise only, well less than a year, about a year ago exactly and so a true new entry at a time when shipping is tightening up.

I can tell you that when rates are pushing past $90,000, as supposed to 18 months ago where they were more like $30,000 a day, it's really difficult to, as a pure middleman trader, take a shipping position and make it work on spot trading.

And I suspect others trying to do that will be having the same difficulty.

There is literally almost no ships to charter right now for any available FOB cargoes, which is the key for anyone to try and get some margin value out of the LNG trade.

When would we come back in?

I don't think it's going to be tied to a time when the shipping market is more balanced.

We won't wait that long.

I think that where you will see a real increase in activity from Golar on the commodity side, and this is where we are really focused now, is where we are able to create a commodity position off the back of one of our infrastructure projects where we provide a bundled service to somebody, for example, of an FSRU with LNG supply tied to it.

Once you do that there may not be a ton of margin for us on the base supply, but once you create that position you can begin to trade and optimize around it, provide risk management services around it.

And that is the type of activity I think you will see from us in the future on the commodity side.

Okay, thank you very much.

(Operator Instructions) Anders Karlsen, Nordea.

Good afternoon.

I have a question regarding Golar Commodities or a few questions.

First of all, is there going to be any impact on G&A and costs going forward from the scaling down, or are you closing down entirely?

Secondly, do you have any remaining vessel exposure in terms of on the quality side?

I think it's fair to say that we will be looking to improve the G&A impact of that activity related to the commodity side, but that is about all we have determined at this point.

We are going to take a hard look at it.

Obviously, reducing trading activity.

We are going to reduce the costs that are pointed at pure trading.

So it may be a case of share reduction, it may be a case of reallocation, but we will be looking hard to reduce the costs associated with that activity.

Obviously that is part of the point.

And I have forgotten your second follow-on.

Whether you have any remaining vessel exposure?

Okay.

The charters that were in -- any charters that we had done, chartered in on Golar Commodities have all finished by now.

We are -- obviously there is settling out costs, a bit of that activity going on, transfer of bunkers and LNG and deal and things like that.

But there is no actual charters existing inside Commodities as of today.

Okay.

Then a little bit back to my CapEx questions.

I was wondering on the Khannur could you shed some light on how much have you been accumulating in terms of costs up to now and how much is remaining until the ship in on charter?

And a little bit, the same on the Gimi.

How much is remaining on the CapEx side there?

I will take the Gimi first.

I think, as Doug mentioned earlier, the cost of reactivating Gimi will be around $20 million.

So obviously the majority of that reactivation is going to happen between -- well, since she started sailing out so that is June 6 until August.

So the majority of the cost you will see in Q3.

Now for the Khannur conversion, we have obviously not made public the total cost of conversion itself.

It's fair to say that, as in the past, as a guidance for these types of conversions they range from between $100 million to $150 million.

Having said that, there is an additional functionality that we are doing for Khannur which is mooring, and mooring itself runs a few million dollars.

But I think, ultimately, the total return on Khannur is very much in line with the returns that we see on all of our other FSRUs.

Okay.

Finally, following the effect that you don't think you are going to get the contract in Brazil, was that a reflection of this price required by the Brazilians?

Or do you see it that the market is now looking more toward newbuildings rather than conversions and is that putting a dent in your conversion case?

No, I think the market still looks for both depending on where you are.

There is definitely a scope for the conversion projects.

Certainly where you have got, for example, a project which has slightly more challenging economics in terms of how much can be afforded to be spent on an FSRU as part of the total commodity cost to deliver.

The conversion projects tend to work better with smaller or lower output rates required.

Again, putting to the capital sensitivity that occurs when that is the case.

Brazil, the tender required a minimum of 170,000 cubic meter vessel and probably one of the higher sendouts that I have seen on it.

I think probably the highest sendout on a floating regas project anywhere.

So it did not require that you brought a newbuild, but there are no -- you would have to convert a very new vessel to get one of that size and put a lot of regas on it in order to get to their output.

So the requirements of the bid basically pointed towards having to bid in a newbuild vessel which we did.

Okay, thank you.

(Operator Instructions) Gentleman, we currently do not have any questions in the queue.

Sorry, before we finish can I just clarify something to Anders' question which is regarding the Gimi?

Although we say that the total cost of the reactivation is going to be close to $20 million, we don't expect all of that.

In fact, not all of that will go through our earnings statement.

So we are looking to capitalize a majority of that cost and will be released to the P&L over time.

So it won't hit -- cash wise it will hit but on income statement wise it will hit over time.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.