Golar LNG Ltd (GLNG) 2012 Q1 法說會逐字稿

Good day and welcome to the Q1 2012 results presentation.

Today's conference is being recorded.

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

Please go ahead, sir.

Thank you.

Hello everyone and apologies for the delay in this presentation.

We unfortunately hit a technical glitch.

Anyway, we are all here, and welcome to Golar LNG's first-quarter 2012 earnings presentation.

And I have said, my name is Brian Tienzo and I will be taking you through the Q1 highlights as well as our financial highlights.

I'm also joined by our CEO Doug Arnell, and he will take you through business updates and outlook.

So let's start by turning to page 4 of the presentation.

Golar LNG reports Q1 2012 consolidated operating income of $27.8 million and net income of $15.2 million for the quarter Q1 2012.

We increased cash dividends to $0.35, which represents an increase of $0.025 from the previous distribution, and is in line as a result of the improved income and its strong financial position.

We saw Golar Arctic and Golar Grand commencing in the new charters during the quarter.

The annualized EBITDA for both charters are around $84 million.

Nusantara Regas Satu, formerly the Khannur, completed its technical conversion in March.

She then sailed from yard in April and she was presented ready to the charterer on May 4, and hence she starts on hire from then.

We have successfully raised $250 million through a convertible bond transaction that was concluded in March.

Further on we also ordered four newbuildings during the quarter, two of which are with Hyundai and two with Samsung.

The reactivation of the Hilli and Gandria are continuing and are nearing completion now.

We expect the marketing for those two vessels to commence next month.

We continue to see LNG shipping markets remaining structurally tight through to the middle of the decade.

Let's now turn to page 5 to go through our financial highlights.

So our net operating revenues for the quarter is $82.3 million, which compared to $79.6 million during the fourth quarter.

The increase there is partly due to a full quarter earnings of the Gimi.

The Artic and the Grand also commenced their charters in March.

Arctic, obviously, as we previously announced is -- will be contributing approximately $45 million in annualized EBITDA, whereas Grand will be contributing approximately $39 million in annualized EBITDA.

Unfortunately, during the quarter we had to take to our operating expenses certain expenses that are in relation to the reactivation costs of Hilli and Gandria.

These expenses are repairs in nature and so they couldn't be capitalized.

The total reactivation cost for Hilli and Gandria are nonetheless on budget, and so we shouldn't expect anywhere near this operating expense during the second quarter.

We booked a gain on acquisition of assets during Q1 of $4.1 million, and that was in respect of buying the remaining 50% of the company that owned Vessel Gandria.

And as a result of that purchase we also had to revalue the carrying value in our books, and the combination of those factors basically concludes our $4.1 million gain.

Our net financial expenses for the quarter is higher -- $8.8 million versus $5.6 million in Q4.

And the main reason for that is a convertible loan that we completed in March and also some mark-to-market losses on currency swaps and forward currency contracts.

All of those taken together leads us to a net income during -- for the quarter of $15.2 million versus our Q4 net income of $17.2 million.

Having said that, TCE for the quarter is higher at $90,464 a day versus Q4 of $86,521 a day.

And again that is mainly due to the full quarter revenue of Gimi and contribution -- higher contribution from Arctic and Grand.

Utilization for the quarter is also very good at 99.5% versus 100% during Q4.

Of course, as we mentioned in our press release, we expect Q2 operating income to be much better than Q1.

The fact is that we had to take into account, of course, is that Khannur will be on hire throughout, sorry, for most of Q2.

Arctic and Grand will be on hire throughout the quarter.

We expect operating cost to come down because we won't be incurring as much on the reactivation costs as we saw in Q1.

We also expect admin costs to be either stable or lower than Q1.

That will be offset slightly by slightly higher depreciation as a result of Khannur becoming operational, and all of that essentially leads us to operating income that will be much higher than Q1.

Let's now turn to page 6 to just quickly go through our net revenue and EBITDA graph.

As you can see there it was improving quite well up to Q3.

But because of higher administration costs and to some extent slightly higher operating costs in Q4, the EBITDA dropped.

But again that was exacerbated by higher operating cost this quarter due to the reactivation costs that we had to take to the income statement in respect of Gandria and Hilli.

Let us now turn to page 7 to quickly go through the highlights on our balance sheet assets.

So we have highlighted there the newbuilding line.

The main movement, of course as already mentioned, is we ordered four newbuildings during the quarter, and that -- the gap between December 11 and March 2012 essentially just reflects the installments paid during that quarter.

Over the page is highlights of the main movement in our liability.

Long-term debt is where the big movement is, from $627 million in December to now $839 million in March.

And the main reason for that is the convertible bond that we entered into and concluded in March.

Just going over the page to page 9, which is the summary of our cash flows, the first highlighted number there is addition to newbuildings and vessels and equipment.

Again, the main movement there just reflects the four newbuilds that we entered into during the quarter and also an installment on one of our existing firm ordered carriers.

Further down the page, we see three numbers that are highlighted -- proceeds from long-term debt, which is the convertible bond.

And then you have got the proceeds from long-term debt from related parties and repayments, and that was in respect of an interim expansion of the World Shipholding loan that we had entered into, but which we repaid as well in the same quarter once the convertible debt had been concluded.

So in summary then we look at Q2 where earnings look to be promising.

Certainly the growth in earnings is going to be fairly significant from Q1 given the earnings of Khannur, Grand and Arctic.

And, of course, there are potentials also for Maria, Hilli and Gandria.

And as well, on top of that the balance sheet position of Golar is strong.

With the potential acquisition by Golar LNG Partners of Nusantara Regas Satu that will contribute cash to satisfy some of our newbuilding commitments.

And on that note I will now turn the presentation to Doug to go through the Group structure and business update.

Thanks, Brian.

Just starting on slide 10 then with a review for those who aren't familiar with the Golar Group structure.

The Group consists of two principal entities, Golar LNG Limited and Golar LNG Partners LP, both separately listed entities with different approaches.

Golar LNG, which holds 65% of the MLP is our growth vehicle.

It is where we do our project development, our FSRU projects, newbuildings, spot and short-term charters of vessels.

It is very much a growth-oriented stock.

Golar LNG Partners is our MLP.

It is a stable cash flow yield play.

It currently has assets and will continue to have assets with long-term committed contracts with stable revenues.

So these two entities we feel have a very good combination for Golar.

Golar LNG Partners has an option to purchase any assets that Golar LNG Limited is able to achieve a long-term contract, longer than five years with.

With that sale from Golar LNG Limited down into Golar LNG Partners that raises -- it is a very efficient vehicle for us to raise funds for Golar LNG Limited to continue its growth.

And the key to the whole structure is that you have Golar LNG with a large upcoming fleet expansion, which creates significant feedstock potential for MLP.

The next near-term drop-down, as Brian alluded to, will be the Khannur, or now known as Nusantara Regas Satu, which we are beginning discussions for that drop-down, but certainly you can expect it in the near term.

Moving to slide 11, just a couple of slides on the current market, which continues to be very strong.

This graph is showing the progression of the spot and short-term charter rates.

You can see as we came through the winter, as you would normally expect in the LNG market, you have a lot of ships coming off of wintertime charters.

You also have a bit of a lag in the demand in Asia.

And certainly this year we saw that Japan, Korea had well-stocked themselves through the winter.

So you definitely did see spot and short-term rates coming up as we came into the springtime.

Close to the end of the first quarter and certainly presently that trend has reversed.

We are seeing spot rate strengthening.

But I think the key through all that period is that Winter 2012/2013 certainly remained strong through that period.

Anyone looking to charter vessels for that period, at which there aren't many, were looking to pay above these rates, certainly in the $145,000 to the $155,000 a day range.

Moving to slide 12.

It is a graphic of how the progression of ship demand looks like against the fleet.

I just want to point out that on this graphic it is based on what we call number of normalized ships, being 160,000 cubic meters.

So when you talk about fleet size this isn't an actual vessel count, it is a normalized vessel count to standardize on the size of the ship, which is 160,000 cubic meters.

Of course, a lot of the existing fleet is smaller than that, but a lot of the newbuild fleet, including our ships, are exactly that size.

So you can see that the structural tightness in the market is looking to sustain all the way out through into 2015.

We believe that an optimum time to be bringing new capacity onto the market is exactly where our newbuild orders lie, which we will show you in a little bit of time.

That gap in 2013 and even moving into 2014, we believe is an optimum time to be looking at initiating new charters.

Keep in mind also that much of that fleet and much of that stack will be older generation vessels, including first-generation vessels which are much, much more inefficient than the new vessels, such as Golar's newbuildings coming onto the market.

There is upside potential to this graphic.

There is potential for debottlenecking in Qatar, which is not included here.

We had a little bit of US export rolled into these numbers, but only Sabine Pass, whereas I think people are trying to realize there is a much greater potential there if the stars align correctly in the US for much more capacity to come on.

And then we have layered in some maybe longer-term things further out in Brazil and Mozambique later out in the decade.

So I don't think we are over-egging on the production side of this graph, and so it is still a very optimistic picture in our minds.

Moving on to the next slide.

Slide 13, just to detail our -- the Golar Group's existing portfolio, which there has been a fair amount of activity through this year.

The top part of the graph is the Golar LNG Partner fleet with the new addition being -- the newest addition being Golar Freeze, which was the fifth vessel that went into that entity.

The others are two carriers Methane Princess and Golar Mazo, and then the other two FSRUs that have been operational for some time, Golar Winter and Golar Spirit.

Looking down to Golar LNG Limited's existing fleet, Nusantara Regas Satu, formally the Khannur, is just in commissioning activities in Indonesia.

I will talk about that more later.

Gimme is on charter successfully.

We are very happy with Gimi's performance since her reactivation as a first-generation vessel.

Virtually 100% uptime since we brought her on, and we expect her to be the same through the rest of the year and into 2013.

Gandria and Hilli, just completing their reactivations.

In fact, the capital work is essentially done and they are both into testing and the application process.

So we expect to be marketing those vessels through June.

And we expect the demand to be good, so we're quite optimistic there.

Golar Viking just started a new charter on May 1. That should extend out into 2013 as well.

Golar Grand and Golar Arctic starting new charters on -- in quarter Q1.

And Golar Maria available for charter coming up.

Moving to slide 14.

Again, we are expecting Q2 to be a very good quarter for us in terms of EBITDA growth, both in terms of operating cost reductions and -- but principally in terms of our fleet really showing the strength of having prompt availability for the tight market that we all saw coming in 2012.

So Golar Grand and Golar Arctic will both be on hire through the whole quarter.

Again, annualized EBITDA there of $84 million.

Golar Viking commenced a new charter on May 1. Certainly it as well has the higher rate that is much improved over the charter it was on previously.

And then, of course, early May we delivered the Khannur, or the Nusantara Regas Satu, where that charter works as soon as the vessel is delivered for -- to start testing she goes on hire.

So she is on hire as of May 4.

Gandria and Hilli, we hope to get on charter during June.

Golar Maria, obviously a newer generation vessel, comes off her existing charter no later than August.

And we are very optimistic actually about the market value of Maria, especially chartering through this upcoming winter.

Turning to slide 15 and our newbuild order book, which we have continued to increase the size of that order book.

During the first quarter we added four newbuild vessels to our new fleet.

Two of them from Hyundai, two of them from Samsung.

Very similar characteristics of all four vessels.

The Hyundai vessel is slightly larger.

Both the three others out of the four vessels in that order will be delivered in 2014.

That is -- one of the Samsung vessels will be early 2015.

All four, again, cutting edge technology, tri-fuel engines, very low boil-off rate, and 19.5 knots charter speed.

So, again our order book now stands at 13 vessels in total, two of them FSRUs.

And we also have four total options along with these new orders, including the ability to convert some of the carriers into FSRUs.

So I talked a little bit about the structural tightness in the market coming in from present day all the way into late 2014.

And this is the open positions that we have carrying into that, what we feel is a very positive market.

The vessels at the top, of course part of our existing fleet, either starting charters this year or early next.

And then we get into our fleet of new carriers starting delivery in August of 2013 and continuing on all the way to late 2014, early 2015.

Turning to slide 17.

I am going to spend a little bit of time on our FSRUs.

We do see the market -- the FSRU market of course has been quite active over the past few years.

There is always a long list of project developers out there looking to access the FSRU technology in order to initiate new import projects into markets.

I think that we tend to look more at the number of projects that have credible developers with sponsors who have an ability to get those projects going.

We believe the list of 20 or 30 projects that everybody totes around the world as new FSRU projects, many of them have little or no ability to move forward.

So we look more at the number of projects that have access to supply, have sponsors that have the financial capability to get it done.

And that is where our optimism is coming in the rest of this year.

We were recently shortlisted on two projects, and on the third project we had been shortlisted earlier -- nearing a decision.

We feel that these projects that we are looking at are very, very credible projects, projects that we feel will likely go ahead.

And thus we think that a potential for a firm award for us for the rest of this 2012 is quite high.

Again, West Java, the conversion is completed, vessel delivered.

She is currently moored offshore Jakarta and going through commissioning.

And we are looking, of course, at once that contract is operational, dropping the asset down into the MLP.

And we're also well-advanced on bank financing supported by the Nusantara Regas Satu charter contract.

Moving on to slide 18.

Just to talk quickly about the existing FSRUs in Brazil and Dubai.

Golar Spirit and Winter operating in Brazil, Golar Freeze operating in Dubai.

I think one of the keys that we bring to the market and why we are always in with a good chance for a new FSRU contract is that operating FSRUs has a level of complexity and sophistication beyond that of operating LNG carriers.

We have gained that experience starting in 2008 in Brazil, and we have continued that up today.

We have been very successful with our operations.

We believe our charterers are very happy with the operations, and we are averaging less than 0.2% downtime across the operating fleet.

So we're very happy with that performance.

Turning to slide 19.

Just a few pictures from Southeast Asia with our Nusantara Regas Project, which we are actually of course very proud of.

The top left you see the vessel sailing away from Jurong Shipyard where the conversion was done.

Top right, the vessel moored offshore Jakarta.

The letters on the side of the vessel are Indonesian, but it means West Java FSRU.

The bottom two pictures are the LNG carrier Aquarius coming alongside for the site-to-site transfer of LNG onto the FSRU.

And we transferred our first cargo just after May 4, 2012.

Turning to slide 20.

Our newbuild FSRUs, which we are very optimistic about, again, they are larger in size than the conversion vessels.

The conversion vessels are 125,000 cubic meters.

These vessels are 160,000 to 170,000 cubic meters.

They are large capacity vessels, with 750 million cubic feet a day.

So that is a substantial LNG project that can be supported off the back of these FSRUs.

Our newbuild FSRUs will be the most efficient in the market.

Substantial savings through the use of gas engines versus steam-based production, which can translate into $30,000 a day in operating costs when operating at peak capacity.

So that is a substantial savings, obviously, for the user of the FSRUs.

Reinforced membrane tanks allow the vessels to operate in decent sea conditions.

And one of the critical things about these FSRUs is they can in all respects, if they are not being used as FSRUs, they are able to be traded as carriers in a normal LNG trade.

Turning to slide 21 to wrap up.

We still believe that the LNG industry fundamentals remain very strong.

Our tonnage availability in 2012 has continued to enable us to do some pretty opportunistic chartering that is going to have immediate impact on Q2 EBITDA and forward, which will be much improved from Q1 levels.

We believe our newbuild delivery timing are very well-placed to hit that structural gap late in 2013 and 2014.

We do have a large fleet growth upcoming.

We are going to double the size of the fleet by the time 2015 rolls around.

So the organization is currently very focused on maintaining our quality operations as that fleet buildup goes along.

Again, FSRU an award in 2012 we are optimistic about.

Of course, we are exposed to the project developers needing to get over all their hurdles and get to their FID before we can get a commitment from them.

But again, we see some credible developers with some good-looking projects and we believe we have made some good offers into those projects and so we are optimistic.

Looking out, as I said, the next drop-down into the MLP will very likely be Nusantara Regas Satu.

We are working on that right now, with the expectation that that will happen.

That will put Golar in an excellent cash position, and able to take delivery of our full newbuild fleet; maintain a high dividend and fund expansion without any requirement to issue equity; and further strengthening our view on our balance sheet.

Right now the Board has approved a share buyback scheme of 10% of the float, and so further showing our confidence in our cash position -- our balance sheet position currently.

So that wraps it up for the presentation part of the call.

And we would like to turn it over for questions.

(Operator Instructions).

Michael Webber, Wells Fargo.

A handful of questions for you.

I wanted to start with the quarter.

And, Brian, you mentioned some of the incremental costs associated with the Hilli and the Gandria that you guys could not capitalize and it obviously inflated that OpEx line item.

Can you give a breakout of how much that was and what a normalized run rate would be going forward?

I think the normalized run rate should be along the lines of the Q4 -- slightly higher than the Q4 number, so $17.6 million, $18 million.

So I guess from that you can deduce that a $10 million as a result of the Hilli and Gandria reactivation costs, i.e., in this case, repair costs.

Okay.

All right, that is helpful.

And you mentioned they're going to start getting marketed relatively soon.

Can you give a little bit of commentary around, I guess, interest level?

I am assuming you probably already have people calling you, or you probably have already, and maybe some color around rate expectations on those assets?

Yes, sure.

I think interest for these carriers have obviously been around.

We said that we would start heavily marketing them in June.

They are now just completing their conversion.

Obviously, we can't really say anything firm just yet simply because we are not at that stage, but certainly interest for these carriers are there and quite numerous.

Okay, that is fair.

I wanted to turn to the Satu, and you have obviously been pretty transparent about the desire to drop that down.

Can you give a little bit more color about where you are in the process and maybe a little color around potential timing?

Well, I think it is a two-way process.

We have obviously been talking with LNG Partners, and that discussion is ongoing.

I think both sets of entities see the benefit in this, but ultimately we have got to decide on the schedule that we would follow and the price that we would agree on.

I think -- this is -- on the pricing that is obviously governed by a fairness opinion on the timing.

Sure.

And given that the vessel is now just -- is now on hire, on charter to -- Nusantara Regas.

We -- I think we expect the drop-down to come in the pretty near term.

All right, so it is fair to classify that as being an early Q3 event.

That is the way --.

Potentially.

Okay.

And then you mentioned the pricing being set, obviously, by a third-party arbiter.

Can you talk a little bit about Golar's expectations would be the parent, in terms of what you're taking back, stock versus equity versus -- the break down there?

You mean how MLP would fund it?

Yes.

How -- what you would be taking back from MLP, yes.

Well, I think -- well, first and foremost, I think, as I said, it is something that is beneficial to both.

I think in terms of pricing that is an ongoing task.

We have appointed a third-party arbiter to do that.

And as far as the pricing is concerned that is yet undecided.

Obviously, from MLP's perspective they have a variety of instruments that they can use to be able to satisfy whatever the price that is agreed.

As you know, they filed -- they have three in May and that gives them the option of potentially raising equity, public debt and so on and so forth.

And of course they have got third-party debt as well.

And given their leverage level at the moment, they remain and they do have that flexibility to choose any of those options.

Okay, that is helpful.

I wanted to change gears momentarily.

And you guys obviously talked a little bit at the end about the buyback program.

Can you talk a little bit about timing?

You put the price target -- the price ceiling out there.

It is obviously above where you are trading now and actually above some of the three price targets.

Can you just talk about how you think about buying back that stock and how we should think about it from a modeling perspective?

Well, first and foremost, we haven't got -- we don't have a roadmap as far as timing is concerned.

We haven't said -- look, we are going to do this, that and the other in these months.

I think ultimately the Board had looked at the price of the -- our stock price and looked at the fundamentals of the business that we are in, where they are very positive about it, and so we are very bullish about the -- certainly the medium term in the business.

And they just feel that there is an opportunity here to be able to reward those shareholders who are in it for the long term.

We just -- I think as far as the valuation is concerned we just feel that it is -- the opportunities are not priced in.

Okay, that is helpful.

One more from me and I will turn it over.

It is more just a modeling question.

Your G&A was off during the quarter.

Can we talk about a Q4 -- actually a 2012 run rate?

2012 run rate, I think we would probably -- with these things they are always sort of one-off costs, but if you took out one-off costs and so on, I think we would be -- the run rates would be somewhere around sort of 5-ish, along those numbers.

But as I said, it is dangerous to just say a number, simply because we do incur one-off costs every so often.

Right, okay.

And I can follow up with you on that off-line.

I appreciate it.

Thank you, guys, I appreciate it.

Fotis Giannakoulis, Morgan Stanley.

Brian, I would like to follow up a little bit on Mike's question about operating expenses.

Can you give us a number of what was the cost of the Hilli and Gandria that we can now back out from our earnings comparison?

I think you can back out $10 million.

Basically we budgeted a number for the reactivation of Gimi -- sorry, for Hilli and Gandria.

They are both running to budget.

But there are certain expenses -- I guess, from a cash prospective it doesn't matter, but there are certain expenses under accounting convention that you simply can't take to the balance sheet.

And we have gone through a technical analysis of these -- our guys -- our technical guys have gone through it with our accountants.

And having sat down and gone through it in detail we have arrived at a conclusion that X, in this case $10 million of those expenses, are all -- more of repair nature as opposed to a capital program.

Okay.

And we should assume, I guess, that for the second quarter these two vessels they incur operating expenses for the entire quarter?

Well, they would incur some operating expenses, but as mentioned, their reactivation process isn't complete.

Having said that, the majority of the repair related costs hit Q1, so we wouldn't expect anywhere near the type of operating cost that we are seeing now in Q2.

I think there will be a bit of expense -- of operating costs in Q2 as a result of the Khannur becoming operational.

But ultimately I think we're looking at a level of around -- similar to Q4 number.

Okay, thank you for that.

Can I ask on the drop-down also, what has prevented you so far to drop-down the vessel?

Are there any issues -- practical issues that you have to resolve first -- any chartering agreements -- why this drop-down has not already happened?

Well, we have never really said to anyone that we are going to drop-down Khannur -- sorry, Nusantara Regas Satu on X date.

But I think simply first and foremost we had to complete the conversion.

We completed that in March.

We then had to go through a process of obviously towing her to where she is now in Jakarta, and that wasn't just a couple of days, it took a few weeks.

And then just prepare for the notice of readiness to the charter; we have done that now.

And as soon as that was done the discussion on a potential drop-down to LNG Partners commenced.

Okay, thank you for that answer.

And I would like to -- if you can clarify for -- to everyone what was the situation regarding the registration statement of the GMLP shares?

It created some confusion in the market when it was -- when the shelf was filed.

Can you please give us some explanation on that, just to have everything clear?

Sure, the shelf filing that we did for LNG Partners, essentially opens the option for LNG Partners to be able to be a rate financing for its growth.

I appreciate that people probably mistook LNG Partners as being LNG Limited, and obviously within that was an option to raise equity and an option to raise public debt.

And to some extent also there was a notion that LNG Limited could potentially sell [those] of a shareholding in LNG Partners.

We included all of those simply because it allows LNG Partners the option to do it.

It doesn't cost us any more than if we didn't include them.

We don't have a roadmap that says we are going to sell down X number of shares at X date in order to fund projects.

It is just something that allows us the further options for being able to finance our growth.

As I said, as in one example we put in the potential to raise public debt, but potentially we might not be able -- we might not use that instrument to raise debt, it is just another option.

Okay, I understand, this is pure housekeeping.

Doug, a couple of questions for you.

I am looking your market outlook on page 12.

It looks very bullish for the next couple of years.

But I see that in 2015 there is some excess capacity.

Of course, this is for a short period of time.

It doesn't include any benefits from debottleneck and spot trading activity.

How do you view your chartering strategy?

You have a number of vessels that they are open, including the newbuildings.

You recently chartered one vessel.

If our information is correct, the rate is at around the $150,000.

But this is only for around one year, how do you view your short-term versus long-term chartering strategy?

Short term we have executed a strategy where I think we have really maximized the value of our -- a lot of our vessels already.

Short-term we have Hilli, Gandria and Maria, I guess, are the key vessels short-term.

I can tell you that the demand through the winter of 2012 and 2013 is what we are going to leverage with those vessels.

The tightness of the upcoming winter market, I think, will be a precedent much more than we have seen even in the last 12 months.

So we will be leveraging that tightness into both higher rates but also getting some -- possibly getting some more term on the charters.

Looking long term, yes, it would be nice if every year looking out that the shipping sector was going to be tight, but that is probably unlikely to happen.

What you can see though is a couple of things.

Our vessels are coming out at a time 2013 and 2014 where there will be good demand for those vessels, and you can turn that into a chartering strategy that can take you through what may be a slightly overbalanced situation in 2015 that is really not extreme.

I think something you have to remember on that stat you're looking at on page 12, are the vast majority of those vessels are significantly less efficient than our newbuild fleet.

So, for example, you have a large chunk of first-generation vessels which are -- will be the first to come out of the market.

And we are not worried at all about finding homes for our newbuild fleets and our modern vessels.

So long term, again, leverage that tightness in 2013 and 2014 and take advantage of the fact that we will have our -- one of the most efficient fleets in the market -- very attractive to charterers.

But just to insist a little bit more, I understand that you're thinking only to fix your vessels that they are becoming available for a short period of time because the rate for -- it seems that the rate for long-term contracts beyond seven years is quite lower than the short-term rates that we see for one to three years.

And also what kind of an impact will have for your potential drop-down strategy to GMLP?

Well, again, you're right.

There is a large gap between the short-term market right now and the longer-term contracts.

Our feeling actually is that the longer-term charters, anyone looking at them now there is a gap between charter expectations and owner expectations right now.

We feel like maybe that long-term market hasn't matured enough.

We are in no panic and no rush to get our newbuilding fleet all chartered out as soon as possible; that is not the idea.

We will make pragmatic chartering decisions that benefit the Group.

And that will, I assure you, benefit eventually benefit MLP in terms of the drop-down strategy.

What we would like to see is the incremental volumes that are coming on through 2012 and 2013, some of it has been a little bit delayed for a couple of months.

And we just think that as that volume starts hitting the market more, and people are seeing the impact of that volume, that the longer-term charter rates will be properly valued at the time.

So we are not rushing out and chasing it in an overaggressive way.

We think the market is going to play out fine and we will capitalize on it at the right time.

I read also in your press release about other potential investments related to the LNG infrastructure.

Can you clarify what these potential investors will be?

There was a discussion about gas to electricity in the past, could it be also some liquefaction -- floating liquefaction projects?

And what would be the economics that would make attractive such a potential investment?

We have conceptual designs for both floating power and floating liquefaction.

Our floating liquefaction concept is not your prelude style offshore full gas field development type concept.

It would be more of a pipeline quality gas liquefaction type project.

So both of those ideas are there, both of them should have quite strong economics.

But, again, they are ideas that take a lot more focus on actual project development, permitting, regulatory processes that we aren't, to be honest, highly focused on now.

We are pretty focused on the existing fleet and operating that fleet properly and efficiently.

But as and when fraction projects or power projects start to become more real, we will certainly return to investors with some news on that.

We don't really have anything short-term or near-term pressing on those right now.

Thank you very much.

Thank you for your time.

Martin Korsvold, Pareto.

Could you give us some guidance on how many of FSRU contracts you think we will see on an overall level in 2012?

And also, a bit more in general terms how you see the activity level on FSRUs develop?

I think previously you said that you see something like 30 viable projects out there at the moment.

I am pretty sure we have never said that there is 30 viable projects out there.

A lot of people say that, but we don't really believe that.

I think there is -- that is not a bad number for the number of projects that maybe are at someplace in the development funnel.

We tend to look at projects in a lot more detail in terms of who the sponsor is; what are underlying economics of the project; what kind of financial capability the sponsors have to develop; what kind of regulatory environment they are in?

Do they have access to supply these kinds of things?

I would say that in 2012 FSRU awards at least one, maximum three, no more than that.

But again, we are quite optimistic about those.

The competitive pool is still very small.

The projects that we are shortlisted on -- there are three projects we are currently shortlisted on.

One of those shortlists has three companies on it and the other two have only two companies on it.

So we like that kind of competitive pool.

And that is why we are quite optimistic of the list of awards that will happen in 2012 that we have a great chance to get at least one of those.

Okay.

Can you also talk a little bit about the [Nanison] contract, the [30 Nanison] contract?

That was temporarily pulled from the market.

You think that is coming back?

If you have any comments on that.

It is -- actually, we are still in discussions on that project.

It does -- it has had some mixed press in terms of public statements being made about the project.

Our contract, of course, is with Pertamina, and we are still getting inquiries and questions and follow-up on that project.

I wouldn't want to say that there is no uncertainty there, there is.

But it is certainly one of the list of projects that we would call viable.

Okay.

Lastly, on conversions versus newbuilds, I guess this is sort of affecting the [Nanison] contract.

Initially we were looking at the conversion and then they went for a newbuild.

Do you feel that the new FSRUs you see going forward are going to be newbuilds and that conversions are the first stage of the FSRU play or are conversions still a viable option for several players?

I think conversions are a good idea for specific projects, projects that may be smaller in size and unit economics more critical.

I would say that newbuild FSRUs have a lot of advantages, it is true -- a brand new vessel, larger size, greater efficiency, et cetera, et cetera.

And now with Golar having committed to these newbuild FSRUs, one of the advantages of conversion, which was quick delivery, kind of taken away.

So we have two newbuild FSRUs that can basically be delivered ahead now of any conversion project that could be done.

I think the other impact you see is that almost all of the first-generation vessels that would be conversion candidates are now viable LNG carriers.

So the economic gap between doing a conversion and a newbuild FSRU squeezed together, so there is no real benefit because the rates on first-generation vessels as carriers has gone up significantly, so the driver for the owner of those vessels to turn them into conversion projects has lessened.

I think when you get out into that 2015 timeframe, the conversion market will probably start to emerge again as those vessels start to get priced out of the market in terms of carriers.

Golar being the only company that has ever done a conversion to an FSRU, we are still confident and optimistic that in that timeframe our vessels will be good conversion candidates.

So we are expecting see a couple of years of trade on Gimi, Hilli and Gandria, and then as the first-generation vessels start to get priced out of the market and when the newbuild fleet comes in, I think they are excellent candidates for FSRU projects and we will be pursuing those at that time.

Okay, thanks for taking my questions.

[Oyven Burl], DNB Markets.

There has been some talk in the market about some unscheduled yard time for the Viking.

Do you have any comments on that before you came under your new contract?

We did conduct a short repair on Viking.

That is what caused our 0.5% utilization number that you saw on Brian's slides earlier.

It wasn't an expected repair, but it was a routine repair and taken care of with no problem.

Could you give some light on what sort of the problem this was and how long the off-water was on it?

Oh, I don't know.

I think it was two days, something like that.

I think we can't really make specific noise on the problem, but yes, the off-water days is about 2 days -- 1.8 days.

Okay, thank you so much.

Erik Stavseth, Arctic Securities.

My question relates to -- I mean, we are all confident on demand coming on, and a lot of new projects coming on, although it might be delayed.

But my focus is turning to the yard capacity.

Right now there is roughly 30 vessels on order for 2014, and there is say 25-ish for 2015, but there is a lot of options.

Do you have any feel for what the yards will be able to output in say three years' time, four years' time?

As it is very high does it skew the graph you have on page 12, right, it could increase significantly on the ordered vessels?

I think I would characterize the yard position right now as it is not very active.

There are a lot of options out there, but I would say that in terms of people considering or pursuing new LNG ship orders it is very quiet right now.

And that, I think, has a lot to do with maybe people looking out at this picture and saying -- okay, it is starting to get imbalanced, and are we the guys to tip it out of balance?

Also, just the ship sector in general being fairly depressed across the board, and debt markets being quite challenging -- I think that in order to get out and make $200 million commitments to vessels, you need to be very liquid and very strong to do so.

And there is only a small set of people that are able to do that right now.

I think that what you have seen is some of the shipowners that have gone out and commenced newbuilds have ended up possibly signing up charters that they wouldn't normally have because they needed it -- a long-term charter in order to access financing to pay for the vessel.

So I think it is quite challenging from a sector point of view in terms of owners that have the ability to go and make major commitments to LNG carriers on spec.

So yes, there is some yard capacity there, but we don't feel that the competitive environment for new owners coming in to make new commitments is very challenging at the moment.

That is good -- that is good to hear.

Second and last question is actually on the order book.

Right now you have approximately one-third of the unfixed tonnage, at least to my knowledge.

Are you seeing any ability to leverage that -- well, I guess you are not since you are having so high rates, but do you see that as a leveraging point coming down the road as you close in on those open positions?

Yes, we certainly feel good, and if you -- about it.

And if you look at the 2013 percentage of the open positions we have, I think it is quite a bit higher than that than the 33% or the number you are quoting, which I think is quite accurate in terms of the overall order book.

And, yes, we do feel that -- I don't know if I would call it leverage, I think that we -- with our open positions we are a player that can't be ignored in terms of supplying the market with the shipping capacity that it needs.

And we have the most efficient, latest technology in our vessels.

We can save charterers some money.

So I just think we are bringing a very good proposition to the market and we will be creating value from that for shareholders.

Thanks.

[Roshan Pujari], [Lindan].

Thanks for taking the questions.

Could you -- going back to an earlier question on long-term charters, could you please tell us what is the going rate right now for a seven-year charter?

We haven't done any seven-years charters, so I don't have any direct experience from our own charters.

And we don't really like to disclose rates, especially -- I mean, you can read in the press there has been some talk of high 70s type rates for seven-year charters, which we feel is awfully low.

But there just haven't been a lot of deals done lately, so I wouldn't want to speculate as to where that rate is going to end up.

So I am guessing you are holding back on just getting a higher rate.

But what sort of improvement are you expecting and what is going to be acceptable?

Is it -- I see that there is one was done in your fleet which was at 100.

Is that the right number or what is the right number for you there?

We don't really discuss rates on calls like this.

We have to -- and it is to the benefit of our shareholders to maintain our competitive position in the market and what messages we have got out there.

We don't like to send signals via these kind of calls out to potential charterers.

So we just don't -- we don't like to predict rates.

Okay, let me move on then.

On financing, just on this unrated party financing between one entity and another, is there a goal as to when that is going to go away or is -- you know, on the revolver and also on the (inaudible) loan from the LNG, I mean, any (multiple speakers).

I guess you are referring to the vendor financing that was effective as a result of the (inaudible) short-term?

Well, I thought there is a loan -- isn't there like a loan from the LNG to GMLP?

Yes, so that is the one.

So the term of the vendor loan is a three-year fixed-rate.

We did -- we would look at refinancing, obviously, as long as it is sufficient.

But as far as the message goes, and what we said in our press release, with the Nusantara Regas Satu drop-down that actually allows us to further satisfy the equity requirements as far as the newbuilds are concerned and maintain high dividend levels.

So in that respect LNG Partners, we can't force them to refinance.

I think there is a deadline -- a maturity date for that loan.

And it is really up to them to find with the equilibrium for when that time is right.

Understood.

Just generally -- and I am switching back to the earlier question on the long-term charter rate.

You know, going even by your numbers, like on slide 12, like in 2014 it seems like that is when you expect equilibrium, and in 2015 a short surplus.

So if I'm looking at 2013, and you are one-third of the uncontracted fleet out there, would -- why as a charterers' perspective, why would I agree to pay much higher than -- wouldn't I just say spot [one for 50] rather than pay a much higher rate off of a seven-year period?

I guess what I'm trying to get at is what are you expecting that people are now pricing it?

I am sorry, I am missing the -- I guess, I didn't understand the question.

With the question -- and this is on the long-term charter -- as I was saying that in 2013 you have about one-third of the uncontracted fleet out there, so -- and on your slide, well, you show that in 2014 you expect some sort of equilibrium in the markets, and in 2015 there is going to the excess supply.

So from a charterers' perspective, I guess what I'm trying to get at is why -- how -- what are we missing, or what is generally -- you know, what are the charterers missing in general?

And why would they agreed to pay a much -- like a higher rate on a long-term charter versus than just paying -- pay up for 2013 or for the short term in 2012 and 2013, and then instead of paying a much higher -- locking in $100,000 a day for a seven-year period?

I guess I am still unsure of the point.

But what our priorities are obviously to create the best value we can for the shareholders.

It is no secret I think that in our chartering strategy we intend to have a large portion of our fleet eventually on long-term charters to leverage our Group structure as best we can.

So there is always that interplay between charterers and owners.

The charterers are -- which they currently are right now, wanting shorter-term agreements because they are looking out at 2015 and saying -- well, I might want to wait and see what happens then so I don't want to charter through that period.

Or you have owners saying -- I would like to charter through that period because I have got some leverage now.

So we just think in 2013, 2014 the structural tightness will still be there.

You will have a lot of the new production coming on will be crystallizing, and that new production is for gas fields that have 20-year life.

The projects -- new projects, some of them requiring financing will need long-term charters.

So we just think the market will be there at that time to charter out long-term at rates that are attractive to us.

Thank you for that.

Thank you.

Bjorn Roed, Danske Bank.

My question has already been answered.

Thank you.

Herman Hildan, RS Platou.

Thank you very much for taking the question.

I just have a quick question.

Newbuild deliveries, they are obviously are a lot more efficient relative to even deliveries in 2005, 2006.

How do you think about this in terms of, first of all, residual value for your older vessels and other sales?

Is it correct to say that the way that you're thinking about the long-term (technical difficulty) is that you would like to pay down your asset to, call it, the 10-year historical leverage average during its first contract period?

Well, I would say on the first point there is an efficiency gap between our newbuild fleet and our modern carriers, the early 2000s.

So we do expect that there will be a premium, or a discount rather, for chartering out those modern vessels later on.

But still very, very well above and profitable over our cash breakeven level for those kind of vessels.

So we aren't concerned about those four modern vessels as they compete in a market where you have higher efficiency newbuilds coming on.

And then the first-generation vessels, as I say, I think once you get into that 2015, 2016 timeframe, unless you see a real upswing on the US export side, for example, those first-generation vessels will start coming out of the market.

I think you will see some mothballing.

But what we intend to do with those vessels is we will be looking for conversion projects and for those vessels in that time period.

And I missed the second half of your question.

The second half of the question was obviously if you look at the 10-year average rate it is about $65,000 a day, and that is obviously not a very attractive rate given the newbuild price, et cetera.

So would you say it is fair to assume that shipowners in the current market should at least be allowed by the charterers to get a premium rate relative to the 10-year historical rates?

Yes I think that -- if you're talking about 10 years up to present?

Yes.

I think you have got three or four pretty ugly years built into that ten-year projection.

And you had a situation during that 10 years which I wouldn't expect to happen again, with the Qatari production being very, very late and all those Qatari vessels coming in on time, which is a huge overhang, combined with financial worldwide meltdown created, a real perfect storm for LNG carriers.

So I think that ten-year average is a little bit skewed.

I think $65,000 a day is well below the indifference point for a charterer who might be making a charter versus build decision.

So we are not worried about rates being down at that level long-term.

Okay.

And also I was wondering, given what is happening on the ship design side, you see that yours are really developing fuel-efficient designs rather quickly.

And that, again if I'm not mistaken, it is about 50 tons on the laden basis through consumption saving on the tri-fuel versus the steam engine from mid-2000.

Do you still -- what is your expected lifetime -- economical lifetime of the assets?

Well, carrier life is 30 to 40 years in terms of design life.

If you're asking about what we would expect in terms of new technology, yes, there is always the potential for the next new thing to come along.

But when you need to have a new technology to come along is you still need to have a big driver for a new wave of fleet expansion, and in a significant kind of way.

Kind of like the one we are going through right now for the tri-fuel diesel engine.

And I don't think there is any concern that through this decade when we have this big growth cycle for LNG production out to the middle of the decade and then it could be even bigger on the back end of the decade that these tri-fuel diesel ships will be the ship of choice for that wave of production.

Yes, I guess my point just goes down to, obviously, you have cut about one-third of the fuel consumption over the last five to seven years.

Obviously, when you price in your internal rate of return on, call at, longer-term contracts, if you, I guess, extrapolate any development on the technology side, that surely is a residual value risk, right, that you have to take into account?

Yes.

That is all my questions.

Michael Webber, Wells Fargo.

I just wanted to -- I had a follow-up question.

I know it has been a long call, but related to slide 20 and we were just talking about in terms of the cost savings associated with the tri-fuel diesel, at $30,000 a day on a relative basis you are using $13 LNG.

Can you give -- when you guys are out there marketing assets what sort of real premium are people pricing in there in terms of, I guess, that fuel savings?

Are they using a $13 -- is it a $13 LNG and a $30,000 per day fuel savings or is there something a touch lower?

Just a little bit of, I guess, color around that.

Okay, just be careful with that $30,000 a day.

That is on an FSRU, which is discharging 4.5 million tons per year of LNG.

So it has got high fuel usage relative to a carrier.

Yes, it is not so simple.

The premium for these tri-fuel engines on a carrier versus a steam vessel, I think we really haven't -- there is not enough of them out in the market to see how it is really going to play out.

The efficiencies come in -- obviously, the lower boil-off and the engine efficiency, it actually has a bigger effect from a charterer point of view, interestingly, if your utilization -- the charterer's utilization is expected to be lower.

So if they are running the ships more frequent, the savings actually interestingly are less because of that boil-off rates -- the low boil-off is more relevant to when you are idle than anything else.

I think that it is very fair an average, I would say, actual day rate discount, modern 2000 area steam turbine to tri-fuel is like $20,000 a day -- $15,000 to $20,000 a day.

All right.

That is helpful.

That is a better way to phrase it.

I appreciate the time, guys.

Thanks.

As there are no further questions in the queue that will conclude today's questions-and-answer session.

I would now like to hand the call back to Mr. Brian Tienzo.

Please go ahead, sir.

Thank you, and thanks everyone for your contribution.

And as always we look forward to speaking to you again in our next quarter results.

Thank you and goodbye.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.