Golar LNG Ltd (GLNG) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2012 results presentation conference call.

For your information today's conference is being recorded.

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

Please go ahead, sir.

Thank you.

Hello, everyone, and welcome to Golar Energy's second-quarter results presentation.

As the administrator said, my name is Brian Tienzo and I will be going through with you the second-quarter highlights as well as the financial highlights.

I am joined here today by our CEO, Doug Arnell, who will take you through the business update and the outlook section.

On that note, let's turn now to page four to go through our second-quarter highlights.

Consolidated operating income increases by 108% over Q1 to $58 million.

Alongside that we have net income increase of approximately 133% to $35.4 million.

Quarterly cash dividend has been increased by 14% to $0.40 per share.

That is a jump of $0.05 from Q1 and, again, reflects the Board's confidence in the Company's earnings capability.

There were material increases in average time charter rates and virtual 100% utilization on chartered vessels.

There is also a significant decrease in operating expenses of 36%.

As announced during the quarter, Nusantara Regas Satu commenced charter on May 4. The vessel then completed commissioning and was accepted on July 13.

She was subsequently sold out to Golar LNG Partners on July 19.

The FSRU has been working well since her completion.

Golar LNG successfully achieved an award for the GasAtacama FSRU.

Again, this cements the Company's profile as one of the leading FSRU solution providers and FSRU projects.

During Q3, Golar Maria was rechartered on a voyage basis at historically high rates.

We expect longer-term contracts will be contemplated in the coming months.

In July, Golar LNG Partners raised net proceeds from public follow-on offering of approximately $188 million as part of the Nusantara Regas Satu drop down.

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

I have highlighted there our net operating revenue for the quarter of $103 million -- $104 million, I should say, has been increased from $82.3 million from Q1.

This is a result of full contribution from Arctic which earns approximately $45 million in EBITDA, Grand which earns $39 million approximately in EBITDA, and also partial contributions from Viking and Khannur whose charters commenced during the quarter.

On operating expenses we mentioned last quarter that the level at which we reported the $27.9 million was exceptionally high.

That was particularly as a result of the reactivation costs we incurred for Hilli and Gandria in Q2 that level of expenses did not materialize and, as a result, our operating expenses for Q2 is at a much better level at $17.8 million.

Those two factors have contributed to a 65% increase in EBITDA from $48.4 million in Q1 to approximately $8 million in Q2.

Our net financial expenses during Q2 have increased to $12.9 million from $8.8 million in Q1.

This is as a result of two factors.

We only incurred a partial charge of convertible bond interest in Q1, whereas in Q2 there was a full quarter charge.

Similarly, we incurred mark-to-market losses on some of our interest rate swaps as a result of medium to long-term swaps declining from levels of Q1 to Q2.

All of those factors have contributed to our net income increase of approximately 133% from Q1 to $35.4 million.

Going to the time charter equivalent rates, as you can see there, there is an increase of approximately 8% from Q1 of $90,464 a day to Q2 level of $97,118 a day.

The utilization is slightly down from Q1 to Q2 as a result of idle time for Hilli and Gandria.

Also, as announced, we increased our dividend by $0.05 from $0.35 from Q1 to $0.40 in Q2, representing approximately a 14% increase.

Going over the page to page six, this basically highlights the three main metrics that we look at as far as performance is concerned.

So from Q1 2011, as you can see, the bar graph shows that our net revenue as well as our EBITDA have been increasing steadily, and as a result of that the Board has been quite confident in increasing the dividend levels to follow those trends.

So obviously the increase from Q1 level to Q2 level is a much steeper increase from previous quarters.

Now turned over the page to page seven to quickly go through our balance sheet.

On the asset side there are only three main movements really that we can point to.

Cash and cash equivalents declined from 31st of March level and that was simply because we paid a few installments, as far as newbuilds are concerned, as well as the completion of Khannur conversion during Q2.

That is obviously offset by the increase in vessels and equipment.

Again, main contribution there is the installments for new buildings and Khannur conversion.

Going over the page to the liability side of our balance sheet, one point to note there really is just the long-term debt.

All other numbers are pretty stable and really the main decrease there is a result of the repayment during the quarter.

As the bottom line of the presentation page suggests, we have a fixed interest debt of approximately 83% and we are averaging approximately 3.15% in weighted average interest.

Going over the page to statement of cash flows, points of interest really are the additions to newbuildings in vessels and equipment.

We had quite a bit of an increase during Q1 as a result of the increasing new building program that we have put into place.

The main movement in Q2, the $38 million as far as -- in addition to newbuildings and vessels equipment is concerned, is as a result of completion of the Nusantara Regas Satu conversion.

On the debt side, we didn't enter into any additional debt facilities during the quarter hence the comparison to nill from to Q1.

That concludes the highlights for financials.

Now I turned to our CEO, Doug Arnell, to go through business updates.

Thank you, Brian.

Good morning and good afternoon, everybody.

I would like to start my part of the presentation on slide number 10.

Obviously, as Brian says, we are extremely pleased with the way the second quarter of 2012 has gone.

We have had a significant upturn in our earnings and I would just like to go through a little bit of what underpinned that, because it tells the story of what we can look forward to in the quarters to come.

So during the second quarter two major new charters began or should I say we had a full quarter contribution from both vessels, Arctic and Grand.

Both of the base term of those charters are three years in length with the Grand having a three-year option on the back end of it.

Also during the quarter, we started up a new charter a little bit early on Golar Viking with a substantially increased day rate.

Again, during the quarter the Nusantara Regas Satu FSRU charter began and it obviously began its contributions by now the Golar LNG Partners.

At the same time, we decreased operating expenses.

Again, this is mostly due to the completion of the reactivations for both Gandria and Hilli.

But the important thing to note there is that the entire fleet now is out of layup and reactivated, so we can be a little bit more predictable with our operating expenses going forward as we won't have those kind of programs on the vessels in the upcoming quarters.

Underpinning all of that, all of that activity on chartering has been excellent execution on our operations side.

We have virtually 100% up time on our chartered vessels so we are really happy to see that.

In upcoming quarters we have some embedded growth that we are looking forward to for the third quarter as we will see a full contribution from Viking in the third quarter, a full contribution from Nusantara Regas Satu in the third quarter, and a positive outlook on Maria.

Looking past the third quarter, Gandria and Hilli, which are still open, we are still very optimistic to put those vessels into service as the move for LNG players to cover their winter positions comes in the next month or so.

So a lot of the increased revenue that we are seeing from these charters is not of a spotty nature.

It is more of a term nature.

We've got really good visibility on our earnings and earnings growth coming up in the next quarter.

If you look out into next year, we have got good visibility up until the time that the first newbuildings come out in September of next year, at which time you should see a steep ramp up in operating cash flow as those vessels begin to contribute.

Turning to slide 11, key to our whole newbuild program and financial performance of our group is our group structure.

As many of you know, we have two main entities in our group -- Golar LNG Ltd.

and Golar LNG Partners LP, of which Golar LNG Ltd.

owns 57.5%.

This structure is designed to allow Golar LNG Ltd.

to pursue growth with new assets and new long-term charters, drop those assets down into Golar LNG Partners, receive the proceeds from that drop down, and put those towards further growth in the Company.

We are very pleased to have seen that the structure has performed well again recently with the drop down of the Nusantara Regas Satu, of which the proceeds were $385 million.

Looking out into our financing and equity requirements for our fleet expansion, we surely expect that with operating cash flow funds from drop downs and some new debt instruments at the Golar LNG Ltd.

we will be able to fund that fleet expansion, maintain the high dividends that we have been providing thus far and continue with our project development without having to issue any equity at the Golar LNG Ltd.

level.

Turning to slide 12 and a little bit of market data here, this graph on the left is a graph which depicts what we feel is probably the most fundamental and basic determinant for driving the growth of the LNG fleet at large and that is the addition of new LNG production capacity.

Because LNG production capacity cost is so much greater than the marginal cost to produce the LNG after the facility is built, the actual capacity of the plant is a very good proxy for how much product will actually be shipped on vessels.

As you can see, we are looking at a 34% increase from present out to 2017.

That is something like 90 million tons a year of new LNG production.

But I think the really interesting thing to note there is that the vast majority of it, in fact, 70 million tons out of that 90 million tons is already under construction with another 7 million tons per year categorized as probable by Wood Mackenzie.

So this volume is coming and it is going to need vessels.

At this point the newbuild order book is lagging behind what will be required for shipping of that production.

On the right you see a graph which depicts where that production is coming from, which countries.

This is, of course, relevant as people look at ship trade routes which also influences the ship capacity required to service that production.

Turning to slide 13, on the left we have got up to the end of the quarter reporting of spot and short-term charter rates.

You can see that through the late part of the first quarter we had a little bit of softness in the spot rate.

I don't think you can really take too much umbrage on that.

It is a situation where there is very few vessels actually being chartered.

At that time you probably saw a little bit of drop off in Asian buying and so the few charters that were done were a little bit softer on the charter side.

But then you can see as we came into the second quarter, as that buying picked up again the spot rates picked up.

Again, the spot rate, while it is a nice indicator for us to look at and see what the general tone of the market is, it is not as relevant as looking out long term to the overall supply/demand balance of production coming on and vessels to serve, which we are showing on the right-hand side.

We can see the deficiency in the ship capacity continuing on through into 2014.

We viewed 2015, 2016 as coming into more of a balance but still strong market, and then, of course, as you move out past 2015, 2016 more shipping capacity is certainly needed.

Turning to slide 14, again this is our existing portfolio of vessels on the water for both Golar LNG Partners and Golar LNG Ltd.

Of course, the Golar LNG Partners fleet is now up to six vessels with the addition of the Nusantara Regas Satu.

That contract has had a net increase on the average term of the contracts in Golar LNG Partners, which is, of course, what we are looking to do with that company.

Down below you see Golar LNG Ltd.'s vessels.

Gimi is on charter through into 2013.

Hilli and Gandria are open.

We do expect to have some charter revenues from those vessels beginning later this year through the winter, and certainly in the longer term those vessels are still excellent candidates for conversions for floating storage or FSRUs.

Below those are our four existing modern vessels, which I have talked about.

Golar Viking is on charter into the spring of next year, Golar Grand and Arctic on longer-term three-year charters, and Golar Maria actually is coming open later in the quarter here so we expect to have some news on that shortly.

Turning over to slide 15, which is, of course, our story and what is driving the growth of this company are these open position starting from now on vessels coming into that positive market story.

We have a large number of vessels, obviously, open and a doubling of the total fleet with the newbuilds which you see starting with the ship that is labeled Hull 2021.

Two of those vessels are FSRUs.

The rest are currently carriers, however, as I will talk about in a minute, the last vessel, Hull 2056, is poised to be converted or built as an FSRU instead for our GasAtacama project.

Turning to slide 16, speaking of our FSRU business, certainly we have had an active few months here recently.

Again, growing the franchise; Nusantara Regas Satu with fully accepted and the charter initiated, and operating very, very well.

I would say it is probably our smoothest entry into a charter for an FSRU to date, so we are really happy with how that vessel is performing.

We were awarded the GasAtacama FSRU project, which I will talk about a little bit more shortly, and we are also currently shortlisted for three other projects which are scheduled for 2012 awards.

A little health warning, scheduled awards don't always happen exactly when our charters would like them to, but we are looking at some more activity through the balance of 2012 in any case.

In terms of new FSRU projects, certainly globally it has remained as robust as it ever was.

We count 25-plus new projects being developed and, of course, we look at a lot of these projects and narrow them down to the ones that we think are the most credible.

Certainly we have seen activity in the Middle East accelerating, some credible projects coming along there as their demand for gas increases significantly.

Interestingly, South America now has the most delivered and awarded projects in the FSRU world, one of which, of course, is our GasAtacama project.

We see probably more than five new tender processes which will initiate in 2012.

Again, the Middle East being active, India as well seems to be coming along, and possibly China as well.

We believe we are extremely well positioned for new awards given our two FSRU newbuilds that I showed you on a previous slide with one being delivered in September or October of 2013 and the other in the early part of 2014.

That 2013 delivery is the only newbuild FSRU available in that year, so for projects that are looking for a fast-track startup that asset, obviously, is very attractive.

We do have the older vessels available for conversions for smaller projects or for markets that a conversion will otherwise suit.

We are certainly pursuing those deals as well and expect that there will be a need for conversion FSRUs going forward as well as the newbuild.

Again, we found in the recent tender activity, including GasAtacama, that our operating track records, which is so critical on FSRU projects, is really selling well for us.

Turning to slide 17, again GasAtacama, which will be Chile's first FSRU, we were successful in that bid process.

It was a long process, a lot of work, but we were happy to be successful in the end.

I think I would say, obviously, charter rate is a critical factor in these deals, but the two factors that I think really put us out in front on that project were, one, our ability to use our newbuilding order book to create some flexibility for GasAtacama.

GasAtacama needed to lockdown their FSRU contract terms in order to bid into power sales process that is going on through the balance of this year.

So they, in effect, needed in a six-month subject period or conditional period where they knew they could depend on a delivering FSRU at a fixed price and date.

Because we had that order book and because we had that last vessel as a carrier ship slot, we were able to uniquely provide that optionality to GasAtacama to support their business.

Also, the GasAtacama power plant; it is an existing power plant.

It has been operating for several years; it is in the north of Chile.

It services the copper mines in northern Chile.

So if you can imagine the importance of power supply to copper mines, which these aren't just any copper mines.

They are some of the largest copper mines in the world and the underpin Chile's economy.

The absolute need for complete dependability on that power supply cannot be overstated.

So when GasAtacama is proposing to have their feed gas come through an FSRU it is very, very important for them that they be able to demonstrate dependability on the gas chain, of which, of course, the FSRU is a very important component.

They chose Golar because it is very beneficial for them to put us out in front to show to the mining companies that they have an operator who is accustomed to operating FSRU in critical base load applications.

I mention the power sales process.

That is the subject of the conditions which still exist on the GasAtacama time charter.

The time charter is actually completely termed and signed, but there is a condition precedent remaining relative to GasAtacama's success in achieving new power sales agreements with the copper mines.

We think they are well placed to do so, but, again, until those power sales agreements are finalized that contract will remain conditional.

We are taking a huge amount of risk on that.

If those conditions don't clear, simply that last vessel on our newbuild order book will be returned and delivered as an LNG carrier as originally envisioned.

Turning to slide 18, that is just a nice illustrative model of our Hull 2031, which will be our first FSRU newbuild delivered in September/October of 2013.

She is currently bid into multiple projects.

Again, because of her prompt delivery that vessel is proving to be very attractive to prospective charterers.

It is a large FSRU.

It will be 170,000 cubic meters, up to 750 million cubic feet a day of send out.

Our move to take a speculative position on the FSRU is any risk that is associated with that is mitigated quite nicely as in all respects the performance characteristics of the Hull 2031 is exactly the same as the other carriers in the newbuild fleet.

Turning to the last slide, slide 19 again for summary and outlook.

We had a highly successful quarter.

We are extremely happy with how things went; significant earnings increase.

We were extremely pleased that we had nearly zero off-hire time proving out the quality and efficiency of our operations.

Looking forward, the outlook is certainly positive with embedded near-term growth that I have spoken about, and as you move into the newbuild long-term potential for steep increases in our earnings.

The Group's structure continues to deliver financial flexibility.

Our increasing operating cash flows, drop downs, and debt financing will satisfy our new build obligations, allow us to maintain a high dividend without requirement for further equity raising.

Our Chile FSRU has solidified our leadership position in that space and we are certainly confident of further success on new contracts.

So with a strong market outlook and a very, very good position we certainly see future success for Golar.

With that we are done with the presentation part of the call, and I will turn it back over to the moderator for questions and answers.

(Operator Instructions) Jon Chappell, Evercore Partners.

Thank you.

Good afternoon, guys.

Couple quick charter questions.

So, first, with the newbuildings you have laid out pretty well in the press release the market is still backwardation and you expect that to narrow a little bit, but just wondering about how early you would want to think about chartering some of those.

The reason I ask is after the drop down of the Regas Satu it doesn't appear that there is any assets that would fit the qualifications for a GMLP drop down.

That obviously was a very successful transaction and helps to lower your cost of capital, so would you potentially take one or two assets maybe charter them a little bit before you typically would just to kind of lock in that revenues security and add to the GMLP growth story?

Maybe not a simple answer to that one, Jon, but I mean -- first of all, I think we are pleased with the growth that we have provided to the MLPs so far.

I think our annual dividend growth rate is something like 11.6%, so that is a little bit better than we had projected when we started out with the MLP.

Secondly, you are right; there is no contracts that are existing that fit that model, but there are certainly assets upcoming that have the potential to fit the bill for the MLP prior to the newbuildings coming out.

So the Maria, for example, is open and the Viking will come open in the spring time.

So just as a hypothetical, if we in the next near-term achieved a charter for Viking and extended her out for a reasonable length of time we could execute that drop down whenever it made the most sense.

The same with Maria.

I think that one thing is for sure, we have to be pragmatic about how we play the shorter, medium-term charter market against that need to keep the MLP growth intact.

The bottom line is we have to do both and so far we have been pretty successful at it.

With the number of assets we have got to support the MLP it is not something that we are entirely worried about.

Certainly given that we have just done the new Nusantara drop down we feel we have done our job there a little bit and aren't sort of pushing the panic button in any way to feed the MLP in the very, very near term.

All right, understood.

Couple other quick ones.

So I just want to be sure, the Gandria and Hilli, are they not employed at all right now even on the spot market?

You're just kind of holding them for the winter months where the market may tightened a little bit?

They haven't traded at all.

They are both in Asia; they are both warm.

We are looking for that right first charter for both of them, which will have to include a gas up and cool down and the appropriate type of voyage for that generation of vessel.

I wouldn't say we are holding them back.

We are certainly active in looking for business for them now.

Right.

And are they still generating operating costs at a similar level to what they would be when operating, or is there a much lower cost basis while they are in warm land?

It is not a lot different.

Two-thirds of the operating cost or so is crewing, which when they are at anchor you generally have them fully crewed, maybe slightly reduced.

So it is somewhat reduced, but not materially.

Then just can you give us a sense of what the Maria has been earning in the spot market?

It is not the most liquid market in the world, but I have heard a couple different numbers over a wide range so if you can just give any clarity on that that would be helpful.

We don't release charter rates typically.

There has been some numbers in the press and they are generally about right.

It might be a little bit higher.

All right.

Then last one before turning it over.

I know you can't speak much about the FSRU tenders that are hopefully coming up later this year, the terms or the timing, but are they somewhat similar as we look at the Atacama?

Are they similar to those type of terms from a rate and duration perspective?

Certainly from a duration perspective, yes, they are -- well, I should say there is a mix.

Certainly the most attractive ones are the longer-term charters.

There could be actually some five-year type deals out there which you would expect the rates to be a little bit higher to compensate for the shorter term.

The other interest interesting thing is that on at least a couple of the opportunities that are coming up they would actually go into service before and significantly before actually the GasAtacama FSRU would.

Great.

Thanks a lot, guys, very helpful.

Michael Webber, Wells Fargo.

Good morning, guys.

Just wanted to follow up first on the Chilean FSRU and potentially converting one of your newbuild slots.

Can you give us kind of an idea about the incremental capital that would be required there?

Stopping short of just applying a multiple on the EBITDA you guys have already thrown out potentially for the FSRU, but just how should we think about the incremental capital that you guys would need to raise above and beyond what we might be expecting for the traditional newbuild?

Michael, that is a tough one to answer.

It is, obviously, extremely sensitive competitive information.

I think we have talked enough about kind of what the speculative FSRUs are running, and the GasAtacama vessel will be slightly more expensive than that.

Got you.

That is helpful.

I may have missed this I the release, but I don't think I did.

Did you guys give an update on the vendor financing you guys have in place for Satu and how that process in terms of securing long-term financing is going?

Certainly for the Nusantara Regas Satu we said that there is sort of a process in place to try and refinance that before the end of the year.

For the vendor financing in respect to Freeze, I think obviously we are constantly on the lookout for the best way of refinancing that.

We do have a term within the vendor financing that allows us to keep it there for three years, but I think as long as the market is there to try and refine it in an efficient way then we will go there.

But currently we are just monitoring the market at the moment, but for Nusantara Regas Satu there is a near-term process to try and refinance that.

Got you.

We have heard from some other players in the offshore space about a tightening lending environment actually impacting their ability to refi some assets that actually have decent charters on them.

I mean have you guys noticed a shift in the net financing, in the financing market there?

Is on impacting your ability to go out and secure longer-term financing at all?

No, not really.

I mean certainly we have been talking to banks and we talk to them quite regularly to also gauge the appetite out there.

And the message comes across really well, which is that if you got a decent charter, or hopefully a long-term charter, then you have got a long list of banks that are keen to get involved in that project.

Got you.

Okay, that is helpful.

Last quarter you guys put the share repurchase program out there with the $45 price target on it.

I know your shares didn't hang out in the mid to low $30s for too long, but it is noticeable you guys didn't buy back any shares during the quarter.

Instead raising the dividend.

Can you talk a little bit about that thought process and how you think about implementing that going forward?

Certainly it was a proposal that was and the Board took it on.

He wasn't, as previously mentioned, in previous [reports] we didn't have a specific time as to when we would affect it.

I think obviously the Board is there and constantly monitoring the situation.

As you can see, Golden Ocean did a similar sort of strategy, and we have that in the back of our pocket.

I think I guess the one thing to note, of course, is that dividends have gone up.

I think given that and the near-term visibility of our increased earnings, we can see that at least the dividends will be maintained.

Got you, okay.

All right, that is helpful, guys.

Thank you for the time.

Fotis Giannakoulis, Morgan Stanley.

I want to ask also about the chartering market.

You mentioned about the short-term, the volatility that you expect in the market the next couple of years and the softness during the summer because of the maintenance of some facilities.

Can you let us know where are these facilities located?

And what do you expect that the charterer market will move when this 6.5 million tons will come back to production?

I think what is really important, Fotis, on the -- again, spot rates they are quite unpredictable in the really near-term in LNG shipping right now because of the dearth of shipping deals being done.

So there is very few vessels, so if you get a little bit of shift in, say, maintenance or usually it is the Asian LNG buyers coming into the market and so you look at driving and arbitrage, you can get a big swing in the spot rate with one or two deals done.

So the parameters and being able to make a prediction about both what is upcoming when that volume comes onto the market I think is something that we just aren't able to do.

And to be honest, we don't focus on it a ton.

It is not really driving our revenue line right now.

When we are out with our vessels we are looking at a huge range of potential deals from the single voyage, which we see very few of -- we did on Maria but it is kind of an exception -- to two to three years, to five years to 10.

So I think we are not really the ones to make that kind of prediction about what is going to happen with spot rates in the very near term.

(inaudible) allocation of these facilities are they are offline, are these Qatari facilities?

I don't know if the Qataris had any maintenance going on.

Maybe we can check into that for you, Fotis, or give a call in to Brian and we will get you that information.

Okay, sounds good.

How many vessels, modern vessels, like Maria, you think they are available right now in the market for short-term voyages?

Again, it flips around from week to week, but there has generally been two or three vessels competing for spot business that we can see.

And if we try to put some number of ships that they require for this 6.5 million tons, let's say, assuming that this capacity comes from Qatar, will it be safe to say that something around a couple of vessels 40 million tons would be a good number?

We generally -- again, obviously it is specific to where that is going on and where the ships are going to go.

But 1.5 million tons on a ship over a period of time is not a bad -- sorry 1.5 ships for 1 million tons is not a bad estimate.

So 6 million tons would certainly use more than two or three vessels.

Okay.

Thank you, Doug.

Just jumping to the FSRU market and the project that we are currently pursuing.

You mentioned that you are a shortlisted in three additional projects apart from the Chile that you just won.

We read in the press that it is (inaudible) decision for them, but it is FSRU will take place next month.

What about the other two, are these projects a fourth-quarter event or a third-quarter?

First of all, I'm not 100% sure the project you mentioned is actually going to be a third-quarter event, so just a little health warning there.

But all three are reported to be, and best information we have, before the end of the year.

And is it possible to give us a little bit more color about the five additional projects that you mentioned?

Where are these projects located and when do you think that these projects will begin operation?

They are all -- the new ones would be all sort of 2014/2015 startups.

They are concentrated in Middle East, India, and Asia.

Okay, thank you.

My last question it is about the newbuilding activity.

We have seen some decline in the number of new orders that have come the last couple of months.

Is it because of a lack of financing?

What is the reason behind this slow activity?

And do you think that we might see some of the importers, particularly the importers from the Sabine Pass facility, to start ordering some vessels in the next couple of quarters?

So the first question is about why the ship orders have slowed down.

I think it is -- we can't speak for anybody else really.

We haven't been ordering simply because we think that there is better deals to come and the timing hasn't been exactly right.

We like the trend of the way the shipbuilding market is going and we definitely think there is possibility that we can do some more ordering if we find the right deal.

I think that we have a bit of a luxury of a fairly strong financial position to be able to increase that order book if we chose to.

That is not necessarily the case with other operators.

I think the financing situation is generally difficult, obviously, out there right now, so players haven't been willing to enter in with new orders when looking out at -- quite frankly, 2015/2016 it is not like today's market.

It looks a little more balanced and you definitely, going into a new order, have to be feeling very, very good about being able to support a shipping fleet long term.

The buyers of the Sabine LNG, I mean all new players with new production have all the options out there to place new orders or to charter.

That tension is always in the system.

But we believe that with the nature of the companies that are buying those products or those that are producing new LNG in Australia the decision to deploy capital -- in a financing constrained environment to deploy capital on vessels is probably unattractive to them.

So we feel pretty good that a lot of them are going to go the chartering route.

And could you comment, there was an article about John Fredriksen potentially buying two existing newbuilding contracts.

Is this something that you can comment on?

No.

Okay, worth trying.

Thank you very much, guys.

[Ovin Beryl], DnB NOR Markets.

Good afternoon, gentlemen.

As we saw with TK, who supposedly fixed one vessel out last week, where 13 months ahead -- in the mid-$80,000s for three years.

This spring we saw contracts roughly $150,000.

So we see -- if we assume that is still correct, we see a backwardation of $70,000 a day.

Could you help us understand how the market looks right now if you are six vessels for three years and how will this develop?

Sorry, your question is about like the three-year market, what it (multiple speakers)?

Do you have a comp delivery?

Comp delivery now for three year.

Well, I think that what you have seen over the last few months is that owners that had a vessel for a three-year market probably have been pushing for over $150,000, $160,000 a day for that type of charter.

There haven't been many of them done, so where it settles out I don't know.

I mean our three-year deals that we signed, I mean the charter started up in late first quarter and we signed the deals around the end of the year.

They were certainly not too far below that in what was a less heated market than it is now.

But it is true that the spread is going to start tightening as we move out in time here and we get closer to the time when a lot of the newbuilding vessels are on the horizon, so that backwardation is going to start coming out of the market.

The velocity at which that happens it is hard to predict.

But if you are saying, if I understand you right, the market is still quit hot.

So when can we see the Maria being fixed in a contract?

Would you see a three-year-plus contract possible, perhaps even a five-year-plus which still takes the drop down to the MLP?

Yes, it is possible, but, again, we aren't being driven solely by creating drop downs for the MLP.

Again, we are quite happy with the growth that we have provided to the MLP so far.

When we're looking at chartering the Maria we will look at all options and, as I think we've done a pretty good job to date, we will do what is best for the Company in terms of value.

Thank you.

Also, on the Hilli and Gandria how much of the year do you see those kind of vessels trading given their high OpEx, etc., or high fuel costs?

Are they (multiple speakers) over the year or will you only see (multiple speakers)?

Yes, they can be.

The Gimi is the same performance characteristics really and that vessel will go all the way through this year.

It started last September.

She will trade all through this year and into next, so is just a matter of finding the right specific trade where the unique nature of those performance characteristics work.

So certainly the winter, winter peak is the most obvious time.

There is also a summer peak that exists in the chartering market now, shoulder times are a little bit tougher.

But we are kind of at this point looking at deploying those ships through the winter and then we will take it from there.

Thank you so much, gentlemen.

Martin Korsvold, Pareto.

Thinking about your current vessels are you delivering in 2013, I think, if I heard you right, you mentioned that the three firm contracts you are bidding on is 2014/2015 start-ups.

Is that looking a bit earlier or are you looking at a business which will fit for the delivery of the whole 2031?

Yes, we have got multiple potential FSRU projects there with a 2014 delivery.

It would have been hard to be that smart that we nailed it exactly that the FSRU project was ready exactly in 2013.

We are not too concerned about up to a year time in between delivery of the FSRU and when she goes into service on an FSRU project.

Two reasons, if the FSRU project is a long-term contract, like a 15-year contract, the charterer will actually pay you to keep the ship idle so they don't have any risk of something going wrong with the vessel in between the time it gets delivered and when it goes into the project.

So you, in effect, recover that year anyway.

As I said, those vessels are -- that FSRU is, in all respects, an LNG carrier as well with the same performance parameters so it should be a very attractive vessel.

Especially September 2013 when we expect vessel demand to be quite strong.

So we are not at all really worried about having to get an FSRU project for her the day after she comes out of the yard.

Okay, that is helpful.

Secondly on -- I guess that is one of the three contracts you are bidding is the Indonesia contract where there was some delays.

Can you give us an update on how that is looking at the moment, if it has sort of pulled back on track?

It is difficult to say.

Indonesia can be challenging at times in terms of trying to predict when things go ahead, but that is just the nature of doing business there.

Golar has worked in Indonesia for many, many years quite successfully, so we kind of understand how it works and understand that predicting it isn't all that easy.

I think the political situation is turning in favor of the project somewhat, but I wouldn't say it is very clear yet.

I think it is -- in terms of what the charterer is saying about it, they seem quite optimistic about being able to kick off the project before the end of the year.

But we have to be honest and say that there is a little bit of noise around it and that is not uncommon with big FSRU projects.

So we are still optimistic.

I wouldn't say it is at the top of the list of likelihood out of the three that will get awarded before the end of the year.

Okay.

Lastly, you also mentioned in your report that you are looking currently at liquefaction and storage.

You have been talking about that for quite some time; is there anything new going on there which you can share with us or --?

Nothing that we can share.

I think that fair to say internally we have turned up the activity level a little bit in terms of refining our concepts for floating LNG.

Again, when we talk about floating LNG we are talking about a smaller scale approach to it, not the full scale, offshore type project.

So I would say the internal activity has ramped up somewhat trying to get a more refined concept and kind of approach to the market determined that will work the best.

But we don't -- there is nothing new in terms of a deal development that we can talk about at this point.

Okay.

Thank you very much.

(inaudible), Linden Advisors.

Thanks for taking the question.

Just wanted to go over the projected CapEx that you guys have and then you guys mentioned that you don't expect to raise any equity at the GLNG level and expect to raise debt at the GLNG level.

So if you could just map out how much in CapEx you have, what you expect to get from bank financing, and then the remaining how you expect to fund?

How much more would you expect to fund at the GLNG level from that.

I think we have basically mentioned the various sources of funds we expect to be able to use to fund the equity portion of the newbuilding program.

So the IPO of LNG partners helped us to get off the ground.

Obviously the Nusantara Regas Satu the vendor financing is still outstanding.

We have received $188 million to $230 million of that already there is $155 million still to come.

The Golar Freeze vendor financing is out there that is due to LNG Limited, the convertible bond issuance that we did in Q3.

So I think all of that potentially with drop downs and where there are opportunities for long-term charters that attracts new debt financing that will enable us to take us through to the delivery of the newbuild program.

I think as far as the schedule of the newbuild obligation come through, as we previously mentioned, it is very much back ended.

So there are obviously installments along the way, but majority of the payment comes through on delivery.

So let's say, drilling down a little bit on this vessel there is around $1 billion of CapEx next year.

What can we expect?

How much of that would be equity?

How much of that would be bank debt?

How much of that would be additional unsecured debt or what are you [expecting]?

That is very difficult to say.

Let's assume that there are other -- there are potentially opportunities out there that allows us to charter some of the vessels, in which case there isn't the potential to raise quite efficient new debt on those assets.

So it is very much dependent on what you assume to be -- what those vessels will be doing.

I think I mentioned earlier, as long as the vessels -- where the vessels have any medium- to long-term charters there are sufficient good list of banks out there that are very much keen to get involved in those projects.

Just one more question.

Is there a particular metric that you are aiming for?

Like, okay, this is the debt-to-equity ratio that I want for a long-term basis or a leverage ratio or anything that you guys think about or have in mind when thinking about the long-term capital structure of the Company?

Currently, as we are, I think we are quite well leveraged.

We are certainly not anywhere near certain covenants that we have.

When we are talking about the newbuilding program, again, that is very much dependent on what the status is of those when they come out.

If in the event a carrier was to be on charter for 10 years, you can leverage that up anywhere between 70% to 80% quite easily.

Whereas, obviously, if it is anywhere on spot then your expectation should be anywhere between 50% to 60%.

All right, understood.

Thank you.

(Operator Instructions) Gentlemen, as we have no further questions, I would like to turn the call back over to you for any additional or closing remarks.

Thank you for that and thank you for everyone for contributing to the call.

From myself and Doug, goodbye and we look forward to seeing you next quarter.

Goodbye.

Thank you.

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

Thank you for your participation.

You may now disconnect.