Golar LNG Ltd (GLNG) 2012 Q3 法說會逐字稿

Good day and welcome to the Golar LNG Limited Q3 2012 results presentation conference call.

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.

Good afternoon, everyone, or good morning to those over the Atlantic.

Welcome to Golar LNG's third-quarter results presentation.

My name is Brian Tienzo, and I will be talking you through the third quarter highlights as well as financial highlights.

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

So let's now turn to page 4 for the Q3 highlights.

Reported consolidated operating income in Q3 has increased by 21% from Q2, to $70.2 million.

Similarly, net income has increased by 26% to $44.7 million.

Both of those two have been positively impacted by fourth-quarter earnings contribution from NR Satu and Golar Viking.

After another good quarter, the Board of Directors has declared an increase in dividends from $0.40 in Q2 to now $0.425 per share in Q3.

Furthermore, it has been decided that on accelerated Q4 dividend of $0.425 per share will be paid also in December.

In September, the vendor financing of $222 million in respect of the Golar Freeze from its truck-down from LNG Limited to LNG Partners last year was repaid following a successful non-bond issuance by Golar LNG Partners.

More recently, Golar Partners raised a further $181 million in its second successful follow-on equity issue, and proceeds for that was used in part to fund the acquisition of the Grand of $265 million purchase price.

We recently announced also a signed agreement with Keppel for the development of Golar's first floating liquefied natural gas vessel.

The feed is continuing on that project with a conversion expected to commence in June 2013.

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

So our net operating revenues for the quarter, $117.8 million, has increased from $103.9 million in Q2.

In comparison, Q3 2011 was $77.4 million, which is an increase of 52% to this quarter.

Our operating expenses in Q3 has increased from $17.8 million in Q2 to $19.4 million in Q3, mainly as a result of the Golar -- of the NR Satu being in operation throughout the quarter versus a partial operation in Q2.

Both the Satu and the Viking contribution in the quarter has led to an increase in 13.5% in our EBITDA from $79.9 million in Q2 to $93.4 million in Q3.

In contrast, our EBITDA has increased by 63% since Q3 2011.

Net financial expenses for the quarter dropped slightly from $12.9 million to $11 million in Q3.

This is mainly as a result of a repaid loan during the quarter from when Golar LNG Limited received the contribution for the NR Satu drop-down in July.

We also saw a slight decrease in LIBOR during the quarter.

All of those factors have resulted in an increase in net income of $44.7 million in the quarter against $35.4 million in Q2 2012.

That's an increase of 26%.

Moving down the list, time charter equivalent for Q3 has increased very slightly to $98,500 a day versus Q2, $97,200 a day.

And that's -- the main contributors there were, again, fourth-quarter contribution from Satu, from Viking and negatively impacted by the Gandria being off-hire.

Our utilization for the quarter is it decreased slightly to 83.2% from 89.7% from Q2, mainly as a result of Maria not in charter throughout the quarter, as well as some commercial waiting time for Gandria and Hilli.

As mentioned earlier, we are increasing our dividend payments in respect of Q3 results from $0.40 in Q2 to $0.425 in Q3.

Looking at Q4, earnings for Q4 should be fairly stable.

However, there will be some negative impact as result of the Golar Spirit going into dry dock as well as the Golar Maria's continuing presence in the spot market.

Going over the page, this is just a graph of our revenue compared with our EBITDA and dividends.

And as you can see there, our EBITDA and dividends record have been increasing since Q1 2011, and of course we have also now announced a dividend in respect of Q4 of $0.425, which will be paid also in December.

We now turn to page 7, which will go through the main highlights of our balance sheet.

We've highlighted a couple of boxes there, one being cash and cash equivalents, which has increased significantly from $77 million in Q2 to $118 million in Q3, mainly as a result of the NR Satu drop-down and the incremental cash coming in from LNG Partners' follow-on offering.

Further down the page, our long-term assets -- our new building assets have increased from $300 million in Q2 to $347 million in Q3 as a result of a couple of installments paid during the quarter.

Over to page 8, there is a decrease in long-term debt-related parties as a result of our repayment of the natural gas loan from when NR Satu was dropped down in July.

Further down the page, our non-controlling interest has increased from $84 million in Q2, to $150 million in Q3 as a result of decrease in shareholding of Golar LNG Limited of Golar LNG Partners.

If you now turn to page 9 to go through the main activities in our cash flow, additions to new buildings, investments in equipment have increased during the quarter as a result of further expenditures on completion of NR Satu, conversion and also the new building installments.

And then going into the financing activities, we see that there was a small drawdown during the quarter from the same loan that was subsequently repaid following the NR Satu drop-down in July.

I will now hand over the presentation to Doug, who will go through the business outlook and our summary for the presentation.

Thank you, Brian, and good afternoon and good morning, everybody.

If we start my part of the presentation on slide number 10, I first want to talk a little bit about the current situation in the shipping market, both short and long-term.

Slide 10 has a couple of graphics there talking about the short-term market, in particular, which in recent months certainly has reversed an upward trend that had been existing throughout the year.

The reason for that is related to a weakening in Asian demand combined with high inventories in Asia and also compounded by unexpected production decreases of major production facilities.

The graphic on the right-hand side of the page there is quite helpful, too, to see what went on since summer time this year, where you saw the arbitrage value between Atlantic Basin and Pacific Basin weakening while spot rates were continuing their strong push, as they did through the first part of the year.

So, although there was, you could say, a bullish sentiment in the shipping owner side of things because there are very few vessels available, for vessels on the margin uncontracted going through this period of time, the weak activity certainly resulted in both a low number of fixtures happening and those fixtures that did happen, happening at quite a decreased rate for spot voyages.

In recent weeks, we have seen the Asian LNG prices turning around, thus the arbitrage value starting to increase.

And we would expect this trend to continue and improve things for ship demand going forward.

Over to page 11, the short-term market certainly was disappointing in the last quarter and the last months, but our view on long-term fundamentals remain unchanged.

And those long-term fundamentals are driven by very visible increases in LNG production which are coming on-stream, for which the shipping capacity is in very short supply.

We see 90 million to 100 million tons of new capacity coming on-stream in 2017, and that's essentially restricted to volumes that are related to projects already under construction.

And that leads to the situation on the right-hand side where you see the expected trade volumes against the available ship capacity.

And again, we see this as very optimistic for ship owners who have available capacity to put into that market.

Turning to page 12, this is a chart many of you have seen many times, although it's changing shape somewhat.

This is the group-wide portfolio of existing vessels.

Out of our 13 vessels in the fleet, seven of them are now inside Golar LNG Partners, which speaks to the success of Golar LNG Limited being able to secure long-term contracts for those vessels, dropping down into Golar LNG Partners and raise capital for the parent.

And I will talk about that some more later.

We have the Methane Princess and the Golar Mazo and the Golar Grand as carriers sitting inside the LNG partners fleet, and of course, Winter, Spirit, Freeze and the most recent Regas Satu as the FSRUs operating in that portfolio.

All of these vessels are operating very successfully.

We've had minimal down time on any of those chartered out vessels through the period, and that certainly contributed to our good charter revenue performance in the third quarter.

Going down to Golar LNG Limited, the vessels that are more on spot or short-term nature would be Golar Gimi, which is on charter until the approximately springtime of next year and operating very successfully.

The Gandria and Hilli were reactivated earlier this year.

It's fair to say that the weakening of the spot market put vessels of this kind on a low priority for charters to charter out, and thus those vessels have been open and remain open at this time.

The Golar Viking is on charter at very good rates through next spring, and the Golar Arctic is on a current three-year charter which ends in early 2015.

The Golar Maria traded quite well through the quarter on a spot basis.

We had a very good rate on one of the charters, one of the higher rates we've ever done on a vessel.

So we did get good revenue from Maria in that quarter.

We expect that revenue from Golar Maria to be somewhat reduced in the fourth quarter, as she has spent some idle time as we pursued opportunities.

She is open at the moment, but we are pursuing some attractive opportunities that we hope to be able to close in on, in the near-term.

Turning over the slide to 13, again, this is the foundation of the growth in the Company is these open positions that we are bringing into a market with very visible production growth and a need for shipping.

The Hilli and Gandria certainly -- and Gimi -- certainly relevant to our discussion that will come shortly about floating liquefaction vessels, and also FSRU conversions, but they are available for charters, should the market improve here coming into the winter of 2012-2013.

Maria and Viking, of course, modern, well performing vessels that will be open for charter.

And then we have the 13 new builds that are on order, which start delivering in September of 2013 and through the early part of 2015.

I will say that one characteristic we are seeing in the chartering market right now is that we are getting close enough to the delivery of the first wave of new builds that the market is beginning to differentiate in a very visible way the existing steam turbine vessels versus the ultramodern, multi-fuel diesel engine vessels.

And the benchmark for new charters is certainly moving towards the diesel-electric engines, but we see the dynamic as the steam turbine rates that -- fixtures that have been done for period are setting a baseline for which we would expect to see the ultramodern vessels achieving $20,000 to $40,000 a day in excess of the rates done on the steam turbine vessels.

Turning to page 14, just a little bit of time on our plan for financing our growth and commitments on the new build program.

I mentioned earlier about the success we've had of securing charters on Golar LNG Limited's fleets, followed by sell-downs to the Partnership.

We are all very, very pleased with how well that has gone so far, and that is a big part of the reason why we are very much on target to fully finance our new build programs and continue dividend growth without having to raise any additional equity at the Golar LNG Limited level or without having to realize our $825 million investment in Golar Partners.

We have, including the IPO on Partners and subsequent drop-down of Freeze, Nusantara Regas Satu and the Grand, that's -- netted, that's about $0.9 billion at the Golar LNG levels, which has obviously been -- is largely pointed at paying out the equity portion of our new build vessels.

But it does, of course, assume refinancing of the existing $155 million vendor loan, which we are confident will happen in the near-term.

The other relevant aspect here is that at the Golar LNG Limited level, we have a material debt capacity with the underlying value of the existing and new build fleet.

We are in discussions with various parties for financing structures for the fleet, and we are confident those will be successful.

With that vendor loan being refinanced, we will end up -- and again, we expect this to happen in the near-term -- we will end up with $500 million cash on our balance sheet.

All of that is why we believe we are in very, very good shape to be able to manage our capital commitments on the new build program.

Turning to slide 15, our project update on FSRUs, again, the existing fleet of FSRUs are operating very successfully -- very, very minimal down time.

So our technology and our execution approach is again being proven.

Brian has mentioned; we do have one of the first drydocking -- well, the first to drydocking of our FSRU that is coming up on Golar Spirit, which is currently scheduled to -- that period is currently scheduled to begin December 7.

In terms of growth, we do see the activity of the past quarters, which has been fairly frantic in terms of new projects, continuing on through today.

There's easily 25 projects being talked about.

We see five very serious projects and very credible projects where we are short listed.

I should mention that, as we previously announced, we were selected as the successful bidder on the Gas Atacama LNG project.

We had also announced at that time that there were certain conditions precedent related to that time charter which related to downstream power sales agreements, which the Gas Atacama power company needed to achieve in order to commit to the charter.

The deadline for those conditions to clear is the end of this year.

Based on our current outlook, we are expecting and anticipating that there is a possible extension of those deadlines going to be discussed with the charter.

And as and when that gets more firmed up, we will return to the market and inform everybody about that.

The demand we are seeing on FSRU projects in terms of where they are -- Middle East continues to be very strong and very active in terms of new FSRU projects, and certainly Asia as well continues with its development programs for new FSRUs.

Our own position, we feel, is very strong.

We have, certainly, the best prompt position for delivery of FSRUs in the market with only available vessel in 2013, and then we've got another in 2014.

We are also, of course, not forgetting about our conversion model on FSRUs, which is applicable to certain projects out there.

So, again, it's really quite an optimistic story.

At times, we aren't always in control of the development time line and the commitment time line for these projects to go ahead, but certainly, we see several awards coming up by the middle of next year and we feel we are well-positioned in all of the projects.

Turning to slide 16, of course, we are all very excited about our advancement of our plans on floating liquefaction productions, our FLNGVs as we are calling them, and this is very much analogous to what we were able to create on the FSRU side.

It's using proven technology, proven providers and a low-cost execution model to change the conventional approach to creating new LNG in the market.

The concept is the conversion of one of our existing Moss vessels to start off.

We are also looking at barge-based concepts as well, but the base plan for the first vessel will be a Moss conversion.

We were use a proven provider of liquefaction technology, a proven shipyard in Keppel at executing the conversions.

And of course, we will lend our own deep experience in being able to execute these conversions.

The solution that we are looking at on the liquefaction side is for clean and relatively dry gas, which will allow us to implement a low-cost execution model for projects with much, much smaller reserve requirements than a conventional play.

Again, this project is all about -- very much the same as what happened with floating regas, which has now become the accepted solution.

Conventional LNG production projects are, of course, extremely expensive, extremely time-consuming and have a high degree of execution risk.

This concept will be a low-cost model, a construction time of less than 24 months once we get our FEED work done here in the next 6 or 7 months, and thus is a low-cost, quick execution model that we think is going to be very attractive to the market.

We're looking at vessel capacities of up to 2 million tons per year, but we will create a modular design so that we can fit the specific capacity to the opportunities.

Turning over to slide 17, I think there's basically two types of the markets that we will be pursuing with our floating liquefaction.

One would be described as pipeline gas, where you have a domestic gas production that includes all the processing and transport infrastructure already in place, but with a supply that exceeds the local demand and gas looking for alternative markets.

So our floating concept, because that gas is, by definition, already cleaned up, this concept that we are developing is perfect for those types of opportunities, and we are currently pursuing several.

The other type of opportunities would be stranded gas markets in Africa and Southeast Asia, for example, where you either have a gas cap on an oil production field that is being flared or is constraining the oil production, or where you have a gas reserve -- a strictly gas field with lean gas that has been previously uneconomic to apply a conventional LNG production model.

So those are the two types of opportunities we are looking at.

We have kicked off the FEED on the FLNG vessel.

That will take us to kind of the middle of next year.

We are working several opportunities, and by the time we get the FEED study done for the vessel, we suspect that we will have good opportunities for deployment of the vessel.

Our commercial approach will be flexible, but the thrust of it will be that we will combine it with our existing carrier and FSRU franchise to create integrated solutions for the market that we think will be highly valued.

And that's the whole key.

Golar's target is to become a completely integrated player in the LNG midstream, and that should allow us to capitalize and capture a larger portion of the overall LNG trade value.

Turning to slide 18 to wrap up before questions, again, we have had an excellent quarter in Q3, record earnings for us resulting from the long-term charters that we've put in place along with other opportunistic charters.

Full-term on -- full quarter on Nusantara Regas Satu and Viking.

And of course, what is also required to support that, efficient and successful operations with minimal down time.

We are very much on track for coverage on our new build commitments from a financing point of view and potential future increases in dividends without issuing additional equity or really realizing our Golar Partners investment.

We have seen a current short-term weakness in shipping, for reasons I've described, but we certainly do expect that to improve over the medium to long-term and still a very rosy picture on long-term fundamentals for LNG shipping.

Looking forward to Q4, Brian mentioned it, we will see some negative influence on the Q4 results related to Golar Spirit and reduced revenue on Golar Maria compared with Q3.

Our strong presence in the FSRU sphere has us optimistic on new FSRU awards.

Again, there's five projects that we see short-listed.

All five are promising projects, and so we absolutely could see some successful awards coming in the next months.

We've signed our -- we've kicked off our initiative with Keppel on our floating liquefaction project, and certainly that's very supportive of our target to be a fully integrated midstream player.

In summary, we feel Golar is extremely well positioned to capitalize on the high growth in LNG trade that everyone can see in the years to come.

And that wraps up the presentation part of the conference call.

Certainly, I will turn it over to the moderator for our question-and-answer period.

(Operator instructions) Michael Webber, Wells Fargo.

Just a couple of questions -- I wanted to start off with the FLNG.

Doug, can you maybe just give a little bit of color, I guess, between the cost differences and the return differences between the conversion work and any sort of barge solution, which I believe is related to Douglas Channel?

And then maybe a little bit of color in terms of how you think about the options that you guys have for conversion there.

And would you need to see a contract in place on the one you are doing on spec now, before you think about exercising those options?

Yes, in terms of the barge versus the conversion, yes; the barge is relevant to Douglas Channel.

But there's other drivers that may push you towards the barge, and that could be, for example, where there's existing LNG storage in a location where you don't need to bring along the storage that you would have with the conversion.

There is some flexibility with the barge concept because, once you convert the Moss vessel to a floating LNG vessel, it's going to be quite difficult.

Well, it won't be used as a carrier anymore.

So if you build a barge and you use -- and for example, use one of the Moss vessels as floating storage, you certainly have the flexibility to -- when that certain application isn't needed anymore, which, of course, is one of the big benefits of this approach, then you do have the vessel available for use as a carrier.

But we think the best, most flexible, best kind of cost approach would be to -- with the combined LNG production facilities on board the converted vessel.

And that's why we've got that one as our favorite approach.

It gives you the most flexibility for the types of markets I was talking about.

For some of these offshore fields where we see stranded gas, it would be a pretty rare instance where you could design a barge to deal with the sea conditions that you might find there.

So we just think the Moss conversion vessel is going to be the most likely, most attractive start-up project.

Got you.

Just to zero in there on the conversion, can you maybe -- A, kind of quantify the level of interest you are seeing now?

Obviously, it's very early.

And then jumping back to my earlier question on the options, is it fair to assume that you guys would need to see a contract on that before you would think about exercising those conversion options on the other two?

Well, in terms of the interest, it is early days, but we -- the FEED on this project isn't going to be hugely expensive, but it's real money.

So we were pretty convinced and had seen a lot of opportunity churn ahead of us signing up the agreement with Keppel.

So we see the level of opportunity as really, really good.

And since we made the announcement, we've certainly had others coming through the door interested in talking to us about opportunities.

It is early days.

For each opportunity, you have a lot of work to do to make sure that the design that we are implementing is going to fit the gas supply, the dependability of the reserves, you know, putting the whole project together.

But the opportunity flow is very good.

I would say the most likely case is that we will have a contract in place before we move ahead with the full conversion.

The conversion schedule, however, is -- it's 24 months, but it's kind of 18 to 20 months of procurement of liquefaction -- of the liquefaction kit followed by 4 or 5 months of installation and conversion on the vessel.

So the one thing that I would see that we would likely do in order to speed up the execution without exposing ourselves to too much risk capital is to start the procurement process on some of the long lead items.

The nice thing about the technology that we are going to employ here is that there's not really any bespoke equipment.

The components of the liquefaction plant that will be used are quite -- are somewhat fungible.

So we can go ahead with procurement on long lead items without too much risk and speed up the execution model.

The full conversion, because there are certain elements that need to be finely tailored to a specific location, what I would see is that we would know where the first conversion is going before we go fully into that, and we are pretty optimistic that's going to happen on the time line that we've laid out here.

Got you.

No; that's very helpful.

Just one more for me and I will turn it over.

And again, just sticking with the liquefaction, can you maybe give an update on the timing of Douglas Channel right now?

I know that process was delayed a little bit about a month ago, kicked back about a week.

Can you maybe give an update in terms of where that process stands now?

Well, again, what we've got with Douglas Channel is a ship option for two vessels to go into that project.

What we know about that project is that they are moving through the permitting phase still; looks very optimistic.

They have got the long-term export permit, they have got a good position on pipeline supply to tie them into the big reserves.

So, as far as we know, the target for that project is still to be on-stream in Q2 of 2015, which will certainly put it either tied for first or a close second on -- or first alone on the first LNG exports from -- first new LNG exports from North America.

But that's about all we know about the project at this point.

Alright, thanks for the time, guys, I'll turn it over.

Herman Hildan, RS Platou Markets.

First of all, one of your competitors has spent two years and $60 million on their fleet for FLNG.

Obviously, that's a very, call it, different type of asset.

But could you give some sort of guiding on the cost they expect to have on the FEED study?

I would say it will be less than 10% of that.

Less than 10%?

Okay.

And I know it's quite early in the phase as well, but could you give some sort of indications on what kind of CapEx that you are looking at for a 1 million or 2 million ton vessel?

Is it $0.5 billion for one ton, approximately?

Yes.

We haven't been releasing specific costs for a couple reasons.

It's kind of commercially sensitive to us.

And the second reason is part of the purpose of the FEED is to confirm all that, so we don't want to get too ahead of ourselves.

With what we know now, our goal is to be competitive with conventional land-based LNG.

And I think there's a huge ability to do this, and nobody should be surprised by it.

The same thing happened on floating regas, where you have all the advantages of a controlled environment to create this asset in the shipyard built on top of an existing vessel that has been depreciated.

All of those same benefits will come into the floating liquefaction production project.

So I think the bottom line thing to remember is that we are very optimistic about unit production costs for producing LNG being competitive with conventional solutions.

Okay, and a final question.

You mentioned that you're looking at quite a few different alternatives.

Is it possible to get some sort of sense about what kind of cash costs that you would have on, call it 1 million BTU basis, before taking into account shipping?

You mean a unit cost of the production in the --

Yes, (inaudible), yes.

Thank you the -- well, I guess that would be similar to me divulging the costs.

You can easily look up and know some -- there have been announced deals in terms of what people are paying on a per-unit basis, for example, in the US Gulf Coast, what they have signed up to deals there.

If we got that kind of equivalent tolling payment into one of our vessels, we would be very happy.

Okay, thank you very much.

Jon Chappell, Evercore Partners.

Just a question on the Maria -- can you give a little more detail in the third quarter what the off-hire time was or what the waiting time was, when it wasn't actually operating?

And then also, quarter to date and fourth quarter, has it had any cargoes to date yet?

Is it possible the Maria can go the entire fourth quarter without any operating days?

I think that in the third quarter, the Maria was on hire for the majority of the quarter; let's say that.

And combined with the fact that part of that, one of those charters was done at a very, very high rate, it performed quite well in the quarter.

You've seen our total results for the quarter, and Maria contributed to that.

I think, for the fourth quarter, there is little chance that the vessel will be off-hire for the entire quarter, but the vessel has been idle for most of the quarter to date.

Okay.

And are you still thinking about operating the Maria on kind of a short term until the broader market picks up again?

Is there any activity whatsoever for 3- to 5-year contracts at rates that you would view as attractive for that vessel?

Yes.

Our approach on Maria has been consistent.

While we can secure very good spot rates for Maria, we may choose to prioritize that ahead of the longer-term charters.

No secrets about what just happened with spot rates through the last months, and that certainly influences how we are marketing and thinking about Maria.

I would say the opportunities that we have upcoming are more of the longer-term nature.

When I say longer-term, it will be more than -- of the more than three-year variety.

That's where we are focused on now and we hope to have an announcement on a deal of that kind very soon.

Great.

And then another FLNG follow-up -- you talked about the two different regions you are looking at, the Americas versus West Africa.

Can you talk about the risk and return dynamic differences of those two regions?

Yes.

It's actually quite interesting.

These are very different (multiple speakers) -- yes, they are very different in characteristics.

In a situation where you've got stranded gas and -- or a gas cap that's being flared or the existence of that gas cap is constraining oil production, you essentially have negative value on the product.

So your ability to extract returns on that type of opportunity, if it works, are very, very good.

However, in order to extract those returns you are probably going to have to realize some specific reservoir risk because the project will essentially be tied to a single reservoir in a single country in a single location.

So there's that specific project risk.

But of course, depending on the projects in the field you are talking about, that risk can be understood and managed and we can make a conscious decision whether there the risk/return balance is okay.

In the Americas, you have a different situation generally where you are tying yourself into existing production and a wide variety of sources of gas.

And you really need to be comfortable that where you are tying in, where you are sourcing your gas and how you are contracting for gas is that you've got security of supply.

Certainly, the Douglas Channel project is a good example of that, where that project is tied into Northeast B.C. and Western Canadian sedimentary basin gas.

Compared with the size of that project, you kind of have infinite access to reserves where the reserve risk isn't great.

I'd say the risk on that kind of project is that the permits come in clean and that your capital costs are managed properly.

So that's how I would differentiate those two types of opportunities.

And just really quickly, as you look at the development of your FLNG business, are you thinking about a balanced portfolio of those two risk/return profiles?

Or, is there one, maybe the less risky one, that you would focus on first?

No, we will do all of the ones that have the least risk and highest returns.

I don't think there's really a natural balance between those two things.

In other words, I don't think -- they are different risk profiles, but that doesn't mean you purposely would try to keep a balance in the portfolio of those.

We will take the vessels to the first best opportunities.

I would say that there's probably -- that the Africa/Southeast Asia opportunities -- there are probably, at this point, more of those in sheer number in the types that we are looking at than the kind of pipeline gas opportunities in the Americas.

But maybe the quality and visibility of how you get to the finish line on the Americas projects are a little bit better.

So I think that is how it's coming out.

I think we will end up doing about both.

Alright, great, very helpful, thanks Doug.

Fotis Giannakoulis, Morgan Stanley.

I would like to ask a few more questions about the FLNG.

If you can just confirm that -- I understand that Golar is not going to be taking any commodity risk.

Is that correct?

Everything will be backed through long-term contracts?

No, I don't think that's necessarily the case, Fotis.

I think that with the FLNG vessel and our carrier portfolio and FSRUs, in one way or another, the whole idea is that because we can be responsible for putting a whole midstream chain together, I think we would be willing to take some kind of commodity risk in some form in order to extract as much value as possible from the LNG trade itself.

That doesn't mean we will take you responsible risk, or risks that we can't control.

But I wouldn't at all limit the opportunity set that we are working on here to a straight leasing model.

Of course, if someone -- we would absolutely least the vessel out to a credit-worthy party who was willing to pay enough to make it worthwhile to us.

But we are definitely not ruling out some exposure to the inherent risk in the chain, because we will be creating the whole chain.

So our ability to manage that risk will be strong, so we will be more willing to take on that risk in return for the value that's there.

Can you explain a little bit, how shall we think of the supply -- the price that you will be paying for supplying yourselves with natural gas and about the sale price of LNG when it is going to be liquefied?

Well, again, the two different types of opportunities I've talked about have different characteristics.

If you look at pipeline gas in the Americas or elsewhere, by definition those type of projects are taking gas out of a market that has a market price and a market dynamic.

So, depending on the location of the project, we would be exposed, or whoever leased the vessel, if that's how it was, would be exposed to whatever gas price dynamic that was.

If that was a US project, it would be Henry Hub or [ACO] in Canada or whatever the underlying value of the gas is.

So in the offshore opportunities, that's a very, very much case-by-case basis.

How badly does that gas want to get out of the ground will influence what value that gas goes into the vessel at.

And then, once we get through our vessel, through the production vessel, then it's exposed to world LNG prices.

Is there a timing that you think that you might have a marketing agreement in place?

Is it going to be after the FEED process is completed?

No, I really believe that we will have our first deal in place prior to the FEED being completed.

Okay.

And will this project be controlled 100% by Golar, or there are also thoughts of a potential -- setting up a JV with one of the oil majors or one of the producers?

Yes.

We will certainly control the conversion process.

Keppel is responsible for executing the conversion, so you can say they're in control as well.

But we will certainly -- when you say control, we will be very strict on maintaining control about how the conversion projects go.

JV structures to implement a specific project are certainly on the table.

We are open to that.

We want to bring our carrier portfolio and have that added value and, if possible, FSRUs.

And once we get this going, by the way, I think floating power becomes a much more achievable concept.

But no -- yes, a JV partnership -- oil major, I'm not sure.

These are smaller projects, kind of 2 million tons or under.

I question whether oil majors specifically are interested in this kind of thing.

We see the natural partner or supplier or JV partner to be more a medium or smaller E&P player who, with this type of project, can have a big impact on their bottom line as well.

Can you also give us some estimate of a cost that we can assume some range, potentially, that you can give us; and, if this range differs, whether this is going to be a pipeline gas project or an offshore project?

Yes.

I think someone asked that earlier.

We are not really disclosing even a range on costs.

Again, it's very apparent to us, in the same way that floating storage and regas vessels ended up being much more economical than land-based solutions, that the same thing is going to happen for floating LNG.

So, as I was saying, if you look around at some of the deals that were tolling deals that have been done recently on new liquefaction production, we would be very, very happy with that kind of deal on our 2 million-ton vessel.

I honestly don't know which of the -- whether there would be an offshore field or a pipeline gas opportunity, which will be our first.

But I'm just pretty glad that we have both of those types of projects that we are pursuing now, because both look very viable.

Thank you for that.

One last question -- regarding the FSRU tenders, if I am not mistaken, the previous quarter you mentioned that you were short-listed for three potential projects.

Now you mentioned that you are for five.

Can you let us know which are these two additional projects?

Yes, Fotis, I think the five will be central East Java in Indonesia, the Q8 FSRU Emirates, LNG FSRU, Jordan and, more recently, the Shell Reliance FSRU in India.

So the three that we mentioned last quarter -- obviously, there has been a bit of a delay in announcing those.

So they continue to be a work in progress.

And can you remind us how many other parties are participating, except of Golar, in this tender process?

Well, the short lists are three or smaller.

Okay, thank you very much for your time.

Erik Stavseth, Arctic Securities.

My question is -- well, it's sort of with respect to FLNG.

Again, I saw that Gandria has been taken off open vessel lists.

Is that a vessel that has been earmarked for conversion now, or could you make a comment on that?

Well, the idea on Gandria, on the reactivation, was certainly that some of the money we would spend to reactivate Gandria would be spent anyway in a future conversion.

So it wasn't a very difficult decision, but the reactivation time wasn't certainly to pick up on potential carrier charters.

That has not gone as we would have liked, but we still have her positioned to hopefully take some opportunistic charters coming into this winter.

But longer term, Gandria is certainly a conversion candidate for floating production or FSRU.

And in terms of commodity risk, if you were to take ownership and the volumes through one of the FLNG projects, would you be -- it might be a specific, but would you be looking and locking in long-term contracts of the gas, or would you be having some kind of spot exposure to Asian spot prices, for example?

Oh, I think we are a long ways from making those kind of determinations.

That will be very much influenced as to what the structure on the pricing and nature of the reserves that are put against the project, our view on the market at the time.

So I think it's too early to comment on how we might structure that.

And when we say take exposure to commodity risk, I guess that could mean we have actual possession of volumes.

But the commodity risk can be structured into the deal as well, without us actually moving the volumes ourselves.

So the details of the structure on these projects, that's all to come.

And final question -- Golar Maria has been rumored to be a fixed [late] (inaudible).

The vessel is still on -- you said it was open.

Is it on subjects right now?

Well, it's open until we have a firm charter.

So when there is a firm charter, we will make an announcement on that.

Alright, thank you.

(Operator instructions) Oyvind Berle, DNB Markets.

Could I ask you what are the various components of costs of the hull versus topside equipment, and any subcategories within the topside equipment for an FLNG, please?

Well, I guess when you have costs, it may be a matter of opinion on the value of the vessel that's been converted.

But the vast majority of the cost, total cost for the FLNG vessel will be, first, the liquefaction process equipment itself, followed by the actual value of the vessel and the yard build for the conversion would be second and third, a long ways behind the liquefaction processing.

Okay.

Second question -- could you provide a time line of such a conversion?

What are the most important processes and where could potential delays arise?

Well, I think one of the benefits, if you look at why conventional LNG production, land-based facilities, get delayed, we are removing a lot of those risks from the project.

The processing technology we are using has been built many, many times.

This will be the first time it's used in a marine environment, but the exact setup has been executed and built many times around the world for peaking applications and other similar uses.

So that part of the project is quite controllable.

The conversion of the vessel is not too much more complicated than a conversion for FSRU purposes, so -- and it's obviously in a controlled environment in a shipyard.

So we are -- delaying the execution timing of the conversion is not very high up on our list of risks that we see.

Okay, final question -- a lot of investors are very concerned for the comparison with FPSOs.

Our understanding is that the biggest cost driver was integration problems between various components for an FPSO.

What are your plans to mitigating this risk?

Sorry, I missed the first part -- the premise of that question.

That a lot of investors are worried about the comparisons with oil FPSOs.

And the biggest challenge was integration between different components.

How do you mitigate such risks?

Well, again, remember that the premise of this facility is quite a bit different from that, in that the opportunities we are targeting are situations where we don't have a lot of specific cleanup or byproducts to come out of the gas stream that we need to deal with.

So the complications could arise and expensive solutions needed when you do a project like Prelude, where that's a true offshore development where you've got liquids handling and a lot of gas cleanup to do.

So this is a long ways from this.

This is quite a simple proposition where the gas is effectively ready to be liquefied in a process that everyone can understand and go into storage and loaded on a carrier.

So I think the analogy is a little bit misplaced.

Thank you so much for your time, gentlemen.

Michael Webber, Wells Fargo.

I know it's been a long call.

I just wanted to hop back on for one more.

Maybe just from a high level, it's obviously been a quarter of transition for you guys.

As you look at more FSRU tenders and you start plowing money into FLNG, if you just take a step back and maybe look at Golar and where it's heading over the next 3 to 5 years, from an investment capital perspective, how do you think your asset mix is going to look?

Is it the third, a third, a third?

Just kind of help us get a viewpoint in terms of how Golar is transitioning away from just a spot vehicle towards a more integrated solution.

Just from an investment capital perspective, how should we think about that pie?

Well, we certainly -- we've got a ways to go on FLNG.

But we are entering that space because we feel it's going to be successful.

So when I look forward and I see, for example, we've got three vessels, three Moss vessels that are candidates for conversions, certainly I would see that all of those will be converted.

It's a question whether there are three FLNG production vessels or whether we still have an FSRU conversion coming up.

So that's where those vessels are headed.

I'm not quite sure how to give you guidance on this.

The underlying asset vessels of the carriers in the group -- I don't think that we will exceed invested capital on FLNG production vessels by 2015, by any means.

I think we will be weighted towards carriers still.

Yes.

But that could reach an inflection point as you look out into 2016, 2017, 2018 type of thing.

But I think that what I'm hoping investors see is that there's a lot of value in the spread between gas and LNG value.

And so, with the production vessel, I think the easy way to think about it is we are trying to capture as much value as we can by linking low-cost gas to high-value markets.

And so from an invested capital point of view, the floating LNG production is the one piece that we have put in place that really gets us there.

So in terms of value sources, I think the FLNG vessel could be a big trigger because it allows us to change how we exist in the space.

Got you, alright, that's really helpful; I'll take everything else offline, thanks, guys.

This will conclude today's question and answer session.

I now would like to turn back over to Mr. Brian Tienzo, Chief Financial Officer, or Doug Arnell, Chief Executive Officer, for any additional or closing remarks.

Well, thank you, everyone.

That concludes our presentation.

And I hope that everyone found, again, this presentation useful.

And we look forward to speaking to you again for our fourth-quarter 2012 results.

Goodbye.

This will conclude today's conference call.

Ladies and gentlemen, thank you for your participation.

You may now disconnect.