Golar LNG Ltd (GLNG) 2012 Q4 法說會逐字稿

Good day, and welcome to the Golar LNG Limited Q4 2012 results presentation.

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, and hello everyone.

Sincere apologies for the delay in starting the presentation.

In any event, welcome to Golar LNG's fourth quarter results presentation.

As the administrator said, my name is Brian Tienzo, and, as per usual, I'll be taking you through the fourth quarter highlights as well as the financial highlights.

I'm also joined here by our CEO, Doug Arnell, who will take you through the business update and summary and outlook section.

Let's now turn to page 4 for the Q4 highlights.

So, Golar reports consolidated operating income of $52.9 million, and net income of $22.8 million for the quarter.

The Q4 numbers, as most of you will have expected, were negatively impacted by commercial waiting time for Golar Maria and a scheduled dry docking of Golar Spirit.

As per our press release, you will have seen a notice to investors and the Company has announced that we continue to assess whether Golar Partners can be consolidated 13 December, 2012 following Golar Partners' first AGM.

Deconsolidation is a significant possibility, but that is something that we are continuing to assess.

During the quarter Golar secured its five-year charter with energy major for the Golar Maria, and that's commenced at the end of November.

And, Golar Partners repaid both Freeze and Nusantara Regas Satu vendor financing using proceeds from its Norwegian bonds and also the $155 million syndicated debt facility entered into in December.

After the quarter, and following various mentions of our pursuit on FLNG projects, we announced plans to launch a new entity that will pursue Floating LNG projects.

Golar Partners also completed two further follow-on equity issues and uses [those] net proceeds of $310 million to part fund its acquisition of the Golar Grand of $265 million and Golar Maria, $215 million purchase price from Golar LNG.

Finally, and most recently, Golar was chosen as preferred bidder in Jordan FSRU projects.

It is expected that time charter negotiations will commence during this quarter.

Turning over to page 6, and for those of you who have read our press release, you will note that we put a notes to investors regarding the presentation of the press release.

I would just like to spend a few minutes on that.

The Golar LNG Partners had its first annual meeting of unit holders on December 13, 2012, at which point the composition of its Board of Directors changed.

So, that the majority of them were elected in by the unit holders.

The company, Golar LNG Limited, nominated all of the elected directors.

By a virtue of this, it could be argued that because the majority of the Board of Directors are independent they could also make decisions on behalf of Golar LNG Partners which are independent to Golar LNG Limited.

Nevertheless, there are other factors to consider such as the shareholding of the Company of Golar LNG Limited, of the partnership, the Company's ownership, the [Jordan] partners, and so on.

As mentioned, the Company's Management continues to assess this and where it continues to be appropriate to consolidate Golar Partners' numbers.

In the event the Company has to deconsolidate the numbers, the main considerations will be that the assets and liabilities pertaining to the vessels in [exercise] at Golar LNG Partners will have to be de- recognized.

Currently, those are recorded at book value assets and they will be replaced by fair valuing of Golar LNG 's investments in Golar Partners.

Furthermore, future drop downs will be at fair value and no longer at common control of transactions.

And, on an ongoing basis, the share of Golar LNG Limited's profit and losses of GMLP will be recognized as part of operating income.

Regardless of the outcome of our assessment, cash flows to the Company are not affected.

The conclusion will be reflected in our Form 20-F to be filed in April.

The following presentation assumes that the numbers are on a consolidated basis.

Turning over to page 7, the net operating revenues for the quarter at $107.5 million is down from $117.8 million of Q3.

As mentioned just now, this Q4 numbers were negatively impacted by scheduled dry docking of the Golar Spirit, which commenced in December, and also of the commercial waiting time for Golar Maria, which spanned almost two months.

Operating expenses for the quarter were also up to $23.8 million from $19.4 million, mainly because of a buildup of crew in respect of our new building program.

There were also higher than expected essential spares budgeted for our FSRUs.

Going down the left, net financial expenses for the quarter is slightly higher at $13.4 million from $11 million of Q3 mainly as a result of the high-yield bond debt Golar LNG Partners entered into in October.

All of the above results to a net income of $22.8 million versus Q3 numbers of $44.7 million.

Further down the page, you will see that utilization has come down slightly from 83.2% in Q3 to 79.1% as of Q4, again mainly as a result of commercial waiting time on the Golar Maria.

The dividend for Q4, along with the dividend for Q3 were both -- were paid in December 2012.

Turning over to page 8, where there is a graphical interpretation of net revenue, EBITDA, and dividend.

As you will see there, the net income and EBITDA for the quarter is down but the Company has maintained its -- a dividend payment of 42.5% per share.

On to the page to balance sheet on assets, cash and cash equivalents as of December, 2012, were close to $500 million.

This is a result of the repayment of the Freeze and to vendor financing during Q4, as well as the Golar Grand drop-down also in Q4.

Further down, in the new buildings you will see that our new buildings have gone up almost by $90 million, as a result of payment of foreign installments during the quarter.

Over the page to liabilities, the points to note there are the long-term debt which has gone up from close to $800 million in Q3 to now $1.1 billion as of December, 2012.

Mainly as a result of the Golar LNG -- Golar Partners bond offering as well as the NR Satu syndicated facility closed in December.

And then, our noncontrolling interest has gone up from $150 million as of Q3 to now $180 million as of December 2012, mainly as a result of the equity offerings that we did during that period.

Turning over to page 11, points to note are the additions in new buildings and investments in equipment.

Again, mainly as a result of payment in respect of new building installments and also further down the page proceeds from long-term debt.

Again, from the bond offering and also the NR Satu financing facility.

Going over the page to page 12, as previously mentioned in our Q3 earnings release, we had initiated new building financing projects and this is an update to date.

So, Golar's progress in its financing -- new building financing is proceeding according to plan.

As you will have seen from our balance sheet, as of the year end the remaining unpaid equity contribution totaled approximately $500 million.

But, against that, Golar's cash reserves stood at approximately $500 million.

This excludes the cash from the Golar Maria drop-down which was a net amount of $110 million.

After the financing of Golar's equity portion, the deliveries of each of our new buildings will be funded by a combination of ECAs.

We have now initiated and are now engaged with both Korea and Norwegian ECAs and we are working through a structure with them.

Furthermore, we are exploring various financing structures with banks such as bridge financing and revolving credit facilities.

As an option, we also have the capability of tapping into the capital markets as we have done a few transactions there.

This will include such transactions as bonds, and those are under consideration.

Furthermore, the drop-downs to GMLP have been very effective.

And, to date, our drop-downs have generated approximately $1 billion for the Company.

And, of course, with this new build deliveries and other existing assets, the Company is confident of future drop-downs as well as increased dividends through its IDR's.

To conclude that, with the above sources of funds at the Company's disposal, we expect to continue -- we expect the Company to continue its dividend growth without additional equity raising.

I will now hand over the presentation to our CEO, Doug Arnell, who will take you through the market outlook and the summaries.

Thanks, Brian.

Good day, and good morning to everybody.

We'll start my part of the presentation on slide 13 with the market outlook.

Which, I think it's fair to say, has seen quite a volatile scenario, especially on the spot term rates for shipping charters.

And, that's largely due to what the effect you're seeing on the right hand graphic on this page, which is a comparison of basically the Atlantic Pacific price arbitrage on LNG versus spot rates for shipping.

You can see that through the third quarter, we had quite a drop in, in fact a collapse, in the LNG price spread and a corresponding drop in the charter rates.

I think it is interesting to note, though, that through that time period the spot rate still remained fairly robust, never dropping below $100,000 per day.

As you can see, as we came through the fourth quarter of 2012, we had a steep recovery in the LNG pricing in Asia and a corresponding recovery in the spot market prices.

Despite all that positive outlook in the last couple of months, it is still the case that there are several anomalies on the production side of the LNG market.

Facilities with unexpected outages, facilities, new facilities, that haven't come on stream on the timing that they were expected, and that has resulted in a lack of available cargoes to be shipped.

It's not just a lack of available cargoes, because these projects often have project shipping associated with them, a lot of cases those ships are released onto the market so you get a drop in the number of cargoes and an increase in the number of ships available -- ships with open positions in the market.

Looking forward, we are very confident that the production anomalies are going to be solved.

The new production facilities are going to come on which will quickly soak up the vast majority of the open tonnage on the market and rates will continue to strengthen.

Turning to slide 14 with a bit more of a long-term outlook on the market, certainly it's the case that we're entering a phase of rebalancing in the market.

But, we feel the long-term fundamentals are very attractive.

Why is that?

Well, it's mostly due to the fact that under construction we have over 80 million tons of new production coming on stream which represents a 44% increase over current levels.

And, although the ship order book, which is fairly concentrated with deliveries later this year, 2014, and early '15, which will certainly catch the shipping up with the existing production.

Following that, we have a large wave of new production coming on stream which will soak up the vessels that are in the order book.

And, certainly more vessels are required in the latter half of the decade.

The demand for LNG we see is very strong, that side of the equation is never in doubt.

LNG pricing, and the cost at which it's produced at existing and new facilities, still compare very well with -- on a heat value parity basis with competing fuels.

And so, the demand side of the equation is solid.

We can experience some volatility in the shipping sector that spurs off of delays and schedules not met on production facilities.

So, we've got a keen eye on the major projects to watch out to see how they are coming on stream and how their actual delivery dates will reflect what has been scheduled.

Turning to slide 15, I think those of you who have been investors for some time in Golar, at least over the last couple of years, we've been showing this same slide.

And, you've, I'm sure, seen a marked shift in the number of vessels that are moving from the bottom of the slide up into the top.

The top part of the slide, of course is the Golar LNG Partners fleet, the bottom part of the slide is Golar LNG Limited's fleet.

Less than two years ago when we launched Golar LNG Partners, the promise of it was that Golar LNG Limited had a large inventory of assets with open positions that could be leveraged into longer term positions, drop down into the MLP and thereby contribute to funding the growth at the Golar LNG Limited level.

I think we're very proud to say -- I think it's very clear that we've delivered on that promise.

The growth into Golar LNG Partners has been excellent.

And, thus, through that structure, Golar LNG Limited, as Brian referred to, has raised close to $1 billion in funding to feed the new building program.

We have, again, in less than two years actually doubled the number of vessels inside Golar LNG Partners.

And, you can see them there with their longer-term contracts.

Remaining in the Golar LNG limited fleet, in the existing part of the fleet anyway, are our three first-generation vessels, which are very relevant to our midstream business which I will talk about in a moment.

And, the two other modern vessels Golar Viking and Arctic, Arctic is on charter currently and through into 2015.

Golar Viking will come open and be available for charter near the end of this quarter, near the end of the first quarter.

Of course, our inventory of assets does not stop with the existing fleet.

We have a significant growth period in the number of assets coming into Golar LNG Limited.

Page 16 is a graphic of the open positions that we have coming near-term through the early part of 2015.

As Brian said, the financing of this part of the fleet is in very good shape.

We believe we have covered the anticipated equity portion of all this program and are optimistic on our ability to use other sources to round out the funding.

You can see the first of the new build vessels, the Golar Seal, coming for delivery in the third quarter of this year.

And, following that with the other vessels, including two FSRU's, we're very optimistic that we're going to see a strong contribution to Golar's growth through these vessels.

Moving on to slide 17 and an update on our FSRU franchise.

We, of course, were somewhat disappointed to be unsuccessful on the Emirates LNG project.

However, at the end of the day, the terms which were tendered finally for that project were not overly attractive to us.

And so, although we missed out on having another FSRU asset in the same region to join our Dubai facility, we remain optimistic about that region for further projects.

Owning to that, we have recently been named as the preferred bidder for the Jordan LNG import project.

Our contribution to that project will be to provide a long-term charter of a FSRU for which we would utilize our Golar Hull 2024 which is due for delivery in 2014, actually named the Golar Igloo.

Again we have been awarded as preferred bidder which means that we do still have to close out formal contractual arrangements with Jordan.

And, that -- those discussions actually begin this week and we are hopeful that they come to a successful conclusion.

The FSRU space continues to be very attractive, there were multiple projects going on.

We see the potential for one to two further awards even in the first half of this year.

We always like to put a cautionary note on the timing of FSRU awards.

They tend to miss their predicted date somewhat, but we believe the awards that are coming up this year are on fairly firm projects so we don't expect dramatic delays.

The Gas Atacama award, we've talked about, again, in our press release.

We still are the provider of the FSRU for that project.

That project continues to suffer some delays in getting to its final investment decision.

And, we're in discussions with them to see if we can extend our offer to them to supply the FSRU on terms that will remain attractive to Golar.

Again, the FSRU, we refer to this many times, the FSRU and FSRU market and its place in the LNG industry we believe has become the default solution for new LNG imports.

It's not a temporary solution anymore until someone builds a land-based terminal and except in very specific circumstances.

Alongside of that, there currently in the market is a limited number of undedicated FSRU's for prompt delivery.

So, we are quite optimistic about this space.

As such, as we pointed out in our press release, we have been in discussions with our shipyards.

Given our optimism on the FSRU side, we are looking at the option to convert some of the existing new build carriers to have FSRU capability as well.

So, they would be -- end up just like our two existing FSRU's, they can be used as FSRU's but still have the original design for the carrier so that they can be used as standard carriers with the original performance characteristics.

We haven't committed to that plan yet, it's under discussions.

But, as we progress things we will let you know as -- how that comes out.

Turning over the slides to slide 18, we continue to be very encouraged and excited by our Floating LNG production project.

Since we've announced this endeavor, we've had excellent feedback from the market especially from sectors that are looking for fast track modular liquefaction solution at low costs and a very simple execution path.

We kicked off our FEED with Keppel last year.

That is on schedule and on budget and due to be complete by mid 2013.

We anticipate when that FEED study is done, which will pin down the specific costs for the unit, it will also confirm what we suspect that our construction time will be less than 24 months once the initial FEED -- from the time the FEED is completed.

So, this creates a very, very fast track project execution opportunity.

We believe that the FLNG vessel approach, the floating approach, will have a similar impact on the LNG industry as FSRU 's have.

Which is, at bottom, to greatly the accelerate the number of production sources worldwide just as the FSRUs greatly accelerated the number of market outlooks available to the LNG industry.

We are, as you probably know, still in ongoing discussions with the Douglas Channel LNG Project in British Columbia where we were conditionally awarded the off take of that project on a joint and several bases with the original developers there, LNG Partners.

Those discussions are ongoing.

And, they're focused on the investment turns for Golar to participate.

And, our commitment to the off take on that project is conditional to us reaching final investment terms on that project.

But, further than that, since we've announced our move into this space, we have had contact and we are in discussions with several projects globally.

A lot of them are at the early stages, but a lot of them show very good promise.

Over to slide 19, again, we mentioned it briefly in our press release, given the good reaction from the market and given the execution parameters in this type of business, we've determined that the best way for us to move forward with this is to create a new subsidiary which we have plans to do, tentative plans to do in the first half of this year.

We would plan to maintain ownership of at least 66% of the entity.

And, we would contribute the three existing first-generation vessels, which of course form the technical basis for our asset offerings into the space, we would contribute all the liquefaction and technical work and the FEED work that we're conducting right now.

And, of course, the projects under development would be executed in this subsidiary.

The justification for the subsidiary are several.

The execution of these projects will be slightly -- is similar to the carrier business.

And, even somewhat similar to the chartering of FSRU's.

We feel that the separate subsidiary will allow us to be raising financing for these projects in an optimal way.

It will clear up any conflicts that we may have with our chartering customers in this area of the build business.

And, again, allow us to maintain and build up the organization capabilities and create a focus on this area of the business, which is quite exciting.

So, the subsidiary will be focused on developing our technical concepts, our organizational capabilities in this area, building and financing liquefaction vessels, promoting the development of new integrated midstream LNG projects, and, of course, a follow on from deploying our Floating LNG production vessels, is creating new opportunities for our LNG carriers and FSRU's in new markets.

So, turning to slide 20, to wrap up with summary and outlook.

As Brian described, we are currently assessing the suitability of consolidating Partners results in with Golar LNG Limited, following the election of the independent directors on December 13.

We will make that determination in order to make the filings later this year on-time.

Looking back at Q4, our earnings were somewhat off, that was mostly caused by some commercial waiting time on Golar Maria as we saw the collapse of the arbitrage, pricing arbitrage coming into Q3 and early in Q4.

And then, of course, the scheduled dry docking of Spirit which continues in through the first quarter.

The financing of our new build, of course, is well on track.

We have cash on hand currently to fund anticipated -- the anticipated equity portion and are in active discussions with other sources of funds to round out the picture.

During the first quarter, following the chartering out of the Golar Maria late last year, we have dropped-down the Golar Maria to Golar LNG Partners with net proceeds of $110 million, which further improves our financial situation at Golar LNG limited.

The FSRU franchise continues to progress well.

The existing facilities are operating at high utilization.

And, as we mentioned, we have been selected as preferred bidder for the Jordan FSRU project.

On the Floating production side, our FEED work is progressing on time and on budget.

That work will be completed in the middle of this year and follow on which a 24 month project execution schedule to have the vessel completely ready.

And finally, we are planning to launch a new entity, for pursuing Floating LNG production projects and other related midstream ventures.

And, with that, that brings us to the end of the presentation part of the webcast today.

I will now turn it over to the operator for questions.

Thank you, sir.

(Operator Instructions)

Jon Chappell, Evercore Partners.

Thank you.

Good afternoon, guys.

Hi, Jon.

Doug, I wanted to ask you, in general terms, and more specific terms as regards to Gas Atacama, the timing as far as the decision to convert new build carriers to FSRU?

So, in the instance of the Tundra, it's not delivered until 2015.

How long can you extend the Gas Atacama before you'd have to make a move to convert that?

And then, I guess as far as the other ones you talked about potentially converting, when would you have to make that decision prior to delivery in order to get in on-time delivery?

That's a good question.

In terms of Gas Atacama, I guess this is in general for conversion to add on FSRU capability, it sounds a bit obvious, but it's true.

The longer you get to the normal delivery time of the vessel, the more expensive and difficult it is to convert the carriers.

We're using the word conversion, but it's more adding the FSRU capability on to the carriers.

Because once we do this work, the vessel will still be fully utilized as a normal carrier with exactly the same performance characteristics.

So, the situation with Gas Atacama and the other vessels is that as of today, for some number of the vessels, we can add on the FSRU capability without, we expect, too much more cost than was originally added on to the FSRU new buildings that we did that are part of the fleet today.

So, as long as we are moving towards this now and in the near-term, we would expect to see a similar costs.

If we get too deep into this year before Gas Atacama makes a decision, or before we move to make the FSRU addition on our own carriers, then it's just a matter of cost.

It just starts getting more expensive to unwind some of the design and redo the work.

As of now, we don't expect -- and again, the discussions are ongoing with the yards right now so I'm predicting things that haven't been solidified yet.

But, we aren't expecting the cost to be too different than that existing FSRU 's that we have.

Okay, now moving on to the new potential subsidiary, I guess definite subsidiary, for the FLNG, I understand the purpose behind it.

I guess it's still early stages, but how do we go about modeling this?

I mean, it will obviously be consolidated, because you'll own 66%.

But, outside of the three first-generation assets, where's the cash going to come from for that business in order to finance the investments and FEED's and whatnot?

Well, again, part of the reason for creating this new subsidiary is to raise financing the most effective way we can to participate in the projects.

So, the financing for the projects will come from various sources.

Obviously, we are going to make contribution to that company initially, which has a certain value.

We certainly expect to have a certain amount of available cash following on the launch of the subsidiary.

And, that cash would generally be used to progress FEED studies, some seed money for the various projects that we're working on, which need some injection of pre-investment decision funds to keep the projects going.

So, we expect to be able to enter the market and get some -- get the vessel schedule on track, get the projects developing with the cash that we would have available just after the launch of the subsidiary.

After that, the raising of finance to implement a full floating LNG production project, that's going to depend on the nature and the structure of each particular project, most of which aren't in a state yet where we can say exactly what will be the best means to do it.

Certainly, we would have all the tools available.

If you have a fully flanged up project, let's say where we are merely leasing in the floating LNG vessel to somebody who has gas reserves turning it into LNG and shipping it away to market, then on the back of that lease we would be able to raise financing for the construction of the vessel.

If Golar is more embedded in the project, then, again, is creating more of an integrated project, we still would, I believe, be able to raise financing based on the revenue stream that we would solidify in place with that particular project.

So, project financing is certainly an option.

But, we think that there's a place for raising further equity in the sub in order to advance those projects.

How to specifically model it at this point?

I think it's a little bit early days.

I think we'll have more news in that and how we intend to structure the Company and how we intend to structure the deal we're working on when we actually get closer to the launch.

Yes, that makes sense.

Just one more quick one then I'll turn it over.

I didn't have a chance to go through the entire press release, but I really didn't see, by skimming through, an updated CapEx budget.

You said $500 million of equity contribution.

But, Brian, if you can just give us an update of the annual capital budget plan for all the new builds, and dry dockings, both the equity and the total components?

Sure.

To start off with our new building program is, obviously, approximately $2.7 billion.

Of which, we've already paid $450 million of that.

We -- then there is an additional $500 million to cover, as what we call the equity portion, which we will pay off from, obviously, generation of cash and drop-downs and so on.

And, we now have that in place.

As we mentioned in the presentation, as of the end of December we had plus $500 -- close to $500 million which excluded Golar Maria drop-down.

And so, that essentially takes us to the delivery of each of the vessels.

And then, of course, we're now entering into very progressive discussions with various parties to try and meet that -- those expansions.

As far as expenditures are concerned, I think for 2013 there are five deliveries which amount to approximately $700 million, and also -- and then next year is where the majority of the deliveries are.

So, that's close to $1 billion.

And then one in 2015.

But, I think, as already highlighted in the presentation, of course we are very much progressing the financing options that we're working on, ECAs, banks, capital markets.

But, we mustn't forget the corporate structure that Golar LNG has been able to make work for its own cause.

To date, we've dropped-down four assets.

And, each of those assets have essentially paid -- has contributed quite a lot of cash to enable the company to pay off some of its equity new building obligations.

Absolutely.

All right.

Thanks, Brian, thanks, Doug.

Michael Webber, Wells Fargo.

Thank you.

Good afternoon, guys how are you?

Hi, Mike.

I just wanted to follow-up first on the new midstream company.

And, just to be clear, anything associated with Douglas Channel or molecule ownership would fall under this new company that's initially going to house the other three Moss tank assets?

That would be the intention, yes, that's right.

Okay.

Specifically you mentioned a minimum ownership of 66%.

Is this something where -- is this something to go with the float?

Is there a private buyer in mind here?

How we think about it?

It just jumps out at me as being a bit odd, how to we think about that at this point?

I think we just wanted to let everyone know that obviously Golar's intention is to retain majority ownership of the entity.

But, we want to keep open the option to be able to find some form of financing outside of Golar that would allow us to progress the project.

I mean, the one thing that we want to be able to do is extract some value out of the vessels that we put in there.

And, although there are old carriers in there, they do have value.

They could be converted to FSRU or, in this case, FLNGs.

Right.

But, you're not saying that upon the spend there's going to be a 34% sale at some point?

This is just more a guideline for the future?

It's not something we'll see?

We'll see a sale from that in the near-term?

I think it's pretty early days.

We wanted to give some early look at our intentions as to how we're going to progress this Floating Production business.

We don't have all the decisions finalized on what the first step is going to look like exactly.

Certainly, we'll be coming back to the market when we make that determination.

Right.

It reads to me, it's certainly one of the more -- it seems to be one of the most lucrative portions of the business and certainly in infantile stage.

So, it just peaks our interest.

I guess separately, around Douglas Channel, and you guys have provided a bit more color here, but can you give us some scale?

And, I know it's very early, and there's a lot of moving pieces, in terms of what your overall ownership could look like in that project?

And then, maybe a bit more color in terms of timing and when you think you could come to an investment decision and how that should work?

Yes, the -- I guess we can't be too open about it.

It's an ongoing negotiation subject to confidentiality and things.

But, I think it's fair to say that the investment -- total investment there is $500 million to $600 million on assets for the first phase.

If Golar participates I would think you would see us contributing, or be responsible for contributing at the end of the day, 50% to 100% of that amount either -- from various sources of funds.

And again, how we finance that kind of endeavor has certainly not been determined at this point.

You don't need all $500 million to get it going.

Obviously, the amount required this year, for example, for that project will be far less than that.

So, timing on the investment, it's hard to predict.

We are working to understand what are our options there as quickly as we can.

Of course we're not the only party at the table.

So, we can't control everybody unfortunately.

So, we're hoping it's the near-term, but I don't want to go on record with prediction of exactly when that --.

No, no, that's fair, and that color's helpful.

I guess just a couple more and I'll turn it over.

Maybe just switching to the carriers.

Viking certainly seems like it's next up.

Just curious as to A, what are you seeing out there right now in terms of deals for the Viking, in terms of tenor, and trying to hit that omnibus mark, and whether or not there's a five-year deal out there?

And then, in terms of the new build carriers, I know you mentioned potentially converting others to an FSRU.

But, of those, say 9 to 10 carriers long-term, how many of those do you think, or intermediate-term, how many of those do you think you'll actually be trading in the spot market?

Well, again, in terms of what we're seeing in the market now I think we are still laboring a little bit under a market that's short on cargoes, or shorter on cargoes than anybody anticipated just from a number of correction outages and some late production on new projects.

So, I think that if I had to predict, it's not necessarily that the first charter following on for Golar Viking would be a longer-term charter.

We may see some shorter-term deals to leg into something longer-term, a little bit like what happened with Maria.

Although, trying to avoid the 60 day idle time that we had on Maria.

Obviously, that's a goal to not have that happen.

And then, on to the new builds again, I think that it's -- as I said, we're coming into a pretty visible rebalancing of the shipping sector.

So, you've got ships coming on a pretty firm schedule, everyone can see it, everyone -- you can find out what the order book looks like.

And, what you have is the shipping catching up in a concentrated way and the production coming out over a more elongated time.

And, that's just naturally how it has to happen.

Obviously, the ships are going to end up arriving ahead of the curve when the new LNG's coming on.

And, in that period, prior to the big wave, you can expect some -- a little bit of volatility on rates and things on the ships as they wait for the new production to come on.

We rely on a couple of things.

One is that when our new build fleet starts coming on, our fleet, along with being one of the largest, will also be one of the most efficient.

And so, when things get a little bit more balanced, what we look to is that fact that our new builds will be among the most attractive ships to charter from a cost of operational point of view for our charter orders.

And also, sitting in the actual open tonnage, late this year and next, I believe there's something like 37 open vessels coming into the market over the next period.

And, we have one-third of those, or a little bit less, 11 of those.

So, we hopefully will be able to show a little bit of market leadership with ships that should be quite attractive to charter.

For me to guess at how many of the ships will be, and on what time, will be in the shorter-term market versus long-term markets, it's difficult to say right now.

But, I think the earning power of the fleet will still be good.

The shipping supply demand looks balanced and then under-supplied starting in 2016, '17.

So, for how we think of the market, it looks quite optimistic.

Got you.

Okay, then that's helpful.

Actually one more for me and I'll turn it over.

But, just curious, as you guys are -- back along the lines of FLNG and that FEED study with Keppel and the three Moss tank assets heading to the new company, within the FSRU space and with the FPSO space we saw a pretty quick conversion from conversions towards new builds.

And, I'm just curious as to what feedback are you guys getting around that conversion?

And, I guess the sustainability of conversion asset and how quickly you think we would see a transition to, say, new build FLNGV 's, being that you've already gone through that on the FSRU side?

Yes, of course, it depends which sector you're looking at.

There's the prelude style FLNG venture which is very field specific, offshore asset that's completely different from what we're talking about here.

Those will get developed and done on a bespoke basis and usually very, very long time lines.

I think you're probably referring to more like what's happened with where Golar, of course, was very successful with the FSRU's with conversions from Moss tankers.

But, very quickly the Korean shipyards figured out how to do that kind of project on a similar, little bit slower time line, but a similar timeline as Golar could do on conversions.

Exactly.

Although, I would still say it's -- their still six months or more slower than a conversion can be done.

I think that kind of thing is natural to have happen.

It's a little bit -- I think on the FSRU side, you can be a little bit more generic on the vessel itself, which aids the Korean shipyards in order to build a generic FSRU new build.

So, it's fairly easy to come into the space a little bit more, a little bit more complex on the technical side on the FLNG space.

But, I'm not going to say it's not something they will get over.

So, our speed of entry here is critical.

I think that we will have to not just rely on the fact that we were able to create floating LNG assets but I think we have to be very good at selecting good projects for those assets.

And, be very good at integrating our other franchises into this integrated midstream position which can turn into more of a self-sustaining optimizable, if you will, business entity that won't be 100% reliant on being the fastest converter of, or builder of, FLNG vessels.

That's certainly our advantage to start off with and get the business going.

Okay.

All right, thanks, that's helpful.

I'll turn it over.

Thanks for the time, guys.

Fotis Giannakoulis, Morgan Stanley.

Yes.

Hi, Doug, hi, Brian.

Hi, Fotis.

Can you please clarify to us the distinct roles between the new subsidiary and your partner in the busy LNG project?

Will the partner be participating in the construction of the FLNG?

Or is it totally separate?

Well, as we've announced, all that's really happened is, formally happened, is that us and the original developer, LNG Partners, have been awarded the off-take on a conditional basis joint several basis.

That project has been under development for some time by the original proponents along with their partner, the Haisla Nation.

The funding, who's going to fund which part, who's going to contribute to the floating aspects of the project versus land-based project, that's all -- there might be some obvious predictive answers to that, but all of that is under discussion and we're just not at a point where we can describe exactly what that looks like yet, Fotis.

Okay, thank you.

And, you announced a purchasing off-take agreement for several hundred thousand tons.

I understand the capacity of the project will be 2 million tons, does this mean that there's going to be a project with three trains, each around 700,000 tons?

Why the agreement was up that amount and not for the total amount?

Well, the original size of the project is driven by the existing pipeline capacity that serves -- that will serve the project.

And, that's what set the volume for the Phase I. Phase II depends on expansion of pipelines which will take a little bit longer time.

So, the project proponents have set about to execute the 700,000 ton per year project, because it can come on stream earlier, which we agree with as a project strategy.

So -- but, the agreement that we are working on on that project does contemplate the expanded volumes, as well.

Thank you, that's very clear.

And, in regards to the marketing process of the LNG, you write in your press release that you are in active discussions right now.

When do you think that these discussions will be concluded or at least give us more details about the preliminary agreement?

Do you expect that the sale of LNG will be in a somewhere fixed price?

Or it's going to be some price linked to the price of natural gas in North America?

And, if you can give us an expectation of what would be the spread?

Are we talking about $3, $4 of MMBtu over a profit for you, or something higher or lower than that?

Okay, well, again it's very difficult for me to talk about too many details on ongoing discussions with that project.

I think I'd like to pull back a bit and just say that our focus right now is to A, get this FEED study done with Keppel and solidify our technical solution that we are bringing to the market.

Because that's in essence, yes there's a different size, 700,000-ton project in Douglas Channel, various other opportunities, but that asset will drive the follow-on opportunities that allow us to participate in the project.

Douglas Channel, or any other project, we will look at to participate in those projects in the best way we can in order to maximize the value and manage the inherent risks of the project.

So, unfortunately, I can't really talk about any specific arrangements for off sales on BC.

I think there's a raging debate about sales of LNG from North America into Asia.

There's certainly different viewpoints.

We would, I think, take the view that the market will speak as to what kind of exposure they want in terms of price indexation and things.

And, we would be, as a first case, responsive to that market.

There seems to be an appetite for pricing that's linked to North American gas price from Asian buyers and the reasons for that are clear.

In terms of what margin people can expect to see on those, far too early to say.

It has everything to do with the specific project, the shipping distances, the type of commitment you're making, whether the buyer is contributing equity to the project or not.

So, it's just too difficult to make a prediction on that, Fotis.

Okay, thank you.

And, in relation to your -- to the three-year-old LNG carriers, does it seem that these vessels, provided that the study goes well, will be tied to the FLNG initiative?

Or, we might see any of these vessels at bidding for an FSLU contract?

Well, I think that the intention is that all three of the first-generation vessels would be part of the new floating production midstream subsidiary.

Because of the nature of the production projects, and the fact that you're actually, by definition, you're introducing new production onto the market, we'd obviously see that there, hopefully, will be good opportunities to integrate entire midstream positions together, which could include carriers and FSRUs and it could include potential for an FSRU conversion project.

But, we haven't been as focused on FSRU conversions for those vessels.

But, there our projects out there, not so active at the moment, there our projects out there that the first-generation vessel conversion for an FSRU make perfect sense.

And, just because those vessels are sitting inside something that we're attaching to our production initiative that we would certainly, if the deal was right and the value was there, try to participate in the FSRU conversion.

Doug, my last question, it has to do with FSRU tenders, the last two tenders.

The one that you have been chosen as the preferred bidder and the second, the Emirates one that you lost.

Can you explain to us what were the elements in the technical aspect of the Jordan FSRU project that made you the preferred bidder?

And, what was the commercial terms, that they were not satisfactory for them, in order to successfully get the Emirates FSRU?

I'm not sure, you'll have to -- I can describe exactly what the Jordanian's mostly liked or disliked about our technical solution.

It did happen that the technical requirements for the project match up very well with both of our new build FSRU's.

And, we selected the second of the deliveries in order to put the vessel in there.

So, they're getting a state-of-the-art new build FSRU that fits their requirements very well.

And again, you seem to be inferring that it was just a technical-based decision to make us preferred bidder, that's not correct.

It was a full consideration of all technical and commercial aspects that lead to the preferred bidder award in Jordan.

I can't speak with specificity about commercial aspects of Emirates LNG project.

That's their project.

But, I think we would say that how this is coming out, if we are able to secure the Jordan FSRU project, we like the one we're getting better than the one we didn't get.

So --.

I understand that.

I'm just trying to understand if there is any increased competition for this project.

And, if rates, from what we have seen, they've been trending lower with made you not want participate or made you not find an acceptable or satisfactory the Emirates terms?

I would say that -- I mean, the competition field is not radically different.

I mean, especially for near-term prompt projects.

There's a very small number of companies with vessels available for these bids.

I think what can happen is due to specific characteristics of a project that one company really, really likes, and they may be thinking of a strategic position, for example, or some other outside element, then a company can tend to get more aggressive on what terms they are willing to provide to projects.

And, in that case you get some downward pressure on things like rates or contractual terms.

But, I wouldn't say the competitive space is radically changing.

It's still quite a few projects and a fairly limited field of competitors.

Is there any significant risk that somebody will try to outbid you on this Jordanian FSRU project in terms of pricing?

Well, the pricing has already gone in.

So, that part of the deal is finished.

Okay.

The technical, commercial, and pricing, all the elements of the bids were submitted previously.

And, the preferred bidder award we received is based on all of that information.

And, which part of the bidding process is left right now?

And, when do you think that this is going to be concluded?

Well, we're entering into an exclusive negotiation period with the Jordanians on the time charter terms.

They are hopeful to be concluded with that within the second quarter.

Okay, thank you, Doug.

I appreciate it.

No further questions.

(Operator Instructions)

Urs Dur, Clarks and Capital Markets.

Hello, gentlemen.

Hi, Urs.

Hi, on the FSRU's going forward, a lot of it's been touched upon.

But, can you guys remind the audience and myself, the main upcoming projects under which you are bidding?

And, any possible timing that you might expect where we see a preferred bidder emerge?

Yes, the two we referred to in the press release in the first half of '13, one is in the Middle East and one is in India.

I would say there's a list of several other projects, actually additional projects in the Middle East which are in formative stages.

India is very active.

We're still hopeful that eventually there will be a next project come up in Indonesia.

But, again, the near-term projects are one in the Middle East and one in India.

Do you have any color or view as to new projects that you might see on the horizon?

Or is that just too commercial that you want to keep close to your vest?

I mean we've heard rumblings in the marketplace of Brunei considering an FSRU.

I'm just wondering if you had any potential market horizons that you might be able to give us on the FSRU side?

Well, I mean, countries that have been out in the open talking about potential projects are Bahrain, Egypt, Lebanon, Cyprus, Kuwait of course, that wouldn't be a new -- well, actually they are looking at a second, potential project.

I don't know the status of it, but they have their existing terminal there.

India, there's three or four projects that are at various stages.

Indonesia, of course Chile is an ongoing interesting situation where they've been trying to push their FSRU projects along and having trouble getting any of them going.

Uruguay has spoken about projects.

And, just others, I just don't have them on the top of my head right now.

But, there's got to be -- there's always a pretty heavy churn of new FSRU projects, and we track them all.

We don't pursue them all aggressively.

Because, quite honestly, there's a lot of them that we just don't believe will ever go ahead.

And, we prefer to focus on high-quality projects.

But, we're, I think it's fair to say, very optimistic of the amount of market churn still on the FSRU side.

Okay, helpful.

The Hilli and Gandria listed as spot.

And, you were going to put them into the new FLNG structure which is -- sounds exciting and looking forward to seeing how that develops.

Do we -- how do we treat them going forward in the model?

Do we treat them as idle until they go into the FLNG project or what do we do there?

I think it's fair to say as this rebalancing phase comes along with the new builds being delivered out of the shipyards, that the efficiency gap between the new builds and first-generation vessels is very, very large.

And so, it will become increasingly difficult to trade older carriers.

The -- it is actually an interesting dynamic I'm not sure gets thought about, but there is a large number of those first-generation vessels trading as carriers in the industry right now.

And, as the new builds start coming in, the first point of flex in the fleet certainly will be those first-generation carriers coming out of the market.

So, what we're doing, we're still obviously open to carrier opportunities for them.

Certainly our focus is shifting onto the midstream opportunities to use -- to utilize those assets.

We're going to be minimizing the operating costs associated with those vessels as quickly as possible.

But, keep them in a ready state so that they can be reactivated quickly, of course, so that they are in very good condition as they are, as one or more of them head into a conversion project.

Okay.

And, you said the FLNG process, remind me, I'm sure it's in the press release, it will take, what, 24 months you said?

Or that's just conversion?

How fast you think the new structure will be in place?

Any guesstimate there?

Well, we're targeting the first half.

So, before the first half of this year is out, we would come with all the details of how that was going to work.

And, as long as things stay looking how they do today, go ahead and execute on that.

The execution time for the vessel itself, I mean that's part of what the FEED study establishes is the exact schedule.

But, we're anticipating that following the FEED being completed, again around the first half of this year, we would have available to us a 24 month execution timeline for the first vessel.

Okay, yes.

Thank you for your time.

I have no further questions.

Thanks.

Herman Hildan, RS Platou Markets.

Good afternoon, guys.

Just have a few questions.

You mentioned a $400 million to $500 million asset in the first phase of, call it, GFLNG.

What kind of production capacity does that asset have?

Is it 1.3 million tons per year?

Or could you give some indications on that?

Sorry, the first phase of which?

I want to make sure we answer --.

Yes, you mentioned, you had a comment where you said that the first phase of the Golar FLNG will be a $500 million to $600 million asset.

What kind of production capacity do you have on the $500 million to $600 million asset?

Actually, that was, I think I believe what I was talking about was the first phase of the Douglas Channel project, which includes a liquefaction asset and also onshore assets related to the liquefaction, which totaled up to $500 million to $600 million for the 700,000 tons a year first phase of that project.

We actually haven't come out with firm costs yet on the converted first-generation vessel for floating LNG.

We will have more information on that when we complete the FEED study.

Is it possible, though, to give some indication, just rough indication, of how much of that $500 billion to $600 million relates to the asset itself?

Sorry, that's project details, again we're not an investor in that project yet.

We're working on it, so I'm pretty hesitant to give away too much detail about those.

The majority of it is on the liquefaction assets, as you might expect.

Of course.

And, why do you have to wait say three, four, five months to spin off the FLNGRU?

It sounds like you expect to spin the FLNG off before your complete -- before you finish the FEED study, is that correct?

Of course, the FEED study is one of these things, it does have a set completion day.

But, every day we're working on it, we're learning more and more.

The timing on the launch of the subsidiary, yes, we want to be able to have solid information about the costs and schedule for our technical solutions that we're bringing to the table.

So, within the first half of the year we'll be ready with that information.

And, I think we're still working on structuring issues and thinking about how best to take Golar into this business.

There's a lot of opportunity there.

There's some different risks inherent in the business that Golar in the past hasn't had to deal with.

So, it's a new, somewhat different, business line for us and we want to get it right the first time out and not have any false starts.

Is it the commercial aspects that you want to, I guess, conclude a bit more before you kick off a subsidiary?

Well, it's everything.

It's solidifying what technical solutions we're bringing, a little bit more work, getting the projects, getting familiar with the potential projects and how they can unfold, thinking about how we're going to structure commercially our participation in projects, our preferred way to raise financing for such projects.

So, it's a full slate of the business model that we need to be able to speak about clearly before we launch the subsidiary.

And also, just the last question, you mentioned, also, the efficiency gap between the older and newer.

You mentioned in your previous press release you referred to a GAAP of $20,000 to $40,000 a day.

Is that -- do you see the willingness by charters to accept that you take part of that efficiency gain or is that, call it, more difficult to get through?

Well, it might not surprise you to hear just because I say on a webcast that the GAAP is $20,000 to $40,000 that the charters don't want to hand that straight over to Golar.

The market will work how the market works and we'll find that inflection point.

We certainly, very much, expect to be sharing in a significant portion of that efficiency uptick.

Okay, thank you, very much.

Conor Ryan, Saba Capital.

Mr. Ryan doesn't appear to be on his line.

Okay.

Okay.

Are there any more questions?

We have no more questions in the queue.

Okay, great.

So, well, thanks everyone for your participation in our fourth-quarter results.

And, as always, we look forward to speaking to you again in May when we announce our Q1 2013 numbers.

And, until then, we will speak then, goodbye.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.