Golar LNG Ltd (GLNG) 2013 Q3 法說會逐字稿

Good day and welcome to the Golar LNG Ltd.

Q3 2013 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 for that.

Hello, everyone.

Welcome to Golar LNG's third-quarter results presentation 2013.

As the administrator said, my name is Brian Tienzo and as per usual, I will be taking you through the third-quarter results highlights as well as the financial highlights in respect to the cash flow and balance sheet.

And for this quarter, I will also be taking you through both the FSRU and shipping business updates.

We will not unfortunately be joined today by our CEO, Doug Arnell, because as of yesterday he became a new dad.

So I think he is probably at home praying that he was here.

But in any event, we are joined by our Senior Board Advisor, Oscar Spieler.

Some of you are probably still familiar with that name, who has been integral to the development of Golar LNG's FLNG project.

Without further ado, let's now turn to page 4 to look at the Q3 highlights.

Disappointingly, Golar reports a third-quarter net loss of $13.1 million.

Within this was a cash/non-cash loans of $8.2 million in interest rate swaps.

Furthermore, EBITDA generated in the quarter was also lower than Q2 and amounted to a loss of $3.3 million but more importantly, cash from operating activities improved from Q2 levels to $23 million in Q3.

Of course the main reason for the negative numbers coming out of the third-quarter net loss and EBITDA is as a result of the Viking and Gimi being idle for a lot of the times during the third quarter.

Onto other activities during the third quarter, we concluded a $1.125 billion eight-facility with the Korean ECAs that was done at the end of July and what this allowed us to do is to actually start new banking relationships as well as start a good relationship with the Korean ECAs.

Subsequent to that, we signed a 10-year time charter for the Golar Eskimo with the Heshemite Kingdom of Jordan that was signed in August this year and that FSRU is due to commence to the latter part of Q4 2014 or early 2015.

Furthermore, we also signed a five-year FFO time charter for the Golar Igloo with KNPC, the Kuwaiti National Petroleum Company again in July this year and that is due to commence during Q1 2014 with the vessel looking to be delivered to us in December -- in next month.

Given the very buoyant FSRU market, we opted to have Golar Tundra change to have an FSRU capability also but as a result of that, delivery of the Golar Tundra is now pushed back to November 2015.

Spot charter rates, as we will mentioned earlier, did hold for them during the quarter but unfortunately markets remains volatile and inefficient and this resulted to idle time and unfortunately high bunks consumption for both Gimi and Viking and impacted negatively the results for the quarter.

Nevertheless, the Board is very buoyant in respect to the opportunities of the Company with the vessel financing that we are about to put in place as well as the opportunities that we see in FLNG; they have started to maintain a dividend at $0.45 for the quarter.

Subsequent events to Q3, so the Company has now taken delivery of both the Golar Seal and Golar Celsius in October.

Whilst we see improving cargo availability, Viking has been able to secure voyage charter but unfortunately Gimi because of the vessel's size and the age of the vessel is now being prepared for a layup.

Golar Arctic commences its drydock in November, the beginning of November and it's just actually recently just completed that.

And finally, we now have received a new financial commitment in respect of four newbuildings that are delivering in 2014.

Turning over now to page 6, we have highlighted certain numbers there on the deconsolidated and consolidated basis so just going through the consolidated numbers, these are what the numbers would've looked like had we continued to consolidate both of our LNG Limited and LNG Partners.

And as you can see, the EBITDA numbers there are very consistent.

Obviously there is a drop in revenue from Q2 2013 to Q3 2013 mainly as a result of the bunks consumption and idle time for the Gimi and the Viking.

Compensating against that is a decrease in operating expenses for the quarter particularly in respect of the underlying operating expenses on the vessels.

On the deconsolidated numbers, there is a market drop from net operating revenues in Q2 to Q3 to $12 million level, albeit there is just positive variance in respect to the operating expenses from the Q2 level to Q3.

The difference in revenue could not be bridged and as a result, the EBITDA for the quarter has decreased markedly from $8.2 million in Q2 to a negative $3.3 million in Q3.

We also saw quite a big movement in respect of mark-to-market valuation for the interest rate swaps that we had entered into, so we were looking at positive a mark-to-market value of close to $49 million in Q2.

That is now reversed to close to $11 million negative in Q3.

That all means quite a big impact for the time charter equivalent at TCE from Q2 level of $86,900 to now $37,963 a day.

Again, the biggest factor here is the number of idle days for both Gimi and Viking as well as the bunks consumed while those two vessels were idling.

As a measure of that, the bunks consumed for Gimi -- sorry, for Viking, it's close to $30,000 a day.

Utilization again as a result of the idling has come down quite markedly from 80% to 40% but despite that, the Board has felt confident to maintain the current dividend of $0.45 per share.

Turning over to slide 7, we just marked here the main movements there.

One obviously the change in operating assets and liabilities where the main movement is a result of the mark-to-market movements in interest rate swaps and the dividends from Golar Partners.

Now it might just on a cash basis, it might seem that the dividends received by Golar LNG Limited from Golar LNG Partners have decreased but in fact the April to June numbers are slightly misrepresented in that there was a catch up payment in April to June in respect of previous quarters' dividends.

But in any event, had that been removed from this equation, then we would be looking at an increase in dividends from Golar Partners.

We also see there again quite an active quarter in respect of additions to newbuilds and equipment with $88 million added to the newbuilding program.

Turning over to page 8, again this is a graph that we showed to you last quarter and it just highlights really that the ever-increasing and more important dividend contribution by Golar LNG Partners.

Golar LNG dividends have been maintained at $0.45 per quarter but in contrast to that, Golar LNG Partners Distribution have been increasing and of course as a result of that, the shares in dividends received by Golar LNG Limited have also been going up.

Turning over to page 9, again some highlights there, cash and cash equivalents have come down quite massively from Q2 level to Q3 as a result of heavy -- huge amounts of predelivery payments in respect to the newbuilding program.

We've also got a new item in there under restricted cash and short-term investments, which is up $23 million and represents the LC deposit that we had to put in place to secure the Kuwaiti charter.

And then going down the page, the newbuilding program has increased from $734 million to now $822 million in Q3.

Going over to page 10, one market change there in respect to the other current liabilities from $35 million to $69 million in respect of certain amounts of creditors that were yet to be settled at the quarter end and again, it has an impact in respect of mark-to-market movements during the quarter.

Turning over to page 11 and to go through the financing of the newbuild program for the Company, so as a result of the Tundra, which is now an FSRU, Golar's CapEx now stands at $2.74 billion.

To date we have paid $862 million after drop-down monies, operating cash flows, and of course we have now put into place two facilities to meet the remaining installments.

Eight vessels will be funded by the $1.125 billion ECA facility which we signed in July and more recently we have received a credit approved commitment from ICBCL on a sale and lease back basis to fund four of the vessels that are delivering next year, which translates approximately $750 million.

Of course we are very happy to have ICBCL starting a relationship with Golar and hopefully obviously amongst the Frederiksen Group as well.

To that extent, we were able to agree with them a 10-year bareboat in respect to this sale-leaseback transaction.

But I think more importantly, they have been very aggressive in terms of their financing and the structures that they believe in to the extent that they are looking to fund 90% of the vessel value.

Of course with any other holes in respect to the newbuild financing will be essentially plugged by two potential drop downs through Golar LNG Partners of Golar Igloo and Golar Eskimo and I think it's fair to say that we should expect at least anywhere between $150 million to $200 million of free cash coming out of those transactions.

And although it's not quite evident yet, operating cash flows are of course still a source of income for the Company.

The shipping market that we are seeing doesn't quite allow us to rely on that for the time being but the long-term outlook certainly looks positive.

On top of that, we continue to receive MLP dividends and of course those dividends -- level of dividends from Golar LNG Partners has been increasing.

And I think just to highlight again the importance of holding the IDRs in respect of Golar LNG Partners, we are nearing now the highest splits as far as the IDRs are concerned and I think as we get closer to it, we will see the value of those IDRs more and more.

So even in downside chartering market case, I think Golar is pretty confident and certainly its cash and financing position continue to be robust.

Going over to page 12 to have a look at the short-term outlook for shipping, I think it's fair to say that there are currently a very bright line between the short-term outlook and the medium- to long-term outlook.

Where the short-term outlook -- although day rates are currently holding despite the arrival of new tonnage, there remains very little opportunities for lifting cargoes and as a result, it's very difficult to take benefits of the day risk that we continue to see holding firm.

The other factor as well to take into account for vessels that are coming into trade especially those newbuilds is typically there is an expenditure to be incurred in positioning vessels and more often than not, charterers are keen to avoid using vessels that have not had a maiden voyage and as a result, owners are likely to incur I think more costs during the initial period of delivery from the yard.

There is a table there that basically shows us the cumulative over and undersupply of vessels versus the liquefaction facilities that we are seeing over the next two to three years.

I think 2013 everyone agrees is going to be tight.

In fact, we are seeing -- we saw it in 2013 and the likelihood is that the pressure on shipping is likely to continue well into 2014 and maybe even 2015.

However, we believe that coming towards the end of 2015 onwards, the amount of demand for energy carriers increases rapidly and as a result of that, the supply of energy carriers need to catch up and currently we are not seeing sufficient movements in orders for LNG carriers to be able to plug that hole.

To that extent, we are confident that coming to the end of 2015 going to 2016, there could be a reversal of what we are seeing today and maybe even reflect a similar event to what we saw when the Qatari production ramped up and shortage and tonnage capacity became very evident.

Going over to page 13, this is the highlights of the long-term outlook.

So anticipated liquefaction capacity indicator requirements at the moment of 225 new vessels by 2020.

The current order book stands at 107 vessels, of which against that there is a retirement of 30 vessels over the next few years which could mean that there is a tonnage gap of approximately 150 vessels.

As the graph there shows, the left-hand side graph, there is certain constraint as far as capacity is concerned.

Currently the most that we've seen delivered in any one year is 50 and that was in 2008.

Samsung and DSME remain the most active yards as far as LNG newbuilds is concerned, but given those factors, there remains a shortage in yard capacity to be able to meet the demands we see coming through from the end of 2015 onwards.

So I think to summarize on that point, although the near-term market shows weakness as far as shipping tonnage and rates are concerned particularly for 2014 and into 2015, there remains a big dislocation for the shipping demand and shipping supply that we see coming through from 2016 and 2017.

And as the one constraint against that which we have -- we are seeing and we continue to see is that whilst there are huge advantages in ordering those vessels ahead at the time, financial constraints become much more evident recently.

And we see certain sort of players out there looking in very expensive financings in order to try and mitigate the potential of not being able to take deliveries of vessels.

Going on to page 14, this is the highlights of our existing portfolio.

Again the table is cut into two.

The top table is highlighting the vessels at Golar LNG Partners level of which a majority are obviously in long-term charters and against very competent and first class charterers,

And at the bottom is the Golar LNG Limited fleet and as you can see, there is very little -- the dark blue lines there signifying not many long-term charters to rely on.

The Gimi, the Hilli and the Gandria, although Gimi had been on charter during the summer, the likelihood is that she will likely be not able to compete with the newbuilds that are coming through and so Company is looking to arrange a layup position for the vessel.

Golar Viking and Golar Arctic are modern carriers and will continue to be competitive and of course, Golar Seal and Golar Celsius which have recently been delivered will be the top of the class when it comes to taking which vessels will be favored by charterers, particularly since even when the idling -- the cost of idling these vessels is much, much lower, I think we're talking about a third compared to I think costs of Viking and Golar Arctic.

Over the page again highlighting the Company's current newbuilds delivery schedule, of course the next delivery for the fleet is going to be the Igloo, which is an FSRU, and assigned to KNPC for a five-year charter.

Their charter will look to commence during Q1 of next year.

And after that, we've got some -- a few deliveries of vessels and the last of the deliveries will be of Eskimo, which is with Jordan, and the Tundra, which has recently been converted to an FSRU.

Just a quick highlight of the Kuwait and Jordanian charters, a majority of these you already know, so the FSRU with Jordan is a 10-year contract, first five years is an EBITDA of $46 million and then that drops very slightly to $43 million for the optional second and fifth year.

There is a -- the aim of the [start-up] for the project is a project startup towards the last part of Q4 2014 or the beginning of 2015.

And of course as a result of this charter, the length of this vessel it is -- it remains a very good candidate for MLP drop down.

On the right-hand side is the vessel for KNPC for a five-year contract.

The Igloo charter will earn approximately $200 million in time charter value over five years.

There is a nine-month regasification service fee built into the contract.

But what this does is it gives us the ability to enhance the earnings capability of the vessel during the quiet period particularly since the vessel is placed in a very advantageous position in the Middle East.

The project -- the Kuwaiti project is looking to start up during March 2014 and again because of the nature of its contract, it is also an excellent candidate for MLP drop down.

I will now ask Oscar to step in to take you through the floating liquefaction project that Golar has been undergoing over the past couple of years.

Oscar of course has been an integral part of the team in developing this project and so he is a much better candidate than me to take you through the details of the project.

Oscar?

Thank you, Brian.

Just going a bit back in time during my time as a CEO, we were working on quite a few liquefaction projects.

One of the first things I did as a CEO was to shut down the activity due the high costs, breakeven on the LNG, the complexity and the risk of the projects which we were working at that time.

With the shale gas revolution and the gas prices in US, we saw a new opportunity for Golar to create a low cost effective FLNG solution and if you look at how we started the FSRU business, it's got quite a lot of similarities in the way we started that business.

As most of you are aware of, we started FEED study on our FLNG last year and have now completed the FEED which has resulted in a very, very cost-effective solution with relatively short delivery time.

The concept, what we have said generally is that we don't want to go for the complex project and the complex gas so our concept have some limitation when it comes to gas quality.

We have targeted the pipeline gas quality and we are also not gone into the difficult environmental areas when it comes to heavy waves and winds.

So we are going for the benign waters.

The fact that the unit is floating we believe creates quite a lot of flexibility where we can employ it.

And the fact that it is floating, it creates much less environmental footprint that an onshore plant, so hopefully this will be a much easier permitting process and that's what we see also on the projects we're working on.

It seems to be much simpler than a land-based project.

We have carried out the FEED and so far we have not really identified any showstoppers.

The FEED has been done on a 2.5 million to 2.8 million ton per year unit.

There are four cranes.

We have made the concepts also that we can easily scale it down from 2.5 to -- or from a four crane solution to a two crane solution without too much cost.

We have had DNV, which is a type of classification society which have approved the (inaudible) in principle.

That means they have reviewed our FEED study and they don't see initial stop rider.

In the end of the FEED, we've got fixed costs from Keppel, not 100% fixed but these are a quite modified fixed EPC contract where we have limited risk for cost overruns.

There are some, but we have tried to limit it quite a lot.

For -- when it comes to the FEED, we are now finalizing the contract negotiations with Keppel and hopefully we will be ending that within the next few months.

We are also looking into order long-lead items in order to shorten the schedule, but that remains to be seen on the decision to be taken in January I believe.

If we go over to the next page, we are working on a number of projects.

We have not really marketed the concept in the market so far but we are working on projects in the Americas, both in North America and South America.

We are working in West Africa and some of the projects are very early stage and some are more developed.

When it comes to the most developed is most probably West Africa, where we believe that we will be able to if everything goes according to schedule, we should be able to take final investment decision by middle of next year.

That will most probably be a $2 trillion solution, so that will be 1.1 [billion] ton.

And a lot of the product which we are looking into in West Africa is actually flaring that we actually stop flaring in West Africa.

With the concept we believe that we can develop fields which nobody else could develop, commercially that can vary from 0.4 TCF to 2.5 TCF.

We are also very flexible when it comes to tolling periods.

Due to the fact that we are floating we can move the unit from one field to the other and also with the cost or the CapEx we have, we believe we also are able to offer these type of varying tolling periods.

So in one way this is ideal for stranded gas fields or like -- yes, stranded gas fields.

When we are looking at the products we are looking at, some of them are pure tolling deal.

That means that we just take a time charter for the vessel and other deals are including that we actually take -- and sell the LNG and transport LNG to the markets.

And when I look at the projects in the FSRU business, every product we have are engaged in, the first thing the developer asks about already we can actually can supply LNG.

And with this project, if we manage to get hold of the molecules we believe that this can create a lot of opportunities for shipping and for the FSRU business.

When it comes to Douglas Channel, which we have been working for on the last year and we have told you about before, we are negotiating with the Partners in order to find a solution and we are hopeful that we will find a solution and due to the ongoing discussions between the Partners, I think we will not really give any more comments on Douglas Channel on this call.

The Board are enthusiastic.

I think what we have seen is that the concept works.

We have found a competitive CapEx.

We're just looking to find the right opportunity.

Brian, can you take over?

Yes, absolutely.

Thank you, Oscar.

So just to summarize the call, then, we continue to see solid uptime for the vessels that are on charter.

Today for the past couple of quarters we've had, we haven't had any downtime, technical downtime in any of our vessels and of course with the new commitment in respect of four vessels, we are now seeing a clear line and sufficient capacity in order to be confident that we will be able to carry the Company through a fairly volatile market, shipping market over the next few quarters.

There remains two distinct chartering timelines for the near-time supply and demand rebalancing that we are likely to see over the next couple of years and of course, the much more positive long-term outlook where shipping demand and opportunities thereby remain very robust.

As mentioned already, the Board is not satisfied with the deconsolidated earnings of Golar LNG Limited particularly as a result of again, this is as a result of the Viking and Gimi.

We are likely to again see challenging numbers during Q4 as we see Golar Arctic go into dry dock and we continue today, we continue to see a certain amount of idling time for Viking, Gimi, and even for the newbuildings.

We are confident, though, that in time these vessels, particularly the modern and the newbuildings, will start contributing to earnings.

Q3 was successful in respect of FSRU contracting with Kuwait and Jordan FSRUs being signed up and as a result of those, we look forward to looking at dropping goes down to LNG Partners.

And Oscar just mentioned the Keppel FEED study for our FLNG concept is now complete.

The EPC contract negotiation continues and is now looking to be finalized for the next couple of months and I think it's fair to say that our project opportunities as a result of this FEED study has widened and they're looking very positively.

And I think lastly, the results of the FEED study was sufficiently robust and very positive such that the Board is looking to consider funding the long-lead items to make sure the timelines for a quick turnaround of FLNG solution is met.

On that note, that ends the presentation for Golar LNG Limited and so I would like now to invite the administrator to queue in questions.

(Operator Instructions).

Fortis Giannakoulis, Morgan Stanley.

Brian, Oscar, thank you.

I want to ask about the FEED study.

I was a little bit surprised to see that you left it until the end of your presentation.

If you can give us an estimate of the cost of the construction, I understand that now the size of this facility is expected around 2.5 million to 2.8 million tons.

Is that correct?

The facility, as I said, it consists of four trains each of them is approximately 0.6 million, 0.7 million tons so we can either have 2.8 million or we can have 2.1 million or 1.4 million.

So it's quite flexible when it comes to sizes under us.

A lot of the fields which we are attacking is smaller fields that no one else can actually develop, so it's important to have a flexible solution so we don't need to do a FEED study every time we meet the client.

When it comes to CapEx, it's competitive.

It's the lowest we have seen in the market.

I don't want to comment the specific figures so the fact that we are using an old unit of course saves cost.

I think we have found a concept which are very effective.

The top side, which we have -- which we are using, we have done quite a lot of optimization there, so actually the fuel consumption on the unit is also very, very competitive compared to similar plans.

Oscar, can you a little bit clarify how this facility will be deployed?

I understand that one opportunity is to get the pure time charter and the other alternative is that you get control of the [monitor] and you will operate it yourself and you will sell the fully delivered LNG.

How would the economics look in each of these cases?

We are looking at all different types of structures.

We are open to have partners in this project.

We would actually like to have partners with local knowledge like in Canada.

We would like to have partners and the deal could be anything from a pure tolling deal as you said to full train LNG facility where we just buy the gas and we sell the LNG and we take the whole risk.

If you take Canada for example or US, the $3, $4 for the gas, $3 or $1 for piping, then you're up to $4, $3 for the liquefaction and then $1.50 in shipping, you are up to $9 delivered in the Far East.

So we might not be able to take the full effect of the $15, $16 which is the price of LNG in Japan, but there's another $3 to be made most probably on top of that or between $1 and $3 by trading the LNG.

And when it comes to the return on the tolling what we can say that it's similar or better than the first FSRU deals that we did.

Okay, very clear and very helpful.

Thank you.

There are a lot of people that they have discussed about the technical difficulties of the construction of a project like that.

I understand that you have some answers from the FEED study which are quite encouraging.

Given the expectation of the size and the CapEx that you are going to have, how will the execution risk going to be distributed?

Is it going to be Keppel's responsibility to provide the facility that can meet the requirements of the newbuilding agreement or there are going to be more parties that they will take the execution risk?

And also in relation to that, how do you expect that a project like that will be financed?

I'm happy that Brian is here because he's going to take care of that, but I can have my ideas around it.

But when it comes to the construction on the conversion itself, Keppel -- we are at a type of modified EPC contract to Keppel where they take on some risk.

The top side provider take on some risk and then we take on risk so it is kind of split between the three parties.

The way I feel it, the way we have constructed it is that we have a limited risk of cost overruns.

We will have more risk on actually that the unit works that will be on us actually.

But the top side provider we have used or the principle we have followed here is that we don't have -- we are not a test bed.

Everything which is on board has been used in marine industry before except a few items that we don't -- we and the providers don't believe that that is any problem at all.

All the liquefaction equipment are -- there are 18 or 20, 25 plants in operation today so it's proven technology.

And we get the type of guarantee from the top side provider but that does not really eliminate our risk.

It just hurts them if they don't deliver, so that's how it's built up.

And on the financing process, I think as I'm sure you've probably gathered from the release itself, the one thing that we want to do is not lose too much time in respect of the actual building itself so the likelihood is that long lead items if indeed they are considered for ordering long lead items would be financed by Golar itself, whether it be through as mentioned in the press release, through a certain amount of balance sheet restructuring, a certain amount of capital raising in respect of this new FLNG business unit.

But of course the big chunk of it is going to be met by a project finance and that is of course possible because at the time of ordering long-lead items, you may not necessarily have a counterparty at the end of it but the fact that you are ordering long-lead items allows you to then firm up certain contracts, offtake contracts and so on, FLNG contracts and so on, such that you will be able to project finance the unit before it is fully built.

Do you think that there is going to be an ability to get any debt financing on that or this has to be project financing of a pure equity?

Certainly not pure equity.

I think it's a bit inefficient to do it in pure equity.

I think debt financing certainly to some extent is still cheaper than the debt equity cost -- the equity cost of Golar today and that's something that we will aim for.

Of course the one thing that we need to be able to do here is to balance properly how we finance it because as you know these are all MLP drop-downable assets and what we don't want to have is such a steep amortization when we put debt on these assets that it hurts the cash flow, albeit the cash flows in these projects will be massively strong.

We've still got to be aware that there is sort of a stream of cash flows that needs we released to MLP unitholders and so we don't necessarily want to debt finance it up to the hilt.

Thank you, Brian.

That's very encouraging.

I want to ask also about if the project economics they sound quite compelling and given the fact that you already have the FEED study, do you think that this can be a solution that can now also be applied for the Douglas Channel project potentially if the other partners accept it?

I know that there is a second FEED study that is underway by the Partners there.

What is the timing of this FEED study?

As I said, we don't really want to comment on Douglas Channel as such.

But that said, I think the concept which we have, the FEED study which we have undertaken, the concept is very, very flexible.

And as long as it's not too harsh environment, as long as the gas quality and the gas condition are correct we can more or less put this anywhere.

So I think that's the answer to your question.

That definitely answered my question.

Thank you and one last question about the newbuilding deliveries and given the idle time that some of these vessels might have to go through until they get -- they find contracts, what should we expect after earnings for these new vessels as they hit the water?

I think we've said before that we would expect to see a lot of volatility in our earnings.

Of course it is very difficult to pin down exactly the earnings expectations.

What is encouraging to some extent is today that the rates that we are seeing remains pretty robust of course.

You are only going to be able to earn that if you are carrying cargo.

I think the next few quarters, the priority for the group is to make sure that those vessels are working because otherwise we get hit by the idle time and the bunks consumption of idling vessels and so it's quite difficult to give too much guidance because we are seeing a bit more newbuild deliveries next year and for each delivery there is of course an amazing voyage issue as charterers look to protect themselves from using vessels that haven't had voyages yet.

Having said that, I think this is where Golar's operating record comes in way above water, where to date we haven't seen any -- last couple of quarters we haven't seen any downtime technically.

So it's a very long-winded way of answering your question.

But again, just to emphasize that although we are seeing volatile numbers coming through over the next couple of quarters, the Company is robust enough to withstand that to then come out of the other end when things are looking much more positively.

Thank you very much, Brian.

Thank you, Oscar, and congratulations for the successful FEED study.

Jon Chappell, Evercore.

Thank you.

Good afternoon, guys.

I have a bunch of questions but I promise to keep them pretty quick.

First of all, we can just summarize capital in two kind of short answers here.

When do you think you have some transparency around starting the construction process with FID?

And then also how much before that would you pursue a contract, an employment contract for that potential asset?

As I said, we are -- we have some good -- we have a project which we are working on where we will leave our potential that we can take FID in Q2 2014.

And then we will need to do -- we actually started to do some small studies on that project already.

If that goes ahead, we will have tried to do it as fast as possible to start up the construction and I think then we are talking about first gas in 2016 sometimes.

We need -- sometimes there are some specific requirements because today the vessel is designed for mooring alongside or a spread mooring.

In some project we will have to do turret mooring and so forth so we will have to do some further studies.

In this specific project I think it's quite easy.

So I think just after we have taken the FID, I think we can start the construction a few months later.

But as we said, we are considering to order long-lead items already in the first quarter next year and if we do that, that will shorten the construction period by two, three, four months.

That's helpful, Oscar.

Thanks.

Brian, just some rapid-fire modeling questions for you.

Shorter-term, the Arctic drydock, what's the off-hire time associated with that and the cost?

Drydocking time as with these vessels are around 20 to 25 days.

Costs again with these vessels range from $4.5 million to $5.5 million.

And that's amortized or expensed?

That is to be amortized but of course cash wise you get hit in that quarter.

Right, the Tundra, the CapEx increase associated with the move to the FSRU, how much is that?

It is not as material as the changes as a result of the Eskimo changing so you will have seen us quoting $2.74 billion for the entire fleet.

I think prior to that, we were just looking at just slightly above $2.7 billion, so $2.7 billion-something.

So it's not hundreds.

I'm just trying to recall it anywhere between 5% to 10% of the costs.

The Viking has been rumored to be on contract and then also the Celsius and the Seal also.

You mentioned some idling time associated with all of those.

What type of employment days should we expect for the three of those ships in 4Q and are the rates kind of well below market at least for the newbuilds given the cooling down process?

Yes, on the Viking, yes, she is currently employed.

Of course the quarter isn't complete yet so we are not sure at what point she will come off charter.

There is a possibility that she may actually continue throughout.

The Celsius and the Seal, I think it's fair to say that obviously they command a better rate than the Viking, albeit that the Viking rate isn't actually that far away from the numbers that we see coming out and being published.

So again which is to some extent encouraging to the extent that rates have remained robust but where people are starting to suffer is that the cargoes are just currently not there at the moment.

But we are seeing much more activity over the past couple of weeks, much more activity on shipping.

So as far as Seal and Celsius are concerned, they have remained idle since the time of delivery but there are now current good opportunities for them to go into chartering.

Okay, finally, just you laid out on the front page of the press release a little bit more clarity on the whole mass associated with the deconsolidation.

The amortization of the fair value of gains, we spoke off-line after last quarter, I think it was about $15 million annually, seems just looking through the numbers that that might have been a little bit low.

Is there a new number that we should be amortizing in that line item?

I think we can go through that in detail off-line, Jon.

Okay, thanks a lot, Brian.

Michael Webber, Wells Fargo Securities.

Good afternoon, guys.

I don't want to beat a dead horse but I have a couple of questions around FLNG and wanted to move to the sale-leaseback and the GP.

You kind of ran through the timeframe for FID on the projects and then when you might want to go spec.

Can you maybe weigh out the lead time, the timeframe for those long-lead items?

At what point would you start actually seeing significant cash outflows and maybe lay those out on a dollar preferably or on a percentage basis?

How far into this would you get prior to a commercial agreement if you are likely to sign something say in West Africa?

I will start on ordering long-lead items.

Let's say we do that in January, I think we have to pay something like 10% to 15% of the costs; the long-lead items will be in the region of $200 million.

So we're talking about $30 million in Q1 and then things will -- there's a payment schedule which is quite more like month by month and the schedule for delivery of those items is the long business is 70 weeks, so that's how that works.

At that point would you still have the ability to flex that up to two to three to four trains or would you be locked into a certain size at that point?

No, as long as they only ordered the long-lead items, we can have one, two, three, or four trains, so we can actually have two units with two trains.

So that's the beauty about it, that we have the flexibility.

Okay, that's helpful, you kind of touched on one of my next questions.

Just in terms of the actual assets, I would assume this would be one at a time but maybe it seems like you could do multiple assets on spec at a time.

Can you maybe talk about how likely that is and whether there is one of the older assets that's better suited to go first and how we should think about that?

We have taken -- the Hilli will be the first vessel which we convert.

That's the basis for our FEED.

Gimi is the sister vessel, so that should not be a problem.

Then we have Gandria.

I don't see a big problem of doing multiple conversion at the same time.

On the other side, it would be nice to see how things go before we start the next one but most probably we will not have time.

If we do this, when the group does something, we do it big so if we do one, we don't do it to do one.

We do it to do multiple.

Got you, that makes sense.

You mentioned the West African project being two trains.

How large are the others in North America and South America that you are looking at?

North America could be from 2.5 million to 5 million tons.

South America could be 5 million tons.

There are -- and the West African, they tend to be a bit smaller.

There's one project there at the 2.5 million tons (multiple speakers)

So those North and South American projects could require multiple assets each?

Yes, yes, yes.

Okay.

The good thing about the whole thing, we haven't really marketed this and as soon as we get up one project and people see what we can actually do, I think they will be multiples of customer coming to us.

Thanks.

Just around the sale-leaseback which is kind of getting buried with the very busy quarter and a lot of balls in the air, you mentioned four of the five remaining would be included in that sale-leaseback.

The Tundra is in that group of five that is not financed yet but that's got obviously FSRU capability.

Would that be excluded from the sale-leaseback?

That's correct, so the Tundra is delivering in 2015.

The financing, selling is by financing basically gets rid of any financing exposure of 2014 deliveries.

Okay, great.

That's helpful.

Just one more for me.

And just maybe at the higher level, kind of in the background of everything here, you mentioned the GP value story that's starting to emerge and you guys are already into the middle splits and moving to the high splits.

And if there is a 30-month lead time on FLNG, it seems pretty likely you will be into the high splits and at kind of your peak level multiple potential range there before you start actually seeing FLNG cash flow.

In terms of how you prioritize driving value per shareholders, does monetizing that GP which could command considerable value, does that fall before FLNG cash flows and is monetizing that a potential way to finance some of these assets?

That's definitely an option that we look at but I think as mentioned in there, we've got two drop down opportunities coming up, the Igloo and the Eskimo.

I think it's fair to say we are not going to wait until the 30 months (inaudible) of FLNG before we drop another one, so you're right, the likelihood is that we would already be in higher split before any of these FLNG stuff comes through.

Now one of the mentioned that as far as financing the FLNG projects is concerned is multiple options, i.e., one is just monetizing the value on some of the vessels that we have had through an FLNG, a separate FLNG business unit.

I think Golar LNG has capability also to use its balance sheet as far as ownership of Golar LNG Partners because ultimately LNG Partners will benefit from the investment into FLNG.

And as far as GP is concerned, it is an option but I think the first two of what I mentioned is probably the more near-term solution for the initial phase of FLNG expenditure.

Sure, that makes sense.

All right, guys.

Thanks for the time.

I will follow up off line.

Urs Dur, Clarkson Capital Markets.

Good afternoon, guys.

What's the timing on the Kuwait FSRU drop down at this point?

I remember last call you were saying fourth quarter possibly and obviously we're coming to the close of that.

What is the timing looking like?

Is it still possible this year or is it much more like next year then?

The commencement of the charter itself officially doesn't start until about March 2014.

So we are not -- we haven't timetabled specifically when the drop-down is except to say that it is coming.

Okay, fair enough.

I just remember on the last call you had mentioned that it may drop down ahead of the charter, so we are talking about 2013 but 4Q.

But it's not a big deal, just trying to figure out where I place places.

I really think that everything else -- you touched upon the chartering strategy.

I guess you're not necessarily in love with the terms that are being offered to your ships at this time on the newbuild side.

Are you just intending to keep the Seal and the Celsius spot for a while or are you going to -- I wouldn't say give in but at least accept a one-, two-, or three-year deal for at least a couple of these newbuilds being delivered next year to stabilize the earnings base of the parent.

What's your view there?

I think it's fair to say that as we've mentioned before, we are looking at it on a sort of portfolio basis here.

I think typically we will see exposure to spots but at the same time, we are not shying away from the two- to three-year deals.

If fact, if a deal comes around and it is within the acceptable range of what we expect, then absolutely, that we will be there.

Okay, fair enough and you probably won't be able to answer this but what is the acceptable range?

Is the acceptable range today's three-year rate of sort of a broad quote for a modern TFDE at about $80,000 a day?

That's probably touching about the right number that we would be looking at.

Fair enough.

Thanks for all the info and congrats on the FEED on the FLNG.

(Operator Instructions).

Omar Nokta, Global Hunter Securities.

Thank you, good afternoon.

I just wanted to just touch on again -- sorry to keep beating it down on the FLNG.

Oscar, you gave us some good CapEx regarding the $200 million on the long-lead items but you didn't want to give -- you didn't want to give us too much on the entire capital expenditure, which I understand.

But I remember river last earnings in the presentation you had provided a slide saying that you are looking at a $3 to $4 per MMBTU cost to meet your CapEx and ongoing OpEx.

Is that still the case?

Is that still a good number to go by?

Yes, I think that's a good number to go by.

It depends on the capacity.

2.8 million tons, we will be able to offer something around $3.

If it's a two-train solution, (inaudible) only be up 4, 4.5.

But to be able to develop 0.5 million tons -- TCF field at that level is very, very, very competitive.

So that's the figures and in one way we are trying -- that's the market.

That's the market.

That's the tolling market, so we will be competitive.

Okay, just regarding the concept of either outright owning the hydrocarbons yourself by buying them and then selling it yourself and trading and taking on that extra speculation versus leasing the vessel out on a charter with the potential for profit share, if you are able to give -- how are you in your negotiations with counterparties?

Are they receptive to one versus the other?

Are they interested in being able to offload the gas just directly to you or do they really want to own it themselves and basically just give you a charter for the ship?

It varies.

It varies a lot.

Like pipe gas that you just buy the gas and then you have to take care of the LNG yourself like in US and Canada.

But I mean we might be able also to stitch up offtakers prior to taking FID and the interest around some of these projects are huge and there are no problems to get rid of this.

Of course you might not be able to take the whole profit but you will still lock in a very, very good profit.

And so there are certain clients who are not interested in LNG at all because that's not our business.

They only want to get rid of the gas.

In West Africa, if we help people with flaring, some of them are just happy.

So -- and then there might be a combination that they want to have a profit split of the profit we do on the LNG sale.

But for us as Golar, it creates a lot of opportunities not only on the LNG side but also on the shipping side and on the FSRU side as I said earlier.

That's helpful.

Just regarding the timing of potentially putting all the FLNG equipment in a separate structure, is that something that you envision happening around FID in potentially Q2 or is that maybe a down the line event closer to delivery?

I think we will -- generally the group as such we are try to have clean plates here and shipping is one thing and then liquefaction is another thing.

So I think we will most probably do it before delivery and sometimes between FID and delivery or something like that, so --.

Okay, just finally, one sort of engineering question just trying to get a sense of what to expect with the Kuwaiti FSRU contract because you have the nine months of the FSRU operations and then you get the three months of winter time to trade it.

Considering there are some issues with the newbuildings and having them I guess be cooled in order for charters to be receptive to wanting to use those ships -- when the FSRU that is deployed in Kuwait, when that one rolls off during the winter, is there a cooling issue there as well or is it the tank is already fine?

The tanks are (inaudible) So that's no problem.

Thank you, that's all I have.

(Operator Instructions).

There are no further questions in the queue at this time.

Okay, good.

If there are no more questions then I suggest we end the webcast and finally just to say thank you to all our listeners.

We didn't post fantastic results this quarter, but I think you will appreciate the amount of development that's been going on behind the scenes when it comes to FSRUs and FLNGs and we hope to be able to talk about them in much more detail and I think much more concrete terms next quarter.

Thank you and speak next time.

Goodbye.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.