Golar LNG Ltd (GLNG) 2014 Q4 法說會逐字稿

Good day and welcome to the Q4 2014 Golar LNG Limited earnings conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Gary Smith. Please go ahead, sir.

Thank you. My name is Gary Smith, and I welcome you to the Golar Q4 conference call. And I'm very pleased to, again, have the opportunity to join this call. I'm joined here in London by Brian Tienzo and Stuart Buchanan.

The agenda for the call is set out on slide 3. I will quickly run you through the highlights for the quarter and then hand you over to Brian, who will then walk you through the financials. And then I'll come back and spend some time on the business update.

We do have a hard stop at half past 4:00 because we do need to prepare for the Golar LNG Partners call, which is scheduled immediately following this call.

Turning to page 4 and the highlights for the quarter, Golar took delivery of three vessels during the quarter, Golar Frost and Golar Glacier, both LNG carriers, and the FSRU Golar Eskimo. And I would add, during the early part of this year, we've now taken delivery of Golar Snow, Kelvin, and Ice, which concludes all but one of the newbuilds and indeed all of the LNG carriers that we had on order.

Following delivery of Golar Eskimo, we entered into an agreement with Golar Partners to sell the vessel into the Partners for a price of $390 million. And excitingly and I think importantly, of all the achievements in Q4, we did manage to sign with SNH and Perenco the Heads of Agreement for the development of a gloating liquefaction project off the coast of Cameroon. And I will come back and talk about that in more detail later on.

Following on from that significant milestone, we then made agreements to commence the conversion of Golar Gimi, a sister ship to Hilli, into a GoFLNG facility as well.

During the quarter, we entered into a share repurchase program, and we authorized the issue of 2.5 million shares for the benefit of directors and employees.

The underlying EBITDA was $7.8 million, which was some $2 million improvement on the previous quarter, the increase primarily due to the increased size of the fleet and our fairly stable utilization across the fleet.

Unfortunately, for the quarter, we also recorded a net loss of $38 million against the profit in the previous quarter of $7.8 million. Some $26.3 million of those, of that loss, is attributable to noncash losses and swaps. And Brian will spend more time on that as he goes through the finances.

Finally, the Board has maintained dividend at $0.45 per share for the quarter.

I'll now hand over to Brian. And he can take us through the financials.

Thank you, Gary. So, as Gary highlighted just there, the underlying EBITDA for the quarter has improved from previous quarter. But, let's go through the individual items to get some clarity on how that movement has arisen.

Turning to page 5, so looking at the net operating revenues for the quarter, you can see slight improvement there. But, breaking that down, you'll actually see that the vessels Celsius, Crystal, and Penguin have contributed approximately $6.8 million in increased revenue from Q3. Unfortunately, against that, we incurred a one-off charge of $4 million in respect of a legacy charge reclaim on the Viking.

We also saw a small increase in operating expenses for the quarter, mainly as a result of growth in the fleet. And whilst the administration expenses this quarter has declined from $5.6 million in Q3 to now $4.3 million in Q4, that is also as a result of a one-off credit charge in respect of capital reimbursement for the feed study costs we incurred in -- for the floating liquefaction.

So, the accounting EBITDA of $6.3 million in Q4 is compared to $5.9 million in Q3. But, stripping out the one-off nonrecurring items for the operation of the business, the underlying EBITDA has actually arisen to approximately $7.8 million.

Further down the page, we also saw recording of dropdown gains in respect of Golar Igloo of $8.6 million and another portion of the charter reclaim in respect to the Viking, which is recorded under losses, and that was $6.4 million.

The biggest impact in the quarter remains the noncash mark-to-market impact on both the interest rate swaps, which was approximately $12.6 million, and the total return swap of $13.7 million.

As we mentioned in our press release, it is the view of the Company that the current share price today reflects the challenging oil environment. And given the stream of opportunities that the Company's undergoing, there is a lot of confidence internally that the share price should improve once those opportunities are executed. And so, it's an opportunity to be able to gain from that increase in value by entering into total return swaps during the quarter.

As Gary mentioned, we took deliveries of vessels during the quarter so that the vessel numbers now for Q4 is 12 compared to 10 in Q3. And whilst utilization improved from 56% to 57% in Q4, the time charter equivalent dropped from approximately $41,000 per day to $28,000 per day, mainly as a result of increase in voyage expenses from the idling vessels during the quarter.

Turning over to page 6 and just looking at the dividend contribution by the Partners, you'll see there that, for the previous quarters, the dividend contribution has been pretty stable. There is -- the recorded dividend contribution in our financials actually lags by a quarter such that the recorded receivable -- the received amounts in Q4 was those in respect of Q3 cash distribution.

In Q4, you will have seen that GMLP has increased their dividend distribution in lieu of Q4 and as a result of the dropdown of Eskimo. We will receive that in Q1 2015, which as a result of the selldown of GMLP units in the beginning of January we will see a slight dip in the contribution received from Partners in cash terms.

Turning over to page 7 to go through the balance sheet items, we've highlighted some numbers there. So, starting at the top, you will see the cash and cash equivalents have reduced from $390 million in September to now $191 million in December, and this as a result of, one, obviously, the ongoing FLNG conversion expenditure for the Hilli. We also paid out certain amounts of Gimi expenditure in the quarter.

But, also, you will see that certain of the cash amounts have been reclassified under restricted cash and short-term investments as a result of requiring to secure some of the instruments that we entered into in the quarter, particularly the total return swaps.

You will see a material increase in other current assets from $57 million in Q3 to $313 million in Q4. That's as a result of reclassification of both Viking and Eskimo as assets for sale following intention of the Company to sell the assets to Golar LNG Partners and to our partners in Indonesia, PT Equinox, respectively.

In the middle of the page, you will see another bracketed numbers there in respect of the vessels and equipment, newbuildings and asset development. And those are as a result of deliveries of vessels as well as ongoing expenditures for the Hilli and the -- for the conversion of the Hilli.

Turning over to page 8 to look at the highlights in the cash flow, the biggest outflow, as you can see there respect of additions, newbuilds, and equipment, which we spent approximately $243 million in Q3 to now $449 million in Q4, again, as a result of taking deliveries of certain of our newbuildings.

You also see an amount under assets and development of $75 million, predominantly in respect of Hilli, and just below that $50 million -- approximately $50 million is the milestone payment of the Gimi paid when those contracts were made effective.

Going over to page 10 now, and as Gary mentioned earlier, with vessel utilization and rates expected to remain poor during the first half of this year, and Golar -- of course, Golar backstopping the Grand charter for GMLP starting from Q1, the Company has taken steps to strengthen its balance sheet position to weather those challenging factors.

We highlighted that we've raised $207 million in respect of secondary offering of our GMLP units. As a result of the finance sale and leaseback transactions we entered into in respect of our -- four of our vessels, we have received $180 million as amounts returned to equity.

$227 million is due in respect of the Golar Eskimo dropdown to LNG Partners. And of course, we -- the revolver loan that GMLP and the Company entered into at the time of the GMLP IPO is due to be repaid in the beginning of the second quarter.

So, the funding position of Golar today means the newbuild program is fully funded. And more importantly, the GoFLNG Hilli conversion process is funded to the extent that we're now capable of completion -- completing the conversion without too much reliance on funding.

Of course, against all of that positive news, there is a backdrop of both capital and ongoing costs in respect of the business. But, most of that actually lies within Golar's control.

We've also shared with you that the certain acceptable terms for financing both FSRU Tundra and GoFLNG Hilli have been agreed in principle, though documentation for those financings are now ongoing. And as a result of those, once executed and available for dropdown, they are -- they could further release equity to Golar, further strengthening the balance sheet, of course, not to mention Golar also receives approximately $50 million of ongoing dividends from GMLP to help with the ongoing operations of the business.

So, as far as liquidity is concerned, the Company's focus is maintaining a solid buffer to shelter itself from needing to be too much -- too reliant on currently unattractive capital markets and is -- with all these transactions now being put into place, the Company is in a very good position to concentrate on the ongoing opportunities of which Gary will now discuss with you.

Thanks, Brian. Turning to page 10 and the familiar Golar portfolio of vessels, there's been a few changes to this chart over the quarter, and I'll just draw your attention to them. Firstly, the Golar Viking no longer exists on this page as a result of selling her into Equinox.

The second significant change, as Brian mentioned is -- and it was in the highlights, the sale of Golar Eskimo from Golar LNG into Golar Partners.

And then a third material change in this chart is now the delivery of all but one of the newbuilds with only Golar Tundra still being constructed in Korea at Samsung. Apart from that, the chart remains unchanged.

Turning to page 11, which deals specifically with the shipping part of the business, again, as previous mentioned, utilization of the fleet during Q4 was in line with Q3 and indeed in line with our previous estimates at around 57%.

However, it's -- we need to report that, as we move towards the end of Q4 and indeed into Q1 of this year, the trading conditions have softened quite markedly on the back of really, like, three different phenomena.

The trading environment for LNG has softened as the arbitrage between east and west has closed. So, we see less reloads out of Europe into the Far East. And as the forward curve flattens and the opportunity for floating storage plays have disappeared, we see vessels being returned from those contango plays.

Over and above the sort of general LNG trading conditions, we've seen a continual delivery of newbuild vessels coming into the fleet and indeed vessels redelivering from contango plays. So, the mix of all of that has been to soften the market, at least for the first half of this year.

We did, however, see this turning and improving as we move into the second half of this year. As we see more greenfield LNG plants preparing and actually starting up, the surplus of ships will be soaked up into those plants. And that's now a trend that will continue well into 2016 and 2017 as some of the big [strain] projects in particular will start producing.

As previously mentioned, our fleet of newbuilds on the carrier side is now complete. And our focus now turns to, in the first instance, keeping the ships utilized -- the fleet utilized, sorry, but with a mind to the fact that this market's going to strengthen as it goes forward. So, the opportunities which we are pursuing at the moment are really sort of short-term opportunities because we want to make sure that our fleet is available for us to enjoy as the market strengthens.

Always a focus, but particularly a focus in the markets is the maintenance of safe and reliable operations. It's important that we are judged as a premium ship provider. And indeed that is our reputation in the market.

And then finally, we've had some success in the recent quarters of seeking out what I would call niche opportunities. The sale of Golar Viking in pursuit for cabotage trade in Indonesia was a not-well-advertised opportunity. And finally, our charter of two of our vessels for approximately 12 months to Nigeria LNG was to bridge into Nigeria more efficient ships as they wait for the delivery of their own newbuild vessels, which deliver in about a year from now.

That was all I was planning to say on shipping. If I now talk to FSRUs in terms of page 12, and on the page, you see a map of the existing Golar facilities, five in operation today. We are at the moment preparing to deliver the Eskimo into Jordan. Following her delivery from the shipyard in Korea, she sells into Singapore, where we carry out some further modifications to make that vessel suitable for the particular circumstance in Jordan. And she will deliver into Jordan during the second half of May of this year and go into service.

The fourth -- sorry, the [second] vessel which is currently under construction in Korea, the Golar Tundra, we are earmarking for a facility which has been in development for some time now in Ghana, where our counterpart is Quantum Power. And I'm pleased to report that we continue to make good progress towards an FID on that project around the middle of the year.

Notwithstanding the focus on Ghana, we are seeing an increasing level of inquiries from a number of different locations regarding FSRUs I think driven by lower absolute commodity price. So, countries that may have held off introducing LNG into their power mix are now seeing the attractiveness of LNG at these prices.

And particularly in the case of South Africa and Brazil, where there's a regime of continuing brownouts and in the case of South Africa I think blackouts due to chronic power shortage, and the need for a quick solution lends well to FSRUs.

So, we remain bullish about this market, and we think it will continue to grow. We do enjoy a leading position in this market. And so, selectively, we will pursue opportunities where it matches our capability and doesn't distract from the other things that we've got on our plate at this moment in time.

Turning the page now to page 13, which is floating LNG, and I thought it would be useful before diving into the specifics of the Cameroon project and indeed progress on the Hilli conversion, just taking one slide to essentially recap our thinking around FLNG.

And that thinking starts with the value proposition. What Golar is seeking to do here is to introduce into the industry a value proposition that is built around especially low unit cost of production, a short lead time from the commitment to the project to the project starting up, and material reduction in execution risk. And all of this is underpinned by a world that is seeking to shift its fuel to gas and, within that gas, increasingly become more dependent on LNG.

That's always been the value proposition. But, we would maintain that, in this sort of low oil price regime, in fact, that has played to Golar's strengths.

The project economics based -- and by project economics, I mean the integrated upstream-midstream project economics of LNG -- based on LNG prices that we currently in the market suggest that GoLNG remains profitable for both the midstream and the upstream participants, even at today's prices.

Against that backdrop, we see that conventional land-based projects are starting to struggle to gain support and most commentators would suggest might struggle to go forward in this current environment.

So, we believe and have always believed in the value proposition, but we find it more compelling today than ever.

Our business model is based on access to dry and clean gas. We need to operate in offshore areas, obviously in seed conditions that are what we would describe as benign to moderate and any -- on a reserve base, anything above 500 Bcf. Ideally, we'd like to target reserves of around about 1 Tcf.

So, we are not pursuing every project on the planet. There is a window within which we need to operate. But, we see plenty of opportunity for us to go after within that window and for the immediate time forward.

Finally, our commercial model, and I think it's important that this be well understood, our commercial model is really based on a tolling model. So, we will provide a vessel to the upstream participant normally on a toll, if you want, dollars per mmBTU basis for the monetization of the gas from a project.

The primary exposure to the commodity price sits with the resource holder. It is the resource holder who, in the first instance, discovers the resource. And it is the resource holder who takes the lead in the monetizing of that resource. And it is Golar which provides the resource holder the wherewithal to actually monetize that gas.

Having said that, the resource holder does take the primary exposure to commodity price. Golar still needs to be obviously acutely interested in that price and the commercial structure underpinning the project.

In the first, the economics of the project overall will be determined by what the LNG can sell into the market for. We're also obviously very interested in the security of the cash flow, which is indeed funding our toll for the provision of the vessel. And as with any project, we need to be careful that the assignment of risk and reward is appropriate for the role that we play within the project.

Having recapped our approach to FLNG or GoFLNG as we like to call it, if I turn to page 14, I'd now like to turn to the specifics of the HOA, which we signed in December regarding the arrangement with SNH and Perenco to develop a floating LNG project off the coast of Cameroon.

The resource base in this project is at the low end of our preferred target area. It's a field called the Kribi field of some -- the 500 Bcf of gas some 20 kilometers off the coast of Cameroon.

On this resource base, the project has about an eight-year life and will produce at about 1.2 million tons per annum.

The region in Cameroon where this project sits is gas prone. And we are aware of available gas which we could use to supplement production on the vessel. And our hope is, over time, that we might be able to find a way to access that gas to both increase the capacity utilized of the vessel and also potentially the life of the project.

The gas quality is clean and sweet and very suitable -- sorry, the gas quality to the FLNG unit is clean and sweet and very suitable for our vessel. The liquids are in fact extracted from the gas onshore before it's sent back out to the vessel. But, the met-ocean data in West Africa is benign and well suited to what we're trying to do.

The HOA does set our timelines for the execution of binding documents for the employment of the vessel for the LNG offtake and indeed for securing all the necessary licenses and approvals to underpin the project. And our target has been and remains mid of this year to complete all those agreements.

Importantly, the project is not dependent on third-party financing, as Brian I think alluded to in his discussion. And we're holding to our first production targeted for April 2017.

If I can now turn onto page 15, which deals with the project of converting Hilli in Keppel in Singapore, and again, the report here is pleasing. Hilli conversion is now in excess of 30% complete against a schedule at the commence of the project at this time of 25.5%. Excluding the value of the vessel, the work completed or the value of the work completed to date is some $305 million.

Both Keppel and Black & Veatch have now taken equity in the project, which is a strong sign of their commitment and the belief of the deliverables from this project. And I'm also pleased to report that the cooperation between the three parties remains excellent.

As Brian has previously said, the contract to convert Gimi was made effective also in December.

Against an ever-increasing work schedule, we see a buildup in resources, both in Oslo and also at site. And I'm very pleased to now be able to show you pictures of Hilli rather than an artist's impression as it moves towards becoming a GoFLNG vessel.

So, on page 16, just to summarize before we go to Q&A, current spot market remains poor. We see that continuing through until around the middle of the year. We're on the back of starting up new capacity. The market should slowly start to recovery. Our focus in this period is on utilization of the vessels and maintaining efficient operation.

Eskimo will go into service in Jordan around midyear following its commissioning and initial startup.

We remain optimistic about the Ghana FSRU project and its employment of Golar Tundra, which is still in the yard being constructed and will deliver around Q4 of this year.

Specifically in GoFLNG, we remain strongly committed to the value proposition. And we see strong interest from resource holders on the basis of our low unit CapEx, our low execution risk, and our commercial capability to deliver these projects.

Most importantly, the Cameroon project with SNH and Perenco working toward binding agreements midyear. The second vessel, the Gimi, has had its contracts initiated. And not mentioned, but we continue to work on some of the other projects which I think have been discussed on these calls previously, such as the Cedar LNG project and the filling out funnel of opportunities, which at the moment is now focused on West Africa.

So, I will stop the formal part of the presentation now and invite questions from those on the call.

(Operator Instructions). Jon Chappell, Evercore ISI.

Thank you. Good afternoon, guys.

Hi, Jon.

Couple questions on just some clarifications on timeline in the press release and the presentation. So, on the Hilli conversion, all commercial and offtake agreements will be -- are scheduled to be completed by June. And do you require both the commitment of the gas as well as the offtake agreement before you can get that 70% financing from the banks.

So, as far as the financing is concerned, the -- of course, you -- whilst all the terms have pretty much agreed in principle and those are being documented now, it's very difficult to close out of financing without necessarily knowing the contract -- the terms of the contract.

Right.

So, but, what we're trying to do, of course, is put -- advance all the work that needs to be done in the financing such that, once the contract for the Hilli is completed with Perenco and SNH, it's just a matter of filling in the gaps. And hopefully, we'll be able to use the financing soon after closing the tolling agreement.

And, Brian, do you need the offtake agreement as well as the agreement with Perenco before you can get that financing?

The current structure, the financing that we're looking at doesn't require that.

Okay. But, in your -- the way you envision this kind of mid-2015, you are assuming it's not just the commercial side, but you will also have offtake agreements in place by June. Is that correct?

So, maybe I can jump in there. So, really, the commercial discussions that are taking place between now and midyear fall into three broad categories. So, obviously, the permitting and the regulatory side is something that primarily Perenco has to go through.

We need to agree a tolling structure for the vessel and all the things that you would expect to find in such a contract. Then finally, we need a route to market that we can be sure of that will underpin the cash flow that will support the hire of the vessel.

Now, that may be -- it may be and could be an LNG offtake agreement, or it might be an ability to provide the LNG into a market where we can be sure of a netback.

And one last thing on timeline. So, let's assume you get this done by June, you get the financing in place. Then you move forward with the Gimi because you freed up a lot of cash with the financing for the Hilli. Does the Gandria still need to be -- or whatever the third asset's going to be, I assume it's the Gandria. Does that option need to be exercised by June 2015, or is it beyond that?

No, I think, Jon, as you can -- as Gary sort of highlighted just now, the cooperation between ourselves and BV and Keppel, whilst there's a written agreement that says we need to be exercising options every six months, there has been a lot of flexibility afforded to each one of us. And so, I think we could also assume that there'd be certain flexibilities on that respect.

Now, it may mean that there may be certain amount -- there's certain changes to the pricing structure because of that. But, we would expect that -- the delivered cost of Gandria as long as it's in the same vein as both Hilli and the base -- Hilli and the base Gimi shouldn't be too far from that delivered cost also.

Okay. Perfect. Thanks, Brian. Just a couple other quick ones. Dividend strategy, you mentioned in the press release, shouldn't expect an increase. That seems pretty obviously. Has there been any thought process around potentially cutting it, though, just to free up more capital? Seems like you're fully financed. But, as you move forward with more of the GoFLNG projects, any thought process about pulling the dividend back a little bit?

I guess there are a couple of thought processes going there. One is, as you mentioned just now, as we mentioned just now, the shipping market remains quite volatile and particularly for the first half remains -- we expect it to remain for.

To some extent, we have sheltered ourselves away from cutting those dividends by putting into place all these transactions that we have completed, the funding transactions that we have completed.

At the same time, whilst we are confident of being able to close the financing in respect of the Hilli, that timeline could be pushed depending on the factors affecting the contractual negotiations.

So, all of those will at some point collide that will make us -- that will require us to have a look at liquidity and revisit whether or not we continue paying dividends. As of today, the intention is with the timeline on the Hilli and the financing thereof the vessel, we -- the Board continues to believe that we can sustain the dividend.

But, as I said, at some point in the future, if there's material delays in certain of those events, we may have to revisit that.

That makes sense. Two quick housekeeping items, and I'll turn it over. First, you're on the hook for the Golar Grand now. But, it says in the press release that there may be something in place that can mitigate the negative impact. Can you talk about that?

And then also, is there any way to give the rates or some type of guidance on the Nigeria LNG contracts for the next [few months]?

Not really.

No, unfortunately, we're -- as a lot of these things, we're bound by pretty strict confidentiality agreements. But, suffice to say that they are probably above market.

Yes, I was about to say they're certainly better than the prevailing market today, but probably at a slight discount for the market when we did the deal. So, that probably ranges where they were done.

And on the Grand?

Well, you'll remember, when we entered the Grand charter with BG, we protected -- Golar LNG Limited protected GMLP from the drop in -- sorry, in the potential of BG not exercising that option by chartering back the vessel. And I think we guided that the reduction in rates that GMLP will get is approximately 20% of the prevailing BG rate.

Obviously, the intention now is to make sure that the vessels are utilized. She is -- she will be implied going to the spot market. So, it's very difficult to tell you what rate we'll be able to achieve for that vessel.

Okay. You just made mention of some provision to mitigate the impact. I didn't know if there was something -- .

-- Absolutely. No, no. So, we put that into place at the time that we entered into the contract. So, that's always been there, more as a precaution that, if the Gimi -- sorry, if the Grand were to not be able to enter into employment, then we have a provision to absorb some of the shortfall in the rates that we can employ the vessel to.

Understood. All right. Thank you, Brian. Thanks.

Chris Wetherbee, Citi.

Hello, Chris.

Herman Hildan, RS Platou Markets.

Good afternoon, guys. My first question is on your comments both in the presentation and the report that, even in this very low price environment for gas, it's still hardly competitive. When you say the current price environment, are you then referring to probably 2017 prices for long-term contracts, or are you referring to the current spot market?

I would maintain it's competitive in both. So, whether you take today's prices, which is clearly not the regime where the vessel will operate, or for sort of 2017 prices, we would be confident of being profitable in those markets.

I think -- sorry, Herman. One of the underlying messages that we've been sharing with investors is, look, we're able to liquefy gas at a [asserted] costs. And I think we're probably at the very bottom of that curve when you measure us against some other liquefaction solutions out there.

So, whilst today, the environment may be challenging, we maintain, believe that we are -- we will continue to be profitable. And in fact, we don't also believe that the current oil environment will continue to be as it is when all these liquefaction projects actually come to fruition.

So, there is a buffer there. But, where we are today as far as the solution, we're very comfortable. And we believe it to be a compelling story.

I also find it quite interesting the comment you made that you find your business model to be more compelling than ever. Obviously, you have liquefaction cost curve where I guess, if not everything, except from your solution, is not able to provide the economical solution.

But, so, how do you think about that? Would you try to grasp the larger growth in the near term at the expense of a lower tolling agreement, or how do you kind of see that competitive edge playing out in terms of tolling versus what you've been indicating in the past for future growth?

So, just to deal with the first part of your question first, indeed, our growing confidence in our solution is in part supported by the fact that the competing alternatives available to project developers are starting to become less and less attractive.

So, our approach to monetizing the reserves that fit our particular sort of space within the available project area is quite attractive. So, we think we're competitive against, say, the brownfield LNG projects in the Gulf of Mexico. So, that's the sort of benchmark which we aspire to. And that is the most competitive approach to liquefying LNG that there is, so long as the reserve sits within our operating window.

We see more than enough interest at the moment to completely fill our capability. And at the moment, we certainly don't feel any need or requirement to start competing on price.

Now, we have a sound approach to the way we want to execute these projects. It's competitive on a sort of unit operating cost basis. And we see more than enough opportunities to keep us busy for the foreseeable future.

And two final questions, one on the Perenco contract in Cameroon. You mentioned that there are some additional reserves. Is there currently discussion to tie in those reserves before the, call it, June 2015 timeline, which would give you full capacity utilization on the first FLNG, or is that more, call it, beyond that HOA deadline?

So, the discussions at the moment are around bind -- putting the HOA into a binding document, which is focused on the reserves that we've been allocated. The comment was really just to suggest that we do see upside in this project. And at the right time, we will go after that.

Okay. And finally, you also mentioned in your report that, if you were to order an LNG carrier today, would get delivery in 2018 and with the expectations that the project will start up April 2017.

Will this Perenco contract be, call it, a part or almost full infrastructure where you provide both liquefaction and transportation, or how do your counterparty think about the remaining part of the infrastructure?

Clearly, as a provider of LNG carriers, we would like to see a Golar ship load up alongside Golar Hilli and take that LNG to market. It's too early at the moment to make any comment on the basis on which the LNG will be sold or indeed who will provide the transportation, but that's within our sight, clearly.

Yes, I don't think -- just to add to that as well, and to some extent, it complements the project that we have an eye on -- the FSRU project we have our eye on in Ghana. So, potentially, within the West Coast of Africa, the FLNG, GoFLNG Hilli and for Cameroon could be the trigger for that entire midstream being populated by Golar assets, where we provide FLNG units as well as hopefully the vessels and, if Ghana takes the FID, certainly, the FSRU.

And of course, there is a potential for LNG coming out of Cameroon to participate in providing LNG for the FSRU also, although that's for Perenco to work on.

To decide. Yes. Just finally, if you then -- for example, you have one of your newbuilds on the one-year contract in Nigeria and -- but you have a startup in April 2017. Does that mean that you can in fact potentially drop down an LNG carrier to the MLP with this contract for the FLNG, call it, transportation in 2015 or 2016 to create more liquidity for the Company, even though that's not -- ?

-- I think the employment of the vessel needs to be closer to when the earnings stream actually happens. Now, we have in the past considered dropping down, or we have dropped down vessels three, four months in advance of those -- of the employment actually commencing.

I mean, if the FLNG unit were to start up in April, Q2 2017, in the likelihood of those vessels needing to transport LNG would be along those timeline as well. So, would we do it? And there is a possibility that we may think about doing it at the end of 2016. But, I think it's probably not before then.

Okay. I was referring to the LNG carriers, not for the FLNG.

Yes, no, yes, the same thing in logic.

Yes. Okay. Thank you very much.

Erik Stavseth, Arctic Securities.

Hi, guys. Question on the LNG shipping market. It remains soft, and the order book is growing with closing 100, 150 vessels. And in the other markets in crude tankers and dry bulk, admittedly being much larger, we've seen some recent activity on creating pools or at least joint structures. We've seen [Frunktal] and [Urinal] do it. And we've seen Golden Ocean, Star Bulk, and a few others join forces. Could that be a way of providing at least some more control of spot vessels that trade in the market which now turns out to be quite a bit?

So, let me commence by saying, to my knowledge at least, there's no history of pooling within the LNG carrier market. So, that's not something that's been previously tried. And with LNG shipping, it's a little more complex than other forms of shipping because you have things like boil offs and repositioning, which become a lot more expensive. But, the principles should apply. So, in theory, there's no reason why it couldn't happen. But, I'm not aware of or able to report on any activity in that area (inaudible).

Okay. And second question related to the FLNG in Cameroon. You said that the gas goes from the offshore field onshore to be processed. Is that correct? Does that mean that the gas goes from well to shore to an onshore processing plant, then out in FLNG unit?

That's correct. Indeed, the gas is going onshore today. So, the field is currently producing and sending a small volume of gas ashore for domestic requirements today. The intention here is to strip the liquids and treat the gas. And that could be done either onshore or offshore -- that's for Perenco to determine -- and then send the gas back out to our vessel for liquefaction.

And that would be Perenco being responsible for building and CapExing that infrastructure or that be part of your task?

So, as it's currently structured, that's the scope of Perenco.

Okay. I think that's it from me. Thanks.

Thanks, Erik.

Thank you.

Fotis Giannakoulis, Morgan Stanley.

Yes, hello, guys.

Hi, Fotis.

I would like to ask about a certain point that you talk in the press release about gas prices influencing the tolling fee and your economics. Can you give -- can you elaborate a little bit on the process? Does this mean that the floating fee might be a floating arrangement depending on the gas prices? And if the economics of the FLNG are based on the project economics, what would be the split between you and the Perenco JV?

So, wherever we sold the gas, we netback the price of the LNG to the FLNG vessel. And at the FOV price, we need to fund both the upstream and the midstream participants. And so, my earlier comments about confidence in the robustness of our approach is based on an understanding of what we think might be available to remunerate both the upstream and the midstream participants.

But, exactly how that is structured and shared is really the subject of discussion at the moment. And I think, for now, you will understand I'm sure that our preference is not to go into the detail there.

I think also, as we've reiterated, Fotis, that the main aim of the current discussions, irrespective of which counterparty we're talking to, is to secure a fixed tariff for these projects. That's always the first point of discussion. And were there opportunities to maximize that in some way, then we would discuss it. But, it -- as today, the discussions in finalizing the agreements with Perenco remains a fixed tariff.

Okay. Let me understand that, when do you think that this process will be finalized? Do we have to wait for the offtake agreement until we have a sense of what the fixed tariff is?

So, there -- I guess there are two work streams, as Gary said just now, that there is the ongoing commercial discussions that will be translated into definitive documents and, of course, the ongoing work by Perenco themselves in marketing LNG. But, the -- both of those really need -- in our mind, in our view, our aim is to have all of that completed by the second half of the -- sorry, the first half of this year.

Okay. Perfect. And I think that, at some point in the press release, you mentioned that capital is 10%, is up to $130 million. Has this -- has a budget for the project, the conversion project changed $1.3 billion, or this is just an upper end of the potential cost?

It's an upper end of the potential cost. And their contribution to the project is pro rata to the expenditures of the project. So, it's not something that we would receive all in advance.

Okay. Very clear. And can you describe us what is the situation right now in the LNG market? And we see the prices in Asia, that they are up around $7 per mmBTU. This is around 11% of Brent price. I was looking historically. The range of this relationship was up to 20%. And usually, it was around 14%. What is the reason that, right now, gas prices are so much lower relative to the Brent prices?

So, indeed, European and Far Eastern prices for LNG in the short-term market are about the same. I think what's happening here is a market going through a lot of change, a situation in the Far Eastern countries, Japan and Korea particularly, where they're receiving terminals that close tank tops because of a fairly mild winter.

And probably, in there as well is some switching of fuel between coal, oil, and gas. So, exactly what's driving this, I wouldn't want to say categorically. But, it's probably somewhere in amongst the factors that I've just mentioned.

Okay. Thank you very much, guys.

Thank you.

Thanks, Fotis.

Shawn Collins, Merrill Lynch.

Great. Hi, Gary. Hi, Brian. Good afternoon.

Hi, Shawn.

Hey, just focusing on page 5 of the slides, on financial highlights and the LNG shipping market, the time charter equivalent in the fourth quarter of roughly 28,000, that seems lower than I might have expected. I know the LNG shipping market has softened. But, this was more than I expected. Can you provide some context around this?

Yes, sure. So, if you -- the one of the explanations for that, of course, is, as I mentioned earlier, that we got hit by a one-off nonrecurring cost in respect of the Viking legacy charter reclaim. And that is in relation to the bunkers of the vessel.

And so, that cost is recorded against revenues that the Golar Viking earned during that quarter, which is why, if you look at the quarter-to-quarter movement in voyage costs, it's jumped from about $6.5 million in Q3 to close to $12 million in Q4.

Now, whilst we saw market improvement in respect of earnings for three of the newbuildings, that was negatively affected by that charge of $4 million from the Viking and also fuel consumption in respect of one of the vessels that were delivered during the quarter of approximately $2 million.

Okay. Would it -- would you be able to kind of normalize that $28,000 to take out the Viking legacy claim? Is there a number that gets -- ?

-- Yes, so, that would be closer to around $33,000 if you take off the Viking legacy claim.

Okay. Great. That's helpful. And then just staying on LNG shipping, so, the market -- on page 11, the market sentiment softened toward the end of the fourth quarter. Can you just talk about what the sentiment has been so far in January and February?

Yes, it's remaining poor I would say. So, all market participants, not just Golar, are struggling to find employment. And rates have come off quite markedly since Q4. And we expect it to stay there until, as we've previously said, we move into the second half of the year.

Okay. Great. Gotcha. And then just one last question. On page -- on slide 4, the noncash losses on the swaps, the $26.3 million, can you just recap the idea behind the total return swaps? Is that -- you're fixing interest that the interest rate expense, and it came in lower, or can you just recap the concept behind it and then what actually happened versus what you expected to happen and then also kind of the duration and nominal coverage of the total return swap?

So, there are two components that contribute to that $26 million loss. One is in respect of interest rate swaps that we entered into in 2012 and 2013 I believe and, more recently, a $13.7 million noncash mark-to-market charge in respect of the total return swap that we entered into in December.

On the interest rate swaps, it's basically just taking the difference in the swap curves at the end of Q3 2014 and the end of December 2014 and just looking at how that curve has moved relative to the previous quarter.

Now, that could actually change quite dramatically. In some quarters, we have seen gains of approximately $50 million on noncash mark-to-market movement on interest rate swaps. And in this quarter, we saw a negative charge of $12.6 million, simply because the interest rate curve has lowered during the quarter. If I remember correctly, I think they've come down by about 15 to 30 basis points from September.

The total return swap is something that we entered into because we believed that, at the time of entering into it, and to some extent, we still do, the value of Golar reflected in the units, in the shares didn't necessarily reflect what we believe to be very good opportunities for both FSRU shipping and the -- definitely for FLNG.

So, we entered into total return swaps to enable us to, at some time in the future, cash out, if you want, of the shares that we have options to buy at a fixed rate, at a fixed price, which would've been priced sometime in December.

So, at the time, I think we published that the weighted average price that we achieved in the total return swap was approximately $40.39 I believe. And of course, any price above $40.39, you will start seeing mark-to-market gains from that instrument.

So, again, just to reiterate, these are noncash charges. And they would fluctuate quarter to quarter depending on the interest rate curve and for the total return swap the shares of the the Company.

Okay. Great. And, Brian, just on the $40 -- the strike, $40.39, what's the rough nominal amount of exposure there?

Well, it'd be $40 times 3.5 million shares.

Got it. Got it. Understand, 3.5 million shares. Okay. Great. That's great. That's very helpful. Thank you very much, Gary. And thank you, Brian. I appreciate it.

Sure. Thanks, Shawn.

Eirik Haavaldsen, Pareto Securities ASA.

Hi, just quickly on the Ceder LNG project, you say it's final investment decision in -- towards the end of 2016. How soon ahead of that you need to start doing feed studies on the vessels you might choose for that potential project?

I don't have a firm date in mind, but likely, it'll be within the first half of this year.

Okay. And when you say it's a 5.8 million ton per annum capacity for two units, does that mean that neither of your [mass] carriers will be large enough for that development?

Yes, that's correct. We're looking at different concept for that project.

Okay. But, a concept also involving vessels or something else?

Yes, that's right. It's generically the same concept. So, it's a floating LNG vessel with most likely Black & Veatch find similar to the process and approach we're adopting now, but it will be a different configuration probably is the best way to describe it.

All right. But, from a cost, dollar per ton basis, it should be pretty similar.

Very comparable, yes.

All right. Thanks, gentlemen.

Michael Webber, Wells Fargo Securities, LLC.

Hey, good morning, guys. How are you?

Hi, Mike.

Hey, just a couple questions I guess haven't been answered, just clarifications. And then we've talked a lot about Cameroon. I don't want to belabor the point. But, around offtakes specifically, which seems to be pretty key in terms of validating the concepts and the business unit, in terms of those negotiations outside of you and Perenco and actually finding a buyer for the gas, who's actually leading that process right now?

At this moment in time, Perenco has the lead on that. So, they're the ones who are directly facing the market, but clearly with our support.

And the timeframe, while it's tough to exactly pin down, you think that's sometime this year.

No, so, that's activity that's taking place right now. And we would hope to have concluded that process to a point where we can enter into binding agreements by the middle of this year.

Right. But, a signed contract to buy the gas is -- would be sometime by the end of the year as opposed to -- but you're saying, by the middle of the year, you'll have a signed -- you could potentially have a signed contract for the gas?

So, by the middle of the year, we will have binding terms. Evolving that into a fully work, sell, and purchase agreement obviously might take some time longer. But, we need sufficient confidence in the nature of those terms to underpin the sort of go forward on the project as a whole.

Right. Okay. Just to clarify one of I guess the first questions around the Grand, and Brian, you mentioned that the backstop, that was put in place when you dropped it down initially to make the contract work. And there is -- the language in the release mentions a provision to mitigate the negative impacts. And the implication is that, at Golar, which would imply some sort of FFA or swap or something to kind of hedge out that exposure. Is that the case, or does that language just purely refer to the backstop at the MLP?

No, no. So, the provision that's been created is at Golar in order that, were we to not be able to achieve the rate which we're backstopping the vessel, then there is a provision there to absorb the shortfall in that rate that we achieve, we're actually able to employ the vessel for.

Okay. Okay. I think we're just talking about the backstop. So, the provision, you're insulating the MLP from that.

Well, no. Just to clarify, MLP, yes, MLP is not affected by this. So, MLP will go ahead and charter the vessel to Golar. Cash wise, it receives exactly what it's been intended to receive under the sale and purchase agreement that was entered into. It's Golar LNG Limited that is affected by this simply because, in an ideal world, it should go out and back-to-back charter the vessel.

But, of course, given the markets today, it may -- it's unlikely to be able to achieve that. And so, Golar LNG Limited in the process said, well, assuming I can't achieve it, let me make some provision in order that my earnings going forward isn't so much affected.

Okay. All right. I can follow up with you offline on the details of the provision. Just two more. And someone just asked about Cedar, but curious, one, around -- you mentioned potential seed work by the beginning of this year and it being a different kind of schematic. When you say different schematic, were we talking converting a newbuild carrier to increase the size, or we talking something more like a large barge? How would we think about that?

So, I don't want to get ahead of the work that needs to be done. But, the current thinking and the concept which we will progress sometime this year, in the first half of this year, will be on the basis of a newbuild vessel.

Okay. Fair enough. And it seems like, with Cedar, you would probably get a better look at the gas that would actually be heading into the project and could -- maybe not quite as much risk in terms of what's coming out of the ground relative to, say, Cameroon.

I'm curious, and it might be a bit early to talk about this, but in terms of how you think about that impacting a toll or maybe an IRR on that project relative to, say, Cameroon, where there's a bit more risk involved and obviously a higher potential return.

Yes, I think it's just a little bit too early to be making comments.

One last one for Brian and just on your liquidity. A lot of -- obviously a lot going on, a lot of numbers flowing around. But, if I just kind of take a look at where your net liquidity is and I just think about what kind of committed capital, what kind of spoken for liquidity, and if I kind of look at FLNG number 2, the Gimi just hit kind of book, it would seem -- it seems like you've got $300 million of kind of unspoken for liquidity altogether. And then assuming the financing of the Hilli, that number would jump to almost $1 billion in terms of just excess -- not excess, but unspoken for liquidity outside of, say, any other FLNG besides the first one. Is that an accurate snapshot?

That's where I would also have my -- approximately where I would be as well.

Okay. Great. All right. That's all I've got. Thanks, guys.

Sure.

Fred Graham, Nomura.

Yes, my question relates to the security interest for the convertible bonds. There's a 30% aggregate threshold interest in the equity of the LP. I'm wondering if you were to go out into the market, as you mentioned in a recent press release, and buy -- retire some of the convertible bonds, would that change the minimum threshold requirement?

So, I think what you're saying is -- well, no, I think those two are disconnected. So, Golar LNG Limited is required to have a shareholding of Golar LNG Partners of at least 30%. That's sort of one of the covenants that we have for Golar LNG Partners.

That is separate to the convertible bond buyback that we entered into or that we have a Board approval for, but which hasn't actually come into place.

Right. So, I guess what I'm asking is, let's just say it's not [changed ratably] with the amount of bonds outstanding I guess is a better way to put it?

No, I'm not quite sure what -- so, the bond buyback program that we had approved is something that we would only put into place if we believe that the pricing of the bonds is just below par. We wouldn't, obviously, buy our own bonds at a premium.

But, yes, so, I think you need to disconnect the 30% threshold. That has got absolutely nothing to do with the share -- with the bond buyback program.

No, no. I know. But, it has something to do with the security interest in the bonds as per the covenants, right? So, you're required to -- .

-- No, it doesn't because the -- you need to be a majority bondholder in order to actually influence that. And our Board-approved bond buyback isn't going to be sufficient to influence that. Hello?

Yes, I'm trying to -- .

-- Maybe -- I think, Fred, maybe we take this offline so I can fully understand your question.

Okay. What number can I -- ?

-- Why don't you -- the number is on the press release. So, call that, and just ask for me.

Okay. Sounds good.

Cheers.

All right. Thank you.

[Johan Nep, GBO Capital].

Yes, hi, good afternoon. Thank you. I just have one question on the LNG shipping market. My question is what you expect the impact of the [MEGI] vessels will have on charter fees for traditional vessels. So, should the MEGI vessels prove to be successfully operated, will MEGI trade at a higher price, or will it actually put further pressure on the traditional vessels? Thanks.

So, it's to some extent a question which we'll answer in a couple of years from now when the first of these vessels deliver. If the vessels perform as advertised and if there is acceptance within the market for the MEGI vessels, then potentially, they will command a premium above other vessels within the market and put more pressure on the sort of first- and second-generation vessels for early retirement. So, it's the next technical step, but at this stage, still very early.

Okay. But, the first launch is already this year, right, of the first conversions of MEGI?

So, the MEGIs are newbuilds. I can't say categorically when the first ship that is -- I thought it was a little later than that.

Okay. Thank you very much.

(Operator Instructions). As there are no further questions at this time, I'd like to hand the call back to the speakers for any additional or closing remarks.

So, just in closing, we thank you for your time and participation, and we very much look forward to joining you again at the end of the Q1 results later this year. Thanks very much.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.