Golar LNG Ltd (GLNG) 2015 Q1 法說會逐字稿

Good day, and welcome to the Q1 2015 Golar LNG Limited earnings call.

Today's conference is being recorded.

At this time I would like to turn the conference over to Mr. Gary Smith, CEO.

Please go ahead, Sir.

Thank you very much, and hello, everybody.

I'm joined here in London today by Brian Tienzo, our CFO, and Stuart Buchanan, responsible for investor relations.

The agenda for the call will be, as in previous calls, I will quickly run through the highlights for the quarter, then hand over to Brian who will take us through the financial highlights for the quarter.

And then I will come back and talk to our business update and give a summary and outlook before we take Q&As at the end of the call.

If I turn to page 4 of the presentation pack and run quickly through the highlights for the quarter.

And firstly, we are pleased to report good progress, good and solid progress with Perenco on the contract surrounding the employment of Hilli in Cameroon.

And I will come back and talk in more detail on that at the back end of the call.

Secondly, we have during the quarter entered into an MoU with Rosneft for the development of two, maybe more, FLNG projects with them.

The two target projects at the moment are in Venezuela and Sakhalin.

During the quarter, Golar concluded the sale of the Eskimo to LNG Partners for the sum of $390 million.

We also sold 7.17 million Partners common units, also generating proceeds of $207 million.

During the quarter we took delivery of the Golar Snow, the Golar Kelvin, and the Golar Ice, which concludes the delivery of all the LNG carrier new-builds.

We have the delivery of Golar Tundra, the final FSRU, which will deliver in Q4 of this year.

As flagged in the last quarter's call, the LNG Chartering market has been weak, and, indeed, has deteriorated, both in terms of utilization and rate over the quarter, and we see that continuing through to the middle of this year.

As previously reported, we commenced the charter of two of our carriers to Nigeria LNG, and those charters for a period of approximately 12 months each.

The first quarter net profit is reported at $24.6 million.

And the underlying EBITDA for the quarter was a loss of $4.3 million, compared to the Q4 profit from last year of $7.8 million.

The Board is please to advise that the dividend will remain at $0.45 per share for the quarter.

Following the close of the quarter, and there's been some additional events take place, which I'll quickly touch on.

Firstly, we purchased from Bonny Gas Transport -- which is the shipping company associated with Nigeria LNG -- the vessel, LNG Abuja.

Whilst this transaction was not directly linked to the charters with Nigeria LNG, they did help facilitate that deal.

We announced earlier on the commencement of discussions with Keppel in relation to exercising an option to commence the conversion of our third GoFLNG vessel.

And that followed the signing of the heads of terms with Ophir, which is our latest GoFLNG project to take place in equatorial Guinea commencing in the first half of 2019.

I will come back and talk in more detail to each of those points, but I'll hand it over now to Brian.

Thank you, Gary.

So to take you through financial highlights of the quarter then, turning over to page 5. If you look at the left-hand column there, looking at the Q1 2015 numbers, you'll see that the revenue for the quarter is actually quite comparable to Q4 2014.

Our numbers, of course, during the quarter, as mentioned earlier, we were able to put both Crystal and Frost into a charter with Nigeria LNG for 12 months.

And to some extent, they anchored some of the lower utilization in the other vessels.

We also saw improved utilization for Celsius, and we continue to have some earnings on the Golar Arctic during the quarter.

But that, of course, has now [ceased], and we will see the Golar Arctic not necessarily taking on revenue during the second quarter, which will likely impact our Q2 numbers.

Against the revenue numbers there, which are quite consistent with Q4, I've highlighted three points which point towards the decrease in net operating revenues.

The first one being the Grand charter in the fair value guarantee related to that specific charter for $11.9 million.

And I've put a footnote at the bottom of the page just to highlight what that is.

And essentially we're under US GAAP.

We are required to fair value the guarantee Golar LNG Limited had placed on the Golar Grand in giving the option to Golar LNG Partners for chartering back the vessel.

And in fair valuing there, we had to take into account the potential earnings capability of the vessel, while it is on charter to Golar LNG Limited, against the obligations of Golar LNG Limited to Golar LNG Partners.

And in the quarter, we recorded an incremental fair value adjustment of $8.8 million.

Within that $11.9 million, also, is the lease cost or the hirer cost to Golar LNG Partners of approximately $3.9 million.

Another negative impact during the quarter is in respect to the Eskimo, as a result of the agreement to charter back the vessel as part of one of the transactions that coexisted with the sale of the Eskimo to Golar LNG Partners.

So Golar LNG Limited is hiring back the vessel for $22 million from Golar LNG Partners, and it has the opportunity to receive any revenues that Golar Eskimo is able to earn up to the end of June.

So we charge during the quarter $9.6 million, which means that will be an incremental charge in Q2, [$12.4 million] in respect of that same transaction.

On a like-for-like basis, the other voyage expense is lower this quarter, from $11.9 million in Q4 to $5.5 million in Q1.

Of course, there was some reduction in bunkers from Frost and Glacier and Crystal, following their charter to Nigeria LNG.

And of course, there is also reduction in bunkers following the sale of the Golar Viking to PT Equinox during the quarter.

So going down the table of little bit, you will see that we recorded a gain of approximately $100 million.

That's resulted from the sale of Eskimo to Golar LNG Partners.

And then, looking at the net financial expenses and income of $47 million, which is fairly consistent with Q4.

But within the $47 million in Q1, $32 million of that is in respect to other financial items, most of which is related to mark-to-market movements from quarter to quarter.

Being total returns mark-to-market negative valuation of $12 million, and then you've got interest rate mark-to-market negative valuation of $16 million.

As Gary mentioned earlier, the continuing weakening of the spot market has lead our utilization for the quarter to decrease from 57% in Q4 to 46% in Q1.

Turning over to page 6 now, I'm not going to go through this in too much detail because we have gone through this in the past.

But it is really just to highlight, currently, the importance of the dividends that Golar LNG Limited are receiving from Partners at the moment.

It also highlights the rise of the value of dividends despite the decrease in the shareholding of Golar LNG Limited, of Golar LNG Partners.

But I think most importantly, in the most recent distribution announcement by Golar LNG Partners means that the annualized distribution from LNG Partners is now $2.31.

Of course, any dividends that Golar LNG Partners announces above that will benefit Golar LNG Limited, as it holds the incentive distribution rights, which will have hit the 50% level.

So potentially, were we able to put the Tundra into long-term charters, which is, of course, one of the very -- it has good opportunity at the moment -- then that is likely to trigger the high splits in incentive distribution rights.

Turning over to page 7 to go through some of the balance sheet items.

You will see that the liquidity position of the company has improved from $191 million to $376 million in respect of unrestricted cash and cash equivalents.

That has been helped by the release of equity on taking the new-buildings and also of the sell-down of GMLP units earlier this quarter.

You will also see that the liquidity has also been helped by the reduction in restricted cash following some improvements in share price as well as the removal of the requirement to put secured cash for one of the vessels which was in existence in Q4.

Going down the columns there, you will see a material increase in vessels and equipment.

And that is the result of the delivery of three vessels during the quarter.

And that also impacts the line before that was a new-building.

And the majority of the balance from Q4 is now transferred to vessels and equipment.

We reported that the Hilli conversion is progressing well.

And you will see that incremental expenditure during the quarter within assets under development is $15 million, and that is in respect to GoFLNG conversion.

There is a new line item there, long-term loans due from related parties.

And that points towards the vendor loan to Golar LNG Limited as a result of the sale of the Eskimo that concluded in January.

And the last item I would just like to say something about is in respect of the current portion of long-term debt, which, as you will see, has jumped from $116 million at the end of Q4 to now $505 million at the end of Q1.

Now this is as a result of the funding transactions that we have entered into in respect to Ice, Kelvin, Glacier, and Snow.

And these are -- the funding structures within these require us to treat those transactions under a variable interest entity accounting convention.

Now what this means is that Golar is currently consolidating the lenders under these financings.

So as a result, as of the end of March, the fundings used by these lenders, whether it be a mixture of short- and long-term loans, Golar is obliged to disclose the short-term portion of those loans within current liabilities.

Of course, from a cash perspective Golar is not obliged to pay any more than the agreed repayment schedule, which we have agreed with those lenders.

But the impact of this is that it makes the current portion of long-term debt much higher than it really is.

The indirect impact of this, of course, is that it may have an impact on Golar covenants, but we are taking steps to make sure it doesn't impact how we calculate those and how we present those covenants to lenders going forward.

Turning over to page 8, and just very quickly go through the main cash movements during the quarter.

Net cash provided by operating activities, mainly as a result of the operations under utilization of the vessels.

Again, the additions in new-build is in equipment, mainly taking into account the three deliveries that we had during the quarter, and, of course, the $207 million positive cash coming in from Golar LNG unit sale in January.

And finally, just turning over to page 9 and to quickly go through the Company's liquidity position.

We have gone through various financing activities during the quarter, and as a result of that, the liquidity position of Golar has been strengthened.

Of course, we have already highlighted that taking delivery of three new-buildings during the quarter has now realized the equity release of $180 million.

And of course, the conclusion of the 7 million unit offering of GMLP units in January has resulted to an additional cash coming in of $207 million.

You will have noted as well that our restricted cash position has dropped from [$75,000] to [$51,000] end of quarter.

And so we have been released of approximately $20 million, and that is now unrestricted.

Looking forward to future potential cash injections, of course, there remains the $220 million Eskimo loan that is owed by Golar LNG Partners.

And for those who have looked at Golar LNG Partner's press release, they concluded a bond offering recently, and so we expect that a big chunk of that will likely go towards repaying some of this loan.

And of course, the recent improvements in share price means that the restricted cash we saw at the end of March, the majority of that is now bring released.

And assuming that the share price doesn't move materially negatively.

Then we expect that cash to remain with in the unrestricted portion.

And then just a quick update on the financing of GoFLNG Hilli and Tundra, so we now have acceptable terms for GoFLNG Hilli and ongoing due diligence are now being performed by the potential lenders.

They are looking at the conversion works, as well as the potential, looking at the reserves and so on that is for the Cameroon project.

The terms that we are seeing indicate a very competitive pricing given that the profile, the loan-to-value of the transaction, and the tenor that we are able to achieve under those transactions.

Of course, the completion of the financing remains subject to vessel employment.

And as I'm sure Gary will tell you later on, we hope that is concluded within this year.

On FSRU Tundra, again, it is going well and is expected.

Funding terms, [where] with or without charter is being received and ready to be triggered.

And that will be dependent on how the commercial discussions on Tundra progress over the next couple of months.

So overall, the company has a good liquidity position to absorb the ongoing challenging shipping environment.

We do have some capital obligations in respect to GoFLNG Hilli, and we are well-funded to do that.

And of course, as the Board has already indicated, there is an intention to continue paying dividends, and the current liquidity position supports that also.

I'm going to turn over now the presentation to Gary to go through the business activities with you.

Thank you, Brian.

I will start on page 10 of the slide presentation deck.

The changes to the Golar portfolio slide are subtle.

As previously commented, we have now taken delivery of Kelvin, Snow, and Ice, so they have been delivered.

Golar Tundra remains outstanding.

You will see on this page the markup of the two charters to Nigeria LNG, so Crystal and Frost.

And the other point worth noting is that Gimi is still showing as a conversion candidate.

She has not yet entered the yard, albeit, but we have made the commitment to commence down that path.

Turning to page 11, shipping.

As we flagged during the Q4 results presentation, it has been a tough quarter with a decline both in utilization of the vessels and in rate.

A couple of weeks ago there was close to 40 LNG carriers sitting idle, spread between the Far East, Middle East, and the Atlantic markets.

However, in the last few weeks we have seen that start to turn.

Indeed, now eight of our open vessels are fixed in the months of June and July.

And we're kind of hoping that we've seen the bottom and things will start to improve from here.

Certainly in the second half we expect new LNG production to start up.

As previously commented, there's projects in Australia and at the end of the year, so [being passed] in the US Gulf Coast is scheduled to start producing.

Somewhat overlooked by commentators is also the fact that we've now got three new markets who are receiving LNG opened up.

All of them facilitated by FSRUs, so Egypt, Pakistan, and our own project in Jordan have all started to receive cargoes.

And so not only the supply side, but the demand side is an improving story as we move in to the second half of the year.

Our strategy for shipping has remained unchanged, and that is, firstly, and most importantly to maintain safe and reliable operations.

We are targeting utilization, and where we can, we will continue to seek out niche opportunities which we can use to employ our vessels.

Moving to page 12, and in somewhat stark contrast to the shipping story, we continue to see healthy and strong interest in FSRUs.

We now have six vessels operating or at least five operating, the six in commissioning and one vessel due for delivery later this year.

Important, particularly in relation to the FLNG story, is that each of our FSRUs represent a market for LNG.

We have installed capacity across the fleet to re-gasify some 25 million tons of LNG, and only 5 million tons of that capacity is secured on any long-term basis.

In respect of Tundra, the Ghana project continues to make good progress, and we remain hopeful of a commitment around the middle of the year.

However, on the back of the increased level of interest within the market, we are pursuing in parallel other opportunities.

And indeed, there are tenders which we are participating in right now.

So we have are very confident about that market and continue to see increased levels of interest.

The interest that we see spans the globe from South Africa and Africa, more generally, to Brazil and South America, more generally.

And I would add to that list Indonesia as well where we see a couple of projects.

On the slide it talks to 40 potential projects worldwide.

I add a note of caution there.

Not all of those will translate into full projects, but certainly it indicates the level of inquiry that we are currently fielding in FSRUs.

If I turn the page then to page 13 where we talked to the two, now, GoFLNG opportunities, which I previously announced.

Starting with the Hilli project in Cameroon, the characteristics of the project are presented there on the slide.

So it is 500 BCF of gas, which will employ the vessel for an eight-year period, producing at 1.2 million tons per annum.

That is below the full capacity of the vessel.

However, we see the possibility to increase project volumes conservatively within the region there is gas available.

But that remains subject to further discussions.

The gas quality in Cameroon is well suited to the GoFLNG project, and, indeed, the met-ocean conditions are perfect.

Perenco has the responsibility for marketing the LNG from the project.

And they have commenced that process and are making good progress.

The project remains on target to start up in April 2017.

And indeed, both Perenco and Golar remain on target to conclude the agreements by the middle of this year.

And those agreements include the Tolling Agreement and the gas convention.

Following approval by -- acceptance by Golar and Perenco, there will be, then, a period of two to three months where those contracts go through a process of ratification with the host government.

So very encouraged by progress there, and as I say, remain on track to conclude negotiations by the middle of this year.

Turning to the equatorial Guinea project, which we announced during the last quarter, the characteristics of this project are a little different.

We have more gas available to feed the vessel, and so in Equatorial Guinea we have a project life of 20 years and producing at the full capacity of the vessel, which in West Africa is 2.2 million tons per annum.

The location of the gas is further offshore and in deeper water, and so it does require us to modify the generic GoFLNG vessel to be able to operate in deep water and to provide the well assurance and upstream operation capability from the vessel.

As with Cameroon, the met-ocean conditions are well suited to our application.

Similar to the Cameroon project in Equatorial Guinea, Ophir and GEPetrol retain the responsibility for the marketing of LNG.

And that process has yet to commence in any serious way.

In the press release that we put out a few weeks back, we indicated a startup in the first half of 2019.

And for now, that remains our target; although, we do recognize some possibility to improve on that if things go well.

Turning to page 14 and dealing specifically with the Hilli conversion.

As at the end of March that the Hilli conversion was 42% complete, and slightly ahead of schedule for this stage in a project.

That conversion progress reports on man hours and associated activities, which includes design, procurement, and actual man hours in the shipyard.

With value of work completed, excluding the value of the vessel is $320 million.

And as Brian reported earlier, some $15 million worth of work completed since the last update.

Both Black & Veatch and Keppel have taken equity in the project, and the cooperation between all three Partners remains solid and strong.

And as also previously reported, we're now turning our mind to Gimi, and long-lead items have been ordered for the Gimi project.

Turning, finally, to the last slide, which is on page 15, which looks at the outlook.

The current spot market, as I've said now a couple of times, is tough.

But we think we have seen the bottom, and, hopefully, as the year pans out, we will see in improvement, both in utilization and in rate.

Eskimo has delivered, and she currently sits in Jordan, has commenced her commissioning.

And at the end of that commissioning period will go into service in Jordan.

The final FSRU Tundra will deliver in Q4 of this year, and we continue to make good progress in Ghana.

But we are pleased to report that we are chasing additional opportunities for the employment of Tundra.

Specifically on GoFLNG, the Cameroon project is working toward financial close.

That will be a two-step process where Perenco and Golar will sign off around the middle of this year.

And then there will be a short period where those agreements then get ratified and the project then becomes fully financable.

In Equatorial Guinea, we are pleased to have signed Binding Heads of Terms, back a couple of weeks ago in Singapore.

We have a lot of work ahead of us to then mature those agreements into binding contracts.

Ophir has a process now to commence in their upstream feed, and we're hopeful of reaching FID on that project in the first half of 2016.

On the back of the momentum achieved with both Equatorial Guinea and Cameroon, we are seeing an increasing level of inquiry, not just in West Africa, but, indeed, in a number of geographies around the world.

And we are very encouraged by that.

And on the back of that level of interest have announced an intention to enter into negotiations with Keppel for the conversion of our third GoFLNG vessel.

And hopefully, we'll have more to say about that in the not-to-distant future.

I think at that point I'll cease the formal part of the presentation, and welcome questions.

Thank you very much.

Thank you.

(Operator Instructions)

Jon Chappell of Evercore ISI.

Thank you.

Good afternoon.

I am going to try to keep it to three quick things here, Gary.

First on the Tundra.

It's just a little curious, or maybe interesting to me, that we are this close to potentially moving forward with the Ghana project, that you are still entertaining other tenders.

Is that just a kind of insurance policy, in case the Ghana project doesn't go through?

Or based on what you've said about the increased inquiry, are terms becoming a lot better now in the FSRUs, and do you need to kind of weigh better terms versus timing now for the Tundra?

No, it is not to do with better terms.

It is more to do with really ensuring we secure a contract at the earliest possible time.

I guess in one of the opportunities, we have the potential to employ Tundra from an earlier date.

So it was less of a gap between when the vessel delivers ex-yard, and when she would go into service.

And so, in that respect, one of the opportunities which we are chasing is a little bit of Tundra, but until we have a signed contract, I think we are obliged to treat every opportunity very seriously.

Okay.

And what is the base case employment start date, if you were to go down the Ghana path?

In Ghana, the employment is third quarter 2016.

Okay.

The second thing I wanted to ask, was about the Hilli.

You mentioned the potential to increase the utilization of the asset.

Just wondering what needs to happen there?

Are there other land-based projects that need to be canceled?

How do you get from the 1.2 to 2 point-something in Hilli in a reasonable amount of time?

Yes.

So it's to do with the gas allocated to the project from the host government.

And there is a, I guess, a juxtaposition versus -- with our project versus completing a land-based project.

So that discussion needs to pan out.

And indeed, there is we believe gas associate -- adjacent blocks to where we're producing.

So that could also come true.

We know there is gas there.

To be clear, we have only been allocated 500 Bcf of gas for our project, but we are very much aware that it's a very gas-prone area, with both proven and prospective gas adjacent to where we are producing.

Okay.

The final thing is, I just want to think about the timeline on the third potential conversion that you started the conversations with.

Is there a drop-dead date on this?

I remember the Gimi, you put out an announcement on December 31.

Do you need to have something in place by June 30 of this year, December 31 of next year?

And how does that kind of lay out relative to moving forward with the Gimi?

Would you need that to be in FID before you move forward with the third one, so you didn't have more quote-unquote -- more than one on spec [at the peds] at the same time?

Thank you.

That is a good question.

And indeed we don't want to have more than one vessel on spec at any one time.

That is our clear stated intention.

If you think about the two projects we've talked about so far, the first in Cameroon is scheduled to start up in the first half of 2017.

The second in Equatorial Guinea is scheduled to start up in the first half of 2019.

We see that we have the capability, the vessel available, and the opportunity to secure a project in the first half of 2018.

And the Gimi could be the vessel available for that slot, and the arrangement we have in Equatorial Guinea allows us to substitute another vessel for Gimi, if that were to happen.

In relation to your question, then that does give us sort of a window of opportunity, in which we have to secure the third project.

And I don't want to be too limiting in my answer here, but I guess, if we haven't found that opportunity by the first quarter of next year, then it will get pretty tough for us to change.

By the first quarter of next year, we have to lock Gimi into either its third as yet unannounced project, or it needs to be dedicated specifically for the Equatorial Guinea project.

Okay.

And there is no drop-dead dates on converting the third, or at least coming to an approval of capital on the third one?

Or could you extend those if need be, as you wait for FID to be finalized?

So the rest of the capital, I mean, l think the discussions are reasonably open and transparent.

So we're really governed by the schedule of the two announced projects, and the time line it would take us to deliver the second project into Equatorial Guinea.

Jon, I think our experience with Keppel has been very good so far.

And if, whilst there may be a drop-dead date, and at the moment we're not saying there is, I think there is some flexibility in there to make sure that we are able to slot a third -- a 2018 FLNG in the conversion process.

Right.

That makes sense, Brian.

All right.

Thanks a lot, Gary.

Thank you.

Ben Nolan of Stifel.

Thanks.

Yes, and I have a couple of questions.

I guess, first following up on a few, or some of that FLNG commentary.

When you talk about the possibility of a third unit, does that -- are we talking about something completely separate from the two already in West Africa, and then some of the other projects you have been working on, whether it is with Rosneft or the Canadian projects?

I mean is this, call it, an incremental over and above those?

So it is most unlikely to be Rosneft or Canada, given the time frame that we are talking.

So it will be an incremental project.

It could well be West Africa, but unlikely to be Equatorial Guinea or Cameroon.

Okay.

That's helpful.

And along those same lines, there was a little bit less commentary in this presentation, with respect certainly to the Canadian projects, but also in general with respect to the -- not much with respect to the Rosneft projects.

How are you guys thinking about those?

How are you sort of weighting perhaps the likelihood of each of those, relative to let's say, the potential for the third project in West Africa if that's where it is?

So Canada, Rosneft and West Africa are all discrete and separate opportunities.

There was some commentary in the release in relation to Canada, or it will be if not in the presentation.

We continue to make good progress in Canada.

Obviously in that location, where it is a little bit dependent on the progress of the Shell project, and my understanding of that project is it continues to make good progress as well.

The issues at the moment being addressed are around the pipeline access to the Douglas Channel site, and the various negotiations associated with that.

With the Rosneft deal, we have signed the MOU with Rosneft.

We have commenced discussions with them.

There are a couple of opportunities which we are focusing in on in the first instance, but it is a little too early to be saying too much at this time.

I would say both the Rosneft and Canadian opportunities are toward the end of the decade, and unlikely to be this third FLNG project delivering in 2018.

Okay.

(Multiple speakers) That's okay.

Yes, and then I was just going to say, we still see plenty of opportunity in other parts of the world, including West Africa, and it's more likely that we're going to mature an opportunity quickly in those geographies, than either Rosneft or Canada.

I see.

Very helpful.

And then quickly on the FSRUs, it sounds like there are a lot of opportunities, not only to deploy the one vessel that you have coming online but potentially others.

Is that an area of market that you would put capital towards, or is it now incremental dollars really spoken for with respect to the GoFLNG?

Golar has a leading position in FSRUs.

We're seen as a quality provider.

Yes, we are very pleased that we have 100% availability across all our units so far this year.

And so, that is a market which we're keen to stay in, and we want to protect our position.

So I think you will see us continue to pursue projects, and put capital towards those projects which make sense.

Okay.

And then lastly for me, I know several quarters ago you had talked about the possibility of the Board revisiting the dividend, and weighing whether or not to continue at the same level.

And obviously, you have thus far, still have what would seem to be an awful lot of potentially very lucrative opportunities that would require an awful lot of capital.

Could you maybe walk me through how you were currently thinking about the dividend policy, and sort of the use of your capital on that front?

Sure.

I think in our presentation, we highlight the potential income liquidity into Golar.

I think, that's to underline a couple of things.

One is, that the Company, albeit in a pretty weakened shipping environment, the Company is in good liquidity condition -- in position.

It has got the means to continue converting GoFLNG, Hilli certainly in the current time line without affecting it, without obviously raising additional equities for that specific project.

And I think also, as we have mentioned in the past, whilst we said investors shouldn't expect any incremental increase in the dividend, we did say that the current position of the Company is that it's looking to continue to pay dividends at the current levels.

Now whilst that's not to say that we will continue forever to pay it, because I think the reality is that we have look at the shipping condition this time next year in 2016.

Of course, everyone expects that to have improved, and if that were the case, then the dividends would have continued to be paid.

If it hasn't improved, then we need to have look at our liquidity position then.

But the current standing is such that we are well-funded.

As Gary said, it not -- it is unlikely that we would look to having more than one speculative GoFLNG conversion ongoing.

So that means that as we stand, we've got funding for FLNG Hilli.

And in one of the discussions we had earlier is, is once that Hilli -- once Hilli is fully contracted, then we have financing in place to put into that, which would mean that leakage on, cash leakage on Hilli would stop, and further capital requirements would be on Gimi.

Okay.

That is a great and thorough answer.

Thank you.

That does it for me.

Thanks.

Thanks, Ben.

Christian Wetherbee of Citigroup.

Great.

Thanks for taking the question.

I wanted to ask about the timing on the Hilli, the terms for the agreement before I go.

I just wanted to get a sense.

Number one, do you need a offtake customer sort of fully in place before you get to term later or not in June?

And then, should we hear the terms prior to the country approval?

I just want to make sure I understand the next sort of steps we should be thinking about from a public disclosure standpoint around the Hilli?

Chris, your question -- your message was not all that audibly clear, but I will try to answer it.

We are progressing the discussions on both the tolling agreement and the gas convention, completely independent and separate to the LNG marketing effort.

And the intention of all parties is to proceed with FID for the project independent of the marketing effort.

Should the LNG buyout be secured within the time frame before finalization of the documents, of course that would be well-received.

But it is not a condition of FID that we have secured [onto a buyer].

Okay.

That's helpful.

And in terms of just the timing, I think you have talked about getting the agreement done by the end of the month of June.

But then there is also a government approval process to sign off on it.

Will we hear the terms by the end of June, or will we wait until the third quarter to get the government approval on it, before we understand what the terms are?

I would expect we should be able to indicate in both parameters the terms around mid June.

But I am not exactly sure what we will, and might be able to say at that point in time.

Yes, I think as we've mentioned before, because the nature of partners that we have here, we need to -- we are little bit more sensitive on what type of information we can disclose, of course.

As you will have seen, the amount of information we disclosed in [Ophir] is very different due to the amount we have been able to disclose them on the Perenco project.

Ultimately, it is a discussion that we will have to have with both Perenco and SNH We've mentioned in the past, we are happy to disclose the information that is firm.

By the time we get to the end of June, I think a lot of the discussions on the commercial side will have been firmed up.

But again, what we can announce out of that is going to be subject to agreement with the counter-parties.

Okay.

That's helpful.

I appreciate the color there.

Just also want to then follow up on the Gimi, and just understand a little bit when you think about the technical differences between the Gimi potentially and the Hilli.

Just want to get a rough sense, maybe order of magnitude of the difference in costs of the two GoFLNG?

Thank you.

So assuming it is Gimi that we use for Equatorial Guinea, and I'm assuming that is the basis of your question, we have in round numbers sort of $200 million, maybe a bit more to spend to adapt the Gimi or the second vessel for Equatorial Guinea.

However, that incremental CapEx will also be renumerated separately as well.

So we again, in the previous press release, we indicated an EBITDAR in the range of $350 million per annum to cover the base vessel.

That the additional CapEx to employ the Gimi, in Equatorial Guinea will attract additional income as well.

Okay.

Okay.

That makes sense.

And then, just a final question.

Just thinking bigger picture about the LNG carrier market, as we look to see the 40 spot-ish vessels that out there open currently, potentially could absorb [much of the] production that comes online as we get through towards the end of 2015, beginning of 2016.

How do you think about sort of the employment that you would like to have in place for the LNG carrier fleet, having some level of guaranteed cash flow?

It seems like it would make sense, just given the cash that you have in the other parts of the business.

Just curious to think about how, what are the break points you guys are watching, before you get a little bit more constructive, and potentially put some ships away for some term.

Obviously, you'd need a better market for that to happen.

Just curious, what your thoughts are around maybe a range that you would be looking for, before you would think about that?

Thank you.

Sorry, your -- the audio there was really hard to follow.

So in this market for sure, we are preferring shorter-term opportunities.

It needs to improve significantly for us to contemplate putting vessels away on a long-term basis.

As I think this is probably not the right forum for us to publicize what that rate might be, due to the commercial nature of that information.

So all I think I can really say is, this is definitely not the market to be pursuing long-term opportunities.

We're open to do so, but no where near the levels where we are today.

All right.

That's helpful.

Thanks you for your time.

I appreciate it.

Erik Stavseth of Arctic Securities.

Hi guys.

A couple of quick ones from me.

You are focusing a lot of the time here on the FLNG side.

I mean, you mentioned that you are keen to stay and maintain your position in the FRSU market.

But any thoughts about streamlining GoLNG into a pure FLNG company, and then sort of create upstream/downstream entities at some point?

I mean, we did see that with Golar LNG, and Golar LNG Energy at some point.

Any comments there?

It is not on our radar at this moment in time, Erik.

I mean, who knows what the future might hold, and where this current phase of development might may take us.

But certainly, as we look at our activities today, we are focused on just securing these contracts.

Right.

And the second question is on -- you mentioned that you could see some additional equity released on the Tundra.

Could you give an indication of what kind of leverage you will be looking at on the Tundra, if there was an equity release?

Well, one thing we mentioned in there is, that we have financing available for the Tundra, whether or not she is on hire -- excuse me, she is long-term charter.

And of course, the equity release is going to be very dependent on that.

If she is in an a long-term charter, obviously, there is going to be a big possibility of dropping her down to Golar LNG Partners.

But prior to that the financing is going to be pretty akin to what we have been able to achieve on some the vessels that we have taken delivery recently.

Okay.

And on that question -- I mean, you have not paid much into the Keppel this quarter, and how flexible is that payment schedule?

I mean, there has not been that much guidance on how the payment structure actually is.

I guess, it is semi-linear is what I've understood.

But can you give any comments on whether that could be more tail-end heavy, should you need to, or want to free up additional equity to invest in a third FLNG unit?

I think we have given guidance in the past, that the contract is as you say, is a bit heavy upfront, and also a bit heavier at sort of the back.

But in the middle it is sort of -- it's a bit linear -- it's pretty flat.

And so, there will be quarters where you see low expenditures such as this quarter.

And there then will be catch-up quarters as well.

But ultimately, those are governed by milestones.

And of course, those milestones need to be achieved in order to -- for the payments to be triggered.

We already announced that we are slightly ahead of those.

So there is no need for concern, by the fact that we haven't paid as much this quarter as we did in Q4.

All right.

And then, last question from me, you mentioned you are seeing other projects potentially for the Gimi, and you're seeing other areas.

I mean, the previous player who was in Ophir was intending to use a new build.

Could that be an alternative for you, to actually build a new build, if that was to be?

Could you do that?

So we're the early stages of developing a concept for conversion of a new build carrier, which is somewhat different to the previous provider in Equatorial Guinea prior to us, so they were looking to build a complete new build hull and liquifaction facility as a fully integrated project.

Our approach is to remain the conversion of carriers, albeit for projects such as the [Cedar] project, and Rosneft PDVSA opportunity in Venezuela, they are more likely to be the conversion of new build carriers.

All right.

Thanks.

Michael Webber of Wells Fargo.

Hey.

Good morning, guys.

How are you?

Hi, Michael.

Fine, thanks.

Just a couple of questions.

I wanted to follow up on the last one, around new builds versus conversions.

And I'm actually going to come at it from just the opposite angle.

It seems like the Ophir developed relatively quickly.

I know you had your conversations with them kind of years ago.

But it seems as though the conversion solution and the speed to market advantage associated with your model was pretty helpful in that scenario.

I'm just curious, with Ophir in general, how much of the speed associated with that project coming together to this point was associated with the prior conversations, versus the conversion solution, which is replacing a new build solution from one of your competitors?

And has that spurred any more dialogue or conversations with projects that may or may not be in FEED or pre-FEED?

Or kind of looking at the conversion solution as an opportunity to vacuum up some of these projects that are kind of stuck in different sorts of FEED quagmires?

I think there are two factors that were be helpful to the speed of developing the Ophir opportunity.

Firstly, clearly, in our discussions in Cameroon we have progressed our own thinking, our own commercial structures to the point where were very close to the finalization of the project.

And similarly, Ophir in their other the discussions have gone a fair way down the path as well.

So when we hooked up, both our thinking was pretty mature.

We weren't starting sort of from ground zero.

We were a long way toward committing to a project, both parties.

So I think the telling points, and that the [selling] points in terms of us securing that opportunity were firstly, the very competitive toll that we were able to offer.

And that is a function of conversion vessels, rather than going and building new in the yard.

And then secondly, the speed with which we can actually deliver the project.

And again, that is a function of converting vessels rather than going and building new in a shipyard.

So it happened quite quickly, because both companies had been contemplating a project such as this for some time.

And so, really we were adapting our respective models to reach an agreement.

But clearly, very clearly the benefits of starting with a platform such as an existing vessel, and it can be an existing vessel or LNG carrier which we order new, gives us the much greater speed to market, and a toll which is far more competitive.

Okay.

Good.

That is helpful.

I wanted to come back to Hilli for a second.

I know you talked a bunch about the negotiations with Perenco and the timeline there.

But as I think about the validating data points, and what would allow the market to more heavily weight some of these potential projects, a long-term offtake agreement would go a long way.

And Brian, I believe you said that was on pace for some time towards the end of the year, or kind of winter time frame.

I was just curious if you can provide any incremental color around Perenco's discussion around offtake?

What those -- what does this potential counter-parties look like, in terms of portfolio players versus utilities, any indications on pricing?

And then I have got a follow-up to that.

So Mike, I think I would say those discussions are at midstream at the moment, and we are not the counter-party to those discussions.

So I think I would prefer just not to comment on where Perenco are at in those discussions, other than our understanding, it is all going constructively and positively.

Okay.

That is fair.

Just kind of a follow-up to that -- kind of the commercial framework around selling the gas.

It was noted as a possibility of selling that into the spot market to kind of facilitate the project moving forward, and stop-gap offtake if you will.

Around that possibility, well, I guess, first and foremost, how realistic is that, and is it any more likely today than it was say, six months ago?

And then, around the mechanics of selling that into the spot market, do you envision that being on a hedged or unhedged basis on at -- for volume and costs, and who would bear the price of those hedges?

So the possibility of selling the LNG into a liquid and fungible market such as Europe is as relevant today as it has been.

So that is -- there is no change, and indeed that is a backstop to the project.

Whether we choose to hedge or not is really not something which we are in a position to comment on at this time.

What is most important, is that we secure the ability to place the cargo, so that volume risk is taken out of the equation.

How we manage the price risk, which is a different question, is still an open question.

Okay.

I can follow-up on that.

Just two more, and I will turn it over.

Brian, you mentioned in your commentary, re-classing some of the debt as short-term based on some of the refi activity.

Just curious around the time frame for that in the back half of the year, whether any incremental debt gets reclassed, and whether that has an impact on the financing for the Hilli?

No, that has no impact on the financing for the Hilli.

It is more -- it's really all just an accounting convention, Mike.

So this is something that we saw happening.

But of course, whilst we say that we are consolidating the lenders to some extent, we are consolidating them simply because we are seen to be the main beneficiary or the risk-taker for those [STV]s.

And so, we are consolidating them, but in reality, we have no control on how they get funded.

Now didn't we foresee that some of the funding would be on a short-term basis.

It is obviously transpired afterwards that it is in a short-term basis, so we need to fix that.

We are having discussions with that company actually next week, to find a solution.

But in any event, it's a fix -- it is a paper fix, as opposed to any cash fix.

Okay.

That's helpful.

Just one more, and I will turn it over.

And around Cedar, I think you mentioned in your prepared remarks as well, and it seems as though that you have pretty good relationship with Haisla Nation.

They recently turned down an offer around that project.

Just curious, does your work with them -- to the extent that you guys are working kind of pre-FEED or anything kind of pre pre-FEED, does that kind of continued in parallel with that process?

Has there been any disruption around that work, with what is going on there?

And is there an inflection point, or kind of a cut off at which point you guys kind of pause, as you wait for that to get further along in terms of funding and FID?

I'm not really sure I understand the question you are asking.

I mean, indeed the discussions with the Haisla have been constructive and positive, and the focus at the moment is around the pipeline access channels.

More bluntly, they are turning down offers around the project, but they are working with you on a consistent basis.

In parallel, it would be a good indication around the viability of the project.

So I'm just curious, to what degree you're working with them and whether that kind of continues as they are also negotiating with others?

No.

They are locked in with us and that relationship is strong and solid.

Okay.

Great, I will follow-up.

Thanks, guys.

Thank you.

Fotis Giannakoulis of Morgan Stanley.

Yes, thanks you, gentlemen, thank you for the opportunity.

I understand that the deadline for June 30 still holds, and that we are only a month away which seems quite positive.

But my question has to do with the sale of the fourth train of the first FLNG unit.

Obviously, this first contract is only going to be 41.2 million tons, but the field that you are working on right now with Perenco has capacity for additional trains [say on November 1 too].

When should we expect some development on that front?

And also, if my understanding is correct, GDF Suez has exclusive rights for the remaining reserves in Cameroon, and is right now contemplating a FEED study regarding building or not a non-(inaudible) facility?

What are the chances of GDF going ahead, and what are the chances of Golar expanding its business in Cameroon be joined with its first FLNG?

Thanks, Fotis.

It's true, and as previously touched on in this call, our allocated gas for the Cameroon project enables us to operate at 1.2 million tons for the period of eight years.

As we've previously indicated, the region does have more gas available, and as you have commented on also.

But we need to be clear, the contracts we're entering into at this moment in time, only contemplate 500 Bcf of gas.

Let me just make a couple of comments about the Gaz de France project, although it is far more appropriate for they to make their own comments.

But Gaz de France have been in Cameroon developing a land-based LNG project for a number of years now.

But the construct of the project is that Gaz de France does not have the rights to reserves in Cameroon.

They were always more to aggregate those reserves, and then to process that gas through a land-based facility.

So that is the situation as it currently sits at the moment, and I probably would leave any more comment in relation to that project to Gaz de France

Do you have any idea about the timing of a potential decision for the third train, where there are sufficient reserves under a specific field?

And also, are you aware about the time schedule of a Gaz de France decision, of whether they would go ahead of their own liquifaction terminal or not?

All I could do at the moment is speculate, and I really don't want to do that.

Okay.

I appreciate.

And one last question.

Can you explain to us what are the differences between a Cameroon project and the Equatorial Guinea project, both in terms of contracts or agreement that you have in place?

And also in terms of the upstream economics between these two projects?

But what I'm trying to understand is that, what does this mean in agreement which is anticipated at the end of the month in Cameroon for the Ophir project, and the possibility of this project moving ahead from the perspective of the upstream providers?

Okay.

So there are clear technical differences between Cameroon and Equatorial Guinea.

Let me deal with them reasonably quickly.

So in Cameroon, that's a field already producing.

The gas goes ashore, is treated, the liquids are recovered.

And then dry gas is sent back out to the FLNG project for liquifaction.

It is relatively shallow water, and obviously there is an income stream from the liquids, in addition to an income stream from the gas.

So the upstream economics are relatively positive, and the production of LNG, and as a result our toll is okay, but as we've previously discussed there is potential for upside.

In the case of Equatorial Guinea, we are operating offshore in deeper water.

The gas is dryer, and we are in water depths of 1,200 to 1,600 meters.

So the development costs are going to be higher.

The liquid stream is not present, but the LNG production rates will be higher, and it will produce for a longer period of time.

I am not a position to make comparisons on the upstream partner's side.

But certainly from Golar's perspective, both projects are attractive, but obviously the Equatorial Guinea project with its longer term and its higher production capacity would rank higher in our minds.

Okay.

Thank you.

One last question.

Can you give us a clear, some estimate of how many potential FLNG projects are you discussing right now?

And what was the amount of projects that we were discussing about a year ago, just to see how much progress you have done on the marketing of your FLNG concept?

So in addition to the Cameron and Equatorial Guinea projects, and as publicly announced we are progressing and continuing to progress in Canada on Cedar.

We've talked about that already on this call.

We have just embarked on discussions with Rosneft, and that will cover a production facility in Venezuela, in partnership with PDVSA.

That is a significant gas accumulation and a significant opportunity for us.

And indeed, Rosneft has other opportunities within their portfolio.

So they are serious discussions.

There are other West African opportunities which I cannot comment on publicly.

There are opportunities in Asia, and there are opportunities in Central America which I cannot comment on publicly.

I guess, just to give you a sense of the scale, we have what we call an opportunity funnel, where we collate all of the various opportunities that come toward us.

I guess, there are in the order of 20 opportunities in that funnel.

That is not to say that there are 20 projects, because some of them are let's say left field ideas.

But a reasonable subset of those 20 have the potential to become meaningful projects.

And how many of the, what about a year ago?

Less than five.

Okay.

Thank you very much.

Thank you.

Shawn Collins of Bank of America.

Okay.

Great.

Thank you.

Good afternoon, Gary and Brian.

So just turning to the LNG carrier market which is clearly challenging.

I know it was weak in the first quarter, and is expected to be possibly weaker in the second quarter per slide 11.

Can you just talk about what your utilization was like in the first quarter for your LNG carrier fleet, from a percentage of utilization standpoint based on 100%?

I think we said 46% in the press release.

So it has deteriorated from 57% down to 46% from quarter four last year to quarter one this year.

Okay.

So 46% for first quarter.

And then how, while I don't want to push you on a number, but how would you think about it for second quarter and third quarter?

So second quarter is going to deteriorate probably further.

Although it could be in line, it could be -- it's going to, because we are finishing the quarter quite strongly.

So if you had asked me that question a few weeks ago, I would have said continued deterioration.

But we have done seven fixtures in the last couple of weeks, which obviously is very well-received.

And if that level of activity continues, then I think you can expect to see growth well into the third and fourth quarter.

Okay.

Great.

And if I look at -- I think it is 40 LNG carriers currently idle, and then compare that to the fleet of roughly 350.

So roughly 12% are idle, how would I compare that?

How would I think about that 12% number to your roughly 50% number?

Yes.

So a large proportion of the full LNG carrier fleet are fixed on long-term charters, so it's in dedicated trades.

And so, we're proportionately a much bigger player in the spot market.

And so, when things are depressed as they are at the moment, then we hurt a little more.

Of course, when things go the other way, then we enjoy the upside as well.

So because of our position in the spot, in the short-term market, I'm not sure the comparison with the total fleet necessarily holds.

Okay.

I understand that, it makes sense.

If you had to estimate on the 350, how many of those are spot versus -- sorry, how many are charters versus spot?

Well, it's somewhat blurred, because you've got the big oil company, sort of the portfolio players having a position in that market as well.

But it's 40 vessels 50 vessels maybe, I would have to -- it would depend on definitions.

I am picking numbers out of the air a little bit here.

Okay.

I understand.

And then, just last, my last question would be, any new marginal color on new terminals coming on in the next 6 to 12 months, new LNG terminals coming on?

Production terminals or receiving terminals?

Production terminals.

Yes.

So there is a number of projects starting up in Australia.

So there are the -- so one of the three coal seam gas production facilities on the east coast of Australia has started, and the remaining two projects are scheduled to be starting up from about now.

And indeed, both those projects are in the market for incremental shipping.

So that points to the fact that they are getting ready to start.

On the West Coast of Australia, you've got Gorgon followed by Wheatstone and the Ichthys project which is running a little late.

In the Gulf of Mexico, you have Sabine Pass scheduled to be ready for start up at the end of the year.

So in terms of total tons of production in the next 12 months, it is sort of 40 million to 50 million tons of incremental capacity coming on stream.

And as a rule of thumb, every incremental million tons of LNG absorbs one LNG carrier.

And that is notwithstanding any reloads and trading between the various trading basins.

And so, in this current market we have seen very little reloading of cargoes from Europe to the Far East.

But we're just starting to see that activity kick off again.

So that absorbs ships as well.

Okay.

Good.

That is helpful.

That is all for me.

Thank you very much, Gary.

Thank you very much, Brian.

Andy Gupta of HITE Hedge Asset Management.

Thanks for taking the question.

Most of mine have been answered over the course of the call.

But one thing on the Perenco deal.

So the final stage here, appears to be the government approval.

What are the risks around that approval occurring once you reach final terms with Perenco?

Far be it for me to speak on behalf of the government of Cameroon.

But the government have been through SNH, which is the national oil company in Cameroon intimately involved in this project all the way through.

So I think it's highly unlikely that they would have sort of impressable objections, although clearly it's their right to comment on the detail of the documents once they're finalized.

It should be said, that they have also participated in the drafting of the documents thus far.

So it is not as if these documents will turn up on their desk as a complete surprise.

So the risk is low, but clearly there is a process that needs to be gone through.

And in terms of the terms with Perenco are the -- at this point, are you very close on the base economics?

Or are is are still a significant debate going on in terms of the economics of the tolling agreement?

No, we sort of the broad parameters were agreed in the term sheet which we announced back in December.

So what we're doing at the moment is filling out the balance of the document to make it complete.

That's not to say that we don't revisit elements of the commercial deal from time to time, as you might expect.

But the broad parameters were locked down some months ago.

Great.

And then, last question.

Moving over to the FSRU market, it seems like one of your main competitors, Hoegh has had some decent momentum signing up a few new contracts here in the recent period.

Now I would be interested in your comment on that competitive environment, and why someone might choose them over you, and how you compete for those -- that incremental business?

Yes, Hoegh is a worthy and legitimate competitor, and there is two or three competitors in this market which we compete against.

I guess, we each make judgments as to which projects are most viable and suitable to the schedule of vessels that we have coming available.

So indeed, they have recently made an announcement in Chile.

We have been pursuing Ghana as you know, and at the moment, we are also pursuing some other opportunities.

So I don't think we expect to win every piece of business that is out there.

But as I said previously, we remain interested in this market and we do want to continue to grow.

Great.

Thank you.

Sunil Sibal of Global Hunter Securities.

Hi, good afternoon guys, and thanks for taking the time.

Most of the issues have been discussed, but I just wanted a couple of clarifications.

So first, on Cameroon LNG, the counter-party for your tolling agreement would be Perenco or the Perenco and SNH together?

And can you confirm that it is tolling agreement is a take-or-pay agreement for 1.2 [Mtb] per year?

It is an tolling agreement with Perenco and SNH, so they are the parties to the agreement.

When you say a take-or-pay, that sounds to me that the question related to the sale of LNG which it is not.

So we -- the tolling agreement looks more like a charter party, where the vessel remains on hire, subject to it being able to perform its contracted obligations.

So it's not dependent on the volume actually handled?

No.

No, it is not.

Okay.

That is helpful

Just one qualifier to that, that is assuming the vessel is there and available to perform.

Got it.

Got it.

Thanks.

And then in terms of the LNG carrier market, the competitive environment there, I was wondering if you could talk a little bit about competing designs?

I think some of your competitors are going with a MEGI designs, versus your TFDE designs, and was wondering how do you see that playing out?

Relative advantages of each of those designs in the current market environment as the market hopefully tightens for carriers?

So yes, clearly MEGI is the next technical step.

We are a little bit cautious, because at this point in time there are no MEGI vessels in operation.

So it remains to be seen whether they perform.

We're very comfortable and confident with the tri-fuel diesel ships that we have.

They are performing very well for us, and indeed are attractive and conduct -- command a premium in the market.

So we're feeling comfortable.

We're cognizant of what is going on with the engine development, and we will watch with interest.

On paper, it looks like a useful and good next step.

And if it proves to be so in actual performance, then indeed that will be where the industry will go next.

I think, in addition to that as well, I think -- part of the previous discussion is we highlighted that there is probably -- well, there is around 400 vessels in the fleet at the moment.

And to ignore the rest of that is a bit folly.

It's going to take a long, long time before it becomes the main shipping of choice.

But certainly, it is there, and we are cognizant of it's presence.

But in the meantime, the steam vessels and now the TFDEs are what's available, and they have proven their worth in the shipping environment.

No, that is very helpful.

And then just a last clarification, if you have to kind of quantifying in the ballpark MEGI versus TFDE, at the current bunker prices, what do you think is the cost advantage for the MEGI versus the TFDE?

I mean, it is very dependent on a whole bunch of factors.

So I think maybe that is a question best dealt with off-line.

Okay.

That's helpful.

Thanks, guys.

That's all I had.

Eirik Haavaldsen of Pareto Securities.

Mr. Eirik Haaveldsen of Pareto Securities, please go ahead, your line is open for your question.

Yes, hi.

Just wanted to follow up on what you mentioned before, on being at the early stage of converting a new build into an FLNG.

Would that be converting one or several existing vessels, or would it be ordering a new build in a way?

And also what would be the estimated costs?

Would that what be more similar to the current conversions, or more similar to ordering a whole new build?

So it's more likely to be a conversion based on converting a new build, which we have not yet ordered.

That is due to our preference to be using most carriers for FLNG conversions, rather than [membrane] just as result of the robustness of the containment system.

So that sort of sets the date by which the earliest new build conversion could take place.

But the cost of conversion actually is not going to be a whole lot different to the conversions which we are currently undertaking.

So clearly, we pay more for a new build vessel, and that's going to be in the range of $200 million to $220 million depending on the actual specification for the vessel.

But where we save, is not needing to refurbish and life-extend the older vessel.

So in the scheme of things, it's not going to be materially different to the projects that we're currently executing.

And then, on based on if you had any dialogues with potential clients on such a project, should we expect then a tolling fee like that to be higher, to reflect the fact that the hull is -- would be new?

And perhaps the environmental permits and such would be easier to obtain?

Or would the economics kind of be similar, also for the ones that would hire such a unit?

Really, like the critical feature is not so much that the hull is new, because the conversions that we are doing at the moment really take the vessel back to almost as new.

So it is fully refurbished going into service.

The real benefit gained from a new build vessel is, it has a much larger storage capacity.

So we go from, in the region of 125,000 meter cubed to something like 175,000 meter cubed.

And that gives a lot of operational benefit to the project.

To the extent we can command a premium for that remains to be tested, but clearly there are benefits in moving in that direction.

Okay.

Just one more then.

What would, I mean, if we don't hear about what Excelerate and all their new build solutions have been guiding towards in terms of costs, that will be -- I would expect at least twice what such a unit that [their management] would cost.

What is really the main difference there in CapEx?

I somewhat, sometimes flippantly say, the difference is a factor of Pi.

It's not far off, in fact.

If you go to a shipyard and ask for a one-off solution, then clearly it's going to cost you a lot more than asking for a well-proven, well-established and bench-marked new build ship.

So the real advantage is we have in our approach is that the hull and the containment system is competitively priced.

And then, we work with a very experienced yard such as Keppel to execute the conversion for us.

And that underpins the benefit of our price rather than what other are pursuing, which is to design everything right from first principles.

All right.

Thanks, Gary.

(Operator Instructions)

Told that this our final question at the moment that is Walther Lovato of Passport Capital.

Hey.

Good morning.

Quickly, what do you think is Keppel's capacity on these conversions for you.

Would they be able to do work on five conversions sort of at various stages of completion at the same time?

Or are there any limits there?

I am not sure I can comment on whether they can do five.

I mean, Keppel is a major yard.

They're not just in the business of doing FLNG conversions, but they are a big player in the FBSO market and the [joint] rig market.

Those markets are soft at the moment, so they clearly have capacity to do more.

And we have not tested what their ultimate capacity might be, but certainly in this market they have more than enough capacity to do everything we contemplate.

Okay.

Thank you.

Thank you.

That now concludes our question-and-answer session today.

I would now like to turn the call back to our speakers for our additional or closing remarks.

We thank you for your interest.

It has obviously been a busy and exciting quarter for us, and we look forward to returning three months from now to give you the next update on progress.

Thank you very much.

Thank you.

That will now conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.