Golar LNG Ltd (GLNG) 2017 Q3 法說會逐字稿

Good day, and welcome to the Golar LNG Limited Q3 2017 conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Brian Tienzo.

Please go ahead, sir.

Thank you, moderator, and good afternoon and good morning to you all.

Welcome to Golar LNG's third quarter earnings call.

My name is Brian Tienzo.

I'm joined today by our new CEO, Iain Ross; and our Head of Investor Relations, Stuart Buchanan.

So let's go on with the presentation by skipping over Page 2 and going over to Page 3 for the financial highlights.

So the improvement in shipping markets is also now starting to show in our results.

While our ships remain below cash breakeven for the quarter, we have nevertheless seen quarter-on-quarter improvement in operating revenues.

Operating revenue this quarter of $32.4 million is better than the previous quarter.

However, our operating performance was negatively impacted by higher voyage and operating costs as a result of Tundra coming back to the Golar fleet and on various repairs and maintenance performed during the quarter.

With the improvement in our share price and increase in swap rates quarter-on-quarter, noncash mark-to-market in these gains helped to stem our net loss at $43.9 million compared to the second quarter loss of $73.8 million.

Saying that, we have the Grand charter lease from the partnership seizing in 4Q.

We continue the recovery in shipping rates as well as the anticipated earnings from FLNG and Hilli Episeyo over the coming months.

We expect to see ongoing improvements in our operating results over the coming quarters.

Let's now turn to Page 4 to look at our balance sheet.

With free cash of approximately $287 million, our balance sheet remains sufficiently robust for operations and upcoming projects.

There are big liquidity milestones over the next few months and most of those relating to Hilli.

And these includes the $435 million still available from the Hilli financing, including a final drawdown of up to $260 million upon vessel acceptance.

Of this, $140 million is free cash.

A positive conclusion to discussions with GMLP regarding the dropdown of the remaining contract capacity of Hilli Episeyo will produce approximately $180 million in free cash also.

And of course, the reduction of the required LC on the Hilli to $300 million from $400 million will result to reduction in receipt and cash requirement, and therefore augmenting our free liquidity still.

Finally, the improvement in shipping rates will further help liquidity.

Just for transparency, the current portion of long-term debt in our balance sheet of $1.1 billion includes $700 million relating to our lead finance arrangements, which are reflected in the [BICS] of the lessor, our benefit, and which we are required to consolidate under U.S. GAAP.

Of this, only $47 million is our real exposure to short term.

Furthermore, of that $1.1 billion, $375 million relates to Hilli, which as you know, will become long term once acceptance is achieved.

So our real underlying current portion of debt as of 3Q is actually close to $70 million.

Anyway, on that note, and without further ado, I now hand over the presentation to our new CEO, Iain Ross.

Good afternoon.

Good morning.

It's a pleasure to be on the call, and I look forward to meeting many of you over the forthcoming weeks and months.

If we can move to Slide 5, this diagram provide some context and is a reminder of our high-level strategic direction.

Starting at the left-hand side of the graphic.

We plan to use our OneLNG joint venture with Schlumberger to access and develop gas assets, which is suitable for monetization to Golar's unique FLNG capabilities.

And then moving across the page, we can move the gas via our LNG transportation business and into floating regas and ultimately, power generation via our Stonepeak joint venture known as Golar Power.

Golar's core skills in midstream gas market together with our key business and technical partners gives us, we believe, a differentiated position in this gas value chain.

And by developing skills, competencies and harnessing experience in all of these elements, we could potentially join up the left-hand side of the picture to the right-hand side to ultimately turning gas molecules into electrons and create superior value for shareholders.

So taking each of these business blocks in turn, and moving to Slide 6. The Hilli Episeyo project completed conversion work and pre-commissioning in the yard, move to anchorage to see trials and further tests before leaving Singapore on the 12th of October 2017.

She completed a journey of some 8,300 nautical miles at an average speed of around 9 knots, taking a quick pit stop in Mauritius before rounding the Cape of Good Hope and then arriving safely in Cameroon on the 20th of November 2017.

The last week has seen the vessel complete various procedures -- inspections in the same customs clearance.

We are now in the process of hooking her up to the soft yoke mooring.

And over the next, next few days, we will complete the mooring, riser and umbilical connections and serve our notice of readiness, which is an important point as it serves -- serving the NOR starts the time process towards earning revenue from the vessel.

Following NOR, we will carry out some further tests and then [the parcel] of LNG from the Golar Bear to cool down the vessel and commence the full LNG commissioning process, which should result in our first production of LNG sometime around the end of the year.

We will take the time that we need to progress through this program safely and thoroughly.

It remains as a view that completion of commissioning and customer acceptance is still on track for the end of the first quarter of 2018.

Moving on to progress in OneLNG.

Fortuna has made good progress in developing alternative financing plans, and we have our off-taker agreed in Gunvor.

The overall economics of the development are strong and we remain extremely positive about the potential to get this project going and see some activity in the yard early next year.

Additionally, within OneLNG, we're progressing well with both other active projects and the funnel of future opportunities that will, hopefully, drop down to become active project status over the course of the next year.

And finally, Golar's MARK II design that we're proposing for Delfin in the U.S. Gulf Coast development is progressing well.

The planned completion of that fleet in March 2018.

So moving to Slide 7 for shipping.

We're seeing a real and positive progress in the LNG shipping market.

The recovery is yielding materially higher swap rates towards the end of Q3 and certainly into Q4.

Now this recovery appears to be driven by several factors.

Firstly, we're seeing increased demand from Chinese markets for the year to October imports are reportedly up 48% to 29 million tons.

Secondly, much of this increased Chinese demand is being supplied from the U.S., resulting in increased ton miles.

So ton for ton, double the number of vessels are required to deliver to China from the U.S. compared to, say, Australia.

Thirdly, we're seeing a tightening of the availability of short-term vessels created by the ramp-up of new volumes coming on both this year and next, which are taking spot vessels off the market.

Fourthly, the reemergence of arbitrage opportunities between Henry Hub and JKM pricing.

So the spot rates with TFDE, they're currently north of 70,000 per day, and we're looking to see steamship rates increase accordingly as charters move to an alternative.

We're also seeing increased interest in long-term time charter rates -- I'm sorry, time charter opportunities.

The outcome of these factors will result in increase to both the average TCE and utilization numbers for the fleet.

So moving to FSRU and Power on Slide 8. The Sergipe project in Brazil remains on schedule and within budget.

Earthworks, civils and foundations are nearing completion, and we currently have an excess of 1,200 people on site.

Q1 2018, we'll see the arrival of the gas turbines, heat recovery steam generators, steam turbines and transformers which are coming on site as modules for installation and hook up.

I visited the site a few weeks ago and was impressed by the quality of the work and the organization and safe management of the site.

The EPCI contractor for the soft yoke moving in pipelines has been appointed.

They will also commission the gas system.

The Golar Nanook FSRU 25-year time charter has been agreed and the vessel remains on target, delivered to site in Q3 2018.

We expect close on the full project finance package in Q1 2018.

Outside of Sergipe, the market for generic FSRU newbuilds remains very competitive, with margins under increasing pressure.

However, the market for small- to mid-sized FSRUs is robust and we currently are working on a number of opportunities suitable for more cost-effective converted DFDE or FD carriers.

We believe the provision of integrated FSRU and power solutions offers Golar greater upside than standalone FSRU deals.

And as a result, we're progressing the development of several opportunities across Latin America, West Africa and the Indian subcontinent.

So moving on to our outlook on Slide 9. We're pleased with the transformation the company has undertaken since ordering FLNG Hilli in June 2014.

Golar is currently going through a process that will see it transition from a midstream shipping company into a fully integrated gas to wire energy company.

The key building blocks to this transformation are as follows: the delivery and start-up of FLNG Hilli Episeyo, a vessel that will generate base operating cash flows under its tolling agreement of approximately $164 million a year over the coming 8 years.

Train 3 and 4, yet to be contracted, represent further potential upside.

Trains 1 and 2 also have Brent-linked upside, which can generate additional annual operating cash flows of approximately $3 million for every dollar increase in Brent prices between $60 and $102 per barrel.

Secondly, the project development of the Fortuna field, organized through the OneLNG joint venture with Schlumberger and Ophir is expected to reach FID in the first part of 2018.

With its particularly robust field economics, this project will give Golar direct access to reserves in the ground.

The development of the power project in Sergipe is progressing according to plan with respect to both construction and financing arrangements.

Commencing in January 2020, this project is expected to generate annual operating cash flows of approximately $330 million based on current exchange rates.

Of this, 50% is controlled by Golar Power, in which Golar has a 50% interest.

The project infrastructure attractively positions Golar Power for further expansion opportunities at a low incremental cost.

The FSRU Nanook is committed to the Sergipe project for 25 years with annual operating cash flows of approximately $39 million accruing to Golar Power.

Further FSRU opportunities in the final stages of negotiation are expected to yield additional business for both Golar Power and Golar Partners.

The shipping market is showing strong signs of improving.

As of today, the effective time charter rates being achieved in the fourth quarter are more than twice that recorded in the third quarter.

An improving trend is expected to continue into 2018 and 2019 when shipping supply should lag demand created by the increased production.

At full utilization, every $10,000 increase in shipping rates equates to approximately $40 million additional annual operating cash flows across the fleet.

The outlook for Golar Partners has improved having taken steps to secure its current distribution by way as of its initial acquired interest in FLNG Hilli.

Improving spot rates for its ships also provides a more supportive backdrop for their re-contracting.

And finally, supported by the successful execution of existing projects and contributions from key joint venture partners, OneLNG and Golar Power, the project portfolio for the Golar Group of companies continues to grow.

This unique combination provides a differentiated and competitive value proposition in the gas to wire energy sector.

So as a result of the above, Golar is a company likely to increase its earning significantly over the coming 3 years.

These results will be underpinned by secured contracts, currently in execution, further augmented by a strengthening shipping market and a solid portfolio of projects that are expected to translate into new contracts.

The company looks forward to providing confirmation of this outlook over the coming quarters.

Thank you very much for your attention.

We'll now move over to questions.

(Operator Instructions) We can now take our first question from Michael Webber from Wells Fargo.

So I wanted to start off on Fortuna.

If you can maybe give a bit of color around what the different alternative financing solutions are whether a soft FID is still a viable alternative and maybe kind of speak to how that would impact your liquidity in 2018.

Sure.

I guess, I think, start off with -- I think it's clear that the sponsors for Fortuna are very frustrated with how long the financing is taking to conclude.

And saying that, we've made some good progress over the past few weeks.

But of course, we need to get to a position where if the delay continues, we need to be able to conduct work in the vessel such that we can progress the project and stop further delays.

So on that point, we are looking at alternative measures to progress the project, including potentially as a consideration for, as you say, a soft FID.

Now to the extent that happens, that actually does not have too much impact on cash flow simply because under the fully debt-financed FID, there is certain amount of equity that needs to be injected into the project before we can drawdown in the facility.

Similar to the way the Hilli was structured to some extent.

So to the extent...

$225 million capital call, I guess, in that original agreement?

Sorry.

What's that?

That's the original $225 million capital call to OneLNG kind of for that original agreement?

Yes.

But that means that, that amount isn't expected to be injected immediately.

It's over a period of time, such that the drawdown on the facility, for example, we don't -- we wouldn't have expected that to happen until the end of 2019 anyway.

So to that extent, it doesn't really impact the cash flow differently from moving from a fully debt FID to equity FID.

Okay.

That's helpful.

And then, Brian, maybe around -- I don't want to get ahead of ourselves, but around the Hilli in train 3. I think you mentioned previously that while it's not something that's on the books now, the terms around the train 3 have already been negotiated if and when it happens.

Can you speak to what the potential EBITDA impact would be there considering everything is built out and that should theoretically fall straight to the bottom line?

Sure.

So I think when we made public the contract, the binding terms that we set -- that we signed with Perenco, we said train 3 could be an additional around $70 million of EBITDA over and above the EBITDA of train 2. Now, obviously, that's Perenco's option, so we can't really speak on their behalf.

But I think given the progress -- the good progress we're making on the Hilli, I think discussions in train 3 we expect would progress more quickly once the vessel is accepted.

And of course, seeing how the commodity space is where it is at the moment, I think there's certainly motivational parties to make that happen.

Okay.

And those conversations are, I'm assuming, is kind of at a pause if you get the asset over the field, hook it up.

That's something you would expect to have a conversation about in H1 of '18?

We would expect so.

I think the most important thing that we have with that vessel at the moment is making sure that it's following the target schedules that we've set.

We can now take our next question from Fotis Giannakoulis from Morgan Stanley.

I want to ask you about the Hilli, the delivery of the Hilli and the start-up.

How critical the commissioning on the Hilli is for the financing of the Fortuna?

And if there are other projects that you are in discussion right now that they are dependent on the successful production of the Hilli.

Well, I think, first and foremost, I think if you ask anyone in the organization if the Hilli would work, I think the answer is a resounding yes, it will work.

Clearly, getting the Hilli working is very important to ourselves and to our counterparties.

As far as the financing is concerned, in the discussions we've had so far, the Hilli as a subject to making financing effective hasn't been mentioned, but clearly the reasoning force has been in there.

And of course, it's easier to discuss financing when you can point to something that already works and that's something that we saw with FSRU.

So to the extent that the Hilli is working, it's a bonus for the projects that we have.

We believe the Hilli will work and I'm sure that the discussions and other projects would probably be a major discussion also once the Hilli is up and running.

And this confidence that you can convey to the other parties both the lenders and the potential customers of other FLNGs, is it the commissioning period that we are going to see starting in December or it's the commercial acceptance?

What shall we expect as the main event for the success of the Hilli?

It's Iain here.

I mean, we're going to go through a very structured commissioning program, which I outlined in my prepared remarks.

We'll start early next month once we're hooked up another of the risers and the umbilical on board.

Once we've got the production of LNG commence, we'll just continue to refine that process.

And towards the end of the quarter, when we expect to -- when we're ready for the acceptance testing and handover to the customer.

Brian, one last clarification.

You still have not drawn down another $585 million of debt of the $960 million, which is the fully available.

What is the remaining CapEx right now for the Hilli?

So I think what we can say there is that we remain confident that we'll be under budget once the Hilli is completed.

You'll have noted that we're over $1 billion in expenditure, but it's only up to Q3 -- by the end of Q3, I should say.

Having said that, by early October, we have drawn down approximately $525 million on the facility.

So to the extent we have an available facility that takes it to $960 million at acceptance, we still have quite a bit to do.

And of course, that's very important because, obviously, we've been saying all along that we will be under budget and of course, that's a less strain to equity.

But at the same time, there is free cash coming from the final $260 million drawdown that we will be able to make once the acceptance has occurred.

So do you expect that you're going to have more free cash in addition to the $260 million?

No.

No.

What I'm saying is that there is ample availability from the facility in order to make sure that there are -- there is very little exposure to addition -- injecting additional equity into the Hilli.

We can now take our next question from Gregory Lewis from Crédit Suisse.

Could you guys delve a little bit into Golar Power?

I mean, as we look at OneLNG, it seems like there's a lot of always headlined projects that are out there in the market.

But it seems like there should be an equally large opportunity set at Golar Power and just if you could provide just a little bit more of an update.

I know you mentioned the opportunities in Latin America and potentially West Africa, but if you could just talk a little bit about more of what you're working on and sort of when we could maybe see some of these projects and any sort of color around that would be helpful.

So we are working on the development of our projects in those geographic areas that I mentioned.

Some of them, obviously, as it relates to Brazil, they go through an auction process.

So we may be participating in some of those.

There's quite a lot of work that has to be done to qualify for participation in the auction process.

But I would say that if you look at the power to -- some of the gas to power projects and the smaller to mid-sized FSRU projects, we do have a lot of activity.

And I'm very hopeful that we'll be able to share more of that as the quarters go on and, obviously, to announce something that's just a little bit more thorough and complete.

Several of these projects is, particularly as we may be progressing with customers and negotiating, we can't say anything about them until they're done.

So, hence the silence, so it's a little bit unbalanced from the optic section at that point.

Okay.

Great.

And then just obviously, we got to get the Hilli up and running before we start thinking about Train 3. But what's interesting is, typically you guys have been pretty creative in bringing things forward, and I guess what I'm wondering is, is Train 3 contingent on Perenco lining up customers?

Or could it be something where the Train 3 could potentially be spot [targets] ?

Well, we can't really comment on whether or not Perenco is -- arrangement in respective of Train 3. As we said earlier, Gregory, I think the -- because Train 3 is purely at Perenco's option.

All we can hope for, of course, is, is a smooth operation of the Hilli, the commodity market going according to -- well, having a positive trend, but there are factors, sufficient factors out there that motivates everyone to making it happen.

We can now take our question from Jon Chappell from Evercore.

Brian, in Golar's former life, you're obviously a pretty heavy spot market player in the LNG shipping market, and that's led to some good times and some bad.

And now that the market, as you've said, is kind of beginning the recovery.

You have a lot of exposure there, the $10,000 a day, equating to the $40 million revenue.

But you're also a much different company now.

So as you kind of think about the chartering strategy in 2018, this market has continued to move forward.

Do you think you'd lock in, kind of more long-term time charters to remove the shipping risk from the entire kind of entity you've created?

And also as you think about further drop downs to the MLP?

Well, I mean, first and foremost, I think it was never really intended that we have such a big exposure on those spot markets.

Saying that, our chartering guy has been very positive recently, which is nice to see because he's normally quite glum on most of these things.

So it is a very positive outlook out there.

Now -- and of course, the first thing that we always try to look for is, is to try and make sure that the decreased volatility on cash flows, as I've said all along the vast majority of that assets should be on long-term charters simply because: one, we have the vehicle to be able to monetize those quickly through the MLP; plus, as we've seen previously on such a big exposure, it does strain the balance sheet quite extensively.

So as far as the improving LNG market is concerned, that is the first phase that we look at.

Of course, as rates get better and utilization follows suit, there may be other structural opportunities that arise that we would seriously consider.

I think as you rightly say, we are moving slightly away from that.

I mean, today, our biggest exposure remains the shipping.

So we need to take care of that, but not too long into the future, with the Hilli up and running and the various projects that we have, including those in Brazil.

Then we need to make a decision from -- on capital allocation.

So it's a very long-winded way to answer your question, but I think the answer there is that we're open to looking at positive structures as the shipping market develops.

Okay.

That make sense.

And then also if I can ask Iain kind of a -- bit of an academic question.

Obviously, you have a lot of experience in the different parts of the supply chain, with hydrocarbons and infrastructure.

In your first few months at Golar, what are some of the opportunity sets that you foresee that you're pretty excited about?

But then also, any particular challenges that have been noteworthy, too, as you kind of transition into the new role?

So what attracted me to Golar was the entrepreneurial spirit of the company and a strategy that I suppose is focused on creating a really differentiated position in the gas supply chain.

And having spent 30 years of my life involved in oil and gas, it's just really thrilling to be involved in a company that's early in its growth cycle and with so much ambition.

And in Golar, there's a -- we really have a strong team of talented, experienced and driven people who share this vision.

So that's the really exciting part of it.

And in terms of challenges, I think I can pick out maybe 3 straight away.

One is to focus on the right opportunities.

There's a lot of opportunities out there, but we need to focus on ones that we think will go ahead and that we have a high probability of making money and generating cash flow.

I think, secondly, finding the right type of people to build out the business, on a sustainable business.

And thirdly, Brian's favorite subject, we need to stay on top of the financing and the cash, so -- for the business.

We can now take our next question from Herman Hildan from Clarksons Platou.

Just to follow up on Jon's question to Iain.

Kind of very broadly, what's your ambitions for Golar 3 years down the road?

My ambitions for Golar is to create a sustainable increase in EBITDA, to create growth and welfare for shareholders and to create a company that is -- that the strategy that I outlined at the start that we're actually living, breathing and doing it.

And as a result of that, generating significant returns for people who have invested in the company.

I guess, kind of rephrasing the question a bit, how will the company look 2 years from now if kind of you reach your ambitions in terms of different projects and kind of what execution path are you envisioning for the company in the next couple of years?

So I think we've stated publicly that the potential of 5 FID, LNG -- FLNG projects on the go.

I think that's not an unreasonable target to still aim at.

And I think our funnel that we'd go up on the active targets that we have in the OneLNG and FLNG business speaks to that.

I'd like to see at the other end of the spectrum, an FSRU and power business that has -- obviously, by the time 3 years comes along, we've completed Sergipe, and we've got another one or two of those types of projects up and running, perhaps more.

And in the middle bit, the shipping bit, I would expect that we've got a shipping business that's highly sustainable in terms of predictability of its cash outcome.

Isn't a drag on the business anymore, and we can still leverage off that marine expertise to create such a great plan so far for Golar.

And then kind of switching gear a bit to the procurement project on -- within FID in Q1 '18.

When do you expect cash flow?

What -- mid-2020.

And also as a follow-up, FID Q1 '18 marks almost a 3-year anniversary from -- when the project kind of reached the surface.

What's the time line on, call it, heads of terms to FID on future projects?

Is it going to take the same amount of time or kind of how -- what should we expect?

As far as the cash flow timeline for Fortuna, that's -- I mean, the target has always been around end-2020 to 2021.

As we mentioned earlier, I think one thing we need to consider seriously is to -- in order to avoid missing those time lines that we take a soft FID, get some work going.

Confident always that once the Hilli and all the other factors surrounding FLNGs up and running, discussions in financing would be easier to have.

With regards to time line on other FIDs, as Iain mentioned earlier, we are working on developing other projects in the background.

Some of those are multiple FLNG requirements.

The timing of which we can't really say.

I mean, there are certain factors that impact timing and as and when we make material progress in those, they will be announced.

Okay.

So kind of -- I guess the question is again, rephrasing it, should we expect that there's a shorter time between the announcement and actual project, call it, commencing in the future compared to what it's been the past?

Yes.

I mean, I think that you -- potentially you mean by announcing, we've got projects that we're working on that haven't necessarily been announced because we're still working on the development of them.

But I would expect that 3-year horizon to be a lot shorter from discussing in the public domain to taking FID.

We can now take our next question from Chris Wetherbee from Citi.

This is [Liam] on for Chris.

I would just like to follow up on a previous question that was asked about possibly moving some vessels away from the spot market and putting them on time charters.

Can you just provide some additional clarity on the level of time charter rates that we ought to see before you consider moving the vessels to time charters?

And also, possibly some clarity on the percentage of your total current fleet that you would consider moving to time charters in the long term.

Well, I think -- I mean, if you look at cash strain over the past couple of years, it's been very leaky, simply because the vast majority of the vessels have been on the spot market.

Now, as I said earlier, the intention has never been always there.

We took on the vessels without intending to trading them on the spot market.

Unfortunately, it did hit us at the wrong time.

As far as rates are concerned, we have seen long-term charter rates staying somewhere between $65,000 to $75,000 a day.

That doesn't really change in the long term.

Having said that, what has changed over the past year -- few years is the tender on those charters.

So previously, we were seeing charters of 20 years.

I think the trend is probably shorter than that now, somewhere between 5 to 10 years.

The vast -- we would like the vast majority of our vessels to go into long-term charters, simply because that gives us more transparency on cash flow, being able to grow the MLP a little bit and less than our exposure to fluctuations, particularly on cash leakage.

That's very helpful.

And also just one additional question on the vessel operating expenses, because they seem like they ticked up a lot to $13.8 million this quarter due to higher fleet management and maintenance cost.

I'm just wondering if you think this will continue as kind of a runway going forward.

Or if you think it could be lower than the third quarter level.

No.

So the -- these vessels, they've been having run rates of somewhere between $12,500 to $13,000 per day.

Q3 was particularly heavy, simply because a few of the vessels did have, sort of, maintenance and repairs incurred during the quarter.

Similarly, the crew cost increased during the quarter simply because of general, sort of, salary increases and so on.

So I'll -- for modeling purposes, I would still pay around $12,500 to $12,750 as OpEx.

We can now take our next question from Frank Galanti from Stifel.

Actually, this is Ben Nolan.

My other line dropped.

But I have a -- well, my first question relates to the FLNG business and the OneLNG business, in particular.

There was some commentary in the press release that you expect the number of additional projects to be concluded in 2018 and that's something that you mentioned earlier.

I'm trying to frame through what concluded means.

I mean is that just MOU or are we talking full FID?

No.

Our hope is that we obviously -- we've talked a lot about the Fortuna project where -- our hope is if we get that FID away, early 2018.

And we're working on other projects that could yield an FID result in 2018.

It may slip a little bit.

But we're working them hard in the background.

In addition to that, we're working other projects, which -- and we hope to be able to take along that journey.

And it's impossible to put out specific information partly because of the confidentiality of some of these developments that we're looking at.

But also, we think, you take time and have to go through a number of hurdles to get to that point.

I'm sorry about being vague about it, but it's just the situation that we find ourselves in.

No.

That's helpful.

I mean -- well, and then switching gears, I guess for my next question relates to the FSRU market.

Obviously, that's being competitive and it's a dynamic situation, but what I've noticed is that a lot of regions, there is a high level of seasonal demand.

Do you think that it's possible, including even for some of your own vessels, to do more of the sort of seasonal trades?

Obviously, there's 1 at GMLP that is contracted for 9 or 10 months of the year.

Is that something where you think you needed to sort of lever your position to kind of create extra value and then trade them in the spot market during the off periods or something?

Is that a path that you're pursuing at all?

In theory, that works.

So it's not something that we're relying on now to go forward.

I mean, if an opportunity, a real opportunity like that came up, we could have a look at it.

But I think the time that it takes to take an FSRU, demobilize and get it ready for a tanker -- a trading vessel.

Is it -- a little bit longer than it makes an awful lot of sense to be able to organize that.

It would take a lot of organization to make that worthwhile.

I think the -- where we are focusing on the FSRU unit is to take some of our older vessels and look at them as conversion opportunities.

And from what I understand from our team, the number of opportunities and the inquiries that we're having is -- has really picked up over the last several months compared to the last several years.

Okay.

And just sort of as a follow-up there, any amenities that -- or Brian said the duration of LNG contracts has shortened.

How -- can you maybe frame in the kind of durations that you're talking about on these FSRUs?

There's still -- they're longer, so they're 15, 20 years in duration.

(Operator Instructions) We can now take our next question from Ken Hoexter from Merrill Lynch.

The -- I just want to understand the FLNG, was this the same process for the FSRU market?

Did you have to kind of wait until commercial operations were up and running before you had the second contract commit?

No.

In fact -- so, I guess the similarity that we were alluding to is in terms of confidence in being able to finance those things.

With the FSRUs we had previously, in fact, we had 2 in a very short periods of time.

We had 2 FSRU contracts signed out with Petrobras, and also both the Golar Spirit and the Golar Winter.

But the financing of those became easier as you're able to point to one that's working.

Okay.

And can you just walk through, Brian, the timing of revenues from the Hilli?

And you didn't consolidate it given you sold 50%?

And I guess, in the bigger picture, how do we think about the return on the investment?

Is it -- you've now covered your cost and it's all a call option on Trains 3 and 4 and the potential of fuel being above -- or crude going above $60 where you can make additional funds.

Or is there -- was there money made in terms of relative price of the dropdown relative to your payments?

So during the commissioning process, yes, we do.

There's obviously revenue accruing on the Hilli.

But it's a mixture of a tolling fee as well as being compensated for the production during that period.

So it's very difficult to pin down exactly how much we're going to be getting.

Post commissioning, it's obviously easier because it's predicated under the contract, and that's when the cash flow stabilizes and as we're pointing towards the EBITDA that we pointed to.

Now the way that the MLP and Golar have sort of constructed the dropdown is such that the first 2 trains, or if you want, the capacity for producing the base capacity in the Perenco contract, absorbs all of the debt that kind of sits in the Hilli.

What that means is that in the event Perenco were to exercise their option to start using Train 3 for an additional gas reserves in addition to what's already predicated for Trains 1 and 2, then that is pure upside as far as LNG is concerned.

Additionally, the EBITDA that we have been discussing really does not include any upside as a result in the commodity prices or Brent being above $60.

So if we continue where we are today, during the operation of Trains 1 and 2, as we've said, for every dollar increase from $60 Brent, there's a $3 million EBITDA contribution for Trains 1 and 2 -- from Trains 1 and 2.

Great.

And just -- if I can just get another one in on the restricted cash.

Have you freed up more as we've moved through this process?

I just want to revisit that.

How much was tied up originally on both sides of the agreement?

And now that you're at this phase, have you released more of that?

Or what are the stages again if you can refresh me?

So as part of the release, we've agreed -- our original agreement to reduce the LC that we provide to Perenco from $400 million to $300 million.

As a result of that, there will be a release of unrestricted cash to liquidity.

And going forward, as we produce LNG, the next milestones have reduced the restricted cash will be then -- will be the LNG that we produce.

So assuming that we start producing 1st of January and we produce 1.2 million tons of LNG by the time we get to, in fact, January 2019, then the restricted cash -- the LC, I should say, will fall again to $250 million and therefore, another batch of restricted cash will be released.

Okay.

I appreciate that insight.

I guess, if you don't mind, another one.

My last one would just be, when was the last time we saw spot rates at this level?

It sounded like you're talking about doubling from the fourth quarter.

We, obviously, saw a spike couples of years ago.

Is this kind of -- are you seeing a transition into sustainable potential to lock up long-term charters?

Or it's still too low and you need the charter rates to drift up a little bit higher?

Well, clearly, we -- I think we've seen previously, we -- we'd like the charter activity to go high as quickly as possible.

But I think we feel this trending upwards is a bit more sustainable than previously.

We've seen very little movement on ordering new ships at the moment.

I think capital allocation has helped -- or capital restriction, I should say, has helped to limit the number of orders there.

Of course, there are the factors out there that could still restrict the upside, namely delays in the compression facilities and so on.

But for the time being, it's trending the right way anyway.

(Operator Instructions) As we have no further questions in the queue at this time, I'll turn the call back over to you for any additional or closing remarks.

I'd just like to thank everyone for their questions and their attendance on the call, and that we look forward to catching up with you soon.

Thank you.

Bye-bye.

Thank you.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.