Golar LNG Ltd (GLNG) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Golar LNG Limited 4Q 2019 Results Presentation.

(Operator Instructions) I must advise you that this conference is being recorded today, Tuesday, 25th of February 2020.

I would like to hand the conference over your first speaker today, Iain Ross.

Please go ahead, sir.

Thanks, operator.

Good morning and good afternoon, everyone.

Welcome to the Golar LNG Q4 2019 Results Call.

My name is Iain Ross, and I'm the CEO of Golar LNG.

And I'm joined today by our CFO, Graham Robjohns; and our Head of Investor Relations, Stuart Buchanan.

Turning to Slide 3 and the highlights.

Today, we report Q4 adjusted EBITDA of $93 million as a result of full contribution from the Hilli FLNG and improved shipping performance.

We've had good operational performance across all our assets and our projects continue to progress to plan.

Our downstream development is gathering pace, and I'll talk more about that later in the presentation.

Slide 4 and a closer look at shipping.

Our TCE for the carriers was $77,000 per day, noting that this included completion of the final 2 ships in dry dock.

We concluded 2019 with $172 million in shipping revenue backlog.

Slide 5 in FLNG.

Hilli continues to perform well with 100% commercial uptime and 34 cargoes now offloaded.

Gimi project remains on track from both a cost and a schedule point of view with approximately 2,000 people currently working on-site in Singapore.

Our Mark III newbuild FEED has completed its first pass, and we're currently working on some project-specific scenarios as well as developing a larger LNG capacity variant of the vessel.

Slide 6 and downstream.

FSRU Nanook was fully commissioned during the quarter.

She is performing well, supplying gas for the Sergipe power station commissioning, which is also going according to plan with the full load acceptance test expected to be completed this quarter.

Project planning for the Barcarena terminal is progressing well as is the small-scale business development.

And turning to Slide 7 and our license to operate.

The safety of our people and our contractors and partners that we work with remains at the height of our priorities.

We recently took time to celebrate 2 million man-hours without a lost time injury on the Gimi project at Keppel Shipyard, and we remain on track to publish our first ESG report after concluding our Q1 2020 results.

I'll come back with more details on our sectors.

But with this, I'll hand over to Graham to run through the financials at this time.

Thank you, Iain, and good day, everybody.

Turning to Slide 8. As you can see, our total operating revenues were significantly up this quarter at $139 million from $99 million last quarter as a result of significantly improved shipping market and few of our vessels dry-docking in Q4.

Fleet utilization was also significantly improved at 90%, and total fleet TCE increased from 35,200 in Q3 to 77,000 in Q4.

TCE for the first quarter of 2020 are expected to be slightly lower, but given the contract coverage we now have, still at $60,000 per day.

2020 will also benefit from the fact that we only have 1 scheduled dry-docking as opposed to 8 during 2019.

With the improvement in shipping revenues and the pleasingly consistent performance of Hilli, our adjusted EBITDA increased from $59 million in Q3, so $93 million in Q4.

With improved adjusted EBITDA and without noncash losses on derivatives of the last couple of quarters, we reported a net income for the quarter of $24.8 million as compared to a net loss of $82 million in Q3.

Year-on-year results have also improved, with adjusted EBITDA up 17% at $255 million, driven by a significant increase in FLNG EBITDA as a result of a full year of operations for the Hilli Episeyo.

Turning to the balance sheet.

Our unrestricted cash position was down slightly at $222 million, primarily as a result of equity payments into the Gimi project, offset by the release of some cash from the Hilli LC security.

During the quarter, we reached the $300 million equity paid in milestone required for the bank financing.

And as at December 31, we have drawn down $130 million in debt.

All CapEx will be funded by debt until we have drawn $300 million of debt.

And then there was a 60:40 debt equity contribution pro-rata ratio.

Our adjusted net debt increased during the quarter, a result of a drawdown of the $130 million on the Gimi facility and a reduction in restricted cash, primarily the Hilli LC, offset by some debt amortization during the quarter.

Turning over.

Our last 12 months adjusted EBITDA is $255 million, as I've said.

And after adjusting for one-off gains and the MLP share of Hilli, our further adjusted EBITDA is at $169 million.

On Slide 9 (sic) [Slide 10], you can see that our 2019 EBITDA has made further improvement up from $144 million in 2018 to $169 million in 2019.

This has been driven by an improvement in FLNG earnings as a result of a full year's operations at Hilli, whilst corporate costs have remained constant.

It should also be noted that shipping earnings outperformed 2018 despite us carrying out 8 dry-dockings during 2019.

And then finally, on Slide 11, we have set out here the Gimi BP project CapEx and debt profile to COD.

The project is fully funded.

And as at December 31, we have paid an equity of $286 million.

Having reached the required milestone for the bank drawdown, as I mentioned, we have drawn down $130 million debt as at year-end.

And so total CapEx spend is $416 million.

Remaining equity requirement on 100% basis until COD is $226 million, and our 70% share of this, so the $158 million, is payable from 2020 through 2022: $59 million in 2020, $70 million in 2021 and $29 million in 2022.

And with that, I'll hand back to Iain.

Thanks, Graham.

So taking a closer look at the sectors.

Turning to Page 12.

Our shipping fleet is currently on charter and can see from the graphic that we've increased our effective shipping revenue backlog by over 6x to around $172 million compared to the beginning of last year.

This improvement has been the result of a change to our shipping strategy over the last year or so, focusing on developing deals with long-term customers that fixes utilization as well as bring some certainty around rates.

We're running a portfolio of different contract styles containing a mix of floating and fixed-rate contracts that has delivered, so far, over 60% of the 2020 fleet days backed by a contract.

And as Graham mentioned, as a result of the dry-dock completion, we've got around 250 additional earning days compared to last year.

And with prevailing rates, we expect our Q1 TCE to be a bit lower, but at still around $60,000 per day.

On to Slide 13 and FLNG.

Hilli has offloaded 34 cargoes.

In terms of extending the Hilli contract, the only update I have for you today is informal advice from Perenco that they are proceeding with their planned drilling campaign, which is good news, in order to prove up reserves and hopefully find a way forward to get more production through Hilli.

And the picture in the slide is Gimi being maneuvered towards dry-dock to finish off the key life extension work on the ship.

She is currently in the third out of 5 dry-docks.

And the next time she heads into dry-dock, which will be later this year, it will be to have the first of the sponsons attached to her hull.

Those sponsons are structurally complete, having been painted and now being fitted out with piping and equipment over the coming months.

Whilst there is potential for the COVID-19 issue to disrupt the supply chain and therefore schedule, there is no current impact, and we continue to monitor the situation and our remediation options.

And in terms of project funding, Graham's gone through that, 20% of the $700 million debt facility has been drawn, and we hopefully have clearly shown you the equity contributions to COD by the end of 2022.

In terms of extending the FLNG business, we continue to develop the portfolio and note that both the conversion and the newbuild solutions we offer score well on 3 metrics: firstly, low-cost liquefaction and a small industry footprint; secondly, a high competitive -- highly competitive carbon footprint compared to traditional onshore solutions; and thirdly, world-class schedule from FID to first export of LNG.

And with low LNG prices, our strategy of focusing on larger companies, you can take the LNG into their portfolios, fits well with the market uncertainty.

Now turning to downstream on Slide 14.

There are 2 main messages I'd like to convey today on downstream.

The first message is that lower LNG prices make an already economically viable business even more compelling.

The second message is that the current development plan being contemplated within Golar Power, which is our downstream business, can be executed through free cash flow from the business.

Sergipe commissioning is in its final stages, with COD expected to be completed in March.

We've carried out our first ship-to-ship transfer of LNG from a carrier onto Golar Nanook, which is also performing well.

As part of the commissioning process, the power station is generating power, which is being sold in the grid at prevailing electricity prices.

The excess capacity of the Golar Nanook and the FSRU that we will place at the Barcarena terminal can generate additional income from several different sources.

Firstly, through the distribution of LNG to end consumers in remote areas, and we will do this by transporting LNG in ISO containers by truck or by barge into the interior of Brazil, particularly in the north of the country.

The LNG end consumers have expressed strong interest in switching from their current fuels of diesel or fuel oil to LNG as a result of highly competitive pricing combined with it being a cleaner fuel.

We have over 100 small-scale customers across Brazil ready to convert to firm supply contracts.

Secondly, we can supply LNG to the massive transportation sector in Brazil and long-range trucking conversions from diesel to LNG.

And thirdly, at Sergipe, through the sale of electricity into the merchant power market, when the power station is not called for dispatch, and also the potential to use of Sergipe as a hub to supply gas to the northeast of the country by connecting to the existing trunk line.

Of course, we've also had the opportunity to bid for a second PPA at Sergipe, which should have very competitive economics as an expansion or brownfield project.

The table at the bottom of Slide 14 shows the EBITDA potential for using the spare FSRU capacity to generate income from any of these sources expressed simply as dollar per MMBTU margin that Golar Power can make on a percentage utilization of this spare capacity of an FSRU.

Now looking more closely at a couple of examples.

Slide 16 illustrates the economics associated with burning of a cargo of fuel through the Sergipe power plant at various spot electricity prices and some practicalities to show how this is feasible.

Firstly, it takes 15 days to burn a cargo when the power station is running 24 hours a day.

Secondly, under our PPA, 60 days' notice is required to be given by the power off-taker prior to dispatch.

So if the power station is not called to dispatch, there is opportunity to produce merchant power.

And then thirdly, the cost of power is a function of the LNG purchase price.

With LNG prices currently at a real-time cost not seen since the 1970s, the potential to generate income is real.

And the graph on Page 16 shows the profit potential per cargo buying LNG at $3 per MMBTU, shown against various historical spot power prices.

And the average per cargo is $32 million of profit.

Another example is shown on Slide 17, and it relates to switching fuels and road transportation.

There are currently 2.8 million trucks in Brazil moving commodities and products, such as soybeans, grains and even beer across the country on road trains.

Each truck consumes 2,000 to 2,500 MMBTUs of fuel per year.

Right now that's diesel and some LPG, and truckers are currently paying an LNG equivalent price of up to $26 per MMBTU depending on the state that they're in.

If we take the previous example of LNG costing $3 per MMBTU, then there's a spread of up to $23 million -- $23 per MMBTU that can be shared between the end users and the LNG suppliers by converting from a diesel-powered truck to an LNG fuel truck.

Distribution channels are crucial to make this happen.

And our recently announced partnership with BR provides Golar Power access to BR's distribution networks and sites, which will host the LNG refueling station.

BR has committed to replace 1,000 diesel trucks per year with LNG fuel trucks over the next 5 years.

And to put this into perspective, there's an annual turnover of around 85,000 trucks per year.

And so the table on Slide 17 shows the EBITDA potential for a range of truck numbers depending on how much of the $23 MMBTU spread is taken by Golar Power.

So these are real examples of our business benefiting from lower LNG prices.

Another way to think of the overall Golar business is shown on Slide 18.

If we consider energy parity of LNG compared to Brent at around 16%, and we look at the LNG pricing expressed as a percentage of Brent, we can see how the cycles oscillate between preferred economics in upstream versus downstream over the years.

We believe Golar participates across that value drain -- chain.

In the FLNG sector, our current contracts, representing $3.4 billion of EBITDA backlog, are essentially tolling arrangements with no negative linkage to LNG pricing.

Yes, there are potential oversupply.

There is potential oversupply in the market for the next couple of years that will likely create a ceiling for spot LNG that makes it difficult for nonportfolio players to get projects away.

We've 2 comments on that.

Firstly, the IOC majors, NOCs and portfolio players take a longer-term view of LNG pricing, and we're focused on them as potential customers due to their ability to take FID during or towards the end of a down cycle.

Secondly, as our customers take a view that the LNG pricing cycle is gaining upward momentum, our FLNG product will offer the fastest schedule to production, and importantly, an extremely competitive cost for any greenfield development and with a carbon footprint that meets or beats many of the onshore alternatives.

In shipping, demand slowdown may see a reduction of ton miles, bringing rates under pressure for short periods.

We have mitigation against this by securing utilization of the majority of the fleet with long-term customers on a combination of fixed and floating rate structures, which should result in a superior commercial outcome compared to previous years.

Additionally, we remain committed to putting our carrier fleet into a different vehicle, which might be better equipped to deal with the cyclic nature of the shipping market.

And last but not least, downstream, where we see great and immediate opportunity with lower LNG pricing.

The economic argument behind fuel switching from more environmentally damaging diesel and fuel oil to LNG was already compelling when LNG was priced much higher than it is currently.

With lower LNG prices, it simply puts more emphasis on our first-mover advantage, particularly in Brazil, strengthening the economic argument for the end users, supporting fuel switching and consequential increased demand for LNG.

And whilst our immediate focus is pushing ahead with our competitive advantage in Brazil, we're also investigating other geographies that will benefit from a similar type of business rollout.

The USP is quite powerful, cheaper energy, with a cleaner and greener footprint, and we'll bring it to you.

So an interesting point on Slide 19, and some of our listed company competitor group.

We think Golar is in a relatively small group of companies that can benefit from higher LNG pricing in the upstream sector right through to benefiting from lower LNG pricing in the downstream distribution sector.

And as a reminder, Slide 20, we've built in a fully financed EBITDA backlog of $7 billion, and that's detailed on Slide 21.

So in summary, our financial and operational performance in 2019 was solid.

We see improved cash flows into 2020.

We're building a sustainable business that can thrive in any LNG price environment.

And our immediate focus is on growth opportunities with low CapEx to EBITDA multiples and short payback times to maximize the value of our asset portfolio.

With that, I'd like to hand back to the operator to take your questions.

(Operator Instructions) Sir, your first question comes from the line of Chris Wetherbee from Citi.

This is Liam on for Chris.

So I just want to start out with -- could you provide an update on your -- with the spin-off you're looking to do for your LNG carrier fleet and where you are in that process, and when you think it might be complete?

So we remain committed to the spin-off and we're, I'd say, making good progress on the alternative structure we're developing following the disappointing outcome that we had late last year, and we hope to be able to give an update in the coming months on how we're going on that.

Okay.

And do you -- for some of these vessels, I know you have sale leasebacks on some of them.

Do you have the ability to kind of walk away from these arrangements and potentially put back the vessels to the lenders, and is this something you would consider if you can't sell or spin off the fleet?

I think the only point we'd make is part of our proposed spin-off into a different vehicle, a key component of that is a comprehensive refinancing package that we're confident will go hand-in-hand with what we're trying to do with the ships.

Got it.

And just one additional question here.

What are your plans in terms of your dividend now that your TRS share repurchase program has been completed?

Well, that's a matter for the Board.

I mean, clearly, there's a number of uses of excess cash.

We can use it to pay down debt.

We can use it to invest in attractive projects.

We can return it to shareholders in form of buybacks and dividends.

This is a matter for the Board.

And my view, the current share price paying dividends isn't the preferred option compared to the alternatives.

We got another question, it comes from the line of Randy Giveans from Jefferies.

So you continue to guide to, I guess, $78 million now in annual EBITDA for Golar Power Sergipe and $21 million for the Nanook, when do you expect that to be kind of fully ramped up?

Meaning, when do you expect to earn, let's call it, $25 million in quarterly EBITDA?

And what is that EBITDA guidance for the second quarter?

Well, that -- I think that will come on when we reach COD, which is forecasted for the end of this quarter.

So the following quarter, we should have full payment, remembering that we get that payment whether we're dispatched or not.

So that's basically availability payment.

And there is a small uptick in the event that we're called to dispatch.

Got it.

Okay.

So starting up and ramping up pretty immediately.

Yes.

That's right.

Excellent.

But no, that's exactly right.

The contract once we're available, we get 100% of that amount.

Perfect.

And then kind of second part of that question, looking at the kind of growth story on, I guess, Slide 14, pretty massive range there, right, from $11 million to, I guess, $2 billion.

Do you have any kind of expectation for maybe a base case?

At what -- where on that table should we kind of earmark 2021, 2022?

I guess we're showing these tables so you can use your judgment as well.

I mean we're working very hard in the background to develop these projects.

And what we're trying to illustrate -- and we have talked to some of these numbers before.

So for example, with Sergipe, we only require to use 1/3 of the capacity of that vessel.

So 2/3, 66% of the capacity is available.

Obviously.

What we don't want to do is have you think that all of that's going to be used and immediately available, but you've got to think there will be -- some healthy proportion of that would be available.

And it will ramp up over a period of time, over months and years.

And I think last time we talked about a sort of profile that runs from now right the way through to 2025 in terms of increasing EBITDA.

I think I'd also guide you back to the announced -- the prepared remarks that I made on the various forms of generating that EBITDA and that we're not relying simply on one type of industry supply, and we're working ahead on many different fronts.

Sure.

All right.

So clearly, some substantial upside there.

And then I guess, second and final question.

You mentioned that Golar is now fully funded in quotes in the press release, does that only refer to the remaining kind of project CapEx or also due to the debt due this year?

And then with that, how much of the, I guess, $411 million of capital repayments over the next 12 months do you expect to refinance?

Randy, it's Graham.

So we're fully funded in terms of our ability to fund our existing projects, refinancings that are coming up this year and future years, we would expect to refinance, and we have no concerns about our ability to do that.

So I mean my take on that is that we're fully funded, and we don't have a problem with liquidity at all.

And we're pushing ahead with our projects in that regard.

Sure.

So I guess for the term loan and the margin loan, $250 million, planning on just refinancing that this year?

Yes.

Of that $411 million that you quoted also includes some of this so-called VIE short-term debt, which isn't kind of really our debt.

Right.

Right.

All right.

Just going to ask you more about the $250 million that's coming up here, but it sounds like you've refinanced that.

So all right, that's it for me.

Thank you.

Another question comes from the line by Chris Snyder from Deutsche Bank.

So my question is around the BP Tortue contract and the associated cash flow stream.

So you have the 20-year contract with annual EBITDA of $151 million.

And just given where BP bonds are yielding, there appears to be a disconnect here between the value of the cash flow stream and the Golar equity value.

Can you maybe talk about transactions to potentially realize or pull forward the value here?

And maybe any thoughts around the opportunity to sell the cash flow stream back to BP or potentially trying to securitize the cash flow and sell it back into the market, just to kind of address the disconnect?

No.

We haven't -- it's an interesting point that we'll maybe take up off-line.

We haven't really spent too much time on that.

We had, I think as we've talked about in previous quarters, considered selling part of the Gimi project to funds of some description, but we've decided not to proceed with that at the current time.

But largely because I think we get better value as we get close to COD.

Exactly.

Okay.

Yes.

Fair enough.

I just thought it could be interesting just given where BP can issue debt and raise capital, it could be value accretive for both sides to potentially buy -- for them to buy part of the cash flow stream back just because that's obviously an obligation on their end and they could raise money quite cheaply.

Yes.

As I say, we just think we'll get a better deal closer to COD.

Okay.

Fair enough.

And then on kind of further follow-up, switching over to the downstream business.

You guys are obviously making pretty good progress here and the rollout.

And with $3 LNG prices, would expect a pretty strong uptake.

So in the slides, you guys do a really good job of laying out the investment case, which is certainly attractive, and then the long-term potential with the wide ranges.

And I guess -- but I guess my question is not on like where can it go, but more on where does it start.

Like when can we start to see meaningful EBITDA showing up here?

And just given that there is some level of fixed costs involved with this business, what kind of scale do you need for the small-scale venture to be cash flow positive?

So we think this small-scale venture will be cash flow positive with a -- certainly within a couple of years.

Much of this investment requires CapEx to EBITDA multiples of somewhere between 2 and 3. So it's a very attractive business from that point of view.

And also, the scale, the size of that CapEx investment is much smaller than, for example, Sergipe.

We've got another question, it comes from the line of Jon Chappell for Evercore ISI.

One short term, one long term from me.

First, on the short term.

The $172 million of revenue backlog in the shipping business, it sounds like shipping is still kind of far from core, but it is the tail that wags the dog sometimes.

So can you explain the duration of that?

Because if we're kind of back into 62% of your current fleet contracted days of the $172 million backlog for this year alone, it points to a TCE rate that's well in the 70s, which would be phenomenal.

So what's the $172 million as it fits to 2020?

And what's kind of the TCE rate associated with that for the next 12 months?

So we're not giving guidance on our TCE for 12 months, we kind of do that quarter-by-quarter, as you know.

But what we're trying to illustrate by that is that we're in -- showing out the $172 million in a much better position than we were this time last year.

The contracted backlog that we have runs between -- some contracts are 6 to 12 months and other -- we have other contracts that go out as far as 5 years.

But that $172 million relates to, basically, those -- both of those scenarios.

So you just have to -- I'm sorry, you have to go calculate it yourself.

We're not going to give such specific guidance.

I would say, just to give you a little bit of help, though, the majority of that is less than 3 years.

And certainly, it's the minority of the contracts that run out to 5 years.

Okay.

That last bit is helpful.

The second part is -- the second question, kind of longer term, clearly, just from the tone of the presentation, the focus on the downstream is significant, which is maybe a bit of a shift from 2 years ago, where the focus was more on the upstream and the FLNG.

So as you think about the cash flow generation as it starts to accelerate at the company from all the different segments, and you said that you're fully financed, but where do you kind of focus the capital envelope going forward?

Should we think about building out the small scale, the downstream, which you've already said is kind of low CapEx at the expense of some of the upstream stuff?

Or can that kind of switch on a dime again depending on the LNG price environment?

I think it's a bit of both, Jon.

I mean we are focused on the downstream right now.

And I think if we look at the next couple of years, there's a driver to get that going.

In terms of FLNG, yes, it's an interesting business.

At the low prices that we've got right now, we would need a customer to take us with them on a journey where they were prepared to take offtake.

And if that came with a financing solution, of course, we'd be interested in looking at it.

But right now our CapEx that we are generating within Golar Power, and obviously, we do some refinancing in there as well with -- to improve our debt profiles.

But that's where that initial focus of CapEx is for the next little while.

Are there just fewer customers willing to take you on that journey today, kind of in a short-term environment?

Because I think even as recently as the last earnings release, there was a conversation -- there was talk about a lot of conversations with people on that upstream end.

Look, we are actually working right now in developing our portfolio.

It hasn't really slowed down that much.

I'm just trying to be realistic about how long it takes to make an FID in the FLNG space, in the upstream space.

And also the difficulty that some customers will have in getting there for us to have such low LNG prices.

My own suspicion is that when LNG prices stabilize and look like they're going to turn the corner, which could be later this year, it could be in the next year or beyond, then we'll see far more interest.

And what we're trying to demonstrate is that our business model is robust and flexible to be able to cope with both of those scenarios.

And right now our focus is on the downstream.

We got another question, it comes from the line of Ben Nolan from Stifel.

So I have a couple.

Number one is, I'm trying to get a sense -- I appreciate that chart that you put on Page 16 showing the potential earnings that you could get out of the excess capacity on the -- or the portion of the power generation that is dispatched.

Any sense of what the dispatch rate is likely to look like?

Are we thinking that it will be 90% dispatched or 50% dispatched?

Any idea there?

We don't know, but we're guessing about 1/3 of the time.

And I think you'll find that as we move forward on the next months, we'll understand the experience of Sergipe a lot more.

The good news is that we're around the corner from COD and actually talking about the ability to dispatch, which I find quite attractive.

Yes.

Interesting.

So -- and then I have just a few sort of record-keeping type questions here.

So you mentioned to Randy that you expect full contribution from Sergipe starting in the second quarter, but obviously, you're selling a little bit currently.

Any sense of what the first quarter contribution is likely to look like out of that $25 million of quarterly EBITDA?

I think it will be negligible.

It's commissioning electricity.

And of course, in the commissioning these big power stations, you ramp up, you shut down, you do some more tests.

Tweak, change things.

I guess the point I'm trying to make in talking about that is that the power station works and it can generate electricity on full load.

That's actually the main point there.

Okay, perfect.

And then the last little one from me is, I believe for Barcarena, you guys had said that you expected to award the FSRU contracts at some point in the first quarter.

Any update on where that is, or any thinking as to which vessel or which version of FSRU you might be using there?

No.

We haven't stated too much around exactly what we're going to do.

But we expect to be able to take FID sometime this year, maybe as quickly as early as the middle of this year on the terminal.

Of course, associated with that would be our plans for the FSRU.

And it'll be one of our FSRUs, and that could be a conversion of 1 of the 2 existing Golar Power vessels or it could be another one that we've already got in the camp.

We haven't concluded that yet, but we're working hard and we should have the answer in the coming few weeks or months.

We got another question, it comes from the line of Sanjay Ramaswamy from Bank of America.

A quick one.

Moving into -- I think Jon mentioned this before, but just going into a little bit into the shipping strategy and how that's changed.

Obviously, with the intention of, I guess, reducing the volatility with the earnings there.

But we're seeing -- with 2020, we're seeing, right, 62% contracted.

Should we kind of expect that percentage to remain at that level given, let's just say, that the shipping spin-off does take longer than expected or the time line does change there?

How should we kind of think about that moving forward?

So the first part of that, it's disconnected from whether the -- we spin the ships off or not.

It's a fundamental shipping strategy and it would continue into the new vehicle as we go.

I don't know where it will exactly end up.

But from my point of view, I want that percentage to increase and for us to put more business on term-related deals and just have a few ships of -- 2, 3 ships maximum playing on the spot market.

Sure.

That makes a lot of sense.

And maybe just a question given the -- quite a few slides mentioning the cadence of a lower LNG price environment and the benefits of kind of moving more into downstream, how should we kind of expect, I guess, the percentage business mix when we look at Golar to shift into kind of more of that downstream business as opposed to upstream?

Well, I think at the moment, we've got $3.4 billion of backlog -- of EBITDA backlog in our upstream business out of a total of $7 billion.

I think logic would say that we're going to build EBITDA backlog in the downstream business.

And at some point, hopefully, it will swing the other way and we can enjoy a bit of a firm upstream again.

But I think that's the way to look at it.

Another question comes from the line of Gregory Lewis from BTIG.

Iain, I guess, I just have a bigger picture question, kind of.

I mean clearly, there's been a lot of focus and you guys seem to be moving full steam ahead in the Golar Power.

You kind of alluded to the uptick that we're going to see and the spreads given where LNG prices are, but then you kind of alluded to, "Hey, eventually, we think LNG prices could stabilize." We agree with that.

We think where we are today projects will either be delayed or demand will accelerate it.

And just thinking about that, as you think about capturing a spread, has there been any thoughts or is it kind of still early days before Golar potentially thinks about -- as you move more into power, about sort of lining up long-term LNG contracts so you can kind of lock in a price?

Or is it kind of -- I'm just trying to understand and square that out.

So it's a good topic.

And it is early days for us, but yes, we've obviously thought a lot about that.

And the beauty of the Golar business is that we have a position in upstream across the transportation midstream and then into that downstream arena.

So we are contemplating what we can do to take advantage of that and the spreads associated with it.

But I think I would come back to the first steps.

We've got a $1.3 billion FLNG project that we're in the middle of in Singapore.

We're just commissioning the power station and we'll learn how to use that and generate value from it from the other downstream ways that I -- we're discussing earlier.

So I think that the spread and the ability to supply our own LNG is, of course, something that's of interest.

And we'll learn how to do that as we move forward over the coming months and perhaps years.

But it's a great topic.

Another question comes from the line of Craig Shere from Tuohy Brothers.

This is Judson actually pitching in for Craig.

Just touching on the Hilli.

You guys mentioned that Perenco is kicking off another campaign in Q2.

Just in terms of the time line as to, assuming it's positive, when do you think you might be in the position to learn a little bit more about the upsizing and extension of the contract?

Is that more likely a 2021 event?

Perenco, it's difficult to say.

Look, we're doing everything that we can to encourage Perenco to invest in drilling.

We're trying to help them with cargoes, if that's going to get us to the end point in moving more volumes.

I just remain very hopeful that they use the drilling campaign to prove up the reserves and that we end up having a very detailed and strong dialogue about how we can improve both the volume and the duration of the Hilli deal.

It's -- I mean personally, it's a source of frustration that we haven't been able to go faster, but some of these things are just outside of our control.

But we are doing what we can to help make it attractive for Perenco to push ahead with that drilling.

Okay.

And then a second one for you.

After the Gimi is completed and refinanced, would you guys still consider a 10% or a 20% sell down?

Yes.

It's something that we look at.

I think what Graham said earlier is spot on, is that we did receive some fairly attractive offers, but under consideration, we just thought we will focus on the refinance between now and COD.

And we think we'll be able to get even more value out of a transaction closer to that time.

But there's certainly interest in the -- both the vessel under contract.

Okay.

That makes sense.

That's it, and congratulations again on the quarter.

Thanks, Judson.

And we got -- our question comes from the line of Liam Burke from B. Riley FBR.

On Slide 19, you highlighted the competitive landscape of the -- both of -- particularly upstream and downstream.

Is there any particular change or any increase in the competitive front there, understanding this is capital and expertise is a pretty high barrier to entry?

I wouldn't say so.

I mean the -- I guess the purpose of this slide is we often get looked at as a shipping company.

And of course, we have ships.

We love them.

And we are involved in upstream and we are involved in downstream, and those 2 areas is where we've deployed capital over the last 5 years.

And the point of this slide is just to try and let people help look at us slightly differently.

We're more than a shipping company.

And interestingly, we are more than just a simple LNG tolling company as well.

So there's a complexity around Golar that's often declined, but I think it's working in our favor at the moment because of our ability to participate in these low price times.

And we'll be right at the front of the queue to take advantage of the higher prices when they come back.

Sir, no more question at this moment.

Please continue.

Thanks, operator.

Well, thank you for your attendance on the call today and your continued interest in Golar.

I hope we've demonstrated that we're in a business that is flexible enough to make money and prosper even with the lower LNG prices.

And with that, we look forward to catching up with you over the coming weeks and again at the next quarterly call.

Have a good day, and goodbye.

That concludes our conference for today.

Thank you for participating.

You may now all disconnect.