Golar Awaits FIDs as Losses Mount
LNG vessel owner Golar reported further losses in Q3. Higher revenues were matched by higher operating costs, charter hire and other expenses. It reported November 30 an operating loss of $22.9mn and pretax loss of $5.5mn, compared with $24.0mn and $6.6mn in the previous quarter.
Voyage expenses rose from $11.8mn in 2Q to $13.1mn in 3Q, with the increase largely attributable to repositioning and cool-down costs for the Golar Tundra which departed Ghana in September after 16 months of inactivity, and prepared for service as an LNG carrier.
On the positive side, the company is seeing the shipping market returning to balance, as demand growth is supported by more capacity coming on line and longer LNG voyages as US capacity comes on stream to meet demand in Asia. Eight liquefaction trains with nameplate capacity of 34mn mt/yr that began operations in 2016 continue to ramp up and a further six trains including Sabine Pass T4 and Wheatstone and Yamal T1 with a collective nameplate capacity of 28mn mt/yr have started operations during 2017 to date. The 5mm mt/yr Cove Point facility is anticipated around year-end.
It said: "Spot rates have steadily increased from two-year highs in early October to three-year highs today with sentiment continuing to improve as we move into peak winter gas demand. LNG prices have also surprised to the upside. Current JKM prices at around $9.80/ mn Btu [spot prices for delivery ex-ship in northeast Asia, assessed by Platts] compare to $7.10 this time last year. "
And Iain Ross was appointed to replace interim CEO Oscar Spieler, who remains available in an advisory capacity to support the Hilli project. Iain joins Golar from project delivery firm WorleyParsons.
On August 15, 2017, Golar entered into a contract with Golar Partners for the sale of equity interests in the Hilli, representing half the two liquefaction trains, out of four, that have been contracted to Perenco Cameroon and Societe Nationale Des Hydrocarbures for an eight-year term. The agreed sale price was $658mn less net lease obligations under the vessel financing facility that are expected to be between $468mn and $480mn, which represents 50% of the Hilli post-delivery facility.
A ship-to-ship transfer of LNG for commissioning purposes will be undertaken followed by the full commissioning process, as part of which first first commercial LNG is expected "around year end. Final commissioning is expected to complete during the second half of 1Q 2018 and the project remains well within budget," it said.
The Mark II front-end engineering and design study on the 4 x 3.2mn mt/yr FLNG unit for the US Delfin LNG project is continuing on schedule and is on track to complete at the end of 1Q 2018, taking the company nearer to final investment decision (FID).
Fortuna needs new finance
The Fortuna project agreed the LNG sales structure, with Gunvor due to buy 1.1mn mt/yr free on board over a 10-year term, priced off a Brent. The Fortuna project participants may market the remaining 1.1mn mt/yr to higher priced gas markets but if they fail they can put up to 1.1mn mt/yr to Gunvor at a price lower than the firm price, for two years after FID.
All that is missing now for that project is the financing. It had been announced as practically in the bag, in May of this year, as Chinese banks had a different view on risk than their western counterparts. They were expected to provide up to 60% of the $2bn cost. Golar says progress has been made on bank and alternative financing approaches over the last month. "Based on the solid economics of this project, the board expects to approve a FID in the first part of 2018," it said.