Golar LNG ordered a fourth FLNG unit, boosting capacity 41% to 12M tonnes. The $2.45B Mark II vessel delivers in 2029. Golar targets a 50% earnings increase with the new unit.
Golar LNG ordered a fourth floating liquefaction unit, a Mark II design to be built at CIMC Raffles Shipyard in China, the company said Wednesday. The unit will deliver in 2029.
The order came "on the back of strong interest from prospective charters," CEO Karl Fredrik Staubo said on the Q2 earnings call. Golar has a total EBITDA backlog of $17 billion across its Hilli, Gimi and Esperanza vessels, before commodity upside and the new unit.
The fourth FLNG will increase Golar's controlled liquefaction capacity 41%, from 8.6 million tonnes to more than 12 million tonnes per year, Staubo said. Assuming contractual terms in line with the Esperanza, the company sees potential for a 50% increase in earnings capacity.
The CapEx budget is around $2.45 billion, up roughly 10% from the Esperanza's $2.2 billion. Staubo attributed the increase to inflation on long-lead equipment like turbines and cold boxes, but called the cost increase "highly competitive" relative to cost inflation on other offshore and shipping assets.
Golar also secured an option for a fifth Mark II FLNG at CIMC and signed a letter of intent with Seatrium Shipyard in Singapore for additional growth units using either Mark I or Mark II designs. The LOI reserves slot reservations, CFO Eduardo Maranhao said.
Total liquidity stands at approximately $1.5 billion, including a $600 million revolving credit facility closed in July that remains undrawn. Maranhao said optimizing Hilli's financing and locking long-term financing for Esperanza could release approximately $2.3 billion of incremental liquidity.
Gimi Overproduces, Hilli Finishes Cameroon Run
Gimi produced 15% above its contracted capacity during Q2, even with higher ambient and water temperatures, Staubo said. The unit delivered its 41st cargo. He expects continued temperature impact in Q3 before improved performance in winter months.
Hilli completed its eight-year contract with Perenco offshore Cameroon with 100% economic uptime and 156 cargoes delivered. The unit is in transit to Singapore for modifications ahead of a 20-year contract in Argentina, where it will generate $285 million of annual EBITDA before commodity upside.
Golar's operations employed more than 100 Cameroonians, spent $80 million in local procurement and generated more than $1.5 billion in cash earnings for Cameroonian state interests, Staubo said.
Esperanza Progress, Argentina Infrastructure
The FLNG Esperanza conversion is 74% complete with more than 15 million manhours worked without a lost-time incident. The unit remains on track for sail-away by year-end 2027 and start-up in Argentina in the second half of 2028. Golar has spent approximately $1.3 billion in cash equity on the conversion out of a total $2.2 billion budget.
In Argentina, SESA – in which Golar owns 10% – is progressing pipeline connections, operations support infrastructure and feeder vessels. The first 2 million tonnes of the total 6 million tonnes offtake has been sold to Europe, and multiple offtakers are bidding for the remaining 4 million tonnes, with more concluded expected before year-end.
Commodity Upside
Hilli generated $37 million of commodity-linked earnings in Q2, up from $10 million in Q1. Under the Hilli and Esperanza charters, Golar receives 25% of FOB prices above $8 per million BTU. Every $1 per million BTU above $8 can generate up to $100 million of incremental annual earnings, Maranhao said.
Based on current and forward pricing, the movement could increase the value of Golar's commodity exposure by up to $500 million per year during the first three years of SESA operations, he said.
At $15 per million BTU – current forward prices for next year – the company would see approximately $1.9 billion in EBITDA, Maranhao said. At 2022 pricing, annual EBITDA could approach $4 billion.
Charter Path and Strategic Review
Staubo said the next steps for the fourth FLNG are signing a term sheet or framework agreement, then a definitive contract, then lifting conditions precedent including export and environmental licenses and, in some cases, tax regime clarification. He declined to specify geography or counterparty credit preferences, citing the open call.
"We are in advanced charter discussions in several different geographies," Staubo said. "Some of them are to NOCs, some of them are to independents and some of them are to IOCs."
Golar will not order a fifth FLNG until it has a long-term contract for the fourth unit, consistent with its policy of having only one open vessel at a time, Staubo said.
On the strategic review announced earlier, Staubo said it remains ongoing. "We will not give any comments on the review itself, neither the outcome nor the timing until we have material information to share or the board has decided to call it off," he said.
Q2 Results
Total operating revenue was $130 million. EBITDA rose 20% quarter-on-quarter to $127 million. Net income was $56 million, bringing year-to-date net income to $158 million. The company declared a quarterly dividend of $0.25 per share.
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