Thank you, speaker, and welcome to Golar LNG's Q1 Earnings Release. Thank you for taking the time to dial in. My name is Karl Friedrich Stavrou, the recently appointed CEO of Golar LNG. Before we get into the quarterly results, please note the forward looking statements on Slide 2. Is I'm joined today by Mr.
Eduardo Maranhao, who's taken over my former role as CFO of Golar. Eduardo was formerly the CFO of Heiko and is well known to the majority of Golar's stakeholders. We are together looking forward to contributing to the continued success of Golar. Turning to Slide 3 for Q1 highlights. We report adjusted EBITDA for the quarter of $78,000,000 and net income of $25,000,000 both ahead of consensus estimates.
Is our shipping portfolio achieved a TCE of $61,700 a day for the quarter, and our shipping revenue backlog stands at $187,000,000 at quarterend. Hilli continues to deliver 100% uptime with the 56 LNG Cargo currently being uploaded. Gimi remains on schedule and is currently 69% technically complete. Is during Q1, we announced and on April 15, closed the sale of Hyogo and DMLP to New Fortress Energy. Is The transactions will be accounted for in our Q2 numbers, but is expected to generate an accounting book profit in excess of $650,000,000 is An increased liquidity and liquid assets with around $900,000,000 We have initiated the announced buyback program of is up to $50,000,000 with 1,200,000 shares bought back to date.
Our cash balance as of Q1 stands at $245,000,000 and does not include sales proceeds from NFE transactions. I'll now turn the call over to Eduardo to take us through the first quarter numbers.
Is Thanks, Karl, and good morning to everyone. I'm excited to provide an update on our financial results for the Q1 of 2021. So turning on to Slide 5, we can see that the group had a very strong performance in Q1. Total operating revenues for the Q1 were $126,000,000 which was 7% above the numbers that we had in Q4 of last year. Is Adjusted EBITDA came in at $78,000,000 and was in line with the previous quarter.
A key driver for this performance came from the higher utilization and higher charter rates of our carrier fleet, which contributed to total revenues of $63,000,000 is We're able to execute on our shipping strategy and increase TCE rates up $10,000 a day from the last quarter. Is FLNG revenues from the Hilli came in line with our expectations at $54,000,000 although lower than the previous is Arthur, when we had the effect of overproduction revenues from past years, those numbers reflect the exceptional operational performance of our team, is, which again delivered 100 percent commercial uptime. The commencement of operations of our long term O and M agreement with LNG Croatia is resulted in higher management fees, which have also contributed to the increase of our other operating revenues totaling $9,000,000 in the quarter. Is Net income was at $25,000,000 which is $17,000,000 higher than the previous quarter. This was mainly driven by improvements in non cash mark to market gains in our interest rate swaps following favorable rate movements.
Is On the financing side, our net debt position at the end of Q1 was just close to $2,100,000,000 is And slightly higher than Q4. That was mainly driven by the $45,000,000,000 drawdown under the Gimi facility. Is We're going to provide further updates on that later on in the presentation. So at the end of Q1, our total cash position, as previously mentioned by Karl was $245,000,000 and that did not take into account the sales proceeds from the NFE transaction. Is So moving on to Slide 6.
The closing of the Heiko and the GMLP transactions last month have further enhanced our liquidity position. Is With $150,000,000 of unrestricted cash on hand at the end of the quarter and $131,000,000 of cash is Receipts received on April 15, our balance sheet has been materially strengthened. Based on yesterday's closing price, Our stake in NFE is now worth close to $800,000,000 and that creates a lot of optionality to our funding strategy. Is Considering that we have now over $1,000,000,000 in liquid assets, as you can see on the left hand side of the slide. We're now well positioned to meet our existing CapEx commitments and also to fund future attractive investment propositions.
I wanted to highlight that our focus for 2021 will be Santardon. Optimizing our debt structure, which includes the refinancing of our April 22 convertible bond, is We're going to continue to further simplify our group structure, and we will also looking forward is to focus on the FLNG and upstream business development. So with that, I'll turn the call back over to Karl.
Is Thank you, Eduardo. Turning to Slide 8 and our shipping performance. As mentioned, our shipping TCE is Yi for the quarter, came in at $61,700 a day. We have fixed 90% of remaining vessel days for 2021. Out on the 90% contracted days, 19% is index linked and 71% is on fixed rate charters.
Is We took a cautious approach to shipping exposure coming into 2021 as we saw around 50 newbuild deliveries coming this year, is where about twothree of deliveries have charter parties and onethree of newbuilds remain open. We are, however, positively surprised by the is strong, L and D freight rates we're currently seeing despite normal seasonal weakness during spring summer months. Is this furthermore supports our positive outlook for our shipping segment going forward. In line with our increasingly optimistic outlook for shipping rates, we have an increasing exposure to LNG freight rates through floating rate charters and vessels coming off fixed charters. Is We have 3% spot exposure for the 2nd quarter, 11% for Q3 and 40% for Q4, is aligned to match the normal seasonal strengthening of LNG freight rates as we enter the winter months.
For Q2, we expect is to see TFDE TCE rates of around $47,000 a day with 98% fleet utilization on the back of our high contract coverage is. Turning to Slide 9. We are increasingly optimistic about the future outlook for LNG carriers. The total current LNG fleet on the water stands at 5.97 ships. Is The fleet comprised of 254 steam carriers, 183 TFDE carriers, 40 is for Q Flex and Q Max and 116 megaships, plus another 130 on order.
Is on the supply side, we believe the order book will be offset by less efficient steam carriers coming off their long term charters and facing new and stricter emission standards, forcing these vessels to slow steam or be uneconomical for international trading. By number of vessels, the 22% order book compares to 42% of existing vessels on the water being steamships. So we think that more than offsets the order book. Demand continues to build with 361,000,000 tonnes of LNG transported last year. According to Clarksons, 1 tonne of LNG transported consumes 1.4 LNG carrier per year on average.
Is With an anticipated growth over the next 3 to 4 years of almost 100,000,000 tonnes, this assumes is 140 incremental ships needed. Furthermore, increasing distances as most of incremental volume is transported from the U. S. To the Far East, consumes 2 times or 2 LNG carriers per tonne and hence would require almost 200 ships. Is Lastly, the 3 Korean shipyards capable of building high quality LNG carriers are filling up with container orders, and hence there cannot be any meaningful additions to the order book with delivery before 2024 at the earliest.
Is This makes us very optimistic to the medium and longer term outlook for LNG carriers, and we are positively surprised by the current seasonal strength is in a year of 50 newbuild deliveries and as demand side, still negatively affected by COVID. Turning to Lloyd 10 to elaborate on some of the environmental regulations coming into play. 1st and foremost, the EEXI, which stands for Energy Efficiency Existing Ship Index, will come into play from 2023. Is EEXI is a pledge made by IMO to work towards reducing CO2 emissions by 50% within 2,050. Is that's still far ahead, but due to the long life of assets operated in the LNG industry, this is in many ways is Ed Curran Prahlom.
Additionally, the first goal after 2,030, IMO targets 40% cut in carbon intensity. AIMO will require all ships across all segments to comply with the commonly agreed index is before 1st January 2023. In order to meet these requirements, all ships trading in international trades is Need to take action in form of either reducing speed, change to cleaner fuels such as LNG, ammonia or hydrogen is Dominic, I'll make all the retrofits to the ship design to increase energy efficiency. For LNG shipping, this will likely result is slow speeding or redundancy of a significant part of the steam carriers. And as mentioned on the previous slide, this represents is 42% of the global LNG carrier fleet.
Turning to FLNG and starting with Hilli on Slide is 12. Hilli continues to operate with 100 percent commercial uptime with its 56th cargo currently being offloaded. Is we've made continuous progress with respect of increased utilization of the Hilli. We have executed all event is required to remove any production caps on gas reserves and to enable production above the current contract capacity. Is We are in advanced discussion for additional production anticipated to start up in Q1 of next year.
Is In addition, we would like to remind you that we are now in a territory where we will recognize Brent linked earnings from the Q2 of this year. Is Golar makes $2,700,000 in annual EBITDA for every dollar the Brent curve is above $60 is based on current Brent forward curves, we expect to continue to see Brent contribution for Hilli in the coming is Turning to Page 13 and an update on Gimi. The is a conversion project is now 69% technically complete, on track and on budget. We have surpassed 9,000,000 man hours is with around 2,400 yard workers currently allocated to the conversion on a daily basis. The vessel's 5th and final dry dock has seen all remaining sponsons blocks attached to the vessel and is on schedule to be completed within this quarter.
Is Gimi is expected to sail away from Singapore in the Q1 of 2023. It will start to make commissioning revenues from the Q2 of 2023, and it will start its 20 year contract with BP from the Q4 of 2023 is with a total EBITDA backlog of $4,300,000,000 We also note that Kosmos, BP's partner on the Tortue field stated in their Q1 report that they are working to maximize the FLNG capacity that fits their current is Schur. By that infrastructure, they mean the FPSO and the breakwater that the project is putting in place. Is that would equate to 5,000,000 tonnes per year. Gimi, as a reminder, have a capacity of 2,500,000 tonnes.
Is Hans, in order to meet 5,000,000 tonnes per year of liquefaction capacity that will support another Mark I design FLNG is or alternatively, and Mark, we design FLNG to satisfy the full 5,000,000 tonnes. Turning to Slide is FOREIGN. We are now in a territory where the gas price suggests that LNG Economics Istrogus in Upstream. We've made an illustrative example of FLNG Economics on the left hand side, is with gas reserved and lifting costs assumed at $1 per MMBtu, dollars 2 tolling fee, which includes a 10% unlevered is return to the FLNG owner. We can deliver through FLNG technology FOB gas at $3 is Permian Btu.
Based on current healthy shipping rates, shipping to the Far East would add another 1 point is $5 per MMBtu and have a delivered LNG price of $4.5 per MMBtu. Is As you can see on the right hand side, this equates to a very attractive downside versus historic JKM pricing with a very healthy upside potential. Is. So to illustrate, whenever the dark blue line is above the green line, the FLNG provider will make money. Is With current JKN price of $10 per MMBtu, this leaves a healthy margin for the gas producer of around 1 point $4,000,000,000 per year.
The risk reward coupled with gas forward prices is what drives both increased interest from majors is for our FLNG tolling arrangements as well as Golar's this Remodel, where we can capture more of the gas upside. We'll further elaborate what is the potential economics of gas upside could look like on Page 15 using a Mark is Rui or a 5,000,000 tonne per annum FLNG. 5,000,000 tonnes of liquefaction capacity equates is 250,000,000 NMBTUs per year. Hence, a $2 margin equates to $500,000,000 in annual is again, current and forward LNG prices suggest that economics for such projects will be between 2 to 4 times EVEBITDA. Integrated gas acquisition and production is not a new concept to Golar, is, but we see fundamentals for this potential upside in Golar's business model stronger than ever due to is the supportive gas forward prices due to our proven track record of 100% utilization on Hilli.
Is and lastly, because we have a balance sheet now capable of lifting such project and execute on this strategy. Is We're currently pursuing stranded gas and associated gas reserve that may enable the rollout of our integrated up Dream Strategy, and we will update the market as soon as we have further developments on this front. Is Turning to corporate and strategic focus. We announced today our 2020 ESG report that can be found on our website. Is although ESG has been an integral part of Golar's operations since the formation of the company, we are increasing Biren Sy to the market on our performance.
Some of the highlights of this year's report can be found on Slide 17. Is The carbon footprint of our FLNG technology is competitive to shore based liquefaction mega projects. We have reduced is Friedt. We have carbon emissions from an AER of 9.95 to 8.71. And on Hilli, we have we're now up to 35.4 local employees and have spent more than $10,000,000 of purchases locally.
Is We've also published our ESG targets until 2,030. These are either aligned or exceed any regulatory requirements is for our fleet and operations. Turning to Slide 18 and the earnings power from our existing asset is Oliuk. Following the sale of Heiko and GMOP to New Shortress Energy, Golar is significantly simplified and our asset portfolio and financial performance should be easier to predict and follow. Our Shipping segment comprised of 10 vessels, of which 8 are TFDE carriers, is 1 steam carrier and 1 FSRU currently operating as a carrier.
The fleet is fully delivered and generated is EBITDA over the last 12 months of $121,000,000 The $10,000 change in rates equates to $32,000,000 is Ian, change in EBITDA. We are optimistic that this segment will see improved performance on the back of the strengthened LNG carrier market outlook. Is On Hilli, we continue to see 100% utilization. And with a pro rata last 12 months EBITDA generation of 90 $3,000,000 We do expect to see further upside on her performance as well. Is This upside will be driven by building of potential overproduction, oil derivative earnings and Ekushin of the advanced discussions on increased capacity utilization from Q1 of 2022.
Gimi, as mentioned, is on schedule to start up its 20 year contract for BP in Q4 2023, adding another $151,000,000 in contracted EBITDA to Golar. We also have further EBITDA potential in uptime bonus On Gimme. Hence, we expect to see a run rate EBITDA based on the existing asset portfolio once Gimme delivers of at least is $352,000,000 versus EBITDA for the last 12 months at $201,000,000 As previously discussed, is there is significant further upside in FLNG tolling and integrated projects that may add significant further EBITA potential. Is So to conclude on Slide 19, we are optimistic on increased earnings power for our shipping business is as we are seeing stronger than our anticipated current rates, a positive market outlook and have increasing exposure to shipping freight rates through our charter is On FLNG, we expect increased earnings from Hilli due to the oil derivative earnings and progress Jons of increased capacity utilization, and Gimi remains on time and budget. Gas price is supportive of FLNG growth, and we experienced increased interest for oiling business and are very excited about the potential to develop integrated gas Enfel and D Upstream Opportunities.
On corporate and investments, we have a strong liquidity is following the sale of Heiko and GMOP. This will enable financing of growth projects and debt optimization. Is Jim. Lastly, we will continue to work on further group simplification, likely splitting our midstream shipping business is an upstream FLNG business into 2 separate vehicles over time. That concludes Golar's is Q1 earnings presentation.
We will thank you all for dialing in, and I'll turn over to the operator for any questions.
Thank you.
Is
is. Our first question is from the line of Randy Giveans from Jefferies. Thank you. Please ask your is Christian.
Howdy, gentlemen. How's it going?
Hey, Randy.
Hey, first off, obviously, congrats is To you, Karl, on the CEO role, Eduardo on the CFO role, seems like a great time to begin these new roles here. Is With that, for the LNG kind of business first, some people are touting the Qatar expansion is somewhat unbeatable, right, because it's $5 or so landed costs. Your Slide 14 shows that, first, your FLNG projects can beat that. So I guess 2 part question here. Any interest in participating in that tender offer for the 100 to 150 LNG carriers from Qatar?
Is And then more importantly for Golar, with Trains 34 having better economics, what are the hurdles and maybe expected time line is to get Perenco to ramp up Trains 34. I know you mentioned 1Q 2022, but any chance for an earlier commencement?
Thanks, Randy. So when it comes to the Qatar tender, we're obviously aware of it. However, we believe our edge is in Upstream and FLNG development, and our incremental dollar is more likely to be spent on that than shipping. So we have no current plans to attend that tender. When it comes to Hilli and upside in production, is I think most of the agreements that should fit between us and the local government and us and Perenko is is closely finalized, if not finalized.
There are, however, existing off takers and other parties that needs to have agreements with Perenco in place, and such agreements are outside of our control. But with this gas price, is Sufficient Economics for everyone around the table. And every day it's not producing, it's an opportunity dollar lost. So is we are encouraged and hopeful that we will find a good common solution for all parties. We do not expect a is for the ramp up of significant incremental production.
Some production, we might be able to build under the existing overproduction arrangements, is but not any substantial increase until Q1 next year.
Okay. Answered everything there. Good. Is Now I guess for your balance sheet. Obviously, it's in stellar shape here following the new Fortress shares.
I guess what are your plans is For the $1,000,000,000 in liquidity, it's well above your $500,000,000 in remaining CapEx as you showed on that slide. You have some expensive sale leasebacks you can repay. Is At the same time, your shares are wildly undervalued. So do you expect to complete the remaining the remainder of the $50,000,000 repurchase in the second quarter? And can you provide some updated details on the convert refinancing timing and options there as well as the NFE for GLNG share exchange?
Is
Okay. That's a few questions. I'll start and then Eduardo, please chime in as we go along. So On the buyback program, you saw that we've repurchased 1,200,000 shares that we basically had to stop as we entered into the blackout period prior to you, one numbers. The initial framework we have approval for at board level is SEK 50,000,000.
And I think it's fair to assume that as long as the share price keeps trading at the discount to both book and underlying values. We expect to continue the buyback program. Is Next sort of question is on the CB. I think what we have said there is that we have a few different alternatives open to us. Is I think by no sort of particular order, we could do an exchangeable offering at Exane Drbul into NFE shares.
We could do a CB or unsecured bond on the LNG level, is Orbiqid settling cash either through cash available from balance sheet or sell down of de risked assets such as Gimi. Is So we have several different venues of addressing that maturity. When it comes to exactly what route we are planning to take, that depends on the relative share price between NFE and GLNG. To some extent, it depends on the absolute Aer Price of GLNG. By that, I mean, if you are to do a CB on GLNG, you obviously wouldn't do it at around current levels.
Is and lastly, it depends on near term growth projects. We are planning to address it during second is Harf of this year, and the primary reason for addressing it at that point is that then we are we have no restrictions on any of our liquid assets and is for R in a position to better weigh the alternatives. In the interim, we are keeping a close dialogue with Constructive Investment Bank and Other Investors is proposing different alternatives, and we are is keeping them on file and comparing where we think we can do the best solution.
Okay. Is That's noted. And then I guess quickly on the NFE GLNG Share Exchange, any additional details or color on that possibility?
Is We have like the exchange offer or distribution of NFE shares. Which one are you referring to?
You mentioned in the press release you could is Exchange NFE shares for Golar common shares in terms of a
Yes, yes, of course. So that is also down to the relative is, share price of NFE versus Golar, and it's something we will consider once we're out of the lockup period, which is 90 days is sir Klasing, which was the 15th April.
Got it.
All right. Well, that's it for me. Thanks so much.
Is Thank you, Randy.
Thank you. Our next question is from the line of Chris Wetherbee from Citi. Thank you. Please ask your question.
Is Good
morning, guys. James on for Chris. I just wanted to follow-up on some of the is Just wanted to follow-up on some of the commentary you had around the priorities. Just when you think about the end markets In terms of, Alan, the carrier side versus the, FLNG side, what one do you sort of see as essentially is More, where you could essentially put capital work sooner. And then also on that is On the line of questioning, is there anything that you need to tidy up before we could potentially see something along the lines of a transaction is in one of those two places.
Okay. I'll kick it off again. So when it comes to is yes, our incremental dollar, I think where we as Golar have more of a unique edge is on Upstream and FLNG. Is as we said in the presentation, we've now delivered a 56th cargo of LNG from the Hilli and an President with operating utilization of 100% in delivery. So we believe that where our edge is FLNG and Upstream, and our incremental dollar will go to FLNG and Upstream growth as opposed to is Shiping.
However, as we've said in the presentation, we have 10 ships. We have meaningful exposure. We like the outlook, but we do not intend to add ships to our portfolio. And when it comes to next steps in terms of when we can do either. Like we've just concluded the $5,000,000,000 EV transaction in selling GMLP and NFE.
Is on the one hand, that's closed on the 15th April. But I think for us, we see sort of no immediate is pressured to resolve the 2. At the same time, we believe part of the reason why we're trading at a discount to the underlying value is is that investors are seeking cleaner exposures to either upstream or shipping. So we will be opportunistic and try to execute a further simplification as soon as we have an attractive way of doing so. And there we are exploring different alternatives, is Balfour to spin out shipping and to also create an upstream company.
So we're open to either.
Got it. Is And in terms of shipping on that side of the house, prepping it to potentially be split out or whatnot, is there any sort of is Thank you. Thank you. Thank you. Thank you.
Your chartering strategy and potentially trying to like increase coverage or anything along those lines is To make it more marketable, is there any sort of like work to be done? Or is that something that really sort of if there is a bid for is You feel that you could basically be separated sooner rather than later?
Yes, sure. So is basically a little while back, 12 months or 12 to 18 months back, we changed our shipping strategy somewhat to take more coverage. Is that was driven really by 2 things. Number 1, we saw a lot of newbuilds entering the market in 2021, and we did not won't have too much exposure given the fact that we have 50 newbuilds coming to market on top of COVID. So we tried to take quite a bit of coverage.
Is and to some extent, we've been positively surprised by how strong the rates and arguably we got a bit too conservative. The second reason or driver for us taking this much is Kavri as early as we did it was that this was all done prior to the NFE transaction where we did not have the is Haim. Balance sheet position as we have today. So we wanted to be cautious not to sort of get any is to you surprising rates. However, as we try to state quite clearly on Page 8, is we have an increasing exposure to the market as we are very optimistic to what the outlook is.
Is and for now, I expect us to be increasingly exposed to the spot market, is either through floating rate arrangements or just from vessels naturally rolling off their fixed rate starter.
Is Got it. I guess what I'm trying to get at is if you feel that in order to do sort of a strategic trend another transaction, is You just need like 1 of 3 things, basically work done to improve the quality of the assets in one way or another. Is If you think that you're in the second bucket, I guess, you could say, if you think that the market timing just isn't right? Or in the third, if you just think is You need a little bit more time given the fact that you just did a significant transaction. And it actually sounds like they're kind of Yes, since you're kind of where you want them to be, the market timing isn't something you're taking a view on and it's really just about sort of Putting some distance between you and the last major transaction you did.
Is that sort of the right way to think about it? Or is this my misconstruing that?
Is if
there is an interesting transaction we could do tomorrow, I don't think we have had any problems doing it tomorrow. I think it's commonly known in the marketplace that we've been Tivoli looking at alternatives for our shipping fleet, including creating sort of a consolidation play. Is we do not think we need to do any high grading of our fleet. TFDE carriers are, if you like, the workhorse of the industry, is and we see the pressure to be more on the steam vessels. So for us, we don't expect a high grading.
I don't is I think we've rested out and are complete with the NFE deal. So we have certainly have enough energy and is opportunism in the company that if we find the right transaction tomorrow, we're happy to go for it. So for us, it's a matter of finding the right home is for the shipping fleet. We like it the way it is today. We think it's going to get better.
But at the same time, we do believe that we are somewhat penalized from keeping it in the same company as the upstream. So we're open to resolve this as soon as we find the right home.
Perfect. Thank you.
Thank you. Our next question is from the line of Mike Webber from Webber Research. Thank you. Please ask your question.
Is Hello?
Hey, Mike.
Is Hey, guys. So I wanted to 0 in on Slide 23, if you don't mind, because I think it's helpful. Is I just want to make sure I'm interpreting this the right way. Your last question was around or at least your last answer was around what to do with the carrier fleet. Is And it certainly seems like the right analog here is in terms of the value prop for Golar as a whole, it's kind of like TK 2015 where is If you can find a home for the carriers, all of a sudden, the value proposition looks a lot simpler and a lot cleaner at Golar.
Is But I did know I know you've talked to this, but I know that distributing the carriers or sending them didn't make it onto is The strategic initiative slide on Slide 23. Given the difficulties in doing that, one, another finding a buyer for a fleet that size or presumably is pumping some equity into it, so there's some value there to distribute. Is it fair to say that as of right now, that looks a bit more difficult is then what you've listed on Slide 23 in terms of disturbing NFE shares and some of the other
Bertie on Slide 23 in the appendix. But I think what we when we say further group simplification, what we mean by that is basically finding a home for shipping or creating the same simplification by potentially spinning out the upstream. So I think we're open to both. Is When it comes to debt optimization on the shipping fleet, we state in the earnings release today is that as part or following the NFE transaction, we have agreed to reduce the debt on 4 of our ships, is Ware. We basically invest $60,000,000 of cash into 4 of the ships, so reducing debt by $15,000,000 a ship is in return for a total debt reduction of SEK 102,000,000.
So we pay in SEK 60,000,000, which will be done during early part of Q3. And in return for that, we get $102,000,000 of debt reduction. So if you want, that's a $42,000,000 debt saving to Golar and to some extent should be seen as further enabling the shipping fleet to respond. Is Ben. And on the other hand, if you look at the implied values of listed peers, that suggests that is our shipping fleet has a value of anywhere between sort of $250,000,000 to $350,000,000 of equity.
That's obviously fluctuating with share prices, but that's where we trace it. Is Right. And both are also higher than that at first.
Well, yes, I mean, I would imagine if it had that kind of value, you Finner, right? So I guess the question is in terms of evaluating look, guys, it's a difficult Riddle Dalsalv, right? I think you're not even the 1st Golar management team to try to tackle that, right? So it's an ongoing question mark. In terms of is The strategic options of the carriers versus, I mean, even on this slide of crystallization of hidden value in FLNG, the potential structural transaction, I think you're meaning is The strategic transaction on the FLNG side.
As it stands today, what's the sequence look like there? Is it more likely that you find something to do with the FLNG assets is Before you can do something with the carriers, do you think it's more likely you find a way to get the carriers out the book first?
Is perhaps to answer where it stands right today, I think it would be shipping out and then GLNG, FLNG and upstream company. Yes. All
right. That makes sense. With regards to FLNG, I know that you guys put some more specs around Mark III in the deck. And at 5,000,000 tonnes, is it's obviously bigger than what you're looking at with the Hilli and the initial technology. I'm trying to compare that with is Fast LNG, which New Fortress has come out with recently, and you guys obviously have a unique relationship there.
To what degree should we look at those as competing technologies? Or have you guys kind of moved a little bit to a little slightly larger size of the market where you're if you're looking to build something that's producing 5,000,000 tonnes of LNG. Are you just sniffing around different projects than fab LNG would be?
I think we're excited about NFS Jakub as well. To the way we see it, they're highly complementary. So fast LNG is basically based on somewhat lower liquefaction on capacity. It obviously stands on the seabed as opposed to float. So to some extent, it's more suited for shallower waters.
Is on the other hand, a jackup doesn't have storage. So what you gain in terms of cost advantage of the liquefaction kit itself, Somal. That's partly offset by the need for an FSU lying next to it. So we think and as NFE has been very clear about publicly on their calls at several occasions. We, the engineering team of Golar, are assisting NFE is in developing the Fast LNG solution.
So we believe that the two technologies are highly complementary. Is we believe that the fast LNG has one very significant advantage in being fast. It's very suitable for certain geographies on shallow water, but we think for larger, stranded or associated gas projects at deeper waters, is Yunid, a floating unit simply due to water depth. And in those areas, we can either use our existing Mark is our Mark III design, which is based on a Mark I. And we're also looking into our former Mark II design, if you remember that one, which is where we basically weld in a midstream or a midsection.
So we like the fast LNG. We also like our FL and D. We don't see them as direct competitors. We see them as complementary sort of kit to is exploit the same very interesting opportunity in producing cheap upstream gas.
And the $2,500,000 is Bolkhar CapEx for Mark III. Does that how much does that involve a significant amount of kit for separation and is Friedman or do you still would you still need to find 5,000,000 tonnes of pretty dry and clean gas to utilize that technology?
That's mainly based is on sort of similar gas spec as the Mark I. Just because Mark III is a new build, you have significantly more deck space. Is so it is room to fit more gas treatment should you want to do that. But one of the attractions of our FLNG technology is is that we are not sort of custom made to one specific gas field. We're reusable and redeployable.
So we don't want to make it sort of too specific, is but we can certainly add gas treatment. We're obviously looking at that in light of the both associated and stranded gas fields is Weyar reviewing these days. And based on that analysis, I think the technology and the stripping opportunities we have on board should be sufficient to produce some of those fields. Yes. Is One more for me, I'll
turn it over. Again, on Slide 23, you referenced the target distribution of NFE shares to dollar shareholders. And forgive me if you mentioned is But do you have a ballpark approximation of what you think you would realistically look to distribute to the Golar shareholders Vestig.
I think as we say in the press release, it's linked to the relative share price of GLNG and NFE. Is linked to near term growth projects. And to some extent, it's linked to the absolute share price is Gee LNG. What we mean by that is if we continue to trade at very suppressed share price levels, it's is you kind of need to distribute more of the NFE shares to your shareholders in order to unlock the value. Albert.
If you can redeploy the capital in near term attractive growth place, that can be sort of 2 to 4 times EVEBITDA is, as we highlighted in the presentation on integrated upstream opportunities. To some extent, we think that's arguably even better than what investors can do if we were to distribute the cash. So for us, we will weigh the 2, but we will not sit on the NFE shares just to sit on the NFE shares. Is and we will not do it if we think we have a growth project 5 year out. Then that's not the right thing to do.
So then we need to execute way quicker than that.
Okay. Thanks for the time. I appreciate it.
Thanks, Mike.
Okay. Our next question is from Omar Napster from Clarkson. Thank you. Please ask your question.
Is Just wanted to ask about just the Hilli just a bit more to understand kind of the opportunity. When you think about the ramp up that you're expecting is You're having discussions with for ramp up in Q1, 2022. Is that based on effectively ramping up Train 3? Or is it both Train 34? Or is it really just sweating Trains 12?
Any color you can give there?
Is Okay. So we'll try to give as much color as we can. So basically, we're today producing flat out on Train 12. Is Ulf. But given that we have spare capacity and Train 3 and 4 are there and kind of well functioning, from time to time, we are Lai Singh, Train 3 and 4, for certain overproduction.
And we also switch between which trains we produce from to make sure that we maintain the is Shyp at a very high sort of capability. The primary reason for is sort of the slow deployment of incremental capacity on Hilli is the need to tie in additional gas fields to produce the gas. Is What we assume will happen is partial utilization of increased capacity. So if you want to define it according to your question, Omar, we're flat out on Train 12 and we're talking about partial utilization of Train 3. But in real life, we're sort of shifting between all four trains to keep the vessel truly operational, but that's how we see it.
Is Okay. Thanks, Karl. That makes sense. And is there any added CapEx that you need to take on if you were to start partially utilizing 3 in that context.
No CapEx and very minimal OpEx increase.
Okay. Is And
then just a follow-up final follow-up on this is the contract itself for the Hilli, it goes till 2026. Is I know it's still 5 years out, but given what's going on in the overall commodity space and is You're being encouraged investing upstream. Is there any talk of extending this contract? Or is it still too early?
Is I think where we're coming from is that we are not interested in extending that contract until we can get is Kate for the full CapEx. So we've obviously invested in 4 trains. We're currently utilizing 2. So if we were to discuss is extension on the current side. It needs to be for the full capacity or at least we need to be paid for the full capacity of the unit.
Is Simultaneously, we are increasingly encouraged by the integrated upstream model and getting the vessel back in 'twenty six could fit very well if we were able to acquire a gas field where we could deploy the ship. The other advantage of Hilli is that is She's obviously has a proven track record. So we know the ship works, and that's attractive is 2 people that want to continue to use our for tolling operations, and it's certainly attractive for us if we were able to produce our own gas reserve.
Is Our next question is from the line of Sean Morgan from Evercore. Thank you. Please ask your question.
I'm sort of intrigued by this concept of moving from pure tolling that you've traditionally done with the FLNGs to more of an integrated upstream is Model. And so would you seek to partner with an E and P or would you kind of step out of your comfort zone and seek to actually handle is The production and all of the operations that traditionally were done by your partner outside of the vessel.
Is I think we definitely see the advantage of teaming up with someone who's got upstream capabilities. We also see that there are is several sort of oil producers currently flaring or reinjecting associated gas, is and it's an opportunity lost for them and an opportunity for us to exploit. But if you were able to produce that gas, is not only will it significantly improve the carbon footprint of such oil production, it will generate very significant incremental earnings is to the owner of the field, very similar to that of Perenko in Cameroon. So is we most likely would target an area where we will have a partner upstream. Is but again, we were sort of looking into a few different alternatives these days.
Okay.
And then going back to your ESG report that you released, I was interested to see that 25% lower carbon intensity that you see versus, I guess, your terrestrial peers. Is that how do you sort of get to that number? And also would that sort of just take is Into account existing operations without the ability for terrestrial LNG producers to reinject is Liquified Carbon.
And is that something you
could do offshore as well?
Is Yes. So if you're referring to the AER number, which has now been reduced from 995 to 871, that's sort of CO2 per tonne mile. Is The way we've obtained that is with certain installations on boarder ships that increase efficiency. Is and when it comes to the FLNG, it's also increased utilization of the ships is Ted, reduce the carbon footprint on per MMBtu produced. So those are sort of the primary is Arias of Improvement.
We are constantly looking into other sort of engineering tweaks we can do to our existing asset portfolio is To Improve. We have an internal, what we call, the green team that's constantly working on improvements across the fleet, is and we continue to use Golar's innovative engineering capabilities to do improvements. And if you've seen on some of our previous reports, is we've, amongst other, improved the cooling of our FSRU portfolio is Mal Sholdt NFE, where we've been able to reduce fuel consumption by 15% to 20% by improved cooling. Is
Okay. So that's mostly
on the fleet though. So for the FLNG relative to a land based, is I think you termed it a mega project. So where are the savings there?
Is that's mainly due to the efficient liquefaction technology that we utilize and the fact that is there's no physical footprint of the ships that we deploy given that they're floating.
Okay. All right. Thanks a lot, Karl.
Thank you.
Thank you. Next question is from the line of Ben Nolan is Stifel. Thank you. Please ask your question.
I want to go back a little bit is To the Hilli and Perenco thing. As I recall, maybe the last quarter you talked about the or it was discussed That you'd effectively kind of given them an ultimatum that if I think by the end of this year, they had not restructured Contract that you were not going to renew your contract at the end of the
is Existing term. Any update on that?
I mean, how confident are you that they've sort of been called to the table here and That it will, in fact, see an increase in duration and volume.
Is I think we are very confident that we will find a solution. The primary driver of it is that it's money to be made from all sides of the table. That includes us. It includes Perenco, and it includes the gas offtaker, and it certainly includes the local government. So is with current gas prices, there's sufficient economics for everyone around the table.
And is to that extent, we should see increased capacity. There has been is Karan. There are some regulatory challenges that's been resolved when it comes to production caps. And there are also sort of is increased confidence in sufficient gas flow and gas tie in for increased production. And we are confident that is we can meet that increased capacity from basically early next year.
But as we've learned over time, nothing is done till it's done, but we remain very optimistic. And arguably, we believe we're closer than ever in having a is resolution in the not too distant future.
Okay. And they would is Sort of as part of that, it would need to see Q1 of next year because the time line has slipped a lot over the last number of years. Is Do you see the Q1 of next year when the volumes begin to tick up as sort of the hard start?
Is I think it's fair to say that it's not been enough. We've been extremely keen to increase utilization for Hilde, of course, since she was delivered on-site. I think for a period of time, we had a noncooperative gas price. Is Dan. There were certain regulatory challenges in terms of gas production cap that needed to be resolved.
Is and then lastly, it's a commercial agreement between the various parties. I think where we are now is that we're done with all but is the commercial agreement. I think part of us around the table already agree. So it's a matter of getting, I guess, is another signature or 2 on the agreement, and then we're done. So I think it makes a lot of is Svens, as I said, economically for everyone around.
It makes all the sense in the world. So we are confident that that's the timing, and we also think Seth. Both Gas Flow and Gas Reserves supports that, and we had some insight into that, which after we pushed hard for a long time. So we think that is that's the time when we can meet.
Right. And then lastly for me, coming back to something you talked a little bit about with Mike, is In terms of the fast LNG and sort of your helping the new Fortress guys is And the idea that it's complementary, appreciating that it is complementary. It's not the same exactly, but there are some similarities. Is I'm curious why you didn't do it yourself and have them as an offtaker or why that wasn't part of The arrangement, like it would be for an FLNG unit, it's is They're complementary, but it's certainly, I would think, within your capability to do.
Is absolutely. So first off, we're a 9% shareholder of NFE. We're very optimistic to that story. We think including is Heiko and GMOP. They have a very interesting sort of future.
We do see the benefit of that model is securing long term certain supply of fixed price gas, and that's part of our motivation is to ensure that our investment in NFE continues to or at least see positive momentum. I think in Upstream altogether, we are exploring different alternatives. I think Mr. Wes Edens said on is one of the calls in conjunction with the merger announcement that we might, over time, look at creating Esar of common upstream or common tolling company. I think when we are looking at is Upstream Investments and especially the integrated model.
One key attraction that we could see is that you fix is enough of the offtake to cover all of the costs of the project. And then you sit naked on the open capacity is and therefore, basically, I have a cash breakeven of 0 and anything over that is profit. So someone like NFE would obviously be an interesting offtaker after the acquisition of Hygge. Is Dey, have certainly got sufficient demand to be a sizable offtaker. So for us, that could be a win win.
Nothing whatsoever is carved in stone in that regard, but it's obviously a group that we enjoy working with. We think they have made a lot is Ove, sort of paved the way for downstream development and downstream penetration of is FLNG, and we do see some synergies on the upstream side.
All right. Great. I appreciate it. Thanks, Karl, and congratulations.
Is Thank you.
Thank you. Our next question is from the line of Greg Phillips from BTIG.
Is Karl, we're on the hour, so I'll just ask one question. Is So just kind of just looking for a little bit more color on the relationship right now is with New Fortress Energy. You're working with them. Are you getting paid a consultant? Are you getting paid like a fee for services?
Or is Do you have like a right of first refusal on a project or an ability to invest in that? Or is it really just, hey, we're working is side by side along them and if we can achieve something then we'll figure out how we can benefit from that. Just any kind of is Is there any kind of written contract in place?
Okay. So as part of the merger, and this has mainly been made public, but When it comes to the operation of the assets they acquired from us, we continue to technically operate, and there's also certain transition services is Doug. We continue to serve from Golar to NFV. For those services, we get the pre agreed fee. Is For anything incremental to those fees, we're basically paid on a consultancy basis.
But for is certain development projects. We see it as an investment both for us and for NFE and to improve the value of NFE. So I think it comes down to exactly what parts of the services that you referred to. But in general, is we get compensated for the hours that's invested into such projects. Is And then when it comes to cooperation beyond that, I'd say that we have a very good relationship is sort of on all levels of the respective organizations, and it's a bit more sort of a play as we go.
And then if we find an attractive solution, we'll see how we potentially can develop it together or if it makes more sense to do it on a stand alone basis. So is we're partly doing things together, and we're partly doing things separately. And I think we have a sort of fairly good is understanding of the various targets of the 2 groups.
Okay, great. And then just one okay, yes, that's perfect. Thank you very much for the time,
is Thank you.
And for our last question is from the line of William Burke from B. Riley. Thank you. Please ask your question.
Thank you. Hi, Carl. Hi. Carl, you talked about the Newmark design And moving away from tolling, the returns on both Hilli and Gimi are very strong. Is What is the return profile of the new design and then moving away from tolling?
I think a way to think about it is that is If someone is willing to charter something from you, they must make money on chartering it from you. So basically, the way we thought about it is, yes, we make good money on tolling. Yes, we will continue to do tolling projects where we see returns as sufficiently attractive. Is. If you just look on current gas price and the profit that is the people basically chartering FLNG from us.
What we make is almost peanuts compared to what they make. And with the cash breakeven support that you have is versus historical gas prices. We think it could be very attractive if we were able to produce gas for our own account or at least take part in that arbitrage. So for us, I don't think you should expect us to Hart, tolling fees altogether, but we've sort of taken another or a slightly deeper look and see that is the real economics are in upstream. If you can also have exposure to the is Sales Krejci of the gas.
Great. And then on the FLNG designs, you've got the is A Fest LNG plus the Mark series. Are you seeing any competing designs out there? Or are Are you pushing the envelope here by providing a faster, cheaper alternative?
Etrona. So it's got FLNG floating FLNG unit. Shell's got the Prelude and Exmar's got the Tango. So is there are certainly other people that are doing sort of floating liquefaction. I don't think anyone has is well, no one has delivered more cargoes than we have.
And secondly, I don't think any of the others have a cheaper is Kost Pertan, liquefied. And I think the combination of our cost point, our performance is Track Record. And sort of the fairly quick speed to market, I think we are very competitive versus peers. And I think the fact that BP has embraced our FLNG technology is a further testimony to the fact that they don't see a better solution out there.
Is Great. Thank you, Karl.
And there are no further questions.
Is Thank you all for dialing in. Thank you for the interest in Golar. We're very excited about the future. Is Faendly. It looks like we have some tailwind across our different segments, and we look forward to speaking to you all soon.