Ladies and gentlemen, thank you for standing by, and welcome to Goro LNG Limited 4Q 2020 Results Presentation. I must advise you that this conference is being recorded today. And I would now like to hand the conference over to your speaker, Ian Ross, CEO. Please go ahead.
Thank you, operator. Good morning, good afternoon, everyone, and welcome to the Golar LNG Q4 2020 results presentation. My name is Ian Ross, and I'm the CEO of Golar LNG. Today, I'm joined on the line by CFO, Karl Stavo. We're also pleased to have Tor Olav Troyim, Chairman of Golar LNG with us today and Stuart Buchanan, Head of Investor Relations.
Before we start, I'd like to draw your attention to forward looking statement on Slide 1. And clearly, there's a lot to cover this quarter, including the transformative deals with NFE for the sale of 100 percent of Hyogo and Golar's share of the Golar Partners business, which incidentally was approved by the MLP unit holders yesterday. Let me kick off by giving you some outcomes for Golar from these deals and some quarterly highlights before Karl takes you through the numbers in more detail. I'd like to explain 3 related themes. Firstly, why the Hygo deal crystallizes value for Golar.
Secondly, how these transactions will financially strengthen the company. And thirdly, that this is the first major step along our journey to simplify the group. If we turn to Slide 4 and look at the value created for shareholders, it's a good story. In 2016, Golar invested invested $290,000,000 into the HyGo JV, it's known as Golar Power in those days. The company built Latin America's largest combined cycle gas fired power station at Sergipe supplied by gas from the Golar Nanook and then built a repeatable downstream business around that structure.
When the deal with New Fortress completes, Golar will book a profitable gain of $760,000,000 based on today's closing price of NFE shares, which translates to 3.2x the invested equity. Turning to Slide 5 and looking at our strength and financial position and just going through the recent activities. We successfully completed the public offering of 12,000,000 shares raising just over $100,000,000 in December last year. Also in December, our FSRU LNG Croatia conversion project was commissioned, accepted and subsequently sold to our customer LNG Hervatska releasing total liquidity of $51,700,000 after repayment of $113,000,000 in debt. To bring this project in on time and within budget during 2020 is a strong performance and I'd like to acknowledge the effort of everyone involved.
We repaid the $150,000,000 bilateral facility and the $30,000,000 margin loan and then executed a new $100,000,000 credit facility and the agreements to sell both Hygo and our shareholding and Golar Partners to New Fortress Energy will deliver a further $131,000,000 in cash together with 18,600,000 shares in New Fortress. So the summary of all of that is that post both NFE deal closings, we will add $204,000,000 in cash to the company and that's after paying down a total of $193,000,000 in debt. The 3rd element is simplification and you can see from Slide 6 that the ownership structure is more streamlined. We will continue to provide operations and maintenance services to the NFE floating assets that they've acquired and we are left with 3 well defined business activities. On Slide 7, post transaction we will have an FLNG business with a contracted adjusted EBITDA run rate that clearly ramps up to $224,000,000 per year when FLNG Gimi comes online in 2024.
A shipping business with an adjusted EBITDA run rate over the last 12 months of $123,000,000 representing an average TCE of around $50,000 per day and the ownership of 8.9 percent of New Fortis Energy which is focused on the downstream part of the gas value chain. With the adjusted EBITDA, book value and net debt of each segment laid out this clearly, we feel that the underlying equity value becomes more apparent. Turning now to Page 9 and a run through of our Q4 2020 highlights. Today, we report an adjusted EBITDA of $78,000,000 on revenue of $118,000,000 for the quarter, which is driven by a further solid FLNG performance and an improved result from shipping. In shipping, we achieved adjusted time charter earnings of $52,000 per day, which is in line with guidance with the TFDE's earnings just under CAD54,000 per day after adjustments.
We ended the quarter with a shipping revenue backlog of CAD193,000,000 compared to €172,000,000 at the end of Q4 'nineteen. Our FLNG operations maintained 100% commercial uptime through the quarter with an additional 8,000,000 in revenue recognized as a result of overproduction on Hilli up to the end of 2020. And the conditional agreement has been entered into with Perenco, which may pave the way for drilling to commence this quarter. FLNG Gimi remains on budget and tracking to the new schedule. Heiko generated $38,000,000 of adjusted EBITDA during the quarter, which as you can see from the graphic is largely in line with the last couple of quarters.
So more detail on the business segments to follow. Let me now hand you over to Karl to take you through the numbers and more detail on financing.
Thank you, Ian. Turning to Slide 10 and the Q4 2020 financial results. We report operating revenue of $118,000,000 for the quarter, up from $96,000,000 in Q3, driven by a seasonal increase in our achieved shipping TCE, which came in at $52,000 for the quarter, a $12,700 increase from Q3. The FLNG Hilli continued its solid and stable operations with the mentioned 100% utilization. Following the Q3 announced revised agreement with Perenco where we removed the 500 Bcf production cap, we have billed Perenco $8,000,000 of incremental revenue for overproduction on the Hilli during 2019 2020.
Adjusted EBITDA for the quarter came in at $78,000,000 a beat against consensus of 70,700,000 dollars driven by the mentioned higher shipping rates and the Hilli overproduction invoice. We report positive net income for the quarter at $9,000,000 Our net debt position was reduced by $243,000,000 to $2,060,000,000 as a result of repayment of $80,000,000 under corporate debt facilities secured against HyGo and MLP Shareholders, a repayment of $112,000,000 on the LNG Croatia and an increase in our cash position of $101,000,000 from our December equity offering. This was only offset by $75,000,000 of debt drawn on the Gimi project. Our cash position at quarter end was 2 $54,000,000 of which $128,000,000 in unrestricted cash and $126,000,000 in restricted cash. The increase in restricted cash relates to receivables in conjunction with delivery of the LNG Croatia, which will be received during Q1.
We expect a further strengthening of our cash position following the closing of the NFP transactions. Turning to Slide 11. Assets on long term contracts are delivered from the yards. This is coupled with improving shipping rates and reduced shipping spot exposure through our revised shipping chartering strategy. We have seen a clear trend in our EBITDA over the last 5 years, moving from negative in 2016 'seventeen to a stable growth of EBITDA performance during 2018 to 2020.
We expect our EBITDA development to continue to build as we take delivery of the Gimi in 2023 as well as potential increased utilization and oil link related revenue from the FLNG Hilli. Turning to the NFE transactions and explaining them on Slide 13. On January 13, Golar announced 2 transactions where we're selling both FIGO and GMLP to New Fortress Energy. The two transactions are independent of each other, but was announced on the same date involving the same counterpart. Starting with the Hyogo transaction on the left, Stonepeak and Golar have agreed to sell Hyogo.
Golar will receive $50,000,000 in cash and 18,600,000 shares in New Fortress Energy for its 50% shareholding in yesterday, this represents a $760,000,000 book gain to Golar and 3.2x equity return over the 5 years we've been invested in Heiko as earlier described by Ian. On the GMOP transaction, Golar agreed to sell its 30.8% common unit interest in DMLP as well as its 2% general partner interest for $3.55 per unit. The bid price represented a 27% premium to the closing price of GMOP on January 12 and a 37.5 percent premium to the 20 day VVAT preannouncement. Golar will receive $81,000,000 in cash proceeds for its common and general partner units. Yesterday, the common unitholders of the MLP voted in favor of the transaction.
Both transactions are scheduled close during first half of twenty twenty one and all parties are working to close as efficiently as possible within that time window. Turning to Slide 14 and a bit of rationale as to why we decided to do the transaction or both transactions, again starting on the left with Heiko. NFE and HyGo share a vision of delivering cheaper and cleaner energy to emerging markets. Once we filed our F-one and later retracted the IPO, we had several suitors around the company. But for us, it's important to team up with someone that share our vision, especially given that we maintain equity exposure in the combined entity.
We think the price that was achieved was an attractive both from a price and execution risk versus an IPO alternative. The transaction crystallizes the value of Heigl to VLNG shareholders whilst maintaining exposure to the attractive LNG downstream rollouts. We believe in industry consolidation, and this will create the leading LNG downstream company globally. We also see significant advantages in a larger entity with better access to growth capital and a more diversified geographical exposure. Turning to MOP on the right hand side, we believe the price, as mentioned, represents an immediate uplift to equity holders, but also saw significant benefit to other stakeholders, including unsecured bondholders in the MLP.
By selling MLP, we removed the refinancing and the recontracting risk of the MLP asset portfolio. This is execution of the announced strategic alternatives where we were looking to better find strategic alternatives for the MLP contract backlog and asset base. We had a unanimous board representation for the bid, and we also have recommendations from investment independent investment bank as well as proxy advisers. With that, I'll turn it back over to you, Ian, to run through shipping.
Thanks, Karl. If we turn to shipping on Slide 16, the quarter commenced with JKM around $5.15 per MMBtu and quoted TFDE headline spot rates of around 59,000 a day, a combination of rapid resumption of U. S. Cargo, strong winter demand from Asia and then some unplanned plant outages pushed JKM up to $15 which in turn drove TFDE spot rates to around $160 per day by the end of the quarter. The cold winter conditions saw JKM break 30 dollars per MBtu and lack of promptly available ships created a further spike in the rates north of 250,000 a day in early January before dropping back below 100,000 per day by the end of the month.
By end of last week the TFDE rates had dropped back into the 40s. Our Q4 utilization of 77% was disappointingly low due to increased commercial waiting time between 2 spot charters, a mechanical failure and the residual dry dock time on Tundra that we mentioned last quarter. But despite those challenges and the fact that we fix the majority of the TFDE's own term business, we did manage to enjoy a couple of higher priced charters that will also help lift the Q1 TCE. Our shipping strategy continues to prioritize long term utilization over short term opportunities and you can see from the table on the bottom right of the slide that our annual TCE continues to improve. The TFDE fleet achieved a 2020 full year figure of 50,000 per day for the first time with a similar annual high of 90% fleet utilization.
And on Slide 17, you can see that we expect utilization to rebound to around 90% in Q1 2021, which with the backlog of 193,000,000 in place at the start of this year and the fixtures that we have in place to date is indicating a TFDE TCE of around €60,000 per day for the next quarter. The higher LNG pricing over the last few months has moved the industry momentum back to upstream. So let's have a look at floating LNG production on Slide 19. As we've mentioned Hilli performed well 100 percent commercial uptime and recently offloaded the 52nd cargo. As Carl mentioned with Brent currently above CAD60 per barrel, the oil linkage kicks in.
And if you remember, that means that for every CAD1 above $60 this equates to $3,000,000 in additional profit over the course of the year. Our discussions with Perenco on a potential LNG production volume increase within the remaining term of the contract are progressing positively. Should we conclude these discussions successfully, there's likely to be a new risk aligned tariff payment for the additional volumes. The next step is to finalize the agreement between Golar, Perenco, SNH and the current Trainers 1 and 2 offtaker, which would allow drilling and testing campaign to commence in the next few months. Any change to the production agreement will likely see the increased volumes in 2022.
Turning to Slide 20 and the Gimi project in Singapore, where we're engaging a construction workforce of around 2,500 people on a fairly consistent basis per day that is. We've worked over 7,000,000 man hours on the project to date with a strong safety record. The 4th dry dock was completed without incident and you can see from the pictures we've now attached the stern most sponsors to the hull. Work continues on outfitting the remaining sponsors which will be attached at the 5th dry dock planned to commence around the end of this quarter. On FLNG Business Development, we continue to respond to new tolling inquiries and are developing of these with customers.
We're carrying out some more engineering work in order to tune our pricing and delivery for the larger capacity newbuild 5,000,000 tons per annum Mark III, concurrent with examining possible redeployment of Hilli post-twenty 26 or a potential mark conversion of Gandria. We are reinvestigating both integrated upstream solutions and also the potential to use smaller units with a shorter production lead time to access associated gas being re injected or flared. Turning West African undeveloped gas into use power via LNG is very much part of the energy transition and we think is also good business. By example, if you look at the graph at the bottom left of Slide 21, which was price spread between West African FOB LNG delivered at say $3 and the forecast LNG pricing at 6. Then the important thing here is that every $1 gas price spread translates to about $250,000,000 in operating margin.
So for a 5,000,000 ton per annum facility, a $3 spread as shown here equates to an illustrative operating margin of CAD750 1,000,000 per year. So it's 3 different development fronts, Mark 1 conversion, Mark 3 new build and taking another look at integrated solutions with lots of potential across all of these fronts. Moving to Slide 23, here we summarize some of the initiatives being considered to capture the value spread between our share price and the book value. I'll leave it to Thor to comment on share buybacks and distribution of N and B shares as they are board matters, but let me highlight that we do intend improving debt financing of FLNG Gimi project. As we approach COD, we believe we can get debt financing at 5 to 6 times EBITDA, which is between €1,000,000,000 and €1,300,000,000 We will examine the potential to crystallize value in FLNG assets through 1 or more structural transactions and we plan to refinance the convertible bond during the second half of this year and will consider using exchangeable bonds against New Fortress shares rather than GLNG.
So summarizing our key initiatives to create value on Slide 24. On shipping, we'll continue to maximize full year TCE and we'll continue to explore separation of the assets. On FLNG, we'll focus on completing the Gimi project safely on time and on budget. We'll continue to progress the Hilli volume expansion and to develop our Mark III newbuild and seek deployment for both the Mark III and the Mark I conversions. Finally, on FLNG, we'll work on integrated upstream LNG developments.
We already have a good relationship with New Fortis and we'll work to create revenue synergies and collaboration in downstream. And of course, we will work to we will continue to examine the various pathways towards further group simplification, specifically through splitting the shipping and FLNG businesses. I'm pleased to now hand you over to JLNG Chairman, Tor Olav Troy to take you through his thoughts prior to Q and A.
Karl, thank you. I think maybe Karl, you're the best one to take it to next slides, and then I will come back with final comments on the LNG. Okay. If you're done that, okay, I will go straight into the risk. I'm sorry for this little confusion.
What we have learned over the last 7 years is that this business is pretty unpredictable. We don't know where prices go. I think we have been through the last 7 years, we have seen oil price above $100,000,000 We've seen them under $37,000,000 Just in the last year, we have seen gas prices and they're around $75 per MMBtu and we've seen them above $35 So expected, however, it's pretty hard to plan for it. The boss of Total, Patrick Boyan, went out this week and said that hydrogen market looks like the LNG market looked 40 years ago, promising, but it's going to take time. I felt the pain of waiting 15 years for LNG.
We are entering into this market 20 years ago, and I was probably 15 years too early since the major controlled the production and kept LNG prices linked to Brent burn parity in equal 16% of Brent. But the big volume came from Qatar, Australia and U. S, the majors couldn't any longer control the prices. The prices went from parity to around 10% of Brent today. So effectively, gas is today 30% cheaper than crude and around 50% cheaper on diesel.
And not only is it cheaper, but it's also cleaner. CO2 reduction is one thing, but SOx, NOx and at least particle has probably killed more people on CO2 for the time being. We started work on an integrated role in 2015 when oil price collapsed. We did 2 efforts. We started 1 LNG and we started Golar Power.
Sadly enough, our partner in 1 LNG, Schlumberger, withdraw and we didn't have the capital to do it alone. It was tough times to make money in the upstream business. Since that time, we have developed a downstream activities where we together with Stonepeak invested approximately $600,000,000 and we built the biggest power station in Latin America. We underpinned which was underpinned with a very good PPA. We developed some super attractive terminal permits, which now coming into play.
And we have now put this company into NFE with making 3.5x money in what's have been a very tough energy market. But the merger of Heiko into NFV is not the same. What we are doing as a large shareholder in NFV is to create a real powerhouse for downstream LNG activities. While all the majors talk about electrons and what they're going to do, New Fortress is not only talking, they're doing it. So if you can't beat them, join them, and that's what we decided to do.
We share a clear vision with the management and Board of NFE to deliver cheaper and cleaner energy to the emerging market. Gas and LNG is due to the cost structure and the amount of research likely to trade at significant discount or for the foreseeable future. However, in order to feed these downstream activities, we need molecules. If you're going to buy from the majors, we are going to give them the money. Let's look a little bit from the gas market that developed over the last 6 months.
And then you will see on the next slide, you effectively see we came from price, which is the blue line of around a little bit less than $5, $5.5 We went all the way down to $2 and now we're up in more than $6 again. The scratched black line is the curve for Brent and similar. So there you see effect the price measured in MMBtu in the spread between Brent and gas. So you see in the summer, there was tremendous upstream margin, but it was negative there was tremendous downstream margin, but negative upstream margins. When you look forward for the next years, we have then put the forward curve for Brent and we put the forward curve for oil.
And you will see oil price indicates a gas parity around $11 going down to around $9,000,000 $9.5 over time. The gas curve for LNG is flat around $6 So there you see effectively the profit. And just to tell you how these different colors are stacked up, the $1 is what you need in order to develop the upstream's reserves in Africa going into an FLNG vessel, including return. The $2 is what it takes to liquefy, it isn't return. The green dollar is the spread you have up to the sales price of LNG.
The light blue on top of that, which is a dollar, is affecting the shipping cost to bring it around the world. And the light green what you then can take out in the downstream market, thus to burst parity of crude. There is more to be taken out on that market because diesel is, of course, much more expensive than crude and diesel is to a large extent what we're competing with LNG. So what you also can see on this curve is the curve is pretty flat around $6 which is an interesting observation. And if you follow the market, you saw that last week or 2 weeks ago, the Qatar is decided to go ahead with the biggest investment of an LNG trains ever in the world in order to produce.
And it seems like their target is to deliver LNG around $6 and effectively thereby make all development in U. S. More or less uneconomical. It's a very interesting strategy, very different from Saudi who let oil price rise and effectively open up for shale. I think it looks like the Qataris have done and said we can supply this market with a very, very healthy profit at the level where U.
S. Cannot be developed. If you look at the summer, there was, as I said, a negative profit in producing LNG and the real money was upstream. Now it's balanced out again. As you can see on the second graph today, you see that the theoretical spread in the upstream today is around $3.80 while the downstream spread is today $3.20 just up to kind of crude and then there's an additional on top on that.
So how can we take out this spread? Let me go on to the next page. We, Hula, have spent 10 years working with a Korean shipyard to develop a 5,000,000 ton vessel. We are now at the stage where the design is more or less completed. You see a drawing over there.
And we also now have received a proposal for a turnkey contract from the Ardagh. Such a vessel is likely to cost around 500,000,000 dollars per production ton, so effectively all to get a $2,500,000,000 ready install. And in order to fill such a vessel, you need reserve base of approximately 5 Tcf for 20 years, and you can stay there for 20 years. It's my opinion that proven gas reserves are some of the most underpriced assets in the world's market. You can buy them for cents per barrel and gas is so far for most operator problem.
It's either flared, reinjector or left in the ground because no one had the technology to develop it. Shell has spent $15,000,000,000 to build Prelude and it has so far just delivered a handful of cargo. It's been a catastrophe. Golar and Golar's fantastic people have cracked the nut with a vessel cost of $1,300,000,000 we have now delivered 52 cargoes even if we only produce 50% of our capacity. I'm proud to say that Ian and the team have delivered 100 percent commercial uptime since we started this thing.
We have not been deducted $1 in off hire. It's a very different story. If you look at the numbers, what we can take out with 125,000,000 ton vessel today, you will effectively see that if you use that and take out the spread on 3,800,000, that vessel can make a super profit of 950,000,000 Then you have already included the return for the vessel itself and the upstream activity. If you then pump that into the MFE pipeline and take off the $3.02 in profit, there is another $800,000,000 to be taken out. So effectively $1,750,000,000 can be made in 1 year by taking out the spread against the real production cost and what we can sell this for in the market today.
I think both Beth Edens, who runs New Fortress and the Board of Golar are extremely excited about this thing. We want to move fast. We want to leverage unique position we have. And in many ways, we are in process of putting together the 1 LNG ID, which we had when our price was high last time and make the company more integrated. That doesn't mean that all this has to happen in 1 company.
I think we already have the downstream activity in NFE. We might see an FLNG company as a precedent and we might see a shipping company then together up. But we will work together to take up this spreads on a donkey basis. And we might do it in the way we do it with Perenco, where we effectively have oil price kicker upside. We effectively make more money the higher the prices go or we can do it on a split tariff basis where we effectively share risk with the producers then.
It's been a challenging year behind us, but I'm looking forward and I'm excited. And I'm excited when I see the results, which kind of being presented there from 2015. You see the trend in the EBITDA, which is increasing dramatically. And you also see that, that trend will continue in the years to come. We have now fixed the balance sheet with the 2 transactions, both the equity raise and the sale to NFE.
That clear signs that L and D carrier market is strengthening the years to come with very limited deliveries coming in 2022 and 2023 and no longer trades. We have together with NFV created what is the leading platform for distribution of LNG. We have LNG, Gimme coming in 2 years' time. And they are effectively in addition to that, we have Hilli where we are now talking about additional production coming from Train 3. And we also have the oil derivatives coming in, which will give us money at current prices.
At $67,000,000 which we are today, that's another $21,000,000 if it stays like that. There are interest, as Ian said, no, every day almost for people who want to utilize our proven LNG technology to either fix long term contracts or for us to take up some risk and participate in that $1,700,000,000 of super profit with Scalar. I again apologize to our shareholders in a most humble way for the performance the last years. It's been a tough market. And in this tough market, we have not been delivered share price.
However, we have, as expressed in the NLP transaction, created significant value for shareholders. And I think we built a unique platform for making money in this energy transition we know We don't have to wait as the guide in total says, 40 years for hydrogen to happen. Gas is the natural substitute to a grid filled in more and more renewable energy. I mean, we're talking about making cash tomorrow instead of in 40 years. I hope the simplification, which we now have gone through is appreciated and it can help us take out that value gap, which effectively Ian is talking about to see a share price rating around 11 and to see book value of 22 with significant extra value in the FLNG side, triggered the Board to start the buyback program.
So we start effectively with SEK 50,000,000 just after the completion of the NFE transaction. But most of all, we want to build a company which adds much leaner cost structure and a much quicker response time than the big majors we're competing with. They are notoriously slow and here there is a massive amount of spread to which we have now all the different tools to gather to take off the vent from the gas grid. In the meantime, shareholders should expect a significant increase in EBITDA just based on the order backlog that we have today and the contracts coming on. I'm excited and I hope that you again can look at Golar as a positive investment, one which is very well positioned for the energy transition which we're going to, backed by hard cash, not by illusion or no IDs.
Thank you.
Thanks, Toolev. I'd like to now hand back to the operator for
Your first question comes from the line of Ken Hoexter from Bank of America. Please go ahead. Your line is open.
Hey, great. Good morning. Thank you for the great details. A lot to unpack. So Ian, maybe I can start off with just the general.
You kind of talked about the 3 new breakdowns in looking at the flings, but one of them is now holding NFE and the downstream. Maybe you can talk about your view on the future. I mean, you've already detailed the desire to sell the LNG carriers or maybe reorganize that into its own structure and that's been something you've worked on for a few years. So maybe talk about your thoughts on the downstream exposure now with Dana Fee Holdings? I
think I mean the way to think about it first of all is our investment thesis right now is there is fundamental disconnect between the current equity value of the company and some of the parts of the business. So we're still on this journey to simplify the business and realize value from these individual parts of the business that should create overall value for shareholders. I think what we try to lay out today is the fact that we've got simplification in 3 businesses in that exposure. With FLNG, we've got our mark 1, our mark 2 and as Tor very enthusiastically outlined for us, we're revisiting this integrated operations because of the spreads that are available. It was something that when I joined the company nearly 4 years ago, I was very excited about and sad to see that part of the business go and I'm very enthused that the potential for that to come back.
So that's FLNG. In shipping, what we've done is we've stabilized the downside. If you look back over the previous years, we kind of hung out for the big numbers as they came through, but at the cost of utilization during the leaner months. And what we've put in place is a shipping strategy that will allow us to put a floor on the loss, if you like, from ships depending on how you look at it and allow us to play on the upside through 2 avenues. 1 is we have some index linked contracts.
So when the rates go up, we can participate there. And we do have a couple of ships available to play in the spot market. Now in shipping, we're pretty well covered for the course of this year. Depending on who you listen to, 2022 can be a very interesting year for shipping in terms of the relative tightness. And I think we're extremely well positioned to make a call on that halfway to 3 quarters away through this year as we look to our shipping strategy for the years coming.
So that shipping and I think that flexibility of the shipping strategy will give us choices on what we do with ships whether they're in the company, out of the company because I mean I don't think we're in a position to comment at all on how we do that split because FLNG could seek external investments and as Thor said we may set up FLNG co in which case shipping is left or we could do it the other way around. I think what we're trying to outline is the flexibility. In downstream, what we have is a collaboration with New Fortress. We will be operating and maintaining the vessels that they've got. And if you think about 2 things, one is that we currently we have a shareholding of 9 percent of New Fortress.
So we really want them to do well. We're encouraging them that. But secondly, as that business grows and they want to take on new vessels, there's an opportunity for us to participate that in providing some of those vessels. So I think what Thor was explaining is that as you look at that spread, there's enough business and work around there for it to be shared around people that are prepared to go after it and realize that value. And that's where we're focused without being particularly definitive on the at this stage of what it will actually look like.
It's a bit of a long answer, Ken, but hopefully that kind of got the point across.
No, it's helpful, especially given how much you have going on and what you've just accomplished with the and congrats on getting the hygote and GMLP sales. I guess for my final or follow-up and final question would be kind of you talked a lot about the FLNG developments. Maybe talk about what happens after the next one, right? What's the timing? Or are you still in discussions or progress on the third one?
And given without LNG rates have tracked, what are your thoughts on the timeframe for that?
So my thoughts are that things progress well. We're in active work with various people in various stages of development. And this is if you think I guess the point I'm trying to make, we've got 2 parallel strategies. We've got our tried and tested strategy that on the back of Hilli, we realized we had to have a counterparty for a tolling FLNG that really has to be a super major with decent balance sheet that can support the financing and offtake. They are the 2 critical things.
The technical part is for me is a straightforward, but it's getting the project up from an offtake and finance point of view. So that requires a super major. What we're talking about now is going back to not necessarily tolling but participating more actively in the integrated environment as we were trying to do with in the one LNG days and work out a position whereby we can participate in that which will move faster and it won't require necessarily the same degree of complexity around offtake and therefore finance. So without being more specific than that, we've got 2 active areas. We've got the Mark I and Mark III in our tolling arena.
And then with the same time, we've got this integrated idea that we're reinvestigating right now.
Your next question comes from the line of Sean Morgan from Evercore. Please go ahead. Your line is open.
Hey, Ian. How's
it going? How's it going?
So we think about Perenco, it's a little bit black box for us as to how they're making their decisions in terms of increasing development at that field. You have the overproduction cap removed. So I guess one question is how much higher can you go in terms of overproduction on the existing two trains? And then also what sense do you get in terms of what Perenco's reservations are? What kind of oil prices they're looking at to sort of make that investment and activate the other two trains?
Just what other information do you have that you could share?
So on your first question, the $8,000,000 that we've invoiced for overproduction, that's from the commencement of operations to December of last year. And that's just a simple factor of dynamics in production. What I would say is that the relationship we've got with Perenco from the operational point of view is very good. And if they've got excess gas or we want to meet a cargo and the timing changes, we end up going up and down a little bit. So that is I think it's just nice acknowledgment of the overproduction.
We are now getting paid for it, which I think in the absence of any other agreement, we've continued something in the order of the same amount. But in terms of the deal with Perenco, there's a couple of things to understand. One, it's Perenco and NNSNH in Cameroon, we have to get seek agreement on. These discussions do take time. Secondly, that I think the momentum has changed.
And if you look back a year at the gas pricing and the ability to get an offtake agreement structured that's attractive, it's very hard to do that on the lower gas pricing. I think time is with us now to get that our momentum and pricing is with us now to get that done. And these discussions just take a bit of time. And all I can report is positive progress. And when the deal is done, we will be the 1st to let everybody know, and we'll be very happy about that.
Until that deal is done, there's not really an awful lot more I can say.
Yes. I think what we can add on is that there are now some conditional agreements within several of the parties as stated in the report, which might there is a good likelihood that we will see drilling in the reservoir pretty quickly in order to go and effectively drill the production well needed to bring more capacity overhilling. But nothing is set in stone, but at least I think they made significant progress over the last 6.
Yes. And so my second question also sort of relates to the Hilli and the FLNG business. And I actually like that Slide 23, where you kind of point out what I think a lot of people are thinking is that the valuation gap. And so one of the things that people are trying to get their head around as they we talk to investors is the value on the existing assets. So the Hilli, what are the outs that Parenco would have at the end of the life of the contract?
Because it's obviously not in most of those models, but people kind of view it in terms of the underlying value of that business like that already exists. So what would have to happen for you to either move the asset or re contract with Perenco and sort of maybe just a little bit of visibility on what like the end life of that contract looks like?
So that contract expires in the middle of 2026. It is an 8 year 500 Bcf gas contract, which if you remember, we took the volume cap off it because of the overproduction. It's now an 8 year contract. So that contract will end at that stage. We've got plenty of these other opportunities that we've been talking about or looking at and particularly the integrated opportunities it would be an ideal fit for Hilli.
So we're not focused necessarily on extending that contract with Perenco at this stage. But what we are focused on is maximizing the value of deploying Hilli wherever that may be. So for it to stay in Cameroon, it would obviously have to be a pretty decent deal for us to consider doing that.
We have informed Prenco that we are leaving in July 2026. We're not willing to extend the contract. So because we think we have much better alternative elsewhere. So if they have more gas, then they have to come back to us. They have no contractual contractual rights whatsoever, either an optional contractual to extend this day out to July 26.
Okay. So if you were going to move it, you'd probably announce a new location maybe 24 months or before the deadline?
Yes. It takes 2, 3 years to develop. So I think we know that vessel is almost the same delivery time as a new building right now. So and it has the proven record. So from that point of view, it's probably more valuable than a new building.
So I think we are this vessel is, in many ways, a spot FLNG vessel as of today. That's the lead time it takes.
Okay. Thanks,
Dore. Thanks, Sean.
Your next question comes from the line of Craig Sie from Tuohy Brothers.
Congratulations on the progress. Hi, Craig. I've got kind of 3 quick ones here. Should the Prenco upsizing come to pass for the remainder of the 8 year contract? What are the prospects for favorably refinancing Hilli?
And can you elaborate on potential for securing improved shipyard and financing terms? Should you go down the route of cookie cutter $2,500,000,000 Mark III projects versus Hilli and Gimi style conversions? And finally, if you do go down the route of the integrated FLNG model you've shared, how do you think about the debt equity mix there?
Karl, do you want to have a
go at that first, please?
Yes, sure. So when it comes to potential refi of Hilli, you're right, Greg, that obviously, we have a quite weak amortization under the existing financing. And we think if you increase the EBITDA on the unit and the backlog itself, we should be able to improve the financing to more favorable terms. I also think the more clarity we can give to any potential financiers about alternatives for Idlib hosted for Enco contract that Thor hinted to will help us in terming out the amortization profile. So to try to answer your quick answer shortly, yes, we think we can refinance the unit if we up the capacity.
One thing is, of course, the EBITDA generation for the remainder of the Perenco contract, but equally important is derisking alternatives after the existing Perenco contract. And with the gas the current gas price and the gas forward price, we see a lot of support for such derisking, and that should help us in turning out the facility. I think, Ian, do you want to comment on Gimi and yard financing?
I think I'm just repeating what I said in the prepared remarks. I mean, we believe as Gimi heads towards COD, there is opportunity to refinance that vessel of 5 to 6 times EBITDA and €215,000,000 EBITDA that's €1,000,000,000 to €1,300,000,000 at favorable terms. And we'll I think we'll progress our work on that. Again, these things take time to put in place. But I think that would then put us in a good position on with Gimi, certainly around COD, maybe before or maybe slightly after.
But we think that that's perfectly viral.
When it comes to the newbuildings and the whole reason why we go to Korea instead of Singapore is that the Korean government are much keener to support their own agency than the Singaporean. So if you do a turnkey contract in Korea, I think you can probably end up with payment terms not far from what the ship business get for shipping thing, which means 3x10 and then 70x by delivery. And that, of course, will change your cash flow dramatically compared to where we are today. And I
guess to the last question, when it comes to integrated project and the capital structure on how we're looking to that, I think we'll review that on a case by case basis. Some of the early discussions we're in on that front involves partners. So it has to do with the specific project, the geography and the interest of the partners that we will develop with. In some of these instances, we are also talking about liquefying associated gas. And in such projects, you obviously have other partners that is willing to take the oil bit, and you're basically taking care of a problem for them because today they're either flaring or reinjecting the gas and without being able to monetize it.
So this is very much back to the sort of one LNG thought process and what we want to try to utilize.
Great. Thank you.
Your next question comes from the line of Randy Givees from Jefferies. Please go ahead. Your line is open.
Thank you, operator. Howdy, gentlemen. How's it going?
Hey, Randy.
Hi, Ron.
Good. Hey, now following the completion of the sale of Hyogo to NFE, I guess assuming the deal closes in April, let's call it, when does your lockup period expire? And can you give a little more details or timeline for decisions on what to do with the NFE shares, selling them, taking a margin loan against them, kind of in a larger block, dividending them out? What are some options there?
Hey, Randy.
So this is Karl. Yes, we have a 90 day lockup from the closing of the transaction. So whenever it closes plus 90 days and then we are free to do whatever we want to do after those 90 days. We are exploring alternatives. And I think it's fair to say that we receive a lot of inbound proposals from investment banks and other financiers.
Alternatives for that ownership block, which is worth around $1,000,000,000 or close to $10 per Golar share, If we could either margin lend against it on margin loans, you can typically see proceeds of at least 60% LTV. We are looking at at alternatives to refinancing the CB involving the NFE shares, which may or may not include an exchangeable. So instead of doing a convertible to the LNG shares, we do an exchangeable to NFE shares. We are also looking at other alternatives, but a primary focus for us is what we have outlined on Slide 23, closing the valuation gap, and we will push forward initiatives to close the gap, and that will very likely include distribution of parts of our NFE holding to DLNG shareholders.
Got it. And then a quick kind of detailed question. If you were to sell the shares prior to, let's call it, next April, would there be any kind of short term capital gains on that? Or how would that work in terms of your ownership of the shares? Is it once you collect them?
Or have you had them historically? How would that work?
There will no with our structure in Bermuda, there will be no tax on the state of those. But I think it's important to say that we intend to be partners with NSE long term. NSE is an important part in order to build that integrated model we have. We will either directly or indirectly be long term shareholders in NFE. We're not there to cash in that $1,000,000,000 We really believe in what the NFE is doing, particularly with the current close to $500,000,000 we have injected into the company in EBITDA now.
On the EBITDA, we have a fantastic platform to continue the work. We successfully started with HIGO and they successfully started NFE. I think that's just the financing with NFE, we have now with unsecured debt and with a market cap of $10,000,000,000 deduct a little bit because I know we have seen this deal is to make this into $100,000,000,000 energy company, But deduct a little bit from it, but we really believe that we have a unique position together with them. And we want to be partners. So you will not see a block sale of $1,000,000 after 91 days, if that's what you're really asking for.
Not as directly, but okay, noted. And then last question, Slide 24, you mentioned you are seeking industry consolidation for the LNG carriers. Now clearly, they are buyers for LNG carriers as most recently seen with the BlackRock taking GasLog private. So I guess what are your plans for the LNG carriers? Is the spin off still on the table in the near term?
Or are you pivoting to maybe be a buyer to further consolidate the industry?
I can kick it off and then Iain can chime in as we
go along. But
as we have communicated to the market previously, we have been looking at alternatives to consolidate the market. From an operational standpoint, we've previously seen the industrial benefits of having a larger fleet through the Cool Pool, which we have together with GasLog and Dynagas. And as you can have seen from the shipping press, we've also been involved with different sort of consolidation efforts that has not yet materialized. We are happy to see the start of some consolidation with BlackRock stepping into GasLog. And I think the combination of that transaction and the NFE and Golar transactions, there's now some movement in what's been a very rigid corporate platform within the different LNG shipping companies.
And we are looking and discussing with potential partners. We don't rule out any alternative. For us, what we believe is that over time, shipping in FLNG most likely does not belong in the same entity, and we would look to further simplify our corporate structure, number 1, to create pure exposures to shareholders and again with the key motivation to unlock the valuation gap.
Yes. You covered it well, Karl.
I have nothing more to add to that. So that's good.
Noted. Nicely done. Well, thanks again. Good quarter.
Cheers, Randy. Thank you.
Your next question comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.
Thanks. I wanted to dig in a little bit more on the potential for incremental FLNG. The Mark I, the Mark III, now you've also sort of outlined the possibility of doing a smaller, maybe more expedited version. Sort of 2 parts of this. First of all, in terms of either sort of the integrated model or the tolling model, does there seem to be a favorite or something that is most interesting at the moment to your counterparts?
And then secondarily, especially maybe with the integrated model or the smaller scale model, you're looking to do it more on an expedited basis. How quickly can you is it realistic to think that something could get off the ground in a more speedy way there?
So maybe I'll take the second one first. The way the secret with the integrated and the smaller model is to get a hold of long lead equipment. And if we can see a string of opportunities ahead of us, it allows us to engage with the supply chain directly and put production slots in place for the main equipment such as the main trigenic heat exchangers, the refrigerant compressor strings and the like. So I think that's one of the things that we're looking at. And the second thing is what type of facility do you put it on?
So we're examining different models around that. And I think as we put all that together, for me, it's a case of going ahead with that supply chain management and ordering or preordering or getting a position where we can get a slot without necessarily putting down a lot of money and showing the supply chain about that sort of string of opportunities going forward. So that's how you do that in a shorter period of time. The actual construction time will depend on the thing that it's sitting on. And so we're not kind of concluded on that yet.
But certainly adopting that cookie cutter approach and doing repeat orders allows us to advance, do the design once repeated and then not have to go through that protracted procurement process, put in place supply agreements and sort of repeat. So that's how you do that. And then on the second one, I don't think I'm going to comment on favorites. But what I would say on the Mark I and Mark III, we keep saying it is that the amount of interest coming through the door is increasing. And we've been saying for the last probably 18 months now that as LNG prices increase, we will get further increased interest for our products because A, they're proven and B, they are cheapest and fastest to market.
And importantly, their carbon footprint is proving to be very competitive. So without answering your question directly, we've got more and the interesting thing is that this number that we're looking at, it changes and rotates as customer processes ebb and flow in time. And I think we've got to some extent go at their pace, which is why Toro's frustration with that is one being one of the other reasons we're kind of relaunching the sort of the integrated idea when we can set our own pace.
Right. Okay. And then just to pivot a little bit to the downstream side, obviously, with the high go and NFE consolidation and everything, you're sort of still involved but less directly. Although you still have the tundra and that's really where my question lies, how should we think about that going forward? Are you likely to be participating in tenders for FSRU contracts?
Or is that sort of available or sort of spoken for as it relates to the consolidated HyGo NFE? Or what are your plans for Tundra, I guess?
So Tundra, as you know, is operating the Kufu right now as a carrier. My view of Tundra is that and this again, this is very consistent with what we've been saying for the last months, if not years. The value in FSRU to us is not to just put her out onto charter as an FSRU earning a marginal return. The value for us is to somehow get into that integrated downstream gas value chain. And that's what we look to do.
We haven't really made any progress on that yet. I think we'll let the 2 deals with NFV consolidate, close, and then we can sort of take our heads up and start to think about some of the other things. And what we do with Tundra will obviously be one of those.
Okay. Thank you.
I think what's important to know where, of course, the relationship to NFE goes further back. We were the people who delivered effectively the FSU for them when they started in Jamaica. We are the people who also do the freeze for them in Jamaica today. In the last couple of months, after this deal have happened, I'm sure we are on the phone to these guys kind of couple of times a day. And half of it is, of course, to close the transaction, but the rest of it is to develop business together.
We want to do business together. And I think if they see an opportunity to put Chundra somewhere, we'll work together with them on that. And that's for us a smarter way. We own 10% of the company than to just put it away on the charter rate, which some of our competitors are offering these days will not give us a good return at all.
Right. Okay. Thanks.
Your next question comes from the line of Liam Burke from B. Riley. Please go ahead. Your line is open.
The execution on Hilli in terms of performance has been very strong. You've got Gimi coming through plus the 2 Mark projects. Have you seen any competitive response in terms of other alternatives to some of your proposed projects as you go forward? No. So I
think we talked to the biggest player in the kind of FPS oversight yesterday, and they have plans for FLNG, but I think they're pretty much given up on it and that was probably the most serious competitor we have.
I think there are plenty of people that are looking to do it. And I think there's one thing building an FLNG unit. There's another thing building it and safely and reliably operating it for 2 or 3 years. And the knowledge that we've gained in that operation space is quite unique and I think very valuable from Golar's point of view.
Okay. You have monetized your assets or harvest them at nice returns. The FLNG is a or the Hilli is a nice example of high return projects. How do you map out the balance between harvesting and reinvesting at high returns as the company unfolds over the next few years?
I think one of the challenges with FLNG that we've talked about is the time it takes from the FID, the final investment decision, to actually generating cash. And so what we've been doing with the downstream business is looking at ways to supplement that. And with FLNG, what we're trying to do is so let me fast forward where we have several of these projects on tolling agreements with super majors on 20 or 25 year contract generating 100 of 1,000,000 of dollars of EBITDA. That's a very, very attractive investment proposition for infrastructure funds and other people. It's very steady constant returns that are generally completely ambivalent to commodity prices because they're linked on tolling.
In order to get there, we have to go through that cycle. So what we're looking at is how we can supplement that with some of, if you like, our own business rather than tolling business where we can participate more directly and more quickly. So if you take the long term view then I would see this company is having a tolling business and supplementing that with an integrated business. And we've got to take the opportunities as they come. And I don't know which one goes faster or Great.
Thank you very much. Yes.
Great. Thank you very much.
Your next question comes from the line of Greg Lewis from BTIG. Please go ahead. Your line is open.
Yes. Thank you and good morning and good afternoon everybody. Ian, a lot has been covered on strategy. So I guess I'll just ask, clearly there's a long term partnership in the making with New Fortress Energy. It seems like they're going to be with their infrastructure network, I guess, combined with what you have, it seems like they're going to be an active player in the LNG bunkering market.
I know you still I believe you still have that small minority stake in Avenir. How do we kind of square those? Or how do we kind of how should we think about that?
Sorry, in terms of what? Can you just I
mean, in theory yes, sure. Is Avenir going to be kind of competing with new fortress fortress? Is that 2 different bunkering companies? Is there any issue around that or not really?
No, I wouldn't think so. I think the whole thing is likely to be highly collaborative, and the Avenir has got small vessels, which if you remember, Golar Power, Hygol, has contracted 1 of the Avenir 7,500 Cubed vessels. And so that vessel contract will flip over to New Fortress. So there will be there's already a working relationship in the making there. And the way to think about moving these cargoes around is that it's going to be done by lots of different ways.
New Fortress have got some other ideas on moving ISO containers directly on barges. There will be avenue type small vessels. I think the way to think about it is as that business grows, the need for different and innovative ways to move LNG around the coast of the various countries rather than a push.
Okay, perfect for me. Thank you very much. Super helpful.
Thanks. And we have time for one last question, operator.
Your next question comes from the line of Lucas Dull from ABG. ABG.
I was just wondering last time on the quarterly call you mentioned you were sort of looking into ammonia and hydrogen doing some preliminary studies there. Today, it seems to me that you are back to your roots, which is LNG. Is that correctly interpreted?
I think they're quite parallel really. I think Thor talked about he was into LNG 15 years ago. He doesn't want to wait 15 years for hydrogen. I think there's a couple of things. The first is that we are an LNG company sure and we're going to develop and push and we try to lay out a little bit more of the strategy as we sort of deconsolidate some of the assets under the group structure and focus on LNG and shipping and what to do with that, again, primarily to create value for shareholders through bridging that gap that we've discussed quite a bit today.
In terms of ammonia and carbon, there are two things that we're focusing on. The first is LNG as a process is quite carbon intensive. And we already have a bit of an advantage with the way we use heat recovery on our floating LNG units, and we have a relatively strong carbon footprint as in it's a good carbon footprint, and it's highly competitive against many of the onshore facilities. So one of the things that we're looking at through technology is how we can bring additional carbon CO2 sequestration from the main cryogenic to the turbine strings, the compressor strings. That's the biggest source of CO2.
So that's one area we're looking at. Linked to that and looking at the hydrogen economy, we're doing some studies in the background that says, okay, we can do floating LNG. Our view and my personal view is that the way that the world will move hydrogen around for the hydrogen economy is in the form of ammonia because it's got higher energy density. It's easier to move, and it's already a proven industry in moving it around. So all we're looking at there is saying, okay, if you can do FLNG, can you do floating ammonia production and look at the supply chain there?
Again, look at what New Fortress are saying in their downstream. They have a commitment through time to progressively change the fuel that their facilities are burning to hydrogen. He hasn't said what format that hydrogen will be in. It could well be ammonia. And I think we'll find, again, as a personal view that many of these engines and turbines will be convertible to ammonia as a fuel.
So we can't ignore it. It's important for the world and society in looking at hydrogen. And I think we've got some of the capability to do it, but it's a long way out. And it's not going to turn cash tomorrow, but we still have to talk about the fact that we're progressing it. So yes, we're an LNG company.
We can improve the carbon energy transition is ammonia.
And Wessner, I see sort of the rationale for you cooperating with NFE and the NPEAK sort of cooperation in projects. But do you sort of see that dependent on you owning a big stake in that company?
Not necessarily. I just think it creates perfect alignment if you own a shareholding in a company, not necessarily a massive one. But if you have a shareholding in a company and you share future, you share alignment, then you're in my experience, the best relationships in business work when both companies benefit from the co creation of something that individually that is bigger than 2 parties working on their own as well as working together. And I think that's all we're trying to say is that we've got a good relationship with New Fortress. We want to develop it and look for revenue synergies along the way.
And to keep us aligned, as our Chairman has said, is that we intend to keep some form of stake in that company. And it's good for us as well. We'll benefit as they grow and are successful.
Okay. And in terms of TURST, big picture vision on the LNG, I guess it's well received in sort of industry circles. But I guess towards the investors, he would immediately be fended off with the methane slip issue. But I was just wondering what is sort of your thought around this topic that is definitely on the mind of investors?
So the methane slip is something that we're looking at and we'll talk a little bit about that when we publish our ESG report around about the same time as 20 F or slightly after that later in the year. The thing with methane slip is you've got to get collaboration with the in LNG carriers, for example, it's the engines that create most methane. What industry is learning is that there's a relationship between the amount of methane slip and how hard the engines are working. And there's a direct correlation then between how much boil off gas or so how much CO2 is emitted. So this is getting more complicated, how much CO2 is emitted depending on how fast your engines are going.
So there's a sweet spot and optimum position in there where we minimize CO2 and we minimize methane slip through speed. The industry, I believe, needs to work on this collectively, and we're participating in that and through discussions with the manufacturers and doing what we can. So we're actively involved, but I think it's an industry collective problem to solve. And I think the industry will get there. If you
want to change the world on CO2, and we're talking about hydrogen, you should have in mind that for each kilo of hydro the hydrogen market today is actually bigger than LNG market and it's all goes into refinery industry. Every kilo of hydro then you produce today, you produce 8.2 kilo of CO2. So if you just start to clean up the world, it's nice to start with the hydrogen industry. It is one of the biggest worst producers on CO2. But we take your point and I think we're going after everything from slipping of engines to and that was also the comment from Total in the week when you have that in the speech where you talked about 40 years too early.
Their main focus is not to reduce the methane slippage on LNG. Meat and slippage and carbon capturing and those kind of things are probably more sensible short term than kind of the long term trend we're talking. You have to focus. I know one thing from having been Golar over the last 20 years. Nobody bothered about the earnings coming 5, 10 years out.
Everybody wants earnings tomorrow or the day after.
I agree. It's just that it seems to be an important issue in the capital market. So I guess having an address would be sort of a good strategy from your side. That's all. I think
now producing papers together with Black and Veatch, which you can find on our homepage. I think the first paper is already out, and there will be more papers coming. Which will be a bit part of what you're now talking about as well.
Yes. We take our contribution to this the whole environmental and emission side of it very seriously and that's why we embarked on our ESG publication journey some 18, 24 months ago. I don't mean to cut you off, but we are absolutely out of time. So thank you for listening everybody and for your questions. Please stay safe and we look forward to sharing our progress with you next quarter.
We'll end it there and hand it back to you, operator. Thanks and goodbye.
That does conclude our conference for today. Thank you for participating. You may all disconnect.