Ladies and gentlemen, thank you for standing by, and welcome to Golar LNG limited 4Q 2019 Results Presentation. [Operator Instructions]. I must advise you that this conference is being recorded today, Tuesday, 25th of February 2020. I would like to hand the conference over your first speaker today, Iain Ross. Please go ahead, sir.

Thanks, Operator. Good morning, and good afternoon, everyone. Welcome to the Golar LNG Q4 2019 Results Call. My name is Iain Ross, and I'm the CEO of Golar LNG. And I'm joined today by our CFO, Graham Robjohns; and our Head of Investor Relations, Stuart Buchanan. Turning to Slide 3 and the highlights. Today, we report Q4 adjusted EBITDA of $93 million as a result of full contribution from the Hilli FLNG and improved shipping performance. We've had good operational performance across all our assets and our projects continue to progress to plan. Our downstream development is gathering pace, and I'll talk more about that later in the presentation. Slide 4 and a closer look at shipping. Our TCE for the carriers was $77,000 per day, noting that this included completion of the final 2 ships in dry-dock. We concluded 2019 with $172 million in shipping revenue backlog. Slide 5 in FLNG. Hilli continues to perform well with 100% commercial uptime and 34 cargoes now offloaded. Gimi project remains on track from both a cost and a schedule point of view with approximately 2,000 people currently working on-site in Singapore. Our Mark III new build FEED has completed its first pass, and we're currently working on some project-specific scenarios as well as developing the larger LNG capacity variant of the vessel. Slide 6 and downstream. FSRU Nanook was fully commissioned during the quarter. She is performing well, supplying gas for the Sergipe power station commissioning, which is also going according to plan with the full load acceptance test expected to be completed this quarter. Project planning for the Barcarena terminal is progressing well as is the small-scale business development. And turning to Slide 7 and our license to operate. The safety of our people and our contractors and partners that we work with remains at the height of our priorities. We recently took time to celebrate 2 million man-hours without a lost time injury on the Gimi project at Keppel Shipyard, and we remain on track to publish our first ESG report after concluding our Q1 2020 results. I'll come back with more details on our sectors. But with this, I'll hand over to Graham to run through the financials at this time.

Thank you, Iain, and good day, everybody. Turning to Slide 8. As you can see, our total operating revenues were significantly up this quarter at $139 million from $99 million last quarter as a result of significantly improved shipping market and few of our vessels dry-docking in Q4. Fleet utilization was also significantly improved at 90%, and total fleet TCE increased from 35,200 in Q3 to 77,000 in Q4. TCE for the first quarter of 2020 are expected to be slightly lower, but given the contract coverage, we now have still at $60,000 per day. 2020 will also benefit from the fact that we only have 1 scheduled dry docking as opposed to 8 during 2019. With the improvement in shipping revenues and the pleasingly consistent performance of Hilli, our adjusted EBITDA increased from $59 million in Q3, so $93 million in Q4. With improved adjusted EBITDA and without noncash losses on derivatives of the last couple of quarters, we reported an net income for the quarter of $24.8 million as compared to a net loss of $82 million in Q3. Year-on-year results have also improved with adjusted EBITDA up 17% at $255 million, driven by a significant increase in FLNG EBITDA as a result of a full year of operations for the Hilli Episeyo. Turning to the balance sheet. Our unrestricted cash position was down slightly at $222 million, primarily as a result of our equity payments into the Gimi project, offset by the release of some cash from the Hilli LC security. During the quarter, we reached a $300 million equity paid-in milestone required for the bank financing. As at December 31, we have drawn down $130 million in debt. All CapEx will be funded by debt until we have drawn $300 million of debt. And then there…

Thanks, Graham. So taking a closer look at the sectors. Turning to Page 12. Our shipping fleet is currently on charter and can see from the graphic that we've increased our effective shipping revenue backlog by over 6x to around $172 million compared to the beginning of last year. This improvement has been the result of a change to our shipping strategy over the last year or so, focusing on developing deals with long-term customers that fixes utilization as well as bring some certainty around rates. We're running a portfolio of different contract styles containing a mix of floating and fixed-rate contracts that has delivered, so far, over 60% of the 2020 fleet days backed by a contract. And as Graham mentioned, as a result of the dry-dock completion, we've got around 250 additional earning days compared to last year. And with prevailing rates, we expect our Q1 TCE to be a bit lower, but at still around $60,000 per day. On the Slide 13 and FLNG. Hilli has offloaded 34 cargoes. In terms of extending the Hilli contract, the only update I have for you today is informal advice from Perenco that they are proceeding with their planned drilling campaign, which is good news, in order to prove up reserves and hopefully find a way forward to get more production through Hilli. And the picture in the slide is Gimi being maneuvered towards dry-dock to finish off the key life extension work on the ship. She is currently in the third out of 5 dry-docks. And the next time she heads into dry-dock, which will be later this year, it will be to have the first of the sponsons attached to her hull. Those sponsons are structurally complete, having been painted and are being fitted out with piping and…

[Operator Instructions]. Okay. Sir, your first question comes from the line of Chris Wetherbee from Citi.

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

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

Okay. And do you -- for some of these vessels, I know you have sale leasebacks on some of them, do you have the ability to kind of walk away from these arrangements and potentially put back the vessels to the lenders, and is this something you would consider if you can't sell or spin-off the fleet?

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

Got it. And just one additional question here. What are your plans in terms of your dividend now that your TRS share repurchase program has been completed?

Well, that's a matter for the Board. I mean clearly, there's a number of uses of excess cash. We can ease it to pay down debt, we can use it to invest in attractive projects, we can return it to shareholders in form of buybacks and dividends. This is a matter for the Board. And my view, the current share price paying dividends isn't the preferred option compared to the alternatives.

We've got -- another question comes from the line of Randall Giveans from Jefferies.

So you continue to guide to, I guess, $78 million now in annual EBITDA for Golar Power Sergipe, and $21 million for the Nanook, when do you expect that to be kind of fully ramped up? Meaning, when do you expect to earn, let's call it, $25 million in quarterly EBITDA? And what is that EBITDA guidance for the second quarter?

Well, I think that will come on when we reach COD, which is forecasted for the end of this quarter. So the following quarter, we should have full payment, remembering that we get that payment whether we're dispatched or not. So that's basically availability payment. And there is a small uptick in the event that we're called to dispatch.

Got it. Okay. So starting up and ramping up pretty immediately?

Yes. That's right.

Excellent.

But no, that's exactly right. The contract once we're available, we get 100% of that amount.

Perfect. And then kind of second part of that question, looking at the kind of growth story on, I guess, Slide 14, pretty massive range there, right, from $11 million to, I guess, $2 billion. Do you have any kind of expectation for maybe a base case? At what -- where on that table should we kind of earmark 2021, 2022?

I guess we are showing these tables, so you can use your judgment as well. I mean we're working very hard in the background to develop these projects. And what we're trying to illustrate, we have talked to some of these numbers before. So for example, with Sergipe, we only require to use 1/3 of the capacity of that vessel. So 2/3, 66% of the capacity is available. Obviously, what we don't want to do is have you think that all of that's going to be used and immediately available, but you've got to think there will be -- some healthy proportion of that would be available. And it will ramp up over a period of time, over months and years. And I think last time we talked about the sort of profile that runs from now right the way through to 2025 in terms of increasing EBITDA. I think I'd also guide you back to the announced -- the prepared remarks that I made on the various forms of generating that EBITDA and that we're not relying simply on one type of industry supply, and we're working ahead on many different fronts.

Sure. All right. So clearly, some substantial upside there. And then I guess, second and final question. You mentioned that Golar is now fully funded in quotes in the press release, does that only refer to the remaining kind of project CapEx or also due to the debt due this year? And then with that, how much of the, I guess, $411 million of capital repayments over the next 12 months do you expect to refinance?

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

So I mean my take on that is that we're fully funded, and we don't have a problem with liquidity at all. We're pushing ahead with our projects in that regard.

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

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

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

So my question is around the BP Tier 2 [ph] contract and the associated cash flow stream. So you have the 20-year contract with annual EBITDA of $151 million and just given where BP bonds are yielding, there appears to be a disconnect here between the value of the cash flow stream and the goal of our equity value. Can you maybe talk about transactions to potentially realize or pull forward the value here? And maybe any thoughts around the opportunity to sell the cash flow stream back to BP or potentially trying to securitize the cash flow and sell it back into the market, just to kind of address the disconnect?

No. We haven't -- it's an interesting point that we'll maybe take up off-line. We haven't really spent too much time on that.

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

Exactly.

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

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

Okay. Fair enough. And then on kind of further follow-up, switching over to the downstream business. You guys are obviously making pretty good progress here, and the rollout. And with $3 LNG prices, would expect a pretty strong uptake. So in the slides, you guys do a really good job of laying out the investment case, which is certainly attractive, and then the long-term potential with a wide ranges. And I guess -- but I guess, my question is not on like where can it go, but more on where does it start. Like when can we start to see meaningful EBITDA showing up here? And just given that there is some level of fixed costs involved with this business, what kind of scale do you need for the small-scale vendor to be cash flow positive?

So we think this small-scale venture will be cash flow positive with a -- certainly within a couple of years. Much of this investment requires CapEx to EBITDA multiples of somewhere between 2 and 3. So it's a very attractive business from that point of view. And also, the scale, the size of that CapEx investment is much smaller than, for example, Sergipe.

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

One short term, one long term for me. First, on the short term, the $172 million of revenue backlog in the shipping business, it sounds like shipping is still kind of far from core, but it is the tail that wags the dog sometimes. So can you explain the duration of that? Because if we kind of back into 62% of your current fleet contracted days of the $172 million backlog for this year alone, it points to a TCE rate that's well in the 70s, which would be phenomenal. So what's the $172 million as it fits to 2020? And what's kind of the TCE rate associated with that for the next 12 months?

So we're not giving guidance on our TCE for 12 months. We tend to do that quarter-by-quarter, as you know. But what we're trying to illustrate by that is that we're in -- showing out the $172 million in a much better position than we were this time last year. The contracted backlog that we have runs between -- some contracts are 6 to 12 months, and other -- we have other contract go as far as 5 years. But that $172 million relates to, basically, those -- both of those scenarios. So you just have to -- I'm sorry, you just -- calculate it yourself. We're not going to give such specific guidance. I would say, just to give you a little bit of help, though, the majority of that is less than 3 years. And certainly, it's the minority of the contracts that run out to 5 years.

Okay. That last bit is helpful. The second part is -- the second question, kind of longer term, clearly, just from the tone of the presentation, the focus on the downstream is significant, which is maybe a bit of a shift from 2 years ago, where the focus was more on the upstream and the FLNG. So as you think about the cash flow generation as it starts to accelerate at the company from all the different segments, and you said that you're fully financed, but where do you kind of focus the capital envelope going forward? Should we think about building out the small scale, the downstream, which you've already said is kind of low CapEx at the expense of some of the upstream stuff? Or can that kind of switch on a dime again depending on the LNG price environment?

I think it's a bit of both, Jon. I mean we are focused on the downstream right now. And I think if we look at the next couple of years, there's a driver to get that going. In terms of FLNG, yes, it's an interesting business at the low prices that we've got right now, we would need a customer to take us with them on a journey where they were prepared to take offtake. And if that came with a financing solution, of course, we'd be interested in looking at it. But right now our CapEx that we are generating within Golar Power, and obviously, we do some refinancing in there as well with -- to improve our debt profiles. But that's where that initial focus of CapEx is for the next little while.

Are there just fewer customers willing to take you on that journey today, kind of in a short-term environment? Because I think even as recently as the last earnings release, there was a conversation -- there was talk about a lot of conversations with people on that upstream end.

Look, we are actually working right now in developing our portfolio. It hasn't really slowed down that much. I'm just trying to be realistic about how long it takes to make an FID in the FLNG space and the upstream space. And also the difficulty that some customers will have in getting there for us to have such low LNG prices. My own suspicion is that when LNG prices stabilize and look like they're going to turn the corner, which could be later this year, it could be in the next year or beyond. Then we'll see far more interest. And what we're trying to demonstrate is that our business model is robust and flexible to be able to cope with both of those scenarios. And right now our focus is on the downstream.

We've got another question. Comes from the line of Ben Nolan from Stifel.

So I have a couple. Number one is, I'm trying to get a sense -- I appreciate that chart that you put on Page 16 showing the potential earnings that you could get out of the excess capacity on the -- or the portion of the power generation that is dispatched. Any sense of what the dispatch rate is likely to look like? Are we thinking that it will be 90% dispatched or 50% dispatched. Any idea there?

We don't know, but we're guessing about 1/3 of the time. I think you'll find that as we move forward on the next months, we'll understand the experience of Sergipe a lot more. The good news is that we're around the corner from COD and actually talking about the ability to dispatch, which I find quite attractive.

Yes. Interesting and then I have just a few sort of record-keeping type questions here. So you mentioned to Randy that you expect full contribution from Sergipe starting in the second quarter, but obviously, you're selling a little bit currently. Any sense of what the first quarter contribution is likely to look like out of that $25 million of quarterly EBITDA?

I think it will be negligible. It's commissioning electricity. And of course, in the commissioning these big bar stations, you ramp up, you shut down, you do some more tests, tweak, change things. I guess the point I'm trying to make in talking about that is that the power station works and it can generate electricity on full load. That's actually the main point there.

Okay, perfect. And then the last little one for me is, I believe for Barcarena, you guys had said that you expected to award the FSRU contracts at some point first quarter. Any update on where that is or any thinking as to which vessel or which version of FSRU you might be using there?

No. We haven't stated too much around exactly what we're going to do, but we expect to be able to take FID sometime this year, maybe as quickly as early as the middle of this year on the terminal, of course, associated with that would be our plans for the FSRU. And it'll be one of our FSRUs, and that could be a conversion of 1 of the 2 existing Golar Power vessels or it could be another 1 that we've already got in the camp. We haven't concluded that yet, but we're working hard, and we should have the answer in the coming few weeks or months.

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

A quick one. Moving into -- I think, John mentioned this before, but just going into a little bit into the shipping strategy and how that's changed. Obviously, with the intention of, I guess, reducing the volatility with the earnings there. But we're seeing -- 2020, we're seeing, right, 62% contracted. Should we kind of expect that percentage to remain at that level given let's just say that the shipping spin-off does take longer than expected or the time line does change there, how should we kind of think about that moving forward?

So the first part of that, it's disconnected from whether the -- we spend the ships off or not. It's a fundamental shipping strategy, and it would continue into the new vehicle as we go. I don't know where it will exactly end up. But from my point of view, I want that percentage to increase and for us to put more business on term-related deals and just have a few ships of -- 2, 3 ships maximum playing on the spot market.

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

Well, I think at the moment, we've got $3.4 billion of backlog -- of EBITDA backlog in our upstream business out of a total of $7 billion. I think logic would say that we're going to build EBITDA backlog in the downstream business. And at some point, hopefully, it will swing the other way, we can enjoy a bit of a firm upstream again. But I think that's the way to look at it.

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

Iain, I guess, I just have a bigger picture question, kind of. I mean clearly, there's been a lot of focus and you guys seem to be moving full steam ahead and with all of our power. You kind of alluded to the uptick that we're going to see and the spreads given where LNG prices are, but then you kind of alluded to, "Hey, eventually, we think LNG prices could stabilize." We agree with that. We think where we are today. Projects will either be delayed or demand will accelerate it. And just thinking about that, as you think about capturing a spread, has there been any thoughts or is it kind of still early days before Golar potentially thinks about. As you move more into power, about sort of lining up long-term LNG contracts so you can kind of lock in a price? Or is it kind of -- I'm just trying to understand and square that out.

So it's a good topic. And it is early days for us. But yes, we've obviously thought a lot about that. And the beauty of the Golar business is that we have a position in upstream across the transportation midstream and then into that downstream arena. So we are contemplating what we can do to take advantage of that and the spreads associated with it. But I think I would come back to the first steps. We've got a $1.3 billion FLNG project that we're in the middle of in Singapore. We're just commissioning the power station and we'll learn how to use that and generate value from it from the other downstream ways that I -- we're discussing earlier. So I think that the spread and the ability to supply our own LNG is, of course, something that's of interest and we'll learn how to do that as we move forward over the coming months and perhaps years. But it's a great topic.

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

This is Judson actually pitching in for Craig. Just touching on the Hilli. You guys mentioned that Perenco is kicking off another campaign in Q2. Just in terms of the time line as to, assuming it's positive, when do you think you might be in the position to learn a little bit more about the upsizing and extension of the contract. Is that more likely a 2021 event?

Perenco, it's difficult to say. Look we're doing everything that we can to encourage Perenco to invest in drilling. We're trying to help them with cargoes, if that's going to get us to the end point, in moving more volumes. I just remain very hopeful that they use the drilling campaign to prove up the reserves and that we end up having a very detailed and strong dialogue about how we can improve both the volume and the duration of the Hilli deal. It's -- personally, I mean, it's a source of frustration that we haven't been able to go faster, but some of these things are just outside of our control. But we are doing what we can to help make it attractive for Perenco to push ahead with that drilling.

Okay. And then a second one for you. After the Gimi is completed and refinanced, would you guys still consider a 10% or a 20% sell down?

Yes. It's something that we look at. I think what Graham said earlier is spot on is that we did receive some fairly attractive offers, but under consideration, we just thought we will focus on the refinance between now and COD. And we think we'll be able to get even more value out of a transaction closer to that time. But there's certainly interest in the -- both the vessel under contract.

And our question, comes from the line of Liam Burke from B.Riley FBR.

On Slide 19, you highlighted the competitive landscape of the -- both of -- particularly upstream and downstream. Is there any particular change or any increase in the competitive front there, understanding this capital and expertise is a pretty high barrier to entry?

I wouldn't say so. I mean I guess, the purpose of this slide is, we often get looked at as a shipping company. And of course, we have ships. We love them. And we are involved in upstream, and we are involved in downstream and those 2 areas is where we've deployed capital over the last 5 years. And the point of this slide is just to try and let people help look at us slightly differently. We're more than a shipping company. And interestingly, we are more than just a simple LNG tolling company as well. So there's a complexity around Golar that's often declined, but I think it's working in our favor at the moment because of our ability to participate in these low price times. And we'll be right at the front of the queue to take advantage of the higher prices when they come back.

Sir no more question at this moment. Please continue.

Thanks. Well, thank you for your attendance on the call today and your continued interest in Golar. I hope we've demonstrated that we're in a business that is flexible enough to make money and prosper, even with the lower LNG prices. With that, we look forward to catching up with you over the coming weeks and again at the next quarterly call. Have a good day, and goodbye.

That concludes our conference for today. Thank you for participating. You may now all disconnect.