Welcome to the Golar LNG Limited Q2 2022 Results Presentation. After the slide presentation by CEO, Karl Fredrik Staubo and CFO, Eduardo Maranhao, there will be a question-and-answer session. [Operator Instructions] I will now pass the floor over to Karl Fredrik Staubo. Karl, please go ahead.

Thank you and welcome to Golar LNG’s Q2 earnings results presentation. My name is Karl Fredrik Staubo, the CEO of Golar LNG. Before we get into the presentation, please note the forward-looking statements on Slide 2. I am accompanied today by our CFO, Mr. Eduardo Maranhao to present this quarter’s results. Turning to Slide 4. This provides an overview of Golar today. Following a group simplification and sale of about $6.8 billion of assets during the last 18 months, we are now a focused FLNG owner and operator. We own 2 FLNG vessels, the Hilli, which has been in operation since 2018 under a contract with Perenco in Cameroon. She is the best performing FLNG globally with 100% operational utilization since delivery. Secondly, we have the FLNG Gimi, currently 86% complete under construction at Keppel Shipyard in Singapore. She will start a 20-year contract for BP on the Tortue field, located offshore Mauritania and Senegal and will unlock an EBITDA earnings backlog of $3 billion to Golar or $151 million of EBITDA annually from next year and until 2043. We are focusing our efforts on FLNG growth project and have developed 3 different FLNG designs. All 3 designs are based on the same proven liquefaction technology and maritime interface. However, they differ in liquefaction capacity and shipyard location. The Mark I has a liquefaction capacity of up to 2.7 million tons per annum. Both our existing units, Hilli and Gimi, are Mark I design FLNGs, and they’re based on conversion of existing LNG [indiscernible] tankers. The Golar Gandria remains a Golar own conversion candidate for potential future incremental Mark I units. The Mark II design has a liquefaction capacity of up to 3.5 million tons. Mark II is also based on converting an existing LNG carrier, but instead of adding…

Thanks, Karl, and good morning, everybody. I’m very pleased to provide an update on our group results for the second quarter of 2022. Turning over to Slide #7, I wanted to show some of the highlights of this quarter. Starting with our FLNG units. Our first vessel, Hilli continues to operate with an excellent performance, delivering 100% uptime in this quarter. We continue to benefit from strong tailwinds from high Brent and TTF prices, which generate incremental earnings to our commodity-linked tariff at no incremental OpEx to us. As a result of that, our share of Hilli distributable adjusted EBITDA has increased considerably to $62 million this quarter, an increase of close to 150% on year-over-year basis. We’re also very pleased to announce that Perenco exercises its option to increase production for an incremental 0.2 million tons of TTF-linked production from 2023 until 2026. Construction of our second FLNG unit, the Gimi, continues in Singapore and is now 86% technically complete. We have agreed initiatives with Keppel Shipyard to safeguard sail-away of the unit within the first half of 2023. We have also advanced a number of initiatives towards the development of a new Mark II unit, capable of producing 3.5 million tons of LNG and which could be delivered as early as 2025. We’ll talk a bit more about that on this presentation. We reiterate a target to announce a new FLNG project within 2022. Moving on to shipping. The last steps of the spin-off of our TFDE fleet were completed this quarter. The last 4 vessels were sold to Cool Company and the transfer of our shipping and FSRU management organization is now complete. In line with our simplification efforts and to focus our business on FLNG, we’ve been awarded a conversion contract for Golar Arctic for €269…

Thank you, Eduardo. And turning to Slide 11, as Eduardo mentioned, Perenco exercised their option to produce the 0.2 million tons from ‘23 to ‘26. Hence Hilli will continue with 3 components to its EBITDA generation. In 2021, Golar share of Hilli EBITDA amounted to $95 million. For ‘22, we expect Golar shares to come in at around $270 million. The earnings increase is caused by higher Brent prices and the start-up of the TTF-linked production. For ‘22, we have hedged the TTF price exposure for Q3 at $25.37 per MMBtu, generating $19 million of TTF-linked EBITDA to Golar for the quarter. We remain open for Q4 ‘22. At current Q4 forward prices, we expect to make an EBITDA of around $47 million for Q4 alone. For 2023, we have just entered into a TTF price swap for 50% of the TTF exposure of $49.5 per MMBtu. That’s the energy equivalent of crude Brent prices at $291 a barrel. With TTF at $49.5 for ‘23, this will generate approximately $160 million in EBITDA to Golar, where 50% of that is now secured in terms of locked in the price. Combined with the Brent forward price for ‘23, which currently stands at $88 a barrel, we expect to generate $305 million in Golar share of Hilli EBITDA next year. Total debt service for Golar share of Hilli is $50 million, and Hilli alone will generate free cash flow to equity of $255 million for 2023 or $2.35 per Golar share. Turning to Slide 12 and Gimi. Gimi is now 86% technically complete for its conversion into an FLNG at Keppel Shipyard in Singapore. We have currently worked over 22 million man hours on the conversion with a daily construction team currently amounting to 4,200 workers. The remainder of the build is…

[Operator Instructions] We will take our first question and your question comes from the line of Chris Tsung from Webber Research & Advisory. Please ask your question.

Hi, good afternoon, Karl and Eduardo. How are you?

Thanks. You?

Thank you. I wanted to just touch on the – we’ve seen the [indiscernible]

Sorry. You are breaking. Any chance you can try to speak closer to the speaker?

Can you – is this better?

Yes, please.

Yes. So I was saying we’ve seen the target sail-away date through the Gimi slide from Q1 ‘23 to first half of ‘23. And now with the $50 million incentive payment to Keppel to maintain the first half ‘23 date, can you provide some color on the risk of Gimi would be further delayed in terms of like months or was it quarters?

I think if you listen to Kosmos’ earnings call on earlier this week, I think they also provided some updates on where they are, both on the FPSO progress, which is somewhat delayed but reiterated the contract start-up date. So I think the combination of – to answer the question, this is a combination of making sure we build the best quality unit and to align the schedule with BP. We do not expect any further delays. As we have been highlighting on several of our previous quarterly calls, we’ve taken very active steps to ensure the current timeline, which is basically the driver of the $50 million cost increase, which then safeguards that timeline, and we are very happy with the progress we’re making basically on a daily basis and feel very comfortable with the current delivery date.

Great, thank you. So, it wasn’t something that systemic conversion projects and you just one-off and aligning the schedule with Kosmos.

Yes.

Okay. And just as of – sorry, this is my second question, probably the last one. When would you need to reserve slots for at the yard for Mark I and II? Like would you risk losing it if the order is in place this year?

I think what we have confirmed on the call today is that we have agreements in place with the shipyard that would construct the Mark I and Mark II, where we have also secured the available slot space. And as we have highlighted a few times, we are targeting to make an FLNG announcement within the second half of this year. I think it’s possible to lock in the slot for somewhat longer than just this year, but we – if you delay a day, you also delay delivery and for us, early delivery is going to be important going forward.

Sure. Thanks for the color.

Thank you.

Thank you. We will take our next question. Your question comes from the line of Ben Nolan from Stifel. Please ask your question.

Thank you, operator. Hi, Karl. So I wanted to ask first, just to make sure that I understand it with [Technical Difficulty] to the ordering and/or conversion. Am I right in understanding that you guys would be willing to order a conversion on spec or without a contract? Is that the implication here?

Yes. This would be similar to how we would view Hilli when she was first ordered. She was not ordered against the contract, but with a clear view as to where the unit would likely end up. At that time, that was a bigger risk because it was an unproven technology. We see now with the scramble to secure new liquefaction as late as by the move by ENI to acquire an idle FLNG at a very high price, that time is the key attribute of the market and also all of the chartering discussions we have. And we think negotiating power would slightly move tough if we move ahead on this basis. But we have a very clear view of where it will end up, whether the contract is secured before simultaneously or in the not too distant timing just after, we feel very confident about where we sit right now.

Okay. That’s helpful. And I’m going to try to squeeze two into one here. So as it relates to sort of those contract negotiations, I know one of the things that you have called out is wanting to have some element of commodity exposure similar to what you have on the Hilli, but less so on the Gimi. First, I guess, is that something that gas owners are willing to do or increasingly willing to do versus where we might have been earlier? And then sort of connected with that, you called out specifically Mark II, but I know that you already own the Gandria, is there a reason why it seems like there’s a little bit more of a Mark II focus versus a Mark I that might be a little bit more bird in hand?

Yes. Okay. So that’s three questions. But to answer the first part, yes, we think that it’s easier to have commodity linked production discussions now than earlier. I think the gas fields that we are targeting are either stranded or associated gas. And we don’t think that the owners of those resources have many, if any, alternatives to utilize those pits. Hence, if either an FLNG or it’s not monetizing the unit and with the amount of pressure to secure new liquefaction right now, we think that it’s an easier environment to have those negotiations. I think it’s also fair to say that the more oil major you go and the longer duration you go, the least – the less the incentive are wanting to give commodity exposure, but we think we can obtain attractive commodities exposure to solid counterparts. And the second part of your question, I think as we highlighted, we have confirmed price and yard availability for both Mark I and II. What we see as a key attraction of the Mark II is the fact that you have somewhat higher liquefaction capacity, somewhat higher storage capacity and due to the way the vessel is converted a quicker conversion time. We also have a fairly good view of the FLNG growth pipeline, and we’re confident that ordering a Mark II present a very attractive risk reward, and that’s why we want to proceed that. Saying that, we would not rule out building another Mark I with the starting point from Gandria, but Gandria is not suited for Mark II.

Alright. I appreciate the – you taking both, albeit somewhat just different questions. Thank you.

Thank you. We will take our next question. Please stand by, and your question comes from the line of Craig Shere from Tuohy Brothers. Please ask your question.

Hi, good morning, New York time.

Good morning.

So as far as future capital availability and liquidity, first question is, is it reasonable to assume that you could cash out over $0.5 billion combined in low cost refinancings for both the Hilli and Gimi? And then could you opine on the timing and size of liquidity needed for an initially FID spec build versus one that’s contracted upfront?

To answer the first part, yes, we can. I think we can expect more than $0.5 billion if you were to refinance Hilli and Gimi today. I think the way we see it is that we have a healthy cash and listed securities position. And we think we can further optimize the debt on those two units once construction risk is taken out of Gimi and once re-contracting risk is taking out of Hilli. That’s why we are not pushing forward on that right now. We have a sufficient cash at hand together with the term sheets received for both Mark I and Mark II newbuilds to proceed with the spec build without having to use anything, but our cash position and available credit or receipt term sheets for potential new credit facilities.

So even if you build on spec, the shipyard will let you kind of put in your equity over time. So, you don’t have immediate issues as far as needing more liquidity.

That’s correct.

Thank you.

Thank you. We will take our next question. And your question comes from the line of Sean Morgan from Evercore. Please ask your question.

Hi Karl, so as we step up in terms of the volumes for Mark II to Mark III with the 5 mtpa, is that going to require, I guess preceding off-taker work, or do you think that the E&P partner that you select for the development of that project would be able to basically take full off-take at 5 mtpa?

Just to confirm, we would not do a Mark III on spec because that’s a large volume and it’s a bigger impact. So, on those, you would typically – that’s more towards tolling arranged contracts where we would expect that the off-taker would lock in some of the production volume.

Okay. And then you talked about – in the presentation about the kind of low cost of the asset development off of the West Coast of Africa in the proximity to Europe. So, it would indicate that Europe would be the primary market for these projects. So, have you been surprised at all of kind of the slowness of Europe to sign long-term SPAs on sort of the percentage of SPAs and signed in ‘22 since the war started relative to, say, Asia? And do you think is that carbon driving that, or what’s causing sort of this delay in heavy European contracting?

I am not surprised by it because we know what it takes to kick in FLNG project off the line and off-take is only part of the puzzle. I think if you secure the off-take, you still need to have the development plans, the regulatory approvals, everything that’s needed to produce the gas. I think to some extent to the contrary, I think the European countries have been very swift to move on FSRU, fairly swift on the LNG carriers. And I think right now, they are actively working on how to crack increased gas production. I think a further testimony to that is when Senegal is invited to G7, at least the last time I checked in the previous meeting, Senegal wasn’t invited to G7. So, I think they are starting to get what’s going on here. And I don’t think it’s really down to just the off-take. It’s way more – you have to sort of embrace the full project and all the scopes. So, these are not just things that’s tying up off-take sorts the problem. And I know that several European countries are looking at off-take and financing to help lift some of these projects. We also need a stable geopolitical environment in the country that you want to operate if you are to put billions of dollars of infrastructure there. Our advantage, of course, is that an FLNG is floating. So, the infrastructure is mainly upstream. The unit can always be redeployed, and we are, as you know, a generic asset. So, we are not customized to the specific deals. So, we think that our technology suits well for those type of projects.

Alright. Thanks Karl. Appreciate it.

Thank you.

We will take our next question. And the question comes from the line of Wayne Cooperman who is an individual investor. Please ask your question.

Hi guys. Two quick questions. On Hilli, the Perenco didn’t take all the amount they wanted. Is there any chance that you can get more volume from somebody else, or does that really you have to wait until their contract expires? And secondly, since you sold a third of the NFE at a lower price, I mean is it the plan to continue to monetize that, especially now that their stock has gone up a lot.

Thank you. I think for the first part of the question, the – as you know, the production on the incremental volume is linked to TTF. If you take a TTF cargo and deliver it spoked into Europe today, you are looking at a fairly steep discount of somewhere between $5 to $10. Hence, it wasn’t in the interest of the off-taker from Perenco to meaningfully increase volumes at the agreed tariff and there was no incentive from neither Golar nor Perenco to go to the negotiating table to increase volumes beyond the 0.2 if that meant the renegotiating of the TTF-linked tariff. I think the way we have viewed this is that let’s just see what happens to the option that was declared at 0.2. I think there is scope to increase production further, but that would likely be at a tariff to be negotiated. Theoretically, there is capacity to sell it away from the current offtaker. Practically, that’s going to be very difficult. So, I think the solution to this is that the off-taker, Perencono needs to sit around the table and see if there is a solution that works for all the three parties. If not, the current TTF prices take care of the earnings clearly, but I think everyone is aligned to see if the rates where we can boost that further. When it comes to the second part of your question, it’s correct that we sold a third of our NFE holding. I think we have further said that we would rather sit NFE than cash. And I think to-date, that’s been the right decision. We like the progress of NFE. And currently, we have plenty of cash and available liquidity to execute our ambitions. So, for now, that position remains the same, but we obviously keep a close eye on the development of the company. We think they have been very successful in executing large improvements to the company just in the last quarter. So, we like the development currently.

Alright. Thank you. Congratulations.

Thank you.

Thank you. We will take our next question. And the question comes from the line of Barry Haimes from Sage Asset Management. Please ask your question.

Thanks so much and congrats on all the progress. My question is you talked about having enough funding for two additional FLNGs. Would that include Mark II and a Mark III? Could you fund a Mark III? And maybe just talk about the relative costs of one versus two versus three, because those numbers were not on that one slide where you laid out the differences. Thanks so much.

I think if you take the liquefaction capacity and multiply by the guidance $500 million to $600 million a ton, I think you get to the price. So, that’s your price. Sorry, what was the rest of the question?

Could you fund a Mark II and a Mark III with the existing…?

Yes. Basically, the answer to that depends on the project. So, for some of these projects, if you have long-term off-take, you get very attractive financing and then you can easily do both. For some of the long-term contracts, we know that the charter would also like to take equity participation in the units, especially if it’s contracted for the life of the unit. And hence, that would enable us to let those two projects. But I think for now, the most likely one to proceed is Mark II, and we have a significant backlog of interested parties across all three designs. And in total, we can run two to three of them. So, it’s a matter of prioritizing the ones that have the most attractive economics and most attractive total scope.

Thanks so much.

Thank you.

Thank you. We will take our next question. And the question comes from the line of Frode Morkedal from Clarksons. Please ask your question.

Yes, just a question on – so that EXMAR sold the Tango FLNG last week at a pretty good price, it seems. That is, of course, a barge and it’s smaller. So maybe if you could just compare if it’s – if I just like extrapolate to a 2.5 million ton conversion candidate, it gives me quite compelling valuation potential. So, curious if you can talk about their differences.

I think if you look at the announcement, they are saying they are going to pay between $572 million and $694 million subject to performance of the unit and that’s 0.6 million ton. Hence, your $950 million to $1,150 million, $1,156 million, if you – to be specific on price. So, if you compare that to a Mark I, let’s say, that means that you compare between $2.4 billion and $2.9 billion per unit or approximately exactly twice the CapEx that we are guiding on between $500 million to $600 million. You are also right that Tango is a smaller unit with less liquefaction capacity and significantly less storage compared to our FLNG technology and also with the – not with the same strong operational track record. They did, of course, operate for YPF in Argentina, but she has been idle for some time after that.

Perfect. Thanks. That’s good color. There seems to be quite significant upside potential then. Thank you.

Thank you.

Thank you. We do have a follow-up question. Are you happy to take that question?

Yes, please.

Thank you. One moment, please. And you have a follow-up question from the line of Ben Nolan from Stifel.

Yes. Thanks and thanks for taking the follow-up. I didn’t get quite enough out of my 2.5 questions last time. The – a little bit more on the potential opportunity to expand in Mauritania and Senegal. Just to be clear, my understanding was that, that was likely to be a Mark III design. Do you have any further color on sort of the direction that, that might be headed?

I think we don’t normally comment on specific projects, but we would lean then on the quarterly earnings call that Kosmos held earlier this week where they have said that they are targeting concept select for the growth of the Tortue phase within Q3 of this year. It’s interesting that last time they did a concept select, they ended on FLNG, which is the Gimi. And with the CapEx per ton liquefied and the carbon footprint per ton liquefied that our FLNG technology can provide. We struggle to see how there are other liquefaction solutions that can be deployed on that site that would be competitive on those two parameters at least. So, we are looking forward to that concept select. So, I think that’s what we would say. And whether they want to grow from 2.5, which is Gimi to 5 instead of two Mark Is or whether they want to add a Mark III, I think it’s a question better directed to Kosmos and BP. But we did note that Kosmos was talking about both Phase 2 and 3 of Tortue within 2024.

Yes. That’s helpful. And then again, sort of I am doing to on an unrelated topic. You guys did buyback some shares – a little bit of shares in the quarter. Maybe just thinking about capital allocation. As I recall, you are a little bit limited on your ability to pay dividends until the delivery of Gimi. First of all, is that still the case? And how are you thinking about sort of in the intermediate term capital allocation as it relates to shareholder returns?

You are correct, Ben. So, the only debt facility we have with such restriction is this $300 million unsecured bond, which prevents us from paying a cash dividend until Gimi delivers. We are, however, allowed to do an incremental $15 million of buyback from where we stand today. We are also allowed to dividend out either the 51% of the total equity value of our share in Cool Company, either through shares or cash. So, since we sold two-thirds for cash and remaining one-third shareholding, the entire Cool Co position could either be monetized and distributed in cash or distributed in shares. When it comes to capital allocation, we are generating a healthy free cash flow from every quarter from now onwards. I think we are having active discussions with the Board to introduce cash dividends from when Gimi delivers. Currently, there are no plans to ask for an amendment to the unsecured bond or otherwise bring that dividend forward as we think our key focus should be on FLNG growth. But subject to how that materializes over the next six months to nine months, that could change.

Alright. Perfect. Thank you. I appreciate you taking the follow-up, Karl.

We have a hard stop now in – basically now in one minute. So, thank you all for dialing in. If anyone has further follow-up questions, please do not hesitate to reach out to us. Thank you for listening to us this morning, and have a great day.

That does conclude our conference for today. You may now disconnect.