FLNG Hilli: Maintained market leading operational track record, generating $73 million of Q3 Distributable Adjusted EBITDA1, of which Golar’s share was $68 million. 122nd LNG cargo export in progress.
FLNG Gimi: Following the commercial reset reached in August 2024, Golar is now contractually entitled to receive daily payments for the period from January 10, 2024 until the Commercial Operations Date (“COD”). Under the new arrangements and based on the operator's latest timeline, Golar expects to receive approximately $220 million across 2024 and 2025 in pre-COD compensation inclusive of milestone bonuses, of which approximately $130 million will be invoiced in 2024. Of this, $78 million has been received in 2024 to date. This pre-COD compensation, net of $110 million of liquidated damages already paid to bp, will be deferred on the balance sheet.
Golar, bp and Kosmos Energy Ltd. agreed to use an LNG cargo to accelerate the commissioning schedule. In October 2024 the LNG carrier British Sponsor started to introduce gas to the FLNG Gimi. FLNG commissioning is now underway and will continue to utilize gas from the accelerated commissioning cargo until the bp FPSO is ready to send gas to the FLNG Gimi. Commissioning activity will then further ramp up.
Based on the latest project schedule, COD is expected within 1H 2025. COD will trigger the start of the 20-year Lease and Operate Agreement that unlocks the equivalent of around $3 billion of Adjusted EBITDA Backlog1 (Golar’s share) and recognition of contractual payments comprised of capital and operating elements in both the balance sheet and income statement.
The contemplated refinancing of the FLNG Gimi is progressing, targeting a new increased debt facility with a lower margin and improved amortization profile versus the current vessel debt facility and potentially releasing significant liquidity to Golar. Credit approvals are being received and detailed documentation has started. Execution of the facility will be subject to remaining credit approvals and finalizing documentation.
FLNG business development: In July 2024, Golar and PAE entered into definitive agreements for a 20-year FLNG deployment project in Argentina. The project will tap into the Vaca Muerta shale deposit in the Neuquén Basin, the world's second largest shale gas formation and is expected to commence LNG exports within 2027. The fully executed agreements include a Gas Sales Agreement from PAE for the supply of gas and an FLNG charter agreement with Golar. The definitive contracts are subject to satisfying defined conditions precedent, including an export license, environmental assessment and FID by PAE. Work on the conditions precedent is progressing with their satisfaction and FID expected within Q1 2025. PAE issued a reservation notice reserving the FLNG Hilli to the project in October 2024. This includes a reservation fee should the project not materialize, and ends Golar’s option to nominate an alternative FLNG to service the contract.
Hilli is expected to generate an annual Adjusted EBITDA1 of approximately $300 million, and a commodity-linked pricing element. Golar will also hold a 10% stake in recently established Southern Energy S.A., a dedicated joint venture with PAE, responsible for the purchase of domestic natural gas, operations, and sale and marketing of LNG volumes from Argentina. The management team of Southern Energy has been appointed and is now focused on securing the requisite regulatory and environmental approvals and working to attract additional Vaca Muerta gas resource owners to part-take in the project.
The FLNG Hilli project will initially utilize spare capacity in Argentina's existing pipeline network. Work to construct a dedicated pipeline connecting the FLNG terminal location directly to the Vaca Muerta shale formation is also being pursued. This could support a multi-FLNG vessel project in Argentina, including opportunities for our MKII FLNG(s).
We continue to make significant positive progress on our other FLNG commercial opportunities on the back of Golar’s position as the only proven provider of FLNG as a service, our market leading operational performance, our competitive construction cost advantage and the earliest available FLNG capacity globally. We are progressing commercial and technical work on FLNG projects in the Americas, West Africa, the Middle East and Southeast Asia. These commercial opportunities are at various stages of development. We target to secure a charter for our MKII FLNG within 2025. Once a charter is secured for the MKII FLNG under construction Golar will seek asset level debt financing for the unit, targeting ~4-6x contracted EBITDA.
In September 2024 Golar signed an Engineering, Procurement and Construction (“EPC”) agreement with CIMC Raffles (“CIMC”) for its first 3.5mtpa MK II FLNG. The MK II design uses the same topside equipment as its MKI FLNG predecessor but incorporates further efficiency and operability advances. Inclusive of the EPC contract, conversion vessel, yard supervision, spares, crew, training, contingencies, initial bunker supply and voyage related costs to deliver the FLNG to its operational site, the budget for the MK II FLNG conversion is estimated at US$ 2.2 billion. Of this, Golar has spent $0.4 billion as of September 30, 2024. The MK II FLNG is expected to be delivered in Q4 2027 and be the first available FLNG capacity globally.
As part of the EPC agreement, Golar has secured an option for a second MK II FLNG conversion slot at CIMC for delivery within 2028. In view of the tight global shipyard situation created by large shipping and FPSO orders, Golar sees availability of early yard slots at credible shipyards as a significant competitive and strategic advantage.
Other/Shipping: Operating revenues and costs under corporate and other items are comprised of two FSRU operate and maintain agreements in respect of the LNG Croatia and Italis LNG. The non-core shipping segment is comprised of the LNGC Golar Arctic, and Fuji LNG which is trading on a multi-month charter. Fuji LNG is expected to enter the CIMC yard at the end of her current charter in Q1 2025.
Macaw Energies has now delivered its first ISO containers to industrial customers with LNG produced from flare-to-gas at its field-testing location in Texas, US. We continue to optimize the unit to cater for fluctuating quality of the flare gas input.
Shares and dividends: As of September 30, 2024, 104.4 million shares are issued and outstanding. Golar’s Board of Directors approved a total Q3 2024 dividend of $0.25 per share to be paid on or around December 2, 2024. The record date will be November 25, 2024.
$74.1 million of the approved share buyback scheme of $150.0 million remains available.
1 Refer to accompanying press release (Report tab) section “Non-GAAP measures” for definition and reconciliation to the most comparable US GAAP measure, where applicable.
