Highlights and subsequent
events
- Golar LNG Partners LP (“Golar Partners” or “the Partnership”)
generated operating income of $32.2 million for the fourth quarter
of 2020, exclusive of its interest in FLNG Hilli Episeyo.
- The Partnership reported net income attributable to unit
holders of $20.7 million for the fourth quarter after accounting
for $0.4 million of non-cash mark-to-market interest rate swap
gains.
- The Partnership generated distributable cash flow1 of $31.6
million for the fourth quarter resulting in a distribution coverage
ratio1 of 22.09.
- Golar Partners entered into an agreement and plan of merger
("the merger", "the merger agreement", or "the transaction") with
New Fortress Energy Inc. and certain of its subsidiaries ("NFE")
whereby NFE will acquire all of the Partnership's common units for
$3.55 per unit.
- In addition, Golar LNG Limited (“Golar”) entered into an
agreement with NFE to transfer all the membership interests in
Golar GP LLC to NFE for $5.1 million in cash, equivalent to $3.55
per general partner unit ("the GP Transfer agreement").
- The Partnership's common unitholders voted to approve the
merger with NFE on February 24, 2021. The closing of the merger is
also conditioned upon receipt of a number of other approvals and
consents.
- The Partnership declared a distribution for the fourth quarter
of $0.0202 per common unit.
Financial Results Overview
Golar Partners reports net income attributable
to unit holders of $20.7 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $32.2 million for the fourth quarter of 2020
(“the fourth quarter” or “Q4”), as compared to net income
attributable to unit holders of $17.4 million and operating income
of $32.1 million for the third quarter of 2020 (“the third
quarter”, "prior quarter" or “Q3”) and net income attributable to
unit holders of $30.4 million and operating income of $36.3 million
for Q4 2019.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q4 2020 |
Q3 2020 |
Q4 2019 |
Total Operating Revenue |
71,692 |
|
71,113 |
|
76,563 |
|
Vessel Operating Expenses |
(13,291) |
|
(14,015) |
|
(14,495) |
|
Voyage and Commission Expenses |
(1,872) |
|
(1,571) |
|
(2,484) |
|
Administrative Expenses |
(4,310) |
|
(3,427) |
|
(3,185) |
|
Operating Income |
32,215 |
|
32,117 |
|
36,348 |
|
Interest Income |
4,046 |
|
4,203 |
|
4,804 |
|
Interest Expense |
(16,440) |
|
(17,805) |
|
(18,555) |
|
Gains/(Losses) on derivative instruments, net |
436 |
|
(1,051) |
|
9,610 |
|
Net income attributable to Golar LNG Partners LP
Owners |
20,716 |
|
17,360 |
|
30,395 |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q4 2020 |
Q3 2020 |
Q4 2019 |
Adjusted Interest Income |
89 |
|
114 |
|
758 |
|
Adjusted Net Debt |
1,399,340 |
|
1,438,258 |
|
1,532,040 |
|
Segment Information2 |
|
Q4 2020 |
Q3 2020 |
Q4 2019 |
(in thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
Total Operating Revenues |
58,780 |
|
12,912 |
|
26,217 |
|
97,909 |
|
58,276 |
|
12,837 |
|
26,018 |
|
97,131 |
|
58,975 |
|
17,588 |
|
26,018 |
|
102,581 |
|
Amount invoiced under sales-type lease |
4,600 |
|
— |
|
— |
|
4,600 |
|
4,600 |
|
— |
|
— |
|
4,600 |
|
4,600 |
|
— |
|
— |
|
4,600 |
|
Adjusted Operating Revenues 1 |
63,380 |
|
12,912 |
|
26,217 |
|
102,509 |
|
62,876 |
|
12,837 |
|
26,018 |
|
101,731 |
|
63,575 |
|
17,588 |
|
26,018 |
|
107,181 |
|
Voyage and Commission Expenses |
(915) |
|
(957) |
|
— |
|
(1,872) |
|
(1,450) |
|
(121) |
|
— |
|
(1,571) |
|
(1,231) |
|
(1,253) |
|
— |
|
(2,484) |
|
Vessel Operating Expenses |
(8,923) |
|
(4,368) |
|
(5,039) |
|
(18,330) |
|
(9,627) |
|
(4,388) |
|
(6,048) |
|
(20,063) |
|
(9,574) |
|
(4,921) |
|
(5,240) |
|
(19,735) |
|
Administrative Expenses |
(2,668) |
|
(1,642) |
|
(1,035) |
|
(5,345) |
|
(2,093) |
|
(1,334) |
|
(121) |
|
(3,548) |
|
(1,896) |
|
(1,289) |
|
(363) |
|
(3,548) |
|
Total Adjusted EBITDA1 |
50,874 |
|
5,945 |
|
20,143 |
|
76,962 |
|
49,706 |
|
6,994 |
|
19,849 |
|
76,549 |
|
50,874 |
|
10,125 |
|
20,415 |
|
81,414 |
|
* Indirect administrative expenses are allocated to the FSRU and
LNG carrier segments based on the number of vessels.** Relates to
effective share of revenues and expenses attributable to our
investment in Golar Hilli LLC (“Hilli LLC”) had we consolidated our
50% ownership of the Hilli LLC common units.
In order to incorporate the economic performance
of the FSRU Golar Freeze into total partnership performance,
management has determined that it will measure the performance of
the Golar Freeze sales-type lease based on Adjusted EBITDA1 (EBITDA
as adjusted for the amount invoiced under sales-type lease in the
period).
The Partnership's Q4 Adjusted Operating
Revenues1 including amounts invoiced under the Golar Freeze
sales-type lease and the Partnership's effective share of operating
revenues from FLNG Hilli Episeyo, increased by $0.8 million
relative to Q3. Following the annual settlement meeting with
charterers of the NR Satu, Q3 operating revenues were negatively
impacted by the reimbursement of $0.5 million of 2019 operating
costs overpaid by the charterers. The remainder of the increase is
attributable to recognition of the Partnership's 2.5% share of
revenues from Hilli Episeyo's 2019 and 2020 overproduction and a
higher average daily rate achieved by the LNGC Golar Maria. Voyage
and commission expenses at $1.9 million increased by $0.3 million
relative to the prior quarter primarily due to positioning costs
incurred by the Golar Maria ahead of its term charter that
commenced during the quarter. Both utilization and average daily
TCE1 were in line with the prior quarter at 98% and $101,100
respectively.
Vessel operating expenses decreased by $1.8
million from $20.1 million in Q3 to $18.3 million in Q4. The cost
of charter flights to effect crew changes, quarantine and extending
crew contracts decreased for the FSRUs Golar Eskimo and Golar
Igloo. Crew costs in respect of the FLNG Hilli Episeyo were also
lower for the quarter. Legal and professional costs incurred in
connection with the merger with NFE together with the non-cash
expensing of certain legacy front end engineering and design costs
for Hilli Episeyo both contributed to a $1.8 million increase in
administrative expenses, from $3.5 million in Q3 to $5.3 million in
Q4.
A decrease in LIBOR rates and ongoing principal
repayments resulted in a $1.4 million decrease in interest expense,
from $17.8 million in Q3 to $16.4 million in Q4. Further increases
in longer-term swap rates resulted in a mark-to-market gain on
interest rate swaps and a gain on derivative instruments of $0.4
million during the quarter. As of December 31, 2020, the average
fixed interest rate of swaps related to bank debt, including the
Partnership's effective share in respect of Hilli Episeyo was
approximately 2.3%.
The third quarter dividend in respect of FLNG
Hilli Episeyo was delayed until costs associated with its scheduled
early October maintenance window had been accurately estimated.
These were finalized during Q4 and the dividend was paid. Surplus
cash in Hilli LLC was also distributed to shareholders in the form
of a special dividend. The Partnership's share of this amounted to
approximately $3.0 million. Distributable cash flow1 increased as a
result and the distribution coverage ratio1 increased accordingly,
to $31.6 million and 22.09 respectively.
Operational Review
Fleet utilization at 98% was in line with the
prior quarter.
FLNG Hilli Episeyo, which completed its
scheduled maintenance window in October, on time and without issue,
continues to maintain 100% commercial uptime and reliably deliver
quarterly LNG tolling revenues. Charterers Perenco and SNH were
also billed for 2019 and 2020 overproduction. The Partnership's
2.5% share of this amounted to $0.2 million. Early in the new year
FLNG Hilli Episeyo achieved another milestone, the production of
its 7 millionth cubic meter of LNG and export of its 50th cargo.
The vessel continues to maintain 100% commercial uptime and most
recently exported its 52nd cargo.
During the quarter, the LNGC Golar Maria
commenced its term charter. The vessel is due to undergo its
scheduled 5-yearly dry docking in Q2 2021. Logistics associated
with reactivating the LNGC Golar Mazo from layup in a COVID-19
constrained environment together with the time and cost associated
with completing its required drydock meant that the vessel was not
available to trade over the exceptionally strong December/January
period. The customized positioning of the FSRU Golar Igloo's
loading arms for the KNPC facility and the need to complete its
scheduled winter maintenance window in Dubai also prevented this
vessel from easily being traded as a carrier during its scheduled
January/February downtime. The vessel has now commenced its 2021
regas season offshore Kuwait.
Financing and Liquidity
As of December 31, 2020, Golar Partners had
cash and cash equivalents of $48.8 million. Adjusted Net Debt1 as
at December 31, 2020 was $1,399.3 million, including the
Partnership's $389.3 million share of debt in respect of FLNG Hilli
Episeyo. Q4 2020 Total Adjusted EBITDA1 amounts to $77.0 million.
Based on the above, the Q4 Adjusted Net Debt1 to Annualized
Adjusted EBITDA1 ratio was 4.5x. As of December 31, 2020,
Golar Partners had interest rate swaps with a notional outstanding
value of approximately $1,233.8 million (including swaps with a
notional value of $250.0 million in connection with the
Partnership’s Norwegian USD bonds and $389.3 million in respect of
Hilli Episeyo), representing approximately 85% of total debt and
finance lease obligations, including assumed debt in respect of
Hilli Episeyo, net of restricted cash.
The average fixed interest rate of swaps related
to bank debt, including the Partnership's effective share in
respect of Hilli Episeyo is approximately 2.3% with an average
remaining period to maturity of approximately 2.9 years as of
December 31, 2020.
Outstanding bank debt as of December 31,
2020, inclusive of Hilli Episeyo related debt, was $1,129.0
million, which had average margins, in addition to LIBOR, of
approximately 2.43%. As at December 31, 2020, the Partnership
also had a November 2021 maturing $150.0 million amortizing
Norwegian USD bond with a coupon of LIBOR plus 6.25% and a November
2022 maturing $250 million amortizing Norwegian USD bond with a
coupon of LIBOR plus 8.1%. Both bonds have call options at 100% of
par until May 2021 and at 105% until maturity thereafter. Inclusive
of the accumulated accretion of the potential 5% premium payable at
maturity and net of amounts repaid, $142.6 million was outstanding
in respect of the November 2021 maturing bond (GOLP02) and $242.5
million was outstanding in respect of the November 2022 maturing
bond (GOLP03), as at December 31, 2020. Under the terms of the
merger entered into on January 13, 2021, the outstanding Norwegian
USD bonds will be settled at par upon closing the transaction.
Prior to announcement of the transaction, GOLP02 and GOLP03 traded
at approximately 85.5% and 84.0% of par respectively.
The Partnership's 7-vessel $800 million bank
facility had $516 million outstanding at December 31, 2020.
Following initial refinancing efforts, existing lead lending banks
indicated a willingness to increase their commitment levels in a
new facility, from approximately $316 million at year end 2020, to
$455 million in a new bank facility. A bank syndication process led
by the lead lenders and the Partnership was then launched. This
process attracted one incremental additional commitment, bringing
the total commitments to $505 million, enough to cover the $503
million outstanding at maturity in April 2021, but less than the
target amount of up to $600 million. The softer than desired
outcome of the syndication process was believed to be a result of
COVID-19 effects on the bank syndication market, as well as
non-subscription of smaller existing lenders, some of whom are
exiting the shipping sector. As the bank syndication process
covered the maturing amount, but would have been unsuccessful in
reducing the refinancing needs for the high yield bonds, the
Partnership extended the syndication process with the lead banks
into mid-February 2021. Under the terms of the merger agreement
signed with NFE in the intervening period, this facility will also
be repaid upon closing of the merger.
Corporate and Other Matters
On January 13, 2021, Golar Partners announced
that it had entered into a merger agreement with NFE.
Upon the merger agreement becoming effective,
all of the outstanding common units will be cancelled and
automatically converted into rights to receive cash in an amount
equal to $3.55 per unit. Upon the GP Transfer agreement becoming
effective, Golar will also receive $5.1 million, equivalent to
$3.55 per general partner unit. In connection with the transaction,
the Partnership's incentive distribution rights will be cancelled.
The Series A preferred units will remain outstanding. Expected to
close in the first half of 2021, consummation of the merger remains
subject to the receipt of certain regulatory approvals, third party
consents and other customary closing conditions.
The merger consideration to be received by
common unitholders represents a 27% premium to the closing price of
the Partnership's common units of $2.79/unit on January 12, 2021,
and a 37.5% premium to the volume weighted average closing price
of those common units for the 20-trading day period ended
January 12, 2021.
The Partnership's Board of Directors, acting
upon the recommendation of the Conflicts Committee of the Board of
Directors, unanimously approved the proposed transaction and
recommended that the Partnership's common unitholders vote in favor
of and to approve the merger. At a Special Meeting of Golar
Partners common unitholders on February 24, 2021, unitholders voted
to approve the transaction.
As at December 31, 2020, there were
70,738,027 common and general partner units outstanding in the
Partnership. Of these, 22,769,977, including 1,436,391 general
partner units, were owned by Golar, representing a 32.2% interest
in the Partnership.
On January 27, 2021, Golar Partners declared a
distribution for the fourth quarter of $0.0202 per unit. This
distribution was paid on February 12, 2021 to common and general
partner unit holders of record as at February 5, 2021.
A cash distribution of $0.546875 per Series A
preferred unit for the period covering November 15, 2020 through to
February 14, 2021 was also declared. This was paid on February 15,
2021 to all Series A preferred unit holders of record as at
February 8, 2021.
There were 20,000 outstanding and exercisable
options as at December 31, 2020. As the exercise price for
these options exceeds the per unit merger consideration they will
be cancelled upon closing of the merger. A further 58,960 Phantom
Units were in issue on December 31, 2020. These will vest
upon closing of the merger.
LNG Market Review
The quarter commenced with JKM at around
$5.15/mmbtu and quoted steam turbine ("ST") headline spot rates of
around $43,000 per day. The rapid ramping up of US export capacity
in October following earlier hurricane related interruptions was
met by strong winter demand in key Asian markets. Multiple and
significant additional supply outages elsewhere then added upward
pressure to LNG prices and widened regional price differentials,
pulling more Atlantic LNG to markets in the Far East. As ton miles
increased and carrier availability decreased, rates responded with
ST spot rates reaching $75,000 per day by late October. Increasing
use of European reloads and significant congestion at the Panama
Canal added further upward pressure to ton miles as 10-day transit
delays sent more vessels around the Cape. Particularly cold weather
in Asia, a shortage of cargoes in the East, US facilities producing
above nameplate capacity to compensate for further supply outages
elsewhere, and a shortage of available vessels then sent both LNG
prices and shipping rates on a path to record levels. As noted
earlier, the Golar Mazo was not available to trade at this point
due to her being in layup and requiring a drydock, Golar Maria had
commenced her term charter, and the FSRU Golar Igloo was limited by
terminal compatibility and time available due to the performance of
scheduled maintenance during her 1.5 month winter downtime. The
quarter ended with JKM at around $15.10/mmbtu and quoted ST
headline spot rates of around $98k/day. Despite the significant
increase in spot rates, term charter rates remained broadly
unchanged.
Outlook
The entry into the merger agreement with NFE by
Golar Partners comes after an extensive search for strategic
alternatives, and is an attractive solution that creates immediate
additional value for the Partnership's stakeholders. The closing of
the transaction is conditional on the receipt of certain regulatory
approvals, third party consents and other customary closing
conditions, and is expected to occur within the first half of
2021.
FORWARD LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning future events and Golar
Partners’ operations, performance and financial condition.
Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words
“believe,” “anticipate,” “expect,” “estimate,” “project,” “will
be,” “will continue,” “will likely result,” “plan,” “intend” or
words or phrases of similar meanings. These statements involve
known and unknown risks and are based upon a number of assumptions
and estimates that are inherently subject to significant
uncertainties and contingencies, many of which are beyond Golar
Partners’ control. Actual results may differ materially from those
expressed or implied by such forward-looking statements. Important
factors that could cause actual results to differ materially
include, but are not limited to:
- the proposed transaction between Golar Partners and NFE
pursuant to the Agreement and Plan of Merger dated January 13, 2021
(the “Merger Agreement”) may not be completed in a timely manner or
at all, including as a result of (i) changes in federal, state,
local and foreign laws to which NFE or Golar Partners is subject
and (ii) the possibility that any or all of the various conditions
to the consummation of the Merger may not be satisfied or waived,
including the failure to receive any required regulatory approvals
from any applicable governmental entities (or any conditions,
limitations or restrictions placed on such approvals);
- our obligation under the Merger Agreement to pay a termination
fee to NFE under certain circumstances;
- our ability to make additional borrowings and to access debt
and equity markets;
- our ability to repay our debt when due and to settle our
interest rate swaps;
- our ability to enter into long-term time charters, including
our ability to re-charter floating storage and regasification units
(“FSRUs”), liquefied natural gas (“LNG”) carriers and floating
liquefied natural gas units (“FLNGs”) following the termination or
expiration of their time charters;
- our ability to maximize the use of our vessels, including the
re-deployment or disposal of vessels no longer under long-term time
charter;
- the length and severity of outbreaks of pandemics, including
the recent worldwide outbreak of the novel coronavirus ("COVID-19")
and its impact on demand for LNG and natural gas, the operations of
our charterers, our global operations and our business in
general;
- the liquidity and creditworthiness of our charterers;
- the effect of a worldwide economic slowdown;
- changes in commodity prices;
- turmoil in the global financial markets;
- fluctuations in currencies and interest rates;
- market trends in the FSRU, LNG carrier and FLNG industries,
including fluctuations in charter hire rates, vessel values,
factors affecting supply and demand, and opportunities for the
profitable operations of FSRUs, LNG carriers and FLNGs;
- availability of skilled labor, vessel crews and management,
including possible disruptions caused by the COVID-19
outbreak;
- our and Golar's ability to retain key employees;
- our vessel values and any future impairment charges we may
incur;
- future purchase prices of new build and secondhand
vessels;
- disruption of shipping routes due to accidents, political
events, piracy or acts by terrorists;
- our anticipated growth strategies;
- the future share of earnings relating to the FLNG, Hilli
Episeyo ("Hilli"), which is accounted for under the equity
method;
- our ability to make cash distributions on our units and the
amount of any such distributions;
- changes in our operating expenses, including dry-docking and
insurance costs and bunker prices;
- estimated future maintenance and replacement capital
expenditures;
- our future financial condition or results of operations and
future revenues and expenses;
- planned capital expenditures and availability of capital
resources to fund capital expenditures;
- the exercise of purchase options by our charterers;
- termination dates and extensions of charters;
- our ability to maintain long-term relationships with major LNG
traders;
- our ability to leverage the relationships and reputation of
Golar and Hygo Energy Transition Ltd. (“Hygo”), formerly known as
Golar Power Limited and NFE in the LNG industry;
- the ability of Golar and us to retrofit vessels as FSRUs or
FLNGs and the timing of the delivery and acceptance of any such
retrofitted vessels by their respective charterers;
- our ability to compete successfully for future chartering
opportunities;
- acceptance of a vessel by its charterer;
- the expected cost of, and our ability to comply with,
governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by our
charterers applicable to our business;
- our general and administrative expenses and our fees and
expenses payable under the fleet management agreements and the
management and administrative services agreement between us and
Golar Management (or the “Management and Administrative Services
Agreement”);
- challenges by authorities to the tax benefits we previously
obtained;
- the anticipated taxation of our partnership and distributions
to our unitholders;
- economic substance laws and regulations adopted or considered
by various jurisdictions of formation or incorporation of us and
certain of our subsidiaries;
- customers’ increasing emphasis on environmental and safety
concerns;
- potential liability from any pending or future litigation;
and
- other factors listed from time to time in the reports and other
documents that we file with the U.S. Securities and Exchange
Commission (the “SEC”).
Factors may cause actual results to be
materially different from those contained in any forward-looking
statement. Golar Partners does not intend to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in Golar Partners’ expectations with
respect thereto or any change in events, conditions or
circumstances on which any such statement is based.
February 25, 2021Golar LNG Partners
L.P.Hamilton, BermudaQuestions should be directed to:c/o Golar
Management Ltd - +44 207 063 7900Karl Fredrik Staubo - Chief
Executive OfficerStuart Buchanan - Head of Investor Relations
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
- Golar LNG Partners LP preliminary fourth quarter and financial
year 2020 results
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