- EBITDA and Operating Loss in the quarter reported a loss of $11.3 million and $28.3 million compared to a 2Q loss of $17.5 million and $37.2 million, respectively.
- Golar LNG Limited ("Golar" or "the Company") and Schlumberger formed OneLNG, a joint venture that will offer an integrated upstream and midstream solution for the development of low cost gas reserves to LNG.
- Closed Golar Power transaction with Stonepeak to capitalise on downstream opportunities.
- Shipping market shows positive signs with improving utilisation, rates and the re-appearance of round-trip economics.
- Ophir and OneLNG agreed to form a Joint Operating Company to develop the 2.6Tcf Fortuna reserves in Equatorial Guinea using FLNG technology.
- Golar Power reached a Final Investment Decision ("FID") on Sergipe power project, signed a 25-year FSRU agreement and entered into a long-term sale and purchase agreement for the supply of LNG.
- The Incentive Distribution Rights ("IDRs") in Golar LNG Partners ("Golar Partners" or "the Partnership") were reset. Golar LNG received 3.8 million new units as consideration.
- Raised $176 million in new equity through issue of 7.5 million new shares.
The Golar Power transaction closed on July 6. Effective from this date, the results of the LNG carriers, Golar Penguin and Golar Celsius, together with the Company's interest in the 2017 delivering FSRU new-build Nanook and the Company's investment in the Sergipe power project have been deconsolidated. The Company will use equity accounting for Golar Power from July 6 and results of this business unit are included within Equity in net earnings of affiliates in the Statement of Income discussed below.
Golar reported today a 3Q operating loss of $28.3 million as compared to a loss of $37.2 million in 2Q 2016. Both shipping rates and utilisation improved during the quarter with utilisation increasing from 31% in 2Q to 37% in 3Q and rates for TFDE tonnage approaching and in cases exceeding $40k/day. Total operating revenues increased from $18.4 million in 2Q to $22.3 million in 3Q. Voyage, charter-hire and commission expenses including those from the Cool Pool collaboration recorded a slight decrease from $12.2 million in 2Q to $11.7 million this quarter reflecting the small increase in utilisation. As in prior quarters, included in voyage, net charter-hire and commission expenses is $5.8 million in respect of the cost of chartering the Golar Grand.
Vessel operating expenses decreased $2.0 million to $12.1 million. Deconsolidation of post July 6 costs in respect of the Celsius and Penguin accounts for most of the reduction however lower insurance costs across the fleet also contributed positively in 3Q. Administration costs at $9.8 million were in line with 2Q. Depreciation and amortisation decreased $2.7 million to $17.0 million in 3Q, again due to deconsolidation of Golar Penguin and Celsius.
Relative to 2Q the above resulted in a $6.2 million decrease in EBITDA* losses from a loss of $17.5 million in 2Q to a loss of $11.3 million in 3Q and an $8.9 million decrease in Operating losses from a loss of $37.2 million in 2Q to a loss of $28.3 million in 3Q.
Net income summary
In 3Q the Company generated a net loss of $23.9 million. Notable contributors to this are summarised as follows:
- After stripping out Golar Power assets, consolidated Variable Interest Entities in respect of the six sale and leaseback financed vessels and non-cash capitalised interest adjustments, underlying 3Q interest expense is consistent with 2Q.
- Other Financial Items report a gain of $22.8 million compared to a $27.5 million charge in 2Q. A 2Q mark to market loss on the Company's Total Return Swap became a $16.5 million gain in 3Q following an increase in Golar's share price from $15.50 on June 30 to $21.20 on September 30. Increases in long-term swap rates also converted a 2Q $5.9 million mark-to-market loss on the valuation of interest rate swaps into a 3Q gain of $10.7 million.
- A $12.2 million non-cash loss was recognised on disposal of Golar Power, of which approximately half is expected to be recovered upon finalisation of the purchase price adjustment. This loss is based on estimates and is thus subject to change.
- Following a change in accounting treatment of the Company's stake in Golar Partners, Golar now accounts for its Common Units, General Partner Units and IDRs in the same way it has previously accounted for its Subordinated Units under the equity method of accounting. The Partnerships 3Q 2016 contribution to Golar's results is included together with the Company's 50% share of Golar Power in equity in net earnings of affiliates. The $15.7 million 3Q equity in net earnings of affiliates is comprised of a $2.7 million loss in respect of Golar's 50% share in Golar Power and net earnings of $18.3 million from the Company's stake in Golar Partners. However, the change in accounting treatment of the various units does not impact the distributions receivable by the Company so that its receipt of $13.2 million in cash distributions in respect of its investment in Golar Partners is consistent with recent quarters.
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