Golar LNG Earnings Call NUGGETS: MLP Growth, Chilean FSRU
On Thursday, Golar LNG, Ltd. (NASDAQ:GLNG) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Jonathan Chappell – Evercore Partners: Couple of quick charter questions. So, first with the new buildings, you’ve laid out pretty well in the press release the markets still backward dated and you expect that to narrow a little bit. But just wondering about how early you would want to think about chartering some of those, and the reason I ask is, after the drop down of the Regas Satu, it doesn’t appear that there is any assets that would fit the qualifications for a GMLP dropdown. That obviously was a very successful transaction. It helps to lower your cost of capital, so would you potentially take one or two assets, maybe charter them a little bit before you typically would, just to kind of lock in that revenue security and added the GMLPs growth story?
Doug Arnell – CEO: Maybe not a simple answer to that one, John. But I mean, first of all I think we’re pleased with the growth that we’ve provided to the MLP so far. I think our annual dividend growth rate is something like 11.6%. So, that’s a little bit better than we kind of projected when we started out with the MLP. Secondly, you’re right. I mean there is no contrast that are existing, that fit that model, but there are certainly assets upcoming that have the potential to fit the build for the MLP prior to the newbuildings coming out. So, the Maria for example is open and the Viking will come open in the spring time. So, just as a hypothetical, if we in the next near term achieve the charter for Viking that extended out for reasonable length of time, we could execute that dropdown whenever it made the more sense, same with Maria. I think that one thing is for sure, we have to be pragmatic about how we play the shorter medium term charter market against that need to keep the MLP growth intact and the bottom-line is we have to do both and so far we’ve been pretty successful at it and with the number of assets we’ve got for to support the MLP it’s not something that we’re entirely worried about and certainly given that we’ve just done the Nusantara dropdown we feel we’ve done our job there a little bit and aren’t sort of pushing the panic button in any way to feed the MLP in the very, very near term.
Jonathan Chappell – Evercore Partners: Couple other quick ones. So I just wanted to be sure the Gandria and Hilli are they not (implatted) alright now even on the spot market, you’re just kind of holding them for the winter months when the market may tighten a little bit?
Doug Arnell – CEO: They haven’t traded at all. They are both in Asia, they are both warm. Where we’re looking for that right first charter for both of them and which we’ll have to include a gas up and cool down and the appropriate type of voyage for that generation of vessel. I wouldn’t say we’re holding them back we’re certainly active in looking for business for them now.
Jonathan Chappell – Evercore Partners: Are they still generating operating cost at a similar than what they would be when operating or is there a much lower cost basis while they are warm last?
Doug Arnell – CEO: It’s not a lot different. Two-third of the operating cost or so is crewing which when they have got anchor you generally have them fully crewed maybe slightly reduced. So, it’s somewhat but not materially.
Jonathan Chappell – Evercore Partners: Then just can you give us a sense of what the Maria has been earning in the spot market, I mean it’s not the most liquid market in that world but for the – a couple of different numbers over a wide range, so if you can just give any clarity on that, that’d be helpful.
Doug Arnell – CEO: We don’t release charter rates typically. There’s been some numbers in the press and they are generally about right. It might be a little bit hard.
Jonathan Chappell – Evercore Partners: Then, last one before turning it over. I know you can’t speak much about the FSRU tenders that are hopefully coming up later this year, the terms or the timing. But are they somewhat similar as we look at Atacama? Are they similar to those type of the terms from a rate and duration perspective?
Doug Arnell – CEO: Certainly, from a duration perspective, yeah, they are – well, I’d actually say there’s a mix that certainly the most attractive ones that are the long term charters. There could be actually some five year type deals out there which you would expect the rates to be a little bit higher to compensate for the shorter term. The other interesting thing is that on at least the couple of the opportunities that are coming up, they would actually going to service before and significantly before actually the Gas Atacama FSRU would.
Michael Webber – Wells Fargo: Just want to follow up on first on the Chilean FSRU and potentially converting one of your newbuild slots. Can you give us kind of idea about the incremental capital that would be required there? I mean, stopping short of just applying the multiple on EBITDA, you guys have already thrown out potentially for the FSRU, but just how should we think about the incremental capital that you guys will need to raise above and beyond what we might be expecting for the traditional newbuild?
Doug Arnell – CEO: Michael, that’s a tough one to answer. It’s obviously extremely sensitive competitive information. I think we’ve talked about enough about our kind of what the speculative FSRUs are running and that, the Gas Atacama vessel will be slightly more expensive than that.
Michael Webber – Wells Fargo: I may have missed this in the release, I don’t think I did, did you guys give an update on the vendor financing you guys have in place for the Satu and how’s that process in terms of securing longer term financing is going?
Brian Tienzo – CFO: Certainly for Nusantara Regas Satu, I mean we said that there is a sort of a process in place to try and refinance that before the end of the year. For the vendor financing in respect to Freeze, I think obviously we are constantly on the lookout for the best way of refinancing that. We do have a term within the vendor financing that allows us to keep it for three years, but I think we are as long as long as the market is there to try and refinance in an efficient way, then we will go there, but currently, we’re just monitoring market at the moment. But for Nusantara Regas Satu, there is a near-term process to try and refinance that.
Michael Webber – Wells Fargo: We’ve heard from some players in the offshore space about tightening lending environment actually impacting their ability to refi some assets that actually have decent charters on them. I mean, have you guys noticed a shift in the net financing, in the financing market there, is that impacting your ability to do unsecured longer term financing at all?
Brian Tienzo – CFO: No, not really. I mean certainly, we’ve been talking to banks and we talk to them quire regularly to also gauge the appetite out of it and the message comes across really well which is that if you’ve got a decent charter and hopefully a long term charter then you’ve got a long list of banks that are keen to get involved in that project.
Michael Webber – Wells Fargo: Last quarter you guys put the share repurchase program out there with the $45 price target on it, I know here it didn’t hang out in the mid to low 30s for too long, but it’s noticeable that you guys didn’t buyback any shares during the quarter instead raising the dividend. Can you talk a little bit about that thought process and how you think about implementing that going forward?
Brian Tienzo – CFO: Yeah, I mean certainly it was the proposal that was made and the Board took it on. It wasn’t as previously mentioned in previous quarter. We didn’t have a specific timelines to when we would effect it. I think obviously the Board is there and constantly monitoring the situation as you can see Golden Ocean did a similar sort of strategy and we have that at the back of our pocket. I guess the one thing to note of course is that the dividends have gone up and I think given that and the near term visibility of our increased earnings we can see that at least the dividends will be maintained.