Golar LNG Ltd GLNG
Q1 2013 Earnings Call Transcript
Transcript Call Date 05/30/2013

Operator: Good day and welcome to the Golar LNG, Ltd. Q1 2013 Results Presentation. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Tienzo. Please go ahead, sir.

Brian Tienzo - CFO: Thank you for that. Hello everyone and welcome to Golar LNG's first quarter 2013 quarter results. My name is Brian Tienzo, and as per usual we'll be taking you through the first quarter highlights as well as the financial highlights also. I'm joined here also by our CEO, Doug Arnell, who will take you through the business updates and summary and outlook sections.

To kick off, let's now turn to Page 4 for the Q1 2013 highlights. As previously announced, Golar LNG Limited now deconsolidated the results of Golar LNG Partners and on the basis that the results of Golar Partners are no longer consolidated, Golar LNG reports operating income of $75.9 million and net income of $85.6 million also. To the extent we are in a transition period for – looking at the results of Golar LNG limited we will also look at the comparative consolidated numbers of how the numbers would have looked like had we continued to consolidate.

Further on, Golar Partners completes its third follow-on equity offering raising net proceeds of $130 million in February. This is by virtue of issuance of $3.9 million units due to public. GP maintains 2% shareholding of GMLP and as a result of this equity raising Golar now owns 50.9% of GMLP.

Golar LNG limited sells its interest in the Company that owns and operates the Golar Maria to Partners for $215 million. This was partly funded by the public offering that Partners did and also assumption of $90 million worth of debt associated with the asset. Subsequent to the dropdown, GMLP increased its dividend to $0.515 per quarter and significantly Golar now has triggered the 25% IDR threshold as part of the increase of distribution from GMLP.

Results on a consolidated basis were affected by the Golar Spirit, completion of drydocking. It was on drydock until up to the 26 of February. We also announced during Q1 that Golar has been chosen as preferred dealer for Jordan FSRU and the Time Charter negotiations and discussions are progressing well.

Finally, the Board declares increased dividend of $0.45 for the quarter. This is despite volatility outlook of the next couple of years and Board has communicated its intention to maintain this level of dividend. To-date, since the IPO of MLP, Golar LNG's dividend has grown by 80% since Q1 2013.

Moving now to Page 5 for the subsequent events, on which Doug will go through in much more detail later. Golar has agreed terms to participate in the Douglas Channel LNG project, with a view of reaching FID in Q3 2013 and start up for the project of late 2015 or early 2016.

Two factors that are likely to impact earnings on a consolidated basis in Q2 will be the Golar Winter drydocking and its modification work. Furthermore, Hilli and Gandria entered layup earlier on in Q2 also.

Turning now to Page 6, this is really just to go through and highlight the differences resulting from deconsolidation of Golar Partners. So, as previously announced the Company has determined that Golar Partners is required to be deconsolidated effective from 13th of December 2012, which as a result of the change in composition of Directors of Golar LNG Partners. The Q1 results, which we made public today, reflect the deconsolidated basis, but for the purposes and to help inventors analyze the underlying performance of the group, we are also showing consolidated basis to help out with that.

As previously mentioned, the main impact of deconsolidation are; one, to derecognize the assets and liabilities associated with GMLP, which is then replaced by recognizing the fair value of its investments in Golar Partners. Furthermore, future dropdowns will be at fair value versus the common control treatment of previous transactions and gains and losses arising from those dropdowns will be recognized. Cash distributions received from GMLP derived from ownership of common units, GP units and IDRs will not be recognized as dividend income in Golar's books.

More importantly though the Company reiterates that cash flows in respect of its relationship with GMLP will not be affected. As we mentioned there in the footnote, we have included some appendices to the presentation to help out understanding how the various treatments of investments are shows in the books.

Turning over to Page 7, so we've got three blocks of columns there I will start-off with the middle block under the consolidated columns and look at Q4 2012 versus Q1 2013 to show what the underlying performance of the Golar Group look like. So, net operating revenues for Q1 2013 are $105.5 million, slightly lower than $107.5 million as in Q4. This is affected mostly by the Golar Spirit drydocking which was in drydock up to the 26th of February, but to some extent mitigated by a full quarter revenue earnings by the Golar Maria under its new time charter. To mitigate the reduction in revenue in Q1, we had lower operating cost in Q1 versus Q4, and within this operating cost are included are crew employment cost in respect with preparation for the upcoming newbuilding deliveries.

In Q1, 2013, we – within the $21.6 million of operating cost, $1.4 million is related to the Korean employment cost of newbuildings in Q4, 2012, $3.2 million of that is in relation to building up a crew for the newbuild deliveries. Furthermore, administration cost for the quarter is also lower by approximately $2 million.

Moving down the left going down to net income as a result of slight decrease in revenue, savings in operating cost, savings on OpEx and some extent also some savings in net financial expenses, we had a net income number of $39 million on a consolidated basis.

Further down the left, now looking at the time charter equivalent as a result of the Golar Maria on charter for most of the quarter, the time charter equivalent for Q1 2013 at $94,748 is better, has improved versus the Q4, 2012 at $91,479 per day. Utilization also improves again mostly because of the Golar Maria full employment during the quarter.

Going now to the standalone deconsolidation numbers, the net operating revenues simply all the five vessels now left at Golar LNG Limited, which are Gimi, Hillii, Gandria, Viking and Arctic, similarly operating expenses, reflect those five vessels operating expenses, but as I mentioned earlier any drop downs now between Golar Partners and Golar LNG Limited will be reflected at fair value, which because of the Golar Maria dropdown in February, Golar LNG Limited now reflects a gain of $65.2 million during the quarter.

Just to note of course that not all of the gains recognized in the quarter, some of the gain is deferred by virtue of certain investments in Golar LNG Partners and that amount of deferral will be amortized over time. Nevertheless, regardless of whether it's a standalone basis on a consolidated basis Golar LNG Limited declares an increase in dividend of $0.025 to $0.45 in respect of Q1 results.

Going over to Page 8; these highlights really just the various treatments of the Company's investments in Golar LNG Partners. So now we have three different treatments as far as the different investments are concerned. Now looking at investments and available-for-sale securities those are essentially representing the common units that Golar LNG Limited owns. Investment and affiliates represents the subordinated units that Golar LNG Limited, also Partners. And finally the cost method investments is where the IDR and GP units now sits.

Obviously these numbers will move according to if and when Golar Partners issue additional units and of course the investments and available-for-sale securities will be remeasured every quarter.

Going over to Page 9, as the result of the deconsolidation, the debt associated with the vessels at Golar LNG Partners now move away from Golar LNG Limited's balance sheet, hence majority of the highlights here is really just showing that's majority of those debts and now out of Golar LNG's balance sheet and will be solely reflected at Golar LNG Partners.

Lastly, the last highlight there is that Golar LNG Limited stockholders equity which jumped from Q3 2012 from $841,000 to $1.7 million in – to end of the year 2012 simply because of the gain recognized as a result of the deconsolidation.

Going over to Page 10, as mentioned in earlier, the cash flows as far as the relationship between LNG Partners and Limited are unaffected. Hence, any gains or losses arising from the transactions between the two are then added back to get to our operating activities. As again, the second highlight there is just to show the number of free delivery installments in respect to the new building program that is paid during the quarter.

Going now to Page 11 and to discuss the financing on a new build program, we continue to progress in financing its program and to-date the discussions have been proceeding very positively. Today, the Company has paid approximately $700 million in pre-delivery installments. It will continue to – there will be another $100 million prior to the first delivery in August. Against that, the Company has cash reserves today of approximately $270 million.

Now the strategy as far as funding, the deliveries are concerned, haven't really changed. We have had very positive discussions and continuing toward refining structures with the ECA. Mentioned there, they are engaged in a financing plan in respect of number of deliveries is being structured and now in much progressed discussions with them. To the extent that discussions have been going very positively, we have had more than sufficient interest from banks and ECAs compared to the number of – to the financing that we're looking for, for the initial deliveries.

We've also been discussing various proposals put forward to us by banks when it comes to funding some of those deliveries by bond transactions. We have today signed a termsheet in respect of one vessel – financing one vessel. We are working through the documentation. And finally, one thing of course that we mustn't forget is the dropdowns to GMLP today. The funding that was resulting from GMLP dropdowns has generated more than $1 billion and of course with the deliveries of the vessels coming through the Company is confident that further dropdowns will occur. This of course alleviates and assists the funding program for the new deliveries.

Finally, a big portion of the financing that's mentioned above is certainly going to be in place by the time the first delivery comes out to the yard.

I'll now handover the presentation to Doug, who will go through the commercial and outlook section of our press release today. Doug?

Doug Arnell - CEO: Thanks, Brian, and good morning and good afternoon everybody. I would like to start off on Page 12. Again, as Brian mentioned briefly, as part of our earnings presentation today, we are announcing that Golar has entered into a firm agreements with respect to the Douglas Channel LNG project. Now, we've talked about this project over the past few quarters, it's something we have been working off for some time, but I'll just review what the project is. It is a project that will take competitively priced natural gas from Western Canada, exported by an LNG liquefaction facility, primarily to markets in Asia. We've been very attracted to this project from the beginning, since we first looked at it due to the assets that the project has, and those include firm existing pipeline capacity all the way back to a very liquid gas supply point.

The project also has a National Energy Board export permit in place for 1.8 million tonnes per year of export for 20 years. So, the combination of those two things and what we have now put in place, which we think is a very excellent partnership, makes for a very, very positive story. So, what we have struck in the past couple of days is a framework agreement between ourselves, the Haisla First Nation, the LNG Partners out of Houston, Texas were the original developers of the project and a major energy company, which will be named due course. Golar has taken a 25% stake in the project, which means that it will have a right to the eventual investment of at least 25% of the capital in the facilities and a right to 25% control of the off-take.

We're very excited as I say about this partnership. The large energy company which will be named later certainly provides very good market capacity for the project, and we also are very excited to be in partnership with the Haisla First Nation, who will work to ensure that the local community relations are handled in a very positive manner. The initial size of the project is 0.6 million to 0.7 million tonnes per year, which corresponds to the level of the pipeline capacity that's in place for the project and we expect that the project can be on-screen in late 2015 or early 2016. It should be said that the commitment that the partners have made presently is to fund all the required activities to take the project to it final investment decision. That means some detailed engineering and some regulatory work in order to lockdown the cost and schedule parameters of the project. We expect that the FID can be taken fairly quickly. It should happen within the third quarter of this year, but the investing community should be aware that the FID will be subject to receipt and positive finalization of EPC contracts and the receipt of required regulatory consents in order to construct and operate the project.

As I mentioned the project has an export permit which allows an export volume of 1.8 million tonnes per year. The initial project, as I said is 0.6 million to 0.7 million tonnes, so the partnership will begin investigation of an additional project to use up the rest of that export for let you the construction of another train and again Golar will have the right and the option to invest in a minimum of 25% of that train and the associated (indiscernible) rates. We are very excited about taking a step forward with our participation in this project. We believe Western Canada with its huge low cost to produce gas reserves in support of legal and government situation in place that this area is going to become a very major LNG export location and we are pretty proud that we believe we are in the first project that we'll export from that area.

So, moving on to Slide 13, of course, the Douglas Channel project is just the first and most major part of what has been strategy that we have been pursuing since more formally since last summer and that is to drive Golar's business presence further along the value chain in this case upstream into the liquefaction space. We believe that with our participation in that part of the value chain. We are able to extract the greater portion of the overall net value of bringing low cost gas to high value markets.

So, we continue the long as you know and as we've talked about in the past, we continue along with our work on the FEED study with Keppel for the conversion of our first floating liquefaction vessel. That work is on track to be completed by the end of July. Also, of course, we are in discussions with various potential gas suppliers and gas supplier regions. We have both other projects which will be sourced from pipeline quality gas in the Americas and we are also looking at stranded or flared gas opportunities in West Africa and other parts of the world.

We will continue on the path that we've taken in Douglas Channel where we will strive to retain partners, who bring unique assets to the table that will reduce the execution risk of the project. We will certainly be willing to trade down on equity percentage in the project, if we can increase materially chance of success for the projects.

The deals that we're looking at are extremely attractive from an economic point of view, but everyone should realize that the execution risk on the deals is great and there is lots of hurdles to get by before they become firm, but we certainly think they are very well – while working on we're very optimistic that some of them will come to fruition. We talked about forming a separate entity to pursue these projects, an entity that will have a very clear mandate to pursue the value proposition of these types of projects. We still have that intention, although probably a little bit later than indicated in our last quarterly call. We determined that given that the materiality of the funding requirements for the projects that we are working on is not very great at this time, and the fact that we are not quite finished with our feed work with Keppel let us to delay the launch of this entity in the pursuit of that strategy until the second half of this year, but we still do have the same intention.

Of course on all of these projects, one of the great side benefits of this is that we can leverage our franchises on the carrier side on the FSRU side, into full chain market propositions. And on every one of these projects including Douglas Channel, we will have the firm opportunity to provide shipping to the projects and we'll be looking for ways that we can also bring our FSRU franchised better on the deals.

Turning to Slide 14; we'll just step back a bit and look at the near term LNG market and how it's impacting on shipping at the moment. I think the story of the past year LNG industry and LNG shipping has been that certainly production levels have been well below in aggregates on what was anticipated due to just a lot of unexpected delays and outages in various projects. In fact 2012 saw an actual reduction, year-on-year reduction in total LNG produced which is certainly unprecedented in recent history.

Despite all that shipping rates have remained strong and the real reason for that is sort of displayed on that graphic on the top right hand corner where the Atlantic base and European price to Asian price spread has been fairly wide which of course tends to draw harbors to the east which increases the overall average tonne miles for the fleet this has kept demand quite strong for shipping and that’s why you are seeing generally that rates have remained very, very strong compared to historical levels.

We in 2013 would expect to see that trend continuing I think on the shipping side things will be improved by the fact that some of these outages and delays on new liquefaction production coming on will start to be work through and you'll start to see those volumes coming on and that the market should remain fairly strong for shipping through the rest of 2013.

Following on '14 and '15 no question it will be rebalancing period both to sort of catch up on shipping in terms of the current demand but also there is a lot of shipping coming on to the market that is destined to be serving the large quantities of new production that will be coming on late 2015, 2016 but as we can see from the graphic in the top left hand corner the shipping is as we've all expected and consistently have shown that the shipping – the new shipping capacity is coming on one to two years before the large production increases. Through that period of time, you will see Golar looking at the market in a pragmatic way. We'll look at mixture of short, medium and long-term fixtures until the new production hits the portfolios of the major industry players' requirement to add structural tonnage to their fleets.

Moving on to Slide 15, of course, a big driver of change and a big game changer for the LNG shipping market likely will be the U.S. LNG exports. Recently, we've had some good news with Freeport LNG becoming the second project to receive their DOE permit to export LNG to non-FTA countries. With that, combined with the Sabine Pass project, we've got 28 million tonnes per annum of nameplate export capacity. Why is that so important? If you look at the stats that we've given there and the bullet points and the differences in LNG carriers required per million tonnes of LNG, you can see that even if with an assumption of the Panama passage, you've got 1.5 LNG carriers per million tonnes per year. Just taking the first five projects that we think are the most likely to go ahead, that's 60 million tonnes per year and obviously that's a lot of vessels. So, it's very good news to see Freeport LNG becoming the second project to receive their permit. Obviously, we can't predict how the DOE is going to handle subsequent permits, but we remain very optimistic on U.S. LNG exports and their impact on carrier demand.

Turning to Slide 16, again showing the Golar Group portfolio including the Golar LNG Partner vessels. As we can see as the quarters go by, that top section of LNG Partners, the vessel count is going up and Golar LNG Limited's is going down, and that's just a sign of the success of what we said we would do with this corporate structure and utilize it as a capital raising vehicle for our newbuild program.

I will say that, we're very proud again of our operating performance in the quarter. All of those vessels excluding those that are currently going into layup and excluding planned drydock time, the MLP obviously likes very low risk to its operating performance and its revenue, and our technical operators have responded with a less than 1% downtime on the operating assets.

I'd also say that the LNG industry where safety is a paramount factor, obviously for ourselves and with our charters. Golar's superior safety performance continues our 12-month rolling long term incident frequency is zero. It effectively means we've had zero serious incidents since in the last 12 months, which is excellent.

Moving on to Slide 17 showing our open positions, coming up in the next years. Again, as I say, as we go through this rebalancing period, see a little bit of volatility in the market. We are still very optimistic, why, well, as you can see, we have most of our existing modern vessels chartered through 2013 and 14 with only the Golar Viking being the open position and we believe we can work that vessel into the market. The other three vessels Hilli, Gandria and Gimi, of course as many of you know, we're working on – always working on conversion opportunities including attractive floating LNG opportunities conversion of these vessels, so that's the destination for those vessels and we are optimistic to turn those assets into a valuable assets.

So, the vast majority of the fleet are ultramodern Tri-fuel diesel engine vessels which have a greater fuel efficiency and better boil-off performance in the vast majority of the rest of the fleet. So, we are quite optimistic about how these vessels will perform in the market. And as I say as the new large quantities of LNG production come into the market more and more longer term charter opportunities will present themselves.

Over to Slide 18, FSRU business continues to roll along very well. The FSRUs that are operating again are part of that less than 1% down time equation I told you about, so very good performance there. In terms of new projects and our two new build FSRU orders, of course, we announced that we were selected as the preferred bidder for the Kingdom of Jordan FSRU project. Those discussions had gone on very well to finalize agreements. In fact, the agreement is in final form and it is about to make its way through the Jordanian government approval process which we hope will happen quite quickly and that project will go firm. They are signing to put the FSRU into operation by the end of 2014 or early 2015, which is when we would expect to deliver the FSRU to them. That vessel is the Golar Eskimo which is the smaller of the two FSRUs, the smaller and later delivery of the FSRU. It is the 160,000 cubic meter FSRU. The larger 170,000 cubic meter vessel, the Golar Igloo is still available. It will be delivered this fall to us. It is the only uncommitted FSRU available before 2015. So, as you would expect, there is a great deal of interest on it. We haven't closed on anything planned for the vessel, but we're certainly in serious discussions with a couple of promising developers.

Gas Atacama, we are in discussion with that project certainly as many of you know, it suffered some significant delays from its intended go from date of the end of last year. It's certainly working through its requirement to sign up a long term power purchase agreements on the other side of their power plant before they can go ahead. We remain the exclusive provider of that FSRU, but the only way to describe the timing of that project is that it's in indefinite delay.

The FSRU market continues to expand an increase certainly the Middle East and South America our key development areas. India itself has multiple projects that are moving forward in various stages. So, we expect that FSRU demand will continue and we expect the goal and we'll continue to grow its FSRU weeks.

So, moving on to Page 19, that's wraps up my part of the presentation. Again, we've had an excellent quarter in terms of our results. We essentially hit the targets that we expected to with the exception of a little bit of extension to the drydock period for the Golar Spirit, but we had excellent uptime on our operating assets and continued superior safety performance.

Looking forward to Q2, there are some upcoming drydockings, which we've talked about, which has been coming up. And longer term, of course, as I've discussed as the newbuild fleet starts to get the market a little bit ahead of the new productions we will see some volatility in shipping rigs. We have grown the dividend this quarter again, highly the Board's confidence in the company's performance and the Board certainly does have the firm intention to maintain the current levels. The financing of the newbuild deliveries progresses positively. We've got offers in excess of what we believe is the financing requirement for the newbuild fleet, so we're quite confident that when we get to closing the financing deals ahead of deliveries later this year that we will have more than sufficient access to finance.

FSRU opportunities continue to expand. We expect the Jordan approvals to come through eminently and we could announce that we are firm in that project and we are short list on another two projects with our other vessel. Then of course our exciting announcement here that on the Douglas Channel project, our first entry into the liquefaction business, which we expect will be a major value-adder to the group. With that project -- add-ons to that project in future in that region and other similar projects worldwide. We will of course as I said schedule a launch of our new entity to pursue these types of projects. We will line-up that launch of that entity when we see the materiality of funding requirements for the Douglas Channel and other projects starting to rise and when we are more complete with our feed project with Keppel, so we have our technology, vessel, conversion, cost, and schedules more solidified.

So that wrap ups the presentation part for today. I'll now turn it over to the moderator for questions.

Transcript Call Date 05/30/2013

Operator: Jonathan Chappell, Evercore Partners.

Jonathan Chappell - Evercore Partners: Doug, my first question is about comments you made about the shipping potential with the FLNG business both Douglas Channel and any new potential opportunities there. How does the Golar arrangement work with your ownership stake in the structure do you get right of first refusal for shipping requirements or even FSRU's, is it up for competitive bidding are there any advantages to you being partner in the project when it comes to the shipping or maybe the FSRU's?

Doug Arnell - CEO: I think it's fair to say that it's more of a soft opportunity than hardwired right to put ships in Jon. I think it is a separate part of those projects generally so. If the offtake is being shared by other partners and though I will have an opportunity to put shipping into the project, but at market rates obviously. So we won't be able to do anything except what the market would otherwise provide. Now obviously when we are in the mix of a partnership and there is things that other people are providing and contributing to the deal. Golar will be seen as the provider shipping. So it does give us a leg up just that we are in partnership. But I wouldn’t say it's something that its contractual absolute right because that’s just hard to create without people being freighted they are going to pay greater than market rates. Obviously, if we're off-taking our own LNG, then that LNG will be on Golar ships.

Jonathan Chappell - Evercore Partners: Then also, Doug, you made some commentary in between quarters regarding potential fitting for some of the LNG newbuild with FSRU capabilities. But there wasn't any update in this call. You just had the two Eskimo and the Igloo in the fleet list. So are you moving forward with that and how does that kind of setup versus the FSRU bidding processes that you see over the next 18 to 24 months?

Doug Arnell - CEO: Yeah, we certainly were looking at what we could do as some of these FSRU deals firmed up for the two existing orders. We were wanting to trigger potentially a conversion of some of the later delivery carriers. I think the situation in reality is that for both of those FSRU vessels, as often happens, these FSRU projects just took longer than we had hoped to firm up and we didn't really want to press ahead with those conversions to FSRUs until we had firm projects with the existing orders, so we just sort of timed out on that. But for the very last vessel we are still kind of holding out a view that we may be able to convert that last vessel which is Hull No. 2056 for a conversion to an FSRU, but again we probably won't pull that trigger until one of the other deals is through.

Jonathan Chappell - Evercore Partners: Then I'll just ask one more and then I'll turn it over. There's been a lot of headlines regarding the softening of the market, and I think a lot of the numbers tend to focus on steam turbine engines. You mentioned again the fuel efficiencies of the dual-fuel or the tri-fuel, diesel-electric engines. Is there any way to kind of quantify when we think about looking at the current market rates and then what your ships may be able to earn as they are delivered with this new technology, the actual kind of spread as far as TCE is concerned with that new technology.

Doug Arnell - CEO: You can quantify, but there are variables and you know we've talked about numbers of $20,000 to $40,000 a day, which I think is a fair assessment. There are parameters that you – that are specific to the charterer which impact on where that number is. And that is related to how the vessel is being used, how much idle time it's having, at what speed do they want to use the vessel, is it slow steaming at a lot of the time or is it going at services speed lot of times. So, there is a lot of variables that depending on how the vessel is going to be used, impact that number. And then of course the chartering community sees that saving and says to themselves what we'd like to capture that saving and have it be a savings to our total shipping cost. So, in effect there is eventually some level of sharing that goes on between the owner and the charterer of these proceed savings, obviously is known and we're offering the ships with a better performance, so we're going to much as maintain the bulk of that savings, but obviously we have to offer some level of saving and to have them decide to contract for the vessel in the first place.

Operator: Fotis Giannakoulis, Morgan Stanley.

Fotis Giannakoulis - Morgan Stanley: I would like to ask a few more questions about the FLNG opportunity. And just to clarify, first of all, I saw that the total capacity of each FLNG is something like 2 million tonnes, when is these capacities expected to come online and what is it going to be supplied from?

Brian Tienzo - CFO: Fotis, I guess, you are referring to the converted mass vessel project, the Keppel project. Is that right?

Fotis Giannakoulis - Morgan Stanley: That is correct, yes.

Brian Tienzo - CFO: So, of course, the capacity of these units is depending on ambient conditions of wherever the vessel is located. So, it is hard to pin down, say the capacity is exactly specific number. But for planning purposes, you can think about a capacity for the vessel of up to 2.5 million tonnes per year. The design of the vessel will be modular, however. So, there will be four trains of approximately 0.7 – little under 0.7 million tonnes, to get you to that 2.5 million tonne level. And the reason we are doing it that way is because the opportunities that we are seeing aren't necessarily for the full 2.5 million tonnes and the gas supply and reserve levels that we are looking at aren't necessarily sufficient to use up all our capacity, so we want to be able to trigger whatever makes more sense for the first project when we build the first vessel. So, our approach at this point is to – we are trying to widen out the deal funnel, just in terms of your question about where the gas is going to come from. We are going to widen out the deal funnel and look at as many opportunities as we can and when we finish the FEED study in July, we will look at the market and decide how quickly you want to start building the actual vessel related to how mature the opportunity set is. We certainly aren't focused on just one project right now to give out for the first vessel. By the way, I mean, West Coast of Canada could be a next project – in Western Canada could be the first place for the vessel or it could be somewhere else in the Americas or it could be offshore West Africa. So, we've got multiple projects that we are looking at. All of them probably won't come to fruition, but a subset of (indiscernible) probably will and again we will look out at the market when we finish the FEED study and determine that what pace and what size to build the first vessel.

Fotis Giannakoulis - Morgan Stanley: Just to understand. How this FLNG connects with Douglas Channel project? I was under the impression that the Douglas Channel project will use one of FLNGs for the liquefaction. You also mentioned about this $500 million cost, what is this cost about? Where does this $500 million go to?

Doug Arnell - CEO: The first phase of Douglas Channel or the first project for Douglas Channel is 0.6 million to 0.7 million tonnes will not be one of the converting mass vessels. This is a good question for us, we should clarify that. That will be a barge-based liquefaction plant, proven technology all very standard equipment, but it will be barge mounted like we built in Asia and float it over to the Douglas Channel. Actually the decision has been made yet, it's not really on the critical path, but the barge will actually potentially be grounded near shore in the Douglas Channel or we will have the barge floating. But either way pretty simple barge. The project is a little bit small to do the full conversion of the mass vessel so the barge is just much more efficient. The $500 million of course will include that barge a little bit of pipeline facilities, metering facilities, a new jetty of course and LNG loading facilities would be the major components in that capital cost. That cost of course, that's one of the things we are going to be doing between now and final investment decision is to finalize the cost estimate and get down to a level of certainty that we're comfortable with and sign up BBC contracts to go ahead with the project.

Fotis Giannakoulis - Morgan Stanley: So given the fact that the total export license is 1.8 million tonnes, we should expect the second barge or expansion of the capacity of this particular barge. What would be the incremental cost, is it a pro rata increase or I would assume there are some savings for the additional capacity from the 600 to 700 tonnes per annum up to 1.8 million?

Doug Arnell - CEO: The same partnership that’s going to pursue the first barge. Has also agreed to begin preparation for looking at the next trading that would use up the rest of that export license, so you're looking at about a 1.1 million tonne per year project. There will likely be some common facilities that could be shared between the projects, but we've got work that out, it's likely a much improved rather than pro rata quotas it will be sort of the economic picture we'll certainly take advantage of some economies of scale on projects that's a little less than double the size of the original one, the cost won't be too dissimilar to the first project. That project does depend I might add on the expansion of the pipeline that we'll be using for the first phase, so the plan is to take the pipeline that we are using for the initial project. The company that owns that pipeline is beginning preparations for an expansion of that pipeline, if that pipeline expansion is successful that’s what will trigger the new project.

Fotis Giannakoulis - Morgan Stanley: Any relations to the FLNG, how do you view the funding of the FLNG and is this a project that Golar intends to develop on its own or we might see more partners and what would be the final take that you think that Golar will have in this investment?

Doug Arnell - CEO: Are you speaking about the converted vessel again for this.

Fotis Giannakoulis - Morgan Stanley: Yes, I am talking about the capital project yes?

Doug Arnell - CEO: We expect that there will be partners in certainly the first number of projects that we used to convert mass vessels for and certainly (capital) was a potential partner as well. It's on the list. When you look at the Douglas Channel situation and the kind of hurdles you have to overcome to make one of these projects work, it's really important to leverage your position to draw in either partners or contractual parties or relationship with people who bring attributes that can get you over the line. These projects are very difficult. They are very difficult to get permitted. They are commercially complicated. There's a large degree of commercial risk to deal with, so we will look to strategic partnerships in almost every project to increase the chances that we're successful on ever projects. I would say, 25% is about as low as we would go and that's where we're at on Douglas Channel at a minimum. If the opportunity to increase that share comes up we probably would do so, but that's not in our hands. But I would say, 25% is kind of a minimum participation that we would have and we'd probably look to be a little bit above that generally.

Fotis Giannakoulis - Morgan Stanley: And for this 25% minimum, I understand that it can be higher than that. You think that you have sufficient cash on hand and funding capacity at the Golar level or we might see some capital increase to fund this investment? And also, you mentioned about partners that you intend to bring along including Keppel. Could this partners be also financial institutions that they will seek to invest directly into the Keppel project?

Doug Arnell - CEO: Well, first off, there's no intention to raise equity – issue equity at the Golar level to fund any of this. We do have an intention to create a separate entity through which we would raise funding for these projects, but how we do that, there's a menu of options how that entity would raise money including project financing vendor financing separate equity raising, specifically this opportunity. So, we've not – at the Golar LNG level seeking to raise specific money for these projects. I'm not sure, quite what you mean about direct investment in the Keppel project by financial institutions. I find that unlikely. We generally – it's not – I don't think we'll be restricted in access to funds to purse these projects, but what we want to do is use our position what we've created with our projects is to bring in partners. Yes, they will bring money, but that's basically to make sure they've got a vested interest in making things happen. Those partners will bring along with funding, they will bring along position or a skill set or something of the like that increases the probability of a successful project.

Fotis Giannakoulis - Morgan Stanley: One last question about your shipping and FSRU activity, I don't think that you have given any guidance about the EBITDA of the Jordan project. Is the assumption that you can do during this call? And secondly about the Viking that came out of contract?

Brian Tienzo - CFO: On that point, Fotis, Brain here. I am thinking in respect of the EBITDA for Jordan, I think that we need to first get the full approval of the process and that's going through the process now. Suffice to say though that the EBITDA of the project isn't dissimilar to some of the numbers you have seen – that we have achieved in some of our FSRUs so far. So that should give you some sense of comforts of it.

Fotis Giannakoulis - Morgan Stanley: Regarding the vessel that came out of contract this quarter?

Brian Tienzo - CFO: So, in the outlook section of our press release today we mentioned that from Q2 investors should expect some down time for the Golar Viking. We mentioned a date of sort of 20 to 25 days. So, to some extent she is on hire for majority of the quarter, but there is a bit of sort of commercial waiting time in there also in between charters.

Operator: Michael Webber, Wells Fargo.

Michael Webber - Wells Fargo: I'll try to keep it to a couple. I wanted to go back and touch on Douglas Channel which is pretty well (tread) at this point, but you are coming in at a minimum of 25% investment and maybe I am curious sort of you can talk about what keeps that from being a majority stake in kind of how you arrives at kind of taking a minority interest, but still taking on risk in the project?

Doug Arnell - CEO: Well, I think that going forward there is four partners here in various rights to invest or not to invest. So, the opportunity is there if some of the other partners or one or more of the other partners do not subscribe to their full entitlement sort of investment that Golar would have the opportunity to step up. Yes, it is a minority stake, but there is also no one partner with the majority stake. So, there is – already agreed fairly fair and comfortable governance methodology which we are very comfortable with. The project (participant) here, the way we got this structured, there is really good alignment between the partner. So, interest of the parties are generally going to be not in conflict. So, we are quite comfortable with being able to manage our risk given a 25% stake.

Michael Webber - Wells Fargo: Guys, this is basically just kind of pro rata across the partners and there is opportunity, if there is void.

Doug Arnell - CEO: Yeah.

Michael Webber - Wells Fargo: Around I guess – and you talked to an FID in Q3 and I don't want to get kind of ahead of ourselves, but can you maybe, and forgive me if you've done it before already, but kind of layout a timeframe around when you and your partners would look to sell that gas forward into the market?

Doug Arnell - CEO: I think that's something I'll defer to this. Yes, I think I'll defer on that one, until we are able to be more open about who that other would be. The large energy company is on the other side which certainly factors into your question there. So, I think that it's just at a point in time where we prefer to discuss that one when we're closer to or moved on a little bit down the path towards FID dates.

Michael Webber - Wells Fargo: That makes sense. I wanted to quickly I guess kind of touch on I guess the barge versus the Moss tank conversion solution. And I know it's been kind of going back and forth for a while and it feels like you guys settled on a barge solution, but – and I guess, if it's $500 million for the first investment and then other $500 million for (train two) give or take. It seems like that would come in north of what you could provide with the Moss Tank solution is based on what I believe are the conversion cost there or the ballpark conversion cost. Are there other factors that kind of drive you towards that barge solution I think maybe environmental or what have you to kind of facilitating for expedited approval to the Canadian government, is there another factor there besides economic.

Doug Arnell - CEO: It's probably the biggest factor. It's the second project requires a big expansion of that pipeline, which probably of all the risk factors of all the things that have to get permutated on this sort of package of deals that one is the one that we'll be watching the closest and most, most concerned about. So, the timing of receipt of that permit for the expansion of pipeline, which would allow that second project to go ahead is to be honest a little bit uncertain at this time. So – they are the vessel, which assumes that all is going to happen and happen in 2015, you may run a big risk of building way too much capacity for the amount of gas you can get there. So it's simply a matter of the fact that prudent call was to just build what we need for that first phase because it could be that that's we don't think so, but it could be that that's all shows up in the end.

Michael Webber - Wells Fargo: One more for me and I'll turn it over. I know you guys have kind of talked to this in the past and might be a bit premature, but the assets you would be providing towards Douglas Channel, are those going to be structured in an MLP friendly way? IS it something you eventually envision heading down to the GMLP provided all those according to plan and any color there and maybe we can divert that to the call in about I guess half an hour, but any thoughts around that would be helpful?

Doug Arnell - CEO: I think the way that the deal is structured now that is how we still look like that at FID which is what we anticipate will happen. There will be some asset investment certainly there would be likely MLP friendly. It certainly goes into our thinking into how we try to structure the deal.

Operator: Urs Dur, Clarkson Capital Markets.

Urs Dur - Clarkson Capital Markets: Very, very simple, most of this has been touched upon. You mentioned in the call that you have and it's good for investors taking all the questions about this that you have offers in excess of your debt requirements for your newbuilds is that the entire program or is that the upcoming five, six or…

Brian Tienzo - CFO: That’s for the entire program. So obviously taken us a little longer to get there but what we wanted to do is get a feel of the interest as far as the banking and ECI community is concerned and over the past couple of weeks as mentioned we've had positive developments and discussions on both sides of the ECI and the banking. And the extent we've always targeted that. Given that we've now paid up to $700 million of $2.7 billion. We are probably looking to $1.8 billion financing if you wanted to finance all of them and so when I say in excess interest – in excess of $1.8 billion that we are looking to do.

Urs Dur - Clarkson Capital Markets: Excellent and that’s really all I have I was wondering that maybe if you could give me call offline I've got a couple of modeling questions on the deconsolidations, so if you have time later that would be great.

Operator: Oyvind Berle, DNB Markets.

Oyvind Berle - DNB Markets: My first question is regarding the Golar Viking where you mentioned that it will be 20 to 25 days off. Does that mean that one, the vessel is going to charter and, if so, could you give us an indication of the rate in this vessel fee?

Brian Tienzo - CFO: I'm not in liberty to give you rates, Oyvind, but she came off charter just at the end of March and then she went in a voyage immediate or sooner after that. She has been on sort of commercial waiting time for a few days, but the expectation is that she now has an employment that will take us through most of June. So, although she wasn't employed throughout Q2, she was certainly employed for most of Q2.

Oyvind Berle - DNB Markets: Okay. My second question is, there's lot of speculation here on the rates are obtainable in the newbuildings and the Statoil charter coming up is fully one of the benchmark that the market is looking for. What is your expectations of, let's say, three to five year rates for the newbuildings from this fall onwards? Where is the market right now in your view?

Doug Arnell - CEO: I think that, I mean, we can all take guestimates of where we think the rates are going to be in six months' time. I think we preferred just do our talking through deals that we eventually signed up. Certainly, there has been three to five year deals on a newbuilding. There haven't been many of those, so it's really hard to say what's been done in the past. There has been some recent – a bit longer term rates, you know mid-80s kind of level. So, there I mean the market dynamic is going to change, that's the bottom line and we just need to play it through. So, it's really difficult to layout an expectation for you of specific numbers.

Oyvind Berle - DNB Markets: When you say volatility will go up, that means rates will go down, or am I misreading you here?

Doug Arnell - CEO: Means the predictability of rates is going to be increasingly difficult.

Oyvind Berle - DNB Markets: My final question is, could you just remind us what is roughly the CapEx for barge solution versus add-ons on an LNG carrier compared to output of the vessel?

Doug Arnell - CEO: Sorry, which figures were you looking for?

Oyvind Berle - DNB Markets: The CapEx for barge FLNG solution versus your Moss solution, the add-ons on existing LNG carrier. How much is roughly the CapEx for the unit itself? And how much will the output of unit be? Please.

Doug Arnell - CEO: Well, the liquefaction facilities themselves whether it's arch-mounted or added on to an LNG vessel are very similar. So, for example, you know it would be for 1 million tonnes, it would be probably under $500 million either way. So, and then you just – the installation on the – on to the vessel is another number, but it is not as material and then you are just left with whatever implied value the value the vessel itself has to give you the comparison.

Operator: Nathan Weiss, Unit Economics.

Nathan Weiss - Unit Economics: Two quick questions; one, on Douglas Channel, will you be taking the engineering lead will that projects believes to be partially based of the FEED work that you are currently completing?

Doug Arnell - CEO: We won't be taking lead on that, Nathan. It is a shared responsibility. Within the project we certainly will be participating in it with our partners. It does not specifically – we can't use the FEED work to build the barge in Douglas Channel, but it has been extremely helpful we'd be going through the FEED at this point because it is very, very similar equipment and design that's going on to the barge and it is going into our FEED study. So, kind of an indirect way, we've been able to advance things along quite smoothly and we will be able to do so on Douglas Channel because of the FED work.

Nathan Weiss - Unit Economics: Assuming that it will work both directions that your involvement there might also help your knowledge with other projects that you do later on?

Doug Arnell - CEO: Absolutely and like I say the next project in Western Canada could directly use the FEED work that we are doing at Keppel because we expect it to be a larger one that be more fitting for the converted mass vessel.

Nathan Weiss - Unit Economics: Second question, there is a lot of confusion in the marketplace about what the EBITDA generation or potential earnings of your liquefaction vessels could be? Can you spell out just a generic project in terms of say a 2 million tonne a year projects, would you expect to deliver roughly 90 Bcf a year and we could then translate that into at a given spread there $5 spread will be $450 million EBITDA or kind of how should we start to think about that?

Doug Arnell - CEO: Yeah. I mean we are trying to get our first sort of launch on to their, firmly on to the rails and get it closer to an actual full investment before we provide too much guidance in that way.

Nathan Weiss - Unit Economics: It's understandable. Yeah. I understand I am bad analyst I'm speaking about the projects today.

Doug Arnell - CEO: Yeah. Well, if you -- I mean there is some markers out there in the market, if you take the single previous liquefaction project on the U.S. Gulf Coast and look at that which is essentially framed as a totaling deal at rough figures we understand $3 per million Btu of throughput. You can -- as far as an asset investment that's a very good go-buy to use for some of the things we are looking at.

Operator: (indiscernible).

Unidentified Analyst: I have the question again also on Douglas Channel. My understanding was that this project with the Douglas Channel Energy Partners which were effectively LNG Partner LLC and the Haisla Nation it was recently announced two years ago, as well as the whole barge solution was announced two years ago. They did a FEED study on this Black & Veatch, they've got the license in February 2012. You guys are coming pretty late to the game when the Douglas Channel project, and were effectively, my understanding was, going to take the off-take, which was what you had announced earlier. Effectively we're either going to sell it to market or to some other and hence get involved with the project with providing the transportation services. It sounds like the transportation services is going to be at market rate, the off-take is going to be actually some big E&P there, presumably in Korea or Japan or something. These guys the Haisla Nation and LNG Partners LLC have been doing this for two years has effectively done a lot of work on this already. What are you paying to get involved with the project for this 25% stake at this stage? What is your FEED study regarding? If it is – if the FEED study is already been done on this project by these guys?

Doug Arnell - CEO: I think it's fair to say that the entrance of Golar and the other entity has allowed the project to take a fresh start. Yes, it has some things in place, some assets that have been developed by the original partners. But I can tell you that the project has been framed exactly how we wanted. We're very happy with the structure, we're very happy having the other partner in there as well. And as I said, we will certainly trade equity down in return for mitigating execution risk on the project I think that’s what we've done. I don’t think we ever announced that we would be taking the offtake from the project we certainly carved out rates to do so, with our early interaction with the project and we held on to those rates and we have leveraged them into position that we are very happy with. Not sure if that answers your question. But that’s…

Unidentified Analyst: My understanding is that project was effectively dead. Your involvement has revived it, now you are going to effectively bring it to fruition effectively is that correct way to put?

Doug Arnell - CEO: You are paraphrasing I never said the project was dead they have some very valuable assets that we are interested in and we brought what we could bring and the other partner probably what they did and the package I think will allow us to take the project forward. its attractive enough for us to and the rest of the partners to put some funding in to do the rest of the work required to take to FID markets some hurdles to get past and that’s what we are going to do. The amount of money we are putting in now is not very material, in relationship the total investments. So that’s how I would describe it.

Unidentified Analyst: That amount of money is effectively into the 25% stake that you are going to get in the project do you have to pay for this or is that part of your involvement and then you'll once you do a spin off something like you said many different ways you could do the funding that’ll come later?

Doug Arnell - CEO: There is no premium being paid by Golar or the other partner to enter the project any money that’s going in is for direct project cost.

Unidentified Analyst: On the question of that new builds arrive I guess, I know you said that you'll let market dictate rather than speculate where the rates will be now or six months from now or et cetera. Can we get some idea of when we could expect an announcement on contracts? Presumably, you will need contracts to take delivery of the vessels with the funding in place kind of financing you want to do as opposed to take them on spot or anything?

Brian Tienzo - CFO: Just to answer that question, I mean, certainly the financing structure is that, that we are looking at and which I've mentioned is, we have more than interest for what we are looking for, actually contemplates the vessels do not have charters. Now, that doesn't mean, of course, that we'll just leave them there at spot and not charter them. But what allows us to do is keep some flexibility as to what kind of employment we put the vessels into. So, chartering is not a requirement under funding structure that we are looking at.

Unidentified Analyst: So charter is not a requirement, but – okay, so we should not expect – I mean, you could take delivery of the vessel and with the financing in place without having a three or five-year charter?

Brian Tienzo - CFO: Correct. Yes.

Doug Arnell - CEO: Well, just to clarify. We can do that, it's not our goal. We are working hard to get employment for these vessels. It's just that we do have the luxury of being able to put this financing in place not dependent on new charters.

Unidentified Analyst: You said on the tri-fuel like the efficiency savings that you have to share with the charters, if you were to charter. I mean, if you were in spot you would keep them on for yourselves and you said that it's a negotiating process. Our experience from like eco vessels and product or in other places also tells us that the charters end up taking most of the upside. I mean, would you say that the negotiating process is any different for LNG, is it a better relationship as opposed to more commoditized spot market like dry bulk et cetera or…?

Doug Arnell - CEO: It is certainly different market than dry bulk. And also there is not a lot of historical experience to go by. I mean you – the last time you had a big wave of vessels came through was started 10 years ago. So, and I guess the technology change at that time wasn't so great as it is now, but since we're getting bigger, so it's – it's really difficult to point at something. And you know but that equation, how much savings you will have to give up to the charter in order to get charters done will quite frankly be mostly influenced by how tight the market is and how many options they have at that time. So, you know, everyone knows the savings are there, (indiscernible) because in the shipping discussion, they will be just, it will be a competitive process like always.

Unidentified Analyst: On the GasAtacama, you said project indefinitely delayed. Most people were expecting earnings to pick in from Q1 '15. Any kind of color on that, when we could expect some resolution?

Doug Arnell - CEO: Really difficult to say. It's dependent on things that are well removed from anything that we have control over as the project is tied to. And it's an existing power plant that the FSRUs would be supplying. In order to lock-in LNG supply and to pay for the charter itself, the power plant requires new long-term power purchase agreements from the large copper mines in Northern Chile, in order to for those power purchase agreements to be struck there, relying on expansions of those projects or expansion of those mines. And those expansions projects are all on the books. They have been talked about, they are visible, but when they get triggered, its' something that we can't predict. So, that's why our guidance is that we are kind of indefinite delay and the timing of – when and if it does trigger it is kind of trigger day and plus three years would be the time that earnings would start to hit.

Unidentified Analyst: Just one last question. We've seen with other liquefaction projects in Australia or Southeast Asia or Africa the delays and CapEx blowouts are extremely going well what do you think could be done to guarding those?

Doug Arnell - CEO: Floating LNG vessels. It is pretty clear that – one of the big advantage is for our floating technology is that you reduce your dependence on local labor and that's exactly what happened for floating storage and re-gas units. That's why the existence of FSRUs has accelerated the pace of new markets being open to LNG very greatly because of those type of advantages. You just have so much better cost control and financing alternatives. We just believe that the same impact will come on the liquefaction side and Golar will be in there leading the way in our own way, in our own size of projects. We are not building Prelude, (Shell) will go and do that for probably the other projects of that scale but we believe that these small scale projects for us there are multiple opportunities (to exploit) and won't be exposed to the kind of risks that the Australian projects have gone through.

Unidentified Analyst: So, on the barge you will be able to get an EPC contract to protect you from CapEx blowout?

Doug Arnell - CEO: Yeah, that's for sure what we will do, and that's the structure of the project that it is today.

Brian Tienzo - CFO: Sorry, before the moderator takes the next question, there is another presentation after this. So, could we just have the next question, as this is the last question for the Q1 Golar presentation please.

Operator: Eirik Haavaldsen, Pareto.

Eirik Haavaldsen - Pareto: Just quick one, you say you have -- and given your I'd say competitive advantage in the financing markets where you have offers in excess of funding environment as you say. Will you use that advantage perhaps in order to do some investment from existing newbuilds or existing units on the construction where the owners might not have that competitive advantage so to say or do you entirely focus on FLNG and FSRU investments going forward?

Doug Arnell - CEO: Well, as far as, I mean for ourselves, obviously we do have this hanging obligation of how to do try and finance and now to-date we've been pretty confident in making sure that it gets funded before the first delivery and certainly the positive outlook is that that we will have it in place before then. I think it's -- because the financing is predicated and secured on vessels it's very difficult to over finance yourself and use that for other strategic needs. I think more likely if there are any sort of opportunities out there then we will use other sources of funding from operations for example or sort of the bond market as mentioned earlier where the financing may not necessarily be secured in the vessels. Where the interest is more than requiring it's funding specific to the CapEx requirement with respect to the newbuildings and its predicated an involvement of ECAs and the banking community.

Operator: That will conclude today's question and answer session. I'd like to turn the call back to speakers for any closing or additional remarks.

Brian Tienzo - CFO: Thank you moderator and thank you very much everyone for your participation in this quarter's results. As always we look forward to again speaking to you again during our second quarter results sometime in August. Thank you and good bye.

Operator: That will conclude today's conference call. Thank you for your participation gentlemen. You may now disconnect.