Highlights
- Golar LNG Partners LP reports net income attributable to unit holders of $31.3 million and operating income of $58.7 million for the first quarter of 2015.
- Generated distributable cash flow of $40.3 million for the first quarter with a coverage ratio of 1.05.
- Strong operational performance with 100% availability of the fleet for scheduled operations.
- Completed the purchase of the Golar Eskimo FSRU for $390 million on January 20.
Subsequent Events
- Declared a 3% increase in distribution to $0.5775 per unit for the first quarter.
- Successful placement of a USD 150 million bond in the Norwegian bond market.
- Received bank commitments, subject to documentation, on a $180 million refinancing facility in respect of the Golar Maria and Golar Freeze.
Financial Results Overview
Golar LNG Partners L.P. ("Golar Partners" or the "Partnership") reports net income attributable to unit holders of $31.3 million and operating income of $58.7 million for the first quarter of 2015 ("the first quarter"), as compared to net income attributable to unit holders of $36.7 million and operating income of $63.2 million for the fourth quarter of 2014 ("the fourth quarter") and net income attributable to unit holders of $32.7 million and operating income of $53.8 million for the first quarter of 2014.
The $4.9 million increase in 2015 first quarter operating income over the same period in 2014 predominantly reflects a $12.2 million increase in revenue received offset by associated ownership and operating costs in respect of the Golar Igloo FSRU which was acquired on March 28, 2014 and the Golar Eskimo which was acquired on January 20, 2015. The Golar Igloo FSRU operates during a nine-month window that runs between March 1 and November 30. First quarter 2015 revenue therefore includes an additional 27 days hire in respect of the Igloo equivalent to $4.2 million and 71 days hire in respect of the Golar Eskimo equivalent to $9.6 million. Offsetting both was a $1.4 million revenue reduction in respect of the Golar Grand which was returned at the end of its contract by BG Group in mid-February and re-chartered to Golar LNG Limited ("Golar") at a lower rate in accordance with existing agreements. Vessel operating expenses, voyage and commission costs, administration expenses and depreciation and amortisation increased by a collective $7.2 million compared to the same period in 2014 primarily reflecting the additional 86 and 71 days ownership and operating costs of the Golar Igloo and Golar Eskimo respectively.
A decrease in revenue net of voyage expenses from $101.4 million in the fourth quarter to $98.5 million in the first quarter reflects a number of factors. The additional $9.6 million received in respect of the 71 days hire for the Golar Eskimo FSRU was offset by a $9.2 million reduction in revenue from the Golar Igloo FSRU due to two of its scheduled three months downtime occurring during the first quarter and the $1.4 million reduction in hire from the LNG carrier Golar Grand following the Partnerships' exercise of its put option to Golar at 75% of the vessel's existing rate with BG Group. The remaining $1.9 million reduction in revenue primarily reflects the shorter quarter (90 days versus 92 days) and a further depreciation in the value of the Brazilian Real and corresponding reduction in revenues for the FSRUs Golar Spirit and Golar Winter.
Vessel operating expenses at $15.6 million were $1.1 million higher than the fourth quarter cost of $14.5 million mainly due to the addition of the Golar Eskimo FSRU to the fleet on January 20. Administration expenses at $1.5 million were in line with the fourth quarter.
Net interest expense at $12.5 million for the first quarter was $1.5 million higher than the fourth quarter predominantly due to associated interest costs in respect of the assumption of $162.8 million debt and a $220.0 million vendor loan from Golar, following the Eskimo acquisition. No new swaps were entered into during the quarter and no existing swaps matured. As at March 31, 2015, the Partnership had undrawn credit facilities of $45 million.
Other financial items for the first quarter were a loss of $10.4 million compared to an $8.1 million loss in the fourth quarter. This included non-cash mark-to-market valuation losses on interest rate swaps of $5.9 million in the first quarter as a result of a decrease in 3-year and 5-year interest swap rates by 19bps and 24bps respectively. This compares to a $5.0 million loss in the fourth quarter.
Tax expense at $2.2 million was $2.5 million lower than the prior quarter. Most of the decrease is due to a $1.2 million reduction in the amount of deferred Indonesian tax released to the income statement.
The Partnership's Distributable Cash Flow1 for the first quarter was $40.3 million as compared to $48.3 million in the fourth quarter and the coverage ratio was 1.05 as compared to 1.29 for the fourth quarter. The decline in coverage is mainly due to the two months of no earnings for the Golar Igloo during its scheduled winter downtime.
1Distributable cash flow is a non-GAAP financial measure used by investors to measure the performance of master limited partnerships. Please see Appendix A for a reconciliation to the most directly comparable GAAP financial measure.
Acquisitions
On January 20, 2015 Golar Partners completed its acquisition of the companies that own and operate the Golar Eskimo FSRU for $390.0 million. The Partnership financed the purchase price with $7.2 million of cash on hand, the proceeds of a $220.0 million loan from Golar and the assumption of $162.8 million of outstanding bank debt in respect of the Golar Eskimo on the closing date of the acquisition.
Delivered from builders Samsung Heavy Industries in December 2014, the FSRU went on to complete a series of modifications to make the vessel compatible with the terminal being constructed in Aqaba, Jordan. In connection with the acquisition, the Partnership also entered into an agreement with Golar pursuant to which Golar pays the Partnership an aggregate amount of $22.0 million starting in January 2015 and ending in June 2015 for the right to use the FSRU. Of the $22 million, $9.6 million was recognised in the first quarter and $12.4 million will be recognised in the second quarter. In return, the Partnership must remit to Golar any hire payments actually received with respect to the vessel during this period and, at Golar's request, charter the vessel to a third party prior to the earlier of the commencement of hire payments from Jordan under the Golar Eskimo Time Charter and June 30, 2015. Accordingly, Golar will receive all revenues in connection with a 20-day voyage charter entered into in early May for the collection of the vessels commissioning cargo, any hire received between May 26 and June 30 under the ten-year time charter with the Government of the Hashemite Kingdom of Jordan and approximately $9.2 million of revenue in respect of fees relating to the later-than-scheduled start-up of operations in Jordan.
The transaction has been accounted for as a business combination and the determination of the fair values of the assets and liabilities acquired from Golar are currently provisional and will be finalized in due course.
Corporate and other matters
In January 2015 the Partnership and Golar announced the pricing of an underwritten secondary offering of 7,170,000 common units representing limited partner interests in the Partnership offered by Golar at a price of $29.90 per unit. The Partnership did not receive any proceeds from the sale of common units in the offering, and the number of common units outstanding will remain unchanged. Golar will use the proceeds of the sale to reinvest in its GoFLNG floating liquefaction projects.
On April 27, 2015, Golar Partners declared a distribution for the first quarter of $0.5775 per unit. This represents a $0.015 or an approximate 3% per unit increase from the fourth quarter 2014 distribution and brings the quarterly distribution up to a level that was recommended by management when the acquisition of the Eskimo was announced in December 2014.
The first quarter dividend was paid on May 14, 2015 on total units of 62,870,335.
Operational Review
Once again, Golar Partners fleet performed well during the quarter with 100% utilisation of all vessels during their scheduled operations. No vessels were drydocked during the quarter, although the Golar Igloo took the opportunity of its winter downtime window to undergo some guarantee claim work performed by the shipyard in drydock. The Golar Freeze FSRU commenced its drydock after the quarter end and management currently expects to incur approximately 30-40 days of offhire during the second quarter in respect of this FSRU. The Golar Grand represents the only remaining vessel in the fleet scheduled to be dry-docked before year end.
The Golar Eskimo has arrived in Jordan having collected an LNG cargo and is preparing to commence commissioning.
Financing and Liquidity
As of March 31, 2015, the Partnership had cash and cash equivalents of $55.4 million and undrawn revolving credit facilities of $45 million. Total debt and capital lease obligations net of total cash balances was $1,301.4 million as of March 31, 2015.
Based on the above net debt amount and annualized2 first quarter 2015 adjusted EBITDA3, Golar Partners debt to adjusted EBITDA multiple was 4.0 times. This ratio is expected to decrease as a function of attaining a full quarter's earnings for the Golar Igloo and Golar Eskimo.
Subsequent to quarter end, the Partnership has received bank commitments, subject to documentation, for a $180 million facility comprised of a $150 million term loan and a $30 million revolving credit facility. The facility will be used to repay approximately $134 million of long term debt, that matures in 2015 and the $20 million revolving facility provided by Golar. The signing of the loan documentation, drawdown and repayment are expected to occur before the end of the second quarter. Secured against the Golar Maria LNG carrier and Golar Freeze FSRU , the facility will have a tenor of 36-months, the $150 million term loan will be repaid in 12 quarterly instalments plus a balloon payment of $114 million at maturity and the facility carries interest at LIBOR plus a margin of up to 195bps.
As of March 31, 2015, Golar Partners had interest rate swaps with a notional outstanding value of approximately $1,035.2 million (including swaps with a notional value of $227.2 million in connection with the Partnership's bonds but excluding $100 million of forward starting swaps) representing approximately 76% of total debt and capital lease obligations, net of restricted cash. The average fixed interest rate of swaps related to bank debt is approximately 2.07% with average maturity of approximately 2.9 years as of March 31, 2015. Subsequent to the quarter end Golar Partners has entered into a $100 million 2.0679% fixed rate non-amortising interest rate swap with a tenor of 7 years.
As of March 31, 2015, the Partnership had outstanding bank debt of $989.9 million with average margins, in addition to LIBOR or fixed swap rates, of approximately 2.46% and a Norwegian Krone (NOK) bond of $161.3 million with a fixed rate of 6.485%. The Partnership has a currency swap to hedge the NOK exposure in this bond. As the US dollar has appreciated against the NOK the value of the bonds in USD terms has fallen whilst the swap liability has grown. The total swap liability as at March 31, 2015, which also includes an interest rate swap element, was $73.7 million. The Partnership also has a $220 million vendor loan from Golar entered into in connection with the acquisition of the Golar Eskimo. The vendor loan has a tenor of 2 years and an average interest rate of LIBOR plus 2.84%.
On May 11, 2015 the Partnership launched a USD 150 million five year non-amortising bond in the Norwegian bond market. The oversubscribed issue successfully priced the same day at LIBOR plus 4.4%. Golar Partners subsequently entered into interest rate swaps to hedge the aggregate principal of the bond such that the all-in interest cost for the $150 million will be approximately 6.275%. The net proceeds from the bond issue are expected to be used to repay debt, including vendor loans, and for general corporate purposes. Golar Partners expects to refinance the balance of the vendor loan ahead of its maturity in January 2017 and continues to monitor the secured Term Loan B market with this in mind.
2Annualized means the figure for the quarter multiplied by 4.
3Adjusted EBITDA: Earnings before interest, other financial items, taxes, non-controlling interest, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure used by investors to measure our performance. Please see Appendix A for a reconciliation to the most directly comparable GAAP financial measure.
Outlook
Operating earnings and distributable cash flow coverage ratio are expected to improve in the second quarter as a result of a number of factors. The Golar Igloo is expected to be earning for the whole of the second quarter as compared to only 31 days in the first quarter as a consequence of the vessels winter downtime period. Having been acquired in January the Golar Eskimo is also expected to provide a full quarter of operating earnings in the second quarter. Offsetting this will be expected offhire time of approximately 30-40 days for the Golar Freeze due to its drydock in the second quarter as well as a full quarter of reduced earnings for the Golar Grand given its new contract rate. As noted above there are no further dry-dockings planed in 2015 other than the Golar Grand.
Following the acquisition of the Golar Eskimo, Golar Partners has a total order backlog of $2.5 billion with an average remaining contract term of 5.7 years, as at March 31, 2015.
Golar Partners distributions have increased approximately 8% for the full year 2014 and approximately 3% thus far in 2015. Further growth via acquisitions will most likely come from vessels within Golar's fleet of 11 modern LNG carriers and 1 newbuild FSRU that get contracted on a long-term basis in the coming years. Currently the most likely first of these is a potential long-term contract for the Golar Tundra FSRU commencing in 2016. However, Golar Partners have in recent months also been involved in specific discussions with regards to acquiring LNG assets under long term contracts from third parties. To date no agreements have been reached mainly due to differing views on valuation.
Golar LNG has recently announced that it has entered into a heads of agreement for its second GoFLNG new building project. Golar Partners sees Golar's GoFLNG liquefaction projects as an extremely interesting growth prospect given the high margin and long-term nature of these assets.
With first class operations, a solid revenue backlog, a strong balance sheet and a good coverage ratio the Partnership is very well strategically positioned. Given with the opportunities the Partnership foresees, particularly for FLNG and FSRU assets, the Board is confident that Golar Partners can deliver profitable growth in earnings and increased distributions to its unitholders over the coming years.
May 27, 2015
Golar LNG Partners L.P.
Hamilton, Bermuda.
Questions should be directed to:
c/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo - Chief Finance Officer
Graham Robjohns - Chief Executive Officer
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Golar LNG Partners L.P. via Globenewswire
