Golar LNG Limited (GLNG)
Q2 2012 Earnings Call
August 23, 2012, 09:45 am ET
Brian Tienzo - CFO
Doug Arnell - CEO
Jon Chappell - Evercore Partners
Michael Webber - Wells Fargo
Fotis Giannakoulis - Morgan Stanley
Martin Korsvold - Pareto
Rishav Puri - Linden Advisors
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Good day ladies and gentlemen and welcome to the second quarter 2012 results presentation conference call. For your information, 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.
Thank you. Hello everyone and welcome to Golar LNG second quarter results presentation. And my name is Brian Tienzo and I will be going through with you the second quarter highlights as well as financial highlights. I am joined here today by our CEO, Doug Arnell, who will take you through the business update and the outlook section.
On that note let’s turn now to page four and to go through our second quarter highlights. Consolidated operating income increased by 108% over Q1 to $58 million. Alongside that, we had net income increase of approximately 133% to $35.4 million.
Quarterly cash dividend been increased by 14% to $0.40 per share. That’s a jump of $0.05 from Q1 and again reflects the Board’s confidence in the company’s earnings capability. There were material increases in average time charter rates and virtual 100% utilization on charted vessels. There is also a significant decrease in operating expenses of 36%.
As announced during the quarter, Nusantara Regas Satu commenced charter on May 4th; the vessel there then completed commissioning and was expected on July 13th. She was subsequently sold out to Golar LNG Partners on July 19th. That SRU has been working well since completion.
Golar LNG successfully achieved an award for the Gas Atacama FSRU and again this amends the company’s profile as one of the leading FSRU solution providers and an FSRU project.
During Q3, Golar Maria re-charted on a voyage basis at historically higher rates. We expect longer-term contracts will be contemplated in the coming months. In July, Golar LNG Partners raised net proceeds from public follow-on offering of approximately $188 million as part of the Nusantara Regas Satu topline.
Let's now turn over the page to go through our financial highlights. Highlighted there are net operating revenue for the quarter of $103 million (inaudible) it’s been increased from $82.3 million from Q1. This is a result of full contribution from Arctic which is approximately $45 million in EBITDA; Grand, which is $39 million approximately in EBITDA and also vast contributions from Viking and Khannur, whose charter commenced during the quarter.
As operating expenses, we mentioned last quarter that the level at which we reported the $27.9 million was exceptionally, high that was particularly as a result of the reactivation cost we incurred for Hilli and the Gandria. In Q2 that level of expenses did not materialize and as a result our operating expenses for Q2 is at a much better level at $17.8 million. Those two factors have contributed to a 65% increase in EBITDA from $48.4 million in Q1 to approximately $80 million in Q2.
Our net financial expenses during Q2 have increased to $12.9 million from $8.8 million in Q1 and this is as a result of two factors, we only incurred partial charge of convertible bond interest in Q1, whereas in Q2 that was a full quarter charge. Similarly, we incurred mark-to-market losses on some of our interest rate swaps as a result of medium to long term swaps declining from levels of Q1 to Q2. All of those factors have contributed to our net income increase of approximately 133% from Q1 to $35.4 million.
Going down to the time charter equivalent rates, as you can see there, there is an increase of approximately 8% from Q1 of 90,464 a day to Q2 level of 97,118 a day. The utilization is slightly down from Q1 to Q2 as a result of idle time for Hilli and the Gandria. Also as announced, we increased our dividend by $0.05 from $0.35 in Q1 to $0.40 in Q2 representing approximately 14% increase.
Going over to page six, this basically highlights the three main metrics that we look at as far as performance is concerned. So from Q1 2011, as you can see the bar graph show that our net revenue as well as our EBITDA have been increasing steadily and as a result of that the Board has been quite confident in increasing the dividend levels to follow those trends. So obviously the increase from Q1 level to Q2 level is a much deeper increase from previous quarters.
We will now turn over the page to page seven to quickly go through our balance sheet. On the asset side, there are only two main movements really that we can point to. Cash and cash equivalents have declined from 31st March level and now simply because we paid a few installments as far as newbuilds are concerned as well as the completion of the Khannur conversion during Q2. That is obviously offset by the increase in vessels and equipments and again, main contribution there is the installments for newbuildings and the Khannur conversion.
Going over the page to the liability side of our balance sheet, one point to note there really just long-term a lot of numbers are pretty stable and really the main decrease there is a result of repayments during the quarter. At the bottomline of the presentation page, we have a fixed interest debt of approximately 83% and we’re averaging approximately 3.15% in weighted average interest.