Golar LNG’s Earnings Call Highlights Long-term Strengths

Golar LNG Limited ((GLNG)) has held its Q1 earnings call. Read on for the main highlights of the call.

Golar LNG Limited’s recent earnings call painted a picture of a company with strong long-term prospects, bolstered by significant contract backlogs and operational excellence. However, there were concerns about the current EBITDA performance, which has been affected by market conditions, and potential undervaluation by the market.

Securing Long-term Charters

Golar LNG has successfully secured two 20-year charters, one for the FLNG Hilli and another for the Mark II FLNG. These contracts are pivotal as they ensure significant long-term revenue streams for the company, reinforcing its position in the LNG market.

Record EBITDA Backlog

The company announced an impressive EBITDA backlog of approximately $17 billion, excluding commodity exposure. This substantial backlog provides Golar LNG with long-term cash flow visibility, which is a testament to its strategic planning and market positioning.

Strong Financial Position

Golar LNG’s financial health is robust, with a market capitalization of around $4 billion and net debt of $800 million. The company maintains a solid balance sheet, evidenced by a net debt to EBITDA ratio of 2.8 times, highlighting its financial stability.

Operational Excellence

The FLNG Hilli has demonstrated operational excellence by achieving 100% uptime. Since 2018, it has delivered 132 cargoes and produced more than 9.2 million tons of LNG, underscoring the company’s operational capabilities.

Successful Refinancing

In a strategic financial move, Golar LNG signed a $1.2 billion debt facility to refinance FLNG Gimi. This refinancing is expected to generate net proceeds of approximately $530 million, which will support the company’s financial strategy.

Lower EBITDA Due to Market Conditions

The company’s total EBITDA reached $41 million in Q1, a decrease attributed to lower Brent and TTF prices compared to previous quarters. This highlights the impact of market conditions on Golar LNG’s financial performance.

Commodity Price Exposure

Golar LNG faces a downside exposure of up to $210 million if annual average FOB prices fall between $7.5 and $6. This exposure underscores the company’s vulnerability to fluctuating commodity prices.

Market Valuation Concerns

Despite its strong performance, Golar LNG’s Board has expressed concerns about the company’s undervaluation by the market. They hinted at exploring strategic alternatives if this situation continues, indicating proactive management.

Forward-looking Guidance

Looking ahead, Golar LNG is focused on transforming into a dedicated FLNG company. With the recent securing of two 20-year charters and an EBITDA backlog of $17 billion, the company is well-positioned for future growth. It aims to optimize its balance sheet, targeting a net debt to EBITDA ratio of 5 times, which could unlock over $1.9 billion of equity for growth initiatives, including new FLNG units.

In conclusion, Golar LNG Limited’s earnings call reflects a company with strong long-term prospects and operational excellence. Despite challenges in current EBITDA performance due to market conditions, the company’s strategic initiatives and financial stability position it well for future growth. However, concerns about market undervaluation remain, prompting the Board to consider strategic alternatives.