Golar LNG Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 30, 2023

There are 8 speakers on the call.

Operator

Welcome to the Golar LNG Limited Q1 2023 Results Presentation. After the slide presentation by CEO, Karl Friedrich Stalbo and CFO, Eduardo Marinau, there will be a question and answer session. Information on how to ask a question will be provided I will now pass you over to Karl Friedrich Stalberg. Karl, please go ahead.

Speaker 1

Thank you, operator, and welcome to Golar LNG's Q1 2023 earnings results presentation. My name is Karl Friedrich Thabo, CEO of Golar LNG, and I'm accompanied today by our CFO, Mr. Eduardo Maranhao, to present this quarter's results. Before we get into the presentation, please note the forward looking statement on Slide 2. On Slide 3, We also reacquired New Fortress Equity Stake in the FLNG Hilli.

Speaker 1

We also sold the LNG carrier Golar Gandria and acquired the LNG carrier, Fuji LNG intended for FLNG conversion. Hence, our key assets continue to be the FLNG Hille operating for Perenco in Cameroon And the FLNG Gimi delivering later this year to start a 20 year contract for BP on the Tortue field offshore Mauritania and Senegal. With the acquisition of Fuji LNG, we are advancing the potential ordering of our 3rd FLNG, Which we intend to be a Mark II FLNG with an annual liquefaction capacity of 3.5 Mtpa. Turning to Slide 4 and highlights for the quarter. On the left hand side, starting with Hilli, As previously announced, we reacquired NFE's equity stake in Hilli for a total consideration of $100,000,000 Plus our remaining 4,100,000 NFE shares and taking over $323,000,000 of debt associated with New Fortress Energy stake in the unit.

Speaker 1

We also unwound our TTF hedges, locking in a total of $140,000,000 of operating cash flow on the hedges, whilst maintaining exposure to TCF Link production. We also agreed to compensate the 0.04 tons of under production in 2022 with a similar amount of overproduction during 2023. We're also pleased to announce that we have agreed and received credit approval and increase our free cash flow to equity from that unit. Eduardo will explain the amendments in further detail later in the presentation. Gimi is now 94% technically complete.

Speaker 1

Our sail away dates have been pushed from first half this year until Q3 this year to allow for time to fully complete the vessel, conduct increased testing at the yard Under business development, we have over the recent months seen significant increasing interest for our FLNG solutions and especially for recontracting of the FLNG Hilli, Given her second half twenty twenty six availability and proven operational track record. We're currently in discussion with several gas resource owners. This includes filing of a memorandum of understanding with NMPC C during the quarter to explore FLNG deployment on specific NNPC controlled proven gas resources in Nigeria. On the back of increasing commercial interaction for FLNG deployment, we have advanced yard and financing discussions Suezmax, we acquired the Fuji LNG as already described. Turning to the right hand side in Corporate and Others.

Speaker 1

Q1 financial highlights it includes a cash position of more than $1,000,000,000 adjusted EBITDA for the quarter of $84,000,000 Net cash proceeds from exit of NSE and Co Company of NOK 102,000,000. We bought back $20,000,000 of our unsecured bonds at par and agreed to amend the bonds to increase financial flexibility. Following the bond amendment, we have reinstated dividend payments and have approved to pay SEK 0.25 per share for Q1. Our target is to declare a stable and over time increasing quarterly dividend, And we will address our dividend outlook ambition in further detail later in the presentation. We have also approved $150,000,000 share buyback program.

Speaker 1

Turning to business development on Slide 6 and some further detail on Gimi. The majority of remaining works our piping, system testings and pre commissioning. As mentioned, expected sale away has shifted From first half until Q3 'twenty three, the updated sail away timing is not expected to impact 1st seed gas on the Tortue project. Due to overall project and FLNG delays, pre commissioning contractual cash flows have started. Parts of these contractual cash flows from BP to Golar is currently disputed, and we are now working to resolve the matter.

Speaker 1

The updated sail away date and pre commissioning cash flow dispute will have no impact on the wider execution of the 20 year project that is expected to unlock around $3,000,000,000 of adjusted EBITDA backlog to Golar, equivalent to an annual adjusted EBITDA of just around 100 and $50,000,000 Turning to Slide 7 and FLNG Business Development, Which is the most exciting area of our business. We experienced increased interest from gas resource owners for FLNG solution. We're currently in discussion with 5 to 6 gas resource owners for potential FLNG deployments. Our key priority is to secure a charter for Hilli at the end of the current contract expiring in July 26 To secure increased cash flow visibility, increased shareholder distribution before taking FID on a mark II FLNG. Several of the potential clients in discussions have resources sufficient to accommodate either Hilli or a Mark II FLNG.

Speaker 1

We continue to target commercial structures where we together with the gas resource owner focus on attractive cash breakeven liquefaction of stranded or associated gas field and share upside through commodity price offtake. Our fully utilized Hilli based on current LNG forward prices has an annual revenue potential in excess of $1,000,000,000 This will then be shared between the gas resource owner and Golar as the liquefaction provider. In April, we signed a memorandum of understanding with NNPC, which is one of the 5 to 6 gas resource owners described earlier. NMPC is Africa's largest domestic energy company. Nigeria is currently producing 33,000,000 tonnes of LNG annually.

Speaker 1

This compares to more than 4,000,000,000 tonnes of proven gas reserve Since signing of the MoU, both parties have allocated significant resources to develop a named JASWIND for a potential FLNG project, we've made material, technical and commercial progress. Overall, the MoU has a 5 year duration and both parties have an ambition to explore We find it best to start with one named one as opposed to try to tackle all at once. Continued progress is also made with other gas export opportunities, both in West Africa and South America. Turning to Slide 8. On the back of this increased charter interest, seeking to acquire the LNG carrier, 2G.

Speaker 1

The key advantages with the enhanced FLNG conversion candidate includes younger age and better sailing condition, increased cargo capacity, larger deck space and lower boil off. We continue to advance yard EPC discussions as well as progressing a debt facility for a mark 2 FLNG project. The final investment decision will be linked to charter visibility on the recontracting of Hilli and or Mark II FLNG. Turning to Slide 9 to further I'll highlight the earnings potential from integrated FLNG projects. We continue to see a very healthy margins for FLNG projects.

Speaker 1

We believe gas prices have reverted to a more sustainable level at the cost advantage to more polluting sources of energy, supported by long term visibility in the commodity forward markets. As described in previous quarterly presentation, We believe stranded or associated gas upstream opportunities can be developed between $1 to $3 per MMBtu in upstream costs. FLNG OpEx, including fuel costs, equate to about $0.60 per MMBT. Add shipping costs to end users in Europe or Asia, and you have a we delivered cash breakeven of between $3 to $5 per MMBtu. This compares to forward prices North of $10 per MMBtu indicating annual EBITDA for a fully utilized Hille of $550,000,000 or $875,000,000 for a mark to FLNG.

Speaker 1

We continue to believe in our business model where the majority of incremental supply over the next 5 to 10 years will be first from the U. S. And if you have a business with 3 key cost components, namely gas source cost, liquefaction costs and shipping costs and you're cheaper on all three components, we believe that's an attractive competitive situation. As you can see in the top right corner, this business model has an attractive risk reward in an historical context with limited downside and significant upside potential. Current forward curves are Turning to Slide 10, the world needs more and cheaper sources of L and D.

Speaker 1

Looking at gas prices over the past year, it has become clear that the world needs more LNG from a wider range of suppliers at cost competitive levels. While LNG may previously have been considered a transition fuel, the event unfolding in 2022 underpins LNG Sanddell and Natural Gas, as a critical part of long term solutions to ensure energy security. However, existing production and current build out of LNG plants will not be sufficient to cover the expected demand growth in the coming decade. According to S&P Global, L and D demand is set to increase from around 400,000,000 tonnes in 2023 6 30,000,000 tons by 2,035. This is equivalent to a compound annual growth rate of 3.5%.

Speaker 1

Turning to the right hand side of the slide, we have shown the estimated CapEx for liquefaction projects currently under construction. The steep cost inflation recently witnessed is pushing costs higher, leading to the supply cost shifting higher. You can see from the majority of the U. S. Liquefaction projects, you're talking CapEx per tonne of liquefaction capacity way in excess of $1,000,000,000 While there are several factors impacting the ultimate economics of a liquefaction project, Keeping liquefaction CapEx contained is one of the three cost drivers of an LNG export project And the key aspect of success, which makes us continued confident in Golar's FLNG Solutions.

Speaker 1

Turning to Slide 11 and an update on Macau Energies. Macau Energies is a startup entity replicating Golar's model in treating and liquefying flared and stranded gas, Stutt on the shore side. Macau was founded by the same team that created Golar Power, which was later renamed HyGo. Golar Power started with an initial investment of $5,000,000 Golar and Stonepic and was sold 5 years after inception at 3 to 4 times the invested capital. Golar has committed up to $25,000,000 for the team to concentrate its efforts constructing a proprietary modularized small scale liquefaction unit as well as partnering with complementary small Safe LNG Businesses to develop LNG to EV charging in areas of high flaring activity, significant trucking demand and the grid currently not capable of supercharging of EV trucks.

Speaker 1

This will include areas like the Permian in the U. S. And several stranded gas resources in South America. Subject to the continued development of Macau, the Macau management team and Golar will We believe in, it's a team that has proven to deliver to us previously and the model that's replicating what we are doing at larger scale off Sure. But this will not be a significant CapEx requirement funded by Golar balance sheet.

Speaker 1

It will then be lifted out of the balance sheet for Capital Markets to fund it. I will now hand the call over to Eduardo

Speaker 2

Thanks, Karl, and good morning, everyone. I'm very pleased to provide an update on our group results for the first quarter of 2023. So if we can turn over to Slide number 13, I wanted to show some of the financial highlights of this quarter. We had total operating revenues of $74,000,000 up 25% compared to Q4 2022. We also had FLNG tariffs of $110,000,000 up 15% when compared to Q4 2022.

Speaker 2

FLNG tariff is a key non GAAP metric comprised of total revenues from liquefaction services and realized gains on oil and gas derivative instruments. Stuart. The contribution from our FLNG operations were very strong this quarter, and we recorded increased earnings from Hilli of close to $98,000,000 up 23% when compared to Q4 2022. On a consolidated basis, this quarter we recorded an adjusted EBITDA of $84,000,000 As a result of non cash mark to market charges of 188,000,000 we recorded a net loss attributable to us of $102,000,000 in the quarter. Those charges are inclusive of movements in the value of our TTF and Brent derivatives of $115,000,000 changes in listed equity securities of $62,000,000 and interest rate swaps of $100,000,000 After closing the acquisition of NFE's stake in Healy just in March, our total share of contractual debt stood at $1,100,000,000 we continue to have access to ample liquidity and our cash position at the end of the quarter was just over EUR 1,000,000,000.

Speaker 2

So moving on to Slide 14, I wanted to provide some further color to our increased shareholding on the FLNG Hilli. In exchange for 50% of the common units, which we didn't control, we paid the total consideration to NFE of $100,000,000 in cash, Plus, our remaining stake of 4,100,000 shares and also we assumed $300,000,000 of debt. As previously announced, the acquisition of Hilli is expected to increase our run rate adjusted EBITDA by $70,000,000 per year. This transaction has closed on March 15. However, the economic benefit to us is effective since January 1 this year.

Speaker 2

As a result of our strong operational track record, corporate simplification and confidence in the unit re contracting, we received management approval from the existing lender to improve some key terms under the current financial facility. A combination of reduced interest margins, extended maturity and reduced amortization schedule is expected to generate additional distributable cash flows to us of approximately $75,000,000 until the end of the current contract. We expect that those changes will become effective in Q3 of this year. Moving to Slide 15. I wanted to provide a recap of our historical earnings from Hilli.

Speaker 2

As you can see on this slide, The Hilli tariff can be broken down into 3 main components: a fixed tolling tariff, a Brent linked fee and a TTF linked fee that started on 1st January of last year. The contribution from fixed tolling fees more than doubled this quarter to $34,000,000 As a result of the closing of the transaction with NFE, lower gas and oil prices this quarter have reduced the contribution from the TTF and Brent linked $37,000,000 $18,000,000 respectively. In total, we had $88,000,000 of adjusted EBITDA from Hilli this quarter, an increase of more than 55% when we compare to the same quarter of 2022. Moving on to Slide 16. I now wanted to provide some further details around our debt optimization strategy for helium, which I touched on before.

Speaker 2

So as explained before, we have received management approval from our existing lender to optimize certain conditions of our existing facility. We're not planning to increase the overall leverage of the unit, but those changes alone should allow us to increase our free cash slow to equity generation to the tune of $26,000,000 per year or approximately $75,000,000 until the end of the current contract. In Q1 2023, we crystallized gains of around $140,000,000 under our TTF hedging program, But it's important to highlight that we remain open and exposed to TTF prices between March until December of this year, As well as 100 percent between 20242026 when the current contract expires. For every incremental dollar change in TTF prices, Diju contributes $3,200,000 of earnings to Golar. In addition to that, for every dollar change in Brent prices above $60 a barrel, we will generate $2,700,000 per year.

Speaker 2

Moving on to Slide 17. Our balance sheet continues to strengthen and we now have greater flexibility to allow for shareholder returns And at the same time to fund our FLNG growth program. When adjusting for our cash receivables from the unwinding of our TTF hedges, We are now practically debt free with a net debt position of just $25,000,000 Out of the original issuance amount of $300,000,000 we have bought back $161,000,000 and approximately $139,000,000 is owned by public shareholders. On May 25, we received approval to amend certain distribution conditions under those bonds, which will now allow us to anticipate shareholder returns, including the ability to distribute up to 51% of total full company cash proceeds, which were $371,000,000 as well as up to 50% of the last 12 months adjusted net income. Based on that, we're very pleased to announce the reinstatement of our dividend distribution Due to a strong cash flow visibility from our contracted assets, Chile, as well as Gimi and also the establishment of $150,000,000 share buyback Now moving on to Slide 18.

Speaker 2

When we look at the implied dollar per ton cost of liquefaction, we believe that Golar is We are actively priced considering our share of net liquefaction capacity from both Hilli and Gimi. Our proven FLNG technology at only $5.90 a tonne is extremely competitive and offers the world's leading solution to floating and LNG liquefaction in the market. That supports our approach to share buybacks and this was one of the reasons which supported our announcement to update our capital allocation strategy. I will now hand over the call to Karl, who can talk a bit more about our approach to shareholder returns and also provide some closing remarks.

Speaker 1

Thank you, Eduardo. And turning to Slide 20. As Eduardo mentioned, we update on capital allocation. The way we think about it is with strong cash flow visibility with more than 70% expected 2024 earnings based on fixed tariffs and further upside in commodity exposure, We have clear cash flow visibility over the coming years. Add to that the delivery of Gimi that further enhances fixed cash flow.

Speaker 1

There's also significant further upside in FLNG projects. We believe Dividend should be paid from operating cash flows, whilst the strong balance sheet position should enable FLNG growth. As Reiterated numerous times during the call, we now have a cash position of more than $1,000,000,000 We're practically debt free And we have an attractive capital markets pricing. Hence, we believe the current balance sheet enables FLNG growth, a buyback program as well as debt optimization of Gimi post delivery and securing a debt facility for the potential construction of a Mark II FLNG. So again, to reiterate, operating cash flow is for the stable quarterly dividend distributions, growing alongside the delivery of Gimi and further upside in Hilli, and the balance sheet will be put to work for FLNG growth.

Speaker 1

Turning to Slide 21 and summary. We have initiated a quarterly dividend distribution. We see embedded earnings growth following Gimi delivery, increased Hilli commodity exposure We see the current valuation as attractive and therefore have put in place $150,000,000 share buyback program. The balance sheet has the capacity to fund FLNG growth. Therefore, we exercise the option to acquire the Sergey LNG, and we see the increasing interaction with prospective FLNG clients, including the signed MoU with NMPC as building in momentum and gives us further confidence of attractive recontracting of Hilli S and Commercial Opportunities for market.

Speaker 1

This concludes our Q1 earnings presentation. Thank you for dialing in. And we'll now hand the call over to the operator for any questions.

Operator

Thank Please stand by. First question from the line of Chris Robertson from Deutsche Bank. Please go ahead.

Speaker 3

Hey, good morning, everyone. Thanks for taking my questions. Guys, you've often mentioned the cost advantage of African Gas. I think you mentioned That one of the 5 or 6 counterparties that you're currently in discussions with is in South America. Could you briefly talk about Any possible cost differential between the two regions?

Speaker 3

And does this bias you to one region or another as you're in these discussions?

Speaker 1

Hi, Chris. So what we see in the South American opportunities potential gas development and a source cost not too different Then what we see for the West African opportunities. However, subject to what end user we end up with, there's somewhat longer sailing distances. But other than that, we see them as another area of interest for FLNG development. And that's why we're also focusing on both South America and West Africa.

Speaker 3

Yes, that makes sense. That's good stuff. I guess my second question relates to the MOU. Not maybe specific to this current MOU, but just broadly speaking, can you just talk about the process that an MOU would have to go through in terms of getting to a contract, In terms of how long that would typically take, what milestones you typically have to reach and just kind of a little bit more detail there.

Speaker 1

Thanks, Ruiz. I think since we signed the MoU, that's the question we've gotten the most. And being the only service provider of FLNG in the world, I don't think there's a textbook as to how these deals go about. It's Sandler, I think, is a little bit hard to describe. When it comes to the specific MOU with NNPC, The MoU is a requirement to unlock significant resources from the NNPC side, Which we have certainly felt the difference since pre and post signing of the NMPC sorry, of the MOU.

Speaker 1

That said, we have other potential charters within the group of 5 to 6 that we mentioned, where we have not formalize the discussions through an MoU, but we're at least equally as advanced as we are with NNPT. So I think it's really down to the procurement process from the charterers as well. And then MPC being SOC, the MOU is a requirement. What we are encouraged by is that None of us signed that MoU for the sake of signing it and real momentum with some mutual deadlines to be met I have been agreed, and I think we're on track to meet those. That's where we're done at the moment.

Speaker 1

An exact timing is difficult to say, but both of us want to see a resolution sooner rather than later.

Speaker 3

Yes, sure. Thanks for the color on that. I know you're probably limited in what you can speculate on there. Thanks for taking my questions.

Operator

Thank you. We'll now take the next question. And this is from the line of Ben Nolan from Stifel. Please go ahead.

Speaker 4

Hi, thanks, Eduardo, Karl. I hope you guys are well. I wanted to ask a little bit as It relates to the re contracting of Hilli. Is it fair to assume in order to get full utilization of the asset that it will likely need to move? And then along with that, How should we think about the timing of contracting?

Speaker 4

Because obviously, if it does move, there will need to be some infrastructure put into place in advance. And so should we expect this to be a 2023 event? Or is there a little bit more time to work with on the contracting

Speaker 1

side. So yes, it is likely to move from the existing site. There are other field within Cameroon that should have the resources to facilitate Hilli. So it could it will very likely not stay on current site. It could stay in Cameroon and it could equally well go elsewhere SME.

Speaker 1

In terms of the timing we would need, I think ideally from For any relocation and site preparation for recontracting. And then obviously, there are commercial aspects as to why you would want to see it earlier. But from just an operational and engineering point of view, Mid-twenty 4 is when we should have a pretty clear view.

Speaker 4

Okay. That's helpful. And then I guess As my follow-up, am I understanding it right that the order of priority is the re contracting of the Hilli first And then a contract on the second vessel, which we would need in order to go FID. So, Just trying to think through timing. So if it is anywhere in the call it the next 12 months, but It could be as much as 12 months for the Hilli.

Speaker 4

Should we expect the a contract on the Mark II to be some point after that? Or does it not necessarily have to go in that order?

Speaker 1

In Broad Strugs, You're correct. So priority number 1 is to reconfract Hilli. Thereafter is to FID the Mark The rationale behind the thinking is that we don't want to be exposed to Hilli coming Off contract in July 26, around the time when a Mark II also would deliver. So you want to fix at least 1 of the 2 before You FID Mark II. And based on current discussions, we believe it's significantly more likely that we fix Hilli Before fixing Mark II, if you fix Hilli attractively, there's sufficient charter interest that you go ahead with Mark II even if it's not Again, the contract from day 1.

Speaker 4

Okay. I appreciate it. Thank you.

Speaker 1

Thanks, Dan.

Operator

Thank you. We'll now take the next question. Please stand by. And this is from the line of Craig Shere from Tuohy Brothers. Please go ahead.

Speaker 5

Hi, congratulations on the progress. Picking up on Ben's questioning, Where does Shipyard's availability to queue stand and What's kind of the drop dead time that you need to lock that up Committed in order to maintain your Mark II timeline that you originally envisioned.

Speaker 1

There's no hiding that yard slot, this is an increasing challenge across, I guess, the whole maritime Steve, we are focused on shipyards obviously in Singapore where we built the Hilli and Gimme and I think have strong relationships, and we've also explored the opportunities in China, where we believe we would also have the right team to construct Mark II unit, we have, as you know, secured long lead items for Mark II construction that safeguards timeline somewhat. Of course, the longer you slip on FID, the more you push out delivery. Based on the current lay of the lands, one day delay of FID is potentially somewhat less than a day Delivery, data delivery because we continue to progress engineering and Preparational words like for example acquiring the Perjian.

Speaker 5

Got you. And As you think about the Mark II conversion and additional prospects you have, I suppose with your half dozen discussions, it's not inconceivable That you can have something beyond the re contracting of the Hilli and the Mark II deployment. So in order to kind of be prepared for that, just how much liquidity do you need to maintain on your balance sheet?

Speaker 1

Eduardo, do you want to have a go?

Speaker 2

Yes, sure. So Craig, as you can see under the current amendment, we have also committed To maintain an incurrence test of a minimum cash position of $100,000,000 after the payment of a dividend, We have stated that we plan to reinstate the dividend program on a quarterly basis. So I think this will be done, as Karl mentioned during the call today, On a sustainable basis from cash flow from operations, we believe that our current liquidity position is more than enough to allow us to develop the Mark II project, you have also to bear in mind that the CapEx will be spread out over period of time, which not only we will benefit from the liquidity position we currently have, but we will also be generating cash during that period. So we feel quite confident that our current position is more than enough to fund both the dividend program as well as The development of a market share.

Speaker 1

And I also just add, I think we have several liquidity levers, of course, in refinancing, give me upon completion. That's the $3,000,000,000 EBITDA backlog, which currently has $700,000,000 of total debt against it. There's also the potential to increase leverage on Hillia upon recontracting. I think through the refinancing announced today, the support from the existing lenders is very significant. And we have also experienced strong support for that facilities even during construction of a Mark II unit.

Speaker 1

So those combined, including the cash flows that Eduardo alluded to, we are confident that we can fund

Operator

This is from the line of Gregory Lewis from BTIG. Please go ahead.

Speaker 6

Hey, thank you and good afternoon bye. And thanks for taking my questions. I was hoping to get a little bit more color and then I guess Congrats on starting the dividend. I was hoping to get a little more color around and realizing it's early days, but how we're thinking about The Jimmy debt optimization, really just any kind of broad strokes you can give us as we try to figure out potential cash flow That's going to be available once that unit starts working as we think about the dividend rate next year. So really Yes, any type.

Speaker 6

I mean, what type of interest rates are we seeing for that type of unit? What type of The duration of debt are we thinking about? How much? Is this going to be like 60% financed or potentially more? Any kind of broad strokes you can give us, I think would be super helpful.

Speaker 1

Eduardo? Yes, sure. Hi, Greg. I think

Speaker 2

you can provide some updates on that one here. So when we look at some of the key alternatives we have when it comes to gaming, I think on a high level basis, considering we have $700,000,000 of debt today, the unit is highly under levered.

Speaker 1

Yes, I think we all agree on

Speaker 2

that one. And we basically have a few alternatives that we have been exploring over the last few months, Which range, for example, from existing or upsizing the existing bank facility, so we have a syndicate of around 11 banks in the current facility today, we could potentially explore to upsize that facility to a level of anywhere from $1,000,000,000 to $1,200,000,000 I would say when it comes to tenure that could be anywhere between 8 to 12 years. But this is not the most, I would say, attractive alternative when it comes to potential volume and also when it comes to cost. Moving on to the other alternatives, we also see a potential sale leaseback as one of the most attractive alternatives here. And we have explored the idea of potentially entering into a leasing agreement, which could unlock, I would say anywhere between $1,200,000,000 to $1,300,000,000 in total financing amounts.

Speaker 2

When we look at standards, I would say that this would be probably longer in duration when compared to a bank financing. So anywhere from 12 to up to 15 years. So with still a remaining tail of When it comes to the contract duration of 20 years. But we also see as a potential alternative, the potential issuance of U. S.

Speaker 2

Private placement bonds, when we could fully benefit from the full contracted duration and the contract backlog. We believe that this alternative could offer us the highest and the biggest volume, whilst at the same time offering a very competitive cost. Of course, this will depend on where the market is at the time of the issuance. But based on the fact that the total amount we'll be sized based on the potential cash flows from the project. And when looking on the SCR basis, We believe that these alternatives could raise anywhere from $1,500,000,000 to $1,700,000,000 So as you can see the alternatives they range quite a bit in terms of volume as well as standard.

Speaker 2

But we believe that we could benefit the most if we wait until we reach COD. And by that point in time, we will then take a decision to move on with the refinancing of Guinea.

Speaker 6

Yes. 100%. Thank you And then Carl, I mean, I guess just that you announced the buyback, that was good to see. Tom, as you're out talking with investors, clearly you're trading at below $600 Ton on liquefaction capacity, I guess there was that not a I guess it was a barge, but nevertheless that was well over $1,000 a ton. Any kind of feedback you're getting from clearly We believe the stock is undervalued.

Speaker 6

Any kind of thoughts around what that dislocation is Between where we've seen some market transactions and where Golar is today.

Speaker 1

By That's also one of the questions we get the most is why the stock is trading where it's trading at. At the end of the day, we need to try to run The business to the best of our ability and the market is at the price thereafter. I think given what we see Not just from dollars per tonne, but I think in cash flow multiples following delivery of Gimi And through some of the parts valuation, at least management and Board used the valuation as very attractive, which is why we put in place the buyback program and that's what we intend to do. Some investors obviously want us to go significantly larger on the buyback program. If you See some of the market chatter about what people are speculating on.

Speaker 1

But at the end of the day, for us, I think $150,000,000 is meaningful and on top of that we start the dividend which both of them combined is of course the start of shareholder returns which we just Based on visible cash flows and significant upside, as we have explained, should have the ability to grow significantly over the Coming quarters and years.

Speaker 6

Yes. Thank you for that. And then just as I think about that, if we were to decide to move Forward with the conversion candidate of like the Fuji. Any kind of realizing that there's inflation, there's shipyard availability, all the things that go into doing a mega project like this. Any kind of thoughts for what we could get that Unit up and running for on a cost basis.

Speaker 1

Yes. We definitely see inflation. I think everybody sees that everywhere. But where we currently see it based on the EPC contract and where we have placed the long lead items, We believe it is achievable around current pricing of Golar, so call it $600 a tonne, but keep in mind that's with construction risk and a couple of years without cash flow. Golar today, Hilli has delivered and generated cash flow and Gimi is delivering this year's starting cash flow.

Speaker 1

So if you take that into account, it is more expensive to go for Which is why we both think it makes sense. And you can fund it from balance sheet without having to impact dividend as long as you base dividend on operating cash flow.

Speaker 6

Great. As always, thanks for the time.

Speaker 1

Thank you. Thanks, Greg.

Operator

Thank you. This is from the line of Sean Morgan from Evercore. Please go ahead.

Speaker 7

Hi, team. Thanks for taking my questions. So As we kind of circle back to Hilli, I think the contract is up in July of 26. So What sort of logistical challenges are there to moving an FLNG off-site? And I imagine there's not a whole lot of precedent cases of what's Are there environmental concerns?

Speaker 7

And then in terms of the cost, does Perenco bear most of the costs for sort of disconnecting? And what do they do with all the undersea equipment when it's

Speaker 1

Hi, Sean. That is it's actually surprisingly simple because this is a standardized unit, Which is designed to be redeployed at different locations. So effectively, what you need to do is to disconnect from the upstream pipe And the soft yoke, which is the mooring system and off you go. The unit even has engine and propellers. So theoretically, you don't even need tugs, But subject to where you go, you probably need a tug.

Speaker 1

And that's it. The only thing we leave in the ground, which we need to decommission, Is the bottom part, which is fixed to the seabed of the mooring system, which we think has a total decommissioning of around $5,000,000

Speaker 7

Okay. And then I guess you have on a calendar basis about 2 years, but as As a management team, you guys realize obviously the equity markets start to look ahead and equity markets still tend to love uncertainty. You would have the gaming up and running by then. So it's not like you wouldn't have any assets producing, but what sort of timeline are you sort of Internally thinking about for when this needs to get completed and moved so that you don't start to run into a bit of an uncertainty overhang?

Speaker 1

I think as we tried to explain earlier, as long as from an engineering and operational point of view, you have Very comfortable time if you have charter visibility by mid next year From where the unit will be contract. That leaves plenty of time to plan decommissioning Any potential vessel upgrades or amendments and new mooring location, set up a new shore base and everything that's required. So that's comfortable. It's certainly not lost on us that the capital markets appreciate earlier visibility and frankly so do we. But at the end of the day, there's the internal trade off between what's industrially right in terms of optimizing economics of the project Versus just fixing and uncertainty.

Speaker 1

And with the level of interest we see around the ship now, you don't I want to marry the first one that shows up at the door, but have a little round on the dance floor to see who delivers best.

Speaker 7

Okay. I like that suitor analogy. So hopefully, Hilli turns out to be the prettiest girl at the ball and you'll have a lot of choices on where

Operator

staff, there are no further questions. So at this time, I will hand the call back to Karl Stahlberg for closing remarks.

Speaker 1

Thanks again, everybody, for dialing in and listening to us and the interest and the very relevant questions, we will continue to progress the company to the best of our ability. Hopefully, we'll speak before, but if not, we will speak to you all again in the next quarter. So thanks again, and have a great day.

Operator

Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect. Speakers, please stand by.

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Earnings Conference Call
Golar LNG Q1 2023
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