Hillenbrand Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 15, 2024

There are 8 speakers on the call.

Operator

Welcome to the Golar LNG Limited Q2 20 24 Presentation. After the slide presentation by CEO, Karl Friedrich Staubo and CFO, Eduardo Marniau, there will be a question and answer session. Information on how to ask a question will be provided then. At this time, all participants are in listen only mode. I will now pass you over to Karl Friedrich Staubow.

Operator

Karl, please go ahead.

Speaker 1

Thank you, operator, and welcome to Golar's Q2 2024 results. My name is Karl Friedrich Staubow, 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 statements on Slide 2. We start at Slide 3 and the overview of Golar today.

Speaker 1

We have 2 existing FLNG assets, the Hilli, which is the world's first FLNG with a market leading operational track record and the Gimi about to commence a 20 year charter for BP Offshore Senegal and Mauritania. We are closing in on ordering our 3rd FLNG, a Mark II with an annual liquefaction capacity of 3.5 1,000,000 tonnes per annum. The Mark II FLNG will utilize the LNG carrier Fuji as its donor vessel for the FLNG conversion. Our financial investments include a 23.5% shareholding in Avenir LNG and a fully owned subsidiary Macau Energies, which is a start up focused on onshore flare to LNG liquefaction. We're encouraged by the development in both of these companies.

Speaker 1

Avenir is a leading small scale LNG shipping company and we see favorable supply demand characteristics of small scale LNG shipping translate into strong charter rates with up to 5 year durations to very solid counterparts. We're very encouraged on the outlook for this business. On Macau, we have now deployed the first F2X, which is the FLARE II LNG liquefaction unit at the live well in Texas, U. S. Macau are currently working on tuning the operations to facilitate for fluctuations in the gas composition from the FLARE gas well.

Speaker 1

Other key statistics highlighted on the page includes our market cap currently standing at around $3,500,000,000 net debt of just under 600,000,000 dollars and an EBITDA backlog of around $11,000,000,000 inclusive of the Pan American Energy Contemplated FLNG contract in Argentina, which we announced in July. Turning to Slide 4. Golar is the world's largest owner and operator of FLNGs and the only proven provider of FLNG as a service. Our 2 existing units are at par with ENI and Petronas in number of units, but market leading measured by liquefaction capacity. Our focus on designing standardized designs that can be redeployed at moderate CapEx have enabled us to construct the units at market leading construction cost measured by CapEx per tonne and obtain market leading operational track record.

Speaker 1

The other existing FLNG players are focused on utilizing their floating units for gas they control or where they target to be the offtaker of the gas for their downstream LNG portfolio. Hence, the only proven provider of FLNG as a service is Golar and this position allows us to offer gas resource owners a monetization venue whilst maintaining meaningful ownership and exposure to their resources. Turning to Slide 5, we have laid out our growth ambition based on our existing asset base and secured yard slots. We have inbuilt cash generation growth from our existing assets through the startup of Gimi expected to commence commissioning within this quarter and full operations next year. We see further earnings growth from increased capacity utilization on Hilli when redeploying from her existing charter, which ends in July 26, Thule announced 20 air charter in Argentina with an estimated start up in Q1 2027.

Speaker 1

Once on their 20 air charters, these 2 existing assets are estimated to generate an aggregate annual EBITDA of approximately $515,000,000 before commodity exposure. On the back of our focused business model, strong balance sheet and demand for our FLNG services, we're now looking to grow our fleet with a target to more than double our operating FLNG capacity by 2,030 to just over 12,000,000 tonnes per annum. We have secured a yard slot for a Mark II, 3.5 MTPA conversion with delivery in 2027 and a further yard option for a second Mark II 3.5 MTPA FLNG with delivery within 2028. We are targeting to order the first of these Mark II FLNGs within this quarter. Each Mark II FLNG has a capacity of 3,500,000 tonnes or about 180 TBtu per annum.

Speaker 1

Assuming a tariff in line with the recently announced FLNG project in Argentina, a Mark T could a Mark II could generate an EBITDA of approximately $500,000,000 before commodity exposure. Hence, based on our existing assets and the identified growth ambitions, Golar may be in a position to generate an annual EBITDA of around $1,500,000,000 once the expansion program has expanded from 2 to 4 units and the liquefaction capacity has increased from 5 to 12 MTPA. This is all expected to be fully operational within 2,030. On Slide 6, we see continued need for further LNG supply projects to come online. Due to depletion of existing gas fields and strong underlying growth in natural gas and LNG demand, mainly driven by the Far Eastern Europe, incremental gas supply is needed to balance the market.

Speaker 1

Based on market research, the incremental supply required to meet the forecasted demand has a landed cost of more than $10 per MMBtu, supporting long term pricing of LNG. Golar's FLNG technology enable monetization of stranded or associated gas field that with a significantly lower cash breakeven compared to the majority of these incremental LNG gas export projects. The spread between where we can generate gas exports and other incremental supply provides for an attractive price spreads to be shared between gas resource owners and Golar as the FLNG provider. Forward pricing of LNG still supports oil to gas substitution in addition to the favorable environmental savings. We see this market balance as a very supportive to our mentioned growth ambitions.

Speaker 1

Turning to business updates at Slide 8. Hilli continued her market leading operational track record during the quarter and is currently in the midst of offloading cargo 117 or more than 8,000,000 tonnes of LNG exports since contract startup in 2018. A key milestone for the quarter was to conclude a commercial reset with BP resolving all contract disagreements and aligning economic compensation from Gimi's arrival in country on January 10 until COD. This commercial reset also unlocks our target to refinance Gimi at improved terms versus the existing facility and to provide the liquidity release that we intend to utilize for our mentioned FLNG growth ambitions. Significant progress has been made on Mark II during the quarter, and we're now targeting contracting within the quarter as mentioned.

Speaker 1

And we've also secured a slot for the option. The key milestone of the quarter was signing a 20 year definitive agreement for deployment of an FLNG in Argentina. The contract envisaged to utilize Italy at the end of our current charter, but Golar has for a period pre final investment decision an option to swap the vessel with a Mark II FLNG. We will elaborate on this later in the presentation. We see continued strong development of our FLNG growth pipeline and we've increased our FLNG commercial team with 2 senior resources to assist in evaluating and developing project opportunities.

Speaker 1

We're currently in discussion for FLNG deployment opportunities in West Africa, South America, Middle East and Southeast Asia. Q2 financial highlights include an adjusted EBITDA for the quarter of $59,000,000 and a liquidity position of just around $600,000,000 Eduardo will provide further insights into this quarter's financial performance later in the presentation. Turning to Slide 9. We've laid out some of the contract highlights on the Pan American FLNG charter in Argentina. We have entered into agreements for a 20 air LNG export project in Argentina.

Speaker 1

The project, as explained several times now, intends to utilize Hilli. However, we have swapping rights to instead utilize a Mark II FLNG before final FID is made, which is expected to occur later this year. The annual adjusted EBITDA based on utilization of the Hilli is approximately SEK 300,000,000 dollars before commodity exposure. The project will utilize gas from the Vaca Muerta field onshore Argentina. Vaca Muerta is the 2nd largest shale gas discovery in the world with estimated resources of around 300 Tcf.

Speaker 1

Target startup of the project is in Q1 'twenty seven, enabling potential redeployment, upgrades and hookup of Hilli after her the end of her current charter in July 26. As part of the transaction, Golar will become a 10% shareholder in South American Logistics. This will provide further commodity exposure in addition to the commodity element of the FLNG tariff. The charter is subject to customary closing condition, including regulatory and environmental approvals. As alluded to, this is expected to be satisfied within year end.

Speaker 1

Further information on the project can be found on Slide 10. Site selection for the FLNG has been selected as San Matias Gulf in the Rio Negro Province in Argentina. The project intends to utilize spare capacity in the existing pipeline system and therefore requires very limited incremental infrastructure to be operational. However, the project aims to secure a dedicated pipeline of about 600 kilometers in order to expand beyond 1 FLNG unit. The counterpart to the agreements are Pan American Energy, one of South America's leading energy companies.

Speaker 1

Pan American is owned 50% by BP and 50% by Britas Energy Corp, which in turn is a fifty-fifty joint venture between CNOOC of China and Britas Energy, which is an Argentinian holding company on behalf of an Argentinian family. Pan American employs around 21,000 employees. They're Argentina's 2nd largest oil and gas producer. And at year end, the company year end of 2023, the company controlled total assets of around $17,000,000,000 with book equity of around 12,000,000,000 dollars We're extremely pleased with the mutual benefits the project enables both to Pan American as a gas resource owner and reestablishing Argentina as a gas exporter, creating an outlet for the vast resources of the Vaca Muerta field to benefit global gas demand. Turning to Slide 11.

Speaker 1

We continue to see strong developments for further FLNG deployments already as mentioned further potential deployments in Argentina, but also elsewhere. We're currently in discussion for potential deployment opportunities in West Africa, South America, Middle East and Southeast Asia and these projects are at various stages of development. We continue to develop projects in Nigeria. And in June, we signed a project development agreement with NNPC to further expand on the existing agreements between Golar and NNPC. As mentioned, we have recently further strengthened our commercial team with 2 senior resources to assist in the development of these growth projects.

Speaker 1

We remain encouraged by the relative attractiveness of our FLNG growth projects, both when comparing them to alternative monetization solutions for the gas resource owners and the cost competitiveness for these projects versus other LNG export projects. Turning to Slide 12 to give some further detail on the commercial reset agreement reached with BP. The commercial reset resolves all previous disputes related to payment mechanisms for pre COD contractual cash flows between Golar and BP. Golar is now contractually entitled to receive daily payments from January 10 this year until commercial operations date. The daily payments have step up mechanisms based on project milestones up to COD and are also secured by launch updates.

Speaker 1

Golar will also be entitled to certain lump sum bonus payments subject to achievement of certain project milestones. In sum, these new arrangements and based on the operator's latest timeline, Golar expects to receive approximately $220,000,000 in payments across 2024 and 2025 pre COD compensation, inclusive of milestone bonuses, of which approximately $130,000,000 will be invoiced in 2024 and the remainder in 2025. The $110,000,000 that Golar has paid BP up until January 10 this year in liquidated damages will remain with BP. In addition, an accelerated commissioning plan has been agreed where the operators BP and Kosmos have procured an LNG cargo expected to deliver to the hub later this month. The commissioning cargo enabled parallel commissioning activities of both the Hub FPSO and the Gimi FLNG.

Speaker 1

Together, this will shorten or target to shorten the time to COD. The commercial reset is also an important milestone that enables refinancing of Gimi. We are targeting a debt facility with significantly better terms on interest and amortization compared to the existing facility and right sized for the strong cash flow visibility of the project and we expect to release up to $500,000,000 of liquidity of this refinancing alone. Turning to Slide 13 and an operational overview of our 2 existing assets. As explained, Hilli continued its market leading operational track record and we're now offloading cargo 117.

Speaker 1

The existing contract runs until July 26 and the vessel is thereafter intended to be moved to Pan American and the contract in Argentina at an increased capacity utilization. Gimi is on-site on the hub offshore Senegal and Mauritania and preparing to start commissioning activities to the mentioned accelerated commissioning plan later this month. First, gas from the FPSO is expected in Q4 and full COD in 2025. The COD will start the 2020 air contract duration, unlocking Golar share of the SEK 3,000,000,000 EBITDA backlog. Turning to Slide 14 and our Mark II growth plans.

Speaker 1

We are now in the final stages of the yard EPC contract. Confirmed delivery of the 1st contemplated Mark II FLNG will be within 2027 at an all in FLNG price at an industry leading $600,000,000 per tonne. We have spent to date, including the acquisition of the intended donor vessel, Fuji LNG, around $277,000,000 on the project, which are all equity funded. The long lead items ordered to date are now 63% complete, and you can see some of those examples on the bottom right of the slide. We target to order the 1st Mark II within Q3 this year, so this quarter.

Speaker 1

And as part of the Ardagh agreements, we've secured an option for a second ship with delivery within 28. On Slide 15, we turn again to Macau. Our pilot unit was completed in early Q2 this year. The unit has proven that the technology works, both through nitrogen leak testing and proven LNG production from pipeline quality gas entering the facility near its construction factory. The unit has now been deployed to a live well in Texas U.

Speaker 1

S. We are currently working on tuning the operations to facilitate for fluctuation in the gas composition from flare gas, which is obviously different to a stable gas quality stream from a pipeline quality gas inlet. As previously announced, we will consider strategic alternatives for the Macau growth phase once the unit has proven stable operations on live well production. I'll now hand the call over to Eduardo to present our Q2 results.

Speaker 2

Good morning, everyone, and thanks, Carl. Very happy to share an overview on Golar's financial performance during Q2 2024. Turning over to Slide 17, I wanted to go through some of the highlights of this quarter. Total operating revenues amounted to $65,000,000 with total FLNG tariffs reaching $88,000,000 up from $86,000,000 recorded in Q1. This increase can be attributed to higher realized Brent and TTF linked earnings when compared to the previous quarter.

Speaker 2

We always look at FLNG tariff as the appropriate metric, which reflects all realized liquefaction revenues, including gains on our oil and gas linked fees from Hilli. We reported total net income of $35,000,000 in Q1. When adjusting for other non controlling interests, the net income attributable to Golar was $26,000,000 This figure represents a significant improvement on a year on year basis when compared to Q2 2023. Adjusted EBITDA came in at $59,000,000 slightly down when compared to last quarter, mainly because of the recognition of pre operational expenses associated to pre commissioning activities of FLNG Gaming. Our liquidity position remains strong with approximately $630,000,000 of cash on hand and expected receivables from our TTF hedges.

Speaker 2

Based on that, our net debt position at quarter end stood at $569,000,000 As alluded by Carl, we reached a significant milestone with BP with the execution of the commercial reset for our FLNG gaming. We're now able to refinance our existing debt facility of $700,000,000 out of which only $630,000,000 has been drawn to date. We are in advanced discussions with potential lenders and a new facility is now in the credit approval process. This potential new facility offers improved terms with lower financing costs and improved repayment profile versus the current one. We expect to release up to $500,000,000 of additional liquidity net to us upon closing of this new facility.

Speaker 2

And lastly, this quarter we are declaring a dividend of $0.25 a share with a record date on the 26th August and payment on or around the 3rd September. Now moving to Slide 18. So, Healy maintained 100 percent economic uptime in each market leading operational track record. Here we can see the evolution of Healy's EBITDA contribution over the last quarters. We're looking on a quarterly basis, Healy generated $64,000,000 in Q2.

Speaker 2

This number is inclusive of $29,000,000 from base tolling fees and around $35,000,000 from Brent and TTF linked fees. We have recently seen higher Brent and TTF prices, so it's important to reiterate that we continue to be exposed to Brent and TTF. So should prices continue to improve in the coming quarters, we should expect increased distributions from Healy until the end of its current contract. Moving on to Slide 19. So based on current forward prices, Healy is expected to generate an adjusted EBITDA net to us of approximately $275,000,000 this year.

Speaker 2

I wanted to highlight that this figure is higher than the amount seen in 2022 when we had higher contribution from Brent and TTF because of higher global energy prices. The 2024 asset level debt service, including principal amortization, is expected to come down to $88,000,000 this year, resulting in total free cash flow net to Golar of approximately $190,000,000 in 2024. At the end of Q2, the total debt outstanding for Hilli stood at $577,000,000 Another great feature from the announcement of our contract with Pan American is that it could also enable refinancing of this existing facility, which could release significant liquidity to us and provide even more flexibility to our balance sheet. Let me now hand the call over to Karl for some closing remarks.

Speaker 1

Thanks, Eduardo. That brings us to Slide 21, which is summary and next steps. So on Hilli, we maintain the market leading operational track record, and we're very pleased to have entered into definitive agreements for a 20 year redeployment in Argentina, starting at the end of the existing charter. On Gimi, another milestone in concluding the new pre COD commercial arrangements and accelerated commissioning. Our focus now is to get the unit into COD and to refinance the existing debt facility at improved terms.

Speaker 1

As explained, we are entering or closing in on ordering our 3rd unit, the first Mark II FLNG conversion expected to be ordered later this quarter with delivery within 27. We're also pleased with the development of our FLNG growth ambitions, and we see strong prospective client interest for additional FLNG projects. As explained by Eduardo, we have a very healthy financial performance and a balance sheet to support our growth ambitions, With the liquidity of just around CHF 600,000,000 continued focus on shareholder returns and strong cash flow generation potential in new FLNG contracts. All in all, we're very pleased with the progress made in the quarter, in particular on our existing assets, business development and interaction with both existing and prospective FLNG clients. We're excited about the next phase of the company development and our focused growth ambitions to more than double our FLNG capacity by 2,030.

Speaker 1

That concludes the quarterly presentation, and we'll now hand the call over to the operator for any questions.

Operator

Thank you. You. We will now take the first question from the line of Chris Robertson from Deutsche Bank. Please go ahead.

Speaker 3

Good morning, Karl and Eduardo. Thanks for taking my questions. Karl, just wanted to circle back on your comments around the potential swap option for a Mark II in Argentina. Should we think about the expected annual EBITDA contribution then on a pro form a basis for a larger asset of being over $400,000,000 if you decide to do that?

Speaker 1

Yes. That would then be pro rata for the size, yes.

Speaker 3

Okay, got it. And then just with regards to the conversations you're having, you've obviously laid out several regions, which you're looking at now, including South America, Africa, Middle East and Southeast Asia. Could you give us an idea of just how many potential counterparties you're in discussions with? I mean, the regions help, but maybe the scope of discussions that you're having.

Speaker 1

I think it's fair to say that the number of counterparts is still concentrated around both West Africa and South America. There are fewer number of clients both on the Middle East and the Southeast Asia opportunities, But we're still very happy with the quality of those discussions that we're having there in both those locations. But the concentration of magnitude is West Africa and South America. Got it.

Speaker 3

All right. I'll turn it over. Thank you.

Speaker 1

Thank you.

Operator

Thank you. We will now take the next question from the line of Ben Nolan from Stifel. Please go ahead.

Speaker 4

Thank you.

Speaker 5

Good morning, Karl and Eduardo. So I wanted to ask a little bit more on Argentina. You gave some good color there about the potential for multiple units effectively dependent, I suppose, on that new pipeline coming in. But obviously, there's multiple companies, groups pursuing FLNGs. How do you think about sort of what the overall opportunity set looks like in Argentina and how you think Golar will end up playing in that development?

Speaker 1

That's a good question. So first and foremost, gas resources are plentiful. Like if you compare this to what's deemed to be very large gas discoveries, for example, like the Greater Tortue area where Gimi operates, that's a 25 Tcf reservoir. Vaca Muertis, 300 Tcf. So there's more than sufficient gas.

Speaker 1

It's onshore and it's relatively easy to extract. Hence, the market opportunity for Argentinian gas exports is massive, probably beyond what just Golar can deliver anyway. We think that the attractiveness of what we can deliver is certainty of supply through proven assets and with very tangible delivery. We know when Hilli comes off contract. And if we do place the order for Mark II within this quarter, we do know when we have delivery of that vessel, and that's further derisked by the progress made on the long lead items for that asset.

Speaker 1

So we see as our role to be the 1st enabler for Argentina or Pacasmuerta specifically gas exports. The gas is plentiful. And the only, call it the key thing you need to cross is to have a designated pipeline in order to bring the gas to the export site. The existing infrastructure supports at least 1 FLNG. In order to go beyond that, you need to expand the existing pipeline system.

Speaker 5

Okay. And would you need an hopefully, I can get one more, but would you need a bigger pipeline for Mark II versus the Hilli? Or would either would the existing infrastructure work for either?

Speaker 1

That's why we have substitution right on the first one. On the first one, you could utilize either Hilli OR MK2. If you go beyond 1 unit, I. E, beyond 3.5 MTPA, you need to look into the pipeline infrastructure.

Speaker 5

Got it. So the my second question is it relates to sort of all of the other opportunities, obviously, Argentina. There's potential for multiple units. But as you're thinking about sort of the opportunity set elsewhere, appreciating that it's diverse, but can you maybe talk through how many of those you think are like single unit kind of situations? Or do you see a lot of situations where there potentially could be multiple units and that would be needed?

Speaker 1

I think if you map out where stranded gas is in the world, it's extremely plentiful, but where it's most obvious is in West Africa. You have very, very large resources of stranded gas sitting in the ground that could be developed significantly cheaper than, for example, incremental U. S. LNG export projects. The shipping distance to end markets both in Europe and the Far East is shorter.

Speaker 1

And we believe we can construct FLNG units at the CapEx per tonne at around half the price of where you can create incremental tons on CapEx per tonne in the U. S. So the competitive advantage of these projects is very significant. The gas is proven and plentiful. So that's where you see the biggest opportunity.

Speaker 1

Obviously, in addition to areas like the Middle East, they have more than enough gas and the same is true for certain pockets of South America. But it's basically South America, West Africa and to some extent Middle East that could see multiple units. The Southeast Asian opportunities is 1 unit initially.

Speaker 5

Right. Okay. Thank you.

Operator

Thank you. We will now take the next question from the line of Craig Shere from Tuohy Brothers. Please go ahead.

Speaker 4

Good morning and thanks for taking the questions. So how quickly could you secure a Hilli refinancing? Could that be a first half twenty twenty five event?

Speaker 1

That can certainly be a 2025 event, yes. So I think once all of the subjects and FID on the project is taken, which we explained is expected later this year, it would be natural to look at refinancing initiatives into next areas.

Speaker 4

Great. And do you have a second Mark II vessel for conversion identified? And when would you have to issue FID for a second Mark II to meet that 2028 delivery?

Speaker 1

Yes, there are plenty of so called MOS Design Ships that you can acquire in the market today that are operating as LNG carriers today. And we have identified several vessels that could be suitable candidates. And some of them we have previously also inspected. FID, if we were to go on the second Mark II, would have to be based on current positions unless we manage to improve them around within Q1 2025.

Speaker 5

Thank you.

Operator

Thank you. We will now take the next question from the line of Liam Burke from B. Riley Financial. Please go ahead.

Speaker 6

Yes. Thank you. Good morning, Karl. Good morning, Eduardo.

Speaker 1

Good morning. Good morning.

Speaker 6

Carl, we saw the addition of a new fortress to the FLNG providers. Obviously, it's smaller capacity. It's for internal consumption. But are you seeing any other understanding these are tough projects to do, but the economics are pretty attractive. Are you seeing anybody else stepping up and trying to provide FLNG as a service?

Speaker 1

So there are there is one project that has FID out of Samsung now, which is called SEDAR LNG, which is backed by Pembina for an LNG export in Canada. So they're doing that, but they're doing it against locked in offtake. And it's a quite I think it's been 15 years in the making of that project. It used its former Golar employees that does it, and it was a project that initially was started under Golar. Other than that, we do see people having the initiatives, but we haven't seen yet other contenders that have the in house engineering or operational or financial balance sheet capability to lift such projects, no.

Speaker 6

Great. Thank you. And on your outside investments, how are you balancing future FLNG projects? Now potentially you have 2 more on the books versus some of your outside projects like Macaw and Avenir.

Speaker 1

So if you look at Golar over the course of the last 3 years, basically after Eduardo and myself came in, we've tried to streamline the companies from a diversified fleet or portfolio to a very focused FLNG company. Avenir LNG is one legacy investment that we haven't disposed for a number of reasons, but it was an investment made when we own Golar Power. We like the supply demand dynamics. We have invested around $50,000,000 And right now, we it's an investment that we have strong belief in and therefore want to keep. We are not planning to deploy incremental capital into it, but we do want to reap the benefits of the investment.

Speaker 1

When it comes to Macau, Macau, the way we see it is a replication of what we are doing in the maritime environment at a smaller scale onshore. But the whole trick is that you capture flare gas that would otherwise be burnt into the atmosphere. So I. E, the cost is extremely low of the input and there's significant environmental benefits of if you manage to crack this solution. So on Macau, what we're trying to do is to leverage on the technological capabilities of the Golar organization to utilize the same or to capture the same market opportunity that we do at large scale in a maritime environment at smaller scale onshore.

Speaker 1

However, there should be no confusion that Golar's focus is to grow on FLNG and that's our focus And we are not planning to divert any significant capital elsewhere.

Speaker 6

Great. Thank you, Karl.

Operator

Thank you. We will now take the next question from the line of Alexander Bittwald from Weber Research and Advisory. Please go ahead.

Speaker 7

Good afternoon. Thanks for taking my question here. Just jumping back to Argentina, with the project requiring minimal infrastructure investment, could you provide a little more color on what infrastructure is actually required? Are we talking mostly offshore mooring or an offshore jetty, subsea infrastructure? And then how much of this infrastructure would be specific to the asset that's deployed, so either Hilli or Mark II?

Speaker 1

The key things that's required is, as you correctly point out, mooring. Mooring is covered by South American Logistics and a short pipeline from the existing grid to site and the site selection.

Speaker 7

Right. Thank you. And a quick follow-up. For Mark II in that swap option in Argentina, I thought I heard you say that the swap had to be executed before FID. Is that correct?

Speaker 1

Yes.

Speaker 7

Okay. Thank you very much.

Speaker 1

Thank you.

Operator

Thank you. We will now take the next question from the line of Chris Robertson from Deutsche Bank. Please go ahead.

Speaker 3

Hey, guys. Thanks for taking a follow-up question for me. I just wanted to return to Macaw for a moment here. And Carl, you mentioned about not being confused with the focus on FLNG. But so with regards to Macau, is there any potential that you could license out the technology given that you have patent control over it rather than taking doing the undertaking yourself?

Speaker 1

Sure. So what we've said quite clearly since we initiated Macau is that we want to fund it through proof of concept. Once proof of concept is achieved, hopefully, in the relatively near term, our ambition then is to look at strategic alternatives for the growth phase. Golar is not intending to have Macau fight for our balance sheet resources. And therefore, we are looking at any type of structure that could benefit the technology that has been created at Macao without compromising any of our FLNG growth ambitions.

Speaker 3

Got it. That's really clear. Thank you, Karl.

Operator

Thank you. I would now like to turn the conference back to Karl Fredek Stavrou for closing remarks.

Speaker 1

Thank you all for dialing in. We are very excited about the quarter that just passed and the direction of where the company is going. And we look forward to talk to you again next quarter. And hopefully, we're then engaged on our FLNG growth phase. Thanks again and have a good day.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Hillenbrand Q2 2024
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