Welcome to the Golar LNG Limited Q3 2022 Results Presentation. At this time, all participants are in a listen-only mode. After the slide presentation by CEO, Karl Fredrik Staubo; and CFO, Eduardo Maranhão, there will be a question-and-answer session. [Operator Instructions] I will now pass you over to Karl Fredrik Staubo. Karl, please go ahead.

Thank you, operator, and good morning and good afternoon to all. Welcome to Golar LNG’s Q3 earnings results presentation. My name is Karl Fredrik Staubo, CEO of Golar LNG. I’m accompanied today by our CFO, Mr. Eduardo Maranhão to present this quarter’s results. Please note our forward-looking statements on slide 3. Slide 3 provides an overview of Golar. We own two FLNGs, the Hilli, operating for Perenco in Cameroon, and the Gimi that was part 20-year contract for BP next year. We are focusing our efforts on FLNG growth projects and we have developed three different FLNG designs. All three designs are based on the same proven liquefaction technology and maritime interface, but defer in liquefaction capacity. During the quarter, we have placed orders for long lead items for a new Mark II FLNG with a total liquefaction capacity of 3.5 million tons. The most notable change in the Company overview since our last quarters, our share sales totaling $430 million, reducing our CoolCo shareholding from 31.3% to 8.3%. And the sale of NFE shares, reducing our shareholding from around 6% to just shy of 3%. Turning to slide 4 and the highlights of the quarter. Hilli generated an EBITDA to Golar of $64.1 million, a 2.6 times increase from Q3 last year. Perenco declared its 0.2 million tons of production increase from Jan ‘23 to end of contract in July of 2026, meaning that we will maintain production at 1.4 million tons per annum for the period. The incremental volume has a tariff linked to TTF gas prices. During the quarter we entered into hedges for 50% of our Q4 2022 exposure at $70 per MMBtu. We hedged 100% of our 2023 exposure at $50 per MMBtu. And we hedged 50% of our 2024 gas exposure at $51.2 per…

Thank you, Eduardo. Turning to Slide 11 and I’ll update on Gimi construction update. The unit is now 90% complete and remains on schedule for sail away during first half of next year, and contract startup during second half. We expect to start booking commissioning revenues during second half and contract startup in Q4 of next year. As a reminder, Gimi will generate $151 million in EBITDA to Golar, every year for 20 years, once contract startup. On slide 12, we elaborate a bit about what we are doing in terms of the scale of the Gimi construction project. We now have a construction team consisting of an average daily workforce of 4,600 with 24x7 activities. We have worked 26 million man hours to-date. We have done 37,000 tons of new steel and equipment installed on board. We have installed 1,500 kilometers of cables that’s equivalent to the distance between London and Rome. Pre-operations are initiated and we will have a crew of more than 120 people mobilized to the vessel by year end. Once in operation, the unit will produce about 2.2 million tons of LNG per year, enough to power more than 3 million U.S. homes. Turning to slide 13 and an update on the long lead and commercial developments for new FLNG projects. Based on strong client engagement for FLNG growth projects, we are of the view that securing attractive delivery for a new FLNG unit increases our ability to drive value with prospective FLNG plans. We have therefore placed orders for main long lead items required for a new Mark II and 3.5 million ton FLNG with total commitments of around $300 million. Included in that we have engaged more than 200 engineers from the topside provider, shipyard, the third party [ph] engineering company and Golar,…

[Operator Instructions] Our first question comes from the line of Chris Tsung from Webber Research. Please go ahead. Your line is open.

Just touching on the divestments of CoolCo in NFE share, I guess financing FLNG project. Do you plan to divest the rest for future projects or will there be some percentage of these companies you plan to hold on to? And also what about Avenir?

I think what we have previously said and definitely stand by, is that we view all of our shareholdings as attractive financial investments, but we will reduce financial investments to focus on core growth, if and when we have core growth. We feel like with our current cash position we are very comfortable to fund the Mark II project that we are now undertaking. It’s safe to say that we don’t need to sell any of our shares to fund that project. But if we do other growth initiatives, we will consider to further reduce our shareholdings. But at the moment as we have previously communicated, we’re happy to be shareholders in all those names and view being shareholders there as better than sitting cash.

Great. Okay, thanks. And another one is just I know that you -- in this press release, you guys have all the long lead items for Mark II. Does that more or less secure timing of when it could be delivered in 2025, or does that depend on when you guys take FID?

That is what is required to ensure that we still can deliver in 2025. So, by definition, a long lead is the critical timeline. So, as long as you secure the delivery of those, you ensure that you can still take ‘25 delivery. But of course, you need to progress the Mark II investments to safeguard that delivery. So, that means formal FID at some point as well. But for now, we have done everything to ensure that we are on track for delivery in ‘25.

Great. Thanks. And just to confirm, the Mark II, that’s an integrated model, right?

So, the units can be used on integrated and tolling. It’s not like a ship is customized to the commercial model of the ships. The ship is hardware at the end of the day. So, we have discussions for Mark II, both for integrated and tolling, and there are several attractiveness of Mark II. One thing is construction timing. But, the way the engineering has been put together, we have received very strong feedback on that design.

Great. Thank you. That’s it for me. Thank you, Karl.

Thank you.

Thank you. We’ll now move on to our next question. Please standby. Our next question comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.

Yes. Hi. This is Frank Galanti on for Ben. I wanted to actually dig into Chris’s last question there on the Mark II design, specifically around the vessel. Given that that’s a conversion, have you sort of -- can you talk about what vessel type you need? Have you guys sort of already picked that out and can you sort of talk around how much that’s going to cost?

Yes. So, basically you use Moss [ph] design ships, so you can take an existing carrier. There are plenty of Moss designs out there. One of the disadvantages of Moss as a shipping vessel is that they’re all steam fired, which means that especially with the new regulations coming into effect from first of Jan next year, these ships are far less competitive than the more modern ships for shipping activities, meaning that you should be able to pick them up, if you want to require them for conversion. We have inspected several suitable candidates, and we are discussing to if and when we will acquire a ship for conversion. We can also use the Gandria, which we own. So, we can also use that one. So we’re not 100% dependent on buying another ship. We would like to buy one with somewhat higher storage capacity, but it’s not the requirement.

And then, I want to switch gears a little bit over under the Hilli, sort of obviously given extremely elevated global LNG prices and sort of increased European demand. Can you start talking about the possibility of increasing production on the Hilli? Is there sort of -- is there feed gas in the region that could be easily tapped? And is there sort of any updates you can give around the increasing Hilli production before the end of the current contract?

Sure. So Perenco took up the 0.2, so we’re now producing 1.4. The two constraints in terms of increasing capacity is the size of the existing gas reserve, and the second is the gas flow from the wells. But I think it would be in everybody’s interest to increase production. It would benefit us, it would benefit Perenco. And the offtaker, which used to be Gazprom has now been nationalized by Germany and changed name to SEFE. SEFE stands for Securing Energy for Europe. So, all else equal, Europe wants more energy, not less energy. So, it could be a triple win, where SEFE gets more volume, Perenco and we increase production. But it’s really down to the upstream part of it, which is under Perenco’s control. And for now, it’s standing at 1.4 million tons. And I think it’s fair to say that we’re all trying to encourage increased production and see what’s possible. I don’t think it’s right of us to give any guidance on whether or not we think that can happen because it is a bit too early to say, but it’s certainly a potential upside.

Our next question comes from the line of Craig Shere from Tuohy Brothers.

So, with the Mark II, you’re now preparing necessarily be targeted to one of the prospective super major independent E&P FLNG customers you’re negotiating with, or in a really best case scenario, is there a way you could envision perhaps three FIDs over the next 18 months?

Let’s do one at a time. But for sure, like our business is to do FLNG and FLNG growth. We like the development, both of prospective clients and projects, and we are ramping up activities as we have shown, both from ordering long lead, but equally important to engage a significant engineering team. And so, we would certainly not rule out that there could be more than one. I think let’s do one at a time, because these are large projects. So I think let’s focus on one at a time. But yes, we’re here to move on this opportunity. We have a balance sheet to support it. We have an organization to support it. And we have focus across the company.

So, when you rightly point out these are large projects, and you don’t want to get too far over your skis, you also noted that the negotiations included both, integrated and tolling arrangements, the latter looking a little more like your BP Gimi, I presume. So, I guess, my question is, given your successful execution and construction of these things, shipyard interest and potential for another highly rated investment grade decades long toll, how do you think about your capital funding options, if you were to get a long-term attractive toll? I mean, could that lift a lot of the investment considerations off your shoulders, given the ability to lever that far better than your original Gimi contract?

Yes is the short answer. I think a couple of things. So, we obviously have $1 billion in cash. We have $450 million or so in listed securities. I think it’s fair to say that there is significant refinancing potential on both, Hilli and Gimi, Gimi in particular, post-delivery, that can free up cash and improve terms. If you read the Q2 presentation, when we also spoke about FLNG growth, we have received term sheets for financing of FLNG growth projects, even during construction at attractive terms and a healthy LTV. So, we do not see any balance sheet constraints for FLNG growth for -- after the unit we can do -- really engineering and operations is basically what puts a cap on capacity and lock balance sheet.

Thank you. We’ll now move on to our next question. Please stand by. Our next question comes from the line of Liam Burke from B. Riley Financial.

Karl, on slide 16, you highlight the production -- African gas vis-à-vis Henry Hub. When you look at the FLNG production, just the process itself. Are your next generation FLNG is more efficient and can they reduce the production cost per MMBtu vis-à-vis Hilli or Gimi?

So, like anything, when you build a new model of a car, you make it and then you have a facelift model of a car, it tends to be somewhat more efficient than the previous one. So, we constantly do improvements. So, it’s slightly more efficient. I don’t think at the end of the day, that’s what’s going to make it or break it. When it comes to operational cost, the Mark II is 3.5 million tons versus around 2.5 million tons for Mark Is. And there is some economies scale, because you don’t need to start-up accordingly. So, if you think operating costs per MMBtu produced, it will be somewhat of more efficient, but by economies of scale and efficiency improvements of the design.

And do you see any competitive development by anyone else in developing FLNGs? It seems that you are increasing production, you are increasing efficiency and you seem to have a great deal of interest from the energy majors and independent E&P companies.

Yes. Right now we are the only ones that do FLNG at the service. The only other FLNGs that operate in the world are oil and gas companies owning FLNGs on their own balance sheet for their own operations. So, the only one that is doing this as the service today is Golar. And based on what we see out there, you have other people pursuing that. I think most notably is what NFE is doing on the liquefaction solutions, we encourage that because we think it’s needed in the industry to be able to provide shorter time timeframes, and new liquefaction solutions. But they too are focusing on producing hydrocarbons mainly for their own merchant and where they can use in their downstream development or portfolio. So, as a service, we see limited competition for the size of liquefaction solutions we have from credible competitors.

Great. Thank you, Karl.

Thank you. We’ll now move on to our next question. Please standby. Our next question comes from the line of Sean Morgan from Evercore. Please go ahead. Your line is open.

Hey, Karl and Eduardo. Thanks for taking the question. I think on the last call, for 2Q, we talked about a target date for a new FID announcement by the end of 2022 and we have a month and half left, so obviously there is still possibility for that. But when you think about what the biggest bottlenecks are for reaching an agreement, and I guess sort of FID, a new project, is it the upstream negotiations with partners that are extracting the molecules or is it the nation space that you kind of have to work with the national oil companies in these West African countries? And just sort of what do you see is the major sticking points in terms of slowing down the timeframe for new announcements?

The key gating item for all this projects is all of the, call it, engineering upstream integration with midstream, like technically making -- planning the project and making it work. Once you have a plan that sort of everybody is comfortable with, then you need to get the governmental and approvals, subject to what the jurisdiction that can take very long. But it can also be somewhat more efficient. I think at the end of the day, the commercial terms are super important. But it’s not the sticking [ph] bit, because if all the other things work, it’s a matter of sort of dividing the cake. But, the one thing that takes time is to bake the cake, not to divide it, to put it that way. In terms of timing, I think what we see is that -- we were trying to highlight that a bit in this presentation. It’s important to secure the attractive delivery. And we really see that our ability to drive value with these clients is more significant. If you have more people wanting something, then there is available that tends to drive value in our favor. So for now, I think we’re most focused on the correct execution to drive value as opposed to have a firm deadline and having to be painted into a corner.

Yes. I mean, I think that kind of goes without saying you don’t want to sign up to bad commercial terms. So -- and then, obviously, a lot of success selling forward some of your, I guess, floating exposure volumes on TTF and oil. And just kind of curious, what’s the limit on, I guess, in this probably different for TTF and oil in terms of kind of forward selling some of that commodity exposure you have. You’ve gone to 2024, as you kind of look at the forward curves, like over the next few months, would you try and kind of sell forward more exposure at end of ‘24, ‘25 and how far could that process really take you kind of from where we are right now?

So, the commodity linkages are on Hilli, and Hilli has the contract till July 26th. So, what we are looking to do is, we can and probably will hedge TTF volumes all the way out there, if we like the overall price. So for us, it’s really a matter of weighing the price dynamics in the market with what we can lock in and provide cash flow visibility for. You also have some relationship to the margin or value at risk that you have between now and the timing or when you start producing those forward volumes. But with our balance sheet now, that’s not a real constraint. On the Brent, we haven’t hedged thus far. Part of the reason is because we have a ceiling on the Brent tariffs at 1 or 2. So if you do it, you need to do sort of a collar to make sure that you don’t end up with two massive margin calls and it’s bigger potential margin volumes there. So, we are likely to do more TTF, if we find the overall price level attractive. We are currently less likely to do anything on the brand side. But that can change subject -- if we can lock in 1 or 2 out the long period. You do it because that’s your max earnings anyway.

Our next question comes from the line of Greg Lewis from BTIG.

Karl, I had a question. You mentioned -- and realizing you have a pretty strong cash position at this point in time, and you mentioned around potentially refinancing existing projects. As we think about the loan to value comment you made, and I can appreciate the slide earlier, where you kind of were marking where other projects have been reselling. Could we see the potential financing based on implied value, which could be higher than the construction price? Eduardo Maranhão: Hi Greg, this is Eduardo here. Yes. I think the short answer to your question is yes. We have -- as Karl said, we have received indications from a few potential blenders to new FLNG projects, which have indicated that they could be willing to look into funds for levels beyond the actual construction price of the vessel. So, I think when we look at the Gimi, for instance, as we have a 20-year contract and with such a long duration, we do have the ability to look at levels beyond what usual land it would look like in terms of a regular loan to value or 70% or 75% LTV. So, I think in that case, we’re effectively looking at the ability of the contract to serve that debt. So, for instance, we believe that finances in excess of $1.5 billion to $1.6 billion could be feasible, just looking at the Gimi alone. But other banks have a different approach and look at those assets on a loan to value basis. So, on those instances, we believe that levels at around 70% to 80% of the value of the asset could be achieved.

Just to summarize, it’s more prevalent for those that proposed those type of financing. It’s driven by the contract value and not the LTV on this deal.

Thank you for that. That’s good to hear. I did want to ask also around the -- you highlighted the investment in Macaw Energies. Realizing that small scale LNG, is there any kind of timelines or framework you can kind of tell us where that stands? In other words, could we see a project and from this company in the next two to three years, or it could be something sooner? I guess how active is Macaw? I’m just not really familiar with that company.

I think one of the attractions there is that what they are looking to do is modularized shore based small scale liquefaction. One of the advantages building smaller scale and in modules is that time to cash flow is shorter. You have plenty of examples of flare gas and stranded gas today. And if you can liquefy the flare gas and use it to something sensible, it’s not only economically attractive, it’s also environmentally the right thing to do. So, those would focus mainly on the U.S. and Latin America. And the plan there is to have the modularized design ready for sure within 12 months, subject to how that design then performs, and we’ll take the next steps on that one. But, all else equal, it’s exactly what we do on the floating sides that are shore based on smaller sized.

And then I just had one other question. As a follow-up to a previous question around number of units obviously, today we kind of have been biting -- doing one project at a time. Karl, as you think about the market and just make the decisions or have the opportunities maybe is the right better word to do more than one project at a time. What are the gating factors? Are the gating factors the shipyards, supply chains, labor? And I mean, like as you think about that and the potential to win multiple -- have multiple projects under construction at the same time, any kind of color you can give us around that?

It’s kind of yes to all of the above. You need all of that in order to push an FLNG project. But at the end of the day, it’s willing clients and a project that’s mature enough that we will be building it. But for most of the projects, subject to where they are -- the somewhat annoying thing, if you think about this, all the time it takes to get to FID, from FID the long lead item is the FLNG. It’s not the upstream infrastructure. So therefore, that’s part of what’s driven us to do -- place the orders for the Mark II long lead just because we see how close some of these projects are to development or FID. And if we don’t have an FLNG available significantly earlier than if you would then go out and place the order, you have an increased attractiveness of that delivery position.

Okay. And then just so I understand this, the $300 million of long lead time items is really specific to the Mark II, where if there was a Mark III design -- I guess you could always go down to the Mark I which would probably require less kit. If I needed that Mark III design, any kind of sense for how much those long lead time items would all-in cost?

The fact of the matter is that most of the equipment we have ordered, it’s interchangeable across our designs, because they are based on the same top side. So what do we have forward, if you are very interested is centrifugal compressors, gas turbines, cold boxes and heat recovery, steam generators, which are the long lead items, longest lead and biggest components of the top side package. So, we are ordering them with a Mark II in mind because that’s where we see the strongest customer pool. But if for whatever reason we had to put that equipment on to Mark I or Mark III, the absolute vast majority of it can be put on either of those two designs. You need to order…

Okay. Super helpful. Thank you very much.

More for Mark III, of course, because its bigger liquefaction size.

Sure. Okay. Thank you.

Thank you.

There are no further questions at this time. So, I’ll hand the call back to you for closing remarks.

Thank you all for listening into our Q3 results. Have a good day and speak to you all soon. Bye, bye.

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