Golar LNG : 2022 Q2 Results

INTERIM RESULTS FOR THE PERIOD ENDED JUNE 30, 2022

• Golar LNG Limited ("Golar" or "the Company") reports Net income of $230.0 million and Adjusted EBITDA1 of $101.0 million for Q2 2022 ("Q2" or "the quarter").
• Sold the FSRU Golar Tundra for $350.0 million and agreed to sell the steam turbine LNG carrier Golar Arctic as a converted FSRU to Italy's Snam Group ("Snam") for €269.0 million.
• Completed the sale of remaining TFDE carriers, The Cool Pool Limited, and Golar's shipping and FSRU management organization to Cool Company Ltd. ("CoolCo").
• Golar's share of Q2 Contractual Debt1 decreased from $1.7 billion at Q1 2022 to $1.0 billion at Q2 2022.
• Subsequent to the quarter end, FLNG Hilli customer elected to exercise optional capacity of 0.2 million tons per annum ("MTPA") of Dutch Title Transfer Facility ("TTF") linked production volumes from 2023 to 2026.
• Entered into swap arrangements to hedge approximately 50% of Golar's exposure to TTF linked production for 2023 at a TTF price of $49.50/MMBtu.
• Advancing MKII newbuild activities scheduled for delivery in 2025.
• Target FLNG project announcement within 2022.

FLNG operations: FLNG Hilli maintained its 4+ year unbroken record of 100% uptime during Q2. Distributable Adjusted EBITDA1 from FLNG Hilli was $92.5 million for the quarter, of which Golar's share was $62.5 million. On July 27, 2022, Hilli customers Perenco Cameroon S.A. and Société Nationale des Hydrocarbures declared 0.2MTPA of their TTF linked optional production from 2023 until the end of the current contract in July 2026. On August 9, 2022 Golar entered into swap arrangements to hedge approximately 50% of Golar's exposure to the 2023 TTF linked production, securing around $80.0 million of 2023 Distributable Adjusted EBITDA1. Based on current average 2023 TTF gas prices for the remaining unhedged portion, Golar's share of 2023 TTF linked gross proceeds from the TTF linked volume is expected to be $160.0 million. Including the Brent oil forward curve ($88/bbl), and the fixed tariff, Golar's share of Distributable Adjusted EBITDA1 from Hilli is expected to be approximately $305.0 million in 2023. Golar's share of forecast 2023 total annual debt service for Hilli's contractual debt is approximately $50.0 million (debt amortization of approximately $29.0 million and interest of approximately $21.0 million).

FLNG Gimi construction: Conversion of FLNG Gimi for its 20-year contract with BP scheduled to commence in Q4 2023 is 86% technically complete. During the quarter Golar and Keppel Capital, together the owners of FLNG Gimi, agreed to a $50.0 million incentive payment to Keppel Shipyard for initiatives to safeguard sail away within H1 2023. Golar owns 70% of FLNG Gimi, hence $35.0 million of the incentive payment will be for Golar's account. This will initially be funded from cash on hand. Once commissioned and delivered to the customer, FLNG Gimi is expected to unlock around $3.0 billion of Earnings Backlog1 to Golar, equivalent to $151 million in annual Adjusted EBITDA1. The commercial start-up of FLNG Gimi together with the commodity linked production from FLNG Hilli could result in Golar's share of annual Adjusted EBITDA1 generation from FLNG Hilli and FLNG Gimi exceeding $400.0 million within 2.5 years.

1. Refer to section "Non-GAAP measures" for definition and reconciliation to the most comparable US GAAP measure, where applicable.

FLNG business development: Multiple new client engagements during the quarter as well as strong development of the existing FLNG growth pipeline across both integrated and tolling based projects.

Yard availability and updated pricing for both MKI and MKII designs was confirmed during the quarter, and in discussion for MKIII. Indicative pricing suggests a capex per ton of liquefaction capacity of between $500-600 million/ton. Both MKI and MKII designs can be delivered within 2025 if ordered during 2H 2022. Competitive construction and long-term lease financing term sheets for FLNG growth projects have been received.

Golar is ramping up construction engineering work and planning to order long-lead items during H2 for a MKII design FLNG, with a liquefaction capacity of up to 3.5MTPA. A suitable conversion candidate vessel has been identified and inspected.

Based on progress across the FLNG growth portfolio the Company maintains its target for FLNG announcement within 2022.

FSRU: Italian energy infrastructure company Snam and Golar signed two contracts. The first contract will see Golar convert the last of its trading steam turbine LNG carriers, Golar Arctic, into a FSRU. After its conversion, ownership of the Golar Arctic will be transferred to Snam who will pay €269.0 million for the completed FSRU. Following Snam's issuance of a Notice-to-Proceed, the conversion is expected to take up to two years. Golar will continue to trade the vessel as a carrier until it enters the yard for conversion.

The second contract saw Snam acquire the FSRU Golar Tundra for $350.0 million. After repayment of vessel debt and fees, Golar received net proceeds of $193.1 million in cash. Golar has agreed to lease the vessel back from Snam and trade it as an LNG carrier until November 2022, generating incremental earnings that will be reported in discontinued operations until Q4 2022. Golar also expects to enter into a development agreement to assist Snam with technical work on the vessel before start-up of FSRU operations.

Financial Summary

	(in thousands of $)	Q2 2022	Q2 2021	% Change	YTD 2022	YTD 2021	% Change
	Net income attributable to Golar LNG	230,032	471,434	(51)%	575,214	496,797	16%
	Ltd
	Total operating revenues	67,227	65,303	3%	140,165	131,105	7%
	Adjusted EBITDA	100,952	39,665	155%	190,647	80,199	138%
	Golar's share of contractual debt1	1,002,228	2,186,512	(54)%	1,002,228	2,186,512	(54)%

Q2 Highlights and recent events

Financial and corporate:

• Profitability: Net income attributable to Golar of $230.0 million for the quarter, including:
• • A $181.6 million unrealized gain (100% basis) on the Hilli Brent oil and TTF natural gas linked derivative instruments.
  • A $55.0 million realized gain (100% basis) on the Hilli Brent oil and TTF natural gas linked derivative instruments.

1. Refer to section "Non-GAAP measures" for definition and reconciliation to the most comparable US GAAP measure, where applicable.

• • A $123.3 million realized gain on sale of the FSRU Golar Tundra.
  • A $76.2 million impairment charge recognized in respect of the Golar Arctic.
  • A $11.2 million realized loss on the 6.2 million New Fortress Energy Inc. ("NFE") shares sold on April 6, 2022.
  • A $37.8 million unrealized mark-to-market loss recognized on Golar's 12.4 million NFE shares held as at June 30, 2022 based on a June 30, 2022 carrying value of $39.57 per share.
  • A $16.3 million unrealized gain on interest rate swaps.
• CoolCo transaction: Sale of the remaining 4 TFDE vessels, The Cool Pool Limited, and Golar's shipping and FSRU management organization released $34.3 million of cash and cash equivalents and reduced Contractual Debt1 by $480.9 million.
• Tundra transaction: Sale of the FSRU Golar Tundra released $193.1 million of cash and cash equivalents and reduced Contractual Debt1 by $155.5 million.
• Arctic transaction: Agreed to sell the LNG carrier Golar Arctic as a converted FSRU for €269.0 million, triggering the recognition of a non-cash $76.2 million impairment charge.
• Hedges: Entered into swap arrangements on August 9, 2022 to hedge approximately 50% of Golar's exposure to TTF linked production for 2023 at a TTF price of $49.50/MMBtu.
• Golar shares: Repurchased and then cancelled 200,000 Golar shares at a cost of $4.5 million. 107.8 million shares issued and outstanding as of June 30, 2022.
• ESG: Invested in Oslo-based Aqualung Carbon Capture in May 2022, a technology company working on a promising carbon capture and separation membrane system that could be used on future FLNG units.

Financing facilities:

• Credit Facility: Repaid the $131.0 million Q1 2022 drawn balance of the $200.0 million 3-year corporate revolving credit facility. The facility remains available until 2024 and is currently undrawn.
• Bilateral Corporate Facility: Agreed to expire the $250 million undrawn bilateral corporate facility available until June 30, 2022 as year to date balance sheet initiatives allow for FLNG growth to be funded from existing cash balances and undrawn credit facilities.
• Legacy UK tax lease case: Settled long running tax dispute in respect of UK tax lease transactions resulting in a $66.4 million final cash settlement (including fees).

FLNG:

• Utilization: Industry leading operations maintained with 100% commercial uptime by FLNG Hilli.
• TTF linked tariff volumes: Subsequent to the quarter end, FLNG Hilli customer elected to exercise 0.2 MTPA pursuant to its 2023+ capacity option which results in TTF linked production volumes from 2023 to July 2026 continuing at 2022 levels.
• Construction: FLNG Gimi conversion project 86% technically complete. 22-millionman-hours worked with strong safety record maintained. Gimi owners agreed to pay Keppel Shipyard an incentive payment of an additional $50.0 million to safeguard 1H 2023 sail away. On schedule for Q4 2023 start-up.

1. Refer to section "Non-GAAP measures" for definition and reconciliation to the most comparable US GAAP measure, where applicable.

Financial Review

Business Performance:

													2022		2021
												Apr-Jun		Jan-Mar		Apr-Jun
	(in thousands of $)												Total			Total		Total
	Net income											286,538			410,014	507,337
	Income taxes											(190)			374	92
	Net income before income taxes											286,348			410,388	507,429
	Depreciation and amortization											13,138			13,742	13,861
	Impairment of long-term assets											76,155			-		-
	Unrealized gain on oil and gas derivative instruments							(181,548)			(168,059)	(70,590)
	Realized and unrealized MTM loss/(gain) on our investment in listed equity				49,001			(344,049)	84,801
	securities
	Other non-operating (income)/losses										(3,887)			(6,136)	73,293
	Interest income											(921)			(33)	(27)
	Interest expense											5,279			6,156	8,110
	(Gains)/losses on derivative instruments										(16,341)			(31,536)	6,869
	Other financial items, net											4,215			(608)	(737)
	Net (income)/losses from equity method investments								(4,065)			1,056	(839)
	Net (income)/loss from discontinued operations							(126,422)			208,774	(582,505)
	Adjusted EBITDA (1)											100,952			89,695	39,665
								2022
					Apr-Jun							Jan-Mar
			Shipping		FLNG		Corporate		Total		Shipping		FLNG		Corporate		Total
	(in thousands of $)				and other					and other
	Total operating revenues		-	60,527	6,700	67,227	3,235	62,894		6,809	72,938
	Vessel operating expenses		(1,685)	(14,972)	(1,439)	(18,096)	(2,134)	(14,181)		(1,789)	(18,104)
	Voyage, charterhire &		(569)	(150)	(25)	(744)	(540)	(150)		(25)	(715)
	commission expenses
	Administrative expenses		71	13	(10,003)	(9,919)	(2)	(42)		(10,100)	(10,144)
	Project development
	(expenses)/income		-	(3,462)	761	(2,701)			-	(1,540)		689	(851)
	Realized gains on oil
	derivative instrument (2)		-	55,019		-	55,019			-	42,631		-	42,631
	Other operating income (3)		-	10,166		-	10,166			-	3,940		-	3,940
	Adjusted EBITDA (1)		(2,183)	107,141	(4,006)	100,952	559	93,552		(4,416)	89,695

1. The line item "Realized and unrealized gain on oil and gas derivative instruments" in the Condensed Consolidated Statements of Operations relates to income from the Hilli Liquefaction Tolling Agreement ("LTA") and the natural gas derivative which is split into: "Realized gain on oil and gas derivative instruments" and "Unrealized gain/(loss) on oil and gas derivative instruments". The realized component comprised (i) Brent oil linked fees of $32.6 million (March 31, 2022: $17.5 million), (ii) TTF-linked proceeds of $29.4 million (March 31, 2022: $26.3 million) and (iii) commodity swap expense of $7.0 million (March 31, 2022: $1.1 million) and represents the contracted amounts in relation to the Hilli LTA receivable in cash.
2. Included in "Other operating income" is $10.2 million (March 31, 2022: $3.6 million) for production over Hilli's contracted tolling capacity of 1.4MTPA.

1. Refer to section "Non-GAAP measures" for definition and reconciliation to the most comparable US GAAP measure, where applicable.

				2021
					Apr-Jun
			Shipping		FLNG		Corporate		Total
	(in thousands of $)				and other
	Total operating revenues	2,849	55,737	6,717	65,303
	Vessel operating expenses	(1,696)	(13,745)	(2,682)	(18,123)
	Voyage, charterhire & commission expenses	(50)	(150)	(25)	(225)
	Administrative expenses	(14)	(185)	(9,332)	(9,531)
	Project development expenses		-	(16)	(718)	(734)
	Realized gains on oil derivative instrument		-	2,975		-	2,975
	Adjusted EBITDA (1)	1,089	44,616	(6,040)	39,665

Golar reports today Q2 net income attributable to Golar of $230.0 million. Golar also reports Adjusted EBITDA1 of $101.0 million inclusive of FLNG Hilli and LNG carrier Golar Arctic but excluding the FSRU Golar Tundra that was sold to Snam on May 31, 2022, and the TFDE carriers, The Cool Pool Limited, and Golar's shipping and FSRU management organization sold to CoolCo during the quarter. Pro-rata Q2 results associated with these assets and entities are reported in discontinued operations.

On May 17, 2022 Golar entered into agreements with Snam relating to the conversion and subsequent sale of the converted LNG carrier Golar Arctic. Although ownership of the converted FSRU is not expected to transfer for up to 3-years, the transaction triggered an immediate impairment test. As the carrying value of the vessel exceeds its fair value as a carrier as of June 30, 2022, an impairment charge of $76.2 million has been recognized. The sale is expected to generate net positive cash and a gain on sale upon completion.

The Brent oil linked component of FLNG Hilli's fees generates additional annual operating cash flows of approximately $3.1 million for every dollar increase in Brent Crude prices between $60.00 per barrel and the contractual ceiling. Billing of this component is based on a three-monthlook-back at average Brent Crude prices. As a result of higher commodity prices, a $32.6 million realized gain on the oil derivative instrument was recorded in Q2, up from the $17.5 million realized in Q1. Golar has an effective 89.1% interest in these earnings. A Q2 realized gain of $29.4 million was also recognized in respect of fees for the TTF linked production, up from the $26.3 million realized in Q1. Golar has an effective 86.9% interest in these earnings. Offsetting this was a $7.0 million realized loss (100% attributable to Golar) on the hedged component of the quarter's TTF linked earnings. Collectively a $55.0 million realized gain on oil and gas derivative instruments was recognized as a result.

The mark-to-market fair value of the Hilli Brent oil linked derivative asset decreased by $0.3 million during the quarter, with a corresponding unrealized loss of the same amount recognized in the income statement. The fair value decrease was driven by a downward movement in the expected future market price for Brent oil. Predominantly driven by the recognition of a derivative asset reflecting the valuation of the discounted value of the tolling fee above the floor in respect of the customer's TTF linked capacity for 2023-2026, the mark-to-market fair value of the Hilli TTF natural gas derivative asset increased by $170.5 million during the quarter with a corresponding unrealized gain of the same amount recognized in the income statement. A $11.4 million unrealized gain in respect of the hedged portion of Q3 2022 TTF linked Hilli production was also recognized during the quarter. Collectively this therefore resulted in a $181.6 million Q2 unrealized gain on oil and gas derivative instruments.

1. Refer to section "Non-GAAP measures" for definition and reconciliation to the most comparable US GAAP measure, where applicable.