Current, Quarterly or Annual Report by a Foreign Issuer — Form 6-K — SEA’34
Filing Table of Contents
Document/ExhibitDescriptionPagesSize 1: 6-K Current, Quarterly or Annual Report by a Foreign HTML 2.13M Issuer
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8: R2 Unaudited Consolidated Statements of Operations HTML 157K
9: R3 Unaudited Consolidated Statements of Comprehensive HTML 73K
Income
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Equity
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Equity (Parenthetical)
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Derivative Instruments
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Financial Items, Net
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Discontinued Operations
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58: R52 General (Details) HTML 41K
59: R53 Segment Information - Narrative (Details) HTML 35K
60: R54 Segment Information - Reconciliation (Details) HTML 83K
61: R55 Segment Information - Schedule of segments HTML 90K
(Details)
62: R56 Revenue - Change in Contract Balances (Details) HTML 53K
63: R57 Revenue - Narrative (Details) HTML 38K
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66: R60 Realized and Unrealized Gain on Oil and Gas HTML 50K
Derivative Instruments (Details)
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68: R62 Gains on Derivative Instruments and Other HTML 43K
Financial Items, Net -Gains (Details)
69: R63 Gains on Derivative Instruments and Other HTML 39K
Financial Items, Net-Financial Items (Details)
70: R64 Operating Leases - Operating Lease Income HTML 37K
(Details)
71: R65 Assets and Liabilities Held for Sale and HTML 168K
Discontinued Operations - Narrative (Details)
72: R66 Assets and Liabilities Held for Sale and HTML 84K
Discontinued Operations - Results of Operations
(Details)
73: R67 Assets and Liabilities Held for Sale and HTML 99K
Discontinued Operations - Balance Sheets (Details)
74: R68 Assets and Liabilities Held for Sale and HTML 38K
Discontinued Operations - Results of Disposed
Entity (Details)
75: R69 Assets and Liabilities Held for Sale and HTML 72K
Discontinued Operations - Net income (loss) of
Equity Method Investments (Details)
76: R70 Assets and Liabilities Held for Sale and HTML 88K
Discontinued Operations - Balance Sheet of Equity
Method Investments (Details)
77: R71 Assets and Liabilities Held for Sale and HTML 66K
Discontinued Operations - Net Income of Equity
Method Investments for the period ended April 15
(Details)
78: R72 Variable Interest Entities ("VIE") - Narrative HTML 49K
(Details)
79: R73 Variable Interest Entities ("VIE") - Summary of HTML 46K
Bareboat Charters (Details)
80: R74 Variable Interest Entities ("VIE") - Schedule of HTML 49K
Variable Interest Entities-Balance Sheet (Details)
81: R75 Variable Interest Entities ("VIE") - Schedule of HTML 43K
Variable Interest Entities-Continuing Operations
(Details)
82: R76 Variable Interest Entities ("VIE") - Schedule of HTML 46K
Variable Interest Entities- Discontinued
Operations (Details)
83: R77 Variable Interest Entities ("VIE") - Schedule of HTML 65K
Variable Interest Entities- Hilli LLC Balance
Sheet (Details)
84: R78 Variable Interest Entities ("VIE") - Schedule of HTML 51K
Variable Interest Entities- Hilli LLC Statements
of Income and Statements of Cash Flow (Details)
85: R79 Variable Interest Entities ("VIE") - Schedule of HTML 65K
Variable Interest Entities- Gimi MS Balance Sheet
(Details)
86: R80 Variable Interest Entities ("VIE") - Schedule of HTML 41K
Variable Interest Entities- Gimi MS Statements of
Income and Statements of Cash Flow (Details)
87: R81 Restricted Cash and Short-Term Deposits (Details) HTML 88K
88: R82 Other Current Assets - Schedule of Other Current HTML 61K
Assets (Details)
89: R83 Asset Under Development - Schedule Of Assets HTML 36K
(Details)
90: R84 Asset Under Development - Narrative (Details) HTML 48K
91: R85 Asset Under Development - Commitments (Details) HTML 37K
92: R86 Equity Method Investments (Details) HTML 45K
93: R87 Other Non-Current Assets (Details) HTML 50K
94: R88 Debt - Schedule of components of Debt (Details) HTML 66K
95: R89 Debt - Narrative (Details) HTML 57K
96: R90 Other Current Liabilities - Schedule of Other HTML 60K
Current Liabilities (Details)
97: R91 Financial Instruments - Carrying Values and HTML 131K
Estimated Fair Values (Details)
98: R92 Financial Instruments - Narrative (Details) HTML 39K
99: R93 Financial Instruments - Interest Rate Swaps HTML 63K
(Details)
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(Details)
101: R95 Related Party Transactions - Narrative (Details) HTML 66K
102: R96 Related Party Transactions - Transactions and HTML 94K
balances with Cool Company Ltd and Subsidiaries
(Details)
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existing related parties-Net (Expenses)/Revenue
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existing related parties -Receivables (Details)
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‘6-K’ — Current, Quarterly or Annual Report by a Foreign Issuer
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ X ] Form 40-F [ ]
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Included
is the Overview, Operating and Financial Review for the nine months ended September 30, 2022 and the unaudited consolidated financial statements of Golar LNG Limited (the “Company” or “Golar”) as of and for the nine months ended September 30, 2022.
The information contained in this Report on Form 6-K is hereby incorporated by reference into the Company's registration statement on Form F-3 ASR (File no. 333-237936), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on April
30, 2020.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events
or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this report, the words “believe,”“anticipate,”“intend,”“estimate”“forecast,”“project”"plan,"“potential,”“will,"“may,”“should,”“expect” and similar expressions identify forward-looking statements.
The
forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. As a result, you are cautioned not to rely on any forward-looking statements.
In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the
forward-looking statements include, among other things:
•our inability and that of our counterparty to meet our respective obligations under the Lease and Operate Agreement entered into in connection with the BP Greater Tortue / Ahmeyim Project (the “Gimi GTA Project”);
•continuing uncertainty resulting from potential future claims from our counterparties of purported force majeure under contractual arrangements, including but not limited to our construction projects (including the Gimi GTA Project) and other contracts to which we are a party;
•our inability to meet our obligations under the Liquefaction Tolling Agreement entered into in
connection with Hilli;
•continuing volatility of commodity prices;
•our inability to effectively reduce our exposures to the fluctuations in the Dutch Title Transfer Facility (“TTF”) gas prices and forecast Euro/USD exchange rates through our TTF linked commodity swaps. The use of these derivatives also require the posting of cash collateral with counterparties, which can impact working capital when commodity prices change;
•increases in costs as a result of recent inflation, including, among other things, wages, insurance, provisions, repairs and maintenance;
•our ability to close potential future sales of additional equity interests in our vessels, including
the Hilli and Gimi or to monetize our remaining equity holdings in New Fortress Energy Inc. (“NFE”) and Cool Company Ltd. (“CoolCo”) on a timely basis or at all;
•continuing volatility in the global financial markets, specifically with respect to our equity holdings in NFE and CoolCo;
•changes in our relationships with our affiliates and the sustainability of any distributions they pay us;
•claims made or losses incurred in connection with our continuing obligations with regard to Hygo Energy Transition Ltd (“Hygo”), Golar LNG Partners LP (“Golar Partners”), CoolCo and Snam Group (“Snam”);
•the
ability of Hygo, Golar Partners, NFE, CoolCo and Snam to meet their respective obligations to us, including indemnification obligations;
•changes in our ability to retrofit vessels as Floating Storage Regasification Unit (“FSRUs”) or Floating Liquefaction Natural Gas vessels (“FLNGs”) and in our ability to obtain financing for such conversions or commissioning works on acceptable terms or at all;
•changes in our ability to obtain additional financing on acceptable terms or at all;
•failure of shipyards to comply with delivery schedules or performance specifications on a timely basis or at all;
•failure of our contract
counterparties to comply with their agreements with us or other key project stakeholders;
•changes to rules and regulations applicable to liquefied natural gas (“LNG”) carriers, FLNGs or other parts of the LNG supply chain;
•changes in the supply of or demand for LNG or LNG carried by sea and for LNG carriers or FLNGs;
•a material decline or prolonged weakness in rates for LNG carriers or FLNGs;
•changes in our relationships with our counterparties;
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•changes in general domestic and international
political conditions, particularly where we operate;
•global economic trends, competition and geopolitical risks, including impacts from rising inflation and the ongoing conflict in Ukraine and the related sanctions and other measures, including the related impacts on the supply chain for our conversions or commission works;
•changes in the availability of vessels to purchase and in the time it takes to build new vessels;
•our inability to expand beyond the liquefaction, regasification or carriage of LNG, particularly through our innovative FLNG growth strategy;
•actions taken by regulatory authorities that may prohibit the access of LNG carriers and FLNGs to various ports;
•the
length and severity of outbreaks of pandemics, including the worldwide outbreak of the coronavirus (“COVID-19”) and its impact on demand for LNG and natural gas, the timing of completion of our conversion projects or commissioning works, the operations of our charterers and customers, our global operations and our business in general; and
•other factors listed from time to time in registration statements, reports or other materials that we have filed with or furnished to the Commission, including our most recent annual report on Form 20-F.
We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from
those projected in the forward-looking statements.
All forward-looking statements included in this report are made only as of the date of this report and, except as required by law, we assume no obligation to revise or update any written or oral forward-looking statements made by us or on our behalf as a result of new information, future events or other factors. If one or more forward-looking statements are revised or updated, no inference should be drawn that additional revisions or updates will be made in the future.
2
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
The following is a discussion of our financial condition and results of operations for the nine months ended September 30, 2022 and 2021. Unless the context indicates otherwise, the “Company”, “Golar”, “Golar LNG”, “we”, “us”, and “our” all refer to Golar LNG Limited or any one or more of its consolidated subsidiaries, including Golar Management Limited, or Golar Management, or to all such entities. References to “Golar Partners” or the “Partnership” refer, depending on the context, to our former affiliate Golar LNG Partners LP (previously listed on Nasdaq: GMLP) and to any one or more of its subsidiaries.
References to “Hygo” refer to our former affiliate Hygo Energy Transition Ltd and to any one or more of its subsidiaries. References to “Avenir” refer to our affiliate Avenir LNG Limited (Norwegian OTC: AVENIR) and to any one or more of its subsidiaries. References to “NFE” refer to New Fortress Energy Inc. (Nasdaq: NFE). References to “CoolCo” refer to Cool Company Ltd (Euronext Growth: COOL) and to any one or more of its subsidiaries. Unless otherwise indicated, all references to “USD” and “$” in this report are to U.S. dollars. You should read the following discussion and analysis together with the unaudited consolidated financial statements and related
notes included elsewhere in this report. For additional information relating to our operating and financial review and prospects, including definitions of certain terms used herein, please see our annual report on Form 20-F for the year ended December 31, 2021, which was filed with the Commission on April 28, 2022.
Overview
We design, build, own and operate marine infrastructure for the liquefaction and regasification of LNG. Following the disposal of our investments in former affiliates, Golar Partners and Hygo, in April 2021, our recent disposal of our LNG carrier fleet and our shipping and FSRU management business to CoolCo (the “CoolCo Disposal”) and the sale of Golar Tundra (the “TundraCo
Disposal”), both discussed in detail in note 11 to our unaudited consolidated financial statements included herein, we are now focused on pursuing and increasing our portfolio of FLNG projects.
Recent and Other Developments
In addition to the other information set forth in this Report on Form 6-K, please see “Item 5 - Operating and Financial Review and Prospects - Significant Developments in Early 2022” of our 2021 Annual Report on Form 20-F.
Since September 30, 2022, certain recent and other developments that have occurred are as follows:
Financing
i.Sale
of our investment in listed equity securities
In November 2022, we sold 6.3 million shares of our NFE common stock (“NFE Shares”) raising net proceeds of $332.4 million. The proceeds are earmarked for potential FLNG growth projects. Following the sale of such NFE Shares, our remaining equity holding in NFE is approximately 2.9% or 6.1 million shares.
ii.Sale of CoolCo shares
In November 2022, we sold 8.0 million of our CoolCo shares, raising net proceeds of $97.9 million. The proceeds are also earmarked for potential FLNG growth projects. Following the sale of such shares, our remaining equity holding in CoolCo is approximately 8.3% or 4.5 million shares. We have entered into a lock up undertaking with CoolCo, following its equity offering in November 2022, which prevents
us from any further sale of our remaining CoolCo shares within 30 days from the first day of trading of the newly issued CoolCo shares. The lock up expires in December 2022.
iii.Share Repurchase Program
In November 2022, we repurchased 81,639 of our common shares under the share repurchase program approved in February 2021, at a total cost of $1.9 million at an average share price of $23.47, inclusive of related fees.
iv.Hygo performance guarantee
In November 2022, the performance guarantee of $1.5 million provided to the senior lenders of Centrais Elétricas de Sergipe S.A. ("CELSE") in connection with the disposal of Hygo was released.
v.Corporate
RCF
In November 2022, we canceled our undrawn $200.0 million revolving credit facility entered in November 2021 (“the Corporate RCF”) and paid the outstanding commitment fees of $0.2 million.
Golar Tundra's exit from Cool Pool and entry into shipyard
In November 2022, the Golar Tundra exited from the Cool Pool and subsequently entered the shipyard in Singapore to commence drydocking works pursuant to the Development Agreement that we entered into with Snam Group in August 2022.
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Operating
and Financial Review
See note 4 “Segment Information” of the unaudited consolidated financial statements included herein for additional information on our segments.
A reconciliation of consolidated net income to Adjusted EBITDA is as follows:
Nine months ended September 30,
(in
thousands of $)
2022
2021
Change
% Change
Net income
871,987
514,803
357,184
69
%
Income taxes
335
407
(72)
(18)
%
Income
before income taxes
872,322
515,210
357,112
69
%
Depreciation and amortization
39,328
41,592
(2,264)
(5)
%
Impairment of long-lived assets
76,155
—
76,155
100
%
Unrealized
gain on oil and gas derivative instruments
(361,972)
(145,282)
(216,690)
149
%
Realized and unrealized (gains)/losses on our investment in listed equity securities
(346,497)
244,210
(590,707)
(242)
%
Other non-operating (income)/losses
(11,267)
67,582
(78,849)
(117)
%
Interest
income
(4,013)
(61)
(3,952)
6479
%
Interest expense
15,589
24,121
(8,532)
(35)
%
Gains on derivative instruments
(73,330)
(17,062)
(56,268)
330
%
Other
financial items, net
3,255
(938)
4,193
(447)
%
Net (income)/loss from equity method investments (1)
(12,996)
562
(13,558)
(2412)
%
Net loss/(income) from discontinued operations
79,281
(603,947)
683,228
(113)
%
Adjusted
EBITDA(2)
275,855
125,987
149,868
119
%
(1) Please refer to the individual reportable segments below for discussions on net income/(loss) from equity method investments.
(2) Adjusted EBITDA is a non-GAAP financial measure and is calculated by excluding tax, depreciation and amortization, impairment, the impact of unrealized movements on embedded derivatives and our investment in listed equity securities, financing costs and results from discontinued operations from net income. Adjusted EBITDA
increases the comparability of our operational performance from period to period and against the operational performance of other companies without regard to our financing methods or capital structure.
The following details our consolidated results for the nine months ended September 30, 2022 and 2021:
Depreciation and amortization: Depreciation and amortization decreased by $2.3 million to $39.3 million for the nine months ended September 30, 2022, compared to $41.6 million for the same period in 2021. This is principally due to a decrease of $1.9 million in depreciation and amortization related to the Golar Arctic
for the nine months ended September 30, 2022, compared to the same period in 2021, as a result of a $76.2 million impairment charge recognized in May 2022.
Impairment of long-lived assets: The impairment charge of $76.2 million is associated with our LNG carrier, the Golar Arctic. In May 2022, we entered into agreements with Snam for the future sale of the Golar Arctic following her conversioninto a FSRU. Although the sale is not expected to close until 2025, the agreement with Snam triggered an immediate impairment test. As the carrying value of the vessel exceeds the price that a market participant would pay for the vessel at the measurement date, an impairment
charge was recognized. The fair value was based on average broker valuations as of the measurement date and represents the exit price in the principal LNG carrier sales market. There was no comparable impairment charge recognized for the same period in 2021.
Unrealized gain on oil and gas derivative instruments: The unrealized gain on our oil and gas derivative instruments increased by $216.7 million to a gain of $362.0 million for the nine months ended September 30, 2022, compared to a gain of $145.3 million for the same period in 2021. This increase was primarily due to:
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•Unrealized
gain on the oil derivativeinstrument: Reflects the mark-to-market movements related to the changes in the fair value of the Hilli oil derivative instrument which we estimated using discounted future cash flows of the additional payments due to us as a result of Brent crude oil prices moving above a contractual oil price floor over the remaining term of the liquefaction tolling agreement between the Company, Perenco Cameroon S.A. and Société Nationale Des Hydrocarbures (the “LTA”). The unrealized gain on the Hilli oil derivative instrument decreased by $72.3 million to a gain of $36.2 million for the nine months ended September 30, 2022, compared to a gain of $108.5 million
for the same period in 2021, due to volatility in the future Brent crude oil price curves over the LTA's remaining term.
•Unrealized gain on the gas derivative instrument: Reflects the mark-to-market movements related to the changes in the fair value of the Hilli gas derivative instrument which we determined using the discounted future cash flows of the additional payments due to us linked to the TTF gas prices and forecast Euro/USD exchange rates over the incremental capacity until the end of the contract in July 2026. In July 2022, the customer exercised the option to increase the contracted capacity of the Hilli by 0.2 million tons of LNG per year from January 2023 through the end of the LTA in July
2026, pursuant to Amendment 3 to the LTA. The unrealized gain on the Hilli gas derivative instrument increased by $272.6 million to a gain of $309.4 million for the nine months ended September 30, 2022, compared to a gain of $36.8 million for the same period in 2021, due to volatility in the future TTF linked gas price curves over the LTA's remaining term.
•Unrealized mark-to-market adjustment for commodity swap derivatives: As of September 30, 2022, we were party to commodity swaps to hedge our exposure to theTTF linked earnings (100% of which attributable to Golar) which resulted in an unrealized gain of $16.4 million for the nine months ended September
30, 2022. There was no comparable loss recognized for the same period in 2021.
Realized and unrealized (gains)/losses on our investment in listed equity securities: The listed equity securities refers to theNFE Shares received in April 2021 as consideration for the disposal of our former equity method investment in Hygo. Realized and unrealized (gains)/losses on our investment in listed equity securities increased by $590.7 million to a gain of $346.5 million for the nine months ended September 30, 2022, compared to a loss of $244.2 million for the same period in 2021. The increase was primarily due to a significant increase in the price of NFE Shares at September 30, 2022, compared to the same period in 2021.
Other
non-operating income/(losses): Other non-operating losses decreased by $78.8 million to an income of $11.3 million for the nine months ended September 30, 2022, compared to a loss of $67.6 million for the same period in 2021. The movement is mainly due to $6.9 million decrease in the $71.4 million liability recognized during the nine months ended September 30, 2021, in relation to the legacy UK tax leases which was fully settled in April 2022.
Interest income: Interest income increased by $3.9 million to $4.0 million for the nine months ended September 30, 2022, compared to an income of $0.1 million for the same period in 2021. The increase was primarily due to an increase in the returns on our
fixed deposits that had been made during the nine months ended September 30, 2022.
Interest expense:Interest expense decreased by $8.5 million to $15.6 million for the nine months ended September 30, 2022 compared to $24.1 million for the same period in 2021. This decrease was primarily due to:
•$21.0 million decrease in interest expense relating to our $402.5 million aggregate principal amount of the 2.75% convertible senior unsecured notes (“2017 Convertible Bonds”), which we redeemed in full on February 15, 2022, compared to a full period of interest expense for the same period
in 2021;
•$4.6 million decrease in interest expense relating to the revolving credit facility following the repayment in November 2021; and
•$3.7 million increase in capitalized interest expense on our borrowing cost in relation to our qualifying investment in our asset under development, the Gimi.
This was partially offset by:
•$17.3 million increase in interest expense relating to our $300.0 million senior unsecured bonds (“Norwegian Bonds”) which closed in October 2021;
•$1.2 million increase in interest expense relating to a $131.0 million drawdown in February 2022
under the Corporate RCF which was subsequently repaid in May 2022;
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•$1.3 million accelerated amortization of the deferred financing cost on the Corporate RCF due to the repayment of the facility in May 2022; and
•$1.3 million increase in interest expense arising on the loan facilities of our consolidated lessor variable interest entity (“VIE”) due to an increase in LIBOR.
Gains on derivative instruments: Gains on derivative instruments increased by $56.3 million due to a gain of $73.3 million for the nine months ended September
30, 2022 compared to a gain of $17.1 million for the same period in 2021. The movement was primarily due to the increase in the long-term swap rates and an increase in the notional value of our interest rate swap portfolio, partially offset by fair value adjustments reflecting our creditworthiness and that of our counterparties for the nine months ended September 30, 2022.
As of September 30, 2022, we have an interest rate swap portfolio with a notional amount of $550.0 million compared to $505.0 million for the same period in 2021, none of which are designated as hedges for accounting purposes. Net unrealized gains on these interest rate swaps were $74.9 million for the nine months ended September 30, 2022 compared to an unrealized gain
of $18.6 million for the same period in 2021.
Other financial items, net: Loss on other financial items, net increased by $4.2 million to a loss of $3.3 million for the nine months ended September 30, 2022, compared to a gain of $0.9 million for the same period in 2021. This movement was principally due to:
•$4.9 million write-off of deferred financing fees and expenses in relation to an undrawn corporate bilateral facility, the availability of which expired in June 2022;
•$1.2 million commitment fee in relation to the undrawn portion of the Corporate RCF; and
•a partial offset
of $2.2 million gain of favorable foreign exchange movements.
Net (income)/loss from equity method investments: Income from equity method investments represents our share of earnings from our equity accounted investments in Egyptian Company for Gas Services S.A.E (“ECGS”), Avenir, CoolCo and Aqualung Carbon Capture (“Aqualung”). Net income from our equity method investments increased by $13.6 million to an income of $13.0 million for the nine months ended September 30, 2022, compared to a loss of $0.6 million for the same period in 2021. The increase was principally due to a $16.5 million share in net earnings of CoolCo which was partially offset by an increase of $2.9 million in our share in net losses of other equity method investments.
Net
(loss)/income from discontinued operations: Net (loss)/income from discontinued operations for the nine months ended September 30, 2022 of $79.3 million resulted from the CoolCo Disposal and the TundraCo Disposal. The CoolCo Disposal resulted in the recognition of (i) a $218.3 million impairment charge; (ii) a $10.1 million loss on disposal of CoolCo; and (iii) $23.4 million of net income from its discontinued operations for the nine months ended September 30, 2022. The disposal of the Golar Tundra resulted in the recognition of a $123.3 million gain on disposal and a $2.4 million net income from its discontinued operations for the nine months ended September 30, 2022.
Net
income from discontinued operations of $603.9 million for the nine months ended September 30, 2021, comprised of a (i) $574.9 million gain on the disposal of Hygo and Golar Partners to NFE; (ii) $6.9 million net loss from discontinued operations from Hygo and Golar Partners; (iii) $33.7 million net income from discontinued operations from the CoolCo Disposal; and (iv) $2.2 million net income from discontinued operations from the TundraCo Disposal for the nine months ended September 30, 2021.
See note 11, “Assets and Liabilities Held-for-Sale and Discontinued Operations” of our unaudited financial statements included herein, for further details of the disposal.
6
The
following details the operating results and Adjusted EBITDA for our reportable segments for the nine months ended September 30, 2022 and 2021.
Realized
gain on oil and gas derivative instruments, net (note 7)
—
154,696
—
154,696
—
11,837
—
11,837
Other operating income
—
299
—
299
—
—
—
—
Adjusted
EBITDA
(3,094)
286,540
(7,591)
275,855
3,324
134,412
(11,749)
125,987
Shipping segment
Nine
months ended September 30,
(in thousands of $)
2022
2021
Change
% Change
Total operating revenues
4,216
8,571
(4,355)
(51
%)
Vessel
operating expenses
(5,676)
(4,942)
(734)
15
%
Voyage, charterhire and commission expenses
(1,699)
(160)
(1,539)
962
%
Administrative expenses
65
(145)
210
(145
%)
Adjusted
EBITDA
(3,094)
3,324
(6,418)
(193
%)
Total operating revenues: Total operating revenues decreased by $4.4 million to $4.2 million for the nine months ended September 30, 2022 compared to $8.6 million for the same period in 2021. This was principally due to 168 commercial waiting days in 2022, compared to no commercial waiting time for the same period in 2021.
Vessel operating expenses: Vessel
operating expenses increased by $0.7 million to $5.6 million for the nine months ended September 30, 2022 compared to $4.9 million for the same period in 2021. This was mainly due to higher repairs and spares costs of $0.3 million in 2022 when compared to the same period in 2021.
Voyage, charterhire and commission expenses: Voyage, charterhire and commission expenses comprised of charterhire expenses, fuel costs associated with commercial waiting time, vessel positioning costs and net expenses related to Cool Pool, an LNG carrier pooling arrangement (the “Cool Pool”). While a vessel is on-hire, fuel costs are typically paid by the charterer, whereas during periods of commercial waiting time, fuel costs are paid by us. The increase of $1.5 million in voyage, charterhire and commission expenses to $1.7 million
for the nine months ended September 30, 2022 compared to $0.2 million for the same period in 2021, was mainly due to $1.6 million in bunker consumption of the Golar Arctic during her commercial waiting time. There was no comparable cost incurred for the same period in 2021.
7
FLNG segment
Nine
months ended September 30,
(in thousands of $)
2022
2021
Change
% Change
Total operating revenues
178,314
164,614
13,700
8
%
Realized
gain on oil and gas derivative instrument, net (note 7)
154,696
11,837
142,859
1,207
%
Vessel operating expenses
(43,380)
(39,288)
(4,092)
10
%
Voyage, charter-hire and commission expenses
(450)
(450)
—
—
%
Administrative
expenses
(22)
(185)
163
(88
%)
Project development expenses
(2,917)
(2,116)
(801)
38
%
Other operating income
299
—
299
100
%
Adjusted
EBITDA
286,540
134,412
152,128
113
%
Other Financial Data:
Liquefaction services revenue (note 5)
178,314
164,614
13,700
8
%
Amortization
of deferred commissioning period revenue, amortization of Day 1 gains, overproduction revenue1 and Other (note 5)
(22,103)
(11,238)
(10,865)
97
%
Realized gain on oil and gas derivative instruments, net (note 7)
154,696
11,837
142,859
1,207
%
FLNG
tariff, net 2
310,907
165,213
145,694
88
%
(1) Overproduction revenue in note 5 Revenue to the unaudited consolidated financial statements included herein, is revenue accrued for any production in excess of Hilli's annual contracted base capacity pursuant to LTA Amendment 2.
(2) FLNG tariff, net is a non-GAAP financial measure and is calculated by taking the liquefaction services revenue adjusting for amortization of deferred commissioning
period revenue, amortization of Day 1 gains, accrued overproduction revenue, other non-cash adjustments and adding the realized gains on oil and gas derivative instruments, net. FLNG tariff, net reflects the cash earnings of Hilli in a given period which consists of the base tolling fees, Brent crude oil linked fees, TTF-linked fees and billed overproduction revenue invoiced to the customer. FLNG tariff, net increases the comparability of our FLNG performance from period to period and against the performance of other FLNGs.
Total operating revenues: Total operating revenues increased by $13.7 million to $178.3 million for the nine months ended September 30, 2022, compared to $164.6 million for the same period in 2021, primarily due to:
•$12.2
million quarterly amortization of the deferred Day 1 gain established when the gas derivative was initially recognized in July 2021. The deferred Day 1 gain is amortized from 2022 in conjunction with the commencement of the increased contracted capacity pursuant to Amendment 3 to the LTA in July 2021. There was no comparable amortization revenue recognized for the same period in 2021;
•$3.8 million in relation to the increased contracted capacity to 1.4 million tons of LNG in 2022 compared to 1.2 million tons base capacity per year for the nine months ended September 30, 2022, as a result of the increased contracted capacity exercised by the customer pursuant to Amendment 3 to the LTA in July 2021. There was no comparable revenue recognized for the same period in 2021; and
•a partial offset
of a $1.3 million decrease in accrued revenue in relation to overproduction of the contracted liquefaction tonnage of 1.4 million tons for the nine months ended September 30, 2021. There was no comparable accrued overproduction revenue for the same period in 2022.
8
Realized gain on oil and gas derivative instruments, net: Realized gain on the oil and gas derivative instruments, net increased by $142.9 million to $154.7 million for the nine months ended September 30, 2022 compared
to $11.8 million for the same period in 2021, primarily due to:
•$100.8 million realized gains on the gas derivative instrument based on the movement of forecasted TTF gas prices and Euro/USD foreign exchange movements during the nine months ended September 30, 2022. The realized gains on the gas derivative instruments relates to the 0.2 million tons increased contracted capacity pursuant to Amendment 3 to the LTA entered into in July 2021. There were no comparable gains for the same period in 2021;
•$71.1 million increase in realized gains on the oil derivative instrument based on a three-month look-back at the average Brent crude oil prices above the base LTA tolling fee. The increase is primarily due to an increase in the Brent crude oil prices; and
•a
partial offset of a $29.0 million realized loss (100% attributable to Golar) on the hedged component of the TTF linked earnings. There was no comparable loss for the same period in 2021.
FLNG Tariff, net: FLNG Tariff, net increased by $145.7 million to $310.9 million for the nine months ended September 30, 2022, compared to $165.2 million for the same period in 2021. This is primarily due to the increase in the three-month look-back average Brent crude oil prices and the commencement of the 0.2 million tons increased contracted capacity option, exercised pursuant to Amendment 3 to the LTA in July 2021, for the nine months ended September 30, 2022, compared to the same period in 2021.
Vessel
operating expenses: Vessel operating expenses increased by $4.1 million to $43.4 million for the nine months ended September 30, 2022, compared to $39.3 million for the same period in 2021, mainly due to:
•$2.2 million increase in repair costs following the planned maintenance window for the nine months ended September 30, 2022. There was no comparable works for the same period in 2021; and
•$1.7 million increase in crew taxes for the nine months ended September 30, 2022 given the 2021 costs were suppressed by the reversal of crew taxes accruals following the finalization of the 2021 local tax return.
Project
development expenses: Project development expenses comprised of non-capitalized project-related expenses such as legal, professional and consultancy costs. The project development expenses increased by $0.8 million to $2.9 million for the nine months ended September 30, 2022, compared to $2.1 million for the same period in 2021 due to an increase in legal costs of $0.8 million for FLNG projects in the early exploratory stages.
Corporate and other segment
Nine
months ended September 30,
(in thousands of $)
2022
2021
Change
% Change
Total operating revenues
26,261
21,575
4,686
22
%
Vessel
operating expenses
(4,861)
(7,659)
2,798
(37
%)
Voyage, charterhire and commission expenses
(25)
(66)
41
(62
%)
Administrative expenses
(30,552)
(25,638)
(4,914)
19
%
Project
development income
1,586
39
1,547
3,967
%
Adjusted EBITDA
(7,591)
(11,749)
4,158
(35
%)
Total operating revenues: Total operating revenues increased by $4.7 million to $26.3
million for the nine months ended September 30, 2022 compared to $21.6 million for the same period in 2021. This was principally due to:
•$5.1 million of revenue from the Development Agreement entered into with Snam to provide services to GolarTundra. There was no comparable revenue for the same period in 2021; and
•a partial offset due to a decrease of $0.8 million in revenue as a result of the weakening of the Euro/USD exchange rates movements.
9
Vessel
operating expenses: Vessel operating expenses decreased by $2.8 million to $4.9 million for the nine months ended September 30, 2022 compared to $7.7 million for the same period in 2021, primarily due to a decrease in costs associated with the Operation and Maintenance Agreement that we entered into with LNG Hrvastska d.o.o. (the “O&M Agreement”) in relation to the FSRU LNG Croatia.
Administrative expenses: Administrative expenses increased by $4.9 million to $30.6 million for the nine months ended September 30, 2022 compared to $25.6 million for the same period in 2021, mainly due to an increase of:
•$2.4
million of professional fees in relation to the sub-contracting of our contractual vessel management obligations (note 11.1 and note 21);
•$1.3 million corporate expenses including legal and other professional fees following the disposal of management companies to CoolCo in 2022; and
•$0.7 million of travel expenses following easing of COVID-19 travel restrictions in 2022.
Project development income: Project development income increased by $1.5 million to $1.6 million for the nine months ended September 30, 2022 compared an income of $nil for the same period in 2021, mainly due to consultancy fees for FLNG and other projects.
Liquidity
and Capital Resources
Our short-term liquidity requirements are primarily for the servicing of our debt, working capital, potential investments in affiliates, FSRU conversion project and FLNG growth projects related commitments due within the next 12 months.
As of September 30, 2022, we had cash and cash equivalents (including restricted cash and short-term deposits) of $629.1 million, of which $130.9 million is restricted cash. Included within restricted cash is $61.1 million in respect of the issuance of a letter of credit by a financial institution to the customer of FLNG Hilli, $38.5 million of collateral in relation to the conversion of the Golar Arctic into a FSRU for Snam following
receipt of a notice to proceed and $11.3 million in respect of the O&M Agreement, with the balance mainly relating to the cash belonging to continuing lessor VIE that we are required to consolidate under U.S. GAAP. Refer to note 13 “Restricted Cash and Short-term Deposits” of our unaudited consolidated financial statements included herein for additional details.
Since September 30, 2022, transactions impacting our cash flows include:
Receipts of:
•$332.4 million of net proceeds from the sale of 6,311,864 NFE Shares in November 2022;
•$97.9 million of net proceeds from the sale of 8,046,154 million CoolCo shares in November 2022;
•$27.6
million returned collateral in relation to our TTF margin exposure under our commodity swap arrangements;
•$6.6 million proceeds from First FLNG Holdings' subscription of equity interest in Gimi MS Corporation (“Gimi MS”); and
•$1.5 million returned collateral in relation to release of obligations under Hygo's performance guarantee.
Payments of:
•$23.3 million of scheduled loan and interest repayments;
•$20.4 million of additions to the asset under development, the Gimi;
•$10.2 million of scheduled payments in relation to net
settlement of our commodity swap arrangements;and
•$1.9 million to repurchase 81,639 of our common shares, as part of our approved share repurchase program.
As of November 21, 2022 we have a free cash position of $945.0 million.
•drew down $131.0 million from the $200.0 million available under the Corporate RCF and subsequently repaid the outstanding balance in May 2022. The Corporate RCF was cancelled in November 2022;
•repaid the $182.0 million Golar Tundra facility concurrent with the sale of the Golar Tundra to Snam in May 2022; and
•allowed the expiration of the undrawn $250 million corporate bilateral facility with Sequoia Investment Management in June 2022.
Security, Debt and Lease Restrictions
Certain of our financing agreements
are collateralized by vessel mortgages and, in the case of some debt, pledges of shares by each guarantor subsidiary. The existing financing agreements impose operating and financing restrictions which may significantly limit or prohibit, among other things, our ability to incur additional indebtedness, create liens, sell capital shares of subsidiaries, make certain investments, engage in mergers and acquisitions, purchase and sell vessels, enter into time or consecutive voyage charters, buy-back additional shares in excess of existing allowances or pay dividends without the consent of the relevant lenders. In addition, lenders may accelerate the maturity of indebtedness under existing financing agreements and foreclose upon the collateral securing the indebtedness upon the occurrence of certain events of default, including a failure to comply with any of these existing covenants
contained in the financing agreements. Many of our debt agreements contain certain covenants which require compliance with certain financial ratios. Such ratios include maintaining a positive working capital ratio, a tangible net worth covenant and minimum free cash restrictions. With regards to cash restrictions, we have agreed to retain at least $50.0 million of cash and cash equivalents on a consolidated group basis at each balance sheet date.
Cash Flow
Nine
months ended September 30,
(in thousands of $)
2022
2021
Change
% Change
Net cash provided by continuing operating activities
141,792
73,347
68,445
93%
Net cash (used in)/provided by discontinued operating activities
(59,960)
95,738
(155,698)
(163%)
Net
cash provided by/(used in) continuing investing activities
61,970
(171,333)
233,303
(136%)
Net cash provided by discontinued investing activities
569,298
119,095
450,203
378%
Net cash used in continuing financing activities
(344,457)
(10,997)
(333,460)
3032%
Net
cash used in discontinued financing activities
(158,280)
(128,552)
(29,728)
23%
Net increase/(decrease) in cash within assets held for sale
80,466
(10,042)
90,508
(901%)
Net increase/(decrease) in cash, cash equivalents, restricted cash and cash within assets held for sale
290,829
(32,744)
323,573
(988%)
Cash,
cash equivalents and restricted cash at beginning of period
338,284
226,124
112,160
50%
Cash, cash equivalents and restricted cash at end of period
629,113
193,380
435,733
225%
Operating activities
Net cash provided by continuing operating activities increased by $68.4 million to $141.8 million for the nine months ended September
30, 2022, compared to $73.3 million for the same period in 2021, mainly due to an increase in revenue from continuing operations for the nine months ended September 30, 2022, compared to the same period in 2021.
Net cash (used in)/provided by discontinued operating activities decreased by $155.7 million to net cash used in discontinued operating activities of $60.0 million for the nine months ended September 30, 2022, compared to the same period in 2021, mainly due to:
11
•$90.5 million decrease in cash, cash equivalents and restricted cash within
assets held for sale following the disposal and subsequent deconsolidation of our lessor VIEs to CoolCo and Golar LNG NB13 Corporation (the disponent owner of the Golar Tundra) to Snam during the nine months ended September 30, 2022;
•$1.6 million drydocking expenditure paid for the nine months ended September 30, 2021 due to scheduled drydocks. No comparable expenditure was incurred for the same period in 2022; and
•general timing of working capital during the period, compared to the same period in 2021.
Investing activities
Net cash provided
by continuing investing activities of $62.0 million for the nine months ended September 30, 2022 is comprised of:
•$253.0 million proceeds from the sale of 6.2 million NFE Shares;
•$26.9 million proceeds from Keppel's 30% subscription of additional equity interest in Gimi MS; and
•the receipt of $4.9 million of dividends from our NFE Shares.
This was partially offset by:
•$220.4 million of additions to assets under development relating to payments made in respect of the conversion of the Gimi; and
•$2.4
million of equity contribution to our investment in Aqualung in May 2022.
Net cash used in continuing investing activities of $171.3 million for the nine months ended September 30, 2021 is comprised of:
•$183.3 million of additions to assets under development relating to payments made in respect of the conversion of the Gimi; and
•$8.6 million additional equity contribution to our equity method investment in Avenir.
This was partially offset by:
•$16.9 million proceeds from Keppel's 30% subscription of its additional equity
interest in Gimi MS; and
•the receipt of $3.7 million of dividends from our NFE Shares.
Net cash provided by discontinued investing activities of $569.3 million for the nine months ended September 30, 2022 is comprised of:
•$351.2 million net proceeds from the sale of Golar LNG NB13 Corporation (the disponent owner of the Golar Tundra) to Snam in May 2022; and
•$218.1 million net proceeds from disposals of our eight LNG carriers and management companies to CoolCo.
Net cash provided by discontinued investing activities
of $119.1 million for the nine months ended September 30, 2021 is comprised of:
•$119.6 million net proceeds from disposals of our former equity method investments, Golar Partners and Hygo;
•$0.5 million dividends received from Golar Partners; and
•a partial offset by $1.0 million of additions to vessels and equipment.
Financing activities
Net cash used in continuing financing activities of $344.5 million for the nine months ended September 30, 2022 arose principally due to:
•$315.6
million redemption of the outstanding face value of the 2017 Convertible Bonds in February 2022;
•$131.0 million repayment of ourCorporate RCF in May 2022;
•$87.7 million of scheduled debt repayments which includes $80.5 million of repayments made by our continuing lessor VIE;
•$39.3 million dividend payment in relation to Golar Hilli LLC (“Hilli LLC”);
•$20.4 million payment to repurchase our own shares under our share repurchase program; and
•$9.0 million financing costs paid predominantly in relation to the Gimi facility, the $250 million undrawn corporate bilateral facility, the availability
of which expired in June 2022 and the undrawn Corporate RCF facility which was cancelled in November 2022.
12
This was partially offset by debt proceeds of:
•$131.0 million drawdown from our Corporate RCF in February 2022;
•$125.0 million collectively representing the seventh and eighth drawdowns from the $700 million Gimi facility; and
•$2.3 million debt drawdown by our continuing lessor VIE.
Net
cash used in continuing financing activities of $11.0 million for the nine months ended September 30, 2021, arose primarily from:
•$70.3 million of scheduled debt repayments which includes $64.9 million of repayments made by our continuing lessor VIE;
•$24.5 million payment to repurchase our own shares under our share repurchase program;
•$24.4 million dividend payment in relation to Hilli LLC; and
•$4.6 million financing cost paid predominately in relation to the Gimi facility.
This was partially offset by:
•$110.0
million collectively representing the fifth and sixth drawdowns from the $700 million Gimi facility; and
•$2.8 million debt drawdown by our continuing lessor VIE.
Net cash used in discontinued financing activities was $158.3 million for the nine months ended September 30, 2022 and arose primarily due to:
•$155.5 million prepayment of the principal balance of the Golar Tundra facility in May 2022 following the sale of Golar LNG NB13 Corporation (the disponent owner of the Golar Tundra) to Snam in May 2022; and
•$2.5 million of scheduled debt repayments.
Net
cash used in discontinued financing activities was $128.6 million for the nine months ended September 30, 2021 and arose primarily due to:
•$137.9 million of scheduled debt repayments which includes $121.2 million of repayments made by our discontinued lessor VIEs; and
•a partial offset by $10.1 million debt drawdown by our discontinued lessor VIEs.
13
GOLAR LNG LIMITED
INDEX TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
Unaudited Consolidated Statements of Operations for the nine months ended September 30, 2022 and 2021
The accompanying notes are an integral part of these unaudited consolidated financial statements.
14
GOLAR LNG LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
2022
2021
(in
thousands of $)
Notes
September 30,
December 31,
ASSETS
Current assets
Cash and cash equivalents
i498,164
i232,211
Restricted
cash and short-term deposits
13
i19,025
i34,025
Trade
accounts receivable
i51,264
i28,912
Inventories
i745
i536
Amounts
due from related parties
21
i4,428
i3,484
Assets
held for sale
11
i707
i82,630
Other
current assets
14
i597,774
i543,799
Total
current assets
i1,172,107
i925,597
Non-current
assets
Restricted cash
13
i111,924
i72,048
Equity
method investments
16
i196,912
i52,215
Asset
under development
15
i1,107,728
i877,838
Vessels
and equipment, net
i1,149,395
i1,264,523
Assets
held for sale
11
i—
i1,614,409
Other
non-current assets
17
i644,747
i141,665
Non-current
amounts due from related parties
21
i3,431
i—
Total
assets
i4,386,244
i4,948,295
LIABILITIES
AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt and short-term debt
18
(i354,322)
(i703,170)
Liabilities
held for sale
11
(i4,189)
(i429,609)
Trade
accounts payable
(i15,132)
(i4,936)
Accrued
expenses
(i35,634)
(i33,023)
Other
current liabilities
19
(i46,879)
(i136,483)
Total
current liabilities
(i456,156)
(i1,307,221)
Non-current
liabilities
Long-term debt
18
(i999,426)
(i920,130)
Liabilities
held for sale
11
i—
(i449,868)
Other
non-current liabilities
(i94,843)
(i93,159)
Total
liabilities
(i1,550,425)
(i2,770,378)
Stockholders'
equity
Stockholders' equity
(i2,427,996)
(i1,730,650)
Non-controlling
interests
(i407,823)
(i447,267)
Total
liabilities and stockholders' equity
(i4,386,244)
(i4,948,295)
The accompanying notes are an integral part of these unaudited consolidated financial statements.
15
GOLAR LNG LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASHFLOWS
Nine
months ended September 30,
(in thousands of $)
Notes
2022
2021
OPERATING ACTIVITIES
Net income
i871,987
i514,803
Add:
Net (income)/loss from discontinued operations
i79,281
(i603,947)
Net
income/(loss) from continuing operations
i951,268
(i89,144)
Adjustments
to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization
i39,328
i41,592
Amortization
of deferred charges and debt guarantees, net
i1,642
i1,107
Impairment
of long-lived assets
4
i76,155
i—
Net
(income)/loss from equity method investments
16
(i12,996)
i562
Compensation
cost related to employee stock awards
i2,455
i2,445
Net
foreign exchange losses/(gains)
(i1,536)
i654
Change
in fair value of investment in listed equity securities
8
(i346,497)
i244,210
Change
in fair value of derivative instruments (interest rate swaps)
9
(i74,915)
(i18,557)
Change
in fair value of derivative instruments (oil and gas derivatives), commodity swaps and amortization of day 1 gains
7
(i381,414)
(i152,546)
Changes
in assets and liabilities:
Trade accounts receivable
(i20,951)
(i2,605)
Inventories
(i209)
i75
Other
current and non-current assets
(i36,575)
i4,184
Amounts
due from/to related companies
(i3,568)
(i9,269)
Trade
accounts payable
i3,325
(i3,379)
Accrued
expenses
(i205)
(i13,827)
Other
current and non-current liabilities
(i53,515)
i67,845
Net
cash provided by continuing operating activities
i141,792
i73,347
Net
income/(loss) from discontinued operations
11
(i79,281)
i603,947
Drydocking
expenditure
i—
(i1,591)
Deconsolidation
of lessor VIEs
(i59,085)
i—
Depreciation
and amortization
i8,699
i37,895
Amortization
of deferred charges
i3,932
i895
Net
loss from equity method investments
11
i—
i6,891
(Gain)/loss
on disposal and impairment of long-lived assets
11
i105,201
(i575,056)
Compensation
cost related to employee stock awards
i239
i618
Net
foreign exchange losses
i574
i160
Changes
in assets and liabilities:
Trade accounts receivable
i437
i3,312
Inventories
i—
i380
Other
current and non-current assets
(i5,536)
i276
Amounts
due from related companies
(i804)
i—
Trade
accounts payable
(i7,285)
i2,915
Accrued
expenses
(i4,946)
i14,378
Other
current and non-current liabilities
(i22,105)
i718
Net
cash (used in)/provided by discontinued operating activities
(i59,960)
i95,738
16
Nine
months ended September 30,
(in thousands of $)
Notes
2022
2021
INVESTING ACTIVITIES
Additions to assets under development
(i220,354)
(i183,305)
Additions
to equity method investments
i—
(i8,625)
Additions
to other investments
(i2,447)
i—
Proceeds
from subscription of equity interest in Gimi MS
12
i26,903
i16,872
Proceeds
from sale of listed equity securities
i252,960
i
Dividends
received from listed equity securities
i4,908
i3,725
Net
cash provided by/(used in) continuing investing activities
i61,970
(i171,333)
Dividends
received
i—
i460
Additions
to vessels and equipment
i—
(i925)
Net
proceeds from disposals of equity method investments
i—
i119,560
Net
proceeds from disposals of long-lived assets
11
i569,298
i—
Net
cash provided by discontinued investing activities
i569,298
i119,095
FINANCING
ACTIVITIES
Proceeds from short-term and long-term debt
i258,287
i112,848
Repayments
of short-term and long-term debt
(i534,294)
(i70,325)
Cash
dividends paid
(i39,293)
(i24,437)
Financing
costs paid
(i8,960)
(i4,599)
Purchase
of treasury shares
(i20,358)
(i24,484)
Proceeds
from exercise of share options
i161
i—
Net
cash used in continuing financing activities
(i344,457)
(i10,997)
Proceeds
from short-term and long-term debt
i—
i10,073
Repayments
of short-term and long-term debt
(i158,000)
(i137,925)
Financing
costs paid
(i280)
(i700)
Net
cash used in discontinued financing activities
(i158,280)
(i128,552)
Cash,
cash equivalents and restricted cash within assets held for sale at the beginning of period
11
i80,507
i64,749
Cash,
cash equivalents and restricted cash within assets held for sale at end of period
11
(i41)
(i74,791)
Net
increase/(decrease) in cash within assets held for sale
i80,466
(i10,042)
Net
increase/(decrease) in cash, cash equivalents, restricted cash and cash within assets held for sale
i290,829
(i32,744)
Cash,
cash equivalents and restricted cash at beginning of period
i338,284
i226,124
Cash,
cash equivalents and restricted cash at end of period
i629,113
i193,380
Supplemental
note to the unaudited consolidated statements of cash flows
The following table identifies the balance sheet line-items included in cash, cash equivalents and restricted cash presented in the unaudited consolidated statements of cash flows:
(1)
Contributed Surplus is 'capital' that can be returned to shareholders without the need to reduce share capital, thereby giving us greater flexibility when it comes to declaring dividends.
(2) As at September 30, 2022, and 2021, our other comprehensive loss consisted of a gain of $i0.1 million
and $i0.1 million of pension and post-retirement benefit plan adjustments and $inil
and $i3.1 million loss of our share of affiliates comprehensive loss from discontinued operations, respectively.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
18
GOLAR
LNG LIMITED
CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.iGENERAL
Golar LNG Limited (the “Company” or “Golar”) was incorporated in Hamilton, Bermuda on May 10, 2001 for the purpose of acquiring the liquefied natural gas (“LNG") shipping interests of Osprey Maritime Limited, which was
owned by World Shipholding Limited.
As used herein and unless otherwise required by the context, the terms “Golar”, the “Company”, “we”, “our” and words of similar import refer to Golar or any one or more of its consolidated subsidiaries, or to all such entities.
We design, build, own, and operate marine infrastructure for the liquefaction and regasification of LNG. As of September 30, 2022, our fleet was comprised of itwo
LNG carriers (ione is contracted for conversion to a Floating Storage Regasification Unit (“FSRU”) subject to receipt of notice to proceed and subsequent sale, and ione vessel
is earmarked for conversion to a Floating Liquefaction Natural Gas vessel (“FLNG”)) and itwo FLNGs (the operational Hilli and the Gimi, which is currently under conversion to a FLNG).
We are listed on the Nasdaq under the ticker: “GLNG”.
2.iACCOUNTING
POLICIES
Basis of accounting
iThese unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited consolidated financial statements do not include all of the disclosures required under U.S. GAAP in annual consolidated financial statements, and should be read in conjunction with
our audited consolidated annual financial statements for the year ended December 31, 2021, which are included in our annual report on Form 20-F for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on April 28, 2022(the “2021 Annual Report”).
As further discussed in note 11, “Assets and Liabilities Held for Sale and Discontinued Operations”, during the first and second quarters of 2022, we (i) disposed of substantially all of our fleet of LNG carriers and our ship management business to Cool Company Ltd. (“CoolCo”) (the “CoolCo Disposal”) and (ii) sold all of the shares of our subsidiary, Golar LNG NB13 Corporation
the disponent owner of FSRU Golar Tundra, to Asset Company 11 S.R.L (part of Italy’s SNAM group, or “Snam”) (the “TundraCo Disposal”).
The CoolCo Disposal met the criteria to be classified as held-for-sale and was reported as discontinued operations on various dates as the sale of our fleet of LNG carriers and our ship management business occurred during a series of phased disposals during the nine months ended September 30, 2022. The TundraCo Disposal also met the criteria to be classified as held-for-sale and was reported as discontinued operations on May 30, 2022. The related assets, liabilities and operating results of the CoolCo Disposal and the TundraCo Disposal are presented as discontinued operations for all periods presented herein.
Significant accounting policies
The accounting policies adopted in the preparation of these unaudited consolidated financial statements for the nine months ended September 30, 2022 are consistent with those followed in the preparation of our 2021 Annual Report, except for those discussed below and those disclosed in note 3.
Revenue and related expense recognition
iContracts
relating to our LNG carrier, FSRU and FLNG assets can take the form of operating leases, finance leases, tolling, services and management service agreements. In addition, we have historically contracted a portion of our vessels in the spot market through our “Cool Pool” arrangement. Although the substance of these contracts is similar (they allow our customers to hire our assets and to avail themselves of CoolCo's management services for a specified day rate), the accounting treatment varies.
19
To determine whether a contract conveys a lease
agreement for a period of time, the Company has assessed whether, throughout the period of use, the customer has both of the following:
•the right to obtain substantially all of the economic benefits from the use of the identified asset; and
•the right to direct the use of that identified asset.
If a contract relating to an asset fails to give both of the above rights, we account for the agreement as a revenue contract. A contract
relating to an asset will generally be accounted for as a revenue contract if the customer does not contract for substantially all of the capacity of the asset (i.e. another third party could contract for a meaningful amount of the asset capacity). In situations where we provide management services unrelated to an asset contract, we account for the contract as a revenue contract. Where we provide FSRU drydocking, site commissioning
and FSRU hook-up services for third parties, we account for the contract as a revenue contract.
FSRU services revenue
Services revenue is generated from contracts entered into to perform drydocking, site commissioning and vessel hook-up services for vessels owned by third parties. The drydocking and commissioning services that we provide are considered a single performance obligation to the customer that is satisfied over time. Progress over time is measured using an input method of recognition based on our efforts expended over the
contract term. Where contractual payment terms include fixed payments at specified periods throughout the contract, these are recognized as contract liabilities to the extent that the payments are received from the customer in advance of rendering the services.
Stock-based compensation
iOur
stock-based compensation includes both stock options and restricted stock units (“RSUs”).We expense the fair value of stock-based compensation issued to employees and non-employees over the period the stock options or RSUs vest. We recognize stock-based compensation cost for awards containing a service condition only on a straight-line basis over the employee’s requisite service period or the non-employee’s vesting period, unless the award contains performance and/or market conditions, in which case stock-based compensation cost is recognized using the graded vesting method. Certain stock options and RSUs provide for accelerated vesting in the event of death or disability in service or a change of control (as defined in our Long Term Incentive Plan). No compensation cost is recognized for stock-based compensation for which the individuals do not render the requisite service. We have elected to recognize forfeitures
as they occur. The fair value of stock options is estimated using the Black-Scholes option pricing model. The fair value of RSUs is estimated using the market price of the Company’s common stock at grant date or the Monte Carlo simulation model, as appropriate. Upon eventual stock option exercises or RSU conversions, shares delivered will be made available from either our authorized unissued shares, treasury shares or repurchasing our shares in the open market.
Use of estimates
i
The
preparation of financial statements requires that management make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of material contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In assessing the recoverability of our vessels’ carrying amounts, we make assumptions regarding estimated future cash flows, estimates in respect of residual value, charter rates, vessel operating expenses and drydocking requirements.
In relation to the oil derivative instruments (note 20), the fair value was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above
a contractual oil price floor over the term of the Hilli's Liquefaction Tolling Agreement (“LTA”). The fair value of the gas derivative was determined using the estimated discounted cash flows of the additional payments due to us as a result of forecasted natural gas prices and forecasted Euro/USD exchange rates. Significant inputs used in the valuation of the oil and gas derivative instruments include an appropriate discount rate and the length of time necessary to blend the long-term and short-term oil and gas prices obtained from quoted prices in active markets. The changes in fair value of our oil and gas derivative instruments are recognized in each period within “Realized and unrealized gains on oil and gas derivative instruments” as part of the unaudited consolidated statement of operations (note 7).
20
During
the period ended September 30, 2022, as a result of the worldwide outbreak of the coronavirus (“COVID-19”) and its impact on our operations, we considered whether indicators of impairment existed that could indicate that the carrying amounts of the vessels may not be recoverable as of September 30, 2022 and concluded that, with the exception of the impairmentdiscussed in notes 4 and 11, no such events or changes in circumstances had occurred to warrant a change in the assumptions utilized in the December 31, 2021 impairment tests of our vessels. We will continue to monitor developments in the markets in which we operate for indications that the carrying values of our remaining vessels are not recoverable.
3. iRECENTLY
ISSUED ACCOUNTING STANDARDS
i
Adoption of new accounting standards
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021 the FASB issued ASU 2021-01 Reference Rate Reform (Topic 848): Scope.
These amendments provide temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. We currently do not believe the use of optional expedients in ASU 2020-04 and ASU 2021-01 will have a significant impact on our consolidated financial statements, however we will continue to evaluate this until December 31, 2022.
In August 2020, the FASB issued ASU 2020-06 Debt – Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Topic 815).
The amendments simplify the issuer’s accounting for convertible instruments and its application of the equity classification guidance. The new guidance eliminates some of the existing models for assessing convertible instruments, which results in more instruments being recognized as a single unit of account on the balance sheet and expands disclosure requirements. The new guidance simplifies the assessment of contracts in an entity’s own equity and existing EPS guidance in ASC 260. We adopted this with effect from January 1, 2022. We adjusted the additional paid in capital as of January 1, 2022 in our unaudited consolidated statement of changes in equity as included herein.
In May 2021, the FASB issued
ASU 2021-04 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging —Contracts in Entity’s Own Equity (Subtopic 815-40). We adopted this with effect from January 1, 2022. The adoption of ASU 2021-04 had no impact on our consolidated financial statements.
In July 2021, the FASB issued ASU 2021-05 Leases (Topic 842) – Lessors – Certain Leases with Variable Lease Payments. We adopted this with effect from January 1, 2022. The adoption of ASU 2021-05 has no impact on our consolidated financial statements.
21
Accounting
pronouncements that have been issued but not yet adopted
i
The following table provides a brief description of recent accounting standards that have been issued but not yet adopted:
Standard
Description
Date
of Adoption
Effect on our Consolidated Financial Statements or Other Significant Matters
ASU 2021-08 Business Combinations (Topic 805) - Accounting for contract assets and contract liabilities from contracts with customers
Requires contract assets and contract liabilities (i.e., deferred revenue) acquired in
a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree (rather than having such amounts recognized by the acquirer at fair value in acquisition accounting, as has been historical practice).
No impact currently expected as a result of the adoption of this ASU.
ASU 2022-03 Fair Value Measurement (Topic
820) - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
This amendment is intended to reduce diversity in practice in the measurement of the fair value of equity securities subject to contractual sale restrictions. For entities that have investments in equity securities that are subject to contractual sale restrictions, the contractual restriction on the sale is not considered part of the unit of account of the equity security, is not considered when measuring fair value and additional disclosures are required. This amendment is required to be applied prospectively from date of adoption; early adoption is permitted.
No impact currently expected as a result of the adoption of this ASU.
4. iSEGMENT
INFORMATION
We provide and operate ithree distinct reportable segments as follows:
•Shipping – This segment is based on the business activities of the transportation of LNG carriers. We operate and subsequently charter out LNG carriers on fixed terms to customers.
•FLNG –
This segment is based on the business activities of FLNG vessels or projects. We convert LNG carriers into FLNG vessels, or build new FLNG vessels and subsequently charter them out to customers. We currently have ione operational FLNG, the Hilli, and ione
undergoing conversion into a FLNG, the Gimi (note 15).
•Corporate and other – This segment is based on the business activities of vessel management, FSRU services for third parties and administrative services and our corporate overhead costs.
22
i
A
reconciliation of net income to Adjusted EBITDA is as follows:
Nine months ended September 30,
(in thousands of $)
2022
2021
Net income
i871,987
i514,803
Income
taxes
i335
i407
Income before income
taxes
i872,322
i515,210
Depreciation
and amortization
i39,328
i41,592
Impairment
of long-term assets (1)
i76,155
i—
Unrealized
gain on oil and gas derivative instruments (note 7)
(i361,972)
(i145,282)
Realized
and unrealized (gains)/losses on our investment in listed equity securities (note 8)
(i346,497)
i244,210
Other
non-operating (income)/losses (note 8)
(i11,267)
i67,582
Interest
income
(i4,013)
(i61)
Interest
expense
i15,589
i24,121
Gains
on derivative instruments (note 9)
(i73,330)
(i17,062)
Other
financial items, net (note 9)
i3,255
(i938)
Net
(income)/loss from equity method investments (note 16)
(i12,996)
i562
Net
loss/(income) from discontinued operations (note 11)
i79,281
(i603,947)
Adjusted
EBITDA
i275,855
i125,987
(1)
In May 2022, we entered into a sale and purchase agreement (the “Arctic SPA”) with SNAM RETE GAS S.p.A (part of “Snam”), pursuant to which, upon receipt of a notice to proceed, we will convert LNG carrier Golar Arctic to a FSRU, deliver, install and connect her to Snam's mooring, and following completion of commissioning activities and provisional acceptance, we will sell her to Snam. Entry into the Arctic SPA changes the expected recovery of Golar Arctic's carrying amount from continued use in operations over her remaining useful life, to recovery from sale, and was considered an indicator of impairment. As the revised future estimated cash flows were less than her carrying amount, an impairment charge of $i76.2
million was recognized, reflecting an adjustment to her fair value (based on average broker valuation at date of measurement and represents the exit price in the principal LNG carrier sales market).
(1)
Includes inter-segment eliminations arising from vessel and administrative management fees revenue between segments.
5. iREVENUE
Contract assets arise when we render services
in advance of receiving payment from our customers. Contract liabilities arise when the customer makes payments in advance of receiving the services. iChanges in our contract balances during the period are as follows:
(1)
Relates to management fee revenue and liquefaction services revenue, see a) and b) below.
(2) Relates to liquefaction services revenue, see b) below and services revenue.
(3) In August 2022, we entered into a Development Agreement with Snam to provide drydocking, site commissioning and hook-up services for the Golar Tundra (the “Development Agreement”), which it acquired from us in May 2022 (note 11.2). The Development Agreement includes contractual fixed payments (recognized over the period of time that we provide the services to Snam, a period of less than one year) and liquidated damages (in the event that we do not deliver the commissioned vessel on a contracted date) which we do not expect to be payable
as of September 30, 2022 and the transaction price has not been adjusted. As of September 30, 2022, we recognized services revenue and a contract liability of $i5.1 million and $i2.3 million
(note 19), respectively. The remaining unsatisfied services revenue performance obligation of $i16.1 million is expected to be recognized within a year.
24
a) Management fee revenue:
The total contract
asset balance above includes $i0.5 million which is included in balance sheet line item “Amounts due from related parties” as of September 30, 2022.
Refer to note 21 for further details of our management fee revenue and contract terms.
i
b)
Liquefaction services revenue:
Nine months ended September 30,
(in thousands of $)
2022
2021
Base tolling fee (1)
i153,376
i153,376
Amortization
of deferred commissioning period revenue billing (2)
i3,081
i3,081
Amortization
of Day 1 gains (3)
i19,442
i7,264
Overproduction
revenue (4)
i—
i1,313
Incremental
base tolling fee (5)
i3,750
i—
Other
(6)
(i1,335)
(i420)
Total
i178,314
i164,614
(1)
The LTA bills at a base rate in periods when the oil price is $i60 or less per barrel (included in “Liquefaction services revenue” in the unaudited consolidated statements of operations), and at an increased rate when the oil price is greater than $i60 per barrel
(recognized as a derivative and included in “Realized and unrealized gain/(loss) on oil and gas derivative instruments” in the unaudited consolidated statements of operations, excluded from revenue).
(2) Customer billing during the commissioning period, prior to vessel acceptance and commencement of the contract term, of $i33.8 million is considered
an upfront payment for services. These amounts billed are deferred (included in “Other current liabilities” and “Other non-current liabilities” in the unaudited consolidated balance sheets) and recognized as part of “Liquefaction services revenue” in the consolidated statements of operations evenly over the contract term.
(3) Day 1 gain consists of the Brent crude oil price linked derivative initially recognized in December 2017 for $i79.6
million (recognized in “Other current liabilities” and “Other non-current liabilities” in the unaudited consolidated balance sheets). This amount is amortized and recognized as part of “Liquefaction services revenue” in the unaudited consolidated statements of operations evenly over the contract term.
The Dutch Title Transfer Facility (“TTF”) gas price derivative initially recognized in July 2021 for $i28.3
million (recognized in “Other current liabilities” and “Other non-current liabilities” in the consolidated balance sheets). This amount is amortized and recognized as part of “Liquefaction services revenue” in the unaudited consolidated statements of operations evenly over the contract term.
(4) In 2021, we entered into Amendment 2 to the LTA with our customer, who agreed to compensate us for production in excess of contracted annual base capacity, commencing with contract year 2019.
(5) In 2021, we entered into Amendment 3 to the LTA with our customer, which included an increase in the utilization of Hilli
(“the Hilli Extended Capacity Agreement”). Commencing in January 2022, the annual capacity utilization of Hilli increased by i0.2 million tons of LNG, bringing total utilization in 2022 to i1.4
million tons (“2022 Incremental Capacity”). The tolling fee for the 2022 Incremental Capacity is linked to TTF and the Euro/USD foreign exchange movements (note 7).
(6) “Other” consists of the unwinding of liquidated damages recognized in 2018 of $i0.4 million (2021: $i0.4 million)
and accrued demurrage cost of $i0.9 million (2021: inil). Liquidated damages prior to the commencement of the contract
term of $i4.6 million was recognized in “Other non-current liabilities” in the consolidated balance sheets and is released evenly over the contract term.
/
25
6.iEARNINGS/(LOSS)
PER SHARE
Basic earnings/(loss) per share (“EPS”)/(“LPS”) is calculated with reference to the weighted average number of common shares outstanding during the period.
i
The components of the numerator for the calculation of basic and diluted EPS/(LPS) are as follows:
Realized
mark-to-market (“MTM”) adjustment on commodity swap derivatives
(i29,034)
i—
Realized
gain on oil and gas derivative instruments, net
i154,696
i11,837
Unrealized
gain on Hilli gas derivative instrument (note 17)
i309,375
i—
Unrealized
gain on Hilli oil derivative instrument (note 17)
i36,186
i145,282
Unrealized
MTM adjustment on commodity swap derivatives
i16,411
i—
Unrealized
gain on oil and gas derivative instruments
i361,972
i145,282
Realized
and unrealized gain on oil and gas derivative instruments (note 20)
i516,668
i157,119
/
26
The
realized gain on oil and gas derivative instruments results from the excess monthly billings above the Hilli base tolling fee pursuant to the LTA and the incremental capacity exercised by the customer whereas the unrealized gain on oil and gas derivative instruments results from movements in forecasted oil and natural gas prices and Euro/USD exchange rates.
8.OTHER NON-OPERATING INCOME/(LOSSES)
iOther
non-operating income comprise the following:
(1)
“Variable lease income” is excluded from lease payments that comprise the minimum contractual future revenues from non-cancellable operating leases.
/
(2) Total operating lease income is included in the income statement line-item “Time and voyage charter revenues”.
27
11. iASSETS
AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
11.1 The CoolCo Disposal
On January 26, 2022, we entered into a share purchase agreement and related agreements with CoolCo, as amended on February 25, 2022 (the “Vessel SPA”), pursuant to which CoolCo acquired all of the outstanding shares of inine
of our wholly-owned subsidiaries. iEight of these entities, Golar Hull M2021 Corp., Golar Hull M2022 Corp., Golar Hull M2027 Corp., Golar LNG NB12 Corporation, Golar LNG NB10 Corporation, Golar Hull M2047 Corp., Golar Hull M2048 Corp., and Golar LNG NB11 Corporation are each the registered or disponent owner of the following modern LNG carriers: Golar
Seal, Golar Crystal, Golar Bear, Golar Frost, Golar Glacier, Golar Snow, Golar Ice and Golar Kelvin. The Cool Pool Limited is the entity responsible for the marketing of these LNG carriers. The purchase price agreed for each LNG carrier recognized as an asset in the respective subsidiaries was stated as $i145.0
million, subject to working capital and debt adjustments arising from the residual balances of each wholly owned subsidiary as of the respective completion date of each subsidiary disposal.
On January 26, 2022, we also entered into the Transitional Services Agreement (the “CoolCo TSA”) with CoolCo, pursuant to which we agreed to provide corporate administrative services to CoolCo for a fixed daily fee for a ione year
term; a loan agreement, pursuant to which we made a $i25.0 million revolving credit facility available for a i24 month term for CoolCo to fund its working capital requirements; and
an agreement in principle with CoolCo that, following the conclusion of an internal reorganization of our management operations, CoolCo will acquire the management entities that are responsible for the commercial and technical vessel management of the LNG carriers that it acquired and the management agreements for the fleet of third party-owned LNG carriers and FSRUs that Golar has been managing (the “ManCo Agreement”, or our shipping and FSRU management business).
On January 27, 2022, CoolCo raised $i275.0
million of proceeds, $i150.0 million of which was subscribed by EPS Ventures LTD (“EPS”) and $i125.0
million in exchange for shares in CoolCo in the Norwegian markets, following which EPS, which is wholly owned by Quantum Pacific Shipping Ltd (“QPSL”), became the largest CoolCo shareholder with the acquisition of i15,000,000 shares. In February 2022, CoolCo's shares commenced trading on the Euronext Growth Oslo with the ticker “COOL”. On February 17, 2022, CoolCo entered into a new term
loan facility of up to $i570.0 million to refinance outstanding vessel debt relating to the vessels that it acquired pursuant to the Vessel SPA (which excludes the sale and leaseback financing in relation to the Golar Ice and the Golar Kelvin, which CoolCo assumed).
Each subsidiary disposal was closed with phased completion dates corresponding with the date that the
respective subsidiary debt was either refinanced (for isix of the subsidiaries disposed of) or assumed by CoolCo (for itwo
of the subsidiaries disposed of, for which lender consent was obtained for the change of control of the existing lease financing arrangements) and customary conditions precedent were met. The disposals closed in stages from March 3, 2022 to April 5, 2022, the date on which the Vessel SPA in its entirety was considered completed. Following completion of the Vessel SPA on April 5, 2022, EPS owned a i37.5%
interest in CoolCo, we owned a i31.3% interest in CoolCo, and the remaining i31.2% was held by the public. GLNG agreed to remain as the guarantor of the payment obligations of itwo
of the disposed subsidiaries' debt relating to LNG carriers, Golar Ice and Golar Kelvin, in exchange for a guarantee fee of i0.5% on the outstanding principal balances.
Following closing of the Vessel SPA, we continued
to provide commercial and technical management to CoolCo for the ieight LNG carriers it acquired pursuant to management agreements entered into contemporaneously with the Vessel SPA.
On June 30, 2022, once we had completed the internal reorganization
of our management operations, we entered into a share purchase agreement and related agreements (“ManCo SPA”) with CoolCo for its purchase of our shipping and FSRU management business, as was contemplated in the ManCo Agreement. We also entered into an Administrative Services Agreement, which replaced the CoolCo TSA (the “CoolCo ASA”), for the provision of the following services from July 1, 2022 to June 30, 2023: IT services, accounting services, treasury services, finance operations services, and any additional services reasonably required by CoolCo.
Given our i31.3%
interest as of September 30, 2022, we consider that we have a significant influence over CoolCo and therefore we account for our investment in CoolCo using the equity method of accounting.
The disposals to CoolCo are considered a disposal group and the associated assets and liabilities of the disposal group were classified as held-for-sale and qualified as a discontinued operation on March 1, 2022. Consequently, we retrospectively reclassified the results of the disposal group and separately presented as “Net income/(loss) from discontinued operations”. Each of the subsidiaries were de-recognized on the respective dates of each disposal with a corresponding recognition of a (loss)/gain on
disposal.
28
The discontinued operations were previously included in itwo of our ithree
reportable segments, “Shipping” (containing the business activities of the LNG carriers and The Cool Pool Limited), and “Corporate and Other” (containing our shipping and FSRU management business).
Our continuing involvement with the discontinued operations of the disposal group includes:
•our equity method investment in CoolCo (note 16);
•the financial guarantees we provide to CoolCo with respect to the debt assumed by CoolCo related to the Golar Kelvin and Golar Ice, in place until the earlier of the repayment of the vessel debt by CoolCo or until release by the lessors (note 21);
•$i25.0 million
revolving credit facility committed per the loan agreement to be made available until January 2024 (note 21);
•CoolCo's management of our LNG carrier Golar Arctic and FSRU Golar Tundra (note 21);
•our agreements with CoolCo that sub-contract our contractual vessel management obligations for the LNG Croatia pursuant to our Operation and Maintenance Agreement with LNG Hrvastska d.o.o. (the “O&M Agreement”) and for New Fortress Energy Inc.'s (“NFE's”) fleet of vessels (further disclosed in note in 11.3 Disposal of Golar Partners and Hygo below and note 21); and
•our
provision of IT services, routine accounting services, treasury services, finance operation services, and any additional services reasonably required pursuant to the CoolCo ASA (note 21).
i
The following table contains the line-items of the CoolCo Disposal discontinued operations:
Nine
months ended September 30,
(in thousands of $)
2022
2021
Time and voyage charter revenues
i37,289
i119,323
Vessel
and other management fees
i1,432
i—
Vessel
operating expenses
(i8,466)
(i37,066)
Voyage,
charterhire and commission expenses
(i1,229)
(i2,443)
Administrative
expenses
i1,757
(i1,029)
Project
development expenses
(i62)
(i149)
Depreciation
and amortization
(i5,745)
(i32,576)
Impairment
of long-lived assets (1)
(i218,349)
i—
Other
operating income
i4,374
i5,020
Operating
(loss)/income
(i188,999)
i51,080
Other
non-operating losses
i—
(i124)
Interest
income
i4
i4
Interest
expense
(i4,725)
(i16,799)
Other
financial items, net
(i787)
(i293)
Income
taxes
(i385)
(i158)
(Loss)/income
from discontinued operations
(i194,892)
i33,710
Loss
on CoolCo Disposal (2)
(i10,060)
i—
Net
(loss)/income from discontinued operations
(i204,952)
i33,710
(1)
Impairment of long-live assets relates to the impairment charge on the held for sale vessels recognized in accordance with ASC 360 Property, plant and equipment, following their classification as held-for-sale.
(2) Loss on CoolCo Disposal comprised of carrying values of the assets and liabilities disposed of $i355.4 million, partially offset by the proceeds received, $i218.2
million cash consideration and $i127.1 million of equity consideration.
/
29
The
following table contains the financial statement line items forming the assets and liabilities classified as held for sale:
Current portion of long-term debt and short-term
debt
(i338,501)
Trade accounts payables
(i7,265)
Accrued
expenses
(i59,094)
Other current liabilities
(i11,572)
Total
current liabilities held for sale
(i416,432)
Non-current liabilities
Long-term debt
(i292,322)
Other
non-current liabilities
(i11,778)
Total non-current liabilities held for sale
(i304,100)
Total
liabilities held for sale
(i720,532)
We retain an investment in CoolCo accounted for under the equity method that is included in discontinued operations. Prior to the CoolCo Disposal we held a i100%
interest CoolCo and the ithirteensubsidiaries disposed of.As of September 30, 2022, we held a i31.3%
interest in CoolCo and no interest in the ithirteensubsidiaries disposed (note 16).
The table below summarizes the financial performance of CoolCo on a 100% basis:
Nine
months ended September 30,
(in thousands of $)
2022
2021
Revenue
i151,675
i125,273
Adjusted
EBITDA
i109,437
i79,019
Net
income
i63,171
i29,220
30
11.2
The TundraCo Disposal
On May 31, 2022 we entered into a share purchase agreement with Snam pursuant to which it acquired i100% of the share capital of our subsidiary Golar LNG NB 13 Corporation, the disponent owner of FSRU Golar Tundra for $i352.5 million
(which includes a $i2.5 million working capital adjustment). The assets and liabilities of Golar LNG NB 13 Corporation met the criteria for presentation as held-for-sale and also qualified as a discontinued operation on May 30, 2022. Consequently, we retrospectively reclassified the results of Golar LNG NB 13 Corporation and separately presented as “Net income/(loss) from discontinued operations”. The
discontinued operations were previously included in the “Shipping” segment.
Our continuing involvement with the discontinued operations of the Golar LNG NB 13 Corporation includes:
•bareboat agreement to charter the Golar Tundra for i160 days;
•incurred pool
expenses from other participants in the pooling arrangement totaling $i1.8 million; and
•the Development Agreement (note 5).
For the nine months ended September 30, 2022, we incurred $i3.1 million
of bareboat expenses.
The following table contains the line-items of the discontinued operation:
Nine months ended September 30,
(in thousands of $)
2022
2021
Time and voyage charter revenues
i22,016
i22,634
Vessel
operating expenses
(i4,155)
(i5,109)
Voyage,
charterhire and commission expenses
(i7,707)
(i7,997)
Administrative
expenses
(i1)
(i45)
Depreciation
and amortization
(i2,955)
(i5,319)
Operating
income
i7,198
i4,164
Interest
income
i17
i2
Interest
expense
(i4,649)
(i1,855)
Other
financial items, net
(i147)
(i121)
Income
from discontinued operations
i2,419
i2,190
Gain
on TundraCo Disposal(1)
i123,252
i—
Net
income from discontinued operations
i125,671
i2,190
(1)
Gain on TundraCo Disposal comprised of (i) cash proceeds received of $i350.0 million, (ii) working capital adjustment of $i2.5 million,
(iii) partially offset by the net asset value of Golar LNG NB 13 Corporation of $i229.0 million and (iv) related fees incurred of $i0.2 million.
The
following table contains the financial statement line-items forming the assets and liabilities classified as held for sale:
Current portion of long-term debt and short-term debt
i—
(i9,911)
Trade
accounts payables
(i183)
(i204)
Accrued
expenses
(i1,217)
(i737)
Other
current liabilities
(i2,789)
(i2,325)
Total
current liabilities held for sale
(i4,189)
(i13,177)
Non-current
liabilities
Long-term debt
i—
(i145,768)
Total
non-current liabilities held for sale
i—
(i145,768)
Total
liabilities held for sale
(i4,189)
(i158,945)
11.3
Disposal of Golar Partners and Hygo
On April 15, 2021, we completed the sale of our investments in Golar Partners and Hygo to NFE. We received consideration of $i876.3 million which comprised of (i) $i80.8
million cash for our investment in Golar Partners and (ii) $i50.0 million cash and i18.6
million Class A NFE common shares (“NFE Shares”) valued at $i745.4 million for our investment in Hygo (the “GMLP Merger” and “Hygo Merger”, respectively).
The net income of equity method investments from discontinued operations for the nine months ended
September 30, 2021, are as follows:
Net income from equity method investments of Golar Partners
i8,116
Net
losses from equity method investments of Hygo
(i15,008)
Loss from discontinued operations
(i6,892)
Gain
on disposal of equity method investments(1)
i574,939
Net income from discontinued operations
i568,047
(1)
Gain on disposal of discontinued operations comprised of (i) proceeds received of $i876.3 million; (ii) release of our tax indemnity guarantee liability to Golar Partners of $i2.1 million;
(iii) a partial offset by the carrying values of our investment in affiliates disposed of amounting to $i257.2 million as of April 15, 2021; (iv) realized accumulated comprehensive losses on disposal of investment in affiliates of $i43.4 million;
and (v) related fees of $i2.7 million.
Golar Partners and Hygo Post-Merger Services Agreements
Upon completion of the GMLP Merger and the Hygo Merger, we entered into certain transition services agreements, corporate services agreements, ship management agreements and omnibus agreements with Golar Partners, Hygo and NFE. These agreements replaced the previous
management and administrative services agreements, ship management agreements and guarantees that Golar provided to Golar Partners and Hygo.
•earned ship management and administrative services fees amounting to $i10.4
million;
•incurred pool income from other participants in the Cool Pool totaling $i0.5 million;
•declared distributions on Golar Hilli LLC (“Hilli LLC”) amounting to $i23.2
million with respect to the common units owned by Golar Partners and accrued for $i2.1 million of Hilli costs indemnification; and
•earned charter and debt guarantee fees from Golar Partners and Hygo amounting to $i1.4
million. On August 15, 2022, NFE terminated its sale and leaseback arrangements in respect of the Golar Celsius, Golar Penguin and Golar Nanook. Consequently, our debt guarantees for Hygo's long-term debt obligations were released.
32
12. iVARIABLE
INTEREST ENTITIES ("VIEs")
12.1 Lessor VIEs
As of September 30, 2022, we leased ione (December 31, 2021: ieight)
vessel(s) from a VIE as part of sale and leaseback agreements. Following the disposals of certain vessels and associated lessor VIEs to CoolCo, our continuing lessor VIE as of September 30, 2022, is a China State Shipbuilding Corporation entity (the “CSSC” entity). The CSSC entity is a wholly-owned, newly formed special purpose vehicle (“Lessor SPV”). In this transaction, we sold our vessel, the Hilli, and then subsequently leased back the vessel on a bareboat charter for a term of iten years. We have an option to repurchase the
vessel at a fixed predetermined amount during its charter period and an obligation to repurchase the vessel at the end of the vessel's lease period. As further discussed in note 11, during the nine months ended September 30, 2022, the Vessel SPA resulted in the disposal of ieight of our subsidiaries,
being the disponent owners of iseven vessels (Golar Seal; Golar Crystal,Golar Bear, Golar Glacier, Golar Snow, Golar Ice and Golar Kelvin).
Refer to note 5 to our consolidated financial statements
filed with our 2021 Annual Report, for additional details on these Lessor VIEs.
i
A summary of our payment obligations (excluding repurchase options and obligations) under the bareboat charter with the lessor VIE as of September 30, 2022, is shown below:
(2) The payment obligations above include variable rental payments due under the lease based on an assumed LIBOR plus margin.
/
i
The assets and liabilities of the lessor VIE that most significantly
impact our unaudited consolidated balance sheet as of September 30, 2022 and December 31, 2021, are as follows:
Current
portion of long-term debt and short-term debt (1)
(i347,097)
(i380,554)
Long-term
debt (1)
(i171,687)
(i216,313)
(i518,784)
(i596,867)
(1)
Where applicable, these balances are net of deferred finance charges.
The most significant impact of the lessor VIE's operations on our unaudited consolidated statements of operations, and unaudited consolidated statements of cash flows are as follows:
Following the sale of common units in Hilli LLC, we have retained sole control over the most significant activities and the greatest exposure to variability in residual returns and expected losses from the Hilli. Accordingly, management has concluded that Hilli LLC is a VIE and that we are the primary beneficiary.
Summarized financial information of Hilli LLC
The assets and liabilities of Hilli LLC(1)that most significantly impact our unaudited consolidated balance sheet are as follows:
(1)
As Hilli LLC is the primary beneficiary of the Hilli Lessor VIE (see above) the Hilli LLC balances include the Hilli Lessor VIE.
The most significant impact of Hilli LLC VIE's operations on our unaudited consolidated statements of income, and unaudited consolidated statements of cash flows, are as follows:
Realized
and unrealized gain on oil and gas derivative instruments
i516,668
i157,119
Statement
of cash flows
Net debt repayments
(i80,492)
(i64,854)
Net
debt receipts
i2,287
i2,848
Cash
dividends paid
(i39,293)
(i24,437)
12.3 Gimi
MS Corporation
Following the closing of the sale of i30% of the common units of Gimi MS Corporation (“Gimi MS”) to First FLNG Holdings in April 2019, we have determined that (i) Gimi MS is a VIE, (ii) we are the primary beneficiary and retain sole control over the most significant activities and the greatest exposure to variability in residual returns and expected losses from the Gimi. Thus, Gimi MS continues to
be consolidated into our financial statements.
34
Summarized financial information of Gimi MS
The assets and liabilities of Gimi MS that most significantly impact our consolidated balance sheet are as follows:
Restricted
cash in relation to the Golar Arctic performance guarantee(2)
i38,492
i—
Restricted
cash and short-term deposits held by lessor VIEs (note 12)
i17,503
i16,523
Restricted
cash in relation to the LNG Croatia (3)
i11,344
i11,328
Restricted
cash related to Hygo performance guarantee (4)
i1,520
i1,500
Restricted
cash relating to office lease
i967
i2
Restricted
cash in relation to liability on legacy UK tax leases (5)
i—
i16,000
Total
restricted cash and short-term deposits
i130,949
i106,073
Less:
Amounts included in current restricted cash and short-term deposits
(i19,025)
(i34,025)
Long-term
restricted cash
i111,924
i72,048
(1)
In November 2015, in connection with the issuance of a $i400 million letter of credit (“LC”) by a financial institution to the customer of the FLNG Hilli, we recognized an initial cash collateral of $i305.0 million
to support the Hilli performance guarantee. Under the provisions of the LC, the terms allow for a stepped reduction in the value of the guarantee over time and thus, a concurrent reduction in the cash collateral requirements. In May 2021, once the Hilli reached i3.6 million tonnes of LNG production, the LC was reduced to $i100 million
and the cash collateral to $i61.1 million.
(2) In connection with the Arctic SPA, we are required to provide a performance guarantee of €i26.9 million
and advance repayment guarantees of €i163.9 million, which will correspond to the three installment payments from Snam. The performance guarantee and the advance repayment guarantees are to guarantee our contractual and performance obligations of the conversion of the Golar Arctic, respectively. As of September 30, 2022, we recognized a cash collateral for the performance guarantee and first repayment of $i29.6 million
(€i26.9 million) and $i8.9 million (€i8.1 million),
respectively. The performance guarantee and advance repayments guarantees will remain as restricted cash until the final acceptance date (October 2027) and the provisional acceptance date (December 2025), respectively.
(3) In connection with the O&M Agreement, we are required to maintain a performance guarantee of €i9.3 million and $i1.3 million,
which will remain restricted throughout the i10-year term (December 2030) of the O&M Agreement.
/
35
(4) In connection with the disposal of Hygo, we provided a $i1.5 million
performance guarantee to the senior lenders of Centrais Eléctricas de Sergipe S.A. to enable the lenders to waive their requirement for consent in the event of a change of control and extend the technical completion date. The collateral was subsequently released in November 2022 (note 23).
(5) The lessor of our isix legacy UK leases had a first priority security interest in relation to the Golar Gandria and second priority interests in relation to the Golar
Tundra and Golar Frost with cash collateral of $i16.0 million. Upon reaching a settlement in April 2022, these interests were released (note 22).
(1)
“Investment in listed equity securities” relates to our i12.4 million NFE Shares (December 31, 2021: i18.6
million NFE Shares). The balance as at December 31, 2021 includes a $i0.6 million dividend receivable (September 30, 2022: $inil)
which is presented in the income statement line-item “Other non-operating income/(losses)”.
(2) “TTF swap collateral” relates to the cash amount required by the swap counterparty, held at measurement date, which is reactive to the daily fluctuations of the market value of the financial instrument.
(3) Other receivables is mainly comprised of $i7.8 million receivable from Snam in relation to the Golar
Arctic conversion.
In February 2019, we entered into a lease and operate agreement with BP Mauritania Investments LTD (“BP”) for the employment of a FLNG, the Gimi, after conversion to an FLNG for a term of i20-years (the “LOA”). In April 2019, we completed the sale of i30%
of the total issued ordinary share capital of Gimi MS to First FLNG Holdings. In October 2020, we announced that we had confirmed a revised project schedule with BP which extended the target connection date by i11 months to March 2023. In June 2022, we agreed to a $i50 million
incentive payment to Keppel Shipyard Limited (“Keppel Shipyard”) for initiatives to safeguard sail away within first half of 2023. The aggregated conversion cost including financing costs is approximately $i1.7 billion of which $i700 million
is funded by the Gimi facility (note 18).
36
i
As of September 30, 2022, the estimated timing of the outstanding payments in connection with the Gimi conversion are as follows:
(1)
Other mainly comprised of long lead items ordered for a potential Mark II FLNG amounting to $i6.2 million and long lead items ordered in preparation for the conversion of the Golar Arctic amounting to $i1.4 million.
At
September 30, 2022, our debt, net of deferred financing costs, is broken down as follows:
Golar debt
VIE debt (1)
Total debt
(in thousands of $)
Current portion of long-term debt and short-term
debt
(i7,225)
(i347,097)
(i354,322)
Long-term
debt
(i827,739)
(i171,687)
(i999,426)
Total
(i834,964)
(i518,784)
(i1,353,748)
(1)
This amount relates to the lessor VIE (for which legal ownership resides with a financial institution) that we are required to consolidate under U.S. GAAP (see note 12.1).
/
2017 Convertible Bonds
In February 2017, we closed a $i402.5 million aggregate principal amount of i2.75%
convertible senior unsecured notes due 2022 (“2017 Convertible Bonds”). In February 2022, we fully redeemed the outstanding notional value of our 2017 Convertible Bonds, inclusive of interest, amounting to $i321.7 million.
Golar Tundra facility
In December 2021, we entered into a secured loan facility for $i182.0 million
(“the Golar Tundra Facility”). The Golar Tundra facility bears interest at LIBOR plus a margin of i3% and is repayable over a term of ifive years. In May 2022, concurrent with the sale of the Golar Tundra to
Snam, we repaid the Golar Tundra Facility in full, including accrued interest. Following the completion of TundraCo Disposal in May 2022, we retrospectively reclassified the comparative period balance of Golar Tundra facility as held for sale (note 11).
Corporate RCF
In November 2021, we executed a $i200.0 million revolving facility (the “Corporate RCF”) which has a term of ithree
years. The Corporate RCF bears interest at LIBOR plus a margin of i2.8% and is secured against our NFE Shares (note 14). Under the terms of the facility, we are permitted to release a portion of the pledged NFE Shares in accordance with the prescribed loan to value ratio based on the then-current market value of such NFE Shares. In February 2022, we had drawn $i131.0 million
of the available funds, which we repaid in May 2022. As of September 30, 2022, the facility was undrawn and available for use. In November 2022, the Corporate RCF was canceled.
(1)
“Day 1 gain deferred revenue - current portion” comprised of the oil derivative embedded in the LTA of $i10.0 million and the gas derivative pursuant to Amendment 3 to the LTA, indexed to TTF of $i2.8 million.
Following the customer's exercise of the 2023+ expansion capacity option pursuant to Amendment 3 to the LTA, $i8.6 million relating to the gas derivative was reclassified to other non current liabilities at September 30, 2022.
/
(2) Other payables mainly comprised of $i11.7 million
settlement in relation to our commodity swaps, which was subsequently paid in October 2022 and a $i2.3 million contract liability for services revenue from Snam (note 5).
20. iFINANCIAL
INSTRUMENTS
Fair values
We recognize our fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on reliability of inputs used to determine fair value as follows:
Level 1: Quoted market prices in active markets for identical assets and liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
(1)
The carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value.
(2) The carrying value of restricted cash and short-term deposits is considered to be equal to the estimated fair value because of their near term maturity.
(3) The carrying values of trade accounts receivable and trade accounts payable approximate fair values because of the near term maturity of these instruments.
(4) “Investment in listed equity securities” refers to our NFE Shares (note 14). The fair value was calculated using the NFE closing share price as of September 30, 2022, resulting in a valuation of $i543.2 million.
(5)
The carrying amounts of our short-term debt approximate their fair values because of the near term maturity of these instruments.
(6) Our debt obligations are recorded at amortized cost in the consolidated balance sheets. The amounts presented in the above table are gross of the deferred charges amounting to $i23.6 million and $i28.2 million
at September 30, 2022 and December 31, 2021, respectively.
(7) The estimated fair values for both the floating long-term debt and short-term debt are considered to be equal to the carrying value since they bear variable interest rates, which are adjusted on a quarterly or six-monthly basis.
(8) The estimated fair values of the unsecured 2017 Convertible Bonds and our $i300.0 million
senior unsecured bonds (the “2021 Norwegian Bonds”) are based on their quoted market prices as of the balance sheet date. In February 2022, following the listing of the 2021 Norwegian Bonds, the fair value hierarchy had been transferred from level 2 to level 1.
(9) The fair value of the oil and gas derivative instruments was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the LTA (Brent crude oil price linked) and the estimated discounted cash flows of the additional payments due to us until the end of the contract in 2026 as a result of gas prices moving with respect to the contractual pricing terms per the Amendment 3 to the LTA and the Euro/USD exchange rates
based on the forex forward curve (TTF price linked). Significant inputs used in the valuation of the oil and gas derivative instruments include management’s estimate of an appropriate discount rate and the length of time necessary to blend the long-term and short-term oil and gas prices obtained from quoted prices in active markets.
(10) The fair value of certain derivative instruments is the estimated amount that we would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, foreign exchange rates, quoted closing market prices and our creditworthiness and that of our counterparties.
(11) The credit exposure of interest rate swap agreements is represented by the fair value of contracts
with a positive value at the end of each period, reduced by the effects of master netting arrangements.
(12) We have entered into commodity swaps to economically hedge our exposure to a portion of FLNG Hilli’s tolling fee that is linked to the TTF index, by swapping variable cash receipts that are linked to the TTF index for anticipated future production volumes with fixed payments from our TTF swap counterparties. We have entered into master netting agreements with our counterparties which we consider to be subject to nominal credit risk as these transactions are settled on a daily margin basis with investment grade institutions. We have economically hedged i50%
of our anticipated Q4 2022 FLNG Hilli TTF-linked production volume, i100% of our anticipated 2023 FLNG Hilli TTF-linked production volume and i50% of our
anticipated 2024 FLNG Hilli TTF-linked production volume. We are exposed to the underlying risk that FLNG Hilli TTF-linked production volumes do not meet these production volumes that have been economically hedged and to the risk that the price of the TTF-linked production volumes that have been swapped exceeds the contracted swap price.
(13) Does not include collateral posted with counterparties to our TTF commodity swaps. We have recognized cash collateral receivable of $i27.6 million
as of September 30, 2022 ($i6.9 million as of December 31, 2021) related to our TTF commodity swaps – included in “Other current asset” (note 14).
iAs
of September 30, 2022, we were party to the following interest rate swap transactions involving the payment of fixed rates in exchange for LIBOR as summarized below:
40
Instrument(in thousands of $)
Notional value
Maturity dates
Fixed
interest rates
Interest rate swaps:
Receiving floating, pay fixed
i550,000
2024 to 2029
i1.69%
- i2.37%
Commodity price risk management
A derivative asset, representing the fair value of the estimated discounted cash flows of payments due to us as a result of the Brent crude oil price moving above the contractual floor of $i60.00
per barrel over the term of the LTA, was recognized in December 2017. Golar bears no downside risk should the Brent crude oil price fall below $i60.00.
i
The
2022 Incremental Capacity for the Hilli is linked to TTF gas prices. As of September 30, 2022, we entered into commodity swaps involving the payment of fixed prices in exchange for Dutch natural gas to manage our exposure to the TTF gas prices volatility, as summarized below:
Instrument
Notional quantity (MMBtu)
Maturity date
Fixed price/MMBtu
Commodity
swap derivatives:
Receiving fixed, pay floating
i5,242,251
2022 - 2024
$i49.50
to $i70.00
/
It is our policy to enter into master netting agreements with the counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of amounts owed to
the counterparty by offsetting them against amounts that the counterparty owes to us. We have elected not to offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable master netting arrangements. As a result, the amounts presented in our consolidated balance sheet in relation to interest rate and commodity swaps have not been offset. For our commodity swaps, if we were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in our consolidated balance sheets as of September 30, 2022 and December 31, 2021 would be as adjusted in the following table:
Gross amounts presented in the unaudited consolidated balance sheet
Gross amounts not offset in the unaudited consolidated balance sheet subject to netting agreements
Net amount
Gross amounts presented in the consolidated balance sheet
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
Net amount
(in thousands of $)
Commodity
swaps
Total derivative assets
i28,504
(i5,423)
i23,081
i1,753
(i88)
i1,665
Total
derivative liabilities
(i10,428)
i5,423
(i5,005)
(i88)
i88
i—
Our
swaps have an arrangement that requires us to provide cash collateral when the market value of the instrument falls below a specified threshold. As of September 30, 2022 and December 31, 2021, cash collateral amounting to $i27.6 million and $i6.9 million,
respectively, have been provided (note 14).
21.iRELATED PARTY TRANSACTIONS
a) Transactions with CoolCo:
As further described
in note 11, on June 30, 2022, we completed the CoolCo Disposal. As of September 30, 2022, we recognized an investment in CoolCo of $i145 million, representing our i31.3%
interest (note 16) and entered into the following transactions:
41
i
Net revenues:The transactions with CoolCo for the nine months ended September 30, 2022 consisted of the following:
Nine
months ended September 30,
(in thousands of $)
2022
Management and administrative services revenue (1)
i2,217
Ship management fees revenue (2)
i1,249
Ship
management fee expenses (3)
(i2,934)
Debt guarantee compensation (4)
i563
Commitment
fee (5)
i86
Total
i1,181
(1)
Management and administrative services revenue – Golar Management Limited (“Golar Management”), a wholly-owned subsidiary of Golar, and Golar Management (Bermuda) Ltd, entered into the CoolCo TSA pursuant to which we provided corporate administrative services to CoolCo. On June 30, 2022, upon completion of the CoolCo Disposal, the CoolCo TSA was replaced by the CoolCo ASA.
(2) Ship management fee revenue – We provided commercial and technical management to the LNG carriers prior to their disposal to CoolCo under the existing management agreements. The CoolCo TSA revised the annual management fee payable to us per vessel. On June 30, 2022, upon completion of the CoolCo Disposal, the ship management agreements were
terminated.
(3) Ship management fee expense – Following completion of the ManCo SPA in June 2022, we entered into commercial and technical management agreements with CoolCo for certain of our vessels, amounting to (i) $i0.3 million ship management fees for the Golar Arctic and Golar Tundra and (ii) $i0.1
million fees incurred for FLNG crewing for the nine months ended September 30, 2022.
We also entered into an agreement to sub-contract our contractual vessel management obligations for the LNG Croatia and NFE's fleet of vessels to CoolCo amounting to $i2.6 million for the nine months ended September
30, 2022. The ship management fee revenue of $i2.4 million received in relation to NFE's fleet of vessels is passed on at cost to CoolCo as our subcontracting ship management expenses presented on "Administrative expenses" in the consolidated statements of operations.
(4) Debt guarantee compensation – We agreed to remain as the guarantor of the payment obligations of itwo
of the disposed subsidiaries' debt relating to itwo LNG carriers, Golar Ice and Golar Kelvin, in exchange for a guarantee fee of i0.5%
on the outstanding principal balances, which as of September 30, 2022 is $i218.6 million. The compensation amounted to $i0.6 million
for the nine months ended September 30, 2022.
(5) Commitment fee – We advanced a itwo years revolving credit facility of $i25.0 million
to CoolCo, which remains undrawn as of September 30, 2022. The facility bears a fixed interest rate and commitment fee on the undrawn loan of i5% and i0.5%
per annum, respectively. The commitment fee amounted to $i0.1 million for the nine months ended September 30, 2022.
(6)
Balances due from CoolCo and its subsidiaries- Amounts due to/from CoolCo and its subsidiaries are comprised primarily of unpaid management services, amounts arising from the results of CoolCo's vessels participating in the Cool Pool, revolving credit facility, commitment fees and other related arrangements. Payables and receivables are generally settled quarterly in arrears. Balances owing to or due from CoolCo and its subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business.
Other
transactions:
Net Cool Pool expenses - The ieight TFDE vessels sold in the CoolCo Disposal were previously managed by Golar under the terms of the Cool Pool. The net expenses relating to CoolCo's vessels participating in the Cool Pool amounted to $i3.7 million
for the nine months ended September 30, 2022. This is presented in our unaudited consolidated statement of operations in the line item “Net (loss)/income from discontinued operations”.
Subleases with CoolCo - Following the completion of the CoolCo Disposal, we entered into subleases to share office space with CoolCo which amounted to $i0.4 million income.
Share-based
payment to CoolCo employees - Following the completion of the ManCo SPA, we agreed to honor the RSUs granted to the officers and employees in the shipping and FSRU management business that CoolCo acquired. The net expenses relating to these share-based payments amounted to $i66.7 thousand for the nine months ended September 30, 2022, in included in our equity method investment in CoolCo.
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Reimbursements
to CoolCo - Payments on behalf of CoolCo amounted to $i12.0 thousand for the nine months ended September 30, 2022.
b) Transactions with existing related parties:
Net (expenses)/revenue:The transactions
with other related parties for the nine months ended September 30, 2022 and 2021 consisted of the following:
(1)Avenir entered into agreements to compensate Golar in relation to the provision of certain debt guarantees relating to Avenir and its subsidiaries. This compensation amounted to $i0.1 million and $i0.3 million
for the nine months ended September 30, 2022 and 2021, respectively.
In October 2021, we advanced a ione year revolving shareholder loan of $i5.3 million
to Avenir, of which $i1.8 million was drawn as of September 30, 2022. In October 2022, the revolving shareholder loan was extended to ithree years. The
facility bears a fixed interest rate of i5% per annum. Interest and commitment fee receivable on the undrawn portion of the loan amounted to $i66.0 thousand and $i83.0 thousand
for the nine months ended September 30, 2022, respectively.
(2) Magni Partners - Tor Olav Trøim is the founder of, and partner in, Magni Partners (Bermuda) Limited (“Magni Partners”), a privately held Bermuda company, and is the ultimate beneficial owner of the company. Receivables and payables from Magni Partners comprise primarily of the cost (without mark-up) or partial cost of personnel employed by Magni Partners who have provided advisory and management services to Golar. These costs do not include any payment for any services provided by Tor Olav Trøim himself.
(3) We chartered the Golar Ice
to ECGS during the nine months ended September 30, 2021. There was no comparable transaction in the same period in 2022.
(4) Borr Drilling - Tor Olav Trøim is the founder, and director of Borr Drilling Limited (“Borr Drilling”), a Bermuda company listed on the Oslo and Nasdaq stock exchanges. Receivables comprise primarily of management and administrative services provided by our Bermuda corporate office. Effective from January 2022, Borr Drilling ceased to be a related party.
(5) 2020 Bulkers - Receivables comprise primarily of management and administrative services provided by our Bermuda corporate office. Effective from January 2022, 2020 Bulkers Ltd.
(“2020 Bulkers”) ceased to be a related party.
Following the completion of the GMLP Merger on April 15, 2021, Golar Partners was no longer considered a related party and subsequent transactions with Golar Partners and its subsidiaries are treated as a third party and settled under normal payment
terms. For the balances with Golar Partners and its subsidiaries prior to the completion of the GMLP Merger, we retrospectively adjusted the comparative period and classified them as held for sale. Furthermore, the management and administrative services agreement and ship management fee agreement were terminated and replaced with the transition services agreement, Bermuda services agreement and ship management agreements (note 11).
During the period from January 1, 2021 to April 15, 2021 we received total distributions from Golar Partners of $i0.5 million with respect to the common units and general partner units owned by us at that time.
During the period from January 1,
2021 to April 15, 2021 Hilli LLC had declared distributions totaling $i7.8 million with respect of its common units owned by Golar Partners. In connection with the Hilli disposal, we agreed to indemnify Golar Partners for certain costs incurred in Hilli operations when these costs exceed a contractual ceiling. During the period from January 1, 2021 to April 15, 2021 we recognized $inil
with respect to this Hilli indemnification arrangement.
Following the completion of the Hygo Merger on April 15, 2021, Hygo was no longer considered a related party and subsequent transactions with Hygo and its subsidiaries are treated as third-party transactions and settled under normal payment terms. For the balances with Hygo and its subsidiaries prior to the completion of the Hygo Merger, we retrospectively adjusted the comparative period and classified them as held
for sale. Furthermore, the management and administrative services agreement and ship management fee agreements were terminated and replaced with the transition services agreement, Bermuda services agreement and ship management agreements (note 11).
Net revenues:The transactions with Hygo and its affiliates for the period January 1, 2021 to April 15, 2021 consisted of the following:
Net Cool Pool expenses - Net expenses relating to the other pool participants are presented in our unaudited consolidated statement of operations in the line item “Voyage, charter hire and commission expenses” for the period from January 1, 2021 to April 15, 2021 amounted to $i2.9 million.
(1)
This excludes the Gimi which is classified as “Assets under development” (see note 15) and secured against its specific debt facility (note 18).
/
Corporate RCF
As of September 30, 2022, the Corporate RCF was secured by a pledge against our NFE Shares. We are permitted under the terms of the facility, to release a portion of the pledged NFE Shares in accordance with the prescribed loan to value ratio based on the then-current market value of such NFE Shares. In November 2022, the Corporate RCF was canceled and the pledge against our NFE shares was
released.
Capital Commitments
Gandria
We have agreed contract terms for the conversion of the Gandria to a FLNG. The Gandria is currently in lay-up awaiting delivery to Keppel Shipyard for conversion. The shipyard conversion agreement is subject to certain payments and lodging of a full Notice to proceed. We have also provided a guarantee to cover the sub-contractor's obligations in connection with the conversion of the vessel.
UK tax lease benefits
As
described under note 29 in our audited consolidated financial statements filed with our 2021 Annual Report, during 2003 we entered into isix UK tax leases. Under the terms of the leasing arrangements, the benefits are derived primarily from the tax depreciation assumed to be available to the lessors as a result of their investment in the vessels. As is typical in these leasing arrangements, as the lessee we were obligated to maintain the lessor’s after-tax margin. The UK tax authorities (“HMRC”) have been challenging the use of similar lease structures and had engaged in litigation
of a test case. In 2021, we reached a settlement with HMRC and in April 2022, we settled our liability to the HMRC in full, resulting in a payment of $i66.4 million, inclusive of fees.
23.iSUBSEQUENT
EVENTS
Sale of our investment in listed equity securities
In November 2022, we sold i6.3 million shares of our NFE shares raising net proceeds of $i332.4 million.
The proceeds are earmarked for potential FLNG growth projects. Following the sale of such NFE Shares, our remaining equity holding in NFE approximately i2.9% or i6.1 million
shares.
Sale of CoolCo shares
In November 2022, we sold i8.0 million of our CoolCo shares, raising net proceeds of $i97.9 million.
The proceeds are earmarked for potential FLNG growth projects. Following the sale of CoolCo shares, our remaining equity holdings in CoolCo is approximately i8.3% or i4.5 million
shares. We have entered into a lock up undertaking with CoolCo, following its equity offering in November 2022, which prevents us from any further sale of our remaining CoolCo shares within 30 days from the first day of trading of the newly issued CoolCo shares. The lock up expires in December 2022.
Share Repurchase Program
In November 2022, we repurchased i81,639
of our common shares under the share repurchase program approved in February 2021, at a total cost of $i1.9 million at an average share price of $i23.47,
inclusive of related fees.
Hygo performance guarantee
In November 2022, the performance guarantee of $i1.5 million provided to the senior lenders of CELSE in connection with the disposal of Hygo was released.
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Dates Referenced Herein and Documents Incorporated by Reference
