Highlights

  • Golar LNG Energy reports a consolidated a net loss of $12.6 million for the first quarter of 2011
  • The West Java FSRU Project time charter agreement with PT Nusantara Regas was executed in April 2011
  • Significant improvement in charter rates during the quarter
  • Golar LNG Energy secures charters for its 4 modern vessels of between 12 and 18 months. The contracts are expected to generate approximately $80 million of EBITDA on an annualized basis
  • In April, 2011 Golar LNG Limited acquired shares in the Company via private placement share swaps and cash purchases that increased its ownership to 95.1%. A voluntary offer was subsequently made for the balance of the outstanding shares of Golar LNG Energy and Golar LNG currently owns 99.4% of Golar LNG Energy. Following the closing of this offer, Golar LNG will initiate a compulsory acquisition of any shares in Golar LNG Energy remaining in the ownership of others and delist Golar LNG Energy from Oslo Axess.

Financial Review

Golar LNG Energy Limited ("Golar Energy" or the "Company") reports a net loss of $12.6 million and operating loss before depreciation and amortization of $1.1 million for the quarter ended March 31, 2011 (the "first quarter").

Revenues in the first quarter of 2011 (the "first quarter") were $18.7 million as compared to $16.1 million for the fourth quarter of 2010 (the "fourth quarter"). The increase is primarily due to an improved performance from the Company's spot vessels offset by the effect of the Golar Grand being in drydock in the first quarter.  Vessel utilization for the first quarter was slightly down at 80% as compared to 91% for the fourth quarter, but average daily time charter equivalent rates ("TCEs") for the first quarter increased to $40,774 from $29,819 in the fourth quarter as a result of higher rates for vessels operating in the spot market.

Voyage expenses and vessel operating expenses together were $0.6 million higher in the first quarter compared to the fourth quarter. Administrative expenses of $7.1 million for the first quarter are consistent with the fourth quarter.

The Company did not recognise any impairment charges or gains on sale of securities in the first quarter. The impairment charge of $3.0 million against long-term investments in the fourth quarter represented a full write down of the Company's cost of investment in TORP Technology AS. The gain on sale of securities in the fourth quarter represented the sale of shares in LNG Limited.

Other operating losses of $3.6 million in the first quarter represent costs incurred and net mark-to-market valuations related to physical LNG cargo trades and financial derivatives entered into by Golar Commodities in the first quarter. It is expected that gains from the delivery and settlement of these cargos will be realized in the second quarter of 2011.

Net interest expense was $2.6 million for the first quarter as compared to $2.0 million in the fourth quarter.

Other financial items increased to a gain of $0.8 million compared to $0.3 million in the fourth quarter. This primarily relates to an increase in gains on foreign currency forward contracts entered into in connection with expenditure on the West Java FSRU project.

Financing, corporate and other matters

On April 26, 2011 the Golar LNG Limited ("Golar LNG") increased its ownership of Golar Energy from 61.1% to 90.5% by entering into agreements to acquire an additional 70,315,792 Golar Energy shares. The sellers received one newly-issued Golar LNG share for every 6.06 Golar Energy shares held. The new Golar LNG shares were effectively issued for $30.30 per share.

On April 27, 2011, Golar LNG further increased its ownership of Golar Energy by acquiring an additional 10,536,287 shares at a price of approximately $5 per share. This increased the Company's ownership of Golar Energy to 95.1%.

Subsequently a voluntary offer was made by Golar LNG to acquire the remaining outstanding shares in Golar Energy at NOK 26.80. Following the closing of this offer, Golar LNG owns 99.4% of the shares in the Company and will, based on Bermuda law, initiate a compulsory acquisition offer of any remaining shares in Golar Energy and a delisting of Golar Energy from Oslo Axess.

As previously announced the Company has entered into time charter agreements for its four modern LNG carriers for periods between 12 to 18 months, providing charter coverage of approximately 57 months. The fixtures commenced between February and April 2011. Based on assumed operating expenses, the four vessels are expected to have a combined annualized EBITDA contribution of approximately $80m.

In April 2011, the Company entered into an $80 million revolving credit facility with its major shareholder Golar LNG Limited. The facility bears interest at LIBOR plus 3.90%. The facility is available until September 2013; all amounts due under the facility must be repaid by then. The Company drew down an initial amount of $35 million in April 2011 to repay the amounts outstanding on its Golar Gas Facility.

In connection with the Company's Employee Share Option Plan, 629,334 options have been exercised by eligible employees. These options have been exercised at a strike price of $2.20. The Company has used a combination of treasury shares and the issuance of new shares to settle the obligation in relation to the share option plan. 200,000 new shares have been issued and the company has reduced its holding of treasury shares from 483,627 shares to 54,293. The total outstanding number of shares in Golar LNG Energy Limited after these options have been exercised is 237,964,540.

Operational Review

Shipping

There has been strong demand throughout the quarter for available modern LNG carriers and also demand for older vessels but there has been little availability of either. Charterers started to take vessels for much longer periods in the region of 12 to 18 months but there is now limited optionality for charterers and they have had to adapt requirements to the availability of vessels. There is strong interest for vessels both in the East and the West but many requirements remain uncovered due to lack of vessels. Some small windows of vessel availability will likely occur in the short-term moving forward but the market is expected to remain tight for the next 2-3 years.

Throughout the quarter charter rates remained strong and have now pushed up towards $90,000 per for modern tonnage.

Based on the fundamental strength of the shipping market and the increased activities in the FSRU market, the Board has decided to reactivate the Gimi which has been laid up since August 2009. The vessel will go through an extensive shipyard upgrading, at a cost of in the region of $10 million, and will be available for trading and infrastructure projects from August this year.

Shareholders should be aware that there are large differentials in total operating costs (including fuel costs) between older steam turbine vessels, modern steam turbine vessels and new generation dual fuel diesel electric ("DFDE") vessels. It can be assumed that the new DFDE ships, based on size, boil off and fuel costs are approximately $40,000 - $50,000 per day more economical to operate than older steam vessels.

The worldwide LNG fleet currently stands at 359 vessels including FSRUs with a further 35 on order, 16 of which have been ordered since January 1, 2011.

There is today very limited shipyard capacity available before 2014. It is anticipated that the tonne mile demand in the period until 2014 will grow significantly faster than the fleet. It is further anticipated that this will lead to a tight and most likely improving freight market.

In the period 2014 to 2015 there are expected to be a number of large LNG projects commencing production, particularly in Australia. These projects will need significant additional shipping capacity. Additional shipping capacity will also be needed to support the recent change in US policy to allow LNG export projects.

Regasification

In April 2011, Golar Energy announced the execution of the long-term time charter in respect of a Floating Storage and Regasification Unit (FSRU) and Mooring facility with PT Nusantara Regas, a joint venture between Pertamina and PGN ("West Java FSRU Project "). The contract is for an initial term of approximately eleven years with automatic conditional extension options up to 2025. The contract value for the initial period is approximately US $500 million. Project execution is progressing on schedule with all long lead items having been ordered, detailed engineering well progressed and conversion of the Khannur at Jurong shipyard in Singapore underway.

Golar Commodities

During the first quarter, contracts were executed to acquire cargoes, on a delivered basis to, a US Gulf coast import terminal with the intention of re-exporting at a later date.  Additionally, sales agreements were executed with customers in premium markets for volumes, on a delivered basis, exported from the US terminal on Golar Commodities chartered vessels.  The economic uplift derived from the transport of these cargoes to premium markets will likely accrue in the second quarter. Term charter agreements have been executed on LNG carriers during the quarter of varying terms with limited rights to extend.  The cost of repositioning these vessels to load cargos has been expensed in the first quarter prior to the delivery of the cargo's.

Golar Commodities has through charter agreements secured access to two 125,000 m3 vessels. These vessels have been taken in on charters of approximately 9 months and 2 months with extension options of 6 months plus 6 months and 3 months plus 3 months respectively.

The earthquake, tsunami and ensuing shut down of nuclear facilities in Japan has had a significant impact on the LNG market due to the need to supplement the country's energy requirements through additional LNG supplies.  The result has been higher LNG prices in the Far East with some ripple effect in other geographic regions.  It has had the additional effect of increasing market shipping rates as supply line distances have increased; effectively reducing slack and availability in LNG shipping.

Negotiations are progressing on term supply, off-take, asset optimization and risk management transactions with a number of customers.  The Company expects to consummate some of these transactions in 2011, most of which have a term of less than one year. Opportunities are increasingly being generated through synergies with the Company's FSRU and other asset-oriented ventures. The Board is clearly not satisfied with the results Golar Commodities has generated since start up, but sees clear positive signs in recent developments and appreciates the hard work of the organisation to create a strong strategic position.

Market

The March 11th tragedy in Japan caused the shut-down of some 12.4GW of nuclear capacity which led to LNG playing an increasingly pivotal role in meeting Japanese energy requirements.  These outages in Japan's nuclear facilities as well as the drive towards replacement gas should result in an additional 7.5 million tonnes per annum ("mmtpa") in 2011 rising to 12 mmtpa by 2015.

Although there is enough flexible LNG available in the market to allow diversions to Japan, this will remove a substantial amount of slack that was previously available.  Qatar is able to supply the bulk of the requirements but Japan has been accessing cargoes from other sellers.  None of these suppliers has the flexibility of Qatar but many suppliers are delaying maintenance to maximise their output.

In China a reduced appetite for spot cargoes is evidenced on the back of heightened Japanese activity whereas Indian imports have increased recently to make up for reduced domestic production.

South American markets are now heading into their peak season where markets in Argentina have been offering large premiums over Henry Hub and UK NBP.  Cargo deliveries into the US showed no signs of picking up in the first quarter.  By the end of March only 2.5 million tonnes had been imported, which is understood to be close to the contractual minimum under existing term arrangements.  Towards the end of the quarter a number of cargoes were heading into the US Gulf and thereafter available for re-export.   

The UK continued to import record amounts of LNG in each month of the quarter and NBP prices showed little sign of easing, which in turn helped prop up Far East prices.

Two new projects (Pluto LNG and Angola LNG) are expected to start up in the second half of 2011 and the first quarter of 2012 respectively. This new production together with debottlenecking projects and the ramp up of the significant number of new projects that have recently started up could add up to 47 million tonnes of LNG to the market by the end of 2012.

In general, the market momentum built up over the previous months as well as the positive outlook going forward should provide some benefits to projects where final investment decisions are yet to be taken

As noted above Golar Energy will become 100% owned by Golar LNG in the near future and delist from Oslo Axess.

Forward Looking Statements

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of Golar LNG Energy. Although Golar LNG Energy believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, Golar LNG Energy cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Included among the factors that, in the Company's view, could cause actual results to differ materially from the forward looking statements contained in this press release are the following: inability of the Company to obtain financing for the new building vessels at all or on favourable terms; changes in demand; a material decline or prolonged weakness in rates for LNG carriers; political events affecting production in areas in which natural gas is produced and demand for natural gas in areas to which our vessels deliver; changes in demand for natural gas generally or in particular regions; changes in the financial stability of our major customers; adoption of new rules and regulations applicable to LNG carriers and FSRU's; actions taken by regulatory authorities that may prohibit the access of LNG carriers or FSRU's to various ports; our inability to achieve successful utilisation of our expanded fleet and inability to expand beyond the carriage of LNG; increases in costs including: crew wages, insurance, provisions, repairs and maintenance; changes in general domestic and international political conditions; the current turmoil in the global financial markets and deterioration thereof; changes in applicable maintenance or regulatory standards that could affect our anticipated dry-docking or maintenance and repair costs; our ability to timely complete our FSRU conversions; failure of shipyards to comply with delivery schedules on a timely basis and other factors listed from time to time in subsequent announcements and reports. Nothing contained in this press release shall constitute an offer of any securities for sale.

May 30, 2010

The Board of Directors

Golar LNG Energy Limited

Hamilton, Bermuda

Questions should be directed to:

Golar Management Ltd - +44 207 063 7900:

Brian Tienzo - CFO

Doug Arnell - CEO

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.