(GLNG) Golar LNG Swings to an Earnings Loss

November 30th, 2009

Golar LNG Ltd. (GLNG) reported third-quarter results on Friday. The company swung to a net loss of $1.0 million, from a net income of $11.8 million in the previous quarter, which included a gain of $22.8 million related to non-cash interest rate and equity swap valuation. Loss per basic share came in at 2 cents during the third quarter, which matched the Zacks Consensus Estimate.

Golar is a mid-stream LNG company engaged in the acquisition, ownership, operation and chartering of LNG carriers and floating storage re-gasification units (FSRUs). At the end of the quarter, the company’s portfolio (including subsidiaries) consisted of 13 vessels and a 50% equity stake in an LNG carrier.

The Bermuda-based company said operating revenues grew 7.5% to $50.3 million from $46.8 million in the previous quarter. The growth was primarily driven by the Golar Winter vessel, which commenced charter operations in September after conversion to a FSRU. Moreover, quarterly revenues were also boosted by the start of new charters for Ebisu and Golar Arctic vessels. Average utilization grew to 80% from 69% in the prior quarter, while average daily time charter equivalent rates (TCEs) increased to $44,140 per day, compared to $37,600 per day in the previous quarter.

Total operating expenses, as a percentage of revenue, dipped by 300 basis points (bps) to 92.8% from the prior quarter, mainly due to a decline in voyage expenses as a result of better utilization of spot trading vessels, which led to reduced fuel costs coupled with lower hiring expenses related to the Golar Frost vessel. Accordingly, operating margin improved by 300 bps to 7.2%, from 4.1% in the previous quarter, while operating income expanded by 86.3% to $3.6 million. However, the company also incurred $14.8 million towards interest expenses, partially offset by financial gains of $10.5 million, which contributed toward the net loss during the quarter.

Golar also stated that a restructuring program aimed at spinning off certain assets to a newly created subsidiary, Golar LNG Energy, was completed during the quarter. The new entity raised about $116.5 million through a private placement of 60 million new shares. Under the program, Golar transferred 8 vessels to the subsidiary and is now left with 5 vessels with long-term charter agreements worth approximately $1.9 billion.

The company ended the quarter with cash and equivalents of $154.6 million, compared to $58.4 million in the previous quarter. During the quarter, Golar received $116.5 million from equity raised by the above subsidiary and $10.0 million from the issuance of long-term debt. The company also deployed about $22.0 million towards capital expenditure and $13.5 million towards repayment of debt.

Looking ahead, management expects performance in the fourth quarter to be driven by Golar Winter, which will operate as a FSRU for the full quarter. Moreover, fourth-quarter results are expected to be positively impacted by a gain of $8 million related to a partial stake sale by Golar LNG Energy in Australia-based LNG Ltd.

Meanwhile, full-year Zacks Consensus Estimate is currently pegged at a loss of 17 cents per share, which has worsened by 11 cents over the past 2 months. However, next year’s Zacks Consensus Estimate currently stands at a profit of $1.34 per share, which has remained constant over the past 3 months.

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(GLNG) Golar LNG Swings to an Earnings Loss

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