Hamilton, Bermuda, Feb. 28, 2014 (GLOBE NEWSWIRE) -- Highlights
- Golar LNG Partners LP ("Golar Partners" or the "Partnership") reports net income attributable to unit holders of $47.6 million and operating income of $54.7 million for the fourth quarter of 2013 ("the fourth quarter")
- Generated distributable cash flow of $44.8 million for the fourth quarter of 2013 with a coverage ratio of 1.32
- Declared distribution of $0.5225 per unit for the fourth quarter of 2013
- Completed fourth follow-on offering raising net proceeds of $150 million
- Agreed to acquire from Golar LNG Limited ("Golar") the Floating Storage and Regas Unit ("FSRU") Golar Igloo for $310 million subject to certain closing conditions
- Entered into $200 million interest rate swaps at fixed rates of between 2.206% and 2.955%
Financial Results Overview
Golar Partners reports net income attributable to unit holders of $47.6 million and operating income of $54.7 million for the fourth quarter, as compared to net income attributable to unit holders of $35.4 million and operating income of $55.8 million for the third quarter of 2013 ("the third quarter") and net income attributable to unit holders of $27.3 million and operating income of $46.0 million for the fourth quarter of 2012.
The improvement in operating income over the same period in 2012 is a reflection of three factors. First, the Golar Spirit entered her first post retrofit drydock during December 2012 and this resulted in approximately three weeks of offhire and associated positioning costs during that quarter. Secondly, during the intervening period a biennial uplift to the capital component of the Golar Spirit and Golar Winter and a further increase in the charter rate for Golar Winter to compensate for modification works completed took effect. Thirdly, the fourth quarter results include the contribution from Golar Maria. Comparable results for 2012 do not as this vessel was not under the common control of Golar at the time of her acquisition by the Partnership in February 2013. The improved results are partially offset by increased depreciation and amortization as a consequence of the acquisition of the Golar Maria, the additional investment in Golar Winter modifications and four vessel drydocks over the intervening 12 months.
As anticipated, fourth quarter 2013 operating results were broadly in line with the third quarter. Revenue net of voyage expenses and operating expenses were both consistent with the prior quarter. Administration expenses were however increased in the fourth quarter by $0.5 million.
Net interest expenses decreased to $10.5 million for the fourth quarter of 2013 compared to $11.1 million for the third quarter. The reduction primarily reflects the maturity of a relatively high cost interest rate swap that matured during November.
On December 11, the Partnership received net proceeds of $150 million in respect of public and General Partner units issued in its fourth follow-on equity offering. Of this, $20 million was applied against a revolving facility provided by Golar and a further $70 million was paid down on two other revolving facilities. This will moderately lower interest expenses for the first quarter of 2014. As at December 31, the Partnership has undrawn facilities of $155 million.
Other financial items for the fourth quarter recorded a gain of $1.5 million compared with a loss of $4.1 million in the third quarter. Non-cash mark-to-market valuation gains on interest rate swaps of $6.0 million in the fourth quarter compared to losses on interest rate swaps of $0.2 million in the third quarter. This non-cash gain was partly offset by additional interest expense of $0.6 million on $100 million of unhedged interest rate swaps entered into in October.
Tax is showing a credit of $4.3 million for the fourth quarter. This principally relates to a credit to tax expense in respect of the current year resulting from a reassessment of current year tax estimates.
The Partnership's Distributable Cash Flow1 for the fourth quarter was $44.8 million as compared to $38.9 million in the third quarter and the coverage ratio was 1.32 as compared to 1.25 for the third quarter. The increase in coverage is primarily a result of the tax credit discussed above offset in part by the distributions paid for the whole of the fourth quarter on the additional units issued during December. Declared distributions are payable on all units as at the record date.
On January 28, 2014, Golar Partners declared a distribution for the fourth quarter of 2013 of $0.5225 per unit, which was paid on February 14, 2014 on total units of 62,870,335.
Follow-on Equity Offering
In December 2013, the Partnership completed its fourth follow-on equity offering selling a total of 5,100,000 common units, representing limited partner interests, at a price of $29.10 per common unit. In addition, Golar GP LLC, the Partnership's general partner, contributed $3.0 million to the Partnership to maintain its 2.0% general partner interest in the Partnership. The Partnership's total combined net proceeds amounted to $150 million. Concurrent to this, Golar as a selling unitholder realized part of its stake in the Partnership by selling 3.4 million common units representing limited partner interests to fund future investment.
1Distributable cash flow is a non-GAAP financial measure used by investors to measure the performance of master limited partnerships. Please see Appendix A for a reconciliation to the most directly comparable GAAP financial measure.
Golar Igloo Acquisition
In December 2013, the Partnership announced its intention to acquire interests in the company that owns and operates the FSRU, Golar Igloo ("Igloo") from Golar for a purchase price of $310 million. The Igloo, which will be the Partnership's first newbuild FSRU, was delivered by Samsung on February 5 and immediately proceeded to Singapore for bunkering and storing up before leaving for Kuwait on February 14 via Qatar where it will collect an LNG cargo. The FSRU is scheduled to arrive off Kuwait with her commissioning cargo in March. Subject to certain closing conditions, Golar Partners expects to complete the acquisition of the Igloo during March. The Partnership estimates that the acquisition will generate annual contracted revenues, after deducting voyage, commission and operating expenses of between $32.0 million to $34.0 million. This estimate does not include any revenues that the Igloo may earn under short-term charters for the three-month period each year during which the Igloo is not providing FSRU services to KNPC under charter.
The Partnership will finance the acquisition of the Igloo by assuming debt on the vessel amounting to approximately $161.3 million and the remainder from the net proceeds of its fourth follow-on equity offering that completed in December 2013.
Financing and Liquidity
As of December 31, 2013, the Partnership had cash and cash equivalents of $103.1 million and undrawn revolving credit facilities of $155 million. Total debt and capital lease obligations net of restricted cash was $878.3 million as of December 31, 2013.
Based on the above debt amount and annualized2 fourth quarter 2013 adjusted EBITDA3 Golar Partners has a debt to adjusted EBITDA multiple of 3.0 times.
The Partnership has a debt facility in respect of the Golar Maria of $84.5 million that matures in December 2014 hence is currently shown as current debt. The Partnership expects to refinance this facility ahead of its expiration and is in discussions with a number of banks with a view to achieving the most effective capital structure. The Board is confident that the facility can be refinanced at attractive terms.
As of December 31, 2013, Golar Partners had interest rate swaps with a notional outstanding value of approximately $1,125 million (including swaps with a notional value of $227.2 million in connection with the Partnership's bonds but excluding $100 million of forward starting swaps) representing approximately 128% of total debt and capital lease obligations, net of restricted cash. Whilst the Partnership is currently over-hedged, this will normalise when the debt associated with the Golar Igloo is assumed at dropdown and the Partnership redraws funds from the revolving facilities it prepaid in December. This hedging level also takes into account $130 million swaps maturing between April and May 2014. The average fixed interest rate of swaps related to bank debt is approximately 2.3% with average maturity of approximately 2.9 years as of December 31, 2013.
2Annualized means the figure for the quarter multiplied by 4.
3Adjusted EBITDA: Earnings before interest, other financial items, taxes, non-controlling interest, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure used by investors to measure our performance. Please see Appendix A for a reconciliation to the most directly comparable GAAP financial measure.
The Partnership entered into a $100 million seven year swap at a fixed rate of 2.206% and a further $100 million of forward start swaps with a five year duration, a start date of October 1, 2015 and a fixed rate of 2.955%. These swaps were entered into to cover maturing swaps. As of December 31, 2013 the Partnership had outstanding bank debt of $675.4 million with average margins, in addition to LIBOR or fixed swap rates, of approximately 2.4%. In addition, the Partnership has bonds of $214.1 million with a fixed rate of 6.485%.
The Golar Igloo acquisition is expected to take place in March 2014 and management have guided that this should lead to a distribution increase of 4.5% with effect from the second quarter of 2014. As noted above, the Igloo is contracted to Kuwait National Petroleum Company ("KNPC") for an initial period of 5 years.
During 2013, Golar also contracted the FSRU Golar Eskimo to the Government of Jordan. The vessel will be moored at a purpose built structure that is to be constructed by the Aqaba Development Corporation off the Red Sea port of Aqaba. The Golar Eskimo is scheduled to be ready for service in the latter part of the fourth quarter 2014 and its ten year contract is due to commence during the first quarter of 2015. This vessel will also be offered to the Partnership to acquire.
As expected, following the completion of a series of four drydockings in 2013, operating results in the fourth quarter were strong and in line with the third quarter. The first quarter of 2014 is similarly expected to show strong operating results as well as being positively impacted by earnings contribution from the Igloo for part of March.
The Partnerships' coverage ratio for the fourth quarter stands at 1.32 times despite the fact that distributions have been paid on the additional 5.2 million units issued in December in connection with equity raised to help fund the acquisition of the Igloo. Leverage as at the end of the fourth quarter at 3.0 times adjusted EBITDA is down from 3.9 times at the same time last year partly aided by the equity raise in December 2013.
Golar Partners strong coverage ratio and reduced net debt to adjusted EBITDA ratio provides financial flexibility for future acquisitions and distribution growth. Related company Seadrill Partners has recently announced its success in placing a Term Loan B in the US capital markets with attractive pricing and a very low level of debt amortization. A similar type of transaction would enable Golar Partners to use its Replacement Capex Reserves more efficiently by investing the cash in new assets rather than paying down large amounts of debt. The Partnership will therefore consider similar types of transaction both to refinance existing debt and in connection with new acquisitions.
With this solid financial position together with the Igloo acquisition and likely Golar Eskimo acquisition as well as Golar's remaining newbuild fleet of 11 as yet uncontracted vessels, the Board is confident that Golar Partners can continue to strongly grow its earnings and distributions over the longer term.
February 28, 2014
Golar LNG Partners L.P.
Questions should be directed to:
C/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo or Graham Robjohns