Golar LNG Limited Q2 FY2025 earnings call

• Key milestones in Q2 included securing the 20-year charter for Hilli, signing a definitive agreement and final investment decision (FID) for the Mark II FLNG, issuing $575 million convertible bonds and buying back shares, releasing an ESG report, welcoming new board members, and progressing the fourth FLNG unit. - Commercial terms: All FLNG contracts are on English law, paid in USD, and with strong counterparties acting as buffers to host governments. Contracts have commodity and utilization-linked upsides, e.g., Hilli in Cameroon has excess cash earnings tied to Brent and TTF gas prices, Gimi has utilization-linked upside, and CEA contracts have excess earnings tied to offtake prices.

In Q2 2025, Golar LNG had total operating revenues of $75 million. FLNG tariffs reached $82 million, driven by Gimi's commercial operations date (COD) in June. Hilli's revenues were split into Base, Brent, and TTF linked fees. Total EBITDA was $49 million, with Hilli and Gimi contributing to this. Specifically, FLNG operations alone generated $57 million EBITDA before project development expenses. Hilli's revenues include Base, Brent, and TTF linked fees, while Gimi's revenues will be recognized between capital and operating elements. The EBITDA backlog stood at $17 billion before inflationary adjustments and commodity exposure.

• Fully contracted EBITDA is expected to grow over 4x the last 12 months' figure before commodity upside. - Plan to use liquidity from debt financing proceeds to fund accretive FLNG growth and increase shareholder returns. - Focus on ordering an accretive fourth FLNG unit, with progress on yard contracts and design decisions expected in the coming months.

• Long lead times for certain components are increasing, potentially affecting timelines. - Regulatory approvals for the Mark II FLNG charter remain a risk, though expected to be met within 2025. - Commodity price fluctuations could impact the upside components of contracts.

Q: Chris Robertson asked about the new board members' skills and if they drive commercial discussions.

A: Karl Fredrik Staubo responded that Mi Hong Yoon has an accounting background, Stephen Schaefer has extensive financing and energy infrastructure experience, and Benoît Fouchardiere, former CEO of Perenco (a large shareholder and charterer), brings upstream know-how relevant for identifying gas fields.

Q: Frode Morkedal asked about valuation and the framework for valuing the backlog.

A: Karl Fredrik Staubo said the fixed EBITDA from Hilli, Mark II, and Gimi (net of G&A) is around $800 million per year before CPI and commodity upside, and the market will determine the discount rate. He highlighted the uniqueness of commodity exposure with a fixed breakeven for profit share at $8 per MMBtu over 20 years.

Q: Alexander Bidwell asked about commercial prospects for the fourth unit and FLNG specs.

A: Karl Fredrik Staubo said start-up timelines are sufficient, with most West African opportunities likely Mark I or II, and South American/Middle Eastern projects possibly Mark II. Long lead items (like gas turbines) are compatible across Mark I, II, and III designs.

Q: Sherif Elmaghrabi asked about Gimi debottlenecking and economies of scale between Mark I and III.

A: Karl Fredrik Staubo said Gimi debottlenecking involves tweaking air inlet chilling, turbo expanders, and FPSO-FLNG interaction. For CapEx per ton, Mark III has less time and money spent on conversion vs. building from scratch, and operating costs have economies of scale with Mark III being more efficient.

Q: Liam Burke asked about capacity growth on next-gen FLNGs.

A: Karl Fredrik Staubo said they don't anticipate extremely large units like 10 MTPA as they require large reserves and proper servicing, focusing on sizes that balance commercial opportunities and upstream infrastructure.

Q: Craig Shere asked about Gimi divestment and commodity links in GTA growth.

A: Karl Fredrik Staubo stated no current plans to divest Gimi, as it proved the FLNG concept for BP. Incremental liquefaction capacity in GTA is expected to have higher tariffs and could include commodity links, depending on commercial negotiation.

Q: Craig Shere asked about the order of FLNG project steps.

A: Karl Fredrik Staubo said they are spending on long leads now, will FID the fourth FLNG once comfortable, and then order the fifth unit after securing a long-term contract for the fourth, ensuring financial flexibility.