Highlights
- Golar LNG Partners LP reports net income attributable to unit holders of $66.9 million and operating income of $65.4 million for the third quarter of 2014.
- Generated distributable cash flow of $53.2 million for the third quarter with a coverage ratio of 1.47.
- Declared a third quarter distribution of $0.5475 per unit.
Financial Results Overview
Golar LNG Partners L.P. ("Golar Partners" or the "Partnership") reports net income attributable to unit holders of $66.9 million and operating income of $65.4 million for the third quarter of 2014 ("the third quarter"), as compared to net income attributable to unit holders of $37.8 million and operating income of $62.1 million for the second quarter of 2014 ("the second quarter") and net income attributable to unit holders of $35.4 million and operating income of $55.8 million for the third quarter of 2013.
The $9.6 million improvement in 2014 third quarter operating income over the same period in 2013 primarily reflects the addition of the FSRU Golar Igloo to the fleet during the intervening period. This FSRU, acquired on March 28 2014, added approximately $10 million to the third quarter operating income.
An increase in revenue net of voyage expenses from $100.1 million in the second quarter to $102.0 million in the third quarter is largely explained by an additional calendar day in the third quarter and 3 days less total offhire time in the second quarter. Vessel operating expenses decreased by $2.4 million with the majority of the vessels in the fleet seeing declines, predominantly due to lower repairs and maintenance and crew costs. Administration expenses at $1.5 million were marginally higher in the third quarter by $0.1 million.
Net interest expense at $11.1 million for the third quarter was, as expected, in line with the second quarter charge of $11.0 million. No new swaps were entered into during the quarter and no existing swaps matured. As at September 30 2014, the Partnership has undrawn credit facilities of $70 million.
Other financial items for the third quarter included a gain of $0.1 million compared with a loss of $8.0 million in the second quarter. This included non-cash mark-to-market valuation gains on unhedged interest rate swaps of $4.2 million in the third quarter compared to a $3.3 million loss in the second quarter.
Following a further reassessment of current tax liabilities, a substantial credit was recorded against tax resulting in a net credit in the third quarter of $15.1 million. $11.8 million of this credit relates to the recognition of a deferred tax asset in respect of tax losses, relating to certain tax positions that were previously not recognised due to uncertainty. The charge for the second quarter was $2.6 million. The tax charge moving forward, ignoring the non-cash reversal of the deferred tax asset, should normalise at approximately $2.0-$2.5 million per quarter.
The Partnership's Distributable Cash Flow1 for the third quarter was $53.2 million as compared to $45.1 million in the second quarter and the coverage ratio was 1.47 as compared to 1.25 for the second quarter. The increase in coverage ratio is predominantly attributable to the tax credit noted above.
On October 29, 2014, Golar Partners declared a distribution for the third quarter of $0.5475 per unit, which was paid on November 14, 2014 on total units of 62,870,335.
Operational Review
Golar Partners fleet performed well again during the quarter with 99.9% utilization and good control over operating costs underlying a strong operating earnings result. One vessel, the Golar Mazo, drydocked in the period but under the terms of this vessels charter there was no offhire.
Financing and Liquidity
As of September 30, 2014, the Partnership had cash and cash equivalents of $57.2 million and undrawn revolving credit facilities of $70 million. Total debt and capital lease obligations net of restricted cash was $1,048.4 million as of September 30, 2014.
Based on the above debt amount and annualized2 third quarter 2014 adjusted EBITDA3 , Golar Partners has maintained a strong balance sheet with a debt to adjusted EBITDA multiple of 3.0 times.
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.
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 has a firm commitment from the incumbent lenders to extend the soon to mature Golar Maria facility for up to 12 months on terms consistent with the existing facility, and intends to accept this offer. The Partnership has recently been actively looking at the possibility of a Senior Secured Term Loan facility to refinance existing debt and to provide funds for future acquisitions. Due to current market conditions the Partnership has decided to wait before launching a Term Loan refinancing. The Partnership will however continue to monitor the Term Loan market.
As of September 30, 2014, Golar Partners had interest rate swaps with a notional outstanding value of approximately $1,059.9 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 101% of total debt and capital lease obligations, net of restricted cash. The average fixed interest rate of swaps related to bank debt is approximately 2.06% with average maturity of approximately 3.4 years as of September 30, 2014.
As of September 30, 2014, the Partnership had outstanding bank debt of $837.3 million with average margins, in addition to LIBOR or fixed swap rates, of approximately 2.3%. In addition, the Partnership has bonds of $202.3 million with a fixed rate of 6.485%.
Outlook
Golar Partners fleet performed well again during the quarter underlying a strong operating earnings result and distributable cash flow coverage of 1.47. The Partnership is also in a strong financial position with a net debt to EBITDA ratio of 3.0, which enables it to increase debt levels to fund future acquisitions.
Operating performance in the fourth quarter is also expected to be strong. In addition the Golar Igloo, which operates on a nine month a year contract and would normally not expect to receive hire during December, January and February, will likely earn hire for the the full month of December as its charterer has requested an extension to operations for this year.
As at the end of the third quarter Golar Partners has a total order backlog of $2.3 billion with an average remaining contract term of 5.7 years.
The Partnership's next identified acquisition is the FSRU Golar Eskimo, which has been chartered to the Government of Jordan under a 10 year contract. The Partnership has commenced discussions with Golar LNG Limited ("Golar LNG") with regards to the acquisition of the Golar Eskimo in the first quarter of 2015. Given the Partnerships strong balance sheet position it has the potential to acquire the Golar Eskimo without raising additional equity.
Golar Partners' expected distribution growth for the full year 2014 is approximately 5%. In 2015, as a function of the likely acquisition of the Golar Eskimo, distribution growth is expected to be at least the level of 2014. Beyond this there are good possibilities of further FSRU and LNG carrier acquisition opportunities from Golar LNG over the next 24 months. For example, the Ghana FSRU opportunity with Quantum Power for the FSRU Golar Tundra, which is a project Golar LNG is helping to develop as exclusive provider of FSRU services.
Looking further forward, the Board is excited about the potential acquisition of floating liquefaction assets from Golar, which will likely be high margin and long contract duration assets. This growth potential underpins the Board's confidence in the Partnership's ability to continue to grow its earnings and distributions over time.
November 26, 2014
Golar LNG Partners L.P.
Hamilton, Bermuda.
Questions should be directed to:
C/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo or Graham Robjohns
