Golar LNG Ltd 2026 Q2 Earnings Call

Thank you, operator. Good morning and welcome to Golar LNG's Q2 2026 earnings results presentation. My name is Karl Fredrik Staubo, I am the CEO of Golar, and I am accompanied today by our CFO, Eduardo Maranhão, to present this quarter's results. Before we get into the presentation, please note the forward-looking statements on slide 2. Starting on slide 3, we start with an exciting announcement. Overnight, we signed our fourth FLNG unit, which is another Mark II FLNG to be constructed at CIMC Raffles shipyard in China. That is the same shipyard already constructing our existing Mark II FLNG on order. The fourth FLNG order will deliver within 2029 and be the earliest available FLNG capacity globally. The order has been placed on the back of strong interest from prospective charters, as well as Golar's stated policy of adding additional FLNG capacity once the existing fleet has secured long-term charter commitments.

Across Hilli, Gimi, and the Mark II under construction, now named the FLNG Esperanza, Golar has a total EBITDA backlog of $17 billion before commodity upside and before a charter on the fourth FLNG unit. During the quarter, Hilli completed her 8-year contract for Perenco offshore Cameroon with 100% economic uptime for the life of the contract. Gimi overproduced 15% versus contractual volume, and the FLNG Esperanza remains on time and on budget. As part of the firm order for our fourth FLNG, we have also secured an option for an incremental Mark II FLNG with CIMC Raffles, i.e. an option unit. Today, we also announce a letter of intent with Seatrium Shipyard in Singapore for further incremental growth units utilizing our Mark I or Mark II design. We will provide further color on our growth ambitions later in the presentation.

Our liquidity stands at approximately $1.5 billion, inclusive of the $600 million revolving credit facility secured during Q2. Turning to slide 4, we highlight our long-term charter contracts with Hilli, Gimi, and Esperanza contracted through 2045, and with a total EBITDA backlog of $17 billion before commodity upside and inflationary adjustments. With our fourth FLNG order, we see potential to meaningfully increase our earnings capacity, and will now elaborate on that on slide 5. Today's announced order marks a 41% increase in Golar-controlled liquefaction capacity, increasing our total fleet capacity from 8.6 million tons to more than 12 million tons on a fully delivered basis. Assuming that we can achieve contractual terms in line with those achieved for Esperanza last year, we see potential for a 50% increase in our earnings capacity.

Our fourth unit is also expected to bring diversification of our earnings backlog, both with regards to charter counterpart as well as geographical exposure. Today's announced order will also be the world's earliest available liquefaction capacity, at least 1-2 years ahead of any alternatives. This again will drive charter interest in the unit. The incremental options, both on CIMC and through the LOI with Seatrium, create a replicable model and a capacity to meet some of the demand we see for FLNG deployments. On slide seven, we lay out the overview of the FLNG industry by owner. With our fourth order, we now regain the position as the market leading owner of FLNG capacity, with number of units at par with Eni, but higher in terms of controlled liquefaction capacity.

We expect to see another 1-3 FLNG orders from the existing owners on this page within the next 6-12 months, further building on our thesis that the FLNG market will see similar development to that of the FPSO industry, which started in 1985 and now has grown to more than 250 units globally. Golar maintains the position as the only proven provider of FLNG as a service. Turning to slide seven, we have laid out the same overview of the FLNG units globally, but here divided by the shipyard of construction. As you can clearly see from the slide, Samsung is the market leader for delivery of FLNGs. Wison shipyard in China has also built three new builds and continue to actively market new build FLNGs. Hanwha Ocean delivered one unit in 2016 and do not have near-term capacity to add additional units.

Two shipyards on the far right, both Seatrium and CIMC, have only ever built units for Golar and only done conversions. The way we see the market today, we do not expect other players actively pursuing conversion candidates, hence, they are focused on Samsung or Wison. Based on conversations with both shipyards, we believe Samsung is, at the very earliest, able to deliver incremental capacity sometime in 2031. We do expect Wison to be in prime position to win two large FLNG units in the relatively near future, and then they will also be spoken for well into the 2030s. Hence, the way we see the market right now, we believe the only incremental capacity that can be added with relatively near-term delivery is Golar conversions at Seatrium and CIMC. In addition to yard capacity, we see significant pressure on critical long-lead equipment.

Equipment like turbines, dual fuel engine, steam generators, and cold boxes see significant competition from other industries, including AI data centers, shipbuilding, and the aircraft industry. Hence, further pressure on these long leads further drives lead times for incremental orders. Therefore, we believe today's announcements, both of a firm order number four, an option for another unit at CIMC, as well as an LOI with Seatrium, secures Golar with a growth trajectory to capture market opportunities ahead of competition. We will remain with our policy of only having one open vessel at the time. As soon as we lock in the contract for number four, we are then likely to proceed at number five, but we have no ambition to overextend.

Again, this is furthermore in line with our announced strategy and also strategic review that we are looking at alternatives to accelerate our FLNG growth, and this speaks to that statement. Turning to slide 8 and an overview of the LNG industry and what's going on in the market as we see it. The industry is set to grow around 40% between 2026 and 2031. As stated on our Q1 call, the two largest exporters in the world, U.S. and Qatar, are at the same time expected to increase their market share from 40% to 53% of global supply. Hence, as much as we see a growing market, we see very significant increase in supply concentration. Turning to the middle graph, geopolitical events make such concentration with increasing uncertainty for off-takers.

The world's second-largest exporter of LNG, Qatar, was directly hit in military action during Middle East events, and the Ras Laffan liquefaction plant has estimates that they will be out, we are around 17 million tons out of a total capacity of 88 for at least three to five years. We therefore see a need for the global LNG market to further diversify its supply. This is where we think FLNG will play a vital role. On the graph on the far right, you can see the location of FLNG projects globally. Six of today's exporters would not have been exporters if it weren't for FLNG technology. Where Golar operates, we represent the only export facility. That's true for Mauritania, Senegal. It will be true for Argentina, and it was true for Cameroon before we left the country.

Significant proven gas reserves remain stranded, which creates further opportunities for FLNG-led LNG supply diversification. Turning to Q2 and recent highlights and developments. As stated during the quarter, Gimi delivered 15% above its contractual day rate with the 41st cargo delivered. Hilli ended its eight-year contract in Cameroon with 100% economic uptime since contract startup and 156 cargoes delivered over the eight years. The unit is now in transit to Singapore for modifications ahead of its 20-year contract in Argentina. Sessa officially named the Mark II under construction the FLNG Esperanza. We secured a $600 million revolving credit facility. We signed the fourth FLNG order, and through the EPC for number four and the LOI with Seatrium, we made a pathway to increase the fleet to over seven units. Turning to slide 11 with a focus on Hilli.

On July 26th, Golar delivered its final cargo under our contract with Perenco Offshore Cameroon. We're extremely proud to see the unit have 100% economic uptime since startup. We're further pleased to see that the redeployment progress as planned. We exited the country and are in transit according to schedule. Once the modification work has completed, we will sail to Argentina, where we will start a contract in the second half of next year, where we will generate $285 million of annual EBITDA before further commodity offset. On slide 12, we would like to extend our gratitude and thankfulness to our partners, SNH and Perenco, for solid cooperation over eight years in Cameroon. In addition to LNG export, the project has created meaningful value to the local economy and people. Golar's operations employed more than 100% Cameroonians or more than 40% local content on board the unit.

In addition to significant scholarship and courses, we have spent $80 million in local procurement and generated more than $1.5 billion in cash earnings to Cameroonian state interests. We have also voluntarily invested in critical infrastructure in-country, such as water holes, streetlights, school renovations, new sport centers, et cetera. We are motivated to work together again on potential gas monetizations in Cameroon and hope to be back in the near future. Turning to slide 13 and the Gimi. Gimi continues to produce above contractual levels. During the quarter, we produced 15% above the contracted capacity. That is despite the fact that we are coming into summer months and liquefaction plants are sensitive to both ambient and water temperature. Hence, we are extremely pleased with this performance. We do expect to see continued impact of high temperatures during Q3 before we see improved performance when we enter the winter months.

Over the year, we do expect the unit to produce meaningfully above the contractual capacity. Turning to FLNG 3, the Esperanza project remains on schedule and on budget. We are now 74% complete on the conversion progress, with more than 15 million man-hours completed without lost time incidents. The unit remains on track for sail away by year-end 2027, and to start operations in Argentina in the second half of 2028. Today, we have spent around $1.3 billion in cash equity into the conversion project out of a total budget of $2.2 billion. On slide 15, we are also progressing the required infrastructure in Argentina. CESA, our contract counterpart, in which Golar is a 10% shareholder, are now progressing critical infrastructure, including pipeline connections required for the startup, warehouse for operations support, supply boats, feeder vessels, and crew vessel, and we are also marketing the LNG offtake.