Shipowners report net quarterly loss but FSRU upside

European shipowners Golar and Hoegh LNG both reported net financial losses for the final quarter of 2014 on 25 and 26 February amid a bearish short-term charter market outlook.

Golar saw the arrival of two LNG carriers over the final quarter of 2014 which pushed its fleet up to 12 vessels but which also increased its operating expenses.

“Whilst utilisation improved from 56% to 57% [quarter on quarter], the time charter equivalent dropped from approximately $41,000/day to $28,000/day, mainly as a result of increases in voyage expenses from the idling vessels,” Golar’s CFO Brian Tienzo said.

This, however, includes a one-off legacy charter reclaim charge of $4m. Excluding this legacy reclaim, which is understood to originate from the bunker costs involved in a Golar Viking charter dispute with Qatargas from 2012, the shipowner’s time charter equivalent in the fourth quarter would have been closer to $33,000/day.

Golar expects vessel utilisation and rates to remain poor during the first half of this year. The shipowner has taken steps to strengthen its balance sheet ahead of these challenging times, including raising $207m through the sale of shares or units in its master limited partnership (MLP) and releasing $180m of equity from financing of its delivered newbuilds.

Following the Q4 delivery of the Golar Eskimo, the floating storage regasification unit (FSRU) which is contracted to sail into Jordan in May for commissioning, Golar earned $390m when it transferred ownership to its MLP. More recently the company sold the Golar Viking – a 2005-built steam-turbine LNG carrier – to Indonesian shipowner Equinox for $135m (see sister publication LMD, 16 February 2015).

The Golar Eskimo is currently undergoing final modifications in Singapore to prepare it for employment in Jordan. Golar reported progress on the unsanctioned FSRU project in Ghana which has reserved another unit still under construction in South Korea, the Golar Tundra. A final investment decision is still expected on that project by mid 2015 with the present shipyard delivery date for Golar Tundra at the end of this year.

A number of further projects across diverse locations are enquiring about FSRUs, which Golar CEO, Gary Smith, attributed to “lower absolute commodity prices”

The CEO continued that “countries that may have held off introducing LNG into their power mix are now seeing the attractiveness of LNG at these prices, particularly in the case of South Africa and Brazil, where there are continuing brownouts and in the case of South Africa blackouts due to chronic power shortages.”

Progress has also been made with Golar’s floating liquefaction plans in west Africa but the Anglo-French upstream resource holder Perenco still has to make binding agreements with authorities in Cameroon to build on the joint venture’s Head of Agreements signed in December.

Hoegh LNG’s one-off losses

Oslo-based shipowner Hoegh LNG suffered a net loss of $57.7m in the final quarter of 2014 due mainly to one-off impairment charges associated with writing off a US floating import project.

The US project in Port Dolphin, Florida which received regulatory approval back in 2009 cost Hoegh $35.5m – about four times the impairment charges it recorded for its oldest operational LNG carrier, the 126,000cbm LNG Libra.

The 1979-build LNG Libra, which the company purchased from Japanese shipowner MOL in 2011 is currently on charter to Spain’s Gas Natural Fenosa until 31 December 2015.

The impairment calculation for the LNG carrier assumes that the vessel will be sold to “green recycling” at the end of the charter period, although the company has not yet committed to this plan and would consider other opportunities.

The company carried out impairment testing ahead of the payment of it first quarterly dividend due next month.

With only two other LNG carriers in its fleet, the shipowner reiterated its growth strategy in the FSRU segment with the CEO Sveinung Stohle saying, “an FSRU generates more than double the EBITDA of an LNG carrier”. Ludovic Aldersley