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Golar LNG: Decent Earnings But Problems May Be Ahead

Jun. 10, 2020 6:56 AM ETGolar LNG Limited (GLNG)BP, BPAQF, KPELF, KPELY10 Comments


  • Golar LNG's revenues surprisingly improved in the face of the coronavirus outbreak that has devastated the shipping and energy industries.
  • The company could see some difficulties over the remainder of the year as the space struggles to recover from the economic shutdowns.
  • It has been taking steps to improve its revenue backlog, which should better help it weather the current conditions.
  • BP's force majeure claim could disrupt or at least delay the company's forward growth story.
  • We definitely see signs of the usual Q1 seasonal weakness and some negative impacts from the virus but the company looks positioned to weather through.
  • Looking for a helping hand in the market? Members of Energy Profits in Dividends get exclusive ideas and guidance to navigate any climate. Get started today »

On Thursday, May 28, 2020, diversified liquefied natural gas tanker and production firm Golar LNG Limited (NASDAQ:GLNG) announced its first quarter 2020 earnings results. At first glance, these results appeared to be mixed as the company managed to beat the expectations of its analysts in terms of top-line revenues but also announced a fairly large net loss during the quarter. With that said though, few people expected too much out of this company as the coronavirus outbreak and resulting global economic shutdown has been devastating for this industry. It was certainly not all bad news in this report though and indeed there were a few items in here that could prove quite promising for the company's future. Overall though, it seems likely that we will continue to see struggles out of it until we return to sense of normalcy, which may take a few more quarters.

As my long-time readers are no doubt well aware, it is my usual practice to share the highlights from a company's earnings report before delving into an analysis of its results. This is because these highlights provide a background for the remainder of the article as well as serve as a framework for the resultant analysis. Therefore, here are the highlights from Golar LNG's first quarter 2020 earnings results:

  • Golar LNG reported total operating revenues of $122.559 million in the first quarter of 2020. This represents a 7.24% increase over the $114.287 million that the company brought in during the prior year quarter.
  • The company reported an operating income of $21.158 million during the most recent quarter. This compares rather unfavorably to the $28.864 million that it reported during the year-ago quarter.
  • Golar LNG's Golar Power division saw its Sergipe power plant in Brazil receive its COD acceptance milestone that triggered the commencement of

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This article was written by

Power Hedge profile picture

Power Hedge has been covering both traditional and renewable energy since 2010. He targets primarily international companies of all sizes that hold a competitive advantage and pay dividends with strong yields.

He is the leader of the investing group Energy Profits in Dividends where he focuses on generating income through energy stocks and CEFs while managing risk through options. He also provides micro and macro-analysis of both domestic and international energy companie. Learn more.

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Comments (10)

The probability of starting to use two additional trains on the Illi could help.

I wonder if they can sell the 50% they own of the Sergipe plant. They can still keep the FSRU in charter and sell the additional gas around, but the plant itself does not make a lot of sense for companies with such a high cost of capital. By all means, they should try and develop other projects like this, but once the plants start producing, I think they should sell them to some better capitalized utility or insurance company.

Another question I have is why, with their supposed best technology in liquefying gas at sea, they do not have more potential projects in the pipeline, apart from Gimi. But maybe I am just ill-informed. Do you know if they have been discussing other similar projects? Thanks in advance.
Gabriel Castro profile picture
doesn't make sense to sell Sergipe, it is a very long term contract inflation hedged with a lot of optionality. What makes sense is to do a Golar Power IPO once the market stabilize. It will unlock a lot of value.

Regarding FLNG... have you seen where the LNG is trading? Nobody is interested in new liquefaction right now... many projects will came, but not now... It has to wait. The current market is perfect for Golar Power growth as LNG is very cheap (even more than coal, it is crazy!)
sts66 profile picture
If they spin off Golar Power in an IPO they'll be giving up a cash cow, leaving them with just Hilli bringing in consistent revenue. If they do spin it, existing shareholders better get a piece of it - when FRO spun off SFL, FRO shareholders got 25% of the new SFL shares, but then again JF was in charge back then and well known for lining his own pocket, Troim may not be as generous.
You are right, gas is very cheap, but there are still people drilling and increasing capacity. Qatar recently placed an order of 100 LNG carriers for its North field expansion. There are absolutely no other players drilling offshore?

Regarding Sergipe, an IPO would be fine. Just big enough to list, I reckon, although a single utility in Brasil might be a bit risky for many investors. But if for some reasons they can’t make it, why keep in-house an asset that with their cost of capital has a NPV of 100, if somebody with a lower cost of capital might give them 150? The fact that they are making more money on it than expected because LNG is cheap would be recognized by the acquirer too. A utility with a BOT contract is almost like a bond (well, a Brazilian bond). These guys are so desperate for cash that having a bond in the asset side of the balance sheet does not seem such a great idea.

Unless of course they have a special relationship with some local politicians and their selling would jeopardize the viability of the project.
Throwing Ketchup profile picture
"BP's force majeure claim..." Let's call it what it is,"Get out of Jail Free Card." And, basically, the US gov't is giving one to our economy with $4 TRILLION.
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