Golar LNG Ltd

NASDAQ:GLNG

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Golar LNG Limited Q3 2020 Results Presentation Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I must advice you that this conference is being recorded today, Monday 30 of November, 2020.

I would now like to hand the conference over to your speaker today, Golar CEO, Mr. Iain Ross. Thank you, and please go ahead.

[Iain Ross, CEO]

Thank you, operator. Good morning, good afternoon, everyone. Welcome to the Golar LNG Q3 2020 results presentation. My name is Iain Ross, and I am the CEO of Golar LNG.

Today, I'm joined on the line by CFO, Karl Fredrik Staubo, replacing Callum Mitchell-Thomson, who has resigned from his position due to personal reasons. We'd like to thank Callum for his contribution to Golar. We're also pleased to have Eduardo Maranhão, CFO of Hygo, and Tor Olav Trøim, Chairman of both Golar LNG and Hygo, with us today. And as usual, we also have Stuart Buchanan, Head of Investor Relations on the call.

I'd like to draw your attention to forward-looking statement on Slide 1. And if we turn to Slide 4, let me give you some highlights, before Karl takes you through the number in more detail.

Today, we reported an adjusted EBITDA of $57 million and revenue of $95 million for the quarter, which is driven by a further solid FLNG performance and a steady result from shipping. In shipping, we achieved overall time charter earnings of $39,000 per day, which is ahead of guidance, with the TFDEs earning just under $44,000 per day if you exclude dry dock days. And we ended the quarter with a shipping revenue backlog of $198 million compared to $147 million at the end of Q3 2019.

Our FSRU LNG Croatia conversion remains on track for handover to our customer, LNG Hrvatska, in December, at which time we expect to release $17 million in cash from the project and a further $30 million of cash in January next year.

Our FLNG operations maintained 100% commercial uptime through the quarter. FLNG Gimi force majeure event with BP has ended, resulting in the project schedule being extended by 11 months and with no other changes to contractual terms. And in downstream, Paul Hanrahan has been appointed as the new CEO of Hygo Energy Transition, that's the new name for Golar Power. Fuel capacity payments were earned from the Sergipe Power Station and FSRU in Nanook, and more progress has been made towards our Barcarena Terminal FID.

Turning to page five and an update on governance, which we take very seriously. The internal review that was instigated following the allegations against the former CEO of Hygo was completed with no findings of wrongdoing. The review has not identified any evidence establishing bribery or other corrupt conduct involving Hygo and confirmed solid corporate governance and compliance. Eduardo will go through this overall timeline and provide more detail on Hygo later in the presentation. So, more detail on the business segments to follow.

Let me now hand over to Karl to take you through the numbers and more detail on financing. Thank you.

[Karl Fredrik Staubo, CFO]

Thank you, Iain. I'm looking forward to take on the role as CFO for Golar. My name is Karl Fredrik Staubo, and I will start by taking you through the summary results on Slide 6.

Shipping TCE for the quarter came in at $39,100 per day, higher than our guidance of $35,000 a day and above Q3 of last year at $35,200. However we were seasonally down from Q2 as expected.

FLNG Hilli continued its solid and stable operations with 100% utilization and earnings in line with Q2. Net loss for the quarter ended at $22 million. We report a cash position for the quarter of $177 million, of which $100 million is restricted cash related to our letter of credit on the FLNG Hilli and consolidated VIE cash balances related to our sale leaseback finance vessels.

The unrestricted cash position for the quarter of $77 million was negatively impacted by $17 million due to having to equity fund Gimi CapEx during the BP FM event. Following the ending of the force majeure event, the draw stop under our $700 million facility available during construction has been lifted, and we have made a $75 million draw, which have replaced the $17 million of equity CapEx, increasing our liquidity post quarter end.

This realigns the drawdown ratios to the original debt equity funding ratios. And adjusting for this equity CapEx installment, our cash position for the quarter would have been $94 million. Adjusted EBITDA for the quarter came in at $57 million, a beat against consensus at $53.4 million, driven by higher than expected shipping rates.

Turning to Slide 7 and adjusted EBITDA development. Quarter-over-quarter, our EBITDA was down by approximately $10 million from $67 million in Q2 to $57 million in Q3, primarily driven by seasonally lower shipping rates, which went from $45,000 a day in Q2 to $39,000 a day, as mentioned.

We also have the COVID-19-related closure of the shipyard, where the Golar Tundra was being dry-docked, which resulted in significant unscheduled off-hire during the quarter and contributed to the net reduction in our fleet utilization from 93% in Q2 to 80% in Q3.

As expected, vessel operating expenses at $28.2 million were higher than those at Q2, which came in at $24 million. The $4 million increase was mainly due to catch-up repairs and maintenance carried out following the lifting of COVID restrictions. And as for our trailing last 12 months EBITDA, were up from $283 million a year ago to $294 million last trailing month, mainly driven by average increase in our achieved shipping rates.

Turning to Slide 8 and our corporate financing. We have two corporate facilities maturing before year-end, a $150 million corporate facility secured against our Hygo shareholding and a $30 million margin loan on our shareholding in Golar Partners.

To address these upcoming maturities, we have entered into $100 million committed corporate debt facility secured in our Hygo shares. This will be withdrawable at maturity of the 150 facility that now maturing. Furthermore, we are in advanced discussion for an incremental $125 million corporate credit facility drawable upon Hygo IPO.

In addition to these facilities other key financing events that will increase our available liquidity include contractual drawdown on the Golar Bear facility of an incremental $10 million, targeted in January 21. As Iain explained, the acceptance and delivery of the Golar Viking project converted to an FSRU, and on its way to acceptance to LNG Croatia. That will free up net liquidity of $47 million between December 2020 and January '21. We've also received term sheets for opportunistic refinancing of the vessel, Golar Frost, and a potential renewal of the maturing DMLT margin loan, which combined can raise $70 million in liquidity to Golar. The net potential liquidity effect if we draw on all of these facilities will be an incremental $172 million in liquidity after repaying the maturing $180 million of corporate debt. So we're comfortable with the liquidity situation, assuming we draw on all these facilities, and we think that will create a significant flexibility to continue the growth on the company.

Turning to slide nine, we have an update on our FLNG Gimi conversion funding sources. We had, as Iain alluded to, extended the -- agreed with BP to extend the project by 11 months. That is expected to come in at an incremental construction cost of $36 million. Furthermore, we have shifted some of the CapEx to later in the construction period to benefit near-term liquidity. For next year, the reduction is $7 million in equity requirement before we increase in '22 and '23, so we have pushed the installments slightly out. We're also happy that the increase in the construction CapEx is not more than the $36 million that we anticipate to be the total increase in construction costs, and we worked hard with our subcontractors to make sure that the increase in costs are not more significant given the 11-month delay.

That concludes it for the financing section, and I'll now hand over for Iain to run through the shipping section.

[Iain Ross, CEO]

Thank you, Karl. Turning to slide 11, in shipping, the quarter commenced with JKM at around $2.15/mmbtu and quoted TFDE headline spot rates of around $30,000 a day. Seasonal upswing was slower than usual due to a combination of around 120 U.S. cargo cancellations over the summer, higher than normal European storage levels, and weather-related supply interruptions which continued into early September. As production resumed late Q3, the shipping rates resumed their seasonal upswing albeit later and lower than last year. The quarter ended with JKM at around $5.15 per mmbtu and quoted TFDE headline rates of around $59,000 a day. Subsequent to that we have seen JKM above $7.00 in spot rates, briefly above $100,000 for single voyages before dropping back.

The remaining through to our shipping strategy and our focus on utilization is serving us well. Q3 utilization of 80% is significantly up on Q3 2019. Our TCE of $39k for the quarter was above guidance, was, as Karl mentioned also adversely affected by the Tundra being in dry dock for much longer than planned due to that COVID shutdown in Singapore, and this will spill over into the early part of Q4. Season is of course out of dry dock.

Additionally, we've built $123 million of shipping backlog this quarter which you can see on slide 12. Utilization going into 2021 is strong with around two-thirds of 2021 fleet days already backed by contract, and whilst we may sacrifice a little of the upside during the winter months, we expect to more than make up for this during the rest of the year, and we're anticipating a TCE of around $50,000 a day for Q4, and as LNG prices cycled up and as mentioned, we did see JKM over $7 over the last few weeks, the prospect of FLNG development starts to become more interesting.

So, let's now have a look at FLNG in slide 14. Hilli performed well in the quarter with 100% commercial uptime as Karl noted, and she has offloaded the 47th cargo. The annual two-week maintenance shutdown was completed without incident during the quarter which I think deserves a mention due to the COVID constraints that the team operated under during that time. We agreed an amendment to the LTA with Perenco and SNH which essentially does two things for us. Firstly, it removes the 500bcf cap on the contract volume and so converts the contract to an eight-year fixed duration deal, and secondly, it allows us to invoice for any overproduction during a calendar year, which will amount to around $5 million with the overproduction to the end of last year. We expect the agreement to be formalized in due course, and our discussions with Perenco and LNG production volume increased, which is enabled with that amendment within the remaining term of the contract continue in the right direction, and we anticipate that Perenco will start its well campaign before the end of Q1 next year in order to prove up the additional reserves to potentially increase utilization of Hilli. Should we reach agreement with Perenco, there will likely be a new risk-aligned tariff payment for that portion of additional volumes rather than a fixed tariff.

Turning to slide 15, on FLNG Gimi, we concluded the FM issue with BP, as Karl mentioned, has resulted in delay to commercial operations of 11 months, but importantly, all other aspects of the contract remain the same, and the impact on the overall budget is minimal, and the financing milestones have been restructured as Karl described. On the project in Singapore, our contractors have ramped up to over 2,400 people working within COVID restrictions and getting on with the project. We expect the next dry dock which will include attaching parts to the large sponsons to the held to go ahead before the year-end.

On the FLNG business development pipeline, we've experienced a material uplift in the level of interest in FLNG with a number of new inquiries during the quarter. The nine opportunities currently being discussed with financially strong counterparties are geographically spread, and it include potential deployments in West Africa, Asia, the Mediterranean and the Americas. We're in active engagement on both conversion and newbuild options, and remain convinced of not only the commercial and scheduled benefits of our design, but increasingly of the competitive carbon footprint of our offering. Clearly, we're focused on delivering Gimi right now, but these deals do take time to put together, and I'd like to think that this potential for good convergence between opportunity is being ready for FID, possibly maybe in 2022, and our availability to put together financing package for the projects.

With that, can I hand over to Eduardo Maranhão to take you through the details on Hygo?

[Eduardo Maranhão, CFO, Hygo]

Thank you very much, Iain, and good morning, ladies and gentlemen. So, switching to slide 18, I just wanted to give a brief recap of the major events that took place over the past eight weeks. So, at the end of September, our IPO efforts were put on hold as a result of allegations involving our former CEO for actions predating his work at Hygo.

Immediately after that, our Board of Directors engaged with external legal and accounting advisors in order to conduct a detailed internal review of the company's procedures and existing compliance policies. The final outcome of this review has been delivered in the end of October and has not identified any evidence establishing improper or other corrupt conduct involving Hygo or its executives and confirms solid corporate governance and compliance.

Also in September, our existing power station at Sergipe faced the issues with one of its four step-up transformers, which temporarily reduced the available generating capacity from 1.5 gigawatts to 1 gigawatt until the end of the second quarter of 2021 when a replacement transformer is expected to be installed. We maintain business interruption insurance cover in place, and we do not expect material financial impact from this event. Also in September, on September 30, Hygo was the only qualified bidder to present a valid offer in the official tender to take over the Bahia terminal from Petrobras. Petrobras subsequently increased Hygo perceived integrity risk, leading to a temporary disqualification of its bid. We have then appealed from this decision and now expect a final outcome from Petrobras before the end of the year.

On October, Paul Hanrahan was appointed as our new chief executive officer. As the former CEO of AES Corporation, Paul brings extensive experience in international business development in emerging markets and has the right skill sets to lead our growth prospects. We remain fully committed to the development of our terminal in Barcarena, and after our mutual decision to terminate the existing MoU with Norsk Hydro, we have entered into a new agreement with a state-owned gas distribution company of the Pará state Gás do Pará with a goal to supply the existing regional demand for cleaner fuels.

Also on November, we have reached an important stone in the development of the Barcarena terminal when the Brazilian authorities granted us a final authorization called Outorga to build the 605 megawatt power station and associated LNG terminal. Just as of last week, we have also been shortlisted in the open season tender to supply large natural gas volumes to Copergas, the state-owned gas distribution company of the State of Pernambuco which has as its shareholders the State of Pernambuco itself, Mitsui, and also Petrobras. This is a fundamental commercial initiative to accelerate the development of our terminal in Suape.

As seen above, we strongly believe that our ability to develop large scale projects and enter into long-term partnerships in Brazil remains unchanged. With our network of strategically located terminals and critical downstream infrastructure, we'll continue our mission to deliver cheaper and cleaner energy to this huge market. If I may switch to slide no. 19, the idea would be to give an update on some of the developments in our small scale LNG business. So, we continue to execute on our strategy. The first batches of equipments including ISO containers, mobile regas units, and gas filling stations have arrived in Brazil, and much more are expected in the coming weeks. So, we have now over 100 ISO containers in the country. In order to supply our first volumes, we have partnered with Galileo to build small liquefaction units in the states of Bahia and São Paulo.

And Hygo will be the first company to deliver bio-LNG in the country by using biomethane from an existing landfill in São Paulo and transforming it into LNG. In the south of Brazil we are also building our strategic distribution hub of city of Uruguaiana, which will allow us to supply the existing demand of this important region, including the states of Rio Grande do Sul, Santa Catarina, and Paraná. If I may switch to slide 20, I also wanted to give an overview of the general update on some of the terminals that we have been developing in Brazil.

So, I wanted to highlight the significant milestones that we have achieved in the Barcarena terminal. Based on those, we believe that we could be in a position to take a final investment decision in the next couple of months. I would like to highlight, for example, the issuance of the installation license for the construction of the LNG terminal and associated facilities for the power plant. We have also been awarded the long-term port concession by CDP for the use of the existing facilities in the Vila do Conde Port in the city of Barcarena.

We have also received binding EPC proposals for the construction of 605 megawatt power station from leading international suppliers. Moving over to Suape, we have also made significant progress over the past quarter. Subject to the receipt of final installation permits, we could also expect the final investment decision in the next couple of months, and upon the arrival of the first veneer vessel expected for next year, Suape is positioned to be the leading distribution center of LNG in Brazil. Our terminal in Santa Catarina, which I also wanted to highlight, is also coming together, preliminary environmental licenses and approvals from both UNTAC and SPU have been obtained, and FID is expected before the end of next year.

Lastly, when it comes to Bahia, although we cannot guarantee the outcome of Petrobras decision, we are confident that our proposed approach is the best solution to address all the commitments that were made for which the antitrust authorities in Brazil. It also goes in line with the government's efforts to provide cheaper and reliable gas supply to the vest local Brazilian market. So, considering the development of all of our terminals Hygo could be in a position to deliver over 25 million tons of LNG in Brazil in 2022.

[Iain Ross, CEO]

Thanks, Eduardo. If we turn now to slide 21 and our ESG progress, I can highlight a couple of items. Firstly, the carrier fleet achieved best ever fuel efficiency during the quarter, resulting in lower CO2 emissions, and the other point that's new is our recently announced partnership with Black & Veatch under which we will be jointly exploring opportunities to marinade some of the processes and activities relating to the hydrogen economy.

The initial focus will be on two areas: firstly, CO2 management, so capture storage and transport initially from the LNG supply chain, but equally it could be from other industrial users; and secondly, floating production of Blue Ammonia, so that's ammonia produced using methane for few, but capturing the carbon from the exhaust stream. Two focus areas are clearly related, but there may well be separate market opportunities evolving from the work early days, but it does look interesting.

So summarizing our priorities on slide 22, we will focus on opportunistic up site now that the majority of the shipping fleet is on term charter. In FLNG, Our focus is to deliver Gimi safely on time on budget and to continue progress. So it continued to progress discussions for potential expansion of Hilli plus development of our newbuild Mark III opportunities. In downstream, high global focus on reaching FID on the terminal, as Eduardo has said at Barcarena, building as the business in Brazil and pursuing international opportunities, focus on concluding the refinancing activities that Karl discussed, and of course we'll complete our budget cycle to confirm a sustainable reduction in G&A and then get back to the simplification of the Golar group structure.

I am please now to handle over to Golar Chairman, Tor Olav Trøim for some remarks prior to Q&A.

[Tor Olav Trøim, Chairman of Golar LNG and Hygo]

Thanks, Iain. I think I was on this call a year ago and giving you a little bit of reflections from the Board. I want to do it again particular in this situation we have been through in the last couple of months. This year, 20 years from the time we went to Singapore and both the company, which at that time was called Offspring, we ended up company with details and knowledge about how to operate ships. We've sent compressed natural gas in 1,600th of the volume, created down to 167 degrees Celsius and we told them was a pretty cool business in all possible way.

The vision we have when we bought the company was that LNG was an interesting energy coming forward. At that time, nobody talked about CO2 and pollution, renewable business very extremely small. The reason we liked the opportunity that you could transport large volume on energy from one part of the world to another part of the world, we notice that the energy and gas prices were very different in different countries. Poor countries with high growth in population typically have high power prices and paid too much for power effectively. LNG created a kind of bridge from cheap gas reserve to high gas price power market, but we were far, far too early. It actually took 15 years before the gas control over LNG production, and then LNG became a commodity. In the meantime, the production cost per terminals on the LNG production came down, LNG became cheaper. Golar was a pioneer in this business converting the [indiscernible] terminal and also delivering the first successful FLNG investment. The FLNG investment, we have working [indiscernible] today is producing gas with all devices would have been flared or re-injected. For me that's sustainable value creation.

[Indiscernible], but the focus the world have today on CO2 reduction has created new world at least in part of the world, it's important to know that 85% of all energy in the world is still produced from hydrocarbon. For next 20 to 30 years, hydrocarbon will produce the material part of the World's energy with different kinds of hydrocarbons if in Alumina refinery in Brazil replace heavy fuel plant with LNG, they can save 750,000 tons of CO2 on the basis to the fact that it will also save significant energy costs and it looks like a very easy decision to make. We can sit in Europe and in USA and we can drive out Tesla and take that into a new market will take off, and then will change very, very quickly. Just remember that the amount of energy consumption in these markets has been going up for 10 years.

Twenty years ago, China consumed approximately half of the energy consumption, U.S. since that time the energy consumption in U.S. have actually gone down, while the energy consumption in China has gone up three times and today approximately 50% larger than U.S., India has doubled its energy at the same time, and remember that the major development in this country is still coal, coal between 65% to 70% of the energy consumed in these nations are coal fired. It's coal because it's cheap.

For the developing world, energy's affordability, it's their way out from poverty. When you come to Delhi, you understand that pollution is what the politicians isn't what the politicians are focusing on. They take what they can get for the money they have. The good news is that the new technology is making LNG cheaper, if some of you traded LNG as Iain said for less than $2 per mmbtu, which is $10 oil.

You're cutting 30% of the CO2 emission, you're cutting 70% of the particle emission and you're cutting 100% of the SOX, but if you can convert anything from LNG and we have something healthy and something cheap and you have a growth commodity. It is commodity grows 10% a year. There's not a mining company in the world today, you don't think about switching from these huge LNG. Every day you're reading stories about shipping companies are now building massive container vessels, smaller boat carriers, whatever they are, they're converting it to LNG. They do it because it's cheaper, it's cleaner, they expect a carbon tax to hit them, and they're also doing it for the fact that the infrastructure of global distribution of LNG is now coming together. In China the import in a COVID year is up more than 12%. Last month, it's up 25%. They were down 450,000 trucks working on LNG in that country, and that's the second leg of energy transformation, the transformation from coal to LNG. In India they just announced last week, that they are going to build a massive infrastructure for LNG including 1,000 petrol stations.

I'm proud of the team it would have delivered in Iain's stewardship. Technically they are as good as you can get them. I'm proud when companies like Exane and BP comes to stay in our offices for several years to learn about the LNG technology. I'm proud of the work done by the shipping team to reduce the risk in our shipping portfolio and to cover to get contact with serious solid partners. I'm proud when I come to see the owner operator for private oil company, we produce 485,000 barrels. I meet the guys, who are extremely thankful for what the P&L together on that. I'm proud of the fact that the people in Brazil of the last year have built a pipeline in the fifth largest nation in the world, a pipeline which might in three years they pick it on Petrobras LNG.

I'm proud of the fact that they know in couple of weeks will produce biofuels, fueling trucks from landfill status of power, and I'd be working exclusively with the biggest petrol distribution in Brazil. What I'm not so proud of is the way we have financed the market of company. We have a lot to learn from some of our other competitors. We trade that close to 100 Times Book, we're trading at 60% of book, building power station LNG costing more than a billion and it takes you four years before you see that. You are in need of a strong liquidity buffer, and even if the board and management know that we have flexibility in our balance sheet to sort out this financing, investors shouldn't have to bother about short-term liquidity events. Their focus should be on the 20-year cash flow coming towards them, and opportunity that gives for stable long-term dividend yield.

As Chairman of the company, I have to take the main responsibility for the fact that that too much time in this company having spent on these matters, but when you have values, you have liquid, you can get liquidity, you can borrow on your house, when you know you have rented out for the next 25 years, and you can balance amortization of that bank loan with your rental income and still have money left over. That's the flexibility we have.

With a Hygo save based on the price range will have a value of 900 plus, or give me with a 10 times multiple is worth $2.3 billion. There are significant borrowing base. Let me finish with some words about the recent events. They're all sad that Callum Mitchell-Thomson decided to leave the company. We liked Callum both personally and professionally. He came with new views. He came from the House of Lords and is probably going back to the political world. He took the decision to leave after six months based on the personal life preference, which also confirmed to some of our largest investor and he left the company with a nice gesture that he will always remain an enthusiastic supporter of Golar and the team.

I'm pleased to say that his role has been currently been taken over by Karl Staubo who knows the company very well and who has made last week confirm his ability to deliver attractive financing to the company. Let me also touch about the Brazilian events which I have hit so hard on September 23, when we were meant to price the Hygo bill and the book actually was covered. This led to the fact that the Former CEO Eduardo Antonello he was totally instrumental in building Hygo from day one have believed the company.

The acquisition against Antonello is being driven to happen five years before he joined our company. The board of Hygo has from day one meant that this investigation not in any way indicated any wrongdoing was done with Hygo. However the board started an external review of business close to 50 people were involved in five weeks coming through the company from A to Z, no wrongdoing was found. It was four weeks of hell with a lot of sleepless nights for a lot of us, and I'm pleased to say that even if you're still suffering from being underserved, dragged into something which I should never have been a part of that the business is getting back to normal. They have subsequent to the event concluded lot of new business in Brazil, as talked about by Maranhão including being awarded critical installation licenses from Brazilian authorities signed deals with states and companies, the venture with BR are progressing well and we expect Maranhão said to take FID on the Barcarena terminal prior to the year-end.

We are in addition progressing very well on some of these national ventures. I'd like to thank our board member Paul Hanrahan for stepping in and taking over the CEO role, Paul is used to run as a Fortune 500 company for 10 years, and certainly have the skill sets and the energy to help us make Hygo into that industry leader in energy transition, we truly deserve to be. Both the Hygo board and the Board of Golar LNG are fully committed to complete IPO process, the SEC documents have been updated with recent events, and have been reviewed by auditors and lawyers that so far not been filed. The timing of the IPO will be driven by market conditions, ongoing business operation and business development activities.

As a result of the delay of the Hygo IPO, Golar has been approached by industrial players, which have expressed interest in different transaction involving Hygo, and Hygo assets. The board of Golar and the board of Hygo will consider its request, but the main track is to develop the company and the great potential we see in this business as an independent company through an IPO. People have today an extreme focus on the new energy driver like hydrogen, ammonia and others. Golar [indiscernible] as Iain mentioned to you and we have done it with a very credible engineering partner, Black & Veatch.

We want to be an energy transformation company, however I've learned one thing through my experience in LNG, 20 years this was that energy transformation took, we're today the only independent, truly integrated LNG company developing for well, it's our vision to maximize the value of that strategic position over the next 10 to 20 years with strong focus on building LNG infrastructure in emerging markets. We don't want to wait 20 to 30 years for cost to come down on hydrogen production as it has with LNG over the last 20 years, and we really can make good business building them for LNG infrastructure today. We can find 25-year deals with energy majors and with BPI with -- EBITDA basis of around five and generating we have found it very lucrative business. Target is though to build sites of our platform so big that the new instrument of financing becomes available for us. That should could with increased EBITDA, which is already programmed into this company by the $6 billion in EBITDA loan backlog we have secured.

We need to convert from project financing to corporate financing, and we need to simplify the complexity of the corporate structure which is a clear target for the Board. We truly support the analysts' opinion that the value of this company is significantly higher than the current share price, and rest assured that the Board will do anything they can in order to materialize that differential, that might include direct distribution of assets, sale of assets, demerger, or whatever it takes in order to get the underlying value of this team up. If we can delivery cheaper and cleaner LNG to the world and make a solid longer-term return I think we have a unique, good business model. Know it's time for all of us in Golar to convert a good business model and a great platform into a solid return to the shareholders, which really deserve it, and we have a job to do. Thank you.

[Iain Ross, CEO]

Thanks, Tor Olav. And then with that, I'd like to now hand back to the operator for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Okay, our first question comes from the line of Ben Nolan from Stifel. Please ask your question.

[Ben Nolan, Stifel Nicolaus]

Yes, good morning. First, let me say, I appreciate the color that you gave on all of the various projects as it related to Hygo and all of the different various things you're doing in Brazil. I did want to ask first of all on you'd mentioned the Sergipe power plant had a transformer issue. Could you maybe talk through a little bit, and appreciating that it's covered by insurance, but could you maybe talk through a little bit what that might mean with respect to cash flows and earnings from Hygo from the business until it's resolved?

[Eduardo Maranhão, CFO, Hygo]

Sure. Hi, Ben, this is Eduardo here. So as I mentioned before, we expect that the transformer will be replaced by the end of the second quarter of next year. And until then, we continue to receive our capacity payments according to the PPA. So the capacity payments remain unchanged.

As you may recall, we do benefit from a 60-day notice whenever the power plant is called for dispatch. And in the event of the power plant being called for dispatch, we would have to compensate really exposure between the current spot electricity prices and the prices that we are paid in the contract at the point in time. That exposure is then covered by insurance, as mentioned before.

[Ben Nolan, Stifel Nicolaus]

Okay.

[Eduardo Maranhão, CFO, Hygo]

So we not expect a material impact in the event of not being called for dispatch. And in the event of being called for dispatch, we are covered by insurance for that.

[Ben Nolan, Stifel Nicolaus]

Okay, that's helpful. And then secondly for me, just as it relates to the two-thirds of the shipping book that is now contracted for next year, and I appreciate that probably some of that is on floating rate basis. But is there any color that you might be able to give us on the type of rate that you've been able to aggregately secure for that two-thirds of the business for next year?

[Iain Ross, CEO]

Hi, Ben, it's Iain. So you're right, we do have ships on index-linked charters. Couple of ships that potentially could be in the spot market, but the vast majority of the fleet is on a fixed rate structure, some of it on up to a year and some of it on a slightly longer.

We're not guiding to longer-term TCEs. But I think it's fair to say that the structure that we put in place and our focus on through year TCE is we're moving in the right direction. And I think, directionally, we wouldn't want to be going backwards from what we've achieved this year.

[Ben Nolan, Stifel Nicolaus]

Okay. So better year-over-year I guess, is how we should think about modeling it for that portion, yes?

[Iain Ross, CEO]

At least as good as.

[Ben Nolan, Stifel Nicolaus]

Okay. All right, perfect. Well, I’ll – that's my two questions. I'll turn it over. Thanks, guys.

[Iain Ross, CEO]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Mike Webber. Please ask your question.

[Mike Webber, Webber Research]

Hey, good morning, guys. How are you?

[Iain Ross, CEO]

Hey, Mike.

[Mike Webber, Webber Research]

Hey, so there's obviously -- there's a ton to swing at here, but I might as well start with Hygo. And maybe Tor, I know you referenced as being a personal issue -- I guess, a personal issue with regards to Callum. But can you just confirm that his departure is in no way related to what happened with Hygo this fall?

[Tor Olav Trøim, Chairman of Golar LNG and Hygo]

Yes.

[Mike Webber, Webber Research]

Okay, good. And then with regards to the -- that review, I think…

[Tor Olav Trøim, Chairman of Golar LNG and Hygo]

I think I specifically said that we have been in contact with some of the biggest shareholders and expressed by cleanings, [ph] it's not just related to that.

[Mike Webber, Webber Research]

Okay. Yes, just the timing -- the timing alone just kind of bears the question. But in terms of that review, I mean, it certainly seems like I know there was a pretty lengthy review in terms of digging into some of the details in Brazil pre-IPO and then certainly kind of post-IPO. Were you guys able to coordinate at all with Brazilian authorities? I'm trying to think about an eventual Hygo IPO, if you do go down that road to what degree can you formally lift any potential overhang there?

I guess, maybe the right way to ask that question is, has there been an ongoing dialogue with any of the authorities in Brazil with regard to the LNG business specifically? Or are they made -- are they giving you any comments there, if you will?

[Eduardo Maranhão, CFO, Hygo]

Absolutely, Mike. So, hi, this is Eduardo here. As I mentioned during the presentation, we do not have any impediment to continue to operate into the business in Brazil. And I think that has been clearly stated by the number of different transactions that we have entered since all the events took place. So I can refer to MOUs that have been signed with the state-owned entities, licenses and authorizations that have been granted by the federal government…

[Mike Webber, Webber Research]

Right. [Multiple speakers] Those were all signed prior to the initial -- I mean, those were all signed subsequently to the initial issues to begin with, so I'm not sure that data stream actually validates the question I'm asking. I'm really just asking whether were you able to coordinate with the authorities in Brazil with regard to that – with that independent review anyway?

[Eduardo Maranhão, CFO, Hygo]

Well, when it comes to the authorities, we have not been questioned or we have not been asked to provide any further explanation. So that I mean, the events that happened with Antonello refer to him on a personal level and do not implicate the company in anyway.

[Mike Webber, Webber Research]

Sure. Yes. Okay. Just to maybe pivot, and Tor, you mentioned in your remarks something, I think, we had all kind of suspected, that you guys would have been approached, probably immediately from interested parties around other strategic options for that Brazilian business, which I think most people kind of view as kind of one of the crown jewels of the EM kind of frontier state energy transition.

If -- you're in a unique position in the sense that you actually got almost -- almost completely done with an IPO and then subsequently had to pull it. But is the right way to think about the valuation benchmark you would use to evaluate strategic interest that value you would have gotten in the IPO? And is that how you're looking at it, and how we should think about, if someone can come in and kind of beat that bid? Is that the right way to think about when you pull the trigger on maybe some other strategic transaction?

[Tor Olav Trøim, Chairman of Golar LNG and Hygo]

Yes. I would say, if you think about it that way, we had an IPO range, which was between 1.8 and 2.1, but Golar wasn't selling -- neither Golar or Stonepeak were selling any shares. We were issuing primary shares. We were not selling any shares. So from that point of view, I think, you can probably assume that we think that the value can be higher, and thereby did not consider any value lower price for any of these assets.

I think we know what is working, and if anything it's probably, and I would say that we did development we know how. I think we continue to build value. It was one month of hell, but I think we are now on track again. I'm super happy with the team adding Paul Hanrahan, and also brought in some of the ex guys that he used to work together with, and then doing an excellent job getting this up and running.

And I think when it comes to things, which are panicking, I think, it's going to be -- I shouldn't say this, but I think it's going to be very hard, for instance, for Norsk Hydro to develop that thing, with LNG, without being in contact with Hygo, and I think they clearly see that there is no alternative. We've spent five years from permitting this too.

[Mike Webber, Webber Research]

Got you. Let me sneak one more in here for Iain. You mentioned the Gimi and BP and Kosmos recently downscaled for 2 million to 5 million tons, which imply there's a second FLNG unit that could potentially be in play there. Is that your understanding, and then where would that opportunity rank within those nine or 10 projects that you mentioned -- you guys are working at?

[Iain Ross, CEO]

So, Mike, you know it's not our practice to comment on anything other than contracted work that we've enhanced and it's mentioned many times before and with specific reference to Gimi, any dealings that we have with BP do remain under strict NDA, but I do refer -- as you've mentioned, BP's public statements on this subject will be no surprise for you to see that the cost structure of any future phase is important, and then, I'd simply repeat that our view that Golar's floating LNG solutions are cost, schedule and carbon competitive, and we keep looking for opportunities to discuss our competitiveness with a large number of -- large and financial counterparties.

I would say that speaking specifically and hypothetically about BP, our portfolio of potential FLNG customers is very heavily weighted to large companies that we can finance against, and that can lift projects, particularly when you look at their ability to take the cargos themselves. So, any company that has the characteristics of being able to sort out their own off-take and give us a good security package with which we can finance the project, then we're very, very interested in speaking to them.

[Tor Olav Trøim, Chairman of Golar LNG and Hygo]

I think Iain and the guys have done a great job selling this to the majors, and I think it's probably not the majors who are afraid of building another premiere. So, from that point of view, to this day, they are looking at [indiscernible] we have delivered 47 cargos with Hilli and [indiscernible] less than half of it, and you see the cost differences. I think people are now searching for cheaper solutions from the majors, which works, and I think our [technical difficulty] team has that credibility. So, the full-year -- you know, today is totally different from what it was three years ago.

[Mike Webber, Webber Research]

Yes, it certainly seems that the opportunity set is actually kind of quietly expanding this product cycle; so, good to hear. I will turn it over. Thanks for your time, guys.

[Iain Ross, CEO]

Cheers, Mike.

[Mike Webber, Webber Research]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Sean Morgan from Evercore. Please ask your question.

[Sean Morgan, Evercore ISI]

Hey, guys. I think my first question probably is best suited for Eduardo, and it was a question on the Bahia lease with Petrobras, and so, I'm just wondering with the bid acceptance from Petrobras, is that ongoing and are there other counterbids out -- and outstanding that you guys are sort of competing at this point, or are you sort of the last man standing on that? And also, maybe just help clarify what this ruling by the Brazilian Mines and Energy Administration related to Bahia means -- is Petrobras dragging their feet because they're not really anxious to lease this asset, or is it more just contractual, legal issues?

[Eduardo Maranhão, CFO, Hygo]

Hi. So, let me try to clarify here what exactly was the Bahia terminal tender. So, we were the only company which was qualified to present a commercial bid, and that took place on the September 30th. We presented a commercial offer which basically met all the commercial, technical, and all the regulatory requirements posted by Petrobras. Just on the day after that, Petrobras, on the grounds of a perceived high integrity risk for Hygo, they disqualified Hygo from the process, but we have remained as the only one that have presented the commercial offer. So, based on that, we have then appealed against that decision from Petrobras, and we continue to discuss a final outcome for that process. I'm not in a position to comment what were the reasons behind Petrobras' position to take that decision, but we firmly believe that there were no reasonable grounds for disqualifying Hygo from the process.

[Sean Morgan, Evercore ISI]

Okay, and is Petrobras obligated to find a lessor for this facility at some point by the Brazilian state?

[Eduardo Maranhão, CFO, Hygo]

Yes, they are. As part of the commitment that was made towards the antitrust authority, Petrobras has the obligation to lease the terminal for a minimum period of three years, and that lease should take place in the next few months.

[Sean Morgan, Evercore ISI]

Okay, and then, one for Iain on the Hilli, I'm just trying to understand the removal of the cap by SNH. What was the purpose of the cap in the first place, and was there any concession that needed to be made? I think you said it was an eight year -- so, it's just a continuation of the existing contract with this newer terms and increased over-capacity.

[Iain Ross, CEO]

That's right. So, the original contract, if you recall, had an endpoint -- stated it's the earlier of 500bcf through the vessel or eight years, and as we've been producing a little over the annual amount each year, that would have potentially brought the contract to an end a few months early. So, what this has done is it's moved the contract to a firm, fixed eight-year duration, and we've got about five-and-a-half years left with that, but importantly, there's two things that come out, one is that we are allowed not to be paid for our overproduction. So, we've made about $5 million of overproduction up to the end of 2019. We will bill the amount of 2020 in January next year when that's calculated. So, that's something that we'll run through the contract, and then, secondly, importantly with that cap being lifted, it means there's no barrier to being able to come up with a deal that would allow us to put more volumes through the Hilli.

[Sean Morgan, Evercore ISI]

Okay, and I think this is around $5 million of overproduction through the end of '19. So, does that revenue recognition all happen in 4Q of '20?

[Iain Ross, CEO]

I think it will happen in 1Q -- it could happen in 4Q '20 if we've invoiced by then. We can confirm that later.

[Sean Morgan, Evercore ISI]

Okay, thanks. That's all from me.

[Operator]

Thank you. Your next question comes from the line of Randy Giveans from Jefferies. Please ask your question.

[Randy Giveans, Jefferies]

Hi gentlemen, how's it going?

[Iain Ross, CEO]

Hey, Randy.

[Randy Giveans, Jefferies]

So, looking at the liquidity events, I guess a few questions, what are the terms for the new $100 million credit facility against Hygo? And for the Frost refinancing, that's going to raise an additional maybe $40 million and you save a marginal amount, an additional $30 million. So, is this your decision to push these refinancings into the first quarter, and how likely is that margin amount to be upsized and completed in the next few months?

[Iain Ross, CEO]

Karl, will you take this?

[Karl Fredrik Staubo, CFO]

Yes, sure. Hi Randy. So, the terms of the facility is LIBOR plus 500 bps. It's a non-amortizing bullet facility that we have on the corporate level. When it comes to the margin loan, it's a question whether we would like to leverage the shares or not. As you know, we are repaying the margin loan now in the mid of December, and we can obviously approach the same banks or subset of those banks to renew the margin loan.

As Tor said previously, not that there's any immediate plans to do so, but if you don't have leverage on certain shareholdings, you can at the later stage consider to also distribute shareholdings to your shareholders, whether that is at the later stage, either DMLT or Hygo, is something that we are considering, but such facility is in place today and should certainly be able to be put in place. When it comes to the $40 million net liquidity release from the potential refinancing of Frost, we received two different term sheets, both of which just given the credit processes of such refinancings is more likely to occur early in the new year as opposed to now, but, one of them we think is extremely effective, and we're pushing ahead in that process, but we also -- you know, that it takes time to tangle on refinancing of the ship and therefore we're guiding on Q1 events. It could of course be started, but then again I think local lenders find it easier to finance new initiatives early in the new year as opposed to late, if you want to think about it like that.

[Randy Giveans, Jefferies]

Got it, okay, and then for that non-amortizing credit facility, the LIBOR plus 500 basis points, that's just one year term?

[Karl Fredrik Staubo, CFO]

It's one plus one. It's against it.

[Randy Giveans, Jefferies]

Got it. All right, and then we can go back to the LNG shipping backlog, you know, increased by $123 million. Can you provide a little more details on those charters? Are they all fixed, all floating, and kind of what are the durations of them?

[Iain Ross, CEO]

So, the majority of the new backlog, in fact, I think all of the new backlog is fixed duration, and the duration, I think the longest one is a couple of years. Most of them are around about a year, and there is a couple that might be somewhere in between.

[Randy Giveans, Jefferies]

Got it. Good deal, well, let's keep the train moving. Thanks so much.

[Iain Ross, CEO]

Thanks, Randy.

[Operator]

Thank you. Your next question comes from the line of Craig Shere from Tuohy Brothers. Please ask your question.

[Craig Shere, Tuohy Brothers]

Just want to clarify the Perenco updated agreement does not allow for reduced annual cash flow and volumes are lower, does it, and does the agreement eliminate potential to get upsized and extended terms that could support a favorable project refinancing?

[Iain Ross, CEO]

There is no linkage to project financing that I'm aware of that would preclude that, and I can come back to you on the -- if we under produce, I don't think we've really contemplated that with the way the vessels going, but I don't believe the way that the contract is structured were paid for availability and throughput. It's just that we'd be putting more through, and so, the contracts been restructured for that, but let me come back to that -- on that Craig, Stuart will follow up with you in the detail. I'm sorry. I don't know yet.

[Stuart Buchanan, Head, IR]

Okay, and on the project finance question, what I meant was if you had upsized, it made it a 15-year agreement, obviously it would be a no-brainer to be able to get better financing terms on the project. Whereas if it's a little more variable and flexible, even you're going to make more EBITDA, it's harder to replace.

[Iain Ross, CEO]

We're focused right now on increasing the immediate throughput on Hilli, rather than thinking about extending the contract, because the latent value that sits in that vessel, we want to do what we can to get more volume through that vessel and the outcome from that goes straight to our bottom line and that that's our immediate focus. So we're not really considering extensions at this state -- in the game.

[Karl Fredrik Staubo, CFO]

Sorry. I'll just comment on their previous question, the revenue cannot come down on the Hilli under the revised schedule. So with that Iain said, we're paying for the capacity and being there in this cannot come down.

[Iain Ross, CEO]

Thanks, Karl.

[Craig Shere, Tuohy Brothers]

Thanks, Karl. That's good to know. On Hygo, is there a potential through a new the North hydro aluminum project MoU after the Barcarena, FID and a successful Hygo IPO, and could we see Hygo contract for FLNG itself as far as off take in the next couple of years?

[Iain Ross, CEO]

Okay. So with regards to Norsk Hydro, what I can say is that, we continue on an active dialogue with them, and our decisions to take the project ahead and move on with a potential FID before the end of the year, are not connected entirely to the discussions with Norsk Hydro. So, we might be in a position to move ahead with the project without their contract.

With regards to the potential FLNG supply to any Hygo project. I think this is of course one of the potential synergies that we believe that could be achieved, and we do contemplate it in some potential projects especially in the North of Brazil, but this is something that is very premature and very preliminary as of today.

[Craig Shere, Tuohy Brothers]

Great, and just clarify there, I guess my thinking was if FID Barcarena, you're the only game in town. There is just no way for these guys to convert, as they have promised the local state to the more emission friendly natural gas fuel without you. So I I'm guess what I'm asking is if you do go ahead and FID in the next month or two, do you think that there is decent opportunity for Norsk Hydro to return to the table in coming quarters?

[Iain Ross, CEO]

I think what you should do is you should call Norsk Hydro is to have an alternative.

[Craig Shere, Tuohy Brothers]

Okay, thank you.

[Iain Ross, CEO]

I don't think we should have enough, I've been said about Hydro. If you see the location for our terminal, it's effective outside the door of Norsk Hydro plant. I think I'm hopeful when this thing is settling down, that is possible to get that back in the fall, but of course, don't take anything for granted.

[Craig Shere, Tuohy Brothers]

Great, thank you.

[Iain Ross, CEO]

Thanks, Craig.

[Operator]

Thank you. The next question comes from the line of Ken Hoexter from BofA. Please ask your question.

[Ken Hoexter, Bank of America Merrill Lynch]

Hey, good morning. Good afternoon, Iain, Karl, Eduardo, Tor, thanks for the detailed updates there before, but maybe towards just your view, you mentioned your kind of view on governance is primary, but yet you're on your fourth CFO here in two years and fourth CEO in five years. I guess just going back some of the questions before what's the concern here just in lack of continuity, given that much shuffling and to give visibility on the steady hand guiding continuing to guide the company?

[Karl Fredrik Staubo, CFO]

I think when you're saying we're on the fourth CFO, I felt totally right, because the CFO we had before Graham Robjohns, he was with us for 20 years. He played different roles, kind of so I don't think that's the guy, Callum took over from. So I don't think necessary, that's right, we have had two for 20 years effectively. I think he changed that a little bit, but Iain has been here in two years, three and a half. Of course, turnover is never good, and if there is no doubt that this is the kind of challenging place to work, it is hard work and accommodation entrepreneurial company with a hard drive and I can admittedly saying that to have an actively involved share might be painful from time to time, Iain laughing over me, but I think that's what we were using from the [indiscernible] that we are actively as board and it works, but the funny thing when you're saying all the alterations, also all the Chief Executive, he was in the company and normally came back to that several times and like Gary and all the people.

So I take your point, you're not correct in your facts because you haven't changed CFO four times, but it's obviously a concern. It's less of a concern at the guy leaves after six months than the guy leaves after couple of years because of course, it was a limited, he could set himself into but we all liked Callum, and I think both Iain and I tried to convince him to stay, but kind of from personally since he said that he wanted a different life.

[Ken Hoexter, Bank of America Merrill Lynch]

Okay, but I mean factually in that seat, it is the numerically right but from Robjohns to Callum to Karl, but okay so but I get your point in terms of still at the company for a while, just let me flip over Iain to your thoughts on the cost from the BP delay you mentioned the $36 million. Can you maybe detail those costs, if I've got that right, and is the shipyard fully operational now and what those costs are associated with?

[Iain Ross, CEO]

Yes, Ken, so the shipyard is fully operational, it's quite amazing what they're doing in terms of their own and it comes from the Singaporean government to start with. They have very strict rules around how do they transport people. So let me give you an example, a lot of the workers live in dormitories, and they sleep in the same area of the dormitory as their fellow workmates for a specific area of the project. So, not only this specific area of the yard, it's a bit of the ship that they're working on, and they go from their dormitories to their canteen facility and of course directly to their work area. They stay with their workmates all day, and then they come back and they can sort of rinse and repeat, and the idea behind that is if there is a COVID case, they can isolate a unit very quickly, and then deal with it. So we were dimed to less than 100 people during the four month shutdown that we experienced in Singapore and they were really on care and maintenance activity. We're now up to 2,450 as of today working on the project, which is higher than it was before we slow down and back on track.

In terms of the additional costs, the $36 million a lot of that has gone into storage passivation and care of equipment that was ready to shift from vendors plus plus additional time-related cost as you may imagine. You have certain fixed costs that just continue and they would go 11 months. So, as a percentage of the overall budget, $36 million and $1330 million is pretty good under the circumstances.

[Ken Hoexter, Bank of America Merrill Lynch]

Great, thank you, and then, lastly, maybe just on going on Hygo the key risks for the FID at Barcarna and Suape, Eduardo you mentioned kind of -- some of things might be coming over the next few weeks. Is there a chance of delay or any other issues of not getting the FIDs or anything else that could delay that process?

[Eduardo Maranhão, CFO, Hygo]

We are highly confident that the progress made in Barcarena today put us in a very good position to take final investment decisions in the couple of months. When it comes to Suape, we believe that they're [indiscernible] from regulatory approvals that are expected in the coming weeks could be main driver for that decision.

[Ken Hoexter, Bank of America Merrill Lynch]

Great, thanks for taking it. Appreciate the time.

[Iain Ross, CEO]

Thanks, Ken.

[Eduardo Maranhão, CFO, Hygo]

Thank you.

[Operator]

Thank you. The next question comes from the line of Greg Lewis from BTIG. Please ask your question.

[Greg Lewis, BTIG]

Yes. Thank you and good afternoon, and thanks for squeezing me in here. I guess I just had a question in kind of going through the prepared remarks, it sounds like -- and I am going to look for a little bit of color around what's been talked about over the last few quarters in terms of strategic reviews and you are kind of repositioning the company. Is it safe to assume that in realizing that the capital markets can be fickle and things are always at a flux in the capital market, but it's a right way to think about the event path here for Golar in trying to crystallize value, is it all contingent on Hygo? The IPO before we think about other things like the NLP and conventional fleet? Just kind of curious any color around -- that you could give us around that.

[Iain Ross, CEO]

Well, let me kind of -- if I think about our sort of enabling strategic plan, it hasn't really changed much over the last year, and as Tor mentioned, we will see the summer parts of the business equating more to the value recognized in the market, but to achieve that vision of creating separate investible businesses, the few things that we are focused on let me list them as there are seven or eight of them. First of all, keeping operations running safely to the satisfaction of the customers. Secondly, working hard to maximize the full-year shipping income, that's a change of pushing quarter by quarter where we are looking at it through the course of the year. Thirdly, delivering LNG Croatia safely on time and on budget before the end of the year to deliver that $47 million in cash and take on 10-year operations and maintenance contract. Number four, maximize throughput on FLNG Hilli first on contract Perenco. So, maximize that volume we can get through and therefore the revenue.

Fifth, we have talked about delivering Gimi safely on time and on budget to commence a 20-year contract with BP, and share of that EBITDA is around $150 million per year; sixth, developing the FLNG portfolio to create that realistic and investible set of project opportunities considering both Mark I conversion and Mark III newbuilds. We've talked a little about that already, but we think that our FLNG portfolio backed by such high quality customers can create interesting investment opportunities for potential partners going forward. Seventh as we commented on the four, the future of Hygo is going to be determined by the Board of Hygo and market conditions, and eighth, we'll dabble in new technology to make sure that we are right there on the fringes of things that are happening in the overall market. These are things that I am focusing on a day to day basis, and they feed in consideration the Board may have.

And Tor, I don't know if you want to add anything?

[Tor Olav Trøim, Chairman of Golar LNG and Hygo]

I think that's a good sum up of day to day. Obviously, the world change every day. I think what has been a problem for us is, of course, we have tried to kind of spin off the shipping activity several times. That has been difficult because that's not really the business we love to be in long-term, but I think by reducing risk and by covering about the charter, we have at least increased the downside risk in that business. When it comes to will I be preferring Hygo? No is because we are ready to go. So, we can't go effectively on a day, and I think you will see us going pretty soon, and that's why we are giving priority to that first. Then when it comes to if we want to do anything as described in some of the slides looking for the partner to build FLNG business going forward, then you really want to get Hilli [indiscernible] up and running. We want to do some more stuff with BP. You want to build a bigger portfolio before you bring in a partner, but I think we are pragmatic. If you can keep the upstream and downstream model together in way or the other, I think it's great because then you have the hedge and gas price are long and high. The midstream is not our business going forward and it shouldn't be, but there are no kinds of structuring talks to other people as well about doing something. So, we will see, but, you're right, Hygo is priority one because that's on the dock right now.

[Greg Lewis, BTIG]

Okay, great. Thanks, everybody.

[Iain Ross, CEO]

Thanks, and with that, I would like to draw the call to close due to time constraints. Thank you for your participation and interest in Golar. Please stay safe. We look forward to sharing our progress with you next quarter. With that, I'll hand back to the Operator.

[Operator]

Thank you everyone. That does conclude our conference for today. Thank you all for participating. You may all disconnect.