Golar LNG Ltd

NASDAQ:GLNG

Earnings Call Analysis

Golar's Steady Growth and Strong Cash Flow

Golar reported $67 million in total operating revenues and a net income of $114 million for the quarter, displaying resilience in their business model. Though commodity-linked fees were lower, driving a slight reduction in adjusted EBITDA to $75 million, there is optimism for a Q4 resurgence due to favorable oil and gas prices. Future revenues look promising, with expectations of a $650 million free cash flow to equity from Hilli alone by 2024 and an anticipated $56 million uplift next year fueled by Brent and TTF prices. Gimi's anticipated start-up in the next year is set to enhance shareholder returns. Dividends stand at $0.25 per share, with a solid liquidity position of approximately $900 million, and there is potential for additional liquidity through non-core asset sales, a proposed Macaw Energies spin-off in 2024, and debt optimization initiatives. The company maintains an available share buyback program aimed at further rewarding shareholders.

A Strong Foundation with Operational Milestones

The Golar LNG Limited story in Q3 2023 centers around continuing operational excellence and strategic movements poised to fortify its market presence. At the forefront, the company celebrated the completion of its Gimi FLNG vessel, a symbol of both significant capital expenditure and a beacon for future revenue streams under a 20-year BP contract. Concurrently, the Hilli FLNG – a linchpin in Golar's current operations – consistently demonstrates its capability by reaching the landmark 100th LNG cargo delivery, with more than 7 million tonnes shipped since 2018.

Strategic Positioning for FLNG and Market Expansion

With the addition of the newly delivered Gimi and existing Hilli FLNGs, Golar dominates the FLNG market by installed capacity and stands unique as a service provider independent of gas reserves. This strategy enables flexible partnerships with gas reserve owners, offering a reliable monetization route during fluctuating commodity cycles. Additionally, the company's proximity to sizable African gas reserves, paired with industry-leading capital expenditure efficiency, spotlights its potential to expand the continent's FLNG exports economically.

Future Growth with Mark II FLNG and Beyond

Golar's growth narrative continues with the Mark II FLNG design, which is 'shovel-ready', awaiting commercial commitments. This pre-emptive groundwork aims to streamline future execution, minimize risk, and shorten construction timelines. In the background, investments in Macaw Energies extend Golar's reach into land-based liquefaction and midstream commercialization platforms, further diversifying potential revenue sources. Also, Golar has hinted at spinning off Macaw Energies as a separate entity by 2024, indicating a strategic alignment of business interests.

Financial Resilience and Profitable Outlook

Financially, Q3 ushered in $75 million in adjusted EBITDA, with total operating revenues reaching $67 million. The robust liquidity position nearing $1 billion, alongside anticipated locked-in gains contributing to the EBITDA, will support Golar’s growth ventures – including the construction of Mark II FLNG units. A momentous $650 million free cash flow is forecasted from Hilli alone between 2022 and 2024. The financial strategy is clear: optimize current assets, explore liquidity-enhancing alternatives, and maintain a strong balance sheet to deliver shareholder value.

Commitment to Shareholder Returns

An unyielding commitment to shareholder returns steers the company's fiscal decisions, evidenced by a dividend declaration of $0.25 per share and a strategic share buyback program. With $117 million still at hand for potential repurchases and Hilli's robust free cash flow, investors can anticipate continued actions to maximize their investment value.

Earnings Call Transcript 2023-Q3

[Operator]

Welcome to the Golar LNG Limited 3Q 2023 presentation. After the slide presentation by CEO, Karl Fredrik Staubo, and CFO, Eduardo Maranhao, there will be a question-and-answer session. Information on how to ask a question will be provided then. [Operator Instructions]

I will now pass you over to Karl Fredrik Staubo. Karl, please go ahead.

[Karl Staubo, executive]

Thank you, operator, and good day to all of you. Welcome to Golar LNG's Q3 2023 Earnings Results Presentation. My name is Karl Fredrik Staubo, CEO of Golar LNG. And I'm accompanied today by our CFO, Mr. Eduardo Maranhao, to present this quarter's results. Before we get into the presentation, please note the forward-looking statements on Slide 2.

Turning to Slide 3 and an overview of Golar today. We own and operate 2 FLNGs. The Hilli operating for Perenco in Cameroon and the Gimi, which delivered from Seatrium Shipyard in Singapore now on Sunday and is currently sailing towards Mauritania/Senegal to start its 20-year contract for BP.

In Q1 next year, we expect to take delivery of the LNG carrier, Fuji, which we acquired in May and intend to convert into a 3.5 MTPA Mark II FLNG vessel. We also own one LNG carrier, Arctic, which has just been through its 5-year class. Arctic has a membrane storage system and is therefore not suitable for FLNG conversion. And we're, therefore, currently considering alternatives for the vessel, including chartering or sale.

We remain committed to FLNG growth and have in addition to the Mark I FLNG design of Hilli and Gimi, spent considerable time and resources to develop 2 incremental designs, Mark II with 3.5 million tons of annual liquefaction capacity and Mark III with 5 million tons of annual liquefaction capacity.

We'll elaborate more on our growth ambitions later in the presentation. We also have 2 investments in Macaw Energies, a land-based liquefaction company, targeting monetization of flare gas and focused on operations in the Americas.

And Avenir LNG, a small-scale LNG company, owning 5 small-scale LNG carriers servicing local distribution trades and the growing maritime LNG bunkering market as well as an LNG terminal in Sardinia, Italy.

Turning to Slide 4. We're pleased to announce that Gimi has completed its construction at Seatrium Shipyard in Singapore and is currently on its way to the GTA field offshore Senegal and Mauritania. The construction of an FLNG is a major milestone for Golar. We have highlighted some key statistics to give some perspective on the scale of the conversion work now complete. During the conversion, we've added 44,000 tons of steel, equivalent to 3,650 double-decker buses. The liquefaction top side requires 215 megawatts of power, equivalent to the output of 150 wind turbines, sufficient to power 80,000 homes. We've added 1,500 kilometers of cabling, which is almost 8x around Singapore, where the vessel has been constructed. The conversion itself has taken 37 million man hours or 18,500 working years.

Through adding sponsons, we've added the equivalent of 20 basketball courts of deck space to fit all the topside equipment needed to liquefy natural gas. This construction was undertaking in the midst of COVID, which caused significant challenges to the conversion project. However, we are now very pleased with the outcome of the vessel and look forward to get the vessel into operation for BP under a 20-year contract on the GTA field.

Turning to Slide 5 and another milestone for the quarter. Hilli delivered its cargo #100 on the 16th of October at the first FLNG in the world to meet this milestone. The unit continued to deliver and just offloaded its cargo 102 or more than 7 million tons since production started up in 2018. The stable operations of Hilli since start-up, as represented on the right-hand side of the slide, speaks to the testimony of the quality of the sign and operational performance of the Golar team and execution model.

We're seeing increased interest for rechartering of Hilli upon current contract expiry in July 26, including detailed commercial discussion for 3 different recontracting opportunities at higher capacity utilization compared to today's contract and with more compelling economics.

Turning to Slide 6 with an overview of the global FLNG fleet. Golar owns the largest fleet of FLNGs in the world measured by million tons of installed capacity and at par with Petronas and ENI in terms of number of FLNGs.

Golar pioneered the FLNG concept with the construction and delivery of Hilli and have also demonstrated the lowest CapEx per tonne of liquefaction capacity. We are today the only provider of FLNG as a service. All the other owners of FLNG tonnage utilize FLNG technology for owned or controlled gas reserves or to service their own portfolio of downstream demand for LNG.

Golar's position as the only service provider of maritime liquefaction enables us to offer a unique value proposition to owners of stranded and associated gas reserves. We offer gas monetization through a targeted integrated approach, where Golar aligned its commercial model with the gas resource owner in a partnership. We ensure aligned economics through the commodity cycles and price volatility. It's worth to know the relative size of the company's controlling FLNG assets, for example, by market cap.

Golar market cap is around $2.3 billion compared to NFE and Petronas of $7 billion to $8 billion, ENI of $55 million and Shell at $215 billion. We're not suggesting that FLNG valuation alone justifies the value of these companies, but this gives insight into the relative scale of the players involved in maritime liquefaction.

Turning to Slide 7 and rationale for why we believe FLNG developments in Africa are attractively positioned for FLNG exports. Africa has 620 Tcf of proven maritime gas reserves, the energy equivalent of 110 billion barrels of oil that today are either stranded, flared or reinjected. A significant portion of these reserves are best monetized through FLNG technology.

Golar's proven market-leading CapEx per tonne compared to other liquefaction solutions, including shore-based developments, set for attractive cost of production. Africa's closer proximity to key LNG markets in Europe and Asia compared to U.S. export projects reduced shipping costs. Hence, if you have a business with 3 cost drivers, and African FLNG projects are cheaper on all 3 inputs, we believe the ingredients for an attractive business model is present. Golar's position as the only proven service provider of FLNG as a service is well positioned to take an active role in further expanding African gas exports.

Turning now to Slide 9 and a business update. Hilli, as referred to, continued its market-leading operational track record and have now delivered its cargo #102. Gimi sale from Singapore on Sunday on our way to the GTA field for commencement over 20-year contracts. On business development, we continue to target an integrated model where we align FLNG economics with the upstream partner to have shared exposure to LNG offtake prices.

On Hilli, we continue to target commitment on rechartering of the vessel within 2024. Current discussions include detailed terms for 3 different redeployment opportunities. On March 2, we continue to progress the sign long lead items and donor vessel delivery expected in Q1 '24.

The next step is to obtain commitment on commercialization projects before proceeding with the final investment decision.

On Corporate and Other, adjusted EBITDA for the quarter came in at $75 million, Golar cash position is about $840 million and north of $920 million, inclusive of the TTF swap receivable.

We finalized the sale of the LNG carrier, Gandria, in the quarter for a net consideration of $15 million. We also continue our focus on shareholder returns and declare a dividend for the quarter of $0.25 and continued our buyback program, acquiring 0.2 million shares in the quarter with total shares now outstanding at 105.9 million shares. Our fully owned subsidiary, Macaw Energies, acquired a majority stake in [indiscernible], an established natural gas distribution company in Brazil.

Macaw remains on track to deliver its first flare to LNG pilot in the U.S. within 2024.

Turning to Slide 10. With Gimi delivery, we now expect a transition from CapEx to cash flow. We look forward to get started on operations and to see Gimi go from cash outflow through CapEx to cash inflow through earnings. As construction risk is now taken out of the project, we will focus on debt optimization for the unit. We will target an increase in facility size, a reduction in debt margin, an extended repayment profile and duration compared to the current facility. We are in discussions with potential lenders and have received term sheets with improved terms for potential new vessel debt.

We also see further earnings upside upon Hilli recontracting at limited incremental CapEx, extracting the full value of the installed liquefaction capacity in our portfolio.

Turning to Slide 11 and elaborating on the next steps towards contract start-up for Gimi. Gimi is now sailing on their own propulsion assisted by one tug. 2 stopovers in Mauritius and Namibia is planned to undertake refueling and crew changes. The total voyage until we're on site is expected to take about 60 days but can be shorter or longer subject to weather conditions.

Once we reach site, we will notify BP that we're ready for mooring and physical connection of FLNG. We will then start upstream -- the project will start upstream commissioning and supply of gas to the FLNG. Once first gas is introduced to the FLNG, we then target a commissioning period, which originally scheduled to take 6 months, but we're actively working with the GTA partners to make further efficiencies on the commissioning period. Once commissioning is complete, we will reach commercial operations date and the start of the 20-year contract at the GTA field.

Turning to Slide 12 and progress on our Mark II FLNG. Major long-lead items have been orders and are under construction. So you can see from the picture on the right-hand side, several of the equipment is now taking shape. This combined with more than 250,000 engineering hours to date allow for fast track project execution, which will reduce execution risk and shorten construction time by about 12 months from when we take FID.

We expect the Fuji LNG to be delivered to us in Q1 '24. The vessel is intended as the donor vessel for the project. EPC contract negotiations and engineering have advanced significantly, and Mark II is ready for execution as soon as we have commitment on commercialization of the units. We continue to see increasing interest for Mark II and several work streams are ongoing for project-specific applications.

Turning to Slide 13 and Macaw Energies. As explained, the company is on track to have the first flare to LNG liquefaction pilot available in the U.S. in Q1 of next year. We also recently teamed up with pilot gas to provide the first LNG to EV charging expected to take place in Q2.

Operational startup of midstream commercialization platform in Brazil is expected to start up now in Q4. We're also actively looking at further expanding the asset portfolio of Macaw, and this could include a potential separate listing of Macaw Energies into a stand-alone entity during 2024.

I'll now hand the call over to Eduardo to take us through group results.

[Eduardo Maranhao, executive]

Good morning, everyone, and thank you, Karl. I'm glad to share an overview of Golar's financial performance during Q3. This quarter has been marked by significant milestones, including the delivery of Gimi and the continued operational excellence at Hilli.

Turning over to Slide 15. I wanted to show some of the financial highlights of this quarter. Total operating revenues amounted to $67 million, with total FLNG tariffs reaching $95 million. FLNG tariff is a critical non-GAAP metric, which reflects a comprehensive approach to liquefaction revenues, including realized gains on oil and gas derivatives. Despite a marginal dip compared to Q2, this robust performance underscores the resilience of our commercial model.

Adjusted EBITDA came in at $75 million, affected by lower realized contributions from commodity-linked fees. However, we anticipate a positive reversal in Q4 driven by higher Brent and TTF prices. Important to note that these fees are calculated on a rolling average basis of the previous 3 months for Brent and 1 month ahead pricing for TTF.

This quarter, we had a net income of $114 million, a significant improvement compared to Q2. This figure includes a total of $39 million noncash items, such as $34 million unrealized gains from oil and gas derivatives and $5 million boost from unrealized gains in our interest rate swaps.

Our liquidity position remains robust, standing at close to $1 billion, when includes cash on hand and other receivables from the unwinding of our TTF hedges earlier this year. With total contract of debt just under $1.2 billion, our net debt position was $251 million.

Now moving to Slide 16. We can see how Hilli's performance compared to previous quarters. When looking on a year-on-year basis, Hilli generated $73 million in Q3, which is 14% greater than during the same quarter of last year. When we break down these numbers in comparison to Q2, we maintain consistency with a fixed tolling tariff of $32 million. Brent-linked fees slightly decreased to $13 million from $15 million last quarter and TTF linked fees of $28 million were down from $30 million last quarter. As I explained on the previous slide, we see lots of tailwinds from these variable fees and expect a positive impact from higher oil and gas prices, driving increased tariffs for the rest of 2023.

Moving on to Slide 17. We can see that we remain exposed to TTF prices for the remainder of 2023 and 2024. While at the same time, we expect to benefit from locking gains from our previous swaps. The locking TTF gains resulting from the effective unwinding of our hedges will be allocated in addition to our fixed tolling fees and variable Brent and TTF revenues.

So between now or between -- in the Q4 of 2023, we expect to recognize approximately $23 million in EBITDA from the -- those locked-in gains. And for the full year of 2024, we expect approximately $49 million of EBITDA secured or approximately $12 million per quarter.

To illustrate how this can improve our earnings for every dollar per million BTU change in TTF, we expect to make $3.2 million per year. So based on forward prices for next year, we should make around $39 million just from this. In addition to that, when it comes to Brent, the incremental contribution is $2.7 million for every dollar per barrel movement above $60. So when we look at forward '24 prices, the total contribution next year should be around $56 million.

As previously announced in Q2, we managed to improve certain terms of the existing Hilli financing, including lower margins and extended repayment profile. As a result of that and based on current forward prices, Hilli alone is expected to generate an impressive $650 million of free cash flow to equity between 2022 and 2024, as you can see on this slide.

Now moving to Slide 18. Our balance sheet remains strong, and we have a great level of flexibility to fund increased shareholder returns and at the same time, back our growth ambitions. Current liquidity position, including cash receivable from TTF hedges amounts to just under $1 billion and fully supports the development in equity requirements for the construction of new FLNG units, as described by Karl on the Mark II slide.

We continue to explore alternatives that could further enhance liquidity in the near term, including the optimization and refinancing of Gimi now that she's left to the yard and construction is complete, potential asset sales such as Arctic and Avenir, the spinoff of Macaw and further optimization and refinancing of Hilli upon a new contract, among other initiatives.

This quarter, we declared a dividend of $0.25 a share, with a record date of December 1 and payment on or about December [ 11 ]. We have repurchased 0.2 million shares this quarter, leaving 105.9 million shares outstanding. Out of the $150 million approved share buyback program, $117 million remains available for further repurchases, which will continue to be opportunistically pursued.

Hilli's strong free cash flow generation. We'll continue to provide the backbone in support of the current dividend and buyback program. On top of that, Gimi's expected to start up next year, will pave the way for increasing shareholder returns.

Now I'll hand over to Karl for some closing remarks.

[Karl Staubo, executive]

Thanks, Eduardo. And turning to Slide 20 for a summary and next steps. Hilli has diversified revenues from its base Brent and TTF-linked earnings, as just described by Eduardo. Secondly, with Gimi about the start-up contract, we will double the amount of FLNGs making cash flow. We see increased interest for rechartering of Hilli beyond July 26, and we're in detailed commercial discussion for 3 different opportunities, with several other parties interested in the ship.

Long lead items are well progressed for Mark II FLNG, the yard contract, design and engineering are ready and our focus is now on the charter commitment. We continue to target integrated projects with exposure to commodity prices.

Potential start-up of operations could be in 2027. As Eduardo explained, we have around $900 million in liquidity. With the delivery of Gimi, we now allow for debt optimization. There's further potential liquidity in potential asset sales of noncore assets, and we are targeting a spin-off of Macaw Energies within 2024.

There's upside to the dividend following the start-up of FLNG Gimi cash flow. There is potential further liquidity boost by debt refinancings and debt optimization. And we also have continued capacity under the existing share buyback program to continue to return value to shareholders through share buybacks.

That concludes the prepared remarks for the Q3 presentation. I'll thank you all for dialing in. I'll now hand the call over to the operator for any questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Ben Nolan from Stifel.

[Benjamin Nolan, analyst]

And Karl, Eduardo, first, congrats on getting the Gimi out. I'm sure it is a welcome relief to see the -- that leave in the yard. As it relates to the Gimi, could you maybe just help me think through what the revenue and the cash flow looks like until the commissioning period, how -- I know you get some payments, but maybe any color as to sort of what those should look like prior to commissioning.

[Karl Staubo, executive]

Ben, thanks for the question. So the commissioning revenue only starts upon commissioning. At which point, we make a fixed contribution per day plus a tolling fee for any LNG actually produced in the commissioning period. As alluded to, the commissioning period is targeted to take 6 months, but as also explained, we're targeting to reduce the commissioning period and working with the GTA partners to shorten that time frame and get into COD earlier.

As you correctly pointed out, there are also contract mechanisms that would provide Golar with further day rates in addition to commissioning revenue. Those day rates are the contract mechanisms that we currently are in a discussion with BP on the relevance of. And given that we are in these discussions, we would disclose the details of those at a later point in time.

[Benjamin Nolan, analyst]

Okay. All right. Well, I guess I'll just wait for that. And then for my second question, I'm curious about the refinancing of the Gimi. Is that something that you can do or anticipate being able to do prior to the final commissioning? And then you mentioned maybe using some of the proceeds for capital return. Just curious, it would seem to me that a buyback is overwhelmingly the easier option relative to a dividend, but maybe how you think about that?

[Karl Staubo, executive]

So to answer the first part of the question, yes, we think refinancing is doable before commissioning is complete. As we have explained on several previous quarterly calls, we have looked at different alternatives for refinancing the vessel for some time, but it's been important to us to take the construction risk element out of the equation in seeking to get the best terms available. Now that the vessel has sailed, we are increasing focus on these refinancing alternatives.

And as we have explained, we have already received term sheets, which we find attractive for refinancing of the vessel. Our primary focus is to return operating cash flow to shareholders and use other liquidity for attractive growth expanding our FLNG portfolio.

[Benjamin Nolan, analyst]

Okay. Thinking between dividend versus buyback?

[Karl Staubo, executive]

At the end of the day, that's a Board decision, but we still have around $117 million worth of buyback program under the existing allowance. And we're currently paying out less than half of free cash flow to shareholders. So we think that there should be capacity to continue to do both. And as long as the share is trading at a discount to where we think fair value of the company is we think buybacks is a sensible way of continuing parts of shareholder returns.

[Operator]

We'll now move on to our next question. Our next question comes from the line of Greg Lewis from BTIG.

[Gregory Lewis, analyst]

I guess maybe this is for Eduardo. As we think about the daily expense of the Gimi. Any kind of variance versus what it's costing to run the Hilli? And is there a contract language that differs much in terms of the operating cost side?

[Eduardo Maranhao, executive]

Greg, so when we look at the forecasted operating expenses for Gimi and is pretty much the same as we have in Hilli, the bulk of the expenses are related to crew. According to our contract arrangements with BP, all of the operating expenses are basically passed through under the contract. So they should follow that arrangement once we start operations.

[Gregory Lewis, analyst]

Okay. And is it -- I guess it's -- I mean realizing the vessel is still sailing. I guess it's safe to assume during the commissioning process at a minimum, we're going to be able to pass that through or we're going to realize a revenue number higher than that?

[Eduardo Maranhao, executive]

During the commissioning phase, that's correct. We will be able to pass through the operating expenses to our customers.

[Gregory Lewis, analyst]

Okay. Great. And then my other question is related to -- thank you for the detail on the active discussions with the Hilli potential rechartering. I guess it's a 2-part question. One is there's -- as we think about these conversations, is there a potential for any of those conversations to spill over into the Mark II if the Hilli gets contracted? And then really, broadly speaking, just given the fact that the Gimi is more of a tolling arrangement, is it safe to say going forward, we're not interested in that type of work?

[Karl Staubo, executive]

Greg, this is Karl. To answer the first part of the question, for all of the commercial opportunities that we're in discussions with, there are spillovers between Hilli and Mark II. Some of them is better suited for one. Some of them is better suited for the other, but many projects can do either.

It's obviously different CapEx involved, different sizes involved. So for us, it's really about gas flow and the size of the reserve and, to some extent, the level of pretreatment before the gas enters the FLNG because Mark II would be built from -- we have more space to deal with pretreatment than what we would have on Hilli. Hence, gas quality, gas flow and reserve size is basically what decides between the 2, but yes, there are spillovers.

If you think a little bit of the history of Golar, so Hilli was ordered on spec and the Perenco contract was done even if the unit wasn't fully utilized to prove the concept. The Gimi contract was entered into with BP. It's well known in the industry that after the Macondo incident, BP probably has the highest operational standards for maritime equipment globally.

Hence, if our technology is sufficient to meet BP operating standards, is a significant proof of concept on using the same technology for basically any other potential FLNG chartering prospect. That's also why we accepted a tolling fee to BP. And you're correctly pointing out that going forward, we would not be looking for tolling fees, but mainly more integrated solutions, given the very attractive risk reward that we see for that type of contract structure and also because we are the only service provider of FLNG that can monetize these assets.

[Operator]

We'll now move on to our next question. Our next question comes from the line of Chris Robertson from Deutsche Bank.

[Christopher Robertson, analyst]

Karl and Eduardo, guys, this question just relates to Slide 10 on the adjusted EBITDA guidance, looking at 2024. Just hoping you can provide clarification around kind of the delta between last quarter's update and this update. Is the difference in the 24 level related to, I guess, timing around the Gimi startup? Or what goes into that number that's changed since last time?

[Karl Staubo, executive]

Do you want to add, Eduardo?

[Eduardo Maranhao, executive]

Yes, sure. So I think the main difference when it comes to 2024 is we have updated those figures with the current forward curves for both Brent and TTF. So I think those will largely drive the variable fees on Hilli and that's where the bulk of the difference can be justified.

[Christopher Robertson, analyst]

Okay. That's clear. Just looking at the Hilli, when the current contract ends, what type of downtime and maybe a range of CapEx requirements do you think would be required to prepare it for its next contract? I know there's questions around where it will go and the type of project, but are you thinking about maybe a range of CapEx required at this time?

[Karl Staubo, executive]

Chris, yes, the range is basically -- it really depends on location and duration of the next contract. But assuming we go for a 10 to 20-year contract upon recontracting and a relocation to another geography than Cameroon, we would likely look at anywhere between 6 and 12 months downtime, which would include the transportation legs to the new site and any potential vessel upgrades. And CapEx could be anywhere from, I guess, in the very low end, $50 million to $200 million.

[Christopher Robertson, analyst]

Okay. Got it. That's clear. And then just following up on CapEx guidance here. Can you remind us what's been invested to date on the long lead items on the Mark II project and kind of what the total projected CapEx remaining would be upon an FID decision?

[Karl Staubo, executive]

Eduardo?

[Eduardo Maranhao, executive]

Yes, sure. So to date, we have committed around $300 million in long lead items, out of which approximately 50% of that or $155 million has been spent to date. We have an agreed payment schedule with all those respective suppliers, and that should basically be paid over the next quarters and going even further beyond the end of 2024. So we have an agreed price and the price falls on a grid schedule.

[Karl Staubo, executive]

And then the incremental $100 million is basically related to the ship and engineering costs. That takes the full commitment -- or current commitment on Mark II to around $400 million. And then the incremental picks upon FID would then be approximately $1.6 billion, bringing total CapEx to around $2 billion.

[Operator]

We'll now move on to our next question. Our next question comes from the line of Christian Wetherbee from Citigroup.

[Unknown Analyst]

This is Matt on for Chris. I wanted to follow up on some of the details on the Gimi time line. And so it's currently in rail to arrive at the GTA hub around that mid-to-late December time line. That is still the expectation, correct? And then just to gain a little bit further clarity on when we could potentially see first gas begin flowing and ultimately realize that full commission rate. If I'm understanding everything correctly in the press release and the conversations today, that will take approximately 6 months, right, from when Gimi arrives on site at GPA, which should sort of put that in sort of maybe year, next year when you would see that full realization? Just trying some further clarity on that because I was under the impression that, that was -- could potentially occur towards the end of first quarter 24. So any details there would be great.

[Karl Staubo, executive]

Yes. Matt, so the transit is expected to take around 60 days from today. So we're looking, call it, late December, early Jan, there is possible to do it quicker. It's really subject to weather going around the Cape, which is the key sensitivity. But 60 days includes for weather window.

Then subject to the project being available to send those gas, we would then hook up and start gas flowing into the FLNG as we are on site, and we would then take up to 6 months for commissioning. And as just explained in Greg's earlier question, we would then make a commissioning fixed day rates plus a tolling fee based on actual liquefaction concluded in the commissioning period. And again, we're working with the GTA partners to shorten that time frame.

In the event that the project is not available to send those gas, there's another contract mechanism that then kicks in, which is effectively a standby day rate, but we are paid to be on site until the project is available to send those gas and commissioning starting up.

The standby day rate is a staircase that starts off relatively low covering OpEx and a little bit more. And then increasing as the potential time of being on standby day rate extends. But our and the GTA partners' clear ambition is to get gas flowing and get to commercial operations date as soon as possible.

[Unknown Analyst]

Great. Really appreciate that detail. Yes, that is very helpful. And then just as a follow-up, could you just touch a little bit more on sort of the further contracting or I should say, recontracting opportunities for Hilli? I know that I see a now 2024 potential commitment on the horizon, which appears to be in development since last quarter. Just any details there just to fully understand the situation and the likelihood of the commitment fully materializing?

[Karl Staubo, executive]

Yes. There's always a trade-off between what we think industrially maximizes the return on the assets and what the financial markets want in terms of visibility, and we're trying to balance the 2. But at the end of the day, this is the only FLNG available for gas monetization at end of early '26, early '27. And we think that the commercial value of that is very attractive, and that's further confirmed by the commercial discussions we're in.

As we alluded to, we are in detailed commercial discussions with 3 opportunities, and there are several other gas research owners doing technical work on the feasibility of FLNG monetization of their resources. Once we reach commercial agreement, which frankly is not the most challenging part of an FLNG commercial transaction, we then need to get together with the upstream partner, all of the regulatory approvals that's needed.

So subject to geography, that is anything to do from PSC terms, fiscal regime, environmental sign-off, confirmation of mooring location and these, call it, steps that's required for FID. so commercially, we think we will have line of sight significantly earlier than when we would formally have a firm commitment. So we are now actively working to finalize commercial terms and to develop a clear time line together with the upstream partner and the local regulators on where the ship would work.

And for now, we see that competitive tension on the interest on the vessel working in our favor, and that's what we're trying to balance together with the financial market anxiety or sort of need or want to see clarity on recontracting.

[Operator]

[Operator Instructions] We'll now move on to our next question. Our next question comes from the line of Craig Shere from Tuohy Brothers.

[Craig Shere, analyst]

So congratulations on all the progress. The clarification on the answer to Ben's question on the Gimi refi. It sounded like your operating cash flow is intended for return of capital to shareholders, but onetime asset sales or cash outs like the Gimi refi are intended for future growth investment. So my question is, how much do you expect to be needed for a Mark III FID in terms of cash on hand?

And if you have notably more liquidity after Gimi refi, would you see that merely helping bridge a Hilli redeployment period? Or are you already eyeing something beyond the Fuji conversion?

[Eduardo Maranhao, executive]

Okay. So the way we see it is, operating cash flow can be returned to shareholders through a combination of buybacks and dividends at the moment. We think the cash at hand can be used for Hilli deployment, FID of Mark II and subject to the timing of which potentially further FLNGs beyond that. In terms of the money required for Mark II, we think that CapEx would be plus/minus $2 billion. We think that debt available in the construction period should be anywhere between, call it, plus/minus $1 billion to $1.2 billion. So we estimated around, call it, [ $800 million ].

Given that we're currently also retaining some of the operating cash flow, we think we have ample liquidity to deal with an FLNG FID, the redeployment of Hilli and then some. If and when we do asset disposals, it will be up to the Board on how that capital is allocated. But mainly, our thinking is operating cash flow should be a sustainable dividend. And then other cash should be used for attractive growth projects.

[Craig Shere, analyst]

Got you. And once you recontract for redeployment of the Hilli, I guess, maybe to start up at a new location possibly at the beginning of '27, are you in a position if it's dramatically more attractive and some higher locked-in cash flows with some upside kickers? Are you in a position to do a refi on that as well in cash out?

[Karl Staubo, executive]

The short answer is yes. So today, the unit is utilized around 1.4 million to 1.44 million tonnes per annum versus installed capacity of 2.4 million. We would typically discount the committed volumes under a new contract to anywhere between 2 million and 2.2 million tonnes, which would drive the majority of the earnings increase versus the current contracts, just the fact that you increased capacity utilization. That combined with also targeting higher or more attractive economics in a new contract should boost earnings from Hilli, so both capacity utilization and improved earnings. And yes, that should trigger refinancing really.

[Craig Shere, analyst]

And is the thoughts about what to do with the Hilli refi similar to what you've already shared on the Gimi? Or is that just extra gravy and maybe can go towards return of capital?

[Karl Staubo, executive]

Well, it should be -- I guess that's up to that point in time if we then see the same attractiveness of FLNG growth projects. But the way we see the outlook right now, we would still do -- deploy that for FLNG growth because we think the market opportunity is very significant and significantly more than 1, 2 or even 3 units.

[Operator]

This concludes today's question-and-answer session. So I will hand the call back to Karl Staubo for closing remarks.

[Karl Staubo, executive]

Thank you all for dialing in. Q3 was a notable quarter in Golar's history, both with the operational milestone of the 100th cargo on Hilli and importantly, the delivery of Gimi. We look forward to the next steps and speak to you all in the next quarter. Thanks for dialing in, and bye-bye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.