LNG shipping company Golar LNG’s FLNG Hilli customers have decided to exercise their option on additional volumes from the 2023 to 2026 period.
FLNG Hilli is located offshore Kribi, Cameroon. Its customers are oil and gas company Perenco and Cameroon’s national oil firm Société Nationale des Hydrocarbures (SNH).
On 27 July, Golar LNG said that the customer of FLN G Hilli have opted to exercise 0.2 million tons per annum (mtpa) of their optional Dutch Title Transfer Facility (TTF) linked production volumes from 2023 to July 2026.
This is continuing Hilli’s 2022 production volume of 1.4 mtpa.
The tariff for the 0.2 mtpa from January 2023 to July 2026 is linked to TTF gas prices. Based on current average 2023 TTF gas prices ($45.49/MMBtu) the 0.2 mtpa of production can generate $135 million of incremental annual Adjusted EBITDA to Golar. For each $1.00/MMBtu change in TTF, this Adjusted EBITDA will increase (or decrease) by $3.2million. The total value of the 0.2 mtpa production from 2023 until July 2026 is approximately $267 million in Adjusted EBITDA to Golar based on current TTF forward prices. Therefore, FLNG Hilli will continue with three components to its Adjusted EBITDA generation; a fixed tariff, a Brent oil-linked tariff, and a TTF gas price-linked tariff.
At current forward prices for 2023, Golar’s share of annual distributable Hilli Adjusted EBITDA is expected to be approximately $286 million.
Golar’s share of total annual debt service for Hilli’s contractual debt is approximately $50 million (debt amortization of approximately $29 million and interest of approximately $21 million). Hilli is therefore expected to generate significant free cash flow to equity for the remainder of the fixed contract.
In addition, Golar may enter into hedging transactions to reduce the sensitivity of the commodity-linked components of FLNG Hilli’s future earnings.
Golar CEO Karl Fredrik Staubo said: “We are pleased to see continued TTF linked gas volumes from Hilli through the rest of the existing contract, maturing in July 2026. These confirmed additional volumes combined with Hilli’s outstanding operational track record will add significant free cash flow generation near term with no incremental capex”.