Golar LNG (GLNG) Just Locked In The World’s Scarcest LNG Capacity

Golar LNG (GLNG) announced on August 13 that it has secured the world's scarcest liquefied natural gas (LNG) capacity with the order for its fourth floating LNG unit. The Mark II vessel will be constructed by CIMC Raffles Shipyard in China and is expected to deliver by 2029, providing the earliest available liquefaction capacity globally.

This new order boosts Golar's controlled liquefaction capacity by 41%, from 8.6 million tonnes to over 12 million tonnes once fully delivered. Management claims that if the unit is chartered on conditions similar to the Esperanza deal, annual earnings capacity could increase by 50%, potentially pushing run-rate EBITDA past $1.2 billion by 2030.

The new unit's construction is limited by shipyard bottlenecks, as Samsung, the industry's largest builder, is not expected to have open capacity until 2031, while Wison in China is committed to its next two large units. Only Seatrium and CIMC, the two yards actively converting FLNG units, have built for Golar. The operating record supports Golar's growth pitch, with Hilli and Gimi showing high economic uptime and production, while Esperanza's conversion is 74% complete and on budget.

Golar's fourth FLNG order provides an opportunity in a market where shipyard slots and critical equipment are scarce. However, the CapEx budget for the new unit is about $2.45 billion, roughly 10% higher than the $2.2 billion spent on Esperanza, due to inflation in long-lead equipment. Golar is still equity-financing Esperanza, carrying net interest-bearing debt of about $1.8 billion.

The company is counting on refinancing Hilli and securing long-term financing for Esperanza to free up liquidity for growth. Commodity-linked income is already evident, with Hilli's contribution rising to $37 million in the quarter from $10 million in the first quarter, pushing EBITDA up 20% sequentially to $127 million. However, the potential growth comes with risks, as a decline in LNG prices could significantly impact earnings.