EBITDA backlog could rise 170%


GOLAR LNG EBITDA backlog could rise 170% Golar LNG today announced furtherance to HoT for an agreement with BP, increasing the prospects of a deal that we estimate could add 65% to annual EBITDA and see the EBITDA backlog increase by 170%. Share price reaction of 10–15% warranted on the news.
Golar LNG today announced a Limited Notice to Proceed (“LNTP”) from BP Mauritania Investments Ltd and BP Senegal Investments Ltd, (together "BP") in their capacity as block operators, in respect of the provision of a Floating Liquefaction Vessel (FLNG) to support the development of Phase 1 of the Greater Tortue/Ahmeyim field, offshore Mauritania and Senegal. Heads of Terms (“HoT”) on a deal were announced in April; the LNTP is in furtherance to this agreement.
Current backlog of ~USD3.0bn… On our calculations, GLNG has an existing EBITDA backlog of USD3.0bn, excluding: 1) ten LNGCs, 2) 32% ownership in GMLP EBITDA, and 3) oil above USD60/barrel. The backlog consists of Hilli (one train, USD85m annual EBITDA over the next 7.5 years), 25% of the Sergipe Project EBITDA (USD72m next 25 years), and the FSRU Nanook (USD21m over the next 26 years).
…which could become USD8.1bn with BP contract. We assume a potential BP contract will be a USD2.5/mmBtu tolling fee structure, which would amount to annual EBITDA of USD255m per annum. Assuming contract duration of 20 years, the uplift to the EBITDA backlog would be USD5.1bn, or an increase of 170%. Annual EBITDA could rise from USD420m… We estimate GLNG to have an annual EBITDA of USD420m from January 2020 based on: 1) USD75k/day shipping rates; 2) a pro forma share of GMLP EBITDA, 3) one train at Hilli, and 4) Golar Nanook and Power. This could increase to USD680m if adding trains 3 and 4 on the Hilli and assuming oil at USD75/barrel.
…to nearly USD1bn on the BP contract. Adding a USD255m contribution from the BP project would lift annual EBITDA to USD935m. Other potential triggers to our one-year forward NAV include USD10/share from FLNG Hilli utilisation rising from 50% to 100% and a 50% probability of the Fortuna project adding USD4.6/share. The announcement today increases the probability of a BP contract, in our view which could add 68% to annual EBITDA and 170% to the EBITDA backlog; hence we argue a 10–15% share price increase is warranted.