Golar LNG Partners LP
Q4 2015 Earnings Call Transcript

Published: 29 Feb 2016

[Operator:]

Good day and welcome to the Golar LNG Partners Quarter Four 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Graham Robjohns. Please go ahead, sir.

[Graham Robjohns:]

Thank you and good day to everybody. I am joined here today by Brian Tienzo, our CFO, and Stuart Buchanan, our Head of Investor Relations. Moving through the presentation on Slide 2, we have our usual forward-looking statements sheet, which I suggest you all read. Then on Slide 3, we will start the presentation with the Q4 2016 highlights. Net income attributable to unitholders was $57.2 million in the quarter, with an operating income of $63.1 million. We generated distributable cash flow of $52.9 million for the coverage ratio of 1.39. The Golar Igloo was, for the second year in a row, had its regas season extended to include December, which is 1 month additional from its as contracted 9-month period, which runs from the March 1 to the December 1. And we therefore had a fleet utilization of 100% during the quarter. We also successfully refinanced the $100 million vendor loan from Golar LNG Limited, which was in relation to the acquisition of the Golar Eskimo by refinancing the Golar Eskimo. Subsequent to the quarter end, we have agreed to acquire our next FSRU, the Golar Tundra, for a gross profit of $330 million, with a closing expected during March 2016. We also have received commitments in respect of an $800 million 5-year tenure senior secured credit facility on 7 of our existing vessels. The documentation on that facility is ongoing. Golar Maria is preparing for its drydocking commencing around the middle of March. And finally, in common with Golar, we have appointed Ms. Lori Wheeler Naess as Director and Head of Audit Committee. Turning over to Slide 4, the income statement. As I have mentioned, the Golar Igloo contract was extended the period for the regas season for 2015 was extended into December. And therefore, our revenue in Q4 was slightly up from $14.1 million to $15 million as a result of the fact that we had zero drydock days in the fourth quarter as opposed to three for the Golar Freeze in third quarter. Operating costs were up from $15.3 million to $17 million mainly as a result of some additional repair costs and also in relation to the fact that Q3 operating expenses were particularly low. Depreciation and amortization increased from $23.2 million to $30.8 million related mainly to some final adjustments to the acquisition accounting in respect to the Golar Eskimo. Net interest expense was similar in the fourth quarter to the third quarter, but other financial items changed from a $19 million expense to a $7.4 million gain and that was predominantly as a result of the movement in the mark-to-market valuation of interest rate swaps, which was a $13.3 million loss in the third quarter of 2015 and a $13.9 million gain this quarter. We had a tax, net tax credit this quarter as opposed to our usual tax cost and that was driven almost entirely by non-cash movement in deferred tax balances. And the foregoing has meant that net income attributable to Golar LNG Partners owners was $57.2 million for the fourth quarter as compared to $32.7 million for the third quarter. Not too much to say on the balance sheet assets on Slide 5, so I will move straight over to balance sheet liabilities on Slide 6. A couple of points I would like to make here. The first one relates to the first line, the short-term debt or current promotion of long-term debt. That includes this quarter, approximately $250 million relating the Golar Eskimo. As I mentioned in the highlights, we refinanced the Golar Eskimo during the quarter, with a sale and leaseback transactions to a Chinese bank. And on the U.S. accounting rules, because this is a sale and leaseback, we have to consolidate the subsidiary of the bank that holds the vessel and the funding related to that vessel. And because that subsidiary at the moment is currently short-term financed by its parent, the Chinese bank parents out that in relation to the Eskimo get shown as short term even though clearly, the Eskimo financing economically as far as we are concerned in the long-term findings if I chose the 10-year financing. So, where it not before U.S. accounting rules in respect of the sale and leaseback, this would be shown as long-term debt. As I also mentioned, we paid off the $100 million loan to Golar in respect to the acquisition of the Eskimo and that’s you see long-term debt due to related parties’ zero as compared to $100 million last quarter. So, our net debt at the end of the year was $1.254 billion. We had a net debt to adjusted EBITDA multiple of 3.3x, 87% of our debt was swapped to a fixed rate of interest and as of the year end, we had available and un-drawn revolving credit facilities of $53 million. Turning over to Slide 7 in our distributable cash flow, where we go from net income remove our non-cash income statement items and deduct maintenance and replacement CapEx to arrive at a distributable cash flow for the quarter of $52.9 million as compared to $51.8 million for the third quarter. You will notice the distributions have reduced slightly from $38.5 million to $38.2 million as a result of the buyback of 534 units that we bought back mainly during December as a result of the announcement of our buyback program at the end of last quarter. And as I have mentioned, we have a very solid coverage ratio of 1.39 for the fourth quarter as compared to 1.34 for the third quarter. Slide 8 is the usual slide that we show the historical development of our distributions, our coverage ratio, our net debt to EBITDA ratio and the numbers of units outstanding. And Slide 9 is also our usual schedule on assets and contracts, which shows $2.4 billion worth of contracted revenue and that was remaining contract term of 5 years. Then the next slide, Slide 10, we have taken that slide and added in the Golar Tundra acquisition and that takes our contracted revenue up to $2.6 billion. The Golar Tundra contract is with West African Gas Limited, which is a joint venture between NNPC or the Nigerian National Petroleum Corporation and Sahara Energy. Sahara Energy was the large independent energy company operating in Africa. And then, on this slide, we have also made note, we referred to in our results release as well the fact that the Golar Mazo, the Golar Grand and the Golar Maria, which are the three LNG carriers that are due for re-contracting at the end of 2017, might be three out of 11 carriers, but that only represents 17% of our new revenue because of course, the revenues generated by FSRUs higher than they are for LNG carriers. And again as we pointed out in our results release, the approximate distributable cash flow contribution from the – currently from the Grand, Maria and the Mazo is around $39 million per annum. Our 2015 coverage was $32.6 million and the estimated approximate distributable cash contribution from the Golar Tundra will be $24 million. And therefore, irrespective of the conditions for re-contracting LNG carriers at 2017, which by the way we think would be fairly and I will come back to that. But irrespective of that, we believe we are in a very strong position. Moving on to Slide 11, a few details to summarize the acquisition of the Tundra, which as I have mentioned, the contract is with West African Gas Limited, which is the joint venture between NNPC and Sahara. The gross purchase price is $330 million. We expect to assume debt with the acquisition when it closes in March of around $230 million that is a cash payment of $100 million, which will be funded with the surplus proceeds from the refinancing of the seven vessels which I have already referred. Contract is 5 years. It’s due to commence operations under the charter towards the end of the second quarter and between the closing and that time, Golar will pay an amount of $2.6 million per month in consideration of the Golar LNG Partners’ chartering the Golar Tundra back to Golar until it commences operations. And as I have mentioned before, we expect the approximate distributable cash flow contribution of the Golar Tundra to be around $24 million per annum. On Slide 12, we have shown the effect of the refinancing on our debt maturity profile. And you can see that the main impact, I mean we split this up between, as you will see bonds financing, which is net of related restricted cash in gold than the dark blue or the debt maturities and the light blue is the regular annual debt amortization. And the main impact, as I said is the movement of that $280 million debt maturity in 2018 moving that out to 2021. So clearly, the refinancing gives us much better transparency over the profile of our debt over the next 5 years. Moving over to Slide 13, a little bit on the market and the lead into discussion about shipping in particular. And it is interesting to point out and reiterate that we have made this point several times before that despite low energy prices, demands and principally supply of LNG is increasing. This slide obviously shows you the increasing supply over time, split out by projects. The vast majority of these projects have taken final investment decision and our construction has commenced. This is adding between now and 2019, approximately 130 million tons of new capacity, which will move once fully constructed because the marginal cost of selling gas once the liquefaction capacity is actually being constructed is so low, it’s always or virtually always beneficial for producers to ship the gas. That additional 130 million tons will require more than 200 ships as well as, of course it supplies, it’s creating additional new LNG supply that can go to potential new FSRU projects. So the message generally is that more supply and more liquidity in the market requires more infrastructure. Moving specifically to ships on Slide 14, as I have said, based on current trading patents and turmoil estimates, the order book of 130 vessels will be insufficient to carry all this new capacity coming. We will need probably in excess of 200. And therefore, if you look at the graph on the bottom right hand side, it shows the gap between the order book and the vessels required for the new projects, opening up and expanding from some of the latter half of 2017. And therefore, we firmly believe that the re-contracting position of the Grand, the Maria and the Mazo at the end of ‘17 will be significantly aided by this and we will be in a much better market position then we currently are. It also bodes well for long-term contracting prospects for the newbuilds, modern newbuild fleets that Golar LNG Limited has and if you listen to the Golar LNG call, you would have heard Gary Smith talking about Golar’s renewed focus on term deals now that this big wave of new supplies coming. Turning over to Slide 15, this is a slide we have shown several times before, but the story maintained FSRUs of being a great successful story over the last few years. They have opened up 75% to 80% of the new LNG markets that have become on stream in the last few years. There is increasing inquiry and interest in FSRUs driven by the low price and the coming availability of new LNG. And all of that puts us as a group, in a very good position to win new business and also, of course re-contract our FSRUs as they come up for re-contracting. On Slide 17, despite our current cost of capital, which we have referred to in our results today, we have of course significant acquisition possibilities as and when our cost of capital reduces to a more attractive level and we effectively get our currency back. And this covers FLNG assets, FSRUs and LNG carriers. Of course, Golar LNG are – or have contracted their first FLNG, the Hilli on an 8-year contract commencing in 2017 and they are working hard on the project for the Golar, the Gandria, with Ophir in Equatorial Guinea and looking at additional projects beyond that. And what I think is interesting, very interesting to note is that the FID on the Hilli project happened shortly before Christmas. The FID on the Gandria project we expect to occur in the next few months. And those are happening in the current energy environment, which goes to show the extremely cost competitive nature of these floating perfection projects. On the FSRU side, Golar have one newbuild FSRU remaining delivering in 2017 that talked about the potential converting LNG carriers to FSRUs as well. And also, I think the FSRU opportunity is enhanced by Golar’s potential power projects, which will be obviously targeting gas and could give rise to additional requirements for FSRUs. And they also have, of course, as I mentioned a fleet of new LNG carriers, which I think we will hope over the next couple of years, at least a proportion of those will get fixed that on a term basis. So moving over to Slide 17 and in summary, we have a solid contract base of $2.4 billion of contracted revenue that will increase to $2.6 billion with the acquisition of the Golar Tundra. We have excellent operating track record. We have a strong financial profile, with the net debt to EBITDA ratio of 3.3, coverage ratio of 1.24, average over the last 2 years. We are refinancing a significant portion of our debt and expanding the maturity of a large portion of it from 2018 to 2021. We have agreed terms on the acquisition of the Golar Tundra which will add approximately $44 million in additional EBITDA and approximately $24 million in additional distributable cash. We have said that we are not recommending distribution increase, so that DCF increase will go to further improve our coverage ratio. We should not forget that we are in despite the sort of general malaise around energy. We are in a fast growing market. LNG is expanding at a rapid rate of knots. We do have future acquisition opportunities, but capital is very expensive with our unit price is up a bit today, but as of close Friday, it was at 17.3%. But irrespective of that, our existing business is in a solid place and regardless of our ability to acquire new assets with a growing LNG market that requires new and continuing use of LNG infrastructure with a good revenue backlog, strong coverage ratio and the recent acquisition of the Tundra and the refinancing, we feel we have a very solid basis with which to support our current distribution going forward. And with that, I would like to turn it back to the operator to open up for Q&A.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Michael Webber from Wells Fargo. Please go ahead.

[Michael Webber:]

Hey, Graham. How are you doing?

[Graham Robjohns:]

Hi, Michael. Yes, good. Thanks.

[Michael Webber:]

Hey, good. Just a couple from me and I wanted to really focus on regas and one of the bigger talking points at the parent call with around potential strategy towards conversions and then potentially kind of separating out the downstream business there, which includes some other assets. I am just curious, how do you think GMLP fits into that, that potential new schematic, maybe beyond just the straightforward idea that there can be more dropdowns, right? But I mean, is there – are there other assets that any of the carriers that would kind of fit in the mold or something that could potentially be converted by the Golar parent entity? Would there be some sort of co-investment in that? Any sort of new vehicle? Just curious as to how involved I guess GMLP will be in that process going forward?

[Graham Robjohns:]

Well, as you say and just to be fair, obviously any FSRUs that get contracted for 5 years or more will become potential GMLP dropdowns. I think in terms of converting assets at the minute, the focus is very much on the sort of the fish to ship design, if you like, to the Golar Eskimo. So, that’s sort of what schedule is sort of reasonably well-developed and fits well together because we have kind of done it with the Eskimo. So at the moment, there isn’t a plan to, for example, to convert.

[Michael Webber:]

The Mazo, Grand, the Maria or anything?

[Graham Robjohns:]

Yes, yes.

[Michael Webber:]

Okay, that’s helpful. And I guess, you mentioned in your answer that the option – the option start with 5 years, would you guys would be able to acquire that. I am assuming that maybe it still would need to be flushed out, but if they ended up being held as a separate entity from Golar parent that the idea would be that, that option would be no way to the new entity?

[Graham Robjohns:]

Yes, correct.

[Michael Webber:]

Okay, that’s helpful. And then just maybe kind of a modeling – not a modeling, it’s more of the financing question. Just in running through some of the color here on the debt profile and the refinancing work you guys have done which is helpful, the bond that rolls in ‘17, how do you think about refing that? And is that captured within the $800 million refi you are working towards now in terms of kind of ongoing refinancing work?

[Graham Robjohns:]

Yes. No, it’s not captured within the 7 vessel refinancing. It’s an unsecured bond facility, matures in October ‘17. We will be looking at opportunities to go back into the Norwegian bond market between now and then to refinancing all parts of that bond. But I think the other point we should note is we have got the Golar Mazo, which is unencumbered and we have the Nusantara Regas vessel that we will have it debt amortized to pretty low level by 2017 and we will still have 5 years worth of contract still to go. So, we will have assets we could look out to raise bank financing if, for any reason, we haven’t been successful for recapping the bond market.

[Michael Webber:]

Alright. That’s helpful. I will turn it over. Thanks for the time, Graham.

[Graham Robjohns:]

Yes, no problem.

[Operator:]

We will now take our next question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

[Fotis Giannakoulis:]

Yes. Hey, Graham. I think everything was very clear from the presentation. I just want to ask you that there is one vessel that has some small fluctuation in its charter once a quarter. Can you remind us which vessel it is and how shall we see this quarter’s – this coming current quarter’s fluctuation on the revenue?

[Graham Robjohns:]

Do you mean the Golar Igloo that has this 9-month contract structure?

[Fotis Giannakoulis:]

Correct, yes.

[Graham Robjohns:]

Yes, yes. So, that contract is defined in regas seasons and the base contract has a regas season that runs from the March 1 to the November 30, so 9 months. And then the KMPC have the option to extend that season, which for the last 2 years they have extended it for 1 month to the end of the year. So, January and February, we will lose two months of higher for the Golar Igloo as its winter regas season and then winter non-regas season.

[Fotis Giannakoulis:]

Okay, thank you, Graham. And regarding the potential dropdown of the FLNG, I know it’s quite early and we are a couple of years ahead of that, how do you think about the multiple that this vessel will be drop down. And given the fact that this FLNG only have a contract for half of its capacity, what kind of structure are you envisioning until the entire vessel is contracted?

[Graham Robjohns:]

Yes. What was – setting aside the obvious points of capital that we have sort of talked about, but for a minute, the multiples, I think if you look at the history of our multiples that we have dropped down assets, there are a few variables in there. Certainly, one of them is the length of the contract. So an 8-year contract is going to have – you would expect to have a lower multiple than the 20-year contract. But – and therefore, if you are talking about Hilli, I wouldn’t expect the multiples to be that different from the multiples that we have been dropped as it is down to-date, which is currently between sort of 5x, 7x and low 9x EBITDA, if you look at the range. Then of course, it depends a little bit on the cost of capital. And then in terms of the fact that it’s only half the capacity, there are a number of possibilities that certainly one is that we have talked about this before, that we wouldn’t be looking to buy necessarily a whole unit. We can put the units in a separate operating company and by percentages thereof, it could be structured so that your MLP was buying the deferred current base level usage to the vessel, i.e. to trains and that’s if another train was added that sort of added to the future purchase price in the same way as you sort of buy 40% and then you buy another 10% or another 20%. There are a number of ways to sort of skin that, obviously always with a view to ensure that the MLP is getting a secured constant cash flow and is not sort of subject of revenue variability.

[Fotis Giannakoulis:]

Thank you, Graham. One last question, I think that at the previous call, Gary mentioned about the potential FSRU conversions, I think that he was primarily focusing on the new vessels, they are on panel level, but I want to ask you if there any thoughts of potentially converting some of the – all the LNG carriers that you hold at the GMLP levels and they come out of contract in 2017?

[Graham Robjohns:]

At the moment, no, as I have said to Mike just now, the design, if you like of the FSRU conversions we will be looking at is based on the sort of the ship model to the Golar Eskimo, which is of the newbuilds that we have built in so it doesn’t – at the minute we haven’t extended that out to other vessel types.

[Fotis Giannakoulis:]

Thank you, Graham.

[Operator:]

We will now take our next question from Ben Nolan from Stifel. Please go ahead.

[Ben Nolan:]

Thanks. So I just have just a couple of pretty quick questions, I think. First of all, with respect to the several vessels that you had mentioned that you have come off contract in 2017, I know in the past, Golar Limited has sort of backstopped contracts just to ensure the visibility of the cash flow is going forward without necessarily being fully committed to having to employ the vessel as there is a good alternative, is that something that you would imagine they would continue to do going forward or any color there?

[Graham Robjohns:]

Yes. I think Golar have done that, I mean I guess, you could say they have effectively done that a bit with the Eskimo and tons of drop-downs but the principal one relates to Golar Grand. That was a contract – construct of the acquisition, so the Grand, when it was bought, had a 3-year contract from BG with an option to extend and in order to kind of get to a 5-year term, which made it attractive for the MLP to acquire, it agreed to charter that back for a further 2 years if BG didn’t extend. So in effect, the MLP is paying for that support. But that’s a bit different to Golar LNG simply coming in and agreeing to charter a vessel at an above market rate.

[Ben Nolan:]

Right. So...

[Graham Robjohns:]

That’s not to say, we didn’t obviously treating shareholders of both companies fairly, I think it’s fair to say that Golar will do it and has demonstrated it will do all it can to help and support the MLP for sure.

[Ben Nolan:]

Okay, that’s helpful. And then another question, I think you mentioned that you would repurchase some units, right prior to the end of the year, could you maybe talk to how you are thinking about any future subsequent repurchases going forward and just sort of how that stacks up in terms of your capital structure and use of cash?

[Graham Robjohns:]

Yes. I mean we are going through this refinancing. We are getting some surplus proceeds to help acquire the FSRU. We have got a little bit of surplus liquidity. So we had a program of $25 million. We spent $6.5 million. We are becoming blacked out and it worked from the end of the year until results release. So we may buy a few more and we will monitor that and analyze with the Board as we go along.

[Ben Nolan:]

Okay. And then lastly, this is I know a difficult thing to answer specifically, but just may be generally, when thinking through your own cost of capital and how to grow, is there a certain level at which you or a range at which you think equity capital is potentially available or accretive or another way to think about it, may be is there a yield at which point – below which point we can at least begin to consider the possibility of using equity to finance growth?

[Graham Robjohns:]

That’s quite difficult because obviously it depends on the economics of a particular transaction. So no it could be that it makes sense for all parties that the price and the economics of the deal makes sense at a higher level of equity cost than we have done in the past. But that’s certainly not 17%, is it in 10%, is it 9%, is it 11%, difficult to say.

[Ben Nolan:]

Okay, alright, great. That’s a better answer and I was hopeful to hit it together. I think that’s helpful. So, thanks a lot. I appreciate it.

[Operator:]

We will now take our next question from Sunil Sibal from Seaport Global Securities. Please go ahead.

[Sunil Sibal:]

Hi good morning, good afternoon. A couple of quick questions for me, so when we look at fourth quarter results, it seems like vessel OpEx picked up a bit, I think you mentioned it also in your remarks. And I was kind of curious with regard and for the fourth quarter, is that kind of a good representative of the run rate?

[Graham Robjohns:]

That’s probably knowing – obviously the Tundra, which will increase operating expenses it may be slightly higher than the global run rate. So the Q3 was a bit low and Q4 was a little bit high.

[Sunil Sibal:]

Okay. Okay, alright. That’s helpful. And then on the 3 steamships or the 3 vessels that are coming off contract in ‘17. So, is it fair to kind of think of those as FLNG conversion kind of candidates, especially considering in light of comments made on the GLNG call with regards to getting more visibility on FLNG projects?

[Graham Robjohns:]

FLNG conversions as opposed to FSRU conversions?

[Sunil Sibal:]

Yes, so those are kind of would be probably the prime candidates for FLNG conversions, correct?

[Graham Robjohns:]

Not, I mean the Grand and the Maria, unlikely because they are membrane ships. The Golar Mazo is a different – a slightly different path to the Hilli and the Gimi and the Gandria, but that’s a Mazo ship, so that’s possible.

[Sunil Sibal:]

Okay, that’s helpful. And then so you obviously have had a pretty strong coverage and you kind of used some of that share buyback program in December. At this stage, do you have any thoughts of expanding that program? Are they still kind of first exhaust the $25 million and then take the next step?

[Graham Robjohns:]

I think that’s correct, yes.

[Sunil Sibal:]

Okay, that’s all I had. Thanks much.

[Graham Robjohns:]

Okay.

[Operator:]

We will now take your next question from Shawn Collins from Bank of America. Please go ahead.

[Shawn Collins:]

Great, thanks. Good afternoon, Graham, Brian and Stuart. Hope you are well.

[Graham Robjohns:]

Yes. Good, thanks.

[Shawn Collins:]

Hey, so I wanted to ask in light of the volatile energy markets and weaker than expected emerging markets, can you provide some color and tone on any recent dialogue and conversations that you might have had recently with your counterparties?

[Graham Robjohns:]

Nothing other than sort of day-to-day business and operations, I don’t know I mean are you alluding to sort of what’s happening in the drilling rig space?

[Shawn Collins:]

No, just as Petrobras had some concerns out there in other energy companies...

[Graham Robjohns:]

Yes, yes. So that is kind of related to the – that seems to be playing a little bit hardball with the drillers and other sort of offshore supply type asset, but I think the thing you should – we should keep very much in mind is that a drilling rig is an expense that could be cut. If you got rid of an FSRU, then you remove the ability of Brazil to import LNG and that affects power production and that means you have to start having power cuts. So, that is significantly different to what’s happening in the rest of the offshore space. And both those FSRUs, the Golar Winter is working flat out, has been for some time. The Golar Spirit has been working at a constant rate day after day after day since she went on contract in 2008 supplying a power station or a couple of power stations up in the north of Brazil.

[Shawn Collins:]

Okay, that’s helpful. Let me ask it slightly or ask a different question, but related. So, in addition, I get asked a lot by investors whether Golar has had any past experience where counterparty has broken the charter or negotiated a charter lower in the midst of the active charter. I am certainly not aware of any history of this, but I thought it might be helpful to get your more accurate thoughts and your history on this important subject to investors?

[Graham Robjohns:]

No, never, never. I have been with Golar for 15 years. I have never seen that in the LNG space. Gary has just joined me here. He has got experience from other companies and he is shaking his head saying no as well.

[Shawn Collins:]

Understand. That’s helpful. That’s my understanding and just hearing it from a direct source is also helpful. But my last question is just a general industry question on the LNG carrier space, just given the current energy market, I am wondering if you are seeing any wage duration, whether they are decreasing, increasing or staying roughly the same?

[Graham Robjohns:]

Yes. I actually let Gary has a similar question on the Golar call, so I will let him answer that one.

[Gary Smith:]

Yes, sure. What we see really in the last 12 months is a collapse in the arbitrage that used to exist between the Atlantic Basin and the Pacific. And the consequence of that is we see less inter-basin trade. So, 12 months ago, you would have frequently seen cargoes reloading out of Europe for delivery into the Far East, into Japan, Korea, China and Taiwan on the back of strong energy demand in the Far East. As energy demand in the Far East has come off and we assume as a result of reduced economic activity, we see less inter-basin trade and more intra-basin trade. The consequence of that is short of voyage durations, albeit there have been an increase in the number of voyages executed year-on-year. So, that’s the cartwheel we re in. It’s not to say that we won’t get back to inter-basin trade and in fact the some prospect of cargoes from the East hitting West has a lot of new capacity comes on stream, particularly in Australia, with a view held by some, including myself that you might see marginal cargoes heading West to – in the first for Middle East and then ultimately on to Europe as they seek a home and Europe being the only sort of fungible market out there to take incremental LNG. Hopefully that helps.

[Shawn Collins:]

Okay. Yes, I understand that. That is helpful. Thank you for the time and the insight.

[Gary Smith:]

Okay, thanks.

[Operator:]

[Operator Instructions] We now have a next question from [indiscernible] Partners. Please go ahead.

[Unidentified Analyst:]

Yes, thanks for the opportunity to ask a question. I have two questions. The first has to do with the Tundra, obviously, that dropdown is going to be extremely significant as the largest kind of piece of cash flow coming online for Golar. My understanding is that currently there isn’t much progress in the Tema port in preparation for the Tundra coming in. And I just wanted to understand from management directly, how likely is it that this contract is actually going to properly kick off in the next say 6 to 8 months? I think it’s fantastic that obviously, there is a backstop with the parent, but the overall kind of value of that backstop is about a third to 50% less of the actual $45 million EBITDA number that you guys highlighted from the actual contract starting. So, I will be very curious of any color on your side as to the progress on that contract? And the second question and I guess it’s a follow-up from couple of the ones already asked about the buyback, but it seems that with your units trading at over 17% yield, then it should be fairly competitive to any other projects that you want to invest capital in since they are trading at such high yield. Are you considering expanding at all the buyback program or are you considering kind of accelerating a little bit of the purchases given the fact that you are a little bit over a third only into the buyback program? Thanks.

[Graham Robjohns:]

Yes. So firstly on Ghana that kind of sentiment isn’t really what we are in reasonably regular contact with our counterparty in Ghana and we actually have somebody in country as well. And general feedback is things are moving ahead well. So, we have every confidence that this project is going to get up and running. And certainly Guinea is in desperate need for the gas and the power. In terms of the buyback, yes you are right. It’s a good investment, hence the reason we put in place the buyback program. Obviously, just the buyback shares, you need cash. I don’t think we are going to be looking to significantly increase leverage to buyback shares. So it may well be we increase the buyback from the $6.5 million we have invested already up to the $25 million that was approved and we will monitor and analyze that as we go along.

[Unidentified Analyst:]

Alright, okay. And just to be a little bit clear on the Tundra timeline, is this something that we should be expecting to kick off in the next six months then or is it still a little less clearing could take up to the full 12 months of the option that you have with the backstop?

[Graham Robjohns:]

No. Our contract commences latest July 1.

[Unidentified Analyst:]

Alright. But does the contract with the parent, not necessarily the contract with...?

[Graham Robjohns:]

No, the contract with the Guinea.

[Unidentified Analyst:]

Alright, okay. That’s very helpful. Thank you very much.

[Graham Robjohns:]

Okay. Thanks.

[Operator:]

[Operator Instructions] We have no further questions at this time.

[Graham Robjohns:]

Okay. Well, thank you, all very much for listening. And we look forward to speaking with you again next quarter.

[Operator:]

That will conclude today’s conference call. Thank you, ladies and gentlemen. You may now disconnect.