Golar LNG orders fourth floating unit to lift capacity by 41 per cent

Golar LNG has announced the order for a fourth floating liquefied natural gas (FLNG) unit, a move that significantly expands the company’s global footprint in the energy sector. The Mark II vessel is to be constructed at the CIMC Raffles Shipyard in China, with delivery expected within 2029. This timeline represents the earliest available liquefaction capacity currently on the market, positioning the company ahead of competitors facing shipyard bottlenecks.

The new order increases Golar’s controlled liquefaction capacity by 41 per cent, raising the total from 8.6 million tonnes to more than 12 million tonnes. Management projects that if the new unit is chartered on terms similar to previous agreements, annual earnings capacity could rise by 50 per cent. This growth trajectory is expected to push run-rate EBITDA past $1.2 billion by 2030, although the new unit currently lacks a charter agreement.

The capital expenditure budget for the fourth unit is approximately $2.45 billion, roughly 10 per cent higher than the $2.2 billion spent on the previous Esperanza vessel. The increase is attributed to inflation in long-lead equipment, such as turbines and dual-fuel engines, which are also in high demand from AI data centre and aircraft manufacturers. Despite the rising costs, the company maintains a robust EBITDA backlog of $17 billion, secured through existing contracts for the Hilli, Gimi, and Esperanza units.

Recent operational performance has supported the growth narrative. In the second quarter, Hilli’s contribution to earnings rose to $37 million from $10 million in the first quarter, helping drive a 20 per cent sequential increase in EBITDA to $127 million. The Esperanza conversion is 74 per cent complete and remains on budget, while the Gimi unit produced 15 per cent above its contracted volume during the quarter.

Investor interest in the company has intensified, with hedge fund ownership increasing from 57 to 61 funds in the last quarter. Short interest stands at 7.82 per cent of the float, indicating some market scepticism. As of 21 August, shares were trading at a forward price-to-earnings ratio of 42.02, a valuation that reflects expectations for substantial earnings growth from the company’s contracted base.

While the expansion offers significant upside, the company faces financing challenges. Golar is still equity funding the Esperanza, having committed $1.3 billion of its budget, and carries net interest-bearing debt of about $1.8 billion. Executives are working to free up roughly $2.3 billion in liquidity by refinancing Hilli and securing long-term financing for Esperanza, transactions that remain in progress.