Despite increasing Q3 operating profit to US$23.9m, up from $22.3m for Q2, John Fredriksen-controlled gas carrier owner Golar made a Q3 net loss of US$5.9m, compared to a Q2 net of $17.3m. The loss was due to an interest rate swap valuation charge of US$11.7m.as compared to a Q2 net gain US$8.3m.
The company notes: “This $20 million swing has been caused by the decline in long-term interest rates during the quarter. However, as approximately 43% of Golar's debt is on floating rate terms, lower interest rates in the future will, if sustained, improve long term earnings.” Regarding operational performance Golar says: “Revenues in the third quarter increased to US$55.9m up from $53.7m in the second quarter. Increased earnings of spot vessels and the addition of the Granosa to the fleet in June 2006, offset in part by the offhire time for two vessels undergoing scheduled drydockings, have been the drivers behind the improvement in revenues and operating income. Average daily time charter equivalent rates (TCE's) for the fleet were US$52,000 per day during the third quarter of 2006 as compared to US$49,700 for the second quarter of 2006.” Golar adds: “Vessel operating expenses at US$11.2m for the quarter were increased from US$10.0m for the second quarter of 2006 as a result of the addition of the Granosa to the fleet. Administrative expenses were at a similar level to the second quarter of 2006.” Net interest expense for the third quarter was $16.4 million compared to $14.1m.
Looking ahead the company says: “The LNG shipping market is generally well balanced although has moved slightly in the ship owner's favour moving into the winter months. Delays in the construction and commissioning of new LNG production capacity could in the future influence this balance negatively whilst geographical market price differentials, general seasonality and technical inefficiencies may well have a positive impact. It is likely therefore that the 'spot' market will remain volatile for some time yet.” It adds: “The Board expects that earnings in the fourth quarter from the Company's spot vessels and those under charter to Shell will show continued improvement as the winter season approaches. Although an improvement in rates is anticipated, these and levels of utilisation will remain highly sensitive to the development in global gas prices and the price differences between the various markets for LNG as these strongly impact the requirement for shipping.”