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Golar LNG Partners LP (NASDAQ:GMLP)
Q4 2019 Earnings Call
Feb 25, 2020, 11:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Golar LNG Partners LP 4Q 2019 Year Results. [Operator Instructions]

I will now like to hand the conference over to your speaker today, Graham Robjohns. Please go ahead, sir.

Graham Robjohns -- Chief Executive Officer

Thank you, and good day to you, all.

Welcome to Golar Energy Partners' Q4 results presentation. As the operator just said, my name is Graham Robjohns. And I am joined here today by our Chairman, Tor Olav Troim, and our Head of Investor Relations, Stuart Buchanan.

Before we start the presentation, I would encourage you to read through page 2, forward-looking statements, in your own time.

Turning over to slide 3 and highlights. At $36.3 million, our operating income was slightly improved on Q3 as we had guided. This result does not however, include our interest in the operating results of the Hilli Episeyo or the capital element of the Golar Freeze contract, which is now classified as a sales type lease and disclosed as interest income. We reported net income of $30.4 million and we generated distributable cash flow of $34.6 million, also an improvement on Q3, with a distribution coverage ratio of 1.21.

Pleasingly, we have had further success in terms of reconstructing our vessels. In addition to the two year charter for the Golar Maria and two year contract extension for the Igloo, we recently agreed a one year extension for the Golar Grand.

Turning over to slide 5 and our financial summary. Revenues and operating income showed a slight improvement from Q3 despite the fact that the Igloo commenced its winter off high periods on December 1 as a result of improved earnings from the Golar Maria and the Golar Mazo.

Interest expense was slightly down as debt balances and LIBOR reduced, but more significant impact on net income came from the increase in longer-term interest rates which gave rise to a non-cash interest rate swap gain. As I mentioned, distributable cash flow improved in the quarter from $33.6 to $34.6, which led to a distribution coverage ratio of 1.21, an improvement from last quarter's 1.18.

Turning over to slide 5, segment information. In order to make a better comparison of our operating results, we have included this slide, some segment information which shows that adjusted EBITDA, inclusive of the Freeze and our share of Hilli Episeyo. As you can see, adjusted EBITDA was up from last quarter at $81.4 billion.

Turning over to slide 6 and the balance sheet. At the end of the quarter, our adjusted net debt was $1.53 billion, which includes $422 million of debt associated with the Hilli Episeyo. With an improved EBITDA and slightly lower debt, our net debt to annualized EBITDA ratio has improved again. At December '18, it was 5.1; last quarter, it's 4.8; and for the quarter ended December 2019, it was 4.7.

On slide, we have a revenue backlog chart that highlights the fact that including the additions of the Maria, Igloo and the Golar Grand, revenue backlog stands at $2.1 billion. The new contracts we have secured with Maria, Igloo and Grant are very pleasing across and we continue to work hard on finding employment for Golar Spirit and Golar Mazo. In particular, in relation to the Golar Spirit, of course, with lower gas price, which is extremely beneficial for the downstream side of business, we expect to encourage activity in FSRU contracting, which could prove beneficial for the Spirit.

Moving over to slide 8. It shows our revenue backlog breakdown and its historical progression. The graph on the left-hand side highlights the point that the vast majority of our revenue is secured by way of long-term contracts. 60% of our income is contributed by our FSRUs and 32% of our income comes from the Hilli Episeyo. This contract runs for a further seven years or 6.5 years. Additionally, we have managed a stable contract revenue backlog over time. In 2015, our revenue backlog was $2.4 billion. And with new contracts for a number of our vessels, it still stands at $2.1 billion.

Turning over to slide 9. We believe we have a very strong ESG story. And the Golar Group as a whole has been working very hard for several months on developing reporting and KPIs which we intend to launch in the coming weeks. We fundamentally believe that gas is a highly complementary fuel to renewables. It provides significant emission savings compared to other fossil fuels, most relevant in remote communities that currently have little choice on how they create energy. Our business provides people with cleaner energy at less cost. In addition, all our vessels run on LNG, and we have some innovative energy solutions, particularly on our FLNG and FSRU vessels.

Turning over to slide 10. And in summary, in the short-term shipping market rates have fallen as a result of seasonality combined with low LNG prices. However, we are extremely pleased to have contracted out the Golar Maria for two years and the Golar Grand for a further year.

The FSRU market, as I've said, we expect it to develop in a positive way, stimulated, we believe, by low LNG prices and increasing interest in smaller scale downstream distribution. We are extremely pleased with the new contract award for Golar Igloo and we will continue our efforts to try and find employment for the Golar Spirit.

And finally, we have a solid financial footing with $2.1 billion of revenue backlog, distribution coverage ratio of 1.21 for Q4 and a falling net debt to EBITDA ratio that now stands at 4.7 times.

Thank you, operator, and I can now open up for Q&A.

Questions and Answers:

Operator

[Operator Instructions] The first question is coming from the line of Michael Webber from Webber Research. Please go ahead.

Michael Webber -- Webber Research -- Analyst

Hey, good morning, Graham, how are you?

Graham Robjohns -- Chief Executive Officer

Hi, Michael. Hi.

Michael Webber -- Webber Research -- Analyst

Hey, just wanted to start off with just some high level commentary or thoughts from you around the distribution and how you think about the different permutations of being able to stay [Indecipherable] readdress that as you move through the year. I guess what are the biggest factors you are looking at right now and kind of what would kind of be cause for action on your end to readdress the current payout rate?

Graham Robjohns -- Chief Executive Officer

So, I think the message I would give, Mike, is a positive one and consistent with what we said at the end of January in connection with the latest distribution announcement, that our focus is on the evaluation of GMP's structure and strategy in order to maximize shareholder value while ensuring that we are appropriately debt financed. This includes potential structure transactions to grow the partnership and also of course looking at the refinancing of the bank debt and the bond financing in addition to pursuing opportunities to redeploy Spirit and Mazo.

So I think, again, as we said in that release and as we have said before, future distribution levels will be determined by the relative success of this work as well as the level and terms of new financing and greater capital requirements.

Michael Webber -- Webber Research -- Analyst

Got you. Okay. That's helpful.

Tor Olav Troim -- Chairman of the Board

It's Tor Olav. I would just like to add on to that. As kind of Chairman of this Company and [Indecipherable] from the Board, I think the Board obviously sees this as a combination of what you build over time and the dividend. I think when we [Indecipherable] the dividend, we [Indecipherable] close to 30%. But I think the Board have to ask the question is that the right structure going forward. You can certainly sustain that with numbers Graham have shown that there at 1.1 and 1.2 times coverage. But the question is tat to optimize, is that the best way to build the Company going forward. Or is it best, as Graham says, to build the structure transition and then have a dividend which reflects the long-term building up of the Company instead of just turning the cash flow from the existing assets.

So I think that's the discussion the Board is having. And we have no decision on it right now. But I think we have built the backlog. We have $2.1 billion. And with a strong balance sheet, I think we have a pretty good flexibility to find solutions. But the biggest problem we're are facing is, what everybody in the MLP market facing is that, the MLP market is out of favor and you are not paid for yield in this market any longer.

Michael Webber -- Webber Research -- Analyst

Right. Yeah, and kind of that was kind of the impetus for the question because it's not like the yield blew out December and January, and you're contemplating [Indecipherable] as you guys have been fighting [Indecipherable] for several years. So just curious in terms of how the calculus changes or any change in 2020.

Graham, my other question is around the Eskimo, which is kind of one of the cash flow pillars at GMLP. I know that back in 2013, when we were discussing it, I think that there was a five year -- I don't think it was necessarily an option, but I think there was an [Indecipherable] with a pretty hefty walkaway fee for the [Indecipherable] after five years, and we will get to that point in May. So I'm just curious -- and I believe their six month notification is a little bit vague in terms of whether that's six months before, after that five year period, they would have to give you six months notice. I'm just curious what conversations, if any, have you had with them? And how should we think about that contrast going forward?

Graham Robjohns -- Chief Executive Officer

As you said, there was a break cause. After five years they effectively, now would need to give two years' notice. There was a termination payment, again, as you say, at the end of that two year notice period. And we have discussions with all our FSRU customers on an ongoing basis, and nothing unusual there.

Michael Webber -- Webber Research -- Analyst

Yes. So in terms of the notification period, is that something that...

Graham Robjohns -- Chief Executive Officer

It's two years, not six months.

Michael Webber -- Webber Research -- Analyst

Okay. And so two years in advance. So we'd be looking at -- so there is no scenario where that [Indecipherable] off the board [Phonetic] between now and two years from now?

Graham Robjohns -- Chief Executive Officer

No.

Michael Webber -- Webber Research -- Analyst

Okay. All right. That's super helpful. Thank you, guys.

Operator

Next question is coming from the line of Randy Giveans from Jefferies. Please go ahead.

Randall Giveans -- Jefferies -- Analyst

Howdy gentlemen? How are you?

Graham Robjohns -- Chief Executive Officer

Hi Randy.

Randall Giveans -- Jefferies -- Analyst

Hi. So I noticed -- obviously there were no share or unit repurchases in 4Q '19. You have $120 million ATM program for the series A preferreds. So is one strategy to issue the preferreds at 8.75%, whatever it is, and buyback common units?

Graham Robjohns -- Chief Executive Officer

Certainly, the preferreds are an attractive source of capital now. And absolutely, it was set up to give us some financial flexibility and one option could be, as you have just said, yes.

Randall Giveans -- Jefferies -- Analyst

Okay. Fair. And then any updates on the timing or pricing or size of maybe refinancing the 150 [Phonetic] million NOK bonds here in three months? And then the 250 [Phonetic] million NOK bond due next year?

Graham Robjohns -- Chief Executive Officer

Yes. We are very well advanced in preparations. We have good dialogue and support from bond investors. So we will be ready to go well in advance of May this year for the 2020 bond and also probably take in some of the refinancing of the 2021 bond. We've just kind of held off a little bit because of the discussions that both I and Tor Olav mentioned may give rise to us having a kind of better structured take [Phonetic] to bondholders and therefore improved terms and pricing.

Randall Giveans -- Jefferies -- Analyst

Got it. And would it still be through the Norwegian kroner, NOK bond?

Graham Robjohns -- Chief Executive Officer

Dollar denominated, but in the Norwegian market.

Randall Giveans -- Jefferies -- Analyst

Yeah. Okay. That's fair. I guess, Tor, while I have you on the line here, as Chairman, what are your thoughts on keeping these two separate entities versus possibly evolving [Phonetic] them together? And then also, do you maybe personally have any appetite for purchasing GMLP units directly?

Tor Olav Troim -- Chairman of the Board

I think when it comes to -- I think we are in a situation currently where we're discussing different strategic options [Indecipherable] a little bit from acting. But of course, that is kind of yield level. It looks cheap, but at the same time we need to build the Company going forward. I think when it comes to Golar LNG, Golar LNG is more and more getting into a situation where the upstream and the downstream activity in Golar are the important legs of Golar, the two legs in Golar, while the midstream activity is kind of in Golar are less important. The midstream activities here is important. And that is a question [Indecipherable] on that side which is sensible for all parties possible.

I think we haven't opened it. We are working on a pretty fast tracked transaction to see what can be done including deals also with third parties. I don't think we should say anything more right now. As I said, I feel the Company, to sum up the Company, we are in a better position than we were last year. Shipping is better. We have extended the Igloo contract. We have a pretty strong balance sheet with $2.1 billion in order backlog. We have huge coverage ratio in what we are doing. We are excited by the fact that Perenco is now going for drilling in Kribi, which will hopefully extend the contract we have on Train 1. But the challenge is, we are trading with 30% yield, and we are not building a Company.

So there is a question, can we find that [Indecipherable] which makes that yield combined with something else and again will continue to build the Company. Because the LNG industry need a midstream company as well. And I think the value of the FSRU today, with these prices we are seeing in the LNG market today are significantly higher than it was a year ago. Because now everybody says how can we get gas quickly into this market. And the solution is FSRUs. The coming -- country after country [Indecipherable] by New Fortress now doing Nicaragua and Puerto Rico and all other places, driven by Exxon going into India, everybody wants LNG these days because it is cheap and the way to get it cheap is to monetize these costs and assets. So hopefully we can get Spirit going and hopefully we can continue to build value. I'm optimistic. I'm more optimistic than I was a year ago, but we have a structural challenge linked to the bond.

And I talk to shareholders in this Company, as I said, should we cut the dividend and use that to buy back shares. There is very strong resistance. And for me, that's almost like redeeming debt, which you are paying 30% yield on. So I think it's not easy. And I'm happy for any kind of input which makes us brighter.

Randall Giveans -- Jefferies -- Analyst

Yeah. And I would agree with that. And then, as I mentioned earlier, the preferreds issuing 8.75% paper to buy back 30% seems economical in that regard. But yeah, obviously...

Tor Olav Troim -- Chairman of the Board

I totally agree on that. I think we all agree on that. To take that perpetual bonds which redeem 30% using equity, that's a good art.

Randall Giveans -- Jefferies -- Analyst

Yeah, absolutely. And obviously, your unit price is cut in half. But you are doing what people wanted in terms of new contracts, rolling contracts. Obviously the Spirit is outstanding, but everything else is shaping up. So hopefully if the market doesn't reward you in terms of the unit price, you can reward yourself through some repurchases. That's all I have.

Tor Olav Troim -- Chairman of the Board

I think it's very kind of -- to be a little bit emotional, I think it's a little bit underserved that Golar partners are knocked down with a coverage ratio 1.1 or 1.2 than one of our competitors who are in a totally different situation, decided to cut their dividend by 80%. That's nothing to do with us. Totally different balance sheet and totally different structural situation.

Randall Giveans -- Jefferies -- Analyst

I would agree with you. And obviously, the units are pricing in massive cuts, and I'm just worried that that could become a self fulfilling prophecy when you don't really need to. That's all.

Tor Olav Troim -- Chairman of the Board

But I think if you look at our history of dividend, that's always been important for us. But it is the question, if people are not willing to pay for dividend, it is better to use that money to kind of grow the Company and continue to build the business or redeem units.

Randall Giveans -- Jefferies -- Analyst

Yeah. That's fair. Well, good conversation. Thanks for the time.

Graham Robjohns -- Chief Executive Officer

Thanks, Randy.

Operator

Next question is coming from the line of Ben Nolan from Stifel. Please go ahead.

Benjamin Nolan -- Stifel, Nicolaus & Company -- Analyst

Yeah. Hey. So I have a couple, but the first, I was hoping that maybe you could give a little bit more color on the contracts for the Maria and the Grand. Are those fixed rate contracts or are they floating? And any sense of sort of what the day rate we should be modeling on that?

Graham Robjohns -- Chief Executive Officer

Yeah, Ben, a fixed rate. And they're kind of fairly similar to -- or the Grand's fairly similar to the rate that it's been running on, and the Maria is kind of similar to that rate as well. I can't give you the rate. It's sort of commercially sensitive.

Benjamin Nolan -- Stifel, Nicolaus & Company -- Analyst

No, understood. But that's helpful. And then getting back to one of the things as it relates to Spirit and really the FSRU market in general. There has been talks in the last six months an unprecedented number of new FSRU awards, although they are almost all older conversions. It should be a good market for the Spirit. But first of all, how long would it take to reposition or redeploy that [Indecipherable] that you did win a contract? And are there any other opportunities to maybe convert some of those existing carriers or are they not ideally situated for that?

Graham Robjohns -- Chief Executive Officer

Yeah, so the carrier conversion is an option. I mean, we have seen that in GLNG with the Golar Viking. The Spirit time, I don't think the kind of dry docking and upgrade and what are the sort of capital improvements required for the Spirit to make a new contract would be the gating item is probably, I don't know nine months to 12 months from start to finish as an estimate. But we probably have that lead time, going into a contract anyway.

I mean I think what is -- the Golar Spirit is a smaller vessel which is sort of on the negative side, but on the plus side she is smaller capacity at FSRU and sort of fairly cheap. So for some of these small scale projects which are popping up more and more she could be well suited.

Tor Olav Troim -- Chairman of the Board

I think it is important just to kind of give a little bit flavor on that factor in this unnecessary use. I think we have in the GLNG situation, we are talking to different people like mining companies and other which are currently burning, have issued including coal and everything, of course one thing is the ESP side of converting from coal on heavy fuel into kind of to gas, which is a strong kind of green conversion. But another thing is that the money which they do in that conversion today compared to where it was two years ago, it's not it. I think we are talking to mines which can save up to more than $100 million by doing their conversion at fixed term long time LNG prices.

That money was not there two years ago, but it is a matter of getting that one in mind who have that saving and then set up the infrastructure and probably it takes, I would say, it takes one and a half to two years to kind of implement the kind of berth side and everything or yet, if that is where they are going. But notably, if you take this tissue from the mining company or from the community electric company to convert and that is what relating for most of the time, it is not all time, which is the routine. When you are talking about profit, so going LNG are more than $100 million, I have a feeling that we are close to a thing where people start to accelerated at weekly.

Ben Nolan -- Stifel -- Analyst

Just a follow on that. One of the other things we have seen is FSRUs, smaller converted FSRUs being paired up with these power ships and put into out of the way places that need sort of power, but a quick solution is that it all anything that you guys have looked at?

Tor Olav Troim -- Chairman of the Board

I think, we have looked at it, it is the norm of course, the current new script done in Turkey, which have several ships which come based on added fuel. And of course, if you look at the spread between heavy fuel and LNG today, there is massive benefit from converting. So they have around 10 ships around, I think which they are looking at converting.

So there is all kinds of projects going on, but you have to be focused. I think we are focused in the LNG, I think some of the stuff is coming in the LNG, hopefully creates opportunity for FSRUs from Golar arbitrage, the only one we have available is Spirit. I think we are working pretty adamantly to try to find the home for that one, which is obviously then going from losing couple of thousand dollars to making a lot of money.

There is also in the current market to place ships and use them as FSUs effectively storage units where you can start to off load. Remember when you started Jamaica to get in New Fortresses, we had a ship at the Arctic, which was kind of used as feeder ship into smaller carriers. The development of this market, but taken more and more FSRU use is becoming on FSU use. So but all price is good for the company.

Ben Nolan -- Stifel -- Analyst

I appreciate it. Thanks Tor.

Operator

Next question is coming from the line of Jon Chappell from Evercore. Please go ahead.

Jonathan Chappell -- Evercore ISI -- Analyst

Thank you. Good afternoon.

Graham Robjohns -- Chief Executive Officer

Hi John.

Jonathan Chappell -- Evercore ISI -- Analyst

Hi Graham. Tor, I have been racking my brain trying to figure out, how to ask this question again, because you have covered all the important points in your answers to prior questions. But a 35% yield and a $300 million market cap I mean, it is just cost prohibitive to grow. So you keep talking about growing the company. And you also noted how your shareholders don't want you to cut the distribution. But as Randy said, I mean, it is almost becoming like a self fulfilling prophecy with the yield right now.

So how do you grow, there is this NOK bond that is new this year. There is one that is due next year, I'm confident you will refinance them that eliminates that, you have a great coverage ratio. I mean, you look at Slide 7 in your revenue backlog and the coverage not just this year, but through next year. And you would think independently if you looked at this with a fresh set of eyes, the yield should be closer to 10%, not 35%. So the market is telling you something how do we, how do you remedy that?

Tor Olav Troim -- Chairman of the Board

I wish, I had solutions for it, I think that what is we are currently going through. I think the only thing I'm afraid though, kind of when you look at order backlog, of course, it is stretched out to 24%, 25% and I think if you are successful on things like [indecipherable] will have a significantly longer but that is the problem is that you need to call it renew your fleet at some stage you need to bring more assets in, and then instead of paying 30% dividend, maybe we should spend some more money on building the company.

That is a discussion, I think, I have had an open discussion with several other large shareholders. The only thing I can say to solving the four or five of them, there is no consensus. So I think some people want us to keep saying 30% on top meeting because some people want us to give the middle to some groups, young kids who can grow up and become big and make money for us in the future.

Jonathan Chappell -- Evercore ISI -- Analyst

Yeah, I mean if you want to pursue that second route of growing and whether that is taking assets eventually from Golar LNG, which I mean we can't even use the phrase drop down anymore because I don't think that is relevant. It just seems like you continue to pay this amount of outflow and you are just kind of treading water you are keeping the one times coverage, you are repaying back your debt as it comes due, which is great. That is maintaining the business but with the type of outflow at 35% yield, that just seems like it is prohibitive to growth. Just I don't know, I know you want to keep everybody happy but --

Tor Olav Troim -- Chairman of the Board

If you are sitting in a shareholders, some of the shareholders probably is that if you paid 35% yield in three years you have your coupon back again.

Jonathan Chappell -- Evercore ISI -- Analyst

Yes. I guess that is true. And I guess maybe one last way to --

Tor Olav Troim -- Chairman of the Board

We are here for sharing with you run this company for the benefits of the unit holders. And I think, whatever people are [indecipherable] but it is very frustrating to say the when -- maybe the shareholders if you cut the dividend I would say a lot of them say, if you don't give dividend and buy back share so I giving up. I think it is a hard turn to maneuver. And I think we try to do what is logic for the company. But I think the combination is the somewhat lower yield over time and building the company. I think that is what I as the Chairman think is right.

But obviously this isn't discussion going on with shareholders because I think you have to have a discussion going forward and I think some of that assets we are having there are great assets for this market very low which means low LNG prices. I think if we can come into these where we can put this FSRUs into these where they also have access to some of the capacity. It gives us opportunity to make more money than just a nominal payment. So we cannot upside in this contract in addition to just have the system, I think it is a wonderful business, to listen to the Golar LNG presentation earlier today, you just see the value of how is the throughput capacity today in this new market.

All these contracts on the fix spaces, I think that is what the amount that's developed in history. If you have had part of the stuff, we didn't have a license to bid normally at current LNG prices.

Jonathan Chappell -- Evercore ISI -- Analyst

I think a lot of people view the two existing entities as you would roll up the MLP into the CCAR, where maybe if the CCAR is really focused on the two ends of the supply chain, the upstream and the downstream and you are looking for something to do with the midstream. And as you said yourself, this market needs a midstream company. Is there a structure that makes sense where you actually spin off the LNG carriers at GLNG into GMLP and that all of a sudden funds, I don't know funds, but it drives the growth at GMLP and maybe with the backload that you have been building with the midstream part of GLNG that that solves some of the issue?

Tor Olav Troim -- Chairman of the Board

It is not something we have been specifically discussing but I think to create a midstream company on the company, which has upstream and downstream it is a matter where I said logic thing, but let's not take that as a kind of -- any kind of specific conclusion on this situation. Just say it as a general comment.

Jonathan Chappell -- Evercore ISI -- Analyst

Alright. Well I appreciate the really tough questions to answer. So thanks for being available, Tor. Thanks Graham.

Tor Olav Troim -- Chairman of the Board

Thanks, Jon.

Operator

The next question is coming from Ari Rosa from Bank of America. Please go ahead.

Ari Rosa -- Bank of America Merrill Lynch -- Analyst

Hi. Good afternoon guys. So just wanted to get an update on, when you look at the seasonality and balance that against obviously some of the volatility that is going on in markets right now, and some of the concerns around global growth given particularly the coronavirus. How do you think about the prospects for those rates recovering and the potential impact that it has on GMLP, particularly on the prospects for the Spirit, but just on the business broadly as well?

Tor Olav Troim -- Chairman of the Board

It won't have any impact on us, because we are effectively, apart from them, the Maria that has a few months in operating the spot market before she starts her long -- term two year contract, we don't really have any exposure to the spot market at the minute in the carrier sector. As a general comment I think the long term prospect for LNG is a growing one and therefore sort of current low prices that had been exacerbated by this coronavirus issue will be sort of short term played through. And then rates will come back to a kind of more normalized position.

In the meantime, as if you had listened to the GLNG call, it is going to make hay where the sun shines. Gas is very, very cheap. And if we can get that distributed downstream using FSRUs, and LNG and Golar Power, through the Golar Power they call it that's a fantastic opportunity.

Ari Rosa -- Bank of America Merrill Lynch -- Analyst

Sure. So, so that makes a lot of sense. But in terms of the prospects for getting the Spirit and Mazo contractor, does that maybe delay the timeline of that?

Graham Robjohns -- Chief Executive Officer

Well no, so I think a low gas price is super positive for the Golar Spirits. So I think that accelerates the possibility of getting her contracted. The Golar Mazo, we are coming into that kind of shoulder season, so we layer up until we start approaching the winter season and then we will bring her back into the market when we expect rates to recover.

Ari Rosa -- Bank of America Merrill Lynch -- Analyst

Got it. Okay. Thank you for the time.

Tor Olav Troim -- Chairman of the Board

I think what is important is to see that the most of the portfolio of Golar's FSRUs are FSRUS, which have gone in substitute all this use of the gas and of course lower the gas price, so our LNG prices grows to more economic and that conversion and the more valuable and necessary you will be.

So that is what just as important, what Graham says, current market for FSRU and I'll refer to the mining company, I referred to it earlier here today with benefit of $100 million more than $100 million by converting. I think the current environment is actually pretty good. I mean, you are talking about substitution, which is what we are doing.

Ari Rosa -- Bank of America Merrill Lynch -- Analyst

Yes. I guess that touches a little bit on kind of what I'm driving at, which is why isn't the rate market seemingly reflecting some of that outlook and clearly again, the share price is failing to capture that as well, right? That fairly upbeat outlook and so you know I'm just kind of looking for your guys views on where the disconnect exists?

Graham Robjohns -- Chief Executive Officer

So there are two different markets though. So the shipping market rates are coming down, because of the -- coming out to the winter season and LNG prices are low and therefore there is limited arbitrage and scope for shipping costs taking LNG from one basin to another basin. But that is separated from the FSRU market, I mean it wasn't really kind of point to great market in the FSRU space.

Tor Olav Troim -- Chairman of the Board

Well, as you remember also is that long year ago, the LNG price in the winter was around $9, and now that is $3. These companies who typically do these conversion, they don't do it overnight. It is not like if I got today the LNG market drops are going to go again FSRU tomorrow. These are processes. I think some of the mining companies that have actually spent three years dealing with them. So it is not, I think it is a long-term effect, you will see of this or medium term effects you cannot see it instantly.

Of course, there was too many FSRU in the market, there are in the process of being snapped up. There are not too many people ordering your own sovereignty. If you look one or two year old, you might see a very different market for FSRUs and you see today. On the carrier market, of course and in use or installation on the FSRUs means that we increase the market which increase transportation, which ultimately will be good for the carrier as well. The spread however, of course, when prices are low. There is no interface in arbitrage to make between trading between businesses. So that trade is gone.

Ari Rosa -- Bank of America Merrill Lynch -- Analyst

Yes, understood. Understood. Thanks for the time guys.

Tor Olav Troim -- Chairman of the Board

Thanks.

Operator

Next question is coming from the line of Chris Snyder from Deutsche Bank. Please go ahead.

Chris Snyder -- Deutsche Bank -- Analyst

Hey thanks for the questions guys. So starting with seeing the low LNG commodity price driving FSRU demand with all the contracts signed in recent months. In Golar Power, we have to assume love growing FSRU demand as it builds up the small scale footprint. I imagine they will be opportunities for Golar MLP to lease FSRU using the Golar Power overtime. But my question is, is there any interest or opportunities to sell and FSRU, I guess the Golar Spirit was the most obvious candidates into power. And then use that capital to either buy back shares given the 35% yield or deleverage the balance sheet, which also seems to be with maturities coming online find a weighing on the yield as well?

Tor Olav Troim -- Chairman of the Board

I think we are comfortable with a balance sheet both in the bonds and the bank refinancing, so I don't think necessarily we need to leverage. Also against order backlog, I think we are at the comfortable level. When it comes to buying back units, that is clearly a good alternative use for proceeds. If you can sell that for a reasonable amount of money to type in somewhere and the same goes from also of course most of which is currently at debt assets which laying down generating no income. And if you can use that to redeem shares that is going to yielding around 20% it is great financial transaction. It doesn't build a company, but it is a better return for the existing shareholders at least.

Chris Snyder -- Deutsche Bank -- Analyst

Yes. By the way, I generally agree on the balance sheet, but with the distribution coverage at 1.2 times pretty sizable backlog and a 35% yield. In my opinion it is showing that the market is having some level of concern around the 2020 and 2021 debt maturities. You guys seem pretty confident that you will be able to either pay these down or refine. Can you just maybe probably give a little more color on the $150 million return bond maturing later this year. Is the plan there to refinance or you guys are generating cash with decent cash pile on the balance sheet, maybe just taking that out with cash?

Graham Robjohns -- Chief Executive Officer

No it is absolutely to refinance it. As I said on the answer to an earlier question we are well advance with preparations for that refinancing. We have very good support and good dialogue with bond investors so we got no concerns about that refinance.

Chris Snyder -- Deutsche Bank -- Analyst

Okay fair enough. And then just one last question --

Tor Olav Troim -- Chairman of the Board

I think what it comes to, just to add on a little bit and why we have done it, if you are thinking about a structural transaction, which might increase the size of the company significantly, of course, that refinancing will be even easier and we will get on the terms on I think that is why we are just dragging our feet a little bit to see what kind of solution can we see for this company going forward. If you are building a bigger company, of course financing is even easier, but I think we are comfortable that you did the current basis we have refinances on as kind of attractive terms.

Chris Snyder -- Deutsche Bank -- Analyst

Okay, yeah, I appreciate that, I appreciate the color. My last one around Hilli Train 3, I know the partnership only owns, I think, 5% of the expansion of the project, but it is obviously very critical to the broader Golar story. And correct me if I'm wrong, but my math says the tolling agreement as it relates to Perenco's around $3.50 per MMBtu. And obviously, it is hard to know what Perenco's additional development costs are, with them being a private company, but certainly the only two layers shipping costs on top of the tolling agreement. So for this reason, it seems like the option is pretty or just highly dependent on the LNG commodity price, at least from my perspective. So can you, what kind of LNG pricing, do you think we need in the market to reasonably expect that this gets exercised?

Tor Olav Troim -- Chairman of the Board

I think first what you need to do is -- they have as informed in the GLNG call informed that they are going ahead with the drilling campaign in order to serve additional -- to prove up additional reserves. The only thing I would say without going into details of economics on the upstream, Perenco have also kind of part of the conversation is production which you also need to take into consideration but the cash breakeven even with $3.50 tariff and Perenco's upstream cost is significantly lower than anybody can deliver LNG out from US.

And of course, if it comes to the fact that we can extend the contract to larger than eight years, then of course you bid on things on and even saying three and four considered to kind of shipping something on tariffs and go down the bid from $3.50 or to extend increased volumes in order to make it even more competitive. But I can tell you there is no tellurian then there is no next decade or anything, it is close to the cash breakeven that Perenco have, even if you don't have tariff.

Graham Robjohns -- Chief Executive Officer

It is in earlier -- the Train 3 option is a bit lower than $3.50 as well.

Tor Olav Troim -- Chairman of the Board

I think it is mentioned about $3 for Train 3. So you can take off 50, 70 --

Chris Snyder -- Deutsche Bank -- Analyst

Yes, I mean, I completely agree that from Perenco's standpoint, definitely cheaper than any project the US can bring online. But I think the critical differences is that when they exercise the contract, it comes to market immediately and starts realizing the prices we are seeing say in 2020 whereas those other projects aren't coming online till 2024, 2025 and really who knows what the price is there, but generally definitely agree that.

Tor Olav Troim -- Chairman of the Board

Long term price for LNG today, to the prices of brands is probably I would say, around 9% of rent currently we are talking about period pricing, in both 11, 12 and within this and we did this deal originally.

Graham Robjohns -- Chief Executive Officer

Also Chris the good news is this. If the long-term of a gas or LNG is sub $5, then we have a fantastic downstream in FSRU business.

Chris Snyder -- Deutsche Bank -- Analyst

Certainly agree with that. Thanks for the time guys. Really appreciate it.

Tor Olav Troim -- Chairman of the Board

Thanks.

Operator

There are no more questions at this time. Please continue.

Graham Robjohns -- Chief Executive Officer

Okay. Thank you very much everybody. Some closing remarks, Tor might have some closing remarks, but I think in a nutshell for me, we have some great new contracts this quarter, which is good news, a really improving outlook for our FSRU business and a really solid financial footing.

Tor Olav Troim -- Chairman of the Board

Thank you, Graham, the $2.1 billion order a good contract backlog, don't look too much to what our competitor do with dividend, look at the company you are looking at and I think we are in pretty different position than the other ones. I think they have a good business going forward but it is a question about how these companies are going to look in one or two years time.

I hope that Golar LNG is the biggest shareholder on this company. We will do what is the right for the shareholders in this company as we build it going forward. I'm hopeful that we over the next quarter can come back to you with a proposal for what we think is the right thing to do with this company in order to create the value long-term both when it comes to the value of the shares as well as the value of the dividend stream. Thank you.

Graham Robjohns -- Chief Executive Officer

Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Graham Robjohns -- Chief Executive Officer

Tor Olav Troim -- Chairman of the Board

Michael Webber -- Webber Research -- Analyst

Randall Giveans -- Jefferies -- Analyst

Benjamin Nolan -- Stifel, Nicolaus & Company -- Analyst

Ben Nolan -- Stifel -- Analyst

Jonathan Chappell -- Evercore ISI -- Analyst

Ari Rosa -- Bank of America Merrill Lynch -- Analyst

Chris Snyder -- Deutsche Bank -- Analyst

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