Golar LNG Limited announced its preliminary fourth quarter and financial year 2021 results.
- Total Q4 operating revenues of $115.0 million and Adjusted EBITDA1 of $93.5 million.
- FLNG Hilli: Increased earnings from Brent Oil linked production, realized income increase of 45% on prior quarter to $12.9 million in Q4. Further 2022 earnings upside from Dutch Title Transfer Facility (“TTF”) linked production.
- Formation of Cool Company Limited (“CoolCo”) will reduce Golar’s Contractual Debt1 by approximately $833 million and will improve Golar’s cash and marketable securities position by $342 million.
- Entered into a new $250.0 million undrawn corporate bilateral facility with Sequoia Investment Management to further increase financial flexibility and facilitate FLNG growth.
- Simplification process concluded, focus shift to FLNG growth projects.
- Awarded 2021 winner of North America Best ESG Energy Business Strategy by Capital Finance International.
The formation and funding of LNG shipping pure-play CoolCo marks the last major step of Golar LNG Limited’s (“Golar” or “the Company”) corporate simplification process. Over the last 12 months that process has involved the sale of assets and subsidiaries for a total enterprise value of approximately $6.2 billion and the refinancing of around $1 billion of debt. This has crystalized underlying value and significantly strengthened our cash and marketable securities position to more than $1.1 billion, facilitating attractive future growth. Golar will now focus on further increasing the value generated by FLNG Hilli and delivering FLNG Gimi to BP. We will seek further FLNG growth projects, leveraging on our market leading track record of FLNG development, construction and operations. We continue to make significant progress on new FLNG projects with existing and new prospective clients and expect a contract award within 2022.
The FLNG Hilli achieved another quarter of 100% commercial uptime. As announced in July 2021, production has seen a 0.2MTPA increase, effective Q1 2022, where the tariff for the incremental production is linked to TTF gas prices. Based on expected TTF linked earnings for Q1 of $22.1 million, $19.0 million for each of Q2 and Q3, and a current Q4 TTF forward price of $29/MMBtu, Golar’s share of Hilli’s 2022 TTF linked income is expected to be approximately $80 million. This can be expected to increase (or decrease) by $0.9 million for each $1.00/MMBtu change in the TTF forward price. Current customer of FLNG Hilli, Perenco is progressing with its drilling campaign with the purpose to take advantage of its one-time three year option expiring in July 2022 to increase production by up to 0.4mtpa from 2023-2026 on the same TTF linked tolling agreement.
FLNG Gimi is 80% technically complete. Pre-commissioning and testing of multiple systems is now underway with construction on track to meet the scheduled 2023 start-up date for the 20-year lease and operate agreement with BP. This will unlock around $3.0 billion of earnings backlog1 to Golar. Assuming current Brent oil and TTF prices prevail and Perenco is able to support production of 1.6mtpa from 2023, Golar’s share of annual Adjusted EBITDA1 generation from Hilli and Gimi could exceed $400 million within 3 years, a quadrupling of 2021 FLNG related earnings.
The formation of CoolCo enables an attractive business separation of Golar’s 8 TFDE1 vessels, creating a leading market player for LNG shipping. By separating shipping activities from the FLNG segment, we allow for pure play exposures that may facilitate faster and more attractive growth for both business segments. Golar shares the enthusiasm of 38% CoolCo owner EPS Ventures Ltd. for further consolidation in the sector and sees some interesting near-term opportunities. As a result of the CoolCo transaction Golar will de-consolidate approximately $832.9 million of year-end Contractual Debt1 associated with the 8 TFDE1 vessels upon closing, expected during Q1 2022. Golar also expects to receive a cash settlement of approximately $217 million, whilst retaining meaningful exposure to an expected continued strengthening of LNG shipping fundamentals. Golar will equity account for its approximate 31% interest in CoolCo upon closing of the sale and purchase agreements.
The Company will continue to explore conversion, sale, or charter alternatives for its remaining steam turbine vessel Golar Arctic, and TFDE1 FSRU Golar Tundra. Golar Tundra is one of the highest-spec large FSRUs available in the market for potential charterers looking to secure a rapid backup source of gas. Recent political developments have enhanced the attractiveness of this position.
|(in thousands of $)||Q4 2021||Q4 2020||% Change||YTD 2021||YTD 2020||% Change|
|Net income/(loss) attributable to Golar LNG Ltd||6,843||8,126||(16)%||412,685||(273,557)||(251)%|
|Total operating revenues||115,048||118,684||(3)%||451,765||438,637||3%|
|Golar’s share of contractual debt 1||2,239,496||2,151,089||4%||2,239,496||2,151,089||4%|
Q4 highlights and recent events
Financial and corporate:
- Profitability: Net income attributable to Golar of $6.8 million, and Adjusted EBITDA1 of $93.5 million for the quarter, including:
- A $51.6 million non-cash mark-to-market loss recognized on New Fortress Energy Inc. (“NFE”) shares based on a December 31, 2021 carrying value of $24.14 per share.
- A $32.9 million non-cash gain recognized on Hilli Brent oil and TTF natural gas linked derivative instruments.
- A $12.9 million realized gain on the Hilli Brent oil derivative. This is expected to further increase to around $16.5 million in Q1 2022.
- Hedges: Entered into swap arrangements to hedge 100% of Golar’s exposure to Q2 and Q3 incremental Hilli TTF linked 2022 production at an average TTF price of $25.375/MMBtu.
- Unsecured Bond: Successfully placed USD $300.0 million Norwegian Bonds in October 2021.
- Convertible Bond: $315.6 million net outstanding balance of 2.75% $402.5 million Convertible Bonds as of December 31, 2021 redeemed on February 15, 2022.
- Credit Facility: $100.0 million December 2021 maturing Revolving Credit Facility (“RCF”) repaid in November 2021. $131.0 million of new $200.0 million 3-year corporate RCF drawn on February 4, 2022.
- New Corporate Facility: Executed a new $250 million 7-year bilateral corporate facility with Sequoia Investment Management on February 11, 2022, secured by Golar’s shareholding in FLNG Hilli and Gimi.
- Golar Tundra Loan: $158.0 million 5-year Golar Tundra facility that can be increased to $182.0 million executed in December 2021.
- CoolCo financing: agreed a new sustainability linked $570 million bank facility to finance the acquisition of 6 of the 8 carriers that CoolCo is acquiring from Golar. $240 million of existing lease financing on two vessels will be transferred to CoolCo.
- Utilization: Industry leading operations maintained with 100% commercial uptime by FLNG Hilli.
- FLNG Hilli now producing additional 0.2mtpa of agreed TTF linked 2022 production. Customer drilling campaign in progress to prove up additional reserves.
- Construction: FLNG Gimi conversion project 80% technically complete. Over 16-million man-hours worked with very strong safety record.
- Commercial: Continued progress on new FLNG projects with existing and new prospective clients. The Company expects a further contract award before year end 2022.
- Hilli earnings insulated from inflation by virtue of Brent oil and TTF commodity links. Gimi earnings protected by operating cost pass through provisions in contract.
- Shipping Rates: Q4 2021 TCE1 of $57,300 for the fleet, up 16% on Q3 2021 and 17% on Q4 2020.
- Utilization: Fleet utilization at 99%, in line with Q3 2021 and up on the 77% realized in Q4 2020.
- Time Charter: Fixed a carrier on a 12-month charter at around $100,000 per day in October 2021.
- Outlook: Attractive longer term rates hold up on the back of limited available tonnage despite near-term weakness in spot rates due to seasonality and fluctuations in regional LNG prices.
|(in thousands of $)||Total||Total||Total|
|Profit/(loss) before income taxes||45,820||(55,483)||39,025|
|Depreciation and amortization||26,464||26,489||26,826|
|Unrealized (gain)/loss on oil and gas derivative instruments||(32,944)||(64,092)||5,700|
|Other non-operating losses/(income), net||50,012||153,791||(5,682)|
|Gains on derivative instruments||(8,950)||(581)||(2,120)|
|Other financial items, net||1,283||(227)||3,538|
|Equity in net (earnings)/losses of affiliates||(1,641)||718||148|
|Net (income)/loss from discontinued operations||(2)||117||(4,481)|
|Adjusted EBITDA (1)||93,523||74,489||78,031|
|(in thousands)||Shipping||FLNG||Corporate and other||Total||Shipping||FLNG||Corporate and other||Total|
|Total operating revenues||52,440||56,406||6,202||115,048||45,829||54,480||6,294||106,603|
|Vessel operating expenses||(9,892)||(11,907)||(4,461)||(26,260)||(16,216)||(13,243)||(2,477)||(31,936)|
|Voyage, charterhire & commission income/(expenses)||260||(150)||232||342||(1,211)||(150)||(25)||(1,386)|
|Project development expenses/(income)||—||(858)||266||(592)||—||(1,371)||70||(1,301)|
|Realized gain on oil derivative instrument(2)||—||12,935||—||12,935||—||8,862||—||8,862|
|Other operating income||—||—||—||—||2,250||—||—||2,250|
(2) The line item “Realized and unrealized gain/(loss) on oil and gas derivative instruments” in the Condensed Consolidated Statements of Operations relating to income from the Hilli Liquefaction Tolling Agreement (“LTA”) and natural gas derivative is split into: “Realized gains on oil derivative instrument” and “Unrealized gain/(loss) on oil and gas derivative instrument”. The unrealized component represents a mark-to-market gain of $32.9 million (September 30, 2021: $64.1 million gain and December 31, 2020: $5.7 million loss) on the embedded oil and gas derivative, which represents the estimate of expected receipts under the remainder of the Brent oil linked clause and 2022 contracted capacity increase clause of the Hilli LTA. The realized component amounts to $12.9 million (September 30, 2021: $8.9 million and December 31, 2020: $nil) and represents the income in relation to the Hilli LTA receivable in cash.
|(in thousands of $)||Shipping||FLNG||Corporate and other||Total|
|Total operating revenues||50,727||62,489||5,468||118,684|
|Vessel operating expenses||(14,629)||(11,677)||89||(26,217)|
|Voyage, charterhire & commission expenses||(5,792)||—||—||(5,792)|
|Project development expenses||(8)||(1,363)||(1,416)||(2,787)|
|Other operating income||2,730||—||—||2,730|
|Adjusted EBITDA (1)||32,233||48,578||(2,780)||78,031|
We report today Q4 net income of $6.8 million attributable to Golar, and Adjusted EBITDA1 of $93.5 million, compared to a Q3 net loss attributable to Golar of $91.0 million, and Adjusted EBITDA1 of $74.5 million.
Total operating revenues increased from $106.6 million in Q3 to $115.0 million in Q4 and were further supported by a decrease in voyage, charter hire and commission expenses, down from $1.4 million in Q3 to $0.3 million credit in Q4. The increase in total operating revenues and decrease in voyage expenses was mainly attributable to a seasonally improved shipping performance.
Revenue from shipping, net of voyage, charter hire and commission expenses was $52.7 million and increased by $8.1 million from $44.6 million in Q3. The quarter began with quoted TFDE1 carrier headline spot rates at around $71,000 per day and ended with rates at around the same level, despite a significant spike in rates during the intervening period. Full fleet TCE1 earnings increased from $49,500 in Q3 to $57,300 in Q4 2021.
Total operating revenues from FLNG Hilli including base tolling fees and amortization of pre-acceptance deferred gains recognized increased $1.9 million to $56.4 million in Q4, against $54.5 million in Q3. Revenues from overproduction account for the $1.9 million Q4 increase. Total overproduction revenues for 2021 amount to $3.2 million and Golar received payment for this in Q1 2022.
An insurance receipt in Q4 accounts for most of the $5.6 million decrease in vessel operating expenses, down from $31.9 million in Q3 to $26.3 million in Q4. As a result of an overhead streamlining exercise earlier in the year and reduced employee stock compensation costs, Administrative expenses decreased from $8.6 million in Q3 to $8.0 million in Q4. Project development expenses at $0.6 million for Q4 declined by $0.7 million, with most of the reduction attributable to a decrease in FLNG front end engineering and design costs.
The Brent oil linked component of Hilli’s fees generates additional annual operating cash flows of approximately $3.1 million for every dollar increase in Brent Crude prices between $60.00 per barrel and the contractual ceiling. Billing of this component is based on a three-month look-back at average Brent Crude prices. As a result of rising prices, a $12.9 million realized gain on the oil derivative instrument (Golar 89.1% share equivalent to $11.5 million) was recorded in Q4, up from the $8.9 million realized in Q3.
A loss of hire claim in respect of a now repaired motor that failed on board one of the carriers accounts for the shipping related Other operating income of $2.3 million in Q3.
Depreciation and amortization, at $26.5 million was in line with the prior quarter.
The mark-to-market fair value of the Hilli Brent oil linked derivative asset increased by $18.4 million during the quarter, with a corresponding unrealized gain of the same amount recognized in the income statement. The fair value increase was driven by an upward movement in the expected future market price for Brent oil.
After entering into agreement with the customer in July 2021 to increase Hilli production by 0.2 million tons in 2022, a derivative asset, representing the fair value of the estimated discounted cash flows of payments due as a result of the TTF natural gas price linked additional 2022 production, was recognized on July 22, 2021. Like the Brent oil derivative above, the TTF derivative asset is adjusted to fair value at each balance sheet date and, on December 31, 2021, the value of this asset increased to $79.6 million. This resulted in the recognition of an unrealized TTF natural gas fair value gain in the income statement of $14.5 million in Q4. Together with the $18.4 million unrealized mark-to-market gain on the Brent oil derivative, a $32.9 million unrealized gain on oil and gas derivative instruments was reported in Q4.
A decline in the NFE share price between October 1 and December 31 resulted in the recognition of a Q4 unrealized mark-to-market loss of $51.6 million on Golar’s 18.6 million NFE shares. The fair value of these shares was $24.14 per share as of December 31, 2021. Netted against this was $1.9 million of dividend income from NFE following its dividend declaration on November 2, 2021. Together these accounted for most of the $50.0 million of other non-operating losses during the quarter.
Interest expense at $13.6 million was in line with the prior quarter. A further increase in interest swap rates contributed to a $9.0 million gain on derivative instruments in Q4, compared to a $0.6 million gain in Q3.
Equity in net earnings of affiliates of $1.6 million is comprised of Golar’s 23% investment in small-scale services provider Avenir LNG Limited (“Avenir”) and 50% stake in Egyptian Company for Gas Services. As it will have Board representation, Golar will also equity account for its 31% interest in affiliate, CoolCo. There will be no quarterly mark-to-market changes in the value of this investment. Indicative proforma results of the shipping segment, as at December 31, 2021 without the 8 TFDE1 LNG carriers is outlined in Appendix B.
Net income attributable to non-controlling interests relate to the Hilli, the Gimi and the finance lease lessor VIEs.
Balance Sheet and Liquidity:
Our cash position as at December 31, 2021 was $418.8 million. This was made up of $268.6 million of unrestricted cash1 and $150.2 million of restricted cash. Restricted cash includes $59.2 million relating to lessor-owned VIEs and $60.7 million relating to the Hilli Letter of Credit. Golar’s total share of this cash position therefore amounts to $359.6 million. As of December 31, 2021, Golar also had an undrawn RCF of up to $200 million secured by its 18.6 million NFE shares. On February 4, 2022, $131.0 million was drawn against this facility and on February 15, the outstanding balance of our $402.5 million 2.75% convertible bond, of $317.3 million (including interest) was fully redeemed. The Company expects to repay the RCF upon receipt of the net sales proceeds from the CoolCo transaction.
On February 11, 2022, Golar entered into a new $250.0 million bilateral facility with Sequoia Investment Management secured by the Company’s equity stakes in FLNG Hilli and Gimi. Available for drawdown until 30 June 2022 and carrying interest of LIBOR + 450-550bps subject to certain financial ratios, this facility has a tenor of 7-years with a bullet maturing in February 2029. Together with remaining cash on hand and approximately $217.0 million receivable in respect of the CoolCo transaction, this facility can be used for FLNG investments. Available funds for investment can be increased further using cash generated from operations and marketable securities.
|Funding for FLNG||USD Million|
|December 31, 2021, Total Golar cash||360|
|Feb 04, 2022: Drawdown against $200m 3-year corporate RCF||131|
|Feb 15, 2022: Redeem balance of 2.75% $402.5 million Convertible Bond (incl. interest)||(317)|
|Q1 2022 Proceeds expected from CoolCo spin||217|
|Undrawn balance of $200m corporate RCF (up to)||69|
|Undrawn balance of $250m Corporate bilateral facility (up to)||250|
|Potential near-term funds available for FLNG investment without recourse to investments||710|
|NFE, Avenir, and CoolCo shares(3)||623|
|Net of corporate RCF secured by NFE investment||(200)|
|Upsized potential funding available for FLNG investment||1,133|
(3) Based on values as of December 31, 2021 for NFE and Avenir and Golar 31% share of CoolCo at formation.
Inclusive of $10.5 million of capitalized interest, $27.3 million was invested in FLNG Gimi during the quarter, taking the total Gimi Asset under development balance as at December 31, 2021, to $877.8 million. Of this, $410.0 million had been drawn against the $700 million debt facility. Both the investment and debt drawn to date are reported on a 100% basis. Golar’s share of remaining capital expenditure, net of the Company’s share of the remaining $290.0 million undrawn debt amounts to $210.0 million. Fees receivable during the final commissioning phase can fund a portion of this. Subsequent to the quarter end, a further $75.0 million has been drawn against the $700 million facility.
Included within the $1.1 billion current portion of long-term debt and short-term debt as at December 31, 2021, is $315.6 million in respect of the Convertible Bond, and $707.5 million relating to lessor-owned VIE subsidiaries that Golar is required to consolidate in connection with seven sale and leaseback financed vessels, including the Hilli. Upon closing of the CoolCo transaction, Golar will be left with one sale and leaseback financed asset (Hilli) and therefore one lessor-owned VIE subsidiary to consolidate.
Of the $2.9 billion of Vessels and equipment, net on the balance sheet, $1.38 billion relates to the 8 TFDE1 carriers being transferred to CoolCo. Based on the agreed average TFDE1 ship valuation of $145 million, the transfer value of these carriers amounts to $1.16 billion. Golar therefore expects to record a loss on sale of between $210-$230 million in Q1 2022. Golar’s $125 million investment in CoolCo will be added to Investments in Affiliates on the balance sheet.
Of Golar’s $2.2 billion share of Contractual debt as of December 31, 2021, $0.8 billion relates to the 8 TFDE1 vessels and will be removed from the balance sheet, leaving $1.4 billion. Net of Total Golar cash of $0.4 billion, Net Debt1 falls to around $1.0 billion. If marketable securities were to be taken into account, this figure reduces by a further $0.6 billion. Assuming current commodity prices prevail, 2022 Adjusted EBITDA1 could exceed $200 million. This should increase further in 2023 if Perenco exercise their option to increase Hilli production to 1.6mtpa, and should exceed $400 million after the first full year of Gimi operations, expected in 2024. Offering strong debt coverage, near-term earnings power and meaningful growth potential that can be financed, the simplified Golar is expected to be well positioned for new FLNG projects.
Corporate and Other Matters:
As at December 31, 2021, there were 108.2 million shares outstanding. There were also 1.5 million outstanding stock options with an average price of $17.65 and 0.4 million unvested restricted stock units awarded. Of the initial $50.0 million approved share buyback scheme, $25.5 million remains available for further repurchases which will be opportunistically pursued.
In addition to disclosing financial results in accordance with U.S. generally accepted accounting principles (US GAAP), this earnings release and the associated investor presentation contains references to the non-GAAP financial measures which are included in the table below. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.
These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP. Non-GAAP measures are not uniformly defined by all companies, and may not be comparable with similarly titled measures and disclosures used by other companies. The reconciliations from these results should be carefully evaluated.
|Non-GAAP measure||Closest equivalent US GAAP measure||Adjustments to reconcile to primary financial statements prepared under US GAAP||Rationale for adjustments|
|Adjusted EBITDA||Net (loss)/income attributable to Golar LNG Limited||+/- Net financial expense
+ Other non-operating income/expenses
+/- Income taxes
+/- Equity in net (losses)/ earnings of affiliates
+/- Net income attributable to non-controlling interests
+/- Unrealized loss/(gain) on oil derivative instrument
+ Depreciation and amortization
+ Impairment of long-term assets
+ +/- Net income/(loss) from discontinued operations
|Increases the comparability of total business performance from period to period and against the performance of other companies by excluding the results of our equity investments, removing the impact of unrealized movements on embedded derivatives and removing the impact of depreciation, financing and tax items.|
|Last Twelve Months (“LTM”) Adjusted EBITDA||Net (loss)/income attributable to Golar LNG Limited||The sum of the last four quarters Adjusted EBITDA (defined above)||Same as Adjusted EBITDA.
The 12-month trailing metric removes the impact of seasonality on our results.
|Average daily TCE||Total Operating revenues||-Liquefaction services revenue
-Vessel and other management fees
-Voyage and commission expenses
The above total is then divided by calendar days less scheduled off-hire days.
|Measure of the average daily net revenue performance of a vessel.
Standard shipping industry performance measure used primarily to compare period-to-period changes in the vessel’s net revenue performance despite changes in the mix of charter types (i.e. spot charters, time charters and bareboat charters) under which the vessel may be employed between the periods.
Assists management in making decisions regarding the deployment and utilization of its fleet and in evaluating financial performance.
|Contractual debt||Total debt (current and non-current), net of deferred finance charges||+ VIE Consolidation Adjustment
+ Deferred Finance Charges
|We consolidate a number of lessor VIEs for our sale and leaseback facilities. This means that on consolidation, our contractual debt is eliminated and replaced with the lessor VIEs’ debt.
Contractual debt represents our debt obligations under our various financing arrangements before consolidating the lessor VIEs.
The measure enables investors and users of our financial statements to assess our liquidity and the split of our debt (current and non-current) based on our underlying contractual obligations. Furthermore, it aids comparability with competitors.
|Total Golar Cash||Golar cash based on GAAP measures:
+ Cash and cash equivalents
+ Restricted cash and short-term deposits (current and non-current)
|-VIE restricted cash and short-term deposits (current and non-current)||We consolidate a number of lessor VIEs for our sale and leaseback facilities. This means that on consolidation, we include restricted cash held by the lessor VIEs.
Total Golar Cash represents our cash and cash equivalents and restricted cash and short-term deposits (current and non-current) before consolidating the lessor VIEs.
Management believe that this measure enables investors and users of our financial statements to assess our liquidity and aids comparability with our competitors.
Reconciliations – Performance Measures (Average Daily TCE Rate)
|(in thousands of $)||Oct-Dec||Jul-Sep||Oct-Dec|
|Total operating revenues||115,048||106,603||118,684|
|Less: Liquefaction services revenue||(56,406)||(54,480)||(62,489)|
|Less: Vessel and other management fees||(6,202)||(6,294)||(5,468)|
|Time and voyage charter revenues||52,440||45,829||50,727|
|Less: Voyage and commission expenses||260||(1,210)||(5,792)|
|Calendar days less scheduled off-hire days||920||901||920|
|Average daily TCE rate (to the closest $100)||57,300||49,500||48,800|
Reconciliations – Liquidity Measures (Contractual Debt)
|(in thousands of $)||December 31, 2021||September 30, 2021||December 31, 2020|
|Total debt (current and non-current) net of deferred finance charges||2,409,800||2,281,721||2,350,782|
|VIE consolidation adjustments||315,652||321,427||293,236|
|Deferred finance charges||32,125||24,816||28,749|
|Total Contractual Debt||2,757,577||2,627,964||2,672,767|
|Less: Golar Partners’, Keppel’s and B&V’s share of the Hilli contractual debt||(395,081)||(404,231)||(431,678)|
|Less: Keppel’s share of the Gimi debt||(123,000)||(123,000)||(90,000)|
|Golar’s share of Contractual Debt||2,239,496||2,100,733||2,151,089|
Please see Appendix A for the capital repayment profile of Golar’s contractual debt.
Reconciliations – Liquidity Measures (Total Golar Cash)
|(in thousands of $)||December 31, 2021||September 30, 2021||December 31, 2020|
|Cash and cash equivalents||268,627||123,690||127,691|
|Restricted cash and short-term deposits (current and non-current)||150,165||144,480||163,181|
|Less: VIE restricted cash||(59,230)||(65,105)||(36,875)|
|Total Golar Cash||359,562||203,065||253,997|
Non-US GAAP Measures Used in Forecasting
Revenue Backlog: Revenue backlog is defined as the minimum contracted daily charter rate for each vessel multiplied by the number of scheduled hire days for the remaining contract term. Revenue backlog is not intended to represent Adjusted EBITDA or future cashflows that will be generated from these contracts. This measure should be seen as a supplement and not a substitute for our US GAAP measures of performance.
Earnings Backlog: Earnings backlog represents the share of contracted fee income for executed contracts less forecasted operating expenses for these contracts. In calculating forecasted operating expenditure, management has assumed that where there is an Operating Services Agreement the amount receivable under the services agreement will cover the associated operating costs, therefore revenue from operating services agreements is excluded.