Navigating the LNG Tide: Golar LNG's Convertible Notes as a Strategic Lever for Growth and Dilution Control

Golar LNG's recent $500 million convertible notes offering, with an option to raise up to $575 million, represents a masterclass in balancing growth ambitions with shareholder value preservation in the volatile LNG sector. By structuring the convertible notes to mitigate dilution while funding high-margin FLNG (Floating Liquefied Natural Gas) projects, Golar has created a capital allocation framework that could position it as a leader in the emerging floating LNG market. Let's dissect how this convertible structure works, why insider participation matters, and whether the risks of conversion or project execution outweigh the strategic upside.

The Convertible Structure: A Dilution Mitigation Play

Golar's convertible notes, due in 2025, carry an initial conversion price of $403.01 per share, based on a conversion rate of 2.4813 shares per $1,000 note. Crucially, the notes have 0% interest, eliminating interest expense drag while the company focuses on FLNG execution. Conversion can occur under two scenarios:
1. Before maturity: If Golar's share price exceeds 130% of the conversion price ($523.91) for at least 20 trading days in any 30-day period.
2. After February 15, 2025: Holders can convert at any time, regardless of price.

The capped call transactions (costing $46 million) further insulate shareholders by capping dilution at the initial conversion price. This means even if shares surge above $403.01, Golar won't issue more shares than anticipated, preserving equity ownership.

As of June 2025, Golar's shares trade around $380, below the conversion threshold, reducing near-term dilution risk. However, investors must monitor whether the stock climbs toward the $500+ range as FLNG projects deliver cash flow.

Capital Allocation: A Dual-Purpose Strategy

The proceeds are split into two strategic buckets:
1. Share Buybacks: Up to $2.5 million in common shares repurchased, or ~2.3% of outstanding shares. This directly offsets potential dilution from convertible note conversions while signaling confidence in the stock's value.
2. FLNG Expansion: The bulk funds FLNG projects, including:
- FLNG Gimi: Achieved first LNG cargo in April 2025, with a $3 billion EBITDA backlog once its Commercial Operations Date (COD) is finalized in Q2.
- MKII FLNG: A $700 million conversion project (3.5 mtpa capacity) set to deliver by Q4 2027, chartered to Argentina's SESA for 20 years.
- Hilli Redeployment: FLNG Hilli's shift to SESA adds $285 million annual EBITDA from 2027 onward.

This allocation ensures Golar reinvests in high-margin FLNG assets while maintaining financial flexibility. The SESA charters alone add $13.7 billion in EBITDA over 20 years, a testament to the strategic value of these projects.

Insider Participation: Voting with Their Wallets

Directors and officers have signaled confidence by expressing intent to purchase shares and notes. This insider alignment is critical:
- $39 million divestment from Avenir LNG in early 2025 reduced non-core distractions.
- $371 million net proceeds from the FLNG Gimi refinancing further bolster liquidity.

Insiders' participation reduces agency risks and underscores their belief in Golar's FLNG-led growth narrative.

Risks: Conversion Triggers and Project Execution

1. Conversion Risk: If shares climb above $523.91, conversion could dilute equity. However, the capped calls limit this exposure, and FLNG projects' cash flows may justify higher valuations.
2. FLNG Project Delays: Delays in Hilli's redeployment or MKII's conversion could strain liquidity. Golar's $678 million cash buffer and $1.2 billion refinancing provide a cushion.
3. Commodity Price Volatility: The SESA charters include commodity-linked tariffs. While upside exists if gas prices rise, prolonged weakness below $8/MMBtu could reduce returns.

Investment Thesis: Long-Term LNG Bulls Rejoice, But Mind the Triggers

Golar's convertible notes offering is a textbook example of capital efficiency in a capital-intensive industry. By:
- Using non-dilutive convertible debt to fund growth,
- Repurchasing shares to offset dilution, and
- Focusing on FLNG's high margins and contracted cash flows,

Golar minimizes balance sheet strain while capitalizing on the $3.5 trillion LNG market opportunity.

Recommendation:
- Bullish investors with a 3+ year horizon should accumulate shares, targeting dips below $350. The FLNG backlog and Argentina's regulatory protections (RIGI framework) underpin stability.
- Caution: Short-term traders must avoid positions if shares near $500, as conversion could trigger volatility. Monitor EBITDA growth from Gimi and SESA closely.

In a sector where execution is everything, Golar's structured approach balances ambition with discipline—making it a compelling play for LNG believers.

Final Verdict: Golar LNG's convertible notes offering is a well-calibrated move to fuel FLNG dominance while shielding shareholders from dilution. For now, the upside outweighs the risks—but stay vigilant on conversion triggers and project milestones.