424B4 1 a2203311z424b4.htm 424B4

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Filed Pursuant to Rule 424(b)(4)
Registration Statement No. 333-173160

           PROSPECTUS

GRAPHIC

12,000,000 Common Units

Representing Limited Partner Interests

$22.50 per common unit

          Golar LNG Limited, our sole unitholder, is selling 12,000,000 of our common units. Golar LNG Limited has granted the underwriters an option to purchase up to 1,800,000 additional common units to cover over-allotments, if any.

          We are a Marshall Islands limited partnership formed by Golar LNG Limited, a leading independent owner and operator of floating storage and regasification units (or FSRUs) and liquefied natural gas (or LNG) carriers, to own and operate FSRUs and LNG carriers under long-term charters. Although we are organized as a partnership, we have elected to be treated as a corporation solely for U.S. federal income tax purposes. This is the initial public offering of our common units. The common units have been approved for listing on The Nasdaq Global Market, subject to official notice of issuance, under the symbol "GMLP."



          Investing in our common units involves risks. Please read "Risk Factors" beginning on page 21.

          These risks include the following:

    We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay the minimum quarterly distribution on our common units and subordinated units.

    We will be required to make substantial capital expenditures to maintain and expand our fleet, which will reduce our cash available for distribution.

    We have only four vessels in our fleet. Any limitation in the availability or operation of those vessels could have a material adverse effect on our business, our results of operation and financial condition.

    We currently derive all of our revenue from three customers, and the loss of any of these customers would result in a significant loss of revenues and cash flow.

    Petrobras has the right to purchase the Golar Spirit at any time and has the right to purchase the Golar Winter at any time after September 7, 2011. If Petrobras exercises its options to purchase one or both of these vessels, it could have a material adverse effect on our cash flow and our ability to make distributions to our unitholders.

    Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to you.

    We may be unable to exercise our right to purchase two additional FSRUs from Golar LNG Limited and Golar LNG Energy Limited, which could have an adverse effect on our expected plans for growth.

    Our growth depends on the continued growth in demand for LNG, FSRUs and LNG carriers.

    We depend on Golar LNG Limited and certain of its affiliates to assist us in operating and expanding our business.

    Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of the unitholders owning more than 4.9% of our common units.

    Our general partner and its other affiliates own a controlling interest in us and have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor their own interests to your detriment.

    Fees and cost reimbursements, which our manager will determine for services provided to us and certain of our subsidiaries, will be substantial, will be payable regardless of our profitability and will reduce our cash available for distribution to you.

    You will experience immediate and substantial dilution of $18.20 per common unit.

          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

       
 
 
  Per Common Unit
  Total
 

Public offering price

  $22.50   $270,000,000
 

Underwriting discount(1)

  $  1.35   $  16,200,000
 

Proceeds, before expenses, to Golar LNG Limited

  $21.15   $253,800,000

 

(1)
Excludes an aggregate structuring fee of $1.35 million payable to Citigroup Global Markets Inc. and Evercore Group L.L.C.

          The underwriters expect to deliver the common units to purchasers on or about April 13, 2011.



Citi   BofA Merrill Lynch   Morgan Stanley



Raymond James   RBC Capital Markets   Wells Fargo Securities



BNP PARIBAS   DnB NOR Markets   Evercore Partners

April 7, 2011


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        You should rely only on the information contained in this prospectus and in any free writing prospectus made available by us. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.



TABLE OF CONTENTS

SUMMARY

  1
 

Golar LNG Partners LP

  1
 

Our Relationship with Golar and the Fredriksen Group

  2
 

Business Opportunities

  2
 

Competitive Strengths

  3
 

Business Strategies

  4
 

Risk Factors

  4
 

Formation Transactions

  5
 

Simplified Organizational and Ownership Structure After this Offering

  7
 

Our Management

  8
 

Principal Executive Offices and Internet Address; SEC Filing Requirements

  8
 

Summary of Conflicts of Interest and Fiduciary Duties

  8
 

The Offering

  10
 

Summary Financial and Operating Data

  16
 

Forecasted Cash Available for Distribution

  20

RISK FACTORS

 
21
 

Risks Inherent in Our Business

  21
 

Risks Inherent in an Investment in Us

  43
 

Tax Risks

  52

FORWARD-LOOKING STATEMENTS

 
56

USE OF PROCEEDS

 
58

CAPITALIZATION

 
59

DILUTION

 
60

OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS

 
61
 

General

  61
 

Forecasted Results of Operations for the Twelve Months Ending March 31, 2012

  63
 

Forecast Assumptions and Considerations

  65
 

Forecasted Cash Available for Distribution

  71

HOW WE MAKE CASH DISTRIBUTIONS

 
74
 

Distributions of Available Cash

  74
 

Operating Surplus and Capital Surplus

  75
 

Subordination Period

  78
 

Distributions of Available Cash From Operating Surplus During the Subordination Period

  80
 

Distributions of Available Cash From Operating Surplus After the Subordination Period

  80
 

General Partner Interest

  80
 

Incentive Distribution Rights

  81

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Percentage Allocations of Available Cash From Operating Surplus

  81
 

General Partner's Right to Reset Incentive Distribution Levels

  82
 

Distributions From Capital Surplus

  85
 

Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

  86
 

Distributions of Cash Upon Liquidation

  86

SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

 
88

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 
92
 

Overview and Background

  92
 

Factors Affecting Our Results of Operations

  96
 

Customers

  98
 

Inflation and Cost Increases

  98
 

Results of Operations

  99
 

Liquidity and Capital Resources

  107
 

Debt and Lease Restrictions

  115
 

Derivatives

  116
 

Capital Commitments

  116
 

Critical Accounting Policies

  116
 

Recently Issued Accounting Standards

  120
 

Contractual Obligations

  121
 

Quantitative and Qualitative Disclosures about Market Risk

  121

INDUSTRY

 
123
 

Overview of the Natural Gas Market

  123
 

Liquefied Natural Gas

  125
 

Floating LNG Regasification

  132
 

LNG Carriers

  134

BUSINESS

 
140
 

Overview

  140
 

Our Relationship with Golar and the Fredriksen Group

  140
 

Business Opportunities

  141
 

Our Competitive Strengths

  143
 

Business Strategies

  144
 

Our Fleet and Customers

  145
 

FSRU Charters

  148
 

LNG Carrier Charters

  150
 

Classification, Inspection and Maintenance

  153
 

Safety, Management of Ship Operations and Administration

  153
 

Crewing and Staff

  154
 

Risk of Loss, Insurance and Risk Management

  155
 

Environmental and Other Regulation

  156
 

Properties

  165
 

Legal Proceedings

  165
 

Employees

  165
 

Taxation of the Partnership

  165

MANAGEMENT

 
172
 

Management of Golar LNG Partners LP

  172
 

Directors

  174
 

Executive Officers

  175
 

Reimbursement of Expenses of Our General Partner

  176

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Executive Compensation

  176
 

Compensation of Directors

  177

SELLING UNITHOLDER AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 
178

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 
179
 

Distributions and Payments to our General Partner and Its Affiliates

  179
 

Agreements Governing the Transactions

  181
 

Fleet Management Agreements

  186
 

Revolving Credit Facility with Golar LNG Limited

  192
 

Security Interest in Earnings from Golar Winter Time Charter

  192
 

Other Related Party Transactions

  193

CONFLICTS OF INTEREST AND FIDUCIARY DUTIES

 
194
 

Conflicts of Interest

  194
 

Fiduciary Duties

  198

DESCRIPTION OF THE COMMON UNITS

 
202
 

The Units

  202
 

Transfer Agent and Registrar

  202
 

Transfer of Common Units

  202

THE PARTNERSHIP AGREEMENT

 
204
 

Organization and Duration

  204
 

Purpose

  204
 

Cash Distributions

  204
 

Capital Contributions

  204
 

Voting Rights

  204
 

Applicable Law; Forum, Venue and Jurisdiction

  206
 

Limited Liability

  207
 

Issuance of Additional Securities

  208
 

Tax Status

  208
 

Amendment of the Partnership Agreement

  209
 

Action Relating to the Operating Subsidiary

  211
 

Merger, Sale, Conversion or Other Disposition of Assets

  211
 

Termination and Dissolution

  212
 

Liquidation and Distribution of Proceeds

  212
 

Withdrawal or Removal of our General Partner

  212
 

Transfer of General Partner Interest

  214
 

Transfer of Ownership Interests in General Partner

  214
 

Transfer of Incentive Distribution Rights

  214
 

Change of Management Provisions

  214
 

Limited Call Right

  215
 

Board of Directors

  215
 

Meetings; Voting

  216
 

Status as Limited Partner or Assignee

  217
 

Indemnification

  217
 

Reimbursement of Expenses

  218
 

Books and Reports

  218
 

Right to Inspect Our Books and Records

  218
 

Registration Rights

  218

UNITS ELIGIBLE FOR FUTURE SALE

 
219

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

 
220

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Election to be Treated as a Corporation

  220
 

U.S. Federal Income Taxation of U.S. Holders

  220
 

U.S. Federal Income Taxation of Non-U.S. Holders

  225
 

Backup Withholding and Information Reporting

  226

NON-UNITED STATES TAX CONSIDERATIONS

 
227
 

Marshall Islands Tax Consequences

  227
 

United Kingdom Tax Consequences

  227

UNDERWRITING

 
229
 

Notice to Prospective Investors in the European Economic Area

  232
 

Notice to Prospective Investors in the United Kingdom

  232
 

Notice to Prospective Investors in Germany

  233
 

Notice to Prospective Investors in the Netherlands

  233
 

Notice to Prospective Investors in Switzerland

  234

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

 
235

LEGAL MATTERS

 
235

EXPERTS

 
235

EXPENSES RELATED TO THIS OFFERING

 
236

WHERE YOU CAN FIND MORE INFORMATION

 
236

INDUSTRY AND MARKET DATA

 
237

INDEX TO FINANCIAL STATEMENTS

 
238

APPENDIX A—Form of First Amended and Restated Agreement of Limited Partnership of Golar LNG Partners LP

 
A-i


APPENDIX B—Glossary of Terms


 


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SUMMARY

        This summary highlights information contained elsewhere in this prospectus. Unless we otherwise specify, all references to information and data in this prospectus about our business and fleet refer to our business and fleet immediately after the closing of this offering. You should read the entire prospectus carefully, including the historical financial statements and the notes to those financial statements. The information presented in this prospectus assumes, unless otherwise noted, that the underwriters' over-allotment option is not exercised. You should read "Risk Factors" for more information about important risks that you should consider carefully before buying our common units. We include a glossary of some of the terms used in this prospectus in Appendix B. Unless otherwise indicated, all references to "dollars" and "$" in this prospectus are to, and amounts are presented in, U.S. Dollars.

        References in this prospectus to "Golar LNG Partners LP," "Golar LNG Partners," "we," "our," "us" or similar terms when used in a historical context refer to the assets of Golar LNG Limited and its vessels and the subsidiaries that hold interests in the vessels in our fleet. When used in the present tense or prospectively, those terms refer, depending on the context, to Golar LNG Partners LP or any one or more of its subsidiaries, or to all of such entities.

        References in this prospectus to "our general partner" refer to Golar GP LLC, the general partner of Golar LNG Partners. References in this prospectus to "Golar" refer, depending on the context, to Golar LNG Limited (NasdaqGS: GLNG) and to any one or more of its direct and indirect subsidiaries, including Golar LNG Energy Limited (OSL: GOLE) and Golar Management Limited. References in this prospectus to "Golar Energy" refer, depending on the context, to Golar LNG Energy Limited and to any one or more of its subsidiaries, including Golar Management Limited. References in this prospectus to "Golar Management" are to Golar Management Limited, a wholly-owned subsidiary of Golar Energy. References in this prospectus to Golar Wilhelmsen refer to Golar Wilhelmsen AS, a company that is 51% owned by Golar and 49% owned by Wilhelmsen Ship Management (Norway) AS. Golar LNG Limited owns an approximate 61% interest in Golar Energy, a publicly traded company that is involved in the ownership, operation and conversion of liquefied natural gas (or LNG) carriers and the development of energy projects based on LNG.


Golar LNG Partners LP

        We are a growth-oriented limited partnership formed by Golar LNG Limited (NasdaqGS: GLNG; OSE: GOL) to own and operate floating storage and regasification units (or FSRUs) and LNG carriers under long-term charters, which we define as charters of five years or more. We intend to leverage the relationships, expertise and reputation of Golar, a leading independent owner and operator of FSRUs and LNG carriers, to pursue growth opportunities in these areas. While we intend to operate our assets under long-term charters with stable cash flows, Golar intends to focus primarily on FSRU and LNG project development, LNG trading and LNG transportation, storage and regasification activities with contract terms and associated cash flows that are more short-term and/or variable in nature.

        Our fleet will consist of:

    a 100% interest in the Golar Spirit, an FSRU retrofitted in 2007 from an LNG carrier built in 1981 that is currently operating under a time charter that expires in 2018 with Petróleo Brasileiro S.A. (or Petrobras), the majority state-owned oil and gas company of Brazil;

    a 100% interest in the Golar Winter, an FSRU retrofitted in 2008 from an LNG carrier built in 2004 that is currently operating under a time charter that expires in 2019 with Petrobras;

    a 100% interest in the Methane Princess, an LNG carrier built in 2003 that is currently operating under a time charter that expires in 2024 with BG Group PLC (or BG Group); and

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    a 60% interest in the Golar Mazo, an LNG carrier built in 2000 that is currently operating under a time charter that expires in 2017 with PT Pertamina (PERSERO) (or Pertamina), the state-owned oil and gas company of Indonesia.

        We further intend to leverage our relationship with Golar to make accretive acquisitions of FSRUs and LNG carriers with long-term charters from Golar and third parties. For example, we will have the right to purchase two additional FSRUs from Golar:

    the Golar Freeze, an FSRU recently retrofitted from an LNG carrier built in 1977 that is currently operating under a time charter that expires in 2020 with Dubai Supply Authority (or DUSUP), the exclusive purchaser of natural gas in Dubai; and

    the Khannur, an LNG carrier built in 1977, following the completion of its FSRU retrofitting and acceptance by its charterer, which is expected to occur in the first quarter of 2012. The Khannur is expected to operate under an 11-year time charter with PT Nusantara Regas (or Nusantara Regas) for the West Java LNG project in Indonesia. Nusantara Regas is a joint venture that is 60% owned by Pertamina and 40% owned by the Indonesia distribution firm PT Perusahaan Gas Negara.


Our Relationship with Golar and the Fredriksen Group

        One of our principal strengths is our relationship with Golar and the Fredriksen Group of companies. Our relationship with Golar will give us access to Golar's long-standing relationships with major energy companies and shipbuilders. We will have access to Golar's customer relationships and its technical, commercial and managerial expertise, which we believe will make us more competitive when seeking additional customers. In addition, trusts established by John Fredriksen, Golar's Chairman, for the benefit of his immediate family, indirectly control investment companies that are the main shareholders of a number of other large publicly traded companies involved in various sectors of the shipping industry, including Frontline Limited, Ship Finance International Limited, Golden Ocean Group Limited and Seadrill Limited. We refer to these companies collectively as the Fredriksen Group. We believe there are opportunities for operational, customer and shipyard-based synergies due to our broader relationship with the Fredriksen Group. We can provide no assurance, however, that we will realize any benefits from our relationship with the Fredriksen Group. Furthermore, the Fredriksen Group is not prohibited from competing with us pursuant to the terms of the omnibus agreement we will enter into with Golar LNG Limited and Golar Energy at the closing of this offering.

        Upon completion of this offering, Golar LNG Limited will own our 2.0% general partner interest, 81% of our incentive distribution rights and a 67.9% limited partner interest in us and Golar Energy will own 19% of our incentive distribution rights. In connection with future vessel acquisitions by us from Golar Energy, Golar LNG Limited may transfer a portion (up to an additional 30% in the aggregate, or 49% in total) of the incentive distribution rights to Golar Energy. Golar intends to utilize us as its primary growth vehicle to pursue the acquisition of long-term stable cash flow generating FSRUs and LNG carriers. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement" for a description of our rights to acquire certain assets of Golar LNG Limited and Golar Energy.


Business Opportunities

        We believe that the following factors create opportunities for us to successfully execute our business plan and grow our business:

    Advantages of FSRU solution.  We believe industry participants will select FSRUs for a variety of reasons, including speed of installation, operational flexibility, ease of permitting and, in some cases, lower cost. We believe FSRUs represent an attractive solution to the increasing demand in

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      countries around the world for timely, low-cost LNG receiving terminals to fulfill their LNG import needs.

    Strong demand for FSRUs and growth in LNG vessels.  Wood Mackenzie Limited, an independent consulting and research company (or Wood Mackenzie), forecasts global demand for LNG will increase by 2.6 trillion cubic feet (or Tcf) per annum or 25% from 2010 to 2015. Improvements in the technologies for liquefaction (the process of liquefying natural gas) and regasification (the process of returning LNG to its gaseous state) have led to greater efficiencies in the LNG supply chain, which, together with increased energy requirements and demand for natural gas, have led to increases in LNG demand, particularly from markets such as China, Brazil, Argentina, Indonesia and Kuwait, which are not members of the Organization for Economic Co-operation and Development (or OECD). We believe that this increase in demand for LNG and in the number and scope of LNG trade routes will result in greater accessibility to LNG and lead to increased LNG supply and demand for LNG transportation.

    Stringent customer standards favor established, high-quality operators.  Major energy companies have developed increasingly stringent operational and financial pre-qualification standards that FSRU and LNG vessel operators must meet prior to bidding on nearly all significant regasification and LNG transportation contracts. We believe that these rigorous and comprehensive standards will increase our ability to compete effectively for new LNG supply contracts relative to less qualified or experienced operators.

    Increasing ownership of world LNG carrier fleet by independent owners.  Independent owners have increased their ownership of the world LNG carrier fleet from approximately 16% in 2005 to 23% in 2008 and comprised 27% of the operational fleet as of March 2011. We believe that this trend will continue and that we will benefit from the opportunities it presents to independent LNG vessel owners such as ourselves.

        We can provide no assurance, however, that the industry dynamics described above will continue or that we will be able to expand our business. Please read "Risk Factors" and "Industry."


Competitive Strengths

        We believe that our future prospects for success are enhanced by the following aspects of our business:

    Secure and stable cash flows from long-term contracts with leading energy companies.  All four of our vessels operate under long-term charters with creditworthy counterparties (Pertamina, BG Group and Petrobras). As of December 31, 2010, these charters had an average remaining duration of approximately 9.0 years, no direct exposure to commodity prices and limited exposure to foreign exchange rates.

    Leadership position in FSRU technology.  We believe that Golar's experience in retrofitting the world's first three LNG carriers into FSRUs provides us a first-mover advantage in securing future FSRU opportunities and that other companies may experience additional time and cost in the engineering and development phases of an FSRU retrofitting due to their lack of experience. To date, Golar remains the only company to have retrofitted LNG carriers into FSRUs.

    Strong relationship with Golar that enhances opportunities for future business.  Golar has a strong reputation in the LNG industry, and we expect to benefit from our relationship with Golar in connection with vessel acquisition opportunities and in developing and maintaining relationships with participants in the LNG industry.

    Relationship with the Fredriksen Group.  We believe there are opportunities for meaningful operational and relationship-based synergies with members of the Fredriksen Group. For

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      example, there are technical similarities between the floating production storage and offloading (or FPSO) systems developed by Frontline Limited and the FSRU system developed by Golar, which enabled Golar to make use of a common pool of engineering talent. Furthermore, Golar has benefited in its dealings with shipbuilders and customers due to its affiliation with the Fredriksen Group.

    Financial ability to pursue growth opportunities.  We expect to have access to public debt and equity markets in order to pursue acquisitions and other expansion opportunities.

        We can provide no assurance, however, that we will be able to utilize our strengths described above. For further discussion of the risks that we face, please read "Risk Factors."


Business Strategies

        Our primary business objective is to increase quarterly distributions per unit over time by executing the following strategies:

    Pursue strategic and accretive acquisitions of FSRUs and LNG carriers.  We believe our affiliation with Golar positions us to pursue a broader array of growth opportunities, including strategic and accretive acquisitions from Golar, with Golar or from third parties.

    Compete for long-term charter contracts for FSRUs and LNG carriers when attractive opportunities arise.  We intend to participate in competitive tender processes and engage in negotiated transactions with potential charterers for both FSRUs and LNG carriers when attractive opportunities arise by leveraging the strength of the industry expertise of Golar and the Fredriksen Group, as well as our publicly traded partnership status.

    Manage our fleet and our customer relationships to provide a stable base of cash flows and superior operating performance.  We intend to manage the stability of cash flows in our fleet by actively seeking the extension or renewal of existing charters, entering into new long-term charters with current customers and identifying potential business opportunities with new high-quality charterers.

        We can provide no assurance, however, that we will be able to implement our business strategies described above. For further discussion of the risks that we face, please read "Risk Factors."


Risk Factors

        An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units, including those set forth below. Please read carefully these and other risks described under "Risk Factors" beginning on page 21 of this prospectus.

    We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay the minimum quarterly distribution on our common units and subordinated units.

    We will be required to make substantial capital expenditures to maintain and expand our fleet, which will reduce our cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.

    We have only four vessels in our fleet. Any limitation in the availability or operation of those vessels could have a material adverse effect on our business, results of operations and financial condition and could significantly reduce our ability to make distributions to our unitholders.

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    We currently derive all of our revenue from three customers, and the loss of any of these customers would result in a significant loss of revenues and cash flow.

    Petrobras has the right to purchase the Golar Spirit at any time and has the right to purchase the Golar Winter at any time after September 7, 2011. If Petrobras exercises its option to purchase one or both of these vessels, it could have a material adverse effect on our cash flow and our ability to make distributions to our unitholders.

    Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to you.

    We may be unable to purchase the Golar Freeze or the Khannur, which could have an adverse effect on our expected plans for growth.

    Fluctuations in overall LNG demand growth, including in areas such as North America, could adversely affect our ability to secure future long-term charters.

    Our growth depends on the continued growth in demand for LNG, FSRUs and LNG carriers.

    We depend on Golar and certain of its affiliates, including Golar Management and Golar Wilhelmsen, to assist us in operating and expanding our business.

    Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of the unitholders owning more than 4.9% of our common units.

    Our general partner and its other affiliates, including Golar, own a controlling interest in us and have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor their own interests to your detriment.

    Fees and cost reimbursements, which Golar Management will determine for services provided to us and certain of our subsidiaries, will be substantial, will be payable regardless of our profitability and will reduce our cash available for distribution to you.

    You will experience immediate and substantial dilution of $18.20 per common unit.


Formation Transactions

General

        We were formed on September 24, 2007 as a Marshall Islands limited partnership to own and operate FSRUs and LNG carriers under charters for five or more years.

        In November 2008, Golar contributed to us a 100% interest in certain subsidiaries which owned a 60% interest in the Golar Mazo and which leased the Golar Spirit and the Methane Princess. Since our formation, we have remained a wholly-owned subsidiary of Golar, and since November 2008, our vessels have continued to operate as part of Golar's larger fleet. Prior to the pricing of this offering, Golar transferred to us a 100% interest in the subsidiary which leases the Golar Winter and the legal title to the Golar Spirit. At or prior to the closing of this offering, the following transactions will occur:

    we will issue to Golar LNG Limited 23,127,254 common units and 15,949,831 subordinated units, representing a 98% limited partner interest in us in exchange for its existing 98% limited partner interest in us;

    we will issue to Golar GP LLC, a wholly-owned subsidiary of Golar LNG Limited, 797,492 general partner units, representing a 2.0% general partner interest in us, and 81% of our incentive distribution rights, which will entitle our general partner to increasing percentages of the cash we distribute in excess of $0.4428 per unit per quarter;

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    we will issue to Golar Energy 19% of our incentive distribution rights, which will entitle Golar Energy to increasing percentages of the cash we distribute in excess of $0.4428 per unit per quarter;

    Golar LNG Limited will sell 12,000,000 common units to the public in this offering, representing a 30.1% limited partner interest in us; and

    Golar LNG Limited will grant the underwriters a 30-day option to purchase up to 1,800,000 additional common units of ours to cover overallotments, if any.

        In addition, in connection with this offering, we entered or will enter into the following agreements:

    a $20.0 million revolving credit agreement with Golar LNG Limited;

    a management and administrative services agreement with Golar Management, pursuant to which Golar Management will agree to provide us administrative and certain management services; and

    an omnibus agreement with Golar LNG Limited, Golar Energy, our general partner and others governing, among other things:

    to what extent we, Golar LNG Limited and Golar Energy may compete with each other;

    our option to purchase the Golar Freeze from Golar LNG Limited at any time within 24 months after the closing of this offering;

    our option to purchase the Khannur from Golar Energy upon completion of its retrofitting and acceptance by its charterer and upon reaching an agreement with Golar Energy regarding its purchase price;

    certain rights of first offer on certain FSRUs and LNG carriers operating under charters of five or more years as described under "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement;" and

    Golar LNG Limited's provision of certain indemnities to us.

        For further details on our agreements with Golar and its affiliates (including Golar Energy), including amounts involved, please read "Certain Relationships and Related Party Transactions."

        We are a holding entity and conduct our operations and business through subsidiaries, as is common with publicly traded limited partnerships, to maximize operational flexibility. We believe that conducting our operations through a publicly traded limited partnership will offer us the following advantages:

    access to the public equity and debt capital markets;

    a lower cost of capital for expansion and acquisitions; and

    an enhanced ability to use equity securities as consideration in future acquisitions.

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Simplified Organizational and Ownership Structure After this Offering

        The following diagram depicts our simplified organizational and ownership structure after giving effect to the offering and related transactions described above, assuming no exercise of the underwriters' over-allotment option:

 
  Number of
Units
  Percentage
Ownership
 

Public Common Units

    12,000,000     30.1 %

Golar LNG Limited Common Units

    11,127,254     27.9  

Golar LNG Limited Subordinated Units

    15,949,831     40.0  

General Partner Units

    797,492     2.0  
           

    39,874,577     100.0 %
           

GRAPHIC


(1)
Chinese Petroleum Corporation holds the remaining 40% interest in the Golar Mazo.

(2)
These vessels are subject to UK tax leases, and the title to those vessels is held by the vessel lessors. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Borrowing Activities—Capital Lease Obligations."

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Our Management

        Our partnership agreement provides that our general partner will delegate to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis. Other than our secretary, we do not have any executive officers and rely solely on the executive officers of Golar Management who will perform executive officer services for our benefit pursuant to a management and administrative services agreement and who will be responsible for our day-to-day management subject to the direction of our board of directors. All references in this prospectus to "our officers" refer to our secretary and those officers of Golar Management who perform executive officer functions for our benefit. We will reimburse Golar Management for its reasonable costs and expenses incurred in connection with providing management, administrative, financial and other support services to us. In addition, we will pay Golar Management a management fee equal to 5% of its costs and expenses incurred in connection with providing these services to us. We expect that we will pay Golar Management approximately $1.4 million in total under the management and administrative services agreement for the twelve months ending March 31, 2012. For a more detailed description of this arrangement, please read "Management—Directors," "Management—Executive Officers" and "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Management and Administrative Services Agreement."

        In addition, each vessel in our fleet is subject to management agreements pursuant to which certain commercial and technical management services are provided by Golar Management and certain other affiliates of Golar, including Golar Wilhelmsen, a company that is 51% owned by Golar and 49% owned by Wilhelmsen Ship Management (Norway) AS. We expect that the aggregate amount of fees and expenses to be paid by our shipowning subsidiaries under these agreements for the twelve months ending March 31, 2012 will be approximately $2.5 million. For a more detailed description of the commercial and technical management of our fleet, please read "Certain Relationships and Related Party Transactions—Fleet Management Agreements."


Principal Executive Offices and Internet Address; SEC Filing Requirements

        Our registered and principal executive offices are located at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda, and our phone number is +1 (441) 295-4705. We are registered in Bermuda as an "overseas partnership" pursuant to the Bermuda Overseas Partnership Act. The purpose of this registration is to permit the partnership to maintain its principal office in, and to be administered from, Bermuda. We expect to make our periodic reports and other information filed with or furnished to the United States Securities and Exchange Commission (or the SEC) available, free of charge, through our website at www.golarlngpartners.com, which will be operational after this offering, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Please read "Where You Can Find More Information" for an explanation of our reporting requirements as a foreign private issuer.


Summary of Conflicts of Interest and Fiduciary Duties

        Our general partner and our directors have a legal duty to manage us in a manner beneficial to our unitholders, subject to the limitations described under "Conflicts of Interest and Fiduciary Duties." This legal duty is commonly referred to as a "fiduciary duty." Our directors have fiduciary duties to manage us in a manner beneficial to us, our general partner and our limited partners. Our executive officers, other than our secretary, are employed by Golar Management and have fiduciary duties to that entity and not to us. As a result of these relationships, conflicts of interest may arise between us and our unaffiliated limited partners on the one hand, and Golar LNG Limited and Golar Energy and their

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other affiliates, including our general partner, on the other hand. The resolution of these conflicts may not be in the best interest of us or our unitholders. In particular:

    all of our current executive officers and four of our current directors also serve as executive officers or directors of Golar LNG Limited, Golar Energy or Golar Management;

    Golar LNG Limited and Golar Energy and their other affiliates may compete with us, subject to the restrictions contained in the omnibus agreement; and

    we have entered into arrangements, and may enter into additional arrangements, with Golar and certain of its subsidiaries, relating to the purchase of additional vessels, the provision of certain services to us by Golar Management and other matters. In the performance of their obligations under these agreements, Golar and its subsidiaries, other than Golar GP LLC, our general partner, are not held to a fiduciary duty standard of care to us, our general partner or our limited partners, but rather to the standard of care specified in these agreements.

        For a more detailed description of our management structure, please read "Management—Directors," "Management—Executive Officers" and "Certain Relationships and Related Party Transactions."

        Although a majority of our directors will over time be elected by common unitholders, our general partner will likely have substantial influence on decisions made by our board of directors.

        For a more detailed description of the conflicts of interest and fiduciary duties of our general partner and its affiliates, please read "Conflicts of Interest and Fiduciary Duties." For a description of our other relationships with our affiliates, please read "Certain Relationships and Related Party Transactions."

        In addition, our partnership agreement contains provisions that reduce the standards to which our general partner and our directors would otherwise be held under Marshall Islands law. For example, our partnership agreement limits the liability and reduces the fiduciary duties of our general partner and our directors to our unitholders. Our partnership agreement also restricts the remedies available to unitholders. By purchasing a common unit, you are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner, its affiliates or our directors, all as set forth in the partnership agreement. Please read "Conflicts of Interest and Fiduciary Duties" for a description of the fiduciary duties that would otherwise be imposed on our general partner, its affiliates and our directors under Marshall Islands law, the material modifications of those duties contained in our partnership agreement and certain legal rights and remedies available to our unitholders under Marshall Islands law.

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The Offering

Common units offered to the public by Golar LNG Limited

  12,000,000 common units.

 

13,800,000 common units if the underwriters exercise their over-allotment option in full.

Units outstanding after this offering

 

23,127,254 common units and 15,949,831 subordinated units, representing a 58% and 40% limited partner interest in us, respectively.

Use of proceeds

 

We will not receive any proceeds from the sale of our common units by Golar LNG Limited.

Over-allotment option

 

Golar LNG Limited will grant the underwriters a 30-day option to purchase up to 1,800,000 additional common units to cover over-allotments, if any. The exercise of the underwriters' option will not affect the total number of units outstanding or the amount of cash needed to pay the minimum quarterly distribution.

Cash distributions

 

We intend to make minimum quarterly distributions of $0.3850 per common unit ($1.54 per unit on an annualized basis) to the extent we have sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to our general partner. In general, we will pay any cash distributions we make each quarter in the following manner:

 

•       first, 98.0% to the holders of common units and 2.0% to our general partner, until each common unit has received a minimum quarterly distribution of $0.3850 plus any arrearages from prior quarters;

 

•       second, 98.0% to the holders of subordinated units and 2.0% to our general partner, until each subordinated unit has received a minimum quarterly distribution of $0.3850; and

 

•       third, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unit has received an aggregate distribution of $0.4428.

 

Within 45 days after the end of each fiscal quarter (beginning with the quarter ending June 30, 2011), we will distribute all of our available cash to unitholders of record on the applicable record date. We will adjust the minimum quarterly distribution for the period from the closing of the offering through June 30, 2011 based on the actual length of the period. Our ability to pay our minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption "Our Cash Distribution Policy and Restrictions on Distributions."

   

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If cash distributions to our unitholders exceed $0.4428 per unit in a quarter, holders of our incentive distribution rights (initially, our general partner and Golar Energy) will receive increasing percentages, up to 48%, of the cash we distribute in excess of that amount. We refer to these distributions as "incentive distributions." We must distribute all of our cash on hand at the end of each quarter, less reserves established by our board of directors to provide for the proper conduct of our business, to comply with any applicable debt instruments or to provide funds for future distributions. We refer to this cash as "available cash," and we define its meaning in our partnership agreement attached as Appendix A hereto and in the glossary of terms attached as Appendix B hereto. The amount of available cash may be greater than or less than the aggregate amount of the minimum quarterly distribution to be distributed on all units.

 

We believe, based on the estimates contained in and the assumptions listed under "Our Cash Distribution Policy and Restrictions on Distributions—Forecasted Cash Available for Distribution," that we will have sufficient cash available for distribution to enable us to pay the minimum quarterly distribution of $0.3850 on all of our common and subordinated units for each quarter through March 31, 2012. However, unanticipated events may occur which could adversely affect the actual results we achieve during the forecast period. Consequently, our actual results of operations, cash flows and financial condition during the forecast period may vary from the forecast, and such variations may be material. Prospective investors are cautioned to not place undue reliance on the forecast and should make their own independent assessment of our future results of operations, cash flows and financial condition.

 

Please read "Our Cash Distribution Policy and Restrictions on Distributions—Forecasted Cash Available for Distribution."

Subordinated units

 

Golar LNG Limited will initially own all of our subordinated units. The principal difference between our common units and subordinated units is that in any quarter during the subordination period the subordinated units are entitled to receive the minimum quarterly distribution of $0.3850 per unit only after the common units have received the minimum quarterly distribution and arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages. The subordination period generally will end if we have earned and paid at least $0.3850 on each outstanding common and subordinated unit and the corresponding distribution on the general partner's 2.0% interest for any three consecutive four-quarter periods ending on or after March 31, 2016.

   

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For purposes of determining whether the subordination period will end, the three consecutive four-quarter periods for which the determination is being made may include one or more quarters with respect to which arrearages in the payment of the minimum quarterly distribution on the common units have accrued, provided that all such arrearages have been repaid prior to the end of each such four-quarter period. If the subordination period ends as a result of us having met the tests described above, all subordinated units will convert into common units on a one-for-one basis, and the common units will no longer be entitled to arrearages.

 

In addition, at any time on or after March 31, 2016, provided there are no arrearages in the payment of the minimum quarterly distribution on the common units and subject to approval by our conflicts committee, the holder or holders of a majority of our subordinated units will have the option to convert each subordinated unit into a number of common units at a ratio that may be less than one-to-one on a basis equal to the percentage of available cash from operating surplus paid out over the previous four-quarter period in relation to the total amount of distributions required to pay the minimum quarterly distribution in full over the previous four quarters.

 

Please read "How We Make Cash Distributions—Subordination Period."

General Partner's right to reset the target distribution levels

 

Our general partner, as the initial holder of a majority of our incentive distribution rights, has the right, at a time when there are no subordinated units outstanding and our general partner and Golar Energy have received incentive distributions at the highest level to which they are entitled (48%) for each of the prior four consecutive fiscal quarters, to reset the initial cash target distribution levels at higher levels based on the distribution at the time of the exercise of the reset election. If our general partner transfers all or a portion of the incentive distribution rights it holds in the future, then the holder or holders of a majority of our incentive distribution rights will be entitled to exercise this right. Following a reset election by our general partner, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (we refer to such amount as the "reset minimum quarterly distribution") and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution amount as our current target distribution levels.

   

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In connection with resetting these target distribution levels, our general partner and Golar Energy will be entitled to receive a number of common units equal to that number of common units whose aggregate quarterly cash distributions equaled the average of the distributions to our general partner and Golar Energy on the incentive distribution rights in the prior two quarters. For a more detailed description of our general partner's right to reset the target distribution levels upon which the incentive distribution payments are based and the concurrent right of our general partner and Golar Energy to receive common units and our general partner to receive general partner units in connection with this reset, please read "How We Make Cash Distributions—General Partner's Right to Reset Incentive Distribution Levels."

Issuance of additional units

 

We can issue an unlimited number of additional units, including units that are senior to the common units in rights of distribution, liquidation and voting, on the terms and conditions determined by our board of directors, without the consent of our unitholders. Please read "Units Eligible for Future Sale" and "The Partnership Agreement—Issuance of Additional Securities."

Board of directors

 

Our current board of directors consists of five members appointed by our general partner. Prior to our first annual meeting of unitholders in 2012, our general partner expects to appoint two additional directors, increasing the size of our board of directors to seven. We will hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before the meeting. Our general partner will have the right to appoint three of the seven members of our board of directors who will serve as directors for terms determined by our general partner. At our 2012 annual meeting, the common unitholders will elect four of our directors. The four directors elected by our common unitholders at our 2012 annual meeting will be divided into three classes to be elected by our common unitholders annually on a staggered basis to serve for three-year terms. The majority of our directors will be non-United States citizens or residents.

Voting rights

 

Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, to preserve our ability to be exempt from U.S. federal income tax under Section 883 of the U.S. Internal Revenue Code of 1986, as amended (or the Code), if at any time, any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for

   

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purposes of nominating a person for election to our board), determining the presence of a quorum or for other similar purposes under our partnership agreement, unless otherwise required by law. The voting rights of any such unitholders in excess of 4.9% will effectively be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.

 

You will have no right to elect our general partner on an annual or other continuing basis. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding common and subordinated units, including any common and subordinated units owned by our general partner and its affiliates, voting together as a single class. Upon consummation of this offering, Golar LNG Limited will own 11,127,254 of our common units and all of our subordinated units, representing 69.3% of the outstanding common and subordinated units. If the underwriters' over-allotment option is exercised in full, Golar LNG Limited will own 9,327,254 of our common units and all of our subordinated units, representing 64.7% of the outstanding common and subordinated units. As a result, you will initially be unable to remove our general partner without its consent because Golar LNG Limited will own sufficient units upon completion of this offering to be able to prevent the general partner's removal. Please read "The Partnership Agreement—Voting Rights."

Limited call right

 

If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all, but not less than all, of the remaining common units at a price equal to the greater of (x) the average of the daily closing prices of the common units over the 20 trading days preceding the date three days before the notice of exercise of the call right is first mailed and (y) the highest price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right.

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U.S. federal income tax considerations

 

Although we are organized as a partnership, we have elected to be treated as a corporation for U.S. federal income tax purposes. Consequently, all or a portion of the distributions you receive from us will constitute dividends for such purposes. The remaining portion of such distributions will be treated first as a non-taxable return of capital to the extent of your tax basis in your common units and, thereafter, as capital gain. We estimate that if you hold the common units that you purchase in this offering through the period ending December 31, 2013, the distributions you receive, on a cumulative basis, that will constitute dividends for U.S. federal income tax purposes will be approximately 70% of the total cash distributions received during that period. Please read "Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Ratio of Dividend Income to Distributions" for the basis for this estimate. Please also read "Risk Factors—Tax Risks" for a discussion of proposed legislation relating to the taxation of dividends. For a discussion of other material U.S. federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read "Material U.S. Federal Income Tax Considerations," and for a discussion of material income tax consequences that may be relevant to prospective unitholders under Marshall Islands law and United Kingdom law, please read "Non-United States Tax Considerations."

Exchange listing

 

The common units have been approved for listing on The Nasdaq Global Market, subject to official notice of issuance, under the symbol "GMLP."

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Summary Financial and Operating Data

        The following table presents, in each case for the periods and as of the dates indicated, summary historical combined financial and operating data of Golar LNG Partners, which includes the subsidiaries of Golar that have interests in the vessels in our fleet. These entities have been or will have been acquired as a reorganization under common control and have therefore been recorded at Golar's book values. The historical combined financial data of Golar LNG Partners as of December 31, 2009 and 2010 and for the years ended December 31, 2008, 2009 and 2010 are derived from the audited combined financial statements of Golar LNG Partners, prepared in accordance with accounting principles generally accepted in the United States (or U.S. GAAP), which are included elsewhere in this prospectus. The historical combined financial data of Golar LNG Partners as of December 31, 2008 are derived from the audited combined financial statements of Golar LNG Partners, prepared in accordance with U.S. GAAP, which are not included in this prospectus.

        The following financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the historical combined financial statements of Golar LNG Partners and the notes thereto, our unaudited pro forma combined balance sheet and the notes thereto and our forecasted results of operations for the twelve months ending March 31, 2012 included elsewhere in this prospectus.

        Our financial position, results of operations and cash flows could differ from those that would have resulted if we operated autonomously or as an entity independent of Golar LNG Limited in the periods for which historical financial data are presented below, and such data may not be indicative of our future operating results or financial performance.

 
  Year Ended December 31,  
 
  2008   2009   2010  
Income Statement Data:
  (in thousands)
 

Total operating revenues

  $ 97,620   $ 119,865   $ 152,647  

Vessel operating expenses(1)

    18,813     24,707     25,718  

Voyage expenses(2)

    6,347     2,320     282  

Administrative expenses

    5,005     4,135     4,615  

Depreciation and amortization

    20,375     23,664     24,539  

Impairment of long-lived assets

    110     1,500     1,500  

Loss on sale of long-lived assets

    (430 )        
               

Total operating expenses

    50,220     56,326     56,654  
               

Operating income

    47,400     63,539     95,993  

Interest income

    18,301     5,238     2,472  

Interest expense

    (39,753 )   (24,447 )   (14,120 )

Other financial items, net

    (38,909 )   12,334     (16,821 )
               

(Loss) income before income taxes and non-controlling interest

    (12,961 )   56,664     67,524  

Income taxes

    815     (2,366 )   (539 )
               

Net (loss) income before non-controlling interest

    (12,146 )   54,298     66,985  

Non-controlling interest

    (6,705 )   (9,012 )   (9,250 )
               

Net (loss) income attributable to Golar LNG Partners owners

  $ (18,851 ) $ 45,286   $ 57,735  
               

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  Year Ended December 31,  
 
  2008   2009   2010  
Balance Sheet Data (at end of period):
  (in thousands, except fleet data
and average daily data)

 

Cash and cash equivalents

  $ 19,956   $ 26,870   $ 29,341  

Restricted cash and short-term investments(3)

    25,174     23,925     16,492  

Long-term restricted cash(3)

    241,451     251,277     140,970  

Vessels, net

    184,425     181,030     331,958  

Vessels under capital leases, net(4)

    533,167     559,448     383,695  

Total assets

    1,030,454     1,062,373     921,066  

Current portion of long-term debt

    27,295     31,514     33,381  

Current portion of obligations under capital leases

    2,606     3,837     3,113  

Long-term debt

    326,327     329,814     296,432  

Long-term obligations under capital leases(4)

    356,936     391,660     268,380  

Non-controlling interest(5)

    41,688     49,340     55,470  

Owner's equity

    151,041     168,423     156,588  

Cash Flow Data:

                   

Net cash provided by operating activities

  $ 38,753   $ 60,028   $ 89,616  

Net cash (used in) provided by investing activities

    (69,252 )   (25,289 )   106,831  

Net cash (used in) provided by financing activities

    33,463     (27,825 )   (193,976 )

Fleet Data:

                   

Number of vessels at end of period(6)

    4     4     4  

Average number of vessels during period(6)

    4     4     4  

Average age of vessels

    12     13     14  

Total calendar days for fleet(7)

    1,464     1,460     1,460  

Total operating days for fleet

    1,175     1,261     1,460  

Other Financial Data:

                   

Adjusted EBITDA(8)

  $ 67,775   $ 87,203   $ 120,532  

Average daily time charter equivalent earnings (TCE)(8)

    77,679     89,935     104,360  

Average daily vessel operating expenses(9)

    12,851     16,923     17,615  

(1)
Vessel operating expenses are the direct costs associated with operating a vessel, including crew wages, vessel supplies, routine repairs, maintenance, insurance, lubricating oils and management fees.

(2)
All of our vessels have been operated under time charters during the periods presented. Under a time charter, the charterer pays substantially all of the vessel voyage expenses, which are primarily fuel and port charges. However, we may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during a period of drydocking.

(3)
Restricted cash and short-term investments consist of bank deposits, which may only be used to settle the Golar Mazo loan or lease payments in respect of the Golar Spirit (in 2009 and 2008) and the Methane Princess.

(4)
During the periods presented, the Golar Spirit, the Golar Winter and the Methane Princess were subject to lease financing arrangements, which are classified as capital leases. Under the arrangements for the Golar Spirit and the Methane Princess, we borrowed under term loans and deposited the proceeds into restricted cash accounts. Concurrently therewith, we entered into capital leases for the vessels, and the vessels were recorded as assets on our balance sheet. These restricted cash deposits, plus the interest earned on the deposits, approximate the remaining

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    amounts we owe under the capital lease arrangements. Where movements in interest rates result in a surplus, this is released to working capital. Similarly, where a deficit arises, this is funded through working capital. In these instances, we consider payments under our capital leases to be funded through our restricted cash deposits, and our continuing obligation is the repayment of the term loans. During December 2010, the outstanding lease liability on the Golar Spirit was repaid from the associated restricted cash deposit. Under U.S. GAAP, we record both the obligations under the capital leases and the term loans as liabilities, and both the restricted cash deposits and our vessels under capital leases as assets. This accounting treatment has the effect of increasing both our assets and liabilities by the amount of restricted cash deposits relating to the corresponding capital lease obligations.

    As of December 31, 2010, our total assets and total debt each included $147.8 million of restricted cash deposits.

(5)
Non-controlling interest refers to a 40% interest in the Golar Mazo owned by Chinese Petroleum Corporation.

(6)
In each of the periods presented, we held a 60% ownership interest in the Golar Mazo and a 100% interest in our three other vessels.

(7)
The operating days for our fleet is the total number of days in a given period that the vessels were in our possession less the total number of days off-hire. We define days off-hire as days lost to, among other things, operational deficiencies, drydocking for repairs, maintenance or inspection, equipment breakdowns, special surveys and vessel upgrades, delays due to accidents, crewing strikes, certain vessel detentions or similar problems, or our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, or periods of commercial waiting time during which we do not earn charter hire.

(8)
Non-GAAP Financial Measures

    Adjusted EBITDA. Earnings before interest, other financial items, taxes, non-controlling interest and depreciation and amortization is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our financial and operating performance. We believe that adjusted EBITDA assists our management and investors by increasing the comparability of our performance from period to period and against the performance of other companies in our industry that provide adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, taxes and depreciation and amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including adjusted EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength in assessing whether to continue to hold common units.

    Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, adjusted EBITDA as

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    presented below may not be comparable to similarly titled measures of other companies. The following table reconciles net income to adjusted EBITDA.

 
  Year Ended December 31,  
 
  2008   2009   2010  
 
  (in thousands)
 

Net (loss) income attributable to Golar LNG Partners owners

  $ (18,851 ) $ 45,286   $ 57,735  

Depreciation and amortization

    20,375     23,664     24,539  

Interest income

    (18,301 )   (5,238 )   (2,472 )

Interest expense

    39,753     24,447     14,120  

Other financial items, net

    38,909     (12,334 )   16,821  

Income taxes and non-controlling interest

    5,890     11,378     9,789  
               

Adjusted EBITDA

  $ 67,775   $ 87,203   $ 120,532  
               

    TCE. It is standard industry practice to measure the revenue performance of a vessel in terms of average daily time charter equivalent earnings (or TCE). For time charters, this is calculated by dividing total operating revenues, less any voyage expenses, by the number of calendar days minus days for scheduled off-hire. The following table reconciles our total operating revenues to average daily TCE.

 
  Year Ended December 31,  
 
  2008   2009   2010  
 
  (dollars in thousands,
except average daily TCE)

 

Total operating revenues

  $ 97,620   $ 119,865   $ 152,647  

Voyage expenses

    (6,347 )   (2,320 )   (282 )
               

  $ 91,273   $ 117,545   $ 152,365  

Calendar days less scheduled off-hire days

    1,175     1,307     1,460  

Average daily TCE

  $ 77,679   $ 89,935   $ 104,360  
(9)
We calculate average daily vessel operating expenses by dividing vessel operating expenses by the number of calendar days.

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Forecasted Cash Available for Distribution

        The amount of the minimum quarterly distribution is $0.3850 per unit, or $1.54 per unit per year. Based on our financial forecast and related assumptions, we forecast that our cash available for distribution generated during the twelve months ending March 31, 2012 will be approximately $66.0 million. This amount would be sufficient to pay 100% of the minimum quarterly distribution of $0.3850 per unit on all of our common units, subordinated units and general partner units for the four quarters ending March 31, 2012. Please read "Our Cash Distribution Policy and Restrictions on Distributions" for more information on our forecast and the significant assumptions underlying it.

        Our forecast reflects our judgment, as of the date of this prospectus, of conditions we expect to exist and the course of action we expect to take during the twelve months ending March 31, 2012. The assumptions and estimates used in the forecast are inherently uncertain and represent those that we believe are significant to our financial forecast. We believe that we have a reasonable objective basis for those assumptions. We believe our actual results of operations will approximate those reflected in our forecast, but we can give no assurance that our forecasted results will be achieved. There will likely be differences between our forecast and the actual results and those differences could be material. Our operations are subject to numerous risks that are beyond our control. If the forecast is not achieved, we may not be able to pay cash distributions on our units at the initial distribution rate stated in our cash distribution policy or at all.

        The forecast has been prepared by and is the responsibility of our management. Neither our independent registered public accounting firm, nor any other independent registered public accounting firm have compiled, examined or performed any procedures with respect to the forecasted financial information contained herein, nor have they expressed any opinion or given any other form of assurance on such information or its achievability, and they assume no responsibility for such forecasted financial information. Our independent registered accounting firm's report included in this prospectus relates to historical financial information of Golar LNG Partners LP. That report does not extend to the tables and the related forecasted financial information contained in this section and should not be read to do so. When considering our forecast of cash available for distribution for the twelve months ending March 31, 2012, you should keep in mind the risk factors and other cautionary statements under the heading "Forward-Looking Statements" and "Risk Factors" and elsewhere in this prospectus. Any of these factors or the other risks discussed in this prospectus could cause our financial condition results of operations to vary significantly from those set forth in the financial forecast and the forecast of cash available for distribution set forth below.

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RISK FACTORS

        Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the following risk factors together with all of the other information included in this prospectus in evaluating an investment in our common units.

        If any of the following risks were actually to occur, our business, financial condition, results of operations and cash flows could be materially adversely affected. In that case, we might not be able to make distributions on our common units, the trading price of our common units could decline, and you could lose all or part of your investment.


Risks Inherent in Our Business

We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay the minimum quarterly distribution on our common units and subordinated units.

        We may not have sufficient cash from operations to pay the minimum quarterly distribution of $0.3850 per unit on our common units and subordinated units. The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which may fluctuate from quarter to quarter based on the risks described in this section, including, among other things:

    the rates we obtain from our charters;

    the level of our operating costs, such as the cost of crews and insurance;

    the continued availability of natural gas production, liquefaction and regasification facilities;

    demand for LNG;

    supply of LNG carriers;

    prevailing global and regional economic and political conditions;

    currency exchange rate fluctuations; and

    the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business.

        In addition, the actual amount of cash we will have available for distribution will depend on other factors, including:

    the level of capital expenditures we make, including for maintaining or replacing vessels, building new vessels, acquiring existing vessels and complying with regulations;

    the number of unscheduled off-hire days for our fleet and the timing of, and number of days required for, scheduled drydocking of our vessels;

    our debt service requirements and restrictions on distributions contained in our debt instruments;

    the level of debt we will incur if we exercise our option to purchase the Golar Freeze from Golar LNG Limited or the Khannur from Golar Energy upon completion of its retrofitting and acceptance by its charterer and upon reaching an agreement with Golar Energy regarding its purchase price;

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    whether Petrobras exercises its right to purchase the Golar Spirit at any time or its right to purchase the Golar Winter at any time after September 7, 2011.

    fluctuations in interest rates;

    fluctuations in our working capital needs;

    variable tax rates;

    our ability to make, and the level of, working capital borrowings; and

    the amount of any cash reserves established by our board of directors.

        The amount of cash we generate from our operations may differ materially from our profit or loss for the period, which will be affected by non-cash items. As a result of this and the other factors mentioned above, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.

The assumptions underlying our forecast of cash available for distribution are inherently uncertain and are subject to risks and uncertainties that could cause actual results to differ materially from those forecasted.

        The forecast of cash available for distribution set forth in "Our Cash Distribution Policy and Restrictions on Distributions" includes our forecast of operating results and cash flows for the twelve months ending March 31, 2012. The financial forecast has been prepared by management and we have not received an opinion or report on it from our or any other independent auditor. The assumptions underlying the forecast are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted. If we do not achieve the forecasted results, we may not be able to pay the full minimum quarterly distribution or any amount on our common units or subordinated units, in which event the market price of the common units may decline materially.

We must make substantial capital expenditures to maintain and replace the operating capacity of our fleet, which will reduce our cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.

        We must make substantial capital expenditures to maintain and replace, over the long-term, the operating capacity of our fleet, which we estimate will average approximately $23.1 million per year. Maintenance and replacement capital expenditures include capital expenditures associated with drydocking a vessel, modifying an existing vessel, acquiring a new vessel or otherwise replacing current vessels at the end of their useful lives to the extent these expenditures are incurred to maintain or replace the operating capacity of our fleet. These expenditures could vary significantly from quarter to quarter and could increase as a result of changes in:

    the cost of labor and materials;

    customer requirements;

    fleet size;

    the cost of replacement vessels;

    length of charters;

    governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and

    competitive standards.

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        Our partnership agreement requires our board of directors to deduct estimated maintenance and replacement capital expenditures, instead of actual maintenance and replacement capital expenditures, from operating surplus each quarter in an effort to reduce fluctuations in operating surplus as a result of significant variations in actual maintenance and replacement capital expenditures each quarter. The amount of estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by our conflicts committee at least once a year. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and replacement capital expenditures, the amount of cash available for distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted from operating surplus. If our board of directors underestimates the appropriate level of estimated maintenance and replacement capital expenditures, we may have less cash available for distribution in periods when actual capital expenditures exceed our previous estimates.

We will be required to make substantial capital expenditures to expand the size of our fleet. Depending on whether we finance our expenditures through cash from operations or by issuing debt or equity securities, our ability to make cash distributions may be diminished, our financial leverage could increase or our unitholders could be diluted.

        We will be required to make substantial capital expenditures to expand the size of our fleet. We generally will be required to make significant installment payments for retrofitting of LNG carriers to FSRUs and acquisitions of LNG carriers. We and Golar regularly evaluate and pursue opportunities to provide floating LNG storage and regasification services and LNG transportation for new or expanding LNG projects. Upon our expected purchase of the Golar Freeze and the Khannur, or if we choose to purchase any other FSRUs or LNG carriers (either from Golar or independently), we plan to finance the cost either through cash from operations, borrowings or debt or equity financings.

        Use of cash from operations to expand our fleet will reduce cash available for distribution to unitholders. Our ability to obtain bank financing or to access the capital markets may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions, changes in the LNG industry and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for future capital expenditures could have a material adverse effect on our business, results of operations and financial condition and on our ability to make cash distributions. Even if we are successful in obtaining necessary funds, the terms of any debt financings could limit our ability to pay cash distributions to unitholders. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing additional equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to pay the minimum quarterly distribution to unitholders, which could have a material adverse effect on our ability to make cash distributions.

We have only four vessels in our fleet. Any limitation in the availability or operation of those vessels could have a material adverse effect on our business, results of operations and financial condition and could significantly reduce our ability to make distributions to our unitholders.

        Our fleet currently consists of two FSRU vessels and two LNG carriers. If any of our FSRUs or LNG carriers are unable to generate revenues as a result of off-hire time, our results of operations and financial condition could be materially adversely affected.

        The charters relating to our FSRUs and LNG carriers permit the charterer to terminate the charter in the event that the vessel is off-hire for any extended period. The charters also allow each charterer to terminate the charter upon the occurrence of specified defaults by us. The termination of any of our charters could have a material adverse effect on our business, results of operations and financial condition and could significantly reduce our ability to make distributions to our unitholders. For further details regarding termination of our charters, please read "Business—FSRU Charters—

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Termination" and "Business—LNG Carrier Charters—Termination." In addition, if a customer exercises its right to purchase a vessel, we would not receive any further revenue from the vessel and may be unable to obtain a substitute vessel and charter. This may result in lower revenue and cash flows from having fewer vessels operating in our fleet. Any replacement newbuilding would not generate revenues during its construction, and we may be unable to charter any replacement vessel on terms as favorable to us as those of the terminated charter. Any compensation under our charters for a purchase of the vessels may not adequately compensate us for the loss of the vessel and related time charter.

We currently derive all our revenue from three customers, and the loss of any of these customers would result in a significant loss of revenues and cash flow.

        We have derived, and believe that we will continue to derive, all of our revenues and cash flow from a limited number of customers. For the year ended December 31, 2010, BG Group plc accounted for 17%, Pertamina accounted for 24% and Petrobras accounted for 59% of our total revenues, respectively. All of our charters have fixed terms, but might nevertheless be lost in the event of unanticipated developments such as a customer's breach.

        We could also lose a customer or the benefits of a charter if:

    the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise;

    the customer exercises its right to terminate the charter in certain circumstances, such as:

    loss of the vessel or damage to it beyond repair;

    defaults of our obligations under the charter, including prolonged periods of off-hire;

    in the event of war or hostilities that would significantly disrupt the free trade of the vessel;

    requisition by any governmental authority; or

    with respect to the Golar Spirit and the Golar Winter, upon six months' written notice at any time after the fifth anniversary of the commencement of the related charter upon payment of a termination fee;

    with respect to the Golar Spirit and the Golar Winter, the customer exercises its option to purchase one or both of the vessels; or

    a prolonged force majeure event affecting the customer, including damage to or destruction of relevant production facilities, war or political unrest prevents us from performing services for that customer.

        Please read "Business—FSRU Charters" and "Business—LNG Carrier Charters."

        If we lose any of our charters, we may be unable to re-deploy the related vessel on terms as favorable to us as our current charters. If we are unable to re-deploy a vessel for which the charter has been terminated, we will not receive any revenues from that vessel, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition. In addition, if a customer exercises its right to purchase a vessel, we would not receive any further revenue from the vessel and may be unable to obtain a substitute vessel and charter. This may cause us to receive decreased revenue and cash flows from having fewer vessels operating in our fleet. Any replacement newbuilding would not generate revenues during its construction and would require substantial capital expenditures, and we may be unable to charter any replacement vessel on terms as favorable to us as those of the terminated charter. Any compensation under our charters for a purchase of the vessels may not adequately compensate us for the loss of the vessel and related time charter.

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        The loss of any of our customers, charters or vessels, or a decline in payments under any of our charters, could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.

Petrobras has the right to purchase the Golar Spirit at any time and has the right to purchase the Golar Winter at any time after September 7, 2011. If Petrobras exercises its option to purchase one or both of these vessels, it could have a material adverse effect on our cash flow and our ability to make distributions to our unitholders.

        Petrobras has the right to purchase the Golar Spirit at any time and has the right to purchase the Golar Winter at any time after September 7, 2011, at prices specified in the purchase option agreements. If Petrobras exercises its option to purchase one or both of these vessels, it would significantly reduce the size of our fleet, and we may be unable to identify or acquire suitable replacement vessels with the proceeds of the option exercise because, among other things that are beyond our control, there may be no replacement vessels that are readily available for purchase at a price that is equal to or less than the proceeds from the option exercise and on terms acceptable to us. Even if we find suitable replacement vessels, the hire rate of such vessels may be significantly lower than the hire rate under the current Petrobras charters. Our inability to find suitable replacement vessels or the chartering of replacement vessels at a lower hire rate would have a material adverse effect on our results of operations, cash flows and ability to make distributions to our unitholders. Please read "Business—FSRU Charters—Purchase Options."

We may be unable to purchase the Golar Freeze or the Khannur, which could have an adverse effect on our expected plans for growth.

        We intend to purchase the Golar Freeze from Golar LNG Limited if we are able to reach an agreement with Golar LNG Limited regarding its purchase price. We intend to purchase the Khannur from Golar Energy upon completion of its retrofitting and acceptance by its charterer, which is expected to occur in the first quarter of 2012, if we are able to reach an agreement with Golar Energy regarding its purchase price. Under the omnibus agreement that we will enter into with Golar LNG Limited and Golar Energy in connection with the closing of this offering, we will have the right to purchase the Golar Freeze from Golar LNG Limited at any time within 24 months of the closing of this offering at a price equal to its fair market value, and we will have the right to purchase the Khannur from Golar Energy after completion of the vessel's retrofitting and acceptance by its charterer at a price equal to its fair market value. The fair market value of the vessels will be determined through negotiations with Golar LNG Limited and Golar Energy or, if we and Golar LNG Limited or Golar Energy are unable to agree as to the fair market value of the applicable vessel, by a mutually acceptable investment banking firm, ship broker or other expert advisor in accordance with the omnibus agreement. The fair market value of the Golar Freeze and the Khannur, as finally determined pursuant to the omnibus agreement, may be an amount that is greater than what we are able or willing to pay. We will not be obligated to purchase either of the vessels at the applicable determined price, and, accordingly, we may not complete the purchase either of the vessels.

        In addition, we may be unable to purchase either the Golar Freeze or the Khannur because of, among other things, difficulties in obtaining acceptable financing or unforeseen permitting or regulatory requirements. We may be unwilling to purchase either vessel if, among other things, the acquisition of such vessel would not be accretive to our cash available for distribution or if our view of the market for FSRUs changes. If we are unable to purchase either of the vessels, our expected business, financial condition and results of operations may be adversely affected.

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The required drydocking of our vessels could be more expensive and time consuming than we anticipate, which could adversely affect our cash available for distribution.

        The drydocking of our vessels requires significant capital expenditures and results in loss of revenue while our vessels are off-hire. Any significant increase in the number of days of off-hire due to such drydocking or in the costs of any repairs could have a material adverse effect on our ability to pay distributions to our unitholders. Although we do not anticipate that more than one of our vessels will be out of service at any given time, we may underestimate the time required to drydock any of our vessels or unanticipated problems may arise. If more than one of our vessels is required to be out of service at the same time, if a vessel is drydocked longer than expected or if the cost of repairs during drydocking is greater than budgeted, our cash available for distribution could be adversely affected.

Fluctuations in overall LNG demand growth, including in areas such as North America, could adversely affect our ability to secure future long-term charters.

        Over the past three years, global LNG demand has continued to rise, but at a slower pace than previously predicted. Wood Mackenzie's forecast for LNG demand for 2010 decreased by 43.9 million metric tons (or MMt) (2.1Tcf) to 213.1 MMt, compared with its outlook in 2007. While global LNG demand is forecasted to increase by 2.6 Tcf per annum from 2010 to 2015 (a 25% increase), LNG demand in areas such as North America is forecasted to increase by only 10.9%. Continued economic uncertainty, falling natural gas prices and the continued acceleration of unconventional natural gas production, could have an adverse effect on our ability to secure future long-term charters.

Our growth depends on continued growth in demand for LNG, FSRUs and LNG carriers.

        Our growth strategy focuses on expansion in the floating storage and regasification sector and the LNG shipping sector. While global LNG demand has continued to rise, the rate of its growth has fluctuated due to several reasons, including the global economic crisis and the continued increase in natural gas production from unconventional sources in regions such as North America. Accordingly, our growth depends on continued growth in world and regional demand for LNG, FSRUs and LNG carriers, which could be negatively affected by a number of factors, including:

    increases in the cost of natural gas derived from LNG relative to the cost of natural gas generally;

    increases in the production levels of low-cost natural gas in domestic natural gas consuming markets, which could further depress prices for natural gas in those markets and make LNG uneconomical;

    decreases in the cost, or increases in the demand for, conventional land-based regasification systems, which could occur if providers or users of regasification services seek greater economies of scale than FSRUs can provide or if the economic, regulatory or political challenges associated with land-based activities improve;

    further development of, or decreases in the cost of, alternative technologies for vessel-based LNG regasification;

    increases in the production of natural gas in areas linked by pipelines to consuming areas, the extension of existing, or the development of new, pipeline systems in markets we may serve, or the conversion of existing non-natural gas pipelines to natural gas pipelines in those markets;

    decreases in the consumption of natural gas due to increases in its price relative to other energy sources or other factors making consumption of natural gas less attractive;

    availability of new, alternative energy sources, including compressed natural gas; and

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    negative global or regional economic or political conditions, particularly in LNG consuming regions, which could reduce energy consumption or its growth.

        Reduced demand for LNG, FSRUs or LNG carriers would have a material adverse effect on our future growth and could harm our business, results of operations and financial condition.

Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to you.

        Upon completion of this offering and the related transactions, we estimate that our combined debt (including capitalized lease obligations, net of restricted cash, and including indebtedness outstanding under our credit facilities) will be approximately $477 million. Following this offering, we will continue to have the ability to incur additional debt. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

        Our level of debt could have important consequences to us, including the following:

    our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be limited or such financing may not be available on favorable terms;

    we will need a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;

    our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and

    our debt level may limit our flexibility in responding to changing business and economic conditions.

        Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.

We have no ability to borrow additional amounts under our revolving credit facility. If we are unable to obtain additional financing, we may be unable to meet our obligations as they come due, enhance our existing business, complete acquisitions, respond to competitive pressures or otherwise execute our growth strategy.

        At the time we entered into our revolving credit facility in September 2008 (which we refer to as the Golar LNG Partners credit facility), such facility provided for available borrowings of up to $285 million. Pursuant to the terms of the Golar LNG Partners credit facility, the total amount available for borrowing under such facility decreases by $2.5 million per quarter from June 30, 2009 through December 31, 2012 and by $5.5 million per quarter from March 31, 2013 through March 31, 2018, its maturity date. As of December 31, 2010, the revolving credit facility provided for available borrowings of up to $267.5 million, of which $267.5 million was outstanding. Accordingly, we currently have no ability to borrow additional amounts under the Golar LNG Partners credit facility. In addition, a final balloon payment of $137.5 million is due under the facility in March 2018. Therefore, we will be required to obtain additional financing in order to fund the expansion of our fleet beyond its current size (including our potential acquisitions of the Golar Freeze and the Khannur).

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        We plan to finance our acquisitions through cash from operations, borrowings or debt or equity financings. Use of cash from operations to expand our fleet will reduce cash available for distribution to unitholders. Our ability to obtain bank financing or to access the capital markets may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions, changes in the LNG industry and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for future capital expenditures could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions.

        Even if we are successful in obtaining necessary funds, the terms of any debt financings could limit our ability to pay cash distributions to unitholders. In addition, incurring additional debt may increase our interest expense and financial leverage, and issuing additional equity securities may result in unitholder dilution and would increase the aggregate amount of cash required to pay the minimum quarterly distribution to unitholders, which could have a material adverse effect on our ability to make cash distributions.

Our financing arrangements are secured by our vessels and contain operating and financial restrictions and other covenants that may restrict our business and financing activities as well as our ability to make cash distributions to our unitholders.

        The operating and financial restrictions and covenants in our financing arrangements, including the Golar LNG Partners credit facility, our lease agreements and any future financing agreements, could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, subject to certain exceptions, the Golar LNG Partners credit facility, which is secured by a first priority charge over the Methane Princess and the Golar Spirit and a second priority charge over the Golar Mazo, requires the prior written consent of our lenders or otherwise restrict our and our subsidiaries' ability to:

    merge or consolidate with any other person;

    make capital expenditures other than capital expenditures on the Methane Princess or the Golar Spirit to meet the requirements of a charterer that do not exceed $10 million in any 12-month period if an event of default is occurring;

    pay distributions to our unitholders if such distributions would result in an event of default or if an event of default is occurring;

    terminate or materially amend the Methane Princess or the Golar Spirit charters or release the charterers from any obligations under those charters;

    cancel or materially amend any of the vessel management agreements relating to the Methane Princess or the Golar Spirit;

    enter into any other line of business other than the ownership, operation and chartering of FSRUs or LNG carriers;

    make any acquisitions if an event of default has occurred and is continuing;

    make any loans or incur additional indebtedness or repay any indebtedness (other than borrowings under the credit facility) or enter into any swaps or other derivatives contracts;

    if an event of default is occurring, permit any of our indebtedness to be guaranteed by any person other than our subsidiaries;

    grant any liens or other encumbrances to secure any of our existing or future indebtedness;

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    issue guarantees or indemnities or, if an event of default is occurring, otherwise become liable for the indebtedness or obligations of any other person;

    sell, transfer or otherwise dispose of our interest in the Golar Mazo or of a substantial portion of our other assets;

    make any material modification to the Methane Princess and the Golar Spirit that would diminish the value of either vessel;

    charter-in or hire any vessel from any other person;

    charter the Methane Princess or the Golar Spirit for a period in excess of 24 months or charter either vessel on terms other than on an arm's-length basis;

    enter into, guarantee or otherwise become liable with respect to any sale-leaseback transactions;

    enter into any transactions with our affiliates, other than on an arm's-length basis; and

    change the flag, class or registry of any of our vessels.

        In addition, we are required under the Golar LNG Partners credit facility to, among other things, comply with the ISM Code and the International Ship and Port Facility Security Code (or the ISPS Code) and with all international and local environmental laws and to maintain certain levels of insurance on the Methane Princess and the Golar Spirit and maintain the vessels' class certifications with no material overdue recommendations.

        The Golar LNG Partners credit facility prohibits us from paying distributions to our unitholders if we are not in compliance with certain financial covenants or upon the occurrence of an event of default. The financial covenants under the Golar LNG Partners credit facility require us to:

    maintain Free Liquid Assets (as defined in the Golar LNG Partners credit facility) equal to or greater than the higher of $2.5 million per vessel or $10.0 million;

    maintain a Net Debt (as defined in the Golar LNG Partners credit facility) to EBITDA (as defined in the credit facility) ratio of no greater than 6.50 to 1.00;

    maintain an EBITDA to debt service ratio equal to or greater than 1.15 to 1.00 on a consolidated basis at all times; and

    maintain a Consolidated Net Worth (as defined in the Golar LNG Partners credit facility) equal to or greater than $45.0 million plus 80% of the equity contribution made to acquire the Golar Winter.

For more information regarding the Golar LNG Partners credit facility, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—The Golar LNG Partners Credit Facility."

        In addition, pursuant to the terms of a credit agreement entered into by Golar Freeze Holding Co., a subsidiary of Golar LNG Limited, and a security assignment entered into by Golar LNG 2220 Corporation and Golar Winter UK Ltd., wholly owned subsidiaries of Golar LNG Limited that will be contributed to us in connection with this offering, in connection with the refinancing of the conversion costs of the Golar Freeze, the lenders under such Golar Freeze credit facility were granted a security interest in a portion of the income generated under the Golar Winter time charter. Golar LNG Limited has guaranteed the obligations of the borrower under the Golar Freeze credit facility. In the event that the borrower under the Golar Freeze credit facility defaults on its obligations thereunder and Golar LNG Limited has not made up the difference by way of an equity contribution to satisfy its guarantee obligation thereunder, the lenders could divert payments from the Golar Winter time charter to fund debt repayments under the Golar Freeze credit facility. In such an event, the lenders may divert

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the entire amount of the income generated under the Golar Winter time charter that remains after all of the Golar Winter's obligations have been satisfied, up to the full amount of the shortfall in the payment obligations due under the Golar Freeze credit facility. See "Business—FSRU Charters—Security Interest in Earnings from Golar Winter Time Charter."

        The agreements governing our other financing arrangements, including the loan facility with respect to the Golar Mazo (or the Mazo credit facility) and our lease agreements also contain operating and financial restrictions and covenants. For more information, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Borrowing Activities—Long-Term Debt—" and "—Capital Lease Obligations."

        Our ability to comply with covenants and restrictions contained in our financing arrangements may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If restrictions, covenants, ratios or tests in our debt instruments are breached, a significant portion of the obligations may become immediately due and payable, and the lenders' commitment to make further loans may terminate. We may not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, obligations under our financing arrangements are secured by certain of our vessels and guaranteed by our subsidiaries holding the interests in our vessels, and if we are unable to repay debt under our financing arrangements, the lenders or lessors could seek to foreclose on those assets. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Restrictions in our debt agreements may prevent us from paying distributions.

        The payment of principal and interest on our debt will reduce our cash available for distribution. In addition, certain of our current financing arrangements, including the Golar LNG Partners credit facility, prohibit, and we expect that any future financing arrangement will prohibit, the payment of distributions to our unitholders if we are not in compliance with certain covenants or upon the occurrence of an event of default.

        Events of default under the Golar LNG Partners credit facility include, among others, the following:

    failure to pay any principal, interest, fees, expenses or other amounts when due;

    default under any other provision of the credit facility, including our covenant to maintain certain levels of insurance coverage, or any provision of the related security documents;

    a material inaccuracy of any representation or warranty;

    default under other indebtedness in excess of $10.0 million;

    failure to comply with a legal judgment or order levied against us with respect to all or substantially all of our assets;

    bankruptcy or insolvency events;

    suspension or cessation of our business;

    seizure of all or a material amount of our assets or revenues under the authority of any government;

    invalidity, unlawfulness or repudiation of any of the related security documents;

    enforcement of any liens or other encumbrances covering our assets;

    arrest of the Methane Princess or the Golar Spirit that continues for more than 10 days;

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    cancellation or termination of the registration or flag of the Methane Princess or the Golar Spirit;

    development of hostilities or civil war or unconstitutional seizure of power in the flag state of the Methane Princess or the Golar Spirit or in other countries in which we operate if the lenders determine such developments may have a material adverse effect on the security documents and we have not within 14 days of notice of such determination taken action to ensure that such developments will not have a material adverse effect;

    failure to comply with any environmental law or the occurrence of any incident giving rise to an environmental claim against us if the lenders determine such failure or occurrence could have a material adverse effect on our business or the security documents;

    failure to comply with the requirements of any protection and indemnity association;

    termination of any charter or management agreement related to the Methane Princess or the Golar Spirit;

    a change of control of our general partner, us or any of our subsidiaries or of any of the entities holding an interest in the Golar Mazo; and

    any event that a majority of the lenders believe is likely to have a material adverse effect on our ability to satisfy our obligations under or otherwise comply with the credit facility.

        The cross-default provision of the Golar LNG Partners credit facility would be triggered if we fail to pay or otherwise have a continued default under other indebtedness, including the $20.0 million credit facility with Golar LNG Limited (or the sponsor credit facility). Events of default under the sponsor credit facility include, among others, the following:

    failure to pay any sum payable under the sponsor credit facility when due;

    breach of certain covenants and obligations of the sponsor credit facility;

    a material inaccuracy of any representation or warranty;

    default under other indebtedness in excess of $10.0 million or any security in respect thereof becomes enforceable;

    a lien, arrest, distress or similar event is levied upon or against any substantial part of our assets which is not discharged or disputed in good faith within 10 business days after we become aware of such event;

    a substantial part of our business or assets is destroyed, abandoned, seized, appropriated or forfeited for any reason;

    bankruptcy or insolvency events;

    suspension or cessation of our business;

    Golar GP LLC ceases to be our general partner; and

    an amendment to our limited partnership agreement that, in the reasonable opinion of the lender, is adverse to its interests in connection with the sponsor credit facility.

        The agreements governing our other financing arrangements contain, and we expect that agreements governing future financing arrangements will contain, similar restrictions. For more information regarding these restrictions, please read "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources."

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Growth of the LNG market may be limited by many factors, including infrastructure constraints and community and political group resistance to new LNG infrastructure over concerns about environmental, safety and terrorism.

        A complete LNG project includes production, liquefaction, regasification, storage and distribution facilities and LNG carriers. Existing LNG projects and infrastructure are limited, and new or expanded LNG projects are highly complex and capital intensive, with new projects often costing several billion dollars. Many factors could negatively affect continued development of LNG infrastructure and related alternatives, including floating storage and regasification, or disrupt the supply of LNG, including:

    increases in interest rates or other events that may affect the availability of sufficient financing for LNG projects on commercially reasonable terms;

    decreases in the price of LNG, which might decrease the expected returns relating to investments in LNG projects;

    the inability of project owners or operators to obtain governmental approvals to construct or operate LNG facilities;

    local community resistance to proposed or existing LNG facilities based on safety, environmental or security concerns;

    any significant explosion, spill or similar incident involving an LNG facility, FSRU or LNG carrier; and

    labor or political unrest affecting existing or proposed areas of LNG production and regasification.

        We expect that, as a result of the factors discussed above, some of the proposals to expand existing or develop new LNG liquefaction and regasification facilities may be abandoned or significantly delayed. If the LNG supply chain is disrupted or does not continue to grow, or if a significant LNG explosion, spill or similar incident occurs, it could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions.

Our growth depends on our ability to expand relationships with existing customers and obtain new customers, for which we will face substantial competition.

        One of our principal objectives is to enter into additional long-term, FSRU and LNG carrier time charters. The process of obtaining long-term charters for FSRUs and LNG carriers is highly competitive and generally involves an intensive screening process and competitive bids, and often extends for several months. We believe FSRU and LNG carrier time charters are awarded based upon a variety of factors relating to the vessel operator, including:

    LNG shipping and FSRU experience and quality of ship operations;

    cost effectiveness;

    shipping industry relationships and reputation for customer service and safety;

    technical ability and reputation for operation of highly specialized vessels, including FSRUs;

    quality and experience of seafaring crew;

    safety record;

    the ability to finance FSRUs and LNG carriers at competitive rates and financial stability generally;

    relationships with shipyards and the ability to get suitable berths;

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    construction management experience, including the ability to obtain on-time delivery of new FSRUs and LNG carriers according to customer specifications;

    willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events; and

    competitiveness of the bid in terms of overall price.

        We expect substantial competition for providing floating storage and regasification services and marine transportation services for potential LNG projects from a number of experienced companies, including state-sponsored entities and major energy companies. Many of these competitors have significantly greater financial resources and larger and more versatile fleets than do we or Golar. We anticipate that an increasing number of marine transportation companies—including many with strong reputations and extensive resources and experience—will enter the FSRU market and LNG transportation market. This increased competition may cause greater price competition for time charters. As a result of these factors, we may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions.

We may have more difficulty entering into long-term time charters in the future if an active short-term or spot LNG shipping market continues to develop.

        One of our principal strategies is to enter into additional long-term FSRU and LNG carrier time charters of five years or more. Most shipping requirements for new LNG projects continue to be provided on a long-term basis, though the level of spot voyages and short-term time charters of less than 12 months in duration has grown in the past few years.

        If an active spot or short-term market continues to develop, we may have increased difficulty entering into long-term time charters upon expiration or early termination of our current charters or for any vessels that we acquire in the future, and, as a result, our cash flow may be less stable. In addition, an active short-term or spot LNG market may require us to enter into charters based on changing market prices, as opposed to contracts based on a fixed rate, which could result in a decrease in our cash flow in periods when the market price for shipping LNG is depressed or insufficient funds are available to cover our financing costs for related vessels.

Hire rates for FSRUs and LNG carriers are not readily available and may fluctuate substantially. If rates are lower when we are seeking a new charter, our earnings and ability to make distributions to our unitholders may decline.

        Hire rates for FSRUs and LNG carriers are not readily available and may fluctuate over time as a result of changes in the supply-demand balance relating to current and future FSRU and LNG carrier capacity. This supply-demand relationship largely depends on a number of factors outside our control. The LNG market is closely connected to world natural gas prices and energy markets, which we cannot predict. A substantial or extended decline in natural gas prices could adversely affect our ability to recharter our vessels at acceptable rates or to acquire and profitably operate new FSRUs or LNG carriers. Our ability from time to time to charter or re-charter any vessel at attractive rates will depend on, among other things, the prevailing economic conditions in the LNG industry. Hire rates for newbuilding FSRUs and LNG carriers are correlated with the price of FSRU newbuildings and LNG carrier newbuildings. Hire rates at a time when we may be seeking a new charter may be lower than the hire rates at which our vessels are currently chartered. Please read "Industry—LNG Carriers—Carrying Capacity and Prices" for information on the cyclical behavior and the current state of LNG carrier shipbuilding prices. If rates are lower when we are seeking a new charter, our earnings and ability to make distributions to our unitholders may decline.

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Vessel values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of vessels, we may incur a loss.

        Vessel values for LNG carriers can fluctuate substantially over time due to a number of different factors, including:

    prevailing economic conditions in the natural gas and energy markets;

    a substantial or extended decline in demand for LNG;

    increases in the supply of vessel capacity;

    the size and age of a vessel; and

    the cost of retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, customer requirements or otherwise.

        As our vessels age, the expenses associated with maintaining and operating them are expected to increase, which could have an adverse effect on our business and operations if we do not maintain sufficient cash reserves for maintenance and replacement capital expenditures. Moreover, the cost of a replacement vessel would be significant.

        If a charter terminates, we may be unable to re-deploy the affected vessels at attractive rates and, rather than continue to incur costs to maintain and finance them, we may seek to dispose of them. Our inability to dispose of vessels at a reasonable value could result in a loss on their sale and adversely affect our ability to purchase a replacement vessel, results of operations and financial condition and ability to make distributions to unitholders.

We depend on certain affiliates of Golar, including Golar Management and Golar Wilhelmsen, to assist us in operating and expanding our business.

        Our ability to enter into new charters and expand our customer relationships will depend largely on our ability to leverage our relationship with Golar and its reputation and relationships in the shipping industry. If Golar suffers material damage to its reputation or relationships, it may harm our ability to:

    renew existing charters upon their expiration;

    obtain new charters;

    successfully interact with shipyards;

    obtain financing on commercially acceptable terms;

    maintain access to capital under the sponsor credit facility; or

    maintain satisfactory relationships with suppliers and other third parties.

        In addition, each vessel in our fleet is subject to multiple management agreements pursuant to which certain commercial and technical management services are provided by certain affiliates of Golar, including Golar Management and Golar Wilhelmsen. Pursuant to these agreements, these entities provide significant commercial and technical management services for our fleet. In addition, pursuant to a management and administrative services agreement between us and Golar Management, Golar Management will provide us with significant management, administrative, financial and other support services. Our operational success and ability to execute our growth strategy will depend significantly upon the satisfactory performance of these services. Our business will be harmed if our service providers fail to perform these services satisfactorily, if they cancel their agreements with us or

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if they stop providing these services to us. Please read "Certain Relationships and Related Party Transactions."

The operation of FSRUs and LNG carriers is inherently risky, and an incident involving significant loss of or environmental consequences involving any of our vessels could harm our reputation and business.

        Our vessels and their cargoes are at risk of being damaged or lost because of events such as:

    marine disasters;

    piracy;

    environmental accidents;

    bad weather;

    mechanical failures;

    grounding, fire, explosions and collisions;

    human error; and

    war and terrorism.

        An accident involving any of our vessels could result in any of the following:

    death or injury to persons, loss of property or environmental damage;

    delays in the delivery of cargo;

    loss of revenues from or termination of charter contracts;

    governmental fines, penalties or restrictions on conducting business;

    higher insurance rates; and

    damage to our reputation and customer relationships generally.

        Any of these results could have a material adverse effect on our business, financial condition and operating results.

        If our vessels suffer damage, they may need to be repaired. The costs of vessel repairs are unpredictable and can be substantial. We may have to pay repair costs that our insurance policies do not cover. The loss of earnings while these vessels are being repaired, as well as the actual cost of these repairs, would decrease our results of operations. If any of our vessels is involved in an accident with the potential risk of environmental consequences, the resulting media coverage could have a material adverse effect on our business, our results of operations and cash flows, weaken our financial condition and negatively affect our ability to make distributions to unitholders.

Our insurance may be insufficient to cover losses that may occur to our property or result from our operations.

        The operation of FSRUs and LNG carriers is inherently risky. Although we carry protection and indemnity insurance consistent with industry standards, all risks may not be adequately insured against, and any particular claim may not be paid. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. Certain of our insurance coverage is maintained through mutual protection and indemnity associations, and as a member of such associations we may be required to make additional payments over and above budgeted premiums if member claims exceed association reserves.

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        We may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. A marine disaster could exceed our insurance coverage, which could harm our business, financial condition and operating results. Any uninsured or underinsured loss could harm our business and financial condition. In addition, our insurance may be voidable by the insurers as a result of certain of our actions, such as our ships failing to maintain certification with applicable maritime self-regulatory organizations.

        Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult for us to obtain. In addition, upon renewal or expiration of our current policies, the insurance that may be available to us may be significantly more expensive than our existing coverage.

An increase in operating expenses or drydocking costs could materially and adversely affect our financial performance.

        Our operating expenses and drydock capital expenditures depend on a variety of factors including crew costs, provisions, deck and engine stores and spares, lubricating oil, insurance, maintenance and repairs and shipyard costs, many of which are beyond our control and affect the entire shipping industry. Also, while we do not bear the cost of fuel (bunkers) under our time charters, fuel is a significant expense in our operations when our vessels are, for example, moving to or from dry-dock or when off-hire. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil-producing countries and regions, regional production patterns and environmental concerns. These may increase vessel operating and drydocking costs further. If costs continue to rise, they could materially and adversely affect our results of operations.

An increased shortage of qualified officers and crew could have an adverse effect on our business and financial condition.

        FSRUs and LNG carriers require a technically skilled officer staff with specialized training. As the world FSRU fleet and LNG carrier fleet continue to grow, the demand for technically skilled officers and crew has been increasing, which has led to a shortfall of such personnel. Increases in our historical vessel operating expenses have been attributable primarily to the rising costs of recruiting and retaining officers for our fleet. In addition, our FSRUs require an additional engineer, deck officer and cargo officer. Furthermore, each key officer crewing an FSRU must receive specialized training related to the operation and maintenance of the regasification equipment. If Golar Management or Golar Wilhelmsen are unable to employ technically skilled staff and crew, they will not be able to adequately staff our vessels. A material decrease in the supply of technically skilled officers or an inability of Golar Management or Golar Wilhelmsen to attract and retain such qualified officers could impair our ability to operate or increase the cost of crewing our vessels, which would materially adversely affect our business, financial condition and results of operations and significantly reduce our ability to make distributions to our unitholders.

        In addition, the Golar Spirit and the Golar Winter are employed by Petrobras in Brazil. As a result, we are required to hire a certain portion of Brazilian personnel to crew these vessels in accordance with Brazilian law. Any inability to attract and retain qualified Brazilian crew members could adversely affect our business, results of operations and financial condition and could significantly reduce our ability to make distributions to our unitholders.

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We may be unable to attract and retain key management personnel in the LNG industry, which may negatively impact the effectiveness of our management and our results of operation.

        Our success depends to a significant extent upon the abilities and the efforts of our senior executives. While we believe that we have an experienced management team, the loss or unavailability of one or more of our senior executives for any extended period of time could have an adverse effect on our business and results of operations.

Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results.

        Currency exchange rate fluctuations and currency devaluations could have an adverse effect on our results of operations from quarter to quarter. Historically our revenue has been generated in U.S. Dollars, but we incur capital, operating and administrative expenses in multiple currencies, including, among others, the Euro, the Brazilian Real and the British Pound. If the U.S. Dollar weakens significantly, we would be required to convert more U.S. Dollars to other currencies to satisfy our obligations, which would cause us to have less cash available for distribution.

        Under the charters and OSAs for the Golar Spirit and Golar Winter, we generate a portion of our revenues in Brazilian Reais. Income under these charters is split into two components. The component that relates to operating expenses (the minority) is paid in Brazilian Reais, whereas the capital component is paid in U.S. Dollars. We incur some operating expenses in Brazilian Reais but also have to convert Brazilian Reais into other currencies, including U.S. Dollars, in order to pay the remaining operating expenses incurred in other currencies. If the Brazilian Real weakens significantly, we may not have sufficient Brazilian Reais to convert to other currencies to satisfy our obligations in respect of the operating expenses related to these charters, which would cause us to have less cash available for distribution.

        Two of our vessels are currently financed by UK tax leases, which are denominated in British Pounds. The majority of our British Pound capital lease obligations are hedged by British Pound cash deposits securing the lease obligations or by currency swaps. However, these are not perfect hedges. Although it would not affect our cash flows, a significant strengthening of the U.S. Dollar could result in an increase in our financial expenses and could materially affect our financial results under U.S. GAAP.

        Because we report our operating results in U.S. Dollars, changes in the value of the U.S. Dollar also result in fluctuations in our reported revenues and earnings. In addition, under U.S. GAAP, all foreign currency-denominated monetary assets and liabilities such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable, long-term debt and capital lease obligations are revalued and reported based on the prevailing exchange rate at the end of the reporting period. This revaluation may cause us to report significant non-monetary foreign currency exchange gains and losses in certain periods.

Two of our vessels are financed by UK tax leases. In the event of any adverse tax changes or a successful challenge by the UK Revenue authorities with regard to the initial tax basis of the transactions or in the event of an early termination of a lease, we may be required to make additional payments to the UK vessel lessors, which could adversely affect our earnings and financial position.

        Two of our vessels are financed by UK tax leases. In the event of any adverse tax changes to legislation affecting the tax treatment of the leases for the UK vessel lessors or a successful challenge by the UK Revenue authorities to the tax assumptions on which the transactions were based, or in the event that we terminate one or more of our UK tax leases before their expiration, we would be required to return all or a portion of, or in certain circumstances significantly more than, the upfront cash benefits that we have received or that have accrued over time, together with fees that were

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financed in connection with our lease financing transactions, or post additional security or make additional payments to the UK vessel lessors. Golar has agreed to indemnify us against these increased costs (with respect to the Methane Princess lease but not with respect to the Golar Winter lease), but any default by Golar would not limit our obligations under these leases. Any additional payments could adversely affect our earnings and financial position. For more information on the UK tax leases, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Borrowing Activities—Capital Lease Obligations."

A renewal of the global financial crisis could negatively impact our business.

        Although there are signs that the economic recession has abated in many countries, there is still considerable instability in the world economy and in the economies of countries such as Greece, Spain, Portugal and Italy that could initiate a new economic downturn and result in a tightening in the credit markets, a low level of liquidity in financial markets, and volatility in credit and equity markets. A renewal of the financial crisis that affected the banking system and the financial markets over the past two years may negatively impact our business and financial condition in ways that we cannot predict. In addition, the uncertainty about current and future global economic conditions caused by a renewed financial crisis may cause our customers and governments to defer projects in response to tighter credit, decreased cash availability and declining customer confidence which may negatively impact the demand for our services. A tightening of the credit markets may further negatively impact our operations by affecting the solvency of our suppliers or customers which could lead to disruptions in delivery of supplies such as equipment for conversions, cost increases for supplies, accelerated payments to suppliers, customer bad debts or reduced revenues.

The economic downturn may affect our customers' ability to charter our vessels and pay for our services and may adversely affect our business and results of operations.

        The economic downturn in the global financial markets may lead to a decline in our customers' operations or ability to pay for our services, which could result in decreased demand for our vessels and services. Our customers' inability to pay could also result in their default on our current charters. The decline in the amount of services requested by our customers or their default on our charters with them could have a material adverse effect on our business, financial condition and results of operations. We cannot determine whether the difficult conditions in the economy and the financial markets will improve or worsen in the near future.

Terrorist attacks, piracy, increased hostilities or war could lead to further economic instability, increased costs and disruption of our business.

        Terrorist attacks such as the attacks on the United States on September 11, 2001, the bombings in Spain on March 11, 2004 and in London on July 7, 2005, and the attacks in Mumbai on November 26, 2008, and the continuing response of the United States and others to these attacks, as well as the threat of future terrorist attacks in the United States or elsewhere, continue to cause uncertainty in the world's financial markets and may affect our business, operating results, financial condition, ability to raise capital and future growth. The continuing presence of the United States and other armed forces in Iraq and Afghanistan may lead to additional armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our business, financial condition, results of operations and ability to pay dividends. Terrorist attacks on vessels, such as the

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October 2002 attack on the M.V. Limburg, a very large crude carrier not related to us, may in the future also negatively affect our operations and financial condition and directly impact our vessels or our customers. Future terrorist attacks could result in increased volatility and turmoil of the financial markets in the United States and globally. Any of these occurrences could have a material adverse impact on our business and results of operations.

        In addition, LNG facilities, shipyards, vessels (including FSRUs and conventional LNG carriers), pipelines and gas fields could be targets of future terrorist attacks or piracy. Any such attacks could lead to, among other things, bodily injury or loss of life, vessel or other property damage, increased vessel operational costs, including insurance costs, and the inability to transport LNG to or from certain locations. Terrorist attacks, war or other events beyond our control that adversely affect the production, storage, transportation or regasification of LNG to be shipped or processed by us could entitle our customers to terminate our charter contracts, which would harm our cash flow and our business.

        Terrorist attacks, or the perception that LNG facilities, FSRUs and LNG carriers are potential terrorist targets, could materially and adversely affect expansion of LNG infrastructure and the continued supply of LNG. Concern that LNG facilities may be targeted for attack by terrorists has contributed to significant community and environmental resistance to the construction of a number of LNG facilities, primarily in North America. If a terrorist incident involving an LNG facility, FSRU or LNG carrier did occur, in addition to the possible effects identified in the previous paragraph, the incident may adversely affect construction of additional LNG facilities or FSRUs or the temporary or permanent closing of various LNG facilities or FSRUs currently in operation.

We currently operate primarily outside the United States, which could expose us to political, governmental and economic instability that could harm our operations.

        Because most of our operations are currently conducted outside of the United States, they may be affected by economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered. Any disruption caused by these factors could harm our business. In particular, we derive a substantial portion of our revenues from shipping LNG from politically unstable regions. Past political conflicts in these regions, particularly in the Arabian Gulf, Brazil and Indonesia, have included attacks on ships, mining of waterways and other efforts to disrupt shipping in the area. In addition to acts of terrorism, vessels trading in these and other regions have also been subject, in limited instances, to piracy. Future hostilities or other political instability in the Arabian Gulf, Brazil and Indonesia where we operate or may operate could have a material adverse effect on the growth of our business, results of operations and financial condition and our ability to make cash distributions. In addition, tariffs, trade embargoes and other economic sanctions by Brazil, the United States or other countries against countries in the Middle East, Southeast Asia or elsewhere as a result of terrorist attacks, hostilities or otherwise may limit trading activities with those countries, which could also harm our business and ability to make cash distributions.

The LNG transportation, storage and regasification industry is subject to substantial environmental and other regulations, which may significantly limit our operations or increase our expenses.

        Our operations are materially affected by extensive and changing international, national and local environmental protection laws, regulations, treaties, conventions and standards in force in international waters, the jurisdictional waters of the countries in which our vessels operate, as well as the countries of our vessels' registration, including those relating to equipping and operating FSRUs and LNG carriers, providing security and minimizing the potential for impacts to the environment from their operations. We have incurred, and expect to continue to incur, substantial expenses in complying with these laws and regulations, including expenses for vessel modifications and changes in operating procedures. Additional laws and regulations may be adopted that could limit our ability to do business or further increase costs, which could harm our business. In addition, failure to comply with applicable

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laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of operations. We may become subject to additional laws and regulations if we enter new markets or trades.

        These requirements can affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in certain ports.

        The design, construction and operation of FSRUs and interconnecting pipelines and the transportation of LNG are subject to governmental approvals and permits. The length of time it takes to receive regulatory approval for offshore LNG operations is one factor that has affected our industry, including through increased expenses.

        Our vessels traveling in international waters are subject to various existing regulations published by the International Maritime Organization (or the IMO) as well as marine pollution and prevention requirements imposed by the MARPOL Convention. In addition, our LNG vessels may become subject to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, as amended by the April 2010 Protocol to the HNS Convention (or the 2010 HNS Convention), if it is entered into force. If the 2010 HNS Protocol were to enter into force, we cannot estimate with any certainty at this time the costs that may be needed to comply with any such requirements that may be adopted.

        In the United States, the Oil Pollution Act of 1990 (or OPA 90), has increased expenses in the LNG transportation industry. OPA 90 applies to all vessels that trade in the United States or its territories or possessions or operate in United States waters, including vessels that use fuel oil for their engines, even if the vessels do not carry oil as cargo. OPA 90 provides for potentially unlimited joint, several, and strict liability for owners, operators and demise or bareboat charterers for oil pollution and related damages in U.S. waters, which include the U.S. territorial sea and the 200-nautical mile exclusive economic zone around the United States. OPA 90 applies to discharges of any oil from a vessel, including discharges of fuel and lubricants from an LNG vessel. To comply with OPA 90, vessel owners and operators generally incur increased costs in meeting additional maintenance and inspection requirements, developing contingency arrangements for potential spills and obtaining required insurance coverage. OPA 90 contains financial responsibility requirements for vessels operating in U.S. waters and requires owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of insurance (or of qualification as a self-insurer) or other acceptable evidence of financial responsibility sufficient to meet certain potential liabilities under OPA 90 and the U.S. Comprehensive Environmental Response, Compensation and Liability Act (or CERCLA), which imposes similar liabilities upon owners, operators and bareboat charterers of vessels from which a discharge of "hazardous substances" (other than oil) occurs. While LNG should not be considered a hazardous substance under CERCLA, additives to fuel oil or lubricants used on FSRUs and LNG carriers might fall within the scope of a hazardous substance. Under OPA 90 and CERCLA, owners, operators and bareboat charterers are jointly and severally strictly liable for costs of cleanup and damages resulting from a discharge or threatened discharge within U.S. waters. This means we may be subject to liability even if not negligent or at fault for a release of oil or a hazardous substance in U.S. waters. OPA 90 and CERCLA do not preclude claimants from seeking damages resulting from the discharge of oil and hazardous substances under other applicable law, including maritime tort law. In response to the BP Deepwater Horizon oil spill, the U.S. Congress is currently considering a number of bills that could potentially modify or eliminate the limits of liability under the OPA 90 liability scheme. Depending on the outcome of any such amendments, compliance with any new requirements of OPA 90 may substantially impact the costs of our operations or increase our potential liability. We currently maintain U.S. Coast Guard issued Certificates of Financial Responsibility (or COFR) for the Methane

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Princess, the Golar Spirit and the Golar Winter to meet OPA 90 and CERCLA potential liabilities; the Golar Mazo has yet to call on a U.S. port and, therefore, does not currently have a COFR.

        Many states in the United States bordering on a navigable waterway have enacted legislation providing for potentially unlimited strict liability without regard to fault for the discharge of pollutants within their waters. Any discharge of hazardous material or other event could result in significant liability, including fines, penalties, criminal liability and costs for natural resource damages. The potential for these releases could increase to the extent we increase our operations in U.S. waters.

        Outside of the United States, other national laws generally provide for a LNG carrier or offshore LNG facility owner or operator to bear strict liability for pollution, subject to a right to limit liability under applicable national or international regimes for limitation of liability. The most widely applicable international regime limiting maritime pollution liability is the Convention on Limitation of Liability for Maritime Claims of 1976 (or the 1976 London Convention). Rights to limit liability under the 1976 London Convention are forfeited where a spill is caused by a vessel owner's or operator's intentional or reckless conduct. Certain jurisdictions have ratified the IMO's Protocol of 1996, which substantially increases the liability limits set forth in the 1976 London Convention. Finally, some jurisdictions are not a party to either the 1976 London Convention or the IMO's Protocol of 1996, and, therefore, a vessel owner's or operator's rights to limit liability for maritime pollution in such jurisdictions may be uncertain.

        We believe that the heightened environmental, quality and security concerns of insurance underwriters, regulators and charterers will generally lead to additional regulatory requirements, including enhanced risk assessment and security requirements and greater inspection and safety requirements on all LNG carriers in the marine transportation markets and offshore LNG terminals. These requirements are likely to add incremental costs to our operations and the failure to comply with these requirements may affect the ability of our vessels to obtain and, possibly, collect on insurance or to obtain the required certificates for entry into the different ports where we operate.

        Further legislation, or amendments to existing legislation, applicable to international and national maritime trade are expected over the coming years in areas such as ship recycling, sewage systems, emission control (including emissions of greenhouse gases), ballast treatment and handling, etc. The United States has recently enacted legislation and regulations that require more stringent controls of air and water emissions from ocean-going vessels. Such legislation or regulations may require additional capital expenditures or operating expenses (such as increased costs for low-sulfur fuel) in order for us to maintain our vessels' compliance with international and/or national regulations.

Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

        Due to concern over the risk of climate change, a number of countries and the IMO have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emission from vessel emissions. These regulatory measures may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy. Although the emissions of greenhouse gases from international shipping currently are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (or the Kyoto Protocol) for now, a new treaty may be adopted in the future that includes restrictions on shipping emissions. Compliance with changes in laws and regulations relating to climate change could increase our costs of operating and maintaining our vessels and could require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions, or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.

        Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also have an affect on demand for our

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services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil and gas in the future or create greater incentives for use of alternative energy sources. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.

        Please read "Environmental and Other Regulations" below for a more detailed discussion of the regulations applicable to our vessels.

Maritime claimants could arrest our vessels, which could interrupt our cash flow.

        If we are in default on some kinds of obligations, such as those to our lenders, crew members, suppliers of goods and services to our vessels or shippers of cargo, these parties may be entitled to a maritime lien against one or more of our vessels. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. In a few jurisdictions, claimants could try to assert "sister ship" liability against one vessel in our fleet for claims relating to another of our vessels. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay to have the arrest lifted. Under some of our present charters, if the vessel is arrested or detained (for as few as 14 days in the case of one of our charters) as a result of a claim against us, we may be in default of our charter and the charterer may terminate the charter. This would negatively impact our revenues and reduce our cash available for distribution to unitholders.

Compliance with safety and other vessel requirements imposed by classification societies may be very costly and may adversely affect our business.

        The hull and machinery of every large, oceangoing commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. The Golar Mazo is certified by Lloyds Register, and the Methane Princess, the Golar Spirit and the Golar Winter are each certified by Det Norske Veritas.

        As part of the certification process, a vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel's machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Each of the vessels in our existing fleet is on a planned maintenance system approval, and as such the classification society attends onboard once every year to verify that the maintenance of the equipment onboard is done correctly. Each of the vessels in our existing fleet is required to be qualified within its respective classification society for drydocking once every five years subject to an intermediate underwater survey done using an approved diving company in the presence of a surveyor from the classification society.

        If any vessel does not maintain its class or fails any annual survey, intermediate survey or special survey, the vessel will be unable to trade between ports and will be unemployable. We would lose revenue while the vessel was off-hire and incur costs of compliance. This would negatively impact our revenues and reduce our cash available for distribution to unitholders.

We may not be able to redeploy our FSRUs on terms as favorable as our or Golar's current FSRU charter arrangements or at all.

        Due to the limitations on demand for FSRUs, in the event that any of the applicable charters are terminated, we may be unable to recharter the Golar Spirit, the Golar Winter or, if acquired, the Golar Freeze or the Khannur, as FSRUs. While we may be able to employ these vessels as traditional LNG carriers, the hire rates and/or other charter terms may not be as favorable to us as our charters on the Golar Spirit and the Golar Winter with Petrobras, the charter on the Golar Freeze with DUSUP or the

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charter on the Khannur with Nusantara Regas. If we acquire additional FSRUs and they are not, as a result of contract termination or otherwise, subject to a long-term profitable contract, we may be required to bid for projects at unattractive rates in order to reduce our losses relating to the vessels.

Due to our lack of diversification, adverse developments in our LNG transportation or storage and regasification businesses could reduce our ability to make distributions to our unitholders.

        We rely exclusively on the cash flow generated from our FSRUs and LNG carriers. Due to our lack of diversification, an adverse development in the LNG transportation industry or the LNG storage and regasification industry could have a significantly greater impact on our financial condition and results of operations than if we maintained more diverse assets or lines of businesses.

The shareholders' agreement with Chinese Petroleum Corporation with respect to the Golar Mazo contains provisions that may limit our ability to sell or transfer our interest in the Golar Mazo, which could have a material adverse effect on our cash flows and affect our ability to make distributions to our unitholders.

        We have a 60% interest in the joint venture that owns the Golar Mazo, which enables us to control the joint venture subject to certain negative controls held by Chinese Petroleum Corporation (or CPC), who holds the remaining 40% interest in the Golar Mazo. Under the shareholders' agreement, no party may sell, assign, mortgage, or otherwise transfer its rights, interests or obligations under the agreement without the prior written consent of the other party. If we determine that the sale or transfer of our interest in the Golar Mazo is in our best interest, we must provide CPC notice of our intent to sell or transfer our interest and grant CPC a right of first refusal to purchase our interest. If CPC does not accept the offer within 60 days after we notify CPC, we will be free to sell or transfer our interest to a third party. Any delay in the sale or transfer of our interest in the Golar Mazo or restrictions in our ability to manage the joint venture could have a material adverse effect on our cash flows and affect our ability to make distributions to our unitholders.


Risks Inherent in an Investment in Us

Golar LNG Limited, Golar Energy and their affiliates may compete with us.

        Pursuant to the omnibus agreement that we and Golar LNG Limited and Golar Energy will enter into in connection with the closing of this offering, Golar LNG Limited, Golar Energy and their controlled affiliates (other than us, our general partner and our subsidiaries) generally will agree not to acquire, own, operate or charter certain FSRUs and LNG carriers operating under charters of five years or more. The omnibus agreement, however, contains significant exceptions that may allow Golar LNG Limited, Golar Energy or any of their controlled affiliates to compete with us, which could harm our business. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement—Noncompetition."

Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of the unitholders owning more than 4.9% of our common units.

        Unlike the holders of common stock in a corporation, holders of common units have only limited voting rights on matters affecting our business. We will hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before the meeting. Common unitholders will be entitled to elect only four of the seven members of our board of directors. The elected directors will be elected on a staggered basis and will serve for three year terms. Our general partner in its sole discretion will appoint the remaining three directors and set the terms for which those directors will serve. The partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders' ability to influence the manner or

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direction of management. Unitholders will have no right to elect our general partner, and our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding common and subordinated units, including any units owned by our general partner and its affiliates, voting together as a single class.

        Our partnership agreement further restricts unitholders' voting rights by providing that if any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to our board), determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such unitholders in excess of 4.9% will effectively be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.

Our general partner and its other affiliates own a significant interest in us and have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor their own interests to your detriment.

        Following this offering, Golar will own a 67.9% limited partner interest in us, assuming no exercise of the underwriters' over-allotment option, and will own and control our general partner. All of our officers and certain of our directors are directors and/or officers of Golar LNG Limited and Golar Energy and their affiliates and, as such, they have fiduciary duties to Golar LNG Limited and Golar Energy that may cause them to pursue business strategies that disproportionately benefit Golar LNG Limited and Golar Energy or which otherwise are not in the best interests of us or our unitholders. Conflicts of interest may arise between Golar LNG Limited and its affiliates (including our general partner and Golar Energy) on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner and its affiliates may favor their own interests over the interests of our unitholders. Please read "—Our partnership agreement limits our general partner's and our directors' fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors." These conflicts include, among others, the following situations:

    neither our partnership agreement nor any other agreement requires our general partner or Golar LNG Limited or its affiliates (including Golar Energy) to pursue a business strategy that favors us or utilizes our assets, and Golar LNG Limited's and Golar Energy's respective officers and directors have a fiduciary duty to make decisions in the best interests of the shareholders of Golar LNG Limited and Golar Energy, which may be contrary to our interests;

    our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. Specifically, our general partner will be considered to be acting in its individual capacity if it exercises its call right, pre-emptive rights, registration rights or right to make a determination to receive common units in exchange for resetting the target distribution levels related to the incentive distribution rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the election of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units, general partner interest or incentive distribution rights or votes upon the dissolution of the partnership;

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    our general partner and our directors have limited their liabilities and reduced their fiduciary duties under the laws of the Marshall Islands, while also restricting the remedies available to our unitholders, and, as a result of purchasing common units, unitholders are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner and our directors, all as set forth in the partnership agreement;

    our general partner is entitled to reimbursement of all reasonable costs incurred by it and its affiliates for our benefit;

    our partnership agreement does not restrict us from paying our general partner or its affiliates for any services rendered to us on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf;

    our general partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units; and

    our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of its limited call right.

        Although a majority of our directors will over time be elected by common unitholders, our general partner will likely have substantial influence on decisions made by our board of directors. Please read "Certain Relationships and Related Party Transactions," "Conflicts of Interest and Fiduciary Duties" and "The Partnership Agreement."

        In addition to the conflicts described above, all of Golar Energy's officers and certain of its directors are directors and/or officers of Golar LNG Limited and its affiliates and, as such, they have fiduciary duties to Golar Energy that may cause them to pursue business strategies that disproportionately benefit Golar Energy or which otherwise are not in the best interests of Golar LNG Limited and, indirectly, our unitholders. As a result, there may be instances where a conflict of interest arises between Golar Energy and its affiliates (including Golar Management), on the one hand, and Golar LNG Limited, on the other hand, that could have an adverse affect on our business.

Our officers face conflicts in the allocation of their time to our business.

        Our officers, all but one of whom are employed by Golar Management and perform executive officer functions for us pursuant to the management and administrative services agreement, are not required to work full-time on our affairs and also perform services for affiliates of our general partner, including Golar. For example, Graham Robjohns, who functions as our Chief Executive Officer and Chief Financial Officer, also provides services in a similar capacity for Golar LNG Limited and Golar Energy. The affiliates of our general partner, including Golar LNG Limited and Golar Energy, conduct substantial businesses and activities of their own in which we have no economic interest. As a result, there could be material competition for the time and effort of our officers who also provide services to our general partner's affiliates, which could have a material adverse effect on our business, results of operations and financial condition. Please read "Management."

Our partnership agreement limits our general partner's and our directors' fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors.

        Our partnership agreement provides that our general partner will delegate to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis, and such delegation will be binding on any successor general partner of the partnership. Our partnership agreement also contains provisions that reduce the standards to which our general partner

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and directors would otherwise be held by Marshall Islands law. For example, our partnership agreement:

    permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. Where our partnership agreement permits, our general partner may consider only the interests and factors that it desires, and in such cases it has no fiduciary duty or obligation to give any consideration to any interest of, or factors affecting us, our affiliates or our unitholders. Decisions made by our general partner in its individual capacity will be made by its sole owner, Golar LNG Limited. Specifically, pursuant to our partnership agreement, our general partner will be considered to be acting in its individual capacity if it exercises its right to make a determination to receive common units in exchange for resetting the target distribution levels related to the incentive distribution rights, call right, pre-emptive rights or registration rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the election of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units, general partner interest or incentive distribution rights or votes upon the dissolution of the partnership;

    provides that our general partner and our directors are entitled to make other decisions in "good faith" if they reasonably believe that the decision is in our best interests;

    generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of our board of directors and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be "fair and reasonable" to us and that, in determining whether a transaction or resolution is "fair and reasonable," our board of directors may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; and

    provides that neither our general partner nor our officers or our directors will be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or directors or its officers or directors or those other persons engaged in actual fraud or willful misconduct.

        In order to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above. Please read "Conflicts of Interest and Fiduciary Duties—Fiduciary Duties."

Fees and cost reimbursements, which Golar Management will determine for services provided to us and certain of our subsidiaries, will be substantial, will be payable regardless of our profitability and will reduce our cash available for distribution to you.

        Pursuant to the fleet management agreements, we will pay fees for services provided to us and our subsidiaries by Golar Management (a direct subsidiary of Golar Energy) and certain other affiliates of Golar, including Golar Wilhelmsen, and we will reimburse these entities for all expenses they incur on our behalf. These fees and expenses will include all costs and expenses incurred in providing certain commercial and technical management services to our subsidiaries. We expect the amount of these fees and expenses to be approximately $2.5 million for the twelve months ending March 31, 2012.

        In addition, pursuant to a management and administrative services agreement Golar Management will provide us with significant management, administrative, financial and other support services. We will reimburse Golar Management for its reasonable costs and expenses incurred in connection with the

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provision of these services. In addition, we will pay Golar Management a management fee equal to 5% of its costs and expenses incurred in connection with providing services to us. We expect that we will pay Golar Management approximately $1.4 million in total under the management and administrative services agreement for the twelve months ending March 31, 2012.

        For a description of the fleet management agreements and the management and administrative services agreement, please read "Certain Relationships and Related Party Transactions." The fees and expenses payable pursuant to the fleet management agreements and the management and administrative services agreement will be payable without regard to our financial condition or results of operations. The payment of fees to and the reimbursement of expenses of Golar Management, Golar Wilhelmsen and certain other affiliates of Golar could adversely affect our ability to pay cash distributions to you.

Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner, and even if public unitholders are dissatisfied, they will be unable to remove our general partner without Golar LNG Limited's consent, unless Golar's ownership interest in us is decreased; all of which could diminish the trading price of our common units.

        Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner.

    The unitholders will be unable initially to remove our general partner without its consent because our general partner and its affiliates will own sufficient units upon completion of this offering to be able to prevent its removal. The vote of the holders of at least 662/3% of all outstanding common and subordinated units voting together as a single class is required to remove the general partner. Following the closing of this offering, Golar LNG Limited will own 69.3% of the outstanding common and subordinated units, assuming no exercise of the underwriters' over-allotment option.

    If our general partner is removed without "cause" during the subordination period and units held by our general partner and Golar LNG Limited are not voted in favor of that removal, all remaining subordinated units will automatically convert into common units, any existing arrearages on the common units will be extinguished, and our general partner will have the right to convert its general partner interest and its incentive distribution rights (and Golar Energy will have the right to convert its incentive distribution rights) into common units or to receive cash in exchange for those interests based on the fair market value of those interests at the time. A removal of our general partner under these circumstances would adversely affect the common units by prematurely eliminating their distribution and liquidation preference over the subordinated units, which would otherwise have continued until we had met certain distribution and performance tests. Any conversion of the general partner interest or incentive distribution rights would be dilutive to existing unitholders. Furthermore, any cash payment in lieu of such conversion could be prohibitively expensive. "Cause" is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our general partner liable for actual fraud or willful or wanton misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor business decisions, such as charges of poor management of our business by the directors appointed by our general partner, so the removal of our general partner because of the unitholders' dissatisfaction with the general partner's decisions in this regard would most likely result in the termination of the subordination period.

    Common unitholders will be entitled to elect only four of the seven members of our board of directors. Our general partner in its sole discretion will appoint the remaining three directors.

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    Election of the four directors elected by unitholders is staggered, meaning that the members of only one of three classes of our elected directors will be selected each year. In addition, the directors appointed by our general partner will serve for terms determined by our general partner.

    Our partnership agreement contains provisions limiting the ability of unitholders to call meetings of unitholders, to nominate directors and to acquire information about our operations as well as other provisions limiting the unitholders' ability to influence the manner or direction of management.

    Unitholders' voting rights are further restricted by the partnership agreement provision providing that if any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to our board), determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such unitholders in excess of 4.9% will effectively be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.

    There are no restrictions in our partnership agreement on our ability to issue equity securities.

        The effect of these provisions may be to diminish the price at which the common units will trade.

The control of our general partner may be transferred to a third party without unitholder consent.

        Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. In addition, our partnership agreement does not restrict the ability of the members of our general partner from transferring their respective membership interests in our general partner to a third party.

Substantial future sales of our common units in the public market could cause the price of our common units to fall.

        We have granted registration rights to Golar LNG Limited and certain of its affiliates. These unitholders have the right, subject to some conditions, to require us to file registration statements covering any of our common, subordinated or other equity securities owned by them or to include those securities in registration statements that we may file for ourselves or other unitholders. Upon the closing of this offering and assuming no exercise of the underwriters' over-allotment option, Golar LNG Limited will own 11,127,254 common units and 15,949,831 subordinated units and 81% of the incentive distribution rights (through its ownership of our general partner), and Golar Energy will own 19% of the incentive distribution rights. Following their registration and sale under the applicable registration statement, those securities will become freely tradable. By exercising their registration rights and selling a large number of common units or other securities, these unitholders could cause the price of our common units to decline.

You will experience immediate and substantial dilution of $18.20 per common unit.

        The initial public offering price of $22.50 per common unit exceeds pro forma net tangible book value of $4.30 per common unit. Based on the initial public offering price, you will incur immediate and substantial dilution of $18.20 per common unit. This dilution results primarily because the assets contributed by our general partner and its affiliates are recorded at their historical cost, and not their fair value, in accordance with U.S. GAAP. Please read "Dilution."

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Our general partner, as the initial holder of a majority of the incentive distribution rights, may elect to cause us to issue additional common units to it and Golar Energy in connection with a resetting of the target distribution levels related to general partner's and Golar Energy's incentive distribution rights without the approval of the conflicts committee of our board of directors or holders of our common units and subordinated units. This may result in lower distributions to holders of our common units in certain situations.

        Our general partner, as the initial holder of a majority of the incentive distribution rights, has the right, at a time when there are no subordinated units outstanding and our general partner and Golar Energy have received incentive distributions at the highest level to which they are entitled (48%) for each of the prior four consecutive fiscal quarters, to reset the initial cash target distribution levels at higher levels based on the distribution at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the "reset minimum quarterly distribution"), and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution amount.

        In connection with resetting these target distribution levels, our general partner and Golar Energy will be entitled to receive a number of common units equal to that number of common units whose aggregate quarterly cash distributions equaled the average of the distributions to our general partner and Golar Energy on the incentive distribution rights in the prior two quarters. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion; however, it is possible that our general partner could exercise this reset election at a time when it is experiencing, or may be expected to experience, declines in the cash distributions it receives related to its incentive distribution rights and may therefore desire to be issued our common units, rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause our common unitholders to experience dilution in the amount of cash distributions that they would have otherwise received had we not issued additional common units to our general partner in connection with resetting the target distribution levels related to our general partner's and Golar Energy's incentive distribution rights. Please read "How We Make Cash Distributions—Incentive Distribution Rights" and "How We Make Cash Distributions—General Partner's Right to Reset Incentive Distribution Levels."

We may issue additional equity securities, including securities senior to the common units, without your approval, which would dilute your ownership interests.

        We may, without the approval of our unitholders, issue an unlimited number of additional units or other equity securities. In addition, we may issue an unlimited number of units that are senior to the common units in right of distribution, liquidation and voting. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:

    our unitholders' proportionate ownership interest in us will decrease;

    the amount of cash available for distribution on each unit may decrease;

    because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;

    the relative voting strength of each previously outstanding unit may be diminished; and

    the market price of the common units may decline.

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Upon the expiration of the subordination period, the subordinated units will convert into common units and will then participate pro rata with other common units in distributions of available cash.

        During the subordination period, which we define elsewhere in this prospectus and in the glossary, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.3850 per unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units. The purpose of the subordinated units is to increase the likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units. Upon the expiration of the subordination period, the subordinated units will convert into common units and will then participate pro rata with other common units in distributions of available cash. See "How We Make Cash Distributions—Subordination Period," "—Distributions of Available Cash From Operating Surplus During the Subordination Period" and "—Distributions of Available Cash From Operating Surplus After the Subordination Period."

In establishing cash reserves, our board of directors may reduce the amount of cash available for distribution to you.

        Our partnership agreement requires our general partner to deduct from operating surplus cash reserves that it determines are necessary to fund our future operating expenditures. These reserves also will affect the amount of cash available for distribution to our unitholders. Our board of directors may establish reserves for distributions on the subordinated units, but only if those reserves will not prevent us from distributing the full minimum quarterly distribution, plus any arrearages, on the common units for the following four quarters. As described above in "—Risks Inherent in Our Business—We must make substantial capital expenditures to maintain and replace the operating capacity of our fleet, which will reduce our cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted," our partnership agreement requires our board of directors each quarter to deduct from operating surplus estimated maintenance and replacement capital expenditures, as opposed to actual maintenance and replacement capital expenditures, which could reduce the amount of available cash for distribution. The amount of estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by our board of directors at least once a year, provided that any change must be approved by the conflicts committee of our board of directors.

Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price.

        If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than the then-current market price of our common units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right. As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability upon a sale of your units. For additional information about the limited call right, please read "The Partnership Agreement—Limited Call Right."

        At the completion of this offering and assuming no exercise of the underwriters' over-allotment option, Golar LNG Limited, which owns and controls of our general partner, will own 48.1% of our

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common units. At the end of the subordination period, assuming no additional issuances of common units, no exercise of the underwriters' over-allotment option and the conversion of our subordinated units into common units, Golar LNG Limited will own 69.3% of our common units.

You may not have limited liability if a court finds that unitholder action constitutes control of our business.

        As a limited partner in a partnership organized under the laws of the Marshall Islands, you could be held liable for our obligations to the same extent as a general partner if you participate in the "control" of our business. Our general partner generally has unlimited liability for the obligations of the partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner. In addition, the limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some jurisdictions in which we do business. Please read "The Partnership Agreement—Limited Liability" for a discussion of the implications of the limitations on liability of a unitholder.

We can borrow money to pay distributions, which would reduce the amount of credit available to operate our business.

        Our partnership agreement allows us to make working capital borrowings to pay distributions. Accordingly, if we have available borrowing capacity, we can make distributions on all our units even though cash generated by our operations may not be sufficient to pay such distributions. Any working capital borrowings by us to make distributions will reduce the amount of working capital borrowings we can make for operating our business. For more information, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Increases in interest rates may cause the market price of our common units to decline.

        An increase in interest rates may cause a corresponding decline in demand for equity investments in general, and in particular for yield-based equity investments such as our common units. Any such increase in interest rates or reduction in demand for our common units resulting from other relatively more attractive investment opportunities may cause the trading price of our common units to decline.

There is no existing market for our common units, and a trading market that will provide you with adequate liquidity may not develop. The price of our common units may fluctuate significantly, and you could lose all or part of your investment.

        Prior to this offering, there has been no public market for the common units. After this offering, there will be only 12,000,000 publicly traded common units, assuming no exercise of the underwriters' over-allotment option. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. You may not be able to resell your common units at or above the initial public offering price. Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of the common units and limit the number of investors who are able to buy the common units.

Unitholders may have liability to repay distributions.

        Under some circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under the Marshall Islands Limited Partnership Act (or the Marshall Islands Act), we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Marshall Islands law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Marshall Islands law will be liable to the limited partnership for the

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distribution amount. Assignees who become substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the assignee at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.

We have been organized as a limited partnership under the laws of the Republic of the Marshall Islands, which does not have a well developed body of partnership law.

        Our partnership affairs are governed by our partnership agreement and by the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. The Marshall Islands Act also provides that it is to be applied and construed to make it uniform with the Delaware Revised Uniform Partnership Act and, so long as it does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to the non-statutory law (or case law) of the State of Delaware. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act, in contrast to Delaware, which has a fairly well-developed body of case law interpreting its limited partnership statute. Accordingly, we cannot predict whether Marshall Islands courts would reach the same conclusions as the courts in Delaware. For example, the rights of our unitholders and the fiduciary responsibilities of our general partner under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. As a result, unitholders may have more difficulty in protecting their interests in the face of actions by our general partner and its officers and directors than would unitholders of a similarly organized limited partnership in the United States.

Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.

        We are organized under the laws of the Marshall Islands, and substantially all of our assets are located outside of the United States. In addition, our general partner is a Marshall Islands limited liability company, and our directors and officers generally are or will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or the assets of our general partner or our directors or officers. For more information regarding the relevant laws of the Marshall Islands, please read "Service of Process and Enforcement of Civil Liabilities."


Tax Risks

        In addition to the following risk factors, you should read "Business—Taxation of the Partnership," "Material U.S. Federal Income Tax Considerations" and "Non-United States Tax Considerations" for a more complete discussion of the expected material U.S. federal and non-U.S. income tax considerations relating to us and the ownership and disposition of our common units.

U.S. tax authorities could treat us as a "passive foreign investment company," which would have adverse U.S. federal income tax consequences to U.S. unitholders.

        A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a "passive foreign investment company" (or PFIC) for U.S. federal income tax purposes if at least

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75.0% of its gross income for any taxable year consists of "passive income" or at least 50.0% of the average value of its assets produce, or are held for the production of, "passive income." For purposes of these tests, "passive income" includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income." U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their interests in the PFIC.

        Based on our current and projected method of operation, and on an opinion of our U.S. counsel, Vinson & Elkins L.L.P., we believe that we will not be a PFIC for our 2011 taxable year, and we expect that we will not be treated as a PFIC for any future taxable year. Our U.S. counsel is of the opinion that (1) the income we earn from our present time chartering activity and assets engaged in generating such income should not be treated as passive income or assets, respectively, and (2) so long as such income (and any other income that our counsel has concluded does not constitute passive income) exceeds 25.0% of our gross income for each taxable year after our initial taxable year and the value of our vessels contracted under such time charters (and any other assets that our counsel has concluded do not constitute passive assets) exceeds 50.0% of the average value of all of our assets for each taxable year after our initial taxable year, we should not be a PFIC for any year. This opinion is based on certain representations and projections provided to our U.S. counsel by us regarding our assets, income and charters, and its validity is conditioned on the accuracy of such representations and projections.

        While we have received an opinion of our U.S. counsel in support of our position, our counsel has advised us that the conclusions reached are not free from doubt and the U.S. Internal Revenue Service (or IRS) or a court could disagree with this opinion and our position. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to each taxable year, we cannot assure you that the nature of our operations will not change in the future and that we will not become a PFIC in any taxable year. If the IRS were to find that we are or have been a PFIC for any taxable year (and regardless of whether we remain a PFIC for subsequent taxable years), our U.S. unitholders would face adverse U.S. federal income tax consequences. Please read "Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—PFIC Status and Significant Tax Consequences" for a more detailed discussion of the U.S. federal income tax consequences to U.S. unitholders if we are treated as a PFIC.

The preferential tax rates applicable to qualified dividend income are temporary, and the enactment of previously proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for the preferential rate.

        Certain of our distributions may be treated as qualified dividend income eligible for preferential rates of U.S. federal income tax to U.S. individual unitholders (and certain other U.S. unitholders). In the absence of legislation extending the term for these preferential tax rates, all dividends received by such U.S. taxpayers in tax years beginning on January 1, 2013 or later will be taxed at graduated tax rates applicable to ordinary income. Please read "Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Distributions."

        In addition, legislation that was previously proposed in the U.S. Congress would, if enacted, deny the preferential rate of U.S. federal income tax imposed on qualified dividend income with respect to dividends received from a non-U.S. corporation if the non-U.S. corporation is created or organized under the laws of a jurisdiction that does not have a comprehensive income tax system. Because the Marshall Islands imposes only limited taxes on entities organized under its laws, it is likely that, if this legislation were reintroduced and enacted, the preferential tax rates of federal income tax discussed

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above and under "Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Distributions" would not be applicable to distributions received from us.

We may have to pay tax on U.S. source income, which would reduce our cash flow.

        Under the Code, 50.0% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves, that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income. U.S. source shipping income generally is subject to a 4.0% U.S. federal income tax without allowance for deduction unless the corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder.

        Based on an opinion of our counsel, Vinson & Elkins L.L.P., and on certain assumptions and representations, we believe that we and each of our subsidiaries will qualify for this statutory tax exemption for the foreseeable future, and we will take this position for U.S. federal income tax return reporting purposes. Please read "Business—Taxation of the Partnership." However, there are factual circumstances, including some that may be beyond our control, that could cause us to lose the benefit of this tax exemption after this offering. In addition, our position, as well as the conclusion of our counsel, that we qualify for this exemption are based upon legal authorities that do not expressly contemplate an organizational structure such as ours; specifically, although we have elected to be treated as a corporation for U.S. federal income tax purposes, we are organized as a limited partnership under Marshall Islands law. Therefore, we can give no assurance that the IRS will not take a different position regarding our qualification, or the qualification of any of our subsidiaries, for this tax exemption.

        If we or our subsidiaries are not entitled to this exemption under Section 883 for any taxable year, we or our subsidiaries generally would be subject to a 4.0% U.S. federal gross income tax on our U.S. source shipping income for such year. Our failure to qualify for the exemption under Section 883 could have a negative effect on our business and would result in decreased earnings available for distribution to our unitholders.

You may be subject to income tax in one or more non-U.S. jurisdictions, including the United Kingdom, as a result of owning our common units if, under the laws of any such jurisdiction, we are considered to be carrying on business there. Such laws may require you to file a tax return with, and pay taxes to, those jurisdictions.

        We intend to conduct our affairs and cause or influence each of our subsidiaries to operate its business in a manner that minimizes income taxes imposed upon us and our subsidiaries and that may be imposed upon you as a result of owning our common units. However, because we are organized as a partnership, there is a risk in some jurisdictions, including the United Kingdom, that our activities or the activities of our subsidiaries may be attributed to our unitholders for tax purposes if, under the laws of such jurisdiction, we are considered to be carrying on business there. If you are subject to tax in any such jurisdiction, you may be required to file a tax return with, and to pay tax in, that jurisdiction based on your allocable share of our income. We may be required to reduce distributions to you on account of any tax withholding obligations imposed upon us by that jurisdiction in respect of such allocation to you. The United States may not allow a tax credit for any foreign income taxes that you directly or indirectly incur by virtue of an investment in us.

        We believe we can conduct our affairs in a manner that does not result in our unitholders being considered to be carrying on business in the United Kingdom solely as a consequence of the acquisition, ownership, disposition or redemption of our common units. However, the question of whether either we or any of our subsidiaries will be treated as carrying on business in any jurisdiction, including the United Kingdom, will be largely a question of fact to be determined through an analysis

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of contractual arrangements, including the fleet management agreements that our subsidiaries have entered into with Golar Management, certain other subsidiaries of Golar and certain third-party vessel managers and the management and administrative service agreement we will enter into with Golar Management in connection with the closing of this offering, as well as through an analysis of the manner in which we conduct business or operations, all of which may change over time. Furthermore, the laws of the United Kingdom or any other jurisdiction may also change, which could cause that jurisdiction's taxing authorities to determine that we are carrying on business in such jurisdiction and that we or our unitholders are subject to its taxation laws. In addition to the potential for taxation of our unitholders, any additional taxes imposed on us or any of our subsidiaries will reduce our cash available for distribution.

The ratio of dividend income to distributions on our common units is subject to business, economic and other uncertainties as well as tax reporting positions with which the IRS may disagree, which could result in a higher ratio of dividend income to distributions and adversely affect the value of our common units.

        We estimate that approximately 70% of the total cash distributions made to a purchaser of common units in this offering who owns those units from the date of this offering through December 31, 2013 will constitute dividend income. The remaining portion of the distributions will be treated first as a nontaxable return of capital to the extent of the purchaser's tax basis in its common units and thereafter as capital gain. These estimates are based on certain assumptions that are subject to business, economic, regulatory, competitive and political uncertainties beyond our control. In addition, these estimates are based on current U.S. federal income tax law and tax reporting positions that we will adopt and with which the IRS could disagree. As a result of these uncertainties, these estimates may be incorrect and the actual percentage of total cash distributions that will constitute dividend income could be higher, and any difference could adversely affect the value of the common units. Please read "Material U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Ratio of Dividend Income to Distributions."

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FORWARD-LOOKING STATEMENTS

        Statements included in this prospectus which are not historical facts (including our financial forecast and any other statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto) are forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such statements include, in particular, statements about our plans, strategies, business prospects, changes and trends in our business, and the markets in which we operate as described in this prospectus. In some cases, you can identify the forward-looking statements by the use of words such as "may," "could," "should," "would," "expect," "plan," "anticipate," "intend," "forecast," "believe," "estimate," "predict," "propose," "potential," "continue" or the negative of these terms or other comparable terminology.

        Forward-looking statements appear in a number of places and include statements with respect to, among other things:

    statements about FSRU and LNG market trends, including charter rates, factors affecting supply and demand, and opportunities for the profitable operations of FSRUs and LNG carriers;

    statements about our and Golar's ability to retrofit vessels as FSRUs and the timing of the delivery and acceptance of any such retrofitted vessels, including with respect to the Khannur;

    our anticipated growth strategies;

    the effect of the worldwide economic slowdown;

    turmoil in the global financial markets;

    fluctuations in currencies and interest rates;

    general market conditions, including fluctuations in charter hire rates and vessel values;

    changes in our operating expenses, including drydocking and insurance costs and bunker prices;

    forecasts of our ability to make cash distributions on the units and the amount of any borrowings that may be necessary to make such distributions;

    our future financial condition or results of operations and our future revenues and expenses;

    the repayment of debt and settling of interest rate swaps;

    our ability to make additional borrowings and to access debt and equity markets;

    planned capital expenditures and availability of capital resources to fund capital expenditures;

    the exercise of purchase options by our charterers;

    our ability to maintain long-term relationships with major LNG traders;

    our ability to leverage Golar's relationships and reputation in the shipping industry;

    our ability to purchase vessels from Golar LNG Limited or Golar Energy in the future, including the Golar Freeze and the Khannur;

    our continued ability to enter into long-term time charters, including charters for floating storage and regasification projects;

    our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term time charter;

    timely purchases and deliveries of newbuilding vessels;

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    future purchase prices of newbuildings and secondhand vessels;

    our ability to compete successfully for future chartering and newbuilding opportunities;

    acceptance of a vessel by its charterer;

    termination dates and extensions of charters;

    the expected cost of, and our ability to comply with, governmental regulations, maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business;

    availability of skilled labor, vessel crews and management;

    our anticipated incremental general and administrative expenses as a publicly traded limited partnership and our fees and expenses payable under the fleet management agreements and the management and administrative services agreement;

    the anticipated taxation of our partnership and distributions to our unitholders;

    estimated future maintenance and replacement capital expenditures;

    our ability to retain key employees;

    customers' increasing emphasis on environmental and safety concerns;

    potential liability from any pending or future litigation;

    potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;

    future sales of our common units in the public market; and

    our business strategy and other plans and objectives for future operations.

        These and other forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties, including those risks discussed in "Risk Factors." The risks, uncertainties and assumptions involve known and unknown risks and are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

        We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

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USE OF PROCEEDS

        The common units being offered by this prospectus, including the common units offered if the underwriters' overallotment option is exercised, are solely for the account of Golar LNG Limited. We will not receive any proceeds from the sale of our common units by Golar LNG Limited. Golar LNG Limited will pay all offering expenses, underwriting discounts, financial advisory fees, selling commissions and brokerage fees, if any, incurred in connection with this offering and any exercise by the underwriters of their overallotment option.

        Golar LNG Limited has granted the underwriters a 30-day option to purchase up to 1,800,000 additional common units to cover overallotments, if any. The exercise of the underwriters' option will not affect the total number of units outstanding or the amount of cash needed to pay the minimum quarterly distribution on all units. We will not receive any proceeds from the sale of any such common units.

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CAPITALIZATION

        The following table shows:

    our historical cash and capitalization as of December 31, 2010; and

    our pro forma cash and capitalization as of December 31, 2010, which reflects the offering and the other transactions described in the unaudited pro forma combined balance sheet included elsewhere in this prospectus.

        This table is derived from and should be read together with the historical combined financial statements and the pro forma combined balance sheet and the accompanying notes contained elsewhere in this prospectus. You should also read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of December 31, 2010  
 
  Actual   Pro Forma  
 
  (in thousands)
 

Cash and cash equivalents

  $ 29,341   $ 49,341  

Restricted cash and short-term investments(1)

    157,462     157,462  
           
 

Total cash, cash equivalents, restricted cash and short-term investments

  $ 186,803   $ 206,803  
           

Debt:(2)

             
 

Current portion of long-term debt

  $ 33,381   $ 33,381  
 

Current portion of long-term capital leases

    3,113     3,113  
 

Borrowings under the sponsor credit facility(3)

        20,000  
 

Long-term debt

    296,432     296,432  
 

Obligations under capital leases

    268,380     268,380  
           
   

Total debt

  $ 601,306   $ 621,306  
           

Equity:

             
 

Owners' equity

  $ 156,588   $  
   

Held by public:

             
     

Common units(4)

        51,595  
   

Held by general partner and its affiliates:

             
     

Common units(4)

        47,842  
     

Subordinated units(4)

        68,578  
     

General partner interest(4)

        3,429  
           

Equity attributable to Golar LNG Partners LP

    156,588     171,444  

Non-controlling interest

    55,470     55,470  
           

Total capitalization

  $ 813,364   $ 848,220  
           

(1)
Under our capital lease arrangement relating to the Methane Princess, we maintain restricted cash deposits that, together with interest earned on the deposits, are used solely to pay lease rentals due on our lease obligation. In addition, restricted cash includes a balance of $9.7 million as of December 31, 2010 that relates to the Golar Mazo loan facility, representing interest and principal payments required to be held by a trust company for defined future periods.

(2)
Except for the borrowings under the sponsor credit facility, all of our outstanding debt is secured by mortgages covering our vessels.

(3)
At or prior to the closing of this offering, we will enter into the sponsor credit facility with Golar. We expect to draw $20.0 million under this credit facility at or shortly after closing. This facility will be interest free and unsecured, and the balance does not include any imputed interest.

(4)
Allocation of pro forma equity held by the public and held by our general partner and its affiliates was made in accordance with percentage ownership interests after this offering as set forth under "Summary—Simplified Organizational and Ownership Structure After this Offering."

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DILUTION

        Dilution is the amount by which the offering price will exceed the net tangible book value per common unit after this offering. On a pro forma basis as of December 31, 2010, our pro forma net tangible book value would have been $171.4 million, or $4.30 per common unit. This remains unchanged when adjusted for the sale by Golar LNG Limited of 12,000,000 common units in this offering at an initial public offering price of $22.50 per common unit. Purchasers of common units in this offering will experience substantial and immediate dilution in net tangible book value per common unit for financial accounting purposes, as illustrated in the following table.

Initial public offering price per common unit

  $ 22.50  

Less: Pro forma net tangible book value per common unit before and after this offering(1)

    4.30  
       

Immediate dilution in net tangible book value per common unit to purchasers in this offering

  $ 18.20  
       

(1)
Determined by dividing the total number of units (23,127,254 common units, 15,949,831 subordinated units and 797,492 general partner units, assuming no exercise of the underwriters' overallotment option) to be issued to our general partner and its affiliates for their contribution of assets and liabilities to us into the net tangible book value of the contributed assets and liabilities.

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OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS

        You should read the following discussion of our cash distribution policy and restrictions on distributions in conjunction with specific assumptions included in this section. In addition, you should read "Forward-Looking Statements" and "Risk Factors" for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our business.


General

    Rationale for Our Cash Distribution Policy

        Our cash distribution policy reflects a judgment that our unitholders will be better served by our distributing our cash available (after deducting expenses, including estimated maintenance and replacement capital expenditures and reserves) rather than retaining it. Because we believe we will generally finance any expansion capital expenditures from external financing sources, we believe that our investors are best served by our distributing all of our available cash. Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that we distribute all of our available cash quarterly (after deducting expenses, including estimated maintenance and replacement capital expenditures and reserves).

    Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy

        There is no guarantee that unitholders will receive quarterly distributions from us. Our distribution policy is subject to certain restrictions and may be changed at any time, including:

    Our unitholders have no contractual or other legal right to receive distributions other than the obligation under our partnership agreement to distribute available cash on a quarterly basis, which is subject to the broad discretion of our board of directors to establish reserves and other limitations.

    We will be subject to restrictions on distributions under our financing arrangements, including the Golar LNG Partners credit facility and lease arrangements. Our financing arrangements contain material financial tests and covenants that must be satisfied in order to pay distributions. If we are unable to satisfy the restrictions included in any of our financing arrangements or are otherwise in default under any of those agreements, it could have a material adverse effect on our ability to make cash distributions to you, notwithstanding our stated cash distribution policy. These financial tests and covenants are described in this prospectus in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Debt and Lease Restrictions."

    We are required to make substantial capital expenditures to maintain and replace our fleet. These expenditures may fluctuate significantly over time, particularly as our vessels near the end of their useful lives. In order to minimize these fluctuations, our partnership agreement requires us to deduct estimated, as opposed to actual, maintenance and replacement capital expenditures from the amount of cash that we would otherwise have available for distribution to our unitholders. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and replacement capital expenditures, the amount of cash available for distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted.

    Although our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions contained therein requiring us to make cash distributions, may be amended. During the subordination period, with certain exceptions, our partnership agreement may not be amended without the approval of non-affiliated common

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      unitholders. After the subordination period has ended, our partnership agreement can be amended with the approval of a majority of the outstanding common units. At the closing of this offering, Golar LNG Limited will own approximately 48.1% of our common units and all of our subordinated units outstanding immediately after the closing of this offering. Please read "The Partnership Agreement—Amendment of the Partnership Agreement."

    Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our board of directors, taking into consideration the terms of our partnership agreement.

    Under Section 51 of the Marshall Islands Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets.

    We may lack sufficient cash to pay distributions to our unitholders due to decreases in total operating revenues, decreases in hire rates, the loss of a vessel (including, without limitation, through a customer's exercise of its purchase option) or increases in operating or general and administrative expenses, principal and interest payments on outstanding debt, taxes, working capital requirements, maintenance and replacement capital expenditures or anticipated cash needs. Please read "Risk Factors" for a discussion of these factors.

    Our Ability to Grow Depends on Our Ability to Access External Expansion Capital

        Because we distribute all of our available cash, we may not grow as quickly as businesses that reinvest their available cash to expand ongoing operations. We expect that we will rely upon external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund acquisitions and expansion and investment capital expenditures. As a result, to the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow. To the extent we issue additional units in connection with any acquisitions or other capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level, which in turn may affect the available cash that we have to distribute on each unit. There are no limitations in our partnership agreement on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional borrowings or other debt by us to finance our growth would result in increased interest expense, which in turn may affect the available cash that we have to distribute to our unitholders.

    Initial Distribution Rate

        Upon completion of this offering, our board of directors will adopt a policy pursuant to which we will declare an initial quarterly distribution of $0.3850 per unit for each complete quarter, or $1.54 per unit on an annualized basis, to be paid no later than 45 days after the end of each fiscal quarter (beginning with the quarter ending June 30, 2011). This equates to an aggregate cash distribution of $15.4 million per quarter, or $61.4 million per year, in each case based on the number of common units, subordinated units and general partner units outstanding immediately after completion of this offering. Our ability to make cash distributions at the initial distribution rate pursuant to this policy will be subject to the factors described above under "—General—Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy."

        The table below sets forth the number of outstanding common units, subordinated units and general partner units upon the closing of this offering and the aggregate distribution amounts payable

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on such units during the year following the closing of this offering at our initial distribution rate of $0.3850 per unit per quarter ($1.54 per unit on an annualized basis).

 
   
  Distributions  
 
  Number of Units   One Quarter   Four Quarters  

Common units

    23,127,254   $ 8,903,993   $ 35,615,972  

Subordinated units

    15,949,831     6,140,685     24,562,739  

General partner units(1)

    797,492     307,034     1,228,137  
               

Total

    39,874,577   $ 15,351,712 (2) $ 61,406,848  
               

(1)
The number of general partner units is determined by multiplying the total number of units deemed to be outstanding (i.e., the total number of common and subordinated units outstanding divided by 98.0%) by the general partner's 2.0% general partner interest.

(2)
Actual payments of distributions on the common units, subordinated units and the general partner units are expected to be approximately $13.3 million for the period between the estimated closing date of this offering (April 13, 2011) and June 30, 2011.

        During the subordination period, before we make any quarterly distributions to subordinated unitholders, our common unitholders are entitled to receive payment of the full minimum quarterly distribution plus any arrearages in distributions from prior quarters. Please read "How We Make Cash Distributions—Subordination Period." We cannot guarantee, however, that we will pay the minimum quarterly distribution or any amount on the common units in any quarter.

        As of the closing date of this offering, our general partner will be entitled to 2.0% of all distributions that we make prior to our liquidation. Our general partner's initial 2.0% interest in these distributions may be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its initial 2.0% general partner interest. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest.


Forecasted Results of Operations for the Twelve Months Ending March 31, 2012

        In this section, we present in detail the basis for our belief that we will be able to pay our minimum quarterly distribution on all of our outstanding units for the twelve months ending March 31, 2012. We present two tables, consisting of:

    Forecasted Results of Operations for the twelve months ending March 31, 2012; and

    Forecasted Cash Available for Distribution for the twelve months ending March 31, 2012,

as well as the significant assumptions upon which the forecast is based.

        We present below a forecast of the expected results of operations for Golar LNG Partners LP for the twelve months ending March 31, 2012. Our forecast presents, to the best of our knowledge and belief, the expected results of operations for Golar LNG Partners LP for the forecast period. Although we expect to exercise our option to purchase the Golar Freeze from Golar LNG Limited within 24 months after the closing of this offering, subject to reaching an agreement with Golar LNG Limited regarding the purchase price of the vessel, our forecast does not reflect the expected results of operations or related financing of such vessel.

        Our forecast reflects our judgment, as of the date of this prospectus, of conditions we expect to exist and the course of action we expect to take during the twelve months ending March 31, 2012. The assumptions and estimates used in the forecast are inherently uncertain and represent those that we

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believe are significant to our financial forecast. We believe that we have a reasonable objective basis for those assumptions. We believe our actual results of operations will approximate those reflected in our forecast, but we can give no assurance that our forecasted results will be achieved. There will likely be differences between our forecast and the actual results and those differences could be material. Our operations are subject to numerous risks that are beyond our control. If the forecast is not achieved, we may not be able to pay cash distributions on our units at the initial distribution rate stated in our cash distribution policy or at all.

        Our forecast of our results of operations is a forward-looking statement and should be read together with the historical combined financial statements of Golar LNG Partners and our pro forma combined balance sheet and the accompanying notes included elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We do not, as a matter of course, make public projections as to future revenues, earnings or other results. The forecast has been prepared by and is the responsibility of our management. However, our management has prepared the financial forecast set forth below in support of our belief that we will have sufficient cash available to allow us to pay the minimum quarterly distribution on all of our outstanding units during the forecast period. The accompanying financial forecast was not prepared in accordance with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. In addition, in the view of our management, the accompanying financial forecast was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of our knowledge and belief, the expected course of action and the expected future financial performance of Golar LNG Partners LP. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on the financial forecast.

        When considering our financial forecast, you should keep in mind the risk factors and other cautionary statements included under the heading "Risk Factors" elsewhere in this prospectus. Any of the risks discussed in this prospectus could cause our actual results of operations to vary significantly from the financial forecast.

        We are providing the financial forecast to supplement the historical combined financial statements of Golar LNG Partners in support of our belief that we will have sufficient cash available to allow us to pay cash distributions on all of our units for each quarter in the twelve-month period ending March 31, 2012 at our stated initial distribution rate. Please read "—Forecast Assumptions and Considerations—Summary of Significant Forecast Assumptions" for further information as to the assumptions we have made for the financial forecast.

        Unanticipated events may occur which could adversely affect the actual results we achieve during the forecast period. Consequently, our actual results of operations, cash flows and financial condition during the forecast period may vary from the forecast and such variations may be material. Prospective investors are cautioned to not place undue reliance on the forecast and should make their own independent assessment of our future results of operations, cash flows and financial condition.

        We do not undertake any obligation to release publicly the results of any future revisions we may make to the financial forecast or to update the financial forecast to reflect events or circumstances after the date of this prospectus, even in the event that any or all of the underlying assumptions are shown to be in error. Therefore, we caution you not to place undue reliance on this information.

        Neither our independent registered public accounting firm, nor any other independent registered public accounting firm have compiled, examined or performed any procedures with respect to the forecasted financial information contained herein, nor have they expressed any opinion or given any other form of assurance on such information or its achievability, and they assume no responsibility for such forecasted financial information. Our independent registered accounting firm's report included in this prospectus relate to historical financial information of Golar LNG Partners LP. That report does not extend to the tables and the related forecasted financial information contained in this section and should not be read to do so.

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GOLAR LNG PARTNERS LP
FORECASTED RESULTS OF OPERATIONS

(in thousands)
  Twelve Months
Ending
March 31, 2012
 
 
  (unaudited)
 

Total operating revenues

  $ 151,708  

Operating expenses:

       
 

Vessel operating expenses

    24,451  
 

Voyage expenses

    156  
 

Administrative expenses

    4,117  
 

Depreciation and amortization

    26,973  
       
 

Total operating expenses

  $ 55,696  
       

Operating income

    96,012  

Financial income (expenses):

       
 

Interest income

    3,868  
 

Interest expense

    (22,685 )
 

Other financial items, net

    (297 )
       

Net financial expenses

  $ (19,113 )
       

Income before income taxes and non-controlling interest

    76,899  

Income taxes

    (2,417 )

Net income attributable to non-controlling interest

    (9,416 )
       

Net income attributable to Golar LNG Partners owners

  $ 65,066  
       

 

(in thousands, except per unit data)
  Twelve Months
Ending
March 31, 2012
 
 
  (unaudited)
 

General partner's interest in net income

  $ 1,301  

Limited partners' interest in net income

    63,764  

Net income per:

       
 

Common unit (basic and diluted)

  $ 1.63  
 

Subordinated unit (basic and diluted)

  $ 1.63  
 

General partner unit (basic and diluted)

  $ 1.63  

        Please read the accompanying summary of significant accounting policies and forecast assumptions.


Forecast Assumptions and Considerations

    Basis of Presentation

        The accompanying financial forecast and related notes of Golar LNG Partners LP present the forecasted results of operations of Golar LNG Partners LP for the twelve months ending March 31, 2012, based on the assumption that:

    we will issue to Golar LNG Limited 23,127,254 common units and 15,949,831 subordinated units, representing a combined 98% limited partner interest in us;

    we will issue to Golar GP LLC, a wholly-owned subsidiary of Golar LNG Limited, 797,492 general partner units, representing a 2.0% general partner interest in us, and 81% of our

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      incentive distribution rights, which will entitle our general partner to increasing percentages of the cash we distribute in excess of $0.4428 per unit per quarter;

    we will issue to Golar Energy 19% of our incentive distribution rights, which will entitle Golar Energy to increasing percentages of the cash we distribute in excess of $0.4428 per unit per quarter;

    Golar LNG Limited will sell 12,000,000 common units to the public in this offering, representing a 30.1% limited partner interest in us; and

    Summary of Significant Accounting Policies

        Organization.    We are a Marshall Islands limited partnership formed on September 24, 2007 to provide floating storage and regasification services and LNG marine transportation. Our general partner is Golar GP LLC, a wholly-owned subsidiary of Golar LNG Limited. In November 2008, Golar LNG Limited transferred to us a 60% interest in the subsidiary that holds the Golar Mazo, a 100% interest in the subsidiary that holds the Methane Princess and a 100% interest in the subsidiary that holds the Golar Spirit.

        Principles of Combination.    This financial forecast includes our accounts and those of our wholly-owned subsidiaries and partially owned subsidiaries we control, including Faraway Maritime Shipping Inc., the subsidiary that owns the Golar Mazo, in which our interest is 60%.

        Use of Estimates.    The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

        Reporting Currency.    Our financial forecast is stated in U.S. Dollars because we operate in international shipping markets that typically utilize the U.S. Dollar as the functional currency. Transactions involving other currencies during a period are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities that are denominated in currencies other than the U.S. Dollar are translated to reflect the period-end exchange rates. Resulting gains or losses are reflected in our consolidated statements of income.

        Revenue Recognition.    Our revenues include minimum lease payments under time charters and the reimbursement of certain vessel operating and drydocking costs. Revenues generated from time charters, which we classify as operating leases, are recorded over the term of the charter as service is provided. Reimbursement for drydocking costs is recognized evenly over the period to the next drydocking, which is generally between two to five years.

        Voyage Expenses.    Voyage expenses, which are primarily fuel costs but which also include other costs such as port charges, are paid by our customers under our time charters. However, we may incur voyage related expenses during an off-hire when positioning or repositioning vessels before or after the period of a time charter or before or after drydocking, the cost of which will be payable by us. We also incur some voyage expenses, principally fuel costs, when our vessels are in periods of commercial waiting time.

        Vessel Operating Expenses.    Vessel operating expenses include direct vessel operating costs associated with operating a vessel, such as crew wages, which are the most significant component, vessel supplies, routine repairs, maintenance, lubricating oils, insurance and management fees payable for the provision of commercial and technical management services.

        Cash and Cash Equivalents.    We consider all demand and time deposits and highly liquid investments with original maturities of three months or less to be equivalent to cash.

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        Restricted Cash.    Restricted cash consists of bank deposits, which may only be used to settle certain pre-arranged loan or lease payments.

        Vessels and Equipment.    Vessels and equipment are stated at cost less accumulated depreciation. The cost of vessels and equipment less the estimated residual value is depreciated on a straight-line basis over the assets' remaining useful economic lives.

        Generally, we drydock each of our LNG carriers one or two times during a full five-year classification period, depending on vessel age and type of service. One drydock in the five-year period will coincide with the Periodical Survey for Class renewal required to be performed at five-year intervals. When performed twice within the five-year period, the second drydock will be timed to coincide with the Intermediate Classification Survey that has to be carried out between 24 to 36 months after the previous class renewal survey. We capitalize a substantial portion of the costs we incur during drydocking and for the survey expenditures and amortize those costs on a straight-line basis from the completion of a drydocking to the estimated completion of the next drydocking. When significant drydocking expenditures occur prior to the expiration of this period, we expense the remaining unamortized balance of the original drydocking cost and any unamortized intermediate survey costs in the month of the subsequent drydocking.

        As of January 1, 2011, we are depreciating our vessels over their remaining useful lives which are approximately 20 years, 29 years, 33 years and 33 years for the Golar Spirit, the Golar Mazo, the Methane Princess and the Golar Winter, respectively.

        We lease certain vessels under agreements that are classified as capital leases. Depreciation of vessels under capital lease is included within depreciation and amortization expense in the statement of operations. Vessels under capital lease are depreciated on a straight-line basis over the vessels' remaining economic useful lives.

        Loan Costs.    Loan costs, including fees, commissions and legal expenses associated with the loans, are presented as other assets and capitalized and amortized on a straight-line basis, which approximates the effective interest method over the term of the relevant loan. Amortization of loan costs is included in other financial charges.

        Derivative Instruments.    We enter into interest rate swap transactions from time to time to hedge a portion of our exposure to floating interest rates. These transactions involve the conversion of floating rates into fixed rates over the life of the transactions without an exchange of underlying principal. In addition, from time to time we enter into foreign currency swap contracts to reduce risk from foreign currency fluctuations.

        Guidance on accounting for derivatives and hedging activities requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and measure these instruments at fair value. Derivatives that are not hedges are adjusted to fair value through the income statement. Our current interest rate swap contracts do not meet the criteria for hedge accounting, and therefore changes in their fair value are recorded each period in current earnings in other financial items, net. In the event that our derivative instruments do meet the criteria for hedge accounting in the future, our results could be significantly different from our forecast.

        Capital Leases.    Leased vessels have been accounted for as capital leases in accordance with FASB ASC Topic 840-10 and ASC Topic 840-20 "Accounting for Leases." Obligations under capital leases are carried at the present value of future minimum lease payments, and the asset balance is amortized on a straight-line basis over the remaining economic useful lives of the vessels. Interest expense is calculated at a constant rate over the term of the lease.

        Income Taxes.    Our subsidiaries incorporated in the United Kingdom and Brazil are subject to income taxes. We account for such taxes using the liability method pursuant to FASB ASC Topic 740-10

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and FASB ASC Topic 740-30, "Accounting for Income Taxes." Income taxes are based on income before taxes.

        Net Income Per Unit.    The calculation of the forecasted basic and diluted earnings for the twelve months ending March 31, 2012 is set forth below:

 
  Common
Unitholders
  Subordinated
Unitholders
  General
Partner
 

Partners' interests in forecasted net income (in thousands)

  $ 37,738   $ 26,026   $ 1,301  

Forecast weighted average number of units outstanding

    23,127,254     15,949,831     797,492  

Forecast net income per unit

  $ 1.63   $ 1.63   $ 1.63  

    Summary of Significant Forecast Assumptions

        Vessels.    The forecast reflects or assumes the following about our fleet:

    363 days of operations for the Golar Mazo;

    363 days of operations for the Methane Princess;

    363 days of operations for the Golar Spirit; and

    363 days of operations for the Golar Winter.

        Total Operating Revenues.    Our total operating revenues forecast is based on estimated average expected daily hire rates multiplied by the total number of days our vessels are expected to be on-hire during the twelve months ending March 31, 2012. In addition, we have assumed two days of off-hire for each of the vessels in our fleet. The amount of actual off-hire time depends upon, among other things, the time a vessel spends in drydocking for repairs, maintenance or inspection, equipment breakdowns or delays due to accidents, crewing strikes, certain vessel detentions or similar problems as well as failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew.

        The hire rates payable under our current charters are generally fixed. However, two of our charters contain a variable cost component intended to adjust the hire rate for inflation. The forecast assumes an annual inflation rate of 2.5%. For more information on the components of the hire rate payable under our charters, please read "Business—LNG Carrier Charters—Hire Rate" and "Business—FSRU Charters—Hire Rate."

        Vessel Operating Expenses.    Our vessel operating expenses forecast assumes that all of our vessels are operational during the twelve months ending March 31, 2012.

        The forecast also takes into account increases in crewing and other labor related costs driven predominantly by an increase in demand for qualified and experienced officers and crew.

        Voyage Expenses.    Our forecast assumes voyage expenses are primarily comprised of fuel consumption costs while a vessel is off-hire.

        General and Administrative Expenses.    Forecasted general and administrative expenses for the twelve months ending March 31, 2012 are based on the following assumptions:

    we will incur approximately $1.4 million of costs and fees pursuant to the management and administrative services agreement that we entered into with Golar Management. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Management and Administrative Services Agreement;" and

    we will incur approximately $1.6 million in incremental expenses as result of being a publicly traded limited partnership. These expenses will include costs associated with annual reports to

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      unitholders, tax returns, investor relations, registrar and transfer agent fees, audit fees, incremental director and officer liability insurance costs and director compensation.

        Depreciation and Amortization.    Our forecasted depreciation and amortization expense assumes that no vessels are purchased or sold during the twelve months ending March 31, 2012. Vessels and equipment are stated at cost less accumulated depreciation. The cost of vessels and equipment less the estimated residual value is depreciated on a straight-line basis over the assets' remaining economic useful lives, which we estimate at the start of 2011 to be approximately 20 years, 29 years, 33 years and 33 years for the Golar Spirit, the Golar Mazo, the Methane Princess and the Golar Winter, respectively. The economic life for LNG carriers operated worldwide has generally been estimated to be 40 years. On this basis, the Golar Spirit would, therefore, have a remaining useful life of 10 years. However, the Golar Spirit has been converted into an FSRU and has been moored in sheltered waters where fatigue loads on its hull are significantly reduced compared to loads borne in connection with operation in a worldwide trade pattern. We believe that these factors validate our estimate that the Golar Spirit will remain operational until it is 50 years old and will therefore have a remaining useful economic life of 20 years from 2011.

        Interest Rates.    We have assumed that interest rates are constant during the forecast period. The rates we have assumed are based on the relevant year's LIBOR forecast.

        Interest Income.    We have assumed that any cash surplus balances will be invested throughout the forecast period and will earn 2.7% per annum. In addition, our forecast includes interest income of $2.8 million associated with restricted cash deposits required by our capital leases, which assumes a British Pound interest rate of 2.1%.

        Interest Expense.    Our forecast for the twelve months ending March 31, 2012 assumes we will have an average outstanding loan balance of approximately $462.3 million with an estimated weighted average interest rate of approximately 4.3% per annum (excluding borrowings under the interest free sponsor credit facility). In addition, our forecast includes $2.6 million of interest expense associated with our capital leases, which assumes a British Pound interest rate of 1.3%.

        Other Financial Items.    Other financial items include financing fee arrangement costs, amortization of deferred financing costs, market valuation adjustments for interest rate swap, foreign currency swap and equity swap derivatives and foreign exchange gains/losses. The market valuation adjustment for our derivatives may have a significant impact on our results of operations and financial position although it does not impact our liquidity. Foreign exchange gains or losses arise primarily due to the retranslation of our capital lease obligations and the cash deposits securing those obligations that are denominated in GBP. Any gain or loss represents an unrealized gain or loss and will arise over time as a result of exchange rate movements. Our liquidity position will only be affected to the extent that we choose or are required to withdraw monies from or pay additional monies into the deposits securing our capital lease obligations or if the leases are terminated. For the purpose of our forecast, we have assumed that the exchange rate between the U.S. Dollar and the British Pound will not fluctuate and as a result, we have assumed that there is no foreign exchange rate gain or loss at retranslation. We have also assumed that there will be no change in long-term interest rates that would result in a variation in the mark-to-market valuation of interest rate swaps.

        Foreign Currency.    Our functional currency is the U.S. Dollar as the vast majority of our revenues are received in U.S. Dollars and a majority of our expenditures are made in U.S. Dollars. Our reporting currency is also in U.S. Dollars.

        We are exposed to some extent in respect of our vessels' crewing costs which are denominated in Euros and Brazilian Reais, as well as U.S. Dollars. For the purpose of our forecast we have assumed a constant foreign exchange rate of one U.S. Dollar to 0.8 Euros and one U.S. Dollar to 1.8 Brazilian Reais.

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        Although we operate in international shipping markets, which typically utilize the U.S. Dollar as the functional currency, the operation and services fee component of our revenue with respect to the Golar Spirit and the Golar Winter is denominated in Brazilian Reais. The revenue that we receive in Brazilian Reais is subject to an annual review and can be escalated to partly take into account exchange rates between the U.S. Dollar and the Brazilian Real as well as inflation. For purposes of this forecast, we have assumed a 12-month forward exchange rate of one U.S. Dollar to 1.8 Brazilian Reais and further assumed that these rates will not fluctuate during the period covered by the forecast.

        We are exposed to some extent in respect of the lease transaction entered into with respect to the Methane Princess, which is denominated in British Pounds, although this is economically hedged by the British Pound cash deposit that secures this obligation or by a currency swap. We use the GBP we receive under our currency swap in respect of the Golar Winter to pay the GBP lease obligations. We use cash from the deposits to make payments in respect of our leases. Gains or losses that we incur on the re-translation of the deposit are unrealized unless we choose or are required to withdraw funds from or pay additional funds into the deposits securing our capital lease obligations. Gains or losses we incur on the mark-to-market valuations of our currency swap are unrealized unless we were to terminate the swap. For the purpose of our forecast, we have assumed that the exchange rate between the U.S. Dollar and the British Pound will not fluctuate and as a result, we have assumed that there is no foreign exchange rate gain or loss at retranslation.

        Income Taxes.    Forecasted income tax expense for the twelve months ending March 31, 2012 is primarily comprised of expected Brazilian tax on the Brazilian operations of the Golar Spirit and the Golar Winter.

        Non-controlling Interest.    Our non-controlling interest consists of Chinese Petroleum Corporation's 40% interest in the Golar Mazo.

        Maintenance and Replacement Capital Expenditures.    Our partnership agreement requires our board of directors to deduct from operating surplus each quarter estimated maintenance and replacement capital expenditures, as opposed to actual maintenance and replacement capital expenditures, in order to reduce disparities in operating surplus caused by fluctuating maintenance and replacement capital expenditures, such as drydocking and vessel replacement. The actual cost of replacing the vessels in our fleet will depend on a number of factors, including prevailing market conditions, charter hire rates and the availability and cost of financing at the time of replacement. Our board of directors, with the approval of the conflicts committee, may determine that one or more of our assumptions should be revised, which could cause our board of directors to increase the amount of estimated maintenance and replacement capital expenditures. We may elect to finance some or all of our maintenance and replacement capital expenditures through the issuance of additional common units which could be dilutive to our existing unitholders. Please read "Risk Factors—Risks Inherent in Our Business—We must make substantial capital expenditures to maintain and replace the operating capacity of our fleet, which will reduce our cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted."

        Drydocking Capital Expenditures.    Because of the substantial capital expenditures we are required to make to maintain our fleet, our initial annual estimated drydocking costs for our vessels for purposes of calculating operating surplus will be $4.0 million per year.

        Replacement Capital Expenditures.    Because of the substantial capital expenditures we are required to make to maintain our fleet, our initial annual estimated replacement capital expenditures for purposes of calculating operating surplus will be $19.1 million per year, including financing costs, for replacing our FSRUs and LNG carriers at the end of their useful lives. The $19.1 million for future vessel replacement is based on assumptions regarding the remaining useful lives of the vessels, a net

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investment rate, vessel replacement values based on current market conditions and scrap value of the vessels.

        Regulatory, Industry and Economic Factors.    Our forecast for the twelve months ending March 31, 2012 is based on the following assumptions related to regulatory, industry and economic factors:

    no material nonperformance or credit-related defaults by suppliers, customers or vendors;

    no new regulation or any interpretation of existing regulations that, in either case, would be materially adverse to our business;

    no material accidents, releases, weather-related incidents, unscheduled downtime or similar unanticipated events;

    no major adverse change in the markets in which we operate resulting from production disruptions, reduced demand for oil or significant changes in the market prices of oil; and

    no material changes to market, regulatory and overall economic conditions.


Forecasted Cash Available for Distribution

        The table below sets forth our calculation of forecasted cash available for distribution to our unitholders and general partner based on the Forecasted Results of Operations set forth above. Based on the financial forecast and related assumptions, we forecast that our cash available for distribution generated during the twelve months ending March 31, 2012 will be approximately $66.0 million. This amount would be sufficient to pay 100% of the minimum quarterly distribution of $0.3850 per unit on all of our common units and subordinated units for the four quarters ending March 31, 2012.

        Actual payments of distributions on the common units, subordinated units and the general partner units are expected to be approximately $13.3 million for the period between the estimated closing date of this offering (April 13, 2011) and June 30, 2011.

        You should read "—Forecast Assumptions and Considerations—Summary of Significant Forecast Assumptions" included as part of the financial forecast for a discussion of the material assumptions underlying our forecast of adjusted EBITDA that is included in the table below. Our forecast is based on those material assumptions and reflects our judgment of conditions we expect to exist and the course of action we expect to take. The assumptions disclosed in our financial forecast are those that we believe are significant to generate the forecasted adjusted EBITDA. If our estimate is not achieved, we may not be able to pay distributions on the common units at the initial distribution rate of $0.3850 per unit per quarter ($1.54 per unit on an annualized basis). Our financial forecast and the forecast of cash available for distribution set forth below have been prepared by our management. This calculation represents available cash from operating surplus generated during the period and excludes any cash from working capital borrowings, capital expenditures and cash on hand on the closing date.

        Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance calculated in accordance with U.S. GAAP.

        When considering our forecast of cash available for distribution for the twelve months ending March 31, 2012, you should keep in mind the risk factors and other cautionary statements under the heading "Forward Looking Statements" and "Risk Factors" and elsewhere in this prospectus. Any of these factors or the other risks discussed in this prospectus could cause our financial results of operations to vary significantly from those set forth in the financial forecast and the forecast of cash available for distribution set forth below.

        Neither our independent registered public accounting firm, nor any other independent registered public accounting firm have compiled, examined or performed any procedures with respect to the forecasted financial information contained herein, nor have they expressed any opinion or given any other form of assurance on such information or its achievability, and they assume no responsibility for such forecasted financial information.

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GOLAR LNG PARTNERS LP
FORECASTED CASH AVAILABLE FOR DISTRIBUTION

(in thousands, except per unit amounts)
  Twelve Months
Ending
March 31, 2012(1)
 
 
  (unaudited)
 

Adjusted EBITDA(2)

  $ 122,984  

Adjustments for cash items and estimated maintenance and replacement capital expenditures:

       
 

Non-controlling share of cash available for distribution

    (12,671 )
 

Cash interest expense

    (19,860 )
 

Cash interest income

    1,078  
 

Cash income tax expense

    (2,417 )
 

Drydocking capital expenditure reserves(3)

    (4,000 )
 

Replacement capital expenditure reserves(3)

    (19,102 )
       

Cash available for distribution

  $ 66,012  
       

Expected distributions:

       

Distributions per unit

  $ 1.54  

Distributions to our public common unitholders(4)

    18,480  

Distributions to Golar common units(4)

    17,136  

Distributions to Golar subordinated units(4)

    24,563  

Distributions to general partner units

    1,228  
       

Total distributions(5)

  $ 61,407  
       

Excess (shortfall)

 
$

4,606
 

Annualized minimum quarterly distribution per unit

  $ 1.54  

Aggregate distributions based on annualized minimum quarterly distribution

    61,407  

Percent of minimum quarterly distributions payable to common unitholders

    100 %

Percent of minimum quarterly distributions payable to subordinated unitholder

    100 %

(1)
The forecast is based on the assumptions set forth in "—Forecast Assumptions and Considerations—Summary of Significant Forecast Assumptions."

(2)
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA means earnings before interest, other financial items, taxes, non-controlling interest and depreciation and amortization and is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our financial and operating performance. Adjusted EBITDA assists our management and investors by increasing the comparability of our performance from period to period and against the performance of other companies in our industry that provide adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, taxes, depreciation and amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including adjusted EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength in assessing whether to continue to hold common units.



Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, adjusted EBITDA as

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    presented below may not be comparable to similarly titled measures of other companies. The following table reconciles our forecasted net income to forecasted adjusted EBITDA.

(in thousands)
  Twelve Months
Ending
March 31, 2012
 
 
  (unaudited)
 

Net income attributable to Golar LNG Partners owners

  $ 65,066  

Depreciation and amortization

    26,973  

Interest income

    (3,868 )

Interest expense

    22,685  

Other financial items, net

    297  

Non-controlling interest

    9,416  

Income taxes

    2,417  
       

Adjusted EBITDA

  $ 122,984  
       
(3)
Our partnership agreement requires that an estimate of the maintenance and replacement capital expenditures necessary to maintain our asset base be subtracted from operating surplus each quarter, as opposed to amounts actually spent. Please read "Risk Factors—Risks Inherent in Our Business—We must make substantial capital expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted."

(4)
Assumes the underwriters' option to purchase additional common units is not exercised.

(5)
Represents the amount required to fund distributions to our unitholders and our general partner for four quarters based upon our minimum quarterly distribution rate of $0.3850 per unit.

        Forecast of Compliance with Debt Covenants.    Our ability to make distributions could be affected if we do not remain in compliance with the covenants of our financing agreements, including the financial covenants in the Golar LNG Partners credit facility and our lease agreements. The liquidity covenant contained in the Golar LNG Partners credit facility, for example, requires us to maintain Free Liquid Assets in an amount equal to or greater than the higher of $2.5 million per vessel or $10.0 million. Our leverage covenant requires us to maintain a Net Debt to EBITDA coverage ratio of no greater than 6.50 to 1.00. Our debt service coverage covenant requires us to maintain an EBITDA to debt service ratio of equal to or greater than 1.15 to 1.00. Our net worth covenant requires us to maintain a Consolidated Net Worth of $45.0 million plus 80% of the equity contributions made to acquire the Golar Winter. The agreements governing our other financing arrangements also contain financial covenants. We have assumed we will be in compliance with all of these covenants. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Borrowing Activities" and "—Debt and Lease Restrictions" for a further description of our financing arrangements, including these financial covenants.

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HOW WE MAKE CASH DISTRIBUTIONS

Distributions of Available Cash

    General

        Within 45 days after the end of each quarter, beginning with the quarter ending June 30, 2011, we will distribute all of our available cash (defined below) to unitholders of record on the applicable record date. We will adjust the minimum quarterly distribution for the period from the closing of this offering through June 30, 2011, based on the actual length of the period.

    Definition of Available Cash

        We define available cash in the glossary of terms attached as Appendix B, and it generally means, for each fiscal quarter, all cash on hand at the end of the quarter (including our proportionate share of cash on hand of certain subsidiaries we do not wholly own):

    less, the amount of cash reserves (including our proportionate share of cash reserves of certain subsidiaries we do not wholly own) established by our board of directors to:

    provide for the proper conduct of our business (including reserves for future capital expenditures and for our anticipated credit needs);

    comply with applicable law, any of our debt instruments, or other agreements; or

    provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters;

    plus, all cash on hand (including our proportionate share of cash on hand of certain subsidiaries we do not wholly own) on the date of determination of available cash for the quarter resulting from (1) working capital borrowings made after the end of the quarter and (2) cash distributions received after the end of the quarter from any our equity interest in any person (other than a subsidiary of us), which distributions are paid by such person in respect of operations conducted by such person during such quarter. Working capital borrowings are generally borrowings that are made under a revolving credit facility and in all cases are used solely for working capital purposes or to pay distributions to partners.

    Intent to Distribute the Minimum Quarterly Distribution

        We intend to distribute to the holders of common units and subordinated units on a quarterly basis at least the minimum quarterly distribution of $0.3850 per unit, or $1.54 per unit per year, to the extent we have sufficient cash on hand to pay the distribution after we establish cash reserves and pay fees and expenses. The amount of available cash from operating surplus needed to pay the minimum quarterly distribution for one quarter on all units outstanding immediately after this offering and the related distribution on the 2.0% general partner interest is approximately $15.4 million.

        There is no guarantee that we will pay the minimum quarterly distribution on the common units and subordinated units in any quarter. Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is determined by our board of directors, taking into consideration the terms of our partnership agreement. We will be prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default is then existing, under our financing arrangements. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for a discussion of the restrictions contained in our credit facilities and lease arrangements that may restrict our ability to make distributions.

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Operating Surplus and Capital Surplus

    General

        All cash distributed to unitholders will be characterized as either "operating surplus" or "capital surplus." We treat distributions of available cash from operating surplus differently than distributions of available cash from capital surplus.

    Definition of Operating Surplus

        We define operating surplus in the glossary of terms attached as Appendix B, and for any period it generally means:

    $35.0 million; plus

    all of our cash receipts (including our proportionate share of cash receipts of certain subsidiaries we do not wholly own) after the closing of this offering (provided, that cash receipts from the termination of an interest rate, currency or commodity hedge contract prior to its specified termination date will be included in operating surplus in equal quarterly installments over the remaining scheduled life of such hedge contract), excluding cash from (1) borrowings, other than working capital borrowings, (2) sales of equity and debt securities, (3) sales or other dispositions of assets outside the ordinary course of business, (4) capital contributions or (5) corporate reorganizations or restructurings; plus

    working capital borrowings (including our proportionate share of working capital borrowings for certain subsidiaries we do not wholly own) made after the end of a quarter but before the date of determination of operating surplus for the quarter; plus

    interest paid on debt incurred (including periodic net payments under related hedge contracts) and cash distributions paid on equity securities issued (including the amount of any incremental distributions made to the holders of our incentive distribution rights and our proportionate share of such interest and cash distributions paid by certain subsidiaries we do not wholly own), in each case, to finance all or any portion of the construction, replacement or improvement of a capital asset (such as a vessel) in respect of the period from such financing until the earlier to occur of the date the capital asset is put into service or the date that it is abandoned or disposed of; plus

    interest paid on debt incurred (including periodic net payments under related hedge contracts) and cash distributions paid on equity securities issued (including the amount of any incremental distributions made to the holders of our incentive distribution rights and our proportionate share of such interest and cash distributions paid by certain subsidiaries we do not wholly own), in each case, to pay the construction period interest on debt incurred (including periodic net payments under related interest rate swap agreements), or to pay construction period distributions on equity issued, to finance the construction projects described in the immediately preceding bullet; less

    all of our "operating expenditures" (which includes estimated maintenance and replacement capital expenditures and is further described below) of us and our subsidiaries (including our proportionate share of operating expenditures by certain subsidiaries we do not wholly own) immediately after the closing of this offering; less

    the amount of cash reserves (including our proportionate share of cash reserves for certain subsidiaries we do not wholly own) established by our board of directors to provide funds for future operating expenditures; less

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    any cash loss realized on dispositions of assets acquired using investment capital expenditures; less

    all working capital borrowings (including our proportionate share of working capital borrowings by certain subsidiaries we do not wholly own) not repaid within twelve months after having been incurred.

        If a working capital borrowing, which increases operating surplus, is not repaid during the 12-month period following the borrowing, it will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowing is in fact repaid, it will not be treated as a reduction in operating surplus because operating surplus will have been previously reduced by the deemed repayment.

        As described above, operating surplus includes a provision that will enable us, if we choose, to distribute as operating surplus up to $35.0 million of cash we receive in the future from non-operating sources, such as asset sales, issuances of securities and long-term borrowings, that would otherwise be distributed as capital surplus. In addition, the effect of including, as described above, certain cash distributions on equity securities or interest payments on debt in operating surplus would be to increase operating surplus by the amount of any such cash distributions or interest payments. As a result, we may also distribute as operating surplus up to the amount of any such cash distributions or interest payments of cash we receive from non-operating sources.

        We define operating expenditures in the glossary, and it generally means all of our cash expenditures, including, but not limited to taxes, employee and director compensation, reimbursement of expenses to our general partner, repayment of working capital borrowings, debt service payments and payments made under any interest rate, currency or commodity hedge contracts (provided that payments made in connection with the termination of any hedge contract prior to the expiration of its stipulated settlement or termination date shall be included in operating expenditures in equal quarterly installments over the remaining scheduled life of such hedge contract), provided that operating expenditures will not include:

    deemed repayments of working capital borrowings deducted from operating surplus pursuant to the last bullet point of the definition of operating surplus above when such repayment actually occurs;

    payments (including prepayments and payment penalties) of principal of and premium on indebtedness, other than working capital borrowings;

    expansion capital expenditures, investment capital expenditures or actual maintenance and replacement capital expenditures (which are discussed in further detail under "—Capital Expenditures" below);

    payment of transaction expenses (including taxes) relating to interim capital transactions; or

    distributions to partners.

    Capital Expenditures

        For purposes of determining operating surplus, maintenance and replacement capital expenditures are those capital expenditures required to maintain over the long-term the operating capacity of or the revenue generated by our capital assets, and expansion capital expenditures are those capital expenditures that increase the operating capacity of or the revenue generated by our capital assets. In our partnership agreement, we refer to these maintenance and replacement capital expenditures as "maintenance capital expenditures." To the extent, however, that capital expenditures associated with acquiring a new vessel or improving an existing vessel increase the revenues or the operating capacity of our fleet, those capital expenditures would be classified as expansion capital expenditures.

        Investment capital expenditures are those capital expenditures that are neither maintenance and replacement capital expenditures nor expansion capital expenditures. Investment capital expenditures

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largely will consist of capital expenditures made for investment purposes. Examples of investment capital expenditures include traditional capital expenditures for investment purposes, such as purchases of equity securities, as well as other capital expenditures that might be made in lieu of such traditional investment capital expenditures, such as the acquisition of a capital asset for investment purposes.

        Examples of maintenance and replacement capital expenditures include capital expenditures associated with drydocking, modifying an existing vessel or acquiring a new vessel to the extent such expenditures are incurred to maintain the operating capacity of or the revenue generated by our fleet. Maintenance and replacement capital expenditures will also include interest (and related fees) on debt incurred and distributions on equity issued (including the amount of any incremental distributions made to the holders of our incentive distribution rights) to finance the construction of a replacement vessel and paid in respect of the construction period, which we define as the period beginning on the date that we enter into a binding construction contract and ending on the earlier of the date that the replacement vessel commences commercial service or the date that the replacement vessel is abandoned or disposed of. Debt incurred to pay or equity issued to fund construction period interest payments, and distributions on such equity (including the amount of any incremental distributions made to the holders of our incentive distribution rights), will also be considered maintenance and replacement capital expenditures.

        Because our maintenance and replacement capital expenditures can be very large and vary significantly in timing, the amount of our actual maintenance and replacement capital expenditures may differ substantially from period to period, which could cause similar fluctuations in the amounts of operating surplus, adjusted operating surplus, and available cash for distribution to our unitholders if we subtracted actual maintenance and replacement capital expenditures from operating surplus each quarter. Accordingly, to eliminate the effect on operating surplus of these fluctuations, our partnership agreement will require that an amount equal to an estimate of the average quarterly maintenance and replacement capital expenditures necessary to maintain the operating capacity of or the revenue generated by our capital assets over the long-term be subtracted from operating surplus each quarter, as opposed to the actual amounts spent. In our partnership agreement, we refer to these estimated maintenance and replacement capital expenditures to be subtracted from operating surplus as "estimated maintenance capital expenditures." The amount of estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by our board of directors at least once a year, provided that any change must be approved by our conflicts committee. The estimate will be made at least annually and whenever an event occurs that is likely to result in a material adjustment to the amount of our maintenance and replacement capital expenditures, such as a major acquisition or the introduction of new governmental regulations that will affect our fleet. For purposes of calculating operating surplus, any adjustment to this estimate will be prospective only. For a discussion of the amounts we have allocated toward estimated maintenance and replacement capital expenditures, please read "Our Cash Distribution Policy and Restrictions on Distributions."

        The use of estimated maintenance and replacement capital expenditures in calculating operating surplus will have the following effects:

    it will reduce the risk that actual maintenance and replacement capital expenditures in any one quarter will be large enough to make operating surplus less than the minimum quarterly distribution to be paid on all the units for that quarter and subsequent quarters;

    it may reduce the need for us to borrow to pay distributions;

    it will be more difficult for us to raise our distribution above the minimum quarterly distribution and pay incentive distributions to our general partner and Golar Energy; and

    it will reduce the likelihood that a large maintenance and replacement capital expenditure in a period will prevent Golar LNG Limited from being able to convert some or all of its subordinated units into common units since the effect of an estimate is to spread the expected expense over several periods, mitigating the effect of the actual payment of the expenditure on any single period.

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    Definition of Capital Surplus

        We also define capital surplus in the glossary, and it generally will be generated only by:

    borrowings other than working capital borrowings;

    sales of debt and equity securities; and

    sales or other dispositions of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or non-current assets sold as part of normal retirements or replacements of assets.

    Characterization of Cash Distributions

        We will treat all available cash distributed as coming from operating surplus until the sum of all available cash distributed since we began operations equals the operating surplus as of the most recent date of determination of available cash. We will treat any amount distributed in excess of operating surplus, regardless of its source, as capital surplus. As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders. For example, it includes a provision that will enable us, if we choose, to distribute as operating surplus up to $35.0 million of cash we receive in the future from non-operating sources, such as asset sales, issuances of securities and long-term borrowings, that would otherwise be distributed as capital surplus. We do not anticipate that we will make any distributions from capital surplus.


Subordination Period

    General

        During the subordination period, which we define below and in the glossary, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.3850 per unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units. The purpose of the subordinated units is to increase the likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units.

    Definition of Subordination Period

        We define the subordination period in the glossary. The subordination period will extend until the second business day following the distribution of available cash from operating surplus in respect of any quarter, ending on or after March 31, 2016, that each of the following tests are met:

    distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded the minimum quarterly distribution for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date;

    the "adjusted operating surplus" (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distributions on all of the outstanding common units and subordinated units during those periods on a fully diluted weighted average basis and the related distribution on the 2.0% general partner interest during those periods; and

    there are no outstanding arrearages in payment of the minimum quarterly distribution on the common units.

        If the unitholders remove our general partner without cause, the subordination period may end before March 31, 2016.

        For purposes of determining whether the tests in the bullets above have been met, the three consecutive four-quarter periods for which the determination is being made may include one or more

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quarters with respect to which arrearages in the payment of the minimum quarterly distribution on the common units have accrued, provided that all such arrearages have been repaid prior to the end of each such four-quarter period.

        If the expiration of the subordination period occurs as a result of us having met the tests described above, each outstanding subordinated unit will convert into one common unit and will then participate pro rata with the other common units in distributions of available cash.

        In addition, at any time on or after March 31, 2016, provided that there are no outstanding arrearages in payment of the minimum quarterly distribution on the common units and subject to approval by our conflicts committee, the holder or holders of a majority of our outstanding subordinated units will have the option to convert each subordinated unit into a number of common units determined by multiplying the number of outstanding subordinated units to be converted by a fraction, (i) the numerator of which is equal to the aggregate amount of distributions of available cash from operating surplus (not to exceed adjusted operating surplus) on the outstanding subordinated units ("historical distributions") for the four fiscal quarters preceding the date of conversion (the "measurement period") and (ii) the denominator of which is equal to the aggregate amount of distributions that would have been required during the measurement period to pay the minimum quarterly distribution on all outstanding subordinated units during such four-quarter period; provided, that if the forecasted distributions to be paid from forecasted operating surplus (not to exceed forecasted adjusted operating surplus) on the outstanding subordinated units for the four fiscal quarter period immediately following the measurement period ("forecasted distributions"), as determined by the conflicts committee, is less than historical distributions, then the numerator shall be forecasted distributions; provided, further, however, that the subordinated units may not convert into common units at a ratio that is greater than one-to-one. If the option to convert the subordinated units into common units is exercised as described above, the outstanding subordinated units will convert into the prescribed number of common units and will then participate pro rata with other common units in distributions of available cash.

    Definition of Adjusted Operating Surplus

        We define adjusted operating surplus in the glossary, and for any period it generally means:

    operating surplus generated with respect to that period (excluding any amounts attributable to the item described in the first bullet point under "—Operating Surplus and Capital Surplus—Definition of Operating Surplus" above); less

    the amount of any net increase in working capital borrowings (including our proportionate share of any changes in working capital borrowings of certain subsidiaries we do not wholly own) with respect to that period; less

    the amount of any net reduction in cash reserves for operating expenditures (including our proportionate share of cash reserves of certain subsidiaries we do not wholly own) over that period not relating to an operating expenditure made during that period; plus

    the amount of any net decrease in working capital borrowings (including our proportionate share of any changes in working capital borrowings of certain subsidiaries we do not wholly own) with respect to that period; plus

    the amount of any net increase in cash reserves for operating expenditures (including our proportionate share of cash reserves of certain subsidiaries we do not wholly own) over that period required by any debt instrument for the repayment of principal, interest or premium; plus

    the amount of any net decrease made in subsequent periods to cash reserves for operating expenditures initially established with respect to such period to the extent such decrease results in a reduction in adjusted operating surplus in subsequent periods.

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        Adjusted operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net increases in working capital borrowings and net drawdowns of reserves of cash generated in prior periods.

    Effect of Removal of Our General Partner on the Subordination Period

        If the unitholders remove our general partner other than for cause and units held by our general partner and its affiliates are not voted in favor of such removal:

    the subordination period will end and each subordinated unit will immediately convert into one common unit and will then participate pro rata with the other common units in distributions of available cash;

    any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and

    our general partner will have the right to convert its general partner interest and its incentive distribution rights (and Golar Energy will have the right to convert its incentive distribution rights) into common units or to receive cash in exchange for those interests.


Distributions of Available Cash From Operating Surplus During the Subordination Period

        We will make distributions of available cash from operating surplus for any quarter during the subordination period in the following manner:

    first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;

    second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;

    third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and

    thereafter, in the manner described in "—General Partner Interest" and "—Incentive Distribution Rights" below.

        The preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.


Distributions of Available Cash From Operating Surplus After the Subordination Period

        We will make distributions of available cash from operating surplus for any quarter after the subordination period in the following manner:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and

    thereafter, in the manner described in "—General Partner Interest" and "—Incentive Distribution Rights" below.

        The preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.


General Partner Interest

        Our partnership agreement provides that our general partner initially will be entitled to 2.0% of all distributions that we make prior to our liquidation. Our general partner has the right, but not the

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obligation, to contribute a proportionate amount of capital to us to maintain its 2.0% general partner interest if we issue additional units. Our general partner's 2.0% interest, and the percentage of our cash distributions to which it is entitled, will be proportionately reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us in order to maintain its 2.0% general partner interest. Our general partner will be entitled to make a capital contribution in order to maintain its 2.0% general partner interest in the form of the contribution to us of common units based on the current market value of the contributed common units.


Incentive Distribution Rights

        Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partner and Golar Energy will hold the incentive distribution rights following completion of this offering. The incentive distribution rights may be transferred separately from our general partner interest, subject to restrictions in the partnership agreement. Except for transfers of incentive distribution rights to an affiliate or another entity as part of our general partner's merger or consolidation with or into, or sale of substantially all of its assets to such entity, the approval of a majority of our common units (excluding common units held by our general partner and its affiliates), voting separately as a class, generally is required for a transfer of the incentive distribution rights to a third party prior to March 31, 2016. Please read "The Partnership Agreement—Transfer of Incentive Distribution Rights." Any transfer by our general partner of the incentive distribution rights would not change the percentage allocations of quarterly distributions with respect to such rights.

        If for any quarter:

    we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and

    we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;

then, we will distribute any additional available cash from operating surplus for that quarter among the unitholders and our general partner in the following manner:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives a total of $0.4428 per unit for that quarter (the "first target distribution");

    second, 85.0% to all unitholders, pro rata, 2.0% to our general partner and 13.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.4813 per unit for that quarter (the "second target distribution");

    third, 75.0% to all unitholders, pro rata, 2.0% to our general partner and 23.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.5775 per unit for that quarter (the "third target distribution"); and

    thereafter, 50.0% to all unitholders, pro rata, 2.0% to our general partner and 48.0% to the holders of the incentive distribution rights, pro rata.

        In each case, the amount of the target distribution set forth above is exclusive of any distributions to common unitholders to eliminate any cumulative arrearages in payment of the minimum quarterly distribution. The percentage interests set forth above assume that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.


Percentage Allocations of Available Cash From Operating Surplus

        The following table illustrates the percentage allocations of the additional available cash from operating surplus among the unitholders, our general partner and the holders of the incentive distribution rights up to the various target distribution levels. The amounts set forth under "Marginal

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Percentage Interest in Distributions" are the percentage interests of the unitholders, our general partner and the holders of the incentive distribution rights in any available cash from operating surplus we distribute up to and including the corresponding amount in the column "Total Quarterly Distribution Target Amount," until available cash from operating surplus we distribute reaches the next target distribution level, if any. The percentage interests shown for the unitholders, our general partner and the holders of the incentive distribution rights for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests shown for our general partner include its 2.0% general partner interest only and assume that our general partner has contributed any capital necessary to maintain its 2.0% general partner interest.

 
   
  Marginal Percentage Interest
in Distributions
   
 
 
  Total Quarterly
Distribution Target
Amount
  Unitholders   General
Partner
  Holders
of IDRs
 

Minimum Quarterly Distribution

  $0.3850     98.0 %   2.0 %   0 %

First Target Distribution

  up to $0.4428     98.0 %   2.0 %   0 %

Second Target Distribution

  above $0.4428 up to $0.4813     85.0 %   2.0 %   13.0 %

Third Target Distribution

  above $0.4813 up to $0.5775     75.0 %   2.0 %   23.0 %

Thereafter

  above $0.5775     50.0 %   2.0 %   48.0 %


General Partner's Right to Reset Incentive Distribution Levels

        Our general partner, as the initial holder of a majority of our incentive distribution rights, has the right under our partnership agreement to elect to relinquish the right of the holders of our incentive distribution rights to receive incentive distribution payments based on the initial cash target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and cash target distribution levels upon which the incentive distribution payments to our general partner and Golar Energy would be set. Our general partner's right to reset the minimum quarterly distribution amount and the target distribution levels upon which the incentive distributions payable to our general partner and Golar Energy are based may be exercised, without approval of our unitholders or the conflicts committee of our board of directors, at any time when there are no subordinated units outstanding and we have made cash distributions to the holders of the incentive distribution rights at the highest level of incentive distribution for each of the prior four consecutive fiscal quarters. If at the time of any election to reset the minimum quarterly distribution amount and the target distribution levels our general partner and its affiliates are not the holders of a majority of the incentive distribution rights, then any such election to reset shall be subject to the prior written concurrence of our general partner that the conditions described in the immediately preceding sentence have been satisfied. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly distribution amount and the target distribution levels prior to the reset such that there will be no incentive distributions paid under the reset target distribution levels until cash distributions per unit following this event increase as described below. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the existing levels of incentive distribution payments being made to our general partner and Golar Energy.

        In connection with the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by our general partner and Golar Energy of incentive distribution payments based on the target cash distributions prior to the reset, our general partner and Golar Energy will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the "cash parity" value of the average

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cash distributions related to the incentive distribution rights received by our general partner and Golar Energy for the two quarters prior to the reset event as compared to the average cash distributions per common unit during this period. We will also issue an additional amount of general partner units in order to maintain the general partner's ownership interest in us relative to the issuance of the additional common units.

        The number of common units that our general partner and Golar Energy would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the target distribution levels then in effect would be equal to (x) the average amount of cash distributions received by our general partner and Golar Energy in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election divided by (y) the average of the amount of cash distributed per common unit during each of these two quarters. The issuance of the additional common units will be conditioned upon approval of the listing or admission for trading of such common units by the national securities exchange on which the common units are then listed or admitted for trading.

        Following a reset election, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the "reset minimum quarterly distribution") and the target distribution levels will be reset to be correspondingly higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives an amount equal to 115.0% of the reset minimum quarterly distribution for that quarter;

    second, 85.0% to all unitholders, pro rata, 2.0% to our general partner and 13.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives an amount per unit equal to 125.0% of the reset minimum quarterly distribution for the quarter;

    third, 75.0% to all unitholders, pro rata, 2.0% to our general partner, and 23.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives an amount per unit equal to 150.0% of the reset minimum quarterly distribution for the quarter; and

    thereafter, 50.0% to all unitholders, pro rata, 2.0% to our general partner and 48.0% to the holders of the incentive distribution rights, pro rata.

        The following table illustrates the percentage allocation of available cash from operating surplus between the unitholders, our general partner and the holders of the incentive distribution rights at various levels of cash distribution levels pursuant to the cash distribution provision of our partnership agreement in effect at the closing of this offering as well as following a hypothetical reset of the minimum quarterly distribution and target distribution levels based on the assumption that the average

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quarterly cash distribution amount per common unit during the two fiscal quarters immediately preceding the reset election was $0.70.

 
   
  Marginal Percentage Interest in Distribution    
   
 
   
   
  Quarterly
Distribution per
Unit following
Hypothetical Reset
 
  Quarterly
Distribution per Unit
Prior to Reset
  Unitholders   General
Partner
  Holders of
IDRs

Minimum Quarterly Distribution

  $0.3850     98.0 %   2.0 %   0 % $0.70

First Target Distribution

  up to $0.4428     98.0 %   2.0 %   0 % Up to $0.805(1)

Second Target Distribution

  above $0.4428 up to $0.4813     85.0 %   2.0 %   13.0 % above $0.805 up to $0.875(2)

Third Target Distribution

  above $0.4813 up to $0.5775     75.0 %   2.0 %   23.0 % above $0.875 up to $1.05(3)

Thereafter

  above $0.5775     50.0 %   2.0 %   48.0 % above $1.05(3)

(1)
This amount is 115% of the hypothetical reset minimum quarterly distribution.

(2)
This amount is 125% of the hypothetical reset minimum quarterly distribution.

(3)
This amount is 150% of the hypothetical reset minimum quarterly distribution.

        The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders, the general partner and the holders of the incentive distribution rights based on an average of the amounts distributed per quarter for the two quarters immediately prior to the reset. The table assumes that there are 39,077,085 common units and 797,492 general partner units outstanding, representing a 2.0% general partner interest, outstanding, and that the average distribution to each common unit is $0.70 for the two quarters prior to the reset. The assumed number of outstanding units assumes the conversion of all subordinated units into common units and no additional unit issuances.

 
   
   
   
  General Partner and IDR Holders
Cash Distributions Prior to Reset
   
 
 
  Quarterly
Distribution
per Unit
Prior to
Reset
  Common
Unitholders
Cash
Distributions
Prior to Reset
   
   
 
 
  Additional
Common
Units
  2.0%
General
Partner
Interest
  IDRs   Total   Total
Distributions
 

Minimum Quarterly Distribution

  $ 0.3850   $ 15,044,678     0   $ 307,034   $ 0   $ 307,034   $ 15,351,712  

First Target Distribution

  $ 0.4428     2,256,702     0     46,055     0     46,055     2,302,757  

Second Target Distribution

  $ 0.4813     1,504,468     0     35,399     230,095     265,494     1,769,962  

Third Target Distribution

  $ 0.5775     3,761,169     0     100,298     1,153,425     1,253,723     5,014,893  

Thereafter

  $ 0.5775     4,786,943     0     191,478     4,595,465     4,786,943     9,573,886  
                                 

        $ 27,353,960     0   $ 680,264   $ 5,978,986   $ 6,659,250   $ 34,013,209  
                                 

        The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders, the general partner and the holders of the incentive distribution rights with respect to the quarter in which the reset occurs. The table reflects that as a result of the reset there are 47,618,493 common units and 952,370 general partner units outstanding, and that the average distribution to each common unit is $0.70. The number of additional common units was calculated by dividing (x) $5,978,986 as the average of the amounts received by the general partner and Golar Energy in respect of their incentive distribution rights, for the two quarters prior to the reset as shown in the

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table above by (y) the $0.70 of available cash from operating surplus distributed to each common unit as the average distributed per common unit for the two quarters prior to the reset.

 
   
   
   
  General Partner and IDR Holders
Cash Distributions After Reset
   
 
 
   
  Common
Unitholders
Cash
Distributions
After Reset
   
   
 
 
  Quarterly
Distribution
per Unit
After Reset
  Additional
Common
Units
  2.0%
General
Partner
Interest
  IDRs   Total   Total
Distributions
 

Minimum Quarterly Distribution

  $ 0.70   $ 27,353,960   $ 5,978,986   $ 680,264   $ 0   $ 6,659,250   $ 34,013,209  

First Target Distribution

  $ 0.805     0     0     0     0     0     0  

Second Target Distribution

  $ 0.875     0     0     0     0     0     0  

Third Target Distribution

  $ 1.05     0     0     0     0     0     0  

Thereafter

  $ 1.05     0     0     0     0     0     0  
                                 

  $     $ 27,353,960   $ 5,978,986   $ 680,264   $ 0   $ 6,659,250   $ 34,013,209  
                                 

        Assuming that it continues to hold a majority of our incentive distribution rights, our general partner will be entitled to cause the minimum quarterly distribution amount and the target distribution levels to be reset on more than one occasion, provided that it may not make a reset election except at a time when the holders of the incentive distribution rights have received incentive distributions for the prior four consecutive fiscal quarters based on the highest level of incentive distributions that the holders of incentive distribution rights are entitled to receive under our partnership agreement.


Distributions From Capital Surplus

    How Distributions From Capital Surplus Will Be Made

        We will make distributions of available cash from capital surplus, if any, in the following manner:

    first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until the minimum quarterly distribution is reduced to zero, as described below;

    second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and

    thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus.

        The preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.

    Effect of a Distribution from Capital Surplus

        The partnership agreement treats a distribution of capital surplus as the repayment of the consideration for the issuance of the units, which is a return of capital. Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the distribution had to the fair market value of the common units prior to the announcement of the distribution. Because distributions of capital surplus will reduce the minimum quarterly distribution, after any of these distributions are made, it may be easier for our general partner and Golar Energy to receive incentive distributions and for the subordinated units to convert into common units. However, any distribution of capital surplus before the minimum quarterly distribution is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.

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        Once we reduce the minimum quarterly distribution and the target distribution levels to zero, we will then make all future distributions 50% to the holders of units, 2.0% to our general partner and 48.0% to the holders of the incentive distribution rights (initially, our general partner and Golar Energy). The 2.0% interests shown for our general partner assumes that our general partner maintains its 2.0% general partner interest.


Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

        In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we combine our units into fewer units or subdivide our units into a greater number of units, we will proportionately adjust:

    the minimum quarterly distribution;

    the target distribution levels; and

    the initial unit price.

        For example, if a two-for-one split of the common and subordinated units should occur, the minimum quarterly distribution, the target distribution levels and the initial unit price would each be reduced to 50% of its initial level. If we combine our common units into a lesser number of units or subdivide our common units into a greater number of units, we will combine our subordinated units or subdivide our subordinated units, using the same ratio applied to the common units. We will not make any adjustment by reason of the issuance of additional units for cash or property.


Distributions of Cash Upon Liquidation

        If we dissolve in accordance with the partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will apply the proceeds of liquidation in the manner set forth below.

        If, as of the date three trading days prior to the announcement of the proposed liquidation, the average closing price for our common units for the preceding 20 trading days (or the current market price) is greater than the sum of:

    any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; plus

    the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial liquidation);

        then the proceeds of the liquidation will be applied as follows:

    first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the current market price of our common units;

    second, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the current market price of our common units; and

    thereafter, 50.0% to all unitholders, pro rata, 48.0% to holders of incentive distribution rights and 2.0% to our general partner.

        If, as of the date three trading days prior to the announcement of the proposed liquidation, the current market price of our common units is equal to or less than the sum of:

    any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; plus

    the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial liquidation);

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        then the proceeds of the liquidation will be applied as follows:

    first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial liquidation);

    second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;

    third, 98.0% to the subordinated unitholders and 2.0% to our general partner, until we distribute for each outstanding subordinated unit an amount equal to the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial liquidation); and

    thereafter, 50.0% to all unitholders, pro rata, 48.0% to holders of incentive distribution rights and 2.0% to our general partner.

        The immediately preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.

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SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

        The following table presents, in each case for the periods and as of the dates indicated, selected historical combined financial and operating data of Golar LNG Partners, which includes the subsidiaries of Golar that have interests in the vessels in our fleet. These entities have been or will have been acquired as a reorganization under common control and have therefore been recorded at Golar's book values.

        The selected historical combined financial and operating data has been prepared on the following basis:

    the historical combined financial data of Golar LNG Partners as of December 31, 2008 and as of and for the years ended December 31, 2006 and 2007 are derived from the combined financial statements of Golar LNG Partners, prepared in accordance with U.S. GAAP, which are not included in this prospectus;

    the historical combined financial data of Golar LNG Partners as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 are derived from the audited combined financial statements of Golar LNG Partners, prepared in accordance with U.S. GAAP, which are included elsewhere in this prospectus. Our independent registered accounting firm's report included in this prospectus relate to historical financial information of Golar LNG Partners. That report does not extend to the tables and the related forecasted financial information contained in this section and should not be read to do so.

        The following financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the historical combined financial statements of Golar LNG Partners and the notes thereto, our unaudited pro forma combined balance sheet and the notes thereto and our forecasted results of operations for the twelve months ending March 31, 2012 included elsewhere in this prospectus.

        Our financial position, results of operations and cash flows could differ from those that would have resulted if we operated autonomously or as an entity independent of Golar LNG Limited in the periods for which historical financial data are presented below, and such data may not be indicative of our future operating results or financial performance.

 
  Year Ended December 31,  
 
  2006   2007   2008   2009   2010  
 
  (in thousands)
 

Income Statement Data:

                               

Total operating revenues

  $ 107,719   $ 87,495   $ 97,620   $ 119,865   $ 152,647  

Vessel operating expenses(1)

    16,273     17,513     18,813     24,707     25,718  

Voyage expenses(2)

    1,265     2,775     6,347     2,320     282  

Administrative expenses

    3,542     5,791     5,005     4,135     4,615  

Depreciation and amortization

    20,311     21,043     20,375     23,664     24,539  

Impairment of long-lived assets

        2,345     110     1,500     1,500  

Loss on sale of long-lived assets

            (430 )        
                       

Total operating expenses

    41,391     49,467     50,220     56,326     56,654  
                       

Operating income

    66,328     38,028     47,400     63,539     95,993  

Interest income

    18,302     23,522     18,301     5,238     2,472  

Interest expense

    (47,229 )   (49,783 )   (39,753 )   (24,447 )   (14,120 )

Other financial items, net

  $ 5,397   $ (5,242 ) $ (38,909 ) $ 12,334   $ (16,821 )
                       

Income (loss) before income taxes and non-controlling interest

    42,798     6,525     (12,961 )   56,664     67,524  

Income taxes

  $ (730 ) $ 999   $ 815   $ (2,366 ) $ (539 )
                       

Net income (loss) before non-controlling interest

    42,068     7,524     (12,146 )   54,298     66,985  

Non-controlling interest

  $ (7,049 ) $ (6,547 ) $ (6,705 ) $ (9,012 ) $ (9,250 )
                       

Net income (loss) attributable to Golar LNG Partners owners

  $ 35,019   $ 977   $ (18,851 ) $ 45,286   $ 57,735  
                       

 

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  Year Ended December 31,  
 
  2006   2007   2008   2009   2010  
 
  (in thousands, except fleet data and average daily data)
 

Balance Sheet Data (at end of period):

                               

Cash and cash equivalents

  $ 9,069   $ 16,992   $ 19,956   $ 26,870   $ 29,341  

Restricted cash and short-term investments(3)

    28,402     29,681     25,174     23,925     16,492  

Long-term restricted cash(3)

    358,984     367,435     241,451     251,277     140,970  

Vessels, net

    194,381     190,532     184,425     181,030     331,958  

Vessels under capital lease, net(4)

    404,628     417,225     533,167     559,448     383,695  

Total assets

    1,031,212     1,069,559     1,030,454     1,062,373     921,066  

Current portion of long-term debt

    31,433     32,806     27,295     31,514     33,381  

Current portion of obligations under capital leases

    3,052     3,393     2,606     3,837     3,113  

Long-term debt

    335,279     302,473     326,327     329,814     296,432  

Long-term obligations under capital leases(4)

    480,569     488,865     356,936     391,660     268,380  

Non-controlling interest(5)

    32,436     36,983     41,688     49,340     55,470  

Owner's equity

    88,138     147,555     151,041     168,423     156,588  

Cash Flow Data:

                               

Net cash provided by operating activities

    55,880     31,283     38,753     60,028     89,616  

Net cash (used in) provided by investing activities

    (16,890 )   (45,822 )   (69,252 )   (25,289 )   106,831  

Net cash (used in) provided by financing activities

    (40,777 )   22,463     33,463     (27,825 )   (193,976 )

Fleet Data:

                               

Number of vessels at end of period(6)

    4     4     4     4     4  

Average number of vessels during period(6)

    4     4     4     4     4  

Average age of vessels

    10     11     12     13     14  

Total calendar days for fleet

    1,460     1,460     1,464     1,460     1,460  

Total operating days for fleet(7)

    1,419     1,109     1,175     1,261     1,460  

Other Financial Data:

                               

Adjusted EBITDA(8)

  $ 86,639   $ 59,071   $ 67,775   $ 87,203   $ 120,532  

Average daily time charter equivalent earnings (TCE)(8)

    73,978     61,930     77,679     89,935     104,360  

Average daily vessel operating expenses(9)

    11,146     11,995     12,851     16,923     17,615  

(1)
Vessel operating expenses are the direct costs associated with operating a vessel, including crew wages, vessel supplies, routine repairs, maintenance, insurance, lubricating oils and management fees.

(2)
All of our vessels have been operated under time charters during the periods presented. Under a time charter, the charterer pays substantially all of the vessel voyage expenses, which are primarily fuel and port charges. However, we may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during a period of drydocking.

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(3)
Restricted cash and short-term investments consist of bank deposits, which may only be used to settle the Golar Mazo loan or lease payments in respect of the Golar Spirit (in 2009 and 2008) and the Methane Princess.

(4)
During the periods presented, the Golar Spirit, the Golar Winter and the Methane Princess were subject to lease financing arrangements, which are classified as capital leases. Under the arrangements for the Golar Spirit and the Methane Princess, we borrowed under term loans and deposited the proceeds into restricted cash accounts. Concurrently therewith, we entered into capital leases for the vessels, and the vessels were recorded as assets on our balance sheet. These restricted cash deposits, plus the interest earned on the deposits, approximate the remaining amounts we owe under the capital lease arrangements. Where movements in interest rates result in a surplus, this is released to working capital. Similarly, where a deficit arises, this is funded through working capital. In these instances, we consider payments under our capital leases to be funded through our restricted cash deposits, and our continuing obligation is the repayment of the term loans. During December 2010, the outstanding lease liability on the Golar Spirit was repaid from the associated restricted cash deposit. Under U.S. GAAP, we record both the obligations under the capital leases and the term loans as liabilities, and both the restricted cash deposits and our vessels under capital leases as assets. This accounting treatment has the effect of increasing both our assets and liabilities by the amount of restricted cash deposits relating to the corresponding capital lease obligations.


As of December 31, 2010, our total assets and total debt each included $147.8 million of restricted cash deposits.

(5)
Non-controlling interest refers to a 40% interest in the Golar Mazo owned by Chinese Petroleum Corporation.

(6)
In each of the periods presented, we held a 60% ownership interest in the Golar Mazo and a 100% interest in our three other vessels.

(7)
The operating days for our fleet is the total number of days in a given period that the vessels were in our possession less the total number of days off-hire. We define days off-hire as days lost to, among other things, operational deficiencies, drydocking for repairs, maintenance or inspection, equipment breakdowns, special surveys and vessel upgrades, delays due to accidents, crewing strikes, certain vessel detentions or similar problems, or our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, or during periods of commercial waiting time during which we do not earn charter hire.

(8)
Non-GAAP Financial Measures


Adjusted EBITDA.    Earnings before interest, other financial items, taxes, non-controlling interest and depreciation and amortization is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our financial and operating performance. We believe that adjusted EBITDA assists our management and investors by increasing the comparability of our performance from period to period and against the performance of other companies in our industry that provide adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, taxes and depreciation and amortization, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including adjusted EBITDA as a financial and operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength in assessing whether to continue to hold common units.


Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in

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    accordance with U.S. GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following table reconciles net income to adjusted EBITDA.

 
  Year Ended December 31,  
 
  2006   2007   2008   2009   2010  
 
  (in thousands, except fleet data and average daily data)
 

Net (loss) income attributable to Golar LNG Partners owners

  $ 35,019   $ 977   $ (18,851 ) $ 45,286   $ 57,735  

Depreciation and amortization

    20,311     21,043     20,375     23,664     24,539  

Interest income

    (18,302 )   (23,522 )   (18,301 )   (5,238 )   (2,472 )

Interest expense

    47,229     49,783     39,753     24,447     14,120  

Other financial items, net

    (5,397 )   5,242     38,909     (12,334 )   16,821  

Income taxes and non-controlling interest

    7,779     5,548     5,890     11,378     9,789  
                       

Adjusted EBITDA

  $ 86,639   $ 59,071   $ 67,775   $ 87,203   $ 120,532  
                       

TCE.    It is standard industry practice to measure the revenue performance of a vessel in terms of average daily TCE. For time charters, this is calculated by dividing total operating revenue less voyage expenses by the number of calendar days minus days for scheduled off-hire. Where we are paid a fee to position or reposition a vessel before or after a time charter, this additional revenue, less voyage expenses, is included in the calculation of net time charter revenues. The following table reconciles our total operating revenues to average daily TCE.

 
  Year Ended December 31,  
 
  2006   2007   2008   2009   2010  
 
  (dollars in thousands, except average daily TCE)
 

Total operating revenues

  $ 107,719   $ 87,495   $ 97,620   $ 119,865   $ 152,647  

Voyage expenses

    (1,265 )   (2,775 )   (6,347 )   (2,320 )   (282 )
                       

  $ 106,454   $ 84,720   $ 91,273   $ 117,545   $ 152,365  

Calendar days less scheduled off-hire days

    1,439     1,368     1,175     1,307     1,460  

Average daily TCE

  $ 73,978   $ 61,930   $ 77,679   $ 89,935   $ 104,360  
(9)
We calculate average daily vessel operating expenses by dividing vessel operating expenses by the number of calendar days.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion of our financial condition and results of operations in conjunction with the combined financial statements and related notes of Golar LNG Partners included elsewhere in this prospectus. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. Our combined financial statements have been prepared in accordance with U.S. GAAP and are presented in U.S. Dollars.

        Some of the information contained in this discussion includes forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those contained in the forward-looking statements. Please read "Forward-Looking Statements" for more information. You should also review the "Risk Factors" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements.

        The following discussion assumes that our business was operated as a separate entity prior to its inception. The entities that own the vessels in our fleet have been or will have been acquired as a reorganization under common control and have therefore been recorded at Golar's book values. The historical financial statements, whose results are discussed below, have been carved out of the consolidated financial statements of Golar LNG Limited, which operated the vessels in our fleet during the periods presented. Golar LNG Limited's shipping interests and other assets, liabilities, revenues and expenses that do not relate to the vessels acquired or to be acquired by us are not included in our financial statements. Our financial position, results of operations and cash flows reflected in our combined financial statements include all expenses allocable to our business, but may not be indicative of those that would have been achieved had we operated as a separate public entity for all periods presented or of future results. Our independent registered accounting firm's report included in this prospectus relate to historical financial information of Golar LNG Partners LP. That report does not extend to the tables and the related forecasted financial information contained in this section and should not be read to do so. Accordingly, the following financial information has been derived from the combined financial statements and accounting records of Golar LNG Partners and reflects significant assumptions and allocations.


Overview and Background

        We were formed by Golar LNG Limited, a leading independent owner and operator of LNG carriers, to own and operate FSRUs and LNG carriers under long-term charters that generate long-term stable cash flows. Following this offering, our fleet will consist of two FSRUs and two LNG carriers.

        Pursuant to the omnibus agreement that we will enter into with Golar LNG Limited and Golar Energy in connection with the closing of this offering, we will have the right to purchase an additional vessel from Golar LNG Limited, the Golar Freeze, which has recently been retrofitted and is operating as an FSRU under a long-term charter with DUSUP, at any time within 24 months after the closing of this offering, and we will have the right to purchase an additional vessel from Golar Energy, the Khannur, following the completion of its FSRU retrofitting and acceptance by its charterer, which is expected to occur in the first quarter of 2012. The Khannur is expected to operate under a long-term charter with Nusantara Regas. We expect that we will purchase the Golar Freeze and the Khannur if we are able to reach an agreement with Golar LNG Limited and Golar Energy, respectively, regarding the purchase price of these vessels.

    Our Charters

        We generate revenues by chartering FSRU vessels and LNG carriers to customers for a fixed period of time at rates that are generally fixed but may contain a variable component, such as an inflation adjustment.

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        The average remaining term of our existing long-term time charters is approximately eight years for our FSRU vessels, subject to certain termination and purchase rights, and 10 years for our LNG carriers.

        Generally, under our existing charters, the rate we charge for our services, which we call the "hire rate," includes the following two cost components:

    Capital Component.  The capital component relates to the cost of the vessel's purchase and is structured to meet that cost and to provide a profit on the services we provide and the risks we take, as well as a return on invested capital. The capital component of our time charters is usually fixed; however, the Golar Spirit and Golar Winter charters provide for inflation adjustments to the capital component.

    Operating Component.  The operating component is intended to compensate us for vessel operating expenses, including management fees. This component is established at the beginning of the charter and then typically either escalates annually at a fixed percentage or fluctuates annually based on changes in a specified consumer price index.

        Hire payments may be reduced if a vessel does not perform to certain of its technical specifications, such as if the average vessel speed falls below a guaranteed speed or the amount of fuel consumed to power the vessel under normal circumstances exceeds a guaranteed amount or if there is a reduction in the output of the regasification unit. Historically, we have had few instances of hire rate reductions and none that have had a material impact on our operating results.

        When the vessel is "off-hire"—or not available for service—the customer generally is not required to pay the hire rate and we are responsible for all costs. Prolonged off-hire may lead to vessel substitution or termination of the time charter. A vessel generally will be deemed off-hire if there is a loss of time due to, among other things:

    operational deficiencies; drydocking for repairs, maintenance or inspection; equipment breakdowns; special surveys; vessel upgrades; or delays due to accidents, crewing strikes, certain vessel detentions or similar problems; or

    our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew.

        For more information on our charters, please read "Business—FSRU Charters" and "Business—LNG Carrier Charters."

    Our Fleet

        Our fleet consists of (i) two FSRUs that have recently undergone retrofitting from LNG carriers and are currently operating under long-term time charters to Petrobras and (ii) two LNG carriers, both of which are operating under long-term charters.

    FSRUs

        The following table summarizes our current long-term charters for our FSRUs, and the expirations and extension options:

FSRU Vessel
  Year of
Delivery
  Post-Retrofit
Charter
Commencement
  Our
Interest
  Charterer   Charter
Expiration
  Charterer
Extension
Option Periods

Golar Spirit

  1981   July 2008   100%   Petrobras   2018   Three years
plus two years

Golar Winter

  2004   September 2009   100%   Petrobras   2019   Three years
plus two years

        For information on the financing of our FSRUs, please read "—Liquidity and Capital Resources."

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    LNG Carriers

        The following table summarizes our current long-term charters for our LNG carriers, and their expirations and extension options:

Vessel Name
  Year of
Delivery
  Our
Interest
  Charterer   Current
Charter
Expiration
  Charterer
Extension
Option Periods

Golar Mazo

    2000     60%(1)   Pertamina     2017   Five years plus
five years

Methane Princess

    2003   100%        BG Group     2024   Five years plus
five years

(1)
Chinese Petroleum Corporation holds the remaining 40% interest in the Golar Mazo.

        For information on the financing of our LNG carriers, please read "—Liquidity and Capital Resources."

    Historical Employment of Our Fleet

        The following table describes the operations of the vessels in our fleet during the periods for which historical results for Golar LNG Partners are presented.

Vessel
  Description of Historical Operations

Golar Mazo

  Delivered in January 2000. Has operated under long-term time charter with Pertamina, which commenced on delivery.

Methane Princess

 

Delivered in August 2003. Operated under short-term time charters until start of long-term time charter with BG Group in February 2004.

Golar Spirit

 

Delivered in 1981. Operated as an LNG carrier under long-term time charter with Pertamina from 1986 until November 2006. Operated under short-term time charters from November 2006 until commencement of retrofitting in October 2007. Has operated under long-term charter with Petrobras since July 2008 following completion of its retrofitting as an FSRU.

Golar Winter

 

Delivered in 2004. Operated as an LNG carrier in the spot market under short-term time charters from its delivery until its entry into the shipyard for retrofitting in September 2008. Has operated under long-term time charter as an FSRU with Petrobras since September 2009 following completion of its retrofitting.

    Factors Affecting the Comparability of Future Results

        Our historical results of operations and cash flows are not indicative of results of operations and cash flows to be expected in the future, principally for the following reasons:

    The Golar Spirit and the Golar Winter did not generate revenues during the period of their retrofitting and are being operated in a substantially different manner than they have in the past. The Golar Spirit operated under short-term time charters from November 2006 until October 2007, when it entered the shipyard to undergo retrofitting for FSRU service, which was completed in June 2008. The Golar Spirit did not generate any revenue while undergoing retrofitting. In July 2008, the Golar Spirit commenced FSRU service under its long-term charter with Petrobras. The Golar Winter operated in the spot market under short-term time charters from its delivery in 2004 until its entry into the shipyard for retrofitting for FSRU service in September 2008. The Golar Winter

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      completed its FSRU retrofitting and was redelivered from the shipyard in May 2009 and commenced FSRU service in September 2009. While in the shipyard, the Golar Winter did not generate any revenue.

    We intend to increase the size of our fleet by making other acquisitions.  Our growth strategy focuses on expanding our fleet through the acquisition of FSRUs and LNG carriers under long-term time charters. For example, pursuant to the omnibus agreement that we will enter into with Golar LNG Limited and Golar Energy in connection with the closing of this offering, we will have the right to purchase an additional vessel from Golar LNG Limited, the Golar Freeze, which has recently been retrofitted and is operating as a FSRU under a time charter with DUSUP that expires in 2020, at any time within 24 months after the closing of this offering, and we will have the right to purchase an additional vessel from Golar Energy, the Khannur, which we expect will be retrofitted to an FSRU and will operate under an 11-year time charter with Nusantara Regas. We expect that we will purchase the Golar Freeze if we are able to reach an agreement with Golar LNG Limited regarding the purchase price of the vessel, and we expect that we will purchase the Khannur from Golar Energy upon completion of its retrofitting and acceptance by its charterer, which is expected to occur in the first quarter of 2012, if we are able to reach an agreement with Golar Energy regarding the purchase price of the vessel. In order to acquire these two vessels or any additional vessels, we may need to issue additional equity or incur additional indebtedness.

    FSRU operating expenses are higher than the operating expenses for LNG carriers and increase our exposure to foreign exchange rates. Our historical operating expenses reflect the operation of the Golar Spirit and the Golar Winter as LNG carriers until the commencement of their FSRU retrofitting in July 2008 and September 2009, respectively. Following the completion of their retrofitting to FSRUs, we incurred generally higher operating expenses on the vessels as compared to when we operated these vessels as conventional LNG carriers. In addition, in the past, the majority of our expenses and revenues have been denominated in U.S. Dollars. Under the Petrobras charters, we incur a portion of our expenses and receive a portion of our revenues in Brazilian Reais and, therefore, we have increased exposure to foreign exchange rates.

    We expect continued inflationary pressure on crew costs.  Due to the specialized nature of operating FSRUs and LNG carriers, the increase in size of the worldwide LNG carrier fleet and the limited pool of qualified officers, we believe that crewing and labor related costs will experience significant increases.

    Our historical results of operations reflect allocated administrative costs that may not be indicative of future administrative costs. The administrative costs included in our historical results of operations have been determined by allocating Golar's administrative costs to us based on the size of our fleet in relation to the size of Golar's fleet. These allocated costs may not be indicative of our future administrative costs. In connection with this offering, we entered into a management and administrative services agreement with Golar Management pursuant to which Golar Management will provide significant administrative, financial and other support services to us. We will reimburse Golar Management for costs and expenses incurred in connection with the provision of the services under that agreement. In addition, we will pay Golar Management a management fee equal to 5% of its costs and expenses incurred in connection with providing services to us.

    We will incur additional general and administrative expenses as a publicly traded partnership. We expect we will incur approximately $1.6 million in additional general and administrative expenses as a publicly traded limited partnership that we have not previously incurred, including costs associated with annual reports to unitholders, investor relations, registrar and transfer agent fees, audit fees, incremental director and officer liability insurance costs and directors' compensation.

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    We may enter into different financing arrangements.  Our financing arrangements currently in place may not be representative of the arrangements we will enter into in the future. For example, we may amend our existing credit facilities or enter into new financing arrangements after the closing of this offering. For descriptions of our current financing arrangements, please read "—Liquidity and Capital Resources—Borrowing Activities."

    In 2008, we began to incur Brazilian taxes in connection with our operation of FSRUs in Brazil. Our operation of the Golar Spirit and the Golar Winter results in our being subject to Brazilian taxes on the revenue we receive under the operation and services agreement with Petrobras. For the years ended December 31, 2008, 2009 and 2010, we incurred $0.8 million, $1.1 million and $1.6 million, respectively, of Brazilian taxes in connection with our FSRU charters.


Factors Affecting Our Results of Operations

        We believe the principal factors that will affect our future results of operations include:

    the number of vessels in our fleet, including our ability to exercise our option to purchase the Golar Freeze and the Khannur;

    whether Petrobras exercises its options to acquire the Golar Spirit or the Golar Winter and, if so, whether we can effectively redeploy the proceeds from any such exercise (please read "Business—FSRU Charters—Purchase Options" for more information about these purchase options);

    whether Petrobras exercises its option to terminate the Golar Spirit or the Golar Winter charters upon payment of a termination fee;

    our ability to maintain good relationships with our three existing customers and to increase the number of our customer relationships;

    increased demand for LNG shipping services, including floating storage and regasification services;

    our ability to successfully employ our vessels at economically attractive rates, as our charters expire or are otherwise terminated;

    the effective and efficient technical management of our vessels;

    Golar's ability to obtain and maintain major international energy company approvals and to satisfy their technical, health, safety and compliance standards; and

    economic, regulatory, political and governmental conditions that affect the shipping and the LNG industry. This includes changes in the number of new LNG importing countries and regions and availability of surplus LNG from projects around the world, as well as structural LNG market changes allowing greater flexibility and enhanced competition with other energy sources.

        In addition to the factors discussed above, we believe certain specific factors have impacted, and will continue to impact, our combined results of operations. These factors include:

    the hire rate earned by our vessels, unscheduled off-hire days and the level of our vessel operating expenses;

    mark-to-market charges in interest rate swaps and foreign currency derivatives;

    foreign currency exchange gains and losses;

    our access to capital required to acquire additional vessels and/or to implement our business strategy;

    increased crewing costs;

    our level of debt and the related interest expense and amortization of principal; and

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    the level of any distribution on our common units.

        Please read "Risk Factors" for a discussion of certain risks inherent in our business.

    Important Financial and Operational Terms and Concepts

        We use a variety of financial and operational terms and concepts when analyzing our performance. These include the following:

        Total Operating Revenues.    Total operating revenues refers to time charter revenues. We recognize revenues from time charters over the term of the charter as the applicable vessel operates under the charter. We do not recognize revenue during days when the vessel is off-hire, unless the charter agreement makes a specific exception.

        Off-hire (Including Commercial Waiting Time).    Our vessels may be out of service, that is, off-hire, for several reasons: scheduled drydocking, special survey, vessel upgrade or maintenance or inspection, which we refer to as scheduled off-hire; days spent waiting for a charter, which we refer to as commercial waiting time; and unscheduled repairs, maintenance, operational deficiencies, equipment breakdown, accidents, crewing strikes, certain vessel detentions or similar problems, or our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, which we refer to as unscheduled off-hire.

        Voyage Expenses.    Voyage expenses, which are primarily fuel costs but which also include other costs such as port charges, are paid by our customers under our time charters. However, we may incur voyage related expenses during off-hire periods when positioning or repositioning vessels before or after the period of a time charter or before or after drydocking, which expenses will be payable by us. We also incur some voyage expenses, principally fuel costs, when our vessels are in periods of commercial waiting time.

        Time Charter Equivalent Earnings.    In order to compare vessels trading under different types of charters, it is standard industry practice to measure the revenue performance of a vessel in terms of average daily TCE. For our time charters, this is calculated by dividing time charter revenues by the number of calendar days minus days for scheduled off-hire. Where we are paid a fee to position or reposition a vessel before or after a time charter, this additional revenue, less voyage expenses, is included in the calculation of TCE. For shipping companies utilizing voyage charters (where the vessel owner pays voyage costs instead of the charterer), TCE is calculated by dividing voyage revenues, net of vessel voyage costs, by the number of calendar days minus days for scheduled off-hire. TCE is a non-GAAP financial measure. Please read "Selected Historical Financial and Operating Data—Non-GAAP Financial Measures" for a reconciliation of TCE to total operating revenues (TCE's most directly comparable financial measure in accordance with GAAP).

        Vessel Operating Expenses.    Vessel operating expenses include direct vessel operating costs associated with operating a vessel, such as crew wages, which are the most significant component, vessel supplies, routine repairs, maintenance, lubricating oils, insurance and management fees for the provision of commercial and technical management services.

        Depreciation and Amortization.    Depreciation and amortization expense, or the periodic cost charged to our income for the reduction in usefulness and long-term value of our ships, is related to the number of vessels we own or operate under long-term capital leases. We depreciate the cost of our owned vessels, less their estimated residual value, and amortize the amount of our capital lease assets over their estimated economic useful lives, on a straight-line basis. We amortize our deferred drydocking costs over two to five years based on each vessel's next anticipated drydocking. Income derived from sale and subsequently leased assets is deferred and amortized in proportion to the amortization of the leased assets.

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        Administrative Expenses.    Administrative expenses are composed of general overhead, including personnel costs, legal and professional fees, property costs and other general administration expenses. For the historical periods presented, administrative expenses (including Golar's stock-based compensation) have been principally carved out from the administrative expenses of Golar on the basis of Golar's number of vessels. Administrative expenses also include a small amount of direct costs such as professional fees.

        Interest Expense and Interest Income.    Interest expense depends on our overall level of borrowing and may significantly increase when we acquire or lease ships. During an FSRU retrofitting period, interest expense incurred is capitalized in the cost of the vessel. Interest expense may also change with prevailing interest rates, although interest rate swaps or other derivative instruments may reduce the effect of these changes. Interest income will depend on prevailing interest rates and the level of our cash deposits and restricted cash deposits.

        Impairment of Long-Lived Assets.    Our vessels are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In assessing the recoverability of our vessels' carrying amounts, we must make assumptions regarding estimated future cash flows and estimates in respect of residual or scrap value. We estimate those future cash flows based on the existing service potential of our vessels. Following expiration of our time charter contracts, our estimate of market charter rates assumes that we will be able to renew our time charter contracts at their existing or lower rates rather than at escalated rates, and that the costs of operating those vessels reflects our average operating costs experienced historically, other than with respect to the Golar Spirit and the Golar Winter for which we anticipate an increase in operating costs. We follow a traditional present value approach, whereby a single set of future cash flows is estimated. If the carrying value of a vessel were to exceed the undiscounted future cash flows, we would write the vessel down to its fair value, which is calculated by using a risk-adjusted rate of interest.

        Other Financial Items.    Other financial items include financing fee arrangement costs, amortization of deferred financing costs, market valuation adjustments for interest rate swap derivatives, foreign exchange gains/losses and foreign currency derivatives. The market valuation adjustment for our interest rate and foreign currency derivatives may have a significant impact on our results of operations and financial position although it does not impact our liquidity. Foreign exchange gains or losses arise due to the retranslation of our capital lease obligations and the cash deposits securing those obligations. Any gain or loss represents an unrealized gain or loss and will arise over time as a result of exchange rate movements. Our liquidity position will only be affected to the extent that we choose or are required to withdraw monies from or pay additional monies into the deposits securing our capital lease obligations.


Customers

        In the years ended December 31, 2008, 2009 and 2010, revenues from the following customers accounted for over 10% of our combined revenues:

Customer   Vessels   2008   2009   2010  
 
  (dollars in thousands)
   
 

BG Group plc

  Methane Princess   $ 23,300     24 % $ 24,513     20 % $ 25,051     17 %

Pertamina

  Golar Mazo     37,066     38 %   37,570     31 %   36,944     24 %

Petrobras

  Golar Spirit     17,900     18 %   39,001     33 %   39,805     26 %

  Golar Winter     19,354     20 %   18,621     16 %   50,846     33 %


Inflation and Cost Increases

        Although inflation has had a moderate impact on operating expenses, interest costs, drydocking expenses and overhead, we do not expect inflation to have a significant impact on direct costs in the

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current and foreseeable economic environment other than potentially in relation to insurance costs and crew costs. It is anticipated that insurance costs, which have risen considerably over the last three years, will continue to rise over the next few years. LNG transportation is a specialized area and the number of vessels is increasing. Therefore, there has been an increased demand for qualified crew, which has and will continue to put inflationary pressure on crew costs. Only vessels on full cost pass through charters would be fully protected from crew cost increases. The impact of these increases will be mitigated to some extent by the following provisions in our charters:

    The Golar Mazo's charter provides for operating cost and insurance cost pass-throughs, and so we will be protected from the impact of the vast majority of such increases.

    The Methane Princess' charter provides that the operating cost component of the charter hire rate, established at the beginning of the charter, will increase by a fixed percentage per annum, except for insurance, which is covered at cost.

    Under the OSAs for both the Golar Spirit and the Golar Winter, the charter hire rates are payable in Brazilian Reais. The charter hire rates payable under the OSAs covers all vessel operating expenses, other than drydocking and insurance. The charter hire rates payable under the OSAs were established between the parties at the time the charter was entered into and will be increased based on a specified mix of consumer price and U.S. Dollar foreign exchange rate indices on an annual basis.


Results of Operations

    Year Ended December 31, 2009 Compared with the Year Ended December 31, 2010

        Total Operating Revenues.    The following table sets forth details of our total operating revenues for the years ended December 31, 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
  2009   2010   Change   % Change
 
  (in thousands)

Total operating revenues

  $ 119,865   $ 152,647   $ 32,782   27%

        Total operating revenues for 2010 were $152.6 million, an increase of $32.8 million from $119.9 million in 2009. The increase in revenue is almost entirely due to the Golar Winter being on hire for a full year in 2010 compared to four months in 2009. The Golar Winter commenced its 10-year charter with Petrobras in September 2009 following its FSRU retrofitting.

        Voyage Expenses.    The following table sets forth details of our voyage expenses for the years ended December 31, 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  
 
  (in thousands)
 

Voyage expenses

  $ 2,320   $ 282   $ (2,038 )   (88 )%

        Voyage expenses were minimal in 2010 at $0.3 million, a decrease of $2 million from 2009. The low level of voyage expenses is a result of all vessels being on time charters throughout 2010 and as such our charterers paid for fuel costs. During 2009, the Golar Winter was positioned from Singapore to Brazil at our cost, after the completion of its FSRU retrofit.

        TCE.    The following table sets forth our average daily TCE for the years ended December 31, 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  

Calendar days less scheduled off-hire days

    1,307     1,460     153     12 %

Average daily TCE

  $ 89,935   $ 104,360   $ 14,425     16 %

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        Average daily TCE is calculated as $89,935 and $104,360 in 2009 and 2010, respectively. The increase in the average daily TCE can be explained by the reasons described above, principally due to the increased contribution of the Golar Winter in 2010.

        Vessel Operating Expenses.    The following table sets forth details regarding our vessel operating expenses for 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  

Vessel operating expenses (in thousands)

  $ 24,707   $ 25,718   $ 1,011     4 %

Average daily vessel operating costs

  $ 16,923   $ 17,615   $ 692     4 %

        The increase in vessel operating expenses in 2010 as compared to 2009 is primarily due to increased costs associated with the Golar Winter commencing operations as a FSRU vessel in September 2009. Operating costs incurred while a vessel is being retrofitted to a FSRU are lower than when operating as a FSRU. Consequently, the Golar Winter's full year of FSRU operations is the primary reason why operating expenses increased in 2010.

        Administrative Expenses.    The following table sets forth details regarding our administrative expenses in 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  
 
  (in thousands)
 

Administrative expenses

  $ 4,135   $ 4,615   $ 480     12 %

        Administrative expenses have principally been carved out from the administrative expenses of Golar (including an allocation for Golar's stock-based compensation costs) and have been allocated to us based on the size of our fleet in proportion to Golar's fleet. Administrative expenses increased from $4.1 million in 2009 to $4.6 million in 2010. In 2009, there was a decrease in administrative expenses of $0.9 million due in part to a decrease in the Golar LNG employee stock option allocated charge.

        Depreciation and Amortization.    The following table sets forth details regarding our depreciation and amortization expense for 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  
 
  (in thousands)
 

Depreciation and amortization

  $ 23,664   $ 24,539   $ 875     4 %

        Depreciation and amortization increased in 2010 from $23.7 million in 2009 to $24.5 million in 2010. The increase of $0.9 million in vessel depreciation is principally attributable to a full year's depreciation of the Golar Winter FSRU capital expenditure compared with approximately four months in 2009.

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        Impairment of long-lived assets.    The table below sets forth details regarding our impairment charge for 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  
 
  (in thousands)
 

Impairment of long-lived assets

  $ 1,500   $ 1,500   $      

        In 2009 and 2010, an impairment charge was incurred on certain assets that will not be contributed to us in connection with this offering. These assets were parts ordered for FSRU projects that were not required for the retrofitting of the Golar Spirit or the Golar Winter and therefore reflects a lower recoverable amount for these parts. These parts will not be conveyed to us by Golar in connection with the closing of this offering.

        Net Financial Expenses.    The following table sets forth details regarding our net financial expenses for 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  
 
  (in thousands)
 

Interest income from capital lease restricted cash deposits

  $ 5,113   $ 2,421   $ (2,692 )   (53 )%

Other interest income

    125     51     (74 )   (59 )%
                   

Interest income

  $ 5,238   $ 2,472   $ (2,766 )   (53 )%
                   

Capital lease interest expense

  $ (10,108 ) $ (5,642 ) $ 4,466     44 %

Other debt related interest expense

    (14,339 )   (8,478 )   5,861     41 %
                   

Interest expense

  $ (24,447 ) $ (14,120 ) $ 10,327     42 %
                   

Amortization of deferred financing costs

  $ (533 ) $ (335 ) $ 198     37 %

Financing arrangement fees and other costs

    (994 )   (193 )   801     81 %

Interest rate swap cash settlements

    (4,490 )   (6,932 )   2,442     54 %

Mark-to-market adjustment for interest rate swap derivatives

    12,926     (5,697 )   (18,623 )   (144 )%

Mark-to-market adjustment for foreign currency derivatives

    21,346     (7,564 )   (28,910 )   135 %

Foreign exchange (loss) gain on capital lease obligations and related restricted cash

  $ (12,969 ) $ 4,546   $ 17,515     (135 )%

Foreign exchange (loss) gain on operations

    (2,952 )   (646 )   2,306     (78 )%
                   

Other financial items, net

  $ 12,334   $ (16,821 ) $ (29,155 )   (236 )%
                   

        Interest income decreased from $5.2 million in 2009 to $2.5 million in 2010 due mainly to a substantial decrease in interest rates in 2010 compared to 2009. This was also due to a lower requirement, in certain of our capital leases, to hold restricted cash deposits, due to the additional security afforded to the lessors as a result of our entry into long-term charters with the respective vessel. The depreciation of GBP against the U.S. Dollar also impacted our interest income earned on our letters of credit, or LC deposits, denominated in GBP as a result of re-translation.

        Capital lease interest expense decreased to $5.6 million in 2010 compared to $10.1 million in 2009 due in part to the decrease in interest rates in 2010 compared with 2009. A portion of the decrease can also be attributed to the effect of the depreciation of GBP against the U.S. Dollar on interest expense on our lease balances denominated in GBP.

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        Other debt related interest expense decreased in 2010 by $5.9 million from $14.4 million in 2009 to $8.5 million in 2010. This was primarily driven by lower USD LIBOR interest rates in 2010.

        Mark-to-market adjustments for interest rate swap derivatives resulted in a loss of $5.7 million in 2010 compared to a gain of $12.9 million in 2009. In 2009, long-term interest rate swap costs increased from 2008 levels resulting in a gain for the year. In 2010, long term interest rate swap rates declined for the first nine months of the year and, although rising in the fourth quarter, still declined over the year. This resulted in a loss for 2010. We adopted hedge accounting for certain of our interest rate swaps, effective as of October 1, 2008. Accordingly, a further $2.2 million loss which would otherwise have been recognized in earnings in 2010 has been accounted for as a change in other comprehensive income. Included within mark-to-market adjustments for interest rate swaps is a gain of $4.1 million and a loss of $3.4 million for the years ended December 31, 2009 and 2010 respectively, representing amounts allocated to us on the basis of our proportion of Golar's debt.

        Mark-to-market adjustments for currency swap derivatives resulted in a loss of $7.6 million in 2010 compared with a gain of $21.3 million in 2009, which relates to the movement in the fair value of the currency swap used to hedge the Golar Winter lease obligation. This swap hedges the currency risk arising from lease rentals due in respect of the Golar Winter GBP lease rental obligation by translating GBP payments into U.S. Dollar payments at a fixed GBP/USD exchange rate (i.e. Golar receives GBP and pays U.S. Dollars). The loss was due to the appreciation of the U.S. Dollar against the GBP during the year and represents an unrealized loss. The gain on retranslation of the lease obligation primarily relates to the Golar Winter lease, which this swap hedges, and was $4.2 million in 2010 compared to a $12.9 million loss in 2009. This gain is an unrealized gain.

        The decrease in the foreign exchange loss on operations in 2010 compared to 2009 is principally due to a carve-out adjustment allocated to us in the prior year to reflect the impact of Golar LNG Limited's entry into foreign currency forward contracts in respect of the Golar Winter FSRU conversion expenditure. In 2010 this amounted to $nil as compared to $3.3 million in 2009.

        Income Taxes.    The following table sets forth details regarding our income tax expense for 2009 and 2010:

 
  Year Ended
December 31,
   
   
 
 
  2009   2010   Change   % Change  
 
  (in thousands)
 

Income taxes expense

  $ 2,366   $ 539   $ (1,827 )   (77 )%

        Income taxes relate primarily to the taxation of our U.K. based vessel operating companies and our Brazilian subsidiary established in connection with our Petrobras long-term charters. The decrease in income tax expense by $1.8 million in 2010 compared to 2009 is principally due to a deferred tax credit recognized in the year resulting from trading losses arising in a U.K. vessel company.

        Net Income.    As a result of the foregoing, we earned net income of $57.7 million in 2010, an increase of $12.4 million over the $45.3 million of net income earned in 2009.

        Non-Controlling Interest.    The following table sets forth details regarding our non-controlling interest for 2009 and 2010:

 
  Year Ended
December 31,