GasLog Partners and GasLog Ltd. announced today that they have entered into an agreement for the Partnership to purchase from GasLog 100% of the shares in the entity that owns and charters GasLog Seattle.
The aggregate purchase price for the Acquisition will be $189 million, which includes $1 million for positive net working capital balances to be transferred with the vessel. GasLog Partners expects to finance the acquisition with cash on hand, including proceeds from its recent equity offering, and the assumption of GasLog Seattle’s existing debt. The Acquisition is expected to close in the fourth quarter of 2016 and is subject to satisfaction of certain closing conditions.
GasLog Seattle is a 155,000 cubic meter tri-fuel diesel electric liquefied natural gas (“LNG”) carrier built in 2013 and operated by GasLog since delivery. The vessel is currently on a multi-year time charter with a wholly owned subsidiary of Royal Dutch Shell plc (“Shell”) through December 2020. Shell has two consecutive 5-year extension options, which if exercised, would extend the charter for a period of either 5 or 10 years.
The Partnership believes the Acquisition will be immediately accretive to unitholder distributions and consistent with its strategy to grow cash distributions through dropdown and third-party acquisitions. GasLog Partners estimates that, assuming full utilization, GasLog Seattle will add approximately $20 million to EBITDA(1) and $10 million to distributable cash flow(1) in the first 12 months after closing. Accordingly, the Acquisition purchase price represents a multiple of approximately 9.4x estimated EBITDA. The Board of Directors of GasLog, the Board of Directors of GasLog Partners (the “Board”), and the Conflicts Committee of the Board have approved the Acquisition.
Following the completion of the Acquisition, the Partnership’s management intends to recommend to the Board an approximately 5% annualized increase in the Partnership’s cash distribution per unit. Any such increase would be conditioned upon, among other things, the closing of the Acquisition, the approval of such increase by the Board, and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.
Andy Orekar, Chief Executive Officer of GasLog Partners, stated, “I am very pleased to announce the Partnership’s third accretive dropdown transaction. Acquiring this strategically attractive vessel and its multi-year charter to Shell highlights GasLog Partners’ differentiated business model, which provides cash flow stability with growth through acquisitions. The Acquisition extends our average remaining charter duration and is consistent with our track record of delivering a 10-15% CAGR from IPO in cash distributions.
After closing the Acquisition, GasLog Partners will have a dropdown pipeline of thirteen vessels and a strong balance sheet, providing a highly visible path to future distribution increases.”
Paul Wogan, Chief Executive Officer of GasLog, stated, “I am delighted that, despite challenging market conditions, we continue to execute on our strategy of dropping vessels into GasLog Partners and recycling the capital to GasLog. This transaction continues to strengthen our balance sheet and provides further funding for future profitable growth. We also benefit from increases in GasLog Partners’ distribution through our unit ownership and incentive distribution rights, which should continue to enhance our valuation.”
GasLog Partners LP Reports Financial Results for the Three-Month Period Ended September 30, 2016 and Declares Cash Distribution
GasLog Partners, an international owner and operator of liquefied natural gas carriers, reported its financial results for the three-month period ended September 30, 2016.
- Successfully completed equity offering and issuance of general partner units, raising total net proceeds of $53.39 million.
- Declared cash distribution of $0.478 per unit for the third quarter of 2016, unchanged from the second quarter of 2016.
- Reduced total debt by $14.28 million during the third quarter of 2016.
- Revenue and EBITDA(1) of $51.45 million and $37.24 million, 4% higher and 5% higher, respectively, than the second quarter of 2016 and in line with the third quarter of 2015.
- Profit of $18.87 million, 9% higher than the second quarter of 2016 and 2% lower than the third quarter of 2015.
- Distributable cash flow(1) of $21.41 million, 8% higher than the second quarter of 2016 and in line with the third quarter of 2015.
- Distribution coverage ratio of 1.25x(2).
(1)EBITDA and distributable cash flow are non-GAAP financial measures, and should not be used in isolation or as a substitute for GasLog Partners’ financial results presented in accordance with International Financial Reporting Standards (“IFRS”). For definition and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with IFRS, please refer to Exhibit II at the end of this press release.
(2)Distribution coverage ratio represents the ratio of distributable cash flow to the cash distribution declared.
Mr. Andrew Orekar, Chief Executive Officer, commented: “GasLog Partners’ strong third-quarter financial and operating performance reflects continued execution of our business model, which provides cash flow stability with growth through acquisitions.
Revenue, EBITDA and distributable cash flow were in line with our expectations, and the Partnership again reduced total debt during the quarter while maintaining conservative distribution coverage. On August 5, 2016, we successfully completed a follow-on equity offering, demonstrating GasLog Partners’ access to equity capital for growth.
On October 20, 2016, our general partner sponsor (the “GP sponsor”), GasLog Ltd. (“GasLog”), announced it signed a new charter party agreement with a subsidiary of Centrica plc (“Centrica”) to charter a vessel for seven years commencing in the second half of 2019. GasLog Partners has rights to acquire this vessel pursuant to the omnibus agreement with GasLog, increasing the Partnership’s pipeline to fourteen vessels eligible for future acquisition.
With a growing dropdown pipeline, substantial liquidity and a supportive GP sponsor, GasLog Partners remains well positioned to deliver predictable and growing cash distributions to our unitholders.”
Completion of Equity Offering
On August 5, 2016, GasLog Partners completed an equity offering of 2,750,000 common units and issued 56,122 general partner units to its general partner in order for GasLog to retain its 2.0% general partner interest at a public offering price of $19.50 per unit. The total net proceeds after deducting underwriting discounts and other offering expenses were $53.39 million.
Amounts reflected in the Partnership’s unaudited condensed consolidated financial statements for the three months ended September 30, 2015, June 30, 2016 and September 30, 2016 are fully attributable to the Partnership. The Partnership Performance Results(1) are the same as the IFRS Common Control Reported Results(2) for the respective periods since there were no vessel acquisitions from GasLog from July 1, 2015 to September 30, 2016, which would have resulted in retrospective adjustment of the historical financial statements.
|IFRS Common Control Results/Partnership Performance Results|
|For the three months ended||% Change from|
|(All amounts expressed in thousands of U.S. dollars)||September 30, 2015||June 30,
|June 30, 2016|
|Distributable cash flow(3)||21,403||19,837||21,413||0%||8%|
|Cash distributions declared||15,712||17,077||17,077||9%||0%|
(1) “Partnership Performance Results” represent the results attributable to GasLog Partners. Such results are non-GAAP measures and exclude amounts related to vessels currently owned by the Partnership for the periods prior to their respective transfer to GasLog Partners from GasLog, as the Partnership is not entitled to the cash or results generated in the periods prior to such transfers. Such results are included in the GasLog Partners’ results in accordance with IFRS because the transfer of the vessel owning entities by GasLog to the Partnership represents a reorganization of entities under common control and the Partnership reflects such transfers retroactively under IFRS. GasLog Partners believes that these non-GAAP financial measures provide meaningful supplemental information to both management and investors regarding the financial and operating performance of the Partnership necessary to understand the underlying basis for the calculations of the quarterly distribution and the earnings per unit, which similarly exclude the results of vessels prior to their transfer to the Partnership. These non-GAAP financial measures should not be viewed in isolation or as substitutes to the equivalent GAAP measures presented in accordance with IFRS, but should be used in conjunction with the most directly comparable IFRS Common Control Reported Results.
(2) “IFRS Common Control Reported Results” represent the results of GasLog Partners in accordance with IFRS. Such results include amounts related to vessels currently owned by the Partnership for the periods prior to their respective transfer to GasLog Partners from GasLog, as the transfer of such vessels was accounted for as a reorganization of entities under common control for IFRS. The unaudited condensed consolidated financial statements of the Partnership accompanying this press release are prepared under IFRS on this basis.
(3) EBITDA and distributable cash flow are non-GAAP financial measures, and should not be used in isolation or as a substitute for GasLog Partners’ financial results presented in accordance with IFRS. For definition and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with IFRS, please refer to Exhibit III at the end of this press release.
The increase in profit in the third quarter of 2016 as compared to the second quarter of 2016, is mainly attributable to the increase in calendar days and the reduced off-hire days from scheduled drydockings, partially offset by higher technical and maintenance expenses related to new technical equipment, various repairs and technical certifications.
On October 26, 2016, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.478 per unit for the quarter ended September 30, 2016. The cash distribution is payable on November 11, 2016, to all unitholders of record as of November 7, 2016.
Liquidity and Financing
As of September 30, 2016, we had $109.72 million of cash and cash equivalents, of which $39.72 million is held in current accounts and $70.0 million is held in time deposits.
As of September 30, 2016, we had an aggregate of $712.85 million of indebtedness outstanding under our credit facilities. An amount of $40.57 million of outstanding debt is repayable within one year.
As of September 30, 2016, our current assets totaled $117.89 million and current liabilities totaled $65.36 million, resulting in a positive working capital position of $52.53 million.
Depending on market conditions, we may use derivative financial instruments to reduce the risks associated with fluctuations in interest rates. We expect over time to economically hedge a material proportion of our exposure to interest rate fluctuations by entering into new interest rate swap contracts. As of September 30, 2016, the Partnership had no interest rate swaps.
LNG Market Update and Outlook
Our demand outlook for LNG carriers with long-term charters remains positive. We continue to see a number of tenders for multi-year charters for vessels, which we expect will be used to transport volumes from new liquefaction facilities coming online over the coming years. We believe that these new LNG volumes will create demand for additional ships over and above those available in the market today.
In the third quarter, there were several announcements highlighting LNG supply and demand growth as well as increased demand for LNG carriers. Cheniere announced the substantial completion of Sabine Pass Train 2 with a production capacity of 4.5 million tonnes per annum (“mtpa”) and commissioning cargoes from this facility are now being transported. Angola LNG’s 5.2 mtpa facility and the Chevron-operated 15.6 mtpa Gorgon project restarted production. The Canadian government gave conditional approval for Pacific NorthWest LNG’s 12.0 mtpa project. BP announced Final Investment Decision (“FID”) for the Tangguh Expansion Project, which will add 3.8 mtpa of capacity to the existing facility, bringing total capacity to 11.4 mtpa. However, during the quarter, Royal Dutch Shell plc (“Shell”) delayed FID for the 15.0 mtpa Lake Charles LNG project and Exxon Mobil announced it will no longer invest in the proposed 20.0 mtpa Alaska LNG project.
On the demand side, Pakistan announced the purchase of its second floating storage re-gasification unit (“FSRU”). The country is expected to continue to increase its LNG imports to counter declining indigenous production. Bangladesh announced agreements for the construction and operation of the country’s first LNG import terminal, which will be a floating facility. Both projects continue a trend of new importing nations selecting FSRUs, which are typically quicker to market and more flexible than land-based terminals. We expect FSRUs to facilitate the creation of additional demand in both new and existing markets.
Year to date LNG import volumes in China and India are up 27% and 34%, respectively, with both countries looking to take advantage of attractive LNG prices. In the third quarter, LNG prices in Northeast Asia and Northwest Europe rose by 16% and 15%, respectively, making the LNG price arbitrage for US exports more attractive.
In the shorter-term shipping market, spot rates increased from multi-year lows due to new LNG supply coming online and the restarts of the Gorgon and Angola LNG projects, which removed vessel re-lets from the market. From January to September 2016, there were approximately 210 spot fixtures completed compared to approximately 130 for the same period last year, an increase of around 60%. Whilst it is too early to predict a sustained recovery we believe that fundamentals continue to point to a recovery in 2017 and beyond.