GasLog Partners LP, an international owner and operator of liquefied natural gas carriers, reported its financial results for the three-month period and the year ended December 31, 2020.
- Following the completion of the Partnership’s strategic review, GasLog Partners will maintain its current corporate structure and will continue to pursue its own independent strategy of owning, operating and acquiring LNG carriers.
- During the quarter, signed a new two-year time charter for the 15-year old steam turbine propulsion (“Steam”) vessel, Methane Jane Elizabeth, with a wholly owned subsidiary of Cheniere Energy Inc. (“Cheniere”).
- Repaid $18.8 million of debt in the fourth quarter of 2020, bringing total debt repayment (excluding prepayments for refinanced facilities) to $107.3 million during 2020.
- Quarterly Revenues, Profit, Adjusted Profit(1) and Adjusted EBITDA(1) of $85.0 million, $22.6 million, $25.9 million and $59.0 million, respectively.
- Annual Revenues, Profit, Adjusted Profit(1) and Adjusted EBITDA(1) of $333.7 million, $56.9 million, $92.4 million and $230.6 million, respectively.
- Quarterly Earnings per unit of $0.31 and Adjusted Earnings per unit(1) of $0.38.
- Annual Earnings per unit of $0.55 and Adjusted Earnings per unit(1) of $1.29.
- Cash distribution of $0.01 per common unit for the fourth quarter of 2020, unchanged from the third quarter of 2020.
Chairman and CEO Statements
Curt Anastasio, Chairman of GasLog Partners stated: “The spot and short-term trading market for LNG carriers has experienced significant growth in recent years and we expect this to continue as the LNG commodity itself becomes increasingly traded on a spot and short-term basis. With a leading operating and commercial platform backing us through our parent, GasLog Ltd., as well as a diverse asset base, the Partnership is positioned to succeed in this market.
While the independent strategic review announced last November has concluded, strategy remains an ongoing focus of the board. We are open to entertaining all value-enhancing options for the business as we continue to reduce debt and enhance liquidity.”
Paul Wogan, Chief Executive Officer, commented: “The fourth quarter was another operational and commercial success for the Partnership with fleet uptime of approximately 100%. I am pleased to say that we were able to execute on our strategic priorities of maximizing fleet utilization and reducing our leverage during 2020, despite the headwinds brought on by the COVID-19 pandemic, and I look forward to further progression in 2021.
During the quarter, we repaid $18.8 million of debt, bringing the total debt amortization for 2020 to $107.3 million. In addition, we entered a two-year time charter with Cheniere for the Methane Jane Elizabeth, increasing our charter coverage for 2021 and 2022 to 77% and 57% of available days, respectively. Although we have taken material steps to balance our market exposure in 2021, we expect our capital allocation strategy to continue to focus on reducing our leverage during 2021.
We expect that our focus on debt reduction will reduce the cash break-even rates of our fleet overtime, increasing our competitiveness and free cash flow capacity.”
Strategic Review Update
On November 10, 2020, the Partnership announced its intention to engage with an independent advisor to assess its strategic alternatives. After a comprehensive analysis conducted by management, in conjunction with Stifel, Nicolaus & Company, Inc. acting as a financial advisor, of the Partnership’s corporate structure, assets, financial position, competitive environment and current and expected commercial market, the following conclusions have been reached:
- The Partnership will maintain its current corporate structure with GasLog Ltd. (“GasLog”, the “General Partner” or “GP”) as its general partner;
- The Partnership will continue to pursue an independent commercial and operational strategy of owning, operating and acquiring LNG carriers; and
- Strategy remains an ongoing focus of the board of directors and we are open to entertaining all value-enhancing options for the business as we continue to reduce debt and enhance liquidity.
|For the three months ended||For the years ended|
|(All amounts expressed in thousands of U.S. dollars, except per unit amounts)||
|Earnings/(loss) per unit (“EPU”), common (basic)||(2.37||)||0.31||(113||%||)||(1.43||)||0.55||(138||%||)|
|Adjusted EPU, common (basic)(1)||0.46||0.38||(17||%||)||1.82||1.29||(29||%||)|
|Distributable cash flow||31,781||25,997||(18||%||)||123,108||91,241||(26||%||)|
|Cash distribution declared||26,754||485||(98||%||)||106,742||12,959||(88||%||)|
There were 1,348 and 5,186 revenue operating days for the quarter and the year ended December 31, 2020, respectively, as compared to 1,348 and 5,397 revenue operating days for the quarter and the year ended December 31, 2019, respectively. The year-over-year decrease in revenue operating days is mainly attributable to increased off-charter days for the vessels not operating under multi-year time charters and increased off-hire days for scheduled dry-dockings.
Management classifies the Partnership’s vessels from a commercial strategy point of view into two categories: (a) spot fleet and (b) long-term fleet. The spot fleet includes all vessels under charter party agreements with an initial duration of less than (or equal to) five years (excluding optional periods), while the long-term fleet comprises all vessels with charter party agreements of an initial duration of more than five years (excluding optional periods).
For the quarter and the year ended December 31, 2020, an analysis of available days, revenue operating days, revenues and voyage expenses and commissions per category is presented below:
|Amounts in thousands of U.S. dollars||For the three months ended December 31, 2020||For the year ended
December 31, 2020
|Spot fleet||Long-term fleet||Spot fleet||Long-term fleet|
|Available days (*)||644||716||2,225||3,108|
|Revenue operating days (**)||632||716||2,078||3,108|
|Voyage expenses and commissions||(549||)||(978||)||(6,272||)||(4,171||)|
(*) Available days represent total calendar days in the period after deducting off-hire days where vessels are undergoing dry-dockings and unavailable days (i.e. days before and after a dry-docking where the vessel has limited practical ability for chartering opportunities).
(**) Revenue operating days represent total available days after deducting off-charter days and unscheduled off-hire days.
Revenues decreased by $11.5 million, from $96.5 million for the quarter ended December 31, 2019 to $85.0 million for the same period in 2020, primarily due to the expirations of the initial multi-year time charters of the Methane Alison Victoria, the Methane Rita Andrea and the Methane Shirley Elisabeth with a subsidiary of Royal Dutch Shell plc (“Shell”), which were contracted at rates higher than their current contracted rates. The Methane Alison Victoria has been on a three-year charter with a wholly owned subsidiary of JOVO Group (“JOVO”) since June 2020, the Methane Shirley Elisabeth has been on a two-year charter with CNTIC VPower Energy Ltd. (“CNTIC VPower”) since September 2020, while the Methane Rita Andrea has been on a multi-month charter since May 2020.
Vessel operating costs also decreased by $1.9 million, from $21.4 million for the quarter ended December 31, 2019 to $19.5 million for the same period in 2020. The decrease in vessel operating costs is mainly attributable to a decrease of $1.3 million in technical maintenance expenses due to savings resulting from management’s operating cost initiatives during 2020. Daily operating costs per vessel (after excluding calendar days for the Solaris, the operating costs of which are covered by the charterers) notably decreased from $16,651 per day for the quarter ended December 31, 2019 to $15,127 per day for the quarter ended December 31, 2020.
General and administrative expenses were $5.0 million for the quarters ended December 31, 2019 and 2020, since the aggregate decrease in administrative services fees and amortization of share-based compensation was almost entirely offset by an increase in other expenses in the three months ended December 31, 2020. Daily general and administrative expenses decreased marginally from $3,659 per vessel ownership day for the quarter ended December 31, 2019 to $3,615 per vessel ownership day for the quarter ended December 31, 2020.
The decrease in Adjusted EBITDA of $9.3 million, from $68.3 million in the fourth quarter of 2019 as compared to $59.0 million in the same period in 2020 is mainly attributable to the decrease in revenues of $11.5 million described above, partially offset by the aforementioned decrease of $1.9 million in operating expenses.
In the quarter ended December 31, 2020, the Partnership recognized a non-cash impairment loss of $5.1 million in aggregate on certain of its Steam vessels, in addition to the impairment loss of $18.8 million recognized in the second quarter of 2020. The COVID-19 pandemic placed downward pressure on economic activity and energy demand, as well as significant uncertainty regarding future near-term LNG demand and, therefore, LNG shipping requirements. This has reduced our expectations for the estimated rates at which employment for our vessels could be secured over the near-term in the spot market. The non-cash impairment loss of $5.1 million in the three months ended December 31, 2020 was recognized with respect to two of our Steam vessels, the Methane Alison Victoria and the Methane Heather Sally.
Financial costs decreased by $6.3 million, from $16.3 million for the quarter ended December 31, 2019 to $10.0 million for the same period in 2020. The decrease is mainly attributable to a decrease in interest expense on loans of $6.2 million, mainly due to the lower London Interbank Offered Rate (“LIBOR”) rates prevailing in the fourth quarter of 2020 compared to the same period in 2019. During the quarter ended December 31, 2019, we had an average of $1,382.4 million of outstanding indebtedness with a weighted average interest rate of 4.2%, compared to an average of $1,316.2 million of outstanding indebtedness with a weighted average interest rate of 2.5% during the quarter ended December 31, 2020.
Gain on derivatives decreased by $2.9 million, from a gain of $2.7 million for the quarter ended December 31, 2019 to a loss of $0.2 million for the same period in 2020. The decrease is attributable to a net increase of $1.8 million in realized loss on derivatives held for trading and a $1.1 million decrease in unrealized gain from the mark-to-market valuation of derivatives held for trading which were carried at fair value through profit or loss.
The increase in profit from a loss of $106.4 million in the fourth quarter of 2019 to a profit of $22.6 million in the fourth quarter of 2020 is mainly attributable to an impairment loss on vessels of $138.8 million recognized in the fourth quarter of 2019 compared to an impairment loss of $5.1 million recognized in the fourth quarter of 2020, as well as the other variances analyzed above.
The decrease in Adjusted Profit of $3.7 million, from $29.6 million in the fourth quarter of 2019 to $25.9 million in the fourth quarter of 2020, is mainly attributable to the decrease in revenues of $11.5 million described above, partially offset by the decrease in interest expense of $6.2 million and the decrease in operating expenses of $1.9 million, as also discussed above.
As of December 31, 2020, we had $103.7 million of cash and cash equivalents. The cash collateral previously held with GasLog during the year has been fully released and is nil as of December 31, 2020.
As of December 31, 2020, we had an aggregate of $1,285.5 million of borrowings outstanding under our credit facilities, of which $104.9 million was repayable within one year. In addition, as of December 31, 2020, we had unused availability under our revolving credit facility with GasLog of $30.0 million, which matures in March 2022.
As of December 31, 2020, our current assets totaled $125.7 million and current liabilities totaled $185.2 million, resulting in a negative working capital position of $59.5 million. Current liabilities include $25.8 million of unearned revenue in relation to hires received in advance as of December 31, 2020 (which represents a non-cash liability that will be recognized as revenues after December 31, 2020 as the services are rendered). Management monitors the Partnership’s liquidity position throughout the year to ensure that it has access to sufficient funds to meet its forecast cash requirements, including debt service commitments, and to monitor compliance with the financial covenants within its loan facilities. Taking into account the volatile commercial and financial market conditions experienced throughout 2020, we anticipate that our primary sources of funds for at least twelve months from the date of this report will be available cash, cash from operations and existing debt facilities. We believe that these anticipated sources of funds, as well as our decision to decrease the common unit distributions and preserve liquidity, will be sufficient to meet our liquidity needs and to comply with our banking covenants for at least twelve months from the date of this report. Our long-term ability to repay our debts and maintain compliance with our debt covenants for at least twelve months from the date of this report without reliance on additional sources of finance is also dependent on a sustainable longer-term recovery in the LNG charter market from the market disruption observed in 2020 as a result of the COVID-19 outbreak.
(1) Adjusted Profit, Adjusted EBITDA and Adjusted EPU are non-GAAP financial measures and should not be used in isolation or as substitutes for GasLog Partners’ financial results presented in accordance with International Financial Reporting Standards (“IFRS”). For the definitions and reconciliations 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.
Preference Unit Distributions
On November 9, 2020, the board of directors of GasLog Partners approved and declared a distribution on the 8.625% Series A Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series A Preference Units”) of $0.5390625 per preference unit, a distribution on the 8.200% Series B Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series B Preference Units”) of $0.5125 per preference unit and a distribution on the 8.500% Series C Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series C Preference Units”) of $0.53125 per preference unit. The cash distributions were paid on December 15, 2020 to all unitholders of record as of December 8, 2020.
Common Unit Distribution
On January 27, 2021, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.01 per common unit for the quarter ended December 31, 2020. The cash distribution was paid on February 11, 2021 to all unitholders of record as of February 8, 2021.
Our fleet currently consists of the following vessels:
|LNG Carrier||Year Built||Cargo
(cubic meters “cbm”)
|Charterer (for contracts of more than six months)||
|Charter Expiration||Optional Period|
|1||Methane Rita Andrea||2006||145,000||Spot Market||Steam||—||—|
|2||Methane Heather Sally||2007||145,000||Spot Market||Steam||—||—|
|3||GasLog Sydney||2013||155,000||Spot Market||TFDE||—||—|
|4||GasLog Seattle||2013||155,000||Shell||TFDE||June 2021||—|
|6||GasLog Santiago||2013||155,000||Trafigura (1)||TFDE||December 2021||2022–2028 (1)|
|7||Methane Shirley Elisabeth||2007||145,000||JOVO (2)||Steam||August 2022||—|
|8||GasLog Shanghai||2013||155,000||Gunvor (3)||TFDE||November 2022||—|
|9||Methane Jane Elizabeth||2006||145,000||Cheniere (4)||Steam||March 2023||2024–2025 (4)|
|10||GasLog Geneva||2016||174,000||Shell||TFDE||September 2023||2028–2031 (5)|
|11||Methane Alison Victoria||2007||145,000||CNTIC VPower (6)||Steam||October 2023||2024–2025 (6)|
|12||GasLog Gibraltar||2016||174,000||Shell||TFDE||October 2023||2028–2031 (5)|
|13||Methane Becki Anne||2010||170,000||Shell||TFDE||March 2024||2027–2029 (7)|
|14||GasLog Greece||2016||174,000||Shell||TFDE||March 2026||2031 (8)|
|15||GasLog Glasgow||2016||174,000||Shell||TFDE||June 2026||2031 (8)|
(1) The vessel is chartered to Trafigura Maritime Logistics PTE Ltd. (“Trafigura”). Charterer may extend the term of this time charter for a period ranging from one to seven years, provided that the charterer gives us advance notice of declaration. The period shown reflects the expiration of the minimum optional period and the maximum optional period.
(2) The vessel is chartered to Singapore Carbon Hydrogen Energy Pte. Ltd., a wholly owned subsidiary of JOVO. The charter commenced in July 2020.
(3) The vessel is chartered to Clearlake Shipping Pte. Ltd., a subsidiary of Gunvor Group Ltd. (“Gunvor”).
(4) The vessel is chartered to Cheniere Marketing International LLP, a subsidiary of Cheniere. Charterer may extend the term of the time charters by two additional periods of one year, provided that the charterer gives us advance notice of declaration. The period shown reflects the expiration of the minimum optional period and the maximum optional period.
(5) Charterer may extend the term of the time charters by two additional periods of five and three years, respectively, provided that the charterer gives us advance notice of declaration. The period shown reflects the expiration of the minimum optional period and the maximum optional period.
(6) The vessel is chartered to CNTIC VPower, an independent Chinese energy company. The charterer may extend the term of the related charter by two additional periods of one year, provided that the charterer gives us advance notice of its exercise of any extension option. The period shown reflects the expiration of the minimum optional period and the maximum optional period.
(7) Charterer may extend the term of the related charter for one extension period of three or five years, provided that the charterer gives us advance notice of its exercise of any extension option. The period shown reflects the expiration of the minimum optional period and the maximum optional period.
(8) Charterer may extend the term of these time charters for a period of five years, provided that the charterer gives us advance notice of declaration.
LNG Market Update and Outlook
LNG demand was 93 million tonnes (“mt”) in the fourth quarter of 2020, according to Poten, compared to 94 mt in the fourth quarter of 2019, or a decrease of approximately 1%. Demand growth varied significantly by region during the fourth quarter, as compared to the fourth quarter of 2019. For example, Chinese LNG demand was 20 mt in the fourth quarter of 2020, an increase of over 2 mt or 14% and demand grew by 1 mt for each of India and Japan, with increases of 13% and 6%, respectively. In contrast, demand from Europe declined by 7 mt or approximately 32%. For the full year 2020, LNG demand was 360 mt compared to approximately 358mt for the full year 2019, an increase of approximately 1%. Demand growth in 2020 was led by China where demand grew over 6 mt or 11% and India where demand grew 3 mt or 13%. This growth was balanced by declines in Europe, where demand declined by approximately 5 mt or 5% and Japan where demand declined by over 1 mt or approximately 2%.
Global LNG supply was approximately 94 mt in the fourth quarter of 2020, an increase of approximately 1 mt, or 1%, over the fourth quarter of 2019, according to Poten. Supply from the United States (“U.S.”) increased by over 3 mt or 30%, the result of the start-up of the third trains at Cameron and Freeport earlier in the year and the ramp up of projects which began production in the second half of 2019. In contrast, a fire at Hammerfest LNG in Norway saw production from the facility shuttered for all of the fourth quarter, a decline of over 1 mt, while feed gas for Trinidad’s Atlantic LNG saw production decline by over 1 mt or 47%. Supply for 2020 totaled 369 mt, an increase of 10 mt or approximately 3% over 2019. The U.S. led supply growth in 2020, up by approximately 12 mt or 32% year-over-year, while Trinidad, Egypt and Malaysia each registered a decline of over 2 mt or 20%, 67% and 8%, respectively. Looking ahead, approximately 109 mt of new LNG capacity is currently under construction and scheduled to come online from 2021-2026.
In the LNG shipping spot market, TFDE headline rates, as reported by Clarksons, averaged $104,000 per day in the fourth quarter of 2020, a modest decrease from the average of $107,000 in the fourth quarter of 2019. Headline spot rates for Steam vessels averaged $73,000 per day in the fourth quarter of 2020, a decrease from the average of $78,000 per day in the fourth quarter of 2019. Headline spot rates in the fourth quarter were aided by a combination of demand growth from Asia and supply growth in the US as well as delays at the Panama Canal.
As of February 19, 2021, Clarksons assesses headline spot rates for TFDE and Steam LNG carriers at $46,500 per day and $30,000 per day, respectively. While headline spot rates at the beginning of 2021 are higher than those over the same period in 2020, forward assessments for LNG carrier spot rates indicate declines from current levels during the seasonally weak shoulder months of the spring. In addition, the magnitude and pace of any recovery of the global economy following the continued COVID-19 outbreak and its effects and the forecasted growth of the global LNG carrier fleet have the potential to create volatility in the spot and short-term markets over the near and medium-term.
As of February 6, 2021, Poten estimates that the orderbook totals 112 dedicated LNG carriers (>100,000 cbm), representing 21% of the on-the-water fleet. Of these, 86 vessels (or 77%) have multi-year charters. During 2020, 34 LNG carriers were ordered, all for long-term business with no vessels ordered on a speculative basis.
Contracted Charter Revenues
The following table summarizes GasLog Partners’ contracted charter revenues and vessel utilization after December 31, 2020:
|For the years ending December 31,|
|(in millions of U.S. dollars, except days and percentages)|
|Contracted time charter revenues(1)(2)(3)(4)(5)||$||237.3||$||189.3||$||149.9||$||70.4||$||80.8||$||727.7|
|Total contracted days(1)(2)||4,079||3,111||2,016||823||940||10,969|
|Total available days(6)||5,325||5,475||5,355||5,430||10,680||32,265|
|Total unfixed days(7)||1,246||2,364||3,339||4,607||9,740||21,296|
|Percentage of total contracted days/total available days||76.6||%||56.8||%||37.6||%||15.2||%||8.8||%||34.0||%|
After giving effect to the charter parties signed from December 31, 2020 until February 16, 2021, the contracted time charter revenues and the percentage of total contracted days to total available days increased to $244.6 million and 80.7%, respectively, for 2021.
(1) Reflects time charter revenues and contracted days for the 15 LNG carriers in our fleet as of December 31, 2020.
(2) Our ships are scheduled to undergo dry-docking once every five years. Revenue calculations assume 365 revenue days per ship per annum, with 30 off-hire days when each ship undergoes scheduled dry-docking.
(3) For time charters that include a fixed operating cost component, subject to annual escalation, revenue calculations include that fixed annual escalation. Revenue calculations for such charters include an estimate of the amount of the operating cost component and the management fee component.
(4) For time charters that include a variable rate of hire within an agreed range during the charter period, revenue calculations are based on the agreed minimum rate of hire for the respective period.
(5) Revenue calculations assume no exercise of any option to extend the terms of the charters.
(6) Available days represent total calendar days after deducting 30 off-hire days when the ship undergoes scheduled dry-docking.
(7) Unfixed days represent available days for the ships after the expiration of the existing charters (assuming charterers do not exercise any option to extend the terms of the charters).
The table above provides information about our contracted charter revenues and ship utilization based on contracts in effect for the 15 LNG carriers in our fleet as of December 31, 2020. The table reflects only our contracted charter revenues for the ships in our owned fleet for which we have secured time charters, and it does not reflect the costs or expenses we will incur in fulfilling our obligations under the charters. In particular, the table does not reflect time charter revenues from any additional ships we may acquire in the future, nor does it reflect the options under our time charters that permit our charterers to extend the time charter terms for successive multi-year periods at comparable charter hire rates. If exercised, the options to extend the terms of our existing charters would result in an increase in the number of contracted days and the contracted revenue for our fleet in the future. Although the contracted charter revenues are based on contracted charter hire rate provisions, they reflect certain assumptions, including assumptions relating to future ship operating costs. We consider the assumptions to be reasonable as of the date of this report, but if these assumptions prove to be incorrect, our actual time charter revenues could differ from those reflected in the table. Furthermore, any contract is subject to various risks, including non-performance by the counterparties or an early termination of the contract pursuant to its terms. If the charterers are unable or unwilling to make charter payments to us, or if we agree to renegotiate charter terms at the request of a charterer or if contracts are prematurely terminated for any reason, we would be exposed to prevailing market conditions at the time and our results of operations and financial condition may be materially adversely affected. Please see the disclosure under the heading “Risk Factors” in our Annual Report on Form 20-F filed with the SEC on March 3, 2020 and the updated risk factors in the Company’s Quarterly Report on Form 6-K filed with the SEC on November 10, 2020 (Exhibit 99.2, under the caption “Forward-Looking Statements”). For these reasons, the contracted charter revenue information presented above is not fact and should not be relied upon as being necessarily indicative of future results and readers are cautioned not to place undue reliance on this information. Neither the Partnership’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the information presented in the table, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the information in the table.