GasLog Partners, an international owner and operator of liquefied natural gas carriers, today reported its financial results for the three-month period ended March 31, 2017.
Successfully completed an equity offering and issuance of general partner units, raising total net proceeds of $79.6 million.
Announced the pending acquisition of the GasLog Greece from GasLog Ltd. (“GasLog”) for $219.0 million, including $1.0 million for positive net working capital, with attached long-term charter to a subsidiary of Royal Dutch Shell plc (“Shell”).
Increased cash distribution of $0.50 per common unit for the first quarter of 2017, 2% higher than the fourth quarter of 2016 and 5% higher than the first quarter of 2016.
Quarterly Revenues, Profit, Adjusted Profit(1) and EBITDA(1) of $57.0 million, $21.0 million, $20.4 million and $42.0 million, respectively.
Highest-ever quarterly Partnership Performance(2) Results for Revenues and EBITDA(1).
Distribution coverage ratio(3) of 1.17x.
(1) Adjusted Profit and EBITDA 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 III at the end of this press release.
(2) Partnership Performance represents the results attributable to GasLog Partners which are non-GAAP financial measures. 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.
(3) Distribution coverage ratio represents the ratio of Distributable cash flow to the cash distribution declared. For definition and reconciliation of Distributable cash flow to the most directly comparable financial measure calculated and presented in accordance with IFRS, please refer to Exhibit III at the end of this press release.
Mr. Andrew Orekar, Chief Executive Officer, commented: “I am delighted with what GasLog Partners has achieved thus far in 2017. We announced the pending acquisition of the GasLog Greece, which is expected to expand the Partnership’s fleet to ten wholly owned LNG carriers and to extend our average remaining charter duration. The first full quarter contribution of the GasLog Seattle, which the Partnership acquired on November 1, 2016, enabled GasLog Partners to deliver our highest-ever quarterly Partnership Performance Results for Revenues and EBITDA. We also completed equity and debt financings in January and April 2017, respectively, with the net proceeds to be used to fund the dropdown of the GasLog Greece and to repay the majority of the junior tranche of the credit agreement entered into on February 18, 2016 (the “Five Vessel Refinancing”), originally due in April 2018.
As a result of these actions, we are increasing our quarterly cash distribution to $0.50 per unit, which represents a 33% increase since our initial public offering (“IPO”), or an 11% compound annual growth rate. Our announced acquisition of the GasLog Greece is supportive of the Partnership’s guidance to grow unitholder distributions at a 10% to 15% compound annual rate since IPO. We affirm this growth guidance, which, if approved, would result in an annualized distribution of $2.09 per unit or higher by the fourth quarter of 2017.
Following the expected closing of the GasLog Greece acquisition in the second quarter of 2017, the Partnership will have a dropdown pipeline of twelve vessels which, assuming the execution of further dropdowns, can support future growth of the Partnership’s fleet and distributable cash flows.”
Completion of Equity Offering
On January 27, 2017, GasLog Partners completed an equity offering of 3,750,000 common units at a public offering price of $20.50 per unit. In addition, the option to purchase additional shares was partially exercised by the underwriter on February 24, 2017, resulting in 120,000 additional units being sold at the same price. The aggregate net proceeds from this offering, including the partial exercise by the underwriters of the option to purchase additional shares, after deducting underwriting discounts and other offering expenses, were $78.0 million. In connection with the offering, the Partnership also issued 78,980 general partner units to its general partner in order for GasLog to retain its 2.0% general partner interest. The net proceeds from the issuance of the general partner units were $1.6 million.
Pending acquisition of the GasLog Greece
On March 23, 2017, GasLog Partners signed an agreement to acquire 100% of the shares in the entity that owns and charters to Shell the GasLog Greece from GasLog. The GasLog Greece is a 174,000 cubic meter (“cbm”) tri-fuel diesel electric (“TFDE”) LNG carrier built in 2016 and operated by GasLog since delivery. The vessel is currently on a multi-year time charter with a subsidiary of Shell through March 2026 and Shell has an option to extend the charter for a period of five years.
The aggregate purchase price for the acquisition will be $219.0 million, which includes $1.0 million for positive net working capital balances 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 the GasLog Greece‘s outstanding indebtedness of $151.4 million.
|IFRS Common Control Reported Results(1)|
|For the three months ended||% Change from|
|(All amounts expressed in thousands of U.S. dollars)||March 31,
|March 31, 2017||March 31,
(1) “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 accounting purposes. The unaudited condensed consolidated financial statements of the Partnership accompanying this press release are prepared under IFRS on this basis.
(2) Adjusted Profit and EBITDA are non-GAAP financial measures. For definition and reconciliation of these measures to the most directly comparable financial measure presented in accordance with IFRS, please refer to Exhibit III at the end of this press release.
The decrease in profit in the first quarter of 2017 as compared to the fourth quarter of 2016 is mainly attributable to a decrease of $3.5 million in unrealized gain on the interest rate swaps signed in November 2016, combined with a decrease in revenues due to fewer calendar days in the first quarter of 2017.
The increase in profit in the first quarter of 2017 as compared to the same period in 2016 is mainly attributable to the increase in the profit from operations, mainly attributable to the scheduled dry-dockings and planned repairs performed in the first quarter of 2016, as well as an unrealized gain on interest rate swaps in the first quarter of 2017 as compared to an unrealized loss for the same period in 2016.
|Partnership Performance Results(1)|
|For the three months ended||% Change from|
|(All amounts expressed in thousands of U.S. dollars)||March 31,
|March 31, 2017||March 31,
|Distributable cash flow(2)||18,867||23,541||23,496||25%||0%|
|Cash distributions declared||15,712||19,549||20,121||28%||3%|
(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 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. For definitions and reconciliations of these measurements to the most directly comparable financial measures presented in accordance with IFRS, please refer to Exhibit II at the end of this press release.
(2) Adjusted Profit, 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 decrease in profit in the first quarter of 2017 as compared to the fourth quarter of 2016 is mainly attributable to a decrease of $3.5 million in unrealized gain on the interest rate swaps signed in November 2016.
The increases in the Partnership Performance Results for the first quarter of 2017 as compared to the same period in 2016 are mainly attributable to the profit from operations of the GasLog Seattle, acquired by the Partnership on November 1, 2016, and also to the increase in profit from operations of the existing fleet, mainly due to the scheduled dry-dockings and planned repairs performed in the first quarter of 2016, which were partially offset by the interest expense with respect to the outstanding debt of the GasLog Seattle.
The Partnership Performance Results reported in the first quarter of 2017 are the same as the IFRS Common Control Reported Results for the period since there were no vessel acquisitions from GasLog during the quarter, which would have resulted in retrospective adjustment of the historical financial statements.
On April 26, 2017, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.50 per common unit for the quarter ended March 31, 2017. The cash distribution is payable on May 12, 2017, to all unitholders of record as of May 8, 2017.
End of Subordination Period
The subordination period on the existing 9,822,358 subordinated units held by GasLog will extend until the second business day following the aforementioned cash distribution. Upon expiration of the subordination period, each outstanding subordinated unit (100% held by GasLog) will automatically convert into one common unit and will then participate pro rata with the other common units in distributions of available cash.
Liquidity and Financing
As of March 31, 2017, we had $129.4 million of cash and cash equivalents, of which $42.9 million is held in current accounts and $86.5 million was held in time deposits.
As of March 31, 2017, we had an aggregate of $800.8 million of indebtedness outstanding under our credit facilities, of which $104.3 million is repayable within one year. In addition, we had unused availability under our revolving credit facilities of $42.9 million.
As of March 31, 2017, $60.1 million under the junior tranche of the Five Vessel Refinancing was reclassified under “Borrowings – current portion” following a notice of prepayment issued by the respective subsidiaries on March 24, 2017 and was prepaid on April 5, 2017, as described below.
On April 3, 2017, the Partnership signed a deed of termination with respect to its revolving credit facility with GasLog. On the same date, the Partnership entered into a new unsecured five year term loan of $45.0 million and a five year revolving credit facility of $30.0 million with GasLog. Subsequently, on April 5, 2017, an amount of $45.0 million under the term loan facility and an amount of $15.0 million under the revolving credit facility were drawn by the Partnership and were used on the same date to prepay $60.1 million of the outstanding debt of GAS-nineteen Ltd., GAS-twenty Ltd. and GAS-twenty one Ltd., which would have been originally due in April 2018.
The Partnership has entered into three interest rate swap agreements with GasLog at a notional value of $390.0 million in aggregate, maturing between 2020 and 2022. As of March 31, 2017, the Partnership has hedged 48.1% of its floating interest rate exposure on its outstanding debt at a weighted average interest rate of approximately 1.6% (excluding margin).
As of March 31, 2017, our current assets totaled $139.9 million and current liabilities totaled $133.4 million, resulting in a positive working capital position of $6.5 million.
LNG Market Update and Outlook
During the quarter, there has been continued momentum in the start-up of new LNG liquefaction capacity with the third trains at both Gorgon and Sabine Pass commencing production. In addition, the world’s first floating liquefaction terminal, the Petronas-owned PFLNG Satu, loaded its first cargo in Malaysia. Later this year, Ichthys, Wheatstone, Cove Point and Sabine Pass Train 4 are all expected to start production. Wood Mackenzie estimates that there will be projects with approximately 34 million tons per annum (“mtpa”) of nameplate capacity coming online in 2017.
Some offtakers of these projects are yet to secure all of their shipping requirements. In addition to newbuild LNG carriers, we expect a number of vessels for these projects to be sourced from vessels currently operating in the short-term market, which should be positive for the overall shipping supply and demand balance. In the 2017-2020 period, Wood Mackenzie expects approximately 120 mtpa of new nameplate capacity to come online around the world. We believe that this new supply will create significant demand for LNG carriers over and above those available in the market and on order today.
Looking longer term, there have been a number of encouraging developments recently: ExxonMobil purchased a 25% interest in Area 4 in Mozambique; ENI’s Coral FLNG has reached the final stages of a multi stage final investment decision (“FID”) process; Total made a $207.0 million investment in Tellurian to develop the Driftwood LNG project; and Qatar Petroleum announced the lifting of the moratorium on incremental production from its North Field.
2016 saw significant increases in LNG demand from a number of new markets such as Pakistan, Poland, Lithuania and Jordan as well as major energy growth markets such as China and India. This trend has continued into the first quarter of 2017 with further strong increases in demand from China (+23% year-on-year to end March 2017) as well as in large conventional markets such as Japan (+13% year-on-year) and South Korea (+18% year-on-year) following the cold winter and slow progress with nuclear re-starts.
A number of markets that do not currently import gas are exploring LNG as an alternative to oil and coal or to replace declining domestic supply. Many countries with growing power demand, such as Ivory Coast, South Africa, Bangladesh and Myanmar, are looking at floating storage and re-gasification units (“FSRU”) as a quick-to-market, cost-effective solution to import LNG. Other countries with FSRUs already in place are looking at expanding their use of FSRUs due to the successful commissioning and effective operations of the existing units. FSRUs continue to dominate new import markets as a quicker to build, more flexible and low cost alternative to an onshore facility. Many of the current and future LNG sellers are focusing their attention on FSRUs as a key enabler in creating new markets for their LNG.
In the shipping market, short-term charter rates declined in February and March largely due to seasonally lower LNG demand following the Northern Hemisphere winter. A high number of “re-lets” during the quarter also weighed on the market. We expect this trend to reverse as we enter the summer cooling season in the Middle East, Europe and Asia and the Southern Hemisphere winter.
While the recovery in charter rates and utilization in the LNG shipping market is taking longer than we had anticipated, we are seeing some initial signs of increased short-term and long-term activity, and we continue to believe that the longer term fundamentals point to a strengthening market in 2017 and beyond.