GasLog Partners agrees sale & charter deals on two LNG carriers

gaslog-partners

GasLog Partners LP Reported its Financial Results for the Second Quarter of 2022.

Highlights

  • Rechartered the Methane Rita Andrea, a steam turbine propulsion (“Steam”) LNG carrier, with an energy major for one year and signed a new multi-month time charter agreement for the GasLog Seattle, a tri-fuel diesel electric (“TFDE”) LNG carrier, with a major trading house
  • Entered into an agreement to sell, subject to customary and other closing conditions, the Steam LNG carrier Methane Shirley Elisabeth, to an unrelated third party for approximately $54.0 million, with the sale expected to be completed in the third quarter of 2022, while pursuing an agreement for the sale and lease-back of another Steam vessel within the next 12 months
  • Repurchased $8.7 million of preference units in the open market in the second quarter of 2022 and a total of $18.7 million of repurchased preference units in the first six months of 2022
  • Repaid $19.9 million of debt and lease liabilities during the second quarter of 2022 and $56.9 million in the first six months of 2022
  • Quarterly Revenues, Profit, Adjusted Profit(1) and Adjusted EBITDA(1) of $84.9 million, $0.8 million, $26.3 million and $59.3 million, respectively
  • Quarterly Earnings/(loss) per unit (“EPU”) of ($0.12) and Adjusted EPU(1) of $0.37
  • Declared cash distribution of $0.01 per common unit for the second quarter of 2022

CEO Statement

Paolo Enoizi, Chief Executive Officer, commented: “The Partnership is glad to report a positive operating result for the second quarter of 2022, driven by an improved LNG shipping spot market and a sustained interest for term business. Our team has been able to secure important chartering opportunities for two vessels in our fleet, the Steam LNG carrier Methane Rita Andrea and the TFDE LNG carrier GasLog Seattle, and realize another two important transactions with the expected sale of the Methane Shirley Elisabeth and the potential sale and lease-back of an additional Steam vessel at prices that reflect the improved LNG carrier sale and purchase market. The two new charters are expected to add approximately $50.0 million of incremental EBITDA(1) to our contract portfolio, while the sale of the Methane Shirley Elisabeth is expected to contribute approximately $20.0 million of incremental net liquidity (net sale proceeds less debt prepayment) to our balance sheet.

We continue to successfully execute on our business strategy and capital allocation plan, de-leveraging our balance sheet and continuing our preference unit repurchase programme and further reducing the all-in break-evens of our fleet.”

Financial Summary

For the three months ended
(All amounts expressed in thousands of U.S. dollars, except per unit amounts) June 30, 2021 June 30, 2022 % Change
Revenues 70,352 84,922 21 %
Profit 14,663 761 (95 % )
EPU, common (basic) 0.14 (0.12 ) (186 % )
Adjusted Profit(1) 12,701 26,329 107 %
Adjusted EBITDA(1) 44,968 59,323 32 %
Adjusted EPU, common (basic)(1) 0.10 0.37 270 %

There were 1,365 available days for the second quarter of 2022, as compared to 1,283 available days for the second quarter of 2021, due to the scheduled dry-dockings of three of our vessels in the second quarter of 2021.

Management classifies the Partnership’s vessels from a commercial 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 up 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 three months ended June 30, 2021 and 2022, an analysis of available days, revenues and voyage expenses and commissions per category is presented below:

For the three months ended June 30, 2021 For the three months ended June 30, 2022
All amounts expressed in thousands of U.S. dollars,
except number of days
Spot fleet Long-term fleet Spot fleet Long-term fleet
Available days (*) 761 522 819 546
Revenues 27,471 42,881 41,424 43,498
Voyage expenses and commissions (1,064 ) (788 ) (663 ) (1,509 )

(*) Available days represent total calendar days in the period after deducting off-hire days where vessels are undergoing dry-dockings and unavailable days (for example days before and after a dry-docking where the vessel has limited practical ability for chartering opportunities).

Revenues were $84.9 million for the second quarter of 2022, compared to $70.4 million for the same period in 2021. The increase of $14.5 million is mainly attributable to a net increase in revenues from our vessels operating in the spot market in the second quarter of 2022, in line with the improvement of the LNG shipping spot and term market, combined with an increase in revenues resulting from the 82 off-hire days due to the scheduled dry-dockings of three of our vessels in the second quarter of 2021 (compared to nil in the same period in 2022).

Voyage expenses and commissions were $2.2 million for the second quarter of 2022, compared to $1.9 million for the same period in 2021. The increase of $0.3 million in voyage expenses and commissions is mainly attributable to an increase in broker commissions in line with the abovementioned increase in revenues in the second quarter of 2022, as compared to the same period in 2021.

Vessel operating costs were $19.0 million for the second quarter of 2022, compared to $20.0 million for the same period in 2021. The decrease of $1.0 million in vessel operating costs is mainly attributable to a decrease in technical maintenance expenses and a decrease in vessel management fees, partially offset by an increase in crew costs, with the latter largely related to the in-house management of the Solaris (after her redelivery into our managed fleet on April 6, 2022). As a result, daily operating costs per vessel decreased to $14,005 per day for the second quarter of 2022 from $15,734 per day for the second quarter of 2021.

General and administrative expenses were $4.4 million for the second quarter of 2022, compared to $3.5 million for the same period in 2021. The increase of $0.9 million is mainly attributable to an aggregate increase in administrative services fees for our fleet in connection with the increase in the annual fee per vessel payable to GasLog Ltd. in 2022 (approximately $0.3 million per vessel per year). As a result, daily general and administrative expenses increased to $3,211 per vessel ownership day for the second quarter of 2022 from $2,554 per vessel ownership day for the second quarter of 2021.

Impairment loss on vessels was $28.0 million for the second quarter of 2022, compared to nil for the same period in 2021. The impairment loss was recognized pursuant to the reclassification of two of our Steam vessels as held for sale and remeasurement of their carrying amounts as of June 30, 2022.

Adjusted EBITDA(1) was $59.3 million for the second quarter of 2022, compared to $45.0 million for the same period in 2021. The increase of $14.3 million is mainly attributable to the increase in revenues of $14.5 million described above.

Financial costs were $9.8 million for the second quarter of 2022, compared to $9.1 million for the same period in 2021. The increase of $0.7 million in financial costs is attributable to an increase in interest expense on loans, mainly due to an increase in the London Interbank Offered Rate (“LIBOR”) rates in the second quarter of 2022 as compared to the same period in 2021, and an increase in interest expense on leases, pursuant to the sale and leaseback of the GasLog Shanghai in October 2021. During the second quarter of 2022, we had an average of $1,058.1 million of bank borrowings outstanding under our credit facilities with a weighted average interest rate of 3.1%, compared to an average of $1,261.1 million of bank borrowings outstanding under our credit facilities with a weighted average interest rate of 2.4% during the second quarter of 2021.

Gain on derivatives was $1.2 million for the second quarter of 2022, compared to a loss of $0.4 million for the same period in 2021. The decrease of $1.6 million in the loss on derivatives is attributable to a decrease in realized loss on derivatives held for trading and an increase in unrealized gain from the mark-to-market valuation of derivatives (interest rate swaps) held for trading, which were carried at fair value through profit or loss, mainly due to changes in the forward yield curve.

Profit was $0.8 million for the second quarter of 2022, compared to $14.7 million for the same period in 2021. The decrease in profit of $13.9 million is mainly attributable to the impairment loss of $28.0 million, partially offset by the increase in revenues of $14.5 million, as described above.

Adjusted Profit was $26.3 million for the second quarter of 2022, compared to $12.7 million for the same period in 2021. The increase in Adjusted Profit of $13.6 million is mainly attributable to the increase in Adjusted EBITDA(1) discussed above.

As of June 30, 2022, we had $147.3 million of cash and cash equivalents, out of which $51.8 million was held in current accounts and $95.5 million was held in time deposits with an original duration of less than three months. An additional amount of $10.0 million of time deposits with an original duration greater than three months was classified under short-term cash deposits.

As of June 30, 2022, we had an aggregate of $1,036.1 million of bank borrowings outstanding under our credit facilities, of which $159.3 million was repayable within one year. Current bank borrowings include an amount of $69.1 million with respect to the associated debt of our two Steam vessels classified as held for sale as of June 30, 2022. As of June 30, 2022, we also had an aggregate of $50.9 million of lease liabilities mainly related to the sale and leaseback of the GasLog Shanghai, of which $10.5 million was payable within one year.

As of June 30, 2022, our current assets totaled $291.6 million and current liabilities totaled $239.8 million, resulting in a positive working capital position of $51.8 million.

(1)   Adjusted Profit, EBITDA, 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.

Sale of Vessels

In June 2022, GasLog Partners entered into an agreement to sell, subject to customary and other closing conditions, the Methane Shirley Elisabeth, a 145,000 cubic meter Steam LNG carrier built in 2007, to an unrelated third party for a gross sale price of approximately $54.0 million, resulting in the reclassification of the vessel as held for sale and the recognition of an impairment loss of $14.7 million as of June 30, 2022. The transaction is expected to be completed in the third quarter of 2022, upon redelivery of the vessel from its current charterer.

In addition, as of June 30, 2022, GasLog Partners had been pursuing an agreement for the sale and lease-back of another Steam vessel, resulting in the reclassification of that vessel as held for sale and the recognition of an impairment loss of $13.3 million. While no definitive agreement has yet been reached, the agreement is expected to be executed and the sale expected to be completed within the next 12 months.

Preference Unit Repurchase Programme

In the second quarter of 2022, under the Partnership’s preference unit repurchase programme (the “Repurchase Programme”) established in March 2021, GasLog Partners repurchased and cancelled 72,762 8.625% Series A Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series A Preference Units”), 140,201 8.200% Series B Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series B Preference Units”) and 132,715 8.500% Series C Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series C Preference Units”), for an aggregate amount of $8.7 million, including commissions.

Since inception of the Repurchase Programme in March 2021 and up to June 30, 2022, GasLog Partners has repurchased and cancelled 80,600 Series A Preference Units, 777,220 Series B Preference Units and 615,599 Series C Preference Units at a weighted average price of $25.44, $25.06 and $25.23 per preference unit for Series A, Series B and Series C, respectively, for an aggregate amount of $37.1 million, including commissions.

LNG Market Update and Outlook

Global LNG demand was forecasted to be 95.7 million tonnes (“mt”) in the second quarter of 2022, according to Wood Mackenzie, Energy Research and Consultancy (“WoodMac”), compared to 92 mt in the second quarter of 2021, an increase of approximately 4%, primarily led by continued strong demand from Europe in response to low inventories and continued disruption of gas pipeline imports from Russia. As a result of increased LNG imports, European inventories were recovering to seasonal average levels. However, Russia has reduced flows via Nord Stream 1 pipeline into Germany by 60%, citing technical issues for the reduction.

Global LNG supply was approximately 101.3 mt in the second quarter of 2022, growing by 6.5 mt, or 6.9%, compared to the second quarter of 2021 according to WoodMac. LNG supply in 2022 retained strong levels compared to the first quarter of 2022, declining by just 0.1 mt as a result of high utilization in the United States (“U.S.”) and the gradual recovery of Norwegian exports. Looking ahead, approximately 163 mt of new LNG capacity is currently under construction and scheduled to come online between 2023 and 2027.

Headline spot rates for TFDE LNG carriers, as reported by Clarkson Research Services Limited (“Clarksons”), averaged $61,846 per day in the second quarter of 2022, a 6.7% increase over the $57,962 per day average in the second quarter of 2021. Headline spot rates for Steam LNG carriers averaged $40,346 per day in the second quarter of 2022, 10% lower than the average of $44,654 per day in the second quarter of 2021. Headline spot rates in the second quarter of 2022 were impacted by an increased availability of sublet tonnage, limited spot vessel enquiries and declining inter-basin demand. Most recently, the fire at the Freeport LNG export facility significantly negatively affected demand for LNG carriers in the Atlantic Basin while simultaneously releasing additional vessels into the spot market. The market for independently owned vessels, however, is supported by strong demand in the multi-month/multi-year market, despite the recent underperformance of the spot market, due to uncertainty, volatility and the small number of uncommitted vessels able to offer charterers the necessary flexibility. One-year time charter rates for TFDE LNG carriers averaged $112,250 per day in the second quarter of 2022, a 43% increase over the $78,267 per day average in the second quarter of 2021. One-year time charter rates for Steam LNG carriers averaged $62,450 per day in the second quarter of 2022, a 20% increase over the $52,083 daily average in the second quarter of 2021.

As of July 1, 2022, Clarksons assessed headline spot rates for TFDE and Steam LNG carriers at $58,750 per day and $32,500 per day, respectively. Forward assessments for LNG carrier spot rates indicate rising spot rates through the remainder of the year.

As of July 1, 2022, Poten & Partners Group Inc. estimated that the orderbook totaled 219 dedicated LNG carriers (>100,000 cbm), representing 37% of the on-the-water fleet. Of these, 189 vessels (or 86%) have multi-year charters. There were 88 orders for newbuild LNG carriers in the first six months of 2022 compared with 77 orders for all of 2021.

Preference Unit Distributions

On July 27, 2022, the board of directors of GasLog Partners approved and declared a distribution on the Series A Preference Units of $0.5390625 per preference unit, a distribution on the Series B Preference Units of $0.5125 per preference unit and a distribution on the Series C Preference Units of $0.53125 per preference unit. The cash distributions are payable on September 15, 2022 to all unitholders of record as of September 8, 2022.

Common Unit Distribution

On July 27, 2022, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.01 per common unit for the quarter ended June 30, 2022. The cash distribution is payable on August 11, 2022 to all unitholders of record as of August 8, 2022.

ATM Common Equity Offering Programme (“ATM Programme”)

The Partnership did not issue any common units under the ATM Programme during the second quarter of 2022.

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