GasLog Partners LP, an international owner and operator of liquefied natural gas (“LNG”) carriers, today reported its financial results for the three-month period ended September 30, 2020.
Highlights
- Refinanced all debt due to mature in 2021 with two new credit facilities representing a total of $454.0 million, strengthening the balance sheet and delivering $14.9 million of incremental liquidity.
- Signed a new three-year time charter for the steam turbine propulsion (“Steam”) vessel Methane Alison Victoria with CNTIC VPower Energy Ltd. (“CNTIC VPower”), an independent Chinese energy company. The vessel will primarily service the transportation, storage and breakbulk of LNG in Myanmar.
- Signed a new multi-month time charter for the Steam vessel Methane Jane Elizabeth with a major LNG charterer.
- Repaid approximately $33.0 million of debt, bringing total debt repayment (excluding prepayments for refinanced facilities) to approximately $88.0 million through the first nine months of 2020.
- Quarterly Revenues, Profit, Adjusted Profit(1) and Adjusted EBITDA(1) of $72.8 million, $11.9 million, $12.8 million and $46.8 million, respectively.
- Quarterly Earnings per unit (“EPU”) of $0.09 and Adjusted EPU(1) of $0.11.
- Declared cash distribution of $0.01 per common unit for the third quarter of 2020.
- The Partnership’s board of directors and management intend to engage with an independent advisor to review together the Partnership’s business and assess its strategic alternatives.
Chairman and CEO Statements
Curt Anastasio, Chairman of GasLog Partners, stated: “The Partnership was created primarily to fund the growth of our parent, GasLog Ltd. (“GasLog”), for which we have undoubtedly been successful, but which also relied on external capital to execute. The last several years have been challenging for capital markets for midstream energy, which along with declining visibility into the Partnership’s future financial performance, exacerbated by the COVID-19 pandemic, have resulted in a significantly higher cost of capital.
In response to these challenges, the board of directors and management have been proactive in refinancing our debt maturities, reducing our cost base, increasing the utilization of our fleet and optimizing our corporate structure. As we look out to 2021, we continue to see uncertainty in the commercial market of our assets. Rather than rely on the continuation of improved market conditions, we believe it prudent to further de-risk the Partnership and prioritize preserving liquidity and deleveraging the balance sheet.
Further to this end, the board of directors have concluded that it is in the best interest of all stakeholders to conduct an independent review of the Partnership’s business and strategic alternatives, which we anticipate to complete not later than the first quarter of 2021.”
Paul Wogan, Chief Executive Officer, commented: “I am pleased to report another positive operational quarter for the Partnership, delivered despite the ongoing challenges presented by the COVID-19 pandemic.
During the quarter, we refinanced all our debt maturing in 2021 meaning we have no debt refinancing until 2024. Excluding prepayments for refinanced facilities, we repaid approximately $33.0 million of debt, bringing the total debt amortization for the first nine months of this year to $88.0 million. In addition, the recent three-year charter for the Methane Alison Victoria, the multi-month charter on the Methane Jane Elizabeth and the two-year charter on the Methane Shirley Elisabeth, entered into in July 2020, increases our charter coverage for 2021 to 71% of available days.
While these are positive developments, our cost of capital remains elevated and there continues to be a high degree of COVID-19-related uncertainty in the near-term LNG and LNG shipping markets. By the end of 2020, all five of the Partnership’s Steam vessels will have ended their initial multi-year time charters with subsidiaries of Royal Dutch Shell plc (“Shell”), while three additional tri-fuel diesel electric vessel (“TFDE”) vessels will conclude their multi-year charters next year. Although we have been successful in finding longer-term employment for some of our available vessels, this has been concluded at current market rates which are below those achieved during the initial charters.
Given these factors, combined with the Partnership’s capital allocation strategy, which is focused on deleveraging, we made the difficult decision to decrease the common unit distribution to $0.01 per common unit beginning with the third quarter of 2020. As a result, the Partnership will retain approximately $22 million dollars annually, allowing it to preserve liquidity during this period of COVID-19-related uncertainty. We believe this action will further strengthen the Partnership’s balance sheet, lower the fleet’s breakeven, reduce its cost of capital and further enhance its competitive positioning.”
There were 1,247 revenue operating days for the quarter ended September 30, 2020 compared to 1,365 revenue operating days for the quarter ended September 30, 2019, mainly due to the increased off-hire days for scheduled dry-dockings.
The decrease of $17.5 million in profit in the third quarter of 2020 as compared to the same period in 2019 is mainly attributable to a decrease in revenues of $23.7 million, primarily due to the expirations of the initial multi-year time charters of the Methane Jane Elizabeth, the Methane Alison Victoria, the Methane Rita Andrea and the Methane Shirley Elisabeth and the 18-month time charter of the GasLog Sydney and also due to increased off-hire days due to dry-dockings. Following the expirations of their initial charters, the Methane Jane Elizabeth was re-chartered to Trafigura Maritime Logistics PTE Ltd. (“Trafigura”) in November 2019, the Methane Alison Victoria to a wholly owned subsidiary of JOVO Group (“JOVO”) in June 2020 and the Methane Shirley Elisabeth to CNTIC VPower in September 2020, while the Methane Rita Andrea and the GasLog Sydney have been trading in the spot market since May 2020 and June 2020, respectively.
The decrease in Adjusted EBITDA of $25.0 million in the third quarter of 2020 as compared to the same period in 2019 is mainly attributable to the decrease in revenues of $23.7 million described above and an increase of $1.2 million in operating expenses due to the scheduled dry-dockings of three of our vessels in the third quarter of 2020.
The decrease in revenues was partially offset by a $6.7 million decrease in interest expense due to the lower London Interbank Offered Rate (“LIBOR”) rates prevailing in the third quarter of 2020 compared to the same period in 2019.
As of September 30, 2020, we had $79.0 million of cash and cash equivalents. In September 2020, an amount of $9.2 million of cash collateral was released, pursuant to an amendment to the Credit Support Annex entered into between GasLog Partners and GasLog in March 2020. As of September 30, 2020, an aggregate amount of $7.6 million was held as cash collateral with respect to our derivative instruments with GasLog ($5.8 million) and bank counterparties ($1.8 million).
As of September 30, 2020, we had an aggregate of $1,303.6 million of borrowings outstanding under our credit facilities, of which $104.9 million was repayable within one year. In addition, as of September 30, 2020, we had unused availability under our revolving credit facility with GasLog of $30.0 million.
As of September 30, 2020, our current assets totaled $106.8 million and current liabilities totaled $179.8 million, resulting in a negative working capital position of $73.0 million. Current liabilities include $25.1 million of unearned revenue in relation to hires received in advance as of September 30, 2020 (which represents a non-cash liability that will be recognized as revenues after September 30, 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 current and expected volatile commercial and financial market conditions, we anticipate that our primary sources of funds over the next twelve months 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 end of the reporting period. Our long-term ability to repay our debts and maintain compliance with our debt covenants beyond the next twelve months 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 the first half of 2020 as a result of the COVID-19 outbreak.
Preference Unit Distributions
On August 4, 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 aggregate cash distributions of $7,582 were paid on September 15, 2020 to all unitholders of record as of September 8, 2020.
Common Unit Distribution
On November 9, 2020, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.01 per common unit for the quarter ended September 30, 2020. The cash distribution is payable on November 25, 2020 to all unitholders of record as of November 20, 2020.
LNG Market Update and Outlook
LNG demand was 84 million tonnes (“mt”) in the third quarter of 2020, according to Poten, compared to 88 mt in the third quarter of 2019, or a decrease of approximately 4%. Although demand declined globally in the third quarter compared to the third quarter of 2019, it also varied regionally. For example, Chinese LNG demand was 17 mt in the third quarter of 2020, an increase of 13% or approximately 2 mt. In addition, Indian demand was 7 mt, an increase of 13% or approximately 1 mt. These increases were balanced by declines in Europe, the Middle East, Japan, South Korea, North America and South America, which in aggregate saw their demand decline by over 6 mt in the third quarter.
Global LNG supply was approximately 86 mt in the third quarter of 2020, a decrease of over 3 mt, or 4%, over the third quarter of 2019, according to Poten. Supply from the United States (“U.S.”) decreased by approximately 2 mt or 18%, the result of an estimated 112 cargoes cancelled by customers of U.S. export facilities as well as unplanned outages at Cameron LNG following damage to its power supply caused by Hurricane Laura in late August. In addition, supply from Australia declined by nearly 2 mt or 7%, due in part to unplanned maintenance at Gorgon LNG. Looking ahead, approximately 104 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 $41,000 per day in the third quarter of 2020, a decrease from the average of $66,000 in the third quarter of 2019. Headline spot rates for Steam vessels averaged $28,000 per day in the third quarter of 2020, a decrease from the average of $43,000 per day in the third quarter of 2019. Headline spot rates in the third quarter were negatively impacted by declines in LNG demand as well as unplanned outages at facilities in the U.S. and Australia as noted above.
Clarksons currently assesses headline spot rates for TFDE and Steam LNG carriers at $105,000 per day and $78,000 per day, respectively. Early indications are for LNG demand to grow in the fourth quarter of 2020, relative to the third quarter of 2020, as demand in October was 2% higher than September, according to Poten. This demand growth has been reflected in the increasing headline spot rates for LNG carriers observed in recent weeks. However, taking into account the impact of the COVID-19 pandemic on the global economy, the forecast growth of the global LNG carrier fleet and expected seasonal trading patterns, there is continued potential for volatility in the spot and short-term markets over the near and medium-term.
As of November 4, 2020, Poten estimates that the orderbook totals 118 dedicated LNG carriers (>100,000 cubic meters, or “cbm”), representing 22% of the on-the-water fleet. Of these, 83 vessels (or 70%) have multi-year charters. 28 LNG carriers have been ordered year-to-date, all for long-term business with no vessels ordered on a speculative basis.
