Monaco - 4 May 2018
GasLog Ltd. and its subsidiaries (“GasLog” or “Group” or “Company”) (NYSE: GLOG), an international owner, operator and manager of liquefied natural gas (“LNG”) carriers, today reported its financial results for the quarter ended March 31, 2018.
• Record quarterly Revenues of $138.5 million (Q1 2017: $128.3 million). Profit of $42.5 million (Q1 2017: $23.4 million) and Earnings per share of $0.21(1) (Q1 2017: $0.08) for the quarter ended March 31, 2018.
• Record quarterly EBITDA(2) of $95.9 million (Q1 2017: $89.1 million) and Adjusted EBITDA(2) of $95.5 million (Q1 2017: $89.3 million). Adjusted Profit(2) of $25.3 million (Q1 2017: $21.9 million) and Adjusted Loss per share(2) of $0.01(1) (Q1 2017: Adjusted Earnings per share of $0.06) for the quarter ended March 31, 2018.
• 7.1% increase in the quarterly dividend to $0.15 per common share payable on May 24, 2018.
• Delivery of the GasLog Houston on January 8, 2018 and, post quarter-end, completion of a short-term time charter agreement with a major LNG producer. The vessel is scheduled to commence a multi-year time charter with a subsidiary of Royal Dutch Shell plc (“Shell”) in December 2018.
• Delivery of the GasLog Hong Kong on March 20, 2018 and the GasLog Genoa on March 29, 2018, two 174,000 cubic meters (“cbm”) LNG carriers with low pressure dual-fuel two-stroke engine propulsion (“LP-2S”) and commencement of their time charter agreements with Total Gas & Power Chartering Limited (“Total”), a wholly owned subsidiary of Total S.A., and Shell, respectively.
• Ordered two 180,000 cbm newbuild LNG carriers from Samsung Heavy Industries Co., Ltd. (“Samsung”) with LP-2S propulsion, with scheduled delivery in the second quarter of 2020.
• Announced and, post quarter-end, completed the sale of the GasLog Gibraltar to GasLog Partners LP (“GasLog Partners” or the “Partnership”) for $207.0 million. Part of the consideration was satisfied by the private issuance of $45.0 million of common units in GasLog Partners to GasLog.
• On February 23, 2018, GasLog signed the Operation and Maintenance (“O&M”) agreement for the provision of related services to the Alexandroupolis floating storage and regasification unit (“FSRU”) project (the “Alexandroupolis Project”).
• GasLog Partners completed a public offering of 8.200% Series B Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series B Preference Units”), raising gross proceeds of $115.0 million and net proceeds of $111.2 million.
(1) Earnings/(loss) per share (“EPS”) and Adjusted EPS are net of the profit attributable to the non-controlling interests of $23.2 million and the dividend on preferred stock of $2.5 million for the quarter ended March 31, 2018 ($14.6 million and $2.5 million, respectively, for the quarter ended March 31, 2017).
(2) EBITDA, Adjusted EBITDA, Adjusted Profit and Adjusted EPS are non-GAAP financial measures and should not be used in isolation or as a substitute for GasLog’s 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.
Paul Wogan, Chief Executive Officer, stated: “I am pleased to report another record quarter of revenues and EBITDA for GasLog, driven by the initial contribution of our 2018 newbuild deliveries and the stronger performance of the vessels operating in the LNG carrier pooling arrangement (the “Cool Pool”). On the back of our improving financial performance, our strong balance sheet and our confidence in the long-term prospects for the company, I am delighted to announce a 7.1% increase in our quarterly dividend to $0.15 per share.
During the quarter, we continued to execute on our business plan, taking delivery of three newbuilds, the GasLog Houston, the GasLog Genoa and the GasLog Hong Kong, all on time and on budget. Due to their fuel efficient engines and low boil-off rate, these vessels will have highly competitive unit freight costs. We also continued to execute on our long-term growth strategy, recycling capital through the drop-down of the GasLog Gibraltar to GasLog Partners and ordering two newbuild LNG carriers for delivery in the second quarter of 2020. In addition, GasLog Partners announced two charter agreements with a new customer, simultaneously meeting key objectives of increasing the Partnership’s contracted revenues and diversifying its customer base.
During the quarter, global LNG supply continued to increase, with Wood Mackenzie forecasting 9% growth in volumes during 2018. Although no new supply projects have yet taken a final investment decision (“FID”) in 2018, several major projects continue to make progress and we remain confident that additional liquefaction capacity will be sanctioned in 2018 and 2019.
As expected, LNG carrier spot rates experienced a seasonal decline from the multi-year highs of Q4 2017. However, headline spot rates remain higher year-on-year, and there are signs that rates have bottomed out as buyers now look to source supply for cooling demand in the Northern Hemisphere summer and heating demand in the Southern Hemisphere winter. We expect rates to strengthen in the second half of this year.
The Alexandroupolis Project continues to make good progress and we signed the O&M agreement during the quarter. Negotiations with the Greek national gas utility, DEPA, and Bulgarian Energy Holding ("BEH") regarding equity participation in Gastrade S.A. (“Gastrade”) are ongoing and, as noted in the Press Release of May 3, 2018 issued by Gastrade and DEPA, the Managing Directors of DEPA and Gastrade reached agreement regarding the future reservation of capacity in the terminal by DEPA. In addition, BEH confirmed its intention to speed up the respective negotiations for the completion of its own participation in the project. FID is still expected in the fourth quarter of 2018."
LNG Market Update and Outlook
Global LNG production continued to grow in Q1 2018, registering a 10% year-on-year increase and a 2% increase over Q4 2017 as measured by Wood Mackenzie. The ramp-up of the Yamal project in Russia has outperformed expectations, the first commercial cargo from Cove Point in the United States was exported in April and legacy liquefaction capacity operated at high utilization to take advantage of the high prices caused by strong demand growth partly driven by the cold Northern Hemisphere winter. However, new supply growth was partly offset by several plant outages, principally at PNG LNG following an earthquake in late February, and shorter outages of other projects in Malaysia, Russia and Peru.
While a number of projects expected onstream in 2018 have experienced delays, Wood Mackenzie currently expects that some 29 million tonnes per annum (“mtpa”) of capacity will enter commercial service between Q2 and Q4 2018, underpinning the forecasted 2018 supply of 325 mtpa, or 9% growth over 2017. Among the projects which Wood Mackenzie expects onstream in 2018 are Wheatstone Train 2 (Q2), Ichthys (Q3) and Prelude (Q4) in Australia, Cameroon floating LNG (Q2) and the second train at Yamal (Q4). A further 51 mtpa is forecast by Wood Mackenzie to come onstream over the 2019-2021 period. These estimates reflect recent news flow on the expected commissioning dates of the Ichthys, Freeport and Prelude projects.
According to Wood Mackenzie, in Q1 2018, 10 mtpa of long-term supply contracts were agreed, bringing the total volume of long-term supply contracts signed since the beginning of 2017 to 37 mtpa, demonstrating strengthening interest from LNG buyers and potential support for sanctioning of further liquefaction capacity. Also during the first quarter, a number of potential new projects continued to make good progress towards FID, including projects in the United States such as Corpus Christi Train 3, in Canada (boosted by British Columbia tax relief proposals) and in Mozambique (the Area 1 project), as well as the announcement by the PNG LNG partners of reaching an agreement on plans to double exports from Papua New Guinea’s LNG facility to 16 mtpa.
LNG market participants continue to forecast significant growth in LNG demand. Consensus compound annual growth rate in LNG demand of 6% is forecast over the 2017-2025 period. Based upon Wood Mackenzie’s forecasts of supply either onstream or under construction, this suggests the market may be short of LNG as soon as 2020, reiterating the need for further LNG supply projects to be sanctioned in the near-term. LNG continues to be seen as an attractive way to diversify energy imports, with Germany being the most recent country to articulate plans to develop LNG import infrastructure.
As measured by Poten, tonne miles in Q1 2018 were 18% higher year on year, continuing the significant growth trend seen in 2017. Structural changes in the LNG market, such as fragmentation of market participants, the increasing market share of portfolio suppliers such as Shell, Total and BP plc and commodity traders, and a move away from destination clauses in supply contracts are all increasing the amount of LNG traded and bode well for further increases in tonne miles.
Headline spot TFDE LNG shipping rates as reported by Clarksons have exhibited seasonal weakness in recent months, declining to $38,000 per day in late April from approximately $80,000 per day at the beginning of the year. The decline has been more rapid than expected and exacerbated by a number of one-off factors, including the unplanned downtime at LNG facilities mentioned above, delays in the commissioning of new liquefaction supply and the delivery of 18 newbuild LNG carriers during the first quarter of 2018. Nonetheless, current spot rates of $42,000 are 40% ahead of levels from a year ago. While the market may continue to be affected by seasonal factors driving LNG supply and demand, and there may be further delays to the commissioning of new liquefaction projects currently under construction, we remain optimistic that a tightening shipping market, driven by the positive outlook for LNG demand growth and the evolving LNG shipping market, will result in spot rates improving from current levels over time.
This positive outlook and the perceived requirement for new ships have resulted in 18 firm newbuild LNG carrier orders so far in 2018, of which two are GasLog vessels. Based on our analysis of expected LNG demand, between 35 and 62 additional LNG carriers will be needed by the end of 2022 and potentially as many as 117 vessels by 2025 to satisfy projected market growth.
New Charter Agreements
GasLog Partners entered into agreements with a new customer for two new charters plus options for an additional two charters, exercisable by the charterer. The agreements include an approximately three-and-a-half-year charter for the GasLog Santiago, a 155,000 cbm tri-fuel diesel electric (“TFDE”) LNG carrier built in 2013, commencing in either August or September 2018 at the Partnership’s option, and a one-year charter for a 145,000 cbm steam-powered (“Steam”) vessel (either the 2006-built Methane Jane Elizabeth or the 2007-built Methane Alison Victoria as nominated by the Partnership) commencing in either November or December 2019 at the Partnership’s option. The charterer has options to extend the first charter for up to an additional seven years and the second charter for up to an additional four years, both at escalating rates.
Delivery of the GasLog Houston, the GasLog Hong Kong and the GasLog Genoa
On January 8, 2018, GasLog took delivery of the GasLog Houston, a 174,000 cbm LNG carrier with LP-2S propulsion constructed by Hyundai Heavy Industries Co., Ltd. (“Hyundai”). The vessel completed a short-term charter to a major LNG producer and is currently available in the spot market until the commencement of her multi-year charter party with a subsidiary of Shell, from the end of 2018 until April 2028.
On March 20, 2018, GasLog took delivery of the GasLog Hong Kong, a 174,000 cbm LNG carrier with LP-2S propulsion constructed by Hyundai. The vessel was originally scheduled to commence a multi-year charter with Total in December 2018 ending in 2025. However, the commencement of the charter was brought forward to delivery from the yard, thus increasing the period of the charter to Total. Whilst the charter hire rate for this additional initial period is lower than that which GasLog will enjoy for the period from December 2018 to 2025, delivery of the vessel straight into charter from the yard together with the additional charter hire resulted in significant operational efficiencies for GasLog.
On March 29, 2018, GasLog took delivery of the GasLog Genoa, a 174,000 cbm LNG carrier with LP-2S propulsion constructed by Samsung. The vessel commenced her charter party agreement with Shell upon delivery until 2027.
On January 12, 2018, GasLog entered into a shipbuilding contract with Samsung for the construction of a 180,000 cbm GTT Mark III Flex LNG Carrier with LP-2S propulsion (Hull No. 2213) that is scheduled to be delivered in the second quarter of 2020. This vessel will now be the vessel to be chartered to Pioneer Shipping Limited, a wholly owned subsidiary of Centrica plc (“Centrica”), for an initial period of approximately seven years, as previously announced on October 20, 2016. The 180,000 cbm GTT Mark III Flex Plus LNG Carrier with LP-2S propulsion (Hull No. 2212) to be delivered in the third quarter of 2019 is currently without charter.
On March 9, 2018, GasLog entered into a shipbuilding contract with Samsung for the construction of a 180,000 cbm GTT Mark III Flex Plus LNG Carrier with LP-2S propulsion (Hull No. 2274) that is scheduled to be delivered in the second quarter of 2020 and is currently without charter.
GasLog Partners’ Issuance of Series B Preference Units
On January 17, 2018, GasLog Partners completed a public offering of 4,600,000 8.200% Series B Preference Units (including 600,000 units issued upon the exercise in full by the underwriters of their option to purchase additional Series B Preference Units), liquidation preference $25.00 per unit, at a price to the public of $25.00 per preference unit. The net proceeds from the offering after deducting underwriting discounts, commissions and other offering expenses were $111.2 million. The Series B Preference Units are listed on the New York Stock Exchange under the symbol “GLOP PR B”.
Sale of the GasLog Gibraltar
On April 16, 2018, GasLog entered into a share purchase agreement for the sale to GasLog Partners of 100% of the ownership interest in GAS-fourteen Ltd., the entity that owns the GasLog Gibraltar, for an aggregate purchase price of $207.0 million, which includes $1.0 million for positive net working capital balances transferred with the entity. GasLog Partners financed the acquisition with cash on hand, $45.0 million of new privately placed common units issued to GasLog (1,858,975 common units at a price of $24.21 per unit), and the assumption of the GasLog Gibraltar’s outstanding indebtedness of $143.6 million. The sale closed on April 26, 2018.
Alexandroupolis Project update
On February 23, 2018, GasLog entered into an agreement to provide O&M services to the Alexandroupolis Project. In addition, Gastrade is currently in discussions with a number of additional potential investors, including DEPA, the Greek state-owned gas company, and BEH, the holding company of the Bulgarian Ministry of Energy, and targets to take FID by the end of 2018 with the FSRU currently scheduled to be operational by the end of 2020. Following a trilateral meeting between DEPA, BEH and Gastrade, the Managing Directors of DEPA and Gastrade reached agreement regarding the future reservation of capacity in the terminal by DEPA. In addition, BEH confirmed its intention to speed up the respective negotiations for the completion of its own participation in the project.
GasLog Partners’ At-the-Market Common Units Equity Offering Programme (the “ATM Programme”)
On May 16, 2017, GasLog Partners commenced an ATM Programme under which the Partnership may, from time to time, raise equity through the issuance and sale of new common units having an aggregate offering value of up to $100.0 million in accordance with the terms of an equity distribution agreement entered into on the same date. Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC agreed to act as sales agents. On November 3, 2017, the size of the ATM Programme was increased to $144.0 million and UBS Securities LLC was included as a sales agent.
Since the commencement of the ATM Programme through March 31, 2018, GasLog Partners has issued and received payment for a total of 2,737,405 common units, with cumulative gross proceeds of $62.9 million at a weighted average price of $22.97 per unit, representing a discount of 0.5% to the volume weighted average trading price of GasLog Partners’ common units on the days on which new common units were issued. No issuances of common units were made under the ATM Programme in the first quarter of 2018. As of March 31, 2018, the cumulative net proceeds were $61.2 million.
On March 8, 2018, the board of directors declared a dividend on the Series A Preference Shares of $0.546875 per share, or $2.5 million in the aggregate, payable on April 2, 2018 to holders of record as of March 29, 2018. GasLog paid the declared dividend to the transfer agent on March 29, 2018.
On May 3, 2018, the board of directors declared a quarterly cash dividend of $0.15 per common share, or $12.1 million in the aggregate, payable on May 24, 2018 to shareholders of record as of May 14, 2018.
GasLog is an international owner, operator and manager of LNG carriers providing support to international energy companies as part of their LNG logistics chain. GasLog's consolidated fleet consists of 29 LNG carriers (25 ships on the water and four on order). GasLog also has an additional LNG carrier which was sold to a subsidiary of Mitsui & Co., Ltd. and leased back under a long-term bareboat charter. Following the closing of the GasLog Gibraltar acquisition, GasLog’s consolidated fleet includes 13 LNG carriers in operation owned by GasLog Partners. GasLog's principal executive offices are at Gildo Pastor Center, 7 Rue du Gabian, MC 98000, Monaco. Visit GasLog’s website at http://www.gaslogltd.com.
GasLog Ltd. press release