spk00: Good morning. My name is Myra, and I'll be your conference operator today. At this time, I would like to welcome everyone to the GOSLOG Partners Third Quarter 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And as a reminder, this conference call is being recorded. On today's call, our Paolo and Noisy Chief Executive Officer, and Acleas Tasioulis, Chief Financial Officer. Joseph Nelson, Head of Investor Relations, will begin your conference.
spk02: Good morning or good afternoon, and thank you for joining the GasLog Partners Third Quarter 2021 Earnings Conference Call. For your convenience, this webcast and presentation are available on the Investor Relations section of our website, www.gaslogmlp.com, where a replay will also be available. Please now turn to slide two of the presentation. Many of our remarks contain forward-looking statements. For factors that could cause actual results to differ materially from these forward-looking statements, please refer to our third quarter earnings press release. In addition, some of our remarks contain non-GAAP financial measures as defined by the SEC. A reconciliation of these measures is included in the appendix to this presentation. Paola will begin today's call with a review of the partnership's third quarter and outlook for 2022, following which Achilleus will walk you through the partnership's financials. Paolo will then provide an update on the LNG shipping and LNG commodity markets. We will then take questions on the partnership's third quarter. With that, I will now turn it over to Paolo Inoisi, CEO of Gaslog Partners. Paolo Inoisi Thank you, Joe, and welcome, everyone.
spk03: Please turn to slide four for Gaslog Partners' third quarter highlights. I'm pleased to report strong operational and financial performances under a tight backdrop for the energy shipping market. The fleet performed at approximately 100% availability, despite the continued challenges of COVID and the resulting crew change issues. Our revenues and cash flow improved significantly on a year-on-year basis, following four new charter agreements announced in recent months, as well as ongoing cost control efforts. With a purchase of over $12 million of our preference units in the open market at a discount to par, further supporting a reduction in our fleet crash break-even rate. The Gaslow Shanghai was sold and leased back to China Development Bank Leasing, releasing $20 million of incremental liquidity. And finally, we retired another $36 million of debt during the quarter, bringing the total to $91 million during the first nine months of the year. Turn into slide five and look at how the landscape for LNG shipping has changed over the last 12 months. Looking back at the last year and the LNG commodity market was expected to have an excess of supply until at least mid-2020, with persistent low prices and regional price differentials. LNG inventories were high around the world. The shipping market was expected to be oversupplied due to a heavy delivery schedule. The term charter market wasn't very active, and both terms and spot rates were well below the mid-cycle. Today, we're in a completely different market. Energy commodity demand is moving as many regions around the world cope with an energy crisis. Energy prices and differentials are consequently at record high. Term charter durations and rates are at levels not seen in seven years. A charter seeks security of shipping capacity to meet end-user demand. Against this backdrop, we expect the partnership open vessels to be well positioned to benefit from stronger rates in the coming months. Turning to slide six, which summarizes our operational upside to the strong Shiba market. As you can see from the chart on the left, the partnership has a balanced charter portfolio. Our fixed charter coverage, shown in dark blue, more than covers our fixed expenses through at least 2022. Meanwhile, our open days, showing light gray, display a significant leverage to the tight shipping market. You'll note we also have one vessel on spot market link contract, which will also benefit from the higher spot rates. On these open days, every $10,000 per day of revenue earned above our operating and overhead expenses will generate an incremental $7 million of EBITDA for the partnership. Slide seven. shows global gas price differentials and the forecast supply and demand balance for LNG. The chart on the left displays the future market, which presently implies a wide differential between US exports and Asian import prices to at least 2023. This should ensure a high level of liquidification utilization. On the right, you'll note that the Pacific Basin is expected to have an LNG shortfall of approximately 129 million tons in 2022, according to Wood-McKenzie. These two dynamics combined, interbasing gas price and volume differentials, should continue to support strong shipping ton-mile demand. Slide 8 sets out our 2022 capital allocation plan, focusing on debt repayment and further reductions in the breakeven rates for our fleet. On this slide, we demonstrate how amortizing our debt builds balance sheet capacity and equity value, using the Gas Block Glasgow as an example. All the partnership debt is at vessels level, and this debt amortizes at roughly twice the rate of our ship's depreciate. As you can see from the left-hand chart, our loan-to-value ratio on the Glasgow declines by over 15% during the three years period, from the end of 2020 through to the end of 2023. During the same period, our book equity for the vessel net depreciation as shown on the right-hand chart, is projected to increase by 20 million, which represents a 9% compound annual growth rate in the equity value. As this compelling value creation demonstrates, we believe that prioritizing debt reduction supports the partnership's future growth in equity value. Slide now presents our three-step approach to unit-holder value creation over the medium term. As we've discussed on this in previous calls, our strategy is strengthening the partnership to be financially resilient and support the business through cycles, as we've seen in 2020, by strengthening our balance sheets and reducing our breakeven costs. We've given ourselves targets to reduce our net debt to below four times our trading 12-month EBITDA and to have a total debt to capitalization below 40%. In addition, we will continue to reduce our fleet crash break-even rate, which we accelerated in the third quarter by repurchasing preference units in the open market as Achilles, we'll discuss later. It is our view that achieving this target will be aided greatly by the sustained strong shipping market we expect in the coming quarters. The partnership, in fact, is one of the few remaining U.S.-listed PurePlay LNG carrier owner, and we're getting stronger and stronger as we will seek to grow and modernize our fleet over time. Lastly, as we execute on the partnership capital allocation strategy of balancing its operational and financial leverage, we enhance unit order returns and unlock the equity value of our business. With that, I'll hand over to Achilles to take you through the partnership Q3 financials.
spk04: Thank you, Paolo. Turning to slide 11 and the partnership's financial results for the third quarter. As Paolo mentioned earlier, our financial performance in quarter three 2021 improved significantly from both the second quarter of 2021 as well as quarter three 2020 following the four new charters on attractive terms. More specifically, revenues for the third quarter were 81 million and 11% improvement from the third quarter of 2020 and 16% improvement over quarter two 2021. The revenue improvement year over year is primarily due to the four new charter agreements mentioned earlier at attractive terms in line with the improvement in the LNG shipping markets and the term business, as well as fewer dry docking days. Adjusted EBITDA was 57 million, an increase of 22% from the third quarter of 2020, while adjusted earnings was 34 cents per unit. The significant improvements in adjusted EBITDA and adjusted EPS were aided by the improved revenue performance, our ongoing cost control initiatives, as well as favorable movements in LIBOR, which is reducing our interest expense cost as we also reduce our debt balances. Looking forward, the partnership has chartered coverage of 100% in the fourth quarter in 2021 and no dry dockings, supporting sequential improvement in our financial performance. Turning to slide 12 and a look at our cost phase. Our operating expenses for the third quarter averaged $14,406 per vessel per day. Our overhead expenses were $2,388 per vessel per day, a significant improvement over 2020. As we look toward the full year, we expect our unit operating expenses to average for the year $14,800 per vessel per day, which includes $450. $80 per vessel per day in relation to the dry docking OPEX component within the full year 2021. We expect our overhead expenses to average $2,500 per vessel per day in 2021. Lastly, declines in LIBOR, as well as lower debt levels, have reduced the interest expense on the unhedged portion of our secured vessel debt by $1.6 million in the third quarter of 2021 compared with the third quarter of 2020. Slide 13 shows the partnership's debt balances and balance sheet metrics, which continue to be robust. Net debt to total capitalization was 48% at the end of the third quarter. The partnership ended the third quarter with $110 million of cash equivalents. After the end of the quarter, we sold and leased back to Gaslok Shanghai, which provided for an incremental $20 million of additional liquidity net to full cost and sale commissions. As Paolo noted earlier, we expect to continue strengthening our balance sheet, beginning with a scheduled retirement of approximately $114 million of debt and operating lease expenses in 2022, which is more than covered by our contracted cash flow over this period. Reducing debt balances will reduce the partnership's cash flow break-even levels over time, improving further the competitiveness of our fleet. Slide 14 discusses the partnership's Preference Unit Repurchase Program, which supports our strategic effort to reduce our all-in-cost base. During the third quarter, we repurchased a total of approximately 12.4 million of our Series B and Series C preference units in the open market at the discounted part. The repurchases reduced preference unit distributions by approximately 1 million on an annual basis. Said differently, Our daily preference unit distributions are reduced by approximately $200 per version per day. We expect to continue opportunistically repurchasing preference units in the open market as conditions dictate. With that, I will turn it over to Paolo to discuss the LNG commodity and LNG shipping markets.
spk03: Thank you, Achilles. Clear and neat as usual. Turning to slide 16, Portland registered a record 49 term charter greater than six months in Quarter 3, 2021, setting a new annual best for term chartering as a broad range of LNG market participants seek to secure shipping tonnage. Term charter rates are also at a level not seen in many years, with Portland quoting one-year time charter rates for TFT LNG carrier around $100,000 per day. Headland spot rates have been reflected strongly in recent weeks. now around $160,000 per day. While it's not unusual for spot rates to move higher ahead of the winter month, spot rates are well ahead of the same period last year and are nearing five-year high. Energy shipping spot rates this year have benefited from strong growth in the inter-Basin trading of energy. Energy carrier spot rates have also benefited from persistent Panama Canal congestion, mainly due to growing container ship and energy carrier traffic. In addition, pole congestions and dry docking delays, particularly in Asia, due to COVID-related closures, restrictions, and staffing challenges, have played their part in reducing vessel availability this year. Lastly, as we head into the LNG and natural gas inventory drawing season during the northern hemisphere winter months, European gas storage levels are presently at 77%, a multi-year low and compared to a five-year average of 92%. We expect restocking in Europe and Asia to continue to create high demand for U.S. energy, which is positive for the energy shipping in the coming months. As a result of these fundamental drivers and frictional challenges, we expect the energy carrier spot market to continue to perform strongly through next winter, as I'll discuss over the next several slides. Slide 17 presents energy demand and supply during Q3 2021. Energy demand increased 8% in the third quarter of 2021 relative to the third quarter of 2020, as shown by the left-hand figure. Continuing a trend in place for much of this year, Asian demand was robust due to a combination of cooling demand and restocking inventories ahead of winter. Latin America demand was also strong due to lower hydroelectric output and a colder than anticipated winter. On the supply side, U.S. production rose by over 150% year-on-year to 18 million tons due to no cargo cancellation, less unplanned downtime, and the ramp-up in production from the third range at Freeport, Cameron, and Corpus Christi LNG facilities. The two figures on this slide demonstrate a theme that we've nearly seen all year. U.S. supply is going to meet strong demand from Asian buyers. The shipping-intensive nature of this trading pattern has propelled ton mine growth of 16% to the first nine months of this year, more than twice that of the demand for the commodity itself. Slide 18 displays the LNG carrier order book and delivery schedule according to POTEN. There are 130 LNG carriers in the order book at present, or about 20% of underwater fleet. Over 86% of the order book has secured multi-year employment. In addition, the number of scheduled deliveries in 2022 were less than half those delivered in 2021, and just three unfixed deliveries will be able to deliver next year. Due to increasing demand for container ships and other merchant vessels, delivery times for a new building order today are approximately three years, making the earliest delivery time in the second half of 2024. Competition for bird slots at the yards as well as cost inflation have also pushed prices to approximately $210 million, up about 10% over the last year. Slide 19 illustrates our view of shipping supply and demand through the middle of 2023. Demand is partly based on the number of vessels needed to export 1 million tons of energy per annum, expressed as a shipping multiplier. This analysis does not assume any vessel scrapping, although There are currently 19 vessels or about 3% of the global fleet over the age of 30, and we've seen already nine vessels scrapped so far this year. Although there's a relatively strong addition to global shipping capacity, we anticipate that the growth of inter-basin trading and likely accelerated recycling of all the tonnage will more than offset the scheduled deliveries over the next couple of years, projecting a relatively tight LNG shipping market through 2022 and 2023. Slide 20 shows the LNG importing and exporting infrastructure currently under construction. As we're seeing in energy prices across the world today, this infrastructure is critical to meeting the world's demand for energy, and more specifically, cleaner and more environmental-friendly energy. The presently domain, 125 million tons per annum of LNG production under construction, 62 million tons of which is in North America. The right-hand chart shows 160 million tons per annum of reclassification capacity being built today, 70% of which is in Asia. This, again, highlights the shipping-intensive nature of this growth. Turning to slide 21 and in summary. So I've been in this seat as CEO of the partnership for the past three months, and I have to say I'm really excited to see the strength of our business, of our people on board and ashore delivering these great results. I'm very confident that we're building a stronger and stronger business, which in fact is one of the few remaining U.S. listed PurePlay energy carriers owner-operator. Our scale fleet of 15 energy carriers is backed by a leading commercial and operational platform and provides the foundation and exposure to the rapidly growing shipping market. We do anticipate continued growth demand for energy and therefore for energy shipping. for many years to come as a complement to renewables as the world transitions to a carbon-free future. Our balanced charter portfolio not only covers our financial obligations, but leaves significant upside to the tight shipping market expected over the near and medium term. We've set out a clear capital allocation strategy, which focuses on strengthening our balance sheets and lower break-even rates for the fleet, and creates tangible value for our unit holders. In this light, we will continue to opportunistically repurchase our preference units in the open market. Finally, we want to strengthen the partnership to the best shape to be an industry of consolidator over time as opportunities for growth and for fleet modernization will appear. With that, I'd like to open the call for questions.
spk00: Thank you. At this time, we would like to take any questions that we have for us today. And as a reminder, to ask a question, you will need to press star, then the number 1 on your telephone keypad. Once again, to ask a question, please press star 1. To withdraw your request, you may press the pound or hash key. We'll pause for a moment to compile the Q&A list. This will only take a few moments. We have our first question comes from the line of Randy Givens from Jefferies. Your line is open. Please go ahead.
spk06: Howdy, gentlemen. How's it going? Hi, Randy. Hi, Randy. It's all good. So I guess first, you know, congrats on the recent sale lease back here. Are there other opportunities for similar refinancings? And is the plan to possibly continue repurchasing preferreds using the incremental liquidity?
spk04: Yes, I can take the PREPS question first. I mean, we saw an opportunity in the market. They were trading below par, so we bought back approximately 12.5 million. This is approximately one million saving on the total distribution of the PREPS. So we will be opportunistic in the future, and we may take the opportunity Just to remind you here that the first callable period for our series of REFs is with Series B in March 2023, where we can buy back the MATPAR. So we will be opportunistic. We think that it provides us a good mix to meet our overall targets of deleveraging and reducing our all-in-cost break-evens.
spk03: And, Randy, on the sell and leaseback, the sell and leaseback with CBBL gave us $20 million of incremental liquidity, and we are going to use that to strengthen our balance sheets. The other thing that the sell and leaseback has done is, one, it has left us with an important upside to what we believe is going to be a tight and strong market. but also it has given us the opportunity to develop our ties in China, which we believe is a really good market, not only for financial instruments, but also, and most importantly, for operations and chartering. So we have received a growing interest from the market following this transaction. What we're doing now is we're evaluating what are the further interest in this and And we'll see if the conditions and the transactions fit the strategy we just discussed.
spk06: Okay. Makes sense. And then second question for me, slide six. It shows you have a couple vessels coming available for the second quarter of 2022. Is it too early to look at employment for those? And is the plan to secure, you know, another one year or so time charter? Or do those have some options on them that will likely be extended?
spk03: I think, you know, a couple of points on what you mentioned. There are some options, and the options are the ones that you list here in the lighter blue. We see, actually, the market is developing in an interesting way. You've seen this summertime, several charts that have taken coverage ahead of winter, to assure vessel availability in what is actually proving to be a very interesting market. So we do see the opportunity for the steam vessels and DFTs available to basically follow the same type of coverage that we have this year. Actually, the input we are seeing from the market is that there is continuous interest. I think it's a little bit too early to say that we will fix it in the next few weeks, but the positive notes is that inquiries keep coming even for 2022. So we're very positive about this.
spk06: Got it. Okay. Because I know like on container ships, you know, they're forward fixing six, nine months in advance. So I don't know if that was spreading over to LNG yet or if we're still kind of waiting for those forward fixings to come. But I appreciate the call there. Thanks again. Thank you. Thank you.
spk00: Our next question comes from the line of Greg Lewis from BTIG. Your line is open. Please go ahead.
spk01: Hey, thank you, thank you, and good afternoon. Good morning, everybody. I guess I had a question around the fleet on the water. I mean, clearly the company did a great job of laying out the order book for 22 and 23 in terms of what is fixed and what is not. You know, just looking at your slide deck on the fleet page, you know, it looks like you have four TFDEs rolling off in 2022 and then another three in 2023. Do we have any sense for, and I guess you don't own any MEGI or XDF, but do we have any sense for what, you know, the contract, what percentage of the fleet um on the water is is rolling off in 22 and 20 you know whatever any kind of color you can provide them i doubt you have specific numbers off the top of your head but is there any kind of way to parcel out you know how much spot availability or open days are there in the fleet in 2022 hi greg um it's an interesting question the one you asked um
spk03: I think maybe a couple of ways to try and answer your question. The first one is, if we believe that our fleet is somewhat representative to the way the spot and short- to medium-term charting actually happens, there's an important level of unpredictability which is expressed by the options that several charters have on the existing tonnage. That one is difficult to predict for our vessels and for everyone else's. On the other hand, we've seen a growing amount of spot fixtures in the past few years. I don't have the slide in front of me, but I think what we can say is if that is representative of a continuous amount of open vessels, I would say that we see that in the past five years, we have seen an important increase of, let's say, open vessels to the spot market. What that represents in terms of percentage of fleets, I don't have the number at hand, but it's a growing trend for sure.
spk04: Just to give a bit more color, Greg, I mean, we have seen a significant increase of the term business lately, which is very encouraging. I mean, the market is so good today that we are in 2021, that we have the biggest new building hitting the water, and the market has been able to absorb not only the new buildings, but the existing older tonnages. So, the market is quite strong, and the trend of new buildings hitting the water in the following years is reducing. So, if you combine that with the fact that ordering a new building now will not – you will not take delivery before the, you know, even end of 2024, the market seems to be in terms of supply. Also, another aspect is the LNG prices and the arbitrage that, you know, it is at the high levels now. All the indications that we have today is that the civic market will remain tight.
spk01: Okay, great. And then just I had a follow-up on the sale and lease back. I think I read it right in that there was no – purchase option for gas log to buy the vessel back in the out years. Kind of curious, what were the give and takes around deciding to either have an option or not have an option to buy that vessel back?
spk04: I guess this is practically what – this is a new type of transaction. It is – it combines the classic elements of a shell and leaseback. We will operate the vessel for five years, so we keep the benefit of the market upside in the next five years, which we believe that it will be a very good market. At the same time, we also have seen an opportunity to deal with our portfolio of assets, and there is no, indeed, option to buy it back. But at the same time, as Paolo mentioned, it gives us an opportunity to open a door to doing business with China.
spk03: Yeah, I mean, in the end, it was, as you mentioned, I mean, you mentioned give and take, We believe, in the end, the combination of SEER price, the bare boat back rates, the tenure, and the overall purchase price was best suited for the condition that included no option back. So it was really, let's say, the evaluation of the business case itself.
spk01: Perfect. All right. So thank you all for the time. Have a great day.
spk03: Thank you. Thanks.
spk00: Once again, I would like to remind everyone, if you wish to ask a question, please press star 1 on your telephone keypad. Your very next question comes from the line of Christian. From wherever we search, your line is open. Please go ahead.
spk05: Hey, good afternoon, Achilles, and Paolo, how are you?
spk03: Hi, Christian, good afternoon.
spk05: Hi, I wanted to just kind of ask on the preferred units buyback, is that part of the 25 million share repurchase program? And if so, how much is left after this?
spk03: Christian, can you repeat that again? Because the line was not so clear.
spk05: Sorry, can you hear me now?
spk03: Yeah, let's go ahead.
spk05: Yeah, I was wondering if the preferred units buyback was part of the 25 million share repurchase program?
spk04: We have a repurchase program to buy back preps. So it is active. It has been active for a while, and we are using it opportunistically.
spk05: No, sorry. I was asking, is this prepared part of that, or is this a separate? Just trying to get a sense of the allocation remaining for you guys to buy back additional units.
spk04: It is a separate.
spk05: Okay, how much is available for the prepared?
spk04: Listen, it is available. We still have availability, but it is a matter of pricing and opportunities. So I wouldn't stick to how much is available. In any case, I mean, our first series of PREVs that becomes callable is in early 2023. where we can buy them back at par, so we don't really have a real rush to act, so we are opportunistic. We have, though, availability, federal availability on the plan.
spk05: Okay. No, that explains it. Thanks. That's helpful. And maybe on to the options on contracts that are coming due in later 2022, I just wanted to get a sense or understand a little bit better Who decides whether or not you guys extend? Is it just completely the Charter, or is this a discussion amongst both of you guys?
spk03: For the contracts in 2022, the options are on Charter's options.
spk05: Okay. All right. That's it for me. Thank you.
spk03: Thank you, Christian.
spk00: And we have no further questions at this time. Mr. Inouye, you may continue.
spk03: Thank you. So thanks, everyone, for listening and for your continued interest in Limited and Partners. We do appreciate it. We look forward to speaking to you next quarter, and as traveling becomes safer, perhaps meeting many of you in person soon. In the meantime, stay safe, and if you have any questions, please contact the Investor Relationship Team. Goodbye for now.
spk00: Ladies and gentlemen, that thus concludes our conference for today. Thank you all for participating. You may now disconnect. Have a great day.
Disclaimer

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