Avance Gas Holding Ltd

Okay thank you everybody for joining and this is Avanska's fourth quarter results presentation where we also cover the recent events, the market and of course the full year 2024 numbers. Today I am joined as usual by our CFO Randi who will go through the numbers in a bit more detail later in the presentation before I do a market section and the Q&A session. So before we begin I just want to highlight our disclaimer We will provide some non-GAF measure like time charter equivalent earnings, which is the best proxy for average rate obtained on the chips. Of course, there are limits to completeness of the detail we can provide. So I also recommend you to read the earnings report, which we also distributed this morning. So let's kick off with the highlights. Q4, maybe not too surprisingly, was a very profitable quarter for us as we closed the sale of the 12 VLGCs to BW in that $1 billion transaction. Hence, we booked substantial gains on that transaction and ended up with net profit for the quarter of $210 million, giving our earnings per share of $2.74. adjust away all the profits and transactions related to the sale of ships. We still delivered a small profit from operation, $13 million, and adjusted earnings of $0.18. In total, we've been selling 16 ships this year, booking profit from those ships. If we take away those transactions for the year, we delivered an adjusted profit of $125 million. which is actually our third highest number obtained. So all in all, a good year just from operation, but it's a tremendous year when taking into consideration also the asset sales we have been doing. Net profit for the year, 443 million, which then includes our market loss on the BW shares we received, giving an X of $5.78. So status, as I mentioned, we completed the sale of the VLDCs with the last ship, Avance Avior, delivered to BW on December 31st, in line with our plan. Again, on sale, 287 million. But we also had 12 million in saved depreciations as we discontinued depreciation when we announced the deal on August 15th. After retiring all our debts, We had net cash proceeds of 242 million, plus then this 19.3 million BW shares, which then made us, for a short while at least, the second biggest shareholder in BW with a 12.7% ownership share. We will not be a shareholder in BW for long. There was a lockup period on those shares, which lapsed on Sunday, February 9th. So we are now today announcing that we will distribute these shares to the owners, being the shareholders of Avansca. So for every four Avansca shares you own, you will receive one share in BW. And we are planning then to transfer those shares to your VPS account by February 26, which means you should have them in your account when BW LPG is reported in their Q4 numbers on February 27th. And if you keep it then until their ex-dividend date, you will also then be entitled to get a dividend from BW for the fourth quarter. In general, in Avantgas, we received $6 million of dividend for the third quarter. We still have one pending transaction. Basically, more or less everything is ready. We signed the heads of agreement with Exma to sell our MGC fleet consisting of four new builds for 282.4 million. So that was signed in November. And then in January, we moved forward signing the actual innovation of the shipbuilding contract where we signed them, Exma signed them, and also the yard signed them that these shipbuilding contracts can be innovated to Exma, which then is liable for the remaining capex. So the only outstanding item today is that the bank providing the refund guarantee for the yard is sending us a swift confirming that the refund guarantee has been moved from Avans Gas to Exmoor. So with the Lantern Festival yesterday in China, marking the end of the Chinese New Year festive season, we expect this SWIFT to be incoming very swiftly. And once that has happened, we have also then today declared a dividend of 75 cents, which will be paid out immediately once the funds are released to us. So the money is already on our escrow. The only thing missing is this SWIFT. And once that's been confirmed, the money will be released to Avanskast and we will not sit there and hold on those 62.1 million. We will send them back to you immediately. So we are declaring a regular cash dividend per share of $2 per share, meaning 153 million. We are structuring this return as return of capital. We had a special general meeting on February 5th. where we were authorized to reduce our paid-in capital, so the shareholders getting this dividend will get this return of capital, not return on capital, which has favorable tax treatment depending a bit on your tax jurisdiction. Then, as I mentioned, we will pay out the extraordinary dividend of 75 cents as soon as we receive the SWIFT and the escrow is released. As I mentioned, we will pay a dividend in kind, where the compensation is one BW share for each four shares you have in Avantgas. Then, once that is done, we will collect the remaining cash. We will still have our pending payment from Exfa of 34 million, payable scheduled in April. So we'll just wind up the company, sort out all receivables and liabilities, and then pay off the money sometime probably April, May this year before we liquidate the company. And in that process, we also terminate all the employment contracts, including my own, Randi's, and all the other employees of the company. So if you're looking at the journey we've been through, We sold three ships, older ships, as part of our fleet renewal process in 2022, Tethys, Glory, Promise and Providence. This year, we've been super busy selling 16 VLCs. We sold Iris Glory in January, Venus Glory in March. We sold the two new builds, Casper and Pollux, in March and May, and then we had a big bang in 15th of August, when we sold 12, the remaining 12 VLGCs to BW for this 1 billion and 50 million. And then lastly, when we reported Q3 numbers on November 27, we also announced the sale of the MGC fleet. These are new buildings under construction in 26. So taking this all together, it's a bit more than 1.8 billion of asset sales, giving us a total book gain of close to half a billion dollars and a cash release of close to 600 million dollars plus these BW shares. We peg them here at the transaction value where we put the BW share at a theoretical net asset value fair price of 17.25. It sagged at the end of the year closing slightly above 11 and now it's up again to 13. Will be exciting to see what BW are reporting later in the month. So we are simple people. So we try to have a simple strategy, basically buy low and sell high. Try to contract the ships when they are cheap and then selling the ships when asset prices are more attractive. So I think we've done that fairly well. If you look at the dual fuel new builds, contracted them for 78 million, put on some extra spec on some of them. So the new build price closer to 80. We sold two new builds, as I mentioned, then with delivery March and May last year for 120 million each. And then we sold the rest of the dual fuel new builds, four ships in total, average age slightly less than two years, and then average price of 150. So we think we really found a good spot there to sell the ships. We sold, as I mentioned, three ships in 2022. The last two ships we sold this year, we're actually selling ships which are 15 years at a price close to the 10-year parity. So altogether, good divestments. And in general, also, it's not that easy to sell a lot of ships. This market is not like super liquid when it comes to secondhand tonnage. We've seen the second-hand market drying out in the second half of 2024, and also new-build activity tapering off. So we're also happy with that. We've seen on the MGCs, contracted these for 61 and a half, selling them at 70.6 million, where basically the new-build price have plateaued. So just to give a recap on the different transactions then, I've already covered this in quite a lot of detail, 12 VLGCs to BW. with the cash proceeds of around 240 million, and then the BW shares at kind of the fair asset value, we think 17.25, meaning 333 million. Value of those stocks today is around 250 million dollars. Then the MGCs contracted 248, sold for 282, giving us this 34 million which we expect to collect in April, once the steel cutting of the fourth and final new building takes place. At the end, we had paid yard installments of 56 million, and then we paid another yard installment of 6 million in January. So that translates to 62 million, which we are waiting to collect shortly, and then 34 million in April. So in our to-do list, or the wind-up process, We are already checking a lot of these boxes. We have distributed some fairly large dividends in advance of the liquidation process. We have closed the BW transaction. We held a special general meeting last week to reduce our paid-in capital. We have signed the innovation on the MGC. The only thing waiting for is the SWIFT to release the 62 and then collect profit in April. We have now reported Q4 and announced distribution of more cash and the BW shares. And then in April, once we collect the remaining funds, we will send out notice for our general meeting probably in May. We will be doing a Q1 final reporting somewhere end of April, maybe early May. we'll do the final distribution of capital to the shareholders and then we will start the kind of wind-up process by having a liquidator in Bermuda and that will be the end of our gas story about 11 years after we listed this company in Oslo so it's been a good run especially the last couple of years here with a lot of dividends I'm going to cover on the last page so We've been doing quite well operationally. Last year, we made 164 million in earnings. We paid out 165 million. So you can see for 2023, dividend per share was 215 compared to earnings of 214. So then we thought, okay, Q1, when we sold some of the ships, let's pay our years of dividend in one quarter, and we paid 215. Next quarter, we paid out 135. Together, that was 350. So we thought, in Q3, why not pay out the same amount in just one quarter? And we took it up to 350. We are not able to double it for Q4, but not far. $2 of our cash dividend, $3.25 dividend in a kind in the BW shares, kind of the market value of those shares today, and then the 75 cents, which We plan to pay out very shortly. And that turned out to $6 of dividends. And then we will have a remaining dividend in April, May of 70, 75 cents or so, depending a bit on timing and cost in connection with the windup. Although, if you look at some of the numbers, it's not really that much. So for those shareholders who have a share count not divisible by four, you have a few days to kind of adapt to that, adapt your share count in order to not miss out on a right for a share. So we will have an X date on February 18. So if you want to maximize your dividend in terms of BW shares, you should get a share count divisible by four. So sources and uses for these dividends before handing over to Durandi. We closed the year with $176 million. $250 million now is the value of our BW shares. We have paid out at year end, we have paid the yard $56 million. And then we paid $6 million in January, meaning the $62 million. We collected $34 million profit elements. in April, and then we have a marginal working capital, G&A, and then these are the costs of about a million dollars. That translates to 516 million in kind of net asset values. I believe in Q3, when we reported, we said 518, estimated 518. So we are in line with the estimates we provided in November. We are paying out the BW shares We will probably, after this dividend, we will probably have around 130,000 BW shares left. That's why it's a slightly lower number, 249. We pay out the ordinary cash dividend of $2 per share. After that, we have $114 million of remaining kind of net asset value. Then we're paying the 75 cents, $58 million. And then we will have somewhere around 55 to 60 million we expect to have left. once that has been completed. And that is the money you can expect to receive for the final Q1 dividends. So, with that, I think I hand it over to you, Randi.

Thank you, Eisen. Let's move to slide 10 for the income statements and key financial figures for the fourth quarter. Overall, the results were more or less in line with the guidance provided in November last year. both in terms of the top line and the bottom line. Our TCE on discharge-to-discharge came in at $28,000 to $200 per day, and we had a positive load-to-discharge effect of $7,000 a day, adding to the TCE, which is explained by no load-to-discharge adjustment of the spot wages as we've sold the whole V2C fleet. at the end, and thereby the effect is only related to the reversal from the third quarter. And we ended up with a reported TTC per day of $35,000 a day, rounded. Moving further down in the P&L, you can see that we have no depreciation during the fourth quarter, which is a result of the VGC fleet being classified as health for sale on August 15, and consequently the depreciation stopped. If we depreciated the vessel until the actual handover date of the vessel to BWLPG, the depreciation expense would have been 12 million, of which five should have been recognized in Q3 and seven in Q4. The gain on sale of 287 million, recording during the fourth quarter, relates to the sale, obviously, of the VLTC fleet to BW. The gain is calculated based on the transaction settlement consisting of 70% settlement in cash and 30% in BW shares. So the BW LPG share was measured using the quoted share price at the announcement date on the August 15 of $16.18. And thereby the total transaction settlement was $1 billion and 33 million in our books. And that's the book value of 746 million brings us to the gain of 287 million. The gain on sale combined with the 12 million lower in depreciation expense gives us the total PML effect of 299 million during the quarter as explained by Esten on previous slide. So the net finance expense of 91 million, a significant amount this quarter, which I will explain on a high level. Since the announcement date of the BW LPG transaction, the share of BW went down from $16.18 to $11.16. And thereby we have an unrealized market-to-market loss in our books of 97 million, recognized as finance expense. As of yesterday, the share quoted at approximately $13, meaning that the unrealized market-to-market loss has been reduced by 35 million, which will be recorded as a gain for the first quarter, 25. As a result of selling the VGC fleet, we have also repaid all our interest-bearing debt. Actually, we early prepaid the debt for five vessels to save some interest expense. But due to the accounting standard, we had to expense the deficient cost amortized over the maturity of the loan of 4.6 million. And with no underlying debt to hedge, we also terminated interest rate swaps during the quarter, resulting in a gain of 8 million, of which 4.4 had cash. So this basically leaves us with a net profit of 210 million or earnings per share of $2.74 per share. for the fourth quarter, 24. And this obviously boosted our net profit for the full year of 24, amounting to $443 million, equaling $5.78 per share, which is actually the best full year results for a bounce ever, much attributable to the best of sales.

It's hard to sell the feet every year.

And we will not try to do the same now, are we?

Maybe try to sell some hot air.

Yeah, so in total during the year, we have sold 16 vessels, as Aisin already commented, which resulted in a big gain on sale of 408 million by excluding the gain on the vessel sales, change in fair value and dividend income of the BW investment. The net profit was 125 million, which ranks as one of the top three best years for our ones. So let's go to slide 11. You can see that our balance sheet has been shrank by the sales, obviously. We had the total assets amounted to 457 million at the year end compared to 1.2 billion last year. Cash were 176 million compared to 132 last year. And during the year, we generated a net free cash flow of 630 million, of which 70% comes from the vessel sales, and the remaining 30% comes from the cash flow from operations, net of cashbacks on the MDCs, and 93% of the free cash flow generated was paid in dividend to shareholders during the year, amounting to 586 million. The 16 VGCs sold was also de-recognized following the completion of the four vessels in the first half and the 12 vessels saved to VW in the second half completed actually the last sale on New Year's Eve just in time. So this explains the reduction in the vessel book values on the VGCs and new building. While the NGC remains in our balance sheet with a book value of 57 million at the end, and it's classified as health for sale as the highly probable criteria in IFRS has been fulfilled, we paid an additional installment of 6.2 million in January, which brings us to the 62.1 million, which will be reimbursed by Exmark shortly. As we commented earlier, the transaction with BW was settled 70% cash, 30% in shares, and these 19.3 million shares were recorded as current assets, measured at fair value of 215 million at year end. This was based on the quoted share price of $11.16. On the liability side, there are no interest-bearing debt left, resulting in an equity ratio of 99%. And we are in the process of distributing the shareholders' equity back to investors, of which 403 million has been announced today. And it's more to come, as explained by Aistan earlier. We have also provided a pro forma financial key figure for 2025 and how the P&L will look like. We initiated the cost cutting last year, following the sale of the fleet, and headcount will be reduced during the first half of 2025, including the termination of employment contracts, including the termination of the employment contract of the management. We estimate that the administrative and general expense will be about 7 million, consisting of settlement of outstanding obligations towards vendors and personal expense as well as the winding up costs. The NGC sale is expected to be recorded at 34 million following closing of the transaction with Exmark. Interest expense of 1 million from our cash holdings will also be collected and we have a fair value adjustment coming from the BW shares of 35 million as mentioned earlier, subject of course to fluctuations in the share So thereby we estimate the net profit to be 63 million for the first half 2025. On the next slide, page 12, we have the cash flow bridge showing the movements during the fourth quarter as well as the expected movements in the cash basis announcement today. So we started the quarter with 193 million in cash We generated $251 million in free cash flow, of which $242 million cash proceeds from BW LPG transactions, all of which and more was paid in dividends. On little Christmas Eve, we paid $3.50 per share in dividends, amounting to $268 million in total. And thereby we ended the quarter with a cash position of 176. In 25, an additional 90 million will be collected coming from the MGC sale, net of yard installments paid by Avans this year. So we have 56 million is expected net cash effect following issuance of the refund guarantee as commented by Sven. and the remaining 34 will be collected in April. Further, we estimate a positive net working capital of 1 million during the first quarter consisting of collecting the outstanding receivables at freight and demurrage, sale of the remaining 130,000 shares in BW after distribution, offset by the outstanding obligation towards ship managers as well as administrative expense including winding up costs. So we announced a combined distribution of the BW shares and return of capital of $5.25 per share in total for the fourth quarter. This includes the $3.25 in GW shares and 2 million in cash dividend structure as return of capital, amounting to 403 million in total. As already commented, shareholders will receive one GW LPG share for every four avants GUS share they hold. And then we expect to pay an additional extraordinary dividend of 75 cents per share once the refund guarantee in relation to the NGC sale has been issued, and the yard reimbursement amounting to 62 million has been settled. So this leaves us with a pro forma cash of 56 million dollars, or approximately 70 cents per share, which is expected to be distributed in May 2025, prior delisting and winding up of the company. So by that, I hand the word back to you, Einstein, to comment a bit on the U.S. production growth and what we can expect in the stock market.

Yes, okay, thank you. I just want to make one comment there, because, you know, when you look at this mark-to-market loss in Q4, 97 million, it seems that although it's been reduced now with the BW share picking up in Q1, so the loss is About 60 million now on this. It seems like, you know, it's a fairly big number. But just to put it into perspective, we sold the fleet for slightly more than a billion. When we sold that fleet, we got 70% of the settlement cash settled. So the remaining shares then we are taking in BW shares. So if we look at, you know, what has happened since we announced this on August 15th, the market really slumped because the winter market never really took off. So if you look at Dorian's share, which Dorian has a very similar strategy to Avans Gas, slightly less levered in terms of indebtedness. And that stock went from $38 to $23 today, which means it dropped 40%, even with less leverage than Avans Gas. So we have then got a BW share, which has less leverage and have a more integrated model where they have made close to $100 million on the product services just in one year, 2024. That stock, since we took settlement of that stock, gone from $16 to $13, down less than 20%. So kind of where would our stock be given the fact we have had a similar kind of set-up as Dorian? So we feel that we de-risked it, we've taken the cash on top of the cycle, we've taken most of the settlement in cash, and then we have been able to get a settlement in a share which have performed relatively better than the sector. So with that, we are not really into the market any longer. We were going to be exposed to the market until we dividend out the BW shares and collect the money on the MGCs, but we can just give some key input on this as you will become shareholder in BW very shortly. So in terms of the market, market growth is good. Driven by US has been the case the last couple of years. And needless to say, the US volumes are the most ton, mileage intensive, driving shipping demand. But as we have told you about in the presentation in November, market's been a bit soft because Panama Canal has been up and at normal capacity, meaning selling distances are driven down, resulting in more ships available in the market, and more ships in the market means lower rates. In terms of the imports, it's still healthy growth from the traditional imports of being China and India. Looking at US exports, which is the main driver for the market, Domestic consumption is basically a flat line, while production will keep on growing, meaning that this will be the main driver of export growth. At the same time, we do see quite a few of export terminals in the U.S. ramping up. The first one out, Energy Transports Netherlands, coming up later in the year, and then two projects from Enterprise, and we had just a recent announcement from 1OK. for a further expansion in 2028. So we can see the capacity in the U.S. here growing from about 60 million tons a year up to 100 million tons. So it's really a good driver for freight demand. In terms of the freight market, as I said, it's really sagged. I think the only thing to say about it this year is we haven't had that huge drop in the freight market as we've seen in 24 and 23 at the beginning of the year. The reason was that the rates were dropping from 40,000 to around $25,000 today, while the last two seasons we have been above $100,000 per day and then dropping all the way down to basically OPEX levels. We are above that. The market will tighten during the year for reasons I'm going to explain. meaning that the FFA curve or the forward freight agreement are flatlining at around $40,000. FFAs are not really that good at predicting actual level, but they give you a good sense of direction of the market. And direction is up. Usually we do see some spikes in the winter market, so it's a bit surprisingly flat in the winter season. But at $40,000 per day, so if we look at the investor presentation by BW, which they released on August 15 in connection with the transaction. They have certain intervals of the freight rates and what kind of dividend yield they will be able to pay under those circumstances. So if you look at that presentation, which is available on BW website, you will see that $40,000 per day, they will be able to pay a dividend yield of 17 to 21%, depending on whether they have a payout ratio of So we do think that it's a good investment, and as we said, when we made the assessment to take those shares of settlement for the 30%, we kind of pegged the value of that stock at 17.25, and it's been trading below that. Still, in terms of the rate movements, we've seen the terminals picking out a lot of the arbitrage, because there's been basically too many ships, that arbitrage between freight And the project has narrowed, but still it's a bit wider than usual. So there are some room here on the upside of rates, which is also evident from the FFA. Looking out at one team that comes up from time to time, it's the Iranian sanctioned trade to China. And the numbers of ships going into that trade just keep on growing. So last year, 23, we ended the year at around 50 ships. We did an assessment this week. We came to a number in cooperation with brokers of 57 ships in this trade. And, you know, you're talking about a fleet of slightly above 400 ships. So it's a huge number. And these ships are old. So of those 57, 35 of those vessels are trading beyond the typical scrapping age. So we do see Trump being more aggressive on Iran. This is one of the drivers of the tanker market. It could also happen in the LPG space. Typically, then, you will see more production from OPEC, being then typically those with slack capacity, main contender Saudi, but maybe also United Arab Emirates. They will have a similar sailing route as the Iranian LPG. However, those ships in that trade will not be able to take those barrels, so you will be moving demand from the dark fleet to the white fleet. Additionally, you could see some more flow from US to China and India, which would be also a driver for ton mileage intensive. And then it's also about the kind of the LPG capacity in the Middle East compared to Iran, which has a fairly high LPG production compared to, or LPG export compared to the crude oil. We were looking at some of the numbers just to give you some sense of this. So in 2021, when we came out of COVID, Saudi were able to put 900,000 more barrels on ships in exports. So during that time, from 2021 to 2022, they grew their LPG exports by 60,000 barrels per day. So that year, so when they grow their kind of oil production by 900,000 barrels, that year Iran produced 1.2 million. They are now closer to 1.6 million. and they produce 250,000 barrels of LPG. So there is a higher LPG export kind of ratio for Iran compared to Saudi, but the historical kind of context here is that Saudi then will have one third of the effect of the LPG to oil ratio compared to Iran. The United Arab Emirates, they have a higher LPG to oil ratio. So in general, we do think this would be positive for those who owns LPG ships in the wide trade. And you would probably also see a big pickup in scrapping of all of these older ships. So heading then into the last slide before concluding the delivery schedule, as I mentioned, You have muted growth in the villages, see if it's now during 2025 and into the first half of 26 before it takes off again from end of 26. But, you know, in line with also the export production growth from the U.S. As I mentioned, contracting has tailed off. So we see a lot less contracting these days than we saw early last year. And we see aging fleet also driven by those Iranian ships, which are very old. So the last element I'm just going to touch upon is these dry docking cycles. They go depending on the contracting cycle. So we see a lot more dry docking this year also, meaning that more ships will exit for special service, which will also kind of reduce fleet growth. So in general, we have a constructive view on 25 and 26. And then we'll see whether there will be some scrapping and how the ramp up of these US volumes will happen. So with that, I think we conclude. I'm just not going to give too much here. Profits are good. We are paying out everything. We completed the sale of the VLGC fleet. We are very soon closing the MGC transaction. Once that happens, you will also get an extra dividend of 75 cents on top of the 5.25 dividends declared today. Then we will collect the remaining funds from the export transaction and the working capital and pay out the remainder of the funds at the end of April, early May, before we close the shop. So with that, thank you for listening in. We're going to do some questions so we can check the phone whether there are some questions there before heading into the chat.

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okay let's check the chat then we have one question on the chat seems like everything is very clear what are you going to do next so i think we explained it in in rather good detail here we're going to collect the money we're going to pay it out uh for myself i'm gonna keep on working on flex so if you want to reinvest the money in another dividend company you are welcome to invest in facts we have paid out i believe $610 million of dividends the last three and a half years. And Randeshi will be busy doing a lot of this cleaning up and winding up the process at least for a couple of more months. But we will come back with the updates end of April, early May. Until then, enjoy the dividends. And I wish you a happy day.