Q1 2020 Earnings Call
[music].
Good morning.
Tony and I will be your conference operator today.
At this time I would like to welcome everyone to be Gaslog limited and Gaslog partners first quarter 2020 for adults conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be question and answer session.
As a reminder, this conference call is being recorded.
On today's call our Paul Wogan.
Executive Officer of Gaslog limited.
Andy recur.
Chief Executive Officer of Gaslog partners, and Alister Mxntwo Chief Financial Officer.
Joseph Nelson head of Investor Relations will begin your conference. Please go ahead.
Good morning, or good afternoon. Thank you for joining the Gaslog limited Gaslog partners first quarter 2020, earning conference call for your convenience.
This webcast presentation are available on the Investor Relations section of our website Www Dot Gaslog LTV dotcom.
W.W. Dot Gaslog, MLP dotcom, where a replay will also be available.
Please now turn to slide two of the presentation. Many about remarks contain forward looking statements for factors that could cause actual results to differ materially from these forward looking statements. Please refer to our first quarter earnings press release.
In addition, somehow remarks contain non-GAAP financial measures as defined by the FCC. A reconciliation of these included in the appendix of this presentation.
Paul will begin today's call with a discussion of Gaslog first quarter highlight and results followed by a brief discussion of the LNG market after which alister will discuss the group financial position and financing activity and finally, Andy will walk you through the partnership's first quarter. We will then be happy to take your questions with that I'll now turn it over to Paul.
Again CEO of catalog.
Thank you Joe Good morning, good afternoon to all of you.
The koby 19 outbreak opposed unprecedented challenges to gaslogs commercial and operating environment during the first quarter.
But I'm pleased to advise that our employees rose to the challenge ensured that our fleet operated with 100% uptime.
We were fortunate compared to many businesses and industries and that we could continue to operate the business. Despite the turmoil achieved despite the turmoil, let me highlight reg levels of utility vessel utilization.
Dedication I'm professionalism under these challenging on on certain circumstances.
In particular, we owe a huge debt of gratitude to off seafarers, who continue to be separated from their families and loved ones in these difficult times.
Slide six shows a cue warm financial highlight.
The two chops on the left display the consolidated revenues and even though about wholly owned fleet as well as a contribution from Gospel partners.
I'll focus on flick utilization delivered stable revenues compared with Q. of 2019.
Well I've continued focus on operating on overhead cost saving initiatives allowed us to grow even though I'm old and 4% year over year.
In addition.
Tested earnings 15 cents per share into one what's the 34% increase year over year aided by low interest expense following declines in libel.
It's like seven highlights the approximately 77% charter coverage for 2020 across a fleet.
This high degree of revenue and cash flow visibility is especially welcome during these uncertain period and other things are resilient business smuggle.
The vast majority about contracted revenues are fixed daily rights of higher with no commodity price exposure.
Well, so long term customers some of the LNG markets major participants, including shell Chen Yeah, Jetta Centrica hotel took out an investor.
[noise] slide eight details new build equity athlete, which to date has experience no covert 19 or like to delight [noise].
We will tell you deliberating seven latest generation X.D.F. vessels in Twentytwenty and Twentytwenty wrong.
All of which will go on a charter to high quality customers.
<unk>, they will generate an incremental $145 million of I'm, you like even once before they deliver it.
Last month, we took delivery the gossip Windsor, which immediately began to send me a charger to centrica, whilst the gas Little Wales.
Deliver on May 11th following which the vessel would immediately commands a 12 year charter to <unk>.
In total the 12 vessels on this slide comprise one of the largest fleets of modern and highly efficient to stroke N.X.T.S. vessels.
As a contract to the revenue backlog of over $2.5 billion.
And I'm, you will even dark contribution of $265 million once fully delivered.
They tend to slide nine.
We took the prudent decision to reduce I'll come into evidence to five cents per share for this quarter to retain cash within the business.
This is a difficult decision as we've cash returns as an important part of delivering shareholder value.
However, both the capital market turmoil and the commercial uncertainties caused by the covert 19 outbreak like an important to focus on near the near to liquidity business resilience.
The slowest evident when combined with a distribution rebalancing already announced that capital partners.
Relates to the gas look group retaining $22 million in cash this quarter relative to the cash paid to external shareholders in respect of Q. for.
It's like 10 provide some detail on the L. and G. commodity marketing Q. whoa.
Early in the court the allergy demand faced headwinds from a warmer than average northern hemisphere winter.
Generally hi inventory levels of natural gas, an l. and g.
Covert 19, and creating huge market uncertainty.
Although the impact vary by month and by region.
For example.
<unk> Q1, 2019, Chinese first quarter demand decreased by over 5% to 15 million metric tons.
Meanwhile, European demand grew by over 4 million tons, all 37% I've got pricing favorite Coulter got switching for power generation and LNG continued to replace indigenous gas production.
In total energy demand was 98 million tons in Q. Wanna Twentytwenty, a strong 10% increase on Q1 2019.
Looking ahead to cope with 19 pandemic.
Elected Lockdowns and consequently, plying in global economic activity continued to create a high degree of uncertainty for near term energy demand.
Hence for allergies shipping.
That could potentially exacerbate the usual seasonal fall in allergy train, giving you too early Q3.
In addition, several major allergy produces havoc knowing the bias of Council shed you would call goes over the course of June and July.
Although some of these calls goes may still be shipped unmarked is by traders.
However, as the right time chart shows.
G demand has started to pick up quickly in China has it relaxes, it's locked down regulations and bias to take advantage of historically low energy prices.
Overall potion estimates April twentytwenty allergy growth of 3% year over year, which compares very favorably with the amount of destruction same foot cold on oil.
Slide 11 shows would Mckenzie forecast of an additional 92 million tons of broad based energy demand growth over the next five years, a healthy compound annual growth of 4%.
I tend to slide 12 for summary.
A covert how to cope with 19 outbreak unfolded <unk> quickly introduce measures to.
And sure the safety of our employees.
On on interrupt a service for our customers, which demonstrated the underlying resilience of gas looks business, which is supported by our 70, 777% contract cover in 2020.
I'll continue focus on cost control, where we remain on track to deliver at least $6 million a van G.N.A. savings like 2021.
But I knew both program, which when fully delivered in 2021 will generate an additional hundred and $45 million a fixed <unk>.
By our decision to preserve additional cash within the company through a reduction of the dividend and finally I thought was the real high like pretty significant progress. We are making in refinancing are 2021 debt maturities with that I'd like to turn it over to our stuff.
Thank you Fools on good morning, a good off and then you will.
The length of the current environment I wanted to to address the impact that it has had on our financial position.
To bleep, you on off announcing plans regarding opined facilities maturing and 2021.
It's only 14 set side all consolidated balance sheet metrics as there'll be ends up to one.
Schedules that we payments over the next several years.
Capital expenditures for the remainder of 2020.
We ended the first quarter wouldn't that that the total capitalization of 60% on total liquidity if $252 million.
This a mind includes $150 million a restricted cash related to the financing of the cast a window.
But exclude $81 million attach classical posted with all swaps counter coffees.
Does not reflect $38 million, it's all the highest for April the routine shortly after the cost around.
Oh gross liquidity position has remained consistently strong over the last several courses despite the impact of accounts environment.
Financial resilience will be reinforce quite a reduction in the dividends are <unk> so partners for Q1.
I'm fine all continuing success in reducing berko operating on O.G.N.A. expenses.
We are also having very constructive dialogue put on swaps kinds apologies.
To identify and execute measures to reduce costs collateral posted.
Existing interest craze and of course coming to school.
Looking forward.
Total that will increase as we take delivery of on you buildings will be advertising all bank debt at a rate of approximately $255 million per random.
<unk> is fully delivered.
Over the period 2020 to 2023 inclusive.
I'm a time like a total of over $1 billion.
Because they can pretty much the underpinned by all consolidated chunk about cloak.
$3.8 billion.
Finally, we have approximately $37 billion of new building cash equity payments remaining do this year.
Expect to meet meet capital commitments with cash on hand, plus operating cash flow.
Slide 15 demonstrate that while the curve at 19 environment has impacted them out to market value of all derivative liabilities.
We also benefiting meaningfully in terms of the reduction in our interest expensive as a result of the fools and interest rates.
Central banks around the world have reduced their funding rates and injected some central liquidity to soften the impact of the virus on the capital markets.
The quarterly three month Libeled average.
Signed by some 200 basis points.
From 2.6% and T. 120, 92, approximately 50 basis points currently.
If interest rates, which remains to be levels for an extended period.
The 200 basis point production will be equipment to an annual locked into a saving of almost $30 million.
Or 37 cents per share.
Apply to the potion about that we're just comedy on <unk>.
We can decide 16.
Which provides an update on the status of the refinancing about 2021 debt maturities.
March 31st Twentytwenty, we had $1.1 billion outstanding under all five that's still facility and all legacy facility, which matured April on July 2021, respectively.
Wearing the processor refinancing both of these facilities on play to report that the group continues to receive strong support from our diverse and high quality group of cool relationship banks.
Today on despite the cope with 19 related disruption to global banking and credit market. We have received commitments totaling approximately $900 million from all lead banks.
I believe that this is a testament to the quality of our assets.
Operating in commercial platform.
Oh constructed backlog.
On the strength of capital longstanding banking on commercial relationships.
We are not proceeding with syndication documentation and are on track to complete these refinancings by the third quarter of this year.
We believe that the combination of the refinancing program together with the incremental cash flows from a fully contracted you build vessels.
The capabilities and commitment of seafaring and show based employees.
Progress without cost saving initiative started last year.
The benefit of lower interest rates and I'll prudent dividend policy will leave the group and a strong financial position.
Well place to emerge from the current environment with highly competitive breakevens.
On an industry, leading platform offering unparalleled service to our customers.
<unk> holders.
And without alternative Andy to discuss the partnerships first quarter.
Thank you all Sir.
18.
Partners performance in the first quarter of 2020.
I'm pleased to announce.
Operating quarter for the partnership despite the challenges related to cope with 19 as Paul discussed earlier.
During the first quarter, we reported revenues of 91 million adjusted EBITDA 64 million and adjusted earnings per unit of 42 cents.
6%, 2% and 1% respectively over the first quarter of 2019.
Two of our vessels steam turbine proposing six new multi month charters.
<unk> expended decreased by more than 10% of the year on year.
We retired approximately 33 million of debt.
And we declared a common distribution of 12 and a half cents per unit.
What we were encouraged bar performance during the first quarter remains a high degree of uncertainty in the commercial environment, given a significant economic disruption caused by the code in 19 pandemic.
Accordingly, we are withdrawing or previously now the dogs for 2020.
However, we are pleased to know if at all 15 of our vessel are currently on charter.
In addition.
31, our fleet is 78% chartered for the remainder of 2020, representing approximately 209 million of contracted revenues.
Including our recent charter of the nothing read Andre or that we completed in April.
Coverage for the year has now increased over 82%.
That's why 19, you'll see the positive impacts are reduced distribution has had on our coverage and liquidity.
As the charts on the slide show or distribution coverage ratio for the first quarter is more than 4.6 times.
Moreover, the 12 and a half then distribution represents a conservative 30% hey out of our adjusted earnings per unit for Q1.
In total dollars are declared distribution represents a quarterly cash flow of 6 million, enabling us to retain approximately 21 million more cash in the business as compared to the partnerships distribution level for the fourth quarter of 2019.
Turning 20 at a discussion of the LNG carrier spot market.
The first quarter of 2020, so I record 102 spot in short term charters according to potent.
24, approximately 20% of the total <unk> carriers.
This activity includes two steamed mussels owned by got four partners.
Nothing else in Victoria, which is now fix for nearly all of two two and into her drydockings schedule to commence this summer.
Methane read Andrea which is now stick through the third quarter.
At Paul discussed earlier, we continue to focus our commercial efforts on maximizing fleet utilization in the coming months.
It's like 21.
Partners balance sheet metrics plan debt repayment over the next several years and capital commitments.
The partnerships credit profile continues to be robust with net to trailing 12 month adjusted EBITDA, a 4.7 times.
That the capital remains a strong 54%.
As of the end of the first quarter, we have 93 million of available liquidity.
We expect to continue strengthening our balance sheet in the near term beginning with retirement of approximately 82 million of debt over the remainder of this year for a total of 150 million retired in 2020.
Reducing debt balances will reduce our cash won't break even levels over time, improving the competitiveness of our sweet.
Lastly, it's important to know that the partnership has no committed growth Catholics, but we will spend an additional 14 and a half million and maintenance capital expenditures related to our three remaining drydockings in 2020, including the installation of Dallas water treatment system as required by regulatory compliance.
Try and just like 22, and a discussion of how our focus on debt repayment praise equity value for our unit holders.
This chart, we demonstrate how amortizing or debt balaji capacity and book equity value using our most recent acquisition up the gas like blog.
Apple.
Oh God willing partners debt.
Level and this that amortizes at roughly twice the radar shift appreciate.
As you can see from this slide or loan devalue on the Glasgow declines by over 9% during the two year period from the end of 2019 through to the end of 2021.
During the same period or book equity for the vessel net appreciation.
Addicted to increase by 14 million, which represents a 10% compound annual growth rate in equity value.
As as compelling value creation demonstrates we believe that prioritizing debt reduction supports the partnerships growth in book equity value per unit, which today's down at approximately $12.50 well above the current trading prices are unit.
Try to fly 23.
Summary in the first quarter the partnership delivered another solid operating and financial performance. Despite the challenging economic conditions, resulting from covert 19.
Our focus remains on ensuring the highest degree fleet utilization, while continuing to reduce our unit G.N.A.X. costs.
The partnerships capital allocation strategy for this year prioritizing debt repayment further improving the resilience of our business.
Finally, as one of the largest independent owners of LNG carriers are scale and continue to focus on operational excellent cost control and reducing cash flow breakevens will improve the partnerships competitive positioning in a growing Ellen g. market.
[noise] without I'd like to now open it up for Q. in a.
Tiffany could you. Please open the line for any question.
Yes.
It's time, if you would like to ask a question <unk> and the number one on your television.
Okay.
Oh mine Oh pots for just a moment you can house last year.
Yeah first question comes from the line of Michael rapper What's Weber research.
Good morning Glory.
Hi, Michael Fine How're you doing.
Good.
A lot of.
But.
<unk> talk this quarter and a conversation has round kind of interruption is just trade slow et cetera, but I actually wanted to.
Tick it off I asked me about some new business now <unk>.
Floating around job in the middle of all this you know we saw suck cutter.
Come out and <unk>, you know what looks like a tentative agreements to.
Build a big slug of allergy carriers in a in Hudong in China, which would be the largest order ever place. There now so I'm just curious what you think about that and then too you know as you think about you know the next several years for for gas log.
You know do you have it would you have any qualms with taking on you know you know several hundred million or a million dollars and capacity that could be you know built in China, I mean, if I'm a residual value risk perspective, just curious I think about that in general because it is kind of one of the data points to kind of flies against the grain in terms of everything else, we're seeing right now.
Yeah.
Yeah I'm sorry.
Yeah, it's interesting isn't it yeah, I I'm like I think coal and oil lowest saying some pretty drastic <unk>. The destruction right now yeah, what we're saying with allergies, it actually holding up quite well despite.
You know the downturn and and the economists and I think that's because you know where that line G. I think it's <unk>.
This no a systemic fall off in the non backed we're still seeing it go you know so I'm certain that we're going to need more LNG in the future without a doubt so I think.
And then moved to to a expand left production is correct I think what this probably does though it push some other projects to the right. You know I don't think you'll see as many F.I.D.'s taking this yeah I think that will fall back into next year. So people have most of the day on the guitar is I think could be one of the people who have the.
Let's see to to do that but you know we do we do see continued increasing demand for L.N.G.
They ordering vessels I think the Qatar is we'll we'll also come to an agreement where the odds in Korea, because I didn't they want to make sure that they have a lot of capacity. So they can hold back it isn't agreement to agree right now there are no sort of 30 Bucks.
But in terms of Ah, China, and who don't I think the Chinese Yods continued to increase in terms of the quality et cetera, <unk> of the L. and G. carriers, and so word gas, let's look at building and try new jobs in the future yeah, absolutely, but we would do that we'd type.
A a view on that at the time, we would go and as we do always look at the inspect them and make sure that we felt comfortable with both the quality, but especially with the with the safety that.
Gotcha, Okay, but that's helpful. <unk> just along the lines of of the environment. We're in now and you know the notion of.
You know lower for longer we used in some of the some of the the the.
Commodity prices were allergies kind of index off of or Benchmarked against you know, we've seen like leverage to the downstream.
It is more important than ever now I'm as as you mentioned, we certainly see the patience and F.I.D.'s sliding to the right now I'm pretty considerably <unk> in terms of you know Gaslog has always been you know.
Reluctant is probably the wrong term I would they may need like going thoughtful about about how it would develop downstream capabilities.
And you know B.S. do acquisition or or building up in house expertise I'm, just curious with with what we've seen as far as as the day. It's the the focus <unk> changed at all or is there is a bit of a heightened focus on developing you know more downstream capabilities as an outlet for your for your legacy.
Tonnage or it's just you know kind of the.
The the aspect to devalue chain. It sees the most attention I mean, the next several years as we work off you know <unk> <unk> <unk>.
And we'll have what would they actually look like.
Yeah, I mean, I think [noise].
That's a business.
It's a really good question difficult around so I think sometimes in the middle of old Yeah. We we do get I think quite rightly focused on the uncertainty that we're seeing when the covert right now, but yeah. Looking forward. We have we have a lot of in bill growth, which is coming into gas slope with the seven new buildings that we're talking about I think that's the.
Number one priority is to.
To take delivery those to to make sure that we run those ships well so that we get the the revenues from those battles and to to make sure, whereas efficient and effective as possible you know we talked about some of the.
Cost saving initiatives that we've introduced <unk>. Some before you know all this uncertainty with Kobe, which were saying they're going to take a a pretty certain going to take at least $6 million out of our G.N.A. next year. So those are the things I think is where where where where focused on right. Now I think coming out is that as a company that will be.
I think at night strong position as we advertise off the debt and bring down the leverage of the business I think we'll be integrate position given our operation plot full to look at other options along the value train, but I think not something that's gonna, becoming a you know a year or two down the line, Mike rather than something that we would be focusing on right now we've got to.
<unk> to <unk> to make sure that we deliver on on all this it grows in cash flow that we've got coming we'll do that first and then when we're in the strongest position with coming out of this uncertainty, yes, I think those those sort of things are going to quite interesting to look at.
That's true, but that's helpful and just just one more maybe near term question you know obviously with with a lot of the Exporters' you know we've been seeing and following the the idea of cancels cargoes make we've seen.
It can cause you have to 40 this quarter or <unk>. Just curious you know obviously there it's it's.
Less of a direct impact on on on gas log in that scenario I'm just curious one you know.
Do you think you think those kind of numbers kind of the you know if you know.
Fortyish cargo as cancelled as he moved through the second quarter, a realistic and then too if you could kind of walk a sue and it forgive me. If you. If if you mention is already adopt one from a different color, but you know if you if you could walk through the actual mechanics of how that impacts your business if at all.
Yeah, I I'm I'm not sure we have a better insight into into any constellations than others, because I think that the calculations are being debris privately between the people who are going to pick up the call goes in the people who are producing them up it doesn't say that some of those going to be.
<unk>.
With companies, where there's a towing agreements. So the question is.
If those calls or the council does the the other come to the companies you know, saying Yeah. For example decide to actually for pro processed the got themselves they call the cash flow from the the telling agreement maybe they do I I, maybe they protest against themselves and export so interesting to see what happens there, but we have done some work.
Around you know if we saw those type of levels Oh.
No movement, it's called those what does that mean for shipping we think that surround about 10 vessels. If you up at 2025 <unk> the U.S.
We always felt that that this yeah, what's going to be quite time and and to be honest with you. The 10, <unk> <unk> carefully make a big impact on that so that level. We think we so why the <unk> <unk> fixtures is honesty spoke about.
Just from the volume's coming on so I does obviously, it's not good news for as it is a pull it is something that we would prefer not to happen but to put it into context, you know those type of levels. We should people have been talking isn't a huge number of of ships, which which would be affected.
Gotcha, Alright, that's <unk>. Thanks.
Thanks.
The next question comes from the line of Randy Gibbons I'm Jay Jeffrey.
Hi, Good morning, Jo and this is Chris Robertson on for Randy how are you.
Hello, Chris good thanks.
Hi, so.
More of a market level question, what what are your expectations for fleet supply growth. This year, it kind of taking into account disruptions both at the yard student covered but also to shut down of the scrap yards.
Yeah I go you know, we wouldn't know expecting much in the way of scrapping this year, Chris to be honest that I.
We were thinking really going to be somewhat close to around 40 vessels delivered this year.
View is that we are likely to see some of those vessels pushed off a into 2022, a number of them no fixed and I think they the owners are those vessels may well want to delay. So I think we could see <unk> in 2020 pushed into 21 and then.
Into 22, so <unk>.
<unk> headline writers 40 vessels, but we would expect a number of those to fall back into 2021.
Gotcha that makes sense moving on to to the Rifai.
So have the 900 million kind of secured to date, how many financial entities does that represent and then how much more running room do you have.
Terms of future negotiations.
<unk> I was still would you like to take that.
Absolutely.
So <unk>, the 900 million a seven banks across three different facilities.
<unk> no of course, we mean tons of running <unk>, but we Oh now in the protests as I said in my remark syndication and preparing the the associated documentation.
Based on all the conversations we've had today, while I you know I'll have to say that what I've indicates isn't tons of commitment to what is quite is approved.
On on confident that we will be able to raise.
The remaining.
270 old million dollars that we need to rake in order to fill all of those three facilities based on conversations with.
A wide range of banks, almost all of whom Oh, then does too off today, so familiar with the credits and we have existing relationships.
Onto the question.
Yes. It does thank you for that and yeah by reading room I meant remain need to be secured so you answer that as well. Thanks.
This is kind of related to what Mike was talking about but you know kind of given the allergies supply glad that's been you know over hanging the market since last year with some of these weaker winters and then of course to to Kobe situation economic slowdown.
Now what are some demand catalyst at the market needs to see to to help alleviate that low underlying price are you seeing any accelerated cold a gas switching and somebody emerging markets that spring on you know building of new gas turbine power plants et cetera. There are these low prices.
Kind of a a good thing looking forward.
Yeah, I mean, I think [laughter]. So, it's just going a bit of a monitor or the or the best thing to slow prices is low prices because I I definitely does.
Stimulate demand and I think you saw that with both India in Europe in the first call to you know Europe continues to switch from cold to gas.
Look at the the U.K. as an example, we've just gone 24 days without a single piece of coping bird.
And that means that gas is being used to supplement.
Yeah, I'm backup the renewables in the U.K. and it's happening across Europe, So you're but increased 4 million tonnes, 37% increase in the first call too because it was taking advantage of the low gas prices to swap out of out of coal India was another great example.
Which you know is a very.
Cost conscious.
<unk> in the first quarter demand went up 37% now of course as a then get starting to look down we going to see that probably coming off and until they come out of love down, but again, India start you know started to so that's the type of growth excuse me expecting for a while based upon those.
Low prices and so yeah, we we pretty bullish interns all well the low prices are going to do in terms of <unk>. The uncertainty is what's happening around the kobe than the close they're all you know some of the economy's and then the.
Fall in production and things like that and how long does it come to to get out of that because those I think of the uncertainties that we're seeing right now that's making us be cautious around up dividend cautious around sort of how we see the feature.
Right that makes sense and last question for me is covered causing any disruptions for discharging in causing any delays are quote unquote forced floating storage just waiting at the port.
Yeah.
Some of that there are some quarantine restrictions in both for example, Australian I'm Chinese pools, we have seen also <unk> being kind of clothes on a temporary basis chips, having to read a direct to go elsewhere. So that we had what we haven't go right now he's any storage.
Around the pricing, but certainly if you like some enforced storage, which has been happening around people trying to adapt to some of the the cope with delays. So I think that as being in a sense not the kind of demands you won't but certainly has been helpful. I think in terms of.
Shit utilization.
I think looking forward you know into the.
So the full quota we have seen.
Oh, the last couple of years storage.
Used as a.
Way to take advantage of the price contango I think we're likely to see that again, because we are coming up very very low prices, assuming people see sort of more normal market in the winter and what what's interesting is you know as we're leaning away with some of our ships the ships are becoming much more.
Efficient in terms of boil up et cetera. So you can actually still call. It goes on chips for longer to take advantage of about price contango. So well the ship owners are doing it with a fleet right now is actually helping not sort of contango storage.
Play as well and the feature.
Great makes sense. Thank you for taking my questions.
Thank you.
The next question from some of the line of John Chapel, whatever core.
Thank you.
<unk>.
Hi, Jim.
Tall, we know the the markets the market and allergy shipping is challenge right now and LNG global prices are challenge as well and there's really nothing you can do about that but the gaslog structure has been set up to kind of deal with those peaks and valleys in the market and it seems like the equity market. Thank you appear spot player. So as we think about.
The two potential areas as concerned that that may be weighing on equity target trigger counter parties and and the balance sheet I know you've addressed each one but but if you'll allow me to to just asking but that more directly first on the contract you said that all your your charters are meeting all of their obligations, but it'd be.
Speak to their ability to maybe back out or or delay payment or do something that would question. The the stability of that contract in a very extreme market environment like a global pandemic.
Yeah they.
I think there a couple of things, which underpaid and confidence in our long term shots as in the high John The first is.
We have actually chador ships to very strong.
Customers have good relationships with them some of the strongest people in the market as we talked about on the cool.
Second thing is we have actually <unk> the vessel to their companies rather than to any specific project.
Some of the allergy carries out there are actually Chaucer to a project and of course, if there are problems with the project. So it's unable to to operates et cetera, then there's the opportunity for the Chaucer too cool for some sure with us because they customer has the ability to take the ship to any.
In the world and to discharge any pulls in the world that is no no no the ability they have under the contract. So those two things I think give us very strong.
Confidence that we will continue into the the the customers will continue to use our ships and continue to to pay the highest.
Okay that sounds good.
Then ouster I also nineties you spoke about the the refinancing which is very important and and even follow up question before but if we try to frame and number value. So new building commitments unfunded new building commitments for what you have in the bank today and what you have the line of sight on.
The refinancing for the next let's call. It 21 months to get you through 2021, what do you foresee as the potential equity gap that you would need to fail to cash flow from operations of your rather new backlog or or maybe a news refinancing that you don't have lined up already you know over that period versus your liquidity today.
Yeah put on.
I'm not supposed to put the question the other way round address it for you.
We have multiple sources of liquidity for the business to cope with you know whether it is an extended period of of a slow market the existing capital commitment whatever it might be.
And those sources of liquid is include festival, the refinancing, which <unk> well advanced as as I've said and and we are on track to get that close dealing t. three.
There are other sources of liquidity and the <unk>.
You know we have experience of it through the one seven we spent we've done so far and Oh investigating other opportunities in that market and that can also very good.
In terms of liquidity and drew dynamites as well as in terms of cost and of course it could also.
Well you to put less pressure on the banking market. So various opportunities in terms of sources of financing.
Pool has to abide will be activity, which is underway on the costs front on I think we're a little confident that we can do better than the targets that we've already communicated and meaning for the better.
Hmm.
I talked to bias in my.
<unk> the discussions that we're happy with all kinds of parties about releasing cast collateral, which is $81 million today and.
Those conversations or Sweeney constructive and I think that the all kinds of parties understand that effectively what that kaskel actually there's a pre payment of interest over the over the course of seven or eight years.
And sort of you like it's as much and accounting issue was it is a credit issue and I'm confident that we will find solutions to the nabel some of that kind of cool significant amount of that kind of classical to be released over time, and then lost sleep.
We got from low interest rates, which as I said, you know she until onto a basis points could be studying but then go to a year benefit in terms of interest payments. It's like you know you look at all with those sorts of liquidity and on absolutely confident that we will.
Be able to meet all capital requirements over the two and that's still in an off the next yeah other than Drybulking, we have no committed Catholics.
Right, Okay Super helpful. In alleviating those concerns if I could just do one more all too quickly I'll watch change in the last three months three months ago. When you did this combined call got like partners was getting buried and gas like what's holding up a little bit if we look at the three month performance. The opera farmers have got both partners to gas like when it is.
35% off the bottom admittedly as your transitioning to C.F.O.s your transitioning the offices as as we think about you know how the world is kind of change in the last three months has there been any reconsideration of the two public company structure and you know how how how do you think about the next step star.
<unk> Joan that hasn't you know some more likely to me what the last three months someone like to me is climbing a mountain in the fall and trying to find your way I I really felt like that I think you know as we sit on the last cold you know that the we have the options around the structure.
Sure the company at any point, we will revisit those I'm sure Oh, but time, but to be honest with you over the last three months I real focus is based on just making sure that we continue to run an oprah right the business and I think those kinds of.
It was kinda discussions are going to be how being put off till we kind of get to the other side of this.
Yeah that makes sense.
If you want to I don't think that up.
No.
Summarize like small.
Yeah right all the best you Alster thanks, guys.
<unk>.
Thank you John.
Your next question comes from the line of.
Let's see fall.
Yeah, Hi, this is Frank.
Then.
I I want to follow up on a couple of the.
Allergy vessels supply questions.
Specifically regarding new export projects are that the historical trend is to build new for all the supply what what like guitar he's aren't doing but it is there a.
Answered expectation that.
Some of those at four projects will use existing tonnage supposing it to the building new.
Hi that <unk> I think that's interesting.
As well as we've seen some of the expert projects you know maybe pushing to the right. They are the really interesting thing. This year is we haven't seen any.
Conventional allergies ships audit.
I think that is very good for the L. and G. shipping knock it.
I think they're a a number of ships, which has been quoted which haven't yet.
<unk> contracts against them on my view is that you're likely to see new project, taking those ships before they all the.
New vessels themselves. So I think you know from a supply demand perspective, you know if you like one glimmer of hope out of all this is the fact that we're not seeing you <unk> very difficult to to I think finances ship right. Now if you haven't got any any contracts against it et cetera. So I do think.
What you're saying is correct and I think it will be helpful. In terms of the overall balance for for shipping going forward.
Okay. That's helpful thing.
And then kind of switching gears, a little bit given the changing market conditions I wanted to talk about the gas like Singapore conversion.
Or that expectation or timeline on the Panama projects still that's close to on track.
Yeah.
That has been a a delay in terms of that we may see that project going back a one or 2123 months, but nothing substantial at this point.
Okay. That's helpful. Thanks very much.
Okay.
Your next question, sometimes in line of credit to Wetherby what city.
Hey, Thanks for taking the question.
You can focus a little bit on the costs like you're in terms of actual costs takeout opportunity.
Your your interest is granted down at you highlighted in in the presentation. Obviously, you from a cash flow perspective, given in production help there, but in terms of outback and and maybe from an S.G.N.A. perspective.
How many 11 hours or are there levers that you guys getting pulled you go through with likely to be sort of a <unk> a year and certainly on certain time just want to get offensive you know how much maybe you guys could be one side.
Yeah I Chris.
I think you know as we talked about before the code.
But then again, along we were already well into looking at a cost based on our G.N.A.. We advised that we are we're aiming to bring down a a G.N.A. by $6 million by 2021, which were still very much on track to do as we look out from that we view that there are.
Opportunities both in a whole effects on our G.N.A. to take out some more costs and I think the <unk> over the next two to three years as we bringing those <unk>. Those initiatives you know that's probably in my view somewhere between 20 $25 million that we can that we can.
Take out of the cost of the business. So the long term that's by being small so that's by using.
Using looking out processes using.
Information technology, and a smarter way et cetera, and still deliver the same level of service into the customer. So I think it's fairly meaningful and as you've seen a already I think once we set a target where we are pretty good and getting after that target.
Okay.
And then just following up on the earlier question.
Around that the combinations of businesses and then I understand trying to make sure you kinda have all your ducks in a row during a fairly on sir.
Yeah.
You know each reasonable to say that once we get through that the basically everything in one of the table in terms of how you think about these businesses potential combination with them.
<unk>.
I just want to get a sense of it kind of how much of the action point that really is for you guys.
Will be on it.
When we get more.
More clarity.
You know what's going on.
Cool.
Sure. That's a question the effects both capital partners and guess what limited, Chris <unk> and I'm, Dave hasn't answered a question Yeah, I think I will pass that one over time to.
Sure like small look I think we're we're really focused right now and execution and pleased to see all of our ships on charter and an active spot market. Despite not as many term chargers for on the one on the water Buffaloes we discussed previously.
And so I think that that really is that really a job one for today I think our job is to do share raises of course always to look at how how we can be maximizing value for our respective unitholders in shareholders and so in my mind. The structure is is kind of an ongoing topic that were were responsible to evaluate.
But but today, it's really about you know this weekend this quarter and executing safely and efficiently for our customers.
Okay, and then maybe just.
What are the benchmarks, we should be thinking about in terms of.
From from your perspective, what are you looking forward to just sort of feel like we're in a bit of a more normalized environment.
Returned to work dynamics for for people kind of or.
Sheltering at home and it it yeah, I I guess I just want make sure I understand how you think about the potential benchmark see before sort of a quarter important normal kind of comes back because what could come come out of if it could be any sort of.
An environment there appears to be a little less than what we're used to it.
I'm just trying to get curious to know how you think.
You want to follow up on based on you.
You know I think I think critically thing. We're we're in the period now which is really typical for our business, where two two tends to be one of the season, we slow recorders and then we have the the strengthening market typically over the summer it into the winter.
And so I think we're we're both got phone and guess what partners trying to use that period and understanding the chartering opportunities and utilization opportunities weekend, we can target for for the respective fleets I I think it's just it's just understanding that we can continue generating earnings in cash flow.
From the ships and feeling that we're we're we're as you say maybe in a new normal but something that resembles the typical yearly pattern with with strength in the fourth quarter.
Okay. That's a that's helpful. I appreciate that appreciate the color and all the bus shelter thing.
No further questions and cue.
Trying to call over back.
You know something else.
Actually I think I I'll take it thank you very much Tiffany.
Before signing off today I'd like to make mention to to press weeks, we put out today about I'll just Maxwell leaving.
I have been very privileged to work with Alastair over the past few years. He has been a great colleague and I'm not highly successful C.F., though.
And my cell phone and everyone has got stuck I think is going to miss it.
However, he has done a great job in the meantime of preparing <unk> <unk> <unk> <unk> a successor I could take over from in my Mom I'm sure I'll also very much enjoy a working more closely with with him but.
Where's that and where the very heavy how I'd like to handover <unk> hours to just give some closing comments.
Oh, Thank you very much in the you know I hope my head cut out of the door. After we finished on the on the cool.
But I also wanted to say what a privilege. It's been sent me to <unk> over the last three plus he is.
I've learned an enormous amount about shipping their pipe corporate life.
More recently about managing a big and through both good times and Motown using times.
I don't think you've done and I stand until leading the the company.
Very challenging two or three month.
But most importantly, I've been extremely fortunate to work with a team of T.V.'s skilled and dedicated colleagues both in finance.
And the rest of against organization and I'm also very fortunate because you mentioned to have such a capable an eminently qualified successfully not to laugh.
And I am so that you know that the company I don't know team.
<unk> stakeholders in the Finance committee are going to be in the best possible hands when I leave at the end of June.
In the meantime, I can assure everyone that I'm going to be working day and night.
<unk>, what feels like a very for the gender of refinancings folks restructuring.
Cost savings on all the activities.
Unfortunately, <unk> make it very difficult for me to say Goodbye M.D.C. will templates and person.
So I'd like to take this opportunity to thank you will you will support over the years.
This is not an easy time for any participants in the energy sector.
Be that accompany on Investor Orlando, where we <unk>.
But I have every competence against always going to continue to be a leader in our industry.
In every respect them and one obese I mean survive, but we'll try whatever the environment will for a lattice.
Oh not no. Thank you very much to every once a day for listening. Thank you go continued interesting down slogan capital partners. We sent me appreciate it and pool, Andy and <unk> look forward to speak into next quarter. In the meantime, you have any questions. Please do contact the investor relations team.
[noise] Tiffany that's nothing with.
Ladies and gentlemen, thank you for participating.
Conference call give me now.
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