Q3 2020 GasLog Ltd and GasLog Partners LP Earnings Call
[music].
All lines have been placed on mute to prevent any background noise. After.
The speakers remarks, there will be a question and answer session.
As a reminder, this conference call is being recorded.
On today's call are Peter the Vonage Chairman of Gaslog limited and the same.
Yeah, Chairman of Gaslog partners, Paul Wogan, Chief Executive Officer and Mike.
Accolades, that's you list Chief Financial Officer Justin.
Just enough and head of Investor Relations will begin your conference.
Good morning, or good afternoon, and thank you for joining the Gaslog limited and Gaslog Partners' third quarter 2020 earnings conference call for your convenience. This webcast and presentation are available on the Investor Relations section of our website Www Dot Gaslog Ltd, Dotcom Www Dot Gaslog MLP dot com, where a replay will.
Also be available please.
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 releases. In addition, some of our remarks contain non-GAAP financial measures as defined by the FCC. A reconciliation of these is included in the <unk>.
Six of his presentation.
The agenda for today's call is shown on slide three Peter will begin with a review of Gaslog strategic outlook and Paul will follow with a discussion of the LNG commodity in shipping markets after which he will present Gaslog limited third quarter highlights and Lance will then walk you through Gaslogs financial position and activity. We will then take your questions regarding Gaslog limited third quarter.
After Gaslog limited skewing, a curt will discuss the strategy for Gaslog partners and Paul will then review the partnerships third quarter and outlook and I collapsed will conclude with a review of its financial positions.
We will then take questions regarding the partnerships third quarter with that I will now turn it over to Mr. <unk> Chairman of Gaslog limited.
Thank you Joe.
A year, which would be fine bloody COVID-19 pandemic I'm.
I'm proud to say that Gaslog, it's proven to be just yet.
Before Matt can take you through gas lumps third quarter and as we near the final weeks of 2020, I wanted to take a moment and reflect and what we've achieved this year and provide my perspective on blood gas wasn't started 2021 and beyond.
With the delivery of the Gaslog Georgetown next week.
Walk for modern Newfield actually EPS carriers into the gas lumpy during 2020.
All of which were on Todd on budget and six on multi year charters with leading counterparties in.
In addition to the revenue and cash flow visibility since you bought your efficiency improved admissions profiles will significantly reduce our foods carbon footprint.
Our fleet rationalization is not limited to the addition of new builds is our intention to sell or we deployed a one remaining steam vessel for the next couple of years.
At Gaslog. We continued you would find on our sustainability ambitions and are currently investigating technologies that can be adopted on their existing fleet certainly would do start greenhouse gas emissions.
Well the EPS third quarter of 2021 people have taken delivery of all remaining Newbuilds Britain Gaslog limited wholly owned fleet to 20 carriers, which will include 12 latest generation X C. S classes.
Our fleet will be among the largest most modern and environmentally fishing in the world.
In addition, our current long term charter backlog will contribute approximately 375 million of committed annual revenue for many years to come.
This year, we also consolidated all our senior management would be gas swaps off its impart because for me its.
Significantly streamlined that decision, making and reduced our overhead expenses bye bye.
It's my view that this leaner more nimble organization will help us meet the challenging demands of the growing industry.
Looking forward, we will continue to focus on our cost base, we expect to further reduce overhead costs by additional 4.5 million next year and over the next two years to see are often cost declined by 20 billion.
These matters a lot of your bad debt redemption would improve the commercial competitiveness of our fleet and add to our free cash flow capacity.
Combination of a modern efficient and high quality fleet.
We feel good revenue backlog and a management team focused on driving down costs will provide gas logs and significant free cash flow over the coming years. This will allow us to reduce leverage and to reward our shareholders. So a reinstatement of our common dividend back to cope with levels as well as opportunistic, especially.
Good for them and the LNG fleet market recovers.
The winter period ahead looks promising with recent industry fixtures well in excess of 100000 per day.
Finally, I can confidently say that LNG.
LNG that's days and by extension Gaslogs are headed despite.
Spike previously unimaginable headwinds LNG growth has continued unabated. This year is projected to do so for decades to come.
Pardon her replacement for dirtier hydrocarbons, such as coal and oil products as a partner.
Partner with renewables, such as wind and solar the times when Wynn isn't flowing for Sun isn't shining.
Or at the fundamental building block.
Thanks.
Natural gas and LNG debates integral to the world's transitioning energy needs.
We will continue to do so for many years.
Ill now hand over to Paul take you through an update of the LNG commodity and shipping markets. Thank you.
Thank you Mr. Jonas.
On slide seven.
Okay reported 111 spot fixtures in the third quarter, taking the 2029 month total to 298.
Already higher than the annual sick I for any previous year.
The increased spot market liquidity has been underpinned by the increasing volume of spot LNG, the grilling participation of traders and resilient LNG demand.
We've taken advantage of this increased spot market liquidity can minimize idle time between voyages, capturing 70% of the average headline spot right through to the end of the third quarter.
Hi utilization means the average earnings have a variable rate TFT fleet for the first nine months of the year a similar to 2019, despite a nearly 30% decline in the average headline spot right.
The chart on the right shows how headline spot rates have risen sharply recently as buyers have looked to secure LNG supplies, a head to the northern hemisphere winter.
Our focus remains on maximizing the utilization of our vessels and so we aim to use this period of market strength to fix our open vessels on time charters wherever possible.
Slide eight shows the LNG demand during the first 10 months of the year.
[noise] demand declined during the northern Hemisphere summer with China, and India being the notable exceptions.
However, since August demand has begun to recover quite strongly driving the recovery in the LNG spot shipping rates.
For the full year wood Mackenzie forecasts LNG demand to grow by 2%, implying further demand growth in November and December.
This growth is certainly being aided by China will continue to build out and de regulate the downstream infrastructure.
Well reported 7 million households were converted to gas from coal in October.
Slide nine shows the woodmac expects LNG demand to grow by 89 million tons between 2021, and 2026 or 4% per annum.
Nearly 80% of this growth comes from outside China, demonstrating LNG broad based appeal and versatility imaging the worlds energy needs.
Slide 10 focuses on LNG as a marine fuel, a new and rapidly growing market.
The last time chart demonstrates that LNG is the cleanest marine field available today.
Can fetch a heavy fuel oil it produces no particulate matter.
The 80% less nox, 99% less socks, and 21% less C. O. Two wells now also being the most to me affordable Marine fuel.
These benefits are expected to drive LNG is rapid adoption in a market, which wouldn't mackenzie forecast to grow over 20% per year through 2014.
Slide 11 shows monthly U.S. exports security Twentytwenty.
U.S. exposed to the most shipping intensive.
The distance to most major discharge destination is above the global average.
For example.
Third quarter, approximately 2.5 ships when needed for every 1 million tons of LNG exported nearly twice the global average.
That's cool as U.S. exports to recover to that pre coverage levels. It is strongly positive for shipping demand.
Slide 12 outlines the scale of the infrastructure currently under construction to both produce and consume LNG.
The figures for re gasification capacity only go up to 2020 I.
As these import terminals can be built much more quickly than production facilities.
There are however, many more planned positions for both production and Regasification and we expect these numbers to continue to increase.
That's presently 104 million tons per annum of LNG production on the construction.
Hi, most of which is in North America.
And on the right you'll note, there's 126 million tons per annum of reclassification capacity being built today, two thirds of which is in Asia.
We therefore believe that this new production will be shipping intensive a positive for our business.
In summary, despite the huge disruptions brought on by the Cobi pandemic demand for LNG in Stark contrast to other hydrocarbons is expected to grow this year.
Demonstrate LNG is resilience and importance as an energy source and gives us confidence the LNG will remain integral to the world's transitioning energy needs for many years to come.
Now turning to slide 14, I know review of Gaslogs third quarter and outlook.
Since we last reported in early August Gaslog has taken delivery of the Gaslog Westminster where.
Oh gosh look Georgetown due to deliver later this month.
We've been asked our liquidity and access and new pools of capital through the sale and leaseback of the Gaslog Hong Kong to a leading Chinese less so.
And despite the ongoing challenges and uncertainties caused by the COVID-19 pandemic, we continued to deliver safe and robust operational performance with close to 100% uptime for our fleet not undergoing drydocking.
We appointed Julie Mezz role as Vice Chairman of our Board. In addition to his role as chair of the safety and sustainability Committee.
And Christian home was appointed as a direct it to aboard.
And finally, we declared a five cents per share dividend for Q3.
And as we look ahead over 70% charter coverage over the next three years provides us with a high degree of revenue and cash flow visibility.
On slide 15, our new XT athlete has to date experienced no cobiz related delays.
In 2020, and 2021, we'll take delivery of seven at the latest generation X.D.S. vessels older.
All of which will go on long term fixed rate charters to high quality customers.
The 12 vessels on this slide comprise one of the largest fleets of modern highly efficient to stroke X D.S. vessels.
Once fully delivered will underpin our $375 million of annualized fixed rate revenue and nearly $3 billion of revenue backlog.
Slide 16 highlights the fleet charter coverage of over 70% through at least the next three years.
The high degree of visibility for both revenue and cash flow underpins, our stable and resilient business model.
Our contracted revenues are predominantly at fixed daily rates at higher.
I have no commodity price exposure.
Our long term customers are some of the LNG market major participants.
Whilst we have limited spot market exposure over the next several years.
Please note that for each $5000 per day improvement in the T.C. above our operating and overhead expenses, we will generate an additional $10 million in EBITDA doing 2021.
In addition to providing significant financial benefits, our new Bill investments will also materially improved the carbon footprint of our fleet as shown on slide 17.
These latest XT EPS vessels have 65% less C O two emissions, but ton mile relative to a one steam vessel.
The figure on the left shows how the delivery of the first five of these vessels is lowering our C. O two emissions per ton mile was through the third quarter of this year, a 16% lower than in 2019.
Slide 18 highlights how we are managing the challenges brought on by COVID-19.
We remain fully focused on the safety about personnel and delivering reliable high quality service to our customers.
Unfortunately, COVID-19 has impacted our drydockings and the third quarter was no exception as we experienced additional drydocking time several of our vessels due to the unavailability of manpower at the yard and the difficulty in getting service engineers into the country.
However, despite the pandemic on new build vessels continue to deliver on time on budget and immediately commenced that long term fixed rate contracts.
Our ability to change crews improved in Q3 as more jurisdictions began to allow crude changes.
However, much work still needs to be done before normality returns.
We will continue to work with maritime authorities around the world to ensure the free moment free movement of these key workers.
So in summary, I'm very proud of how Gaslogs employees, both the show and onboard of vessels have risen to the challenge of keeping the fleet operating and delivering a reliable high quality service to our customers.
Despite the many challenges at Cobiz.
I believe that Gaslogs operational platform is second to none and provides the bedrock the ongoing and future success of the business.
With that I'll now turn it over to Iraqi less to discuss the group's finances.
Thank you Paul.
Please turn to slide 20.
The two charts on the left so the combination of end use NPV that excluding the contribution from gossiping about those.
Revenue and adjusted EBITDA for the second quarter into these 21% and 28% year over year, respectively.
Oh, the revenues and adjusted EBITDA, well show, 15%, an 8% improvement respectively over the second quarter of Clinton.
As you can see from the panel on the thought I want to know where the pockets and modest loss of one thing I've sat in the South Dakota gas mix adjusted EPS, mostly natively statement on the out of it yet in sequence conveys.
They leave any Oh gosh lewin, so that's the ways and gusto listening families. Yeah, I love with nickel must have started to maximizing the utilization of basis today thinking this book market.
Declines from lower thought that agency buy out unless there's something else you can as opposed to market.
In addition, we experienced additional five days for the vessel in southern England that scheduled dry dockings equivalent to the Lady delays adjustable discussed.
Turning to slide 10, due out and you can see that our cost reduction initiatives continue to be broadened out now he's out.
Operating expenses for the first nine months of the year hip hop and it's just another $15700 concession per day.
While our overhead expenses adjusted for certain one off items, what I'm, ultimately 3800 dollar spend, especially but they both significant improvements over 2019.
As we look so what's the full year, we continue to expect that was going it'll behave like expand slava is $14000 professional company, giving effect to start trying to movements in not help anything close as well as any vessel or sometimes it doesn't gain seen NV. This yet, but he got me with respect to travel related expenses and other cold winter related.
Savings.
Lastly, the flashing light book, if they use the dose expansion with young kids Fulchino thousand cubic vessel that my thought was going to be six media. During the first nine months of 220, despite the increased <unk> Buck that related to our new building deliveries.
Slide 22 sets out our consolidated balance sheet metrics as of the end of course, the fee schedule debt repayments over the next seven yes liquidity and capital expenditures for the remainder of 2020.
We ended the second quarter with net debt to total capitalization of 63 cents.
That's a cash equivalent at the end of course, the fee was 175 million.
Since the end of this have gotten out of liquidity has been fed it boasted by the leasing approximately 26 million of sentimental liquidity following the sale and leaseback of the Castro Hong Kong to see two CMBS one of the China's largest missile Intel that's fine nothing with Chinese content.
Looking for a little while total debt will increase as we think they live video Newbuildings, we wouldn't be amortizing called punk they thought that eight of approximately 266 million Pat on when the fleet is fully they leave it.
Over the ego Twentytwenty two Glenn just trying to think Wilson was willing to tie it nearly 1 billion of that the simultaneous there some payments have been buyouts consolidated toughened backlog of 3.6 billion.
Lastly, we have approximately 79 million of Newbuilding cost equity payments remaining confident newbuilding vessels that you're getting some cost to see 2020. One he building the gaslog jumped style, which we didn't even later this month, we expect to meet this capital commitments with cash on hand, plus all paying customers.
Moving to slide one defeat Intel he still useful activity financing profile gets much worse.
Over the last 12 months, we kept refinanced approximately 1.2 billion of that including 1.1 billion looks a good bunk beds, which was gaslog slots is the financing today I do a lasting approximately 19 million I think you would not see on bump.
Each of these refinancing activities. These were kind of down the waiting of the buses and much of anything.
It has not been much whether it be some do you plan to 24, who have no 10000 attention to find I think I'll see how this 15 million unsecured bonds during the month splendid went to do.
She's talking with how he study we expect to make progress on is fine I think this bodes well ahead of its much with it.
Turning to slide 24 for the somebody in thousand Oaks.
We have continued to take my P. any elections to still definitely business team can either disease and they leave at any level high quality said, we still have customers.
Newbies continue to deliver it on time and on budget and the three vessels. They leave it touched fighting Twentytwenty drove strong financial performance, while holding fleet owned fleet in coffee.
Oh fleet, he said minimum of 70% south of covenants for the next the yes.
Did you guys with a high degree of visibility and stability well no revenue some cash flows.
Watson, our liquidity through the sale and leaseback of the Gusto Hong Kong, while opening new capital access in China, and finally, the longest and fundamentals of the LNG business is managed by natural gas and LNG. We continue to replace coal and died in hydrocarbons I spent that money energy source for many years to come into the.
Many of the ideal partner for the new up Lindsay.
The growing demand for LNG will produce a growing demand for LNG shipping and gas looks eyes open national platform to enter the quotation meanwell ideally placed to benefit from these favorable trends.
With that I would like to open it up for questions. If it got think that's looks like the deep South Dakota, but they took can you. Please now open the call for any questions.
Thank you as a reminder to ask a question you will need to press Star then one on your touched on telephone.
Withdraw your question from the queue. Please press the pound key.
Please stand by while we compile the culinary roster.
First question comes from Greg Lewis with <unk>. Your line is now open.
Yes, Thank you and good afternoon, and good morning, everybody I'm. Realizing that this question could kind of also be asked the Gaslog partners, but I think it's important just because you know what it means for kind of the global LNG shipping market and really what I'm getting at is is kind of.
It seems like some of your assets and maybe other people other competitors assets seem to be starting to find opportunities as infrastructure assets and really it seems you know if we were to go back seven eight years ago. The world was going to be littered with that best use an FSR use kind of all.
All over the world and while that didn't play out the way many of US thought just looking at what what Gaslog as a whole companies been able to do over the last year with a couple other chips you know it's interesting that opportunities finally looks to be playing out with you know the FSR FSRU project in South America and Asia.
Then there's reports or one in Africa. So Paul if you could talk a little bit about what you think has changed if anything it and really.
What else is the company, claiming the kind of continue to take advantage of this.
Yeah. Thanks, Gregg Youre, absolutely right I think as you look.
The market at the moment there are definitely a number of opportunities for the on the infrastructure side and I don't think that comes by accident, though I think there's been a lot of work going on behind the scenes. The truth is the it infrastructure projects do take a long time to bring to market and they have a much more.
Red tape, sometimes to get through et cetera than just going out and ordering a new ship, but the fact that LNG is now such such a price competitive commodity is available and it's available in smaller volumes to many more bias now I think is stimulating the interest in these infrastructure.
Infrastructure projects are you said you know we have a very closely.
And then you have to show you in Greece, we have the F. issue project in Panama and did the chances that we've done recently on a couple of our steam ships I'm much more kind of logistics oriented than than shipping as in which we're moving cargoes, but we're also storing them would also breaking both.
S.T.S. shipments and I do see that's a market where our steam ships actually I'm very competitive you know when you're not steaming a lot with the vessels. When you are just sitting and storing then they can be much more competitive, especially as a lot of the areas that these things.
Projects are being developed and are restricted you know in terms of sites et cetera. So I think it's a combination of LNG continuing to be a very attractive commodity which people Wanna get held up and the fact that a lot of the projects that have been you know taking time to to develop.
All coming through so yeah, it's very interesting times I think for its infrastructure development in LNG.
Okay, and then just one more for me around it I mean, clearly the bulk of Gaslogs fleet as you know on the Newbuilds are contracted you know you do have a little bit of spot exposure, those one or two vessels and depending on how things roll off you know just as we think about that and as you think about this issue.
Turning to sleep is is there any benefit you the kind to have one or two vessels consistently trading in the spot market or if this winter rally is a little bit stronger and a little bit longer than we think plays out. It is there is there some is.
Is there kind of a.
Could we see could we see you know your spot exposure kind of just be eliminated her 2021.
He picks alcohol fleet for the calendar year.
Yeah I think.
Right.
Looking at that on a you know on an ongoing basis, what's interesting the depict development in the market has been the fact that a lot of Oh custom, especially the traders.
Interested in taking.
Floating rate charters fixed <unk>, but which actually increase the utilization of our vessels and that I think is a very interesting market because one of the things in the past it's been difficult trading spot is making sure you get the utilization up so having that option I think is very useful to a ship.
Owner it means that you can be more choosy about whether you want to put your ship or on a fixed rate charter as opposed to a floating rate John to and I think you know the great thing about that is that we can then decide as we see the market do we want to go fix do we want to go spoke so I wouldn't be afraid of having our.
Our ships in the spot market as you say, we have limited exposure.
The spot market is something that I personally know very well having been in the business 35 years and spent most of my time in the spot market and something which I frankly, a enjoy so we wouldn't shy away from that and I'm very happy to trade in that market I think have the skills to do it but we will be always constantly taking you know whats the I phone.
<unk> of of at this point looking at a fixed rate as opposed to keeping those ships floating, especially when we can do it on a floating rate chunk to without customers.
Okay, Great and then just Paul following up on that just you know, it's something that we've typically seen a lot in other shipping.
[laughter] being sectors right like you you constantly hear about that in other sectors. You know when you talk about these are you know whether we whether it's I guess, it's not a C away. It's just the charter at a floating rate, but as we think about that I mean at this at this point in the market is there any sense for how many of these kind of contracts are out there in the market right now.
Yeah, I mean, I think if you look at our open a sleek crop consolidate to now cross Gaslog partners. The gas costs. The limited, we probably have something like 30% to 40% of our fixtures done that so.
That's I think a honest traders come into this market there is a growing.
Uh huh.
Desire to go to look at those kinds of deals and that's I think a then going out to the other.
The customers in the market. The other thing I think that will help that and on fear of interest to ship owners and charter is going forward is that were starting to see the growth of the derivative market in LNG as well, where you can use freight forward instruments to hedge position. So therefore, you can take a flow.
Right and at some point decide if you want to turn that into a fixed rate. So I think all of those things are very much part of a growing spot market maturing spot market a spot market. As we said this got much more liquidity in it and I think you'll continue to see a those types of.
Instrument those type of floating charters increase right.
Perfect. Thank you very much.
Thank you and as a reminder, we'd like to ask you keep yourself to one question and one follow up question before rejoining the queue. Our next question comes from Randy Gibbons with Jefferies. Your line is now open.
Oh, the gentleman how's it going.
Oh understood. Thank you.
Great I guess first question you know in the recent years during the strong winter, especially December Gaslog has announced special dividends right and late fourth quarter now is that the goal again this year or would you rather you know repurchase the unsecured debt or the preferred equity with any excess cash.
Yes.
I think our you know our focus at the moment is around some of the uncertainty we're seeing with Cove. It as you look out to the next year or Randy. Despite some of the great News that was was out yesterday I think there's still a large amount of uncertainty in the mouth.
But about what how that will play out I think it's very good that we are seeing the strength in the market right now I think if we continue to see strength in the market. Then you know returning cash to shareholders is something that we would very much like to do and I think over the long term as we see rates are coming back towards Midcycle rights, you know getting our dividend back to.
Pre covered levels or something that we definitely are aiming for but I think at this stage is probably a little too early to call that a and obviously that would certainly be a decision for the for the board, but obviously very positive that we are seeing good cash flows and good earnings in the fourth quarter.
Got it okay. So no special dividend, but pretty confident in the current five cent dividend per quarter going forward.
Yeah, I think thats for us this is incredibly important and we're able to to reward.
Reward our shareholders with a dividend and as I said you know we very much believe long term that this business can return back to the dividend back to the sort of pre cobot a uncertain times.
Yes, after the pre cobot uncertainty has gone sorry.
That's fine and then for my second question any updates on the gas trade advertising Dropless FSRU or the Philippines, FSRU and then how is the Singapore FSRU conversion progressing I know, what's delayed wins the start date and maybe the new end date for that.
Okay.
We only Alex but what do you say project and we have some updates lately. He would have if he set holder in guest facing this he says that's fine, but likewise the bundle a sensitivity about eight that over the and national on natural gas transmission system in Greece. A this is an important time.
On diesel and then development I hand over the eight if I deal with budget and that.
Scheduled to take place at the beginning of.
So these are.
Are you expecting over the delay said the previews, yes had some significant developments of the last year.
Well I would say not only on the Panama project and the annual investment over the.
Over the vessel to be enough issue and that has been a a delayed you to call we'd but it Facebook I think is expected to stop a asked me to enter into the convention of the I think that was would it be a in a cost of on plan to plenti.
And it's scheduled to the vessel to be on site meet I didn't do on.
Right got.
Got it.
Sounds good well that's it for me. Thanks, so much I'll hop back in for a July.
Thank you Randy.
Thank you. Our next question comes from Ben Nolan with Stifel. Your line is now open.
Yeah.
Good morning, guys. So I'll I'll start with one and I think Peter you had mentioned that going forward you are hoping that operating expenses could come down by $20 million a year.
Was hoping for a little color on that obviously it seems like operating expenses are one of the harder things to to move from a cost basis, but the other thing that was interesting to me is that the fleet is actually scheduled to grow.
Well of course of the next six months or so I was hopeful that you might be able to shed a little light on on on how that a you know a year you expect to.
Slide down you know or cut out $20 million at the same time the fleets.
Yes.
Yeah. Thanks anyway.
I'm, sorry, that's for me or for Peter or for UQM whoever wants it.
All leave it to you [laughter].
Okay.
Well I think that's why don't you why don't you have to go out and I'm happy to say land or on a high level. If you. If you. If you. If you if you feel you need to go ahead.
Thanks, Thanks, So and just say if you think that and we've for the why do we have done already because this is an important topic for us we have faced a lot of attention. So you've done a great focus both on the GE and they envy operating expenses.
We have as you know moved and manufacture all of them and people and to grow. He said it was up close that office use into the U.S. The size of the London office, we can say that approximately 9 million on the a DNA and who should state that special attention to have a a lean management that tracks with institutions.
Lined the decision, making on the Opex side.
And again I would have seen that deductions on the operating expenses. The focus is to continue the sound flippant identify efficiencies Kevin focused social on the today show that can them and create efficiencies and say close and I'm actually I see as a business. It includes.
Isn't that much to send the fleet increase and we take the live video of the main new modern vessels actually the lever that deal finish our leverage increases as well so it's easier to find efficiencies.
[laughter], Let me, let me, let me add to what like U.S. and said, yes.
Margin component of the operating expenses the yacht, it's the crew wages.
And we've spent a lot of time and continue to examine our our batting programs.
And we've been able to find some additional efficiencies.
Both in terms of the.
The the type and type and number of crudes that that that that we would be deploying on the vessels.
That that's a major part or the other.
A large part of this is the way we look at dry dockings.
And you know we've been exploring with with some success your ability to strike you bring the regular or a dry dockings of these ships into areas other than Singapore, where there may be a cost advantage such as such as Oh, China Middle East and areas like that.
And so it's up to them.
Those two particular areas are areas, where I'm encouraged that we should be able to get some some bus real operational cost savings.
In addition to that we've been looking at the process, it's been very involved and.
It using data analytics all to give you a lot about software enabled that we've been able to streamline a number of I'm talking about swap. This is on the ships, which have a possible deduction <unk> operating cost.
I hope that's helpful.
No that's tremendously helpful and just to clarify.
Despite the fact that the ship count is going to be a little larger you would be hopeful that actually opex might be lower next year is that a fair modeling assumption for us.
Yes, it is okay.
Okay.
[noise] and then and then my second question really quickly is I know that last year call you guys had a.
Booked a number of sort of intermediate level charters.
And the third and fourth quarter and it it it's moved the curve a little better than <unk> and maybe Miss some of the really frothy Mark.
Market, we're not quite at the same level of profit them element that we were in last year, but was curious just again on how we should be thinking about the fourth quarter and the first quarter with respect to the smaller portion of the fleet that is open is there a.
A portion of the fleet that is quote unquote spot that that is already booked or are you that are you benefiting from.
From some of the.
Rates north of $100000 today, we see it moment.
Yeah, I spent a little bit of both because as we talked about in the prepared remarks. The fact that we managed to sort of holds the 70% capture rate hold the rights you know the earnings at similar levels on the spoke ships to 2019, despite the headline rates being down 30% is because of that so.
Strategy of fixing sort of longer term and fixing ER into that to interest a position of strength, but may be missing some of the the top of the market. However, as I talked about earlier you know you're looking at so the 30, 40% of of the ships in the spot market from US also now being on floating rate charters and whilst there are some floors and ceilings.
On those they are much more.
Operationally leveraged to the to the upswing, so we will be able to benefit from a the the upswing in the market as well. Despite the fact that we talk about being 19, 95% coverage for the fourth quarter. It because that coverage includes ships, which are on on floating rate charters, so it'll be a a little bit of both and I'm.
I'm very happy with that kind of mixture that we have in terms of making sure that we.
Fix forward two to ensure we have good cash flow if if the market comes off at all next year, but also some upside to the to the strengthening market.
All right. Thank.
Thank you.
Thank you. Our next question comes from Chris Wetherbee with Citi. Your line is now open.
Good morning, guys James on for Chris wanted to touch on the sale leaseback of the Gaslog Hong Kong in the quarter was this [noise].
Centrally something we should be expecting more and moving forward or is it really about sort of funding advantage source of liquidity given some of the challenges from COVID-19, just wanted to get your thoughts around the deal the deal.
Yes.
First of all who have very happy to have opened a new financing markets gosh look in China for US. This was a particularly put them. It is a market that is growing and we go into two sandboxes social and opening these marketing that middle of the call. The concept in P.A. season at least when they'll a success.
My view, we recently, we also managed to improve the profile of the of the.
Especially with payment and the facility significantly that's really what have you so export.
I see and English also completed expense so.
Lastly, provide these five <unk>, so I would say that although endless they need to seek a successful d., so VCC or.
Yeah.
An opportunity that we have to do more and it's not happen, but it any differently I would say.
Got it but just maybe at a high level just understanding how you sort of think about leveraging your current amortization profile something that your.
Our schedule, rather something you're comfortable with or should we look for you to pursue.
Prototype is that more so moving forward just kind of under couldn't understand your thoughts around leverage and maybe that deal within that sort of broader idea.
Yes, he actually did not change the busy today given some of the vessel because she has a much longer for high. So I. If you look at it on a net debt basis, the incremental costs practically has not changed the limits.
Okay. Thank you.
I think the one thing I would add to that of course as you know as we said in the prepared remarks change we have a almost a a billion dollars worth of Ah I'm or are we going to be doing on a consolidated basis over the next four years you know so given the life of the assets they amortization schedule is quite a bit.
Yes, if in itself. So you see the de leveraging coming through a quite quickly given the amortization of the debt.
Great. Thank you for that perfect I'll hop back in the queue.
Okay. Thank.
Thank you our.
Our next question comes from Omar Nokta of Clarksons Platou Securities. Your line is now open.
Hey, guys. Just wanted to ask you know 2020, then obviously very thoughtful for Gaslog and refinance the billion of maturities that were due next year that was a teen priority and your centralized management, Greece. Another key priority you know when we think about priorities going forward. What's next on the docket from here.
Is there one key thing that stands out for you as you kind of approached 2021, whether it's a strategic or operational or financial priority.
I think I'm always having Peter on the line.
And the board being very much focused on strategy, that's probably a good question for you to take Peter.
Oh, Yeah Omar.
Yep.
Priorities, if you break them into a into short medium and long term.
In the short term like Ah Ah Ah well, a number of all of our competitors in fact the industry at large.
There there are some macro headwinds we believe we have to face ER.
And get them, a small small manner and that obviously is called the <unk> and the returns you more.
Hi, Colby deterred mortality, particularly in the energy sector and consequently, the shipping sector. So that that had been management's focus.
From or the early part of 2020 and I believe that will continue certainly into the early part of 21 as we continue to see this this second spiked and the consequences of that second spots which are.
Which are uncertain.
Yeah in the medium term.
You know.
We would we would be looking at.
Our strengthening balance sheet.
Business as putting us in a position where we might take advantage of.
Additional oh well.
Growth Capex around you know new projects that are coming on at 24 and 20 fives.
But but there's no word can see for that at this stage.
We believe both projects are likely to be a delayed is as liquefaction projects always are and it gives us plenty of opportunity to to sort of reset the platform.
Patients with that.
Over the long term, it's very much a understanding how LNG its use as a transition fuel vote in the transport sector and in the global economy positioning ourselves around that and looking at different alternatives in terms of of LNG news and.
Ultimately fuel use.
And our ability to provide midstream support to both new fuels in those new people uses so that's how we sort of break it up.
But it's all hands on deck from short term at this stage.
Yeah Yeah.
I'm.
Hopeful that a lot of the time, we get into 2021, we should be seeing some normality, returning a and and Ah you know one of the one of the big objectives that I have is to get the dividend back to it's a it's pretty cold bid levels. You know that has always been a key a key factor.
Well, what we do well.
So so it's it's about balance sheet strength and free cash flow in the short term.
Great. Thanks, Peter for breaking it up that way in a short medium and long term one maybe one follow up to that as you maybe for the medium term and as you mentioned the growth opportunities more come 24 25, no residual risk is has been this ongoing concern, especially in the LNG space ended up once the newbuilding charters roll.
While you still have a you know a a.
Heavy assets, though that needs to be paid down when you think about that at that time to invest in done several contracts. So Bert you know over your history.
The the upcoming four Newbuildings mission here those are southern your charters, which kind of leave you. Some exposure even though these are fantastic assets. When do you think about the the next wave of investment on your side do you see yourself going beyond so.
That's up near term looking for something much longer in duration.
Well, it's interesting because the technology curve that we've talked about on a number of these calls and that that had a really really good or the <unk>. The LNG shipping market has has absolutely flattened out.
AH you do you know what we want a.
Very rapidly through to changes in propulsion systems from seem to tee up to either to the the slow speed diesel we did sides changes Oh.
Well, we've seen ships 128 going up to an optimum size of about 175 180.
But all that has sort of flattened out or so.
So so my my worry the technological obsolescence on the ships that we have now coming into the fleet for me for the charters with people like here is going to be less of a risk and it was five or six years ago at the technology curve changed.
Yeah, I would think that that.
No one should consider.
Is that when when people were making investment decisions on new ships.
They were looking at ship blogs, and 35 years and in some cases longer.
If you start you overlay the IMO requirements 2050, where we should we should be quite rightly been seeing.
Some new technology in terms of marine propulsion in marine fuels the potential for a commercial lives of a newbuilding and Twentytwenty five going 35 years beyond 2050.
Become somewhat more challenging and that has and this should drive the economics in a way that any new buildings coming in 25, 26, <unk> make a financing calculations on a shorter promotional like let's give some advantage to the ships that are coming out in 20 and 21 such as ours.
They are very similar in technological capabilities.
Well alongside all that there are opportunities to to.
To do Abu evolutionary rather than revolutionary changes to the existing ships. There's a number of of of technological devices that can be added to existing ships did improve their efficiency.
And there are one or two a revolutionary changes that might be retrofittable to things like the P.F.D. ships or I mean, if you get if you have any confidence in fuel cell technology, and frankly, I do you know doing a fuel cell converging on T.F.D. is.
Significantly more likely that you would want to put a slow speed diesel ships in that half the propulsion system that chip and electric motors anyway.
Well these are the kinds of things that were exploring.
There is no silver.
Silver bullet.
And the technology is still very much you guys had a and initial stage but.
Yeah, we're hopeful that the.
The the the residual risk on certain ships.
We have today sits in T.F. needs may change around the ability to do things like fuel cell conversions.
And that's the residual Wes on ships that we have the newer technologies is going to be somewhat balance outside the shorter commercial lives of a newbuilding in 25 or 26, if that makes sense.
Yeah, absolutely. Thank you for that that was very very informative I'll leave it at that thank you.
Thank you. Our next question comes from Sean Morgan with Evercore. Your line is now open.
I guess I'll just try to be quick would just wanted it because I'm sure you guys want to move on to next presentation.
For the senior notes are you, you've obviously done a great job pushing out maturities I'm addressing that long before it starts to become a problem with those senior notes is that going to have to be a bank financing solution or could you potentially address that with with Asian lease finance and also are you, having any issues with European banks getting more stringent.
Due to kinda carbon controls and in terms of what their lending or is that market still pretty much wide open.
Yeah. This is less.
We continue to explore all options available I would say the historical fill activity financing and we don't expect that it's going to be different with the pay you as long as the years bones or.
It was having the benefit of time at this point they had you in.
Must and 22.
And we have and clear the way we sold the actions that we've taken and hi, nice total holiday bunk that comp IXYS and Oh epic scale Gummies are you know probably thinking or does it tend do on so hussein options available that exploiting them and we.
You got to be able to do they find I think well ahead of its time.
And the European banks shift capacity.
And that's the piece parts over the over the options I think we got exploding it wouldn't be it wouldn't be a mix or acuity financing over the.
It could bump behind us.
Alright, thanks, guys.
[laughter].
Thank you and our next question comes from Mike Webber with Webber research.
I like to tell you Megan.
Hey, good morning, guys how are you.
Oh my.
I was wondering when you back off of off of Omars question on on residual value risk and.
You get a very helpful answer, but one thing I didn't hear in there was a lot of commentary around new business and that could just be that didn't get through it but.
In terms of the value proposition for you for new tonnage here I mean, even the even the blockage shifts you guys had going on this year I guess, the blocker Simpson years, taking the.
The material degree of variance and the returns from ship owners that are participating in that in that block.
Where do you think the actual while our lives right now on on on on New business signed today within within the LNG market for Tom.
And I know that's a that's a very big question in term can drive a lot of that but you know.
The apples to apples from a couple of years ago is it a couple of hundred basis points wider than it was and is that and how does that impact. The way you guys think about the point capital.
Yes.
Oh, My God, I frankly have been surprised at.
The willingness of some of the new entrants or.
Two chartered new ships at levels that are we simply would not do.
ER and ER, and so and so and.
So I guess, you know I don't really understand.
You know what parameters are using to come to bear to their return thresholds that they're comfortable with.
But you know again the return thresholds on on on on this business are very much driven by where you see the residual that's and at what point or what putting the white, yes. It didn't see the residual risk. So so you can you can you can play with those numbers and really make the numbers.
You know with one or two percentage points off the bat looking anywhere where you where you want to look at them.
From our perspective.
You know, we we would really need to see a ER or more so 9% unlevered return to feel entitled to go ahead.
In terms of deploying capital in new buildings.
And you know, we're taking a very disciplined view on our Catholic.
We've had up we've had a remarkable throughout two.
2012.
We've had a remarkable growth since 2016.
You know I think I think now is the time to sort of reap the rewards of that which I'll look forward to and antenna and starts and start to work.
Gibson meaningful returns back to back to the shareholders you know.
Definitely would often be opportunistically looking at the growth opportunities, but we're we're not the LNG LNG shipping company for every man.
Mhm.
As it pertains to the new business and again I I hearing everything you just said around yeah. We got you certainly hunker down you're focused on margins, which makes sense in your kind of <unk>.
<unk>.
Gathering cash flow from the expansions in the past cycles, but if I were to look out across the tenders in the market right now I don't know many that would check that box.
Looking for a couple on the biggest one is probably a bit too.
And I know that's a that's a difficult gamut, considering where those ships are being built and and the.
The risk that they listen I, just wanted to see where we probably could get term and probably were turned that meets that hurdle.
It does your view on that change at all in the past and the best here, you're not since we last talked about.
[noise] not to put like Rod.
Mike, which which project I didn't hear which project you sell.
Arctic too.
32.
Maybe I can I can give you my view and I think you know, it's always a risk reward isn't it. So the return that you guys have to be commensurate with reward and while she maybe up to get to and and maybe a better returns you have to weigh that up against the the seed risk going into it. So I don't think there's a.
Free lunch that I didn't just picking up on what Peter said earlier. One is you know we have a lot of inbuilt growth still in the business, we don't need to grow at this point HM.
We've seen rate we've seen returns five years ago Difei, we saw them come up again and when when we did our newbuildings and we were successful in getting returns, which met our threshold I would see them go down again and I'm pretty certain you'll see those returns go up again I don't think its a downward slope I think it's more of a sign curve and I think.
We will be very careful to make sure that you know we only invest when we feel that that's the right time for Gaslog and I think there will be opportunities other than just for example, going into the Russian projects, where we'll be able to do that in the future, but but we will be disciplined.
Mhm apologies to all the vagaries of walk Downs in Greece, I got disconnected I Hope Paul was give you able to give you a satisfactory answer Mike.
[laughter] as always goes it was it was I'm point no I know, but that's my my second just around and it is look for one in terms of ancillary businesses. It was LNG bunkering before for you all in terms of the potential weighted to eventually what capital at a return that might be higher than than the new kitchen alone.
EBITDA spending.
And maybe it's about to bring some degree vertical integration.
Look I think LNG Bunkering is a is an interesting growth opportunities opportunities.
You know, we we look at small scale LNG as one of our options in the medium and long term.
But we also look at other tangential areas, where we where we might be able to deploy the platform that could that could that could be more interesting than a than simply the LNG bunkering.
Bunkering sector I think the LNG Bunkering is is it's certainly something that's going to be driven by the majors the shell in particular.
Yeah. So.
So it's interesting.
It's not it's not the first thing that I think about a as I look at the medium and long term.
But but it is what it is on it its on my list you know I mean, we've got you know, we we miss the opportunity to do an investor day in 2020, hopefully you know we will all be able to to meet up and do that and I would be very much looking forward to that point to putting through some some some ideas of how I see the evolution of the Gaslog platform.
Yeah. That's helpful. Thanks for the time guys appreciate it.
Thank you.
Thank you and I like to turn the call back to Paul Wogan for continuing the call.
Thank you very much Jamie and thank you everyone for your questions on Gaslog limited third quarter I will now turn it over to Mr., Curt Anastasio Chairman of Gaslog partners for his opening remarks of the partnerships third quarter results.
Thank you Paul Slide 27, that's worth today key messages from Gaslog partners, but I think it's important to take a few minutes to provide some context for the decisions. We are taking accordingly distribution reduction.
Gaslog partners waste created primarily to fund the growth of Gaslog limited, which was done very effectively since its IPO in 2014 during which a billion dollars of equity capital was raised.
At the same time, the partnership crude via dropdown acquisitions from Gaslog and increased its distribution to the common unitholders every year until this year.
Approximately $455 million has been paid out to the common unit holders at 24 million of units have been repurchased.
It's no secret that access to capital markets for MLP has deteriorated due to various factors, resulting in a significantly higher cost of capital for Gaslog partners.
Faced with a very unfavorable market for MLP equity the partnership was able to secure alternative sources of funding via our three series of preferred shares.
With respect to which $82 million of dividends have been paid and the aggregate but.
But that option is not limited.
With the rapid growth of Gaslogs fleet, drawing to a close in our continuing high cost of capital. The partnership was the first marine MLP to eliminate its ideal arc from 2009 Cook.
In early 2020, we made the difficult decision to reduce our distribution given the poor state of the MLP market.
The elevated level of downside risk any LNG create market.
Shortly thereafter global impact of the cobot pandemic, including its impact on energy could that became politically evident.
And this board supported management's initiatives to reduce operating expense capital to expand and DNA.
Which is an ongoing effort you are hearing more about today.
That included closing, our Connecticut office, and reducing the size of extensive the board among other steps.
Management also successfully refinanced our debt on improved parents Cushing.
Pushing out our nearest debt maturity to 2024.
And all the while we've managed to write a first class safe and sound operation mindful of all of our stakeholders not only investors, but also employees, including those that he who face particular difficulties during a global pandemic.
While enhancing our efforts to protect the environment now and in the future.
We are proud to a public start for sustainability report during this period of unprecedented crisis.
As you are hearing today, the LNG freight market has improved substantially this fall.
Partnership expected benefit from that.
Our commercial team has had some notable success re chartering vessels, including our smooth shift.
But as we look ahead to 2021, we see continuing uncertainty in the world.
Rather than rely on the continuation of improved market conditions, we believe it to be prudent to continue to de risk the company and prioritize preserving liquidity and further de levering the balance sheet.
Your board and management believe that is the best course for now notwithstanding some interesting commercial opportunities through the partnership which he will also learn about today.
In the course of considering strategic alternatives for Gaslog partners management and the board have come to the conclusion that all stakeholders would best be served by an independent review of such alternative.
The board is therefore decided to engage an independent financial advisor to advise it and management on the partnership's strategic alternatives.
We expect to select the independent advisor in the very near future.
And to have the review completed not later than the first quarter of 2021.
With that I will turn the microphone over to our CEO Mr. Paul Wogan.
Thank you could on slide 29.
I discussed Gaslog partners' third quarter highlights.
Well, despite a difficult quarter, we executed on new charters for two of our steam vessels, including a three year charter for the Mi thing Allison Victoria as well as a multi month charter for the meeting Jane Elizabeth.
Together these fixtures helped to increase our charter coverage to 99% for the fourth quarter.
We repaid $63 million of debt, bringing our total debt repayment to approximately $88 million thus far in 2020.
And lastly, as Kirk discussed earlier, the board and management have initiated a review of the partnership's strategic options.
Slide 30 shows well start fleets charter coverage is now over 71% for 2021.
Our operational leverage is set to increase in the coming years.
And as our vessels complete their initial shell charters.
Although we have successfully re agent.
Successfully reach out to several vessels these new contracts have been at lower rates.
Given the present market conditions and future covert uncertainties, we will continue to focus on reducing our financial leverage.
I'd like you last will discuss shortly the partnerships balance sheet is robust and we intend to strengthen it further to meet the demands of a shortage onto portfolio.
Combined with our focus on further reducing operating and overhead expenses, our breakevens, we'll continue to lower improving our fleet potential free cash flow capacity.
It's like 61 highlight a recent commercial successes.
During the third quarter, we signed a new three year charter for the meeting outage and Victoria with C.N.T.I.C.V. power, an independent Chinese energy company.
The vessel will transport still on break bulk LNG into Myanma, which imported LNG for the first time in June this year.
In addition, we've also recently agreed a multi month Johnston with optional periods for the Mi thing Jane Elizabeth to develop to deliver LNG into a terminal in Taiwan with size restrictions.
And as a reminder, earlier this year, we signed a two year charter for the meat thing surely Elizabeth with Joe Another leading independent Chinese energy company.
He jumped as highlighted a developing opportunities for us steam turbine fleet, where the show voyage distances storage requirements and physical terminal restrictions may know vessels can compete with larger more modern vessels.
The higher rate is lower than devesh vessels initial charters when acquired by the partnership.
However, they provide 100% utilization, giving us visibility and security of earnings.
And that's the amount of LNG cargo traded in the spot and short term market increases.
It will continue to increase the amount of spot and short term business for our vessels.
This is something that I'm wholly comfortable way, then frankly enjoy I.
Having spent most of my 35 year history in shipping trading spot ships.
In the whole commercial team believes that by really focusing on this aspect of the market Gaslog partners has the opportunity to excel in this area and create a market leading position.
And with that I'll hand over to actually last to take you through the partnerships financials for the third quarter.
Thank you both.
Turning to slide that the fee and the partnerships find that's how these out for successful tests.
And then use for the set forth in last seven to 3 million adjusted EBITDA was 47 media and that that's having spent you an English 11 cents.
Hi person at the 5%, 78% declines inspecting compared with the second quarter those tend to 19.
In addition, I have.
Revenues adjusted EBITDA and adjusted to be you showed declines, what 15%, 22% and 7% respectively compared to the second quarter of 200000.
Hi, Nice had is out for the second quarter was impacted by the expire over the next kind of multi year South This little club partnerships steam turbine vessels expiring in 18 miles south to handle the Gaslog Sydney.
While we have taken steps topped out fleet and maximize ending utilization.
But equally over 90 pumping.
Pumping demand close well they lindsay plenty plenty.
Thank you at least during quarter, two and philosophy.
In addition, he vessels well Skype for the telephone if at all how today's relating to this scheduled drydockings, which led extended due to the challenges with manpower the yes.
Sequence with additional done measures and see those throughout the year.
Looking for a little that button sick is one vessel scheduled for dry docking in the fourth quarter the message at the Sally, which we anticipate will take four days of the vessel is Kevin to ballast water treatment system installed and regulatory requirements.
Slide set the full shows that the partnership's credit profile continues to be resilient with net debt capital.
The center.
It is important to note that the castle toughness, because no committed growth capex, but we wish it was scheduled dry docking I have previously mentioned.
We expect to continuously things that balancing beginning with a testament of approximately 19 million on that although that Amanda is here for the total of why has 7 million and Glenn to 20.
Using that balances with it use it on the cips cash flow breakeven level. So the time, improving the competitiveness of our fleet.
Turning to slide that fight and they look at the potential impact that to payment and cost reductions can shift will not come but snus.
The chart on this slide displays the eye, but it's kind of funny keven for the top and the six month kind of 55000 cubic meter PSD vessels as well as its 145000 cubic meter steam turbine vessels.
As you can see capital of course, including compensation and interest expense make up most of the vessels guys today given.
Our focus on debt repayment and cost reductions over the next 700, yes, we could have a significant deep uncoated using these values. So the time for example, each why haven't 10 million of that to dive approximately equal to our annual scheduled amortizations over the next the EPS usually south fleets.
Yes, but even by approximately 1710 vessels, but they did.
This concludes mcleod fleets casualty keven will enhance our cash flow capacity over time.
With that I'd like to open it up for Skinny bundles can you. Please now open the call.
Thank you as a reminder to ask your question you'll need to press Star then one on your touched on telephone to withdraw your question from the queue. Please press the pound key.
Yeah. Thank you. Please keep yourself to one question and one follow up question before rejoining the queue. Please.
Please stand by while we compile the culinary roster.
Our first question comes from Ben Nolan with Stifel. Your line is now open.
Yeah, Hi, [noise].
Thanks for fitting me in again my first question has to do with the the thinking on timing really more than anything else with respect to the distribution cut the strategic review is just being undertaken now and.
Curious why you decided to go ahead and cut distributions prior to this.
The strategic review sort of in advise from advisors.
Yeah, Ben X pull here I think you know as we look at this.
We have continue.
Considerable uncertainty still in terms of Cove, it hopefully, we're being conservative, especially with the news. The last couple of days, but I think whatever happens would cope with the return to know monitoring in the world is going to take some time.
We we the management and the board felt it was prudent to do to move quickly in this respect and to make sure that we conserve liquidity and continue to protect the balance sheet to put the.
Partnership in a very strong position coming out of this and so rather than Oh wait for the strategic review we wanted to be ahead of the curve and to to act proactively and Ah you know, we very much look forward to reporting back following the strategic review this upcoming.
Okay, and then and then my follow up and the last well in the first part of the call peers suggested that the one steam powered ship that's owned by the parent.
You were looking to redeploy which obviously you've done on a number of assets at the partnership or sell <unk> is the same true of assets I. Obviously redeploying is but would you look to maybe sell some of those steam powered ships that are held at the partnership if.
If employment long term employment doesn't materialize.
Yes, I think that I think that basically three options for US here one is to redeploy I'd be very pleased with how we've been able to do that and I think the chances that we've got to position us very well to do more of those more logistic type businesses.
The second thing is to look at joint ventures with certain companies around those assets, where they work well for those assets and I think that's something that we're also exploring and the third option is to sell now selling right now I would not be in favor of we're in the middle of a lot of coping uncertainty and a.
Hey liquidity in the market, but certainly I think as we come out of that and if there are opportunities to sell the vessels. Then we would also look it up and so yes, you know I think those three options gave us a lot you know three three alternatives gives a lot of optionality around those vessels and then the final thing I'd say about those vessels.
You know, there's 235 ships still in the in the World steam flee the ships. The reason, we're getting them away and fixing them is these are some of the most mountain on some of the best performing ships in the fleet and so if you like when we're looking at these type of projects. These are the first ships off the block. So you know a very different animal to some of the oldest.
Moelis steam ships, which I think are going to be marginalized a you know a quite quickly.
Okay. Thanks, Paul.
Thank you and our next question comes from Sean Morgan with Evercore. Your line is now open.
Oh, Hey, guys I realize it's probably a bit early to talk about what kind of conclusions the strategic review might lead to.
But you know through your remarks, you made it clear that that cost competiveness for for the fleet at Glop is going to be very important in terms of winning business in the type tightening market and with assets that may not be in a premier and brand new so what sort of savings you think you could get in terms of I know you've already.
Reduce the public trading costs of of glop by consolidating some management and taking other steps, but does there come a point, where there maybe a private option would would make the fleet more competitive against the rest of the players are competing with and that kind of frontier market you're describing.
I think you know Weve <unk> as Rick talked about show and we've done a lot of work around the cost of the business. Both in terms of cutting the opex and the Gionee and Ah you know Weve also done cost in terms of as as could out.
Line to cutting the costs of the board as well. So I think we've been doing a lot of those things I think you know part of this strategic review would be to look at all options for for the company, which I would imagine would also include a take private but you know there isn't a that's not necessarily.
So Chris for US right now we think that is a very much a future for this business in the public markets.
Okay, and I think I think it's interesting this strategy are sort of laying out in competing in markets like the break bulk in Myanmar, and some of these new emerging markets and do you see I would imagine that initially the lot of them are sort of on more D.S. type contracts, but do you see any interest from from these parties as they become more Ics.
Branson and trading in the LNG markets that they might start looking to people you know companies like yourselves to to do long term charters like a more established player that you're used to dealing with like the GLOG level.
I think that's one of things I was alluding to it didn't didn't really flush it out shown so thank you for the opportunity I cant because these companies develop that will be more opportunities to be a a large part of that so I think they will integrate both that break bulk and bringing the.
Cargoes and potentially buying a fob et cetera, and I think that's the exciting bit photos and gosh look as we.
Get give you like getting to these projects at an early phase I think that would be more spin offs for the other ships in the fleet you know to be part of the supplying that to those customers and I think you know the growth potential for some of these customers in China. It is huge so yes I think.
I'm going to be a really interesting.
Opportunity for us okay.
Okay, Thanks, I'm going to turn it over.
Thank you. Our next question comes from Randy Gibbons with Jefferies. Your line is now open.
Oh the agenda UBS.
Going again, I guess for me the questions are on guidance on the rate and the duration for the methane Jane Elizabeth Charter and then the rate for the three year methane Allison Victoria charter.
Yeah, I mean, we can actually give a give out rates running because confidential to the to the charters, but if you you know if you look at where are the brokers are putting the right. So at the moment I think so far this year clarksons have fixed the the steam rights.
On the spot market around 30000, a day potent of putting the a one year rate for steam ships are in the high Twentys. So I think as you look at the opportunities for the steam ships I would say that those those broker right or you know are pretty good guide.
Got it all right and I'm, a three year, you would expect to be lower than the one year affair.
Not particularly.
Okay.
Because I think we I guess, Oh, sorry, sorry, Randy there and the reason for that is I think as we look at the Threeg market I think we see a tightening market coming into over the next three years. So you know first a discount to a one year right two or three year rate may not be the best thing for us to do so I think you know there as we look at it there are factors that would would work against.
Oh, Oh, Oh argue against giving any you know discounts on the one you're right.
Got it.
On your other vessels that are either in the spot market or short term market is the plan to keep those haven't summit availability or do you want to have a full charter coverage throughout 2021 hours that all kind of contingent upon this review happening in the next few months.
Yeah, I mean, I think whilst the reviews going on and I think we will continue to to to do what we've been doing which is try to maximize utilization. So some of that will be I think done through making sure that we have.
The ships on charter with fixed rate, but part of that getting that utilization up can also be a as we discussed on the limited cool through a variable rate charters, which keep us with some exposure some open to the market. So I think you know you will see us trying to deploy a mixture of all of those.
To strategies on the fleet, but obviously, if we feel comfortable with the fixed rate charters Oh repaired than well then we would continue you're certainly continue to fix the fix those.
Got it good.
Good deal that's it for me thank you.
Thank you Tony.
Thank you and our next question comes from Chris Wetherbee with Citi. Your line is now open.
Yes, James on for Chris <unk>.
And just understanding that are acknowledging that there is a strategic review ongoing but just wanted to get a little bit more detail around how you're thinking about the dividend reduction and just as we look through 2021, if we see like a sharp rebound or.
Could it actually be something that might be adjusted midyear or is it really something that was sort of like senators like more driven by the level of debt.
And it's probably something that's unlikely to change over the course of one year.
I would.
I Dunno Cook I would you like to take that question.
Yeah, Yeah, Yeah, sure I mean I.
I don't want to preclude anything that may come out of the strategic review, but you know as I've said in my remarks, we are focused on retaining that $22 million or sell to preserve liquidity liquidity and continue de levering. During this period and while we're certainly I think a I would never preclude preclude the board for revisiting.
The dividend decision as we move forward I I personally just as one director would not expect any close to what we've done during this review period, but we'll see.
Just one director.
Understood then.
I guess a.
A little bit along that point just [noise].
Talking about the capital structure in general and I think there's a general tone of moving towards something more short term basis, and a little bit more rate volatility from a revenue perspective Dizzy.
Capital structure, something that you think fits that and then again I understand this is a strategic review going on but she is our asset sales something that you think might be the best revenue for sort of de leveraging if you think that's a problem or do you think that maybe an equity raise just trying to understand your thoughts around sort of the capital structure and sort of the chain.
Valving revenue model.
Hi, Todd I do think we need.
Hey, Paul you take it I don't think please. Please go ahead I was just going to say.
In terms of the capital structure I do think we would be best served by continuing to de lever that was one of the motivating decisions behind the actions we've taken that just on the dividend, but on Opex and everything else.
I'd get down with proven to be a very high high cost to capital given the capital markets Nowadays for us.
And that will reduce our our our fleet breakeven. So I I think Oh, you know in terms of capital structure. I mean, that's that's that's relevant to that question that the sale of assets I think Paul answered earlier, where he said that he would expect that absolutely be on the table for us as well as.
The one steam vessel at CAD GLOG, but that in his view and I share. His view. This is not at this moment. This is not an opportune time to do it during the cold disruption.
Yeah, they emerge as it as an opportunity as we move forward I agree with what he said on that.
Yeah. Thank you.
Thanks James.
Thank you and I'm showing no further questions in the queue at this time.
I'd like to turn the call back to Paul Wogan, CEO for any closing remarks.
Thank you Jamie and thank you to everyone today for listening.
For your continued interest in Gaslog limited and Gaslog partners. We certainly appreciate it and we look forward to speaking to you next quarter and in the meantime, if you have any questions. Please contact the investor relations team. Thank you very much.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program you may now disconnect.
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