Q4 2020 Teekay LNG Partners LP Earnings Call

Welcome to the Teekay LNG partners fourth quarter and fiscal 2020 earnings results conference call. During the call all participants will be in a listen only mode. Afterwards, you will be invited to participate in a question and answer session.

At that time, if you have any question you may signal by pressing the star one to register for your question.

We're assistance during the call. Please press star zero on your Touchtone phone.

As a reminder of this call is being recorded.

Now for opening remarks, and introductions I would like to turn the call over to the company. Please go ahead.

Good morning, I would like to direct all participants to our website at www Dot Teekay LNG Dot Com, where you will find a copy of the fourth quarter and fiscal 2020 earnings presentation. We will review of this presentation. During today's conference call. Please.

Please allow me to remind you that our discussion today contains forward looking statements actual results may differ materially from results projected by those forward looking statements additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the fourth quarter and fiscal 2020 earnings release and earnings presentation available on our website.

I will now turn the call over to Mark Cremin, Teekay gas group's president and CEO to begin.

Okay.

Thank you Scott.

Good morning, everyone and thank you for joining us on our fourth quarter and fiscal 2020 earnings call for Teekay LNG partners.

We hope that you and your families are all safe and healthy.

I'm joined today by Scott Gayton, Teekay gas group's CFO.

Before getting into our results, we will take a moment to thank all of our seafarers and shore based staff for their continued dedication to maintain business continuity. We are truly proud of how our onshore colleagues and especially our seafarers have continued to respond to COVID-19 restrictions, while maintaining consistent the safe in the fish.

Operations for our customers.

Turning to slide three of the presentation.

Use of both Teekay Lng's recent highlights.

The fourth quarter of 2020 was a solid quarter for T. G. P. The earnings was $60 million of adjusted net income or <unk> of 61.

This caps off a record year from Teekay LNG.

Adjusted net income of $234 million. The total adjusted EBITDA of $758 million were the best in our 16 year history.

Selecting the multiyear Newbuild program, which we completed in early 2020.

Towards the end of 2020, we fixed the 62% O methane spirit on the two plus year contract with shell to increase our fixed contract percentage of our LNG fleet 297 per cent for this year.

Nearly 90% for next year.

The late 'twenty 'twenty early 'twenty 'twenty, one the LNG shipping market experienced volatility volatility that we had never before witnessed but for those who are investing with us for a while know it's really doesn't impact us given our focus on fixed rate contracts.

We have structured our business for the long term and the long term prospects for LNG are attractive at the world in China in particular transitions away from Dirtier Forbes the fuel such as coal towards cleaner burning LNG.

This is a bit of well noted trend for many years and we expect that will continue for the next two decades of more benefiting our relatively young modern fleet.

Based on the stability of our earnings the strength of our contracted portfolio.

The positive long term outlook for LNG and.

And our desire to provide our investors with a well covered distribution.

We are announcing another increase to Teekay LNG is distributions the third.

The double digit increase in as many years.

We intend to increase the first quarters distribution by 15% to $1 15 per common unit per year, starting with the first quarter's distribution to be paid in may.

As we discussed on the last slide we think Teekay LNG units represent the compelling investment net.

Now with the forward yield of eight 4% as of close of market yesterday or around the eight 2% of today, which compares favorably to other income oriented investments.

And we'd like to finish the slide by once again congratulating our shore based we each of our staff for a great accomplishment.

We have now released all of our overdue seafarers and we have still not had any COVID-19 cases on board.

This is no small feat and we appreciate all of the efforts by our shore based staff and the patients exhibited by all of our colleagues of <unk>.

As we deployed the full capability of our robust operating organization to work through the many global logistical challenges over the past year.

Looking ahead, we will do to make true relief in the future seamless as possible for everyone.

We now look the slides four and five.

Which we include in nearly all of our corporate presentations, because we believe they set us apart from everyone else in our universe.

With the recent extension of the 52% owned would be think spirit charter to early 2023.

Our LNG fleet is now 90% fixed for 'twenty, one 'twenty 'twenty, one and 89% fixed for 2022.

Our LNG fleet currently transport transports approximately 8% the world's seaborne gas for our high quality customers.

With revenue and total adjusted EBITDA backlog of $8 $8 billion, and 60 $363 billion, respectively. Our future earnings power is stable.

We expect this stability the last well into the future.

The average remaining contract tenure is 10 plus years.

And as we've described before our ships are of critical component of the LNG infrastructure chain and exits of Foldable flexible floating pipelines, which offer loading of destination flexibility.

Turning to slide five.

This is one of the reasons of our fixed rate take or pay contracts have not been impacted over the past few months or really the past 15 years by changes in the pricing of natural gas cargo cancellations or structural or global imbalances in LNG trade.

Our LNG contracts of generally fixed rate with built in escalators to lock in margins in our current Counterparties are blue chip LNG names, where government backed projects.

The fixed rate contracts in our portfolio had no unilateral provisions for change in the terms or charter rates in each of our contracts continues to perform as expected.

We do expect to have one vessel the fully owned Creole spirit trading in the short term market. After her dry dock and later this month.

We expect the trade this vessel.

And in the market until such time.

As we can locker away on a multi market from a multiyear contract at an attractive rate as you of how do you have seen the SKU in the past.

Turning to slide six.

We look at the global LNG mix out of 2040, according to the IEA, where natural gas and LNG are key components of the energy transition.

The global energy mix is expected to go through significant changes in the next two decades at the macro level.

If we look particularly at the expected 30% increase in the demand for natural gas.

South and East Asia are expected to make up most of this increase in part due to the transition away from coal.

As can be seen on the chart coal was the only source of energy, which is expected to decline between now and 'twenty force.

Dipping below of 20% share of the world's energy demand for the first time in modern history.

The increased demand for gas over coal is based on three factors.

First.

Natural gas is considered to be of which two of Decarbonize feature in part because natural gas has 50% of the carbon output of coal.

And therefore, it will benefit from policies, which prioritize lower emissions and better air quality.

The carbon output of natural gas can be further reduced when combined with carbon capture which is the big focus area of globally.

Jack <unk>.

Natural gas, it's the U S more reliable than many other renewable fuel sources, which based on current technology can be interpreted and difficult to store and therefore, not yet support of industrial growth.

And third <unk>.

The gas is abundant and easy to transport.

Making its delivered cost of affordable to most developing and development issues.

It's also interesting to note that hydrogen doesn't factor into the slips.

Likely because by 2040 hygiene expected is expected to make up.

One 7% of LNG demand.

And the only five 6% by 2050.

So we are excited about the opportunities that may come from the commercialization of hydrogen, but we don't see of being a meaningful meaningful contributor to the LNG space for many years to come.

The switching from coal to gas.

It's nothing new as can be seen on slide seven.

As the chart indicates this phenomenon has been taking place since 2011 led by the United States looking at the dark blue bars.

But China represented by the Red bars still has a long way to go which creates an immense opportunity for LNG to the part of the solution towards lower greenhouse gas emissions.

Nearly two thirds of Chinese electricity generation comes from coal fired plants or natural gas fired plants. The account for only 3% of Chinese what Tricia the generation.

As a result, we expect Chinese demand for gas to come into force.

As of cleaner replacement per existing coal fired plants that can to transition the gas and its new power plants are constructed to meet the growing economies the needs.

We expect many of these will be gas fire.

Once you have this incremental natural gas demand from Asia, we shipped in the form of LNG as can be seen on the chart on slide eight.

Each of our B L.

LNG demand, which is typically longer haul of in other areas of the world is predicted to account for nearly 75% of global LNG demand by 2040.

Which funded pins, our long term expectation that the demand for the services that we provide will remain high into the long term.

China has aggressive emission targets many of which are currently not being met.

Should you sort of.

So these targets the enforced there will be of power generation from China equal to 214 metric tons per annum LNG equivalent basis.

If we assume that only 40% of its power generation GAAP is masked by switching from coal to cleaner burning gas and additional 175 to 205 LNG carriers will be required for over 25 per cent of the LNG trade in 2019.

And again this isn't incremental demand to support China's growth ambitions. This demand, it's just to get the China closer to the existing clean air targets.

In summary, we expect the seaborne gas tree will exceed the seaborne coal trade over the next 20 years.

Greatly benefiting teekay LNG, its existing fleet and provide future growth opportunities.

I will now turn the call over to Scott, who will discuss the next two slides before we conclude.

Thank you Mark.

On slide nine as Mark mentioned earlier this was a record year for Teekay LNG in terms of annual adjusted net income and total adjusted EBITDA looking at the two charts on the left of the slide.

Our earnings and cash flow have grown as our of three 5 billion growth program has delivered and have resulted in EBITDA and earnings CAGR of 21% of 63% respectively over the past two years.

And because we did not issue any common units to fund this growth our debt balance grew as can be seen in the top right chart, but we have made significant progress this year of lowering net debt by nearly $560 million, which includes the proceeds received on the sale of two LNG carriers in early 2020.

And the combination of increased cash flow of lower debt has resulted in drastic deleveraging as can be seen on the chart to the bottom right.

Our leverage peaked in 2018, as we were taking delivery of vessels and due to the timing mismatch between debt and cash flow being recognized by the in 2019 and 2020, our leverage decreased decreased quickly as debt.

That was amortized and cash generated we finished the year with net debt to EBITDA of five eight times on a proportionate consolidation basis of basis, which is still above our targeted range of four and a half to five and a half. However, I'm hopeful we can get down to the top end of a range of later this year.

Turning to slide 10, Mark mentioned earlier that we think Teekay LNG represents a compelling investment in part because we are adding significant equity value through deleveraging and because we are increasing the returns to our investors in the form of well cover distributions.

Starting with the balance sheet. In addition to significant debt reduction, which I touched on in the previous slide. We also have all of our $460 million of liquidity and only one remaining debt maturity in 2021.

Since we last spoke with you in mid November we completed two refinancings each of them oversubscribed and the lower all in interest rates, thereby reducing our interest costs and increasing our earnings and free cash flow. Our only remaining maturity is a 147 million equivalent Norwegian bond, which matures October and we have the ability to repay debt.

What the cash if we choose to.

At the bottom of the slide we have chartered out Teekay LNG is current and future yield against other income investments at our current distribution of a dollar per unit per year, we're yielding seven 3% based on yesterday's closing price, but if you project out to the distribution level of $1 15 per unit per year as announced today where trade.

<unk> and afford yield of $8 four per cent, which allows investors to earn an eight 4% yield plus potential unit price appreciation over time as we continue to pay down debt and since we are currently trading below our intrinsic value.

In addition, the eight 4% yield is attractive relative to other income producing investments lifted to the left listed to the left hand side of this chart at eight 4% we were yielding more than double the high yield bond index and 270 of phase 275 basis points wide of the S&P energy index of dividend yield.

And what energy and small cap value stocks in gaining more of a following so far in 2021 were hopeful that new investors will take notice of our relatively attractive yield which is well covered.

I would now like to turn the call back to Mark to conclude.

Thank you Scott.

It's been a while since our last earnings call and we're happy to report strong operating and financial performance through 2020, despite the challenging challenges, resulting from Covid, which we have been able to successfully worked through.

We're glad to see the vaccines of good being rolled out and we are optimistic that this will soon have a positive impact on the world economy and demand for LNG.

Looking forward, we believe ggp's unique portfolio of long term fixed price contracts will continue to allow us to generate consistent cash flows further reduce our leverage and return capital to our shareholders.

The unique tailwind in the global LNG industry provide the strong outlook for our business in 2021 and beyond and.

And we believe the steps we are taking today to further strengthen our financial foundation will position us well for the future.

Thanks for your time today.

Operator, we are now available to take questions.

Yes, Sir Thank you and as a reminder, if you would like to ask a question you may signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to the liars signals from each of our equipment.

Once again that is star one if you would like to ask a question.

And we will now take our first question.

Randy given from Jefferies.

Hey, guys. This is Chris Robertson on for Randy Thanks for taking our call.

Good morning, Chris.

Yeah. So the first question is just around the distribution increase I just wanted to get a little bit more color on how the 15% number was decided.

Yeah.

Scott on the yourself from myself so.

Share, maybe I'll I'll take a stab.

Thanks, Chris.

I think you know the first place that we start of when we look at our distributions is what do we think of sustainable and based on the cash flow portfolio that we have and also the income that we're expecting over the next number of years. It was a just sort of determined as an amount that we thought we could.

Comfortably do comfortably afford and would hopefully allow investors to give us a another look and say Oh, Here's a company of this increased distributions by double digits over the last three years and it has got a good profile until that will hopefully get us noticed in and maybe picked up this year. After a couple of years of maybe some of them from.

<unk>.

Yes that makes sense and that was certainly good luck.

With that I'm moving towards I guess the industry, so with Blackrock, taking gaslog private you know golar, possibly spinning off its LNG fleet later this year and maybe next year, what's the T G piece of appetite for industry consolidation.

Yeah.

Well, let's just start with the couple of those transactions I think it's pretty exciting the risk.

Investing like Blackrock.

Coming in the Blackrock over the very good reputation for ESG and so the the fact that day they value. The the shipping is part of the infrastructure of LNG is the cause of real validation for our business.

The.

What the specific question you asked I'm, sorry, Chris was the grounded.

Just in terms of your appetite for consolidation.

Yeah. So.

We'll have to we'll have to see.

We typically.

I mean, we're not what I was thinking.

He can comment on on any specifics the word.

But I.

I think the.

The market is does have consolidation opportunities.

Obviously, we've seen two companies go private.

It will be going proud of this year, there's more smaller ship owners around that there were certainly five years ago, and so I assume you don't know whether it be us, but I think some of these smaller ship owners are concerned.

For consolidation.

Okay.

I guess the last question from me regarding the 147 million knock bond due in October of I know you mentioned that it could be repaid in cash, but I guess, if you could ascribe some type of likelihood of that Oh are you leading more towards just repaying it in cash or is it likely that it'll be refi it in some way.

Yeah, we do we do monitor of that market very closely and we do think of we've got pretty decent access to it.

And I think it's going to depend on what opportunities really we see a towards the maturity date to actually deploy that capital and versus the rates. So we think we can get so I think where we're still in a wait and see I know that's sort of an answer to your question, but we're very much in a wait and see mode to see if there's a way for us to actually go in and do something with the proceeds.

I think it was good that we are able to go in in May.

We paid off the Norwegian bond that we had and because of that market was not attractive at that time and then we wait for the window of open up at the end of the summer and we saw that the rates were significantly lower and so that was a great time for us to go in and add some cash to the to the balance sheet for for the potential opportunities.

But then I think since that time the.

In some ways that were all of those kind of calmed down and are there seems to be a more orderly orderly future.

And so maybe having that extra cash or you know call. It insurance. If you will on the balance sheet is maybe not something that a net we would need by the time, we get to October of so I think we'd have to just wait and see the world continues to develop and what opportunities we see in the.

Versus the pricing that we think we can achieve so there's a bunch of different things go into it.

Yeah I appreciate the details around your thought process, there and I think that's it for our questions. Thanks for the time.

Thanks, Chris.

Well now take our next question from Ben.

Nolan with Stifel.

Hey, guys.

I want to come back to a to the distributions of little bit.

And and and maybe less sort of around the math of how you got to the number that you got to and and more.

More of maybe about the cadence of it.

The third year of ROE now that you've made a pretty meaningful increase in your distributions.

And as you said Scott I mean, hopefully later this year, you'll be at the top end of your target leverage range.

As you sort of look out going forward do you do you think this is let's say the the distribution increase here.

By 15 per cent you think this is just sort of another one of what it could be you know the.

A multiyear process, even going forward of distribution increases or are you getting to kind of a level, where you can say okay. What's the this is a good plateau and incremental dollars.

Yeah. It can be allocated of growth because of our leverage is down the way we wanted to be but.

Just trying to get a sense of of sort of how from the capital allocation standpoint, you you feel about the distributions at the end.

In terms of the sort of the the process in the lifecycle of it.

Sure.

So you're right at the in just three years in a row now of double the double digit increases, but I think we also have to remember that that's off of a.

Relatively small base and so the dollar value increases are not as sizable as the as the headline of percentage range would be and I think the that's important because really we do look at the center on the free cash flow on the cash flow basis is what are we generating a wash that net income and how do we ensure that.

Our distributions are going to be well covered not not just by DCF, which is sort of the old school.

L. P type economics, but really of what is that going to be covered by our net income and cash flow. So I don't really want to get drawn on what the future looks like I think we'd do like the look back of.

Having increased the distribution a year over year and getting people to really evaluate the understand the cash flow that we have so maybe without all three of Mark has any other comments.

Not really Scott is as you mentioned the.

You've mentioned the quarter on quarter, it's part of a balanced capital allocation program. So.

As we see the unit price hopefully go up as we look at the fleet renewal.

The opportunities to have the didn't been coming along with the that's why he's taken install if we look at all of these different opportunities when we look at the distributions next time.

We will take of course by horse So I as Scott said, we cant really.

Say exactly where we're going to go because we do have all the things up around the opportunities we're always weighing against now.

Maybe just following on again I think the other thing we have to always remember as part of that balanced capital allocation plan is that our primary objective is to continue to delever the balance sheet.

And we will do that naturally of with around 300 million of amortization, which includes our joint venture debt and on a percentage basis and that still has to be our number one we did lever up in order to take on that growth and so that's the other part of the equation is that we can have a distribution that is of such a level.

That will not allow us to continuing of Delevering efforts.

Okay.

Appreciate that.

And then secondly, just sort of as it relates to growth and it may even be getting a little bit closer to that.

It's sort of been reported that there's there's been a new building contracts on vessels for the most of them Big project.

I assume that you guys looked at that and just curious as to sort of how you see returns in the market now and incremental opportunities.

Are they are are they up to your threshold or you know did you choose to pass on the merit. It was just too early or or any color there.

We are we took a pass on the the most big project and there are two honestly most of the big projects. The first one.

Hotel, which is of what you're referring to.

We took a pass for a couple of different reasons, but one of which is exactly what Scott just said this is Dave.

They were expected at the time that the tender keen now to come a little closer to our Delevering path now things of being delayed and in Mozambique, as we know for for various reasons and not just COVID-19, but the first center was come out it wasn't it wasn't winding up.

As well with our priority to Delever.

It does have some some hair on it is as you know and I'm just kind of alluded to the returns for that one of our it should be double digit on the equity single on the on the return.

For an unlevered sort.

The levered basis.

But I'm not sure that when we look at a project like that I'm not sure of the risk reward is it's there. So we're always looking at the risk adjusted return and it has to be seen the Fortunately as the project gets delayed and I'm not sure that the ship owners of necessarily are on the hook the those delays, but the reason.

Always a little bit of risk with the with the projects like that I think that warrants. The frankly, if you look at the big the big probably the the tender that's going to come out as probably the Qatar.

Obviously, the returns would be able to lower but the risks are are all obviously you should be correlated lower too. So when we look at a big portfolio. We have you have the African business now we havent even in Golar, we have the mall business, we have infrastructure projects, we've got the.

The the risk side of it all and I think we're a little bit more leaning right right now this year towards the later, the midrange, which are a little bit less risk.

Yeah.

Okay.

That's helpful and then laugh I wanted to come back around of the two one other question that you the answered earlier and not really about consolidation but.

The on on that theme, obviously of a an infrastructure fund that's buying infill.

The infrastructure of sorts of assets.

Maybe not as a buyer, but has the potential I don't know if seller is that at all of something that you guys have given any consideration to or do you think there would be any appetite for.

Okay.

The Mark the average I got one more.

Sorry, Yeah, sorry, I thought it was and I was on mute, but we're always we're always obviously assessing opportunities to increase shareholder value, but you know we don't comment on things like that any of it as I said to you. It is interesting that you see infrastructure, it's the validation for our business than we'd like them, what's happening with the.

With the infrastructure coming out of especially like the the likes of the of a couple of Blackrock. So I think you know all of them because it's in the industry.

Okay.

Alright, thanks, guys.

And well take our next question from Omar Saad with Clarksons Plateau Securities.

Thank you.

Hi, Mark Hi, Scott Good morning.

I don't know.

I wanted to just maybe I think and I think Scott may have already answered it from the last call of last question from Ben but.

Wanted to ask kind of how you guys are thinking about things now with the deep backlog do you have leverage is approaching the target is at the.

The payout.

And in terms of key priorities going forward is it still the most important thing number one right now is to delever and get within that range.

Sure.

Yeah, Hey, Omar Scott, Yeah, I think that that is still the number one priority.

You know as I said earlier, we did take on a fair amount of debt.

And even though the debt is completely manageable because of the fixed rate contracts, we have and that we feel very confident and have seen over the last number of years that all of them perform as expected I think that none of us wanted to get back into that position because of just really limits your flexibility to.

To add value going forward and so I think the way, we would want to see ourselves at least half of trajectory to get into that.

Into our target leverage range before we start to look at ways of of adding adding to our leveraged portfolio. So I think it still is the number one.

Some of our kind of off here on the other comments, but that's where I am.

No I totally agree with Scott.

Okay, and then murky.

You mentioned, the Qatar gas tenders in which I'm taking.

On the North field expansion of recently have you gotten any sense of timing or any information regarding the.

Those tenders of what they would consist of any sort of update on that from.

No the industry hasnt, yet as far as I know receipts due to the updated.

Timeline.

Maybe just shifting maybe of the shipbuilders or having some dialogue as a result of the FY <unk>, but we don't have that shook ours are clear.

A clear deadline or time line yet it was initially expected not to be until the human or so and I don't think that's changed at least.

So it's gonna be of its going to be a little while and then the ships actually when they are awarded our understanding of they'll stagger out so even if the order sorry of award.

Stack of ships this year.

Those deliveries might be staggered out to 'twenty five 'twenty six 'twenty seven or so.

Yes.

So we don't have a great update for you, but we are still stuck.

Expecting at the year. This year, it's probably the most probable and the thing I really liked about it is is the carbon capture aspect of the liquefaction side. So it's just.

Another.

Think of good thing for the industry that if you had the liquefaction projects like debt, it's become an increasingly clean it can really compete for decades, as we said over a over another.

Fuel sources.

Thanks, Bob that's interesting yeah, that's all we'll stay tuned.

<unk>.

What sort of general question I have the I know you don't have really that much exposure to spot rates.

Wanted to just assets in the spot.

Spot rates.

Started the graduate with higher this past fall and even as they are moving up we really didn't see charters go crazy looking for the time charters, obviously there were some opportunities.

Guys did again the job with the the methane spirit of generally doesn't seem that the net sure enough of it screens pretty much all charters the sweet epicentre of caught short do you think.

Charter's attitudes may change here as you think of that take next time, there's a leg up in rates of any indication.

That Oh, you had the senior debt.

We're looking more actively for the car.

Correct.

Well, you're right we didn't see a lot of time charter opportunities. We didn't have a lot to to offer but we have just a little bit. So we have a good understanding of the the time charter market and there haven't been a lot of time charters the.

The market run up I think wasn't even that much experience by individual ship owners because sublets are we're able to take some of these more exciting fixture of rates in terms of what happens in.

In the future.

Even though the award of lot of our time charter opportunities I'm not sure that that won't be the case in the future because the the mark the the charters like Teekay see that 'twenty 'twenty, one and 2022 will probably the relatively weak is how how we and I think most charter.

So do it so even if so they saw the run up I think they also saw this coming down which it now has.

As we look into the.

The winter I think there'll be another seasonal peak in the winter.

But I think we have another dip in 2022, I think the share that with the charter so but as you look to 'twenty three 'twenty four 'twenty five again, I think the charters of share our view or vice versa, and I think youll see more charter time charters starting around that debt that period of time, so for us on the <unk>.

Real spirit.

We're actually as we said in the prepared remarks, we're not eager to get a time charter out of six or eight rate base at least right now because we think the of the.

The time charter suite available.

They're just not that they're just not that favorable.

We have a big enough portfolio.

Debt, we can actually let the Creole spirit I think right on the rate basis, a little bit this year and stuff and hopefully be able to get one of those time sort of as I mentioned later.

And so we just have the two ships basically we're looking at this year. The open the Korea of both of which had been redelivered from from from Cheniere and that'll be our focus this year.

Got it okay. Thanks, a lot of for that kind of I appreciate it.

The it from me.

Our next question will come from Chris Chung with Weber Research.

Hey, good afternoon, guys how are you.

Hi.

Hey, Scott.

Wanted to kind of once congrats congrats on the record result on page I think from that.

All of the 24, one of the most of.

And I guess I wanted to the.

So all of them a little bit more.

The strong out of low quality.

Guys to yourself.

On the chartering in more vessels.

Chartering in vessels kind of.

Participate.

Hey, its level.

Yeah.

Hi, Kevin.

To capture what you guys are talking about like the strong walk the walk from 2020 day.

Sure.

We haven't been looking at insurers right now I think the the lines a little bit hard for you for me to hear sorry, but I think you talked about how the the.

Rates, we would expect it to be improving in 2023, 24 and would be would we be in chartering to.

To take advantage of the that is that what I heard.

Yes, sorry is this better.

Yeah. So that's what I heard the point, we have done that in the past very successfully.

One charter debt, we have onto Petrobras, which is the sub charter with the chartered essentially from the JV and we were able to lock in those returns.

The almost in advance of doing the charter and so that's been out of exciting if we see that opportunity, but again, we're there to do it for sure.

We haven't seen other Indian or orders yet.

Looking for charters out to two.

Or sub charters to that matter to two other owners.

It's not a it's not a typical thing that happens in LNG, maybe that's changed just like the rest of the industry is the change more towards the accrued setting but.

No right now you don't see a lot of in chartering opportunities from owner at the corner, but if it comes up.

It's something we would.

Certainly certainly look at.

Okay cool debt.

Makes sense and I guess on capital allocation priorities. The party right now is to Delever.

But I guess I need the task.

Are there any appetite or desire for secondhand vessels, perhaps or.

Is all of the cash flow from operations going to Delever, and possibly looking at the cut or tender.

So at the right, where the marketing I think or yeah.

Yeah, I think youre right I think of preferences for for new builds for a couple of reasons number one it's Scott mentioned, our number one priority of Delevering and it wasn't newbuild we can.

Order to day, you theoretically and we will take the Liberty until we are de Levered. So we've met both goals if we were to buy a secondhand.

Today or next year whenever I'm certainly this year.

Run into that have we sidetracked the delevering more that's one the.

The thing is the ships at our bread and butter, our real goal, although we're going to let the creel.

Flow if that's better.

We prefer of portfolio by and large it's fixed term contracts that's our hallmark.

And the second term secondhand opportunities that we've been seeing it we'll probably see in the future if they come with any contracts, they're not that long.

So Arnold our hope is that when a tender comes out we'll just use as far as the example that we can bid for relatively long term contracts that are the lab that are delivering later and our competitors hopefully wont be as competitive as states maybe been in the past.

Because they didn't have a lot of these ships that are delivering now and they have a verity of having to deal with that whereas we have nothing out of the order books, we havent ordered.

That's a little over five years and so we're just we're just building our our powder up.

Yeah, Thanks, and just one last question I.

I guess just touching on your comment earlier on risk and reward.

It goes right to me the reports earlier this year about the damage to one of your average Kevin's been the correct yes.

Of note, while traveling the northern Sea route.

You provide some color here and is there any impact to GGP line of shifting is damaged.

Because I understand it they didn't list.

Going through the parents, but I wasn't able to understand the disappointing.

Thanks.

Yeah in that case, we it looks like that's the damage.

One of the parts.

We use instead of propulsion types of work.

The propulsion instead of the pillars normal propellers of.

So of the ship will be in in the dry dock.

Starting tomorrow, and we'll get it fixed we'll put it back up into the better we don't expect.

There to be any of its insured and as far as deductibles. So we actually are currently not expecting net there'd be any liability for the owners. So I think that I think it should be a non issue is that we see it. Although we do have to get the damage done repair it I should say over the next couple of weeks.

Okay, Great. That's it for me of tender with 10 stores.

Our next question of will come from Liam Burke with B Riley.

Yeah.

We discussed earlier on the Newbuild is there anything adjacent to the industry that has the types of returns are the.

The meet your discipline them like in the U S.

All of your space.

We may have missed I may have missed most of your question I'm not sure. If there was the mute or something but I did pick up at the end you talked about.

Adjacent opportunities in the right.

True.

Okay go ahead of the answer is yes, yes. So we're looking when you look at it at a number of things.

For instance, if we look at.

Very large ethane carriers that might be of possibility. Some day, it's in the nascent stages and we have that type of expertise and if theres a good tender that comes out that would be that would be of interest to us the fsrus.

The Jason C. It's relatively easy to in.

In fact with one of the right now we do Regasification net the Bahrain terminals, so that would be something we could we could we could do the issue we have with except for certain use at the moment in our opinion is that there over the order.

Or I should say even on the seat so but that's that's something we would definitely take a look at.

The LPG business is something we really like and our ex smart side of the fully refrigerated it's somewhat limited on how much growth we could have because we're already relative to the dominant through debt J D. In the in the midsize space, but that is adjacencies too as you know we also carry ammonia on that and as normal ammonia becomes a.

Bigger part of the energy mix.

The carrying a lot more ammonia for instance, and then we talked today about how we think the hide it seems relatively small small part of the the energy mix going forward.

In the near term and that is true, but to the extent things like that come up.

Different types of liquefied gas the sort of of the capture of liquefied the carriage of of <unk>.

Captured gases et cetera, we've got a pretty good team to not real good team of I think to take a look at that and take advantage of these east of liquefied gas adjacencies wherever they may come.

But in the near term in this year I think it's the.

The opportunities were most likely to take a look at.

Or it's simply part of LNG carriers.

Thank you.

That does conclude our question and answer session I would like to turn the conference back over to Mr. Coleman for any additional or closing remarks.

Just like to thank everyone for their support and look forward to catching up with you next quarter, if not sooner. So thank you very much.

And once again that does conclude today's conference. Thank you all for your participation you may now disconnect.

Yes.

Okay.

Okay.

Uh huh.

Yeah.

Okay.

Okay.

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Yeah.

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