Q1 2022 Hoegh LNG Partners LP Earnings Call

Good morning, and welcome to the Hoegh LNG.

Partners first quarter 2000.

'twenty one earnings conference call.

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Chief Financial Officer, and interim CEO . Please go ahead.

Thank you Andrea and good morning, ladies and gentlemen, and welcome to Hook Energy partners earnings call for the first quarter of 2022.

My name is a whole lot to do and I am the Chief financial Officer of the partnership on a also fill the role as interim CEO .

For your convenience. This custom presentation is available on our website.

Turning to page two in today's presentation, we have an overview of the content on the presentation I will start with some highlights from the first quarter.

It doesn't cover the quarterly financials thereafter, I will give a market update before summarizing the presentation.

You'll have the opportunity to ask questions at the end of the call.

Okay.

Before we start please take note of the forward looking statements on page three and a glossary on page four.

Then turning to page five the highlights.

I'm pleased to report that the fleets hot 100% availability in the quarter. This was soft in total revenues was $35 3 million and a segment EBITDA of $33 4 million in the quarter.

I still today the partnership has not been materially impacted by the COVID-19 pandemic.

The Hook Lindsay group has taken steps to mitigate risks from COVID-19, I didn't show the health of safety of our crews are stuffs, which is our highest priority.

Thanks to the hard work our people on board the vessels and onshore the fleet is operating as.

Expected.

Despite the pandemic.

Yeah.

The whole gallon commenced FSA your operation in Jamaica for New fortress energy towards the end of the first quarter.

Okay.

Despite the pending arbitration with the charterer under the lease and maintenance agreements with the pizza unnecessary lumping. Both parties have continued to perform their respective obligations under the agreement.

No assurance can be given at this time as to the outcome of the disputes with the charter.

Okay.

The refinancing of the coupon debt facility, which was agreed on December 15th 'twenty 'twenty. One is expected to close on June 1st 2022.

Okay.

Today, the partnership announced it has entered into definitive merger agreement with Hook Lindsay.

Two which hugged Lindsay will acquire for cash all of the outstanding publicly held common units of the partnership at a price of $9.25 per common unit I will speak more about this on the next page.

Turning to page six we covered the merger agreement with <unk>.

As mentioned pursuant to the merger agreement turbulence. He was a quiet for cash all of the outstanding publicly held common units of the partnership at a price of $9.25 per common unit.

The revised price represents an increase of $5 when compared to the offer of $4.25 per common unit made by hook Lindsay on December 3rd touch sent to them and a premium of 35% to the closing price of the partnerships common units of $6.85 per unit yesterday.

In connection with the transaction the board of directors of the partnership directed the conflicts Committee of the board of directors comprised solely of directors and affiliated with her glitchy to consider hugs and Gs offer.

Following a period of discussion with her guilty and it's the devices. The conflicts committee approved the merger agreement and determined that the merger agreement and the transaction contemplated thereby are in the best interest of the partnership and the holders of the partnerships common units unaffiliated with LNG.

Based on the recommendation of the conflicts committee the board of directors and I'm not going to see approved the merger agreement and recommended that the partnership common unit holders approve the merger.

The merger is expected to close in the second half of 'twenty to 'twenty two.

And it's subject to approval of the merger agreement and the transaction contemplated, thereby by a majority of the outstanding common units of the partnership.

Certain regulatory filings and customary closing conditions.

Hug Lindsay owns 45, 7% of the common units.

Entered into a support agreement with the partnership committing to both its common units in favor of the merger.

The series a preferred units of the partnership will remain outstanding.

Turning to page seven we are showing an overview of the partnership's modern assets. The partnership has approximately eight and a half years average remaining contract length and full contact coverage until late 2026.

Turning to page nine we have the key figures for the quarter, showing an operating performance, which was weaker than in the same quarter of 2021 with a segment EBITDA of 33 4 million in the quarter compared to $34 5 million in the first quarter I'd like to talk to them. The decrease is mainly due to.

<unk> administrative expenses.

The limited partners interest in enough to soak was $16 3 million in the quarter down from $20 million in the same cultural trying to talk to them.

Turning to page 10, there showing the development in key messages all the time.

And as you can see from the graph the operating performance remains relatively stable.

Two quarters have Mark Neville negative deviations the second quarter will tend to 19 in the second quarter of 2021.

In the first instance, the duration was primarily caused by the dry docking and maintenance so the calendar 2019.

The deviation in the second quarter of 2021 was primarily caused by a tax provision for previous periods. Following your salt with Pax, OLED, which could disagree to dispute it.

Turning to page 11.

Here, we are showing the income statement in more detail.

Total revenues of $35 3 million in the quarter was about <unk> 5 million more than in the same period in 'twenty took to them.

Vessel operating expenses of $6 2 million in the quarter were almost the same as in the same period last year.

Administrative expenses of four point well, maybe in the quarter were 1.4 million higher than in the first quarter of 2021.

The increase is primarily caused by higher consultancy fees and audit fees.

Equity and earnings from joint venture for the quarter was $8 6 million a decrease from $11 1 million for the same period of time to talk to them.

Unrealized gains on derivative instruments impacted the equity in earnings of doing two inches for the first quarter 2022 and 2021 respectively.

Excluding these two items equity in earnings So joint ventures would have been $3 8 million in the quarter. This quarter, an increase from $3 4 million for the same period in 'twenty to 'twenty one.

Yeah.

Total financial expense of $5 5 million in the quarter equals a decrease of Cedar point $7 million from the same quarter sent to them.

Income tax expense of $2 8 billion in the quarter represents an increase of $1.1 million from the same quarter of two of them.

Turning to page 12, the balance sheet has not changed much since year end 2021 with total liabilities and equity standing at 1 billion at the end of the quarter.

The $85 million revolving credit facility from Hoagland tea, which is currently doing with $24 $5 million is now classified as current liabilities as it matures on January one 'twenty 'twenty three.

Turning to page 14 on the LNG market.

Global LNG trade rose, 8% in the first quarter of 'twenty to 'twenty, two compared to the first quarter 'twenty tend to work.

The LNG market witnessed a significant shift in regional demands with Europe in the droppings seats.

The European LNG imports increased with an impressive 64% in the quarter or first quarter of 'twenty to 'twenty two compared to the first quarter tend to tend to him and LNG prices continued to be high.

The high demand for LNG in Europe is to a large degree driven by uncertainty around access to Russian pipeline gas.

Turning to page 15, we have two graphs illustrate in the projected development in global LNG markets from now until 2026.

In the chart to the left the incremental volume supply is projected for the most part to come from the USA, Russia and the Middle East.

The recent surge in demand and higher LNG prices have led to more long term LNG sale and purchase agreements concluded lately.

Bringing potential new liquefaction capacity closer to.

This would potentially add to the long term supply growth at the back end of this period.

The graph to the right shows the projected growth in LNG imports globally.

As you can see global LNG demand growth is projected to remain robust mainly driven by the aging ace in the region and Europe .

And the current geopolitical situation European countries seem to be the termite to secured both LNG and LNG import capacity to safeguard the energy supply and shift away from Russian pipeline gas.

This has recently led to an increased demand for restless they use us the input facilities from countries, such as Germany, The Netherlands, Italy, Poland, Finland, and others typically looking to secure a large capacity fsrus with prompt delivery.

With that I turn to page 17 for a summary, what I would like to highlight the following.

100% availability of the fleet during the quarter.

Segment EBITDA of $33 4 billion in the quarter.

Refinancing on the Cape Ann that facility expected to close on June 1st 2052.

Merger agreement with Huggler G pursuant to which hug them to you will acquire for cash all of the outstanding public common units of the partnership at a price of $9.25 per common unit.

And we'd have to I think we will open for questions from the audience.

Yeah.

Question.

Yeah.

Good question.

I'll start.

Thank you Pat.

Thank you.

Okay.

Preston.

At this time.

Well the roster.

And our first question will come from.

Uh huh.

Scott.

Okay, great. Thanks, and thanks for taking the question.

Maybe the first question is just on the transaction so.

I'm curious if you could sort of help us understand the $5 premium relative to the last.

For price.

Basis that was agreed upon on the back of that or how you think about sort of capturing that premium and ultimately how it's justified.

This obviously strong market outlook that you have.

Yeah. Thank you if I could create some unless you've seen where the transaction was announced this morning are on us as we say in the press release. It has been an ongoing process, obviously between the conflicts committee and Unhook Lin Chi.

Negotiating on.

Arriving out what has been agreed a set price.

Detailed surround this will follow in the proxy statement that will be prepared on published a to a to the shareholders are in a few weeks from now so so I need to know.

I need to wait with further details until the proxy statement is complete.

Okay, Okay and then.

In terms of and I know back half closes what we're thinking about do you have a rough sense of how many months do you think you might need obviously, we need a shareholder vote, but then you know probably closing relatively shortly after that if there's something that can get that in the third quarter or are we thinking fourth quarter.

It's a bit hard to tell I mean, we first of all the the proxy statement needs to be prepared and then approved by SSE for for a filing.

That could take a you know what one to two months and then there will be a a shareholder meeting I should say so.

We think third quarter could be possible, but it's also likely that it slides into the fourth quarter. That's why we say during the second half.

Okay. That's helpful. And then I guess the last question just sort of taking a step back and thinking about the market a little bit more broadly so clearly significant demand in the market for fsrus, a lack of capacity you know and obviously that the geopolitical situation in Europe has changed that perspective significantly over the course of the last several months.

That is how to take advantage of that so so what are the what are what are sort of the strategic opportunity that you guys are looking at to try to leverage. This just given the fact that you have 100% utilized fleet as it stands right now I know that the merger is happening. So maybe this is a moot point, but I'm kind of curious about how you guys think about taking advantage of the strength of the market, which could persist for some time.

Yeah. It's a good question unless you know the partnership has full contract coverage until 'twenty two at the sake. So theres not much the partnership can do it with our existing assets.

You may have seen that the parent has concluded our two contracts into Europe recently, it was announced two contracts to Germany. So so the parent Todd.

It's available for you know short.

Almost immediate startup so sudden so the product has been able to utilize that market. Unfortunately.

The or that the partnership has hustled contract called Russell, that's not much much to do with that.

Okay, all right well, thanks very much for the time I appreciate it.

Thank you for great questions Chris.

Yeah.

Okay.

Yeah.

I would like to turn the conference.

Yeah.

For any closing remark.

Okay. Thank you without that I would like to thank everyone for dialing in and participating on the call. Thank you and have a good day.

Conference.

Thank you for attending today's presentation.

Yes.