Q4 2022 GasLog Partners LP Earnings Call

The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Okay.

Okay.

Good morning, My name is Sylvia and all of your conference operator today at this time I would like to welcome everyone to the Gaslog partners fourth quarter 2022 results conference call all.

All lines have been placed on mute to prevent any background noise.

A reminder, this conference call is being recorded on today's call are below I know you'd see chief Executive Officer.

Let's see.

Chief Financial Officer.

And now Robert Greenberg from Roseland Company will begin your conference.

Good morning, or good afternoon, and thank you for joining the Gaslog Partners' fourth quarter 2022 earnings conference call for your convenience. This webcast and presentation are available on the Investor Relations section of our website Www Dot Gaslog MLP dot com.

A replay will also be available.

We are participating via webcast. Please note that the slide presentation and these are controlled and we encourage you to attend the presentation that you're prompted to.

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 our fourth quarter earnings press release.

In addition, some of our remarks contain non-GAAP financial measures as defined by the SEC. A reconciliation of these measures is included in the appendix of this presentation. Paolo will now begin today's call with a review of the partnership's fourth quarter and full year highlights and market update following which I will walk you through the partnerships right now.

With that I will now turn the call over to Paolo.

The Gaslog partners.

Okay.

Thank you, Rob and welcome everyone to our fourth quarter conference call.

Before I get started I would like to acknowledge that SP yesterday's press release. The partnership received an unsolicited proposal from Gaslog LCD, which our board and conflict Committee are currently reviewing.

This presentation will remember it does not touch upon the proposal at this process is currently underway.

We therefore deem it appropriate then no Q&A session is out today.

Please turn to slide four for Gaslog partners fourth quarter highlights.

Thanks to increased LNG flow throughout the year Europe managed to replace Russian gas, achieving seasonally high inventories and it shouldnt that Europe will be able to get through this winter in.

In the process and as your prices and spot shipping rates increased to record highs.

Both prices and rates soften during the fourth quarter as warmer than average weather in Europe resulted in decreased consumption.

Prices fell nearly 80% from their August peak and inventories are currently nearly 20% above the seasonal average.

Although the LNG shipping spot market has come off significantly the partnership manage to fixes remaining open days in the in the term market at attractive rates.

This leaves a partnership with 87% of days in 2023 fixed well the remaining ones are heavily weighted to work the seasonally strong fourth quarter.

The term market has remained tight leading to the declaration of charter as options for two of our vessels and the new charter picture for Gaslog, Seattle as I will discuss shortly.

Overall, our contracted revenue backlog rose to $729 million, an increase of 18% since our last update in approximately 30% compared to the fourth quarter of 2021.

Our capital allocation strategy and disciplined use of cash has allowed us to continue working towards our gross debt to cap target, while our press buyback have increase our free cash flow per unit by 11%.

We also derisk, our fleet to the well time direct sale and sale and leaseback transactions in 2022.

Please turn to slide five.

In this slide we'll focus on the impact that the Russian Ukrainian conflict as Ed on the LNG commodity market.

You can see the monthly pipeline flow from Russia and have fallen nearly 90% since the start of 2022.

Despite this and thanks to the flexibility of the LNG supply chain Europe magnitude affinity mentor is a seasonally high levels.

Thankfully competition for major importers was notably absent due to a combination of LNG prices moderate weather and continuing COVID-19 restrictions in China.

This has created two dynamics that are out of interest.

Firstly higher LNG flows into Europe are likely to continue in 2020 feet.

Secondly increased global demand for LNG is exacerbated in an overdose called city of energy supply and specifically in LNG supply deficit, which is likely to remain until new import and export capacity comes online.

In response to this we've seen about 25 million tons of new projects being sanctioned and expect this figure to double in 2023.

Creating additional demand for LNG carriers to match the robust new building order book.

Slide six focuses on the impact of these dynamics in the shipping market.

The spot market saw significant volatility in the last quarter of 2022, driven primarily by the conditions that I discussed.

The spot market peak of nearly $450000 per day, as congestion and floating storage heavily restricted availability of vessels.

Charter is where most of them willing to sublet their vessels.

Since rate peaked above average temperature of reduced a constant need to refill inventories, resulting in falling LNG prices and easy on floating storage.

Additionally, the continuum Freeport outage and persistent low exports from Nigeria have resulted in reduced LNG exports and increased the number of spot vessels available in the Atlantic.

Increased volumes are balanced with the shorter clips, reflecting the higher flow from USD Europe rather than.

In Asia to keep ton mile demand flat in 2022.

Regardless the term market remains strong thanks to the charters continue interest for multiyear coverage, we can only be met with independently owned vessels, while the number of uncommitted vessel keeps falling.

In the next slide you can see more details on the charter that was referenced earlier, namely the two extensions into one new charter and you can combine <unk> hundred 67 millions of EBITDA.

The extensions also have reaffirmed the attitude of charter is to focus on long term business.

As mentioned in our previous calls the work with any synergies progress and although still under negotiation. We have agreed in principle that the partnership will convert one of its 145000 cubic steam LNG carriers to an FSU, which will be chartered to Venice energy as effective returns.

Further information on the project that you had expected mid 2023.

Such conversion is expected to cost in excess of $100 million and take between eight to 10 months.

Finally in slide eight we would like to give an update on the environmental related regulations affecting our business.

There are several other regulatory bodies that have issued another developing dedicate their regulations aimed at decarbonizing world by shipping.

Late 2020, the European Union has moved on to funds under the fit for 55 umbrella.

Ratifying the A&P of shipping into the European emission trading scheme EU ETS.

And launching the field EU in order to promote their transition to green fuel and a step approach.

These regulations will gradually enter into force in the next few years and net to the <unk> framework in order to drive the industry net zero targets.

As we seek further clarifications on the application of such rules. The partnership is developing dedicated plans to improve ships efficiency and reduce emissions as well as cooperating with our customers and investing in digital tools to improve the efficient use of our ships.

Further updates in the months to come and in our 2022 ESG it effort.

Before I hand over to a cliff I'm delighted to report that the partnership vessels another year, a particularly good safety score in 2022 with zero LTE is achieving the ever needed gold data.

Yes.

Thank you Paolo.

Turning to slide 10, and the partnership finalized how these ads for the fourth quarter of 2022.

Revenues for the fourth quarter were one 5 million a 19% increase from the fourth quarter of 2021. This was primarily due to a net increasing that have a need for a modern vessels. How proud I think of this fault and felt that the market in the fourth quarter of 2022 in line with the convenience of the LNG shipping spot and.

So that market.

This increase came despite a decrease in available days due to the sale of the methane Jane Elizabeth.

2022.

Adjusted EBITDA was 81 million, an increase of approximately 17 million or 26% from the fourth quarter of 2021.

Two of your out of it yet.

As mentioned earlier.

Operating expenses decreased by 0.9 million, mostly due to the favorable movement of the Euro USD exchange rate in the fourth quarter of 2022 as well as the sale of the message really is our best quarter of 10 22, partially offset by the in house My Name's ran over this whole life asset.

The liberty into our managed fleet in quarter two 2022.

Finally, our adjusted earnings was 70 74 cents per unit.

This increased by 64% compared to the fourth quarter of 'twenty one.

Overall, we are pleased with how that farmers in this quarter as we continued at a top tier in our fleet at <unk> with improved visibility on our 2020 free cash flows.

Turning to slide 11, and look at our cost base.

Our daily operating expenses per vessel.

10000, $9075 in the fourth quarter, a decrease of $721 per day compared to the fourth quarter of 2021 due to the factors I just described earlier.

General and administrative expenses were $12 2 million in the first quarter of 2022, an increase of approximately 0.7 million from the fourth quarter of transplant lung.

Daily General and administrative expenses increased to $3240 per vessel per day in the fourth quarter after understandable.

2000, and $543 per vessel per day in the fourth quarter of <unk> due to an increase in the administrative service fees for our fleet, which was partially offset by a decrease in the size of our fleet. Following the sale of the methane Silverdale is I bet.

Was that of transatlantic.

As a reminder, that J&J is can the vessel management commercial management and that means I think service fees compared to the prior year and in line with our commentary in the previous call desk and disclosed in detail in our 20-F.

Our results were also impacted by a $6 3 million increase in interest expense due to an increase in the base interest rate.

LIBOR or cell phone compared to the fourth quarter of 2021, partially offset by the deleveraging etsy during the last 12 months.

10000 feet, we expect our unit operating expenses to average approximately <unk> thousand eight.

That vessel update with actual operating expenses materially impacted by the foreign exchange movement.

General and administrative expenses are expected to average approximately $8600 per vessel per day in 2028.

Also we have for the vessels that will undergo scheduled dry dockings in 10, <unk>, which will result in approximately 30 of higher revenue base by vessel and the total estimated cost of $15 5 million, including cost for ballast water treatment systems.

The impact of scheduled off hire days is factored in the slide 14 to discuss subject.

Okay.

Slide 12 illustrates the progress the partnership has continued to make in person but.

Currency unit repurchase program.

During the fourth quarter, we repurchased an aggregate of $10 5 million of residential units in the open market.

Since the program was initiated in August of 'twenty, one the partnership yesterday that says approximately 68 million, but I think it's again.

It's an aggregate at an average price close to $25 a unit.

These are the best sense is heavily used brass LNG unit distribution by approximately $5 7 million or 11 cents per common unit on an annualized basis based on the Niobrara units outstanding as of today.

We expect to continue Opportunistically repurchasing.

In the open market as conditions to date and that $87 4 million in series B preferred units outstanding as of today, which are callable at.

Apart from mid March then 23 and onwards at the partnerships option.

Okay.

Slide 13 shows the progress we have made the works how the leverage targets, which we first introduced in the third quarter of <unk>.

We have made good progress on these goals. Despite the impediments houses we took in 2010 at all in connection with a book value of our investments.

During the fourth quarter of 2022, we repaid $21 $7 million of definitely this on scheduled amortization and 16 million in the first quarter of trying to tie the tone.

Sure.

We paid $34 2 million of debt outstanding in relation to the sale of the methane is really the best in quarter, three 2022, and $32 9 million of debt I'll start digging in relation to the sale and leaseback over the methane Hello, Sally in both desktop and transitory.

I said it out.

Debt to total capitalization widen over there to leverage targets as we have said he has been reduced from 54% as of the end of the fourth quarter of <unk> to 49% as over the end of this past quarter.

Furthermore, our net debt to trailing 12 months EBITDA has been reduced from four four times to two eight times, which is currently below our long term target.

Net debt to EBITDA has of course been positively impacted by the partnership's strong performance in 2020 tolls I realize the increase in the cash and cash equivalents in our balance sheet.

It is important to remember that our net debt to EBITDA may fluctuate based on our future operating results and the deployment of gasoline in the execution of our capital allocation strategy.

We expect to continue reducing our gross debt to capitalization intends to interface with the scheduled retirement of approximately 112 million of scheduled debt principal payments in aggregate.

Do you think that balances and making opportunistic repurchases of preference units will further reduce the partnership's cash flow all in breakeven levels over time and increases how future free cash flow generation potential and passing the partnerships equity value.

Slide 14 shows our contracted revenues by quarter into 2025.

As you can see from the chart on the left we have managed our exposure to the spot market over the next 12 months, while still maintaining exposure to the seasonally strong fourth quarter in 2028.

<unk> significant downside protection in 2028.

Average 10000 per day increase in TCE on our open days above all operating break even out as we will increase our EBITDA by approximately $6 7 million on full year basis.

With that I will it doesn't always follow for closing remarks.

Thank you Nicholas turning to slide 16 and in summary.

Energy security continues to drive market volatility demand for LNG supply and supports new.

That additional capacity.

The LNG shipping market has benefited from such dynamics and currently maintained strong term business level, even in the face of potentially challenging ton mile developing between Europe and far east.

The partnership is capitalized well under strong LNG market securing lucrative fixture throughout 2022 and the exercise of two option charter period for our vessels.

Our disciplined approach and focus on deleveraging a strengthened partnership balance sheet, delivering tangible value to our unitholders as well as enabled us to identify growth opportunities and attractive market returns.

Finally, the partnership continues to benefit from the favorable shipping market in 2023, and we are diligently executing on our strategy to meet our capital structure targets.

Thank you to everyone today for listening and for your continued interest in Gaslog partners.

Stay safe and if you have any question please contact the investor relationship team.

Thank you. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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