Q1 2023 GasLog Partners LP Earnings Call
Good morning, My name is Shannon and I will be your conference operator today at this time I would like to welcome everyone to the Gaslog partners first quarter 2023 results conference call. All lines have been placed on mute to prevent any background noise.
As a reminder, this conference call is being recorded.
On today's call are Paolo you noisy Chief Executive Officer, and Chief Financial Officer.
Good morning, or good afternoon, and thank you for joining the Gaslog Partners' first quarter 2023 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, where a replay will also be available. If you are participating via webcast. Please note that a slide presentation that user controls and we encourage you to advance to the presentation in New York.
Two 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 first quarter earnings press release in addition, centrica.
Our remarks contain non-GAAP financial measures as defined by the SEC. A reconciliation of these measures is included in the appendix to the presentation.
Karla will begin today's call with a review of the partnership's first quarter highlights and market update following which I will walk you through the partnerships' financials with that I will now turn it over to pilot it nor is it cheap <unk> CEO of Gaslog partners.
Thank you, Rob and welcome everyone to our first quarter conference call.
Please turn to slide three for Gaslog partners first quarter highlights.
I would like to begin by first providing an update on the partnership merger with Gaslog LCD.
As recently announced the partnership has entered into a merger agreement with Gaslog LCD for the takeover price of $8 $65 per common unit.
Both the conflict committee and the pulp she board have unanimously approved and determine with the assistance of independent legal and finance evaluation the transaction to be fair and in the best interest of the partnership and the holders of common units and affiliated with Gaslog L. T D.
We expect the transaction to close in the third quarter of this year.
Before continuing I like to note that the transaction is still pending and we will not be taking any questions at the end of this presentation.
In terms of company performance the partnership fleet keeps delivering good results. Thanks to the actions taken in the strong market of 2022.
Our exposure in the spot market in 2020, these marginal with nearly 86% of days in fixed time charters.
This is protected short term profitability from the persistent seasonal downturn witnessing quarter one since rates peaked in November 2022.
The increased prevalence of short trips from the U S to Europe as impacted ton mile demand relax have disrupted both spot and term markets and the seasonally high European inventories have reduced Europe's immediate need for LNG.
We were pleased to receive the option renewal declaration from shell on the Gaslog Geneva and kept taking advantage of a sustained sale and purchase market with the completion of the sale and leaseback transaction of the Gaslog Sydney with new repurchase obligation attached to its five year bareboat charter.
This matches well our disciplined capital allocation strategy and continued work towards our stated deleveraging targets.
I will now pass onto a kit as well who will present the financial results for the partnership.
Thank you Paolo.
To slide five and the partnership's financial results for the first quarter of 2028.
Revenues for the first quarter were 99 million a 15, 9% increase from the first quarter of 'twenty to 'twenty two.
This was primarily due to a net increase in revenues from our fixtures we entered into in 2022.
This revenue increase was partially offset by a tendency of avenues, Hello, and due to the off charter days all of the scheduled drydocking of the Gaslog Shanghai in total the sale of the methane Shirley Elisabeth.
First quarter of 2022, please reduced.
We reduced our ownership days all that out.
Adjusted EBITDA was $76 million, an increase of approximately $15 4 million from the first quarter of 2022, primarily due to a year over year. They understand that they need to have mentioned earlier and a decrease in vessel operating expenses, which I will describe in the next slide.
Finally, our adjusted earnings were 62 cents per unit all of that out as we had.
We are pleased with our performance in this quarter as we continue until it's out there I think our fleet at healthy and as with improved visibility on our 2020 free cash flows.
Okay.
Turning to slide six and an outlook at our cost base.
Financing expenses decreased by two 7 million, mostly due to a decrease in crew costs largely related to nonrecurring costs associated with COVID-19 measures in 2022 as well as a favorable look really good.
The exchange rate in the first quarter of 2020.
Compared to the same period in 2022.
Yes, there's a sultry decrease in technical maintenance costs in relation to seasonally lower plant maintenance costs in quarter, one 'twenty fate, all that all our daily operating expense were $12614.
In the first quarter.
General and administrative expenses were $5 6 million in the first quarter of 10 23, an increase of approximately $9 million from the first quarter of transplant stone.
Daily General and administrative expenses increased to 4000.
$82 per vessel per day in the first quarter of 'twenty three mainly due to transaction costs of <unk> 8 million in cats in the first quarter of 2023 comprising of legal and other professional fees.
Our results were also impacted by an $8 6 million increase in interest expense.
The increase in the base and demonstrates Libra Asaf will come back to the first quarter of 2022 irrespective of the meaningful deleveraging I'd say during the last 12 months.
Well stand at 23, we expect our unit operating expenses to average approximately $13850 per vessel per day with actual operating.
Costs being sensitive on the foreign exchange fluctuations.
Also we have a remaining vessels that will undergo scheduled dry dockings in 2023, which will result in meaningful revenue days per vessel as well as a total estimated capex cost of $15 6 million, including costs for ballast water treatment systems.
It is likely to increase due to more expensive European yards elected to perform the dry dockings to mass nickel metal trading schedule of their respective vessels.
Yeah.
Slide seven illustrates the progress the partnership has made in its Beth.
Instead of purchasing program until today.
Although we remain committed to the <unk> Inc.
As part of our capital allocation strategy no buybacks was conducted during the first quarter of 10 23 due to the transaction blackout periods.
While the blackout period is over we intend to continue with the repurchase of preferred units in the open market.
Hello, guys as outlined in previous quarters has resulted in projected annualized savings of about 11 cents per unit by reducing preferential unit distributions by approximately $5 7 million per annum.
As of March 31st I'm trying to say there is approximately 87 million in series B preference are you getting yourself, starting we decided the level any at all.
Since mid March then 23 at the partnership's option.
Finally, approximately $77 million in seating seat preference units outstanding So the novel and <unk> 10, before a third option as well as approximately 27 million series a preference units outstanding.
And I wouldn't intend 77 adoption.
Finally on March 15, 2020 say the precedence.
M series B units tend to floating at LIBOR, plus a spread of 5.8, 39% per annum, which was which has resulted in a significant cost increase.
Series B distributions for the eight for this lean mass areas. What are they said to standpoint, 78% on an annualized basis compared to the Facebook one of eight 2% previously and will reset every three months going forward based on the floating rate.
Slide eight shows the progress we have made towards our leverage target, which we first introduced in the first quarter of 2021.
We have made good progress on these goals. Despite the impairment charges. We took in 2022 in connection with a book value for phosphine vessels.
Okay.
During the first quarter of 2023 really paid $32.1 million of debt and leases from scheduled amortization.
Additionally, we repaid 87 $8 million of debt outstanding in relation to the sale and leaseback of the Gaslog Sydney with this transaction also re leasing approximately $49 million Africa Amanda liquidity.
As a result, our gross debt to total capitalization one of the two leverage targets. We have said he has been reduced from 52, 7% as of the end of the first quarter of 2022 to 46, 5% as of the end of this past quarter.
Furthermore, our net debt to trailing 12 months EBITDA has been reduced from four three times to two two times, which is currently below our long term target.
Net debt to Ebitdas schedule of course been positively impacted by the partnership's strong performance in the last quarters as well as the significant increase in the cash and cash equivalents in our balance sheet in relation to the vessel sales and the sale and leasebacks and still it remains available in our balance sheet as of March 31st entrant debate.
It is important to remember that our net debt to EBITDA will fluctuate based on the future operating results and the employment of cash in the execution of our capital allocation strategy.
We expect to continue reducing our gross debt to capitalization with the scheduled retirement of approximately $116 million of scheduled debt and lease principal payments in aggregate in the next 12 months as well as Opex.
Opportunistic buy finished.
Yes.
Reducing debt balances added processing, but after that says it will further reduce the partnerships cash flow all in daily breakeven levels, which remains management's key focus with that I will talk about outlook of the market outlook and closing remarks.
Thank you Nicholas.
In slide 10, we focus on the developments in the commodity market.
A warm winter and a lower Chinese demand, where the saving grace for Europe in the fourth quarter, allowing significant reduction in demand for gas.
The same dynamics that the assistant in the first quarter of 2023, leading to unexpectedly high inventory levels. Despite the Colo Russian pipeline imports supported by continuing high flows of LNG.
Europe is expected to continue relying on LNG for the foreseeable future and we also expect China to come back to the market.
The outlook for new projects continues to look fundamentally strong although persistent delays, mostly through inflationary prices and cost of capital might be affecting do you expect to start up of several U S projects.
This dynamic could prolong the LNG supply deficit beyond 2027.
In the next slide you can see the impact that we.
We mentioned before and on the LNG shipping market.
Rates peaked early November and maintain a steady decline since falling about 90% from peak levels as we entered the seasonally weak market.
Although the market remains relatively strong it has been affected by this downturn in the spot market and the persistent presence of re lets take a multiyear charter deals.
In slide 12, we comment on the trend in the new building market.
2022 was a record year for LNG carriers orders with 169 confirm orders and the order book comprising nearly half of the active trading fleet.
The delivery schedule, we are showing here does not include any tender that might've been reserved but none yet confirmed.
One such center, which is expected to add to the already blown through the book at the second Qatari tender.
New vessels now being sold for close to 206 dominion's with delivery dates in 2027 non lasers.
Even in the context about 12% of vessels in the order book remains uncommitted.
In slide 13, you can see more details on our spot exposure per vessel for 2023.
We are pleased to announce that shell is the clear their option to extend the chartered the gaslog Geneva for five years, starting in September of this year, adding about $122 million of EBITDA.
Currently our spot exposure stands at about 86% for the reminder of 2020, Italy and Armenia exposure is mostly clustered towards the end of the year.
Finally, with regard to that of any synergy FSA you project. The partnership is waiting news on the <unk> form of any synergy.
Turning to slide 15, I would like to address the merger transaction in more details.
The merger agreement and the transaction contemplated, thereby we're in that and it must be approved by the bulk ship board of directors, including the unanimous approve a recommendation of the conflict committee and determined to be fair to and in the best interest of the partnership and the older or common unit and affiliated with Gaslog LCD.
The transaction remains subject to approval by a majority of the partnership common unitholders at a special meeting to be held in connection with the transaction and this fact satisfaction or waiver of certain customary closing conditions.
The transaction is expected to close by the third quarter of 2023.
Upon completion of the merger each outstanding common unit other than those common unit fell by Gaslog LCD or its affiliates will be converted into the right to receive $537 per common unit in cash without interest.
In addition, as soon as reasonably practical after received the unitholders approval of the merger.
The ship Board will declare a special distribution of <unk> $28 per common unit.
Please monitor our website over the next several weeks, where a detailed SEC filing and disclosure would be made big idea transaction, which will include further information the closing process and related tax treatment.
Thank you everyone today for listening and for your continued interest in Gaslog partners stay safe and if you have any question. Please contact our investor relationship team.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
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