GasLog Partners LP, an international owner and operator of liquefied natural gas (“LNG”) carriers, reported its financial results for the third quarter of 2022.
Highlights
CEO Statement
Paolo Enoizi, Chief Executive Officer, commented: “GasLog Partners delivered strong operating results for the third quarter of 2022, driven by favorable dynamics in the LNG shipping market. We have successfully captured the strength of the market by securing period charters for our vessels. Most recently, we signed a three-year charter for a Steam LNG carrier, as well as one two-year and one one-year time charter for two of our TFDE LNG carriers. Combined, these charters are expected to add approximately $134.0 million of incremental EBITDA (1), thus improving our cash flows visibility.
Overall, our recent fixtures support our business strategy centered around de-leveraging and, together with our continued focus on our preference unit repurchase programme, improving the Partnership’s all-in break-even levels in our fleet and de-risking our balance sheet.
Furthermore, following the completion of the sale of one of our Steam vessels in the third quarter of 2022, we entered into a sale and lease-back agreement post quarter-end for a second Steam vessel, with no repurchase option or obligation at the end of her bareboat charter in mid-2025.”
There were 1,359 available days (2) for the third quarter of 2022, as compared to 1,321 available days (2) for the third quarter of 2021, due to the scheduled dry-dockings of three of our vessels in the third quarter of 2021 (compared to nil in the same period in 2022), partially offset by a decrease of available days (2) due to the sale of the Methane Shirley Elisabeth in September 2022.
Revenues were $95.7 million for the third quarter of 2022, compared to $80.5 million for the same period in 2021. The increase of $15.2 million is mainly attributable to a net increase in revenues from our vessels operating in the spot market in the third quarter of 2022, in line with the improvement of the LNG shipping spot and term markets, combined with an increase in revenues resulting from the 59 off-hire days due to the scheduled dry-dockings of three of our vessels in the third quarter of 2021 (compared to nil in the same period in 2022).
Vessel operating costs were $16.7 million for the third quarter of 2022, compared to $18.6 million for the same period in 2021. The decrease of $1.9 million in vessel operating costs is mainly attributable to a decrease in technical maintenance expenses and crew costs. Both decreases were largely related to the favorable movement of the /USD exchange rate in the third quarter of 2022 compared to the same period in 2021, partially offset by an increase of operating costs from inflationary pressures, as well as due to the in-house management of the Solaris (after her redelivery into our managed fleet on April 6, 2022). As a result, daily operating costs per vessel decreased to $12,276 per day for the third quarter of 2022 from $14,406 per day for the third quarter of 2021.
General and administrative expenses were $4.3 million for the third quarter of 2022, compared to $3.3 million for the same period in 2021. The increase of $1.0 million is mainly attributable to the increase in administrative services fees for our fleet, effective January 1, 2022, in connection with the increase in the annual fee per vessel payable to GasLog Ltd. compared to prior year (approximately $0.3 million per vessel per year). As a result, daily general and administrative expenses increased to $3,127 per vessel ownership day for the third quarter of 2022 from $2,388 per vessel ownership day for the third quarter of 2021. Adjusted EBITDA (1) was $73.3 million for the third quarter of 2022, compared to $57.3 million for the same period in 2021. The increase of $16.0 million is mainly attributable to the increase in revenues of $15.2 million and the decrease in vessel operating costs of $1.9 million described above.
Financial costs were $13.4 million for the third quarter of 2022, compared to $9.4 million for the same period in 2021. The increase of $4.0 million in financial costs is mainly attributable to the increase in interest expense on loans, mainly due to an increase in the London Interbank Offered Rate (“LIBOR”) rates in the third quarter of 2022 as compared to the same period in 2021. During the third quarter of 2022, we had an average of $1,025.9 million of bank borrowings outstanding under our credit facilities with a weighted average interest rate of 4.3%, compared to an average of $1,232.9 million of bank borrowings outstanding under our credit facilities with a weighted average interest rate of 2.4% during the third quarter of 2021.
Gain on derivatives was $3.0 million for the third quarter of 2022, compared to a loss of $0.2 million for the same period in 2021. The decrease of $3.2 million in the loss on derivatives is attributable to a decrease in realized loss on interest rate swaps and an increase in unrealized gain from the mark-to-market valuation of interest rate swaps, which were carried at fair value through profit or loss, mainly due to changes in the forward LIBOR curve.
Profit was $42.7 million for the third quarter of 2022, compared to $26.5 million for the same period in 2021. The increase in profit of $16.2 million is mainly attributable to the increase in revenues of $15.2 million and the decrease of $1.9 million in vessel operating costs, as described above.
Adjusted Profit (1) was $39.8 million for the third quarter of 2022, compared to $24.7 million for the same period in 2021. The increase in Adjusted Profit of $15.1 million is mainly attributable to the increase in revenues discussed above.
As of September 30, 2022, we had $139.0 million of cash and cash equivalents, out of which $44.5 million was held in current accounts and $94.5 million was held in time deposits with an original duration of less than three months. An additional amount of $25.0 million of time deposits with an original duration greater than three months was classified under short-term cash deposits.
As of September 30, 2022, we had an aggregate of $970.8 million of bank borrowings outstanding under our credit facilities, of which $122.9 million was repayable within one year. Current bank borrowings include an amount of $32.6 million with respect to the associated debt of the Steam vessel Methane Heather Sally, classified as held for sale as of September 30, 2022. As of September 30, 2022, we also had an aggregate of $48.2 million of lease liabilities mainly related to the sale and lease-back of the GasLog Shanghai, of which $10.5 million was payable within one year.
As of September 30, 2022, our current assets totaled $251.3 million and current liabilities totaled $194.9 million, resulting in a positive working capital position of $56.4 million.
(1) Adjusted Profit, EBITDA, Adjusted EBITDA and Adjusted EPU are non-GAAP financial measures and should not be used in isolation or as substitutes for GasLog Partners’ financial results presented in accordance with International Financial Reporting Standards (“IFRS”). For the definitions and reconciliations of these measures to the most directly comparable financial measures calculated and presented in accordance with IFRS, please refer to Exhibit II at the end of this press release.
(2) Available days represent total calendar days in the period after deducting off-hire days where vessels are undergoing dry-dockings and unavailable days (for example days before and after a dry-docking where the vessel has limited practical ability for chartering opportunities).
Steam Vessel Transactions
In September 2022, GasLog Partners completed the sale of the Methane Shirley Elisabeth, a 145,000 cubic meter (“cbm”) Steam LNG carrier built in 2007, to an unrelated third party for a gross sale price of approximately $54.0 million. The sale resulted in the recognition of a loss on disposal of $0.2 million. The outstanding indebtedness of $32.2 million associated with the vessel was prepaid pursuant to its sale.
In October 2022, GasLog Partners entered into an agreement for the sale and lease-back of the Methane Heather Sally, a 145,000 cbm Steam LNG carrier, built in 2007, for $50.0 million. The vessel was sold to an unrelated third party and leased back under a bareboat charter until mid-2025 with no repurchase option or obligation. The completion of the transaction in the fourth quarter of 2022 is expected to release approximately $17.0 million of incremental net liquidity (net sale proceeds less debt prepayment) to the Partnership, while the vessel remains on its new three-year charter with a Southeast Asian charterer.
Preference Unit Repurchase Programme
In the third quarter of 2022, under the Partnership’s preference unit repurchase programme (the “Repurchase Programme”) established in March 2021, GasLog Partners repurchased and cancelled 233,179 8.625% Series A Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series A Preference Units”), 198,746 8.200% Series B Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series B Preference Units”) and 178,544 8.500% Series C Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series C Preference Units”). The aggregate amount paid under the Repurchase Programme in the third quarter of 2022 was $20.0 million, including commissions and an amount of $4.7 million relating to 90,841 Series A Preference Units, 70,000 Series B Preference Units and 27,000 Series C Preference Units, which were repurchased during the third quarter of 2022 and cancelled post quarter-end, on October 3, 2022.
Since inception of the Repurchase Programme in March 2021 and up to October 27, 2022, GasLog Partners has repurchased and cancelled 415,406 Series A Preference Units, 1,051,066 Series B Preference Units and 827,043 Series C Preference Units at a weighted average price of $25.08, $25.04 and $25.18 per preference unit for Series A, Series B and Series C, respectively, for an aggregate amount of $57.7 million, including commissions.
LNG Market Update and Outlook
Global LNG demand was forecasted to be 97.3 million tonnes (“mt”) in the third quarter of 2022, according to Wood Mackenzie, Energy Research and Consultancy (“WoodMac”), compared to 88.6 mt in the third quarter of 2021, an increase of approximately 9.8%, primarily led by continued strong demand from Europe in response to continued disruption of gas pipeline imports from Russia. As a result of increased LNG imports, European inventories have recovered to seasonal average levels (88.7%), however Russian flows via Nord Stream 1 have completely ceased since the beginning of September, reducing possible sources of supply during the winter.
Global LNG supply was approximately 97.9 mt in the third quarter of 2022, growing by 5.3 mt, or 5.7%, compared to the third quarter of 2021, according to WoodMac. During 2022 year-to-date, LNG supply has increased by 15.5 mt with United States (“U.S.”) exports accounting for 5.5 mt. 62% of U.S. exports were directed to Europe year-to-date 2022, compared to about 34% in 2021, according to Kpler Analytics. Norwegian exports have also recovered to historical levels following the restart of Snøhvit.
Headline spot rates for TFDE LNG carriers, as reported by Clarkson Research Services Limited (“Clarksons”), averaged $94,464 per day in the third quarter of 2022, a 60% increase over the $58,788 per day average in the third quarter of 2021. Headline spot rates for Steam LNG carriers averaged $42,518 per day in the third quarter of 2022, a 2% increase over the average of $41,692 per day in the third quarter of 2021. Headline spot rates in the third quarter of 2022 began to exhibit seasonal tightness earlier than in 2021 due to anticipated volatility and tight availability of vessels for the winter. Demand for period employment has continued to define the third quarter of 2022 resulting in a lack of available independently owned vessels. This, in conjunction with the unwillingness of disponent owners to release vessels in anticipation of strong winter demand, has contributed to market tightness. Due to this and strong European demand, disponent owners have also been unwilling to allow vessels to leave the Atlantic Basin, creating further distortions.
One-year time charter rates for TFDE LNG carriers averaged $125,125 per day in the third quarter of 2022, a 29% increase over the $97,167 per day average in the third quarter of 2021. One-year time charter rates for Steam LNG carriers averaged $56,250 per day in the third quarter of 2022, 10% lower than the $62,650 daily average in the third quarter of 2021.
As of September 30, 2022, Poten & Partners Group Inc. estimated that the orderbook totaled 248 dedicated LNG carriers (>100,000 cbm) with deliveries between 2022 and 2028, representing 42% of the on-the-water fleet. Of these, 217 vessels (or 87.5%) have multi-year charters already contracted, leaving 31 vessels uncommitted with deliveries clustered between 2024-2026. There were 126 orders for newbuild LNG carriers in the first three quarters of 2022 compared with 75 orders for all of 2021.
Preference Unit Distributions
On October 26, 2022, the board of directors of GasLog Partners approved and declared a distribution on the Series A Preference Units of $0.5390625 per preference unit, a distribution on the Series B Preference Units of $0.5125 per preference unit and a distribution on the Series C Preference Units of $0.53125 per preference unit. The cash distributions are payable on December 15, 2022 to all unitholders of record as of December 8, 2022.
Common Unit Distribution
On October 26, 2022, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.01 per common unit for the quarter ended September 30, 2022. The cash distribution is payable on November 10, 2022 to all unitholders of record as of November 7, 2022.
ATM Common Equity Offering Programme (“ATM Programme”)
The Partnership did not issue any common units under the ATM Programme during the third quarter of 2022.
