MONACO–(BUSINESS WIRE)–GasLog Ltd. and its subsidiaries (“GasLog” or “Group” or “Company”) (NYSE:GLOG), an international owner, operator and manager of liquefied natural gas (“LNG”) carriers, today reported its financial results for the quarter ended September 30, 2015.
|•||Financing of $1.3 billion for the eight vessel newbuilding program, signed on October 16, 2015.|
|•||Launched the LNG Carrier pool agreement with Dynagas Ltd. (“Dynagas”) and Golar LNG Ltd. (“Golar”), the “Cool Pool” for GasLog’s 3 vessels currently operating in the spot market, on October 1, 2015.|
|•||Completion of the dropdown of three vessels to GasLog Partners LP (“GasLog Partners”) for $483.0 million on July 1, 2015.|
|•||Quarterly dividend of $0.14 per common share payable on November 19, 2015.|
|•||EBITDA(1) of $65.7 million (Q3 2014: $68.7 million), Profit of $4.9 million (Q3 2014: $31.0 million) and earnings/(loss) per share (“EPS”) of $(0.12) (Q3 2014: $0.32), for the quarter ended September 30, 2015.|
|•||Adjusted EBITDA(1) of $65.7 million (Q3 2014: $68.7 million), Adjusted Profit(1) of $10.8 million (Q3 2014: $26.7 million) and Adjusted EPS(1) of $(0.05)(2) (Q3 2014: $0.26) for the quarter ended September 30, 2015.|
(1) EBITDA, Adjusted EBITDA, Adjusted Profit and Adjusted EPS are non-GAAP financial measures, and should not be used in isolation or as a substitute for GasLog’s financial results presented in accordance with International Financial Reporting Standards (“IFRS”). For definition and reconciliation 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) For the calculation of Adjusted EPS, the Adjusted Profit for the period of $10.8 million was negatively affected by the Profit attributable to the non-controlling interest of $12.2 million and the dividend on preferred stock of $2.5 million.
Paul Wogan, Chief Executive Officer, commented “GasLog continued to execute on its long-term strategy during the quarter. Our contracted vessels performed strongly and we have been pleased by the performance of the Cool Pool in its initial weeks of operation. GasLog also completed its largest financing to date, raising $1.3 billion to fund its eight vessel newbuild program. The lenders were a combination of new and existing lenders along with the Korean export credit agencies. This financing demonstrates the banks’ strong appetite to lend to high quality companies with good assets and strong contracts. As the vessels deliver over the next four years, it is anticipated that the equity component of the newbuilding program will be funded by cash on GasLog’s balance sheet and operational cash flow.”
On September 18, 2015, the board of directors declared a dividend on the Series A Preference Shares of $0.546875 per share or $2.52 million in the aggregate payable on October 1, 2015 to holders of record as of September 30, 2015. GasLog paid the declared dividend to the transfer agent on September 29, 2015.
On November 4, 2015, the board of directors declared a quarterly cash dividend of $0.14 per common share payable on November 19, 2015 to shareholders of record as of November 16, 2015.
Financing of Eight Newbuildings
On October 16, 2015, GasLog entered into a debt financing agreement with 14 international banks for up to $1.3 billion to partially finance the delivery of our eight newbuildings expected to be delivered in 2016, 2018 and 2019. The financing is the largest in GasLog’s history and has a tenor of up to 12 years with an amortization profile of 15 years from vessels’ delivery. The final commitments were more than two times oversubscribed from a combination of new and existing lending institutions. The financing was backed by the Export Import Bank of Korea (“KEXIM”) and the Korea Trade Insurance Corporation (“K-Sure”), who are either directly lending or providing cover for over 60% of the facility. Seven of the eight newbuildings with contracts are eligible for future dropdown into GasLog Partners.
Cool Pool Agreement with Dynagas and Golar
On October 1, 2015, GasLog, Dynagas and Golar established the Cool Pool to market their vessels, which are currently operating in the LNG shipping spot market.
The Cool Pool allows the participating owners to optimize the operation of the pool vessels through improved scheduling ability, cost efficiencies and common marketing. The objective of the Cool Pool is to serve the transportation requirements of a rapidly growing LNG shipping market by providing customers with reliable, yet flexible, and innovative solutions to meet their increasingly complex shipping requirements.
The Cool Pool will initially consist of 14 modern, high quality and essentially equivalent vessels powered by fuel efficient Tri Fuel Diesel Electric (“TFDE”) propulsion technology. The three owners’ initial vessels eligible for participation in the Cool Pool will be as follows: GasLog: three vessels; Dynagas: three vessels; and Golar: eight vessels. Each vessel owner will continue to be fully responsible for the manning and technical management of their respective vessels.
GasLog Savannah Contract Extension
Post quarter end, GasLog was informed by BG Group of their intention to declare the extension option on the contract of the GasLog Savannah by a further twelve months plus a number of optional periods out to 2023. The charter extension will be done at rates in line with the current market rates, which will increase during each option period to rates in line with those of our existing contracted fleet.
Completion of GasLog Partners Dropdown Transaction
On July 1, 2015, GasLog completed the sale of three LNG carriers, the Methane Alison Victoria, the Methane Shirley Elisabeth and the Methane Heather Sally to GasLog Partners for $483.0 million including $3.0 million of positive net working capital. To fund the acquisition, GasLog Partners launched and completed an equity offering of 7,500,000 common units and issued 153,061 general partner units to GasLog. The proceeds were used to partially finance the acquisition from GasLog of 100% of the ownership interests in GAS-nineteen Ltd., GAS-twenty Ltd. and GAS-twenty one Ltd., the entities that each own one of the three 145,000 cbm LNG carriers mentioned above.
Following the completion of the transaction, GasLog Partners’ board approved an increase in distribution of 10%. This takes the distribution into the 25% incentive distribution right (“IDR”) threshold, resulting in GasLog receiving a greater amount of future incremental cashflows of GasLog Partners.
|In thousands of U.S. dollars except per share data||For the three months ended|
|September 30, 2014||September 30, 2015|
|Profit/(loss) attributable to the owners of GasLog||25,499||(7,279||)|
(1) Adjusted Profit, EBITDA, Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures, and should not be used in isolation or as a substitute for GasLog’s financial results presented in accordance with IFRS. For definitions and reconciliations of these measurements 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.
There were 1,568 operating days for the quarter ended September 30, 2015, as compared to 1,371 operating days for the quarter ended September 30, 2014. The increase in operating days resulted from the new vessel deliveries and on-the-water vessel acquisitions during the previous periods. Specifically, we took delivery of the GasLog Saratoga on December 16, 2014, we acquired the Methane Becki Anne and the Methane Julia Louise on March 31, 2015 and we took delivery of the GasLog Salem on April 30, 2015.
Profit was $4.9 million for the quarter ended September 30, 2015 ($31.0 million for the quarter ended September 30, 2014). This decrease is mainly attributable to the increase in loss on swaps, increased financial costs derived from higher average outstanding debt, increased depreciation and operating expenses due to the increased fleet and decreased daily hire rate resulting from the vessels operating in the current weak spot market.
Adjusted Profit(1) was $10.8 million for the quarter ended September 30, 2015 ($26.7 million for the quarter ended September 30, 2014) adjusted for the effects of the non-cash gain/loss on swaps and the foreign exchange gains/losses.
Loss attributable to the owners of GasLog was $7.3 million ($25.5 million profit for the quarter ended September 30, 2014). The decrease in profit attributable to the owners of GasLog resulted from the decrease in profit mentioned above and the increase in profit attributable to the non-controlling interest (GasLog Partners’ third party owners).
EBITDA(1) was $65.7 million for the quarter ended September 30, 2015 ($68.7 million for the quarter ended September 30, 2014). The decrease in EBITDA is mainly attributable to the increase in vessel operating costs resulting from the increased technical maintenance expenses for repairs that were undertaken during the drydockings of two of our vessels and the increase in unchartered days.
Adjusted EBITDA(1) was $65.7 million for the quarter ended September 30, 2015 ($68.7 million for the quarter ended September 30, 2014).
EPS was a $(0.12) loss per share for the quarter ended September 30, 2015 ($0.32 earnings per share for the quarter ended September 30, 2014). The decrease in EPS is attributable to the decrease in Profit, the dividend on preferred stock and the increase in Profit attributable to non-controlling interest which rose to reflect the increased profit at GasLog Partners following the most recent dropdown transaction mentioned above.
Adjusted EPS(1) was a $(0.05) loss per share for the quarter ended September 30, 2015 ($0.26 earnings per share for the quarter ended September 30, 2014). The decrease in Adjusted EPS is attributable to the decrease in Adjusted Profit, the increase in Profit attributable to non-controlling interest and the dividend on preferred stock.
Revenues were $105.8 million for the quarter ended September 30, 2015 ($99.4 million for the quarter ended September 30, 2014), being somewhat impacted by the current weak spot market.
Vessel operating and supervision costs were $29.6 million for the quarter ended September 30, 2015 ($20.9 million for the quarter ended September 30, 2014).
Depreciation of fixed assets was $28.2 million for the quarter ended September 30, 2015 ($21.4 million for the quarter ended September 30, 2014).
The increase in revenues, vessel operating and supervision costs and depreciation of fixed assets was mainly attributable to the increase in operating days from our increased fleet discussed above. The vessel operating and supervision costs were further affected by the increased technical maintenance expenses for repairs that were undertaken during the drydockings of two of our vessels and the increase in the unchartered days.
General and administrative expenses were $10.9 million for the quarter ended September 30, 2015 ($10.3 million for the quarter ended September 30, 2014).
Financial costs were $24.5 million for the quarter ended September 30, 2015 ($17.7 million for the quarter ended September 30, 2014). The increase is mainly attributable to an increase of $5.5 million in interest expense deriving from higher weighted average outstanding debt and realized loss on cash flow hedges and an increase in the amortization of deferred loan fees of $1.3 million. An analysis of financial costs is set forth below.
|(All amounts expressed in thousands of U.S. dollars)||For the three months ended|
|September 30, 2014||September 30, 2015|
|Amortization of deferred loan issuance costs and premium||1,873||3,168|
|Interest expense on loans and realized loss on cash flow hedges||12,786||18,240|
|Interest expense on bond and realized loss on cross-currency swaps||2,856||2,856|
|Other financial costs, net||216||219|
Loss on swaps was $8.2 million for the quarter ended September 30, 2015 ($1.4 million gain for the quarter ended September 30, 2014). An analysis of gain/loss on swaps is set forth below.
|(All amounts expressed in thousands of U.S. dollars)||For the three months ended|
|September 30, 2014||September 30, 2015|
|(Gain)/loss on swaps|
|Realized loss on interest rate swaps held for trading||2,958||2,327|
|Unrealized (gain)/loss on interest rate swaps held for trading||(5,227||)||5,538|
|Recycled loss of cash flow hedges reclassified to profit or loss in relation to derivatives no longer designated as hedges||915||364|
|Ineffective portion on cash flow hedges||(51||)||(1||)|
Contracted Charter Revenues
GasLog’s contracted charter revenues are estimated to increase from $321.0 million for the fiscal year 2014 to $483.8 million for the fiscal year 2017, based on contracts in effect as of September 30, 2015 (including the seven of the eight LNG carriers on order for which we have secured time charters), but without including any extension options. The total future firm contracted revenue stands at $3.8 billion (2) on September 30, 2015, including the eight vessels owned by GasLog Partners and excluding the vessels operating in the spot market.
(2) Contracted revenue calculations assume: (a) 365 revenue days per annum, with 30 off-hire days when the ship undergoes scheduled drydocking; (b) all LNG carriers on order are delivered on schedule; and (c) no exercise of any option to extend the terms of charters.
Liquidity and Capital Resources
As of September 30, 2015, GasLog had $318.9 million of cash and cash equivalents, of which $209.9 million was held in time deposits and the remaining balance in current accounts. Moreover, as of September 30, 2015, GasLog had $50.0 million held in time deposits with an initial duration of more than three months but less than a year that have been classified as short-term investments. As of September 30, 2015, GasLog had $62.0 million in restricted cash in relation to cash held in blocked accounts in order to comply with the covenants under two of its credit facilities.
As of September 30, 2015, GasLog had an aggregate of $2.4 billion of indebtedness outstanding under eleven credit facilities, of which $621.4 million is repayable within one year, including $42.2 million under the revolving credit facility. GasLog is currently engaged in constructive discussions with a number of lending institutions around the re-financing of the indebtedness that falls due in 2016. As of September 30, 2015, GasLog had $117.9 million outstanding under the NOK bond agreement that is payable in June 2018.
As of September 30, 2015, there was an undrawn amount of $7.8 million under the revolving facility of GAS-two Ltd. which is available to be drawn under certain conditions.
As of September 30, 2015, GasLog’s commitments for capital expenditures are related to the eight LNG carriers on order, which have a gross aggregate contract price of approximately $1.6 billion. As of September 30, 2015, the total remaining balance of the contract prices of the eight newbuildings was $1.5 billion, which will be partially financed by the $1.3 billion financing signed in October 2015.
GasLog has hedged 44.4% of its expected floating interest rate exposure at a weighted average interest rate of approximately 4.6% (including margin) as of September 30, 2015.
GasLog has six newbuildings on order at Samsung Heavy Industries Co., Ltd., and two newbuildings on order at Hyundai Heavy Industries Co., Ltd. Our vessels presently under construction are on schedule and within budget. The expected delivery dates are as follows:
|Hull No. 2072||Q1 2016|
|Hull No. 2073||Q2 2016|
|Hull No. 2102||Q3 2016|
|Hull No. 2103||Q4 2016|
|Hull No. 2130||Q1 2018|
|Hull No. 2800||Q1 2018|
|Hull No. 2801||Q1 2018|
|Hull No. 2131||Q1 2019|
Our subsidiaries that own the vessels expected to be delivered in 2016 have signed seven to ten year time charters with Methane Services Limited (“MSL”), a subsidiary of BG Group plc, at attractive rates. Our subsidiaries that own two of the vessels expected to be delivered in 2018 and one vessel expected to be delivered in 2019 have entered into 9.5 year time charters with MSL at similar rates. GasLog currently has one newbuilding on order that is not currently fixed on a long-term contract.
LNG Market Update and Outlook
There have been a number of positive developments within the LNG sector despite weaker LNG prices. The Santos-backed Gladstone facility shipped its first gas cargo earlier this month with Korean Gas taking the first commissioning cargo. BG’s Curtis Train 2 also started up during the period following the successful launch of its first train at the end of 2014.The first cargo was shipped on a GasLog vessel. The Australia Pacific project, backed by Origin, ConocoPhillips and Sinopec, is also expected to come online by the end of 2015. Chevron indicated first LNG from its Gorgon project may be delayed to early 2016 due to non-market related issues.
In the US, those projects that have taken final investment decision (“FID”) continue to make positive progress with Sabine Pass, the first US LNG export project, expected to start up by the end of 2015. After the quarter end, there was also news of the new $11 billion “G2” project in Louisiana, which is intending to file for Federal Energy Regulatory Commission approval, having already received Department of Environment approval to export gas to countries with free-trade agreements with the US. The project will have a nameplate capacity of 14 million tonnes per annum.
We expect LNG liquefaction projects that are under construction, have firm offtake agreements and committed financing to come online even in a lower oil and gas price environment. Projects that have reached FID stage, but are yet to start production represent over 100 million tonnes per annum of new LNG capacity.
Henry Hub is currently trading below $3 per million British Thermal Units, making US natural gas an attractively-priced fuel source for countries and companies looking to diversify away from dirtier fossil fuels such as oil and coal and often to comply with newly introduced carbon emission targets. With the price of LNG declining over the last year, particularly in Asia, we are seeing new demand centers emerging and growing requirements from existing importing nations looking to take advantage of cheaper gas, such as India. The number of importing countries is expected to rise rapidly as the next wave of LNG supply starts to enter the market.
We remain confident for the long-term supply and demand outlook for LNG and also remain confident for the LNG shipping market, despite the current weak spot market.
GasLog will host a conference call to discuss its results for the third quarter of 2015 at 8:30 a.m. ET (1:30 p.m. London Time) on Thursday, November 5, 2015. Paul Wogan, Chief Executive Officer and Simon Crowe, Chief Financial Officer, will review the Company’s operational and financial performance for the period. Management’s presentation will be followed by a Q&A session.
The dial-in numbers for the conference call are as follows:
+1 855 537 5839 (New York, NY)
+44 (0) 20 3107 0289 (London, UK)
+33 (0) 1 70 80 71 53 (Paris, France)
+852 3011 4522 (Hong Kong, Hong Kong)
Passcode for the call is 44953430
A live webcast of the conference call will also be available on the investor relations page of the Company’s website at http://www.gaslogltd.com/investor-relations.
For those unable to participate in the conference call, a replay will also be available from 2:00 p.m. EDT (7:00 p.m. London Time) on Thursday, November 5, 2015 until 11:59 p.m. EDT (4:59 a.m. London Time) on Thursday, November 12, 2015.
The replay dial-in numbers are as follows:
+1 855 859 2056 (New York, NY)
+44 (0) 20 3107 0235 (London, UK)
+33 (0) 1 70 80 71 79 (Paris, France)
+852 3011 4541 (Hong Kong, Hong Kong)
Replay passcode is 44953430
All statements in this press release that are not statements of historical fact are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that address activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, particularly in relation to the Company’s operations, cash flows, financial position, liquidity and cash available for dividends or distributions, plans, strategies and business prospects, and changes and trends in the Company’s business and the markets in which it operates. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections. Accordingly, you should not unduly rely on any forward-looking statements. Factors that might cause future results and outcomes to differ include:
- continued low prices for crude oil and petroleum products;
- LNG shipping market conditions and trends, including spot and long-term charter rates, ship values, factors affecting supply and demand of LNG and LNG shipping and technological advancements;
- our ability to enter into time charters with new and existing customers;
- changes in the ownership of our charterers;
- our customers’ performance of their obligations under our time charters;
- changing economic conditions and the differing pace of economic recovery in different regions of the world;
- our future financial condition, liquidity and cash available for dividends and distributions;
- our ability to obtain financing to fund capital expenditures, acquisitions and other corporate activities, the ability of our lenders to meet their funding obligations, and our ability to meet the restrictive covenants and other obligations under our credit facilities;
- our ability to enter into shipbuilding contracts for newbuildings and our expectations about the availability of existing LNG carriers to purchase, as well as our ability to consummate any such acquisitions;
- our expectations about the time that it may take to construct and deliver newbuildings and the useful lives of our ships;
- number of off-hire days, drydocking requirements and insurance costs;
- our anticipated general and administrative expenses;
- fluctuations in currencies and interest rates;
- our ability to maximize the use of our ships, including the re-employment or disposal of ships not under time charter commitments;
- environmental and regulatory conditions, including changes in laws and regulations or actions taken by regulatory authorities;
- requirements imposed by classification societies;
- risks inherent in ship operation, including the discharge of pollutants;
- availability of skilled labor, ship crews and management;
- potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;
- potential liability from future litigation; and
- other risks and uncertainties described in the Company’s Annual Report on Form 20-F filed with the SEC on March 26, 2015. Copies of the Annual Report, as well as subsequent filings, are available online at http://www.sec.gov.
The Company does not undertake to update any forward-looking statements as a result of new information or future events or developments except as may be required by law.