Piraeus, Greece - May 07, 2020
GasLog Ltd. and its subsidiaries (“GasLog”, “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 March 31, 2020.
• Dedicated COVID-19 task force established to manage the impact of COVID-19 on all aspects of our business and operations and to review and update our business continuity plan as required, including strict guidelines regarding access to all vessels and a company-wide “work from home” policy.
• Delivery of the GasLog Windsor on April 1, 2020, a 180,000 cubic meters (“cbm”) LNG carrier with dual fuel medium speed propulsion (“X-DF”) and commencement of its seven-year time charter agreement with a wholly owned subsidiary of Centrica plc. (“Centrica”).
• Announcement by Gastrade S.A. (“Gastrade”) of the successful conclusion of the binding phase of the market test for reservation of capacity at the floating LNG terminal being developed in Alexandroupolis. This reservation of up to 2.6 billion cubic meters (“cbm”) of capacity for periods out to 15 years represents a key milestone for the project.
• Repurchase and cancellation of NOK 434,000 of the outstanding senior unsecured bonds due in May 2021 (the “NOK 2021 Bonds”).
• Scheduled delivery for May 11, 2020, of the GasLog Wales, a 180,000 cbm LNG carrier with X-DF propulsion and commencement of its 12-year time charter agreement with the principal LNG shipping entity of Japan’s Jera Co., Inc. (“JERA”).
• Contracted time charter revenues of approximately $430.0 million for the remainder of 2020, representing 77.0% charter coverage.
• Quarterly Revenues of $165.9 million, Loss of ($39.4) million and Loss per share of ($0.67)(1) for the quarter ended March 31, 2020.
• Quarterly Adjusted EBITDA(2) of $114.0 million, Adjusted Profit(2) of $26.8 million and Adjusted Earnings per share(2) of $0.15(1) for the quarter ended March 31, 2020.
• Reduced quarterly dividend of $0.05 per common share payable on May 28, 2020.
(1) Earnings/(loss) per share (“EPS”) and Adjusted EPS are net of the profit attributable to the non-controlling interests of $12.0 million and the dividend on preferred stock of $2.5 million for the quarter ended March 31, 2020 ($16.8 million and $2.5 million, respectively, for the quarter ended March 31, 2019).
(2) 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 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.
Paul Wogan, Chief Executive Officer, stated: “GasLog’s business model and strategy demonstrated its resilience in the first quarter of 2020, despite the challenges imposed by the COVID-19 outbreak. Our proactive approach to mitigating the impact of the outbreak on our seafarers and onshore staff allowed the Company to deliver uninterrupted service for our customers with fleet availability of close to 100%. I have been deeply impressed with the dedication and hard work of our employees, and I am especially grateful to our seafarers for their commitment and professionalism while apart from their loved ones.
In light of the uncertainties created by the current environment, we have taken actions to improve our liquidity, including drawing on our existing revolving capacity of $100.0 million as well as reducing our dividend for the first quarter of 2020 to $0.05 per share. We continue to expect to realise approximately $6.0 million of general and administrative cost reductions in 2021, resulting from the personnel relocations and headcount reductions announced earlier this year. We also anticipate finding additional ways to reduce meaningfully our operating and overhead expenses.
Although the COVID-19 outbreak creates an uncertain outlook for near term economic activity and LNG demand, underlying demand for LNG has held up well in 2020 to date and I have been pleased with the utilisation we have achieved with our vessels operating in the spot market. We have also had several positive commercial and operational developments in recent weeks, including the delivery of the GasLog Windsor which delivered last month on time and on budget. The vessel is chartered for seven years to Centrica, providing added visibility for our future revenues and cash flows. In addition, the Alexandroupolis Floating Storage and Regasification Unit (“FSRU”) project in northern Greece successfully completed its second and binding market test, an important milestone toward the sanctioning of the project.”
GasLog’s main focus is on securing the health and safety of our employees and ensuring safe and reliable operations for our customers. To date, there have been no confirmed cases of COVID-19 infection amongst sea-going or shore-based personnel. During 2020 to date, extensive measures have been taken to limit the impact of COVID-19 on GasLog’s business. These include:
• A dedicated task force established to manage the impact of COVID-19 on all aspects of our business and operations and to review and amend our business continuity plan as required;
• A company-wide “work from home” policy instituted for all onshore employees; and
• Strict guidelines imposed, restricting access to all vessels and suspending shore leave and crew changes from mid-March 2020.
As a result of these measures and the dedication of our employees onshore and aboard our vessels, approximately 100% of our fleet continues to be available for commercial use. These measures have also allowed GasLog to opportunistically bring forward the scheduled dry-dockings of three vessels such that their dry-dockings were completed entirely during the slowdown of LNG trade in February and March 2020.
Given the continuing impact of COVID-19 on economic activity and energy demand, there is uncertainty regarding future LNG demand and, consequently, near-term LNG shipping requirements.
• To date, we have not experienced any disruption to the charter parties, including contracted revenues, for our term- or spot-chartered vessels, as a result of COVID-19;
• Our vessels operating in the spot and short-term market are currently chartered through to at least June 2020; and
• The combined impact of COVID-19 and normal seasonality may lead to greater volatility in spot rates and to lower utilization of vessels trading in the spot and short-term markets.
COVID-19 has had a significant impact on the global capital and bank credit markets, including access to and cost of liquidity.
• The recent fall in interest rates and the Norwegian Krone/U.S. Dollar exchange rate as a result of central bank measures to support economies affected by the COVID-19 pandemic and the significant fall in oil prices, respectively, have resulted in an increase in the mark-to-market derivative liabilities with respect to our derivative instruments and a significant increase in cash collateral posted with our swaps counterparties which amounted to $81.2 million as of March 31, 2020; and
• There have been no other material impacts to date of the COVID-19 pandemic on our financial position and we are continuing the process of refinancing our bank loans maturing in April and July 2021. We are also in discussion with our swaps counterparties in order to identify and execute measures to reduce cash collateral posted under the existing interest rate and cross-currency swaps.
LNG Market Update and Outlook
LNG demand faced several headwinds in the first quarter of 2020 including a warmer than average winter in the northern hemisphere, high inventory levels of natural gas and LNG in several of the largest end markets for LNG and the outbreak of COVID-19, the impact of which has had an uneven distribution around the world during the year to date. For example, Chinese demand was 15 million tonnes (“mt”) in the first quarter of 2020, a decrease of 5% over the first quarter of 2019, according to Poten, but apparent demand in April has increased year-on-year based on vessel tracking data, including several cargoes exported from the U.S.. Meanwhile, demand from Northern Asia more broadly (Japan, China, South Korea and Taiwan) grew by approximately 1 mt in the first quarter or 3% year-over-year. In addition, demand from India grew by nearly 2 mt in the first quarter of 2020 (or 37%) as the country looked to take advantage of historically low gas prices, although apparent demand in April is likely to be lower year-on-year based on vessel tracking data. Finally, demand from Europe grew by over 4 mt (or 37%) as gas pricing favored coal-to-gas switching for power generation and LNG replaces indigenous gas production. In total, LNG demand was 98 mt in the first quarter of 2020, compared to 89 mt in the first quarter of 2019, or an increase of 10%.
Wood Mackenzie currently expects global LNG demand to grow 21 mt or 6% this year, slower than the 26 mt or 7% it anticipated earlier this year prior to the global outbreak of COVID-19. Nonetheless, the demand for LNG over the near-term continues to be uncertain as many LNG importing countries either continue to have in effect shelter-in-place orders which prevent the operation of businesses deemed to be “non-essential” or are in the early stages of reopening their economies. Consequently, measures of global economic activity have declined significantly from comparable periods in 2019. However, the longer-term outlook for LNG demand remains favorable with demand growth of 92 mt estimated over the 2019-2025 timeframe, or compound annual growth of approximately 4%, according to Wood Mackenzie.
Global LNG supply was approximately 98 mt in the first quarter of 2020, an increase of 10 mt over the first quarter of 2019 (or 11%), primarily due to new supply additions in the U.S. (Cameron T1 and T2, Freeport T1, T2 and T3 and Elba Island), according to estimates from Wood Mackenzie. LNG supply is estimated to grow by 22 mt this year as the third train of Cameron begins operations and recent capacity additions continue to increase production. Further ahead, approximately 97 mt of new LNG capacity is expected to begin production during 2021-2025. However, Wood Mackenzie expects the pace of new project sanctions to slow significantly in 2020 due to the uncertainties caused by the COVID-19 outbreak in long-term demand for LNG and low global energy prices, in particular crude oil prices due to oversupply following a collapse in oil demand due to the COVID-19 virus.
In the LNG shipping spot market, tri-fuel diesel electric vessel (“TFDE”) headline rates, as reported by Clarksons, averaged $57,000 per day in the first quarter of 2020, a decrease from the averages of $108,000 in the fourth quarter of 2019 and $59,500 in the first quarter of 2019. Headline spot rates for steam turbine propulsion (“Steam”) vessels averaged $40,000 per day in the first quarter of 2020, a decrease from the average of $78,000 per day in the fourth quarter of 2019 but approximately in line with the $39,000 per day observed in the first quarter of 2019. Slower than expected LNG demand growth due in part to the impact of COVID-19 (as detailed above), high global inventories of natural gas and LNG following a warmer than average winter in the Northern Hemisphere and limited opportunities for LNG arbitrage trading between Atlantic and Pacific basins impacted headline spot rates in the first quarter of 2020.
Clarksons currently assesses headline spot rates for TFDE and Steam LNG carriers at $32,500 per day and $23,000 per day, respectively. The COVID-19 outbreak has introduced significant uncertainty regarding demand for LNG, and consequently, demand for LNG shipping over the near term. The combined impact of the COVID-19 outbreak and normal seasonality may lead to greater volatility in spot rates and to lower utilization of vessels trading in the spot and short-term markets, in particular Steam vessels. In addition, global gas prices and gas price differentials remain near historic lows in the key markets of North Asia and Europe, limiting the opportunities for inter-basin arbitrage trading and likely reducing average voyage distances as well as potentially reducing global output of LNG over the near-term, particularly in the U.S., where a number of cargo deferrals and/or cancellations have been reported for this summer.
As of May 5, 2020, the orderbook totals 118 dedicated LNG carriers (>100,000 cbm), according to estimates from Poten, representing 22% of the on-the-water fleet. Of these, 74 vessels (or 63%) have multi-year charters. The pace of newbuild ordering has slowed significantly relative to 2018-19, with only 4 newbuildings ordered so far in 2020 and all of them ordered against multi-year contracts, an encouraging development for the future supply and demand balance of LNG carriers.
Alexandroupolis Project Update
On 23 December 2019, the board of directors of the Public Gas Corporation in Greece (“DEPA”) approved the acquisition of a 20% stake in Gastrade, which was completed in early 2020. Through this participation, DEPA assumes an active role in the implementation of the project together with the existing shareholders.
On March 26, 2020, Gastrade announced the successful conclusion of the binding phase of the market test for reservation of capacity at the floating LNG terminal being developed at Alexandroupolis in northern Greece. This reservation of up to 2.6 billion cbm of capacity for periods out to 15 years represents a key milestone for the project.
Delivery of the GasLog Windsor
On April 1, 2020, GasLog took delivery of the GasLog Windsor, a 180,000 cbm LNG carrier with X-DF propulsion constructed by Samsung Heavy Industries Co., Ltd. (“Samsung”). Despite the industrial disruption in South Korea caused by the COVID-19 outbreak, the vessel was delivered on time and on budget. Upon delivery, the vessel immediately commenced its seven-year charter with Centrica.
Delivery of the GasLog Wales
On May 11, 2020, GasLog is scheduled to take delivery of the GasLog Wales, a 180,000 cbm LNG carrier with X-DF propulsion constructed by Samsung. Upon delivery, the vessel will immediately commence its 12-year charter with JERA.
On March 12, 2020, the board of directors declared a dividend on the Series A Preference Shares of $0.546875 per share, or $2.5 million in the aggregate, payable on April 1, 2020 to holders of record as of March 31, 2020. GasLog paid the declared dividend to the transfer agent on April 1, 2020.
On May 6, 2020, the board of directors declared a quarterly cash dividend of $0.05 per common share, or $4.0 million in the aggregate, payable on May 28, 2020 to shareholders of record as of May 18, 2020.
Office Relocation Update
In November 2019, GasLog announced plans to relocate more of its employees including several members of senior management to Piraeus, Greece, home of our operational platform, in order to enhance execution, efficiency and operational excellence and to reduce overheads. These plans are being executed as scheduled and will be fully implemented in the second half of 2020, generating annualized general and administrative savings of $6.0 million with effect from 2021. For the quarter and the year ended December 31, 2019, the Group had recognized total restructuring costs of $4.7 million, the majority of which will be paid in 2020. In the three months ended March 31, 2020, additional restructuring costs of $0.4 million were recognized.
Chief Financial Officer (“CFO”) Transition
Alastair Maxwell, CFO of GasLog and GasLog Partners, has informed the Company that, as a result of the relocation of his role to Piraeus, Greece, he will be stepping down from his position on June 30, 2020. Achilleas Tasioulas, currently Deputy CFO, will assume the responsibilities of CFO of GasLog and GasLog Partners on July 1, 2020. Please see the separate press release of today’s date on this matter.
GasLog is an international owner, operator and manager of LNG carriers providing support to international energy companies as part of their LNG logistics chain. GasLog’s consolidated fleet consists of 35 LNG carriers. Of these vessels, 19 (13 on the water and six on order) are owned by GasLog, one has been sold to a subsidiary of Mitsui & Co., Ltd. and leased back by GasLog under a long-term bareboat charter and the remaining 15 LNG carriers are owned by the Company’s subsidiary, GasLog Partners. GasLog’s principal executive offices are at 69 Akti Miaouli, 18537 Piraeus, Greece. Visit GasLog’s website at http://www.gaslogltd.com.
GasLog Ltd. press release