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GasLog Ltd. Reports Financial Results for the Quarter Ended December 31, 2012

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Mr. Paul Wogan, Chief Executive Officer, stated “We are pleased today to release our fourth quarter 2012 results, which reflect a continued solid performance and 100% utilization of our existing fleet. Following the dividend paid in the fourth quarter, we are today announcing the payment of a dividend of 11 cents per share, to be paid in the first quarter. At the beginning of February 2013, we announced an order for 2 additional LNG carriers, and their concurrent 10-year charter to a subsidiary of BG. We believe the combination of price and charter terms make this transaction an attractive investment for GasLog and our shareholders. These orders include four additional priced options with similar payment terms, which we believe, are at attractive prices. The transaction reflects our ability to leverage our high quality technical platform and customer relations and we expect the same combination of factors will continue to allow us to take advantage of growth in the LNG trade. We also took delivery of the GasLog Shanghai ahead of schedule, the first of five LNG carriers to be delivered to GasLog in 2013. Upon delivery the vessel commenced her charter with BG. In addition to the three fully-owned ships on the water, we now have 9 LNG carriers on order.
Concluding these two firm ten year charters allows us to be opportunistic in placing our unfixed new buildings into shorter term charters. We believe that this, along with the new seasonal component for one of our new buildings, gives us the optionality and flexibility to capture incremental value from our portfolio. In addition, Gaslog’s new management team will continue to focus on optimising its capital structure.”
Dividend Declaration
On February 26, 2013, the Board of Directors declared a quarterly cash dividend of $0.11 per common share payable on March 25, 2013 to stockholders of record as of March 11, 2013.
Delivery of GasLog Shanghai
On January 28, 2013, GasLog took delivery of the GasLog Shanghai, an LNG carrier of 155,000 cubic meters capacity with tri-fuel diesel electric propulsion constructed by Samsung Heavy Industries Co. Ltd. The vessel is chartered out to a subsidiary of BG Group plc from delivery until 2018 with charterer’s option to extend the terms of the charter at specified rates.
Loan Drawdown
On January 18, 2013, GasLog through its subsidiary GAS-three Ltd. drew down $136.25 million from the facilities agreement arranged by DnB Bank ASA and The Export-Import Bank of Korea for the financing of GasLog Shanghai.
Financial Summary
For the three-month-period:
Revenues were $18.3 million (which eliminates $1.5 million of intercompany revenue) for the quarter ended December 31, 2012 ($17.8 million for the quarter ended December 31, 2011). The increase is mainly attributable to additional revenues in the vessel management segment from external customers of $0.5 million.
Vessel operating and supervision costs were $4.3 million for the quarter ended December 31, 2012 ($3.8 million for the quarter ended December 31, 2011). The increase is mainly attributable to an increase in new employees hired to fulfill the planned new requirements from our existing customers and an increase in crew expenses in the vessel ownership segment.
General and administrative expenses were $6.0 million for the quarter ended December 31, 2012 ($6.3 million for the quarter ended December 31, 2011). The decrease is mainly attributable to an increase in net foreign exchange gains, a decrease in equity-settled compensation expense, partially offset by an increase in employee costs, legal and professional fees and travel expenses, in line with GasLog’s planned growth.
Financial costs were $2.8 million for the quarter ended December 31, 2012 ($2.7 million for the quarter ended December 31, 2011). The increase is primarily a result of increased interest expense as a result of swapping floating rate interest for fixed rate interest in connection with the outstanding indebtedness related to the vessel GasLog Savannah.
Profit for the period was $2.7 million for the quarter ended December 31, 2012 ($0.3 million loss for the quarter ended December 31, 2011). This increase is mainly attributable to a recognition of a net gain on interest rate swaps of $0.2 million in Q4 2012 as opposed to a net loss on interest rate swaps in Q4 2011 and to the aforementioned factors.
Adjusted Profit(1) was $1.8 million for the quarter ended December 31, 2012 ($2.1 million for the quarter ended December 31, 2011), after excluding the effects of the net gain/loss on interest rate swaps and net foreign exchange gains.
EBITDA(1) was $8.5 million for the quarter ended December 31, 2012 ($5.6 million for the quarter ended December 31, 2011).
Adjusted EBITDA(1) was $7.6 million for the quarter ended December 31, 2012 ($8.0 million for the quarter ended December 31, 2011).
EPS was $0.04 for the quarter ended December 31, 2012 ($0.01 loss for the quarter ended December 31, 2011). The increase in EPS is attributable to the increase in profit partially offset by the increase in the weighted average number of shares following the completion of the IPO and the concurrent private placement.
Adjusted EPS(1) was $0.03 for the quarter ended December 31, 2012 ($0.05 for the quarter ended December 31, 2011).
For the year:
Revenues were $68.5 million (which eliminates $4.8 million of intercompany revenue) for the year ended December 31, 2012 ($66.5 million for the year ended December 31, 2011). The increase is mainly attributable to an increase in revenues in the vessel management segment from external customers of $1.5 million.
Vessel operating and supervision costs were $14.6 million for the year ended December 31, 2012 ($12.9 million for the year ended December 31, 2011). The increase is mainly attributable to an increase in employee costs related to new employees hired to fulfill the planned new requirements from our existing customers and an increase in technical maintenance and crew expenses in the vessel ownership segment.
General and administrative expenses were $20.4 million for the year ended December 31, 2012 ($16.0 million for the year ended December 31, 2011). The increase is mainly attributable to an increase in personnel expenses, directors’ fees, travel expenses, and legal and professional expenses, with such increases generally in line with GasLog’s planned growth and compliance requirements of being a public company.
Financial costs were $11.7 million for the year ended December 31, 2012 ($9.6 million for the year ended December 31, 2011). The increase is primarily a result of increased interest expense as a result of swapping floating rate interest for fixed rate interest in connection with the outstanding indebtedness related to the vessel GasLog Savannah.
Profit for the year was $4.2 million for the year ended December 31, 2012 ($13.7 million for the year ended December 31, 2011). This decrease is mainly attributable to an increase in net loss on interest rate swaps of $4.1 million and to the aforementioned factors.
Adjusted Profit(1) was $10.5 million for the year ended December 31, 2012 ($16.3 million for the year ended December 31, 2011), after excluding the effects of the net loss on interest rate swaps and net foreign exchange gains.
EBITDA(1) was $27.8 million for the year ended December 31, 2012 ($36.1 million for the year ended December 31, 2011).
Adjusted EBITDA(1) was $34.0 million for the year ended December 31, 2012 ($38.7 million for the year ended December 31, 2011).
EPS was $0.07 for the year ended December 31, 2012 ($0.36 for the year ended December 31, 2011). The decrease in EPS is attributable to the decrease in profit and the increase in the weighted average number of shares following the completion of the IPO and the concurrent private placement.
Adjusted EPS(1) was $0.18 for the year ended December 31, 2012 ($0.42 for the year ended December 31, 2011).
Contracted Charter Revenues
GasLog’s contracted charter revenues are estimated to increase from $56 million for the fiscal year 2012 to $234 million for the fiscal year 2016, based on contracts in effect as of today for the ten ships in GasLog’s owned fleet for which time charters have been secured, including contracts for seven newbuildings that are scheduled to be delivered on various dates in 2013, 2014 and 2016 and for GasLog Shanghai delivered in January 2013.
Liquidity and Financing
As of December 31, 2012, GasLog had cash and cash equivalents of $111.0 million and short-term investments in time deposits of $104.7 million.
As of December 31, 2012, GasLog had an aggregate of $255.7 million of indebtedness outstanding under two credit agreements (before netting unamortized deferred loan issuance costs of $1.4 million), of which $26.5 million is repayable within one year.
GasLog’s commitments as of December 31, 2012 for capital expenditures are related to the eight LNG carriers on order, which have a gross aggregate contract price of approximately $1.55 billion. As of December 31, 2012, the total remaining balance of the contract prices of the eight newbuildings on order (GasLog Shanghai is included) was $1.34 billion, for which there are $1.13 billion of undrawn credit facilities and $215.7 million in cash, cash equivalents and short-term investments as of December 31, 2012, which includes proceeds from GasLog’s IPO and concurrent private placement completed on April 4, 2012.
Interest Rate Swaps
As of December 31, 2012, GasLog has entered into fifteen interest rate swap agreements for a total notional amount of $862.9 million. This is in relation to the outstanding indebtedness of $255.7 million and the new loan agreements of $1.13 billion in the aggregate that will be drawn by GasLog through its subsidiaries upon delivery of the newbuildings. In total 62.3% of GasLog’s expected floating interest rate exposure has been hedged at a weighted average interest rate of approximately 4.3% (including margin) as of December 31, 2012. During the fourth quarter of 2012, GasLog recognized a gain of $0.2 million on interest rate swaps, primarily attributable to the gain from the mark-to-market valuation of six interest rate swaps agreements signed in 2012 which do not qualify for hedge accounting. During the year ended December 31, 2012, GasLog recognized a loss of $6.8 million on interest rate swaps, primarily attributable to a $4.6 million loss from the mark-to-market of six interest rate swaps agreements signed in 2012 which do not qualify for hedge accounting and a $2.1 million loss recognized at the inception of four interest rate swaps agreements signed in 2012 and designated as cash flow hedging instruments.
Business Update
As of December 31, 2012, the eight ships under construction at Samsung Heavy Industries were on schedule and within budget. GasLog Shanghai was delivered on January 28, 2013 and four ships under construction are also scheduled for delivery in 2013.
The two ships in GasLog’s fleet as of December 31, 2012, currently on multi-year charters to a subsidiary of BG Group plc, performed without any off-hire during the quarter ended December 31, 2012, thereby achieving full utilization for the period.
As of December 31, 2012, two of the newbuildings remain uncommitted and GasLog continued to hold options for two additional LNG carriers at Samsung Heavy Industries.
In February 2013, GasLog announced the ordering of two 174,000 cubic meters LNG carriers from Samsung Heavy Industries. The ships are scheduled to be delivered in the first half of 2016, and will each commence a 10 year firm charter to a subsidiary of BG Group plc., with charterer’s option to extend the duration of the charter at specified rates. GasLog also agreed to modify and extend the current charter to a subsidiary of BG Group, for Hull Number 2017, scheduled for delivery in Q3 2013. Under the new arrangement the ship will deliver into an eight year charter in which the first three years remain as previously contracted. The subsequent five years are a seasonal charter under which the ship is committed to BG Group for seven consecutive months each year for which it will pay a fixed monthly charter hire and available to accept other charters for the remaining five months. In connection with this transaction, GasLog now has increased the number of options held from 2 to 4 additional LNG carriers at Samsung Heavy Industries.
LNG Industry Update
GasLog believes the current supply and demand dynamics of the LNG industry are positive for LNG shipping. There continues to be progress on new LNG production projects, and the new volumes and potentially greater voyage distances should create increased requirements for LNG carriers.
The fourth quarter of 2012 saw the release of the US Department of Energy –commissioned study which suggested that exports of natural gas from the USA would be net beneficial to the nation. This was viewed as highly supportive of plans to construct LNG export facilities in the US. In addition to the already under-construction production trains at Cheniere Energy’s Sabine Pass facility, there are over a dozen prospective export projects. Many plan to produce relatively large volumes of LNG, and based on the sales agreements signed so far, voyage distances are expected to be great; therefore strong demand for new LNG carriers may be expected. In Australia, the construction continues apace of the many new LNG trains that will see Australia rival Qatar as the world’s number one LNG exporter. In East Africa, we have seen further progress on initial plans to develop LNG export capacity.
We have seen some older technology ships continue to experience idle time. However, on a historical basis LNG shipping rates remain very firm, and we expect this firmness to be reflected in the longer-term charter market.
GasLog believes the robust development of new LNG supply projects and growing global demand for natural gas is likely to drive the need for more LNG carriers. LNG project developers are typically large multinational oil and gas companies with exacting standards for safety and reliability. In addition, we continue to expect a preference for the latest technology in ship design and propulsion. GasLog believes first class charterers will continue to engage experienced LNG shipowners to provide high quality LNG carriers for multi-year charter requirements.
Outlook
GasLog believes the strong fundamentals of the LNG industry will provide significant growth opportunities for GasLog’s high quality LNG shipping operations. Focus in the near term will be on delivering the growth of the business, through the on-time delivery of the newbuilding fleet, while ensuring full utilization of the existing ships. GasLog expects that its strategy of leveraging its established platform and customer relationships will aid in qualifying for charter possibilities for the two uncommitted newbuildings and the options it holds for four additional newbuildings. GasLog’s experience and track record may also allow GasLog to explore possibilities for industry consolidation of new entrants and to be flexible to adjust to market developments.
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