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GasLog Partners LP Posts Record Revenues and Announces Methane Becki Anne Acquisition

GasLog Partners LP, an international owner and operator of liquefied natural gas (“LNG”) carriers, reports its financial results for the three-month period ended September 30, 2018 and announces its acquisition of the Methane Becki Anne from GasLog Ltd. (“GasLog”).

Highlights

Post-quarter end acquisition of the Methane Becki Anne from GasLog for $207.4 million, including assumed debt of $93.9 million, with attached multi-year charter to a subsidiary of Royal Dutch Shell plc (“Shell”).

Agreement for the sale of 2,250,000 common units to funds managed by Tortoise Capital Advisors, L.L.C. (“Tortoise”) for gross proceeds of $53.1 million through the Partnership’s at-the-market common equity offering programme (“ATM Programme”).
Quarterly Revenues, Profit, Adjusted Profit(1) and EBITDA(1) of $81.9 million, $27.3 million, $25.6 million and $58.9 million, respectively.

Highest-ever quarterly Partnership Performance Results for Revenues(2) and EBITDA(1)(2) of $81.9 million and $58.9 million, respectively.

Cash distribution of $0.53 per common unit for the third quarter of 2018, 2.4% higher than the third quarter of 2017.

Distribution coverage ratio(3) of 1.06x.
(1) Adjusted Profit and EBITDA are non-GAAP financial measures and should not be used in isolation or as a substitute 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 III at the end of this press release.

(2) Partnership Performance Results represent the results attributable to GasLog Partners which are non-GAAP financial measures. 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.

(3) Distribution coverage ratio represents the ratio of Distributable cash flow to the cash distribution declared. For the definition and reconciliation of Distributable cash flow to the most directly comparable financial measure calculated and presented in accordance with IFRS, please refer to Exhibit III at the end of this press release.

CEO Statement

Mr. Andrew Orekar, Chief Executive Officer, commented: “I am very pleased to present another strong operating and financial quarter for GasLog Partners, with record quarterly Partnership Performance Results for Revenues and EBITDA. In the third quarter, we continued to execute on our strategy, raising growth capital from a leading energy infrastructure investor and delivering stable cash flows from our existing fleet. The acquisition of the Methane Becki Anne is anticipated to be immediately accretive to our Distributable cash flow per unit and increases our contracted days to 91% in 2019 and 70% in 2020.

We are reiterating our year-on-year distribution growth guidance of 5% to 7% in 2018, and we expect further year-on-year distribution growth of 2% to 4% in 2019. Our guidance reflects the positive fundamentals in the LNG shipping market, where spot rates have recently reached new multi-year highs, our acquisitions of the GasLog Gibraltar and the Methane Becki Annein 2018, and continued access to equity capital to fund drop-down acquisitions, while also considering our scheduled dry-dockings and one vessel coming off charter in late 2019.”

Acquisition of the Methane Becki Anne

GasLog Partners announces an agreement with GasLog to acquire 100% of the shares in the entity that owns and charters the Methane Becki Anne to Shell. The Methane Becki Anne is a 170,000 cubic meter (“cbm”) tri-fuel diesel electric (“TFDE”) LNG carrier built in 2010 and technically managed by GasLog since delivery. The vessel is currently on a multi-year time charter with a subsidiary of Shell through March 2024 and Shell has a unilateral option to extend the term of the time charter for a period of either three or five years.

The aggregate purchase price for the acquisition will be $207.4 million, which includes $1.0 million for positive net working capital balances to be transferred with the vessel and is approximately equal to the vessel’s net book value. GasLog Partners expects to finance the acquisition with cash on hand, plus the assumption of the Methane Becki Anne’s outstanding indebtedness of $93.9 million. The Partnership believes that the Methane Becki Anne acquisition will be immediately accretive to Distributable cash flow per unit and is consistent with its strategy to grow cash distributions through drop-down and third-party acquisitions. GasLog Partners estimates that the Methane Becki Anne will add approximately $22.0 million to EBITDA in the first 12 months after closing. Accordingly, the purchase price represents an acquisition multiple of approximately 9.4x estimated EBITDA. The acquisition is expected to close in the fourth quarter of 2018.

Tortoise Common Equity Investment

On September 26, 2018, GasLog Partners announced an agreement to sell 2,250,000 common units to funds managed by Tortoise, a leading energy infrastructure investor, for gross proceeds of $53.1 million and net proceeds of $53.0 million. The common units were sold at a price of $23.60 per common unit through the Partnership’s ATM Programme. The sale of the units was settled in two tranches, with 2,093,775 units settled on September 27, 2018 and the remaining 156,225 units settled on October 9, 2018.

ATM Programme

On May 16, 2017, GasLog Partners commenced an ATM Programme under which the Partnership may, from time to time, raise equity through the issuance and sale of new common units having an aggregate offering price of up to $100.0 million in accordance with the terms of an equity distribution agreement entered into on the same date. Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC agreed to act as sales agents. On November 3, 2017, the size of the ATM Programme was increased to $144.0 million and UBS Securities LLC was included as a sales agent. During the third quarter of 2018, GasLog Partners issued and received payment for 2,293,775 common units at a weighted average price of $23.68 per common unit for total gross proceeds of $54.3 million and net proceeds of $54.0 million, after broker commissions of $0.2 million and other expenses of $0.1 million. The total units issued include the aforementioned 2,093,775 common units which were purchased by funds managed by Tortoise. In connection with the issuance of common units under the ATM Programme during this period, the Partnership also issued 46,812 general partner units to its general partner in order for GasLog to retain its 2.0% general partner interest. The net proceeds from the issuance of the general partner units were $1.1 million.

In the period from October 1, 2018 through October 9, 2018, GasLog Partners issued and received payment for an additional 156,225 common units at a price of $23.60 per unit for gross proceeds of $3.69 million and net proceeds of $3.68 million after broker commissions of $0.01 million. The issuance of these units fulfilled contractual commitments entered into with Tortoise before September 30, 2018.

Since the commencement of the ATM Programme through October 9, 2018, GasLog Partners has issued and received payment for a total of 5,188,425 common units, with cumulative gross proceeds of $120.9 million at a weighted average price of $23.30 per unit. In connection with the issuance of common units under the ATM Programme during this period, the Partnership also issued 102,699 general partner units to its general partner.

Financial Summary

  IFRS Common Control Reported Results(1)  
  For the three months ended   % Change from  
(All amounts expressed in thousands of U.S. dollars)   September 30,
2017
  June 30,
2018
  September 30,
2018
  September 30,
2017
  June 30,
2018
 
Revenues 86,353 76,934 81,887 (5 % ) 6 %
Profit 31,007 23,841 27,270 (12 % ) 14 %
Adjusted Profit(2) 31,192 22,840 25,617 (18 % ) 12 %
EBITDA(2) 64,910 54,992 58,850 (9 % ) 7 %

(1) “IFRS Common Control Reported Results” represent the results of GasLog Partners in accordance with IFRS. Such results include amounts related to vessels currently owned by the Partnership for the periods prior to their respective transfer to GasLog Partners from GasLog, as the transfers of such vessels were accounted for as reorganizations of entities under common control for IFRS accounting purposes. The unaudited condensed consolidated financial statements of the Partnership accompanying this press release are prepared under IFRS on this basis.

(2) Adjusted Profit and EBITDA are non-GAAP financial measures. For the definitions and reconciliations of these measures to the most directly comparable financial measure presented in accordance with IFRS, please refer to Exhibit III at the end of this press release.

The decrease in profit in the third quarter of 2018 as compared to the same period in 2017 is mainly attributable to decreased net revenues due to the expiry of the initial charters of the GasLog Shanghai, the GasLog Santiago and the GasLog Sydney, which ended in May, June and September 2018, respectively. Following the expiry of their initial charters, the GasLog Shanghai has been trading in the spot market through the Cool Pool, an LNG carrier pooling arrangement operated by GasLog and Golar LNG Ltd. After completing their subsequent spot charters, the GasLog Santiago began a new, multi-year charter with a new customer and the GasLog Sydney is expected to begin a new 18-month charter with Cheniere Energy, Inc. in December 2018.

The increase in profit in the third quarter of 2018 as compared to the second quarter of 2018 is mainly attributable to increased net revenues due to the off-hire days for the two scheduled dry-dockings of the GasLog Santiago and the GasLog Sydney performed in the second quarter of 2018, partially offset by an increase in voyage expenses and commissions due to the spot market exposure of the GasLog Shanghai, the GasLog Santiago and the GasLog Sydney and increased financial costs.

  Partnership Performance Results(1)  
  For the three months ended   % Change from  
(All amounts expressed in thousands of U.S. dollars)   September 30,
2017
  June 30,
2018
  September 30,
2018
  September 30,
2017
  June 30,
2018
 
Revenues 73,277 74,909 81,887 12 % 9 %
Profit 25,299 22,901 27,270 8 % 19 %
Adjusted Profit(2) 25,484 21,900 25,617 1 % 17 %
EBITDA(2) 53,529 53,260 58,850 10 % 10 %
Distributable cash flow(2) 26,867 22,915 27,167 1 % 19 %
Cash distributions declared 22,377 24,272 25,658 15 % 6 %

(1) “Partnership Performance Results” represent the results attributable to GasLog Partners. Such results are non-GAAP measures and exclude amounts related to vessels currently owned by the Partnership for the periods prior to their respective transfers to GasLog Partners from GasLog, as the Partnership is not entitled to the cash or results generated in the periods prior to such transfers. Such results are included in the GasLog Partners’ results in accordance with IFRS because the transfers of the vessel owning entities by GasLog to the Partnership represent reorganizations of entities under common control and the Partnership reflects such transfers retroactively under IFRS. GasLog Partners believes that these non-GAAP financial measures provide meaningful supplemental information to both management and investors regarding the financial and operating performance of the Partnership necessary to understand the underlying basis for the calculations of the quarterly distribution and earnings per unit, which similarly exclude the results of vessels prior to their transfers to the Partnership. These non-GAAP financial measures should not be viewed in isolation or as substitutes to the equivalent GAAP measures presented in accordance with IFRS, but should be used in conjunction with the most directly comparable IFRS Common Control Reported Results. For the definitions and reconciliations of these measurements to the most directly comparable financial measures presented in accordance with IFRS, please refer to Exhibit II at the end of this press release.

(2) Adjusted Profit, EBITDA and Distributable cash flow are non-GAAP financial measures and should not be used in isolation or as a substitute for GasLog Partners’ financial results presented in accordance with 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 III at the end of this press release.

The increase in profit for the third quarter of 2018 as compared to the same period in 2017 is mainly attributable to the profits of the GasLog Geneva, the Solarisand the GasLog Gibraltar, acquired by the Partnership on July 3, 2017, October 20, 2017 and April 26, 2018, respectively, and the decrease in mark-to-market loss on interest rate swaps attributable to the Partnership, which were partially offset by the decreased revenues and increased voyage expenses and commissions, due to the expiry of the initial charters of the GasLog Shanghai, the GasLog Santiago and the GasLog Sydney.

The increase in profit in the third quarter of 2018 as compared to the second quarter of 2018 is mainly attributable to increased net revenues due to the two scheduled dry-dockings performed in the second quarter of 2018, partially offset by an increase in voyage expenses and commissions due to the expiry of the initial charters of the GasLog Shanghai, the GasLog Santiago and the GasLog Sydney.

Preference Unit Distributions

On July 25, 2018, the board of directors of GasLog Partners approved and declared a distribution on the Series A Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series A Preference Units”) of $0.5390625 per preference unit and a distribution on the Series B Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series B Preference Units”) of $0.5125 per preference unit. The cash distributions were paid on September 17, 2018 to all unitholders of record as of September 10, 2018.

Common Unit Distribution

On October 24, 2018, the board of directors of GasLog Partners approved and declared a quarterly cash distribution of $0.53 per common unit for the quarter ended September 30, 2018. The cash distribution is payable on November 9, 2018 to all unitholders of record as of November 5, 2018.

Liquidity and Financing

As of September 30, 2018, we had $168.8 million of cash and cash equivalents, of which $91.1 million was held in current accounts and $77.7 million was held in time deposits with an original duration of less than three months. An amount of $10.0 million of time deposits with an original duration greater than three months was classified as short-term investments.

As of September 30, 2018, we had an aggregate of $1,156.6 million of indebtedness outstanding under our credit facilities, of which $85.0 million is repayable within one year. In addition, we had unused availability under our revolving credit facilities of $55.9 million.

In August 2018, the Partnership entered into three new forward foreign exchange contracts with GasLog with a notional value of €6.0 million and staggered maturities during the third quarter of 2019 to mitigate its foreign exchange transaction exposure in its operating expenses.

The Partnership has entered into five interest rate swap agreements with GasLog at a notional value of $550.0 million in aggregate, maturing between 2020 and 2023. As a result of its hedging agreements, the Partnership has hedged 46.9% of its floating interest rate exposure on its outstanding debt as of September 30, 2018, at a weighted average interest rate of approximately 1.9% (excluding margin).

Following the completion of the scheduled dry-dockings of the GasLog Santiago and the GasLog Sydney in the second quarter of 2018, the GasLog Seattle is scheduled to commence her dry-docking in the fourth quarter of 2018.

As of September 30, 2018, our current assets totaled $197.3 million and current liabilities totaled $150.3 million, resulting in a positive working capital position of $47.0 million.

LNG Market Update and Outlook

LNG demand growth was strong and broad-based during the first nine months of 2018, growing 7% over the same period of 2017, according to data from Poten. LNG demand growth was led by China which grew approximately 42% year-over-year or nearly 11 million tonnes per annum (“mtpa”) as the country continues to grow its natural gas usage as a percentage of its total energy consumption. Moreover, demand from South Korea, India, Pakistan and Taiwan grew by 14%, 20%, 63%, and 8%, respectively, or a combined total of approximately 10 mtpa. The outlook for future demand growth continues to be robust, with over 6% per annum projected for 2018-2023, and more than two-thirds of this demand growth coming from countries in South East Asia and Europe, according to estimates from Wood Mackenzie.

LNG supply grew by 8% year-over-year during the third quarter of 2018 and increased by 5% from the second quarter of 2018, according to estimates from Wood Mackenzie. Supply growth was driven by the start-up of Yamal Train 2 as well as the ramp-up of production from Wheatstone Train 2, Cameroon FLNG and Cove Point. In addition, the Ichthys LNG project in Australia began operations this month while Yamal Train 3 (Russia) and Corpus Christi Train 1 (United States, or “U.S.”) are expected to begin production by year end, underpinning Wood Mackenzie’s supply growth estimate of 8% for this year. Looking ahead, an additional 44 mtpa of LNG production capacity (or 14%) is anticipated in 2019, primarily as a result of the start-up of new liquefaction facilities in the U.S. such as Freeport and Cameron.

Earlier this month, Shell and its project partners (Petronas, PetroChina, Mitsubishi and KOGAS) announced a final investment decision (“FID”) on the first phase of the LNG Canada project located in British Columbia on Canada’s Pacific coast. The project is the first LNG project sanctioned in Canada and this first phase targets a total of 14 mtpa of capacity. In addition, Qatar Petroleum announced its intention to add a fourth liquefaction train of 8 mtpa of capacity to its expansion plans, taking its total planned LNG production capacity to 110 mtpa by the middle of the next decade.

Headline spot shipping rates for TFDE LNG carriers as reported by Clarksons averaged $82,000 in the third quarter of 2018, compared to $42,000 in the third quarter of 2017. Rates continued to exhibit counter-seasonal strength through the third quarter of 2018, rising to $95,000 per day in late September from $78,000 per day at the beginning of the quarter. Since the end of the third quarter, spot rates have continued to increase, now assessed at $147,000 and approaching the record high as reported by Clarksons of $150,000 set in July of 2012. Inter-basin trading of LNG continued to support activity in the spot market and 76 fixtures were reported during the third quarter of 2018, bringing the total number of fixtures from January through September of this year to 255, an increase of 9% over the same period in 2017. According to Poten, charter durations have also increased, rising by nearly 50% this year to 43 days, compared with 29 days in 2017, with many multi-month or multi-voyage charters fixed in recent months. A natural outcome of this positive dynamic is that the number of ships available for charter has been reduced and, as such, near-term spot fixture activity may decline relative to the record levels seen earlier in 2018.

Looking ahead, in our view, strong LNG demand, new sources of supply coming onstream and limited availability of shipping capacity over the near-term are combining to create the potential for the recent strength in LNG shipping spot rates to be sustained through at least early 2019. While we may see a seasonal moderation in spot rates during the first half of 2019, we do not expect this to be as pronounced as was the case in early 2018.

According to Poten, 41 newbuild LNG carriers have been ordered so far in 2018, taking the total orderbook for LNG carriers to 96 vessels of which 65% are backed by long-term charters. Notwithstanding recent order activity, we believe the LNG shipping fleet is set to experience very high levels of utilisation in the near-term based on our current supply and demand projections and the build time of approximately two and a half years for new LNG carriers. We continue to believe that further shipping capacity will be needed over and above the current orderbook to satisfy projected demand from 2021 onwards. However, following the increase in newbuild ordering in 2018, we believe that a more measured pace of shipping capacity additions is needed in the future as a result of the time required to complete the construction and commissioning of new production capacity, particularly if these projects experience delays in their completion.
Source: GasLog Partners

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