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GasLog Partners Rides Strong Market Conditions During Fourth Quarter of 2022

GasLog Partners LP, an international owner and operator of liquefied natural gas (“LNG”) carriers, reported its financial results for the three-month period and the year ended December 31, 2022.

Highlights

Extended the time charter agreement of the Methane Becki Anne, a tri-fuel diesel electric (“TFDE”) LNG carrier, with a wholly owned subsidiary of Shell plc (“Shell”) exercising their five-year option to extend, with the contract now due to expire in 2029. Also, extended the time charter agreement of the Methane Jane Elizabeth with a subsidiary of Cheniere Energy Inc. (“Cheniere”) exercising their option to extend for another year and entered into a one-year time charter agreement for the TFDE LNG carrier GasLog Seattle with a Swiss-headquartered energy trading company
Completed the sale and lease-back of the Methane Heather Sally, a steam turbine propulsion (“Steam”) LNG carrier for $50.0 million, with no repurchase option or obligation
Repurchased $10.5 million of preference units in the open market in the fourth quarter of 2022 and a total of $49.2 million of repurchased preference units during 2022
Repaid $21.7 million of debt and lease liabilities during the fourth quarter of 2022, bringing total debt repayment to $115.7 million during 2022 (excluding $65.1 million of total prepayments with respect to the sale of the Methane Shirley Elisabeth and the sale and lease-back of the Methane Heather Sally)
Recognized a non-cash impairment loss of $4.4 million in the fourth quarter of 2022 on the book values of two Steam vessels of the Partnership, built in 2006 and 2007
Quarterly Revenues, Profit, Adjusted Profit(1) and Adjusted EBITDA(1) of $105.0 million, $40.6 million, $44.8 million and $81.1 million, respectively
Annual Revenues, Profit, Adjusted Profit(1) and Adjusted EBITDA(1) of $371.0 million, $119.0 million, $139.3 million and $274.6 million, respectively
Quarterly Earnings/(loss) per unit (“EPU”) of $0.66 and Adjusted EPU(1) of $0.74
Annual EPU of $1.77 and Adjusted EPU(1) of $2.15
Declared cash distribution of $0.01 per common unit for the fourth quarter of 2022
On January 24, 2023, the Partnership received an unsolicited non-binding proposal from GasLog Ltd. (“GasLog”) to acquire all of the outstanding common units representing limited partner interests of the Partnership not already beneficially owned by GasLog, at an aggregate purchase price of $7.70 per common unit in cash

CEO Statement

Paolo Enoizi, Chief Executive Officer, commented: “The Partnership delivered strong financial results in the fourth quarter of 2022, taking advantage of market conditions to secure a series of term charters at attractive rates during the course of the year. The Partnership enters 2023 with a charter backlog of approximately $729.0 million of contracted time charter revenues and fixed charter coverage of about 87.0% of its total days in 2023, with the majority of our open days in the seasonally stronger fourth quarter, further enhancing our cash flow visibility in 2023.

Overall, the term fixtures in 2022 supported the disciplined execution of our capital allocation strategy, helping us make meaningful progress towards our leverage targets and strengthening our balance sheet with the repurchase of $49.2 million in preference units in the year, or approximately $68.0 million since inception of the repurchase plan in August 2021, which is also improving the Partnership’s all-in break-even levels in our fleet. Our ability to capture the market and our continued focus on our capital allocation strategy keep delivering shareholder value, helping us make progress towards our long-term goals, and will position us to take advantage of accretive growth opportunities.

Lastly, on January 24, 2023, the Partnership received an unsolicited non-binding proposal from GasLog to acquire all of the outstanding common units not already owned by GasLog for an aggregate purchase price of $7.70 per common unit in cash, which our board of directors and conflicts committee are in the process of reviewing.”

There were 1,288 available days (2) for the quarter ended December 31, 2022, as compared to 1,380 available days (2) for the quarter ended December 31, 2021. The quarter-over-quarter decrease is attributable to the sale of the Methane Shirley Elisabeth in the third quarter of 2022.

Revenues were $105.0 million for the quarter ended December 31, 2022, compared to $88.2 million for the same period in 2021. The increase of $16.8 million is mainly attributable to a net increase in revenues from our vessels operating in the spot and short-term markets in the fourth quarter of 2022, in line with the continued strength of the LNG shipping spot and short-term markets. This increase was partially offset by a decrease in revenues due to the sale of the Methane Shirley Elisabeth in the third quarter of 2022.

Vessel operating costs were $18.0 million for the quarter ended December 31, 2022, compared to $18.9 million for the same period in 2021. The decrease of $0.9 million in vessel operating costs is mainly attributable to a more favorable EUR/USD exchange rate in the fourth quarter of 2022 compared to the same period in 2021, and the sale of the Methane Shirley Elisabeth in the third quarter of 2022, partially offset by 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 $13,974 per day for the quarter ended December 31, 2022 from $14,695 per day for the quarter ended December 31, 2021.

General and administrative expenses were $4.2 million for the quarter ended December 31, 2022, compared to $3.5 million for the same period in 2021. The increase of $0.7 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 compared to prior year (approximately $0.3 million per vessel per year), which was partially offset by a decrease in administrative fees due to the sale of the Methane Shirley Elisabeth in the third quarter of 2022. Daily general and administrative expenses increased to $3,240 per vessel ownership day for the quarter ended December 31, 2022, from $2,543 per vessel ownership day for the quarter ended December 31, 2021.

Adjusted EBITDA (1) was $81.1 million for the quarter ended December 31, 2022, compared to $64.2 million for the same period in 2021. The increase of $16.9 million is mainly attributable to the increase in revenues of $16.8 million described above.

The Partnership recognized an aggregate non-cash impairment loss of $4.4 million with respect to two of its Steam vessels for the quarter ended December 31, 2022, in accordance with International Financial Reporting Standards (“IFRS”), as compared to an aggregate impairment loss of $104.0 million for the same period in 2021. The principal factors that led to the recognition of a non-cash impairment loss in the fourth quarter of 2022 included the continuous decline in the fair values of Steam vessels, driven by reduced market expectations of the long-term rates for these older technology vessels, combined with potential costs of compliance with environmental regulations applicable from 2023 onwards.

Financial costs were $15.7 million for the quarter ended December 31, 2022, compared to $9.4 million for the same period in 2021. The increase of $6.3 million in financial costs is mainly attributable to the increase in interest expense on loans, mainly due to an increase in base interest rates (London Interbank Offered Rate, “LIBOR”, and Secured Overnight Financing Rate, “SOFR”) in the fourth quarter of 2022 as compared to the same period in 2021. During the quarter ended December 31, 2022, we had an average of $952.7 million of outstanding indebtedness with a weighted average interest rate of 5.9%, compared to an average of $1,137.7 million of outstanding indebtedness with a weighted average interest rate of 2.4% during the quarter ended December 31, 2021.

Gain on derivatives was $0.4 million for the quarter ended December 31, 2022, compared to $1.8 million for the same period in 2021. The decrease of $1.4 million is attributable to a decrease 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, partially offset by a decrease in realized loss on interest rate swaps.

Profit was $40.6 million for the quarter ended December 31, 2022, compared to a loss of $70.8 million for the same period in 2021. The increase in profit of $111.4 million is mainly attributable to a decrease in the non-cash impairment loss of $99.6 million and an increase in revenues of $16.8 million, partially offset by an increase in financial costs of $6.3 million, as described above.

Adjusted Profit (1) was $44.8 million for the quarter ended December 31, 2022, compared to $30.7 million for the same period in 2021. The increase in Adjusted Profit of $14.1 million is mainly attributable to the increase in revenues discussed above.

As of December 31, 2022, we had $198.1 million of cash and cash equivalents, of which $57.2 million was held in current accounts and $140.9 million was held in time deposits with an original duration of up to three months. An additional amount of $25.0 million of time deposits with an original duration of greater than three months was classified under short-term cash deposits.

As of December 31, 2022, we had an aggregate of $921.9 million of bank borrowings outstanding under our credit facilities, of which $90.4 million was repayable within one year, and an aggregate of $62.6 million of lease liabilities mainly related to the sale and leaseback of the GasLog Shanghai and Methane Heather Sally, of which $17.4 million was payable within one year.

As of December 31, 2022, our current assets totaled $243.0 million and current liabilities totaled $177.2 million, resulting in a positive working capital position of $65.8 million.

Sale and Leaseback of the Methane Heather Sally

On October 31, 2022, GasLog Partners completed the sale and leaseback of the Methane Heather Sally, a 145,000 cubic meter (“cbm”) Steam LNG carrier, built in 2007, with an unrelated third party, for $50.0 million, resulting in the recognition of a gain on disposal of $0.3 million in the three months ended December 31, 2022. The vessel was sold and leased back under a bareboat charter until mid-2025 with no repurchase option or obligation and remains on its charter with a Southeast Asian charterer.

Preference Unit Repurchase Programme

In the three months ended December 31, 2022, under the Partnership’s preference unit repurchase programme (the “Repurchase Programme”) established in March 2021, GasLog Partners repurchased and cancelled 351,237 8.625% Series A Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series A Preference Units”), 127,652 8.200% Series B Cumulative Redeemable Perpetual Fixed to Floating Rate Preference Units (the “Series B Preference Units”) and 144,812 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 three months ended December 31, 2022 was $10.5 million, including commissions.

In the year ended December 31, 2022, GasLog Partners has repurchased and cancelled 665,016 Series A Preference Units, 639,189 Series B Preference Units and 669,406 Series C Preference Units at a weighted average price of $24.64, $25.11 and $24.96 per preference unit for Series A, Series B and Series C, respectively, for an aggregate amount of $49.2 million, including commissions.

Since inception of the Repurchase Programme in March 2021 and up to January 26, 2023, GasLog Partners has repurchased and cancelled 665,016 Series A Preference Units, 1,103,618 Series B Preference Units and 938,955 Series C Preference Units at a weighted average price of $24.64, $25.01 and $25.03 per preference unit for Series A, Series B and Series C, respectively, for an aggregate amount of $67.6 million, including commissions.

LNG Market Update and Outlook

Global LNG demand was estimated to be 99.1 million tonnes (“mt”) in the fourth quarter of 2022, according to Wood Mackenzie, Energy Research and Consultancy (“WoodMac”), compared to 95.1 mt in the fourth quarter of 2021, an increase of approximately 4.2%, primarily led by continued strong demand from Europe in response to continued disruption of gas pipeline imports from Russia. Due to increased LNG flows and a very mild fourth quarter, European inventories finished the year at higher-than-average levels (83.4% compared to a 70% five-year average).

Global LNG supply was approximately 104.1 mt in the fourth quarter of 2022, growing by 2.5 mt, or 2.4%, compared to the fourth quarter of 2021, according to WoodMac. During 2022, LNG supply has increased by 17.5 mt with United States (“U.S.”) exports accounting for 6.5 mt despite the continuing outage at Freeport LNG, now targeting a restart in February or early March 2023. 69% of U.S. exports were directed to Europe in 2022, compared to about 34% in 2021, according to Kpler Analytics.

Headline spot rates in the fourth quarter of 2022 rose to new records, $447,500 per day at their peak in November for TFDE vessels, due to a combination of factors. Firstly, a large number of vessels were classified as floating storage due to congestion and speculative floating storage plays targeting the contango in Europe. Secondly, disponent owners were reticent to sublet vessels, further reducing the number of vessels available in the spot market. However, continuing warm weather, high levels of inventories and significant reduction of floating storage in December led to rates subsequently falling to $163,000 per day as of December 30, 2022, as per weekly assessment by Clarksons Research Services Limited (“Clarksons”). Rates continue to drop to around $67,500 per day as of January 20, 2023. This extreme volatility continues to demonstrate the significant impact of weather and seasonality on the LNG freight market.

One-year time charter rates for TFDE LNG carriers averaged $189,231 per day in the fourth quarter of 2022, an 81% increase over the $104,643 per day average in the fourth quarter of 2021. One-year time charter rates for Steam LNG carriers averaged $82,308 per day in the fourth quarter of 2022, 20% higher than the $68,250 daily average in the fourth quarter of 2021.

As of December 31, 2022, Poten & Partners Group Inc. estimated that the orderbook totaled 290 dedicated LNG carriers (>100,000 cbm) with deliveries between 2023 and 2028, representing 48.5% of the on-the-water fleet. Of these, 265 vessels (or 91.3%) have multi-year charters already contracted, leaving 25 vessels uncommitted with deliveries clustered between 2023-2026. There were 172 orders for newbuild LNG carriers in 2022 compared with 75 orders for all of 2021.
Source: GasLog Partners LP

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