GasLog Ltd. and its subsidiaries, an international owner, operator and manager of liquefied natural gas (“LNG”) carriers, reported its financial results for the quarter ended June 30, 2018.

Highlights

• Signed a multi-year charter party with Pioneer Shipping Limited, a wholly owned subsidiary of Centrica plc (“Centrica”), for a newbuild LNG carrier. The vessel, a 180,000 cubic meter (“cbm”) LNG carrier to be built by Samsung Heavy Industries Co., Ltd. (“Samsung”) with dual fuel two stroke engine propulsion (“LP-2S”), is scheduled for delivery in the third quarter of 2020.

• Completed the sale of the GasLog Gibraltar to GasLog Partners LP (“GasLog Partners” or the “Partnership”) for $207.0 million on April 26, 2018. Part of the consideration was satisfied by the private issuance of $45.0 million of common units in GasLog Partners to GasLog.

• Completion of the dry-docking of, and installation of reliquefaction modules on, the GasLog Santiago and the GasLog Sydney, enhancing the commercial competitiveness of both vessels.

• GasLog Partners announced a new time charter for the GasLog Sydney for 18 months with a wholly owned subsidiary of Cheniere Energy, Inc. (“Cheniere”), scheduled to commence between September and December 2018.

• Revenues of $132.8 million (Q2 2017: $129.9 million), Profit of $14.2 million (Q2 2017: $6.9 million) and Loss per share of $0.08(1) (Q2 2017: Loss per share of $0.12) for the quarter ended June 30, 2018.

• EBITDA(2) of $92.6 million (Q2 2017: $87.4 million) and Adjusted EBITDA(2) of $92.9 million (Q2 2017: $87.4 million), Adjusted Profit(2) of $14.8 million (Q2 2017: $14.4 million) and Adjusted Loss per share(2) of $0.07(1) (Q2 2017: Adjusted Loss per share of $0.03) for the quarter ended June 30, 2018.

• Quarterly dividend of $0.15 per common share payable on August 23, 2018, 7.1% higher than the second quarter of 2017.
(1) Earnings/(loss) per share (“EPS”) and Adjusted EPS are net of the profit attributable to the non-controlling interests of $17.8 million and the dividend on preferred stock of $2.5 million for the quarter ended June 30, 2018 ($14.4 million and $2.5 million, respectively, for the quarter ended June 30, 2017).

(2) 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 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.

CEO Statement

Paul Wogan, Chief Executive Officer, stated: “We continued to execute our long-term strategy in the second quarter with the announcement of a new seven-year time charter party with a wholly owned subsidiary of Centrica. Against this, we ordered a newbuild 180,000 cbm LNG carrier with LP-2S propulsion from Samsung for delivery in the third quarter of 2020. We now have five newbuilds on order for delivery in 2019 and 2020, three of which have committed multi-year charters, while the two uncommitted newbuilds are expected to deliver into an attractive LNG shipping market.

As we anticipated, there was seasonal weakening in demand for LNG and for LNG shipping in the second quarter. LNG shipping spot rates troughed in late April but then more than doubled through June, driven by counter seasonal strength in LNG demand and Asian pricing that provided a clear arbitrage opportunity between the Atlantic and Pacific Basins. If this recent momentum is maintained through the 2018/19 winter, we expect the future financial performance of our spot vessels to show significant improvement on the second quarter of 2018.

The longer-term supply and demand fundamentals for LNG remain very positive, with China’s LNG imports, in particular, increasing 50% year-on-year in the first half of 2018. On the back of these robust fundamentals, Cheniere took a final investment decision (“FID”) on Corpus Christi Train 3 which was the first new liquefaction FID since June 2017. We have seen momentum pick up for new, long-term offtake contracts which should encourage further new liquefaction FIDs within the next 12 to 18 months. GasLog is well positioned to capitalize on the shipping requirements for any new LNG supply.

Additional Vessel

On May 30, 2018, GasLog confirmed the order of a 180,000 cbm GTT Mark III Flex LNG Carrier with LP-2S propulsion (Hull No. 2262) from Samsung that is scheduled to be delivered in the third quarter of 2020. The vessel will be chartered to Pioneer Shipping Limited, a wholly owned subsidiary of Centrica, for an initial period of seven years.

Completion of Dropdown of the GasLog Gibraltar

On April 26, 2018, GasLog completed the sale of 100% of the ownership interest in GAS-fourteen Ltd., the entity which owns the GasLog Gibraltar, to GasLog Partners, for an aggregate purchase price of $207.0 million, which includes $1.0 million of positive net working capital. In connection with the sale, GasLog was issued $45.0 million of newly issued, privately placed common units (1,858,975 common units at a price of $24.21 per unit) of GasLog Partners as partial consideration.

Alexandroupolis Project Update

During the quarter, Gastrade S.A. (“Gastrade”) and the stakeholders in the Alexandroupolis project continued their efforts to move the project towards FID. The parties have finalized the majority of the terms under which both the Greek national gas utility DEPA and Bulgarian Energy Holding (“BEH”) would take a shareholding in the project. Preparations have been ongoing during the quarter for the launch of a market test for potential users and the invitation to tender for various elements of the project, with both expected to commence in the near-term. Gastrade and its partners continue to target an end-2018 FID.

New Charter Agreements

On June 18, 2018, GasLog Partners entered into a new time charter for the GasLog Sydney for 18 months with Cheniere Marketing International LLP, a wholly owned subsidiary of Cheniere, scheduled to commence between September and December 2018. The charterer has options to extend the charter for up to two consecutive periods of six months at escalating rates. The GasLog Sydney is a 155,000 cbm TFDE LNG carrier built in 2013 and currently concluding a multi-year time charter with a wholly owned subsidiary of Royal Dutch Shell plc (“Shell”) in September 2018. The vessel recently completed a scheduled dry-docking during which its commercial competitiveness was enhanced through the installation of a reliquefaction module.

In addition, GasLog entered into an agreement with a major LNG producer for an approximately seven-month charter for the GasLog Houston, a 174,000 cbm low pressure, LP-2S propulsion, which commenced in June 2018 and ends on delivery of the vessel into her long-term charter with Shell in the beginning of 2019.

GasLog Partners’ At-the-Market Common Units Equity Offering Programme (the “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.

Since the commencement of the ATM Programme through June 30, 2018, GasLog Partners has issued and received payment for a total of 2,738,425 common units, with cumulative gross proceeds of $62.9 million at a weighted average price of $22.97 per unit, representing a discount of 0.5% to the volume weighted average trading price of GasLog Partners’ common units on the days on which new common units were issued. As of June 30, 2018, the cumulative net proceeds were $61.2 million.

In the second quarter of 2018, GasLog Partners issued and received payment for an additional 1,020 common units at a weighted average price of $24.25 per common unit for total gross and net proceeds of $0.02 million.

Dividend Declaration

On May 11, 2018, the board of directors declared a dividend on the Series A Preference Shares of $0.546875 per share, or $2.5 million in aggregate, payable on July 2, 2018 to holders of record as of June 29, 2018. GasLog paid the declared dividend to the transfer agent on June 28, 2018.

On August 1, 2018, the board of directors declared a quarterly cash dividend of $0.15 per common share, or $12.1 million in the aggregate, payable on August 23, 2018 to shareholders of record as of August 13, 2018.

Financial Summary

(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 2,249 operating days for the quarter ended June 30, 2018, as compared to 2,081 operating days for the quarter ended June 30, 2017. The increase in operating days resulted mainly from the deliveries of the GasLog Houston, the GasLog Hong Kong and the GasLog Genoa on January 8, 2018, March 20, 2018 and March 29, 2018, respectively, partially offset by the off-hire days from the dry-dockings of the GasLog Santiago and the GasLog Sydney.

Revenues were $132.8 million for the quarter ended June 30, 2018 ($129.9 million for the quarter ended June 30, 2017). The increase was mainly driven by the new deliveries in our fleet (the GasLog Houston, the GasLog Hong Kong and the GasLog Genoa), partially offset by the decreased revenues from vessels operating in the spot market, the increased off-hire days due to dry-dockings (two extended dry-dockings in the second quarter of 2018 as opposed to no dry-dockings in the second quarter of 2017) and the decrease due to the expiration of the long-term time charter of the GasLog Shanghai and her entering into the spot market.

Net pool allocation was $7.0 million for the quarter ended June 30, 2018 ($0.5 million for the quarter ended June 30, 2017). The increase was attributable to the movement in the adjustment of the net pool results generated by the GasLog vessels in accordance with the pool distribution formula. GasLog recognized gross revenues and gross voyage expenses and commissions of $5.0 million and $2.2 million, respectively, from the operation of its vessels in the Cool Pool during the quarter ended June 30, 2018 (June 30, 2017: $8.0 million and $1.7 million, respectively). The increase in GasLog’s total net pool performance compared to the quarter ended June 30, 2017 was driven by higher spot rates and higher utilization achieved by all vessels trading in the Cool Pool. GasLog’s total net pool performance is presented below:

Voyage expenses and commissions were $4.6 million for the quarter ended June 30, 2018 ($3.3 million for the quarter ended June 30, 2017). The increase resulted mainly from the increased voyage expenses of the vessels operating in the spot market and an increase in bunkers consumed during off-hire and unchartered periods for the remaining vessels of the fleet.

Vessel operating and supervision costs were $32.7 million for the quarter ended June 30, 2018 ($29.8 million for the quarter ended June 30, 2017). The increase was mainly attributable to the deliveries of the GasLog Houston, the GasLog Hong Kong and the GasLog Genoa operating in our fleet for the full second quarter in 2018, partially offset by one-off savings in certain crew expenses.

Depreciation was $38.8 million for the quarter ended June 30, 2018 ($34.5 million for the quarter ended June 30, 2017). The increase resulted from the deliveries of the GasLog Houston, the GasLog Hong Kong and the GasLog Genoa on January 8, 2018, March 20, 2018 and March 29, 2018, respectively.

General and administrative expenses were $10.4 million for the quarter ended June 30, 2018 ($10.2 million for the quarter ended June 30, 2017).

Financial costs were $42.0 million for the quarter ended June 30, 2018 ($37.1 million for the quarter ended June 30, 2017). The increase was attributable to the increased weighted average debt outstanding as a result of the debt drawdowns for the vessels delivered in 2018 and the increased weighted average interest rate deriving from the upward movement of the USD London Interbank Offered Rate (“LIBOR”) rates. An analysis of the financial costs is set forth below.

Gain on derivatives was $1.2 million for the quarter ended June 30, 2018 ($9.7 million loss for the quarter ended June 30, 2017). The increase in gain on derivatives in the second quarter of 2018, as compared to the second quarter of 2017, is mainly attributable to the $4.4 million decrease in loss that was reclassified from equity to the statement of profit or loss, an increase of $3.6 million in gain from mark-to-market valuation of our derivative financial instruments carried at fair value through profit or loss, derived mainly from the higher LIBOR yield curve which was used to estimate the present value of the estimated future cash flows compared to the agreed fixed interest rates and an increase of $3.2 million in realized gain on interest rate swaps held for trading. An analysis of gain on derivatives is set forth below.

There was a profit of $14.2 million for the quarter ended June 30, 2018 ($6.9 million profit for the quarter ended June 30, 2017). This increase in profit is mainly attributable to the increase in gain on derivatives and the increase in profit from operations due to the factors mentioned above, partially offset by the increase in financial costs.

Adjusted Profit(1) was $14.8 million for the quarter ended June 30, 2018 ($14.4 million for the quarter ended June 30, 2017) adjusted for the effects of the non-cash gain on derivatives, the write-off of unamortized loan fees as well as the net foreign exchange gains/losses.

Loss attributable to the owners of GasLog was $3.6 million for the quarter ended June 30, 2018 ($7.5 million loss for the quarter ended June 30, 2017). The decrease in loss attributable to the owners of GasLog resulted mainly from the respective movements in profit mentioned above, partially offset by the increased amount allocated to third parties as a result of GasLog Partners’ ATM Programme initiated in May 2017, the preference unit issuances in May 2017 and January 2018, and the sale of four vessels to GasLog Partners.

EBITDA(1) was $92.6 million for the quarter ended June 30, 2018 ($87.4 million for the quarter ended June 30, 2017). The increase in EBITDA was driven by the increase in net revenues, partially offset by the increase in vessel operating expenses as discussed above.

Adjusted EBITDA(1) was $92.9 million for the quarter ended June 30, 2018 ($87.4 million for the quarter ended June 30, 2017).

Loss per share was $0.08 for the quarter ended June 30, 2018 (a loss of $0.12 for the quarter ended June 30, 2017). The decrease in loss per share is mainly attributable to the respective movements in loss attributable to the owners of GasLog discussed above.

Adjusted Loss per share(1) was $0.07 for the quarter ended June 30, 2018 (a loss of $0.03 for the quarter ended June 30, 2017), adjusted for the effects of the non-cash loss on derivative financial instruments and the net foreign exchange gains/losses.

(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.

Contracted Charter Revenues

GasLog’s contracted charter revenues are estimated to increase from $486.0 million for the fiscal year 2017 to $548.8 million for the fiscal year 2019, based on contracts in effect as of June 30, 2018, without including any extension options. As of June 30, 2018, the total future firm contracted revenue stood at $3.2 billion (1), including the vessels owned by GasLog Partners but excluding the vessels operating in the spot market.

(1) Contracted revenue calculations assume: (a) 365 revenue days per annum, with 30 off-hire days when the ship undergoes scheduled dry-docking (every five years) and ten additional off-hire days for the enhancement of one vessel; (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 June 30, 2018, GasLog had $314.4 million of cash and cash equivalents, of which $189.2 million was held in time deposits and the remaining balance in current accounts. Moreover, as of June 30, 2018, GasLog had $26.0 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 and $2.3 million in restricted cash, which consisted of a guarantee held for a vessel with respect to the enhancement of its operational performance.

As of June 30, 2018, GasLog had an aggregate of $2.9 billion of indebtedness outstanding under its credit facilities and bond agreements, of which $182.6 million was repayable within one year, and a $209.8 million finance lease liability related to the sale and leaseback of the Methane Julia Louise, of which $6.5 million was repayable within one year.

As of June 30, 2018, there was undrawn available capacity of $100.0 million under the revolving credit facility of the credit agreement of up to $1.1 billion entered into on July 19, 2016 (the “Legacy Facility Refinancing”).

As of June 30, 2018, the total remaining balance of the contract prices of the five LNG carriers on order was $875.9 million that GasLog expects to be funded with the $165.8 million undrawn capacity under the financing agreement entered into on October 16, 2015, as well as cash balances, cash from operations and borrowings under new debt agreements.

As of June 30, 2018, GasLog’s current assets totaled $389.6 million, while current liabilities totaled $324.7 million, resulting in a positive working capital position of $64.9 million.

During the second quarter, GasLog terminated, extended or signed new interest rate swap agreements maintaining the total notional amount as of June 30, 2018 at $1.2 billion. GasLog has hedged 46.2% of its expected floating interest rate exposure on its outstanding debt (excluding the finance lease liability) as of June 30, 2018.

Future Deliveries

GasLog has five newbuildings on order at Samsung which are on schedule and within budget:

(1)      Expected delivery quarters are presented.
(2)      Charter expiration to be determined based upon actual date of delivery.
Source: GasLog Ltd.