GasLog Ltd., an international owner, operator and manager of liquefied natural gas (“LNG”) carriers, yesterday reported its financial results for the quarter ended September 30, 2012. Highlights • For the third quarter, GasLog reports Adjusted EBITDA(1) of $9.7 million, Adjusted Profit(1) of $4.0 million and Profit of $2.9 million. • Adjusted EPS(1) of $0.06 and EPS of $0.05 for the third quarter of 2012. • Quarterly dividend of $0.11  per common share is payable on December 17, 2012.
• Continued strong fundamentals for the LNG industry.
• 100% utilization of GasLog Savannah and GasLog Singapore during the third quarter of 2012.
• The eight LNG newbuildings are on schedule and within budget.
• 62% of the floating interest rate exposure on our fully funded debt program has been hedged at a weighted average interest rate of approximately 4.3% (including margin) as of September 30, 2012.
Chairman & CEO Statement
Mr. Peter G. Livanos, Chairman and Chief Executive Officer, stated “We are pleased with our third quarter results, which exceeded internal expectations, reflecting lower general and administrative expenses. We are announcing today our first dividend as a public company. The 11 cents per share, as earlier promised, will be paid in the fourth quarter. The strong revenue reflects the continued 100% utilization of our existing fleet. Our construction program at Samsung Heavy Industries is on time and on budget. The first ships are currently undergoing outfitting and will be delivered in the first quarter of 2013. Concurrently with the delivery to us by the shipyard they will commence their charters to the BG group. We see additional new requirements for LNG ships emerging that support our optimism regarding our 2 open vessels. We are studying a number of alternative financial structures, including an MLP, that we feel could be beneficial to our growth aspirations and shareholder value. We believe our high quality technical platform and customer relations positions us well to take advantage of the growth in the LNG trade.”
Dividend Declaration
On November 20, 2012, the Board of Directors declared a quarterly cash dividend of $0.11 per common share payable on December 17, 2012 to stockholders of record as of December 3, 2012.
Financial Summary
Revenues were $16.9 million (which eliminates $1.2 million of intercompany revenue) for the quarter ended September 30, 2012 ($15.9 million for the quarter ended September 30, 2011). The increase is attributable to an increase in revenues in the vessel management segment from external customers of $0.9 million and an increase in revenues in the vessel ownership segment of $0.1 million, with GasLog’s existing fleet performing at 100% utilization.
Vessel operating and supervision costs were $3.6 million for the quarter ended September 30, 2012 ($3.1 million for the quarter ended September 30, 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 $2.9 million for the quarter ended September 30, 2012 ($3.0 million for the quarter ended September 30, 2011).
Financial costs were $2.9 million for the quarter ended September 30, 2012 ($2.3 million for the quarter ended September 30, 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 $2.9 million for the quarter ended September 30, 2012 ($4.6 million for the quarter ended September 30, 2011). This decrease is mainly attributable to a $1.5 million increase in non-cash loss on interest rate swaps, largely resulting from mark-to-market valuations and to the aforementioned factors.
Adjusted Profit(1) was $4.0 million for the quarter ended September 30, 2012 ($4.8 million for the quarter ended September 30, 2011), after excluding the effects of the net loss on interest rate swaps and foreign exchange gains.
Adjusted EBITDA(1) was $9.7 million for the quarter ended September 30, 2012 ($10.3 million for the quarter ended September 30, 2011).
Adjusted EPS(1) was $0.06 for the quarter ended September 30, 2012 ($0.12 for the quarter ended September 30, 2011). EPS was $0.05 for the quarter ended September 30, 2012 ($0.12 for the quarter ended September 30, 2011). The decrease in Adjusted EPS(1) and EPS is attributable to the decrease in Adjusted Profit(1) and Profit and the increase in the weighted average number of shares following the completion of the IPO and the concurrent private placement.
As GasLog stated in the final prospectus filed April 2, 2012 for its IPO, the ramp-up of general and administrative expenses is expected to exceed revenue growth in 2012, as GasLog’s newbuildings will only commence delivery in 2013. Accordingly, GasLog expects 2012 profit will be lower than in 2011.
For a detailed discussion of GasLog’s financial results for the quarter ended September 30, 2012, please refer to the Financial Report for the Three Months and Nine Months Ended September 30, 2012, furnished on Form 6-K to the United States Securities and Exchange Commission (the “Q3 6-K”).
Contracted Charter Revenues
GasLog’s contracted charter revenues are estimated to increase from $56 million for the fiscal year 2012 to $211 million for the fiscal year 2015, based on contracts in effect as of September 30, 2012 for the eight ships in GasLog’s owned fleet for which time charters have been secured, including contracts for six newbuildings that are scheduled to be delivered on various dates in 2013 and 2014. For further details please refer to the Q3 6-K.
Liquidity and Financing
As of September 30, 2012, GasLog had cash and cash equivalents of $26.7 million and short-term investments in time deposits of $211.8 million.
As of September 30, 2012, GasLog had an aggregate of $262.6 million of indebtedness outstanding under two credit agreements, of which $24.7 million is repayable within one year.
GasLog’s current commitments 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 September 30, 2012, the total remaining balance of the contract prices of the eight newbuildings on order was $1.36 billion, for which there are $1.13 billion of undrawn credit facilities and $238.5 million in cash, cash equivalents and short-term investments as of September 30, 2012, which includes proceeds from GasLog’s IPO and concurrent private placement completed on April 4, 2012.
Interest Rate Swaps
As of September 30, 2012, GasLog has entered into fifteen interest rate swap agreements for a total notional amount of $865.7 million. This is in relation to the outstanding indebtedness of $262.6 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 62.2% 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 September 30, 2012. During the third quarter of 2012, GasLog recognized a loss of $1.7 million on interest rate swaps, primarily attributable to the loss from the mark-to-market valuation of six interest rate swaps agreements signed in 2012 which do not qualify for hedge accounting.
Business Update
As of September 30, 2012, the eight ships under construction at Samsung Heavy Industries were on schedule and within budget. Of these eight ships, two were launched during Q2 2012 and they are on schedule for delivery during Q1 2013, and a third ship was launched in Q3 2012 and is scheduled for delivery during Q2 2013. Five of the eight ships that have now progressed to the steel cutting stage or beyond are scheduled for delivery in 2013.
The two ships in GasLog’s existing fleet, currently on multi-year charters to a subsidiary of BG Group plc, performed without any off-hire during the quarter ended September 30, 2012, thereby achieving full utilization for the period.
As of September 30, 2012, two of the newbuildings remain uncommitted and GasLog continues to hold options for two 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 production projects, and recent announcements in the LNG industry regarding additional LNG production projects are expected to create increased requirements for LNG carriers.
The third quarter of 2012 saw the final investment decision ("FID") by Cheniere Energy on the construction of two LNG production trains at their Sabine Pass, Louisiana facility, for a planned first-production as early as 2015. These volumes are set to be the first commercial LNG exports produced in the lower-48 states, and may mark the commencement of the USA as a large future LNG exporter. Elsewhere, a tolling agreement was signed between the developers of Freeport LNG export project in Texas, and Japanese buyers. There are many US-based LNG export projects in the planning stages, all seeking to capitalize on relatively inexpensive natural gas in the US. In Australia, the Australia Pacific LNG project took FID on a second production train, with an expected start-up in 2016. In East Africa, we have seen further increases in gas reserve estimates around which LNG exports may be developed.
We have recently seen some older technology ships experiencing 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 two 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.
Source: GasLog Ltd.