Avance Gas Holding Ltd reported unaudited results for the first quarter 2022.
HIGHLIGHTS
• The average time charter equivalent (TCE) rate was $37,608/day compared to $27,631/day in Q4 2021.
• Daily operating expenses (OPEX) were $8,459/day, up from $8,139/day in Q4 2021.
• A&G expenses were $1,126/day, down from $1,351/day in Q4 2021.
• Net profit of $24.3 million compared to $7.5 million for the fourth quarter 2021, or earnings per share of 32 cent compared to 10 cent for the fourth quarter.
• During the first quarter 2022, the CEO and the Chairman elected to step-down. The Board resolved to appoint Øystein Kalleklev as Executive Chairman and Jens Martin Jensen as a Director of the Company.
• During the first quarter 2022, the Company took delivery of Avance Polaris and Avance Capella, the first two of its six dual fuel 91,000 cbm VLGC newbuildings from Daewoo Shipyard in South Korea. The vessels were shortly thereafter delivered on Time Charter Agreements for 2 years.
• During the first quarter 2022, the Company entered two contracts to sell the 2008-built VLGCs Thetis Glory and Providence. These vessels were subsequently delivered to the new owners in March and May, respectively. The transactions generated in total $48.3 million in net cash proceeds at delivery.
• In May 2022, the Company signed a $555 million sustainability-linked term facility with a bank syndicate. The facility is a refinancing of the previous bank facility financing the nine VLGCs including a financing of the newbuildings three and four, Avance Rigel and Avance Avior, for delivery in the fourth quarter 2022 and the first quarter 2023.
• The board declared a dividend of $0.20 per share for Q1 2022 corresponding to $15.3 million.
• For the second quarter of 2022, we estimate TCE rate between approximately $35,000/day and $36,000/day on a discharge to discharge basis and between $32,000/day and $33,000/day on a load to discharge basis.
The first quarter started with a strong LPG price differential between US and Asia lifting the freight rate levels to $50,000/day in January and fell to $25,000/day in February/March due to low US inventory levels, high energy prices narrowing the LPG price arbitrage and high bunker prices eating into the earnings.
The US VLGC exports averaged 80 cargoes per month for the first quarter with March reaching the all-time high record with 90 cargoes which is ~15% above the monthly average for 2021 of 78 cargoes. The growth in the US export capacity states higher terminal utilization in Marcus Hook, Nederland, and Enterprise. The strong US volumes continues into the second quarter with 89 cargoes reported in April.
The Middle East VLGC exports (excluding Iran) averaged 50 per month for the first quarter in line with the average monthly volumes for 2021. The region (excluding Iran) has reported an increase of ~14% in export volumes or 57 cargoes in April. The strength of exports comes mainly from Saudi Arabia and the majority of volumes are transported to India and China indicating that the demand remains strong despite the lockdowns.
Combined with strong US export volumes and a strengthening LPG price arbitrage in April, we continue to see the usual inefficiencies in the LPG market in particular delays in China due to covid closures and Panama Canal due to the removal of the pre-booking system for neo-panama vessels which has created both uncertainty and delays in transiting.
The geopolitical tensions and energy levels have and still are impacting bunker prices and earnings while the trade pattern remains unchanged as 80% of the demand is East of Suez. Short-term the VLGC segment has not been directly impacted by the geopolitical situation in Ukraine but there has been a rapid growth in US activity which may result on more US volumes destined for Europe.
Source: Avance Gas