Freight income for the quarter was MUSD 8.6, up from MUSD 6.4 in Q2 2018 due to improving market fundamentals, offset by 21 offhire days in connection with the 5-year survey and dry-docking of WilForce. Fleet utilisation for the quarter ended at 70 %, compared to 71 % in the previous quarter (excluding scheduled off-hire). Voyage related expenses amounted to MUSD 1.3, compared to MUSD 1.8 in Q2 2018. Operating expenses were MUSD 6.7 in the quarter compared to MUSD 2.0 in Q2, including a MUSD 4.5 provision for repair of damage to the WilForce. In early September 2018 damage was incurred to certain non-critical machinery equipment on the WilForce, and a MUSD 4.5 non-cash provision has been recognised in the quarter.

The repair costs are confirmed to be recoverable towards the vessel's H&M insurance, less a deductible, and an insurance claim of MUSD 4.0 has been recognised in Q3 2018 as other income. Yard repairs are expected to take place in the second half of 2019. Certain upgrades planned for WilPride during dry-docking in Q4 2018 will instead be carried out on WilForce concurrent with planned repairs in 2019, in order to reduce the overall number of off-hire days. Administration expenses were MUSD 0.8 in Q3 compared to MUSD 0.7 in Q2 2018. EBITDA for the quarter was MUSD 3.8 (MUSD 1.9 Q2 2018).

Depreciation for the quarter was MUSD 3.3, same as in Q2 2018. Net financial items were MUSD (5.3) compared to MUSD (5.2). Interest expenses on the WilForce and WilPride financial leases amounted to MUSD 5.4, same as in the previous quarter. Loss for the period was MUSD 4.8, compared to MUSD 6.5 in Q2 2018. Statement of financial position Book value of vessels was MUSD 360.9 as at 30 September 2018 (MUSD 360.6 Q2 2018). The increase reflected capitalisation of dry-docking of WilForce during the quarter, offset by ordinary depreciation. Total current assets were MUSD 37.4 as at 30 September 2018 (MUSD 31.6 Q2 2018), including the abovementioned insurance claim of MUSD 4.0 and cash and cash equivalents MUSD 24.3 (MUSD 26.5 Q2 2018).

Total equity as at 30 September 2018 was MUSD 116.8 (MUSD 121.5 Q2 2018). Total current liabilities were MUSD 20.7 as at 30 September 2018 (MUSD 7.6 Q2 2018), of which MUSD 4.7 was deferred revenue relating to Q4 2018 invoiced in Q3 and MUSD 4.5 provision for repairs of WilForce. MUSD 6.4 of the current liabilities relates to the short-term portion of the WilForce and WilPride financial leases (MUSD 5.1 as at 30 June 2018). Total non-current liabilities were MUSD 260.9 as at 30 September 2018 (MUSD 263.0 Q2 2018), of which the long-term portion of the WilForce and WilPride financial leases was MUSD 258.6 (MUSD 260.7 Q2 2018). Total deferred bareboat hire towards the financial leases was MUSD 17.0 as at 30 September 2018 (MUSD 14.1 Q2 2018).

Image: Awilco LNG ASA

MARKET UPDATE
Increasing demand for gas in Asia coupled with higher oil price and rising electricity prices in Europe pushed NBP and FE gas prices to levels not seen in a third quarter since 2014. Far East gas price increased from USD 10.4/MMTBU at the start of Q3 to USD 11.4/MMBTU at the end of the quarter. UK NBP started Q3 at USD 7.2/MMBTU and closed at USD 9.6/MMBTU, while US Henry Hub opened and closed at USD 2.9/MMBTU. According to Fearnleys LNG headline day rates started the quarter at USD 85,000 and 70,000 West and East of Suez respectively.

Rates moved marginally down in July and early August before gradually, and in spite of the closing gas price differential, firming towards the current all-time high rates of USD 175,000 per day. The 3 rd quarter ended with day rates quoted at USD 100,000 in the West and USD 90,000 in the East. LNG trade is estimated to have increased by 6 % in the first nine months of 2018 compared to 2017. LNG imports to China increased by about 45 % in the period, and China is now the world's largest importer of gas, having surpassed Japan in Q3 2018. Imports to South Korea increased by 17 % and India 12 %. LNG imports to Japan were unchanged compared to same period last year.

Yamal LNG T2 (5.5 MTPA) started production in August, six months ahead of schedule, and in early October Ichthys (8.9 MTPA) loaded its first cargo. Prelude FLNG (3.8 MTPA), Yamal LNG T3 (5.5 MTPA), Corpus Christi T1 (4.5 MTPA), Elba Island (2.5 MTPA) and Sabine Pass T5 (4.5 MTPA) are all expected to start up before year end. A total of 47 MTPA of new LNG production capacity is expected to commence production in 2018, followed by 22 MTPA in 2019 and a total of 22 MTPA in 2020 and 2021. In October 2018, FID was announced on LNG Canada (14 MTPA) with expected start up in 2024, the second liquefaction FID in 2018. According to industry analysts new LNG production plants with total potential production capacity of over 380 MTPA are in various stages of planning. 38 LNG carriers were delivered in the first nine months of 2018, and a further 13 vessels are scheduled for delivery in the remainder of 2018, marking 2018 as a record year for newbuild deliveries.

42 newbuilding orders have been placed year to date of which about 27 are assumed speculative. According to shipbrokers the current orderbook for LNG vessels above 100,000 cbm (excl. FSRU and FLNG) is 93 vessels, of which 37 are potentially available for contract. Although the orderbook represents almost 20 % of the fleet, market analysts expect the 91 MTPA of new LNG production scheduled to start up from 2018 to 2021 to require more vessels than the current available tonnage and orderbook during periods of high ton-mile demand.

VESSEL CONTRACT STATUS
WilPride is scheduled for dry-docking expected to be completed early December 2018, and is being marketed in the spot/short term market. WilForce was delivered 15 September 2018 on a 9-12 month time charter contract to an oil and gas major.

OUTLOOK
Despite newbuild deliveries at an all-time high and a closed West – East arbitrage, spot market rates are presently at an all-time high. Heading into the winter season, with further LNG production coming on stream, activity may increase, and although there is always some uncertainty, Owners with available vessels have high expectations for the near future. In the medium-term, a total of 91 MTPA of new LNG production capacity is expected to start up in 2018 to 2021. Close to 50 MTPA of the new production is out of the US, which is expected to increase average sailing distances, and combined with orderbook visibility until 2021 the medium-term outlook for LNG shipping is promising.

However, periods of volatility and seasonality should be expected. In the longer term recent liquefaction FIDs are promising, and to meet the growing demand for gas, estimated at twice the growth rate of the total global energy demand according to Shell Energy Outlook, several new LNG production plants are expected to be sanctioned in the next 6-12 months. Awilco LNG has one vessel on contract until June / September 2019 and one vessel trading in the spot market and is well positioned in this exiting market.

Source: AWILCO LNG