GasLog Ltd. and its subsidiaries (“GasLog”, “Group” or “Company”) (NYSE: GLOG), an international owner, operator and manager of liquefied natural gas (“LNG”) carriers, today reported its financial results for the quarter ended June 30, 2020.
|•||Post quarter-end, refinanced in full the Group’s debt maturities due in 2021 with four new credit facilities representing a total of approximately $1.1 billion, strengthening the balance sheet and delivering $30.2 million of incremental liquidity to the Group.|
|Completed the sale of 14,400,000 shares of common equity through a private placement, including 6,500,000 million shares purchased by Blenheim Holdings Ltd., wholly-owned by the Livanos family, and 4,000,000 shares purchased by a wholly-owned affiliate of the Onassis Foundation, for total gross proceeds of $36.0 million.|
|•||Delivery of the GasLog Windsor on April 1, 2020, a 180,000 cubic meters (“cbm”) LNG carrier with dual fuel medium speed propulsion (“X-DF”) and commencement of its seven-year time charter agreement with a wholly-owned subsidiary of Centrica plc. (“Centrica”).|
|•||Delivery of the GasLog Wales on May 11, 2020, a 180,000 cbm LNG carrier with X-DF propulsion and commencement of its 12-year time charter agreement with the principal LNG shipping entity of Japan’s JERA Co., Inc. (“JERA”).|
|•||Post quarter-end delivery of the GasLog Westminster on July 15, 2020, a 180,000 cbm LNG carrier with X-DF propulsion and commencement of its seven-year time charter agreement with Centrica.|
|•||Published the inaugural Sustainability Report for 2019 on June 11, 2020.|
|•||Materially concluded the previously announced organizational changes in relation to our London and Monaco offices. On further review have decided to expand this plan to GasLog Partners and our Stamford office, aiming to achieve further operational efficiencies and to reduce overheads.|
|•||As of June 30, 2020, recognized a non-cash impairment loss of $22.5 million in aggregate on certain of our steam turbine propulsion (“Steam”) vessels.|
|•||Contracted time charter revenues of approximately $294.9 million for the remainder of 2020, representing 82.2% charter coverage.|
|•||Quarterly Revenues of $158.9 million, Loss of ($13.3) million and Loss per share of ($0.30)(1) for the three-month period ended June 30, 2020.|
|•||Quarterly Adjusted EBITDA(2) of $111.7 million, Adjusted Profit(2) of $24.6 million and Adjusted Earnings per share(2) of $0.02(1) for the three-month period ended June 30, 2020.|
|•||Quarterly dividend of $0.05 per common share payable on August 27, 2020.|
(1) Earnings/(loss) per share (“EPS”) and Adjusted EPS are net of the profit attributable to non-controlling interests of $8.0 million and the dividend on preferred stock of $2.5 million for the quarter ended June 30, 2020 ($15.5 million and $2.5 million, respectively, for the quarter ended June 30, 2019).
(2) 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.
Chairman and CEO Statements
Peter G. Livanos, Chairman of GasLog, stated: “The second quarter again demonstrated the resiliency of GasLog’s platform despite the ongoing difficulties created by the COVID-19 pandemic. Our in-built and fully financed growth is delivering as planned, we have made great progress in reducing our operating and overhead expenses as well as our debt service costs following the recent refinancings and we have significantly enhanced our liquidity.”
Paul Wogan, Chief Executive Officer, stated: “Despite the current challenges in our operating and commercial environment we achieved stable year on year performance in the second quarter of 2020 and delivered close to 100% uptime for our fleet. During the second quarter, the GasLog Windsor and the GasLog Wales, both delivered on time and on budget and into multi-year fixed-rate charters with high quality counterparties, we increased the Group’s available liquidity through a private placement, raising $36.0 million, 75% of which was from insiders, including our Founder and Chairman, Peter G. Livanos and the Onassis Foundation. In addition, we published our inaugural Sustainability Report for 2019.
Our strategic execution continued in the third quarter where, together with GasLog Partners, we refinanced all of the Group’s 2021 debt maturities with four new credit facilities, improving the Group’s liquidity by $30.2 million. In addition, we took delivery of the GasLog Westminster, on time and on budget and she immediately began a 7-year charter with Centrica.
I continue to be impressed with the dedication and professionalism of our employees during these uncertain times, particularly our seafarers, many of whom have been away from their families for an extended period. Although we have made progress in crew changes since the COVID-19 outbreak began, progress is slower than we hoped as many countries remain reluctant to allow crews to embark and disembark through their ports. As our seafarers are delivering vitally needed energy to the world I believe they should be recognised as key workers with their health and wellbeing acknowledged and respected by all maritime nations and with their passage from and to their vessels recognised as a priority.”
Given the current uncertainty in relation to COVID-19, we have disclosed certain risks and uncertainties in our Form 6-K for the three months ended June 30, 2020 (refer to Exhibit 99.2), which also updates the risk factors described in our Annual Report on Form 20-F filed with the SEC on March 6, 2020 and in our Quarterly Report on Form 6-K filed with the SEC on May 7, 2020.
GasLog’s focus continues to be on ensuring the health and safety of our employees while providing safe and reliable operations for our customers.
- Beginning on June 1, 2020, employees at our Piraeus, Greece location returned to the office on a rotational basis at a capacity of approximately 50.0%. Piraeus office personnel have been provided with the appropriate personal protective equipment and modifications were made to the office’s floor plan to ensure social distancing; plexiglass dividers were installed and enhanced cleaning procedures have been enacted. All other onshore locations continue under a “work from home” policy in accordance with local guidelines and regulations;
- Crew changes continue to be planned at every opportunity and to date GasLog has been able to rotate approximately 80.0% of the officers and a smaller percentage of the other ranks. The majority of the crew rotation difficulties we face, are due to continued lockdowns in Singapore and the Philippines;
- The GasLog Savannah is expected to complete her scheduled dry-docking by the end of August 2020. The vessel began its dry-docking in Singapore on April 9, 2020; however, COVID-19 related lockdown measures were enacted soon thereafter and extended through early July, preventing its scheduled completion and, as a result, the GasLog Savannah was off-charter for a total of 90 days and approximately 60 days during the second and third quarters of 2020, respectively; and
- As a result of these measures and the dedication of our employees onshore and aboard our vessels, excluding the GasLog Savannah approximately 100% of our fleet continues to be available for commercial use.
COVID-19 placed downward pressure on economic activity and energy demand during the second quarter and there remains significant uncertainty regarding near-term LNG demand and, therefore, LNG shipping requirements.
- The Group’s charter coverage for the remainder of 2020 is 82%;
- The combined impact of COVID-19 and normal seasonality has led to greater volatility in spot rates;
- The utilization and earnings of our vessels trading in the spot market may be materially lower than their earnings under their initial multi-year charters; and
- On September 4, 2019, GasLog announced a new 10-year time charter with Sinolam LNG Terminal, S.A. for the GasLog Singapore for use as a floating storage unit (“FSU”) in support of a LNG gas-fired power plant currently being developed near Colon, Panama, by Sinolam Smarter Energy LNG Power Company, a subsidiary of private Chinese investment group Shanghai Gorgeous Development Company. The completion of the power plant was initially scheduled for the second quarter of 2020 but has since been delayed by 6 months, the result of COVID-19 related impacts to the construction schedule. GasLog has received approval to defer conversion of the GasLog Singapore until the first quarter of 2021 to align more closely with the project’s new expected start date. All other terms of the charter party agreement remain in effect.
COVID-19 has had a sustained impact on global capital and bank credit markets, affecting access, timing and cost of capital.
- Notwithstanding COVID-19, we have refinanced the Group’s debt maturities due in 2021 with four new credit facilities representing a total of approximately $1.1 billion, strengthening the balance sheet and delivering $30.2 million of incremental liquidity to the Group;
- Following recent amendments with several counterparties to our interest rate swap agreements as well as a strengthening of the Norwegian Kroner versus the U.S Dollar since late March, our cash collateral with respect to our interest rate and cross-currency swaps agreements was $44.8 million as of July 31, 2020, down from $71.1 million as of June 30, 2020 and $81.2 million as of March 31, 2020; and
- As of June 30, 2020, we recognized a non-cash impairment loss of $22.5 million in aggregate on certain of our Steam vessels due to the uncertainty regarding the effects of COVID-19 in the short-term spot market, as discussed in the Commercial update above.
LNG Market Update and Outlook
LNG demand was 86 million tonnes (“mt”) in the second quarter of 2020, according to Poten, compared to 87 mt in the second quarter of 2019, or a decrease of approximately 2%. More specifically, Chinese LNG demand was 16 mt in the second quarter of 2020, an increase of 20% year-over-year, while demand from the Middle East was 5 mt, growing over 1 mt, or 39%. In contrast, demand from Asia, excluding China, declined by 4 mt, or 8%, and demand from Europe declined by approximately 1 mt, or 3%.
Global LNG supply was approximately 89 mt in the first quarter of 2020, an increase of 2 mt over the second quarter of 2019, or 2%, according to Poten. Supply from the United States (“U.S.”) increased over 3 mt, or 39%, the result of production increase from new large projects including Cameron and Freeport, while re-exports out of Europe increased by 2 mt, or over 140%. This growth was offset by declines out of the Middle East and North Africa, where supply decreased by over 2 mt, or 8%. Looking ahead, approximately 94 mt of new LNG capacity is expected to begin production during 2020-2025, according to estimates from Wood Mackenzie.
In the LNG shipping spot market, tri-fuel diesel electric vessel (“TFDE”) headline rates, as reported by Clarksons, averaged $35,000 per day in the second quarter of 2020, a decrease from the averages of $57,000 in the first quarter of 2020 and $49,000 in the second quarter of 2019. Headline spot rates for Steam vessels averaged $23,000 per day in the second quarter of 2020, a decrease from the averages of $40,000 per day in the first quarter of 2020 and $33,000 per day in the second quarter of 2019. Headline spot rates in the second quarter were negatively impacted by declines in LNG demand due, in part, to ongoing impacts from the COVID-19 outbreak to the global economy as well as high inventories of natural gas and LNG, particularly in Europe, which limited opportunities for LNG arbitrage trading between Atlantic and Pacific basins. Clarksons currently assesses headline spot rates for TFDE and Steam LNG carriers at $36,500 per day and $23,000 per day, respectively.
Although many economies around the world have begun to reopen in various stages, the COVID-19 outbreak continues to create high levels of uncertainty for LNG demand and therefore, LNG shipping, at least through the near-term. In addition, global gas prices and gas price differentials between the Atlantic and Pacific basins remain near their historic lows, limiting the opportunities for inter-basin trading, as evidenced by the reported cancellation of over 100 cargoes out of the U.S. during the third quarter of 2020. These factors, when combined with scheduled deliveries to the global fleet and usual seasonal trading patterns, have the potential to keep downward pressure on rates in the spot and short-term shipping markets over the near-term. Further ahead, futures curves for global natural gas prices indicate the potential for higher LNG demand and the resumption of inter-basin trading during the Northern Hemisphere winter, which if realized, would be expected to translate into higher utilization for the global LNG carrier fleet.
As of July 31, 2020, the orderbook totals 109 dedicated LNG carriers (>100,000 cbm), according to estimates from Poten, representing 20% of the on-the-water fleet. Of these, 70 vessels (or 64%) have multi-year charters. Orders for newbuild LNG carriers are on pace for their lowest annual total since 2017 as just 6 newbuildings have been ordered so far in 2020, all of which are chartered under multi-year contracts.
On July 16, 2020, GasLog Partners entered into a credit agreement of $260.3 million with BNP Paribas, Credit Suisse AG and Alpha Bank S.A., each an original lender, with BNP Paribas acting as security agent and trustee for and on behalf of the other finance parties mentioned above, in order to refinance the existing indebtedness due in 2021 on three of its vessels. The facility will amortize over ten equal semi-annual installments of $8.6 million beginning in January 2021, with a final balloon amount of $174.3 million payable concurrently with the last installment in July 2025. Interest on the facility will be payable at a rate of U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) plus a margin. The relevant amount of $260.3 million was drawn on July 21, 2020, out of which $258.5 million was used to refinance the outstanding indebtedness of GAS-twenty Ltd., GAS-seven Ltd. and GAS-eight Ltd., the respective entities owning the Methane Shirley Elisabeth, the GasLog Seattle and the Solaris.
Also, on July 16, 2020, GasLog Partners entered into a credit agreement of $193.7 million with DNB Bank ASA, London Branch, and ING Bank N.V., London Branch, each an original lender, with DNB Bank ASA, London Branch acting as security agent and trustee for and on behalf of the other finance parties mentioned above, in order to refinance the existing indebtedness due in 2021 on three of its vessels. The facility will amortize over ten equal semi-annual installments of $8.6 million beginning in January 2021, with a final balloon amount of $107.7 million payable concurrently with the last installment in July 2025. Interest on the facility will be payable at a rate of USD LIBOR plus a margin. DNB Bank ASA, London Branch and ING Bank N.V., London Branch were also registered as hedging providers under the facility. The relevant amount of $193.7 million was drawn on July 21, 2020, out of which $174.9 million was used to refinance the outstanding indebtedness of GAS-nineteen Ltd., GAS-twenty one Ltd. and GAS-twenty seven Ltd., the respective entities owning the Methane Alison Victoria, the Methane Heather Sally and the Methane Becki Anne.
GasLog has concurrently refinanced the existing indebtedness due in 2021 for the GasLog Savannah, the GasLog Singapore, the GasLog Skagen, the GasLog Saratoga, the GasLog Salem, and the Methane Lydon Volney by entering into a credit agreement of $576.9 million. ABN AMRO Bank N.V., Citigroup Global Markets Limited and Nordea Bank ABP, Filial I Norge acted as global co-coordinators and bookrunners, while HSBC Bank plc acted as mandated lead arranger; Credit Agricole Corporate and Investment Bank acted as lead arranger and Unicredit Bank AG and National Bank of Australia Limited acted as arrangers, each of those being an original lender. ABN AMRO Bank N.V. was appointed by the other finance parties in this syndicate as security agent and trustee. The facility comprises of a $494.5 million Term Loan Facility which will amortize on a quarterly basis (following an initial repayment six months after initial drawdown equal to the sum of two quarterly repayments), with a final balloon amount payable concurrently with the last installment in June 2025; and a $82.4 million revolving loan facility which also matures in June 2025. Interest on the facility will be payable at a rate of USD LIBOR plus a margin. An amount of $576.9 million was drawn on July 21, 2020, out of which $557.0 million was used to refinance the outstanding indebtedness of GAS-one Ltd., GAS-two Ltd., GAS-six Ltd., GAS-nine Ltd., GAS-ten Ltd., and GAS-eighteen Ltd., the respective entities owning the GasLog Savannah, the GasLog Singapore, the GasLog Skagen, the GasLog Saratoga, the GasLog Salem and the Methane Lydon Volney. The balance of the proceeds will be used for general corporate and working capital purposes.
On July 30, 2020, GasLog entered into a credit agreement with National Bank of Greece S.A. for the refinancing of GAS-fifteen Ltd., the entity owning the GasLog Chelsea. Funded on July 31, 2020, the facility provides $96.8 million of additional financing, refinancing the $92.3 million of outstanding indebtedness of GasLog Chelsea and contributing to the $30.2 million of incremental liquidity for general corporate and working capital purposes referenced above. National Bank of Greece S.A. is acting as the sole original lender. The facility will amortize on a quarterly basis, with a final balloon amount payable concurrently with the last instalment in July 2025.
The signing and closing of the four credit facilities described above was completed during a time of unprecedented uncertainty in credit and bank markets and saw participation from new and existing lenders, which underscores the strength and scale of our platform to attract new capital providers, refinancing in full our debt maturities due in 2021, strengthen the balance sheet and create additional liquidity.
Delivery of the GasLog Windsor
On April 1, 2020, GasLog took delivery of the GasLog Windsor, a 180,000 cbm LNG carrier with X-DF propulsion constructed by Samsung Heavy Industries Co., Ltd. (“Samsung”). Despite the disruption in South Korea caused by the COVID-19 outbreak, the vessel was delivered on time and on budget. Upon delivery, the vessel immediately commenced its seven-year charter with Centrica.
Delivery of the GasLog Wales
On May 11, 2020, GasLog took delivery of the GasLog Wales, a 180,000 cbm LNG carrier with X-DF propulsion constructed by Samsung. Despite the disruption in South Korea caused by the COVID-19 outbreak, the vessel was delivered on time and on budget. Upon delivery, the vessel immediately commenced its 12-year charter with JERA.
Private Placement of Common Shares
On June 29, 2020, GasLog completed the sale of 14,400,000 common shares at a price of $2.50 per share for total gross proceeds of $36.0 million through a private placement of unregistered common shares (“the Private Placement”). The net proceeds were used for general corporate purposes. Approximately 75% of shares issued in the Private Placement were purchased by GasLog’s directors and affiliates, including 6,500,000 common shares purchased by Blenheim Holdings Ltd., wholly-owned by the Livanos family and 4,000,000 common shares purchased by a wholly-owned affiliate of the Onassis Foundation. In addition, member of the Tung family, whose roots in shipping date back over 70 years, purchased common shares in the Private Placement.
Delivery of the GasLog Westminster
Post quarter-end, on July 15, 2020, GasLog took delivery of the GasLog Westminster, a 180,000 cbm LNG carrier with X-DF propulsion constructed by Samsung. Despite the disruption in South Korea caused by the COVID-19 outbreak, the vessel was delivered on time and on budget. Upon delivery, the vessel immediately commenced its seven-year charter with Centrica.
On May 14, 2020, the board of directors declared a dividend on the Series A Preference Shares of $0.546875 per share, or $2.5 million in the aggregate, payable on July 1, 2020 to holders of record as of June 30, 2020. GasLog paid the declared dividend to the transfer agent on July 1, 2020.
On August 4, 2020, the board of directors declared a quarterly cash dividend of $0.05 per common share, or $4.0 million in the aggregate, payable on August 27, 2020 to shareholders of record as of August 17, 2020.
Impairment Loss on Vessels
As of June 30, 2020, the Group recognized a non-cash impairment loss of $22.5 million in aggregate on certain of its Steam vessels. The COVID-19 pandemic placed downward pressure on economic activity and energy demand, as well as significant uncertainty regarding future near-term LNG demand and, therefore LNG shipping requirements. This has reduced our expectations for the estimated rates at which employment for our vessels could be secured over the near-term in the spot market. The non-cash impairment loss of $22.5 million was recognized with respect to three Steam vessels owned by the Partnership, the Methane Rita Andrea, the Methane Shirley Elisabeth and the Methane Heather Sally, and one Steam vessel owned by GasLog, the Methane Lydon Volney.
Inaugural Sustainability Report
On June 11, 2020 GasLog issued its inaugural 2019 Sustainability Report. The report presents GasLog’ s strategy and commitment toward environmental, social and governance (“ESG”) practices. In addition, the report is transparent in its presentation of operational data, detailing vessel-by-vessel CO2 emissions, fleetwide methane emission and efficiency indices and presents the numerous Key Performance Indicators underscoring our ESG commitment. A copy of the report can be found on our website at https://www.gaslogltd.com/investors/sustainability.
In November 2019, GasLog announced plans to relocate more of its employees, including several members of senior management, to our main operating office in Piraeus, Greece, to enhance business efficiency, operational excellence and to reduce overheads. By the end of 2020, we will have concluded these organizational changes, having closed the Monaco office and reduced the number of employees in our London office. These measures will result in annualized general and administrative (“G&A”) savings of $6.0 million with effect from 2021. In the three months ended June 30, 2020, additional restructuring costs of $1.1 million were recognized ($1.5 million for the six months ended June 30, 2020).
As the next phase in our strategy to enhance efficiency and reduce costs, we have now decided to include GasLog Partners and our Stamford office in this initiative. Andrew Orekar, CEO of GasLog Partners, has informed the Company that, as a result of the relocation of his role to Piraeus, Greece, he will step down from his position on September 15, 2020. Paul Wogan, currently CEO of GasLog, will assume the responsibilities of CEO of GasLog Partners on September 16, 2020. Please see today’s separate press release on this matter. In addition, we will reduce the size of the Partnership’s board of directors from seven to five members and will close our Stamford, Connecticut office. This plan is expected to generate annualized G&A savings of $3.0 million per annum starting in 2021.
When taken together with the organizational changes already announced, we expect to reduce our G&A expenses by $9.0 million in aggregate beginning in 2021.