GasLog Ltd.
Q1 2015 Earnings Call Transcript

Published: 6 May 2015

[Operator:]

Good morning. My name is Teresa. And I will be your conference operator today. At this time I would like to welcome everybody to GasLog Limited First quarter 2015 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. As a reminder this conference is being recorded. Today's speakers are Mr. Paul Wogan, Chief Executive Officer, Simon Crowe, Chief Financial Officer and to commence the call Mr. Jamie Buckland, Head of Investor Relations at GasLog. Mr. Buckland, we are ready to begin your conference.

[Jamie Buckland:]

Great. Thanks very much. Good afternoon and thank you for joining us for our first quarter results call. As a reminder, this call, webcast, and presentation, are available on the Investor Relations section of our website, gaslogltd.com where a replay will also be available. As shown on Slide 2 of the presentation, many of our remarks contain forward-looking statements. Let me refer you to our Q1 press release and our results filed with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements. In addition, some of our remarks this afternoon contain non-GAAP financial measures as defined by the SEC, and a reconciliation of these is attached as an annex to the presentation. Please now turn to Slide 3, where I'll handover to Paul Wogan, GasLog's Chief Executive.

[Paul Wogan:]

Thank you, Jamie. Good afternoon and good morning to all of you in the United States. Thank you to everyone for joining us for our Q1 results call. Today I will briefly summarize recent events, including the potential merger between BG and Shell, before handing over to Simon to take you through GasLog's quarter in more detail. Following that, I will provide an overview of our recently announced or completed transactions and will conclude with a brief update on the LNG shipping markets. So if you now turn to Slide 3. Within the last few weeks we have announced one and close another very important transaction that have significantly added to GasLog's long-term fixed revenue at attractive rates. These transactions put us on a path to realizing our GasLog 40

[Simon Crowe:]

Thanks, Paul. Good morning and good afternoon to you all. It’s been another extremely busy few months for GasLog with a significant amount of transaction and capital market activity. We continue to grow the business with attractive long-term contracts despite the weakness we are seeing the shorter term market. I am pleased that we have delivered another solid quarter. Please now turn to Slide 5. Our adjusted EPS was $0.13 for the quarter; adjusted EBITDA of approximately $64 million, and adjusted profit of around $20 million. We declared a quarterly dividend of $0.14 which will be paid on May the 21st to shareholders of record as of May the 18th. At the end of the quarter we launched and completed the preference share offering of 4.6 million shares, raising $111 million net proceeds which broadens out our capital structure and diversifies our funding sources. This transaction gives us the financial flexibility to move on potential future opportunities. Also at the end of the quarter we closed on acquisition of 270,000 cubic meter TFDE vessels, the Methane Julia Louise and Methane Becki Anne from BG group. These vessels have average charters of 10 years at attractive rates and commenced on 31st of March. After the quarter end we were very pleased to announce time charter was up to nine newbuildings, the subsidiary of BG Group. Paul will come to talk about the transactions in more detail. But it’s worth highlighting that the three firm vessels would add approximately $845 million of long-term contracted revenue to our backlog. If the six option ships were exercised this number increases to $2.6 billion. It also increases the drop down pipeline for GasLog partners to 15 vessels. Finally, on this slide we took delivery of the GasLog Salem on 30th of April and this ship has left the yard and is currently on subjects for its maiden charter. Please now turn to Slide 6. Quarter-on-quarter, we have made significant positive progress, as we have built out the fleet to newbuildings and acquisitions. You can see that our average owned fleet in the first quarter of 2015 was double that in the first quarter of 2014. These additions have driven large increases in revenue, adjusted EBITDA and adjusted profit. The two ships we added at the end of the first quarter and the recently announced three firm charters provides further visibility for continued future growth. Turning now to Slide 7. We have condensed the balance sheet to show some of the key line items. A more complete balance sheet is in the appendix and also in today's quarterly results announcement. Of most our recent preference share offerings is not included in this table as we closed that transaction in the early April. At the end of quarter we had approximately $170 million of cash on the balance sheet. We consolidate our accounts, so this includes the cash on the GLOG balance sheet. Our total assets were $3.7 billion, up approximately $460 million, primarily as a result of the acquisition of two vessels from BG that closed on March 31. Our total debt of around $2.3 billion has also increased quarter-on-quarter, largely as a result of that acquisition which was funded using all debt. This demonstrated our ability to continue to access the debt markets on attractive terms against the difficult market backdrop. Please now turn to Slide 8 where we look at contracted revenue table, which is been updated with the closings of the two vessel acquisitions announced in December and also the three firm time charters we announced with BG in mid April. Our contracted revenues increased to almost $4 billion roughly double the figure at the end of the first quarter 2014. This highlights our stated strategy of adding fixed rate revenue on long-term contracts. This backdrop of long-term contracted revenue gives us the financial strength to continue to look at opportunities to grow the business despite the current softness in the short term market. Please now turn to Slide 9. As you can see from the previous slide, we expect the full year contracted revenue for the second quarter to the end of the year will be around $305 million, and this includes the contribution of the newly acquired BG ships from the 31st of March with approximately 800 open base from Q2 to Q4, and we hoped 60s through the year. The current spot market is weak with both rates and utilization impacted by an oversupply of vessel. Clarkson currently estimate the short term spot rates to TFDE vessels of around $30,000 a day and posted another ship vertical recently stated for the utilization of LNG vessels in the spot market in 2015 year-to-date is been just under 50%. We would expect utilization to start to move higher through the second half of the year as the big Australian project start to ramp up. We have GasLog Chelsea coming off its charter with the Papua New Guinea project with Exxon this week and that ship will immediately go into dry dock for 30 days before trading spot. We have five dry docks in the second quarter which really impacts our revenue for Q2. We then expect one dry dock in Q3. Turning now to slide 10. We successfully launched the retail preference share offering in Q1 and closed the transaction early in Q2. We raised $111 million net fees adding another pool of liquidity to our increasing diverse capital structure. The preference shares have a coupon of 8.75% which we were very pleased with. So turning now to Slide 11, before I hand back to Paul. I wanted to draw your attention back to slide that we laid out at our Capital Markets Day in December. We continue to build the business since then making good progress on our GasLog 40

[Paul Wogan:]

Thank you, Simon. Please turn to Slide 12. So it was busy quarter for GasLog with a number of transactions both during the period and after the quarter end. Within Q1 we completed the acquisition of two LNG carriers from BG Group both with 10 year average charters at attractive rates. This transaction marks the first step towards the GasLog 40

[Operator:]

Thank you, sir. [Operator Instructions] We will now take our first question from Jon Chappell from Evercore Partners. Please go ahead.

[Jon Chappell:]

Thank you. Good afternoon, guys.

[Paul Wogan:]

Hi, Jon.

[Simon Crowe:]

Hi, Jon.

[Jon Chappell:]

I want to ask first just given the latest BG announcement and then the optionality on the six ships. What's the current timeline for your exercise of those options, when do those expire?

[Paul Wogan:]

Yes, we have always spoken out and put in newbuilding orders or options, scale options around the same timing that we have with BG, Jon. So we have not locked in and we have the ability to push that further out if we need to do so. So it’s a back to back with BG.

[Jon Chappell:]

Okay. So we don’t need to worry about any exploration dates in the – on the near horizon?

[Paul Wogan:]

No. No, we don’t.

[Jon Chappell:]

Okay. And then wanted to ask about the three uncontracted ships. It seems in that guidance slide that you gave that you are just anticipating that they are not going to be contracted at any point in any short-term or long-term matter this year with the 803 open days. But I was wondering what the competitive landscape is like for those right now and a couple things there. One, how much excess capacity do you foresee in the market today? Just kind of from an overall overcapacity perspective and then also, with the Yemen and maybe Angola plant being offline, maybe temporary overcapacity. And then what is liquidity like for longer-term contracts there? Are the rates just so below decent returns that the only kind of near-term option for those would be short-term employment like you did with the Chelsea?

[Paul Wogan:]

Yes. So trying to take those in order. I think we're showing the potential open days for our vessels there Jon and but not sort of saying that they will definitely stay in the spot market. If we see attractive opportunities to put those away into term contracts then we would certainly do that. It’s interesting you know, as we keep saying, the spot market is a very small sub-sector of the overall LNG market here and probably talking around about 10%, 15% of most. So if you take – just take for example a fleet of 400 vessels, you probably at any one time having say 40 of those vessels looking at the short term market. If you take Angola for example with seven ships, you take the Yemen with eight ships, that’s 15 vessels, you start to pull those vessels out of that equation and that market tightens very quickly. And I think the other thing to remember around the fleet at the moment is there are number of vessels there which are project vessels or into portfolios which are going to be going into the new projects which are coming on in Australia. So I think as we see that Australian project – those projects ramping up, I think we will see a tightening of that spot fleet quite quickly, which is why we believe that we will see these – the utilization in the rates increasing in the same top of the year and assuming a seasonal increase as well, that gives us additional optimism if you like around that Jon. Then talking about the longer – talking about the longer term. There are a number of people looking at longer term contracts at the moment. And I think they are doing that on the basis that if you look out past to 2015, into 2016, to 2017, again we see that the potential of this market tightening quite quickly. And I think the discussions which were taking place now were based around people not wanted to get caught on the wrong side of that. And as always you have the benefit you have to spread on what make sense to lock away for longer term deals. But I certainly think, certainly from our experience a number of people are starting to talk about those potential longer term deals.

[Simon Crowe:]

And I think as to add that, Jon, its Simon here. The BG deals that we signed up just emphasize I think their view of that tightening in the future and the result you know, the supply and demand will tighten up in our favor then we'll be short shipped. So that’s just tangible evidence for us, but that’s happening.

[Jon Chappell:]

Absolutely. One more quick one, Simon, I appreciate the sum of the parts reference and, correct me if I'm wrong, but I think in the investor day you either put a range on the page or maybe you just spoke around a range. Number one, are you comfortable giving your view on that range again right now? And I guess number two, if you're not, vis-à-vis the investor day time period, given everything that's happened over that time, would that range in your mind be higher or lower?

[Simon Crowe:]

I think we set out a range during the December discussions and we stand behind that range. Clearly, things have moved on in a very positive way since we went on in December. So we're in certainly the more positive territory since December and we see a number of opportunities ahead of us well which we don’t need here, only increases and enhance that range. So we're pretty comfortable with that range. It was a good range, some of the parts is the right way to think about it. We're consistently building value. We're building – we're being conservative and we're just adding to those building blocks as we go forward and you know we are very comfortable with that range.

[Jon Chappell:]

Okay. Thanks, Simon. Thanks, Paul.

[Simon Crowe:]

Thank you.

[Operator:]

Thank you. We will now take our next question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

[Fotis Giannakoulis:]

Yes. Hello, guys. We've had some very good developments in the industry that you have presented. I want to ask you about these projects that you are – that you show in your presentations that they are coming in the next few years, or that they – you are expecting to get FID. How the lower oil price and the recent rebound has changed this decisions for liquefaction projects and at what oil levels do you think that it make sense for a US projects, but also non-US projects to continue investing in the liquefaction?

[Paul Wogan:]

Yes, I'll take that Fotis. I think you know, what's been interesting is if you like been below the surface despite the drop in the oil price per quarter and into beginning of 2015, people were still looking at the liquefaction, still making their decisions based on – I think on longer term price expectations higher than we are. And of course as we see oil now nudging back up towards $70 it probably makes those decision easier. But people are not taking their decisions together FERC lightly, to do a FERC – to go to FERC and to get approval can be up to $100 million. So these are not things that they are doing one week and then forgetting about it the next. So I think the news coming out of the US has been very much supportive of how we see it. We've been looking in our models at between 5, potentially 6 times coming out in the US. That’s I think where we're coming out now, but given some of the developments we may actually see more than that. So I think as these liquefaction plants, especially in the US are looking to the long-term they are making decisions which are based around longer term pricing than we're seeing today. I've also being getting, as we've been talking around East Africa, I think are still again trying to move forward on that plants. The people have gas there and not sitting still and saying well in this low price environment we don’t see any need to move at the moment. They are making headway in terms of trying to move those projects ahead. So I think it is anecdotal I have to say, but I do see that people are making decisions on continuing to put in liquefaction plants even in this price environment, and the risk have been really broadened. I think I'll go back to what I said, I still believe that the 21st century is the century of gas.

[Fotis Giannakoulis:]

Thank you, Paul. And is it possible or you can try to be a little bit more specific. I know that part of my question – part of the answer involves a lot of speculation. But is there a magic number that made some of this projects that you have on slide 14 being delayed, for example like Charles, FID. And now that oil prices are above $65, does this change the material, the decision making process or from the beginning everybody was looking at the forward. But I am just trying to understand what is the oil price that supports that. And if you can also expand a little bit about where is the demand going come from, we see a number of projects either being under consideration and under construction already or considering getting FID is easier able to absorb all this volume and at what price is are we going keep seeing this 13% to 14% of brand or we might see a different pricing system that will involve also Henry Hub or even lower oil linked prices?

[Paul Wogan:]

Yes, I mean, I don’t think there is a – certainly I am not aware of a magic number that sort we get above $60 or $65 or $70 you know, stimulates people to go out make the decisions. In fact, so I don’t feel I am able to answer that part of the question Fortis. But as I said, I don’t think people were making decisions based around where the oil was. If people are going to do FERC approvals and then put applications in, they were doing this some weeks and months ago and so they are doing this through the down side, the down side that we saw in the oil prices. And so that’s where I come from I don’t think there is a magic number, I think people are kind of projecting forward. And then it’s an interesting question about the demand because people have been questioning all this new capacity where the demand is coming from. Let me just give you one quick anecdote which I happened to be reading before I came in here. I am going just – where I am showing today that the Chinese government are basically saying for in six of the major cities all the industrial boilers they have there which are burning coal at the moment have to swap over to either very clean coal or more likely to gas over the next few years. We've seen that they are mandating it by 2020. That gas has to be a much bigger part of their overall energy portfolio. So we're seeing over time China as you know, the pollution they are driving towards being a gas economy. We are seeing the pick up in demand in India as well. And I think as we – with the lower LNG prices that we're seeing and as those work through the system, I think you will see that stimulating demand for gas going forward. And then final area I think which is very interesting in terms of demand for gas is in the bunker's for ships because with the new requirements coming on the NOx and the SOx requirements its very difficult using fuel to meet those requirements. And I think gas will play an increasing important role in providing bunkers for ships. And I think that will also be a big simulative demand. So my view is that the demand will be there and you've – like everything you will have periods of over supply and lower prices until demand catches up, its not going to be a straight forward upward trajectory with straight forward pricing. But around that I think the trend is definitely long-term secular growth in the gas market.

[Fotis Giannakoulis:]

Thank you, Paul. And may I lead to the conclusion that from your presentation that you are seeing that Lake Charles will take an FID and is this in your base case scenario. And I also want to ask about Corpus Christi or even Mongolia LNG, are these projects base case projects for you that you think that mostly likely they will come on line. And what is the investment in newbuilding vessels that you are considering, it has to be done in addition to the existing newbuilding program?

[Paul Wogan:]

Yes, I mean, I am happy to talk about some of those plants, because I think overall what we said is that we think there will be around about five or six exploring plants and we are probably from the US and we are probably conservative to some people on that. But as we look at that, yes, we have assumed that Lake Charles will happen. We haven’t assumed for example that might nearly will happen. We'll assume that Corpus will happen. But I think what's important overall is yes, it make a difference, if certainly those ones happen. But overall what is the export terms that we're going to see coming out of there. We may be grown on one projects and that may not get build in right in another. But overall I think our view where that market is coming out with the five or six projects is looking as well it could be – to be correct. And I you factor those in with what we're seeing with Australia through to 2020, we are still showing on our facility investments around a hundred ships short for those exports which is why we believe there is going to be opportunity for us for further growth in the medium and long-term market.

[Simon Crowe:]

Yes, Fortis, its Simon here. I mean, just to sum up, our thesis is very much intact, both on supply side and the demand side. Everything we said in over the last two years we still believe and very strongly we are seeing very good sign over the last few months of supply continuing to move forward in terms of getting FERC approval or getting FID, all of those signs are still there and it’s still moving forward. And in terms of demand again we're seeing strong demand indicators coming out of China and the rest of Asia. We are seeing consolidation in the industry which is good at the gas BG show level. We're seeing re confirmation by BG, one thing, like options, one thing to confirm long-term charters with us. So we feel – we feel still very strongly that the thesis is intact and it’s going to be short shift and that will be ultimately a good thing for GasLog.

[Fotis Giannakoulis:]

Thank you, Simon, it seemed that with the hundred ships shorter you're 40

[Simon Crowe:]

Yes. So in terms of the pricing of those three current ships and the negotiations, negotiations do take – for those kind of transaction IT do take a long time. And when we as closest we are to customize BG, we're are in constant dialog with them about their requirements and helping them to meet those requirements. So we – those discussions take place over a long period time. But it’s interesting that as we talked about earlier that the spot market is such a small part of this market. When the rates were $120,000 or $150,000 a day, if you think about it, the long-term business 10 years or 7 to 10 years wasn’t being done at those rates, it was been done in the $70,000 to $80,000 a day range, now we've seen this spot market in a lower place for a while, we're still seeing those sort of rates. Because when we look those longer term contracts and people are fixing in vessels for their logistics change to make sure that product gets to their customers, its more around making sure that they have the right people and right vessels in place, at what is a reasonable price than looking and comparing that to the spot market. And so that’s kind of the dynamics I think of that market, different to how we see the spot market. And then in terms of our engines, we have gone for the LP-2S, that’s the low pressure engines which have good spin consumptions compared to the existing TFDE vessels. There also – a number of our competitors have gone with, what it’s called [Technical Difficulty] that deliver gas at high pressure into the engine where as the low pressures you may get from the name actually delivers that at low pressure. Our view is that both engines have advantages and will probably end up in a place where both of them have a place in the world fleet. But in terms of reliability, in terms of efficiency, our view was that the LP-2S engines were a good choice for us and that’s supported obviously by BG, it wanted to take vessels with those engines.

[Fotis Giannakoulis:]

Thank you very much Paul. Thank you, Simon.

[Simon Crowe:]

Thank you.

[Operator:]

Thank you. We will now take our next question from Chris Wetherbee from Citi.

[Chris Wetherbee:]

Hey, great. Thanks. Good afternoon, guys.

[Simon Crowe:]

Hi, Chirs.

[Paul Wogan:]

Hi, Chirs.

[Chris Wetherbee:]

I wanted to touch base on the spot market. Kind of curious to get a sense of maybe how many, specifically how many vessels you think are currently trading on the spot market. When you think about the second half of the year and the Australian projects that are coming online, what do you think the incremental shift in demand will be from those projects? I mean, I'm really trying to understand how much of this capacity in the spot market will begin to transition out here just in the second half of this year. I think, Simon, in the past you've talked about maybe 1.5 ships per 1 million tons of annual production. I don't know if that's still a good number to use; just wanted to get your thoughts on that.

[Simon Crowe:]

Yes, I mean I think the – that’s certainly a good rule of thumb number to use is the 1.5 ships to million metric tons and of course you can look at how the Australia products are due to ramp up. And if I look at the – as I were saying earlier, if I look at the spot market and normally if you assume around about 40 ships trading in that market and you take Angola for example which is due to come on stream either later this year or beginning 2016, with seven or eight ships, project ships there. If you look at Yemen with sort of seven or eight project ships, it doesn’t take very much for those ship to come out in the market and for the additional volumes you see coming out of Australia to actually absorb that very quickly and of course you don’t need to have no ships in the spot market for it to be very tight. So our view is that this market has the potential to tighten much more quickly than perhaps other people are thinking.

[Paul Wogan:]

Yes, there is probably about 30 million tons coming on in the next – in the second half of this year, that could be about 45 ships. So we think to your point, there could be some soaking up of incremental spot capacity under the number of ships sort of sailing around at the moment, waiting to start on that project if you like as the project start. So our view is that utilization will get better in the back half and we hope and expect that would impact on rate.

[Chris Wetherbee:]

Okay, that's helpful. That is exactly sort of what I was looking at and thinking about. One technical question, any prospects for Chelsea post the drydock, just wanted to get a rough sense. I'm assuming it's going to go out into the market on short-term or single voyage employment, but is there anything specific that you guys have targeted in the past? You've done a pretty good job of contracting that I guess in the spot market, but on sort of the projects that have had a little bit of duration above what I would normally think about in the spot market just curious your thoughts there?

[Paul Wogan:]

Yes, I mean, at the moment we don’t have the ship contracted out after the dry docking, that vessel has done a very good job. I think our customers are being pleased with how that vessels performed. So as things stand, she would go into the spot market, but I am hopeful that we also see opportunities for longer term business with that vessel when we get it back from the drydock.

[Chris Wetherbee:]

Okay. That makes sense. One final question. I know there's been a lot of questions so far on the call about the BG arrangement and the long-term charters you were able to secure on the vessels at pretty favorable rates. In the market typically charterers see other charterers' activity and kind of follow-on to that. Have you see any sort of pickup in at least interest or the depth of that charter market to some extent on the back of those transactions? Just kind of curious how sentiment in the market is post that deal because it seemed like it was a little bit of an outlier?

[Paul Wogan:]

Yes, I mean, I think if you look at the rates that we've done on those deals they are similar to the rates that we've done on previous deals with BG. And I think as I said inline with the longer term rates that we've seen for quite a while now. I mean, we obviously announced those deals quite recently and so I don’t think – I wouldn’t be able to say that that’s had an affect on the market. But I would say is that, there are number of people who have got either off takes in – from US projects or looking at other projects who have bee through the last few months looking at that portfolio, looking at what their requirements are and given the number of people we've been talking to that’s why we are fairly confident we will see continued opportunities through this year for new vessels.

[Chris Wetherbee:]

Okay. That’s very helpful. Thanks for your time guys. I appreciate it.

[Paul Wogan:]

Thanks, Chris.

[Simon Crowe:]

Thanks, Chris.

[Operator:]

Thank you. We will now take our next question from Ben Nolan from Stifel. Please go ahead.

[Ben Nolan:]

Thank you. I guess my question has to do with the vessels that you guys have in the spot market. Obviously, the Chelsea was on contract for the Papua New Guinea project. But especially now that the Salem has been delivered and it sounds like you have at least an initial voyage for it; you have a few other vessels that are actively trading in the spot market. Given your relationship with BG, do you find that they typically are sort of the primary user of those assets or are you – do you think that maybe you are somehow advantaged with respect to the ability to employ those vessels with BG in the spot market?

[Paul Wogan:]

I think the great thing about having that sport market exposure is that it has given us the opportunity to fix our vessels to a number of different clients. And I think we really work hard to sort of deliver a very good high quality service. And so our hope is that by delivering that in the spot market we can then start to use that to develop longer term relationships. If you look at how we fixed our ships Benefit over, there has been in spot, it speaks to quite a large the right diverse number customers, we have also fixed on the spot to BG. But I wouldn’t say that our – I think BG have a large number of portfolio of vessels themselves, if they are shorter ships than I think we would get to very advantageous look at the cargos. But I think our spot market strategy is very much based around developing strong relationships across the whole market.

[Ben Nolan:]

Okay. All right. And specifically with respect to the Salem, is it fair to assume that what you have in place is just a single voyage contractor, or is it something that is – I believe it's challenging oftentimes to get that first cargo, so it's good that you have it. But trying to get a sense of the duration of that in cargo or contract.

[Paul Wogan:]

Yes I think we don’t know, we talk about individual voyages but yes it is a single voyage contract that we've got the ship on subject. So – and you are correct, I mean the trick is to get the ship fixed out of the yard, get the ship with all the proper inspections, sire inspections, et cetera and that’s very helpful in getting the ship fixed on from there. So yes, we are very pleased to hopefully have that ship fixed into first voyage out of the yard.

[Ben Nolan:]

Okay. Good. All right. And then my next question, really last question is, as it relates to the development on the second hand acquisitions specifically, as you guys have done a number of these sale and leaseback transactions, has your view on that market changed at all? Are you been approached by potentially other current ship owners about doing similar transactions or is the market not quite there the way that it was? Specifically, most of years were with BG. Trying to get a sense of how you see that currently and how it sort of builds into your strategy going forward relative to where you are today.

[Simon Crowe:]

Ben, its Simon here. I mean, we are very positive on that second hand market. We've proven that we can do it. We've done it a number of times now and we do it when we see value, when we se that accretion, when we see that positive net present value if you like. We've done it very successfully with the Chelsea on a one-off basis, we've done with BG on the multiple ship basis. I am very encouraged by the number of sort of opportunities and discussions we are having, whether they convert into things that are tangible and that we can execute on that remains to be seen. But having the dry powder, having the ability to analyze, having the ability to move quickly where we've demonstrated all of that, I think we remain very vigilant, we remain looking for value, looking to add that value in that incremental shift. And I think we will continue to see those opportunities come up, I think depressed market or energy prices, depressed spot prices only just encourages those discussion and encourages that those things to surface. So I am pretty positive, we remain vigilant and as and when we have any news we'll let you know.

[Ben Nolan:]

Okay. But there are - it does sound like there are at least a reasonable number of discussions taking place and so…

[Simon Crowe:]

But we are always having discussion Benefit. We're always thinking, we're always analyzing, we're always having discussions. We're looking for that value, we're running our calculations. We had some good discussions I am sure we'll have more good discussions. Whether or not they convert it remains to be seen, but we are committed to the growth and to the vision. We see value, there we saw a strong underlying market, we see short shipping in next few three to five years. So the timeframe so you know we remain committed to our strategy.

[Ben Nolan:]

Okay. Perfect. Well, I know I said that the other was my last question, but this is legitimately my last question. You guys have now quite a few vessels that you have done, second-hand vessels specifically you have done these sale-leasebacks on with time charters. Would seem to me that the pace of dropdowns would probably need to accelerate a bit in order to make room for others. Is that a fair assumption?

[Simon Crowe:]

As we said at the time at the IPO, we said on the – at the GasLog partners call, we remain committed to that drop down strategy. We'll be self eligible in the next few months. I guess by the end of the year at some stage you could see us doing something. It depends to 15% growth in unit distribution per annum, so that’s what we're really focused on. We've been reemphasizing that at partners. That’s very important to us that GasLog Limited in terms of some of the parts and driving the valuation both to the intent of distribution rights. It’s about recycling the capital. So yes, absolutely in the strategy that we said and we keep saying it for 10% to 15%, its about pacing it right, its about being conservative, its about making sure that we get good value all around than we continue to have that drop down pipeline available to us. So that’s how we look at it, that’s how we analyze it. We look at third party opportunities. We looked at the drop down opportunities. We balance them up, we raise them up, we remain committed to that 10% to 15% growth in distribution.

[Ben Nolan:]

All right. It sounds good. Thanks.

[Simon Crowe:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] We will now take our next question from Hilary Khatarchandal from Wells Fargo.

[Hilary Khatarchandal:]

Hi. Thanks for taking my call. My question is regarding the change in the omnibus agreement. Now that GLOP has 36 months versus 30 days, how do you think about the timing of the drop downs? Will this change the way, will this change the consistency of the drop-down in any way? Will we see a period where there's less drop downs because it's not as opportunistic for GLOP or vice versa?

[Simon Crowe:]

We made that change basically on the pacing of the commitment to the 10% to 15% growth in distribution, that’s what's its all about Hilary. It’s about expanding the pipeline for GLOP, it’s about ensuring that the optionality is there to - to have those drop done and it’s about achieving our objective over 10% to 15% growth in needed distribution. So I don’t think that changes – it matches the existing vessel, that’s the key you know we have the 36 months and everything else. This just matches up to what we have on those. So there is nothing to particularly magical in that change. It’s all about pacing it. It’s about being conservative, it’s about delivering on our commitment to the 10% to 15% Hilary, so that’s how we see it.

[Hilary Khatarchandal:]

Okay. Overall I think it's good. And all my other questions have been answered, so thank you.

[Simon Crowe:]

Thank you very much.

[Operator:]

Thank you. As there is no more further questions in the queue, that will conclude today's question-and-answer session. I would now like to turn the call back over to our speakers for any additional or closing remark.

[Simon Crowe:]

Just like to say thank you very much to everybody for attending the call, for your time and we look forward to speaking to you in the near future. Thank you.

[Paul Wogan:]

Thank you, very much.

[Operator:]

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.