GasLog Ltd.
Q3 2015 Earnings Call Transcript

Published: 5 Nov 2015

[Operator:]

Good morning. My name is Cadence, and I will be your conference operator today. At this time, I would like to welcome everybody to the GasLog Ltd. Third 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 call is being recorded. Today's speakers are Paul Wogan, Chief Executive Officer; Simon Crowe, Chief Financial Officer and to commence the call, Jamie Buckland, Head of Investor Relations at GasLog. Mr. Buckland, we may begin your conference.

[Jamie Buckland:]

Thanks very much. Good afternoon, and welcome to the GasLog Limited third 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 Q3 press release and our reports filed with the SEC where you'll find factors that could cause actual results to differ materially from those 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, the highlights, while I'll handover to Paul Wogan, GasLog's Chief Executive Officer.

[Paul Wogan:]

Thank you, Jamie. Good afternoon, and good morning to all of you. We appreciate you taking the time to join us for our Q3 results call. I will take you through the highlights for the quarter before handing over to Simon Crowe, GasLog's CFO, who will cover the financials. I will then give a sector update and close with a summary and market outlook. Please turn to Slide 3 for the highlights. It was another busy period for GasLog. At the beginning of the quarter we closed a three vessel dropdown transaction with our MLP, GasLog Partners who announced a 10% increase in their distribution on their results call last week. This moved the incentive distribution rights or IDRs of our wholly-owned general partner into the 25% tier. This further enhances the sum of the parts of our view of GasLog. Shortly after quarter end we announced the completion of $1.3 billion newbuilding finance and Simon will talk about this in more detail. We were pleased that BG declared its option to extend the contract on the GasLog Savannah. The vessel has been extended initially in line with market rates and has a number of optional periods. The rates for these optional periods escalate over time until they are in line with the balance of our long term contracted fleet. During the quarter we announced the formation of The Cool Pool which was formally launched on the 1st of October. We've been very encouraged with the performance of the pool in the first few weeks of trading. It is already achieving improved commercial optimization leading us to believe that this will translate into increased earnings for our spot vessels over time. We are also pleased to declare a quarterly dividend of $0.14, which is payable on the 19th of November. With that I would like to hand over to Simon to take you through the financials.

[Simon Crowe:]

Thanks, Paul and good morning and afternoon to you all. Turning now to Slide 4, I had like to review the key financial highlights for the quarter. Revenue was high year-on-year reflecting the new additions in the fleet over the last 12 months and EBITDA of $65.7 million was slightly lower due to a weaker spot market versus this time last year. We currently have three ships in the spot market whereas last year we only had the GasLog Chelsea which is in on contract for the full quarter. Adjusted profit at $10.8 million and adjusted EPS of negative $0.05 reflected the increased profit at GasLog Partners as well as the payment of the preferred share dividend. Our time charter equivalent rate per day and utilization came down as a result of our spot exposure in this period. And utilization was impacted by the open days on our spot vessels as well as drydockings and planned maintenance. The consolidated fleet currently have three of its 19 on the water vessels in the spot market and these are now trading as part of The Cool Pool, which Paul will talk about later. Turning now to Slide 5 in the balance sheet. This has continued to expand as we have taken on new vessels and their related debt. We have over $3.5 billion worth of vessels on the water and under construction. And our cash and cash equivalents and short term investments currently stand at around $430 million taking our total assets to just over $4 billion. On the liability side the non-controlling interest has increased as a result of the recent three ship dropdown. While GasLog Partners issued 7.5 million additional common units to part fund the transaction. As GasLog Partners continues to grow through dropdown this number will increase. Debt [indiscernible] within a year stands at just over $600 million and following the completion of the newbuild facility our focus has turned to refinancing our 2016 [bullet] repayments. We are already in advanced discussions with a number of institutions to refinance these facilities into long term commitments and I am very pleased with the interest we have received so far and look forward to reporting on a successful refinancing around the end of the year. Our long term borrowings have remained broadly stable at around $1.8 billion. If we turn now to Slide 6, I had like to talk to you about the solid financial position we have at GasLog with a specific focus on the financing we closed mid-October. Eight newbuild packages have staggered draw downs for most of the vessel deliveries between 2016 and 2019 and seven of the vessels are already contracted at very good rates with an average contract duration of almost nine years. This makes an attractive dropdown candidate to GasLog Partners. We are very pleased with the terms of the facility which is a tenor between 10 and 12 years and an amortization profile of 15 years and an attractive margin and time of package. There are 14 banks in the facility, half of whom are new lenders to GasLog. These continue to demonstrate the interest and the appetite of banks to lend to high quality companies in the LNG sector, especially those with good assets, good contracts and good customers. We are also very pleased to have declared excellent credit agencies, [indiscernible] in the facility. Between them they are lending or providing guarantees over 60% of the facility. Following the $1.3 billion financing we have a strong financial position to fund our newbuild program and it is anticipated that the equity component will be funded by cash on the balance sheet and operational cash flow. And as mentioned on the previous slide we are making very good progress with our 2016 refinancing. Turning now to Slide 7, compared to market weakness it can be easy to lose focus on the fundamentals of our business and I think the charts on this page is a helpful reminder of GasLog's core strategy. We continue to focus on long term contracts with high quality customers and the chart here shows that we have consistently added to our contracted revenue backlog every year since becoming a public company. We now have $3.8 billion in total. And just to remind you this contracted revenue is not at risk of commodity price fluctuations or related to any specific LNG project, not is it reliant on any new projects taking FID. It is fixed rate revenue that we will receive regardless of any fluctuations in the wider energy markets. We are confident though we will continue to grow this backlog through adding accretive contracted revenue with new and existing customers. Turning now to Slide 8, before I hand back to Paul I wanted to briefly touch on the dropdown transaction that we completed in the quarter. In their results last week GasLog Partners declared a distribution increase of 10% for the third quarter. This pushes the incentive distribution rights or IDRs into the 25% threshold, meaning GasLog Limited will receive greater incremental cash flows from GasLog Partners every quarter going forward. Over time as the distributions from GasLog Partners continue to increase with some of the past valuation of GasLog should be further enhanced. And as we said last week on GasLog Partners' results call, the relationships between ourselves and GasLog Partners is extremely important to the future success of both entities and we remain very committed to the success of both companies. And with that I would like to hand over to Paul, to take you through an update on operations and the current market outlook.

[Paul Wogan:]

Thanks, Simon. Please turn to Slide 9. There have been a number of positive developments during the quarter and we are now starting to see a new wave of LNG supplies coming on stream. In recent weeks two major projects in Australia have entered service. The 4.2 million tons per annum Train 2 at BG's Queensland Curtis plant started production following the successful launch of its first train at the end of 2014. Also the first cargo was loaded at the 7.7 million ton plant in Gladstone LNG plant. We expect Australia-Pacific LNG to commence production by the end of the year which will add further momentum to the new products startups in the region resulting in greater volumes of LNG that need to be shipped. It is likely that some of this new Australian LNG will be shipped into European markets which would increase ton miles and tighten the LNG shipping supply and demand balance. We anticipate that commencement of Chevron's 16 million ton Gorgon project to take place early in 2016, with their 5 million ton Angola project expected to resume production around the same time. In the U.S. Sabine Pass is expected to start production around year end which will mark the beginning of the ways of U.S. production that comes on line over the next five years. Now from just a handful of projects I've mentioned above, that have either recently started or about to start very shortly those have combined production of approximately 16 million tons per annum. Using our simple rule of thumb of 1.56 meters per million tons of LNG this equates to around 90 ships demand needed now or in the very near future and this is why we believe we will see a tightening shipping market in 2016. Elsewhere Petronas reaffirmed their commitment to their Pacific Northwest project in Western Canada which announced a positive final investment decision earlier this summer subject to one final regulatory condition. They expect to start construction in 2016. Turning now to Slide 10, as the liquefaction projects outlined on the previous slide start production the need for shipping increases. There are a number of tenders in the market at the moment which have a requirement of between 22 and 29 ships. Looking ahead to 2016, we expect further tenders of between 20 to 30 ships incremental to those that are shown here. Please now turn to Slide 11. Looking at forthcoming U.S. exports, the cost competitiveness of this gas will open new markets. Henry Hub futures recently traded below $2 per MMBtu making U.S. produced LNG a competitive and attractive source of energy. The chart on this slide shows the cost to land U.S. LNG in Asia on both a fixed and variable cost basis. You can see from the blue line that on an energy equivalent basis, U.S. LNG is more competitive than oil at the current Brent price of around $50 a barrel. This is especially the case if you have already entered into a long term tolling agreements where the cost to liquefy the gas is a sunk cost. When we presented this slide at our Capital Markets Day just under a year ago, oil was trading at similar levels as today while Henry Hub prices on the other hand have fallen by around a third over the same period. Due to lower shipping costs, U.S. LNG delivered into Europe would be under $5 -- $7 per MMBtu on a fixed plus variable cost basis. And just over $4 per MMBtu on a variable cost basis. As a result we believe U.S. LNG can be very cost- competitive and gain market share in Europe. We believe the growing availability of LNG and cheaper gas prices will stimulate increased demand. I'd like to mention the tanker market where I have spent a large part of my 30 year shipping career. In this market lower crude oil and product prices usually increase the demand for the commodities and hence the demand for the tankers. With a new wave of low cost LNG hitting the market we expect a major increase in the number of importers looking to take advantage of these low prices and diversify their energy sources. The demand for FSRUs continues to expand with many countries looking at FSRUs a quick to market and cost effective solution to import LNG. Bahrain for example is currently in the market tendering for an FSRU to import LNG. This in addition to other recent examples including Jordan, Lithuania, Colombia and Egypt. This not only creates demand for our existing ships but opens up opportunities in this FSRU sector. We believe we have the core competencies to enter the FSRU sector and have been doing a lot of internal work on this recently. We are in the advantageous position of having 16 vessels in our consolidated fleet which are excellent conversion candidates for future FSRU projects. In summary, we believe there will be considerable demand for new LNG coming on stream particularly at current gas prices, which is great for LNG shipping companies like GasLog. Turning now to Slide 12. We recently set up with Dynagas and Golar, The Cool Pool we launched at the beginning of October and when all the ships are delivered we will have 14 vessels; three from GasLog, three from Dynagas and eight from Golar. We joined the set of the pool to improve scheduling and vessel availability for our customers and to save costs on vessel pool down positioning and waiting time. The initial reaction from our customers has been very positive. They like the portability to offer numerous different contract structures including COAs where they consign a charter for single or multiple vessels without committing to a specific time period. This provides great flexibility for our customers who then look to cover their short-term requirements. These types of flexible arrangements are especially advantageous as a new wave of LNG production commences, new demand centers emerge and new trading patterns develop. The pool is ideally placed to take advantage of these changes in the market. Whilst it's still early days and already one month into its launch, we have been encouraged by the performance so far. It has already concluded 10 fixtures and had a 50% share of all spot market fixtures done in October. So turning now to Slide 13 for the summary and outlook. The LNG market remains robust and we remain confident about the rollout of new LNG production. We are also seeing a number of new demand centers and new buyers looking to diversify their energy supplies with cheap, cost competitive gas that is more environmentally friendly than other fossil fuels. We continue to see new opportunities for our shipping services through the tender activities we have outlined and other off market discussions we are having. We have a strategy of having our fleet committed to the time charter market and we currently have the majority of our fleet locked away on long-term contracts. However we are actively managing our short term exposure through the Cool Pool which has made a very encouraging start. GasLog Partners had another excellent quarter and recently increased its distribution by 10% pushing the payout through the 25% IDR threshold, resulting in greater incremental cash flow for GasLog Limited and further enhancing the sum of the parts valuation. Following the $1.3 billion financing we have a strong financial position to fund our newbuild program and is anticipated that the equity component will be funded by cash on the balance sheet and operational cash flow. We are also making good progress with our 2016 refinancing and as a result we are confident in our outlook for the company and are paying a $0.14 dividend for the quarter. With that operator we would now like to open the call to questions.

[Operator:]

[Operator Instructions] Our first question comes from Chris Wetherbee of Citigroup. Your line is now open.

[Prashant Rao:]

Hello and good afternoon, this is Prashant in for Chris. I had a question on the Savannah extension. Just wanted to get a sense of where does the contract reset to and clarification is the extension all the way out to 2023 or are those options going to be exercised later?

[Paul Wogan:]

Yes. The options are out to 2023 but as in the previous those are staggered options that they have that take them out to 2023.

[Prashant Rao:]

Then in terms of the contract rate, any color on where we should think about that resetting would be helpful?

[Paul Wogan:]

Yes. I mean, we can't talk about individual rates for contracts, but we have said it, what we say the market rates at the moment and that rate steps up over time with the option period and goes back to the existing rates of our long term charter fleet after a couple of years.

[Prashant Rao:]

Then on the Singapore charter which is 2016 any thoughts there in terms of maybe a similar strategy or any early reads on how you are thinking about ship management there?

[Paul Wogan:]

Yes. I think as we show, we are in constant dialog with BG around their requirements and their need for ships and Singapore is part of that. So as we get great clarity on their requirements we will take a look at that ship. It obviously is doing similar things where we try to support our customer by being flexible and I think they appreciate that and see these ships as part of their logistics setup. So nothing to report now but we will continue dialog on that ship.

[Prashant Rao:]

And just one final one. Appreciate the slide on the Cool Pool and the update there. Just wanted to get a sense of apart from all the other [indiscernible] you are talking about early reads in the market, a means for [indiscernible] contracts, is there -- anything you could point to any clue and give us on how utilization in the pool has trended and now it's early days versus maybe the rest of the stock market and how you expect that to develop should there be a delta there? I would imagine that you would be able to deleverage better utilization now that you have that pool structure.

[Paul Wogan:]

I mean what's interesting is that the ships deliver staggered into the Cool Pool as they come off their existing charters. So we are having 14 ships in the pool day one and we just reported we did -- the pool did 10 fixtures in October. So the utilization that the ships in the pool are getting at the moment is very high. Too early to sort of take the trends on that, but I am very optimistic that we are going to have a very high utilization on the Cool Pool vessels compared to the general market.

[Simon Crowe:]

Yes. It's been a really good start and I think the customers are appreciating it and the changing market is appreciating it. So we are optimistic.

[Prashant Rao:]

Great. Thanks for the time guys, appreciate it.

[Operator:]

The next question comes from Fotis Giannakoulis of Morgan Stanley. Your line is now open.

[Fotis Giannakoulis:]

Yes. Hello and thank you giving for giving the opportunity. I want to ask about the Slide 10, you have the list of reported requirements. If you can give us a little bit more color. I know that the GAIL has tried many times to find vessels [somewhere least of the] requirement of building the vessels in India. And what is going on with the timing of the remaining projects? When are these projects targeted to be awarded and targeted to begin?

[Paul Wogan:]

Yes. I mean again, we have put down the vessel requirements, because it's a fairly well known information. The market is difficult for us to talk about the terms in any traditional tender. GAIL I think has been reported that they would like to see Indian content in that and I expect that to remain. If you look at those requirements, I think they are all very much life and ongoing at the moment. And I would expect those to be completed in the coming months. I mean I can't talk to how quickly the customers will do it. I mean they obviously are moving to be able to cover the positions they have for the U.S. Gulf liftings in particular.

[Simon Crowe:]

And we got to fairly remember the [indiscernible] is really the point where '17, '18 where things get tight we believe. We still believe in that time. So that means its now, it's today, you have to act today, because to get a ship delivering in '18, '19 you got to act today. So I think that tendering activity is ongoing and we are participating in it. But you got to look through your draft. So thinking about the supply and demand tightness in shipping in '17, '18 you have to act today.

[Fotis Giannakoulis:]

From your comment Simon, does this mean that all these requirements are for newbuilding vessels and am asking regarding the existing vessels that they are operating the spot market. I understand that there are close to 70 vessels. Do these vessels have a chance to get period contracts or we are talking about a new group of vessels that has to operate in the spot market?

[Simon Crowe:]

I think as you look at these requirements I think you are going to see a mixture of both Fotis. I think some of these requirements being taken by existing vessels and some of them will require new vessels that are project specific.

[Paul Wogan:]

Also Fotis, you got to remember some of the spot vessels today will get sucked up next year as things like Angola and the Golden projects start to come in, some of those ships are even out of the spot market they will get sucked in. So we expect to see a reduced number in the spot market as that additional capacity comes on line in 2016.

[Fotis Giannakoulis:]

Of course that's a good point. Paul, can you comment also on your view on LNG prices. We have seen that global prices have converged significantly. We do not see any differential between Europe and Asia or any meaningful differential and everybody is trying to sell to Europe. How much Europe can absorb? How many million tons do you think the imports of Europe can increase given the facts that it's only 15% right now?

[Paul Wogan:]

I mean it's interesting. I think it was yesterday I saw a bulletin from the EU where they are looking at LNG as promoting that to promote the single gas market in Europe and also as an alternative to the Russian pipeline supply. So the EU regulators are very much focused on LNG and of course, this new wave of LNG we are seeing from both Australia and from the U.S. gives them the ability to do that probably for the first time in a meaningful way. I mean it's a huge gas market. If you can land the LNG in a cost competitive way then you can take market share in what's a huge gas market. I don’t know the million tons figure off the top of my head, but I think Europe has the ability to take a huge amount of LNG provided its priced competitively.

[Fotis Giannakoulis:]

Regarding pricing on Slide 11, you show how much is the cost. I understand that this cost has a liquefaction fee around the -- liquefaction cost around $3 and a shipping cost to average of around $2. How fixed are these numbers? How fixed is the liquefaction cost? Is this something that could be considered as a sank cost since a lot of these projects have already been built and financed? How do you view the potential of a -- the supply -- the oversupply of LNG at the same time in order to be competitive to put pressure on the freight costs as well?

[Paul Wogan:]

Yes, I mean I think certainly just to take your point, so I think the point we are trying to get across in the slide is the liquefaction cost we put in $3, so an average kind of price. But these are take or pay contracts where basically those people have committed to the tolling costs. So that's a sunk cost. So you take that off and that's where we get to the variable cost. The shipping cost to Asia, we put in around $2. What's interesting is you told me about the fact that as the pricing goes down to that squeeze, the shipping costs, what we have seen and I alluded to it when I was in my sort of prepared remarks, what we have seen in the tanker market is something completely different. We are only seeing the commodity prices dropping which stimulates the amount and certainly there is demand for the ships. And so, I don’t think it follows necessarily that will lead to a squeeze in the pricing of the shipping component. We will see how that turns out. My personal view is, when you see low commodity prices it's self correcting, because those low commodity prices are going to in my opinion drive demand for LNG and I think as we see more contracts coming on line looking at using LNG as cost effective and diversified source of energy that that's going to be very beneficial for the shipping market.

[Simon Crowe:]

I think also as you see low commodity prices you tend to see people coming into the market to potentially buy out that capacity. Some of those people are traders, they don’t necessarily have an end destination in mind and perhaps they steam slightly slower and have slightly more irregular trading patterns in which case the shipping market becomes a little bit more inefficient and obviously that's a good thing for shippers like ourselves. So I think we have seen that in the tanker market, we have seen the low commodity price attract a lot of interest and lot of business, a lot of activity is happening. But it’s the inefficiency in that market I think is quite interesting for us as we go forward into 2016 and that additional capacity is arriving from those plants that are being finalized and are being built out now.

[Fotis Giannakoulis:]

A couple of more questions quicker for me. The first has to do with the FSRU plant, are there any projects that you are looking [indiscernible] to this sector or this has been postponed for the future?

[Paul Wogan:]

Again I think Fotis we see that we are as I mentioned that with our 16 vessels in the consolidated fleet we have an advantageous position that those are great kind of for conversion. Some of them we are looking very closely at about how we can do it and part of that is looking at the potential projects which are there to take up those kind of ships.

[Fotis Giannakoulis:]

Is this something that you are looking on your own or in a partnership with other parties that they are already in this sector?

[Paul Wogan:]

I think it will -- I think it's interesting. I think partnerships in this can come in many different guises. I met with a large institution yesterday who were looking at how they can supply gas into an area and how they can supply other components. I think as we -- the FSRUs I think is very interesting around power production and as that comes on I think somebody who can offer a kind of total solution is going to be -- have an advantage, in which case sort of partnering with other people to put that total solution in maybe a good way forward.

[Fotis Giannakoulis:]

Thank you Paul, thank you Simon.

[Operator:]

The next question comes from Jonathan Chappell of Evercore ISI. Your line is now open.

[Jonathan Chappell:]

Just a quick couple of follow-ups. Sounds like disadvantage concerns and also you tie that together with the Cool Pool, the three ships that are on the spot market right now, I understand that if they want to -- if you want to employ them on a long term charter you can obviously remove them from the pool. But if there is something like what you had for the Savannah where you basically guarantee employment at the current market rate at a duration of let's say under two years, could you employ the vessels on that as well?

[Paul Wogan:]

Yes. We can. I mean if it's anything above one year then we could do that.

[Jonathan Chappell:]

Anything above one year?

[Paul Wogan:]

Yes.

[Jonathan Chappell:]

And are there other opportunities like that out there or is this just simple extension based on the long term employment of Savannah with BG?

[Paul Wogan:]

No. There are other opportunities out there, Jon and again I can't speak about things specifically. But I think as we are seeing -- other people are seeing potential tightening in the market and I think the interest in taking ships in for periods I think is starting to gather momentum. So we may see more of that I think in the coming months.

[Jonathan Chappell:]

You mean obviously the rates are market rates, so that's not much better but getting the utilization is important in this period of over capacity. On that note you mentioned a couple of times in the press release, the off hire time in the third quarter both related to drydocking and unchartered vessels. Can you provide any more information on that? How much of the off hire time was related to drydocking specifically? How much of it was waiting time associated with the ships in the spot market?

[Simon Crowe:]

Yes. We had about -- we had one drydock in the last quarter and that was about 23 days, 24 days roughly. So that compares to 80 days of drydocking I think in the last quarter, quarter two. So the off charter days were roughly the same as about 150.

[Jonathan Chappell:]

Are there any drydocks for 4Q?

[Simon Crowe:]

Not to my knowledge, no, I think we are pretty much done. We even had a quite busy year, quite a successful year in terms of the time in drydock. We have actually been doing very well in terms of getting them in and out very quickly. We typically had sort of 30 days but we have been doing that sort of a few days earlier than that and in some cases even better. So nothing planned for Q4.

[Jonathan Chappell:]

Final question and forgive me because that's probably going to be a little bit long. But somewhat of a little bit more strategic. So obviously in your refinancing discussions you probably want to keep as strong a balance sheet as possible as you go into those discussions. Notice you didn’t bring up sum of the parts other than just referencing in those slide or anything about that. Guessing it's still significantly higher with the share prices today. And then also just the volatility of your stock, I mean, to have a fleet with 16 of 19 vessels on long term charter and therefore pretty good visibility of the earnings here to have 5%, 6% moves on almost a daily basis. Just curious about the excess capital capacity to employ some type of a buy back where you can take advantage of opportunities when the stock is down 6% or 7% on something macro that has nothing to do with your business whatsoever. Any thoughts to that or and then the timing around that vis-a-vis the refinancing discussions?

[Simon Crowe:]

Yes. So let me start and try and address those and I am sure Paul will chip in. Firstly the refi is going very well, fairly confident that we may have something in the next few weeks for the [bullets] next year. Sum of the parts, yes, I mean we talked about it last quarter quite a lot. Clearly we believe sum of the parts significantly puts our value well above where we are today. So we strongly believe in that and believe in the strategy that we have employing long term fixed rate charters, making sure the Cool Pool works. So we definitively are very focused on that and that remains a key part of our thesis. You mentioned sort of excess capacity and excess capital, we are in pretty good shape as you can see in terms of capital. In terms of buyback specifically, I mean, in these times of volatility for us it's good to maintain that war chest, that dry powder. It's good to maintain a margin of safety in terms of the opportunities we see. As we know from the cycles. We have lived through many cycles some of us here, we see most opportunities during the down cycle and we are seeing a lot of things come across our desk. Obviously we can't really talk about those for the moment, but we look at the FSRU space with great interest and we talked about that earlier. But in terms of buy backs it's about maintaining the war chest at the moment. Of course we are in discussions with our Board. Of course we look at that, but we would like to maintain that war cheat and that dry powder at this point in time.

[Jonathan Chappell:]

I would just think that as far as opportunities and the war chest are concerned there is probably no better deal out there than your stock relative to sum of the parts. I don’t think you will be seeing very many assets at $0.50 on the $1. But I understand the willingness to keep a strong balance sheet especially as those negotiations take place. So I appreciate the time, Simon. Thanks, Paul.

[Operator:]

Our next question comes from Michael Webber of Wells Fargo. Your line is now open.

[Michael Webber:]

Just to be brief it's been a long call, I just want to touch base on re-gas and then a tendering question. But that you have touched on it a little bit, but in turn you had two competitors trying to merge and fell apart this quarter and it seems to be -- really that seems to be a bit of a chicken and an egg question in terms of building something out organically or buying a platform. I am just curious the way you sit right now from a dry powder perspective and from a profit capital perspective, is there anything that prohibits you from looking at larger platforms of FSRUs? Do you think you will necessarily look at building something organically? How should we think about it, especially in terms of you guys building any scale relatively quickly in a market where it's kind of difficult to do that?

[Paul Wogan:]

I think Mike, as we look at the FSRU space, you are absolutely correct, there are two ways we can do this. One is, through building out organically and we believe we have the ability and the knowhow, core competence stuff to do that. The other is, to look to M&A activity and to joining up with other people. I think both of those especially, as we are talking about [expensing] our balance sheet in this period, both of those remain open to us and we will choose the one that we think can add most value for the share at the end of the day.

[Simon Crowe:]

My instinct, yes, we are looking at this very hard and we can parallel track both of those opportunities come and go but also we are looking at that organically as well as we go forward. So it’s an interesting space. We like it and we like the returns on capital. I mean they are mission exclusive exactly. What I am trying there is that we can parallel track those and we are looking at that very closely.

[Michael Webber:]

But you guys aren't sized out of anything at this point in terms of your options?

[Simon Crowe:]

No. Not at all. We are not excluding anything really and we are open to both options, both small and large scale.

[Paul Wogan:]

Yes. I mean obviously the great advantage as well as having the core competence for us is the FSRU space is one where we can deploy our abilities well and put assets to work on long term contracts which helps us again build the pipeline for GasLog Partners and drive sum of the part scene. That was a very, very nice virtuous circle there for us.

[Simon Crowe:]

We are very active in that space. We are very active.

[Michael Webber:]

That makes sense. Just around tendering and Paul you touched on this I guess a bit, but just not directly. Daily [indiscernible] has been out there for a long time but we are getting closer to the point where the dedicated volumes from corporates and others are going to start seeing some tendering activity. Have we actually started seeing those hit the market yet or is that something you think will hit over the next six months? And in terms of the vessels out there involved in tenders, [have they an uptick] you think we are going to see over the next six to nine months?

[Paul Wogan:]

Yes. I think we tried to put in the slides there, but a number of tenders which are ongoing which we are showing there between 22, 29. In my prepared remarks I talked about a fact that I think we are probably going to see another sort of 20 to 30 vessels kind of in 2016, because as you say quite rightly the volumes are going to be there. They need to be shipped and so people are going to be moving on those timing, that you will see people moving on those volumes, Mike.

[Michael Webber:]

There is one more I will try to overrun, the Cool Pool, and its more theoretically and it might be a bit early, but with the idea that we could see more -- if incremental U.S. domestic volumes drawing a bit more merchant, is it too early to think about you guys actually marketing that pool with more of a dynamic solution versus kind of a shelter for any incremental spot exposure? And if it's not or if it is, where does the technology -- the platform stand on either side both on the trader side and on your side to actually kind of have a bit more of a robust trading platform and kind of the mini version what we are seeing in some other spaces?

[Paul Wogan:]

Yes. I mean I think the Cool Pool kind of is coming at just the right time. We have seen these huge volumes coming on stream. A lot of which hasn't got destination clauses, some of which hasn't got long terms contracts against and will be traded. And so having that Cool Pool with a large number of ships just offers opportunities to our customers and for traders who are trying to get into that market where they want to have flexibility about when and how they take ship into master flexibility they are doing around their trading. It just seems to me that the confluence of those is working very well. I don’t see us at the moment using that Cool Pool as a trading platform ourselves. I think what we will be using it for and developing the product in that Cool Pool is to be able to support our customers as they sort of do their changes in what is a very much sort of dynamic market at the moment.

[Michael Webber:]

What are those communications been like with your customers around that, if some of these guys have moved forward with trains that may or may not be -- or I guess have a lower degree of volumes sold forward. Now are you seeing an uptick in there and in your communications with them around something more dynamic? I mean, like it's based or anything like that.

[Paul Wogan:]

We have been approached by three or four customers at the moment wanting to look at how we can work with them to develop their trading ability around existing commitments and future commitments. Looking at how can we kind of if you like have right of first refusal on our ships and their product, et cetera. So very downhill. For something that's a month into its gestation this is a very dynamic platform I think. I am really very interested to see how this works out.

[Michael Webber:]

Okay. That was very helpful. Thanks for your time guys. Appreciate it.

[Operator:]

[Operator Instructions] Our next question comes from Noah Parquette of JPMorgan. Your line is now open.

[Noah Parquette:]

I just had a couple of questions, first on the Korean shipyard situation. Obviously Korean shipyards are big producers of LNG ships [indiscernible]. Do you see any change in terms of shipyard capacity or pricing or any sort of dynamics that will affect your sector?

[Paul Wogan:]

I mean, there are some [space] in certain shipyards in Korea having a problem. But in terms of the availability of berths I think we have very good relationships with our yards. I think we have good availability of shipyard berths. I think pricing at the moment is probably a little bit down on what it was so we can probably take advantage of that. But there haven't been huge movements at the moment and the three major shipyards which are producing LNG vessels are still well and willing to produce. What's been very interesting though is of course the upside of this lower spot market has been the fact that we haven't seen people going out and ordering newbuildings on speculation. And so as we look forward to 2018, '19 where we definitely see this market tightening that last year of new ordering we think is going to be quite an important factor and in that market tightening up even further.

[Simon Crowe:]

Just to add to Paul's. We are very active -- we have got all these tenders coming out and we are very active in the market with the shipyard where Graham our COO does an amazing job of applying pressure and getting the right technology and the right price and the right payment terms and we have been very lucky and very successful in that over the past. So I think we continue to do that. We continue to be very active with them to make sure that we see what they can do and how best we can meet our potential opportunities going forward. And also the time is now because it's 2018 as some people are thinking about their requirements and that means they have to act today and we are very busy looking at that.

[Noah Parquette:]

And then I just wanted to follow-up on in talking about more U.S. cargoes going to Europe. How much of that is just kind of localization of trade or especially that we are going to go Asia and now are going to Europe? And I guess how much of it is drawing the part where Europe is getting off of pipeline gas, I mean what are your views there?

[Paul Wogan:]

Yes. I think we are trying to demonstrate the competitiveness of gas across the world. I think U.S. gas will go into Asia and I think U.S. gas will go into Europe. What's interesting is that Europe does have this sort of if you like market last resortability that can take in an easy amount of LNG thus providing this class price competitive. But I don't think you are going to can see -- if we had been asking this question a year, 18 months ago, we would have been talking about Asia as the market. I think Asia will come back as a very, very important market for LNG from both the States and the Australia. But I think Europe offers some very interesting potential.

[Simon Crowe:]

I think as Australian cargoes come on line they are going to start going to the Middle East and then Europe. That's just great for ton miles, it really is great for ton miles. So we again see 2016 as an interesting time as these Australian projects come on.

[Noah Parquette:]

Okay. Thanks.

[Operator:]

Our next question comes from Fotis Giannakoulis of Morgan Stanley. Your line is now open.

[Fotis Giannakoulis:]

I have one more question, given the fact that your call happens just one day after an announcement that upset yesterday the tanker market. If you have any comment for the sale of the shares of the stake of Ceres in Euronav. How does this relate to your company? Are there any thoughts of potential exiting from your company or even redeploying the capital from Euronav to GasLog? Anything that you can add to that?

[Paul Wogan:]

Yes. I mean I can't really talk about the way that Ceres is deploying their capital in Euronav. But what I can say is that Peter Livanos has been in the topics this week and very involved working with us as we had gone through this earnings release remains as committed as ever I believe to the LNG sector, see it as a really interesting long term growth sector in shipping market and I see him being a huge supporter of this company for many years to come.

[Fotis Giannakoulis:]

So you don’t foresee any sale of this stake in Euronav? In GasLog sorry.

[Paul Wogan:]

There is nothing to indicate that at this point, no, definitely not.

[Fotis Giannakoulis:]

Thank you very much, Paul.

[Operator:]

I am showing no further questions at this time, I’d like to turn the conference back over to Mr. Paul Wogan for closing remarks.

[Paul Wogan:]

Well thank you very much everybody for being on this call today. We very much appreciate your time and interest in GasLog and have a wonderful rest of the day. Bye-bye.

[Simon Crowe:]

Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day everyone.