GasLog Partners LP
Q1 2018 Earnings Call Transcript

Published: 27 Apr 2018

[Operator:]

Good morning. My name is Nicole and I’ll be your conference operator today. At this time, I would like to welcome everyone to GasLog Partners First Quarter 2018 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question-and-answer session. As a reminder, this conference call is being recorded today. Today's speakers are Andy Orekar, Chief Executive Officer, Alastair Maxwell, Chief Financial Officer; and [Indiscernible] Joseph Nelson, Deputy Head of Investor Relations.

[Joseph Nelson:]

Good morning and thank you for joining GasLog Partners first quarter 2018 earnings conference call. For your convenience, this call, webcast and presentation are available on the investor relations section of our website, www.gaslogmlp.com where a replay will also be available. Please now turn to slide two of the presentation. Many of our remarks contain forward-looking statements. The factors that could cause actual results to differ materially from these forward-looking statements please refer to our first quarter earnings press release. In addition, some of our remarks contain non-GAAP financial measures as defined by the SEC; a reconciliation of these is included in the appendix to this presentation. I will now hand over to Andy Orekar, CEO of GasLog Partners.

[Andy Orekar:]

Thank you, Joe. Good morning and thanks to everyone for joining GasLog Partner's first quarter earnings call. I'll begin today's call with our highlights for the quarter and an overview of our recent transactions. Our CFO Alastair Maxwell will follow the review of our financial performance and drop down pipeline and I’ll conclude with an update on the LNG and LNG shipping markets and our distribution growth outlook. Following our presentation, we’d be very happy to take any questions you may have. Turning to slide three, you can see our highlights. In the first quarter, we delivered our highest ever results for revenues, EBITDA and distributable cash flow, and today we are declaring our sixth [ph] consecutive quarterly distribution increase. Our distribution now stands at $0.53 per unit or $2.12 on an annualized basis, which represents growth of 1.2% from the fourth quarter and 6% from the first quarter of 2017. Even at this increased distribution level, our coverage ratio for the quarter was greater than 1.1 times. In January, we completed a public offering of preferred equity raising gross proceeds of $115 million at a rate of 8.2%. This well received offering demonstrates GasLog Partners continued ability to raise gross capital at an attractive cost. In March, we announced the acquisition of the GasLog Gibraltar from our parent GasLog Limited. The GasLog Gibraltar is on a multi-year charter with the subsidiary of Royal Dutch Shell and I’m delighted to report that we closed the transaction last night. In addition, we successfully re-chartered two of our vessels reaching agreement with a new customer for a 3.5 year charter for the GasLog Santiago beginning in the third quarter of this year and a one year charter for one of our modern steam vessel beginning in the fourth quarter of 2019. Lastly, we produced our outstanding debt balances by nearly 10% during the first quarter, retiring [ph] a $103.9 million in total debt and strengthening our balance sheet for future growth. Turning onto slide four, where we summarize two of our recent transaction. On the left panel, you’ll see that we recently completed the acquisition of the GasLog Gibraltar for $207 million in the form of 45 million in new common unit issued to our parent, $18.4 million in cash and $143.6 in assumed debt. This is the first time GasLog Limited have taken our unit as partial consideration in the drop-down transaction, which we believe underscores the value our parent see in GasLog Partners as the preferred funding vehicle for the group. The Gibraltar was built in 2016 and is operating under a charter to Shell in late 2023. We anticipate the vessel will generate approximately $22.4 million in EBITDA and $11.5 million in distributable cash flow over the next 12 months. This acquisition increases the partnerships holding on fleet to 13 ships, meaningfully increases our contracted cash flows and extends our average remaining chartered duration. On the right panel, you’ll note that we paid down our 45 million inter-company loan last month, which was due to mature in 2022. The loan borrowed [ph] interest at a rate of 9.1525% and was repaid with proceeds from our 8.2% preferred equity offering in January. Each of these transactions is accretive to the partnerships distributable cash flow per LP unit and highlights the strong alignment between GasLog Partners and GasLog Limited. With that as introduction, I’ll now hand it over to Alastair to take you through our financials.

[Alastair Maxwell:]

Thanks, Andy and good morning to everyone. I’m delighted to report another excellent quarter in terms of the operational and financial performance of the partnership. Please turn to slide five. In the first quarter of 2018, we achieved our highest ever quarterly partnership performance results for revenues, EBITDA and distributable cash flow, all three metrics show increases over Q4, 2017 due to a full quarter’s contribution of the Solaris, the acquisition of which closed on October 20. Compared to the first quarter of 2017, our record results was using acquisitions of GasLog Seattle, GasLog Greece and the GasLog Geneva as well as the Solaris, all of which were accretive to our distributable cash flow and to our distributions per unit. As you can see in the bottom row of the table, our distribution coverage for the first quarter was 1.13 times, which reflects the new units issued post quarter end to GasLog Limited for the acquisition of the GasLog Gibraltar. Excluding the impact of the new unit issued the coverage ratio would have been 1.18 times. Looking forward, I would like to call the attention to two factors which will impact our distribution coverage in the coming quarters, namely the expiry of the GasLog Shanghai’s charter would show and the three dry dockings we had scheduled for 2018. Turning to slide six, where I’ll discuss the financial impact of our upcoming dry dockings. We will have three dry dockings this year, two of which will take place during the second quarter. And just to remind you, dry dockings are required every five years during which we have seen maintenance of our ships performed and special surveys are undertaken. A typical dry docking lasts for approximately 30 days and we record no revenue from the vessel during this period, but we do incur incremental operating expenses. All other dry docking costs have capitalized and amortized over the five year period to the next dry docking. As you will know, we provide for the cost of dry docking our ships by reserving approximately $270,000 per quarter for each ship to account for the estimated cost of a normal dry docking including the loss of revenues. Nonetheless, as a result of the lost hire and the incremental operating expenses, our coverage ratio will be negatively impacted during any period when our vessels are undergoing dry docking. More specifically, during this quarter we are dry docking both the GasLog Santiago and the GasLog Sydney and willing soon reliquefaction modules on both ships, the cost of which will be capitalized. Combined, we expect this to result in approximately 80 days of total off-hire and additional operating expenses of approximately $600,000 some of which have been incurred in Q1. These factors are likely to result in our coverage ratio falling below one times for the second quarter. Please turn to slide seven where I’ll discuss the benefits of the Reliquefaction Modules. Simplistically, reliquefaction modules increased the commercial value of our ships to our customers, by reducing the amount of gas lost to natural evaporation or boil off, through capturing it, reliquefying it and returning it to the cargo tank. This process both reduces the cost of each unit of LNG delivered by increasing the amount delivered by our customers to their end users and increases the operating flexibility of the vessel by enabling it to sail at slower speeds without loss of cargo through higher boil off relative to fuel consumption. These two factors significantly increase the value of the vessel to our customers. Installing these facilities on the GasLog Santiago and the GasLog Sydney, we’ll make them more competitive in 70% of the underwater fleet in our estimation and better position them to capture long term business for a modest capital expenditure. Turning to slide eight and the financial position of the partnership. On March 31, 2018 we had total available liquidity including revolver capacity of $206 million net of the approximately $104 million of debt we repaid during the first quarter. After adjusting for the cash consideration relating to the acquisition of the GasLog Gibraltar, we will have pro forma liquidity of $188 million. As we’ve discussed in previous quarters, we are taking advantage of the dry docking in 2018 to make investments in certain of the vessels requiring a further approximately $19 million in addition to what we’ve already spent, leading up to a pro forma liquidity of $168 million. After giving effect to these adjustments, our leverage is still modest at 51.9% of total cap and 4.4 times EBTIDA. This strong liquidity position combined with our aftermarket program and growing debt capacity leaves us well positioned to fund future growth. So turning to slide nine and our drop down pipeline. The top panel of this slide shows the 13 vessel comprising the partnerships fleet today, including the GasLog Shanghai and the GasLog Sydney, a few charters expire later this year. As I mentioned previously, the GasLog Shanghai will begin trading in the stock market next month, until such time as we can reach out to her on a multi-year basis. We expect to place the vessel into the crew pool, a commercial vessel showing arrangement between GasLog Golar and DYNAGAS, the benefits of which Andy will discuss later in the presentation. The bottom panel shows the ten vessels on multi-year charter GasLog Limited. The charter period range from 2019 to 2029 and represents approximately $200 million in total annual EBITDA. These vessels provide visible future growth opportunities for GasLog Partners and will contribute positively to the average charter length of our fleet as well throughout distributable cash flow. Lastly, when considering the new charters for the GasLog Santiago and one of the Methane Jane Elizabeth or the Methane Alison Victoria which we announced in March, plus the drop down of the GasLog Gibraltar. GasLog Partners has now contracted 90% of our operating days in 2018 and 83% in 2018. With that, I will turn it back to Andy to discuss the outlook for the LNG commodity and LNG shipping markets.

[Andy Orekar:]

Thank you, Alastair. Turning now to slide 10, which shows the new LNG supply coming online. This year approximately 33 million tons of new reliquefaction capacity is scheduled to start up, an increase of 10% over 2017. Dominion and Cove Point facility in Maryland began commercial production earlier this month and is now the second LNG export facility in the U.S. Near term start ups includes Cameroon LNG and Wheatstone Train 2, both expected to begin operation here in the second quarter. In 2019, an additional 44 million tons of new LNG is expected to come online, including trains of large projects such as Cameroon and Freeport which are expected to have a significant impact on ton mile as more gas is exported from the U.S. Further ahead, estimates from Wood Mackenzie point to approximately 700 million tons of new LNG production in various stages of planning across the world, a significant proportion of which is in North America. At least 125 million tons of this potential capacity is estimated to have a breakeven of less than $10 per mmBTU a freight level which has historically generated interest from long term buyers. Turning to slide 11, this slide shows the increase in LNG imports by country during the first quarter of this year as compared with the first quarter of 2017. After strong demand increases in 2017, the global LNG trade grew by 5 million tons during the first quarter, an increase of 8% over last year. China posted the largest year-on-year increase in absolute buying importing over 4 million tons more LNG in Q1, which represents an increase of 59% over Q1 of 2017. Pakistan, South Korea and India also recorded significant import growth, of 43%, 15% and 9% respectively. Turning to slide 12, where we discuss the supply and demand balance for LNG carriers. This slide illustrates our view of shipping supply and demand for 2025 based on Wood Mackenzie and Potent data. The shaded area represents low and high vessel demand scenarios, based on consensus LNG demand growth projections and a range of 1.5 to 1.7 ships per million tons of LNG for U.S. volumes and 1.3 to 1.4 ships for non-U.S. volumes. The solid blue line shows vessel supply based on ships on the water today and the current order book with no assumptions made for scrapping or FSO new [ph] conversions. The dotted blue line represents a scenario where all older vessels built before 2000 and were not charters are either going to be laid out or scrapped. Based on these scenarios, there is expected to be a shortfall between 35 to 62 vessels by the end of 2022 and a shortfall between 85 to 117 vessels by 2025. However, it is very important to remember that an absolute shortage of ship is not required for our market to be strong. When utilization of vessels goes above 80% to 85% earnings improve considerably. In summary, we believe the LNG shipping market will need significant incremental new vessels over the next three to five years. Turning to slide 13, where we look at recent spot market development. This slide shows the development of spot rates and highlights the average of the peak years of 2011 to 2014 when headline spot rates averaged $100,000 per day and the top [ph] year of 2015 to 2016 when they averaged $35,000 per day. As can be seen in the figure [ph] since the beginning of 2016, when spot rates were historic low, rates have begun to set a series of higher heights during the seasonally strong winter period as well as higher lows during the spring shorter month. For vessel, spot rates have declined to approximately 38,000 per day in the winter peaks they remain 27% higher than rates at this time last year. In addition, spot fixing activity continued to increase. As can be seen in the table on the upper right corner, 71 spot fixture growths were recorded during the first quarter of 2018 representing a 1 5% year-over-year increase. Prior to the LNG demand for expected from the upcoming cooling season here in the Northern hemisphere, we expect a weaker spot market relative to the peak we saw in the first quarter. However, looking a bit further ahead, the visible outlook for vessel supply projects a significant market tightening supporting our view of improving spot rates overtime. Please turn to slide 14. As Alastair mentioned, beginning next month the GasLog Shanghai would begin trading in the spot market. She will be placing Cool Pool which was founded in 2015 as the first pool of LNG carriers, and today manages a suite of 18 ships of similar size and specification to the GasLog Shanghai. All of the vessels in the Cool Pool trade in the spot market with a focus on charters of less than one year in duration. We believe this pooling arrangement should create higher utilization overtime relative to the spot ships operating outside the Pool and will provide short term employment for the GasLog Shanghai with increased customer exposure as we evaluate longer term travelling opportunities. Turning to slide 15, and a recap of our growth track record and our distribution guidance for 2018. You can see on the far left panel, we’ve not grown our distributable cash flow per unit by over 10% on a compounded annual basis by PL [ph]. Today we are increasing our quarterly distribution to $0.53 per unit or $2.12 annualized, which represents a 6% increase on a year-on-year basis and 9.7% annualized growth since IPO. As shown on the far right panel of the slide, we are reiterating our guidance of 5% to 7% year-on-year distribution growth for 2018. This guidance is supported by the rechartering of the GasLog Santiago, our fleet of acquisition of the GasLog Gibraltar and our continued access to attractively priced capital. We are also reflecting our three scheduled dry docking and two vessels coming off charter later this year. Now turning to slide 16, in summary in the first quarter of this year GasLog Partners continued to execute its growth strategy. We delivered our highest ever quarterly results for revenue, EBITDA and distributable cash flow enabling us to increase our cash distribution for the sixth consecutive quarter while maintaining prudent coverage. Following our recent acquisition and new chartered agreement, we continue to believe 5% to 7% growth is an achievable target for 2018 and we substantially address our equity funding requirements for our next acquisition. Finally, looking longer term, continued progress of new liquefaction and strong LNG demand should result in improving LNGs shipping rate overtime. With that I’d like to open it up for Q&A. Nicole, could you please open the call for any questions, please.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Jon Chappell of Evercore. Your line is now open.

[Jon Chappell:]

Thank you. Good morning, Andy.

[Andy Orekar:]

Good morning, Jon.

[Jon Chappell:]

Andy, first question and I understand all the seasonal components you spoke about should have been expected, although maybe not just with the depth and the speed that the downturn happened. But I’m wondering as it relates to you guys in the timechart environment, you know the Shanghai, I think you are pretty clear with that, couple of quarters hopefully yet a long term contract but some other ships start to roll off as well. So the question essentially is, has the time charter environment or the conversations changed versus when you were out there able to charter the Santiago and either one of the Methane because of the depth of this seasonal downturn and some people kind of pull back a little bit. I’d really missed the charter longer term as the headline rate come off a little bit or do you have people taking a longer term view here and it’s very similar to that prior environment.

[Andy Orekar:]

Yes, it’s a good question. I would say a couple of things. Firstly, both the Shanghai and the Sydney are the subject of multi customer enquiry. And so those conversations continue for term business and I think we are trying to balance working on a term opportunity and this which is really the seasonally weakest part of the year versus a potentially stronger period as we head closer to the fall and winter and the ability to achieve higher term rate for multiple years. So, I think the environment is the same, but there is a little less leverage in our favor here in the past month or so. But I still think if you take Santiago as an example, clearly very sophisticated customers are seeing lot of the trends that we been talking about for some time and want to take cover for multiple years heading into the 2018 winter and beyond. So I feel that there is still attractive opportunity for term charters, but we're being patient having foot one away to try to earn the best possible rates we can on the remaining two.

[Jon Chappell:]

Right. And just a quick follow-up to that. The conversations you're having on the Shanghai and Sydney; are they similar to duration terms to that as Santiago or is there a pretty wide range, I mean, people coming to you for one year and maybe say seven or eight or they're all kind of in the two to four year type of range?

[Andy Orekar:]

Yes. I think per ships on the water is, well, I guess per ships that are in the pool today people are talking about multi-months deals as well as shorter on wages, but for our ships similar to the Santiago I think one to kind of four, five years at the assets of other, Randy, is probably the right number I think but maybe a greater concentration around call it three, three unchanged.

[Jon Chappell:]

Okay. That makes sense. And then just second question on kind of longer term strategy. You know the 5% to 7% growth range is identified and obviously quite achievable and you've already raise the financing to get there and with dropdown in Gibraltar you're well on your way. But it seems like kind of some major issues going on in the broader MLP space is kind of shifted a focus of investors from distribution growth to distribution coverage. So even though lot of those things don't affect your business directly kind of swimming in the same pool as some of guys where it does, so as you kind of look beyond 2018 does the offence that you been playing since the IPO kind of ship to more of a defensive stance where you focus more on the coverage especially as you have a couple of more ships moving off contract next year? Or do you still think that 5% to 7% kind of the right term, the right long-term distribution growth rate?

[Andy Orekar:]

Sure. It’s a really good question. I think today there is – what I calls there's the wholly triangle of MLP investor concerns, but as distribution growth, distribution coverage and leverage. And I think we've done a good job of managing the balance between those three items which I think quite compelling growth, proven coverage and very reasonable leverage. I still don't believe today that we're really getting full value for the growth that we're delivering. I think we're still at a discount to where we should be. It feels like in terms of our trading yield and the market valuation. So it's something we really evaluate almost every quarter in sense of the distribution that we're able to provide and the coverage we're able to provide and is it something that we feel our investors will receive well and reflect in our valuation. So we feel that 5% to 7% is clearly achievable for 2018. At this time I think we have some thinking to do about 2019 and beyond and what the right distribution rate is. But so far I think moderating the growth from the 10% to 15% CAGR we had to about 5% -- 5% to 7% annual number has felt like the right decision and we'll continue to evaluate as the year moves along.

[Jon Chappell:]

Okay, great. That's super helpful. That's a lot, Andy.

[Andy Orekar:]

Thanks, Jon.

[Operator:]

Thank you. Our next question comes from the line of Chris Wetherbee of Citi. Your line is now open.

[Chris Wetherbee:]

Yes. Hey, thanks guys. Good morning. I just sort of maybe pick right up on that last topic and think about maybe the longer term and not necessarily specific to 2019, but when you take a step back and think about sort of the growth profile of the parent company, sort of the opportunities for dropdowns, but you know the challenges of the larger and to the ultimately over time, can you just sort of help us frame out how you guys might approach the discussion of sort of distribution growth beyond 2018, not looking necessarily for specific numbers, but kind you give us some color and to the way you guys think about that?

[Andy Orekar:]

Sure, Chris. It's Andy here. I think the MLP community has a evolved from a time when distribution growth in the low to mid-single digits was quite compelling and put you sort of in the top quartile of the investable universe to a period where, if you didn't have double-digit growth you were sort of forgotten about. And I think if you look at our model and the assets you mentioned that we can drop down today and no doubt that core of assets will grow quite significantly in the future as GasLog Limited execute this strategy. Clearly, I think we have the opportunity to grow at rates that are very competitive and compelling, probably not double-digits like maybe they once were, but I think a low to mid single-digit growth rate with good coverage and healthy balance sheet is likely a strategy for all season in the MLP world at least as far as we can see. So I think that's in our mind a realistic target given our scale and given the growth that we have internally as well as some third-party related growth that we hope to target here with our bigger platform and our continued access to capital.

[Chris Wetherbee:]

Okay. That's actually very helpful. I really appreciate that color. I don't want to hop, but I just kind of coming back to the spot exposure and sort of your thoughts about, are there any hard sort of parameters about the amount of days in any given period whether the quarter or year that you in the spot market. Now just as you sort of evolved going forward and there's potential for some ships to rollup of longer-term charters. And there maybe end features like you're describing where it makes more sense to sort of be in shorter term market while you wait for seasonal improvement or better demand dynamics because of projects or whatever. Are there some parameters around sort of that percentage into the shorter term market that you guys are comfortable with as take out?

[Andy Orekar:]

Sure. You're right. We don't have a hard target around the percentage of contracted days. Our strategy is really to the extent we could be as close to fully contracted as possible without giving up too much in rate. I think that very simplistically how we view the world. As you note, we feel that waiting a bit further on the Shanghai and of course the Sydney is still under charter here for several months to come, we'll give you a stronger opportunities for business over a longer period than trying to term them up today. And so that's temples out as Alastair mentioned in his comments that 90% of the days being contracted this year and 83 next year. Hopefully, those numbers go up with not only new charters but of course additional acquisitions of contracted asset. So I think we're without having a hard target we're trying to balance what we feel the better opportunity tomorrow and do a strengthening market with enough visibility and a very substantially contracted fleet that gives our investors visibility on cash flow.

[Chris Wetherbee:]

Okay. That's helpful. Last question quick housekeeping, when you think about the second half of the year, expectations for dry-docking days?

[Alastair Maxwell:]

Chris, I'll take that. It's Alastair. So the third dry-docking in the year will be a regular schedule dry-docking and we budget for 30 days.

[Chris Wetherbee:]

And that's 3Q or 4Q?

[Alastair Maxwell:]

Currently scheduled I think to be late 3Q, but that may change, but that's roughly the right window.

[Chris Wetherbee:]

Okay. Perfect. Thank you very much for the time. I appreciate it.

[Operator:]

Thank you. Our next question comes from the line Randy Giveans from Jefferies. Your line is now open.

[Randy Giveans:]

Hey, thanks guys and congrats on the record quarter. So, few quick questions. Assuming know our dropdowns where does the expected quarterly distribution 4Q, 2018, so basically it’s the Gibraltar enough to get you to that 5% to 7% growth year-over-year by the end of this year?

[Andy Orekar:]

Sure. Hi, Randy, its Andy here. I don't want to give specific quarter by quarter distribution guidance. I think as you know, we're at 2.12 [ph] today. We feel that Gibraltar is nicely accretive on a per unit basis and have, I guess, what is about – about eight months left in the year of more probes that we hope to accomplish. So I think we are a long way there to the 5% to 7% fore sure, but there's more we'd like to do this year and the time that we have.

[Randy Giveans:]

Okay. Yes. I guess a good segue. So with that kind of expected timing of the next dropdown, should we expect another one in the next three to six months? And then, an ideal dropdown duration? I know the last two I think the Solaris was a little under four year; the Gibraltar is about 5.5 years, so how should we think about that?

[Andy Orekar:]

Sure. So if you look at our, I guess now four-year history of the public partnership we've averaged two to three dropdown per year, I guess in 2016 we only did one because 2016 was a really tough market as we all remember. And so I think that -- I think that number of two to three per year is a good figure to have which will put us on pace to another dropdown and say the next six months or so. We're fortunate about to took you through the dropdown pipeline we have well over half a dozen vessels that have more than five years of charter life remaining on them, so I think we'll continue to focus on assets that are parent that have five years of contracted life or more.

[Randy Giveans:]

Okay. And then final question is piggybacking on the dry-docking question earlier. So I know for the Sydney and the Santiago I guess you're doing that 40 day with the incremental kind of cost but appearing not on the Seattle on the fourth quarter this year. So I guess why is that? As you're doing on two with three and not the Seattle as well?

[Alastair Maxwell:]

Hey, Randy, it's Alastair. That's very simple. Just because of the additional time require to install the relay protection modules on those 30 ships.

[Randy Giveans:]

And then, why – when did you do that on Seattle as well?

[Alastair Maxwell:]

Good question. It's not part of the plan today. The Seattle is just slightly more modern ship and we may do it at later stage but it's not part of the current plan, plus sees on a term charter of the Shell as you know.

[Randy Giveans:]

Okay. Well, that's it from me. Thanks again.

[Operator:]

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

[Fotis Giannakoulis:]

Yes. Hi, gentlemen and thank you. I am observing the slide number 12 with supply/demand outlook for the LNG shipping market. And it seems there is a broader consensus among the LNG shipping companies and among analysts and investors. Are the market is going to be short in a couple of years of vessels. I am wondering in your discussion with your customers at what point the other side of the equation is start worrying about this shortage and start ordering ships.

[Andy Orekar:]

Sure. Fotis, its Andy here. I think you're right. I think there is a growing consensus of the tightness expect with the market particular in 2019 and 2020. And I think there's has been a response so far here in the first quarter that we have seen some more ships orders than we've seen in 2016 and 2017 and comparable period. But again I think one point I stress is that 80% of the order book today is on long term charters and even many of the ships orders here recently are ordered again long term charters including two that are parent ordering which we very much expect will be put again long-term charter. So I think you've seen a little bit of that supplier response, but the rates coming off a bit has probably been helpful to pause that. And I think we're also seeing the shipyards become a bit more courageous in their pricing and their ability driven really by some of the restructuring and profitability challenges as they've had in recent years. And so we think that our parent really picked a greater time to be ordering a few new ships than that shipbuilding prices are clearly moving up.

[Fotis Giannakoulis:]

And Andy, can you elaborate a little bit on the range of this shortage. It seems pretty wide. I wonder is this range due to potential additional projects that they might be serve between the low and high case? Or it's about the ton mile expansion and the multiplier you are using. And can you give us some food for salt about how to see to evaluate the right multiplier. Is it 1.3? Is it 1.5, 1.6, how shall we think about it?

[Andy Orekar:]

Sure. The range that you refer to in our slide presentation is driven by ton miles and really where the cargos are going and from what source, at what production. So what you see here the global average has been about 1.3, 1.4 times, but for U.S. project we see in Cheniere report 1.6 times for this to be in that volume to-date so that's why we use the range here of 1.5 to 1.7 for the U.S. cargo. So it's really driven by ton miles with our projected very much consensus views of LNG demand growth over the next five to seven years.

[Fotis Giannakoulis:]

And I know it’s a hard call to move to make, but I wanted your views about what do you think the call on a U.S. incremental production and which projects out of the U.S. the second part of my question, are you're seeing that they are going to be fruitful and reach FID in the next couple of years?

[Andy Orekar:]

It’s a good question, one we obviously follow closely because by definition projects that have had yet take FID means incremental shipping for our business. I think it's hard for us to call the winners and losers of perhaps the so called second wave. I think we're clearly focused on some of the U.S. Brownfield projects, these folks that are pitching $500 of my guess maybe just under a $1000 a ton, really look very competitive from a cost perspective versus the [Indiscernible] and others of the world that were $3,000, $4,000 of a ton, so I think the U.S. looks like it’s going to be competitive for some time to come particular at a high $2 gas environment and $75 Brent or whatever these days holds, but I think U.S. gas is going to be extremely competitive. So hard for us to say but it is easy to envision the scenario where there is a lot of U.S. LNG being exported.

[Fotis Giannakoulis:]

Thank you, Andy. One more question for Alastair. I know that you are a company that you plan many years ahead your moves and I'm wondering how shall we think the ownership of the 2006, 2007 vessels five years from now. Are these vessels going to stay in the fleet as part of a larger fleet, a small portion of a large fleet? Or you have thoughts of converting or even selling the vessels either to the parent or to some third party?

[Alastair Maxwell:]

Yes, Fotis, good question. I think the answer is that we don't have any current plans for those vessels, all the modern steam ships other than first of all running them under the existing charters that we have with Shell. Going to those ships the first two we deliver at the end of the 2019 as you know and one of which has been reach out to these new customers we disclosed in March. And I think it's too early at this stage to make any predictions about long-term plans for those vessels rather than continuing to trade them and as and when they we deliver to look for new chartering opportunities. It possible to use those ships for conversions, they work better for FSUs rather than FSRUs because the FSRU has a significant requirement for power generation and the TFDEs are better suited for that purpose. But it is an option to convert a steam ship either to FSRU platform more likely in FSU as a suitable opportunity arises.

[Fotis Giannakoulis:]

Thank you, Alastair. Can you remind us what percentage of your debt is hedged right now?

[Alastair Maxwell:]

At the partnership level its low 48% [ph]. I think it just under 45%.

[Fotis Giannakoulis:]

Okay. Thank you very much gentlemen.

[Alastair Maxwell:]

Thanks Fotis.

[Andy Orekar:]

Thank you, Fotis.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Hillary Cacanando of Wells Fargo. Your line is now open.

[Hillary Cacanando:]

Hi. Thanks for taking my questions. I'm just curious when you are marketing GasLog Santiago, what that vessel marketed as something as a vessel that was going to have a like reliquefaction module. And if so, how big of a factor was that in getting that chartered? Just trying to get the sense of like the value you placed on that module from the charters?

[Andy Orekar:]

Hi, Hillary, Andy speaking.

[Hillary Cacanando:]

Hi, Andy.

[Andy Orekar:]

It was part of the customer discussion as you might imagine our plans to install the reliquefaction unit have been in place for some time now, given how far we plan our dry docking. So, I think it’s clearly something our customers found of value, Alastair mentioned in his comments that the increased efficiency benefit that had converse versus a ship without reliq. So I think it was a factor in that ship taking up all the charter that it did. It’s hard to translate to exactly what that means in rate. I think it’s difficult to put it in real dollar and cents in terms of day rate, but I think it probably puts the ship towards the front of a pack of what our customer was looking for and ultimately we were successful in putting it away for three and a half years, so we are very happy with it.

[Hillary Cacanando:]

Okay, so is this something that you are planning to do for all your vessels going forward. I know it’s not going to be done for Seattle, but in the future but in the near term I guess for your next dry dock?

[Andy Orekar:]

Yes, so it just makes sense to do it for both the Santiago and the Sydney because they are dry docking or at/or near the end of their current charter periods at first back of it that is perhaps under our fixed rate for many years to come with the same customer and so you are not going to get any benefit in the charter rate by adding the capital associated with the reliq. So part of it comes down to timing and if the visiting customer is expecting to take the vessel back or how many years left she has on our charter. So but we think it is very worthwhile technology, we are progressing with it on a few vessels and I think a vessel or two up with the parent company as well and so we’ll see it translates in the commercial success, but so far so good.

[Hillary Cacanando:]

Okay, great. Well thanks for taking my questions. Thank you.

[Andy Orekar:]

Thanks, Hillary.

[Operator:]

Thank you. [Operator Instructions] And I’m showing no further questions at this time. I’ll turn the call back over to Andy or Andy Orekar for any closing remarks.

[Andy Orekar:]

Thank you, Nicole. Well thank you all for listening and your continued interest in GasLog Partners. Well, we appreciate it very much and look forward to speaking to you next quarter.

[Operator:]

Ladies and gentlemen thank you for participating in today’s conference. That does conclude today’s program. You may all disconnect. Everyone have a great day.