GasLog Partners LP
Q4 2017 Earnings Call Transcript

Published: 31 Jan 2018

[Operator:]

Good morning. My name is Gigi [ph], and I'll be your conference operator today. At this time, I'd like to welcome everyone to GasLog Partners' Fourth Quarter 2017 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 Andy Orekar, Chief Executive Officer; Alastair Maxwell, Chief Financial Officer; and to commence the call, Joseph Nelson, Deputy Head of Investor Relations. Mr. Nelson, you may begin your conference.

[Joseph Nelson:]

Good morning and thank you for joining GasLog Partners fourth quarter 2017 earnings conference call. For your convenience, this call, webcast and presentation are available on the Investor Relations section of our Web site, www.gaslogmlp.com, where a replay will also be available. Please now turn to Slide 2 of the presentation. Many of our remarks contain forward-looking statements. For factors that could cause actual results to differ materially from these forward-looking statements, please refer to our fourth 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 of this presentation. I'll now hand it over to Andy Orekar, CEO of GasLog Partners.

[Andy Orekar:]

Thank you, Joe. Good morning and thanks to everyone for joining GasLog Partners fourth quarter earnings call. I'll begin today's call with our highlights for the quarter and an overview of our recent transaction. Our CFO, Alastair Maxwell, will follow with a review of our financial performance, financing activity, and dropdown pipeline and I'll conclude with an update on the LNG shipping market and our distribution growth outlook. Following our presentation, we'd be very happy to take any questions you may have. Turning to Slide 3, you can see our highlights. In the fourth quarter we delivered our highest ever results for revenue, EBITDA, profit and distributable cash flow. And today we’re declaring our 5th consecutive quarterly distribution increase. Our distribution now stands at $0.5235 per unit or just over $2.09 on an annualized basis, which represents growth of 1.2% from the third quarter and 6.8% from the fourth quarter of 2016. Even at this increased distribution level, our coverage ratio for the quarter was 1.18x. In October, we closed the acquisition of the Solaris from our parent. Our third acquisition completed in 2017. Subsequent to the end of Q4, we prepaid approximately $30 million of remaining junior debt that was scheduled to mature in April. And lastly, earlier this month, we completed a public offering of preferred equity raising gross proceeds of $115 million at a rate of 8.2%. The offering demonstrates GasLog partners continued ability to raise gross capital at an attractive cost and substantially addresses our equity needed to deliver our guidance of 5% to 7% distribution growth in 2018. Turning now to Slide 4, where we summarize our acquisition activity last year. 2017 was an active year for GasLog Partners. During the year, we completed three acquisitions with a total value of $630, closing the GasLog Greece in May, the GasLog Geneva in July, and the Solaris in October. Each of these vessels was operating under a multiyear charter to subsidiary of Royal Dutch Shell. Together, the acquisitions of these three modern LNG carriers adds approximately $67 million of annualized EBITDA, while increasing our fleet contract coverage to approximately 90% in 2018 and 72% in 2019. In summary, these accretive acquisitions expand the partnership's fleet to 12 wholly-owned LNG carriers, extend our average remaining charter duration and significantly increased our contracted EBITDA and distributable cash flow. With that as introduction, I will now turn it over to Alastair to take you through our financials.

[Alastair Maxwell:]

Thank you, Andy. Good morning to everyone. I’m pleased to report another excellent quarter in terms of the operating performance and financial strength of the partnership. Please turn to Slide 5. In the fourth quarter of 2017, we achieved our highest ever quarterly partnership performance results of revenues, EBITDA, and distributable cash flow. All three metrics show increases over Q3 2017 due to the acquisition of the Solaris, which closed on October 20. Compared to the fourth quarter of 2016, our record results were due to the acquisitions of the GasLog Seattle, the GasLog Greece, the GasLog Geneva, and the Solaris, all of which were accreted to our distributable cash flow and to our distributions per unit. We expect further growth in revenues, EBITDA, and distributable cash flows as a result of the full quarter contribution from the Solaris. The bottom row of the table shows the impact of the dry docking of the GasLog Shanghai on our coverage ratio which would have been a healthy 1.24x absent to the dry docking. Looking forward, we would note that we have three dry docking scheduled for 2018, two in the second quarter, and one in the fourth quarter and these are likely to have some impact on distribution coverage in the respective quarters. Please turn to Slide 6. This slide shows our track record of growing our annual EBITDA, distributable cash flow and cash distributions paid over the past three years. This level of growth in our cash distributions has been achieved through nine acquisitions from our parent, growing our fleet from 3 ships at IPO to 12 today. Please turn to Slide 7. This slide looks at our distributable cash flow and our cash distributions on a quarterly basis since our IPO in May 2014. The first chart shows the compound annual growth in our distributable cash flow which has been a strong 39%. On a per unit basis, this equates to approximately 10% compound annual growth as can been seen in the second chart. The chart on the right is based on actual cash distribution per LP unit, which has also grown at a 10% compound annual rate since our IPO in line with our stated guidance and in line with the growth we’ve achieved in our distributable cash flow, which we believe is an important discipline as we think about setting our distributions. As a result, our distribution coverage ratio has remained healthy, averaging a conservative 1.2x Since IPO. Turning to Slide 8. The top panel of this slide shows the 12 vessels comprising the partnership's fleet today, including the three vessels whose charters expire later this year. We continue to have multiple customer discussions focused on spot and term charters for these ships. The bottom panel shows the 11 vessels on multiyear charters owned by our parent GasLog Ltd. The charter period range from 2019 to 2029 and represent well over $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 as to our distributable cash flows. Turning to Slide 9 and the financial position of the partnership. On December 31, 2017, we have total available liquidity including revolver capacity of $199 million. After factoring in our recent Series B preferred equity offering, we would have had total available liquidity of approximately $310 million. In early January, however, we prepaid in full the $29.8 million junior tranche of the five vessel refinancing facility. Following this prepayments, all of our debt majorities through November 2019 will have been addressed. Over the course of 2017 and through January 2018, we have repaid $184 million of our debt, equivalent to 0.9x our 2017 EBITDA and more than our total cash distributions for 2017. Finally, as we discussed in last quarter, we are taking advantage of the dry dockings in 2018 to make investments in certain of the vessels requiring a further $24 million, leaving us with pro forma available liquidity of $256 million. This strong liquidity position combined with the ongoing proceeds of our aftermarket program, and growing debt capacity leave us well-positioned to fund future growth. Please turn to Slide 10, where we present our recent financing activities. As the top chart demonstrates, GasLog Partners has raised over $400 million in growth capital since the start of 2017, while simultaneously diversifying our sources of funding. In January, we raised approximately $80 million of common equity in a block transaction. This was followed in May by our first preferred equity offering which raised $144 million. Our aftermarket common equity program has raised approximately $63 million since its inception in May 2017, primarily through reverse enquiry. These units have been issued at an average price of $22.97 per unit representing a discount of only 0.5% to the volume weighted average price. Finally, we raised $115 million through our second preferred equity offering, which closed recently on January 17th. As a result, we believe that we have meaningfully diversified our sources of capital to fund our growth. Moreover and despite the amount of capital that we raised during the year, our cost of capital has declined steadily over time, which you can see in the bottom chart. The terms of our inter-company loans associated with GasLog are based on the terms at which GasLog issued its U.S dollar bonds in March of 2017 with a coupon of 8 and 7/8ths. These bonds are now trading at a yield to maturity of approximately 0.0725%. Similarly, our recent Series B preferred equity offering was priced 42.5 basis points inside our Series A preferred, which was issued only eight months ago. We strongly believe that our access to multiple sources of capital and our success in reducing our costs of capital reflect the increase in scale and maturity of the business and position us well for continued accretive growth. With that, I'll turn it back to Andy.

[Andy Orekar:]

Thanks, Alastair. Turning now to Slide 11 and the market for LNG shipping, which we believe looks attractive for the next several years to come. Since our last conference call there have been a number of positive data points that demonstrate the recovery is now taking place. The wave of new LNG supply is coming online largely as expected with production ramping up from new projects, particularly in the U.S and Australia. New demand for LNG continues to keep pace with this increase in supply with increased demand for gas in both new and existing markets, especially China. We have seen very few orders of new LNG carriers which we believe will result in a shortfall of vessels from 2019 relative to what the current order book will deliver. And in the shorter term shipping market, rates reach multiyear highs in December setting the spot market on course for its best start to the year since 2015. Turning to slide 12, which shows the new LNG supply coming online. During 2017, nearly all the projects which were due to come online is still on time with some ramping up production quicker than expected. In total, over 30 million tons per annum with new nameplate liquefaction capacity was added during the year, an increase of 11% over 2016. As we look ahead to later this year, approximately 25 million tons of new liquefaction capacity is scheduled to start off, an increase of approximately 9%. More than half of this production is anticipated to begin during the first half of this year, including Cameroon FLNG, Wheatstone Train 2 and Ichthys Train 1 and 2. In 2019 an additional 42 million tons of new LNG is expected to come online including trains at large U.S projects such as Cameron and Freeport which are expected to have a significant impact on ton miles as more gas is exported from the U.S. In addition, a number of projects in the U.S and elsewhere continue to progress towards FID to meet demand growth for LNG beyond 2020. Turning to Slide 13, this slide shows the increase in LNG imports by country last year as compared with 2016. The global LNG trade grew to 292 million tons during 2017, an increase of 12%. China posted the largest year-on-year increase in absolute volumes, importing our 12 million tons more in 2017 which represents an increase of 47% and overtaking South Korea as the world's second-largest importer of LNG. While South Korea is now the world's third-largest importer, its imports grew 11% year-over-year, an increase in absolute volumes of nearly 4 million tons. The increased demand for LNG witnessed last year has come from both traditional importers as well as emerging markets such as Turkey, India, and Pakistan. Turning to Slide 14. Out of the U.S., Cheniere has now completed 4 trains from the Sabine Pass facility and shipped over 240 cargoes since the project start up. More specifically, over 50% of these cargoes shipped during Q4 were delivered to destinations in Asia, an encouraging development as these long haul shipment expand ton miles and tighten the supply and demand balance for shipping. Using data compiled since exports from Sabine Pass began in early 2016, we can refer thus far that each 1 million tons per annum of LNG exported out of United States has driven demand for 1.76 LNG carriers significantly greater than the historic global average of 1.3 vessels per million tonnes. Turning to Slide 15, where we look at recent spot market developments. As can be seen from the chart in the bottom left corner, the number of spot fixtures in each quarter of 2017 was greater than those of 2016 with an aggregate increase of 22% year-over-year. The growth in spot fixtures led to higher utilization during 2017 compared to last year which when combined with higher rates underpinned the spot market that has strengthened at the right time for our 2018 redeliveries. We continue to have multiple customer discussions regarding these shifts. Turning to Slide 16. This slide shows the development of spot rate last year as compared to the peak years of 2011 to 2014 when headline spot rates averaged $100,000 per day and the trough years of 2015 to 2016 will may average approximately $35,000 per day. As can be seen in the figure, spot rates rose sharply during the fourth quarter of this year, stronger than anticipated demand for LNG, but eagerly from Asia, attractive long haul supply of LNG from production sources in the Atlantic to demand centers in the Pacific. This dynamic tightened the availability of ships in the spot market driving rates to over $80,000 per day by the end of December, their highest levels in three years. As we begin to exceed the winter months in the northern hemisphere, we expect spot rates to moderate in line with seasonal norms. Looking further ahead, limited orders for new building LNG carriers during 2017 provide a visible outlook for the supply of vessel, indicating expected shortfall from 2019 and supporting sustained recovery in shipping spot rates. Turning now to Slide 17 and a recap of our distribution growth history and our guidance for 2018. You can see on the far left panel we have now grown our quarterly distribution to over $0.52 per unit or $2.094 annualized. This represents a 10% compound annual increase since our IPO and a 7% increase on a year-on-year basis. We have consistently targeted a 10% to 15% CAGR in distributions from our IPO through the fourth quarter of 2017 and we're proud to say that we have met our guidance in every quarter as a public partnership. As we noted when we spoke last quarter and as shown on the far right panel of this slide, today we're reiterating our guidance of 5% to 7% year-on-year distribution growth for 2018. This guidance is supported by a full quarter contribution of the Solaris, our extensive dropdown pipeline and our continued access to capital, while also reflecting our 3 scheduled dry dockings and 3 vessels coming off charter later this year. Now turning to Slide 18. In summary, in the fourth quarter, GasLog Partners continue to execute its growth strategy. We delivered our highest ever quarterly results enabling us to increase our cash distribution for the 5th consecutive quarter, while maintaining conservative coverage. The partnership's acquisitions have delivered significant growth since IPO as well as year-on-year, and we believe 5% to 7% growth is an achievable target for 2018, particularly as our recent preferred issuance have substantially addressed the equity we need to meet this guidance through further accretive acquisitions this year. Finally, looking longer term, continued progress with new liquefaction, strong LNG demand and a lack of new vessel orders support a continued recovery of LNG shipping rates. Before we open the call for Q&A, I'd like to turn your attention to Slide 19 and the Investor and Analyst event we plan to hold in New York on April 10. Senior management of GasLog Partners and GasLog Ltd will provide an update on the group's business and strategy and I hope to see you all there. Operator, could you now please open the call for any questions.

[Operator:]

[Operator Instructions] And our first question is from Jon Chappell from Evercore. Your line is now open.

[Jonathan Chappell:]

Thank you. Good morning, Andy.

[Andy Orekar:]

Good morning, Jon.

[Jonathan Chappell:]

So a lot of good information there on the spot LNG market. But you mentioned in the press release that you haven't really seen any kind of follow-through yet in the time charter market. And as we kind of put that up against the views of 2019 or slightly being tighter than '18, how do you think about the redeployment of the 3 ships that come off of charter in 2018? I know you're obviously favoring long-term employment, but given that kind of 12 to 24 month outlook, would you look to maybe do 6 to 12 month contract of bridge until a tighter market later this decade?

[Andy Orekar:]

Yes. I think it's a good question. And I think the shorter answer is we would consider that. And as Alastair mentioned in our remarks, the ships that we have are renewing this year are subject to active discussion for both what I recall multi-month as well as potentially multiyear charters. And really for us, it's a balance of providing our investors with visibility of cash flow which is really our mission as an MLP, but also timing -- to some degree what you correctly point out is a market that should be stronger in '19 than it is in 18 and you could make the case for why it would be stronger in '20 than '19 as well. So I think for us it's a balance. I would certainly hope that we are able to put one of the three ships away for a multiyear period and then have a bit of optionality on the other two. I would remind you and listeners on the call that the GasLog Sydney is subject to an agreement with our parent to effectively guarantee the distributable cash flow from the vessel for up to one year after its charter ends in the fall. So we have a bit of optionality around that as well. So in short, I think we are -- we feel good about the market trajectory and certainly could imagine it being tighter in '19 than '18 and so we will have to juggle that as we think about these three redeliveries we have.

[Jonathan Chappell:]

Okay. That makes sense. And then just a follow-up, post preferred deal earlier this year, Alastair walk-through the liquidity situation that you have. We kind of went out and said that you’ve raised basically the equity that you need this year to do a couple of dropdowns which could get you to your distribution growth. Assuming two dropdowns this year, would that be accurate that you have enough equity this year and return to the market would only be kind of necessary if you had growth opportunities above and beyond kind of that 5% to 7% distribution growth rate?

[Andy Orekar:]

Sure. I think you’ve calculated it correctly. We feel that we’re very well funded for one dropdown and well on our way to two, which at our historical valuations would get us to our guidance. I think this year is one where we are hopeful that there might be a bit of a tailwind in the MLP market and a more constructive environment for pricing of our units and therefore yield. And so, I think we'll continue to use our ATM I think responsibly for reverse inquiry like we have seen the success we had in '17. So I think we would still consider adding assets to the fleet if we get to add some at an attractive cost. And I think over time, continue to want to grow our distributable cash flow per unit which we can then parcel out distribution growth from there as and when it's been awarded, I think that's something we as the management are very focused on. But the preferred has clearly given us a running start to meet the 5% to 7% guidance and we feel very good about it.

[Jonathan Chappell:]

Right. Okay. That's very helpful. Thanks, Andy.

[Operator:]

Thank you. And our next question is from Gregory Lewis from Credit Suisse. Your line is now open.

[Gregory Lewis:]

Yes, thank you and good morning.

[Andy Orekar:]

Hi, Greg.

[Gregory Lewis:]

Just following up on real quickly with Jonathan's question about the three vessels that are rolling off contract, maybe asking it a different way. Could you provide a little bit more color in terms of what sort of work they are doing? Are they tied to existing projects that could maybe see them actually get extended?

[Andy Orekar:]

Sure. So, they’re all currently on charter to Shell. So the nature of our charter is with Shell, Gregg, it's not project specific. It’s sort of charter to the corporate shipping entity. And so, they are working basically in every basin of the world depending on the day or the months in Shell's program of significant number of ships. So I think these are everything we have seen from Shell suggests that they’re sort of growing their shipping presence rather than shrinking it and so they continue to be very active ships for them. They could get now charter to a different customer because they are through their option period as we have the ability to have discussions with Shell and others about their employment. But they are not project specific in anyway and could be used by a lot of different customers.

[Gregory Lewis:]

Okay. Okay, great. And then I think you guys mentioned it in the prepared remarks, but there are some new capacity that is coming online, that it does -- that is project based, it doesn't look like it has vessels -- it looks likes there is room for incremental multiyear contracts to be fixed this year. If you just sort of just thinking about that as we are here sitting in January and the year is starting, should we be thinking that we could see an influx of multiyear contracts maybe if some of these projects maybe like a Cove Point or something else comes to market where there could actually be some opportunities to lock these vessels up on maybe some other types of projects that might be a little bit off the radar?

[Andy Orekar:]

Sure. I think the short answer is yes. The -- if you kind of look at the term market here in recent years, it's largely comprised of the folks who are offtakers of the U.S and Australian projects and no surprise they are. And so that group, particularly some of the projects that are now starting up in '19, have not fully contracted their shipping requirements. You mentioned Cove Point. I think Cove Point is reasonably well covered by a couple of offtakers, but there are others, again I would say looking a bit further out into '19 who still need shipping and are going to be arranging that here in '18. So I think that remains an opportunity. I also think we are going to continue to see folks take ship to may want a new building in '19 or '20, but it's simply waited too long to have order that that ship and simply can't get it today. So I think we will continue to see beyond the water ships that’s bridging vessels to some of these new buildings in the first part of the next decade.

[Gregory Lewis:]

Okay, perfect. Thanks for the time, gentlemen.

[Andy Orekar:]

Thanks, Greg.

[Operator:]

Thank you. And our next question is from Randy Giveans from Jefferies. Your line is now open.

[Randy Giveans:]

Hey, guys. Thanks and congrats on the record quarter there. So few questions on looking at the timing of the next dropdown and the ideal dropdown contract duration of the last 3, I think the Greece had about nine years remaining, the Geneva about six years remaining, the Solaris a little less than four years remaining, so if you can touch on that.

[Andy Orekar:]

Sure. Randy, it's Andy here. Well, I guess, to answer your first question timing, we are very focused on closing our next dropdown here in the first half of the year. So that's something with Alastair having raised the preferred so successfully we are very focused on that as we speak. In terms of the contract duration, we're lucky, we’ve got nine ships in our pipeline that all have five years or more in terms of remaining fixed charter period. And so, frankly anyone of those will be extending our average chart duration and it's a modern ship that we think will be very competitive for years to come. So I think that work is ongoing, but it'll certainly be a ship with five years or more left on its charter.

[Randy Giveans:]

Perfect. Okay and then looking at the distribution coverage ratio and I know 4Q is 1.18 or so, cumulative since IPO has been, basically north of two. I know you have guided to kind of 1.125x coverage in the past, is that still a fair guidance going forward?

[Alastair Maxwell:]

Randy. Hey, its Alastair here. I think we're likely to see in 2018 in particular with a three dry dockings there is going to be some impact on the coverage ratio. We will see that in particularly in Q2 and Q4 as I mentioned in my remarks.

[Randy Giveans:]

Okay.

[Alastair Maxwell:]

So I think for sure we are going to be somewhat on the historic run rates since the IPO and depending on the quarter we may also be a little bit under the minimum 1.125.

[Randy Giveans:]

Got it. Okay. And then lastly you touched on in the past, obviously GLOP's currently at 25% IDR split, if you say 7% growth to distribution, you're pretty much right at 2.25 annually which is basically the mark of the 50% split. So any updates there with either retaining the table on the IDRs or other options for that?

[Andy Orekar:]

Sure. So I think we have said this before, but I think I will just repeat it for the benefit of the call. And Alastair, I thought took you through a very thoughtful recap of all of our efforts to reduce our cost of capital at the partnership level and clearly the IDRs and that the GPK play a role in that effective cost of capital. So it's something you can imagine we are extremely sensitive to and focused on. I think having said that even with the growth we have had last year the IDR take right now is about 4%. So it's a relatively small number which doesn't mean it is not important to us and frankly it will be a bigger number in the 50% tier which is where we are all -- we all know we are heading. So it's something that both GasLog Partners and GasLog Ltd management are in active discussion on and we expect to address before it becomes a drag on our growth, but I would just point out that in our view at least -- any drag today is really quite minimal. So we think this is the year to focus on it and address it before it becomes a problem.

[Randy Giveans:]

Sure. That's fair. [Indiscernible] getting some questions on it, so I want to make sure I'd ask and -- I will update the call or so. Thanks again. That’s all I have.

[Andy Orekar:]

Thanks, Randy.

[Operator:]

Thank you. And our next question is from Spiro Dounis from UBS Securities. Your line is now open.

[Spiro Dounis:]

Hey, good morning, Andy. Good morning, Alastair.

[Alastair Maxwell:]

Good morning.

[Andy Orekar:]

Hi, Spiro.

[Spiro Dounis:]

Just wanted to go back to rate environment, if we could. So spot rates obviously pretty strong. And I’m just wondering if there is an data points out there that maybe can help us triangulate what that would mean to a 3 to 5 years charter what that might look like on a TFD today and how long that being -- you mentioned $24 million in enhancements on the vessels. What do you think that translates to? Are you able to quantify? Does that mean a higher rate -- charter rate you guys can get or is it just increased the likelihood of chartering that vessel?

[Andy Orekar:]

Sure. So just to take the first part of your question, Spiro, it’s Andy here. I think the spot market of course has been very constructive here for both TFDs and steam vessels at the end of last year and then to start of the year. I think the term market, of course depends on the customer and the owner, but I think our view is that something for the ships that we have on a multi-year basis would still be somewhere in the 60s. And I think that is something that we're sort of planning around. Of course, the balance of that may change as the spot market stays elevated for a longer period of time. But I think for the current environment and in our customer discussion it's in and around that level. The second part of your question in terms of the vessel enhancements, you kind of hit the nail on the head. The concept here is to effectively lower the unit freight costs for our customers relative to the vessels sort of status quo condition. And in so doing we would hope to achieve arguably a slightly higher rate because of the unit freight cost benefit. I think the practical matter is those enhancements will make our ships more attractive than, say one of our competitors and so it might be hard to measure the sort of rate with and without, but it might mean that our ships get fixed before one of our competitors would. So it's -- it's hard to perfectly quantify it, but we think it's helpful addition to the renewals that we are pursuing right now.

[Spiro Dounis:]

That's good color. That's really I was looking for on that. And then just longer term, how do you think about funding growth beyond this year? We have seen the broader move in the MLP space towards running higher coverage ratios and relying less on public equity and obviously you guys have not any issues raising capital to date, but just how do you view that model longer term? Does it make sense for you?

[Alastair Maxwell:]

Spiro, so I think -- look, first of all, I think in terms of 2018 we feel we are in a very good place in that for anything on top of where we are now, if you like it, is nice to have. We have -- we do receive and I think we will continue to receive inbound interest from people in looking to help us fund further growth in the future, whether that is public or private, whether that is equity or debt, or combinations of the two, I think we are in the full term position of having quite a few options and be able to choose from those options. But I don't think we feel we are under any significant pressure and we will continue to be selective and we will continue to look to try to keep the cost of capital heading down in the right direction in order to be able to deliver more recreation and more cash flow to unit holders. So I think multiple options, continue to work on all those options, but don't feel we are in an immediate hurry given where we sit today and given the -- where we are vis-à-vis our guidance for '18.

[Spiro Dounis:]

Got it. That makes sense. That's it for me. Thanks, guys.

[Operator:]

Thank you. And our next question is from Ben Nolan from Stifel. Your line is now open.

[Ben Nolan:]

Yes. Thanks. Hey, Andy. Hey, Alastair. So my first question I guess relates to how you came to your level of confidence to keep the distribution growth guidance in place there, particularly, you talked about the possibility of perhaps operating a few of those vessels coming off contract this year on shorter time basis? And then, also in 2019 there is a inflow of the steam power ships that are coming off contract, where I assume -- the guidance would also imply that you intend to maintain or increase distributions even further. So, is it a function of maybe growth and cash flow through dropdowns that really gives you that level of confidence or your outlook in the market or how you really feel firm in that guidance level?

[Andy Orekar:]

Sure. I mean, I would say, Ben, it's just -- I guess, just to clarify one of your points that I think the 5% to 7% does just apply to 2018. So we are not really commenting on '19 for now, but I think it's really a combination of several of those factors you mentioned. I think we can look at the capital that we raised and been able to raise to fund further fleet growth, which of course we do at a -- we will only perform at a level that's accretive to our DCF per LP units where we expect our ships to be earning as we’re rolling off here in '18 whether that's in a new term charter or in spot market. And then also being sensitive to dry dockings which are once every five year events, but something that we need to manage through. So I think it's really the combination of those factors plus really getting the full-year benefit of acquisitions that we completed last year, all of which were nicely accretive. So taking those various pluses and minuses and ultimately -- particularly with the capital that we raised earlier this month, we feel quite good about reaching that guidance range. And as Alastair said it's anything and above that would be kind of a nice to have at this point.

[Ben Nolan:]

Yes, okay. That's helpful. And then as it relates to the market, Andy, and just how you view the market developing, one of the things that would appear has been pretty helpful to the current level of strength that we see is that there was a large number of vessels that were supposed to have been delivered last year that weren't delivered, I think in north of 20. And I think one of the concerns that I have heard from investors, what if all those materialize this year in addition to what was also supposed to come to the market. Do you have any sense of whether or not those delays will sort of translate into incremental delays on 2018 ships too or how you’re thinking about kind of the backlog of those vessels being delivered into the market here?

[Andy Orekar:]

Sure. I think you are certainly correct. There where a number of vessels who were scheduled to deliver in late '17 that were pushed into 2018. We ship owners love to do that because then we can call them a 2018 ship forever. But really there is an interesting dynamic as these ships as and when they compete in the spot market is that these new ships need a gas up and cool down and first cargo and siren inspection and ultimately there the unit freight cost benefits that they have for longer journeys are less relevant and frankly less competitive than you would have for TFD or even a steamship in the same market. And so, one of the interesting phenomena we have seen so far here in January is actually steam rates have moved quite a bit, because those ships in the Asia basin have actually been winning a lot of business against some of these new buildings that you mentioned. So part of it is clearly those are the most modern propulsion [indiscernible] boil off technologically superior ships for longer trades. But in the spot market they are not necessarily more competitive than the TFD or steamships you typically think of. So I think that dynamic -- I don't want to undersell the importance of more ships hitting the water, but I think the typical benefits one associates with those ships are a little less relevant in the spot market than they are in, say at seven-year charter basis.

[Alastair Maxwell:]

Andy, just adding to that that have been that the vast majority of the ships which are being delivered are being delivered into contract. So I think in the first half of this year its somewhere a little bit north of 40, is the total number of deliveries that are expected. I think something like 90% of those have contracts and therefore unlikely be to be competing in the spot market.

[Ben Nolan:]

Okay. That's helpful. Thank you both. And then, lastly, and I will turn it over. You had mentioned the -- and I think in the past you’ve talked about sort of the enhancements that you're making to some of the vessels that are in dry dock. I was just various if you could -- is that a re-liquefaction that you're installing or maybe talk through what exactly you're doing that you feel like can add a competitive advantage?

[Alastair Maxwell:]

You know that it, Ben. It’s reliquefaction. And as Andy was saying earlier, it has all the benefits that we have been talking about in terms of bringing the boil-off ratio down, and in terms of increasing the flexibility of the ships, in terms of their ability to go at different speeds, etcetera.

[Ben Nolan:]

Okay, great. Thank you.

[Operator:]

Thank you. And our next question is from Chris Wetherbee from Citigroup. Your line is now open.

[Unidentified Analyst:]

Hello. This is William on for Chris. Thank you for taking my question. So I just want to follow-up on a previous question that was asked regarding your confidence in the guidance range. So I believe that you said you're expecting a potential re-charter rate in the 60s based on your current view of the market. I'm just wondering if that's factored into your distribution guidance, because it seems like those vessels that are expiring in 2018 have much higher charter rates currently than those levels. So it seems like you kind of take a pretty big hit for having to re-charter it down to somewhere into the 60s?

[Andy Orekar:]

Hi. Yes, its Andy here. Yes, so those expectations are factored into our guidance.

[Alastair Maxwell:]

William, its Alastair. I will just add that as Andy said we have 19% charter coverage for 2018. And if you would factor in the agreement between GasLog Partners and GasLog Ltd, around the Sydney, that number could be even higher than that. So this is a -- it's a marginal impact in 2018.

[Unidentified Analyst:]

All right. That's very helpful. And just I got a follow-up question. In terms of the reason increase in spot rates, I’m just wondering how that is kind of impact your discussions about -- with your current charters about them exercising their optionality period about extending these charters?

[Andy Orekar:]

Sure. So as I mentioned the three ships this year that the option that Shell held them and have now expired. So we are free to charter them to anyone else or Shell as well. The spot market firming is clearly helpful for our term discussions and I think if you think back to a year-ago and the spot market for TFDs, its about 48,000 a day and here we are at 78, it certainly -- it sets a very different tone for our ability to term ships up. Having said that, I think we have -- we are still in the early days of the recovery here and I think the expectations will be as a spot market stays elevated, you will see a greater desire to term ships, but it's still a relatively recent recovery in spot rates here in the past 3 to 4 months or so.

[Unidentified Analyst:]

All right, great. Thank you very much for taking my questions.

[Operator:]

Thank you. And our next question is from Fotis Giannakoulis from Morgan Stanley. Your line is now open.

[Fotis Giannakoulis:]

Yes. Hi, gentlemen and thank you. Andy, I would like to ask you about the upcoming dropdowns and you have plenty of capital right now after the preferred. How much debt are you considering of putting on each of these dropdowns? In the past you have done anything from 116 to 155 and how does this -- that changes if you fund this acquisitions with preferred equity?

[Andy Orekar:]

Sure. So, Fotis, we’ve -- as you’ve said, we have sort of a range of debt-to-equity balances over time on the dropdowns. Our general thinking is that we dropdown assets at around 60-40 debt-to-equity and then of course pay down debt over time today sort of on the consolidated balance sheet for partners we're at just over 50% debt-to-equity. I think our general strategy for that won't change. I will say and Alastair touched on this, our balance sheet is now a $2 billion plus balance sheet with a -- frankly significant amount of debt capacity that we have not used and I think if there was an opportunity for either interesting third-party acquisition or an attractive debt financing, we certainly have the headroom to consider it. But I think that’s sort of a ordinary course number for your model, I think, sort of 60-40 then equity is generally how we will approach it.

[Fotis Giannakoulis:]

Thank you, Andy. And can you also commend about the upcoming -- the 2019 refinancing of the Citibank facility? Do you expect to see any change in the debt repayment or your modeling right now indicates that we should see similar amortization profile?

[Alastair Maxwell:]

Fotis, this is Alastair. Look, first of all, it's a long way out the end of 2019, but that doesn't means that we're sitting still. We are actually starting to do some reasonably detailed work around what our refinancing options might look like and we are starting with a blank sheet of paper and looking at what is the right mixture of bank versus bond, amortizing versus non-amortizing, secured versus unsecured, et cetera, et cetera. So I think it's way too early to give you any details. I’m not sure, we even have them yet, but I think that we’re thinking about it and we are looking at multiple options and we will do what we think is take the best option when the time comes.

[Fotis Giannakoulis:]

Thank you, Alastair. One last question about the market. We saw the first long-term off-take from the U.S after -- over three years earlier this month. I'm wondering if you see this as a sign of U.S LNG volume being back or more sanctioning of new projects? And if there are any differences in the dynamic of the market that they can lead to more demand for vessels and additional new building or just backed by long-term contracts?

[Andy Orekar:]

Sure, Fotis. Well I think we were of course pleased to see that and I think I would expect that you will see another FID at least out of the U.S here hopefully in the first half of the year. And I think it's an interesting fanatic phenomenon on where you’ve got a trader taking a term cargo deal for many years and we have seen this play out in some other regions, but to have it here in the U.S., I think speaks to the level of the competitiveness of U.S LNG. And I think the more that folks are buying gas on a long-term basis, of course the need to understand and fix their shipping costs to some degree, it is more relevant as well. So we hope that this is a sign of more of long-term offtakes to come, and I think it's clearly creating a new potential customer for shipping, it's in fact you have got traders taking long term cargo deals as well as majors and other end-users of the gas. So something we are very pleased by for sure.

[Fotis Giannakoulis:]

Andy, is there a way that you can quantify how many vessels do the existing projects under construction need to secure either from the spot market or from additional new buildings and what will you see to be the opportunity of shipping demand from these new potential FIDs like the one that you mentioned that is expected to come in the first half of this year?

[Andy Orekar:]

You know it's probably -- frankly, Fotis, you might have a better way of estimating than we do in terms of FIDs to come. I think what we look at as we see very few projects getting sanctioned for liquefaction output after 2020 and ultimately growing demand trends that we took you through in the presentation. And so, I think that the bottom line we feel is the market should be short shipped fairly significantly by 2020 just on what is taking FID today and then for all the reasons we have discussed on the demand side and some of the recent deal that you just mentioned, there should be an opportunity for more FIDs from the U.S for gas production in '21, '22, and beyond. So it's hard for me to cut it in terms of what that means for additional ships, but we think the market is going to be short even with what we can just see today. So clearly one of the reasons we’re bullish on '19, '20, and beyond.

[Fotis Giannakoulis:]

Thank you very much for your answers.

[Andy Orekar:]

Thanks, Fotis.

[Operator:]

Thank you. And our next question is from Michael Webber from Wells Fargo. Your line is now open.

[Michael Webber:]

Hey, good morning guys. How are you?

[Andy Orekar:]

Hi, Mike.

[Michael Webber:]

Hey. Good morning. I will keep it quick, it’s been a long call. I wanted to jump back towards, I guess, the way you guys think about the model now and you kind of in an interesting position because it's been more a -- bit of a valuation disparity that’s developed between GasLog and GasLog Partners on, at least on a NAV basis to where you got a pretty significant premium at the parent. So I guess -- my first question was going to be does that shape the way you think about funding the business and if not now, how long would that need to persist you think before you would think about maybe kind of altering the way you fund forward growth? But I guess maybe the more germane way to kind of to tackle it is, if you think about the charters you are rolling of next year, at one point you have talked about for this year rather, you talked about assets swaps as a way to kind of fortify the distribution. The parent is clearly getting credit for spot exposure right now and the MLP is clearly not. Is it fair to say swap assets, swaps to the parent -- between the parent and the sub are still on the table and what would need to happen for you guys to actually act on that?

[Alastair Maxwell:]

Mike, its Alastair. I don't think that anything is off the table today. I think we were spending lot more time talking about possible ways in which the parent GasLog Ltd could support the partnership during the course of 2017 and probably before my time as well, just given what the state of the market was at that time, I think we all feel much more confident that the recovery we have been talking about for sometime is now coming and the market is tightening and given the customer discussions that we are having and that we have referenced on the call. We continue believe that we will be able to put the partnerships which are redelivering in 2018 back on the charter whether that happens immediately or whether that happens over the course of the next year or two TBD. But I think that options around swapping ships is still something which is on the table as we felt it would be advantageous to both parties to do it.

[Michael Webber:]

Okay. Maybe I guess the way -- a better way to ask you would be that just given the fact the way those -- that spot tonnage is getting value to the parent, would you make that decision almost independently of whether or not you actually need to do it to support the distribution? It seems like you would make sense for both sides regardless of whether you need to do it with the distribution?

[Alastair Maxwell:]

I think you’re going to be capped with cycles, Mike. And today I agree with you. I think that the spot exposure has been helpful and we’re seeing that in terms of how those ships are trading in the market today. But the life of a ship is 30 years or 35 years and we need to think about that kind of timeframe and not just what the next 2, 3, 4, 5 years might have like.

[Andy Orekar:]

I think I would also say that the …

[Michael Webber:]

I’m not saying its swapping on for steam, I’m been talking like for like to be clear. To be clear, yes, but I hear you there, but just like for like, but okay.

[Andy Orekar:]

And I think Mike, just -- you made an interesting comment on valuation. Clearly we’re all delighted with the valuation of GasLog Ltd than the recent reflection that it's taken. I think part of it is of course the sort of cost of capital and the other is sort of the reality of the depth of the market. And I think the MLP market while it has some ups and down, I think clearly GasLog Partners have sort of an addressable investor base that seems to be strengthening. And so I think financing growth of the MLP level still as an option is a really nice alternative for the parent -- and sort of an extra sort of tool to have in the toolbox.

[Michael Webber:]

Sure. Pretty sure that investors won't mind the extra cover, but I can take it off-line. Just two more and it's been a long call, but one, you talked about there is a bunch of different ways before, but just in terms of what you do have rolling off into the market now like what is the realistic applicable discount on a four-year vessel in the market right now from a charter rate perspective?

[Andy Orekar:]

In terms of rate?

[Michael Webber:]

Yes, on a percentage basis.

[Andy Orekar:]

In other words what will be the new building -- what's the discount of an on the water vessel versus [multiple speakers]…?

[Michael Webber:]

Relative to prompt?

[Andy Orekar:]

Yes. Well I think as I mentioned earlier, I think the term market for on the water vessel I think is in the 60s. And I think that the new building rates are a bit more of a function of what people are paying at the yard, which in our view feels like it had a cyclical low rate now. And so the two are, I guess, right there they’re a little bit hard to compare because that sort of new building rate is not really competing for a charter here in 2018.

[Michael Webber:]

Sure. Sure. Okay. And then finally, Andy, just in your deck you referenced the $63 million in ATM proceeds, which kind of stands out when you kind of fill it up against the different capital you guys have raised. And you mentioned something I think in your remarks around saying pretty solid reverse inquiry. Did you mean that in the context it’s just kind of a typical ATM program or would you say you're seeing interest in larger than normal blocks associated with that ATM? I just want to make sure I understood that correctly.

[Andy Orekar:]

Sure. No, it was in the context of the ATM, but of course we have the flexibility to do something as large as the ATM would have capacity for and I think today remaining we got about 80 million give or take. So the -- of that $63 million we sold nearly all of that has been 2 million, 3 million, 4 million, 5 million, maybe up to 10 million blocks that we have been able to get off basically at the market price as Alastair stamps would show you. So you kind of add all those up and it turns into $63 million and we’d be cautiously optimistic that we could continue to do that. We are realistic about our liquidity. We are not one of these big MLPs that can be selling day in and day out and not move the stock price. So we really view it as a selective tool and we want to use it responsibly.

[Michael Webber:]

Got you. It makes sense. All right. Thanks for the time, guys. I appreciate it.

[Andy Orekar:]

Thanks, Mike, and congratulations on the new arrival.

[Operator:]

Thank you. [Operator Instructions] At this time, I'm showing no further questions. I would like to turn the call back over to Andy Orekar, CEO for closing remarks.

[Andy Orekar:]

Thanks very much. Thank you everyone today for listening and your continued interest in GasLog Partners. We certainly appreciate it and we look forward to speaking to you next quarter. Thanks again.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.