Teekay LNG Partners L.P.
Q3 2017 Earnings Call Transcript

Published: 9 Nov 2017

[Operator:]

Welcome to the Teekay LNG Partners' Third Quarter 2017 Earnings Results Conference Call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. [Operator Instruction] And as a reminder, this call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to Mr. Mark Kremin, Teekay LNG Partners' President and Chief Executive Officer. Please go ahead, sir.

[Emily Yee:]

Before Mark begins, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the third quarter 2017 earnings presentation. Mark Kremin and Brody Speers will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the third quarter 2017 earnings release and earnings presentation available on our website. I will now turn over the call to Mark to begin.

[Mark Kremin:]

Thank you, Emily. Good morning everyone and thank you for joining us on the third quarter of 2017 investor call for Teekay LNG Partners. I'm joined today by Brody Speers, Teekay Gas Group's CFO. Turning to slide three of the presentation, I will review some of Teekay LNG's recent highlights. For the third quarter of 2017, the Partnership generated distributable cash flow or DCF, of $40 million, and cash flow from vessel operations or CFVO of $107 million. We continue to generate stable cash flows that were in line with our expectations. However, the Partnership's results for the quarter were again impacted by collection issues related to our six LPG carriers charter to I.M. Skaugen. We were actively pursuing alternatives for these vessels to improve their earnings potential, including potentially bringing the commercial management of the vessels in-house to Teekay and focusing our efforts on capitalizing on small scale LNG opportunities that exist in the market. During the quarter, the Partnership generated DCF per limited common unit of $0.50 per unit resulting in a strong distribution coverage ratio of 3.5 times. I'm pleased to report that in October and November, the Partnership took delivery of three newbuild LNG carriers all of which immediately commenced charter contracts with Shell ranging between six and 20 years. This included two wholly-owned MEFI LNG carriers and a 30% owned TFDE LNG carrier, which I will touch on in more detail on the next slide. We continue to execute on financing our newbuild products and have recently completed $327 million in new debt financings related to a floating storage unit or FSU, for the Bahrain regasification project and one MEGI LNG carrier newbuild for BP. I will touch on these financings in more detail later in the presentation and I would also like to refer you to our appendix where we have provided full details on the status of our newbuilding financings and our 2018 debt maturities. Lastly, we have once again demonstrated access to capital markets and further strengthened our balance sheets through our recent $170 million preferred equity offering completed in October 2017 including $20 million sold pursuant to the exercise of the underwriters' overallotment option. Turning to slide four, I will highlight the Partnership's recent LNG vessel deliveries, which occurred in October and November and immediately commence charter contracts with Shell. Two of the vessels, the wholly-owned Macoma and Murex commenced six and seven-year term period plus option period charter contracts upon delivery. The remaining vessel, the 30% owned pan-Asia commenced its 20-year charter contract with Shell upon delivery. We expect these vessels to positively contribute to the Partnership's cash flows starting in the fourth quarter of 2017. The two wholly-owned MEGI LNG carriers will trade as part of Shell's global shipping portfolio, while the pan-Asia will service the Queensland Curtis LNG project in Australia. Turn into slide five, we have provided an update on the Yamal LNG project. As a reminder, the Partnership owns a 50% interest in six ARC LNG -- ARC 7 LNG carriers and wholly-owns one conventional MEGI carrier, all charter to the Yamal LNG project under long-term charters. The Yamal LNG plant continues to move ahead according to schedule and the commissioning for the first train is now underway. The project sponsors have announced they expect to lift the first LNG cargo on the [Indiscernible] Christophe de Margerie this month and remain ahead of schedule for bringing online the second and third trains, which will result in a total production of 16.5 million tonnes per annum. Teekay LNG's first ARC 7 vessel is scheduled to deliver in January 2018 and has now successfully completed sea trials and gas trials. Our second ACR 7 vessel scheduled to deliver in November 2018 has been launched and together, the two were officially named last month in Korea. Overall, we're pleased with how the construction of the -- how these -- of these specialized vessels is going and how the overall project is coming together. Lastly, on the financing side, together with our joint venture partner China LNG Shipping or CLNG, we continue to make progress on the debt financing of our six ARC 7 vessels and are nearing completion of this facility. Turning to slide six, we look at the developments in the LNG shipping market. After growing by 7.5% in 2016, global LNG export growth has been even stronger this year increasing by approximately 11% in the first nine months of 2017 compared to the same time last year. The increase in global LNG exports continues to be driven by new export projects in the United States and Australia. In total, the increase in LNG exports this year will be the second largest annual growth on record in the LNG industry. Furthermore, we expect that export growth will remain strong through year end and into 2018. In total more than 30 million tonnes per annum of new LNG export capacity is scheduled to come online from the fourth quarter of 2017 through the end of 2018. This includes the recent start-up of the Wheatstone project in Australia and the fourth train at the Sabine Pass project in the United States. These projects will soon be joined by the start of export from Cove Point in the U.S. and Yamal LNG in Northern Russia. Turning our attention to demand, approximately 80% of the net increase in LNG supply this year has been consumed in Asia. This robust growth in Asian LNG exports demonstrates that global LNG demand is keeping pace with supply. Import growth in China has been particularly strong with Chinese LNG imports increasing by approximately 40% per year in both 2016 and 2017. China's import growth is expected to continue and EIA projects that China will surpass South Korea next year to become the world's second largest LNG importer. Import growth in other emerging LNG markets in Asia such as Pakistan and Thailand has also been robust. The combination of an increase in global LNG exports and some arbitrage opportunities due to higher LNG prices, particularly in Asia due to gas shortages, has supported short-term LNG shipping rates. As of November, brokers who are reporting short-term charter rates which were at their highest levels in almost three years. We are encouraged by these recent trends and see it as another sign of an improving LNG market that will benefit Teekay LNG in both the short and medium terms. Turning to slide seven, we take a look at the medium term market fundamentals. We continue to expect that annual LNG trade will increase faster than fleet supply from 2017 onwards. Orders for newbuild conventional LNG carriers remain low with only 13 firm newbuild orders being in place since the start of 2016. With LNG shipyards now booked through 2019, this provides good visibility of declining LNG fleet growth in the medium term. In contrast, we expect global LNG exports will continue to increase strongly. 10 new LNG export projects are currently in construction and are scheduled to start or have recently started between the fourth quarter of 2017 and the end of 2020. In total, we expect global LNG exports will increase more than 30% above 2016 levels by 2020. As a result, we expect that higher fleet utilization will drive an ongoing recovery in LNG shipping rates. In summary, we're encouraged by the recent uptick in LNG shipping rates as new export capacity comes online. In the medium term, we continue to expect that LNG trade will increase faster than fleet supply leading to an ongoing improvement in LNG shipping market and LNG vessel earnings. Turning to slide eight, we have provided an overview of the Partnership's industry leading portfolio of newbuild LNG vessels, all of which will commence charter contracts averaging 18 years in duration upon the duration -- upon excuse me, upon the delivery between now and 2020. Including the first three of these vessels which recently delivered and commenced their charter contracts to Shell, the Partnership has a total of 11 LNG carriers delivering by the end of 2018 and 18 by 2020, plus a 30% interest in the Bahrain regasification terminal. With our recent deliveries, the Partnership has now commenced a period of high growth as we take delivery of 11 LNG vessels by November 2018 and expect these vessels to contribute approximately $160 billion an annual run rate CFVO. Adding to this our expected vessel deliveries in 2019 and 2020, we expect our entire committed order book to contribute approximately $250 million an annual run rate CFVO growth. As illustrated on the right hand of the slide, we continue to progress the debt financings for a new build vessels and have recently completed $327 million in new financings to fund the FSU for the B -- for the Bahrain regasification facility and 1 MEGI LNG carrier chartered to BP. Again, full details of the status of our newbuild financings as well as an update on our 2018 maturities can be found in the appendix to this presentation. Finally, the Partnership is focused on increasing distributions to unitholders at the appropriate time and in a sustainable manner. In this regard, our current thought process has not changed from prior quarters where we continue to focus on achieving key milestones including completing all the long-term debt financing of our newbuild vessels, while obtaining sufficient comfort on refinancing our 2018 bond maturities. We expect to provide more guidance on distributions around the second half of 2018 and in the meantime focus on completing our financings and executing on our newbuilding growth projects. In summary, we continue to progress our newbuild financings and are beginning to transition from project execution to operations on our committed newbuild vessels. We believe Teekay LNG's near-term visible cash flow growth and portfolio of long-term charter contracts places the Partnership in a market leading position and the LNG shipping sector. Thank you all for joining us on the call today. Operator, we are now available to take questions.

[Operator:]

Thank you. [Operator Instructions] We'll go ahead with our first question from Michael Webber of Wells Fargo. Please go ahead.

[Michael Webber:]

Hey, good morning, guys. How are you?

[Mark Kremin:]

Good morning. Mike.

[Michael Webber:]

Hey Mark just wanted to -- just going to start off on a rate just considering how topical it is. I know you don't have a ton of exposure to the market but certainly seems like we're firming at a level that we haven't seen in three or four years. And just curious when you think about the next year to 18 months, you know do you think that this level of tightness or something kind of call it you know at or around the industry-wide breakeven if you kind of put that at 50,000. Do you think that's sustainable from here on out? Or do you think we're in a scenario where it's kind of a similar pattern to last year maybe a bit more amplified and a real like in a sustained multi-year recovery in spot rates would be more of a Q4 2018 event. And I realize again you don't have a ton of leverage to it but it's a liquid proxy for residual value risk, a rollover risk really, so hence the interest.

[Mark Kremin:]

Thanks Mike. As you say we don't have a lot of exposure but we have enough to I think understand what's happening in the market. So, with our joint venture particularly with Marubeni 50

[Michael Webber:]

That's helpful. Just -- in terms of -- I guess in terms of your balance sheet and kind of juggling you know the refinancing that you guys are looking to finish off and kind of the certainly a pretty conservative posture when it comes to redistributing cash flow. Now -- I'm just curious how you balance that with additional growth. It certainly seems like the tender market is picking up. And if you're looking to address you know your cash commitments when it comes to distribution in the back half of 2018 which again you've been pointing to for a while. I would certainly expect the tender environment to be firm through that period to the point where you're probably looking at redeploying or deploying new capital on a new term business hopefully by some point in the next year. I'm just curious when you think about that target of the back half of next year to address this. Is that inclusive of the idea of actually spending new money on a new period tonnage?

[Brody Speers:]

Hi, Mike. Yes I think your question, we've certainly been seeing more activity in the tender market and as we said in past quarters we kind of selectively looking at participating in some of that. So, when we look at our balance sheet and the actions we're taking and we're certainly considering some possible participation in future tenders. And you know some of the ways to finance those. Obviously we have a strong equity position now. The -- we've shown access to the preferred capital or preferred equity market and also through preferential financing firms from yards that are available. So, we think it's manageable to you know continue on with their plan and also selectively participate in future tenders.

[Michael Webber:]

Right. To do so is not mutually exclusive. So, around that Brody one more and I'll turn it over -- just kind of -- just thinking about narrow hurdles for you guys getting comfortable from a cash perspective you know you could have been laying out your commitments and your refinancing targets for a couple of quarters now on things on like 11 which is helpful. And I'm just curious on the previous slide, your existing financing and what's been drawn and what has been drawn. How much of that remaining undrawn capacity can only be drawn upon delivery and I guess the right because what I'm getting at is in terms of maybe over equitizing assets up to delivery, kind of upon the broader release of the financing is there a bigger cash commitment there than would otherwise be implied by simply looking at what you have financed, I guess a bigger short-term cash commitment?

[Brody Speers:]

No. ZIN terms of your question, no. Pretty much all of the undrawn financings we show they're available to be drawn for yard installments as well as delivery. So….

[Michael Webber:]

It's all in lock [ph] step?

[Brody Speers:]

Yes, yes.

[Michael Webber:]

Okay. That's helpful. All right. I will -- I'll stop there and turn it over. Thanks guys.

[Mark Kremin:]

Thanks Mike.

[Operator:]

Your next question will come from the line of Spiro Dounis of UBS Securities. Please go ahead.

[Spiro Dounis:]

Hey, good morning, Mark. Good morning, Brody.

[Mark Kremin:]

Good morning Spiro.

[Spiro Dounis:]

Just wanted to start-off on deleveraging just trying to get a sense if there's a specific goal or strategy at this point to delever the balance sheet and it sounds like some of the preferred proceeds maybe reduce the help in that process. So, I guess I'm just trying to get a sense there, is there a plan to do more of that or is the plan really to just delever over time as the cash flows ramp-up?

[Brody Speers:]

Hi, Spiro. Yes, obviously the recent preferred equity was a big step towards the balance sheet and directionally speaking that is our intent is to delever over the next few years and that's mainly driven by we have a very large order book and that puts some leverage stress on the balance sheet. But what we see is as these vessels start to delevering cash flow, there will be no significant natural delevering process that will occur between kind of now and 2020 when all the ships hit the water. So, we see our leverage kind of naturally declining overtime and the other factor is on our existing vessels there's a few cash flow drags that we've mentioned in terms of Skaugen and we're also seeing some increases in the short-term LNG market. And so those -- as those things normalize over the next few years we think that also help the natural delevering process between now and 2020.

[Spiro Dounis:]

Got it. Got it. And then just follow-up on one of my questions around the tenders. I guess, you've seen an overall move towards more flexibility in the LNG space and also shorter terms. I am just wondering in sort of what you see and are looking to participate in? Are you seeing on the LNG tenders side just more flexibility being asked on the counter-party or any sort of shortening in the tender that you normally seen?

[Mark Kremin:]

We are Spiro. We are seeing a fair amount of one, two, three year types of tenders right now. This is actually different from even earlier in the year where we've just seen void's charters. So, things have picked up but we do see a lot of relatively short-term time throws. Some of these, we've actually been passing on because they have forward starts and people are trying to understand the market and where it's going to be in a forward place just as Mike mentioned, where is it going to be in Q4 2018? But there's certainly a little bit more optionality that charters are seeking now and whether or not folks give those has still to be determined but there is flexibility that's being desired by charter more than we've seen previously and when I say previously, I mean a few years ago as I said we've improved from voyage, charters to time-charterers, but now they have a little bit more optionality than they used to.

[Spiro Dounis:]

Got it. That's it from me. Appreciate the color. Thanks, guys.

[Operator:]

Your next question will come from the line of Fotis Giannakoulis of Morgan Stanley. Please go ahead.

[Fotis Giannakoulis:]

Yes. Hi guys and thank you. I’d like to ask you estimate about the upcoming refinancing of the vessels in 2018 obviously the Spanish vessels they have very long-term contracts, but would you be able to give us an estimate for how much of this amount can be refinanced or all of it can refinanced? And also expand on the older vessels the Arctic, Polar -- the Arctic and the Polar and comment about the Skaugen vessels, if these vessels could be potentially candidates for selling or scrapping when that comes to?

[Brody Speers:]

Hi Fotis. In terms of our re-financings, we have been progressing those in the background over the last few months or so and one thing to point out just in terms of our 2017 maturity is we're fully committed now on our unsecured corporate revolver that matures this month. So we expect to complete that refinancing in the next few days. In terms of 2018 refinancings, we've been working on the first one is to the two Spanish LNG carriers and that one has progressed quite a bit over the last quarter. So we do expect to complete that refinancing later this year or early in in 2018 and that one would be rolled over at its ballooned amount. The other long-term Spanish LNG carrier, we've had some initial discussions on what we would expect to be able to provide a better update next quarter on that one.

[Fotis Giannakoulis:]

Okay.

[Brody Speers:]

And then in terms of -- in terms of the Arctic/Polar and Skaugen ships, the Arctic/Polar loan matures in April of next year and we started having discussions on that and obviously, it's partially linked to the contract status of those ships. But at this stage, we do expect to be able to roll over the majority of the balloon amount but we're still in early discussions on that. And then in terms of the Skaugen vessels, those mature later in 2017 -- 2018 in September and that will obviously be dependent again on kind of the contract structure that's in place for those as Mark mentioned in the prepared remarks we're currently looking at alternatives for those ships.

[Fotis Giannakoulis:]

Okay. Thank you that's very helpful. And can you also comment about the changes in the market and especially the increase in oil price if this can change the macro environment for LNG producers and especially for the U.S. producers if you think that with oil close to -- Brent oil close to 65. We might see more uptakes and that would lead to a decent long-term where contracts and demand for newbuildings.

[Mark Kremin:]

Hi, Fotis, it's Mark. Just a couple more questions on Skaugen or comments as you say before I get into all increasing question. It was certainly not looking to sell or scrap the ships at this point. They have an average age of under 10 years at this point and we are at a low part of the cycle but we still have optimism, maybe even bullishness for the market improving. Not just for the ethylene that these ships are capable of but also two of the ships are LNG -- small scale LNG capable. And so what we've been seeing in general in the market is that whereas used to be OECD countries would export, so its non-OECD countries would export to OECD countries. That's actually reversed. And we have the small Bangladesh and the islands and the other smaller importers of the world that could be very much users of small scale LNG in the future. So, we think the ships have a good future just a tight spot for the moment and we have no intention to sell or scrap the ships.

[Fotis Giannakoulis:]

But -- thank you. That's very helpful. And being imply that this vessel so young where would be candidates for scrapping that was my mistake.

[Mark Kremin:]

That's not a problem. So on to your question about oil pricing, things are seem to be going lockstep to some extent in a good way. There have been as you know very few FIDs on LNG since 2015 or so. We've seen any of the additional tanker train. But I do think that it gives a lot of -- I'll use this term green shoots for new FIDs being taken in LNG next year whether that's golden pass or Mozambique and a Darco or additional out of Qatar or PNG. I'm not telling you and there's a number of them I'm not sure exactly what's going to happen. But yes, we do think that the additional demand that we're seeing for -- from China in particular in the Asia and match with the oil prices should prompt more FIDs next year than certainly we've had in previous ones.

[Fotis Giannakoulis:]

I'll take -- thank you. That's very helpful.

[Operator:]

Your next question will come from the line of Espen Landmark of Fearnley. Please go ahead.

[Espen Landmark:]

Yeah, hi, good morning, guys. I wanted to ask about the kind of the cash flow potential in the JVs as new vessels are delivered. So, I mean the EBITDA or the CFCO, but the cash flow after financing because it's -- it is a bit tricky for us to judge. You know you need to make certain assumptions with regard to interest costs and amort. So, I mean, if I were to start with the cash flow statement you have you know equity income of $22 million year-to-date and if I were to add dividends to give me around about $50 million. Is that kind of a fair you know statement for the actual cash flow from the JVs this year? And if I were to add you know the vessel coming next year and maybe also the third ones out of Yemen what could that number look like for next year you think?

[Brody Speers:]

Yes, hi Espen. Yeah, in terms of the cash flows from our JVs, you know we typically have a policy and agreement with all the partners that will distribute you know any available cash that we can. And that's what we technically do. There are obviously some timing differences. So you know just looking at one particular quarter or even a few quarters in a row it's hard to kind of see because some of the cash flows to be lumped more into one quarter and then there will be a quarter without any for example. So there are some timing considerations but overall you know the interest costs for your modeling purposes I guess are in line with what we typically see of about 5% all-in on the debt. And going forward, obviously, we're expecting some significant growth to our distributions coming from our joint venture partners as the Bahrain regasification project comes on line, as all of our Shell long-term 20 year charter start, as well as the Yamal LNG project which is 50% owned and recorded off balance sheet.

[Espen Landmark:]

Yes. And just to dig a bit more into it. I mean if I were to a judge on a fully delivered basis, you guys maybe have 800 million of you fuel and maybe 300 million plus of that will be in the JVs, but it's a bit hard for us to really judge how much of that can actually be distributed up into TGP.

[Brody Speers:]

Yes. Well I think you just have to take -- you're right, roughly 30%, 40% of that number is -- are in the JVs and that -- those JV typically have debt profiles of 20 years and I have mentioned the interest costs. So, you can -- you should be able to back into kind of the net amount coming out.

[Espen Landmark:]

Okay, that's fair. And as a final one, do you first see any cap recalls in the JVs, I guess, beyond the Skaugen? I know there was a re-fire earlier this year that actually released some cash.

[Brody Speers:]

Yes. In terms of cap recalls for injections into the JVs for existing projects, no, we don't foresee any. We did have one in our Marubeni joint venture earlier in the year as we did that refinancing. But looking forward, everything is appropriately leveraged and we don't expect anything.

[Espen Landmark:]

All right. Thank you very much.

[Operator:]

And we'll take our next question from Jerry Zhou of Citi. Please go ahead.

[Jerry Zhou:]

Hey guys, good morning. Most of my questions been answered, but I just had two other quick ones. I think if we -- kind of go back to the sort of the big picture about the growing demand, I think, specifically out of China, have you guys sort of seen a change or a tightening or fundamental shift in the market from the sort of the Chinese buyers? And how sustainable do you guys think that is moving forward?

[Mark Kremin:]

There's been a big shift obviously I think year-to-date. China is up 45%. We're delivering a fair amount of cargo ourselves to there both conventionally and through the sub-charter we have. Teekay has two ships dong exclusive China traits right now on the smaller Arctic Spirit and the Polar Spirit. So, yes, the short answer is China has been a factor and will continue to be.

[Jerry Zhou:]

Got it. Awesome. And then the second question I just -- I think if you turn to slide 10, just any more color around sort of the Yamal LNG ACR 7 in process, I know you commented on that in the past, still sort of ongoing. Is there any sort of update on your end in terms of how discussions are going?

[Brody Speers:]

Yes, hi Jerry. Yes, in terms of are you building financing, we just -- we announced the $327 million completion for the Bahrain FSU and the BP MEGI LNG carrier. So, we're happy with that closing. In terms of the Yamal ships, our focus right now is on the ARC 7, obviously, because our first ship delivers in January of next year. And we've made significant progress on that financing over the last quarter. And we're getting very close. It's nearing completion and we expect it will be completed later this year or at the latest by January of next year.

[Jerry Zhou:]

Got it. Awesome. Thanks guys. Appreciate it.

[Operator:]

Your next question will come from the line and from Ben Brownlow of Raymond James. Please go ahead.

[Ben Brownlow:]

Hey, thanks for taking the question. You answered part of my question earlier on, but the six LPG carriers, you had some preliminary comments that you touched on the small scale employment opportunity and you alluded to taking the commercial management in-house. Could you just expand on that change in approach to the market and kind of the timing? Is it largely an opportunity for an LNG conversion or is it just better capitalizing on LPG market?

[Mark Kremin:]

We actually have seven ships, six are currently on [Indiscernible], one is already in a pool I think we're -- we haven't made the decision yet, but obviously, with the lack of revenues we've been receiving from the Norgas pool, it's something we have to consider. I think it's something we have to probably consider in the relatively near-term. In terms of -- I do think if we ultimately -- we do have a good platform for small scale LNG and we hopefully can capitalize on that. I can't give you too many comments, but it is -- I think it's probably a Q4 event that would need to take a very serious look at it about how we manage the ships going forward.

[Ben Brownlow:]

Okay, great. Thank you.

[Operator:]

And your next question will come from the line of Randy Giveans from Jefferies. Please go ahead.

[Randy Giveans:]

Hey guys. Thank you. Most of my questions have been already asked and answered as well. Just looking at the preferred offering, just kind of getting some color, your mindset around issuing that as opposed to issuing common units?

[Brody Speers:]

Hi Randy. Yes, the preferred market is one that we've accessed in the past as well back in in Q4 2016. It's the market that we've continued to follow and our recent issuance primarily was to delever and strengthen the balance sheet. But what we did we did like the terms in the market. At the time, we thought it was competitively priced permanent capital. So, in terms of comparing that to common, the preferred offering was in the long-term, the more efficient cost of capital for the company.

[Randy Giveans:]

Okay. And then I guess lastly any updated guidance on distribution growth or ramping in the next 12 to 24 months?

[Mark Kremin:]

No, we don't have anything to add to our narratives, will be unlikely to do anything in the first half of 2013 for the reasons we stated in the narrative.

[Randy Giveans:]

Fair enough. Thanks so much.

[Operator:]

And there are no further questions at this time. Mr. Kremin I'd like to hand it back to over to for closing remarks.

[Mark Kremin:]

Before we say goodbye, we will recap a few points from our call today. First, we are leading -- a leading owner and operator of LNG carriers with a total of 50 LNG vessels, which includes our 15 LNG carriers currently under construction. Second, our large and diverse portfolio of long-term LNG charters totals over $11 billion of forward revenues and has a weighted average remaining duration of 13 years. Third, LNG shipping rates are well on the road to recovery, which is good for the overall LNG shipping market and will lead charters fixing vessels for term charters. And finally, the Partnership has focused on increasing distributions to unitholders at the appropriate time and in a sustainable manner. As we said, we'll provide more guidance on that in the second half 2018. With that said, we thank everyone for the support and we wish you a pleasant good bye. Thanks.

[Operator:]

And this concludes today's call. Thank you for your participation. You may now disconnect your lines and have a wonderful day.