GasLog Partners LP — FY2017 Form 20-F
Reporting period: Fiscal year ended December 31, 2017; filed February 12, 2018. This is an annual report, not a standalone fourth-quarter filing. Financial statements use IFRS as issued by the IASB and are audited by Deloitte.
Business context
The Partnership owns and operates LNG carriers on time charters. At year-end it had 12 vessels, all chartered to Shell subsidiaries, making Shell the source of all 2017 revenue. Three vessels were acquired from GasLog during 2017: GasLog Greece, GasLog Geneva and Solaris. Because these were common-control transfers, IFRS reported results include their historical results before the Partnership acquired them; the filing also presents non-GAAP Partnership Performance Results that exclude those pre-acquisition amounts.
Key financial metrics
| Metric | FY2017 | FY2016 |
|---|---|---|
| IFRS revenue | $311.5 million | $282.3 million |
| Profit from operations | $165.3 million | $148.7 million |
| Profit for the year | $112.8 million | $92.5 million |
| Basic earnings per common unit | $2.09 | $2.18 |
| Operating cash flow | $180.1 million | $191.0 million |
| Cash and cash equivalents at year-end | $142.5 million | $56.5 million |
| Total borrowings at year-end | $1,155.6 million | $1,244.8 million |
| Current portion of borrowings | $103.8 million | $73.9 million |
IFRS operating margin was approximately 53.1% and net profit margin approximately 36.2%, calculated from reported revenue and profit. EBITDA, a non-GAAP measure, was $233.0 million on the IFRS common-control basis and $196.1 million on the Partnership Performance basis. Partnership Performance revenue was $269.1 million and profit was $94.1 million. Partnership Performance distributable cash flow was $100.6 million; this non-GAAP measure is not equivalent to operating cash flow.
Year-end total assets were $2.11 billion and partners’ equity $910.2 million. Current assets of $151.3 million exceeded current liabilities of $148.2 million, a $3.1 million positive working-capital position. Operating, investing and financing cash flows were respectively $180.1 million, $2.2 million provided and $96.3 million used.
Material changes versus the prior year
- IFRS revenue increased 10.3% and profit for the year rose 21.9%; the filing attributes much of the revenue and operating-profit growth to the additional vessels and operating days, including the 2017 acquisitions.
- Profit attributable to Partnership operations, under the filing’s non-GAAP presentation, increased 21.7% to $94.1 million. Basic common-unit earnings decreased from $2.18 to $2.09, while the common-unit count increased substantially through offerings and conversion of subordinated units.
- Operating cash flow fell $10.9 million, primarily due to working-capital movements and higher cash interest, partly offset by increased revenue. Cash increased by $86.0 million overall, principally reflecting equity proceeds and other financing activity.
- Borrowings declined $89.2 million. The weighted average interest rate on average outstanding debt increased to 3.8% from 3.2%; the year-end weighted-average rate on credit facilities was 4.0%.
- Interest-rate-swap results shifted from a $6.8 million loss in 2016 to a $0.1 million gain in 2017.
Outlook, risks and unusual items
- Charter renewals: Charters for GasLog Shanghai, GasLog Santiago and GasLog Sydney expire in 2018; Methane Jane Elizabeth and Methane Alison Victoria expire in 2019. Shell had not exercised extension options for these vessels identified in the filing. Renewal rates and redeployment are uncertain, and spot-market exposure could reduce cash flow and distributions.
- Dry-docking and upgrades: Three vessels were scheduled for dry-docking in 2018. Two were expected to receive additional performance-enhancement work, with approximately $28 million of total planned investment and longer off-hire periods; the filing notes that timing and cost could overrun.
- Customer concentration: Shell subsidiaries accounted for all revenue. Customer default, charter termination, or failure to renew could materially affect results and distributions.
- Distribution: The board declared a $0.5235-per-common-unit distribution for Q4 2017, payable February 14, 2018. The filing states the common-unit minimum quarterly distribution is $0.375, but payment is not guaranteed and is subject to available cash, board discretion, debt covenants and preference-unit priority. Series A preference distributions are cumulative; Series B preference units were issued in January 2018.
- Capital and debt: The Partnership reported $103.8 million of borrowings due within one year and substantial balloon payments under several facilities. Vessels secure debt, and covenants include liquidity, leverage, debt-service and collateral-value tests. The Partnership and GasLog were reported in compliance with financial covenants at December 31, 2017. The $29.8 million junior-tranche balance was prepaid in January 2018.
- Liquidity outlook: Management expected operating cash flow and available liquidity to cover operations, working capital and required debt service for at least the next 12 months. This depends on market conditions, covenant compliance and access to financing; the filing gives no guarantee of future financing on acceptable terms.
- Impairment and estimates: No vessel impairment was recorded. However, the five older steam vessels had aggregate carrying values $211.3 million above estimated charter-free market values; management’s discounted-cash-flow tests supported carrying values. A lower scrap-value estimate is expected to increase annual depreciation by about $0.46 million.
- Other exposures: Floating-rate debt, unhedged euro-denominated expenses, LNG shipping supply and demand, regulation, vessel operations and reliance on GasLog for management and growth are material risks. The filing reports no material pending or threatened legal proceedings and no material debt default.
Most important facts for an investor to verify
- Progress and final economics of renewals or redeployment for the five vessels whose charters expire in 2018–2019, including actual hire rates and off-hire periods.
- Actual cost, timing and revenue impact of 2018 dry-dockings and the planned vessel upgrades.
- Cash available for common distributions after preference distributions, maintenance and replacement reserves, debt service and covenant requirements; distinguish distributable cash flow from operating cash flow.
- Debt maturities, balloon payments, interest-rate exposure and covenant headroom, including the effect of vessel values and any refinancing needs.
- Dependence on Shell and GasLog, related-party service fees, and the terms and funding requirements of any proposed vessel acquisitions.