GasLog Partners LP — 2019 Form 20-F summary
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB. Certain historical results were restated to reflect common-control vessel transfers; the filing also presents non-GAAP “Partnership Performance” measures that exclude results from before the relevant transfers.
Business context
GasLog Partners owns and operates LNG carriers. At year-end, its fleet comprised 15 vessels: 10 TFDE and five older Steam vessels. Most revenue came from multi-year charters, but several contracts were nearing expiry, increasing the fleet’s exposure to spot and short-term charter markets. Shell subsidiaries generated 83% of 2019 revenue.
Key financial metrics
| Metric | 2019 | 2018 | Change or context |
|---|---|---|---|
| Revenue | $378.7 million | $383.2 million | Down 1.2% |
| Operating profit | $48.1 million | $198.4 million | Includes $138.8 million vessel impairment |
| Net profit/(loss) | $(34.8) million | $128.0 million | Common-unit basic loss per unit was $1.43 |
| Adjusted EBITDA, IFRS common-control basis | $276.3 million | $285.9 million | Down 3.4%; excludes vessel impairment |
| Distributable cash flow | $123.1 million | $108.9 million | Non-GAAP Partnership Performance measure |
| Operating cash flow | $239.1 million | $196.6 million | Increase was partly driven by working-capital movements |
| Cash and cash equivalents | $96.9 million | $133.4 million | No short-term investments at year-end 2019 |
| Borrowings | $1.346 billion | $1.366 billion | $109.8 million current; amounts are net of loan costs |
| Current assets / liabilities | $109.4 million / $186.7 million | — | Negative working capital of $77.3 million |
2019 operating margin was approximately 12.7%, compared with approximately 51.8% in 2018, largely reflecting the impairment charge. Adjusted EBITDA margin was approximately 73.0%, versus 74.6% in 2018. These ratios are calculated from reported figures.
Material changes versus 2018
- Revenue declined by $4.5 million as earlier charters expired and replacement employment contributed lower or variable rates; average daily hire declined from $72,645 to $70,161.
- Vessel operating costs rose $3.0 million to $76.7 million, mainly from higher technical maintenance. General and administrative expense eased $0.4 million to $19.4 million.
- A $138.8 million non-cash impairment was recorded on all five Steam vessels. The impairment assessment used a $41,000 average daily re-chartering rate for those vessels, down from $58,000 in the prior assessment, and a 7.25% discount rate.
- Derivative losses increased to $12.8 million from $0.05 million, principally due to fair-value movements in interest-rate swaps.
- Operating cash flow increased, while financing cash outflow widened to $281.0 million, reflecting debt repayments, unit repurchases, distributions and lower equity issuance proceeds, partly offset by new borrowings.
- The Partnership repurchased and cancelled 1.17 million common units for $22.9 million. It also eliminated incentive distribution rights in exchange for common and Class B units issued to GasLog; Class B units may convert into common units in annual tranches from 2020 through 2025.
Liquidity, debt and distributions
- At December 31, 2019, unused revolving-facility availability was $58.0 million. The Partnership reported compliance with its financial covenants and no material debt payment default.
- Two credit facilities mature in 2021. Management said operating cash flow was expected to cover operations, working capital and required debt service over the following 12 months; refinancing and future financing on acceptable terms were not assured.
- Debt covenants include a minimum liquidity requirement, a debt-to-assets limit and collateral-value tests. In December 2019, amendments aligned covenants across facilities, reduced minimum liquidity requirements from 3% of debt to $45 million and removed a debt-service coverage covenant.
- Common-unit distributions were $0.55 per unit in each of the first three 2019 quarters and $0.561 for Q4, paid February 21, 2020. The Q4 distribution totaled $26.8 million. Preference distributions were also declared and paid during 2019.
Outlook, risks and unusual items
- On February 6, 2020, management announced a shift toward debt repayment and balance-sheet strength and expected to reduce the common distribution to $0.125 per unit for Q1 2020, from $0.561 for Q4 2019. This equates to $0.50 annualized if maintained.
- As of the filing, six vessels’ charters had expired or were due to expire in 2020, including all five Steam vessels; three further charters expire in 2021. Contracted days represented 81.0% of available days in 2020, falling to 52.1% in 2021, assuming no extensions or new charters.
- Management cited weaker-than-expected term charter markets, lower expected Steam-vessel utilization and earnings, new modern-vessel competition and a prolonged high cost of equity. Spot-market employment may bring lower and more volatile revenues while vessel costs and debt service remain.
- The filing discusses the emerging COVID-19 outbreak and potential adverse effects on global activity, LNG demand, operations, markets and access to capital. It also identifies LNG-carrier oversupply, customer concentration, vessel-value and covenant risks, 2021 refinancing needs, and higher, longer dry-dockings to install ballast-water treatment systems.
- Four vessels were scheduled for dry-docking in 2020 and five in 2021. The auditors issued an unqualified opinion on the IFRS financial statements and an unqualified opinion on internal control over financial reporting. The audit highlighted vessel impairment estimates as a critical audit matter.
Most important facts for investors to verify
- Whether the Q1 2020 common-unit distribution was reduced as announced, and the status of subsequent common and preference distributions.
- Actual charter renewals, utilization and rates for vessels coming off charter, particularly the Steam fleet; compare results with the filing’s contracted-day assumptions.
- Liquidity, covenant headroom and refinancing plans for the facilities maturing in 2021, including collateral-value tests and available revolver capacity.
- Whether impairment assumptions for Steam-vessel re-chartering rates and discount rates remain supportable; the filing notes material sensitivity to these estimates.
- Cash-flow sustainability after maintenance and replacement capital needs, preference distributions, debt service and other reserves; distributable cash flow is a non-GAAP measure.
- Developments in Shell-related revenue concentration, COVID-19 impacts, dry-docking costs and timing, and the potential dilution from conversion of GasLog’s Class B units.