Business Context and Reporting Period
Company: GasLog Partners LP (a Marshall Islands limited partnership)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2014
Business Overview: GasLog Partners is a growth-oriented limited partnership focused on owning, operating, and acquiring LNG carriers engaged in long-term time charters. As of December 31, 2014, the Partnership owned a fleet of five LNG carriers. All revenues for the year were derived from a single customer, Methane Services (a subsidiary of BG Group). The Partnership completed its IPO in May 2014 and a follow-on offering in September 2014.
Key Financial Metrics
| Metric (in thousands USD) | 2014 | 2013 |
|---|---|---|
| Revenues | $119,041 | $64,143 |
| Profit from Operations | $64,700 | $37,283 |
| Profit for the Year | $29,169 | $26,218 |
| EBITDA | $89,338 | $49,521 |
| Adjusted EBITDA | $89,219 | $49,559 |
| Distributable Cash Flow | $27,118 | N/A |
| Cash and Cash Equivalents | $27,188 | $14,404 |
| Total Debt | $473,076 | $385,992 |
| Net Cash from Operating Activities | $78,276 | $32,159 |
Capitalization (as of Dec 31, 2014): Total Partners' Equity was $408.1 million. Total Debt consisted of $21.0 million current and $452.1 million non-current.
Earnings Per Unit (2014): Common units: $0.75; Subordinated units: $0.56; General partner units: $0.66.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 85.6% to $119.0 million, driven by the addition of two vessels (Methane Rita Andrea and Methane Jane Elizabeth) acquired in April 2014 and full-year operations of the initial three vessels.
- Profitability: Profit for the year increased 11.3% to $29.2 million despite a significant loss on interest rate swaps ($8.1 million) compared to a gain in 2013 ($1.0 million).
- Expense Increases:
- Depreciation: Increased 101.3% to $24.6 million due to the full-year impact of the initial fleet and the addition of two new vessels.
- General & Administrative (G&A): Increased 276.5% to $5.8 million, primarily due to costs associated with being a public company (legal, accounting, investor relations) and increased management fees.
- Financial Costs: Increased 126.6% to $27.5 million, largely due to a $9.0 million write-off of unamortized fees related to debt refinancing and termination fees.
- Debt Refinancing: In November 2014, the Partnership entered into a $450 million Credit Facility to refinance existing debt, replacing previous facilities and terminating interest rate swaps.
Guidance, Outlook, and Risks
Outlook and Growth: The Partnership intends to grow its fleet through acquisitions from GasLog (its general partner) and third parties. It holds options to purchase 10 additional LNG carriers from GasLog. Management expects to finance growth through external debt and equity, as the partnership agreement requires the distribution of all available cash.
Contracted Revenue: As of December 31, 2014, the fleet had contracted charter revenues totaling $538.1 million through 2020. However, utilization drops significantly after 2017 as charters expire (69.7% contracted days vs. available days).
Key Risks and Contingencies:
- Customer Concentration: 100% of 2014 revenue came from one customer (Methane Services). Loss of this customer would have a material adverse effect.
- Internal Control Weakness: Management identified a material weakness in internal controls regarding the classification of cash flow transactions with GasLog in the third quarter of 2014. This was corrected in the full-year filing but resulted in a restatement of interim cash flows.
- Interest Rate and FX Risk: The Partnership has significant floating-rate debt ($450 million) and expenses denominated in Euros, exposing it to interest rate and currency fluctuations. No interest rate swaps were in place as of year-end.
- Capital Expenditures: Substantial maintenance and replacement capital expenditures are required (estimated at $23.4 million annually), which are deducted from operating surplus before distributions.
Investor Verification Checklist
- Customer Dependency: Verify the stability of the relationship with Methane Services (BG Group) and the terms of the time charters expiring between 2018 and 2020.
- Debt Covenants: Review the financial covenants in the $450 million Credit Facility (e.g., EBITDA/Debt Service ratio, Debt/Capitalization ratio) to ensure compliance and distribution eligibility.
- Internal Controls: Assess the remediation plan for the material weakness in cash flow classification identified in Q3 2014.
- Acquisition Options: Evaluate the terms and financing requirements for the 10 optional vessels available for purchase from GasLog.
- Interest Rate Exposure: Monitor the impact of rising LIBOR rates on the $450 million floating-rate debt, given the lack of hedging instruments at year-end.
- PFIC Status: Confirm the Partnership's status regarding Passive Foreign Investment Company (PFIC) rules for U.S. tax purposes, as this affects tax treatment for U.S. holders.