Quarterly Report • May 24, 2018
Quarterly Report
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| USD million | Q1'18 | Q4'17 | Q3'17 | 2017 |
|---|---|---|---|---|
| Freight income | 13.8 | 9.6 | 5.7 | 20.4 |
| Voyage related expenses | 1.4 | 2.3 | 1.3 | 6.9 |
| EBITDA | 9.5 | 4.2 | 1.2 | 1.7 |
| Net profit/(loss) | 1.0 | (4.5) | (6.8) | (31.8) |
| Total assets | 398.3 | 399.6 | 402.2 | 399.6 |
| Total equity | 128.0 | 127.0 | 131.6 | 127.0 |
| Interest bearing debt | 269.0 | 268.9 | 268.6 | 268.9 |
| Cash and cash equivalents | 30.1 | 29.0 | 30.4 | 29.0 |
| Book equity ratio | 32 % | 32 % | 33 % | 32 % |
Freight income for the quarter was MUSD 13.8, up from MUSD 9.6 in Q4 2017 due to full exposure to a spot market with increased activity and rates following a firm winter market. Fleet utilisation for the quarter ended at 97 %, compared to 83 % in Q4 2017. Voyage related expenses amounted to MUSD 1.4, compared to MUSD 2.3 in Q4 2017.
Operating expenses were MUSD 1.9 in the quarter, same as in Q4 2017. Administration expenses were MUSD 1.0 in Q1, down from MUSD 1.2 in Q4 2017, due to timing of expenses and provisions yearend. EBITDA for the quarter was MUSD 9.5 (MUSD 4.2 Q4 2017). Depreciation for the quarter was MUSD 3.2, same as in Q4 2017.
Net financial items were MUSD (5.3) compared to MUSD (5.5). Interest expenses on the WilForce and WilPride financial leases amounted to MUSD 5.4, down from MUSD 5.5 in Q4 2017 due to fewer days in the quarter.
Profit for the period was MUSD 1.0, compared to a loss for the period of MUSD 4.5 in Q4 2017.
Book value of vessels was MUSD 361.8 as at 31 March 2018 (MUSD 363.9 Q4 2017). The decrease reflected ordinary depreciation during the quarter, offset by capitalisation of certain items. MUSD 0.4 in scheduled overhauls of the two main engines on WilForce was capitalised in the quarter, and MUSD 0.8 in long lead items were capitalised relating to both vessels' first 5-year special survey scheduled for second half of 2018.
Total current assets were MUSD 36.5 as at 31 March 2018 (MUSD 35.7 Q4 2017), of which cash and cash equivalents were MUSD 30.1 (MUSD 29.0 Q4 2017).
Total equity as at 31 March 2018 was MUSD 128.0.
Total current liabilities were MUSD 5.1 as at 31 March 2018 (MUSD 6.4 Q4 2017). MUSD 3.9 of the current liabilities relates to the short-term portion of the WilForce and WilPride financial leases (MUSD 2.7 as at 31 December 2017).
Total non-current liabilities were MUSD 265.1 as at 31 March 2018 (MUSD 266.2 Q4 2017), of which the long-term portion of the WilForce and WilPride financial leases was MUSD 262.8 (MUSD 263.9 Q4 2017).
Winter in the Northern Hemisphere, coupled with coal to gas switch in China, drove gas prices towards a three year high in Europe and the Far East. The Far East gas price started the quarter at USD 10.4/MMTBU, hit a high of USD 11.0/MMBTU in January and ended Q1 at USD 7.7/MMBTU. The UK NBP price started Q1 at USD 7.9/MMBTU and closed at USD 6.9/MMBTU, while US Henry Hub opened at USD 2.8/MMBTU and closed at USD 2.7/MMBTU, staying relatively flat throughout the quarter.
The widening gas price spreads Far East vs NBP and HH created arbitrage opportunities and supported an improvement of 18 % in ton/miles in Q1 according to Poten. Of the 67 cargoes shipped from Sabine Pass in the US in Q1 2018, 68 % were delivered to Asia, compared to about 50 % in 2017. According to Fearnleys LNG the quarter started with day rates at USD 85,000 and USD 80,000 West and East of Suez respectively, which gradually declined to USD 55,000 and USD 38,000 following normal seasonal patterns heading into spring compounded by an influx of new tonnage delivering from the yards.
LNG trade is estimated to have increased by 6 % in Q1 2018 vs Q1 2017. LNG imports to China increased by 59 % in the quarter, continuing the strong growth seen in 2017. Imports to South Korea increased by 15 %.
Cove Point in the US (5.8 MTPA) and Golar LNG's FLNG Hilli Episeyo (1.2 MTPA) were scheduled to start production in Q1 2018. Cove Point entered commercial service in early April 2018, and the first cargo from Hilli Episeyo was loaded in mid-May. Australia's Wheatstone T2 (4.5 MTPA), Ichthys (8.9 MTPA) and Prelude FLNG (3.8 MTPA) are all expected to start up in the near future. Subsequent to the recently announced nine-month delay of Freeport T1 (4.4 MTPA) to Q3 2019, a total of 30 MTPA of new LNG production is expected to commence production in 2018, followed by 39 MTPA in 2019 and 22 MTPA in 2020 to 2021. Representing the first LNG liquefaction FID in the US since 2015, on 22 May 2018 Cheniere announced FID on Corpus Christi T3 (4.5 MTPA). CCL T3 is expected to start production in 2020/2021. According to industry analysts over 700 MTPA of new LNG production plants are in various stages of planning, and many of them have moved substantially closer to FID in the last couple of months, notably Qatargas´ 23.4 MTPA expansion as well as several US and African projects.
In Q1 2018 18 newbuildings were delivered and 17 orders were placed, of which 9 are assumed speculative. According to shipbrokers the orderbook at the end of Q1 2018 for LNG vessels above 100,000 cbm (excl. FSRU and FLNG) was 92 vessels, of which 18 are potentially available for contract. 29 further vessels are scheduled for delivery in 2018, 41 vessels in 2019, 20 in 2020 and 2 in 2021 however some delays to the delivery schedule may be expected.
The principal activity of Awilco LNG ASA and its subsidiaries is to invest in and operate LNG transportation vessels. Technical and commercial management of the fleet is performed from the Group's office in Oslo, Norway. The Group has 7 employees. In addition, Awilco LNG purchases certain administrative and sub-management technical services from two companies in the Awilhelmsen Group; Awilhelmsen Management AS and Awilco Technical Services AS, see note 5 for further details.
Both WilForce and WilPride are trading in the spot/short term market.
The firm market established in Q4 2017 continued into Q1 2018 before activity and rates softened heading into the shoulder season with lower energy consumption in the northern hemisphere. Headline spot rates in Q1 2018 were on average 70 % higher than in Q1 2017, and in late April activity again picked up with a long list of charterers coming to the market for multi-month term business and spot rates appear to have troughed.
Moving towards winter we expect rates to strengthen in the second half of this year, and the long-term outlook for LNG shipping remains promising. Gas is affordable, abundantly available and the cleanest fossil fuel. To meet the growing demand for gas, and with the support of the current oil price environment, new LNG productions plants are expected to be sanctioned in the near future. Newbuilding activity was muted in 2017 and 2016, but recent low yard prices and the estimated unmet tonnage requirements from new production coming online over the next three years triggered 17 newbuilding orders in the first quarter of 2018. Although the orderbook of 92 vessels represents 20 % of the LNGC fleet, the 91 MTPA of new LNG production scheduled to come on stream from 2018 to 2021 is expected to require more vessels than the current available tonnage and orderbook. Still, periods of volatility and seasonality should be expected.
Awilco LNG is presently trading both ships in the spot market, is fully financed until 2020 and is thus well positioned for the improving market.
Oslo, 23 May 2018
Sigurd E. Thorvildsen Chairman of the Board
Jon-Aksel Torgersen Board member
Henrik Fougner Board member
Annette Malm Justad Board member
Synne Syrrist Board member
Jon Skule Storheill CEO
| In USD thousands, except per share figures | Q1 | Q4 | Q1 | ||
|---|---|---|---|---|---|
| 2018 | 2017 | 2017 | 2017 | ||
| Note | (unaudited) | (unaudited) | (unaudited) | (audited) | |
| Freight income | 2 | 13 808 | 9 633 | 2 492 | 20 437 |
| Voyage related expenses | 5 | 1 351 | 2 286 | 1 648 | 6 883 |
| Net freight income | 12 456 | 7 347 | 844 | 13 554 | |
| Operating expenses | 1 933 | 1 945 | 1 876 | 7 949 | |
| Administration expenses | 5 | 1 007 | 1 194 | 919 | 3 915 |
| Earnings before interest, taxes, depr. and amort. (EBITDA) | 9 516 | 4 207 | (1 952) | 1 691 | |
| Depreciation and amortisation | 3 242 | 3 196 | 2 934 | 12 269 | |
| Earnings before interest and taxes (EBIT) | 6 274 | 1 012 | (4 886) | (10 579) | |
| Finance income | 223 | 43 | 63 | 1 045 | |
| Finance expenses | 5 497 | 5 577 | 5 545 | 22 269 | |
| Net finance income/(expense) | (5 274) | (5 534) | (5 481) | (21 224) | |
| Profit/(loss) before taxes | 1 000 | (4 522) | (10 367) | (31 803) | |
| Income tax expense | - | - | - | - | |
| Profit/(loss) for the period | 1 000 | (4 522) | (10 367) | (31 803) | |
| Earnings per share in USD attributable to ordinary equity holders of Awilco LNG ASA: | |||||
| Basic, profit/(loss) for the period | 0.01 | (0.03) | (0.15) | (0.31) | |
| Diluted, profit/(loss) for the period | 0.01 | (0.03) | (0.15) | (0.31) |
| Profit/(loss) for the period | 1 000 | (4 522) | (10 367) | (31 803) |
|---|---|---|---|---|
| Other comprehensive income: Other comprehensive income items |
- | - | - | - |
| Total comprehensive income/(loss) for the period | 1 000 | (4 522) | (10 367) | (31 803) |
| In USD thousands | 31.3.2018 | 31.12.2017 | 31.3.2017 | |
|---|---|---|---|---|
| Note | (unaudited) | (audited) | (unaudited) | |
| ASSETS | ||||
| Non-current assets | ||||
| Vessels | 361 812 | 363 917 | 369 229 | |
| Other fixed assets | 12 | 12 | 90 | |
| Total non-current assets | 361 825 | 363 929 | 369 319 | |
| Current assets | ||||
| Trade receivables | 424 | 1 611 | - | |
| Inventory | 2 007 | 2 335 | 1 904 | |
| Other short term assets | 3 983 | 2 730 | 3 310 | |
| Cash and cash equivalents | 30 050 | 28 979 | 19 355 | |
| Total current assets | 36 465 | 35 655 | 24 570 | |
| TOTAL ASSETS | 398 289 | 399 584 | 393 889 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 3 | 49 407 | 49 407 | 48 420 |
| Share premium | 3 | 133 384 | 133 384 | 126 463 |
| Other paid-in capital | 18 157 | 18 157 | - | |
| Retained earnings | (72 921) | (73 921) | (52 486) | |
| Total equity | 128 028 | 127 028 | 122 397 | |
| Non-current liabilities | ||||
| Pension liabilities | 298 | 263 | 323 | |
| Long-term interest bearing debt | 4 | 262 828 | 263 907 | 255 396 |
| Other non-current liabilities | 4 | 2 000 | 2 000 | - |
| Total non-current liabilities | 265 126 | 266 170 | 255 719 | |
| Current liabilities | ||||
| Short-term interest bearing debt | 4 | 3 893 | 2 682 | 14 107 |
| Trade payables | 234 | 240 | 883 | |
| Income tax payable | - | - | - | |
| Provisions and accruals | 6 | 1 008 | 3 464 | 784 |
| Total current liabilities | 5 135 | 6 386 | 15 773 | |
| TOTAL EQUITY AND LIABILITIES | 398 289 | 399 584 | 393 889 |
| In USD thousands | Share | Share | Other | Retained | Total |
|---|---|---|---|---|---|
| capital | premium | paid-in capital | earnings | equity | |
| Equity at 1 January 2018 | 49 407 | 133 384 | 18 157 | (73 921) | 127 028 |
| Profit/(loss) for the period | - | - | - | 1 000 | 1 000 |
| Other comprehensive income for the period | - | - | - | - | - |
| Total comprehensive income | - | - | - | 1 000 | 1 000 |
| Balance as at 31 March 2018 (unaudited) | 49 407 | 133 384 | 18 157 | (72 921) | 128 028 |
| In USD thousands | Share | Share | Other | Retained | Total |
|---|---|---|---|---|---|
| capital | premium | paid-in capital | earnings | equity | |
| Equity at 1 January 2017 | 48 420 | 126 463 | - | (42 118) | 132 764 |
| Profit/(loss) for the period | - | - | - | (31 803) | (31 803) |
| Other comprehensive income for the period | - | - | - | - | - |
| Total comprehensive income | - | - | - | (31 803) | (31 803) |
| Share capital reduction | (18 157) | - | 18 157 | - | - |
| Equity issue | 19 145 | 7 658 | - | - | 26 803 |
| Transaction costs equity issue | - | (736) | - | - | (736) |
| Balance as at 31 December 2017 (audited) | 49 407 | 133 384 | 18 157 | (73 921) | 127 028 |
| In USD thousands | Q1 | Q4 | |
|---|---|---|---|
| 2018 | 2017 | 2017 | |
| (unaudited) | (unaudited) | (audited) | |
| Cash Flows from Operating Activities: | |||
| Profit/(loss) before taxes | 1 000 | (4 522) | (31 803) |
| Income taxes paid | - | - | - |
| Interest and borrowing costs expensed | 5 370 | 5 539 | 22 152 |
| Items included in profit/(loss) not affecting cash flows: | |||
| Depreciation and amortisation | 3 242 | 3 196 | 12 269 |
| Changes in operating assets and liabilities: | |||
| Trade receivables, inventory and other short term assets | (38) | (1 108) | (1 571) |
| Trade payables, provisions and accruals | (1 992) | 1 593 | 1 059 |
| i) Net cash provided by / (used in) operating activities | 7 583 | 4 698 | 2 134 |
| Cash Flows from Investing Activities: | |||
| Investment in vessels / sale of vessels | (1 138) | (841) | (2 327) |
| Proceeds from sale of other fixed assets | - | - | 43 |
| ii) Net cash provided by / (used in) investing activities | (1 138) | (841) | (2 284) |
| Cash Flows from Financing Activities: | |||
| Gross proceeds from equity issue | - | - | 26 803 |
| Transation costs of equity issue | - | - | (736) |
| Repayment of borrowings | - | - | (5 580) |
| Interest and borrowing costs paid | (5 373) | (5 244) | (21 405) |
| iii) Net cash provided by / (used in) financing activities | (5 373) | (5 244) | (919) |
| Net change in cash and cash equivalents (i+ii+iii) | 1 072 | (1 387) | (1 068) |
| Cash and cash equivalents at start of period | 28 979 | 30 366 | 30 047 |
| Cash and cash equivalents at end of period | 30 050 | 28 979 | 28 979 |
Awilco LNG ASA (the Parent Company) is a public limited liability company incorporated and domiciled in Norway. The Parent Company's registered office is Beddingen 8, 0250 Oslo, Norway.
The interim consolidated financial statements (the Statements) of the Parent Company comprise the Parent Company and its subsidiaries, together referred to as the Group. The principal activity of the Group is the investment in and operation of LNG transportation vessels. The Group owns and operates two modern TFDE LNG carriers.
The Statements for the three months ended 31 March 2018 are prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The Statements have not been subject to audit or review. The Statements do not include all of the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and the Statements should be read in conjunction with the Group's annual consolidated financial statements for the period ended 31 December 2017, which includes a detailed description of the applied accounting policies.
The accounting policies adopted in the preparation of the Statements are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2017, with the exception of two new IFRS standards implemented with effect from 1 January 2018:
IFRS 15 Revenue from contracts with customers: Under this new standard, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard applies to all revenue contracts. The Group's revenue is generated by time charter contracts which contain both a lease element and a vessel management element (service agreement). Whereas accounting of the lease element is still to be governed by IAS 17 Leases, accounting of the vessel management element will be governed by IFRS 15. The vessel management element is assessed as a performance obligation that is satisfied over time, given that the customer simultaneously receives and consumes the benefits provided by the Group. This is analogue to the Group's previous revenue recognition policy of load-to-discharge basis, and the Group's revenue recognition is not impacted by implementation of IFRS 15 besides extended note disclosure requirements in the annual financial statements. Voyage expenses are expensed as incurred. The Group has used a modified retrospective method, and cumulative impact of the new standard has been recognised towards retained earnings as of 1 January 2018. Comparative figures have not been restated.
IFRS 9 Financial instruments: The standard addresses the classification, measurement and recognition of financial assets and financial liabilities, and have replaced the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 introduces a single approach for the classification and measurement of financial assets according to their cash flow characteristics, and provides a new impairment model based on expected credit losses. The new standard has not had an impact on the measurement of financial assets and changes in equity. The Group has used a modified implementation method, and cumulative impact of the new standard has been recognised towards retained earnings as of 1 January 2018. Comparative figures have not been restated.
The following new standards have been issued and become effective in 2019 onwards: IFRS 16 - Leases (2019): The Group has made a preliminary assessment of the effects of replacing IAS 17 with IFRS 16, and has not identified any material impact on the Group's financial position or performance.
The Group owns and operates two LNG vessels. For internal reporting and management purposes the Group's business is organised into one reporting segment, LNG transportation. Performance is not evaluated by geographical region as the vessels trade globally and revenue is not dependent on any specific country. Revenue from the Group's country of domicile, Norway, was NIL in Q1 2018, same as in Q4 2017.
The Group had four customers contributing with more than 10 per cent of the Group's freight income in Q1 2018, at 21, 22, 28 and 29 % of total revenue, and four in Q4 2017 at 10, 20, 22 and 40 % total revenue.
The number of issued shares was 132,548,611 as at 31 March 2018. There were no changes in shares issued in Q1 2018. The share capital is denominated in NOK, and the nominal value per share is NOK 2.5. All issued shares are of equal rights.
Both vessels are financed by sale/leaseback agreements with Teekay LNG Partners L.P. which mature 31. December 2019. Awilco LNG has rolling repurchase options throughout the lease period and repurchase obligations at maturity.
The contractual bareboat hire per day is USD 49,100 per vessel. From July 2017 to March 2018, the bareboat hire payable is USD 28,500 per day, from April 2018 to March 2019 USD 33,500 per day, and from April 2019 to December 2019 USD 38,500 per day. The deferred amounts will become payable at maturity of the contracts, or by way of a cash sweep mechanism measured on a quarterly basis. Net earnings in excess of cash break even levels, currently at approx USD 53,000 per day, is to be sweeped towards the outstanding deferred charter hire, subject to the Group retaining a minimum cash position after sweeping of approx. MUSD 31 prior to the scheduled 2018 dry-dockings and MUSD 23.5 thereafter.
The purchase obligations at maturity of the lease agreements in December 2019 are MUSD 113.3 and MUSD 114.5 for WilForce and WilPride, respectively, in addition to the deferred hire.
According to the amended lease agreements a fee of MUSD 2 is payable to Teekay LNG. The fee is payable either following voluntary prepayment of all, or parts, of the deferred amounts or by repurchase of the vessels. The fee has been capitalised as cost price of the vessels and depreciated over the term of the lease, and presented as other non-current liabilities until paid.
Until Teekay LNG and the Group agrees to not defer any bareboat hire, the Parent Company is not entitled to pay dividends to its shareholders.
| Agreements | ||
|---|---|---|
| Related party | Description of service | Note |
| Awilco Technical Services AS (ATS) | Technical Sub-management Services | 1 |
| Awilhelmsen Management AS (AWM) | Administrative Services | 2 |
| Astrup Fearnley Group | Ship Brokering Services | 3 |
(1) The Group's in-house technical manager, ALNG TM, has entered into a sub-management agreement with ATS, whereby ATS assists ALNG TM in management of the Group's fleet. The sub-management services also include management for hire of the managing director in ALNG TM. ALNG TM pays ATS a management fee based on ATS' costs plus a margin of 7 %, cost being time accrued for the sub-manager's employees involved. The fee is subject to quarterly evaluation, and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months notice. ATS is 100 % owned by Awilco AS.
(2) AWM provides the Group with administrative and general services including accounting and payroll, legal, secretary function and IT. The Group pays AWM MNOK 2.0 in yearly management fee (approx. MUSD 0.3) based on AWM's costs plus a margin of 5 %. The fee is subject to semi-annual evaluation, and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months notice. AWM is 100 % owned by Awilhelmsen AS, which owns 100 % of Awilco AS.
(3) One of the Parent Company's Board Members is also the General Manager of the Astrup Fearnley Group. The Astrup Fearnley Group delivers ship brokering services on a competitive basis to the Group.
| Purchases from related parties | |||
|---|---|---|---|
| In USD thousands | Q1 | Q4 | |
| Related party | 2018 | 2017 | 2017 |
| Awilco Technical Services AS | 162 | 160 | 680 |
| Awilhelmsen Management AS | 65 | 60 | 302 |
| Astrup Fearnley Group | 46 | 10 | 10 |
Purchases from related parties are included as part of Administration expenses in the income statement, except from commissions paid to the Astrup Fearnley Group, which are included in Voyage related expenses.
Provisions and accruals as at 31 March 2018 were MUSD 1.0 (MUSD 3.5 as at 31 December 2017), of which deferred revenue was NIL, compared to MUSD 2.1 as at 31 December 2017.
There were no material events after the balance sheet date.
Alternative performance measures (APMs), ie financial performance measures not within the applicable financial reporting framework, are used by Awilco LNG to provide supplemental information. Financial APMs are intended to enhance comparability of the results and cash flows from period to period, and it is Awilco LNG's experience that these are frequently used by analysts and investors.
These measures are adjusted IFRS measures defined, calculated and used consistently. Operational measures such as, but not limited to, volumes, utilisation and prices per MMBTU are not defined as financial APMs. Financial APMs should not be considered as a substitute for measures of performance in accordance with IFRS. Disclosures of APMs are subject to established internal control procedures.
Awilco LNG's financial APMs:
*When vessels operate in the spot market, freight income includes bunkers compensation and the fuel element of ballast bonuses, whereas voyage related expenses include the corresponding costs of bunkers compensation, and unless the vessels are fixed back to back also repositioning costs. The APM net freight income adjusts for this grossing up, and provides for improved comparability of the Group's performance between periods.
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