Interim / Quarterly Report • Aug 30, 2018
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
| USD million | Q2'18 | Q1'18 | Q4'17 | 2017 |
|---|---|---|---|---|
| Freight income | 6.4 | 13.8 | 9.6 | 20.4 |
| Voyage related expenses | 1.8 | 1.4 | 2.3 | 6.9 |
| EBITDA | 1.9 | 9.5 | 4.2 | 1.7 |
| Net profit/(loss) | (6.5) | 1.0 | (4.5) | (31.8) |
| Total assets | 392.2 | 398.3 | 399.6 | 399.6 |
| Total equity | 121.5 | 128.0 | 127.0 | 127.0 |
| Interest bearing debt | 268.2 | 269.0 | 268.9 | 268.9 |
| Cash and cash equivalents | 26.5 | 30.1 | 29.0 | 29.0 |
| Book equity ratio | 31 % | 32 % | 32 % | 32 % |
Freight income for the quarter was MUSD 6.4, down from MUSD 13.8 in Q1 2018 due to seasonal effects impacting activity and rates. Fleet utilisation for the quarter ended at 71 %, compared to 97 % in Q1 2018. Voyage related expenses amounted to MUSD 1.8, compared to MUSD 1.4 in Q1 2018.
Operating expenses were MUSD 2.0 in the quarter, same level as in Q1 2018 (MUSD 1.9). Administration expenses were MUSD 0.7 in Q2, down from MUSD 1.0 in Q1 2018, mainly due to depreciation of NOK vs USD. EBITDA for the quarter was MUSD 1.9 (MUSD 9.5 Q1 2018). Depreciation for the quarter was MUSD 3.3, marginally up from MUSD 3.2 in Q1 2018.
Net financial items were MUSD (5.2) compared to MUSD (5.3). Interest expenses on the WilForce and WilPride financial leases amounted to MUSD 5.4, same as in the previous quarter.
Loss for the period was MUSD 6.5, compared to a profit for the period of MUSD 1.0 in Q1 2018.
For the first half of 2018 freight income was MUSD 20.2, compared to MUSD 5.1 same period last year. Voyage related expenses were MUSD 3.2 (MUSD 3.2), operating expenses MUSD 3.9 (MUSD 3.8) and administration expenses were MUSD 1.7 (MUSD 1.8). EBITDA in the first half of 2018 was MUSD 11.5, compared to MUSD (3.7) in the first half of 2017. Net loss for the period was MUSD 5.5, compared to MUSD 20.5 in the first half of 2017.
Book value of vessels was MUSD 360.6 as at 30 June 2018 (MUSD 361.8 Q1 2018). The decrease reflected ordinary depreciation during the quarter, offset by capitalisation of certain items. MUSD 1.9 in dry-dock long lead items and periodic overhauls of main engines was capitalised in the quarter.
Total current assets were MUSD 31.6 as at 30 June 2018 (MUSD 36.5 Q1 2018), of which cash and cash equivalents were MUSD 26.5 (MUSD 30.1 Q1 2018).
Total equity as at 30 June 2018 was MUSD 121.5 (MUSD 128.0 Q1 2018).
Total current liabilities were MUSD 7.6 as at 30 June 2018 (MUSD 5.1 Q1 2018). MUSD 5.1 of the current liabilities relates to the short-term portion of the WilForce and WilPride financial leases (MUSD 3.9 as at 31 March 2018).
Total non-current liabilities were MUSD 263.0 as at 30 June 2018 (MUSD 265.1 Q1 2018), of which the long-term portion of the WilForce and WilPride financial leases was MUSD 260.7 (MUSD 262.8 Q1 2018).
Increased demand for power generation in the Far East, due to warmer weather earlier than normal, pushed Far East gas price from USD 7.7/MMTBU at the start of Q2 to USD 10.4/MMBTU at the end of the quarter. UK NBP started Q2 at USD 6.9/MMBTU and closed at USD 7.2/MMBTU, while US Henry Hub opened at USD 2.7/MMBTU and closed at USD 2.9/MMBTU.
According to Fearnleys LNG the quarter started with day rates at USD 55,000 and USD 38,000 West and East of Suez respectively. The rates stayed relatively flat in April and May, until gradually firming in June, ending at USD 85,000 respectively USD 70,000 on the back of counter seasonal strength in Far East gas prices supporting the West to East arbitrage.
LNG trade is estimated to have increased by 6 % in the first half 2018 compared to 2017. According to Arrow Research total power consumption in China increased by 9.2 % in H1 2018 compared to same period last year, and LNG imports to China increased by 50 % in the period. Imports to South Korea increased by 16 % and India 8 %. LNG imports to Japan declined by 3 % in H1 2018 compared to same period last year.
Three liquefaction plants started production in Q2 2018; Cove Point (5.8 MTPA) in April, FLNG Hilli Episeyo (1.2 MTPA) in May and Wheatstone T2 (4.5 MTPA) in June. Yamal LNG T2 started production in August, six months ahead of schedule. Australia's Ichthys (8.9 MTPA) and Prelude FLNG (3.8 MTPA) are both expected to start up in the second half of 2018. 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. According to industry analysts new LNG production plants with total potential production capacity of over 700 MTPA are in various stages of planning, and many of them are progressing towards FID as supported by recent offtake contracts.
29 vessels were delivered in the first six months of 2018, and a further 20 vessels are scheduled for delivery in the remainder of 2018.
Newbuild orders has picked up in 2018 compared to 2016 and 2017, and 33 newbuilding orders have been placed year to date of which about 18 are assumed speculative. According to shipbrokers the current orderbook for LNG vessels above 100,000 cbm (excl. FSRU and FLNG) is 90 vessels, of which 31 are potentially available for contract. Although the orderbook represents almost 20 % of the fleet, market analysts expect the 91 MTPA of new LNG production scheduled to start up from 2018 to 2021 to require more vessels than the current available tonnage and orderbook during periods of high tonmile demand.
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.
WilPride is currently trading in the spot/short term market.
WilForce will commence its 9-12 month time charter contract to an oil and gas major in early September following scheduled dry-dock in August.
Through its global LNG shipping operations, Awilco LNG is exposed to certain market, operational and financial risks. There have been no material changes to these key risks and uncertainties since the release of the 2017 Annual report. For a thorough explanation of the risk factors, please refer to the 2017 Annual report pages 21 to 22 and note 20, page 49 to 51.
Although rates and activity softened at the start of Q2 in line with normal seasonal patterns, increased LNG production coupled with strong power generation demand in the Far East in the latter part of the quarter saw average market rates in the quarter 50 % above Q2 2017 levels. Activity in Q3 initially softened but has again started to improve as buyers already start to prepare for winter, and owner's expectations are correspondingly high.
The long-term outlook for LNG shipping remains promising. To meet the growing demand for gas, estimated at 2 % per year according to Shell Energy Outlook and twice the growth rate of total global energy demand, several new LNG production plants are expected to be sanctioned in the near future.
Awilco LNG has one vessel commencing a 9-12 month contract in September and one vessel trading in the spot market, and is well positioned for the improving market.
We confirm, to the best of our knowledge, that the condensed set of financial statements for the first half year of 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting, and give a true and fair view of Awilco LNG ASA's consolidated assets, liabilities, financial position and income statement, and that the interim report includes a fair review of the information required under the Norwegian Securities Trading Act section 5-6 fourth paragraph.
Oslo, 29 August 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 | Q2 | Q1 | Q2 | 1.1 - 30.6 | 1.1 - 30.6 |
|---|---|---|---|---|---|
| 2018 | 2018 | 2017 | 2018 | 2017 | |
| Note | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) |
| Freight income 2 |
6 435 | 13 808 | 2 590 | 20 243 | 5 081 |
| Voyage related expenses 5 |
1 806 | 1 351 | 1 600 | 3 158 | 3 248 |
| Net freight income | 4 629 | 12 456 | 990 | 17 085 | 1 833 |
| Operating expenses | 1 982 | 1 933 | 1 905 | 3 915 | 3 781 |
| Administration expenses 5 |
703 | 1 007 | 861 | 1 710 | 1 781 |
| Earnings before interest, taxes, depr. and amort. (EBITDA) | 1 944 | 9 516 | (1 777) | 11 460 | (3 728) |
| Depreciation and amortisation | 3 268 | 3 242 | 2 941 | 6 511 | 5 875 |
| Earnings before interest and taxes (EBIT) | (1 325) | 6 274 | (4 718) | 4 949 | (9 604) |
| Finance income | 239 | 223 | 199 | 462 | 262 |
| Finance expenses | 5 427 | 5 497 | 5 596 | 10 924 | 11 141 |
| Net finance income/(expense) | (5 188) | (5 274) | (5 398) | (10 462) | (10 879) |
| Profit/(loss) before taxes | (6 513) | 1 000 | (10 115) | (5 513) | (20 483) |
| Income tax expense | - | - | - | - | - |
| Profit/(loss) for the period | (6 513) | 1 000 | (10 115) | (5 513) | (20 483) |
| Earnings per share in USD attributable to ordinary equity holders of Awilco LNG ASA: | |||||
| Basic, profit/(loss) for the period | (0.05) | 0.01 | (0.13) | (0.04) | (0.28) |
| Diluted, profit/(loss) for the period | (0.05) | 0.01 | (0.13) | (0.04) | (0.28) |
| Profit/(loss) for the period | (6 513) | 1 000 | (10 115) | (5 513) | (20 483) |
|---|---|---|---|---|---|
| Other comprehensive income: Other comprehensive income items |
- | - | - | - | - |
| Total comprehensive income/(loss) for the period | (6 513) | 1 000 | (10 115) | (5 513) | (20 483) |
| In USD thousands | 30.6.2018 | 31.3.2018 | 31.12.2017 | 30.6.2017 | |
|---|---|---|---|---|---|
| Note | (unaudited) | (unaudited) | (audited) | (unaudited) | |
| ASSETS | |||||
| Non-current assets | |||||
| Vessels | 360 623 | 361 812 | 363 917 | 368 610 | |
| Other fixed assets | 12 | 12 | 12 | 85 | |
| Total non-current assets | 360 635 | 361 825 | 363 929 | 368 695 | |
| Current assets | |||||
| Trade receivables | - | 424 | 1 611 | 757 | |
| Inventory | 1 923 | 2 007 | 2 335 | 2 125 | |
| Other short term assets | 3 168 | 3 983 | 2 730 | 2 211 | |
| Cash and cash equivalents | 26 476 | 30 050 | 28 979 | 34 654 | |
| Total current assets | 31 567 | 36 465 | 35 655 | 39 747 | |
| TOTAL ASSETS | 392 203 | 398 289 | 399 584 | 408 442 | |
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Share capital | 3 | 49 407 | 49 407 | 49 407 | 48 408 |
| Share premium | 3 | 133 384 | 133 384 | 133 384 | 133 050 |
| Other paid-in capital | 18 157 | 18 157 | 18 157 | 18 157 | |
| Retained earnings | (79 434) | (72 921) | (73 921) | (62 601) | |
| Total equity | 121 515 | 128 028 | 127 028 | 137 014 | |
| Non-current liabilities | |||||
| Pension liabilities | 304 | 298 | 263 | 351 | |
| Long-term interest bearing debt | 4 | 260 745 | 262 828 | 263 907 | 265 869 |
| Other non-current liabilities | 4 | 2 000 | 2 000 | 2 000 | 2 000 |
| Total non-current liabilities | 263 048 | 265 126 | 266 170 | 268 221 | |
| Current liabilities | |||||
| Short-term interest bearing debt | 4 | 5 124 | 3 893 | 2 682 | 225 |
| Trade payables | 1 556 | 234 | 240 | 1 766 | |
| Income tax payable | - | - | - | - | |
| Provisions and accruals | 959 | 1 008 | 3 464 | 1 216 | |
| Total current liabilities | 7 639 | 5 135 | 6 386 | 3 207 | |
| TOTAL EQUITY AND LIABILITIES | 392 203 | 398 289 | 399 584 | 408 442 |
| 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 | - | - | - | (5 513) | (5 513) |
| Other comprehensive income for the period | - | - | - | - | - |
| Total comprehensive income | - | - | - | (5 513) | (5 513) |
| Balance as at 30 June 2018 (unaudited) | 49 407 | 133 384 | 18 157 | (79 434) | 121 515 |
| 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 | - | - | - | (20 483) | (20 483) |
| Other comprehensive income for the period | - | - | - | - | - |
| Total comprehensive income | - | - | - | (20 483) | (20 483) |
| Share capital reduction | (18 157) | - | 18 157 | - | - |
| Equity issue | 18 145 | 7 258 | - | - | 25 403 |
| Transaction costs equity issue | - | (671) | - | - | (671) |
| Balance as at 30 June 2017 (unaudited) | 48 407 | 133 050 | 18 157 | (62 601) | 137 014 |
| In USD thousands | Q2 | Q1 | 1.1 - 30.6 | 1.1 - 30.6 |
|---|---|---|---|---|
| 2018 | 2018 | 2018 | 2017 | |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| Cash Flows from Operating Activities: | ||||
| Profit/(loss) before taxes | (6 513) | 1 000 | (5 513) | (20 483) |
| Income taxes paid | - | - | - | - |
| Interest and borrowing costs expensed | 5 388 | 5 370 | 10 758 | 11 064 |
| Items included in profit/(loss) not affecting cash flows: | ||||
| Depreciation and amortisation | 3 268 | 3 242 | 6 511 | 5 875 |
| Changes in operating assets and liabilities: | ||||
| Trade receivables, inventory and other short term assets | 1 323 | (38) | 1 585 | 12 |
| Trade payables, provisions and accruals | 1 202 | (1 992) | (1 090) | 531 |
| i) Net cash provided by / (used in) operating activities | 4 669 | 7 583 | 12 251 | (3 000) |
| Cash Flows from Investing Activities: | ||||
| Investment in vessels / sale of vessels | (2 079) | (1 138) | (3 217) | (629) |
| ii) Net cash provided by / (used in) investing activities | (2 079) | (1 138) | (3 217) | (629) |
| Cash Flows from Financing Activities: | ||||
| Gross proceeds from equity issue | - | - | - | 25 403 |
| Transation costs of equity issue | - | - | - | (671) |
| Repayment of borrowings | (1 105) | - | (1 105) | (5 580) |
| Interest and borrowing costs paid | (5 059) | (5 373) | (10 432) | (10 917) |
| iii) Net cash provided by / (used in) financing activities | (6 164) | (5 373) | (11 537) | 8 236 |
| Net change in cash and cash equivalents (i+ii+iii) | (3 574) | 1 072 | (2 503) | 4 607 |
| Cash and cash equivalents at start of period | 30 050 | 28 979 | 28 979 | 30 047 |
| Cash and cash equivalents at end of period | 26 476 | 30 050 | 26 476 | 34 654 |
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 and first half year ended 30 June 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 (nil) 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 (nil) 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 Q2 2018, same as in Q1 2018.
The Group had four customers contributing with more than 10 per cent of the Group's freight income in Q2 2018, at 12, 26, 29 and 30 % of total revenue, and four in Q1 2018 at 21, 22, 28 and 29 % total revenue.
The number of issued shares was 132,548,611 as at 30 June 2018. There were no changes in shares issued in Q2 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 was 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 leases, 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 the lessor. 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 | Q2 | Q1 | 1.1 - 30.6 | 1.1 - 30.6 |
| Related party | 2018 | 2018 | 2018 | 2017 |
| Awilco Technical Services AS | 148 | 162 | 310 | 336 |
| Awilhelmsen Management AS | 61 | 65 | 126 | 156 |
| Astrup Fearnley Group | - | 46 | 46 | - |
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.
On 5 July 2018 WilForce was fixed on a 9-12 month time charter contract to an oil and gas major. The vessel is scheduled for delivery to the charterer early September and is expected to contribute an annualised EBITDA of about MUSD 26 during the charter period.
WilForce completed dry-docking in mid-August 2018 at a cost of about MUSD 3.5 and incurring 21 offhire days.
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.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.