Avance Gas Holding Ltd

Peder Simonsen - Chief Financial Officer Christian Andersen - President

Thank you. Thank you to everyone and thank for those dialing in to this earnings release for the first quarter.

We’ll start by going to Slide Four. In the first quarter, our TCE rates came in at 64,800 day, which was about $2,500 above the spot index for the period.

And compared to the three months ended 31st of December, 2014, we came in slightly above. We have the delivery of the Monsoon and Mistral in the quarter and Breeze just into second quarter in April.

And as we previously have reported, the repairs of the stern tube bearings on the Monsoon and Breeze are commencing on schedule. The board declared a dividend of $0.70 per share for the quarter.

Moving over to Slide Five, we have the operating revenues of just below 50 million for the quarter and TCE earnings of 40 million. Regards of one-offs, we have a change of voyage accounting method for three of our ships where we changed to the discharge-to-discharge method, which is the market practice and this resulted in approximately $1 million increased revenue for the quarter.

This was offset by a $1 million provision that we took for Monsoon regarding her ongoing repairs. The OpEx came in just 1 million above the three months ended 31st of December and OpEx came in at just above $9,000 a day for the quarter.

The financial expenses increased due to the increased debt on the Breeze and - the Mistral and Monsoon and also commitment fees for new credit facilities. And A&G expenses were essentially unchanged for the last three month period.

Our net profit came in at just below $24 million and - which equals $0.69 per share. Moving to Slide Six, our interest bearing debt increased to $278.9 million and this is mainly due to the delivery of the Monsoon and Mistral.

Our free cash totaled 121 million for quarter end, excluding undrawn available credit lines of 50 million. And our equity ratio was 63% at the end of the quarter.

Slide Seven, cash flow statement. Our net operating cash flow for the quarter was 27 million.

The cash flow for financing and investment activities was negative 67.7 million, of which 34.5 million was the dividend paid for the four month quarter ended 31st of December. And the decrease in cash in total was 40.8 million, mainly due to dividend payment, the repurchase of own shares of $12.5 million and the delivery of Monsoon and Mistral.

And I’ll give the word to Christian.

Thank you very much. Good morning.

I think we’ll start with Page number Nine, having looked at fixtures done during first quarter. We have done ten spot fixtures.

On the left graph on Page Nine, you will see dots showing the fixtures compared to the advance gas spot index. In addition with the two voyage time charters that were on Mistral and Breeze, they almost marked on this chart because it was short easy.

But for the ten sport voyages, eight of them are down to India. And as you can see, three - two fixtures below the index, two fixtures on the index and six fixtures above the index and again it’s the Indian business paying above the index.

It’s worth also seeing that in January, we also have to accept one voyage to India below the Index. Of these fixtures, some of them are for loading second half of March and some few also for April.

So some of the last fixtures here are employment into second quarter, but of course the majority of these fixtures are within this quarter. If we look at the right graph, it’s the waiting days.

January had a bit more waiting unaccepted close to four days per ship. This is again the course of the shutdown in Saudi Arabia in October and overhang of ships into November, December.

And these ships were taken away during January and the market continued firming and the waiting days went down to zero in February and March. If we look at Page number 10 and exports.

It’s very high and maybe a bit surprisingly high export from the Middle East in March and it’s mainly the Emirates exporting more than expected. Iran is pretty close to full capacity and Saudi Arabia and Qatar is also according to expectations.

In the U.S. we see the increasing export.

The third export terminal in the U.S. Gulf in Netherlands and Texas came on stream in February and this with the seven cargos.

And as you can on the graph also in March, the Netherland terminal exported full capacity. In March, we saw volumes in the Middle East - sorry in the U.S.

Gulf coming slightly down. This is a combination of some LGC lifting and also some fewer cargos from the U.S.

Gulf. We haven’t had the April numbers yet, so we are waiting to get confirmed April numbers.

We do expect them to grow back to close to 1.5 million tons per month. It’s very interesting to see the export pattern from the U.S.

Gulf. Last year, the U.S.

export to Asia was above 23%. First quarter this year, it’s about 34%.

In addition, our Sun loadings transshipments in Panama on the Pacific side were Panamaxes are discharging their cargos into VLGC like what we did on Monsoon, she loaded in Balboa from Panamax. So it’s very good news for ship employment with a high export from U.S.

Gulf to Asia. If we look at the schedule of the new buildings, Monsoon - well actually Breeze is the first one completing repair works.

She will be out of drydock tomorrow afternoon in Singapore. Monsoon is completing the work on Saturday and she is leaving drydock in China on Saturday.

There will be short sea tries per load by guest tries and both ships the Breeze will be load ready early June and Monsoon being a couple of days further away from the Middle East when the load ready along the 10th of June. So both ships are basically back in service from early June.

We are in continues discussions with the yard about the five remaining new buildings and of course we are insisting that they do the same kind of investigations on these ships prior to deliver than what we have done on the ships on Monsoon and Breeze. So far the yard has accepted to do this on 1074 and we are now in final discussions through frontline who is the contract holder across with the procedures for Hull 74.

This ship is basically ready for delivery and we say that they have to do further investigations to make sure that everything is 100% before we get her. And we haven’t really started on the deep time discussions on the remaining four that since the yard has accepted to do this work on own.

And looking into 1074, we do expect them also to accept the same for the other four ships. And if there is some repairs to be done, probably a couple of weeks delay according to the schedule we have today.

And of course if there are no repairs to be done, it will only take some three-four days delay. So to be a bit cautious, let’s say plus or minus three weeks delay if the yard is accepting to do this prior to delivery.

We have fixed Mistral on another voyage still on subject until tomorrow. So this is confirming that the ships are tradable and there are no challenges in getting them accepted from the customers.

So we do expect this subject to be lifted prior to return and the ship will be loading in early June in the Middle East. If we look at Page 11 the order book.

There are some changes on the order book. We haven’t been contracted in the Gulf yet because we still need confirmations.

As you all are aware of, China piece decided to walk away from the contract of six new buildings at Daewoo. The yard resold four of the contracts to BWLPG and the two remaining contracts for delivery in 2017 are expected to be confirmed, but so far it’s not confirmed, but we do expect to be confirmed.

There has been an order of three new ships in China, Jiangnan. They have launched a new design of 85,000 cubic meter compared to the 83,000 cubic meter we are building.

So PSW a Chinese owner has ordered three ships for delivery in 2017. And a Chinese - sorry a Japanese owner Kanrei is about to sign a contract for one ship for 17 delivery in Japan.

So there might be one or two additions to these numbers but there is nothing significant. And from what we are hearing from the brokers and from the market, there are no big discussions on any huge orders from any of the Shipyard, which is good news.

Consequently, we have not done anything to our market utilization outlook. It’s been very affirmed for ’15 and ’16, and ’17 is really very much depending on new buildings and also Balboa, Panama is going to be utilized.

Latest news from Panama seems like they could open already late first of early second quarter next year. They’ve even given us the tariff.

It remains to be seen how many VLGCs will use Panama if we’re going to use them laden and ballast or just laden. In our models, we have been using Panama laden and going through, that could hope South of Africa in ballast.

So obviously the market utilization into ‘17 is a bit uncertain but with the pattern history of the export from U.S. Gulf to Asia today, we feel that ‘16 as I've been saying many times, it’s fantastic upside and right now it’s looking very promising.

To summarize, we will continue to pay out some dividends based on the earnings from the very strong freight market. We continued to have a 100% spot exposure.

We are pursuing COAs, Contract of Affreightment but still we are marketing this on a floating price rather than the fixed-price. We’ll have the next five new buildings delivered most of them before mid-year.

And Avance Gas, the share has been the 14th most traded share on the Oslo Stock Exchange lately. And Oslo Stock Exchange has decided to move the Avance Gas share up to the main index from 1st of June, which we think is good for liquidity and we think that Avance Gas might even be even more popular share based on that.

Outlook for the remaining part of ‘15 is very good and as I said, we also still very optimistic for ’16. With this, I am opening up for questions.

Is there any question from…?

Could you elaborate on the 1074 and 1075 in terms of [Technical Difficulty] when should we expect this start generating revenue?

The 74 and 75?

Yeah.

Not really, 74 is about to be taken into drydock again and the yard as I have said, accepted to do the measurement and investigations. If they don’t find anything, she should be out within a week or 10 days.

If they find something, she might be delayed by plus or minus three weeks. So she should, by the late, this start making money towards end of June, early July.

75, I don’t really know yet. We have been contracting on 74, because the hard one to deliver 74 mid-May and there's been enough discussions.

And it's a bit complicated because we don't have any formal relationship with the yard, so all the discussion has to go through frontline. So there is a lot of people and a lot of - and the yard is trying to get off to it.

And so we concentrate on 74. Once we have sold up, we will work on the remaining four.

And this mark has been [Technical Difficulty]

No. In general, any new building coming directly from the yard quite often has to accept the discount.

So we will not be surprised if we have to do as well, but as a general discount, no way. And as I said, we - Mistral has been on the time of charter voyage loading and discharge in China.

She's now booked for her second voyage and it's a very good rate.

People are being to appreciate that U.S. LPG other small collapsed tomorrow, invested concern have shifted towards Asia’s technical ability to its view a lot more LPG even they do today.

And if I remember correctly, you mentioned that some months to go that you’d have been toward in Asia into the opportunities to investments in even capacity, right? Yeah.

Could you sort of just remind us about the outcome of those investments?

I think we have over the past two-three years in working and talking to potential customers if there has been any opportunity to develop receiving facilities for LPG in Asia either through Avance Gas or in a joint venture with Stolt-Nielsen customers. And the reaction we have got back from the potential customers in Asia has been very clear.

There is no bottleneck in receiving capacity for LPG in Asia. So no, thank you.

I have to say though that I think there will be room for projects receiving project. And I think this will mostly be floating terminals.

Today there are about 15 VLGCs, 15 around the world as receiving terminals. I think we - as the market is growing, I think we will see more requirement for floating receiving terminals.

But I appreciate that there is probably and the appetite for onshore and facilities for LPG import. But we are very relaxed when it comes to the Asian capability of taking all these addition incomes from the U.S.

Yeah. Hi.

And you talked about Mistral since trading, I mean has there been any issues witnessed to all as you’ve been with the Monsoon and Breeze, that will be completely with Avance Gas?

There’s been no issue with Mistral after delivery to Avavnce Gas.

And then secondly, I mean there might be some delay to refill your account, the processing now other companies and some delays of vessels, which - is it made visible or do you think that the yards are actually taking to that too much work on in terms of those final delivery on time in 2015 especially?

Are you asking about all the Chinese ships or in general?

In general.

I don’t expect to see any slippage from Korea. The Korean yards are extremely professional and they are delivering on time if anything they deliver prior to the contract date.

So I think we’ll see all the Korean and Japanese ships being delivered on time.

And then the last question. I mean you mentioned the LGP shipment, transshipments out of the U.S.

just a consequence of shipping capacity being so quite, it looks or is that you can only fist of all doing the transshipments?

It’s tight shipping. When there are only four Panamaxes in the world, 75,000 cubic meter ships, these going back and forth through Panama in the time and some of these cargos are discharged into South America, some cargos are discharged into other VLGCs industries and go across Pacific.

In addition, we’ve seen a couple of listings on LGCs but they are very few. So the majority is loaded on VLGCs and on these four Panamaxes.

Did you see any duel split between MGCc to the LGCs [Technical Difficulty] or is it primarily LGCs and the VLGCs?

It’s really only VLGCs and Panamaxes and a couple of few LGCs.

Okay, now we can take questions from the callers.

Okay thank you for coming and thank you for dialing in.