Avance Gas Holding Ltd

Peder Simonsen - Chief Financial Officer Christian Andersen - President

Unidentified Analyst -

Thank you. Thank you for dialing in and thank you for those coming here today.

Let's move to Slide 4. The highlights for the quarter, we saw the effect of fleet growth in third quarter which saw commercial effect in the fourth quarter impacted freight markets.

We saw Middle East exports were down in line with expectation. And we saw that US export grew which added Ton-miles to the market.

And we had a TCE raised on average $12,163 from $7,500 in the third quarter. And as you can see on the graph on the right side we were higher than Avance Spot Index adjusted 30 days both in the third and fourth quarter.

On a full year basis, we ended up at $10,600 for the year, above the index which came in at $10,300. We have available liquidity at quarter end of $112 million which included $50 million in un-drawn available RCF.

If you look at the P&L, the TCE earnings came at $15.3 million, which was up from $9.7 million in the previous quart. Our operating expenses A&G and non -operating expenses were more or less in line with the previous quarter.

We saw that our OpEx came in at $7,600 for the quarter just marginally up from last quarter. Our G&A ended up at just above $1,000 per ship per day in line with last quarter.

We reported net loss of $12.3 million which compared to a net loss of $17.8 million in the previous quarter. Moving to Slide 6 of the balance sheet, the main change in the balance sheet this quarter is we drew $15 million on our revolving credit facilities.

This resulted in unchanged total balance sheet of $910 million, with the added cash from the drawdown and an increase in receivable offset the normal depreciation of the fleet. Our total interest bearing debt was $487 million, which was $10 million up from previous quarter, and we had shareholders' equity ratio of 44.4%, slightly down from the previous quarter.

We remain in compliance with all our original financial covenants with the comfortable cushion at the quarter end. Moving to the cash flow, much of our balance sheet -- it was mostly impacted by the increase in cash due to the drawdown on the revolver.

And we also recorded cash flow from investing activities, and the dry docking of the Avance which was completed this quarter. Our cash position at the quarter end was $62.3 million and the total liquidity as mentioned at $112 million including $50 million in available credit.

Moving to Slide 8, our cash breakeven for 2017 was $17,200 per day which includes a reduction in principal payments in accordance with the bank agreement that we entered into one year ago. We continue to focus on maintaining low cash breakeven.

As you can see from chart on the right hand, our OpEx for the year was $7,600 per day. This is down from $7,800 for the full year 2016, and just below $8,000 per day in 2015.

So we continue to focus on pushing cost down where we can. The A&G per ship day is around $1,000 per day and this is down from $1,300 per day in 2015, and just above $2,000 per day in 2015.

We have five ships due for docking during 2018, and we estimate the CapEx for these dockings at the total of $9.5 million. Well then have over to Christian.

Thank very much. I think we can agree that also in the fourth quarter last year was bit disappointing.

TCE, we saw effects of eight new buildings delivered from Avance third quarter coming into the freight markets in the fourth quarter, moving downward pressure on the freight. However, if you compare fourth quarter to the third quarter, the TCE is higher seasonality is a bit higher in the recent period this year.

We have seen increased volume and increased Ton-mile in the fourth quarter. We did six spot fixtures during the fourth quarter as you can see on the graph on page 9, and the docks above the furrow line is spot fixtures and placement is indicating when the fixtures were done.

Normally, we think in today's markets 15 - 20 days before loading in Middle East and around 6-10 weeks before loading in the US. And the spot fixtures within fourth quarter, three was loading in the Middle East; two were loading in UWCO and one was loading in West Coast, US which is currently - and was the fixtures based on fixed price, total confirm fixture.

We also have the certain contract replacement nominations during the fourth quarter and all these are 100% floating thing based on important prices Middle East freight pricing. As Peder was mentioning, we started our dry docking program in the last year and our older ship in Avance 2003 built was docked in the end of November.

The high end Korean ships are due for dry dock next. We have two of the ships both complete, for Q1 has completed, one is preparing to go in and each of these docking will take about 30 days.

That's including gas stream, including the work in the yard, and it's including positioning and gasing up again after the docking. We have two ships scheduled for docking in the second quarter and the last one of these ships is scheduled in Q4.

This is in 2003, 2008 and 2009 built ships and the Promise is schedule to finish by fourth quarter this year. We have not finished the [Indiscernible] We have this morning Passat couple of weeks ago, she drifted into an anchor ship as she was preparing to going for discharge in South Korea.

And nose dived was involved and also fortunately there was no injuries on people and no pollution to the air or water. But again we have a small penetration indeed and we had water into the ship, and it will take time to repair.

But repair in the hull is quick and you see it the hull come to repair is the installation over time, we had some water in the installation and so we need to do some installation and different use and change. It's not very complicated but it takes time but we have to dry off and we have to [Indiscernible].

We still don't know exactly how long time this will take, we do expect that ship will back in service again soon in April. If we look at the fleet utilization last year around first week, has the utilization of above 92%, this is more or less same as we had in 2016.

And if we look at the global fleet utilization according to [Indiscernible] led Global VLGC fleet have 85% utilization last year. So we are a bit above that, we have slightly more than 2 days waiting on average per ship per day last year.

If we move to page 11, there is a picture of new building, and fortunately we have had a big order book delivered as of today. The order book is about 30% of the existing fleet.

This year we expect 11 ships to be delivered. There are four ships delivered in January, there are a couple of Chinese ships sitting at Jiangnan Shipyard in Shanghai.

They have been completed since early last year and they are ready to be delivered, but we don't know exactly they will enter the market in February or March; some ship brokers suggest that they will come into the market in March. So a couple of more new buildings, February and March, and then we are basically done for this year.

And there are two more ships scheduled for December, but that would be surpassed essentially to January next year. Unfortunately, the order book for 2019 is building up, and right now we have 17 ships that can't use, it's too late to deliver order ships for 2019.

So this is basically what we have got. But of course, there is ample capacity for 2017, so far 11 ships are ordered for the delivery.

We have seen couple of scrapping, 299 ships have been scrapped so far this year. We have ship brokers are suggesting that there will be more scrapping towards 2020 when the new initial regulations come into force.

If you look at Page 12, we see a picture of the export for Middle East and Gulf, the two most important areas for LPG export. And as you can see on the right hand side, there is continues increase and growth in the US export.

The last year the VLGC export from US Gulf Coast ended up 24 million tons from 19.7 million ton. In the Middle East, the export was slightly down last year as expected is basically because of crude cut backs in Saudi Arabia, so this is because of OPEC.

And I think what is key to understand the trade market in 2018 is to look at the right hand graph, what's going to happen this summer. If you look at the listings last year, you can see that orders were very low and this is basically because of our own Hurricane Harvey, over loading in US Coast in last days of August get cancelled and it picked up again in September.

It's good news to see that the last four months in 2017 has an average of 46-47 cargoes and if we turn to the next page, Page 13, you can see here and also bit piece here and the indications for January, this is to be confirmed, so just it's 54-55 cargoes listed in January. And this is confirmed it's 4x high, Nederland list, and so many lists for US Gulf and US East Coast.

So this is good news. But we need the history back from 2015 and 2014 to repeat where we have the continuous growth throughout the year.

And we rather not like to see 2016 and 2017 repeat it where a number of exports during from the time came down. There are infrastructure investments going on, it is upgrading on pipeline in the US and both to US Gulf and to US East Coast.

As far as we understand the pipelines to US Gulf is on track and we expect the producers to be able to get more and more recruit [Indiscernible] but the pipeline to market search is a bit delayed. It was originally scheduled for end first quarter, early second quarter.

We now think that this will be towards end of the quarter this year. The good news with the US export if we turn on to Page 14 is that the increase of LPG from the US to Far East is growing.

If we go back to 2016, 52% of the US export went to Far East, and we were quite happy with 52%, but in 2017 is as much as 66%. So the Ton-miles are growing, increased the volume and big, big percentage going to the Far East.

So to summarize, we are optimistic for 2018. We do see that the LPG product is coming -- is produced more we see even with the setback of crude oil, [Indiscernible] that is big increased in crude oil production and nitric gas production which gives us more LPG.

And this LPG we expect to be exported. So the growth is of promising.

From other ship you saw on this graph new building, list has been ordered in December and January. We haven't seen any last few weeks but we do expect the order book for 2020 to increase somewhat.

I think I am going to end my presentation by this, and I am fairly optimistic spot for 2018 and open up for questions.

[Question Inaudible]

It's a bit difficult to quantify how much new business we expect going forward. There are still couples of options out there.

We don't have from -- option. They are telling us but it' unlikely they will clear them.

We are not aware of any other options and only activity we really don't know is that some Indian ship owners are in dialogue with Avance for new orders. They have been quite some time and it hasn't materialized yet.

So we still think that they are struggling to get the terms they need in order to placing order. Recent quarters have been traders and importers, we haven't seen any orders from traditional ship owner, if ship brokers are right that there will be more scrapping towards 2020, if I believe quite likely that we will see a couple of orders from traditional ship owners as replacement like [Indiscernible] recently, but it's very difficult to have any opinion of them now.

[Question Inaudible]

What we see today is that there is a difference between the Middle East market and the US Gulf market. And I think we are talking about spot market.

So there is downward pressure on the spot market in the Middle East and this is very much driven by customer dealer, lifting of the competition to the cargo. We don't see this there is left for much in the Atlantic basin so that US freight is higher, across the volume is more or so we can't really take this through global basis, but [Indiscernible] though I think if the ship owner with certain fleet is able to have the balance between the Middle East and the US Gulf.

It's quite likely that we have return even in today's market which is above over cash breakeven. I do think that if we maintain a next quarter let's say 55 cargos a month from US; I think the freight market this year will be very strong.

[Question Inaudible]

There is always some activity in the trade market, -- market, there are a lot of, there are a number of customers out there and try to ship on fixed price. And we think that they are looking for numbers in high teens, low incentive, we don't-- we aren't interesting in locking in those numbers and we don't see that any of other ship owners either to -- smaller owner with the smaller fleet might be tempted to take plunge after and close deal for a year to close to cash breakeven

[Question Inaudible]

To compare new building prices where some people are closing prices in let say two day certification and some people are talking prices in tomorrow's certification which will have a tier 3 ship which will have a new gas code implemented. So I think that if you got agree today and like tier 3 ships either with tier 3 engine or with the scrubber solution, you are probably in the mid less below mid-70s.

I think in China you are probably in the very high 60s if you compare VLGC ships. If we quote sufficient ships without scrubber and without tier 3 engine, you would probably have it priced below mid-60s towards low 60s.

[Question Inaudible]

Yes. I think that it's quite likely that rather than scrapping old ships, they will try to find employment and storage.

Right now these prices are quite high. So we do get the good price for scrapping an old ship.

But I think for anyone with old engine think about is it worth scrapping or should I try to do turn something internal on that. We haven't seen that recently, no.

Any further question from the audience?

Okay. Since there are no further questions.

Thank you for coming.