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GasLog Ltd. (NYSE:GLOG)

Q4 2013 Results Earnings Conference Call

February 28, 2014; 08:30 a.m. ET

Executives

Paul Wogan - Chief Executive Officer

Simon Crowe - Chief Financial Officer

Jamie Buckland - Head of Investor Relations

Analysts

Michael Webber - Wells Fargo Securities

Jon Chappell - Evercore

Chris Wetherbee - Citi

Fotis Giannakoulis - Morgan Stanley

Herman Hildan - RS Platou Markets

Nishant Mani - J.P. Morgan

Operator

Good morning. My name is Maureen and I will be your conference operator today. At this time I would like to welcome everyone to GasLog's fourth quarter 2013 results conference call.

All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions). As a reminder, this conference call is being recorded.

Today's speakers are Paul Wogan, Chief Executive Officer; Simon Crowe, Chief Financial Officer; and to commence the call, Jamie Buckland, Head of Investor Relations at GasLog.

Mr. Buckland, you may begin your conference.

Jamie Buckland

Thank you, Maureen. Good afternoon everyone and thank you for joining us for our fourth quarter 2013 results conference call. As a reminder, this conference call webcast and presentation we're using this afternoon are available on the Investor Relations section of our website, www.gaslogltd.com and the replay will also be available.

As shown on page two of the presentation, many of the remarks we made this afternoon contain forward-looking statements. Let me refer you to our Q4 results press release and our reports filed with the SEC, where you will find factors that could cause actual results to differ materially from these forward-looking statements.

In addition, some of our remarks this afternoon contain non-GAAP financial measures as defined by the SEC. A reconciliation of these to the most comparable GAAP measures is attached as an annex to the presentation.

If we now turn to slide three, the agenda for the presentation. I'll hand you over to Paul Wogan, GasLog's CEO.

Paul Wogan

Thank you, Jamie. Good afternoon and good morning to all of you in North America. Thank you to everyone for joining us for our fourth quarter results.

On today's call, I will give you an overview of our fourth quarter highlights and performance and provide a summary of GasLog’s achievements this year. Simon will then review the fourth quarter financial results and provide a summary of our forward committed revenue.

I will then give an update on the LNG market in Q4, followed by an overview of our fleet and charter information, and this will include our two recent announcements which happened after quarter end, mainly the fact that we have made a confidential filing to the SEC for an MLP and the acquisition of the three shifts from a subsidiary of BG Group. So please turn to slide four of the presentation.

It has been another excellent quarter for GasLog with record earnings. We took delivery of two ships, further increasing the size of our on the water fleet to eight vessels. These two deliveries have additional significance. The GasLog Chelsea was the first time we’ve acquired a second hand vessel from a third party and our first ship with exposing to the shorter-term market.

I’m pleased to advice that since we’ve purchased the vessels she’s been active in the slot market with multiple charters through the fourth quarter and into 2014. And the GasLog’s Seattle, which delivered in December, was the first of our vessels to commence a multiyear charter to Shell.

We also added to our fleet after the end of the quarter as we agreed to acquire three ships from BG Group, each with a six-year charter back to the seller. Upon completion of these acquisitions, our wholly owned fleet will increase to 18 vessels, an 80% increase from this time last year.

Let me now hand you over to Simon who will take you through the fourth quarter financial results in more detail.

Simon Crowe

Thank you, Paul. Good morning and good afternoon to everybody. For me the fourth quarter of 2013 continued to demonstrate our ability to deliver on plan and to execute on some of the growth opportunities that we see in our industry. We have released a strong set of financial results and made two significant announcements in January about the planed MLP and the three BG ships that we are acquiring. I’m very pleased with our progress in 2013 and remain very optimistic about the growth potentially in the coming years.

I will now take you through the financial highlights for the quarter, talk about the recent announcements and provide some commentary on 2014. Please now turn to slide five of the presentation.

Revenues for the quarter increased significantly by over $41 million to approximately $59 million compared with the same period in 2012. The increase is largely attributable to the six ships that were delivered through 2013.

Our solid revenue figure is underpinned by the 100% utilization of all the ships in our contracted fleet since delivery. This increase in revenue versus this time last year was partially offset by an increase in operating expense around $10 million and higher depreciation of $7 million, both due to the growth of the fleet. This gives an increase in profit from operations of about $24 million.

You can see there have been sharp increases in EBITDA, profit and EPS over the last 12 months as we’ve continued to deliver on our plan. EPS for the quarter has been calculated using $62.8 million shares, post the recent equity raise. Our share account is $76.1 million.

I want to highlight that in the quarter we had an interest rate swap gain of $3.9 million, taking the full year interest rate swap gain to $17.2 million. This is a non-cash charge and our adjusted figures shown on this page are all stated without any of these exceptional gains.

You can see at the bottom of the table, our time charter equivalent rates for the period. For the full year we delivered a rate of just over $80,000 a day, and in Q4 we were, mainly thanks to the contribution of the Chelsea, able to deliver a rate of almost $87,000 a day. Later on I will talk to you about how you might want to think about rates in your models for 2014.

Please now turn to slide six of the presentation. This shows the positive growth across all of the metrics. This confirms to me that we are delivering on plan and on budget.

Please now turn to slide seven of the presentation. Fixed assets have increased materially with the continued rollout of our fleet and this will continue to increase as vessels move from a construction phase to delivery. The vessels under construction figure shows the phase payments that we’ve made to Samsung for our ongoing new build program. At the year-end we had just over $100 million of cash in the bank, and we’ve added $200 million to this figure in January as a result of the recent equity raise.

If we turn over to slide eight of the presentation, you can see that the borrowings add up to about $1.1 billion, reflecting the financing for the new buildings delivered, the financing of the Chelsea and the proceeds from the NOK Bond that were completed during the year.

So to summarize the last few slides, we’ve had a very strong fourth quarter, where we have beaten our budgets, strengthened the balance sheet and prepared for more growth.

Turning now to slide nine, we showed the detailed picture of our debt facilities. During the quarter we drew down on the loan for the GasLog Seattle, which was delivered in December. I’ve also included the loan for the three BG ships in the table for illustration purposes. We would draw down on the $326 million for those ships in the next few months. The facilities to hold 2042, 2043 and 2044 are committed and will remain un-drawn until delivery. Of the committed facilitates, we are approximately 65% hedged into fixed rates.

Please now turn to slide 10 of the presentation. The table here includes the fixes for the Chelsea and the recent BG three-ship transaction and takes our committed revenue out to 2026 to over $2.5 billion. You can see that by dividing our overall committed charter revenue, by our total contracted days, you get to a time charter rate of about $77,000 a day, which takes into account the new fleet mix. You might want to think about using this sort of rate going forward for conservative modeling purposes.

The recent accretive BG transaction gave us an opportunity to increase our fleet flow and liquidity of our common stock. We sold just under 11 million shares to the market at $15.75 per share and $2.3 million shares in the concurrent private placement. We were delighted with the response to the offering.

I wanted to say a few words on the outlook for 2014. The table shows that we have committed revenue for 2014 of about $278 million. We have a number of variables for 2014 that will impact both our revenues and our costs.

First, we have some remaining uncommitted days showing for the Chelsea that we are working to fill. She has been active since the delivery last year and we have her fixed from early summer, for a minimum of seven months of what we believe is an attractive rate.

Second, we have assumed in the table on page 10 that the three BG ships deliver by May 1 and this may change. Third, as a result of buying the three BG vessels, we will as expected loose approximately $2 million of management income per annum.

Four, the euro dollar FX rate continues to show strength against the dollar. Most of our shore-based costs are in euros, so this may impact us going forward.

Finally, our G&A cost will increase by about $2 million this year, as we add resources to take account of the dramatic growth in our fleet and prepare for the launce of the MLP. We continue to remain very cost conscious and take a very disciplined approach to adding to our cost base.

None of these should be a surprise to anyone, as they are part of what we do at GasLog. We are managing them on a day-to-day basis and see the investments in people and resources as a prudent way to anticipate the profitable growth that we see coming in the next few years.

So, we have a very stable, secure and predictable revenue stream going out until 2026. This solid revenue base gives us the flexibility and the optionality to look at additional accretive opportunities in both the short term and long-term markets. We have also continued to enhance our financial flexibility and the options available to us to fuel our platform going forward.

Before I hand over to Paul, I just like to sum up the last 12 months at GasLog from a financial point of view, because I think we’ve had a very successful year. We have financed six new deliveries in 2013, accessed new sources of capital in the Norwegian bond market, raised our dividend and brought new banks into our bank group.

Post the quarter end we announced our intention to file a perspective for the MLP and further diversified our funding options, as we access the equity market raising approximately $200 million in our first ever follow-on for the BG transaction. We remain on tract, on budget and are well ahead of our plan.

And with that, I’ll hand over to Paul to take you through the next part of the presentation.

Paul Wogan

Thank you Simon. Please turn to slide 11, the market update. We continue to be very optimistic about the long-term potential of the global LNG market. The near record high gas prices we are presently seeing in Asia and South America are further evidence of the continuing strong demand for LNG. This supports our thesis that LNG will play an increasingly important role in global energy markets for many years to come and will in turn continue to support multi-year forward rates in LNG shipping.

The stock market rates for LNG have fallen, both LNG shifting have fallen from their winter highs in recent weeks. The demand for LNG remains robust or a lack of available cargos has led to a build-up of unfixed ships, particularly new buildings that need to be cooled down.

We expected to see rate volatility in the short term market ahead of the new liquefaction projects coming online, and based on this market assessment, we have ensured that our fleet have largely contracted over this period, so that we do not have significant exposure to short term fluctuations in the market.

However as we look at the shorter-term market, there is course for optimism and several projects either started around production in 2014. Papua New Guinea LNG is due to start production in the second half of the year and when fully optionally will produce just under 7 million tons of LNG per annum.

Curtis LNG in Australia is on track to begin production by the end of 2014 and has nameplate capacity for train 1 of over 4 million tons per annum. Finally Angola LNG scheduled to ramp-up production this year and expects to be a full nameplate capacity of 5.2 million tons per annum by the end of the year.

But also in the longer term there continues to be positive developments. In the U.S. Cameron became the fifth product to receive the Department of Energy approval to export to non-free trade association countries and when fully operational will have a capacity to produce about 12 million tons per annum.

Also in the U.S Freeport received a Department of Energy approval to export to non-free trade association countries from its third trade, having already received approvals for trains 1 and 2. Lastly in Russia the Yamal project has taken a final investment decision. At full capacity the project is expected to produce about 16.5 million tons of LNG per year.

However it’s also important to note this is not just a supply story and the demand for LNG continues to growth. A good example of this is China, the world’s largest energy consumer, where in recent months a number of new LNG import terminals have been completed and a number of others are under construction.

First December and then subsequently January were record months for Chinese LNG imports, with January imports increasing 77% year-on-year to 2.65 million tons. China continues to promote this natural gas as they look cut pollution and the National Energy Administration in China is forecasting gas demand will rise approximately 14.5% in 2014.

Please now turn to slide 12. For some time now we’ve been highlighting that we felt there would be opportunities for consolidation in the LNG shipping market. The acquisition of the GasLog Chelsea from STX Pan Ocean in October signaled our intent to be consolidated in the industry. We’ve been very pleased with the performance of this vessel since we took delivery and are particularly pleased to have placed it on a seven month charter commencing in the early summer and what we believe will be a strong rate.

But on a consolidation theme we followed this up in January this year with an agreement to acquire three ships from a subsidiary of BG for a total of $468 million. The ships will be charted back to BG for a six-year period and BG has options on two of the ships to extend the charter land by three or five years. We know these ships very well as we oversaw the construction at the yard in Korea and have managed them since delivery.

The addition of these underwater vessels with their charters adds approximately $420 million in total committed revenue over the six-year period and around $50 million of EBITDA per year. The transaction is immediately accretive to earnings per share.

We continue to be excited about the potential for further industry consolidation. We feel these opportunities will potentially arise, both from oil and gas majors divesting in their existing fleet and from smaller industry players exiting the market. We feel we are very placed to take advantage of these opportunities as and when they arise. However, I would also like to stress that we will only pursue consolidation opportunities if they look attractive both financially and operationally.

Please now turn to slide 13, the GasLog owned fleet. This chart, which we have shared with you before, continues to grow and with the additional of the three BG steam ships we now have 18 wholly owned ships in the fleet.

In terms of opportunities for further growth, you can see at the bottom of the chart that we continue to hold six options with Samsung, four of which are priced. These options were originally due to expire at the end of fourth quarter, but due to our strong ongoing relationship with Samsung, we have now extended them to the end of this quarter.

So now please turn to slide 14 for the summary. Well, it has been a very busy year for GasLog. We have executed on the business plan we set out at the time of our IPO. We delivered five new buildings into multi year charters with BG and Shell. We achieved 100% utilization of the contracted fleet and we declared the dividend for the fourth quarter of 2013 of $0.46 in total.

In addition we have grown the fleet by over 80% and added an excess of $1.4 billion of contracted forward revenue to the business. And as you would have seen already in the first few weeks of 2014 with the announcement of the MLP filing and the acquisitions of vessels from BG, we continue to look for opportunities to profitably grow the business.

The forecast expansion of the LNG industry, combined with GasLog’s experienced technical platform, proven track record of execution and willingness to drive consolidation in the market, we are confident that we will continue to see attractive growth opportunities for our company and our shareholders.

And that brings us to the end of the speech. Operator, if you could please open the call for questions.

Question-and-Answer Session

Operator

Thank you (Operator Instructions). Thank you. We will now take our first question from Michael Webber. Please go ahead.

Michael Webber - Wells Fargo Securities

Hey, good morning guys, how are you?

Simon Crowe

Good.

Paul Wogan

Michael fine. How are you doing?

Michael Webber - Wells Fargo Securities

Good, good. I wanted to ask a couple of questions around the, around your recent filing and announcement around MLP spend. And first and foremost I know you kind of touched on this in your addressing the prepared remarks, but if you could give us a kind of a more detailed sense of the timeline for when you think that, that could actually come to fruition. And then as kind of a second part to that question, how many assets or maybe in terms of market cap, how big of an initial market cap do you think would be needed for a viable MLP.

Simon Crowe

Mike hi, Simon here, thanks. As you know we’ve made the confidential filing. We are limited in what we really can say at this point. I mean my hope and expectation is we work through the SEC process over the coming months and I’d hope to be able to be out there by the early summer, that’s my hope if not sooner. But in terms of the assets and the composition, again we are limited to what we can say. We are trying to keep our MLP as straightforward as possible.

Michael Webber - Wells Fargo Securities

Okay, that’s helpful. You mentioned also in your prepared remarks that you kind of went through the BG acquisition and they obviously still have some assets there at their wholly owned fleet. Is that your biggest option in terms of additional growth and what do you think the rightful way it is, with their additional BG kind of sales, we expect opportunities fro you guys on that.

Simon Crowe

Yes, I can’t really speak for BG themselves, but as we look at the opportunities in the market of consolidation, we do think in general that the oil and gas majors will be looking to divest their fleet and that’s where one of the areas we see, that there will be opportunities going forward.

I think also as we said before, there are a number of smaller players in the industry at the moment, who I think are going to find it difficult to continue to work in an industry where their charters and customers, I think are looking for the larger players to support their projects. And so we think there’ll also be opportunities from industry consolidation of smaller players in the industry.

Michael Webber - Wells Fargo Securities

Got you. No, that makes sense. One more thing and I’ll turn it over. Paul you mentioned the Yamal tender and those (inaudible) LNG carriers and Angola seems like its also out there, but can you maybe give us a bit more color beyond those two, where the tenders are currently out there and what you guys might be looking at and maybe kind of comp that tendering activity maybe to – on a year-over-year basis what it looked like last year versus this year and how do you think that will progress through the first half of this year.

Simon Crowe

Yes, I think yes, it’s really interesting at the moment Michael. You named a couple, but there are quite a number of open tenders our there at the moment and its difficult for us to comment on any of these specifically. But if I look at the tendering activity now compared to this time last year, I would say its increased quite considerably and there are quite a number of ships which are going to be needed for the new projects coming up. Yamal is obviously one that you mentioned, but also the off takes from the U.S. production as well. So as we are looking out at the moment, there are a number of tenders that we are looking at.

Michael Webber - Wells Fargo Securities

Got you. Can you put a number around that or a number in terms of the vessels that are required by the major tenders out there, the number of tenders? Is there a way you can kind of quantify that?

Simon Crowe

You are certainly looking in access of 40, 50 vessels at the moment.

Michael Webber - Wells Fargo Securities

Okay, that’s very helpful. All right guys, thanks a lot. I’ll turn it over.

Paul Wogan

Thanks Mike.

Operator

Thank you. We will now take our next question from Jon Chappell from Evercore. Please go ahead.

Jon Chappell – Evercore

Thank you. Good afternoon guys.

Paul Wogan

Hi, Jon.

Simon Crowe

Hi Jon.

Jon Chappell – Evercore

Simon, I wanted to ask a little bit about the Chelsea and the impact on the fourth quarter top line. It was significantly higher than we though and you only added one vessel. I went back to the third quarter presentation just to check the average GP rate and it went from about 76,800 to 86,700. If you do the math on just one ship, that’s like mid 100,000 a day. Were there any other seasonal escalation bonus; anything else that distorted or inflated the revenue number in the fourth quarter? Is that strictly just the impact of the Chelsea?

Paul Wogan

It was mainly the Chelsea Jon. By we had one or two other things that helped during that quarter, so mainly the Chelsea. I mean the guys have been doing a fantastic job on the Chelsea. They really have been in the market. I think the charters have approached us and we’ve had – we’ve been very active and achieved some pretty decent rates as far as I can tell.

So its mainly the Chelsea Jon, but as I said in my remarks, I mean if you sort of do the math now with $2.5 billion, that is our contracting, you get to about 77 and if I was a conservative modeling sort of guy, that’s the kind of full par that I would plug into my models just sort of going forward, you know the conservative estimate, but that’s where I am.

Simon Crowe

Yes, I think Jon as well on that – hi there. You know I think we did well in finding charters for the Chelsea and I think it speaks well to our platform and I think it speaks well that we’re – I know we’re a choice for a lot of charters out there, but I think the stars also align for us, so we did particularly well with the Chelsea in that quarter and we are pleased with that, but sometimes as the stars align you do better than the market.

Jon Chappell – Evercore

Right. And then you have two, you mentioned in the presentation, two short-term contracts for the Chelsea in the first quarter. How did those match up against how it performed in the fourth quarter and then also could you give any type of kind of ballpark figure around the seven-month contract starting in the summer?

Paul Wogan

Yes, I mean I think, its fair to say in the first quarter we did see rates starting to come off, so that’s certainly the case that we saw for the Chelsea, but I think if you look at the rates for the – if you take our long term contractor rate that we’ve been talking about, for the Chelsea on the seven month charter, you can look at the rates sort of in excess of those long term charter rates that we’ve been talking about. But certainly in the first quarter we weren’t as strong as in the fourth quarter.

Simon Crowe

That’s right.

Jon Chappell – Evercore

Okay, makes sense. On the BG transaction, I just wanted to discuss a little bit, the decision to go with steam vessels as opposed to the majority of the fleet being the TFTE. What are your thoughts around the residual value of those ships once the contracts expire and what’s the difference in the economics of acquiring those vessels versus the TFTE vessels in your fleet?

Paul Wogan

Yes, I mean I think we looked at that quite closely. When we’re analyzing our projects we like to sort of take everything into consideration. So I think the first thing for us as we’re looking and saying, okay, those ships were to come off contract at the end of the six years; the options weren’t taken by BG. We think that’s going to be a strong market you know. As we look at the liquid fraction plants coming on towards the end of the decade, we think that will be a strong market they come into.

In terms of residual value, I think its very difficult at this point to sort of say where do we see that residual value. So what we did do is, look at how do we think those ships are going to perform. What’s important to the charter is what’s the unit rate cost? What’s the delivered cost per molecule of gas, and we took a look at the written down value of the vessels at that point and said okay, if we are competing against say a modern TFTE vessel and we have to be competitive with that, how does that look in terms of the time charter for the equivalent and we felt very comfortable with the rates that that comes up with you know; very competitive time charter rate. So that’s kind of how we looked at it.

Jon Chappell – Evercore

Okay, understood. My last one just has to do with the two new builds that do not have charters attached yet. I think the plan probably 12 months ago was to definitely have those chartered. Now you obviously have a much bigger fleet with a lot more contract backlog and also have some success with the Chelsea in the short-term market. Have you changed your plans at all around contracting those for a longer-term period?

Paul Wogan

I think we remain the same. I think we’re going to be opportunistic and say, where can we see the value for those for the company and the shareholders. And I think what we’ve done with the GasLog Chelsea over the last few months is given those optimism about how we can trade those vessels. We always thought we would be able to…

But also I think there are still opportunities showing for longer-term contracts and if we feel those are the best way to sort of create value for the company, we’ll go for them. So the great thing about having as you said, the sort of forward cover and mostly the ships fixes, we can be opportunistic and look to take the value where we see that either in the shorter term or fixing the ships for the longer term business.

Jon Chappell – Evercore

Okay and just a final follow-up on that. If you were to pursue a long-term contract, how far ahead of delivery would you want to have that kind of locked up?

Paul Wogan

Well, I think we’ll just again – sorry, it sounds like we’re saying the same thing, but I think we’ll be opportunistic on it. There are a number of things which we’re looking at, at the moment. If those showed the value that we want, then we’ll be happy to do them at any time between now and when the ship comes free.

Simon Crowe

Yes, yes.

Jon Chappell – Evercore

Okay, understand. Thank you Paul; thanks Simon.

Paul Wogan

Thanks Jon.

Operator

Thank you. We will now take our next question from Chris Wetherbee. Please go ahead.

Chris Wetherbee – Citi

Hey thanks. Good afternoon guys.

Paul Wogan

Hey, Chris.

Simon Crowe

Hi Chris.

Chris Wetherbee – Citi

Hey, I just wanted to – I think during the prepared remarks you mentioned that the timing of some of the BG ships might be adjusted somewhere. I guess I just wanted to make sure I understood sort of what we would be thinking about there sort of earlier or later. Just wanted you to give a sense if there is, much variability here that’s just sort of a little bit shorter term.

Paul Wogan

Sure, sure Chris. I mean we said today May 1 we take delivery of the three BG ships. We think that’s a reasonable external at this point in time, so its how we are modeling it. I put it in May 1 and that’s how I would run my model. I mean yes, things do change, but that’s a reasonable conservative estimate at this point in time.

Chris Wetherbee – Citi

Okay, that’s helpful. And when you think about the options that you have, I know you pushed those out, I think you said to the end of the quarter and that’s helpful. What’s sort of the dynamic or the thought process behind making that decision or not making that decision? What sort of intent, devices you guys to pull the trigger on the options specifically, relative to what you see in the market otherwise?

Simon Crowe

Yes, I think the great thing obviously about options is you get optional value from them. I think we’re particularly lucky and the fact that we have a very strong relationship with Samsung built up over a number of years and they are happy to work with us as you’ve seen both on these ships and previous options to work with us and keep that option obviously open for us. And once we have that ability to do so, I think we’ll take advantage of that.

But obviously there are – we’re seeing quite a number of opportunities in the market, so we’ll take a look at those, but whatever, we can continue to push those out and keep those options available to us, then we’ll continue to do so.

Paul Wogan

Yes, I think just to add to that, I mean we have a great relationship with Samsung. We’ve got some good prices and some good payment terms from those guys and we see the market strengthen when those ships deliver; I’d say that’s the key. So we’ll weight up all those factors, but you know the greatest or the beauty is we’ve got a very good relationship with Samsung and we talk to them all the time. They give us maximum flexibility.

Chris Wetherbee – Citi

Okay, that’s helpful. And then my final question will just be around as you think about sort of your customer exposure and obviously there’s some concentration there and understandably so, but when you think about in sort of the context or further expansion through the MLP opportunity, how likely is it sort of shorter term potential.

You had a little bit more customer diversity to the overall fleet and that’s something that sort of a priority or just more just sort of opportunistically wait and see whether that opportunities come. I’m guessing it’s the latter versus the former, but just wanted to get your thoughts around that.

Simon Crowe

Yes, it’s a good question. I mean as the CFO I think about concentration risk, but I mean its one of the best. The best companies out there in the space is BG, but I think the answer to your question is it’s a bit of both really. We are looking to diversify the customer base, that’s no doubt and we’ve been very successful with that, but in the short term market with the Chelsea, we’ve had several charters in there with what I think are pretty interesting customers and that may lead to some more long term work, but it gets us into the door. They get to know us. They’ve been very pleased with our performance.

So I think from a risk diversification perspective, we’re thinking about that quite a lot and thinking about trying to diversify. There’s a proactive approach, as well as waiting to see what does turn up and what tenders we can win and what new business we can get.

Paul Wogan

Yes, and I think I would agree how hard it is to do what’s Simon’s saying there, but just backing up what Simon started up with, you know we’re doing business with probably one of the most active and dynamic companies in the business, BG, and I think there’s a lot of our competitors out there who would love to have the business that we have with them, so that’s also pretty strong.

Chris Wetherbee – Citi

Yes, I know. That’s a very good point and I guess it makes sense. You might be able to find some new opportunities to the shorter-term market with the Chelsea as well, so very helpful. Thank you very much for the time. I appreciate it.

Simon Crowe

Thanks Chris.

Paul Wogan

Thanks a lot.

Operator

Thank you. We will now take our next question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

Fotis Giannakoulis - Morgan Stanley

Yes, hi and thank you. You mentioned earlier how thoughtful you are about the long term prospects of the LNG shipping market, both on the supply of LNG and the demand. However the market seems to be quiet and there is for the near term for 2014 and 2015 and we saw that you had some very good results for the Chelsea.

What is the situation right now in the near term and opportunities to give charter vessels and also ask you about the re-chartering of the two vessels as they come out of contract in 2014 and ’15.

I assume that you have expansion of – the chances to be expanded with the existing charters and then what is happening with the project vessel that produces hold and give them for optimization and if you feel that there’s going to be a preferential in the market for the next 12 to 18 months.

Paul Wogan

Yes, thanks Fotis. Good questions. First of all just to pick up on your question around the redeployment of existing ships, the first one that would come up charter if we did is in September 2015, so nothing in 2014.

I think the way we look at those ships, they are on particularly I think attractive rates to the charters even allowing for the market today and also I think the service that we give, the fact that we’re so engrained if you like in the logistics chain of our customers gives us a lot of confidence that those ships will be extended in that present contract.

Especially I think as we move through into 2015, we catalogue the new production that we see coming on in 2014, but again in 2015 we’re seeing a lot more new production coming on and so I think we always thought that there maybe some sort of turbulence, if you like in the market, but certainly I think its going to likely be short lived and I think we’re seeing now as we see the new production coming on stream, I think the market have been tightening up a lot quicker than a lot of people think.

I think from our point of view as well, as we look at our strategy, the reason we’ve done what we’ve done with our business, you know in terms of being very focused on having that strong underlying contracted revenue against our ships, so we have the $2.5 billion of backlog that we like to talk about, so that as we look at that market, yes we follow what’s happening on the shorter term and we have some exposure there, but basically underneath that we have this very strong underlying base of the business.

Fotis Giannakoulis - Morgan Stanley

Thank you. And can you comment also about in the near term market. What were the stars that became aligned and helped you have such strong results in the previous quarters. We’ve been hearing about some additional demand that is coming from Brazil. What are the rules in the spot market and the various demand that they may give some support. And also if you can comment, if you have any idea, how many of the project vessels there might become available in the next couple of years.

Paul Wogan

Okay. I think in terms of the other stars aligning, it really does come down to utilization and so we were lucky in terms of being able to find cargos on the ships data and find cargos to load very close by to where we were discharging. So our sort of balancing on the ship was fairly negligible, and I think the fact that we were able to get those opportunities speaks well for the sort of platform and the reputation that we have in the market.

I think yes, the route is interesting. I mean its becoming such a globalized industry and as we are seeing the spot cargos moving more, I think they are giving the opportunity to sort of feel like you triangulate and take away some of the balanced date and certainly South America is one of the areas where we’ve seen strong demand and where they are obviously willing to pay up for the gas.

So I think that plays back to what we’ve been talking about, where we’re sort of seeing this market becoming over time and more of a traded market and where we’re seeing arbitrage opportunities which add to the ton miles.

In terms of project vessels coming open in the next couple of years, I haven’t got exact figures on that, but when we’ve been looking at that we haven’t seen a huge number from memory, of project vessels in the next couple of years, which are due to come off charters. But I haven’t got any exact figures on that Fotis.

Fotis Giannakoulis - Morgan Stanley

Thank you Paul. One more question. You mentioned earlier that you’re very actively looking on potential acquisitions. That’s a (inaudible), but the BG was a good example earlier and also the STX Pan Ocean vessel. But you mentioned that you will be quite selective, both in the price and the technical specifications.

What exactly does this mean? Are you going to be focusing only on very young vessels, certain kind characteristics and my question is because if there are buyers and they are willing to sell new building vessels like the majority of your fleet, those are if you are willing to go to all the vessels as well.

Simon Crowe

Good question. It’s Simon here. We’ve taken a very disciplined approach. I mean things come across our decks all the time. It’s the question as Paul said, its weighting up the value, the risk adjusted returns, that’s the key for us. Where do we see the risk in the acquisition and what returns do we see and does it make sense to deploy our capital into that opportunity?

So I don’t think – we’re not going to get a sort of pigeonhole. We want to sort of keep an open mind, keep evaluating the opportunities as they present themselves and take an opportunistic approach as and when if we see that value. So there is no sort of single formula and it’s a question of weighing out the pros and cons and making sure we see the value.

Fotis Giannakoulis - Morgan Stanley

That’s very clear, thank you. It seems like its more valuing each opportunity separately and having I think as an alternative. You think that’s correct no?

Paul Wogan

Yes, that’s fair, yes.

Fotis Giannakoulis - Morgan Stanley

If you allow me one last question that is more related on the open new buildings that they come in a few years. How many of the U.S. projects right now, the ones that you have, they have received the approvals? I assume that only [Shanghai] has some vessels contract able and the rest of the projects are open. How do you think of the Panama Canal expansion? Do you know it will impact the market and how many more vessels they could be absorb during this period of the delay?

Paul Wogan

Yes, it’s an interesting question. Certainly in terms of the projects which have actually taken on the ships that they need, I think there are a large number of the projects or the off take is from the projects who still need to secure the vessels and then you get back to the question earlier about you know all the tenders that we’re seeing and the amount of ships which are required at the moment I think speaks to a lot of those participants as uptake as looking for ships.

Its interesting actually, we looked out. What happens if there’s a problem with the Panama Canal you know. Does that prevent people from moving cargo from the U.S. into the Far East?

Actually when we looked on the freight cost per mmbtu, I think we came out with something like a $0.20 differential between going through the Panama Canal and going around the Cape of Good Hope. So when your looking at the profitability, the arbitrage opportunity between Henry Hub and the Far East, I don’t think that’s going to be anything like it you know, to stop people thinking they are just worth moving the product. However what it will do is add quite considerably to the ton-mile effect and to the need for ships. So as a ship owner we’re looking at the issues in the Panama Canal with quite (inaudible) at the moment I would say.

Fotis Giannakoulis - Morgan Stanley

That’s very interesting and it was also very interesting the fact that you mentioned that there are a lot of tenders that you see right now are coming from U.S. projects. So does it mean that even the facilities apart from [Shanghai] part that they have not received full approvals and they have not started contraction there. They have already started looking for vessels?

Paul Wogan

Yes, that’s correct.

Fotis Giannakoulis - Morgan Stanley

Okay, thank you very much for your answers.

Paul Wogan

Thank you.

Operator

(Operator Instructions) We will now take our next question from Herman Hildan from RS Platou Markets. Please go ahead.

Herman Hildan - RS Platou Markets

Good afternoon guys. Hi, just sort of two question questions. The first on the MLP; have you been in decisions in terms of the kind of liquidity that you will release from the MLP structures in terms of the product mainly through growth, addition growth or will you also maybe ramp-up just some GasLog result.

Paul Wogan

I mean of course we’ve been looking at all these issues as we’ve been building up for the filing and for me its about recycling capital into growth opportunities, but more than that I can’t really comment on it at this point in time, but we see it very positive.

Herman Hildan - RS Platou Markets

And in terms of growth, I mean its clear that the pair at 61 will be quite interesting in terms of volume growth. Are you anywhere near or are you considering the possibilities to do it specifically near the border, not to build a spot fleet for call it 2017, 2018 deliveries as that should be a very good time of the market as of now.

Simon Crowe

I think as we look out, I think we will fundamentally stick with our strategy of making sure that we have a strong underlying contract business for the company. Because I think its that kind of industry. These are very high capital-intensive vessels and you want to make sure that you have the revenue to support that.

But as we talked about, as we’ve shown with GasLog Chelsea and our willingness on Gas 9 and 10, we are willing to look at some market opportunities and seeing where we can extract value from the market. But I think that we’ll always be in line if you like, with what we are doing on the longer term and we’ll always be looking at this as sort of portfolio risk and I don’t think you’ll see us earring too heavily on the side of the spot and short term market.

Herman Hildan - RS Platou Markets

And also just a final kind of technical question on Chelsea. I see that just left the Hammerfest in Norway yesterday. So are you able to do another contract before the seven months contract that starts up in the summer or she’ll kind of go back to that.

Paul Wogan

We would expect that we would have time for further trading before that.

Herman Hildan - RS Platou Markets

Okay. Well, thank you very much.

Paul Wogan

Thank you.

Simon Crowe

Thank you.

Operator

Thank you. We will not take our next question from Chris Combe from J.P. Morgan. Please go ahead.

Nishant Mani - J.P. Morgan

Hey, good afternoon guys. It’s Nishant Mani on for Chris.

Paul Wogan

Hi there Nish.

Nishant Mani - J.P. Morgan

Hey, just one quick follow up question on options. I know we’ve already kind of circled around it, but in thinking about exercising or potentially exercising these options, would you necessarily want to have a charter in place and how would that kind of impact the amount of leverage you would take on for doing the transaction.

Paul Wogan

I think we can stay fairly open on that. We wouldn’t necessarily need to have a contact in place for us to declare the options on those. But as I said, we’ll kind of review that as time goes on. If we can keep pushing out options then we will do, but I think given where we are with our kind of portfolio at the moment, we’d also be comfortable at taking these vessels or declaring options without necessarily having firm contracts against some other time, and then in terms of leverage…

Simon Crowe

Yes, in terms of leverage Nish as you know, we got to tail heavy payment terms, so we don’t want to pay too much commitment fee, but we want to have, we want to de-risk the financing, but we wouldn’t have the financing for a number of years if they are delivered in the ’16, ’17 timeframe.

Nishant Mani - J.P. Morgan

Got it, and I guess without a charter in place if you were to go with an order, I mean financing coming in late, would you book at levels similar to the past, kind of in the 75% to 85% overall debt package.

Simon Crowe

Certainly, 70% is kind of typically where we were, 75% where we’ve been, yes absolutely, but again as you get closer to what – if you got a charter, haven’t you got a charter, they all come into play and you do the financing based on the set of assumptions that you got around that, at that sort of the time.

Nishant Mani - J.P. Morgan

Got it. Very helpful guys. That’s it from me. Thank you so much.

Paul Wogan

Thank you Nish.

Operator

Thank you. As there are no further questions, I would like to turn the call back to Mr. Paul Wogan for any closing remarks.

Paul Wogan

Okay, well thank you very much. I just like to say thank you to everybody for joining us today. Thank you for your time and interest in GasLog and we look forward to speaking to you again soon. Thanks bye-bye.

Simon Crowe

Thank you.

Operator

Thank you. That will conclude today’s conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.

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