GasLog Partners' (GLOP) CEO Andy Orekar on Q1 2016 Results - Earnings Call Transcript

| About: GasLog Partners (GLOP)

GasLog Partners (NYSE:GLOP)

Q1 2016 Earnings Conference Call

April 28, 2016 8:30 AM ET

Executives

Samaan Aziz - Investor Relations Manager

Andy Orekar - Chief Executive Officer

Simon Crowe - Chief Financial Officer

Analysts

Fotis Giannakoulis - Morgan Stanley

Noah Parquette - JP Morgan

Spiro Dounis - UBS

Hillary Cacanando - Wells Fargo

Joe Nelson - Credit Suisse

Operator

Good morning. My name is Candice and I will be your conference operator today. At this time, I would like to welcome everyone to GasLog Partners First Quarter 2016 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. As a reminder, this conference call is being recorded.

Today’s speakers are Andy Orekar, Chief Executive Officer; Simon Crowe, Chief Financial Officer and to commence the call, Samaan Aziz, Investor Relations Manager. Mr. Aziz, you may begin your conference.

Samaan Aziz

Good morning. Thank you for joining GasLog Partners’ First Quarter 2016 Earnings Conference Call. For your convenience this call, webcast and presentation are available on the Investor Relations section of our website, www.gaslogmlp.com, where a replay will also be available. Please now turn to Slide 2 of the presentation.

Many of our remarks contain forward-looking statements. For factors that could cause actual results to differ materially from these forward-looking statements, please refer to our first quarter earnings press release. In addition, some of our remarks contain non-GAAP financial measures as defined by the SEC. A reconciliation of these, are included in the appendix of this presentation.

I will now hand it over to Andy Orekar, CEO of GasLog Partners.

Andy Orekar

Thanks, Samaan. Good morning, and thanks everyone for joining GasLog Partners’ first quarter earnings call. I’ll begin today’s call with our highlights for the quarter, and our plans for continued fleet and distribution growth.

Our CFO, Simon Crowe, will follow with a review of our financial performance and strong balance sheet. And I'll conclude with a brief review and outlook for the LNG shipping market. Following our presentation, we'd be very happy to take any questions you may have.

On Slide 3, you can see our highlights. In the first quarter we generated distributable cash flow of 19 million, which is 34% higher than the first quarter of 2015. We have declared a cash distribution of $0.478 per unit or just over $1.91 on an annualized basis. This distribution is 10% higher than the first quarter of 2015 and unchanged from last quarter.

Even at this strong distribution level, our coverage ratio was 1.21x, well above our 1.125x target but lower than last quarter, primarily due to the drydocking of the Methane Jane Elizabeth and one pure calendar day during the period. Simon will review the impact of vessel drydocking to have on our distributable cash flow later in today’s presentation.

During the quarter we refinanced 305 million of our current debts. Following this transaction, we do not have any near term debt maturity. Lastly, during the quarter we utilized excess cash flow to further reduce our total debt balances by 14.6 million, including 10 million of our intercompany loan with GasLog Limited, which can be redrawn at any time. This debt pay down is accretive to our distributable cash flow on a per unit basis.

Please turn now to Slide 4. I’d like to take a moment today to emphasize that our GP sponsor, GasLog Limited is firmly committed to GasLog Partners future growth. As a reminder our dropdown pipeline comprised of 12 modern LNG carriers with firm charted periods ranging from 2020 to 2029 and each of these vessels under charter to a subsidiary of wells at Shell. We believe that the extensive pipeline differentiates us from our peers and GasLog Partners and GasLog Limited find to utilize these attractive assets to maintain and grow our stable cash flows for many years to come.

In every case our objective will always be to maximize visibility of GasLog Partners cash flow and the stability of our cash distribution. Accordingly, in the future support from GP could take the form of exchanging certain GasLog Partners vessels for GasLog Limited vessels with charter ending in 2020 or later or charters of our vessels back to GasLog Limited or other means is yet to be determined.

Turning to Slide 5, with the strong support from our GP, we have a solid foundation on which to build additional growth. Despite ongoing equity market volatility, we have several available financing alternatives to continue growing at the 10% to 15% CAGR we’ve met or exceeded since our IPO. These options include significant cash on hand plus excess distributable cash flow, meaningful additional debt capacity and several offers from private capital sources, which we continue to actively evaluate.

Slide 6 shows the details of our dropdown pipeline where you see 12 vessels each with long-term contracts. This pipeline represents well in excess of 200 million in annual EBITDA and has an average remaining charter length of eight years. GasLog Partners has right to acquire all the vessels shown on the bottom panel of the slide.

In sum with strong operating performance support from our GP parent and multiple financing alternatives, we remain confident that GasLog Partners can continue to grow our fleet and cash distributions and in so doing deliver strong returns to our equity holders.

With that I’ll turn over to our CFO Simon Crowe to take you through the financials.

Simon Crowe

Thanks Andy and Good morning and afternoon to everyone. I'm pleased to report another strong quarter for Partnership.

Turning to Slide 7, as of the first quarter you can see that we’ve distributable cash flow per unit at a 17% CAGR since our IPO. This performance is primarily due to the successful execution of two dropdown transactions, operation efficiencies and other cost savings.

On the right hand side of the page, you can see that we’ve outperformed our 1.125x target coverage ratio since IPO. Given our firm charters resell and stable cash flows we consider driving our distribution to bring our coverage ratio closer to our target. However, due to market volatility and investor feedback, we decided to retain our excess cash flow and we’ve used this cash flow to repay debt.

Turning to Slide 8, we’ve now got cash distribution per unit at a 15% compound annual growth rate since IPO. This is at the top-end of our target range. We’ve been able to achieve this performance via volatile markets without increasing leverage although in our target coverage ratios.

We remain confident that we can continue to achieve our target 10% to 15% cash distribution CAGR, given our range of financing alternatives, strong sponsor support, total debt [ph] for the dropdown pipeline and solid financial position.

On Slide 9, you can see that our coverage ratio of 1.21x is in line with our cumulative coverage ratio since IPO. It is lower than last quarter’s coverage ratio of 1.43x, primarily due to the drydocking of the Methane Jane Elizabeth, which lowered revenues and increased expenses. The total impact of this drydock to distributable cash flow is about $2.5 million.

On Slide 10, I’d like to take a moment to further explain how drydocks impact distributable cash flow. Our vessels are drydocked for maintenance CapEx once every five years for approximately 30 days. The vessel earns no revenue while in drydock; I mean current cost for maintenance in the past. All three items lower distributable cash flow in the period.

GasLog Partners reserve cash every quarter for the maintenance, repair and lost revenue of each vessel while in drydock. Off note, the Methane Rita Andrea entered a scheduled dry dock early in the second quarter and this is now completed. This will lower GasLog partners’ second quarter distributable cash flow by approximately $3 million. We don’t have any of the scheduled drydocks until 2018, which provides investors with clear cash flow visibility.

Turning now to Slide 11, we repaid approximately 60 million in debt since our last dropdown. At the end of the first quarter total indebtedness to total book cap was 55%, down from 58% last dropdown. This debt repayment has increased the partnership’s debt capacity. We’re able to raise that and still maintain strong credit profile.

Turning now to Slide 12, you can see that at the end of first quarter GasLog Partners’ had $80 million of total available liquidity. Net debt to adjusted EBITDA increased primarily due to lower revenues and higher expenses less the drydocking of the Methane Jane Elizabeth. This ratio should remain elevated in the second quarter due to the drydocking of the Methane Rita Andrea. After the second quarter, we expect it to return back to around 4.5x.

Please now turn to Slide 13, in late February we refinanced 305 million of current debt. Post the refinancing we have no near term debt repayment obligations. The transaction was structured with the senior and junior tranch. The terms of the facility attractive with the blended margin and is in line with GasLog Partners’ existing secured debt. We were very pleased with the appetite from the syndicate banks. Our strategy of being focused on long-term charters with high quality counterparts means that banks are keen to lend to GasLog Partners.

And with that I’ll turn it back to Andy.

Andy Orekar

Thank you, Simon. Turning now to Slide 14, and an update on the global supply of LNG. In the first quarter senior Sabine Pass became the first of many new U.S. liquefaction projects to export natural gas. The facility has shipped cargos to Brazil, Dubai, India and Portugal, highlighting destination flexibility of U.S. supply. The GasLog Salem, which is owned by our parent company, was the third best of the shipped LNG from the project, delivering its cargo to Brazil.

LNG prices in Asia and Europe remain low, but U.S. export continued to be competitive due to the $2 and rehab natural gas prices.

For 2016, we expect LNG producing trend with total annualized capacity of approximately 40 million tones to come on line as these projects ramp up to their name plate capacity. This new supply of LNG is creating new shipping customers and we’re seeing encouraging levels of tendering activity from a range of charters, who are considering both on the water and new building vessels for medium and long-term employment. Overall, our long-term supply demand outlook for LNG shipping remains positive, as we continue to see a future shortfall of vessels required to transport the new supply.

Turning to Slide 15 and the impact these projects will have from the demand for shipping. On the left hand we showed effective shipping requirements. If you see 1.5 shipped per million metric tons of LNG, the 140 million tons of new annualized capacity will require approximately 210 vessels. With the new building order book at the start of the year at a 132 shipped that equates to a shortfall of about 178 vessels. Even if you assume 20 to 30 of these vessels come from a distinct over supply in the spot market, it still needs 40 to 50 additional ships needing to be ordered by 2020. This estimate also takes no account of potential deletions from the fleet, even if you’re scrapping or lay off of all their tonnage.

On the right hand panel you can see the order book continues to decrease as ships deliver and few new orders in place. Given a three year bill cycle for LNG vessels, anything ordered today we’ll not deliver before 2019, giving us great visibility on the global fleet size over the next three years. Given the lack of new orders, we expect the short-term market to tighten significantly as new supply comes on line.

Now turning to Slide 16, in summary GasLog partners’ continues to meet or exceed the 10% to 15% target CAGR and cash distribution we first provided at our IPO two years ago. GasLog Limited remains firmly committed to the partnership stability and future growth and our dropdown pipeline of 12 vessels with long-term contracts gives us significant optionality to maintain and grow GasLog Partners’ firm charted cash flows through 2020 and beyond. We have a strong balance sheet, substantial liquidity and attractive financial alternatives despite the ongoing volatility in the public equity market. To conclude GasLog Partners’ remains well positioned to continue delivering stable, predictable cash flows with additional growth through acquisition.

Quickly turning to Slide 17 before Q&A, I wanted to inform you that we plan to host a GasLog Investor Update on June 20 at the Pierre Hotel in New York City. The executive teams of GasLog Partners and GasLog Limited will present more details on the current LNG shipping dynamics, our strategic positioning and growth strategy. If you like to attend, please register with Jamie Buckland or Samaan Aziz at ir@gaslogltd.com. We hope to see you all there.

And that brings us to the end of today’s presentation. Operator, could you please open the call now for any questions?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Fotis Giannakoulis of Morgan Stanley. Your line is now open.

Fotis Giannakoulis

Yes. Hi, guys and thank you. It seems that the slide with all the focus of this presentation and I would like, if it’s possible to clarify what do you mean by support by exchanging the vessels, how can you transfer something without taking value away from GasLog and giving it to GasLog Partners? This seems to me that pretty much guaranteeing the dividend of GasLog Partners right now at least until 2020. Can you give us a little bit more color how you can sense for something like that?

Andy Orekar

Sure, so I think today Fortis, we’re really just providing a strategic comment when we look our portfolio vessels and the consolidated fleet and which assets we believe will continue to be a great fit for the NLP and as you know we have 12 carriers with long-term contracts in addition to the eight carriers with long-term contracts we have in the NLP. So I think our view is that the two companies will work together to optimize the maximum amount of cash flow visibility we can provide investors and again that’s something we feel will benefit both companies and both sets of shareholders. And in our view that could take many forms as I mentioned, it could be an exchange of vessels, it could be a charter back at levels that are consistent with the current distribution, but the point is to provide as much visibility on the NLP cash flows and in so doing we think that would optimize value for both companies.

Fotis Giannakoulis

Thank you, Andrew. In which support - can we assume that you might also be thinking additional dropdowns through the issuance of equity to the parent, is the parent willing to take at least the non-financed portion of the asset value through sales or give us a little bit of - how you think the issuance of sales - your stock price has gone up again of course is still quite undervalued compared to the recent past. But in the last month it has increased the price. Are you willing to issue equity at current levels or anywhere close to current levels, is the parent willing to get any equity.

Andy Orekar

Sure, I think you touched on the critical point which is, despite the recovery in our unit price we do not feel that the current unit price reflect the appropriate value for GasLog Partners to be issuing units today and so we are - we continually look at all the alternatives we have around that. In some cases perhaps the equity in our current investment might be some of the cheapest part of the capital that we have in addition to our cash and debt capacity. So I think what you are hearing from us is that while we closed our fleet with the momentum and the unit price is still is below a level that which we think common equities attractive issue, but with support from our GP as well as several other sources we feel we can continue to finance growth and finance dropdowns and stay in line with our 10% to 15% guidance we have given from the start.

Fotis Giannakoulis

Thank you, Andy. Yeah.

Simon Crowe

Sorry this is Simon, just to reiterate really I mean I think what we wanted to do is highlight the differentiation here, we think we are different, We have a very strong and supportive GP and any support obviously has to work for both companies, but in these volatile and uncertain markets, we really wanted to reemphasize that differentiation, the pipeline, the strength of the GP and the supportive nature of the relationship. It is a symbiotic relationship, it works very well together it is one portfolio that we want to optimize and adjust depending on the situation and markets and we wanted to highlight that we got our eyes on that and we want this to be a very successful as it has been and continued to be a very successful group of company.

Fotis Giannakoulis

Thank you, Simon. I want to move to another topic, which I didn't see you touching at your presentation about the FSRU endeavor of your Group. You spent quite some time last quarter talking about the FEED study that you are preparing. Can you give us an update of how does this FEED study develops, and if there are any projects that you are bidding on right now? We see a very large list of FSRU projects that they are under development. Have you submitted any bid for any of these projects?

Andy Orekar

Sure, Fotis this is Andy speaking. I will let Paul Wogan and the GasLog team provide more of an update on this, on the GasLog call next week. But we have hired a gentleman Mr. Bruno Larsen, to head up our FSRU activities. And as you know it is a very active market right now with depending on how you count it probably upwards of 20 to as many as 40 projects of different scale. And so it is something we are very focused on, but we are also very mindful of our cost of capital and the ability to invest and generate the appropriate return relative to our cost of capital. So we are delighted to be in a group of dialog with Bruno’s help and are continuing to monitor our financing cost such that if and when there is a project we are confident, we can deliver the financing on appropriate cost, relative to return of that project might earn. So more to come and we’ll have more to report in future about the capital FEED study, but I think the early signs are we are very delighted to have Bruno on board and be a part of this additional adjacent market for GasLog.

Simon Crowe

Just to add to that Andy, we will give you a full update on next week when we do the GLOG earnings as Andy said, we are very encouraged by the great start that Bruno has made and we are really focusing on those fixed long-term projects which as Andy said, is well funded. So it is really interesting times and Paul and myself will update you next week.

Fotis Giannakoulis

Yes. We're all hoping we can advance, but we can wait for another week. But can I - what I want to ask is, now about the movement in oil prices. We have seen prices going up. Obviously, Asian prices in natural gas have been in an upward movement; European price is much less. How do you view this movement in oil prices impacting the natural gas market? There are some people, they’re talking about disconnect of the natural gas prices from oil. Is this something that you share? Is this something temporary until the supply is being absorbed by the market? We also saw some changes in the contracts of Gazprom, the natural gas contracts, the pipeline contracts - toward the spot market in Europe. Is this something that concerns you in relation to shipping and also the trading of LNG?

Andy Orekar

Sure. So it's Andy speaking. I think it is fair to say that it appears gas prices have disconnected from oil I think the important figures we monitor are the spread between Henry Hub and NBP and as you said of course in Asia the price has come down significantly from where it was just few years ago, but the Henry Hub to NBP are continue to exists and NBP remains a relatively liquid market. So the U.S. production in already been responding in the U.S. pricing mechanism since already been responding to the export opportunity and right now that window is still open. So that of course we will continue to monitor, but I do think it is important there is a lot of talk of U.S. export and this ongoing monitoring of regional gas prices. It is important to remember that the vast, vast majority of these U.S. volumes are sold to end users and so the small amount of what I call merchant volumes are much more subject to these, week to week, month to month commodity price swings. As so again while it is continuing to work today, it is something that we monitored, but it is not necessarily something, certainly at MLP and even at the parent company level, that we feel is necessary for the impact in shipping demand as I mentioned in the prepared presentation.

Fotis Giannakoulis

Andy, just on that, I know that you do not have any open vessels and most of the parent's vessels are also contracted, but I assume that the spot market plays its own role. The spread right now between Henry Hub and international prices is around $2, which supports the trade. But I wondered if there is any spread that - as the spread expands - as all commodity prices go up and as spread expands, is there any level that you think that traders become significantly more active, and we start seeing a lot of spot cargoes floating around and absorbing most of the current oversupply much faster than we thought?

Andy Orekar

I don’t think there’s - as you say, we agree it is roughly $2 spread today which more than covers the marginal cost and I think clearly as and when you see that establishing a much greater differential with Asia, I think that may really get the spot market off to the rates in the same way it was earlier in the decade, but in our mind it’s just continued momentum and continued liquefaction hitting the water and you think about where these first cargos from the U.S. are going. They are basically heading to a number of different places and not just Europe, which I think was sort of the base case assumption for many people. So I think if more volume hitting the water will create more trade routes and the price response to that I think is still to be determined. But today we are just still waiting on some of these projects have been delayed to get really up to their name plate capacity.

Fotis Giannakoulis

Thank you, Andy and thank you, Simon, for the good news.

Andy Orekar

Thank you.

Operator

Thank you. And our next question comes from Chris Wetherbee of Citi. Your line is now open.

Unidentified Analyst

Good morning this is Prashant in for Chris, how are you.

Andy Orekar

Hi, Prashant

Simon Crowe

Hi, Prashant, good.

Unidentified Analyst

So I think a lot of my questions already were answered. I wanted to get a sense of - obviously you are getting the story of differentiated and I think the markets are starting to appreciate that is reflected in the share price clearly not retracing to the levels we saw in the first half of 2015, but we are almost getting there. I think little bit more credit might be given to in the MLP market now as we are recovering here. I was just trying to get sense you know obviously, you said you know this is not sort of spill attractive in terms of equity issuance and dropdowns, you still want to be little bit cautious, but I wanted to get a sense if you would maybe give notional distribution increase perhaps just even if the optically kind of strength, clearly you chartered out for next couple of years and cash flows are highly visible. I wanted to get your thoughts on strategically if that makes any sense or is that something that you’ve considered? And you coverage ratio I think would be able to handle it and obviously your CAGR running in front of right now in terms of distribution increases, so seems like there is a little headwind [ph], we just wanted to get your thoughts on that.

Andy Orekar

Sure Prashant, its Andy speaking. I think couple of points there, I would say one I think we demonstrated the market this quarter that even in a drydocking which only happens once every five years for each vessel, we have run at a very secure coverage ratio of over 1.2 times. And so you are right we could increase the distribution. I think our general perception has been that stability and being able to provide a certainty to our unit holders has been at a premium. If and when we think that running at a tighter ratio closer to our target would be rewarded. We are more than happy to encourage the distribution. I think as a general matter, speaking at the CEO, I prefer to increase distributions after we have grown assets or grown the returns we are earning from those assets, in our mind that’s just a more sustainable model. But each and every quarter we look at our cash flows and our projects and if we thought we could sustain a distribution increase and not run the risk of a presumption of lower stability, we are always more than happy to consider that.

Unidentified Analyst

Okay, thanks. That’s very helpful. And just a couple of quick follow ups on few other topics. With the debt refinances, is there - how much debt left on the book is available for refinancing or is this pretty much - should we consider this kind of, the sizeable slug, so should we consider this kind of the end of refi for the near term.

Andy Orekar

Sure, go ahead Simon.

Simon Crowe

Sorry, I mean yeah, we’ve refied and pushed out the maturities now, so we are in pretty good shape. It is nothing in the next few years now, so that is the refinancing done in terms of sort of headroom, we like to keep some headroom and keep some liquidity, but as Andy and I both said in our prepared remarks, we were looking at examining all the different options to meet that 10% to 15% CAGR. That could involve in a little bit more debt, it could involve the coverage ratio, it could involve high fleet, you know more drop downs, so there is a lot of range of options there, we want to keep the powder dry on various options, so that when we look at it we got things that we can think about and consider. But although refinancing is done, we are in good shape, I don’t see we are amortizing that time every quarter which is good, so our fire power effectively increases every quarter so we are in pretty good shape and a very strong financial position.

Unidentified Analyst

Excellent, that's my two. Thank you very much.

Simon Crowe

Thank you.

Operator

Thank you. And our next question comes from Noah Parquette of JPMorgan. Your line is now open.

Noah Parquette

Hey thanks. I wanted to ask you a little bit about a couple of things. After just finishing up the financing, can you just talk generally about what your takeaway is and how the banks are viewing the finance market now, and how willing they are to lend? I mean, I know that you talked about your great relationships and the high charter coverage. But is it more than that that differentiates? And just some color there would be helpful.

Simon Crowe

Yeah, Andy maybe I could take that. I mean, yes, the relationship with GasLog is very strong. GasLog Partners and GasLog Limited, we have a very, very supportive group of banks. I think banks are increasingly coming under regulatory pressure and they are all differentiating their customers. We’re certainly in the right place, we’ve got very solid metrics, we’ve always done what we said we are going to do and we refinance when we said we were going to do it. So we continue to enjoy strong level of support on the equity side from our banks and our investment banks. So we think that uniquely puts us in a very strong position to capitalize on growth, to capitalize on differentiation. We’ve got the strong pipeline, our banks like that and enjoy that. So throughout the capital structure of GasLog Limited and GasLog Partners, we were able to I think access that funding at very competitive rates. The others perhaps aren’t and I think increasingly that will differentiate, and will help to continue to differentiate and drive that growth in distribution and drive the profitability of GasLog.

Noah Parquette

Okay. And moving to the market, I just - we haven't seen a lot of scrapping despite the spot market - where it's at. And there's a decent amount of older ships. What do you think is driving that, and what's the catalyst to get some of these ships sold for scrap? Is it just FSRUs? I mean, just talk a little bit, how you do that.

Andy Orekar

Sure, now it is Andy. I think you are right, there are still a great number of pre 1985 vessel that are on the water today, some are reaching the end of charter life and you know it is our view that you will see some scrapping or some lay off of that type of tonnage. I think just a relative use of the LNG shipping market has, perhaps just now reaching with ages where some of our competitors are pursuing conversions, we are obviously studying conversions at both companies of younger vessels. But I think it is - we’re still in the early stage of that and hopefully a potential silver lining of the weak spot market will see some scrapping or lay off activity in this year and next, but you are right it is really not been a factor in reducing supply in any great measure.

Noah Parquette

Yeah. Okay. And then just lastly, the Panama Canal's finally about to open. It seems like most of the Sabine Pass destinations - we have Brazil; Portugal; India was one. But do you think you'll start to see more go to Asia once that opens, or will that change things?

Andy Orekar

I think the canal will obviously change trade routes and I think opportunities between basins versus going around the Cape, I think today it is really more the specific customer demands and needs for the time of the cargo can be delivered. So I don’t think the canal itself will really change, sort of sourcing of customers, but it may increase the frequency of trade because of the mixer in trade work but otherwise wouldn’t. But I think it is the same destination, but you might see more volumes.

Noah Parquette

Okay. That makes sense. Thanks again, guys.

Simon Crowe

Simon here, just to reiterate we met with Wood Mackenzie this week and they were saying they are expecting 60 more countries to be importing nations by 2020 and I think obviously the Panama Canal will play a role in that, but we were excited about the opportunity for more and more trade routes.

Noah Parquette

Okay. Thanks again.

Operator

Thank you and our next question comes from Spiro Dounis of UBS Securities. Your line is now open.

Spiro Dounis

Hey, good morning Andy and Simon. Thanks for taking the question. Just want to touch real quick on, I guess, some recent news that came out. It looks like Shell cancelled the large FLNG order, and I guess it was cited, weakening market condition was the reason. So I guess two-part question, first, does it give you any pause in pursuing FSRUs? And I fully recognize that's at different end of the gas line, so different fundamentals. But it's obviously kind of a big statement to make. And I guess the second part of that is following the merger with BG, obviously you and Shell are sort of best friends now. Does this change anything in your outlook?

Andy Orekar

Hi Spiro, it is Andy. No I think I guess it’s the take of an order [ph], I think the FSRU market is really - we think it is interesting because of the impact that will produce commodity prices that had on creating demand and of course the potential applicability of the vessels and assets we already own to that market. So I think that - while there has been several headwinds with low commodity price for producers, we think that demand impact itself positive and will still lead to more demands for FSRUs. With respect to Shells FLNG or other project, I think you’re probably tired of hearing us say this, but the project that we talk about in from our demand texture have all taken out by BE and are mostly in the U.S. and Australia. We feel we’ve got a very conservative supply outlook probably more conservative than others. But the project that we are including in basing our own fleet growth forecasts on are really for projects that are either producing today or taken up by being under construction and will produce in the next few years. So we continue to I think have a very conservative, narrow view of what may happen and other floating group of actions or project in different parts of the world [indiscernible] would be upside to our forecast.

Spiro Dounis

Got it, okay. Good. And then just maybe going back real quick to the swapping of assets or charters at some point, and I know how much management loves to talk about hypothetical’s, but thinking about FSRUs and maybe swapping one of those steam vessels out to go get sort of retrofitted to an FSRU, if you win a contract, mechanically how would that work and allow you to keep, I guess the cash flow stream stable while something like that was being incubated, assuming that's kind of a route that you would take?

Andy Orekar

Sure, as you said that is a hypothetical at the moment. But our view as I mentioned in my prepared remarks is always maximize the cash flow stability and visibility of GasLog partners and so if there was an FSRU conversion of one of steam vessels and what we would seek to do is with our parent swop that vessel out for another vessel in our pipeline that’s on charter, so there would be no interruption in the cash flow. And again that’s purely hypothetical at this stage, but we wouldn’t want to create a pothole if you will in our cash flow to pursue an FSRU project. Now, another alternative is that our parent incubates the FSRU project as they have done so successfully with all of our other ships and then we simply drop it down and acquire it at a future date. So many options around that, but always with the belief that we never want to take a step backwards with respect to our cash flow at the MLV.

Spiro Dounis

Got it, yeah, options are always a good thing. Appreciate the color, guys. Thanks.

Andy Orekar

Thanks Spiro

Operator

Thank you. And our next question comes from Hillary Cacanando of Wells Fargo. Your line is now open.

Hillary Cacanando

Hi, thanks for taking my questions, just wanted to talk about the tendering activity. It looks like it really picked up in the first quarter. We saw a large tender activity in Argentina. Wondering if you could talk a little bit about what you're seeing in the second quarter. Are there - are you seeing an increasing tendering activity in the second quarter as well?

Andy Orekar

Sure, hi Hilary, it is Andy. We said previously that increase in liquefaction hitting the water in our view has created by a broader base of shipping customers in addition to what I say as historical core of the energy majors and real leaders in the LNG production. And so we’ve continued to see that with demands for I’d say medium and long term employment as well as in the spot market. So the pace continues to be quite active. We haven’t seen an announcement recently, but we expect that several tenders will conclude by summertime or at the end of the early fall. We obviously hope to be successful where we can be, but again it is from not only the historical customer base, but I would say a broader group including an increasing frequency with those trading LNG volumes in places around the world who have a variety of needs in addition to the historical utility and other end user type customers who are buying the gas for our generation. So we are encouraged by it and we look forward to some of the current prophecies reaching conclusions, so they can be talked about more publicly.

Hillary Cacanando

Okay, great, sounds good. Yeah.

Simon Crowe

Hilary it is Simon, obviously GasLog Partners is focused on long-term contracts and at GasLog Limited we've seen a lot of tendering activity focused on those long term contracts, which is as Andy said, the result of the new supplier and over the long fixed term contracts based on new builds and existing tonnage which is very encouraging. And as Andy said, once we have the news we’ll wait and we’ll be telling you that news, but I think interesting on the spot market and Paul would comment on this next week in the GasLog Limited earnings, but we have seen a 64% increase in the volumes. The spot volumes versus this time last year in 2015, again which is interesting. So as Andy said, the traders are much more much more active, but could be some turmoil there and there’s a lot of spot work there, but it is encouraging a lot of the gas is coming online and it's moving and that's what we really care about, got to move.

Hillary Cacanando

That's encouraging to hear. I just want to go back to the getting sponsor support, in terms of exchanging vessels. I know it's not - is this something that's possible for some of your older steam vessels as well? I know your steam vessels have longer charter term and so it's not something that you would need support for any time soon. But down the road, should you need support for, let's say, Rita Andrea, Elizabeth, Victoria, and other steam vessels, is this something that the charterer - your charterers would agree to or your older steam vessels, to exchange them?

Andy Orekar

Sure. So Hilary it’s Andy speaking. It's something that - we really provided this comment today as a statement of our philosophy and our strategy as opposed to sort of a vessel by vessel commentary. But I think what the board will take away is that GasLog limited is really committed to a vibrant and growing MLP and will do what it takes to ensure if that continues to be the case, then we feel we have a unique asset position that allows us great flexibility to create a really best in class marine MLP. And I think the comment - the question on the steam vessels as you said that’s in our market that is five years from now and with the best role in the world. I think from there it is hard for us to predict rates at that particular moment in time. So I think we feel great about the visibility we offer and the support we have from our GP and the asset base we have to work with to really make sure we have the very best MLP we can.

Hillary Cacanando

Okay, sounds good. I think that's it for me. Thank you very much.

Simon Crowe

Thanks Hilary.

Operator

Thank you. [Operator Instruction] And our next question comes from Gregory Lewis of Credit Suisse. You line is now open.

Joe Nelson

Yeah, hi thank you. It's Joe Nelson, on for Greg this morning.

Simon Crowe

Hi, Joe.

Andy Orekar

Hi

Joe Nelson

Just a couple of questions from me, you highlighted this quarter, I guess or if I should say the rest of the year, you've got about 22 million a little more in scheduled debt amortization. Just kind of given where your strong contract coverage at this point and cash flow generation abilities, is there potential here to do more than just kind of what's laid out in front of you?

Andy Orekar

Sorry, when you say do more, in terms of do more, in terms of distribution growth.

Joe Nelson

No, in terms of paying down debt, I mean, you've got the 22 million or so scheduled, you guys thinking of maybe doing more than what's laid out on a schedule?

Andy Orekar

Sure. Well, you seem to be pointing out that we’ve been paying debt in excess of our amortization, which has been a conscious decision. I would say that one thing that we have valued of being able to payback revolving debt because in so doing we are not reducing our liquidity. Liquidity is not sort of leaving the system even though we are repaying debt, so that’s kind of two for one in my book. But I think, again we feel we have been kind of storing away balance sheet capacity for a brighter moment in the equity market and we are not there yet, but we are just creating that much more financial capacity for further growth and don’t necessarily need common equity to do that. So it’s been a conscious effort to get through an incredibly volatile period in MLP market and luckily it feels like that period is improving, but we are not there yet. And hopefully we can use this balance sheet capacity for our next dropdown.

Joe Nelson

Great, thank you. And then maybe just one more, thinking a little bit more industry-wide. It seems like liquefaction capacity is going to be kind of baked into the cake at this point for ‘16 and ‘17. Can you talk a little bit about how you think about this coming capacity in terms of maybe taking out what's in the spot market at this point?

Andy Orekar

Sure, I think what we've mentioned several times on previous call is there’ve been a couple of project a down in the global market, one is in Yemen and one is in Chevron and global projects. And that alone is responsible for about 15 ships, with those two and without having a crystal ball for either one comes back online you can imagine what taking 15 ships out of the spot market would do for either one of those and [indiscernible] are coming back online this year. So I think you need to kind of see the liquefaction is less the market comeback a bit and then as you say we got significant additions here in ‘16 and ‘17. And so I think the overall trend should be firming, but we're still waiting on those projects to begin moving volumes in real scale and I think when they do, you will see that shipping market pile up.

Joe Nelson

Great, thank you very much. That does it for me, guys.

Andy Orekar

Thanks.

Simon Crowe

Thanks.

Operator

Thank you that conclude our question-and-answer session for today. I’d like to turn the conference back over to Mr. Orekar for closing remarks.

Andy Orekar

Well, again thank you very much for your interest in GasLog Partners and for listening today. We sincerely appreciate it and hope that we will see all of you in June in New York for our investor day. Thank you very much.

Simon Crowe

Thanks everyone.

Operator

Ladies and gentlemen thank you for your participating in today’s conference. This concludes the program and you may all disconnect. Have a great day everyone.

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