Avance Gas Holding Ltd: Second Quarter 2024 Results

BERMUDA, 28 August 2024 – Avance Gas Holding Ltd (OSE: AGAS) (“Avance Gas” or the “Company”) today reports unaudited results for the second quarter of 2024.

HIGHLIGHTS

• The average time charter equivalent (TCE) rate on a discharge-to-discharge basis was $50,100/day, compared to $60,900/day in the first quarter of 2024. For reference, our forecasts were at $48,000/day with 83% of days booked.
• TCE/day on a load-to-discharge basis was $46,700/day compared to $78,800/day in the first quarter of 2024. The adjustment related to the load-to-discharge basis was negative $3.7 million or $3,400/day in TCE/day in the second quarter compared to a positive adjustment of $20.9 million or $17,900/day in the first quarter.
• During the second quarter, we had time charter (TC) coverage of approximately 25% at an average TCE rate of $50,100/day and spot voyage coverage of approximately 75% at $49,100/day, resulting in an average fleet TCE of $49,300/day, excluding Forward Freight Agreement (FFA) gains of $1 million and $800/day, respectively.
• Daily operating expenses (OPEX) were $8,100/day, compared to $8,200/day in the first quarter of 2024.
• Net income for the second quarter was $60.6 million, or earnings per share of $0.79.
• Net income for the first half of 2024 was $207 million, or earnings per share of $2.70, our highest half-year result ever.
• In the second quarter, the company paid out $2.15 per share in cash, for a total of $165 million. This distribution consisted of $0.99 in capital returns and $1.16 in dividends for the first quarter of 2024.
• The Company successfully completed the sale of Avance Pollux (2024) in the second quarter for cash consideration of $120 million, less brokerage commissions. This sale resulted in a gain of $36 million and net cash proceeds of $62.0 million after debt repayment and transaction costs. This was the fourth vessel sale completed in 2024, bringing total gain from vessel sales to $120.9 million and net cash proceeds for the first half of 2024 to $188.6 million.
• On August 15, 2024, the Company announced the sale of its Very Large Gas Carriers (VLGC) fleet to BW LPG Ltd for $1,050 million. The total gain on the sale is expected to be approximately $315 million, of which $305 million will be recorded as gain on sale and approximately $10 million will be recorded as lower depreciation expense. In accordance with accounting standards, the VLGC fleet will be reclassified from non-current assets to current assets, which will be reported as assets held for sale, effective from the announcement date. The deal will be settled with approximately $585 million in cash, the novation of approximately $132 million of debt obligations under two sale and leaseback agreements and the balance through 19.282 million shares of BW LPG valued at $17.25 per share, for a total of $333 million. The transaction and delivery of the vessels are expected to take place between September 15 and December 31, 2024. Upon completion of this transaction, Avance Gas will own four dual-fuel medium-sized gas carriers (MGCs) capable of carrying full ammonia loads, a 12.77% stake in BW LPG and a significant cash balance.
• The Board of Directors has declared a dividend of $1.35 per share, or $103 million, for the second quarter of 2024.
• For Q3 2024, we have booked 79% of capacity at an average TCE/day of approximately $41,000 on a load-to-load basis. Load-to-load adjustment is expected to be +/- $1,000.

Øystein Kalleklev, CEO of Avance Gas Holding Ltd., commented:

“2024 was a transformative year for Avance Gas with several key events. In the first half of the year, we sold four VLGCs for a total gain of $121 million, which together with strong trading results contributed to our highest half-year result of $207 million. Due to the strong results, we paid out $165 million or $2.15 per share for the first quarter alone. This amount was the dividend payout for the entire year of 2023. With only 12 VLGCs left in the fleet, we concluded that it was in the best interest of our shareholders to pursue a sale of the remaining vessels. This decision was primarily driven by a somewhat undersized operation; it is difficult to compete with a smaller fleet, while at the same time used VLGC prices are at an all-time high, making the sale of our vessels attractive.

On August 15, we completed the sale of the remaining 12 VLGCs to BW LPG for $1.050 billion, with the 12 vessels being sold under separate MoAs for delivery to the buyer by year-end. As part of the transaction, Avance Gas will receive 19.282 million shares of BW LPG, becoming its second largest shareholder. We will also receive $585 million in cash and assume two sale and leaseback notes, which totaled $132 million at the end of the second quarter. We believe that combining the BW LPG and Avance Gas VLGC fleet makes perfect sense from both a strategic and industrial perspective. With the transaction, BW LPG will gain scale while renewing its fleet. For Avance Gas, the financial benefit is that we will be able to sell our vessels at a very attractive price, allowing us to return significant capital to our shareholders.

The expected gain on the transaction is approximately $315 million, of which $305 million is book gains and a $10 million effect from the fact that we will stop depreciating our vessels from August 15 until the vessels are delivered to BW LPG, which will increase our earnings in the second half of 2024. Following the transaction, we will have sold 16 VLGCs this year at a gain of approximately $436 million. In addition, we also generated healthy earnings in normal operations, which, taking into account the gain from the BW LPG transaction after the quarter end, results in a pro forma result of $522 million for the first half of 2024.

As we have a cash balance of $268 million at the end of Q2 and will receive $585 million before year-end as cash settlement for the sale of the 12 VLGCs, the Board has decided to declare a dividend of $1.35 per share, or a total of $103 million. The combined dividend for H1-24 is therefore $3.50, or $269 million, which represents approximately 30 percent of current market capitalization. Once we close the transaction with BW LPG, we will distribute the remaining capital to our shareholders in a timely manner, with the exception of the required equity for the four MGC newbuilds we contracted last year. Having already paid $43 million in yard rates for these vessels at the end of the second quarter of 2024, we expect the remaining equity contribution to be approximately $50 million to $75 million if we fund the remaining capital commitments with traditional bank financing.

We are also pleased to report second quarter results in line with guidance. On an unloading basis, we achieved TCE of $50,125/day versus an 83% guidance of $48,000/day. Due to increasing rates in the second quarter, we had forecast lower load-unloading numbers by $3,000-5,000/day and achieved $46,700 on this metric, also in line with guidance. Since we also sold the DF VLGC newbuild #6 for $120 million in May, we recorded a $36 million gain on this sale, resulting in net income of $61 million or $0.79 per share for the second quarter of 2024.

Improvements in Panama Canal slot availability during the summer have resulted in shorter sailings and greater vessel availability, which has negatively impacted freight rates in Q3 despite increased product arbitrage levels. Freight rates reached cash breakeven levels of around $20,000/day in late July/early August before recovering in mid-August to now be just under $40,000/day for AG-Japan and ~$45,000/day for USGC-Japan ballasted to the Cape of Good Hope and loaded through Panama. As a result, due to a weaker market, we have booked 79% of Q3 at $41,000/day and expect actual Q3 TCE to be at this level, discharge to discharge. With the ability to trade our vessels until the end of the year, we are well placed to improve our trading results in the fourth quarter, with freight rates for this quarter at around USD 50,000. While this is well below last year’s record levels, if realised, it should still deliver a satisfactory trading profit.

With the sale of all our VLGCs, we are left with four MGC newbuilds for delivery in Q4 2025 to Q4 2026. The Company is currently evaluating how best to maximize the value of these assets. Since we contracted the vessels last summer, the newbuild price for such vessels has increased by approximately 15 percent, while delivery dates have been pushed back from 2025/2026 to 2027. Therefore, we are confident that we will also achieve attractive returns on these assets by either 1) contracting them to TCs, 2) selling the vessels, or 3) developing Avance Gas into an MGC/Ammonia company by actively partnering with other owners with similar assets with the goal of building a company of sufficient scale.”

PRESENTATION AND WEBCAST

Avance Gas will host an audio webcast and conference call on Wednesday, August 28, 2024 at 2:00 p.m. CEST to discuss the Company’s results for the period ended June 30, 2024. A question and answer session will follow the presentation.

Moderator of the presentation and webcast:

• Mr Øystein Kalleklev – CEO
• Ms. Randi Navdal Bekkelund – CFO

The presentation will also be available as an audio webcast and can be accessed via the Avance Gas website (www.avancegas.com) or via the following link: https://edge.media-server.com/mmc/p/tgju86bc

Guests can log into the conference call using the following link:
https://register.vevent.com/register/BI1592112ff29a4499a8a88cfd9f9d8d0a

If you have any further questions, please contact:

Media contact: Øystein Kalleklev, CEO
Phone: +47 23 11 40 00

Contact for investors and analysts: Randi Navdal Bekkelund, CFO
Phone: +47 23 11 40 00

ABOUT AVANCE GAS Avance Gas operates in the global liquefied natural gas (LPG) transportation market. The Company is one of the world’s leading owners and operators of very large gas carriers (VLGCs) and owns sixteen LPG vessels, consisting of twelve VLGCs on the water and four dual-fuel MGCs for delivery in 2025 and 2026. For more information about Avance Gas, visit www.avancegas.com

This information is subject to the disclosure requirements under sections 5-12 of the Norwegian Securities Trading Act.

For further questions please contact: Media contact: Øystein Kalleklev, Chief Executive Officer Investor and analyst contact: Randi Navdal Bekkelund, Chief Financial Officer Tel: +47 23 11 40 0

• Avance Gas – Presentation Q2 2024

• Avance Gas Q2 2024 Interim Financial Information