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GasLog Partners LP (NYSE:GLOP)
Q3 2019 Earnings Call
Oct 30, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Shannon and I will be your conference operator today. At this time, I would like to welcome everyone to GasLog Partners LP Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. Today's speakers are Andy Orekar, Chief Executive Officer; Alastair Maxwell, Chief Financial Officer; and to commence the call Joseph Nelson, Deputy Head of Investor Relations. Mr. Nelson, you may begin your conference.

Joseph Nelson -- Deputy Head of Investor Relations

Good morning, and thank you for joining GasLog Partners third quarter 2019 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 third quarter earnings press release. In addition, some of our remarks contain non-GAAP financial measures as defined by the SEC. A reconciliation of these is included in the appendix of this presentation.

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

Andrew J. Orekar -- Chief Executive Officer

Thank you, Joe. Good morning, and thanks to everyone for joining GasLog Partners 3rd Quarter Earnings Call. Before I begin this morning, those of you who participated in our previous calls will undoubtedly notice our new presentation format. This is part of a larger rebranding initiative we've begun rolling out at GasLog and GasLog Partners to emphasize our priorities at safety, operational excellence and customer focus and we are delighted to be sharing this with you today. Looking ahead to today's call, I'll begin with our highlights for the quarter. Our CFO, Alastair Maxwell will follow with a review of our financial performance and dropdown pipeline, after which I'll conclude with an update on the LNG and LNG shipping markets as well as our distribution growth outlook. Following our presentation, we'd be very happy to take any questions you may have.

Turning to Slide 3, you can see our highlights. After another strong quarter of operational and financial performance today we reported our highest ever partnership Performance Results for revenue, EBITDA and distributable cash flow. During the third quarter our drop-down pipeline increased to 14 vessels as our parent charter the GasLog Singapore for 10 years as a floating storage unit. We repurchased $10 million of our common units at an average price under $20. We declared a distribution of $0.55 per unit or $2.20 on an annualized basis, an increase of nearly 4% over the third quarter of 2018. Today we are reiterating our guidance of 2% to 4% distribution growth for 2019. Lastly, it gives me enormous pride to share that the crew of the Methane Alison Victoria was awarded crew of the year at this year's IHS Market Safety at Sea Awards. Remarkably this vessel has had zero loss time incidents since their delivery in 2007.

Turning to Slide 4. Our record third quarter results reflected a full quarter's contribution from several strategic actions the partnership has executed in the last 12 months. Including 2 accretive vessel acquisitions, the elimination of our GP incentive distribution rights, a new 3.5-year charter for the GasLog Shanghai and most recently the accretive repurchasing of our common units. Taken in combination, these steps have significantly improved our financial performance as you can see from the figures on this slide. In particular, our EBITDA has increased by 22% year-over-year, while our per unit DCF growth has been stronger at 28% over the third quarter of 2018. With no IDRs we expect future dropdown acquisitions can continue to deliver meaningful growth.

Turning to Slide 5 and the impact of our recent unit repurchases. Since the inception of our buyback authority, we've repurchased $20 million of common units retiring nearly 1 million units or approximately 2% of our total debt outstanding. As you can see from the figure on the left, these repurchases have been accretive to our per-unit distributable cash flow. During the third quarter of 2019, we generated $0.72 of DCF per common unit, a figure which reflects approximately 1.5% growth as a result of repurchases we've made this year using only a modest amount of capital. On the right, you can see these repurchases have had a dramatic effect on the capital return to our unitholders. Inclusive of our Q3 distribution, we've now returned a total of $2.64 per unit over the last 12 months, an increase of 25% over the prior 12-month period. More specifically unit repurchases have amounted to approximately $0.44 per unit of that total.

As we look ahead, we expect returns to our unitholders to remain principally in the form of quarterly cash distribution. However, we plan to continue opportunistic repurchases of our common units as market conditions dictate, which as you can see, make a meaningful impact in both our coverage ratio and total unitholder returns.

With that as introduction, I'll now turn it over to Alastair.

Alastair Maxwell -- Chief Financial Officer

Thanks, Andy, and good morning to everyone. I'm delighted to report another strong quarter in terms of the operational and financial performance of the partnership. Please turn to Slide 6 for our financial and operational highlights. In the third quarter of 2019, we achieved record quarterly Partnership Performance Results for revenues, EBITDA and distributable cash flow, which showed robust year-over-year increases of 18%, 22% and 26% respectively. Our strong financial performance was due to our 2 vessel acquisitions in 2018 and 1 in 2019, as well as a full quarter's contribution from the GasLog Shanghai's market-linked charter to [indecipherable] which offers us exposure to the current strong market for LNG shipping at 100% utilization and which delivered a significantly improved performance compared to Q2. When she was primarily trading in the Kupel.

Operationally, our fleet continues to perform exceptionally well with uptime of 100% during the quarter and year-to-date unit opex of $14,468 per vessel per day. A reduction of $427 from the $14,895 we reported in the first 9 months of 2018. While we are benefiting partially from a stronger U.S. dollar exchange rate, we are also continuing to make progress with our cost reduction initiatives. As you can see in the bottom of the table, our reported distribution coverage for the third quarter was 1.3x. This increase is the 1.33x when adjusting for several days of scheduled dry docking for the Solaris which was primarily undertaken in Q2 and carried over into the beginning of the third quarter. Looking forward, we have one scheduled drydocking in the fourth quarter, which we anticipate will take up to 40 days to complete due to the need to install a ballast water treatment system on the vessel. Looking further ahead, we have 4 drydocking scheduled in 2020, all of which will also have ballast water treatment systems installed.

Please turn to Slide 7, where I'll discuss our recent fleet developments. The chart on this slide shows the 15 vessels comprising the Partnership's fleet. Our revenue backlog continues to be robust at over $1 billion, which only includes the minimum rate of higher for the GasLog Shanghai. As a reminder, our first open steam vessel the Methane Jane Elizabeth scheduled to commence a new one-year charter to Trafigura in November. The Partnership's nearest upcoming charter expiry is for the Methane Alison Victoria, which may be redelivered late in the fourth quarter of this year or in early January. Looking forward to 2020, we already enjoyed locked-in charter cover of 81% with over 75% of our open days falling in the second half of the year and we anticipate a very strong LNG shipping market, as Andy will discuss shortly. We are confident that the strengthening LNG shipping market through 2020 and into 2021 will create opportunities to reach out our open ships and to further benefit from the market linked charter of the GasLog Shanghai.

Turning to Slide 8 in our balance sheet. In the chart on this slide, we set out our year-to-date and future scheduled amortization during 2019 and 2020. Our debt amortizes at roughly twice the rate our ships depreciate building equity value and balance sheet capacity for future growth. For the Partnership as a whole, we expect to amortize approximately $220 million of debt over 2019 and 2020, equivalent to almost 1x annual EBITDA and 9% of total Cap. More specifically, you can see that our net debt to total Cap and our net debt to EBITDA remained healthy at 51% and 4.5x respectively. Our total available liquidity including revolver capacity and short-term investments is approximately $133 million as of the end of Q3. Turning to Slide 9 and look at the Partnership sources and cost of capital. The chart on this slide lays out the current trading yields for GasLog's and GasLog Partners listed debt and preferred equity securities. As you can see the GasLog Group has securities trading at attractive levels in the U.S. and Norwegian bond markets and in the U.S. retail preferred equity markets. In addition, GasLog Partners continues to evaluate financing options in the private debt and preferred equity markets with a number of counterparties. We are confident that we will be successful in securing cost-competitive capital to fund our next acquisition without requiring access to common equity in the public markets.

Turning to Slide 10, where I'll discuss our future growth opportunities. The chart shows the 14 vessels with multiyear charters owned by our parent, GasLog Limited. Our drop-down pipeline increased during the third quarter after GasLog Chartered and the GasLog Singapore to sign line LNG for the 10 years as a floating storage unit. The vessel is GasLog's first FSU project and underscores the benefits of the Group's scale fleet diversity and commercial innovation. In addition, GasLog took delivery of the GasLog Warsaw at the end of July and so immediately commenced the 22 months charter with Shanghai, ahead of her 8-year charter to [indecipherable] beginning in May 2021.

Together the charter periods and our drop-down pipeline extended from 2025 to 2032 and represent approximately $3 billion in contracted backlog and some $300 million in total annual EBITDA with an average charter duration of approximately 8 years. These vessels provide visible future growth opportunities for GasLog Partners and would contribute positively to the average charter length of our fleet, as well as to our distributable cash flows. Taken in combination with our strong balance sheet and access to diverse sources of debt and equity capital, GasLog Partners remains poised for continued growth.

With that, I'll turn it back to Andy to discuss the outlook for LNG commodity and LNG shipping markets.

Andrew J. Orekar -- Chief Executive Officer

Thank you, Alastair. Turning to Slide 11, and trends in LNG demand. This slide shows the increase in LNG imports by country on a trailing 12-month basis. LNG demand grew by 43 million tons year-over-year, an increase of 14%. China posted the largest increase in absolute volumes importing 11 million tons more LNG or an increase of approximately 22% year-on-year. Natural gas continues to grow as a percentage of the country's overall energy mix and recently Sinopec stated it expects China's gas demand to increase by more than 80% from 2018 to 2030. While Chinese demand continues to be strong, LNG growth has been broad-based. Particularly in Europe, where demand in the region grew by nearly 36 million tons over the period, an increase of 105% year-over-year. European demand has been bolstered by a combination of declining production, continued coal to gas switching for power generation and inventory restocking.

Turning to Slide 12, and the future outlook for LNG demand by geographic region. In total, Wood Mackenzie expects net LNG demand to grow by 150 million tons between 2018 and 2025. Although China's imports have been significant in recent years, it's important to note that other countries in Southeast Asia, together with Europe account for nearly two-thirds of the projected LNG demand growth 2025.

Turning to Slide 13, which shows the new LNG supply coming online. Next year, over 22 million tons of new LNG capacity is planned to begin production. Mostly from projects in the U.S. which are expected to have a significant impact on ton-miles. In particular, the second and third trains at Cameron and Freeport are expected to begin production and ramp throughout 2020 and into 2021. Further ahead, there is approximately 94 million tons of new capacity scheduled to start production in 2021 through 2024. Including ventured global calc issue path in Louisiana, which took FID in the third quarter of 2019.

Turning to Slide 14, And a look future supply growth. The LNG supply outlook continues to be dynamic and growing. While 2019 is already a record year for new project sanctions Wood Mackenzie expects an additional 7 million tons of LNG capacity to reach FID prior to year end, followed by another 61 million tons in 2020 and 21 million tons in 2021. These proposed supply expansions have been supported by continued momentum in new long-term LNG sale and purchase agreements where over 170 million tonnes per annum have been signed at the beginning of 2017.

Slide 15, we discuss how U.S. exports have positively impacted shipping demand. According to Potent, 119 cargoes were exported from the U.S. in the third quarter. Of 30's cargos delivered in Asia, brought another 7% to the Middle East destinations that can require more than 2 ships for each million tons of LNG exported per annum. Compared to historical global average of 1.3 ships needed for LNG export in the rest of the world. Sent exports out of the U.S. began in 2016. An average of 1.8 ships have been required for each million tons. A positive development for shipping demand particularly considering the significant amount of liquefaction capacity expected to be online in the States by the end of 2020. Approximately half of which has been sold to Asian buyers.

On Slide 16, we discuss how the demand for LNG impacts the supply and demand balance for LNG carriers. This slide illustrates our view of shipping supply and demand through the end of 2021 based on Wood Mackenzie and Potent data. As you can see the market is expected to be structurally tighter through at least the end of 2020 based on Wood Mackenzie's latest quarterly LNG supply growth estimates and the on the water shipping fleet plus scheduled vessel deliveries. As a reminder, the Partnership fleet is 98% contracted through the end of this year and our nearest exposure to the spot market is not expected until December or January and we expect shipping demand to be strong. In 2020, the Partnership's fleet is 81% contracted and 75% of our open days are weighted toward the second half of the year when shipping demand is expected to be similarly robust.

On Slide 17, we discussed the rate trends in the LNG shipping market. The left panel shows the monthly average headline spot rates for TFDE carrier during 2018 and 2019. While the right panel shows the average headline rate by month for the period beginning in 2011 through 2018. While the absolute values may differ from the historical monthly averages, the trend in 2018 and 2019 has closely followed previously observed seasonal patterns. With headlines spot rates generally bottoming in early spring and peaking in the fourth quarter. As you can see from the figure headlines spot rates have risen sharply in recent weeks, predominantly as a result of 2 factors. One, increased demand for LNG ahead of the winter heating season in the Northern Hemisphere; and two, the continued start-up of new LNG production facilities, particularly in the U.S.

On Slide 18 and the discussion of recent developments in the multi-year chartering market. As the chart on this slide shows, periods of strength and weakness in the spot market have historically influenced activity for multi-year charters. Most recently 14 charters between 6 months and 3 years in duration were reported in the third quarter of 2019, the most since Q2 of 2018. Of these 14 charters, 6 TFDE and 16 ships were fixed on charters greater than 6 months. In addition, brokers currently assess the one-year time charter rate at $84,000 per day for a TFDE and $50,000 per day for a steam vessel. Although we would note that the term charter market for on the water ships and steams, in particular, has limited liquidity for charters of greater than 1 year. Over the last 18 months, we've utilized the periods of strength in the spot market to build on our customer relationships and fixed 3 of our TFDE for multiple years as well as one of our steamships for one year. Our strategy remains to pursue similar opportunities to reach charter our ships as the LNG market improves through 2020.

Turning to Slide 19 and a recap of our growth history and distribution guidance. As the far left panel shows our distributions have now grown on an 8% annual rate since our IPO backed by a coverage ratio, which is average more than 1.1x. Today we are declaring a third quarter distribution of $0.55 per unit or $2.20 annualized, which represents a nearly 4% increase over Q3 of 2018. As shown on the far right panel of the slide, we are reiterating our guidance of 2.4% year-on-year distribution growth for 2019. This guidance is supported by our accretive vessel acquisitions and positive outlook for the LNG shipping market, while also reflecting our one dry-docking in the fourth quarter and one vessel scheduled to end its charter in December.

Now turning to Slide 20. In summary, in the third quarter, the Partnership continues to execute the strategy, delivering record quarterly financial performance. Our access to multiple sources of debt and equity capital remains strong and our 14 vessel dropdown pipeline represents highly visible future growth. We reiterate our target to deliver 2% to 4% distribution growth for 2019 while maintaining prudent coverage and opportunistically repurchasing our common units. Finally, looking longer term, steady progress of new liquefaction facilities and increasing LNG demand should result in strong fundamentals for LNG shipping and create additional opportunities to recharter our ships.

With that I'd like to now open it up for Q&A. Shannon, could you please open the call for any questions.

Q&A

Operator

[Operator Instructions] Our first question comes from Greg Lewis with BTIG. Your line is open.

Greg Lewis -- Analyst

Yes, thank you and good morning and good afternoon. Andy, it's been interesting to watch the distribution coverage ratio go up a little bit here and I think when you guys went public, it was more in the 1.1, 1.2 range. Now we're up in the 1.3 range. How should we be thinking about that in the medium term as you think about balancing maybe some vessels rolling off contract over the next year? Should we be thinking more along the lines of what we're going to opt to be in kind of a new distribution range coverage type level in sort of the annual medium term?

Andrew J. Orekar -- Chief Executive Officer

Yes. Greg, thanks for the question. I think a couple of observations. One, clearly the challenges that MLP market has seen for several years now have manifested in coverage seeming to be valued at a premium to incremental distribution growth. So for several years now I'd felt like we could have grown the distribution by more than we have, but have begun to prioritize coverage in a more meaningful way. Having said that, I think you're right that we have some ships that over the next few years are ending their current charters and I think out of prudence may recharter at lower rates than they are earning today. And so it feels that having the substantial level of coverages is both the right thing to do from a market valuation perspective and the conservative thing to do for our distribution sustainability. So that's one of the reasons, really the reason that the unit repurchase program has been our focus. As it's been adding to coverage and rather than paying that incremental dollar out and distributions spending it on buying back our stock at these levels has been more effective in our view.

Greg Lewis -- Analyst

Okay, great. And then just one more from me on some of these vessels that are rolling off charter over the next 12 months. I mean clearly the rate market has improved. As we think about some of these vessels that are rolling off primarily the steam vessels, should we be thinking about those getting rechartered before they roll off contract or should we be thinking about maybe some idle time or downtime in between when they're going to be winning their next contracts?

Andrew J. Orekar -- Chief Executive Officer

Sure. So I think the honest answer is we're still quite a ways away from a number of them ending their current periods and it's generally difficult to fix a ship until you know where she's redelivering. And that sometimes is not known more than 30 days in advance of the period ending. So it's still early days on a number of these ships. I think the Jane Elizabeth is a good example of the ship whose ending its charter with Shell and then going into a dry-dock and then immediately coming out of dry-dock onto a new charter with Trafigura as Alastair mentioned in his remarks. And so that was really well done by our commercial team in minimizing the time in which it's earning revenues. I think most likely there'll be a number months where the ships are in a spot market, but we of course in many ways as possible we'll try to get them back to back with their existing charters. Having said that as well, the second half of next year, we expect to be quite strong and so if they're in the spot market for some period of time it's likely to be a strong one.

Greg Lewis -- Analyst

Okay, perfect. Thank you for the time, everybody.

Operator

Thank you. Our next question comes from John Chappell with Evercore. Your line is open.

Jonathan Chappell -- Analyst

Thank you, good morning. Andy, first question has to do with the capital return. I think that's really interesting. The slide you laid out according to share buybacks to distribution equivalent you're still trading at nearly 11% yield. And if we kind of do some rough math on where you've used the ATM versus where you've purchased units it's pretty widespread. Like close to 9% on ATM and 11% on buybacks. So you're still kind of in that sweet spot. You said you'll be opportunistic, but you only have about 5 million left I think on the authorization. So does this seem like the time where you kind of not getting credit for a 1.3x coverage ratio in the balance sheet, etcetera and you would still be more aggressive on the repurchase front?

Andrew J. Orekar -- Chief Executive Officer

Thanks, John. I think we are -- to put it simply, I think we're more buyers of our stock than sellers anywhere near these levels. That's for sure. I think we've been consistent. Since we've initiated a buyback program, we've been consistent in the amount we've repurchased in each quarter. In terms of the remaining authorization, I think, well, my guess is sometime in the New Year we can refresh that with the Board. So that's not really a limitation. But as you noted, we're some ways away from where issuing common equity would be attractive, but as Alastair mentioned in his remarks, we feel we've got other growth capital alternatives with respect to preferred equity and or unsecured debt. So we feel there is capital available to us, but it's very unlikely to become an equity anywhere near the share prices.

Jonathan Chappell -- Analyst

That makes sense. My second question was kind of along those lines as well. So you laid out the maintaining the 2% to 4% distribution growth this year which you're essentially there. I know it's too early to kind of give "guidance on 2020" but it seems like distribution growth isn't being rewarded in the MLP space. You talk to your yield specifically or the broader group. So do you really need kind of further dropdowns? When you think about dropdowns whether -- regardless if you can finance do you think about them as funding ongoing distribution growth or kind of more fleet replacement especially as some of the existing charters roll-off?

Andrew J. Orekar -- Chief Executive Officer

It's good question. I think for us, our philosophy for some time has been as an MLP, it is just fundamental to who we are that we continue to grow our asset base through dropdown and third party acquisitions which we've evaluated as well. And so I expect that to continue. The distribution growth itself as you've noted is somewhat subject to the way in which the units are being valued and what feels like is being rewarded as sufficient growth but my view is generally been that if you grow assets, you ought to grow your distribution as well. Perhaps not by a like amount but by a non-zero amount. So even though we're not thrilled with an 11% yield that's why we're continuing the guidance we've given for 2019. It is too early to talk about 2020. I think 2020 there is worth bearing in mind that we do have 4 dry dockings in 2020 so there'll be some ships out of the water in Q2 and Q3 as it stands right now. And of course the number of acquisitions, we can do will influence significantly the amount of EBITDA growth and then ultimately how we think about distributions as well. So still some time to come to think about that, but we certainly believe that growing assets at the Partnership level is critical and we plan to continue doing that.

Jonathan Chappell -- Analyst

That makes sense. One last one if I could, just to follow up to Greg's question. If we think about the 3 steamships that are rolling off in the next 12 months and think about why the units may be trading 11% yield I think that's probably one of the top reasons. I understand that you don't know where the last voyage is going to end and therefore, it's hard to get the next charter in advance in a perfect world. But given that the rates are much stronger than probably anybody thought at this point, and I understand that you're optimistic on 2020 but we don't know. And here we are and it's kind of our time to shine. Have you thought about maybe just taking a little bit of a discount just to guarantee that 100% utilization? Because clearly that's been very impactful with the new [indecipherable] just locking in that 100% utilization as supposed to maybe squeezing every last dollar out of the contract rate.

Alastair Maxwell -- Chief Financial Officer

You're absolutely right. And I think that mirror is the way we're thinking about it. I would expect that of the ships that we have exposure -- where we have exposure in 2020, it will be a combination of some ships and the spot market for a period of time. Hopefully some ships on term charters that as you say, ensure 100% utilization or perhaps market link structures. I would remind you that the ships -- our steamships have very little debt at the asset level. Most are only levered about 40% versus 50% for the partnership as a whole. And so rate levels that are say start with a 4 are comfortably above their break-evens because of all the debt we've paid down on them over time. So we feel we have some flexibility there and certainly share your view that utilization can be very powerful and we'll be looking to put some way to take advantage of that.

Jonathan Chappell -- Analyst

All right, that's super helpful. Thank you, Andy.

Andrew J. Orekar -- Chief Executive Officer

Thanks, John.

Operator

Thank you. Our next question comes from Chris Wetherbee with Citi. Your line is open.

Christian Wetherbee -- Analyst

Hey, thanks for taking the question. I just want to make sure I understand the moving pieces as you see them to that may influence how you think about distribution growth in 2020. Obviously you have a few ships coming off charter that need to be rechartered. It sounds like you have some dry docking if you can give us the days that would be great like in 2Q and 3Q next year. At least those dynamics influence it and obviously, the market and how it sort of values the units. So I think things to think about their coverage is up relative to what it has been historically. When I pull all those together: number one, am I missing anything; number two, how does that sort of influence your thoughts directionally about distribution growth compared to what has been for the last 12 to 24 months?

Andrew J. Orekar -- Chief Executive Officer

Sure. I think you've captured all the moving parts Chris. I think, again, with no IDRs continued access to growth capital even if it's not common equity we feel we have some very visible growth ahead of us with the dropdown pipeline we have and our sort of funding model. So that kind of continues through 2020. Clearly, you've seen us moderate growth over time since our IPO. And I think generally the MLP sector as a whole has embraced a kind of lower growth, higher coverage model and having growth that is non-zero with good coverage in our mind, especially within our peer group, feels like a pretty compelling combination. So I think our growth history is not likely to revert to our early years of double-digit and then high single-digit growth. But I think that's more in keeping with the overall investor dynamic we've been experiencing. And then as you say, some of the idiosyncratic elements of 2020 where we have some maintenance capex perform on some of our vessels.

Christian Wetherbee -- Analyst

All right. That makes sense. Do you have a number for the dry-dock days that you're projecting? I know it's early, but for 2Q or 3Q?

Andrew J. Orekar -- Chief Executive Officer

We can get you some more specific data Chris but it will be a little bit longer than usual because of the ballast water treatment system installation and we usually are like 30 including but of sailing time to and from the dry-dock. So it might be somewhere around 40, but we can get you a bit more information on that including specific time.

Christian Wetherbee -- Analyst

Okay, that makes sense. I appreciate that. Thank you. I guess maybe one other question. When you think about the fleet more broadly that you have currently at the Partnership and then you think about what the potential dropdowns look like, is there a thought around potentially selling some of the steamships just to kind of completely freshen up the fleet as you think out over the course of the next several years? Obviously the dropdowns of more modern vessels. You have a high degree of modern vessels already in the fleet. Does it make sense to continue that sort of flow through a company at your stage in its lifecycle? We haven't really seen vessel sales. And I'm just kind of curious as you look out over the next couple of years is that going to be something that we should be considering just potentially sort of premium up the charter coverage premium up sort of the asset base?

Andrew J. Orekar -- Chief Executive Officer

Yes, it's something we clearly study and unfortunate your observation is correct, Chris. There is essentially no liquidity for second hand vessels in LNG carriers right now. I think that is likely to change and certainly is going to change over time. We're hopeful that it may be changes in the next 12 to 24 months with the strong market that we're envisioning and people trying to be able to enter the business without having to secure a new building in a new building charter. So I think we're hopeful that asset sales in our market are possible, but today just to manage expectations, I think there is very little real out there that I think could be explored on that front. But something we monitor very closely and we can hope develops with the strength in the market in the next couple of years.

Christian Wetherbee -- Analyst

That's very helpful. I appreciate the time. Thank you.

Operator

Thank you. Our next question comes from Randy Givens with Jefferies. Your line is open.

Randy Giveans -- Analyst

How are you gentlemen? How's it going?

Andrew J. Orekar -- Chief Executive Officer

Good morning, Randy.

Randy Giveans -- Analyst

So I look at chart 17, there's obviously been some extreme kind of seasonality with rates rising in the fourth quarter of back in 2017 falling sharply in the first quarter first half of 2018. Same thing rising in the fourth quarter of 2018, falling sharply in the first quarter of 2019. We're already seeing a strong 4Q 2019. That said, what if anything would kind of keep the seasonal decline in the first half of 2020 more moderate than in recent years.

Andrew J. Orekar -- Chief Executive Officer

I think there is a natural seasonality as part of this really any natural gas business. So I think that that is a feature of our market. I would highlight though in most previous seasons JKM has peaked in December. And this year, while the JKM prices are a bit lower than they've been in years past the peak is expected in February at this time. So there certainly a thesis that the winter could last longer, so to speak with more trading opportunities into the new year. Also you have really just to sort of steady drumbeat of liquefaction being added and being added in here in the States behind schedule. So it will be brought on as soon as some of these commissioning exercises can be completed. So I think you've got a slightly different dynamic than years past where we'll have by this time next year, Randy, probably twice as much LNG or thereabouts being exported from the U.S. that we have today and much of that is ramping in the early part of next year, including at some smaller projects like Elba. So I think there is reason to imagine that the fall off won't be as significant, but I do think it's realistic to expect that the market may be a little bit lower during that shoulder period of March to May than it is right now.

Randy Giveans -- Analyst

Got it, all right. And then I guess one more question for the GasLog Shanghai. What was the average TCE that it earned in the third quarter? What is the most [indecipherable] in the fourth quarter? I know there is a ceiling rate, but it's likely below the $120,000 a day we're seeing today.

Andrew J. Orekar -- Chief Executive Officer

Sure. So fortunate the terms of the charter are confidential so I can't give you a lot of precision on that but maybe some guidance. It's linked to a series of broker quoted rates with a bit of a lag and at a percentage. So if you think about the average rate for the third quarter being in and around $60,000 a day as quoted by the leading brokers it was at that sort of a modest discount to that level for the quarter. That will carry on through the fourth quarter, as you say with the ceiling. But the ceiling and the floor are fairly widespread so it can certainly earn nicely above what we'd say our mid-cycle rates. Even if that's not $140,000 a day it can earn nicely above the mid-cycle numbers here you still looking at.

Randy Giveans -- Analyst

Nicely above. Okay, sounds good. That's it for me. Congrats again on the Methane Alison Victoria for the crew of the year. I know it's a big award to win.

Andrew J. Orekar -- Chief Executive Officer

Thank you very much. I appreciate that.

Operator

Thank you. Our next question comes from Michael Webber with Webber Research. Your line is open.

Michael Webber -- Analyst

Hey, good morning guys. How are you?

Andrew J. Orekar -- Chief Executive Officer

Good morning, Mike.

Michael Webber -- Analyst

A lot of it has already been picked over. But Andy, I want to look back to actually to the Sydney. It's one of the [indecipherable] you guys have rolling off next year with Cheniere. I know that the end of that term is going to be a little fuzzy because there's going to be some optionality in the back of it. But this Cheniere have a 6-month advance notice in terms of when they would pick up that option. So that's something you would know about whether that hits the spot market by year-end.

Andrew J. Orekar -- Chief Executive Officer

No Mike, it's not 6 months. I have a feeling its 2 or 60 days. I think it might be 60 days. But you're right that it's a 6-month extension option.

Michael Webber -- Analyst

Okay. We have clarity on that by the end of Q1 of this sounds like. Most of the team question may kind of picked over. But in the past when you guys add or when the spaces had tonnage rolling into a market that I know it's from now there's some concern around going to 2021, 2022. You helped form the core pool, which is predominantly dry fuel assets. When you look around the landscape are there other owners with steam tonnage that are going to be market exposed? Where you maybe as an alternative to kind of term out 13-year-old, 14-year-old assets are going to get looking on that side? You could find or develop some sort of full employment for steam tonnage and maybe service some shorter haul or kind of discounted lanes.

Andrew J. Orekar -- Chief Executive Officer

Certainly it's something we're considering. And we've had some brainstorming around pools for various vessel classes. So it's a good thought. Today there is nothing sort of on the board for that, so to speak, but there is no reason that that couldn't be similarly effective as the TFDE pool we had with [indecipherable] and Dynagas. But I think that the interesting thing about the relative compression and gas prices globally is that actually suits the steams on a relative basis vis a vis the TFDE if you've got some shorter distances, smaller ports testing and basin. The unit freight cost advantage of the TFDE or even the 2 stroke ship is as much smaller by comparison. So I think that's why you've seen steams have a fair bit of activity here in the third quarter. With the caveat that you're not seeing a lot of 3-year deals for a steam. You're saying 6 months to a year and something shorter voyages. The sort of market dynamic that we're in around gas prices is actually a bit advantageous to steams on a relative basis.

Michael Webber -- Analyst

All right, that's helpful. And I guess Andy I think I forgot who it was. Someone earlier mentioned the fact that it takes a lot for an LNG carrier to actually clear on the market and there may not be actives S&P market. Now we're really any growth point for tonnage. But when you think about what to do with these steam assets, I know in the past Alastair that GasLog is kind of voice support for the LP and we've talked about asset swaps or finding different ways to be supportive of the LP structure. That was all kind of pre-IDR take out. So just curious within that sort of context, it is fair to say the same level of support ultimately is there from GasLog parent with regards to finding a workable solution for these steam assets or say maybe swapping them back to the parent for something with term presuming you can get the valuation right on both ends?

Andrew J. Orekar -- Chief Executive Officer

So Mike I think that your first comment is answer right. There is -- continues to be full support from the GP for GasLog Partners. And we do continue to believe that the Partnership has access to different pools of capital, which can be valuable to the Group going forward. In terms of using the streams as currency if you like for funding dropdowns, I think nothing is ruled out but there is nothing under active discussion today. And so yes it's definitely a possibility. It's something that we have had some conversations around, so I'd certainly wouldn't rule it out. But I think that with the GasLog Partners, I think we're primarily focused on accessing what you might call more conventional sources of capital both private and public both that and preferred. And I think that that will be our first choices means to fund its growth.

Michael Webber -- Analyst

Okay. All right, that's helpful. I just look, we hadn't really address that kind of post IDR restructuring. So It's good to hear. That's it. I'll turn it over. Thanks for the time guys.

Andrew J. Orekar -- Chief Executive Officer

Thanks, Mike.

Operator

Our next question comes from Chris Snyder with Deutsche Bank. Your line is open.

Chris Snyder -- Analyst

Hey, good morning guys. So, just another one following up on the steam fleet outlook. So even in this relatively tight LNG shipping market and one that I guess should actually be pretty supportive of steam with the low commodity price. We're still only seeing one-year term opportunities at the most for the steam fleet. So I just wondering if you see any opportunities steer for conversion into either floating storage units or other applications where term employment is usually much larger. The GasLog parent recently announced a conversion of our younger and larger vessel. So I guess my question is do you see potential opportunities here for the steam fleet or are they too small or old for such applications where there is a very long contract associated?

Andrew J. Orekar -- Chief Executive Officer

Hi, Chris. No, I think you're spot on and in fact, I think the FSU market might actually be a better fit for steams than the FSRU market given the power requirements of the latter business model. So I think there are other uses for steams rather than carriers that at a relatively low capital cost in the project that our parent is pursuing in Panama. A great example of a market that's just getting going. But I do think I want to be a little careful because we're in a market today where there is essentially no ships available as you would see from the rates. You've got and on the water fleet size of about 500 ships and more than 40% of that number are steamships and in fact about 70 of that number are steams that were built before 2000. So we're in a market where essentially every ship as required with of course some seasonality during the year. And so I think while I would agree that you're probably not likely to see a 7 to 10 year deal for an on the water steamship as a carrier there does very much feel like a place in the market for these assets. We, in fact, did an opportunity for a multi-year charter for a steamship to a very well-known customer that one of our competitors unfortunately won. So they're out there, but they are -- you're right in saying that they are likely to be shorter-term opportunities, but there are absolutely essential for the market that's being serviced today.

Chris Snyder -- Analyst

Okay. Makes sense. And then just kind of following up on the tight market. So these spot rates are tracking extremely almost early similar to what we saw last year despite a much lower LNG commodity price. So I guess how do you compare what you're seeing in the market today versus this time last year? And how do you think about the recent Q4 day rate inflection despite a still-sluggish commodity price? Does this add like an incremental positive to kind of the underlying fundamentals you see in the market?

Andrew J. Orekar -- Chief Executive Officer

Yes, thanks for the question. I think we've been a little lost in the narrative around weak global gas prices. We're threatening the record high freight rates in a market where JKM is $6 in December and not $11. And so to us that signifies that you've got some real underlying demand and a structural shortage of ships that's driving freight rates high despite not as many trading opportunities for our customers. So I think it's really many of these long-awaited themes of particularly U.S. liquefaction finally producing on a meaningful scale that we expect to continue over the next 12 months. Hopefully, we'll have a bit of a tailwind in months and quarters to come with higher gas prices in Europe and Asia but even with this muted environment, you're seeing close to record rates again. So feels like a collaboration of the demand trends we've been discussing.

Chris Snyder -- Analyst

And just one last quick one, if I can. Andy, I thought it was very interesting what you said earlier about the LNG forward curve peaking in February 2020 when normally the commodity peaks out in December. So I guess, question is what's causing this?

Andrew J. Orekar -- Chief Executive Officer

If I knew, I probably wouldn't be on this phone call. I think there has been a couple of issues we've seen. I think last year and in some previous years there was storage built up ahead of a winter demand and expected cold weather that never really came through in Japan and China and so hopefully we're reverting to a more normalized weather pattern this year. And so I think that's part of the dynamic but the last year was really an exception to the rule of the seasonal timing of that demand. And then I do think you've had a number of these projects that delay and now are finally reaching close to some nameplate capacity especially here in the States. We saw, I think was a week ago, we saw a record feed gas for the U.S. LNG projects of 7 BCF a day, which is a good indication of the transaction actually producing what they're supposed to be. So there's just the opportunity for more gas to be sold later in the year as we move to the winter and schedule cargoes. So other than that, hard to say for sure.

Chris Snyder -- Analyst

Well, interesting. I appreciate the color. Thanks for the time guys.

Andrew J. Orekar -- Chief Executive Officer

Thanks, Chris.

Operator

[Operator Instructions] Our next question comes from Ben Nolan with Stifel. You may begin.

Ben Nolan -- Analyst

Hey, good morning guys. I have a couple of questions. One is sort of the capital allocation but it really is more on the debt side. I think, Alastair you said that the plan over the next 2 years, was to repay about $200 million of debt and the release had said around $110 for this year. Is that incorporating in some refinancing or is just to be clear, is the target really pretty aggressive actual reductions of the debt balance?

Alastair Maxwell -- Chief Financial Officer

It's just scheduled amort [Phonetic] so it's roughly $110 million per year, and that's just -- it's obviously build on a per vessel basis but you aggregated up to the consolidated fleet of the Partnership. That's just what we're due to pay on an annual basis over 2019 and 2020. There's no refinancing in there.

Ben Nolan -- Analyst

I understand. To that end, or just kind of doing the math if you are paying that down and then given the current distributions as they stand now does it really leave a whole lot left for distribution growth or buybacks unless there is some other element of growth or something else that works in there? Is that also an important element and how to think about where you stand going forward and sort of what the capital needs are relative to the capital once?

Alastair Maxwell -- Chief Financial Officer

So I think that the important thing about the annual we said this on a number of different calls now is that the annual schedule the profile is roughly sort of 15, 16, 17 years and the ships have a trading life. there are ships that are trading with 40 years of life, but somewhere between 30 and 40 years. So what the amort does for us is it creates incremental balance sheet capacity. What we're not going to do is relever the business at the levels, which are not appropriate. But it does give us an additional lever that we can pull on in terms of accessing capital and then how we allocate that capital as you say, is correct as that go toward growing the asset base and growing the underlying cash flows as it goes repurchasing units and that's why we have some a choice around what we do with that capital. But that I think is the message around the amorts and the impact of the amort.

Ben Nolan -- Analyst

Okay, that's helpful. And then, Alastair, another thing I wanted to just touch on a little bit that you mentioned briefly was that you're undergoing some cost-cutting efforts and finding ways to do things efficiently. I was just wondering if you could just maybe put some color around what that entails and ultimately what if it's possible to put some sort of a number around how much you might be able to -- how much blood might be in the rock here?

Alastair Maxwell -- Chief Financial Officer

So at the Investor Day in 2018, we talked about looking for savings of approximately $1,500 per vessel per day over the time horizon between 2017 through 2022 -- end of 2017 through 2022. I think that based on what we know today -- and that was across G&A and opex. Based on what we know today, we are very confident that we will hit that target and I think actually will do better than that target. If you look at the costs today, our total cost base, it's roughly two-thirds opex and one-third G&A and so I would expect the savings to be roughly proportional to the cost base that we have in the business as a whole today. Some of this is coming through a relentless focus on just a blocking and tackling in the business around procurement, negotiating contracts, maintenance arrangements, maintenance scheduling leverage over yards for dry-docking. Really basic stuff which individually doesn't make massive contributions but when you add it all up, it has a significant impact. The other factor is growth in the fleet because we look at this very much on a unit basis. And as the fleet grows, we're not adding G&A proportionately, we're not adding vessel management cost proportionately, so some of this is underlying cost reduction, some of it is the effect of scale over time. Does that help?

Ben Nolan -- Analyst

Okay. That is very detailed and I really appreciate it. It does for me. Thanks guys.

Operator

Our next question comes from Espen Landmark with Fearnley. Your line is open.

Espen Fjermestad -- Analyst

Hey, good morning. Sorry if we keep going on with these steam turbines but as it's obviously important for the long-term story. So first question I guess we can pretty much calculate this ourselves. But the cash breakeven on the turbines when you include operating cost step service, dry-dockings and whatnot what's that number roughly?

Andrew J. Orekar -- Chief Executive Officer

Espen, I would say it's probably in the high '20s, low '30s. Depends a little bit on the vessel and it depends on how much debt she's got and so on but high 20s, low 30s.

Espen Fjermestad -- Analyst

Okay. And secondly, probably a bit more difficult questions. But there has been a few ship owners seeking price indications for their TFDE this year and it seems price talks are a bit below what would typically be real crew cost. So I was wondering, what do you think are fair values for the steam turbine on a charter-fee basis? I know you have them in the books for around $130,000.

Andrew J. Orekar -- Chief Executive Officer

Espen, hi. It's Andy. I wouldn't want to comment on that. Obviously, every quarter we go through a very rigorous process for what our assets are worth as of our balance sheet date and that's scrubbed internally and externally and so we're comfortable with the asset values that we have today. I'm not surprised to hear that maybe if others are trying to sell assets in the market it's rather a look with maybe some low prices are required to get them to move. But other than that we haven't seen a lot of those opportunities, nor seen a lot of evidence in our transactions happening so hard to say other than we're very comfortable with the values that we're reporting in our balance sheet.

Espen Fjermestad -- Analyst

Fair enough. Finally, so to say that the cash breakeven is 30 day, how many of those could you kind of put away on the profit split contract similar to one you have on or what we have seen elsewhere in the space written there?

Andrew J. Orekar -- Chief Executive Officer

You mean, sort of things which are not just fixed rate term charters right?

Espen Fjermestad -- Analyst

Say you're locking your 30 day for a cash breakeven, and then there's a profit split on pulp, could you do that on some of these steam turbines?

Andrew J. Orekar -- Chief Executive Officer

Interesting question. We haven't done that. I'm not saying that we couldn't but wouldn't. What we have done is that with the Gaslog Shanghai entered in to the market late. We continue to look with our customers at quite a large number of different options which may be related to shipping rates that may be realated to commodity prices and differentials. They may have flexibility around seasonal usage and so on. So I think there's quite a lot of different options and we're being quite proactive in exploring those options with customers. Clearly what we're trying to do ultimately is to align the interest of our customers in having access to efficient shipping when they need it. And for us, it is getting utilization as high as we can on the vessels which don't have long term chances. So I think the answer is not saying yes or no to that particular structure, but we're trying to be as creative as we can in terms of the commercial employment of our ships.

Espen Fjermestad -- Analyst

Right. Okay, that's interesting. Thank you very much.

Andrew J. Orekar -- Chief Executive Officer

Thanks, Espen.

Operator

Thank you. And I'm currently showing no further questions at this time. I'd like to now turn the call back over to Andy Orekar for closing remarks.

Andrew J. Orekar -- Chief Executive Officer

Thank you, Shannon. Thank you all very much for listening. We very much appreciate your continued interest in Gaslog Partners. We look forward to speaking to you again next quarter. Thanks very much.

Operator

[Operator Closing Remarks]

Questions and Answers:

Duration: 58 minutes

Call participants:

Joseph Nelson -- Deputy Head of Investor Relations

Andrew J. Orekar -- Chief Executive Officer

Alastair Maxwell -- Chief Financial Officer

Greg Lewis -- BTIG -- Analyst

Jonathan Chappell -- Evercore ISI -- Analyst

Christian Wetherbee -- Citi -- Analyst

Randy Giveans -- Jefferies -- Analyst

Michael Webber -- Webber Research -- Analyst

Chris Snyder -- Deutsche Bank -- Analyst

Ben Nolan -- Stifel -- Analyst

Espen Fjermestad -- Fearnley Securities -- Analyst

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