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GasLog Partners LP (NYSE:GLOP)
Q1 2020 Earnings Call
May 9, 2020, 8:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Tiffany and I will be your conference operator today. At this time I would like to welcome everyone to the GasLog Limited and GasLog Partners First Quarter 2020 Results Conference Call. [Operator Instructions]

On today's call are Paul Wogan Chief Executive Officer of GasLog Limited; Andy Orekar Chief Executive Officer of GasLog Partners; and Alastair Maxwell Chief Financial Officer; Joseph Nelson Head of Investor Relations will begin your conference. Please go ahead.

Joseph Nelson -- Head of Investor Relations

Good morning or good afternoon and thank you for joining the GasLog Limited and GasLog Partners First Quarter 2020 Earnings Conference Call. For your convenience this webcast and presentation are available on the Investor Relations section of our website www.gaslogltd.com and www.gaslogmlp.com where a replay will also be available. Please now turn to slide two 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 is included in the appendix of this presentation. Paul will begin today's call with a discussion of Gaslog's first quarter highlights and results followed by a brief discussion of the LNG market. After which Alastair will discuss the group's financial position and financing activity. And finally Andy will walk you through the partnership's first quarter. We will then be happy to take your questions.

With that I will now turn it over to Paul Wogan CEO of GasLog.

Paul Wogan -- Chief Executive Officer

Thank you Joe. Good morning or good afternoon to all of you. The COVID-19 outbreak posed unprecedented challenges to GasLog's commercial and operating environment during the first quarter but I'm pleased to advise that our employees rose to the challenge and ensured that our fleet operated with 100% uptime. We were fortunate compared to many businesses and industries in that we could continue to operate the business and despite the turmoil achieved despite the turmoil achieved high rate levels of vessel utilization. This allowed us to generate revenues in line with Q1 2019 while our continued focus on operating and G&A costs combined with lower interest expense that we grew both our adjusted EBITDA and adjusted EPS. We have 77% charter cover in 2020 providing high visibility of both revenue and cash flow during this period of heightened uncertainty. However given the difficult and uncertain macro environment we also took a proactive and prudent step to reduce our common dividend to $0.05 per share for this quarter to ensure the ongoing resilience of our business. Finally despite the challenges facing the wider credit and banking markets we have made significant progress in refinancing our 2021 debt maturities and we are on track for completion in the third quarter of this year. Turning to slide five. I've been highly pleased and proud at how GasLog's employees have responded to the challenges presented by the outbreak of COVID-19. Our overriding focus has been on ensuring the safety of our employees followed by desire to provide uninterrupted service for our customers.

In Q1 we delivered on these aims through establishing a dedicated COVID-19 task force to develop implement and constantly review our business continuity plan. And by introducing from mid-March a work-from-home policy for all GasLog shore staff and with the support from our seafarers by minimizing crude changes and restricting third-party access to our vessels. These and other actions resulted in our fleet operating with 100% uptime. And to date there have been no reported incidence of COVID-19 on board our vessels.

In addition despite the turmoil in the LNG commodity market through focusing on utilization we have continued to conclude business for our vessels operating in the short-term market. Presently all of our available vessels are fixed on charters with Clarksons currently assessing headline rates for TFDE vessels at approximately $32000 per day. All of our vessels on long-term charter continue to receive higher as per the terms of our charter parties which is a testament to the strength of our customers. Our new business deliveries have so far been unaffected by COVID-19. Last month we took delivery of the GasLog Windsor with the GasLog Wales scheduled to deliver on May 11. The Alexandroupolis FSRU project in Northern Greece successfully completed a binding market test an important milestone on the project's path toward a final investment decision. Lastly I'd like to thank all GasLog employees for their dedication and professionalism under these challenging and uncertain circumstances. In particular we owe a huge debt of gratitude to our seafarers who continue to be separated from their families and loved ones in these difficult times.

Slide six shows the Q1 financial highlights. The two charts on the left display the consolidated revenues and EBITDA of our wholly owned fleet as well as the contribution from GasLog partners. Our focus on fleet utilization delivered stable revenues compared with Q1 2019 while our continued focus on operating and overhead cost save initiatives allowed us to grow EBITDA by more than 4% year-over-year. In addition adjusted earnings of $0.15 per share in Q1 was a 34% increase year-over-year aided by lower interest expense following declines in LIBOR. Slide seven highlights the approximately 77% charter coverage for 2020 across our fleet. This high degree of revenue and cash flow visibility is especially welcome during this uncertain period and underpins our resilient business model. The vast majority of our contracted revenues are at fixed daily rates of hire with no commodity price exposure. Whilst our long-term customers are some of the LNG markets major participants including Shell Cheniere Jera Centrica Total and Endesa.

Slide eight details our newbuild XDS fleet which to date has experienced no COVID-19 related delays. We will take delivery of seven latest generation XDF vessels in 2020 and 2021 all of which will go on charter to high-quality customers. In aggregate they will generate an incremental $145 million of annualized EBITDA once fully delivered. Last month we took delivery of the GasLog Windsor which immediately began a seven-year charter to Centrica while the GasLog Wales is scheduled to deliver on May 11 following which the vessel will immediately commence a 12-year charter to Jera. In total the 12 vessels on this slide comprise one of the largest fleets of modern and highly efficient 2-stroke XDF vessels with a contracted revenue backlog of over $2.5 billion an annual EBITDA contribution of $265 million once fully delivered.

Please turn to slide nine. I we took the prudent decision to reduce our common dividend to $0.05 per share for this quarter to retain cash within the business. This is a difficult decision as we view cash returns as an important part of delivering shareholder value. However both the capital market turmoil and the commercial uncertainties caused by the COVID-19 outbreak make it important to focus on near-term liquidity and business resilience. This lower dividend when combined with the distribution rebalancing already announced at GasLog Partners will lead to the GasLog Group retaining $22 million in cash this quarter relative to the cash paid to external shareholders in respect of Q4. Slide 10 provides some detail on the LNG commodity market in Q1. Early in the quarter LNG demand faced headwinds from a warmer than average northern hemisphere winter and generally high inventory levels of natural gas and LNG. COVID-19 and created huge market uncertainty although the impact varied by month and by region. For example compared to Q1 2019 Chinese first quarter demand decreased by over 5% to 15 million metric tons. Meanwhile European demand grew by over four million tonnes or 37% as gas pricing favored coal-to-gas switching for power generation and LNG continued to replace indigenous gas production. In total LNG demand was 98 million tonnes in Q1 2020 a strong 10% increase on Q1 2019.

Looking ahead the COVID-19 pandemic-related lockdowns and consequent decline in global economic activity continue to create a high degree of uncertainty for near-term LNG demand and hence for LNG shipping. This could potentially exacerbate the usual seasonal fall in LNG trade during Q2 and early Q3. In addition several major LNG producers have acknowledged that buyers have canceled scheduled cargoes over the course of June and July although some of these cargoes may still be shipped and marketed by traders. However as the right-hand chart shows LNG demand has started to pick up quickly in China as it relaxes its lockdown regulations and buyers take advantage of historically low LNG prices. Overall Poten estimates April 2020 LNG growth of 3% year-over-year which compares very favorably with the demand destruction seen for coal and oil. Slide 11 shows Wood Mackenzie's forecast of an additional 92 million tonnes of broad-based LNG demand growth over the next five years a healthy compound annual growth of 4%.

And turning to slide 12 for summary. As the COVID-19 outbreak unfolded GasLog quickly introduced measures to ensure the safety of our employees and uninterrupted service for our customers which demonstrated the underlying resilience of GasLog's business which is supported by our 77% contract cover in 2020 our continued focus on cost control where we remain on track to deliver at least $6 million of G&A savings by 2021 by our newbuild program which when fully delivered in 2021 will generate an additional $145 million of fixed rate EBITDA by our decision to preserve additional cash within the company through a reduction of the dividend and finally as Alastair will highlight through the significant progress we are making in refinancing our 2021 debt maturities.

With that I'd like to turn it over to Alastair.

Alastair Maxwell -- Chief Financial Officer

Thank you Paul and good morning and good afternoon to you all. In light of the current environment I wanted to address the impact that it has had on our financial position and to brief you on our financing plans regarding our bank facilities maturing in 2021. Slide 14 sets out our consolidated balance sheet metrics as of the end of Q1. Scheduled debt repayments over the next several years and capital expenditures for the remainder of 2020. We ended the first quarter with net debt to total capitalization of 60% and total liquidity of $252 million. This amount includes $150 million of restricted cash related to the financing of the GasLog Windsor but excludes $81 million of cash collateral posted with our swaps counterparties and does not reflect $38 million of charter hires for April that were received shortly after the quarter end. Our gross liquidity position has remained consistently strong over the last several quarters despite the impact of the current environment and our financial resilience will be reinforced by the reduction in the dividends of GasLog and GasLog Partners for Q1 and by our continuing success in reducing both our operating and our G&A expenses. We are also having very constructive dialogues with our swaps counterparties in order to identify and execute measures to reduce cash collateral posted under the existing interest rate and cross currency swaps.

Looking forward while our total debt will increase as we take delivery of our new buildings we will be amortizing our bank debt at a rate of approximately $255 million per annum when the fleet is fully delivered. Over the period 2020 to 2023 inclusive we will amortize a total of over $1 billion. These amortization payments are underpinned by our consolidated charter backlog of $3.8 billion. Finally we have approximately $37 million of new building cash equity payments remaining due this year and we expect to meet these capital commitments with cash on hand plus operating cash flow.

Slide 15 demonstrates that while the COVID-19 environment has impacted the mark-to-market value of our derivative liabilities we are also benefiting meaningfully in terms of the reduction in our interest expenses as a result of the falls in interest rates. As central banks around the world have reduced their funding rates and injected substantial liquidity to soften the impact of the virus on the capital markets the quarterly three-month LIBOR average has declined by some 200 basis points from 2.6% in Q1 2019 to approximately 50 basis points currently. If interest rates were to remain at these levels for an extended period the 200 basis point reduction will be equivalent to an annualized interest saving of almost $30 million or $0.37 per share when applied to the portion of our debt which is currently unhedged.

Moving to slide 16 which provides an update on the status of the refinancing of our 2021 debt maturities. As at March 31 2020 we had $1.1 billion outstanding under our five vessel facility and our legacy facility which mature in April and July 2021 respectively. We're in the process of refinancing both of these facilities and I'm pleased to report that the group continues to receive strong support from our diverse and high-quality group of core relationship banks. To date and despite the COVID-19 related disruption to global banking and credit markets we have received commitments totaling approximately $900 million from our lead banks. I believe that this is a testament to the quality of our assets our operating and commercial platform our contracted backlog and the strength of GasLog's long-standing banking and commercial relationships. We are now proceeding with syndication and documentation and are on track to complete these refinancings by the third quarter of this year.

We believe that the combination of the refinancing program together with the incremental cash flows from our fully contracted new build vessels the capabilities and commitment of our seafaring and shore-based employees progress with our cost-saving initiatives started last year the benefit of lower interest rates and our prudent dividend policy will leave the group in a strong financial position and well placed to emerge from the current environment with highly competitive breakevens and an industry-leading platform offering unparalleled service to our customers and attractive returns to our shareholders.

And with that I'll turn it over to Andy to discuss the partnership's first quarter.

Andrew J. Orekar -- Chief Executive Officer

Thank you Alastair. Turning to slide 18 for a review of GasLog Partners' performance in the first quarter of 2020. I'm pleased to announce the solid financial and operating quarter for the partnership despite the challenges related to COVID-19 as Paul discussed earlier. During the first quarter we reported revenues of $91 million adjusted EBITDA of $64 million and adjusted earnings per unit of $0.42 increases of 6% 2% and 1% respectively over the first quarter of 2019. Two of our vessels with steam turbine propulsion fixed new multi-month charters. Our G&A expenses decreased by more than 10% year-on-year. We retired approximately $33 million of debt and we declared a common distribution of $0.125 per unit.

While we are encouraged by our performance during the first quarter there remains a high degree of uncertainty in the commercial environment given the significant economic disruption caused by the COVID-19 pandemic. Accordingly we are withdrawing our previously announced EBITDA guidance for 2020. However we are pleased to note that all 15 of our vessels are currently on charter.

In addition as of March 31 our fleet is 78% chartered for the remainder of 2020 representing approximately $209 million of contracted revenues. Including our recent charter of the Methane Rita Andrea that we completed in April our chart recoverage for the year has now increased to over 82%.

On slide 19 you'll see the positive impact our reduced distribution has had on our coverage and liquidity. As the charts on this slide show our distribution coverage ratio for the first quarter is more than 4.6x. Moreover the $0.125 distribution represents a conservative 30% payout of our adjusted earnings per unit for Q1. In total dollars our declared distribution represents a quarterly cash outflow of $6 million enabling us to retain approximately $21 million more cash in the business as compared to the partnership's distribution level for the fourth quarter of 2019.

Turning to slide 20 and a discussion of the LNG carrier spot market. The first quarter of 2020 saw a record 102 spot and short-term charter fix according to Poten. 20 or approximately 20% of the total were for steam LNG carriers. This activity includes two steam vessels owned by GasLog Partners. The Methane Alison Victoria which is now fixed for nearly all of Q2 and into her dry docking scheduled to commence this summer and the Methane Rita Andrea which is now fixed through the third quarter. As Paul discussed earlier we continue to focus our commercial efforts on maximizing fleet utilization in the coming months.

Slide 21 sets out GasLog Partners' balance sheet metrics planned debt repayment over the next several years and capital commitments. The partnership's credit profile continues to be robust with net debt to trailing 12-month adjusted EBITDA of 4.7x. Our net debt-to-capital remains a strong 54%. As of the end of the first quarter we have $93 million of available liquidity. We expect to continue strengthening our balance sheet in the near term beginning with the retirement of approximately $82 million of debt over the remainder of this year for a total of $115 million retired in 2020. Reducing debt balances will reduce our cash flow breakeven levels over time improving the competitiveness of our fleet.

Lastly it's important to note that the partnership has no committed growth capex but we will spend an additional $14.5 million in maintenance capital expenditures related to our three remaining dry dockings in 2020 including the installation of ballast water treatment systems as required by regulatory compliance.

Turning to slide 22 and a discussion of how our focus on debt repayment creates equity value for our unitholders. On this chart we demonstrate how amortizing our debt builds balance sheet capacity and book equity value using our most recent acquisition of the GasLog Glasgow as an example. All of GasLog partners debt is at the vessel level and this debt amortizes at roughly twice the rate our ships depreciate. As you can see from this slide our loan-to-value on the Glasgow declines by over 9% during the two-year period from the end of 2019 through to the end of 2021. During the same period our book equity for the vessel net of depreciation is projected to increase by $14 million which represents a 10% compound annual growth rate in equity value. As this compelling value creation demonstrates we believe that prioritizing debt reduction supports the partnership's growth and book equity value per unit which today stands at approximately $12.50 well above the current trading price of our units.

Turning to slide 23. In summary in the first quarter the partnership delivered another solid operating and financial performance despite the challenging economic conditions resulting from COVID-19. Our focus remains on ensuring the highest degree of fleet utilization while continuing to reduce our unit G&A and opex costs. The partnership's capital allocation strategy for this year prioritizes debt repayment further improving the resilience of our business. Finally as one of the largest independent owners of LNG carriers our scale and continued focus on operational excellence cost control and reducing cash flow breakeven will improve the partnership's competitive positioning in a growing LNG market.

With that I'd like to now open it up for Q&A. Tiffany could you please open the line for any questions?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Michael Webber with Webber Research.

Michael Webber -- Webber Research -- Analyst

Good morning, guys.

Andrew J. Orekar -- Chief Executive Officer

Hi, Michael.

Michael Webber -- Webber Research -- Analyst

Obviously a lot of COVID talk this quarter and conversations around kind of interruptions of trade flow etc. But I actually wanted to kick it off by asking about some new business that's floating around in the middle of all this. We saw Qatar Cutter come out and sign it would looks like a tentative agreements to build a big slug of LNG carriers in Hudong in China which would be the largest order ever placed there. So I'm just curious one what you think about that. And then two as you think about the next several years for GasLog would you have any qualms with taking on several hundred million or $1 billion of capacity that could be built in China not from a residual value risk perspective. Just curious how you think about that in general because it is kind of one of the data points that kind of flies against the grain in terms of everything else we're seeing right now.

Paul Wogan -- Chief Executive Officer

Yes. Thanks Mike. It's interesting isn't it? Unlike I think coal and oil where we're seeing some pretty drastic demand destruction right now what we're seeing with LNG is it's actually holding up quite well despite the downturn in the economies. And I think that's because with LNG I think is this not a systemic fall off in demand. In fact we're still seeing it going up. So I'm certain that we're going to need more LNG in the future. Without a doubt. And so I think the Qataris in their move to expand their production is correct. I think what this probably does though is push some of the projects to the right. I don't think you'll see as many FIDs taken this year. I think that will fall back into next year so people have more certainty. And the Qataris I think could be one of the people who have the ability to do that. But we do we do see continued increasing demand for LNG.

In terms of the ordering vessels I think the Qataris will also come to an agreement with the yards in Korea because I think they want to make sure that they have a lot of capacity that they can hold back. It is an agreement to agree right now. There are no sort of firm births.

But in terms of China in Hudong I think the Chinese yards continue to increase in terms of quality etc of the LNG carriers. And so would GasLog look at building in Chinese yards in the future? Yes absolutely. But we would do that. We take a view on that at the time. We would go. And as we do always look at the yards and spec them and make sure that we felt comfortable with both the quality but especially with the safety there.

Michael Webber -- Webber Research -- Analyst

Got you. Okay. That's helpful. Just along the lines of the environment we're in now and the notion of lower for longer at least in some of the commodity prices where LNG has kind of indexed off of our benchmarked against. It would seem like leverage to the downstream is more important than ever. As you mentioned you certainly see the pace of FIDs sliding to the right pretty considerably.

In terms of GasLog has always been reluctant is probably the wrong term. I would say maybe like particularly thoughtful about how it would develop downstream capabilities be it through acquisition or building up in house expertise. I'm just curious with what we've seen thus far has the is the focus changed at all? Or is there going to be a bit of a heightened focus on developing more downstream capabilities as an outlet for your legacy tonnage? Or it's just kind of the aspect of the value chain that sees the most attention over the next several years as we work off globally at capacity? And what would that initially look like?

Paul Wogan -- Chief Executive Officer

Yes. I mean I think as a business it's a really good question. Difficult to answer. I think sometimes in the middle of all we do get I think quite rightly focused on the uncertainty that we're seeing with the COVID right now. But yes looking forward we have a lot of inbuilt growth which is coming into GasLog with the seven new buildings that we're talking about. I think that's our #1 priority is one to take delivery of those to make sure that we run those ships well so that we get the revenues from those vessels. And two to make sure that we're as efficient and effective as possible. We talked about some of the cost-saving initiatives that we've introduced and we introduced them before all this uncertainty with COVID which we think are going to take pretty certainly going to take at least $6 million out of our G&A next year. So those sort of things I think is where we're focused on right now.

I think coming out of that as a company that will be I think in a strong position as we amortize off the debt and bring down leverage of the business. I think we'll be in a great position given our operation platform to look at the options along the value chain. But I think that's something that's going to be coming a year or two down the line Mike rather than something that we would be focusing on right now. I think we've got a lot of wood to chop to make sure that we deliver on all this growth and cash flow that we've got coming. We'll do that first. And then when we're in a stronger position and we're coming out of this uncertainty yes I think those sort of things are going to be quite interesting to look at.

Michael Webber -- Webber Research -- Analyst

Got you. That's helpful. And just one more maybe near-term question. Obviously with a lot of the exporters we've been seeing and following the idea of canceled cargoes. I think we've seen think we could see up to 40 this quarter. I'm just curious obviously it's less of a direct impact on GasLog in that scenario. I'm just curious one do you think those kind of numbers kind of 40-ish cargoes canceled as we move through the second quarter are realistic? And then two if you could kind of walk us through and forgive me if you mentioned this already. I have hopped on from a different call. But if you could walk through the actual mechanics of how that impacts your business if at all.

Paul Wogan -- Chief Executive Officer

Yes. I'm not sure we have better insight into any cancellations than others because I think the cancellations are being done very privately between the people who are going to pick up the cargoes and the people who are producing them. It does appear that some of those are going to be with companies where there's a tolling agreement. So the question is if those cargoes are canceled does do the other do the companies Cheniere for example decide to actually process the gas themselves? They've got the cash flow from the tolling agreement. Maybe they process the gas themselves and export. So it'd be interesting to see what happens there.

But we have done some work around if we saw those type of levels of nonmovement of cargoes what does that mean for shipping? We think that surround about 10 vessels if you were up at 20 25 cargoes a month out of the U.S. We always felt that this year was going to be quite time. And to be honest with you the 10 vessels doesn't materially make a big impact on that sort of level. We've seen we saw quite a lot of spot fixtures as Andy spoke about earlier in this year just from the volumes coming on. So it does obviously it's not good news for us. It is something that we would prefer not to happen. But to put it into context those type of levels which people have been talking isn't a huge number of ships which would be affected.

Michael Webber -- Webber Research -- Analyst

All right. That's helpful guys. I'll hop back in the queue. Thanks.

Operator

Your next question comes from the line of Randy Giveans.

Chris Robertson -- Jefferies -- Analyst

Hi, good morning gentlemen. This is Chris Robertson on for Randy. So more of a market level question. What are your expectations for fleet supply growth this year kind of taking into account disruptions both at the yards due to COVID but also the shutdown of the scrap yards?

Paul Wogan -- Chief Executive Officer

Yes. I don't we were not expecting much in the way of scrapping this year Chris to be honest. There are we were thinking that we're going to be somewhere close to around 40 vessels delivered this year. Our view is that we are likely to see some of those vessels pushed off into 2022. A number of them are not fixed and I think the owners of those vessels may well want to delay. So I think we could see vessels in 2020 pushed into '21 and then into '22. So headline rate of 40 vessels but we would expect a number of those to fall back into 2021.

Chris Robertson -- Jefferies -- Analyst

Got you. And that makes sense. Moving on to the refi. So of the $900 million kind of secured to date how many financial entities does that represent? And then how much more running room do you have in terms of future negotiations?

Paul Wogan -- Chief Executive Officer

Alastair would you like to take that?

Alastair Maxwell -- Chief Financial Officer

Absolutely will do. So Chris the $900 million is seven banks across three different facilities. And not question we mean in terms of running room but we are now in the process as I said in my remarks of syndication and preparing the associated documentation. And based on all the conversations we've had to date while I have to say that what I've indicated in terms of commitments is what is credit approved I'm confident that we will be able to raise the remaining $270-odd million that we need to raise in order to fill all of those three facilities based on conversations with a wide range of banks almost all of whom are lenders to us today. So familiar with the credit and we have existing relationships if that answers the question.

Chris Robertson -- Jefferies -- Analyst

Yes it does. And yes by running room in remaining to be secured. So you answered that as well. This is kind of related to what Mike was talking about but kind of given the LNG supply glut that's been overhang in the market since last year with some of these weaker winners and then of course the COVID situation and economic slowdown what are some demand catalysts that the market needs to see to help alleviate that low underlying price? Are you seeing any accelerated coal-to-gas switching in some of the emerging markets? Is that spurring on building of new gas turbine power plants etc? Are these low prices kind of a good thing looking forward?

Paul Wogan -- Chief Executive Officer

Yes. I mean I think sorry it's kind of a bit of a mantra. The best thing to low prices is low prices because it definitely does stimulate demand and I think you saw that with both India and Europe in the first quarter. Europe continues to switch from coal to gas. If you look at the U.K. as an example we've just gone people or days without a single piece of coal being burned and that means that gas is being used to supplement and back up the renewables in the U.K. and it's happening across Europe. So Europe increased four million tonnes 37% increase in the first quarter because it was taking advantage of the low gas prices to swap out of coal. India was another great example which is a very cost-conscious market for LNG. In the first quarter demand went up 37%. Now of course as India is going to lockdown we're going to see that probably coming off in until they come out of lockdown. But again India started to sort of service the type of growth which we've been expecting for a while based upon those low prices.

And so we are pretty bullish in terms of what the low prices are going to do in terms of demand. The uncertainty is what's happening around the COVID and the closure of some of the economies and the fall in production and things like that and how does it come to get out of that. Because those I think are the uncertainties that we're seeing right now that's making us be cautious around our dividend and cautious around sort of how we see the future.

Chris Robertson -- Jefferies -- Analyst

Right. That makes sense. And last question for me. Is COVID causing any disruptions for discharging and causing any delays or "forced" floating storage just waiting at the port?

Paul Wogan -- Chief Executive Officer

Yes there has been some of that. There are some quarantine restrictions in both for example Australian and Chinese ports. We have seen also where ports have been kind of closed on a temporary basis ships having to redirect and go elsewhere. So what we haven't got right now is any storage around the pricing. But certainly if you like there's some enforced storage which has been happening around people trying to adapt to some of the COVID delays. So I think that has been in a sense not the kind of demand you want but certainly has been helpful I think in terms of ship utilization.

I think looking forward into the third and fourth quarter we have seen over the last couple of years storage used as a way to take advantage of the price contango. I think we're likely to see that again because we're coming off very very low prices assuming people see a sort of a more normal market in the winter and what's interesting is as we're leading away with some of our ships the ships are becoming much more efficient in terms of boiler etc. So you can actually store cargoes on ships for longer to take advantage of that price contango. So what the shipowners are doing with their fleet right now is actually helping that sort of contango storage play as well in the future.

Chris Robertson -- Jefferies -- Analyst

Okay, great. Makes sense. Thank you for taking my questions.

Operator

The next question comes from the line of Jon Chapell with Evercore.

Jon Chapell -- Evercore -- Analyst

Thank you. Good afternoon, everyone.

Alastair Maxwell -- Chief Financial Officer

Hi, Joe.

Jon Chapell -- Evercore -- Analyst

Paul we know the market to market and LNG shipping is challenged right now and LNG global prices are challenged as well and there's really nothing you can do about that. But the GasLog structure has been set up to kind of deal with those peaks and valleys in the market and it seems like the equity markets think you're a pure spot player. So as we think about the two potential areas of concern that may be weighing on equity charter counterparties and the balance sheet I know you've addressed each one but if you allow me to just ask a bit more directly.

First on the contracts you said that all your charterers are meeting all of their obligations. But maybe can you just speak to their ability to maybe back out or delay payment or do something that would question the stability of that contract in a very extreme market environment like a global pandemic.

Paul Wogan -- Chief Executive Officer

Yes. The I think there are a couple of things which underpin our confidence in our long-term charters and the higher Jon. The first is we have actually charged our ships to very strong customers have good relationships with them some of the strongest people in the market as we talked about on the call.

The second thing is we have actually chartered the vessels to the companies rather than to any specific project. So some of the LNG carriers out there are actually chartered to a project. And of course if there are problems with that project it's unable to operate etc then there's the opportunity for the charter to call force majeure. With us because the customer has the ability to take a ship to any port in the world and to discharge in any port in the world that is not an ability they have under the contract. So those two things I think give us very strong confidence that we will continue that our customers will continue to use our ships and continue to pay their hires.

Jon Chapell -- Evercore -- Analyst

Okay. That sounds good. And then Alastair I also know you spoke about the refinancing which is very important and even in a follow-up question before. But if we try to frame a number of value so newbuilding commitments unfunded newbuilding commitments for what you have in the bank today and what you have line of sight on the refinancing for the next let's call it 21 months to get you through 2021 what do you foresee as the potential equity gap that you would need to fill through cash flow from operations or your revenue backlog or maybe a new refinancing that you don't have lined up already over that period versus your liquidity today?

Alastair Maxwell -- Chief Financial Officer

Yes. So Jon I might put the question the other way around perhaps address it for you. We have multiple sources of liquidity for the business to cope with whether it is an extended period of a slower market the existing capital commitments whatever it might be. And those sources of liquidity include first of all the refinancing which is well advanced as I've said and we are on track to get that closed during Q3. There are other sources of liquidity in the sale and leaseback market and we have experience of it through the one selling leaseback we've done so far and are investigating other opportunities in that market and that can offer very good terms in terms of liquidity and drawdown amounts as well as in terms of cost. And of course it can also enable you to put less pressure on the banking market. So various opportunities in terms of sources of financing.

Paul has talked about all of the activity which is under way on the cost front and I think we're all confident that we can do better than the targets that we've already communicated and meaningfully better. I talked about in my remarks about the discussions that we're having with our swaps counterparties about releasing cash collateral which is $81 million today. And those conversations are extremely constructive. And I think that the our counterparties understand that effectively what that cash collateral is is a prepayment of interest over the course of seven or eight years. And so if you like it's as much an accounting issue as it is a credit issue. And I'm confident that we will find solutions that enable some of that cash or a significant amount of that cash collateral to be released over time.

And then lastly the benefit that we get from lower interest rates which as I said assume 200 basis points could be a $30 million a year better in terms of interest payments. So you look at all of those sources of liquidity and I'm absolutely confident that we will be able to meet our capex requirements over this year or next year. And after next year other than dry docking we have no committed capex.

Jon Chapell -- Evercore -- Analyst

Right. Okay. Super helpful. And leaving those concerns. If I could just do one more Paul to you quickly. A lot's changed in the last three months. three months ago when you did this combined call GasLog partners was getting buried and GasLog was holding up a little bit. If we look at the three-month performance the outperformance of GasLog Partners to GasLog Limited is 35% up a bottom admittedly. As you're transitioning the CFO as you're transitioning the offices as we think about how the world has kind of changed over the last three months has there been any reconsideration of the two public company structure? And how do you think about the next steps there?

Paul Wogan -- Chief Executive Officer

To be honest Jon there hasn't someone likened it to me the last three months someone likened it me as climbing a mountain in the fog and trying to find your way and it's really felt like that. I think as we said on the last call we have the options around the structure of the company at any point and we will revisit those. I'm sure over time. But to be honest with you over the last three months our real focus has been on just making sure that we continue to run and operate the business. And I think those kind of discussions are going to be have been put off until we kind of get to the other side of this. And Andy I don't know if you want to add anything to that?

Andrew J. Orekar -- Chief Executive Officer

No that's well summarized. Thanks Paul.

Jon Chapell -- Evercore -- Analyst

All the best to you Alastair.

Operator

Your next question comes from the line of Ben Nolan with Stifel.

Frank Galanti -- Stifel -- Analyst

Yeah, hi, This is Frank Galanti on for Ben. I wanted to follow-up on a couple of the LNG vessel supply questions. Specifically regarding new export projects the historical trend is to build new for all the supply like the Qataris are doing. But is there a sense or an expectation that some of those export projects will use existing tonnage opposing to building new?

Paul Wogan -- Chief Executive Officer

Frank it's Paul here. I think what's interesting is as well as we're seeing some of the export projects maybe pushing to the right the other really interesting thing this year is we haven't seen any conventional LNG ships ordered and I think that is very good for the LNG shipping market. I think there are a number of ships which have been ordered which haven't yet got contracts against them. And my view is that you are likely to see new projects taking those ships before they order new vessels themselves. So I think from a supply/demand perspective if you like one glimmer of hope out of all this is the fact that we're not seeing new orders. It's very difficult to I think finance a ship right now if you haven't got any contracts against it etc. So I do think what you're saying is correct and I think it will be helpful in terms of the overall balance for shipping going forward.

Frank Galanti -- Stifel -- Analyst

Okay. That's helpful. And then kind of switching gears a little bit given kind of the changing market conditions I wanted to talk about the GasLog Singapore conversion. Are the expectations or time line on the Panama project still as close to on track?

Paul Wogan -- Chief Executive Officer

Yes. There has been a delay in terms of that. We may see that project going back one or two, one, two three months but nothing substantial at this point.

Frank Galanti -- Stifel -- Analyst

Okay, that's helpful, thanks very much.

Operator

Our next question comes from the line of Chris Wetherbee with Citi.

Chris Wetherbee -- Citi -- Analyst

Hey, thanks for taking the question. Maybe you could focus a little bit on the cost side here in terms of potential cost takeout opportunities. I know some of your interest expense is down as you highlighted in the presentation. Obviously from a cash flow perspective dividend reductions help there. But in terms of opex and then maybe from an SG&A perspective how many levers or are there levers that you guys can pull as you go through what's likely to be sort of a fairly lean time here and certainly an uncertain time? I just want to get a sense of how much maybe you guys can do on that side.

Paul Wogan -- Chief Executive Officer

Yes. Chris. I think as we talked about before the COVID pandemic came along we were already well into looking at our cost base on our G&A. We advised that we were aiming to bring down our G&A by $6 million by 2021 which were still very much on track to do. As we look out from that we view that there are some opportunities both in our opex and our G&A to take out some more costs. And I think that over the next two to three years as we bring in those initiatives there's probably in my view somewhere between $20 million $25 million that we can take out of the cost of the business over the longer term. That's by being smarter. That's by using looking at our processes using information technology in a smarter way etc and still deliver the same level of service into the customer. So I think it's fairly meaningful. And as you've seen already I think once we set target we are pretty good at getting after that target.

Chris Wetherbee -- Citi -- Analyst

Okay. Understood. And then just following up on the earlier question around the combination of the businesses and I understand trying to make sure you kind of have all your ducks in a row during a fairly uncertain period of time that we have here is it reasonable to say that once we get through this that basically everything is on the table in terms of how you think about these businesses potential combinations with them or restructuring of these businesses? I just want to get a sense of kind of how much of an action point that really is for you guys. Is it something that will be on a front burner kind of when we get maybe a bit more clarity on sort of the demand market and what's going on from a public health perspective in the globe?

Paul Wogan -- Chief Executive Officer

Sure. As that's a question that affects both GasLog Partners and GasLog Limited Chris and Andy hasn't answered a question. Yes. I think I will pass that one over to Andy.

Andrew J. Orekar -- Chief Executive Officer

Sure. Thanks Paul. Look I think Chris we're really focused right now on execution and pleased to see all of our ships on charter in an active spot market despite not as many term charters for on the water vessel that we discussed previously. And so I think that is that really is job one for today. I think our job as fiduciaries is of course always to look at how we can be maximizing value for our respective unitholders and shareholders. And so in my mind the structure is kind of an ongoing topic that we're responsible to evaluate. But today it's really about this week in this quarter and executing safely and efficiently for our customers.

Chris Wetherbee -- Citi -- Analyst

Okay. And then maybe just the final point on that. What are the benchmarks we should be thinking about in terms of from your part what are you looking for to sort of feel like we're in a bit of a more normalized environment? Is it just sort of sort of return-to-work dynamics for people kind of who are being sheltering at home? Is it I guess I just want to make sure I understand sort of how you think about the potential benchmarks you need to see before sort of "normal" kind of comes back. Because when we come out of this it could be in a sort of an environment that appears to be a little less than what we're used to as normal. So I guess I'm just trying to be curious kind of how you think about that.

Paul Wogan -- Chief Executive Officer

Do you want to follow-up Andy?

Andrew J. Orekar -- Chief Executive Officer

Sure Paul. I think Chris I think we're in the period now which is really typical for our business where Q2 tends to be one of the seasonally slower quarters and then we have the strengthening market typically over the summer and into the winter. And so I think we're at both GasLog and GasLog Partners trying to use that period in understanding the chartering opportunities and utilization opportunities we can target for the respective fleets. So I think it's just understanding that we can continue generating earnings and cash flow from the ships and feeling that we're as you say maybe in a new normal but it's something that resembles the typical yearly pattern with strength in the fourth quarter.

Chris Wetherbee -- Citi -- Analyst

Okay. That's helpful. I appreciate the color. And all the best Alastair.

Operator

And with that I'm showing no further questions in queue. I will now turn the call over back over to Mr. Joseph Nelson.

Paul Wogan -- Chief Executive Officer

Actually I think I'll take it. Thank you very much Tiffany. Before signing off today I'd like to make mention to the press release we put out today about Alastair Maxwell leaving. I have been very privileged to work with Alastair over the past few years. He has been a great colleague and a highly successful CFO. And myself and everyone at GasLog I think is going to miss him. However he has done a great job in the meantime of preparing Achilleas Tasioulas to be his successor and to take over from him. I'm sure I'll also very much enjoy working more closely with him. But with that and with a very heavy heart I'd like to hand over to Alastair to just give some closing comments.

Alastair Maxwell -- Chief Financial Officer

Paul thank you very much indeed and I hope my head will fit out of the door after we finish on the call. But I also wanted to say what a privilege it's been some me to work at GasLog over the last 3-plus years. I've learned an enormous amount about shipping about corporate life and more recently about managing the business through both good times and more challenging times. And I think you've done an outstanding job leading the company through the recent very challenging two or three months. But most importantly I've been extremely fortunate to work with a team of hugely skilled and dedicated colleagues both in finance and the rest of the GasLog organization. And I'm also very fortunate as you mentioned to have such a capable and eminently qualified successor in Achilleas. And I absolutely know that the company and our team and all of the external stakeholders in the finance community are going to be in the best possible hands when I leave at the end of June. And in the meantime I can assure everyone that I'm going to be working day and night to complete what feels like a very full agenda of refinancing swaps restructuring cost savings and other activities.

Unfortunately the current environment will make it very difficult for me to say goodbye and introduce you all to Achilleas in person so I'd like to take this opportunity to thank you all for your support over the years. This is not an easy time for any participant in the energy sector be they a company or an investor or a lender or a research analyst. But I have every confidence that GasLog is going to continue to be a leader in our industry in every respect. And we won't only survive but we'll thrive whatever the environment will throw at us.

So on that note thank you very much to everyone today for listening. Thank you for your continued interest in GasLog and GasLog Partners. We certainly appreciate it and Paul Andy and Achilleas look forward to speaking to you next quarter.

In the meantime if you have any questions please do contact the Investor Relations team.

Paul Wogan -- Chief Executive Officer

Tiffany that's it. I think we're done.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Joseph Nelson -- Head of Investor Relations

Paul Wogan -- Chief Executive Officer

Alastair Maxwell -- Chief Financial Officer

Andrew J. Orekar -- Chief Executive Officer

Michael Webber -- Webber Research -- Analyst

Chris Robertson -- Jefferies -- Analyst

Jon Chapell -- Evercore -- Analyst

Frank Galanti -- Stifel -- Analyst

Chris Wetherbee -- Citi -- Analyst

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