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GasLog Ltd (NYSE: GLOG)
Q2Â 2020 Earnings Call
Aug 5, 2020, 8:30 a.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 Ltd. asnd GasLog Partners' Second Quarter 2020 Results Conference Call. [Operator Instructions]
On today's call are Paul Wogan, Chief Executive Officer of GasLog Limited; Andrew Orekar, Chief Executive Officer of GasLog Partners; and Achilleas Tasioulas. Chief Financial Officer; Joseph Nelson, Head of Investor Relations, will begin your conference. Please go ahead, sir.
Joseph Nelson -- Deputy Head of Investor Relations
Thank you, Tiffany. Good morning or good afternoon, and thank you for joining the GasLog Ltd. and GasLog Partners' Second 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 second quarter earnings press releases. In addition, some of the 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 second quarter highlights and results, after which, Andy will walk you through the partnership's second quarter. Calais will then discuss the group's financial position and financing activity. And finally, Paul will conclude with an update of the LNG commodity and shipping markets. We will then be happy to take your questions.
With that, I will now turn it over to Paul Wogan, CEO of GasLog Ltd.
Paul Wogan -- Chief Executive Officer
Thank you, Joe. Please turn to slide four. Although the COVID-19 pandemic continues to present challenges and uncertainties for our industry, I'm pleased to report GasLog's continued operational and financial progress in the second quarter. Since we last reported in early May, we have refinanced all the group's debt that was due in 2021. Enhanced liquidity through the private placement of common equity, the majority of which was purchased by directors and affiliates. We've taken delivered three new build vessels on time and on budget that together with cost reductions, produced adjusted EBITDA growth in Q2, continue to deliver a reliable, high level of service to our customers with fleet uptime of approximately 100%. Published our inaugural sustainability report for 2019. And finally, we declared a $0.05 per share dividend for Q2. Looking ahead, our charter coverage of approximately 80% for the second half of 2020, provides us with revenue and cash flow visibility during this time of continued uncertainty. Turning to slide five. And an update of how we are dealing with the impact of COVID-19. We remain fully focused, both on the safety of our personnel and delivering reliable, high-quality service to our customers. This focus has allowed us to maintain a high degree of uptime and fleet utilization, a testament to the dedication of our crews and shore-based employees. Unfortunately, the impact of COVID-19 has extended the GasLog Savannah dry docking as a series of nationwide lockdowns in Singapore created delays. The vessel is now scheduled to leave the yard at the end of this month.
Whilst we've experienced some driving delays, I'm pleased to report that despite the pandemic, our newbuild vessels continued to deliver on time, on budget and immediately commenced their long-term fixed rate contracts. And also during the quarter, we successfully implemented a phased return of employees to the Paris office. In recent weeks, we have also been able to accelerate crew changes on our vessels despite significant ongoing challenges. Our crews continued to deliver much needed clean energy to the world during this difficult period. And we will continue to lobby governments and industry bodies to try to ameliorate the difficulties the whole shipping industry faces in returning these dedicated men and women to their families. slide six highlights the additional steps we have taken to reduce costs and streamline decision-making. GasLog has grown significantly since going public in 2012. As we look to complete our latest phase of growth, our focus has shifted toward operational excellence, efficiency and cost reductions. Last November, we announced our intention to relocate most of our senior management in the Paris office. Having seen the tangible benefits of this initiative, we have decided to expand it to include GasLog Partners. As a result, we will close our Stamford office, resulting in a reduced presence in the U.S. Unfortunately, Andy has decided not to relocate to Greece, and will, therefore, step down from his role as CEO of GasLog Partners effective September 15. In addition, we have taken steps to reduce the size of the partnership's board to five members from 7.
Joe Nelson will remain in his role as Head of HR for the group based out of the U.S. When taken together with last year's organizational changes, we expect these steps to reduce 2021 G&A expenses by $9 million or approximately 20% when compared with 2019. Please turn to slide seven. The two charts on the left show the company's consolidated revenues and EBITDA and the contribution from GasLog Partners. The delivery of GasLog Windsor and GasLog Wales in Q2, combined with a strategy of maximizing the utilization of vessels trading in the spot market, delivered revenue growth of 3% compared to Q2 2019. While operating and overhead cost savings met adjusted EBITDA grew by over 4% year-on-year. In addition, adjusted earnings of $0.02 per share in Q2 was aided by lower interest expense following declines in LIBOR. Slide eight highlights the fleet's approximately 80% charter coverage for 2020. This high degree of revenue and cash flow visibilities especially welcome during this uncertain period and underpins our resilient business model. The vast majority of our contracted revenues are at attractive fixed daily rates of hire with no commodity price exposure, while our long-term customers are some of the LNG markets major participants. Slide nine details our new build, latest generation XDF fleet which to date has experienced no COVID-19 related delays. The seven vessels delivering in 2020 and 2021 will all go on charter to high-quality customers. In aggregate, they will generate an incremental $145 million of annualized EBITDA once fully delivered. Since the end of Q1, we've taken delivery of GasLog Windsor, the GasLog Wales and most recently, the GasLog Westminster, all of which entered immediately into multiyear fixed rate charters. And we expect to take delivery of our latest newbuilding in October of this year. In total, the 12 vessels on this slide comprise one of the largest fleets of modern, highly efficient 2-stroke XDF vessels with a contracted revenue backlog of over $2.5 billion and an annual EBITDA contribution of $265 million once fully delivered.
Please turn to slide 10. In June, GasLog and GasLog Partners issued their first sustainability report, laying the foundation for our environmental, social and governance initiatives. The reports aim to provide clear emissions and efficiency data for our fleet, outline our ASG road map and identify the KPIs, which we will benchmark ourselves against. We've received much positive feedback on these reports, and we look forward to further developing and improving them. With our Board's strong commitment toward ESG, I'm confident we are charged to course toward achieving our sustainability ambitions.
With that, I'll turn it over to Andy to discuss the Partnership's second quarter.
Andrew J. Orekar -- Chief Executive Officer
Thank you, Paul. Turning now to slide 12 and a summary of second quarter highlights for GasLog Partners. During the quarter, the partnership delivered a solid operating and financial performance despite the challenges resulting from COVID-19. Our focus remains on maximizing fleet utilization while continuing to reduce unit G&A and opex costs. GasLog Partners' capital allocation strategy has evolved in 2020 to prioritize debt repayment and further improve the resilience of our business. And the Partnership's balance sheet is stronger following the refinancing we completed in July, with our nearest debt maturity now pushed out to 2024. Turning to slide 13 for a review of the Partnership's financial performance. During the second quarter, we reported revenues of $84 million, adjusted EBITDA of $60 million and adjusted earnings per unit of $0.38, a stable top and bottom line performance despite a significant increase in our fleet spot exposure relative to Q2 of 2019. The partnership signed a new two-year charter for one of our steam vessels with Jovo, a leading independent energy company in China with a growing LNG business, and we retired approximately $23 million of debt. slide 14 illustrates the impact of our rebalanced distribution. For the second quarter, we declared a common distribution of $0.125, which represents a 33% payout of our adjusted EPU, a significantly lower percentage than previous quarters. In total dollars, our declared distribution represents a quarterly cash outflow of $6 million, enabling us to focus our capital allocation on debt repayment. While we are pleased by our performance during the second quarter, the COVID-19 pandemic has created a high degree of uncertainty in the commercial environment. Our fleet is 86% charted for the remainder of 2020 and 59% for 2021. And the Partnership will continue to seek ways to maximize vessel utilization in the near term.
Turning to slide 15 and a discussion of our debt balances at the vessel level. On this chart, you'll see the total debt per vessel for the partnership's fleet as been noted by the bars, as well as the years of charter duration for each of our ships. As a reminder, GasLog Partners has no corporate level debt. Following the recent refinancing, we've improved our balance of operational and financial leverage. The average debt outstanding on our steam ships has been reduced to approximately $45 million to better match their average six months of charter duration, an age of 13 years. In contrast, our TFD fleet is younger at roughly six years of age with an average debt balance of $111 million against an average charter duration of four years on our 170 and 174s, and one year on our 155s. We believe it's prudent for our ships with greater spot exposure to carry lower debt balances, and the partnership expects to continue deleveraging trend over time. Slide 16 sets out our balance sheet metrics planned debt repayment over the next several years and capital commitments. The partnership's credit profile was solid with net debt to trailing 12-month adjusted EBITDA of 4.7 times.
Our net debt-to-capital remains a strong 53%. It's important to note that GasLog Partners has no committed growth capex, but we will spend $14 million in maintenance capital related to our three remaining dry dockings in 2020, including the installation of ballast water treatment systems as required by regulatory compliance. We plan to continue strengthening our balance sheet over the remainder of 2020, with total debt repayment expected to equal nearly $100 million for the year. Reducing debt balances will lower the Partnership's cash flow breakeven levels over time, improving the competitiveness of our fleet. As Paul mentioned, today will be my last earnings call as GasLog Partners' CEO. Leaving the partnership since its IPO has been an extraordinary honor for me and an immensely rewarding personal and professional experience. I want to thank all of the incredible GasLog employees, both on our ships and in our offices as well as our investors and analysts for your support over the many quarters and years. I look forward to staying in close touch with all of you.
With that, I'll now turn it over to Achilleas to review the Group's cost performance and balance sheet actions.
Achilleas Tasioulas -- Chief Financial Officer
Thank you, Andy. Turning to slide 18. And you can see that the Group has benefited meaningfully from our cost reduction initiatives as well as COVID-19 related savings. Our operating expenses for the first half of the year have averaged just under $13,400 per vessel per day, while our overhead expenses were approximately $3,700 per vessel per day, both significant improvements over 2019. Structural improvements to our unit operating and overhead expenses have come from our previously announced organizational changes and the delivery of four vessels to our consolidated fleet since the beginning of 2019 which has improved the scale of our purchasing and maintenance agreements. In addition, the COVID-19 pandemic has also presented favorable but transitory impacts to our costs, including foreign exchange rates and lower-than-expected travel-related expenses. We expect some of this COVID-19 savings to reverse in the second half of this year, primarily as crew changes and routine vessel maintenance returns to its historic pace. As we look toward the full year, we now expect our unit operating expenses to average $14,000 per vessel per day, giving effect to structural improvements in our operating costs, as well as reversal of some transitory gains seen earlier this year. Lastly, declines in LIBOR have reduced the interest expense of our secured vessel debt by approximately $9 million during the first half of 2020 despite the growth of our fleet.
Slide 19 sets out our consolidated balance metrics as of the end of quarter 2, scheduled debt repayments over the next several years, liquidity and capital expenditures for the remainder of 2020. We ended the second quarter with debt to total capitalization of 63%, inclusive of the approximately $22 million noncash impairment we took on 4 of our steam vessels. Our cash and cash equivalents at the end of quarter two was $173 million. Since the end of the second quarter, our liquidity has been further bolstered by the release of an additional $27 million of cash collateral related to our interest rate and currency swaps. In addition, the refinancing of our 2021 debt maturities has created an approximately $30 million of additional liquidity to the group. Looking forward, while our total debt will increase as we take delivery of our newbuildings, we will be amortizing our bank debt at a rate of approximately $260 million per annum when the fleet is fully delivered. Over the period 2020 to 2023 inclusive, we will retire over $1 billion of debt. This amortization payments are underpinned by our consolidated charter backlog of $3.7 billion. Lastly, we have approximately $17 million of new building cash equity payments remaining due this year. We expect to meet these capital commitments with cash on hand plus operating cash flows. Moving to slide 20, where I will discuss our four new credit facilities, refinancing all the Group's 2021 debt maturities. I'm proud to say that over the last several weeks, we have closed on approximately $1.1 billion of new credit agreements despite the unprecedented turmoil in the global credit and banking markets. These four new facilities fully refinanced all of our debt originally due in quarter one and quarter two of next year. Our new credit agreements have attracted profiles of at least 22 years, reduce our debt service cost by at least $5 million per annum, for the approximately $30 million in incremental liquidity and simplify our debt facilities across GasLog Ltd. and GasLog Partners. This financing so participation from a diverse collection of leading financial institutions from around the gold, a testament to GasLog scale and ability to attract new capital. We very much appreciate the continued support from our banking partners and look forward to working with them for many years to come.
With that, I will turn it over to Paul for an update of the LNG commodity and shipping markets.
Paul Wogan -- Chief Executive Officer
Thank you, Achilleas. Slide 22 looks at the LNG commodity market in Q2. The chart on the left shows year-on-year LNG demand growth by region. Overall, LNG demand declined by approximately two million tonnes or 2% in Q2, as regional demand reflected COVID-19 related lockdown restrictions. For example, European LNG demand declined 3% in Q2 as many countries in the region entered lockdown. Whilst Chinese demand grew 20% as the country began exiting its lockdown measures in early Q2. Looking ahead, Wood Mackenzie expects LNG demand to grow 2% this year. This is in stark contrast to the high levels of demand destruction experienced by other hydrocarbons. Longer term, LNG demand projections remain robust and globally diverse, forecast to grow 73 million tonnes from 2020 through 2025 or 3% per annum. Slide 23 shows the impact of U.S. exports on global LNG supply growth. During the second quarter, LNG supply grew 2% year-over-year. However, U.S. supply grew by 39% or over three million tonnes despite the reported cancellation of 33 U.S. cargoes in June as new trains at Cameron and Freeport began production. In Q2, almost half of all U.S. cargoes were export into Asia, the highest percentage in almost two years, resulting in counter-seasonal high increase shipping demand that reflected both longer trading distances and slow speeds. As shown by the right-hand chart, Q3 U.S. supply growth will be impacted by approximately 110 reported cargo cancellations. However, the number of cancellations is expected to decline dramatically by the end of this quarter as we head into the northern hemisphere winter.
Turning to slide 24 and the LNG carrier spot market. For the second quarter of 2020, Poten reported a record 128 spot and short-term charters, a slight increase on the previous record of 122 fixtures in Q1 2020. And so in total, spot market activity is up 64% year-on-year in the first half of 2020. Although headline spot rates for LNG carriers are low at present, reflecting the seasonably weak time of year and lower global economic activity. We are encouraged by this record fixing activity as we continue to focus our commercial efforts on maximizing fleet utilization. Turning to slide 25 and in summary. We have continued to take material actions to strengthen the business increase its resilience and deliver a reliable, high-quality service to our customers. We have strengthened the group's liquidity by refinancing our 2021 debt maturities and releasing additional cash collateral. Our invoked growth and cost reduction initiatives delivered adjusted EBITDA growth in Q2. And these cost reduction initiatives, combined with operational efficiencies are set to reduce G&A by at least $9 million in 2021 when compared with 2019. Our new building program continues to deliver on time and on budget, and the seven vessels scheduled to deliver in 2020 and 2021 will generate an additional $145 million of fixed rate EBITDA. And finally, despite the near-term challenges and uncertainty presented by COVID-19, the longer-term fundamentals of the LNG business remain intact. LNG continues to replace coal as a primary energy source and remains the ideal partner for renewable energy as the world transitions toward a low-carbon economy.
The growing demand for LNG will produce a growing demand for LNG shipping. And GasLog's scale, operational platform and reputation means we are ideally placed to benefit from these favorable industry trends. Before I open the call up to Q&A, as Andy mentioned, this will be his final GasLog earnings call. In his role as GasLog Partners' CEO, Andy has been a wonderful business partner. Much of the growth and development of GasLog over the past few years has been down to Andy. And he is quite simply a great colleague and friend, and I will certainly miss his wise counsel. But I'm also confident he will go on to achieve great success in the next stage of his life. So thank you, Andy, for me and all your colleagues for all you have done for GasLog. It is very much appreciated.
With that, I'd like to open up the Q&A. Operator, could you please now open the call for any questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Mike Webber with Webber Research.
Mike Webber -- Webber Research -- Analyst
Hey, good morning guys, how are you. So yes. Well, first off, I want to echo Paul's sentiments for Andy, started to see you go and best of luck. The handful of questions. I guess we'll start first on LP, its considering it's pretty topical. If I, kind of, back away and look at obviously, it's been a difficult seven, eight months for the LP after a pretty unprecedented run. But if we look at your centering your U.S. presence, kind of the Board, what's in the future for GasLog Partners. If the days of it being an equity currents here are behind it now, should we expect some sort of I guess, a shift in terms of the operational paradigm for that unit where it's taking on intentionally taking on more spot or residual value risk there's just so many big moving pieces that it in the last six, seven months, it certainly kind of bears the question of what's the asset of what's the purpose of it because crunching risk is always going to make sense to some degree. But it's some sort of formal pivot in that regard in the cars in the next couple of years?
Paul Wogan -- Chief Executive Officer
Maybe I'll take that, Mike. Thanks. I think over the last few quarters, Andy's set out a strategy for GLOP, which was very much around strengthening its balance sheet bringing down the breakeven costs for the vessels and extracting the maximum value for the vessels. As the some of the ships come off charter, I think that very much remains the focus for us right now. I think in terms of what the way GasLog plans develop, we will continue to sort of look at all options and opportunities for that. But right now, to be honest, given where we are in the middle of COVID and the operational issues that are continuing, our focus really is on continue to operate the business in the most effective and efficient way that we can. And I think some of those more strategic questions, I think that we'll take a look at, hopefully, when we get to the other side of the these issues.
Mike Webber -- Webber Research -- Analyst
Okay. That's fair. I guess, Paul, along those lines, it's been a very busy six, seven months for you guys. I'm not even counting COVID. But we have seen a decent amount of new build orders and business getting done, albeit it what looks like pretty narrow returns. I think Achilleas recently took down six with and JPM. Just curious, one, have you guys been quite as active in that process in the first half of the year, just given what's this restructuring a part of your business in the first half of the year? And then two, when you look at those the profitability of new business, it certainly feels like we're kind of back toward the returns that we saw kind of 2018, maybe at least 2017, where you saw some new builds getting done in the low to mid-60s. Is that kind of pricing and return dynamic fully entrenched right now? And is that one of the reasons why you might not be as active in the first half of the year?
Paul Wogan -- Chief Executive Officer
Yes. Thanks, Mike. I think our mantra has been, I think, from the start that, well, actually, we wanted to grow. GasLog. We wouldn't it at any price. And it has to be at returns that make sense for our investors, and I think we've been fairly consistent with that. And I think we've been able to grow the fleet. If you look at the new buildings we have coming, all of them are fixed rate contracts, all of them at attractive rates that we're happy with but there has been business that we've passed up at various times, which didn't meet our hurdle requirements, and we will continue to do that. So we can't see new business that meets our hurdle requirements, we simply we won't do it. And we're happy that we have the platform that we can find business that meets our requirements from the right customers.
Mike Webber -- Webber Research -- Analyst
What direction is that trending right now? Are you seeing more business today that you've got to exclude simply because it doesn't hit your return hurdle, just given the pricing pressure? What direction is that moving?
Paul Wogan -- Chief Executive Officer
Yes. I think it's I think ebbs and flows, Mike. So I think we saw a period, as you rightly pointed out, where it act away from us, and we didn't do very much, and then it came back and we did business. I would say, right now, it has ebbed away for a while. And so we're happy to sit on our hands. I think the other side of it is, though, as well, while we are seeing some new buildings coming for some of this contracted business. The positive sign for the shipping market is we're not seeing any speculative newbuilding orders as well. So those cases, I think in that case, I think that's very good. And as I said, yes, it's probably ebbing at the moment. But I think as it has in the past, there'll be a period when it comes back, and we'll be able to do our requirements.
Mike Webber -- Webber Research -- Analyst
Got you. And then finally, on some of the legacy steam tonnage, I know you've been putting some of the more modern stuff away. You mentioned Jovo, which has got a particularly interesting both behind it. But the in terms of maybe some of the stuff you guys are doing or looking at, that might be further downstream. Any updates there in terms of maybe getting creative in terms of the way it's displaced those assets from a storage or an FSRU perspective. Any I know it's something you've been gradually working on putting tonnages away and kind of inching your way downstream as you develop the core competency measured. Just curious, is there any update through Q2 and into Q3?
Paul Wogan -- Chief Executive Officer
Yes. I mean I think what's interesting right now is you're seeing because of the low pricing and availability of LNG, you're seeing a lot of interest in those kind of projects, Mike. I think the deal what we did with Sinolam in Panama is a great example of being able to execute on those. And I would say there are more of those opportunities showing right now given the the commodity pricing, et cetera. So nothing that we would want to report on in this period, but I do think it's an interesting and potentially growing area.
Mike Webber -- Webber Research -- Analyst
Got you. Actually, a lot, I do have one more, and then correct me if I'm wrong, but I believe I saw during the quarter that you guys are working on some to work on, I believe, it was fuel cells. Kind of trying to integrate that into maybe some next-gen design. Is that something you guys are working on? I think you can kind of talk about a bit right now?
Paul Wogan -- Chief Executive Officer
Yes. I think we published the ESG report this in this quarter. And we are very much focused on how we can deliver on some of the carbon sort of initiatives. So we're working, usually with other industry partners on a variety of different ways to do that. And fuel cell is actually one of them. But again, I think it's nothing that we would want to report on at this point, but it's one of a number of initiatives that we're looking at, at the moment, Mike. So that we can continue to sort of improve our kind of carbon footprint in line with KPIs we're setting ourselves.
Mike Webber -- Webber Research -- Analyst
Got it. Okay, all right. I thank, again, for the time guys. I appreciate it.
Operator
Thank you. Your next question comes from the line of Greg Lewis with BTIG.
Greg Lewis -- BTIG -- Analyst
Yes, thank you and good morning, everybody. Yes. I guess, Andy, hey, it's been a pleasure and all the best. Paul, as I look at what is that, Slide 24, 25, you kind of outlined the pickup in the spot market liquidity really in the first half 2020 and really picked up in Q2. Could you talk a little bit about what's driving that? And really, I'm kind of curious, is this more a function of cancellations of contracts, where there stranded cargoes? Or is this is the LNG spot market kind of just much or? And is this something that we think is going to go higher over time?
Paul Wogan -- Chief Executive Officer
Yes. Thanks, Greg. I think it's probably a combination of both those factors. I think this market is maturing and becoming more liquid. And I think that's incredibly helpful in terms of maximizing utilization and therefore, capture rate on the vessels. So some of that, I think, is just from the fact that we're seeing more and more production coming online, a lot of it not a lot, but usually sort of 20%, 25%, 30% of which is not necessarily contracted out. I think some of it may well be where you've seen people scaling back on their annual call off from their contracts, and you've seen producers actually producing that and then selling it on, which again is part of the flexibility, which comes from Australian but primarily U.S. production. So I think it's a little bit of both, but I think the major factor is just the fact that we are getting it's a growing market more of the product available in the spot market, and that's helping that market to mature, I think, quite quickly.
Greg Lewis -- BTIG -- Analyst
Okay. Great. And then just one more for me. Clearly, the company has kind of pivoted to this focusing on the balance sheet, it seems to make sense where we are in the cycle. I guess I'm wondering, it seems like we're focused a lot more on the bank debt than as we look kind of at like public, whether you look at the corporate debt or maybe even the press those are kind of that those are double-digit type yields. I'm just kind of curious, like as you think about being opportunistic. Is that something we should be thinking about? And really, what I'm kind of curious is, as we look at the the public debt at GasLog. And that's not until Q1 of '22, but sometimes the markets aren't open, sometimes they're open. Just kind of curious how we should be thinking about that piece of debt as I get it's, I guess, six quarters away, but tonne has a tonne seems like it's just flying by. And maybe that's because I'm locked without power, but it's it's interesting, right? I mean, I feel like that's going to hopefully be here before you know and. So I'm just kind of curious of your view.
Achilleas Tasioulas -- Chief Financial Officer
I'll take that, Greg. Listen, you are right, time flies, but with the flights, we have to deal with the issues one at the time. We refinanced all of 2021 debt maturities. We did great progress on the cash collateral. We have released about $30-plus million of cash for lateral. From that was secured on the interest rate swaps. And we will we have the bond refinancing in mind. It is still relatively soon. But again, as you say, we don't have we need to do our strategy in order to see when the window will be open. So now it's the time to start thinking and working on that. And we will not touch upon you.
Greg Lewis -- BTIG -- Analyst
Okay, all right, guys. Thank you very much all.
Joseph Nelson -- Deputy Head of Investor Relations
Thank you, Greg.
Operator
Your next question comes from the line of Sean Morgan with Evercore.
Sean Morgan -- Evercore -- Analyst
Hey guys, I just also want to wish Andy well. I had a question. The spot market activity that you talked about on slide 24, a 64% growth year-over-year. And I see it's helping to absorb some of the steam ships that are not on long-term contracts. But I guess my question and what I'm wondering is, it's obviously nice to have the higher amount of spot activity to kind of rely, but does that also is there a bit of a double-edged sword where it's going to make it harder and harder to put away those older vessels to the point where maybe because their customers have more flexibility in terms of being able to step into the spot market to find short term target when they want them that there's really not going to be much activity in long-term targets going forward?
Paul Wogan -- Chief Executive Officer
Yes. I mean I think, we will you are right,I think, to differentiate between some of the older vessels, some of the new vessels. We're still seeing 70% to 80% of the volumes in this business contracted. And it's if you look at our fleet, it has sort of a similar look about it in terms of the contracted volumes. But you're right in the fact that the older ships are likely to be the ones that trade more in the spot market. The I would rather have a very liquid spot market where we can trade those ships then and a liquid one where people are then trying to chase whatever kind of longer-term business for older ships that they can. And I think the team is a great example of where actually the markets that are opening up into China and India, for example, before the lockdown, India was going great guns in terms of LNG. shorter distances work well on those steam ships. And that's where you're seeing the growth in the number of fixtures. So it kind of plays into that. And as I said, I think having that it's sort of self-reinforcing because people know that there will be the ability to potentially work in the spot market. They're happy to do it. That grows the spot market, which grows the liquidity, which means that you can up the utilization rate and up the capture rate. And that's been, I think, the problem for the spot market for quite a while. So net-net, I see there's a positive that we're seeing this increase. And I think then we can use that to improve the earnings of these older vessels.
Sean Morgan -- Evercore -- Analyst
Okay. So that's kind of an interesting concept that you're bringing up. So I mean, would you say then increased depth and liquidity of the spot market because before you had that level of liquidity, you're especially for these older vessels, you might be taking a pretty aggressive discount in order to get the contract coverage that over like a three- or four-year period, you might actually be earning a higher economic return by placing them in the spot market than you would have had you been kind of forced to look for whatever charter you can find?
Paul Wogan -- Chief Executive Officer
Yes. I mean the to have that ability to sort of then say, well, do I want to put in the spot market into the contract, not because I need to but because I think that's a good thing to do as opposed to I really want to put in this contract because there's no spot markets to the shifts. I think the adds to the optionality that you have around them. And you've seen we have put one of our ships steam ships on two-year charter to Jovo. And I think that's quite interesting because I think Jovo as an LNG imported, but also a logistics company, we feel that, that's a very strategic customer to have in China. So having the ability to sort of look at both sides of the coin, the spot market and the longer term, I think, is advantageous. And as I said, I think for the steam ships, the markets that we're seeing in there in China and the short duration voyages from the ag into India, for example, and from Australia up into China, actually much more suited to the older teen tips than long-haul voyages from the U.S., et cetera.
Sean Morgan -- Evercore -- Analyst
Okay. And then you talked a little bit about Europe demand sort of falling off with the lockdown. But I'm also wondering, is part of that storage constraints? And how much of it because if you think of Europe, you think a lot of just utility demand, which should be kind of more fixed, even middle of down. So what are you how are you sort of looking at the winter storage season and your kind of typical seasonality in light of covet and potentially storage limits in Europe and maybe needed demand in Asia?
Paul Wogan -- Chief Executive Officer
Yes. I think what is interesting really around storage levels are high right now in Europe. But I was having this conversation with fairly senior commodity guy in Investment Bank about it recently. And who pointed out that in the last two winters have been in the northern Hemisphere, they've been very warm. He was saying if we see a cold winter in the northern Hemisphere, which law of averages we should be due fairly soon. He sees the drawdown of those stocks happening quite quickly and actually being able to pull back into a sort of more normalized market quite quickly. So I think we we are seeing high stocks at the moment. I don't I think that is partly driven by economic activity in Europe. There's no doubt about it. Even though power generation continues for homes, et cetera, some of the industrial complex has certainly slowed down, which has led, I think, to an increase in the storage levels. But I think two things, and it comes back a little bit, Sean, to this uncertainty around COVID. Do we continue to come out of the COVID lockdown, do we have a quick rebound in industrial activity. And another uncertainty really is, are we going to have a cold winter this year in terms of being able to pull those stocks down quite quickly and then attract LNG back in from certainly from the U.S.
Sean Morgan -- Evercore -- Analyst
Okay, all right. Thanks, Paul.
Operator
Your next question comes from the line of Randy Giveans with Jefferies.
Randy Giveans -- Jefferies -- Analyst
How do you gentlemen has gone.
Andrew J. Orekar -- Chief Executive Officer
Hi, Randy. Very well. Good, good.
Randy Giveans -- Jefferies -- Analyst
So, I guess, first question, can you give some additional color on the $36 million private placement, specifically regarding the timing of it and why that specific amount was it needed to complete the debt refi? And then also with this increased liquidity and following the refi, and plans to repurchase preferred or even your unsecured notes trading at a discount?
Paul Wogan -- Chief Executive Officer
I'll take the first bit, and then I'll hand over to Achilleas. I think in terms of the equity rate, what we're really focused on run is making sure we have a resilient business at all times. And when we raised that money, there was a huge amount of uncertainty. Also around we were still doing the refinancing. It wasn't a requirement of the refinancing, but with uncertainty around the refinancing, given all the turmoil in the capital and banking market. So we just felt it was prudent that for us at all times, we want to make sure we have a resilient business so we're pleased very pleased that our reference shareholders were willing and able to provide the funds at that point to make sure that we were always in a prudent situation. And pleased that we're then able to affect the rest of the things that we did in the quarter to make sure that we were in a good position. So I think for us, it was definitely around just making sure that we were kind of as we would like to put it resilient at still times. And now I'll hand over to Achilleas for the other question.
Achilleas Tasioulas -- Chief Financial Officer
Thanks. So we agree that they are look attractive, and they seem to be below the fair value according to our view. Our focus right now is on making sure we are as resilient as possible in this difficult and certain period. We don't know exactly how the COVID situation will develop. And to be honest, we would be more inclined to return to the shareholders value for the dividends than buying back flesh or bones or whatever.
Randy Giveans -- Jefferies -- Analyst
Got it. But part of the current repurchase program does allow for preferred dividend preferred repurchases?
Paul Wogan -- Chief Executive Officer
Yes.
Achilleas Tasioulas -- Chief Financial Officer
Yes....
Randy Giveans -- Jefferies -- Analyst
Go ahead. All Right, and...
Paul Wogan -- Chief Executive Officer
And, I don't know if you heard us, the answer was yes. It does allow for repurchase of the preferred as well. So yes, you're correct.
Randy Giveans -- Jefferies -- Analyst
Okay. Good. Good. All right. Looking at the FSRUs, any updates on the Gas Trade Alexandroupolis FSRU or the Philippines, FSRU? And also how is the Singapore FSRU conversion progressing?
Paul Wogan -- Chief Executive Officer
So we have with the gas trade. What we kind of what we said previously is that when we had the information, we would come back to the market to let them know gas trade FSRU project continues to make good progress, and we hope to be able to bring some good news to the market on that before the end of this year. In terms of other potential projects, we continue to look at those. Yes. No major updates at the moment. The Sinolam FSU project that we have, Randy, we put in the 6-K that dropped back a little bit because of the COVID basically. They haven't been able to get the worker on-site to on the power station. And so that's draw back six months, so we on the back of that, have also pushed back the timing of our conversion of the vessel back six months to line up with that. But as I was saying earlier, it is quite interesting at the moment. I think the low prices for LNG and the fact that it's sort of available and plentiful. There are a number of people looking at how they can utilize that in their energy mix, if they especially where they use still using fuel oil coal, et cetera. So interesting opportunities, but nothing that we would want to sort of report on at this point, given the fact that we like to come to the market when we have very concrete news rather than just speculation.
Randy Giveans -- Jefferies -- Analyst
Perfect. All right. And then just quickly, I think Mike alluded to it earlier, but obviously, further steps are being made to kind of consolidate, right, GLOG and GLOP, kind of roll them back. Is that an expectation or what's the possible timing for this combination?
Paul Wogan -- Chief Executive Officer
As I said earlier, I think we will continue to look at all the different options for the companies. The latest move is really around the fact that we do see great benefits from the measures we've already taken to bring management into Paris to shorten, if you like, decision-making, make the company more efficient and more cost effective. And so those were the real drivers in terms of the decision around the partnership. The sort of structural questions we really are putting up for a different day when we're past this COVID situation, and we have the time to kind of think about those strategic issues because right now, I can promise you that we're spending just about every waiting day working hours sorry, Working at how do we get our crews on and off the ships? How do we keep the maintenance up without we don't get service engineers on the ship. How do we get space to the ship when the the airlines are not moving and the ports are closed, et cetera. So a huge focus on the day-to-day, which we really want to kind of make sure we continue to deliver on because that allows us to deliver results. So those sort of more strategic questions, I think, were sort of saying, OK, we can come back to those. We can keep options open and come back to those when we're through this sort of co with challenges and uncertainty.
Randy Giveans -- Jefferies -- Analyst
Perfect. All right. Well, that's it for me. And yes, Andy, definitely a pleasure working with you and best of luck going forward.
Andrew J. Orekar -- Chief Executive Officer
Thank you, Randy.
Operator
[Operator Instructions] Your next question comes from the line of Chris Wetherbee with Citi.
Chris Wetherbee -- Citi -- Analyst
Thanks, good morning guys. Andy, yes, best of luck. It's been a pleasure. Maybe two questions for you. First, just on the opex reductions. Are we kind of done with that process. You just mentioned how much time and effort you're putting into managing the day-to-day given the sort of which is understandable, given the circumstances that you're dealing with. But is there more opportunity beyond what we've seen so to streamline the cost structure a bit here?
Paul Wogan -- Chief Executive Officer
Simple answer, Chris, is, yes, we believe that there is more opportunity. It's something that we will continue to work on. We think that potential opportunity, both the G&A and the opex side. But we do we need to carve out the time to be able to sort of really do the opex in a very measured way. And again, sort of getting caught up in the day-to-day with keeping the ships running. But certainly, we would be very hopeful that we can put more cost reduction into the business without affecting the service levels and the safety of the business that we, I think, have got a good reputation for so. Yes.
Chris Wetherbee -- Citi -- Analyst
And just on the back of that, do you think that there are currently costs being incurred around the COVID disruption? I don't know if you called out specific costs related to that, but to your point about maintenance and spare parts and crude changes, all of that. Do you have costs been elevated? Or has it been you guys have managed that relatively well and you'd argue that you kind of kept cost it relatively in line versus where they otherwise been?
Paul Wogan -- Chief Executive Officer
Yes. I think actually, it's probably a little bit the other way, Chris. The costs are probably lower than they would have been normal circumstances, we haven't been able to change our crews as we'd like. We haven't been able to get spares on ships, and we haven't been able to get service engineers on ships. Our crews have done an amazing, amazing job of keeping the vessels running by doing repairs and maintenance that would normally be done by third parties themselves. And each quarter that I'm able to come and say, we've got 100% uptime. It's just a huge testament to those crews. But that's saved us money. So the run rate right now is lower than it would have been, I think, if we hadn't been in covered. We're sort of saying we're leading toward sort of 14,000 a day for the vessels for the by the end of the year, thinking that if we return to some sort of normality, those costs would go up and come a little bit more in line. But generally, there has been a saving because of COVID.
Chris Wetherbee -- Citi -- Analyst
Okay. I guess, do you think from a capital perspective, whether it be just from a dry docking standpoint or otherwise that there is some cost accruing through this process that might ultimately need to be incurred. When we get more of a sort of normalized environment, whether it be from a yard perspective or otherwise, once things kind of open back up? Is there a crude cost or some of these cost efforts that you've made kind of maybe potentially smooth all of that out, so we won't necessarily see a quarter a few quarters down the road where there might be something where we kind of have to pay out?
Paul Wogan -- Chief Executive Officer
I think the as we for the second half of the year, we're thinking that we may have higher costs than the first half of the year, but still, those costs would come in quite a long way below the costs for the opex cost for 2019 and we think going forward, Chris, that we can continue with that and actually take out some more costs. So we are not expecting at this point that you'll suddenly see a quarter or two quarters where you would see a huge increase in our opex costs. We think we can continue to keep them under control and in fact, keep them bring them lower over time.
Chris Wetherbee -- Citi -- Analyst
Okay. Okay. Understood. And we spent a lot of time on the call getting questions about sort of the potential consolidation of the two entities. And I guess maybe wanted to sort of ask the question from the other angle. So what do you see as sort of the greatest benefit of having the company separate? So what's sort of the on that side of the ledger? What's the most compelling argument in your mind?
Andrew J. Orekar -- Chief Executive Officer
Well, I think until now, I think they've done a great job of complementing each other. We've been able to raise the capital through GLOP and do the newbuilding some projects through GLOP. I think as you look at it going forward, actually, what's interesting is you now not by any kind of design, but you now have the more fixed rate business in the parent company in GLOG and in GLOP, you have the the lower cost vessels, which can take advantage of the spot market. And when you're trading the spot market, it really is all about your cost so and being able to drive down the financing costs, having lower debt, etc, those vessels are then able, I think, to be more competitive in the spot market. So there are some advantages in having those two different types of business and being able to react to either market. But as I said, we will continue to remain open once we get through these times to see what we think the ideal structure is for GasLog in the future.
Chris Wetherbee -- Citi -- Analyst
Okay. That's very helpful. I appreciate the time. Thanks so much.
Andrew J. Orekar -- Chief Executive Officer
Thanks, Chris.
Operator
Your next question comes from the line of Ben Nolan with Stifel.
Ben Nolan -- Stifel -- Analyst
Great. Thanks.So I've got a couple here. Number one, your spot performance looks to have been be better actually at both entities than I was anticipating. Maybe and it seems like probably better than the market. Would is that maybe attributable to better utilization, sort of my inclination? Or did you have some just pretty exceptionally good spot rates? And also maybe tying into that, maybe talk through some floating storage. I think we will probably average 20 ships in the market with floating storage in the second quarter? And is that something that you guys were able to participate in?
Paul Wogan -- Chief Executive Officer
Yes. So I think in terms of the spot rates, Ben, we very much had a focus on utilization of the ships. And we've kept the ships that have been available, not in dry dock or whatever, all operating basically all the time, very short ballasting and short times when they weren't on hire. And I think that partly that's because we had the strategy to do that to maximize utilization. But partly, it comes back to a little bit where I was talking about in terms of the spot market being more liquid. The more liquid market is, the easier it is to be able to do that. So I think it's a combination of those two things, our strategy and the deepening and liquidity of the spot market. The second question, do you...
Ben Nolan -- Stifel -- Analyst
Floating storage, just say whether that was something of benefit to you?
Paul Wogan -- Chief Executive Officer
We didn't have, if you like, actual floating stores where people were saying, "OK, we wanted to take this car go on and sit for three weeks before you go anywhere with it." But what we did what you are seeing, and I alluded a little bit in the remarks prepared remarks, is out of the U.S., a lot of the volumes in the second quarter went to Asia, but a lot of them were slow steaming. And so it kind of it's almost the same thing as storage. So instead of taking, let's say, 20 days to get out to the far East, you're going at 40 north, you may do some deviations, and you end up taking 30 days to get there before you go into a new discharge. So you have this sort of storage around the fact that the voyages have been done at slower speeds, there some wanted to keep optionality around where the ships are going. And we've seen quite a bit of that actually, where charters are changing either load or discharge port quite quickly to take advantage of better arbitrage opportunities. And so I think if you think about it in terms of 10 times, it's a combination of that, how much cargo you're carrying, where it's going, but then the speed of which you go at. And so the storage we've been seeing it's been more around the fact that we've been slow steaming and potentially then waiting a couple of days to go into port, et cetera, rather than us being involved and actually just sit there, please and store this cargo for us.
Ben Nolan -- Stifel -- Analyst
And those dynamics are continuing thus far in the third quarter as you can tell?
Paul Wogan -- Chief Executive Officer
Yes. That's correct.
Ben Nolan -- Stifel -- Analyst
All right. Helpful. My next question sort of goes around the FSRU, and I think that's been FSRU, FSU, have the potential projects and I noticed that you guys have been shortlisted on several, I think, incremental projects, which is we'll see how they develop. But my question is really, how are you thinking about allocating resources to that given that you're really whether you're talking TFDs or steam ships or whatever. You have vessels available in both GLOG and GLOP. They're very similar. And as far as I can tell and sort of their design and everything else. If you're successful in winning those, who gets to see the benefit of that?
Paul Wogan -- Chief Executive Officer
Yes. Yes, very much as we look at FSRUs and FSUS, it's very much for us is looking at using existing ships for that rather than newbuilding. So you're correct in that. In terms of where would those go? I do think, it to a large extent, it depends on the type of vessel, when it's available, et cetera. So sometimes, it's pretty obvious where it's going to fit in the structure. But I think we just we stay fairly flexible on that. We don't have a set view that if it's a TFDE, it should go into GLOG or going to GLOP. We'll just sort of see which of those entities is best placed with the ship at the time to make that bend. For us, the main thing is to be able to to utilize those ships in some way, shape or form from whichever entity.
Ben Nolan -- Stifel -- Analyst
Okay. Perfect. And then last for me. With respect to well, congrats on the refinancing, but as it relates to that debt, can you maybe talk through if you have done any interest rate hedging? Or have if that's something that you're looking to do, given sort of the state of rates at the moment?
Paul Wogan -- Chief Executive Officer
For the moment, we have not done new into the phase, with a focus on the cash collateral release. So we are doing an optimization of our trades in order to be able to release cash collateral. But it's something that we are considering. Because the LIBOR rates are quite low, we will see how this will develop.
Ben Nolan -- Stifel -- Analyst
Okay. Perfect. I appreciate it. And again, having trails to you, Andy. Hopefully, we'll bump into each other in airports once people start bumping into each other in airports again.
Andrew J. Orekar -- Chief Executive Officer
Thank you, Ben. Same to you. All the best.
Operator
And at this time, I'm currently showing no further questions in queue. I will now turn the call back over to Mr. Paul Wogan for in closing remarks.
Paul Wogan -- Chief Executive Officer
Thank you, Tiffany, and thank you to everyone today for listening and for your continued interest in GasLog Ltd. and GasLog Partners. We certainly appreciate it, and we look forward to speaking to you next quarter. In the meantime, if you have any questions, please contact the Investor Relations team. Thank you very much.
Operator
[Operator Closing Remarks]
Duration: 65 minutes
Call participants:
Joseph Nelson -- Deputy Head of Investor Relations
Paul Wogan -- Chief Executive Officer
Andrew J. Orekar -- Chief Executive Officer
Achilleas Tasioulas -- Chief Financial Officer
Mike Webber -- Webber Research -- Analyst
Greg Lewis -- BTIG -- Analyst
Sean Morgan -- Evercore -- Analyst
Randy Giveans -- Jefferies -- Analyst
Chris Wetherbee -- Citi -- Analyst
Ben Nolan -- Stifel -- Analyst
