Avance Gas Holding Ltd: Second Quarter 2024 Earnings Release

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

HIGHLIGHTS

• The average Time Charter Equivalent (TCE) rate on a discharge-to-discharge basis was $50,100/day, compared to $60,900/day in the first quarter of 2024. For reference our guidance was 83% of days booked at $48,000/day.
• TCE/day on a load-to-discharge basis was $46,700/day, compared to $78,800/day in the first quarter of 2024. The adjustment related to load-to-discharge was negative $3.7 million, or $3,400/day in TCE/day for the second quarter, compared to a positive adjustment of $20.9 million, or $17,900/day, in the first quarter.
• For the second quarter, we had Time Charter (TC) coverage of ~25% at an average TCE rate of $50,100/day and spot voyages covering ~75% at $49,100/day, resulting in an average fleet TCE of $49,300/day, excluding Forward freight Agreements (FFA) gains of $1 million or $800/day.
• Daily operating expenses (OPEX) were $8,100/day, compared to $8,200/day in the first quarter of 2024.
• Net profit for the second quarter was $60.6 million or earnings per share of $0.79.
• Net profit for the first half of 2024 was $207 million or earnings per share of $2.70, our highest ever half year results.
• During the second quarter, the Company distributed $2.15 per share in cash, totalling $165 million. This distribution consisted of $0.99 in return of capital and $1.16 in dividends for the first quarter of 2024.
• The Company successfully completed the sale of Avance Pollux (2024) during the second quarter for a cash consideration of $120 million, less broker commission. This sale resulted in a gain of $36 million and net cash proceeds of $62.0 million after debt repayment and transaction costs. This was the fourth vessel sale completed in 2024, bringing the total gain from vessel sales to $120.9 million and net cash proceeds to $188.6 million for the first half of 2024.
• On August 15, 2024, the Company announced the sale of its Very Large Gas Carrier (VLGC) fleet to BW LPG Ltd for $1,050 million. Total gain on sale is expected to be approximately $315 million of which $305 million will be recorded as gain on sale and ~$10 million lower depreciation expense. According to the accounting standard, the VLGC fleet will be reclassified from long term assets to current assets presented as assets held for sale with effect from the announcement date. The deal will be settled with approximately $585 million in cash, the novation of about $132 million in debt obligations under two sale and leaseback agreements, and the remaining amount through 19.282 million shares in BW LPG, valued at $17.25 per share, totalling $333 million. The transaction and delivery of the ships are scheduled to occur between September 15 and December 31, 2024. Following the completion of this transaction, Avance Gas will own four dual fuel medium-sized gas carriers (MGC) capable of transporting full ammonia cargoes, hold a 12.77% shareholding in BW LPG, and a substantial cash holding.
• The Board declared a dividend of $1.35 per share or $103 million for the second quarter 2024.
• For the third quarter of 2024, we have booked 79% of capacity at an average TCE/day of approximately $41,000 on a discharge-to-discharge basis. The load-to-discharge adjustment is expected to be +/- $1,000.

Øystein Kalleklev, Chief Executive Officer of Avance Gas Holding Ltd., commented:

“2024 has been a transformative year for Avance Gas with several key events. In the first half of the year, we sold four VLGCs with a combined profit of $121 million, which, together with strong trading results, contributed to our highest ever half-year results of $207 million. Due to the strong results, we paid out $165 million or $2.15 per share for the first quarter alone. That amount matched the dividend paid out for the entire 2023. With only 12 VLGCs left in the fleet, we concluded that it was in the best interest of our shareholders to pursue a sale of the remaining ships. This decision was mostly driven by a somewhat subscale operation; it's difficult to compete with a smaller fleet, while at the same time, second-hand prices for VLGCs are at a historical high level, making it attractive to sell our ships.

On August 15, we concluded the sale of the remaining 12 VLGCs for $1.050 billion to BW LPG, where the 12 ships are sold under separate MoAs for delivery to the buyer by year-end. As part of the transaction, Avance Gas will receive 19.282 million shares in BW LPG and thus become their second-largest shareholder. We will also receive $585 million in cash and novate two sale-and-leaseback debt obligations, which were $132 million at the end of Q2. We think a combination of the VLGC fleet of BW LPG and Avance Gas makes perfect sense both from a strategic and industrial point of view. With the transaction, BW LPG adds scale while at the same time renewing their fleet. For Avance Gas, we benefit financially by selling our ships at a very attractive price, which will allow us to return significant capital to our shareholders.

Expected profit from the transaction is about $315 million, $305 million in book gains, and a $10 million effect from the fact that we stop depreciating our ships from August 15 until delivery of the ships to BW LPG, which will boost our earnings in H2-24. Following the transaction, we will have sold 16 VLGCs this year with a profit of approximately $436 million. In addition, we have also generated healthy earnings from normal operations, resulting in a pro-forma result of $522 million for the first half of 2024 when taking into account the profit from the BW LPG transaction subsequent to quarter-end.

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

We are also pleased to deliver second-quarter results in line with guidance. On a discharge-to-discharge basis, we delivered TCE of $50,125/day vs. guidance of 83% booked at $48,000/day. We guided $3-5,000/day lower load-to-discharge numbers due to increasing rates during Q2 and delivered $46,700 on such measure, i.e., also in line with guidance. As we also sold DF VLGC newbuild #6 for $120 million in May, we booked $36 million in gain from that sale and thus ended up with a net profit of $61 million or $0.79 per share for Q2-24.

Improvements in slot availability in the Panama Canal during the summer have resulted in shorter sailing distances and more vessel availability, which has negatively impacted freight rates during Q3 despite elevated product arbitrage levels. Freight rates hit cash break-even levels of around $20,000/day by end July/early August before rebounding by the middle of August, where rates are now in the low $40,000s/day for AG-Japan and ~$45,000/day for USGC-Japan with ballast Cape of Good Hope and laden leg through Panama. Hence, due to a softer market, we have booked 79% of Q3 at $41,000/day and expect actual TCE for Q3 to be at this level on a discharge-to-discharge basis. As we will be able to trade our ships until year-end, we are well-positioned to improve our trading results in Q4 as the freight forward rates for this quarter are hovering at around mid $50,000s. This is significantly below the record rates seen last year but should in any case provide a satisfactory trading profit, if realized.

With the sale of all our VLGCs, we are left with four MGC newbuilds for delivery in Q4-25 to Q4-26. The Company is now in the process of evaluating the best way forward for maximizing the value of these assets. Since we contracted the ships last summer, the newbuilding price for such vessels has increased by approximately 15 percent while delivery slots have moved from 2025/2026 to 2027. Hence, we are confident that we will also generate attractive returns from these assets either by 1) contracting them on TCs, 2) selling the ships, or 3) developing Avance Gas into an MGC/ammonia company by actively engaging with other owners with similar assets with the aim of developing a company with sufficient scale.”

PRESENTATION AND WEBCAST

Avance Gas will host an audio webcast and conference call to discuss the company's results for the period ended 30 June 2024 on Wednesday, 28 August 2024, at 14:00 CEST. There will be a Q&A session following the presentation.

The presentation and webcast will be hosted by:

• Mr. Øystein Kalleklev - CEO
• Mrs. Randi Navdal Bekkelund - CFO

The presentation will also be available via audio webcast, which can be accessed at Avance Gas' website www.avancegas.com or using the link: https://edge.media-server.com/mmc/p/tgju86bc

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

For further queries, please contact:

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

Investor and analyst contact: Randi Navdal Bekkelund, CFO
Tel: +47 23 11 40 00

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

This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act

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

Attachments

• Avance Gas - Q2 2024 Presentation
• Avance Gas Q2 2024 Interim financial information