Avance Gas Holding Ltd (ticker: AGAS) reported unaudited results for the fourth quarter 2020.
- The average time charter equivalent (TCE) rate was $40,759 on a discharge to discharge basis and $36,130/day on the basis of IFRS 15 accounting standard, compared to $23,283 and $21,524/day in Q3 2020 respectively.
- The full year 2020 TCE rate on the basis of IFRS 15 accounting standard was $32,418/day compared to $34,309/day. On a discharge to discharge basis, the rates were $32,862/day and $35,220/day respectively.
- Daily operating expenses (OPEX) were $9,419/day, compared to $9,256/day in Q3 2020. OPEX was impacted by change of technical manager and Covid-19 related crew change expense representing approx. $900/day in both Q4 and Q3. Full year 2020 OPEX was $8,968/day, up from $7,983/day in 2019. The operating expense is expected to normalise and recover from 2021.
- A&G expenses were $701/day, down from $727/day in Q3. Full year 2020 A&G expenses were $771 and $1,083 /day for full year 2019.
- In January the Company entered into shipbuilding contracts for two 91,000 CBM, LPG Dual-Fuel VLGCs with Daewoo Shipbuilding and Marine Engineering (DSME) in South Korea, for delivery Q4 2022 and Q1 2023.
- In January, the Company announced the appointment of Kristian Sørensen as the new Chief Executive Officer of Avance Gas AS. Sorensen currently holds the position as CEO of the Oslo based shipbroker Fearnleys and will be joining the Company in April 2021.
- The board declared a dividend of $0.11 per share for Q4 2020.
- For the first quarter of 2021, 70% of vessel days is contracted for approximately $48,000/day on a discharge-to discharge basis.
Q4 was a strong quarter for LPG as we predicted back in our Q3 reporting. We saw strong US exports coupled with good buying from Far Eastern buyers, representing 80% of the LPG demand.
US exports averaged 77 cargoes per month, up from 68 per month in Q3. Year on year, there were 837 VLGC cargoes exported in 2020 versus 744 in 2019. The AG loaded an average of 53 VLGCs per month in Q4, slightly down from Q3 which was principally due to OPEC cuts due to oil pricing.
The main drivers for the strong freight market, together with a compliant commodity price, have been the continued market inefficiencies in particular the slower than usual discharge in India and China and the massive delays in transiting Panama Canal. These all add to a stretched fleet and increased utilisation profile and therefore a higher freight market.
The Panama Canal has had a particularly noticeable impact with delays ranging from 5-10 days and dependent of the subsequent strength of the freight market, adding between 15-25 USD to the delivered price of LPG in the East. This ultimately was one of the main factors that culminated in the market correcting itself so violently in January of this year where rates moved from $115,000/ day in Time Charter Equivalent on a Ras Tanura basis down to $35,000/day in the space of 3 weeks.
Q1 started off strongly but a US Gulf FOB price increase, due to colder than anticipated weather coupled with panama delays and a lack of buying activity in the East have resulted in a closed arb and a correction in commodity and freight prices.
The outlook for 2021 remains positive but subject to change with the volatile freight markets. Fundamentally it remains a positive outlook with US exports expected to grow year on year and demand in the Far East to increase with China being the main driver specifically with the new PDH plants amounting to a 2 million metric tons additional volume. Through a more robust oil price, it is expected LPG will remain the preferred petrochemical feedstock, offsetting the possibility of demand decline due to naphtha switching.