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Operator: Good day, and thank you for standing by. Welcome to the Avance Gas Holding Limited Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Oystein Kalleklev, CEO. Please go ahead.
Oystein Kalleklev: Okay. Thank you, everybody, for joining. And this is Avance Gas fourth quarter results presentation, where we also cover the recent events, the market and, of course, the full year 2024 numbers. Today, I am joined as usual by our CFO, Randi, who will go through the numbers in a bit more detail later in the presentation before I do our market section and the Q&A session. So before we begin, I just want to highlight our disclaimer. We will provide some non-GAAP measure like time charter equivalent earnings, which is the best proxy for average rate obtained on the ships. Of course, there are limits to completeness of the detail we can provide. So I also recommend you to read the earnings report, which we also distributed this morning. So let's kick off with the highlights. Q4, maybe not too surprising, was a very profitable quarter for us as we closed the sale of the 12 VLGCs to BW in that $1 billion transaction. Hence, we booked substantial gains on that transaction and ended up with net profit for the quarter of $210 million giving our earnings per share of $2.74. If we adjust the way all the profits and transaction related to the sale of ships, we still delivered a small profit from operations, $13 million and adjusted earnings of $0.18. In total, we've been selling 16 ships this year booking profits from those ships. If we take away those transactions for the year, we delivered an adjusted profit of $125 million. So, which is actually our third highest number of gain. So all in all, a good year, just from operation, but it is tremendous year when taking into consideration also the asset sales we have been doing. Net profit for the year 443 million, which then includes our after-market loss on the BW shares we received, giving an ex of $5.78. So, status as I mentioned, we completed the sale of the [indiscernible] with the large ship amounts RVU delivered to BW on December 31st in line with our plan, again on sale 287 million, but we also had 12 million in safe depreciations as we discontinued depreciation when we announced the deal on August 15th. After retiring all our debt, we had net cash proceeds of 242 million plus then this 19.3 million BW shares, which then made us for a short while at least the second biggest shareholder in BW with our 12.7% ownership share. We will not be a shareholder in BW for long. There was a lockup period on those shares, which lapsed on Sunday, February 9th. So we are now today announcing that we will distribute these shares to the owners, being the shareholders of Avance Gas. So for every four Avance Gas share you own, you will receive one share in BW. And we are planning then to transfer those shares to your VPS account by February 26th, which means you should have them in your account when BW LPG is reported in the Q4 numbers on February 27th. And if you keep it then until the ex-dividend date, you will also then be entitled to get the dividend from BW for the fourth quarter. In general, Avance Gas, we received $6 million of the from, during third quarter, we still have one pending transaction basically more or less everything is ready. We signed the heads of agreements with Exmar to sell MGC fleet consisting of four newbuilds for 282.4 million. So that was signed in November. And then in January we moved forward signing the actual innovation of the shipbuilding contract where we signed them, Exmar signed them, and also the yard signed them that these shipbuilding contracts can be innovated to Exmar, which then is liable for the remaining CapEx. So the only outstanding item today is that the banks providing the refund guarantee for the yard is sending us our SWIFT, confirming that the refund guarantee has been moved from Avance Gas to Exmar. So with the Lantern Festival yesterday in China, marking the end of the Chinese New Year festive season, we expect this switch to be incoming very swiftly. And once that has happened, we have also then today declared a dividend of $0.75 which will be paid out immediately once the funds are released to us. So the money is already on our escrow and the only thing missing is this SWIFT and once that's been confirmed, the money will be released to Avance cash, and we will not sit there and hold on those $62.1 million, we will send them back to you immediately. So we are declaring a regular cash dividend per share of $2 per share, meaning $153 million. We are structuring this return as a return of capital. We had our Special General Meeting on February 5th, where we were authorized to reduce our paid in capital. So the shareholders getting this dividend will get this return of capital, not return on capital, which has favorable tax to it depending a bit on your tax jurisdiction. Then as I mentioned, we will pay out the extraordinary dividend, a dividend of $0.75 as soon as we receive the SWIFT and the SCO is released. And then as I mentioned, we will pay a dividend in kind where the compensation is 1 BW share for each four share you have in Avance Gas. Then once that is done, we will collect the remaining cash. We will still have our pending payment from Xmark of $34 million payable scheduled in April. So we'll just wind up the company, sort out all receivables and liabilities and then pay out the money sometime probably April this year before we liquidate the company and in that process, we also terminate all the employment contracts, including my own around this and all the other employees of the company. So if you're looking at the journey we've been through, we sold three ships, older ships as part of our fleet renewal process in 2022, Tethys, Glory, Prominent and Providence. This year, we've been super busy selling 16 VLGCs. We sold Iris Glory in January, Venus Glory in March. We sold the two newbuilds, Castor and Pollux, in March and May and then we had a big bang in 15 on August when we sold 12 remaining 12 VLGCs to BW for this 1.5 billion. And then lastly, when we reported Q3 numbers on November 27, we also announced the sale of the MGC fleet. These are newbuildings under construction at 2026. So taking this altogether, it's a bit more than 1.8 billion of asset sales, giving us a total book gain of close to $0.5 billion and a cash release of close to $600 million plus these BW shares. We peg them here at the transaction value, where we put the BW share at a theoretical net asset value fair price of $17.25. It's sagged at the end of the year, closing slightly above $11 and now it's up again to $13, so it will be exciting to see what BW are reporting later in the month. So we are simple people, so we try to have a simple strategy basically, buy low and sell high. Try to contract the ships when they are cheap and then selling the ships when asset prices are more attractive. So I think we've done that fairly well. If you look at the dual fuel newbuilds, contracted them for 78 million and put on some extra spec on some of them. So the newbuild price closer to 80 million. We sold two newbuilds, as I mentioned, then with delivery in March and May for 120 million each and then we sold the rest of the dual fuel newbuilds, four ships in total, average age slightly less than two years, but, and then average price of 150. So we think we really found a good spot there to sell the ships. We sold, as I mentioned, three ships in 2022. The last two ships we sold this year, we actually selling ships, which are 15 years at our price, close to the 10-year parity. So altogether good divestments and in general also it's not that easy to sell a lot of ships that this market is not like super liquid when it comes to secondhand tonnage. We've seen the secondhand market drying out in the second half of 2024 and also newbuild activity tapering off. So we also happy with that. We've seen on the MDCs contracted these for 61.5 selling them at 70.6 million, where basically the newbuild price plus. So just to give a recap on the different transactions, then, I've already covered this in quite a lot of detail. 12 wheel is to BW with the cash of around 240 million and then the BW share at kind of the paid asset value, we think 17.25, meaning 333 million value of those stocks today is around $250 million. Then the MGCs contracted 248, sold for 282, giving us this $34 million profit, which we expect to collect in April once the steel cutting of the fourth and final newbuilding take place. At year-end, we had paid the yard installments of 56 million and then we paid another yard installment of 6 million in January. So that translates to 62 million, which we are waiting to collect shortly, and then 34 million in April. So in the to-do list or the windup process we are already checking a lot of these boxes. We are distributed some fairly large dividends in our advance of the liquidation process. We have closed the BW transaction. We held a special general meeting last week to reduce our paid in capital. We had signed innovation on the MGCs. The only thing waiting for is the SWIFT to release the 62 and then collect profit in April. We have now reported Q4 and announced distribution of more cash and the BW shares. And then in April, once we collect the remaining firms, we will send out notice for our general meeting probably in May, we will be doing a Q1 final reporting somewhere end of April, maybe early May, where we'll do the final distribution of capital to the shareholders. And then we will start the kind of wind up process by having a liquidator in Bermuda and that will be the end of Avance Gas story about 11 years after we listed this company in Oslo. So it's been a good run, especially the last couple of year here with a lot of dividends, I'm going to cover on the last page. So we've been doing quite well operationally. Last year we made 164 million in kind of earnings. We paid out 165 million. So you can see for 2023 dividend per share was 2.15 compared to earnings of 2.40. So then we thought, okay, Q1, when we sold some of the ships, let's pay our years of dividend in one quarter, and we paid 2.15. Next quarter we paid out 1.35 together that was 3.50. So we thought in Q3, why not pay out the same amount in just one quarter, and we took it up to 3.50, we are not able to double it for Q4, but not far $2 of our cash dividend dollars, $3.25 dividend in a kind in the BW shares, kind of the market value of those shares today and then the $0.75 which we plan to pay out very shortly and that's turned out to $6 of dividends, and then we will have a remaining dividend in April, May of $0.70, $0.75 or so depending a bit on timing and cost in connection with the winder. Although, if you look at some of the numbers there, it's not really that much. So for those shareholders who have a share count not divisible by four, you have a few days to kind of adapt to that adapt your share count in order to not miss out on our write for our share. So we will have our X date on February 18. So if you want to maximize your dividend in terms of BW shares, you should get our share count divisible by four. So sources and uses for these dividends before handing over to Randi. We closed the year with $176 million, $250 million now is the value of our BW shares. We have paid out at year end, we have paid the year $56 million and then we paid $6 million in January, meaning the $62 million. We collected $34 million profit element in April, and then we have a marginal working capital G&A and then these are the costs of about $1 million. That translates to $516 million in kind of net asset values. I believe in Q3 when we reported, we said 518 million, estimated 518 million. So we are in line with the estimates we provided in November. We are paying out the BW shares. We will probably after this dividend, we will probably have around 130,000 BW shares left. That's why it's a slightly lower number, 249. We pay out the ordinary cash dividend of $2 per share, after that, we have $114 million of remaining kind of net asset value then we're paying the $0.75, $58 million and then we will have somewhere around $55 million to $60 million, we expect to have left once that has been completed and that is the money you can expect to receive for the final Q1 dividend. So with that, I think I hand it over to you, Randi.
Randi Navdal Bekkelund: Thank you, Oystein. And let's move to Slide 10 for the income statement and key financial figures for the fourth quarter. Overall, the results were more or less in line with the guidance provided in November last year, both in terms of the top line and the bottom line. Our TCE on discharge to discharge came in at $28,000 to $200 per day, and we had a positive load to discharge effect of $7,000 a day adding to the TCE, which is explained by no load to discharge adjustment of the spot wages as we hold the whole wind cyclic at the end, and thereby, the effect is only related to the reversal from the third quarter and we ended up with a reported TCE per day of $35,000 a day rounded. Moving further down in the P&L, you can see that we have no depreciation during the fourth quarter, which is a result of the VC fleet being classified as house of sale on August 15 and consequently, the depreciation stopped. If we depreciate the vessel until the actual handover date of the vessel to BW LPG the depreciation expense would have been 12 million of which 5 million should have been recognized in Q3 and 7 million in Q4. The gain on sale of 287 million recording during the fourth quarter relates to the sale obviously of the BW. The game is calculated basis on the transaction settlement consisting of 70% settlement in cash and 30% in BW shares. So the BW LPG share was measured using the cost share price at the announcement date on August 15 of $16.18 and thereby the total transaction settlement was $1.033 million in our books and less the book value of 746 million brings us to the gain of 287 million. The gain on sale combined with the 12 million lower in depreciation expense gives us the total P&L effect of 299 million during the quarter as explained by on previous lines. So the next finance expense of 91 million of significant amount this quarter, which I will explain on a high level. Since the announcement date of the BW LPG transaction the share of BW went down from $16.18 to $11.16 and thereby we have an unrealized mark-to-market loss in our books of 97 million recognized as finance expense as of yesterday the share quote is at approximately $13, meaning that the unrealized market loss has been reduced by 35 million, which will be recorded as a gain for the first quarter ’25. As a result of selling D2C fleet we have also repaid all our interest-bearing debt. Actually, we early prepaid the debt for five vessels to save some interest expense. But due to the accounting standard, we had to expense the deposition cost amortized over the maturity of the loan of 4.6 million and with no underlying debt to hedge we also terminated interest rate swaps during the quarter, resulting in a gain of 8 million, of which 4.4 have cash. So this basically leaves us with a net profit of 210 million or earnings per share of $2.74 per share for the fourth quarter ’24 and this obviously boosted our net profit for the full year of ‘24, amounting to 443 million equaling $5.78 per share, which is actually the best full-year results for Avance ever, much attributable to the vessel sales. Yeah, and we will not try to do the same now, are we. So in total pool during the year, we have sold 16 vessels as already Oystein already commented, which resulted in a big gain on sale of 408 million by excluding the gain on the rest of sales, change in fair value and dividend income of the BW investment. The net profit was 125 million, which ranks as one of the top three best years for Avance. So let's go to Slide 11. You can see that our balance sheet has been shrinked by the sales, obviously. We had the total assets amounted to $457 million at year-end, compared to $1.2 billion last year. Cash were $176 million compared to $132 million last year and during the year, we generated a net cash free -- net free cash flow of $630 million of which 70% comes from the domestic sales and the remaining 30% comes from the cash flow from operations, net of CapEx on the MDCs and 93% of the free cash flow generated was paid in dividend to shareholders during the year amounting to $586 million. The 16 VLGC sold was also derecognized following the completion of the four vessels in the first half and the 12 vessel sales to BW in the second half completed, actually the last sale on New Year's eve just in time. So this explains the reduction in the vessel book values on the VLGCs and newbuilding. While the NGCs remains in our balance sheet with a book value of $57 million at year-end, and it's classified as health of sale as the highly probable criteria in IFRS has been fulfilled. We paid additional installment of 6.2 million in January, which brings us to the $62.1 million, which will be reimbursed by Exmar shortly. As we commented earlier, the transaction with BW was settled at 70% cash, 30% in shares, and these 19.3 million shares were recorded as current assets measured at fair value of $215 million at year end. This was based on the quoted share price of $11.16. On the liability side, there are no interest-bearing debt left, resulting in an equity ratio of 99% and we are in process of distributing the shareholders' equity to back to investors, of which $403 million has been announced today, and it's more to come as explained by Oystein earlier. We have also provided a pro form a financial key figure for 2025 and how the P&L will look like. We initiated a cost-cutting last year following the sale of the fleet, and headcounts will be reduced during the first half of '25, including the termination of employment contracts with the -- including the termination of the employment contract of the management. We estimate that the administrative and general expense will be about $7 million consisting of settlement of outstanding obligations towards vendors and personal expense as well as the winding up costs. The MGT sale is expected to be recorded at $34 million following closing of the transaction with Exmar. Interest expense of $1 million from our cash holdings will also be collected, and we have a fair value adjustment coming from the BW shares of $35 million, as mentioned earlier, subject, of course, to fluctuations in the share. So, thereby, we estimate the net profit to be $63 million for the first half of 2025. On the next slide, Page 12, we have the cash flow bridge showing the movements during the fourth quarter as well as the expected movements in the cash basis announcements today. So we started the quarter with 193 million in cash. We generated 251 million in free cash flow, of which 242 million cash proceeds from BW LPG transaction, all of which and more was paid in dividends on little Christmas Eve we paid $3.50 per share in dividends amounting to 268 million in total and thereby we ended the quarter with a cash position of 176 in ‘25 and additional 90 million will be collected coming from the MGC sale net of yard installment by paid by Avance this year. So we have 56 million as expected net cash effect following issuance of the refund guarantee as commented by Oystein, and the remaining 34 will be collected in April. Further we estimate a positive networking capital of 1 million during the first quarter consisting of collecting the outstanding receivables as freight and demerge, sale of the remaining 130,000 shares in BW after distribution offset by the outstanding obligation towards ship managers, as well administrative expense including winding-up costs. So we announced a combined distribution of BW shares and return of capital of $5.25 per share in total for the fourth quarter. This includes the $3.25 per share in BW shares and 2 million in cash dividend structure as return of capital, amounting to 403 million in total. As already commented shareholders will receive one BW LPG share for every four Avance Gas share they hold, and then we expect to pay an additional extraordinary dividend of $0.75 per share once the refund guarantee in relation to the MGC sale has been issued and the yard reimbursement amounting to 62 million has been settled. So this leaves us with a proforma cash of $56 million or approximately $0.70 per share, which is expected to be distributed per year, made 2025 prior delisting and winding up of the company. So by that, I hand the word back to you, Oystein to comment a bit on the US production growth and what we can expect in the stock markets.
Oystein Kalleklev: Yes. Okay, thank you. I just want to make one comment there because, you know, when you look at this mark-to-market loss in Q4 of 97 million, it seems like all always been reduced now with the BW share picking up in Q1. So the loss is about 60 million. Now, on this, it seems like it's a fairly big number, but just to put it into perspective, we sold the fleet for slightly more than a billion. When we sold that fleet we got 70% of the settlement cash settled. So the remaining shares then we are taking in BW shares. So if we look at, you know, what has happened since we announced this on August 15th, the market really slumped because the winter market never really took off. So if you look at Dorian share, which, Dorian has a very similar strategy to Avance Gas, slightly less levered in terms of indebtedness. And that stock gone from $38 to $23 a day, which means it dropped 40% even with less leverage than Avance Gas. So we have then got a BW share, which has less leverage and have a more integrated model where they have made close to $100 million on the product services just in one year 2024. That stock, since we took settlement of that stock has gone from $16 to $13 down less than 20%. So kind of where would our stock be given the fact we have had a similar kind of setup as Dorian. So we feel that we have de risked it. We've taken the cash on top of the cycle. We've taken most of the settlement in cash and then we have been able to get a settlement in a share, which have performed relatively better than the sector. So with that, we are not really into the market any longer. We're going to be exposed to the market until we dividend out the BW shares and collect the money on the MGCs, but we can just give you some key input on this as you will become shareholder in BW very shortly. So in terms of the market, market growth is good, driven by the U.S. has been the case in the last couple of years, and needless to say, the U.S. volumes are the most on mileage intensive driving shipping demand. But as we have told you about in the presentation, in November, market has been a bit soft because Panama Canal has been up at normal capacity, meaning sailing distances are driven down resulting in more ships available in market and more ships in the market means lower rates. In terms of the imports, it's still healthy growth from the traditional importers being China and India. Looking at U.S. exports, which is the main driver for the market, domestic consumption has basically a flat line, while production will keep on growing, meaning that this will be the main driver of export growth. At the same time, we do see quite a few of export terminals in the U.S. ramping up. First one, our Energy Transfers Netherlands coming up later in the year and then two projects from enterprise, and we had just a recent announcement from ONEOK for a further expansion in 2018. So we can see the capacity in the U.S. has growing from above 60 million tons a year up to always up to 100 million tons. So it's really a good driver for freight demand. In terms of the freight market, as I said, it's really sagged. I think the only about this year is we haven't had that huge drop in the freight market as we've seen in 2024 and 2023 at the beginning of the year. The reason was that the rates were dropping from $40,000 to around $125,000 today, while the last two seasons, we have been above $100,000 per day and then dropping all the way down to basically OpEx levels. We are above that. The market will tighten during the year for reasons I'm going to explain later, meaning that the FFA curve or the forward freight agreement are flat lining at around $40,000 FFAs are not really that good at predicting actual level, but they give you a good sense of direction of the market and direction is up. Usually, we do see some spikes in the winter market, so it's a bit surprisingly flat in the winter season. But at $40,000 per day, so if we look at the investor presentation by BW, which they released on August 15 in connection with the transaction, they have certain intervals of the freight rate rates and what kind of dividend yield they will be able to pay under those circumstances. So if you look at that presentation, which is available on BW website, you will see that $40,000 per day, they will be able to pay a dividend yield of 17 to 21%, depending on whether they have a payout ratio of 75% at 100%. So we do think that, you know, it's a good investment and as we said, when we made the assessment to take those shares of settlement for the 30%, we kind of take the value of that stock at 17.25 and it's been trading below that. Still, in terms of the race movements, we've seen the terminals picking out a lot of the arbitrage because there's been basically too many ships that arbitrage between freight and product has narrower but still it's a bit wider than usual. So there are some room have on the upside of base, which is also evidence from the FFA. Looking out at one team that comes up from time to time is the Iranian-sanctioned trade to China and the numbers of ships going into that trade just keep ongoing. So last year ‘23, we ended the year at around 50 ships. We did a assessment this week. We came to a number in cooperation with brokers of 57 ships in this trade and you're talking about the fleet for slightly about 400 ships. So it's a huge number and these ships are old. So of those 57, 35 of those vessels are trading beyond the typical scrapping age. So we do see Trump being more aggressive on Iran with this is been one of the driver of the tanker market. This could also happen in the LPG space. Typically then you would see more production from OPEC being then typically those with slack capacity, main contender Saudi, but maybe also United Arab Emirates, they will have a similar sailing route as the Iranian LPG. However, those Iran, the ships in that trade will not be able to take those battles. So you will be moving demand from the dock fleet to the white fleet. Additionally, you could see some more flow from US to China and India, which would be also a driver for ton mileage intensive. We have, and then it's also about that kind of the LPG capacity in the Middle East compared to Iran, which has a fairly high LPG production compared to or LPG export compared to the crude oil. We were looking at some of the numbers, just to give you some sense of this. So, in 2021, when we came out of COVID, Saudi, were able to put 900,000 more barrels on ships in exports. So during that time, from 2021 to 2022, they grew their LPG export by 60,000 barrels per day. So that year, so when they grow the kind of oil production by 900,000 barrels that year, Iran produced 1.2 million. They are now closer to 1.6 million and they produce 250,000 barrels of LPG. So there is a higher LPG export kind of ratio for Iran compared to Saudi but the historical kind of context there is that Saudi then will have one third of the effect of the LPG to oil ratio compared to Iran while the United Arab Emirates, they have a higher LPG to oil ratio. So, in general, we do think this would be positive for those who owns LPG VLGC, so LPG ships in the Y-trade. And you would probably also see a big pickup in scrapping off all of these older ships. So heading then into the last slide before concluding, it's the delivery schedule. As I mentioned, we have muted growth and we'll just see a bit now during 2025 and into the first half of '26 before it takes off again from end of '26, but in line with also the export production growth from the U.S. As I mentioned, contracting has paid off, so we see a lot less contracting these days than we saw early last year and we see all aging fees also driven by those Iranian ships, which are very old. So the last element I'm just going to touch upon is these drydocking cycles. They go depending on the contracting cycle. So we see a lot more drydocking this year also, meaning that more ships will exit for special survey, which will also kind of reduce fleet growth. So in general, we have a constructive view on '25 and '26, and then we'll see whether there will be some scrapping and how the ramp-up of these U.S. volumes will happen. So with that, I think we conclude. I'm just not going to give too much. The profits are good. We are paying out everything. We completed the sale of the VLGC fleet. We are very soon closing the MGC transaction. Once that happens, you will also get a extra dividend of $0.75 on top of the $5.25 dividend declared today. Then we will collect the remaining funds from Exmar transaction and or the working capital and pay out the remainder of the funds April, early May before we close the shop. So with that, thank you for listening in. We're going to do some questions so we can check the phone whether there are some questions there before heading into the chat.
Operator: There are no questions at this time. [Operator Instructions] If you like to ask a question via the webcast, please type into the box and click submit.
A - Oystein Kalleklev: So I think we explained it in rather good detail here. We're going to collect the money. We're going to pay it out. For myself, I'm going to keep on working on Flex. So if you want to reinvest the money in another dividend company, you are welcome to invest in Flex. We have paid out, I believe, $610 million of dividends in the last 3.5 years and Randi will be busy doing a lot of this cleaning up and winding up the process at least for a couple of more months. But we will come back with updates end of April, early May. Until then, enjoy the dividends, and I wish you a happy day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.