Awilco LNG posts second-quarter loss

Norwegian LNG transportation provider Awilco reported a net loss for the second quarter of 2020 as the COVID-19 pandemic impacted global economic activity and energy demand.

Awilco reported a net loss of $5.3 million for the period, which compares to a $2.7 million profit in the first quarter.

The ongoing Covid-19 pandemic has severely impacted global economic activity and energy demand. Activity and rates in the LNG shipping are no exception, Awilco LNG said.

Shipping rates have been weak since April this year and only lately started to climb following early signs of demand recovery coupled with seasonal effects as usually seen towards winter in the Northern Hemisphere.

Freight income for the quarter was $5.1, down from $14.0 in the first quarter of 2020, following a marked drop in spot market rates due to muted end-user demand and historically low gas price curves.

Despite these factors spot market fixture activity in general remained high and fleet utilisation for the quarter ended at 99 per cent compared to 100 per cent in Q1 2020.

Awilco noted in its statement that net loss for the first six months of the year $2.6 million which compares to an $11.9 million loss in the first six months of 2019.

WilForce and WilPride are currently trading in the spot/short term market. WilPride is expected to deliver on a 110-day TC contract in late September 2020.

WilPride is expected to deliver on a 110-day time-charter deal in late September 2020.

Both WilForce and WilPride are financed with sale/leaseback arrangements with CCB Financial Leasing (CCBFL). The vessels are chartered back on bareboat basis to units of the company for a period of up to 10 years.

In terms of risk, Awilco LNG sees uncertainty regarding near-term LNG demand and tonnage requirements, which may translate into weak shipping rates and earnings until the pandemic abates.

Looking forwards, although its second-quarter results in 2020 are not satisfactory, there is cause for optimism.

Early signs of demand recovery in key Asian markets have already resulted in fewer US cargo cancellations from October and increasing gas prices, followed by firmer shipping rates.

With Northern Hemisphere winter season approaching and an open arbitrage between the Atlantic and the Far East the Company’s results are expected to improve.

In the longer-term, tonnage demand and supply appear balanced going forward following new liquefaction capacity under construction and an orderbook which is currently not sufficient to meet the transport requirements from these new volumes. Natural gas is on average currently priced at less than half of oil on an energy equivalent basis. Low prices and the growing supply of molecules is expected to support growth in demand for natural gas as a flexible and clean fuel compared to other fossil alternatives and importantly also as a complement to renewables.

However, near-term uncertainty persists and with both vessels employed in the spot and short-term market the impact of the current situation on the Company’s earnings and financial position is challenging to assess.