Norway's Awilco LNG believes storage demand could help dampen the effects of the coronavirus pandemic on its markets.
The Oslo-listed LNG carrier owner, which has two vessels operating in the spot market, said the ongoing pandemic started to hit energy demand in the second half of the first quarter.
The company expects the LNG sector to be negatively affected.
But Awilco LNG said: "A potential deep contango in LNG prices may be supportive of storage and slow steaming ahead of summer and winter peak seasons, and demand for LNG carriers as storage may arise to counter market bottlenecks following lockdowns and disruptions, as seen in other shipping segments."
The company added that depending on the "pathway to recovery" from the Covid-19 pandemic, tonnage demand and supply appeared to be balanced due to new liquefaction capacity under construction and expected slippage in newbuilding deliveries.
"However, there is more uncertainty than perhaps ever, and with both vessels employed in the spot market the impact of the current situation on the company’s earnings and financial position is challenging to assess both on a short and longer tern basis," Awilco LNG said.
Doubts over storage potential
TradeWinds has reported brokers as saying weakened demand forecasts, as the longer-term impacts of the coronavirus pandemic start to be felt, mean it is unlikely that storage will take off in the current market conditions, however.
Spot rates have tumbled as the effects of low gas pricing, cargo cancellations and the weakened demand from the pandemic start to kick in.
Brokers said levels plummeted over 20% to below the $30,000-per-day mark for tri-fuel diesel-electric (TFDE) ships trading in the Far East, with their larger gas-injection cousins earning sub-$40,000 daily rates and steam-turbine vessels levels in the low $20,000s.
Rates in the Atlantic were higher, with TFDE and steam-turbine vessels pegged at daily levels in the $30,000-per-day range and two-stroke, gas-injection vessels just squeaking over the $40,000-per-day mark.
Profit rising
Awilco LNG posted a net profit of $2.69m in the first quarter, from a loss of $3.36m a year ago.
Revenue grew to $14.02m, against $9.35m. Vessel utilisation was 100%, compared to 95% in 2019.
"Activity and rates in the LNG shipping market has until recently been firm compared to same periods in previous years," the company said.
"Although shipping rates have come down the last few weeks it is challenging to determine to what degree this is attributable to the usual shoulder season effects or to temporary demand destruction caused by the pandemic."
Voyage-related expenses amounted to $1.1m, up from $900,000 in the fourth quarter of 2019.
Awilco LNG called the result "solid" and said average time charter equivalent earnings were $70,800 per day per vessel.
The recent sale and leaseback refinancing of the two ships is expected to provide substantial savings on financial expenses, the shipowner added.
Fearnley Securities said Ebitda of $10m and earnings per share of 2 cents were slightly ahead of consensus.
But the cash balance of $22m was well below its $29m estimate.
"For the second quarter, we estimate rates to...average $40,000 per day on a headline basis, though highlight that utilisation adjusted earnings likely are substantially lower," it said.
"Assuming a fleet TCE of $24,000 per day would see the cash position deteriorate by circa $7m in the second quarter of 2020."
