Financial Data and Key Metrics Changes - Net income for Q2 2023 was $7.4 million, down from $20.4 million in Q2 2022, with net income per common unit at $0.36 compared to $1 in the previous year [23][27] - Total revenue increased to $88.5 million in Q2 2023 from $74 million in Q2 2022, primarily due to contributions from new vessels [45] - Total expenses rose to $58.6 million in Q2 2023 from $40.9 million in Q2 2022, with a significant increase in interest expense to $25.5 million from $11.7 million due to higher average indebtedness and interest rates [46][47] Business Line Data and Key Metrics Changes - The partnership's charter coverage for 2023 and 2024 stands at 96%, with a remaining charter duration of approximately 6.7 years and a contracted revenue backlog exceeding $1.8 billion [24][53][32] - The delivery of the Buenaventura Express and the new LNG Carrier Asterix I contributed to increased daily rates for LNG carriers, partially offset by the sale of two older container vessels [25][43] Market Data and Key Metrics Changes - The LNG market remains strong, with one-year time charter rates for LNG carriers at $140,000 per day, although there was a seasonal downward pressure on gas prices and spot charter rates in Q2 2023 [33][34] - The container market experienced a softening in the first half of 2023, with the Clarkson's charter index at 103 points, down 76% from its peak in April 2022, but still significantly higher than the 2010-2019 average [65] Company Strategy and Development Direction - The company aims to allocate about 20-25% of free cash flow to unitholders through distributions and unit buybacks, while focusing the remainder on growth opportunities, particularly in the LNG sector [3][14] - The company is strategically positioned to control a fleet of up to 18 latest-generation LNG carriers, enhancing investor visibility and liquidity [36] Management's Comments on Operating Environment and Future Outlook - Management noted the importance of the current interest rate environment and its impact on future distribution policies, maintaining a cautious approach until more visibility is gained [3][4] - The company anticipates a multiyear up-cycle in LNG demand, supported by increasing commodity supply and energy security considerations [70] Other Important Information - The partnership repurchased 156,560 common units at an average cost of $13.30 per unit during Q2 2023 [44] - A noncash impairment charge of $8 million was recorded due to the sale of the Cape Agamemnon, which is expected to be delivered to new owners in Q4 2023 [26][52] Q&A Session Summary Question: What is the company's strategy regarding LNG dropdowns and capital allocation? - Management indicated that growth through dropdowns is a priority, and they will balance this with debt repayment and returning capital to shareholders [14][15] Question: How does the company view the current LNG charter market? - Management noted that while the spot market has softened, the long-term charter market remains firm, with increasing rates for longer-term contracts [74] Question: What are the expectations for future growth and fleet modernization? - Management emphasized the need for strategic thinking regarding fleet modernization and potential monetization of assets to unlock value [72][61]
Capital Product Partners L.P.(CPLP) - 2023 Q2 - Earnings Call Transcript