Financial Data and Key Metrics Changes - Total revenue for Q1 2024 was $104.5 million, an increase from $81 million in Q1 2023, primarily due to revenue from new vessels acquired [39] - Net income for Q1 2024 was $33.9 million, or $17.5 million excluding vessel sale gains, compared to $10 million in the same quarter last year [15][13] - Total expenses for Q1 2024 were $54.9 million, up from $45.1 million in Q1 2023, with vessel operating expenses increasing to $22.7 million from $19.3 million [14] - Average interest expense increased to $34 million in Q1 2024 from $23.7 million in Q1 2023, attributed to higher average indebtedness and interest rates [40] - Total debt rose by $156 million to $1.944 billion compared to the end of 2023, due to new bank debt and seller's credit related to vessel acquisitions [41] Business Line Data and Key Metrics Changes - The LNG fleet has a contracted backlog of 76 years at an average daily rate of $88,500, which could extend to 111 years if all options are exercised [7] - The container fleet's contracted backlog spans 32 years at a weighted average daily rate of $38,200, potentially increasing to 51 years with exercised options [8] - The partnership's current fleet charter coverage for 2024 and 2025 stands at 100% and 82% respectively, with a revenue backlog of $2.8 billion [3][17] Market Data and Key Metrics Changes - The LNG market is normalizing after high rates due to decreased demand, with spot rates weakening due to high gas storage levels in Europe and Asia [9] - Charter markets for two-stroke vessels are expected to remain healthy in 2024 and 2025, driven by attractive freight costs and environmental regulations [10] - Global LNG imports remain strong, particularly from China, with overall tonne-miles higher in Q1 2024 compared to last year [20] Company Strategy and Development Direction - The company is focused on LNG and energy transition gases, including ammonia and liquid CO2, and plans to divest from container vessels if reasonable prices are offered [58] - The company aims to complete the conversion from a master limited partnership to a corporate structure, with expectations to announce plans in June [25] - The strategy includes taking delivery of three LNG carriers by mid-2024 and continuing progress on the conversion to a corporate structure [23] Management's Comments on Operating Environment and Future Outlook - Management noted that geopolitical disruptions are key for the LNG carrier sector, with expectations of high volatility in rates later in the year [19] - The company anticipates a tightening market from 2026 onwards, with significant demand for new projects and replacement of older vessels [78] - Management expressed confidence in the ability to navigate the transition to a corporate structure without issues from lenders [72] Other Important Information - The partnership declared a cash distribution of $0.15 per common unit for Q1 2024, payable on May 14 [3] - The company recognized a gain of $16.4 million from the sale of two container vessels [13] - The LNG fleet order book currently stands at approximately 50% of the total fleet, indicating strong demand for new builds [47] Q&A Session Summary Question: Update on corporate conversion timing - Management expects to communicate the outline of the new corporate governance and conversion by June, with a likely need for a unit holder vote [25] Question: Current charter rates and market conditions - Charter rates for the second, third, and fourth quarters are projected to be around $55,000, $78,000, and $140,000 per day respectively, indicating a seasonal low but expected recovery [27] Question: Liquidity in the container ship market - The container market is tight, with increasing charter rates and asset values, and the company is patient in seeking reasonable bids for remaining vessels [30][31] Question: Future dividend and capital allocation policy - Management indicated a potential shift to a more flexible payout structure post-conversion, but specific details will be determined by the board [33] Question: Appetite for long-term contracts on new builds - There is an expectation of significant demand for replacing older vessels with newer fleets, particularly as environmental regulations take effect [73]
Capital Product Partners L.P.(CPLP) - 2024 Q1 - Earnings Call Transcript