Q2 2017 Teekay LNG Partners LP Earnings Call
Aug 03, 2017 AM CEST
TGP - Teekay LNG Partners LP
Q2 2017 Teekay LNG Partners LP Earnings Call
Aug 03, 2017 / 03:00PM GMT
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Corporate Participants
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* Brody Speers
Teekay LNG Partners L.P. - CFO of Teekkay GP LLC
* Mark J. Kremin
Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc
* Scott Gayton
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Conference Call Participants
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* Espen Landmark Fjermestad
Fearnley Securities AS, Research Division - Equity Analyst
* Fotis Giannakoulis
Morgan Stanley, Research Division - VP, Research
* Jerry Zhou
* Michael Webber
Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst
* Noah Robert Parquette
JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst
* Randall Giveans
Jefferies LLC, Research Division - Equity Associate
* Spiro M. Dounis
UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping
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Presentation
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Operator [1]
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Welcome to Teekay LNG Partners Second Quarter 2017 Earnings Results Conference Call. (Operator Instructions)
As a reminder, this call is being recorded.
Now for opening remarks and introductions, I would like to turn the call over to Mr. Mark Kremin, Teekay LNG Partners' President and Chief Executive Officer. Please go ahead.
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Scott Gayton, [2]
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Before Mr. Kremin begins, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the second quarter 2017 earnings presentation. Mark Kremin and Brody Speers will review this presentation during today's conference call.
Please allow me to remind you that our discussion today contains forward looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the second quarter 2017 earnings release and earnings presentation available on our website.
I will now turn the call over to Mark to begin.
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [3]
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Thank you, Scott. Good morning, everyone, and thank you for joining us on the second quarter of 2017 investor call for Teekay LNG Partners. I'm joined today by Brody Speers, Teekay Gas Group's CFO.
Turning to Slide 3 of the presentation. I will review some of Teekay LNG's recent highlights. For the second quarter of 2017, the partnership generated distributable cash flow, or DCF, of $41 million and cash flow from vessel operations, or CFVO, of $106 million. The partnership's results for the quarter were impacted by one-off and temporary items, including an unscheduled off-hire event relating to 1 of our 70%-owned LNG carriers that required repairs during the quarter. It is now back in operation and contributing to earnings; and collection issues related to our 6 LPG carriers chartered to IM Skaugen during the quarter we expect to resolve once Skaugen commences a new small-scale LNG project in West Africa. Once the project is operational, we expect to recognize our regularly quarterly revenue related to these vessels and gradually recover unpaid revenues owing from Skaugen.
Despite the one-off and temporary items just described, the partnership still generated DCF per limited partner common unit of $0.51 per unit resulting in strong distribution coverage ratio of 3.6x. Pro forma for these one-off and temporary items, the partnership would've reported DCF of $48.3 million or $0.61 per unit, which would've resulted in a coverage ratio of 4.3x.
During the quarter, the partnership successfully completed charter contract extensions for 2 LNG carriers chartered to Awilco LNG in connection with their raising $25 million in new equity, including a further investment from their largest investor, Awilhelmsen. Both of these charter contracts have now been extended to December 2019 along with an accompanying hire deferral, which averages $15,000 -- excuse me, $15,600 per day per vessel starting in July 2017 until the end of the new charter period. Awilco continues to have an obligation to repurchase the vessels at or prior to December 2019, and the deferred hire amounts plus interest will be added to the repurchase price.
In addition, I'm pleased to report that following these extensions, we have now extended the loan facilities associated with these 2 vessels to mid-2020, which were previously scheduled to mature in 2018. Brody will provide more detail on this and our continued progress on financing our remaining contracted newbuilding vessels later on in the presentation.
Lastly, our 50%-owned Exmar LPG joint venture took delivery of its 10th midsized LPG carrier, the Kruibeke, in late July. This vessel will operate as part of the joint venture's portfolio, which includes time-charter contracts, the contract of affreightment and short-term trading.
Turning to Slide 4. I would like to highlight the partnership's market-leading portfolio of fixed contracts, which currently stands at $11.4 billion of forward revenues, with a weighted average remaining contract duration of 13 years, excluding charter extension options. These forward fixed revenues come from a diverse customer group, including energy majors and large LNG projects and contribute to the stability of our cash flows. As illustrated on the slide, the partnership's forward fixed revenues are set to more than double with the delivery of our current LNG vessel order book.
In addition, I would like to highlight the partnership's LNG fleet is 96% fixed in 2017 based on available ship days, which is consistent with our business model of employing our vessels on medium- to long-term contracts.
Finally, we are seeing positive signs that the market is gradually tightening, and we expect this to continue as more liquefaction capacity comes on line. The partnership has taken advantage of the strengthening market. And during the first half of 2017, we fixed 3 of 4 52%-owned vessels trading in the short-term market on term charters ranging from 6 to 18 months and beginning at various times starting from July 2017 to the fourth quarter of 2018.
Turning to Slide 5. We have provided an overview of the partnership's newbuilding LNG vessels, which will commence fixed rate charters upon the delivery. In total, the partnership has 18 newbuilding LNG vessels and a 30% interest in the Bahrain regasification facility, which are scheduled to commence operations under charter contracts ranging from 6 to 28 years between now and early 2020. This LNG carrier order book, which is the largest in the industry, is expected to contribute approximately $250 million of incremental run rate CFVO to the partnership by 2020, with many of these vessels scheduled to deliver over the next few quarters.
With that, I will now turn the call over to Brody to provide an update on the partnership's financing activities.
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [4]
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Thank you, Mark, and hello, everyone.
Turning to Slide 6. I will provide a brief update on our progress in securing long-term financing for our growth projects.
I'm pleased to report that we continue to make progress on the financing for our remaining projects delivering through 2020 and continue to work on these in a parallel track. I won't cover all the financings on this slide, instead, I will focus on the update since we last reported earnings in May.
Starting at the top of the slide. As reported in previous quarters, the partnership has completed long-term financing for 5 of the 7 MEGI LNG carriers under construction. The financing for our remaining 2 MEGI LNG carrier newbuildings delivering in early 2019, which are employed on long-term charter contracts to BP and the Yamal LNG project, are progressing well, with 1 vessel credit approved and in documentation and the other vessel now having a signed term sheet.
Moving down the list. We have now also signed a term sheet and begun documentation for the financing of our FSU newbuilding, which will go on charter to the Bahrain regasification project for 20 years.
Our next update is on Yamal ARC7 financing. Together with our 50-50 joint venture partner, China LNG Shipping, or CLNG, we have decided to pursue a 6-vessel financing package for our ARC7 LNG vessel in place of our earlier guidance that we would split this financing with a 2-vessel sale leaseback and a 4-vessel term loan. Since earnings in May, we have been progressing this discussion with our lender for the 6-vessel transaction and have already begun documentation. The 6-vessel term loan is expected to have slightly lower leverage than our previous guidance but will come with more attractive pricing. We continue to target for this financing to be completed by the end of 2017.
Finally, our 50%-owned Exmar LPG joint venture expects to secure financing for our newly acquired LPG carrier, which is being constructed at Hyundai Heavy Industries in Korea and delivers in the third quarter of 2018. This financing will be put in place at the joint venture level and is currently being discussed with potential lenders.
Overall, we are pleased with the progress we have made since we last updated you and continue to expect that we will complete our remaining newbuilding financing within the second half of 2017.
Turning to Slide 7. I will provide an overview of the partnership's upcoming refinancing between now and 2020. In the second half of 2017, the partnership has 1 remaining maturity, which is our $170 million, 364-day unsecured corporate revolver facility, of which only $10 million was drawn at June 30. This corporate revolver comes due in November of each year, and we expect to begin refinancing discussions on this next month.
As previously discussed, 2018 is a heavier refinancing year for the partnership, with several loan facilities coming due. Previously, these refinancings amounted to approximately $730 million but has now being reduced to approximately $550 million as a result of extending $180 million of loans for the 2 LNG vessels chartered to Awilco LNG till mid-2020, which Mark touched on in his opening remarks. The remaining 2018 financings can be placed into 3 categories: firstly, approximately $300 million of maturities relating to the Galicia Spirit, the Hispania Spirit and Madrid Spirit, all of which are in long-term charters; secondly, approximately $110 million relating to 2 niche trade LNG vessels and 6 LPG vessels, all of which have low loan-to-value ratios; and finally, a NOK bond maturity in September of 2018 for $150 million.
In addition to the recent loan extensions for the Awilco LNG vessel, we have also begun discussions on some of the other 2018 maturities, and we'll keep you updated in future quarters on how we progress these. The partnership's maturities in 2019 and 2020 include a NOK bond maturing in 2020, and the remaining amounts are all secured by vessels either on long-term charters having low loan-to-value ratios or which carry charter purchase obligation.
I will now turn the call back over to Mark to conclude.
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [5]
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Thank you, Brody. Turning to Slide 8. I will summarize Teekay LNG's key investor highlights.
We have a market-leading position as the third largest independent owner and operator of LNG carriers with a total of 50 LNG carriers, including 18 vessels currently under construction.
We have a stable and -- we have stable and growing cash flows supported by one of the largest and most diverse portfolios of long-term LNG charters totaling $11.4 billion of forward revenues and a weighted average remaining duration of 13 years.
In addition, we have the world's largest LNG order book, which is entirely contracted out on long-term charters, which will provide significant cash flow growth between now and 2020. And we operate in an attractive market, which has already begun the road to recovery.
We currently project a shortfall of LNG vessels by 2020 for the expected liquefaction capacity that is already under construction. And longer-term, we expect the growth in LNG demand to drive future demand for LNG shipping.
Finally, the partnership is focused on increasing distributions to unitholders at the appropriate time and in a sustainable manner. In this regard, our current thought process has not changed from prior quarters where we continue to focus on achieving key milestones, including completing all the long-term debt financing of our newbuilding vessels while obtaining sufficient comfort on refinancing our 2018 balloon maturities.
Further, we again highlight the significant incremental cash flow, which we expect will be generated as our committed growth projects deliver between now and early 2020, which will add to our distributable cash flow capacity. We will continue discussing our distribution policy with our board in the second half of 2017.
Thank you for joining us on the call today. Operator, we are now available to take questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions) We'll go first to Spiro Dounis with UBS.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [2]
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Just wanted to start off, Mark, on maybe just getting an update on your views of the opportunity set out there. I know earlier in the year...
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [3]
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Operator, we are available for questions.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [4]
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Can you guys hear me? Hello?
(technical difficulty)
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [5]
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This is Mark Kremin and Brody Speers. So we're available for questions.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [6]
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Mark and Brody, it's Spiro, can you guys hear me now?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [7]
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Yes. Thanks again, apologies for that. It's a technical difficulty.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [8]
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Great, no worries. You guys didn't need to run off, it's not like I was going to ask you the exact date and time when the distributions get lifted, so I'll give it to something else. Just in terms of where you guys stand, Mark, I know earlier in the year, you kind of felt there weren't a lot of opportunities out there that attracted you. Then last quarter, you kind of shifted a bit, and it sounded like things were getting more interesting, just wondering where that stands now. And as you look forward, the opportunity set, how many tenders are out there? Maybe that you think will close in the second half of this year, not necessarily that you'll win but maybe what's available?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [9]
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Okay. Thanks, Mike. Yes, things to be -- things seem to be picking up a little. And you've seen that, to some extent, in the term charters that we've done. Those are relatively short-term on the Marubeni joint venture-owned ships, but they are an indication that people are looking back at term business again. In the longer term, there are, I'd say, a number of tenders out there that we may or may not win, GAIL being one of them. GAIL's yet to be decided for most of their ships. That will be followed shortly after, we believe, by IOC in India. And there are some other longer-term tenders out there right now. There's a, for instance, a European utility that's looking for a long-term charter. So that's a good sign for things. On the FSRU side, there are obviously a lot of uptick. We see about up to 30 potential projects. That's a little different for us, however, in that there are around 7 uncommitted vessels for those, so we wouldn't necessarily be the winners for those 30 opportunities. But there is certainly an uptick in projects that we've seen over the last quarter or 2.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [10]
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Got it, okay. That's good to hear. And then just wanted to -- a quick housekeeping question on the Awilco LNG carriers. Looking at the debt, it looks like you got kind of a 6-month time window between when the purchase obligation would be and then when the debt matures. Just wondering -- that appears by design, just wondering why that is? Trying to get a sense of if there are any sort of other outcomes other than Awilco purchasing those vessels at the end of '19.
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [11]
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Spiro, this is Brody. Yes, the original loans that we did have the same feature where the loans matured a few months after the charter purchase obligations were due, and so we just kept that in place on this refinancing. So there's no -- we currently expect Awilco to repurchase the ships, but we've just put the debt out an extra 6 months just for flexibility. But we don't expect any other outcome at this point.
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Operator [12]
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We'll go next to Espen Landmark with Fearnley.
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Espen Landmark Fjermestad, Fearnley Securities AS, Research Division - Equity Analyst [13]
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Two ones for me. I know you didn't put anything on this in the presentation. But given everything that has happened with TOO and Teekay, I was just wondering what this means for TGP. Is there any potential positive spillovers for you guys there?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [14]
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Yes, I think there is, hopefully, a positive spillover for us. The transaction is, in fact, we hope positive to the entire Teekay Group. It's reflective of the brand that Teekay has in the industry and the ability to attract a quality partner like Brookfield. So the transaction, we hope and we believe, will strengthen Teekay's -- sponsor Teekay Corporation. And it's very much in line with TGP's own model, which is to partner with people, and we've done that successfully in the past, and hope for the same with this. So I can't see it as anything other than a positive.
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Espen Landmark Fjermestad, Fearnley Securities AS, Research Division - Equity Analyst [15]
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All right. And then, you have a couple of -- or quite a few mid-sized LPG carriers, with Exmar, who's been struggling with a bond refi and has also yet to secure employment for the FLNG and FSUs. I know the newbuilds are close to fully financed, but is there an angle for you guys to maybe increase your ownership in this segment?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [16]
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At this point, we're not really looking at that. The -- this segment, we believe, will take a bit longer to recover than the LNG market, which is already in the uptick. As you know, we did -- or as you may recall, we did take ownership of an opportunistic newbuild. Last quarter, we announced that. So we are making small growth. But in terms of consolidation in a big way, it's not really on our plans right now. The order book for LPG has just delivered one of the biggest increases ever in the last quarter, so it is fairly -- there's a fair amount of shipping supply available and we're not, at this point, looking to make any big move around consolidation.
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Operator [17]
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We'll go next to Michael Webber with Wells Fargo.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [18]
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Just wanted to circle back on the refis and the distribution. Brody, you mentioned in your prepared remarks after -- and you laid out the schedule financing work you're doing right now and you expect to reasonably, I guess, have that done by the back-end of the year, the Slides 6 and 7 are helpful. When I look at 7, the remaining refi activity that's needed, can you give us a sense of when you'd realistically be able to address the 2018 refis to a point where distributions become a relevant -- distribution bump becomes a relevant topic for you guys?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [19]
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Yes, sure. Yes, as I mentioned in the prepared remarks, we are currently starting to work on some of those 2018 refinancings now that the Awilco one has been completed. Realistically speaking, I don't see us completing all of those refinancings by the end of the year. It's going to spill over into 2018. The maturities on most of those are, I would say, in the latter half of 2018, but we expect to complete the refinancings before those maturity dates. And then in terms of the comfort level for the distribution, I think what we've said in the past holds true, which is we would look to have completed our commitments for the majority of those refinancings.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [20]
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Okay, for the majority. Okay, that's helpful. Mark, I wanted to touch base on some LNG chartering activity, I guess, to the broader Teekay umbrella. I know the assets are chartered out to the Teekay parent level, but the Arctic looks like it found some employment starting in September. Can you give us a sense on rate and term? And just kind of what the market was like for both that and the Polar?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [21]
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Sure, Mike. You're correct. The Arctic has been fixed for employment. So the ship is right now in Singapore getting dry docked, touched up for the charter, which will commence in early September. Both ships are on similar trades. They're on niche trades to China. And as a result, they do earn above-market rates, and we expect that to continue when Teekay redelivers the ships most likely to TGP in April of 2017 -- I'm sorry, 2018. So we're in contact with the various opportunities in -- and it's a good opportunity perhaps to extend for TGP. But they are at above market rates for niche trades to China, both of them.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [22]
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There's a good opportunity to extend the charter out to Teekay parent, at TGP?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [23]
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I don't think that's likely. The options are long. And I think now that TGP has the portfolio that it does, it will be TGP that will continue on with the Arctic and Polar.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [24]
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Right, okay. That makes sense. Okay. I was confused for a second. Okay. Brody, one more on the debt. Sorry to hop around like this, but kind of have been looking at the detail in 2018 refinancing work, the $307 million for the Spanish LNG carriers. Can you remind us when in 2018 that matures?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [25]
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Yes, the Spanish LNG carrier debt matures in September and November. It's 2 separate facilities. It's September and November of 2018.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [26]
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Okay. So realistically, I mean, that's the only remaining financing that would drive you to the majority of your 2018 work. So that's kind of the fulcrum, if you will, for freeing up additional cash?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [27]
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Yes, I don't think we necessarily said exactly which facilities need to be done, but I think we'll just continue to look at it on a holistic basis as we progress here into 2018.
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Operator [28]
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We'll go next to Fotis Giannakoulis with Morgan Stanley.
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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [29]
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I want to ask about the financing of the newbuildings. I'm trying to understand, I was under the impression that 3 of these 7 vessels, they had originally been financed together with the Torben Spirit at around $170 million. Can you give us a little bit more background why this reduction in the amount of the financing? And also what would be the bareboat rate and the debt service of this newbuildings?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [30]
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Fotis, this is Brody. You're correct, the 3 MEGI vessels you're referring to were financed alongside the Torben Spirit with the Chinese lessor sale leaseback financing. And that hasn't changed and those amounts haven't changed. I think the reason you see the reduction on that slide is because we're showing just the undrawn amounts. And what we've done is, of the total 5 MEGI LNG carrier financings that we've completed there, we did draw down on some predelivery financing during the second quarter. So it's reduced the undrawn amount. So nothing has changed in respect to those 5 completed MEGI LNG carrier financings. In terms of the debt service, we've guided in the past that it's about a 5% all-in cost for these sale leaseback financings and leverage of, as you said, roughly $175 million. So it works out to roughly $40,000 a day in total debt service.
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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [31]
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Okay, that's very helpful. And in relation to the refinancing of the existing debt -- the 2018 debt, and I'm asking particularly the bank debt not the unsecured debt, how shall we think the debt service for the refinancings?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [32]
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Yes, on the debt service amounts for those refinancings, we're still in discussions. We've obviously just started discussions on some of them. But it's largely going to be linked to the remaining charters for the Spanish vessels. So those charters they mature in 2022, 2024 and 2029. And so we would expect the tenor and the profile of the loan to match that charter period. On the unchartered ships -- or sorry, the short-term charter ships, we would expect probably about 5- to 7-year repayment profile on the remaining balloons there.
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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [33]
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Okay. That's very helpful. Just to clarify, the Spanish ships, are they all the 4 Spanish ships in the collateral package of this facility?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [34]
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No. There's 2 separate facilities, so the Hispania and Galicia, are financed together, and the Madrid is financed on its own. And then there's a fourth Spanish ship, which is also financed on its own but is not maturing in 2018.
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Operator [35]
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We'll go next to Noah Parquette with JPMorgan.
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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [36]
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I wanted to ask if you can give any update or color on the Yemen LNG deferrals and what you're thinking about for next year if you need to? And how much of a factor is that in the dividend decision?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [37]
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There has not been any progress towards the restarting of the plant, as the conflict in Yemen continues. As described in our previous earnings releases, our joint venture with Marubeni agreed to defer a significant portion of the charter hire for both ships until the end of 2017. We expect the negative impact to TGP's share of the CFVO resulting from the deferral at least in 2017 will approximate that of last year, which is roughly $25 million of CFVO. During this period, however, I would remark that in addition to the subsidy that we do get still or the portion of hire we get still from Yemen, we've been subchartering the vessels. So both the Marib Spirit and the Arwa Spirit have been subchartered. And one is -- has gone on to a longer-term charter, so -- has been fixed to a longer-term charter, I should say. But that's the -- in short, we will probably end up having to [increase] some type of deferral arrangement beyond the end of this year with Yemen.
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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [38]
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Okay, great. And then, just one question on the market. Are you able to give any sort of color on your ships that are loading in Sabine Pass and discharging in the Far East, what they're doing for the second voyage, if they're just backhauling or if there's a backhaul cargo or if they're just ballasting back?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [39]
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Well, you bring up some good news, which is that the ships that we are loading in Sabine Pass, and we have a number of them because not only do we have the Oak Spirit and Creole Spirit on time charter to Cheniere, we have other vessels that are doing a lot of spot marketing for Cheniere. And they are going to the Far East, which some had doubted would happen. And so we've been making long-haul ton miles through the Panama Canal. And typically, they've been ballasting back all the way from the Far East. So it's so far kind of an inefficient project -- process, at least for trading, but a nice story for LNG -- or I should say shipping. So whereas the trade from Australia is very short for the most part, from Australia to the Far East, we're making long-haul ballast back to the United States through Sabine Pass still.
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Operator [40]
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We'll go next to Jerry Zhou with Citi.
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Jerry Zhou, [41]
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A lot of my questions have been answered, but just a quick one, just regarding what you guys are seeing in the market right now? What kind of -- what sort of like loan-to-value ratio are you seeing sort of within the industry regarding your types of vessels or similar types of vessels?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [42]
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This is Brody. In terms of loan-to-value, it largely depends on the contract coverage that you have. So for our newbuilding order book, which is all chartered on long-term contracts, we've been seeing approximately 80% loan-to-value, and then a little bit higher when you start looking at the Asian sale leaseback opportunities.
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Operator [43]
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We'll go next to Randy Giveans with Jefferies.
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Randall Giveans, Jefferies LLC, Research Division - Equity Associate [44]
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Most of my questions have also been asked and answered. Just 2 quick things, looking at Slide 6, it looks like you have $2.6 billion or so in remaining CapEx. $1.1 billion in completely undrawn debt refinancing and then the $1.4 billion in in-process debt refinancing. So should we assume you take on that full, I guess, $2.5 billion-or-so in debt for the remaining $2.6 billion in CapEx?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [45]
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Yes, that's right. And we've essentially paid, I would say, our equity contribution for these newbuilding installments -- or these newbuilding projects already. And so we do expect to finance the vast majority of the remaining CapEx with debt.
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Randall Giveans, Jefferies LLC, Research Division - Equity Associate [46]
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Got it. And then lastly, just for modeling purposes. Any dry docking scheduled for the second half of this year and 2018?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [47]
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Yes, there are some -- if you look in the appendix, the final slide of the presentation, we provided a dry docking schedule that we have planned. So there's a few ships docking. In Q3 specifically, we have the Arctic Spirit. We'll do a dry docking as well as one of our vessels with the -- within the Marubeni joint venture.
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Operator [48]
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And at this time, there are no further questions.
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Scott Gayton, [49]
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Well, sorry about the technical glitch, but thanks again for the call, and we look forward to updating you on all of our activities next quarter. Thanks again. Bye.
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Operator [50]
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This does conclude today's conference. We thank you for your participation.
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