Q3 2017 Teekay LNG Partners LP Earnings Call
Nov 09, 2017 AM EST
TGP - Teekay LNG Partners LP
Q3 2017 Teekay LNG Partners LP Earnings Call
Nov 09, 2017 / 04:00PM GMT
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Corporate Participants
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* Brody Speers
Teekay LNG Partners L.P. - CFO of Teekkay GP LLC
* Emily Yee
* Mark J. Kremin
Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc
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Conference Call Participants
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* Ben Brownlow
* 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
* 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 the Teekay LNG Partners Third Quarter 2017 Earnings Results Conference Call. (Operator Instructions) And 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, sir.
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Emily Yee, [2]
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Before Mark to begin, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the third 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 third 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, Emily. Good morning everyone and thank you for joining us on the Third Quarter of 2017 Investor Conference 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 third quarter of 2017, the partnership generated distributable cash flow or DCF of $40 million and cash flow from vessel operations or CFVO of $107 million. We continue to generate stable cash flows that were in line with our expectations. However, the partnership's results for the quarter were again impacted by collection issues related to our 6 LPG carriers chartered to I.M. Skaugen. We are actively pursuing alternatives for these vessels to improve their earnings potential, including potentially bringing the commercial management of the vessels in-house to Teekay and focusing our efforts on capitalizing on small scale LNG opportunities that exist in the market.
During the quarter the partnership generated DCF per limited common unit of $0.50 per unit, resulting in a strong distribution coverage ratio of 3.5x. I'm pleased to report that in the October and November, the partnership took delivery of 3 new build LNG carriers, all of which immediately commenced charter contracts with Shell, ranging between 6 and 20 years. This included 2 wholly owned MEGI LNG carriers and a 30% owned TFDE LNG carrier, which I will touch on in more detail on the next slide.
We continue to execute on financing our new build projects and have recently completed $327 million in new debt financings related to a floating storage unit or FSU for the Bahrain regasification project and 1 MEGI LNG Carrier new built for BP. I will touch on these financings in more detail later in the presentation, and I would also like to refer you to our appendix where we have provided full details on the status of our newbuilding financings and our 2018 debt maturities.
Lastly, we have once again demonstrated access to capital markets and further strengthened our balance sheets through our recent $170 million preferred equity offering completed in October 2017, including $20 million sold pursuant to the exercise of the underwriters over allotment option.
Turning to Slide 4. I will highlight the partnership's recent LNG vessel deliveries, which occurred in October and November and immediately commenced charter contracts with Shell. Two of the vessels, the wholly owned Macoma and Murex commenced 6 year and 7-year firm period plus option period charter contracts upon delivery.
The remaining vessel, the 30% owned Pan Asia commenced its 20-year charter contract with Shell upon delivery. We expect these vessels to positively contribute to the partnership's cash flows, starting in the fourth quarter of 2017. The 2 wholly MEGI LNG carriers will trade as part of Shell's Global shipping portfolio while the Pan Asia will service the Queensland Curtis LNG project in Australia.
Turning to Slide 5. We have provided an update on the Yamal LNG project. As a reminder, the partnership owns a 50% interest in ARC7 LNG carriers and wholly owns one conventional MEGI LNG carrier, all chartered to the Yamal LNG project under long-term charters. The Yamal LNG plant continues to move ahead according to schedule and the commissioning for the first train is now underway. The project sponsors have announced they expect to lift the first LNG cargo on the Sovcomflot-owned Christophe de Margerie this month, and remain ahead of schedule for bringing online to 2nd and 3rd trains, which will result in a total production of 16.5 million tonnes per annum.
Teekay LNG's first ARC7 vessel is scheduled to deliver in January 2018 and has now successfully completed sea trials and gas trials. Our 2nd ARC7 vessel scheduled to deliver in November 2018 has been launched, and together, the two were officially named last month in Korea. Overall, we're pleased with how the construction of these specialized vessels is going and how the overall project is coming together.
Lastly on the financing side, together with our joint venture partner China LNG Shipping or CLNG, we continue to make progress on the debt financing of our 6 ARC7 vessels and are nearing completion of this facility.
Turning to Slide 6, we look at the developments in the LNG shipping market. After growing by by 7.5% in 2016, global LNG export growth has been even stronger this year, increasing by approximately 11% in the first 9 months of 2017, compared to the same time last year. The increase in global LNG exports continues to be driven by new export projects in the United States and Australia. In total, the increase in LNG exports this year will be the second largest annual growth on record in the LNG industry.
Furthermore, we expect that export growth will remain strong through year-end and into 2018. In total, more than 30 million tonnes per annum of new LNG export capacity is scheduled to come online from the fourth quarter of 2017 through the end of 2018. This includes the recent startup of the Wheatstone project in Australia and the 4th train at the Sabine Pass project in the United States. These projects will soon be joined by the start of exports from Cove Point in the U.S. and Yamal LNG in Northern Russia.
Turning our attention to demand, approximately 80% of the net increase in LNG supply this year has been consumed in Asia. This robust growth in Asian LNG exports demonstrates that global LNG demand is keeping pace with supply. Import growth in China has been particularly strong with Chinese LNG imports increasing by approximately 40% per year in both 2016 and 2017. China's import growth is expected to continue and the EIA projects that China will surpass South Korea next year to become the world's second largest LNG importer.
Import growth in other emerging LNG markets in Asia, such as Pakistan and Thailand has also been robust. The combination of an increase in global LNG exports and some arbitrage opportunities due to higher LNG prices, particularly in Asia due to gas shortages has supported short-term LNG shipping rates. As of November brokers were reporting short-term charter rates, which were at their highest levels in almost 3 years. We are encouraged by these recent trends and see it as another sign of an improving LNG market that will benefit Teekay LNG in both the short and medium- terms.
Turning to Slide 7, we take a look at the medium-term market fundamentals. We continue to expect that annual LNG trade will increase faster than fleet supply from 2017 onwards. Orders for newbuild conventional LNG carriers remain low with only 13 firm newbuild orders being placed since the start of 2016.
With LNG shipyards now booked through 2019, this provides good visibility of declining LNG fleet growth in the medium term. In contrast, we expect global LNG exports will continue to increase strongly. 10 new LNG export projects are currently in construction, and are scheduled to start or have recently started between the fourth quarter of 2017 and the end of 2020. In total, we expect global LNG exports will increase more than 30% above 2016 levels by 2020.
As a result, we expect that higher fleet utilization will drive an ongoing recovery in LNG shipping rates. In summary, we are encouraged by the recent uptick in LNG shipping rates as new export capacity comes online. In the medium term, we continue to expect that LNG trade will increase faster than fleet supply, leading to an ongoing improvement in the LNG shipping market and LNG vessel earnings.
Turning to Slide 8, we are providing an overview of the partnerships industry-leading portfolio of new build LNG vessels, all of which will commence charterer contracts, averaging 18 years in duration upon their delivery between now and 2020. Including the first 3 of these vessels, which recently delivered and commenced their charterer contracts with Shell, the partnership has a total of 11 LNG carriers delivering by the end of 2018 and 18 by 2020, plus a 30% interest in the Bahrain regasification terminal.
With our recent deliveries, the partnership has now commenced a period of high growth as we take delivery of 11 LNG vessels by November 2018, and expect these vessels to contribute approximately $160 million in annual run rate CFPO. Adding to this, our expected vessel deliveries in 2019 and 2020, we expect our entire committed order book to contribute approximately $250 million an annual run rate CFPO growth.
As illustrated on the right hand of the slide, we continue to progress the debt financings for our new build vessels and have recently completed $327 million in new financings to fund the FSU for the Bahrain regasification facility, and one MEGI LNG carrier chartered to BP.
Again, full details of the status of our newbuild financings, as well as an update on our 2018 maturities can be found in the appendix to this presentation.
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 new build vessels, while obtaining sufficient comfort on refinancing our 2018 bond maturities. We expect to provide more guidance on distributions around the second half of 2018, and in the meantime, focus on completing our financings and executing on our new building growth projects.
In summary, we continue to progress our new build financings and are beginning to transition from project execution to operations on our committed new build vessels. We believe Teekay LNG's near- term visible cash flow growth and portfolio of long-term charterer contracts places the partnership in a market- leading position in the LNG shipping sector. Thank you all 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 ahead with our first question from Michael Webber of Wells Fargo. Please go ahead.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [2]
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Just to start off on rates, just considering how topical it is, I know you don't have a ton of exposure to the market, but certainly seems like we're firming at a level that we haven't seen in 3 or 4 years. And I'm just curious when you think about the next year to 18 months, do you think this level of tightness or something kind of call it at or around industry-wide breakeven, if you kind of put that at 50K, do you think that's sustainable from here on out, or do you think we're in a scenario where it's kind of a similar pattern to last year, maybe a bit more amplified like in a sustained multi-year recovery, and spot rates would be more of a Q4 2018 event? And I realize again you don't have time to leverage to it, but it's a liquid proxy for residual value risk, a rollover risk, really, so hence the interest?
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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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As you say, we don't have a lot of exposure, but we have enough to, I think, understand what's happening in the market. So with our joint venture, particularly with Marubeni in a 50:50, we call Mom. We do have exposure through those 4 ships. And I must say for the first time in -- they're all -- our entire fleet, in fact, is fully utilized at this point. And we're definitely seeing some good things. For instance, for the first time in a very long time, our TCEs have actually been exceeding our charter rates, meaning we're actually, the utilization, we're moving from one charter faster than we expect to another faster than we expected. So things are good as you know. The brokers are reporting rates in 60s or so.
And, to your question, whether that's going to continue and whether we're going to see a real uptick in Q4, now or later. At this point, we don't see any reason for the rates really to soften. I think we've been a little bit more conservative, most in our forecast and saying, how fast we can arise. But we've always been saying that they will continuously rise through 2018 or so, and as the market rebounces. So I don't think, right now, we're at the point of long-term charter rate bounce, but I can see us getting near in certainly the first half of this year, so when I mean at 2018, and hopefully, we'll have indeed good rates in 2018. But right now, things are certainly much better than they were even a quarter ago.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [4]
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Just in terms of -- I guess in terms of your balance sheet and kind of juggling, the refinancing that you guys are looking to finish off and kind of certainly a pretty conservative posture when it comes to redistributing cash flow. I'm just curious how you balance that with additional growth? It certainly seems like the tender market is picking up, and if you're looking to address -- your cash commitments when it comes with distribution in the back half of 2018, which again, you've been pointing to for a while, I would certainly expect the tender environment to be firm through that period to the point where you're probably looking at, redeploying or deploying new capital on new-term business, hopefully by some point of the next year. I'm just curious, when you think about that target of the back half of next year to address this, is that inclusive of the idea of actually spending new money on new period tonnage?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [5]
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Hi, Mike. Yeah, I think your question -- we've certainly been seeing more activity in the tender market. And as we said in past quarters, we kind of selectively looking at participating in some of that. So, when we look at our balance sheet and the actions we're taking there, we're certainly considering some possible participation in future tenders. And some of the ways to finance those, obviously, we have a strong liquidity position now. We've shown access to the preferred capital, preferred equity market, and also through preferential financing terms from yards that are available. So, we think it's manageable to continue on with our plan and also selectively participate in future tenders.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [6]
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Right. To do those, those are not mutually exclusive. So around that, Brody, I've one more, and I'll turn it over. Just thinking about hurdles for -- you guys getting comfortable from a cash perspective, you guys have been laying out your commitments and your refinancing targets for a couple quarters now. And I think it sounds like 11, which is helpful. But I'm just curious, on the previous slide, your existing financing and what's been drawn, and what hasn't been drawn, how much of that remaining undrawn capacity can only be drawn upon delivery? And I guess the right -- because what I'm getting at is, in terms of maybe over- equitizing assets up to delivery, kind of upon the broader release, the financing. Is there a bigger cash commitment there? Then what is otherwise be implied by simply looking at what you have financed? I guess a bigger short-term cash commitment.
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [7]
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No, in terms of your question, no, it's pretty much all of the undrawn financings we show they are available to be drawn for yard instalments as well as delivery.
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Michael Webber, Wells Fargo Securities, LLC, Research Division - Director & Senior Equity Analyst [8]
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Which were all in lockstep?
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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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Yeah.
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Operator [10]
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Your next question will come from the line of Spiro Dounis of the UBS Securities. Please go ahead.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [11]
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I want to start off on deleveraging, just trying to get a sense if there is a specific goal or strategy at this point to delever the balance sheet and it sounds like some of the preferred proceeds, maybe reused to help in that process. So I guess, I'm just trying to get a sense that is there a plan to do more of that or is the plan really to just delever over time as the cash flows ramp up?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [12]
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Yeah, basically the recent preferred equity was a big step towards delevering the balance sheet. And directionally speaking, that is -- our intent is to delever over the next few years. And that's mainly driven by -- we have a very large order book and that puts some leverage stress on the balance sheet. But what we see is, as these vessels start to delivering cash flow, there will be a significant natural delevering process that will occur between kind of now and 2020 when all the ships hit the water. So, we see our leverage kind of naturally declining over time. And the other factor is on our existing vessels, there is a few cash flow drag that we've mentioned in terms of Skaugen and we're also seeing some increase in the short-term LNG market. And so those -- as those things normalize over the next year, we think that also help the natural delevering process between now and 2020.
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Spiro M. Dounis, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Shipping [13]
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And then, just follow up one of my questions around the tenders. I guess we've seen an overall move towards more flexibility in the LNG space and also shorter terms. I'm just wondering sort of what you see in or looking to participate in, are you seeing on the LNG tender side just more flexibility being asked from the counter-party, or any sort of shortening in the tender that you've normally seen?
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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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We are, Spiro. We are seeing a fair amount of 1, 2, 3-year types of tenders right now. This is actually different from even earlier in the year where we've just seen voyage charters. So things have picked up, but we do see a lot of relatively short-term time charters. Some of these we've actually been passing on because they have forward starts and people are trying to understand the market. And where it's going to be in a forward place, just as Mike mentioned, where is it going to be in Q4 2018? But there's certainly a little bit more optionality the charters are seeking now. And whether or not folks give those, it's still to be determined. There is flexibility that's being desired by charterers more than we've seen previously. And when I say previously, I mean a few years ago. As I said, we've improved from voyage charters to term charters. But now they have a little bit more optionality than they used to.
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Operator [15]
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Your next question will come from the line of Fotis Giannakoulis of Morgan Stanley. Please go ahead.
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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [16]
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I would like to ask your estimate about the upcoming refinancings of the vessels in 2018. Obviously, the Spanish vessels, they have very long-term contracts. But would you be able to give us an estimate of how much of this amount can be refinanced before all of it can be refinanced, and also expand on the older vessels, the Arctic and the Polar? And comment about the Skaugen vessels, if these vessels could be potentially candidates for selling or scrapping when that comes due?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [17]
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In terms of our refinancings, we have been progressing those in the background over the last few months or so. And one thing to point out, just in terms of our 2017 maturities is, we're fully committed now on our unsecured corporate revolver that matures this month. So we expect to complete that refinancing in the next few days. In terms of 2018 refinancings, we've been working on the first one as the 2 Spanish LNG carriers. And that one has progressed quite a bit over the last quarter. So we do expect to complete that refinancing later this year or early in 2018. And that when would be rolled over at its balloon amount. The other long-term Spanish LNG carrier, we've had some initial discussions on, but we would expect to be able to provide a better update next quarter on that one.
And then in terms of Arctic, Polar and Skaugen ships; the Arctic, Polar loan matures in April next year. And we started having discussions on that. And obviously, it's partially linked to the contract status of those ships. But at this stage, we do expect to be able to roll over the majority of the balloon amount, but we're still in early discussions on that. And then, in terms of the Skaugen vessels those mature later in 2018 in September, that will obviously be dependent again on kind of the contract structure that's in place for those. As Mark mentioned in the prepared remarks, we're currently looking at alternatives for those ships.
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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [18]
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Can you also comment about the changes in the market, and especially the increase in oil price? If this has changed the macro environment for LNG producers and especially for the US producers. If you think that with oil close to -- brand oil close to $65, we might see more upticks and that would lead to additional long-term contracts and demand for new buildings.
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [19]
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Hi, Fotis. It's Mark. Just a couple more questions on Skaugen or comments I should say before I get into increasing question. It was certainly not looking to sell or scrap the ships at this point. They have an average age of under 10 years at this point. And we are at a low part of the cycle, but we still have optimism and maybe even bullishness for the market improving, not just for the ethylene that these ships are capable of, but also two of the ships are small scale LNG capable.
And so, what we've been seeing, in general, in the market is that whereas used to be non-OECD countries would export to OECD countries. That's actually reversed. And we have the small Bangladesh as in the islands and the other smaller importers of the world that could be very much users of small-scale LNG in the future. So we think the ships have a good future, it's just the tight spot for the moment, and we have no intention to sell or scrap the ships.
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Fotis Giannakoulis, Morgan Stanley, Research Division - VP, Research [20]
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That's very helpful. I didn't imply that these vessels so young and would be candidates for scrapping. That was my mistake.
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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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That's no problem. So on to your question about oil pricing, things are do seem to be going lockstep to some extent in the good way. There have been, as you know, very few FIDs on LNG since 2015 or so. We've seen any -- the additional tanker train, but I do think that it gives a lot of -- I'll use this term green shoots for new FIDs being taken in LNG next year, whether that's Golden Pass or Mozambique Anadarko or additional out of Qatar P&G. I would not tell an area, and there is a number of, I'm not sure exactly what's going to happen, but yes, we do think that the additional demand that we're seeing from China in particular in the Asia and match with the oil prices should prompt more FIDs next year than certainly we've had in previous months.
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Operator [22]
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Your next question will come from the line of Espen Landmark from Fearnley.
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Espen Landmark Fjermestad, Fearnley Securities AS, Research Division - Equity Analyst [23]
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I wanted to ask about the, kind of the cash flow potential in the JVs as vessels are delivered. So I mean not the EBITDA or the CFVO, but the cash flow after financing because it's a bit trick for us to judge, you need to make certain assumptions with regards to interest costs and amor. So I mean, if I were to start with the cash flow statement, you have equity income of $22 million year-to-date and if I were to add the dividends, it gives me around about $50 million. Is that kind of a fair statement for the actual cash flow from the JVs this year? And if I were to add the vessels coming next year and maybe also the third ones out of Yemen, what could that number look like for next year, you think?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [24]
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Yes, in terms of the cash flows from our JVs, we typically have a policy in agreement with all the partners that we'll distribute any available cash that we can and that's how we technically do. There are obviously some timing differences, so just looking at one particular quarter or even a few quarters in a row, it's hard to kind of see because some of the cash flows be lumped more into one quarter and there will be a quarter without any, for example.
So there are some timing considerations, but overall the interest cost for your modeling purposes, I guess are in line with what we typically see in about 5% all in on the debt and going forward, obviously, we're expecting some significant growth to our distributions coming from our joint venture partners as the Bahrain regasification project comes online, as all of our Shell long-term 20-year charter start as well as the Yamal LNG project, which is 50% owned and recorded on our balance sheet.
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Espen Landmark Fjermestad, Fearnley Securities AS, Research Division - Equity Analyst [25]
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And just to dig a bit more into it, I mean if I were to judge on the fully delivered basis, you guys maybe have $800 million of CFVO and maybe $300 million plus of that will be in the JVs, but it's a bit hard for us to really judge how much of that can actually be distributed up into TGP?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [26]
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Yes, I think you just have to take, you're right, roughly 30%, 40% of that number are in the JVs, and that those JVs typically have debt profiles of 20 years, and I've mentioned the interest costs. So, you should be able to back into kind of the net amount coming out.
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Espen Landmark Fjermestad, Fearnley Securities AS, Research Division - Equity Analyst [27]
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Do you foresee any capital costs in the JVs, I guess beyond the scale. I know there was [refi] earlier this year that actually released some cash?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [28]
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Yes, in terms of capital cost for injections into the JVs, for existing projects, no, we don't foresee any. We did have one in our Marubeni joint venture earlier in the year as we did that refinancing. But looking forward everything is appropriately levered, and we don't expect anything.
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Operator [29]
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We'll take our next question from Jerry Zhou of Citi.
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Jerry Zhou, [30]
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Most of my question's have been answered, but I just had 2 other quick ones. I think if we kind of go back to the sort of the big picture about the growing demand, I think specifically out of China. Have you guys sort of seen a change or tightening of fundamental shift in the market from the sort of the Chinese buyers and how sustainable do you guys think that is moving forward?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [31]
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There's been a big shift, obviously I think year-to-date. China is up 45%, we're delivering our a fair amount of cargo ourselves to there, both conventionally and through the sub charter, we have, Teekay has 2 ships doing exclusive China trades right now on the smaller Arctic Spirit, and the Polar Spirit. So yes, the short answer is China has been a factor and will continue to be.
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Jerry Zhou, [32]
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And then the second question, I just, I think if you turn to Slide 10, just any more color around sort of Yamal LNG, ARC7 in processing that I know you guys commented on that in the past, still sort of ongoing. Is there any sort of update on your end in terms of how discussions are going?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [33]
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Yes, in terms of our newbuilding financing, so we announced the $327 million completion for the Bahrain FSU and BP MEGI LNG carrier, so we're happy with that closing. In terms of the Yamal ships, our focus right now is on the ARC7, so obviously because our first ship deliveries in January of next year. And we've made significant progress on that financing over the last quarter and we're getting very close, it's near completion and we expected to be completed later this year or at the latest by January of next year.
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Operator [34]
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Your next question will come from the line of Ben Brownlow of Raymond James.
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Ben Brownlow, [35]
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Thanks for taking the question, you answered part of my question earlier on, but the 6 LPG carriers, so you had some preliminary comments that you touched on the small scale employment opportunity and you alluded to taking the commercial management in-house. Could you just expand on that change in approach to the market and kind of the timing, is it largely an opportunity for an LNG conversion or is it just better capitalizing on the LPG market?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [36]
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We actually had 7 ships, 6 are currently [on bearable], but one is already in a pool. I think we haven't made the decision yet, but obviously with the lack of revenues, we've been receiving from the Norgas pool, something we have to consider. I think it's something we have to probably consider in the relatively near-term. In terms of -- I do think if we ultimately -- we do have a good platform for small scale LNG and we hopefully can capitalize on that. I can't give you too many comments, but it is -- I think it's probably a Q4 event that we need to take a very serious look at it, about how we manage the ships going forward.
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Operator [37]
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Your next question will come from the line of Randy Giveans from Jefferies.
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Randall Giveans, Jefferies LLC, Research Division - Equity Associate [38]
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Most of my questions have been already answered as well, just looking at the preferred offering, just kind of getting some color your mindset around issuing that as opposed to issuing common units?
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Brody Speers, Teekay LNG Partners L.P. - CFO of Teekkay GP LLC [39]
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The preferred market is one that we've accessed in the past as well back in Q4 2016 and the market that we've continued to follow. And our recent issuance primarily was to delever and strengthen the balance sheet, but we did like the terms in the market at the time we thought it was competitively priced permanent capital. So in terms of comparing that to common, this the preferred offering was in the long-term, the more efficient cost of capital for the company.
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Randall Giveans, Jefferies LLC, Research Division - Equity Associate [40]
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Okay and then I guess lastly, any updated guidance on distribution growth or ramping in the next 12 to 24 months?
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [41]
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No, we don't have anything to add to our narratives. We'll be unlikely to do anything in the first half 2018, for the reasons we stated in the narrative.
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Operator [42]
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And there are no further questions at this time, Mr. Kremin, I'd like to hand it back over to you for your closing remarks.
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Mark J. Kremin, Teekay LNG Partners L.P. - CEO of Teekkay Gp Llc and President of Teekkay Gp Llc [43]
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Before we say goodbye, we will recap a few points from our call today. First, we are a leading owner and operator of LNG carriers with a total of 50 LNG vessels, which includes our 15 LNG carriers, currently under construction. Second, our large and diversed portfolio of long-term LNG charters, totals over $11 billion of forward revenues, and has a weighted average remaining duration of 13 years. Third, LNG shipping rates are well on the road to recovery, which is good for the overall LNG shipping market and will lead to charters fixing vessels for term charters. And finally, the partnership is focused on increasing distributions to unitholders at the appropriate time in a sustainable manner. And as we said we'll provide more guidance on that in the second half of 2018. With that said, we thank everyone for the support and we wish you a pleasant goodbye. Thanks.
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Operator [44]
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And this concludes today's call. Thank you for your participation. You may now disconnect your lines and have a wonderful day.
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