Good day, and welcome to the Nakilat first quarter 2022 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ahmed Hazem. Please go ahead.
Thank you, Maureen. Good morning, ladies and gentlemen. This is Ahmed Hazem from EFG Hermes Research. Hope everyone is well and safe. We are pleased to welcome you all today to Nakilat's first quarter 2022 results conference call. With us on the line today is Mr. Hani Abuaker, CFO of Nakilat, Mr. Fotios Zeritis, Head of Investor Relations, and Mr. Waheed Siddiqi, Financial Planning and Reporting Manager. I'd first like to congratulate Nakilat on a solid set of results. Without further delay, I would like to hand over the call to Fotios. Please go ahead.
Good afternoon, everyone, and welcome to Nakilat's first quarter of 2022 results conference call. For your convenience, the transcript of this call and presentation will be available on the company's investor relations section of our website. As a reminder, this conference call is being recorded and media or press is not allowed to attend this IR conference call. Many of our remarks contain forward-looking statements and for factors that cause actual results to differ materially from these forward-looking statements, please refer to slide 2 of the investor relations presentation. In addition, some of our remarks contain non-IFRS financial measures. A reconciliation of this is included in the note of this presentation. Waheed Siddiqi, Nakilat's Financial Planning and Reporting Manager, will begin today's call with a brief discussion of our group's earnings results. After, I will give you an overview of LNG shipping market.
Finally, Nakilat CFO, Hani Abuaker, will walk you through the company's business outlook. We will be happy to address your questions. Now I would like to hand it over to Mr. Waheed Siddiqi, Nakilat's Financial Planning and Reporting Manager. Waheed, please go ahead.
Thank you, Fotios. Appreciate it. Ramadan Kareem to everyone, and welcome to Nakilat's first quarter earnings results conference call. Our CFO, Hani Abuaker, Head of Investor Relations, Fotios, and I will together be your guides to today's presentation. First off, I hope you and your families are safe and are following the required precautionary measures against the COVID-19 pandemic. Also, my thoughts go out to everyone impacted by the war in Eastern Europe. These thoughts and sincere gratitude also go out to our seafarers and shore-based staff for their dedication and continued efforts to bring clean energy to the world without delay. They are truly an inspiration, and we pray the world returns to peace very soon.
Moving to our Q1 2022 achievements, Nakilat successfully managed to receive delivery of its fourth and final new build LNG vessel during the month of January 2022 on time and on budget. This is an indication of Nakilat's excellent technical and operating management, as well as our seafarers' commitment to continued growth and progress. Turning to slide 7 of the presentation, I'm pleased to announce Nakilat reported a profit of QAR 382 million or 0.07 per share. This represents an increase of 19.3% year-over-year compared to the same quarter in 2021. Nakilat's continued efforts to optimize its structure and generate additional savings have led to a reduction in G&A expenses of 4.5% and finance charges of 1.5% versus the same period last year.
Nakilat has healthy and stable operational cash flows as evidenced by the Q1 EBITDA, which stands at QAR 859 million, an increase by 6.9% year-on-year, with a current ratio of 0.96. With a resilient business model and focus on growth, Nakilat is well positioned to continue creating added value for its shareholders. This is further evidenced by a 14.2% return on equity. I will now hand it back to Fotios who will provide you with an overview of the LNG shipping market. Go ahead, Fotios. Thank you.
Thank you so much, Waheed. Hello, everyone. I would like to give you now a brief update for the LNG shipping market. When looking into the future demand of LNG shipping, it is almost impossible not to recognize that the current war has influenced Europe's energy approach to significantly increase the portion of LNG in their gas consumption profile at the expense of pipeline gas. With additional LNG regasification capacity being announced by various European countries, there is a significant upside to European LNG import demand. Under normal conditions, increased European Union LNG imports may lead to an overall decrease in the shipping demand due to the shorter sailing distance ton-miles. However, market expects that given the large amount of LNG is required to cover the European pipeline gas will result in a positive LNG shipping market in the medium and long term.
Now please turn to slide 12 of our presentation. According to Clarksons, the average spot charter rates in the first quarter of 2022 for modern two-stroke tankers is around $57,000 per day. For DFDE, it is $35,000 per day. For the steam vessel, $22,000 per day. Clarksons assessed the average 2022 1-year LNG shipping charter rates at $102,000 per day for ME-GI X-DFs and $84,000 per day for DFDE and $55,000 per day for steams, which is a very helpful benchmark when an owner discusses term opportunities.
At page 12 of our presentation, you can see that the global LNG fleet has 646 vessels in operation and another 184 conventional LNG vessels on the order book until 2025 as per Clarksons. This implies an increase of 28% of the total LNG fleet in terms of number of conventional LNG vessels as of March 2022. In general, the long-term market for LNG shipping remains healthy and looking favorable, driven by increased demand of LNG, which will tie up shipping capacity and increasing shipping requirements. Positive momentum for LNG is driven by the need for energy security and the diversification of the source of supply, as well as the role of LNG in the global transition into a lower carbon future, which LNG plays integral role in achieving these objectives.
Now, I would like to hand it over to Mr. Hani Abuaker to give you an insight on the Nakilat business outlook. Hani, please go ahead.
Thank you, Fotios. Hello, everyone. I would like first to start with highlighting that Nakilat business model is very strong and resilient. Our LNG ships acts as a floating pipeline which offer flexibilities as the world dynamic has changed recently. The unfortunate war in Eastern Europe does not impact Nakilat business model and in fact strengthen our resolve to deliver clean energy to the world. Despite of global inflation and expected rise in interest rate, Nakilat majority of its debt is hedged to minimize such exposure and also we are on an annual basis deleveraging our balance sheet. That will also help us to mitigate any sort of impact from a rise in the interest rate. In addition, most of our contract or almost all of them has an escalation factor towards the OpEx in line with an inflation index.
Now I will start to discuss the outlook for 2022. We continue to expect a successful year for Nakilat due to the management effort to maximize the utilization of our entire fleet and to optimize our expenses. In addition, we start to see a more positive, sustainable momentum that is coming from the shipyard groups, so it has pivoted towards to be providing a positive contribution to our results compared to the previous years. It goes without saying that Nakilat is continuously screening for global LNG shipping opportunity to identify an attractive business opportunities which continue to provide a sustainable return to our shareholders. With that, I will ask the operator to open the floor for questions, and we can provide, hopefully, the answers. Thank you. Please go ahead.
Thank you. If you would like to ask a question at this time, please press the star followed by the digit one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find your question has already been answered, you can remove yourself from the queue by pressing star two. Again, as a reminder, please press star one to ask a question. We will now take our first question from Santosh Gupta from Drewry Maritime Financial Research.
Thank you, and hello to Nakilat team. I have two questions. The first one is, can you please comment on the increase in loans to joint venture, which I think have increased by QAR 277.9 million compared to December 31? This was my first question. The second question is related to the basically significant activity in FSRU market that we are seeing. I remember that Nakilat and Karpowership they have announced some collaboration in this regard. Can you please comment if you you are seeing some increased inquiries or any other things in this market? These are two questions that I have and grateful if you can please answer. Thank you.
I can take the FSRU question, and I will let the second question to Waheed and Hani to elaborate. Regarding your second question, Santosh, regarding FSRU, as you understand, it is a very favorable environment about FSRU, with the current war, with additional regasification capacity being announced by many countries in Europe, there is a significant upside for European LNG import demand. This is definitely more interest in the FSRU space and in particular around the Europe area in the following years or quarters. The FSRU market is very interesting segment, and we believe that the market, as the market expect, is that you will see a boost on the FSRU market, either with new orders of FSRU, either conversions of LNG ships.
I hope I answered your question, and I let the second question to be answered by Waheed Siddiqi. Sure. Sure. Thank you.
Thanks, Fotios. Regarding your first question on the loans to JVs, this is mainly due to the additional vessel, the final vessel for Global Shipping, which we received in January 2022. Once we secure the external financing, this balance will reduce.
Yeah, sure. That's fine.
Thank you. We will now move on to our next question from Nafez Al Abbas from Ajeej Capital. Please go ahead.
Well, thank you, gentlemen, very much for the call and congratulations on the results again. My first question is on the income from joint ventures. If you can just give us a little bit more clarity on the strong performance during the quarter and should we expect the same to remain for the rest of the year? I know it's difficult to give guidance, but just to get your view on that, specifically if the shipyard also is doing well or not. My second question will be on the QatarEnergy vessels order. I know you don't like to comment on it, but we just wanted to get your view on the recent announcement regarding them awarding a series of time charters to Mitsui O.S.K. Lines for four LNG ships.
Is there any comments that you have on that side, please? Thank you.
I can take the first one.
Waheed, I think you can take the first question.
Yeah.
Exactly. Yeah. I will take the second one.
I'll go with the first question about the JV performance. Thanks for the question. Essentially, we've had strong performance across our JV line, main factors being the additional vessels we have for global shipping vessels compared to the prior period, 2021. Our JV partners all have strong performances. We have high strong short-term charter rates, which we were able to secure. Of course, the shipyards, as you've mentioned, also have seen an uptick in the performance. Specifically, you've mentioned the shipyards, which you know, they have faced a couple of tough years because of the COVID-19 pandemic. We realized and we are cognizant of the fact that this is a very strategic position for Nakilat.
We have been prudent in provisioning sufficient resources and time to accommodate the plan. We see now that they're bearing fruit, and we've seen an uptick in performance of the shipyards. Hope that answers the first question, and I will let Fotios take care of the second one.
Just if you, if you allow me just one comment. I mean, if we understand there are, like, around 37 vessels under the joint ventures, right? How much of these would be running on short-term contracts at the moment? Just a rough estimate is fine.
Thank you for the clarification. Okay. We don't disclose a specific number, but you can understand that there's a very minor number, a very small number. It can be approximately, let's say, five vessels on short-term charter. We don't trade on the spot market. Everything is on short-term market, could be between one to three years. You have to understand that sometimes also these contracts have some optionalities, so we don't always exercise. For your information, let's say approximately five to six vessels could be approximately.
Great. Thank you very much for that.
I can take your second question. As it was announced, QatarEnergy announced the first batch of the time charter parties under QatarEnergy's massive LNG shipping program, and they will continue to allocate many more such contracts in the near future. Nakilat has always an open communication with its largest charterer, and we are always happy to extend our support and expertise wherever we are requested by either QatarEnergy or Qatar Gas. As we have mentioned earlier in the previous conference call, Nakilat will not comment on the commercial or technical details related to North Field LNG project that is owned exclusively by QatarEnergy and Qatar Gas.
I see. Thank you very much for that clarification.
Ladies and gentlemen, as a reminder, please press star one if you would like to ask a question. We have no further questions at this time.
Okay. Thank you, Maureen. If there are no further questions, Fotios, would you like to give some closing remarks for the call?
I will let the CFO first, and after I will come take it. Hani?
Yeah. I will thank you all and for taking the time out today to participate in our conference call. Once again we will always take these comments into consideration, and hopefully, we can provide further clarity and disclosure to make sure that all of you guys are well informed about your investment decisions for Nakilat. I, as I said before, 2022 should be another good successful year for the company, and that's due to our business model and due to the fact that we are excelling in almost in every single segment, including our shipyards, who is becoming a contributor rather than a potential burden that used to be in the previous years. I will take it now to Fotios to finalize. Thanks.
Thank you, Hani, and thank all of you for participating in this call. Always, we appreciate your participation and feedback. Always, we are available to answer any question that you need in the future. We definitely appreciate your contribution to Nakilat calls always. Thank you so much. Have a great day.
That will conclude today's conference call. Thank you for your participation. You may now disconnect.