Avance Gas Holding (AVACF) Q4 2016 Results

Christian Andersen – President

A more open FOB/CIF spread differential drives cargo capacity

“…in a market where you have the spread between the FOB prices in U.S. Gulf and the CIF prices in Far East, when the spread is open there would be a lot more activity, and we will see the last few additional cargoes being lifted. This happened in fourth quarter and we saw the activity, as I said towards end of 2016 increase. Of course the spread was opening and people saw the lifting more tones, more cargoes. This continued into 2017 and activity in January was also quite interesting. So, I’m saying that in order to have a full cargo capacity export of U.S. Gulf we are more dependent on the FOB/CIF differential, the spread to be open….So with the FOB/CIF differential wide open and with the volumes being cut down in Middle East there is upside for a higher export from U.S. in 2017 compared to 2016.”

Product market in Conango in Spring

“Last year, 52% of the 21 million tons went from U.S. to Far East. Most of this is using Panama, but we do expect as we come into spring and early summer that we will see more of these cargoes going via Cape. The product market is normally more in Contango when we come to the spring market and the trade is a more interested to use the long route rather than short route to play a bit Contango in the product market.”

Contango in spring leads to a stonger freight market in the summer

“If the contango is very strong this spring and summer, it’s quite likely that we might see a stronger freight market in the summer, but some people are divided, some people believe really that the freight the strongest in the winter and some believe that it’s — as it has been the last couple years with a strong summer market.”

Market outlook past 2017 looks very good

“The good news in this market is of course that they owe in 2017, there’s hardly any ships for order. Right now, there are four ships for order in 2018. So once we get the 2017 order book delivered and absorbed into the market there’s good the outlook for 2018 and 2019….We don’t think there would be a lot of more 2018 deliveries added to the order book, and we don’t really expect to see a lot 2019 orders either. So the outlook past 2017 is very good.”