Avance Gas has completed its successful exit from the gas transportation market, agreeing to sell its remaining fleet of 12 vessels, valued at over $1 billion, to BW LPG. The company, whose major shareholder was well-known shipping magnate John Fredriksen, spoke of the opportunity to capture strong market value, while BW highlighted the opportunities for scale, flexibility and operational influence in what it described as the “fast-growing LPG space”.

Although freight rates are reaching new highs in 2023 and demand for seaborne LNG transportation is strong, Avance had plans to sell its fleet. In the first half of 2024, the company sold four VLGCs, generating a profit of $121 million. This transaction came after the company previously sold the oldest vessels in its fleet. The company reported that today’s deal generates an additional profit of between $310 million and $320 million for a fleet with a book value of approximately $740 million.

The company stressed that it has one of the youngest fleets in the industry. Six of the vessels have already been fitted with exhaust gas scrubbers and several are already able to switch from transporting liquefied gases such as propane and butane to the emerging ammonia transport market. The transport capacity includes four 91,000 cbm VLGCs and eight 83,000 cbm. The vessels were built in 2015 and the newer, largest vessels in 2022 and 2023.

“Avance Gas’ fleet is somewhat under-sized today and therefore we found it more attractive for our shareholders to take advantage of the relatively high used prices and sell the VLGC fleet to BW LPG,” said Oystein Kalleklev, CEO of Avance Gas Holding.

Avance Gas’s origins date back to 2007 when Stolt-Nielsen Gas was formed to capitalise on opportunities in the growing liquefied natural gas transportation market. Avance began trading in 2009 and grew through a number of transactions as well as new builds. They highlighted a recovery in the market in 2019 and said the company was well positioned with a premium fleet operating with low G&A and OPEX costs.

“This fleet expansion comes at an opportune time as new VLGC deliveries are declining and global LPG export volumes continue to grow,” BW said in announcing the acquisition. “This further cements BW LPG’s position as the world’s leading VLGC owner and operator with the largest number of LPG dual-fuel VLGCs.”

The company stresses that the transaction will significantly increase BW LPG’s fleet, increasing the number of owned and operated VLGCs from 41 to 53, of which 22 are LPG dual-fuel vehicles. Avance reports that the handovers will take place between September 15 and December 31, 2024.

Under the terms of the deal, the majority of the consideration will be in the form of shares, making Avance Gas the second largest shareholder in BW LPG. The company will hold 12.77 percent of the company’s shares. Avance will also receive a cash payment of $585.4 million, which will be used to repay existing bank debt and novate two sale-leaseback agreements.

Avance Gas has also ordered a total of four medium-sized gas carriers in 2023 to be built by China’s CIMC. The vessels, scheduled for delivery in 2025 and 2026, are dual-fuel vessels that can use both fuel oil and liquefied natural gas. The new vessels will have a capacity of 40,000 cubic meters and are considered potentially attractive for the ammonia transport market.