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AVANCE GAS Annual report 2023

Annual report 2023

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AVANCE GAS Annual report 2023

CONTENTS

3 Key Operational and Financial Highlights

10 History & Fleet

14 Presentation of the Board of Directors

16 Board of Director’s Report

26 Responsibility Statement

27 Consolidated Financial Statements

63 Statement of Corporate Governance

71 Auditor’s Report

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AVANCE GAS Annual report 2023

Key Operational and Financial

Highlights

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AVANCE GAS Annual report 2023

$ pr. ton

Freight Rates 2023

Week number

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AVANCE GAS Annual report 2023

KEY FINANCIAL HIGHLIGHTS

TCE/day 1) (in millions)

$57,186

Available liquidity

(in millions)

$131.5

Ships

14

NB Dual-fuel

6

Calendar days

4,922

Operating days

4,787

OPEX/day

$8,187

A&G/day

$1,402

1) Refer to Note 10 of the financial statements for definitions and reconciliation of Alternative Performance Measures (APMs)

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AVANCE GAS Annual report 2023

In 2023, Avance Gas (the “Company”) reported a net profit of $163.6 million compared to a net profit of $89.0 million in 2022. Basic and diluted earnings per share was $2.14 and $2.12 in 2023, a significant increase compared to $1.16 in 2022.

Operating expenses in 2023 were $40.3 million down from $40.7 million in 2022 equalling an average daily operating expense of $8,187 for 2023, compared to $8,403 in 2022. The decrease is explained by delivery of newbuildings requiring less maintenance partly replacing the three 2008-9 vessels sold in 2022.

The year 2023 was the second-highest full year results in the history for Avance Gas recording a net profit of $164 million or $2.14 in earnings per share. A strong freight market was the main driver for our results where we achieved an average Time Charter Equivalent (TCE) rate per day of $57,186 for the full year. The Return on Equity was thus 27% measured against average book equity. The strong balance sheet and healthy cash position combined with a strong commercial market, allowed us to return value back to our shareholders where we distributed $2.15 per share or $164.7 million in total dividend for the full year 2023 (101% of net profit). The following sections below are describing further details.

TCE Earnings

$ 0

$ 50

$ 100

$ 150

$ 200

$ 300

$ million

$ 250

Full year 2022

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Full year 2023

TCE/DAY

38,200

$ 183

$ 274

$ 62

$ 63

$ 90

$ 59

TCE/DAY

58,400

TCE/DAY

52,000

TCE/DAY

46,700

TCE/DAY

71,900

TCE/DAY

57,200

+50%

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AVANCE GAS Annual report 2023

Cash and cash equivalents were $131.5 million on 31 Decem- ber 2023, compared with $224.2 million at 31 December 2022, reflecting capital expenditures, repayment of long-term debt and dividend payments, offset by positive cash flows from operations and proceeds from borrowings.

On the financing side, the Company received credit approval in second half of 2023 to refinance Avance Pampero (2015) in a $43 million bank Facility. The refinancing was completed in March 2024 resulting in a net cash release of $5 million. The margin was significantly improved from 3.26% to 1.90%, has an age adjusted profile of 20 years and matures in 2028. Further, the Company reached an agreement with BoComm to swap the intended lease from the two VLGC newbuildings for delivery in March and May 2024, Avance Castor and Avance Pollux, to the sister ships Avance Polaris and Avance Capella (both 2022). The refinancing extended maturity from 2027 to 2034 and resulted in a net cash release of $40 million in February 2024. Following the transactions, the Company released $45 million in cash during the first quarter 2024, secured no debt maturity prior 2028 while maintaining an industry low cash break-even of $22,500 per day.

Further, the Company announced the sale of three vessels in 2023, Iris Glory (2008) and the two-remaining dual fuel VLGC newbuildings, Avance Castor (2024) and Avance Pollux (2024), in addition the Company announced the sale of Venus Glory (2008) in early January 2024 at attractive asset sale prices. Thereby, the Company expect to record in total $120 million in gain on sale for vessels and $188 million in net cash proceeds from the four vessel sales for the first half of 2024.

Administrative and general expenses, totalled $6.9 million in 2023, broadly in line with $6.7 million in 2022.

Net non-operating expenses, consisting mainly of finance expense and finance income, were $18.8 million, down from $20.0 million in 2022. Both finance expense and finance income increased due to higher interest rate levels, however, increase in finance expense was offset by interest rate hedges, resulting in a decrease in net non-operating expenses.

Avance Gas’ total assets amounted to $1,153.6 million at 31 December 2023, up from $1,067.9 million at 31 December 2022. The Company took delivery of Avance Rigel and Avance Avior, the third and fourth of six 91,000 cbm VLGC new- buildings from Hanwha Ocean (formerly known as Daewoo Shipbuilding & Marine Engineering) in South Korea, resulting in reclassification of $166.4 million from newbuildings to property, plant and equipment (PP&E). The Company also entered newbuilding contracts with CIMC (Nantong CIMC Sinopacific Offshore & Engineering Co., Ltd) for the construc- tion of four mid-sized LPG/ammonia gas carriers with dual fuel engines (MGCs). For the twelve months ended December 31, 2023, the total capitalised expenses were $178.7 million, of which $131.8 million related to pre-delivery milestone payments to the yard and other newbuilding costs for VLGCs, $37.1 million related to pre-delivery milestone payments for MGCs, $7.0 million in drydocking expenses, $1.6 million in other upgrades for PP&E and $1.2 million in capitalised borrowing costs.

Total net interest bearing debt was $524.3 million at year-end 2023, compared to $451.5 million as of year-end 2022. The company drew $115.0 million on a $555 million sustainability linked financing facility signed in May 2022 in connection with delivery of the VLGC Avance Rigel and the VLGC Avance Avior during the first half of 2023. The $555 million facility agree- ment includes an annual sustainability margin adjustment mechanism linked to the Company’s ambition to reduce the carbon intensity of the fleet which is a high priority for the Company.

Total shareholders’ equity amounted to $603.8 million, cor- responding to an equity ratio of 52.3%, compared to $603.9 million and 56.6% as of December 31, 2022. The equity ratio decreased from year end 2022 due to increase in total assets, while total equity remained at the same level due to increase from net profit of $163.6 million and compensation expense for share options of $0.2 million offset by dividend payment of $153.2 million and other comprehensive loss of $10.7 million mainly from fair value loss of derivatives.

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AVANCE GAS Annual report 2023

Avance Gas fleet utilisation:

99.0%

Waiting days per ship per month:

0.29

On shore employees:

9

Deadweight tonnage:

771,656

Crew members:

294*

Number of countries:

29

Marine casualties:

0

Total distance travel by vessel:

1,278,676

*Number of employees on board ships at any time are recorded, this does not reflect the aggregate number of shipboard employees during the year

KEY OPERATIONAL HIGHLIGHTS

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AVANCE GAS Annual report 2023

Total calendar days for the fleet was 4,922 up from 4,849 last year which is explained by delivery of the third and fourth dual fuel newbuildings, VLGCs Avance Rigel and Avance Avior in February and May 2023 offset by less calendar days for the three vessels sold in 2022, Thetis Glory (2008-built), Providence (2008-built) and Promise (2009-built). Further, the Company recorded 135 off hire days for the year 2023, of which 84 off hire days relates to scheduled drydocking including Ballast Water Treatment System (BWTS) upgrade of Iris Glory (2008) and Venus Glory (2008), remaining off hire days relates to maintenance and repair and compares to 62 off hire days in 2022. Thus, the Company recorded 4,787 operating days (calendar days less off hire days) in 2023, which was the same as the number of operating days in 2022.

Avance Gas vessels mainly operate in the Middle East Gulf and US Gulf/US East Coast for loading with transport of the cargo to Asia primarily via Panama being the shortest route to Asia depending on end destination. During 2023, waiting time in the Panama canal increased significantly caused by a draught on top of VLGCs being downprioritised due to new transit booking rules introduced in 2020. Therefore, Avance routed the majority of the fleet via Suez for US cargoes up until the Houthi militia’s attacked merchant shipping around the Bab el-Mandeb strait at the end of the year. Thereafter, Avance routed vessels loading in US via the Cape of Good Hope. Consequently, sailing distance for the fleet increased by 11%, up from 1,150,819 nautical miles in 2022, to 1,278,676 nautical miles in 2023.

The commercial utilisation remained high throughout the year as a resulting of the re-routing of the vessels as described above. For the fleet we recorded a utilization of 99.0% for the full year compared to 98.3% in 2022. Waiting days in 2023 for the Avance Gas fleet totalled 47 days com- pared to 83 days in 2022, representing an average of 0.29 days per ship/month compared with average 0.57 days per ship/month in 2022.

The Company had a decrease in energy use and CO2 emission of 7% measured in AER (Annual Efficiency Rate). The main driver behind the reduction is execution of our renewal strategy where we sold three older vessels in 2022 while taking delivery of four dual fuel newbuildings in 2022 and 2023. The final two 2008-built vessels in the fleet were subsequently sold in 2024, which will decrease the average age of the fleet and have a positive impact on energy use and CO2 emissions going forward. For the year 2023, we obtained an AER of 6.64 compared to 7.11 in 2022 and 7.46 in 2021.

For more information about GHC emissions, compliance work and ESG, please find our separate ESG report published on our website www.avancegas.com.

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AVANCE GAS Annual report 2023

History and fleet

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AVANCE GAS Annual report 2023

The fleet

* Subsequently sold: - Iris Glory (2008): sale completed in January 2024 - Venus Glory (2008): sale completed in March 2024

**Subsequently financed: - Pampero (2015): completed refinancing from sale leaseback to bank financing in March 2024 - Avance Polaris and Avance Capella (2022): completed refinancing from bank financing to sale leaseback in February 2024

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AVANCE GAS Annual report 2023

2007-2009

Avance Gas traces it’s roots to 2007 and was established with the goal “to pursue growth opportunities in the expanding market for the transportation of liquefied petroleum gas (LPG)”. The company entered the market in 2009 with a three-year timecharter of the VLGC Yuhsho, followed by the acquisition of the 2003-built VLGC Althea Gas , later renamed Avance . Avance Gas Holding Ltd was established.

2013-2014

Frontline 2012 Ltd entered as a new shareholder of Avance Gas through a cash investment. In addition, Avance Gas agreed to purchase eight VLGC newbuildings—previously ordered by Frontline 2012 Ltd from Jiangnan Shipyard in China. The acquisition was in part financed by a $100 million private equity placement, through which Avance Gas was listed on the Norwegian Over-the-Counter (“N-OTC”).

On April 9, 2014, an initial public offering of Avance Gas shares was completed, raising $100 million from the issuance of new shares. Avance Gas’ three largest shareholders—Stolt-Nielsen Gas Ltd, Sungas Holdings Ltd and Frontline 2012 Ltd—simultaneously sold shares with a total aggregate value of $175 million, including over-allotment options. Trading of Avance Gas shares commenced on the Oslo Stock Exchange on April 15, 2014. During 2014, Avance Gas also completed the financing of its newbuilding program by raising a total of $650 million from a consortium of eight large shipping banks, under- scoring the market’s confidence in the Company’s business strategy.

2010-2012

In exchange for 50% ownership in the Company, Sungas Holding Ltd sold three 2008 built VLGCs to the Avance Gas fleet: Iris Glory , Thetis Glory and Venus Glory . Navigator Taurus, a medium sized gas carrier, was also taken on timecharter in 2010, bringing the fleet up to a total of six ships.

In 2012 Avance Gas acquired Maran Gas Knossos and Maran Gas Vergina from Maran Gas Maritime, Inc. in a cash transaction, now named Promise and Providence . Expiry of the Yuhsho and Navigator Taurus timecharters.

2015-2017

In 2015, Avance Gas took delivery of Mistral , Monsoon , Breeze , Passat , Sirocco , Levant , Chinook and Pampero , all 83,000 cbm VLGC newbuildings from Jiangnan Shipyard in China. The Avance Gas fleet now consists of 14 modern VLGCs, with a total capacity of 1.17 million cbm.

In 2016, Avance Gas prepares for a weaker market by entering into an amendment agreement with its banking group to defer part if its principal payments. Simultaneously, the Company raised $58.7 million in a private placement and subsequent offering, issuing 29.5 million new shares.

History

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AVANCE GAS Annual report 2023

2023

The year 2023 ended with the second-best annual results in the Company’s history with a net profit of $164 million. A strong freight market throughout the year was the main driver.

In February and May, the Company took delivery of Avance Rigel and Avance Avior , the third and fourth of its six dual fuel 91,000 cbm VLGC newbuildings from Daewoo Shipyard in South Korea.

During the second quarter, the Company also entered into newbuilding contracts with CIMC (Nantong CIMC Sinopacific Offshore & Engineering Co., Ltd) for the construction of four mid-sized LPG/ammonia gas carriers with dual fuel engines scheduled for delivery in 2025 and 2026.

In July, the Company announced the sale of the 2008-built VLGC Iris Glory. In December, the Company announced the sale of the two remaining VLGC newbuildings for a gross cash consideration of $240 million with ex-yard delivery to the new owners in 2024.

The strong commercial market combined with a strong balance sheet and healthy cash position of the Company, allowed Avance Gas to return value back to the shareholders by distributing $2.15 per share or $165 million in total dividend for the full year 2023.

2021-2022

In 2021, Avance Gas entered shipbuilding contracts for in total six 91,000 cbm, LPG Dual-Fuel VLGCs with Daewoo Shipbuilding and Marine Engineering (DSME) in South Korea. Avance Gas successfully completed a private placement raising $65 million in new equity to finance the newbuilding program, and also signed a $104 million sustainability-linked term facility with a bank syndicate to finance its first two dual-fuel newbuildings.

In August 2021, the majority shareholder of Avance Gas Holding Ltd., Hemen Holding Limited (“Hemen”) acquired additionally 127,207 shares in the Company. The transaction triggered an obligation for Hemen to make a mandatory offer to acquire all shares in the Company at a price of NOK 43 per share. Following settlement of the mandatory offering in October 2021, Hemen owned 59,382,696 shares, equating to approximately 76.7% of the Company.

In 2022, Avance Gas continued the fleet renewal program by selling the three VLGCs Thetis Glory (2008), Providence (2008) and Promise (2009). In January and February, the Company took delivery of Avance Polaris and Avance Capella , the first two of its six dual fuel 91,000 cbm VLGC newbuildings from Daewoo Shipyard in South Korea.

In May 2022, Avance Gas signed a $555 million sustainability-linked term facility with a bank syndicate to re-finance the previous bank facility financing including financing of newbuildings three and four, Avance Rigel and Avance Avior . The Company concluded the financing for the whole newbuilding program by entering into a sale leaseback arrangement for the final two newbuldings, Avance Castor and Avance Pollux .

2018-2020

During 2018, Hemen Holding Limited increased its holdings and became the largest shareholder in Avance Gas. Avance Gas is integrating closer to the Seatankers group of companies, benefitting from economies of scale and the group’s extensive commercial and technical experience. After a weak freight market since 2016, the VLGC market began to strengthen at the end of 2018. In 2019 Avance Gas refinanced all outstanding debt and closed a new $515 million credit facility. End 2019, Avance Gas entered into two Dual-Fuel 91,000 cbm VLGCs at Korean shipbuilder DSME for delivery in 2021 and 2022, and scrubber installation contracts were signed for six of our vessels.

The global pandemic outbreak (Covid-19) has significant impact on the global market and economy in 2020, with reduced demand for LPG and lower fleet efficiency impacting the VLGC market. Avance Gas manages through a challenging year, and completes the scheduled drydocking programme for 8 vessels, in addition to scrubber installations on 5 vessels. Avance Gas completes the sale of its oldest vessel Avance, and proceeds with the construction of two LPG dual-fuel newbuildings at Daewoo Shipbuilding and Marine Engineering (DSME) in South Korea.

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AVANCE GAS Annual report 2023

PRESENtation of the

Board of Directors

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AVANCE GAS Annual report 2023

Øystein Kalleklev

CEO and Director

Øystein served as Director of Avance Gas since 26 May 2021 and was elected as Chairman of the Board in March 2022 until he stepped down to Director as he was appointed as CEO in April 2023. Mr. Kalleklev has been the CEO in FLEX LNG Management since August 2018, after serving as CFO of Knutsen NYK Offshore Tankers since 2013 and Chairman of the General Partner of the MLP KNOT Offshore Partners from 2015-2017. Previous roles include CFO of industrial investment company Umoe Group, Managing Director of Umoe Invest, Partner of investment bank Clarksons Platou and Business Consultant at Accenture. Mr. Kalleklev holds a MSC in Business and Administration from Norwegian School of Economics and a Bachelor in Business and Finance from Heriot-Watt University.

François Sunier

Director

François Sunier has served as a Director of Avance Gas since 1 December 2010. He has been the CEO and Managing Directors of Suntrust Investment Co. S.A. since January 2002. Prior to Suntrust Investment Co. S.A., Mr Sunier worked as an Executive Director at Goldman Sachs, London and at UBS Philips & Drew, London. François Sunier serves at the board of Mirabaud SCA and Groupe Minoteries (listed on the Swiss Stock Exchange Market). François Sunier graduated from the University of Geneva, with a bachelor in political sciences. Mr Sunier is a Swiss citizen, and resides in Switzerland.

James O'Shaughnessy

Director

James O'Shaughnessy has served as a Director of the Com- pany since January 2021. James O'Shaughnessy has been an Executive Vice President, Chief Accounting Officer and Corpo- rate Controller of Axis Capital Holdings Limited since March 26, 2012. Prior to that Mr. O'Shaughnessy has amongst other served as Chief Financial Officer in the Bermuda operations of Flagstone Reinsurance Holdings and as Chief Accounting Officer and Senior Vice President of Scottish Re Group Ltd., and Chief Financial Officer of XL Re Ltd. at XL Group plc. Mr. O'Shaughnessy received a Bachelor of Commerce degree from University College Cork, Ireland in the year 1981 to 1985 and is both a Fellow of the Institute of Chartered Accoun- tants of Ireland and an Associate Member of the Chartered Insurance Institute of the UK. Mr. O'Shaughnessy earned a Master's Degree in Accounting from University College Dublin in the year 1985 to 1986.

Kathrine Fredriksen

Director

Kathrine Fredriksen served as Director of Avance Gas since 26 May 2021. Ms. Fredriksen serves as President of Seatankers UK, board member of Norwegian Property since 2016 and as a board member in Ship Finance since February 2020. She has previously been on the boards of Seadrill, Golar LNG, Frontline and Deep Sea Supply. Through her role as President of Seatankers UK, she pro- vides advice on all group investments and is intrinsically involved in the administration of the organization. Kathrine is educated at European Business School in London. She is a passionate collector of modern and contemporary art.

Will Homan-Russell

Director

Will Homan-Russell has been a Director of Avance Gas since December 2023. Mr. Homan-Russell is an experienced pro- fessional investor in the maritime sector, currently serving as Chief Investment Officer of UK based WMC Capital Ltd., where he cofounded Albemarle Shipping Fund. From 2003 to 2018 he worked for Tufton Oceanic Limited, a fund management company specializing on investments in the maritime and energy sectors. Mr. Homan-Russell holds an MA in Mathe- matics from Oxford University and an MSc. in Finance from London Business School.

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AVANCE GAS Annual report 2023

Board of Directors’ Report

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AVANCE GAS Annual report 2023

Executive summary

The year 2023 was the second-highest full year results in the history for Avance Gas recording a net profit of $164 million or $2.14 in earnings per share. The solid results were driven by strong export growth from the US, very favourable product price arbitrage between US Gulf Coast and Far East Asia coupled with slippage of the orderbook and congestion in the Panama Canal.

2023 has also been an active asset transaction year for the Company where we continued to execute on the fleet renewal. In the second half of 2023, we agreed to sell the two last vintage 2008-built vessels, Iris Glory, and Venus Glory, at attractive sale prices with delivery in early 2024 thereby a total gain on sale of $48 million and cash release of $66 million is expected to be recorded in relation to these sales for the first quarter 2024. While at the same time, we placed newbuilding orders for four mid-sized LPG/ammonia carriers (MGCs) equipped with dual fuel engines capable of running on both LPG as well as compliant fuel oil at contract price of $61.5 million per vessel with delivery in 2025 and 2026.

Further, we agreed to sell two dual fuel VLGC newbuildings for $240 million at an estimated gain on sale of $72 million. The two newbuildings were contracted in April 2021 at

approximately $78 million per vessel and were subsequently modified to load ammonia as cargo and prepared to run on ammonia as fuel for approximately $3 million bringing the total contract price to $81 million each and sold for $120 million per vessel. Thereby the Company expects to record a gain on sale of $72 million and a cash release of $122 million in the first half of 2024. This brings total gain on sales for the four vessel sales to $120 million and net cash proceeds of $188 million after repayment of debt and delivery instalment to be recorded during the first half of 2024.

On the financing side, in 2023 the Company agreed to refi- nance three vessels to improve terms resulting in a net cash release of approximately $45 million at drawdown during the first quarter 2024 while securing no debt maturity prior to 2028.

Given the strong results during the year and a solid balance sheet, the Company has returned value back to shareholders by paying $165 million or $2.15 in dividend for the full year 2023 which corresponds to 101% of net profit. This translated into an annualised dividend yield of 17% based on a share price of NOK 130 and foreign exchange rate for USD/NOK of 10.5.

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AVANCE GAS Annual report 2023

canal fees of $0.4 million. Consequently, owners decided to reroute their vessels via Cape of Good Hope (CGH) or through the Suez Canal which later in the year effectively closed due to the Houthi militia’s attacks on merchant shipping around the Bab el-Mandeb strait.

Looking at the market quarter by quarter, first quarter of the year got off to a shaky start as charterers and ship owners battled for the upper hand. Aided by low US gas prices as US domestic inventories at multi-year highs, strong demand from especially China in the East to feed its increasing num- ber of PDH plants saw freight rates improve through the first quarter, averaging $67,400 per day (average US Gulf/Arabian Gulf). Mild weather in the US allowed for steady production while the absence of the normal seasonal fog in US Gulf allowed for export terminals in the Houston area to increase their utilization rates with especially March being a strong month that saw more than 100 VLGCs being loaded out of US terminals.

VLGC shipping rates are highly sensitive to the US/East LPG price arbitrage. Broader macroeconomic uncertainty with softening oil prices as a backdrop saw freight rates soften at the start of second quarter with traders unwilling to engage in the spot market. However, the market made a strong recovery through the quarter as China’s seemingly insatiable appetite for LPG following increasing utilization rates amongst its PDH plants supporting ever widening price arbitrages and thus VLGC freight rates. Freight rates averaged $77,800 per day (average US Gulf/Arabian Gulf) through second quarter.

The historically weaker third quarter were anything but this year as the Baltic index for all three LPG trade routes reached all-time high in the last days of the quarter. OPEC, and Saudi Arabia in particular, announced further production cuts during the summer in a bid to tackle supressed oil prices subsequently leading to reduced tons for export as Saudi Arabia’s LPG production is more interlinked with oil produc- tion than some of their more gassier neighbouring countries. Despite this, freight rates firmed up significantly at the end of the second quarter and remained relatively stable through the first two months of the third quarter. A prolonged period of supporting LPG price arbitrage, inefficiencies relating to delays in loading in US Gulf, Panama Canal delays and a sustained period of forward fixing made September a month for the record books. Several trading days printed all time high on the Baltic index with an average TCE for September at $145,000/day (average for US/Arabian Gulf).

COMPANY AND BUSINESS

Avance Gas Holding Ltd. (“Avance Gas” or the “Company”) is a Bermuda registered company. Avance Gas is a leading operator of Very Large Gas Carriers (VLGCs) and provides LPG transportation services to destinations in Europe, South America, India, and Asia, mainly loading in the Middle East Gulf and the US Gulf/US East Coast.

As of December 31, 2023, Avance Gas’s fleet consists of four- teen VLGCs on water including the two 2008- built vessels which were subsequently sold, and in addition two LPG dual-fuel newbuildings for delivery in 2024, sold ex-yard in March and May 2024 respectively, and four mid-sized LPG/ ammonia gas carriers with dual-fuel engines with delivery in 2025 and 2026.

The Company has outsourced technical management of the fleet to Bernhard Schulte Shipmanagement (Singapore) and Northern Marine Management Ltd (Glasgow) whose respon- sibilities include employment of onboard personnel, in close collaboration with the Company’s technical supervisors, Frontline Management.

FREIGHT MARKET IN 2023

Despite the substantial number of newbuildings scheduled for delivery in 2023, the VLGC spot freight market was the best year seen in eight years. The underlying fundamentals kept the freight market at strong levels with US seaborne LPG export growth of 13% year-on-year and China being the key import nation recording an import growth of 22% year-on- year. US export growth was supported by 10% production growth year-on-year resulting in high inventories thereby lowering the US Mont Belvieu LPG prices allowing a widening US/Far East average LPG price arbitrage of $257 per metric ton representing an increase of 60% year-on-year. Middle East export was impacted by continued OPEC production cuts and shipowners’ reluctance for loading cargoes out of Yanbu due to the tense situation in the Red Sea resulting in a modest export growth of 3% year-on-year. Further, 47 VLGCs were scheduled for delivery in 2023 whereas 40 VLGCs were delivered implying a slippage of 15%. Panama Canal conges- tion also contributed to market strength caused by a drought due to the weather phenomenon El Nino. This resulted in severely limiting the number of transits, increased waiting time and as a result auction fees skyrocketed, peaking at near to $4 million during the fourth quarter on top of ordinary

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AVANCE GAS Annual report 2023

SALE OF VESSELS

In December 2023, the Company announced the agreement to sell its two remaining 91,000 cbm dual fuel newbuildings scheduled for delivery in 2024. The buyer agreed to pay $240 million en bloc for the two newbuildings ex-yard delivery. The newbuildings, with the intended names Avance Castor and Avance Pollux, were originally scheduled for delivery in the third and fourth quarter of 2023 but have been delayed with expected delivery now scheduled for March and May 2024, respectively. The newbuildings were contracted in April 2021 at a price of approximately $78 million each. They have since been upgraded with capex of about $3 million each for the ships to be able to load ammonia cargoes as well as being ready to run on ammonia as fuel when this feature becomes commercially available. Hence, Avance Gas expects to book a profit of approximately $72 million from the sale of which $36 million will be booked in the first quarter and $36 million in the second quarter. The cash release from the sale is expected to be $122 million/$61 million per vessel as we have already paid about $47 million in milestone payments to the yard in accordance with the Ship Building Contract.

In January 2024, the Company completed the sale of Very Large Gas Carrier (VLGC) Iris Glory, built 2008, for a gross cash consideration of $60 million. The vessel completed her two-year Time Charter with IOC at the end of November 2023. After completion of the Time Charter, Iris Glory also carried out a single spot voyage at a net Time Charter Equivalent (TCE) result of $3.1 million prior to delivery of the vessel to the new owners. The Company will record a book gain on sale of approximately $21 million and net cash proceeds following repayment of the lease financing of approximately $26 million for the first quarter 2024.

In January 2024, the Company announced that it had entered into an agreement to sell the VLGC Venus Glory, built 2008, for a gross cash consideration of $66 million. The vessel completed her two-year Time Charter Party (TCP) with IOC at the end of December 2023. After completion of this Time Charter, Venus Glory also carried out a single spot voyage at a net Time Charter Equivalent (TCE) result of $5.5 million. Delivery of the ship to the new owner, a National Oil Company, was successfully completed in March 2024. The Company will record a book gain on sale and a cash release following repayment of bank financing of $27 million and $40 million respectively.

Freight rates started to taper off in early October before recov- ering towards the end of the month. This positive momen- tum continued into November on the back of Panama Canal authorities announcing a reduction in number of transits and BLPG3 – Houston-Chiba/Panama averaged at almost $237 per metric ton with a corresponding TCE of $146,000/ day which is one of the highest average TCE/day recorded. However, US/East LPG price arbitrage started to narrow on the back of weak macro-economic sentiment in Asia, rising US gas prices in December and freight rates started to slide. A small pre-Christmas rush managed to retake most ground lost through the month and for the average of BLPG 1 and BLPG 3 came in at $125,000/day over the quarter. US Export continued to be strong through the quarter with China being the end destination for almost a quarter of all VLGCs heading out of the US in 2023.

Middle East export (excluding Iran) growth continued where 2022 left off in the first half of 2023 until OPEC production cuts were announced in the second half of 2023 combined with security issues in the Red Sea at the end of the year. December AG cargo liftings were only 47 VLGC loadings being the lowest since July 2021. Iranian exports on the other hand recorded a strong increase in 2023 as exports increased by 23% y-o- y. The ongoing situation in the Red Sea / Gulf of Aden and particularly around the Bab el-Mandeb strait have effectively closed the Red Sea for VLGCs either in transit to load cargoes out of Yanbu or to sail through in laden or ballast passage. Although the time impact of increased sailing distances by going via Cape of Good Hope rather than Suez is approxi- mately 3.5 days (ballast), the real impact on VLGC is coming from the disappearance of Yanbu cargos which, combined with the OPEC production cuts, are further reducing cargo availability in AG.

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AVANCE GAS Annual report 2023

employee share options during the third quarter. Non-oper- ating expenses, consisting mainly of financial expenses, were $18.8 million in 2023, compared with $20.0 million in 2022, reflecting mainly a higher interest rate level in the market, which was offset by interest rate hedges, combined with interests earned on cash deposits.

Financial position and cash flow

As of December 31, 2023, the carrying amount of Avance Gas’ assets was $1,153.6 million compared to $1,067.9 million as of 31 December 2022. The Company took delivery of two vessels (VLGC Avance Rigel and VLGC Avance Avior) during the first half of 2023, resulting in reclassification of $166.4 from newbuildings to property, plant and equipment. The Company also entered into newbuilding contracts with CIMC (Nantong CIMC Sinopacific Offshore & Engineering Co., Ltd) for the construction of four mid-sized LPG/ammonia gas carriers with dual fuel engines. During 2023, the Company capitalised in total $170.1 million related to Newbuildings. For the twelve months ended December 31, 2023 the amount capitalised consists of instalments and other costs related to the newbuilding program, including borrowing costs of $1.2 million.

The Company holds derivative financial instruments for hedge accounting, both interest rate swaps and forward freight and bunker hedge agreements. The net change in fair value of the derivative financial instruments was negative $9.1 million as the freight market reached elevated levels by the end of the year combined with interest rate swaps becoming effective.

Total shareholders’ equity as of December 31, 2023 was $603.8 million, corresponding to an equity ratio of 52.3%, compared to $603.9 million and 56.6% as of December 31, 2022.

Total free cash and cash equivalents in 2023 amounted to $131.5 million compared with $224.2 million in 2022. Net cash flows from operating activities were $165.3 million. Net cash flows used in investing activities were $177.4 million, consisting of instalments and other costs paid on the Com- pany’s dual fuel newbuildings and drydocking expenses. Net cash flows used in financing activities were $80.4 million, consisting of drawdown of debt of $115.0 million and cash

FINANCING

In 2023, the Company received credit approval to refinance Avance Pampero (2015) in a $43 million bank Facility. The refinancing significantly improved the margin from 3.26% to 1.90%, bears an age adjusted profile of 20 years and matures in 2028. Drawdown of the Facility occurred in March 2024 resulting in net cash proceeds of approximately $5 million after repayment of previous debt.

Further, in 2023, the Company agreed with the financier to swap the intended lease from the two VLGC newbuildings for delivery in March and May 2024, Avance Castor and Avance Pollux, to the sister ships Avance Polaris and Avance Capella (both 2022). The refinancing extended maturity from 2027 to 2034 and resulted in a net cash release of $40 million in February 2024. Following the transaction, the Company has no debt maturity prior to 2028 while maintaining an industry low cash break-even of $22,500 per day.

FINANCIAL RESULTS

Looking at our commercial results, the Company recorded TCE earnings of $57,186 per day for full year 2023, compared to $38,236 per day in 2022. Avance Gas reported a net profit of $163.6 million in 2023, compared to a net profit of $89.0 million in 2022.

Out of a total 4,922 calendar days, Avance Gas fleet had 135 offhire days (2.74%) in 2023. This compared to 4,849 calendar days, and 62 offhire days (1.28%) in 2022. The increase in offhire days is mainly related to drydocking of the VLGCs Iris Glory and Venus Glory in 2023. Of total operating days, the fleet had a commercial utilisation rate of 99%, up from 98% in 2022.

Consolidated results

The TCE 1) earnings for 2023 were $273.7 million, compared to $183.0 million in 2022. Operating expenses decreased to $40.3 million in 2023 from $40.7 million in 2022. The decrease is largely related to changes in the fleet, with newer ships requiring less maintenance replacing older ships. Administrative and general (A&G) expenses were $6.9 million in 2023, an increase from $6.7 million in 2022. The increase in A&G expenses in 2023 was largely related to settlement of

1) Refer to Note 10 of the Financial Statements for definition and reconciliation of Alternative Performance Measures (APMs).

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AVANCE GAS Annual report 2023

HUMAN RESOURCES AND DIVERSITY

All seagoing crew are under employment contracts with our technical managers and are hired in close collaboration with the Avance Gas’ technical supervisors, Frontline Man- agement Ltd. Avance Gas’s ambition is to ensure a safe and diverse place to work, that human rights are respected, that all workers have decent working conditions, and to improve the well-being of all our employees. Our actions are guided by industry and international standards, in line with what is expected by our key stakeholders.

Avance Gas prohibits discrimination against any employee, or any other person based on sex, race, colour, age, religion, sexual orientation, marital status, national origin, disability, ancestry, political opinion or any other basis. The Company prohibits unlawful harassment, and employees are expected to treat one another with respect. We also expect our con- tractors, suppliers and other business partners to aspire to similar standards of fair treatment and equal opportunities for their employees.

To enhance awareness on this topic as well as to prevent and mitigate any form of discrimination and harassment, Avance Gas has included discrimination and harassment as a topic in its compliance training that is mandatory for all employees and management.

Avance Gas is an international company that values diversity and cultural differences. Our offshore employees come from across the world, with the main nationalities being Indian and Filipino. Historically, our industry has been male domi- nated, a trend mirrored in the Company’s offshore workforce composition. Our materiality assessment and the following review identified gender diversity as a material topic. While the majority of our employees working at sea are men, we actively promote the inclusion of female seafarers and have welcomed female cadets onboard our vessel. Onshore, Avance Gas is actively working to address gender imbalances by taking a conscious approach toward this topic during the recruitment process. Presently, women constitute 33.3% of Avance Gas’ onshore workforce, which is above the broader representation of women working onshore in the maritime industry.

Avance Gas had 9 onshore employees by year-end 2023. It is the ambition to create a good working environment, offering challenging and motivating work tasks and equal develop- ment opportunities to all employees. The absence due to sickness for onshore employees was 0% in 2023.