Dorian LPG Ltd., a leading owner and operator of modern very large gas carriers (“VLGCs”), yesterday reported its financial results for the three months and fiscal year ended March 31, 2020.

Highlights for the Fourth Quarter Ended March 31, 2020

• Revenues of $95.2 million.
• Daily Time Charter Equivalent (“TCE”)(1) rate for our fleet of $51,888.
• Net income of $29.4 million, or $0.56 earnings per diluted share (“EPS”), and adjusted net income(1) of $42.3 million, or $0.81 adjusted diluted earnings per share (“adjusted EPS”)(1).
• Adjusted EBITDA(1) of $67.2 million.
• Time chartered-in the 2020-built Future Diamond to our fleet with an expiration during the first calendar quarter of 2023.
• Repurchased over $34.5 million of our common stock, or approximately 3.1 million shares, at an average price of $10.99 per share

Highlights for the Fiscal Year Ended March 31, 2020

• Revenues of $333.4 million.
• TCE(1) rate for our fleet of $42,798.
• Net income of $111.8 million, or $2.07 EPS, and adjusted net income(1) of $130.0 million, or $2.41 adjusted EPS(1).
• Adjusted EBITDA(1) of $232.8 million.
• Repurchased over $49.3 million of our common stock, or approximately 4.4 million shares, at an average price of $11.24 per share
• TCE, adjusted net income, adjusted EPS and adjusted EBITDA are non-GAAP measures. Refer to the reconciliation of revenues to TCE, net loss to adjusted net income, EPS to adjusted EPS and net loss to adjusted EBITDA included later in this press release.

Key Recent Developments

• Closed the refinancing of the commercial tranche of our 2015 Facility pursuant to an Amended and Restated Facility Agreement (the “2015 AR Facility”) resulting in Dorian LPG borrowing $155.8 million, of which $152.9 million went to repay the outstanding loan under the commercial tranche of the 2015 Facility and the balance of $2.9 million will be available for general corporate purposes. Key features of the 2015 AR Facility include:
• Extension of the maturity of the refinanced commercial tranche from March 2022 until March 2025;
• Reduction of annual principal amortization from $12.3 million to $600,000 on the refinanced commercial tranche;
• Addition of a $25 million revolving credit facility, subject to customary availability conditions;
• Reduction in the LIBOR margin on the refinanced commercial tranche to 250 basis points from 275 basis points, subject to 10 basis points upward or downward adjustment based on the Company’s loan to value ratio for vessels secured under the 2015 AR Facility; and
• Additional LIBOR margin reduction of up to 10 basis points for reduction in the Company’s Average Efficiency Ratio for the vessels in its fleet that are owned or technically managed pursuant to a bareboat charter.
• Completed a $71.5 million sale and bareboat charter arrangement for the 2015-built Cresques (the “Cresques Japanese Financing”) resulting in net cash proceeds of $52.5 million, $28.5 million of which we used to prepay a portion of the 2015 Facility, and the balance of which will be used for general corporate purposes. The Cresques Japanese Financing has a mandatory buyout in 2032 with early purchase options from the end of year 3 onwards, amortizes principal of $285,000 per month, and carries a floating interest rate of 1 Month LIBOR plus 2.5%.
• Time chartered-in the 2012-built Astomos Earth to our fleet with an expiration during the second calendar quarter of 2021.

John Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, “It is appropriate that I acknowledge the commitment of our nearly eight hundred seafarers, five hundred presently at sea, as well as the dedication of our shore-side staff. Their professionalism ensures our continued safe operation. Freight rates have recently fallen substantially, however, considering the uncertainty about the impact of the pandemic on demand and the price of crude and natural gas, I believe it is too early to make any predictions. As a company, Dorian LPG has, perhaps, never been in a stronger position than we are presently. As a result of our recent refinancing, we have increased our liquidity and decreased our cost of debt through an innovative and environmentally linked structure with new commercial banking partners.”

Fourth Quarter Fiscal Year 2020 Results Summary

Our net income amounted to $29.4 million, or $0.56 per share, for the three months ended March 31, 2020, compared to a net loss of $(16.0) million, or $(0.29) per share, for the three months ended March 31, 2019.

Our adjusted net income amounted to $42.3 million, or $0.81 per share, for the three months ended March 31, 2020, compared to an adjusted net loss of $(12.0) million, or $(0.22) per share, for the three months ended March 31, 2019. We have adjusted our net income for the three months ended March 31, 2020 for an unrealized loss on derivative instruments of $12.9 million. We have adjusted our net loss for the three months ended March 31, 2019 for an unrealized loss on derivative instruments of $3.9 million Please refer to the reconciliation of net income/(loss) to adjusted net income/(loss), which appears later in this press release.

The $54.3 million increase in adjusted net income for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 is primarily attributable to an increase in revenues of $60.7 million and a $1.8 million decrease in interest and finance costs, partially offset by increases of $3.5 million in charter hire expenses from our chartered-in VLGCs, $2.8 million in vessel operating expenses, $0.7 million depreciation and amortization and a decrease of $0.7 million in realized gain on derivatives.

The TCE rate for our fleet was $51,888 for the three months ended March 31, 2020, a 174.8% increase from the $18,883 TCE rate from the same period in the prior year, primarily driven by increased spot market rates as further described in “Revenues” below. Please see footnote 6 to the table in “—Financial Information” below for other information related to how we calculate TCE. Total fleet utilization (including the utilization of our vessels deployed in the Helios Pool) increased from 90.2% in the quarter ended March 31, 2019 to 91.7% in the quarter ended March 31, 2020.

Vessel operating expenses per day increased to $9,407 during the three months ended March 31, 2020 from $8,104 in the same period in the prior year. Please see “Vessel Operating Expenses” below for more information.

Revenues

Revenues, which represent net pool revenues—related party, time charters and other revenues earned by our vessels, were $95.2 million for the three months ended March 31, 2020, an increase of $60.7 million, or 176.2%, from $34.5 million for the three months ended March 31, 2019. The increase was primarily attributable to an increase in average TCE rates and fleet utilization. TCE rates of $51,888 for the three months ended March 31, 2020 increased from $18,883 for the three months ended March 31, 2019. During the three months ended March 31, 2020, the board of the Helios Pool approved a reallocation of pool profits in accordance with the pool participation agreements. This reallocation resulted in a $1,019 increase in our fleet’s overall TCE rates for the three months ended March 31, 2020 due mainly to favorable speed and consumption performance of our VLGCs operating in the Helios Pool compared to other VLGCs operating in the Helios Pool. Excluding this reallocation, TCE rates increased by $31,986 when comparing the three months ended March 31, 2020 with the three months ended March 31, 2019, primarily as a result of higher spot market rates during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, partially offset by increased bunker prices. The Baltic Exchange Liquid Petroleum Gas Index, an index published daily by the Baltic Exchange for the spot market rate for the benchmark Ras Tanura-Chiba route (expressed as U.S. dollars per metric ton), averaged $66.662 during the three months ended March 31, 2020 compared to an average of $29.675 for the three months ended March 31, 2019. The increase in bunker costs was primarily due to the implementation of IMO 2020 regulations that went into effect in January 2020. Very-Low-Sulphur Fuel Oil, which must be used by all non-scrubber-equipped vessels under the regulations, averaged $501 (expressed as U.S. dollars per metric tonnes) from Singapore and Fujairah for the three months ended March 31, 2020 compared to High-Sulphur Fuel Oil, which was permissible on all vessels prior to the regulations, averaging $413 (expressed as U.S. dollars per metric tonnes) from Singapore and Fujairah during the three months ended March 31, 2019. Our fleet utilization increased from 90.2% during the three months ended March 31, 2019 to 91.7% during the three months ended March 31, 2020.

Charter Hire Expenses

Charter hire expenses for vessels time chartered-in from third parties were $3.7 million for three months ended March 31, 2020 compared to $0.2 million for the three months ended March 31, 2019. This increase was caused by the number of vessels time chartered-in. During the three months ended March 31, 2020, we time chartered-in one vessel for the entire three months and one vessel for a portion of the period, while we time chartered-in one vessel for less than one month during the three months ended March 31, 2019.

Vessel Operating Expenses

Vessel operating expenses were $18.8 million during the three months ended March 31, 2020, or $9,407 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet, increasing $2.8 million, or 17.4%, from $16.0 million, or $8,104 per vessel per calendar day, for the three months ended March 31, 2019. The increase in vessel operating expenses was primarily the result of a $1.6 million, or $796 per vessel per calendar day, increase in operating expenses related to the drydocking of vessels including repairs and maintenance, spares and stores, coolant costs, and other drydocking related operating expenses. Additionally, we had an increase of $0.6 million, or $313 per vessel per calendar day, in spares, stores, and repairs and maintenance costs not related to the drydocking of vessels, and an increase in crew wages and related costs of $0.4 million, or $119 per vessel per calendar day.

Interest and Finance Costs

Interest and finance costs amounted to $8.3 million for the three months ended March 31, 2020, a decrease of $1.8 million, or 17.7%, from $10.1 million for the three months ended March 31, 2019. The decrease of $1.8 million during the three months ended March 31, 2020 was mainly due a decrease of interest incurred on our long-term debt, primarily resulting from a decrease in average indebtedness and reduced LIBOR rates. Average indebtedness, excluding deferred financing fees, decreased from $723.8 million for the three months ended March 31, 2019 to $659.8 million for the three months ended March 31, 2020. As of March 31, 2020, the outstanding balance of our long-term debt, excluding deferred financing fees, was $646.1 million.

Unrealized Loss on Derivatives

Unrealized loss on derivatives amounted to approximately $12.9 million for the three months ended March 31, 2020, compared to $3.9 million for the three months ended March 31, 2019. The $9.0 million difference is attributable to a decrease of $6.4 million in the fair value of our interest rate swaps caused by changes in forward LIBOR yield curves and reductions in notional amounts and an unfavorable change of $2.6 million on our forward freight agreement (“FFA”) positions.

Fiscal Year 2020 Results Summary

Our net income amounted to $111.8 million, or $2.07 per share, for the year ended March 31, 2020, compared to a net loss of $(50.9) million, or $(0.38) per share, for the year ended March 31, 2019.

Our adjusted net income amounted to $130.0 million, or $2.41 per share, for the year ended March 31, 2020, compared to an adjusted net loss of $(43.1) million, or $(0.79) per share, for the year ended March 31, 2019. We have adjusted our net income for the year ended March 31, 2020 for an unrealized loss on derivative instruments of $18.2 million. We have adjusted our net loss for the year ended March 31, 2019 for unrealized gains on derivatives of $7.8 million. Please refer to the reconciliation of net income/(loss) to adjusted net loss, which appears later in this press release.

The favorable change of $173.1 million in adjusted net income for the year ended March 31, 2020 compared to the year ended March 31, 2019 is primarily attributable to an increase in revenues of $175.4 million and decreases of professional and legal fees related to the BW Proposal (defined below) of $10.0 million, $4.5 million in interest and finance costs, and $1.0 million in general and administrative expenses, partially offset by increases of a $9.7 million increase in charter hire expenses from our chartered-in VLGCs, $4.6 million in vessel operating expenses, $1.5 million in voyage expenses, $1.1 million in depreciation and amortization, and decrease of $1.0 million in realized gain on derivatives.

The TCE rate for our fleet was $42,798 for the year ended March 31, 2020, a 96.8% increase from the $21,746 TCE rate from the prior year, reflecting a resurgence of market conditions during the year ended March 31, 2020. Please see footnote 6 to the table in “—Financial Information” below for other information related to how we calculate TCE. Total fleet utilization (including the utilization of our vessels deployed in the Helios Pool) increased from 89.9% in the year ended March 31, 2019 to 95.4% in the year ended March 31, 2020.

Vessel operating expenses per day increased to $8,877 in the year ended March 31, 2020 from $8,329 in the prior year. Please see “Vessel Operating Expenses” below for more information.

Revenues

Revenues, which represent net pool revenues—related party, time charters and other revenues earned by our vessels, were $333.4 million for the year ended March 31, 2020, an increase of $175.4 million, or 111.0%, from $158.0 million for the year ended March 31, 2019. The increase is primarily attributable to an increase in average TCE rates and fleet utilization. TCE rates of $42,798 for the year ended March 31, 2020 increased from $21,746 for the year ended March 31, 2019. During the year ended March 31, 2020, the board of the Helios Pool approved a reallocation of pool profits in accordance with the pool participation agreements. This reallocation resulted in a $240 increase in our fleet’s overall TCE rates for the year ended March 31, 2020 due mainly to favorable speed and consumption performance of our VLGCs operating in the Helios Pool compared to other VLGCs operating in the Helios Pool. Excluding this reallocation, TCE rates increased by $20,812 when comparing the year ended March 31, 2020 with the year ended March 31, 2019, primarily as a result of higher spot market rates during the year ended March 31, 2020 as compared to the year ended March 31, 2019. The Baltic Exchange Liquid Petroleum Gas Index, an index published daily by the Baltic Exchange for the spot market rate for the benchmark Ras Tanura-Chiba route (expressed as U.S. dollars per metric ton), averaged $67.050 during the year ended March 31, 2020 compared to an average of $34.702 for the year ended March 31, 2019. Our fleet utilization increased from 89.9% during the year ended March 31, 2019 to 95.4% during the year ended March 31, 2020.

Charter Hire Expenses

Charter hire expenses for vessels time chartered-in from third parties were $9.9 million for year ended March 31, 2020 compared to $0.2 million for the year ended March 31, 2019. This increase was caused by increases in the number of vessels time chartered-in and their respective time chartered-in days. During the year ended March 31, 2020, we time chartered-in one vessel for the entire year and one vessel for a partial year, while we time chartered-in one vessel for less than one month during the year ended March 31, 2019.

Vessel Operating Expenses

Vessel operating expenses were $71.5 million during the year ended March 31, 2020, or $8,877 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet. This was an increase of $4.6 million, or 6.9%, from $66.9 million, or $8,329 per vessel per calendar day, for the year ended March 31, 2019. The increase in vessel operating expenses was primarily the result of a $3.2 million, or $391 per vessel per calendar day, increase in operating expenses related to the drydocking of vessels including repairs and maintenance, spares and stores, coolant costs, and other drydocking related operating expenses. Additionally, we experienced an increase of crew wages and related costs of $1.0 million, or $114 per vessel per calendar day.

General and Administrative Expenses

General and administrative expenses were $23.4 million for the year ended March 31, 2020, a decrease of $1.0 million, or 4.4%, from $24.4 million for the year ended March 31, 2019. This decrease was due to a reduction of $2.2 million in stock-based compensation, partially offset by an increase of $0.8 million in professional and legal fees unrelated to the BW Proposal (defined below) and a $0.6 million increase in salaries, wages and benefits.

Professional and Legal Fees Related to the BW Proposal

BW LPG Limited (“BW”) made an unsolicited proposal to acquire all of our outstanding common stock and, along with its affiliates, commenced a proxy contest to replace three members of our board of directors with nominees proposed by BW (the “BW Proposal”). BW’s unsolicited proposal and proxy contest were subsequently withdrawn on October 8, 2018. Professional and legal fees related to the BW Proposal were $10.0 million for the year ended March 31, 2019. No such costs were incurred for the year ended March 31, 2020.

Interest and Finance Costs

Interest and finance costs amounted to $36.1 million for the year ended March 31, 2020, a decrease of $4.5 million from $40.6 million for the year ended March 31, 2019. The decrease of $4.5 million during the year ended March 31, 2020 was due a decrease of $4.3 million in interest incurred on our long-term debt, primarily resulting from a decrease in average indebtedness and reduced LIBOR rates, and a reduction of $0.2 million in amortization of deferred financing fees. Average indebtedness, excluding deferred financing fees, decreased from $747.2 million for the year ended March 31, 2019 to $683.9 million for the year ended March 31, 2020. As of March 31, 2020, the outstanding balance of our long-term debt, excluding deferred financing fees, was $646.1 million.

Unrealized Loss on Derivatives

Unrealized loss on derivatives amounted to approximately $18.2 million for the year ended March 31, 2020 compared to $7.8 million for the year ended March 31, 2019. The $10.4 million difference is attributable to a decrease of $15.6 million in the fair value of our interest rate swaps caused by changes in forward LIBOR yield curves and reductions in notional amounts and an unfavorable change of $2.6 million on our FFA positions.

Fleet

The following table sets forth certain information regarding our fleet as of May 25, 2020. We classify vessel employment as either Time Charter, Pool or Pool-TCO.

Market Outlook Update

Global seaborne LPG volumes remained buoyant during the first calendar quarter of 2020, totaling 26.9 million tons, 3.5% above the same period in 2019. U.S. seaborne LPG exports have driven global growth, as such exports have increased to record levels during the first calendar quarter, totaling 11.0 million metric tons and representing 33.2% annual growth. Elevated U.S. exports were balanced by slightly declining Middle Eastern export volumes. The Middle East exported 9.2 million metric tons of LPG during the quarter, a 7.6% year-over-year decrease.

During the quarter, LPG imports in key Asian markets such as India, Japan, and South Korea all witnessed significant year-over-year growth. Chinese LPG imports, however, decreased 15.6% year-over-year to roughly 4.0 million metric tons. The effects of COVID-19 reduced demand, while PDH plants operated at reduced capacity and maintenance was brought forward. Two Chinese PDH plants with 1.2 million tons of annual throughput that were planned to start operations during the quarter were delayed.

For the first calendar quarter, the Baltic VLGC Index averaged $67 per metric ton, reaching a quarterly high of $81 per metric ton in late January. For the second calendar quarter to date, the Baltic Index has averaged $51 per metric ton.

Currently the VLGC orderbook stands at approximately 12% of the current global fleet. An additional 35 VLGCs, equivalent to roughly 3.0 million cbm of carrying capacity, are expected to be added to the global fleet by calendar year-end 2021. The average age of the global fleet is now approximately ten years old.

The above market outlook update is based on information, data and estimates derived from industry sources, and there can be no assurances that such trends will continue or that anticipated developments in freight rates, export volumes, the VLGC orderbook or other market indicators will materialize. This information, data and estimates involve a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors. You are cautioned not to give undue weight to such information, data and estimates. While we believe the market and industry information included in this release to be generally reliable, we have not independently verified any third-party information or verified that more recent information is not available.

Seasonality

Liquefied gases are primarily used for industrial and domestic heating, as a chemical and refinery feedstock, as a transportation fuel and in agriculture. The LPG shipping market historically has been stronger in the spring and summer months in anticipation of increased consumption of propane and butane for heating during the winter months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and the supply of certain commodities. Demand for our vessels therefore may be stronger in the quarters ending June 30 and September 30 and relatively weaker during the quarters ending December 31 and March 31, although 12-month time charter rates tend to smooth these short-term fluctuations and recent LPG shipping market activity has not yielded the expected seasonal results. To the extent any of our time charters expire during the typically weaker fiscal quarters ending December 31 and March 31, it may not be possible to re-charter our vessels at similar rates. As a result, we may have to accept lower rates or experience off-hire time for our vessels, which may adversely impact our business, financial condition and operating results.

Financial Information

Adjusted EBITDA has certain limitations in use and should not be considered an alternative to net income/(loss), operating income/(loss), cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income/(loss). Adjusted EBITDA as presented below may not be computed consistently with similarly titled measures of other companies and, therefore, might not be comparable with other companies.

In addition to the results of operations presented in accordance with U.S. GAAP, we provide adjusted net income/(loss) and adjusted EPS. We believe that adjusted net oncome/(loss) and adjusted EPS are useful to investors in understanding our underlying performance and business trends. Adjusted net income/(loss) and adjusted EPS are not a measurement of financial performance or liquidity under U.S. GAAP; therefore, these non-U.S. GAAP financial measures should not be considered as an alternative or substitute for U.S. GAAP.

Source: Dorian LPG Ltd.