Dorian LPG Ltd., a leading owner and operator of modern very large gas carriers (“VLGCs”), reported its financial results for the three months ended June 30, 2024.

Key Recent Development

Declared an irregular dividend totaling $42.6 million to be paid on or about August 21, 2024 to shareholders of record as of August 8, 2024.
Highlights for the First Quarter Fiscal Year 2025

Revenues of $114.4 million.
Time Charter Equivalent (“TCE”) (1) rate per operating day for our fleet of $55,228.
Net income of $51.3 million, or $1.25 earnings per diluted share (“EPS”), and adjusted net income (1) of $51.7 million, or $1.26 adjusted earnings per diluted share (“adjusted EPS”). (1)
Adjusted EBITDA (1) of $78.0 million.
Declared and paid an irregular cash dividend totaling $40.6 million in May 2024.
Issued 2,000,000 common shares at a price of $44.50 per share less underwriting discounts and commissions of $2.225 per share.
(1)

TCE, adjusted net income, adjusted EPS and adjusted EBITDA are non-U.S. GAAP measures. Refer to the reconciliation of revenues to TCE, net income to adjusted net income, EPS to adjusted EPS and net income to adjusted EBITDA included in this press release under the heading “Financial Information.”

John C. Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, “During the quarter, we paid a dividend to our shareholders based on strong earnings and cash flow generation, and completed a significant strategic objective with a successful equity offering that positions us well for future fleet growth and renewal. Demand for LPG remains strong, as its availability, cost effectiveness, and environmental footprint make it a fuel of choice for many applications. As always, I acknowledge our dedicated seafarers and shoreside staff, whose hard work and dedication make our results possible.”

First Quarter Fiscal Year 2025 Results Summary

Net income amounted to $51.3 million, or $1.25 per diluted share, for the three months ended June 30, 2024, compared to $51.7 million, or $1.28 per diluted share, for the three months ended June 30, 2023.

Adjusted net income amounted to $51.7 million, or $1.26 per diluted share, for the three months ended June 30, 2024, compared to adjusted net income of $48.9 million, or $1.21 per diluted share, for the three months ended June 30, 2023. Adjusted net income for the three months ended June 30, 2024 is calculated by adjusting net income for the same period to exclude an unrealized loss on derivative instruments of $0.4 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.

The $2.8 million increase in adjusted net income for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, is primarily attributable to (i) increases of $2.8 million in revenues and $2.0 million in interest income and (ii) a reduction of $0.9 million in interest and finance costs; partially offset by increases of $1.2 million in general and administrative expenses, $0.7 million in vessel operating expenses, $0.5 million in depreciation and amortization, and $0.5 million in voyage expenses.

The TCE rate per operating day for our fleet was $55,228 for the three months ended June 30, 2024, an 8.0% increase from $51,156 for the same period in the prior year. Please see footnote 7 to the table in “Financial Information” below for information related to how we calculate TCE. Total fleet utilization (including the utilization of our vessels deployed in the Helios Pool) decreased from 98.0% during the three months ended June 30, 2023 to 90.4% during the three months ended June 30, 2024.

Vessel operating expenses per vessel per calendar day increased to $10,717 for the three months ended June 30, 2024 compared to $10,383 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, net, were $114.4 million for the three months ended June 30, 2024, an increase of $2.8 million, or 2.5%, from $111.6 million for the three months ended June 30, 2023 primarily due to an increase in fleet size, partially offset by a reduction of fleet utilization. Our available days increased from 2,219 for the three months ended June 30, 2023 to 2,275 for the three months ended June 30, 2024. Our fleet utilization decreased from 98.0% during the three months ended June 30, 2023 to 90.4% during the three months ended June 30, 2024. Average TCE rates increased by $4,072 per operating day from $51,156 for the three months ended June 30, 2023 to $55,228 for the three months ended June 30, 2024, but was relatively flat when comparing TCE rates per available day with a slight decrease from $50,164 for the three months ended June 30, 2023 to $49,911 for the three months ended June 30, 2024.

Vessel Operating Expenses

Vessel operating expenses were $20.5 million during the three months ended June 30, 2024, or $10,717 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time-period for the technically-managed vessels that were in our fleet and increased by $0.7 million, or 3.2% from $19.8 million for the three months ended June 30, 2023. The increase of $334 per vessel per calendar day, from $10,383 for the three months ended June 30, 2023 to $10,717 per vessel per calendar day for the three months ended June 30, 2024 was primarily the result of increases of $159 per vessel per calendar day for spares and stores and $102 per vessel per calendar day for crew wages and related costs. Excluding non-capitalizable drydock-related operating expenses, daily operating expenses increased by $523 from $10.094 for the three months ended June 30, 2023 to $10.617 for the three months ended June 30, 2024.

General and Administrative Expenses

General and administrative expenses were $10.4 million for the three months ended June 30, 2024, an increase of $1.2 million, or 13.1%, from $9.2 million for the three months ended June 30, 2023 and was driven by increases of $0.5 million in stock-based compensation, $0.5 million in cash bonuses, and $0.2 million in other general and administrative expenses.

Interest and Finance Costs

Interest and finance costs amounted to $9.5 million for the three months ended June 30, 2024, a decrease of $0.9 million, or 8.5%, from $10.4 million for the three months ended June 30, 2023. The decrease of $0.9 million during this period was mainly due to a decrease of $0.9 million in loan interest on our long-term debt, which was driven by a decrease in average indebtedness, excluding deferred financing fees, from $658.2 million for the three months ended June 30, 2023 to $606.6 million for the three months ended June 30, 2024.

Interest Income

Interest income amounted to $3.7 million for the three months ended June 30, 2024, compared to $1.7 million for the three months ended June 30, 2023. The increase of $2.0 million is mainly attributable to (i) higher average cash balances for the three months ended June 30, 2024 when compared to the three months ended June 30, 2023, and (ii) an increase in interest rates over the periods presented.

Unrealized Gain/(Loss) on Derivatives

Unrealized loss on derivatives amounted to $0.4 million for the three months ended June 30, 2024, compared to a gain of $2.9 million for the three months ended June 30, 2023. The $3.3 million unfavorable change is primarily attributable to changes in forward SOFR yield curves and reduced notional amounts.

Market Outlook & Update

Following the end of the Northern Hemisphere winter, U.S. propane prices fell below 40% of West Texas Intermediate (“WTI”) prices, averaging 39% in the second calendar quarter of 2024 (“Q2 2024”), down from 46% in the first calendar quarter of 2024 (“Q1 2024”). U.S. exports increased by 250,000 metric tons, totaling over 16 million metric tons (“MM MT”) in Q2 2024, with June alone exceeding 5.5 MM MT

In Asia, demand remained focused on petrochemical consumption, particularly in China where four new PDH plants began operations, according to NGL Strategy’s analysis. Following measures announced in China in early May to revive the property market, improved sentiment and prices for olefins and polyolefins in the East improved somewhat, with propane demand for PDH operations in China increasing from around 3.1 MM MT in Q1 2024 to 4.4 MM MT in Q2 2024. This gain was somewhat offset by less propylene output from steam crackers in Q2 2024, with several facilities undergoing maintenance. Downstream demand for olefins and polyolefins remains sluggish despite the property market stimulus, with overcapacity remaining for ethylene and propylene in the East. As a result, PDH margins continue to be under pressure averaging around $17 per metric ton in Q2 2024 compared to $26 per metric ton in Q1 2024 (based on variable margins).

Steam cracking margins for naphtha remained negative in the East, however, propane continued to outperform naphtha averaging $66 per metric ton in Q2 2024, compared to over $120 per metric ton in Q1 2024. Naphtha margins in NW Europe for the production of ethylene via steam crackers remained positive through April and May 2024, but in June 2024 saw a severe deterioration as ethylene prices and other co-product prices fell at the same time naphtha prices increased. The propane-naphtha spread remained favorable at an average of ($153) per metric ton in Q2 2024 in NW Europe.

In the Middle East, OPEC+ met to discuss crude oil production levels for the remainder of 2024 and 2025. The additional voluntary production cuts announced in April 2023 and November 2023 are to be extended to the end of September 2024. LPG exports as a result remained subdued from countries such as Saudi Arabia where LPG exports totaled 1.6 MM MT in Q2 2024, 1 MM MT less than levels seen for the same time period in 2023. The additional measures by some of the OPEC+ oil producing countries helped maintain an average Brent price of $86 per barrel in Q2 2024 which was in line with the level seen in Q1 2024.

Freight rates started Q2 2024 on a softening note averaging around $64 per metric ton in April 2024. However, May 2024 saw levels rise to over $80 per metric ton before falling to $74 per metric ton on average in June 2024. The VLGC supply/demand balance was seen to improve/tighten in May/June 2024 primarily on the additional ton-mile demand and supportive arbitrage levels between the U.S. Gulf Coast and the Far East.

A further six new VLGCs were added to the global fleet during Q2 2024. An additional 41 VLGCs equivalent to roughly 3.6 million cbm of carrying capacity and 49 VLACs are expected to be added by calendar year 2027. The average age of the global fleet is now approximately 10.6 years old. Currently the VLGC orderbook stands at approximately 10.5% of the global fleet, excluding the very large ammonia carriers (approximately 21%, including the VLACs) and very large ethane carriers orderbook.

The above market outlook update is based on information, data and estimates derived from industry sources available as of the date of this release, 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. We have not independently verified any third-party information, verified that more recent information is not available and undertake no obligation to update this information unless legally obligated.

Seasonality

Liquefied gases are primarily used for industrial and domestic heating, as chemical and refinery feedstock, as 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 our quarters ending June 30 and September 30 and relatively weaker during our quarters ending December 31 and March 31, although 12-month time charter rates tend to smooth out these short-term fluctuations and recent LPG shipping market activity has not yielded the typical seasonal results. The increase in petrochemical industry buying has contributed to less marked seasonality than in the past, but there can no guarantee that this trend will continue. 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.
Source: Dorian LPG Ltd.