Dorian LPG Ltd., a leading owner and operator of modern very large gas carriers (“VLGCs”), today reported its financial results for the three months ended September 30, 2022.

Key Recent Developments

• Declared an irregular cash dividend totaling $40.4 million to all shareholders of record as of November 7, 2022.
• Exercised a two-year option during October 2022 on the time charter-in of Future Diamond through the first calendar quarter of 2025.
• Extended the existing time charter on Corsair in October 2022 for a period of two years through the fourth calendar quarter of 2024.

Highlights for the Second Quarter Fiscal Year 2023

• Revenues of $76.0 million.
• Time Charter Equivalent (“TCE”)(1) rate per operating day for our fleet of $40,632.
• Net income of $20.3 million, or $0.51 earnings per diluted share (“EPS”), and adjusted net income(1) of $17.2 million, or $0.43 adjusted earnings per diluted share (“adjusted EPS”).(1)
• Adjusted EBITDA(1) of $46.2 million.
• Paid cash dividend of $1.00 per share of our common stock to all shareholders of record as of the close of business on August 15, 2022.
• Entered into a $240.0 million debt financing facility (the “2022 Debt Facility”) to refinance indebtedness under the 2015 AR Facility, Concorde Japanese
• Financing, and Corvette Japanese Financing.

John C. Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, “The second quarter’s results were supported by a strong freight market and resulted in good cash generation. The most recent $1.00 dividend, declared on October 27, 2022, brings total cash returned to shareholders since our IPO to almost $500 million. Current geopolitical and economic uncertainty call for prudence. I believe that maintaining focus on our mission to provide safe, reliable, clean and trouble free transportation services to our clients, and on financial discipline, comprise the arsenal which enables us to retain flexibility in our commercial decisions and provide the best returns to our shareholders. As always, I acknowledge, with gratitude, the good work of Dorian’s people working at sea and on shore”.

Second Quarter Fiscal Year 2023 Results Summary

Net income amounted to $20.3 million, or $0.51 per diluted share, for the three months ended September 30, 2022, compared to $14.1 million, or $0.35 per diluted share, for the three months ended September 30, 2021.

Adjusted net income amounted to $17.2 million, or $0.43 per diluted share, for the three months ended September 30, 2022, compared to adjusted net income of $9.9 million, or $0.25 per diluted share, for the three months ended September 30, 2021. Adjusted net income for the three months ended September 30, 2022 is calculated by adjusting net income for the same period to exclude an unrealized gain on derivative instruments of $3.1 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.

The $7.3 million increase in adjusted net income for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, is primarily attributable to an increase of $12.9 million in revenues, decreases of $1.2 million in general and administrative expenses, $0.9 million in depreciation and amortization and $0.8 million in vessel operating expenses, and a $1.5 million favorable change in realized gain on derivatives, partially offset by increases of $6.4 million in interest and finance costs, $3.0 million in charter hire expenses, and a $1.0 million unfavorable change in other gain/(loss), net,.

The TCE rate for our fleet was $40,632 for the three months ended September 30, 2022, a 31.1% increase from a TCE rate of $30,996 for the same period in the prior year, driven by higher spot rates despite higher bunker prices. 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 95.7% during the three months ended September 30, 2021 to 90.7% during the three months ended September 30, 2022.

Vessel operating expenses per day increased to $9,541 for the three months ended September 30, 2022 compared to $9,210 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 $76.0 million for the three months ended September 30, 2022, an increase of $12.9 million, or 20.4%, from $63.1 million for the three months ended September 30, 2021 primarily due to an increase in average TCE rates, partially offset by a decrease in fleet utilization. Average TCE rates increased by $9,636 from $30,996 for the three months ended September 30, 2021 to $40,632 for the three months ended September 30, 2022, primarily due to higher spot rates despite higher 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 $66.710 during the three months ended September 30, 2022 compared to an average of $42.154 for the three months ended September 30, 2021. The average price of very low sulfur fuel oil (expressed as U.S. dollars per metric ton) from Singapore and Fujairah increased from $540 during the three months ended September 30, 2021, to $840 during the three months ended September 30, 2022. Our fleet utilization decreased from 95.7% during the three months ended September 30, 2021 to 90.7% during the three months ended September 30, 2022.

Charter Hire Expenses

Charter hire expenses for the vessels chartered in from third parties were $5.4 million and $2.4 million for the three months ended September 30, 2022 and 2021, respectively. The increase of $3.0 million, or 122.9%, was mainly caused by an increase in the number of chartered-in days from 92 for the three months ended September 30, 2021 to 184 for the three months ended September 30, 2022.

Vessel Operating Expenses

Vessel operating expenses were $17.6 million during the three months ended September 30, 2022, or $9,541 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. The decrease of $0.8 million, or 4.7% from $18.4 million for the three months ended September 30, 2021 was due to a reduction of calendar days for our fleet from 2,001 during the three months ended September 30, 2021 to 1,840 during the three months ended September 30, 2022, driven by the sales of Captain Markos NL and Captain Nicholas ML prior to the three months ended September 30, 2022. The increase of $331 per vessel per calendar day, from $9,210 for the three months ended September 30, 2021 to $9,541 per vessel per calendar day for the three months ended September 30, 2022 was primarily the result of increases of $159 and $142 per vessel per calendar day in crew wages and related costs, and spares and stores, respectively.

General and Administrative Expenses

General and administrative expenses were $8.2 million for the three months ended September 30, 2022, a decrease of $1.2 million, or 12.6%, from $9.4 million for the three months ended September 30, 2021. This decrease was driven by a decrease of $1.8 million, representing the cash bonuses for the Company’s named executive officers in respect of the fiscal year ended March 31, 2022 that were approved by the Compensation Committee of the Board of Directors and expensed and paid prior to the three months ended September 30, 2022, whereas the cash bonuses for the named executive officers of the Company in respect of the fiscal year ended March 31, 2021 were approved by the Compensation Committee of the Board of Directors and expensed and paid during the three months ended September 30, 2021. This was partially offset by an increase in stock-based compensation of $0.4 million, from $1.3 million for the three months ended September 30, 2021 to $1.7 million for the three months ended September 30, 2022.

Interest and Finance Costs

Interest and finance costs amounted to $12.0 million for the three months ended September 30, 2022, an increase of $6.4 million, or 115.9%, from $5.6 million for the three months ended September 30, 2021. The increase of $6.4 million during this period was mainly due to increases of $3.3 million in accelerated amortization of financing costs resulting from the repayment of the 2015 AR Facility, $2.5 million in interest incurred on our long-term debt and $0.6 million in loan expenses driven by an increase in average indebtedness, excluding deferred financing fees, from $587.2 million for the three months ended September 30, 2021 to $702.4 million for the three months ended September 30, 2022. The increase in average indebtedness is due to the 2022 Debt Facility refinancing during the three months ended September 30, 2022. As of September 30, 2022, the outstanding balance of our long-term debt, net of deferred financing fees of $6.6 million, was $642.0 million.

Unrealized Gain on Derivatives

Unrealized gain on derivatives amounted to $3.1 million for the three months ended September 30, 2022, compared to $0.7 million for the three months ended September 30, 2021. The favorable $2.4 million difference is primarily attributable to an increase in favorable fair value changes to our interest rate swaps resulting from changes in forward Secured Overnight Financing Rate (“SOFR”) yield curves.

Realized Gain/(Loss) on Derivatives

Realized gain on derivatives amounted to $0.6 million for the six months ended September 30, 2022, compared to a realized loss of $1.8 million for the six months ended September 30, 2021. The favorable $2.4 million difference is due to an increase in floating SOFR resulting in the realized gain on our interest rate swaps.

Gain on Disposal of Vessel

Gain on disposal of vessel amounted to $3.5 million for the three months ended September 30, 2021 and was attributable to the sale of Captain Markos NL. There was no gain on disposal of vessel for the three months ended September 30, 2022.

Fleet

The following table sets forth certain information regarding our fleet as of October 28, 2022.

Market Outlook & Update

The ongoing conflict between Russia and Ukraine continued to influence oil and gas markets, including liquefied petroleum gas (“LPG”) dynamics. The level of LPG available for export in Northwestern Europe continued to be depressed due to higher levels of LPG remaining in the natural gas stream. Exports from Russian ports (e.g., ports in Ust-Luga and the Black Sea region) were also subdued. As a result, Europe and the Mediterranean regions continued to import LPG from the U.S.

The global economic recession has significantly affected the propane markets, particularly petrochemical demand. Margins for producing ethylene from steam crackers declined sharply throughout the third calendar quarter of 2022. After reaching an average of $778 per metric ton in April 2022 in Northwestern Europe, margins fell to ($230) per metric ton on average in September 2022 for propane. Naphtha margins in Northwestern Europe followed a similar trend, showing negative margins for August and September 2022.

In the eastern hemisphere, naphtha continued to be unfavorable to LPG as a feedstock for steam cracking, yielding negative margins for the production of spot ethylene throughout the third calendar quarter of 2022. While propane provided better margins, average margins for the production of spot ethylene were approximately ($31) per metric ton in the third calendar quarter of 2022 compared to an average of $142 per metric ton in the second calendar quarter of 2022.

With lower (at times negative) margins, demand for LPG into petrochemicals declined, resulting in lower import demand for LPG than expected, particularly in Northwestern Europe, where LPG imports are expected to have fallen approximately 0.4 million metric tons in the third calendar quarter of 2022 from the second calendar quarter of 2022. Propane demand for propane dehydrogenation (PDH) continued to rise in China in the third calendar quarter of 2022 despite margins remaining under pressure. Subdued propylene/polypropylene demand and continued COVID-19 restrictions in China have resulted in lower than expected growth for PDH demand, with some plants lowering operating rates or undergoing maintenance as seen in the second calendar quarter of 2022.

Subdued demand for U.S. exports of LPG in the third calendar quarter of 2022 was due to low petrochemical margins in Europe, continued restrictions in China, and additional Middle Eastern supply of LPG. U.S. gas plant production rose during the third calendar quarter of 2022 compared to the previous quarter. However, seaborne exports of LPG declined by around one million metric tons from 13.8 million metric tons in the second calendar quarter of 2022 to 12.8 million metric tons in the third calendar quarter of 2022. This resulted in LPG stocks rising in the U.S. and propane prices remaining under 50% of West-Texas Intermediate.

The Baltic VLGC index on average increased in the third calendar quarter of 2022 to around $67 per metric ton from approximately $76 per metric ton in the second calendar quarter of 2022. Healthy VLGC supply and demand balance and strong bunker prices supported continuously positive freight rates during the third calendar quarter of 2022.

Three VLGCs were added to the fleet during the third calendar quarter of 2022 with a further seven vessels expected to be added before the end of 2022.

Currently the VLGC orderbook stands at approximately 20% of the current global fleet. An additional 65 VLGCs equivalent to approximately 6.0 million cbm of carrying capacity are expected to be added to the global fleet by calendar year 2025. The average age of the global fleet is now approximately 10.5 years old.

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 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

The following table presents our selected financial data and other information for the periods presented:

Adjusted EBITDA has certain limitations in use and should not be considered an alternative to net income/(loss), operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. 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.

The following table sets forth a reconciliation of net income to Adjusted EBITDA (unaudited) for the periods presented:

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

Source: Dorian LPG Ltd.