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Dorian LPG Ltd. Declares Irregular Cash Dividend of $1.00 Per Share and Announces First Quarter Fiscal Year 2023 Financial Results

·17-min read
Cision

STAMFORD, Conn., Aug. 3, 2022 /PRNewswire/ -- Dorian LPG Ltd. (NYSE: LPG) (the "Company," "Dorian LPG," "we," "us," and "our"), a leading owner and operator of modern very large gas carriers ("VLGCs"), today reported its financial results for the three months ended June 30, 2022, and announced that its Board of Directors has declared an irregular cash dividend of $1.00 per share of the Company's common stock, returning over $40.1 million of capital to shareholders. The dividend is payable on or about September 2, 2022 to all shareholders of record as of the close of business on August 15, 2022.

Key Recent Developments

  • Declared an irregular cash dividend totaling over $40 million.

  • Entered into a $260.0 million debt financing facility (the "2022 Debt Facility") to refinance indebtedness under the 2015 AR Facility and the Concorde Japanese Financing (upon its repurchase in September 2022) and to releverage Corvette following its repurchase on July 21, 2022.

Highlights for the First Quarter Fiscal Year 2023

  • Revenues of $76.8 million.

  • Time Charter Equivalent ("TCE")(1) rate per operating day for our fleet of $39,608.

  • Net income of $24.8 million, or $0.62 earnings per diluted share ("EPS"), and adjusted net income(1) of $22.4 million, or $0.56 adjusted earnings per diluted share ("adjusted EPS").(1)

  • Adjusted EBITDA(1) of $46.9 million.

  • Declared an irregular cash dividend totaling $100.3 million.

  • Completed the refinancing of Cougar resulting in cash proceeds, net of $20.0 million to prepay a portion of the 2015 AR Facility, of $29.9 million.

  • Voluntarily prepaid $25.0 million of the 2015 AR Facility.

  • Provided three-month notice in connection with the exercise of our repurchase option of Concorde for $41.2 million in cash and application of the of $14.0 million deposit.



(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, "The first quarter results reflected a good chartering market, which generated strong operating cash flow. We believe that our new seven year facility affords us additional flexibility for capital allocation and are pleased that our board of directors authorized another irregular dividend. I am grateful to our sea and shore personnel who make this possible with their commitment to serving our charterers and to conducting our business with a relentless focus on safety and efficiency."

First Quarter Fiscal Year 2023 Results Summary

Net income amounted to $24.8 million, or $0.62 per diluted share, for the three months ended June 30, 2022, compared to $5.9 million, or $0.14 per diluted share, for the three months ended June 30, 2021.

Adjusted net income amounted to $22.4 million, or $0.56 per diluted share, for the three months ended June 30, 2022, compared to adjusted net income of $5.4 million, or $0.13 per diluted share, for the three months ended June 30, 2021. Adjusted net income for the three months ended June 30, 2022 is calculated by adjusting net income for the same period to exclude an unrealized gain on derivative instruments of $2.5 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.

The $17.0 million increase in adjusted net income for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, is primarily attributable to an increase of $13.8 million in revenues, decreases of $3.2 million in vessel operating expenses and $1.3 million in depreciation and amortization, a $2.5 million favorable change in other gain/(loss), net, and a $0.8 million favorable change in realized loss on derivatives, partially offset by increases of $2.4 million in interest and finance costs, $1.9 million in charter hire expenses, and $1.4 million in general and administrative expenses.

The TCE rate for our fleet was $39,608 for the three months ended June 30, 2022, a 25.5% increase from a TCE rate of $31,571 for the same period in the prior year, driven by higher spot rates despite increased 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 slightly from 96.1% during the three months ended June 30, 2021 to 95.9% during the three months ended June 30, 2022.

Vessel operating expenses per day decreased to $9,378 for the three months ended June 30, 2022 compared to $10,131 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 $76.8 million for the three months ended June 30, 2022, an increase of $13.8 million, or 22.0%, from $63.0 million for the three months ended June 30, 2021 primarily due to an increase in average TCE rates, despite a slight decrease in fleet utilization. Average TCE rates increased by $8,037 from $31,571 for the three months ended June 30, 2021 to $39,608 for the three months ended June 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 $76.175 during the three months ended June 30, 2022 compared to an average of $52.790 for the three months ended June 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 $508 during the three months ended June 30, 2021, to $955 during the three months ended June 30, 2022. Our fleet utilization decreased from 96.1% during the three months ended June 30, 2021 to 95.9% during the three months ended June 30, 2022.

Charter Hire Expenses

Charter hire expenses for the vessels chartered in from third parties were $5.4 million and $3.5 million for the three months ended June 30, 2022 and 2021, respectively. The increase of $1.9 million, or 54.0%, was mainly caused by an increase in the number of chartered-in days from 139 for the three months ended June 30, 2021 to 182 for the three months ended June 30, 2022.

Vessel Operating Expenses

Vessel operating expenses were $17.1 million during the three months ended June 30, 2022, or $9,378 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 $3.2 million, or 15.8% from $20.3 million for the three months ended June 30, 2021 was due to a reduction of calendar days for our fleet from 2,002 during the three months ended June 30, 2021 to 1,820 during the three months ended June 30, 2022, driven by the sales of Captain Markos NL and Captain Nicholas ML, prior to the three months ended June 30, 2022. The decrease of $753 per vessel per calendar day, from $10,131 for the three months ended June 30, 2021 to $9,378 per vessel per calendar day for the three months ended June 30, 2022 was partly the result of a $0.9 million, or $426 per vessel per calendar day, decrease in non-capitalizable operating expenses related to the drydocking of vessels. Adjusting for the non-capitalizable drydocking costs, vessel operating expenses per vessel per calendar day decreased $326 during the three months ended June 30, 2022, mainly due to lower crew wages and related costs.

General and Administrative Expenses

General and administrative expenses were $9.4 million for the three months ended June 30, 2022, an increase of $1.4 million, or 17.1%, from $8.0 million for the three months ended June 30, 2021. This increase was driven by an increase of $1.6 million, representing the cash bonuses for the Company's named executive officers that were approved by the Compensation Committee of the Board of Directors and expensed and paid during the three months ended June 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 and not during the three months ended June 30, 2021.

Interest and Finance Costs

Interest and finance costs amounted to $8.0 million for the three months ended June 30, 2022, an increase of $2.4 million, or 40.9%, from $5.6 million for the three months ended June 30, 2021. The increase of $2.4 million during this period was mainly due to increases of $2.0 million in interest incurred on our long-term debt and $0.3 million in loan expenses driven by an increase in interest rates and average indebtedness, excluding deferred financing fees, from $600.0 million for the three months ended June 30, 2021 to $687.9 million for the three months ended June 30, 2022. Average interest rates increased on our long-term debt from 3.7% to 4.1% due to rising LIBOR and SOFR on our floating-rate long-term debt. The increase in average indebtedness is due to the refinancings of the VLGCs Constellation, Commander, Cratis, Copernicus, Chaparral and Caravelle during the year ended March 31, 2022, as well as the refinancing of the VLGC Cougar during the three months ended June 30, 2022. As of June 30, 2022, the outstanding balance of our long-term debt, net of deferred financing fees of $6.6 million, was $657.0 million.

Unrealized Gain on Derivatives

Unrealized gain on derivatives amounted to $2.5 million for the three months ended June 30, 2022, compared to $0.4 million for the three months ended June 30, 2021. The favorable $2.1 million difference is primarily attributable to an increase in favorable fair value changes to our interest rate swaps resulting from changes in forward LIBOR yield curves.

Realized Loss on Derivatives

Realized loss on derivatives amounted to $0.1 million for the three months ended June 30, 2022, compared to $0.9 million for the three months ended June 30, 2021. The favorable $0.8 million difference is due to an increase in floating LIBOR resulting in the reduction of realized losses on our interest rate swaps.

Fleet

The following table sets forth certain information regarding our fleet as of July 29, 2022.







































Capacity




Sister




ECO


Scrubber




Charter




(Cbm)


Shipyard


Ships


Year Built


Vessel(1)


Equipped


Employment


Expiration(2)


Dorian VLGCs


















Captain John NP


82,000


Hyundai


A


2007




Pool(4)



Comet


84,000


Hyundai


B


2014


X


X


Pool(4)



Corsair(3)


84,000


Hyundai


B


2014


X


X


Time Charter(6)


Q4 2022


Corvette


84,000


Hyundai


B


2015


X


X


Pool(4)



Cougar(3)


84,000


Hyundai


B


2015


X



Pool(4)



Concorde(3)


84,000


Hyundai


B


2015


X


X


Time Charter(7)


Q1 2023


Cobra


84,000


Hyundai


B


2015


X



Pool(4)



Continental


84,000


Hyundai


B


2015


X



Pool(4)



Constitution


84,000


Hyundai


B


2015


X


X


Pool(4)



Commodore


84,000


Hyundai


B


2015


X



Pool-TCO(5)


Q1 2023


Cresques(3)


84,000


Daewoo


C


2015


X


X


Pool(4)



Constellation


84,000


Hyundai


B


2015


X


X


Pool(4)



Cheyenne


84,000


Hyundai


B


2015


X


X


Pool-TCO(5)


Q2 2023


Clermont


84,000


Hyundai


B


2015


X


X


Pool-TCO(5)


Q1 2023


Cratis(3)


84,000


Daewoo


C


2015


X


X


Pool(4)



Chaparral(3)


84,000


Hyundai


B


2015


X



Pool(4)



Copernicus(3)


84,000


Daewoo


C


2015


X


X


Pool(4)



Commander


84,000


Hyundai


B


2015


X


X


Pool(4)



Challenger


84,000


Hyundai


B


2015


X



Pool-TCO(5)


Q4 2022


Caravelle(3)


84,000


Hyundai


B


2016


X



Pool(4)



Total


1,678,000


































Time chartered-in VLGCs


















Future Diamond(8)


80,876


Hyundai




2020


X


X


Pool(4)



Astomos Venus(9)


77,367


Mitsubishi




2016


X



Pool(4)















(1)

Represents vessels with very low revolutions per minute, long-stroke, electronically controlled engines, larger propellers, advanced hull design, and low friction paint.

(2)

Represents calendar year quarters.

(3)

Operated pursuant to a bareboat chartering agreement as of July 29, 2022.

(4)

"Pool" indicates that the vessel operates in the Helios Pool on a voyage charter with a third party and we receive a portion of the pool profits calculated according to a formula based on the vessel's pro rata performance in the pool.

(5)

"Pool-TCO" indicates that the vessel is operated in the Helios Pool on a time charter out to a third party and we receive a portion of the pool profits calculated according to a formula based on the vessel's pro rata performance in the pool.

(6)

Currently on a time charter with an oil major that began in November 2019.

(7)

Currently on time charter with a major oil company that began in March 2019.

(8)

Currently time chartered-in to our fleet with an expiration during the first calendar quarter of 2023.

(9)

Currently time chartered-in to our fleet with an expiration during the fourth calendar quarter of 2022.

Market Outlook & Update

After a slight upturn in average propane and butane prices relative to crude prices in April 2022, propane and butane prices declined during the second calendar quarter of 2022. Propane prices in North-Western Europe fell from an average of 61% of Brent in April 2022 to 46% of Brent in June 2022. In the Far East region, propane prices reached an average of 48% of Brent by the end of the quarter from 66% on average for April 2022.

Additional supply was observed in the market with U.S. exports in the second calendar quarter of 2022 totalling 13.7 million metric tons, 1.7 million metric tons higher than U.S. exports in the previous quarter. Saudi Arabian exports in the second calendar quarter of 2022 were also higher than they were in the first calendar quarter of 2022, averaging approximately 0.6 million metric tons per month during the quarter.

Due to the decrease in propane prices in the East and the continued strength of propane-naphtha's advantage as a feedstock for the production of ethylene via steam crackers and margins for naphtha crackers (according to consultant, Next-Generation Logistic Ship's, proprietary model) were predominately negative for the period ended June 2022, with the propane margin averaging approximately $142 per metric ton of ethylene in the second calendar quarter of 2022, a significant improvement from the levels seen in the first calendar quarter of 2022. Despite this, many petrochemical operators were seen to lower operating rates over during the period.

In North-Western Europe, propane continued to provide the largest margin for the production of ethylene via steam crackers until June 2022 when high aromatic prices increased naphtha's advantage, despite negative propane-naphtha spreads. Since then, margins for naphtha have subsided with propane's advantage once again returning. Overall, margins for utilising propane as the feedstock in North-Western Europe steam crackers increased from an average of $490 per metric ton in the first calendar quarter of 2022 to over $670 per metric ton on average in the second calendar quarter of 2022. Unlike in the East, margins for European petrochemical players have turned positive for naphtha from the end of the first calendar quarter of 2022 to the beginning of the second calendar quarter of 2022.

For propane dehydrogenation (PDH) operators, margins have remained under pressure during the second calendar quarter of 2022 with some plants lowering operating rates. Furthermore, additional COVID-19 restrictions in China during the second calendar quarter of 2022 has limited the growth in Chinese demand for LPG. Imports into China remained at 6.1 million metric tons in the second calendar quarter of 2022, similar to the levels seen in the fourth calendar quarter of 2021 and the first calendar quarter of 2022.

A key factor of the market going forward will be downstream demand, particularly olefins and polyolefin growth in the East. Overall oil and gas prices will also continue to heavily influence the market particularly with the ongoing conflict between Russia and Ukraine.

The Baltic VLGC index on average increased in the second calendar quarter of 2022 to approximately $76 per metric ton from approximately $57 per metric ton in the second calendar quarter of 2022. Healthy VLGC supply/demand balance and strong bunker prices have contributed to the increased rates observed.

One VLGC was added to the fleet during the second calendar quarter of 2022, with a further 11 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 67 VLGCs equivalent to roughly 6.0 million cbm of carrying capacity are expected to be added to the global fleet by calendar year 2024. The average age of the global fleet is now approximately 10.6 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

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












Three months ended



(in U.S. dollars, except fleet data)


June 30, 2022


June 30, 2021



Statement of Operations Data









Revenues


$

76,823,722


$

62,950,738



Expenses









Voyage expenses



775,545



1,356,392



Charter hire expenses



5,402,145



3,508,070



Vessel operating expenses



17,067,913



20,281,554



Depreciation and amortization



15,809,778



17,142,915



General and administrative expenses



9,413,139



8,038,807



Total expenses



48,468,520



50,327,738



Other income—related parties



591,802



632,888



Operating income



28,947,004



13,255,888



Other income/(expenses)









Interest and finance costs



(7,958,554)



(5,649,774)



Interest income



408,278



186,299



Unrealized gain on derivatives



2,454,234



433,726



Realized loss on derivatives



(50,384)



(903,718)



Other gain/(loss), net



1,047,142



(1,453,321)



Total other income/(expenses), net



(4,099,284)



(7,386,788)



Net income


$

24,847,720


$

5,869,100



Earnings per common share—basic



0.62



0.14



Earnings per common share—diluted


$

0.62


$

0.14



Financial Data









Adjusted EBITDA(1)


$

46,871,074


$

29,778,905



Fleet Data









Calendar days(2)



1,820



2,002



Time chartered-in days(3)



182



139



Available days(4)



...