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, 2021.
Key Recent Developments
- Announced that our Board of Directors has declared a cash dividend of $1.00 per share of the Company’s common stock. The dividend is payable on or about September 8, 2021 to all shareholders of record as of the close of business on August 9, 2021.
- Classified the debt-free Captain Markos NL as vessel held-for-sale.
Highlights for the First Quarter Fiscal Year 2022
- Revenues of $63.0 million and Time Charter Equivalent (“TCE”)(1) rate for our fleet of $31,571 for the three months ended June 30, 2021, compared to revenues of $73.2 million and TCE rate for our fleet of $41,249 for the three months ended June 30, 2020.
- Net income of $5.9 million, or $0.14 earnings per diluted share (“EPS”), and adjusted net income(1) of $5.4 million, or $0.13 adjusted earnings per diluted share (“adjusted EPS”),(1) for the three months ended June 30, 2021.
- Adjusted EBITDA(1) of $29.8 million for the three months ended June 30, 2021.
John C. Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, “The safety of our seafarers and shoreside staff remains paramount. We are grateful for their dedication in these challenging times. We declared our first ever dividend and will continue to look at a variety of ways to return capital to shareholders. In addition, the prospective sale of the Captain Markos NL underscores our commitment to realize value from our asset base.”
First Quarter Fiscal Year 2022 Results Summary
Net income amounted to $5.9 million, or $0.14 per diluted share, for the three months ended June 30, 2021, compared to $12.2 million, or $0.24 per diluted share, for the three months ended June 30, 2020.
Adjusted net income amounted to $5.4 million, or $0.13 per diluted share, for the three months ended June 30, 2021, compared to $12.7 million, or $0.25 per diluted share, for the three months ended June 30, 2020. Net income for the three months ended June 30, 2021 is adjusted to exclude an unrealized gain 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 $7.3 million decrease in adjusted net income for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, is primarily attributable to a decrease of $10.2 million in revenues and increases of $2.9 million in vessel operating expenses, $0.6 million in voyage expenses, $0.2 million in depreciation and amortization, and a $1.4 million unfavorable change in other gain/(loss), net, partially offset by decreases of $3.5 million in interest and finance costs, $3.3 million in general and administrative costs, and $1.2 million in charter hire expenses.
The TCE rate for our fleet was $31,571 for the three months ended June 30, 2021, a 23.5% decrease from a TCE rate of $41,249 for the same period in the prior year, primarily driven by increased bunker costs. 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) increased from 82.3% in the quarter ended June 30, 2020 to 96.1% in the quarter ended June 30, 2021.
Vessel operating expenses per day increased to $10,131 for the three months ended June 30, 2021 compared to $8,686 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 $63.0 million for the three months ended June 30, 2021, a decrease of $10.2 million, or 14.0%, from $73.2 million for the three months ended June 30, 2020 primarily due to a decrease in average TCE rates and fleet availability despite an increase in fleet utilization. Average TCE rates decreased by $9,678 from $41,249 for the three months ended June 30, 2020 to $31,571 for the three months ended June 30, 2021. We recognized a reallocation of prior period pool profits based on a periodic review of actual vessel performance in accordance with the pool participation agreements. This resulted in a $31 per operating day increase in our fleet’s overall TCE rates for the three months ended June 30, 2021 due to adjustments related to speed and consumption performance of the vessels operating in the Helios Pool. During the three months ended June 30, 2020, we recognized a similar reallocation that resulted in a $916 decrease in our fleet’s overall TCE rates. Excluding these reallocations, TCE rates decreased by $10,625 when comparing the three months ended June 30, 2021 and 2020, primarily driven by higher bunker prices, partially offset by an increase in spot market rates during this period. The average price of very low sulfur fuel oil (expressed as U.S. dollars per metric ton), from Singapore and Fujairah increased from $272 during the three months ended June 30, 2020 to $508 during the three months ended June 30, 2021. 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 $52.790 during the three months ended June 30, 2021 compared to an average of $41.484 for the three months ended June 30, 2020. Our fleet utilization increased from 82.3% during the three months ended June 30, 2020 to 96.1% during the three months ended June 30, 2021.
Charter Hire Expenses
Charter hire expenses for the vessels chartered in from third parties were $3.5 million and $4.7 million for the three months ended June 30, 2021 and 2020, respectively. The decrease of $1.2 million, or 25.6%, was caused by a decrease in time chartered-in days from 192 for the three months ended June 30, 2020 to 139 for the three months ended June 30, 2021, due to the redelivery of one time chartered in vessel during the period.
Vessel Operating Expenses
Vessel operating expenses were $20.3 million during the three months ended June 30, 2021, or $10,131 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. Vessel operating expenses per vessel per calendar day increased by $1,445 from $8,686 for the three months ended June 30, 2020 to $10,131 for the three months ended June 30, 2021. The increase in vessel operating expenses for the three months ended June 30, 2021, when compared with the three months ended June 30, 2020, was primarily the result of an increase in crew wages and related costs of $2.3 million, or $1,159 per vessel per calendar day, and an increase in operating expenses related to repairs and maintenance, spares and stores, and coolant costs of $0.7 million, or $342 per vessel per calendar day. COVID-19 related expenses were the primary driver of the increase in crew wages and related costs, particularly in crew travel and medical costs.
General and Administrative Expenses
General and administrative expenses were $8.0 million for the three months ended June 30, 2021, a decrease of $3.3 million, or 28.9%, from $11.3 million for the three months ended June 30, 2020. This was driven by reductions of $2.4 million in cash bonuses and $1.3 million in stock-based compensation. The Compensation Committee of our Board of Directors had not yet approved cash bonuses for our named executive officers as of June 30, 2021.
Interest and Finance Costs
Interest and finance costs amounted to $5.6 million for the three months ended June 30, 2021, a decrease of $3.5 million, or 37.8%, from $9.1 million for the three months ended June 30, 2020. The decrease of $3.5 million during this period was due to (1) a decrease of $1.8 million in amortization of deferred financing fees and loan expenses, primarily resulting from accelerated amortization of $2.1 million during the three months ended June 30, 2020 that did not recur in the current period, and (2) a decrease of $1.7 million in interest incurred on our long-term debt, primarily resulting from a reduction of average indebtedness and a reduced margin on the commercial tranche of the 2015 AR Facility due to the results of our Average Efficiency Ratio (which weighs carbon emissions for a voyage against the design deadweight of a vessel and the distance travelled on such voyage). Average indebtedness, excluding deferred financing fees, decreased from $676.0 million for the three months ended June 30, 2020 to $600.0 million for the three months ended June 30, 2021. As of June 30, 2021, the outstanding balance of our long-term debt, net of deferred financing fees of $10.0 million, was $579.1 million.
Unrealized Gain/(Loss) on Derivatives
Unrealized gain on derivatives amounted to $0.4 million for the three months ended June 30, 2021, compared to $0.5 million loss for the three months ended June 30, 2020. The favorable $0.9 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.
Market Outlook & Update
Global seaborne LPG supply increased an estimated 1.5 million tons during the second calendar quarter of 2021 compared to the first calendar quarter of 2021 and a 6% increase from the same period of 2020. The majority of this increase was from the U.S. where exports reached an average of 4.4 million tons per month in the second calendar quarter of 2021. Middle Eastern LPG seaborne supply remained relatively constant with production cuts and Iranian Sanctions remaining in place.
Crude oil prices rose throughout the second calendar quarter of 2021 with Brent averaging approximately $69 per barrel, compared to $32 per barrel during the same period in 2020. Flat prices of propane and butane consequently rose, however, the percentage of propane and butane compared to crude oil dropped from the previous quarter across all major regions.
With higher seaborne supply, imports into the major consuming regions rose particularly to China, where LPG imports increased from around 5.7 million tons during the first calendar quarter of 2021 to 6.5 million tons during the second calendar quarter of 2021. After two new propane dehydrogenation plants began operating in the first calendar quarter of 2021, a new steam cracker utilizing imported propane as the feedstock started production in April 2021.
Petrochemical margins increased throughout the first calendar quarter of 2021 and this trend continued into the second calendar quarter of 2021 as a number of facilities did not return to full operation after being shut in the first quarter. This was most noticeable in the western hemisphere. Consumption of LPG as a feedstock for petrochemicals increased in the second calendar quarter of 2021 compared to the first quarter with propane favored as a feedstock for the production of ethylene over naphtha. The propane-naphtha spread in north-western Europe widened to -$90 per ton on average in the second calendar quarter of 2021, compared to an average of -$23 per ton during the first quarter. Towards the end of the second quarter, however, margins for the production of ethylene via steam cracking started to decline, with the largest declines in the eastern hemisphere.
The Baltic VLGC index averaged around $53 per ton in the second calendar quarter of 2021, only $2 per ton below the performance of the Baltic Index as of the first calendar quarter of 2021.
Currently, the VLGC orderbook stands at approximately 22% of the current global fleet. An additional 70 VLGCs, equivalent to roughly 6.2 million cbm of carrying capacity, are expected to be added to the global fleet by calendar year-end 2023. The average age of the global fleet is now approximately 10 years old.
