Dorian LPG Q1 2027 Earnings Call Transcript

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Provided by Quartr
August 5, 2026

Key Takeaways

  • Positive Sentiment: Dorian reported its highest-ever TCE revenue per available day at $75,926, while adjusted EBITDA reached $165.4 million, including a $30.1 million gain on the Cobra sale.
  • Positive Sentiment: VLGC market conditions remained strong as Middle East disruptions redirected LPG trade toward the U.S. Gulf, which posted record exports of nearly 20.8 million tons and increased ton-mile demand. Management said rates have remained healthy despite some Panama Canal-related cost pressure.
  • Positive Sentiment: The company’s balance sheet has strengthened following vessel sales and debt repayments, with cash approaching $600 million, debt-to-total capitalization of 29.3%, and net debt-to-total capitalization of 9.7%. Dorian also expects lower interest and principal-amortization costs after approximately $80.6 million of debt reductions.
  • Neutral Sentiment: Dorian declared a $1-per-share dividend, its 20th dividend payment, while emphasizing that future capital allocation will balance shareholder returns, debt reduction, and conservative fleet renewal. The company has ordered one dual-fuel 90,000-cubic-meter VLGC for mid-2029 delivery and is evaluating additional renewal opportunities without excluding measured fleet expansion.
  • Negative Sentiment: Management noted that the VLGC order book is increasing and expressed concern about excess newbuilding activity, which could pressure future returns. Freight markets also corrected from record highs after the June ceasefire memorandum, although management believes a lasting peace would not necessarily be negative for the sector.
AI Generated. May Contain Errors.
Earnings Conference Call
Dorian LPG Q1 2027
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, and welcome to the Dorian LPG first quarter 2027 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Additionally, a live audio webcast of today's conference call is available on the Dorian LPG's website, which is www.dorianlpg.com. I would now like to turn the conference over to Theodore Young, Chief Financial Officer. Thank you. Mr. Young, please go ahead.

Speaker 1

Thank you, Tasha. Good morning, everyone, and thank you all for joining us for our first quarter 2027 results conference call. With me today are John Hadjipateras, Chairman, President, and CEO of Dorian LPG Ltd., John Lycouris, Head of Energy Transition, and Taro Rasmussen, Vice President of Chartering. Many of our remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe, or similar indications of future expectations. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions.

Speaker 1

Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove to be incorrect, actual results may vary materially from those we express today. Additionally, let me refer you to our unaudited results for the quarterly period ended June 30, 2026 that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-K, where you'll find risk factors that could cause actual results to differ materially from these forward-looking statements. Finally, I would encourage you to review the investor highlights posted this morning on our website. With that, I'll turn over the call to John Hadjipateras.

Speaker 2

Thank you, Ted. Good morning, everyone. Thank you for joining Ted, John, Taro, and me. Before my colleagues provide you with detailed comments on our financial results, our market outlook, and our operational progress, I'd like to highlight the following. Our recently declared dividend of a dollar per share totaling $42.8 million will be our 20th dividend payment, bringing total dividends distributed to over $810 million and total capital return to shareholders to over $1 billion since our IPO. This past quarter, the VLGC market experienced another three months of strong rates as the continued disruption to Middle East volumes drove much of the fleet to the U.S. Gulf and supply chain inefficiencies apparently increased ton mile demand. The closure of the Strait of Hormuz cut off nearly all supply volumes from the Middle East.

Speaker 2

Liftings from the region fell to roughly 3.4 million tons in the quarter, down more than 70% from the same period last year. Countries such as India and Indonesia, who were already starting to diversify supply away from the Middle East, were now forced to source all their LPG from U.S. Gulf, adding healthy ton mile demand. Fortunately, U.S. production has continued to surprise to the upside. U.S. exports reached a record of nearly 20.8 million tons, up 20% from a year ago. The United States now accounts for approximately 65% of global seaborne LPG exports, up from less than 50% a year ago. The conflict in the Middle East has also disrupted LNG and oil cargoes out of the region and created more demand for those commodities to be sourced from the U.S.

Speaker 2

This increased congestion in Panama and pushed many ships to route around the Cape of Good Hope in both ballast and laden conditions, amplifying the ton mile demand increase. The market strength has carried into this quarter, with BLPG reapproaching record territory at around $175,000 a day. Panama is congested again with elevated auction rates. Plant starts in Europe have increased LPG demand for steam cracking there, and Chinese petrochemical demand is expected to increase in the coming months. Taro will elaborate on the freight market over the last quarter and on our outlook going forward. This year, we contracted to sell 4 and have so far delivered 3 ships to their buyers. We contracted to build one 90,000 cubic meter dual-fuel Panamax VLGC at Hyundai Heavy Industries, and our plan is to pursue a conservative renewal program. We believe that a conservative program is appropriate at this time.

Speaker 2

Our investment in energy-saving devices have once again proven their value as they are reducing our overall fuel consumption in an elevated bunker price environment. Now I'll hand over to Ted, who will present our quarterly financials and our view for the future as well.

Speaker 1

Thank you, John.

Speaker 2

Ted.

Speaker 1

My comments this morning will focus on capital allocation, our financial position and liquidity, and our unaudited first quarter results. We've been active on the fleet renewal front in recent months. As we discussed in our last earnings call, we completed the sale of Cobra in May and prepaid $16.5 million of debt on her. We also completed the sales of Corsair and Constellation in July, generating vessel sale proceeds of approximately $166.4 million net of commission. The associated debt for those two vessels of $48.1 million was repaid in connection with the sales. We've also signed a memorandum of agreement to sell the Clermont and expect to complete the sale in September or October. Together with our recently contracted new building with 2029 delivery, measured fleet renewal remains very central to our thinking around capital allocation.

Speaker 1

At June 30, 2026, we reported $342 million in cash, which was sequentially up from the previous quarter. Since then, we have received sale proceeds from Cobra, Corsair, and Constellation and enjoyed a particularly strong market. Our current cash balance stands now at almost $600 million. Our debt balance at quarter end was $512.4 million. We have given notice of repurchase to the owners of two of our Japanese-financed vessels, the Cougar and the Cresques, and expect to close both transactions by the end of the September 30 quarter. The expected total cash application for those two vessels will be approximately $56 million. We are currently evaluating refinancing options for the two vessels.

Speaker 1

Pro forma for the sale of the Clermont, which again, we anticipate occurring no later than mid-October, and the already concluded sale of the Constellation, our debt balance at June 30 would have been about $473 million. Using our stated book debt at June 30th of $512.4 million, our debt to total book capitalization stood at 29.3% and our net debt to total cap at 9.7%. We have well-structured and attractively priced debt with a current all-in cost of about 5.1%, an undrawn $41 million revolver, and one debt-free vessel. Coupled with our strong cash rebalance, we have a comfortable measure of financial flexibility. We currently expect our cash cost per day for the coming year to be approximately $26,000 to $27,000 per day, excluding capital expenditures associated with the dry docking of the Captain John that's currently planned for our fourth fiscal quarter.

Speaker 1

For discussion of our first quarter results, again, you may find it useful to refer to the investor highlight slides posted this morning on our website. I would also remind you that my remarks will include a number of terms such as utilization, TCE, available days, and adjusted EBITDA. Please refer to our filings for the definitions of these terms. Turning to our first quarter chartering results, as our entire spot trading program is conducted through the Helios Pool, its reported spot results are the best measure of our spot chartering performance. For the June 30 quarter, the Helios Pool earned a TCE per day for its spot and COA voyages of $82,445, reflecting the overall favorable VLGC market conditions. The overall TCE result for the pool, which was over $75,100 per day, also shows the strength of our TC out portfolio.

Speaker 1

On page four of our investor highlights material, you can see that we have seven Dorian vessels on time charter within the pool, indicating spot exposure of just over 75% for the 29 vessels in the Helios LPG Pool. Dorian's reported TCE revenue per available day for the quarter was $75,926, which is the highest TCE rate we have reported in our corporate existence. The current rate environment remains healthy, though Panama Canal transit fees are having some impact on realized rates. As always, we will issue our forward-booking information in the coming weeks. Daily OpEx for the quarter was $10,308, excluding dry docking-related expenses, which was a modest increase over the prior quarter. Increased freight, which isn't surprising given the macro environment, and maintenance and repair costs drove the increase.

Speaker 1

Our gross time charter in expense for the sixth time charter in vessels came in at $22.6 million, or $41,418 per TC-in day. Thus, those vessels contributed positively to our quarterly profits. As a reminder, the profit-sharing expense on our P&L represents MOL Energia's portion of the net chartering profit. That's charter hire earned less charter hire expense on the BW Tokyo. Total G&A for the quarter was $13.5 million, and cash G&A, excluding non-cash comp expense, was about $11.5 million. Note that this amount included about $4.2 million of incentive compensation expense, which leaves our core G&A around $7.3 million. Our reported adjusted EBITDA for the quarter was $165.4 million, including a $30.1 million gain on the sale of the Cobra. Total cash interest expense for the quarter was $6.9 million, which is down sequentially from the prior quarter. Scheduled principal amortization remains steady at around $13 million.

Speaker 1

The $80.6 million in debt reductions, including the expected payoff of the Clermont, will reduce our principal amortization by around $2 million per quarter and reduce interest by about $1 million per quarter on a run rate basis. The irregular cash dividend declared at the beginning of the month of $1 per share is our 20th and brings to $19.65 per share in irregular dividends that we've paid since September 2021. Including that irregular dividend, we will have paid nearly $811 million of dividends and have generated net income of $974 million over the same time period. Our board weighs current earnings, our near-term cash forecast, fleet investment needs, and the overall market environment among a number of factors in making its determination of the appropriate level, if any, for our dividends. Our sector can be a volatile one, and our dividend policy needs to reflect that.

Speaker 1

The $1 per share irregular dividend reflects a constructive market outlook while also allowing the company financial flexibility for future fleet reinvestment. We continue to be on the lookout for those sorts of opportunities and will be judicious with our free cash flow, working to balance shareholder distributions, debt reduction, and fleet investment. With that, I'll pass it over to Taro Rasmussen.

Speaker 3

Thank you very much, Ted. Good day, everyone, and thank you for dialing in. The quarter ending June 30th, 2026 was primarily impacted by the de facto closure of the Strait of Hormuz for most of the quarter. Although the initial shocks to the market were witnessed in March, there were direct impacts to the VLGC market over most of the quarter through realignment of trade flows, sentiment-driven arbitrage, and higher costs. The inefficiencies to the market and heightened buying appetite in importing regions resulted in record-high freight markets for VLGCs. Some of the disruptions and urgency for sourcing commodities subsided when the U.S.-Iran ceasefire MOU was signed in mid-June. At time of speaking, we can see that the prospects for enduring peace are fragile. Regarding the higher costs, bunker prices and auction prices at the Panama Canal stand out.

Speaker 3

Starting with bunker prices, the largest voyage cost for shipping companies, the average quarter-on-quarter increase was about 36% across a basket of Rotterdam, Fujairah, Japan, Singapore, and Houston. This price increase is unit cost only. There were also unquantifiable costs incurred due to impractically long lead times for securing bunkers, as availability of fuel was inconsistent. The inconsistency of bunker fuel availability was a direct result of the Middle East situation, impacting the flows of all hydrocarbons to the wider world. It was the disrupted flows in other segments that significantly contributed to the increased auction prices at the Panama Canal. As oil, LNG, and LPG product prices spiked in April, vessels of all segments prioritized Panama transits to deliver cargoes to Asia from the U.S. Gulf in a hurry.

Speaker 3

For example, LNG carriers had not won any auctions in January, February, but succeeded in April, and the average auction price in April was almost $900,000 higher than in March. Furthermore, waiting time increased significantly, particularly for ballasting vessels, as the number of auctions were reduced in April and laden vessels on the southbound passage were prioritized during May. As for the record-high postings of the Baltic indices, higher freight was supported by positive buying appetite by importers, widening the arbitrage, and the realigned trade partially exacerbated by vessels avoiding the Panama Canal and sailing longer distances. Import demand was high due to the supply shock from the Middle East, and the West to East arbitrage was overall higher than ever before. The activity levels for sourcing LPGs from exporting regions, excluding the Arabian Gulf, was sporadic because sentiment dictated the levels of activity.

Speaker 3

Crude oil and LPG prices fluctuated in line with news headlines interpreting mixed signaling by U.S. and Iranian sources hinting ceasefires while also making aggressive overtures. These short-term price fluctuations are an explanation for why shortage-stricken countries did not drive product markets upwards linearly. Amidst the widened West to East arbitrage, the market witnessed increased shipping demand. High production and increased terminal capacity in the U.S. Gulf yielded a new export record for the quarter, almost 1.8 million tons higher than the previous quarterly record, and most of the tons flowed the long passage to Asia. As an example, U.S. Gulf cargoes to India increased about 138% for April, May 2026 compared to the February-March period. The freight markets fell from the record highs in mid-June when the MOU ceasefire was announced.

Speaker 3

Markets welcomed the news and priced in the theoretically available supply of oil and gas on previously trapped vessels likely longing to depart the Arabian Gulf. The price correction was likely a reflection of increased supply availability rather than a firm belief in a return to pre-conflict normalcy in the Middle East. Mixed messaging and occasional breaches in the ceasefire have justified hesitancy by many market players to rely on Middle East exporters for steady supply. At this time, the situation remains unclear, but the breakdown of ceasefire talks in early July reaffirms the fragility of peace regarding the Strait of Hormuz. The quarter ending June 30th, 2026, was shaped by the markets adapting to the regional conflict impacting the world economy. The disruptions presented threats and opportunities to the market, but the challenges in providing reliable energy to the world was ultimately addressed by the VLGC market.

Speaker 3

The company remains well-positioned to tackle any upcoming challenges that may emerge. Thank you. I will now pass over to Mr. John Lycouris.

Speaker 4

Thank you, Taro. At Dorian LPG, we remain committed to continually enhancing energy efficiency and promoting the sustainability of both our operations and of our vessels. We currently operate 15 scrubber-fitted vessels and six dual-fuel LPG vessels after taking delivery of our VLGC/VLAC Areion last quarter and completing the sale of two scrubber vessels, the 2014-built Corsair and the 2015-built Constellation last month. Amidst the high oil prices driven by the ongoing Middle East conflict and the frequent disruptions in the Strait of Hormuz, bunker price differentials have remained elevated, underscoring the value of scrubbers and our fuel efficiency initiatives. Scrubbers neutralize sulfur oxides from fuel oil while significantly reducing particulate matter and black carbon emissions compared with conventional very low sulfur fuel oils.

Speaker 4

For the first fiscal quarter of 2027, scrubber vessel savings were lower than last quarter as a result of four scrubber-fitted vessels being on time charter out. Savings amounted to approximately $1,971 per calendar day per vessel, net of all scrubber operating expenses. Fuel differentials between high sulfur fuel oil and low sulfur fuel oil averaged $117 per metric ton, while that of LPG versus the very low sulfur fuel oil stood at about $369 per metric ton, making LPG economically attractive for our dual-fuel vessels. As previously announced, we have concluded a shipbuilding contract with Hyundai to purchase a 90,000 cubic meter Panamax newbuilding VLGC with dual-fuel LPG main engines for delivery in mid-2029. This vessel will be fitted with a shaft generator, which allows the vessel to harness the mechanical energy from the main propulsion system, optimizing operational power efficiency and reducing the vessel's overall emissions.

Speaker 4

The current net zero framework, which was introduced in MEPC 84, remains the basis of negotiations currently. Alternative proposals did not gain sufficient support, no compromise was reached on the contested fuel standard provisions or on the proposed net zero funds. As next steps, an adoption vote is scheduled for Friday, 4th of December, alongside the MEPC 85, which will take place between the 30th of November and the 3rd of December. Approval will require two-thirds majority of the MARPOL Annex VI parties, as any net zero framework agreement would become effective approximately 16 months after adoption. Implementation of any agreement is unlikely to be before 2028. We are confident that the Dorian LPG fleet will be prepared to meet regulatory changes in the future. Now I would like to pass it over to Mr. John Hadjipateras for his final comments.

Speaker 2

Thank you very much, John. Tasha, if we have any questions, we're ready to take them now.

Operator

Thank you. If you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We'll take our first question from Omar Nokta with Clarksons Securities. Please go ahead. Your line is open.

Speaker 5

Thank you. Thanks, operator. Hi, guys. Good morning.

Speaker 2

Good morning, Omar.

Speaker 5

Hi. Thank you. A strong quarter. Things continue to look quite very bright here. Your balance sheet is now shifting into net cash territory, and it seems like you may be there already following those 2 VLGC sales. You've got one more pending. I guess you've added the new building back in June, the dividends back to that dollar threshold. How should we think about uses of cash from here? Recently, I think about a couple of months ago, you mentioned new buildings looking more interesting. Sure enough, you ordered one vessel. Are new buildings still an attractive opportunity? If that's still the case, I guess just generally, how do you prioritize cash flow from here, just given where things are at for Dorian?

Speaker 2

Well, as we said last time, I think, we are mindful of the fact that we have a concentration of 2015 kind of build, majority of our ships built at that time. We have obviously in mind a fleet renewal program. As I said in my remarks, we believe that the best way to go forward is conservatively. That's not to say that it doesn't require a lot of cash. And it will. We continue to engage with shipyards to see what opportunities there are that we feel are right for us right now. I think that's the way to look at it, Omar.

Speaker 5

Thanks, John. I guess, kind of from those comments, it seems more of, say, fleet rejuvenation, perhaps fading out of the 2015s and getting into newer versus say, just altogether fleet expansion.

Speaker 2

We would not exclude fleet expansion.

Speaker 5

Okay. Then maybe just one more and kind of a bit more on the market. Clearly, we'd say this year it's been seven going on to eight months now where you've had elevated earnings. Spot rates are fairly strong. Pre-Houthi moves that got even stronger following all those disruptions. Recently with the reopening and reclosing back and forth, spot rates have generally remained quite high. Volatile, but higher. How do you think, or have you guys given some thought as to assuming that this latest peace agreement comes to fruition and we get another sort of pause in hostilities, how do you think the VLGC market kind of moves forward from here over these next few months?

Speaker 2

You see the shipping markets, every time there's a threat of peace, the oil price then goes down, and the shipping markets seem to suffer. I think it's kind of silly, to be honest. I don't see that the day after the day after is going to be negative. I think, okay, you won't have the disruption, you won't have the displacement of tonnage west to the same degree. You'll have tonnage back in the east. Traffic will increase, and overall replenishment will take place. I'm not worried about it, and I don't think, again, that the markets react I don't think it's really correct when they look at it as a negative, when peace is viewed as a negative.

Speaker 5

Yeah. No, appreciate that. Thanks, John. I appreciate the comments. I'll turn it back.

Operator

Thank you. Again, that is star one to ask a question. We'll take our next question from Stephanie Moore with Jefferies. Please go ahead. Your line is open.

Speaker 6

Great. Good morning. Thank you. Continuing on those prior questions. A lot of moving pieces here. It would be helpful. Could you talk a bit about how spot earnings are tracking so far in the September quarter and whether vessel utilization, waiting times remain elevated relative to the June quarter? I think that's a good place to start. I will follow up. Thank you.

Speaker 2

Stephanie.

Speaker 4

Sorry.

Speaker 2

We'll give that forward booking information later. It'd really be premature for us to comment on any of that right now. I certainly understand the basis for the question. If my colleagues want to provide some general comments, by all means, we will provide more specific data later in the quarter.

Speaker 6

That's fine. That's fair. That's definitely fair. I'll move on. I did want to jump a little bit to the industry order book. It does seem to have risen a bit here. I guess as you think about your own vessel and capital allocation plans, what gives you confidence that the returns on a 2029 delivery should remain attractive? How are you underwriting that investment?

Speaker 2

John, can you answer that question for me? Because I didn't hear it very well. I'm sorry. It's not coming across well.

Speaker 4

Stephanie, would you like to rephrase it again? Is it the returns on the current pricing of new building ships? Is that what you're asking?

Speaker 6

Well, yeah. I guess, it does appear that the industry order book is rising. It's a pretty decent, fairly high percentage of the fleet. How should we think about, as you think about a 2029 delivery, what gives you confidence that those returns should be sustainable by 2029? How are you underwriting those investments?

Speaker 6

obviously, you're looking a couple of years out, what gives you confidence that we'll still remain in an attractive environment to kind of make those investments?

Speaker 2

Okay. We think that the prices to first of all, would I be happier with less new buildings on order? Clearly, yes, right? I don't like to see the new order book expanding as much as it has. People seem to be catching on and getting in. That this is a good sector to be in. From our point of view, we look at it on a long-term, we look at it as an ongoing business. Whether we're ordering here or at a different point in the cycle, I think that we take a measured view, we take an incremental view. On average, we're here for the long term. We're here to renew our tonnage with the latest and the best and continue providing a good service.

Speaker 2

I think that's the way we can assure the best returns for our shareholders and our investors.

Speaker 6

Understood. Okay. Maybe last one for me here. Obviously, to your point, given today's overall environment, are you seeing more customers showing greater interest in, I guess, securing multi-year coverage? Maybe if you could talk a little bit about some of those charter economics relative to spot rates. I guess any general commentary on the time charter environment. Thanks.

Speaker 2

Sure. Taro, do you want to answer that?

Speaker 3

Yeah, I'm happy to do so. Thank you for the question, Stephanie. As we have released our results and disclosed some increased time charter coverage, it is indicative that there is appetite out in the market. Regarding the question about economics, I won't speak on behalf of how others in the supply chain see it, but clearly amidst an environment of sourcing, just access to commodities, and yeah, certainly also for LPG, there is appetite. It's a security game. Yeah, I hope that answers the question. It was quite brief, but security is important. That has been highlighted these last few months.

Speaker 6

Absolutely. Thank you, guys.

Speaker 2

Thanks, Stephanie. Thank you, Stephanie.

Operator

Thank you. At this time, this concludes our question and answer session. I will now turn the meeting back to John Hadjipateras for closing remarks.

Speaker 2

No, thank you very much for your questions, both very interesting. We look forward to engaging with you again during the quarter and at next quarter's earning call. Thank you.

Operator

This concludes today's meeting. We appreciate your time and participation. You may now disconnect. Thank you.

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