BW LPG Q1 Earnings Call Highlights

Key Points

• BW LPG posted strong Q1 results, with time charter equivalent income of $55,500 per day and profit after minority interests of $164 million, helped by historically high VLGC freight rates driven by Middle East disruptions and longer LPG trade routes.
• The board declared a $0.67 per share dividend, and the company ended the quarter with lower leverage, healthy liquidity of $680 million, and a strong outlook for Q2 with guidance of about $81,000 per day.
• BW LPG announced a major fleet renewal plan, ordering eight Panamax newbuildings at about $117.5 million each, with deliveries starting in 2029; management said the move will reduce the fleet’s average age and “future-proof” its composition.

BW LPG NYSE: BWLP reported sharply higher first-quarter earnings and announced a major fleet renewal program, as management said geopolitical disruptions in the Middle East and shifting LPG trade flows have pushed very large gas carrier freight rates to historically elevated levels.

Chief Executive Officer Kristian Sørensen said the first quarter was marked by “significant geopolitical volatility,” with the Middle East conflict and the continued closure of the Strait of Hormuz creating inefficiencies that drove more LPG cargoes toward the U.S. Gulf and supported higher shipping demand.

The company reported time charter equivalent income of $55,500 per available day, above its guidance of $54,000 per day, and $51,300 per calendar day. Profit after minority interests was $164 million, or $1.08 per share. BW Product Services, the company’s trading arm, reported gross profit of $127 million and profit after tax of $98 million, driven largely by unrealized mark-to-market gains on its portfolio.

For the second quarter, BW LPG guided for approximately $81,000 per day, with 85% of available days fixed. Sørensen said that level is “solid” and well above the company’s all-in cash breakeven of $24,500 per day. The second-quarter figure includes fixed time charter coverage for 40% of available days at $44,000 per day.

Dividend Declared as Earnings Strengthen

Chief Financial Officer Samantha Xu said BW LPG reported net profit after tax of $187 million for the quarter, including $9 million from BW LPG India and $98 million from BW Product Services. Profit attributable to equity holders was $164 million.

The board declared a dividend of $0.67 per share. Sørensen said $0.56 represented a 100% payout of first-quarter shipping profit, while $0.11 came from BW Product Services’ final dividend from 2025. Xu noted that the 100% shipping profit payout exceeded the company’s guided 75% payout ratio under its dividend policy.

“The dividend decision is a reflection of a continuous forward-leaning principle to give back to our shareholders in a good market,” Xu said, adding that the decision was supported by healthy liquidity and a positive market outlook.

BW LPG ended the quarter with a net leverage ratio of 26.3%, down from 28.4% at the end of 2025, reflecting principal repayments during the period. Shareholders’ equity stood at $2 billion. The company reported annualized return on equity of 38% and return on capital employed of 30% for the quarter.

Company Orders Eight Panamax Newbuildings

BW LPG also announced that it signed a contract with HHI for eight 90,000 cubic meter Panamax newbuildings. The average newbuilding price is approximately $117.5 million per vessel, subject to final technical specifications. Deliveries are expected from the start of 2029 through the second quarter of 2030.

Sørensen said the order supports BW LPG’s ongoing fleet renewal program and would reduce the average age of the current fleet by about three years after the final vessel is delivered. He described the Panamax design as flexible and said it would help “future-proof” the company’s fleet composition.

Management said 30% of the total newbuilding price is expected to be paid within the next six months, while various financing options are being considered. Xu said BW LPG had $680 million of liquidity at the end of the first quarter, including $176 million in cash and $442 million in undrawn credit facilities, providing a base to support the newbuilding program.

Middle East Disruption Reshapes LPG Trade

Sørensen said the closure of the Strait of Hormuz has introduced a “structural disruption” to Middle East LPG exports, removing a significant portion of VLGC loading volumes and forcing trade flows toward longer-haul routes from the U.S. Gulf to Asia.

He said the U.S. Gulf has effectively become the key supplier of LPG to Asia, operating close to maximum utilization as it replaces constrained Middle Eastern export volumes. At the same time, a larger-than-expected number of VLGCs remained idle in the Arabian Sea while waiting for the strait to reopen, further tightening vessel availability.

BW LPG said U.S. propane inventories entered 2026 well above historical norms, at about 100 million barrels compared with 85 million barrels a year earlier. Strong production, stable domestic demand and expanded U.S. Gulf export infrastructure helped create a persistent export surplus.

Management said Panama Canal congestion has added another layer of inefficiency. Sørensen said some VLGCs are sailing via the Cape of Good Hope, extending voyage distances between the U.S. and Asia and absorbing additional shipping capacity. During the Q&A session, he said auctions for Panama Canal transit slots had recently ranged from several hundred thousand dollars to as high as $4 million, before canal fees.

Fleet Coverage and Trading Results Discussed

Xu said BW LPG fixed 53% of its time charter portfolio in the first quarter, including 41% fixed-rate time charters. For full-year 2026, the company has secured 42% of its portfolio through fixed-rate time charters and FFA hedges at $44,800 and $48,100 per day, respectively. She said the time charter-out portfolio is expected to generate about $245 million.

During the Q&A session, Sørensen said BW LPG generally aims to have about 40% time charter coverage and expects to increase coverage for 2027 if market levels are attractive.

Product Services posted a realized loss of $10 million in the first quarter, but also reported a $145 million increase in mark-to-market value on cargo positions, partly offset by an $8 million decrease in paper positions. Xu said the trading model combines cargo, paper and shipping positions, and cautioned that trading gains and losses can fall across different financial periods and should not be extrapolated from past performance.

In response to an analyst question about whether recent mark-to-market gains could be secured, Sørensen said the Product Services model is based heavily on hedging positions and locking in margins through the paper market. He said BW LPG expects “a large part” of the mark-to-market gain to be realized in the second quarter and possibly into the third quarter, while noting that valuation corrections are possible after very high market levels.

Market Outlook Remains Tied to Hormuz and Canal Conditions

BW LPG said the VLGC fleet has grown to 429 vessels on the water, while the order book includes 130 VLGCs under construction with deliveries stretching into early 2030. Sørensen also noted that 9% of the fleet is older than 25 years and that 53 VLGCs are considered part of the shadow fleet.

Management said its forecast assumes the Strait of Hormuz reopens during the second quarter of 2026, followed by gradual normalization, though Sørensen emphasized that timing is uncertain. He said repairs to production and export infrastructure could take a year or longer before Middle East LPG exports return to pre-war levels.

BW LPG also said it still has one vessel from its India fleet inside the Persian Gulf on time charter. Two other vessels safely transited the Strait of Hormuz in April. Sørensen said the remaining vessel is carrying cargo and remains on time charter, with the company focused on ensuring safe transit once the strait reopens.

About BW LPG NYSE: BWLP

BW LPG NYSE: BWLP is a pure‐play owner and operator of liquefied petroleum gas (LPG) carriers. The company's core business centers on the maritime transportation of LPG, predominantly propane and butane, under both time‐ and voyage‐charter arrangements. Its fleet comprises pressurized and semi‐refrigerated vessels designed to meet the specific requirements of LPG producers, traders and end‐users around the world.

Headquartered in Singapore, BW LPG serves a global customer base, with commercial offices in key energy hubs including Houston, London, Dubai and Tokyo.

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