Dorian LPG Q2 Earnings Call Highlights

Key Points

• Dorian LPG reported record results, with adjusted EBITDA of $242 million, including $63.6 million in vessel-sale gains, and record TCE revenue of nearly $97,000 per available day. It declared a $1.25-per-share dividend.
• Vessel shortages supported sharply higher freight rates as longer Cape of Good Hope routes, Panama Canal congestion and Middle East shipping disruptions absorbed capacity. The Baltic Exchange’s BLPG3 TCE rose from about $82,000 per day in July to roughly $198,000 by September’s end.
• Vessel sales and pool distributions lifted cash to nearly $785 million, while a new seven-year credit facility lowered borrowing costs. Dorian ordered three dual-fuel VLGCs for 2030 delivery, bringing its newbuilding total to four.

Dorian LPG NYSE: LPG reported record adjusted EBITDA and its highest-ever quarterly charter earnings for the fiscal second quarter, as Middle East shipping disruptions and Panama Canal congestion tightened the market for very large gas carriers.

Adjusted EBITDA reached $242 million in the quarter ended September 30, including $63.6 million in gains from the sales of the Corsair and Constellation, Chief Financial Officer Ted Young said on the earnings call. Excluding those gains, EBITDA was $178.4 million.

The company’s reported time charter equivalent, or TCE, revenue per available day was just under $97,000, a corporate record for the third consecutive quarter. Young attributed the result’s improvement over prior guidance to demurrage booked in September and favorable mark-to-market adjustments on contracts of affreightment.

Chairman, President and CEO John Hadjipateras said strong freight rates and vessel-sale gains contributed to record earnings. The company declared a $1.25-per-share dividend, which he said would bring total shareholder returns since its 2014 initial public offering to more than $1.1 billion.

Vessel Shortage Supports Freight Rates

Hadjipateras said U.S. export facilities did not operate at maximum capacity during the quarter, which he viewed as evidence of a shortage of ships. Vice President of Chartering Taro Rasmussen said vessel availability was the main constraint on exports.

Rasmussen said U.S. Gulf VLGC loadings averaged about 102 a month during the quarter, compared with approximately 113 a month in the prior quarter. Longer voyages around the Cape of Good Hope absorbed vessel capacity as congestion and restrictions complicated Panama Canal transits, he said.

Rasmussen also said Middle East exporters have used shuttle operations and ship-to-ship transfers to move cargo through the Strait of Hormuz. The process is logistically inefficient because of irregular vessel availability and scheduling, he said, adding that available data suggested regional export volumes were about half their pre-conflict levels.

The Baltic Exchange’s BLPG3 calculated TCE rose from about $82,000 per day on July 1 to roughly $198,000 per day on September 30, Rasmussen said. He cautioned that the calculation assumes a roughly 60-day round trip, rather than approximately 80 days when a vessel’s ballast voyage goes around the Cape of Good Hope, and does not account for delays and other costs.

Asked how a potential easing of Middle East tensions might affect rates, Hadjipateras said the market could react quickly but that he did not expect peace to be a net negative over the medium to long term. A reopening of Hormuz could increase volumes to be shipped, although it would take time for the market and vessel movements to rebalance, he said.

Sales and Refinancing Build Liquidity

Dorian completed the sales of the Clermont and Captain John NP in October for approximately $167.4 million net of commission, Young said. The company repaid $16 million of debt associated with the Clermont and expects to recognize more than $88 million in gains from the two sales in the following quarter.

Hadjipateras said Dorian had sold five ships during the year at an average price of about $83 million. The vessels had an average age of nearly 13 years. While he did not rule out further sales, he said the company was not actively seeking to sell more ships at present.

Dorian also ordered three 90,000-cubic-meter, dual-fuel Neo-Panamax VLGCs from Hanwha Ocean for approximately $338 million, with delivery scheduled for 2030. The order brought its total number of newbuildings to four. Hadjipateras said the company was content with its current order book and was not in a rush to add vessels, though a natural replacement cycle would require more newbuildings in coming years.

Young said the company had nearly $785 million in cash at the time of the call, up from $578.8 million at September 30, following the vessel sales and distributions from its Helios Pool. It had approximately $320 million in net cash using current balances and the debt repayment, he said.

In September, Dorian entered a seven-year, $368.4 million credit facility to refinance several existing facilities. The financing carries a margin of 140 basis points over SOFR, approximately 60 basis points below the margin on one of the refinanced facilities, according to Young.

Fuel Savings and Dividend Policy

John Lycouris, head of energy transition, said 14 of the company’s 22 commercially operated vessels were fitted with scrubbers and five were dual-fuel LPG vessels. Scrubber savings averaged approximately $4,174 per calendar day per vessel during the quarter, net of operating expenses, exceeding savings in each of the previous 11 quarters, he said.

Young said the board considers earnings, near-term cash flow, fleet investment needs and market conditions when determining dividends. The latest $1.25-per-share payment reflects a constructive market outlook while preserving flexibility for fleet reinvestment, he said.

About Dorian LPG (NYSE:LPG)

Dorian LPG Ltd. NYSE: LPG is a maritime transportation company that owns and operates liquefied petroleum gas (LPG) carriers. The company primarily transports propane, butane and other LPG products for energy companies, commodity traders and other commercial customers under time-charter, voyage-charter and other contractual arrangements.

Dorian LPG's fleet is focused primarily on very large gas carriers (VLGCs), including modern, fuel-efficient vessels designed to transport LPG in large quantities over international trade routes.

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