Dorian LPG Ltd. Announces First Quarter Fiscal Year 2021 Financial Results

STAMFORD, Conn., Aug. 4, 2020 /PRNewswire/ -- Dorian LPG Ltd. (NYSE: LPG) (the "Company," "Dorian LPG," "we," 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, 2020.

Highlights for the First Quarter Fiscal Year 2021

• Revenues of $73.2 million and Time Charter Equivalent ("TCE")⁽¹⁾ rate for our fleet of $41,249 for the three months ended June 30, 2020, compared to revenues of $61.2 million and TCE rate for our fleet of $29,671 for the three months ended June 30, 2019.
  
  
• Net income of $12.2 million, or $0.24 earnings per diluted share ("EPS"), and adjusted net income⁽¹⁾ of $12.7 million, or $0.25 adjusted earnings per diluted share ("adjusted EPS"),⁽¹⁾ for the three months ended June 30, 2020.
  
  
• Adjusted EBITDA⁽¹⁾ of $41.1 million for the three months ended June 30, 2020.
  
  
• Closed the refinancing of the commercial tranche of our 2015 Facility pursuant to an Amended and Restated Facility Agreement (the "2015 AR Facility"). Key terms of the 2015 AR Facility include:
  
  
  
• Extension of the maturity of the 2015 AR Facility from March 2022 until March 2025;
• Reduction of annual principal amortization from $12.3 million to $600,000 on the refinanced commercial tranche;
• Addition of a $25 million revolving credit facility, subject to customary availability conditions;
• Reduction in the London Inter-bank Offered Rate ("LIBOR") margin on the refinanced commercial tranche to 250 basis points from 275 basis points, subject to 10 basis points upward or downward adjustment based on the Company's loan to value ratio for vessels secured under the 2015 AR Facility; and
• Additional LIBOR margin reduction of up to 10 basis points for reduction in the Company's Average Efficiency Ratio (which weighs carbon emissions for a voyage against the design deadweight of a vessel and the distance traveled on such voyage) for the vessels in its fleet that are owned or technically managed pursuant to a bareboat charter.
  
  
• Amended the 2015 AR Facility and received the requisite lender consents, as applicable, to, among other things, relax certain covenant restrictions under the agreement including:
  
  
  
• Elimination of the interest coverage ratio;
• Reduction of minimum shareholders' equity to $400 million with no upward adjustments;
• Reduction of the minimum liquidity covenant to $27.5 million;
• Reduction of minimum cash balance from $2.2 million to $1.0 million per mortgaged vessel; and
• Increase of the security value ratio from 135% to 145%.
  
  
• Completed a $71.5 million sale and bareboat charter arrangement for the 2015-built Cresques (the "Cresques Japanese Financing") resulting in net cash proceeds of $52.5 million, $28.5 million of which we used to prepay a portion of the 2015 Facility, and the balance of which will be used for general corporate purposes. The Cresques Japanese Financing has a mandatory buyout in 2032 with early purchase options from the end of year 3 onwards, amortizes principal of $285,000 per month, and carries a floating interest rate of 1 Month LIBOR plus 2.5%.
  
  
• Time chartered-in the 2012-built Astomos Earth to our fleet with an expiration during the second calendar quarter of 2021.

Key Recent Developments

• Provided three-month notice in connection with the exercise of our repurchase option of Captain John NP for $18.3 million in cash and applied the $26.6 million deposit.

John C. Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, "I am grateful to our seagoing and shore staff for their contribution in achieving a good financial result for this quarter during which the Company faced challenges particularly relating to crew movements and the drop of the Baltic from 50 at the beginning of April to 30 at the end of June. The market has since recovered to over 60 and I believe the Company is strongly positioned as global conditions begin to normalize."

First Quarter Fiscal Year 2021 Results Summary

Net income amounted to $12.2 million, or $0.24 per diluted share, for the three months ended June 30, 2020, compared to of $6.1 million, or $0.11 per diluted share, for the three months ended June 30, 2019.

Adjusted net income amounted to $12.7 million, or $0.25 per diluted share, for the three months ended June 30, 2020, compared to adjusted net income of $12.1 million, or $0.22 per diluted share, for the three months ended June 30, 2019. Net income for the three months ended June 30, 2020 is adjusted to exclude an unrealized loss on derivative instruments of $0.5 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.

The $0.6 million increase in adjusted net income for the three months ended June 30, 2020, compared to the three months ended June 30, 2019, is primarily attributable to an increase of $12.0 million in revenues and a decrease of $0.6 million in interest and finance costs, partially offset by increases of $4.6 million in general and administrative expenses, $2.6 million in charter hire expenses, $1.3 million in vessel operating expenses, $0.6 million in depreciation and amortization, $0.5 million in voyage expenses, and a $1.8 million unfavorable change in realized gain/(loss) on derivatives. 

The TCE rate for our fleet was $41,249 for the three months ended June 30, 2020, a 39.0% increase from a TCE rate of $29,671 for the same period in the prior year, primarily driven by a more favorable revenue mix. 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 from 98.4% in the quarter ended June 30, 2019 to 82.3% in the quarter ended June 30, 2020.

Vessel operating expenses per day increased to $8,686 for the three months ended June 30, 2020 from $8,052 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 earned by our vessels, were $73.2 million for the three months ended June 30, 2020, an increase of $12.0 million, or 19.6%, from $61.2 million for the three months ended June 30, 2019. The increase is primarily attributable to an increase in average TCE rates, partially offset by decreased fleet utilization. Average TCE rates increased from $29,671 for the three months ended June 30, 2019 to $41,249 for the three months ended June 30, 2020. During the three months ended June 30, 2020, 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 reallocation resulted in a $916 decrease in our fleet's overall TCE rates for the three months ended June 30, 2020 due to adjustments related to speed and consumption performance of the vessels operating in the Helios Pool. Excluding this reallocation, TCE rates increased by $12,494 when comparing the three months ended June 30, 2020 and 2019. The increase in TCE during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 was driven by a more favorable revenue mix due to a decrease in fixed rate time charters, lower fuel prices for our scrubber-equipped vessels, and a general decline in bunker prices. After new regulations for sulfur emissions went into effect on January 1, 2020, very low sulphur fuel oil ("VLSFO") replaced heavy fuel oil as the standard fuel in publishing TCE rates by third parties. Despite the change to VLSFO, the average price of standard fuel decreased as heavy fuel oil (expressed as U.S. dollars per metric tonnes) from Singapore and Fujairah was $414 during the three months ended June 30, 2019 compared to $272 for VLSFO during the three months ended June 30, 2020. 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 $41.484 during the three months ended June 30, 2020 compared to an average of $62.337 for the three months ended June 30, 2019. Our fleet utilization decreased from 98.4% during the three months ended June 30, 2019 to 82.3% during the three months ended June 30, 2020.

Charter Hire Expenses

Charter hire expenses for the vessels chartered in from third parties were $4.7 million and $2.1 million for the three months ended June 30, 2020 and 2019, respectively. The increase of $2.6 million, or 129.5%, was caused by increases in the number of vessels time chartered-in and their respective time chartered-in days. We had 192 time chartered-in days for the three months ended June 30, 2020 compared to 91 for the three months ended June 30, 2019.

Vessel Operating Expenses

Vessel operating expenses were $17.4 million during the three months ended June 30, 2020, or $8,686 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 $634 from $8,052 for the three months ended June 30, 2019 to $8,686 for the three months ended June 30, 2020. The increase in vessel operating expenses for the three months ended June 30, 2020, when compared with the three months ended June 30, 2019, was primarily the result of a $0.8 million, or $392 per vessel per calendar day, increase in operating expenses related to the drydocking of vessels including repairs and maintenance, spares and stores, coolant costs, and other drydocking related operating expenses.

General and Administrative Expenses

General and administrative expenses were $11.3 million for the three months ended June 30, 2020, an increase of $4.6 million, or 67.8%, from $6.7 million for the three months ended June 30, 2019. This was driven by increases of $3.0 million in annual cash bonuses to certain employees, $0.6 million in stock-based compensation, $0.5 million in salaries, wages and benefits, and $0.4 million in legal and professional fees, which is largely a result of costs incurred in our transition from being an emerging growth company under the Jumpstart Our Business Startups Act.

Interest and Finance Costs

Interest and finance costs amounted to $9.1 million for the three months ended June 30, 2020, a decrease of $0.6 million, or 6.3%, from $9.7 million for the three months ended June 30, 2019. The decrease of $0.6 million during this period was due to a decrease of $2.3 million in interest incurred on our long-term debt, primarily resulting from a decrease in LIBOR rates and a reduction of average indebtedness, partially offset by an increase of $1.7 million in amortization of deferred financing fees, mainly due to accelerated amortization of $2.1 million related to the refinancing of the Cresques and the refinancing of the commercial tranche of the 2015 Facility during the three months ended June 30, 2020. Average indebtedness, excluding deferred financing fees, decreased from $707.9 million for the three months ended June 30, 2019 to $676.0 million for the three months ended June 30, 2020. As of June 30, 2020, the outstanding balance of our long-term debt, net of deferred financing fees of $12.1 million, was $647.5 million.

Unrealized Loss on Derivatives

Unrealized loss on derivatives was approximately $0.5 million for the three months ended June 30, 2020, compared to $6.1 million for the three months ended June 30, 2019. The $5.6 million difference is primarily attributable to a reduction of $5.7 million in unfavorable fair value changes to our interest rate swaps. This reduction resulted from changes in forward LIBOR yield curves and reductions in notional amounts. Partially offsetting the reduction in unrealized loss on derivatives was an unfavorable change of $0.1 million on our forward freight agreement ("FFA") positions.

Realized Gain/(Loss) on Derivatives

Realized loss on derivatives was approximately $0.8 million for the three months ended June 30, 2020, compared to a realized gain of $1.0 million for the three months ended June 30, 2019. The unfavorable $1.8 million change is primarily attributable to (1) decreases in floating LIBOR resulting in a $1.5 million unfavorable variance on realized losses in the current period on our interest rate swaps and (2) unfavorable settlements of $0.3 million on our FFA positions.

Fleet

The following table sets forth certain information regarding our fleet as of July 31, 2020.

Market Outlook & Update 

Global seaborne LPG liftings during the second calendar quarter of 2020 totaled 26.8 million metric tons, representing a 2.7% decline compared to 27.6 million metric tons during same period during 2019. Calendar 2020 year-to-date volumes have totaled 53.8 million metric tons, slightly ahead of 2019 year-to-date volumes of 53.5 million metric tons.

While year-over-year quarterly global volumes declined, U.S. volumes increased during the quarter totaling 10.8 million metric tons, representing a 5.2% increase over the 10.3 million metric tons during the same period in 2019.  These gains were offset by lower Middle Eastern exports, which totaled 9.2 million metric tons in the quarter, a decrease of 8.1% from the same time period in 2019, which totaled 10.0 million metric tons. The lower export volumes are attributable to OPEC+ production cuts in May and June 2020.

Through the second calendar quarter of 2020, continued demand and subdued global production levels resulted in relatively strong LPG prices compared to naphtha. The resulting positive propane-naphtha spreads during much of April and May caused operating margins for steam crackers utilizing LPG as a feedstock to fall significantly in NW Europe and in Asia. As a result, several petrochemical operators switched feedstocks to naphtha from LPG, impacting demand. Towards the end of the quarter, however, propane-naphtha spreads turned negative and ethylene plant margins using LPG as a feedstock improved in both NW Europe and the Far East, supporting the freight demand outlook.

For the second calendar quarter of 2020, the Baltic Index averaged $41 per metric ton, compared to an average of $67 per metric ton in the previous quarter. For the third calendar quarter to date, the Baltic Index has averaged $41 per metric ton. The VLGC orderbook stands at approximately 11% of the current global fleet. An additional 31 VLGCs, equivalent to approximately 2.6 million cbm of carrying capacity, are expected to be added to the global fleet by calendar year-end 2022. The average age of the global fleet is now approximately 9.5 years old.

A return to more favorable commodity price relationships, the ongoing increase in secular demand for LPG as a more environmentally friendly alternative to other forms of energy and forecasted high levels of U.S. exports as evidenced by export capacity and pipeline investments are expected to provide long-term support for VLGC demand.

The above summary is based on data 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.

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 expires 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:

Conference Call

A conference call to discuss the results will be held today, August 4, 2020 at 10:00 a.m. ET. The conference call can be accessed live by dialing 1-877-407-9716, or for international callers, 1-201-493-6779, and requesting to be joined into the Dorian LPG call. A replay will be available at 1:00 p.m. ET the same day and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The pass code for the replay is 13707641. The replay will be available until August 11, 2020, at 11:59 p.m. ET.

A live webcast of the conference call will also be available under the investor relations section at www.dorianlpg.com.

About Dorian LPG Ltd.

Dorian LPG is a liquefied petroleum gas shipping company and a leading owner and operator of modern VLGCs. Dorian LPG's fleet currently consists of twenty-four modern VLGCs. Dorian LPG has offices in Stamford, Connecticut, USA; London, United Kingdom; Copenhagen, Denmark; and Athens, Greece.

Forward-Looking Statements

This press release contains "forward-looking statements." Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "may," "will," "should" and similar expressions are forward-looking statements. These statements are not historical facts but instead represent only the Company's current expectations and observations regarding future results, many of which, by their nature are inherently uncertain and outside of the Company's control. Where the Company expresses an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.  However, the Company's forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. The Company's actual results may differ, possibly materially, from those anticipated in these forward-looking statements as a result of certain factors, including changes in the Company's financial resources and operational capabilities and as a result of certain other factors listed from time to time in the Company's filings with the U.S. Securities and Exchange Commission. For more information about risks and uncertainties associated with Dorian LPG's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Dorian LPG's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. The Company does not assume any obligation to update the information contained in this press release.

Contact Information

Ted Young; Chief Financial Officer: Tel.: +1 (203) 674-9900 or [email protected] 
Source: Dorian LPG Ltd.

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SOURCE Dorian LPG Ltd.