Title

Presentation

Dorian LPG Ltd. beats earnings expectations. Reported EPS is $1.26, expectations were $1.01.

Operator: Good day, everyone, and welcome to the Dorian LPG First Quarter 2025 earnings conference call. [Operator Instructions]. As a reminder, this conference call is being recorded. Additionally, a live audio webcast of today’s conference call is available on Dorian LPG’s website, which is www.dorianlpg.com. I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.

Theodore Young: Thank you, Mickey. Good morning and thank you, everyone for joining us for our first quarter 2025 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Limited; John Lycouris, Head of Energy Transition and Chief Executive Officer of Dorian LPG USA; and Tim Hansen, Chief Commercial Officer. As a reminder, this conference call webcast and a replay of this call will be available through August 8, 2024. 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. 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 expressed today. Additionally, let me refer you to our unaudited results for the period ended June 30, 2024, that were published 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 those forward-looking statements. Finally, you may find it useful to refer to the investor highlights slides posted this morning on our website as we make our remarks.

With that, I’ll turn over the call to John Hadjipateras.

John Hadjipateras: Thanks, Ted, and thank you all for joining us to discuss our first quarter financial 2025. We had a strong first quarter with net income of $51.3 million. During the quarter, our offering — equity offering materialized our significant strategic objective, further enhancing the strength of our balance sheet and positioning the company for future growth and fleet renewal. As mentioned last quarter, we have one VLGC/VLAC on order from Hanwha — from Hanwha shipyard, and we are investing in some retrofits on ammonia — for ammonia carriage on our existing ships. our Board declared a $1 irregular dividend, bringing the total capital return since our IPO to more than $777 million. We believe that our strong balance sheet and good debt profile enable us to pursue opportunities when we determine that the timing is appropriate.

As you will hear from both Ted and Tim, margin volatility featured again during the quarter and continued in July. We believe that these swings do not reflect any significant changes in the fundamentals of supply and demand for VLGCs, rather, they define a near equilibrium where small changes can result in big price swings. Factors such as restrictions on restoration of Panama transits, weather events in the US Gulf, and there’s still unresolved wars in the Middle East and the Black Sea, alternately increase or inhibit our quarterly earnings, but the underlying fundamentals point to continued growth in the trade of LPG. 56 VLGCs have been added since the beginning of 2023, increasing the fleet by roughly 16% to 394 ships today, while in 2023, global liftings were about 12% higher than in 2022.

So clearly the various disruptions have been contributing to profitability. Looking ahead, we expect five ships will be delivered in 2024 and 13 at 2025, increasing the fleet by 1% and 3% respectively in each of those years before larger increases again in ’26 and ’27 in anticipation of potential demand for ammonia transportation. Meantime the prospects for increased production and exports from the US are favorable, as are the indicators for demand in Asia and elsewhere. These fundamental factors underpin our [Technical Difficulty] development prospects for VLGCs. As you will hear from John L., our teams are working on reducing emissions and fuel and operating costs for our fleet. We have embarked on a top-down initiative to simplify and revamp onboard safety procedures.

Our fully integrated structure provides a real benefit in our pursuit of these objectives. As always, I acknowledge our dedicated seafarers and shoreside staff whose hard work and dedication make our results possible. Now I give you, Ted.

Theodore Young: Thanks, John. My comments today will focus on our recent capital allocation events, our financial position, liquidity, and our unaudited first quarter results. At June 30, 2024, we reported $353.3 million of free cash. The significant increase from March 31 reflects the net proceeds of our equity offering and strong free cash flow to equity generated less, of course, the dividend paid during the June 30 quarter. Also, as we previously disclosed, we’ll pay another $1 per shares as irregular dividend or roughly $43 million in total dividends on or about August 21, 2024, to shareholders of record as of August 8. With a debt balance at quarter end of $597.1 million, our debt-to-total book capitalization stood at 34.8%, and our net debt-to-total book capitalization at 14.2%, or even lower, if one includes our short-term government bond holdings.

Our weighted average cost of debt is about 4.7%, which is actually below the current one and three months SOFR rates. Our next refinancing event is not until the end of December 2026, which is the bulk cap facility. We amortized about $13.4 million in principle per quarter or roughly $53.5 million for the current fiscal year, which we consider quite manageable and largely in line with our book depreciation. With well-structured and attractively priced debt capital, an undrawn $50 million revolver and one debt-free vessel, coupled with our strong free cash balance, we have a comfortable measure of financial flexibility. We expect our cash cost per day for the coming year to be approximately $26,000 per day, excluding capital expenditures for special surveys and upgrades.

I will discuss those items in just a moment. For the discussion of our first quarter results, you may find it useful to refer to the investor highlights slides posted this morning on our website. I would also remind you that my remarks will include a number of terms such as TCE, operating days, available days, and adjusted EBITDA. Please refer to our filings for the definitions of these terms. Looking at our first quarter chartering results, we achieved total utilization of 90.4% for the quarter with a daily TCE per operating day of $55,228, yielding utilization adjusted TCE or TCE revenue per available day of about $49,900. Though sequentially lower than last quarter’s results, the TCE still represents an attractive free cash flow to equity.

As our entire spot trading program is conducted through the Helios Pool, they reported spot results and the best measure of our spot chartering performance. For the June 30 quarter, the Helios Pool earned a TCE of $50,145 per day for its spot and COA voyages. On page 4 of our investor highlights material, you can see that we have five Dorian vessels on time charter within the pool, plus one our MRL Energia vessel, indicating spot exposure of about 80% for the 30 vessels in the pool. Turning to the quarter ending June 30, 2024, we currently have nearly 50% of the available — sorry, as of September 30, 2024, we currently have nearly 50% of the available days in the Helios Pool booked. Given the difficulty in predicting loading dates and they’re significant in effect on our revenue net recognition, we feel it more appropriate to share TCE revenues over all available days in the pool for the quarter.

On that basis, we see a TCE in the range of $30,000 per day on a load to discharge basis in accordance with US GAAP. That rate includes both spot fixtures and time charters in the Helios Pool only. Daily OpEx for the quarter was $10,618, excluding some small expenditures for dry-docking related expenses. That amount was up a bit sequentially from last quarter. Our time charter-in expense for the four TCE vessels came in — [Technical Difficulty].

Operator: [Operator Instructions].

John Hadjipateras: Operator, we can move on to Tim Hansen and pickup Ted when he gets back online.

Theodore Young: I’m back online now.

John Hadjipateras: So do we have Ted online or not?

Operator: We don’t have Ted at this time.

John Hadjipateras: Okay. So why don’t we have Tim continue the presentation and then we’ll go back to Ted when he comes back. Tim?

Tim Hansen: Hi, good day, everyone. Tim Hansen here, Chief Commercial Officer. The quarter ending in June 30, 2024, saw an improvement in the freight market compared to the quarter prior. The biggest improvement was seen in May when freight rates in the West were reminiscence of those seen in early January. April and June were relatively weaker months, characterized mostly by external factors disrupting regular market movements such as dynamic fixing windows, sudden changes to the Panama Canal waiting time, and an efficient balancing of vessels demand versus with the ship — with the vessel supply. Despite significant swings in the market months and months, the underlying demand for VLGC shipping is firm. April is not amongst usually analyzed at first glance.

The market for the months is reflective of commercial fiction decisions, which was made as early as in February and as close as a few days prior to the loading dates. The snapshot, therefore, covers more than one months of market considerations. This is explained by many market players initially anticipating a weaker than usual export demand from the US Gulf. And then on short notice, correcting our approach when it became clear that export cargoes was plentiful. Thus cargoes and similarly cans were seen fixed at levels over $30 per metric ton surpassed, and it speaks to the strength and the strong fundamentals of the VLGC market. May build on the strong fundamentals, but hit particularly higher freight levels because of a sudden but very brief period of congestion in the Panama Canal.

Auction prices for transit reached levels not seen since December 2023, but the bottleneck was quickly resolved. I can to reach a certain delays in the Panama Canal giving the market a bump reflects positively on the fundamentals of the VLGC market, but we may have demonstrated how external factors can start on a short-term — can start a short-term bounce in the markets. June versus the months, exposing the flip sites. Throughout June, it must be emphasized that West to East arbitrage was positive. Nonetheless, rising Mont Belvieu prices over the months dominantly narrowed the arbitrage slowing the market as charters were looking to find a rate to find it slow. The Mont Belvieu prices was on the rise due to a reduction in available spot cargoes.

The reduction has been attributed by market players with downtime on the chillers amidst a heat wave in the North America and capacity reduction in the US Gulf terminals in anticipation of the Hurricane Beryl at the end of June. Meantime, it can be mentioned that in the Arabian Gulf Far East market, we have followed the trends of the US Gulf export market. Particularly in May, it could be seen that charter has reacted to the strength in West market paying off on freight to ensure that VLGCs would be available to loading in the Arabian Gulf. When Western Premium eroded in June, the Middle East export market duly followed downwards. Though the quarter showed significant swings in the market over the months, the underlying red threat is one of robust demand for VLG, for LPG in the Far East, and an open arbitrage.

The sensitivity to available export from North America was made clear, but it should be noted that North America in the key production and export continue to grow. Meantime, most market players anticipate a gradual return to congestion of the Panama Canal. Despite healthy fundamentals to VLGC demand driven by growing ton-miles and robust import demands, there are challenges to the market in the short term. The reduced availability of spot cargoes from the US Gulf seen in June has a considerably knock on effect. Delaying at export terminals due to the Hurricane Beryl continued into July and the declarations of force majeure by various terminals seriously hindered the optimization of export capacity. Amidst a wide-open Panama Canal with full utilization — close to full utilization, enabling Chinese to converse near to the US Gulf and increase in backlog of vessels.

Delays at the terminals was an unwelcome complication. Lastly, the tragic events from 10 days ago when a capsized tugboat in Houston Ship Channel limited the market’s corrective movements to normalize the export levels. Finally, returning to the demand type of VLGC shipping, we’re eager to see the effect of the seven opening of PDH plants in China. North American exports, external factors aside, are for the most part forecasted to grow as is the congestion of the Panama Canal. Thus, we do remain positive on the medium to long-term prospects for our business. With that, I will pass you back to Ted, maybe.

John Hadjipateras: I think we’ll go to John first and then Ted will come back — he’s online, but we’ll have him wrap up after John Lycouris. Thank you.

John Lycouris: Thank you, John, and thank you, Tim. In continuation of our commitment to sustainability, Dorian LPG strives to improve the energy efficiency of its vessels with a focus on operational and technical performance while continuing to follow and employ technological advances and innovations as they become commercially available to the marine sector. Our scrubber vessels savings for the second quarter of 2024 amounted to $2.8 million or about $2,561 per day net of all scrubber operating expenses. Fuel differentials between high sulfur fuel oil and very low sulfur fuel oil averaged $136 per metric ton. While the differential of LPG HSFO fuel versus VLSFO, very low sulfur fuel oil, stood at about $217 per metric ton, which is quite advantageous for the dual-fuel LPG engine vessels.

The total number of vessels fitted with scrubber units in our fleet is 14, and we’re about to retrofit another vessel in the current calendar quarter during vessel irregular dry-docking window. The CII project initiated by the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping focuses on engaging with the aim, with the IMO for review process of the carbon intensity indicator. The objective is to propose process improvements in carbon reduction targets for the next phase, which begins in 2026. The project Group’s goal is to provide clear recommendations to the IMO on necessary amendments and updates to the CII regulation for greater effectiveness in the next phase. The Center presented the project findings at the last MEPC meeting in March 2024 and anticipates preparing two papers for presentation at the next MEPC session in October, where there’s hope they are agreed for revising the CII regulation ahead of its 2026 amendment window.

Dorian LPG is a mission ambassador to the center and has actively contributed to this project. The new biofouling management plans, which were adopted by the IMO by an IMO resolution last year, are currently being developed for the entire Dorian LPG fleet. The key points of these new biofouling management plans comprise of monitoring how and fuel performance caused by biofouling, taking actions to alleviate biofouling, and finally, logging the actions taken. This entail shore and crew training and familiarization of the biofouling risk parameters and the actions which must be taken proactively and/or reactively to mitigate adverse performance results. We expect to complete the biofouling management plans for the whole fleet by the end of August 2024.

The European Union has adopted FuelEU Maritime Regulation to promote the use of renewable fuel and low carbon fuels in maritime transport. This regulation aims to reduce greenhouse gas emissions by providing a clear legal framework for ship operators and fuel suppliers. Thereby, increasing the demand for and consistent use of cleaner fuels in the maritime sector. The regulation sets targets for the greenhouse gas intensity of energy use in vessels. Companies are required to submit electronic monitoring plans that document the methods of monitoring and reporting, which will be subject to third-party verification by accredited independent entities to ensure their accuracy. Recently with assisted ship propulsion system technologies have attracted considerable interest in the maritime industry to potentially reduce the fuel consumption and emissions from vessels.

These systems use wind power to supplement vessel propulsion by creating our dynamic forces by tapping into an unlimited, free, and zero carbon energy source, as it is called, can significantly improve the efficiency of maritime operations and support the industry’s decarbonization goals. Various sailing technology concepts are being developed or have been developed such as water sails, wing sails, high sails, and suction sails. Each technology has a different method of harnessing the wind and producing thrust, necessitating a full analysis investigation to assess their potential and implications to safe operation and trade. If installed, we will continue to monitor developments and results of this technology in the future. And now I pass it back to John Hadjipateras and Ted?

Theodore Young: Thanks, John. I’ll quickly finish off my remarks with the apologies for the technical issue. We’ll be sure to pay our phone bill next quarter. So very quickly, just to summarize, I believe I was cut off just talking about the Helios Pool. The pool had roughly $11 million of cash on hand at the end of the — at the end of July, reflecting the dividend just paid. To recap, we’ve now paid $13.50 per share in dividends since September 2021. Again, we want to remind you that these dividends are irregular. Our market and our business is not regular. And therefore, our dividend policy is not either. Total capital returned from dividends, open-market repurchases, and our self-tender now totals $777 million gross. I’d probably like to note that the dividend payment reflected our strong earnings and cash flow generation.

And at the same time, we were able to accomplish our strategic objective of raising additional equity capital to increase our financial flexibility as we look at fleet renewal and expansion. I think that underscores our Board’s commitment to balancing returns to shareholders with growth in the business. Again, we remain optimistic about the prospects for our business as my colleagues have outlined. And with that, I’ll turn the call back to John Hadjipateras.

John Hadjipateras: Thank you, Ted, and apologies again to everyone who joined us. I hope we didn’t distract too much from the very three — I think very good presentations by my three colleagues with lots of material for you to hopefully digest. And Mickey, we’re happy to take questions now if anyone has any.

Operator: [Operator Instructions]. We will take our first question from Omar Nokta with Jefferies.

Omar Nokta: Hey, guys, good morning. Just to add a handful, hopefully not too many, but just at least a couple of questions for you. John H, you talked a bit about the swings we’ve seen in the VLGC market, especially in July. And just kind of wanted to touch a bit on that and get a sense of what’s been driving it? I know, Tim, you mentioned a variety of things. There’s obviously the Panama Canal returning a bit to normally, that Hurricane Beryl in the Gulf, Middle East volumes. I guess I just wanted to ask if you could rank maybe or highlight which of these issues would you say is like the biggest — has had the biggest impact on the market and what can you see kind of coming on the horizon that would alleviate that?

John Hadjipateras: A million-dollar question. Tim, I think you are the best of us to answer that one.

Tim Hansen: Yeah, I think what the biggest factor is really the US Gulf production which in June was hampered by these delays with the chiller problems and some force majeure. So we saw less exports and because the terminus is really running very close to full capacity, once they have a problem, it takes them a long time to catch up again, so you can see they’re so busy that you’re still have the — close to months after these events, you still have a backlog of three to five days in most of the terminals. Even though they’re running on full capacity now, their system takes them a long time to clear the backlog of ships and then the catch-up on the exports. And then this coincided in June with, as I mentioned, the Panama Canal from the delays I described.

In may suddenly coming back fully open and everybody turning their ships around and heading straight for the canal instead of the other capes. So of course, gave a number of more ships in the US Gulf available. In July, so that there was basically no overhang of ships from June into July. But the effect of what happened in June and then the Beryl and the capsize I talked in the Houston Ship Channel, of course, increased the problems. So I think we will see probably this again with the US Gulf being — any problems hit in the US Gulf will take longer time to to catch up than what we saw last year because they’re closer to capacity now. And then on the Panama Canal side, we have seen it swing heavily from — over a few days basically from heavy congestion to fully open and, I think, longer term or coming into the winter, I think we will see the trends that we have seen there.

The last few years at the Panama Canal will be heavily delayed from September, October onward throughout the winter. And then clear out early in the spring.

Omar Nokta: Okay. Thanks for that. I just wanted to say in — the winters are good?

John Hadjipateras: No, no, I’m I would just say it’s ironic that in the winter we had the delays caused by a freeze and in the summer, we have delays caused by the chiller, but which is because of the heat waves and the extremes of weather are pretty impactful. Again, when you’re running at close to full utilization and the export infrastructure.

Omar Nokta: Yeah, no, that’s a good point. So just on that then in terms of, say, the backlog that has been hampering activity from Beryl in the Gulf Coast. Have we kind of started to work through that? Has it been improved from, say where it was, I guess, perhaps a month ago when that happened?

Tim Hansen: I mean, the terminals are fully up and running and producing, and they are back at the same export levels as they were and trying to then catch up and clear the ships that has been fixed already waiting for the late cancel. We are seeing the delays of that — the delays, waiting for loading for the ships already booked, is coming down. So that should allow hopefully the terminals to catch up within this month and more spot to become available after that. So we expect to see then they’re back on full swing now. And then that should be possible to squeeze out more hours eventually. Touch wood that everybody — everything keeps running normal without any further incidents and problems.

Omar Nokta: Got it.

Tim Hansen: We have two more activity now for August.

Omar Nokta: Okay. Yes. So maybe we’ll start to see a reversal potential. So just before you got cut off in your earlier comments, you had been — I think you had mentioned about the bookings for the pool thus far into the quarter. And if I recall, it was roughly around 50% of available days on that basis around 30,000 or higher?

Theodore Young: It’s right. Around 30,000, yeah.

Omar Nokta: Okay. All right. And so just — and this is like — clearly this is beneath kindergarten math. But last quarter on the call you had mentioned, having booked a good chunk of Helio’s at above 40, you end up realizing 50. With this 30,000, what kind of magnitude do you think if you were to adjust this for like an operating day basis and recognizing that you said in your comments that it’s hard to figure what the actual operating days will be, but any best guess — does that 30 become 40 or we’re looking at 30, maybe becoming 33 and you kind of — you’re willing to step out of it?

Theodore Young: It’s really hard to say, Omar, I’d like to think there is some upside to that number come. I will say that the upside last quarter surprised us to the upside but it’s really tricky to say. I think, you know, probably — well, I know you’re focused on trying to get a good number for the quarter. I’d say more that, Tim’s comment about activity picking up, some of that may fall into this quarter and the rest of it may fall into the following quarter. So I don’t have a very good answer to your question. But I’d say at least the trend line seems to be above that number. How much we realized in this quarter from an accounting perspective versus mix is a little tricky.

Omar Nokta: Understood. I appreciate that. And sorry if I’m going long in my session, but just maybe one more now. And I’ll let you go. Just obviously, in terms of the equity issuance back in June, any thoughts or anything you’re willing to say in terms of kind of plans with that extra $80 million or so of proceeds. It’s obviously on the balance sheet, but just any anything you’re willing to share on thoughts of that?

John Hadjipateras: There’s nothing really that we can share. There’s nothing active at the moment, but we’ve been looking at opportunities that we believe could put money to good use, and we’ll keep you appraised, if anything — when when anything comes to fruition.

Operator: Thank you. And this will conclude our Q&A session. I’ll now turn the call over to John Hadjipateras for closing remarks.

John Hadjipateras: Well, thank you for coming on a summer day to listen to us and have a good rest of the summer. Bye, bye.

Operator: And this does conclude today’s program. Thank you for your participation. You may disconnect at any time.