Dorian LPG Ltd., a leading owner and operator of modern very large gas carriers (“VLGCs”), reported its financial results for the three months ended September 30, 2020.

Highlights for the Second Quarter Fiscal Year 2021

Revenues of $54.7 million and Time Charter Equivalent (“TCE”) (1) rate for our fleet of $26,015 for the three months ended September 30, 2020, compared to revenues of $91.6 million and TCE rate for our fleet of $47,623 for the three months ended September 30, 2019.

Net income of $0.5 million , or $0.01 earnings per diluted share (“EPS”), and adjusted net income/(loss) (1) of $(3.4) million , or $(0.07) adjusted earnings/(loss) per diluted share (“adjusted EPS”), (1) for the three months ended September 30, 2020.
Adjusted EBITDA (1) of $22.3 million for the three months ended September 30, 2020.

TCE, adjusted net income/(loss), adjusted EPS and adjusted EBITDA are non-U.S. GAAP measures. Refer to the reconciliation of revenues to TCE, net income to adjusted net income, EPS to adjusted EPS and net income to adjusted EBITDA included in this press release under the heading “Financial Information.”

John C. Hadjipateras , Chairman, President and Chief Executive Officer of the Company, commented, “I will start by again acknowledging the commitment of all Dorian personnel particularly our seagoing staff who have contributed to our uninterrupted services. I am very glad to report that we have managed to keep safe and healthy during this hazardous time. Having successfully dealt with considerable difficulties associated with crew movements due to pandemic related global restrictions, we are now at normal crew rotation levels. Our reported earnings for the quarter ended September 30, 2020 reflect, to a large extent, the low freight market of the previous quarter which closed on June 30, 2020 at Baltic $29 . This quarter closed on September 30, 2020 at Baltic $55 and rates remain robust into the current quarter with sustained demand and new building deliveries, which are being absorbed. Our board has continued to focus on capital allocation and we expect to pursue opportunistic share repurchases, and consider potential dividends, deleveraging further and other opportunities.”

Second Quarter Fiscal Year 2021 Results Summary

Net income amounted to $0.5 million , or $0.01 per diluted share, for the three months ended September 30, 2020, compared to of $40.7 million , or $0.74 per diluted share, for the three months ended September 30, 2019.

Adjusted net loss amounted to $(3.4) million , or $(0.07) per diluted share, for the three months ended September 30, 2020, compared to adjusted net income of $41.4 million , or $0.75 per diluted share, for the three months ended September 30, 2019. Net income for the three months ended September 30, 2020 is adjusted to exclude an unrealized gain on derivative instruments of $4.0 million . Please refer to the reconciliation of net income to adjusted net income/(loss), which appears later in this press release.

The $44.8 million decrease in adjusted net income/(loss) for the three months ended September 30, 2020, compared to the three months ended September 30, 2019, is primarily attributable to a decrease of $36.9 million in revenues and increases of $4.0 million in vessel operating expenses, $2.4 million in charter hire expenses, $0.7 million in depreciation and amortization, and a $2.8 million unfavorable change in realized gain/(loss) on derivatives, partially offset by a decrease of $2.6 million in interest and finance costs.

The TCE rate for our fleet was $26,015 for the three months ended September 30, 2020, a 45.4% decrease from a TCE rate of $47,623 for the same period in the prior year, primarily driven by reduced spot market rates. 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) increased from 92.9% in the quarter ended September 30, 2019 to 97.4% in the quarter ended September 30, 2020.

Vessel operating expenses per day increased to $10,591 for the three months ended September 30, 2020 compared to 8,594 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 $54.7 million for the three months ended September 30, 2020 , a decrease of $36.9 million , or 40.3%, from $91.6 million for the three months ended September 30, 2019 . The decrease is primarily attributable to a reduction in average TCE rates, partially offset by increased fleet utilization. Primarily driven by a reduction of spot market rates, average TCE rates decreased by $21,608 from $47,623 for the three months ended September 30, 2019 to $26,015 for the three months ended September 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 $51.589 during the three months ended September 30, 2020 compared to an average of $65.991 for the three months ended September 30, 2019 . Our fleet utilization increased from 92.9% during the three months ended September 30, 2019 to 97.4% during the three months ended September 30, 2020 .

Charter Hire Expenses

Charter hire expenses for the vessels chartered in from third parties were $4.5 million and $2.1 million for the three months ended September 30, 2020 and 2019, respectively. The increase of $2.4 million , or 119.9%, was caused by an increase in time chartered-in days, which increased from 92 for the three months ended September 30, 2019 to 184 for the three months ended September 30, 2020 .

Vessel Operating Expenses

Vessel operating expenses were $21.4 million during the three months ended September 30, 2020 , or $10,591 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 $1,997 from $8,594 for the three months ended September 30, 2019 to $10,591 for the three months ended September 30, 2020 . The increase in vessel operating expenses for the three months ended September 30, 2020 , when compared with the three months ended September 30, 2019 , was primarily the result of a $3.5 million , or $1,723 per vessel per calendar day, increase in operating expenses related to repairs and maintenance, spares and stores, and coolant costs, which is inclusive of an increase of $1.6 million , or $810 per vessel per calendar day, in operating expenses related to the drydocking of vessels including repairs and maintenance, spares and stores, coolant costs, and other drydocking related operating expenses. Additionally, we experienced an increase in crew wages and related costs of $0.8 million , or $413 per vessel per calendar day.

General and Administrative Expenses

General and administrative expenses were relatively flat at $5.9 million for both the three months ended September 30, 2020 and the three months ended September 30, 2019. We experienced increases of $0.8 million in salaries, wages and benefits, $0.6 million in higher insurance premiums, and $0.2 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, offset by reductions of $1.1 million due to the timing of annual cash bonuses to certain employees and $0.5 million in stock-based compensation.

Interest and Finance Costs

Interest and finance costs amounted to $6.7 million for the three months ended September 30, 2020 , a decrease of $2.6 million , or 28.4%, from $9.3 million for the three months ended September 30, 2019 . The decrease of $2.6 million during this period was due to a decrease of $2.9 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 $0.2 million in amortization of deferred financing fees and loan expenses. Average indebtedness, excluding deferred financing fees, decreased from $692.0 million for the three months ended September 30, 2019 to $657.5 million for the three months ended September 30, 2020 . As of September 30, 2020 , the outstanding balance of our long-term debt, net of deferred financing fees of $11.8 million , was $634.5 million .

Unrealized Gain/(Loss) on Derivatives

Unrealized gain on derivatives amounted to $4.0 million for the three months ended September 30, 2020 , compared to an unrealized loss of $0.7 million for the three months ended September 30, 2019 . The favorable $4.7 million difference is attributable to an increase of $3.0 million in favorable fair value changes to our interest rate swaps resulting from  changes in forward LIBOR yield curves and an increase of $1.7 million in favorable changes to our forward freight agreement (“FFA”) positions.

Realized Gain/(Loss) on Derivatives

Realized loss on derivatives was $2.1 million for the three months ended September 30, 2020 , compared to a realized gain of $0.7 million for the three months ended September 30, 2019 . The unfavorable $2.8 million change is primarily attributable to (1) decreases in floating LIBOR resulting in a $2.1 million unfavorable variance on realized losses in the current period on our interest rate swaps and (2) unfavorable settlements of $0.7 million on our FFA positions.

Market Outlook & Update

Global seaborne LPG liftings during the third calendar quarter of 2020 totaled 26.1 million metric tons, a 7.9% decline compared to 28.3 million metric tons during same period during 2019. Calendar 2020 year-to-date volumes have totaled 79.7 million metric tons, slightly below 2019 year-to-date volumes of 81.9 million metric tons.

While quarterly global volumes declined year-over-year, U.S. export volumes increased during the third calendar quarter of 2020, totaling 11.5 million metric tons, an 11.0% 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 9.0 million metric tons in the quarter, a decrease of 11.5% from the same time period in 2019, which totaled 10.3 million metric tons. The lower export volumes are attributable to OPEC+ production cuts that were extended through year end in June 2020 .

Through the third calendar quarter of 2020, continued LPG demand and subdued global production levels resulted in relatively strong prices relative to naphtha. Propane held a price advantage over naphtha in the Far East for most of the quarter before shrinking towards the end of September. Delayed winter stocking increased Asian LPG prices, particularly towards the end of the quarter. In Europe , propane cracking held a price advantage over naphtha throughout the third calendar quarter, while butane cracking was attractive until the end of September.

For the third calendar quarter of 2020, the Baltic Index averaged $52 per metric ton, compared to an average of $41 per metric ton in the previous quarter. For the fourth calendar quarter to date, the Baltic Index has averaged $60 per metric ton. The VLGC orderbook stands at approximately 11% of the current global fleet. An additional 33 VLGCs, equivalent to approximately 2.8 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 9.6 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.

Source: Dorian LPG