BW LPG Limited

Welcome to BWLPG's Second Quarter 2022 Financial Results Presentation. Bringing you through the presentation today are CEO Anders Anaheim, CFO Elaine Ong, EVP Commercial Neil Srigu, and EVP Technical and Operations Pontus Berg. We are pleased to answer questions at the end of the presentation. Should you have any, please type them into the chat box in your Zoom panel. You may also use the raise hand option. Before we begin, we wish to highlight the legal disclaimers shown in the current slide. This presentation held on Zoom is also recorded. I now turn the call over to BWLPG CEO, Anders Olleheim.

Thank you, Lisa. Let me start by welcoming Christelle Sorensen to BWLPG. Christelle needs no introduction in our community, having been in the LPG shipping industry for over 20 years. He joins us this week, and we look forward to his contributions. I'm sure he'll hit the ground running right away. It has been a busy quarter for the team at BWLPG. We concluded the sale and delivery of BWL Liberty, completed a second tranche sale of our India subsidiary, which takes our ownership to 52%, and we entered into an agreement to acquire the LPG trading operations from Wilm Oil to expand our product services division. The acquisition is still subject to regulatory approvals, My thanks to all colleagues who worked hard to cross the finishing line. More on this later. I'm also pleased to announce that all 15 of our retrofits are now successfully back on water and capable of burning LPG as fuel. The world is facing great geopolitical instability. This is having a significant impact on the energy and shipping markets. Energy security is a growing concern and we want to play our part. Let me show you how LPG can contribute to the energy solution on our slide page four. The current instability highlights the value of LPG, and we're seeing increasing investments in US exports due to higher demand, and in particular from Europe. LPG is versatile, as it is imported by ships from global suppliers and provides attractive energy security compared to solutions that require costly investments in infrastructure and pipelines. LPG is also cleaner than most other alternatives. These attributes support further investments and growth in LPG exports, imports and thus transportation. On the right side, we can see that LPG continues to be highly competitive from a price perspective. And there can be a convenient substitute in industrial processes, given the current elevated prices on natural gas. At the moment, natural gas is actually six times more expensive than LPG in Europe. Given increasing importance of LPG as an energy source, we're committed to investing further in the LPG value chain. As part of this strategy, we were happy to announce the expansion of our product services through the acquisition of the LPG trading operations from Wilma. Let's turn to slide five. Again, we entered into the agreement on August 1st to acquire the LPG trading operations from Wilma Oil. Wilma has a strong track record and credible reputation in the LPG community. We are very excited to have a highly experienced team coming on board. The transaction is in line with our strategy and enables us to expand our product services division. The combined team traded over 4 million tons of physical LPG last year, and we have the capacity to grow further. The transaction also adds five additional TC and VLDCs, including one new build into our fleet. This also means we are expanding our coverage from US-centric to global presence, supported by teams in both Europe and Asia, and thus widening our service offering to our customers. The acquisition brings increased agility and important insight in today's volatile market, further enhancing our core shipping business. We also see tremendous growth opportunities ahead along the LPG value chain, allowing us to generate even greater value for our shareholders. As I mentioned, the acquisition is subject to approval from the Spanish regulatory authorities, and we expect the transaction to close by the end of Q4 this year. You can turn to slide six. Moving on to the highlights for the quarter, we want to leave you with some key messages. We will continue to deliver on our stated strategy of fleet renewal and further expansion into the LPG value chain. We continue to have amply available liquidity of $360 million and a record low net leverage of 25%. Against the uncertainties in global energy market and concerning order book, we remain still optimistic for 2023, but we are also prepared for continued volatility. More specifically on highlights, in addition to the development transaction, we also sold the BW Loyalty during the second quarter. In terms of outlook, we want to remind everyone that LPG, which mainly comes as the byproduct of upstream product production, is highly dependent on the oil and gas outlook. If oil and gas prices are sustained at high levels, we are well positioned to benefit from another strong energy cycle ahead. If the global economy experiences further turbulence and commodity price retreat, however, our balanced fleet and trading portfolio, ample liquidity, and strong balance sheet will prepare us to maneuver through those challenges also. And finally, on dividends for this quarter, with net leverage of 25%, we'll return to shareholders a dividend payout of 75% on their profit after tax for 20 cents per share. This amounts to a total of $27 million. Turn to slide seven, please. The key financials, the second quarter, we reported a day rate of $35,400 for a BLGC fleet per calendar day. Daily OPEX was $8,800. The increase was largely due to escalation in cost of lubrication rolls and rise in insurance premiums. This is something we're all facing at the moment. We generated a net profit after tax of $39 million, earnings per share of 26 cents. This translated into an analyst return on equity of 10%, with an analyst return on capital employed of 9%. Next up is Niels. He'll take you through the market review and the commercial update. Niels.

Thank you, Anders. Good morning, afternoon, and good evening to all of you. Please turn to slide number nine. On slide nine, we share our view of the market. As Anders mentioned, we remain positive for the rest of 2022 and next year. There are several encouraging developments. The two main export hubs continue to increase their export, US leading the way with record LPG export Middle East export is up significantly, in line with OPEC Plus phasing out its existing oil production cuts. For the coming winter, we expect strong winter heating demand and retail demand to switch more to the clean and cheap LPG compared to the expensive natural gas and oil. Today, LNG cost is about $500 in oil price equivalents. And oil price is today around $100. LPG is trading to 20% discount to oil, so the LPG cost is only $80 in all price equivalents. In other words, and as Anders also mentioned, LPG is about six times cheaper than LNG. I repeat myself, six times cheaper than LNG. So far, in Q3, we have fixed approximately 84% of our available fleet stays at an average rate of approximately $36,000 per day on a discharge-to-discharge basis. Hence, Q3 is in line or slightly weaker than Q2. Looking into 2023, we maintain a more positive outlook despite the order book. US midstream operators announcing to expand fractionation capacity, which will increase LPG production. We also expect the Middle East to continue their export growth, with Iran being a great upside potential should the sanctions be lifted. Iran alone can give employment to about 150 VLDC cargoes per year. On the demand side, we have been concerned of the current lockdown in China. However, the stats show that LPG imports were relatively stable compared to Q2 last year. Hence, this could be another great upside potential when China opens up again with the numbers of PDA plants, which are still scheduled to come on free. Let's turn to slide 10. The two chart on this slide reflects the current energy situation well. Compared to same period in 21, North America and Middle East exports have grown 6% and 16% respectively. For the same period, European exports were down 13%, and Russian exports declined substantially by 33%. Looking at the chart on the right-hand side, I want to draw your attention to the strong growth in the Indian imports, up 16% year-on-year, which is very positive for our BW India business. As mentioned, China remains the biggest importer of seaborne LPG, and imports were stable. European imports were also up by a significant 15%, again, reflecting the energy situation for the region. Let's turn to slide 11. US LPG export are fundamental to a well-balanced LPG shipping market. With Europe looking to become less dependent on Russian gas, seaborne LPG export from the US plays an important part in bridging that gap. Since our last earnings presentation, EIA has revised up its expectation for 2022. The result in net export growth of 10%. The previous growth forecast was 5.4%. The forecast for 2023 is unchanged with an 8.8% growth. Let's turn to slide 12. The current WC order book stands at 65 vessels. And only two ships were ordered during Q2. We see a clear tendency in the market that with current record high new building prices and a long delivery time, the appetite for ordering has diminished. Due to our return focus, we have no immediate plans of ordering vessels despite a positive market outlook. We remain comfortable with our current fleet profile, which should allow us to maneuver to all kinds of market conditions ahead. Our 15 upgraded LPG propulsion are currently enjoying a huge savings by burning LPG instead of the less environmental oil fuel. Today, the savings are about $8,000 per day while sailing on LPG. Please skip ahead to slide number 15, We have fixed 16% of our fleet to 23, at an average rate of TCE of $33,900 per day, or 15 million revenue locked in for our TCE book. Most of our TCEs out is for our BW India business. We are confident with our spot-open position to capture the positive market fluctuation ahead. and serve the expansion of product services through the acquisition of Wilma LPG Trading. The expansion enabled us to offer clients all over the world delivery of LPG directly from the world exporters. In addition to service our clients, product services has contributed to high fleet utilization, increased market information, additional revenues, and growth opportunities. That's it for me. Next in line is Pontus Beck, who will take you through the technical and operational update. Thank you.