Dorian LPG Ltd.

all locations on hold for today's Dorian Conference. We appreciate your patience and we ask that you continue to stand by. We'll be starting momentarily.

Please stand by. Your program is about to begin. Good day, everyone, and welcome to the Dorian LPG First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. 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.

Thank you, Nikki. Good morning, and thank you, everyone, for joining us for our first quarter 2025 results conference call. With me today are John Hodge-Bateras, Chairman, President, and CEO of Dorian LPG Limited, John LaCouris, 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 unedited 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 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 Hadjibateris.

Thanks, Ted, and thank you all for joining to discuss our first quarter financial 2025. We had a strong first quarter with net income of $51.3 million. During the quarter, our equity offering materialized a 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 VLDC VLAC on order from Hanwha, from Hanwha Shipyard, and we are investing in some retrofits on ammonia on our existing, for ammonia carriage on our existing ships. Our board declared a $1 the 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, market 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 VLDCs. Rather, they define a near equilibrium where small changes can result in big price swings. Factors such as restrictions and restoration of Panama transits, weather events in the U.S. 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. Fifty-six VLGCs have been added since the beginning of 2023, increasing the fleet by roughly 16% to 394 ships today, while in 2023, global listings were about 12% higher than in 2022. So clearly the various disruptions have been contributing to profitability. Looking ahead, we expect five ships to be delivered in 2024 and 13 in 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 U.S. are favorable, as are the indicators for demand in Asia and elsewhere. These fundamental factors underpin our confidence in the market prospects for VLCs. 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'll give you Ted.

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 share as an irregular dividend of roughly $43 million in total dividends under about August 21, 2024, to shareholders of record as of August 8th. 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-month SOFR rates. Our next refinancing event is not until the end of December 2026, which is the ball cap facility. We amortize about $13.4 million in principal 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 highlight 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 charting results, we achieved the total utilization of 90.4% for the quarter, with a daily TCE per operating day of $55,228, yielding utilization-adjusted TCE or TCE per 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, Their reported spot results are the best measure of our spot chartering performance. For the June 30 quarter, the Helios pool earned a TC of $50,145 per day for its spot and COA voyages. On page four of our investor highlights material, you can see that we have five Dorian vessels on time charter within the pool, plus one MOL 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, September 30th, 2024. We currently have nearly 50% of the available days in the Helios pool booked. Given the difficulty in predicting loading dates and their significant effect on 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 U.S. GAAP. That rate includes both spot fixtures and time charters in the Helios pool only. Daily up extra 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 TCN vessels came in. Thank you.

And to all locations on hold, please stand by. We're having technical difficulties. Please remain on the line.

Operator, we could move on to

We can move on to Tim Hanson and pick up Ted when he gets back online.

I'm back online now. Oh. Okay. So do we have Ted online or not?

We don't have Ted at this time.

Okay, so why don't we have Tim continue the presentation, and then we'll go back to Ted when he comes back.

Tim? Okay. Yeah, I'll do that.

It looks like Tim is past disconnected as well.

Okay. Ted, we were going to go on to Tim, but you can finish up your... From your end, Ted. All right, guys.

This is the summertime technical issues. How about Tim? You go ahead, please.

Okay. Go for it.

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 improvements were seen in May when freight rates in the West were reminiscent 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 with the vessel supply. Despite significant swings in the market month-on-month, the underlying demand for VLTC shipping is firm. April is not a month easily analyzed at first glance. The market for the month 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 month of market considerations. This is explained by many market players initially anticipating a weaker-than-usual export demand from the U.S. Gulf, and then, on short notice, correcting upwards when it became clear that export cargoes was plentiful. Thus, cargoes on similar lake hands were seen fixed at levels over $30 per metric ton to pass, and it speaks to the strength and the strong fundamentals of the VLTC market. May built on the strong fundamentals, but hit particularly high 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. Again, two weeks of sudden delays in the Panama Canal giving the market a bump reflect positively on the fundamentals of the VFDC market. But where May demonstrated how external factors can start a short-term bounce in the markets, June was a month exposing the flip side. Throughout June, it must be emphasized that the West-to-East arbitrage was positive. Nonetheless, rising Montbellevue prices over the months nominally narrowed the arbitrage, slowing the market, as charters were looking for rates to find a floor. The Mount Belger crisis was on the rise due to a reduction in available spot cargoes. The reduction has been attributed by market players to downtime on the chillers amidst a heat wave in North America and capacity reduction in the U.S. Gulf terminals in anticipation of the hurricane barrel at the end of June. Meantime, it can be mentioned... that in the Arabian Gulf Far East market followed the trends of the U.S. Gulf export market. Particularly in May, it could be seen that charters reacted to the strengthening West market, paying up on freight to ensure that VLGCs would be available for loading in the Arabian Gulf. When the Western premium eroded in June, the Middle East export market truly followed down once. Though the quarter showed significant swings in the market over the months, the underlying red thread is one of robust demand for LPG in the Far East and an open arbitrage. The sensitivity to available exports from North America was made clear, but it should be noted that North American LPG 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 drained 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 U.S. Gulf seen in June has a considerably knock-on effect. Delaying at export terminals due to the hurricane barrel continued into July, and the declarations of force majeure by various terminals seriously hindered the optimization of export capacity. capacity. Amidst a wide open Panama Canal with full utilization, enabling tinnitus to converse near to the U.S. Gulf and increase the backlog of vessels. Delays at the terminals was an unwelcome complication. Lastly, the tragic events from 10 days ago when I capsized tugboats in the Houston Ship Channel limited the market's corrective movements to normalize. the export levels. Finally, returning to the demand side for VLTC shipping, we're eager to see the effect of the seven-odd 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 I think back to Chet, maybe.

Yeah, I think we'll go to Chet first, and then Ted will come back. He's back online, but we'll have him wrap up after John Licoris. Thank you.

All right.

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 vessel savings for the second quarter of 2024 amounted to $2.8 million, or about $2,561 per day, net overall 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 as 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 vessels' regular dry docking window. The CII project, initiated by the Merce McKinney Moller Center for Zero Carbon Shipping, focuses on engaging with the IMO for a review process of the carbon intensity indicator. The objective is to propose process improvements and 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's findings at the last MEPC meeting in March 2024 and anticipates preparing two papers for presentation at the next MEPC session in October, where it is hoped 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 an IMO resolution last year, are currently being developed for the entire Dorian LPG fleet. The key points of these new balanced biofouling management plans comprise of monitoring how and fewer performance caused by biofouling, taking actions to alleviate biofouling, and finally logging the actions taken. This entails sure and crude 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 adapted fuel EU 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 used on vessels. Companies are required to submit electronic monitoring plans that document the methods of monitoring and of reporting, which will be subject to third-party verification by accredited independent entities to ensure their accuracy. Recently, wind 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 aerodynamic forces. By tapping into an unlimited free and zero carbon energy source, WASP, 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 rotor sails, wing sails, hodge sails, and suction sails. Its technology has a different method of harnessing the wind and producing thrust, necessitating a thorough analysis and 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 Hegepeteris and to Ted Young.

Thanks, John. I will quickly finish off my remarks with... 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 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. Our 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 cashflow generation And at the same time, we were able to accomplish a 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 Hadjibateris.

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 interesting presentations by my three colleagues with lots of material for you to hopefully digest. And Nikki, we're happy to take questions now if anyone has any.

Thank you. And with the prepared remarks completed, we will now open the live for questions. If you would like to ask a question, please press the star and 1 on your telephone keypad. And withdraw your question by pressing star 2. Once again, to ask a question, please press the star and 1 on your telephone keypad. I will take our first question from Omar Nocta with Jefferies. Please go ahead.

Thank you. Hey, guys. Good morning. I had a handful, hopefully not too many, but just at least a couple questions for you. John H., you talked a bit about the swings we've seen in the BLGC 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 normal. You've got 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?

Ah, million dollar question.

Kim, I think you're the best of us to answer that one.

Yeah, I think what the biggest factor is really the U.S. 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 terminal 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 still have the... So close to a month after these events, you still have a backlog of three to five days on most of the terminals. Even though they're running on full capacity now, it still takes them a long time to clear the backlog of ships and then 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 to the canal instead of via the cape. So that of course gave a number of more ships in the U.S. Gulf available in July. So there was basically no overhang of ships from June into July, but the effects of what happened in June and then the barrel and the cape size talk in the Houston Ship Channel, of course, increased the problems. So I think we will see probably this again with the U.S. Gulf being any problems hit in the U.S. Gulf will take longer time to catch up than what we saw last year because they're closer to capacity now. On the Panama Canal side, we have seen it swing heavily from you know, over a few days, basically from heavy congestion to fully open and, and I think longer term or coming into the winter, I think we will see the, the, the trends that we've seen the, the last few years that, that the Panama Canal will be heavily delayed from, from September, October, uh, onward throughout the, the winter and then, then clear up, uh, early in the, in the spring. Um, yeah.

Okay. Thank you. Thanks for that. Um, I just wanted to start going.

No, no, Omar, I was just going to say it's ironic that in the winter we had delays caused by a freeze, and in the summer we have delays caused by the chiller, which is because of the heat waves. And the extremes of the weather are pretty impactful, again, when you're running it close to full utilization and the export infrastructure.

Yeah, that's a good point. So, just on that then, in terms of, say, that backlog that has been hampering activity from Beryl in the Gulf Coast, have we kind of started to work through that? Has it improved from, say, where it was, I guess, perhaps a month ago when that happened?

Yeah, I mean, the terminals are fully open 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. So that has been fixed already, waiting for the late cancel. We are seeing 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 their back on full swing now, and then that should be possible to squeeze out more targets eventually, touch wood that everything keeps running normal without any further incidents. Got it.

We have more activity now for August, yeah.

Okay, yeah, so maybe we'll start to see the, you know, the reversal potentially. Ted, just before you got cut off earlier.

Okay.

Go ahead, Omar.

Yeah, yeah, Ted, 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? That's right.

Yeah, around $30,000.

Okay. All right. And this is beneath kindergarten math, but last quarter on the call you had mentioned having booked a good chunk of Helios at about $40,000, you end up realizing $50,000. 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 is that 30 become 40, or are we looking at 30 maybe becoming 33? Any kind of, if you're willing to step out.

It's so hard to, it's really hard to say, Omar. I'd like to think, you know, there is some upside to that number. You know, I will say that the upside is, last quarter surprised us to the upside. But, you know, 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, you know, Tim's comment about activity picking up, you know, whether 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. Not much we realize in this quarter from an accounting perspective versus next is a little tricky.

Understood. I appreciate that, Ted. And sorry if I'm going long in my session, but just maybe one more and I'll let you go. Just obviously, you know, 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 gone on the balance sheet, but just anything you're willing to share on thoughts with that.

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 money to good use. And we'll keep you appraised if anything, when anything comes to fruition.

Okay. All right. Well, thank you. Thanks, John, Tim, Ted. Appreciate it.

Thanks. Thank you, Omar, as always. Thank you.

Thank you. And this will conclude our Q&A session. I will now turn the call over to John Hajepateris for closing remarks.

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

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