Dorian LPG, reported its financial results for the three months ended December 31, 2022, and announced that its Board of Directors has declared an irregular cash dividend of $1.00 per share of the Company’s common stock, returning over $40.3 million of capital to shareholders. The dividend is payable on or about February 28, 2023 to all shareholders of record as of the close of business on February 15, 2023.
Key Recent Developments
- Declared an irregular cash dividend totaling over $40.3 million.
Highlights for the Third Quarter Fiscal Year 2023
- Revenues of $103.3 million.
- Time Charter Equivalent (“TCE”)(1) rate per operating day for our fleet of $52,768.
- Net income of $51.3 million, or $1.27 earnings per diluted share (“EPS”), and adjusted net income(1) of $52.0 million, or $1.29 adjusted earnings per diluted share (“adjusted EPS”).(1)
- Adjusted EBITDA(1) of $76.2 million.
- Paid an irregular cash dividend of $1.00 per share of our common stock to all shareholders of record as of the close of business on November 7, 2022.
- Committed to the installation of scrubbers on three additional vessels, which are expected to be completed during calendar year 2023.
- Exercised the option to extend the time charter-in of the 2020-built Future Diamond to our fleet with an expiration during the first calendar quarter of 2025.
- Extended the time charter-out of the 2015-built Concorde and the 2014-built Corsair with expirations during the first and fourth calendar quarters of 2024, respectively.
|
(1) |
TCE, adjusted net income, 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, “We were pleased to deliver results for the quarter led by strong TCEs. Our chartering performance drove good cash generation and solid forward bookings, which enabled us to pay a dividend of $1.00 per share, increasing our total dividends declared in the last twelve months to $5.50 per share and cumulative cash returns to shareholders of over $535 million since our IPO. We remain positive on our core business and look forward to four additional VLGCs joining our fleet during calendar year 2023 and additional earnings capacity following scrubber installations on three additional vessels. We closely monitor evolving technologies and opportunities in our sector as well as potentially attractive investments in related areas. As always, I acknowledge, with gratitude, the good work of Dorian’s people working at sea and on shore”.
Third Quarter Fiscal Year 2023 Results Summary
Net income amounted to $51.3 million, or $1.27 per diluted share, for the three months ended December 31, 2022, compared to $16.6 million, or $0.41 per diluted share, for the three months ended December 31, 2021.
Adjusted net income amounted to $52.0 million, or $1.29 per diluted share, for the three months ended December 31, 2022, compared to adjusted net income of $13.5 million, or $0.34 per diluted share, for the three months ended December 31, 2021. Adjusted net income for the three months ended December 31, 2022 is calculated by adjusting net income for the same period to exclude an unrealized loss on derivative instruments of $0.7 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.
The $38.5 million increase in adjusted net income for the three months ended December 31, 2022, compared to the three months ended December 31, 2021, is primarily attributable to increases of $34.7 million in revenues and $1.1 million in interest income, a $2.3 million favorable change in realized gain/(loss) on derivatives, a $1.3 million favorable change in other gain/(loss) and net decreases of $0.9 million in depreciation and amortization, $0.4 million in voyage expenses and $0.3 million in vessel operating expenses, partially offset by increases of $1.2 million in interest and finance costs, $1.0 million in general and administrative expenses, and $0.3 million in charter hire expenses.
The TCE rate per operating day for our fleet was $52,768 for the three months ended December 31, 2022, a 57.5% increase from $33,508 for the same period in the prior year, driven by higher spot rates despite higher bunker prices. 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 98.5% during the three months ended December 31, 2021 to 97.8% during the three months ended December 31, 2022.
Vessel operating expenses per day increased to $9,739 for the three months ended December 31, 2022 compared to $9,423 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, net, were $103.3 million for the three months ended December 31, 2022, an increase of $34.7 million, or 50.6%, from $68.6 million for the three months ended December 31, 2021 primarily due to an increase in average TCE rates, partially offset by a decrease in fleet utilization. Average TCE rates increased by $19,260 per operating day from $33,508 for the three months ended December 31, 2021 to $52,768 for the three months ended December 31, 2022, primarily due to higher spot rates despite higher bunker prices. 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 $119.106 during the three months ended December 31, 2022 compared to an average of $59.252 for the three months ended December 31, 2021. The average price of very low sulfur fuel oil (expressed as U.S. dollars per metric ton) from Singapore and Fujairah increased from $609 during the three months ended December 31, 2021, to $676 during the three months ended December 31, 2022. Our fleet utilization decreased from 98.5% during the three months ended December 31, 2021 to 97.8% during the three months ended December 31, 2022.
Charter Hire Expenses
Charter hire expenses for the vessels chartered in from third parties were $5.2 million and $4.9 million for the three months ended December 31, 2022 and 2021, respectively. The increase of $0.3 million, or 6.1%, was mainly caused by an increase in the number of chartered-in days from 169 for the three months ended December 31, 2021 to 184 for the three months ended December 31, 2022.
Vessel Operating Expenses
Vessel operating expenses were $17.9 million during the three months ended December 31, 2022, or $9,739 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. The decrease of $0.3 million, or 1.6% from $18.2 million for the three months ended December 31, 2021 was due to a reduction of calendar days for our fleet from 1,932 during the three months ended December 31, 2021 to 1,840 during the three months ended December 31, 2022, driven by the sale of Captain Nicholas ML prior to the three months ended December 31, 2022. The increase of $315 per vessel per calendar day, from $9,423 for the three months ended December 31, 2021 to $9,739 per vessel per calendar day for the three months ended December 31, 2022 was primarily the result of increases of $115 per vessel per calendar day in operating expenses related to lubricants, $110 per vessel per calendar day in operating expenses related to repairs and maintenance, and spares and stores, and $65 per vessel per calendar day in operating expenses related to crew wages and related costs, for the three months ended December 31, 2022.
General and Administrative Expenses
General and administrative expenses were $6.9 million for the three months ended December 31, 2022, an increase of $1.0 million, or 18.4%, from $5.9 million for the three months ended December 31, 2021. This increase was driven by $0.2 million in financial support for the families of our Ukrainian and Russian seafarers affected by the events in Ukraine and increases of $0.4 million and $0.4 million in stock-based compensation and other general and administrative expenses, respectively, for the three months ended December 31, 2022.
Interest and Finance Costs
Interest and finance costs amounted to $8.6 million for the three months ended December 31, 2022, an increase of $1.2 million, or 16.5%, from $7.4 million for the three months ended December 31, 2021. The increase of $1.2 million during this period was mainly due to an increase of $3.1 million in interest incurred on our long-term debt, partially offset by a decrease of $1.5 million in amortization of financing costs resulting from the refinancing of Commander and Constellationduring the three months ended December 31, 2021, and an increase in capitalized interest of $0.3 million. The increase in interest on our long-term debt was driven by an increase in average interest rates due to rising SOFR on our floating-rate long-term debt, and an increase in average indebtedness, excluding deferred financing fees, from $576.0 million for the three months ended December 31, 2021 to $645.0 million for the three months ended December 31, 2022. The increase in average indebtedness is due to the 2022 Debt Facility refinancing prior to the three months ended December 31, 2022. As of December 31, 2022, the outstanding balance of our long-term debt, net of deferred financing fees of $6.3 million, was $629.3 million.
Unrealized Gain/(Loss) on Derivatives
Unrealized loss on derivatives amounted to $0.7 million for the three months ended December 31, 2022, compared to a gain of $3.1 million for the three months ended December 31, 2021. The $3.8 million swing is attributable to reductions in notional amounts and an unfavorable change in forward SOFR yield curves (forward LIBOR curves in the prior period).
Realized Gain/(Loss) on Derivatives
Realized gain on derivatives amounted to $1.4 million for the three months ended December 31, 2022, compared to a realized loss of $0.9 million for the three months ended December 31, 2021. The favorable $2.3 million difference is due to an increase in floating SOFR resulting in the realized gain on our interest rate swaps.
Market Outlook & Update
The weak petrochemical market continued into the fourth calendar quarter of 2022 from the previous quarter, with margins for ethylene production via steam crackers declining further for naphtha in the Far East and in Northwestern Europe. The global economic downturn and low Chinese demand due to continued lockdown measures were key factors for the market in the fourth calendar quarter of 2022.
Despite negative margins for steam cracking seen for propane throughout the fourth calendar quarter of 2022 in the Far East region, overall, they were higher than naphtha and hence, where possible, petrochemical players with flexibility to use propane switched to the lighter feed. Operating rates, however, declined throughout the quarter with some ethylene production capacity off-line. In Northwestern Europe, margins remained positive for propane throughout the quarter with imports for petrochemicals rising in the fourth calendar quarter of 2022 compared to the previous quarter. Overall, the propane-naphtha spread in Northwestern Europe widened from an average of ($50) per metric ton in the third calendar quarter of 2022 to an average of ($83) per metric ton in the fourth calendar quarter of 2022.
In terms of seaborne supply and demand, after a decline in U.S. exports in the third calendar quarter of 2022, levels increased by approximately 0.6 million metric tons in the fourth calendar quarter of 2022 to 13.5 million metric tons from the previous quarter. Demand for liquified petroleum gas in China remained subdued even as lockdown restrictions decreased, although additional demand was seen from propane dehydrogenation plants (PDH) plants as propane demand for PDH increased from 2.7 million metric tons in the third calendar quarter of 2022 to 3.2 million metric tons in the fourth calendar quarter of 2022. Chinese imports overall, however, did not increase in the fourth calendar quarter of 2022. After a significant increase in the third calendar quarter of 2022, some of the growth in demand in the fourth calendar quarter of 2022 was met from inventory.
Sufficient supply and tepid growth in global demand in the fourth calendar quarter of 2022, caused prices of propane to remain at much lower levels compared to crude oil than during the same period in the previous year. In Northwestern Europe, propane prices averaged approximately 50% of Brent prices in the fourth calendar quarter of 2022 compared to 76% of Brent prices in the fourth calendar quarter of 2021. This was particularly seen in the U.S. where propane prices continued to fall throughout the quarter reaching an average of 38% of West Texas Intermediate (WTI) prices in December 2022, as production continued to rise and inventory levels remain sufficient.
Another key influence in the seaborne trade market during the fourth calendar quarter of 2022 was the increase in delays in the Panama Canal, particularly in November. Such delays increased the use of other routes to Asia, such as via the Cape of Good Hope and the Suez Canal. The influence of the delays was particularly observed in freight rates throughout the quarter.
The Baltic VLGC index on average increased in the fourth calendar quarter of 2022 to approximately $120 per metric ton from approximately $67 per metric ton in the third calendar quarter of 2022. Along with the additional inefficiencies in the market due to the Panama Canal delays, overall healthy VLGC supply and demand balance, port delays and strong bunker prices provided support to continuous positive freight rates. Rates reached the level of approximately $150 per metric ton throughout the quarter and subsequently reduced as market inefficiencies have eased.
After a further three VLGCs were added during third calendar quarter of 2022, another seven VLGCs were added to the fleet during the fourth calendar quarter of 2022 with a substantial number of additions expected by the early stage of calendar year 2023.
Currently the VLGC orderbook stands at approximately 20% of the current global fleet. An additional 67 VLGCs equivalent to approximately 6.0 million cbm of carrying capacity are expected to be added to the global fleet by calendar year 2025. The average age of the global fleet is now approximately 10.5 years old.
The above market outlook update is based on information, data and estimates derived from industry sources available as of the date of this release, 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. This information, data and estimates involve a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors. You are cautioned not to give undue weight to such information, data and estimates. We have not independently verified any third-party information, verified that more recent information is not available and undertake no obligation to update this information unless legally obligated.
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 expire 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.
