Dorian LPG Ltd., a leading owner and operator of modern very large gas carriers (“VLGCs”), today reported its financial results for the three months ended December 31, 2024.
Key Recent Development
Declared an irregular dividend totaling approximately $30.0 million, or $0.70 per share, to be paid on or about February 27, 2025 to shareholders of record as of February 5, 2025.
Highlights for the Third Quarter Fiscal Year 2025
Revenues of $80.7 million.
Time Charter Equivalent (“TCE”) rate per available day for our fleet of $36,071.
Net income of $21.4 million, or $0.50 earnings per diluted share (“EPS”), and adjusted net income(1) of $18.5 million, or $0.43 adjusted earnings per diluted share (“adjusted EPS”).
Adjusted EBITDA(1) of $45.2 million.
John C. Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, “The quarterly results reflected an improving market environment. With additional export capacity coming on line in the United States this year and a modest orderbook, we have a positive market outlook. Our dividend payout in excess of the quarter’s net income reflects our constructive view of the VLGC market over the coming months. As always, I acknowledge our dedicated seafarers and shoreside staff, whose hard work and dedication make our results possible.”
Third Quarter Fiscal Year 2025 Results Summary
Net income amounted to $21.4 million, or $0.50 per diluted share, for the three months ended December 31, 2024, compared to $100.0 million, or $2.47 per diluted share, for the three months ended December 31, 2023.
Adjusted net income amounted to $18.5 million, or $0.43 per diluted share, for the three months ended December 31, 2024, compared to adjusted net income of $106.0 million, or $2.62 per diluted share, for the three months ended December 31, 2023. Adjusted net income for the three months ended December 31, 2024 is calculated by adjusting net income for the same period to exclude an unrealized gain on derivative instruments of $2.9 million. Please refer to the reconciliation of net income to adjusted net income, which appears later in this press release.
The $87.5 million decrease in adjusted net income for the three months ended December 31, 2024, compared to the three months ended December 31, 2023, is primarily attributable to (i) a decrease of $82.4 million in revenues; (ii) increases of $2.2 million in charter hire expenses, $2.2 million in vessel operating expenses, $0.2 million in voyage expenses, and $0.1 million in depreciation and amortization expenses; and (iii) decreases of $1.1 million in realized gain on derivatives and $1.6 million in other gain/(loss), net, partially offset by (i) decreases of $1.2 million in interest and finance costs and $0.2 million in general and administrative expenses and (ii) an increase of $0.9 million in interest income.
The TCE rate per available day for our fleet was $36,071 for the three months ended December 31, 2024, a 49.9% decrease from $71,938 for the same period in the prior year. Please see footnote 7 to the table in “Financial Information” below for information related to how we calculate TCE.
Vessel operating expenses per vessel per calendar day increased to $11,097 for the three months ended December 31, 2024 compared to $9,936 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 charter revenues, and other revenues, net, were $80.7 million for the three months ended December 31, 2024, a decrease of $82.4 million, or 50.5%, from $163.1 million for the three months ended December 31, 2023 primarily due to reduced average TCE rates, which declined by $35,867 per available day from $71,938 for the three months ended December 31, 2023 to $36,071 for the three months ended December 31, 2024, primarily due to lower spot rates, partially offset by lower 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 $55.717 during the three months ended December 31, 2024 compared to an average of $132.773 during the three months ended December 31, 2023. The average price of very low sulfur fuel oil (expressed as U.S. dollars per metric ton) from Singapore and Fujairah decreased from $653 during the three months ended December 31, 2023, to $570 during the three months ended December 31, 2024.
Vessel Operating Expenses
Vessel operating expenses were $21.4 million during the three months ended December 31, 2024, or $11,097 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 and increased by $2.2 million, or 11.7% from $19.2 million for the three months ended December 31, 2023. The increase of $1,161 per vessel per calendar day, from $9,936 for the three months ended December 31, 2023 to $11,097 per vessel per calendar day for the three months ended December 31, 2024 was primarily the result of an increase per vessel per calendar day of non-capitalizable drydock-related operating expenses of $909. Excluding non-capitalizable drydock-related operating expenses, daily operating expenses increased by $252, or 2.5%, from $9,909 for the three months ended December 31, 2023 to $10,161 for the three months ended December 31, 2024 primarily due to a $181 per vessel per calendar day adjustment to an expense estimate in the prior period that did not recur and an $86 per vessel per calendar day increase in vessel communications.
General and Administrative Expenses
General and administrative expenses were $7.5 million for the three months ended December 31, 2024, a decrease of $0.2 million, or 2.5%, from $7.7 million for the three months ended December 31, 2023 and was driven by a $0.2 million natural disaster relief donation in the prior period that did not recur in the current period along with decreases of $0.1 million in cash bonuses and $0.2 million in other general and administrative expenses, partially offset by an increase of $0.3 million in stock-based compensation.
Interest and Finance Costs
Interest and finance costs amounted to $8.9 million for the three months ended December 31, 2024, a decrease of $1.2 million, or 11.8%, from $10.1 million for the three months ended December 31, 2023. The decrease of $1.2 million during this period was mainly due to a decrease of $1.2 million in loan interest on our long-term debt, which was driven by a decrease in average indebtedness, excluding deferred financing fees, from $633.2 million for the three months ended December 31, 2023 to $579.9 million for the three months ended December 31, 2024.
Interest Income
Interest income amounted to $3.8 million for the three months ended December 31, 2024, compared to $2.9 million for the three months ended December 31, 2023. The increase of $0.9 million is mainly attributable to higher average cash balances for the three months ended December 31, 2024 when compared to the three months ended December 31, 2023.
Unrealized Gain/(Loss) on Derivatives
Unrealized gain on derivatives amounted to $2.9 million for the three months ended December 31, 2024, compared to a loss of $6.1 million for the three months ended December 31, 2023. The $9.0 million favorable change is primarily attributable to a favorable change in the fair value of our interest rate swaps caused by changes in forward SOFR yield curves and changes in notional amounts.
Realized Gain on Derivatives
Realized gain on derivatives amounted to $0.8 million for the three months ended December 31, 2024, compared to $1.9 million for the three months ended December 31, 2023. The $1.1 million reduction is primarily attributable to (1) a $0.6 million decrease in realized gains on our interest rate swaps and (2) a realized loss on our forward freight agreements totaling $0.5 million.
Market Outlook & Update
Average petrochemical margins for steam cracking remained negative for naphtha during the fourth calendar quarter of 2024 (“Q4 2024”) for Far East ethylene producers. Meanwhile, propane margins had averaged positive figures for the majority of 2024 but deteriorated at the end of the third calendar quarter of 2024 (“Q3 2024”). Ethylene and propylene margins were at their lowest in October 2024 but improved for the remainder of Q4 2024 with softening feedstock prices. Imported propane prices increased from September to October 2024 to an average of 64% and 70% of Brent in NW Europe and the Far East respectively. Propane costs subsided after October in these two major importing regions as overall propane demand remained subdued with deteriorating steam cracking margins for ethylene for Q4 2024 compared to the previous quarter. By November, positive margins returned for both the production of ethylene via steam cracking and propylene via PDH. Another PDH plant began operating in China during the last quarter of 2024, bringing the total number of new facilities in 2024 to seven, maintaining a current overcapacity environment and keeping operating rates in low levels.
On exports, Saudi CP prices rose as a percentage of Brent from 59% in Q3 2024 to 67% in Q4 2024. Meanwhile the U.S. Gulf saw a similar increase in propane prices relative to crude oil in October 2024, with Mont Belvieu prices as a percentage of West Texas Intermediate (“WTI”) increasing to 45% from an average of 39% in September 2024. The upward pressure throughout the remainder of the quarter continued with the average propane price relative to WTI increasing to 48% in November 2024 before settling at 46% of WTI in December 2024.
Lower propane availability in NW Europe and the Far East during October, is partly explained by the continued impact of terminal capacity in the U.S. Gulf due to the announced force majeure at Nederland terminal declared at the end of Q3 2024. Overall U.S. exports fell to a level of 5.5 million metric tons (“MMT”) in October 2024, but quickly recovered back to 5.7 MMT in November.
Weaker import demand from China, driven in part by lower steam cracking demand, resulted in a decline in LPG imports from high levels of 3.5 MMT in July 2024 to 2.3 MMT in November 2024. Imports into China recovered in December to an estimated 2.8 MMT, though remained lower than the levels seen earlier in the year. Overall, total LPG imports into China in Q4 2024 totaled 8.2 MMT compared to a high of 10.1 MMT in the second calendar quarter of 2024 (“Q2 2024”), reflecting the impact of higher import prices seen in Q4 2024 compared to earlier in the year. It was also an unseasonably warm start to the winter in the Far East.
The OPEC+ group announced a continuation of the additional voluntary cuts announced in November 2023 for another quarter until the end of March 2025, lowering the production and potential export of LPG from the Middle East compared to earlier expectations, although total Middle East export volumes reached a new record high for 2024.
After falling in Q3 2024, freight rates remained relatively steady in Q4 2024 with the Baltic averaging around $56 per metric ton for the Ras Tanura-Chiba route, although the Houston-Chiba route posted higher with an average of about $108 per metric ton during Q4 2024, up from around $99 per metric ton during Q3 2024.
In Q4 2024, three new VLGCs were added to the market, representing a modest addition to the global fleet. An additional 107 VLGCs are expected to be added to the global fleet by calendar year 2027. The average age of the global fleet is now approximately 10.5 years old. Currently, the VLGC orderbook (including VLACs) stands at approximately 20% of the global fleet.
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 chemical and refinery feedstock, as 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 our quarters ending June 30 and September 30 and relatively weaker during our quarters ending December 31 and March 31, although 12-month time charter rates tend to smooth out these short-term fluctuations and recent LPG shipping market activity has not yielded the typical seasonal results. The increase in petrochemical industry buying has contributed to less marked seasonality than in the past, but there can no guarantee that this trend will continue. 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.
Source: Dorian LPG Ltd.
