Q3 2025 Dorian LPG Ltd Earnings Call
Speaker Change: Neil Hamilton, Gloria King, Tchaikovsky, Elizabeth Smith, Louis G蒨 ano, The Defenders
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© transcript Emily Beynon
Speaker Change: Good day and welcome to the Dorian LPG 3rd Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change: A brief question and answer session will follow the formal presentation.
Speaker Change: 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.
Speaker Change: I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.
Speaker Change: Thank you, Nicky. Good morning, everyone, and thank you all for joining us for our third quarter 2025 results conference call.
Speaker Change: With me today are John Hadjipateras, Chairman, President, and CEO of Dorian LPG Ltd.
Speaker Change: John Lycouris, Head of Energy Transition and Chief Executive Officer of Dorian LPG USA, and Tara Rasmussen, Vice President of Chartering. As a reminder, this conference call webcast and a replay of this call will be available through February 27, 2025.
Speaker Change: Many of our remarks today contain forward-looking statements based on current expectations.
Speaker Change: 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.
Speaker Change: These forward-looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions.
Speaker Change: 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 express today.
Speaker Change: Additionally, let me refer you to our un-audited results for the period ended December 31, 2024 that were filed this morning on Form 10-Q.
Speaker Change: In addition, please refer to our previous filings on Form 10-K, where you'll find risk factors that could cause actual results to differ materially from those forward-looking statements.
Speaker Change: Finally, I would encourage you to review the investor highlights slides posted this morning on our website. With that, I'll turn over the call to John Hadjipateras.
Theodore Young, John Lycouris Ltd.
John Hadjipateras: Thank you, Ted. Good morning and thank you for joining us today.
John Hadjipateras: Before passing back to Ted and my colleagues, John and Taro, who will provide you with detailed comments or financial results on the market and our outlook, I'd like to highlight the following.
John Hadjipateras: Our dividend of $0.70 per share is consistent with our irregular dividend policy overlining shareholder returns.
with Market Realities.
John Hadjipateras: Our current voyage bookings reflect the improved market, and our confidence in paying a dividend exceeding our current EPS by the heavy dry docking schedule underscores our positive outlook.
John Hadjipateras: I would like to note that we are achieving fuel savings higher than 10% from the energy-saving devices and silicone paints we are installing during these dry hockings, resulting in payback periods of less than a year and continuous fuel and cost-emissions saving.
John Hadjipateras: We expect production growth and terminal expansions at Targa and Nederland by second half 2025 and deliveries of only 11 ships this year will support a healthy freight market in the foreseeable future.
We are mindful of a volatile political environment.
John Hadjipateras: and China's share of U.S. exports was 60% in 2024 compared to 30% in 2015.
John Hadjipateras: We are confident in the LPG trade, with growth prospects in PET can as well as domestic consumption.
John Hadjipateras: Expected deliveries in the latter part of 26 and in 27 are substantial and give pause. As a percentage of the existing fleet, there are more modest than past delivery cascades.
John Hadjipateras: On production, some evolving policies of the U.S. have the potential to unleash its oil and gas industry.
John Hadjipateras: We are mindful of the challenges posed by many uncertainties on the geopolitical front, including developments in Ukraine, Iran, and the Middle East, which may strongly influence our market.
John Hadjipateras: To navigate this environment, we will focus on prudent capital allocation and operational excellence.
John Hadjipateras: Doing what we know best, serving our customers by providing safe, reliable, clean, and trouble-free transportation while maintaining a solid balance sheet.
John Hadjipateras: We are preparing our operations and fleet to be able to bid on emerging ammonia projects.
John Hadjipateras: We already have the Captain John MP on the water fully ammonia capable. We recently retrofitted one of our 2015 built VLGC's to be ammonia capable and plan to retrofit another two ships this year.
In addition, we have one VLGC-VLAC delivering in 2026.
John Hadjipateras: With a strong balance sheet, the company is well positioned to continue being a leader in the VLGC-VLAC market.
And now I'd like to pass you back to Ted.
Thanks, John.
Ted Young: My comments today will focus on capital allocation, our financial position, liquidity, and our unaudited third quarter results.
December 31st, 2024
We reported $314.5 million of free cash.
Ted Young: which was sequentially down from the previous quarter. The change in cash from the quarter was essentially $10.9 million in cash flow to equity offset by $42.6 million in irregular dividends paid and $2.8 million in vessel capex.
Ted Young: As disclosed last week, we will pay a 70 cent per share irregular dividend, or roughly $30 million in total, on or about February 27th, 2025, to shareholders of record as of February 5th.
Ted Young: We have well-structured and attractively priced debt capital with a current all-in cost of about 4.7 percent, an undrawn $50 million revolver,
Ted Young: and One Debt-Free Vessel, and coupled with our strong free cash balance gives us a comfortable measure of financial flexibility.
Ted Young: Looking ahead, we expect our cash costs per day for the coming year to be approximately $26,000 per day, excluding capital expenditures for dry docking.
Ted Young: I would note that our lowest cost hedges, which are at 0.92% for three months SOFR, are rolling off at the end of this quarter, which will result in about a 30 basis point increase in our all-in debt costs beginning in the first fiscal quarter of 2026.
Ted Young: For the discussion of our third quarter results, you may also find it useful to refer to the investor highlights slides posted this morning on our website. I'd also remind you that my remarks will include a number of terms such as TCE, available days, and adjusted EBITDA. Please refer to our filings for the definition of these terms.
Thank you.
Ted Young: Looking at our third quarter chartering results, we achieved a TC revenue per available day of about $36,100. Though marginally lower than the prior quarter's results, the monthly trend was quite good, with November and December results showing strong improvements over the October level.
Ted Young: As our entire spot trading program is conducted through the Helios Pool, its reported spot results are the best measure of our spot chartering performance.
Ted Young: For the December 31 quarter, the Helios pool earned a TCE per day for its spot and COA voyages of 33,200, reflecting the improving monthly trend I just mentioned.
Ted Young: The overall results benefited from the strong Time Charter Out portfolio in the pool.
Ted Young: I'd like to note that the Corsair, which had been on a long-term time charter outside the pool, has now entered the Helios pool.
Ted Young: That read includes both spot fixtures and time charters in the Helios Pool.
Ted Young: Please note that given the difficulty in predicting loading dates, which obviously have a huge effect on revenue recognition, disport options in some charters, and the fact that our COAs are priced on average Baltic rates, the estimates we quote during these calls and the rates actually realized can vary.
Ted Young: The area OPEX for the quarter came in at $10,161 excluding dry docking related expenses, which was marginally up from the prior quarter's $9,767.
Ted Young: This quarter saw a nearly $1,000 a day difference between the reported OPEX that includes expense dry docking amounts and our preferred measure of OPEX that excludes those costs.
Ted Young: Total G&A for the quarter was $7.5 million, and cash G&A, that's G&A excluding non-cash compensation expense, was about $5.8 million, which reflects what we consider to be our core G&A at a level which is consistent with our expectations.
Ted Young: Those amounts netted a reported adjusted EBITDA for the quarter of $45.2 million.
Ted Young: Total cash interest expense for the quarter was $6.9 million, again reflecting our 4.7% all-in cost of debt.
Ted Young: As a reminder, in the first fiscal quarter of 2026, that's the April to June 2025 quarter, our total interest costs will increase a bit to about 5% following the roll-off of those hedges I mentioned.
Ted Young: For the current fiscal year, we have completed three dry dockings and will be dry docking four more of our vessels before the end of March, including some upgrades.
Ted Young: Year-to-date, we have incurred roughly $12.5 million in cash outlays for those dry docks, and we anticipate about an additional $7 million through year-end, which includes both payments for the dry docks already completed and advanced payments related to coming dry docks. Days in dry docks should be consistent with our previous disclosures.
Ted Young: The irregular dividend declared last week of $0.70 a share brings to $15.20 per share in irregular dividends that we have paid since September 2021.
Ted Young: The modest reduction of the dividend is consistent with our previous discussions around the topic. It reflects a balanced mix between current results and the long-term need and prospects of the business.
Ted Young: The VLGC business is by no means a utility, and we don't think our dividend policy should be either.
Ted Young: Including the dividend to be paid next month, we've returned approximately $850 million in cash, $230 million for open market repurchases and our self-tender offer, and $620 million in dividends.
Ted Young: Those dividends compare favorably to our net income since June 30, 2021, which is the quarter immediately prior to our first irregular dividend, of $633 million.
Ted Young: As we've said, our board weighs current earnings, our near-term cash forecast, future investment needs, and the overall market environment among a number of factors in making its determination of the appropriate level, if any, for our dividends.
Ted Young: Thus, the $0.70 per share dividend reflects a constructive market view when considering last quarter's earnings and cash flow and our heavy dry-dock schedule this year.
Speaker Change: We continue to be on the lookout for fleet renewal opportunities and will be judicious with our free cash flow, working to balance shareholder distributions, debt reduction and fleet investment. With that, I'll pass it over to Taro Rasmussen.
Theodore Young, John Lycouris
Taro Rasmussen: Thank you, Ted. Good day, everyone, and thank you for dialing in. The quarter ending December 31, 2024, saw freight market in recovery from the challenges witnessed the quarter prior, but without a winter spike as had been seen the previous four years.
Speaker Change: Export volumes from major export regions remained high, but a warm winter and tepid demand for petrochemicals in the Far East halted any booms from emerging.
Speaker Change: The high inventory levels and record high production levels in the United States created favorable market conditions for exports during October.
Speaker Change: But physical liftings from U.S. Gulf terminals were hampered as a force majeure at Midland Terminal had knock-on effects through October.
Speaker Change: The constraint on export capacity was priced into the West-to-East arbitrage, which limited speculative buying for any potential cold snaps in the Far East.
Speaker Change: The fundamentals of high inventory levels and high production ensured stable export volumes through October, and the Western market traded at a continued premium to the East for the duration of the quarter.
The relative attractiveness of the Western market to the East
Speaker Change: drew significant VLGC supply to U.S. loading areas and supported a then-record export month for VLGCs from the United States in November.
Speaker Change: With negligible delays at the Panama Canal in November, vessel supply was effectively programmed and rates were held sideways.
Speaker Change: The average freight rates in December for the Western market were slightly higher than November.
Speaker Change: owing mostly to the many vessels laden en route to the Far East from the month prior, reflecting the situation of continued positive fundamentals of high inventory and production levels, but fewer vessels available to export.
Speaker Change: The Arabian Gulf to Far East spot market was, as during the previous quarter, characterized by inquiries by Indian public sector undertakings.
Speaker Change: The limited number of pure fixtures to the Far East made assessment of the freight market difficult for brokers, with rates mostly subject to the pull of vessels to the west, and reduced availability for loading in the Arabian Gulf.
Speaker Change: Although, there were periods with sudden fixing inquiry reported in the market.
Speaker Change: It was often to cover for late-running vessels rather than catering to new export tons.
Speaker Change: The recovery in the freight market from the third calendar quarter 2024 was welcomed by all market players, even if a firmer freight market through the fourth calendar quarter 2024 was likely anticipated by most.
Nonetheless, our expectations remain positive for VLGC shipping.
Speaker Change: Despite some analysts seeing a challenged petrochemical market in the Far East due to oversupply, propane continues to remain the competitive feedstock for steam cracking. PDH plants continue to come on stream in China increasing overall propane demand.
Speaker Change: Also, the Panama Canal's utilization has reached maximum efficiency during 2024, creating upside potential if congestion increases.
Moreover, the limited delivery schedule of new builds in 2025
Speaker Change: expected high export supply from North America and roughly 13% capacity expansion at US Gulf terminals during the second half of 2025 are positive factors moving forward.
Speaker Change: Thank you. I will now pass over to Mr. John Lycouris.
Thank you, Tyler.
John Lycouris: During LPG we strive to improve the energy efficiency of our vessels with a focus on operational and technical performance and continue to follow the employment of technological advances and innovations commercially available to the marine sector.
requirements by using real-time
Data Monitoring to Determine Mid-Voyage Technical and Operational Optimizations.
John Lycouris: Our 2024 Annual Efficiency Ratio, or AER, which is a CO2 emissions intensity metric for the industry, and grades vessels from A to E, with A being best.
John Lycouris: was 10.6% better than the IMO target and grades the fleet with a CIA rating of B.
John Lycouris: The Employment of Energy Saving Devices, Advanced Engine Software Modifications, Implementation of Advanced Vessel Routing Software.
and AI Engine Monitoring System.
John Lycouris: Our scrubber vessel savings for the fourth calendar quarter of 2024 amounted to $1.6 million, or about $1,346 per calendar day, net of all scrubber operating expenses.
Speaker Change: ...pure differentials between high self or pure loyal and very low self, pure loyal, averaged...
Eighty-three dollars per metric ton.
Speaker Change: While the differential of LPG as fuel versus very low sulfur fuel oil stood at about $155 per metric ton.
making LPG
Thank you very much.
We operate 16 scrubber-fitted vessels and 4 dual-fuel LPG vessels.
Speaker Change: As mentioned earlier in our call, a second 2015 built vessel is currently undergoing an extensive cargo upgrade for Ammonia Cargoes during the special survey and dry docking window for that vessel's regulatory requirements.
Speaker Change: There is another ammonia as cargo upgrade for a vessel planned for dry dock later this year.
Speaker Change: Upon completion of these projects, the Dorian LPG fleet will have in the water four vessels capable of ammonia cargos and one new building VLAC-VLGC delivering in 2026.
Speaker Change: MEPC 83 is scheduled to meet in April 2025 with a focus on finalizing the mid-term greenhouse gas reduction measures.
which are expected to take effect from 2027 onwards.
Speaker Change: The focus is on emission regulations with the approval of amendments to MARPOL Annex 6 and the review of the EEXI and CII measures, including the adoption of NOH technical code updates.
Speaker Change: We further expect for the MEPC to codify the establishment of technical and economic decarbonization measures and the progression of the lifecycle greenhouse gas assessment framework.
© The Bulletproof Executive 2013
Speaker Change: The IMO is also likely to make progress towards a global carbon tax, and we may see a proposal for adoption emerge from this meeting.
Speaker Change: As previously mentioned, wind-assisted propulsion systems offer benefits under the current and upcoming regulatory frameworks.
Speaker Change: We have undertaken an evaluation and analysis of the weather patterns and conditions encountered during our typical voyage routes.
Speaker Change: the aerodynamic and hydrodynamic factors of our vessels so that we can identify suitable wind-assisted propulsion systems solutions for our fleet.
Speaker Change: Selecting wind technology that is both efficient and straightforward to install and operate can be a pivotal step in the energy transition, delivering a cost-effective path towards reduced emissions and seamless regulatory compliance.
Speaker Change: We continue to believe that our focus on energy and emission savings makes good business sense for our shareholders and for the environment.
Speaker Change: Now I would like to pass it over to John Hadjipateras for his closing comments. Thank you.
John Hadjipateras: Thank you very much, Nicky. Let's go to open questions we have.
Speaker Change: And with the prepared remarks completed, we will now open the line for questions.
Speaker Change: If you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2. Once again, to ask a question, please press the star and 1 on your telephone keypad.
Speaker Change: We'll take our first question from Omar Nocta with Jeffreys. Please go ahead, your line is open.
Thanks, Operator. Hey, guys. Good morning.
Speaker Change: Thanks for the the detailed update as usual. I'm good to get into everything. I guess, you know, you answered a good amount of the, you know, the question on the dividend with your remarks.
I'll probably leave it at that, but maybe just...
Speaker Change: We wanted to ask first kind of on capital allocation going forward as we think about things. You know, the past couple of years you've taken advantage of a very strong market. You paid down a good amount of debt, built up cash.
acquired some ships.
Speaker Change: and clearly paid some big dividends along the way. How do you think about what's important as we move through and into 2025? Obviously, there's a good amount of uncertainty.
Speaker Change: You know, there's a sense here that maybe, you know, freight rates are going to be moderating from what we saw previously. How would you think, or how do you rank your uses of capital moving forward from here?
Thanks for that question, Omar.
You always ask of a very...
pertinent and
Deep questions.
So it is...
Speaker Change: I think we continue the same. I mean, we don't, our priorities remain the same. I think that
Speaker Change: We see the market, as I said in my comments, as being constructive. There may be opportunities for expansion. There may be opportunities...
Speaker Change: for I think that we are well positioned for that with our debt structure and our cash position.
Thank you very much.
More or less on the same level, the same...
Thank you very much.
Speaker Change: Very good. Yeah. Thanks. Thanks, John. That's really helpful. And I guess maybe just kind of talking about the amount of supply coming on. You mentioned in the release the 107 VLGCs on order, equalling to about 20% of the fleet. You know, looking back,
Over the past few years the trade growth has been
Speaker Change: Very strong and easily could have absorbed that amount of capacity. How do you think about the demand going forward? Do you think that we can still see a good amount of, you know, trade growth that can pull in these vessels without a significant impact to the supply-demand balance?
Speaker Change: you know maybe that's the first question and then maybe like part two of that there's also maybe 50 or 60 you know VLECs coming in to the market. Can you just talk about how those you know how those affect the trade going forward?
Thank you.
Omar, I think you know that the bordering boom was...
Speaker Change: course by optimism on a developing ammonia sprayed. And currently there's a bit of pullback and certainly people are feeling
more cautious about it.
Speaker Change: But I think that it's being discounted, the delays are being discounted, and from here forward...
Speaker Change: The upside is greater than... So, just like in the last few years, we absorbed a significant amount of...
Speaker Change: shift deliveries. I think the trade, the increase in the trade, both of the LPG, my own feeling is, and in and in the potential of ammonia, is going to, you know, is going to
Speaker Change: There's going to be enough to absorb the deliveries that we see coming in 26 and 27.
Theodore Young, John Lycouris,
Speaker Change: Great. All right. Thanks. That sounds good. And maybe just, do you mind just touching on the VLECs in terms of how those, are those fully contracted for the most part and are by design going into ethane or is that something that we should consider as amount, you know, as potential oncoming supply as well? Are you talking about VLEC, the ethane or?
Speaker Change: I think that trade is increasing on its own. I think those ships will be absorbed in that market.
Speaker Change: I know they have the potential to drop down into the VLGC market, but I don't think that will happen because their exports and the expansion of that market is significant.
Speaker Change: Okay. Got it. Well, thanks, John. That makes sense and I appreciate it. I'll turn it over.
Thank you.
Thank you.
Speaker Change: And we will move next with Clemente Mullins with Value Investors Edge. Please go ahead, your line is open.
Hi, good morning. Thank you for taking my questions.
Clemente Mullins: I wanted to start by asking about your booking so far in Q1. Could you talk about what percentage of days you've fixed so far and at what rates?
Unidentified: Ted or Tara, which of you would like to take that? I'll just reiterate what we said earlier in the call.
Unidentified: That's helpful. I had missed it. I also wanted to ask about the time-chartering vessels with purchase options. Could you provide some commentary on the price those are exercisable?
No, we don't disclose that.
Unidentified: Alright, and then final question from me. Following up on Omar's question on capital allocation, you're now back trading at a substantial discount to NAV. And this is a decision more for the board, but could you comment on how you view the trade-off between shared purchases and dividend distributions?
When we have a share repurchase authority...
Unidentified: and we are watching the price of the stock, obviously, and it's definitely not off the table.
Unidentified: for us to continue to sort of accelerate, perhaps, our share repurchase.
Speaker Change: Makes sense. That's all from me. Thank you for taking my questions. Thank you.
Speaker Change: Thank you. And this will conclude our Q&A session. I will now turn the call over to management for closing remarks.
Well, thank you very much, everyone. We look forward to...
Speaker Change: talking to you at our next call. In the meantime, have a good time. Thank you. Bye-bye.
Speaker Change: And this does conclude today's program. Thank you for your participation. You may disconnect at any time.