Q1 2020 Earnings Call
P.G. first quarter 2020 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 is being recorded.
Additionally, a live audio webcast of today's conference is available on Dorian Lpgs website, which is www dot Dorian LPG Dotcom I would now like to turn the conference over to Ted Young Chief Financial Officer.
Thank you Mr. young please go ahead.
Thanks Devin.
Good morning, all and thank you for joining us for our first quarter 2020 results conference call.
With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG limited and John Lycouris, Chief Executive Officer of Dorian LPG USA as a reminder, this conference call webcast. A replay of this call will be available through August 14th 2019.
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 these we express today.
Additionally, let me refer you to our unaudited results for the period ended June 32019 that were filed this morning on Form 10-Q . In addition, please refer to our previous filings on Form 10-K , and 10-Q, where you'll find risk factors that could cause actual results to differ materially from these forward looking statements with that I'll turn over the call to John Hadjipateras.
Welcome to our first quarter 2020 earnings call.
On our last call I mentioned some historical rates.
Allow me to do the same today as I think these put context to our market.
Four years ago in August 2015, the Baltic rate was $101.
12 months ago, and August 28, two and it was $39.
On the first week of April of this year, the first day of our quarter.
It was $41 and on the last the June 20, Eightth It was $78.
Ted will shortly run through the numbers and next John will update you on the latest developments in the trade as well as our fleet.
I'm happy to be reporting a profitable quarter.
A seven fold increase in EBITDA from last year, which is reflective of the strong increase in the market.
The TC were reporting is nearly double that of the same quarter last year.
At $29671 a day it represents a result of about 70 voyages.
Well these almost half were booked in the January to March quarter.
Hence there is a lag which we have discussed in previous calls as well.
To illustrate this note that our fixtures in June which of course are for voyages that are not represented in these results.
Were booked at time charter equivalent of over $60000 per day.
And it appears that since the end of June and appeared to date. The average TC all of our fixtures is about $50000 a day.
Assuming no dramatic changes these stronger numbers will be reflected in the quarter.
And the next quarter results.
The <unk> reported yesterday record U.S. production and lower U.S. demand.
Well U.S. cargoes are reaching new destinations in Asia, there are still markets, such as Vietnam, Thailand, and the Philippines, which a further potential.
Even in India, where LPG has been a cornerstone of the Modi governments policy the potential for further inroads as Greg considering that there are still 800000 deaths annually attributable to indoor air pollution caused by cooking with solid fuels.
With the order book contained and the prospects of removals for regulatory compliance we believe the market fundamentals provide some solid support for our optimism.
With 12 of our ships fitted with exhaust gas cleaning systems by the beginning of next year, we believe doron will be very well positioned to navigate the IMO 2020 transition.
Our people diligently continue to push through cost efficiencies, our senior management during the migration is flat to lower than it has been in the four years since our IPO.
And we have commenced program's evolving digital initiatives for performance management, including intelligent Bunkering.
You will have read that our board has approved a stock buyback program.
As you might guess, we cannot discuss the specifics of this other than to say that it underscores our board's commitment to return value to all our shareholders.
I'm not passing the microphone back to Ted.
Thanks.
My comments today will focus on our capital planning for the remainder of the year and our unaudited first quarter results.
In light of the favorable rate outlook, we've expanded and accelerated or a scrubber installation and dry docking program.
We now expect to have all 10 of our newly ordered scrubbers installed by the end of calendar 2019.
Upon completion of the program 12 of our 23 vessels would be able to profit from the expected fuel price differential between low sulfur fuel oil and high sulfur fuel oil phone nibbling implementation how about 2020.
Based on this revised plan, we now expect to have total cash outlays of roughly 31 million or about $5000 per calendar day for the remainder of the fiscal year for the 10 died drydockings, including scrubber installation and ballast water management system installation.
That's for the remainder of the year, we anticipate cash cost per day of 28000, which is the sum of the $23000 per day to which we have historically guided and the five and a half thousand just mentioned.
To put the cash generation of our business in context in the current rate environment.
At a rate a realized fleetwide tc rate of $40000 a day, we would generate roughly $76 million of free cash flow for the remaining nine months of this fiscal year after all debt payments and paying for the scrubber and dry docking in investments.
John also mentioned our stock buyback authority and we expect that we will have sufficient liquidity to fund our scrubber dry docking program and any stock repurchases under the under the program as market conditions may allow.
We end up debt financing any portion of our scrubber program. We will obviously have additional liquidity, which we may deploy towards stock buybacks.
I'd now like to turn to our financial results for the quarter. You May also find it useful to refer to the Investor highlight slide posted this morning on our web site.
Beginning with our chartering results, we achieved total utilization of 98.4% for the quarter with with a time charter equivalent that is time charter equivalent revenue over operating days as those are defined in our filings of 29671, yielding a utilization adjusted TC That's Tc revenue per available day of about 29200.
Spot Tc, which reflects our healios poor results per operating day for the quarter was 29659 with utilization of 98.1%.
I'd also point out that our spot results are net of the administrative cost of the pool and as a result, our actual Tc is higher than this level.
Daily Opex for the quarter was $8052, which compared favorably to last quarter's 8104.
We're pleased with the quarter over quarter trend and our technical management team continues to keep a sharp eye on costs.
Total GMV for the quarter was 6.7 million in cash DNA that is Gina excluding non cash compensation expense was around $5.4 million.
Gene eight for the quarter also reflect bonus payments to a number of non executive employees of about 900000, excluding those payments cash DNA was roughly flat versus the prior quarter.
Please note that for the prior period Gionee does exclude the professional legal fees associated with BW LPG is unsolicited proposal, which we separately reported.
Going forward for the remainder of the fiscal year, we expect our DNA, including non cash compensation non cash compensation expense to decline.
Specifically, we expect to see the decrease because the original awards granted in 2014 invested in 2017 18 19 have now been fully amortized.
Those are words hit our PML by roughly 700000, a quarter and thus we expect noncash comp expense to be reduced by this amount going forward.
Our reported adjusted EBITDA for the quarter was 38.4 million, which was a significant increase from the fourth quarter, reflecting the more favorable rate environment that we enjoyed in the quarter just ended.
As you know we look at cash interest expense on debt as the sum of the line items interest expense, excluding deferred financing fees amortization and other loan expenses and realized gain loss on derivatives on that basis total cash interest expense for the quarter was 7.7 million, which was down about $100000 from the prior quarter largely due to continued debt pay down.
We continue to benefit from our hedging policy and the favorable pricing of our Japanese financings.
Leaving us with the current interest cost fixed hedge a small floating piece of 4.3%.
On July 20, Threerd, we finalized the modest amendment with our bank group that among other things allows us to add back the cost associated with the BW proposal to our EBITDA for purposes of the calculation of the interest coverage ratio, we did not pay a fee in connection with this amendment.
All the details are in our 10-Q.
I would note. However, we do expect based on the current rate environment that we will be comfortably in compliance with all of our covenants for the current fiscal year.
Our cash flow and liquidity remains strong.
Since quarter end through to August 5th our restricted and unrestricted cash is up it's up about 9 million to over $65 million.
Although we hold an 80 plus percent economic interest in the Helios, we do not consolidate its balance sheet.
Which has the effect of understating, our cash and working capital. That's we believe it is useful to provide some additional insight in order to give a more complete can pick picture of our.
Cash and liquidity as of Monday August 5th the pool had roughly $45 million of cash on hand, and no debt.
With a solid market at Barton market backdrop, and a strong balance sheet, we maintain a very constructive view on our business and expect to continue to be able to generate solid cash on cash returns for our shareholders with that I'll pass it over to John of course.
Thank you Ted.
US LPG exports year to date through July have grown 22% to 22, and a half million tones and middle East exports have grown 3.5% to 22.6 million tons compared with the same period of 2018.
For the first time, you asked in Middle East Sip on volumes were equal and the expectation is that the U.S. equity will grow faster than it does from the middle East as additional export capacity comes on line.
In total from the U.S., we saw 68 VLGC Liftings in April 64, and me 63 in June and for July and New record of 70 Liftings.
Yes, propane inventories continued to push towards the higher end of their five year range hitting 18 million barrels in July 26.
These levels at 21.4% higher than last year at this time and are almost equal to export volume increases.
Yes short term energy forecast estimates.
LPG monthly production.
Increased from in volumes from the Shadow pipeline and we expect further volume increases to continue in third quarter of 2019 with the opening of the Grand Prix pipeline.
I will take us a new Ridley Island terminal on the West Coast of Canada is now exporting to Congress a month, one enterprise expects its LPG marine terminal expansion to be ready by the end of September followed by an even more substantial expansion in third quarter of 2020.
Targa resources announced an expansion project or 200000 barrels per day by next year and energy transfer partners announced scheduling changes this summer to facilitate vessel loadings and increase the refrigeration capacity as our Nederland terminal by September 2020.
Sunocos Marcus Hook terminal has maintained a strong loading schedule last quarter exporting nine VLGC cargoes in April 10 in May and nine in June .
Over the past few months LPG volumes from the US East coast have primarily been direct to Europe , where you are sourced LPG has been highly competitive as a cracker feedstock with a propane naphtha spread averaging $130 per metric ton.
We continue to see increased eurs cargo destined to Japan, and Korea, but also towards India, Indonesia, and Taiwan with Middle East volumes increasingly absorbed by Chinese buyers.
In terms of global demand, China currently has nine PDH plants in operation and a further two PDH plants are expected to start up in the second half of 2019.
Each of these new PDH plants represent a potential of over 700000 tons per annum of LPG demand.
In Korea to launch LPG crackers build in the first half of the year are now currently ramping operations and represent potential LPG demand of 1.8 million metric tons per annum.
As feedstock.
With ballast water treatment regulations coming to effect. This September and the IMO 2020 regulations at the beginning of next year, the global fleet will be evolving with major equipment of retrofitting.
According to Clarksons. There are now 35 vlccs in the fleet 20 years of age or older and a similar number of vessels in the Newbuilding order book.
Given the fleet age profile and the increases in owner's costs from environmental regulations, we believe that scrapping considerations of older tonnage will come into focus.
With a stable order book of about 12, 12% of the global fleet, we expect the near term VLGC market to remain healthy.
In terms of the evolving regulatory events landscape it is worth pointing that.
During LPG design and diligent preparedness fleet with a view to capitalize on the IMO 2020 regulations that are now in sight.
We have been operating scrubbers in our fleet since 2015, gaining experience and knowledge and Realtimes cover equipment operations. We current expect 10 of our vessels to have scrubbers installed by calendar year end, meaning that more than half of our fleet will be scrubber equipped.
Well, we'll be hybrid multi screen scrubbers, enabling our vessels to operate in all global ports either in open or closed loop in pressure short waters.
We expect our fleet to be commercially flexible and compliant with any regulatory or sovereign restrictions.
Thank you.
Ill pass it over to John .
Thank you John .
Devin can we.
Any questions.
With the prepared remarks complete we'll now open the lines for questions. If you would like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q.
Thanks, Steve.
It may be necessary to pick up your handset before pressing the sarkies one moment, please while we poll for questions.
Oh.
Yes, Vince.
Our first question comes from the line of Jay Men's Meyer, Oh, well, John Deysher with Pinnacle Capital Management. Please proceed with your question.
Who is this we actually may have lost that line. One moment. Please as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
There appear to be no questions at this time I'd like to turn the floor back over to Mr. Hodge, but terrorists for closing comments.
Thank you very much Devon and thank you all for listening. Thank you for.
Making part of real time during the summer and we wish you a good rest of the summer and look forward to having you.
Again on our next quarterly call.
In due course bye bye.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Thanks.