Dorian LPG Ltd. Announces First Quarter 2015 Financial Results

John Hadjipateras, Chairman, President and Chief Executive Officer, commented, “We are pleased to begin 2015 with the delivery and immediate charter of the first VLGC vessel from our newbuilding program of 19 VLGCs. The U.S. has shifted from being a small player in the export market to becoming a significant player in the industry and is now the world’s leading exporter of LPG. We believe this change has created a fundamental shift in our business and with the remaining 18 vessels in our VLGC newbuilding program and we are well positioned to take advantage of this significant opportunity.”

First Quarter 2015 Results Summary

Revenues of $15.9 million for the three months ended June 30, 2014 represent charter hire and voyage charters earned for our three VLGC vessels and our pressurized 5,000 cbm vessel. Revenues from the Captain John NP, which operated in the spot market, amounted to $8.3 million, or a time charter equivalent (“TCE)” rate of $64,340, for the three months ended June 30, 2014. Revenues from time charter hire earned for our two VLGC vessels and the Grendon amounted to $7.6 million, of which $3.2 million represented profit sharing. The Grendon, which ended its time charter at the end of May 2014, had $0.6 million of revenues and 60 operating days for the three months ended June 30, 2014.

Voyage expenses were approximately $2.8 million during the three months ended June 30, 2014 and mainly related to bunkers of $2.1 million, port charges of $0.2 million, brokers’ commissions of $0.2 million, security costs of $0.2 million, and other voyage expenses of $0.1 million.

Vessel operating expenses are influenced by the age and size of the vessel, the condition of the vessel and other factors, as discussed above. Vessel operating expenses were approximately $3.5 million during the three months ended June 30, 2014, or $9,569 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period. This included approximately $0.4 million relating to training of additional crew on our operating VLGC fleet in anticipation of newbuilding deliveries. The Grendon, which ended its time charter at the end of May 2014, had $0.6 million of vessel operating expenses and 60 operating days for the three months ended June 30, 2014.

Management fees expensed for the three months ended June 30, 2014 represent fees charged by our vessel manager, Dorian (Hellas), S.A. (“Dorian Hellas”), a related party, amounting to approximately $1.1 million, representing $93,750 per vessel per month in accordance with our management agreement entered into with Dorian (Hellas). The management fees are charged on a monthly basis per vessel and the total fees are affected by the number of vessels in our fleet.

Depreciation and amortization was approximately $2.5 million for the three months ended June 30, 2014 and mainly relates to depreciation expense for our operating vessels.

General and administrative expenses were approximately $0.8 million for the three months ended June 30, 2014 and represent expenses not covered under our management agreement with Dorian (Hellas) including expenses related to audit and accounting fees, professional and legal fees and investor relations.

Interest and finance costs amounted to approximately $0.2 million for the three months ended June 30, 2014. The interest and finance costs consisted of interest incurred on our long-term debt of $0.6 million, and amortization of financing costs of $0.3 million, less capitalized interest of $0.7 million. The average indebtedness during the three months ended June 30, 2014 was $128.1 million and the outstanding balance of our long‑term debt as of June 30, 2014 was $127.4 million.

Loss on derivatives—net, amounted to approximately $1.4 million for three months ended June 30, 2014. The net loss on derivatives was primarily comprised of a realized loss of $1.4 million relating to interest rate swaps which convert the Company’s debt from a floating to a fixed rate.

Market Outlook Update

The LPG shipping market enjoyed a favorable first-half market environment. Increased U.S. exports, due to growth from shale gas and oil production, and demand from India and China, in addition to traditional Asian markets, have driven the demand for LPG shipping and created a tight shipping market. With only nine vessels being delivered in 2014 into the global VLGC fleet (mostly in the second half of the year), we believe the outlook for LPG seaborne trade remains favorable. Spot charter rates reached all-time high levels during the first half of the year, and such rates remain strong, though off the all-time high levels seen earlier in 2014. There can be no guarantee that rates will remain at these levels.

Export infrastructure and fractionation capacity in the U.S. has grown, and both Targa Resources and Sunoco / Energy Transfer Partners are expected to open additional capacity during the second half of 2014. U.S. sourced LPG continues to enjoy a price advantage over LPG sourced from the Middle East, thereby creating more demand for U.S. LPG in the important Asian markets.

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 liquefied gas carrier market is typically 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. As a result, demand for our vessels 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 these short‑term fluctuations. To the extent any of our time charters expires during the relatively weaker 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.

Fleet

Our operating fleet currently consists of five LPG carriers, including one fuel-efficient 84,000 cbm VLGC, three modern 82,000 cbm VLGCs and one pressurized 5,000 cbm vessel. In addition, we have newbuilding contracts for the construction of 18 new fuel‑efficient 84,000 cbm VLGCs with Hyundai and Daewoo Shipping and Marine Engineering, Ltd., both of which are based in South Korea, with scheduled deliveries between September 2014 and January 2016.

Each of our newbuildings will be an ECO‑design vessel incorporating advanced fuel efficiency and emission‑reducing technologies. Upon completion of our VLGC Newbuilding Program in January 2016, 100\% of our VLGC fleet will be operated as sister ships and the average age of our VLGC fleet will be approximately 1.6 years, while the average age of the current worldwide VLGC fleet is approximately 10 years.
Source: Dorian LPG