Dorian LPG Ltd. Announces Third Quarter Fiscal Year 2018 Financial Results and Financing Transaction for the Concorde

STAMFORD, Conn., Feb. 1, 2018 /PRNewswire/ -- Dorian LPG Ltd. (NYSE: LPG) (the "Company" or "Dorian LPG"), a leading owner and operator of modern very large gas carriers ("VLGCs"), today reported its financial results for the three months ended December 31, 2017.

Highlights for the Third Quarter Fiscal Year 2018

• Revenues of $44.5 million and Daily Time Charter Equivalent ("TCE")(1) rate for our fleet of $22,833 for the three months ended December 31, 2017, compared to revenues of $35.7 million and TCE rate of $17,796 for the three months ended December 31, 2016.

• Net income of $1.7 million, or $0.03 earnings/(loss) per basic and diluted share ("EPS"), and adjusted net loss⁽¹⁾ of $(2.1) million, or $(0.04) adjusted diluted earnings/(loss) per share ("adjusted EPS"),⁽¹⁾ for the three months ended December 31, 2017.

• Adjusted EBITDA⁽¹⁾ of $24.7 million for the three months ended December 31, 2017, which increased by $10.8 million from $13.9 million for the three months ended December 31, 2016.

• Entered into a $65.0 million sale and bareboat charter arrangement for the Corsair ("Corsair Japanese Financing") resulting in net cash proceeds of $52.0 million, $30.1 million of which we used to repay a portion of our existing bridge loan agreement with DNB Capital LLC (the "2017 Bridge Loan"). The Corsair Japanese Financing has a mandatory buyout in 2029 with purchase options from November 7, 2019 onwards and carries a fixed interest rate of 4.9%.

• Entered into an agreement to amend the maturity date and margin on the 2017 Bridge Loan. The remaining outstanding principal amount is due on or before December 31, 2018 and accrues interest on the outstanding principal amount at a rate of LIBOR plus 2.50% for the period ending March 31, 2018; LIBOR plus 6.50% for the period April 1, 2018 until June 30, 2018, and LIBOR plus 8.50% from July 1, 2018 until December 31, 2018.

⁽¹⁾       TCE, adjusted net income/(loss), adjusted EPS and adjusted EBITDA are non-GAAP measures. Refer to the reconciliation of revenues to TCE, net income/(loss) to adjusted net income/(loss), EPS to adjusted EPS and net income/(loss) to adjusted EBITDA included in this press release.

Key Recent Developments

• Entered into a $70.0 million sale and bareboat charter arrangement for the Concorde ("Concorde Japanese Financing") that closed on January 31, 2018 and resulted in net cash proceeds of $56.0 million, $35.1 million of which was used to repay a portion of the outstanding principal on the $758 million debt financing facility that we entered into in March 2015 (the "2015 Debt Facility"). The Concorde Japanese Financing has a mandatory buyout in 2031 with early repurchase options from January 31, 2021 and carries a fixed interest rate of 4.9%.

• Accelerated the termination of our shareholder rights plan to January 26, 2018 from August 31, 2018.

John Hadjipateras, Chairman, President and Chief Executive Officer of the Company, commented, "The performance of our fleet reflects the strength of our commercial and technical management platforms as well as the premium our modern ships earn compared to older ships. We have taken further steps to ensure the continued robustness of our balance sheet through a second sale and bareboat charter arrangement. We are cautiously optimistic about the outlook for the LPG tanker sector as industry fundamentals continue to improve."

Third Quarter Fiscal Year 2018 Results Summary

Our net income amounted to $1.7 million, or $0.03 per share, for the three months ended December 31, 2017, compared to net income of $5.0 million, or $0.09 per share, for the three months ended December 31, 2016.            

Our adjusted net loss amounted to $(2.1) million, or $(0.04) per share for the three months ended December 31, 2017, compared to adjusted net loss of $(19.3) million, or $(0.36) per share for the three months ended December 31, 2016. We have adjusted our net income for the three months ended December 31, 2017 for an unrealized gain on derivative instruments of $3.8 million. Please refer to the reconciliation of net income/(loss) to adjusted net loss, which appears later in this press release.

The favorable change of $17.2 million in adjusted net loss for the three months ended December 31, 2017 compared to the three months ended December 31, 2016 is primarily attributable to increased revenues of $8.8 million, an $8.0 million decrease in realized loss on derivatives, a $1.3 million decrease in vessel operating expenses, and a $0.8 million decrease in voyage expenses, partially offset by increases of $1.4 million in interest and finance costs and $0.3 million in general and administrative expenses. 

The TCE rate for our fleet was $22,833 for the three months ended December 31, 2017, a 28.3% increase from a TCE rate of $17,796 from the same period in the prior year, primarily driven by increased spot market rates. Please see footnote 6 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 98.4% in the quarter ended December 31, 2016 to 95.6% in the quarter ended December 31, 2017.

Vessel operating expenses per day decreased to $7,804 in the three months ended December 31, 2017 from $8,456 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, voyage charters and other revenues earned by our vessels, were $44.5 million for the three months ended December 31, 2017, an increase of $8.8 million, or 24.7%, from $35.7 million for the three months ended December 31, 2016. The increase is primarily attributable to an increase in average TCE rates from $17,796 for the three months ended December 31, 2016 to $22,833 for the three months ended December 31, 2017 as a result of higher spot market rates during the three months ended December 31, 2017 as compared to the three months ended December 31, 2016. 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 $29.857 during the three months ended December 31, 2017 compared to an average of $25.817 for the three months ended December 31, 2016. Additionally, during the three months ended December 31, 2017, the board of the Helios Pool approved a reallocation of pool profits in accordance with the pool participation agreement. This reallocation resulted in a $961 increase in our fleet's overall TCE rates for the three months ended December 31, 2017, due mainly to favorable speed and consumption performance of our VLGCs operating in the Helios Pool. The increase in TCE rates was partially offset by a reduction in utilization of our vessels from 98.4% during the three months ended December 31, 2016 to 95.6% during the three months ended December 31, 2017.

Voyage Expenses

Voyage expenses were $0.4 million during the three months ended December 31, 2017, a decrease of $0.8 million, or 67.6%, from $1.2 million for the three months ended December 31, 2016. Voyage expenses are all expenses unique to a particular voyage, including bunker fuel consumption, port expenses, canal fees, charter hire commissions, war risk insurance and security costs. Voyage expenses are typically paid by us under voyage charters and by the charterer under time charters, including our vessels chartered to the Helios Pool. Accordingly, we mainly incur voyage expenses for voyage charters or during repositioning voyages between time charters for which no cargo is available or traveling to or from drydocking. The decrease for the three months ended December 31, 2017, as compared with the three months ended December 31, 2016, was mainly attributable to a reduction in the number of operating days for our VLGCs operating on voyage charters outside of the Helios Pool during the relevant periods.

Vessel Operating Expenses

Vessel operating expenses were $15.8 million during the three months ended December 31, 2017, or $7,804 per vessel per calendar day, which is calculated by dividing vessel operating expenses by calendar days for the relevant time period for the vessels that were in our fleet. This was a decrease of $1.3 million, or 7.7%, from $17.1 million for the three months ended December 31, 2016. Vessel operating expenses per vessel per calendar day decreased by $652 from $8,456 for the three months ended December 31, 2016 to $7,804 for the three months ended December 31, 2017. The decrease in vessel operating expenses for the three months ended December 31, 2017 when compared with the three months ended December 31, 2016 was primarily the result of (i) a $0.6 million, or $293 per vessel per calendar day, reduction of crew wages and related costs, (ii) a $0.3 million, or $163 per vessel per calendar day, reduction in insurance costs, reflecting a reduction in premiums, and (iii) a $0.3 million, or $159 per vessel per calendar day, reduction in spares, stores, and repairs and maintenance costs.

General and Administrative Expenses

General and administrative expenses were $5.5 million for the three months ended December 31, 2017, an increase of $0.3 million, or 7.2%, from $5.2 million for the three months ended December 31, 2016. The increase was mainly due to an increase of $0.2 million in salaries, wages and benefits and an increase of $0.1 million in stock-based compensation. Other general and administrative expenses remained constant for the three months ended December 31, 2017 as compared to December 31, 2016.

Interest and Finance Costs

Interest and finance costs amounted to $8.7 million for the three months ended December 31, 2017, an increase of $1.4 million, or 18.4%, from $7.3 million for the three months ended December 31, 2016. The increase of $1.4 million during this period was due to an increase of $0.8 million in amortization of deferred financing fees along with an increase of $0.6 million in interest incurred on our long-term debt, primarily resulting from an increase in LIBOR, partially offset by a decrease in average indebtedness. Average indebtedness, excluding deferred financing fees, decreased from $802.0 million for the three months ended December 31, 2016 to $751.3 million for the three months ended December 31, 2017. As of December 31, 2017, the outstanding balance of our long-term debt, net of deferred financing fees of $18.9 million, was $727.5 million.

Unrealized Gain/(Loss) on Derivatives

Unrealized gain on derivatives amounted to approximately $3.8 million for the three months ended December 31, 2017, compared to an unrealized gain of $24.4 million for the three months ended December 31, 2016. The $20.6 million decrease is primarily attributable to changes in the fair value of our interest rate swaps due to changes in forward LIBOR yield curves, reductions in notional amounts, and an $8.1 million unrealized gain as a result of the termination of interest rate swaps related to the RBS Loan Facility during the three months ended December 31, 2016 that did not recur during the same period in 2017.

Realized Loss on Derivatives

Realized loss on derivatives amounted to approximately $0.4 million for the three months ended December 31, 2017, a decrease of $8.0 million, or 95.6%, from a realized loss of $8.4 million for the three months ended December 31, 2016. The decrease is primarily attributable to the termination of the interest rate swaps related to the RBS Loan Facility during the three months ended December 31, 2016 that did not recur during the three months ended December 31, 2017.

Subsequent Events

Termination of Shareholder Rights Plan

On December 16, 2016, our board of directors declared a dividend of one preferred share purchase right (a "Right") for each share of our common stock outstanding, as set forth in the Rights Agreement dated as of December 16, 2016, by and between the Company and Computershare Inc., as rights agent (the "Rights Agreement"). The dividend was paid on December 27, 2016 to the stockholders of record on such date. Each Right attached to and traded with the associated share of common stock. The Rights were exercisable only if a person or group acquired 15% or more of our outstanding common stock or announced a tender offer or exchange offer which, if consummated, would result in ownership by a person or group of 15% or more of our outstanding common stock (an "Acquiring Person"). If a person became an Acquiring Person, each Right would have entitled its holder (other than an Acquiring Person and certain related parties) to purchase for $60 a number of shares of our common stock having a market value of twice such price. In addition, at any time after a person or group would have acquired 15% or more of our outstanding common stock (unless such person or group would have acquired 50% or more), our board of directors had the option to exchange one share of our common stock for each outstanding Right (other than Rights owned by the Acquiring Person and certain related parties, which would have become void). Any person who, prior to the time of public announcement of the existence of the Rights, publicly disclosed in a Schedule 13D or Schedule 13G (or an amendment thereto) on file with the Securities and Exchange Commission that they beneficially owned 15% or more of our outstanding common stock would not be considered an Acquiring Person so long as such person does not acquire additional shares in excess of certain limitations.

The Rights Agreement was amended on January 26, 2018 to accelerate the expiration of the Rights from August 31, 2018 to January 26, 2018, and had the effect of terminating the Rights Agreement on that date. At the time of the termination of the Rights Agreement, all of the Rights distributed to holders of our common stock pursuant to the Rights Agreement expired.

Concorde Japanese Financing

We have entered into a sale and bareboat charter arrangement that closed on January 31, 2018 for the Concorde, which was previously financed under the 2015 Debt Facility. The net proceeds from the transaction amounted to $56.0 million, of which we repaid approximately $35.1 million under the 2015 Debt Facility. Under this arrangement, the Concorde was delivered to the buyer upon completion of the transaction and, on the same day, we entered into a 13-year bareboat charter for the vessel. We have a purchase option to re-acquire the Concorde from the third anniversary of the commencement of the bareboat charter through the end of the bareboat charter. We will continue to technically manage, commercially charter, and operate the vessel. The bareboat charter carries a 4.9% fixed interest rate for the duration of the contract and has a 17.3-year loan profile.

Fleet

The following table sets forth certain information regarding our fleet as of January 31, 2018.

Market Outlook Update  

U.S. LPG exports for 2017 amounted to over 29 million metric tons, a 16% growth over 2016, and another annual record. The LPG supply volumes from the United States have now increased its global market share from 29% in 2016 to 33% in 2017. The United States is the single largest NGL exporting nation and the depth of the U.S. NGL markets, including their liquidity and availability of hedging opportunities, should position the United States as the price setter for the global markets.  

For 2017, LPG deliveries into China increased by more than 10% from the previous year. We expect demand growth into 2018 with the start-up of two new PDH plants and higher petrochemical demand from state-owned refiners starting new alkylation units for gasoline production. The winter season in north China has brought increased demand for LPG from residential and commercial users, while industrial users have faced natural gas supply shortages and have been forced to switch to LPG. The same natural gas supply shortages also affected methanol to propylene production plants, causing propylene prices to reach levels close to 2013 highs and have resulted in over a 10% increase in PDH plant utilizations.

India LPG imports averaged over one million tons per month over the course of 2017, surpassing Japan's monthly LPG imports for the first time. The Indian government's cleaner energy program objective was to add 50 million LPG connections within five years. Over the past two years the program achieved two-thirds of the LPG connections objective, while LPG cylinder subsidy removals have now been halted. Demand from the residential sector and autogas sectors are also set to grow on account of recent tax reductions.

Indonesia has posted LPG demand growth of about 20% in 2017 and according to Pertamina's estimates will likely continue into 2018. The country has started diversifying its sources of LPG imports to include LPG sourced from the Phillips 66 operated terminal at Freeport, Texas.  

Waiting days related to Neo Panama Canal transits northbound and southbound averaged 2-3 days in 2017 with LPG vessels ranking second with 28% of all transits, behind only container vessels transits at 54%.

The order book stands at about 13% of the VLGC fleet, while VLGCs over 20 years of age currently comprise 14% of the fleet. There are eight vessels expected to be delivered in 2018, with another 18 in 2019. We have seen nine new VLGC orders placed in the last two months, which will weigh in the fleet supply of vessels from 2019 to 2020 unless we see an equivalent number of vessels scrapped by then.

We expect LPG supply and demand will continue to grow. With the upcoming IMO 2020 mandate on 85% reduction of sulphur emissions for shipping, LPG, being a sulphur free fuel, has the potential to capture a meaningful share of the marine fuels market and likely to become an attractive and cost-effective alternative to other marine fuels. We, therefore, believe that it further supports the case for LPG as a mainstream fuel to the global energy markets and to consumers around the world.

There can be no assurance that imports will continue to grow or that adoption of LPG as a fuel will develop.  Furthermore, there can be no assurance that additional VLGCs will not be ordered.

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 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. 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 these short-term fluctuations. To the extent any of our time charters or the charters of the vessels in the Helios Pool expire during the relatively weaker fiscal quarters ending December 31 and March 31, it may not be possible to re-charter the vessels at similar rates. As a result, we and the Helios Pool may have to accept lower rates or experience off-hire time for the vessels, which may adversely impact our business, financial condition and operating results.

Financial Information

The following table presents our selected financial data and other information for the periods presented:

The following table sets forth a reconciliation of net income/(loss) to Adjusted EBITDA (unaudited) for the periods presented:

The following table sets forth a reconciliation of revenues to TCE rate (unaudited) for the periods presented:

In addition to the results of operations presented in accordance with GAAP, we provide adjusted net income/(loss) and adjusted EPS. We believe that adjusted net income/(loss) and adjusted EPS are useful to investors in understanding our underlying performance and business trends.  Adjusted net income/(loss) and adjusted EPS are not a measurement of financial performance or liquidity under GAAP; therefore, these non-GAAP financial measures should not be considered as an alternative or substitute for GAAP. The following table reconciles net income/(loss) and EPS to adjusted net income/(loss) and adjusted EPS, respectively, for the periods presented:

Conference Call

A conference call to discuss the results will be held today, February 1, 2018 at 10:00 a.m. ET. The conference call can be accessed live by dialing 1-877-407-9716, or for international callers, 1-201-493-6779, and request to be joined into the Dorian LPG call. A replay will be available at 12:00 p.m. ET the same day and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The pass code for the replay is 13676012. The replay will be available until February 8, 2018, at 11:59 p.m. ET.

A live webcast of the conference call will also be available under the investor relations section at www.dorianlpg.com.

About Dorian LPG Ltd.

Dorian LPG is a liquefied petroleum gas shipping company and a leading owner and operator of modern VLGCs. Dorian LPG's fleet currently consists of twenty-two modern VLGCs. Dorian LPG has offices in Stamford, Connecticut, USA, London, United Kingdom and Athens, Greece.

Forward-Looking Statements

This press release contains "forward-looking statements." Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "will," "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "may," "should" and similar expressions are forward-looking statements. These statements are not historical facts but instead represent only the Company's belief regarding future results, many of which, by their nature are inherently uncertain and outside of the Company's control. Actual results may differ, possibly materially, from those anticipated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect future results, see the discussion in the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, under the heading "Risk Factors." The Company does not assume any obligation to update the information contained in this press release.

Contact Information

Ted Young; Chief Financial Officer: Tel.: +1 (203) 674-9900 or IR@dorianlpg.com

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