Business context and reporting period
Dorian LPG Ltd. owns and operates very large gas carriers (VLGCs) transporting liquefied petroleum gas worldwide. This unaudited Form 10-Q covers the three and nine months ended December 31, 2021; the comparable periods ended December 31, 2020. At quarter-end, the fleet comprised 23 VLGCs, including two time-chartered-in vessels. Most company vessels operated through the Helios Pool, a 50%-owned joint venture.
Financial and operating performance
| Metric | Three months ended Dec. 31, 2021 | Prior-year quarter | Nine months ended Dec. 31, 2021 | Prior-year nine months |
|---|---|---|---|---|
| Revenue | $68.6 million | $88.5 million | $194.6 million | $216.4 million |
| Operating income | $22.6 million | $41.9 million | $54.9 million | $69.8 million |
| Net income | $16.6 million | $35.8 million | $36.6 million | $48.5 million |
| Diluted EPS | $0.41 | $0.71 | $0.90 | $0.96 |
| Adjusted EBITDA | $39.4 million | $60.1 million | $107.1 million | $123.5 million |
| Operating cash flow | Not reported separately for quarter | Not reported separately for quarter | $88.8 million | $87.6 million |
Quarterly operating and net margins were approximately 32.9% and 24.2%, respectively, compared with 47.3% and 40.5% a year earlier. For the nine-month periods, those margins were approximately 28.2% and 18.8%, versus 32.3% and 22.4%.
Average TCE rate fell 20.8% to $33,508 per day for the quarter and 11.7% to $32,034 per day for the nine months. Fleet utilization improved to 98.5% for the quarter and 96.8% for the nine months. Cash and cash equivalents were $115.8 million at December 31, 2021. Debt obligations were $585.0 million gross and $576.3 million net of deferred financing fees; total debt was $602.1 million gross at March 31, 2021. Net cash provided by investing activities was $22.5 million, while financing used $80.0 million in the nine-month period.
Material changes versus prior comparable periods
- Quarter revenue declined 22.5% and net income declined 53.7%; nine-month revenue declined 10.0% and net income declined 24.7%.
- Management attributed lower revenue primarily to reduced TCE rates, reflecting lower spot rates and higher bunker costs, partly offset by stronger utilization. Quarterly average very low sulfur fuel oil prices rose to $609 per metric ton from $361.
- In September, the company sold the 2006-built Captain Markos NL for net proceeds of $43.3 million and recorded a $3.5 million gain. In December, it classified Captain Nicholas ML, carrying value $43.4 million, as held for sale.
- The December refinancing of Commander and Constellation introduced an $83.4 million, five-year fixed-rate facility at 3.78%; the company received $34.9 million net proceeds after refinancing costs and repayment of prior debt.
- Cash rose from $79.3 million at March 31, 2021 to $115.8 million at December 31, 2021. The company paid $40.2 million in dividends and repurchased $21.3 million of shares during the nine months.
Outlook, commentary, and risks
No quantified earnings or rate guidance was provided. Management said it expects to meet liquidity needs for at least the next 12 months using cash on hand and operating cash flow, while noting financing may be needed if these prove insufficient. The board declared a further irregular $1.00-per-share dividend in January 2022 and authorized up to $100 million of share repurchases in February; no purchases had been made under that new authority as of the filing.
Key risks discussed include LPG shipping rates and bunker-price volatility, COVID-19 effects and crew-related costs, charterer or Helios Pool counterparty exposure, vessel age and maintenance, environmental compliance costs, and availability and terms of financing. The company reported compliance with debt financial covenants and no vessel impairment. It had $243.2 million of time-charter-in commitments and approximately $9 million of remaining commitments for a dual-fuel VLGC expected in 2023. A charter-related dispute was settled for $4.0 million during the quarter. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting reported.
Important facts for investors to verify
- Whether TCE rates and pool distributions recover, and how bunker prices affect earnings and cash generation.
- Timing and economics of the Captain Nicholas ML sale and related financing repayment; the vessel’s debt was repaid on January 26, 2022.
- Cash-flow capacity to support debt service, charter-in commitments, capital expenditure, dividends, and the newly authorized buyback.
- Exposure to Helios Pool receivables: net receivables were $67.0 million at December 31, 2021, including contributed working capital.
- Debt structure and rate sensitivity: $336.9 million of 2015 AR Facility principal was hedged; a 20-basis-point LIBOR move was estimated to change annual interest expense on unhedged debt by about $0.2 million.