BW LPG Ltd (BWLP) 2017 Q1 法說會逐字稿

Welcome to BW LPG's first quarter 2017 financial results presentation. We will begin shortly. You will be brought to the presentation by Martin Ackermann, CEO and Elaine Ong, CFO of BW LPG.

They will be pleased to address any questions raised after the presentation. (Operator instructions). We will begin the presentation now.

Thank you very much. Welcome everyone to the presentation of the BW LPG's results for the first quarter of 2017, the financial period ending March 31. I am joined here by our CFO Elaine Ong.

We appreciate your interest in our results and encourage your queries at the end of our call.

Freight rates improved by 16% quarter on quarter to $15,800 on the benchmark Baltic route due to favorable geographic price spreads and continued strong import demand growth from China, Korea and India.

The market has been trading between $15,000 and $20,000 per day in the last few weeks as the arbitrage fluctuates between marginally open and closed.

We have seen a pickup in Middle East exports recently, particularly from Saudi Arabia and Qatar, while too-high US propane prices are still challenging the VLGC market. Spot rates currently stand at around $16,000 per day, while the forward Asian propane price curves remains flat as we head into the summer market.

Turning to slide 4, we review the highlights of the first quarter.

The Company continues to remain profitable in a challenging market. We generated net revenue of $95 million based on daily rates of $20,900 for the VLGC segment, and $11,300 for our LGCs, with total contract coverage of 30% during the quarter.

EBITDA gain came in at $42 million, while net profit was $8 million, or $0.07 per share.

Excluding gains on the sale of BW Messina and BW Havfrost we generated a net profit of $600,000.

In January, we sold the 2017-built BW Messina for $78 million and leased her back for seven years.

We also recycled the LGC BW Havfrost in accordance with the Hong Kong IMO convention standards.

Lastly, in March, we completed the refinance of the six 2016-built ex-Aurora VLGCs at an all-in cost of LIBOR plus 188 basis points, and a 16-year amortization profile.

Our leverage remains at a manageable 55%.

I'll now turn to slide 5 for an overview of our commercial performance in the first quarter.

TCE rates on our VLGC fleet averaged roughly $20,900 per day in the first quarter with contract coverage of 30%.

Our LGC fleet generated TCE rates of $11,300 per day for the quarter.

Focusing on our VLGC chartering performance, we recorded 536 total CoA days, or 13% of VLGC revenue days.

CoA TCE rates of $34,200 were in line with our probable minimum guidance released last quarter.

We also make no adjustments to our CoA portfolio for the rest of year 2017, and we reiterate guidance for probable minimum levels in today's freight rate environment.

Time chartered days came in at 722 days, or 17% of VLGC revenue days, with a blended time charter rate of $35,700 per day. We expect rates of $34,900 per day from our time chartered portfolio for the remainder of 2017, lower than first quarter, as some of our high rate time charters expired during the first quarter.

Our spot fleet generated $15,500 per day, in line with the Baltic index, and based on a commercial utilization rate of 91%, calculated as available days less commercial waiting days, divided by our available days.

Switching to our LGCs, we operated roughly 70% of our fleet on time charter, and the remainder on the spot market.

On slide 6, we see the global fleet of VLGCs on the water today stands at 248 vessels, with 32 VLGCs still to be delivered, for an order book ratio of 13%. Seven vessels have delivered this year, and one has been scrapped. We expect a further 19 deliveries in 2017 with five set to enter the fleet in 2018, and six in 2019.

Our VLGC market share remains at 20%. Including LGCs and new-builds, our total fleet comprises 55 vessels, with an average age of seven years.

On slide 7, we provide an overview of seaborne LPG trade in the first quarter of 2017. Seaborne LPG trade grew by 0.5% in the first quarter of 2017 compared to first quarter of 2016, led by import growth of 40%, 21% and 9% in India, Korea, and China respectively.

US seaborne LPG export volumes continued to grow, standing at approximately 8.1 million tons in the first quarter of 2017, compared to 6.4 million tons in the first quarter of 2016.

Middle Eastern LPG export volumes declined by 6% year on year to 8.8 million tons following the November 2016 OPEC production costs.

Turning now to slide 8. Here we provide an updated snapshot of EIA's outlook for LPG balances in the US. US LPG production declined by 1.2% year on year in first quarter of 2017, while domestic US consumption declined by 4.5%.

For 2017, the EIA expects net US LPG exports of 26.1 million tons, while production is forecast to grow by 3.2% to 78.6 million tons, and domestic consumption to decline to 53.5 million tons from 53.9 million tons.

The EIA now shows its 2018 forecast for LPG production growth at 4.8% and domestic consumption growth of 1.6%.

Net exports are forecasted to grow by 4.5% in 2018, reaching 27.2 million tons.

We believe that there is an upside potential to EIA's 2018 production growth estimates and that LPG production growth can at least match the EIA's expected 7% growth in 2018 crude oil production.

LPG production growth has now also outpaced US nat gas in the last four years, as LNG content in the shale extraction has been quite high.

With that, let me turn over to our CFO Elaine Ong, who will walk you through the financial position and results.

Thanks, Martin. Starting with our income statement on slide 9, our net revenue for the quarter was $95 million compared to $137 million in the same quarter last year.

Other operating income is higher this quarter due to the loss of higher insurance payout arising from a prolonged off hire situation on the vessel.

Charter hire expenses for the quarter decreased as we operate at one less charter-in vessel. Charter-in expenses will continue to decrease through the year as we deliver VLGC BW Broker and Yo Yo Spirit to their owners in Q2 and Q3 respectively.

Operating expenses was approximately $7 million higher year on year, reflecting 12 more vessels in our operating fleet.

We generated EBITDA of $42 million in the quarter compared to $89 million in the same quarter last year.

Finance expenses were higher by $6.5 million year on year due to the draw-downs on debt to finance 11 new vessels; five BW new-build vessels, and six from the Aurora acquisition.

We recorded net profit for the quarter of $8 million, or $0.07 per share. Excluding a $7.4 million gain on the sale of the BW Messina and the BW Havfrost, we recorded a gain of $600,000 in Q1.

Turning to slide 10, we provide a snapshot of our balance sheet and cash flow position. We continue to maintain a strong balance sheet with a leverage ratio of 55%, a 1% decline from the previous quarter's peak.

In the first quarter of 2017, we paid the final instalment on our two new building -- remaining new builds of approximately $70 million. This concludes our new build program. As of today, we have no remaining growth CapEx commitments.

Cash and cash equivalents at the end of the quarter was $48 million.

On slide 11, you will see our net debt position at $1.4 billion at the end of the quarter. Available cash and undrawn facilities were $288 million.

As of March 31, we have six debt facilities. For BW LPG's pre-existing facilities, the first is the $800 million facility with $433 million outstanding and $200 million of undrawn credit.

Secondly, we have the $400 million ECA facility with $363 million outstanding.

Next, we have the $221 million ECA facility, with $201 million outstanding following the draw-down to finance the delivery of our final own DSMU VLGC new build the BW Mindoro.

We then have the $150 million unsecured revolving credit facility with $110 million outstanding and $40 million of undrawn credit.

In March, we finalized the refinancing of the six 2016-built ex-Aurora ships with ABN Amro, OCBC and CEXIM, for $290 million, or $48 million per ship, at an all-in cost of LIBOR plus 188 basis points, and a 16-year amortization profile. There is currently $287 million outstanding under this facility.

Lastly, we have $1 million outstanding under the ex-Aurora bond that is maturing in August this year.

As of today, our total liquidity is $288 million. Assuming a constant rate of $12,000 per day, we will have sufficient liquidity runway until the first half of 2019.

With that, I would like to hand it back to Martin to conclude our presentation.

Thank you, Elaine. So, if you please turn to slide 12, I will summarize the presentation, and after which we will open for questions.

We generated earnings per share of $0.07 in the first quarter and net revenues of $95 million, and a 44% EBITDA margin. We completed the refinancing of the six modern ex-Aurora vessels at market-leading terms. We sold one of our VLGC new builds for a healthy profit right before asset values started declining and recycled our oldest LGC.

As a result of our enlarged fleet, we established commercial and technical operations in Oslo and Houston to better serve our customer base in the West.

Looking ahead, we expect total contract coverage of between 24% to 32% for the remainder of the year, depending on uptake on our CoA contracts.

Our short-term outlook remains cautious as we enter the summer months with continued cover tightness in the Middle East, high US domestic LPG prices, and significant new building deliveries for the rest of year 2017. These factors will maintain downward pressure on rates, especially for the near term.

Low US inventorial levels will continue to prop up domestic LPG prices and until the confidence returns that US inventories have built sufficiently for the typical winter season heating demand.

We maintain our view that renewed US LPG production is the key to reopening global price spreads and a more sustained rebound in freight.

With the NGL content per barrel of oil on an upward trajectory in the major US shale basins, we're led to believe that the growth of LPG production can potentially outpace the growth rate of crude oil on a comparative basis.

Our immediate managerial focus remains on continued operational improvements and optimizing commercial performance in an otherwise challenging market.

This concludes our results update for the first quarter of 2017. We, as always, appreciate your interest in our market updates, and I would like to open the line for questions now. Thank you.

We will begin our question and answer session now. (Operator instructions). We will take our first question from Lukas Daul from ABG. Please go ahead.

Thank you and good morning. I was wondering, Martin, if you could talk a little bit about the OpEx. Your other operating expenses was in line with Q4, and you had more sort of -- you absorbed the Aurora vessels. So I was wondering what you have done with the cost structure and what can we expect there going forward.

Good morning, Lukas, and for once it's morning for us too as we're sitting in Oslo, so that's actually very nice this time of the year.

Your question on OpEx is quite relevant. I think I've spoken about this in the past. In the summer of 2015, we launched a cost saving initiative that was an 18-month program, which is -- well, it's a never-ending project, but it maintains a continuous focus on our cost structure. And as you can see, we've taken off considerable costs on our OpEx, so we're now very competitive across our entire fleet, and that focus remains.

Okay. So this is, if you say, some sort of a run rate we can expect from you going forward.

Yes, that's exactly right. If anything, you will see us improve further.

Okay, that's very good. Then the second question, looking at your guidance going forward, I know that the number of total days or available days is down by around 417 in 2017 and 240 in 2018. Can you explain what's behind that?

If I'm not mistaking, it follows the redelivery of two of our time charter ships that Elaine just mentioned. I don't think there's anything else behind that. So it's simple --

You didn't sort of allocate more time to off-hire or anything in that guidance? It's just simply the moving vessels in and out.

No, to the contrary. We don't allocate more to off-hire. Of course, we have built in the usual dry dock maintenance as per regular cycles.

Our fleet availability was 98% for the VLGCs in the quarter and that even included a prolonged time of off-hire on one of our vessels.

But no, there's nothing in the numbers apart from redelivery of two time charter ships.

Okay, that's good. Thank you.

(Operator instructions). We will now take the questions from the webcast.

As there are no further questions, we have come to the end of today's presentation. Thank you for attending BW LPG's first quarter 2017 financial report presentation. More information on BW LPG is available online at www.bwlpg.com. Goodbye.