Operator
Good morning, and welcome to the Dorian LPG Second Quarter 2027 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 call is available on Dorian LPG's website, which is www.dorianlpg.com. I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.
Thank you, Chelsea. Good morning, everyone, and thank you all for joining us for our second quarter 2027 results conference call. With me this morning today are John Hodge-Beteris, Chairman, President, and CEO of Durian LPG Limited, John LaCouris, Head of Energy Transition, and Taro Rasmus, and Vice President of Chartering. As a reminder, this conference call webcast and a replay of this call will be available through November 12, 2026. Many of our remarks to date 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 those we expressed today. Additionally, let me refer you to our unaudited results for the quarterly period ended September 30, 2026, that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-Q, where you'll find risk factors that could cause actual results to differ materially from those forward-looking statements. Finally, I would encourage you to review the investor highlight slides posted this morning on our website. With that, I'll turn over the call to John Hadjipateras.
Thank you, Ted. Good morning, everyone, and thank you for joining us. On a busy morning, we're proud to be following in the footsteps of Maersk, Janko, Seaways, and last but not least. So before my colleagues provide you with detailed comments on our financial results and an interesting market overview, as well as progress of our operation, I'd like to provide some strategic perspective. The freight market, which hit new highs as well as gains on sales, are reflected in the record earnings that we are reporting today. After the one and a quarter per share dividend, irregular dividend declared by our board last week, the total return to our shareholders since our 2014 IPO will amount to over $1.1 billion. We're confident in the sector's dynamics for the foreseeable future. With the refinancings completed in September, we feel that we have a balanced capital structure with capacity to support growth and withstand headwinds may arise. Our fleet investment and reinvestment strategy has always been measured and deliberate. The ships we have on order will have improved technical and operational features, which will add to their earning potential. In market cycles where bigger investments are warranted, as was the case with our expansion in 2013, we will aim to be ready to take them on. While in the last quarter the strong rates stole the show, we found the fact that U.S. export fertilities did not operate at maximum capacity to be the most interesting development because it showed that the sector is currently short shipping.
In the 12 years since our IPO,
not only has U.S. production and exports been growing, but their growth is also surprised on the upside, absorbing with new building books, which at the time had seemed excessive. We believe in LPG fundamentals, and we hope that together with potential growth in ammonia carried down the line, demand will continue to expand, as has been the case to date. Having said that, we also believe that the order book is adequate, and the restraint will be rewarded. Going back to the present, the Iran conflict and its recent developments effectively put a stranglehold on exports out of the Straits of Hormuz and out of the Red Sea and highlighted the critical role that the U.S. plays in global LPG supply. The Panama Canal is once again heavily congested, pushing more VOGCs to balance around the Cape of Good Hope, and with the dry season approaching, we do not anticipate near-term relief. While it's impossible to predict the outcome and implications of the Middle East conflict on our trade, we believe that peace is not a threat, as some have predicted, but rather it will restore and expand trade, replenish stocks, and potentially clear the dark fleet when it comes. I will now pass over to Ted, who will present our quarterly financial review.
Thanks, John. My comments this morning will focus on capital allocation, our financial position, liquidity, and our unaudited second quarter results. We've continued to opportunistically monetize our fleet since our last earnings call. In October, we completed the sale of both Claremont, which we had discussed on our last call, as well as the Captain John MP, the oldest ship in our fleet. The two sales generated proceeds of approximately $167.4 million debt of commission. We also paid down debt associated with a Claremont of $16 million. On September 2nd, we entered into a new seven-year, $368.4 million credit facility to refinance several credit facilities, including the 2023 amended and restated facility, the Cougar and Crest Japanese financings, and the Commander Trunch of the Ball Cap facility. The new facility carries a margin of 140 basis points over SOFR, which is an improvement of around 60 points compared to the 2023 A&R facility and also has an age-adjusted profile of 22 years. The facility also has a revolving credit facility, which currently has a capacity of $154 million and a $200 million accordion facility, both of which give us financial flexibility and support our future growth. We've also managed to keep in place an existing interest rate swap, which means that about 58.5% of the current term loan balance is currently fixed at 2.85%. We'd also note that the syndicate of banks includes all those previously part of the 2023 A&R facility, in addition to three new banks. In September, we also announced that we entered into an agreement with Hanwha Ocean to build three 90,000 CBM dual-fuel Panamax VLGCs for delivery in 2030 for a price of approximately $338 million. This brings our total number of new buildings to four. We made the 10% down payments on those vessels during the September quarter. At September 30, 2026, we reported $578.8 million of free cash, an increase of $236.6 million, or nearly 70% from the previous quarter. Since September 30, we have received sale proceeds from Claremont and Captain John and Pee and enjoyed continued strong freight markets as reflected in distributions from our Helios pool, leading to our current cash balance of almost $785 million. And our debt balance of $484.8 million at quarter end was reduced following the sale of the Claremont and repayment of $16 million of debt, therefore bringing our pro forma debt balance at the 30th of September to $469 million. Based on our stated quarter end book debt at $484.8 million, our debt-to-total book capitalization stood at 25.6%, and our net debt-to-total capitalization at negative 5%. Using the pro-forma sale proceeds, the debt repayment, and our current cash balance, we currently have net cash of about $320 million and a current all-in debt cost of 4.94% and our undrawn revolver of $154. million. Coupled with our healthy cash balance, we clearly have a comfortable measure of financial flexibility to support growth or whatever may come. We expect our cash cost per day for the coming year to be approximately $27,000 per day. The slight increase versus our previous guidance is largely a function of the reduced number of vessel days following the vessel sales. For the discussion of our second quarter results, you may find it useful to refer to the investor highlights slides posted this morning on our website. For the second quarter, the Helios pool earned a TCE for its spot in COA voyages of $115,163 and an overall TCE result of $99,915, reflecting the very strong rate environment. On page four of our Investor Highlights materials, you can see that we have seven Dorian vessels on time charter within the pool, indicating spot exposure of just over 73% for the 26 vessels in the Helios pool. Dorian's reported TCE revenue per available date for the quarter was just shy of $97,000, which, for the third quarter in a row, is the highest TCE rate we have earned in our corporate existence. The favorable variance versus our forward guidance is due to demerge booked in September and favorable mark-to-market adjustments on our COAs. We plan to issue our forward booking information in the near future. Daily OPEX for the quarter was $10,273, excluding dry docking-related expenses, which was a modest decrease over the prior quarter due mainly to lower maintenance and repair costs. Our gross time-sharing expense for the five TCN vessels came in at $18.2 million, or $36,635 per TCN day. Those vessels contributed positively to our quarterly profits. As we redelivered one vessel during the quarter, we note that we expect our TCN expense to decrease to about $29,954 per TCN day going forward, or about $13.8 million quarterly in aggregate. Total G&A for the quarter was $14 million, and cash G&A, that's G&A excluding non-cash comp expense, was about $8.2 million. The $8.2 million included about $1.3 million of incentive compensation expense accruals, which leaves our core G&A around $7 million. Our reported adjusted EBITDA for the quarter was $242 million, which is also a record, and included $63.6 million of gains on sale from the sales of the Corsair and the Constellation. We will reflect the gains on the sales of the Claremont and the Captain John next quarter and expect those to amount to in excess of $88 million. But for this quarter just ended, excluding the gains on the Corsair and the Constellation, EBITDA was $178.4 million. Total cash interest expense for the quarter was $5.7 million, which is down sequentially from the prior quarter, and principal amortization for the quarter was $9.9 million. For the coming quarter, ending December 31, after taking into account the changes in our financing structure, we expect cash interest expense to come in around $6.1 million and principal amortization to be about $9.8 million, excluding the $16 million we already paid in conjunction with the sale of the Claremont. The regular cash dividend declared at the beginning of the month of $1.25 per share is our 20th consecutive and 21st in total, and brings the total to $20.90 per share in irregular dividends that we have paid since September of 2021. Including that irregular dividend to be paid this month, we have paid nearly $865 million of total dividends and have generated net income of $1.2 billion, including about $100 million of gains on sale over the same time period. As we've explained, our board weighs current earnings, our near-term cash forecast, fleet investment needs, and the overall market environment among a number of factors in making its determination the appropriate level of, if any, for our dividends. Our sector can be a volatile one, and our dividend policy needs to reflect that. I would note, however, that the $1.25 per share dividend reflects a constructive market outlook, while also allowing the company financial flexibility for future fleet reinvestment. We continue to be on the lookout for fleet renewal opportunities, and we'll be judicious with our free cash flow. With that, I'll pass it over to Terrell Rasmussen.
The quarter ending September 30, 2026, has three headlines, escalating conflict in the Middle East, congestion at the Panama Canal, and record highs in the BLGC freight market. There are several aspects of the conflict in the Middle East that have had significant impacts on shipping and arbitrage economics, whether the initial collapse of the MOU, Bhutia advances to the Red Sea coast, or the successful attack on the Saudi East-West pipeline. These aspects combine to create a backdrop for energy markets, solving a shortage crunch. for importing regions and explains energy markets acting with urgency. Meanwhile, the Panama Canal's critical role in U.S.-Asia trade cannot be ignored. Record high Panama Canal auction prices and severe delays were witnessed during the quarter amidst meteorologists concluding the coming El Nino season could be one of the most severe on record. These are the leading explanations for how the Baltic Exchange's BLPG3 calculated TCE climbed from about $82,000 per day on July 1st to about $198,000 per day on September 30th. This nominal TCE is based on a roughly 60-day round-trip rather than about 80 days if the ballast length is around the Cape of Good Hope, which increases the denominator for getting per-day earnings. Furthermore, the assessed TCE does not account for weather factors, delays, and other costs. Increased delivered product prices after the MOU ceasefire and increasing freight rates Incentivized solutions to increasing exports from the Arabian Gulf and vessels to chance transits through the Strait of Hormuz. Notably on oil tankers and VLGCs, Middle East exporters turn to own tonnage or willing ship owners to load at Arabian Gulf terminals and discharge to wading vessels outside the Arabian Gulf. Additional seaborne tons of oil products and LPG. Gave some relief to shortage-stricken countries in Asia and drove rates up. However, because of irregular availability of vessels willing to transit the Strait of Hormuz, irregular scheduling to ensure a transit with least risk, and irregular supply of vessels to receive cargo in the Indian Ocean, sometimes with little notice, It is a logistically inefficient operation. Freight markets benefited from the inefficiencies, increasing vessel utilization. And the requisite premiums for ship owners to take the risk of transiting the Strait of Hormuz acted as a locomotive on the reported rates. It should also be noted that while the shuttle services through the Strait of Hormuz have increased Middle East exports compared to the prior quarter, presently available data suggests export volumes are about half of pre-conflict levels. The secondhand tonnage markets also benefited from the new trade, as Middle East exporting countries and risk-willing companies turned to purchase prompt tonnage to outright own vessels and secure a regular supply of vessels able to attempt transits through the Strait of Hormuz. The successful attack on the Saudi East-West pipeline to Yambou by pro-Iranian interests had a significant impact on widening the arbitrage. As crude oil and LPG export capabilities were severely restricted, the Houthi Alliance's capture of Mocha and Perim Island during 10-11 September has further expanded their capacity to attack vessels in the Red Sea and drove up delivered prices in Asia, whereas several container alliances have committed to Red Sea transits. Bab al-Mandeb is de facto closed to tankers and VLGCs because of expressive threats to Saudi-origin cargo, as would be the case for Yambu exports. The Houthi Alliance's advance to the Red Sea coast happened immediately after a period of rising, record-setting auction prices at the Panama Canal. In August, there were 25 Neo-Panamax auctions with an average winning bid of about $2 million. With winning auction prices rising above $4 million five times. In July, there were 45 auctions, with winning bids averaging about $1 million. The reduced number of auctions reflected the reduced transit capacity and water management implemented by the Panama Canal authorities in preparation for El Nino. Through August and mid-September, The Canal Authorities issued multiple notices to the restrictions, adding planning uncertainty for ship owners and adding congestion when demand was peaking due to the elevated commodity markets. The new records set during this calendar quarter were primarily due to high demand from all shipping sectors, as seen the quarter prior. But it was the reduced transit capacity and ever-changing restrictions that made non-auction transits nearly impossible to accomplish. It should be noticed that the drought season in Panama has not yet commenced. The additional costs associated with Panama Canal congestion translates to higher freight levels, and higher barriers to smooth canal transits incentivize sailings around the Cape of Good Hope. The longer transits from the U.S. to Asia absorbing vessel supply explain why VLCC loadings in the U.S. Gulf for this calendar quarter averaged about 102 a month compared to about 113 a month the quarter prior, because North American production continues to grow. The Middle East conflict is therefore not the only point of attention for the VLCC market. The quarter ending September 30th, 2026, mimics the prior quarter in that the Iran conflict has instilled urgency into worldwide commodity markets and exacerbated existing logistical inefficiencies. Even with the VLGC market contributing to solutions for providing energy from the Arabian Gulf, knock-on inefficiencies have presented itself. And while there are no obvious silver bullets to address congestion at the Panam Canal, Past experiences and the company's flexible fleet will help overcoming those obstacles in the coming quarter, and we remain well-positioned to capture a rising opportunity. Thank you. I will now pass on to Mr. John LeCouris.
Thank you, Taro. At Dorian LPG, we remain committed to continually enhancing energy efficiency and promoting the sustainability of our business at sea and on shore. Of the 22 vessels we commercially operate, 14 are scrubber-fitted and 5 are geofuel LPG. The high oil prices driven by the ongoing Middle East conflict and frequent shipping disruptions in the Strait of Hormuz has caused bunker price differentials to remain elevated, underscoring the value of our fuel efficiency initiatives and installation of scrubbers in our vessels. For the second fiscal quarter of 27, scrubber vessel savings were higher than the previous 11 quarters, amounting to approximately $4,174 per calendar day per vessel, net of all scrubber operating expenses, and has benefited our vessels with improved voyage economics. Fuel differentials between high-sulfur fuel oil and very low-sulfur fuel oil average $174 per metric ton. While that of LPG as fuel versus the very low sulfur fuel oil stood at about $314 per metric ton, making LPG economically attractive for our dual fuel vessels. We remain committed to being at the forefront of energy efficiency advancements. Our participation in the MIT Maritime Consortium continues to support and sharpen our focus on future sustainability and operational efficiency across several areas of maritime research. One topic that has received particular attention in a recent meeting was nuclear propulsion. A panel featuring representatives from the Maritime Administration, the Department of Energy, the U.S. Coast Guard, the American Bureau of Shipping, and the West PNI, which was moderated by a Dorian Opeji board member and ex- American Bureau of Shipping CEO, Christopher Wernicke, explored the potential of nuclear power in commercial shipping, particularly its ability to reduce emissions and enhance energy security. Ongoing research into reactor and port safety has yielded encouraging results with floating nuclear power plants potentially paving the way for broader adoption in commercial shipping. We continue to closely monitor developments at the IMO, particularly the ongoing discussions around the net-zero framework, ahead of the MEPC 85 in late November and early December of 2026. While the final regulatory framework and implementation timeline remain uncertain, we believe a practical and globally consistent approach is important to support long-term investment decisions rather than the fragmented regional regulations. In the meantime, our focus remains on improving fleet energy efficiency, reducing emissions, and maintaining flexibility in our future fuel strategy. We have also developed an emission simulation model to assess different regulatory scenarios and their potential financial applications for a fleet, allowing us to remain well-prepared as the regulatory landscape evolves. We are confident that the Dorian LPG fleet will be prepared to meet regulatory changes in the future. And now, I would like to pass it over to John Hedipateras for his final comments. Thank you very much, John.
Chelsea, we're ready to take questions.
Operator
Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. To leave the queue at any time, please press star 2. Once again, that is star 1 to ask a question. And our first question will come from Omar Nacta with Clarkson Securities. Please go ahead.
Hi, thanks. Thanks, operator. Good morning. Obviously, nice results. Congrats on the, you know, record earnings and record achieved rate. You know, the business is clearly, and the market, you know, clearly are in a strong position, and you did discuss a good amount of the Panama Canal dynamic here in your remarks, and clearly there were a lot of log jams definitely throughout the year, but I did want to ask about what we've seen here recently. You know, it seems at least that over the past several weeks, there's been maybe an easing in the congestion levels there. It's been going on, it feels like, maybe for the past six to eight weeks. It doesn't appear that there's as much of a delay dynamic as there was before. And yet, you know, VLGC spot rates remain at exceptionally high levels, if not still at the near record figure. So, just wanted to get from your perspective, are we perhaps maybe overplaying the impact of the Panama Canal dynamic? Are spot rates maybe structurally supported by something else beyond just the congestion that we have been seeing there? Thank you. If you're able to answer that, I appreciate it.
I think, like I said in my remarks, but also Taro more completely, there are several factors, and Panama is just one of them. I think that the – I'd let Taro give you a better – a more complete explanation, but I think that – You know, the Panama effect, you don't get it until you get it, and when it comes, it exasperates, and then it unwinds slowly. But, Taro, you can tell Omar a little more about why it seems to linger in the freight market, or whether you think freight other factors are influencing the freight market more than the Panama effect.
Sure. Thank you for the question, Omar. Yeah. The quick answer is that a lot of the decisions about ballasting were made weeks before, several weeks before. That reduces some of the immediate congestion and adds to the front miles. It also is a reflection that What I mentioned about changing rules and transit advisories, that causes a lot of unease because you need to make your ballasting decisions, you know, a month before your lake hands. That's a reflection of that. And also, we know some will try to predict the weather way too far in advance, but we're very aware of the fact that October, November is typically the wet season in the area, and the drought season starts around the new year. So we just have to look at mitigating potential risks here, and I don't think we're alone because otherwise we would see more congestion. So I think it's a perfectly fair reflection, the spot market, of where we are vis-a-vis Panama.
Okay. Thank you. I appreciate that. In addition to the Panama effect, the ton-mile effect, don't forget also the inefficiency. The 50% of the volumes that are coming out of the Middle East do not travel efficiently. There's transshipment that delays both at the loading and the crossing of Hormuz and the transshipment and then the delay and then the reloading. So that whole system also creates a shortage.
Yeah, thanks, John. Maybe just a quick follow-up to that point. Are you able to give a sense of the volumes coming out of the Middle East? What portion are coming out of, say, the Hormuz via the SDS and what's coming out of the Red Sea?
We don't have the most recent figures. I think most are scrambling to put that data together. What you will see is for many VLGCs, you know, to answer your point about the proportion coming out of the Red Sea. They might have loaded around now, but you would not see the data until much later because those vessels are presently heading north into the Mediterranean around Africa, so you'll have a delay in data. So, unfortunately, I don't have the best answer for you right now. I'm sure we'll all get more clarity later on.
Thank you. Okay. Yeah, that certainly makes sense. I appreciate it. And just one more, and maybe on kind of Dorian specific, certainly you've been, you know, taking advantage of the strong market, especially the run up in asset values, you monetize for the older VLGCs, and you've been basically rolling the proceeds effectively into the new buildings. How are you thinking about the capital allocation from here? Ted, I know you've mentioned in your comments. You know, looking at modern tonnage. But, you know, should we expect you maybe to continue this approach of monetizing some of the older vessels in this environment and perhaps replacing them with new buildings? Or do you maybe look for on-the-water tonnage?
We sold five ships this year, and the average age of those ships was almost 13 years, and the average price that we got for them was about $83 million. The market has continued to advance, and it reflects abnormal conditions. So I'm not going to say that we won't sell anymore, but I will say that we're not at the moment actively seeking to sell. On the new billing front, yes, we're content with where we are at the moment, and we're not in a rush to go add to the order book, but a natural replacement cycle would require us to do more new billings in the next few years. Whether we do them in the next year or beyond that is still up in the air. We're content to wait and see how the prices develop.
Got it. Thank you, John, for that. That's it for me.
Operator
Thank you. Our next question will come from Stephanie Moore with Jefferies.
Hi, good morning. Thank you. I think you noted today just that U.S. terminals still didn't run at full capacity because ships were effectively short. You know, how much spare terminal capacity is there? When do the new export projects come online, and then is the constraint now Shipping rather than actually terminal. And then my second question, just to put it all together at once here, is we always think it's important to know if we do see some kind of normalization in the Middle East and Gulf cargoes return, how quickly would you expect to see rates adjust? I know that's a pretty complicated question, but would just love to get your thoughts on that dynamic, too. So just those two. Thank you.
I'm not too complicated for Taro, but it's a very interesting question. Thanks, Stephanie.
Taro? Thanks for the question, Stephanie. Yeah, the way we see it right now is that the main constraint is indeed the availability of tonnage, short and sweet. In terms of the capacity or the utilization rate, wow. I don't have the percentage off the top of my head here. I'll refer to what I mentioned, that we're, compared to what we saw last quarter, we're down about 10 loadings just in the U.S. Gulf a month. So, near 10% inefficiencies, plus or minus.
And I forgot, what was the third question, sorry? Or maybe it's difficult to do the follow-up.
I hope that addressed it. Oh, there you are.
Yes, so the first question was just about terminal capacity. And the second was just on the Hermus and how fast if we were to see some form of peace when we would start to see rates move.
Excellent question. I hope my previous remarks covered the capacity there, but about foreign moves, I thank you. As with anything geopolitical, the initial wave is one of sentiment, and then comes the realignment of the trade, so it's probably going to be in two phases, but in terms of the normalization of rates, We certainly, as Mr. Hedges-Beteris mentioned, peace is an attractive enabler of trade, so may that happen. With regards to answering your question properly, I think it's difficult to start making predictions about when peace happens, and also a key consideration is what kind of peace. I think there's many... Options up in the air right now, and whether it's the discussed tolls or whether it is a ceasefire or a permanent peace, and I think that's a few too many scenarios for me to digest right now, but I think that's a question for everybody to consider.
Yeah, no, Stephanie, also you asked how fast. It could be very fast. You know, the market may react very fast, but I don't believe that in the medium to long term. We're looking at a net negative. So you saw when the MOU was signed, the market went down, and then within days, it bounced again. The volumes are still there to be shipped, and if the Hormuz opens, there'll be more volumes to be shipped. It takes time for the market to rebalance, for tonnage to get into an efficient mode. So I really find, as I said before, that when the threat of peace is viewed as a negative, it's a little bit silly. I don't view it as a negative in the long run. But thank you anyway. I thought it was a nice, challenging question. It's difficult to, also the first part of it about the capacity, the capacity, you know, it's difficult to pinpoint when you don't know, when it's a new situation, when it's a wonderful situation to find yourself in when you're on the supply side where, you know, the demand exceeds. And we haven't had that too often in shipping until recently, so it's kind of in play. Let's see how it goes. Thank you, Stephanie. I think, Chelsea, we're done with the questions, right? Yes, sir.
Operator
This is the Q&A portion of the call, so I'd like to turn it back to John Hadjipateras for any additional or closing remarks.
Thank you, Chelsea. Yes, indeed. Thank you very much, Omar. Thank you, Stephanie, for your participation and everyone else. Have a good fall, and see you in January. Thank you.
Operator
Thank you, ladies and gentlemen. This brings us to the end of today's meeting. We appreciate your time and participation, and you may now disconnect.
