Welcome to BW LPG's First Quarter 2022 Financial Results Presentation. Bringing you through the presentation today are CEO Anders Onarheim, CFO Elaine Ong, EVP Commercial Niels Rigault, and EVP Technical and Operations Pontus Berg. We are pleased to answer questions at the end of the presentation. Should you have any, please type them into the chat box in your Zoom panel. You may also use the raise hand option. Before we begin, we wish to highlight the legal disclaimers shown in the current slide. This presentation, held on Zoom, is also recorded. I now turn the call over to BW LPG's CEO Anders Onarheim.
Thank you, Lisa, and welcome to our First Quarter Results Presentation for the financial period ended 31st of March 2022. As Lisa said, I'm joined here by Elaine, Niels, and Pontus. If you go to slide three. The year started with a good level of activity in the VLGC market and demonstrating the importance of our business in a context marked by global geopolitical and economic uncertainties. I also want to take the opportunity to congratulate colleagues on the completion of our ambitious LPG retrofitting program. I'd also like to thank all our partners and suppliers for their support. It's been a long journey from contract signing in 2018 to the re-delivery of our 15th retrofitted VLGC earlier this month.
Even with complications from COVID-related restrictions, where our on-site team spent the equivalent of one and a half years in quarantine, the team managed to complete the program ahead of schedule and within budget, and with zero major safety incidents. We now own and operate the world's only fleet of retrofitted LPG-powered vessels and the world's largest fleet to be powered by LPG. This is part of our strategy for smarter shipping. We decarbonize operations, deliver strong financial performance, and invest in innovation and technology. Let me quickly then talk about the key business highlights and market outlook. Please turn to Slide four. In the first quarter, we reported $36,900 per day for our VLGC fleet per calendar day, with 9% technical off hire. This was primarily due to the retrofitting.
Commercially, we achieved strong TCE of $40,400 per day, available day, with a high commercial utilization of 96%. We generated a net profit after tax of $58 million, and this translates into Earnings Per Share of $0.41. Moving on to the highlights for the quarter. We now report the highest available liquidity to date at $651 million and a record low net leverage ratio of 25%. Today, we want to leave you with three key messages. Firstly, we now have a more optimistic view of 2023. Secondly, as mentioned, our leverage ratio is at record low levels. Thirdly, our dividend policy is updated to target a 75% dividend payout ratio when net leverage is below 30%, continued on a quarterly basis going forward.
Our more optimistic outlook is driven by higher energy prices and growing political support for LPG as transitional fuel and an energy source. We believe the market fundamentals in 2023 are supported despite uncertainties from heavy new building delivery schedule. Niels will talk more about this later. For this quarter, with net leverage of 25%, we will return to shareholders a dividend payout that is 75% of NPAT or $0.31 per share. This amounts to a total of $42 million. Continuing our focus on generating returns for our shareholders, we have sold the BW Liberty in the second quarter at a very attractive price. We currently have no CapEx commitments other than just regular maintenance, but we still continue to evaluate investment opportunities along the LPG value chains.
Like with the LPG retrofit program, there are opportunities that are smarter, less capital intensive, and allow us to further strengthen our position in the LPG value chain without ordering new vessels. LPG is clearly a part of the solution towards a sustainable future, and as a member of the broader LPG industry, we must continue to communicate this strongly. On that note, we're also honored to be selected to form part of the OBX ESG Index that comprises of 40 blue chip companies listed in Norway that demonstrates good ESG practices. There's no doubt in my mind that LPG is a sustainable transition fuel and can power a cleaner energy future. If you go quickly to slide five, the key financials. We generated an annual return on equity of 16% and with an annual return on capital employed of 12%.
Our operational and free cash flows were $164 million and $249 million respectively for the quarter, maintaining our flexibility, allowing us to evaluate sizable investment opportunities, and enabling us to continue to return cash to our shareholders. With that, I will let Niels take you through the market review and commercial update. Niels.
Thank you, Anders. Good morning and afternoon to all of you. On slide seven, we share our view of the market. As Anders mentioned, we have upgraded our market outlook for 2023, driven by expected increases in LPG production following the rapid surge in oil and gas prices.
Of course, the order book is a concern. However, our analysis suggests that tightening emissions regulation and increased congestions in the Panama Canal, combined with higher LPG production, should partly offset the freight pressures from the new vessels. So far in Q2, we have fixed approximately 74% of our available fleet days on an average rate of $36,000 per day on the discharge-to-discharge basis. Turn to slide eight. The world needs LPG, and this is perfectly demonstrated in today's energy situation. Since the start of 2022, WTI has increased by 40%, natural gas has more than doubled, and European naphtha has jumped by 24%, while LPG prices have increased by only 8%, making it more competitively priced for both industrial and retail users.
A good thing about LPG is that you don't need expensive infrastructure investments compared to other gases such as LNG. It is practical and give cost competitive solutions to provide energy safety to both established and developing markets. Almost 50% of the world LPG demand goes into retail. The retail demand is continuing to grow strongly, well supported by progressive governments in emerging economies, seeing the benefits from a clean and affordable source of energy. We also see strong demand from the petrochemical segments. Taking April as an example, seaborne LPG imports into Northwest Europe from the U.S. rose by 22% from the previous month due to favorable propane naphtha spreads. Countries such as China, Vietnam are ramping up their PDH and cracker projects, adding significant incremental demand for LPG.
What I'm trying to emphasize here, until the world finds a green energy solution to completely replace fossil fuel, LPG is helping the world meeting its energy demand in a flexible manner that can integrate well with renewable energy production. Turn to slide nine. U.S. is the main driver of global VLGC seaborne trade, and it will continue to be. With Europe looking to reduce their dependence on Russian gas, more seaborne LPG will be part of the solution. U.S. shale producers have the capacity and the capability to ramp up production. Under today's $100 oil price environments and an industry that is quick to react, we expect the LPG production to increase. EIA expect the U.S. LPG export to grow by almost 15% in 2023. In addition, we also have seen that midstream companies reevaluating or planning for new NGL infrastructure investments.
This has certainly given us more confidence in facing the high new building orders next year. Turning to slide 10. The current VLGC order book holds 65 vessels or 20% of the existing fleet. If you look from percentage perspective, the fleet is expected to grow by 13% next year. While I just mentioned the last slide, EIA expect the U.S. LPG export to grow by 15% in 2023. We have not even talked about Middle East, which is also progressively adding back production. Our investments in the 15 dual fuel upgrades is the largest commitment towards decarbonization in the sector. We believe that LPG as a fuel is both clean and economical.
Looking at the price between compliant fuel and LPG for 2023, LPG is priced over $100 cheaper, representing a TCE premium of about $4,500 per day compared to conventional vessels. We have, for the last five years, been active to sell our vintage vessels, total 23 ships. For the last 12 months, we have sold seven VLGC at price above book values. These transactions have generated a total net gain of $35 million or $0.26 per share for our shareholders. We are now comfortable with our current fleet profile, which will allow us to maneuver through all kinds of market conditions ahead. We have no vessel orders and no immediate plan of ordering vessels despite a more positive market outlook. Please skip ahead to slide number 13, and I'll talk about our time charter overview.
We have fixed 16% of our open days in 2023 at an average TCE of $33,800 per day. Mostly are for our BW LPG India business. We have a good position to capture the strong market ahead, and we will continue to focus on the U.S. to Far East voyages. I'm confident and comfortable with our current portfolio. We have the critical mass, which is the key to optimize the spot earnings and help our clients with today's inefficiencies. That's it for me. Next, Pontus Berg will take you through the technical and operations update. Thank you.
Thank you very much, Niels. Good day, everybody. The year has gone off to a good start for the technical and operations team. As Anders mentioned, we have completed our ambitious project to retrofit 15 VLGCs with LPG dual fuel technology. We have done so during what is possibly the most challenging times in recent history. The global, well, possibly more so the local, COVID-related restrictions and lockdowns, which meant we had 462 days in Chinese quarantine hotels for the site team. We managed to complete this LGIP project ahead of time and within budget. This massive achievement is possible only with an excellent team on site, supported by dedicated shore personnel and external partners.
I take this opportunity to thank Isle of Man Ship Registry, DNV, Julian Dockyard, Wärtsilä, MAN ES, WLPGA, and last but not least, our own teams for their support from idea to realization of this pioneering project. With close to 25,000 hours on LPG, we are accumulating some very valuable learnings. Of course, as with all pioneering technology, there are some teething challenges, but our dedicated teams is working hard alongside trusted suppliers for solutions. Our in-house technical and operations teams manages complex multimillion-dollar projects such as new buildings, upgrades, life extensions. In the past decade, the teams has reduced OpEx by a noteworthy 20%, and this while improving safety performance to be best in class and reducing technical off hire. Hence, we see lower OpEx, less incidents, and higher commercial availability. When required, we can leverage on colleagues across functions at the larger BW Group.
We are ready to support our core shipping business and pool partners with deep experience and expertise from offices that cover all the time zones. Looking ahead, the team will continue to ensure our owned and chartered in fleets are managed to market-leading operational levels, and that they are all future-proof and in compliance with upcoming environmental requirements. Our LPG-powered vessels will fully comply with CII and EEXI requirements that will come into force January 2023, meaning we will see no need for power reduction and lower speed for compliance. That is actually the reality for any VLGC that only have a scrubber or rely on IMO-compliant fuel. Our entire fleet will benefit from current digitalization and smart voyage routing initiatives to optimize our fuel consumption.
Also, our Alpha Ori Smart Technology initiative is helping us to monitor our emission performance, and we are now piloting its ability to automate data flow for compliance with the IMO Organization's data collection and reporting requirements. We will also continue to explore new technologies as we develop our next generation VLGC. With that short update, let me now turn over to our CFO, Elaine Ong, who will walk you through our financial position and results.
Thank you, Pontus. Greetings. Let me provide some color on our first quarter financial results. Net profit for the quarter was $58 million, with an EBITDA of $93 million. This translates to an EBITDA margin of 72% for the quarter. As at the end of March, our available liquidity of $651 million and net leverage ratio of 25% are our highest and lowest since listing. We are therefore in a solid financial position to withstand any short to medium term volatility and to invest in the right opportunities for future growth. Let me now highlight a few things on our balance sheet. In quarter one, we generated $164 million in operating cash flows and $249 million in free cash flows.
This includes $94 million in sales proceeds from the sale of the BW Trader and the BW Niigata during the quarter. As previously announced, we have received the $50 million in new equity from Maas Capital for their investment into our India subsidiary. Just earlier this week, Maas Capital confirmed a further increase in their capital investment. When this transaction is concluded, BW LPG will own 52% in our India subsidiary. Our strong cash flow has allowed us to return value to our shareholders in several ways. First, it has allowed us to aggressively pay down our debt. We will voluntarily prepay $268 million of debt by the end of Q2. I'll elaborate more on this in a bit.
Second, as earlier mentioned by Anders, we have enhanced our dividend policy to target a quarterly payout ratio of 75% of NPAT when our net leverage ratio is below 30%. With a net leverage ratio at 25% this quarter, we have declared an interim dividend of $0.31 per share, which translates to a payout ratio of 75% of NPAT. Third, we announced our share buyback program in December last year, and as of the end of Q1, we have purchased 3.8 million shares, amounting to approximately $21 million. We plan to complete the program in due course. Finally, for full year 2022, we expect our operating cash break even for our total fleet, including our chartered-in vessels, to be at $21,300 per day.
Here on slide 16 is an update on our financing structure and debt repayment profile. Our gross debt was $843 million, which included $728 million in debt outstanding from our four term loans. The rest relates to lease liabilities arising from the time chartered in vessels under IFRS 16. Our trade finance facilities of $280 million remain unutilized during the quarter. We ended the first quarter with $353 million in cash.
This, together with $298 million in available revolving credit facilities, put our available liquidity at $651 million and a 25% net debt of $490 million. As mentioned earlier, given our strong liquidity, minimal committed CapEx, and with no major balloon payments due in the next five years, we have voluntarily prepaid $73 million of debt in April, and we plan to prepay another $195 million in June. These prepayments will be reflected in our second quarter results. With this, we will have eight unencumbered vessels worth over $600 million available for financing when needed. On this note, let me open the floor for questions. Thank you, and back to you, Lisa.
Thank you, Elaine. We will begin our Q&A session now. Should you have questions, please type them into the Zoom chat box. You can also click on the Raise Hand button to ask your question verbally. Please note that participants have been automatically muted. Please press unmute before speaking. Should you have questions, please type them into the Zoom chat box. You can also click on the Raise Hand button to ask your question verbally. Please note that participants have been automatically muted. Please press unmute before speaking. One more time. Should you have questions, please type them into the Zoom chat box. You can also click on the Raise Hand button to ask your question verbally. We have one question from Desmond Bimo. Good morning. What is the current NAV per share? Anders.
Elaine, do you wanna give that?
I don't have the latest number, but if I could just come back to you in a bit, we should be able to get that to you shortly.
We have a few questions on the chat channel. Can you please share some more details around the second transaction with Maas on the India JV? How much did they invest, and at what valuation? Anders.
Yeah. Niels, I'll let you answer that for the Maas Capital, you know, how much they invested.
Ooh. That's a big question. In total, they have committed about $80 million in equity.
That guy gives them, you know, a little less than 50% ownership.
Yeah.
Next question from Frederik Ness. To what degree does the war in Ukraine impact LPG freight markets?
I can start, and I'll let you continue, Niels. I think it's impacting us in the way that of course with the increasing oil and gas prices, that helps the production and hence also the exports from the U.S. in particular, as Niels said. Russia is not a big exporter of LPG, so the direct impact is somewhat limited. We clearly see that, as Niels said, LPG is a very flexible and a clean energy source. We do see that there is increased demand also in Europe for LPG. But direct effect, I guess, Niels, is not that high.
No. We have obviously seen much more activity from U.S. to Europe. I mean, I mentioned earlier that's because also because of the naphtha, LPG spread has been very positive. I mean, we also see that the shipping premium market, if you compare Houston to Northwest Europe, it's paying about $20,000 more per day in premium compared to Middle East, Far East. It's for shipping terms, the rates are highest between Europe and U.S.
If you come back to the previous question, our NAV or at least the equity per share is $10, $10.3 per share. Just about NOK 100 per share. Of course, we have to make some assumptions on new build equivalent, but that's our forecast.
Next question. What are the expectations in terms of MEG Exports?
The expectation for energy export?
MEG Exports.
Oh, Middle East.
Middle East.
Niels?
Yes. I mean, as we have also seen in the presentation, we have seen now that Middle East has been a declining export area, while U.S. have grown dramatically. We clearly see now that the export from the Middle East is growing.
Yeah. Both Saudi and Kuwait are increasing production and also exports.
Yes.
Moving on to the next question. Will forecast a 4.8% growth in exports require additional export projects online, or is there spare capacity?
Do you want to take that, Niels, or maybe Iver? Do you want to take and answer that? Okay, but I would just say that they are definitely export capacity in the U.S.
Yes. Hello? Can you hear me, right? Yes. I can add some color to that. I think in the U.S. right now we see, you know, ample supply of infrastructure. We can see that still the terminal rates are still stable, indicating that there's good terminal capacity. We expect even with the higher production out of the U.S., that there should be sufficient both pipeline fractionation and terminal capacity to take us at least through 2023 and probably into 2024, 2025. Just on the Middle East now, I mean, our expectation is, as you know, it's been a period of up and down demand.
In 2020, the export from Middle East was down around 6% for VLGCs, and we expect that now it'll grow around 5%, 6%, 7% in 2022 and 2020. That's similar to what we saw in 2021. Then going forward, in 2023, it will also be around 5%. In this which for the Middle East is a healthy growth, meaning that number of VLGCs occupied in the Middle East from 2021 - 2023 will grow with about 10 VLGCs.
If I can just add a little bit more color on the U.S. I think of course we are studying very closely, you know, what's going on in the U.S. and while we see there's clear incentives now to increase production, we also know that from history, shale has been very adamant about the companies really being disciplined on the CapEx. So this, we're watching it closely, but we do see, you know, at least tendency towards again, more aggressive behavior from the producers. So we are quite optimistic about volumes from the U.S.
Okay. Next question. Are you looking at acquisition opportunities given your high cash levels?
I mean, we are always evaluating opportunities. I think for right now, we feel that we have interest in prospects. As Niels said, we are looking at both other types of investments, you know, along the value chain. We're always looking if we can create value through acquisitions or partnerships. We'll continue to evaluate that. There's nothing concrete to mention now.
Next question. Can you provide any commentary around the new build market? What kind of delivery timelines are being marketed, and at what pricing?
Niels, I'll let you take that.
Yes. Obviously the yards are quite busy these days. There are, you know, three different places where you could order a VLGC. That's either in China or Korea or Japan. Korea being the larger exporter of VLGCs. Right now they are quite busy on the containers and LNG and then the tanker side. What I understand now, the delivery now for a VLGC, we're talking more second half 2025. As for the prices, they are indicating around low $90 million for a VLGC.
Next question. There are about 50 VLGCs older than 20 years. How will EEXI and CII impact these older vessels in terms of speed, and do you expect increased scrapping as a result of these regulations?
Pontus, this is your favorite subject.
Absolutely. Thanks, Anders. Well, if we look at the really old ones, which are high on the fuel consumption, we will expect about two-three knots speed reduction will be required. That will be achieved by installing something that's called Engine Power Limitation. I don't think anyone has the final number since the actual expected date for the final calculation methods will not be available until later this summer because the IMO people are still disputing a little bit. It is believed that it is a very high likelihood that it will be implemented. If it entails higher scrapping levels, it is quite likely, but I think this question more comes around what we believe in the market. Since there are a lot of LPG coming online, possibly not.
Next question. Is there a particular target ratio for the share repurchases in terms of NAV per share, or is there any market value under NAV acceptable at these debt levels?
Well, we have. That's the discussion we have with the board, you know, continuously. We generally stay quite disciplined when it comes to, you know, what levels we buy back shares. Again, for now we will continue with the program that we have started and, but again, we will be disciplined. We haven't set a specific ratio, but we have our own limits in mind.
Next question. Will there still be Panama delays if much of the LNG exports head for Europe rather than Asia?
Niels, you wanna answer that?
Yes. I mean, the LNG towards Europe is additional. You will still see a lot of LNG. The same thing goes for LPG product going east and using the Panama Canal. Even though there's been much more activity from U.S. to Europe, we have seen the Panama Canal delays increasing. Just today, back and forth on the Panama Canal is about three weeks waiting. From a voyage, Houston- Far East, which normally takes 60 days, suddenly now we're talking about three months per voyage. Yes, we expect more delays in Panama going forward.
I mean, the Far East is still the biggest importer of LNG.
Yes.
Next question on newbuilds. Can you provide any commentary on the newbuild timeline and marketing?
I'm sorry, I didn't quite understand that question, Lisa. One more time.
Yeah, one more time. One second. Can you provide any commentary around the newbuild market? What kind of delivery timelines are being marketed and at what pricing?
We're talking about 25, second half 2025 to deliveries. The prices for a VLGC today is quoted around $90 million.
Okay, there are no more questions on the channel. Should you have any questions, please type them into the Zoom chat box. You can also click on the Raise Hand button to ask your question verbally. Please note that participants have been automatically muted. Please press Unmute before speaking.
Okay. I guess, Lisa, then I think we should just thank everybody for participating, and we will be back with more news as soon as we have them. Thank you very much.
Thank you, Anders. We have come to the end of today's presentation. Thank you for attending BW LPG's First Quarter 2022 Financial Results Presentation. More information on BW LPG is available online on our website at bwlpg.com. Have a good day and a good night.