Welcome to BW LPG's Third Quarter 2021 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 disclaimer shown in the current slide. This presentation, held on Zoom, is also recorded. I now turn the call over to BW LPG CEO, Anders Onarheim.
Thank you, Lisa, and welcome to our third quarter results for the period ending 30 September 2021. As always, I am joined by Elaine, Nils, and Pontus. Finally, the leadership team and I are on the road this quarter. We'll be speaking from various corners of the world. Me back in Oslo, Elaine from Frankfurt, Nils and Pontus in Singapore. We certainly look forward to meeting our investors and business and bank partners face-to-face very soon. While we see a gradual easing of COVID-related restrictions around the world, operations remain challenged. We also continue to insist on strict measures to protect crew and staff from COVID-19 also going forward. On the business and commercial fronts, the third quarter allowed us to again deliver decent returns, and we remain optimistic for the rest of the year.
We think we'll provide another good year for returns from BW LPG. We turn to slide four. The shipping industry is really at a crossroads, and ship owners must plan the next steps carefully. Our decisions cannot only cater to short-term market investor demands, but must also accommodate long-term developments in technology and regulations. At BW LPG, we strive to maximize the return on our assets, and one important way we are doing so is through focusing on technology. The pioneering LPG propulsion technology now powers 10 of our VLGCs. This is the world's largest fleet of lower emission VLGCs. Let me remind you, LPG has the lowest greenhouse gas emissions profile of any carbon-based fuel. With LPG, we benefit from a 17% decline in CO2 emissions versus MDO. By retrofitting, we save over 1 million tons in CO2 emissions versus ordering new builds.
With 10 vessels on water, 2 at yard, and over 10,000 hours in operation, we have proved that the LPG propulsion technology works. Our program to retrofit 15 of our VLGCs with this technology will be completed in the first half of 2022. We also continue to invest in digitalization. Smart ship technology on board our ships enables real-time data transfers between ship and shore. Together with other initiatives, such as smart weather routing, reduce fuel consumption, which not only means lesser emissions, but also greater savings. To slide five. In the third quarter, we reported $27,800 per day for our VLGCs, for the VLGC fleet per calendar days. Importantly to note, though, we had 8% planned off-hire on our fleet. This was driven primarily by our LPG dual fuel retrofit program.
Commercially, we achieved $30,100 per available day with consistently high commercial utilization of 98%. This performance translated to a net profit after tax of $29 million and an earnings per share of $0.20. For the third quarter, we'll be distributing a dividend of $0.10 per share, amounting to a total of $14 million. Before we move to the highlights of the quarter, I'd like to again stress that our focus is to ensure the best long-term returns for our shareholders. This strategy includes optimizing the returns on our assets through LPG propulsion retrofits, buying and selling vessels opportunistically, having a strong balance sheet, and utilizing technology to optimize voyage returns. We do walk the talk.
We've been strengthening our financial position and deleveraging our balance sheet since 2020, including $256 million of undrawn revolving credit facility and $127 million dollars cash. Our available liquidity is at $383 million with the lowest net leverage ratio in seven years at 36%. This strong balance sheet prepares us for all kinds of market conditions and allows us to participate in sizable and attractive investments in the LPG value chain when we identify good opportunities. Our retrofit program remains on track. We have retrofitted further two vessels this quarter with LPG dual fuel propulsion, bringing the total to 10 vessels on water. We continue to embrace technology in shipping and have fitted three more vessels with smart ship technology, bringing the total now to 20 vessels.
This technology, together with active weather routing, has given us fleet-wide fuel savings of approximately $1.5 million so far this year. Since 2020, we have been divesting our less economic and efficient vessels at very attractive levels and well above new build equivalent prices. During the quarter, we have concluded the sale and delivery of BW Confidence in July, and BW Boss and BW Energy in August, generating $81 million in liquidity and a net gain of $9 million. Lastly, we have exercised the purchase option on Yuricosmos in August, now named BW Niigata. This transaction has generated an expected 8% return on capital and a gain on right-of-use assets of $3 million. These asset transactions are an integral part of our strategy.
In order to provide healthy returns over a cycle, we need to deliver steady operations and sound commercial decisions. Thus, we find it highly rational to sell our least favorable assets at prices at or above NAV, while the stock market is valuing these assets at more than a 40% discount. Looking at the market, we expect healthy TCE rates for Q4 2021, comfortably above cash break-even. This is supported by continued growth in U.S. exports, recovering volumes out of the Middle East, strong and stable end user demand, as well as increasing shipping inefficiency, primarily in the Panama Canal. We also continue to be optimistic for the next year. As we look towards 2023, we reiterate the sustained export growth of U.S. LPG and no further new builds are key to bring about a balanced market.
Let's quickly go to key financials on slide six. The VLGC market held relatively steady during Q3 compared to the preceding quarter. We generated an average return on equity of 9%, and our annualized return on capital employed came in at 7%. Year to date 2021, we delivered a return on equity of 13% and a 9% return on capital employed. Our operational and free cash flows remain healthy at $63 million and $106 million respectively for the quarter, giving us good flexibility and enabling us to continue to return cash to our shareholders. As highlighted earlier, our net leverage ratio continued down from 40% at the end of the second quarter to now 36% at the end of Q3. The lowest in seven years.
Next up, Niels will take you through the market review and commercial update. Niels.
Thank you, Anders. Good morning and afternoon to all of you. In slide eight, we are sharing our view of the market. Currently, the market is robust, and we expect rates to continue to firm up. This is driven by strong fundamentals such as winter heating demand in Asia and increasing shipping inefficiencies, especially for the Panama Canal. Last fixture we did for December lifting out of the U.S. to discharge into Asia gives a round voyage rate above $40,000 per day. We have fixed approximately 80% of our Q4 available fleet days at an average rate of $32,000 per day on the discharge to discharge basis. As Anders said, we continue to be optimistic for next year. The current high oil and gas prices will support stronger production growth out of both U.S. and the Middle East.
The shipping inefficiencies will continue to support the ton mile demand, offset vessel supply, and add market volatilities. Today, we have seen the Panama Canal waiting days increasing to more than one month for both legs. We believe the congestion in the Panama Canal will become the new norm. As a result, we expect more traffic around Cape of Good Hope for the U.S. products to Asia. Turning to slide nine and talk about the seaborne LPG trades overview. Driven by high oil and gas prices, we continue to see a recovery in U.S. upstream activities. North American LPG export have increased by 16% year-over-year. The strong export, despite the high LPG prices, continue to illustrate the strength of the LPG import demand. Despite falling petrochemical margins, China LPG imports recovered strongly by 30%.
China is set to drive the most meaningful LPG demand growth moving forward. There are 21 PDH developments scheduled from 2021 to 2024 in China. Those plants will generate over 12 million tons of incremental import demand per year. Retail demand into India continue to grow, and the LPG import have increased by 20%. Significant infrastructure investments has taken place in India to encourage high levels of import, such as new pipelines, port expansions, and storage facilities. Furthermore, the country is expanding into petrochemical segments with PDH plants investments. This will unlock tremendous potential import demand growth for the petrochemical sectors in India. Turn to slide 10. As you can see in slide 10, we have the EIA short-term energy outlook released in November. The forecasts that U.S. LPG export will remain high for 2022. Production growth by 6% compared to 4.1% in 2021.
Let's turn to slide 11. The VLGC fleet profile. Seven more vessels are expected to be delivered from 2023 to 2024 compared to last quarterly updates. This include 19 in 2022, 42 in 2023, and another eight in 2024. We have no new build orders, but we have the largest fleet of LPG propulsion vessels ready by Q1 next year. We continue to offload some of our non-LPG propulsion [ladies] at good premium to book values and in line with brokers valuations. These transactions crystallize the values for our shareholders as our current share price is trading more than 40% discount to our book values at $9.4 per share. Turning to slide 13 and talk about our commercial performance.
Despite the 50% increase in bunker costs compared to only 4.5% increase in freights, we have achieved a commercial result of $30,100 per available days with a strong commercial utilization of 98%. This is approximately 20% above the average voyage rate Ras Tanura to Chiba. Our TCE per calendar days came in at $27,800, and the result was mainly impacted by having 8% of off-hires. We decided to bring forward our drydock LPG conversions so we can enjoy a more available sailing days next year when we anticipate a stronger market. Turn to slide 14 and talk a little bit about our time charter portfolio.
During the quarter, we have renewed three time charters contract in our Indian subsidiary for two years at an average gross TCE rate of mid-$30,000 per day. Our time charter out revenues for 2022 now stands at $75 million, with an average TCE rate of $33,100 per day. Our TCE in costs remain low at $26,100 per day. As of today, we're happy with our spot exposure for next year. That's it for me and, Pontus Berg will take you through the technical updates.
Thank you very much, Nils. Turning to slide 15, please. [And the portfolio] mentioned that to date we have actually 11 LPG powered VLGCs serving our customers with the lowest greenhouse gas emission profile in the sector in the water. BW Freya is currently undergoing sea trial following her conversion. She is expected to be redelivered to commercial by the end of next week, and she will thus be number 12. The three final vessels in the retrofitting program are planned for conversion during Q1 in next year. Furthermore, we have five vessels due for normal drydock, where the majority are scheduled in the second half of 2022. In total, we estimate 290 days of planned off-hire due to scheduled dry docks in 2022. As we progress our retrofitting program, we also continue to invest resources to answer the question of what's next.
Our engineering and innovation teams are busy working on the task. In an uncertain future, our next generation VLGCs must comply with long-term trends in emission regulations and yet make business sense in the short term. We remain convinced that LPG propulsion is part of the solution as we wait for technologies to progress and for alternative fuel supplies to mature and reach the scale needed to make economic sense. In the meantime, we are exploring hydrogen, batteries, Rotor Sails, and ammonia as alternative fuel sources. We continue to optimize our assets and operations by looking at how we can improve hardware systems and designs. We are also exploring the feasibility of carbon capture on board for future compliance requirements. As we explore what is next in terms of technology and design, we are also making good progress with digitalization of our fleet.
Over 50% of our ships are now connected to Alfa Laval's smart ship system, sharing real-time data with our offices. This allows for better and more efficient support to our teams at sea. With better data, we provide better support and improve our operational performance. This translates to real savings for our business. For example, we have saved nearly 2,500 metric tons of fuel since January by usage of active weather and voyage routing. Now, on our crew. We continue to navigate operational challenges from COVID-19. To mitigate complexities in embarking and disembarking crew, as well as with port calls, we focus on getting our crews vaccinated. Having fully vaccinated crew on board reduces time spent in quarantine, minimizes vessel delays, and helps protect our team members both at sea and on shore.
We now have 12 fully vaccinated ships and approximately 85% of the total crew pool vaccinated. Finally, on OpEx. We continue to maintain market-leading OpEx trends for our fleet. We see this as an important priority and business practice, despite unprecedented global challenges to our operations. However, our vessel operating expenses came in higher than normal this quarter at $8,400 per day. This was due to incremental manning and logistics costs incurred due to pandemic.
Now let me turn over to Elaine, who will walk you through the projected fleet CapEx and our fleet positions and results.
Thanks, Pontus. Let me just begin with a few comments on the table on this slide. Thus far this year, we have spent $89 million on fleet upgrades. This relates to the retrofitting of nine dual fuel propulsion engines, as well as installations of ballast water treatment systems and smart ship technology onto our vessels. We plan to spend a further $31 million on these fleet upgrades in 2022, of which the remaining three retrofits will be financed by new debt. The remaining capital expenditures relate to the regular scheduled maintenance on our vessels. Let me now provide a few highlights on our income statement here, where we reported $29 million in net profit this quarter. Our TCE income was $105 million for the quarter.
Similar to the previous quarter, we have a higher than usual plan off-hire, with four of our vessels at the yard undergoing LPG propulsion retrofits. The TCE number includes a net positive impact of $1 million related to the effects of IFRS 15, which is an adjustment to the guided TCE that we provided earlier on a discharge to discharge basis. Vessel OpEx was $8,400 per day, which was explained earlier by Pontus. We concluded the sale of three vessels during the quarter, realizing a net gain of $8.7 million. The vessels were delivered to its new owners for further trading in July and August. We also exercised the purchase option for the Yuricosmos in August, reporting a $2.5 million gain, which represents the difference between the lease asset and lease liability on our balance sheet.
Page seventeen provides a snapshot of our balance sheet and cash flow statement. On our balance sheet, we ended the quarter with $127 million of cash and $1.8 billion in vessel book values. We also had $1.3 billion in shareholders' equity at the end of the quarter, which translates to $9.35 per share. Our operating cash break-even for 2021 is at $22,200 per day. At the end of September, our available liquidity is at $383 million, with our net leverage ratio at its lowest level in seven years at 36%. Our net debt position at the end of the quarter was $765 million, and we will have no major balloon payments due in the next five years.
Lastly, let me provide a quick update on our financing. We are in the documentation stage for the financing of the remaining LPG retrofits, which we expect to close by year-end. On this note, I would like to open up the call for questions.
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. Once again, we have a question from Ryan Reynolds. Ryan Reynolds, please unmute and go ahead.
Hello, everyone. Looking ahead, towards the uncertainty in 2023, just around the regulatory environment, just kind of curious, if there was an initial view on what we would need to see from scrapping lower steam rates and canal congestion to help offset the new builds expected to come online in 2023. Any initial thoughts would be helpful. Thanks.
Niels, maybe you should take that.
Yes. I mean, well, it was several inefficiencies coming up, but in 2023, the new EEXI regulations will take place where we are currently calculating that about 50% of the fleet will need to reduce speeds. The other inefficiency will be the Panama Canal. What we have so far is that it's possible to book the slots six months in advance. That will not be possible from next year. You could already see today that there are more than one month's waiting to go north and southbound from the Panama Canal today. I think that's the majority of the inefficiencies we see which could offset some of the new buildings.
I guess, Niels, when it comes to scrapping, I mean, we've always been conservative, I think, in estimating and scrapping. There's no question that as we head towards 2023, there will be, I think, some ship owners having to make some tough decisions because clearly, some of the older assets will be very hard to deploy.
Yeah, you're right. I mean, there hasn't been any VLGC sent for demolition since 2018, and if you look at the fleet profile, more than 10% of the fleet will be 28 and older. So yes, there are definitely.
Great. Appreciate that color. Maybe just staying on the theme of IMO 2023 and towards next week's MEPC 77 meeting. Just kind of curious, sounds like you guys are trying to set yourself up, you know, to be compliant for any type of new regulations. But you know, from a carbon tax perspective, I know you know, $100 per metric ton has been tossed around as the right number to spur investment in no carbon propulsion systems. Just kind of curious if you have a thought around what the right number is and how BW LPG is, you know, kind of situated, you know, for that number or anything, you know, either higher or lower. Thanks.
Yeah. I don't think we have a, you know, a number that we, you know, want to share or have. I've seen our chairman have commented on that in other forums. I think clearly we are prepared for there to be some taxes coming on this. I think that's also why I think you're seeing that we are, we're both very still very focused and committed to our LPG retrofitting program. We are also, as you say, as you see, we've been selling some of our least efficient vessels. I think we are really preparing ourself for that.
Of course, that's also a reason why we, again, also have strengthened our balance sheet. We wanna be prepared for various scenarios. Again, I don't have a number that I could share. I mean, we would discuss some internally, but we do not have a number that we'd like to put out there.
Okay. Appreciate it. Maybe just as a quick follow-up on capital allocation as we go ahead into 2022. I know you guys have been pretty consistent with the historical payout ratio, around 50%. You know, just given with leverage dipping low 2x and which much of the retrofit program kind of ending, just kind of curious how we should think about capital allocation into 2022 where, you know, just given the regulatory uncertainty, if you guys would like to keep a little bit more cash on the balance sheet just to make any future, you know, potential capital investments. That's it for me. Thanks.
Yeah. No, I think it's a relevant question. It's clearly, you know, that's something that, you know, the board is also, you know, asking us the same thing. Again, clearly, given both the uncertainty, but given also the fact that we think there will be some quite interesting developments, you know, on everything from engines to fuels to even ship designs, you know, in the next several years, we at least, we probably want to keep, you know, a little bit extra on the balance sheet. At the same time, it will come to a point where we will have to really consider, you know, if there are other good ways to deploy that capital also.
As Niels mentioned, we are also looking at certain parts of the value chain outside just pure shipping, 'cause we've seen already that, you know, our Product Services area has given us a lot of good insight into more of the value chain. We are actively looking for investments. If you find the right ones, we will definitely execute.
Great. Appreciate all the color. That's all from me today. Thank you.
Thank you.
We have two questions from the chat box. The first question: With high LPG prices, are you currently running vessels on LPG? And the second question: Are you seeing any demand for term charters at present time, and if so, at what levels?
Yes. Again, I, Niels, maybe you can take that, unless Pontus want to talk about, you know, the what we're running the ships on at the moment.
Yes. At the moment, as we have said that LPG prices are quite high due to the high demand for LPG. Currently, we are burning compliant fuel for our ships. But we also see that the propane prices compared to WTI is going down. As soon as this makes economic sense, we will switch back to LPG.
I should also add that we are actually running a few ships on LPG still because with our play with Epic Gas and saving our heel and actually accumulating LPG from before going into the retrofitting, we still have some heel left which we are using as fuel right now.
Yes. Also Pontus and Nils, I guess we also still have one ship on a TC going on LPG. You know, the first ship retrofitted.
The BW Gemini. Yes, correct.
Yeah. We're getting still very good valuable experience, even though economically right now it's better to go on compliant fuel.
Okay. Once again, should you have questions, please type them into the Zoom chat box. You can also click on the Raise Hand button to ask your questions verbally. Please note that participants have been automatically muted. Please press unmute before speaking. Okay, we have a question. Are you seeing any demand for term charters at present time, and if so, at what levels?
That's for you, Niels.
Okay. Yeah, we do see demand for time charters. Lately, the Indian PSUs oil majors have been very active on the time charter front. There have been several ships fixed for two years. As I mentioned during the call, we have just fixed three ships for two years at mid-$30,000 per day. We do see that the market is improving. If you just look at the FFA for 2022, the market is, or are, expecting the rates to be around mid-$30s. I think that's.
Okay.
Yeah.
Okay, one more, one final round. Should you have questions, please type them into the Zoom chat box. You can also click on the Raise Hand button to ask your questions verbally. Please note that participants have been automatically muted. Please press unmute before speaking.
Okay. If there are no more questions, then I would just like to thank everybody for calling in, and we appreciate you, your interest still. Thank you very much.
We have come to the end of today's presentation. Thank you for attending BW LPG's Third Quarter 2021 financial results presentation. More information on BW LPG is available online at www.bwlpg.com. Have a good day and good night.