Greetings, and welcome to the Dorian LPG second quarter 2020 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 Theodore Young, Chief Financial Officer. Thank you. Mr. Young, please go ahead.
Thank you, Stacy. Good morning, everyone, and thank you all for joining us for our second quarter 2020 results conference call. On the call today are John Hadjipateras, Chairman, President, and CEO of Dorian LPG Ltd., and John Lycouris, Chief Executive Officer of Dorian LPG USA. As a reminder, this conference call webcast and a replay of this call will be available through November seventh, 2019. Many of our remarks today 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 express today. Additionally, let me refer you to our unaudited results for the period ended September 30, 2019, that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-K and Form 10-Q, where you'll find risk factors that could cause actual results to differ materially from those forward-looking statements. With that, I'll turn over the call to John Hadjipateras.
Thank you, Ted. Welcome to our second quarter 2020 earnings call. I am in Singapore, where I attended the Global Maritime Forum, and where much of the discussion concerned climate change. Although the long-term goal of the industry is zero carbon emissions, in the meantime, LPG provides a significantly better alternative to fuels currently being consumed. John and Ted are in Connecticut, and after I give you a brief report, Ted will follow with a discussion of our quarterly numbers and John of the market and our fleet status. We will complete the call with questions. On this date last year, the Baltic rate was $41 a ton, and a year before that, it was $30. Today, the Baltic is above $70. The market appears to have reached a degree of stability, having traded above $50 a ton since April of this year.
Just this quarter, the Baltic struck a highest level since 2015 at $81 a couple of weeks ago. This quarter's profitable results reflect the health of the current trade market. Our fleet is well positioned to capitalize on the potential price differential between low sulfur and high sulfur fuel oil. Two of our ships recently came out of dry dock, bringing our scrubber-equipped fleet to four ships on the water trading. We believe that there are about 20 in all scrubber-fitted VLGCs currently. In addition, we expect to have four more VLGCs enter dry dock, five more before the end of this year and three during next year. At the conclusion of our program, we will have 12 out of our 22 ships scrubber-fitted. The freight environment and cost control have contributed to strong cash flows, enabling us to fund the scrubber installation and stock buybacks from cash flow.
Today, we have repurchased $6.7 million of stock in accordance with our previously announced $50 million buyback authorization. This program underscores our board's commitment to thoughtful capital allocation. Our optimistic view of the market continues to be supported by market fundamentals with a contained order book and prospects for increased demolitions. With this, I will hand you over to Ted.
Thanks, John. My comments today will focus on our unaudited second quarter results and our capital planning for the remainder of the year. For the discussion of our second quarter results, you may also find it useful to refer to the investor highlights slide posted this morning on our website. Beginning with our chartering results, we achieved total utilization of 92.9% for the quarter with a daily TCE, that is TCE revenue over operating days as defined in our filings of $47,623, yielding a utilization-adjusted TCE, which is TCE revenue per available day, again, as defined in our filings, of about $44,241. Spot TCE, which reflects our Helios pool results per operating day for the quarter, were $51,613 per day, with utilization of 91.5%.
I'd also point out that our spot results are net of the administrative cost of the pool, and as a result, our actual TCE is higher than this level. Daily OpEx for the quarter was $8,594 or $8,403 per day, excluding amounts expensed for dry dockings. Those amounts compared to last quarter's $8,052. Increased insurance premiums in some lines played a role in the cost increase, which we will seek to offset by efficiencies in other cost categories. Total G&A for the quarter was $5.9 million, and cash G&A, i.e., G&A excluding non-cash compensation expense, was about $5 million. G&A for the quarter also reflects bonus payments to our executive team of about $1.1 million. Excluding those payments, cash G&A of $3.9 million was down from $600,000 versus the prior quarter and $200,000 versus the same quarter last year, excluding the professional and legal fees related to BW LPG's unsolicited proposal.
As we discussed last quarter, our G&A, including non-cash compensation expense, should decline. For our non-cash comp expense, we expect to see a decrease because the original awards granted in 2014, invested in 2017, 2018, and 2019, have now been fully amortized. These awards hit our P&L by roughly $700,000 a quarter. Thus, we expect non-cash comp expense to be lower by this amount. Our reported adjusted EBITDA for the quarter was $67.3 million, which was a significant increase from the prior quarter's $38.4 million and substantially stronger than the $19.6 million recorded during the same quarter last year. That $19.6 million does exclude the cost related to BW LPG's unsolicited takeover proposal. The strong rate environment and lower G&A accounted for most of the improvement.
We look at cash interest expense on debt as the sum of the line items of interest expense, excluding deferred financing fees and other loan expenses, and realized gain loss on derivatives. On that basis, total cash interest expense for the quarter was $7.6 million, which was down about $100,000 from the prior quarter, largely due to continued debt paydown. We continue to benefit from our hedging policy and the favorable pricing of our Japanese financings, leaving us with a current interest cost fixed hedge and a small floating piece of 4.3%. For the quarter, we had cash outlays of roughly $3.6 million for drydockings or $1,719 per fleet day. Fleet day is calendar days plus time charter in days. Both of those latter two terms are defined further in our filings.
We also managed to repurchase $6.2 million of stock during the quarter and an additional 500,000 since the end of the quarter. Our free cash flow to equity, which I remind you is a non-GAAP term, before outlays for stock buybacks and drydockings, was $25.3 million or roughly $12,000 per calendar day for the three months ended September 30, 2019. Clearly, our cash flow and liquidity remain strong. Since quarter end through to October 29th, our restricted and unrestricted cash is up about $13 million to somewhat over $96 million. Although we hold an 80-plus% economic interest in the Helios pool, we do not consolidate its balance sheet accounts, which has the effect of understating our cash and working capital. Thus, we believe it is useful to provide some additional insight in order to give a more complete picture.
As of Tuesday, October 29th, the pool had roughly $35 million of cash on hand. As a reminder, the pool has no debt whatsoever. In light of the strong rate environment, we have taken advantage of a disruption at one of the shipyards to postpone installation of three scrubbers until the first calendar quarter of 2020. While we remain very constructive on the rate outlook, historically we have seen a bit of a rate pullback in the winter months and thus felt that a slight delay reduced our opportunity cost from the installation. Based on this revised plan, we now expect to have total cash outlays of roughly $25 million or about $6,000 per day for the remainder of the fiscal year for the 10 drydockings, including scrubber installation and ballast water management systems.
Since we do get extended payment terms from a number of our vendors, some additional amounts in respect of these drydockings will not be payable until our fiscal year 2021. Upon completion of the program, 12 of the 23 vessels in our fleet will be able to profit from the expected fuel price differential between low sulfur fuel oil and high sulfur fuel oil following the implementation of IMO 2020. For the remainder of the fiscal year, we therefore anticipate cash cost per day of $29,000, which is the sum of the $23,000 a day to which we have historically guided, plus the $6,000 just mentioned. With a solid market backdrop and a strong balance sheet, we maintain our constructive view on our business and expect to continue to be able to generate solid cash-on-cash returns for our shareholders. With that, I'll pass it over to John Lycouris.
Thank you, Ted. Global seaborne LPG has grown 15% year to date over 2018, while U.S. export volumes in recent months have, for the first time, taken the global supply lead over the Middle East exports. According to Waterborne IHS, U.S. LPG exports to date are at 34 million tons, while all the Middle East liftings are at 32.3 million tons. This might be a direct result of the attacks last month in Saudi Arabia, reducing lifting volumes of September and October. The U.S. LPG supply has grown by 4.8 million tons year-over-year. The rest of the world supply growth has kept pace, growing 4.4 million tons year-over-year and recovering to roughly 2016 levels. Australian, Southeast Asia, and European volumes have experienced the largest growth, which we believe are favorable for ton mile demand.
During the third quarter, we saw 187 VLGC liftings out of the U.S., about six monthly cargoes on average more than last year, and are likely attributable to Energy Transfer's Marcus Hook terminal increased capacity during the year to about 15 VLGC liftings per month. We expect increased number of liftings in this quarter and next year on account of expanding U.S. export and fractionation capacity by Enterprise, Targa, and Nederland Terminals , which would increase the total monthly VLGC lifting from all terminals to about 100 vessels. U.S. propane inventories are still at high end of their five-year range, hitting 100 million barrels last week, 22% higher than last year at the same time. A wider LPG pricing spread between the U.S. and the Far East has drove demand last quarter. In China, two PDH units started up operations.
Dongguan Grand Resource Science and Technology's 600,000 metric tons per annum PDH plant conducted trial production, and Hengli Petrochemical in Dalian started a single-train dehydrogenation unit. SP Chemicals put into operation a steam cracker, which utilizes both propane and ethane as feedstock. Demand also increased in South Korea as Hanwha Total and LG Chem both restarted production of their steam crackers after maintenance, which were expanded to increase their propane feedstock capabilities. The order book overall remains stable, representing 13% of the current fleet. With the implementation of IMO 2020, we remain hopeful that the cost of compliance may drive less efficient ships to demolition. The scrubber adoption rate in all marine sectors continues to be strong, and for the VLGC fleet, we expect more than 40 vessels to have scrubbers installed by the end of first quarter 2020.
We currently expect that our scrubber installation will be completed by the end of the first quarter 2020, which will mean that 12 out of our 22 ships will be scrubber-equipped. As Ted mentioned, we have decided to opportunistically push back installations, allowing our vessels to continue trading and take advantage of strong market rates and vessel demand. Given our fleet of installed and scrubber retrofit installations, we expect that our fleet will be commercially flexible and compliant with any regulatory or sovereign restrictions. Thank you very much. I'll pass it over to John Hadjipateras.
Thank you, Ted. Thank you, John. Stacy, do we have any questions?
With the prepared remarks completed, we will now open the line for questions. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Omar Nokta with Clarksons. Please go ahead.
Hi. Thank you. Hi, John, and Ted.
Hey, Omar.
Hello, Omar.
Hi there. That was a very good overview you gave on the market fundamentally for this year and the outlook, especially with the VLGC liftings being about 100 or so each month. When you think about where things are right now, obviously VLGCs are very strong, earning $60,000 a day or so. We're supposed to be approaching, or we're supposed to be feeling some of the winter seasonality that tends to lead to a weaker market, at least for the next several months. Clearly that's not happening. Is there something that's different this year relative to last year or the year before that's causing this strength to persist as we get into the winter?
Yeah. Omar, I think that the seasonality aspect of the market has been distorted for a while anyway, and there's less of it. Each year we go on, you see the seasonality not sort of playing out as we expect. It could be because of the new supply that we're getting. It could be because of the new terminals that are being established in the Far East. I, myself, don't kind of count on seasonality. I look through it, and I think we should be looking at the average for the year more if we wanted to make a prediction than when we're going to be spiking or falling, and I just don't think the market will follow those usual patterns anymore.
Okay. Yeah. That makes sense, that there's probably more cyclical themes at play that are driving these seasonality issues maybe a bit towards the wayside. Based off how strong the market's been, really, as you said, since effectively April, what's the inquiry looking like for longer-term deals from charterers?
It's beginning. It's beginning again. After a long period, of course, of a bad market, there's reluctance on the part of charterers. Except that in the spike earlier this year, when the market spiked during this year, it also spiked a little bit the year before. When it spiked, there was a little bit of a rush for people to cover, and you could see that the main incentive was to avoid being exposed to the spot rates. The period was maybe a year's period in August. At the moment, I think it's maturing a little bit, and people are looking further ahead and that we see inquiries for two and three years. Of course, we also, at the same time, have been seeing inquiries for projects for longer period time charters. It's coming. I think, period.
We haven't seen anything sort of at the moment which is, for us, actionable. We're watching it very closely.
Okay. Got it. Just maybe just some color then potentially on, say, you mentioned the project deals, would those be the ones you're seeing, are those for existing ships or ones that would be against a new build order?
We try not to say that word, I think.
Okay.
Yeah. Look, I think both.
Okay. Maybe just one final one for me, and maybe just taking a step back and thinking of Dorian, obviously now, pure-play VLGC company, 22 ships owned, obviously cash machine at the moment. What are your thoughts on the fleet from here as you think about the next phase in Dorian's lifespan? You had an aggressive investment five years ago in building up the fleet. When you think about the next time you're ready for growth, do you want to continue on with VLGCs or do you look elsewhere within the LPG chain?
That's a very good question. No, the further it gets from the VLGC, the more opportunistic we would be. In terms of investing in the VLGC, as long as we feel some confidence in the prospects over the long term, and we would be ready to do that. I think we'll be very cautious, not so much because of we fear the market, but we fear that a start of a new building program could create a very unwelcome sort of
Yeah. No. Understood. Well, good. That'll do it for me. Thanks so much for the answers.
Thanks, Omar.
Our next question comes from Nicolai Dyvik with DNB. Please go ahead.
Good morning. Just a quick question on the Enterprise terminal. What do you hear in terms of volume ramp-up since U.S. inventories are high, investors leaving for scrubber retrofit and the China LPG demand is finally strong after a weak H1 and 2018 as PDH ramps up, as you talked about. If you're now having higher terminal volumes, I just wanted to see if you have any insights on how that is shaping up, that ramp-up.
Can I take that then, John H.? Nicolai, the Enterprise has tested already 175,000-barrel expansion and they're operational already. We've seen that this month. We expect another expansion from Enterprise for 260,000 barrels in the third quarter of 2020. We really expect that with their 85% utilization, they will be able to push a lot of cargoes and liftings forward.
Is your sense that the 175,000 ramp-up is already now fully operational or yet to come?
We've seen in the last two weeks a very high utilization of the terminal. We assume it is, and we have also heard that they have tested it and it is operational from the call a week ago.
Thank you. You bought back some stock this quarter. How should we think about cash dividends versus buyback in our modeling for 2020?
Okay. You know what? John, you on? Yeah, I'm back on. I left, Omar, when I was talking about the things I don't want to talk about.
Well, did you catch Nicolai? If you want to pick up, your timing's impeccable. Nicolai asked about dividends versus stock buybacks, if you'd like to take that one, how they should think about that as they model out the coming 12 months.
We can't give you a guidance on that because I think we look at it from time to time, and our board is looking at the most efficient way of returning to our shareholders. At the moment, we can say that the buyback program is there, but we don't want to exclude the possibility of dividends or any other way of returning value, which could be also debt reduction.
Okay. All from me. Thank you.
Thank you.
Thanks, Nicolai.
Thank you.
Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Gregory Waszolek with Weber Research. Please go ahead.
Hey, good morning. How are you guys?
Good. How you doing, Greg?
Hello, Greg.
Good. I'll bring up the scrubbers. I just want to get the numbers right. The original schedule was to have all 12 done prior to January 1st, right? Now we're expecting nine to be done by January 1st and three of those to slip past, right?
Correct.
Okay. Maybe what is causing those delays? Is it too many orders at the yards or is it more the installations are just taking a little bit longer than expected?
It's not the installation. Whether our ships have gone into the yards, they've come out in good time and within expected, both in terms of the cost and the time. We've not been far from our estimates, and we don't expect to be very far. The three ships who were delayed were stemmed in China and they weren't the only ones in China, but there were three in a particular Chinese shipyard which had problems and so we've been examining alternatives. We frankly have been a little bit relaxed, bluntly, about looking for alternatives because in the meantime, we're taking advantage of the high earnings.
I expect early next year we'll be proceeding and it is by no means a postponement in terms of any significance, it's just that in reaction to something that just came up unexpectedly, we kind of opportunistically took advantage of it to continue with some voyages before we put the ships in the shipyard.
Okay. Was it specific operationally to the yard specifically or is it a broader issue?
No, it's specific to the yard. That yard actually was closed down by a local authority because of a dispute between its owner and the local authority.
Oh, okay.
John, of course, is more aware of the details, but yeah, You've seen that in general, I think you may have heard also from the other markets, that there are delays and instances, particularly in China, where they're overbooked.
This might not have as much impact now that people are taking the VLCCs out of the lineup and keeping them trading, too.
Right.
I expect that it's not going to be an issue for us or other people to complete the scrubber programs, even if there is a little bit of a delay.
Okay, that makes sense. The remaining five for this quarter, I'm assuming they are not in China?
Two are in China.
John, I think two are in China.
Okay.
Yeah.
Okay.
One is there right as we speak.
Yeah. Okay, cool.
Right.
Just from a modeling perspective, can you remind us how long we should expect those ships to be off hire for Q4?
We've given guidance previously. We've given guidance previously that it's 25-30 days. Could slip a little bit, but sometimes it could slip a little bit either way. Sometimes a little faster, sometimes a little slower.
Right. Okay. That's helpful. All right, just switching gears real quick, I always enjoy hearing about your developments with LPG as a marine fuel. I think you guys had something going with MAN and Hyundai, if memory serves. Do you have any updates there? When do you think we could start to talk about LPG engine retrofits becoming more realistic?
Greg, yes, we are.
John is following this quite closely. Yeah, John, of course. Why don't you take that? You've been following it closely.
Thank you, John. Yes, Greg, we are continuing those discussions. We have progressed our engineering studies with all the parties concerned. We will be trying to put the whole project together as an economic proposition for the board to consider sometime towards later in the year.
Okay. Cool. All right. Very helpful. Thanks for your time, guys.
You're welcome.
Thank you. I will now turn the floor over to John Hadjipateras for closing comments.
Thank you, Stacy, and thank you all. I wish you all a happy Halloween, a good day, and good night from me, and good morning to all of you.
This concludes today's teleconference. Thank you for your participation.