08/22
BW LPG (BWLP) announced their Q2 2024 results. Of course, in addition to their results, the company management also got to expand on a subsequent event - their purchase of 12 VLGCs from Avance Gas.
Main items from Q2
- Q2 2024 TCE of $49700 ($48K per calendar day)
- Product services Net profit of $16M (Gross Profit $25M)
- Declared div of 58c/sh.
- With only 7% leverage, company paid out 100% of its earnings
- The leverage picture changes with the Avance Gas vessel acquisition
The presentation goes into more details on the acquisition (Slide 5).
- Much of the debt obligations is covered via cash.
- The sale & leaseback deal involving the two newest VLGCs is novated over to BW LPG.
- BW Group, as major owner of BWLP, provided a shareholder loan
- In the deal, the shares transfer to Avance Gas @ $17.25/sh.
- The vessels deliver to BWLP between mid Sept and Dec 2024, and each delivery will comprise a cash and share transfer.
- BWLP’s revenue and leverage will increase over time. In theory, BWLP’s dividend should increase. But two things change the picture.
a. With shares issued to fund the purchase - the payout denominator changes
b. BWLP has a formula for calculating the payout. Since the payout is dependent on debt ratio, the dividend payout will be affected by the higher debt ratio.
Given the current FFAs project a rate of $50K daily in Q4 2024, it probably is helpful that the deliveries are staggered thru the end of 2024. But, that also means the real revenue capacity of the shipping side does not show on a full quarter basis until May 2025 (Q1 2025).
As noted in another BWLP thread - shipping revenues are not BWLP’s strength. But shipping revenue margins >> trading revenue margins
- BWLP will not participate in the Panama Canal slot auction.
- BWLP fleet mix changes in Q3 2024 (LGCs), and will change again as the Avance Gas vessels deliver
Overall, Q2 2024 was what it was, and in some ways, better than expected. OTOH, Q3 2024 is likely to end up with a lower shipping TCE in what is generally a stronger qtr.