BWLP Q3 2024 report

Industry Discussions Shipping News
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The presentation slide deck for BW LPG’s Q3 2024 results
Q3 div - 42c/sh

Will be dissected later

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BW LPG (BWLP) is a somewhat complicated entity, so I knew I couldn’t just skim two or three slides, and quickly hit the high points. For starters, BW LPG have four significant groupings of vessels. But, these four groupings can essentially be separated into two segments

  1. Shipping - three flavors of shipping
  2. Trading/industrial - one segment

As noted in prior BWLP posts, shipping has the margins while trading has the revenue generation (but lower margins).
Avg TCE for the shipping segment - $46,800 daily
[ IIRC, vessel break-even costs are < $20K daily. So those are some really healthy margins generated]
Slide 4 has Net profit after tax as $120M, or $0.79 per share (That’s the shipping side). Net profit adjusts to $105M to account for the minority stake of BW LPG India. [Edit: Incorrect - The $120M is from combined shipping and trading. However, trading profits are actually spread out over several qtrs. Hence, div gets paid out of the “sure” profit i.e. shipping segment]

Normally, the trading side has a much lower profit contribution. In Q3 2024, the contribution is much higher - $58M
Slide 12 is the significant slide that covers the Trading segment, Slide 14 for the debt side, and Slide 19 (Fleet involved in the trading segment - 9 vessels in the Operated segment)

BW LPG major development in Q3 2024 was the acquisition of the Avance Gas VLGC fleet (12 VLGCs) for $1.05B The acquisition was completed via cash, shares and transfer of debt facilities. Per Slide 19, 9 of 12 vessels have delivered to BWLP already. There is a BWLP share component per each vessel delivered. After the last three VLGCs deliver, BWLP’s share count will jump to ~ 152M shares.

Proforma fleet count should increase to 55, then drop to 54 (in Q1 2025). BWLP have sold one of their BW LPG (India) vessels in Q4 2024 for a decent profit.
BWLP have also acquired one of their charter-in vessels for a very attractive price. The Japanese built VLGC is only 5 years old and cost BWLP about $70M. Added benefits

  1. Vessel already on the water (as opposed to waiting at least 3 years for a newbuild @ $120M)
  2. Vessel has a scrubber installed
  3. BWLP are familiar with the vessel as a charter-in

Shortly after BWLP ticker listed on US Exchange, company announced Q1 2024 results, which included a dividend of $1/sh. BWLP share price took off from mid $15s, to over $21/sh in short order. Price then pulled back. My first BWLP purchase was $18/sh. I did think the $1 payout was a one-off due to a spike in rates in Q1. According to management at competitor Dorian (LPG), the LPG shipping market is stronger during the second half of the year. My expectation was BWLP could average a 60c/sh div in Q2 and Q3. Well, Dorian management’s stronger rate in Q3 argument hasn’t exactly played out in 2024. So, back to the drawing board for me on BWLP
expectations for Q4 2024. And then expectations for 2025. Actually, pause on expectations - I learned something from their first earning call (Q1 2024 call). I should skim through their Q3 earnings call.

Without skimming thru the Q3 transcript, I will say this for their mgmt team - BWLP manage their debt very well. Proforma debt if I include $128M in sale & leaseback facilities from Avance Gas vessels would mean about $350M in debt for 29 vessels. That’s like $12M per VLGC (with only one of those vessels being > 10 years old)

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Added insight from the BWLP earnings call transcript.

  • It was slightly fuzzy initially. On profit, the $120M represents both shipping and trading profits. However, trading profits are recognized over several quarters (and the final numbers could fluctuate some). Hence, BWLP board uses the shipping profit to guide the dividend payout.
  • Mixed views on the Q3 market. On the one hand, CEO suggests the VLGC market is more balanced. Yet, during the Q&A, the CEO did not correct analyst suggestions that Q3 was a weaker qtr.
  • So far, 5 Avance Gas vessels have actually delivered. BWLP are suggesting 9 vessels will be eligible for the Q3 div, which means 4 more vessels will join the BWLP fleet by mid next week. Slide 19 shows 9 Avance Gas vessels.
  • Messed up slightly on debt per vessel. $120M is the debt for the BW LPG India subsidiary. Debt picture is changing with the multiple events. About $100M in two ECA loans, plus $128M for the sale & leaseback debt, plus the charter-in becoming owned will add up to another $70M. That means about $300M for the owned fleet for 30-ish vessels. Or, about $10M per owned vessel. The BW India subsidiary leverage is $120M on 8 vessels, and will go down once BW Cedar is delivered to new owners. After the BW Cedar debt is paid off, BWLP will still have additional cash to allocate for other purposes, including debt payments.
  • Avance Gas vessels will have minimal contribution to Q4 rev numbers. BW mgmt seemed to waffle a little on their answers to that question. But, in my view, additional vessels for any rate uptick is a positive. More so, during a time when the LPG shipping market usually gets an uptick.
  • It is in the slide deck, but worth mentioning, US will likely have increased exports in H2 2025. Locations in Middle East e.g. Qatar, Abu Dhabi likely more LPG exports in 2026.
  • Still trying to reconcile figures in Slide 22-23 with a figure tossed out by CFO $36,900 daily. That’s a big delta. Is the spot rate very weak? I was originally going to go with 30c for Q4 div. But I think I will lower Q4 to 25c, and adjust 2025 going forward.
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