BW LPG Receives Fifth VLGC under $1 Billion Deal with Avance Gas

BW LPG Ltd. has taken delivery of the fifth of 12 very large gas carriers (VLGCs) sold to the liquefied petroleum gas (LPG) shipper under a stock-and-cash transaction with Avance Gas Holdings Ltd.

A total of nine are expected to be delivered in time for third-quarter dividend payments, the Singapore-based company said in its quarterly report.

On August 15 BW LPG signed an agreement with Avance Gas for the acquisition of four 91K CBM dual-fuel VLGCs, of which two are 2022-built and two are 2023-built, and eight 2015-built 83K CBM VLGCs, of which six are scrubber-fitted. The total consideration of $1.05 billion consists of $585.4 million in cash and the issuance of 19.282 million new BW LPG shares to Avance Gas, which would make the seller a 12.77 percent shareholder in BW LPG.

Avance Gas started delivery November. “When all twelve ships are delivered, total shares outstanding will amount to 151.6 million”, BW LPG said in the statement of results on its website.

For the July–September quarter, BW LPG logged $120.5 million in profit after tax, down one percent year-on-year due to a higher income tax expense. This was partially offset by a higher operating profit and lower finance expenses.

Profit attributable to shareholders came at $104.7 million, with earnings per share at $0.79. BW LPG declared a Q3 dividend of $0.42 per share.

“The third quarter of 2024 began on a challenging note for VLGC owners, as the Panama Canal normalized operations, putting sailing distances and VLGC utilization under pressure”, the company said.

“Weather and technical issues also meant fluctuations in export volumes. This translated to volatility in spot rates, swinging as low as US$23,000/day and US$50,000 during the quarter”.

United States export volumes rebounded in August after a negative impact in July from Hurricane Beryl. “Towards the end of September however, one export terminal announced it had to close for unscheduled maintenance due to problems with their chilling capacity”, BW LPG said. “This negatively impacted overall VLGC loadings in both September and October.

“These issues were eventually resolved, and going into November, all major US Gulf Coast export terminals were running at full capacity”.

Notwithstanding, LPG exports via VLGCs out of North America rose 6.7 percent in the third quarter compared to the same three-month period a year ago, “reflecting the strong underlying trend in production and exports”, BW LPG said.

“The new locks in the Panama Canal are operating near full capacity, with the old locks increasing throughput as well”, it added. “While this reduces fleet-wide inefficiencies, LNG carriers and dry bulk vessels are also gradually returning to the canal, increasing the competition for transit slots”.

In the Middle East, extended production cuts by the Organization of the Petroleum Exporting Countries and its Plus allies “contributed to LPG on exports on VLGCs only growing 0.6 percent for the third quarter compared to Q3 2023”, BW LPG said.

Shipping revenue totaled $220.42 million while product services generated a revenue of $584.6 million.

Average TCE income per ship per calendar day fell to $46,520, with increased coverage offsetting weaker LPG spot rates.

Operating activities generated $54.5 million in net cash. Adjusted free cash flow landed at negative 27.5 million.

BW LPG said it had signed a new seven-year revolving credit facility of $460 million after voluntarily pre-paying and canceling a $400 million facility.

Current liabilities stood at $654.33 million as of the end of the third quarter. Current assets totaled 875.09 million including $313.5 million in cash and cash equivalents.

Looking forward, BW LPG said, “Following a quarter with disruptions in exports and volatility in rates, it is encouraging to note that LPG export terminals are again back to high levels of exports”.

“Going forward, several terminal expansion projects in the US, are expected to support growth for North American LPG export growth in the high single-digits for the next three years”, it added.

“Middle East LPG exports are expected to grow in the mid-single digits over the coming years, driven by higher gas production from new projects in Qatar, UAE and other countries in the region.

“Furthermore, Chinese PDH plants are currently operating at above average run-rates, with 5 and 6 new PDH plants scheduled to start up in 2025 and 2026 respectively, supporting growth in LPG imports.

“The Houston-Chiba FFA market for CAL2025 is currently trading at ~US$ 40,000 per day, although with limited liquidity.

“The spot market is expected to fluctuate however, driven by weather changes, geopolitical situation, Panama Canal availability and other drivers of the VLGC market”.

To contact the author, email jov.onsat@rigzone.com