Greetings, and welcome to the Dorian LPG First Quarter 2022 Earnings Conference Call. [Operator Instructions] 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 Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.

Thanks, John. Good morning, everyone, and thank you all for joining us for our first quarter 2022 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Ltd; John Lycouris, Chief Executive Officer of Dorian LPG USA; Tim Hansen, Chief Commercial Officer. As a reminder, this conference call, webcast and a replay of this call will be available through August 11, 2021. 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 June 30, 2021, that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-K, where you'll find risk factors that could cause actual results to differ materially from those forward-looking statements. With that, I'll turn it over the call to John Hadjipateras.

Thanks, Ted. Good morning, everybody. Thank you for joining us this morning to discuss our first quarter financial year 2022 results. And Ted, John and I are speaking from Stanford, Tim Hansen from Copenhagen. We had a healthy market this past quarter. North American exports rebounded swiftly going into April and May as winter storms abated in the Gulf and U.S. LPG production and export capacity once again proved resilient. This swift increase in a temporary -- resulted in temporary ship shortages in the West and pushed rates up. The Baltic began the quarter on an upward trend reaching a peak rate of $64.57 in mid-May before the increase in bunker price has started to put some pressure on earnings. Rates remained healthy for the rest of the quarter, and we are optimistic about market strength going into fall and winter. On the operational side, our shoreside staff have worked very hard to continue to facilitate safe crew changes around the world despite the continuous and new logistical challenges due to the COVID pandemic. Our drydocking and scrubber upgrade program is now complete. The last 2 ships left the shipyards in late May and early June. In total, we have installed 10 scrubber systems since the summer of 2019. 12 of our 22 owned ships are now capable of operating with scrubber -- hybrid scrubbers, enhancing their earning potential and commercial flexibility. In June, after the MEPC 76 meeting, the IMO announced their near-term carbon and greenhouse gas emissions reduction measures. We have been planning for these measures and are now in the late stages of our analyses of various emissions-reducing technologies. We plan to compare these add-on technologies to the environmental and financial considerations around converting some of our vessels to burn LPG as fuel. In calendar year 2020,…

Thank you, John. Good day, everyone. To begin with some macro factors, the crude oil prices rose throughout the quarter with Brent averaging around $69 per barrel compared to just $32 barrels in Q2 of 2020. The prices of propane and butane consequently rose. However, the relatively price to crude oil dropped from the previous quarter across all major regions. LPG, therefore, remained a desirable commodity. As a result, global seaborne LPG supply rose as an estimated 1.5 million tons in Q2 '21 from the previous quarter and a 6% increase from the same period of 2020. The majority of the rise was from the U.S., where exports reached an average of 4.4 million tons per month, rebounding swiftly after the polar storm in February, which demonstrated the robustness of LPG production and export capacity in the North America. Middle East LPG seaborne supply remained relatively constant with production cuts and Iranian sanctions remaining in place through the quarter. Imports into the major consumption region rose, particularly into China, where LPG imports increased from around 5.7 million tons in Q1 '21 to 6.5 million tons in Q2 '21. This is after 2 new PDH plants began operating in Q1 and a new steam cracker utilizing propane as a feedstock started production in April-May of '21. The imports for feedstock utilized -- illustrate the consumption of LPG as a feedstock for petrochemicals, which increased in Q2 '21 compared to the Q1 in '21, where propane favored as a feedstock for the production of ethylene and -- over naphtha. The propane-naphtha spread in Northwest Europe widened to $90 on average in Q2 compared to an average of $23 in Q1 '21. The demand for LPG transport -- translated to a shipping market characterized by monthly volatility by comparable quarterly freight markets to…

Thank you, Tim. During this quarter, we have completed the scrubber retrofit program of 10 hybrid scrubbers to our own fleet, which started in the third quarter of 2019, and Dorian now operates 12 scrubber vessels. The last 2 vessels retrofitted with hybrid scrubbers were completed and commissioned in early June, including drydocking and the completion of their first 5-year special survey requirements. With the completion of these 2 vessels, a total of 20 vessels of the Dorian LPG fleet have now successfully passed their 5-year special service cycle. Since the beginning of the calendar year, the actual price spread of the high sulfur fuel oil to low sulfur fuel oil supplied to our scrubber vessel fleet has averaged over $105 a ton of fuel. As we envisage, this spread has produced an earnings advantage for our scrubber-fitted vessels and validates our original expectations on the payback period by having returned about 1/3 of the CapEx as of June 30, 2021, notwithstanding the oil markets collapse during most of the calendar year 2020. Dorian continues to evaluate LPG dual fuel technology in those few dual fuel LPG new buildings and retrofitted vessels entering service, and we will continue to consider an upgrade for some of our vessels. We are continuing to invest in our vessels' performance and efficiency to reduce emissions and lower operating costs. An improved environmental footprint is very important to Dorian LPG and we continue to explore other incremental energy efficiency technologies. Greenhouse gas emissions from shipping came sharply into focus over the last 2 months, both on the IMO and the EU with several environmental proposals made for future implementation. The IMO MEPC 76 adopted several amendments on multiple annexes, which become effective later this year, and finalized the technical measure for energy efficiency of existing…

Thanks, John. I'd like to focus today on our financial position and liquidity and also discuss our unaudited first quarter results. At June 30, 2021, we had $78.3 million of free cash. As of August 2, Monday, our free cash balance stood at $82.6 million. Please note that since we repurchased $14.2 million of stock during the quarter and an additional $2.7 million following the quarter end, we really have generated quite strong cash flow through the quarter and beyond. With a debt balance of $589.1 million at quarter end, our debt to total book capitalization stood at 38.6%. We have no refinancings until 2025, ample free cash and an undrawn revolver. Also, since the Captain Markos has now been classified as vessel held for sale, we expect to generate additional cash upon completion of the transaction. We continue to expect our operating cash cost per day for the coming year to be approximately $21,000 to $22,000 a day, excluding an $8 million progress payment that is due for our new building in our fourth fiscal quarter, the quarter ending March 31, 2022. Further to John's comments, this dividend is an irregular dividend. The payment of this irregular dividend is responsible to our shareholders who've communicated very clearly to us that they wanted dividend to be part of our capital allocation strategy, and we've heard them loud and clear. For the discussion of our first quarter results, you may also find it useful to refer to the investor highlight slides posted this morning on our website. Turning to our first quarter chartering results, we achieved a total utilization of 96.1% for the quarter with a daily TCE, that's TCE revenue over operating days as we define operating days in our filings, of $31,571, yielding utilization adjusted TCE, which is TCE…

Thanks, Ted. Mr. John, Operator, we have -- we can open for questions.

[Operator Instructions] Our first question comes from Sean Morgan with Evercore ISI.

I appreciate this is maybe somewhat new news in terms of what's happening with the pipeline potential for, I guess, LPG pipeline across the Panama Isthmus. How do you sort of gauge what that would do to utilization for kind of the global VLGC fleet? And if Panama does proceed with this project? Is that an indication from the government of Panama that they think that we're going to be having high sustained overutilization of the canal kind of as a new normal going forward?

We take it as having that optimistic tone to it. But -- and of course, we don't know if it's going to happen and when it will happen, if it does. But it is a letter of intent. And I think we all have an answer with this. But I think I'll let John Lycouris give you the numbers that we've calculated that would be displaced than what it would do to overall demand. I think he has it encapsulated. John?

Yes. John, thank you very much. I'm sure Tim also might want to chime in. But we figured that, Sean, even if we build a pipeline and even if it was 250,000 barrels a day, it would still take 2 days and in the change just for 1 cargo VLGC to go through. So it's a kind of top GAG measure to help and alleviate the pressures on the canal. And as we know, container ships have priority, LNG ships have priority. So it's probably an additional measure to help a little bit on the -- on being able to throughput enough cargoes through. On the other hand, it kind of sets up the country as a 2-tier because some fleet is going to be on the West side and some fleet is going to be on the East side. And so that's also going to cause increased ton miles and other activities and utilization of the fleet. So in general, the fact that it's being considered is positive for LPG for sure. And secondly, it's just a way to try to help the delays and the increased amounts of LPG that we have to go through. I don't know if Tim wants to add something to that.

Yes, Tim, go ahead.

Yes. I think John is right. I think it's positive that there is a problem in the Panama and that such a measure here should be even considered, which kind of demonstrate that the delays we've been talking about will continue and probably rise. And when you look at the capacity of the project, it's maximum around 5 VLGCs per month. So it's not something that will make a big dent in the ton mile demand. If there is indeed a problem, the delay should be more than really 10 days in effect to make this a viable solution. So if there is 10 days delays in Panama going forward, that's a positive sign and we will see more going around the cape and as also John Lycouris was saying, it will fragment the market more and call for more efficiency. So -- but this is even considered, I think, is a positive sign for the market. And again, the size of the project is not something that should be -- we should be too worried about in that sense.

So if I'm understanding you guys correctly, then there'll still be a need for VLGCs to transit the Panama Canal. This pipeline wouldn't fully supplant those canal transits that kind of exist today in a normal market?

Yes, that's correct. It will be a fraction of the total capacity needed or export needed from the U.S. to lease that this pipeline will be able to handle.

I don't think it would fully built. I don't think it would displace more than the demand for 5 ships, fully built. It that correct, Tim?

Yes, that's correct. Yes. We estimate the capacity of 90,000 barrels per day to be around 5-year VLGCs capacity per month. And that is then given that they build sufficient storage so that it's not just a throughput, but actually storage that doesn't cause any delay so that you can load the deals fully in a normal 2-day cycle and discharge level 2-day cycle. If it's only a pipeline, then the complications around the logistics will be worse, and it will be less than 4 ships.

And then with the sale of the Captain Markos, does that portend potential exit on your ownership of the John and the Nicholas that are kind of the same older vintage? Or is this just kind of a one-off?

Possibly. We're looking at sales and I think they -- we do relate those to what I said in the script about -- my script about intrinsic value. So while we're at a big discount and is it a natural thing to look at the sales of the older ships, I wouldn't be -- you shouldn't be surprised if we do more.

Our next question comes from Omar Nokta with Clarksons Securities.

Obviously, you guys have become much more aggressive, I'd say, returning capital to shareholders. We've done the share buybacks in the past. You did the big tender offer this past March and now you have the special dividend. John and Ted, you guys made it pretty clear in your opening remarks that the special dividend or it's an irregular dividend. What are your thoughts about going forward with a regular dividend? How did you come up with the idea of just doing a special versus instituting a regular dividend policy?

Well, I'll let Ted explain the difference between a special and an irregular dividend. It's a bit of an archaic difference, but definition. But we purposefully said it's irregular because we're saying it is not special. So we're not saying it will not -- we will not have future dividends. We just want to keep the optionality while we have this -- first of all, as long as we're generating enough money, obviously and once we have this discount to our intrinsic value, we want to keep that optionality very much in the front. And if you want Ted to give you a little textbook difference, you can use right here.

Yes, I think John kind of nailed it. But look, the reason we're calling it irregular is and not special to us as it's going to -- it's unique. It may never happen again. Regular obviously means it's going to be pursuant to a policy, and irregular is something in between for us. I think we looked at our cash balance and took a look at how we felt about the short-term outlook and said, yes, we can return capital. The next question was, and I think, again, we heard loud and clear from a large handful of shareholders, they'd like to see a dividend as part of this capital allocation plan. And so I think our Board and management said, okay, let's be responsive. On the other hand, it doesn't necessarily follow Corporate Finance 101 given the discount at which we're trading relative to our intrinsic value. So as John said, we want to retain the optionality. We certainly wanted to reward shareholders including ourselves, we own stock and weren't necessarily wild about selling out at different points in the cycle. But on the other hand, we continue to be mindful of the discount to our intrinsic value. And clearly, a dividend or a dividend as part of -- as a potential method of closing that gap, but buying back stock and capturing that discount directly for remaining shareholders is pretty attractive. So I'd say that our thinking is still -- we're still pretty stuck on the fact that we're at such a significant discount. We -- I think we want to continue to work on that. But again, dividends will undoubtedly be some portion of our capital allocation strategy going forward.

I appreciate that. Yes. So I just was going to ask, it does make sense given the -- as you mentioned, intrinsic value. And what seems like you'll be selling the Markos for versus the share price, definitely, there's a big difference to capture. When we think about this irregular dividend, should we think about it as you're basically taking the proceeds from this vessel sale and giving it to shareholders? Is that a good way to think about it?

No. No.

There will be another capital allocation decision.

Got it. Okay. And then I guess one more, and I know, John, you had mentioned this, that you are looking at the older vessels. When it came to this one, in particular, obviously, it's the oldest in the fleet. The decision to sell that vessel, did it come to the decision to see the vessel?

Holistic. I think we're looking at it as a market. We don't -- we're optimistic on the market. We're not there to reduce our exposure, but I think it's natural in the cycle to kind of renew, and this is partly renewal and partly what you said before, again, intrinsic value. It's when you see -- you can sell an asset at such a premium to what the market is evaluating it at, it's -- it makes sense in that respect. So it's all those considerations that our Board took into account.

[Operator Instructions] Okay. At this time, we have reached the end of the question-and-answer session, and I will now turn the call over to John Hadjipateras for closing remarks.

Many thanks for all of you who dialed in and for the questions. And I wish you a happy rest of the summer. Please stay safe and talk to you in a quarter. Bye-bye.

This concludes today's conference. You are now free to disconnect at this time. Have a great day.