Welcome to BW LPG’s Second Quarter 2022 Financial Results Presentation. Bringing you through the presentation today are CEO, Anders Onarheim; CFO, Elaine Ong; EVP, Commercial, Niels Rigault; and EVP, Technical and Operations, Pontus Berg. We are pleased to answer questions at the end of the presentation. Should you have any, please type them into the chat box in your Zoom panel. You may also use the raise hand option. Before we begin, we wish to highlight legal disclaimers shown in the current slide. This presentation held on Zoom is also recorded. I will now turn the call over to BW LPG’s CEO, Anders Onarheim.

Thank you, Lisa. Let me start by welcoming Kristian Sørensen to BW LPG and Kristian needs no introduction in our community, having been in the LPG shipping industry for over 20 years. He joins us this week and we look forward to his contributions. I am sure he will hit the ground running right away. It’s been a busy quarter for the team at BW LPG. We concluded the sale and delivery of BW to Liberty, completed a second tranche sale of our India subsidiary, which takes our ownership to 52%. And we enter into an agreement to acquire the LPG trading operations from Vilma Oil to expand our Product Services division. The acquisition is still subject to regulatory approvals. My thanks to all colleagues that works hard to cross the finishing line, more on this later. I am also pleased to announce that all 15 are retrofits and now successfully back on water and capable of running LPG too. The world is facing great geopolitical instability. And this is having a significant impact over the energy and shipping markets. Energy security is a growing concern and we want to play our part. Let me show you how LPG can contribute to the energy solution on our Slide – Page 4. The current instability highlights the value of LPG and we are seeing increasing investments in U.S. exports due to higher demand and in particular from Europe. Nobody is versatile as it is important via ships from global suppliers and provides attractive energy security compared to solutions that require costly investments in infrastructure and pipelines. The LP DSOs are cleaner than most other alternatives. These attributes support further investments and growth in LPG exports, imports and dust transportation. On the right side, we can see that LPG continues to be…

Thank you, Anders. Good morning, afternoon and good evening to all of you. Please turn to Slide #9. On Slide 9, we share our view of the market. As Anders mentioned, we remain positive for the rest of ‘22 and next year. There are several encouraging developments. The two main export hubs continue to increase their export, U.S. leading the way, with record LPG export. Middle East export is up significantly in line with OPEC plus phasing out its existing oil production costs. For the coming winter, we expect strong winter heating demand and retail demand to switch more to the clean and cheap LPG compared to the expensive natural gas and oil. Today, LNG cost is about $500 in oil price equivalents and oil price is today around $100. LPG is trading to 20% discount to oil. So, the LPG cost is only $80 in oil price equivalents. In other words, and as Anders also mentioned, LPG is about 6x cheaper than LNG, I repeat myself 6x cheaper than LNG. So far in Q3, we have fixed approximately 84% of our available fleet stays at an average rate of approximately $36,000 per day on a discharge to discharge basis as Q3 is in line or slightly weaker than Q2. Looking into ‘23, we maintain a more positive outlook despite the order book, the U.S. midstream operators announcing to expand fractionation capacity, which will increase LPG production. We also expect the Middle East to continue their export growth, with Iran being a great upside potential, so the sanction be lifted. Iran alone can give employment of about 150 VLGC cargoes per year. On the demand side, we have been concerned of the current lockdown in China. However, the stats shows that LPG imports were relatively stable compared to Q2 last…

Thank you, Niels. Thank you everybody for dialing in and listening to us. This quarter has been about capturing value for us. On the technical front with the largest fleet of LPG powered VLGCs on water, we have been systematically scaling up our intake of LPG as fuel to maximize our earnings by reducing the cost for fuel. Our engineers are also holding their expertise in dual fuel engine management. On the operational front in Q2, we conducted close to 200 port calls Panama and Suez Canal transits and the team targets just-in-time arrivals to say bunkers and reduce emissions. Our global network of select port agents help minimize turnaround times and maximize commercial availability. With all the 15 LPG powered VLGCs now on water, we have been reaping the rewards of our ambitious retrofit project. We have supplied close to 10,000 metric tons of LPG as fuel, saving about $5.3 million in fuel costs for the fleet. We have also reduced the carbon emissions by just over 15% by using this LPG as fuel. Our LPG deck tanks complement existing fuel bunker capacities and provide us with full fuel and cargo flexibility during the operations. We have setup LPG bunker fuel contracts with new and existing partners in most major loading barge. Being able to lean on decades of operational experience has helped us to reduce the impact of inflationary pressures on the OpEx. For example, we are currently experiencing a 50% escalation in cost on lube oils, an almost 40% increase in insurance premiums and consumables. As Anders earlier mentioned, we are in uncertain times and prices of raw materials are soaring due to widespread restrictions of movement of goods from major producing countries due to the war in Europe and COVID-related lockdowns remaining in Asia. All of this reflects in the current increase seen on our OpEx. We will continue to do our utmost to keep the OpEx on market leading levels, however without compromising on the well-being and safety of our crew and the reliability of the operations. Also, we have ensured that all our crew are fully vaccinated, which not only protect themselves, but also their shipmates, terminal employees and surveyors and allow for minimal quarantine requirements during crew relief. That’s my short update. So let me now turn over to our CFO, Elaine Ong, who will walk you through the financial positions and results.

Thanks, Pontus. Let me walk you through some financial highlights from our second quarter. Net profit for the quarter was $39 million, with an EBITDA of $83 million. This translates to an EBITDA margin of 68% for the quarter. At the end of June, our available liquidity was $360 million, with a continued low net leverage ratio of 25%. Our solid financial position will allow us to withstand any short to medium-term volatility and to invest in the right opportunities for future growth. Some key figures to highlight on our balance sheet. This quarter net outflow from operations was $15 million, largely due to changes in working capital that amounted to $96 million. In brief, $68 million was due to the settlement timing for 2 LPG cargoes that straddled the quarter end and $19 million was a result of higher bunker prices for inventory. We reported a positive free cash flow of $21 million. This includes $45 million in proceeds from the sale of the BW Liberty in Q2 and $9 million in CapEx spent for our LGIP propulsion retrofitting program, which was completed in May. As previously announced, we received an additional $30 million in new equity from Mass Capital in June for their further stake in BW LPG India. From June onwards, BW LPG now owns 52% of our India subsidiary and will continue to consolidate our India results. During the quarter, we also prepaid $268 million of debt and returned $42 million in dividends to our shareholders. With a net leverage ratio of 25% at the end of the quarter, we have declared an interim dividend of $0.20 per share for the second quarter, which translates to a payout ratio of 75% of impact. For 2022, we expect our operating cash breakeven for our total fleet, including our charter-in vessels to be at $22,300 per day. Here on Slide 18 is an update of our financing structure and debt repayment profile. After the voluntary prepayment of $268 million of debt during the quarter, our outstanding bank debt was at $490 million at the end of June are those that currently stands at $653 million, this includes $61 million advances drawn from our trade finance lines and $107 million in lease liabilities from our time charter-in vessels. With a cash balance of $166 million and $194 million undrawn revolving credit facilities, we ended the quarter with $360 million of available liquidity and a net debt of $487 million. On this note, let me open the floor for questions. Back to you, Lisa.

Thank you, Elaine. [Operator Instructions] We have the first question from Peter [indiscernible]. Please go ahead, Peter.

Good morning and good day to all. This is [indiscernible] from ABG talking. Very interesting these days with the great discrepancies among the different energy carriers. First, could you shed some light upon what demand you have seen well as of today, in terms of utility sort of motivated demand for LPG in order to utilize the lower price for LPG compared to natural gas?

Niels, do you want to have a crack at that?

Yes. I think it’s – I mean, still early days. I mean, the winter hasn’t really started and for instance, in Europe, but it’s clearly that people will tend to go for the cheaper energy and we have also seen announcements on the petrochemical side that people are looking at different alternatives and for instance, using LPG as a fuel.

Yes. But I think also, it’s – we still see that it’s still I think that the LPG market is still not well understood by all. And I think so we are starting to see more and more inquiries and interest. And of course, I think when again, as Niels says, when the winter starts hitting, I think that the search will really, really step up and we are seeing already industrial players stating they can replace quite a bit of their LNG with LPG. And we think that’s something that will continue.

Interesting. Thank you so much. Another market related question, we have seen congestion services starting to solve themselves in many segments, but in the Panama Canal, which to the best of my knowledge has been perhaps the most impactful in the LPG markets. My understanding is that there is still substantial congestion and while looking for comments, and if possible, any foresight on what to expect on the congestion issue and particularly in Panama for LPG carriers?

Niels?

Yes. It’s definitely first of all, it is very volatile, the waiting days, but we anticipate that to continue, I mean, currently now I think some of our ships have been waiting on the northbound of about 2 weeks to transit. So like I say, so it’s volatile, but the inefficiencies in the Panama Canal is here to stay.

Okay. Quick follow-up on that, did you see congestion elsewhere?

Yes, I mean, there are, for instance, in India has been a lot of lately lot of congestions, because they have increased their imports to LPGs. We are seeing a lot of inefficiencies on the discharge port. So, ships are waiting. There also been some – well, they start inefficiencies in China. So yes, I would say that the inefficiencies we have experienced the last 24 months are still there in our segments.

Okay, thanks. That’s all for me.

Next, we have Anders Carlson. Anders, please.

Yes. My question goes on the ships that you said were on charter to remind, you said there are 5 ships secured in one new build I heard. Can you say anything about the duration? What kind of propulsion these ships have? And also if there are any purchase options or anything similar linked to the charters?

Niels, for you again.

Yes, I mean, there are 5, 6, so we will take over, they are all on TCE from the 5, 6, one of them is a new building. The duration is everything from 8 years to 2 years. And the propulsion of the new building is the LPG while some of them have scrubbers and the rest is compliance fuel. But remember that 3 of the 5 already have a TCE attached.

Okay. Thank you. That’s all for me.

Thank you. Next we have Lars Christensen. Lars, would you please.

Yes. Thank you very much. Lars Christensen with Navigare Capital Partners and Copenhagen. On the outlook for 2023, you had two highlights that you mentioned. One was obviously the economic outlook that has a lot of volatility these days. And the other one was the order book. Could you please put some more words on what it is you see with the order book that the order book coming in, how will that be absorbed in the market? And what impact do you believe that’s going to have on the open ship dates you have for 2023?

I will start and I will let Niels also talk. I think if you listened before, we have been somewhat concerned about the order book 2023, in the past and then we have been tried to voice that quite clearly. I think with – in the current energy environment, I think we do see and expect higher production particularly from the U.S. and also higher exports. And I think we are seeing that the increased activity should, at least to a great extent absorb the additional fleet. But of course, we are still cautious because we also know that with the interest rates environment, we are seeing, it could hurt the economy, and also of course, energy prices. So, we don’t think that we are totally out of the woods, but I think we are more constructive. And we believe that both in efficiencies, as Niels is talking about and increased activity will lead to more exports and more activity on water. Niels, do you want to add something or?

I mean as I have said, I mean the two main hubs, both them have quite large export growth going forward. I mean as I mentioned, U.S. is 6.6% and then the rest 16% and I have to admit that we just see already now how much LPG is coming up from the Middle East now. So, the Middle East is really delivering on the opposite side. And as we discussed little bit earlier, the inefficiencies will still be there, both on the Panama and on the discharge areas. So, yes, so if you combine everything and also if you do look at the forward market, the FFA market, they also anticipate the market, about $30,000 per day. So, in our view, even though the order book is large, it still seems like next year will be a good year.

Okay. Next we have Joe Mars. Joe, would you please.

Hi. Thanks for taking the question. Just going back to your previous point, can you just explain a bit better and excuse my ignorance? What the applications of natural gas that you think you could substitute into LPG from a price perspective at this ratio, whether that’s, I think you mentioned utilities, but I assume it’s not just utilities, there is also industrial use, if you could just talk about specific kind of use cases that you are seeing? And the second is, can you just explain in more detail, I mean I understand that, obviously, to increase the exports from both the U.S. and Middle East is a combination of having the product and then also having the facilities. So, is this a case where the facilities in terms of the export terminals need to be built-up more, or is it a case that you actually need more output, I mean I am assuming in the Middle East and the U.S. you have sufficient output? It’s just a question of facilities utilization, as you mentioned, can you explain those points? Thank you.

Niels, do you want to add?

I think the first question is the LPGs question to LNG. I mean I think the main part we will see from the retail. I mean as we mentioned, currently, the LPG is 6x cheaper than natural gas. So, obviously, if Europe and Asia get the kind of a cold winter, it’s quite easy to substitute that to use LPG. We also see that as I also mentioned that I mean, we do use a lot of LPG – I mean they use as much LPG to spike up the LNG as possible. So, the maximize that so that don’t say also, it’s as demand growth and we also see I mean there is the margins, not that compared to LPG, it’s also very favorable. So, obviously, the petrochemicals industry using as much LPG to crack compared to naphtha. And then you said about, if there is any bottlenecks or concerns of the export terminals, no, I mean as I mentioned, maybe the fractionation, building up more fractionation to get more LPG export that is underway. I mean a lot of the midstream companies have had their earnings release and also mentioned that they will increase the fractionation capacity, which is very positive. So, when it comes to the export terminals of the U.S., they still have capacity to increase export. So, we don’t see that and the same thing will come from the Middle East.

I just want to emphasize, we don’t have any sort of good numbers on what Neil is saying spike to LNG. But I think we are seeing more and more people talking about it. And that’s something that we are going to watch very closely because obviously, if you can mix in LPG and LNG to a great extent for given the price differentials, I think that’s going to be quite interesting also.

Yes. I understand. Thank you.

[Operator Instructions] We have one question from Desmond Lim [ph]. Please go ahead.

Hi. Good morning. I am a private investor from the United States. My question really quickly, I am very pleased with the voluntary debt payments. Do you expect these voluntary debt payments to continue? And is there a specific target that you are looking to meet with across that?

Elaine, do you want to answer that?

I will do. I don’t think these voluntary debt payments are going to continue indefinitely because a lot of our facilities now are predominantly term loan facilities that have scheduled repayment schedules. And also with the rising interest rate environment, I think it would be prudent not to be too aggressive in paying off the debt that we have which are quite attractively priced.

Okay. Next, we have Joe Angel Morris. Please go ahead.

Yes. Sorry. Just a follow-up. And again, I recognize it’s very hard to historically find any parallel to the current situation. So, normally, in the energy business, everyone tries to find the historical parallel, it’s alright. So, I guess what I just don’t understand is the capability of the various equipment to be able to take, I mean I can certainly understand in the United States, where the natural gas, you generally have LPG within the natural gas. So, the whole system is built up to basically fractionate. But you can clearly keep it in, there is a whole economic discussion of whether you keep the liquids in or you split them. I just wasn’t aware, I guess in the UK, historically, there has been a fair amount of natural gas liquids produced out of the North Sea, or I guess in Norway and sort of other countries that use North Sea gas. Is that where you would think the majority of the capability would be to basically take more LPG, because it seems like if you built a system in Norway, or the UK, or maybe Denmark, historically you had a lot of natural gas liquids just coming out of the North Sea that you were taking advantage of in your industrial system that probably as those systems ran down, you didn’t – you don’t have as much LPG. So, is that is that where you would see the sort of demand source, if you will, for the marginal equipment that could switch? Thanks.

I mean I think – I am not going to dare to give you a clear answer on that, because I think we are still also investigating it as we sort of move further into the value chain, we are also learning quite a bit. Obviously, so far, we have been basically shipping it from A to B, and we are happy with that. Now, certainly Norway, I don’t think it’s going to happen, even though we have here, tough discussions at the moment, because we are sending all our electricity out of the country. But I don’t think this is going to happen here. UK might be a market. I think also on the continent, I would expect that more will look for opportunities and to see. And I think we, again, we are going to be humble enough to say, we don’t know enough about that, but we are going to certainly try to and also now with the development team coming onboard, we are certainly going to try to be better with understanding that and take advantage of it. But I think also Niels said, I mean where I think the real potential is, I mean there are many parts of the world where they are not as into, they don’t have the infrastructure, and they are not into the green shift like we have in the other places. And I think that’s also where we as a world, we need to find solutions also for those places. So, I guess we just think that gravity works. And if something a product as clean and as efficient as LPG if it remains that much cheaper, we do believe that it’s going to be a – we are going to see increased demand and also a substitution effects. But again, I am sorry, I can’t be more specific because I really don’t know.

No. Thanks very much. I mean the logic is 100% true. It’s just always, it’s always a path which is the challenge. But I guess we will see in the coming quarters how it all shakes out. Thanks for your help.

At least we will do our best to get better and better answers.

Okay. There are no further questions. We have come to the end of today’s presentation. Thank you for attending BW LPG’s second quarter 2022 financial results presentation. More information on BW LPG is available on our website. Have a good day and good night.