Greetings and welcome to the Dorian LPG Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. 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.

Thank you, Darrell, and good morning everyone. Thank you all for joining us for our second quarter 2022 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Limited; John Lycouris, Chief Executive Officer of Dorian LPG (USA); and Tim Hansen, Chief Commercial Officer. As a reminder, this conference call webcast and a replay of this call will be available through November 10, 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 September 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. Finally, for our discussion this morning of our second quarter results, you may also find it useful to refer to the investor highlight slides posted this morning on our website, both under the Recent News section on the homepage, and under the News & Media tab which can also be located on our homepage www.dorianlpg.com. With that, I'll turn over the call to John Hadjipateras.

Okay. Good morning or good afternoon as the case may be. Ted, John and I are speaking from Stamford and Tim Hansen, calling in from Copenhagen. Thank you for joining us to discuss our second quarter 2022 financial and operating results. We now have 62% of our seafarers fully vaccinated 27% or 236 out of 889 who're vaccinated at U.S. ports. The pandemic has brought our teams closer and coordinating efficient and safe crew changes and is also enabling us to engage and integrate our seafarers into our processes of fuel and emission savings. Our seafarers will be our most valuable partners, and the continuing effort to decarbonize. Our fleet performance and technical teams are assessing emission saving devices, which potentially will reduce consumptions of our eco fleet. Since January 2020, our efforts to reduce emissions have resulted in fuel savings of over $2.5 million. We were able to achieve solid market rates this quarter by optimizing our positioning and timing. Ton-mile demand increased, but bunker prices have also risen alongside crude oil prices. The Baltic Index averaged about $42 for the period July 1st to September 30th, down roughly $10 from the previous three months average. At $51.60 Baltic average for the quarter July to September, the TC equivalent was about $8,000 higher than at yesterday's $56 quelled. North American exports continue to rebuild after reaching low levels last fall due to COVID delays. Middle East exports are also recovering from their four-week moving average as it passed 700,000 last week. Actually 750,000 in mid-October it was 700,000 at the last week of September. And that's a highest export number from the region since last February. The arbitrage between Mont Belvieu and the Far East Index price for LPG has widened in recent weeks. The Baltic VLGC Index is…

Thank you, John. Again the third quarter of 2021 continues many of the trends that we saw in the previous quarter. North American LNG results been demonstrate robustness, Asian demands -- our Asian import demand grew, and crude oil prices continued to climb with the average Brent crude oil price at about $73.5 per barrel. In Q3 of 2021 global seaborne LPG was marginally up compared with Q2 in 2021 and about 750,000 tons about the same period in 2020. The North American exports were slightly down in the third quarter compared to the second quarter. But the increase in Middle East volumes exceeded the lower exports figures from North America. North American exports were hampered by the production difficulties emerging after Hurricane Ida when oil production was shut down at the end of August. Aside from the storm relief decline in production North American NGL production and thereby the LPG export reflected the levels seen in the quarter prior to. The increase in export volumes from the Middle East come on the back of the reversal of production costs agreed by their OPEC+ countries commencing from August. This is not to say all exporting nations from the Middle East increased exports. Some of the increase seen from Saudi Arabia and Iran was offset by lower exports from the United Arab Emirates and from Kuwait. Import volumes into India increased by about 1 million ton compared to the second quarter. Imports into China, South Korea, and Japan declined. Despite the new PDH plan commencing operations in China during the first quarter of 2021, run rates were progressively dropping during the quarter. Reporting margins due to rising feedstock has been suggested as the main cause by several analysts. Power costs and energy control measures in China has been hinted as a…

Thank you, Tim. My comments today will focus on our financial position and liquidity, and of course, our unaudited second quarter results. Since our last report, we've exercised our repurchase options on the Captain John and the Captain Nicholas. We expect that John to close on or about December 1, and we'll pay about $15.9 million, including accrued interest in cash on or about that date. We expect the Nicholas to be delivered back to us in late January 2022 and we anticipate a cash payment then of approximately $17.8 million. In addition to paying off our highest cost debt 6%, repayment of this debt enhances our flexibility to consider asset sales even more opportunistically as we've seen firm pricing for vessels a disadvantage. We will continue to evaluate fleet optimization opportunities as they present themselves. On September 30 2021, we had $98.1 million of free cash. And as of yesterday, our free cash balance stood roughly unchanged at $92.3 million. I point out that even pro forma for the two repurchases and an $8 million payment on our Kawasaki new build that is forthcoming, we retain a healthy cash balance. In addition, we do continue to consider several financing alternatives that would allow us to free up equity in our vessels without significantly changing our cash cost per day. With a debt balance of $576.2 million at quarter-end, our debt-to-total book capitalization stood at about 38.8%. As a reminder, we have no refinancings until 2025, ample free cash as well as an undrawn revolver. On that basis, we expect our operating cash cost per day for the coming year to be approximately 22,000 per day, which excludes the $8 million progress payment that I mentioned for our new building that's due in our fiscal fourth quarter, that is the…

Thank you, Ted. This past quarter is the first one during which all 12-scrubber vessels of Dorian LPG fleet were in operation, and they have produced significant savings in fuel costs, while producing emissions measurably below those vessels burning compliant fuels. While visiting one of the scrubber equipped vessels at Freeport, Texas during loading operations a couple of weeks ago, the gas analyzer of the hybrid scrubber system which was in operation in port at the time was recording SOx emission of 0.4 sulphur more than 50% lower than the compliant fuel supplied in the markets, which is 0.1 sulphur content. The emission advantages of the scrubbers are not limited to SOx emissions. They also reduced by about 90% carbon and particulate matter emissions that are normally produced by diesel engines and which are harmful to life and the environment. We continue to average above $105 a ton of fuel for the 2021 calendar year being the differential between high sulphur fuel oil and low sulphur fuel oil. For the last quarter, this differential price spread has produced savings advantage of about $3,000 per calendar day or scrubber fitted vessels. This results validate original expectations on the payback period having returned about 40% of the CapEx as of September 30, 2021, notwithstanding events or the oil markets collapse during the calendar 2020 and that of COVID-19. We are continuing to invest in our vessels performance and energy efficiency to reduce emissions and lower operating costs. The main measures currently being considered for our vessels are route optimization, and data monitoring software, including data collection and devices from board, energy saving devices installed on our ships that can improve how performance and power and reduction of fire requirements. By capturing and redirecting energy dissipation towards vessel performance and emission improvements, with…

Thank you very much. And we're happy to take questions from anyone who cares to give us any questions.

With prepared remarks completed, we will now open the line for questions. [Operator Instructions]. Our first question is come from the line of Omar Nokta with Clarksons Securities. Please proceed with your questions.

Hey, John, thanks for the discussion. Lots of good stuff to talk about. I did want to ask about the new buildings. Obviously you've been a bit more maybe expansive of late. And it's interesting that time charter and approach which is nice. You don't have to put up capital basically, these three latest additions, they come after the new building that you have an order from earlier this year that's financed via the lease or the capital lease. Can you maybe just go over the difference in how both of these deals came together or came about and can perhaps we think about growth from here. Not necessarily there has to be growth, but in general as you think about expanding the fleet, is it really the lease charter in type of approach that you want to continue to do going forward?

Yes, Omar it's not. I wouldn't say that it's -- that we've made a conscious decision to go one way over the other. The new building that we concluded in Japan was actually came together after a very long discussion we've had and with the shipyard, and with potential counterparties there. And she's on a favorable finance arrangement. So that was one thing. But our reluctance to do anything more than that should be viewed as a conservative approach to the new building market. And the charter in, I think the feature there was opportunistic. I mean, we saw well priced time charters with the options to buy. And I really felt that we were in the opportunity, we could take advantage of that opportunity. The timing is good. And the features of the ships that distinguishes all three of those is that they are Panamax. In other words, that they can transit the old Panama Canal and we feel quite strongly that that is a big differentiator going forward.

Okay. Thanks, John. And just wanted to double check just so we understand the trend, or I can understand the transaction a bit. The initial new building the Japanese one, that's a lease, these three are charter ends and as a purchase options, right along the way, there's no purchase obligation, as I understand it?

Correct.

Okay, and then just one follow-up, I did want to ask just clearly the performance during the quarter, at least from my perspective was quite firm and stronger than anticipated. Quarter-over-quarter your realized rate was very little different from the prior-quarter. However, the spot market, at least from what we were seeing quoted, had come off quite a bit, I want to say averages were maybe a TCE of call it 33,000 last quarter then this last one, it was 25. And so you had a pretty big difference in prevailing averages, but your average stayed the same, any color you can give as to how your performance, I guess you could say outperform relative to what we think the market did?

I should punt that because it's a difficult question. But maybe I shouldn't punt it because it's a difficult question. No, I think it's we have never actually been very focused on quarter-to-quarter, I think very difficult there, you have the quarters are short and voyages are long, and they carry from one end to the other. So I don't take great pride and over performed in one quarter, or I don't get terribly nervous about underperforming in another quarter. So time charter outs are a stable element in the equation, but the spot market performance is better to look at it on a rolling average of more than one quarter, that would include several quarters to get a real indication of a trend, I think.

Thanks for that, yes, I understand. But yes, it's notable at least that the performance was a bit better than anticipated. I'll leave it at that. Thanks, guys.

Thanks, Omar. Thank you.

Thank you. Our next question comes from the line of Brian Reynolds with UBS. Please proceed with your questions.

Hi, good morning, everyone. Maybe just to follow-up on the Time Charter announcement with the purchase option, Tim, just kind of just curious if you can talk about maybe that thought process around the duration of the announcement, it seems like there's still some hesitancy to fully invest in LPG, Joule propulsion, just given that, emerging technologies might occur as talked about in the prepared remarks, just kind of curious if you can talk about a little bit more about those emerging technologies and how we should think about the tenure of the purchase options and whether we should see more CapEx spend on emerging technologies, whether it's five to seven years down the road. Thanks.

Yes, just a man to answer that for you. But in respect of choosing to do the ships in with dual fuel, it wasn't our choice. The owners made that choice. We charted the demand, the incremental cost to us was nothing and the cost to the owner for having that feature is very small and I don't know if you can order a ship now, an LPG ship without a dual feature, dual fuel feature. So it's a whole different discussion to the retrofit discussion which where the numbers are still very considerable. But in terms of new technology and all this, John has been spending a lot of time on it. And I'm sure, I think it will be useful to everybody here kind of review that.

Yes, Brian, we have to consider a number of new technologies, dual fuel is a good way to go forward. But also the ships that exist need to improve their performance, and we have to look at a number of opportunities, and new developments that are coming to the marine sector. First of all, we need to know exactly where the regulation would land and how it will land and what demands are going to be made out of the Marine sector. As you may know, the EU has different requirements than the IMO. And now we have COP26, which is talking about other things. So things have not landed yet precisely. And once we know what we need to do, we will make the decisions along the way, the CapEx needs to be within reasonable levels. So we could at least be able to improve all our fleets vessels, it goes without saying. So, I don't know if you have anything in particular you want to ask, but happy to follow-up later.

I guess maybe, as a quick follow-up on IMO and COP26, just kind of curious how we should think about what you guys are specifically looking at in terms of carbon emission targets that would trigger an investment one way or the other?

Brian, the main point is that we need to reduce our emissions, our CO2 emissions, but also our NOx emissions and our SOX emissions. So we've done that with scrubbers, scrubbers can be changed and amend and retrofitted in such a way to reduce additional amount of NOx and CO2. So that's a clear way forward for us. We cannot go to zero from now. We have to start in steps to improve our emissions and you have to do it in an effective way. So that's the way we're thinking about it.

Thank you. [Operator Instructions]. Our next question is coming from the line of Sean Morgan with Evercore ISI. Please proceed with your question.

Hi, guys. So you kind of closed out the remarks and the prepared remarks talking a lot about the upcoming regulations regarding carbon emissions. And to me, it's sort of around a little bit with a lot of what we were hearing just a few years ago on IMO 2020. And that kind of looking back at that now, there is a lot of excitement going on IMO 2020 about things such as were discussed on the call, capital restrictions through smaller operators and more levered operators, and then some differentiation. And it wasn't just for the LPG sector, but across shipping were stronger operators would benefit. With the benefit of hindsight now on IMO 2020, I don't think that it really panned out to the level that was kind of trumpeted prior to the implementation. So as we kind of look forward to COP26 and carbon emissions, and some of these similar themes that we heard just a few years ago, what makes this different than the sort of the last regulatory capital expenditure cycle that we saw the beginning of 2020?

, :

Yes, so I mean, I guess from the perspective of the operators like yourself, I mean, there is definitely, it's something you have to really focus on. And it's something that could go wrong, but from the perspective of shareholders, is there like an upside, I guess, golden scenario that they can kind of look for kind of similar to what was promises IMO 2020? Or it's just you guys are talking about it, because it's an important operational decision that you kind of have to get right.

I think it's a ladder, it's an important decision that we have to make as an environmental decision, we are all committed to do the best we can for...

Yes, but it's also -- I wanted to add, I consider all this to be an investment opportunity. I mean, we're looking at that as an opportunity not only as an obligation, so we haven't -- some of our competitors have invested in battery units and other things. We've invested internally, mostly in optimization so far. And then -- but I look at this whole environmental pressure less as a pressure on us and more as an opportunity to make a contribution, and hopefully to give a better return to our shareholders as a result. So far, the efforts to reduce emissions are resulting in fuel economies as I said in my message. So it's the same thing actually. Less emissions comes with less fuel consumption.

Right. And I think he said there was $2 million of savings on the fuel consumption, is that mostly solar steaming, or is that specific technologies you're employing?

This is not from solar steaming. No, no, no. This is from optimization. And then better planning of health cleanliness is a direct result of having better feedback of the operational conditions of the ships, so that we can decide when to clean a hull or propeller or better weather routing services. It's really, technology delivered savings.

Okay, wow. So it sounds like a confluence of a lot of different factors optimizing together?

Yes.

I think -- thanks. That's all I have.

Thanks, Sean.

Thanks, Sean.

Thank you. There are no further questions at this time. I would like to turn the call back over to John Hadjipateras for any closing remarks.

Thank you all very much, and I hope you have a good fall and winter, and stay safe and see you next time.

Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.