Ted Young - CFO John Hadjipateras - CEO John Lycouris - CEO, Dorian LPG USA.

Spiro Dounis - UBS Michael Webber - Wells Fargo.

Greetings and welcome to the Dorian LPG Second Quarter 2017 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. [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..

Thank you, operator, good morning. Thank you all for joining us for our second quarter 2017 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Limited; and John Lycouris, Chief Executive Officer of Dorian LPG USA.

As a reminder this conference call webcast and replay of this call will be available through November 4, 2016. 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 to you to our fiscal second quarter 2017 results filed this morning with the SEC on Form 10-Q, where you'll find risk factors that could cause actual results to differ materially from those forward-looking statements. With that, I'll turn over the call to John Hadjipateras..

Good morning and thank you for joining. After my brief remarks Ted will review our financials and John Lycouris will update you on the broader market and our operating environment and finally we will take questions. Dorian is the largest owner of ECO VLGC, owning 22 VLGCs, all built through high specifications at two of the world's best shipyards.

The Helios Pool, which we co-founded and jointly owned with Phoenix Tankers is the second largest LPG pool in the world, with a fleet comprising 28 VLGCs, including 18 owned by Dorian, four owned by Phoenix and six entered by Oriental Energy, one of the largest PDH plant operators and LPG Importers into China.

We have four VLGCs on time charters outside the pool and one vessel on time charter within, three of these have a duration of greater than two years. Collectively these time charters account for approximately 23% of our fleet’s available calendar days in fiscal 2017.

For the quarter ended September 30, 2016, our full VLGC utilization rate was 82.5% and our overall VLGC utilization rate was 85.7%. As a reminder, we calculate fleet utilization as defined in our filings by dividing our total operating days in a period by the total available days in that period.

The average TCE for our fleet, including time charter ships was 19,137,000 a day and for our pool ships $15,296 per day. Global LPG imports volumes have continue to expand and fleet growth is being gradually absorbed.

In the last quarter in the absence of the East-West arbitrage, a number of US export cargoes were canceled, a lump low in buying from China resulted in a number of ships slow steaming on charters orders and/or being used for storage. During the quarter, we saw the opening of the new Panama Canal.

In fact, for a time we together with Shell and Petrobras were three of its top five users. More recently other vessel traffic through the new canal is increasing and we expect that in future VLGCs will not feature as high on the list.

Further, as a result of increasing Chinese amount, the number of shipment storage is down and volumes and freight rates have improved from the lows witnessed during August and early September. Let me hand over to Ted now, who will discuss the financial results for this past quarter..

Thank you, John. In spite of good management of our cost base and a high utilization rate, our results reflect the softness that the LPG market has experienced since the beginning of the year. Before I move on to discuss the results for the quarter, we do look at our business in a long-term perspective.

For the quarter ended September 30, 2016, we reported total revenues of $33.6 million, representing net pool revenues from the Helios LPG pool, charter hire and voyage freight revenue earned for our VLGCs.

We have previously described, we report our share of the Helios results as net pool revenues in our income statement, which represents our percentage participation in the pool revenues, less pool voyage expenses and pool general and administrative expenses. Our share of net pool revenues for the quarter was $20.8 million.

Timer charter equivalent revenues per day cross all of our VLGCs, including those in the Helios pool amounted to $19,133 a day. Well our spot VLGCs and vessels with time charters of less than two years duration, both of which reported exclusively in the Helios pool earned $15,296 per day for the quarter.

Our voyage expenses were $0.5, 87% reduction from the three months ended September 30, 2015. The decrease is due to the increased number of our vessels operating in the Helios LPG pool, and our voyage expenses are netted against revenue.

Vessel operating expenses for the quarter were approximately $16.3 million or $8,073 [ph] per vessel per calendar day, which is calculated by dividing the vessel operating expenses by calendar days for our VLGCs for the relevant time period. The comparable three-month period in 2015, our OpEx per day for VLGCs was 8,860.

This year-over-year decrease of 787 [ph] per day in our VLGCs related principally to a $655 per day reduction in cost related to training of additional crew and a higher proportion of newer vessels which incur lower OpEx.

Our daily vessel operating expenses have continued to perform, at or exceed our originally budgeted levels, and we are confident these OpEx levels will remain competitive going for forward, particularly given the young age of our fleet, our commitment to high maintenance standards.

General and administrative expenses were approximately $5.2 million for the quarter, which is roughly flat compared the same period in 2015. Excluding non-cash compensation expense, cash G&A for the quarter was $4.1 million, which is consistent with our expectations and roughly $300,000 over the same period last year.

Depreciation and amortization for the quarter totaled roughly $16.4 million, which is primarily attributable to depreciation on our operating vessels.

Our reported interest and finance cost for the quarter was $7.2 million, which was comprised of interest expense on our debt, amortization of financing costs and other financing expenses compared to $0.9 million for the same period last year.

The increase of $6.3 million during this period was mainly due to a $4.1 million increase in the interest incurred on our long-term debt, amortization and other financing expenses. The other piece of our cash interest expense booked as realized loss on derivatives amounted $2.3 million, an increase of $1.1 million versus last year.

We also have unrealized gain of $6.5 million for the changes in the fair value of interest rate swap due to the increase in the forward LIBOR curve. The unrealized gain on the derivatives amounted to $0.12 per share for the quarter. We currently have approximately 80.4% of our existing debt facility hedged.

Our RBS facility is over 99% hedged, while the 2015 facility is now approximately 78% hedged. The current weighted average LIBOR rate in 2015 facility is approximately 1.45% including the unhedged portion, while the RBS facility has weighted average fixed LIBOR rate of 4.57%.

Overall for the quarter we reported a net loss of $7.1 million or $0.13 in loss per share, and an adjusted net loss of $13.7 million or $0.25 per share. Adjusted net income for the three months ended September 30, 2016 strips out the effect of the unrealized gain on derivatives of $6.5 million.

Our EBITDA as defined in our filings for the quarter was $13.3 million and we also repaid $17.6 million of bank debt under our two bank facilities during the quarter. During the fiscal second quarter we generated nearly $15 million of cash flow from operations, a decrease of roughly $50 million the prior year.

This decrease is primarily attributable to the lower year-over-year time charter equivalent rates realized. As of September 30, 2016, we had total outstanding indebtedness of $803.1 million including $698.4 million drawn under the 2015 debt facility and $104.7 million under the RBS facility.

Please note that in accordance with new FASB [ph] guidance, our deferred financing fees are no longer shown both as an asset and an increase in the debt balance on the liability side of the balance sheet. However, the footnote does reflect the full principal debt balance of $803.1 million.

The RBS facility amortizes $9.6 million per year in principal while the 2015 facility which is now fully drawn amortizes approximately $56.4 million per year. We finished the quarter with $43.6 million in unrestricted cash and equivalents and $50.8 million of restricted cash.

We are in compliance with all financial covenants covens under the two loan facilities and I would note in particular, we continue to have ample headroom on our loan to value covenant, which is reflected with a disciplined approach that we took to the financing the business.

We have cash breakeven cost per calendar day of roughly $23,000, which includes vessel OpEx, cash G&A, cash interest expense and principal amortization. We remain focused on managing our liquidity and risk profile to allow us to operate our business in all economic and market climate. With that I'll turn it over to John Lycouris..

Thank you, Ted. LPG fundamentals, the supply, all the demand for LPG continue to support seaborne LPG trade on VLGCs. Through September 2016, the global seaborne LPG volumes amounted to about 64 million metric tons compared to about 61 million metric tons during the same period last year, a 5% increase.

LPG export volumes in both the US and the Middle East have remained strong during the first nine months of this year at about 19 million and 30 million metric respectively, registering a 21% and a 9% increase over the same period last year.

To date [indiscernible] have been operating high utilization rate, including some new plants that come on stream, thus maintaining buying interest for LPG. We believe that the softness in the Far East markets was likely the result to several cargos arriving at any time, which created a short-term glut in the market.

This resulted in a number of vessels employed as floating storage and other vessels to perform long voyages at reduced fee. Mont Belvieu [ph] LPG prices have continued to create considerably higher than expected adversely affecting arbitrage trade.

Price competition from the Middle East producers, in particular Saudi Arabia and persistently high Mont Belvieu price resulted in cancellations of some contract with US export cargos during the last quarter.

The new Panama Canal traffic over its first quarter of operations showed a significant number of VLGC vessel expanded and good of liability of slot. The initial [indiscernible] also meant that larger vessels could only transit partly late [ph].

With the container line is now amending the schedules to include Panama transit, and the [indiscernible] reduced, we expect more container lines traffic, reducing slots for VLGC traffic. The VLGC fleet utilization was at 88% in spite of more than 40 new building vessels delivered doing this calendar year-to-date.

The VLGC order book now stands at about 18% of the kind fleet where delivery is likely to slip, 15.6% of the fleet is over 20 years old, which should encouraging scrapping and help to offset fleet growth. Thus far, two VLGCs have been scrapped this year we expect more to follow.

The loyalty of this two market rate have enabled VLGCs to take advantage - to take advantage and market share from smaller size vessels, short period storage using VLGCs became economical in the weaker rate environment and optimized logistics.

This meant that the VLGC market covers became significantly wider with VLGCs now reaching final destinations, like Arabia and East Africa, Mediterranean and Indonesia and other areas where local logistic plans where the cargo can be performed instead of direct market service cover of these areas smaller LPG vessels.

The rig count in the US has rebounded from a low 404 in May 2016 to 553 and the propane inventory is holding at above 100 million barrels. The freight market has begun to rebound from multiyear lows.

To summarize, we continue to see both LPG export and demand growth which will help to absorb the fleet growth and establish LPG as a mainstream fuel and feedstock to the global energy markets and to the world economy..

Thank you, John. With this we will open up for questions. Thank you, operator.

Thank you. [Operator Instructions] Our first question is from the line of Noah. Please go ahead with your question.

Good morning. Thanks. I wanted ask a little bit, you have an interesting slide talking about how a fleet utilization staying pretty high by the rate weakness.

I mean, how do we think about, you know, obviously the arbitrage for the cargo you are carrying is gone done a lot, is that’s what driving the rates, I mean should we look at that instead, what's going to lead the rates as long as utilization is high, I mean how do you think about in relationship with those two?.

Noah, I'll get John Lycouris to give you an answer on that. But it is not only the two factors. There is both the amount available for export, the demand on the other side and of course the arbitrage. And it’s good not to forget that we really in expanding LTG business, I mean, both product availability and demand for it is expanding.

So it’s easy and in a down market which in my view is more the result of course of tonnage of trying to absorb a huge demand of deliveries in this past. That isn’t easy to forget how we are actually in an expanding business. So I'll give you John, who will give you a little more color on that..

Hi, Noah. As John said, the arbitrage of course is something that we always look at. There is a number of cargos that are available. We have been seeing supply coming out in abundance from the US and Arabian Gulf, in particular Saudi Arabia.

That has caused a substantial glut of cargos in the Far East, has reduced utilization of the fleet, as a result, because there were so much product over to the Far East in July and August and somewhat in September.

We have seen that supply kind of being drizzled away, a number of ships with in storage have gone and most of the ships have picked up speed.

So we think that it was a temporary phenomenon that was caused not only from what you mentioned, by pricing, but also by the fact that we had a number of cargoes in the water moving to the Far East and staying there and causing a little bit of a glut. And that's really where we think that the utilization went away in the shipping business..

Okay. That’s helpful. Just trying to understand as to the arbitrage is caused by the – so I don’t know what exactly that is, how to really ship it.

But can you talk a little bit about you know, we've got a few months of the Panama Canal expansion, are you seeing any changes, any expects where the trader is that you're seeing? If you could talk a little bit about that, that be helpful..

The Panama Canal, we have seen a great arbitrage being opened as a result of the Panama Canal. As you know, mostly the cargos went the low way, while they keep a good hope.

The opening on time of the Panama Canal in July offer the opportunity to ship cargoes to the Far East and that kind of connects to the previous question that you made, it supplied cargos faster than one had expected.

They cut the days by 10 days that really made a difference in pricing for those traders that wanted to get the cargo within the same month back to the Far East, which was not possible before and at a lesser cost. So it opened up a little bit of an arbitrage.

And it was very positive for keeping ships going, however, it meant that less ships were needed something cargo stood at Panama Canal..

Okay. That’s all I had. Thank you..

Yes. Thank you..

[Operator Instructions] The next question is from the line of Spiro Dounis with UBS Securities. Please state your question..

Hey. Good morning, gentlemen.

How are you?.

Hi, Spiro. Good, thank you..

Good, good.

Just maybe one to stick on rates, growth rates, just panning in our run to the fourth quarter here and I guess creating a counter seasonal pick back up, I think seasonality wise you guys mentioned that fourth quarter it shouldn’t be one of the stronger quarters, but I suppose its obviously coming off of a lows that we saw on August, September.

So I guess, talking about rates, I am not going to pin you down the rate, maybe heading into the end of the year here, back during seasonality, back during in the opening of the arbitrage trade and I guess we're still call it 12,000 a day off of cash breakeven, maybe magnitude wise here, what do you see the under the year shape now?.

That’s forward looking a guess you want? I'll give you a guess, but I think you can rely on it as much as you would if I gave you a prediction on the election result, particularly in the U.S. Senate..

I think we'll be closer to 20,000 for the last quarter, calendar quarter than for event is to '15..

Got it. Okay. I'll take it. And then second question just around M&A, we've seen a sort of come back in in its base here, I guess, just wondered from your perspective, is M&A a good thing, obviously your competitors are getting larger, should I guess do why that, maybe it’s a bad thing.

But just curios how you're viewing that?.

We view it very positively, we think it's good. We think consolidation when it makes sense for the company's and their respective balance sheet and their philosophy and their fleet, compatibility, et cetera, is a good thing for the market..

Okay. And then just last one kind of random, you mentioned floating storage and I guess, obviously that with LNG on that side of thing.

Anything about boil off rate and may be why that kind of - any real floating storage trade from emerging, is that not the same issue with LPG, is there boil off rate issue that prevents floating storage from really getting larger?.

No, there isn't, because the cargo is kept the cool by being re-circulated, there is no boil off..

Okay.

And do you have any sense of how large that trait ended up being, was it just like a handful of vessels and was it proper floating storage or it sounds more like they got corner situation and maybe what kind of force into it?.

They – it wasn't contango. So bit of it was planned to take advantage and there – as it was the slow steaming, but I don't know if it rose to it, its probably more than 20 ships at some point were storing and I wouldn't want to [Technical Difficulty] time was less than three months..

That they were employed and stored..

I don’t have exact numbers, but it has dwindled already, as contango close the number of ships storing has dwindled too..

Got it. I appreciate the color. Thanks, guys.

Thanks, Spiro..

Thank you, Spiro.

The next question is from the line of Michael Webber with Wells Fargo. Please proceed with your question..

Hey. Good morning, guys.

How are you?.

Hi, Mike..

Morning, Mike..

Just a handful of follow up question, I'll start, I guess, let [indiscernible] for the balance sheet, obviously rates are – have narrowed considerably and you are generating a bit let cash, the fact that you’ve got a pretty long runway on your debt give you a fair amount of flexibility, handle I know loaded certainly something [indiscernible] it does amortize pretty evenly over the next couple of years.

So I was just curious, how do you think about – how you think about the position you're in for the next few years be able to adequately handle that service.

And then, at what point could you realistically expect to gain traction with your bank, with your banking group rather if you did want to move around some of the payment schedule and/or any of your either covenants that were still on the situation over the next 18 months or two years?.

So Mike, you're right I mean, we think intentionally took down lower debt then people wanted us to initially, and that’s given us a lot more flexibility in that regard.

In terms of – I mean, look, in terms how we might rearrange payments or any we might do in the future what that discussion I have first and foremost with our banks and I wouldn’t want to have that in this one, given courtesy, in respect of obviously doing that directly with them.

You know, look, I think, I'd point more broadly to what we've seen among other companies and be able to drive both kind of a world unto itself, across the line competitors guess something with their banks, that’s on their blueprint. So it’s as and when we decided that were necessary know that probably provides a reasonable blueprint.

I would say as I said in my prepared comments, we've got a fair amount of headroom on our LTVs right now that’s usually, that’s usually the bit trigger on a lot of discussions we thank borrowers and our experienced shippers..

I don’t want to necessarily delve into any negotiation or anything that’s mission critical there, but just from an equity perspective, the idea behind plan, when you could actually even get traction with that dialogue, is it a scenario, I think where your plan is a big, where you need work with your LTV covenants to get the bank [indiscernible] could actually have a meaningful dialogue.

At certain point it’s too early, generate so much at the moment and I think it’s though proxy by the year something like that, right.

So what, from an equity holder perspective, how should we think about that, when can you actually realistically address that?.

Look, I'll button here for a minute because there is - I think our record shows and our experience shows, that we will be ahead of the time needed to – when it's necessary we will do it.

So, you know, we may already be having dialogue, we may be planning to have dialogue, but you can be assured that we'll be ahead of it and we'll be there if it becomes necessary to make any amendments we'll be dealing with it in those times..

It seems like just to pick up on John's comment, you don’t want no – nobody likes surprises in this world and shipping lenders are probably more surprised of us then most understandably.

So what ever you do you get out in front of it, I mean, that again, I'm not saying anything as it relate to us, but if you look the guys who've done this pretty intelligently in our industry, there is a way out in front of it. And so as John said that’s what we do if we see an issue, we're going out and front….

And of anything it’s a question you know, is it, at what point its too early or what point can you actually even have a meaningful dialogue, they are not that you would want to, but it is fun.

I would say this, its difficult given the last three or four years to take some of work forward, right, they are having more detail around that [indiscernible] dialogue, it might simply just be too early.

Around the - around the floating storage questions, Spiro, we've actually, and one that I know of, what I want to detail here that actually went into bit of LPG storage and then all their [indiscernible] asset, there was I believe 36 years old.

Along the lines I think John, your earlier your commentary around having been VLGC drafted here and thinking wrapping of pick up, to what degree do you think the optionality associated with those short term floating storage could provide a meaningful life line for some of the – that older tonnage and do you think that pushes out near by a quarter or two or more some of the time frame for those older assets exiting the global fleet..

While it’s never – you never have a fine line where you can define when they are going to leave, as much a commercial factors as they are, physical characteristics. So then - and on physical characteristics you know - you will have noted that recently the ballast water convention came at the ports.

So this is now a real - the real deadlines that we're going to be faced with and we figure is in roughly our preliminary estimates between 2017 and 2018, they'll be 17 that will be over 20 years old that will require drydocking and in ballast water treatment installations and in 2019, another 33 ship and those ships, the expenses of upgrading those ships if the market is not in stratospheric, its stratospheric, it probably will not be justified commercially..

Geographically where we do see this [indiscernible] actually going at LPG?.

Singapore and a little bit in the – in Europe, but I mean, we had ships waiting – waiting in Europe for prolonged periods of time, waiting for market price adjustments and Singapore..

Okay. All right. That’s helpful..

Thanks very much..

Thank you, Mike..

Thank you. Gentlemen, there are no additional questions at this time. I'd like to turn the floor back to you for additional remark..

Okay, well, thank you for joining us and happy winter everybody and happy hokey day and today is a day they celebrated as a national holiday because it was a day that the Greeks told the Germans or the Italian really rule, they refused to allow their truth invade in the Second World War.

So whatever that's worth, have a great day and I just want to remind everybody that we are in an industry because it's too easy to get depressed by all the short-term movements in the price and freight rates and – we are in a an industry that is expanding, we're going a very exciting cargo with great, clear air potential and the penetration of it in many market is only just beginning.

So thank you and have a great day..

Thank you. And this concludes today's conference. Thank you for you participation. You may now disconnect your lines at this time..