Q2 2022 Analysis – Continued growth in a volatile market

Q2 2022 has been a busy quarter with some notable transactions. We concluded the sale and delivery of 2007-built Very Large Gas Carrier (VLGC) BW Liberty for further trading. We completed a second tranche sale of our India subsidiary which takes our ownership to 52%, and we entered into an agreement to acquire the LPG trading operations from Vilma Oil to expand our Product Services division. Q2 is also the first quarter where all 15 LPG-powered VLGCs are on water serving customers.

Playing Our Part in Troubled Times

The world is facing great geopolitical instability, and this is having a significant impact on the energy and shipping markets. Energy security is a growing concern, and at BW LPG, we want to play our part. LPG can contribute to the energy solution. LPG is versatile – there are global suppliers and a large fleet of vessels to import LPG, offering additional and attractive energy security compared to solutions that require costly investments in infrastructure and pipelines.

LPG as a fuel is cleaner than most other alternatives. These attributes support further investments and growth in LPG exports, imports and thus transportation. It can also potentially be a convenient substitute in industrial processes given the current elevated prices on natural gas. LPG also continues to be highly competitive from a price perspective – LNG is six times more expensive than LPG in Europe. Given the increasing importance of LPG as an energy source, we are committed to investing further in the LPG value chain. As part of this strategy, we are happy to announce the expansion of our Product Services through the acquisition of LPG trading operations from Vilma.

Expanding Product Services to Enhance Our Shipping Business

In addition to servicing our clients, Product Services has contributed to high fleet utilisation, increased market information, additional revenues and growth opportunities. BW LPG entered into an agreement on 1 August 2022 to acquire the LPG trading operations from Vilma Oil. Vilma Oil has a strong track record and credible reputation in the LPG community and will bring increased agility and important insight into a volatile market and enhance our core shipping business. The transaction also adds five additional time-charter in VLGCs, including one newbuild into our fleet. BW LPG will offer customers a global presence supported by teams in both Europe and Asia. The combined team traded over four million tons of physical LPG in 2021, and there is capacity to grow further. We also see tremendous growth opportunities ahead along the LPG value chain allowing us to generate even greater value for our shareholders. The acquisition is subject to approval from the Spanish regulated authorities, and we expect the transaction to close by the end of Q4 this year.

Strategic Highlights

We will continue to deliver on our stated strategy of fleet renewal and further expansion into the LPG value chain. We continue to have ample available liquidity of US$360 million and a record low net leverage of 25%. Against the uncertainties in global energy market and concerning order book, we remain optimistic for 2023, but we are also prepared for continued volatility. In terms of outlook, LPG as a byproduct of upstream production is highly dependent on the oil and gas outlook. If oil and gas prices are sustained high levels, we are well positioned to benefit from another strong and reduced cycle ahead. If the global economy experiences further turbulence and commodity price retreat, however, our balanced fleet and trading portfolio, ample liquidity and strong balance sheet, we are prepared to maneuver through those challenges.

Financial Highlights

In Q2, with a net leverage of 25%, we have returned a dividend pay-out that is 75% of Net Profit After Tax, or US$0.20 per share. This amounts to a total of US$27 million. We reported a rate of US$35,400 per calendar day. We generated a net profit after tax of US$39 million, with an earnings per share of US$0.26. At the end of June, our available liquidity was US$360 million, with a continued low net leverage ratio of 25%. We also prepaid US$268 million of debt and returned US$42 million in dividends to our shareholders. With a net leverage ratio of 25% at the end of Q2, we have declared an interim dividend of US$0.20 per share for the second quarter which translates to a pay-out ratio of 75% of NPAT.

For 2022, we expect our operating cash breakeven for our total fleet, including our chartered-in vessels, to be at US$22,300 per day. With a cash balance of US$166 million, and US$194 million in undrawn revolving credit facilities, we ended the quarter with US$360 million of available liquidity and a net debt of US$487 million.

Technical Highlights

We remain comfortable with our current fleet profile, which should allow us to maneuver through all kinds of market conditions ahead. Our 15 upgraded LPG propulsion are currently enjoying huge savings by burning LPG instead of less environmentally friendly fuel oil. Today the savings are about US$8,000 per day while sailing on LPG. With all 15 LPG-powered VLGCs now on water, we have been reaping the rewards from our ambitious retrofitting project. We supplied close to 10,000 metric tons of LPG as fuel, saving about US$5.3 million in fuel costs for the fleet. We have also reduced carbon emissions by just over 15% by using LPG as fuel. Our LPG deck tanks complement existing fuel oil bunker capacities and provide us with full fuel and cargo flexibility during operations. We have set up LPG bunker fuel contracts with new and existing partners in major loading ports.

Market Outlook

We remain positive for the rest of 2022 and next year. There are several encouraging developments. The two main export hubs continue to increase their exports with U.S. leading the way with record LPG export. Middle East export is up significantly in line with OPEC+ phasing out its existing oil production cuts. For the coming winter, we expect strong winter heating demand and retail demand to switch more to the clean and cheap LPG compared to expensive natural gas and oil. Today, LNG cost is about US$500 in oil price equivalent and oil price is today around US$100. LPG is trading at 20% discount to oil. So, LPG cost is only US$80 in oil price equivalent. So far in Q3, we have fixed approximately 84% of our available fleet days at an average rate of approximately US$36,000 per day on a discharge-to-discharge basis.

Looking into 2023, we maintain a more positive outlook despite the VLGC newbuild order book. The U.S. midstream operators have announced plans 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, should sanctions be lifted. Iran alone can give employment to about 150 VLGCs per year. On the demand side, we have been concerned over the current lockdown in China. However, statistics show that LPG imports have been relatively stable compared to Q2 last year, and there could also be another upside potential when China reopens with several PDH plants which are still scheduled to come on stream.

Compared to same period in 2021, North America and Middle East exports have grown 6% and 16% respectively. For the same period, European exports were down 13% and Russia exports declined substantially by 33%. Indian imports grew strongly and was up 16% year-over-year, which is very positive for our BW LPG India business. China remains the biggest importer of seaborne LPG and imports were stable. European imports were also up by a significant 15% – reflecting the energy situation for the region.

U.S. LPG exports are fundamental to a well-balanced LPG shipping market. With Europe looking to become less dependent on Russian gas, seaborne LPG export from the U.S. plays an important part in bridging that gap. EIA had revised its expectations upwards for 2022, forecasting a 10% net export growth its last estimation of 5.4%. The forecast for 2023 is unchanged with an 8.8% growth.


As the world’s leading owner and operator of LPG carriers with five decades of operating experience, we champion competitive, sustainable solutions to secure enduring value for our society and stakeholders. 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.

Image of BW Frigg, courtesy of AB Kamalpreet Singh

Read More

– Read about LPG and its benefits at The World LPG Association.
– Read about the benefits of LPG propulsion.
– Read about why retrofitting of vessels makes sense.
– Read about our Sustainability Approach.

Topics: Market Outlook, LPG market, liquefied petroleum gas trends, emissions reduction, carbon reduction, decarbonization, ESG, Sustainability, environmental protection, technology, LPG