BW LPG is expected to report its third consecutive loss when it reports fourth quarter 2016 results, a report from Arctic Securities says. But contracted cargoes should help the Oslo-listed gasship owner weather spot rate weakness.
Arctic's estimate for BW LPG to report a fourth quarter loss of $0.01 per share is in-line with a consensus estimate. This would follow on much deeper losses reported in the second and third quarter of 2016 of $0.41 and $0.44 per share respectively.
Arctic trimmed its earnings outlook for 2017 from breakeven to a $0.01 per loss for the full year.
Analyst Andreas Wikborg notes a surge in US LPG exports during the fourth quarter due to colder temperatures in Asia. But the increase was "from summer slumps and did not fully return to 2016 peak exports."
Vessel supply growth has slowed, but another 14 VLGCs are expected to enter the market over the first half of this year.
Wikborg says BW LPG's Contract of Affreightment (CoA) coverage should act as "a buffer in the soft spot market." Even if spot rates fell back to $10,000 per day, he says BW LPG will have an average time charter equivalent rate of $17,000 per day, implying a cash burn of $3,000 to $4,000 per day per VLGC.
