BWLP

• Market Volatility & Geopolitics: The VLGC market experienced extreme volatility in H1 2026 due to the US-Iran war and the subsequent closure of the Strait of Hormuz. This shifted LPG arbitrage economics, forcing US Gulf exports to replace Middle Eastern volumes in Asia, thereby increasing ton-miles and supporting freight rates.
• Operational Execution: Fleet utilization remained high at 96%, reflecting strong operational execution despite market disruptions. The company maintained prudent downside protection through active risk management.
• Asset Management & Sales: The commercial team executed second-hand sales, including BW Elm, BW Birch, and BW Levant. The sale of BW Birch is expected to generate net proceeds of approximately $64 million. Newbuilding deliveries continue, with BWN delivered in July and BW Birch expected by mid-November.
• Portfolio Strategy: The company continues to build a robust time charter portfolio. Notably, one 2016-built dual-fuel retrofit vessel was fixed for a five-year time charter in the mid-$40,000s per day range.
• Dry Docking: A busy dry docking period occurred in Q2 with 99 days recorded. Q3 expects 58 dry dock days.
• Dividend Policy: The board declared a dividend of 95 cents per share, representing 100% payout of shipping impact, exceeding the policy's minimum 75% requirement.

• Q3 TCE Guidance: Management guides Q3 TCE income to be approximately $88,000 per day.
• Coverage Ratio: For Q3, 92% of available days are fixed. This includes 41% of available days fixed at an average rate of $44,300 per day via time-sharded coverage.
• All-in Cash Break-even: The all-in cash break-even is estimated at $24,900 per day.
• H2 2026 Coverage: Approximately 45% of the H2 2026 portfolio is secured through fixed-rate time charters and FFA hedges at averages of $44,100 and $48,000 per day, respectively.
• Revenue Expectation: The remaining fixed-rate time-chartered portfolio is expected to generate approximately $249 million in revenue during H2 2026.

The company operates two primary segments: Shipping and Trading (BW Product Services).

Shipping Segment:

• Financial Performance: Reported a Time Charter Equivalent (TCE) income of $74,000 per available day. This figure is below the guidance of $81,000 per day primarily due to negative IFRS 15 adjustments ($16.4 million) and FFA adjustments ($12 million), which equate to approximately $7,500 per available day. Underlying spot performance was stronger at $87,600 per available day excluding waiting time and FFA.
• Revenue Contribution: The shipping business generated net profit attributable to equity holders of $120 million for the quarter.

Trading Segment (BW Product Services):

• Financial Performance: Generated a strong realized trading gain of $127 million. However, the segment reported a net loss after tax of $31 million. This loss was driven by a large negative change of $145 million in the unrealized mark-to-market valuation of open cargo positions, partially offset by a $45 million increase in paper position valuations.
• Revenue Contribution: The segment contributed to the overall net profit but ended with a reported accounting loss due to non-cash valuation adjustments.

• Geopolitical Instability: The ongoing conflict in the Middle East and the closure of the Strait of Hormuz create significant uncertainty regarding trade flows, pricing, and vessel supply. Recovery of Middle Eastern exports is expected to take 12-36 months if/when the strait reopens.
• Market Volatility: Extreme volatility in VLGC markets leads to significant unrealized mark-to-market losses, as seen in the trading segment's $145 million negative adjustment. These fluctuations can distort reported quarterly results.
• Regulatory & Environmental Constraints: Declining water levels at the Panama Canal have reduced transit capacity, increasing congestion and costs (auction fees up to $5 million), which forces rerouting via the Cape of Good Hope and consumes additional shipping capacity.
• Operational Risks: High activity in dry docking and fleet renewal presents operational complexities. Additionally, reliance on new export infrastructure expansion carries execution risks.

Q: Why are Q3 fixed rates significantly lower than current exceptional spot rates, and what is the open exposure for Q4 and 2027?

A: CEO Kristian Sorensen explained that while spot rates are high, the company maintains a strategy of securing time charters for downside protection in a volatile market. For Q3, only 41% of capacity is fixed at $44,300/day, leaving considerable exposure to the spot market. Looking ahead to 2027, 36% is currently fixed at $43,500/day, with plans to increase this percentage if attractive rates are available.

Q: What drove the significant increase in General and Administrative (G&A) expenses this quarter?

A: CFO Samantha Xu confirmed that the G&A increase correlates directly with compensation related to the positive trading results achieved by the product services division. She emphasized that the trading unit delivered a strong commercial result despite market turbulence, justifying the associated cost increases.

Q: How would the market react if the Strait of Hormuz reopened while the Panama Canal remained constrained?

A: Mr. Sorensen noted that initial reopening might pressure US Gulf spot rates due to narrowed US-Far East arbitrage. However, he argued that US LPG volumes must eventually flow to Asia as other markets cannot absorb them. He expects medium-term dynamics to balance out as US prices remain competitive, ensuring continued long-haul trade flows similar to previous cycles.

Q: What are the prospects for scaling up operations in India given current disruptions?

A: Mr. Sorensen stated that India remains a critical part of their business model. While they may adjust vessel numbers temporarily, they intend to maintain their presence. He referenced past actions where older vessels were transferred to their India JV, suggesting similar flexibility could be applied in the future based on market conditions.