Staying on Course Chairman and CEO’s Review

2017 proved to be a test of our strategy and our business plans amidst a challenging year for the LPG segment. We saw strong headwinds from ship oversupply continuing to blow. Spot rates for Very Large Gas Carriers (VLGCs) were at their lowest since 2009, continuing a weak trend from 2016. Tighter Far East-US LPG price spreads contributed to cargo cancellations from the US, and the OPEC production cuts also meant lower Middle East volumes.

Against this backdrop, our financial returns were negatively impacted, and we ended the year with a loss of US$44.8 million. We nevertheless built better momentum in 2017. We strengthened our capital position through competitive financing and strategic vessel divestments, whilst also renewing our fleet. Following our acquisition of Aurora LPG at the end of 2016, we completed the integration of nine VLGCs vessels into our wider fleet in January, and successfully refinanced six vessels at competitive terms. We also made some opportunistic divestments of older vessels when the prices were right. Five vessels were sold for total sales proceeds of US$185 million. We brought total costs below 2016 levels with focus on our OPEX, bunkering and drydocks costs.

New regulatory requirements, political uncertainties and unpredictable economic developments will have an influence on our long-term strategy. While there has been little exuberance in the LPG segment in 2017, the fundamentals for LPG trade remain reasonable, and we should start to see renewed momentum in 2018. The supply overhang is expected to ease, especially with possible acceleration in recycling of older vessels with an eye on upcoming environmental regulations, and the global fleet growth should stabilise. The strengthening of VLGC demand should provide some relief to freight rates. Demand is expected to increase in Asia, led by India and China.

Positioning ourselves for the future, we established a joint venture, to Own and operate a fleet of VLGCs for the transportation of LPG to India. We sold two of our vessels, BW Energy and BW Boss, to the joint venture, as part of this agreement. This joint venture allows us to create a strong base in India to serve customers in the region. We have also enhanced our customer coverage model through the establishment of a commercial presence in Oslo and a technical office in Houston. The establishment of these offices should enhance the quality of our service, improve our ability to capture growth opportunities and differentiate us from our competitors.

Leadership in sustainability remained an important part of our strategy. In 2017, we strengthened our safety results through our Zero Harm approach. Our Lost Time Injury Frequency (LTIF) stands at 0.23 and this is below the industry baseline of 0.4. We continue to interact directly with customers for optimal operational solutions, maintain regular feedback with them and adopt Zero Harm principles across all our operational activities. We also updated our Vision, Mission and Values (VMV) in 2017 to align goals and behaviours throughout our shipboard and shorebased organisation. Built on the original company values, the new “VMV” refreshes the organisation’s purpose and introduces the concept of striving to be “Best on Water”.

We aim to be “Best on Water”, delivering clean energy for our customers and for a sustainable future, while investing wisely through market cycles.

The ongoing digitalisation of society has been impacting the way we conduct business. Mobile solutions and ubiquitous internet access provide opportunities for us to interact with customers and suppliers in new ways, as well as making operations more efficient. To ensure that we are at the forefront of this development, we embarked in 2017 on a journey to enhance the business as a digital enterprise, where all information is integrated and easily accessible, with the intention to drive data-driven decision-making and achieve cost efficiencies.

With our strong balance sheet, customer focus, cost consciousness and stability in operations, we believe BW LPG is well positioned to achieve its targets for 2018. We would like to thank our employees and stakeholders for their important contributions.

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Andreas Sohmen-Pao

Chairman of the Board

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Martin Ackermann

Chief Executive Officer

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Martin Ackermann

Chief Executive Officer

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