Board of Director’s Report


Financial Performance

Our operating revenue was US$491.8 million in FY 2017 (US$506.5 million in FY 2016).

TCE income decreased to US$335.4 million from US$406.7 million, mainly attributable to the decline in LPG spot rates and lower fleet utilisation despite an increase in fleet size. These factors resulted in a decrease in TCE income of US$47.0 million and US$24.3 million, in the VLGC and LGC segments respectively. Charter hire expenses decreased to US$68.7 million in FY 2017 (US$69.5 million in FY 2016) due to overall lower hire rates for charter-in vessels.

Other operating expenses increased to US$146.8 million in FY 2017 (US$128.8 million in FY 2016) mainly attributable to an overall larger fleet size. The Group reported a loss after tax of US$44.8 million in FY 2017 (profit after tax of US$23.6 million in FY 2016). The decrease in profit was mainly due to the decline in TCE income arising from decline in LPG spot rates, lower fleet utilisation despite an increase in fleet size, and recognition of an impairment charge of US$4.6 million on vessels that were reclassified as assets held-for-sale.

Parent Company Accounts

Vessels and related assets, as well as external debt financing, are held in subsidiary companies within the Group.

The investment holding company’s balance sheet includes primarily cash and receivables from subsidiaries; as well as shareholders’ equity, trade payables and accrued expenses.

Total assets are US$985.9 million, shareholders’ equity is US$985.7 million, and total liabilities are US$0.2 million. Income of US$9.0 million is solely from dividends from our subsidiary and expenses of US$3.2 million, which consists of overhead and other costs related to the operations of the investment holding company as a listed entity.


Safety is top priority at BW LPG and the Board is conscious that safety performance is a continuous process. The Group has active programmes in place with a focus on ‘Zero Harm’.

In 2017, the safety statistics for the Group improved with a LTIF (Lost Time Injury Frequency per million working hours) rate of 0.23 compared to a rate of 0.59 in 2016. TRCF (Total Recordable Case Frequency) in 2017 stands at a rate of 1.28 compared to a rate of 1.32 in 2016.

Corporate Governance

The Board of Directors has adopted a corporate governance policy reflective of the Group’s commitment to good governance and taking into account standards of Corporate Governance in the Norwegian Code of Practice for Corporate Governance (the Code). Deviations from the Code are addressed in the corporate governance section of this Annual Report. The Board held five meetings in 2017.


BW LPG is exposed to various market, operational, and financial risks. The most significant of these risks are set out in the IPO (Initial Public Offering) prospectus issued in November 2013. That document and other information on risks are available on the Company's website at

The Group employs an enterprisewide risk assessment process to analyse and evaluate risk exposures and to allocate appropriate resources to risk mitigation activities. The Group’s risk mitigation activities take into account the unpredictability of shipping and financial markets. The Group’s main risks relate to the inherently cyclical nature of the shipping industry and the consequent inherent volatility of financial performance; the potential for oversupply of shipping capacity to negatively impact freight rates and asset values; and the dependence on continued export volumes of relevant hydrocarbons to maintain demand for shipping.


Freight rates remain at low levels, with recovery being dependent on increasing US LPG production, continued demand from Asia (especially India and China) and geographic LPG price spreads.

Crude oil production, natural gas and thus, LPG, is expected to continue growing in the US as per the EIA’s short-term forecast for 2019. Coupled with renewed growth in other regions, the supply-demand balance will tighten in 2018 with production outweighing consumption in 2019.

Data suggests that shale production continues to increase, with the current rate of growth and level of NGLs matching or exceeding global demand. Activity levels in US crude oil production remain elevated and drilling activity is likely only to decline if WTI prices drop significantly

Going forward, we see healthy demand from PDH facilities and alkylation units. Petchem margins were well-supported throughout 2017, resulting in additional PDH plants being commissioned between 2018 and 2020. Demand for LPG is expected to remain firm from China and India.

The VLGC freight rate market has seen newbuild orders in early 2018 though this is expected to partially offset by several ships heading for recycling over the next two years. Net fleet growth, on average, is expected to be roughly 2%.

Significant Events After 31 December 2017

In January 2018, as part of the establishment of the newly formed joint venture, BW Global United LPG India Private Limited, a second VLGC, BW Boss was delivered to the joint venture.

In February 2018, the Group signed a five-year Senior Secured Term Loan of US$150 million with a syndication of five banks to replace the existing unsecured US$150 million Revolving Credit Facility due March 2018. The all-in cost for this financing is LIBOR plus 1.7% per annum.

Going Concern

In light of the Group’s liquidity position, balance sheet strength, assets, employment, and continuing cash flow from operations, the Board confirms that the going concern assumption, upon which the Group’s accounts are prepared, continues to apply.

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