BW investment opens growth path

EPIC SUCCESS

FULLY PRESSURISED • WITH THE FINANCIAL CLOUT OF BW GROUP NOW BEHIND IT, EPIC GAS IS MAKING PLANS TO EXPAND TO TAKE ADVANTAGE OF POSITIVE FUNDAMENTALS

EPIC GAS HAS reported strong growth in the first quarter of 2019, with revenue up 3.1 per cent year-on-year at $39.6m and adjusted EBITDA ahead by 20.4 per cent at $11.0m. “The year-on-year improvement in business performance and EBITDA reflects our continued focus on quality, cost control and fleet optimisation, as well as improving underlying market fundamentals,” says CEO Charles Maltby. “The increase in our timecharter equivalent and improved fleet operational utilisation shows the underlying and growing demand for our vessels.”

During the quarter Epic timechartered in a modern 7,500-m³ vessel, the 2011-built Emmanuel. Since the end of the quarter it took the 9,500-m³ Westminster, also built in 2011, on timecharter.

More importantly, during the second quarter BW Group completed its voluntary tender offer, now controlling some 83 per cent of Epic Gas shares. With that backing behind it, Epic Gas has signed a letter of intent to buy four modern Japanese-built LPG carriers on the secondhand market for a total sum of $106.5m.

“We have commenced initiatives to capture further profitable growth, including the time charter-in of additional pressurised LPG vessels and the proposed purchase of four modern second-hand carriers. These measures are well aligned with our vision of being the leading provider of pressurised LPG shipping solutions,” adds Maltby, who as part of the takeover by BW Group has now stepped down as chairman, making way for BW’s chairman, Andreas Sohmen-Pao.

“The new initiatives position Epic Gas to benefit from the improving fundamentals of the LPG shipping market,” Maltby continues. “These include global seaborne LPG volume expected to surpass 100m tonnes in the next 18 months, with growth of 9 per cent forecast for 2020; fleet supply in the smaller vessel segment constrained for at least the next two years; a growing pool of scrapping candidates from older vessels and increased activity in the second-hand market.”

WHAT IT DOES Epic Gas currently has 40 LPG carriers in the water, all fully pressurised and ranging in size from 3,500 m³ to 11,000 m³. That fleet accounts for some 12 per cent of the global fully pressurised fleet (excluding domestic Chinese vessels) and, with only 10 new ships currently on order and at least 20 of an age that means they are likely to be candidates for demolition, Epic believes that the supply/ demand balance will be swinging significantly back into owners’ favour – something that BW Group has evidently picked up on.

While there has been continued growth in LPG imports in many Asian countries – growth that is expected to persist over the coming decade – Epic Gas has enjoyed significant demand for breakbulk operations, transferring cargoes from larger vessels for delivery into ports unable to handle them. This business took off in 2015, when it handled 108 ship-to-ship transfers, a number that increased to 413 in 2017 and 358 in 2018; it undertook 67 such transfers in the first quarter, with demand staying strong in the Caribbean and growing in the Middle East and East Africa.

Another strong point for the fully pressurised fleet is the propylene demand balance; although Chinese imports have remained fairly flat at around 3m tpa over the past three years, there is a growing deficit prompted by polypropylene demand. HCB www.epic-gas.com