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Dorian LPG LTD  (NYSE:LPG)
Q3 2019 Earnings Conference Call
Feb. 04, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Dorian LPG Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Additionally, a live audio webcast of today's conference call is available on Dorian LPG's website, which is www.dorianlpg.com.

I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.

Theodore Young -- Chief Financial Officer

Thank you, Christine, and good morning, everyone, and thank you for joining us for our third quarter 2019 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Ltd.; and John Lycouris, Chief Executive Officer of Dorian LPG (USA). As a reminder, this conference call webcast and a replay of this call will be available through February 11th, 2019.

Many of our remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe or similar indications of future expectations. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove to be incorrect, actual results may vary materially from those we express today.

Additionally, let me refer you to our unaudited results for the period ended December 31, 2018, that were filed this morning on Form 10-Q, where you will find risk factors that could cause actual results to differ materially from those forward-looking statements.

With that, I'll turn it -- turn the call over to John Hadjipateras.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Welcome from sunny Stamford, Connecticut. During the quarter, the Baltic rate reached $48.286 per ton in October, the highest level since February 2016. Volumes from the U.S. were unchanged from the previous quarter. AG volumes fell by $700,000 (ph) and yet the West premium was eliminated and at times negative, as owners and traders ballasted their ships to the West.

With the November propane-naphtha spread at $58 versus $13 in 2017, 10 cargoes were shipped to Europe in October-November 2018, versus four in October-November 2017 and freight rates to Europe traded at a premium to both US East and AG East rates. Ships returning from the shorter trips to Europe, the wild gyration and fall in oil prices, Mont Belvieu prices in backwardation, U.S. inventories higher in 2018 and Far East buyers holding off in December and January, all took their toll, pressing the Baltic to nearly $25 last week. We cannot guess when this will reverse, but the paper market is forecasting a recovery in March.

I think it's perhaps useful at this time to briefly review some of the fundamentals of the VLGC trade. In the period 2013 to 2017, total seaborne trade in LPG increased more than 50% from 63 million tons per annum to 92.5 million tonnes per annum and U.S. exports increased by more than 200%. New (ph) fractionation is planned in the U.S. through 2020, amounts to 1.6 million barrels a day and export capacity through 2020 is expected to increase by 11 to VLGC 12 VLGC cargoes per month.

China's imports between 2013 and 2017 increased from 4.2 million tons per annum to 18.3 million tons per annum. Three new PDH plants are scheduled for 2019, with total 2 million metric tons per annum capacity, a further three are scheduled for 2020 and two in '21 and two in '22. Plant expansions of Korea's cracking capacity is expected to double demand there over 10 years. Indian government forecasts demand for LPG to grow 11% to 12% per annum over the next five years. LPG is a clean and portable fuel. It produces five times less NOx than diesel. It is non-toxic and non-corrosive. Up to 3.7 million deaths annually, according to the WLPGA are attributed to ambient air pollution. LPG can and should be making inroads in transport, residential and electricity generation.

The world VLGC fleet now comprises 270 ships, of these 24 are over 25 years old and an additional eight are aged between 20 and 24 years. There are 46 ships on order. We have been asked to comment on the rationale for ordering new ships when the spot market is below levels that provide adequate, let alone attractive returns. We haven't placed any orders, so I can only speculate as what motivates others. Some of the orders were placed by traders at the time when the proposed Dorian BW merger was widely discussed in the press. Most others are either project-related orders by end users or as in the case of several jump in these owners as replacement of older ships in their fleets. Some anticipated higher newbuilding prices.

We would prefer to see -- not to see any orders, but we also believe the trade volume is increasing and will absorb them. The average age of the world fleet is 9.4 years. The average age of our fleet is 4.6 years. That age advantage should result in customer preference and it comes with significant fuel efficiencies, which translate into higher earnings. Furthermore, we have planned to equip 10 ships with exhaust gas cleaning systems, prior to the implementation of IMO 2020. John Lycouris will give you some details about this, as well as our thoughts on LPG as fuel.

Finally, before putting Ted on, I would like to point out that despite a very low market during the first part of the nine months of our current financial year, our TCE improved to $22,688 from $21,199 for the same period last year, and our balance sheet remains strong. On an annual basis, we repaid $64 million in principal. Our debt is 90% hedged and our effective interest rate is less than 4.5% per annum. We have the lowest debt to new building parity value and debt to total cap among our quoted peers as well as the youngest and most efficient fleet.

Over to you, Ted.

Theodore Young -- Chief Financial Officer

Thanks, John. Beginning with our chartering results, we achieved a total utilization of 90% for the quarter, with Time Charter Equivalent revenue, which we define as TCE revenue over operating days of $30,108, yielding a utilization adjusted TCE of $27,101, that again is TCE over available days. Our spot TCE for the quarter was $30,139, with a utilization of 88.4%. Daily OpEx for the quarter was $8,287, which compared favorably to last quarter's $8,585, reflecting a fairly typical operating environment. The quarter-over-quarter trend is favorable and our technical management team continues to keep a sharp eye on cost.

Total G&A for the quarter was $5.2 million and cash G&A, i.e., G&A excluding non-cash compensation expense was about $4 million. This amount does exclude the professional and legal fees related to BW LPG's unsolicited proposal, which we have separately reported. Our reported EBITDA for the quarter was $27.2 million, but if we strip out the professional fees related to the BW situation, which we certainly don't consider to be ordinary course, our actual EBITDA for the quarter would have been $35 million, which we believe is a reasonable representation of the earnings power of our business in a rate environment that is still somewhat below the long-term average rate.

We look at cash interest expense as the some of the line items of interest expense excluding deferred financing fees and other loan fees, and realized gain loss on derivatives. On that basis, total cash interest expense for the quarter was $8.1 million, which was down from the prior quarter, reflecting our continued strong principal amortization. We do continue to benefit from our hedging policy and the favorable pricing of our Japanese financings, leaving us with a current interest cost fixed hedged in a small floating piece of 4.3%.

Excluding costs related to BW proposal, we continue to maintain cash cost per day of approximately $23,000. In addition to the seven scrubbers previously announced, we have committed to three additional hybrid scrubbers for $4.3 million, not including installation costs. As we have some flexibility on timing the installation of our scrubbers, we may elect to finance these investments from cash on hand, though we do continue to pursue a range of debt financing options. Our liquidity remains good. And following the distribution from the Helios Pool in January, our current free cash position is approximately $46 million.

With that, I'll pass it over to John Lycouris.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Thank you, Ted. With IMO 2020, 0.5% sulphur cap for Marine fuel is coming to effect in less than 11 months, we are beginning to see fuel markets develop pricing for compliant fuel, which is critical to the payback economics for scrubber investments. The most recent trades are supportive of a healthy difference between compliant fuel and heavy fuel, which our scrubber equipped ships will burn.

The recent trades were two large of 10 December Mini Singapore FOB Marine Fuel of 0.5% futures contracts, which traded at $500 per metric ton and $517 per metric ton. The mini refers to 100 metric tons instead of 1000. The December Mini Singapore fuel oil for 380 fuel oil, futures contract traded at same time at $320 per metric ton. That's with a premium of more than $180 per ton for that 0.5% sulphur fuel versus the current market trades for the 3.5% heavy marine fuel oil, we would expect to recoup our investment in approximately 18 months. Although the market and the demand for low-sulfur fuels is still developing, we believe that the investment decision is already well supported. We will continue to monitor developments, pricing and then the reliability of the compliant fuel in the next few months. We feel we should also explain this misconception that exhaust gas cleaning systems move the pollution from the air into the sea. The scrubber washwater removes and converts sulfuroxides from the exhaust gases, so that they're discharged in the wash water as harmless sulphate. Besides sodium and chloride, sulphate is the most common ion in the seawater. Even if all the sulfur in the world were to be scrubbed , the increase in the ocean sulphate would be tiny.

By the way, scrubber wash water discharges are also continuously monitored by the exhaust gas cleaning equipments, as so the emissions and both are subject to straight discharge limits by the IMO and the Port States. The waste produced from the open and closed loop systems is segregated on board and must be landed to shore side reception facilities. Also, low-sulfur fuels and distillate have been praised, but these fuels by their very chemical composition will increasingly produce toxicity in their emissions, whereas scrubbed emissions will be a lot better. The Singapore MPA decision to ban open-loop scrubbers was not supported by any scientific evidence and it did not go any maritime industry consultation as far as we have seen.

At Dorian LPG, we have designed and diligently prepared our fleet with a view to retrofitting either a scrubber or alternative fuel for the vessels. We have been operating two scrubbers in our fleet since 2015, gaining experience and the knowledge base related to scrubber equipment, which combined with the scrubber readiness of our vessels expected to result in the retrofitting during calendar 2019 and 2020 of the 10 hybrid exhaust gas cleaning systems we have recently contracted.

Given a project of $150 to $200 per metric ton price differential between heavy sulfur fuel oil and the compliant 0.5% sulfur marine fuel, we expect to recoup the CapEx for the retrofitting of the hybrid scrubber systems onto our vessels within 15 months to 24 months. We also consider that the LPG as fuel upgrade to some of our vessels will be possible in 2020, when the first LPG engines are to be built and retrofitting becomes possible. However, the investment required for this option at the current pricing is significant, perhaps up to three times that of a scrubber and we plan to closely monitor the evolution into the next year.

Another important aspect of the LPG as fuel development is very much dependent on future LPG pricing, when compared with 0.5% compliant fuel pricing and/or the scrubber solution viability in 2020 and thereafter. We do remain hopeful, however, that LPG as fuel will become an economically viable solution, given its lower emissions and the upcoming environmental regulations past 2020. Thank you.

And with that, I will pass it over to John Hadjipateras.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Thank you, John and Ted. Christine, we can open for questions now. Thank you.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Thank you. Our first question comes from the line of Noah Parquette with J. P. Morgan. Please proceed with your question.

Noah Parquette -- J. P. Morgan -- Analyst

Thanks, good morning, afternoon. I wanted to ask, I think a couple quarters ago, we talked a little bit about the Panama Canal increasing its tolls for LPG ships. I just wanted to follow up on that and just kind of see if there has been any effect in the usage of the Panama Canal by VLGCs at all or has that affected, thinking that -- wanted to hear what you guys think.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Yeah, thank you, Noah. Why don't you -- John Lycouris will answer you.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Noah, hi. Yes. The increase in tolls has been taken in without a lot of heavy concern. There have been some instances where ships have been waiting to get their slots rather than go sooner, but otherwise, we do see that the traffic through the Neo Panama canal is very strong and we still see more than 30 ships every day going around -- I mean, sorry, not every day, every month going back and forth through the Panama Canal, LPG ships that is.

Noah Parquette -- J. P. Morgan -- Analyst

Okay. And then just a follow-up on the scrubbers, the news that some of the ports around the world are banning open loop scrubbers. I mean, I know that ships are not spending a lot of time burning fuel in ports, but can you give us an idea of like how that impacts the economics of the scrubbers or how many less days perhaps that you'd be burning the high-sulfur fuel? Thanks.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Yeah, John would give you some detail, but as far as we're concerned, this ban doesn't affect us, because all the scrubbers that we're fitting are hybrid and therefore -- so they can be closed loop. But we actually believe that the open loop solution is viable and John will tell you why.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Noah, the open-loop scrubber is good for the open sea and it does not reduce the sulfur content enough to the 0.1% which is applicable in many ports. As a result, many scrubbers are called VGP compliant and have the ability to reduce that affluent and emission to 0.1% and also have effluent which is compliant with the port by using caustic soda. That makes sure that the water that you put out and the emission that you put out are compliant. So there are -- and we do use in the United States a scrubber which uses caustic soda and therefore neutralizes all the emissions and comes out completely clean. So that's why we thought that the jump of the Singapore port authority was a little bit far ahead of itself. But that's --

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Uncharacteristically on the studies, we would say.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Yes.

Noah Parquette -- J. P. Morgan -- Analyst

Yeah. And do you think, I mean, there's definitely been momentum for the kind of -- called the anti-scrubber crowd, do you feel like there'll be some organizational (Technical Difficulty) on using scrubbers to try to kind of defend the science or do you see any of that sort of momentum building on that front?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

We kind of think that the anti-scrubber thing is self-defeating, but -- and I think -- and the famous exchange between Patty Rogers and Bob Burke, Bob Burke told Patty Rogers, you stick with it, we need the differentiation. So I'm not sure it's in our interest to convince everybody to put scrubbers in.

Noah Parquette -- J. P. Morgan -- Analyst

We can all have different opinions you're saying?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Yeah.

Noah Parquette -- J. P. Morgan -- Analyst

All right. Okay, that's all I have. Thank you.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Thanks, Noah.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Thanks, Noah.

Operator

(Operator Instructions) Our next question comes from the line of James Jang with Maxim. Please proceed with your question.

James Jang -- Maxim Group -- Analyst

Hey, good morning, guys.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Hey, James.

James Jang -- Maxim Group -- Analyst

So, do you have any more insights into what's going on with the Mariner East pipeline? I think Sonoco's Eastmans are -- I think they're expired now and then there were more sinkholes. I mean how does -- I mean have you heard anything more about what's going on there and potential impact for you guys for the rest of this year, if those pipelines are shut down.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Yeah. Yes. Again, John will tell you. We'd know as much as the industry knows, but maybe we're closer to it, because we have been directly -- they have been our customers and we've been talking to them. He can give you a little bit detail.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

James, as you know, the Mariner East 1 is the ethane pipeline and does not really affect us. What we are more happy about is the Mariner East 2, which is the one that brings in propane into Marcus Hook in Philadelphia. So we are happy to tell you that, that pipeline is operational and will start loading its first ship this month and we will be probably bringing in quite a lot of propane from -- the area -- from the eastern area of the United States. So this is good news for us. The Mariner East 1, which is the ethane that you're referring to, I'm sure that it will take some time before it is restored (ph), those sink holes. And last time -- last year this time, in March of 2018, we had the same problems and they managed to fix it up after a couple of months. I hope that they manage to do the same this year with Mariner East 1, because it's going to cause a huge congestion in Houston with -- and supply stretch on the ethane side of the business, which is not good news for a lot of crackers that are starting up at the same time in Houston.

James Jang -- Maxim Group -- Analyst

Okay. So, do you guys -- it doesn't seem like it's a big risk possible, because what's going on in Mariner East 1 and the protest, you don't think that's going to lead to anything on Mariner East 2?

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

No, no, those are different pipes. Yeah.

James Jang -- Maxim Group -- Analyst

Okay, great. And the last thing I have is, the order book for the VLGC is a little robust this year and next year. In your guesstimation, I mean, do you believe all these vessels will be delivered?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

I think it's hard to say that they will not be because they are mostly in shipyards that have a record of building and reliability. But some of the orders that are included in the order book are for ethane carriers and at least six of those were associated with the Delos deal which you may know about and which we know now has been scuppered. So those ships might be -- might -- something might happen with them, but at the moment, I will consider them questionable, certainly not in the delivery slots that they've been -- that they have been scheduled and have been shown until now.

James Jang -- Maxim Group -- Analyst

Okay, great. Thanks for the color, guys. I'll jump off now.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Thanks.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Thank you, James.

Operator

Our next question comes from the line of Michael Webber with Wells Fargo. Please proceed with your question.

Greg Wasikowski -- Wells Fargo -- Analyst

Hey, good morning, guys. This is Greg on for Mike.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Hey, Greg.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Hi, Greg.

Greg Wasikowski -- Wells Fargo -- Analyst

Hey. So just following up on the scrubbers, they are hybrid, can you remind us on what the transition is like for them, is it quick and easy or is there additional dry-docking periods there?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

You mean to retrofit the scrubber?

Greg Wasikowski -- Wells Fargo -- Analyst

No, to switch them over from open loop to closed loop?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Oh, no, that's --

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Well, it would require additional pumps, additional tank space and it is --

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

No, no, once it's hybrid, it's hybrid.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

One it's hybrid, it's hybrid.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

He's talking operationally, during the time -- during.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Oh, if it is operational --

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

What -- yeah, if we go from closed to open --

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Yes.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

So just switch the --

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Yes, so I thought he meant the installation. That you mean installation or --

Greg Wasikowski -- Wells Fargo -- Analyst

Yes, just to clarify if the regulatory bans continue and you decide it's in the best economic interest to switch over the closed-loop operationally, what does that process look like? You have to bring the ship in for further days off or if is it something that you can just do onboard?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

No, I think the ship can operate for all of the time or part of the time. Once it's hybrid, it's hybrid. You can do a closed or open, this is by definition. This is it. There are no extra installation or modification. It's just operationally, it's just a flick of a switch almost.

Greg Wasikowski -- Wells Fargo -- Analyst

Okay, cool, helpful. And then thinking about the comparison between the scrubbers and LPG fuel, when you think about it long-term, you could see profitability in the scrubbers maybe changing from you know after the 15-to 24-month period, whereas LPG fuel might be more profitable over the long term. So how do you weigh that decision thinking about in very much a long-term way?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Well, it depends on the pricing and it depends on visibility. If we would like to think that LPG will be competitive, so as to gain a bigger market share as to become more -- to penetrate more markets like I've said in my remarks, where there's clean air around -- where people desperately needing a cleaner air which -- and including LPG as fuel for ships, especially LPG ships. But at the moment, from what we know and we cannot justify making the investment, which is between 2.5 and 3 times, 3 times the investment of a scrubber to making the investment into the LPG to do then an LPG conversion. We think like John said that over the next 12 months, I mean, we'll keep watching and over the next 12, 24 months, we'll see how it goes, and if we can, we will. I mean, it is also a likelihood that the price will come down. The price of conversion, once it becomes that people started doing it on a more regular basis. In fact, on the scrubbers, as you know we have scrubbers on our -- on two of our ships which we put in at the new building stage, which is nearly five years ago now. And I think that the price now in the scrubbers today is 50% less than we paid for when we put them. Isn't that right, John?

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Yes, that's right.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

So we would think that perhaps some things, some similar development will happen with the LPG as fuel -- LPG conversion of engines. Yeah.

Greg Wasikowski -- Wells Fargo -- Analyst

Yeah, that makes sense. Thinking like super long term if that -- if we are in 2021 or 2022, so you even already got your payback on your scrubbers, but the spread starts to narrow and profitability starts to go down on the scrubbers. And like you said, the LPG fuel maybe gets more cheaper in the future. Is it something that we could see that you could go for an LPG fuel conversion on the ships that have scrubbers now?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

We could, we could.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Yes.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Yes, absolutely.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Absolutely, and not only that because the generator engines of the ships are not -- cannot be converted to LPG at this stage, nor have any engine been built to burn LPG as of this minute -- at this time or plan for building -- they're still working on building engines, auxiliary engines like that. So you would be able to use the scrubber for the auxiliary engines, while in port. So it would be useful to still have a scrubber on board, even though you use LPG. And remember if you don't have enough LPG to burn on board, you would be able to switch into the compliant fuel of the future or into the heavy fuel oil if you have a scrubber. So you have this dual fuel ability in the future, that is also very advantageous.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Tri-fuel.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Tri-fuel.

Greg Wasikowski -- Wells Fargo -- Analyst

Got it.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

You'll have compliant, heavy and LPG.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Tri-fuel. You will be able to do anything. So that gives you the full flexibility for the future. And besides, we think that LPG in the engine would reduce maintenance, it's a cleaner burning fuel and it is very important to understand that.

Greg Wasikowski -- Wells Fargo -- Analyst

Got you, OK, cool, very helpful. Thanks for your time, guys.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Thanks. Greg.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Thanks, bye.

Operator

Our next question comes from the line of Eirik Haavaldsen with Pareto Securities. Please proceed with your question.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Hi. I just wanted to ask you about your -- those two ships you have with scrubbers. Can you share any data on how those two have outperformed over the past -- well, since, delivery really?

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Well, the thing is that we have been able to obtain employment that is superior to what we would have been able to obtain otherwise in time charter terms and we also have been able to use the heavy fuel oil into all ports into the North Sea and into the American emission control area. So we do get a good benefit with these systems already. However out at the open sea, we don't need to use them at this time, but we will be able to use them in the future. So yes, we did have some benefit, not as it would be in 2020 onwards.

Eirik Haavaldsen -- Pareto Securities -- Analyst

And have you -- obviously, but have you started to initiate discussions with potential charters, which kind of incorporate that potential scrubber premium in 2020, so we can see or you can know what was your share of that premium will be?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

We have fixed the ship already, which we reckon has an element of a premium in it, but it's difficult to say what was the share is. I can't speak, because it's a long-term charter and it has -- and you have to make assumptions about the price and all. But the very fact that you can get a piece of business because of it is significant.

And going back to your original about our two existing ships, so we were not -- we were not able to get a charter that will pay sufficiently to what we thought was a fair kind of premium. So we kept them -- we kept the ships parked. And you know we were perfectly happy because of the benefit and knew where completely to us. I think that the -- sometimes, you see that the straight calculation where a charter that helps to pay for a scrubber and then claims 50% of the benefit or something like that. We haven't -- we don't expect to be in that -- to be doing that, although if we see something, that would work, we would address it. But at the moment, we're quite content to take -- to make the investment and see the return either by way of directly benefiting in the spot market from the lower cost or depending on -- getting it back on increased premium on a time charter, which is kind of difficult to identify exactly what the premium is.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Okay. And then another question then maybe for Ted. You mentioned that you had received some of -- some full payment recently about $12 million or something, but the buildup last year or this year has been rather significant, still in working capital. Is this something we should expect to be reversed completely over the course of the next couple of quarters or --?

Theodore Young -- Chief Financial Officer

I hope not, because that would mean the rates are falling off. Most of the increase that you saw particularly over the last quarter, which was, I don't know, I think $14 million of prime reserves, it was really -- it's a function of increased profits in the pool. So hopefully, we won't see the -- we won't see that tail off too much. I think it's worth pointing out because of -- the way the pool works, it definitely -- there certainly is a working capital effect, but it's not the way you would typically think about it, if it were a fully owned entity. In other words, cash only flows one way, it only flows from the pool to us. It only flows from the pool to us. So as a result, we -- when you see that there was a cash effective consumption because of receivables, that's part of -- that is truly part of the effect of reconciling net income to cash. I guess as it always is, but again, it's not as if we're forwarding money to the pool to help finance that receivable. So the pool maintains its own levels of working capital. So what's dividended out are the -- are truly the profits.

Eirik Haavaldsen -- Pareto Securities -- Analyst

Okay, that's great. Thank you.

Theodore Young -- Chief Financial Officer

Yeah.

Operator

We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Thanks, Christine. I want to thank everybody, and before closing down, John Lycouris wants to say something about the numbers that he gave you.

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Because I saw there was a lot of interest in scrubbers, I just wanted to mention the fact that American Bureau of Shipping has given us their latest research on the matter and they told us that the adoption trend in scrubbers has reached above 2,000 vessels as of the end of last year. So we are seeing very strong trends here for adopting scrubbers and we have seen a number of visible and large companies coming in favor of scrubbers. And I just wanted to give you that statistic, because it is important to share. Thank you very much. John?

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

Thanks to all.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Duration: 37 minutes

Call participants:

Theodore Young -- Chief Financial Officer

John Hadjipateras -- Chairman of the Board, President & Chief Executive Officer

John Lycouris -- Chief Executive Officer, Dorian LPG (USA) LLC

Noah Parquette -- J. P. Morgan -- Analyst

James Jang -- Maxim Group -- Analyst

Greg Wasikowski -- Wells Fargo -- Analyst

Eirik Haavaldsen -- Pareto Securities -- Analyst

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