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Dorian LPG LTD (NYSE:LPG)
Q1 2021 Earnings Call
Aug 4, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Dorian LPG First Quarter 2021 Earnings Conference Call. [Operator Instructions] 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 B. Young -- Chief Financial Officer

Thank you, Shimoli. Good morning, everyone, and thank you all for joining us for our first quarter 2021 results conference call. With me today are John Hadjipateras, Chairman, President and CEO of Dorian LPG Limited; John Lycouris, Chief Executive of Dorian LPG (USA); and Tim Hansen, our Chief Commercial Officer.

As a reminder, this conference call webcast and a replay of this call will be available through August 11, 2020. 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 June 30, 2020 that were filed this morning on Form 10-Q. In addition, please refer to our previous filings on Form 10-K where you'll find risk factors that could cause actual results to differ materially from those forward-looking statements.

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

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Thank you for joining us today. It has been a challenging quarter, particularly in our mission to keep more than 500 seafarers safe while facilitating crew movements whenever and wherever possible. With COVID conditions and regulations fluctuating around the world, we have taken advantage of windows to move people off and their replacements on to our ships observing the protocols which are mandated and more when considered necessary or desirable.

Our legacy has held the seafarer the core of our business. Indeed, we see seafarers as essential to the world economy. But during this pandemic, many of them have had to make sacrifices, some by extending their tour of duty and others by not getting back to work when they are ready. We have increased our focus and intensity in our efforts to ameliorate these hardships.

Following our strong performance last fiscal year, the New Year has begun positively and we remain optimistic. Concern about forward US production volumes has waned to a large degree. We continue to strongly believe in LPG as an environmentally friendly fuel. Though we have witnessed and are prepared for further disruption, we do not see permanent demand destruction. Dorian LPG stands strongly positioned to service our customers and create shareholder value with our young ECO fleet, a strong balance sheet and ample liquidity. Our Board continues to evaluate capital allocation options, including dividends, acquisitions, debt reduction and stock buybacks.

The format of our call today is a little different from previous calls. John Lycouris will focus on a subject that investors have been increasingly interested in and sensitive to. He will brief you on the company's environmental and energy efficiency profile and activities as well as update you on our fleet and the world fleet. Fluctuating COVID conditions were not the only volatility we have been coping with during this quarter, and I'm introducing our CCO, Tim Hansen, who will review the seesaw of the spot market. Finally, Ted will present the quarter's financial results and recent events.

John?

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

Thank you, John. At Dorian LPG, the commitment to address environmental issues started back in 2012-'13 when the first newbuild investments were ordered. We had considered the marine industry's fundamental objective was to align with and advance the IMO initiatives regarding the promotion of environmentally sustainable shipping. Pollution control and prevention were part of the IMO's mission and vision statements. Currently, the IMO decarbonizing strategy aims to reduce greenhouse gas emissions by at least 50% by 2050 when compared with 2008.

The vessels built by Dorian LPG in 2014 through '16 were equipped with ECO engines, ballast water treatment systems, scrubbers and LPG as fuel features, which were novel and implemented new technologies. Many of these features were integrated in the vessel designing and engineering phases in advance on regulatory frameworks and rule implementation.

They were in early response in the advancement of sustainable shipping by managing emissions in pollution at the newbuilding stage. The Dorian LPG fleet as built has an obtained fleet average Energy Efficiency Design Index, EEDI code, of 5.96 grams of CO2 per ton mile versus a regulation requirement for the fleet of 7.72 grams CO2 per ton mile. The first annual emission report was submitted by the entire shipping sector to the IMO data collection system for the calendar 2019. Each ship over 2,000 -- over 5,000 gross tons had to submit data, obtain a certificate of compliance and was issued an international energy efficiency certificate.

The data collected from its vessel is extensive and covers, among others, observe distances, fuel consumptions, engine running hours and other environmental parameters. That data is used to monitor and record the CO2, SOX, NOX, particulate matter emissions produced by each vessel and to assess each vessel ship efficiency and performance. The data will regularly provide rolling average indexes and establish a good guide of vessel and fleet management over time. And main metric calculated from the data is the annual and quarterly reported Energy Efficiency Operational Indicator, EEOI, which shows the graph of CO2 emission per ton mile for each vessel and for the fleet in total.

The average efficiency ratio, AER, metric is derived from the vessel's IMO DCS data and uses fuel consumption, distance traveled and designed deadweight as parameters and calculates the carbon intensity in grams of CO2 per ton mile. This metric is selected by the members of the Poseidon Principles through presenting financial institutions in maritime sector and is applicable to commercial ship landing facilities. The Dorian LPG fleet reported for calendar 2019 an EEOI of 17.7 grams of CO2 per ton mile and an AER of 7.93 grams of CO2 per ton mile compared with the Poseidon Principles 2019 trajectory value for the same type of vessel in size of 8.6 grams of CO2 per ton mile.

With these results, Dorian would qualify for a sustainability margin adjustment under the 2015 Amended and Restated Facility as reported. The company is a signatory to the 2018 Global Maritime Forum's call for action in support of decarbonization and plans to pursue actively those objectives.

Now, we'll hear the technical update of the fleet. We have completed a hybrid scrubber retrofit installation on the vessel constitution, including drydocking and first special survey. Eight vessels are now retrofitted with hybrid scrubbers and completed drydocking special surveys during the last 12 months, including two vessels which were fitted with ballast water treatments.

Dorian operates a total of 10 scrubber vessels, including two which were fitted in -- during the 2015 delivery. We are programming for the retrofit of two scrubber vessels in the coming months to coincide with vessels upcoming five-year special service in drydockings. Dorian remains committed to improving environmental emissions with the use of scrubbers achieved significant reductions in sulfur oxide emissions as well as black carbon and particulate matter emissions that normally are released by vessels burning low sulfur fuel oil.

The current VLGC fleet, according to Clarksons, comprises of 299 vessels, of which about 10% is either in storage or undergoing repairs. The order book currently stands at 34 vessels or about 11% of the VLGC fleet with four vessels due to be delivered this year, 21 vessels expected in 2021, and nine vessels in 2022. Including the 2022 deliveries, other three LPG fueled newbuilding vessels, VLGC orders which were announced by AW Shipping and Adnoc-Wanhua joint venture aimed to service a 10-year LPG supply contract. There are currently 27 vessels in the fleet which are 25 years and older.

With that, I finish my comments and I will pass it over to Tim Hansen, Chief Commercial Officer. Tim?

Tim Hansen -- Chief Commercial Officer

Yeah. Thank you, John. Global seaborne LPG volumes year-to-date held steady compared to last year, growing less than 1% year-on-year to a total of 53.8 million tons. Volumes during the second calendar quarter of 2020 totaled 26.8 million tons, which was a 2.7 year-on-year decrease. US export growth have largely -- in counterbalance by decline in Middle East volumes. Through the second quarter, American export volumes increased by 17.8% to close to 22 million tons compared to the same time last year. On a quarterly basis, US volume grew 5.2% to 10.8 million tons in the second quarter of 2020 versus the same period in '19. Over the same period, however, the Middle East volumes decreased by roughly 8%.

April marked the record months for the global volumes recorded, which recorded an all-time high of 9.8 million tons. Not surprisingly, US cargos also marked a record activity with 74 cargos before stabilizing to an average of 65 cargos in May and June. Middle East cargos in April was also strong, but declined significantly through the quarter end. The Baltic market index on the Russian route [Phonetic], Chiba route fell from 52 to 47 metric tons within the first decade of April. However, the increased US and Saudi exports combined with the China liftings, the tax on US origin LPG and the Chinese PDH buyers returning to the market after the extented Lunar New Year and COVID lockdown helped pose the Baltic back up to $60 per ton at the end of April.

In April, with the lockdown spreading, Europe sold the lowest number of VLGC parcels in two years. And on the back of reduced demand for pet-chems, and plastics [Phonetic] as well as travel restriction in Turkey, a reduction in auto-gas was seen. In May, US production and exports declined due to the fall in crude prices. However, the Mont Belvieu prices held up due to nervousness of shortage as well as -- and with a low crude price, naphtha became more attractively priced than propane for the European crackers as well as steam crackers in Asia. The high export from the US and Algeria, along with increased Saudi exports in April hitting the Asian market in May, made an abundance of product available in Asia, which closed the arbitrage from the US and reduced the US liftings for May.

Saudi exports announced from May also reflected the cuts in crude and was significantly reduced from April levels. Lack of shipping demand both East and West started to create links and fall in freight rates, which was accelerated by multiple trader relets. Newbuilding deliveries in Q1 has less -- as well as less vessels and expected going into drydock also impacted the length of the shipping market and the fall in TCE was something -- somewhat arrested by simultaneous fall in the bunker prices, the spread of HFO and those of the fuel oil also narrowed partly due to the lower overall prices of the fuels as well as more availability of low sulfur fuel oil.

With Asia and Europe slowly opening up in the second half of the quarter, along with cautious optimisms on forward demand and with less volatile crude oil prices making conservative prices in Asia possible, LPG again started to replace naphtha in European crackers and toward the end of the quarter also an Asian crackers. The PDH demand also started to increase, which helps the demand for shipping.

Shipping rates through May and June drops down to OPEC level and some owners started to slow steam as well as ballasting via cape. At the end of the quarter, drydocking again slowly picked up and helped the market turnaround. It took some time to clear the length however and started to build on rates, which only started toward the end of the quarter. The impact of the increased demand as well as the stabilizing of US production have been apparent throughout July with the rapid recovery of the Baltic from low-20%s at the end of June to low-60%s at the end of July.

On the supply side, concerns over US NGL production volumes has decreased, propane storage levels are healthy. They are standing 10% higher than this time last year, while production has averaged 4% ahead of last year, and last week's production has reported 6% higher than in 2019. Given the wave of infrastructure additions completed during the first calendar quarter, going forward, we believe that US production may continue to surprise on the upside.

On the demand side last quarter, Chinese LPG imports declined -- the declines continued mainly due to the COVID-19 lockdowns falling 8.7% year-on-year, while Indian, South Korean and Indonesian demand grew significantly. Indian imports grew by 16% year-over-year to 3.8 million tons while South Korean volumes grew 7.9% year-on-year to 2.2 million tons, and Indonesian imports grew 29.1% year-on-year to 1.8 million tons. While the propane-naphtha spread favored naphtha for most of the quarter addressing the impact industrial LPG demand, the spread was more recently turned in favor of the LPG cracking economics. Thus, we remain quite constructive on the market fundamental at this time while we acknowledge the potential for unforeseen disruptions.

With this, I'll pass on to Ted.

Theodore B. Young -- Chief Financial Officer

Thanks, Tim. My comments today will focus on our financial position and liquidity, as well as our unaudited first quarter results. For the discussion of our first quarter results, you may also find it useful if you refer to the Investor Highlights slide posted this morning on our website. We finished the quarter with nearly $158 million of free cash and short-term investments, which reflects an increase of about $94.6 million from last quarter's $63 million. We generated $34.4 million of that from operations, reflecting a strong chartering results realized during the -- particularly the first part of the quarter, $26.8 million from the two debt transactions that we completed, as well as $33.3 million from cash transferred from our restricted cash account as a result of the implementation of the new financial covenants in our 2015 Amended and Restated Facility.

On the last point, on July 14, 2020, we received the final approvals required to implementing new set of covenants, which, among other things, eliminate the interest coverage ratio covenant, reduces the minimum cash requirement to $27 million from $40 million, and eliminates the upward ratchet mechanism on the shareholders' equity covenant. In return to these improvements, we did agree to a modestly higher value to loan covenant 145% versus 135%. There was a tremendous amount of headroom under that particular covenant as we're currently well over 200% as it relates to this facility.

We're extremely pleased with the all-around improvement in terms that we received under the 2015 AR Facility, which recognize our strong performance through the cycle and rewarded us with improved financial flexibility. Importantly, in July, we also gave three-month notice to the lessor of the Captain John that we plan to repurchase the vessel in October by repaying the debt to be outstanding at that point about $18.3 million and applying the seller's credit from the inception of the transaction of $26.6 million.

When we complete the payout of the Japanese financing arrangement for the Captain John, which carries a fixed 6% interest rate, we will realize annual savings of $1,447,500 in principal and about $1.1 million in interest and other commissions. These savings equate to about $300 per fleet day, that's calendar days plus TCN days for sake of clarity.

Turning to our first quarter chartering results, we achieved a total utilization of 82.3% for the quarter with a daily TCE, that's TCE revenue over operating days as those terms are defined in our filings, of $41,249, yielding utilization adjusted TCE or TCE revenue per available day, again, available days defined in our filings, of about $33,935. We estimated industry utilization for the quarter at about 87%, which reflected the slowdown in industry activity that Tim has already touched on, following some fairly high utilization in April and May.

Spot TCE per available day available day, which reflects our portion of the net profits of the Helios Pool for the quarter, was $34,535. Also, the overall Helios Pool reporting as an entity achieved a spot TCE, including COAs, of approximately $37,000 per available day for the quarter. Our reported chartering results were reduced by about $829 per available day due to the reallocation of pool profits as a part of the periodic assessment of relative speed and consumption of the pool numbers. In addition, the Helios Pool had a small exposure to ZenRock, the Singapore-based commodity trader that has filed for insolvency, and we recognized the pro rata impact on our results from this quarter.

Daily OpEx for the quarter was $8,295 a day, excluding amount expensed for drydocking. It was $8,686, including those costs. On a sequential basis, we saw modest decrease in our OpEx from last quarter's $8,556 a day, again that number excluded drydocking costs. Our total G&A for the quarter was $11.3 million and cash G&A, i.e. that's G&A excluding non-cash compensation, of about -- was about $9.4 million. This amount included annual employee bonuses awarded during the quarter in the amount of $4 million, which means that "normal" G&A was about $5.4 million. This number was a little higher than we would normally expect as we incurred about $300,000 of G&A costs related to our transition from an emerging growth company. And as we completed our first fully integrated audit this past fiscal year just ended, we do hope to reduce these costs going forward.

Our time charter expense per day was slightly elevated because we had 11 days overlap between the Laurel Prime and the Astomos Earth. Our reported adjusted EBITDA for the quarter was $41.1 million. To give some indication of the chartering market environment, we generated roughly 90% of our EBITDA during the first two months of the quarter. We look at cash interest expense on debt as the sum of the line items of interest expense, excluding deferred financing fees, and other loan expenses and realized gain loss on interest rate swap derivatives. On that basis, total cash interest expense for the quarter was $6.9 million, which was slightly below the guidance we gave in our remarks at the end of last quarter.

We continue to benefit from our hedging policy and the favorable pricing of our Japanese financings leaving us with a current interest cost to fixed hedged in a small floating piece of 4.11%. That will decline a bit further after we complete the payoff of the Captain John in October.

As a reporting matter, I'd like to point out that our realized and unrealized gain and loss on derivatives as reflected on the face of our P&L also include the effect of our FFA portfolio. The calculation of EBITDA on our filings adds back only the interest on the realized gain-loss, not the FFA piece. John has already touched on our drydocking program, but I would add that our current financial position allows us to finance whatever drydocking schedule best supports our charterers.

Our cash flow and liquidity remain strong. Since quarter end through to July 31, 2020, our restricted and unrestricted cash and short-term marketable securities is up about $160 million. Although we currently hold a 76-plus-percent economic interest in Helios, we did not consolidate its balance sheet accounts, which has the effect of somewhat understating our cash and working capital. Thus, we believe these views will provide some additional insight in order to give a more complete picture. As of Friday, July 31, 2020, the Pool had roughly $20 million of cash on hand, reflecting the fact that Pool had just paid a distribution at the end of the final week. With overall liquidity and capital structure positioned us well for whatever rate environment we faced in the coming months, and we believe that allows our company to make capital allocation decisions from a position of strength.

As John noted, we've elected to deleverage, which we believe represents an excellent yields for shareholder funds as it permanently reduces our cash cost per day, particularly with the backdrop of some global uncertainty. We still have over $50 million remaining under our share buyback authorization and we remain interested in accretive growth opportunities that meet our risk-reward criteria. We will continue to be prudent in deploying cash, but our financial position allows us to act quickly on meaningful opportunities as they may arise.

With that, I'm going to turn it back to John Hadjipateras.

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Thanks, Ted. We're happy to take some questions.

Questions and Answers:

Operator

With the prepared remarks completed, we will now open the line for questions. [Operator Instructions] And our first question comes from the line of Omar Nokta with Clarksons Platou Securities. Please proceed with your question.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Thank you. Hey, guys.

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Hi, Omar.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Just wanted to ask -- hi, there. I just wanted to ask, obviously the market has gotten much stronger here over the past six, seven weeks. And you've talked a good amount about, and it was in the release the fact that the propane naphtha spreads have reverted back to kind of where they were prior to the disruptions. But we haven't really seen a -- that reversion back where regional prices between propane here in the US versus Europe and in the Far East were wide. They're still fairly tighter. But despite that, rates have strengthened and now reached $50,000 a day plus on the spot market. I guess, one, is it -- are you surprised that just how strong the market has gotten without those differentials in place? And then, two, does that make you nervous or cautious on the outlook?

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Omar, we're always nervous and cautious. But I think that the team has got -- has a good answer for the generic arb question that you're really putting here, right. You're saying, if you're on paper that doesn't seem to be an arb, can we -- how is it that the freight rate is going to support it?

Tim, do you want to have a go with that?

Tim Hansen -- Chief Commercial Officer

Yeah. First of all, you can say, the arb is not massively wide, but it has been enough that we had seen the pet-chem buyers in Europe come back to the market and do the ship. So, whether their arb is strong as it was before is questionable, of course, but there it been enough to support the ship and it actually went pretty quick when we saw the rest of the Europe also returning and the demand going up also for -- in target [Phonetic] for also cash and all that. So it created this kind of a search whereby everybody was scrambling for those funds.

I think also the return of the market has been, as I touched upon a little bit that, there's a little bit more discipline from the owners when the market fell to OpEx levels with slow steaming and holding back a bit on the fixing. And I think, with the big -- quick change, maybe someone was caught a little bit out by surprise and didn't see it changing that quickly. And that helped of course the markets went back pretty quickly.

I think it always kind of goes in waves where the ships are, so this was not imbalance of the shipping was maybe not -- so maybe not have gone through the OpEx levels, as you can say, because the market was actually not as long as it was -- as it seems. But the negative sentiment of the market made the rates go so deep.

I hope that answers your question.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. Thank you. That does, appreciate. Thanks for that color. We've seen obviously and we've been seeing reports that, and looking at the fixtures that vessels are being fixed, five, six weeks ahead of time, in the second quarter where we had the COVID-19 disruptions and a slowdown in just overall trade, utilization was 80% as you highlighted, but for the spot fleet, how are you guys thinking about where utilization is heading in the third quarter? Can you see it recovering back to that 90%-plus it had been at for the prior quarter?

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Yeah. Again, I'll defer that to Tim.

Tim Hansen -- Chief Commercial Officer

Yes, definitely, Of course with tighter market and the higher rates and facing further ahead, the utilization is coming back. I think also the way that you look at these 80% is what was booked and at the end of June, if you look at like operational idling time, it was still in the low-90%s at that point. So, I think -- but of course, the market will tighten and it will be less when the market is at the stage.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. And just to make sure I heard you correctly, you're saying that we by the end of June, it was back into the low-90%s?

Tim Hansen -- Chief Commercial Officer

No. I'm saying that that the 80% that is calculated at AR is the financial idling time which doesn't change what was fixed into June or July at that time.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. And then, Ted, on the financial side, clearly you guys have built up a lot of cash and liquidity. I didn't want to ask about the sale leaseback on the Captain John NP. You exercised the option and just want to make sure I understand it correctly, you basically going to -- you're going to give the owner $18.3 million of cash, they will also take the $26.6 million of restricted cash. And so that totals somewhere in the mid-$40 million. Does that that looks to be kind of the carrying value of the shift at least on your financials? What are your thoughts or plans with this vessel going forward? Is it one that you want to own and just have it all cash? Will you refinance or do you intend to sell it?

Tim Hansen -- Chief Commercial Officer

For the moment that's -- our thoughts are that the ship is going to be all cash. But I think Ted wants to clarify a little bit from your question of economics.

Theodore B. Young -- Chief Financial Officer

The economics just -- Yeah. Just to be clear, it's a sellers deposit on margin and there is no restricted cash. So basically all it's going to happen is, they're going to -- we're going to pay them $18.3 million. And they sort of notionally kept the deposit at the time. So, we'll pay off the $18 million and that's all that will happen. And then as you point out, it'll be debt free. And as John just touched on, that gives us a lot of flexibility to do whatever we want with it.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. And then, the plan, I guess is to have a bit more flexibility. In exchange for the $18 million of cash, you'll just effectively have a debt-free vessel with a [Speech Overlap].

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Loan to debt ratio.

Theodore B. Young -- Chief Financial Officer

Correct. Correct. It lowers the breakeven a bit and...

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay, cool. Well, I appreciate the market color and financial color. I'll leave it there. Thanks, guys.

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Thanks, Omar. Appreciate it. Take care.

Operator

[Operator Instructions] And our next question comes from the line of Sean Morgan with Evercore. Please proceed with your question.

Sean Morgan -- Evercore -- Analyst

Hey, guys. So, going into this sort of COVID disruption, looks like you spent a fair amount of focus on sort of building the war chest of cash. I'm reticent to say that we're sort of through COVID, especially in light of potential second waves, but with the rates market sort of improving for VLGCs, possibly lapping some of the worst parts of the market disruption. How are you starting to think about sort of the capital deployment, I think, $50 million left on the authorization with the focus need to continue be leveraging, potentially buyback or what do you guys thinking sort of the light of the changing market?

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Ted, do you want to take that?

Theodore B. Young -- Chief Financial Officer

Sure. I think, Sean, the globe answer is probably a bit all of the above. I think -- I don't think anyone should read anything into the fact that we piled a lot of excess cash into paying off to John is any belief that our shareholders -- that our buyback activity should be curtailed? I think it was a smart move at the time and we like it. I think, going forward, it's going to be fact and circumstance dependent. Obviously things look good. At the moment, as Tim has pretty well outlined, and I think as our confidence grows in the near-term outlook, we may -- depending how the stock price responds or doesn't respond, we'll certainly look at buybacks. We still could pay down some debt. But we're really happy with where we're sitting. And we'll have to see what other opportunities may present themselves in terms of potential opportunities to grow the fleet or whatever else.

So, I think, the point of this financial flexibility is to give us full optionality. And I think that's what we've achieved and not trying to dance around the question but it's going to be fact and circumstance dependent.

Sean Morgan -- Evercore -- Analyst

Okay. And then, I think you have two commitments right now remaining for the scrubbers. And you did obviously a long preamble on ESG, you believe that the scrubbers are an important part of your ESG focus, but is there any thought now with the lower spread, high sulfur to low sulfur fuel oil and most likely not like a massively resurging steel demand, especially in light of -- probably more work from home and another changes? Would you consider trying to delay those scrubbers or cancel a scrubber? Is there any contract optionality there or you just going to continue to do that one possible?

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

John?

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

Yeah. John L.

Sean Morgan -- Evercore -- Analyst

Hi, John.

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

Yes, there is a frenality [Phonetic] and flexibility precisely, we will do it whenever it's suitable. And the scheduling of the ships, and we do have a number of ships that need to be drydocked and special surveyed, etc. And we will try to combine it. It adds days to the works, but it is effectively, as we said before, an advantageous solution environmentally and also fuel wise. We understand that the spreads are smaller in actual terms. However, as percentage, they are still around 20% cheaper than the compliant fuel of the day to buy high sulfur fuel oil. So that spread may change in the future. We understand that fuel oil has been sought after to distil and crack additional low sulfur fuel oil. However, at some point, things are going to reverse back, and we may see those spreads change again. So it's a moving market as we see it.

Sean Morgan -- Evercore -- Analyst

Okay. So even right now, those are economically attractive. All right. Thanks, guys. That's all I have.

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

Yeah, thank you. Thank you, Sean.

Operator

And we have reached the end of the question-and-answer session. I will now turn it back over to John Hadjipateras for any closing remarks.

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

Thank you very much. And thank you all for coming to the call and stay safe, and see you next quarter. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Theodore B. Young -- Chief Financial Officer

John C. Hadjipateras -- Chairman, President and Chief Executive Officer

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

Tim Hansen -- Chief Commercial Officer

Omar Nokta -- Clarksons Platou Securities -- Analyst

Sean Morgan -- Evercore -- Analyst

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