BW LPG Limited (“BW LPG” or the “Company”), listed on the Oslo Stock Exchange (OSE ticker: “BWLPG.OL”) and the New York Stock Exchange (NYSE ticker: “BWLP”), announced the acquisition of 12 modern Very Large Gas Carriers (VLGCs) from Avance Gas Holdings Ltd (“Avance Gas”, OSE ticker: “AGAS”). This transaction marked a pivotal development in BW LPG’s growth strategy, culminating in the delivery of the final vessel, BW Avior, on 31 December 2024. With this, the entire fleet of 12 VLGCs has been successfully delivered through a seamless handover process, signifying the completion of this landmark transaction.
Issuance of New Shares
As part of the consideration for the acquisition, BW has issued 2,141,000 new shares to Avance Gas. This brings the total number of issued shares of BW LPG to 159,282,000, representing a total share capital of USD 619,867,048. These newly issued shares have been legally and validly authorized and are fully paid. Consequently, Avance Gas now holds 19.282 million shares in BW , equivalent to approximately 12.11% of the Company’s total shareholding.
Each tranche of consideration shares issued to Avance Gas is subject to a 40-day lockup period, commencing from the delivery date of the respective vessels. This lockup ensures stability in the Company’s stock market performance and reflects the trust and commitment between the two companies involved in the transaction.
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Financial Details of the Transaction
The total transaction value amounted to USD 1,050 million, structured as follows:
- Cash Consideration: USD 585.4 million was paid in cash.
- Novation of Leaseback Agreements: USD 132 million related to two sale-leaseback vessels was novated.
- Issuance of New Shares: 19.282 million new BW LPG shares were issued, priced at USD 17.25 per share, accounting for USD 332.6 million.
Post-transaction, BW reported an estimated liquidity of USD 552 million, as disclosed in its Q3 earnings release. Additionally, 14 vessels in the fleet remain unencumbered, offering potential financing opportunities in 2025.
Fleet Expansion and Strategic Positioning
With the acquisition completed, BW fleet now comprises 53 VLGCs, including 22 LPG dual-fuel vessels. This expansion further cements BW position as the world’s largest owner and operator of VLGCs, as well as the leading operator of dual-fuel-powered VLGCs. These vessels, equipped with cutting-edge technology, offer enhanced fuel efficiency and environmental performance, aligning with the industry’s shift towards sustainability.
BW chartering strategy remains balanced, with approximately 35-40% of its fleet capacity covered through time charters and Freight Forward Agreements. This approach ensures a stable revenue stream while retaining flexibility to capitalize on favorable market conditions.
Market Outlook
The spot market for VLGCs is currently trading in the mid-USD 40,000s per day. While market rates are subject to fluctuations, BW maintains a positive outlook for 2025. Over the past six months, normalized Panama Canal transit levels have reduced sailing distances, exerting downward pressure on rates. However, the market’s long-term fundamentals remain robust, supported by:
- Growth in LPG Production: Strong growth in production, particularly from North America, is expected to drive export volumes.
- Export Terminal Expansion: Ongoing expansion projects at export terminals will bolster supply chains, further supporting the market.
The demand for LPG continues to grow, driven by its versatility as a fuel and feedstock. Residential use, particularly in developing economies, remains a key driver of demand, as provides a cleaner and more efficient energy source compared to traditional fuels like wood and coal. Additionally, industrial applications, including petrochemical production, have expanded significantly, contributing to the robust demand profile.
CEO’s Statement
Mr. Kristian Sørensen, CEO of BW, expressed his satisfaction with the successful completion of the transaction, stating, “I am very pleased to announce the successful closing of the transaction and the commencement of revenue generation from our additional 12 VLGCs. I thank the Avance Gas team for ensuring an efficient and seamless handover process. We have issued 15% more shares to expand our owned fleet by 40%, and through our enlarged fleet, we are enhancing our commercial scale and operational leverage.”
Industry Leadership and Future Prospects
BW LPG’s operational expertise spans five decades, making it a global leader in the shipping industry. The Company’s fleet has a total carrying capacity exceeding 3 million cubic meters (CBM). Beyond shipping, BW LPG has expanded its presence across the value chain, with an in-house LPG trading division and growing investments in terminal infrastructure and distribution networks. This integrated approach enables BW to offer flexible and reliable services to its customers.
The acquisition of the 12 VLGCs significantly enhances BW LPG’s operational scale and market presence. With its expanded fleet, the Company is well-positioned to meet growing global demand for LPG, driven by its applications in residential, industrial, and petrochemical sectors.
Environmental and Operational Efficiency
BW LPG remains committed to sustainability, as evidenced by its fleet of dual-fuel VLGCs. These vessels can operate on both conventional fuels, reducing greenhouse gas emissions and meeting increasingly stringent environmental regulations. The adoption of dual-fuel technology underscores BW LPG’s commitment to pioneering green shipping solutions.
In addition to environmental benefits, the dual-fuel fleet enhances operational efficiency. By leveraging economies of scale and advanced vessel design, BW can optimize fuel consumption and reduce operating costs, providing a competitive edge in the market.
Challenges and Opportunities
Despite its strong position, BW faces challenges, including fluctuating spot market rates and geopolitical uncertainties that may impact trade flows. However, the Company’s diversified fleet and balanced chartering strategy provide resilience against market volatility. Furthermore, BW investment in advanced technologies and sustainable practices positions it to adapt to evolving regulatory requirements and industry trends.
The global push towards decarbonization presents both challenges and opportunities. As governments and industries prioritize reducing carbon emissions, LPG is increasingly recognized as a transitional fuel. Its lower carbon footprint compared to traditional fossil fuels makes it an attractive option for various applications. BW dual-fuel vessels align with this trend, enabling the Company to capture opportunities in the shift towards cleaner energy solutions.
The completion of the acquisition marks a significant milestone for BW, strengthening its position as the global leader in LPG shipping. Through strategic fleet expansion, innovative technology adoption, and a balanced chartering strategy, the Company is well-equipped to capitalize on emerging opportunities in the LPG market. As the world transitions towards cleaner energy sources, BW LPG’s integrated approach and commitment to sustainability position it as a key enabler of this transformation, delivering value to shareholders and stakeholders alike.
