BW LPG Seeks "constructive dialogue" with Aurora

Posted by Joseph Keefe September 19, 2016

BW LPG, the world's largest liquid petroleum gas (LPG) shipper, has raised its stake in smaller rival Aurora LPG by 10 percentage points to 29.83 percent.

"We don't comment on our future strategic direction or investment plans but we look forward to a constructive dialogue with Aurora's management team and board," BW LPG investor relations spokesman John Papaioannou told Reuters

* Aurora LPG Chairman Leif Askvig declined to comment on the latest development, and on whether or not he will seek dialogue with BW LPG

* BW LPG also bought 57 million Norwegian crowns worth of Aurora's senior unsecured bond maturing on Aug. 9, 2017

* "We can't comment on our next step," Papaioannou said

* He added the following regarding the purchase of Aurora bonds:

* "We see this purchase as a good way to protect our equity investment in the company"

* Spot rates for very large gas carriers have dropped from around $50,000 per day in January to currently below $10,000

* "Our view is that the market can remain low for the foreseeable future," Papaioannou said

* "We see where demand growth is coming from and that is mainly export growth out of the US and natural export growth out of the Middle East (Saudi/Iran), and then you have some West African volume coming online but over the same corresponding period you have 25-30 new VLGCs in the water as well. So our view is that the market can remain low for the foreseeable future," Papaioannou said

* The case for M&A was at best unclear, he said

* "To be honest we don't have any evidence that consolidation helps, perhaps it can, perhaps it doesn't"

* "But from our view this is just an opportunity we had, to increase our position in Aurora at attractive prices"

* "In general this purchase is in line with our overall strategy to invest countercyclically and grow in market downturns"

* Shares in Aurora LPG trade 13 percent higher for the day at 12.40 Norwegian crowns while BW LPG is up 7 percent to 20.74 crowns, outperforming a one-percent rise in Oslo's benchmark share index

* VLGC shares peaked in December 2015 when Aurora shares were traded at 66 crowns and BW LPG at 76.95 crowns

* Shares in rival Avance Gas, which failed to buy Aurora LPG in an offer last year, are rising 3.7 percent

* BW LPG owns and operates 41 gas carriers, of which 36 are VLGCs and 5 LGCs (large gas carriers)

* Aurora LPG owns and operates 9 VLGCs

* Avance Gas owns and operates 14 VLGCs

* Brokerage DNB Markets argued BW LPG is unlikely to pay much above current valuation (if BW LPG should make a bid) as Aurora LPG currently trades at 30 percent of its net asset value (NAV) of 44 crowns per share (using a $70m million resale price for a VLGC) as BW LPG also trades at 30 percent of its NAV of 65 crowns per share.