NGLs and ethane – What’s on the horizon?

Argus India Oil & Gas Summit

March 18 2015

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Important information and disclaimer

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Section 1

Business Update Section I

BW LPG Introduction

Vision

“BW LPG will be a driving force in the growth of the global NGL

marketplace by providing market leadership in marine-based NGL

logistics solutions across the globe.”

BW LPG is the largest owner/operator of VLGCs, with a fleet of

38 VLGCs and 5 LGCs, including newbuilding VLGCs on order.

Our largest shareholder is the BW Group, 100% owner pre-IPO,

presently holding approximately 47% of our shares.

We have an ongoing 8 ship newbuilding program at HHI, with a

balance of 6 vessels delivering through 2015 - 2016.

Our market leading position

4

35 years of operating experience to provide

market-leading reliability

Oil companies have strict requirements on crewing

Experience requirement for top 4 officers

1 vessel 10 vessels BW LPG

(pool of 334 senior officers)

BW LPG onshore (53 technical professionals)

Time on gas

carriers 24 years 240 years 4,446 years

816 years (in the gas industry)

Time in company 8 years 80 years 4,921 years 844 years

LPG requires specialised competencies

Engineers do not normally have refrigeration knowledge:

If the cargo is a few degrees off, the vessel is rejected by the terminal

Complex cargo operations:

Ship to ship transfer to different ship types, part discharge/loading,

temperature, different phases

Re-liquefaction during voyage:

Crew need to constantly monitor cargo condition and re-liquefy throughout

the voyage

LNG-like complexity with less technology to manage it:

Many of the same challenges as LNG, but with more reliance on crew

knowledge and operational systems rather than automation

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Section 1

Business Update Section II

Indian LPG Fleet & Ethane Orderbook Overview

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Indian flagged & owned LPG fleet

Source: Clarksons, BW LPG analysis

• 3% of the LPG fleet is under Indian Ownership with the majority under Indian flag

• Largest presence in LGC & MGC segments

• Limited presence in the VLGC sector

Indian Flagged & Owned Ships As % of Fleet By Segment

2.2% 1.7%

9.1% 4.0%

- 0.4% 3.0% 2.2%

9.1% 7.1%

- 0.4% -

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LPG Fleet VLGC LGC MGC 5- 20k CBM <5k CBM

Indian Flag Indian Owner

8

Ethane orderbook

Source: Company data

• Bulk of ethane-capable orderbook will service coastal European crackers

• VLECs will be deployed on long-haul routes to South and East Asia

• Full alignment across entire ethane value chain needed to support further investment in shipping capacity

Owner Yard # Vessels CBM Design Charterer Servicing

Hartmann / Jaccar Sinopacific Offshore & Engineering 5 85,000 Tri-lobe Type C Oriental Energy China

Reliance Industries Samsung Heavy Industries 6 87,000 Membrane Reliance Industries Jamnagar, India

Navigator Gas Jiangnan S.Y. 4 35,000 Bi-lobe Type C Borealis Stenungsund, Sweden

Ocean Yield Sinopacific Offshore & Engineering 3 36,000 Tri-lobe Type C Sabic Teesside, UK

Evergas Sinopacific Offshore & Engineering 6 27,500 Bi-lobe Type C Ineos Rafnes / Grangemouth

Evergas Yangzijiang Shipbuilding 2 27,500 Bi-lobe Type C Ineos Rafnes / Grangemouth

Section 1

Business Update Section III

VLGC Snapshot

VLGC rates still going strong while NB prices steady 2014 was a record year for VLGCs, with continued strength in the beginning of 2015

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Source: Clarksons, BW LPG analysis

Trailing Ten Year Monthly Nominal VLGC One Year Timecharter-Equivalent Rates ($ Per Day)

-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

January February March April May June July August September October November December

10Y High / Low 2013 2014 2015

2002 - 2015 YTD Monthly Nominal Newbuild VLGC Prices ($ MM)

-

$20

$40

$60

$80

$100

$120

$ M

M

VLGC fleet growth & rates; this time might be different?

Fleet age: 10.8 years

Orderbook: 85 vessels / 50% of delivered fleet

2015 Deliveries: 36 vessels

2016 Deliveries: 46 vessels

11 Source: Clarksons, BW LPG analysis

Annual VLGC Fleet Growth vs. VLGC TCE Rates

Fleet Growth Average Median Low High

Since 2009 4.0% 3.9% 0.0% 9.3%

Last Five Years 3.7% 2.4% 0.0% 9.3%

Last Ten Years 5.4% 4.7% 0.0% 19.0%

All Available Time 4.2% 3.6% (1.5%) 19.0%

5.3%

77,253

-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

(5%)

-

5%

10%

15%

20%

25%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Fleet Growth

Fleet Growth Forecast

TCE Rates

• Difference between 2008 & 2015 is that current fleet build-out is supported by strong trade outlook

underpinned by solid U.S. volumes and increasing Chinese & Indian demand

Version 2008

Version 2015

Section 1

Business Update Section IV

U.S. NGL Snapshot

U.S. LPG export terminal capacity will nearly double Enterprise, P66 & Occidental all confirmed LPG export projects in quarterly earnings call with analysts,

underpinned by term contracts

13 Source: Company data

US LPG Export Terminal Capacity Expansions

-

5

10

15

20

25

30

35

40

45

Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

MM

TPA

Petrogas

Trafigura/Buckeye

DCP Midstream

Pembina

Sage Midstream

Occidental

Phillips 66

Sunoco

Targa

Enterprise

Consensus U.S. LPG production & export forecast Production CAGR of 7% over next two years, export growth ranges from 12% - 30% p.a.

14 Source: EIA, various investment banks’ research, BW LPG analysis

US LPG Production & Exports (mmtpa)

-

5.0

10.0

15.0

20.0

25.0

30.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

U.S. LP

G Exp

orts (m

mtp

a)LP

G P

rod

uct

ion

(mm

tpa

)

External Export Forecast Range

LPG Production (LHS)

LPG Production Forecast (LHS) (2014 - 2016 CAGR - 7.2%)

LPG Exports (RHS)

NGL prices are too high! NGL prices are too low! Prices must find the balance between keeping cargoes flowing and supporting U.S. production growth

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Source: Bloomberg, BW LPG analysis

NGL Barrel as % of Crude Oil (Trailing 5 Years)

-

20%

40%

60%

80%

100%

120%

140%% of Brent % of WTI

NGL Barrel as % of Crude Oil (2014 - Present)

-

10%

20%

30%

40%

50%

60%

70%

80%% of Brent % of WTI

Arb closes fol lowing OPEC

announcement

Arb opens on Jan 22

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Total rig count down by 38%, oil production still rising

Source: Baker Hughes, BW LPG analysis

• 38% decline in rig count since OPEC announcement

• Horizontal rigs now account for 75% of total, up from 72% pre-announcement

• Decline in vertical rigs has slowed down, while decline in horizontal rigs has accelerated

Total U.S. Rig Count (1192) By Trajectory

Rig Count Delta As % of Total

Trajectory Current 26-Nov-14 # Rigs % Current 26-Nov-14

Directional 120 194 (74) (38%) 10% 10%

Horizontal 895 1,371 (476) (35%) 75% 72%

Vertical 177 352 (175) (50%) 15% 18%

Total 1,192 1,917 (725) (38%)

-

1

2

3

4

5

6

7

8

9

10

-

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500M

MB

PD#

Rig

s

Directional Horizontal Vertical Oil Prod (mmbpd)

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Horizontal rig count at major shale plays down 31%

Source: Baker Hughes, BW LPG analysis

• Horizontal rig count in major shale plays down 31% since OPEC announcement

• Largest declines in the Bakken and Permian plays due to wide differentials to coastal prices

Horizontal Rigs (660) By Major Shale Play

Rig Count Delta As % of Total

Shale Play Current 26-Nov-14 # Rigs % Current 26-Nov-14

Bakken 119 187 (68) (36%) 18% 20%

Eagle Ford 143 203 (60) (30%) 22% 21%

Haynesville 37 37 - - 6% 4%

Marcellus 59 77 (18) (23%) 9% 8%

Niobrara 32 59 (27) (46%) 5% 6%

Permian 236 350 (114) (33%) 36% 37%

Utica 34 43 (9) (21%) 5% 4%

Total 660 956 (296) (31%)

-

200

400

600

800

1,000

1,200

Bakken Eagle Ford Haynesville Marcellus Niobrara Permian Utica

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International propane price differentials have narrowed

Source: Bloomberg, BW LPG analysis

Propane Prices ($ Per Ton)

($100)

-

$100

$200

$300

$400

$500

$600

$700

-

$200

$400

$600

$800

$1,000

$1,200

$1,400Asia - MB Spread Asia Propane Mont Belvieu

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Competitiveness of U.S. ethane over naphtha has eroded

Source: Bloomberg, BW LPG analysis

• Oil price drop has given way to “wait and see” approach for new projects

• U.S. ethane still makes sense for owners of existing ethane cracking capacity with feedstock switching capability

• Industry updates:

o Ethane rejection has risen to near record levels of between 350,000 – 500,000 bpd

o Enterprise states that 80% of 200,000 bpd Morgan’s Point facility has been sold out at 10 year contracts

In discussions with 3-4 other parties for the remaining 20%

o Targa still evaluating ethane export terminal investment

Ethane & MOPJ Prices ($ Per Ton)

-

$150

$300

$450

$600

$750

$900

-

$200

$400

$600

$800

$1,000

$1,200MOPJ - $503 Ethane - $136 MOPJ - Ethane Spread (RHS)

Section 1

Business Update Section V

Conclusions

• Lower oil price leads to lower naphtha price and narrower arbitrage

• Rig counts, and thus production, will decline

– Rig productivity has increased but average well productivity has decreased

– Production can only be maintained by drilling more wells, but rig count is declining

• Abundant U.S. propane export capacity will increase correlation between U.S. & global propane prices, keeping the arbitrage tight and limiting U.S. LPG export growth

• OPEC will maintain production for as long as is needed to curb U.S. output

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BEAR

Consensus bull & bear views on effect of oil price drop on

U.S. LPG exports

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• 45% of 2015 (and some 2016) production is hedged at profitable oil price levels

• Declines in production will come from high-cost fields with minimal LPG production

– Permian, Southern Bakken, Niobrara

– Stripper wells

• Majority of 2015 LPG volumes (16mt) traded under term contracts

• 2015 guidance suggests 10% production growth

• Cost reductions in upstream value chain will keep production profitable at lower oil price levels

• High grading shifts production focus to NGL-rich, wet-gas shale plays

• Re-fracking of ~50,000 wells

BULL

Source: Various investment banks’ research, EIA, Bloomberg

Market-based corrective measures for NGLs

Increased steam cracker consumption

Propane has been feedstock of choice till recently in U.S. helping to lower historically high inventories

Asian crackers have switched some capacity from naphtha to propane

Rejection

Ethane rejection at very high levels

Production growth rate decline

Current consensus of 7% production growth vs. ~15% consensus 2015 growth as recently as Q3 2014

Exports

Doubling of LPG export capacity, new ethane export capacity in U.S.

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STRICTLY PRIVATE & CONFIDENTIAL

SHIPPING

What is on the horizon?

NGL PRICES

NGL

PRODUCTION

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NGL EXPORTS

• >20% VLGC fleet growth p.a. over next two years

• Peak of new orders was in 2014

• Cargoes still coming to market, greater importance of long-term shipping coverage

• Doubling of U.S. LPG export capacity

• Sunoco & Enterprise begin exporting ethane, Targa still evaluating

• Majority of 2015 volumes on term commitments, some cargoes have been cancelled

• NGL prices could trade down to nat-gas equivalent levels in near-term

• Prices balanced to catalyze trade while also encouraging new production

• Contango in crude prices suggests stronger naphtha prices than implied by MOPJ curve

• 2015 U.S. production growth of 7%

• Algeria emerging as substantial long-term supplier of LPG

• Importance of Iran should sanctions be lifted?

The value of long term shipping partners Freight as a % of cargo is near all-time high, shipping coverage secured at favorable terms good for trading

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Source: Clarksons, BW LPG analysis

Spot Freight as % of CIF Asia Propane Price

Term Charter as % of Spot

-

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

50%

100%

150%

200%

250%

300%

350%

Thank You