Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Q3 2019, That's Oh Corporation Limited earnings Conference call. At this time, all participants in the listen only mode.
Third the speaker presentation, there will be a question answer session. That's a question during the session you will need to press star one I get telephone keypad also much advice another call. This being recorded today Thursday, that's when it first up there remember 2019 and without any further delay oh, no like that Dolby called to your first speaker today.
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Thank you and workable too that's it felt third quarter conference call I will start to call by briefly going through the highlights of the quarter unfolding in outdoor <unk> action Olafson will take us through the financials.
Well, we'll be concluded by opening up for questions.
Before we begin a presentation I would like to note that this conference call will contain forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act or 1995.
Such as expects anticipates intends estimates or similar expressions are intended to identify these forward looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward looking.
Statements.
Factors that could cause actual results to differ include conditions in the shifting offshore in credit markets for further information. Please refer to Sslps reports and filings with the Securities and Exchange Commission.
The board has declared a quarterly dividend of 35 cents per share this just or 63rd quarter with profits in dividends and the dividend represents one dollar at 40 per share on an annualized basis, when nearly 10% dividend yield based on closing price of $14 at 46 cents yesterday.
Over the years get paid more than $26 per shares in dividends or 2.2 billion in total and we have a fixed rate charter backlog of 3.7 billion, which should support continued dividend capacity going forward.
The total charter revenues in the quarter, where $152 million with 89% of this from vessels are long term charters and 11% from mesas employed on short term charters and then the spot market.
The EBIT da equivalent cash flow into quarter was approximately $117 million last 12 months CBD a couple that Ashley though has been approximately $488 million.
The reported net income for the quarter was approximately 4 million were forced to share.
This plus after a non cash impairment of $26 million in the quarter relating to two 1700 to you container ships built in 2005 and the vessel uncharted just sourced offshore.
In addition, there were some noncash mark to market new events on equity securities and interest rate swaps.
And we've added more than $160 million in charter backlog recently as a combination of asset acquisitions of charter adjustments linked to scrubber investments.
In September we agreed the acquisition of three new builds 300000 deadweight ton crude oil carriers or vlccs.
Vessel was delivered in late September the purchase price of $60 million is very attractive compared to.
Charter free values of nearly a $100 million for these vessels, we have secured financing of $47.5 million vessel and that equity invested is that 12.5 million.
Three vessels have now been delivered and the charter period is five years and the transaction added around $33 million per vessel to us.
This is in reality, a structured financing where the charter I will have repurchase option starting after six months and the risk reward profile is very attractive for us given thats charter free broker values are so much in excess of the purchase price we have paid.
We were able to execute on this opportunity on very short notice and with leverage we have secured the return on investment equity is very attractive.
During the quarter. We also acquired three container vessels ranging from 2400 to 4400 team.
The vessels immediately commenced approximately 5.5 year bareboat charters to a leading container line until 2025, adding approximately $30 million EUR $40 million to the backlog.
The purchase prices confidential, but similar to the 15 vessels acquired in 2018, and we continue building relationship with one of our largest clients.
Or asset exposure here is very near recycling values for the vessels at the transaction will amortize to shifts to virtually zero over the charter period.
We have also agreed to fund the installation of scrubbers and seven out of eight vessels on charter to gold notion.
We will be compensated with an increase in the charter rates, which gives us a decent return on invested capital, but more importantly, the profit share threshold level remains the same as before.
We have a 33% profits bit on top of the base rate of $17600 per day, plus and not small interest adjustment, which makes it around $18000 per day currency.
The most us more profit share contribution in the third quarter.
With the agreement to install scrubbers on seven of these vessels without increasing the profit shift threshold that could be very good prospects for profit share from these vessels going forward.
And also we would like to highlight that after owning 11 million frontline shares for several years, we have freed up most of the capital tied up in these assets and expects to deploy the capital in new investments.
Some at the half of the 11 million shares have been sold and we have freed up the capital in the other shares through a forward contract where we have received the cash now but also agreed to repurchased any shares in June 2020 through a forward contract adjusted for financing cost. We are there for effectively still exposed to some of these shares and we see in.
Interesting signs for us time to market over the next few months.
Following the recent charter extensions or charter backlog no stands at approximately $3.7 billion and of this more than $350 million has been added in 2019.
Over the years, we haven't changed both fleet composition of structure and we know of 92 vessels and race at early and only one vessels remaining from the initial feet in 2000 or.
We have gone from a single asset class chartered.
Company to a diversified feet with multiple counterparties and over the time the mix of the chart. The backlog has varied from 100% tank guess initially so nearly 60% offshore at one stage to the contain a mountain segment now being the largest segment with a bit over 50% of the backlog.
We do not have a set mix in the portfolio focuses on evaluating deal opportunities across the segments attempt to do the right transaction from a risk reward perspective.
Overtime, we believe this will balance itself out from a from a second segment allocation perspective, and we have recently increased in the tanker segment, which now stands at 9% of the backlog.
In addition.
Strategy has been to maintain a strong technical and commercial operating platform in cooperation with her sister companies and to see tanker group.
This gives us the ability to offer a wide range of services to customers from structured financing to full service time charters, but more importantly, we also believe it gives us unique access to deal flow in our core segments.
And unlike most other companies with a financial profile in the maritime world more than 60% of our cash flow comes from vessel, so time charters and less than 40% from bareboat chartered vessels.
On the liner sign after the likely this acquisition SFL has a fleet of 48 container vessels at two car carriers.
While our container vessels are employed on longer term fixed right charters and therefore not exposed to short term fluctuations in the market with the exception of to 1700 do you container ships that are coming off charter or not.
After being employed on 12 year charters.
Since effectively 2007 2008.
We have recently increased our backlog in the segment by more than 160 million in connection with scrubber upgrades and relate to charter adjustments to Containerships and several additional vessels are expected to be upgraded which scrubbers paid for by our customer.
On the Drybulk side, we have 22 drybulk vessels in the fleet with 13 larger vessels chartered out on long term basis, and seven handysize vessels in two supramax focus trading in the spot market.
One of our long term objectives is to combine stability and predictability and cash flows with optionality as we've seen over time the market volatility can generate superior returns from time to time.
Profit share arrangement, we havent gold notion as mentioned earlier is a good example of this.
The cap some access and most of the Supramaxes are all on long term fixed rate time charters well, the two supramaxes and 700.
Continue to trade in the spot market.
The average rate achieved for these vessels. This quarter were approximately 9001 on a dollar per day, which is up from $6200 per day in the previous quarter.
On a tanker side SFS 12 crude oil product in chemical tankers, most of which are deployed on long term charters and the vessels represent around 9% over the charter backlog.
The tanker market has recently strengthened and is expected to be healthy for the remainder of 2019 and into 2020 as crude oil demand is forecasted to increase through the end of the year and a temporary reduction investment supply is expected as owners.
And prepare for the upcoming implementation of IMO 2020.
The crude oil tankers charter to front on shipping limited.
$20000 on average per day in the third quarter.
Sure.
With no profit share contribution partly due to vessels being out of service.
In connection with Drydocking and scrubber installing.
Yes.
The average daily charter equivalent rate.
From the company's two modern Suezmax tankers.
Were approximately 85 to 700 into third quarter.
Compared to 15800 into previous quarter.
Well the exercise.
Up until 2017, the offshore segment was our largest segments for a long period.
Well, there's no doubt the 25% bubble chart a backlog.
And we own three rigs and five hopes or social support vessels.
The charter hire from the drillings rigs were 27 minutes at $27 million into third quarter.
Seadrill has subcharters the harsh environment Jackup rig vessel dealers to clinical Phillips until the end of 2028.
At the harsh environment semi submersible rig best Hercules as sweeten the recent being awarded multiple consecutive sub charters in the North Sea and is working for Ecuador.
Including the vessel in US we have reduced its debt from $1.9 billion. Initially on the seadrill related rigs to around $625 million currently or just over $200 million per rig.
At this aggregate outstanding loan balance only $266 million, so less than 40% is currently guaranteed by SFL.
The market for offshore support vessels remain very challenging and the five smaller rupture support vessels on charter to a subsidiary of sold stock remain in layer.
In light of the difficult market suits, the has announced that they will have to restructure the balance sheet and there is a standstill agreement with multiple lenders and other stakeholders in place, including SFL until March 2020.
And with that I will give the word over to our CFO Mr. Wilson, who will take us through the financial outcomes.
Thank you Miss yes, okay.
On this slide so for ministration of cash flows for the third quarter.
Please note that this is only guideline to assess the company's performance and it's not in accordance with us GAAP.
Also met of extraordinary and noncash items.
The company generated gross charter hire one on a 52 million in this third quarter is approximately 89% through revenue coming from our fixed charter rate backlog.
The benefit generated gross charter hire approximately 82 million of.
This amount approximately 65%.
Right from time to vessels and approximately 3% to 5% from bareboat charters.
Our tankers generated 16 million in gross talk tire in the quarter.
Not profits from our recent season soccer different then was recorded in the quarter.
Two of the three vessels on the been schedule to all service scrum installments during the third and into the fourth quarter.
The reason investments in you listed on long term charters.
Expects to see an increase in the fixed revenue from our tankers.
In addition to potential upsides from a profit split arrangements on the previous diseases from.
As Phil Assa from our two Suezmax tankers trading this book market.
Both of these vessels. This group assistance scheduled service in the fourth quarter of tend to 19, and the first quarter authentic.
Uh huh.
Both vessels.
28 million in gross charter hire this third quarter.
Approximately 18% was derived from vessels on long term charters.
During the quarter Seville received approximately 200000 in province fit from charges from Golden Ocean.
Subsequent to quarter trends.
I will agree to invest in scope insulation seven for keeps us focused on long term charters to go motion and extend for increased short rates from January sentiment.
The profit since they're sold will be unaffected by them and then.
And with the ability to use cheaper than most other large spoken vessel very good prospects for profit share going into this entity.
On the office side.
You talked to higher approximate incentive 7 million in the third quarter.
From the Seadrill rigs.
This is down from approximately 30 million in the second quarter.
Scheduled rent reduction for the Visteon.
At this act from May tend to 19.
Our three drilling rigs or sergeant to fully guaranteed affiliates of CG.
The harsh environment second rig visteon.
So charters to Conoco Phillips.
Until they tend to 28.
The harsh environment semi submersible rig mr.
It's employed consecutive short term subcharters, nor in the North Sea.
Semisubmersible rig. This total is currently in layup in Norway.
This summarizes to adjusted EBITDA of approximately 117 million for third quarter were one dollar and nine cents per share.
But then move on to the profit until statement as reported under Us GAAP.
As you described.
Earnings call.
Our accounting statements are different from those over traditional shipping company.
As a business strategy focuses on long term charter contract.
Large part of our activity.
Defined as capital leasing.
So a significant portion for talked revenues are excluded from U.S GAAP operating revenues.
And instant book revenues justified as repayment of investment in finance leases and this low.
Results in associates.
During this month.
Interest income from associate.
So overall for the quarter report total operating revenues according to schedule.
Approximately 111 and a half million.
Slogan, which is 11 number the 152 million gross charter hire actually receive redevelopments in recent.
The comp recorded a non cash impairment starts with approximately 25.9 million in the quarter.
SFL owns two 2000 5 billion cubic container vessels.
Long term talker doing well.
Greenville operator.
During a purchase options accessible incented centene with we have been advice that these are not exercise.
Due to the prevailing market conditions.
There were recorded a noncash impairment.
Within the 5 million, bringing the big valid down to estimated chart trophy market valleys the vessels our debt free.
Subsequent to quarter end.
Soon stauffer unknowns.
It has agreed with stakeholders and lenders.
Using SFL.
Six down its ongoing standstill agreement until March 31st sentence empty.
Liqtech read milestones being met throughout this downturn period.
Due to this continued uncertainty the company recorded an impairment of approximately 900000 on one of the vessels in the quarter.
Furthermore, as Phil recorded a totaling 5 million gain on mark to market movements.
Acuities investments.
Losses from approximately 1 million related mark to Mark Newman hedging derivatives.
Well as approximately $2 million urbanization of.
Deferred charges all of its a non cash items for the quarter.
So overall and according to you is kept the company reported net income of 3.8 million were four cents per share.
Then looking other liquidity and capex stages.
At quarter end at approximately 154 million in cash on the balance sheet.
Thank you the cats in wholly owned Nonconsolidated subsidiaries.
In addition, the company's marketable securities for President of 127 million this market prices.
Quarter.
This included 11 and assist in frontline international investments and secured loans and other securities.
On the lending side is still currently has a group of more than 75 international banks.
Many companies in the method of space challenging to secure effective financing.
Strong access due to a side track record and affiliation with the C tankers group of companies.
So this also repeat issue in both the U.S. and RBC capital markets and our bonds.
Our senior unsecured.
All currently trading above par, enabling us to test the market, it's a timing and prices right.
And in the third quarter, the comp Reight hundred million. The recent kroner raplixa met the $11 million to attack. This on the phone loan maturity incentives entity.
The both reissued other premium to par and the new offsetting amount up to stop issue is 700 million the recent cylinder.
Incremental.
So do you sold at an all in fixed rate of approximately 5.9%.
The company has approximately 36 vessels in the fleet.
Our upgraded scheduled to be upgraded with scrubbers in preparation of Iron Mountain dissenting.
In active discussions with some of the clients for this note scrubber upgrade.
Source distributors, who have installed by customers at their own expense fell to cover up to 100% within the segments on some missiles.
At the analyst third quarter as Phil has often the committed capex related disturbance of approximately $40 million.
We should be financed by communism tests and senior bank financing.
On the back of these investments as well has increased.
Sorry backlog approximately 180 million in addition to the potential increase in profits between rate and.
And savings and acute from stress on some for larger container vessels.
To summarize.
The board has declared a cash dividend of 35 cents per share for the quarter.
This represents a dividend yield of 9.7% based on the closings Airbus yesterday.
Recently added approximately 160 million in back to increase charter extensions and then on the acquisition of three more than meets disease.
And while they continue to collect revenue from our treatments 7 billion take soccer backlog.
Also upside from province that arrangements from out from our real Ccs and Capesize bulk carrier soccer to from fan and Golden Ocean.
In addition to profits bids related if you savings on some of our large container vessels.
It's an interesting to observe that the IMO, 10%. This story starting to unfold with strong sentiment in the crude tanker market.
Well, it's increasing spread between low and high sulfur fuel cards.
The company has some very strong liquidity position.
Ready to deploy capital in order to grow the backlog.
On the business development side notice to strengthen in math on financing market.
Firstly.
Capital markets are not very excited about shipping or energy.
Thanks to closing don't exit the coverage and there's limited capital markets activity in the sector in terms of raising new equity for industry.
Secondly.
Being banks, the deepest source of capital to the sector. Historically this ongoing regulatory pressure to deal with balance sheet.
Reduce maritime exposure.
At this itself it is as an opportunity.
The wrist elbow consisting of time charters.
Financing and bareboat charter structures.
Okay, we can provide companies.
The financing structures.
Back to risk adjusted return for shareholders.
This is illustrated by the recent Hunter transaction.
Mr cost efficient flexible structure and ability to execute transactions swiftly we were able to deliver to hunter a highly competitive financing at the same time, you transaction as highly attractive missile.
Provides immediate cash flow and it's accretive to portfolios return on equity with strong downside protection.
And with that I guess revert back to the operator, we'll open the lines for questions. Thank you.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Reminder, if you wish to ask a question. Please press star one of your telephone keypad and weight bearing Antebi announced.
And if you wish to cancel your request that the has.
Once again star one if you wish to ask a question.
And our first question is from the line of Chris Wetherbee. Thank you. Please ask your question.
Hi, guys, James Fronda going on for Chris one.
Touch on that.
Moving around the two chartered vessels again.
James said.
Paul recognizing that Snine Tasha still seems pretty substantial wonder understand what's the assumption there that.
That was driving Anthony on the books at that level, and then essentially what drove them do not.
Or what drove it to stay there over time, even though the vessels.
And then potentially if there's other.
Options like similar options outstanding in your books now.
Yes, Hi, Chris.
Vessels have been on charter too.
To.
The Korean operator for a number of years 12 years to be precise.
And this is.
Good day.
Under us GAAP as soon as Im sure Youre well aware there are very stringent rules for how you account for assets and also.
You depreciate the assets and also what you do when when if and when you take any impairments and typically is one of the test that you do.
Is that due to take undiscounted cash flow from from now on sale will at the end of the.
Before the asset.
And I think in this instance was a border line, but we felt that it was approved prudent for us to two to take this impairment.
Because you could say there these vessels are.
14 year so.
And they still have a significant life remaining.
With me, we felt that it's better to take it now.
And you say, it's impart due to assumptions or college market earnings that we could expect going forward.
The balance of this of course is that these vessels, where as they were depreciating from from a higher level.
Depreciation will then reduce going forward. So you say this will have a onetime call it negative impact on the PNM, but over the long Ron if you will have a positive impact so.
On a life from a lifecycle perspective, it's a neutral it's just that it's because it's a concentration.
Right now and and there are no other assets I mean, this would you call it.
Everybody will have to do well it impairment testing on oil assets every single quarter. So.
We have this these are the two assets, where we know where at the border on where we took this impairment.
Really all weekend, where we can say about that.
Got it are there.
Or other similar structures coming up in the near future.
Well as I'm sure you know when you have assets.
If you own if you own maritime assets. It all depends on when you bought them but.
Well the charter free values vary from time to time remember that most of our assets are chartered on long term charters and therefore call it.
Not all the call it the charter free Colette broker assessment call. It today may not be reflective of the cash flow characteristics of those assets.
So we we generally try to take a conservative approach.
In.
So on the on our accounting.
And we test is every quarter.
Got it.
I wanted to touch on the.
Nine shares.
And the sale at the repurchase agreement is this essentially.
Are you thinking about business debt and then thats not necessarily so we should be thinking matters is dead Wow you pursue an outright sale just going on you get the logic behind that and make sure that we're thinking about that direct way.
Yes.
What we've done there I mean remember maybe bone 11 million shares in front line. Since 2015, so we've been very long term shareholder in that company.
We still have we still have we still have we're going to say.
We are still positive to the market, but we felt that it was appropriate now to take somewhat offset it off the table relating to those shares.
And so we've done it's really a combination of two things we've sold approximately half those shares at what we believe is quite attractive price level and then the other half we have effectively freed up the capital.
In in a structure where the.
Well in interest add on is seen as very attractive and certainly much cheaper than colette on.
Well it.
Senior unsecured debt. So so this is you can say from from from our perspective. This is sort of half the shares where we have.
Structure at very attractive unit risks equal and reward financing structure.
But we have good flexibility here, if you want to release more of that we can do that most likely also ahead of time, if you like to.
And as we see good prospects for the tanker market going into 2020.
And also with front on having a lot of scrubbers.
Being installed already or or in the process of installing.
We think they are well positioned and the market. There. So we're not concerned with with that but we are seeing but we are included in it for all practical reasons. We are effectively exposed or are we still have full if the market exposure to have those shares and which also means that should give share price go up from here.
It's great for Us because then we will get the benefit for that.
Yes.
But for us since it's a better use of our capital instead of having having it locked away there we can free up at the very attractive.
Cost of capital.
Got it and then one more just wanted to touch on the VLCC deal I understand some.
Very good job not walk to the dynamics about.
Hi, they would do the deal and wireless.
If you actually just wonder understand a bit more about certain market size and the opportunity for more of these deals with time.
Tony.
Just around the corner.
You might think that where you see you'd see lots of these deals more or more.
More so just kind of want to get your view on the outlook to do similar deals.
And some of the potential opportunity, that's not necessary and if there aren't necessarily that many maybe some color around potential deals you could see.
Implementation deadline would be great.
Yes.
Thanks.
The deal there for those three vessels was something that came up we were able to execute on that on a very swiftly because we saw the.
Good for US it was really attractive from a risk reward perspective assess I think we mentioned in the in the press release.
We have a very low quality cost base compared to call. It charter free market value CSR brand new vessels Cohen with all the latest bells and whistles. So we have a very interesting.
Beyond there we also structure from financing for that.
And and we could probably if you wanted to we can probably have levered more that we pay for the vessels.
Because of where we started of course for us that doesn't make sense for us we want to have capital at work that is really what is generating or the dividend capacity for us going forward. So we restructured 47 and a half million dollar effective financing here.
For attractive rates, because if you are a bank in that structure, you see that well one.
The ship is worth arguably a $100 million maybe more.
You. We are we are in the air we pay 60, which of course is attractive and then the bank is lending.
Below that again, so so we get the benefit of super attractive pull it back leverage which means that when where the call. It the implied call. It financing cost store yield you can say in the in the leasing deal is quite good of course, we get a super return if we can fund us with very cheap capital.
Behind us so it's a it's a cost of capital our where we can use our effective March strengthen the market are very strong relationships with the banks, where I think we can most likely get at this is good at probably better terms financing terms than any other maritime company up there.
Perhaps getting to that it's basically asked about kind of opportunity to induce more of these deals and I would say definitely yes, no traditional capital sources are constrained.
And that kind of more median.
Yes.
Owners are facing difficulties in attracting attractive financing so basically the need for alternative capital providers.
Well our in big demand.
Very versatile twod books being able to provide both time charters on bareboat to find the stock structures. So we definitely expect to see more of these type of Steve.
Going into this entity.
And given that we have a balance sheet, we have enterprise value above one 4.6 $4.7 billion means that we can execute on relatively large transactions quickly.
Which I think was one of the benefits in this specific transaction, we could do we basically we're ready when in less than two days. We had listed all subjects and had to deal Randy and there that I think was very big attraction in the overall structure. So we think that.
So hopefully that could be other opportunities similar assets or to the other assets. They know then they tend to have to be brand. New we also look at sort of older assets.
With the right risk characteristics, but we generally prefer colette commodity type of that type assets.
Where you can say worst case scenario, we could you know we could end up owning those assets.
If you look at it from a financing perspective, but there we have a huge.
Got it.
Strength compared to many companies with a financing profile because we tend to run vessels. We operate vessels. So we can we you know for us if we have if we have to take a vessel baskets, it's not necessarily a downside there could be some very interesting upside characteristics around that and the two suezmaxes. We have is a good example of that.
It was originally effectively a financing structure at the time the counterparty.
We're unable to pay the charter rate some years ago, we set Dan they handed the keys facts to us and three weeks later in the market showed up and and we really got the benefit of strengthening market. So we don't see that as we see more opportunities around that the than that really risk whereas.
Bank would look at it very differently because they couldn't operate those assets themselves.
Got it thank you.
Thank you.
Next question is from the line of Chris Robertson, taking please ask your question.
Hi, guys. This is Chris Robertson of Jefferies. Thanks for taking my call.
Multipart scrubber installation question. So bear with me here. So can you walk us through kind of the quarterly cadence of the installation and Capex spend and then.
How many including how many were installed in Threeq, you and the associated off hire with that and then can you walk us through how many of the 36 retrofits will be kind of finance upfront versus.
Paid for over time by increased premiums.
And if you could mention kind of average cost per unit and suppliers of the units that'd be great.
Hi, Chris we have our chief operating officers from Scholey here and he can he can give you the details there.
Thanks.
Hi.
The over a couple of questions in there has also taken in turn.
We have so far.
Lee.
Vessels, where we have done the payment upfront did you say infill in Threeq and Fourq and so already now it's one k.
The two vlccs.
And there will be.
One more K and one more suezmax.
Coming up now.
Q4.
Okay, Yes, and then understanding the rats spread out in the is it going to be the first quarter of 20 or first half of Tony.
Andrew.
So.
If you look at the whole.
If we do the containerships than we have.
We haven't summer of can't container ships coming in the first.
Basically it's going to be the first half most of them will be done in the first quarter next year.
And with some sort of tailing into April .
Well the total of seven.
The tweens.
Annually in April .
For the and from the Capes.
More or less dumb.
In the second the first half next year than all the seven ships will more or less the dumb.
And.
All the tankers will be done by.
First quarter next year.
Okay.
In terms of those seven.
Capes with Golden Ocean on a kind of per day basis does that work out to be around 1400 today in the premium.
Over the life of the charter.
It's approximately.
And then just shy of $5100 per day per vessel.
Okay perfect.
So I.
Container ships, we have.
Three ships.
Well charter.
Will install the scrubbers.
On the time charter basis and forward SFL will install this krogers.
I will be.
A profit split to pay them back.
So we havent mixture there and we are in discussion to do more on the same basis.
Okay.
So and so for MSC.
Our one of our biggest clients. This total of 21 ships.
And.
They will be done gearing more or less during the normal drydocking schedule.
For those ships.
So.
And thats going to be done sort of throughout next year.
More or less.
I would say evenly spread out.
So thats about us being done on the charter is on schedule for charters on benefit.
Okay and on any of the other non containerships than our any special surveys or anything else being pulled forward to coincide with the scrubber installation to kind of maximize the off our time.
Yes.
We are doing on.
You can say as in general rule, we do we make the scrubber installations coincides with the special survey.
But of course, you have some flexibility on that so we have done at them within just a couple of the instances here to maximise on it, particularly where we have put it benefit out of what we believe would be quite attractive scrubber economics. So this is something we tried to June we fight for every dollar.
So some some of the installations.
The very tail end of the of the window to be able to actually get the scrubbers in time.
All the ships, we are pulling them forward. So that we can do it as early as Paul possible. So that means the bulk of.
Finished ship installations will be done from December start of Dsos.
Putting in December this year and will be done by April next year.
So we so our aim is to get us muscle that 2020 payback as as possible while staying within in the world. The Special survey.
Okay.
Great. My next question is kind of related to the charter backlog in the dividend. So it looks like you guys have done a really good job here with extending the charter backlog and then increasing it with the new vessels as well as in addition to the scrubber premium backlog.
So what are your thoughts around the dividends stability.
Kind of over the next few quarters.
And what are your plans for growing it next year.
Well I think.
This is morrison principal or does not communicated forward dividends it's always.
Decided quarter to quarter, but of course looking at the history, it's been very stable or or.
Has been increasing many times too. So we cannot guide you there specifically of course now we have been adding to the backlog.
And we have freed up quite a bit of cash around is the fronts on shares.
We do look for other investment opportunities et cetera. So.
Hopefully overtime, we can we can build on the David we can build and increase the dividend.
But.
We cannot give you any specifics.
Sure when in terms of just returning capital.
Just in general what would the thoughts be around growing the dividend versus.
Accelerating some repayments or even some repurchases.
Well, we tried to take all of this call is an opportunistic approach to the back we tried to maximize value per share for our shareholders sets or thats. Our principal objective. So we will look at any any option there if we think.
I tried to do what we believe will benefit our shareholders. So.
We are at capital Agnostics, and we could look at theater.
Alright, thanks for the time and taking my questions.
Thank you.
Next question is from the line of Greg Lewis. Thank you. Please ask your question.
Yes, Thank you and good afternoon.
All right curious could you talk a little bit more about how you think about the returns on the scrubber investment I know you mentioned payback, but but as we think about.
Where scrubber investments in your portfolio stack up against other assets just thinking about that maybe.
The outlook for scrubber investment is probably doesnt have the time horizon that a lot of the vessels do and in terms of residual value just kind of curious how you think about the returns on on.
Scrubbers.
I would say generally when we have been invested again scrubbers. We have we take so we can have multiple hassle, we can do scrubber investments, where we have pullet direct benefit relating to that.
Well if fuel delta.
Where we install it on a rolling vessels trading in the spot market like to two Suezmax tankers for instance, or where we participate.
On on two of our Vlccs, where we have frontline actually chipping in half of the increase in this scrubber installment, but where the profit share threshold remains the same I'd is really increasing the probability of getting revenues from the profit share same thing with the goal notion vessels, we are putting on the scrubbers we.
They are we are increasing the charter rates in a way, where we get a decent return on our capital without anything else, but of course, when you have that equipment on board the risk the higher probability of profit share. If you don't increase the profit share threshold.
What we have also dawn and are willing to do is to put on scrubber us on vessels were also relating to long term charter vessels, where you can do a profit share type arrangement.
Of course, we what we focused on is we think that profit College scrubber economics is what will most likely be better in the early days and then over time.
There is we think that pull it that the spread between.
Well if the oil.
Standards as a few loyal and low circle few Lauren.
May come come together and therefore, we tried to maximize that sooner. So it's you can say is an opportunistic approach, we think that that could be very interesting benefits for us into 2020 from a couple of these factors.
And.
We think that when we put down this money remember let me put down this money. Good typically be almost you could call an equity investment and therefore, you need to have certainly equity light return characteristics on it while other vessels.
It effectively finance them within the existing financing structure, and therefore have a very low cost of capital relating to that building on building on the returns. So we look at it from a case by case perspective.
And if we if we didnt truly believe that Google and Kevin Good return on our capital of course, we wouldn't do it.
Okay, Great and then just more of a big picture question for me.
Clearly layout your your available cash marketable securities just as we think about total.
Nivo capacity for growth.
Polluting the balance sheet, how should we be thinking about the available capacity.
Deploy capital over the next no over the next 12 months ahead as we sit here today looking ahead to 2020, how do you think the landscape differs today than maybe it did a year ago in terms of the opportunities.
To deploy cat deploy that capital.
I think.
It's hard to perhaps come with a specific number in terms of investment capacity if you do get.
All right or like free cash to invest.
And if that together with the axis, we have two senior bank financing in terms of regular traditional financing and also.
Jeff and NGL costs within the last year.
I would say it is significant.
We're entering into markets where.
As I mentioned before is that we see more and more opportunities.
So attractive risk rewards.
You can step in that's now alternative for traditional financing.
So it's.
Thank you to twofold strategy. It just is still continue to work on.
With our existing clients.
Or even you end users, but also kind of more financing structures like to recent entities.
Get 20 tend to be very exciting.
We also believe it's good entry point in terms of investing in terms of and two point on vessel values I missed the interesting market headwinds with a very limited order book opt in the arts.
Okay, and then just one last one from me realizing it's only slight but it's probably less than 1% of your total revenue.
Those vessels that you mentioned that you took the impairments on there are obviously going to be look to deployed.
Yes come Q1 of next year, what's sort of the opportunities to deploy those ships.
Thank you looking ahead it looks like you have another three vessels are all three container ships that roll off contract in Q1, how should we think about those five ships in terms of their re chartering opportunities.
As they roll off contract.
Firstly, the only shifts that will roll off contract in the near future all the to 17 hundreds from.
From Korea.
The others will be.
We'll not be redeliver.
They've already been extended.
Well they can they haven't they will.
We are there we have put options. So we can choose to extend that if we want to.
Okay.
So so if we then turn turn back to the 17 hundreds.
We will get them sort of end December we will spend a little bit assigned to to get accrual onboard and make sure they're ready for trade and since they have special survey due dates sort of spring of next year, So second third quarter.
We.
We will try them sort of short term until there do you feel special survey and that will carry that out and then we can do more of a long term.
Deal on them, so typically fulfill that kind of assets.
It's difficult to do long term deal it says and special survey coming up so we will have to do it into in two stages.
Okay perfect. Thank you very much.
Thank you.
Next question is from lineup Liam Burke. Thank you. Please ask your questions. Thank you good afternoon.
You talked about your competitive advantages you've talked about the demand.
The other side of the market, but could you give us a sense as to what's the competitive landscape looks like where demand seems to be pretty high out there.
Yes, Sir I think gives us a competitive landscape I think.
I was quite unique most alder.
Companies are focused on I would say traditional leasing just providing.
Bareboat Soccer's basically so it's kind of.
I'll turn it into bank getting quotes.
Our competitive advantage, it's our flexibility you look at our current backlog.
Significant part is time charters that basically enable suit to do have a much wider much bigger deal flow in terms of opportunities, while they're just being a financing.
I think thats kind of that kind of differentiating factor from.
More pure financial.
Yes, I think also from a shareholder perspective I think.
We are comfortable with drilling the ships it does not become a liability if you need to repurpose SMS. So I mean have all those capabilities in house.
That's very interesting dynamics.
Okay. Thank you and you announced a two deals this quarter, one where are you taking ownership.
New vessels and then at the other end feeder vessels that you purchased at a slight premium to scrap.
If I look at your backlog is it more heavily weighted towards newer acquisitions of newer assets or are you a or is it more heavily weighted towards the assets with a slight premium to scrap.
Well I think.
I mean to just to start fleet into perspective, and the compliment public 15 years ago, we have put in fee and crude tankers.
We have more than doubled the fleet meal level of those vessels less it's going to be enough continuous focus from for management to recycle and buy into core that modern tonnage believe in.
In 2018, you invest in more of 1.2 billion predominantly in more than tonnage.
Said you know we also see at the risk.
Return on older assets basic core are very attractive given that this extremely strong downside protection. So.
In some instances that that it did that this attractive but.
I would say our focus on new more than last it's like the recent transactions up to treat the vessels, but also there you see that we're able to acquire them at the significant discount two to two markets out.
60 million fishing vessels at the time are diverse.
Mccain about 95 million per vessel.
Great. Thank you.
Thank you.
Thanks again for those participants I'd like to ask questions that is firewall.
No further questions Sir please continue.
Thank you Dennis I'd like to thank everyone for participating in a third quarter conference call and also tank decimal team for their efforts. We are committed to continue building. The company asked we tried to explain arrows on the coil and we believe there will be good investment opportunities for US also going forward with attractive risk reward profile. If you do have any follow up question.
There are contact details in the press release, how are you can get in touch with us through the content pages on our web page Www Dot Felcor dotcom. Thank you.
So that does conclude our rate conference for today. Thank you Albert question I mean, you may all disconnect.