Q4 2020 Earnings Call
[music].
Greetings and welcome to the Dorian LPG fourth quarter 2020 earnings Conference call.
At this time, all participants are in listen only mode.
A brief question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
Additionally, a live audio webcast of today's conference call is available on Dorian Lpgs website, which is www dot Dorian LPG dot com.
I would now like turn the conference over to Ted Young Chief Financial Officer.
Thank you Mr. young please go ahead.
Thank you Christine.
Good morning, everyone and thank you all for joining us for our fourth quarter 2020 results conference call.
With me today are John Hadjipateras, Chairman, President and CEO, Dorian LPG limited and John Lycouris, Chief Executive Officer, Dorian LPG U.S. say.
As a reminder, this conference call webcast a replay of this call will be available through June 30, 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.
Forward looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions.
One or more of these risks or uncertainties materialize or should underlying assumptions restaurants proved to be incorrect actual results may vary materially from those we expressed today.
Additionally, let me refer you talked about it results for the period ended March 31, 2020, there were filed this morning as part of our earnings release on form 8-K. In addition, please refer to our previous filings on form 10-K, and form 10-Q, where you'll find risk factors that could cause actual results to differ materially for moves forward looking statements with that.
Ultimately, we called the John Hadjipateras.
[noise] good morning from South.
Okay. Thank you for joining us.
Oh, I will say a few words before its head who will review the financials with you.
John will then talk about the fleet and the market.
Today, we also have with us.
On the line from Copenhagen, Tim Hanson, our Chief Commercial Officer, who will answer questions from you about the market the current.
Freight market.
In my prepared remarks for on last call on February four I said.
Our outlook for the coming calendar year remains optimistic the Corona virus is of course a potential headwind.
That was 16 weeks ago.
And the intervening period my priority is being the safety of the 500 seafarers currently serving all bought a ships.
Well I saw shore based stuff and stakeholders.
And I can report that our fleet has continued to operate thanks to the dedication to wash U pairs and colleagues onshore.
And that we're all safe.
Mindful of then you peril that surrounds.
The most talked about disruption for us has been a difficulty to make crude changes.
For a while we could hardly make any.
Yes in convenience, both those who we exceeded their contractual time on board and those are sure waiting to replace them access to get back to work.
We are starting to see opportunities to carry out crude changes no.
Well it wasn't a simple tasks in the past has become a logistical challenge.
Transporting a coated freesheet <unk> through airports launches to the ship.
Try to minimize exposure and striving to ensure they ship remains disease free is no simple tasks as you can imagine.
It is encouraging though the start to retirement normality.
One of our second engineers west shortly shortly be going home to meet its new baby born at the end of April.
I hope that you and all your families and friends are also safe and healthy.
Our financial year 2020, you conclude at March 31st was our best sense 2016.
Continued growth so seaborne trade of LPG.
Hey, somewhat restraining order book and renewed exports from the U.S. say to China resulted in freight levels I would call good.
These developments were supported by continued expansion of U.S. shale production and a PDH demand in China, and South Korea as well as continued inroads of LPG for residential use in India and all the Asian countries.
The freight market was quite resilient and at Tcs were also underpinned by a lower bunker cost.
And a quarter ended March 31st we achieved total utilization of 91.7%.
The daily P C.
[noise] revenue over operating days as defined in our filings Oh 51888 [noise].
So I was a day, yielding utilization adjusted T C.
Well, what do you see per available day of about $47594 a day.
April continued robust.
And we estimate that we have a 75% Cabo the current quarter near $50000 per day.
However, the current market as expressed by the published Baltic Index is now closer to 20000 per day.
We have made red many forecast.
Ranging from little.
A little too very pessimistic.
Predominately based on assumptions.
How about a decline and U.S. shale production available for extra export.
I didn't know pretend to know which forecast to believe much less to make them.
Well economic activity bounce well crawl back.
Well, there would be permanent demand destruction.
What I do know is that the order book is it about 12%.
Propane as a fuel for several applications is among the most attractive options avoiding greenhouse gas emissions it produces fewer than gasoline diesel and heavy fuel oil and whereas natural gas methane producers fewer pair of you'd be a greenhouse gas <unk>.
You.
Propane if it released in air directly or from methane slip. It produces a global warming effect 25 times that of carbon dioxide.
LPG SB as has been shown in India can improve the quality of life for a very large not part of the world's population.
Dorian has a young eco fleet.
Darren has a strong balance sheet with leverage.
Low leverage and good liquidity and no significant capex commitments.
As we previously reported we completed two strategically significant transactions during April 2020.
Japanese sale leaseback, our seventh and a refinancing of the commercial tranche of our main banking facility.
These transactions increased our available liquidity reduced our financing cost.
And extended the maturity of our dad and reduced our principal amortization.
We are optimistic on the fundamentals are the LPG trade and confident that Dorian LPG as well position to continue to provide safe reliable clean in trouble free transportation for our customers and create value for our shareholders.
Oh, that's a tad to discuss our financial results.
Thanks.
My comments today will focus on our recent financings are unaudited fourth quarter results.
A discussion of our fourth quarter results. You May also find that you sold to refer to the investor highlights slide.
Ah posted this morning on our website [noise].
Hi, John just touched on the to strategically significant financing transactions, we completed during April 2020.
I think April 23rd we completed the sale leaseback financing of the Cresca after prepaying that debt on the ship, we netted $23.9 million an additional liquidity.
Well the floating rate of 250 basis points over LIBOR and an age adjusted amortization profile of over 20 years. This financing represents attractive terms and met our goals of lowering our interest cost and extending the debt maturity inline with our strong balance sheet.
On April 29, we completed the refinancing of the commercial tranche of our 2015 that facility. This transaction addressed a number of objectives first we turned out the next major refinancing to March 2025.
Secondly, we added a $25 million revolving credit facility, which gives us access to additional liquidity should be needed.
Thirdly, we achieved an immediate reduction in interest margin on our commercial tranche from 275 basis points over LIBOR 250 basis points.
We can also reduce the margin by an additional 10 basis points, if we reduced the loan to value ratio on the vessels and this facility below 40%.
Finally, we're extremely pleased to have a adena sustainability feature by which we have the opportunity to reduce our interest margin further.
By achieving agreed levels of improvement in our average efficiency ratio, which is part of the Poseidon principles prama. Good promulgated by the leading shipping banks measures annual carbon emissions per deadweight ton and targets consistent year over year over year decreases in this ratio in line with the IMO guidelines.
Finally.
The new facility reduces the mandatory amortization on the commercial trucks from approximately 12.3 million per year to 600000.
With these two financings now completed we've reduced the principal portion of our cash cost per day by approximately $1330.
Going forward, we will amortize about $9 million per quarter on the 2015 amended and restated facility and $4.3 million, an all the Japanese financing arrangements.
In total, we will pay down $13.3 million per quarter or $53.3 million per year, which is down from nearly $64 million here.
Again, turning to our fourth for a first quarter results.
We had a total utilization of 91.7 per cent for the quarter and T. C per operating day of $51888 a day, yielding utilization just a rate of 47 594.
Our spot T C, which reflects our portion of the net profits into Helios pool for the quarter was $50311 per day.
Finally to give you some additional insight into our overall spot chartering performance Helios pool as a unit encompassing about 35 ships recorded a spot P.C., including contracts of pre Friedman of approximately $51500 per available day for the quarter.
Daily Opex for the quarter ended March 31, 2020 was $8556 per day, including amounts Expensed for dry dockings. It was 9004 seven including those costs.
Opex per day, excluding the dry docking related costs modestly increased compared to last quarter's $8413 a day.
Since the March quarter, though had fewer calendar days than December quarter total Opex was roughly flat on an aggregate basis again, reflecting our teams continued vigilance on operating costs.
Total DNA for the quarter was 5.7 million <unk>.
When cash DNA I gionee, excluding non cash compensation expense was about 5.3 million. This level is generally consistent with rice with our expectations. The first calendar quarter of the year.
Our reported adjusted EBITDA for the quarter was $67.2 million, which was a significant increase from the 14.1 million excluding costs related to the unsolicited BW LPG proposal recorded during the same quarter last fiscal year.
The strong rate environment, a lower gionee accounted for most of the improvement.
Compared to the prior quarter EBITDA increased 7.3 million in spite of modestly higher cost from Drydocking.
Turning to our financing costs, we look at cash interest expense on our debt as the some of the line items interest expense, excluding deferred financing fees and other loan expenses realized gain loss on interest rate swap derivatives.
On that basis total cash interest expense for the quarter was $7.1 million, which was down about 300000 from the prior quarter largely due to continued debt pay down at somewhat lower LIBOR rates, we continue to benefit from our hedging policy in the favorable pricing of our Japanese financings, leaving us with the current interest cost fixed hedging to Smes.
Offloading piece of 4.15%.
For the coming quarter with our new financings in place, we anticipate cash interest expense in roughly the same magnitude approximately $7 million as lower LIBOR margin will be offset by slightly higher debt balances given our lower amortization.
For the quarter, we had cash outlays for capital cost associated with dry dockings of roughly $9.6 million or $4398 per fleet day.
Leap day is again calendar days plus time charter in days as those terms are used in our filings.
Combined with amounts expensed during the quarter or total drydocking cash outlay was $11.3 million.
We also made if repurchased $32.2 million and stock since the last time, we reported in February.
And that represents about 3 million shares in total we have now repurchased $49.3 million worth of stock comprising 4.4 million shares or roughly 8% of the shares outstanding prior to the announcement of the buyback in August.
Turning briefly to our full year results, we reported total adjusted EBITDA of 232.8 million the highest in our history and adjusted net income of 130 million.
To put those levels in historical context or T. C per available day for fiscal year, 2020 was 40824 and our daily T. C. In 2016 heretofore our best year was 51 to 66, the increasing profits off a lower T.C. reflects the improvements in our cost structure in the intervening years as.
Recent available days.
For fiscal year 2020, we generated free cash flow, which we defined as cash flow from operations less principal repayments.
Before dry docking outlays of $110.3 million and $85.2 million. After all Drydocking outlays, both expense can capitalize this equates to between $1.16 to 17 per share based on the shares currently outstanding.
Our cash flow and liquidity remains strong.
Since quarter end through May 26, 2020 are restricted and unrestricted cash and short term Marcia marketable securities balances up to over $148 million.
In order to assist you in your modeling please note that our quarter ending debt balance excluding deferred financing fees.
066 hundred $46.1 million does not reflect the two transactions we completed in April.
Those two transactions increased our total debt by 26.8 million, although our net debt was unchanged because we retained the cash proceeds the debt increase for general corporate purposes. We expect therefore, our debt balance at June 30, 2020 to be approximately 660 million again, excluding deferred financing fees.
Although we currently hold the 76 plus percent economic interest in Healios, you're not consolidated balance sheet accounts, which has the effect of understating, our cash from working capital.
That's we believe it is used to provide some additional insight in order to give a more complete picture as of Tuesday may 26, 2020, the pool at roughly 13 million of cash on hand, reflecting the fact that the pool is just paid the distribution.
At the end of last week.
We feel that our liquidity and capital structure have positioned us well for whatever rate environment, we face in the coming months and we believe that allows our company to make capital allocation decisions from a position of strength, we sold over $50 million remaining under our share buyback authorization. We also remain interested in accretive growth opportunities that meet our risk reward criteria.
With that I'll pass it over to John look worse.
Thank you Ted.
Global LPG volumes during the first quarter 2020 totaled 26.9 million metric tons, the 3.6% year over year increase well you U.S. seaborne export volumes for that first quarter reached a record high of 11 million metric tons, which is oh about 30.
<unk> percent increase from the same period last year.
The other she lifting from the U.S. reached over 50, both in March and April and the Middle East Golf lifting reached 70 in April.
So that's the highest level since June 2019 for the Middle East.
Even though may has not concluded yet we expect about 66 deal do you see lifting from the U.S. slightly higher than May last year, while the middle East Liftings were low at 50 to 54, most likely on account of crude oil production cutbacks.
Year to date seaborne exports of LPG from the U.S. were 5.3 person higher than last year, well the middle East has seen a 16.3% reduction year on year.
On the supply side U.S. NGL exports have continued strong in 2020 with capacity and infrastructure additions remaining on schedule. During this year by all major export terminals.
Several projects related to dock expansion additional fractionation capacity.
Nine commitments are all expected to complete during 2020 at nearly 21, perhaps at a slower pace.
The covered 19 lapdancing the oil price collapse. The last few months have led to poor market fundamentals in the U.S. and of course early production cut shut ins refinery cutbacks deferred drilling and reduce processing volumes, which supported the Mont Belvieu NGL pricing and.
Also absorbed NGL inventory volumes would satisfied record export demand from two countries, which were preparing for locked down and for their inventory builds.
Although Chinese LPG imports declined last quarter, mainly due to the covered 19 lockdowns in that country. There were substantial demand growth from India, Japan, South Korea and Indonesia.
During the same period.
India imports grew 7.2% to say point ninemillion million metric tons, while Japan is imports grew 13.2% to 3.1 metric Don <unk> million metric tons, and Korea, but grew 36% to 2.2 million metric tons.
Not with Europe, and Mediterranean demand for U.S. LPG is expected to recover now that the markets in Europe gradually return from loved tops.
And with crude oil prices recovering to above study dollar levels, we find the per bankannapolis spread starting to turn in favor of LPG cracking economics.
Yeah. The as you see fleet order book stands at roughly 12% or about 35 vessels. According clarksons only four ships have been ordered this year compared to seven at this time last year.
The crude oil price collapse brought in lower bunker price to the shipping markets.
The absolute bunker fuel price levels in spreads we show earlier this year have shrunk, but in relative terms. They have remained the same.
Hi, cellphone marine fuel oil Hs AFFO was 300% sulfur content still trades at about 25% to 30% discount to the new I'm, a 20, 27.5% sulfur content compliant fuel.
Oh, so called real SFR.
Well, that's scrubbers equipped vessels would be just consistently higher tcs as they continue to benefit from the relevant front, the relative price discount spread or having marine fuel had to those burning compliance your lives.
Doran remains committed to improving the environment and I would note that scrubbers not only read you suffer upside for vessel emissions, but also they deliver significantly reduction significant reductions in black carbon and in particular matter emissions, particularly when compared with emissions produced by very low sulfur fuel oils, which.
Normally blended then unstable too.
And now to comply and marine fuels Obama 2020.
We also continue to monitor closely and evaluate the potential for Lpgs fuel.
The current prices might marginally appear to make economics more attractive.
However, it is difficult to make a longtime decision given the volatility in the underlying hydrocarbon prices.
And most significantly the significant more significantly the capital investment required.
Dorian LPG has gardening service nine scrubber, if it did vessels seven of which were fitted with hybrid scrubbers during the last eight months.
Also completing a their first especially survey endo dry dockings.
Two of those vessels well show installed new ballast water treatment systems.
We have now commenced the retrofit work on attend hybrid.
Scrubber vessel, which is scheduled to complete next month, including completion of the first pressure server and dry docking.
Subject to market conditions in the second half a talk 2020 were considering a retrofitting scrubbers to those matters, which were originally committed when their program to undergo their upcoming dry docking, especially servers.
Thank you and now I'll pass it over to John.
Thank you.
We are ready to take questions.
Anybody who wishes to questioned us.
Thank you will now be conducting a question and answer session. If he would like to ask your question. Please press star one on your telephone keypad.
All information Tom will indicate your line is and the question Q.
If I start to if he would like to remove your question from the Q.
Participants do you think that men necessary to pick up your hands that people that person's talkies.
One moment, please let me pull for questions.
Thank you. Our first question comes well I know Omar knocked out with Clarksons Platou. Please proceed with your question.
Hi, Thank you hi, everyone. Yeah, obviously, a very impressive performance on the spot market.
Very good results overall, they're really despite a lot of disruptions John that you mentioned that we're seeing here. These past few months and I've a couple of market related questions. But also just wanted to ask about the the refinancing I'm. Here recently you guys have unlock the good amount of cash with the sale lease back and you defer to maturity is what the 2016 refinery.
That you mentioned the annual repayments are now 53 million.
Excuse me from the 2019 10-K.
64 million due in fiscal 21 and 203 in physical 22 are both years now basically the this is Peter.
That's correct Omar Yeah, we termed the the anyone landlord is now down to about 53.3 million from 63.96 before and then most importantly, as part of the 2015 financing we were able to what extend out that maturity on the commercial tranche of the of our big facility to add to 2025.
So, yes, you're absolutely right.
Yeah, and then right Okay and that includes the 52 million that includes the at least basketball.
Yes.
Thank you. So also just wanted to ask about I'm clearly that the market backdrop that were and clearly you guys had a very strong performance in the first quarter and John you mentioned booking 75% to fuel I believe at 50000, as we kind of think about how things are clearly the market's dropped off into the low twentys per day.
Yeah, the OPUC plus cuts that we think about <unk> crude market I was call. It 10 million barrels a day out of say global trade of 40 million barrels of crude good can you give us they've been order of magnitude. How this is affecting the LPG trade. It John I recall, you mentioned that in your remarks about 42 lifting.
Per month, or 54 could you might just kind of going over that again, given some perspective.
Wave a question on the can you just repeat the last bit of your question. Yeah, just basically trying to understand what do we think about the the the lost volumes that are that are coming as a result of city OPEC cuts by themselves.
Oh, okay.
All right on Mark why don't we let him take that because he can give you a more current view of what's going on and how it affects more.
More specifically I would have been affecting the market in the last few weeks.
Tim.
Yeah Yeah.
I would say Oh of course, we were seeing these costs also eating into the TV LPG volumes.
Specs with all the U.S. and as John mentioned area, it's a little bit early to say exactly how much because LPG boats are reaching some from the crudes are drilling and and the Oh Gee.
Certainly and also a d. and NGL sit at the moment looks to be more profitable Oh. So we're trying to figure out what what is that is directly related to the adoptions and beams you ought to be west to the reduction in ALS already drilled.
Definitely she was on the summit changes and be already she got even even though we have not seen.
Cancellation yet.
That you didn't yields actually seems to be.
Hi value a compound for each of the art.
But.
But you can see there, there's probably almost rigorous from or is that there yeah.
I show that shouldn't in the LPG markets are due to two high demand.
So we would expect that you're.
You can say the reduction or optic adoption there would be somewhat offset also bar at the moment I'm ventures that would be.
Eaten through through the on so yeah.
Production starts recovering.
What exactly how much I mean, you've been saying $10 million 10 in balance.
Good day exactly.
What that is based on the on the on fuel price or are your prices answer one is quite.
Oh, it's quite uncertain projections are at the moment coaching.
Yeah Okay.
What you think though I, probably should be [laughter] [noise].
I no that make sense I guess, maybe just maybe thinking about so the main thing.
The Jamul course had mentioned 62 or 54 listings for May how does that compare to set the prior prior may.
John If you don't mind just to give up first I was 52. It was 52 lifting the prior prior May Oh, sorry, I haven't got shot summer I will get it to you.
During the.
[noise] it but it was a little bit below where we thought it was on on the back of production cuts.
Andrew perhaps.
What's up why did we get into June, but we'll see whether a this reduction in Liftings will continue the middle East. We're just talking here, Tim talked about the U.S. golf and I think you are talking about the middle East and true enough Middle East has seen a lower liftings this may but.
I'll give you the number for last year. This may.
If you carry on I will come back.
Okay. Thank you shouldn't say they the U.S. <unk> from our you drilled some of the U.S. give small LPG then when when do I production cost somewhere in the middle East.
Sort of the ratio of LPG bottles drilled is different from probably wish him.
Please.
Got it okay. Thank you and then sorry, just one maybe one more just on this because there's a lot of moving parts and a lot of you know whether you didn't you mentioned the are really cargo cancellation, but obviously it limited arbs, then things happening very quickly and very fluid like we've seen in the say the product tanker space or the M. ours.
And he's a lot of logistical issues or access the marriage and waiting time, that's something that's happening in that field, you see trade as well.
Ah, Yes, you saw a little bit on on India.
And when they close down but that they oh, macacos, which had been because it's expected that demand to be or.
The high when people was at home so they bought a extra Congress, which resulted in more waiting time in India.
And then eventually they get from some of the copper show back back East where.
Well there was more stores from them, but we haven't seen those kinds of delays.
Oh, Yeah, you can see some so I'm sure just for.
Certain destinations, where where there would be a block off due to oh, so little off take a especially like India, where you're right. It's taken Oakland on trucks, and they're going through bought her plans or whatever that that this or.
Not working efficiently.
In these times, so you're going to your goods to your Congestions, there will be already Gina [noise].
Got it okay, well really appreciate the color guys. Thank you very much and Omar the last quarter.
Walmart they are the Liftings for 2019 Mae West 60.
From the Middle East.
And this is Scott it looks like that 54.
Thanks Omar Okay. Thanks, Thanks, guys.
I think Ted mentioned that the interest rate on on some of the new loans that were refinanced. Our is there's a component of it that's tied to them, but not all Poseidon principal hi element.
And I just wanted to figure out how material that is and I think in the past you talked about there is no vlgcs you could potentially retrofit for.
LPG propulsion and I know some of your competitors or are kind of implementing them and pushing ahead with that so just wondering if there's if there's any kind of incremental savings there might be material enough to push you towards.
LPG or or whether you think you get enough benefit to realize those those savings from.
From scrubber retrofits alone or does this does this kind of change the strategy at all in terms of how you approach the environment and just awesome vessels.
Ted Ted will give you a little bit, especially if its specific on what how the instead of what's inside of isn't and kind of a percentage terms, but we of course looking at the one competitor who is moving to retrofit chips and others of course, we're building ships.
At our LPG.
Fueled and it is and it's not something which we have.
Excluded from a possibilities of four for ourselves. We we were always interested in and Lpgs as an alternative fuel for the ships and we continue to be Andrew until now we've chosen to be to have the advantage of a second mover.
[laughter], but we continue with but we were very much a wet what's going on in touch with the manufacturers and the shipyards and.
And.
Let's see I don't know I don't know whether the banking.
Isn't enough to incentivize, but a tad will tell you why what what comes out I mean, I think like any sort.
Your question Sean is it's a it's a 10 basis point reduction in the commercial tranche of our facility, which now represents about a third of the entire facility. So it's more of a it's more of a way that the banks are buddy.
Their money, where their mouth is and so we you know we certainly support that.
I think like any business decision that we make here.
If the economics the drive it and if the economics of the investment are supported by the future fuel savings. Then it's then you know as John suggested then we get we're comfortable with the technical aspects of it then it's coming off if you look out but the the financing differential alone wouldn't drive the decision.
Okay and did the banks give you an indication of what they view it most green friendly or is it not that specific yet.
No. We just happy we it at this point, it's I think you know generally within the sustainability world LPG seems to be viewed as a bridge fuel so better than the existing alternatives.
You know not as Green as you know I don't know wind or solar hydrogen or something but those aren't really on the table at this point and so the metric is really a calculation that measures our year over year average efficiency ratio across the fleet.
And I suddenly catalyst its data, we capture anyway, and you have the IMO.
Has printed promulgated improvement curve and that's the basis on which these there's potential interest margin saving is calculated so if we can hit the levels that are already out. There then we will enjoy further interest savings.
Okay, Thanks, and I should be clear, it's it's up to five basis points. Your one five basis points here too. So it's not 10 basis points all at one go.
Although we might try for that if we do a really good job on our emissions reductions.
Okay.
And then a it looks like you've kind of in terms of the total year, you accelerated buyback and to.
Your your fiscal year Fourq, you. So one key account here, but.
If I look at the average price I mean, I think kind of assume that some of that was done in January February. So no. More recently so are you guys you know in light of.
Weaker VLGC rates and lower yield you Oh LPG exports.
Are you getting a little more cautious in terms of using a $50 million a buyback authorization outstanding or you do you try to try to be aggressive in light of the lower share price.
We've we've always been cautious and we look at that then in terms of a value and the opportunity. So I think we will continue and the same way.
All right. That's all have thanks guys.
Thanks, Sean.
Refresh that time, it's cheap.
Our next question comes from the line of Randy Evans with Jefferies. Please proceed with your question.
Oh, the gentleman has gone.
Hey, Randy Hi.
God just following up on the question about Uh Huh scrubber, saying, Oh, you dual fuel what are you kind of call differential for car Annenberg incremental scrubbers Americans do start to claim earlier this year versus possibly going nonaccrual youre because you've got.
Okay, well up.
Randy I.
Significant enough to do due to say that it's on the high single digits in millions of dollars.
The differential so it's over probably six to six to 10 or maybe you know.
We believe from what BW reported the other day yesterday.
They have it looks like.
Over $9 million per ship.
And Oh from what they reported so.
But I, we believe it's a little bit more than that I pro how perhaps even over 10, but this is.
This is where we think this but oh, our interest remains where we'll see how cost and pricing of or the fuel develops and in the meantime, the scrubber provides a intermediate solution for us, which is very satisfactory compared to a blind fuels.
Got it okay.
Oh I'm, just one more kind of general market question possible expansion or on the completion of.
Oh the Mariner.
To him.
Okay.
Marcus Hook up there as well as Congress has been a project on the West Coast a card or have you heard an upgrade right you got there.
Nothing that's not out Tim let him take that.
Tim I you.
Yeah, I heard a as well as far as we hear that are Mariner true. We still are still moving ahead, and then should should come on room here This year, which which is also well thing girl.
And we haven't heard a lot more delays, but of course there has been alone.
Last minute problems there Oh.
We've also well, but so far it's used to be on time and all kinds of I have no no news on that I kinda them right.
Project.
Well of course, a years you have seen remember you ever the price teachers and that there is shut ins due to concerns.
That could of course impact.
But your confusions.
Sure sure.
Hi, thanks to the color.
Thanks, Randy Thank you.
As a reminder, if he would like to ask your question. Please star one on your telephone keypad.
Our next question comes from the line of Eric Halvorson with Prieto Securities. Please proceed with your question.
Hi, <unk> your line is like Eric.
Yeah, sorry, sorry about that a high just one question on the on the time chartering strategy and whats.
Hi, I mean, you had another one now can you first give an indication on the rate on that second one secondly, what it's a it's the strategy Harris, it's always going to be two fell on a you know your chart drought coverage with new ships or or the other way around there.
Because this is always be adding a layer of risk to the to the set up in a way.
Yes, yes, I mean, I I think Tim is perfectly.
I'm.
Able to to give you the what goes into our thinking with respect to charter in a charter out.
Yeah, I think you use a ship so that's been out this year has been gone Oh, yeah, why not go a weren't one whats the new building so constructive.
Termed out a few years ago and the last one a these yeah six to eight months ago come to the contract. So I can see the time charter even has been a ball orbitz units. They are burberry she.
Why we know what democracy were go in and of course are confident to two increasing exposure of it.
And ER and then we have heard chartered out there also.
So the two to balance there's a little bit unlocking a launch in the oil or absent any changes.
Yeah.
In the markets two to <unk> and also you can say either appear it's a different show there the time charter out or just on through the pool is very short term so.
Six six to 18 months and then the or the time charter out.
That's on the store in the small.
<unk>.
Three Oh last years, right, where it's more like a.
Financial decision.
Talking something.
And then.
<unk>.
Yeah, and I just want to add there's also a strategic element to chartering out if I go if a good customer requires a longtime China.
There isn't that aspect to it as well.
Understood, but that sort of I mean, where it's a whereas the three year time charter today, and where was it a you know back in February so to say.
Where is it in and how do you mean, where is it it does it above or below what you pay.
I would the obviously assume it's above the current markets, but but where if you can be a little bit more specific.
It is I don't know that we can be but more specifically because we have a confidentiality clauses and it is and it it has being considerably below the market and now it may be if the market is is in that twentys. It probably is below.
Above the market above the market, but not not there by very much. The thing is that we have this good. This question often and this is one of the disadvantages of of or a disadvantage of reporting on a quarterly basis because deals like this [laughter] basically I can only be reckons.
So that the under the day.
Yeah, you can have including charter out or charter in.
Last year, we had ships chartered out and it and and the and of the caught Qalat calendar year. They were very deeply out of the money because you know the market had gone up to that 60 $70000 levels, and we were fixed and Twentys and ER and the me in the meantime, however, though.
The ships in the in the early part of that period, where where a providing a very good cash flow buffer for us.
So it's very difficult to look at these on a kind of flash.
Basis, you have to look it is consistent.
[noise] data you know what time I don't know rolling basis.
No I agree on that but but just if we can maybe I'll just on the little bit more to the strategy because it's just an intention to kind of continued to build on this you know expand the fleet.
Hi out time charter in agreements because it was the now with rates being a little bit lowered and you can say there should be ample opportunity to charter in ships. It you know rates that at least.
Three months ago seem attractive I don't know I'm, just trying to kind of understand.
Got 10, there's nothing pointing out to me.
Ted It yeah, Ted is pointing out to me that we can disclose a number you can you can be calculated eirik from that from the numbers that we've disclosed. So you know it's fair to say that you know its 24 to 26, a day I'll call. It 25 and change or so 20 Fiveish today, you can extrapolate that in the numbers we've disclosed.
On your next question Yeah, our chartering window is open and Tim can tell you whether you can tell your soldering people will give us a call or not.
[noise] <unk> I think.
As a strategy Oh, sorry.
Or longer term time charter from a newbuilding is is that true to have a mixed portfolio all owned and ER and two seats on it. So yes, if there are opportunities.
You can look at it if it makes it would be would make sense and those are race I, probably lower than there was a couple of months ago [noise].
Okay. Thank you.
Thanks, Eric.
Our next question comes from the line of course stone with Weber Research. Please proceed with your question.
Hey, guys are you today [laughter].
Good.
So I just kind of wanted to get a couple of.
Questions on discovery program going in I know, there's a the fine to retrofit 12 week and there's about two left for the rest of the year and.
Given the spread on bunker prices and benefit you get from L. already missing a black smoking and everything are there plans he wants extended because.
Greg aren't there or maybe PRASK spend it they kind of neat. My next question, which is the sustainability metric that you guys are trying to hit on that refinancing.
Okay.
We we are.
Our doing one ship now so we have further to scrubbers to fit and and Ah several ships.
Due for dry docking this year. So in time when their ships built a dry dog, we will decide whether to to fit them or not to fit that we may we may fit them. This year, all we may differ and do it at a later time on chipset to dry docking next year going forward, but it.
We have it under review as you said the.
Spread as is closed down a lot. So I'm, we're happy to have the scrubbers that we have on board because we still have.
The saving that they produce and and.
As a if the market is close to his 20000.
Or close to 20000, <unk>, you know three $4000 a day.
There's a lot more makes a lot more different than it does between 50 and 55.
Yeah.
And you had a phone you would another question Chris about the financing.
Yeah. Yeah. Thanks, just just one more on that scrubber, just I know last quarter that there they were being done like around 35, 33 to 35 days and I know the shipyards, we're having trouble beauty Corona has there been any started delays the one that in dry dock not constitution is it I mean.
Aiming for like that 33 35 days.
I see seem to be at 40 days a that's the plan a we are hoping to do it sooner.
Chris.
Okay, Yeah that makes sense, thanks, and yes, that's it was the for the financing.
I guess I was wondering if you can go into little bit more detail I think schon covered this earlier, but Freddie.
Average efficiency ratio I mean based up on certain benchmark or is an absolute unit you have specific unique gram of steel two per ton mile that you guys are trying to achieve and you want to get a sense of like what are the goals here that either you said or the bank. It said that you guys. It's it's about it it it's about it's it's really IMO guidance is not that it's not the guidance.
Thanks.
It's it's about a 2.7% reduction per year.
And it's based on the dead weight of the ship, there's a there's a metric that the IMO puts together and we and Ah you know on a on a you know for ship of this much dead weight. This is this is the kind of emissions.
Do you ought to be targeting well, we filed the 10-K in a couple of weeks the.
The loan agreement will be Upended as an exhibit and there's a couple of pages that I outlined the terms there and I think it's probably best do we not get into the details until we disclose it not lose anything so setting or incendiary, but I don't need to.
File an 8-K in advance of finally, my 10 K. So you know I think there's there's there's plenty of meat in there I guess I'd be I I guess I guess to give all agree words do you know ours look similar to what the international Seaways dead on its usually a market.
That's usually kind of a market standard.
Chris It's just based on the energy a efficiency operationally indicator or in short called E. I. Most of the people use that and it has to do with a that C. O. Two admission per unit of transport work done if you want to know how much you will see more detailed.
So I'm sure in the press and in our filings.
Right Yeah, Great date, I mean, I know you guys and you're seeing that we put out a good sustainability report corporate square Garden state something that I'm digging into right now so I was.
We're excited excited about this oh I'm, sorry for more color than that she is necessary and I guess just for like a last question that I have it.
The 40% LTV for margin reduction it that's the I'm sort of tethered to the NAV at the date that deal was done or is it like more or less floating where it's about 41% or 40%. It goes up 10 basis points. It was below the any drop down and the changes quarter over quarter.
Not quite it it's tethered to the actual LTV at every quarter.
Based on the vessels in the in the security packaging that amount of debt. There's reason for the no foul no harm no fell range, which is between 40% in 60% or 59.99%. It. There you know, there's it's 2.5 250 basis points. If it goes above 60 or below 40.
That's when they that's when the benefits kick in so there's sort of a wide range of LTV before there's a change in the before there's a change in the margin.
I can't keep 20% bad got it okay, great. Thanks, and thanks, everyone. That's it for me Thanks, Chris Hi, Thanks Bye.
We have no further questions at this time I would now like to turn the floor back over to management for closing comments.
Thank you all very much and have a good they say five a good summer and talk to you soon.
Bye.
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