Q3 2020 Ardmore Shipping Corp Earnings Call
To Ardmore shipping third quarter Twentytwenty earnings conference call.
Today's call is being recorded and an audio webcast and presentation are available in the Investor Relations section of the company's website Ardmore shipping dot com.
We'll conduct a question and answer session.
After the opening remarks instructions will follow at that time.
A replay of the conference call will be accessible anytime during the next two weeks by dialing 187734475 to nine or 1412317 0088 and.
Entering passcode 10149 100.
At this time I will turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore shipping. Please go ahead.
Thank you Debbie good morning, and welcome to Ardmore, Shippings third quarter 2020 earnings call first.
First let me ask our CFO fault it meant to describe the format for the call and discuss forward looking statements.
Thanks, Tony and welcome everyone before we begin our conference call I would like to direct all participants are one sided ardmore shipping dot com, where you will find a link this morning's third quarter 2020 earnings release and presentation Tony.
Tony and I will take about 15 minutes to go to the presentation and then open up the calls questions.
Turning to slide two please allow me to remind you that our discussion today contains forward looking statements actual results may differ materially from the results projected from those forward looking statements.
Additional information concerning factors that could cause the actual results to differ materially from those in the forward looking statements is contained in the third quarter experiments went to parents release, which is available on our website.
And now I'll turn the call back over to Tony.
Thanks, Paul Let me first outline the format for todays call to be getting wed call discuss quarterly highlights and then the market outlook after.
After which I'll provide some thoughts on the energy transition.
Following this fall will provide a summary of the product and chemical tanker fundamentals and a detailed financial update.
And then I'll conclude the call.
And open I conclude the presentation and open up the call for questions.
Turning first to slide four.
We are reporting an adjusted net loss of 6.6 million or 20 cents per share for the third quarter.
And then the adjusted net profit of 13.6 million or 41 cents per share for the first nine months of the year.
RMR as or 30000 per day for the third quarter and 17850 per day for the first nine months, reflecting the recent decline in rates, but overall still good results here to date.
Meanwhile, hardware is maintaining a strong balance sheet and financial flexibility with cash of 60 million as of October thirtyth.
Net leverage at 49% and a demonstrated ability to obtain attractive financing terms.
Our capital allocation policy years resulted in good progress towards lower leverage and stronger cash reserves and the faces a difficult charter market, but our priorities me now shift given equity market conditions.
We announced a $30 million three year share repurchase plan at the end of September.
And in the meantime, our share price has dropped to levels well below analyst consensus and the $7.10 a share and around depreciated replacement value adds to the $9.50 per share.
The tanker market is at very low levels across all sizes. The pruning products as a result of the evolving economic impact of the pandemic, including the second wave of contagion.
Our fleet average Tc for October was down to 10750 per day, reflecting what we believe is the market trough and which of course represents just one third of the quarter, we do expect rates to improve towards the end of the year, but given the reduced underlying oil demand not the typical winter market levels.
Looking ahead into 2021, we expect product tanker demand to recover fully let's spend a minute and then continue on a normalized 2% to 3% growth trajectory.
[noise] [noise] as we will discuss later the energy transition they pose challenges for the tanker sector overall, but for companies such as our more it's also a significant opportunity.
Turning next to slide five and starting with the near term outlook.
Tanker spot charter rates are running at very low levels. The near term outlook is challenging but there could be surprised to the upside for tankers going into 2021 in the form of oil price volatility as OPEC balances out, but price and quote a compliance.
In addition, and specifically for product tankers, we believe that output cuts from older refineries are incrementally boosting product tanker ton mile demand and we expect geographically the balances of oil products to result in greater cargo movement going into recovery.
The chemical tanker sector, where hardware has a presence through our fully IMO two chemical tankers as well as our crossover trading strategy looks to be on a more positive demand trajectory the products, which of course is positive for our earnings prospects.
Turning to the medium term the most recent report, which we believe provides a comprehensive an unbiased oil forecast predicts a full oil demand recovery post have done it and oil demand growth at 0.85% thereafter out to 2030.
Because of ongoing trends relating to the location of the refinery construction and products trade development product tanker event is always run higher than oil demand growth for example over the past 10 years.
Other tanker demand growth has been 4% to 5% versus 1.1% for oil demand growth.
Usually the 0.85% figure from the idea, we expect slower, but still substantial product tanker demand growth of.
2% to 3% post endemic with chemical tanker demand growth expected to be higher.
Beyond the short term closures the refinery industry is now facing permanent shutdowns of older less efficient refineries. They replaced by new export oriented capacity and that's resulting in greater seaborne volumes over longer distances. This is an important point, which Paul is going to discuss later in detail.
And our next topic is going to be the energy transition and in particular, the New York side regulations, which targeted reduction in existing shipboard emissions and are expected to have a big impact on tanker supply.
So overall as a consequence of these many factors we're very positive on the prospects are modern fuel efficient product and chemical tankers, such as those in the Ardmore fleet.
Turning to slide six now on the energy transition.
The push to reduce shipping carbon emissions as if anything has accelerated with very little patients being shown for gradualism.
The IMO framework to reduce carbon emissions and chip in firstly.
Tends to do that.
Near term efficiency measures in other words eco design, and then through longer term switched to zero carbon or carbon neutral fuels.
In particular, it appears that the rollout of yet so I will marginalize older less fuel efficient ships in the coming years the graph in the upper right on the slide shows what might be in store between now and 2030. If these regulations force scrapping of product tankers at 20 years of age.
Typically it's at 23 to 24 year stage.
A further set of regulations to phase out the use of carbon based fuels will come later.
But many of Jos a national bodies I believe this will be too slow and are putting pressure on the industry.
As a consequence for example, the European Union emissions trading system for shipping is on a European Union emissions trading scheme for shipping is under discussion.
For possible isn't plantation by 2023.
So it's clear that the energy transition will have a profound impact on shipping and we think that most of its positive you'll be increased pressure on inefficient shifts to exit.
The transition to cleaner fuels is already underway for example, dual fuel LNG and nothing no vessels being built.
And orders against long term charters, which is a trend that we expect to accelerate.
And while tanker demand growth is expected to flatten as we approach peak oil product and chemical tankers are expected to fare better with continued growth in trade beyond people element.
We believe ardmore is well positioned to take advantage of these opportunities first all ardmore vessels are expected to be compliant with the direct E X y regulations.
And we believe that is one of only two Mr. Tanker companies that are going to be in that position.
Second we have longstanding focus on innovation around efficiency and as a consequence, we already we're already 10% ahead of the Poseidon principles curve there.
Their annual target and we intend to keep or increase that lead.
And third we already have a meaningful presence up in non petroleum cargos, which is likely to grow over time.
Overall, we believe the energy transition will present opportunities to companies that have modern fuel efficient fleets technical and operational expertise and access to capital needed to fund the industry's requirements for new generation vessels.
And on that note I'll hand, the call over to Paul.
Thanks, Tony moving to slide eight something I'm told me Tony's points, we would go into some more detail on that product and chemical tanker fundamentals.
Global oil demand is recovering from its lows in April while the global economy is expected to sharply rebounded 20 to 21 cents.
Substantial stimulus packages are expenses, resulting GDP growth of 5.2% next year as compared to minus 4.4% in 2020.
Turn to like consumption is 92 million barrels per day, which is 7.4 million pounds per day below January 2020 levels, primarily related to the decline in jet fuel consumption.
Yes, he is expecting only consumption will increase substantially through 2021 as economies reopened its continued growth, reaching 106.8 million barrels a day in 2013.
Meanwhile, the northern refinery industry is facing a massive shake up following recent events.
Latest estimates are the 2.5 million barrels per day of refinery capacity is under threat of closure in Europe, North America, and Australia over the course of the next three years.
In Australia, all four refineries totaling 475000 barrels a day or at risk for the first calendar formally announced.
A few weeks ago BP announced that they are 150000 barrels a day refinery in Perth workloads within six months and be converted to an import terminal in.
And Youre going to go intends to mothball, its 115000 barrels a day refinery non TARP.
Well the total is considering converting a night because our debt refinery in Paris to Biofuels as essential repairs and looking uneconomical.
These three cases adjusting samples from a very long list and totally wood Mackenzie cabinets is 11 refineries in jeopardy in Europe alone.
At the same time large export oriented.
Export and capacity increases in the middle East and China totaling 4 million barrels per day are coming on line over the next three years. These projects are in many cases complete or in some cases construction is well underway.
In September the new 400000 part of their refinery in Japan in Saudi Arabia came online with its first shipment of products. So the 600000 part of their refinery in Kuwait, which will be the largest in the middle East is now 95% complete unexpected to come online in early 2021.
China is rapidly, becoming a refining powerhouse and refined product export with substantial refinery projects underway, a 400000 barrels per day and finally in G zone. The starting trial runs well work is underway and until $21 billion you long refining complex in Shandong scheduled for completion in 2024.
These projects and ongoing refinery capacity refinery expansion in China substantially exceed Chinese domestic refined product demand and as a consequence, we expect significant increase in exports.
Turning to supply product and chemical tanker supply remains low.
Our tanker order book is 6.1% delivering over the next three years, we expect net of scrapping FICO within 1% to 2% from over the period.
The chemical tanker order book is similarly, low at 4.1% delivering over two years and net of scrapping, we expect fleet growth of less than 1% per annum over the period.
In the near term new ship orders will remain low until such time as charging on propulsion technology onto an economic justification.
Meanwhile, the energy transition is getting underway and will result in a major transformation of the Golar fleet and accelerated scrapping of older ships.
Based on the age profile of the fleet under the consequence of anticipated increased regulations concerning greenhouse gas emission targets approximately 1800 ships could be scrapped over the next 10 years, which is far above recent scrapping levels.
Moving to slide 10 for a summary of our financial performance, we're reporting a net loss of 6.6 million or 20 cents per share for the third quarter, reflecting the sharp decline in charter rates related to the pandemic.
Charter market weakness is continuing into the fourth quarter, but aren't more remains profitable for the year to date net profit of 13.6 million or 41 cents per share for the nine months ended September.
We expect to be profitable for the full year.
As always we remain very focused on cost control and efficiency improvements.
Corporate cash overhead came in at 3.3 million for the quarter in line with prior quarters, but for the year to date September Twentytwenty costs are slightly down year on year.
Mark on chartering costs were 800000 in line with prior periods.
As mentioned before to many companies the commercial chartering costs are incorporated into voyage expenses, which means that our corporate cost as the comparable overhead.
Our commercial chartering of the comparison, even with our moderate scale.
Our costs are running at 50% of standard industry proceeds.
For the fourth quarter, we expect total overhead and corporate in corporate and commercial to be 5 million, including cash and non cash items.
In October we completed a rather rigorous budgeting process for 2021, I'm not expecting a flat budget for the year. Despite insurance increases in line with the broader markets.
Operating expenses are in line with full year estimates total operating costs for the quarter was 16.1 million and looking ahead, we expect operating expenses for the fourth quarter to be 16.5 million, reflecting the addition of shipping operations for the quarter.
Interest costs are substantially down year on year.
We executed a floating to fixed swap in may locking in Libra 32 basis points and as a consequence interest costs came in at $4 million well below the 4.8 million for the second quarter.
Looking ahead, we expect interest and finance costs in the fourth quarter to be approximately $4.1 million, which includes amortized deferred finance fees of 400000.
Depreciation and amortization totaled 9.8 million for the third quarter, we expect depreciation amortization for the fourth quarter to come in at 10.2 million.
Overall, our cost structure this month as amongst the lowest of our peer group. Despite our smaller size in significant incremental improvements profit and through scale.
Turning to slide 11, we will look to charter rates.
Looks like a chart charter rates experienced a sharp decline in the third quarter with them our spot rates highlighted in green on the left hand side, making just under $13000 a day on average.
It is an important point out that none of that Mars scrubber sales.
Ignoring capital and operating costs associated which covers our estimate is that a scrubber fitted MRC generate or premium to Tc at $620 a day for the third quarter and $1400 a day for the nine months ended September on the spread between HFO and viola central for the period.
Looking ahead to the fourth quarter, we have 40% of our days booked on the NR that 10500 per day, representing an all time low and reflecting continued weakness in the charter market.
Meanwhile, the chemical tanker rates on the far right are performing much better on a relative basis.
As with last quarter, we present charter rates on the chemical tankers on an actual and the capital adjusted basis.
The purpose here is to present the rates for the various doses on a comparable basis to an MSR.
The methodology is simple.
We established a bareboat equivalent rates for the ships each quarter based on the Tc performance.
We then make an adjustment to the bareboat for the relative value shift to an MSR and this is an artist or subtracted two the Tc ratio.
This is one of the methods, we use internally to assess relative Tc performance and it is starting to silicon for contextualizing rates across different asset classes.
Using this methodology, the chemical tankers and 11050 per day for the quarter or 11900 per day on a capital adjusted basis.
Looking ahead to the fourth quarter, the chemical tankers are outperforming the MRC, earning 11650 per day with 65% of the days booked.
Moving to slide 12 feet an operations update.
Ardmores modern fleet is well positioned for the energy transition.
Our fleet comprises eco design, and Mars and highly fuel efficient Japanese built vessels upgraded for further enhance efficiency.
We anticipate that all ships are already in compliance with the proposed dxi targets on average 5% better.
Our fate carbon emissions levels are 10% better than the Poseidon principles target for 2020, and we have an ongoing focus on improvement of technologies to stay ahead of the curve.
Operation of the fleet continues to run well despite challenges associated with the pandemic.
As part of our focus on performance improvement and efficiency. We are currently applying new technologies for controlling power limitation on main engine engines.
Enhancements for capturing Jennifer generator with teachers and further technological advancements to existing propeller on modifications.
Also we are currently taking advantage of a weaker charter market on vessel positioning to accelerate dry docking on six vessels in the fourth quarter.
All six vessels are ultimately positioned in China, and Singapore, enabling more cost effective dockings.
Finally, taking account of the two ships, which delivered in August and September total revenue days are estimated to be 9140 for the full year 2020.
Turning to slide 13, we will go to the capital allocation policy on financial activity.
Ardmore has a strong financial position with total liquidity of 60 million available in cash and Undrawn lines as at the end of October and this equates to costs of 2.3 million on a percent basis, which is significantly higher than our peers.
We are currently finalizing a 10 minute known to the Ardmore seafarer with the Japanese bank on highly attractive terms.
It is a five year loan priced at LIBOR, plus 2.25% and we expect to drawdown in the coming weeks.
The attractive terms highlight ardmores strong financial profile on ability to access highly attractive financing in challenging market conditions.
We are continuing to invest in the seats with Capex of 7.5 million for the year to date.
On the capital allocation policy has strengthened the company's financial profile.
We are continuing to repay test scheduled debt repayments of 9 million per quarter or 36 million annually, while maintaining the revolving credit facilities for our financial flexibility.
At the end of September our total net debt was 344 million with leverage at 40 from 49%, which is down year on year.
However, as Tony pointed out given the current equity market conditions, our priorities may shift.
And with that I would like to turn the call back over to Tony.
Thanks, Paul So to sum up then the tanker market is currently at very low levels, we still expect to winter winter market lift in spot rates, but not to levels typically seen in prior years, given the missing underlying movement.
Product tanker demand growth is expected to recover fully post pandemic and then continue on a 2% to 3% growth trajectory.
In the meantime, we are maintaining the strong balance sheet and financial flexibility Ardmores capital allocation policy is prudent successful in improving our financial strength, but our priorities new ships given our stock price.
Notwithstanding we still believe financial strength is very important given the difficult market conditions. We're in so this is a balancing act.
Regarding the energy transition well upwards as challenges for the tanker sector overall for companies such as Ardmore It represents real opportunity.
And it's a blend of blood ardmores focus on long term shareholder value remains unchanged. We continue to look for compelling strategic opportunities and other means to build value. We continue to prioritize operating performance and financial strength and we continue to preserve significant earnings upside in a recovering market.
And with that we're happy to open up the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up the handset before pressing the keys.
To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from John Chappell with Evercore. Please go ahead.
Thank you good afternoon guys.
Hey, Paul probably probably for you just a couple questions on the buyback, which I think probably the biggest focus right. Now. So first of all approved in September where are you able to get any off in the third quarter early fourth quarter before a quiet period kicked in and then also when as the post earning quite poor.
Great and.
Great question, John So we see the press release announcing the share repurchase was issued on or around September thirtyth. So we would have been in a quiet period at that point, so nothing executed on the buybacks.
From that point to know on the the open period would typically open.
Two or three days after the after the earnings announcements pending any other and transaction related items, but ordinarily we'd expected to open up in the next two days okay.
Okay 60 million of liquidity 36 million of annual debt amortization 24 million just given the uncertainty in the market right now the weak start to Fourq two cases re accelerating out of that 24 million.
Of what we should consider kind of excess liquidity right now versus your capital commitments. How much would you consider true liquidity to be active in buybacks versus keeping a buffer during an uncertain time.
Yes, that's a great question, John and I guess I'll refer back to Tony's remarks to say. This this is a balancing act I think.
Yes, the equity market conditions have been depressed right across the tanker space not just our more so almost all of the companies are trading at a substantial discount to NAV DRV pick your number.
So from that standpoint equity prices and bring attractive and as you quite rightly pointed out the the market is challenging and it's uncertain. So it is a balancing act.
In terms of kind of preserving financial strength and taking advantage of opportunities. So it depends you know I think we it's something we reflect on all the time as to what what's the appropriate.
The amount of excess liquidity that you need to keep how long would this market conditions.
Conditions may last.
What levers you might need to pull.
What level of share repurchases you should you should take on so I think it's a conversation that comes up all the time.
And I think it's you just have to ultimately I guess, I guess wait and see as to how we.
As we execute on both.
Okay and then final question I know you just purchased a ship, but as you said things change and the equity markets have changed so what's your appetite to sell ships to actually fund the buyback just given I Trust me I know the whole groups trading at massive discounts anyway, but in your situation pretty extreme relative.
To your capital structure and your fleet so is.
Is there any has there been any thought of trying to narrow that arb with maybe non core vessel sales.
Help expedite that three year program.
Yes, I mean thats another great question, John I think.
You're you're absolutely right so.
Straightforward you touched shifts in buying back your stock and I suppose two points to make his number one we are a business where a going concern.
I'd of selling a large number of ships to buy back your stock is not did not really an option, but but definitely front you could trim certain shifts on the fringes I would say more broadly and hopefully we laid this out fairly coherently in the presentation. We do think getting beyond the pandemic that there's potentially a real squeeze in the mob.
Get here in terms of vessels.
And marginalization of older ships, no, we're very fortunate that the better fleets.
Very modern the majority of them are eco design, we have four.
Four or five eco mod vessels, which will actually meet the targets quite easily. So we do believe we have a fleet, which is set up for the longer term and we do think there is a lot of value there within the fleet, which might not necessarily be realized in the S&P market. Today. So it's almost similar similar points to the last.
Response to the last question. It is a balancing act between.
Kind of trimming your fleets.
Managing share repurchases in capturing equity, but also protecting upside earnings potential in what we believe is a recovering market kind of true through the pandemic ads and things ease and ultimately jet fuel and an aviation and general economic activity gets gets gets back to more normal levels.
Okay. Thanks for that.
Helpful. Sorry, John just to add a couple of more things again.
<unk> million cash number doesnt include the $10 million drawdown coming.
Coming up from the financing of new ship <unk>.
Right.
I'm not against our cash and then it's also why book, it's widely known in the S&P market that we're marketing the Ardmore Seamariner for sales Thats, our 2006 and in fact, when we bought his replacement for that rate. So that will bring us down to 25 on ships and based on our expected sales price, we think that'll bring in another five or so million dollar.
Yes.
Great cash after we've ended up so.
Great all right. Thanks, Tony Thanks, Paul.
The next question comes from Mike Webber with lever research.
Please go ahead.
Hey, good morning, guys how are you.
Hey, Mike.
Hey.
Couple of questions that kind of higher level, Tony you mentioned.
In your remarks plans include shipping and the emission trading system right, yes in Europe.
2023, I'm, especially back on it but it is interesting and I know it's positioned this kind of a regional system, but would certainly have.
A broad based impact.
If different merchant fleets kind of trading in and out of Europe. Aside from just simply the airlines that are running in circles. There I'm just curious you know.
I know, it's early and we're pretty we'd be pretty far down a hypothetical path here, but.
What impact you think that ultimately hands on the EMR market as it further bifurcate the global fleet in terms of trading patterns, we're pretty far down that the hypothetical path, but that kind of mechanism seems like it's inevitable at some point somewhere so just curious if we were to see that happen. How do you think that actually plays out for four years.
Yeah. This is Greg nothing like I think isn't.
Right because it might not.
Yeah, Thanks, Hey, Aaron.
Yeah.
But mostly been a big night [laughter] anyway, so yes.
It's.
[laughter].
You know the European Union is talking about is the way to describing is that it's going to apply at least two intra European trade, so they're not ruling out applying it to vessels.
We're just originator or terminating in Europe. So that's one point to make they're giving it to put pressure on the IMO. The very unhappy with takes the only those working at.
And it.
It seems like other we're hearing that other other areas of the world are interested in something similar so this might become a trend.
And clearly.
Would it means effectively is that if you trade into Europe were if you're trading around Europe, which a lot of them ours in Handys do.
It's effectively incremental voyage costs.
And so that would be marginalized shifts generally I mean, it would mean that the more fuel efficient vessels would trade in those areas with some kind of EPS.
So.
Yes, so I mean, it should it should.
You know the way, it's a little bit parallel going way back to what happened in Europe started banning single oil tankers.
Gotcha, Yeah, no. It's it's an interesting premise and more kind of kind of wrap our heads around here.
Maybe maybe even more broadly I know.
There's.
Always a push to try to monetize a discount to any of the.
If you kind of think about schematically, where we are now relative to maybe were a couple of years ago. We've gone through a IMO 2020, and the key to that it's kind of it's kind of an office gated by by the pandemic, but it certainly looks like we're on the precipice, especially in Europe of.
The build out of a continental hydrogen economy.
I'm just curious as you think about our the way ardmores position here and the Manically.
What opportunity is there and then thinking specifically on the chemical tanker side to participate in the build out of methanol ammonia the kind of solve for hydrants midstream.
Great with just bill still certainly very very early innings are developing but I'm just wondering whether you've seen any pickup in conversations around plans for the refinery conversions or greenfield methanol export projects, where people might be kicking the tires on looking for term coverage on the on the chemical tanker side.
I know, there's a lot of discussion long along these lines. We are hearing from for example, Japanese trading houses are thinking ahead to newbuilding demand for more chemical tankers, because a lot of the future fuels are going to be true.
Perhaps chemicals, SEC and need to move on chemicals anchors.
And.
Including include potentially methanol et cetera, so and different types of bio of Biofuels.
To be honest, there's no discussion yet of people needing to lock in that kind of tonnage on a term basis, but generally speaking we think that the demand outlook the growth prospects for things that generally get categorized as chemicals is quite significant.
And we're very you know and we're following it closely right. So.
It's early days to transition is really getting underway now and.
And we are looking for ways, we can participate in profit plant.
Alright, great ill turn it over thanks guys.
Exactly.
The next question comes from Randy given with Jefferies. Please go ahead.
A gentleman has it gone.
Hey, Ronny.
Hey set you know obviously appreciate the quarter to date rate guidance I'm, certainly outperforming any of the benchmark indices. We have been looking at so in the prepared remarks, Tony you stated that rates reflect the market trough before likely improving in December so I guess two questions on that what kind of MRV.
18 currently fixing this week and when do you expect rates to kind of get back to the maybe mid teen levels for your end bars.
Okay.
What's interesting right now is that the rates were fixing or really all over the place. Some of them are are very very low and others are really up in the mid mid teens, even sometimes high teens. So it's very it's very lumpy at the moment and we don't know, whether that's just volatility or potentially green shoots.
You know it's still early November right. So I don't know where you are but here, it's not there's not a lot of winter weather yet.
But we do acknowledge that there's a big chunk of demand this and from the market offset by you know the refinery situation et cetera. So so its really there is a lot of cross currents on on demand and activity.
And it's hard it's hard to know whats really happening at the moment.
It does feel like things are trending up a little bit to that we'll see what happens.
Okay, Yeah, I'm I'm here in Houston, So there's never really any winter weather here.
And then like turning to the time charter market, how liquid is that one year time charter market. What's the current one year time charter rate and then with that any appetite for additional time charter ins at these levels. If you are pretty bullish on kind of rates in the next six to 12 months.
Yeah, We did we did the one ship 13 for and we're still happy with that obviously, it's it's not quite in the money yet sensor is profitable voyage, just recently, though and you know and so we're interested in growing a.
Portfolio piece again.
If we can pick off the right shifts at the right time.
So that's that's you know.
Thats on our agenda.
It's also a very efficient way to get exposure to the market.
Instead of buying ships so.
Well, it's something that we look at all the time.
But I will make the point that the shift we did buy.
It's gotten more attention and quite frankly, we thought it would.
You know actually because of the price because we condition. When we bought it. It was you know X dry dock with ballast water salt breaks even at 11700 per day for the next three years.
So.
We're also happy with the Tcten rate and.
Weve up until you know we have charter ships in the distant past, but we're probably moving to more of a mixed model of a ton of sourcing for the business.
Sure and in terms of current one year time charter rate, what number you kind of seeing out there no other probably depends on the ship type and.
Location et cetera, but for for the type of shifted we did charter in its probably off a little bit maybe a couple of hundred today. So low 30, thousands and maybe maybe 752000 higher for eco design, but having said that that's quite theoretical there's virtually nothing happening right now.
There is a real stand off in the market.
Got it okay I'd be remiss to ask 'em any comments on a biden versus Trump win on the product tanker market.
No comment I know, you're a political man so you've got something to say.
But I'm not a publicly political man so we'll leave it at that.
Noted hi effect.
Thanks Simon.
The next question comes from Ben Nolan with Stifel. Please go ahead.
Hey, good afternoon, guys eventful day on this fine, but I wanted to dive in a little bit more on what.
On some of the Johns question them one of the big.
Have you thought you guys had always included when talking about buybacks with that having done them in the past.
Your ability to actually actually execute on much volume was challenged.
So capital availability aside and I think Paul.
Oh, you did a good job of answering that but how do you think about what's realistic and win and I assume that you've looked at you know how how much you can do but.
At this share price assuming that you are interested in buying what's a realistic number of what you think is possible.
Well you know.
I'm sure you are as you know that the practical limitations in the share repurchase program and set by the EPS the.
And then you just look at the volumes and you can figure out, which you know theoretically possible on on a macro basis.
But it will also mentioned that there is the possibility to do a tender offer.
HM Okay, that's interesting and Anna I assume if you're bringing up something considered but.
All right well I I don't like to ask macro questions, but as I was staring at your presentation something occurred to me that I think I'm kind of how you think about these kind of things [noise], obviously, big new refineries coming online in China, and the Middle East.
As everybody has talked about one of the things that I haven't really heard anybody talk about is the massive new Dan goatee refinery being built in Nigeria.
And I would just optically think that it's probably not good news if you're in the L.R. to market, where a lot of color to business goes, but I haven't really thought through if there are any implications as it relates to Andy the rim ours or some of the area that you guys are transit.
Have you have you read or thought through what.
More African refinery capacity might do I mean, if we're right around the corner from that coming online so.
Any thoughts about that.
Yeah, just just brief us it's a good point its a big refinery.
Definitely would have an impact on trade flows it would eliminate.
Some product important but it also would create some cross trading in West Africa.
Net debt is probably negative but.
But not huge on a global scale.
We're not sure about the timing of that of that refinery coming online.
So we're not we're not really in a position to comment definitive.
Definitively on it but I think it's something we're looking into.
It's been on the books for a long time.
Right I I think I read some upon shortly after the first of the year, but I didn't know if like you got that they've got the case.
That was the case two years ago, as well [laughter] Oh I I didn't know if there was maybe like a hidden like a silver lining for the MRM market. Obviously that you know if you could.
Suddenly be you know using that as a hub and spoke out to the rest of West Africa, and maybe that's an MRC trade rather than now on track.
But.
Anyway I'd ER.
That's all I have so.
Good talking to guys.
Okay. Thanks, Bill Thanks.
Again, if you have a question. Please press Star then one.
The next question comes from Oman, No caught Mt Todd Clark.
Clarksons Platou Securities. Please go ahead.
Hey, guys. Thank.
Thank you just.
Quick a quick couple of questions and maybe just continuing on from John then and and bent discussion on the balancing act that you've been referring to you know between the share buyback preserving liquidity you know selling ships that is an option as you reference though critical mass comes into play so what about what are your thoughts then on on further.
Or sale leasebacks are those the possibility.
[noise], Hey, Omar yes, no they are for sure.
That that's freeing up freeing up either using our excess liquidity or or refinancing or selling chips and beacon structure ships or that you've you've got the use of it in the earnings potential profit, but but you're also monetizing the residual that's all that's always an option and I suppose but I cant say Omar is that everything is on the table.
Let's be clear here Theres theres.
No one more so than them then the people in this room here are.
Motivated to add to build value and to get the share price up and but it is a balancing act and we have seen and everybody on this call would have witnessed lots of share repurchase activity alters the sectors, which have which have which have not worked out. So there are there are there ways of capturing and and and building value.
You, probably a ship you make a long term investment and you get cash flow off and so it's an income generating assets you retire your shares you retire the permanently so it is a balancing act for sure.
Financial strength is is a key priority preserving liquidity and capturing value in the shares there is theres a good few leveraged them and.
On things that play here your your opportunity rice as selling chips freeing up liquidity in buying back stock is that it's absolutely one of them.
The market on a number of fronts is not is not as liquid as a as it has been for practical reasons are related to college.
But I suppose ultimately everything everything's on the table Omar in terms of in terms of building value and capturing isn't and making sure that we got a long term.
Returns for shareholders.
Thanks, Paul and just to be clear when when you mentioned, there's not as much liquidity given cobot or your friends said sales outright or were you talking also about the sale leaseback.
Yes, I mean, everything everything I think S&P activity is lower financing activity is definitely nor in terms of the.
You know, we're very fortunate such as we've just demonstrated with the three for the financing of the recent acquisition without that loan that is underway, but there's no doubt about it in terms of financing activity overall from the leasing houses and many others has as.
Really tightened up we're fortunate.
Strong financial profile as a public company and a good track record of execution that we continue to have good access and premium axis I would say to financing, but I think broadly in the market liquidity on S&P and financing is not where it was.
Two years ago, let's put it that way.
Yeah that makes sense and maybe just one one final one just on that $10 million loan on the bar that you purchased a couple of months ago that looks like that that's about 60% of the purchase price, which I'd say somewhat attractive given its older 10 years old do you view this type 60 per se.
On LTV is this a one off where it's a Japanese built ship with a Japanese bank, providing alone or is 60% for the second hand tonnage now potentially more widely available than ER than perceived.
Yeah, I would say I would say, 60% financing is not widely available I think you hit the nail on the head I think it's a bank that we've been talking to for many years. We've been we've been financing ships in Japan now for a number of years and this bank has as you know we've been cultivating relationship overtime I think the fact that it is a high quality.
Companies shift certainly helped it certainly proved attractive.
To the bank they know the yard to know the ship they know the the prior owner. It is a very interesting ship until then it can probably comment on that more in terms of its fuel efficiency features is way ahead of its time.
So no for a whole variety of reasons.
60% financing felt like the right level for this ship, but definitely would be the norm I think that's that's very attractive, particularly 60% financing at that level in terms of pricing is highly attractive.
Okay hard to replicate if I'm honest.
Yep seem so thanks, thanks, Paul appreciate it I'll leave it there.
Thanks.
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