Q3 2021 Euroseas Ltd Earnings Call
[music].
Thank you for standing by ladies and gentlemen, and welcome to the universities conference call on the third quarter 2021 financial results, we have with US Mr out of Sitos, PFS, Chairman and Chief Executive Officer, and Mr. Toss US as leaders Chief Financial Officer of the company at this time all participants are in a listen only mode.
There'll be a presentation followed by a question and answer session at which time if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced I must advise you that this conference is being recorded today forward looking statements. Please be reminded that the company announced their results with a press release.
That has been publicly distributed before passing the floor to Mr. Pitts us I would like to remind everyone that in todays presentation and conference call you're overseas will be making forward looking statements. These statements are within the meaning of the federal Securities law.
Matters discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result, in such expectations not being realized I kindly draw your attention to slide number two of the webcast presentation, which has the full forward looking statement and the same.
Statement was also included in the press release, please take a moment to go through the whole statement and read it and now I would like to pass the floor to Mr. Pitts US. Please go ahead Sir.
Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call.
Together with me is faster says leave yourself Chief Financial Officer.
The purpose of today's call is to discuss our financial results for the third quarter and nine months period ended September 30 of 2021.
Let us turn to slides to be.
Other income statement highlights are shown here.
Well the third quarter of 2021 we reported total net revenues of $23 million and net income of eight and a half million dollars.
Adjusted net income attributable to common shareholders for the period was $8 4 million or $1 16, <unk> basic and diluted.
Adjusted EBITDA for the period stood at $10 $6 million.
For the nine months period total net revenues were $55 $6 million and net income was <unk> 2 million.
Adjusted net income attributable to common shareholders was $19 1 million or $2.74 per share basic and diluted.
Adjusted EBITDA for the period was $56 $6 million.
These results are strikingly better than the equivalent three and nine months period results of last year.
This will go over them in more detail later on in the basin.
Please turn to slide four where I will discuss our recent operating developments.
On October 18, 2021, we took delivery of motto vessel, Jonathan B 740, you contain the feed the vessel built in 2006, formerly known as <unk> III.
But issuance to the previously announced transaction on September seven 2021.
The liquidity of the company the vessel commenced its charter at the net rate of $26662 per day.
On November 11th in 'twenty, and 'twenty, one the company announced the acquisition of them.
And we live by that amount.
<unk> named <unk> Medical's would be there.
6350 Teu containership.
Built in 2005 for $40 million the vessel, which is expected to be delivered to the company who are in 2021 will be financed by your own funds and the bank loan.
Well I'm glad you see with the acquisition of the vessels will enter into a three year time charter contract at <unk>.
Daily rate to $42200 per day with a possible extension for an additional four.
Yes. It is the opposite of the charterer at $15000 per day.
Continuing on the chart the chartering firmed Yemen. This P was fixed for a minimum period of 36 to fucking modes at $27000 per day, starting from October 2021.
<unk> was also fixed for a minimum period of fix for maximum voting months at $29 $5000 for the de stocking for most.
The synergy Auckland was fixed for fixed minimum period of 60 to 85 days.
$202000 a day gross as from November 2021.
Last but not least the aimco food was fixed and our positioning.
To the far east for the next dry docking beginning in December 2021 at a rate of $5125 per day for the first 37 days and 77 and the $5000 per day thereafter.
Ooh vessels pass the special survey Drydocking with a drydock in the third quarter.
This b well 46 days between September and October 'twenty, 'twenty, one and every leaky Z for 38 days from mid July to mid August.
Two one.
Please turn to slide five where you can see how current fleet profile.
You'll see Skagen fleet is comprised of 16 vessels is now including 10 feet six intermediate container ships with fleet average age of about 16 years in the U S.
After the delivery over the to feed the containership new buildings in the first and second quarter of 2023 years. This fleet will consist of 18 vessels with a total carrying capacity of 56000 Teu.
Slide six shows the vessel employment.
As you may see governance for the fourth well 2021 Stanford.
Finn.
The contracted EBITDA is $28 $5 million.
2022 we have all of it because of a 68% of our vessel days with the contract at the EBITDA level of about $68 million was from 2023 of the government stands at 40% and contracted EBITDA at $47 $7 million.
Our contract with Devon.
I'm sorry, the rate for the fourth quarter of 2021 stands at about $30000 per day, driven up by the high $202000 a day. So it's after all of the Schindler Joakim.
While for 2022 and 23 it is estimated that 24027 in the house thousands per day, respectively.
Let's now turn to slide eight to review how time charter rates have developed in the last 10 years.
As you can see all three of these moves seem meaningless in front of the huge hikes that rates have been climbing too since the fall of last year.
Have you seen of course, a new all time highs by far exceeding previous highs.
The health of the markets is reflected in all of the data points on slide nine where we give them a bird's eye view of the agenda will contain the market for the third quarter and beyond.
As shown in that they move time charter rates across all segments skyrocketed over the past 12 months.
The all time highest just described.
During the third quarter, the smaller vessels of age caught up with those of the larger ones in there.
Doubled relative to the second quarter. It was for the biggest <unk> pieces between 50% to 80%.
I live in November 2021 rates are still generally above the average of Q3, but we have seen over the last month, a small correction over the peak values that was witnessed in early October.
There hasn't been second hand price index to those will never rose on average by about 35% in the third quarter of 2021 over the second quarter of 2021.
And I think leases rather than across the different age groups with the end of the vessels and can be seen even though.
<unk>.
During the third Cogs, the new building prices increased by approximately 6% due to steel prices being on the rise and strong interest from new buildings on the back of the containership market.
The negative containers and Goldman <unk> fleet as of October stands at about 140000, Teu approximating, 6% of the fleet the lowest level ever.
The percentage of container subscribe to date has dropped dramatically to approximately 12000 Teu 4.0.
5% over the fleet again, the lowest point ever.
This is despite the fact that prices have increased to 615 per lightweight ton due to the high demand for steel.
Overall, the fleet has grown by six foot three 6% year to date without of course accounting for a variety of Activations.
The overdue book has more than doubled in the last six months with the government to look to fleet ratio hovering around 23% compared to only 10% six months ago.
Please turn to slide 10.
Global recovery continues, albeit a bit weaker than the previous focused over the IMF.
Back to the July growth for us the global growth projection for 2021 in their October report, because it's been revised marginally down to 549% from 6%.
But he is unchanged for 2022 at four 9%.
This modest headlined the division for 2021 however reflects more difficult near term prospects for the advanced economies group due to supply disruptions fueled by higher commodity prices and second thoughts that occur on whether the resulting inflation tends to tobi or not.
Particularly in the U S is expected to grow 6% for 2021 below its July forecast of 7%.
The downward revision reflects the slowdown in economic activity, resulting from their highs in COVID-19 cases and delayed production caused by supply. So it's just in the resulting in accelerating of acceleration of inflation.
So I'll speak for the emerging markets and developing economies have been moderate down.
Q1, especially for messaging as yet.
China's economy is expected to grow 8% slightly less than the July four nuclear scaling back of public spending.
India's growth focus is retained by <unk>, 9% footprint into 'twenty one.
Beyond 2022, which has a focus city is expected to grow strongly at 449%.
I am therefore cost is still reasonably strong global growth level of three 3% and three in 'twenty two 'twenty three.
If you look at the containerized trade growth in Teu mice based on collateral protections for 2021 where we see the demand growth expectations continue to be on an upward trajectory.
Of six 7% for this year.
2022, and 2023 containerized trade is expected to grow at healthy levels of three 6% and 5% respectively.
It should be mentioned that all of the above forecast should be taken with a grain of salt.
The future is always difficult.
It is perhaps.
Even harder now due to the disruption caused by COVID-19, which is vastly changing established life and trade patterns.
It's unknown duration interacts with the uncertainty of the geopolitical developments global financial markets and climate sustainability issues to make forecasting even more to peak.
Anyway, let's turn to slide 11 to review the containership age profile and delivery schedule.
As you can see the containership base profile chart from the left side of the slide.
Over the containerized fleet overall is a young fleet with EMEA was 7% of seats being above 20 years old.
However, the older vessels are mainly concentrated in the smaller classes.
Our <unk> subsidiary.
The right side chart shows delivery schedule of the Governor Containership Order book, which is expressed as a percentage of the fleet.
The circle figures for 2021 to 2025 reflects the older roof before scrapping and slippage is.
I don't believe the total containership order book stands at three 2% of the fleet.
This is still at a historically low figures despite the recent rise.
The majority of the deliveries are scheduled for the second half of 'twenty to 'twenty three on lubes.
Thus over the next couple of years, especially during 2022 fleet growth should remain modest and provides us with opportunities to have exhausted all the vessels at very effective rate levels.
Please turn to slide 12, where I will discuss our outlook summary.
He said, we didnt that the global recovery continues at a solid base. Despite the delta variant of COVID-19, being silicone de juice, and then negative price significant increases which are delaying and reducing economical.
Why is the containership trade remains positive, but moderate supply growth in 'twenty. One 'twenty two the recent surge in ordering is likely to lead to accelerated lagged both for mid 2023 onwards.
Both congestion has continued to significantly impact the container shipping markets, leading to excessive wait times and disrupting operations schedules.
These logistical bottlenecks have resulted in new highs and container trades at age, which I would expect it to remain at least throughout the first half of 2022.
The sort of outlook, therefore looks optimistic reinforced by the logistical disruptions on the phone trade demand.
In addition, the limited supply growth in 2022 should provide the right support Befalling to these new building deliveries from mid 2020 to be kicking.
In the medium to long term fundamentals of complex with a range of factors likely to have an impact.
Including uncertainty demand for vessels eases up once you set up some disease.
Cereal supply pressure from 'twenty to 'twenty three are unwilling to do doing these deliveries, which may overtake demand goes.
And thirdly, and deposing Lee New environmental regulations that will probably result in even slower steaming by 2000 22024, effectively removing capacity from the market.
Let's move to slide 13.
Under this sustainably high demand firming rates and prices are expected to prevail for the ensuing months.
The left side of the slide shows the evolution of the one year time charter rates for containers are two of the 5000 Teu since 2000.
As I discussed we are witnessing the highest charter rates in the last 20 years at Goldman.
Clarksons last week, one year daily time charter rates for three to 5000 Teu container ships stood at 70000 per day.
<unk> 3000 per day, often speak of $73000 per day in mid October.
The right hand side of the slide shows the vessel values in relation to historical prices since 2011.
As we can see current containership values have significantly increased above median and leverage levels.
They are now the highest they have been over the last decade.
Actually ever.
In this current market environment.
Container rates at present levels or perhaps continuing to rise, we expect that profitability to high strongly as well.
Additionally, with the increased visibility about earnings, which now extends into next year and well into 2023.
We are able to better formulate our growth strategy.
We expect that the buildup in cash will be extremely significant during the next two years.
We tend to use it.
In the best possible way for the benefit of that circle.
We remain committed to being a key long term participants in the feeder intermediate container segment.
This is evidenced by our recent new building all of those and the acquisition of the two vessels with charters.
So the duration of the charter periods amortize the vessels down to scrap values.
Still offering the potential for significant upside.
We will continue to implement such projects when you can find them.
Additionally, we will continue using of listing.
<unk> platform to consolidate privately owned vessels or fleets as done in 2019.
Hello, everyone everything I've said whole news about instituting common stock dividends or buying back shares when such actions makes sense for our investors.
My family remains the biggest one.
And with that I will now pass the floor to our CFO touchless slated to go over our financial highlights in further detail.
Thank you very much.
Good morning from me as well, ladies and gentlemen.
I will now take you through the next five slide presentation.
An overview of our financial results for the third quarter and nine month period.
Senator therapy.
Thank you Anna and some bad debt.
In April of last year.
So with that let's turn to slide 15.
Well the third quarter of 2021, the company reported total net revenues of 23 here.
<unk> and 87% increase.
Total net revenues of $12 3 million during the third quarter of 2020, which was mainly the result of that.
However, charter rates our vessels, Sir in the third quarter of this year as compared to the previous year, although partially offset by the lower average number of vessels we operate it.
Third quarter of this year.
The company reported net income and net income attributable to common shareholders for the period of eight and a customer here.
Baird.
Income of zero point.
And the net income attributable to common shareholders of zero point zero.
<unk> for the third quarter last year.
Well another.
14 vessels were owned and operated during the third quarter.
Aaron.
Average time charter equivalent rate of $19400 per day.
Baird.
Sure.
All in a very good in the same period of last year.
Another time charter equivalent rate of $8004.
Mr vessels per day.
You guys and other financing costs for the third quarter of this year amounted to <unk> 6 million compared to four 9 million for the same here as of last year.
Being you.
The level of debt.
We get it.
Our average weighted LIBOR rate.
Compared to the same period of last year.
Depreciation expense remained unchanged at <unk>.
It's $1 6 million for both quarters, although the average number of vessels operating operated this quarter three.
And as I mentioned is around $16 five.
From the same period of last year most of the additional vessels. We operated last year were fully depreciated and get the complete due to the depreciation.
Adjusted EBITDA for the third quarter of 2021 was $10 6 million compared to one point to me here.
In the third quarter.
Randy.
<unk> et cetera.
90% Okay.
Basic and diluted earnings per share.
Reputable to common shareholders for the third quarter of 2000.
Were $1 18.
I'm going to answer that.
Effectively.
7.2 million.
Sasha 72 4 million shares respectively.
Going back.
Basic and diluted earnings per share of 0.01 dollar.
Third quarter of 2020.
$5 7 million basic and diluted weighted average number of charge offs.
Excluding the effect on the income statement.
Move to common shareholders for the quarter.
Realized gain in here with you.
That's it.
Our favorable performance tariff wellness.
With there being $1 16, SaaS basic and diluted.
Back to an adjusted loss.
<unk> <unk> six.
Dollar per share basic and diluted.
The quarter ended September 32020.
There are two excluding realized losses on derivatives and the net gain on the sale of excellence.
Usually security I know, there's not include these items and their families safe.
That's why we're making the adjustments.
If we look now.
It's our numbers for the first nine months of <unk> The company reported.
Total net revenues of 55 6 million, representing a 35% increase.
Total net revenues of $41 3 million during the first nine months of 2020 again et cetera.
Higher average charter in charter.
The rates that our vessels are going back to last year. Despite again, the fact that we operated fewer vessels.
The company reported net income for the period of 'twenty two.
Income attributable to common shareholders of $19 6 million.
Compared to a net income.
$3 5 million.
Net income attributable to common shareholders of two 9 million for the first nine months of last year.
Well I think this first nine months of the way we operate.
<unk> 14 versus <unk>.
An average time charter equivalent rate of $15461 per day.
<unk> to 18, two vessels in the same period of last year.
Another 90000 at one time the instruments.
Okay.
Interest and other financing costs for the first nine months of Thanksgiving.
Amounting to about 2 million compared to $3 3 million for the same period of last year.
This decrease is due to the decreased levels of debt.
LIBOR in Asia.
We face.
Our theory as compared to the same period of last year.
Depreciation expense for the first nine months of 2021 was four 8 million compared to Friday's media. During the same period of last year at the same comments I made.
You shouldn't require sheets.
Right.
Adjusted EBITDA for the first nine months of <unk> was 26 6 million compared to $9 7 million during the first nine months with Greg granted reflecting 70.
75%.
Basic and diluted earnings per share attributable to common shareholders for the first nine months of <unk> were $2 80 for Samsung $2 and 80%.
<unk> is expected to be calculated 169, and $6 94 million.
Weighted average number of shares outstanding respectively.
Compared to basic and diluted earnings.
$0 to satisfy the first nine months of 2020.
Five.
462 million basic and diluted weighted average number of fish testing.
Excluding again here.
The effect on the income attributable to common shareholders for the first nine months of 2021.
Realized gain on derivatives.
Adjusted earnings per share.
What's their being.
2.76 basis to $474 diluted.
Compared to adjusted earnings.
<unk> 15.
Per share basic and diluted for the same period, the first nine months.
Great.
Let's now move to slide 16.
You are performing for you guys.
Our fleet performance Amy.
As usual, we'll start our review by looking first at our utilization rates for the third quarter.
This year in comparison to the shape of last year.
Our fleet utilization rate is broken down in a solid waste into commercial and operational.
Starting first with our commercial utilization rate.
We're pleased to see that there was a 100% for the first for the third quarter.
Compared to 97, 9% for the same period of last year.
Bearish on utilization rates for the third quarter of a year was 99, 2% compared to 99, 9% for the same quarter of last year.
Just to remind you here with a realization rate calculation does not include vessels in drydock or schedule their status.
That's a dash of fewer during the period were from Covid.
As I mentioned earlier on average we operated well.
New investments during the third quarter of this year.
Air.
Again 90000 for comprehensive I think dollars.
Good day compared to $16 52 vessels I was saying.
With the third quarter when planted area of the Niobrara.
We're kind of tradeoff of stripping.
Operating expense per day, including management fees general and administrative expenses.
Looking at guidance before.
7000.
Drilling down into unless their vessel per day in the third quarter of this year.
<unk> $6759 per vessel per day for the <unk>.
Same period of 2020, reflecting mainly increase incurring related cogs.
Let's now look at the bottom of the table to our daily cash flow breakeven levels presented here again on that.
Vessel per day basis.
In the third quarter of 2020, while our cash flow breakeven level was $11573 per vessel per day.
<unk> 7920.
$4 per vessel per day for the same.
Last year as you can see mainly because we get a lot more territories.
Yes.
Let's now review the remaining figures that are shown on the slide and you look at the highest part of the slide for the nine month figures.
During these nine months.
Our commercial utilization rate was again.
That actually.
I actually utilization rate in North America.
Eight 5%.
Compared to 97 two.
2% commercial.
90, 598, 5% operational for the same period of last year.
Now that 14 vessels.
Owned and operated in the first nine months of this year.
We've got another time charter equivalent rate of 15000.
$461 per day compared to 18 point 17 vessels.
The same period for the first nine months of planning and the number is 90000 and 1007 of them.
Okay.
Total daily operating expenses.
Again, including management fees and G&A excluding diagnosis.
[noise] amounted to 7000, especially food dollars per vessel per day compared to 6000.
$74 per vessel per day for the <unk>.
First nine months of last year.
Looking again at the bottom of the table, we can see our cash flow breakeven level for the nine months of this year, which stood at $10079 per vessel per day compared to 8000, if they found in the first one.
So I'll ask their vessel per day for the same period.
Let's move now to slide 17.
Okay. This slide over the last two earnings calls.
Both our shareholders and investors for Ross says the earnings potential of our fleet for the rest of this year, but also 2022 in 2023.
The table shown on this slide.
The first refers to are already in place quarter.
The table shows the available days for fire.
Making assumptions for the scheduled day bookings the number of contracted days days.
Yeah, well the differentials there too exactly.
The remaining what we call open days.
As you can see almost all of our vessels all of our vessels are contracted in the fourth quarter of this year.
Y 68% of our available days.
Contracted for 2022, and even 40% of our available days.
Thank you Frank.
But that goes off to date.
You can also shows the average contracted rate.
Allowing them by making an assumption for the operating expenses and G&A expenses per day.
We estimate.
Nike EBITDA contribution.
Okay.
Open days.
As usual his calculator or to make an assumption what the daily.
Daily rate be air, which is what that allows him or her to estimate the EBITDA contribution of the open days.
Right definitely indicative calculation.
While we use the same rate as the blended rate of the contracted days.
I would see the effect on the total EBITDA.
You saw in the fourth quarter of 2021.
Our 2022 and full year 2023.
I would love to hear from last year.
Based on the current rate.
Weighted by the new quantum fixing this.
Our open days for example in 'twenty to 'twenty two.
Sure Eric.
The average age of more than $40000 per day.
Which is significantly above the currently contracted play for the contractor.
Days for planning to exit.
These statements.
Except for HD supply.
EBITDA for 2022.
Resolved.
Broadsoft, possibly exceed 604 for me.
Yes overall exercise.
They have to provide to calculate our EBITDA for the remaining.
Under this year granted to anybody.
But I think once all of the assumptions about.
The rest of Europe, and Asia, it's actually.
However, it's hard not to observe.
But even if we just assume that theyre often days malaria.
As shown in this statement, which as I mentioned or talked about crop of the hatred that card in the market at least proclaim thank you too.
We'd be back.
For the fourth quarter of this year.
More than double X comparatively resolve that.
Third quarter, one in 'twenty to 'twenty, two and 'twenty 383, we would've seen phases of the order of 50% a year in Opex.
Let's now move to slide 18.
We'll review our debt profile.
This slide shows the important part of our.
Our cash flow breakeven level expectation for the next 12 months.
The first part of the slide you can see our scheduled debt repayments over the next several years.
The long profile shown us.
On a pro forma basis that is.
Lucy.
If you're a development that took place after a game before specifically the 15 million long, we do enough from their partners.
Partly financed the acquisition of Jonathan E.
Another 50 million loans that were in the final documentation stage noticed going between things.
And then negotiate with laws to partly finance the acquisition of <unk>.
Paramount, which is about <unk>.
The dark shaded part of it.
On the top left shows almost all scheduled payments presently.
'twenty 'twenty four for example, a loan repayments during the fourth quarter of this year.
The $3 90.
The light gray or like new part of the bar shows our scheduled balloon payments for example in the fourth quarter of 2021.
And by whom.
Payment of two point for me.
Further out 2022 there's the smaller balloon with one 9 million.
Thank you Sydney with a balloon catheter balloon payment.
7 million.
Part of it all at 1.8 million balloon class.
Sure.
Okay.
Being able to refinance our balloon payments.
If we decided to do so.
Before we leave this slide.
He's not on the cost of our debt as it relates.
The launch of standing as of September 32021.
The average margin we pay is about three 6%.
Assuming a library of <unk>, 3%.
Our senior debt cost on average about three 9%.
He will shift embedded all of us, but as I mentioned before.
Margins in days of 2.42 to four 8%.
You can realize even further drive low.
Lower cost of market.
Looking at the bottom of this paper you can see our cash flow breakeven level expectation.
Dora.
The vessels that they see.
C that are long in advance over the next one.
After me.
<unk> thousand 250.
$59 per vessel per day contribution to our.
Cash flow breakeven level.
If we make similar assumption for the remaining components of our cash flow breakeven level that these operating expenses G&A expenses sneakers payments.
And of course, we can come up with the cash flow breakeven level for the next 12 months well just about $12635 per vessel per day.
Let's now move to slide 19.
Finally on slide.
This slide provides highlights from our balance sheet and stuff that go to reflect the market value of our fleet and new building contracts.
Yes sure September therapeutics.
I was on planes you want.
Why do you basis first we had cash and other assets of about $15 1 million.
Book value of our vessels.
Advances for the new buildings.
The acquisition of Jonathan E.
Okay.
4.6 million, giving us a total book value of our assets.
One point or $119 70.
On the liability side.
Same thing bank debt of $59 7 million.
Other liabilities of $6 80.
Producing a net book value for a company of 53 point to me.
Is there the market value of our fleet is much higher than its book value.
Even adjusted for the negative value of their charters.
Which is the result of communication market.
Vessels are estimated to be worth.
75 million inclusive of the appreciation of the value.
While new building contracts.
You will now replace the book value of our vessels do their market value.
To protect the interest that I mentioned above we can calculate the net asset value of our fleet being or are there kind of an advantage because I'm going to end.
Finally for the year or around $45 per se.
Recently, our search with trades have been trading clean.
The age of 30 to $36 per share.
The other side to reflect a significant increase since the beginning of the year.
Does that get a significant discount.
Net asset value per share, thus offering good appreciation potential.
Holders and good investment opportunities for us.
With that I would like to pass the floor back where it appears to continue our expansion.
Yeah.
Thank you ladies and send someone can I have opened up the floor for your questions.
Thank you.
If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.
Wish to cancel your request please press <unk>.
<unk> once again, please press star one if you wish to ask a question.
Your first question today comes from the line of Tate Sullivan from Maxim Group. Please go ahead. Your line is open.
Alright, Thank you Hello.
First if I may on wheel Paramount back that the acquisition of the 2005 built ship and you mentioned also earlier amortizing down the cost of that acquisition.
Scrap values.
How long do you expect you'd be able to operate that ship first Austin and I have a follow up question as well please.
Sure.
The sheep will you.
B 20 years, so the ethics nation of the charter.
Historically, we've operated shapes our opt in are even when they are 30 years old.
I would expect that we cannot pay it technically easily update at the time that it's 25 years old it will depend of course on the commercial considerations.
At the time and also the the Bakken around our the gossiping eh.
The energy the energy matters, but I think that.
If the markets are the decent are we will be able to operate it for another five years after the expiration of the justice.
And the comment about operating bringing really amortize the value of the acquisition down to scrap.
And on the future potential environmental background in this sector I mean, do you forecast higher scrapping values for your ships and the demand for recycled steel increases or is that all.
A major consideration.
Additional acquisitions.
No we don't we don't.
I assume high of a valuation scribes values. In fact are out of the base case scenarios based on lower scrap values than carbon scrap values.
The price is at $615, but a thumb today are higher than what.
We base our calculations on today.
It might be higher it's probable that it would be higher but we are more concerned about the run out of models.
When we model things.
Great. Thank you for that additional detail.
Okay.
Thank you.
Your next question comes from the line of.
<unk> from Naval capital markets. Please go ahead your line is open.
Good morning, Steve Good morning, or good afternoon to you in Kansas.
Just a quick follow up on the Mark of five what would depreciable life are you going to use on that then.
I mean, I got an economy was 25 years.
Okay.
And then when you look at the auction, okay, what's giving the fourth year at 15000, what should we read into that you know really good rate for the first three years, but then stepping down to 15000 can you just give us a little color on is that where you think the market may be for that.
For that type of basketball or is that something that you know it was a trade off with the charterer as far as getting a higher rate for the first three years, and then a lower rate than before.
It's the latter.
A lot of it was a trade off to get the the fixed the job for three years at that level. So we had to to do that but because with the three years, Jonathan we bring the vessels down to Scott we felt quite comfortable.
Even with the 15000 dollar level when you assume that you know the author of that operating expenses will be around seven eight you are still making money even at $15000. A day. So it's still contributing it's not contributing that much but.
You know who knows how this situation will be after the four years.
Yeah I appreciate the your use of the word complex.
So it's not where you think the market will be in.
After three years, it's more just the mid dose negotiated transaction okay.
And then could you give us an idea of sort of what are you thinking as far as the <unk>.
Oakland and the Corfu as far as what.
Are willing to.
How are you are you going to keep those short or try to get time charters or can you give us an appreciation for sort of what you expect on those two which are the nearest one.
And then we also did that.
These are the near near this was I think we will that I and we have all of their desire to see if we can get there.
One of the two ships on long term charter.
At least.
So all that sort of stuff.
I imagine lead towards getting one of the two vessels on a long term software and <unk>.
Maybe playing the other one on the sort of themselves.
This is out of main thoughts, but nothing is finalized.
And we will see within the next.
These days or so.
Okay.
Would you be willing to probably don't want to negotiate in public but would you be willing to sort of give ranges on both of those as far as what you might expect.
I wouldn't want to do as you say to commit.
And here in the prejudice, having negotiating position with all sure Yeah, no no give any misleading data so I'd, rather not say, but obviously the longer the duration the lower the rates will be the sort of the duration the higher the rate that soldiers.
Yes, do you see any hesitancy at this point in time, given where the order book.
Yes.
Charter is committing to longer to charter in the two to three range to get you into that sort of complex timeframe of 'twenty.
2023 2024.
Whereas the market is still tight and that's where people are willing to make long term commitments.
I think the market is still tight and so we see quite a lot of interest on the ships.
I have to say.
And we have seen.
Some hesitancy to continue.
Fixing at higher rates than previously done. So there is some some small low resistance in their child to lose but are we.
We will see this is a just temporarily over the because of you know we are approaching the and the condition must holidays and people are taking a breather.
I think this is highly profitable, but yes. The truth is that we are seeing a little bit off because eastern still move towards higher levels and Oh. This is seen in the market for sure.
And then one thing that surprised me during the quarter was the dry docking expense scene.
It seemed a little high.
And you are absolutely right and you are absolutely right are the logistical issues that have been created.
Not only on the operating of the ships and.
Getting in and out of the both in the loading and discharging the cargo. It has also affected the.
Dry dockings of vessels less people that are working in the yard it's more difficult to get your Spanish to the shipyard.
It takes more time to do things all these add to the cost and as you rightly said we.
We have gone a little bit above budget on the on both our dry docks.
But yeah.
Each obviously be nuts compared to what we are rather than being on the ships, but youre right that there hasn't been a slight.
The increase in the dry dock cost and time.
Because the duration also plays an important role the duration of effect.
I'm, sorry, I didn't understand that.
And longer duration, Nevertheless days during the period.
Yes, and that's why you see the.
Some deviation from what we were expecting.
Yeah, the opportunity cost.
And so if we look at the fourth quarter you still had the I always puts you. This name, but they had great April D can revisit it is the name of my grandmother.
Paul.
I'm sorry to your grandmother.
Sure.
Okay. Okay.
And he said we forgive me.
So that's still that is still in process.
How should we be what should we be using for an estimate for dry docking expenses in the first or the fourth quarter and then even if you did take stab at the course, which would be in dry dock in January.
Yes.
About a million a piece would be on the immediate one to be sure I would say.
Okay, and then if they weren't one reason of why we took a these are low.
Low paying job sort of for the full two days it China is to cut the cost of the dry dock because.
China is the most efficient place to Drydock is cheap and it's faster and cheaper.
So.
It made sense to take a few of the things I've started to get down that quickly.
And save money on the dry dock.
And do you protect yourself, if they try to use it longer than than you forecast or your you know your drydocks.
It's available right, so jumped to 35, which more than compensates you for that right.
Yes, yes exactly.
And when I look at the Opex cost US I think you sort of alluded to it but.
Was it fairly.
Reasonable jump in the third quarter versus second quarter, and even versus the third.
Third quarter last year.
Is that something we should build into our estimates looking at the fourth quarter, and then 2022 or do you think there were a couple of factors in the quarter.
It might not be present in the ensuing quarters definitely a couple of factors that are unique to the quarter. A couple of COVID-19 incidents in some of our vessels with creative.
More growing cost fluctuations in replacement, that's why I did alluded to saying that most of the increase was due to crewing costs and overall dealing with accruing to us a little more complicated given the situation now so a piece of it my might we might see in the following quarters.
Cannot say that for sure, but we'll see it kept a wait and see how the next quarter will play, but the piece of it was on certain incidents that hopefully will not be repeated.
And then am I reading it right that you're gonna for Demarco, Fived youre going to have to finance, 85% of that purchase price of $34 million.
That is correct that is the intention and that is the preliminary arrangements with our bonds that were talking to.
The best thing is financed on the basis of its charter free value with choosing the hiseq since entering second 70 once the valuation we got.
So the yeah.
It's just how the third floor is a.
It sounds like 50% of a charter for anybody.
Yeah, Okay, and then I know, it's early you're still.
Ah you're way.
But are you seeing any interest in the new builds as far as chartering. The newbuild is it too early or when should we sort of expect to see.
Start to see some interest if you haven't seen it yet.
On chartering the new builds.
It is too early for us to look at that Oh I think this is a we still have maybe six months before we looked into it.
Okay, and then you.
Every state is you talked about you know potentially dividends share buybacks, a little surprised that the reaction to your stock price today.
Is there anything that you need to do to your existing credit agreements or the new credit agreements to allow dividends or buybacks or would you be once you you know.
Look at a couple of days you might be able to.
Implement at.
At least stock buyback or something like that.
We have we have no restrictions whatsoever to pull them out of a balance in doing either of these events are as long as we comply with all allowed to call balloons are we can we can do that and we do comply with all our covenants. So we have a very safe food.
Great I appreciate the time thank you.
Thank you Paul Thanks for the question.
Thank you with that I will now hand, the floor back to <unk> for closing remarks.
Thank you all for being with US today for this call and will be again with you in February to go over the end of the year results. Thanks, a lot and have a good day. Thanks everybody.
After Thanksgiving.
Right.
Thank you that does conclude today's conference call. Thank you for participating you may all disconnect.
Okay.
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