Q4 2021 Ardmore Shipping Corp Earnings Call
Speaker 1: regulations which will begin to take effect from January 2023 for further increased pressure on older ships.
It will take effect from January 2023, further increased pressure on ownership.
Speaker 1: Meanwhile, looking at future supply, the order book for product and chemical tankers is low relative to the demand outlook and ongoing strapping. While new ordering is constrained due to very limited berthing availability, as a consequence of activity in other sectors, rising up prices and pushing out deliveries.
Meanwhile, looking at future supply the order book for product and chemical tankers is low relative to the demand outlook and ongoing scrapping.
New ordering is constrained due to bring them in at Berkeley debate of energy as a consequence of activity in other sectors winding up prices and pushing out deliveries.
Speaker 1: and an ongoing lack of clarity and propulsion technology has dampened the willingness of tanker owners to order now.
On an ongoing lack of clarity on propulsion technology dampens, the willingness of tanker owners to order now.
Turning to slide 10 for financial highlights.
Speaker 1: Reporting an adjusted loss of 8.6 million or 25 cents per share for the fourth quarter The president adjusted loss of 12.8 million or 37 cents per share in the third quarter
We reported an adjusted loss of $8 $6 million or <unk> 25 per share for the fourth quarter.
Prior to an adjusted loss of $12 $8 million 37 per share in the third quarter.
Speaker 1: MR has averaged 11,400 a day for 4Q21 and 10,900 a day in the third quarter, while chemical tankers perform better with PCE of 11,300 per day in 4Q compared to 8,400 per day in the third quarter.
And margins averaged 11400, a day for <unk> 'twenty, one and 10900 a day in the third quarter, while chemical tankers performed better with TCE of 11300 per day with <unk> compared to 8400, a day in the third quarter.
Charter rate improvements reflect the ongoing recovery in oil demand.
Speaker 1: Charter rate improvements reflect the ongoing recovery in oil demand. Also, while freight rates have strengthened, some of the upward momentum in TCEs are being eroded by higher bunker prices.
Also we're on freight rates have strengthened some of the upward momentum in tcs are being eroded by higher bunker prices.
Next we will take a closer look at our cost line items and provide some guidance for the coming quarter.
Speaker 1: Next we will take a closer look at our cost line items and provide some guidance for the coming quarter.
Speaker 1: Operating expenses were $16.1 million for the fourth quarter and $61 million for the full year. A slight decrease on the prior year mostly relates to one less ship in operation in 2021.
Operating expenses were $16 1 million for the fourth quarter and $61 million for the full year, a slight decrease from the prior year, mostly relates to one less shipping operations in 2021.
Speaker 1: Looking ahead, we expect operating expenses for the first quarter to be approximately 15.6 million.
Looking ahead, we expect operating expenses for the first quarter to be approximately $15 6 million.
Speaker 1: Charging expense was 2.1 million in the fourth quarter. We expect it to be in line in the first quarter.
Charter in expense was $2 1 million in the fourth quarter and we expect it to be in line in the first quarter.
Speaker 1: Appreciation amortization totals 9.3 million in the fourth quarter and 37 million in the full year, slightly down year on year. We expect appreciation amortization of the first quarter to be 9.5 million.
Depreciation and amortization totaled $9 3 million in the fourth quarter and 37 billion for the full year slightly down year on year.
We expect depreciation and amortization for the first quarter to be $9 5 million.
Speaker 1: Total overhead costs were 4.3 million for the quarter and 19.2 million for the full year, representing a slight increase in 2020, mostly attributable to market-related increases in insurance and foreign exchange.
Total overhead costs were $4 3 million for the quarter and $19 2 million for the full year, representing a slight increase in 2020, mostly attributable to market related increases in insurance and foreign exchange.
Speaker 1: For the first quarter of 2022, we expect overhead to incorporate in corporate and commercial be approximately 5.1 minutes.
For the first quarter of 2022, we expect overheads, incorporating corporate and commercial to be approximately $5 1 million.
Speaker 1: Interest expense was 4.1 million for the fourth quarter and 16.7 million for the full year down significantly from the prior year
Interest expense was $4 1 million for the fourth quarter and $16 7 million for the full year down significantly from the prior year.
Speaker 1: We're currently benefiting from the float to fixed interest rate swaps entered into in mid 2020. Currently 255 million or 79% of our debt is fixed at a margin plus 32 basis points through June 2023.
We're currently benefiting from the float to fixed interest rate swaps entered into in mid 2020.
Currently $255 million or 79% of our debt is fixed at a margin plus 32 basis points through June 2023.
Speaker 1: The first quarter of 2022, we expect interest expense to be approximately 4.1 million, continuing amortized deferred finance fees of 400,000.
For the first quarter of 2022, we expect interest expense to be approximately $4 1 million premium amortized deferred finance fees of 400000.
Speaker 1: Overall we believe our cost structure is among the lowest of our peer group and in particular our internal commercial overhead costs are approximately 50% of prevailing market movies.
Overall, we believe our cost structure is among the lowest of our peer group and in particular, our interim of commercial overhead costs are approximately 50% of prevailing markets two of these.
Moving to slide 11 for fees and operational highlights.
Speaker 1: We are continuing to invest in the fleet to optimize operating performance. Three dry dockings and one ballast water treatment system insulation were completed in 2021. And we expect to complete two dry dockings and two ballast water treatment system installations this year with capex of 4.8 million.
We are continuing to invest in the fleet to optimize operating performance.
Three dry dockings and one ballast water treatment system installations were completed in 2021, and we expect to complete two dry dockings in two ballast water treatment system installations. This year with Capex of $4 8 million.
Speaker 1: Forecasted revenue days for 2022 are approximately 9,500. Chemical tankers representing 23% of total fleet days.
Forecasted revenue days for 2022, or approximately 9500 chemical tankers, representing 23% of total fleet dates.
Speaker 1: For the first quarter, we have about 10% of the days fixed on time chart.
And for the first quarter, we have about 10% of the days fixed on time charter.
Speaker 1: Operationally, the fleet continues to perform well. On-hire fleet availability was 99.5% last year. And 87% of our crew are now fully vaccinated for COVID. But challenges continue for our industry, and crew welfare will remain a top priority.
Operationally the fleet continues to perform well on higher fleet availability was 99, 5% last year and 87% of our crew and have fully vaccinated for cohorts of.
The challenges continue for our industry and crew welfare will remain a top priority.
Speaker 1: Turning to slide 12, we take a look at charter rates. Reporting the feed average TCE of 11,319 per day in the fourth quarter, up from 10,300 per day in the third quarter.
Turning to slide 12, we take a look at charter rates reported a fleet average TCE of 11390 per day in the fourth quarter up from 10300 per day in the third quarter.
Speaker 1: He could design a margin of 11,600 in the fourth quarter up from 11,050 in the third quarter. The chemical factors are performing very well on a relative basis.
Eco design and margin of 11600 in the fourth quarter up from 11050 in the third quarter.
The chemical tankers are performing pretty well on a relative basis.
Speaker 1: As of previous quarters, we are presenting chart rates on the chemical tankers on an actual and capital adjusted paper.
As with previous quarters, we have presented charter rates on the chemical tankers on an actual capital adjusted basis.
Speaker 1: The purpose here is to present the rates for the various vessels on a comparable basis to an MR.
The purpose here is to present the rates for the various vessels on a comparable basis to an EMR.
Speaker 1: Chemical tanker rates are reported at 11,250 per day for the quarter. And on a capital adjusted basis, the chemical ships reported 12,200 per day.
Chemical tanker rates are reported at 11250 per day for the quarter and on a capital adjusted basis. The chemical ships reported 12200 per day.
Looking ahead as of today for the first quarter of 2022, we have 60% of our days booked on the <unk> at 13725 per day, and 70% of the days booked on the chemicals at 13325 per day.
Turning to slide 13 for our capital allocation and then look at our balance sheets.
Speaker 1: Turning to slide 13 for capital allocation and a look at our balance sheet.
Speaker 1: We completed the drawdown of the second tranche of the preferred shares, raising 15 million in December . Preferred shares are a highly attractive piece of capital, boosting liquidity and enabling leverage reduction.
We completed the drawdown of the second tranche of the preferred shares raising $50 million in December .
FERC chairs at a highly attractive piece of capital boosting liquidity and enabling leverage reduction.
Speaker 1: maintaining a strong balance sheet and liquidity position. We had 67 million in total liquidity, comprising cash of 55 plus another 12 million under online at the end of December , which equates to 2.7 million per sheet.
Maintaining a strong balance sheet and liquidity position, we had $67 million in total liquidity comprised of cash of 55, plus another $12 million Undrawn lines at the end of December which equates to $2 7 million per ship.
Speaker 1: Total net debt stood at $313 million at the end of December , with leverage on a net debt basis of 49%, down 3% from 4 Q2 020.
Total net debt stood at $313 million at the end of December with leverage on a net debt basis up 49% down 3% from <unk> 2020.
Debt reduction remains a top priority in our capital allocation policy.
Speaker 1: We reduced overall debt by $34 million in 2021. And we have scheduled repayments of $37 million this year while maintaining the revolving credit facilities for financial flexibility.
We reduced overall debt by $34 million in 2021, and we have scheduled repayments of 37 million this year, while maintaining the revolving credit facility for financial flexibility.
Meanwhile, ship volumes are increasing and boosting net asset value.
Speaker 1: Values are up approximately 6% since June 2021, on the back of rising new building costs, limited new supply and a positive outlook.
Findings are up approximately 6% since June 2021 on the back of rising EBITDA cost limited new supply and a positive outlook.
With that I'd like to turn the call back over to Tony.
Speaker 2: Well, so to sum up, then our fourth quarter results reflect conditions prior to the onset of winter, along with the tail end of the pandemic related to demand destruction. And so far this quarter conditions are...
So to sum up then our fourth quarter results reflect conditions prior to the onset of winter along with the tail end of the pandemic related demand destruction, and so and so.
For this quarter conditions are much better.
Speaker 2: Where we go from here is a function of the global economic recovery and tanker fundamentals, all of which look positive.
Where we go from here is a function of the global economic recovery and tanker fundamentals all of which look positive through 2022 and beyond.
Speaker 2: As mentioned at the beginning, the oil market itself should be considered as well, given the currently negative impact it's having on the tanker market.
But as mentioned at the beginning of the oil market itself should be considered as well given the currently negative impact it's having on the tanker market.
Factors include.
Speaker 2: oil price and backwardated futures curve resulting in very high bunker costs and impeding trading activity as well as driving
The high oil price and backward dated futures curve, resulting in very high bunker costs, and impeding trading activity as well as driving ongoing inventory destocking.
Speaker 2: OPEC plus production discipline and some operational constraints on supply resulting in further reduce.
OPEC plus production discipline, and some operational constraints on supply, resulting in further reduced crude shipments.
Speaker 2: political factors seemingly creating inactivity as opposed to any activity.
Geopolitical factors seemingly creating an activity as opposed to any activity at the moment.
Speaker 2: and gray markets keeping substandard crew tankers in operation when they should have already been scrapped.
And gray markets, keeping substandard crude tankers and operation when they should have already been scrapped.
Speaker 2: The point here is that any shift away from these negative conditions would not only raise overall tanker demand, but also pull crude tankers out of clean trades, as well as attract LR2s back into crude.
The point here is that any shift away from these negative conditions would normally raise overall tanker demand.
So full crude tankers that are clean trades as well as attract LR twos back into crude thus boosting the product and chemical tanker sectors as well.
Speaker 2: Overall, we're optimistic for the coming year, but given the crosscurrents that we've discussed, we're also maintaining a conservative...
Overall, we're optimistic for the coming year, but given the cross currents that we've discussed we're also maintaining a conservative financial stance.
Speaker 2: Long term, we feel that our focus on operating performance, our ETP framework, and our selective approach to transaction.
Long term, we feel that our focus on operating performance, our ETP framework and our selective approach to transactions are keeping us focused on the right things above all protecting and building value for shareholders.
Speaker 2: keeping us focused on the right things, above all protecting and building value for shareholders.
And with that we'll open up the call for questions.
Speaker 3: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
Your question. Please press Star then two.
Speaker 3: The first question is from Randy Gibiens of Jefferies. Please go ahead.
The first question is from Randy <unk> Jefferies. Please go ahead.
The gentlemen, how's it going.
Good Rodney Rodney.
Speaker 4: Excellent doing well. So I guess first question just on the overall market kind of your fleet strategy clearly constructive on the outlook Moving a lot of your vessels more to the spot exposure. I guess two questions Maybe exactly how bullish are you on the market and then will that lead to some charter in? opportunities for some additional exposure
<unk>.
Excellent.
First question just on the overall market kind of your fleet strategy clearly constructive on the outlook.
Moving a lot of your vessels more to the spot exposure I guess two questions maybe exactly how bullish are you on the market and then will that lead to some charter in opportunities for some additional exposure.
Speaker 2: Yeah, I think I'll just answer that simply that we do at the moment have two ships chartered in. This is something we've been doing for a while, but we're not really
Yes, I think I'll just answer that simply that we do at the moment have two ships chartered in that's something we've been doing for a while but.
We're not really ever in a position to communicate our commercial attentions.
But but certainly.
That's one option that we have.
Speaker 4: Sure, that's fair. And then looking at the E1 investment and the methanol to hydrogen tow boat, I guess looking at your partners, how will they all kind of fit into the development process? What's the estimated timeline for that development and more importantly maybe the financial impact or upside from this new project?
Sure.
Fair and then looking at the E. One investment in the methanol to hydrogen towboat I guess looking at your partners how will they all kind of fit into the development process.
You made a timeline for that development and more importantly, maybe the financial impact or upside from this new project.
Speaker 1: Hey Randy, I'll take that one. Great question. I guess, first of all, you know, we're here to talk about Maritime Partners and their investment of their returns, but it is a very exciting announcement made in November for the first vessel. The anticipated delivery of that vessel is 2023 and interest overall in the system and particularly on the back of that announcement.
Hey, Randy I'll take that one great question, I guess first of all where we.
I heard you talk about maritime partners there.
What are their returns, but it is a very exciting announcement made in November for the first the first vessel.
The anticipated delivery of that vessel in 2023.
Interest interest overall in the system and particularly on the back of that announcement and the one system has been has been significant so too early to say in terms of what it means overall, but it is a very positive development for the system and validation of it. So yes, we're very excited about it.
Speaker 1: NEON system has been significant so too many to say in terms of what it means overall But it's a very positive development for the system and validation of it. So yeah, we're very excited about it Got it
Got it.
Turn it over from there thanks again.
Thank you.
Speaker 3: The next question is from John Chapelle of Evercore. Please go ahead.
The next question is from John .
The power of Evercore. Please go ahead.
Speaker 5: Thank you. Good afternoon or good morning. Tony, starting with you and the response to your outlook, one of the things you noted moving gradually into non-CPP cargos, could you kind of describe exactly what you mean by that? Does that mean the existing fleet or any upgrades or other alterations you need to make to the fleet as you get out of the traditional trades or just any other things regarding strategy as you kind of...
Thank you good afternoon, and good morning, Tony starting with you in the response to your outlook one of the things you noted moving gradually into non CPP cargos could you kind of describe exactly what you mean by that does that mean, the existing fleet or any upgrades or other operations you need to make to the fleet.
The traditional trades or just any other things regarding strategy as you kind of deemphasize I guess the traditional CPP.
Yes, I'll just answer briefly and as grownups here, so I'll ask him to comment as well, but I think it's a mix of things first of all about 25% of our cargoes are already non CPP, we do have the six chemical tankers.
Speaker 2: I'll just answer briefly and as you know Gurney's here so I'll ask him to comment.
Speaker 2: But I think it's a mix of things. First of all, about 25% of our cargos are already non-CPP. We do have the six chemical tankers. And most of our MRs are chemical tankers.
And in most of our peers are chemical tanker rotation. So I think it's a combination of a little bit of technical aspect to it and operational knowhow.
But I'll I'll ask or not to comment further yes. Thank you Tony maybe just to add to that on the chemical tankers. The six that we own and the further we commercially manage.
Speaker 2: Tony, maybe just to add to that on the chemical tankers, the six that we own.
Speaker 2: for the week commercially managed. We are trading those predominantly in non-CPP cargos, but that has also created interesting cross trading opportunities for MRs where we are engaging in non-CPP trades.
We are trading those predominantly in non CPP cargos, but that has also created interesting cross training opportunities for <unk>, where we are engaging in CVP.
<unk>.
Both eastern West.
We leave them on occasion parceled out some of our larger ships.
Speaker 2: There's also a lot of demand coming from biofuel, biofuel blending for anything that has to do with not just straight up petrochemical chemical demand, but feedstock and blending feedstock mechanism.
There's also a lot of demand coming from.
Biofuel biofuel blending for anything that has to do with not just straight up petrochemical chemical demand, but feedstock.
Feedstock for Biofuels.
A lot of that happening at the moment and where we've been able to capitalize on that.
Speaker 5: And for my second question, Gurnot, keep you in the hot.
And for my second question Youre, not keep you in the hot seat.
Speaker 5: talked about this refinery dislocation for some time now. I think Paul said it's been accelerated through the pandemic.
You've talked about this refinery dislocation for some time now I think Paul said its been accelerated through the pandemic why do you think it hasn't led to more material improvement in the marketing conditions yet.
Speaker 5: think it hasn't led to more material improvement in the marking conditions yet? And as a follow-up to that, how much of this kind of pressure on product do you think is made in voyages of new-build crude carriers? And are we kind of getting close to the end of the tunnel on that?
Follow up to that.
How much of this kind of pressure on product do you think is maiden voyages of Newbuild crude carriers and are we kind of getting close to the end of the tunnel on that pressure.
Speaker 2: Yeah, I think it's important that we look at where inventories are.
Yes, I think it's important that we that we look at where inventories are at the moment, particularly in the Atlantic and the U S. And also in Europe , we see refined product inventory is quite low and of course in a market that has been pretty backward dated you don't see that pop on long haul trading demand as much as we would see in a contango market.
Speaker 2: Particularly in the Atlantic, in the US and also in Europe , we see refined product inventory is quite low.
Speaker 2: back related. You don't see that you know pop on long-haul trading demand as much as we would see in a contango market but that ought to change at some point and and you could you could certainly see.
To change at some point and you could you could certainly see.
Great and you put inventory.
Restocking that would.
Particularly in the Atlantic that would get sourced from.
Speaker 2: of the new refineries and more excessive inventories we would see east of Suez. The sort of the trend that we've seen towards the start of the year around crew tankers taking CPP cargo, that certainly is happening. But as we see crew...
Some of the new refineries.
That's a inventories we would see east of Suez.
The.
Sort of the trend that we've seen with the start of the year around crew tankers, taking CPP cargos that certainly is happening.
But as we see crude markets improve.
That should that should also abate and in a way the eastern freight markets have already priced at and Hum.
Alright. Thank you thanks Tony.
The next question is from.
Speaker 3: Magnus Fear of HD Wainwright. Please go ahead.
Magnus <unk> of H C. Wainwright. Please go ahead.
Speaker 6: Yes, hi. Just a question on the market outlook, excluding the pandemic and any potential wars, how do you see the seasonality playing out this year going forward?
Yes, hi.
Hi.
Question on the market outlook.
<unk>.
The pandemic and any potential awards, how do you see the seasonality playing out this year.
Going forward.
Speaker 7: Yeah, I mean, maybe I'll just ask her not to answer that. But the winter is far from over.
Yes, I mean, maybe I'll just ask her not to answer that but the winter is far from over.
Explain what happens, yes, clearly, we I think the winter market is showing a lot of interesting movement, particularly in the Atlantic at the moment.
Speaker 2: Yeah, clearly we are, you know, I think the winter market is showing a lot of interesting movement, particularly in the Atlantic at the moment. We've seen quite a bit of tightness in the market.
We've seen we've seen quite a bit of tightness in the market and as of this morning <unk>.
Gasoline route from Europe to New York.
Be earning roughly 19500, a day on a neutral basis.
Speaker 2: golf is somewhat behind still but also firming and is getting quite tight so at the moment the triangulated...
U S. Gulf is somewhat behind still but also firming and is getting quite tight so at the moment the triangulated Tc would be probably around $15, five, but where we see things moving on Tc 14.
Speaker 2: might well be 17.5 on an Atlantic average. And then the Eastern markets are still somewhat behind based on what we just described, giving some of the, you know, some of the...
Next up might well be $17 five on Atlantic average and then eastern markets are still somewhat behind.
Just on what you just described given some of the.
Some of the activity on crew tanker new buildings, but with increased CPP flows and inventory restocking. We should also see what used to west arbitrage that should also support creative assets in the east.
Speaker 6: Do you think with market recovery underway, do you think there will be much seasonal dips like we typically see in a year? Or do you think there will be steady improvements throughout the year?
Great.
Our market recovery underway.
Much seasonal dip.
Typically in.
In a year or you think could be steady improvement throughout the year.
Yes.
It's a very.
Sure.
Speaker 7: you get these pockets of market increases and pockets.
You get you get these pockets of market increases and pockets of weakness.
Kind of pretty much all the time, no matter, what kind of market environment yearend.
And so we obviously look at the global averages.
To get a sense of the direction, but at the moment the west strengthening in the east is a bit weak.
Opposite a few weeks ago.
Speaker 6: Just one question on your fleet. Most of them eco-design. These three ships, or there are four ships built in Japan, a very good shipyard, three of them are built in O-8. How do you see them trading going forward? I know they're very high quality ships, so I'm just curious what your thoughts are. You know, they are very fuel efficient ships.
Alright, Thank you and just one question on your fleet.
I mean, most of the new design.
And.
How do you see I mean these three.
Sure.
It's built in Japan. It is very good shipyard.
Three of them are built in a way how do you see them, creating going forward I know, they're very high quality fit so just curious.
What your thoughts there.
Yes.
Fuel efficient ships of a very high quality with great following among the customers.
And the and the oil traders. So they are very risk tell shifts even though they would be more focused on the refined product trades, but of course, there's plenty of that to go around and looking at the particular dimension double shifts. They can also access certain trades in certain ports.
Speaker 2: plenty of that to go around and looking at the particular dimensions of those ships.
Which would be uniquely suited for these ships. So there is a very meaningful.
For the ships to continue trading.
Speaker 6: All right, so then turning 15 next year shouldn't really have any implications for those shifts despite stricter regulations? Yeah, I think it's really kind of a preference issue for the customers and obviously with the market stronger they don't seem to mind.
Alright. So then turning 60 next year shouldn't really have any patience for.
Whether it sits there.
Regulations.
Yes, I think it's.
Really kind of a preference issue for the customers and obviously with the market stronger they don't seem to mind.
As much but if they if they have choice.
Obviously, we'll go at that point for the more modern ships.
They continue to trade quite well even beyond 15.
Historically, we've tended to sell off ships when they get to around that age.
But that that's.
Not a cast iron rule.
Okay very good thank you.
Speaker 3: Again, if you have a question, please press star then one. The next question is from Ben Nolan of Stiefel. Please go ahead.
I was wondering if you have a question. Please press Star then one.
Question is from Ben Nolan of Stifel. Please go ahead.
Hey, guys.
Speaker 8: I guess I've got a couple first.
Got a couple.
First.
Speaker 8: Um, Paula, with respect to I appreciate you giving the guidance with respect to the equity method and obviously there's a loss and I know that you don't control sort of how that. Flows through, but any any color that you might be able to have as to sort of how we should expect those numbers to to come in or flow through going forward or is it just. Going to be.
Paul.
With respect to your I appreciate you've given the guidance.
With respect to the equity method and obviously there is a loss and I know that you don't control sort of how that.
Flows through but any any color that you might be able to have as just sort of how we should expect.
Those numbers to come in or flow through going forward or is it just going to be we'll see.
Speaker 1: Thanks, Wendy. I guess it's a case of we'll see, I mean, E1 Corp and E1 Marine are early stages of development, so it's really at a commercialization stage now, so the running costs are fairly modest, but obviously if things really pick up on the revenue side, then there'll be a positive impact. It's a little bit too early to say, but I wouldn't expect any major movements on it for the coming quarter.
Thanks, Bryan I guess, it's the case.
We'll see.
One.
<unk> Corp.
Marine or early stages of development. So it's really a commercialization stage now so the running costs are fairly modest, but obviously, if we if things really pick up on the on the on the revenue side and there'll be a positive impact. So it's a little bit too early to say, but I wouldn't expect any any major a major movements on it for that for the coming quarters.
Speaker 8: Okay, and then just sort of in line to that, is there, assuming that things pick up and move forward, is there any capital call that you guys would be obligated or would want to make? Should that be?
And then just sort of in line to that is there.
Assuming that things pick up and move forward is there any.
Capital call that you guys would be.
Gated or would want to make should that be necessary.
No I mean as we.
When we made the investment.
Almost coming up to a year ago now it is a pretty asset light model. So don't expect any any any capital calls as such it's intended to be primarily a licensing model there may be small.
Capital amount for assisting with prototypes et cetera, but no wouldn't expect any any capex on.
Speaker 8: Okay. And then and then shifting gears just sort of to market commentary color. I just appreciate that this is sort of a touchy feely kind of an answer. But yesterday, I'm sure you heard your one of your competitors came out and said they were hyper or uber bullish or whatever. I don't know Tony, are you guys sort of in that same camp or maybe maybe a little bit less?
Okay.
And then and then shifting gears just sort of the two market.
Terry color just to.
<unk>. This is sort of a touchy feely kind of an answer but yesterday I'm sure you heard your one of your competitors came out and said they were hyper Uber bullish or whatever.
I don't know Tony are you guys sort of in that same camp or maybe maybe a little bit less.
Speaker 8: um... you know exuberant or or at an i a anyway to frame that
Exuberant or not in any way to frame that.
Speaker 7: I think it's safe to say that we've been humbled by the past two years. And it's, the pandemic has really thrown a lot of curveballs at us. Some good but a lot bad. But all the milkbo Ultron extending incredibly traditionally future skinNew Ranked by Michael C
Yes, I think it's safe to say that we've been humbled by the past two years.
And it's.
Downtick is really thrown a lot of curve balls at us.
Some good but a lot that.
We just try to call it as we see it right now.
Speaker 7: trying to call it as we see it right now, but I'm just kind of focusing on the numbers in terms of the oil demand outlook, global economic recovery, and what looks to us to be very tight to my outlook as well. But also for a short list of aspects we wanted to talk about.
Just kind of focusing on our numbers in terms of the.
Oil demand outlook global economic recovery.
And it looks to us to be a very tight supply outlook as well.
But also acknowledging that there's a lot going on in the oil markets that are having an impact so.
Yes, I think that we.
I think we certainly directionally share their view.
We're characterizing it in our own way here.
Speaker 8: Gotcha. And then lastly for me, fuel spreads really widened out a bit. Now all of a sudden scrubber economics, even for things like MRs, seem to be wide open. Any thought at all about sort of revisiting that idea for you guys?
Got you.
And then lastly for me.
Fuel spreads really widened out a bit now all of a sudden scrubber economics, even for things like <unk> seem to be wide open any thought at all about sort of revisiting that idea for you guys.
Good question.
Speaker 7: One that we look at all the time, we tend to when we look at our performance.
One that we look at all the time, we tend to when we look at our performance we strip out the benefit of the scrubbers recognizing that that doesn't really capture the cost of the scrubbers, which is some operational cost as well as the initial capital investment.
Speaker 7: out the benefit of the scrubbers recognizing that that doesn't really capture the cost of the scrubbers which is some operational cost.
So I think that.
Given given what's happened so far.
Speaker 7: Given what's happened so far, we're pretty happy with our...
We're pretty happy with our decision.
Yeah.
Speaker 7: every company had its own rationale and view on it. That's what I'm saying.
Every company has its own rationale in our view on it and Thats perfectly.
That's not to be questioned.
Speaker 7: But we've chosen to invest instead more heavily in...
But we've chosen to invest instead more heavily in fuel saving devices.
<unk> directly improved performance.
Speaker 7: where the returns on investment are north of 50%. So we like those. Again, none of
The returns on an investment or north of 50%. So we like those.
Again, none of them have been particularly large.
Total amount but.
When we talk about our ECP, that's really what we're working on that part.
Speaker 7: So I think that so far, the
So.
I think that so far.
The scrubber investments haven't been.
Speaker 7: factor in the upfront capital costs and operating expenses. It's been okay. I don't think it's been a home run, nor has it been a home run.
When you factor in.
The upfront capital cost and operating expenses.
I don't think its been a homerun nor has it been.
Boston in terms of returns, but you have to factor in all the components of it and not just the revenue enhancement.
Speaker 8: Right, and so from where you say you're not necessarily imminently looking to make an investment in that.
Alright.
From where you said youre not.
Youre not necessarily imminently reevaluate or looking to.
Make an investment in that direction today.
Speaker 7: No, because our own view, and again everybody has a different angle on it, our own view is that the incremental return for the incremental investment is still...
No because our own view and again everybody has a different angle on it our own view is that the incremental return for the incremental investment is still.
They are pretty neutral, okay, alright perfect.
Speaker 7: Alright, perfect, thanks. And I just want to clarify, that's particularly the case with MR's and chemical tankers.
I just want to clarify that's particularly the case with <unk> and chemical tankers, it's very different from the bigger ships right.
The next question is from climate Merrill Lynch of value Investor's edge. Please go ahead.
Speaker 3: The next question is from Climate Mullins of Value Investors Edge. Please go ahead.
Good morning, gentlemen, thank you for taking my questions.
Speaker 9: Looking at the order book, it's at very low levels, but I was wondering, with all the ordering we have seen in other segments, what kind of delivery would a buyer be looking at on an MR order?
Looking at the order book is at very low levels, but I was wondering with all of you are doing we have seen in other segments.
What's kind of delivery a year will be looking approximately at.
Or is there.
Speaker 7: Yeah, I think it depends on the yards you go to. If you look at the biggest yard that builds MR's, it's Hyundai Meepo. Last year they delivered 29 ships, and if you look at the delivery...
Yes, I think it depends on the yard to go to if you look at the biggest yard builds of ours.
Repo.
Last year, they delivered 29 ships and if you look at the delivery schedule from that yard over the next couple of years it declined substantially.
Speaker 7: from that yard over the next couple of years, it declined substantially. And I think we're looking out into the next couple of years, certainly well into 2024.
And I think we're looking out into certainly well into 2024 at this point.
It may be possible, you can get orders and other yards.
To deliver it sooner but.
It's definitely pushed out quite substantially I don't.
We'll have that answers the question.
Speaker 9: Indeed it does, it does. Thank you. And secondly, just a modeling question. Go on, go on, sorry. I was just going to mention, the other thing that's very important to understand is that new building prices have pushed up for an MR from arguably 34 million a couple years ago.
Indeed, it does it does thank you.
Secondly, just a modeling question.
I'm sorry.
I mentioned the other thing that's very important to understand is that new building prices have pushed up from fruit MLR from arguably $34 million a couple of years ago to 41 million today. So.
So big increase in price.
Speaker 9: Indeed, that's putting a lid on newly-ordered. And secondly, I was going to ask a modeling question. When do you expect to conduct the tooth-vay docking forecasted for 2022?
And that's putting a lethal new building ordering and secondly, I was going to ask a modeling question. When do you expect to conduct the pud value duckings forecasted for 2022.
Speaker 1: The drydocking for 2022 would be mid-year towards the second half.
The dry dockings for 2022 would be midyear.
Towards the second half.
Alright, that's helpful. That's all from me. Thank you very much.
This concludes our question and answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.
Speaker 3: This concludes our question and answer session and today's conference. Thank you for attending today's presentation.