Q3 2023 Dorian LPG Ltd Earnings Call
Okay.
Welcome to the Dorian LPG third quarter 2023 earnings conference call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded addition.
Additionally, a live audio webcast of today's conference call is available on Dorian Lpg's website, which is www dot Dorian LPG Dot com I would now like to turn the conference over to Ted Young Chief Financial Officer. Thank you. Mr. Young. Please go ahead.
Thank you Daryl and good morning, everyone and thank you all for joining us for our third quarter 2023 results conference call.
With me today are John <unk>, Chairman, President and CEO of Dorian LPG Limited and Tim Hansen, Chief Commercial Officer as a reminder, this conference call webcast. A replay of this call will be available through February eight 2023.
Many of our remarks today contain forward looking statements based on current expectations. These statements may often be identified with words, such as expect anticipate believe or similar indications of future expectations. Although we believe that such forward looking statements are reasonable we cannot assure you that any forward looking statements will prove to be correct.
These forward looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates prove to be incorrect actual results may vary materially from those we express today. Additionally.
Additionally, let me refer you to our unaudited results for the period ended December 31, 2022. They were filed this morning on Form 10-Q.
In addition.
Please refer to our filings on Form 10-K, where you'll find risk factors that could cause actual resort results to differ materially from those forward looking statements.
Finally, you may find it useful to refer to the investor highlight slides posted this morning on our website with that I'll turn it over the call to John Entrepot terrorists.
Yeah.
Thank you Ted good morning, and thank you for joining Ted the term in May to discuss our third quarter financial year 2023 results.
John of course isn't with us this morning, because he's having knee surgery.
John of course has contributed a slide you will find in the deck.
It was much interesting information, which I think you will maybe want to note that would take and we will follow up with we will have some remarks red for buy from him at the end of our presentation and and field any questions you may have.
After me Tim will present, and then I'm, sorry, I don't have any Ted will present, and then Tim including the $1 irregular dividend announced today, we will have returned over 500 million.
Dollars to shareholders since our IPO.
Our board has focused on returns to shareholders, while remaining commercial retaining commercial flexibility and ensuring a strong balance sheet.
We're still investing in our business as evidenced by the four vessel joining our fleet in this calendar year and our commitment to the installation of three additional scrubbers.
For the quarter, our EBITDA was $76 2 million and net income was $51 3 million.
The net income it's the second highest in our corporate history.
Our net debt to capitalization was about 34%.
Ted will give you details on of course answer any questions you may have on our quarter's financial results.
Global LPG market fundamentals strengthened in 2022 with increased volumes from both major export basin.
And more frequent cargo routes to Europe global exports increased 4% this past quarter and are up 6% for the year with support primarily from North America.
Total exports for 2022 increased to 117, and a half million from $110 9 million tons in 2021 U.
U S exports increased 6% or 700000 metric tons from the third calendar quarter supported by favorable arbitrage economics, which persist today.
2022 U S volumes were up 3% and increase.
One 3 million tons from 2021.
Middle East export volume showed continued growth despite maintenance in some terminals or at the beginning of December .
Annual volumes out of the region are up 18%, increasing by $6 4 million tons from $35 9 million tons in 2021 to $42 three in 2022, driven by reversals, the OPEC plus production cuts.
Yeah.
Yeah.
Freight rates were this past quarter underpinned by a strong arbitrage and increased waiting time in Panama.
Rates fell in early December as can now waiting eased in some terminals in the middle East underwent maintenance.
And demand in Asia was subdued.
We're now seeing a rapid reversal and an increase in freight rates in both basins.
On the shore side Dorrans operation, we continue to work hard to ensure the well being of our crew, especially our Ukrainian and Russian seafarers and our families.
The performance side, we have been very focused on our strategy to comply with the 'twenty to 'twenty three I am all emission regulations.
E E X I N C. III, we have built out dashboards and forecasting tools that assist our commercial team and optimizing our utilization and achieve a solid <unk> score for each vessel in the pool.
Our team has spent the past two years preparing for these regulations and see this year is a turning point in the journey to Decarbonize shipping.
We will continue our research efforts and installations of various energy saving devices and premium paints to reduce consumption costs and carbon footprint.
Looking ahead at the market estimates for U S exports point to further growth in 'twenty, three and 'twenty four and as January short term outlook report the E.
<unk> said it now estimates of U S. LPG exports will grow 15, 9% in 2023 year over year.
This is up from their October estimate of 11, three and twice 273.
The U S is now producing well over 100 million tonnes of LPG, a year with 2022 numbers coming in at about 106 million tonnes.
How do you over to Ted for his remarks.
Thanks, John My comments today will focus on the recent capital allocation events, our financial position liquidity and our unaudited third quarter results.
At December 31, 2022 reported a $129 8 million of cash which was net of the $40 million dividend payment made at the beginning of the month.
At January 32023, we had roughly $165 million in cash with the increase from December 31, reflecting the January distribution from the Helios pool.
Also as John mentioned, we will pay another $1 per share as it is an irregular dividend of roughly $43 million and total dividends on or about February 28, 2023 to shareholders of record as of February 15th 2023.
The regular dividend announced this morning reflects the strong rate environment, and our resulting cash flow.
Once paid at the end of February Dorian will have paid over $300 million in dividends and have repurchased nearly $229 million in stock representing $18 8 million shares.
Which together totaled nearly $530 million in capital return to our investors since our IPO in 2014.
Our board continues to take a pragmatic quarter by quarter review of the company's performance, the LPG chartering market environment, and other macroeconomic and industry factors to determine whether to pay and if so how much in dividends.
With a debt balance at quarter end of $635 $6 million, our debt to total capitalization stood at 43, 2% and our net debt to total cap is of course, even lower given our large cash balance.
Moving into this calendar year, we will take delivery of our dual fuel no new building from Kawasaki at the end of March as well as three long term time chartered in dual fueled ships, representing nearly 20% growth in our commercially managed fleet with these additional vessels our cash cost per day will increase to 24% to $25000 a day, but I would also.
Note that these vessels offer higher earnings potential given their size fuel efficiency and dual fuel optionality.
So the discussion of our third quarter results. You may also find it useful to refer to the investor highlight slides posted this morning on our website.
Turning to our third quarter chartering results, we achieved a total utilization of 97, 8% for the quarter with a daily TCE per operating day as those terms are defined in our filings $52768, yielding a utilization adjusted TCE of about 51 630.
As TCE per available day.
Spot TCE per available day, which reflects our portion of the net profits of the Helios pool for the quarter was about $52583.
Also the overall Helios pool reported a spot Tc, including.
Approximately $57000 per available day for the quarter.
You will note that these results were somewhat correlated with the average Baltic.
<unk> recorded on a two month lag as many investors and analysts look to model. The business. We would note that a two month lag Baltic is more in line with the actual cycle of the business. Our team books voyages about 30 days out and the average load to discharge voyage.
One wave wage is about 30 days.
It is also worth reminding the investment community to the published Baltic rate assumes 100% utilization is based only on the reston or a cheaper route.
Turning to the cost side, our daily Opex for the quarter was $9739, which was up marginally from the quarter ended September 32022.
Crew costs, which include crew travel appear to have found a new normal as crew cost per day has been relatively stable over the last three quarters and spares and stores were actually down sequentially.
Spares and maintenance and lubricant costs drove the increase this quarter.
Our time charter inexpensive to TC in vessels remained stable at $5 $2 million.
Total G&A for the quarter was $6 9 million.
And cash G&A G&A, excluding noncash compensation expense was $5 9 million included in the $5 9 million or approximately 200000 that we spent to provide accommodation and food to the families of our seafarers affected by the war in Ukraine. We also recognized about $250000 of performance based bonuses.
For some employees in the quarter, thus our core G&A for the quarter was about $5 $5 million, which is consistent with our expectations.
Our reported adjusted EBITDA for the quarter was $76 $2 million up sharply from the prior quarter's $46 2 million.
We look at cash interest expense on our debt is the sum of the line items interest expense, excluding deferred financing fees and other loan expenses and realized gain loss on interest rate swap derivatives on that basis total cash interest expense for the quarter was $6 6 million or hedges saved us $1 $4 million in cash interest this period.
And we recently extended our existing hedge profile to ensure that the 2022 debt facility is 80% hedged until its maturity in 2029.
Although we currently hold an 87, 5% economic interest in Helios, we do not consolidate its P&L or balance sheet accounts, which has the effect of understating, our cash and working capital.
Thus, we believe it is used to provide some additional data in order to give a more complete picture as of Monday January 32023, the Helios pool held $25 million of cash on hand.
Page five of the Investor highlights materials outlines the economics of our scrubber investments and clearly this investment has been valuable for our shareholders of note. The total scrubbers cost savings cost savings have now paid back the entire initial investment.
In addition, as John noted we have committed to three additional scrubbers and I would note that the installed cost of these three scrubbers will be roughly two thirds of the costs that we incurred in the first 10 retrofits.
You'll also note that our investments and performance monitoring have also proven their value as both our ADR and EEO I have on the basis of unaudited figures for calendar year 2022, followed by mid single digit percentages versus the prior year.
Thus <unk> contribution to a cleaner environment continues unabated.
The significantly irregular dividends in the last 12 months underscore our board's commitment to a sensible capital allocation policy the balances market outlook operating and capital needs of the business and an appropriate level of risk tolerance, given the volatility in shipping.
We also continue to evaluate potential potentially interesting investment opportunities that may represent attractive risk adjusted returns.
With a continuing solid freight market backdrop, we remain cautiously optimistic about our cash flow generation over the coming months with that I'll pass it over to Tim Hansen.
Yeah.
Thank you, Jeff and good day, everyone. Thanks, apart again.
The October to December 122 quarter saw increased LPG exports as well as import demand.
Which translated into a great market.
North American export was buoyed by a relatively mild winter dampening domestic LPG consumption and continued record silver production levels.
The quota is often characterized by seasonality adhesion importers tends to stockpile the Windsor.
Wanted to do was no exception North American exports.
We set a record.
Exports for the quarter, while South Korea, and Japan posted strong imports level also helped by demand for <unk> to navigate the cold winter.
Middle East export volumes were slightly down compared to previous quarter, but nonetheless, it was a record high fourth quarter exports.
The east of Suez, Margaret So <unk>, one which is the benchmark.
Sheba rate continues the upward trend on the quarter prior despite a brief lull during the Golden week holidays in the far east several.
Several delays can you just charge ports in India.
In the far east absorb considerable detail.
Amit.
During October November .
Meantime market players also had to plan.
With long lead times, because the west Margaret <unk> fixing windows prior to six weeks in advance of the loading Lake hands.
The result of a.
Favorite product market absorbing tonnage or at discharge port and navigating long lead times.
The markets in October and November on the 20.
20, <unk> of November we saw a record high.
<unk> posted a $148 from Missouri tons.
December was relatively.
Wired.
The seasonal backwardation in the market impacted deposit market and a significant downward correction we're seeing.
In the second half.
Jim.
So the west of Suez market he was likewise.
The addition of Suezmax Likewise, so a rising market during October and November with a downward correction in December the west of Suez market was also impacted by delays at discharge port but also.
Had to contend with increasing delays for transiting the Panama Canal.
These delays taxes, two vessels with solid market players, having some securities filings.
Possibly cabs.
West of Suez market climb at the same pace as the market, partly due to the fact that ship owners being in time to lock in very good earnings and longer voyages, which.
Increased competition for cargo is known to be destined for the parties. These charts rages.
By September Beacon arbitrage.
CMO investor deck online.
Yeah.
Due to the port delivery prices of product in the far east.
Activity levels.
In the last few trading days or calendar 2022.
This resulted in a significant freight market reductions.
The eastern West marketplace indicated they build balanced shipping market.
Boarded by strong fundamentals.
West into some of the balanced shipping market demonstrated that the VLCC market could weather seasonal summer doldrums.
Demonstrated our strong democracy rice with shipping demand increased.
The positive fundamentals of the market has been the theme over the quarters risks remain however market.
<unk> been to understand the impact of the new COVID-19 normal in China, and with a world recession is that right.
Horizon.
Despite the presence.
There are no risks propane inventories continue to build in North America and demand for LPG remains robust.
Also there's a reasonable optimism of increasing demand in China once the hard landing of sudden opening.
<unk> is handled with more PVH truly come on stream and industry operating on most.
Industry operating on more stable businesses.
Is that wrong.
Thanks.
John .
Yes. Thank you.
As I said at the beginning I think.
I will have the.
Remarks briefly that does.
John the quarters had the prepared.
Briefly read now and then we'll go back for questions. Thank you Peter.
Thank you.
Absence, I'll give everyone a brief.
Other operation results and our near term ESG strategy Star.
Starting with our scrubbers fuel spreads for calendar fourth quarter 22, our third quarter 'twenty three widened between Alex <unk> and HMO benefiting our scrubber vessels with improved voyage economics, averaging about $5831 per day net of our scrubber opex costs the realized average.
So we're about $246 per metric ton at H M consumed by our scrubber vessels versus the cost of Dallas.
The hybrid features of our scrubbers provided additional upside for all <unk> and CK areas of trading.
In addition, scrubbers reduced not only stocks, but also significantly reduce particulate matter and black carbon and we feel are necessary precursor for putting future carbon capture systems on our vessels.
Pivoting to our ESG strategy.
Our immediate focus is on our fleet the IMF mandated <unk> Si and Ci rating, which will come into effect in stages in 2023.
We are reducing emissions and improving commercial performance by installing various energy saving devices our USPS.
We have also implemented real time data monitoring as we mentioned before with sensors, the track performance and optimize onboard operations and voyage completion.
We combine this with robust crew training efforts, which we feel are paramount Paramount to getting this done.
In addition, we have contracted three additional scrubbers, which will be installed in the next two quarters on three of our vessels, which have upcoming dry docks.
Looking ahead.
We are investigating the potential for carbon capture and storage onboard our vessels.
We're continuing to improve our energy efficiency onboard our vessels with a focus in vessel performance and emissions improvement and we're continuing to study technological innovations and advances as they mature and implementing them as soon as we can.
With that I'll pass it back to our chairman.
Thank you. Thank you Daryl we can go to questions now thank you very much.
Thank you with the prepared remarks completed we will now open the line for questions. If you would like to ask a question.
Star one on your telephone keypad.
Again that was star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question in front of the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys one.
One moment, please while we poll for your questions.
Yes.
Our first questions come from the line of Omar <unk> with Jefferies. Please proceed with your questions.
Thank you Hey, guys good morning.
Sure.
Hi.
It's a nice solid quarter, obviously and it looks like you know more is on the way here, especially given what we've seen in the spot market here the past week or so.
Obviously.
Sorry, what was that.
I said from your mouth to God's ear.
[laughter].
Sure got it.
Listening to the analysts alright.
He is looking happily on you.
Thank you.
I would say the dollar dividend declared I think clearly you're conditioning us to.
Thank you I'm being conditioned to expect these payments and I know you're still viewing.
Irregular and you mentioned on the opening remarks, the board takes a more pragmatic approach to the payout each quarter, but how should we think of dorians use of cash here as we think about the near to medium term our dividend the number one priority.
No.
They are not they are.
Right.
Capital allocation is our number one priority.
And.
Our.
The way, we think about the dividend as part of a whole which includes.
<unk> has included in the past buybacks.
And now they have been.
Ken could include them again.
Dividends obviously.
And.
Reserves for.
Sure.
Randy day and for investment so.
Including renewal so.
Up until now.
As you know we've invested on it only one new ship.
We feel that we're covered with a three.
Double fuel ships that we've chartered in include plus a new building that we're taking in for ourselves we've got.
We invest we're investing a little more in the scrubber.
Because we feel that thats that has given us good returns and we think the prospects are good.
So while dividends are right up there.
I think you asked specifically are the first priority and I think.
We should say that they are equal weight in.
That's how we view of them April weight within every cup every quarter's Cabot.
Capital decision allocation, which is kind of long term and medium term.
Okay. That's fair enough I appreciate that color and maybe you did mentioned the investments in <unk>.
Got the one newbuild re charter in.
At this point it looks like you're deploying capital on us on those three scrubbers just out of curiosity, you mentioned that those will carry a cost that's about two thirds of the initial program a few years ago I think.
Generally people that just assume that it would be more costly today and so just wanted to get a sense of what makes it cheaper.
Earl.
I think.
Production.
Production really because.
Youre right, there should be it should be more expensive, but but.
If you compare it to the first time, we put scrubbers on blood, which was in our initial two new buildings.
It's not only a third of it is probably a third of the cost not just a third of the third offer so theyre just they keep coming down I am sure that will level off somewhere but.
But.
More efficient they're.
More compact.
Easier to install.
And that's it really I think Ted do you want to add I mean, I think the other thing if there was some cost when we initially did the first retrofit some.
Basically I'm not a technical guy, but like high Tech Mris.
The structure to see exactly where to put stuff well now we know that playing out the ship. So some of that we've avoided and we've gotten better at installing them our piece of it and the yards have gotten better too. So it's all of the the learning curve I think like John said.
Okay.
Is it what do you think in terms of timing it sounds like I think Peter had mentioned in the second and third quarters or you expect to complete them.
Whats the expected sort of off hire time for those ships.
But we've.
We've modeled for the time being 30 days. That's that's what it's worked out to historically, we've been a little bit better than that sort of 27% 28 days, but we've assumed 30 for our internal modeling purposes.
Okay, and that'll happen anyway with the with the surveys that are done.
Except that except it's worth remembering that when we normally do our special surveys we actually early in dock for 15 days. So it takes sort of an additional two weeks to install the scrubber.
So we normally do not have 30 day regular dry dockings.
Okay got it and then maybe just one more and I guess, maybe more bigger picture just on what we're seeing in the market.
For instance, early in the commentary maybe maybe Tim.
What's been going on I guess with the with the spot market here recently kind of came into the year a bit softer tended a little lower it looks like the first couple of weeks and then here maybe over the past week or so its been a big jump.
Just wondering whats driving that.
That upfront here recently.
Yes.
Okay.
Tim you want to try it.
Maybe I'll stop with that.
Yeah.
Yes, I think it's a.
A combination of things.
At the end of simple became from a from a very high point.
And as we close in on Christmas and the arbitrage posting a little bit I think people got quite keen to take.
It would take to take the cargos that was there before the holidays.
That made the debates all that you have.
Kind of two weeks of quietness.
Before people got back in the seat.
In that time, its really the you can say that.
The progress setting the policy.
The kind of dictate the market without any indeed much actions, so probably the market probably felt modem it.
Should've done from that perspective, but also at the same time as we came back we normally see.
The required of the Chinese new year, but this year due to the cold spell suddenly hitting the Asia, we actually sold the Chinese coming back during the <unk>.
Chinese holidays.
Normally they take a week or so to beef.
They get back in the seats so.
The demand really picks up Q2 due to the cold spells in Asia.
We sold them scrambling for tons or even during the holidays. We normally don't see so that of course that demand opened you off in a kickback.
Action in the market and actually be.
Lynn.
When we then saw that there was exited and all those things.
In the shipping market, which became apparent quite quickly but.
As there was no demand.
Previous Vigo activity said.
And then that that kind of make the market dropped quite quite quickly and then it rebounded back through.
Property.
Sure.
Sorry.
Yes.
Got it. Thank you thanks for that color I. Appreciate the time guys. Congrats again on a solid quarter and I'll turn it over.
Thank you very much Omar.
Okay.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of Sean Morgan with Evercore. Please proceed with your questions.
Hey team.
I want to wish trauma cortisol speedy recovery from his knee surgery.
Thank you and yeah and.
Just a kind of a I guess sort of a macro question about the market. How do you sort of think about that.
Current order book one in one in five I guess versus the existing fleet.
That delivery schedule, and 23 versus kind of some of the pet Chem build out in Asia and sort of the ability of the market to sort of absorb that new tonnage like how do you how do you get comfortable with sort of the rate outlook in that context.
We think about it a lot.
And.
And whenever we never get comfortable we just.
Wave of balance the balance of probability.
Best of our ability.
So I'll, let Tim give you some.
The benefit of some of the conclusions that we've reached on the on the.
Projected.
Equilibrium everywhere, we're generally I think a little more optimistic than some other people.
And.
And he will tell you why Tim.
Yeah.
Yes.
Yes of course.
One thing that you said you cant hydrogel versus evidence, where everybody is 46 or ships or so delivering.
Delivering this year.
What we think.
We believe.
<unk>.
How do you see additional production.
Especially from the U S, which are <unk>.
Quite a lot on the on the op side.
So we see that.
Most of the EU would say 80%.
<unk> produced in the U S or will go to the far east.
The demand side is really there in the far east.
So when we model that we see.
Or kind of around 20 ships.
Due to that increase.
Or at least and Thats without any inefficiencies on top of that do you have more congestion and the orders received.
More and more is for a lot of places to your infrastructure isn't built out for the increased volume, especially be like India and.
In other places.
We're seeing a lot more going into Europe .
Due to the Warren Ukraine. So so here your orders were seen more delays than usual less as it is.
Weaker volumes coming in.
And then I.
I think we mentioned a few times the Panama Canal delays.
Do see them increasing.
You can see the.
Some of the delays have been due to the quite firm.
Or container market on again.
Even though we got is that it's kind of easing off.
<unk> or <unk>.
Significant amount of LNG carriers for.
For the next year are delivering in the next year and we also cannot see or.
More panamax through.
Sure.
They are delivering and the new regulations and the Panama also.
Now on the larger container ships actually to go through as they do not have to take the talks into their box anymore. So so we do see increased kind of Panama Canal delays.
And then you have those.
Peter mentioned earlier, the regulations on the science Cir, which.
<unk>.
Which will have an impact on there on the shipping fleet VLCC normally goes very close to full speed.
Where you see the.
The tanker market drive markets.
<unk> has not been running at full steam shows for the MD <unk> high reduction is not sort of a sort of an acre significant sorry.
But from your seat this will have an impact on <unk>.
On the fleet, which is which is quite significant actually.
So should we see these practices are being able to wear two offshore fisher shipping or keep coming in.
Okay.
That's really interesting.
So basically I think you have a little bit of a natural hedge.
The downside I guess import more vlccs coming into market and obviously a larger impact.
From the big container ship right, but what Youre, saying is that there is still only one Panama canal and you're just going have more congestion. So are you sort of now thinking that the new steady state is just just constant congestion in the Panama Canal boats effectively slowing down fleets for not just obviously vlccs, but just global fleets.
An increase in kind of a utilization based on wait times.
Yes.
That is all of you I mean, you have about 260, new Panamax container ships on order.
About 250.
LNG, new Panamax ships on order.
So this will.
Not all of them will naturally user canal, but there is more ships going in that way.
I think the LNG from the U S eventually or even though you have seen it they could use the oracle into two or three Europe .
There will be more crude into the east as well as sort of things.
Utilization of the Panama Canal will be alright.
It'd be more busy and we have also seen.
LPG carriers, probably being the hardest hit of those because were excluded from from booking a hit.
Sure.
Relative lineups.
And the LNG carriers that can speculatively book slots are a year or.
LPG ships kind of when you book forging base I hit.
Kind of all in.
Due to the ranking that most companies have then.
That is an issue.
The larger consumer lines have higher rankings.
So I see this increase.
Increased continue and also the Panama Canal authority use have increased cost offer of the LPG carriers pausing.
I guess.
<unk> is the smallest chip that can possibly compostable.
<unk> will come out.
And given the lease revenues for that kind of helps reduce Unix significant increases.
The extra transit cost plus people as most of the time having too.
Before the auctions or which goes everything from.
$100000 to two two.
On the auction fees. So we're seeing more people also taken the longer route around.
The Cape or through the year.
The Suez canal to to ensure that they can actually meet <unk>.
And have a pretty much gets you so.
So that longer Gibson.
To give some more ton miles.
And the balance of things.
And that consideration has gone through to the delays and due to the uncertainties in the.
And the auction piece of course, which short term you don't know where it can be.
So these things so I think as the actual state.
And then if I could just squeeze in one more.
On this I think Ted in the prepared remarks said that.
The Baltic rate reflects a rush in order to achieve a route and.
If I'm hearing you correctly, it's almost sounding like he doesn't view that as maybe as central and important to route relative to the actual rates that you guys are seeing at your chartered vessels. So what what routes do you think like now or kind of more indicative.
Of how the trade is really happening for vlccs on kind of a weekly basis.
Yes.
Sean Sean Let me take this as two questions actually.
I'll give you two answers to that Tim will answer you specifically on this on the part of.
Your question, which is what kind of mix.
The trade, how we should think of the mix right because it's not just the AG East obviously, it's a it's a western route and even though the west is both AG.
U S Gulf East, but also U S Gulf to the continent and other short term. So I'll, let him give you that but first I wanted to I wanted to Ted to address the reason why he said.
The lag and the 100% being closed.
When and I noticed that most analysts now use a one month lag on the VLCC rate on the AG right.
Of course, it is still a 100% utilization, which is fine, but I think.
I'd like Ted to explain to you why we think the one month lag.
We will not reflect the actual earnings.
Because because the lag going to receipt of freight is is at least two months, but.
Ted do you want to yeah sure Yeah, So Sean.
Exactly what John said so.
Aside from there being a mix, it's really the business, it's really the cycle right.
Our guys are booking.
Now here at the beginning of February .
For voyages that wont complete until.
The earliest sort of sort of April and may be even further out and so as a result, when you're when you're trying to do.
A modeling exercise.
And then given how the given how the loaded sorry, the revenue recognition accounting works.
We're really trying to find that.
The two month lagged average is going to be a lot better Tim will give you more on the on the specific trade lanes and there is some the rates behave differently there.
Particularly.
We've seen U S Gulf to northwest Europe be a sweet spot that Tim will comment on that but it's really just simply.
Look if there's no perfect way to do this and we acknowledged that we wanted to give a little guidance to the investment community about how to may be narrow.
<unk>.
They get somewhat more accurate.
And again averages are tricky.
We booked somewhere around nine to 10 voyages a month so when they're in their.
20, some odd working days in any given month, so it becomes quite tricky to strike broad averages, but we at least feel that looking at a two month lag is going to give you a better indication of what we expect to see intra quarter and what you can expect to see when we deliver quarterly results.
Okay.
Oh, you want do you want to hear from Tim about the mix actually.
Yeah.
Would be good actually okay, Sean it was a great question Tim.
<unk> been through it quickly.
Okay I'll answer to your short.
The segments, that's basically three routes so the wrestling to achieve.
East.
Middle East to far East and then there's a route.
Go to the far east and U S Gulf to.
To Europe , and I actually indexes for these three rooms.
Not used very much because.
There have been two really great and you can say.
Trading purposes, and I know of us.
What's really the intended.
For these groups to be to be published.
So they are not really used on a on a paper trading basis.
And the market is not so big to have too many indexes, which then makes them adequate but.
You can see our trading is property.
80% out of the U S and 20%.
In the U S. East. This is the most active spot market rules.
Uh huh.
The routes and it's also the long carbon which I can say it will have a bigger impact fixing one more as you work through the east and then.
And the AG to the east of our U S to the to the west So we employ that.
The ship for 70 days instead of 30.
30 to 40 days.
So.
<unk> is really the most significant food I would say through mentioned open of course people will change from one patient to.
One of the.
The routes is paying far less than the other ones, but it's a matter of how do you deploy your ships.
And with Chicago to you.
And where did you come open.
Obviously, the most traded who as you work through the to the far east.
I would kind of watch out for that as well as we've gone up there.
John Shaw your earnings.
And they're like Doug said on the AG East.
Index route doesn't take into account kind of a waiting and it doesn't take into account I think time auction fees.
So the Panama Canal. So again when you calculate the cheesy returns on those you would have to take that with a pinch of sold as well.
And then you have.
Premium market has been the U S to the west.
Well, that's a difficult market to operate in.
Cause you a movement quite close to the low ports.
As I mentioned before sometimes.
Fixture saw clients to six weeks ahead.
When we fix a ship so youre hockey opening the AG. When you opened in the far east already when you fix the ships let alone open 14 based on the low point, so a lot of people avoid giving.
Ending up in the west due to these reasons, but they do pay a premium. So if you if you kind of.
Figure out how to manage it.
So attractive market.
Some so.
But that also again when you're then yoga your earnings is really depending on.
Where I come open under previous whereas if I'm walking into the west and go to the far East of course that will give you a significantly higher return on a discharge to discharge versus balancing from the east and then ending up on the shortage in the west.
So these are kind of.
The variances as Rajeev mentioned, we fix sometimes five to six weeks.
It is tight.
If the market is not so much higher than you were fixed two to three weeks ahead in the west.
But in the east it would be more like 10 to 10 to 20.
10 to 30 days and hit the big sort of validation of the tight market 10 days and then Nordstrom type market.
Of course again.
Of.
The lag that you would have to use.
Depends on how tied is a modern.
How do we fix that.
Thanks, Tim I mean, Sean as I give you more than your water.
Yeah, No that's great Tim Thanks, a lot of deep nuance on kind of how it works.
I actually thought it would be useful.
Yeah, Yeah, Yeah, that's great. Thanks.
Thanks, guys.
Thanks, John Thank you very much thank you.
Daryl I think we're done.
Thank you. Thank you very much everyone for joining us and we look forward to.
Our next quarters call. Thanks, again bye bye.
Okay.
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