Q2 2024 Ardmore Shipping Corp Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to Ardmore Shipping's second quarter 2024 earnings conference call. Today's call is being recorded for an audio webcast, and the presentation is available in the investor relations section of the company's website, ardmoreshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A replay of their conference call will be accessible anytime during the next two weeks by dialing 1-888-660-6345 or 1-646-517-4150 and entering passcode 88347. At this time, I will turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore Shipping.
Good morning, ladies and gentlemen, and welcome to Ardmore shipping second quarter 'twenty 'twenty four earnings conference call. Today's call is being recorded and an audio webcast and presentation are available in the Investor Relations section of the company's Scott sight Ardmore shipping Dotcoms people.
We'll conduct a question and answer session. After the opening remarks instructions will follow at that time, a replay of the conference call will be accessible anytime during the next two weeks by dialing 18886606345 or 1646517415.
Anthony Gurnee: Zero and entering passcode 88347 at this time I will turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore shipping.
Anthony Gurnee: Good morning, and welcome to Ardmore Shipping's second quarter 2024 earnings call. First, let me ask our CFO, Bart Kelleher, to discuss forward-looking statements.
Anthony Gurnee: Good morning, and welcome to Ardmore shipping second quarter 2024 earnings call.
Bart B. Kelleher: Let me ask our CFO Mark Kelleher to discuss forward looking statements.
Bart B. Kelleher: Thanks, Tony.
Speaker Change: Turning to slide two please.
Bart B. Kelleher: Turning to slide two, please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the second quarter 2024 earnings report, which is available on our website. And now I will turn the call back over to Tony.
Bart B. Kelleher: Please allow me to remind you that our discussion today contains forward looking statements.
Bart B. Kelleher: Actual results may differ materially from those projected in the forward looking statements additional information concerning factors that could cause the actual results to differ materially from those in the forward looking statements is contained in the second quarter 2024 earnings release, which is available on our website.
Bart B. Kelleher: And now I'll turn the call back over to Tony.
Anthony Gurnee: Thank you, Bart. So first, let me outline the format of today's call. To begin with, I will discuss the upcoming leadership transition which we announced earlier this month. Following this, Gernot Ruppelt, who will be taking over as CEO in September, will clarify what this means for Ardmore. He will then discuss our second quarter highlights, the near-term market outlook, and our capital allocation policy, after which Bart will provide an update on product and chemical tanker fundamentals and our financial performance.
Tony: Thank you Bart So first let me outline the format of today's call to begin with I will discuss the upcoming leadership transition, which we announced earlier this month.
Tony: Following this drought repelled who'll be taking over as CEO in September well clarify what this means for Ardmore will then discuss our second quarter highlights and near term market outlook and our capital allocation policy.
Bart: After which Bart will provide an update on product and chemical tanker fundamentals and our financial performance.
Speaker Change: We will conclude the presentation before opening up the call for questions.
Anthony Gurnee: And then Gernot will conclude the presentation before opening up the call for questions. So, turning first to slide four to discuss our leadership transition. Our succession plan has been underway for several years and aligns with what has always been my intention to retire around the age of 65. The board has done a terrific job with the selection process, and quite frankly, as the founder of the company and a shareholder, I'm extremely pleased with the outcome.
Speaker Change: So turning first to slide four to discuss our leadership transition.
Speaker Change: Our succession plan has been underway for several years and aligns with what it has always been my intention to retire around the age of 65.
Speaker Change: The board has done a terrific job with the selection process that quite frankly is the founder of the company and a shareholder I'm extremely pleased with the outcome together Garnaut and Bard had a combined 50 years of experience in the shipping industry spanning everything from our strategy and operations to finance Naval architecture.
Anthony Gurnee: Together, Gernot and Bart have a combined 50 years of experience in the shipping industry, spanning everything from strategy and operations to new finance, naval architecture, chartering, sale and purchase brokerage, capital markets, and practical experience on TACR. And in addition to Gernot and Bart, our COO, Mark Cameron, our SVP Corporate Services, Adina Driscoll, and our newly promoted SVP Commercial, Robert Gayna, will round out the new Senior Management Team effective September. I believe what you will see is a high degree of continuity in business philosophy and strategy, continuing a dynamic and energetic approach to building Ardmore in the years to come, which I'm really looking forward to following And on that note, I'm more than happy to hand over the call to Gernot. Thank you.
Order, a sale and purchase brokerage capital markets and practical experience on tankers.
Speaker Change: And in addition to going out and Bart <unk>, our CFO Mark Cameron, our SVP corporate services, a D&O driscoll and our newly promoted SVP commercial Robert Dana will round out the new senior management team effective September.
Speaker Change: I believe what you will see is a high degree of continuity and business philosophy and strategy, continuing a dynamic and energetic approach to building ardmore or the years to come which I'm really looking forward to following along with the rest of you and on that note I'm more than happy to hand over the call to growing up.
Speaker Change: Thank you Tony.
Gernot Ruppelt: Ardmore has had an amazing journey since you founded the company in 2010. And while the company is looking ahead, speaking on behalf of the entire Ardmore staff, there is tremendous gratitude throughout the organization for what you have built over the past 14 years. I am excited to lead Ardmore into our next era, to build on the company's substantial success and position us for the future, and to do so with such a strong and unique team around me. Now, turning to slide five.
Tony: Florida has had an amazing journey since you founded the company in 2010.
Speaker Change: And while the company has looking ahead speaking on behalf of the entire Ardmore staff. There is tremendous gratitude throughout the organization for what you have built over the past 14 years.
Grayson: I am excited to lead Ardmore into a next era.
Speaker Change: To build on the Companys substantial success and position us for the future.
Speaker Change: And doing so with such a strong and unique team around me.
Speaker Change: Now turning to slide five.
Gernot Ruppelt: Let me expand on Tony's comments and provide further insights into our strategic thinking. The key message is continuity. Ardmore's long-term strategy has been very consistent over the years.
Speaker Change: Let me expand on Tony's comments and provide further insights into our strategic thinking.
Speaker Change: The key message is continuity.
Speaker Change: <unk> is a long term strategy has been very consistent over the years. It has been tested and it has been successful.
Gernot Ruppelt: It has been tested, and it has been successful. Not only are both Bart and I supportive of the strategy, but we have been part of the leadership team that has developed and executed on it. Our focus will continue to be on product and chemical tankers, as well as the overlapping trades these ships are involved in. For Ardmore, this is a core area of expertise and is an important way to differentiate ourselves in the marketplace.
Tony: Not only are both bartonite supportive of the strategy, we have been part of the leadership team that has developed and executed on it.
Tony: Our focus will continue to be on products and chemical tankers as well as the overlapping trades. These ships are involved in.
Speaker Change: For Ardmore. This is a core area of expertise and is an important way to differentiate ourselves in the marketplace.
Gernot Ruppelt: We will continue to reinvest opportunistically as we have in the past. This includes opportunities for fleet modernization, vessel upgrades, and growth, always provided that such transactions enable us to increase long-term shareholder value, and we remain committed to our capital allocation policy. Strategic continuity also means that we will continue to evolve as a business. We will evaluate and embrace new ways to integrate technology and machine learning into how we run the company, both on board and ashore.
Speaker Change: We will continue to reinvest opportunistically as we have in the past.
Speaker Change: This includes opportunities for fleet modernization vessel upgrades and growth.
Speaker Change: Always provided that such transactions enabled us to increase long term shareholder value.
Speaker Change: And we remain committed to our capital allocation policy.
Speaker Change: Strategic continuity also means that we will continue to evolve as a business.
Speaker Change: We will evaluate and embrace new ways to integrate technology and machine learning and how we run the company.
Speaker Change: Both on board and are sure.
Gernot Ruppelt: It also means that we will continue to build out the strong culture we have at Ardmore and to develop our incredibly competent and diverse team. Therefore, we will strengthen our organization and increase our capability. Today, we have a fully integrated global platform.
Speaker Change: It also means that we will continue to build out the strong culture, we have at ardmore and to develop our incredibly competent and diverse teams.
Speaker Change: Thereby we will strengthen the organization and increase our capabilities.
Speaker Change: Today, we have a fully integrated global platform.
Gernot Ruppelt: Our shoreside team is strategically located across key regions and works closely with our seafaring colleagues on what our modern fuel-efficient... This gives us the scale and reach to service a diverse, high-quality customer base. Our markets and our industry continue to change. Continued demand growth, the Energy Transition, environmental regulation, geopolitical complexity, and the natural evolution of cargo and trade flows.
Speaker Change: Our shore side team strategically located across key regions.
Speaker Change: We're closely with our <unk> colleagues on what a modern fuel efficient fleet.
Speaker Change: This gives us the scale and reach to service a diverse high quality customer base.
Speaker Change: Our markets and our industry continue to change.
Speaker Change: Continued demand growth.
Speaker Change: Angie transition.
Speaker Change: In environmental regulation.
Speaker Change: Geopolitical complexity.
Speaker Change: And the natural evolution of cargo and trade flows.
Gernot Ruppelt: We expect that all these factors will create ample opportunities, and we believe that our agile and forward-looking approach to running the business and developing our organization should position us well to capture these opportunities. Moving to slide six.
Speaker Change: We expect that all of these factors will create ample opportunities and.
Speaker Change: And we believe that our agile and forward looking approach to running the business and developing our organization should position us well to capture these opportunities.
Speaker Change: Moving to slide six.
Gernot Ruppelt: You will have heard us discuss in the past how integrating performance and progress forms an important part of our cultural bedrock. This slide shows three examples of our approach to driving strong performance while at the same time being a progressive company. As highlighted above, we perform to a very high standard when it comes to TCE results, both in terms of absolute and relative performance. Our breakeven levels are very low due to strong cost discipline throughout the cycle and minimal debt, which, among other things, has enabled us to provide a meaningful dividend yield to our shareholders.
Speaker Change: You will have heard us discussed in the past, how integrating performance and progress forms an important part of our cultural bedrock.
Speaker Change: This slide shows three examples of our approach to driving strong performance, while at the same time being a progressive company.
Speaker Change: As highlighted at the top we perform to a very high standard when it comes to TCE results.
Speaker Change: Both in terms of absolute and relative performance.
Speaker Change: Our breakeven levels are very low due to strong cost discipline throughout the cycle and minimal debt, which among other things has enabled us to provide a meaningful dividend yield to our shareholders.
Gernot Ruppelt: We continue to see a strong link between our operational performance and the way we embrace progress as a company. Today's performance paves the way for future investment and continued progress, which in turn further enhances our future performance. We have a dedicated team to seek out energy efficiency and innovation projects, and we consistently rank at the top of the industry's ESG scorecard. With that, let us turn to our second quarter earnings, the near-term market outlook, and an update on capital allocation. Turning to slide 8.
Speaker Change: We continue to see a strong link between our operational performance and the way we embraced progress as a company.
Speaker Change: Today's performance paves.
Speaker Change: The way for future investment and continued progress, which in turn further enhances our future performance.
Speaker Change: We have a dedicated team to seek out energy efficiency and innovation projects.
Speaker Change: And we consistently rank at the top of the industry's ESG scorecard.
Speaker Change: With that let us turn to our second quarter earnings the near term market outlook and an update on capital allocation.
Speaker Change: Turning to slide eight.
Gernot Ruppelt: We have seen exceptionally high rates in the seasonally slow summer period, reflecting positive fundamentals along with ongoing geopolitical impact. Seasonal volatility is playing out around a very high baseline. Our second quarter performance reflects robust market conditions with adjusted earnings of $47.6 million, or $1.13 per share, and elevated rates even in the seasonally slower third quarter. Our MRs earned $41,400 per day for the second quarter and $33,700 per day so far in the third quarter with 45% blocked.
Speaker Change: We are seeing exceptionally strong rates in the seasonally slower summer period, reflecting positive fundamentals along with ongoing geopolitical impact.
Speaker Change: Seasonal volatility is playing out around a very high baseline.
Speaker Change: Our second quarter performance reflects a robust market conditions with adjusted earnings of $47 6 million.
Speaker Change: $1 13 per share and elevated rates, even in the seasonally slower third quarter.
Speaker Change: Oh Mr's earned $41400 per day for the second quarter and $33700 per day, so far in the third quarter with 45% booked.
Gernot Ruppelt: And our chemical tankers, on a capital-adjusted basis, earned $36,100 per day for the second quarter and $31,200 per day for the third quarter, with 50% booked so far. As you can see from the chart on the upper right. We see robust market strength, with TCE rates showing a substantial increase year-on-year. Meanwhile, we continue to execute on our longstanding capital allocation policy. We are declaring another quarterly cash dividend of $0.38 per share, consistent with our policy of paying out one-third of adjusted earnings.
Speaker Change: And our chemical tankers on a capital adjusted basis earned 36100 per day for the second quarter and $31200 per day for the third quarter with 50% booked so far.
Speaker Change: As you can see from the chart on the upper right we.
Speaker Change: We see a robust market strength with TCE rates, showing a substantial increase year on year.
Speaker Change: Meanwhile, we continue to execute on our long standing capital allocation policy.
Speaker Change: We are declaring another quarterly cash dividend of 38 per share consistent with our policy of paying out one third of adjusted earnings.
Speaker Change: And we also continue to invest in the fleet to improve performance and reduce emissions. While also taking a gradual and opportunistic approach to fleet modernization overtime.
Gernot Ruppelt: And we also continue to invest in the fleet to improve performance and reduce emissions while also taking a gradual and opportunistic approach to fleet modernization over time. Overall, Ardmore continues to benefit from having strategic focus and optimizing our spot trading performance while tightly managing costs and reducing our break-even level down to $12,650 per day. Moving to slide nine.
Speaker Change: Overall <unk> continues to benefit from having strategic focus and optimizing our spot trading performance, while tightly managing costs and reducing our breakeven level down to $12 $650 per day.
Speaker Change: Moving to slide nine.
Gernot Ruppelt: The near-term outlook continues to be very positive. Strong macro-fundamentals are cemented by multiple layers of ton-mile demand with limited supply additions. The chart on the upper right highlights the ongoing impact of the EU refined product embargo, which continues to drive higher ton miles due to the bifurcation of the global fleet. However, some emerging trade routes, such as exports from West Africa and biofuels from China to the U.S. and Europe, are further supporting market strength.
Speaker Change: The near term outlook continues to be very positive.
Speaker Change: Strong macro fundamentals are cemented by multiple layers of ton mile demand with limited supply additions.
Speaker Change: The chart on the upper right highlights the ongoing impact of the EU refined product embargo, which continues to drive higher ton miles due to the bifurcation of the global fleet.
Speaker Change: Some emerging trade routes such as exports from West Africa, and Biofuels from China to the U S and Europe are further supporting market strength.
Gernot Ruppelt: Finally, it also highlights the significantly extended voyage distances caused by the rerouting of vessels away from the Red Sea and around the Cape of Good Hope. However, as we pointed out in the past, this is only a relatively small portion of overall MR demand. Seen in isolation, the Red Sea situation is more an LR story, and we're happy to touch on this further in Q&A.
Speaker Change: Finally, it also highlights the significantly extended voyage distances caused by the rerouting of vessels away from the Red Sea and around the Cape of good hope.
Speaker Change: As we pointed out in the past this is only a relatively small portion of overall a more demand seen in isolation. The reps. The situation is more in our story and we're happy to touch on this further in Q&A.
Gernot Ruppelt: In addition, near-term demand drivers are robust. As you can see from the graph on the lower right, global refinery runs have surpassed pre-COVID highs, with further growth forecasted into 2025. Also, OPEC plus will start to phase out 2.2 million barrels per day of supply cuts in September. And the global economy remains resilient, with the IMF keeping forecasts steady with growth of 3.2% in 2024. On the other hand, the low scheduled deliveries this year will result in limited net feed growth.
Speaker Change: In addition, near term demand drivers are robust.
Speaker Change: You can see from the graph on the lower right global refinery runs have surpassed pre COVID-19 highs with further growth forecasted into 2025.
Speaker Change: Also OPEC plus will start to phase out $2 2 million barrels per day of supply cuts in September.
Speaker Change: And the global economy remains resilient with IMF, keeping forecast steady with growth of three 2% in 2024.
Speaker Change: Meanwhile, the low scheduled deliveries. This year will result in limited net fleet growth.
Gernot Ruppelt: Moving to slide 10, where we highlight our longstanding capital allocation policy. Given our strong financial position, we continue to pursue all of our capital allocation priorities simultaneously, as shown on this slide. In particular, we are pleased to declare another dividend of $0.38 per share, highlighting our commitment to returning capital to shareholders. Meanwhile, we refinanced two of our lease ships while lowering our cash break even further. We continue to develop and evaluate potential transactions, and this includes the gradual modernization of all. And with that, I would like to hand the call over to Bart.
Speaker Change: Moving to slide 10, where we highlight our long standing capital allocation policy.
Speaker Change: Given our strong financial position, we continue to pursue all of our capital allocation priorities simultaneously, which is shown on this slide.
Speaker Change: In particular, we are pleased to declare another dividend of <unk> 38 per share highlighting our commitment to returning capital to shareholders.
Speaker Change: Meanwhile, we refinanced two of our lease chips, while lowering our cash breakeven further.
Speaker Change: We continue to develop and evaluate potential transactions and this includes the gradual modernization of our fleet now.
Speaker Change: Now with that I would like to hand, the call over to import.
Import: Thanks, Karen.
Bart B. Kelleher: Building upon Gernot's comments on the market outlook, we will further examine the industry fundamentals. As we've been discussing, the supply-demand dynamics remain highly favorable.
Import: Building upon <unk> comments on the market outlook.
Will: Will further examine the industry fundamentals.
Will: As we've been discussing the supply demand dynamics remain highly favorable.
Bart B. Kelleher: On slide 12, we highlight the significant supply-demand gap, and I'll address each component in more detail in subsequent slides. As we can see from the green bars in this chart, the strong forecasted ton-mile growth, which is a result of the positive underlying demand fundamentals in the ongoing market dislocation. In contrast, we can see limited net fleet growth across both product and chemical, and in particular MRs, as indicated by the gray and blue bars.
Speaker Change: On slide 12, we highlight the significant supply demand gap and I'll address each component in more detail in subsequent slides.
Speaker Change: As we can see from the Green bars on this chart the strong forecasted ton mile growth, which is a result of the positive underlying demand fundamentals and ongoing market dislocation.
Speaker Change: In contrast, we can see the limited net fleet growth across both product and chemical tankers and in particular <unk>.
Speaker Change: As indicated by the gray and blue bars.
Bart B. Kelleher: So overall, we believe the limited net fleet growth across these sectors, combined with increasing ton miles, supports the ongoing market. Moving to slide 13, where we highlight how the low MR tanker order book contrasts sharply with a rapidly aging fleet, the chart on the left provides an important visual representation of the changes in the MR fleet over time. Fifteen years ago, as highlighted in the red quadrant, we observed a modern fleet with a large number of personnel.
Speaker Change: So overall, we believe the limited net fleet growth across these sectors combined with increasing ton miles supports ongoing market strength.
Speaker Change: Moving to slide 13.
Speaker Change: Where we highlight how the low MLR tanker order book contrast, sharply with a rapidly aging fleet.
Speaker Change: The chart on the left provides an important visual representation of the changes in the EMR fleet over time.
Speaker Change: 15 years ago as highlighted in the Red quadrant, we observed a modern fleet with a large order book.
Bart B. Kelleher: However, over time, the order book has declined while the fleet has aged. Currently, as highlighted in the green quadrant, we have a low order book by historical standards and the oldest fleet in two decades, with an average age of nearly 14 years. Looking at the graph on the right side, the current MR order book is equivalent to 11% of the existing order book.
Speaker Change: However over time the order book has declined while the fleet has aged.
Speaker Change: Currently as highlighted in the Green quadrant, we have a low order book by historical standards and the oldest fleet in two decades.
Speaker Change: With an average age of nearly 14 years.
Speaker Change: Looking at the graph on the right side. The current <unk> order book is equivalent to 11% of the existing fleet.
Speaker Change: But it's important to put this in context.
Bart B. Kelleher: Vessels over 15 years of age typically experience some trading restrictions. And right now, four times as many MRs are over 15 years old compared to the new buildings down the road. With the overall product anchor order book standing at 17% of the current fleet, it's important to reemphasize the impact the lack of Aframax Crude Tanker New Buildings has on the overall product tanker order. Currently, the Aframex crew tanker fleet is shrinking while still experiencing demand expansion, including some notable growth as a result of the Trans Mountain Pipeline, which recently opened in Western Canada.
Speaker Change: Vessel has over 15 years of age typically experienced some trading restrictions.
Speaker Change: And right now four times as many mr's are over 15 years old compared to the new buildings on order.
Speaker Change: With the overall product tanker order book standing at 17% of the current fleet.
Speaker Change: Important to reemphasize that the impact the lack of Aframax crude tanker new buildings has on the overall product tanker order book.
Speaker Change: Currently the Aframax crude tanker fleet is shrinking while still experiencing demand expansion.
Speaker Change: Including some notable growth as a result of the Trans mountain pipeline.
Speaker Change: Which recently opened in Western Canada.
Bart B. Kelleher: This implies that an increasing proportion of LR2s, most likely older vessels, will naturally transition to the crude trades to cover the shortfall in the AFRMEC. Turning to slide 14, where we address demand drivers in greater detail. As previously mentioned, the ongoing conflict between Russia and Ukraine, coupled with the EU embargo on refined products, has resulted in persistent reordering of global product trade, thereby enhancing overall ton miles. At the same time, the reality of energy transition is moderating the pace of energy transition, and market forecasts consistently indicate an annual increase in oil demand. In addition, the enduring trend of oil refinery and petrochemical production capacity expansion in the west, along with closures in the east, continues to drive increased ton miles.
Speaker Change: This implies that an increasing proportion of LR twos, most likely older vessels will naturally transition to the crude trades to cover the shortfall in the Aframax fleet.
Speaker Change: Turning to slide 14.
Speaker Change: Where we address demand drivers in greater detail.
Speaker Change: As previously mentioned the ongoing conflict between Russia, and Ukraine, coupled with the EU embargo on refined products has resulted in persistent reordering of global product trades.
Speaker Change: Thereby enhancing overall ton miles.
Speaker Change: At the same time energy reality is moderating the pace of energy transition.
Speaker Change: And market forecast consistently indicate an annual increase in oil demand.
Speaker Change: In addition, the enduring trend of oil refinery and petrochemical production capacity expansion in the east along with closures and the West continues to drive increased ton miles.
Bart B. Kelleher: In summary, these positive long-term fundamentals point to continued strength in the product and chemical tanker market. Moving to slide 16, and turning our attention to the company, Ardmore continues to build upon its financial strength.
Speaker Change: In summary, these positive long term fundamentals point to continued strength in the product and chemical tanker markets.
Speaker Change: Moving to slide 16, and turning our attention to the company.
Speaker Change: Ardmore continues to build upon its financial strength.
Bart B. Kelleher: As a reminder, the chart on the bottom left highlights our focus on significantly reducing our cash break-even level, achieving a reduction of almost $4,000 per day in an elevated interest rate environment. As a result of our effective cost control, lower debt levels, and access to revolving credit facilities, we see a potential pathway to further reduce our breakeven to below $11,500 per day. In the second quarter, we refinanced two of our lease vessels at our first available opportunity for a total of $41 million.
Speaker Change: As a reminder, the <unk>.
Speaker Change: Chart on the bottom left highlights our focus on significantly reducing our cash breakeven levels.
Speaker Change: Achieving a reduction of almost $4000 per day, and an elevated interest rate environment.
Speaker Change: As a result of our effective cost control lower debt levels and access to revolving credit facilities, we see a potential pathway to further reduce our breakeven to below $11500 per day.
Speaker Change: In the second quarter, we refinanced two of our lease vessels at our first available opportunity.
Speaker Change: For a total of $41 million.
Bart B. Kelleher: And as always, Ardmore is focused on optimizing performance while closely managing costs and preserving a strong balance. Turning to slide seven, Financial Highlights. As noted, we're very pleased with our performance as we report results of $1.13 per share for the second quarter. We are correspondingly reporting strong EBITDAR for the quarter and continue to frame EBITDAR as an important comparable valuation metric against our IFRS reporting. Well, I won't go into detail here. There's a full reconciliation of this presented in the appendix on slide 29.
Speaker Change: And as always <unk> is focused on optimizing performance, while closely managing costs and preserving a strong balance sheet.
Speaker Change: Turning to slide 17 for financial highlights.
Speaker Change: As noted we're very pleased with our performance as we report results of $1 13 per share for the second quarter.
Speaker Change: We are correspondingly reporting strong EBITDAR for the quarter and continued to frame EBITDA is an important comparable valuation metric against our <unk> reporting peers.
Speaker Change: Well I won't go into detail here. There is a full reconciliation of this presented in the appendix on slide 29.
Bart B. Kelleher: While we continue to hold our $10 million stake in Element One, the developer of methanol-to-hydrogen reformer technology, in May, we divested our small stake in its affiliate, E1 Marine, for $1.65 million, realizing a modest gain of half a million dollars. However, given our position in Element One, we will continue to benefit from E1 Marines' growth in the maritime sector. Also, please refer to slide 30 in the appendix for our third quarter guidance number.
Speaker Change: While we continue to hold our $10 million stake in element one the developer of methanol to hydrogen reformer technology.
Speaker Change: In May we divested our small stake and its affiliate <unk> Marine.
Speaker Change: For 165 million, realizing a modest gain of $5 million.
Speaker Change: However.
Speaker Change: Given our position in element one we will continue to benefit from <unk> Marines growth in the maritime sector.
Speaker Change: Also please refer to slide 30 in the appendix for our third quarter guidance numbers.
Bart B. Kelleher: Moving to slide 18, examining our, As highlighted in the chart on the upper right, the majority of our dry docking and fleet enhancement program for this year is now complete, with increased revenue days and enhanced earnings power expected for the balance of the year. Capital expenditure payments for the fleet in 2024 are currently forecast at approximately $25 million, including $15 million of CapEx related to efficiency enhancing technologies and scrubber installations. 50% of our MR fleet now has scrubbers, with a further four to be fitted in 2025.
Speaker Change: Moving to slide 18, examining our sleep.
Speaker Change: As highlighted in the chart on the upper right. The majority of our Drydocking and fleet enhancement program for this year is now complete.
Speaker Change: With increased revenue days in enhanced earnings power expected for the balance of the year.
Speaker Change: Capital expenditure payments for the fleet in 2024 are currently forecasted approximately $25 million, including $15 million of capex related to efficiency enhancing technologies and scrubber installations.
Speaker Change: 50% of our MLR fleet now has scrubbers with a further four to be outfitted in 2025.
Bart B. Kelleher: Finally, we are preparing for the implementation of Fuel-EU Maritime, which comes into effect on January 1, 2025. A lot of planning is going into this by our chartering and operations team. In essence, this is a pass-through voyage expense.
Speaker Change: Finally, we.
Speaker Change: We are preparing for the implementation of fuel EU maritime which comes into effect on January one 2025.
Speaker Change: Well a lot of planning is going into this by our chartering and operations team in essence. This is a pass through voyage expense.
Bart B. Kelleher: Also, it's important to note that this regulation increases market complexities, which likely will lead to even greater trading inefficiencies, representing New Opportunities for our Nimble Charter. Moving to slide 19, where we highlight the power of our strong operating leverage. In these volatile markets, we can experience significant jumps in charter rates, so it's important to understand what a $10,000 per day increase in TCE rates means for our performance. It equates to an annual increase of about $2.30 in earnings per share and a boost of nearly $100 million in free cash flow generation. That's the kind of exciting potential Ardmore is positioned to harness in this market.
Speaker Change: Also it is important to note that this regulation increases market complexities, which likely lead to even greater trading inefficiencies.
Speaker Change: Representing new opportunities for our nimble chartering team.
Speaker Change: Moving to slide 19, where we highlight the power of our strong operating leverage.
Speaker Change: In these volatile markets, we can experience significant jumps in charter rates. So it's important to understand where the $10000 per day increase in TCE rates means for our performance.
Speaker Change: It equates to an annual increase of about $2 30 in earnings per share.
Speaker Change: And a boost of nearly $100 million and free cash flow generation.
Speaker Change: That's the kind of exciting potential ardmore is positioned to harness in this market.
Bart B. Kelleher: With that, I'm happy to hand the call back to Gernot and look forward to answering any questions at the end. Great. Thank you.
Guyana: With that I'm happy to hand, the call back to Guyana, and look forward to answering any questions at the end.
Gernot Ruppelt: Great. Thank you, Bart.
Guyana: Great. Thank you Bart.
Gernot Ruppelt: To summarize then, first, the market. Rates continued their strong momentum in the second quarter. Even during the seasonally slower third quarter, rates are up substantially year on year. Key drivers of this market strength are the persistent changes in product-tanker trades due to the EU products embargo and other geopolitical factors creating more ton-mile demand and new cargo flows. Long-term market fundamentals are supported strongly by a significant supply gap, limited new building deliveries and an aging fleet on the one hand, versus steady growth in oil demand and emerging new trades on the other.
Guyana: To summarize them.
Guyana: First the market.
Speaker Change: Rates continued their strong momentum in the second quarter.
Speaker Change: Even during the seasonally slower third quarter, we track rates up substantially year on year.
Speaker Change: Key drivers of this market strength of the persistent changes and product tanker trades due to the EU products embargo and other geopolitical factors, creating more ton mile demand and new cargo flows.
Guyana: Long term market fundamentals.
Guyana: Supported strongly by significant supply gap.
Guyana: Limited new building deliveries and an aging fleet on one hand versus steady growth in oil demand and emerging new trades on the other.
Gernot Ruppelt: Regarding Ardmore... We are achieving strong TCE performance and simultaneously effective cost control, enabling us to drive our break even lower. The result is a robust balance sheet, allowing us to execute on all our capital allocation priorities. Before we open up the call for questions, I'd like to hand over the call to Tony for some concluding remarks.
Guyana: Regarding ardmore.
Speaker Change: We are achieving strong TCE performance and simultaneously effective cost control, enabling us to drive our breakeven lower.
Guyana: The result is a robust balance sheet, allowing us to execute on all our capital allocation priorities.
Guyana: Before we open up the call for questions I'd like to hand over the call to Tony for some concluding remarks.
Tony: Thank you.
Anthony Gurnee: Many people have been asking me why I'm retiring now, and the simple answer is that this has been in the works for many years, as it was always my intention to step down around the age of 65. And if you're wondering why September, it's to align with a personal commitment I have starting at that time. I do believe we're in the middle of what I think of as a long-cycle upturn that has been 14 years in the making, part of a clear historical pattern, and one where the upturn portion typically lasts four to six years. Of course, there are no guarantees, but I do believe that historical patterns as strong as this are usually very powerful predictors.
Tony: Many people are improving the wind retiring now and the simple answer is that this has been in the works for many years as it was always my intention to step down around the age of 65.
Tony: And if you're wondering why September is to align with the personal commitment I have starting at that time.
Speaker Change: I do believe we are in the middle of what I think of is a long cycle upturn that was 14 years in the making part of a clear historical pattern and one where the upturn portion typically last four to six years.
Speaker Change: Of course, there are no guarantees, but I do believe that historical patterns as strong as this are usually very powerful predictors.
Anthony Gurnee: Given this market outlook and the opportunities that lie ahead for Ardmore, this is not an easy time to step down. I will, of course, also miss friendships that have developed during 40 odd years in the industry as well as colleagues at Ardmore, but it is definitely the right time to move on to new challenges, and I also believe this is an excellent time to pass the torch on to what is an eminently qualified new generation.
Speaker Change: Given this market outlook and the opportunities that lie ahead for Ardmore. This is not an easy time to step down I will of course also miss friendships that have developed during 40 odd years in the industry as well as colleagues at Ardmore.
Speaker Change: It's definitely the right time to move on to new challenges and I. Also believe this is an excellent time to pass the torch on to what is an eminently qualified new generation.
Anthony Gurnee: I have to say I'm very proud of the Ardmore team at all levels of the organization. As you can imagine, with changes like this at the top, there is a knock-on effect down many levels, likely all to be filled internally.
Speaker Change: I have to say I'm very proud of the Ardmore team at all levels of the organization as you can imagine with changes like this at the top there is a knock on effect on many levels likely all to be filled internally.
Anthony Gurnee: It is therefore important to explain that the Ardmore team, from top to bottom, is bound not just by shared goals but also by shared values, in particular our belief in the power of combining performance and progress. As a consequence, I'm very excited about Ardmore's prospects. I believe the company is better positioned to succeed now than ever before, and I look forward to watching it go from strength to strength in the years ahead. And with that, we'd like to open up the call for questions.
Speaker Change: It is therefore important to explain that the ardmore team from top to bottom is bound not just by shared goals, but also shared values in particular, our believes in the power of combining performance and progress.
Speaker Change: As a consequence I'm very excited about our growth prospects I believe the company is better positioned to succeed now than ever before.
Speaker Change: And I look forward to watching it go from strength to strength in the years ahead.
Speaker Change: And with that we'd like to open up the call for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please for your first question. Your first question comes from the line of Jon Chappell from Evercore. Your line is now open.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by number one on your Touchtone phone, you'll hear problems that your hand is being released should you wish to decline from the polling process. Please press star followed by number two if you are used.
Speaker Change: A speaker phone please lift the handset before pressing any keys.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from the line of Jon Chapelle from Evercore. Your line is now open.
Jonathan B. Chappell: Thank you. Good afternoon. Congratulations, Tony. Heck of a run going out on top of the market, and you don't have to answer our questions anymore. So, well done.
Jonathan B. Chappell: Thank you good afternoon, congratulations Tony Heck of a run going out on top of the market and don't have to answer our questions anymore. So well done. So I'll ask my first one that you are not.
Gernot Ruppelt: So, I'll ask my first question to Gernot on the market. So, Gernot, several years ago, you locked in some time charters when the market was somewhat peaky, I think, to get some balance, and that proved to be very well-timed. I think the outlook for the next 24 months is different than when you did that back in 2020. But I was just wondering how you're considering the balance of maybe locking in some duration here at elevated historical rates.
Speaker Change: On the market so going out several years ago, you locked in some time charters when the market was somewhat P. M.
Speaker Change: To get some balance and that proved to be very well timed I think the outlook for the next 24 months is different than when you did that back in 2020, but just wondering how you're considering the balance maybe locking in some duration here at elevated historical rates.
Gernot Ruppelt: Yeah. Hi Jon.
Speaker Change: Yes, Hi, John Thank you and Great question and I think in general the way, we look at all time charter exposure, it's really governed by opportunity.
Gernot Ruppelt: Thank you. And a great question. And I think, in general, the way we look at our time charter exposure is really governed by opportunity and not policy. And I think, as you said correctly, we took on a lot more coverage in 2021 when markets were a lot more difficult and kind of switched to a more time charter approach. And we opened up the exposure for the year that came to fully capitalize on market strength.
Speaker Change: Our policy.
Speaker Change: And I think as you think you said correctly, we had taken on a lot more coverage in 2021 when markets were not more difficult.
Speaker Change: And kind of switched to more time charter and approach and really opened up the exposure.
Speaker Change: <unk> been paying to fully capitalize on the market strength.
Gernot Ruppelt: I think looking ahead, there's always liquidity in deals, and we're kind of evaluating those constantly. At the moment, we feel very strongly about the potential that the spot market holds for us, which is why we are predominantly in the spot market. We have done an interesting spread play where we took a ship, extended one of our ships for 12 to 18 months, not too long ago, wrote that spot over the winter months, and then kind of locked in that remaining period to realize that option value at a significant premium, kind of locking in, I think, $2.5 million.
Speaker Change: I think looking ahead, there's always liquidity.
Speaker Change: Deals and we're kind of evaluating those constantly at the moment, we feel very strongly about the potential that the spot market holds for US which is why we are predominantly in the spot market.
Speaker Change: <unk> done an interesting spreads where we took a ship extended one of our ships for 12 to 18 months not too long ago throughout that spot over the over the winter months, and then kind of locked in depth.
Speaker Change: The remaining periods.
Gernot Ruppelt: To realize that option value.
Speaker Change: At a significant premium kind of locking in I think $2 5 billion.
Gernot Ruppelt: So we can always continue to do sort of relative value plays. And as far as time charter opportunities are concerned, we're consistently monitoring. But right now, again, we think the potential of the spot market is quite significant.
Speaker Change: So we can always continue to do sort of relative value trades.
Speaker Change: As far as the time charter bookings are concerned we're consistently monitoring but right now again, we think the potential at the spot market is significant.
Bart B. Kelleher: Okay, that makes sense. And Bart, I understand you wanna keep the strategy in place, especially as you go through the leadership transition, and a strong balance sheet is a key part of that. By anyone's estimation, you're gonna be pretty close to net cash by the end of this year, if not before. So just wondering, as you think about a net cash position, does your capital allocation strategy change? Is there a difference in the way you're looking at risk aversion as it relates to current asset values? Just help us think about the early stages of 25, if the path continues the way that we think it does.
Speaker Change: Okay that makes sense.
Bart: Bart I understand wanting to keep the strategy in place, especially as you go through the leadership leadership transition.
Speaker Change: And a strong balance sheet is a core of that by anyone's estimation and youre going to be pretty close to net cash by the end of this year.
Speaker Change: Not.
Speaker Change: Sure.
Speaker Change: So just wondering as you think about a net cash position.
Speaker Change: Does the capital allocation strategy change is there a difference in the way youre looking at risk aversion as it relates to our current asset values.
Speaker Change: Just help us think about the early stages of 25, if the path continues the way that we think it does.
Bart B. Kelleher: Sure. Thanks, John. You know, I think, as always, we're guided by the capital allocation policy that's been in place for a number of years. And, you know, we still do have some further scope for deleveraging through this year and are always looking at and still making plans for investing in our current fleet to increase its efficiency. And also, you know, you saw us do the pair trade, so the potential for fleet modernization.
John: Sure. Thanks, John.
Speaker Change: I think as always we are guided by the capital allocation policy that's been in place for for a number of years.
Speaker Change: We still do have some further scope for deleveraging.
Speaker Change: This year.
Speaker Change: And always looking at and still making plans for investing in our current fleet to increase its efficiency and and also you saw us do in the pair trade so on the potential for fleet modernization.
Speaker Change: It really remains situational.
Bart B. Kelleher: So, I think it really remains situational related to that while also continuing to pay our substantial dividend. I think it's important to point out the benefit that we've had from this delevering mission. If we didn't do so, our break-even would be close to $17,000 per day versus the current level of, you know, $12,650 and on a path to $11.5. And so, as a consequence of that, we've got an additional $40 million per annum of earnings, or about $1 per share. So, I think, you know, continue on that front, further enhance that, and, you know, continue to see situationally if things come up on the investment. Okay. Thanks, Bart.
John: Related to that.
John: While also continuing to pay a substantial dividend.
John: I think it's important to point out.
John: Benefit that we've had from this delevering mission.
John: Didn't do so our breakeven would be close to $17000 per day versus the current level of 12650 and on the path to 11, and a half and so as a consequence of that.
Anthony Gurnee: We've got an additional $40 million per annum of earnings or about one dollar per share. So I think continue on that front further enhance that.
John: And continue to see situationally, if things come up on the investment front.
unknown: Okay, thanks Bart. Congratulations again to you and Gernot and all the best, Tony.
John: Okay. Thanks, Bert Congrats again to you and Theyre not and all the best Tony.
Bart B. Kelleher: Thank you Phil and thanks John.
John: Yeah.
Operator: Your next question comes from the line of Omar Nokta of Jeffries. Please ask your question.
Speaker Change: Your next question comes from the line of Omar nature of Jefferies. Please ask your question.
Omar Mostafa Nokta: Hey guys, good morning. Also, Tony, congrats on your retirement. And Gernot, Bart, also congrats on your elevated roles. A couple of questions. First, just kind of thinking about the way the market is and how you've been deploying capital, so maybe thinking about the last topic of discussion. Earlier this year, you acquired the 2017 built MR.
Omar Mostafa Nokta: Thank you Hey, guys. Good morning, I also Tony Congrats on your retirement and Theyre not Bob also congrats on your your elevated role.
Omar Mostafa Nokta: A couple of questions.
Omar Mostafa Nokta: First just kind of thinking about the way the market is and how you've been deploying capital. So maybe thinking about the last topic of discussion.
Omar Mostafa Nokta: Earlier this year you acquired the 2007.
Omar Mostafa Nokta: The 2017 built emaar.
Speaker Change: We've seen prices I think firm from here, but just wanted to get a sense from you on how youre seeing values, having trended since you acquired that vessel and then also do you see returns still look and compelling and the MRO segment or in the chemicals any kind of color you have on what youre seeing there.
Speaker Change: Sale and purchase market.
Gernot Ruppelt: Hi Omar. Thanks for that. Look, I think we're really committed to the way we approach capital allocation through our capital allocation policy, where we return capital to shareholders but also find different ways to reinvest in the business. And we have done a lot in terms of just really upgrading our existing fleet, sometimes with incredible returns, between 40% to 100% IRR. But of course, as you're pointing out, we've also done an interesting spread play, buying one of our older ships, a 2010 build, at an incredibly high price.
Speaker Change: Yes, Hi, Omar thanks for that.
Speaker Change: I think we are.
Speaker Change: We are committed to the way we approach capital allocation through our capital allocation policy.
Speaker Change: We returned capital to shareholders, but also find different ways to reinvest in the business and we have done a lot in terms of just be upgrading our existing fleet, sometimes with incredible returns between 40% to 100% IRR.
Speaker Change: But of course as you're pointing out we've also done an interesting spread play.
Speaker Change: One of our older ships in 2010 built.
Gernot Ruppelt: Incredibly strong price and then also of course paying and accordingly.
Gernot Ruppelt: And then also, of course, paying an appropriately market price for a much more fuel-efficient, more modern, and more versatile asset that was a 2017 build. And I think that's how we will continue to approach the market, really being focused on opportunity across the whole bandwidth of reinvestment, from upgrading our existing assets to continue to be focused on gradual fleet modernization or even growth. You're making a good point.
Speaker Change: Prohibit you from a market price play.
Speaker Change: Much more fuel efficient more modern and more versatile asset that was 2017 built and I think thats. How we will continue to approach the market really being focused on.
Speaker Change: Opportunity really across the whole bandwidth of reinvestment from upgrading our existing assets to continue to be at to be focused on.
Speaker Change: Gradually feed monetization growth.
Gernot Ruppelt: The markets are very strong. We can't fight the markets. We're, of course, fully benefiting from that with the amount of cash that we're generating here. But I think even within sort of the larger stroke cycle, which is, you know, very positive, there's always going to be opportunities to find pockets of value. It's a big sector, quite fragmented still, and we're engaging kind of on all fronts to make sure that we identify opportunities as they develop.
Speaker Change: A good point market. So very strong you can find the markets we of course fully benefiting from that.
Speaker Change: But with the amount of cash flow, we are generating here.
Gernot Ruppelt: But I think even within sort of the largest stroke cycle, which is very positive. There is always going to be opportunities to find pockets of value. It's a big sector.
Speaker Change: Quite fragmented still and with agent kind of on all fronts to make sure that we identify opportunities and see if.
Speaker Change: As they develop.
Gernot Ruppelt: Thanks, Gernot. And yeah, just maybe on that spread trade, so the 10 that was sold and the 17 acquired, do you think that kind of, I mean, it seems like you've got the critical mass of, you know, 20-odd, you know, ships plus, and you're obviously able to punch above your weight, at least relative to other big companies; you're still able to capture a very decent real rate, it seems, quarter in,
Speaker Change: Thanks, Scott and then just maybe on the on that spread trade. So the 10 that was sold in the 2017 acquired do you is that kind of I mean, it seems like you've got the critical mass of 20 odd ships plus and you are obviously able to punch above your weight at least relative to.
Speaker Change: Other big companies are still able to capture very decent.
Speaker Change: Realized rate it seems quarter end quarter out so perhaps growth isn't necessarily needed and so are you, saying basically that you've got.
Gernot Ruppelt: So perhaps, you know, growth isn't necessarily needed. So are you saying basically that you've got the footprint you want or need, and further investment's really just about fine-tuning, so you'll sell maybe the 13s and replace them with older ones? So kind of doing a spread trade, is that the thought or the ideal scenario going forward?
Speaker Change: You've got the footprint, you want or need and further investments really just about fine tuning and so you'll see that you'll sell it maybe the 13th and replace with with older ones kind of doing a spread trade does that.
Speaker Change: Are the ideal scenario going forward.
Gernot Ruppelt: Yeah, I think that will continue to play a part, but I think we want to kind of think about, you know, not just growing the fleet but also building the business and building the organization. So I think there's a lot we can do to evolve the business, even around a consistent fleet size. But I don't think it has to be this binary. Again, I think for us, the approach is really finding value to make sure that, you know, we kind of look at this as lateral as possible. And as markets evolve and as opportunities present themselves, you know, kind of continue to pursue both avenues of reinvestment.
Speaker Change: Yes, I think that will continue to create part, but I think we want to kind of think about.
Speaker Change: Not just.
Speaker Change: Growing the fleet, but also building the business and building the organization. So I think there is.
Speaker Change: We can do to evolve the business.
Speaker Change: Even though rounding.
Gernot Ruppelt: Consistent fleet size.
Speaker Change: But I don't think it has to be this binary again I think for US. The approach is really finding value to make sure that.
Gernot Ruppelt: We kind of look at this as lateral as possible.
Speaker Change: Uh huh.
Speaker Change: As.
Speaker Change: Markets evolve and as opportunity present themselves.
Speaker Change: No.
Speaker Change: And you do pursue pursue both both avenues of reinvestment.
Gernot Ruppelt: Okay, thank you. And just one final one for me, Bart. You touched on this a bit during the E1 sale. I'm wondering if I recall at the time of that transaction a few years ago, there was a preferred equity issuance as a result or as part of that transaction. Any interest, I guess one, the sale, does that sort of trigger, I know it's a small amount that was sold, but does that trigger in any way that that preferred equity? And also, is there an interest on your part to redeem that?
Speaker Change: Okay.
Speaker Change: Thank you and one just one final one for me Bart you touched on this a bit on that.
Speaker Change: One sale.
Speaker Change: Wondering if I recall at the time of that transaction a few years back there was a preferred equity issuance as a result as part of that transaction.
Speaker Change: Any interest in that.
Gernot Ruppelt: One the sale does that sort of trigger I know, it's a small amount that was sold but does that trigger in any way the preferred.
Gernot Ruppelt: And then also is there interest on your part to redeem that.
Bart B. Kelleher: No. So, yeah, a good question, Omar. Yeah, as a reminder to the listeners, when we did the transaction for E1 Marine and Element One, we also simultaneously did a transaction to put a $40 million preferred equity piece on our balance sheet. And really, it's come to a point where, after building up the business for three years, that company needs additional capital to scale. And we thought about our own capital allocation policy and felt that it was best to exit.
Bart: No. Good question Omar Yes. It is.
Speaker Change: A reminder to the listeners when we.
Speaker Change: <unk>.
Speaker Change: When we did the transaction for <unk> Marine and element. One we also simultaneously did a transaction to put 40 million preferred equity piece on our balance sheet.
Bart B. Kelleher: And it really it come to a point for the exit of <unk> Marine after building up the business.
Speaker Change: For three years that company needs additional capital to scale, and we thought about our own capital allocation policy and and felt that it was best to exit it doesn't trigger anything automatically for the preferred at all and so going back to.
Bart B. Kelleher: It doesn't trigger anything automatically for the preferred at all. And so, going back to my answer for John, we see a further pathway for deleveraging from the traditional bank debt side first, and then enhancing the breakeven, and then can continue to assess something from there, but no immediate plans in terms of taking action on the preferred. Very good.
Bart B. Kelleher: To my answer for John we see further pathway for deleveraging from the traditional bank debt side first.
Speaker Change: Enhancing the breakeven and.
Ken: And then Ken.
Ken: Can continue to assess.
Something from there, but no immediate plans in terms of taking action on the preferred.
unknown: Very good. Thank you. Thanks, Bart. Thanks, Gernot. And Tony, congrats again.
Speaker Change: Very good. Thank you. Thanks, Bart thanks, Tony.
Tony: Tony Congrats again.
Omar: Thanks Omar.
Operator: Once again, if you want to ask a question, please press star, followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by number two. If you are using a speakerphone, please lift the handset before pressing any key.
Speaker Change: Once again, if you want to ask a question. Please press star followed by number one on your Touchtone phone.
Speaker Change: Your problem that Youre hand, ASEAN region should you issued a client from the polling process. Please press star followed by number two if you are using a speaker phone. Please lift the handset before pressing any key.
Ken: Okay.
Benjamin Joel Nolan: Your next question comes from the line of Ben Nolan of Seifel. Your line is now open. Thank you. I have a couple. The first is just, I suspect I know the answer, but the ECO mods are doing in the third quarter so far a bit better than the ECO design. Is that just asset positioning, or do those have some specific... Something that people find more desirable, or is there anything to that?
Speaker Change: Your next question comes from the line of Ben Nolan of Stifle. Your line is now open.
Operator: Thank you.
Speaker Change: So I have a couple.
Speaker Change: The first is.
Benjamin Joel Nolan: Just.
Benjamin Joel Nolan: I suspect I know the answer but the eco mods are doing in the <unk>.
Ken: Third quarter, so far a bit better than the eco design is that just asset positioning or.
Benjamin Joel Nolan: Yes.
Benjamin Joel Nolan: Specific.
Ken: Something that.
Speaker Change: People find more desirable or is there anything to that.
Gernot Ruppelt: Yeah, hi, Ben. Good question. Right now, it's just a pretty small data set. The e-commerce portion of the fleet is now comparably small, and while the quarter is just underway, there's just not that many workers booked yet.
Speaker Change: Yes, Hi, Ben.
Speaker Change: Good question right now, it's just a pretty small data set.
Speaker Change: The ecommerce portion of the three years now.
Speaker Change: Apparently small and for the quarters just on the way this is not that many voyages booked yet.
Gernot Ruppelt: And of course, then, you know, you sometimes find different ratios between front haul, back hauls, triangulation opportunities that have to kind of fully average out over the quarter. These ships are very good ships. Of course, they've been under our care for a long time. You know, three of them are now with a tonnage provider that we're close with on charter back to us. And they're doing a really great job operating those ships.
Gernot Ruppelt: <unk>.
Speaker Change: Sometimes find different ratios between front haul backhaul triangulation opportunities that have to kind of fully average out over the quarter.
Gernot Ruppelt: Very good ships of course, they've been under our care for a long time.
Gernot Ruppelt: Three of them all over the world.
Speaker Change: The tonnage provider networks.
Gernot Ruppelt: Let me close with charter back to us and they're doing a really great job operating those ships.
Gernot Ruppelt: So even though they're on the older end of the age profile of our fleet, they are extremely well received in the marketplace, very broadly accepted by all majors. And so we can really fully take them to our heart's desire. And I think you can see this play out in the earnings. But again, you know, just take this as a small data set for now.
Speaker Change: So even though theyre on the older end of the of the age profile of our fleet extremely well received in the marketplace.
Gernot Ruppelt: Broadly acceptable by the majors and so we can really fully treat them to our heart's desire and I think you can see you can see this play out.
Gernot Ruppelt: On the earnings but again I'll just take this take this is a small data set for now.
Gernot Ruppelt: Sure, that's what I assumed, and then secondly, I've got three, hopefully that's okay, but secondly, on the Matterhorn, which started in September. Curious when you have to exercise that option and what the rate is for the six-month extension. All right.
Speaker Change: Sure. Okay. That's that's what I assumed.
Gernot Ruppelt: And then segue.
Speaker Change: Secondly, I've got three hopefully that's okay, but secondly on the Matterhorn reconstruct it in.
Gernot Ruppelt: Okay.
Speaker Change: <unk> has an option to extend for six months in September curious when you have to exercise that option and what the rate is for the six months extension.
Gernot Ruppelt: All right, yeah, so that time shuttering is actually structured as a mid-max period where we don't actually have to exercise the option. We basically can re-deliver the ship by providing a notice, and that gives us kind of full flexibility in that sense. So typical contracts, you're right, are kind of firm periods with option declaration dates, but in this case, it's just a mid-max period. So that's it
Speaker Change: Alright, so that time charter and is actually structured.
Speaker Change: Is it mid Max period, where we don't actually have to exercise the option. We basically can can redeliver the ship by by providing providing a notice.
Gernot Ruppelt: And that gives us full flexibility in that sense, so typical contracts youre right.
Gernot Ruppelt: Kind of from periods with option declaration dates, but in this case its just a min Max period. So.
Gernot Ruppelt: That's kind of that.
Gernot Ruppelt: Okay, that's helpful. And then, actually, for me, Stepping into a new role, obviously big shoes to fill here. Is you and appreciating it, and you guys did cover this well, talking about continuity and sticking to the plan and so forth. But just sort of the big picture, as you look out three, five years down the line, what, how would you define success as, you know, as the leader of the company? And, you know, it's a cyclical business, and we all appreciate that. But what do you think that you can do and that you'd say, you know, mission accomplished?
Speaker Change: Okay. That's helpful.
Gernot Ruppelt: And then I.
Speaker Change: Please for me.
Speaker Change: Stepping into a new role, obviously big shoes to fill here.
Gernot Ruppelt: As you and appreciating and you guys did cover this.
Speaker Change: Well I'm talking about continuity and sticking to the plan and so forth but.
Gernot Ruppelt: Just sort of big picture as you look out three to five years down the line.
Gernot Ruppelt: What.
Speaker Change: How would you envision success.
Gernot Ruppelt: <unk>.
Speaker Change: The leader of the company.
Gernot Ruppelt: And it's a cyclical business and we all appreciate that but.
Gernot Ruppelt: What do you think that you can do and you'd say mission accomplished.
Gernot Ruppelt: Yeah. Yeah, a good point, Ben. Definitely big shoes to fill, and I'll be working very hard to do justice. But I have full faith in the team around me, including Bart, of course, who's got an incredible background and really diverse experience and a really high-value network. And I think between him and me, we will do our best to be up to the task. Now, in terms of my vision, looking ahead, the point I made is something I'd like to reiterate.
Speaker Change: Yeah, Yes, good point, Ben definitely depictions to Phil and I'll be I'll be working very hard to do justice, but I have full faith in the team around me, including part of course Who's got.
Gernot Ruppelt: Incredible.
Gernot Ruppelt: Backgrounds and diverse experience in a real high value network and I think between him and I, we will do our best to.
Gernot Ruppelt: To be up to the task now.
Gernot Ruppelt: In terms of my vision looking ahead.
Gernot Ruppelt: Yes.
Gernot Ruppelt: The point I made is very <unk>.
Gernot Ruppelt: Something I'd like to reiterate we have had them.
Gernot Ruppelt: You know, we have had an incredible run, an incredible journey, a well-tested and successful strategy. But if I were to kind of fast forward, I think we would have, as a company, embraced opportunities to truly innovate the business in ways that we integrate technology, whether it's hardware or more machine learning, both ashore and throughout the fleet. So innovation focus, you know, being opportunistic on transactions and continuing to kind of build and develop the organization and the culture that we have. So looking back in five years, I would like to think that on those three elements, innovation, opportunistic transactions, and culture, we would have continued to progress and advance as a company.
Speaker Change: An incredible run incredible journey, well tested and successful strategy, but if I were to kind of fast forward I think we would have as a company embraced opportunities to truly innovate the business in ways that we integrate technology, whether it's hardware or more machine learning both sure.
Gernot Ruppelt: And throughout.
Gernot Ruppelt: Throughout the fleet, so innovation focus.
Gernot Ruppelt: Being opportunistic on transactions and continue to kind of built into both the organization and the culture that we have so looking back in five years. So what I would like to think that on those three elements innovation.
Gernot Ruppelt: Opportunistic transactions and and culture, we would've continued to progress and advance as a company.
Benjamin Joel Nolan: Great. I appreciate it, and let me just say Tony congratulations and I look forward to turning the tables and critiquing some of your work. And to Bartnott. I'm excited to continue to work with you.
Gernot Ruppelt: Great I appreciate it and let me just say Tony.
Speaker Change: Congratulations and I look forward to turning the tables and critiquing some of yours.
Benjamin Joel Nolan: Yeah.
Barton: Barton on.
Speaker Change: I'm excited to continue to work with you guys.
unknown: Great. Thank you, Ben. Thank you. Thank you, Ben.
unknown: Thank you, Ben. Thank you. Thank you, Ben.
Bartnott: Great. Thank you. Thank you Bob.
unknown: ...
Benjamin Joel Nolan: Okay.
Benjamin Joel Nolan: Yeah.
Benjamin Joel Nolan: Okay.
Operator: We don't have any further questions at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: We don't have further questions at this time. This concludes today's conference call. Thank you for your participation you may now disconnect.