Avance Fuel Holding Ltd (OTCPK:AVACF) Q3 2022 Outcomes Convention Name November 24, 2022 8:00 AM ET
Øystein Kalleklev – Government Chairman
Randi Bekkelund – Chief Monetary Officer
Convention Name Members
Climent Molins – Worth Investor’s Edge
Good day, and thanks for standing by. Welcome to the Avance Fuel Holding Restricted Third Quarter 2022 Earnings Convention Name. Right now, all individuals are in a listen-only mode. After the audio system’ presentation, there shall be a question-and-answer session. [Operator Instructions] Please be suggested that at present’s convention is being recorded.
I might now like at hand the convention over to your speaker at present, Øystein Kalleklev, Government Chairman of the Firm. Please go forward.
Okay. Thanks, and thanks, everyone, for becoming a member of this third quarter webcast for Avance Fuel. I am an Øystein Kalleklev, Government Chairman of the Firm, and I am joined right here at present by Randi, who’s the CFO of the Firm, and he or she shall be presenting the financials a bit later within the presentation.
Earlier than we start, I feel I simply need to make you conscious of our disclaimer. We are going to present some forward-looking statements and a few non-GAAP measures. So please, we advise you to view the presentation along with the earnings launch, which we printed additionally at present earlier at present.
So let’s start Q3 highlights. TCE revenues for the quarter was $39.1 million, which is barely decrease than the $44 million we delivered in Q2. That is reflecting considerably a weaker spot market with our time constitution equal earnings coming in at $33,000 per day, which was according to our steerage of round $32,000 per day.
Web revenue got here in at $11.6 million, which equals to our earnings per share of $0.15. Please additionally be aware that we have now had appreciable good points on our rate of interest swaps in the course of the yr in whole $25 million of good points to date this yr, and Randi will inform extra about this a bit later.
The freight market has turned from in the course of the begin of Q3, so now the strongest spot market we have now seen since 2015 and truly, the Baltic LPG Index 1 from to Japan this week hit its all-time excessive. Through the — additional, we even have offered one in all our older ships, 2009 constructed Promise.
Throughout Q2, we offered the sister vessel Windfall. The sale of Promise is giving us a e book acquire of $7.5 million, and the money proceeds from the transaction is round $20 million, and we count on the transaction to be finalized by finish of November, and this revenue will then be booked in This autumn.
Now we have additionally just lately entered right into a 12-month time constitution for the non-scrubber ship Pampero 2015 construct, which then mainly changed the time constitution contract we had on Promise till November subsequent yr. After which we’re changing this with barely higher numbers for the time constitution. Now we have agreed with Pampero for our completely different shoppers.
Now we have now booked 93% for This autumn with our estimated TCE of round $50,000 — $50,000 to $55,000 on a discharge-to-discharge foundation after which $45,000 to $50,000 on a low to discharge foundation. The market has been shifting in a short time up after which generally you may have a bit distinction in whether or not it is on a low to discharge foundation, which is the idea for the IFRS numbers after which discharge-to-discharge, which is what we often deal with commercially clever.
For the quarter, we’re additionally declaring our dividend as soon as once more of $0.20 per share, just like the one we have now offered in Q1 and Q2. And this provides our year-to-date payout ratio of 85%. The inventory has been performing fairly dangerous at present. So really, at present, you get whole 11% of annualized yield, it is someplace nearer to 12-13% %. So that ought to give our traders engaging direct yield by being invested within the Firm.
Let’s head for the subsequent slide and the fleet renewal, which is sweet for the setting, but additionally superb for our revenue and loss assertion. Now we have now, in the course of the yr, offered three for older ships with Thetis Glory in Q1, Windfall in Q2 and now in This autumn, we’re promoting Promise. Meaning we have now divested three of the older ships in our fleet. In whole, this has contributed with a e book acquire of $18 million and money launch of $67 million.
So at present, given the inventory worth, we’re highest round worth e book [0.85] and we’re promoting our older ships at significantly increased costs than our e book worth. And in addition, we invested in six new ships there as we have now additionally within the slide, which had been purchased at round $80 million, whereas newbuilding costs for comparable belongings at present are $95 million. So with this renewal, we’re promoting off the older ships, preparing for IMO2023 after which delivering new twin gas LPG ships, all with A ranking on the EIA.
These ships are then lowering sulfur emissions by near 196%, particulate matter round 90% after which CO2, 40%. And it is a mixture of the actual fact the ship is larger. It is consumed much less gas than our 2010 constructed VLGC. After which as well as, we will use LPG as maritime bunkering gas, thus additionally shaving off 20% of the emissions in comparison with a daily gas.
So let’s head for the subsequent slide, then we can provide an replace on the present fleet construction. As you may see, Promise offered. So she shall be out of the fleet, and we began the yr with 5 2008, 2009 constructed ships after which we’re left with two ships, each on time charters till finish of subsequent yr. So, we’re absolutely mitigated by costlier bunkers price at present as these ships are then on time constitution and fuels for the charters account.
So at present, we have now 17 ships, very shortly, this shall be 16. As you may see right here, there are some completely different specs on a number of the ships. So we have now the wind class, the 215 class, six of the eight ships are fitted with the scrubber, which is offering superb economics in at present’s market. The 2 ships which isn’t fitted with our scrubber is Chinook and Pampero. Chinook Is on our variable time constitution till the center of subsequent yr.
So we’re not uncovered to gas price for this ship both and the identical goes with Pampero, which we just lately coated on our contract now from November to November subsequent yr, changing the time constitution protection we misplaced on Promise. The 2 newbuildings, Polaris and Capella additionally on a variable index time constitution. They’re, as you may see right here, fitted with LPG gas. They’re twin gas. After which the 4 subsequent ships Rigel, Avior, Castor and Pollux. We even have this ammonia prepared.
So, ship quantity three and 4, are ammonia prepared within the sense they’ll burn ammonia as maritime gas. After which, we just lately additionally made a change order on Pollux. So each Castor and Pollux at present are absolutely ammonia prepared additionally for having ammonia as a cargo. After all, these are very huge ships. So, the parcel dimension for ammonia is just not actually at this stage at present, however there’s a number of deal with blue ammonia, win ammonia. So this market is creating, and we have now 4 ships there that are very effectively fitted for this commerce and likewise fitted for being nonetheless emission ships.
Sure. And generally, we have now a balanced portfolio. Now we have additionally taken out some FSA covers. That is ahead contracts mainly on freight. And we have now just lately coated 63% of subsequent yr for one ship. After which we have now our legacy 33% protection for Q1. So, the brand new 63% protection we have now executed for the 2023 is at $47,000 per day, and the protection we had from pre-existing offers executed a few yr in the past, is at round $30,000 for the Q1.
So effectively coated, after which we have now a number of market exposures and all the brand new ships coming for supply, we’re absolutely open and may profit from a a lot stronger freight market at present. Now we have two ships developing in early subsequent yr, after which you’ll in all probability discover there in slip, customized merchandise had been initially supposed for supply ’23 because of delays at yards because of varied causes, together with labor strikes. These ships would possibly very effectively each of them find yourself in 2024, and that is a basic theme for the trade, which I’ll come again to later available in the market part.
So, final slide earlier than handing over to Randi for our monetary evaluate is the dividend. Now we have simply included a bit extra coloration on the dividend. And we’re form of — to be frank simply copied a number of the ideas from advanced simply to present you some coloration on how we’re eager about the dividend. The dividend is — it is probably not one thing you solely think about the quarter you might be in, however you might be additionally taking a look at how is the outlook for the subsequent quarter. How is our monetary place?
So by way of Q3 this yr, it’s kind of on the smooth facet. That is why we have now a yellow mild. The market outlook has considerably improved from what we had after we had been reporting in August. So it is inexperienced mild on that. The one motive why it isn’t darkish inexperienced, given the truth that spot market is on hearth is, in fact, the truth that there are extra ships for supply subsequent yr. In order that’s why I am a bit cautious in the marketplace outlook.
Backlog and visibility won’t ever be Extremely inexperienced for Avance Fuel. That is commodity transport, however we do have some backlog, as I discussed on the final slide. Liquidity place is tremendous sturdy. Covenant compliance, we have now executed a mistake. This must be darkish inexperienced. We’re passing the compliance of economic covenants with flying colours. Debt maturities, nothing earlier than 2027. CapEx liabilities. Sure, we do have $242 million of remaining newbuilding CapEx. Nonetheless, that is coated totally plus some with the $250 million of debt services, which shall be drawn on supply of the ships.
So, we are going to really be money optimistic on taking deliveries of the remaining 4 newbuildings after which different issues is probably going. So all in all, a bit softer quarter, however we’re preserving the dividend of $0.20, after which earnings for subsequent quarter goes to be so much higher than for this quarter.
So with that, I give it again to you, Randi.
Thanks, Øystein. Let’s go to Slide 7 and take a look at our outcomes.
The third quarter was as Øystein already touched upon softer than the primary and the second quarter because of a slower freight market. The time constitution equal or TCE earnings for the third quarter was $39 million or TCE per day of $33,000, which is forward of our steerage of $32,000 and is defined mainly by extra favorable place than anticipated.
Working bills had been $9.8 million, pretty according to the earlier quarter, equaling a every day common OpEx of $8,200. As commented within the second quarter, airfare is making crew modifications costlier, having a destructive impression on our OpEx and represents about $300 per day for the third quarter.
When that mentioned, the OpEx per day is down from $9,000 a day stage we noticed in 2020 and 2021 and the rollout of the vaccine are having a optimistic impact mixed with a decrease OpEx on our newbuilding.
Administrative and basic expense or A&G for the quarter had been all the way down to $1.5 million in comparison with $1.9 million and represents a normalized A&G expense, which is roughly $1,200 a day and has been and nonetheless is the bottom A&G in comparison with our friends.
Web revenue for the quarter was $11.6 million or $0.15 per share. Trying on the year-to-date income, we have now $54.3 million and is the strongest 9 months because the glory days in 2015 and is mainly defined by a stronger freight market.
As we’re reporting in accordance with IFRS, we have now an estimate or an prolonged P&L, additionally known as different complete earnings, the place we acknowledge our spinoff portfolio consisting of our curiosity hedges.
As commented within the second quarter presentation in July, we blended and prolonged an present $50 million LIBOR rate of interest swap and transformed right into a software-based swap and improve our hedging with one other $100 million, leading to a software-based hedge of $150 million at 1.87% maturing in 2030 and 2031.
Moreover, at quarter finish, we had a LIBOR hedge with a notional quantity of $202 million at a mean price of two.82% maturing in 2025. Now we have benefited fairly effectively on these positions, leading to a acquire of $7.8 million for the quarter, bringing the whole good points for the yr about $25 million.
Subsequently, we have now terminated $100 million notional price of curiosity swaps in the course of the fourth quarter because the rate of interest peaked. So of the $100 million $75 million was money settled, which resulted in a money receipt of $6 million, whereas the remaining $25 million was transformed right into a 30-month swap to take extra protection within the brief finish.
For subsequent yr, we have now 50% of our debt is hedged at a SOFR equal price of two.6% and as well as, we have now a money reserve of $6 million from the terminated swaps. This compares to a one-year sulfur price of 4.9% at present.
A couple of feedback to the fourth quarter outcomes earlier than we transfer on, as Øystein commented, we have now booked 93% of the vessel days, that is 60%. And as we have now seen earlier than, the IFRS 15 or low to discharge adjustment can have a major impact because the market has moved upwards by the top of the quarter in our books.
And we count on a destructive impact of about $5, 000 a day, and this leads to the TCE expectation per day between $45,000 to $50,000 a day on a load to discharge foundation, which is our reporting figures in accordance with the accounting requirements. We even have some results on the sale of Promise. The acquire, in fact, of $7.5 million and a decrease depreciation expense of $300,000.
So shifting to Slide 8. On the stability sheet, we will see that we have now 77% of our stability sheet are vessels, consisting of 13 VLGCs changing into 12 very quickly as Promise is offered and the remaining 9 newbuildings at present below building and scheduled for supply in ’23 and ’24.
The newbuildings had been contracted in 2019 and 2021 on the backside of the cycle at a mean worth of NOK80 million per vessel and is valued at mid-high $90 million at present. This provides as much as extra e book values of $90 million to our books. Now that will be very good so as to add this into our stability sheet. So this isn’t allowed in accordance with the accounting commonplace, as our fleet is carried at price much less depreciation and any impairment, which is probably the most used accounting mannequin inside the transport house.
Our money place has been considerably improved this yr as we have now offered three older women producing approximate $67 million in internet money proceeds, and we have now refinanced the fleet, leading to a money launch of $83 million, mixed with a robust freight market contributing $88 million in money circulation from operations, we recorded a money stability of $188 million.
Trying on the right-hand facet of our stability sheet. Now we have maintained our stable shareholder fairness above 50%. At quarter finish, we have now a shareholder fairness of $583 million, similar to an fairness ratio of 54% and the whole interest-bearing debt of slightly below $500 million, equaling a debt to whole asset ratio of 45%. The share has moved a bit down from yesterday, however it’s nonetheless supporting our e book worth considerably, and it is priced as dedicated by $0.08 at $0.85 at present.
The following slide illustrates the quarterly money motion. We began up with a money stability of $199 million at the start of the quarter. And because the freight market is above our money breakeven stage, we generated $60 million in free money circulation or internet of money from operations of $26 million and scheduled debt reimbursement of $10 million.
We additionally paid pre-delivery CapEx of $9 million in relation to the third dual-fuel VLGC Avance Avior scheduled for supply in Q1 ’23. Only a few months forward. Moreover, we have now distributed $0.20 per share or $15 million in dividend for the second quarter. Different money format of $3 million pertains to primarily transaction prices, in relation to the current sale leaseback settlement and alternate price impact because the U.S. greenback forex has strengthened towards the Marbella, which we have now for primarily administrative prices solely.
This provides as much as a destructive money motion of $11 million and a money stability of $188 million on the finish of the quarter. For the fourth quarter, we count on the money place to develop and to be effectively above $200 million as we are going to obtain $20 million in internet money proceeds from the sale of Promise and obtain freight from a really supportive commerce market.
Shifting to the subsequent slide. Taking a look at our newbuilding CapEx, we have now now paid about 50% of the whole capital expenditure and $242 million stays to be paid. The whole expenditure contains improve for making ready the vessel to sail on ammonia gas for all remaining newbuildings and carry ammonia cargo for brand new constructing 5 and 6, which ends up in a zero carbon answer from a effectively to wake pondering.
The 2 twin gas VLGCs, Avance Polaris and Avance Capella are financed by banks within the $104 million facility, which was drawn at supply in January and February this yr. The financing for the 2 subsequent years’ Avance Avior and Advance Rigel to be delivered in a number of months, are secured in $115 million financial institution mortgage facility as part of the fleet refinancing that we accomplished in Could this yr. And the 2 final vessels, Avance Castor and Avance Pollux scheduled for supply in Q3 ’23 and Q1 ’24 are secured in $135 million sale-leaseback settlement as introduced in August this yr.
So, which means that we have now no unfunded CapEx, besides of the scheduled dry dockings and the financing of our newbuilding program is now accomplished. 75% of our financing portfolio has been considerably improved this yr, and we have now achieved longer reimbursement profile, now between 20 to 22 years. Now we have achieved longer time or nearer to 6 years, with the primary maturity in February 2027.
Now we have elevated our revolver capability to make the most of the flexibleness to handle and optimize money and keep away from related curiosity prices, and we have now decrease margins. So — and thereby, we have now really improved our money breakeven by roughly $1,000 a day in comparison with earlier years.
So at present’s money breakeven is about $21,800 and assuming at present’s freight market setting at $90,000 a day on scrubber vessel on a U.S. Asia voyage, the Avance fleet has the potential to generate about $50 million in free money circulation in quarter — on a quarterly foundation.
And with that, I hand the phrase again to you, Øystein, for the market replace.
Okay. Thanks, Randi. Let’s do a brief evaluate of the current market developments. Let’s begin simply with wanting on the LPG market, as a result of LPG is a really versatile gas. You should utilize it for lots of various stuff. When you have a look at the on a world foundation, it is mainly 40% of residential and industrial heating and cooking, after which one other 40% for the petchem trade and likewise a reasonably large stake for the refining.
However relying on the area to what the LPG is utilized for actually relies upon so much, you will notice that in additional creating international locations. It is largely for rescomm. In U.S., it is — LPG is usually a petchem product, is a petchem or refinery mixing. After which in case you have a look at Asia, it actually will depend on so much on the completely different international locations. The largest importer is China, the place rescomm is simply 40% according to the world mixture. Whereas in India, it is 90% for this use. After which the order about Europe with a reasonably large auto gasoline market the place LPG can also be utilized as gas for autos.
Let’s head into the market and the current traits. On the export facet, it is a pretty easy market. The 2 huge markets are North America and the Center East. And we have now seen a really sturdy progress of the exports this yr, 11% up first 10 months of the yr, pushed primarily then by Arabian Gulf international locations like Saudi Arabia, Iran, all having 30% plus out regardless of much less oil volumes from OpEx.
On the import facet, it is wholesome progress in all places mainly China. China has been lowering their LNG imports one hundred and first month of the yr by 22%. This isn’t the identical in LPG. LPG can also be, as I discussed on the earlier slide, very reasonably priced. So, Chinese language imports are literally is 9% to date this yr. Europe, with our power disaster are additionally substituting in additional LPG and has been rising 67% this yr, though from a a lot decrease stage than the Chinese language demand.
If we’re wanting on the spot earnings, good instances are again for certain. We are actually on the highest stage since we have been within the interval 2015. And as I discussed, AG China — AG Japan index, the Baltic 1 has been on the best stage ever this week. And that is represented by this smiling man with some cool form, as a result of final time it was good, then we had been again in 2015 and fairly all the time had a very good smile when. If we have a look at the one-year time constitution price, it is, in fact, a bit extra steady than the risky spot earnings, however nonetheless at fairly wholesome ranges.
If we’re wanting on the subsequent slide on the arbitrage. So okay, why the charges shifting this shortly up, it is, in fact, a conductive setting for the arbitrage. So, we do see the costs between Mont Belvieu, U.S. propane after which the Far East Index in Asia had been up 4.5 star. After which in case you’re wanting on the arbitrage, which is then changing into mainly the restrict of feeling for what you may pay on the transport freight charges, it is nonetheless preserving an excellent stage.
And if we form of assume all of the arbitrages for the good thing about our ship proprietor, which is often the case in our sturdy market, then we’re taking a look at earnings stage for scrubber ship of $60,000 subsequent yr, $66,000 in ’24 after which, in fact, considerably decrease for our non-scrubber ships. And naturally, these usually are not solely theoretical numbers, so we have now secured 63% of our ship within the FFA market just lately at $47,000 per day for the AG to Japan route, so not actually the arbitrage for ship house owners, however nonetheless a really conductive transport market given these arbitrages.
If we’re taking a look at what’s taking place available in the market, it’s kind of just like what we have seen in LNG, the place ton mile is on the weak facet as a result of you could have extra imports into Europe. Not on the identical scale in LPG as in LNG. However alternatively, we do see a while mitigating the sluggish tempo of ton mileage progress and the typical velocity is down for the ships are down 4%. And naturally, that is additionally pushed by the congestion in Panama, the place ready time is above 20 days nowadays, each on the north and the south sure. That is additionally the unpredictability of the Panama canal once you’re making an attempt to schedule a ship.
Additionally signifies that increasingly more ship house owners are taking the ships longer routes by Cape of Good Hope or alternatively to Suez in an effort to have our agency on the ship, which makes it simpler to repair it, as a result of in case you have an unpredictable date, it is laborious to repair the ship. So that is additionally driving up on time and ton mile finally. And naturally, with the Panama Canal now growing the charges by mainly doubling it within the subsequent couple of years, we do count on extra of the LPG commerce. We squeezed out of the Panama Canal leading to longer tailing distances than previously.
So attrition, in fact, now we’re in an excellent market and folks typically do not discuss attrition and scrapping of ships. However we have now been available in the market now even in our weak market for a few years the place we have nonetheless not seen any scrapping. And naturally, this has been good within the sense that secondhand costs for all of the ships have been very agency, and this is likely one of the the explanation why we have now additionally been promoting three ships this yr. However the final time you had scrapping right here was again in 2018. So you could have had very muted scrapping for a very long time.
Whereas subsequent yr, we can have the brand new IMO23 guidelines, EEXI and CII. And naturally, this can put extra stress on the compliance of the fleet, and we have now a form of illustrated this by the CII ranking at present or anticipated subsequent yr after which the event. So you will notice a number of the ships there can have struggling complying with the brand new IMO guidelines.
So we do suppose this can finally impression scrapping and staffing, which has been holding again for a very long time now, we are going to finally improve. There’s one motive which I’ll come again to shortly, why we additionally see much less scrapping and that’s associated to the truth that increasingly more ships within the is leaving the normal worldwide transport market and going into captive Iran, China facet had as an alternative.
So let’s simply spotlight the order e book first. I discussed this, the order e book for subsequent yr is 45, 46, 47 ships relying a bit on the way you depend, though we do see slippage, we have now already seen it from the Avance ship the place one or probably two of our newbuildings will slip from ’23 to ’24. Now we have seen points on the Chinese language yards, the place due to the COVID locked on, this has delayed the development of newbuilds VLGCs, so with 12 VLGCs scheduled for This autumn supply subsequent yr, we’d count on a few of this to leap into ’24 and a number of the Q1 ships to stumble upon later within the yr and thus balancing the order e book a bit higher than what it seems at present.
On the identical time, we do see a number of deferred upkeep. So our numbers are on 70 VLGCs, which we’ll be doing the scheduled upkeep subsequent yr. With the scrubber economics at present very favorable, I would not rule out that a number of the house owners may even make the most of the chance to place in a scrubber within the ship to learn from the associated fee financial savings. And naturally, that can outcome within the dry dock sometimes doubling. So, you should have two results there. There’s only a common upkeep after which probably some scrubber installations as effectively.
So if we have a look at the fleet stability then for ’23, it is a huge order e book, as talked about. Nonetheless, U.S. is importing — exporting at wholesome ranges and EIA is anticipating this to proceed with round 10% export prices. And naturally, U.S. cargoes are usually crusing the longest. So that is good for ton mileage, particularly when the Panama Canal is congested. After which we have now had a velocity discount pattern, which I additionally identified earlier. You could possibly have a reversal of the velocity discount pattern, however you then in all probability would have increased ton mileage, as a result of as an alternative of ready within the queue in Panama, you might be crusing an extended distance and avoiding the Panama Canal totally.
Then, we do see the drydock off-hire which I discussed on final slide after which the potential slippage. So this market can stability out fairly effectively. And I feel increasingly more persons are realizing this, and that is why the sentiment round ’23, which was fairly dire this summer season, has now turned to be really fairly good. If we have a look at the ahead freight charges, freight market must be fairly good subsequent yr, however let’s examine, we are going to discover out quickly.
Then wanting on the order e book, it is a slide we have now added a few instances, as a result of we have now seen this spike of deliveries subsequent yr. However once more, order e book to fleet is 20% after which as I mentioned, there is a pent-up scrapping demand on this sector with a number of ships above 20 years and even 25 years. After which additionally, you do have a market which is rising fairly quickly on the quantity facet by way of exports as effectively.
Final slide then earlier than going to the highlights, I discussed is I alluded to this, a number of ships are leaving the worldwide commerce and ending up in the course of the form of captive Iran China commerce. My numbers, checking final night time is 44 ships now. This has grown from 30 to 44 ships. In order that’s additionally why you see much less scrapping. So it is a World Cup now in Qatar. The final time U.S. and Iran met one another was in ’98 and Iran received 2:1. So, we’ll let see subsequent week whether or not what the outcomes shall be of the brand new match.
So with that, I feel we conclude with the highlights revenues, $29 million, considerably weaker than Q2 because of our softer spot market. We’re producing $0.15 of earnings and paying out $0.20. Freight market has, nevertheless, turned the nook and gone from smooth in Q3 to tremendous sturdy now throughout This autumn. Now we have offered one other ship. We’re persevering with to resume the fleet by promoting the older ships and taking within the supply of our new twin gas ships. We’re 93% already coated for This autumn. The ships we’re typically fixing now’s for late December loadings, which means that these bookings shall be turning up in our numbers in Q1 subsequent yr.
So we’re additionally then at present, we’re reserving superb numbers for Q1 subsequent yr, and earnings relying a bit on the way you calculate it on $50,000 anticipated, for subsequent quarter, which means that we must always make much more cash for This autumn after we are presenting that in February subsequent yr. So with that, I feel I conclude, and I thanks all for collaborating. I want you all a very good Thanksgiving. After which you may get up tomorrow and it is Black Friday, and you should buy our inventory, which has been tumbling at present.
So with that, Heidi, the operator, possibly you may open up for some questions.
[Operator Instructions] We are going to take our first query.
Any individual is driving right into a tunnel. Okay. Okay. I feel why we’re ready you may take a look at whether or not that connection is sweet. Now we have had a chat query. This can be a query I get each quarter on the Flex course as effectively. It is mainly you could have a number of money, easy methods to spend it. Liquidity with money stability, $188 million is big. It is inefficient to have a lot capital tied off since your new constructing program is already absolutely financed. What do you propose to make use of the money for? Will we see particular dividends like?
So it is a good query, a good query. I feel we’re paying out 135% of earnings on this quarter. For the yr it’s at 86% or so. Now we have had some asset gross sales, which is extra like one-off earnings, which has contributed to our earnings. What we did after we begin was — this spring was the form of we noticed that we may get higher financing phrases within the banks. So when banks are keened to lend you cash, it is best to attempt to borrow. And so we refinanced mainly in virtually all the fleet.
After which throughout this refinancing, we have now added a number of money to our firm. How we have now structured that’s so as to add a major revolver capability, which at finish of the quarter is absolutely drawn. So — however how we handle that is to often draw it at finish of the quarter, after which we will repay this. So it is a versatile mortgage. After which when we’re not using the revolver facility, we’re solely paying a dedication price of 0.75%. So the price of having that revolver capability may be very low.
So I can perceive you suppose it is very inefficient, however really, we’re utilizing this revolver to flex down the money. So we’re sustaining a a lot decrease money stability frequently. After which one of many the explanation why we additionally did this was, in fact, the financing market was good, but additionally there was a number of issues about 2023 outlook with a number of analysts placing in numbers the place folks had been bleeding.
After which the very last thing you need to have is a scenario the place persons are beginning to calculate your runway. How lengthy does the cash final? As a result of then you are going to destroy fairness worth, and we have now seen this on this identical firm previously when persons are calculating how lengthy are you going to final. So what we’re doing then is so as to add a number of money, which is a versatile money, in order that no one must make such calculations.
After all, now the outlook for ’23 have turned over the last six months from being very dire to be very optimistic. So no one is making this sort of calculations once more, however I feel it is clever for the Firm to have ample entry to liquidity, to alleviate any issues if there’s a sure change in market sentiment that individuals will suppose that, effectively, I can sleep secure at night time. The Avance folks they’ve sorted out the financing properly, and we’ll be capable of stand up to even a troublesome marketplace for one yr or two years and even three years. In order that’s why we have now a number of monetary flexibility within the Firm.
That mentioned, I feel we have now ample money. We in all probability have greater than we’d like, as we are actually absolutely financed on the newbuildings. That is why we’re paying up 135% on payout ratio for the quarter, and we intend to not — a number of the transport firms, they brag, they are going to pay 50% of their earnings in dividends. We aren’t going to brag about that as a result of we will pay 100%.
Now we have greater than ample money, so we intend to generate all of the earnings we’re producing, we are going to ship again to you, traders, in dividends. We’d have been eager about doing buybacks given the place the inventory is being priced in comparison with NAV. Nonetheless, we have already got exemption from the Oslo Inventory Change to be listed, as a result of the requirement there is no such thing as a shareholders ought to have greater than 75%.
Our largest shareholder, Hemen Holding, managed by John Fredrikson & household personal 77% of this firm. In order that makes it a bit troublesome for us to purchase again the inventory. However as an alternative, we’re going to pay handsomely in dividends at present and going ahead.
So — after which, Heidi, did we handle to trace that man who’s driving right into a tunnel or no?
Now we have one query from the telephone line. So, this one is from the road of Climent Molins from Worth Investor’s Edge. Please go forward. Your line is open.
Thanks for this very complete presentation. We are going to see a number of deliveries in 2023, however the provide facet outlook for ’24 and ’25 appear considerably extra engaging. You have taken benefit of excessive secondhand asset pricing by disposing of a few of your sturdy belongings. Is there any urge for food to probably order extra new builds? Or is worth unattractive at present ranges?
Okay. Thanks. Good query. Sure, as Randi mentioned, we contracted six newbuildings that, I might say, name it, the underside of the market, $80 million. So they’re $95 million at present on our stability sheet. They are going to be — have a historic price of $80 million, not $95 million, which is the worth at present. So, it is mainly virtually 20% above e book values in form of asset values for these ships. After which we have now been promoting ships at round 12%, 13% uplift to e book values as effectively on the older ships. That is on price. So it does not actually have an effect on view by way of making new investments.
I feel one of many difficult issues for us is that we have now a inventory worth, which is buying and selling effectively under e book worth, and the e book worth is effectively under NAV worth. After which, if it’s essential increase fairness, you might be diluting shareholders. So, it is probably not accretive progress for the Firm. Nonetheless, we do have some surplus money we may in all probability to work. Nonetheless, we additionally prefer to pay the excess money as dividends. In order that’s — it is a effective stability for public listed transport firms, the place it is laborious to be concern if you find yourself within the public market as a result of most transport traders usually are not actually opposite and they’re cyclical.
In order that signifies that a number of the transport firms, they’ll have a very good inventory worth when the markets are purple scorching. And often, when the market is purple scorching, newbuilding costs are additionally fairly agency. Meaning the general public transport firms like my colleague Olga has mentioned previously, this system to do unwise funding choices as a result of they’re investing on the prime of the market that induced the inventory worth is on the peak then.
So we attempt to be a bit smarter on this group of firms. We are going to think about it. I feel we have now had the order e book 20% of fleet. Newbuilding costs have been selecting up. Deliveries heaps now are extra ’26. So, sure, we have now appeared into it. However to date, we have now thought of that the perfect different for our shareholders is that we deal with chartering our present ships, taking supply of our present ships and maximizing dividends for our shareholders quite than constructing extra ships.
That is very useful. And certainly on buying and selling under NAV, issuing doesn’t seem to be the best choice. And turning in the direction of Pampero, you mounted it on a one-year contract. Might you present some perception on the speed you locked it in? And also you additionally talked about the 2023 FFAs implied this yr of round $40,000 per day whereas freight price from the arbitrage is even increased. How is the 2024 FFA curve taking a look at like in the intervening time?
Okay. A few questions there. So it’s essential begin with the primary one. Sure, we did the Pampero, it is reported to be mid- 30s. So, we mounted this some time again earlier than the market took off. So at present, which may sound a bit low cost when you are able to do the FFA at $47,000. Nonetheless, you are evaluating a bit apples and bananas there, as a result of the scrubber unfold is $10,000, $12,000.
So the Pampero mounted is a non-scrubber ship and after we are doing the FFA, we’re getting into the FFA. After which we’re hedging the IFO 380 heavy gas oil as a result of our final spot ships are scrubber fitted. In order that in case you’re making mid-30s on a one-year time constitution non-scrubber, you ought to be making mid-40s on a scrubber ship. In order that was query primary.
And you then had one thing concerning the FFA for ’24. Sure, it is round $45,000 for scrubber ship in ’23. Subsequent ’24 is decrease. So for scrubber, I haven’t got the quantity in entrance of me, however I might — my guesstimate at present is someplace round $35,000 to $40,000, however please do not shoot me down on that, however it’s softer and that is why we’ve not mounted something for that calendar yr. And take note, the FFA market can also be very illiquid. However in case you are available in the market for a time, you will get some offers executed.
Sure. Was there any extra questions? I feel there was a 3rd one, was it?
Sure, that was it. That is all for me. Thanks very a lot for taking my questions.
Okay. Thanks. Okay. Then I feel we conclude. Thanks once more, everyone, additionally for contributing questions. That is all the time probably the most nice a part of doing this webcast.
So thanks once more, everyone, and have a very good Thanksgiving, and we’ll speak to one another once more in February after we are reporting tremendous sturdy This autumn numbers. Thanks.
Thanks. This does conclude the convention for at present. Thanks for collaborating, and you might now disconnect.