Avance Fuel Holding Ltd (OTCPK:AVACF) Q3 2022 Outcomes Convention Name November 24, 2022 8:00 AM ET
Firm Individuals
Øystein Kalleklev – Govt Chairman
Randi Bekkelund – Chief Monetary Officer
Convention Name Individuals
Climent Molins – Worth Investor’s Edge
Operator
Good day, and thanks for standing by. Welcome to the Avance Fuel Holding Restricted Third Quarter 2022 Earnings Convention Name. Presently, all contributors are in a listen-only mode. After the audio system’ presentation, there can be a question-and-answer session. [Operator Instructions] Please be suggested that at the moment’s convention is being recorded.
I’d now like at hand the convention over to your speaker at the moment, Øystein Kalleklev, Govt Chairman of the Firm. Please go forward.
Øystein Kalleklev
Okay. Thanks, and thanks, everyone, for becoming a member of this third quarter webcast for Avance Fuel. I am an Øystein Kalleklev, Govt Chairman of the Firm, and I am joined right here at the moment by Randi, who’s the CFO of the Firm, and she or he can be presenting the financials a bit later within the presentation.
Earlier than we start, I believe I simply need to make you conscious of our disclaimer. We’ll 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 revealed additionally at the moment earlier at the moment.
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 steering 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 word that we’ve got had appreciable good points on our rate of interest swaps throughout 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 throughout the begin of Q3, so now the strongest spot market we’ve got seen since 2015 and really, the Baltic LPG Index 1 from to Japan this week hit its all-time excessive. Throughout the — additional, we even have bought one among our older ships, 2009 constructed Promise.
Throughout Q2, we bought the sister vessel Windfall. The sale of Promise is giving us a guide achieve of $7.5 million, and the money proceeds from the transaction is round $20 million, and we anticipate the transaction to be finalized by finish of November, and this revenue will then be booked in This fall.
We have now additionally not too long ago 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. We have now agreed with Pampero for our totally different purchasers.
We have now now booked 93% for This fall 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 premise for the IFRS numbers after which discharge-to-discharge, which is what we normally concentrate on commercially sensible.
For the quarter, we’re additionally declaring our dividend as soon as once more of $0.20 per share, much like the one we’ve got supplied in Q1 and Q2. And this offers our year-to-date payout ratio of 85%. The inventory has been performing fairly dangerous at the moment. So really, at the moment, 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 following slide and the fleet renewal, which is nice for the atmosphere, but additionally excellent for our revenue and loss assertion. We have now now, throughout the yr, bought three for older ships with Thetis Glory in Q1, Windfall in Q2 and now in This fall, we’re promoting Promise. Which means we’ve got divested three of the older ships in our fleet. In whole, this has contributed with a guide achieve of $18 million and money launch of $67 million.
So at the moment, given the inventory worth, we’re highest round worth guide [0.85] and we’re promoting our older ships at significantly increased costs than our guide worth. And in addition, we invested in six new ships there as we’ve got additionally within the slide, which have been purchased at round $80 million, whereas newbuilding costs for related property at the moment are $95 million. So with this renewal, we’re promoting off the older ships, preparing for IMO2023 after which delivering new twin gasoline LPG ships, all with A score on the EIA.
These ships are then decreasing sulfur emissions by near 196%, particulate matter round 90% after which CO2, 40%. And this can be a mixture of the actual fact the ship is larger. It is consumed much less gasoline than our 2010 constructed VLGC. After which as well as, we will use LPG as maritime bunkering gasoline, thus additionally shaving off 20% of the emissions in comparison with an everyday gasoline.
So let’s head for the following slide, then we can provide an replace on the present fleet construction. As you may see, Promise bought. So she can 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 dearer bunkers value at the moment as these ships are then on time constitution and fuels for the charters account.
So at the moment, we’ve got 17 ships, very shortly, this can be 16. As you may see right here, there are some totally different specs on a few of the ships. So we’ve got the wind class, the 215 class, six of the eight ships are fitted with the scrubber, which is offering excellent economics in at the moment’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 aren’t uncovered to gasoline value for this ship both and the identical goes with Pampero, which we not too long ago 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 gasoline. They’re twin gasoline. 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 will burn ammonia as maritime gasoline. After which, we not too long ago additionally made a change order on Pollux. So each Castor and Pollux at the moment are absolutely ammonia prepared additionally for having ammonia as a cargo. In fact, these are very massive ships. So, the parcel dimension for ammonia is just not actually at this stage at the moment, however there’s a number of concentrate on blue ammonia, win ammonia. So this market is creating, and we’ve got 4 ships there that are very effectively fitted for this commerce and likewise fitted for being nonetheless emission ships.
Sure. And basically, we’ve got a balanced portfolio. We have now additionally taken out some FSA covers. That is ahead contracts mainly on freight. And we’ve got not too long ago coated 63% of subsequent yr for one ship. After which we’ve got our legacy 33% protection for Q1. So, the brand new 63% protection we’ve got completed for the 2023 is at $47,000 per day, and the protection we had from pre-existing offers completed a few yr in the past, is at round $30,000 for the Q1.
So effectively coated, after which we’ve got a number of market exposures and all the brand new ships coming for supply, we’re absolutely open and might profit from a a lot stronger freight market at the moment. We have now two ships developing in early subsequent yr, after which you’ll most likely discover there in slip, customized merchandise have been initially supposed for supply ’23 on account of delays at yards on account of varied causes, together with labor strikes. These ships may very effectively each of them find yourself in 2024, and that is a normal 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 evaluation is the dividend. We have now simply included a bit extra coloration on the dividend. And we’re sort of — to be frank simply copied a few of the ideas from advanced simply to offer you some coloration on how we’re fascinated with the dividend. The dividend is — it is probably not one thing you solely take into account the quarter you might be in, however you might be additionally how is the outlook for the following quarter. How is our monetary place?
So by way of Q3 this yr, it is a bit on the delicate facet. That is why we’ve got a yellow gentle. The market outlook has considerably improved from what we had once we have been reporting in August. So it is inexperienced gentle on that. The one motive why it isn’t darkish inexperienced, given the truth that spot market is on hearth is, after all, 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 delivery, however we do have some backlog, as I discussed on the final slide. Liquidity place is tremendous sturdy. Covenant compliance, we’ve got completed a mistake. This ought to be darkish inexperienced. We’re passing the compliance of monetary covenants with flying colours. Debt maturities, nothing earlier than 2027. CapEx liabilities. Sure, we do have $242 million of remaining newbuilding CapEx. Nevertheless, that is coated fully plus some with the $250 million of debt amenities, which can 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 quite a bit higher than for this quarter.
So with that, I give it again to you, Randi.
Randi Bekkelund
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 on account 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 steering of $32,000 and is defined mainly by extra favorable place than anticipated.
Working bills have 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 dearer, having a detrimental 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 normal expense or A&G for the quarter have been right 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. Wanting on the year-to-date income, we’ve got $54.3 million and is the strongest 9 months for the reason that glory days in 2015 and is mainly defined by a stronger freight market.
As we’re reporting in accordance with IFRS, we’ve got an estimate or an prolonged P&L, additionally referred to 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 enhance 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 charge of two.82% maturing in 2025. We have now benefited fairly effectively on these positions, leading to a achieve of $7.8 million for the quarter, bringing the full good points for the yr about $25 million.
Subsequently, we’ve got terminated $100 million notional value of curiosity swaps throughout 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’ve got 50% of our debt is hedged at a SOFR equal charge of two.6% and as well as, we’ve got a money reserve of $6 million from the terminated swaps. This compares to a one-year sulfur charge of 4.9% at the moment.
A couple of feedback to the fourth quarter outcomes earlier than we transfer on, as Øystein commented, we’ve got booked 93% of the vessel days, that is 60%. And as we’ve got seen earlier than, the IFRS 15 or low to discharge adjustment may have a major impact because the market has moved upwards by the tip of the quarter in our books.
And we anticipate a detrimental 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 achieve, after all, 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’ve got 77% of our stability sheet are vessels, consisting of 13 VLGCs turning into 12 very quickly as Promise is bought and the remaining 9 newbuildings at the moment beneath building and scheduled for supply in ’23 and ’24.
The newbuildings have 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 the moment. This provides as much as extra guide values of $90 million to our books. Now that might be very good so as to add this into our stability sheet. So this isn’t allowed in accordance with the accounting normal, as our fleet is carried at value much less depreciation and any impairment, which is probably the most used accounting mannequin inside the delivery house.
Our money place has been considerably improved this yr as we’ve got bought three older women producing approximate $67 million in web money proceeds, and we’ve got refinanced the fleet, leading to a money launch of $83 million, mixed with a powerful freight market contributing $88 million in money movement from operations, we recorded a money stability of $188 million.
Wanting on the right-hand facet of our stability sheet. We have now maintained our stable shareholder fairness above 50%. At quarter finish, we’ve got a shareholder fairness of $583 million, similar to an fairness ratio of 54% and the full interest-bearing debt of just under $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 guide worth considerably, and it is priced as dedicated by $0.08 at $0.85 at the moment.
The subsequent slide illustrates the quarterly money motion. We began up with a money stability of $199 million in the beginning of the quarter. And because the freight market is above our money breakeven stage, we generated $60 million in free money movement or web 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’ve got distributed $0.20 per share or $15 million in dividend for the second quarter. Different money structure of $3 million pertains to primarily transaction prices, in relation to the current sale leaseback settlement and alternate charge impact because the U.S. greenback forex has strengthened towards the Marbella, which we’ve got for primarily administrative prices solely.
This provides as much as a detrimental money motion of $11 million and a money stability of $188 million on the finish of the quarter. For the fourth quarter, we anticipate the money place to develop and to be effectively above $200 million as we are going to obtain $20 million in web money proceeds from the sale of Promise and obtain freight from a really supportive commerce market.
Transferring to the following slide. our newbuilding CapEx, we’ve got now paid about 50% of the full capital expenditure and $242 million stays to be paid. The overall expenditure consists of improve for getting ready the vessel to sail on ammonia gasoline for all remaining newbuildings and carry ammonia cargo for brand new constructing 5 and 6, which leads to a zero carbon resolution from a effectively to wake considering.
The 2 twin gasoline 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 just a few 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, because of this we’ve got 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’ve got achieved longer reimbursement profile, now between 20 to 22 years. We have now achieved longer time or nearer to 6 years, with the primary maturity in February 2027.
We have now 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’ve got decrease margins. So — and thereby, we’ve got really improved our money breakeven by roughly $1,000 a day in comparison with earlier years.
So at the moment’s money breakeven is about $21,800 and assuming at the moment’s freight market atmosphere 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 movement in quarter — on a quarterly foundation.
And with that, I hand the phrase again to you, Øystein, for the market replace.
Øystein Kalleklev
Okay. Thanks, Randi. Let’s do a brief evaluation of the current market developments. Let’s begin simply with trying on the LPG market, as a result of LPG is a really versatile gasoline. You need to use it for lots of various stuff. In case you take a look at the on a world foundation, it is mainly 40% of residential and business 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 quite a bit, you will note that in additional creating international locations. It is principally for rescomm. In U.S., it is — LPG is generally a petchem product, is a petchem or refinery mixing. After which in case you take a look at Asia, it actually is dependent upon quite a bit on the totally different international locations. The most important importer is China, the place rescomm is just 40% according to the world combination. 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 be utilized as gasoline for autos.
Let’s head into the market and the current tendencies. On the export facet, it is a pretty easy market. The 2 massive markets are North America and the Center East. And we’ve got seen a really sturdy development 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 development all over the place mainly China. China has been decreasing their LNG imports one hundred and first month of the yr by 22%. This isn’t the identical in LPG. LPG can be, as I discussed on the earlier slide, very inexpensive. 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 trying on the spot earnings, good occasions are again for positive. We at the moment are 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 have been again in 2015 and fairly all the time had a superb smile when. If we take a look at the one-year time constitution charge, it is, after all, a bit extra secure than the unstable spot earnings, however nonetheless at fairly wholesome ranges.
If we’re trying on the subsequent slide on the arbitrage. So okay, why the charges shifting this shortly up, it is, after all, a conductive atmosphere for the arbitrage. So, we do see the costs between Mont Belvieu, U.S. propane after which the Far East Index in Asia have been up 4.5 star. After which in case you’re trying on the arbitrage, which is then turning into mainly the restrict of feeling for what you may pay on the delivery freight charges, it is nonetheless preserving an excellent stage.
And if we sort of assume all of the arbitrages for the advantage of our ship proprietor, which is usually the case in our sturdy market, then we’re earnings stage for scrubber ship of $60,000 subsequent yr, $66,000 in ’24 after which, after all, considerably decrease for our non-scrubber ships. And naturally, these are usually not solely theoretical numbers, so we’ve got secured 63% of our ship within the FFA market not too long ago at $47,000 per day for the AG to Japan route, so not really the arbitrage for ship homeowners, however nonetheless a really conductive delivery market given these arbitrages.
If we’re what’s taking place available in the market, it is a bit much like what we have seen in LNG, the place ton mile is on the weak facet as a result of you’ve got extra imports into Europe. Not on the identical scale in LPG as in LNG. However then again, we do see a while mitigating the gradual tempo of ton mileage development and the common pace 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 while you’re making an attempt to schedule a ship.
Additionally signifies that increasingly ship homeowners are taking the ships longer routes via Cape of Good Hope or alternatively to Suez with the intention to have our agency on the ship, which makes it simpler to repair it, as a result of you probably 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 rising the charges by mainly doubling it within the subsequent couple of years, we do anticipate extra of the LPG commerce. We squeezed out of the Panama Canal leading to longer tailing distances than prior to now.
So attrition, after all, now we’re in an excellent market and folks usually do not speak about attrition and scrapping of ships. However we’ve got 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 among the the explanation why we’ve got additionally been promoting three ships this yr. However the final time you had scrapping right here was again in 2018. So you’ve got had very muted scrapping for a very long time.
Whereas subsequent yr, we may have the brand new IMO23 guidelines, EEXI and CII. And naturally, this may put extra stress on the compliance of the fleet, and we’ve got a sort of illustrated this by the CII score at the moment or anticipated subsequent yr after which the event. So you will note a number of the ships there may have struggling complying with the brand new IMO guidelines.
So we do assume this may finally impression scrapping and staffing, which has been holding again for a very long time now, we are going to finally enhance. 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 ships within the is leaving the standard worldwide delivery market and going into captive Iran, China facet had as an alternative.
So let’s simply spotlight the order guide first. I discussed this, the order guide for subsequent yr is 45, 46, 47 ships relying a bit on the way you depend, though we do see slippage, we’ve got already seen it from the Avance ship the place one or presumably two of our newbuildings will slip from ’23 to ’24. We have now 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 fall supply subsequent yr, we might anticipate a few of this to leap into ’24 and a few of the Q1 ships to stumble upon later within the yr and thus balancing the order guide a bit higher than what it appears to be like at the moment.
On the similar 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 the moment very favorable, I would not rule out that a few of the homeowners can even make the most of the chance to place in a scrubber within the ship to learn from the price 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 presumably some scrubber installations as effectively.
So if we take a look at the fleet stability then for ’23, it is a massive order guide, as talked about. Nevertheless, 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 typically crusing the longest. So that is good for ton mileage, particularly when the Panama Canal is congested. After which we’ve got had a pace discount development, which I additionally identified earlier. You can have a reversal of the pace discount development, however then you definitely most likely 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 fully.
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 believe increasingly individuals 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 take a look at the ahead freight charges, freight market ought to be fairly good subsequent yr, however let’s have a look at, we are going to discover out quickly.
Then trying on the order guide, this can be a slide we’ve got added a few occasions, as a result of we’ve got seen this spike of deliveries subsequent yr. However once more, order guide 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 amount 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 throughout the sort 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 can be of the brand new match.
So with that, I believe we conclude with the highlights revenues, $29 million, considerably weaker than Q2 on account of our softer spot market. We’re producing $0.15 of earnings and paying out $0.20. Freight market has, nonetheless, turned the nook and gone from delicate in Q3 to tremendous sturdy now throughout This fall. We have now bought 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 gasoline ships. We’re 93% already coated for This fall. The ships we’re usually fixing now could be for late December loadings, that means that these bookings can be turning up in our numbers in Q1 subsequent yr.
So we’re additionally then at the moment, we’re reserving excellent numbers for Q1 subsequent yr, and earnings relying a bit on the way you calculate it on $50,000 anticipated, for subsequent quarter, that means that we should always make much more cash for This fall once we are presenting that in February subsequent yr. So with that, I believe I conclude, and I thanks all for taking part. I want you all a superb Thanksgiving. After which you may get up tomorrow and it is Black Friday, and you should purchase our inventory, which has been tumbling at the moment.
So with that, Heidi, the operator, possibly you may open up for some questions.
Query-and-Reply Session
Operator
[Operator Instructions] We’ll take our first query.
Øystein Kalleklev
Any person is driving right into a tunnel. Okay. Okay. I believe why we’re ready you may take a look at whether or not that connection is nice. We have now had a chat query. This can be a query I get each quarter on the Flex course as effectively. It is mainly you’ve got a number of money, 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 plan to make use of the money for? Will we see particular dividends like?
So it is a good query, a good query. I believe we’re paying out 135% of earnings on this quarter. For the yr it’s at 86% or so. We have now had some asset gross sales, which is extra like one-off earnings, which has contributed to our earnings. What we did once we begin was — this spring was the sort of we noticed that we might 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’ve got added a number of money to our firm. How we’ve got 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 normally draw it at finish of the quarter, after which we will repay this. So it is a versatile mortgage. After which when we aren’t using the revolver facility, we’re solely paying a dedication payment of 0.75%. So the price of having that revolver capability may be very low.
So I can perceive you assume it’s totally inefficient, however really, we’re utilizing this revolver to flex down the money. So we’re sustaining a a lot decrease money stability regularly. After which one of many the explanation why we additionally did this was, after all, 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 individuals have been bleeding.
After which the very last thing you need to have is a state of affairs the place individuals 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’ve got seen this on this similar firm prior to now when individuals 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 person must make such calculations.
In fact, now the outlook for ’23 have turned over the last six months from being very dire to be very optimistic. So no person is making this sort of calculations once more, however I believe it is sensible 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 assume that, effectively, I can sleep secure at night time. The Avance individuals they’ve sorted out the financing correctly, and we’ll have the ability to face up to even a tricky marketplace for one yr or two years and even three years. In order that’s why we’ve got a number of monetary flexibility within the Firm.
That mentioned, I believe we’ve got enough money. We most likely have greater than we want, as we at the moment are 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 few of the delivery corporations, they brag, they are going to pay 50% of their earnings in dividends. We’re not going to brag about that as a result of we will pay 100%.
We have now greater than enough 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 might have been fascinated with doing buybacks given the place the inventory is being priced in comparison with NAV. Nevertheless, 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 greatest shareholder, Hemen Holding, managed by John Fredrikson & household personal 77% of this firm. In order that makes it a bit tough for us to purchase again the inventory. However as an alternative, we’re going to pay handsomely in dividends at the moment and going ahead.
So — after which, Heidi, did we handle to trace that man who’s driving right into a tunnel or no?
Operator
We have now 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.
Climent Molins
Thanks for this very complete presentation. We’ll 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 property. Is there any urge for food to doubtlessly order extra new builds? Or is worth unattractive at present ranges?
Øystein Kalleklev
Okay. Thanks. Good query. Sure, as Randi mentioned, we contracted six newbuildings that, I’d say, name it, the underside of the market, $80 million. So they’re $95 million at the moment on our stability sheet. They are going to be — have a historic value of $80 million, not $95 million, which is the worth at the moment. So, it is mainly virtually 20% above guide values in sort of asset values for these ships. After which we’ve got been promoting ships at round 12%, 13% uplift to guide values as effectively on the older ships. That is on value. So it does not actually have an effect on view by way of making new investments.
I believe one of many difficult issues for us is that we’ve got a inventory worth, which is buying and selling effectively beneath guide worth, and the guide worth is effectively beneath NAV worth. After which, if you have to increase fairness, you might be diluting shareholders. So, it is probably not accretive development for the Firm. Nevertheless, we do have some surplus money we might most likely to work. Nevertheless, we additionally wish to pay the excess money as dividends. In order that’s — it is a tremendous stability for public listed delivery corporations, the place it is laborious to be concern if you find yourself within the public market as a result of most delivery traders are usually not actually opposite and they’re cyclical.
In order that signifies that a number of the delivery corporations, they may have a superb inventory worth when the markets are purple sizzling. And normally, when the market is purple sizzling, newbuilding costs are additionally fairly agency. Which means the general public delivery corporations like my colleague Olga has mentioned prior to now, this system to do unwise funding selections as a result of they’re investing on the prime of the market that brought about the inventory worth is on the peak then.
So we attempt to be a bit smarter on this group of corporations. We’ll take into account it. I believe we’ve got had the order guide 20% of fleet. Newbuilding costs have been choosing up. Deliveries heaps now are extra ’26. So, sure, we’ve got appeared into it. However to date, we’ve got thought-about that the perfect different for our shareholders is that we concentrate on chartering our present ships, taking supply of our present ships and maximizing dividends for our shareholders somewhat than constructing extra ships.
Climent Molins
That is very useful. And certainly on buying and selling beneath NAV, issuing doesn’t appear to be the most suitable 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 charge from the arbitrage is even increased. How is the 2024 FFA curve like for the time being?
Øystein Kalleklev
Okay. A few questions there. So you have to 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 the moment, that may sound a bit low cost when you are able to do the FFA at $47,000. Nevertheless, 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 once we are doing the FFA, we’re getting into the FFA. After which we’re hedging the IFO 380 heavy gasoline 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 have to be making mid-40s on a scrubber ship. In order that was query primary.
And then you definitely had one thing in regards to 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’d — my guesstimate at the moment 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 consider, the FFA market can be very illiquid. However if you’re available in the market for a time, you may get some offers completed.
Sure. Was there any extra questions? I believe there was a 3rd one, was it?
Climent Molins
Sure, that was it. That is all for me. Thanks very a lot for taking my questions.
Øystein Kalleklev
Okay. Thanks. Okay. Then I believe 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 superb Thanksgiving, and we’ll discuss to one another once more in February once we are reporting tremendous sturdy This fall numbers. Thanks.
Operator
Thanks. This does conclude the convention for at the moment. Thanks for taking part, and it’s possible you’ll now disconnect.