Avance Gas Holding Limited (AGAS) has announced a strong finish to 2023 with fourth-quarter earnings that exceeded their own projections. The company reported a time charter equivalent rate of $76,200 per day, leading to a quarterly profit of $61.5 million, marking the second-best in its history. The full-year profit stood at $164 million. Avance Gas also revealed plans to increase its dividend to $0.65 per share and intends to seek approval at the Annual General Meeting to distribute surplus cash to shareholders. With 70% of its Q1 voyages already booked at an average rate of $70,000 per day, the company is optimistic about the current market trends despite earlier setbacks due to reduced oil production.
Key Takeaways
- Avance Gas outperformed its earnings guidance with a quarterly profit of $61.5 million.
- The company achieved a full-year profit of $164 million.
- Two ships, Iris Glory and Venus Glory, were sold, generating significant profits.
- Avance Gas has already secured 70% of Q1 bookings at favorable rates.
- Dividend increase to $0.65 per share proposed, pending AGM approval.
- Fleet renewal in progress with older ships sold and new medium-sized carriers for ammonia trade acquired.
- Strong cash position anticipated post-vessel sales and financial maneuvers.
Company Outlook
- Expectation to book a profit of approximately $72 million from the sale of four vessels.
- Pro forma cash balance projected to be $362 million.
- No maturities before 2028 and interest bearing debt hedged at approximately 3% for 2024.
- Fleet costs expected to decrease in the coming years with potential scrapping of older ships.
- US remains a primary driver for seaborne volume growth.
Bearish Highlights
- Market slump experienced due to a cold snap in the US affecting oil production.
- Routing via Panama faces potential congestion issues due to low water levels.
Bullish Highlights
- Rates have rebounded and are trending upwards after the initial slump.
- The VLGC market has performed well with "fantastic" rates.
- Strong growth in the LPG market noted, with the expectation of continued favorable conditions.
Misses
- The company did not provide specific information on any misses or underperformance in the earnings call.
Q&A Highlights
- Discussion on the impact of the Panama routing and potential congestion.
- Commentary on the VLGC order book size and the LPG market's robust growth.
- Ethane's market potential and its effects on propane discussed.
- Speculation on Middle East volumes for 2024 based on OPEC decisions and political factors like the US election.
- Company's bullish stance on the market compared to FFA curves for 2025.
Avance Gas Holding Limited's earnings call highlighted a period of strategic maneuvers and financial strength. The sale of older vessels and the acquisition of new ones for the ammonia trade are part of the company's fleet renewal initiative. Financially, Avance Gas is positioned to have a substantial cash balance, bolstered by the sales of ships and refinancing activities. The market dynamics for VLGCs remain complex, with geopolitical and environmental factors influencing routing decisions and potential congestion. Despite these challenges, the company remains optimistic about the market outlook, expecting rates to improve and fleet costs to decrease over time. The next quarterly report is anticipated in May, which will provide further insights into the company's performance and market conditions.
Full transcript - None (AVACF) Q4 2023:
Operator: Good day, and thank you for standing by. Welcome to the Avance Gas Holding Limited Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Øystein Kalleklev, CEO. Please go ahead.
Øystein Kalleklev: Thank you and welcome everybody to the full year result presentation for Avance Gas. We very much appreciate you sharing your Valentine's Day with myself and Randi, and I hope we will get you in the right mood for the rest of the night. So before we begin, I just want to remind you on the disclaimer. Randi? So this is a not exact science so we will give some forward-looking statements. We use a couple of non-GAAP measures like time charter equivalent earnings and of course we cannot cover all the ground in this short presentation, so we also recommend you read our quarterly report which we also published this morning. So with that, I think we are ready to go. So let's review the highlights. Numbers came in slightly ahead of our guidance provided in November. Time charter equivalent rate or earnings per ship, this is the average hedging [ph] rate, was 76,200 per day, slightly ahead of our guidance of $70,000 to $75,000 per day. So please note that we are guiding on discharge-to-discharge numbers. That resulted in a very nice profit for the quarter, 61.5 million in total, translating into earnings per share of $0.80 which is actually the second best quarterly results we have delivered in the history of the company, only beaten by Q3 in 2015. Altogether, that also resulted in a very strong numbers for the full year, full year profit of 164 million translating into earnings per share $2.14. Again, the second best year, only beaten by 2015. And actually if we wanted, we could have beaten the 2015 numbers as we sold the ship Iris Glory which came off our two-year time charter with IOC in the end of November. We could have handed her to new owners at that time. But as we sent out in the press release, we managed to squeeze in one spot voyage prior to delivering this ship to new owners where we made a profit of 3 million on that spot voyage which is booked in the Q1 -- December and Q1 numbers and we booked a profit on the sale in January of 21 million basis the sale price of 60 million. Also provided a cash release of 25 million. We have also sold the last remaining older vintage ship Venus Glory, sale price of 66 million which will then generate a profit of 27 million. Same strategy we have applied to Venus Glory, she came off our two-year time charter with IOC in December. We have been able to squeeze in a spot voyage on that ship also prior to delivering the ship to new owners with a net result from that spot voyage of $5 million. So that $5 million come on top of the 66 million and the profit of 27 million and now reflected in the Q1 number. So with those ships sold, we have sold all the 5, 2.8, 2.9 [ph] vintage ships and we also made a more opportunistically sale of our two newbuildings for delivery this year, Avance Castor and Avance Pollux. They are set for delivery in March and May, respectively. We have sold them and blocked to the same buyer and we will about $72 million with a cash release of 120 million. So all of this will take place in Q1 and Q2 and we will cover some more ground on this later in the presentation. So hence given the strong numbers, our good cash position and a lot of cash coming from these sales which Randi will cover later in the presentation, we are happy to increase the dividend. We paid $0.50 per share the last four quarters. We are increasing it now to $0.65 reflecting also the stronger earnings, and this takes the dividend for the year to $2.15. So we are paying out approximately 101% of the earnings for this year which should give a quarterly dividend yield of 22%. But if you are applying the last four quarters, we have a running yield of about 18%. We put in these numbers last night when our stock closed at NOK126, and I'm happy to see that the investors are liking what we are presenting today and last time I checked the stock was up at about 9% today. So the yield is slightly lower but still at very elevated and attractive levels we think. Given the substantial cash we will release from the asset sales, as we have communicated in the past, we do expect to utilize the proceeds from the sale of Iris and Venus Glory as equity for the four medium-sized gas carriers which we contracted last year. However, in relation to Avance Castor and Pollux, we raised $65 million in equity in April 2021 for these ships. So we raised $65 million and we are now also selling them at a profit of $72 million bringing that in total to $137 million. So we are planning, as we also communicated when we sold the ships, that we will seek authorization from the Annual General Meeting scheduled for early May to pay back some of this capital so we can distribute some of this surplus cash to our shareholders in a tax-efficient way so it's being taxed as return of capital rather than return on capital. So once we come back with our Q1 numbers in May, we have done our AGM and we will come back to the dividend situation in relation to these asset sales. In terms of the market, we had a fantastic market last year, was the best market probably since 2015 reflecting also the strong results. However, this year we ended up with a slump, not that dissimilar from the slump we had in 2023 at the beginning of the year, but it's been a bigger fall. And it's been driven by the Arctic cold snap in the U.S. which reduced oil production from about 13 million barrels per day to 12 million barrels per day and resulted in gas prices in the U.S., both natural gas and propane really shooting up, making arbitrage less attractive. And I will cover more of this in the market section later in the presentation. However, rates have rebounded from the lows and are trending upwards. And if we look at the future price curve, we are at around $47,000 per day for Q2, Q3 and Q4 on average for our non-scrubber ship, which is still a pretty attractive level compared to our cash-back even which Randi will present later of around $22,500 per day. When prior to the market slumping, we kind of focused on fixing long voyages at the end of the year. With the congestion in Panama, which has been an issue last year and not so much these days, we have been able to book very long voyages. So if you go in China via Cape, Suez is not really an alternative these days, which I will explain later. You're basically booking a quarter, 90 days. So we had good bookings coming into Q1 and we have booked 70% of the quarter already at an average rate of $70,000 per day. Of course, we have 30% of space still remaining to be booked. This will naturally be at lower levels given where the freight market is today. But if you apply the current rate, we should be once fully booked in line with Q1 last year, where we delivered a TCE of $58,000 per day. And as you all know, last year ended up quite well for us. So just let us review the bookings in more detail. Q4, as I mentioned, very strong numbers, slightly above $100,000 on average on the spot ships. We had about 70% exposure to the spot market during the quarter. As I mentioned, we focused mostly on long voyages; Asia, Cape, U.S., back Cape, where you are locking in very good rates for longer duration and that is also reflected in the bookings we have for Q1. Our TCE ship ended up at around $49,000. As we have explained in the past, and as you will also see from the appendix slide, we have had some coverage where we have utilized freight derivatives or FFA to cover part of our fleet. In Q3 and Q4 last year, we had two ships covered on FFA. In Q4, it was one ship, scrubber ship at $47,500. And one ship on VLSFO at, I believe, $63,000 per day. So of course, when the spot rates are much higher, that is dragging down our net result. So after taking the FFA losses or the losses in relation to the hedges, we ended up at $76,200. For Q1, when the market slumped, we actually will generate slight profit on the freight hedges. We have covered one and a half ship for Q1 at an average rate of $63,300. So that is contributing when spot rates are down. As mentioned, $80,000 on the 50% of spot rates covered and $47,000 on the TCE rates, and then we have 30% still to be booked. And I just want to highlight one thing. These numbers are on discharge-to-discharge, which is the roundtrip economics, and which is the preferred way of calculating economics for voyages. In our accounts, the auditors, for some reason, have decided that you would have to book your earnings on a load-to-discharge, and this are creating some timing effects in our numbers. This was more on an issue in our Q3. So when the market took off in Q3, we delivered, I would say, just average numbers because of this time lag. So during Q3 and Q4, when the market was firing up, we had these IFRS, or accounting effects, negative by $16.3 million. And once the market now is normalizing and coming down, we expect to reverse most of these effects. So that will add further kind of earnings to the Q1 numbers on top of the bookings we have done. Let's look at the fleet. It's been an evolving story the last two years or so. We have been active renewing our fleet. We sold off all the five older ships with Iris Glory delivered to new owners in January. Venus Glory set for delivery to new owners end of February. We are left with 2015 Eco-class ships, these are more efficient in terms of fuel consumption. And six of them have installed exhaust gas cleaning system or Scrubber. Chinook (NASDAQ:KDNY) is on a variable higher OTC until the summer of this year. Pampero, as we announced last autumn, we fixed her on our 21-month time-charter until Q3 2025, where earnings is about $45,000 per day. And she will be on that time charter until she will be doing her 10-year special survey Q3 2025. So the six scrubber ships are all in the spot market where we do get the benefit of having a scrubber on the ship. Dual fuel class ship, we have Polaris (NYSE:PII), which is on a variable time charter for the remainder of February. The other three dual fuel class ships are in the spot market where we get the benefit of having ships that can take bigger parcel sizes. So rather than taking about 46,000 tons, these can lift 51,000 tons, so where we can get paid for our ability to transport more products. They are also more eco, consume less fuel than older type of ships. And then they can also burn LPG with a dual fuel engine, which can give considerable cost savings in terms of price arbitrage versus very low self-reward. And then as mentioned, we have sold the two new buildings for delivery this year. It wasn't really the plan to sell these ships. However, we got a very good price. We contracted the ships at $78 million. We have done upgrades to ammonia spec on the ships for about $2 million, so around $80 million, and then we are selling them for $120 million. So it just became too tempting to take some money off the table, and then having the ability to return this capital to our shareholders. And we also bought some new ships during the summer and autumn. Last year, the MGC saw the max to medium-sized gas carrier or medium-sized ammonia carrier. So these ships have a very high filling ratio, 98% of ammonia, which means they are very ideal for this trade, where we also do things that, when this trade starts up on the ammonia side, probably we are, in the beginning at least, we do think that there will be a lot of interest for our parcel size of around 40,000 cubic rather than the big size. So these ships give us a lot of optionality. They are dual-fuel, very efficient ships, come for delivery end of '25 into '26, and we already see people contracting ships for delivery in '27 at significantly higher prices than the $61.5 million we paid for these ships last year. So that's a fleet renewal for Dummies. We are utilizing the net proceeds from the sale of Venus and Iris Glory to utilize equity for the four new MGCs, and the cash release from the sale of Iris and Venus Glory is about $5 million. And then we have been able to top that up with about $8 million in spot earnings prior to delivery of the ships to new owners. Let's look at the dividend. We have been ramping up the dividend the last two years or so. We were at $0.05, we increased it to $0.20, last four quarters been $0.50, and now we increased it to $0.60 -- $0.65, reflecting our earnings. We paid out slightly more than earnings in Q3, '23, reflecting the fact that these timing effects in terms of load-to-discharge is impacting the IFRS numbers. So while basically the time charter equivalent earnings on these ships were quite similar in Q1, Q2, Q3, we had an accounting effect in Q3 when the market took off. So we are paying out slightly below earnings for Q4, but on average for the year, we are paying out 101% of the earnings. In terms of the dividend decision criteria, earnings are strong and market outlook of course, given the slumps in the rates, it's been a poorer sentiment, which I will cover later. But the future freight rates are at very conductive levels for Q2, Q3 and Q4. Backlog, we have taken more export exposure this year. We have sold off some of, as I mentioned, two ships which were on time charters. We have not replaced that time charter coverage. We are structurally build [ph] on the market '24 and '25. This year, we will have delivery of ships half the numbers of last year and even fewer in '25. So we have a constructive view on the market and want to capture that upside by having ships in the spot market. Liquidity, $132 million year-end, but this cash position will increase by a lot, which Randi will cover. Covenants, we are meeting with flying colors and as Randi will also inform, we have also done some refinancing and pushed out maturity. So no maturities prior to '28. We have some CapEx liabilities in relation to the MGCs, but we do feel that equity is covered now by the sale of Iris and Venus Glory. And we already have a lot of banks willing to finance these ships. But for now, we are waiting a bit because the ships are not due for delivery in '25, '26 and we don't want to pay too much commitment fees in order to have that financing in place, given our strong financial position. So with that, I think I hand it over to Randi for our financial review, and I come back on the market section.
Randi Bekkelund: Thank you, Øystein. Let's go to Slide 7 and have a look at the key financial figures for 2023. So our reported freight rate [ph] or TCE per day for the quarter was $71,900 compared to $46,700 a day from previous quarter. As Øystein already commented, note that the reported figures are load to discharge in accordance with IFRS 15 accounting standards, while our commercial performance based on a round-trip voyage discharge-to-discharge was higher $76,200 and in line with our guidance between $70,000 to $75,000 per day. For the full year, we reported a TCE of $57,200 from $38,200 in '22, equalling an increase of 50%. We continue to hold a relatively low operating expenditure or OpEx, which came in at $8,100 for the quarter and $8,200 for the year. And we also have a very low administrative expense of $1,200 for the quarter and $1,400 per shift day for the year. And thus, the increase in TCE earnings during the year is maintained in our reported EBITDA or earnings before interest tax and depreciation and amortization, which is up $91 million or 84% from 2022. Net profit came in at $61.5 million for the quarter, up from $30 million in previous quarter. For the full year, net profit was $164 million or earnings per share of $2.14 basic compared to $89 million or at of $1.16 cents in 2022. And this is actually the second highest result ever, which is explained by a solid spot freight market driven by continued strong exports from the US, supported by a very favorable price arbitrage between the US and Far East, combined with inefficiencies in the Panama Canal. Øystein will cover this more in detail later on. Moving to slide eight, you can see that we have a clean balance sheet. 80% of our balance sheet consisted of 40 VLGCs on water at year end, which currently is 13 as we sold Iris Glory mid-January and it seems to be 12 following the upcoming sale of VLGC, Iris Glory, the 2008 build, which will be handed over to the new owner in a few weeks' time. Additionally, we have a few new buildings under construction, the VLGC Avance Castor and Pollux, which will also be de-recognized from our balance sheets and also for books within May this year in connection with the sale. Also, we have the four MGCs where we have capitalized 15% of the shipbuilding contracts, amounting to $37 million at year end. Looking at the credit side, we have a book net leverage ratio of 39% and we have maintained our solid shareholder equity of 52%. Return on the average shareholder book equity of $604 million was 27% during the year '23. Moving to slide nine, we have a very solid cash position of $132 million as of 31st of December '23, which was down $14 million from previous quarter and is explained by capital expenditure of $27 million in relation to our newbuildings, of which $18 million relates to the MGCs and approximately $8 million relates to Avance Pollux for delivery and following sale in May. We have also paid $11 million in scheduled repayments of debts and $38 million in dividends, which is offset by net $62 million in cash generated from operations in the fourth quarter. However, the cash balance will grow boosted by cash generated from the four vessel sales, as illustrated on slide 10. 15th of January, we successfully completed the sale of Iris Glory, one of the two last vintage ships, 2008 build. The vessel completed her two-year time charter and November and after completion of the time charter, Iris Glory also carried out a single spot voyage at the net charter equivalent result of $3.1 million prior to delivery of the vessel to the new owner. The sale price was $60 million less broker commission and will record a big gain on sale of approximately $1 million and net cash proceeds following repayments of the lease financing of $25 million in cash released in total. And also in January, we announced the sale of Venus Glory, the last vintage ship. The vessel is currently about to finalize her last spot voyage at the net TCE result of $5.4 million. Delivery of the ship to the new owner will take place in a few weeks' time and the sale price was $66 million less broker commission and thereby we expect to record a big gain of $27 million and net cash proceeds of $40 million after repayments of debt. Further in December, the company announced the agreement to sell the two remaining new buildings scheduled for delivery in March and May this year. The buyer has agreed to pay $240 million en bloc for the two newbuildings and they were intended to be named Avance Castor and Avance Pollux, expected to be delivered as I said in March and May and sold ex-yard. The new buildings were contracted in April 2021 at the price of 78 million each. They have since been upgraded with a CapEx of about 3 million each for the ship to be able to load ammonia cargoes as well as being ready to run on ammonia fuel. We expect to book a profit of approximately 72 million from the sales of which 36 will be booked in the first quarter and 36 in the second quarter. The cash release from the sale is expected to be in total 120 million, 60 million per vessel as we've already paid 24 or 48 in total in milestone payments to the yard. To summarize, we will record approximately 120 million in gain on sale from the four vessel sales of which 84 million will be recorded in the first quarter and the remaining 36 million in the second quarter. Total cash release from the sales is 185 of which 25 million has been released already and additionally 100 million to be released within March. The remaining 60 million will be released in May. In addition to the vessel sales, we will also increase the cash balance in connection with the recent refinancing that we've done shown on Slide 11. In January, we will sign the 43 million bank facility to refinance the Pampero as previously announced. The facility will improve the margin from 325 basis points in the currency leaseback agreement which was signed in December 2020 and the new 43 million facility will bear a margin of 190 bps. That's lower interest expense. The sale leaseback has been terminated and will be fully repaid early March where we will simultaneously draw on the 43 million facility resulting in a cash release of 5 million. In February, or actually just last week, the company signed them and drew on the amended 135 million sale leaseback arrangement. As previously announced, the company agreed with the leasing house from the two VLGC newbuildings for delivery in March and May 2024 to the sister ships, Avance Polaris and Avance Capella, both 2022 builds. The refinancing will extend maturity from 2022 to 2034 and resulted in a net cash release of 40 million last week. All in all, we have a total cash release of 230 million where 45 comes from refinancing and 185 million comes from sales which brings us up to a pro forma cash balance of 362 million. And with the refinancing, we don't have any maturity before 2028, shown on Slide 12. Post refinancing and sale of vessels, we will have interest bearing debt of 511 million which will amortize down to the payment of 220 million in 2028 and balloon payments of 73 million in 2034. A clean and easy financing portfolio consisting of 75% bank financing and 25% lease, giving an industry low cash breakeven of 22,500. As we've hedged all our interest bearing debt at approx 3% in 2024 for the floating leg, we expect the cash break even to be maintained throughout the year. And that was it for me and I hand the word over to you, Øystein, to cover the market section.
Øystein Kalleklev: Thank you, Randi. I guess you're going on vacation now until 2028. Before you have to work a year and on vacation until 2034. So we're well covered on the financing. We don't have any upcoming maturity as Randi mentioned also. Even if Ted now is postponing this pivot and cutting rates from May to June or whatever, it doesn't really matter to us. We already fixed 100% of our floating exposure at very nice levels of 3% compared to the, yeah, so far today of 5.3%-ish. So, let's review the spot market, how it's performed in 2023. Here are the three main routes. So on the VLGC side, the U.S. cargoes are close to 60% of the market to Asia, Middle East, around 30% and then slightly below 10% for this Atlantic voyage going U.S. to Europe. And as you can see, rates have been fantastic. So if you knew this a year ago, of course, you should be 100% spot covered. But as I will explain a bit later in the presentation, sentiments around the VLGC market for 2023 at the start of last year was not very bullish. So we took some coverage in order to protect ourselves. On the U.S. side, of course, that's the longest voyage. So the Baltic tree is a bit peculiar with all the Panama congestion, because this round trip is about 60 days where you assume one day of waiting on each way in Panama, both southbound and northbound. That has not really been the reality last year. So most of the players have been ballasting via Cape or Suez until that closed down and then doing Leiden either Panama, Cape, Suez, the distance, dragging out the duration of the voyage, but then also reducing your achieved TC because of longer sailing distances. But regardless of that, rates have been fantastic levels. Average spread, the spread between LPG prices in the U.S. as measured by Mont Belvieu prices compared to the Far East import prices has been $257 per metric ton. So even when deducting average rate of $172 per metric ton, it's not only been a good year for ship owners, it's been also a great year for terminal owners and traders, which have been netting them $85 per metric ton in trading or terminal fee profits. And the main drivers of growth are U.S. and China. So despite all the disagreements and conflicts surrounding this bilateral relationship, it's certainly chimerica when it comes to the LPG market in terms of floods. So let's have a more look into the U.S. fundamentals. As we have said also in the past, very strong fundamentals, the fields in the US are getting more gaseous, which we covered in more detail in our Q3 presentation, and that is driving up LPG production, even a lot faster growth than oil production, which is a bit more stagnant. And then it helps that the US consumption is flat, which means a lot of these volumes are being exported. Inventories in the U.S. were record high last year. As I mentioned, the cold snap at the beginning of the year have driven up demand, driven up prices, and then also reduced the inventories. But still after this huge drawdown on inventories, we are still at average inventory levels in the U.S. And given where the production is going, this inventory situation in the U.S. is quite comfortable. And if we look at the natural gas side, we are at four-year lows on natural gas prices in the US. So certainly, the US is flowing over with NGL, LPG, and natural gas. So let's look at the seaborne volumes. The U.S. being the main driver, as they are producing more, consuming flat. A lot of the volumes are being exported and exported by ships. So 17% growth in U.S. LPG exports from 2023 to 2021. Middle East, despite the OPEC cuts, production are good. The Emirates, Iran, they are not cutting back. It's mostly Saudi where export growth has been below par recently. So let's see what the summer will bring. If there is a reversal in the OPEC policy in terms of barrels being produced, we will also probably have an effect on the LPG side from Saudi. On the import side, as I mentioned, China growing very rapidly. China is ramping up a lot of BDH plants. And this rapid growth in capacity, these are basically refineries. So you have oil, you have a refinery cracking the oil hydrocarbons. On the LPG, you have a refinery cracking the LPG. So you can utilize it for other products like plastics. And the big ramp up in capacity in China has resulted in a lower utilization, lower margin. So that has also reduced the prices in China. So that has kind of, on one side, you have this in U.S. which have driven up domestic prices. And then you have had overcapacity on the BDH plants in China, which has kind of eaten on the arbitrage from both sides recently. But where we are now seeing normalization given where gas prices in U.S. is heading. India, and not surprisingly also, a growth market and Europe have also taken benefit of cheap LPG prices compared to, let's say, substitutes like LNG. Arbitrage is a super important driver for the theoretical price you can pay for freight. And we have a very conductive market. Last year, as mentioned, our average at healthy levels, and we saw arbitrage going all the way up to close to $400 metric ton. When you have the cold snap, prices in U.S. came up. The overcapacity in China on the BDH plants have resulted in lower prices there. So the up really fell down very quickly from end of the year into the new year. And that rolled on the freight rate. Market now kind of rebalanced driven by lower domestic prices in U.S. And if we look at the right hand side here, which the dotted line represents the future curve for freight, it's in Contango, meaning it's trending upwards as the market is absorbing the available shipping capacity that came open when a lot of cargoes were lost. So if we look at the current status of the VLDC fleet, so I took this out from my Kepler platform yesterday. So this shows all the VLDC ships in the world with the AIS transponder. So what's interesting to see is, of course, the flow now has halted via Red Sea and Suez. There are still a couple of ships there because Saudi, they do have export plans in the Red Sea, the Yanbu. So somebody has to pick up these cargoes, even though export volumes from Yanbu have also suffered recently. And as far as I can read out of Kepler, they are down 44% in January. But there are still some ships picking up these cargoes, and it's feasible to use the route from the Mediterranean via Suez to Saudi, pick up those cargoes and go back via Suez to Mediterranean without taking a lot of risk in terms of the Houthis. Then we see for the other ships, mostly routing via Cape of Good Hope, is adding 788 on a ballast voyage from Asia to U.S. on a round-trip basis. But the most important driver lately has been less congestion issues in Panama, where we do see more ships now ballasting from Asia to Panama in order to shorten the route from Asia to U.S. On a roundtrip basis, you can shorten down your voyage by around 30 days. So people are taking the chances again that they get a slot in Panama, and this has resulted in shorter sailing distances and more vessel availability. Kepler has open ships in yellow. Some of these ships are probably on subs and not open, but at least it gives a good picture of the current flows. More routing via Cape of Good Hope, more routing via Panama, very few ships in Red Sea. And just for the new people to the VLGC space, Russia is a minor player in LPG export. They don't export any cargoes on VLGC, so there are no VLGCs in the Black Sea. Just to dig a bit more into the Suez and Panama situation, as you can see here, it's a round-trip on the three different route alternatives, Suez, Cape of Good Hope, and Panama. So 60 days, Panama, China, via US, if you add one day of waiting on each passing through the Panama Canal. So it really means you can save about 30 days taking this route rather than via Cape of Good Hope, which is the alternative today, as US cargoes being exported from US. None are going via Suez today, as you can see on the graph on the right. Panama routing has bounced back. Even though water levels in Panama are still very low, it's a long time before we get into the rainy season. Rainy season typically starts end of May, June. So the water levels in Panama will continue to be reduced. There will be curtailments on traffic, and we could have a situation where in terms of higher traffic through the Panama Canal, we could suddenly see congestion issues popping up, similar to what we saw last year, when actually water levels were very high in Panama prior to a linear situation. So this is something we monitor closely. But lately, the kind of less congestion in Panama has opened up more ships in the market than was the case prior to New Year. In terms of the fleet, we have been through our situation with very high fleet cost. For this year, when we talked about a year ago or so, we expect, it was scheduled around 45 ships for delivery in 2023. In our webcast, we said we expected the number, the real number to be between 35 and 40. We also did on our basis that actually two out of four ships were delayed. So we had four ships for delivery last year, we ended up with two. And those two ships not being delivered are now being delivered in March and May this year. So all the people have faced the same problem. However, given the very strong market at end of the year, of course, it made a lot of sense for owners to take delivery as quickly as they could. So we ended up with 40 ships for delivery in 2023. And as you can see here now, fleet cost will taper off. So for this year, we expect around 20 ships going down all the way to 30 ships in 2025 before bouncing back to 20 something, low 20s in 2026. And of course, if you are contracting VLGC today, you are quite lucky if you get the 27 plus, we are already starting to book ships for delivery in 2028 given the scarce yard capacity. So we will have a period here with muted fleet cost. And also the fact that we have had extremely low levels of scrapping in this industry, a lot of ships being more than 20 years old, actually 15% of the fleet. So we do expect some further scrapping in this period as well. So we've been lucky in the sense that the year we had very high fleet cost last year. We also had very high export growth from US, strong demand from China, congestion issues in Panama, which kind of made the market very tight, despite the high fleet cost. So we structurally balance of market looks better for this year, and certainly even more so for next year. Something maybe also to consider here, most people know contracting ships are contracting what they call the VLAC, very large amount. But these ships are quite similar to the new buildings we have. VLAC have a filling ratio on ammonia of 98%. The two ones we have sold for delivery this year had a filling ratio of 86%. The MGCs or MAX we have invested in have a filling ratio of 98%. So it's meaning you can basically load a full ammonia cargo and we are a bit more bullish on the smaller size ships for ammonia trade than the big size of ships. We do expect most of the VLACs coming here for delivery will trade LPG. But if the ammonia trade takes off, especially Japan and Germany are very keen on utilizing ammonia as blending in their coal plants in order to reduce emissions. So if that takes off, you could see some of the ammonia enabled ships leaving the LPG space and rather trading as ammonia. But it's a bit too early to say how this will develop. And it will also really depend on the price of carbon. So as I mentioned or alluded to in the beginning of the presentation, one year ago, we had a lot of worried people about supply demand balance for VLGC sector for 2023 with each 46 ships scheduled for delivery ended up at 40. And that people thought that the order book was too big, that the LPG market was mature with limited growth. VLGC rates were crazy volatile. That in case LPG prices went too high, you could use the substitute being NAFTA. And that would kill the economics. And then lastly, stock rallied a bit from January to February when we presented our Q4 last year. And some people said, okay, we lost this window. It's too late to buy the stock now. So let's see how those [indiscernible] pieces played out. So number one, order book too big. Well, certainly not the case. We had slippage as expected. But as I mentioned, we did have more deliveries in Q4 given the very strong market. People had a big monetary incentive to take the ships on the water and start trading them. But the market was super tight, basically throughout the year with the best rates we've seen since 2015. So that's the worry didn't come to fruition for sure. Does the market mature? Not really. We had very high growth from US as mentioned, supporting seaborne LPG trade. Volatility for sure, it persisted. And we do see it today with a market gone from basically close to all time high to very low levels. But you know, we had a volatile trade market last year as well. But every month, we were above cashback even level. So as we presented last year, you know, yes, there is volatility. But in relation to the tankers and dry bulk space, there's a lot less month in the VLGC space where you are below cashback even level. So while we have been in a situation here in middle of January until recently where we have been below cashback even level. Actually, if you look at the average for January, we are above cashback even. And let's see where it's going now. I'm not sure we're going to be very much below cashback even level for February either. So one thing is volatility. Volatility also gives you the opportunity to rake in very good rates. So volatility is not necessarily negative. It can be very positive because you can make some very good rates. So you should more focus on how volatile it is, and how often do you go below cashback even level, which has, if you look back 10 years, it's been very rare. So then the last two months, NAFTA didn't kill the economics when LPG prices really fired up at the end of the year last year. We did have two months where NAFTA was cheaper. But that's not the case any longer. And then last one, no, it wasn't too late to buy the stock. We started the stock at NOK55 beginning of the year. When we did this mid-February special edition in February, stock was around 80. We closed the year at 170. We are close to NOK137 today. And then on top of that, you have had a lot of dividends. And actually, if you held the stock last year from beginning of the year to end of the year, reinvested your dividends, you would generate a 208% return, which made it the best stock in the Oslo Stock Exchange All Share Index. So I managed to squeeze in Warren Buffett quote in our FlexLNG presentation last week. And I saw the opportunity to also add that to the advance presentation. So from the documentary of Warren Buffett on HBO, he tells you that maybe you shouldn't worry too much. So if you are a worrywart, maybe reading the book from Dale Carnegie is a good option. So with that, I think we conclude. I'm not going to spend too much time running through the highlights. Numbers slightly ahead of guidance. Strong numbers, second best quarterly results ever with 61.5 million, NOK80 of earnings per share. Second best year, 164 million of profits, $2.14 of earnings. We are paying out the dividends of $2.15. We have been selling off ships at very good timing, two older ships and two new buildings where we'll generate substantial profits, substantial cash release, especially when you combine it with the refinancing we carried out. We pay, we hike the dividends $0.65. We will propose on the AGM that we can return some capital to shareholders, which we will come back to when we have the AGM and the Q1 report in May. Rates have fallen off from their peaks before New Year's, but they are now rebounding and the market looks conductive for the rest of the year. And fleet growth will be muted this year and even more so next year. And we are good booked for Q1. So regardless of the market, Q1 will be a very good quarter for us. And on top of that, we will have a reversal of this accounting effect also in Q1, which will boost our numbers on top of the bookings. So with that, I think we conclude and we open up for some questions.
Operator: Thank you. [Operator Instruction].
Øystein Kalleklev: Okay, I can take a question from the chat maybe before, while you're doing the telephone conference. So we have a question about ethane. We have a remark here about ethane carriers. Ethane carriers can in theory, carry LPG. However, ethane carriers are more like LNG chips. And they are a lot more costly than VLGC. Price of VLEC is around $170-$180 million. So it doesn't really make sense to trade it as a LPG chip. And also all the chips that have been contracted are on long term contracts. Most of these chips are taking ethane out of US to China or India, where yes, they can be a substitute for propane. Okay. Ethane, if you review our Q3 presentation, we have some more details on the NGL space or natural gas liquid, which composed of not only LPG, but also ethane. This is also a very fast growing market in the US. If you have ethane, you can either consume it in the US, you can do what we call ethane rejection, where you are flowing the ethane into natural gas and spiking that, or you can export it. And if you export it, you could have crackers, cracking ethane for ethylene, which yes, could be a substitute for LPG depending a bit on prices. And depending a bit on whether that plant is a flexi cracker, which can crack not only LPG or propane, but also ethane. But we don't see it as a big threat. We do see that this market for both hydrocarbons. So that was the question from John Nicolai Skolan. And then we have a new question here from Kevin Whelan, whether the US decision on moratorium on LNG export will have big effects for propane? Yeah, it's actually a good question. It could have some indirect effects, because if you're building a lot of LNG export plants, you need to have access to feedstock and the being natural gas. So when you're drilling in shale basins, some basins are drilling for dry gas. And actually, it's very nice to have dry gas because then the treatment of that gas on the LNG export plant is minimal. However, most people when drilling are drilling for oil, where they do get associated gas, consisting of maybe methane or NGL. So you could have an indirect effect that if US is not exporting more LNG, that could result in lower domestic prices, lower domestic prices will result in less drilling activity, less drilling activity will result in less associated gas production, and less associated gas production could result in less propane export. So yeah, could have an effect. I do think a lot of the drilling players will kind of target those basins where they can recover resources, which could be exported. So if you are then, then I do think a lot of the shale players will rather target, you know, oil wells, where you can export that oil, and then the associated gas will consist of NGL, where LPG will be part of it, and that can be exported. So it will probably mean less drilling of dry gas. So to summarize, it can have an indirect negative effect, but it could be mitigated by people rather electing to drill more oil rich wells. Yeah. I think that's it. So let's just -- before we say goodbye, maybe we can check if we have somebody on the telephone conference.
Operator: We have. Yes, we have one question on the phone lines. Please stand by. This is from the line of Clément Mollins from Value Investors Edge [ph]. Please go ahead.
Unidentified Analyst: Good morning, Øystein and Randi. Thank you for taking my questions.
Øystein Kalleklev: Hi. How are you?
Unidentified Analyst: Yeah, I wanted to start by asking about your market outlook. You've been clear on your structural bullishness on the overall market, and I was wondering, would you provide some further commentary on your expectations for US exports throughout 2024?
Øystein Kalleklev: Sorry, we have some technical issues. Could you maybe repeat the question?
Unidentified Analyst: Yeah.
Øystein Kalleklev: Sorry.
Unidentified Analyst: I wanted to start by asking about your market outlook. I mean, you've been really clear on your structural bullishness on the overall market. And I was wondering, could you expand a bit on your expectations for U.S. exports throughout 2024? And secondly, the question is more about the capacity for the U.S. to continue increasing exports if production continues to increase and consumption remains steady.
Øystein Kalleklev: Yeah, it's a lot of questions there. Let's start with the one I think is the most interesting, and that's U.S. export capacity. And you're right. U.S. exports have been ramping up quickly. We are getting kind of close to nameplate capacity. There's not any near term big expansion in the U.S. So from the graph we have shown as well, and from the graph we've shown in Q3, we don't expect similar growth factor for U.S. in 2034. We do see more export capacity being brought online from 2025 on export side, it will be probably a bit more muted on the US side. So we are a bit also dependent on sailing businesses. In terms of the freight market, it's been more a bit of a shakeout. When we had this cold snap, people have been losing cargoes, less cargoes from Yanbu as well. Suddenly you have more ships open and then you typically get these kind of shakeouts in the market and people just have to fix the ship because they are already way on the ballast leg and need to secure it. So we are walking through the book of unfixed ships. And we have cleared out a lot of ships and that's why also rates rebounded from, let's say, around $10,000 maybe at the bottom to now somewhere around $25,000 to $30,000. And as mentioned, cashback even is around $22,000 for us. So it's weaker. However, the ARB [ph] is holding up fairly well. And sometimes I disagree with the FFA curve, but I think the FFA curve looks fairly reasonable. It's reasonable to think that the market will continue to tighten a bit and that we will get gradually better rates. And it will depend a bit on how the situation in Panama progresses. Are the water levels running down? How will the rainy season be once we're getting into the summer? I think those will be important factors for how the market will behave in the second half of the year running into the winter season.
Unidentified Analyst: Makes sense. Thanks for the color. I actually wanted to follow up on the FFAs. You mentioned they are quoted at about 47K for the remainder of the year. How are they looking in 2025? And secondly, in the physical market, could you give us an indication of what is available for a medium-term charter, say, like two to three years?
Øystein Kalleklev: To be honest, I think the FFA curves are pretty good at predicting the near term. Once you're getting out on the curve, they have fairly limited predictable value, I would say. And also, of course, these are not super liquid. So if you want to start trading FFAs for 2025, you would have a hard time kind of filling up your position. But in general, they are kind of trending upwards and then plateauing. With calendar '25, it's around 50,000. So kind of you have a curve here trending up and then plateauing at around $50,000 per day. So that's where the market is today. Q4 is at 48, and then 50 for the full year '25. But we don't plan to kind of hedge on FFA on these rates. We are probably a bit more bullish on the market than FFA curves for '25, given how few ships there are for delivery in '25. In terms of the term deals, there's not really been a lot of terms deals lately. So I don't really have very good data points on it.
Unidentified Analyst: Makes sense. That's all from me. Thank you for taking my questions. And congratulations for the quarter.
Øystein Kalleklev: Okay, thank you. I think we take one more question before we conclude. And it's from Lars Hjelplot. What are our expectations about the Middle East volumes in '24? Yeah, well, it really depends on MBS and his friends in OPEC. Are, will they start pulling more cargoes into the market? How will Russian oil production develop? And will that leave more room for OPEC? I think most people at one time think that OPEC will provide more barrels to the market. So we could see some upside, especially on Saudi. But it's entirely up to politics. I'm not sure if MBS really wants to add a lot of barrels to the market prior to the election in the US. He's not very friendly of Biden. He'd probably rather prefer Trump winning that election. Adding barrels to the market with everything equal reduce the price. The pump price in the US can be a swing factor in the election. So I think, you know, MBS will look at this and make a decision. I don't think they will flow the market with oil unless there are supply disruptions all the place in the world. Okay, thank you, everybody. And thank you for listening in. I hope you have a great Valentine's Day. And we will be back as mentioned in May with our Q1 report. And I hope to see you then. Thank you.
Randi Bekkelund: Thank you.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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