Avance Gasoline 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 Gasoline Holding Restricted Third Quarter 2022 Earnings Convention Name. Right now, all contributors are in a listen-only mode. After the audio system’ presentation, there will likely be a question-and-answer session. [Operator Instructions] Please be suggested that at the moment’s convention is being recorded.
I might 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 Gasoline. 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 he or she will likely be presenting the financials a bit later within the presentation.
Earlier than we start, I feel I simply need to make you conscious of our disclaimer. We are going to present some forward-looking statements and a few non-GAAP measures. So please, we advise you to view the presentation along with the earnings launch, which we 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 in keeping with our steerage of round $32,000 per day.
Internet revenue got here in at $11.6 million, which equals to our earnings per share of $0.15. Please additionally be aware that we’ve got had appreciable beneficial properties on our rate of interest swaps through the yr in complete $25 million of beneficial properties up to now this yr, and Randi will inform extra about this a bit later.
The freight market has turned from through 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. In the course of the — additional, we even have bought one in all our older ships, 2009 constructed Promise.
Throughout Q2, we bought the sister vessel Windfall. The sale of Promise is giving us a e-book acquire of $7.5 million, and the money proceeds from the transaction is round $20 million, and we anticipate the transaction to be finalized by finish of November, and this revenue will then be booked in This fall.
We have now additionally lately entered right into a 12-month time constitution for the non-scrubber ship Pampero 2015 construct, which then principally 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 completely different shoppers.
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 typically 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 deal with commercially smart.
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 offered in Q1 and Q2. And this provides 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 complete 11% of annualized yield, it is someplace nearer to 12-13% %. So that ought to give our traders enticing direct yield by being invested within the Firm.
Let’s head for the subsequent slide and the fleet renewal, which is nice for the setting, but additionally superb for our revenue and loss assertion. We have now now, through the yr, bought three for older ships with Thetis Glory in Q1, Windfall in Q2 and now in This fall, we’re promoting Promise. Meaning we’ve got divested three of the older ships in our fleet. In complete, this has contributed with a e-book acquire of $18 million and money launch of $67 million.
So at the moment, given the inventory value, we’re highest round value e-book [0.85] and we’re promoting our older ships at significantly greater costs than our e-book worth. And likewise, 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 ranking 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 greater. It is consumed much less gasoline than our 2010 constructed VLGC. After which as well as, we are able to 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 subsequent slide, then we may give an replace on the present fleet construction. As you may see, Promise bought. So she will likely 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 will likely be 16. As you may see right here, there are some completely different specs on a number 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 superb 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’re not uncovered to gasoline value for this ship both and the identical goes with Pampero, which we lately lined 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’ll burn ammonia as maritime gasoline. After which, we lately 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 measurement for ammonia isn’t actually at this degree at the moment, however there’s lots of deal with blue ammonia, win ammonia. So this market is growing, and we’ve got 4 ships there that are very nicely fitted for this commerce and likewise fitted for being nonetheless emission ships.
Sure. And usually, we’ve got a balanced portfolio. We have now additionally taken out some FSA covers. That is ahead contracts principally on freight. And we’ve got lately lined 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 performed for the 2023 is at $47,000 per day, and the protection we had from pre-existing offers performed a few yr in the past, is at round $30,000 for the Q1.
So nicely lined, after which we’ve got lots of market exposures and all the brand new ships coming for supply, we’re absolutely open and may profit from a a lot stronger freight market at 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 meant for supply ’23 on account of delays at yards on account of numerous causes, together with labor strikes. These ships would possibly very nicely each of them find yourself in 2024, and that is a common theme for the trade, which I’ll come again to later out there part.
So, final slide earlier than handing over to Randi for our monetary overview is the dividend. We have now simply included a bit extra shade on the dividend. And we’re type of — to be frank simply copied a number of the ideas from advanced simply to provide you some shade on how we’re eager about the dividend. The dividend is — it is not likely one thing you solely think about the quarter you might be in, however you might be additionally taking a look at how is the outlook for the subsequent quarter. How is our monetary place?
So by way of Q3 this yr, it’s kind of on the delicate facet. That is why we’ve got a yellow mild. The market outlook has considerably improved from what we had once we have been reporting in August. So it is inexperienced mild on that. The one purpose why it isn’t darkish inexperienced, given the truth that spot market is on hearth is, in fact, the truth that there are extra ships for supply subsequent yr. In order that’s why I am a bit cautious in the marketplace outlook.
Backlog and visibility won’t ever be Extremely inexperienced for Avance Gasoline. That is commodity transport, however we do have some backlog, as I discussed on the final slide. Liquidity place is tremendous robust. Covenant compliance, we’ve got performed a mistake. This ought to be darkish inexperienced. We’re passing the compliance of economic covenants with flying colours. Debt maturities, nothing earlier than 2027. CapEx liabilities. Sure, we do have $242 million of remaining newbuilding CapEx. Nonetheless, that is lined solely plus some with the $250 million of debt amenities, which will likely be drawn on supply of the ships.
So, we’ll 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 steerage of $32,000 and is defined principally by extra favorable place than anticipated.
Working bills have been $9.8 million, pretty in keeping with the earlier quarter, equaling a each day common OpEx of $8,200. As commented within the second quarter, airfare is making crew adjustments 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 degree 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 common expense or A&G for the quarter have been all the way down to $1.5 million in comparison with $1.9 million and represents a normalized A&G expense, which is roughly $1,200 a day and has been and nonetheless is the bottom A&G in comparison with our friends.
Internet revenue for the quarter was $11.6 million or $0.15 per share. Trying on the year-to-date income, we’ve got $54.3 million and is the strongest 9 months because the glory days in 2015 and is principally 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 known as different complete earnings, the place we acknowledge our by-product portfolio consisting of our curiosity hedges.
As commented within the second quarter presentation in July, we blended and prolonged an current $50 million LIBOR rate of interest swap and transformed right into a software-based swap and improve our hedging with one other $100 million, leading to a software-based hedge of $150 million at 1.87% maturing in 2030 and 2031.
Moreover, at quarter finish, we had a LIBOR hedge with a notional quantity of $202 million at a mean charge of two.82% maturing in 2025. We have now benefited fairly nicely on these positions, leading to a acquire of $7.8 million for the quarter, bringing the entire beneficial properties for the yr about $25 million.
Subsequently, we’ve got terminated $100 million notional price of curiosity swaps through 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 top 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 acquire, in fact, of $7.5 million and a decrease depreciation expense of $300,000.
So shifting to Slide 8. On the stability sheet, we are able to see that we’ve got 77% of our stability sheet are vessels, consisting of 13 VLGCs changing 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 value of NOK80 million per vessel and is valued at mid-high $90 million at the moment. This provides as much as extra e-book values of $90 million to our books. Now that may be very good so as to add this into our stability sheet. So this isn’t allowed in accordance with the accounting commonplace, as our fleet is carried at value much less depreciation and any impairment, which is probably the most used accounting mannequin throughout the transport area.
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 robust freight market contributing $88 million in money stream from operations, we recorded a money stability of $188 million.
Trying on the right-hand facet of our stability sheet. We have now maintained our strong shareholder fairness above 50%. At quarter finish, we’ve got a shareholder fairness of $583 million, comparable to an fairness ratio of 54% and the entire interest-bearing debt of just under $500 million, equaling a debt to complete asset ratio of 45%. The share has moved a bit down from yesterday, however it’s nonetheless supporting our e-book worth considerably, and it is priced as dedicated by $0.08 at $0.85 at the moment.
The following slide illustrates the quarterly money motion. We began up with a money stability of $199 million initially of the quarter. And because the freight market is above our money breakeven degree, we generated $60 million in free money stream or web of money from operations of $26 million and scheduled debt compensation 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 trade 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 nicely above $200 million as we’ll obtain $20 million in web money proceeds from the sale of Promise and obtain freight from a really supportive commerce market.
Transferring to the subsequent slide. Taking a look at our newbuilding CapEx, we’ve got now paid about 50% of the entire capital expenditure and $242 million stays to be paid. The full expenditure consists of improve for making ready the vessel to sail on ammonia gasoline for all remaining newbuildings and carry ammonia cargo for brand spanking new constructing 5 and 6, which leads to a zero carbon resolution from a nicely 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 a couple of months, are secured in $115 million financial institution mortgage facility as part of the fleet refinancing that we accomplished in Might this yr. And the 2 final vessels, Avance Castor and Avance Pollux scheduled for supply in Q3 ’23 and Q1 ’24 are secured in $135 million sale-leaseback settlement as introduced in August this yr.
So, which means that we’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 compensation 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 pliability 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 setting at $90,000 a day on scrubber vessel on a U.S. Asia voyage, the Avance fleet has the potential to generate about $50 million in free money stream 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 overview 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 the event you take a look at the on a world foundation, it is principally 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 growing international locations. It is largely for rescomm. In U.S., it is — LPG is usually a petchem product, is a petchem or refinery mixing. After which for those who take a look at Asia, it actually is dependent upon quite a bit on the completely different international locations. The most important importer is China, the place rescomm is simply 40% in keeping with 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 also be utilized as gasoline for automobiles.
Let’s head into the market and the current developments. 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 robust 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 in all places principally 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 also be, as I discussed on the earlier slide, very reasonably priced. So, Chinese language imports are literally is 9% up to now this yr. Europe, with our vitality disaster are additionally substituting in additional LPG and has been rising 67% this yr, though from a a lot decrease degree than the Chinese language demand.
If we’re trying on the spot earnings, good occasions are again for certain. We are actually on the highest degree 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 degree 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 at all times had an excellent smile when. If we take a look at the one-year time constitution charge, it is, in fact, a bit extra secure than the risky 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, in fact, a conductive setting for the arbitrage. So, we do see the costs between Mont Belvieu, U.S. propane after which the Far East Index in Asia have been up 4.5 star. After which for those who’re trying on the arbitrage, which is then changing into principally the restrict of feeling for what you may pay on the transport freight charges, it is nonetheless preserving an excellent degree.
And if we type of assume all of the arbitrages for the good thing about our ship proprietor, which is usually the case in our robust market, then we’re taking a look at earnings degree for scrubber ship of $60,000 subsequent yr, $66,000 in ’24 after which, in fact, considerably decrease for our non-scrubber ships. And naturally, these should not solely theoretical numbers, so we’ve got secured 63% of our ship within the FFA market lately at $47,000 per day for the AG to Japan route, so not actually the arbitrage for ship homeowners, however nonetheless a really conductive transport market given these arbitrages.
If we’re taking a look at what’s taking place out there, it’s kind of much like what we have seen in LNG, the place ton mile is on the weak facet as a result of you’ve 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 velocity is down for the ships are down 4%. And naturally, that is additionally pushed by the congestion in Panama, the place ready time is above 20 days today, each on the north and the south certain. That is additionally the unpredictability of the Panama canal if you’re making an attempt to schedule a ship.
Additionally signifies that an increasing number of ship homeowners are taking the ships longer routes by 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 when you have an unpredictable date, it is onerous 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 principally 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 previously.
So attrition, in fact, now we’re in an excellent market and folks usually do not discuss attrition and scrapping of ships. However we’ve got been out there now even in our weak market for a few years the place we have nonetheless not seen any scrapping. And naturally, this has been good within the sense that secondhand costs for all of the ships have been very agency, and this is likely one of the the explanation why we’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 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, it will put extra strain on the compliance of the fleet, and we’ve got a type of illustrated this by the CII ranking at the moment or anticipated subsequent yr after which the event. So you will note lots of the ships there may have struggling complying with the brand new IMO guidelines.
So we do assume it will finally impression scrapping and staffing, which has been holding again for a very long time now, we’ll finally improve. There’s one purpose which I’ll come again to shortly, why we additionally see much less scrapping and that’s associated to the truth that an increasing number of ships within the is leaving the normal worldwide transport market and going into captive Iran, China facet had as a substitute.
So let’s simply spotlight the order e-book first. I discussed this, the order e-book for subsequent yr is 45, 46, 47 ships relying a bit on the way you depend, though we do see slippage, we’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’d anticipate a few of this to leap into ’24 and a number of the Q1 ships to stumble upon later within the yr and thus balancing the order e-book a bit higher than what it seems to be at the moment.
On the identical time, we do see lots 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 number of the homeowners will even make the most of the chance to place in a scrubber within the ship to profit from the fee financial savings. And naturally, that may 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 nicely.
So if we take a look at the fleet stability then for ’23, it is a massive order e-book, as talked about. Nonetheless, U.S. is importing — exporting at wholesome ranges and EIA is anticipating this to proceed with round 10% export prices. And naturally, U.S. cargoes are 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 velocity discount development, which I additionally identified earlier. You would have a reversal of the velocity discount development, however you then most likely would have greater ton mileage, as a result of as a substitute of ready within the queue in Panama, you might be crusing an extended distance and avoiding the Panama Canal solely.
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 nicely. And I feel an increasing number of persons are realizing this, and that is why the sentiment round ’23, which was fairly dire this summer time, 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 examine, we’ll discover out quickly.
Then trying on the order e-book, 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 e-book to fleet is 20% after which as I mentioned, there is a pent-up scrapping demand on this sector with lots 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 nicely.
Final slide then earlier than going to the highlights, I discussed is I alluded to this, lots of ships are leaving the worldwide commerce and ending up through the type 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 will likely be of the brand new match.
So with that, I feel 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 robust 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 lined for This fall. The ships we’re usually fixing now’s for late December loadings, that means that these bookings will likely be turning up in our numbers in Q1 subsequent yr.
So we’re additionally then at the moment, we’re reserving superb numbers for Q1 subsequent yr, and earnings relying a bit on the way you calculate it on $50,000 anticipated, for subsequent quarter, 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 feel I conclude, and I thanks all for taking part. I want you all an excellent 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, perhaps you may open up for some questions.
Query-and-Reply Session
Operator
[Operator Instructions] We are going to take our first query.
Øystein Kalleklev
Any person is driving right into a tunnel. Okay. Okay. I feel why we’re ready you may take a look at whether or not that connection is nice. We have now had a chat query. This can be a query I get each quarter on the Flex course as nicely. It is principally you’ve lots of money, the way to spend it. Liquidity with money stability, $188 million is large. It is inefficient to have a lot capital tied off since your new constructing program is already absolutely financed. What do you propose to make use of the money for? Will we see particular dividends like?
So it is a good query, a good query. I feel we’re paying out 135% of earnings on this quarter. For the yr it’s at 86% or so. 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 type of we noticed that we might get higher financing phrases within the banks. So when banks are keened to lend you cash, you need to attempt to borrow. And so we refinanced principally in nearly the entire fleet.
After which throughout this refinancing, we’ve got added lots 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 are able to repay this. So it is a versatile mortgage. After which when we’re not using the revolver facility, we’re solely paying a dedication charge 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 frequently. After which one of many the explanation why we additionally did this was, in fact, the financing market was good, but additionally there was lots of issues about 2023 outlook with lots 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 persons are beginning to calculate your runway. How lengthy does the cash final? As a result of then you are going to destroy fairness worth, and we’ve got seen this on this identical firm previously when persons are calculating how lengthy are you going to final. So what we’re doing then is so as to add lots 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 past six months from being very dire to be very optimistic. So no person is making this sort of calculations once more, however I feel it is smart for the Firm to have ample entry to liquidity, to alleviate any issues if there’s a sure change in market sentiment that folks will assume that, nicely, I can sleep secure at night time. The Avance individuals they’ve sorted out the financing correctly, and we’ll be capable of 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 lots of monetary flexibility within the Firm.
That mentioned, I feel we’ve got enough money. We most likely have greater than we want, as we are actually absolutely financed on the newbuildings. That is why we’re paying up 135% on payout ratio for the quarter, and we intend to not — a number of the transport corporations, they brag, they’ll pay 50% of their earnings in dividends. We aren’t going to brag about that as a result of we’ll pay 100%.
We have now greater than enough money, so we intend to generate all of the earnings we’re producing, we’ll ship again to you, traders, in dividends. We might have been eager about doing buybacks given the place the inventory is being priced in comparison with NAV. Nonetheless, we have already got exemption from the Oslo Inventory Change to be listed, as a result of the requirement there is no such thing as a shareholders ought to have greater than 75%.
Our greatest shareholder, Hemen Holding, managed by John Fredrikson & household personal 77% of this firm. In order that makes it a bit troublesome for us to purchase again the inventory. However as a substitute, 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 cellphone 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 are going to see lots of deliveries in 2023, however the provide facet outlook for ’24 and ’25 appear considerably extra enticing. You have taken benefit of excessive secondhand asset pricing by disposing of a few of your strong property. Is there any urge for food to probably order extra new builds? Or is value unattractive at present ranges?
Øystein Kalleklev
Okay. Thanks. Good query. Sure, as Randi mentioned, we contracted six newbuildings that, I might say, name it, the underside of the market, $80 million. So they’re $95 million at 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 principally nearly 20% above e-book values in type of asset values for these ships. After which we’ve got been promoting ships at round 12%, 13% uplift to e-book values as nicely on the older ships. That is on value. So it would not actually have an effect on view by way of making new investments.
I feel one of many difficult issues for us is that we’ve got a inventory value, which is buying and selling nicely beneath e-book worth, and the e-book worth is nicely beneath NAV worth. After which, if it’s good to elevate fairness, you might be diluting shareholders. So, it is not likely accretive development for the Firm. Nonetheless, we do have some surplus money we might most likely to work. Nonetheless, we additionally prefer to pay the excess money as dividends. In order that’s — it is a high-quality stability for public listed transport corporations, the place it is onerous to be concern when you find yourself within the public market as a result of most transport traders should not actually opposite and they’re cyclical.
In order that signifies that lots of the transport corporations, they’ll have an excellent inventory value when the markets are crimson scorching. And normally, when the market is crimson scorching, newbuilding costs are additionally fairly agency. Meaning the general public transport corporations like my colleague Olga has mentioned previously, this system to do unwise funding selections as a result of they’re investing on the prime of the market that triggered the inventory value is on the peak then.
So we attempt to be a bit smarter on this group of corporations. We are going to think about it. I feel we’ve got had the order e-book 20% of fleet. Newbuilding costs have been selecting up. Deliveries tons now are extra ’26. So, sure, we’ve got seemed into it. However up to now, we’ve got thought of that the very best different for our shareholders is that we deal with chartering our current ships, taking supply of our current ships and maximizing dividends for our shareholders relatively than constructing extra ships.
Climent Molins
That is very useful. And certainly on buying and selling beneath NAV, issuing doesn’t look like the most suitable choice. And turning in 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 greater. How is the 2024 FFA curve taking a look at like in the mean time?
Øystein Kalleklev
Okay. A few questions there. So it’s good 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. Nonetheless, you are evaluating a bit apples and bananas there, as a result of the scrubber unfold is $10,000, $12,000.
So the Pampero mounted is a non-scrubber ship and 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 for those who’re making mid-30s on a one-year time constitution non-scrubber, you ought to be making mid-40s on a scrubber ship. In order that was query primary.
And you then had one thing concerning the FFA for ’24. Sure, it is round $45,000 for scrubber ship in ’23. Subsequent ’24 is decrease. So for scrubber, I haven’t got the quantity in entrance of me, however I might — my guesstimate at 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 have not mounted something for that calendar yr. And have in mind, the FFA market can also be very illiquid. However in case you are out there for a time, you will get some offers performed.
Sure. Was there any extra questions? I feel 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 feel we conclude. Thanks once more, everyone, additionally for contributing questions. That is at all times probably the most nice a part of doing this webcast.
So thanks once more, everyone, and have an excellent Thanksgiving, and we’ll discuss to one another once more in February once we are reporting tremendous robust This fall numbers. Thanks.
Operator
Thanks. This does conclude the convention for at the moment. Thanks for taking part, and you might now disconnect.
