Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the d'Amico International Shipping Third Quarter Nine-Month 2022 Results. As a reminder, all participants are in listen only mode. After the presentation, there will be a Q&A session. For operator assistance via web call, please press the headset icon on the bottom left side of your screen. For conference call assistance, please press star and 0 on your telephone. At this time, I would like to turn the conference over to Mr. Paolo d'Amico, Chairman and CEO. Please go ahead, sir.
Thank you. Welcome to our third quarter and nine-month result presentation. Let's go straight to the presentation itself. As usual, we jump the executive summary because we don't want to repeat ourselves twice. I leave the floor to Carlos for the first part of it. Please, Carlos.
Thank you, Paolo, and good afternoon to everyone. Just as usual, a quick glance at our fleet composition. As at the end of the quarter, 36 vessels, which 24 MRs and the same number of handys and other ones, six of each, in terms of control, 19 are owned, eight are bareboat chartered, and nine are time chartered in. Young fleet, average age of 7.5 years. Mostly IMO class at almost 78%, and also 78% Eco-design. Meaning by that, vessels which were delivered since 2014 and which consume around 30% less fuel than the conventionally designed vessels.
This fleet composition is the result of important investments we did between 2012 and 2019 to renew our fleet. Over that period we ordered and received 22 newbuildings. Since then, we have had mostly maintenance CapEx, which has been falling actually over the last few years. This year we had a few opportunities that we could seize in terms of investments. The first one being the redemption of the shares of our JV partner, Glenda International Shipping, for around $27 million. That company controlled four MR vessels, three built in 2011, one built in 2010.
The implicit values of the vessels acquired were around $21 million, while today they are worth around $27 million. That was a very good deal for us. We were, I must say, lucky with the timing because the agreement was reached just before vessels' values started moving sharply upwards. We also had purchase option on a vessel time chartered in. This purchase option was in yen, and the strong depreciation of the yen relative to the dollar made that purchase option very attractive, so we were able to declare that option and acquire the vessel. It still has to be delivered to us. It will be delivered towards the end of November for $30 million. The vessel, it's a five-year-old vessel built in the Onomichi Dockyard.
Very good shipyard in Japan. We have time chartered the vessel since its delivery, so we knew it very well. The vessel value today is probably around $39 million-$40 million. Also that one was, we believe, a very good deal, which allows us to significantly lower our break-even on that particular vessel. Going forward, we still have only mostly maintenance CapEx. We do have, however, another option on a vessel on time charter and, as we will look in more detail later in the presentation, that we are likely to exercise. Going on here, we look at our bank financing repayments and balloons. As previously discussed, we have already refinanced all the debt which was maturing in 2023.
We only have one facility maturing in 2024 with a balloon of around $22 million. That is also quite positive from our perspective. Although, of course, today, this is not a big concern for us as it was in the past, given the very strong markets we are experiencing. The daily repayments on the loans had been falling from 2019 to 2022. As a result of the recent refinancings, these increased in 2023, but should start then gradually falling again. Going on to the next page, the purchase option on the lease vessels. We exercised and sold the High Venture in 2021.
It was one of the oldest vessels in our fleet. This year we exercised and refinanced through new leasing transactions, the High Fidelity and the High Discovery. We have six other options on these vessels that can be exercised. We are most likely gradually going to be exercising them over the coming quarters and years as a way of deleveraging and reducing our breakeven and strengthening our company to be able to then act counter-cyclically at the right time. That is a potential use of funds going forward. Here we then look at the vessels which are time chartered in and on which we have purchase options. One, as previously mentioned, the High Venture was already exercised.
We have also the High Explorer, which has a purchase option in yen, and we have to exercise it by January next year. It is the price in yen is the same as for the High Venture, and so it is likely that we are going to be exercising this option in the coming months. The remaining four options on these vessels on time charter in are in the money, but they are at a significantly higher value relative to the High Venture and Explorer, so we are unlikely to exercise them anytime soon. Going on to the following page. Here we show our contract coverage. The blue line includes both the time charter contracts and the bareboat charter contracts.
The average rates on this coverage is moving up quite sharply over the coming quarters. It is around $25,000 for Q4 this year. It was only $15,500 in Q3. It rises to just over $28,000 for 2023. We have fixed recently some vessels at some very attractive rates, and that is why these average rates have been moving up fast. We might decide to take some more coverage. We are likely to take some more coverage at the current very attractive rates. We would like to reach a coverage of around 20%-30% at least for 2023 at the current high rates.
The percentage of our Eco fleet has been increasing over the years and this trend should continue over the coming years as we sell some of our older vessels in our fleet. Going on to the following page. This is a new slide that we didn't include in the past in our presentation, but we wanted to align ourselves with our peers which provide also an outlook on the earnings of the current quarter. Here we are showing, based on the fixed days, both relating to period contracts and to spot days already fixed, what is the blended rate achieved so far, which is $32,440.
This is composed by 46% of the available days in the quarter fixed through spot contracts at an average rate of $37,500, and the period rate contracts representing 20% of the available days at an average rate of $20,500. We have 65% of our days covered at this blended rate of $32,440, and 35% of our days in the quarter still open. Here, these are not indications of what we expect to earn on these free days, but we just made some assumptions.
Of course, you as analysts and investors are free to make your own assumptions given how the market is performing and what the outlook for the rest of the quarter is. I would say these are quite conservative assumptions. We look here at what our earnings would be if we earned $20,000 per day on average on the free days. There, blended earnings for the quarter would be $28,000, around $28,000. If we earned $25,000 per day on the open days, then our earnings for the quarter would be $30,000.
If we earned $30,000 per day on the free days, our blended earnings for the quarter would be $31,600, and that is higher than the blended rate we achieved in Q3. It doesn't look like a very high hurdle to overcome to earn $30,000 per day on the remaining open days, given so far we have achieved $37,500 on the spot days, and the market continues to be very strong. We're actually looking at the paper market, the expectation is for the market to strengthen further in the second half of November and in December this year. Going on to the following page, this slide is slightly modified relative to what we presented before.
We decided here to show also on the left in the bottom what are the potential earnings from the contracts which are already fixed in relation to Q4 that includes both the spot days already fixed and the time charter days already fixed. Assuming P&L break-even costs all inclusive of $15,000 per day, but excluding, of course, non-recurring items. That would imply that on these fixed days, we already have locked in $36 million in profit for Q4. Assuming the remaining days are employed at break even, this would be the profits that we would be earning in Q4.
For 2023, we did the same exercise, assuming the same P&L breakeven of $15,000 per day, and the locked-in profits therefrom the period contracts is $20 million. On the right-hand side, we show, given the sensitivity that we show on the upward part of the page of $1.1 million for every $1,000 per day change in the TCE equivalent earnings, how this would affect our overall earnings for Q4 and for 2023 and 2024.
We show if our earnings on the free days were $20,000 per day in Q4, our results, our recurring results would be $40 million. If our earnings on our free days were $25,000 per day, our overall recurring net results would be $46 million. If our earnings on our remaining free days were $30,000 per day, then our net earnings for the period would be $51 million. We do the same exercise also for 2023, and you can see here how the earnings would vary. Here we show the evolution of our daily operating costs and so, and of our G&A.
We are glad that we managed to keep under control the daily operating costs despite the inflationary environment that we are confronting. Unfortunately, I believe that is going to be more complicated to keep at the same level going next year, because we are likely, especially on the crews, to face some upward pressure in this respect. Ukrainian crews are important for our vessels and generally for the industry. Of course, there are some issues today finding enough Ukrainian seafarers, so recruiting Ukrainian seafarers. It was a market that was already tight, and so that is, of course, not helping.
On the right-hand side, we saw the G&A, where the evolution has been not as positive as on the daily operating costs. Of course, partly this is related to the greater traveling that is happening now. There's also some catch-up traveling for business purposes after the COVID period. There is also some accruals of benefits linked to the long-term incentive plan, which are taken into account this year, which are also contributing to the increase in G&A. Nonetheless, it is important to note that they remain below the 2018 figures.
Going on to the following page, we show the ratio between the net financial position and fleet market value, which not surprisingly has improved markedly since the end of last year. We are now at 42%. Of course, this is the result of the cash that significant cash we generated this year, as well as the increase in asset values. In the end of 2018, this figure was at 73%. This is a very big improvement. We are glad that we can count today on a very strong balance sheet, with $85 million in cash and cash equivalents at the end of the quarter. Here we look at the key P&L line item.
The profit for the quarter Q3 was $44 million, and over the nine months, it was $63 million. Excluding non-recurring items, the profit for Q3 was almost $46 million, and for the first nine months of the year, $68 million. Looking in greater detail at the daily results of our vessels, those employed on the spot market, as previously mentioned, earned on average just over $37,000 per day, which is more than three times more than what they earned in Q4 2021. They on the...
Given also the contracts that we had at an average rate of around $15,500, the blended rate for Q3 was $30,230, in Q3 and t he blended rate for the nine months was $22,400. I pass it over to Paolo for the market overview.
Thank you, Carlos. Now, of course, we had a strong upside from last year to today, not in earnings and as a consequence in the fleet value. We are still below the last cycle peak, but this doesn't mean that we are going to repeat ourselves in the same way. This is something has to be seen. The fundamental are very strong. Today, an MR is currently valued for a one-year period at $32,500, and an LR1 is valued at $42,500. By the way, we fixed two LR1s at $43,000. We even did better than these Clarksons assumptions.
Talking about the situation in Ukraine, as you very well know, starting December first, Russian crude will be sanctioned by E.U., and by February first, the products will be sanctioned. Already, the flow of the crude is going down, reducing due to the fact that the sanction works in a way that you have to discharge the Russian cargo before the first of December. Whatever is on the water today has to arrive to destination before the first of December. Which means that traders are already not taking position on the Russian oil. What is going to happen is that, of course, the Russian have to look for something like 1.5 million barrels per day of crude and 1 million barrels per day of products.
They have to look for new clients. It is, I would say, clear that the clients will be mostly China, India, and Turkey. If they manage to have enough fleet to move this oil, we doubt it. If the so-called dark fleet will be big enough to take care of the Russian trade, this is going to move around. As I said, we find it extremely unlikely. On the product side, now we have to see with the new president what's going to happen. Brazil struck a deal with Bolsonaro and Putin for a supply of diesel. Diesel is extremely important in Brazil, so they should receive this Russian diesel at a highly discounted price. The point is, has to be seen if Lula is going to continue this type of deal.
This to give you an idea how long and how far the Russian crude and the Russian product they have to navigate to get to a new market now that they lost Europe. Saying that, on the European side, as I said last time, Europe has to look for her own products from other sources. This is going to happen either Middle East, either China, or if there is any availability in the United States. The United States, as you know, are very short of diesel, especially in this moment. This also adds new ton-miles to the today equation, which as you can see, is very tight and is let's say for us, a very good market.
The sanctions are going certainly to tighten more the freight market, and we expect an increase out of this on the freight rates. How much has to be seen. There have been various calculations, but we prefer not to make numbers. COVID, page 23, is not anymore, excluding China, a problem. Thank God. Let's hope it stays this way. China is the only one who still does lockdown. In some ways, even a good thing, because if China was there buying crude and buying products today with the rest of the world, the cost of a barrel, as you can imagine, where it could have been. The demand for refining products. It recovered totally from the disaster of COVID-19. The demand is growing.
As far as global oil demand, we expect to go basically where we were before the COVID, so around 100 million barrels per day. The refinery runs in 2021 rose by 3.2 million barrels on average, and we expect another 1.3 million barrels of increase in refining capacity. The refined products inventory are still very low. The United States is facing a strong shortage of diesel on the East Coast. The stocks are something like 56% under, 56% of what they used to be as an average over the last 10 years. You can imagine how tight the market is over there.
Where we can see a strong recovery on the product side always is from jet fuel because people are traveling again. We have a recovery on the gasoline, but it's flattening out due to the price and the prices start denting the demand. Instead, on the jet fuel, we see a very strong potential coming in. We have more and more flights coming in in operation, so we can surge. We expect also a strong crude tanker market, which helps us a lot. It does help us for two elements. Number one, we have a number of swing ships like the LR2s that may move from crude to products.
If the crude is strong enough, they could well shift to crude and stay in crude, and this will be limiting even more the supply side on products. Number two, the VLs, they used to, in let's say a difficult moment, the newbuildings, they used to load full cargo. When I talk of full cargo, I'm talking 2 million barrels. Full cargo of diesel oil in the Far East, in China, Singapore, Korea, and carrying it to North Europe. But on their way to North Europe, they were stopping in West Africa, doing ship-to-ship operation. They were basically killing two markets for us. The West Africa market that used to be supplied by MRs from North Europe and the North Europe market itself.
Thank God, due to the fact that they are making a lot of money on the crude, they will stay out. It's another element of supply which should be out of our way. The long-term demand is there, healthy and resilient. I mean, the participation of the products to the seaborne, the share of the products of total seaborne trade is always increasing. Always on the long-term demand, you know this slide very well for those one who have been with us recently. The old refineries in Europe are still closing down and all the growth in refining capacity coming out between Middle East and Far East, principally from China. In the Far East, Australia and New Zealand, New Zealand closed the last refinery they had. And Australia already lost 50% of the refining capacity.
They are both supplied by Singapore and Korea. This trade is growing every day, every year. Shale oil will be on long term. Always talking about long-term demand, shale oil will be there. We have a majority today of private company drilling, so not subject to environmental pressures of shareholders or pressure from shareholders to be paid in dividends and not to spend in production because we're a private company, they can do what they want, and they are investing in production. We can expect, thanks to this, an increase of oil of shale oil production in the future. There are a number of elements, I would say more ruling elements that will limit our future supply.
We have two indexes which are extremely severe coming in in Europe next year, and they are both related to CO₂ emissions. As a consequence of these indexes, the old ships may either have to reduce their speed, and this is reducing supply, and/or even go to demolition because they are not going to be economical anymore. Even from the regulatory side in Europe, we have this element which of course, for those who have a younger fleet like we have, is more than positive. More than positive. When the fleet, due to the very low order book, is becoming older, big number of 57% is going to overtake the 15-year of age.
This is a moment where the ship is technically still very valid, but from a commercial point of view, the big oil companies and the big traders, they don't trade them anymore. They have to move to secondary trades with the second, say, second quality type of traders. 50% are over 20 years of age, and this is an element instead of thinking of scrapping your ship. The candidates going on and not being replaced by newbuildings, you see, we can expect the fleet growth, but we are going to see it in a few years, basically close to zero. The deliveries, as you can see, in the coming months are really non-existent.
I mean, I think that only the element of the indexes coming into force, the European indexes that I was saying before, can offset completely the newbuilding capacity coming into operation in these months. We do not think that we are going to see a rush to newbuildings for two elements. Number one, if you want a ship today, you are going to have it at the end of 2024, if not beginning 2025. You don't know what the market could be. It's too far away. Number two, it's going to be an extremely expensive ship, and you tend to refrain to put money on these numbers. Number three, with the technical limitation that we don't know what technology is going to be needed.
As you know, we are entering in this decarbonization zone, and you can easily make a mistake. This is key, and you will see it finally on page 37, the fleet is not growing. I mean, we expect a 0% growth. This is coming from Clarksons, but we are talking 0% is like saying zero. That said, I leave to Carlos for NAV. Thank you.
Thank you, Paolo. Yeah, this is the usual graph we show with our NAV evolution. Between June and September, there was a sharp increase, which reflects the results we achieved and also the increase in asset value. Our NAV increased from $420 million to around $610 million. It's almost a 50% increase. On a per share basis, it increased from $0.34 per share to $0.5 per share. Although our share price has performed very well also during the period, here we are showing our share price as at 30th of September, but since then it has traded up significantly. We are still trading at a very important discount to NAV.
Of course, this is an NAV which we expect to continue rising over the coming quarters. Maybe there is some upside, but maybe not as strong as we have seen in terms of increases in asset values. The cash we expect to generate in Q4 and in 2023 should drive the future increases in NAV. There's still potentially quite a lot of upside to our share price, we believe. I believe that covers the main presentation. I pass it over to you for the question and answer session.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. To ask a question, please click on the Q&A icon on the left side of your screen, and then press the Raise Your Hand button. Please do not mute your microphone locally, and when prompted, make sure you turn on your webcam in the pop-up window. If you are on the phone instead, please press star and 1 on your telephone. The first question is from Daniele Alibrandi of Stifel. Please go ahead.
Yes. Good afternoon, everybody. First of all, congrats for these strong results. I was suspecting one of the best quarter in your history, but when I look at the commentary you gave on Q4, I mean, I'm not that sure that that was Q3 anyway. My first question actually is a $1 million question. I really appreciate the comments you provided us on where we stand in terms of TC fixed rates and coverage in Q4. This was very, very helpful. Nevertheless, when it comes down to forecast these two parameters for the next year, this is a much more difficult exercise. You provided us the picture where we stand today on the slides.
I was trying to figure out where we could land at the end of next year. I know that this is a function of where the spot rates will be, which are the opportunities that you can take on securing these strong rates on the fixed side and so on. Maybe if you can elaborate a little bit on what's your best guess on this.
That's really a $1 million question. Or more than that, I would say. More than one. Yeah, well, I wish we knew, but I think we cannot help you much more than what we did by providing the sensitivity analysis and what are, you know, the earnings on the contracts that we already secured and given different scenarios, what the earnings could be for next year. You know, also taking into account, Daniele, that the time charter rates today are very high and, you know, they do reflect an expectation that the market is going to be very strong next year. One year rates, I'm talking about. An Eco MR is around $33,000 per day, and an Eco LR1 is around $43,000 per day.
That can help guide you in your forecast, I guess. We internally prefer to be a bit more prudent, but that doesn't mean that we, you know, we actually expect and hope. We are a bit superstitious, but we expect and hope to do better than the numbers we are providing when we do these simulations and say, "Okay, what will happen at $20,000 or $25,000 or $30,000 per day?" These are, of course, historically speaking, very good numbers. You know, as things stand today, we could actually do even better than that. It's. You know, if it ended up being $25,000 , it will still be a great year. I mean, it's yeah. It is.
Can we say, let's say two things, that first of all, at this level of spot rates, is that correct, that it still represent like 5% or for sure less than 10% of the total value of the cargo still at this rate? Maybe the spot has possibly some way to go up. Also, given that the TC are really attractive, maybe you will take advantage progressively of these high rates.
Yes. It is true. I mean, we did mention, you know, we are not in a hurry to cover our vessels with TC contracts. We will do it if we find the right opportunities. We feel that today, at least for periods of one year, the rates start to make sense. We have started taking coverage and the way we covered the two LR1s and Paolo mentioned that $43,000 per day. And we covered also one of the older vessels in our fleet, an MR2, for one year. And we are likely to take more coverage going forward and reach this 20%-30% level of coverage that I was referring to previously.
You know, we don't have any formal commitments to do. I mean, we will do it if we feel that it is the right thing to do. Currently, the numbers seem to make sense. We will keep reevaluating the situation constantly when making these decisions.
Okay. Thank you. The last one is that we all know that there are two key catalysts, basically. One in a month in December, the other one in February with the sanctions on Russian products in Europe kicking in. You perfectly explained to us what can happen. I'm really struggling to see maybe what can go wrong. Sorry for the question, but what do you think maybe the other flip of the coin, what can go wrong with the. Actually it is expected by all of us in terms of higher ton-mile demand.
What it can go wrong, I mean, in respect of the sanction, is this.
Yeah.
Look, in the short term, what can go wrong is the peace, if you want to. I mean, the fact that we lift the sanction itself and Russia goes back where it was, but even with Russia going back where it was and where it is today, because today Russia is exporting its product, we go back to where we are today. I wouldn't. It's a beautiful way to go around. Of course, if the conflict would be resolved, in the medium term, the world will be by far better. I mean, things will improve in our direction, consumption will go up for different reasons. The overall picture, to me at least, it doesn't look. I don't see the dark side of the coin.
I'm not exactly this moment. Maybe it's one of the few times in my life. Frankly, today, the way things are, I see it quite positively. Let's put it this way. Always to be proven.
Yeah. That takes into account, Daniele, that demand this year, oil demand, would have increased much more if this war hadn't occurred. I mean, this war has created economic mayhem. I mean, it was a lot of inflation, forced central banks to increase interest rates very fast and it's starting to affect demand. This could worsen potentially in the coming quarters. But if there were a peace agreement, we would expect then a much more benign economic scenario, as Paolo was saying. We might lose some ton-miles. By that I mean the distances sailed might shorten again. Maybe some inefficiencies would disappear.
The flip side, the positive flip side would be that consumption would and volumes transported would increase much faster. So it is not a given that it would be negative. Potentially, I would say if I were to think of what is the worst scenario that could happen is deep recession in the U.S. and Europe because of the monetary tightening coupled with the high commodity prices and China not reopening, and so Chinese GDP growth remaining depressed because of continuous COVID lockdowns. That and OPEC+ remaining very disciplined in cutting supply in the face of a non-spectacular growth in demand or a potential contraction in demand.
Today, the base case scenario is still for oil demand, even taking into account all these factors to increase next year. If the situation from a macroeconomic perspective were worse than currently anticipated by most analysts and we were to experience a contraction and if OPEC were to react to that by cutting oil supply, then potentially we could have an issue. Which, however, could in theory still be compensated by an increase in ton-miles because the effects of these sanctions still have to come into play, the full effect of these sanctions. So yeah. Even that scenario is not necessarily a bad scenario for us.
Yes, if there could be, let's say, a correction at a certain point, but we don't expect it to be a long-lasting correction because the supply side looks very good.
Thank you. Very, very explicative. Thanks.
The next question is from Massimo Bonisoli of Equita. Please go ahead.
Hello. Good afternoon. Thank you for the presentation, and congratulations for the results, as well from my side. I have two question. One is on the, let's say, rates. I understand you are taking some more coverage. But clearly the coverage rates are quite strong, so why not accelerating the coverage in your portfolio? And if you can give us some color on the willingness of the clients to, let's say, engage at such high rates for longer terms. If they are very willing or very reluctant right now, just to have an idea from the other side. The second question is on the, let's say, new vessel.
How long does it take from the day of the order to receive a new vessel on the market right now? I understood that there are some concern regarding the new technology, and that's something that we appreciate. Just to understand how quick a new vessel can arrive on the market.
Now, the reason why we didn't take more coverage because there was a very strong differential between the spot rates and what the charters were prepared to pay for period. As you rightly say how much the charters are reluctant or prepared to take certain rates in, but they were not at the beginning. This thing is changing. It's a work in progress, so it's not something that it happens tomorrow morning. Things are getting to maturity. As we see, as we saw in the case of two LR1 that we fixed for one year at $43,000 a day, as we see rates entering in certain, let's say, certain levels, we are willing to take them. We have in our mind anyhow a coverage for next year between 20% and 30%.
This is not the Bible in the sense. It will be always the market dictating what we are going to do. This is the ballpark where we want to arrive. As far as the traders and the oil companies, they are certainly more prepared to look at longer term today. They are even looking at one to three years. The three years is still very much discounted, so we wait a little bit on looking at such long thing. I have to say, we also would like to wait for February to see how in reality the sanction will work. Because what we said is what we expect, I mean, reality can be different, even if I doubt it. I mean, but today is really some.
It is a life that you really live every day, and every day is a different day. To take a strategic position that we want to take and we will take needs us some more maturity the way the market is going. Also because don't forget that we had this result, but on the first quarter of this year, we lost money. The speed how the market is recovering and the way the market is proposing itself, it really changes every day. We are trying to be prudent, which is always our sort of, this is our Bible. In the meantime, we know that we have to exploit the market the way it is today because it's unique.
As far as the second question, today, if you order an MR, you have, y ou're going to have a delivery in 2024, at earliest.
End of 2024.
Yes, end of 2024. What happened that the LNG, it moved in very heavily, and the containers moved in very heavily, and if you follow the rest of the shipping industry, you'll notice that. The yard, they fill up their capacity with mostly these two type of ships without leaving space to tankers. This is a good thing because it's going to restrain the supply for quite a while. As far as new technology, okay, you can read it on the papers. I mean, we are talking about many things. I still suspect that we are still going on fuels, maybe blended with biofuels for a while before we really do a big change.
Because not only the technology is not totally there, but it's the supply network which is not totally there. Because we can even have an engine which goes on ammonia. If I don't see and I don't find the ammonia, I cannot refuel my ship. It's the old thing which has to go to maturity, and this is going to take years, maybe more years than I think. I hope I gave a good answer.
Very good. Thank you very much.
The next question is from Matteo Bonizzoni of Kepler. Please go ahead.
Thank you. Good afternoon. I have two questions. The first one is related on the purchase option which you have on your lease vessel. You show that you have still six purchase options in the money. The question is just to understand what is the maximum theoretical cash out to exercise this option and how this cash out compares with the IFRS liabilities, just to assess the net balance on your total net financial position in case you exercise. The second question is as regard your capital allocation. Clearly, you have dramatically improved your loan-to-value to 42%.
It was, let's say, about 60% only a few quarters ago, so very sharp improvement. What are you thinking about capital allocation, including dividends, but above all, including a potential return to a more aggressive CapEx mode or fleet expansion or other decisions of this kind? Thanks.
Yeah. Thank you. So regarding the purchase options, it depends, of course, when we exercise these options. I would say that most of them today are between the purchase option prices between $22 million and $19 million. So that is, let's say, the residual leasing liability that has to be settled to exercise these options. And of course, this declines over time. We can, as a very back-of-the-envelope, you can assume between 120 and 125, if they were all exercised today, to exercise these six remaining options and keep the vessels debt-free. So that is just a rough approximation of the deleveraging that could be achieved in this respect.
The purchase option on the High Explorer, it's in yen, and today's yen values, it's around just below $30 million. In terms of dividends, our expectation is that the dividend, of course, this is a decision that has to be taken by the board and then by the shareholders, but our expectation is that the dividend will be distributed next year out of the 2022 results. It might not be you know a very big payout ratio this year, but it is you know a signal and that. The idea is that the payout ratio will increase over time as we deleverage our balance sheet.
What we will look at is not necessarily the ratio between the net financial position and the fleet market value at a certain point in time, but the ratio between the net financial position and the average market value of our vessels over the cycle. We will look over the last 10 years at these averages and look at this indebtedness ratio when deciding what portion of our profits to pay out as dividends. I don't know if this answered the question. In terms of other investments, we don't have any plans currently to order newbuildings for the reasons Paolo mentioned.
I think we are not the only ones who are thinking that way, and that is why only 24 vessels were ordered this year in the MR, MR1, MR2, and LR1 segments, which is a very low number. You know, a new vessel today would cost you around $44-$45 million delivered, and that is not including the financing cost between the date you order the vessel and the date the vessel is delivered to you. In two years' time, you might have missed a good portion of this strong market. Is that a good idea? You remain with an expensive vessel in your fleet.
I think that it doesn't look very appealing today to order newbuildings, and that is the reason why very few are being ordered. I hope that answered your question.
As a reminder, if you wish to register for a question, please press the Q&A tab on the left bar and raise your hand or press star and 1 on your telephone. Gentlemen, there are no more questions registered at this time. I'll turn the call back to you for any closing remarks.
Okay, gentlemen. Thank you very much for being with us. Of course, we are extremely satisfied from the results, and we hope in the future to keep going the way we did now. Thank you to be here and, I hope, I mean, we'll talk for at the next call. Thank you. Bye-bye.