Good afternoon. This is the Chorus Call operator. Welcome, and thank you for joining the d'Amico International Shipping First Quarter 2024 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be a question-and-answer 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 zero on your telephone. At this time, I would like to turn the conference over to Mr. Carlos Balestra di Mottola, CEO. Please go ahead, sir.
Thank you, and good afternoon to everyone. Thank you for attending our presentation today. As usual, we will skip the executive summary, and we will start with the fleet overview. This is a snapshot of our fleet as of 31st of March 2024. We controlled 35 vessels, mostly MRs, 23, and an equal presence of six vessels in each of the LR1 and Handysize segments. Modern fleet with an average age of 8.8 years relative to an industry average of 13.4 for MRs and 14.8 for LR1s. 80% of the controlled fleet is Eco design. The fleet was built mostly through an important newbuilding program with vessels delivered to us between 2014 and 2019, 22 vessels. Recently, we ordered another four vessels, which are going to be delivered to us starting in the second half of 2027.
Going on to the following slide, we show here the important investments that we made since 2012. We put pause during a few years, and then we have started reinvesting through the exercise of some time charter re-options and an opportunity that was presented to us where we acquired the 50% stake of a JV partner in a vehicle, Glenda International Shipping. Most recently, through the purchase of a young second-hand vessel, $43.5 million, and the 4 LR1s that we ordered, which would entail a total investment of over $220 million, of which $43 million this year, and the rest mostly in 2027 with a small part at the end of 2026. I pass it now over to Federico.
Thank you, Carlos. This is the situation of our debt repayments. Very stable situation. We have no refinancing need for 2024 and 2025. We are repaying approximately $27 million a year from 2024 to 2026. As you can see, in 2024, and this is going to happen in Q2, we're going to repay also $6.5 million, which is the debt related to Glenda Melanie, which is the oldest vessel of our fleet that we recently announced the sale of, and we're actually going to deliver the vessel to the buyers between this week and next week. On the right side of the slide, you see our daily bank loan repayment on our own vessels. This has been falling down quite substantially. It was $6,147 in 2019, went down to $3,600 a day in 2023, and we're expecting it to be even lower than $3,000 a day in 2024.
This is obviously the result of our large deleveraging plan that we implemented in the last years. And also, right now, we have some of the vessels on which we exercise our purchase options that we previously sold and leased back that are currently free of debt. So obviously, this helps this ratio to fall even lower. Carlos, on the purchase options?
Yeah, on the purchase options, we have been very active exercising these options in the last few years. We have three remaining. These are contracts where we have purchase obligations at the end. So they are basically alternative financing arrangements for us. We have exercised these mostly to lower our cost of financing. The Cielo di Houston, we could have exercised this year with deciding not to because the implicit cost of financing of doing so later in September next year is actually very low. But we will be exercising the Fidelity and Discovery, one in September 2024 and the other one in September 2025. The Cielo di Houston, we will also be exercising September 2025, which is basically the purchase obligation date for that vessel.
On the TC-in vessels, we exercised already the options for the Adventure and the Explorer, but we still have four vessels on which we have purchase options that are well in the money and that we plan to exercise in the coming quarters, two possibly this year and two next year. They are all high-quality vessels built at good Japanese shipyards. They are relatively young Eco Design vessels. We are looking forward to add these to our fleet for a long period of time. If we were not to exercise these options, we would eventually lose control of these vessels. These are the last purchase option exercise dates here. Going on to the following slide, Federico.
Yeah. So this is how we show here our coverage. We had 41% of our days in Q1 2024 covered at an average daily rate of $28,123. Q2 2024 is going to be more or less at the same level with 40% coverage at an average daily rate of slightly less than $28,000 a day. Then our coverage is expected to go slightly down in Q3 2024 at 33% at an average daily rate of $27,951. And in Q4 2024, with 22% coverage, an average daily rate of $27,240. So overall, in fiscal year 2024, we're expecting to have coverage of 34% at an average daily rate of $27,900 a day. So an extremely profitable rate for us. It's interesting to see also the graph below.
This goes back a little bit to what Carlos mentioned before, the large investment plan of the last years, and also the fact that we delivered 2 kind of old time charter vessels between Q1 and Q2. We're also going to sell the Glenda Melanie in the course of this month. This ratio was 38% in Q1 2018, and we are expecting to go up to 85% of our total fleet by the end of the current year. Here, as always, we give a little bit of an overview on how we are performing so far in the second quarter of the year. As I mentioned before, we already fixed 40% of our days at $27,932 a day in terms of time charter coverage. Plus, we already fixed 31% of our spot days at $39,441.
This is an extremely profitable rate and even higher than what we have achieved in Q1. Overall, we fixed more than 70% of our Q2 days, 71% of our Q2 days, to be exact, at an average blended TCE. The sum of the fixed of the spot side and the TC side of almost $33,000 a day. We show on the right side what our blended TCE would be should we make $27,500 a day on our remaining 3 days for the quarter or $30,000 a day on our remaining 3 days for the quarter or $32,500 a day on the remaining 3 days for the quarter. This figure could be between, as you can see, $31,400 a day up to probably $33,000 a day of blended average TCE. Here, we show at the top the estimated fleet evolution from 2024 to 2026.
So we're expecting to manage an average of 34.2 vessels in 2024. This figure should be slightly lower in 2025 to 33 vessels and then 32 vessels in 2026. Then the other graph at the top shows, as usual, our sensitivity for each $1,000 a day of higher spot rate. So for each $1,000 a day of higher or lower spot rates, we have a sensitivity of $5.3 million for 2024 based on what we've already fixed right now. This obviously goes higher in 2025 and 2026 since we have very little coverage for those years right now, and it's to the tune of $10.3 million or $10.7 million for 2026. At the bottom, we show, as usual, what our estimated net result for 2024 would be should we run the rest of the year at a break-even level, at a level of around $15,000 a day.
So this would entail a net result already locked in, if you want, of almost $119 million for 2024. As usual, we show also a sensitivity on this figure here. So in case the free days, the spot rate for the remaining three days of the year were $20,000 a day, we would make $143 million of net profit this year. In case this figure were $25,000 a day, we would make $169 million for the year. In case it would be in case it were $30,000 a day, we would make $195 million for the year. In terms of costs, we discussed this several times in 2023. As for many other sectors, we had an impact, obviously, of the inflation going on. We had some inflationary pressures, particularly on crew costs and also on insurance costs.
On insurance, in particular, this is also the reflection of higher vessel values, which obviously pay a higher premium. However, this pressure is kind of taming this year. We see these costs stabilizing. The increase in 2024 relative to Q1 2023 is not very significant. We went from $7,700 a day to $7,800 a day. So we believe this is under control. In terms of G&A costs, our G&A for the first quarter of the year were $5.2 million, $1 million higher than the same quarter of last year. This is mainly due to the variable component of our personnel costs, which is really the result of a very profitable year that we achieved in 2023 and that we're expecting to achieve also in 2024 from what I mentioned before. In terms of net financial position, very strong financial structure for this.
We have the ratio between our net financial position and our fleet market value is of only 11.5% at the end of the quarter versus 18% at the end of 2023. Net financial position was $152.5 million at the end of the first quarter of the year compared to $224 million at the end of the previous year. Cash and cash equivalent went from $111 million at the end of 2023 up to $170.1 million at the end of March of this year. What is interesting also to show, to mention, is that this ratio that is very significant for us of 11.5%, our financial leverage, was 73% at the end of 2018. So this is obviously the result of our deleveraging plan that we also mentioned before.
Key highlights on our income statement: very profitable quarter, $56.3 million for the first 3 months of the year, even better than last year. We made $54 million in the first quarter of 2023. Excluding some non-recurring items, our net result would have been of $56.7 million in the first quarter of this year versus $56.5 million in the same quarter of last year. Strong EBITDA also, $76 million. Strong operating cash flow, which was almost $77 million in Q1 2024. This is actually lower than what we generated in Q1 2023 when we made an operating cash flow of $99.2 million. But this is just the result of a timing effect in our working capital, which was very positive in Q1 2023 because it was very negative in Q4 2022, so in 2022. So it's really a timing effect. Moving to the next slides, our KPIs for the quarter.
We manage an average of 35.5 vessels in Q1 2024, slightly lower than the 36 ships that we manage in Q1 2023. Our fleet contract coverage, we saw this before, was 41.3% in Q1 2024, higher than the 25.2% of the same quarter of last year. Our daily cover rate was $28,123 per day, way higher than the $26,400 a day of Q1 2023. In particular, our spot daily rate was $38,200 a day in Q1 2024 compared to $36,652 in Q1 2023. Overall, our blended TCE was above $34,000, which is the last figure that you see there in the table, was above $34,000 a day, very much in line with the same quarter of last year despite the higher spot rate. This is only due to the mix between the different mix between spot and time charter coverage. And I leave it to Carlos for the market overview.
Yeah. Thank you, Federico. So here we show the evolution of time charter rates, freight rates, and vessel prices over quite a long time horizon. We see that on the TC rates and spot rates, we are quite close today to the all-time highs. TC rates, in particular, one-year TC rate for an MR vessel is currently of around $33,000 per day. The highest we have seen in this last cycle was around December 2022 at $35,000 per day. So we are very close to that level. And also for the Eco LR1 vessels, the rate, the one-year TC rate is currently very high, around $42,500. And vessel values have continued moving up throughout the course of the first quarter. They are now. They're still below the last supercycle peak, although especially in terms of new building prices, we are starting to get close to where we stood then.
We are now 7% below. 5- and 10-year-old vessels instead are still lagging a bit behind, 16% below the last supercycle peak, which was a long time ago, around 2007, 2008. If we look at where freight rates are today relative to where they were in 2007, 2008, TC rates, freights, we are, however, at a higher level today. So that seems to indicate there is more room for vessel values to potentially continue moving up. And why do we have such a strong market? Well, there are a number of structural factors which have been playing out over a number of years, and that should continue positively affecting the market going forward.
But there are also some more exogenous factors which we have benefited from and which we did not anticipate occurring, such as the effects of the war in Ukraine, which has been supporting the market since the beginning of 2022 and which, since February 2023, caused a major change in trade flows for Russian refined product exports, which have hovered at around the same level as before the war started, around 2.5 million barrels per day, but whose destination has changed dramatically while around 50% of their products used to be exported to Europe and the UK, to the EU and the UK. Now, only a small amount are exported to EU countries, mostly landlocked countries, which buy these through pipelines and don't have alternatives. And with the remainder, exported to much more distant locations, Latin America, Middle East, and Asia in particular.
Some sales locally go to North Africa or Turkey. From Turkey, it is then re-exported. They have their own refining industry, so they are basically swapping Russian products for their products. But it does increase the overall amount of refined products traded. And also, the products which are going to North Africa are mostly then being re-exported from that to other locations. So very inefficient. And of course, Europe, which used to source a lot of its products from Russia, now is buying more from the U.S., from the Middle East, and Asia. So big increase in this has led to a big increase in ton-mile demand for refined product tankers. More recently, since the end of last year, we have also witnessed a new trade disruption linked to the Houthis' attacks on vessels transiting through the Bab-el-Mandeb Strait.
This has always been an important passageway for product tankers, but it's a important increase after the onset of the war in Ukraine. As we see here in January 2022, 37.5 million barrels crossed Suez. But this figure then rapidly rose after the war, started to 70-80 million barrels per day. And since the onset of these attacks, it collapsed to 19 million barrels per day. So what is flowing today through Suez is mostly linked to Russian and Chinese interests, which are not being targeted by the Houthis, with most other shipowners avoiding crossing, including ourselves, of course, through Suez. The alternative of crossing Suez is sailing through Cape of Good Hope. And this, of course, is a much longer route. How much longer depends on which is the loading port and the discharge port.
So here we have shown, importantly, the most important routes sailing through Suez and how they were affected in terms of sailing dates and percentage-wise by having to sail through these longer routes. So, for example, Sikka to Amsterdam, Rotterdam, sailing days increased from 23 to 38 days. So it's a 15-day increase, which is equivalent to a 65% increase. So it's a very, very significant increase. And how has this impacted the market? Well, of course, it did close some of the arbitrages, which were open when vessels could sail through Suez because there are higher costs entailed in going the longer route. So overall volume sailing on these routes have fallen to some extent. But nonetheless, it did have a positive impact on the market. The maximum potential impact if volumes had not been impacted would have been between 5%-7% actual impact.
This is our own estimate here. It's probably closer to 2%, which is still very significant given we were already in a very tight market before this additional disruption started. Panama Canal is a less important passageway for product tankers than Suez is, but is also quite an important disruption for our vessels, mainly because they trade tramp and they cannot book crossings in advance. So they do tend to end up at the end of the queue, which means that some of product tankers decided to sail the longer way through Magellan, so adding ton miles, but also that some trades, which would have happened typically from the U.S. Gulf to the west coast of the Americas, both South and North America, through Panama instead, were replaced by volumes imported into the west coast of Americas from Asia over much longer distances.
So once again, an increase in ton miles. This problem was linked; this reduction in permitted crossings was linked to the low water levels in the Gatun Lake, which was linked to the El Niño effect last year. We are now moving into La Niña and also into the rainy season, which starts in around April, May in Panama, and goes until October, November. So water levels in the Gatun Lake are expected to rise, and this problem is expected to alleviate short term. Longer term, however, we are likely to be confronted with other restrictions in crossings through Panama because there is a structural problem which needs to be solved and would require a new lake to be built. And that requires a number of years to be done.
So it is likely that this problem is not going to be as important short term, but it is likely to be a recurring problem we will encounter in the future. Moving on to the more structural factors supporting the market, oil demand has been growing very fast. Last year, still recovering from COVID and in particular benefiting from the reopening of the Chinese economy with an important growth of 2.3 million barrels per day. In 2024, the expected growth is lower but still robust, 1.2 million barrels per day in oil demand growth, with an increase in refined volumes of around 1 million barrels per day. Already a very tight market where, as we will see later when we look at the supply picture, vessel supply is growing at historical lows.
As we saw from the slides presented by Federico, our results in Q1 and in Q2 so far have been very strong on the spot market, that despite the fact that March and April tend to be seasonally very low periods for us because they tend to coincide with peak refinery maintenances worldwide and therefore with very low refined volumes, as we see here in the graph on the right-hand side. Refined volumes are expected to pick up during the course during the rest of Q2 and into Q3, reaching a peak probably around August, as happened last year where the highest volumes, yearly volume, happened in August. We are already in a strong market, so potentially the market could get even stronger as we move into Q3.
On the supply side, not spectacular growth in supply expected this year because of the continuing OPEC cuts and also slightly lower output from Russia, but more than compensated by higher output coming out, especially from the U.S., Brazil, Guyana, and Canada. The good thing is that these additional volumes are most likely going to be imported by Asian countries and in particular China, contributing to ton-mile demand for crude tankers. We expect, especially because of very low, very limited supply growth for crude tankers, a very strong and improving market in 2024 and 2025, which should also support the product tanker market because of the linkages between the two sectors, as we will see later, which occurs mostly through the LR2 vessels. Refined product stocks are, again, well below the five-year averages.
This also could be a supporting factor for the markets, as in some locations, these stocks could reach critically low levels and then will have to be replenished, leading to an additional demand for seaborne transportation, which exceeds that of which we would normally have if it were only linked to the consumption growth. Going on to the following slide, refinery margins are very strong. There has been quite a lot of volatility if we look at individual products. Most recently, we have seen a weakening in refining margins for diesel and jet fuel, but an important strengthening in margins for gasoline since November last year, with fuel oil margins which stay at quite historically attractive levels. Looking at the contributors to demand growth next year, whilst in 2023, most of the growth was linked to an increasing consumption of jet fuel as the Chinese economy reopened.
We see on the left-hand side that the number of commercial flights are well above where they were in 2019 already. This year, most products are contributing more or less evenly to the growth in demand, with maybe the star product being naphtha due to the opening of these new petrochemical plants in China, but also important contributions coming from gasoline, fuel oil, and jet fuel. Here we look at the crude tanker space because of these linkages we were referring to before. Here, the order book has increased since the low reached at the end of 2023, but it's still at very low levels, 5.9%. Freight rates are already at very attractive levels, but we expect them to strengthen further in the coming years. It's also quite important to note that 62% of the LR2s are trading clean right now.
This is quite a high percentage. Going back to January 2020, it was only higher in January 2023 at 64%, but it was as low as 54%, for example, in July 2020. So there's a lot of scope for LR2s to move into dirty trades going forward if crude tanker markets, as we expect, are strong, providing further support for the clean products trade. We can skip this slide. On this slide here, we look at the refining landscape. This is another structural factor which has been playing out over a number of years. We have seen a lot of refinery closures in Oceania, in Europe, and in the east coast of the US.
Over the last few years, this was accelerated during the COVID pandemic, but is expected to continue going forward as these refineries, older refineries, lose market share to the new refineries, which are being built in Asia and the Middle East. We saw last year quite a big increase in refinery capacity in the Middle East. It was, of course, a ramp-up throughout the year. We are going to be benefiting from this additional capacity mostly this year. We see also an important increase in refinery capacity in China in the coming years. A lot of that also likely to be export-driven. We also see here Africa, which is an important contributor this year. The Dangote Refinery in Nigeria is already up and running. It's going to be, when it's at capacity, potentially producing up to 650,000 barrels per day.
It will dampen demand for imports into Nigeria, but it will also lead to more exports out of Nigeria. Often, refineries are not able to produce exactly what is needed for the domestic market. Therefore, we expect the same to happen in the case of Dangote. They are probably going to have surpluses of certain products and scarcity in other products as well. There's still going to be some import activity, but also some export activity. It's uncertain whether this is going to be positive or negative for the market. Time will tell. Going back to the U.S. and to the crude oil market, we see how resilient oil output out of the U.S. has been despite flat rig counts since around the middle of last year.
The high oil price re-environment we are in now should support an increase in rig counts going forward, which should further stimulate U.S. production. And then moving on to the supply side, there are several factors which should be stimulating demolitions going forward. One of them is the very high scrap steel prices we are seeing currently. Of course, in the very strong environment, freight environment we are in, demolitions have been minimal. But they are an important safety buffer we have because the fleet, as we will see in the following slides, is aging quite rapidly. And if for some reason market were to correct, this could be an important rebalancing factor which could then allow us to recover and to see stronger markets quite fast. There are also regulatory pressures which should penalize older vessels, more polluting vessels, which should encourage demolition of all that tonnage.
As we see here, we have, as at the end of March, 12.1% of the fleet, which was more than 20 years of age, whilst the order book was at the same date, was at 8.9%. So this is an important increase from 3.5% at the end of 2022. But if you look at the delta between the vessels, which are more than 20, and the order book, it was at 3.7% at the time. Now it's at 3.2%. So it's actually not a big increase in this or a big decrease in this delta. And the potential for demolitions will keep rising in the coming years. By the end of 2025, we anticipate around 60% of the fleet will have more than 20 years, and almost 56% will have more than 15 years.
This other line here is important because as vessels cross the 15 years of age, they are limited commercially. They cannot call all terminals. As they cross the 20 years of age threshold, then they face even tougher limitations, and they tend to start operating in niche markets. They also are less productive as they get older. They have to stop after 15 years of age, every 2.5 years for special surveys, rather than every 5 years. And of course, they also usually encounter more breakdowns and more off-hires. So fleet productivity should decrease in the coming years because of this aging, rapidly aging fleet, which should provide further support for the market. At the bottom here, we see vessels which are reaching the 25 years of age threshold, where most likely they are going to get demolished.
Rarely do they say that they operate beyond this age only in very strong markets. So we see that, for example, already in 2027, 2.2% of the vessels currently reaching 25 years of age would represent 2.2% of the current trading fleet. And by 2029, this figure goes up to 7% and then 11% by 2033. So it is unlikely that the yards, given the current production capacity, are going to be able to deliver enough vessels to compensate for the likely demolitions that we are going to be witnessing from 2028 onwards, which should be very supported for the markets in the medium term. Here we see how demolitions have collapsed because of the strong markets, creating room for pent-up demolitions going forward.
Here we see how there were a lot of vessels ordered in 2023, but for the reasons we mentioned just now, we don't see this as an issue. One additional factor we didn't refer to is the fact that vessels ordered today are for delivery, in most cases, in 2027. Very few slots still available for delivery in 2026. So the current order book, which is rather low by historical standards... If we look where we were at the end of 2027, the ratio was at 60%, is going to be delivered over a number of years. And therefore, that should also avoid any oversupply issues. In our case, we just ordered now 4 LR1s, and we had to accept deliveries at the end of 2027. So I think that's quite indicative of how spread out these deliveries are going to be going forward.
Here you see the anticipated fleet growth, which is. It's a historical low this year of less than 1% and of a slightly higher next year, where we anticipated a small increase in demolitions, which remain at historically low levels. So very good supply picture also. Our NAV at the end of March, in absolute numbers, was at one point almost $1.1 billion. Translated on a per-share basis, it equates to $9.1 per share, which, as at the end of March, was equivalent to a 24%. We were trading at a 24% discount to NAV. The share price has traded up since then, but of course, also the NAV, which we don't measure that regularly, but has, I would expect, moved up because of the strong cash generation since the end of the first quarter. Vessel values held up since then.
Possibly, they actually even increased slightly. Finally, use of funds. Here we show the use of funds up to the end of 2027. We show what we have already committed to here. For example, the secondhand vessel we acquired for $43.5 million. The investments associated with the four LR1s ordered, which this year will amount to $43 million, with most of the investments for these vessels occurring in 2026 and, in particular, in 2027 at delivery.
Instead, the planned investments for which we are still not committed for the exercise of the purchase options on the TC-in and the bareboat charter-in vessels in 2024 and 2025, as per our current plans, for a total investment of $471 million during the period, which is quite a substantial figure, but one which we don't foresee any problems managing because of our current, very strong balance sheet and the current, very strong cash generation, as well as because of some vessel disposals, which will be generating some cash for us.
The Glenda Melanie that we already sold, as Federico mentioned, which was the oldest vessel in our fleet, a 2010-built vessel, as well as 3 2011-built vessels, which we are most likely going to be selling in the coming 2-3 years and replacing them with the LR1s that are going to be coming in. In terms of shareholder returns, we have been increasing them over the course of the last years, and we plan to continue doing so now that we have achieved most of our deleveraging objectives. Although we don't have an explicit dividend policy, as we have stated several times in the past, that as we delivered our balance sheet, we intended to distribute a higher proportion of our profits.
So if this year we do as well as last year, which came in the beginning of the year, we think there are good chances we could achieve this, then we are likely to be distributing more dividends out of these 2024 results than we distributed in 2022. So I believe that is it. So I pass it over to the Q&A section, please.
Thank you. This is the Chorus Call Conference Operator. We will now begin the question-and-answer session. To enter the queue for questions, 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 one on your keypad. The first question is from Matteo Bonizzoni of Kepler. Please go ahead.
Thank you. Thank you, everybody, and good afternoon. It was a very comprehensive presentation, so we have just two detailed questions. The first one is as regards capital allocation. So since the 2023 conference call, which was only two months ago, you have placed this order for four new LR1s, so more than $220 million. The question is, you are done for now, or should you expect potentially more decisions of new buildings for the next weeks or months? And in relation to that, you have already commented at the end of the presentation that the dividend this year should not be lower than the last year. So it was just to check that what is the trade-off between potential new CapEx and dividend? I think there is room for both, given the continuation of strong rates, but just to check.
The second question, which is just a detail on your P&L and particularly cost, I was seeing that your operating costs over the last few quarters are moving sideways in a range of $23-$24 million per quarter. G&A costs probably could have some seasonality in the sense that Q4 last year was much higher than Q1 this year. So the question is, what should you expect more or less in terms of evolution of your operating costs and G&A costs, including variable remuneration, for 2024? Thanks.
Okay. Thanks, Matteo. So I'll try to answer the first two questions. I'll leave the third question to Federico. No, in terms of investments, our plans currently are really to keep a pretty stable fleet.
The new buildings that will be coming in are going to be replacing some older secondhand tonnage that I referred to previously that we should be selling. However, let's say our fleet composition should improve, hopefully for the better, in the coming years. We should have, by the end of 2027, only owned vessels. We should have almost exclusively, maybe with the exception of two vessels, eco-vessels. We should have a higher proportion of LR1 vessels in our fleet.
So that's where the direction we are moving in, pretty much keeping a stable fleet relative to where we are today, but a more modern fleet and a more competitive fleet, hopefully a more profitable fleet going forward because of higher potential earnings, because of a higher proportion of eco-vessels, but also because of lower costs, as we will not have the time chartering vessels and the Bareboat Charter-In vessels, which typically had higher break-evens for us. And in terms of dividend policy, no, you are correct. If in 2024 our results are as strong as they were in 2023, our expectation is that there will be room to distribute more dividends than we distributed in 2023, in addition to being able to pursue these investments we referred to just now.
There's probably not much room now for additional buybacks, which is a shame since we see a lot of value in our shares too. But we don't want to further reduce liquidity of our shares, given the controlling shareholder has already a very important stake in the company. I pass it over to Federico for the other question.
Yeah, in terms of other direct operating costs, we're currently not seeing huge increases relative to the trend of Q1 of this year. Probably overall in the year, we should tend to something similar to what we achieved in fiscal year 2023. In terms of G&A, it's what obviously works on an accrual basis. We obviously accrue quarter by quarter also the variable component of our personnel costs.
What happened last year, I guess you were referring to different figures in terms of G&As from one quarter to the other. I think there was a kind of catch-up in terms of these accruals, which we increased after Q1. So Q1 G&As, we presented slightly lower results, and then we increased these G&As in the following quarters. I would say that in 2024, probably we should expect, I'd say, something close to what we had in Q1, what we had in Q1 2024.
Thank you.
The next question.
Something more stable, probably, relative to last year.
Sorry. The next question is from Daniele Alibrandi of Stifel. Please go ahead.
Yes. Good afternoon. Thanks for taking my questions. So the first one, if you can please elaborate a little bit more on the choice of expanding your exposure to LR1 rather than MR with the new building decisions from a strategic point of view, which are the reasoning behind this choice. First question. Second question. I was wondering about your coverage strategy going forward, especially going into 2025. Today is rather low, 13%. Historically, the guidance was 40%-60%, so a midpoint of 50% in the last couple of years. It has clearly decreased due to strong underlying market. What should we expect, let's say, going forward?
And the last one, just a follow-up on your commentary on the seasonality Q2 versus Q3. The spot rate was really strong in Q2, despite the, let's say, the low seasonal environment. I was thinking about Q3, if Ceteris Paribus, actually, we could see even an improvement or.
Sorry, we cannot speak to this last part, Daniele.
Yeah. Can you hear me? Can you hear me now?
Yeah. The question was a bit lower volume, if you can.
Okay. No, the last question was around your seasonality. Before, you mentioned that Q2 is a seasonally lower quarter, but you actually printed a strong spot rate so far. So what should we expect in Q3, possibly even better market conditions? Thank you.
Okay. Thanks. All right. So on the LR1 versus MR, look, I mean, the MR vessels are great. They still represent the large majority of our fleet still. But we have seen, and we are not surprised about this, that the LR1s, especially in strong markets like the ones that we are experiencing today, they tend to outperform. I mean, they provide economies of scale.
Their operating costs are not too dissimilar to those of MRs. But of course, they can carry much more cargo, right? So their TC equivalent earnings can potentially be much higher. The voyage costs, the fuel cost per unit transported is also much lower. And in addition to that, they are more competitive over longer distances. And this is a trend that we have been seeing where ton-miles have been rising, average sailing distances have been increasing, so increasing the attractiveness of these larger vessels, the LR1s. Another good reason why we ordered the LR1s is because of the very attractive fleet age profile. If you look, there is 15.4% of the LR1 fleet currently trading has more than 20 years of age. But even more, I think, important here is that 62.6% is more than 15 years of age.
If you look at MRs, for example, MR2s, it's around 42%, which is more than 15 years of age. So there are very few LR1s, modern Eco-LR1s today in the market, very few LR1s were delivered over the last few years. There's really a scarcity of quality vessels in this particular segment. That is probably the reasons why we were able to achieve these very good results on the LR1 vessels we have on the water and why we decided to focus on this particular segment for the new building orders. In terms of coverage strategy, if we go back on the presentation, we have very good coverage still for Q2 this year. But this then falls quite a bit going forward, also already in the course of this year. So let me just to give you more precise figures.
So we go down to 22% coverage already by Q4 this year and then 30% coverage next year. We are currently not discussing. There are a few opportunities out there. We have interested parties in taking vessels for longer-term business from us. So some opportunities might materialize. There's not a big push at this very moment to cover a high portion of our fleet. But we will play it by year as opportunities arise. And of course, it is likely that as we move forward in the year, the percentage of our fleet which is covered for Q3 and Q4, in particular for 2025, will increase in the coming quarter. So as existing contracts terminate, they will be renewed. And there's also today the opportunity to take longer-term coverage at quite attractive rates. So this is also longer-term, I mean, even three-years coverage.
So this is something that we are also looking at. Of course, it is a less liquid market. The longer the coverage, the less deals there are out there. But if the right opportunities arise, we might decide to cover one or two vessels for longer periods. And finally, on the seasonality, yes, it is true that we are quite surprised by the strength of Q2 so far. Q2 tends not to be a particularly strong quarter because of these refinery outages. And as we move into the second half of Q2 and into Q3, with refined volumes ramping up, if these disruptions that we are currently benefiting from persist, we could potentially witness even stronger markets. Of course, there is a lot of volatility. Until a few days ago, for example, the markets west of Suez were quite weak. They were very strong east of Suez.
Over the last few days, we have seen markets west of Suez strengthen also, with markets east of Suez remaining strong. And so average spot rates have risen. And so we are quite positive on the outlook for 2024, generally. I mean, of course, the Suez situation is impacting the market positively. We don't know how long that will last. Hopefully, a solution can be found for the conflict between Israel and Hamas fast. And that might entail a normalization of the situation in Suez, which would be, in theory, bad for us. But we expect the markets to remain very strong. We will probably not be earning anymore $38,000, $37,000, $39,000 on the spot market. But we would still probably be averaging more than $30,000.
I mean, if we look at despite the volatility we saw in rates last year, which was quite pronounced, when you look at the averages that we achieved on the spot markets from Q2 onwards, there's actually quite a lot of stability around the 31,000 level. So possibly, if the Suez conflict were to terminate, we would go back to similar levels that we witnessed on the spot market last year.
Thank you very much.
The next question is from Massimo Bonisoli of Equita. Please go ahead.
Good afternoon, Carlos and Federico. Thank you for the presentation. A couple of follow-ups from my side. One, regarding the spot rates. At the end of April and beginning of May, spot rates were slightly lower than the Q1 average, as we discussed previously. Can you help us in understanding the drivers behind the recent decline?
Understand the short-term market drivers are quite volatile, so maybe they are not so crystal clear. Are they relative to the lower diesel crack or maybe lower refinery utilization, if you can help us on this issue? The second question on the new LR1 vessels you just recently ordered. You previously stated the reference break-even rate for the existing fleet at more or less $15,000 per day. What would be the new break-even rate for the new vessel that you just recently ordered? Thank you.
Massimo, could you please speak to the first question?
Yeah. Unfortunately, there is a bit of background noise. The first question is on the spot rates, if you can comment on the very recent decline, the drivers behind the recent decline. Recent decline?
But we don't see a no, okay. No, but we actually haven't seen a decline in the spot rates, really.
I mean, spot rates are there is volatility. The weakness we saw was mostly linked to the west of Suez markets. The Atlantic market was a bit weaker. It was weaker out of the U.S. Gulf and out of Europe, exports out of Europe. I would say the U.S. Gulf market was weak because there was quite a lot of refinery maintenance going on in the U.S. in March. It started a bit earlier than usual. Therefore, that dampened exports out of the U.S.
The weakness that we saw in the Continent market was mostly linked to, apparently, one of the reasons was the lower exports out of Russia, partly linked to the attacks to Russian refineries by the Ukrainians with vessels which would have typically carried Russian cargoes, then moving into the, let's say, non-Russian business at the margin, negatively affecting the earnings of these other vessels which cater for this non-Russian business. And instead, the markets were extremely strong east of Suez throughout, let's say, the last few months. Of course, there were ups and downs in that region too, but always at very high levels. And as I mentioned, over the last few days, we actually have seen some strengthening also west of Suez. And so average earnings overall are back at very attractive levels. And on the LR1 question, I pass it over to Federico.
Yeah. Hi, Massimo. Look, on the LR1s, we already have six LR1s in the water, as you know. We've never seen a very different break-even relative to our MRs. OpEx are almost the same, usually, for an LR1. Maybe they have slightly higher new boiler costs, but nothing major that changes completely the dynamics of your break-even. Then obviously, it depends on the price that you're paying for your vessels and the leverage that you're going to have on those vessels. But an LR1 doesn't have, per se, a higher cost. They have maybe a slightly higher cost than an MR vessel, but nothing significant.
The direct operating costs are quite similar?
Yeah. I mean, they're not, the crew costs, for example, which are the same. More than 50% of the direct operating costs are pretty much the same. New boiler costs too, as Federico was saying.
Slightly higher insurance costs because the vessels are worth more in theory. I mean, of course, especially younger vessels. But younger vessels then benefit from lower operating costs because of lower spare parts costs, maintenance costs, generally. So it compensates a bit in that respect. So the higher costs are going to be mostly linked to higher depreciation, non-cash costs. And then depending on the amount of leverage, we are going to have higher financial costs depending on how much leverage we will have on these vessels.
Very clear. Thank you.
Thank you, Massimo.
The next question is from Climent Molins of Value Investor's Edge. Please go ahead.
Good afternoon, Carlos and Federico. First of all, congratulations for the recent promotion.
Thank you. Thank you very much.
You already provided ample commentary on your fleet outlook. But I was wondering, going forward, should we expect you to focus on exercising purchase options on leased or time-chartering vessels, or are additional new build orders or modern second-hand acquisitions also in the cards?
No, I think it's mostly the exercise of the options going forward. We did this; it was almost a concurrent swap this year where we sold the Melanie, which was the oldest vessel of our fleet, 2010-built. And we purchased a younger vessel, 2017-built Eco vessel. And we ran some figures. And we thought that given the Eco premium that we can achieve on the younger tonnage, it made sense to do the swap. And it was a way of rejuvenating our fleet without reducing our exposure to the market. We might look at other such transactions in the future, but we don't have anything planned at this stage.
And we will focus our investments on the items that we highlighted on the use of funds slide we just showed, which is the exercise of the time-chartering of the options on the time-chartering vessels, on the bareboat chartering vessels, the new buildings that we ordered, and the second-hand vessel that we purchased.
That's helpful. Thank you. And turning towards the recent new build orders, what kind of loan-to-value do you expect to secure on those?
We will decide closer to delivery. I mean, we are not looking for bank financing for these vessels today because delivery is quite far out. For such young tonnage, it shouldn't be a problem achieving 60% LTVs, possibly even 65%. But we might decide to go for lower leverage ratios if we can afford to do so. And depending on our other investment and capital allocation priorities at the time. But this is something that we will decide closer to the delivery of the vessels.
Makes sense. That's all from me. Thank you for taking my questions.
Thank you. Thank you, Climent.
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