Ladies and gentlemen, thank you for standing by, welcome to the TORM's Q1 2018 report webcast. At this time, all audio participants are on a listen-only mode. During the presentation, we will have a question and answer session. At this time, if you wish to ask a question, you will need to press star one on your telephone keypad and wait for your name to be announced. Alternatively, you can submit questions at any time via the webcast. I must also advise you that this webcast is being recorded today, Thursday, May 17, 2018. I would now like to hand the webcast over to your presenter, Christian Søgaard. Please go ahead.
Thank you, and thank you for dialing in, and welcome to TORM's conference call regarding the results for the first quarter of 2018. As mentioned, my name is Christian Søgaard, and I am the Chief Financial Officer of TORM. As usual, we refer to the slides as we speak, and at the end of the presentation, we'll open up for questions. Slide two, please. Before commencing, I would like to draw your attention to our usual safe harbor statement on this page. Slide three, please. With me today is Chief Executive Officer and Executive Director, Jacob Meldgaard. With this, I will hand over to Jacob Meldgaard for a presentation. Next slide, please.
Thank you very much, Christian, and good day, and thank you all for dialing in. I am pleased to report that we remain profitable here in the first quarter of 2018, despite what I think we can all call a muted freight rate environment. One key driver behind our result was the competitive advantages of the One TORM platform, which continues to deliver competitive commercial results. Here in Q1, we realized an EBITDA of $37 million and a profit before tax of $1 million. TORM's Return on Invested Capital was 2.4%, and earnings per share was $0.01. Across all segments, our average TCE rate was $14,225 per day in Q1. Market upside was capped due to the continued stock products, as well as an influx of new building deliveries.
In January, we successfully completed a $100 million equity raise to provide further capacity for growth, and here, by the end of Q1, our available liquidity was $465 million, and TORM's net loan-to-value stood at a conservative 51%. During the first quarter, we took delivery of 2 LR2 new buildings. In April, we took delivery of yet a third LR2 new building, and our fourth and final LR2 new building is scheduled to deliver later this year. Also, here in April, we executed a new building option for three high-specification MR product tankers with expected delivery next year and through the first quarter of 2020. The aggregate purchase price for these vessels was $93 million, and this compares favorably to the values we've had assessed by brokers, which are approximately 10% higher than our average purchase price.
All in all, we have already contracted for 10 more vessels to come: one LR2, two LR1s, and seven MRs. At the end of the quarter, TORM's fleet, including new buildings, had a market value of $1.6 billion. We had, as of last Friday, fixed 61% of our remaining Q2 earning days at an average TCE of $14,244 per day. I'll now focus on some of the primary market drivers we are currently following. Slide five, please. Overall, global demand for refined products remains strong, supported by healthy economic growth. Inventories had reached record levels, and demand-driven drawdowns led to reduced transportation demand for product tankers in 2017.
Global inventory levels have now normalized, but we are still drawing on inventories, although at a slower pace. On the negative side, we are seeing reports that an oil price at its highest levels since the fourth quarter of 2014 could limit demand growth for gasoline. Another factor causing headwind this year is the effect of crude oil tanker building crude tankers delivered from Asian yards have cannibalized traditional LR trades in the East, and looking at the current crude tanker orderbook, this is likely to be a factor throughout this year. Given the current depressed state of the crude tanker market, migration of LR into the crude oil market has reversed. Looking forward, product tanker fundamentals do remain intact.
There is a growing dislocation between demand and export centers, which is expected to continue, with further export-oriented refineries coming online in the Middle East, starting from next year. That will be a positive for TORM market growth. The product tanker fleet to order book is at record low level. Here, all in all, we are still believing that the fundamentals are in place for market recovery, despite some headwind at the moment. Slide six, please. In the first quarter, record high refinery maintenance in the Middle East negatively impacted the product tanker segment, adding to the pressure caused by crude oil tanker new builds, which, as already mentioned, were cannibalizing traditional LR trades. The MR segment saw strong volumes throughout the quarter, led by U.S. exports. These cargos were primarily shorter haul in nature from the U.S. Gulf to Central and South America.
As the quarter progressed, a combination of tonnage migration from east to west and U.S. refinery maintenance caused the Western market to soften. Thus far, in the second quarter, refinery maintenance continued into April, impacting all market segments. The Atlantic market has been healthy, with increased volumes from Europe to the U.S. East Coast and steady volumes to West Africa. As I mentioned earlier, our product tanker fleet realized competitive average TCE earnings of $14,225 per day in the first quarter of 2018. In the LR segment, TORM achieved LR2 rates of $15,026 per day, and LR1 rates of $14,635 per day.
For our largest segment, MR, TORM achieved rates of $14,320 per day, and TORM's Handysize segment earned rates of $11,905 per day. Slide seven, please. As already mentioned, global product inventories have normalized and are approaching five year average levels. Despite this development, stock drawing has continued, albeit at a slower pace. Inventories are now below five year averages based on days of forward cover, which is a good indication of the growth in the demand. While continued draws are not sustainable over the long term, price liquidation deters floating storage and also reduces inefficient sailing patterns. A tight diesel market in Europe, coupled with easier refinery maintenance in Asia, could lead to better arbitrage opportunities in the coming months, but we will have to wait and see. Slide eight, please.
The product tanker orderbook-to-fleet ratio is currently just below 10%. This is low in a historic context. We estimate that this ratio will fall to around 8% by the end of this year and to around 6% by the end of 2019. Here, you should note that this takes into account our estimates for additional ordering beyond the already known orderbook. The orderbook is one of the important factors in development of the freight rate environment, Current levels do point to the positive. Slide nine, please. With our spot-based profile, TORM has significant leverage to increases in underlying product tanker rates. This is particularly true going forward in 2019 and 2020, when our unfixed days increase as a result of the growth in our fleet.
As of 11th May this year, every $1,000 increase in the average daily TC rate achieved translates to an increase in EBITDA of around $15.7 million for this year. This figure increases to $28.6 million and $31 million in 2019 and 2020, respectively. TORM has a positive long-term view on the market, and we believe we are well positioned to generate significant cash flows. Slide 10, please. As we've seen in prior quarters, TORM's operational platform is capable of delivering very competitive TC earnings. In fact, if we look back over the past 13 quarters, we have outperformed the peer group average 12 out of 13x , which translate into additional earnings of $81 million for the period, $5 million for this first quarter alone.
I'll now hand it back over to CFO, Christian Søgaard, for a further review of our cost structure and financial position.
Thank you, Jacob. Slide 11, please. TORM operates a full integrated commercial and technical platform and also employs an internal sales and purchase team. Many of our peers outsource these functions, but we do believe that we derive a significant competitive advantage by internalizing these processes. Importantly, it also provides a transparent cost structure for our shareholders and eliminates the possibility of related party transactions. While we do not have a target, particularly for OpEx, and rather, we would rather focus on maintaining efficient operation and providing a high quality service to our customers. We have, however, seen a gradual decrease of operating expenditures over the last five years, and TORM's scale and ability to exercise cost control is illustrated by our highly competitive operating expenditures.
We also remain disciplined in respect to general and administrative expenses, although these can be expected to fluctuate a bit based on the size of our fleet.
... Recently, we have opened new offices and invested in digitalization and business intelligence efforts. Slide 12, please. As of 31st of March this year, TORM had available liquidity of $465 million after completing a $100 million equity raise in January. Cash total, $174 million, we had undrawn credit facilities and new building financing agreements of $292 million. Our total remaining CapEx commitments were $242 million as per end of March, of which approximately $75 million is due in 2018. The remainder will fall due in 2019 as we take delivery of our new high specification vessels. Our strong liquidity position provides us with sufficient funding to meet our CapEx obligation, as well as pursue further accretive growth opportunities.
We turn to the next slide, please, for an overview of our debt profile. TORM had an outstanding gross debt amounting to $751 million as per end of March 2018. We have a very favorable financing profile, with more than 65% of the scheduled installments falling due after 2020. Our net loan-to-value was 51% at the end of the quarter, which we consider to be a conservative level at this point of the business cycle. To recap, we have a strong balance sheet that provides us with ample strategic and financial flexibility going forward. Slide 14, please. With this, I'll let the operator open up for questions.
Thank you very much. Ladies and gentlemen, if you would like to ask a question via the telephone, please press star one now, and then please wait for your name to be announced. Alternatively, you can submit questions via the Q&A panel on the webcast. We do have a question over the phone. The question comes from the line of Jonathan Chappell. Please ask your question.
Thank you. Good afternoon, Jacob and Christian.
Morning, John.
Jacob, first question for you. Just a clarification on some of the commentary around the market. I understand the cannibalization of crude tanker new builds as they come from the shipyards in the Far East. What do you mean by the current oil pricing structure that favors short hauls?
Thanks for that. What we are experiencing is that the current backwardation really doesn't allow some of our customers, especially the traders, to speculate in prolonged voyages or longer voyages. It really means that, the cargo you buy today, everything else being equal, you want to get rid of it as soon as possible. This is also has to do, of course, with arbitrages, them not being open at the same time. We are simply not experiencing that this backwardation in oil prices in general, which currently is quite strong, in an environment where the political situation seems to do affect the pricing structure, that this is also affecting the behavior of our customers.
Mm-hmm. I think we've been focused very closely on inventories over the last 15 months or so, and it seems like they're at least normalizing, if not getting to the point of maybe switching from destocking to restocking. Would it be fair then, to think that we should also be watching the oil price curve as it relates to ton-miles? Is your comment about the new facilities coming out in the Middle East and the potential ton-miles from those, more of an offset to the current price structure as it stands today?
I think that it's just an observation that the current price structure is, it's relatively new, that you've got such a spread on the curve. I think coming up this morning, the price was the highest on crude spot, but it's not so that the tail of this price curve is following with the same volatility. This is clearly that goes for all products, and I don't think we can just see that this is not a positive for the market. Is it? I don't think it's gonna be the main driver to watch, but clearly, we are better off with a little more, maybe price stability from that point of view in relation to transportation volumes. I'm more longer term.
I think this current political environment is, in my opinion, not gonna be here forever. That's a short-term factor, and prices will sort of find their own levels. Again, what is more important for the longer run is obviously the new refinery capacity that we do see, having both been implemented, invested in, and coming on stream in the Middle East over the coming years.
Mm-hmm. Timed well with the limited order book.
Yes, exactly.
Right. Just a couple quick ones on TORM specifically, then. You're able to exercise these MR options at well below what I would consider kind of broker values. Can you just remind us if there's any outstanding options and the timing on expiration of those? The second part of that is your appetite to potentially continue to exercise those, even though the market's remained, in your terms, muted.
Yes, we do have a number of options still left, John. I think we feel that currently we have 10 vessels still to be delivered into our fleet between now and for early part of 2020. That feels like we're in a good position. We, of course, need to evaluate whether to move further forward on that. My instinct at this stage is that it's gonna be very much on the margin if we do anything further at this stage.
Okay. That leads to my last question then, and Christian laid out pretty good liquidity situation, especially relative to your capital commitments, and you tie that in with a very low debt amortization for the near term. Assuming the market does recover and cash flow starts to accelerate, if continued fleet expansion is kind of on the margin, what's your ideal uses of cash then? Would you accelerate the deleveraging process or maybe take advantage of the 11.6 NAV and buy back stock? How do you kind of think of uses of cash moving forward?
Yeah, that's a good question. What we've been saying is that we do have a distribution policy, where we intend to distribute somewhere between 25% and 50% of the net earnings on a semiannual basis. I'm careful also not to say dividend. I call it distribution, because it can be a combination of share buybacks and cash distributions.
Okay. Thank you, Christian. Thanks, Jacob.
Thanks, John.
Thank you once again, ladies and gentlemen. It's star one if you wish to ask a question via the telephone. Alternatively, please submit your questions via the webcast. Thank you. At this point, we have no further questions via the phone lines.
Thank you very much. With this, I'll conclude the earnings conference call for the first quarter of 2018. We will release our first half report on 16th of August, and we look forward to providing you updates on our business at that time, we'll keep you informed of any interim developments. Thank you for dialing in.
Thank you, ladies and gentlemen. That does conclude your webcast for today. Once again, thank you very much for participating. You may now disconnect.