Good morning, everybody, and welcome to Odfjell's presentation of our fourth quarter results and our preliminary result for 2022. Today's agenda follows a traditional pattern. I will present the highlights. My colleague, Terje Iversen, the CFO, will present the financials, and then I will take over and give you an operational review. I will conclude this presentation with a market update and prospects going forward. If we look at the highlights for the fourth quarter, we are happy to inform that the firming chemical tanker market that we saw in the third quarter continued through the fourth quarter and concluded a very strong year for Odfjell. Our time charter earnings increased to $187 million, up from $171 million in the previous quarter.
We delivered an EBIT of $73 million compared to $71 million in the third quarter. The net result was $50 million, same as previous quarter. If we adjust for one-offs, then the $50 million compares to $46 million in the third quarter. We also saw contract rates increasing by 26% through the quarter, and the net result contribution from Odfjell Terminals was $0.2 million. This compares to $8 million in the third quarter. Then we have to remember that the third quarter was heavily impacted by insurance proceeds in that quarter. We refinanced five vessels during fourth quarter, and this refinancing reduced the cash breakeven for those vessels with approximately $3,100 per day.
Finally, I'm very happy to inform that the board approved a dividend of $0.61 per share based on the adjusted second half of 2022 results. If we look at the 2022 in full, then we delivered a net result of $142 million. I'm also very happy to inform that despite the significant increase in the commercial activity, we still delivered safety, environmental, and operational performance well within our set targets. We also see that our strong focus on cost, efficiency, and quality has positioned us to fully utilize the firming markets that we now see. The total dividend for the full year of 2022 was $66 million.
This concludes, the highlights, and then I give the word to, Terje Iversen.
Thank you, Harald, and good morning to all of you. I will, as normal, start with the income statement for the group for this quarter. As Harald just mentioned, we saw an increase in the time charter earnings this quarter, from $171 to 187 million. That was despite of actually a decrease in the gross revenue, because we had fewer pool vessels in this quarter compared to the third quarter. We also had less bunker surcharges in the fourth quarter due to lower bunker expenses. Seeing that the time charter earnings increased with $50 million is then primarily due to the improved spot market, but also due to the improved contract ratements during the year so far.
Looking at the expense side, we see that we had an increase in the operating expenses from $45.9 to 49.6 million this quarter. Main reason being that we had extraordinary year-end bonus to all seafarers with around $2 million in the fourth quarter, and we also had some inventories that were adjusted towards the year-end that impacted the operating expenses. On the G&A side, we also saw an increase from $16.6 to 19.7 million. Also there we had an extraordinary year-end bonus to onshore employees, adding to the G&A with around $2 million, and we also had quite high activity level in the fourth quarter also leading to increased G&A.
We have an EBITA of $112.8 compared to $111.6 in the third quarter. Depreciation very much the same level as in the third quarter. We are left in the EBIT of $73.4 compared to $71.1 in the third quarter. Net interest expenses increased in this quarter. Reason being, increase in LIBOR, as you have all noticed, that increased net interest expenses with around $2 million. In addition, we also had amortization of some financing costs in relation to the refinancing of the five vessels that we just mentioned on the highlights. That took our net interest expenses from $18.8 to $22.4 in this quarter.
After other financial items and taxes, we are then left with 50.4 in net results, leading to earnings per share of $0.64 this quarter. If you adjust for non-kind of recurring events, we have the same results, $50 million compared to adjusted results for the third quarter of $46 million. Also mentioning that for the terminal side, we had revenue this time according to the equity method included here with $7.2 million compared to $7.6 million in the third quarter. Reason being that we had this insurance proceeds that impacted results in the third quarter with around $5.6 million and positively.
Also this quarter, we had some challenges in the U.S. due to the freeze that led to a decrease in the earnings and also some extraordinary cost items related to repair and maintenance in the fourth quarter, leading to a slightly reduced results adjusting for also for the insurance proceed in the third quarter. We go on to the time charter earnings, we saw that increased this quarter from around $29,600 in the third quarter to $31,700 in this quarter. As you can see that is well above our annual cash breakeven, which now is around $22,600 per day, which also is the expected level going forward into 2023.
Cash breakeven this quarter was around $22,800 compared to $22,600 or $22,700 in the third quarter. The main reason for the increase was mainly related to the increase in the interest rates and also the year-end bonus payments for seafarers and onshore employees, which I just mentioned. Looking at the balance sheet, we see that ships in our balance sheet is now just above $1.3 billion. We saw that right-of-use assets increased slightly this quarter compared to the third quarter. Reason being delivery of one time charter vessels end of third quarter and also one into the fourth quarter, which is increasing down the right-of-use of assets to $208.7 million.
Investments in associate and JVs being mainly our terminal assets increased from around 160 to 167.8 in this quarter. Despite the current low result, the increase is due to the currency effects from our terminal assets that are valued in euros and also in Korean won, giving a positive effect on the balance sheet for the asset. Looking at the cash position, that increased from around $100 million to $117.7 million this quarter.
If you include undrawn loan facilities, you have a cash position of around $186 million available, and that should be more than sufficient to cover the dividend that we just mentioned of around $48 million to be paid in the next week or the week thereafter. The equity increased to around close to 700 now up from 630. That is of course, due to the strong results this quarter. We also had other comprehensive income that also improved our equity position year on compared to end of third quarter. On the debt side, we have been active. We have done some refinancing, as mentioned. We had scheduled installments around $20 million.
We had done extraordinary debt repayments of $50 million, and we are now below, just below $1 billion in interest-bearing debt, which is actually the lowest level that we have seen in many years now. On the balance sheet, also worth noticing that the bond which is maturing in September 2023 is now classified as a short-term debt on our balance sheet, around $950 million, which is due then, as I said, in September this year. Looking at the cash flow, we saw a slight decrease in operational cash flow this quarter despite the improved earnings. Main reason being an increase in the working capital, where we had a very positive development in the third quarter. I would say we are more at normalized levels end of the fourth quarter.
In addition, we have some unrealized exchange differences that is also impacting the operational cash flow and also the increase in interest rate this quarter also impacted the operational cash flow. Even though we are at quite strong levels when we look at the operational cash flow. Looking at investments, we had close to negative $10 million, mainly being investment in our vessels, dry dockings and also some energy-saving devices that we continue to invest in our fleet. On the debt side, I said we have been quite active. We had done $35 million in debt installments and extraordinary debt reductions. We also, when we did the refinancing of the five vessels that we just mentioned, reduced the leverage on those vessels with around $10 billion.
That led to a net cash flow from financing activities of around $58.7 million, and we saw an increase in cash this quarter of $18 million. If you look a bit longer term on the free cash flow, looking here at 12 months rolling basis for per quarter, we saw that the free cash flow this quarter ended at $77 million. If you adjust for debt repayments related to right-of-use assets, it reached $62 million, which is up from $49 million in the preceding quarter. We used the free cash flow this quarter to reduce our debt and strengthen our balance sheet and also of course to prepare for the dividend to be paid in February this year.
As I mentioned, we saw an increase in working capital, end the quarter, but we have seen quite a good improvement even though in the working capital on a longer-term basis. Going forward, as we have indicated earlier, we have very limited CapEx plans, meaning that if we continue to deliver good and solid operational cash flow, there are expectation that also then the free cash flow should be quite strong going forward based on the fact that we have very limited investments and CapEx for the coming quarters. Here's a slide showing how our debt has developed actually the last two years. We have reduced our debt with around $257 million the last eight quarters.
We have out of that, 174 is scheduled installments, and we have done extraordinary debt repayments due to the strong cash flow of $83 million during the same period. We have used a lot of that cash also to reduce our kind of, the volume that we have loaned through the revolving credit facility that we have available today. Over the same period, if you include the dividend to be paid in February this year, the total dividend is $74 million compared to the $257 million that we have reduced our debt with.
Also worth noticing that all our new debt since December 2020 is sustainability-linked and is based on the sustainability-linked framework that we established early 2020 for the new bond issue we did at that stage. As I said, we are close to just shy of $1 billion in interest-bearing debt. If you analyze and look at the EBITDA, we are down at 3.2x EBITDA in debt levels. If you look at the debt compared to the value of our vessels using indicative market values from VesselsValue, we have a loan-to-value for our total balance sheet of around 63%. Going forward, we have not that much debt maturing in the coming quarters.
I would say into third quarter 2024, we have a large balloon maturing. Except for that, we have the bond that is maturing in September. As I mentioned, we have a very strong free cash flow this time around. Going forward, we will have to evaluate whether we are going to do a new issue or we are just going to redeem the loan at maturity without issuing a new bond or doing a tap. That is something that we are considering, and of course, we will follow the market and try to time that in case we should do a new issue. We have done a lot the last few quarters to reduce the cash breakeven.
As I mentioned, the refinancing we did, that took down our leverage with around $10 million and also reduced the cash breakeven for those five vessels with around $3,100 per day. At the bottom of this page, you see what is the expected debt going forward. As we have flagged earlier, we have an ambition to be around in the interval of $750 million-$900 million in interest-bearing debt end of 2023. I think we are on a good track to do that, based on the scheduled installments going forward and also based on a situation where we just redeem the bond that is maturing in September. That was the end of my slides. I leave it over to you again, Harald.
Thank you very much, Terje. I will continue with the operational review. If we look at the Clarksons spot tanker spot rate, then that index is up 12% during the quarter. The Odd Fix, which is an expression for Odfjell's time charter earnings, was in the same period up 5.8%. If we look at the four main product groups that we carry, we have seen healthy renewals on our speciality contracts, and those contracts are the backbone of many of our trades. Easy chemicals also saw steady volumes. We saw renewals between 10% and up to 100% on the contract rates. As I said, the volumes were stable.
We only do veg oils on a spot basis, and the typical veg oils that we carry are palm oil distillates, soybean oil and UCO or used cooking oil. CPP is a marginal cargo group within our segment, but we occasionally carry CPP on our backhaul trades. Our largest vessels are adapted to MR size packages, and the typical cargos that we carry on the CPP side are unleaded gasoline, diesel and ultra-low sulfur diesel. If we look at the contract renewals, as I said, our rates were up 26% during the quarter. We saw stable volumes and our contract coverage was slightly below 50%, 46%.
We also see that demand from our charterers contain, continue to be high. We see that the available space for contracts in the market continues to be limited. On that basis, we say that the fundamental outlook for the tanker market on the contract side, remains solid. We have no further vessels scheduled for redelivery in the near future. There has been a strong focus on contract renewals during the past two quarters and for that reason, we decided to include some additional information on our contracts. We have a portfolio of approximately 100 contracts and fully utilized, those 100 contracts will include approximately 9 million tons.
It's also important to observe that these 100 contracts include more than 2,000 contract obligations. If we look at the contracts themselves, there are two types of contracts. We have the contracts where there are renewal options, and we have the contracts where there are no renewal options. The contracts typically include customers' obligations. They include the owners' obligations, and there are plenty of details related to volumes, to ports, to types of products, and so on. A contract that has no contract options is renewed, all terms in the contracts are subject for renegotiation.
This is a very thorough and time-consuming process where we go through all the obligations, both on the customer and on the owner side, obligation by obligation. It's also important to notice that when we change the obligations, then we have to make sure that these new obligations are in line with obligations that we have for other customers in the same trade line. Once we have agreed on the contract terms, then these contract terms are subject for approval by our insurers, and they are subject for legal review. There has been high interest in contract renewals this quarter, and due to these circumstances, we have seen that the contract negotiations have taken significantly longer time than what we have seen in previous quarter.
To avoid doing this process over and over again, we occasionally, when the renewal process is completed, then we include options for the following year. By that, we are not going through the obligations in detail. We are, we are only adjusting the freight rates, the volumes, and occasionally the loading or discharge ports. This implies that when we are referring to the average contract renewal rate, which this quarter was 26%, then that figure only includes those contracts where the terms are comparable to the previous quarter.
If there are significant changes when it comes to volumes, or when it comes to ports or when it comes to products, then that contract can not be included in the average contract renewal rate simply because the terms are no longer comparable. When it comes to Odfjell's energy efficiency, then I'm also very happy to once again confirm that we have an all-time low when it comes to our AER. The AER, the average AER in 2022 was 7.59, and that is the lowest AER in Odfjell's history, and it's 49.5% below the 2008 baseline for Odfjell.
We have initiated several novel technology projects that are now ongoing, and we expect to see full effect of full implementation of those great projects from 2024 and onwards. None of those projects will imply extensive dry docking or substantial CapEx. This implies that we have a clear ambition to further reduce our AER going forward. On the terminal side, when we compare the fourth quarter to the previous quarter, the EBITDA declined by approximately $5.7 million. This is mainly due to insurance proceed received in the third quarter. Adjusted for corporate non-recurring items, the net income of the underlying business was marginally weaker in the fourth quarter.
If we compare 2022 to 2021, the EBITDA increased by approximately $6.9 million, the performance of the underlying business in 2022, adjusted for corporate and non-recurring items, came out $2.6 million higher than 2021. All in all, 2022 was a strong year with continued occupancy, high occupancy, and robust activity levels, particularly in the first three quarters of the year. The average commercial occupancy reached 96.7%. This is up from 95.2% in 2021. We have two ongoing expansion projects.
The funding is done locally in the joint ventures. At our Antwerp terminal, we are building a new tank pit that consists of six tanks, 36 thousand cubic meters. At the terminal in Houston, we are building bay 13, which is six carbon steel tanks and three stainless steel tanks, and the total capacity is around 32 thousand cubic meters. Both these expansions are funded locally. They are on schedule, and we expect them to be operational in the fourth quarter of 2023. We see some uncertainties when it comes to macroeconomics and political instability, and for that reason, this and those factors may impact the activity levels at our terminals.
When it comes to the expected commercial occupancy, we expect this occupancy to be high also in 2023. I will continue with a market update and the prospects going forward. As we have said, we saw firming spot rates in the fourth quarter and in all trades. East of Suez, we saw rates. Sorry, west of Suez, we saw rates going up with approximately 17%. Despite some initial challenges in Europe, we now see that also the Europe to U.S. trade, which is normally a backhaul trade for us, is also picking up pace. We have a positive outlook for the trades west of Suez.
East of Suez, we saw that at the end of the last quarter, there was some excess tonnage being built up, and that put some pressure on the rates. We nevertheless saw an average increase east of Suez of approximately 3% through the quarter. If we look at the total fleet trading in chemicals, over the past year, we've seen reduction of approximately 10%. The trend that we reported last quarter that was less capacity available for the transportation of chemicals, seem to have continued also through the fourth quarter. If we look at the outlook, there are some bullish and then some bearish factors that will impact trade flows within chemicals.
We see that the fear of higher inflation and interest rates has eased and now seem to be flattening. We have been fearing slow economic growth, we also noticed that IMF have adjusted their prospects up during the last months. On the positive side, we will see an effect of the relaxation of the COVID restrictions in China. We saw signals of there was a tight energy supply in Europe, this also seems to be easing up partly thanks to warmer than average winter in Europe.
The political instability remains high. We do believe that the import, the EU import of Russian products will have an effect. The effects that this will have on the chemical tanker market, we have after the third quarter, we reported that we saw some reduction when it comes to the production of chemical products. We are not that pessimistic now. We see signs that the production is picking up, partly due to reduced energy prices. We see that the trend that we reported in the third quarter, after the third quarter, with longer trade hauls, that trend is continuing.
the demand side, there will be sufficient production, and we believe that the trend of increased distances will continue. On the supply side, we also see a positive picture. There are no new orders of chemical tankers, and we see a continued stagnation of the fleet. We do see that swing tonnage is remaining outside chemicals and in CPP. We continue to see a trend that older chemical tankers are being sold for regional trade, particularly in the Far East. And we do not see that the average fleet speed is increasing
All in all, we believe particularly on the supply side that there are, that we will see a positive trend in 2023. To summarize, this presentation, we saw that the good trend in the third quarter continued into the fourth quarter and that concluded a strong year for Odfjell. These strong market conditions support us during contract renegotiations, and we have a positive view on the contract renewals ahead of us. If we adjust for non-recurring items on the terminal side, the net income was slightly weaker in the fourth quarter compared to the third quarter. We have a positive outlook when it comes to the supply and demand situation.
Partly due to a somewhat slow start in the spot market in January, then we believe that our first quarter results will be similar or maybe slightly lower than the fourth quarter. That concludes our presentation, and we are now on to the Q&A session if there are any questions.
We have a few questions from our listeners. The first one comes from Lars Bastian Østereng. How are COA renewals going so far in the first quarter? Is 26% on rates realistic for the next quarters as well?
Well, I think that that question has been partly covered by the presentation, but that yes, 26% increase is clearly realistic for that part of the contract portfolio that has not yet been renewed after we saw the increase in rates which started in March 2022. I think we will continue to see increases in the first quarter. Of course, we are on to renewing contracts that have already been through a significant increase. I'm more uncertain about the second half of the third quarter of 2023. First half, yes, we will see similar increases.
Thank you. Perhaps you can answer this one, Terje, also from Lars Bastian. Is it possible to provide a rough split between spot rates and Koa rates in the fourth quarter?
tion, and it's not that easy to be precise on that. Often you have different products that you are transporting under the contracts and you are transporting in from the spot market. But of course, spot rates are substantially still substantially above contract rates. Whether it's 100% more or plus-minus that, I don't know. But substantially above, I would expect
An anonymous question, how do you view the outlook for swing tonnage? Pal?
Well, I noticed that the analysts, they have a very positive view on the ama market in, after the 5th 5 February ban. If we take that into consideration, my anticipation is that the swing tonnage will remain in CPP and that the chemical tanker market will continue to be stretched on tonnage.
For the next three years, how should we think about Odfjell's Koa coverage and duration of the contracts?
I think, all in all, our contract coverage will more or less remain the same. We've seen that pattern over maybe the past 10 years that we've been swinging around, contract coverage of 50%. I think that trend will continue also in the years to come.
Thank you. That question was from På l Holdø Dahl. We have one from Evan Kolsgard. Order book for chemical tankers remain low. How do you see fleet renewal and the pricing of new build these days?
Well, it's correct that the order book is historically low these days. It's also a fact that there are hardly any yards available to build stainless steel chemical tankers. The third fact is that the price of tankers today is high, so it's a challenge to justify that investment. My anticipation is that it will take time before new chemical tankers are being built.
Thank you. There are a lot of interest about the Koa. Another question on the 26% increase. How much of the Koa volumes were renewed in the fourth quarter?
Yeah. We had a full and final renewal of approximately 15% of our total portfolio. When then we have another 15% that where we are agreed on the terms, but we are still waiting for insurance and legal reviews for subjects to be lifted. We are trading under the new conditions, but the contract is not yet signed. We have renegotiated approximately 30% of the total volumes during the fourth quarter and 50% are fully signed off, and we expect to sign off the remaining 50% within weeks, I believe.
Thank you. That, the second part of the question is if we could share some comments on how much of the core volumes that are up for renewal in the first quarter 2023, and in 2023 as a whole.
That I didn't bring that figure. I think I have to be careful when answering it. It's, you also have to distinguish between number of contracts and volumes. I don't think that I should go into any speculations.
How long is the time lag from core renewals and until earnings? When should we start to see the effect of the 26%?
I think when it comes to the 26%, most of those contracts were renewed from 1 January. Those contracts are already in force.
Question from Christian Falness, will consolidation of A and B shares be on the agenda in 2023?
That is a subject that we are discussing from time to time. I can say that, at the time being, we are not planning to propose that for the general meeting in May. That is not on the agenda so far. Things can change of course.
Perfect. Thank you. That was the final question that came in. I'll leave it to you for some final remarks, Hal.
Yeah. Thank you very much. To all of you, listening in, thank you all much for, attending and, see you next time in approximately three months. Thank you.