Welcome to OET's First Quarter 2021 Financial Results Presentation. We will begin shortly. Ioannis Alafousos, Chairman and CEO Aristides Alafousos, COO and John Papuano, CFO of Okeanos Eco Tankers will take you through the presentation. They will be pleased to address any questions raised at the end of the call. I would like to advise you that this session is being recorded.
And John will now begin the presentation. Thank you.
Welcome to the presentation of OET's results for the Q1 of 2021. We will discuss matters that are forward looking in nature. These forward looking statements are based on our current expectations about future events, including OEC's commercial performance, dividend policy, projected drydock schedules and anticipated debt capital commitments. Actual results may differ materially from the expectations reflected in these forward looking statements. Starting on Slide 3, we review the highlights of Q1.
We generated net revenue of $40,000,000 Adjusted EBITDA of $25,000,000 and adjusted profit of $6,000,000 or $0.18 per share. Last week, we announced the sale of our 3 ship Aframax LR2 fleet for $121,000,000 We expect the sale to generate net proceeds of approximately $45,000,000 after repayment of debt. We will return the majority of this $45,000,000 to our shareholders in the coming months. Initially, we will maintain some dry powder to be flexible be able to capitalize on any opportunities over the next few months. If we do not find accretive uses to deploy this capital at scale, It is highly likely that we will ultimately return 100 percent of the proceeds to shareholders before the end of the year.
We will not grow the fleet either through secondhand transactions or new buildings. I'll now hand it over to Aristides for an overview of our industry leading commercial performance.
Thank you, John. Once again, OET is trending as a top performer in the spot market for Suezmaxes and Afamaxes in Q1 and across all three segments in Q2. During Q1, we achieved a fleet wide TCE rate of $26,100 per operating day, net of 1% technical off hire days. Our VLCCs generated $16,600 per day in the market, a 3% outperformance relative to our tanker peers that have reported Q1 earnings. We have fixed Only one ship from West Africa to China, the Nissosunaka.
Our Suezmaxes generated $18,200 per spot day, 53% higher than the tanker peer group average. We continued our strategy of trading the MedEast route and traded Thank you, Jason. Take advantage of the strength there. Lastly, our Aframax LR2 fleet generated 18,600 dollars per spot date, 59% higher than the tanker peer group average. We will deliver the AFRS to their new owners after one last lucrative spot voyage, Recognizing only the leading leg in RTC, which would lead to strong realized rates.
In Q2, we have fixed The following: 90% of our VLCC spot days at $15,000 per day 47% of our Suezmax spot is at $18,600 per day and 65 percent of our Aframax spot is at $16,600 per day. In mid July, we will release a full commercial update
for the
Q2. Moving on to Slide 5, We provide an overview of our commercial and operational performance for full year 2020 relative to the peer group. In the VLCC segment, OET generated daily spot earnings throughout the year of $73,400 per day, representing 39% outperformance relative to the average of the crude tanker peer group. Similarly, our Suezmax daily spot earnings of $41,700 per day Represented a 24% outperformance relative to the peer group. Our ability to capitalize on strong markets Was matched by the cost competitiveness of our operations.
Our daily operating costs, the sum of vessel OpEx, technical management fees and G and A Of $8,433 per ship day in 2020 was the 2nd lowest in the crude tanker group and the lowest among full service crude tanker owners. The incremental profit that our commercial and operational outperformance generated for our shareholders in 2020 amounted to $36,000,000 And the highest return on equity in the peer group at 28%. Back to John.
Thanks, Ayatuby. Starting with our income statement on Slide 6. In Q1, daily OpEx, excluding management fees, averaged $6,600 per day, While daily G and A for the 12 months for the trailing 12 months came in at $800 per ship date. Moving along to Slide 7. We report book value of DKK 106 per share.
Our leverage stood at $821,000,000 at quarter end And is set to decline to approximately $707,000,000 by year end. On Slide 8, We summarize our cash flows. Our liquidity position is $32,000,000 while we have concluded our growth CapEx and scrubber retrofit program. The next ship due for 1st special survey is the Suezmax Milos entering drydock in late June. Shifting to Slide 9, we provide a comprehensive overview of our debt stack.
Our all in cost of debt is roughly 3.5%. Following the sale of the Aframax fleet, we now have no debt maturities until 2025. Now turn it over to Yami to walk you through our market outlook and summary.
Yes. Hello from me also. Well, We are extremely bullish for the future, for the next remaining months of the year and obviously for the 20 2 as well. OPEC production will rise the most it has ever risen in the next 6 months in history. Over the same period, Goldman Sachs expects the biggest jump in oil demand, which will be over £5,200,000 per day.
At the same time, as we know, inventories have been normalized. I will just give you a couple of examples of how bullish we are and why we are so bullish. First of all, On secondhand prices or newbuilding prices, I will just give you one example. Outside of Okeanis, we ordered 2 VLCCs in September last year At $85,500,000 including scrubber and our spec. And today, I have been approached to date By broker indicating $100,000,000 and I said no.
And we have approaches of a number of people offering above $95,000,000 and we said no. We feel that the price has a long way to go up in secondhand. And I think that our fleet, Which is very modern and scrubber fitted and eco consumption is the lowest it can be for the time being. He is uniquely positioned to capitalize on this situation. In addition, in my experience in shipping, When the market moves, it moves, it booms.
There is no in between in shipping. It's either up or down and the sentiment And the increase in demand for oil will be huge. So we anticipate an extremely firm market, which might Take us above what we saw a year ago with price war in crude. This is about I think I expressed myself clearly as my bullishness is concerned our bullishness rather is concerned. Now on Slide 11, we would like to summarize that we have kept our promises when we went public In 2018, we have always been very serious about our performance.
We have distributed dividends and we have sold ships. And we've always been transparent in our management. This is what we promised and this is what we have delivered. I think that's what I have to say and we are open to any questions you have.
Thank you. So we will now open the line for questions. We also kindly ask participants submitting questions via the webcast to phrase their comments in the form of a question and refrain from abbreviations. Thank you. We currently have no telephone questions coming through.
And we have a question coming through from the line of Dennis Angelopoulos From ABG, please go ahead.
Good afternoon, gentlemen. Hope you guys are all doing fine.
Thank you. Likewise. Thank you. So just
you guys are sort of pointing
to the fact that you think asset values are really going to Increased quite strongly going forward, but you recently sold some vessels. Could you sort of help provide some clarity as to Why that timing was the way it was? Is it because 5 years old is sort of like the oldest you want to have in your portfolio? Or was the price just too good to leave on the table?
Well, when you sell ships, you cannot sell them at the top of the market. And we felt that this level was the first level that we reached that was Profitable enough for us to make a sale and to be able to distribute a significant dividend as we have promised to do to our shareholders. At the same time, these are the old ships. And if you want the 2015 built ships, We're a little bit are a little bit less efficient than ships built after 2018. So for these reasons, we sold these ships.
Also, I think Dennis could add there. When we were seeing the analyst reports of where The sell side was sort of taking the value of these shifts at the time. I think you can say it was in the mid-30s. And ultimately, as you've seen from the sale price that we've concluded, asset values are a lot firmer than what Folks think they are. And I think Mr.
Galapagos gave some anecdotal evidence to sort of the kind of price levels that we're seeing being offered for the private VLCCs. I think this is generally happening across shipping, but certainly in the tanker space where The underlying sentiment in the S and P market is a bit firmer than I think most people will realize.
Same goes for Suezmaxes. We bought a number of Suezmaxes both for Okeanis and outside Okeanis for about $64,000,000 to $64,500,000 $4,500,000 and today we're being offered $70,000,000 for those ships.
Okay. So
if you look at sort
of the newbuild market today, would you think it would be to potentially order something not right now, but maybe down the line because you think that in 3 years, 2 years from now, it's going to be much, much firmer market? Or is the newbuild market not very attractive
here at this level? For us, the market is not attractive at those levels. First of all, we don't know what these levels are. Hyundai, our brokers approached them and they indicated that at the $100,000,000 they don't know whether they will sell the ship of our specification. And also the delivery is quite late.
I think the shipyard capacity, especially in 1st class yards, It's extremely tight. And as you know, LNG ships, LPG ships, container ships are preferred to tankers. And there's a lot of demand of other types of ships. So the yards have the optionality to order more profitable to build more profitable ships for them. And it's interesting to hear rumors in the market that also Certain refund guarantees were not issued and we suspect that this was because the price of the deals That we're done or we're going to be done.
We're too low for the issuing banks because the yards cannot afford to lose money. And at the prices The ships were sold even 2 or 3 months ago. Shippiers were losing a lot of money.
And just if I can just follow-up there. You're talking about very tight yard capacity. How long would it take To get a VLCC sort of delivered, is that sort of potential constraint on the supply side that you guys see that it will take too long to deliver a vessel?
Late 2023, definitely Q4 of Q1 2023 or Q1 2024. That's when we think ships will be available now. Again, from the major yards, I don't know what would happen if you go to a 3rd rate or second rate Chinese yards. I'm exploring the major Chinese yards. That's what I mean.
I'm talking about the smaller ones.
Okay. Thank you guys for taking the time and wish you a good afternoon.
Thank you. Thank you.
The next question comes from the line of Frode Morquedahl from Clarksons Securities. Please go ahead. Yes.
Thank you. John, I think I came on a bit late, so I think I just catch your Last words on the upfront there. I think you said something about you're not going to invest in newbuild or secondhand tonnage. Was that correct?
Yes. We just wanted to make it abundantly clear that we're holding on. We're not currently now in the next couple of months distributing and returning 100% of the net proceeds To be able to be a little bit flexible on opportunities that may come around in terms of buybacks and some other things, but we want to let our investors know that it's not for buying ships. We think that where we see real underlying asset values and the NAV that that implies for OET, Buybacks start to look very interesting. Our issue has always been the liquidity of our share and being able to do a buyback At sufficient scale to actually make a dent in terms of the accretion to us.
If we're unable to do that, Then it's highly likely and probably the base case outcome will be that we will distribute 100% of the $45,000,000 back to shareholders by the end of the year.
Okay. So it's going to be a combination of stock repurchase and dividends then, it seems. But given the market outlook you have with the very strong rates ahead and asset values improving, wouldn't Wouldn't it be tempting to add the exposure on the ship size as well?
Well, we feel very happy
with the We have and we feel this is the time to capitalize on it. We cannot spend what we earn in the good times to Buy new ships because then we will never give the investment back to our investors, to our shareholders. So No, we don't think so.
Our big investment was placed through 2018, 2019 and now is the time to harvest those cash flows and return capital back to shareholders.
Okay. So this upcycle you're going to sell basically. That's the message. Yes. Yes.
Final question for me is like, I think you mentioned when you announced the sales that it's Going to improve the emission performance of your fleet. But surely those ships would not have been a big problem, I would think, right? It's fairly new, fairly modern ships. So just like our general But what's your view on this IMO 2023 event and the EXI? What's the implication for the tanker market really?
Do you have any view On, say, potential scrapping, slow steaming and vessel value for those ships that Are not able to be compliant.
First of all, on scrapping, I want to make a point before Aristides gives you A more detailed answer about the whole question. I think today we're facing a very strange anomaly. If you go to buy an 18 or 19 year old ship today, a Suezmax for example, is priced at, let's say, $16,000,000 This is a fact. This is not this is we know that. Scrap value of the same ship is about $11,000,000 It is very clear that All the old ships right now, all the old ships that are being sold and trade are servicing Venezuelan and or Iranian group.
It's very clear that there is a major, major breach in the let's say in In the sanctions. Thank you. And this is keeping those ships alive. I think the minute The situation is normalized with Venezuela or Iran. We see a dramatic drop In over 8 ships that will be able to trade for safety concerns and for emissions reasons.
And here And pass
it on to Espirit
to give you the answer about 23, which I think is the best thing that's happened to us
in any event. Hi, Frode. The entire fleet including the 2015 builds that we've now sold, We believe we'd be compliant and wouldn't need any alterations or modifications for the upcoming EEXI regulation. That being said, the majority of the fleet would. And I think the expectation is that I mean, the only way to achieve the ratings for vessels that are, let's say, over 6 years old today, but Especially vessels that are 10 years, 15 years old and even more so Chinese ships is to have Serious reduction in their engine output capacity.
So these ships by definition they wouldn't be able to achieve speeds that More modern ships could. Now I mean this could lead to them trading at slower speeds, but Up until now, charters have not been accepting the owner to stipulate what speed the vessel can do. And I mean, if it's half a knot, Perhaps, but not just 2 or 3 knots. So I mean, in a firm market, some of the old medium aged vessels Could still perform, but in medium and weaker markets, I think that especially the old going on to 10 plus years old Wood could be faced with a scrapping scenario.
And we have also heard from senior Staff and Boards of major oil traders and oil companies for the first time that they are discussing To actually prepare ships that have a smaller carbon footprint. And this is a very interesting development. Thank you.
Yes, indeed. Thank you very much.
Thank you. Thank you.
We have a follow-up question now from the line of Dennis Angelopoulos from ABG. Please go ahead.
Just one more quick follow-up question, gentlemen. What's going on who's bidding For the vessels, the younger vessels that you're hearing about that 95 plus, who are the interested buyers? Is it independent Boners or is it more conglomerate type companies like Costco?
Look, I think you've seen the recent S and P transactions that have happened recently. They've been both they've been state oil companies, they've been listed owners such as Arkays trying to modernize their fleet, but we can't comment on any specific names.
Okay. And then just one quick follow-up on the EXI comments you made. You That some people might have to derate their engines, right, the output and potentially go slower. But This derating on EXI, is it on design speeds, which are much higher? Like or is it that vessels won't be able to sail over 10 knots if
The EXI and The derating of the engine will regulate the speed that they're allowed to do. I don't know if that Yes,
I understand that. But just say, I guess, potentially in the research you guys have done, if you derate 15 year old VLCC, Does that vessel have to go at max 10 knots because it's been derated? Or can it still go at 12 knots And that'd be acceptable to a charter?
So I think they we with the technical department, we've seen Some calculations of how the ESI could work for thirsty or older ships and it could be power reductions of 30%, 40%. So if the ship has a service speed of 14 knots, it would be a reduction of 40% from that speed. And obviously, a service speed is it's an ideal scenario when the ship is delivered after 10, 15 years, the ship doesn't have the same performance that it did.
And we don't know yet how they would monitor that, actually, I mean And weather,
if you
would mind. Yes.
All right. Thank you very much for the clarity. Hopefully, we'll get more some going forward. Thank you,
Tom. Thank you.
We have no further questions. So I will now hand back to John for any closing remarks.
Thank you all for your continued interest in OEP and we look forward to speaking to you next quarter. Thank you all.
Bye bye. Thank you.
Bye bye.
Thank you for joining today's conference. You may now disconnect your lines.