Good day and thank you for standing by. Welcome to the Avance Gas Holding Ltd first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link anytime during the conference. Please be advised that today's conference is being recorded, Wednesday, the 25th of May, 2022. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Øystein Kalleklev. Please go ahead.
Thank you, and good afternoon, and welcome to Avance Gas first quarter earnings presentation. I'm Øystein Kalleklev, the Executive Chairman of Avance Gas. Today, I will be joined by Randi Navdal Bekkelund, our CFO, who will guide you through the financials a bit later in the presentation, and our Chief Commercial Officer, Ben Martin, who will join us for the Q&A session. If you like to ask a question in the Q&A session, you can either use the telephone conference or just use the chat function in this webcast. Before we start the presentation, just to remind you of the disclaimer, we are providing some forward-looking statements and some non-GAAP measures linked to the TCE numbers, and there are limits to completeness of detail we can provide. I recommend reading also our earnings release today. Okay, let's start on the highlights.
In the first quarter, we delivered time charter equivalent income of $46.9 million, corresponding to an average TCE of $37,600 per day, which we are reasonably satisfied with. We took delivery of two first LPG dual fuel VLGC new buildings, Avance Polaris and Avance Capella, which went straight from the yard on two variable time charters with TotalEnergies and Petredec, respectively. The VLGC market started the year on good footing, but have been very volatile so far this year, with rates starting off at around $50,000 before falling down to about $15,000 in early March, before quickly rebounding and now hovering above $50,000 again. Financially, we are therefore also doing well with a net profit of $24.3 million for the quarter, equating to earnings per share of $0.32 per share.
This corresponds to an annualized return on book equity of 17%, while we are trading well below book value with a market cap today of around $370 million compared to book equity of $570 million, i.e., giving a price book ratio of around 65%. Please note that we utilize hedge accounting for interest rate swaps and thus do not book unrealized, realized gains. Just like a lot of other shipping companies, we also made big gains on interest rate swap in the first quarter, which Randi will elaborate on.
Given the healthy bookings and improved outlook, as well as the new financing we announced today, improving our financial position, the board of Avance Gas has therefore decided to hike the quarterly dividend per share from $0.05 - $0.20 per share, which provides our investors with an attractive running yield of around 17%. While we have taken delivery of two newbuildings, we have also utilized a strong secondhand market to divest two of our older 2008-built ships. The two ships have been sold with a total book profit around $11 million, of which we are booking $6.2 million in Q1 for Thetis Glory sale, while the second sale will be booked in Q2 as delivery to the new owners took place in May.
Lastly, we are today announcing a $555 million sustainable loan at very attractive terms. This loan will replace the loan for 9 of our existing VLGCs, plus our two next new building with an accordion option to also add new building 5 and 6. This will push out our major debt maturity from 2024 - 2028, boost our cash significantly with pro forma cash of around $200 million, which gives us a very healthy cash cushion. Turning to slide 4 and our fleet status. Avance Gas is a shipping company focused on seaborne transportation of LPG, with a fleet consisting entirely of the largest ships in this segment, which we call Very Large Gas Carrier, or just VLGCs for short. The VLGC market represent about three-quarters of all LPG volumes being moved at sea.
Mid-size gas carriers transport about 15% of volumes. Large Gas Carriers, handy-size ships, and small coasters share the remaining approximately 10% of the market. 11 of our ships have a capacity of around 83,000 cubic meters, with our latest six LPG dual fuel ships having a slightly bigger parcel size of 91,000 cubic meters, so we also have space for LPG as fuel and/or cargo on board. As mentioned, we have sold two of our older ships.
For the remaining three 2008/09 ships, we have secured fixed higher time charter coverage for most of 2023, thus also eliminating the fuel price risk, as these ships are on average thirstier than newer ships and are also not fitted with exhaust gas cleaning system or what we typically call a scrubber. We are also seeing very wide price spreads between very low sulfur fuel oil and heavy fuel oil, with the spread currently at around $200-$300 depending on where you tank up. Six out of our eight ships in the spot market are fitted with a scrubber, and this fuel spread is significantly boosting their earnings potential compared to ships without a scrubber. During the first quarter, we took delivery of two of our new buildings, which are equipped with LPG dual fuel system.
These ships have very favorable freight economics compared to older ships, as they are the most efficient and have the flexibility to run on LPG fuel as well as compliant fuel, which is also good for the environmental profile of these ships. Before turning over to Randi for our financial update, I just want to reiterate the favorable characteristics with our six new dual fuel LPG VLGCs. By burning LPG, we have a low sulfur fuel and do not require any scrubber. Particle pollution, which can be detrimental to people's health, is also reduced by 90%, while CO2 footprint is around 40% less than for a standard 2010 Korea-built ship due to more efficient engines, while also lower carbon levels in LPG compared to traditional marine fuel.
Hence, it should not come as a surprise that these ships will score top tier in the coming EEXI ratings, and also when it comes to the annual carbon intensity rating, which we call CII. Our next four VLGC newbuildings are also what we call ammonia-ready. This means that we can, with some modification to the engine, which MAN is working on as we speak, burn ammonia as fuel in the future in case this fuel takes off. One of our ships will also be able to carry ammonia as cargo. In connection with our annual report filing in April, we also published our fourth annual ESG report, which is based on the marine transportation framework from Sustainability Accounting Standards Board, and we are this year also adding the Global Reporting Initiative index.
With that, I turn it over to Randi for our financial review before I will revert with a short market update.
Thank you, Øystein, and good afternoon from Oslo. Moving to slide six, I will briefly go through the key financial highlights for the first quarter 2022. The charter equivalent TCE earnings came in at $46.9 million, corresponding to a daily TCE per ship day of 37,600, which is up from $21.6 million or a daily TCE of 27,600 in previous quarter. Operating expense were $10.7 million, equaling a daily average OpEx of just below 8,500. This compares to $9.7 million or 8,100 per ship day in previous quarter.
We are still seeing COVID-19 crew change expenses in our books, this is likely to continue somewhat, but it's expected to come down during the course of the year as the vaccine is rolled out to all of our seafarers and the local restriction being eased as we speak, especially in Asia. Administrative and general expense, A&G, for the quarter was $1.4 million, corresponding to $1,100 a day, down from $1.6 million in previous quarter due to the recognition of one-off personal expense, and is expected to be maintained at $1.5 million on a quarterly basis in 2022. Based on this, we reported an earnings before interest, tax, and depreciation of just below $35 million for the first quarter, up from $21.6 million previous quarter.
As Øystein already mentioned, we sold two of our older units, the 2008-built vessels, Thetis and Providence, where one vessel was delivered to the new owner in March, thereby recognizing a gain on sale of $6.3 million in the first quarter, and Providence was delivered to the new owner last week and will recognize a gain on sale of just below $5 million in the second quarter. Net profit was $24.3 million or $0.32 per share for the first quarter, corresponding to an annualized return on book equity of 17%. Furthermore, we have recognized $11.7 million in positive mark-to-market adjustment related to our interest hedges designated for hedge accounting through other comprehensive income and equity.
For the second quarter, we maintain the supportive commercial results, which is expected to be similar to Q1 of $35,000-$36,000 a day on a TCE per day basis on a discharge-to-discharge. As the market is picking up at the end of the second quarter, we expect the reporting TCE to be approximately $32,000-$33,000 a day, which is on a load-to-discharge basis. A few comments to the balance sheet. At quarter end, we had an interest-bearing debt of $444 million, equaling a debt-to-total asset ratio of 43%, and we have a solid equity position of $571 million, corresponding to a book equity ratio of 56%.
We have a robust cash position of $110.6 million at quarter end, and I will now move to the next slide to go through the cash movements during the quarter. We generated $39 million in cash flow from operations and approximately $22.5 million in net cash proceeds from the sale of the VLGC Thetis Glory. We paid quite a lot of new building CapEx of $121 million, mainly related to our 2 first dual fuels, Avance Polaris and Avance Capella, delivered in January and early or end February. Out of the $121 million in CapEx, $104 million was financed with bank debt, and the remaining $16 million was sourced from cash at hand.
Furthermore, we repaid $10.7 million in scheduled debt amortization and prepaid $20 million on the revolving facility and just below $4 million in dividends, resulting in a cash position of $110.6 million by the end of the first quarter, which is up $9 million from year-end. We will significantly increase our cash availability with the refinancing in place, which leads us to the next slide. Slide eight. Last week, we signed a $555 million sustainability-linked facility with a bank syndicate consisting of seven well-reputed Nordic and European banks. The new facility is a refinancing of the existing bank debt for nine of our vessels on water and consists of an amortizing term loan facility of $200 million and a non-amortizing revolving credit facility of $125 million.
In addition, we also secured financing for the newbuildings number three and four for delivery in Q4 this year and Q1 2023. This is structured in a $115 million term loan facility, and we added an uncommitted option to finance the two last newbuildings for delivery second half next year at the same terms. The new facility bears a tenor of 5.7 years from signing and matures in January 2028, has an age-adjusted profile of 20 years, a margin of 220 basis points, plus floating SOFR, and will significantly lower our cash break-even with $800 per day for the nine VLGCs and $1,300 a day for the whole Avance Gas fleet.
This gives us a cash break-even at attractive levels of $21,200 for the whole fleet, including the new builds and based on quoted SOFR today of 78 basis points. Looking at our debt maturity profile post the refinancing on the next slide, nine. Including the uncommitted accordion option for newbuilding five and six, all vessels are financed with the first debt maturity in January 2027, pushing the majority of the outstanding debt from 2024 - 2028. This leaves us with a very limited unfunded CapEx at approximately $20 million, which potentially can be sourced through free cash flow within less than two months in the current market environment quotes at $50,000 a day.
Looking at today's cash position on the next slide, we have a cash position of $121 million, and we will draw down the new facility of $325 million in the second quarter, corresponding to a pro forma cash position exceeding $200 million. We have structured the new loan with a revolving facility of $125 million, we can utilize the flexibility to manage and optimize the cash to avoid associated interest costs for overcapacity in cash. Lastly, all of our bank financing has now a sustainability-linked structure attached, further demonstrating our commitment to reduce our carbon footprint, which is well integrated into our business model. With that, I leave the word back to you, Øystein, for the market update and outlook.
Thank you, Randi, and well done with the financing. Let's review the recent market development. As I mentioned in the introduction, our market is the VLGC market, representing 75% of seaborne LPG market. We'll focus on data for this market rather than the overall LPG market. So far this year, the VLGC market has grown steadily with 11% in the first four months of the year compared to an overall growth of 9% for the whole LPG market in this period. U.S. is about 50% of the market, while Middle East deliver close to 40% of the VLGC cargoes. On the import side, Asia is the main importer, taking around 75%-80% of the VLGC cargoes.
The export growth so far this year is driven primarily by the Middle East, growing a whopping 20%, with 68% export growth from Saudi Arabia, 56% from Iran, and 19% from the United Arab Emirates. Export from Qatar is, however, down 18% compared to last year. The biggest export market, North America, where U.S. exports represent about 95% of the volume, grew at a steady rate of about 6%. On the import side, the biggest market is China, which represents about 25% of all VLGC cargo volumes. India is slightly ahead of Japan, with these countries importing about 14% of the volume.
With the energy crisis in Europe has also been pulling in more VLGC cargos than usual, with VLGC imports in the first four months going from 1.6 million tons to 2.6 million tons, equating to 60% growth. Yeah. Given the uproar in energy and commodity markets since the invasion of Ukraine by Russia, we do get some question about Russian LPG exports. Russia produce quite a lot of LPG, which is maybe not too surprising given their vast hydrocarbon infrastructure. In 2021, Russian LPG production was about 16 million tons. However, around 75% of this is consumed domestically, so only about 5 million tons are available for exports, and most of this is being exported over land, typically by rail.
The seaborne LPG exports from Russia is minuscule, with volume slightly above 1 million tons in 2021, and with all these cargoes being smaller than VLGC cargoes. The seaborne LPG exports have been holding up. Volumes so far this year is 0.5 million tons compared to 0.4 million tons last year. We do see LPG exports by land to Europe declining and more Russian LPG exports by land being diverted to other markets. If we look at the VLGC export market with a bit longer view, the growth of US exports become more evident. Following the shale boom in the US, volumes are up 400% the last seven years, with US market share growing from about 20% to about 50% today, while Middle East exports have stayed fairly stable.
This have also resulted in steady overall growth for the market, with close to 8% annual growth in VLGC volumes in this period, with total volumes of around 83 million tons in 2021 compared to the overall LPG market of around 110 million tons, i.e., the 75% market share of VLGCs that I mentioned. With the good start of the year, as I recently explained, we do expect volume growth to be steady both this year and next year, with U.S. Energy Information Administration estimating close to 15% growth in U.S. LPG exports in 2023, which will mitigate the high fleet growth for the next year. What can we expect from U.S. volumes going forward? In the past, U.S. shale producers have been gobbling up debt in order to meet their production targets.
Following the oil price slump in 2015, U.S. shale players become somewhat more restrictive on investment, and this was further aggravated by the oil price crash caused by the COVID-19 outbreak in 2020, which resulted in shale producers becoming even more restrictive on CapEx. This have mainly been driven by investor pressure for the companies to rather return cash flow through dividends, deleveraging, and buyback, as evident from this recent survey by Dallas Fed, where about 60% of companies point out this as the major factor for them restraining production growth. With oil price firmly above $100 and also high natural gas prices, both domestically in the U.S. and even more so internationally, the free cash flow for the shale producer have therefore shot up, as illustrated by this The Wall Street Journal article or graph this week.
We do think that there are a couple of drivers that will result in increased shale production, which will also benefit LPG exports. We are in the midst of a global energy crunch where there are very many drivers favoring increased U.S. production, which have short lead time to the market. This is also evident from the stock market, where the energy stocks in the S&P 500 index are up by about 50% this year, despite the overall index being down almost 20%. The Baker Hughes Rig Index has also staged a comeback and is up 60% compared to a year ago, which will be needed as the inventory of drilled but uncompleted wells, or DUCs, is now at the lowest levels. Turning to slide 15, and let's have a look at the freight market.
The biggest driver for the freight rates is this price spread or arbitrage between the producing regions, U.S. and the Middle East, and the main import destination, Asia. With improved arbitrage spreads and tight shipping market, Baltic LPG One, Middle East to Chiba in Japan, has bounced back from around $40 per ton to around 85 today, while Baltic LPG Three Index for U.S. to Japan has bounced back from mid-70s to around 135 today, while fuel prices have stayed relatively flat. Keep in mind that VLGC shipping is predominantly a voyage charter market, where the owner of the ship gets paid dollar per ton of cargo shipped and take care of the fuel and canal costs, in contrast to the time charter market, where the charters pay both for higher fuel and canal costs in advance.
With the US LPG price Mont Belvieu at an arbitrage spread to Far East index of around $160 per ton, shipping is thus grabbing a big share of the cargo economics. The Q3 and Q4 freight forward agreement, or FFAs, are at very conducive levels with the two main freight indices at around $75 and $123 per ton for BLPG One and BLPG Three, respectively, which provides similar time charter equivalent earnings as today, given the fact that fuel prices are in degradation as well. With current prices per ton, time charter equivalent earnings for modern non-scrubber ships today is, as mentioned above $50,000 a day.
If we have a look at the current fleet, we do see a big chunk of the fleet is approaching retirement with 31 vessels already past 25 years and 18 vessels between 20 and 25 years old. All the 31 vessels are above 15 years and will be hit by upcoming decarbonization regulation with expected engine power limitation for these ships as well as for some newer ships. Keep in mind that sanction trade is not just something we see in the crude oil market. Around 30 older VLGCs are also transporting product, which is sanctioned primarily from Iran. In case sanctions are lifted due to progress on the former Joint Comprehensive Plan of Action, these ships will probably not be around for trading any longer.
We pointed out slippage possibility for the order book for 2023, as the number of ships are quite big but very slim for 2024. Hence, we would expect some slippage, particularly if the market turn weak. Gibson assume 39 expected deliveries in 2023 rather than the scheduled 46, as it's not unlikely that we do see some delays, particularly in China, where they have a stringent zero-COVID policy. Okay, last slide before doing the summary. Again, a new look at the order book.
As you can see from the graph, scrapping of older ships has been very muted the last couple of years, and we put it in this question mark here about scrapping from 2023 onwards when we do get the implementation of the new IMO regulation, the EEXI and the CII, which I mentioned. Another factor these days are the fuel prices. The older ships, especially without a scrubber, are becoming less economically. We are also getting into EU carbon trading scheme for shipping, probably implementation 2024. For VLGC, this will not be a big factor because a slim portion of the cargoes are going into Europe. We would expect other countries to follow the path of EU to implement carbon pricing in shipping, which will penalize less efficient ships.
Another factor is the voyages are becoming longer. We do see the Panama Canal will nearly double their canal fees over the next 3 years, which means that we will see more ships continuing to avoid the Panama Canal, taking longer routes to end consumer market in Asia, and this will be positive for ton mileage. All in all, we think we have a fairly stable market. Order book for 2023 is a bit high, but as I mentioned, we could see some slippage. We do expect scrapping activity to pick up in the coming years due to the reasons I mentioned. I think we can just do the summary. Good results. As we mentioned, we are reasonably satisfied with the TC for the quarter.
Bookings for next quarter are also at healthy levels with good outlook for Q3, as most of the cargoes being booked now are for Q3. We are hiking our dividend from $0.05 - $0.20. We're giving our investors a pretty good attractive yield. We have done a great new refinancing, pushing out maturities and boosting our cash position while lowering our cash break-even levels. We've started the renewal process of the fleet, selling two of the older 2008 ships at very good prices and booking at a profit to book values while we are trading well below book values. Then we have taken delivery of newer, more efficient ships. Outlook, as I mentioned in the presentation, it's fairly good.
Very conducive rates for the second half based on the FFAs we are seeing in the market. 2023 will be—it's a bit too early to say how that will play out. Order book is a bit big, but also we see pretty high production growth. We see reasons for increased scrapping. With the current newbuilding prices of above $90 million for high-spec VLGCs on dual fuel, which is the only type people are ordering these days, we do think also that the contracting of newbuildings will be a bit muted as a lot of the yard slots are being taken up by LNGC carriers and container ships. With that, I think we conclude the presentation, and we can check whether we have any questions.
Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the hash key. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link. Please stand by while we compile the Q&A roster. Your first question from the audio comes from the line of Climent Molins from Value Investor's Edge. Please ask your question.
Good morning, and thank you for taking my questions. You're now sitting on a very solid financial position, which will be further strengthened by the new refinancing. You declared a significant dividend on quarterly earnings, but given the discount to NAV you're currently trading at, how do you think about balancing dividend distributions with share repurchases? Okay, that's a good question. I think maybe I had you on my call in Flex LNG conference call here two weeks ago as well. I think we also had some similar questions, where we have a big pile of cash and, what to do with it. Yeah, it's a good question. We just signed the loan agreement, last week. We are preparing for draw down of the new facility within a week and a half.
Getting the money on the account ahead of closing of the second quarter with, you know, a pretty big cash pile. As mentioned, pro forma cash slightly above $200 million. We've put in some, you know, similar to what we have done in Flex LNG, we put in a big revolver facility, which enable us to keep a lot of liquidity available without having to pay a very high price for that liquidity. We have a commitment fee here of 75 basis points, which means that we can have this cash available then for the next 5.8 years without incurring a lot of financial expenses, which will hurt our cash break-even levels. Our cash break-even levels are pretty attractive, I would say, for this fleet. Let's see.
It's a bit too early to comment on it. We are, of course, as a function of better market and better financial position, we are hiking the dividend quite substantially. In terms of buybacks, it's a bit difficult as well with the liquidity and float in this year is not very great. We have Hemen Holding owning close to 77%. Actually, Avance Gas is one of the biggest shareholder also in Avance Gas with a big number of treasury shares. In that sense, buybacks is a bit difficult given the liquidity in stock. We have so far focused on paying higher dividends to the shareholders. We have also good bookings for next quarter.
Hopefully that is something we can keep on paying effective dividends to our shareholders. Then let's see when we are getting everything in place and what to do with it. We're also doing this to have more financial flexibility, you know, in case 2023 market is a bit wobbly.
That's helpful. Thank you. BW LPG conducted a very aggressive LPG dual retrofit program. Most of your fleet is now either scrubber fitted, LPG dual fuel for the new builds or chartered out, but you do have a couple vessels which could be potentially retrofitted. Is this something you have considered? If so, how much would it cost?
Yeah, it's. I think we have two ships. This would be Chinook and Pampero, which is 2015-built. Before they go in dock in 2025, we probably have to make a decision what to do, either retrofit LPG on them or scrubber. Right now in current market, having scrubber is a huge advantage, as I mentioned, with scrubber spreads of $200-$300, depending on location. Right now we are just, you know, sitting back and enjoying having scrubbers on our ships. Of course, how prices will develop will also affect our decision, what to do, going for a LPG retrofit or the scrubber, which is a cheaper alternative.
We haven't made any decision yet on whether to go for the other or the next, because for us, it's more like we have the option to wait, and we don't need to make this decision at least 18 months before getting to dock in order to kind of place the orders for the equipment. It's certainly something we look into, but we will make that decision when we're getting a bit closer to 2025.
All right. That's very helpful. That's all from me. Thank you for taking my questions.
Thank you.
Thank you. Once again, if you do wish to ask a question, please press star 1 on your telephone. There seems to be no further questions from the phone lines.
I think we have one question here on the web. What do you forecast regarding dividends in the coming quarter? The answer is very simple. Depends on the market. We aim to pay out, you know, our excess cash and earnings to shareholders. If the market stays strong, which it looks to be doing right now, I think people can enjoy a pretty good dividend. But, you know, this is not really a company where we have a lot of backlog. We have made, you know, we put five ships on time charter, three of them on a fixed higher time charter, which is giving us stable income on those three older ships for the next two years or so. Then we have variable time charter on the new building.
The earnings for those ships are really dependent on where the market is going. As long as we are making money, we aim to distribute the money back to shareholders. With this new financing, we also have a bit better financial position than we had in the past. We have much longer maturity profile. We've taken on the cash break-even slightly, and we will have a lot more cash on hand so that we are able to kind of have the exposure to the market, which we like to have the exposure to, but you need to have some money in order to take some risk. That's it. I would thank you all for joining today this presentation, and we will be back with Q2 numbers in August.
Hope to see you again then. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.