Good day, and thank you for standing by. Welcome to the Avance Gas Holding Limited Second Quarter 2024 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 one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link any time during the conference. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Øystein Kalleklev. Please go ahead.
Thank you, and thank you everybody for joining this, Second Quarter Results Presentation For Avance Gas. I'm Øystein Kalleklev, as mentioned, CEO of Avance Gas, and I will be joined here today, as usual, by our CFO, Randi Navdal Bekkelund, who will run you through the numbers. As mentioned in the introduction, we will, close the presentation today with a Q&A session, where you can either ask a question by the conference call or by the chat function. So, as you can see from our front page, we have found some inspiration in the Japanese icon, The Great Wave off Kanagawa by Hokusai. This picture was sold at Christie's last year for $2.7 million.
So we made our own edition, which we call The Great Wave of Dividends by Avance Gas, and we paid out close to $270 million of dividends for the first half year of 2024, which means that our shareholders can buy close to hundreds of this picture. So, let's begin with the disclaimer. During the presentation, we will be giving some forward-looking statements, provide non-GAAP measures like TCE, and there's, you know, limits to how much details we can provide in this short presentation, so we recommend that you also read the presentation together with the earnings release, which we published today. So let's kick off with the highlights. Numbers came in as expected.
We delivered our time charter equivalent earnings on a discharge-to-discharge basis, which is the basis for our guidance of $51,100 per day. The load-to-discharge number we said would be $3,000 - $5,000 lower, given where the market was trading, and we were also in line with that guidance measure with the 46,700 on the load-to-discharge number. This resulted in strong numbers for the second quarter as well. During the quarter, we sold one ship, our last new building, VLGC dual fuel new building number six. That ship was sold in May at $120 million, giving us a profit of $36 million. So altogether, for the second quarter, we delivered net profits of $61 million.
That means for the first half of the year, as you might recall, we had fantastic numbers for Q1, driven also by the sale of three ships, so first half of the year, net profit is $207 million. This is not only the highest ever half-year result, it's actually higher than any full-year results we ever delivered. This results in our earnings per share of $2.7, and as we will touch upon, it's also a lot of cash release here, giving us ample room to pay very attractive dividends. Subsequent to quarter end and prior to us reporting, we announced the sale of the remaining 12 VLGC in our fleet to BW LPG for a sum of $1.05 billion. This provided us with a gain of approximately $350 million.
So we will be trading all the ships until end of the year. Some ships might be delivered to BW earlier, so we also have some room to make a trading profit on the ships prior to delivery of the ships to BW, where we will also then become the second biggest shareholder of BW LPG. Cash proceeds from the transaction is $585 million, and we will now raise $132 million of debt. When we are concluding the transaction, we will also pay down all debts of Avance Gas.
So this gives us a pro forma cash Q2, adjusting for the sale of $485 million, which we do think, of course, we will also be making some free cash flow in Q3, given our bookings, and Q4, given where we see the FFA rates for that quarter. During the summer, we had a bit soft market. Q1, Q2, yeah, a decent quarter with $50,000 in TCE. Given the improvement in the traffic through Panama Canal, with more slots coming available, there's been more ships in the market dragging down the freight economics. So currently, we are booked 79% of third quarter at $41,000, also on a discharge-to-discharge number. We don't expect much deviation this quarter or the third quarter for load-to-discharge and discharge-to-discharge.
Q4 looks better, which is usually the case. You're getting into the winter season, more traffic, more weather, and usually more pull to Asia. So, FFA rates or the forward freight rates are currently at around $55,000 per day for the fourth quarter. So, with strong numbers, a very big cash balance and even bigger on a pro forma basis, adjusted for the transaction we recently announced, the dividend for Q2 will be $1.35 per share, bringing the dividend for the first half of the year to $3.50. That translates to $268 million of dividend being paid in the first half of the year, or equal to about 30% of our market cap.
There will be more dividends here as we are closing the transaction with BW during Q3 and Q4. Delivering those ships to BW, we will be paid cash and shares, which will give us ample room to continue paying out dividends, very high dividends for the rest of the year. Let's see what we've done the last couple of years here now in Avance on slide four. We've sold all our VLGCs. We started off in 2002 by renewing the fleet. We sold three older 2008, 2009-built ships for a profit of approximately $20 million. This was in connection that we took delivery of new buildings, so we took delivery of Polaris and Capella in 2022, Rigel and Avior ordered the year after.
Our plan then was to sell off the older ships and renew the fleet with the dual-fuel class of ships. We continue doing so. Last year, we announced the sale of Iris Glory and Venus Glory. Iris at $60 million, Venus at $66 million, which gave us a profit on those two sales of close to $50 million. However, at that time, those ships were traded by us until Q1 last year. So with those ships were closed in Q1, and we booked the profit from the sales in Q1. At that time, we also got a very good offer on our new building, being Castor and Pollux, which was scheduled for delivery in 2024.
We contracted those ships at $78 million, upgraded them with ammonia spec for about $2-3 million, and we sold them prior to delivery for $120 million. So with those sales, we had a fantastic Q1, and of course, the Pollux sale was booked then in Q2, as that ship was delivered from shipyard to the new owners, Pertamina, in May. So we were left with 12 ships, our rather new fleet then, as we have done the fleet renewal, eight 2015 Eco-class ships, of which six fitted with our exhaust gas scrubber, and then four dual fuel, 91,000 cubic, larger VLGCs.
We then found it in the best interest of the shareholders, given where new building prices are, where secondhand prices are, to sell them en bloc to BW for this $1.05 billion. And we concluded that sale on August 15, and I will provide more color on the sale. So altogether here, we have sold ships for $1.559 billion, with gains of $455 million, of which $436 million has been done this year, and with a cash release of around $474 million, plus we will also receive a 12.8% stake in BW LPG once the transaction is closed, where we've put a value on that, on the transaction, of $333 million.
So we calculated the NAV of the BW share in that transaction to $17.25. It's slightly higher than the stock price today, but we think they are well positioned with these ships, with the fully integrated value chain, with also product services. So I think that will be a good deal for the Avance shareholders. That leaves us with four new builds. These ships were contracted last summer. Four of them, these are medium size gas carrier or medium-sized ammonia carriers. They can carry both. And these ships are set for delivery in Q4 2025 until Q4 2026. And I will come back a bit more on what we are planning to do with these ships later in the presentation. So just a glance on the transaction with BW.
We had a cash at quarter end of $268 million. We will receive a cash settlement from BW, where we will be repaying all the debt in Avance, where we will have a remaining cash balance of $217 million. That gives us a pro forma cash, as I mentioned in the introduction here, of $485 million. Then we will receive 19.3 million shares in BW, where we pegged the value at $333 million. Once we receive those shares, we will treat them as fair value assessments and basically take them to mark-to-market in our accounts. The MGC fleet has a value, where we've taken the Clarksons number. A Clarksons new building price for similar ships is around $70 million per ship.
However, those are for delivery 2027. We have delivery of our ships earlier, 2025 and 2026. Today, interest rates are quite high, so it has a value of getting the ships earlier. Also, given the fact that actually, as I will refer to, time charter rates for MGCs are quite attractive these days. So we pegged those at $288 million, or about $72.5 million each, or $72 million each. We then deduct the remaining CapEx on those ships. We paid in $43 million to the yard in pre-delivery installments, so we deduct the obligation to the yard of $203 million. And then, once we have closing down the financing, we will have to terminate our interest rate swaps.
As some of you might recall, we hedged our interest rate at very attractive level, basically more or less all our debt this year at about 3% and also coverage well into next year. Mark-to-market on these swaps at end of Q2 was $8-$9 million. So that we will also release. And then on top of that, trading ships in the freight market also entails having working capital. We had 27 million of net working capital at end of Q2, which we will release.
Then finally, depending a bit on where the freight market is, we do expect our peak cash flow during Q3 and Q4, trading these ships in the market, given our guidance and forward assessment of somewhere around $30-60 million, where we then ending up at a NAV, a debt-free NAV of close to $1 billion, which should translate into a value per share of close to $13 or about NOK 135 per share. That is the value we intend to deliver back to the shareholders in the coming quarters. Just a bit more on the transaction on page six, it's a bit repeating here. $585 cash BW shares, we will now raise the two leases we have. That adds up to $1.05 billion.
We have a $350 million gain on the sale. And once we are paying down the debt, the net proceeds is $217 million of cash, $333 million of BW shares, and then we can add top up with some trading profits in Q3 and Q4. Looking at the timing of the sales, we kind of crystallize the returns for our shareholders. Here we have the curve of Clarksons new building prices. As you can see, we hit the bottom quite well on contracting ships in 2019 and 2021. We ordered altogether six dual-fuel MGCs at the price of $78 million each.
We did some upgrades on number three and four, where those could be fitted for burning ammonia at a later stage, once that combustion engine or the combustion of fuel gas system is ready. And we also added a specification on number five and six, where they could carry ammonia, which cost about $2 million. So altogether, around less than, slightly less than $80 million average on the ships. We sold the five and six for $120 million. We announced that last year, and they were so delivered to new buyers in March and May, and now we sold the remaining four dual fuel new builds. If we then look down on the curve, these are quoted 5-year resale prices, and then we have adjusted the curve for depreciation to also arrive at a 10- and 15-year curve.
We see that we sold Thetis and Providence above the 15-year curve, and then Venus Glory, as you know, we got a really good price on her for $66 million, where basically we're getting close to a 10-year price for a 15-year-old ship, and then the 8-15 ships are now sold at an average of about $73 million, which is spot on kind of the ten-year resale price. So we've been able here to selling ships at very attractive prices, both historically and in relation to the resale curve, which has resulted in pretty good shareholder returns. We have start first of August, prior to COVID. Stock was doing pretty well in 2019, and then COVID happened, and basically all stocks in the world had a hard time before the world recovered.
So if you had invested in the stock first of August and you have it today, you would have an 800% return in U.S. dollars. If you were Norwegian, bought them in Norwegian kronas, your return would be 1,000%. So you would be done doing a ten-bagger the last five years by being invested in Avance Gas, and now we basically crystallize that return for you because we're selling the fleet, and we are receiving cash and shares in BW as proceeds from that sale, and we have a remaining investment in four MGCs. So, let's talk a bit about the numbers for the quarter. As mentioned, our numbers are in line with guidance. We guided 83% at $48,000. We delivered all in $51,000, where our numbers were pushed up slightly by our FFA hedges.
We had some hedging by using forward freight agreements, ending up at the $51,000 when we include this. We also expect to make some profits on our FFA hedges in Q3, given the soft market. As mentioned, we are 79% covered, expect to arrive at around $41,000 today for Q3, including the FFA hedges, which are contributing $1,300 on average for that quarter. And as I mentioned, we don't expect much mismatch between the discharge to discharge and the load to discharge numbers, ± $1,000. So, then before giving the word to Randi, just a bit on the dividend.
We had this huge hike in dividend in Q1, where we paid out $2.15 per share in just one quarter, the same amount we paid out in the whole of 2023. This translates to $165 million. For Q1, that was $0.99 return of capital because we returned the capital for new building five and six, where we raised $65 million in April 2021 to finance that transaction, and then the return on the profits. In Q2 now, we are paying $1.35, $103 million for this quarter. And then as we are releasing money from the transaction in the coming quarters, we will continue to pay out the net proceeds as cash dividends to our shareholders. The dividend decisions and criteria are quite easy this time.
We have, you know, good profits, we have fairly good bookings. Visibility is very clear because all the ships will be delivered to BW before year-end. We have ample liquidity, $268 million+ , you know, if the pro forma cash is higher, we will repay all the debts, but we are flying colors, of course, on the debt covenant. Then we will maintain some cash for the CapEx liabilities for the MGCs. We paid in $43 million, as I mentioned in the earnings release in the CEO statement, we will preserve somewhere around $50-$70 million for the remaining equity for those ships. But we are also assessing strategic alternative for those ships.
So it could be that also those ships will be sold, and then if that is the case, the proceeds from such a sale will also be distributed as dividends to our shareholders. So with that, I hand it over to you, Randi.
Thank you, Øystein. I think you have already addressed and summarized all of my slides, but I will go over them. Let's go to slide 10, and have a look at our income statement and key financial figures for the second quarter. Our TCE per day for the quarter was $50,000 on a round-trip discharge-to-discharge basis, which is in line with the guidance of $48,000 a day for 83% of vessel days. As the market was stronger by the end of the quarter compared to the previous quarter, we had a discharge effect and adjustment in accordance with the accounting standard IFRS 15, resulting in a reported TCE per day of $46,700, which was also in line with the guidance.
We successfully completed the sale of Avance Pollux during the second quarter for a cash consideration of $120 million. The sale resulted in a gain of $36 million and a net cash proceed of $62 million. This was the fourth vessel sale completed this year. Actually, for the first half, bringing the total gain from vessel sales to $121 million, and net cash proceeds of $89 million for the first half. Net finance expense was $1.5 million for the quarter, and consists of net interest expense of $5 million, relatively low, compared to the floating interest rates, as we have hedged most of our outstanding debt at 3% SOFR, compared to the floating SOFR of 5.3.
Additionally, we recognize the finance income of $3.5 million coming from interest income on cash deposits. Net profit of $61 million for the first quarter, $0.79 per share, and with the first quarter results of $146 million, net profit for the first half 2024 came in at $207 million, $2.70 per share, which is the highest half-year results, and as Øystein mentioned, exceeds any full-year results recorded ever. Let's go to slide 11, and have a look at the key financial effects of the completion of the transaction with BW LPG.
The sale of the VLGC fleet at $1.05 billion will result in a derecognition of the VLGC fleet, booked at $750 million at quarter end, and $745 million at the announcement date, August 15th. The delivery window is between September 15 until December 31st, and we estimate a total gain on sale of $350 million, of which $305 million will be recorded as gain on sale and $10 million in lower depreciation expense. Just a few comments on the IFRS standard. A reminder, the VLGC fleet will be reclassified from long-term assets to current assets, presented as assets held for sale, with effect from the announcement date, August 15th. And with the total gain recorded for the first half, $121 million, for the four vessel sales.
In the first half, we estimate the total gain on sale of $426 million, and in addition, $10 million in lower depreciation expense for the full year 2024. We also estimate a positive effect of $4 million on net finance expense, as we aim to terminate the interest rate swap hedges with a market value of $8 million as of June. This is probably gonna be offset by approximately $4 million in expense debt issue costs following the recognition of the outstanding debt. For the balance sheet, the settlement in BW LPG shares of $333 million will be booked at cost initially, and subsequently measured at fair value, with changes recognized in profit or loss. This will be classified as current assets in the balance sheet.
Further, we have, or we will derecognize $500 million, following repayments of bank and novation of sale leaseback agreements at delivery, leaving us with a net cash effect of $270 million, which gives a pro forma cash of $485 million, which I will come back to. We will now move to slide 12, expense over the quarter. We started the quarter with a cash balance of $360 million, which was added by cash flow from operations of $25 million, sale of Avance Pollux in May of $62 million, and we also settled some interest rate swaps of $1 million. This was offset by some CapEx related to the first MGC of $6 million, where we now have paid 25% of the shipbuilding contract.
We also paid out on debt schedule, debt repayments of $10 million. Lastly, as you might recall, we had a very high distribution to shareholders in May of $165 million, which was split into return of capital, representing $79 million or $0.99 per share, and dividend of $86 million or $1.16 per share. By adding these movements, we have a reduction of $92 million in cash over the quarter, and gives us a cash position of $268 million at quarter end. On slide 13, you will see that the cash will increase substantially after completion of the transaction and sale of the 12 VLGCs.
We expect a cash release of $270 million, as commented already, after delivery of all the vessels within the delivery window in December 31st. Additionally, we aim to terminate interest swaps of $8 million and some FFA position of $1 million, as well as trading profits generated during the third and the fourth quarter in a range between $30 million and $60 million, depending on the spot price market. We have already booked 79% at $41,000 a day, and by applying the FFA curve for the fourth quarter, which is currently at $55,000 a day, this suggests the cash flow from operations of about mid-point $45 million.
Based on the cash quarter-end and the cash flow following the transaction gives us a pro forma cash of $539 million. Moving to slide 14, here is an overview, some more details on the outstanding debt as of June. We have, in total, $500 million in interest-bearing debt, of which $358 million is bank term loan facilities, split in two. Nine vessels are financed by a bank syndicate, consisting of seven banks, and one vessel, Pampero, is financed by a bank bilateral. So the remaining two vessels are financed in a sale and leaseback arrangement with BoComm, which currently is $132 million in outstanding debt, will be novated to BW LPG.
And with that, I leave the word over to you, Øystein, for the market comments and the game plan ahead.
Thank you, Randi. Also worth mentioning, I think when we announced the deal with BW, we had some subjects here to credit approval of the novation of the sale and leaseback, and that has been approved. So we are progressing with all the paperwork so that we can close that transaction prior year-end. Let's look at the overall market for seaborne LPG exports. We have had continued growth in U.S., which is by far the biggest exporter and by far the biggest leaser of VLGCs. OPEC has kind of stagnated the growth in the Middle East, where we have seen flat markets. And then on the import side, it's continued growth in China, which is ramping up a lot of PDH capacity. India is a growing market, which will continue to grow.
LPG price has been quite elevated, so we've seen more switch back to LNG in Europe, where LNG has been trading at a discount to LPG, so 5% down on the European imports. Worth mentioning here, and I will come back to that, we see very strong growth on MGCs compared to VLGCs these days, which bodes well for our new builds. Digging a bit more into U.S. LPG production, it's really the same story. Consumption in the U.S. is relatively flat, while we keep on growing volumes. There is a lot of NGLs when you are drilling for oil. A lot of the NGL is being recovered.
A lot of the NGLs are now located in Texas, where it's easier to build all the infrastructure required to get these volumes on ships, and this is driving the growth of the market. U.S. inventories were brought down by the cold winter season in U.S. at the start of the year, where we actually hit down to the five-year average on inventories, which really killed off the arbitrage in the beginning of the year. Which resulted in rates going from $140,000 per day over New Year, and all the way down to $10,000 at the beginning of the year. However, with this good production profile in the U.S., inventories has bounced back and are now at the high end of the five-year average.
Which means that also prices in U.S. are very low, and when they are low in the U.S., the arbitrage improves, which I will come back to. So we see a very conducive market for arbitrage now, where actually freight rates are artificially low compared to where arbitrage levels are. So, looking in the U.S. a bit going forward, we have had situation now where we've been when close to the ceiling of exports. But it's good to see then that our, you know, more capacity being added. There's a stream of announcements from the big players that they're adding capacity.
As I mentioned, you know, a lot of the production now are located in Texas or New Mexico border, where you have easy access to getting the permits required to build the infrastructure to get the LPG on ships. We do see a ramp up in LPG exports, which bodes well for market balance 2025, 2026. We think having also some of the settlement in BW LPG ships could be beneficial for us. Spot market, as I mentioned, it's been up and down as usual. We had this, you know, big drop in the market. If you look at the graph on the left-hand side here, from $120,000, we were at higher levels than that also prior new year, down to $10,000. So cash break-even there is about $20,000.
We had a bounce back once the cold weather in the U.S. dissipated, and had a pretty good market until summer, where kind of the glut of ships coming open dragged on freight rates again, down to about $20,000, end of July, early August, before they now bounce back, trading now at around $40,000-$50,000 per day. The dotted line shows the freight forward rates for the remainder of the year, where we said this is at about $55,000 for Q4. So that's on the low side compared to historical average. You see this gray shaded area is the historical average. Usually, Q4 tends to be by far the best quarter, and we are far below the average on the FFAs today, so there are some upsides on freight, we think.
As we have alluded to here, this time last year, we were hitting all-time record high freight rates. Freight rates are very much impacted by arbitrage economics, so arbitrage economics kind of put a ceiling on what you can pay for freight. If arbitrage is $300, you shouldn't be paying more than $300 per ton of freight. Right now, arbitrage is close to $250 per ton. In this graph, freight is at around $100 per ton. It's been picking up recently. We are now at close to $120 per ton, but still, kind of the arbitrage is twice as much as the freight. So there are, as we put in our mind, the gap, the plethora of available ships.
There was also ships coming available in the market because of Hurricane Beryl, which disrupted exports. So when there are too many ships in the market, they are dragging down the freight rates. If shipping market becomes tighter, there is a lot of upside on freight, given the arbitrage. That's kind of our message here. If we look at the order book, we have also said in the past, we had a period now where we have had high fleet growth through 2023. A lot of the investors were so worried about the fleet growth for 2023, that we even made a Mythbusters VLGC edition for this in 2022, where we told people shouldn't be too worried, because also export growth is very high in the U.S. So export growth has been high.
We were also lucky last year in the fact that we had the drought season in Panama, which really cut down on slots. So a lot of ships had to sail longer routes. So actually, we ended up with the best market in 2023 since 2014. This year, congestion in Panama has loosened up, and this has resulted in more ships in the market, which has put some dent on the rates. But still, you know, if you look at the average TC for the first half of the year, it's pretty good. So we're quite satisfied with the trading earnings. Going forward, we will see less growth in the market for ships for 2025, before we have this new wave of ships hitting the market from end of 2026.
These are larger ships, typically either 88,000 or 93,000 ships, which we call the VLAC, Very Large Ammonia Carrier. These are LPG ships which can carry full ammonia cargo, 98% filling ratio. Those ships are coming from 2026, 2027, 2028, and basically everybody who's contracting our ships today are contracting these ships because they are not that much more expensive than our VLGC. At the same time, as we have pointed out in the past, there is an aging fleet. However, there isn't much scrapping, because a lot of the older ships are being turned into the shadow fleet of VLGCs, which is basically ships trading from Iran to China.
So that has been holding back scrapping activity, but we do see quite a lot of ships now turning more than 25 years, where we would expect at one time, typically when market is a bit soft, that some of these ships will leave the market, but rarely ships are being scrapped in a very good market. Game plan then. Okay, what are we gonna do here, except for counting money and paying out dividends? We are left with four MGCs, or we could also call them MACs, MAC, because these, as mentioned, like the VLACs, they can carry full ammonia cargo. So we kind of, some people were surprised when we contracted these last June. So we did a contract with the CIMC SOE, Chinese yard, for 2+2 ships at a very good price.
We exercised the two first ships in June, and then the two options in end of August last year, and we are now having four ships for delivery, 2025, 2026. So there are three alternatives. The easy alternative would just be selling these ships, and shipbuilding prices have gone up. So we will be doing all of these three alternatives in parallel. We can chew gum and walk at the same time. So while we are exploring S&P opportunities for the ships, we will also be, we are also in discussion about longer-term charters, and charter rates are good at the moment, as I will touch upon.
Then we do have some discussion with other owners of similar assets, where, you know, we are open to the idea that people are putting in ships of some similar quality and receiving shares in Avance Gas, so you can build sufficient scale, because having a publicly listed company with four MGCs is not really a viable strategy in our view. We will be working on these items in the coming months, and hopefully conclude with a favorable outcome for our shareholders. We are quite confident about that, given where the market is for MGCs and where secondhand prices are as well, which I will cover. Next slide. The two dots here are when we contracted the ships at what we said was very favorable point of time.
Since then, newbuild price has gone up around 13%. So we are at around $70 million for a similar ship now, but as I mentioned, for delivery 2027, we do think there is value in having ships earlier. We paid down $43 million in pre-delivery installments. All the ships have an installment profile of 15% payment at signing, then 10%, 10%, 10%, and 55% at delivery. So the big cash outflow here is not before Q4 2025, when we take the first delivery, then Q1 2026, second, Q2 2026, the third ship, and the final ship expected Q4 2026. So far, we have good progress on the yard, very happy with the quality, and actually all the ships are slightly ahead of schedule.
Then looking at the market for MGCs, this is really a growing segment. So we've seen this high growth on the LPG seaborne transportation, but where we see the highest level of growth is on the MGCs. So the MGCs is grabbing market share, and if we look at this CAGR growth factor from 2015 to now, it's about 30% U.S. growth. And it's a lot of growth in also the different end import nations, being Europe, Mexico, Morocco, Chile, and the rest of the world. So we think it's an attractive market, and that's also why we contracted the ship last year. So if you look at rates, so we have good fundamentals there. You'd also typically then have good fundamentals for rates.
Rates have been doubling the last five years from a low of $15,000 per day to now close to $35,000 per day. OpEx on these ships are quite similar, slightly lower. They are all fitted with scrubbers. So $35,000 should equate to an annual EBITDA of about $10 million per ship. So, if you put the value of the ship of $70 million, that gives you an EV/EBITDA of 7, which is a low number. I think with the contract, these ships could be worth more. So that's why we are looking at that in parallel. And the order book profile looks well. It's not that many ships for delivery. And also the fact, which I pointed out in the last.
Last bullet here is the fact that typically this market has consisted of three asset types. It's the MGCs, the medium size, the large gas carrier, which is typically 60,000 cubic, and then the VLGCs from 80,000+ . And what we've seen today is that people are cutting up their cargos and utilizing MGCs and VLGCs, and the LGCs are losing ground, which we think is favorable because this segment is gonna continue to eat market share. So with that, I think we conclude. Numbers, as mentioned, in line with guidance, $50,000 on TCE for the quarter. Q2 numbers are also inflated by our sale of VLGC newbuild number six, giving us $61 million of profit. In total, $207 million of profit for the first half of the year.
And then we've hopefully explained the rationale for selling the remaining VLGCs to BW, where we've received substantial cash and shares in BW, becoming the second biggest shareholder. And we are committed to paying that dividend, this cash back to you as dividend, and that's why we're also paying a dividend of $1.35 per share for Q2, where this adds up to $3.50 for the first half of the year. We have fair bookings for Q3, so we do expect to generate some cash flow in Q3, and hopefully with the FFA curve, we will be making a bit more in Q4. And once we close the transaction with BW, you can expect us to return the surplus cash to you in a timely manner.
So with that, I think we just head over for the Q&A with the chat, but we maybe can start with the phone.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please type it into the box and click Submit. Please stand by while we compile the Q&A roster. Once again, if you wish to ask a question, please press star one and one on your telephone.
Okay. This-
We have a few questions from...
Ah!
From the webcast.
Okay.
Uh-
I don't have my glasses on, so maybe you can go.
Yeah, yeah, yeah. The questions are quite similar, so I will try to combine all of them, but starting off with, what is the intention with the stock position in BW?
Mm.
Will Avance shareholder value be affected?
Yeah, so how we have organized this transaction is it's 12 ships. So 10 ships will be sold under a standard memorandum of agreement. This is just a sales contract, which is a standard form contract, NSF 2012, to be exact. So once we sell the ship, BW will post collateral or escrow for that amount. In connection with the transaction, BW will take over the ship. The money will go to the banks, repaying the mortgage on that ship, and the mortgage will then be released, and the remaining residual amount will be paid to us. In connection with each delivery, we will receive a set number of shares, and when all the 12 ships has been delivered to BW, that will add up to 19.282 million shares.
There is a lockup, as we said in the presentation in the press release, of 40 days. So we do expect most of the ships to be delivered to BW around November. So once we get that ship, those shares, there will be a lockup, which, you know, 40 days is convenient. We will come back with our Q4 presentation in February, where we will present our numbers for Q4, and then hopefully, we have been able to deliver a free cash flow in accordance with the waterfall we have shown today. And all the shares in BW, the lockup will have expired. So then, of course, we are not planning to become like a. There's a share in Oslo called Treasure, where you can buy a share to become an indirect owner in another company.
So what we are planning to do is either, you know, if we find a willing buyer, we might sell the shares and distribute the cash to the Avance Gas shareholder. If not, we will simply just dividend out the shares to our shareholder in Avance Gas. And if you add up the number, that means that for every share you have in Avance, you will get a quarter of a share in BW. And we find that stock very reasonably priced. And with the fairly muted fiscal 2025 into 2026, we think that could be also a good investment for you guys to have. So we are not planning to sit on those shares and be a kind of a derivative of BW LPG.
Our intention is to return that kind of asset, either by cash or share, to you, and this we will know by when we are reporting Q4 in February. But we will do whatever is best for the shareholders.
Mm.
... Very good. And then we have quite a few questions in relation to the company's plans regarding the ammonia market.
Mm.
Do we intend to keep the MGC?
No, yeah, as I said, we have three plans in our head. We are pursuing all of them in parallel, selling them, chartering them, or finding somebody else who have similar assets and combine with those. We do not intend to. Now we're sitting with a huge pile of cash, so we're not intending to run around then and contract a lot of new MGCs. We are committed to paying out the proceeds we have received from the VLGCs to our shareholders. If we are to do some consolidation, either then we raise money for that venture, for those who are interested, or we find other people who have ships who can take shares in Avance Gas. So we find it a good market, as you've seen, you know, the fundamentals for that market is good.
We didn't really dig too much into ammonia here. We have done that in the past. Ammonia market is expected to also grow quite heavily in the next couple of years, both by ammonia blending into coal plants, typically in Korea and Japan, and also in the general ammonia market, there are more people who want to have food, so and then there are also the blue and green ammonia, which could also pay off, depending a bit on the subsidies and the price of carbon, as this is a more expensive fuel than hydrocarbons, so we are open to that idea. We are doing everything simultaneously, and what our aim is just to maximize the value of those assets.
You know, we have received you know, quite a bit of interest on the ships, given the announcement on the sale of the VLGC fleet. The people do see that it's possible to do transaction with us. We have demonstrated that we have sold 16 ships this year, 19 VLGCs in total the last two years or so. Let's see. I hope I have some more answers to you when we are reporting Q3 in November, but we are in no rush. Those ships are not gonna be delivered before Q4 2025 onwards, and there's very limited cash outlay before delivery of the first ship.
And then, we have a question on the market: Could you please explain why the arbitrage is not going to the shipowners in the form of higher rates?
Yeah.
Is it remaining with the exporters?
Yeah, it's, you know, this is supply and demand. So Alfred Marshall, he explained this, I believe it was in Principles of Economics . So if there is a lot of ships in the market, given supply and demand is kind of the same, you know, what will happen if everybody wants to have that freight? Having a ship idle, it costs a lot of money in terms of OpEx and fuel. So you will take the price the market sets, and the market price is decided by the supply and demand. And during this summer, when you have seen a large increase in slots being available in Panama, that means, you know, if a ship is sailing from U.S. Gulf Coast to China, through Panama, both ways, going there laden and ballast, it's 10,000 nautical miles.
If it goes through Cape of Good Hope, because Suez is not really a viable option, it's like 15-15.5 thousand nautical miles. So when a lot of ships are switching trading pattern from going Cape, and then we have seen Cape and then Panama on laden, and suddenly also see ships doing the ballast leg on the Panama, it really frees up a lot of ships in the market. When there are more ships, rates will be low. That's just the law of economics. And that explains why the arbitrage and freight has disconnected, which is not that good for us, the shipowners. It's more, it's much better for the terminal owners or the people who have a term contract on the product.
So typically, you know, you enter into, let's say, a five-year agreement with the terminal, that you will be taking off of LPG, and you're paying a terminal fee then for that five-year period, which could be $0.05 or $0.06 or $0.07 per gallon. But certainly now, you have been in the position where you, as a buyer of the, that cargo, can turn around and sell it, FOB, free on board, for $0.27 per gallon, and then you're making a $0.20 profit on having the contract to lift that cargo. So it, you know, this goes in ups and down. It really depends on the balance. So once the freight market is tighter, then shipowners will be able to take out more of the arbitrage.
And as we saw last year, and seen in period where this freight market is super tight, most of the economics will end up with the shipowners. But when the freight market is loose, more of the economics will end up with the product owner.
We also have a question relating to the stock price. It has dropped 30% after announcing-
Yeah
-the sale.
Yeah, that has hurt a bit. Yeah, we had a stock price. We kind of had a rally here during the summer, despite, you know, freight at pretty low levels. And when we did the announcement, you know, depending on what analyst you will talk to, our price/NAV was somewhere around 1.2, 1.3 times. Of course, it hurts then to kind of agree a price where, kind of the proceeds from that transaction is lower than what is implied in the stock market. But we do know that the stock market is quite volatile. So as Warren Buffett says, "The stock market is a bipolar person who comes to your door every day and give you a price." Some days that price is too low, sometimes it's too high.
We've seen that the price we can achieve on selling the assets, and as I demonstrated on the cursor, is really very high asset prices, and that's also reflected in the net profit of $315 million, where we also have some upside on the trading. In that sense, kind of, it hurts to do something which is lower than the stock prices, but we can't have the stock price deciding the strategy of a company, because then the strategy of the company will be totally bipolar and volatile. We need to be kind of long-term thinking in terms of our approach. What we see now is that, okay, if you invested in Avance Gas the last five years, we're basically crystallizing an 800% gain for our investors in dollars, in NOK is, 1,000%.
That's a pretty good results. That's why we did the transaction. It also helps that it makes 100% industrial, strategically, sense, in addition to financial sense. It's... Of course, we like the stock only to go up, unfortunately, that's not feasible.
Yeah. I think we have concluded the questions from the webcast as well.
Yeah. Okay. Thank you, Randi, for reading the questions and presenting the financials. Thank you, everybody, for joining in on the call. We will be back in November with Q3. I think then we know where are more details about the closing process with BW. I would imagine quite a few of the ships has already then been delivered to BW and we have visibility on the remaining deliveries to BW. And then we probably also have some idea about the remaining bookings for the year and the cash flow we will have made on the trading of the ships. We will then come back with the numbers and give you an update on all that. Hopefully, we also have some idea on the strategy for the MGC.
So thank you, everybody, and talk to you guys back then in November.
This concludes today's conference call. Thank you for participating. You may now disconnect.