Ladies and gentlemen, thank you for standing by, and welcome to Avan's Gas Holdings Ltd. Second Quarter twenty twenty Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Peter Simonson.
Please go ahead, sir.
Thank you. Thank you for dialing in to this presentation of the second quarter results for Amanskast. I will start to talk a little bit about the key financial highlights, which will follow by a market and company update. So if we start by moving to Slide three. We recorded a time charter equivalent rate of just below $29,000 and 94% commercial utilization for the quarter compared to $45,000 per day and 97% utilization previous quarter.
Have about five ships completed special survey by the second quarter and four scrubbers have been installed. So we recorded a total of eighty nine off hire days for this quarter related to these installments. We have a time charter coverage rate of 21% for the second half of this year at an average rate of just below $34,000 as I will return to. We have announced today two transactions. One was previously announced, which is the sale of the Advance of $35,000,000 which will contribute with $17,000,000 in cash in the when it closes, which is expected during next month and also a reduction in the CapEx of $2,000,000 In addition, we have received credit approval for a $45,000,000 JV SPAC transaction for the Pompero with the Chinese leasing house at very attractive terms, giving a low cash breakeven, which also will contribute to the $10,000,000 in free cash.
For the company, a total of $30,000,000 raised, which will be raised during the course of the second half of this year. On the cost side, the OpEx came in around $8,600 similar to last quarter, still impacted by the COVID-nineteen situation, which
makes
it complicated to do crew changes. It increases traveling costs and freight costs and also has increased our spares and stores onboard the ships. We do expect some of these costs to be come down during the course of the year, but some of them are expected to be unrecoverable as part of the COVID-nineteen pandemic. On the administrative and general costs, they have come in significantly lower this quarter, most of which relates to personnel expense as we now have a joint CFO and CEO role. In terms of cash flow, we have this quarter recorded $11,000,000 in scrubber and dry dock CapEx compared to $14,000,000 in the previous quarter.
We've also had an equity ratio of 4544% and a cash position today of $78,000,000 Our net profit for the quarter was $6700000.0.00 $11 per share. Moving to Slide four. As mentioned, in the previous in our Q1 presentation, we've had been affected by the COVID-nineteen situation at our drydocking program at the Malaysian shipyard. And this has also caused off hire dates this quarter. We have eighty nine days recorded, most of which can be related to COVID-nineteen and our drydocking program.
We have moved the program now to a Chinese shipyard and have, by mid September, completed the dry dock and scrubber installation for the Chinook in Passat scrubber installation for Passat only. And we expect to have the program completed by mid November with Breeze and Pompero outstanding, where Breeze has already carried out a special survey. We have approximately 75% of our drydocking and scrub CapEx paid as of today. Moving to Slide five, our cash breakeven and coverage overview. We have a cash breakeven overview or estimate for the full year 2020 at around $22,000 just below above $22,000 per day.
This includes the reduction in the cash breakeven due to the refinancing of the Pantera and also the sale of the Avance. The refinancing will give a cash breakeven for Dutch ship only of below $20,000 per day, which we find this very, very attractive. On the coverage side for the second half, we have, as mentioned, 21 coverage at a rate of around $33,500 per day. We also have approximately 5% of the days in the second half of this year for planned drydock, as mentioned, and also the remaining 74% are available days. If we move to the market and Slide six, we can see the volatility in the freight rates on the graph showing the black line, the Houston Chiva Dollar per ton rate, and the Houston crushing and the Rusten River Chiva or Baltic rate in the blue and green color, respectively.
The COVID-nineteen pandemic has impacted the market through a temporary reduction in demand in Asia for LPG, particularly in China and elsewhere in Eastern Europe, now Eastern Asia. And it also created significant operational challenges through lockdowns and manning challenges, and also through the dry docking program that we've had, as mentioned. Coinciding with this have been the OPEC plus production increases, which affected the oil price in late last quarter. And this both led to lower oil prices or lower U. S.
Oil expectations for production, but also closed the arbitrage between The U. S. And Asian LPG prices. And this reduced the trading activity for a long period, which put pressure on rates. We have seen the rebound of rates since July, and this is obviously a result of returning demand in Asia, where we've seen the Chinese return significantly and also Indian demand stabilized.
And this is, as you remember, predominantly residential demand in India, which is less affected by economic instability than the industrial demand. We have also seen the impact of lower fleet capacity due to dry dockings and slow steaming, which has contributed to the freight market upswing that we've seen during Q3 to date. Moving to Slide seven. We saw the arb close in following the oil price fall, and this has led to lower activity, particularly out of The U. S.
We have seen that we've seen an average of around 55 cargoes for Q2, and this is with the weakest month being May and June. And we've seen this rebound sharply in July as we saw the arb open up and oil prices rebounding to around the levels that they are now in the mid-40s. The largest increase from the terminals has been on The U. S. East Coast, where the Marcus Hook terminal is sourcing propane from the Marcellus and Utica shale formations.
And we've seen a strong growth in the exports out of this region, which also follows some of the seasonal trends as the winter market normally reduces LPG exports from this area in particular. Moving to Slide eight, we can see that the export out of The Middle East has been following very much the behavior of the OPEC plus countries. The Middle East exports are very much driven by the production as there is very little storage capacity in The Middle East. And you can see the spike in April month on the left hand graph, which was 70 cargoes for that month, while coming down to the more normal levels in May and June as the cuts were implemented. The July numbers are up after the cuts have been reversed slightly in July.
We do expect that The Middle East production and exports will be rather flat. As you can see on the left hand graph, it does follow the same levels for a number of years now, although it's a little bit below due to the pandemic in May and June this year. Moving to Slide nine. We the graph here, the graph on the left hand side shows the expectations from the EIA at their update in earlier this month. And it shows that it will be rather flat production in 2020 from last year, but they expect a reduction in U.
S. Production in the next year. We've seen that this estimate has come up significantly by 4,000,000 tons since the May estimate. And also, we've seen looking at the EIA numbers that they have continuously year on year underestimated The U. S.
Production and have between two percent and twenty percent underestimated the actual LPG production in Europe. And I think as has been discussed in the market these recent weeks, they have been using a lower oil price than as an assumption, and it seems to be lagging the development of the oil price and the expectations. So we do expect that production levels will be higher than what is what the EIA here estimates. And this also relates to the fact that onethree to 50% of the production of LPG comes from non oil based production, or at least non oil production based LPG, which is natural gas production, where the natural gas prices have been low for a long time and it's not the profitability of NGLs contributes more significantly into that equation than it does in the oil based fields, and also on the refinery runs where the oil put into these refineries either have to be sourced from The U. S.
Or imported. So we expect this to increase. And this follows also The U. S. Export capacity, which includes still significant increases in export capacity from Targa coming onstream this year and also planned increases from on the Markerschuk Terminal in the years to come.
And in addition, significant pipeline and infrastructure investments, which are due to come on stream in the next one to two years or starting with later this year, which will add more product availability in the terminals at a lower cost, which will contribute to improving the fundamentals of the export U. S. Export. Moving to the demand side, and we have mentioned it, we did see as you can see, China particularly reducing their demand in the early part of this year. And this was somewhat offset by Indian demand staying strong due to the shutdown of the refineries in India and whereby their refineries the output of LPG from the refineries had to be replaced by imports.
Once the refineries started up again, this has been balanced out by growth in Chinese imports, which is up by 25% from first quarter. And we do expect that this will start to normalize as we move ahead. Chinese PBH plants are back to around 80% utilization, and we do expect this to normalize to the more normal 90% utilization as we move along. There is also still significant capacity coming on stream for the PDH plant in China in 2021 and 2022, which is still going on as planned from the information that we have. So the long term fundamentals on the demand side does look very healthy.
And bearing in mind that 80% of the global demand is in Asia and that a lot of this is or most of this is non industrial demand, residential demand and also auto gas demand, which is inelastic and not as sensitive to economic volatility as industrial demand. Moving to the order book. We have a fleet per February '99 ships, and of this, 11% on order, around 33 ships. We've seen four ships being ordered since May when we released the first quarter numbers. And there is nine ships now due for delivery or eight ships due for delivery in 2022.
We still have, as we have discussed previously, around onefour of the fleet to drydock in 2020 to 2022, and we've seen that effect in the second third quarter to date, how quickly the fleet balance can change when ships are taking out the drydock. And the most ships due for drydock comes into the later this year and into 2021, after we had 40 ships being delivered in 2016, which are now due for their first special survey. We have 27 ships still older than twenty five years, and these ships are getting closer to recycling by the quarter. And this will naturally follow the state of the market, but the with the improvements that we see on technology and on efficiency and emissions, we do believe that these ships will be phased out in the coming years, depending on the market, of course. We now see some of these ships staying at storage where they are not as impacted by fuel capacity and so on, and emissions.
But this will have an impact at some point and serves as a reserve in terms of fleet balance against a weaker market where surely these ships will have the potential of being recycled. Just to remind everybody of the strategy we have on our fleet renewal. We sold the our oldest ship, the Avant, which, although being an efficient ship for her age, did have a higher consumption of fuel than what we see our future fleet to be. And we have two new buildings, which will be fully dual fuel with LPG and low sulfur fuel oil. They have 91,000 cubic meter intake, which means that they have a much larger intake than the current ships on water, which will contribute to the flexibility of our customers in trading the ships.
We have significantly lower consumption and speed due to the design of the ships and also due to the higher calorific value of the LPG. The ships will be able to go round trip U. S, Asia on LPG without bunkering, so it will be more efficient to trade the ships. And they are fully designed as dual fuel, which means that they have the shaft generators, which will enable them to run on dual fuel in the ECA and SAK areas as well. They will reduce SOx emissions by close to 100%, and particle pollutions by 90%, and together with slow steaming we are already close to achieving the 2,030 CO2 reduction targets with an estimated CO2 reduction only on the engines itself of 28%.
We do also believe that these ships will be very, very attractive in the financing market, given the green profile of the ships and the focus that you see from investors and banks on supporting the green shift in shipping. So moving to Slide 13. On the supply side, as mentioned, we see a reasonable order book. We do not expect that we will see a lot of ordering in this segment or due to the lack of capital, both debt and equity capital, which is now avoiding cyclical businesses in general. I think that this will limit the number of ordering going forward.
We have a lot of the fleet coming out of the market, going to drydock, both ships being retrofitted with LPG per day portion and also going into the special surveys. And we also have quite a lot of ships being due for recycling and being older than the average scrapping age of twenty eight years as we speak. On the production and demand side, we have significant natural gas and refinery based production in The U. S, which is going to continue to produce regardless of the oil price. We have EIA estimates, we believe will be improved.
We believe that they will be they are underestimating the production. And this is what we also saw in 2016 when the oil price fell the last time, is that the LPG production stayed quite stable throughout the period, much related to the fact that a lot of this product is not oil based as such and will continue to be produced regardless of oil prices. We have significant improvements in U. S. Infrastructure that will come on stream that have been confirmed throughout this period.
We do have also some projects such as the enterprise second expansion of their terminal that has been put on hold, but they have confirmed that pipelines and splitters and fractionation capacity will continue to be carried through. And also pipelines going out to the Markerskuk Terminal in on the East Coast, the Mariner East 2X pipeline, which it's going to contribute with more propane going out to the terminal in Markerskuk. The Asian demand is returning to normal and will also increase with the growth trajectory that we've seen on the domestic or residential demand side, but also with the growth in PDH plants, which is expected to be significant over the next couple of years. So a key takeaway, I think, the outlook is that for the company, we have raised $30,000,000 in cash that we will close during the next couple of months. And we have thereby covered our pre delivery CapEx at a normal conservative financing for the newbuildings at trade rates significantly below our cash breakeven rate, which means that we are very comfortable with our capital situation with these transactions.
We will continue to look at ways of raising more capital and strengthening our ability to invest further, but we're very happy with these two transactions. We also had covered our book with for the second half of this year with 21% of timeshare coverage at attractive rates. And we believe that we are very well positioned for what can be positive forecast durations going forward, both for U. S. Production and also for freight rates in general.
With that, I can take questions.
Ladies and gentlemen, we now begin the question and answer session. There are no questions from the phone at the moment, sir. We have one question from the line of Gregory Lewis from BTIG.
Hey, good afternoon. Yeah, just kind of looking at the current moving rates that we've seen here over the last couple of weeks. Just trying to get a better understanding and you definitely touched on it throughout the presentation and just your comments around some of the optimism that you're having as we move into the back half of the year. Like do we think are we at a point now where we'll kind of move through the impact of the pandemic? I mean, like just looking like rates year over year kind of have gotten back to where they were.
I mean, we've definitely seen stronger rates, but nevertheless rates are okay by historical standards. Just kind of if you could talk a little bit about, I guess, what's happened over the last couple of months and kind of to kind of help tighten up the market a little bit?
Well, I think as I tried to touch upon, it is the rebound that we saw in June was, to a large extent, driven by ship tightness and slow steaming and dry docking of ships. But obviously, showing that the small changes in the supply and demand balance can have a significant impact on the freight rates. That combined with the oil price coming up to the levels that we have now, where we can see that the price arbitrage between The U. S. And Asia can open up.
And normally, you've seen that the Asian prices have been very much linked to the oil price, while Mont Belvieu has been living its own life, so to speak. So but with the oil price moving up to this territory that we see now and with the slow recovery from the COVID and discipline supporting the oil price, we should see a further move on the oil price, which will further help the arbitrage to open up. So it is a combination of the fleet being reduced in capacity due to sloping and dry docking, but also obviously the underlying fundamentals of the market returning. And this has also obviously impacted the inventory levels in Asia, where you've seen that with the less imports, they have been starting to chew into their inventories, which then again pushed the prices up. And the same in The U.
S. With inventories staying building over the past months with a steady production level. It's bringing the inventories up to solid levels, which has pressure on the battery.
Okay, great. And then just one more for me. At least in North America, gas flaring has really been put on guard as something that's not really it doesn't seem like there's it seems like that's going to just continue to kind of get the ability to flare gas is going to continue to get kind of pushed out of the market. I mean, you kind of think about the development of that, and it's not going to happen overnight, but as you think about that over the next couple of years, do you see the potential for and you touched on the arbitrage opportunities that sometimes drive volumes. I mean, could it be one of these things?
I mean, could it just be arbitrage or not? This gas that was previously flared needs to kind of be kind of needs to be pushed into other markets. I mean, that something I feel like it's something that we've heard a lot about over the last couple of years. Do you think that's something that actually starts to happen? Or do you think it's really going whether the volume is there or not, it's really going to come down the price, guess, is what I'm asking.
Yes, which is obviously a positive thing for the arbitrage. I mean, the gas that previously which has been flared needs to be pushed to the system, that's going to impact the inventories and the price levels. I think that the market is moving as I know some of our competitors have also been talking about, and we have discussed this before, moving into a more demand driven market where the Asian demand is what's going to drive things going forward. We see that we're now closing in on 50 of The U. S.
Volumes going to export. And year to date, 67% of The U. S. Exports have gone to Asia. So rather than this being an arb or not issue, which it hasn't been historically either because there's been a lot of volumes that are growing regardless of the arbitrage sort of base volumes that are basically lack of growth in The Middle East has made the Asian buyers turn to The U.
S. For LPG, and that's going to continue. But I think at some point, the growth will outpace the it will need to be sourced from The U. S, and that will need to be cleared by the prices in the market in some way. And obviously, the more product that's going to help on pushing The U.
S. Prices down, but I think it's going to work in both on the Asian prices and The U. S. Price.
Okay, Thank you very much for the time today. Have a great day.
Thank you, Greg.
Thank you for your question. We don't have any other question from the phone.
Okay. Then I thank you for joining today's call and have a great week.
That concludes the conference for today. Thank you for participating. You may all disconnect.