Ladies and gentlemen, thank you for standing by and welcome to the Avance Gas Holding Ltd first quarter 2020 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 keypad. I must advise you this conference is being recorded today, Thursday, the 28th of May 2020. I would now like to hand the conference over to your speaker today, Peder Simonsen, Interim CEO and CFO. Thank you, sir. Please go ahead.
Thank you. Thank you for dialing in. I hope everybody's staying safe in these unprecedented times. The VLGC market long remained protected from severe impact of COVID-19. The OPEC Plus production increases and the oil price fall following that. While we, subsequent to the quarter end, have seen this slowly impacting the market. The cuts implemented after quarter end from the OPEC countries, reducing volumes out of the Middle East and temporary lower Asian demand has added to the closed arb between the U.S. and Asia. That has reduced activity, bringing the freight rates under pressure. I will start today's presentation by going through the financial highlights of the quarter. I will follow that by a market and company update, and have a Q&A session at the end. If we start by going to slide three.
We had achieved TCE rate for the quarter of $45,000 per day, which is $6,000 per day lower than in Q4 2019. We had an OpEx of $8,600, which was up from previous quarter. This is largely due to increased costs due to storing and spares in connection with the COVID-19, where we have increased critical spares level and stores aboard our ships. We expect this to even out during the year. Our G&A was at just above $1,000 per ship day, which was slightly down from last quarter due to one-off effects in the previous quarter. Our non-operating expenses were largely unchanged, and our net profit for the quarter was $15.1 million or $0.24 per share. In terms of cash flow, we had a strong operating cash flow. We had drawdowns under our scrubber financing that we announced in the previous quarter.
This was offset by the aggregate of dividend payments of $19.1 million in March and CapEx related to our two new buildings and scrubber and dry dock payments. Our cash position was $86 million at the end of Q1 and is today approximately $92 million. We had an equity ratio of 44%. This quarter, the board has decided not to do declaring dividend in view of the more challenging market outlook that we see currently on the basis of the oil price falling and demand slowly returning. Still more challenging than what we have seen previously. Moving to slide four. Our result this quarter was impacted to a large extent by our dry docking program, where we had 295 of our days. Out of these days, we had 100 days directly related to COVID-19 out of our estimate. This has impacted the results severely.
We have, during this period, seen both delays in delivery of equipment and also returning of the workers to the shipyard following Chinese New Year, which escalated into a full shutdown of the shipyard where we had our ships dry docked during March, April. We have now completed four out of six scrubbers that we have planned to install and five out of nine scheduled dry dockings that are due in 2020. Due to the closing of the spread between VLSFO and HFO, we are considering what to do with the remaining four dry docks and two scrubbers. We are also postponing currently the slots that we have at the Malaysian shipyard, which we intend to dry dock in China at a later stage. Moving to slide five. We have a cash break-even of $22,000 per day.
This excludes dry dock CapEx, but includes the new financing that we had in place as of the first quarter. This is the estimate for the remainder of 2020. In terms of time charter coverage, we still have, in accordance with the dry docking plans and scrubber retrofit plans, we have 5% of planned dry dock for the remainder of the year. We have a TC cover for the remainder of the year of 15%, at an average rate of approximately $35,000 per day. We have them on six days of 78% for the last three quarters. We can move into the market update.
If we start off with the quarter, we have seen that the Q1 started off on a very strong note both seasonally and in absolute terms with very tight shipping situation, which was largely attributed to both strong export volumes out of the Middle East and U.S., but also due to the IMO 2020 implementation, which held back capacity, both due to shipyard scrubber retrofits that took capacity, but also due to bunkering situations where there was delays, both in bunkering of ships from shipyards and also in the Panama Canal. This led to, obviously, the tightening of the freight market, but it did also impact each voyage result negatively and due to the delays that were incurred due to this.
As you can see from the graph, we were impacted then following quarter end by the further delays in shipyards, but that was offset by the events that I talked about earlier. The COVID-19 slowdown in demand and also lower exports. If we move to slide eight. We can see from the graph the strong growth that we've seen on the left-hand side from the U.S., reaching a record 73 cargoes per month in April, a very strong all-time high level. From the left-hand side, you can also see the long-term trend on the U.S. side, which we'll revert to in a minute, which is now expected to fall down in 2021. On the Middle East volumes, on slide nine, you can see that the production increase had a significant impact in March and April, where the Middle East exports were reaching 69 cargoes in April.
This is also a recent record. We see that these volumes are expected to come down as the cuts are responding quickly to the export volumes. Looking ahead, on slide 10. We saw the EIA come with their updated estimate on U.S. LPG production and consumption in mid-May. These numbers show the significant reversion of previous growth rates where they now expect a flat production rate year-on-year 2020 to 2019 and a fall in 2021. They do also expect a significant fall in consumption rates, which means that the export volumes are not expected to fall as much as the production cuts should indicate. We should also bear in mind that 35% of U.S. production comes from non-oil price related refinery and gas plant production wells.
We've seen from experience that the resilience of LPG exports versus production and also the LPG production versus oil production is quite strong. We should also note that EIA have historically been underestimating the U.S. LPG production throughout the last six years each year. We do expect positive revisions once the oil price stabilizes and there's more visibility on the future economic development. That said, it is imminent that we will see lower activity out of the U.S. going forward. On the terminal side, on the right-hand graph, we still see and expect a growth in terminal capacity. In 2021, we still expect Targa to come out with their terminal expansion, which they reconfirmed in their earnings call earlier this month. We also expect Enterprise to come on with their expansion, and also their further expansions plans on different terminals going forward.
Moving to demand on slide 11. We did see that the Asian demand came down following the COVID-19 situation. This was predominantly in the industrial side of the demand, which represents 40% of the total demand globally. When you saw the Korean and the Chinese demand come down due to lower activity at the petrochemical plants in the area, we saw that India increased their production due to shutdowns of their oil refineries, which normally supplies them also with LPG. The balance was a fairly flat demand situation throughout COVID, until recently where we've seen India starting up their terminals again or their refineries again, and thereby supplying more LPG. This has reduced the imports somewhat. The overall underlying demand situation is unchanged. 80% of global demand is in Asia.
A lot of this is residential demand, which is continuing to grow regardless of COVID-19 and the global economy as such. China PDH has been a driver for the market for a long time. Some of these volumes have been reduced due to COVID-19. We see now that the existing plants are returning to full operation. There are only minor delays estimated from analysts on the new PDH plant capacity which is due in 2021 and 2022 now. This also goes for Korea, which has also quite significant PDH petchem plant growth plans ahead. India will continue to supply a steady growth in terms of cargoes going into their mainly residential demand growth. This also goes for Indonesia, Vietnam, Philippines, Cambodia, and other highly populated countries which also are increasing their imports of LPG to cover residential demand.
Year to date, 64% of all U.S. exports has been exported to Asia. This is an increase of one percentage points compared to 2019, and further three percentage points in 2018. We do expect this figure to grow as the growth is in Asia in terms of LPG exports. Moving to slide 12. On the fleet, I think we are in a situation where we have a order book of 11% by end April. By year-end this year, we will have only 7% order book. We do not expect any orders. We haven't seen any orders since January. We do expect that to continue. We do not expect a lot of orders in this market environment. We have 27 ships older than 25 years.
Out of these, approximately half are trading ships which we expect can be taken out of trade and recycled if the market stays at low levels. We also have a fleet of which a very large number were delivered in 2015, 2016, and 2017, which means that these ships are due for their special survey during 2020 to 2022. Approximately 20%-25% of the global fleet will be taken out annually in this period. That will also take out capacity. Finally, we do also expect that in the order book that we have, that there will be delays. We have indications from brokers that the order book will be delayed, that there will be slippage in the order book due to delivery of long lead items as a result of COVID-19. This remains to be seen, but that is at least the indications that we see now.
We will also see continued scrubber and LPG retrofit programs to a lesser degree, but that will also add to the capacity side of the fleet. In conclusion, if you just move to page 13, I think that in general, the oil price has dropped and this has had a significant impact on what we expect the U.S. production will be in the years ahead based on the current oil price scenario. It seems that the oil market and the experts covering this market expect a recovery, but it's still uncertain when this will happen. The EIA, who we are in this market using as a benchmark for the estimates of the LPG production and exports, they have, in their report, used the current market sentiment as a backdrop for their estimates.
We do expect that once the oil market recovers, we will see an increased revision or upwards revision of those estimates. It will also impact the U.S.-Asia LPG price arbitrage, which is also impacting the marginal incremental volumes that are going out of the U.S. We also see further improvements in the infrastructure and terminals on the U.S. land side. It's not an issue as it is now, and we saw that Enterprise exported 37 cargos alone in April. More efficient throughput and distribution of product is also a positive thing for the market going forward. The long-term demand situation still looks fundamentally strong. It is a matter of timing when this will come back to normal growth trajectories, but we see that this is returning. We do have a modest order book at this time.
In 2016, the last time the market turned, the order book was 30%, three zero. We do have a lot less ships to absorb coming out of this what we expect to be a somewhat weaker period than what we had the last time. We do also expect that the capacity will be reduced by the dry dockings and also by scrapping potential going forward. With that, I think that I will open up for questions.
Thank you, sir. Ladies and gentlemen, we now begin our question and answer session. If you wish to ask a question on the telephones, please press star and one. If you wish to cancel the request, please press the hash key. That is star and one to ask a question. We do have some questions coming in, sir. Your first question comes from the line of Gregory Lewis. Please ask your question.
Yes, thank you and good afternoon. You touched on it a little bit throughout the call. You kind of talked a little bit about the arbitrage between, for LPG, kind of mentioned the oil price. How should we be thinking about the naphtha, the LPG trade, naphtha cutting in the LPG volumes as we look at the futures curve for Brent, it's basically under 50 out through 2024, where a year ago it was over 60 that whole period. Realizing that the futures curve is not necessarily the best indicator of where the oil price is going to be. Is there any kind of oil price level we should be thinking about that could actually see what makes naphtha less competitive, which could drive those kind of incremental opportunities?
Hi, Greg. I think that the inflection point where the naphtha and LPG becomes less or more attractive, I think it's a very difficult number to pinpoint. In general, I think that the switching capacity in the Asian LPG to naphtha crackers is less significant to the demand side than it has been before. The ones we talk to estimate around 5% of demand that have switching capacity. In general, I think the switching between naphtha and LPG is less significant. It is significant in terms of the total volumes, and now we also see the petchem volumes sort of overall come down. I don't have a specific number, but I think that obviously a stronger oil price at somewhere between $50 and $60 would reach that inflection point. I don't have a single oil price number to give you.
Okay. No, that's fair. Great. Just given your position, moving cargoes into China, we hear a lot about China returning to normal, driving miles back to pre-COVID type levels. What has Avance been seeing in the LPG market in terms of, you mentioned the Chinese PDH facilities, it sounds like they're moving forward. A market recovery from an economic standpoint in China, everybody has a different idea of what it looks like. What are you seeing in terms of volume liftings? You have the good chart on slide 11. How should we be thinking about Q2, and maybe it's not even Q2, maybe it's the second half of Q2, in Q3.
As we think about that chart building out, is there something where we think 2020, is it going to look more like 2015, you think, in terms of the LPG imports, or do you think it maybe looks more like 2019?
I think in general, the demand from China is going to return. We see that if you analyze the numbers from Q1, you can see that India will have a massive growth from 2019, but China will not, and that is because of the COVID-19 shutdown of the plants there. I think that Asia needs LPG and China, they are building, continue to build their capacity on PDH. They also have a big residential demand. The growth is coming predominantly from the PDH plants. This is not going to change. I do think the growth is going to continue, and I think if we look away from the timing perspective right now, obviously China will increase their growth compared to the first quarter growth or the imports, that's for sure.
We saw in April that they have taken a lot of cargoes from the U.S. in that month. They are increasing from those numbers. Also, with the cuts that we see in the Middle East, the demand that we see growing in Asia, there's only one source where this LPG can be taken from, and this will need to impact somehow the price arbitrage, to be able to clear tons from the U.S. to Asia. I think that we are close to 50% of the U.S. volumes going to export now. It was about 46%, 47% last year. We are reaching that point where the export volumes are going to have a much larger impact on the pricing of the product. I think that there's no reason to believe that the demand over time will be much lower.
Rather to the contrary, the underlying fundamentals of the demand is continuing to be strong. I don't know if that answered your question.
That's super helpful. Then just one more quick one from me. Just as you think about the strategy and the fleet. Clearly, there should be some opportunities to grow the fleet. Is that something, given some of the uncertainties, clearly you guys have the balance sheet's in a pretty good position. Are there opportunities that the company's actively engaging in to try to build out the fleet, or is it kind of, hey, the rates have come down, there is some uncertainty, and we're kind of just hunker down for a little while before we think about maybe some fleet expansion? Just kind of loosely, could you talk about how you're thinking about the future of the fleet?
No. We are naturally always looking at doing deals. We are reviewing all kinds of structures, both buying and selling older tonnage, buying newer ones, chartering structures and so on. We are very active looking at that. Obviously with the volatility in the market, the price spreads on quite high. This is also a market where you've seen very low liquidity in the second-hand market for tonnage, and also in the time charter market. There are.
Okay.
Yeah.
Okay. That's what I was getting at. The ability to charter in vessels is really almost as illiquid as the S&P market.
Well, I think that it's more liquid, but it is not as liquid as for a lot of other shipping segments.
Sure.
the deals that you see over time being done for longer periods are usually financially driven, rather than commercial time charters. That said, with the growing of the fleet there's more activity now than there has been, and we are constantly looking into different types of contract structures.
Okay, perfect. All right, thank you everybody for the time. Have a great day.
Thank you, Greg.
Thank you. Once again, ladies and gentlemen, if you do wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you wish to cancel that request, please press the hash key. Your next question comes from the line of Dennis Anghelopoulos of ABG. Please ask your question.
Hi, Peder. Quick question on the bookings. You guys normally have been guiding for that. I haven't been able to locate that.
How do your fixtures look for Q2 and beyond on the spot market?
I think that we haven't guided this for a reason. This obviously, we saw how the analysts were missing the target for all the players in this market now, and it has historically been very difficult to track. We also have a lot of ships in dry dock, and will obviously impact our results. We haven't guided the market now, but we do have the number on our time charter coverage, which is on a higher level than it usually is or has been in this company. It does give some impact on results. I think naturally, what we saw also in the first quarter was that the results were impacted by higher bunker prices than what you could read out from the market reports.
As the bunkering, you drag on pretty high bunker costs into the quarter, further into the quarter than what you guys managed to pick up. That will not be the case now, hopefully. It will be closer to where the market is trading.
That's very good color. Now you had a lot of off-hire days due to COVID, 100 incremental days. How does that look going forward? Do you think that the estimate that you guys currently guide for, the 5%, does that including sort of a COVID adjustment or is that your sort of, just expectations based on what the yards have told you?
This is more a real estimate. I don't think there's much Well, I shouldn't say that, it really came as a shock to us as well. It is a more real estimate than just the work time. It is also including positioning and so on. I think it should be a fair estimate.
Just last question, how is the remaining CapEx for the new builds and the remaining dry docks? How much is that for in 2020 and potentially 2021? Can you guide on that?
We have approximately $14 million left in dry dock and scrubber installment cost. We have approximately $20 million or $22 million in new building related CapEx.
Was that just for 2020 or is that also for That's not also for 2021, right?
No. We don't have any dockings due for 2021.
Yeah.
That's just the rest of the new building.
Yep. All right. Thank you very much, Peder.
Thank you, Dennis.
Thank you. There are no further questions from the telephone lines, sir. Please continue.
All right. I'll just thank you for dialing in and wish you a nice summer evening. Thank you much.
Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you all for participating. You may now disconnect.