Welcome to Avance Gas' Third Quarter twenty nineteen Presentation. You will be brought through the presentation by Avance's CEO, Ulrik Andersen and CFO, Per De Simonson. They will be pleased to address any questions after the presentation. This presentation contains forward looking statements, which are based upon various assumptions. Avance Gas believes that these assumptions were reasonable when made.
These assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors, which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from
the
expectations expressed or implied in this presentation by such forward looking statements. With that, I'm now pleased to turn the call over to Avance Gas' CEO, Ulrik Andersen. Thank you. Please go ahead, sir.
Thank you very much. Good afternoon from Oslo, and welcome to the presentation of Vanskast Q3 results. As you just heard, my name is Ulrik Andersen. I'm the CEO. By my side, I have Peter Simonson, our CFO.
And together, we will talk you through the highlights from last quarter. In a few short moments, I shall give the word to Peter, who will present the financial highlights as well as talking you through our decision to pay down debt and the positive implications that have for our company. Here, I will go over the VLGC market, how it developed in Q3 and also have a look at what we see going forward from here. We will focus on the forward looking period rather than looking behind, but of course go through some of the main points from Q3. As the last point on today's agenda, I will spend a few minutes talking about our freshly published ESG report.
And that's the main schedule for today. After the presentation, we look forward to answering any questions you may have. Thanks for joining us today, and I hope you enjoy the session. And with that, I'll hand the word over to Peter. Please go ahead.
Thank you.
Thanks, Ulrik. Then I would ask you to turn to Page three in the presentation to start with the financial highlights for the quarter. We have achieved TCE rate of $44,300 in the quarter and adjusted for the IFRS 15 accounting standard, our TCE rate came in at 42,700 We have achieved an OpEx of just above $8,000 per ship per day and an A and G of or overhead costs of just above $1,000 per ship per day. Both of these are down from the previous quarter. The main event for this quarter, as Ulrik mentioned, is the repayment of the $35,000,000 top up tranche in our financing, in which we will remove all limitations extraordinary limitations on dividend payments, investments and so on, as we have previously disclosed.
In addition, we will reduce the cash breakeven per ship per day for the total fleet of $350 per ship per day. We acquired one in addition to the one more scrubber in addition to the five previously disclosed, bringing a total up to six scrubbers, all of which will be delivered during the first quarter of and installed first quarter next year in connection with their scheduled dry dock five year dry dock. We have extended the time charter with Wilma for Mistral until December 21 at $1,200,000 per month, up from the previous duration of our expiry date of July 2020. And 88% of the ship days are fixed above $50,000 per day. If we move to Slide four, as mentioned, we have repaid top up tranche of $35,000,000 which represents 7% of our total debt.
And this has reduced our cash breakeven by $350 per ship per day. Previous quarter, we reported a cash breakeven of $21,900 with reduction in the top up tranche and a slight increase in underlying LIBOR rates. We now expect a full year 2020 cash breakeven of $21,700 And as you see on the graph on the right hand side, we now have no extraordinary maturities until 2024 when our main debt facility matures. Moving to Slide five. We are now getting close to 50% debt to total asset ratio and firmly have strengthened our balance sheet to a level where we are very comfortable.
Further, we have invested in increased earnings capacity and flexibility for our fleet by adding another scrubber to our scrubber installment program. We will have the six ships installing scrubbers at the same yard in succession in Q1 this year. And after that, we will have no material CapEx until 2023. So with 85% of our fleet docked by Q1 this year and in addition to the scrubber benefits that will benefit the earnings, which at one and fifty dollars per ton spread equals around $5,000 per day. We expect very, very strong cash flows going into 2020 and beyond, as Ulrik will mention in the market presentation.
And I'll thereby give the word to Ulrik.
Yes. Thank you very much. So if we turn to Page number seven, we'll have a look at what happened in Q3. If we paint with a very broad brush, Q3 was almost V shaped. We had very good continuation of Q2 and then a little dip in the rates in August and then shut back up in September.
It's perhaps a little bit difficult to see on the slide, but that's how it played out again with a broader brush. The dip in August was mainly attributed to a dip in The U. S. Export. And what can you say, despite this modest export in August, we still saw rates stay at a very respectable level throughout the quarter.
In fact, it was such that July and September were so strong months that on a year on year basis, the export out of The U. S. Were up with 15%. Towards the end of the month, we had a regrettable attack on the Saudi oil installations. This made the product markets uneasy and immediately saw an increase in freight rates as volume had to be rerouted.
So what happened was that the Saudi tons got blocked in, Saudi could not export and these tons were then sourced from The U. S. Of course, the whole uncertainty as well aided the market and you can see that at the end where the market starts to creep back up again. Luckily, the situation were relatively quickly resolved and today Saudi, of course, are back exporting. We sincerely hope this event itself was a one off and that there will be no further unstabilizing events in the region.
But what we have seen is a permanent effect on ton mile, I. E. The demand for vessels as Japanese or Korean buyers are changing strategy and looking to source more tons from The U. S. In the wake of this incident.
They are spreading the risk, so to say, to secure the supply. In other words, to avoid a similar situation in the future, they will take more tons from The U. S. So we see a permanent effect on ton mile on that, which is all other things equal, of course, positive for the market. There are of course a lot of factors at play, but these are sort of the three main ones we want to point to, which have defined the Q3 developments.
Turning the page to Page number eight and start looking a little bit forward. Where we stand today on the supply side, we have what we would define as a pretty modest VLGC order book. It stands at around 13%, which is not insignificant, but certainly not alarming either, particularly seeing what kind of volumes that are going to enter the market, which I'll talk to you about in a second. We see around 21 vessels entering the market next year, but they are spread out fairly even starting from around March and then with a couple to three each month for the remainder of the year. The point being that it's not a front loaded delivery schedule.
So we think this gets even out relatively over the year. We expect some scrapping, not all that much to be fair, because we think the market is going to stay so high that scrapping is going to be kept at a minimum, but there is potential for that as well. We also see some vessels going into floating storage, particularly in Southeast Asia due to infrastructural constraints. However, I would say these minor things compared to what is really influencing the supply side at the moment, which are the upcoming IMO 2020 regulations. We see quite a few vessels in the beginning of next quarter going into dry dock to retrofit.
We have some of them, but also other owners have and we think that will have a positive effect on the supply demand in Q1. Also, we see a lot of scrambling around in essence for bunkers. We see delays in bunkers due to having to wait for the right spec and this is something that is impacting supply side as well. So overall, a modest VLGC order book with some disruptions in efficiencies in the short run. Turning the page and looking at the production and export side.
The U. S. Phenomenal growth just seems to continue. We are almost getting accustomed to it in the business, but we mustn't forget just how impressive this growth is and it's continuing. We do not have the final figures of course for 2019, but what we can see is that we will end at an increase in the production from 11% since last year, very impressive.
Next year, we expect around 7% growth. And of course, these are significant volumes over just two years. So at the moment, The U. S. Is still driving very fast and looking to continue to doing so.
As we have a very steady U. S. Domestic consumption as it appears on the graph on the left hand side, there are really only two places this additional production could go. It can go for storage or it can go for export. And we believe that this excess capacity will put downward pressure at the price and hopefully eventually also be exported.
The million dollar question is of course, if there's an export capacity to also export this excess production. And from what we can see, the amount of additional terminal capacity coming on stream from primary enterprise and Saga looks like that the capacity will not be a constraint for the coming years. We are specifically hearing rumors of additional capacity expansions also from Nederland and we have also heard perhaps even about a new terminal coming together as well. Anyhow, what we see is increasing production, steady consumption and increasing export capacity. So we are confident in the near term that this U.
S. Growth will not slow down. Turning the page to Page number 10. What we also note is that more or less all of The U. S.
Export is long haul. Today, year to date, around 62% of the export is going to the Far East. 12 Months ago or for 2018, this percentage was 52%. So it's growing in line with the additional export. It's not so surprising because most of the new demand, if not all of it, is coming from Asia.
And most of the production, if not all, is coming in The U. S, which means that there's only one way to source this product and that is from The U. S. So we expect this percentage to increase going forward, which is obviously very good for shipping as they are very ton mile heavy tons that come out of The U. S.
Turning to Page 21 and the other important region in the sector for VLGC shipping is, of course, The Middle East. We don't see too much happening here in terms of growth. It's a very stable development. And yes, there's really no need to talk too much about that. If we turn to page number 12, of course, all this production we just talked about in The U.
S. Needs to find a home. And we are happy to see the continuous strong growth development in the Asian LPG demand. It's primarily driven by China and India, to some extent South Korea, Philippines, but the two main ones definitely China and India. From last year to this year, we expect an increase in the key import of around 20% and closely followed by India with around 16% increase year on year.
As you can see from the slide, the LPG is used for various things. For China, it's mainly a PDH plant, although there's also domestic consumption in those numbers, but a lot of the growth is driven by PDH plant. For India, around two thirds of the population live in rural areas, so they are using LPG as a source for cooking. LPG is, of course, easy to store. It's easy to transport.
It's safe and it doesn't require any infrastructure investments, which can be very, very expensive. Think about natural gas for instance. Here you can transport it in the cylinders. So for India LPG is the ideal product and we expect to see that growth rate on the import side to continue. Finally, for South Korea, the growth from last year to this year has been super impressive, but we expect to see more from that country in the future, primarily driven by oil and gas and petrochemicals.
So an important takeaway from this is that the demand story is not dependent on one factor. There are different uses for the product and most of them being relatively price insensitive. So we are confident about the demand to will keep growing and will absorb these volumes primarily from The U. S. Obviously, at the moment China will not, but as and when the trade war gets resolved.
Turning Page number 14. I'd like to spend a few minutes So the climate change has increased almost exponentially over the past years and it's a trend that impacts all of us across sectors and industries And of course, shipping is no exception. If you look at the slide on the or the picture on the left hand side, you can see, as most of you are probably aware, that shipping is the most efficient form of transporting goods over a long haul. And actually LPG tankers are among the best in class when it comes to CO2 emissions.
Of course, that is not an excuse for not acting and we have to act and the shipping industry and the LPG industry has to lift a responsibility as well. Here at Advance, we believe that sustainability would be one of main drivers of returns in the years to come and we are also convinced that by improving energy efficiency and reducing emissions, we will be provided with both an environmental and economic and competitive advantage. I. E. With other words, we do not believe that reducing emissions and have a lower carbon footprint is in opposition to making money.
On the contrary, we think that these two go hand in hand. This is also the motivation why we have published an ESG report. It will provide our investors, banks and other stakeholders with an easy access to this very important non financial information. So our report is based on internationally recognized standards and methodologies, as you can see on the right hand side. And it means that everyone can follow our efforts in reducing our carbon footprint.
This will be published each year. So hopefully, we can see an improvement in the years to come. It's important to remember that ESG is not just about battling climate change. So as a part of addressing sustainability in a broader perspective, we have also identified three UN Sustainable Development Goals, the so called SDGs, where we believe Alaskan can contribute. You can also find them on the right hand side.
The website is sorry, the report is now to be found on the website and it can be downloaded from today. On that remark, it concludes today's presentation. Thank you very much for listening. And moderator, we will now go to the Q and A session. Thank you very much.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. You. There are no questions coming through at the moment. So I'll hand the conference back to the speakers.
All right. Thank you very much. With that, we will wrap up today's session and say thank you from Peter and myself. Have a lovely day.