Good day, and thank you for standing by. Welcome to the Avance Gas third quarter 2023 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 one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Alternatively, you may submit your question via the webcast. 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, CEO. Please go ahead.
Thank you, and good afternoon, and welcome to Avance Gas third quarter earnings presentation. As mentioned, I'm Øystein Kalleklev, CEO of Avance Gas, and as usual, I will be joined by our CFO, Randi Navdal Bekkelund, who will guide you through the financial a bit later in the presentation. As mentioned, you can submit questions either by the telephone conference or using the chat function, and we will cover the questions at the end of the presentation. Before we begin, I would like to draw your attention to the picture on the front page. Here you can see Sirocco, one of our VLGCs, leaving the Panama Canal, which, we thought would be an appropriate picture for today's presentation.
As you are probably aware of, Panama has experienced significant drought this year, which have reduced water levels to such low levels that the canal authorities have been forced to cut daily allowed transit by half in order to preserve freshwater. The reduced capacity in Panama has dramatically increased sailing distances for VLGCs, and thus made the freight market super tight. We will discuss the situation in Panama and the implication for VLGC freight market in more detail in the market section. In the picture here, Sirocco is going through the Cocoli Locks, close to Panama City in laden condition, and you can actually see both the Bridge of the Americas and the Pacific Ocean in the horizon.
Before we begin the presentation, I will just remind you the disclaimer, as we will provide some forward-looking statements, use some non-IFRS measures, and of course, there are limits to completeness of detail we can provide in this webcast, so we recommend to review the earnings report together with the presentation. So Randi, let's kick off today's presentation. Q3 highlights. Our average time charter equivalent earnings, or TCE, for the third quarter came in at $55,300 per day for the fleet. This is on a discharge-to-discharge basis, which is the basis we use for our guidance.
While we technically are within the TCE guidance at $55,300/day, which is in the high interval of $50,000, we have to admit that we were expecting that the TCE would be more like $58,000 or $59,000 per day when we made our guidance on August 30. However, on the following day, August 31, we saw the biggest ever daily jump in the Baltic LPG One Index. Baltic LPG One is the index for spot voyages from Saudi Arabia to Japan, which is the most liquid index and therefore the index we utilize for hedging freight by using forward freight agreement or FFAs. In one single day, on August 31, the cost of freight for this route jumped 20% from $98.5 per metric ton to $118 per metric ton.
The Baltic LPG One Index then went on to record its strongest ever seven-day trading results, with the index shooting up by more than 50% to 151.5 points by September 8. While a booming freight market is good news for us, our results in Q3 is, however, adversely impacted by FFAs, especially in September, as this is the fixing window for October cargoes. Overall, average TCE for the fleet was thus reduced by $10.6 million in Q3, or $8,300 per day, due to FFA hedging, and I will cover this in more detail shortly.
Another effect of rapidly increasing freight rates is that we recorded a very big deviation in our earnings on a load-to-discharge basis, which is the basis for IFRS accounts, compared to discharge-to-discharge basis, which is, it's, one trip economics typically utilized by shipping industry to measure trading performance. Over time, these two metrics evens out, but they can deviate substantially when the market moves either up or down. For this quarter, the IFRS effect was $10.9 million, and the load-to-discharge numbers therefore came in $8,600 lower at $46,700 per day. I will also shed some more light on this timing effect shortly.
Despite these two, timing effects totaling $21.4 million, trading results for the quarter was very strong, with a net profit of $30 million for the quarter, thereby increasing the net profit for the year to $102 million. Hence, we have already surpassed the results from last year with the best yet to come, as we expect Q4 to be by far our best trading results this year. Please note that the $102 million above does not include the gain from the sale of Iris Glory. As we announced in July, we have agreed to sell Iris Glory for $60 million, and we expect to book a profit of $22 million once she is delivered to new owners.
Iris Glory is currently discharging her last cargo under her two-year time charter, and we are currently marketing her for a final spot voyage prior to delivering her to new owners. We therefore expect to hand her over... Okay. Is it something wrong with the sound? Okay, no. Okay, let's continue. I just got some message here from my speakerphone, but okay. Okay, we therefore expect to hand the Iris Glory over to new owners once this last spot voyage has been completed. The profit from the sale will be-- Sorry, we do have some technical glitches there. Okay. Okay, I think we just-- Okay, we expect to hand Iris Glory over to the new owners once the last spot voyage has been completed.
The profit from the sale will be booked when such handover occurs, and we expect this to take place at the end of the year, or more probably early next year, depending on the timing of our final spot voyage. Of all the recent events, we are pleased to have secured a new $43 million bank financ ing for Pampero at improved terms compared to the sale and leaseback she currently financed under. And Randi will give some more details on this in the finance part. Finally, as already mentioned, the Panama Canal congestion is of particular importance. As mentioned in the introduction, this has really fired up the freight market, and I will cover this in more detail in the market section. So with the spot freight market shooting up from September, we expect to deliver substantially stronger numbers for fourth quarter.
We still have some days to book for Q4, which is okay given the spot rates currently at $130,000-$140,000 a day. Overall, we expect the fleet to deliver a time charter equivalent earnings for the fourth quarter of $70,000-$75,000 per day. This is on discharge to discharge basis, and then includes the effects from FFA hedging at current rate levels. Hence, with strong numbers, a healthy cash position and compelling outlook, the board has once again decided to declare a quarterly dividend of $0.50 per share, which brings the dividend last twelve months to $2 per share, which implies a running yield of about 12%. So, let's review our commercial performance.
This is where we spend most time with the analysts today, given, you know, the big timing effects on our results. For the third quarter, about 64% of our fleet was allocated to spot voyages, while the remaining was allocated to the market through TC coverage. Given the strong spot market, we generated average spot earnings of $75,700 per day, slightly ahead of guidance of $71,000 per day. While the TC ships delivered average earnings of $41,700, in line with guidance of $42,000 per day. We thus ended up with an average of $63,600 per day before FFA deductions.
As we have hedged two of our spot ships by FFA in the third quarter at an average of $50,000 per day, this dragged down numbers for the fleet by about $8,300 per day to $55,300, as spot rates were significantly higher than our average hedging rates. Particularly, this was true in September, as mentioned. As rates spiked from September, we have been able to book Q4 at substantially higher rates than Q3, and we do expect this to be by far the best quarter for us this year, and probably the best quarter since third quarter of 2015. Achieved spot rates for Q4, we expect to end up somewhere between $90,000-$100,000 per day on average.
As the two-year TC for Iris Glory and Venus Glory is coming to an end in Q4, spot exposure will be reduced to about 30%, with average TCE rate of around $50,000 per day. Overall, this should give our TCE for the fleet of around $80,000-$85,000 per day, but since we have hedged two ships by FFA at an average of $55,000 per day, we expect a negative revision also from FFA in Q4. Best estimate, around $10,000 per day, giving a net TCE for the fleet of around $70,000-$75,000 per day. Keep in mind, our cash break-even level is around $22,000 per day, so we will generate substantial super profits in the fourth quarter. Okay, so let's go into the timing effects a bit more in detail.
First, let me explain briefly the difference between discharge to discharge and load to discharge. When we calculate freight economics in shipping, we usually use discharge to discharge basis. This is then the gross freight income, less voyage costs like bunkers, canal fees, and broker commission. And then we take the net voyage result and divide it by the days for our own trip, i.e., from discharge of last voyage to discharge of the current voyage. In IFRS, we do, however, apply load to discharge basis for spot voyages. So here we only recognize revenue from the point in time we have cargo on board and until we discharge it. So when the market moves sharply up or down, you typically will have a lot of ships ballasting into new fixtures, which you cannot recognize income from, and that's why we have this so-called IFRS 15 timing effect.
In a flat market, there would be no such effect. Our timing effect is also magnified by the fact that we utilize FFA to hedge two of our spot ships, as mentioned in third and fourth quarter. Here, we calculate profit loss every single day, and when the market moved sharply up in September, as you can see from the graph, we have to recognize these losses immediately in the September P&L, while we are booking the ships for voyages well into fourth quarter. Hence, we have illustrated the effect with a bridge from gross average TC of $63,600, with deduction of FFA of about $8,300 per day, and then finally, the IFRS effect of $8,600 per day.
As we are starting from a high point, we do expect the IFRS 15 effect to be less or significantly less in Q4. Okay, let's look at the fleet. What we have been doing the last couple of years is to sell older ships and renew with newer, more fuel efficient and flexible tonnage. Last year, we sold three ships, all at a decent book profit, and we announced a sale this year of Iris Glory. We have recently docked Venus Glory, and she is currently completing her final voyage under her two-year time charter. So we are marketing her for sale and have received quite a lot of interest, so we are upbeat about the prospect for divesting her also at a very healthy book profit. At the same time, we are investing in new ships.
We contracted the right ships at the right time, with in total six large dual fuel LPG VLGCs at about $80 million each. New build prices for such vessels today are at about $150 million-$120 million, depending on spec, and these ships are typically not due for delivery prior to 2027. Our large dual fuel VLGC has a cargo capacity about 9%-10% larger than traditional VLGCs, and they can run on LPG instead of compliant fuel, which is not only good for the environment, but also for economics, as LPG is much cheaper than compliant fuel. Last year, we took delivery of Polaris and Capella. This year, we are taking delivery of Rigel and Avior.
The two last ships, Castor and Pollux, which are scheduled for delivery this year, has been delayed until Q1 and Q2 next year, due to a lot of, a lot of work at the yard these days with all the container and LNG contracts that they have entered into. Additionally, we contracted 4 mid-sized gas carriers this summer for delivery in 2025 and 2026. These ships can carry both LPG and ammonia, and we contracted them at very good price point of $61.5 million each, which compares very favorable to newbuilding prices being quoted for such ships today, with typical delivery into 2027. The equity for the MGCs, we are planning to release from the sale of the older ships, where we have one more ships to sell as explained. So, let's look at our employment profile.
As mentioned, our two older ships are coming off 2-year fixed TCs in Q4, and Iris Glory will be delivered to new owners in December or January. Venus Glory, as mentioned, on her final voyage under our TC, and we will trade her spot until we potentially can secure a buyer for her, where we already have some interest. We have eight 2015 eco ships. The two ships without a scrubber is on time charter. A variable time charter for Chinook until summer next year, and a fixed higher TC of 21 months for Pampero until she will be carrying out her 10-year special survey in Q3 2025. We have stated that the backlog from this time charter for Pampero is $29 million, so this gives you a rate of around $45,000 per day.
The other six 2015 eco ships, we have installed a scrubber, and we are trading those ships in the spot market. One of these ships we hedged by use of FFA last autumn, at $48,000 per day for the calendar year of 2023. This is the FFA one, as you can see at the bottom of the graph. Then we have six dual fuel ships, of which four have now been delivered. Both Polaris and Capella went on two-year variable TCs directly from yard, with a floor and a ceiling of around $50,000 per day. The Polaris TC expires in January, while we in May agreed to prematurely terminate the Capella variable TC.
We then turn around and hedge this ship at $53,000 and $63,000 respectively, for the third and fourth quarter of this year. This hedge is noted as FFA three in the graph. There is some upside on the FFA numbers for Capella, as we can take a bigger parcel size than a conventional in size, and in case we burn LPG instead of very low sulfur oil. So this is the rationale for our two FFA positions for the Q3 and Q4 this year. The two dual fuel ships we have taken delivery of this year, Rigel and Avior, we are trading spot, and the two ships for delivery next year is also open. This means we are increasing our spot exposure next year, unless we find some good TCs for some of these ships.
We also do have some FFA cover for next year. We have extended the scrubber hedge into Q1, at one ship for Q1, at $60,000 per day, and then we have also hedged 50% of one scrubber ship for calendar year 2024, at $70,000 per day, noted as FFA 2 in the graph. Lastly, we have four MGCs for delivery in 2025 and 2026, which we are currently marketing for longer term TCs. Last slide before handing over to you, Randi, is the dividend slide. As you can see, we have ramped up dividend in Q4 last year, given the stronger results. We have now kept the dividend at $0.50 per share for the last four quarters, with today's declaration of $0.50 per share for the third quarter of 2023.
We are paying slightly more in dividends than earnings in the third quarter, as the earnings are dragged on by the timing effects I explained earlier. However, as mentioned, we do expect a rather big bounce in earnings for the fourth quarter, so we do not see any reason for not maintaining the dividend at $0.50, bringing the total to $2 per share the last twelve months. I covered the factors for determining the dividend level in great detail in the past, but as you can see, more or less green lights on all the factors. And that's why we are optimistic about the outlook also for dividend in the coming quarters. So that's it around it, and we do the financials.
Yes. Thank you, Øystein. And let's go to slide 9 and have a look at our income statement and key financial figures. So, as already presented by Øystein, our commercial performance measured in time charter equivalent rate, or TCE rate, for the quarter was 55,300 on a discharge-to-discharge basis, versus the guidance in the high 50s and compares to 50,800 for the second quarter. The TCE rate was impacted by forward rates agreement, so FFA losses, of $10.6 million, or $8,300 a day for the fleet in the third quarter. The TCE rates, according to the accounting and reporting standards, IFRS, recognize revenue on a load-to-discharge basis.
Thereby, adjustment of IFRS was -$10.9 million, or $8,600 per ship day, for the third quarter, as the spot market reached elevated levels by the end of the quarter, resulting in a reported TCE of $46,700, compared to $52,000 for the second quarter. Operating expense or OpEx were $10.4 million, equaling a daily average of $8,100 per ship day, approximately at the same level as the previous quarter. We continue to hold the lowest administrative and general expense compared to our industry peers, despite a higher A&G for the quarter, which is explained by non-recurring expenses as settlement of share options.
For the quarter, A&G came in at $2.8 million, equaling a daily average per ship day of 2,200, whereas a normalized A&G is closer to $1,000 a day, which is as expected going forward. That concludes an operating profit before depreciation or EBITDA of $46 million, compared to $52 million in previous quarter. Depreciation is down from $12 million previous quarter to $11 million this quarter, as we have reclassified Iris Glory, the 2008-built VLGC, following the sale previously announced in July, and consequently, the vessel is not depreciated while holding the classification as held for sale. At delivery to the new owners within January 2024, we expect to generate $22 million in book profits in the first quarter of 2024.
Net finance expense was up $4 million from $5 million previous quarter due to rising interest rates and higher average net debt, interest-bearing debt, as we have a full quarter with financing on our recent delivery of Avance Avior in May. So despite this, we maintain a lower net finance expense compared to the floating SOFR by interest rate hedges. Currently, we have approximately 90% of the underlying interest-bearing debt is fixed at 3% on the floating rate compared to the current SOFR at 5.32%. So this concludes the net profit of $30.1 million and corresponds to an annualized return on book equity of 21%.
Moving to slide 10, you can see that 80% of our total assets currently consist of 14 VLGCs on water, which is soon to be 13, as we sold the Iris Glory, with delivery to the new owner within January 2024. Additionally, we have a few newbuildings under construction, the VLGC Avance Castor and Avance Pollux, with expected delivery in March and May 2024. And also, we have paid the first pre-delivery CapEx on our two first mid-sized gas carriers, MGCs, representing $18.6 million for the quarter. The MGC number three and four will start capitalized the next quarter, when we will pay the first installment to the yard. Looking at the credit side, we have a balanced loan-to-value ratio of 49%, as we have amortized interest-bearing debt while values have gone up.
We have also refinanced the VLGC Pampero, which I will come back to in a few minutes. Looking at the total shareholder equity, we also maintain a relatively solid shareholders ratio of 50%. And the total shareholder equity was $581 million at quarter end and has decreased $9 million during the quarter, which is explained by a net profit of $30.1 million, being offset by dividend paid of $38.3 million for the second quarter, and negative movements in other comprehensive income of $900,000, sorry, which is explained by positive market movements in interest rate swaps of $1.6 million, and negative mark-to-market movements in FFA hedges of $2 million.
We have a solid cash position of $146 million as of the 30th of September 2023, which leads us to the next slide, showing the cash movements during the quarter. We started the quarter with a cash position of $192 million. And during the third quarter, we generated $42 million in cash flow from operations, coming from a strong freight income, exceeding our cash break-even level at $22,000. Which was offset by a decrease in working capital items of $50 million, driven by increased prepayments, which is explained by cash deposits in relation to our FFA hedges.
Further, we had $21 million in capital expenditure, of which $18.6 million relates to our two first MGCs, scheduled for delivery in Q4 2025 and Q1 2026, and the remaining $2.4 million is dry docking of Venus Glory. Further, we repaid $11 million in debt, and lastly, we paid, yeah, as already mentioned, $38 million in dividend for the second quarter and $1.8 million in settlement of share options. So this brings the total negative cash movement of $46 million, and explains the bridge from the second to the third quarter. So just to summarize the recent transactions announced in cash terms, we expect to generate in total $45 million in cash proceeds during the first quarter 2024, in addition to the cash from operations.
Where we have the sale of Iris Glory, will generate approximately $25 million, $5 million from the refinancing of Pampero, and $14 million coming from financing of the remaining two VLGC newbuildings at delivery. Looking at our financing structure on slide 12, 70% of our outstanding committed debts is bank financed with a split in term loans and flexible non-amortizing revolving credit facility or RCF of $113 million.
Post sale of Iris Glory and refinancing of Pampero, about 80% of our committed financing will be provided by banks, and the remaining 20% is sale lease back arrangement with BOCOM of $135 million, which will be drawn next year at delivery of our remaining two newbuildings, Avance Castor and Avance Pollux, and thereby we will be cash positive of, in total, $14 million, during Q1 and Q2 2024. Looking a bit into the refinancing that we've done, we have been working on improving the financing structure for the VLGC Pampero, 2015 build. So we have terminated the current Chinese lease and replaced it with a bank facility.
So by end of October, we received a credit approval for the refinancing of the vessel in a $43 million bank facility. And as already mentioned, the transaction will generate net cash proceeds of $5 million, a drawdown scheduled in March 2024. And the refinancing will significantly improve the current financing of the vessel, bearing a margin of 1.9% versus existing margin of 3.25%. Further, the bank facility will have adjusted profile of 20 years and matures in January 2028, and we expect to close documentation and procedures within January 2024. And thereby, we will maintain our low cash break-even of about $22,000 a day. And we have no debt maturity before 2028 for the majority of the fleet.
With that, I give the word back to you, Øystein, for providing an update on our smoking hot LPG markets.
Okay, thanks, Randi. I will spend so much time with IFRS 15 now and FFA, so I think we will run through the market slide a bit quickly. This just gives an overview and a slide 14 of the current market with overall elevated freight levels. Baltic One, as I mentioned, the main route from Saudi Arabia to Japan. Of course, the Baltic Three route today, Houston, Chiba. This is on basically only exists on paper. This route assumes you're going from Japan to Houston, both ways, using the Panama Canal and having a long trip of 60 days. While today you will mostly route your ship both ways through Suez or Suez and Cape of Good Hope, making that voyage 90-95 days, rather than the 60 days in a perfect voyage.
Still, so the TCE $145,000 for the longest route. It will be a bit lower on paper when you're adjusting for the sailing route. The premium route continues to be Atlantic, where rates are very elevated from US to Flushing. But of course, you do have a bit more waiting risk on some of these shorter routes. The freight levels are supported by good arbitrage levels, about $350 cheaper with the LPG in US than Japan now. So the propane spread is $350. So even after paying $239 on freight, you still have a lot of margin for the terminals and the traders. As mentioned, the Panama Canal is clogged.
Average auction fee in order to skip the queue for November is $2.6 million northbound and $2.3 million southbound, which, of course, are leading a lot of the, the bigger ships to take longer routes other than waiting in Panama. U.S. exports, very stellar growth, 14% year-on-year. We do get a question from time to time, why do we do see this high growth of U.S. exports when, U.S. oil production are fairly flat? And I will come into that and touch a bit upon, on the later in the presentation. In terms of import, China, despite slow, economic recovery following Zero COVID, 23% growth year-on-year.
So of course, the Chinese are importing a lot of cheap LPG and, with a lot of new PDH plants commissioning, they have a lot of demand for US LPG. So, let's look at the overall market on slide 15. As we've shown in the past, very high growth in both US, which is by far the biggest exporter, especially when it comes to VLGCs, cargos, and then Middle East, despite the OPEC cuts, very strong growth. It's OPEC cuts only applies to oil, and there's a lot of gas producers in the Middle East, which are ramping up exports. On the import side, as I mentioned, China is up 32% from 2021, which was prior to the zero COVID policies.
We even had growth in China in 2022, despite the zero COVID policies, and then we have had a big spike in import growth this year, despite somewhat disappointing economic recovery. Europe as well, have been importing Russian LPG by rail and on smaller size ships. They are now buying more U.S. LPG, and the growth or volumes are up 58% from 2021. Looking into U.S. on page 16 here, you see very strong growth, and we will touch a bit upon why we do see this extremely strong growth from U.S. LPG exports.
And, you know, the high growth in U.S. LPG production is also driving down domestic prices and inventories to new record high, which is then creating this, you know, fantastic arbitrage to Far East markets. And, you know, today, 60% of the propane in the U.S. is being exported, so this has really become a domestic export product for the U.S. producers. Looking into next slide on the arbitrage, it's just the same picture. You can see here, the arb goes up and down, the price difference between U.S. and Far East, and this is also, of course, then driving into what you can pay for freight.
If you look at the forward market for the arbitrage, it's very conducive, staying at $200-$300 per ton, which means that the freight market also expect rates to stay at high levels. We do expect the freight market to start softening from next year, but still staying at $80,000-$100,000 per day is very favorable compared to our cash break-even as shown at $22,000 per day or so. So on there, let's look at some of the drivers for this extremely strong growth in US exports. You know, people— You know, 80% of the drilling in the US is for oil. Nobody really drill for propane or butane. So this is driven, the volumes are driven here by associated gas, primarily.
So what happens typically in this wells is that the ratio of gas to oil is increasing with time. We have some of the major basins in the U.S. here on the graph on the left-hand side, and what we do see is the gas-to-oil ratio is picking up. So for Permian, which is a rather new area in terms of shale, this has increased from 3.4 to 3.8 in from 2017. It doesn't sound like a lot, but given, you know, the scale of Permian drilling, this really increased the availability of associated gas.
As you can look at this graph, number 2, higher gas-to-oil ratio means more associated gas, and this is particularly true for the Permian, which associated gas production has gone up a lot, and this is associated gas close to export plants in the U.S. and also in a favorable regime in terms of regulation, where there's not a lot of obstacles to building pipelines. So this has also then resulted in, as I mentioned, more associated gas, and this associated gas is saturated with NGLs, natural gas liquids, which is not only propane and butane, but also ethane. So the gas to the gas recovery of gas in the associated gas, or what we call the gallons of NGL produced per thousand cubic or GPM, this ratio is also picking up.
So not only are you producing more associated gas, you are also... Especially when you have this rapid build-out of infrastructure in U.S., everything from export plants to pipelines. So this is, you know, the main drivers why you have higher growth of NGL, natural gas liquids, than you do from crude and natural gas, which I will show on graph number 19 the next. So this is a nice graph from RBN Energy, which is a very good source for information about the LPG business. So if you look at the growth in crude oil in U.S., it's been a fantastic growth story since 2013.
The same goes for natural gas, but they are far lower than NGLs, where you have more than 50% higher growth in production of NGLs than crude oil, and even more so when it comes to natural gas. So if you look at the situation today on page 20, actually, we are in a situation now today where for every barrel of crude oil being produced in the U.S., you today produce half a barrel of natural gas liquids, and this consists of ethane. And then we have the main feedstock for all trade, the propane, the butane, and the Iso-butane, which is the LPG. And then on top of that, you have, call it natural gasoline, which you utilize for refineries. So that means with all these drivers, you really have a much stronger growth picture for NGLs than crude.
And if you look at next slide, 21, you will actually see world oil demand from 2010. So you see the picture here from 2011, 2014, and then you see this dark blue starting to pick up, and this is the NGLs, or also consisting of LPGs, which is driving world oil demand. And this is actually 36% of all growth since 2010 is NGLs. So that explain why US can produce a lot more growth for LPG than they can do for both natural gas and crude oil. Yeah, let's also have a look at the Panama Canal. We do get a lot of questions about this these days.
So of course, when they agreed to expand the canal back in 2007, this was mainly driven by container traffic. Container traffic was booming after China became member of WTO in December 20, 2001. And, in order to facilitate the container traffic, they added a third lane in Panama. You have a regular, you have the Panamax, and then the Neo-Panamax opened in summer of 2016. However, this is not really an ordinary canal, where you just go through a ship channel. This is actually more what I would call a water escalator.
So what the Panama Canal does is you take a ship from either the Atlantic or the Pacific side, and you lift it up to well above ground level, and where you end up in this lake called the Gatun Lake. And then you take the elevator down again, and you go to the other side. So either from the Atlantic to the Pacific side or the other way around. In normal operation, the Panama Canal can, you know, facilitate up to about 40 daily transits. Usually, the nameplate capacity is 36.
And then of those, 36-40 daily slots, around 10 of them are for the Neo-Panamax size, the bigger ships, with a beam wider than 32.5 meters, but less than around 50 meters, which is, you know, most of the VLGCs, except for the Panamax size. So what has happened now is you have had a period with El Niño, with a drought. We have had drought caused by El Niño in the past. We had that in 2020 and then we had the double El Niño in 2014, 2015, 2016. This was prior to the Neo-Panamax locks opening in Panama. So when you have less rainfall, you are also not able to create enough freshwater in the Gatun Lake.
So in order to mitigate that, first, they implemented draft limitations, and then now we have had a sharp reduction in allowed daily transits, where the daily transits will go from 36 to 40, down to 32, 28, 24, 22, 18. And by February, this will be at 18, which means that Neo-Panamax slots will go from around 10 to 5. So you're cutting the capacity in half, and of those slots, container ships are being prioritized because they have a more valuable cargo and can pay a higher fee. Second, it's LNG carriers, which also have a more valuable cargo than a VLGC, and then VLGCs are being prioritized out of the canal and are having to find other routes or participating in auctions.
So there has been a couple of special auctions lately, and we have set new records in terms of the price being paid to skip the line. The recent record was $3.98 million being paid for a one-way transit northbound. And as you can see from the data points there, they have gone rapidly up from, you know, typically below $500,000 to stabilizing, as I mentioned briefly in the beginning, at $2.5-$3 million on average. So that means the waiting time has gone up, auction price has gone up, and today there is about 50 VLGCs taking a route via Suez or Cape of Good Hope to U.S. In the summer, June, July, this number was 10.
So the numbers of VLGCs taking longer routes to US from Asia has skyrocketed. And this means because sailing distances is up, as I mentioned, 60 days perfect Japan voyage from US to Japan, it's more like 90 days today. With all the ships taking longer routes, this means fewer ships available in the market, and it's the reason why freight rates are elevated, supported by the very high arbitrage from US to Far East. So maybe look at the last slide before concluding. It's the order book. It's a typical slide for this segment. Order book's been really small this year. Scheduled delivery this year was 46. We said we actually, one year ago, we didn't think that there will be 46 ships for delivery.
We estimated around 35-40 ships for delivery this year, depending a bit on market conditions, as we also had two of our four ships delayed for delivery this year until next year. We will end up probably around 40 ships because the market is so strong now that you want to get your ship out and into the spot market in order to capture these rate levels. Then the order book will taper off with significantly fewer deliveries in the coming quarters. So actually, the Panama congestion has come at a perfect time for the VLGC market. We have had now a year and a period with a very high growth in the fleet, which could have derailed the spot market.
But given the longer sailing routes we have had, we stressed the fleet out so that the ton mileage effect has been mitigating the fleet growth. And we do expect the problems in Panama to endure. The rainy season is only for two more months. There are limitations to how much they can get the water level up again before they start consuming again. We do expect this to endure as a problem well into 2024, and then we will see whether there will be another El Niño or not. But regardless of that, we have to keep in mind the canal was made for container traffic. When the canal was expanded, nobody foresaw that U.S. would become the world's biggest LNG exporter, and by far the biggest LPG exporter in the world.
So it's really not scaled for this kind of growth in the U.S., exports. So we do expect Panama Canal to be a headache for VLGC owners, in the future. Headache in the sense that they have to take longer routes, which is generally good for the market overall, given the ton-mile effect. Also worth noting, the dark fleet of, VLGCs trading in, captive trade, typically, Iran to China, that, number of ships keep on growing given the export growth from Iran, and we now count 52% of the fleet being in this kind of trade and not being in the kind of international trade. So with that, I do think we can conclude today's presentation, which has been rather long.
As mentioned, 55,300 on TCE numbers are, you know, impacted a bit by FFAs and then also the IFRS 15 on the load to discharge numbers. However, best numbers since 2015 year to date, $102 million, already ahead of last year, and we do expect Q4 to be by far the best quarter for this year. We are in the process of selling Iris Glory once we fix for the final spot voyage. We have a refinancing in place for Pampero. Panama Canal will continue to be a bottleneck for the trade. And we are guiding numbers of 70,000-75,000 in TCE for next quarter. And, you know, with that, we are happy to continue paying very good dividends to our shareholders.
$0.50 also for Q4, bringing the total to $2 the last 12 months. So that's it. Maybe we could do some questions then.
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. We'll now go to our first question. Please stand by. Our first question comes from the line of Climent Molins from Value Investor's Edge. Please go ahead.
Hi, Øystein and Randi. Thank you for taking my questions. Hi, good afternoon, yeah. I wanted to start by asking about your Q4 guidance. I mean, after the impact that the load to discharge accounting had on Q3 earnings, could you give us some commentary on whether we should expect a reversal, so a positive accounting effect in Q4?
Yeah, we can start with that. I think actually, if you look at some of the notes we have put in what we do expect this effect to be in Q4. So, you know, given that we are in a rising market, we don't expect this effect to be reversed in Q4. We do, however, expect effect to be significantly less than in Q3.
So if in one of the notes there in the presentation, we have put in that we do expect the IFRS 15 effect in Q4 to be negative by $2,000 per day. And we will first see a reversal of this effect once the market starts moving downwards, then we will have kind of, on average, a higher freight rates on the ships with a loaded cargo than the ships we are booking.
Makes sense. Thanks for the color. In the slide 15, you had an interesting graph with the market share of VLGCs, MGCs, and smaller vessels. The VLGC market share has increased a bit over the past few years, and as U.S. exports continue to increase, this trend could or should continue. Could you give us some commentary on where you see that trend finishing out in the medium term?
Generally, we have seen a trend towards bigger ships, the VLGCs, especially U.S., it's mostly a VLGC market. Russia, which is actually a very small exporter of LPG, was mostly our smaller ships, handy mid-size segment, so that volume has disappeared. I think for us, it's mostly interesting in the VLGC for the LPG market, and that's where we do see our competitive advantage. However, we have invested in four MGCs because these MGCs are both LPG and ammonia carriers. We do think that once the LPG trades start taking off, we do see more of that, more of those cargoes being put on MGCs with a smaller cargo size than our VLGC. That's why we found those ships attractive.
That said, we do have ammonia capabilities on newbuildings 5 and 6 for delivery next year. Those ships can carry ammonia as well as LPG. So, but in general, you know, we stay focused as a VLGC shipping company, where we do find most of the action, but we added the MGCs because of the fit for also the ammonia tank, and not least the good price point we got at them.
Makes sense. Thanks for the color. And final question for me, actually, on the MGCs you ordered. The equity portion looks well covered with existing cash position and proceeds from the sale of the Iris Glory. But I was wondering, when should we expect financing to be announced for the vessels? And secondly, are you comfortable with your current fleet positioning, or should we expect some additional acquisitions?
Yeah, financing-wise, of course, it's 2 years until delivery of the first MGC, and then almost 3 years until the last one. So, we have had several banks already knocking on this door and offering us quite attractive financing and more attractive than the one we did for Pampero, actually, because this has to do also with the green credential of these ships. They make them very interesting for a lot of banks to finance those ships. However, if we were to put in place financing today for those ships, we would have to pay commitment fees to banks for 2-3 years, and we don't really see the value in locking in financing now and paying commitment fee for such a long period.
We do have the equity from the cash position and the sales we have been announcing, and we rather do financing once we get closer to delivery. At that time, we might also know better whether we have been able to secure long-term charters for the ships, because that will also affect both the leverage we can put on and possibly also the margin, in case we have a very good counterparty. So that was question number one. Question number two was in terms of our fleet. Of course, we're always happy to new builds. We are in the middle of a newbuilding program with two VLGCs for delivery next year and then four MGCs for delivery in 2025 and 2026. So we have been doing some contracting the last two years.
But at the same time, we are also selling off older ships in order to renew the fleet. We are open to continue doing that, but prices for new ships or newbuildings now have become very elevated. The yards are packed with orders for container ship and LNGs, which is driving up the newbuilding price for VLGCs. As I mentioned, $115 million-$120 million for similar VLGCs today, which we contracted at $80 million. And if you are adding this VLAC spec, the very large ammonia carrier, you can also be paying $125 million. So we do think that is a bit elevated, and we rather than focus on taking delivery of our existing ships. If we find opportunities to add ships at attractive price points, we might do that.
But you know, that is something we are discussing with yards and the brokers all the time to see if we find some a good angle to do something. But right now, it's focus is to take delivery of existing ship and sell the last old ship.
Thanks for the call. That's all from me. Thank you for taking my questions, and congratulations for the quarter.
Thank you. Thank you. Yeah, we had some chat questions as well, but maybe we have some more on our audio. Let's see.
At this time, there are no further audio questions.
Okay, good. Then, we just jump on some of these chat questions. Some of them are a bit long, but there is: What are the key dates for the dividend? I think we sent out a separate press release today with key information regarding the dividend, with all the dates for record date, ex-date, and payment date. So you should find them on our website, unless you have them in the back of your head, Randi.
Yeah, the ex-dividend date is seventh of December, followed by record date, the eighth of December.
... payment date is fifteenth of December, right ahead of the Christmas holidays.
Yeah. Okay, and then we just pick a couple of them. Do you see, a fundamental driver for why FFA rates are lower in Q2 2024 than currently, despite the fact that Panama Canal restrictions increase in February? That's a good question, yeah. So actually, we are, we are nothing near, the peak kind of bottlenecks in Panama. We expect the situation in Panama to kind of become tighter and tighter, and more ships having to ballast around it. So yeah, you should think maybe then, that the freight market should be even tighter. Freight market forward rates or FFAs are, however, very much linked to the arbitrage. So, when we have a situation where the LPG product prices are in backwardation, meaning they are lower in February than they are today, then typically freight follows that pattern.
And that's why the FFA, even though it's very strong for Q1, the FFA or the forward rate curve is also in backwardation linking up with the product backwardation curve. So that is the main reason. And then, of course, the FFA are not always very good at predicting the future. So let's see when we get to February, and we are reporting Q4. We have one long question here from Greg Miller, and he writes very good articles in FreightWaves, which I recommend to everybody to read. So maybe you can read it. I don't have my glasses with me.
Yeah, sure. If the upside scenario that Permian Basin M&A leads to higher U.S. production, even more U.S. LPG becomes available for export. And at that, and at the same time, Panama Canal restrictions lengthen sailing distance and limit the number of VLGCs available to load the increased volumes of U.S. LPG available for export. Thereby, supporting high U.S. inventories and low U.S. LPG prices, which in turn supports arbitrage spreads, and thus VLGC freight.
Okay, I think-
Question mark.
Yeah, that's a long question. Actually, I did have a slide which I took out the last night from the slide deck, which was about M&A activity in U.S. shale industry. We have had two big mega mergers recently. Both Exxon and Chevron have been buying up smaller players. So yes, we do see a trend towards consolidation on the shale side. And yes, we do think that will result in higher growth than maybe EIA is expecting. Because a lot of these smaller shale players have been kind of cut off from the financing market, and they have scaled back CapEx investments because investors have been forcing on them some more capital discipline than in the past.
Of course, the big oil players like Chevron and Exxon, they don't really have the same kind of pressure from their investors to cut CapEx. Actually, it's something maybe they get more pressure to invest, increase CapEx, because to kind of increase the reserve ratio. And, you know, a lot of these projects have a very good IRR. These bigger players also have access to cheaper financing. So yes, we do expect that with big mergers here, you could see increased drilling activity, and once you get the higher drilling activity, you get more associated gas. And with the build-out of infrastructure, you will probably also have a higher recovery of gas in the associated gas, which is available then for export.
So, it's a long way to say that we are quite optimistic about that. I do think the merger wave in U.S. shale has just begin, begun. I do think we will see more of it, because it's also a short cycle investment. You know, drilling offshore, oil well and getting that to production can take a decade. With these wells in the Permian, it's much shorter and a much shorter payback time, which fits better today, in today's environment, where a lot of governments are pushing for a pathway to net zero by 2050. Then it's, it's a lot, a lot less risky to actually drill wells with shorter lead time.
So yes, that's a roundabout way to say that we do concur with your analysis in terms of the premise for the question. So I guess with that, 3 o'clock, one hour, I think that is sufficient. Thank you all for listening in. Randi and I will be back in February with stronger numbers. And in the meantime, you can enjoy your dividend coming a bit late for Black Friday, but still, there are a lot of good shopping opportunities. So thank you for listening in.
This concludes today's conference call. Thank you for participating, you may now disconnect. Speakers, please stand by.