Good morning, ladies and gentlemen, and welcome to the Ardmore Shipping Corporation's Q1 2022 Earnings Conference Call. Today's call is being recorded, and an audio webcast and presentation are available in the investor relations section of the company's website at ardmoreshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A replay of the conference call will be accessible anytime during the next two weeks by dialing 1-877-344-7529 or 1-412-317-0088 and entering passcode 1055748. At this time, I will turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore Shipping Corporation.
Thank you. Good morning and welcome everyone to Ardmore Shipping's Q1 2022 Earnings Call. Let me first ask our CFO, Paul Tivnan, to describe the format for the call and forward-looking statements.
Thanks, Tony, and welcome everyone. Before we begin our conference call, I would like to direct all participants to our website at ardmoreshipping.com, where you'll find a link to this morning's Q1 earnings release and presentation. Tony and I will take about 15 minutes to go through the presentation and then open up the call to questions. Turning to slide 2, please allow me to remind you that our discussion today contains forward-looking statements. Additional results may differ materially from the results projected from those forward-looking statements, and additional information concerning factors that could cause the actual results to differ materially from those in the forward-looking statement is contained in the Q1 earnings release, which is available on our website. Now I'll turn the call back over to Tony.
Thanks, Paul. In terms of the format for today's call, to begin with, I'll discuss highlights and recent market developments, after which Paul will provide an update on product and chemical tanker fundamentals and financial performance, and then we'll wrap up the presentation and open up the call for questions. Turning first to slide 4. Over the past two months, the product and chemical tanker markets have changed completely. The Q1 was only partially impacted by these conditions, but the Q2 will show the full effect. Ardmore's MR TCE for the Q1 averaged $15,600 per day, whereas for the Q2 with 50% fixed so far, the result is $25,500. Actually rising as evidenced by the last two weeks fixtures now averaging $34,400 per day.
In anticipation of an improving market based on strong fundamentals, we had already gone to full spot exposure as of February, thus are well positioned to capture the benefits of the strong market for our shareholders. The impact on our financial performance is significant. Using the Q2 TCE to date with 50% complete, our net income would be $22 million or $0.63 per share for the quarter, an annualized 30% return on book equity, with every additional $1,000 per day generating another $0.28 per share or 3.4% incremental ROE. Asset values are also rising, with five-year-old MRs now valued at $32.5 million, representing a year-on-year increase of 18%.
Taking advantage of rising values, Ardmore has sold its three 2008-built MRs with charter back for two years plus options at attractive rates, which maintains our commercial scale and earnings power. Ardmore has not undertaken any voyages from Russia since the outbreak of the conflict. In the current market, our focus is on optimizing our commercial performance elsewhere while making every effort to support our seafarers and engaging in other measures to assist those in need. Moving next to slide 5. On our last call, we discussed improving fundamentals offset by adverse oil market dynamics. Since then, the oil market has changed completely and has in fact turbocharged the product tanker sector and MRs in particular, given their versatility.
The oil market is now characterized by dislocation of physical supply and demand, record high refining margins, wide price arbs, and a shift in sentiment regarding inventories. These factors are driving up both volume shift and distance traveled, thus resulting in a significant boost to product tanker ton-mile demand. The chemical tanker market is being driven by similar factors, exacerbated by urgent buying of liquid fertilizer and various types of veg oils to substitute for volumes lost out of Russia and the Ukraine. As a result, the commodity end of the chemical tanker sector is also experiencing very high spot rates, which are clearly reflected in our own fleet performance.
How high rates can go and for how long is unclear, but with MR transport costs still only around 5% of the value of the cargo on board, we don't see rates alone capable of destroying demand, and thus there's no practical upper limit. Similarly, with the dislocation of cargo flows and a steady stream of oil market events continuing to disrupt, there is a sense that these conditions could persist for quite some time, even after a cessation of hostilities. Meanwhile, although fundamentals have taken a backseat to the oil market, we believe they're still improving and are providing underlying strength to our sectors, which Paul will discuss later in more detail. Next on to slide 6. The next two slides are normally further back in the deck.
However, we thought it would be useful to discuss them now as they highlight what's currently happening in the market and the impact on Ardmore's earnings. On this slide 6, you can see the progression of rates over the past six quarters, which covers the depth of the pandemic last year to this new market environment that we're in. We had a slight uptick in rates in the Q1 . However, as you can see clearly with the green bars, there's a dramatic impact the market is having on our charter rate performance for the Q2 to date. I'm moving next to slide 7. On this slide, we show the resulting annualized earnings and EPS for the full range of market conditions we've seen over the past six quarters, and where at least some people think rates could go toward the upper end.
Looking at the red dotted box, you can see that at current levels, our annualized earnings would be $88 million or $2.52 per share. On that note, I'll hand the call over to Paul.
Thanks, Tony. I will take a look at the fundamentals and then move to a review of our financial performance. Starting with slide 9 for demand fundamentals. All of the focus in recent weeks has been on the current market activity and volatility. At the same time, the fact remains that fundamentals are solid, despite pretty evident crosscurrents in the global economy. On the demand side, the outlook for product and chemical tankers is very positive, driven by increased re-refinery throughput and oil market disruption in the near term, and continued oil demand growth and refinery dislocation over the medium term. Oil demand growth has not gone away, and based on the most recent estimates from Rystad and the IEA, overall global oil demand is expected to increase by 1.9 million barrels a day this year, surpassing pre-COVID levels in the Q3 .
Looking to the medium term, as you can see on the graph on the upper right, the demand outlook remains firm. Global refinery activity continues to be a significant driver of product tanker ton-mile demand. Global refinery throughput in the Q3 is expected to be 5% higher year-on-year. Notably, there are significant increases in throughput in the U.S. Gulf and the Middle East, with corresponding reductions in Russian throughput. At the same time, the ongoing trend of refinery dislocation, which we've been talking about for some time, will continue to have a positive impact on product tanker demand, providing an additional layer of growth. Over the next few years, there are significant increases in capacity in the Middle East and Asia, while at the same time closures of refineries in the U.S., Europe, China, Australia, which is increasing seaborne volumes of refined products.
Significantly, the Al Zour refinery in Kuwait is expected to open in the next few weeks, approximately two years behind the original schedule. Overall, product tanker ton-mile demand is expected to be 3% to 4% annually to 2026, which is well above supply growth. Based on recent market activity, ton-mile demand for product tankers is potentially much higher this year. Chemical tanker demand outlook is also positive, driven by GDP growth, petrochemical output, and supported by an improving product tanker market, resulting in these vessels staying more on their core CPP trades. In April, global GDP was revised down by 0.8%, but by the IMF from January's estimates, but it's still expected to be 3.6% in 2022 and 2023.
Chemical tanker demand is highly correlated to global GDP, with chemical tanker trade expected to grow by 3% this year and 5% year-on-year in 2023 and 2024. Moving to slide 10, we'll take a closer look at the supply fundamentals. The supply outlook for product and chemical tankers is very favorable, driven by a low order book and increased scrapping levels. Net fleet growth, which is deliveries less scrapping, is expected to be well below demand growth for the coming years. In 2022, estimated net fleet growth for product tankers is 1.2%, and for chemical tankers it is 1%. Scrapping levels increased significantly in 2021, and we expect scrapping to be at similarly elevated levels in the years ahead, with an aging fleet and increasing pressure on efficiency and carbon reduction.
Finally, consistent with our comments in prior calls, the order book for product and chemical tankers remains low, and this is expected to remain the case for the foreseeable future for two reasons. Firstly, there continues to be a lack of clarity on future ship designs to meet the industry's emission targets. Secondly, there's very limited berth availability for MRs because of significant ordering in other sectors, particularly container ships. Turning to slide 12 for financial highlights. We're reporting adjusted loss of $900,000 at $0.03 per share, representing a significant improvement year-on-year. MRs averaged $15,600 a day for the Q1 versus $11,400 per day in the prior quarter, while chemical tankers earned TC of $13,600 per day in the Q1 compared to $11,300 per day in the Q4 of 2021.
As Tony noted, these rates have subsequently increased a great deal. Charter rate improvements reflect the ongoing recovery in oil demand post-COVID and the onset of the Ukraine-Russia conflict towards the end of the Q1 . Next, we'll take a closer look at our cost line items and provide some guidance for the coming quarter. Wage costs increased significantly quarter-over-quarter due to higher bunker costs and operating expenses were $16.4 million in the quarter, slight increase mostly related to timing and crew changes. Looking ahead, OpEx for the second quarter, we expect it to be approximately $15.6 million. Charter-in expense was $2.1 million for the quarter, and we expect it to be in line in the Q2 .
Depreciation and amortization totaled $9 million for the Q1 , and we expect depreciation and amortization for the Q2 to be $8.5 million. Total overhead costs were $4.8 million for the Q1 , in line with prior periods. For the Q2 , we expect overhead incorporating corporate and commercial to be approximately $5 million. Interest expense was $4.1 million for the Q1 , and we expect it to be in line in the Q2 . We're currently benefiting from float-to-fixed interest rate swaps entered into in mid-2020. Currently, $250 million of our debt is fixed at a margin of +32 basis points through June 2023, and overall, 88% of our debt is fixed.
Our interest rate swaps entered into in 2020 are currently in the money by $5 million at the end of March. Overall, we believe our cost structure is amongst the lowest of our peer group, and in particular, internal commercial overhead costs are approximately 60% of prevailing market-wide pool fees. Moving to slide 13 for fleet and operational highlights. We're continuing to invest in the fleet to optimize performance. We expect to complete two dry dockings and two ballast water system installations in the Q4 of this year with CapEx of $3.2 million. We have some flexibility and we'll determine the precise timing of these dry dockings depending on market conditions at the time. Our forecasted revenue days for 2022 are approximately 9,500, with chemical tankers representing 23% of total fleet days.
For the Q2 , 96% of total days are spot or 105% on an owned ship basis. Overall, operationally, the fleet continues to perform very well. Finally, for me, we'll turn to slide 14 for capital allocation and balance sheet. We're continuing to prioritize financial strength as a means to build value, and cash flow has really started to improve in the past few weeks. A sustained strong charter market at current levels will provide more options for capital allocation over time. For now, our focus remains unchanged on the priorities that we've been highlighting for some time. In the meantime, we're maintaining a strong balance sheet and healthy liquidity levels and relatively low leverage. Looking at working capital last year, we had five ships employed on time charter out at competitive rates, which supported earnings.
We've since returned all of our one ship to spot trading and taken two more ships in on time charter in anticipation of strong charter market conditions. As a result, working capital increased in the Q1 , partially related to more ships trading spot and also higher bunker prices. Ship values are increasing and boosting net asset value. Values are up 18% year-on-year on the back of rising newbuild costs, limited new supply and a positive outlook. On the back of a stronger S&P market, we agreed terms for the sale of three ships and in a separate transaction, Ardmore time chartered in the ships at market rates for two years, plus options, maintaining our scale and earnings power.
The sale is consistent with our policy on capital allocation and fleet renewal, and it will generate net cash proceeds of $15 million after prepayment of debt. These vessels were financed through a fixed rate lease structure, and our overall cost of debt will reduce following the transaction. With that, I'd like to turn the call over to Tony.
Thank you, Paul. To sum up, the market environment has changed completely as a consequence of the war, and its impact on the oil market, for which there's no clear end in sight. Even after the cessation of hostilities, we believe the resulting dislocations will persist, until sanctions have been lifted and any repairs required are completed. While the disrupted oil market has taken center stage for now, fundamentals shouldn't be ignored. Overall, the world is continuing its post-COVID recovery despite some crosscurrents at the moment. While it's unclear how far this market can go, it is clear that there's a renewed appreciation for the role that oil products play in energy security and in providing a bridge to a full energy transition.
There is logic to the view that we've reached a turning point in the product and chemical tanker sectors. The impact on Ardmore's financial performance is clear. Assuming the second half performance continues, we would earn $22 million or $0.63 per share in the Q2 . And each incremental $1,000 per day is another $0.28 per share. As a final point, our capital allocation policy, as Paul just described, still prioritizes financial strength, but our targets could be met rapidly in this new market, which could allow us to pursue other means to build value, build and deliver value to our shareholders, including well-timed growth opportunities and return of capital to shareholders. With that, we'll open up the call for questions.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Jonathan Chappell with Evercore. You may now go ahead.
Thank you. Good morning or good afternoon. Tony, my two questions are gonna be on two of the points you made in your summary, one company specific, one industry specific. You know, I think we've been talking for a long time about this market hopefully recovering based on fundamentals, and it seemed like things got really tight really fast. I think there's this misinformed view that this is strictly a war outcome. You've talked about even after the cessation of hostilities, using your term, you believe these dislocations could last a little bit. To that regard, can you talk a little bit about what has exactly transpired in your markets since the invasion that's kind of been the catalyst to these tightening fundamentals?
I know this is really hard to answer, but even post a peace environment, hopefully sooner rather than later, you know, what are some of the long-lasting effects on trade flows, on arb opportunities, on maybe even the impact of commodity trading houses that you think can have a much longer tail to this cycle, than just a war-related impact?
Good. We'll start with that. I think you had another question. We can answer that. You know, those are very thoughtful questions. We do really believe that the fundamentals are slightly diminished because of the evident slowdown in global economic growth and also the COVID situation in China. You know, overall, I mean, for any of us that travel, we're seeing a lot, you know, it seems like air travel is coming back strong and in particular, long-haul international. That was really the big chunk that was missing.
I think that's just an important underlay, you know, kind of, if you will, to what's happening. While we're going through this, you know, kind of very disruptive period, we think that's continuing to build underneath. That's a really good question in terms of, you know, what will have changed permanently, you know, once we get out of this. I do think that I think there's a view that inventories got to very low levels. I think that's something that would persist.
I think, you know, especially in the chemical sector, you have a lot of, you know, UAN or liquid fertilizer and veg oils, you know, sunflower oil that moves out of the Black Sea. You know that those crops and that production has certainly been disrupted and, you know, how long it takes for that to come back on is unclear. That has to be replaced by other substitute products farther away. In terms of petroleum flows, you know, I think it's interesting. I'm in the U.S. right now, but I spend most of my time in Europe, and we're very close to what's happening.
There's a real sense of alarm around the dependence that Europe has allowed itself to find itself in today vis-à-vis Russia for energy supply, whether it's gas or oil. I think that's gonna change. You know, there's no doubt that the EU is not gonna. You know, it's gonna take a while, you know, it'll be a messy process to get consensus within the EU, but I don't think there's any going back to that level of dependence. Of course, that directly means substitute product coming in from further away.
Got it. Okay. That's very helpful, and I understand that was a difficult, somewhat hypothetical question to answer, so thank you for that. The other one's hopefully a bit easier. You know, it's amazing, during your last conference call, we were still facing investor questions about liquidity and measures you can take if this market stayed poor for even longer than anyone expected. Now the tone of questions has shifted to use of capital, which you've touched on a little bit there. Are you in the, at this maybe early stage of the recovery, is it strictly a focus on getting the balance sheet to a position of strength? So maybe, you know, further sale on these sale-leasebacks are off the table?
Because of the formulaic nature of your dividend policy, does it kind of become a capital return story immediately, like as soon as the Q2 , just given the strength in the quarter to date rates that you pointed out?
I think it's important. I t's amazing how quickly things can change in this business. It's also amazing how quickly people can forget the fact that last year was a really tough year. We lost $38 million. We weren't alone. Others lost a lot more. You know, I think for most companies, I think the priority has to remain, and it is for us, in essentially balance sheet repair, for a period of time. You know, we've been very clear with our capital allocation policy, what our financial strength targets are. Happy to talk about that more. The fact is that, you know, with rates where they are today, that can happen very quickly.
W e have to see what the opportunities are at the time. you know, we've always, you know, we've had, you know, granted, we haven't had a dividend policy in place for the past 2.5 years. you know, prior to that we're very focused on shareholder value and high quality corporate governance. We understand that investors, you know, expect a return of capital from their investees.
Got it. Thank you, Tony.
Our next question will come from Ben Nolan with Stifel. You may now go ahead.
Yeah. Thanks. Actually, just if I could follow on where John was there, maybe Paul or Tony, either. You did mention sort of your as part of that capital allocation policy that you do have targets. Tony, you just mentioned there that you could elaborate on this. Could you elaborate on those? What do you think you're shooting for with respect to leverage?
Yeah. I'll ask Paul to comment on that.
Yeah, sure. I mean, Ben, our capital allocation policy has been fairly clear that we wanted to get to a target of below 40% debt to capital. We're currently around 50%, so we've ways to go on that. As Tony mentioned, given the current rate environment, we could get there very quickly at these levels.
Okay. Helpful. Just for my second question, and you talked a little bit about this about the low order book and how incremental fleet growth is gonna be somewhat limited. You know, one of the things that we've seen a little bit more on the larger ship classes, although not pervasive yet, is you know, oil majors generally subsidizing shipping companies to go out and build, you know, well, typically LNG fuel, but other types of propulsion systems on new ships. That has sort of been seemingly where most of the incremental new buildings are coming. Sort of two questions. First is that happening at all in the MR market? Doesn't seem like it.
Is that something that you guys would consider if XYZ big company came to you and said, "Hey, we want you to build some ships," will you do it?
Yeah. You know, I think that it is, you know, there have been projects in the past involving oil majors for construction of MRs. They usually go out on long-term time charter at very low rates. That's not something that we've ever been very excited about. We do, as part of our energy transition plan, intend to, you know, engage in conversations and really develop a collaborative dialogue and relationship with customers where, you know, they're, you know, we can help them meet their own energy transition needs on the back of long-term charter business, but with, you know, acceptable returns on capital. I don't imagine that anything like that is gonna result in a meaningful boost in shipbuilding in our sectors anytime soon.
You know, I think the real transition is still quite far ahead. We're also dealing with the reality that yards are very full at the moment. You know, I think if we worry about oversupply in the near term, I think that's kind of off the table, because there's a long lead time for ordering new ships and the low order book and the fact that, you know, mainly container ships but also gas carriers, et cetera, have taken up all the slots.
You're not seeing oil majors pushing for, you know, or subsidizing it in the MR market the way that there's been a little bit in VLCCs or LR2s, whatever?
Yeah. I take exception to the word subsidized because if you can ask any of the people that have done those deals, they probably don't feel like they're being subsidized. They're providing very attractive rates, you know, and that's a prerogative of an oil major. It's not something that's evident in our sectors at the moment.
Okay, perfect. All right, I appreciate it. Thanks, guys.
Sure.
Our next question will come from Magnus Fyhr with H.C. Wainwright & Co. You may now go ahead.
Yes. Hi, Tony, Paul. Thanks for the presentation. Just a question on, you know, on your chartering strategy going forward. You went spots ahead of the recovery. Do you see that changing? I mean, you paint a very positive forward picture. Would you see, you know, securing tonnage or staying spots for the remainder of the year or do you have ongoing discussions now? I mean, how are some of the trading houses looking to secure tonnage for the second half of the year?
Yeah. I think there's probably a scramble at the moment. I think, you know, I think the like one-year MR eco-design rate might be up to around $20,000 a day now. That's unappealing given the spot market performance. I think it's, you know, we always keep a close eye on what's happening in the time charter market, both chartering in and chartering out. You know, we've kind of got lucky or smart last year with our timing on both. At the moment, we have two ships time chartered in at a little under $12,000 a day, and we have one remaining time chartered out at $15,500. We like the spread there and we like the incremental spot exposure.
We're not averse to putting more ships out on TC. Generally, they're one-year deals and it's really just a position you take against a view you have on the spot market. You know, kind of just managing exposure and looking for relative value chartering in and out. That's kind of a rambling answer to a good question, which is, yes, we are keeping an eye on the time charter market and, you know, it probably begins to look attractive into the kind of mid-20s.
That would be, you know, longer term, 24, 36 months, or?
That gets pretty thin, that end of the market, unless you're in a really hot market. You know, we haven't really seen that yet. I know that's been some discussion in other forums, but maybe we're not aware of it, that's happening. It does feel like it's building in that direction. This is a very typical kind of cyclical trend that we're experiencing right now with spot rates leading then time charter rates and asset values.
All right. Thank you. Just one more question. You know, the chemical tanker market, you know, we're very familiar with the MR market, but maybe, you know, the chemical tanker market very levered to global GDP. I mean, from looking at the market now, it looks like GDP is gonna be revised further down. Can you kind of talk a little bit about some points, where there's the resilience on the chemical demand versus GDP?
Yeah. I think, you know, typically under normal circumstances, there's a very tight correlation, and that's good. At the moment, it's being heavily affected by disruption from the conflict, just like the MR sector is. You know, you see really interesting trades going on. For example, we put a ship on one of our 25s on a voyage from Trinidad to the U.K. with UAN, which is liquid fertilizer, at $32,000 a day. That's essentially, you could almost call that panic buying to cover, you know, springtime fertilizer needs that were expected to be covered out of Russia. Another interesting one is a voyage with styrene monomer, which is used to make polystyrene, you know, from China all the way to Rotterdam at a very, very high rate. Obviously that's based on price arbs.
I think that market is also very disrupted at the moment and, you know, rates are very, very spiky there as well. I think that, you know, when we get completely past the disruptive phase of what we're dealing with here, we'll have to see what the nature of GDP growth is at that time, to kind of have any view on how, you know, what the effect will be on the chemical market. At the moment it feels you know, the chemical market is never quite as spiky as products, but, you know, we've heard of voyages up to $50,000 a day. We haven't seen that yet in ours. We did one voyage with an MR at $95,000. You know, the averages are what we described on the call.
All right. Very good. That's it for me. Thank you.
Our next question will come from Christopher Robertson with Jefferies. You may now go ahead.
Hey, good morning, Tony and Paul. Thanks for taking my questions.
Good to hear from you.
Tony, I guess given the low product inventory levels, how long do you think seaborne transport will simply meet immediate demand versus when inventories will actually begin to be restocked given kind of the key theme here for energy and national security?
There has been outright panic buying of diesel, and that's had a knock-on effect. We went into that in too much detail, but, you know, like South American countries, you know, have had to go very, very far afield to cover their requirements. You know, we've done some very back-of-the-envelope analysis and it, you know, it seems like you could add, you know, at least a few percent to MR demand over, you know, upwards of a year as people kind of like reset their stocks to a little bit higher, not back to high levels. You know, we think it's additive. We don't think it's transformative, but we think it's additive. I think another thing if I could just throw in, it's important to just mention that LR2s have begun to trade out of clean into dirty.
So far I think about 15 ships this year have done that transition and that's taking supply out. I just forgot to mention that earlier on, but just throw it in there for the record. We think that it's unclear today whether there's any meaningful restocking taking place or if it's all just covering immediate requirements. We think restocking will come.
Okay, thank you. I guess the second question here. You mentioned last year was pretty tough in terms of rates. I think that's reflected in the scrapping that took place in 2021. How might rising rates during this year impact the scrapping thesis? Do you think it pushes at least a few of those ships at the tail end of the age spectrum out even further? Or have they come to kind of the end of the road here?
The average age of scrapping for MR is typically around 25 years. You know, that, you know, we saw a big run in scrapping last year. If you go back to, you know, earlier, you know, strong markets, you know, it definitely does drop off. We would expect that to happen, to be honest with you. But because, you know, there's not a big swing in age, and so, you know, these ships are, you know, they're gonna have to go pretty immediately anyway. You know, yes, I think it will probably negatively impact scrapping, but it's not like it'll disappear. It's not the kind of dynamic that you find in the VLCCs at the moment.
Okay, fair. If I could sneak one last question in. How are the current lockdowns in China impacting refined product tanker demand? Do you think it'll be a tailwind into 3Q once the lockdowns end?
Yeah, I hesitate to say because it always sounds like we're just positive on everything. The fact is that slower, completely lower consumption levels in China, in that area, has resulted in more exports.
All right. Thanks.
Again, if you have a question, please press star then one. Our next question will come from Climent Molins with Value Investor's Edge. You may now go ahead.
Good morning, gentlemen. Thank you for taking my questions. Following up on the capital allocation question, you have a generally young fleet, and I was wondering how do you currently think of fleet renewal? You provided some commentary regarding potential new build ordering, but how do you think of middle-aged vessel values, especially after the recent running rates?
Well, I think I'll start and then maybe there's anything that Paul wants to add to that. That's a good question. You know, inherently middle-aged ships are usually very good investments. You know, they especially, you know, before they get to a certain age. It almost sounds like I'm talking about people, but I'm not. I'm talking about ships. You know, when ships are kind of between 10 and 15 years of age, it's in many respects their best point in terms of current returns on investment. You know, because there's a lower amount of capital invested, but the earnings are about the same.
You know, I don't think we have a hyper modern fleet anymore. That's also okay, because it's a written down fleet and provides us good returns on investment. We were gonna sell our 08s anyway. Really pleased we could find a high-quality partner to charter them back from because that keeps our earnings power intact in our commercial scale. The charter back rate, I think gives them a decent return on investment, but it's an attractive level. I don't know if there's anything, Paul, you wanna add to that.
No, I think that's pretty well covered.
That's helpful. Regarding the four vessels agreed to sell and charter back for minimum period of two years, will you hold that purchase option once those charters come to an end?
No. We have options to extend, but not repurchase options.
That's helpful. Final question from me. Idan Ofer recently emerged as a significant shareholder in Ardmore, and I was wondering if you could provide any commentary regarding whether he has approached you over the past few months.
Good question. Look, you know, the filing they made was a 13G passive filing. You know, we're very pleased to have Quantum as an Ardmore investor, and I imagine they're pretty pleased with the returns they've gotten so far on the investment. You know, we have a regular investor outreach program, and we talk to all of our shareholders, big and small, and they're no different.
That's very helpful. Thanks for taking my questions.
You're welcome.
This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.