Good morning, ladies and gentlemen, and welcome to Ardmore Shipping's Second Quarter 2021 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, 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 2 weeks by dialing 1-eight 77 3447529 or 1412 317-0088 and entering passcode 1015 89 excuse me, 10158, 718.
Again, 101 58, 719. At this time, I will turn the call over to Anthony Gurney, Chief Executive Officer of Ardmore Shipping.
Thank you, and good morning, and welcome to Ardmore Shipping's Q2 2021 earnings call. First of all, I'll ask Paul Tippett, our CFO, to describe the format of the call and discuss 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 Q2 2021 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. Actual 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 materially differ from those in the forward looking statements is contained in the Q2 2021 earnings release, which is available on our website.
With that, I'll turn the call back over to Tony.
Thanks, Paul. So in terms of the format for today's call, to begin with, I'll discuss financial highlights and recent product tanker market activity, after which Paul will provide an update on product tanker fundamentals and financial performance. And then I'll conclude the presentation and open up the call for questions. So turning first to slide 4. We're reporting an adjusted net loss of $7, 600, 000 or $0.23 per share for the quarter compared to $8, 600, 000 or $0.26 per share for the Q1, the result of extremely challenging trading conditions as a result of the pandemic, but with a recovery now in sight later this year, which we will discuss in-depth later on.
Charter rates improved in the Q2, representing continued sequential improvement from the lows seen in the Q4 of last year, but we're now into a seasonally soft summer period. Our MRs earned $11, 600 per day in the 2nd quarter compared to $11, 200 in the Q1 and $9, 700 in the Q4 of last year. For the Q3 to date, we've earned approximately $10, 000 per day with 40 percent of the quarter fixed and expect a decline given the time of year regarding the seasonal slowdown. Our chemical tankers continue to perform well relative to MRs with earnings of $12, 300 per day or $14, 000 on a capital adjusted basis, but are now following the product tankers down in a seasonally soft summer period. Meanwhile, in the face of these challenging market conditions, we continue to focus on operating performance, financial strength and executing on our energy transition plan.
Operationally, we're performing well relative to the market and our peers and in anticipation of improving market conditions are looking to build earnings upside, most recently by adding another TCN MR for a period of up to 1 year at a rate of $11, 850 per day. Regarding balance sheet strength, we closed and funded a $25, 000, 000 perpetual preferred issuance with Maritime Partners and we also refinanced 2 2015 built ships on sale leaseback basis with an existing finance year providing net cash proceeds of $15, 000, 000 And in terms of our energy transition plan, we closed the Element in June. And among other initiatives, we are working on deploying the lean marine fuel op system across the fleet, which will improve our fuel efficiency and represents an excellent return on incremental investment. As of quarter end, we had total cash on undrawn lines of 70 $7, 000, 000 consisting of cash on hand of $55, 000, 000 and available undrawn facilities of $22, 000, 000 and net leverage of 48%. So we're in a very comfortable position financially despite the ongoing market challenges.
Moving to slide 6 for a summary of MR charter market activity. Rather than walk through the slide here in detail, I'd like to make a few key observations. First, is that the increasing level of market activity during the quarter resulted in the 3rd successive improvement quarter from the market bottom. And while the market's been weak, it felt quite normal in terms of the tighten and the amount of trading activity. 2nd is that this level of market activity was sufficient to result in real moves in charter rates when the Colonial Pipeline hacking incident occurred, meaning that there was a sufficient base in demand to support a market improvement with relatively little increment.
The third thing I want to mention is that if you introduce on top of this base of demand another 3000000 to 4000000 barrels a day as expected by the end of the year, you should have a very healthy MR spot market again. And 4th and finally, the shutdown of the Kwinana Refinery in Australia, which is discussed on the slide, is a case study in refinery dislocation, resulting in another 32 MRs calling there in the quarter or about 10 a month and representing roughly 0.5% increase in global MR ton mile demand. That's small, but it's nevertheless incremental and permanent and resulting from the retirement of just 1 relatively small refinery in an ongoing trend of shutdowns. In terms of our own fleet deployment, as you can see in the call out box on the lower left, in the Q2, we were 55% East and 45% West, 23% of our revenue days were from chemicals and 19% of our fleet was time chartered out, meaning that if you deduct TC out in chemicals, only about 60% of our revenue days were exposed to the very challenging MR spot market. And with that, I'd like to hand the call back to Paul.
Thanks, Tony. On the next 2 slides, we will take a look at the product tanker demand drivers, primarily underlying oil consumption and increasing tonne mile demand as a result of accelerated refinery dislocation. So looking firstly at global oil demand on Slide 8. The global oil demand recovery is well underway. Current oil consumption is expected to increase by approximately 4, 000, 000 barrels a day by the end of the year.
Road fuel demand is coming back strongly and expected to exceed pre COVID level this September, while the recovery in aviation fuel remains constrained by border closures. Overall, demand across all refined products is expected to return to pre COVID level this winter as the vaccine rollout continues. At the same time, oil production is expected to increase to meet demand. OPEC plus are reversing their cuts, while other producing regions are gradually increasing their output. Finally, oil product inventory surfaces have been worked through with current stock levels in line with the 5 year trailing average.
Moving to slide 9, we take a look at refinery dislocation developments, which is a key driver of tonne mile demand growth. Dislocation means shutting down of locally oriented refineries in developed areas and subsequently supplying those markets with refined products transported by sea from refineries which are opening in the Middle East and China. As you can see on the map on this slide, there's a very clear trend in where the refineries are closing and where refineries are opening. Over the past few years, we have seen a redrawing of the global refining map, specifically closures in less efficient refineries in the U. S, Europe and Australia and Japan and at the same time significant refinery capacity expansions in the Middle East and Asia.
These new refineries are larger and much more efficient. And while the trend has been ongoing for some time, the pandemic has accelerated the closure of smaller refineries. Approximately 4, 000, 000 barrels a day of refinery capacity has been closed or announced since the start of last year. Most recently in June, it was announced that the 200, 000 barrel a day refinery in Saint Croix would close again indefinitely. And meanwhile, the new 400, 000 barrel a day Jazan refinery in Saudi Arabia and the 600, 000 barrel a day refinery in Al Zour in Kuwait are scheduled to come online later this year.
Overall, refinery dislocation developments are providing a significant boost to our market, which will become more evident in the coming months as oil consumption returns to more normalized levels. Turning to Slide 10. Supply growth for product tankers remains constrained. The significant increase in ordering activity in other shipping sectors is resulting in a crowding out of tankers and curtailing future supply. The order book is already very low.
As you can see on the graph on the upper right, the product tanker order book is 6.7% of the fleet with 208 ships delivering over the next 3 years. Net of scrapping, which we will go through in more detail below, we expect fleet growth of less than 1% for the next 2 to 3 years. On the graph on the lower right, you can see that the product tanker scrapping significantly increased with levels so far this year double 20 nineteentwenty 20 full year numbers despite COVID related challenges. 40 product tankers have been scrapped so far in 2021 equating to a run rate of 70 ships for the full year. The scrapping levels are encouraging, particularly given the scrapping the delays at scrapping difficulty facilities in Southeast Asia, where activity has been hampered by COVID restrictions.
We also expect scrapping to increase in the coming years. Firstly, increased emissions and efficiency targets associated with the energy transition will put pressure on older and less efficient ships. Secondly, the product tanker fleet is aging. Currently, 240 product tankers are over 20 years old, equating to an average of 50 to 60 ships to be scrapped annually for the next 5 years. And looking further out, there are 9.30 ships over 15 years old, which would indicate a much higher scrapping rate over the next 10 years.
Overall, based on the low order book and current and anticipated scrapping levels, we expect product and chemical tanker supply growth to be muted for the next 3 years. Moving to slide 12 for a summary of our quarterly performance and financials. We're continuing our focus on cost control and efficiency improvements. Operating expenses are under budget at $15, 100, 000 for the 2nd quarter compared to $14, 300, 000 for the same period last year, reflecting operational constraints in 2020. Looking ahead, we expect operating expenses for the Q3 to be approximately 16, 500, 000 dollars Chartering expense was $1, 400, 000 for the 2nd quarter and we expect cost for the 3rd quarter to be $2, 300, 000 with the additional ship chartered in, in June.
Depreciation and amortization totaled $9, 200, 000 for the 2nd quarter We expect depreciation and amortization for the 3rd quarter to come in at $9, 300, 000 Total overhead costs were $4, 900, 000 for the quarter, comprising corporate expenses of $3, 800, 000 commercial and chartering of $600, 000 $500, 000 of non cash items. As mentioned before, in many companies the commercial and chartering costs are incorporated into voyage expenses, which means that the corporate cost is a comparable overhead. Overall, despite Ardmore's cost structure is amongst the lowest of our peer group despite our smaller size with significant incremental improvement possible through scale. Currently, our internal commercial overhead costs are approximately 50% of market rate prevailing pool fees. For the Q3 of 2021, we expect total overhead in corporate and commercial to be $4, 900, 000 including cash and non cash items.
Interest cost came in at $3, 700, 000 for the 2nd quarter compared to $4, 800, 000 for the same period last year. The lower interest cost reflects the fixed the floating to fixed swap entered into May 2020. Currently, dollars 270, 000, 000 of our debt or 70% of our debt is fixed at a margin plus 32 bps through May 2023. We expect interest and finance costs for the 3rd quarter to be approximately $4, 800, 000 including amortized deferred finance fees of $460, 000 dollars Finally, as you can see on the chart on the lower right, we're maintaining a strong liquidity position with $55, 000, 000 in cash on hand as at the end of June with an additional $22, 000, 000 available in undrawn lines. Turning to slide 13 for fleet and operations highlights.
We're continuing to invest in the fleet to optimize operating performance. We had no dry dockings in the Q2, but we had 3 dry dockings scheduled for the Q3 including 1 ballast water treatment system installation. In total, we're forecasting CapEx of $6, 200, 000 for 2021, comprising 3 dockings, 1 ballast water treatment system installation and performance enhancing upgrades. Forecasted revenue days for 2021 were 9, 410. We have 5 vessels fixed on time charter at attractive rates, representing 19% of revenue days for the 3rd quarter.
Overall, the FIG continues to perform well with all COVID related challenges continuing to be carefully managed. Turning to slide 14, we take a look at charter rates. As mentioned, rates have improved slightly from the prior quarter. We reported a fleet average TCE of $11, 800 per day in the 2nd quarter, up from $11, 350 per day for the Q1. MRs averaged 11, 650 for the quarter comprising 11, 800 on Eco Designs and 11, 130 on Eco Mod.
Meanwhile, the chemical tankers are performing very well on a relative basis. As with previous quarters, we are presenting the charter rates the chemical tankers on an actual and capital adjusted basis. The purpose here is to present the rates for the various vessels on a comparable basis to an MR. Chemical tanker rates reported $12, 308 per day for the quarter. And on a capital adjusted basis, the chemical ships reported $13, 173 per day.
Looking ahead, as of today and already mentioned by Tony, for the Q3, we have 40% of our days booked on the MRs at $10, 000 per day and similarly 10, 000 per day on the chemicals with 35% of the days booked. Turning to slide 15, we are continuing to prioritize financial strength. We have a strong balance sheet and liquidity position. Total net debt is CAD321, 000, 000 with corporate leverage on a net debt basis of 48%. We refinanced 2 MRs with existing financiers on a sale and lease back in June with cash proceeds of $15, 500, 000 after prepayment of debt.
In June, we completed the drawdown of $25, 000, 000 on the preferred equity for Maritime Partners and the second tranche of $15, 000, 000 is subject to final request and approval. Debt reduction remains a key priority under our capital allocation policy with all of Ardmore's debt amortizing. We have scheduled debt repayments of $19, 600, 000 for the second half and maintaining revolving credit facilities for financial flexibility. The preferred share issuance provides flexibility to prepay debt, reduce cost and cash breakeven levels. And finally, we have unrestricted available liquidity of $3, 100, 000 per owned ship, which is amongst the highest of our peer group.
And with that, I would like to turn the call back over to Tony.
Thanks, Paul. So to sum up on Slide 17, product tanker charter rates improved quarter on quarter, but we're now in a seasonally slow period. Chemical tanker rates are performing very well on a relative basis with rates outperforming product tankers in the last 3 quarters, a trend we expect to continue. We also expect product and chemical tankers to lead an overall tanker market recovery given the very we expected very rapid recovery in CPP demand. While the exact timing of a market recovery is unclear, we do expect to see meaningful improvement in tanker rates towards the end of the current quarter and into the next as economies reopen in earnest and international air travel begins again.
Meanwhile, the MR supply outlook is very positive with the scrapping rate now 3 to 4 times the level of 2020 and an ordering boom in other shipping sectors taking up yard driving up pricing. As we await a market recovery, operational performance and financial strength remain our top priorities. We also continue to pursue our ETP initiatives. We closed the Element 1 transactions in June and are working on other initiatives to drive improvement in fleet performance and emissions reduction. And as a of COVID-nineteen on of COVID-nineteen on our operational world.
In particular, our thoughts remain with our Seafarers and their families and we're working every day to ensure their health and safety through the pandemic. We're very pleased to have co led the Seafares International Relief Fund fundraising effort initiated in May and we want to thank those of you who participated. And with that, we're happy to open up the call for questions.
We will now begin the question and answer session. The first question comes from Jon Chappell with Evercore. Please go ahead.
Thank you. Good morning. Good afternoon.
Hey, John. Hey, John.
Paul, my first 1 is for you. The Seawolf and the Seahawk refinancings, they freed up a fair amount of cash relative to the size of your balance sheet. Just curious, did you have to change the terms of those financing, take on a bigger spread? And then also, are there any other ships in your fleet where you have the potential to do a a similar refinancing and free up the same type of liquidity?
Good question, John. So on the specifically on those 2 ships, they've it's an existing financier, but they've moved from a bank facility to a sale and leaseback structure. So the terms and the pricing of that would reflect the more leasing type structures, so a slight increase on the margin there. And yes, we would have a number of other ships in the fleet that we could put into those type structures if we need to. But as Tony pointed out and I pointed out in my comments as well, we've got a strong liquidity position now and that there's no it doesn't feel like there's any immediate need for any financings like that for the next quarter or so.
Okay. I mean, could you just say how many ships? Because it's good to know you have that option without a more dilutive necessity if need be.
Yes. No, we have I think it's approximately 8 ships on 8 or 10 ships on senior bank financing, which we could transfer to if need be.
Great. And then my second question, I know you said you have 80 dry dock days coming up. But as I read about the Celine Marines fuel out propulsion and installing it on the entirety of your fleet, is this something that can be done in voyage? Is it something that's done just during the normal dry dock? Will there be an acceleration of dry dock days in the quarters forthcoming to do this?
And then also maybe if you can just explain a little bit more of the financial benefits of using this technology?
Sure. I'll answer it and then pass it over on to Tony. But no, the lean marine system we've had it on 1 of our existing ships, trialing it for a period of time. That doesn't require any additional dry docking. It can be done on the run.
And the dry docking days, yes, we had ships scheduled for dry docking in the Q2, but yard constraints they've all now would be done in the Q3. So 80 days would be pretty standard for that. And then in terms of the fuel benefits and payoffs, the payback on these things is a matter of months. I don't know, Tony, if you have any further comments on that.
Yes. I mean, it's probably, yes, close to $2, 000, 000 across the fleet. We'll roll it out over time. There's no meaningful time out of service. It can be done on the run as Paul said.
And the IRR is about 75%.
Okay. Great. Thanks, Tony. Thanks, Paul.
Thanks, Tony.
The next question comes from Randy Giveans with Jefferies. Please go ahead.
Howdy, gentlemen. How's it going?
Hey, Randy.
Hey. So looking at that the 1 year time charter in, I really like that deal there under 12, 000 a day for the 2, 009 built MR. Is there a big discount there relative to maybe a modern or eco 2015, 2016 built MR? Any further appetite for further time charterings here?
We're pretty selective in what we do. Probably an eco design would cost maybe $1, 000 more because that's what that's the additional incremental earnings from the fuel efficiency and a bit of commercial flexibility in the design. So, yes, I mean we it's time chartering in now is you could consider it a core part of our business. Great.
All right. And then I guess second question, obviously, the E1 deal is complete. You raised the $25, 000, 000 in the preferred. Congrats on that. Any updates on timing for the additional $15, 000, 000 in preferred equity and maybe the use of capital that $25, 000, 000 or even
$40, 000, 000 Thanks, Randy. I'll take this. So no update on timing. It's in the works. It's likely after the summer break at this point.
And in terms of use of proceeds, there's nothing earmarked for it right now. I think maintaining financial flexibility is a key priority for us. But in terms of use of proceeds, debt reduction or opportunistic acquisitions or just investment in the energy transition. So I think the main priority right now is maintaining a strong liquidity position and maximum financial flexibility.
Got it. All right. Well, that's it for me. Thanks so much.
Thanks, Randy. Thanks, Randy.
The next question comes from Magnus Fuhr with H. C. Wainwright. Please go ahead.
Yes. Hey, guys. Just a couple of questions left. Just on the Hydrogen joint venture, I mean, it's been 6 months in now. Do you have any can you kind of give us a little update on what's going on there and what our expectations should be over the next 12 months?
Thanks, Magnus. So I guess E1 Marine it officially closed on at the end of June on June 17. So the management team there we've managing director of place and a marketing director will be joining in the next few weeks. So they're busy. Right now they're working on class approval for the system and getting it marinized I suppose for the want of a better phrase.
I think it's possible we could have sales on the board this year, but more likely it will be in 2022. So I think right now they're working on the regulatory modernization and but significant inbound interest from the shipping community as well across all sectors. So I think it bodes very well for that business, but I would say likely 2022 before we get proper sales on the board.
All right. Very good. That's it for me. Thank you.
Thanks, Magnus.
This concludes our question and answer session and today's Ardmore Shipping 2nd quarter 2021 Earnings Conference Call. Thank you for attending today's presentation. You may now