Welcome to the Dorian LPG Q3 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Additionally, a live audio webcast of today's conference call is available on Dorian LPG's website, which is www.dorianlpg.com. I would now like to turn the conference over to Theodore Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.
Thank you, Daryl. Good morning, everyone, and thank you all for joining us for our Q3 2023 results conference call. With me today are John Hadjipateras, Chairman, President, and CEO of Dorian LPG Ltd., and Tim Hansen, Chief Commercial Officer. As a reminder, this conference call webcast and a replay of this call will be available through February 8th, 2023. Many of our remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe, or similar indications of future expectations. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions.
Should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates prove to be incorrect, actual results may vary materially from those we express today. Let me refer you to our unaudited results for the period ended December 31, 2022, that were filed this morning on Form 10-Q. Please refer to our filings on Form 10-K where you'll find risk factors that cause actual results to differ materially from those forward-looking statements. You may find it useful to refer to the investor highlight slides posted this morning on our website. With that, I'll turn over the call to John Hadjipateras.
Thank you, Ted. Good morning, and thank you for joining Ted, Tim, and me to discuss our Q3 financial year 2023 results. John Lycouris isn't with us this morning because he's having knee surgery. John Lycouris has contributed a slide you will find in the deck with much interesting information which I think you may want to note and take, and we will follow with. We will have some remarks read from him at the end of our presentation and field for any questions you may have. After me, Tim will present and then. Sorry. After me, Ted will present and then Tim. Including the $1 irregular dividend announced today, we will have returned over $500 million to shareholders since our IPO.
Our board has focused on returns to shareholders while retaining commercial flexibility and ensuring a strong balance sheet. We are still investing in our business as evidenced by the four vessels joining our fleet in this calendar year and our commitment to the installation of three additional scrubbers. For the quarter, our EBITDA was $76.2 million, and net income was $51.3 million. The net income is the second highest in our corporate history. Our net debt to capitalization was about 34%. Ted will give you details and of course, answer any questions you may have on our quarter's financial results. Global LPG market fundamentals strengthened in 2022 with increased volumes from both major export basins and more frequent cargo routes to Europe.
Global exports increased 4% this past quarter and are up 6% for the year with support primarily from North America. Total exports for 2022 increased to 117.5 million from 110.9 million tons in 2021. U.S. exports increased 6% or 700,000 metric tons from the 3rd calendar quarter, supported by favorable arbitrage economics, which persist today. 2022 U.S. volumes were up 3%, an increase of 1.3 million tons from 2021. Middle East export volumes showed continued growth despite maintenance in some terminals in the beginning of December. Annual volumes out of the region are up 18%, increasing by 6.4 million tons from 35.9 million tons in 2021 to 42.3 million tons in 2022, driven by reversals to OPEC+ production cuts.
Freight rates were this past quarter underpinned by a strong arbitrage and increased waiting time in Panama. Rates fell in early December as canal waiting eased and some terminals in the Middle East underwent maintenance, and demand in Asia was subdued. We're now seeing a rapid reversal and an increase in freight rates in both basins. On the shore side, Dorian's operation, we continue to work hard to ensure the well-being of our crew, especially our Ukrainian and Russian seafarers and their families. On the performance side, we have been very focused on our strategy to comply with the 2023 IMO emission regulations, the EEXI, and the CII. We have built out dashboards and forecasting tools that assist our commercial team in optimizing our utilization and achieve a solid CII score for each vessel in the pool.
Our team has spent the past two years preparing for these regulations and see this year as a turning point in a journey to decarbonize shipping. We will continue our research efforts and installations of various Energy Saving Devices and premium paints to reduce consumption costs and carbon footprint. Looking ahead, market estimates for U.S. exports point to further growth in 2023 and 2024. At its January short-term outlook report, the EIA said it now estimates that U.S. LPG exports will grow 15.9% in 2023 year-over-year. This is up from their October estimate of 11.3% in 2023. The U.S. is now producing well over 100 million tons of LPG a year, with 2022 numbers coming in at about 106 million tons. I'll hand you over to Ted now for his remarks.
Thanks, John. My comments today will focus on the recent capital allocation events, our financial position and liquidity, and our unaudited Q3 results. At December 31, 2022, we reported $129.8 million of cash, which was net of the $40 million dividend payment made at the beginning of the month. On January 30th, 2023, we had roughly $165 million in cash, with the increase from December 31 reflecting the January distribution from the Helios pool. Also, as John mentioned, we will pay another $1 per share as an irregular dividend of roughly $40.3 million in total of dividends on or about February 28th, 2023 to shareholders of record as of February 15th, 2023. The irregular dividend announced this morning reflects the strong rate environment and our resulting cash flow.
Once paid at the end of February, Dorian will have paid over $300 million in dividends and have repurchased nearly $229 million in stock, representing 18.8 million shares, which together totals nearly $530 million in capital returned to our investors since our IPO in 2014. Our board continues to take a pragmatic quarter-by-quarter review of the company's performance, the LPG chartering market environment, and other macroeconomic and industry factors to determine whether to pay, and if so, how much in dividends. With a debt balance at quarter end of $635.6 million, our debt to total capitalization stood at 43.2%, and our net debt to total cap is of course even lower given our large cash balance.
Moving into this calendar year, we will take delivery of our dual-fuel new building from Kawasaki at the end of March, as well as three long-term time chartered in dual-fuel ships, representing nearly 20% growth in our commercially managed fleet. With these additional vessels, our cash cost per day will increase to $24,000-$25,000 a day. I would also note that these vessels offer higher earnings potential given their size, fuel efficiency, and dual-fuel optionality. For the discussion of our Q3 results, you may also find it useful to refer to the investor highlight slides posted this morning on our website.
Turning to our Q3 chartering results, we achieved a total utilization of 97.8% for the quarter, with a daily TCE per operating day, as those terms are defined in our filings, of $52,768, yielding a utilization-adjusted TCE of about $51,630. That, again, is TCE per available day. Spot TCE per available day, which reflects our portion of the net profits of the Helios pool for the quarter, was about $52,583. The overall Helios pool reported a spot TCE, including COAs, of approximately $57,000 per available day for the quarter. You will note that these results are somewhat correlated with the average Baltic rate recorded on a two-month lag.
As many investors and analysts look to model the business, we would note that a two month lag Baltic is more in line with the actual cycle of the business. Our team books voyages about 30 days out, and the average load-to-discharge voyage, i.e., a one-way voyage, is about 30 days. It is also worth reminding the investment community that the published Baltic rate assumes 100% utilization and is based only on the Ras Tanura Chiba route. Turning to the cost side, our daily OpEx for the quarter was $9,739, which is up marginally from the quarter ended September 30th, 2022. Crew costs, which include crew travel, appear to have found a new normal as crew cost per day has been relatively stable over the last three quarters, and spares and stores were actually down sequentially.
Repairs and maintenance and lubricant costs drove the increase this quarter. Our time charter in expense for the two TCE in vessels remained stable at $5.2 million. Total G&A for the quarter was $6.9 million. Cash G&A, that's G&A excluding non-cash compensation expense, was $5.9 million. Included in the $5.9 million is approximately $200,000 that we spent to provide accommodation and food to the families of our seafarers affected by the war in Ukraine. We also recognized about $250,000 of performance-based bonuses for some employees in the quarter. Our core G&A for the quarter was about five and a half million dollars, which is consistent with our expectations. Our reported adjusted EBITDA for the quarter was $76.2 million, up sharply from the prior quarter's $46.2 million.
We look at cash interest expense on our debt as the sum of the line items interest expense, excluding deferred financing fees and other loan expenses, and realize gain/loss on interest rate swap derivatives. On that basis, total cash interest expense for the quarter was $6.6 million. Our hedges saved us $1.4 million in cash interest this period, and we recently extended our existing hedge profile to ensure that the 2022 debt facility is 80% hedged until its maturity in 2029. Although we currently hold an 87.5% economic interest in Helios, we do not consolidate its P&L or balance sheet accounts, which has the effect of understating our cash and working capital. Thus, we believe it's useful to provide some additional data in order to give a more complete picture.
As of Monday, January 30th, 2023, the Helios LPG Pool held $20.5 million of cash on hand. Page five of the investor highlights materials outlines the economics of our scrubber investments. Clearly this investment has been valuable for our shareholders. Of note, the total scrubber cost savings have now paid back the entire initial investment. In addition, as John noted, we have committed to three additional scrubbers. I would note that the installed cost of these three scrubbers will be roughly 2/3 the cost that we incurred on the first 10 retrofits. You also note that our investments in performance monitoring have also proven their value, as both our AER and EEOI have on the basis of unaudited figures for calendar year 2022, fallen by mid-single-digit percentages versus the prior year. Dorian's contribution to a cleaner environment continues unabated.
The significant irregular dividends in the last twelve months underscore our board's commitment to a sensible capital allocation policy that balances market outlook, operating and capital needs of the business, and an appropriate level of risk tolerance given the volatility in shipping. We also continue to evaluate potentially interesting investment opportunities that may represent attractive risk-adjusted returns. With a continuing solid freight market backdrop, we remain cautiously optimistic about our cash flow generation over the coming months. With that, I'll pass it over to Tim Hansen.
Thank you, Ted, and good day, everyone. Thanks for dialing in. The October to December 2022 quarter saw increased LPG export as well as import demand, which translated into a firm trade market. North American export was buoyed by relatively mild winter, dampening domestic LPG consumption and continued record-setting production levels. The quarter is often characterized by seasonality as Asian importers tend to stockpile for the winter, and 2022 was no exception. North American exports set a record for exports for the quarter, while South Korea and Japan posted strong imports level, also helped by demand for LPG spiking to navigate the cold winter. Middle East export volumes were slightly down compared to previous quarter, but nonetheless, it was a record high Q4 exports.
The East of Suez market saw the BLPG1, which is the benchmark, for AG-Chiba rate, continue the upward trend from the quarter prior, despite a brief lull during the Golden Week holidays in the Far East. Several delays at key discharge ports in India and in the Far East absorbed considerable tonnage during October and November. Meantime, market players also had to plan with long lead times because the West market was seeing fixing windows five to six weeks in advance of the loading laycans. The result of a favorite product market absorbing tonnage at discharge port and navigating long lead times was a bullet market in October and November. On the 21st of November, we saw a record high BLPG1 posted at $148 per metric tons.
December was relatively quiet as the seasonal backwardation in the market impacted the product market, and a significant downward correction was seen in the H2 of December. For the West of Suez market, it was likewise. The West of Suez market likewise saw a rising market during October and November with a downward correction in December. The West of Suez market was also impacted by delays at discharge port, but also had to contend with increasing delays for transiting the Panama Canal. These delay factors to vessels resulted in market players having to secure tonnage well in advance of the laycans.
The West of Suez market did not climb at the same pace as the East market, partly due to the fact that ship owners being enticed to lock in firm earnings on longer voyages, which increased the competition for cargos known to be destined for the Far East discharge ranges. By September, a weakened arbitrage, as you can see on our investor deck online, due to the forward delivery prices of product in the Far East, the activity levels in the last few trading days of calendar 2022. This resulted in a significant freight market reductions. The East and West market rates indicated a well-balanced shipping market, supported by strong fundamentals.
In the summer, the balanced shipping market demonstrated that the VLGC market could weather seasonal summer doldrums, the early winter demonstrated how strongly the market could rise when shipping demand increased. The positive fundamentals of the market has been the theme over the quarters. Risks do remain, however, with market players attempting to understand the impact of the new COVID-19 normal in China and whether a world recession is looming in the horizon. Despite the present external risk, propane inventories continue to build in North America and demand for LPG remains robust. There is reasonable optimism of increasing demand for LPG in China once a hard landing of sudden opening is handled with more PDH truly coming on stream and the industry operating on more stable basis. With that, I'll hand it back to John.
Yeah. Thank you. As I said in the beginning, I think, well, I will have the remarks briefly that John Lycouris had prepared, briefly read now and then we'll go back for questions. Thank you. Peter?
Thank you. In John's absence, I'll give everyone a brief on our scrubber operation results and our near-term ESG strategy. Starting with our scrubbers, fuel spreads for calendar Q4 2022, our Q3 2023 widened between LSFO and HFO, benefiting our scrubber vessels with improved voyage economics averaging about $5,831 per day, net of our scrubber OpEx costs. The realized average payments were about $246 per metric ton of HFO consumed by our scrubber vessels versus the cost of LSFO. The hybrid features of our scrubbers provided additional upside for all ECA and SECA areas of trading. In addition, scrubbers reduce not only SOx, but also significantly reduce particulate matter and black carbon, and we feel are a necessary precursor for putting future carbon capture systems on our vessels.
Pivoting to our ESG strategy, our immediate focus is on our fleet's IMO-mandated EEXI and CII rating, which will come into effect in stages in 2023. We are reducing emissions and improving commercial performance by installing various Energy Saving Devices or ESDs. We have also implemented real-time data monitoring, as we mentioned before, with sensors that track performance and optimize onboard operations and voyage completion. We combine this with robust crew training efforts, which we feel are paramount to getting this done. We have contracted three additional scrubbers, which will be installed in the next two quarters on three of our vessels, which have upcoming dry docks. Looking ahead, we are investigating the potential for Carbon Capture and Storage on board our vessels. We're continuing to improve our energy efficiency on board our vessels with a focus in vessel performance and emissions improvement.
We're continuing to study technological innovations and advances as they mature and implementing them as soon as we can. With that, I'll pass it back to our chairman.
Thank you. Thank you. Daryl, we can go to questions now. Thank you very much.
Thank you. With the prepared remarks completed, we will now open the line for questions. If you would like to ask a question, please press star one on your telephone keypad. Again, that was star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Omar Nokta with Jefferies. Please proceed with your questions.
Thank you. Hey, guys. Good morning. You know.
Hey, Omar.
Hi. It's a nice solid quarter, obviously, and it looks like, you know, more is on the way here, especially given what we've seen in the spot market here the past week or so. You know, obviously the dollar-...
From your mouth to God's ear.
Sorry, John, what was that?
I said, from your mouth to God's ear.
Yeah.
I'm sure God is listening to the analysts, right?
He's looking happily on you.
Good. Thank you.
Well, I would say that the dollar dividend you declared, I think clearly you're conditioning us to... Or I'm being conditioned to expect these payments. I know you're still viewing them as irregular. You mentioned in your opening remarks that the board takes a more pragmatic approach to the payout each quarter. How should we think of, you know, Dorian's use of cash here as we, as we think about the near to medium term? Are dividends the number one priority?
No. They're not. They are, our capital allocation is our number one priority. The way we think about the dividends are as part of a whole and which includes, has included in the past, buybacks. Now they could include them again. Dividends, obviously, and reserves for a rainy day and for investment, so including renewal. Up until now, we've, as you know, we've invested only in one new ship. We feel that we're covered with the three dual-fuel ships that we've chartered in, plus the new building that we're taking in for ourselves. We've got.
We're investing a little more in the scrubber because we feel that that's, that has given us good returns, and we think the prospects are good. While dividends are right up there, I think you asked specifically, are they the first priority? I think we should say that they are equal weight in that's how we view them, equal weight within every quarter's capital decision allocation, which is kind of long-term and medium-term.
Okay. That's fair. I appreciate that color. You know, maybe you did mention, you know, the investment and you've got the one new build, the three charter in. At this point, it looks like you're deploying capital on those three scrubbers. Just out of curiosity, you mentioned that those will carry a cost that's about two-thirds of the initial program a few years ago.
Mm-hmm.
I think generally people have just assumed that it would be more costly today. Just wanna get a sense of, you know, what makes it cheaper this time around?
I think the production really, because you're right, they should be more expensive. If you compare it to the first time we put scrubbers on board, which was in our initial two new buildings, it's not only a third, it's probably a third of the cost, not just a third of the, a third off of. They're just, they keep coming down. I'm sure they will level off somewhere. They're more efficient. They're, you know, more compact, easier to install. That's, that's it really. I think, Ted, do you wanna add anything?
I mean, I think the other thing, if there was some cost when we initially did the first retrofit, some, basically, I'm not a technical guy, but like high-tech MRIs of the structure to see exactly where to put stuff. Now we know the plan of the ship, so some of that we've avoided and we've gotten better at installing them, you know, our piece of it. The yards have gotten better too. It's all the learning curve, I think, like John said.
Okay. Yeah. What do you think in terms of timing? It sounds like, I think Peter had mentioned in the second and Q3s, you expect to complete them. What's the expected sort of off-hire time for those ships?
About, we've modeled for the time being 30 days. That's what it's worked out to historically. We've been a little bit better than that, you know, sort of 27, 28 days. We've assumed 30 for our internal modeling purposes.
Okay. That'll happen anyway, you know, with the surveys that are due.
It would, except it's worth remembering, Omar, that when we normally do our special surveys, we actually are only in dock for 15 days. It takes sort of an additional 2 weeks to install the scrubber. We normally do not have 30-day regular dry dockings.
Okay. Got it. maybe just one more, I guess maybe a bit more bigger picture just on what we're seeing in the market. you referenced this earlier in the commentary, maybe for, you know, maybe Tim, you know, just what's been going on, I guess, with the spot market here recently? Kind of came into the year a bit softer, trended a little lower, it looks like the first couple of weeks, here, maybe over the past week or so, we've seen a big jump. just wondering, you know, what's driving that uptrend here recently?
Tim, you wanna try and?
Yeah, yeah.
take a stab at that?
Yeah. I think it's a combination of things that probably at the end of December, we came from a very high point. As we closed in on Christmas and the arbitrage closed in a little bit, I think people got quite keen to take, you know, to take them of the cargos that was there before the holidays, and that made the rates fall. You had like kind of two weeks of quietness before people got back in their seat. In that time, it's really the, you can say, the broker setting the Baltic that kind of dictates the market without any much actions.
Probably the market probably felt more than it should have done from that perspective. Also at the same time, as we came back, we normally see the quiet of the Chinese New Year. This year, due to the cold spell suddenly hitting Asia, we actually saw the Chinese coming back during the Chinese holidays, where which normally they take a week or so to, before they get back in their seats. The demand really picked up due to the cold spell in Asia and we saw them scrambling for tons even during the holiday, which we normally don't see.
That of course, that demand opened the up and kicked back the action in the market. And actually when we then saw that there was actually not a length in the shipping market, which became apparent quite quickly. As there was no demand, the previous week or activity at least, and then that kind of made the market drop quite quickly, and then it rebounded back to probably where it should have been as the market was fairly tight.
Got it. Thank you. Thanks for that color. I appreciate the time, guys. Congrats again on a solid quarter, I'll turn it over.
Thank you very much, Omar.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next questions come from the line of Sean Morgan with Evercore. Please proceed with your questions.
hey, team. you know, wanna wish John Lycouris a speedy recovery from his knee surgery.
Thank you.
Yeah. just a kind of a, I guess sort of a macro question about the market. How do you sort of think about the current order book, you know, one in five, I guess, versus the existing fleet and that delivery schedule in 23 versus kinda some of the petchem build out in Asia and sort of the ability of the market to sort of absorb that new tonnage? Like, how do you, how do you get comfortable with the sort of the rate outlook in that context?
We think about it a lot. We never get comfortable. We just weigh the balance of probability and to the best of our ability. I let Tim give you some a benefit of some of the conclusions that we've reached on the projected equilibrium. Where we're generally, I think, a little more optimistic than some other people. He'll tell you why. Tim?
Yes, of course, we One thing that you, that you can't hide is, or which is evident to everybody is the 46 ships or so delivering in this year. What we think, or we believe will balance this out is the additional production, especially from the U.S. which have surprised quite a lot on the upside. We see that most of the, you can say 80% of whatever is produced in the U.S. will go to the Far East. The demand side is really in the Far East. When we model that, we see kind of around 20 ships absorbed due to that increase of volume at least, and that's without any inefficiencies.
On top of that, when we have more congestions in the port as we see, more and more as a lot of places the infrastructure isn't built out for the increased volume, especially like India and other places. We're also seeing a lot more going into Europe, due to the war in Ukraine. Here we're also seeing more delays than usual as it's bigger volumes coming in. And then as I think we mentioned a few times, the Panama Canal delays, we do see them increasing. You can say the some of the delays have been due to the quite firm container market.
Again, even though that is kind of easing off, you're gonna have a significant amount of LNG carriers built for the next year or delivering in the next year. We're also gonna see more Panamax container ships delivering. The new regulations in the Panama also allowing other or larger container ships actually to go through as they do not have to take the tugs into the locks anymore. We do see increased Panama Canal delays. We have as Peter mentioned earlier, the regulations on the EEXI and CII, which will have a impact on the shipping fleet as VLGC normally goes very close to full speed.
Where you see the tanker markets and the dry markets previously has not been running on full steam. For them, the EEXI reduction is not so significant. Sorry. For VLGCs, this will have an impact on the fleet, which is quite significant actually. We see these factors as being able to absorb this shipping fleet coming in.
That's really interesting. Basically, I think we have a little bit of a natural head. You know, the downside, I guess, of more VLGCs coming to market and obviously a larger impact from the big container ship rate. What you're saying is that there's still only one Panama Canal, and you're just gonna have more congestion. Are you sort of now thinking that the new steady state is just constant congestion in the Panama Canal that's effectively slowing down fleets for not just obviously VLGCs but just global fleets and increasing kind of utilization based on wait times?
Yeah. That, I would, that is our view. I mean, you have about 260 new Panamax container ships on order and about 250 LNG new Panamax ships on order. This will. Not all of them will naturally use the canal, but there is more ships going in that way. I think the LNG from the U.S. eventually, even though you're seeing it lately due to the war going into to Europe, there will be more going to the East as well. I think the utilization of the Panama Canal will be or it will be more busy.
We have also seen, you know, LPG carriers probably being the harder hit of those because we are excluded from booking ahead, where other liners and LNG carriers that can speculatively book slots a year ahead. LPG ships can only book 14 days ahead for the Panama Canal. Due to the ranking that most companies have, then that is an issue as the larger container lines have the higher rankings. I see this increase continue. Also the Panama Canal authorities have increased the cost of the LPG carriers passing. I guess the LPG carriers is the smallest ship that can't pass the whole Panama Canal.
Thus, giving the least revenue to the canal. We're seeing significant increases of the actual transit cost, plus people is most of the time having to bid for the auctions, which goes everything from $100,000- $2 million on the auction fee. We're seeing more people also taking the longer route around the Cape or through the Suez Canal to ensure that they can actually meet their laycan and have a firmer schedule. Also that longer route will give some more ton-miles in the balance of things.
And that consideration is done due to the delays and due to the uncertainties and the and the auction fees, of course, which also you don't know what will be. These things I think is there to stay.
If I could just squeeze in one more on this. I think Ted, in the prepared remarks, said that the Baltic rate, you know, reflects Russian or Chiba route. If I'm hearing him correctly, it's almost sounding like he doesn't view that as maybe as central and important a route relative to the actual rates that you guys are seeing at your charter desks. What routes do you think like now are kind of more indicative of how the trade is really happening for VLGCs on kind of a weekly basis?
Um,
Sean, let me take this as two questions, actually. And we'll give you two answers. Tim will answer you specifically on the part of your question, which says, what kind of mix the trade, how we should think of the mix, right? It's not just AG East, obviously. It's a Western route. Even the West is both AG, U.S. Gulf East, but also U.S. Gulf to the continent and other short term. I'll let him give you that. First, I want Ted to address the reason why he said the lag and the 100%. When I notice that most analysts now use a one month lag on the VLGC rate, on the AG rate.
Of course, it's still 100% utilization, which is fine. I think the... I'd like Ted to explain to you why we think the one month lag will not reflect the actual earnings, because the lag in the receipt of freight is at least two months. Here's it. Ted, you wanna.
Yeah, sure. Yeah. Sean, exactly what John said. Aside from there being a mix, it's really the business. It's really the cycle, right? You know, Our guys were booking, you know, now, here at the beginning of February, you know, for voyages that won't complete until, you know, at the earliest, you know, sort of, sort of April and maybe even further out. As a result, when you're, when you're trying to, you know, undertake a modeling exercise, and given how the, given how the, you know, the revenue recognition accounting works, you really tend to find that a two month lagged average is gonna be a lot better. Tim will give you more on the, you know, on the specific trade lanes, and there's some...
The rates behave differently there. You know, particularly, you know, we've seen U.S. Gulf to Northwest Europe be a sweet spot, but Tim will comment on that. It's really just simply a better... Look, there's no perfect way to do this, and we acknowledge that, but we want to give a little guidance to the investment community about how to maybe narrow or make it somewhat more accurate. You know, and again, I mean, averages are tricky. You know, we book somewhere around nine to 10 voyages a month. You know, and they're, you know, 20 some odd working days in any given month. It becomes quite tricky to strike broad averages.
We at least feel that looking at a two-month lag is gonna give you a better indication of what we expect to see intra-quarter and what you can expect to see when we deliver quarterly results.
Tim, you want to.
You want to hear from Tim about the mix actually a little bit or not?
Yeah. Yeah. That would be good, actually.
Okay, Sean. It was a great question. Tim, have a go and see if you can do it quickly.
Okay. I'll try to keep it short. Yeah, as Ted mentioned, there's basically three routes. The Ras Tanura Chiba, so East, or Middle East to Far East. Then there's a route, U.S. Gulf to the Far East and U.S. Gulf to Europe. There are actually indexes for these three routes. They are not used very much because they have been too illiquid, and you can say for trading purposes and others, which was really the intended for these routes to be published. They're not really used on a paper trading basis. The market is not so big to have too many indexes which then makes them illiquid.
You can say our trading is probably 80% out of the U.S. and 20% out of the AG. The U.S. East is the most active spot market route of the routes, and it's also the longer route. You can say it will have a bigger impact fixing one voyage US to the East than AG to the East or US to the West. It will employ the ship for 70 days instead of 30-40 days. That route is really the most significant route, I would say, to match it up.
Of course, people will change from one basin to the other if one of the route is paying far less than the other ones, but it's a matter of like how do you deploy your ships and which cargo do you go for and where do you come open. I would say the most traded route is U.S. to the Far East. I would kind of watch out for that as well to kind of judge your earnings. There, like Ted said on the AG East, the index route doesn't take into account Panama waiting, and it doesn't take into account, I think, time as well, or auction fees for the Panama Canal.
Again, when you calculate the TC returns on those, you would have to take that with a pinch of salt as well. Then you have a premium market has been U.S. to the West, where that's a difficult market to operate in because you are open quite close to the load ports. As I mentioned before, sometimes the fixtures are five to six weeks ahead when we fix a ship. You're hardly open in the AG when you are open in the Far East, or when you fix the ships, let alone open 14 days on the load port. A lot of people avoid ending up in the West due to these reasons, but they do pay a premium.
If you kind of figure out how to manage it, then it's a attractive market for some. That also again, when you then look at your earnings, it's really depending on where I come open on the previous voyage. If I'm open in the West and go to the Far East, of course, that will give you a significantly higher return on a discharge to discharge versus ballasting from the East and then ending up on a short voyage in the West. These are kind of the variances as you see. As I said, we fix sometimes 5- 6 weeks ahead the, if the market is tight.
If the market is not so tight, then you will fix two to three weeks ahead in the West. In the East it will be more like 10 to 20 to 10 to 30 days ahead that you fix. 30 days in a tight market, 10 days in a not so tight market. That's of course again kind of the lag that you would have to use would depend on how tight is the market and how far do we fix it.
Thanks, Tim. I mean, Sean, does that give you more than you want or?
Yeah. No, that's great, Tim. Thanks. That's a lot of deep nuance on kind of how it works.
We thought it would be useful.
Yeah.
Yeah.
That's great.
Thank you.
Okay.
Thanks.
Thanks, guys.
Thanks, Sean. Thank you very much. Thank you. Daryl, I think we're done. Thank you. Thank you very much everyone for joining us, and we look forward to our next quarter's call. Thanks again. Bye-bye.
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