Ardmore Shipping Corp Q3 FY2020 Earnings Call

Good morning, ladies and gentlemen, and welcome to Ardmore Shipping's Third Quarter 2020 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. A replay of the conference call will be accessible anytime during the next 2 weeks by dialing 1 (877) 344-7529 or 1 (412) 317-0088 and entering passcode 10149100.

Thank you, Debbie. Good morning, and welcome to Ardmore Shipping's Third Quarter 2020 Earnings Call. First, let me ask our CFO, Paul Tivnan, to describe the format for 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, ardmoreshipping.com, where you will find a link to this morning's third quarter 2020 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 those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially is included in the third quarter 2020 earnings release which is available on our website. And now I'll turn the call back over to Tony.

Thanks, Paul. Let me first outline the format for today's call. To begin with, I'll discuss quarterly highlights and then the market outlook. After which I'll provide some thoughts on the energy transition. Following this, Paul will provide a summary of product and chemical tanker fundamentals and a detailed financial update. And then I'll conclude the presentation and open up the call for questions. Turning first to Slide 4. We're reporting an adjusted net loss of $6.6 million or $0.20 per share for the third quarter and an adjusted net profit of $13.6 million or $0.41 per share for the first 9 months of the year. Our MRs average $13,000 per day for the third quarter and $17,850 per day for the first 9 months, reflecting the recent decline in rates, but overall still good results year-to-date. Meanwhile, Ardmore is maintaining a strong balance sheet and financial flexibility with cash of $60 million as of October 30, net leverage of 49%, and a demonstrated ability to obtain attractive financing terms. Our capital allocation policy has resulted in good progress towards lower leverage and stronger cash reserves in the face of the difficult charter market. However, our priorities may now shift given equity market conditions. We announced a $30 million 3-year share repurchase plan at the end of September. And in the meantime, our share price has dropped to levels well below analyst consensus NAV of $7.10 a share, and our own depreciated replacement value estimate of $9.50 per share. The tanker market is at very low levels across all sizes, both crude and products as a result of the evolving economic impact of the pandemic, including the second wave of contagion. Our fleet average TCE for October was down to $10,750 per day, reflecting what we believe is the market trough, which represents just 1/3 of the quarter. We do expect rates to improve toward the end of the year, but given the reduced underlying oil demand, not to typical winter market levels. Looking ahead into 2021, we expect product tanker demand to fully recover post-pandemic and then continue on a normalized 2% to 3% growth trajectory. As we will discuss later, the energy transition may pose challenges for the tanker sector overall, but for companies such as Ardmore, it's also a significant opportunity. Turning next to Slide 5 and starting with the near-term outlook. Tanker spot charter rates are running at very low levels. The near-term outlook is challenging, but there could be surprises to the upside for tankers going into 2021 in the form of oil price volatility as OPEC balances output, prices, and quota compliance. Additionally, and specifically for product tankers, we believe that output cuts from older refineries will incrementally boost product tanker tonne-mile demand, and we expect geographical imbalances of oil products to result in greater cargo movement going into recovery. The chemical tanker sector, where Ardmore has a presence through our fully IMO 2 chemical tankers as well as our crossover trading strategy, looks to be on a more positive demand trajectory for the products, which is positive for our earnings prospects. Turning to the medium term, the most recent IEA report, which we believe provides a comprehensive and unbiased oil forecast, predicts a full oil demand recovery post-pandemic and oil demand growth of 0.85% thereafter out to 2030. Due to ongoing trends relating to the location of new refinery constructions and products trade development, product tanker demand has historically outperformed oil demand growth. For example, over the past 10 years, product tanker demand growth has been 4% to 5% versus 1.1% for oil demand growth. Using the 0.85% figure from the IEA, we expect slower but still substantial product tanker demand growth of 2% to 3% post-pandemic with chemical tanker demand growth expected to be higher. Beyond the short-term closures, the refinery industry is now facing permanent shutdowns of older, less efficient refineries being replaced by new export-oriented capacity, resulting in greater seaborne volumes over longer distances. This is an important point, which Paul is going to discuss later in detail. Our next topic is the energy transition, particularly the new EEXI regulations, which target a reduction in existing ship port emissions and are expected to have a big impact on tanker supply. So overall, as a consequence of these many factors, we are very positive on the prospects for modern, fuel-efficient, product, and chemical tankers, such as those in the Ardmore fleet. Turning to Slide 6 now on the energy transition. The push to reduce shipping carbon emissions is accelerating, with very little patience being shown for gradualism. The IMO framework to reduce carbon emissions in shipping intends to do this through near-term efficiency measures, specifically EEXI, and then through a longer-term switch to zero carbon or carbon neutral fuels. In particular, it appears that the rollout of the EEXI will marginalize older and less fuel-efficient ships in the coming years. The graph on the upper right of the slide shows what might be in store between now and 2030, if these regulations force the scrapping of product tankers at 20 years of age instead of the typical 23 to 24 years of age. A further set of regulations to phase out the use of carbon-based fuels will come later, but with many NGOs and national bodies believing this will be too slow, they are putting pressure on the industry. Consequently, for example, the European Union emissions trading scheme for shipping is under discussion for possible implementation by 2023. It's clear that the energy transition will significantly impact shipping, and we think that most of it will be positive. There will be increased pressure on inefficient ships to exit. The transition to cleaner fuels is already underway. For instance, dual fuel LNG and methanol vessels are being built and ordered against long-term charters, which is a trend we expect to accelerate. While tanker demand growth is expected to flatten as we approach peak oil, product and chemical tankers are expected to fare better with continued growth in trade beyond peak demand. We believe Ardmore is well positioned to leverage these opportunities. First, all Ardmore vessels are expected to be compliant with the new EEXI regulations. We believe we are one of only two listed tanker companies that will be in that position. Second, we have a long-standing focus on innovation around efficiency, and as a result, we are already 10% ahead of the decided principles curve for their annual target, and we intend to maintain or increase that lead. Third, we already have a meaningful presence in non-petroleum cargoes, which is likely to grow over time. Overall, we believe the energy transition will present opportunities to companies that have modern fuel-efficient fleets, technical and operational expertise, and access to the capital needed to fund the industry's requirements for new generation vessels. And on that note, I'll hand the call over to Paul.

Thanks, Tony. Moving to Slide 8 and building on Tony's points. We will delve into some more detail on the product and chemical tanker fundamentals. Global oil demand is recovering from its lows in April, while the global economy is expected to sharply rebound in 2021. Substantial stimulus packages are expected to result in GDP growth of 5.2% next year, compared to minus 4.4% in 2020. Current oil consumption is 92 million barrels per day, which is 7.4 million barrels per day below January 2020 levels, primarily due to the decline in jet fuel consumption. The IEA is expecting oil consumption to substantially increase through 2021 as economies reopen, reaching 106.8 million barrels a day in 2030. Meanwhile, the global refinery industry is facing a massive shakeup following recent events. Latest estimates indicate that 2.5 million barrels per day of refinery capacity is under threat of closure in Europe, North America, and Australia over the next 3 years. In Australia, all four refineries totaling 475,000 barrels per day are at risk, with the first closure formally announced. A few weeks ago, BP announced that their 150,000 barrel per day refinery in Perth will close within 6 months and be converted to an import terminal. In Europe, Gunvor intends to mothball its 115,000 barrel per day refinery in Antwerp, while Total is considering converting a 90,000 barrel per day refinery in Paris to biofuels as essential repairs appear uneconomical. These three cases are just examples from a very long list. In total, Wood Mackenzie has listed 11 refineries at risk in Europe alone. At the same time, large export capacity increases in the Middle East and China, totaling 4 million barrels per day, are coming online over the next 3 years. These projects are, in many cases, complete, or in some cases, construction is well underway. In September, the new 400,000 barrel per day refinery in Jazan, Saudi Arabia, came online with its first shipment of products, while the Azure 600,000 barrel per day refinery in Kuwait, which will be the largest in the Middle East, is now 95% complete and expected to come online in early 2021. China is rapidly becoming a refining powerhouse and refined product exporter, with substantial refinery projects underway. A 400,000 barrel per day refinery in Xinjiang is starting trial runs, while work is in progress on a $21 billion Yulong refinery complex in Shandong, scheduled for completion in 2024. These projects and ongoing refinery expansion in China substantially exceed Chinese domestic refined product demand and, as a result, we expect a significant increase in exports. Turning to the supply side, product and chemical tanker supply remains low. The product tanker order book is at 6.1%, delivering over the next 3 years, and we expect net growth of 1% to 2% per annum over this period once net of scrapping fees are considered. The chemical tanker order book is similarly low at 4.1%, delivering over 2 years, and we expect fleet growth of less than 1% per annum when net of scrapping is taken into account. In the near term, new ship orders will remain low until there is clarity regarding propulsion technology and an economic justification. Meanwhile, the energy transition is underway and will lead to a major transformation of the global fleet, as well as accelerated scrapping of older ships. Based on the age profile of the fleet, and anticipated increased regulations concerning greenhouse gas emission targets, approximately 1,800 ships could be scrapped over the next 10 years, which is significantly above recent scrapping levels. Moving to Slide 10 for a summary of our financial performance. We are reporting a net loss of $6.6 million or $0.20 per share for the third quarter, reflecting a sharp decline in charter rates related to the pandemic. Charter market weakness is continuing into the fourth quarter, but Ardmore remains profitable for the year-to-date with a net profit of $13.6 million or $0.41 per share for the 9 months ended September, and we expect to be profitable for the full year. As always, we remain very focused on cost control and efficiency improvements. Corporate cash overhead came in at $3.3 million for the quarter, in line with prior quarters. For the year-to-date period ending September 2020, costs are slightly down year-on-year. Commercial and chartering costs amounted to $800,000, consistent with prior periods. As mentioned before, in many companies, commercial and chartering costs are incorporated into voyage expenses, which means that our corporate cost is the comparable overhead. In commercial and chartering, despite our moderate scale, our cost of operations is running at 50% of standard industry rates. For the fourth quarter, we expect total overhead, incorporating corporate and commercial, to be $5 million, including cash and non-cash items. In October, we completed a rigorous budgeting process for 2021 and are expecting a flat budget for the year despite insurance increases in line with the broader market. Operating expenses are in line with full-year estimates. Total operating costs for the quarter were $16.1 million, and we anticipate operating expenses for the fourth quarter will increase to $16.5 million, reflecting the additional shift in operations for the quarter. Interest costs are substantially down year-on-year, as we executed a floating to fixed swap in May, locking in LIBOR at 32 basis points. Consequently, interest costs came in at $4 million, considerably lower than the $4.8 million for the second quarter. Looking ahead, we expect interest and finance costs in the fourth quarter to be approximately $4.1 million, which includes amortized deferred finance fees of $400,000. Depreciation and amortization totaled $9.8 million for the third quarter, and we expect depreciation and amortization for the fourth quarter to come in at $10.2 million. Overall, Ardmore's cost structure is among the lowest of our peer group despite our smaller size, with significant incremental improvements occurring faster than through scale. Turning to Slide 11, we will take a look at charter rates. Product and charter rates experienced a sharp decline in the third quarter, with MR spot rates highlighted in green on the left-hand side, averaging just under $13,000 a day. It is important to point out that none of the MRs are on scrubber status. Ignoring capital and operating costs associated with scrubbers, our estimate is that a scrubber fit in March generated a premium to TCE of $620 a day for the third quarter and $1,400 a day for the 9 months ended September on the spread between HSFO and VLSFO for the period. Looking ahead for the fourth quarter, we have 40% of our days booked on the MRs at $10,500 per day, which is representative of an all-time low and reflects continued weakness in the charter market. Meanwhile, chemical tanker rates on the far right are performing much better on a relative basis. As with last quarter, we present charter rates on the chemical tankers on an actual and capital-adjusted basis. The purpose here is to present the rates across various cases on a comparable basis to an MR. The methodology is simple: We establish a bareboat equivalent rate for the ships each quarter based on the TCE performance, then we adjust the bareboat for the relative value shift to an MR, which is then added or subtracted to the TCE rate. This is one of the methods we use internally to assess relative TCE performance and is very useful for contextualizing rates across different asset classes. Using this methodology, the chemical tankers earned $11,050 per day for the quarter or $11,900 per day on a capital-adjusted basis. Looking ahead to the fourth quarter, the chemical tankers are outperforming the MRs, earning $11,650 per day with 55% of the days booked. Moving to Slide 12 for a fleet and operations update. Our more modern fleet is well positioned for the energy transition. Our fleet comprises Eco-Design MRs and highly fuel-efficient Japanese vessels that have been upgraded for enhanced efficiency. We anticipate that all our ships are already in compliance with the proposed EEXI targets, averaging 5% or better. Our fleet's carbon emissions levels are 10% better than the departing principles target for 2020, and we maintain a continuous focus on improvement and technologies to stay ahead of the curve. Operationally, the fleet continues to run well despite challenges associated with the pandemic. As part of our commitment to performance improvement and efficiency, we are applying new technologies for controlled power limitation on main engines, enhancements for capturing generator waste heat, and further technological advancements to existing propeller front modifications. We are also currently taking advantage of the weaker charter markets and vessel positioning to accelerate drydocking six vessels in the fourth quarter. All six vessels are optimally positioned in China and Singapore, enabling more cost-effective dockings. Finally, accounting for the two ships which delivered in August and September, total revenue days are estimated to be 9,140 for the full year 2020. Turning to Slide 13, we will discuss the capital allocation policy and financial activity. Ardmore is in a strong financial position, with total liquidity of $60 million available in cash and undrawn lines as of the end of October. This equates to cash of $2.3 million per ship, which is significantly higher than our peers. We are currently finalizing a $10 million loan for the Ardmore Seafarer with a Japanese bank at highly attractive terms. It is a 5-year loan, priced at LIBOR plus 2.25%, and we expect to draw down in the coming weeks. These attractive terms underscore our strong financial profile and ability to access favorable financing in challenging market conditions. We continue to invest in the fleet with CapEx of $7.5 million for the year-to-date. The capital allocation policy has strengthened the company's financial profile as we continue to repay debt at a scheduled rate of $9 million per quarter or $36 million annually, while maintaining revolving credit facilities for our financial flexibility. At the end of September, our total net debt was $344 million, with leverage at 49%, which is down year-on-year. However, as Tony pointed out, our priorities may shift given the current equity market conditions.

Thanks, Paul. To sum up then, the tanker market is currently at very low levels. We still expect a winter market lift in spot rates, but not to levels typically seen in prior years, given the missing underlying oil demand. Product tanker demand growth is expected to fully recover post-pandemic and then continue on a 2% to 3% growth trajectory. In the meantime, we are maintaining a strong balance sheet and financial flexibility. Ardmore's capital allocation policy has proven successful in improving our financial strength, but now our priorities may shift due to our stock price. Notwithstanding, we still believe financial strength is critical given the difficult market conditions we're currently in, so this is a balancing act. Regarding the energy transition, while it poses challenges for the tanker sector overall, for companies like Ardmore, it represents a real opportunity. As a final point, Ardmore's focus on long-term shareholder value remains unchanged. We continue to look for compelling strategic opportunities and other means to build value. We prioritize operating performance and financial strength and aim to preserve significant earnings upside in a recovering market. With that, we're happy to open up the call for questions.

Paul, probably for you, just a couple of questions on the buyback, which I think is probably the biggest focus right now. So first of all, approved in September, were you able to get any stock executed in the third quarter or early fourth quarter before a quiet period kicked in? And then also, when does the post-earnings quiet period end?

Great question, Jon. The press release announcing the share repurchase was issued around September 30. So we would have been in a quiet period at that point. Thus, nothing was executed on the buyback from that point to now. The open period would typically begin 2 or 3 days after the earnings announcements, pending any other transaction-related items. But ordinarily, we expect it to open up in the next 2 days.

Okay. $60 million of liquidity, $36 million of annual debt amortization, $24 million. Given the uncertainty in the market right now, the weak start to Q4, and cases reaccelerating. Out of that $24 million in what we should consider excess liquidity right now versus your capital commitments, how much would you consider true liquidity to be active in buybacks versus keeping a buffer during uncertain times?

Yes. That's a great question, Jon. I’ll refer back to Tony's remarks to say this is indeed a balancing act. The equity market conditions have been depressed across the tanker space, not just Ardmore. Almost all companies are trading at some discount to NAV, which makes equity prices quite attractive. However, as you rightly pointed out, the market is challenging and uncertain. Therefore, it is a balancing act to preserve financial strength and take advantage of our activity. So it really depends on how long these market conditions may last, and what levers need to be pulled regarding share repurchases versus liquidity.

Okay. Final question. I know you just purchased a ship, but as you said, things change and the equity markets have changed. What is your appetite to sell ships to fund the buyback? Given that the entire group is trading at massive discounts to NAV, but in your case, it is pretty extreme relative to your capital structure and fleet. Has there been any thought of trying to narrow that gap with non-core vessel sales to expedite that 3-year program?

Yes, that’s another great question, Jon. You are correct in saying that the straightforward option would be to sell ships and buy back stock, but two points to note: First, as a business, we're a going concern. Selling a large number of ships to fund a buyback isn't a viable option. But yes, we could trim certain ships on the fringes. More broadly, and hopefully, we laid this out coherently in the presentation, we believe there is potential for a real squeeze in the market here in terms of vessels and the marginalization of older ships as we move beyond the pandemic. We're fortunate; our fleet is very modern. The majority are Eco-Design, and we believe we have a fleet set up for the longer term with valuable assets that may not be realized in the S&P market today. Therefore, it is a balancing act between trimming your fleet, managing share repurchases, and capturing equity while also protecting our upside earnings potential in a recovering market as things ease.

A couple of additional points, Jon. Our $60 million cash figure does not include the upcoming $10 million drawdown from the financing of the new ship. Additionally, it is widely known in the S&P market that we're marketing the Ardmore Seamariner for sale. This is our 2006 vessel, and the one we purchased is a replacement for that. This will reduce our owned fleet to 25 ships, and based on our expected sale price, we believe it will generate an additional $5 million in cash after paying off the debt.

A couple of questions at a higher level. Tony, you mentioned in your remarks plans to include shipping in the Emission Trading System in Europe by 2023. The IMO is pushing back on it, but it is an interesting situation. I know it's seen as a regional system, but it would certainly have a broad-based impact as different merchant fleets trade in and out of Europe beyond just the container lines. I'm curious, what impact do you think that ultimately has on the MR market? Could it further bifurcate the global fleet in terms of trading patterns?

Yes, this is Greg, not Mike, I think, isn't it? Is it Mike?

This is Mike.

So yes, the European Union is discussing that it will apply at least to intra-European trade. They're not ruling out applying it to vessels on voyages originating or terminating in Europe. So that’s one point to note. They’re doing this to put pressure on the IMO, as they are dissatisfied with the pace the IMO is working at, and we are hearing that other regions are interested in something similar. This might become a trend. What it effectively means is that if you trade into or around Europe—where many MRs and Handys operate—it would add an incremental voyage cost, marginalizing certain ships and leading to a tendency for more fuel-efficient vessels to perform better in those areas. It’s somewhat parallel to what happened when Europe started banning single-hulled tankers.

That's an interesting premise, and we're trying to wrap our heads around it. Even more broadly, there’s always a push to monetize the discount to NAV. However, when looking at the thematic landscape we find ourselves in now relative to a couple of years ago, especially with the build-out of a continental hydrogen economy in Europe, what opportunity exists for Ardmore, specifically on the chemical tanker side, to participate in the development of methanol ammonia that addresses hydrogen's midstream trade? Although this is still nascent, have you observed any progress in conversations regarding refinery conversions or greenfield methanol export projects where stakeholders might be looking for long-term coverage on the chemical tanker side?

There are many discussions along these lines. For instance, we are hearing from Japanese trading houses that they're thinking ahead to new building demands for more chemical tankers because many of the future fuels will need to be transported on chemical tankers, including potential methanol and various types of biofuels. That said, there are currently no discussions about needing to lock in that tonnage on a term basis. We believe that the demand outlook and growth prospects for products categorized as chemicals are quite significant, and we are closely monitoring this situation as the transition is really just starting now, and we’re looking for ways to participate profitably.

I appreciate the quarter-to-date rate guidance, which is certainly outperforming any benchmark indices we've been monitoring. In your remarks, Tony, you mentioned that rates reflect a market trough before likely improving in December. So I have two questions regarding that. What kind of MR rates are you currently fixing this week, and when do you anticipate rates will return to the mid-teen levels for your MRs?

Right now, the rates we are fixing vary significantly. Some are very low, while others are in the mid-teens and occasionally even higher, indicating a lumpy market at the moment. It’s hard to determine whether this trend stems from volatility or if we’re beginning to see green shoots. In early November, we’re not experiencing much winter weather yet, but we do acknowledge a significant chunk of demand is still missing from the market, which is offset by the refinery situation. Therefore, it is challenging to gauge the current state accurately, but there do seem to be slight upward trends.

Sure, I'm in Houston, so there's never really any winter weather here. Regarding the one-year time charter market, how liquid is it currently, and what are the current one-year time charter rates? Also, is there any appetite for additional time charters at this level if you are bullish on the next 6 to 12 months?

Yes, we chartered one ship at 13.4%, and we are satisfied with that. Although it’s not quite profitable yet, it has successfully completed its first voyage recently. Growing our portfolio of TCN is definitely on our agenda as it's an efficient method to gain exposure to the market without having to buy ships. I would also note that the ship we recently purchased attracted considerable attention due to its pricing and condition at purchase, which was post-drydock and with ballast water treatment, and it breaks even at $11,700 per day for the next three years, so we’re pleased with that. We're also interested in the TCN rate, and while we have chartered ships in the past, we are probably moving towards a mixed model of tonnage sourcing for business.

What current one-year time charter rate are you seeing out there?

It varies based on ship type and location, but for the specific type of ship we charted, it's likely off a little, perhaps a couple of hundred a day, so below $13,000, and maybe $750 to $1,000 higher for an Eco-Design. However, this is somewhat theoretical as there’s virtually nothing happening at the moment—a real standoff in the market.

I would be remiss not to ask any comments on the potential impact of a Biden versus Trump win on the product tanker market?

No comments.

I know you are a political man, so I'm sure you have something to say?

But I'm not a publicly political man, so we'll leave it at that.

I wanted to dive deeper into some of Jon's questions. One of the significant caveats you referenced with past buybacks is the challenge of executing on significant volume. Capital availability aside, assuming you've analyzed how much is feasible, what realistic number do you think is achievable if you are interested in buying back shares at these prices?

Well, you know the practical limitations in a share repurchase program set by the SEC, and you can look at the volumes to assess what’s theoretically possible on a maximum basis. However, there’s also the option to conduct a tender offer.

That's an intriguing point, and if you mention it, it must be something we can consider moving forward. Also, not to ask macro questions, but as I observed in your presentation, we've seen the new refineries coming online in both China and the Middle East. While much has been said about this, no one has addressed the new Dangote refinery in Nigeria. What implications do you anticipate this might have on the LR2 market, especially considering that a lot of LR2 business flows through that region?

Yes, that's a valid point. It's a significant refinery that will certainly impact trade flows by reducing some product imports; however, it will also promote cross-trading in West Africa. Overall, it may net-negative from a global scale perspective. We are unsure about the timing of that refinery coming online, so we are not positioned to comment definitively at this time, but I think it’s a topic worth exploring, especially since it's been on the books for a long time.

Right, I think it will come online shortly after the new year, but I wasn't sure if you had any insights regarding the timing.

Yes, the timing was projected that way two years ago as well.

I wasn't sure if perhaps there could be a hidden silver lining for the MR market. If that facility could serve as a hub, could it potentially lead to new MR trade opportunities as opposed to just LR trades?

The next question comes from Omar Nokta with Clarksons Platou Securities.

I have a few quick questions. Continuing from Jon and Ben's discussion on the balancing act you’ve been addressing between the share buyback and preserving liquidity, how do you view the possibility of further sale-leasebacks?

Omar, yes, they are a possibility for sure. By leveraging excess liquidity or refinancing, we can structure our ships in a manner that allows us to benefit from continued use while monetizing their residual value. Every option remains on the table, as the team here is highly motivated to build value and enhance the share price. Nonetheless, it’s a balancing act. We're all aware of various share repurchase activities across multiple sectors that haven't yielded positive outcomes.

To clarify, when you mentioned lower liquidity due to COVID, are you referring to both outright sales and sale-leasebacks?

Yes, I mean all aspects of the market. S&P activity is at lower levels now, and financing activity overall has tightened. We are fortunate to have demonstrated a strong financial profile and efficient track record, enabling access to premium financing conditions. However, broadly speaking, market liquidity for S&P and financing isn’t what it was two years ago.

That makes sense. Finally, regarding the $10 million loan for the MR you purchased a few months ago, it appears to be about 60% of the purchase price. Is this considered attractive financing given the age of the vessel? Or do you think 60% LTV is more widely accessible for second-hand tonnage now?

Yes. I would say 60% financing is not common. This financing level was established due to our longstanding relationship with the bank and the vessel's high-quality construction in Japan by a reputable builder. The competitive rates stem from this bank’s history with us and their confidence in the ship along with the previous owner's status. Therefore, while we find our level attractive, I wouldn't expect this type of financing to be easily replicated across the board.

This concludes our question-and-answer session, and it concludes the conference as well. Thank you for attending today's presentation. You may now disconnect.