Earnings Call Transcript
Euroseas Ltd. (ESEA)
Earnings Call Transcript - ESEA Q3 2021
Operator, Operator
Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Third Quarter 2021 Financial Results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded today. Forward-looking statement. Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide number two of the webcast presentation, which has the full forward-looking statement and the same statement was also included in the press release. Please take a minute to go through the whole statement and read it. And now I would like to pass the floor to Mr. Pittas. Please go ahead, sir.
Aristides Pittas, CEO
Good morning ladies and gentlemen and welcome to our scheduled conference call for today. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the third quarter and nine months period ended September 30th, 2021. Let us turn to slides three. Our income statement highlights are shown here. For the third quarter of 2021, we reported total net revenues of $23 million and net income of $8.5 million. Adjusted net income attributable to common shareholders for the period was $8.4 million, or $1.16 per share basic and diluted. Adjusted EBITDA for the period stood at $10.6 million. For the nine months period, our total net revenues were $55.6 million and net income was $10.2 million. Adjusted net income attributable to common shareholders was $19.1 million or $2.74 per share basic and diluted. Adjusted EBITDA for the period was $26.6 million. These results are strikingly better than our equivalent three and nine-month period results of last year and Tasos will go over them in more detail later on in the presentation. Please turn to slide four where we discuss our recent operating developments. On October 18th, 2021, we took delivery of motor vessel Jonathan P, a 1,740 TEU container fleet vessel built in 2006. Upon delivery of the company, the vessel commenced the sea charter at a net rate of $26,662 per day. On November 11th, 2021, the company announced the acquisition of M/V Leo Paramount to be renamed M/V Marcos V, a 6,350 TEU containership built in 2005 for $40 million. The vessel, which is expected to be delivered to the company within 2021, will be financed by own funds and the bank loan. Contemporaneously with the acquisition, the vessel will enter into three-year time charter contracts at a daily rate of $42,200, with a possible extension for an additional four years at the option of the charterer at $15,000 per day. Continuing on the chartering front, Diamantis P was fixed for a minimum period of 36 to 40 months at $27,000 per day starting from October 2021. The EM Spetses was also fixed for a minimum period of 36 to a maximum of 40 months at $29,500 per day starting from August. The Synergy Oakland was fixed for a minimum period of 60 to 85 days at $202,000 per day gross as from November 2021. Last, but not least, the EM Corfu was fixed for repositioning charter to the Far East for the next drydocking beginning in December 2021 at a rate of $5,125 per day for the first 37 days and $37,500 per day thereafter. Two of our vessels passed a special survey with drydocking in the third quarter; Diamantis P for 46 days between September and October 2021 and Evridiki G for 38 days from mid-July to around mid-August of 2021. Please turn to slide five where you can see our current fleet profile. Euroseas' current fleet is comprised of 16 vessels now, including 10 feeder and six intermediate containerships with a fleet average age of about 16 years in TEU terms. After the delivery of the two feeder containership newbuildings in the first and second quarter of 2023, Euroseas' fleet will consist of 18 vessels with a total carrying capacity of 56,000 TEU. Slide six shows our vessel employment chart. As you may see, coverage for the fourth quarter of 2021 stands at 100% and the contracted EBITDA is $28.5 million. In 2022, we have already covered 68% of our vessel days with the contract EBITDA level of about $60.8 million. While for 2023, our coverage stands at 40% and contracted EBITDA at $47.7 million. Our contracted average time charter rates for the fourth quarter of 2021 stand at about $30,000 per day, driven up by the high $202,000 per day charter of the Synergy Oakland. While for 2022 and 2023, it is estimated at $24,000 and $27,500, respectively. Let's now turn to slide eight to review how time charter rates have developed in the last 10 years. As you can see, all previous moves seem meaningless in front of the huge heights that rates have been climbing to since the fall of last year, reaching, of course, new all-time highs far exceeding previous highs. The health of the market is reflected in all the data points in slide nine, where we give a bird's eye view of the general container market for the third quarter and beyond. As shown in the table 10, time charter rates across all segments skyrocketed over the past 12 months and have reached the all-time highs just described. During the third quarter, the smaller vessels' rates caught up with those of the larger ones and doubled relative to the second quarter, whilst for the biggest ships, the increases were between 50% to 80%. As of November 2021, rates are still generally above the average of Q3, but we have seen over the last month, a small correction from the peak values that were witnessed in early October. The average second-hand price index shows the level rose on average by about 35% in the third quarter of 2021 over the second quarter of 2021. Price increases vary because different age groups with the younger vessels increasing even over 100%. During the third quarter, the newbuilding prices increased by approximately 6% due to rising steel prices and strong interest for newbuildings backed by the containership market prices. The inactive containers in the containership fleet as of October stand at about 140,000 TEU, approximating 0.6% of the fleet, the lowest level. The percentage of containers in scrap to date has dropped dramatically to approximately 12,000 TEU or 0.05% of the fleet, again, the lowest point ever. This is despite the fact that prices have increased to $615 per lightweight tonne due to the high demand for steel. Overall, the fleet has grown by 3.6% year-to-date, without accounting for idle reactivations. The order book has more than doubled in the last six months, with the current orderbook to fleet ratio hovering around 23% compared to only 10% six months ago. Please turn to slide 10. Global recovery continues, albeit weakened from the previous forecast of the IMF. Compared to the July growth forecast, the global growth projections for 2021 in their October report have been revised marginally down to 5.9% from 6%, but remains unchanged for 2022 at 4.9%. This modest headline revision for 2021 reflects more difficult near-term prospects for the advanced economy group due to supply disruptions fueled by higher commodity prices and second thoughts regarding whether the resulting inflation is transitory or not. Particularly in the U.S., it is expected to grow 6% for 2021, below its July forecast of 7%. The downward revision reflects a slowdown in economic activity resulting from rising COVID-19 cases, delayed production caused by supply shortages, and the accelerating inflation. Prospects for emerging markets and developing economies have been marked down for 2021, especially for emerging Asia. China's economy is expected to grow 8%, slightly less than the July forecast due to scaling back public spending, while India's growth forecast is retained by the IMF at 9.5% for 2021. Beyond 2022, which has a forecast of 4.9% and is expected to grow strongly at 4.9%, the IMF still reasonably forecasts strong global growth levels of 3.3% in 2023. If you look at the containerized trade growth in TEU miles based on Glaxo's projections for 2021, we see that demand growth expectations continue to be on an upward trajectory of 6.7% for this year. For 2022 and 2023, containerized trade is expected to grow at healthy levels of 3.6% and 3.5%, respectively. It should be mentioned that all the above forecasts should be taken with a grain of salt as predicting the future is always difficult. It is perhaps even harder now due to the disruptions caused by COVID-19, which is vastly changing established life and trade patterns. Its unknown duration interacts with the uncertainty of geopolitical developments, global financial markets, and climate sustainability issues to make forecasting even more complex. Let’s move to slide 12, where we discuss the outlook summary. It is evident that global recovery continues at a solid pace despite the Delta variant of COVID-19 being so contagious and significant increases in energy prices, which are delaying and reducing economic growth. While containership trade remains positive with moderate supply growth in 2021 and 2022, the recent surge in ordering is likely to lead to accelerated supply growth for mid-2023 onwards. Port congestion has continued to significantly impact the containershipping markets, leading to excessive wait times and disrupting operator schedules. These logistical bottlenecks have resulted in new highs in container freight rates, which are expected to remain at least throughout the first half of 2022. The short-term outlook, therefore, looks optimistic, reinforced by the logistical disruptions on the firm trade demand. Additionally, limited supply growth in 2022 should provide rate support before increased newbuilding deliveries for mid-2023 kick in. In the medium to long-term, fundamentals are complex, with a range of factors likely to have an impact, including uncertainty about demand for vessels easing up once disruptions ease, material supply pressure from 2023 onwards due to increased deliveries that may overtake demand growth, and opposingly, new environmental regulations that will probably result in even slower steaming by 2023, 2024, effectively removing capacity from the market. Under this sustainably high demand, firm rates and prices are expected to prevail for the ensuing months. The left side of the slide shows the evolution of the one-year time charter rates for containers of 2,500 TEU since 2000. As discussed, we are witnessing the highest charter rates in the last 20 years. According to Klaxon’s, last week, one-year daily time charter rates for 2,500 TEU containerships stood at $70,000 per day, that’s $3,000 per day off its peak of $73,000 per day in mid-October. The right hand side shows the vessel values concerning historical prices since 2011. As we can see, current container values have significantly increased above median and average levels, and they are now the highest they have been over the last decade. In this current market environment, with container rates at present levels or perhaps continuing to rise, we expect our profitability to rise strongly as well. Additionally, with the increased visibility of our earnings, which now extends into next year and well into 2023, we are able to better formulate our growth strategy. We expect that the buildup in cash will be extremely significant during the next two years and we intend to use it in the best possible way for the benefit of shareholders. We remain committed to being key long-term participants in the feeder intermediate containership segment as evidenced by our recent newbuilding orders and the acquisition of the two vessels with attached charters that through the duration of the charter periods, amortize vessels down to scrap values while still offering the potential for significant upside. We will continue to implement such projects when we can find them. Additionally, we will continue using our listing as a potential platform to consolidate privately owned vessels or fleets or rewarding our shareholders by reinstituting common stock dividends or buying back shares when such actions make sense for our investors. And with that, I will now pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.
Tasos Aslidis, CFO
Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. I will now take you through the next five slides of our presentation, giving you an overview of our financial results for the third quarter and nine months period ended September 30th, 2021, and comparing them to the same period of last year. For that, let's turn to slide 15. For the third quarter of 2021, the company reported total net revenue of $23 million, representing an 87% increase over our total net revenues of $12.3 million during the third quarter of 2020, which was mainly the result of the carrier average charter rate our vessel earned in the third quarter of this year as compared to the previous year. Although partly offset by the lower average number of vessels we operated in the third quarter of this year. The company's reported net income and net income attributable to common shareholders for the period was $8.5 million as compared to a net income of $0.2 million and the net income attributable to common shareholders of $0.03 million respectively, for the third quarter of last year. In average, 14 vessels were owned and operated during the third quarter of 2021, earning another time charter equivalent rate of $19,417 per day compared to 16.5 vessels that were owned and operated in the same period of last year, adding another time charter equivalent rate of $8,403 per vessel per day. Interest and other financial costs for the third quarter of this year amounted to $0.6 million compared to $0.9 million for the same period of last year. This decrease was due to the decreased level of debt that we carried and decreased average weighted LIBOR rate in the current period compared to the same period of last year. Depreciation expense remained unchanged, roughly at $1.6 million for both quarters, although the number of vessels operated this quarter is 14 as I mentioned from 16.5 from the same period last year. Most of the additional vessels we operated last year were fully depreciated. Adjusted EBITDA for the third quarter of 2021 was $10.6 million compared to $1.2 million achieved during the third quarter of 2020, reflecting a 729% increase. Basic and diluted earnings per share attributable to common shareholders for the third quarter of 2021 were $1.18 and $1.17 respectively, calculated from 7.2 million shares and 7.24 million shares respectively compared to basic and diluted earnings per share of $0.01 for the third quarter of 2020 calculated from 5.7 million basic and diluted weighted average number of shares outstanding. Excluding the FX and the income attributable to common shareholders for the quarter of unrealized gains on derivatives, the adjusted earnings attributable to common shareholders would have been $1.16 basic and diluted compared to an adjusted loss of $0.26 per share basic and diluted for the quarter ended September 30th, 2020. If we look now at our numbers for the first nine months of 2021, the company reported total net revenues of $55.6 million, representing a 35% increase over total net revenues of $41.3 million during the first nine months of 2020, again as a result of higher charter rates that our vessel showed compared to last year, despite again the fact that we operated fewer vessels. The company reported net income for the period of $20.2 million and net income attributable to common shareholders of $19.6 million as compared to a net income of $3.5 million and net income attributable to common shareholders of $2.9 million for the first nine months of last year. On average, in the first nine months of 2021, we operated 14 vessels earning another time charter equivalent rate of $15,461 per day compared to 18.2 vessels in the same period of last year, earning on average $9,171 per day. Interest and other financing costs for the first nine months of 2021 amounted to about $2 million compared to $3.3 million for the same period of last year. This decrease is due to the decreased levels of debt and decreased LIBOR rates that we paid in the current period compared to the same period of last year. Depreciation expense for the first nine months of 2021 was $4.8 million compared to $5 million during the same period of last year. Adjusted EBITDA for the first nine months of 2021 was $26.6 million compared to $9.7 million during the first nine months of 2020, reflecting a 175% increase. Basic and diluted earnings per share attributable to common shareholders for the first nine months of 2021 were $2.84 and $2.82, respectively, calculated on 6.9 million and 6.94 million shares weighted average number of shares outstanding, respectively compared to basic and diluted earnings of $0.52 for the first nine months of 2020 calculated from 5.62 million basic and diluted weighted average number of shares outstanding. Excluding the gains here, the effect on the income attributable to common shareholders for the nine months of 2021 of the unrealized gain on derivatives, the adjusted earnings per share would have been $2.72 basic and $2.74 diluted compared to adjusted earnings of $0.15 per share basic and diluted for the same period in the first nine months of 2020. Let's now turn to slide 16 to review our performance in greater detail regarding our fleet. We will start by looking at our utilization rates for the third quarter of this year and comparing them to the same period last year. Our fleet utilization rate is divided into commercial and operational categories. Beginning with our commercial utilization rate, we were pleased to see it at 100% for the first quarter of 2021, up from 97.9% in the same period last year. Our operational utilization rate for the third quarter this year is 99.3%, compared to 99.9% for the same quarter last year. I should remind you that our utilization rate calculation excludes vessels in drydocks or scheduled repairs if those events occur during the period we are considering. As I mentioned earlier, on average, we operated 14 vessels during the third quarter of this year, equivalent rate of $19,417 per day, compared to 16.5 vessels for the same period in the third quarter of 2020 and an average rate of $8,403 per vessel per day. Our total daily operating expenses, including management fees, general and administrative expenses, but excluding drydocking costs, averaged $7,621 per vessel per day in the third quarter of this year, compared to $6,759 per vessel per day during the same period of 2020, reflecting mainly increased operating-related costs. Let's now look at the bottom of the table to our daily cash flow breakeven levels presented here again on a per vessel per day basis. For the third quarter of 2021, our cash flow breakeven level was $11,576 per vessel per day, compared to $7,924 per vessel per day for the same period of last year, as you can see mainly because of the additional drydocking expenses. Let’s now review the remaining figures that are shown in this slide, and look at the right part of the slide for the nine-month figures. During this nine-month period, our commercial utilization rate was again 100%, and the operational utilization rate was 98.5%, compared to 97.2% commercial and 98.5% operational for the same period last year. On average, 14 vessels were owned and operated in the first nine of this year, earning an average time charter equivalent rate of $16,461 per vessel per day, compared to 18.17 vessels in the same period of the first nine of 2020, earning an average time charter equivalent rate of $9,171 per day. Our total daily operating expenses, again including management fees, G&A, but excluding drydocking costs, amounted to $7,036 per vessel per day compared to $6,134 per vessel per day for the first nine months of last year. Looking again at the bottom of the table, our cash flow breakeven levels for the nine months of this year stood at $10,079 per vessel per day compared to $8,631 per vessel per day for the same period of 2020. Let's move now to slide 17. This is a new slide over the last two earnings calls, we provide our shareholders and investors with a tool to assess the earning potential of our fleet in the rest of this year, but also 2022 and 2023. The table shown in this slide is in two parts. The first refers to our already in-place contracts. The table shows the available days for hire, making assumptions for the scheduled drydockings, the number of contracted days in each period, as well as the differential of the two that is the remaining, what we call open days. As you can see, almost all of our vessels are contracted for the fourth quarter of this year, while 68% of our available days are contracted for 2022, and even 40% of our days are contracted for 2023. For the contracted days, the table also shows the average contracted rate which allows you, by making an assumption for the operating expenses and the G&A expenses per day, to estimate our likely EBITDA contribution. For the remaining open days, the user of this calculator can assume that the daily rate to be earned which would allow him or her to estimate their own EBITDA contribution of the open day. To provide just an indicative calculation, this example uses the same rate as the contracted days; one could see the effect on the total EBITDA for three periods, as shown for the fourth quarter of 2021, full year 2022, and full year 2023. I would like to mention here that based on the current rates, as indicated by the new ConTex Index, our open days for example in 2022 should earn on average a rate of more than $40,000 per vessel per day significantly above the contracted rate for those days for 2022 as shown in these pages. This is applied to our EBITDA from 2022 as a result, with the approach of possibly exceeding $140 million. This overall exercise is meant to provide a tool to calculate EBITDA for the remainder of this year, 2022, and even 2023, by entering once shown assumptions above the rates for the open days as I explained. However, it is hard not to observe that even if we just assume that our open days will earn the rates as shown in the table, which as I mentioned are just above half of the rates currently in the market, at least for 2022. Our EBITDA for the fourth quarter of this year would more than double compared to the results we get in the third quarter while in 2022 and 2023 we will see increases of 50% on average. Let’s now move to slide 18 to review our debt profile. This slide shows in the bottom part of the slide our cash flow breakeven level expectations for the next 12 months, and on the top part of the slide, we can see our scheduled debt repayments over the next several years. Our loan profile shows on a pro forma basis, that is inclusive of a few developments that took place after the end of the quarter, especially a $15 million we drew in October to partially finance the acquisition of Jonathan P and another $15 million loan that we are in the final recommendation phase and the negotiated loan to partially finance the acquisition of Leo Paramount. The top state of the chart in the top left shows our scheduled repayments presently until 2024. For example, our loan repayment schedule for the fourth quarter of this year is $3.9 million. The light grey or light blue part of the bar shows our scheduled balloon payment. For example, in the fourth quarter of 2021, the balloon payment is $2.4 million, which will cover around in 2022 versus a smaller balloon of $1.9 million and in 2023 smaller balloon payment of $30.7 million and further out $1.8 million balloon in 2024. Typically, we have been able to refinance our balloon payments if we decided to do so. Before we leave this slide, a quick note on the cost of our debt as it relates to the loans outstanding as of September 30, 2021. The average margin on our debt is about 3.6%, and assuming the LIBOR rate of 0.3%, our senior debt costs on average about 3.9%. The cost of temporary loans, as I mentioned, carries average margins in the range of 2.4% to 2.8%, which can help to drive down further the cost of our debt. Looking at the bottom of this table, where we can see our cash flow breakeven level expectations for the next 12 months in dollars per vessel per day. You can see that our loan repayments over the next 12 months are to make $4,259 per vessel per day contribution to our cash flow breakeven level. If we make similar assumptions for the remaining components of our cash flow breakeven level, that is operating expenses, G&A expenses, interest payments, and drydocking costs, we can come up with a cash flow breakeven level for the next 12 months of just about $12,335 per vessel per day. Let's now move to slide 19, providing highlights from our balance sheet, adjusted to reflect the market value of the fleet in newbuilding contracts. As of September 30, 2021, on a book value basis, we had cash and other assets of about $15.1 million and the book value of our vessels including advantage for the newbuildings and the acquisition of Jonathan P of $104.6 million, giving us a total book value of our assets of $119.7 million. On the liability side, we had outstanding bank debt of $59.7 million, and other bank liabilities of $6.8 million producing a net book value for our company of $53.2 million. However, the market value of our fleet is much higher than book value, even adjusted for the negative value of the charters, which is a result of an increasing market. Our vessels are estimated to be about $375 million, inclusive of the appreciation of the value of our NB contracts. If we replace the book value for our vessels with the market values adjusted for charters as I mentioned above, we can calculate the net asset value of our fleet to be around $325 million or around $45 per share. Recently, our shares have been trading in the range of $30 to $36 per share, and although this share price reflects a significant increase since the beginning of the year, it still represents a significant discount to our net asset value per share, thus offering good appreciation potential for our shareholders and good investment opportunities for other investors.
Aristides Pittas, CEO
Thank you, ladies and gentlemen. I now open the floor for your questions.
Tate Sullivan, Analyst
Hi. Thank you. Hello. First, if I may on the Leo Paramount acquisition, the 2005 built ship. And you mentioned earlier amortizing down the cost of that acquisition to near scrap values. How long do you expect to be able to operate that ship? First question, and I have a follow-up question as well, please.
Aristides Pittas, CEO
Sure. The ship will be 20 years old at the expiration of the charter. Historically, we've operated ships up till even when they are 30 years old. I would expect that we can operate it technically easily until it’s 25 years old. It will depend, of course, on commercial considerations at the time and also the background regarding the energy matters. But I think that if the markets are decent, then we will be able to operate it for another five years after the expiration of the charter.
Tate Sullivan, Analyst
Great. And the comment about amortizing the value of acquisition down to scrap and on the future potential environmental background in the sector. I mean, do you forecast higher scrapping values for your ships as demand for recycled steel increases? Or is that not a major consideration as you evaluate additional acquisitions?
Aristides Pittas, CEO
No, we don't assume higher valuations for scrap. In fact, our base case scenarios are based on lower scrap values than current scrap values. Scrap prices at $615 per tonne today are higher than what we're based on calculations today. It might be higher; it’s probable that it’ll be higher, but we are more conservative in our models when we model things.
Tate Sullivan, Analyst
Great. Thank you for that additional detail for that. Thank you.
Tasos Aslidis, CFO
Thanks, Tate.
Operator, Operator
Thank you. Your next question comes from the line of Poe Fratt from NOBLE Capital Markets. Please go ahead. Your line is open.
Poe Fratt, Analyst
Good morning Aristides. Good morning or good afternoon to both of you and Tasos. Just a quick follow-up on the Marcos V. What depreciable life are you going to use on that?
Tasos Aslidis, CFO
I mean, accounting-wise, its 25 years.
Poe Fratt, Analyst
When you consider the option provided in the fourth year at $15,000, what should we interpret from that? It presents a strong rate for the first three years, but then it decreases to $15,000. Can you provide some insight on whether that reflects your expectations for the market value of that type of vessel? Or was it a compromise with a charter in exchange for achieving a higher rate in the initial three years, followed by a lower rate in the fourth?
Tasos Aslidis, CFO
It's the latter. It was a trade-off to get the fixed charter for three years at that level. So we had to do that. But because with the three years charter, we bring the vessels down to scrap, we felt quite comfortable. And even with the $15,000 level, when you assume that the operating expenses will be around 780, you're still making money even at $15,000 a day. So it's still contributing; it's not contributing that much. But who knows how the situation will be after four years?
Poe Fratt, Analyst
Yes. I appreciate your use of the word complex. So it's not where you think the market will be in after three years. It's more just the negotiated transaction. Okay. And then can you give us an idea of what you are thinking as far as the Oakland and the Corfu? Are you going to keep those short, or try to get time charters? Or can you give us an appreciation for what to expect on those two, which are the nearest ones?
Tasos Aslidis, CFO
We are focusing on securing one of the two ships for a long-term charter, while also considering placing the other on a shorter-term charter. This is our primary goal, but nothing has been finalized yet. We expect to have more information within the next 10 days.
Poe Fratt, Analyst
Okay. Would you be willing to provide some ranges on both of those as to what you might expect?
Aristides Pittas, CEO
I wouldn't want to commit to anything that might affect our negotiating position or provide misleading information. So, I prefer not to specify. However, it's clear that the longer the duration, the lower the rate will be, and the shorter the duration, the higher the rates will be.
Poe Fratt, Analyst
Do you see any hesitancy at this time, given where the order book is on charter committing to longer charters in the two to three range to get you into that sort of complex timeframe of 2023, 2024? Or is the market still tight enough where people are willing to make long-term commitments?
Aristides Pittas, CEO
I think the market is still tight enough; we see quite a lot of interest in the ships, I have to say, and we have seen some hesitancy to continue fixing higher rates than previously done. So there is some small resistance in the charters. But we will see if this is just temporary or because we are approaching the Christmas holidays and people are taking a breath. I think this is highly probable. But yes, the truth is that we are seeing a little bit of resistance to move towards higher levels, and this is seen in the market for sure.
Poe Fratt, Analyst
And then one thing that surprised me during the quarter was the drydocking expense; it seemed a little high in the kind…?
Aristides Pittas, CEO
And you're absolutely right. The logistical issues that have been created are not only regarding the operation of the ships that will get in and out of the boat and loading and discharging the cargo; it has also affected the drydocking of vessels. Less people are working in the yard, it's more difficult to get your spares to the shipyard, it takes more time to do things; all these adds to the cost. And as you rightly said, we have gone a little bit above budget on both drydocks. But it's obviously peanuts compared to what we are earning on the ships. But you are right that there has been a slight increase in the drydocking cost and time because the duration also plays an important role.
Tasos Aslidis, CFO
The duration is important as well.
Poe Fratt, Analyst
Yes, I'm sorry, Tasos, I didn't understand that.
Tasos Aslidis, CFO
The longer duration results in fewer days during the period for our revenues, which explains the deviation from our expectations.
Poe Fratt, Analyst
Yes, the opportunity costs. If we look at the fourth quarter, you still have the Evridiki.
Aristides Pittas, CEO
Evridiki, it's the name of my grandmother.
Poe Fratt, Analyst
I'm sorry, your grandmother, and I apologize for that.
Aristides Pittas, CEO
It's okay. It's okay.
Poe Fratt, Analyst
So that's still in process. How should we estimate the drydocking expenses for the fourth quarter? And could you also provide some insight on the Corfu, which will be in drydock in January?
Aristides Pittas, CEO
Yes, Tasos, please.
Tasos Aslidis, CFO
Yes, I would estimate this to be around $1.2 million.
Poe Fratt, Analyst
Okay. And then
Aristides Pittas, CEO
One reason we took this low-paying charter for the Corfu to take it to China is to pass the cost of the drydock because China is the most efficient place to drydock a ship; it's faster and cheaper. So it made sense to take a low-paying charter to get down there quickly and save money on the drydock.
Poe Fratt, Analyst
And you protect yourself if they try to use it longer than your forecasts or your drydock slide is available, right? So jumps to 35, which more than compensates you for that, right?
Aristides Pittas, CEO
Yes, yes, exactly.
Poe Fratt, Analyst
When I look at the operating expenses, Tasos, I think you mentioned it, but there was a significant increase in the third quarter compared to the second quarter and even compared to the third quarter last year. Should we factor this into our estimates for the fourth quarter and 2022, or do you believe there were some unique factors this quarter that may not be relevant in the upcoming quarters?
Tasos Aslidis, CFO
I mean, definitely a couple of factors that are unique to the quarter; a couple of COVID incidences in some of our vessels increased our crewing cost for replacements. But as I alluded to saying, that most of the increase was due to crewing costs, and overall dealing with crewing is a little more complicated given the situation now. So a piece of it we might see in the following quarters; I cannot say that for sure. But we'll have to wait and see how the next quarter will play out, but the piece already was on certain incidents that hopefully will not be repeated.
Poe Fratt, Analyst
And then am I reading that right that you're going to for the Marcos V you're going to finance 85% of that purchase price or 34 million?
Aristides Pittas, CEO
That is correct. That is the intention and that is the preliminary arrangement with a bank that we are talking to. The vessel is financed on the basis of its charter-free value, which is in the high 60s and 70s, I think 70 was the valuation with that. So this is how the purchase was of like 50% of the charter fair value.
Poe Fratt, Analyst
Okay. And then I know it's early; you're still sort of a year away, but are you seeing any interest in the newbuilds as far as chartering the newbuilds? Is it too early? Or when should we sort of expect to start to see some interest, if you haven't seen it yet, on chartering the newbuilds?
Aristides Pittas, CEO
It is too early for us to consider that. I think we still have about six months before we can look into it.
Poe Fratt, Analyst
Okay. Aristides, you've mentioned the possibility of dividends and share buybacks. I'm a bit surprised by the market's reaction to your stock price today. Is there anything you need to modify in your current or new credit agreements to permit dividends or buybacks? Or do you think that after a couple of days, you might be able to initiate at least a stock buyback?
Aristides Pittas, CEO
We have no restrictions whatsoever from our banks in doing either of these events. As long as we comply with all our covenants, we can do that. And we do comply with all our covenants. So we are very safe here.
Poe Fratt, Analyst
Great. I appreciate the time. Thank you.
Tasos Aslidis, CFO
Thank you, Poe Fratt, for your questions.
Operator, Operator
Thank you. With that, I will now hand the floor back to CEO, Aristides Pittas for closing remarks.
Aristides Pittas, CEO
Thank you all for being with us today for this call, and we'll be again with you in February to go over the end of the year results. Thanks a lot, and have a good day.
Tasos Aslidis, CFO
Thanks everybody. Thank you for your participation.
Operator, Operator
Thank you. That does conclude today's conference call. Thank you for participating. You may all disconnect.