Golden Ocean Group Limited

Hi there, and a very good afternoon from Oslo. My name is Lars Christian Svensson, and I am the Interim CEO of Golden Ocean. Today, CFO Petter Simonsen and I will guide you through our Q3 numbers and update you on recent activities in Golden Ocean and our forward outlook. Here are our highlights for Q3. Our adjusted EBITDA in the third quarter of 2023 ended up at 78.9 million compared to 80.4 million in the second quarter. We delivered a net profit of 28.7 million and earnings per share of 14 cents. This compared with net profit of 34.9 million and earnings per share of 17 cents for the second quarter. Our TCE rates for Cape Size and Panamax vessels were 18,200 per day and 15,400 per day respectively. Combined, a total fleet-wide net TCE of 17,100. For Q4, we have secured a net TC of $23,045 per day for 79% of the Cape size days and $17,250 per day for 83% of the Panamax days. For Q1, we have secured a net TC of $21,700 per day for 12% of the Cape size days and $15,600 per day for 23% of the Panamax days. During Q3, we have also entered into back-to-back agreements to buy and sell a Supermax vessel, which we held as a purchase option. The company expects to recognize a gain from the sale of approximately 6 million upon delivery of the vessel, and the expected delivery date is before year-end. We also completed the sale and delivery of one of our Panamax vessels to new owners, recognizing a gain from the sale of about 1 million and net cash proceeds of about 7 million. True to the dividend policy, we declare a dividend of 10 cents per share for the third quarter of 2023. With that, I will pass the word over to Petter.

Thank you, Lars Christian. If we move to our profit and loss. We delivered strong commercial performance with CAPE TCE rates coming in at 18,200, slightly down from previous quarter, and Panamax coming in at 15,400, in line with previous quarter. Our total fleet-wide time tractor equivalent was 17,100, which was materially unchanged from Q2. We had two ships dry docked in Q3 versus six ships in Q2, resulting in approximately 115 days of fire versus 215 days of fire in Q2. We have two ships expected to dry docked in Q4, which are expected to be complete by the second half of the quarter. We added just below 550 vessel days compared to Q2 through new ship deliveries, net of vessel sales in Q3. Our net revenues came in at 156.6 compared to 154 million in Q2. Looking at our operating expenses, we recorded 64.5 million versus 62.4 million in the previous quarter. This was impacted by additional ship days compared to the previous quarter. In addition, we recorded approximately 3 million expense relating to the change of technical managers on certain of our ships. This was offset by fewer dry dockings in this quarter compared to previous quarter and also offset by lower OPEX reclassified from charter hire with fewer ships being charted in on average during the quarter. The reclassified charter hire was 4.9 million in Q

versus 6.2 million in Q2.

Our general and administrative expenses came in at $4.4 million, down from $5.2 million in Q2, which is fairly unchanged when adjusting for non-recurring items in Q2. Our daily G&A ended at $470 per day, net of cost recharged to affiliated companies, down from $560 per day in Q2. Our charter hire expense were 8.3 million down from 10.2 million due to fewer vessel days in the trading portfolio. And an adjusted DBTA of 78.9 versus 80.4 in Q2. Looking at the net financial expenses, we recorded 28 million in net interest expense versus 23 million in Q2, a change due to higher reference rates and higher average debt in the quarter. The increase in interest rates also needs to be seen in relation to the realized portion of the interest rate swap portfolio, which impacted our derivatives and other financial income in the quarter. We recorded a gain of 11.9 million compared to a gain of 14.3 million. of which 10.6 million relates to interest rate swaps and 1.8 million relate to bunker derivatives and FFA gains. And of the 10.6 million, 4.9 million is realized cash gains and 5.8 million is market-to-market gains following an increase in long-term interest rates. Results from investments in associates. We recorded a loss of 300,000 compared to a gain of 4.9 million in Q2, which relates to our investments in Swiss Marine, TFG and UFC. A net profit of 28.7 million and 14 cents per share and a dividend declared of 10 cents for the quarter. Moving to the next slide. Our cash flow from operations came in at 47.4 million, which includes 600,000 dividend from associated companies. Our cash flow provided from financing came in at 33.5 million. We recorded 32.4 million drawdown relating to delivery of one Newcastle master vessel. We drew 40 million relating to deliveries of two Camsomax new buildings, and we drew 25 million under our revolving credit facility. This was offset by 7.6 million prepayment relating to the sale of one Padamax vessel, and 35.8 million in scheduled debt and lease repayments. We recorded a dividend payment of 19.9 million relating to our Q2 results, and a 900,000 payment for share repurchases. Our cash flow used in investments was 88.5 million, which mainly relates to 45.3 million relating to the delivery of the last Newcastle MAX vessel, 58.1 million in installments and costs relating to our CAMSA MAX new buildings, And this was offset by 14.8 million in net proceeds from the sale of a Panamax vessel. Total net decrease in cash of 7.8 million during Q3. Moving to the balance sheets, we had a cash and cash equivalents of 99.7 million, including 2.2 million of restricted cash at the end of Q3. In addition, we had 50 million in undrawn available credit facilities at quarter end. Our debt and lease liabilities totaled 1.5 billion end of Q3, up by approximately 72 million since Q2. Our average fleet-wide loan-to-value under the company's debt facilities per quarter end was 45.6%. With the book equity of 1.9 billion, we had a ratio of equity to total assets of approximately 53% at the end of Q3. With that, I give the word back to Lundqvist.

Thank you, Peter. In Golden Ocean, we like to focus on the larger vessels where we have the most volatility and also potential upside historically. A young and modern fleet, which currently holds an average of seven years, allows us to constantly beat the market over time, And with our current vessel count of 95, we offer a large commercial platform. Our market cap of 1.5 billion in dual listings in New York and Oslo provides solid liquidity for our shareholders. All of the above should make Golden Ocean an attractive go-to company for all investors wanting dry bulk exposure. As I mentioned in our previous slide, we're proud of a young and modern fleet. However, it's just as important to maintain a low cash break-even to float in practically any market. Illustrated here with our 60 Cape-sized vessels, our Cape and Newcastle Max cash break-even over our entire fleet holds at $14,800 per day. Due to our fleet composition and clinical execution, we have outperformed the market with about $5,000 per day so far this year. If you deduct that premium from the 14,800, Golden Ocean's adjusted cash break-even is below $10,000 per day. From the bottom left historical graph, you can clearly see the Golden Ocean modern fleet combined with an industry-low cash break-even, much due to excellent financing, will make money in almost any market. We will continue to invest in our vessels to increase our fleet premium towards the market and thus decrease our adjusted cash break-even further. Not only should we be considered a market-leading company with high liquidity, but a company that has a massive upside potential with downside protection well covered. Albeit volatile, Q3 finished on a strong note for both Panamax and Capesize. China is continuing to import iron ore, bauxite, coal, and agri-products, surpassing last year's levels. Even so, the Chinese iron ore and steel stockpiles are decreasing, much due to a huge steel export program. We have seen increased ton miles in both segments, and with the seasonality coming to life, the Panamax and Cape sectors look to finish 2023 on a strong note. The iron ore trade has come into full bloom so far in 2023, with steady Chinese demand and continuous imports from both Brazil and Australia. Brazil will for the first time since the Bramantinho incident deliver around her yearly targets. The commodity price itself is pushing $130 per tonne, which has led to frustration in the Chinese government and steel mills as their stockpiles continue to diminish. India has had a declining iron ore export throughout the third quarter, and in addition they have concluded a large iron ore contract from Brazil to India for 5 million tonnes, which can indicate a new trend and trading pattern for dry cargo. For a tonne-mile scenario, we would very much welcome more iron ore imports to India from Brazil. So where has all the increased landed iron autons been absorbed? Well, China is the world's largest steel producer, accounting for 56% of global steel output. Contrary to negative macro news, China's steel production is up 2% year-on-year, with a solid 4.5% increase in Q3. Although property investments are down about 9%, we see that the Chinese iron ore production is down, and rotation to technology-intensive manufacturing and energy transition with infrastructure investment is up 9% year-on-year, and private manufacturing investments are up 6%. In addition, Chinese car exports are up 62%, and steel oxford exports 30% year-on-year, which equates to about 80 million tons of iron ore. As we have discussed earlier this year, the bauxite trade from Guinea has developed into a steady long-haul Cape size trade, predominantly into China. This bauxite trade has dominated the total global Cape tonne mile with a staggering 12.5%. In addition, is inversely seasonal to the iron ore trade from Brazil, which makes it tempting to assume that the coming Q1 will be more volatile and interesting than we've seen in many years. We see an upside to this trade into 2024, and we will position large parts of our fleets accordingly. The supply side is still looking vastly compelling in the dry space. The total dry order book is around 8% of the total fleet, and even more alluring is the Cape size segment, where we have 5% of the total fleet ordered for new buildings.

Historically, this remains at an all-time low, and combined with unusual low congestion, it still suggests that the downside is priced already.

To round off this presentation, we would like to show you the significant earnings potential in Golden Ocean. as we finish off the volatile dry cargo year of 2023.

Keeping in mind the premium we achieve on our fleet, the graph on the right shows the substantial cash flow potential and yield at various freight levels. As an example, to achieve a 25% yield, you must need an average Baltic index rate of 20,000 per day if you apply the 2023 year-to-date performed Golden Ocean premium of $5,000. while the current spot market suggests a free cash flow yield of approximately 30%. With that, thank you very much for listening and I will pass the word back over to the operator.

Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 for any question and wait for your name to be announced. To answer your question, please press star 1 and 1 again. We are now going to proceed with our first question. And the questions come from the line of Sherif El-Makrabi from BTIG. Please ask your question. Your line is opened.

Hi, good afternoon. Thanks for taking my question. Hi. I just want to first focus on that Supermax that you sold. It sounds like the purchase option and then subsequent sale was a pretty unique opportunity. But are there any other upcoming options on the eight capes that you've time charted in, which could present a similar opportunity, or could you even hang on to that tonnage given where asset prices are today?

Yeah, thank you for that. I think, first of all, when it comes to the Supermax vessel, that is something that we consider non-core business. So for us to be able to do a good market transaction, we thought that was a good idea. When it comes to CAPE sizes, which we absolutely consider core business, we are definitely interested in the clearing options if it makes sense to the market at the time.

Okay. And then turning to scrubbers, the scrubber premiums really widened over the last few months. With that in mind, could we see scrubbers installed on other vessels in the fleet as they come in for dry dock or special survey?

Yeah, definitely. If there's a young enough asset that we see potential in, we will upgrade as many of them as possible in the next dry dock cycle.

Okay. Thanks for taking my question. Thank you, Charles.

Thank you. As a reminder, once again, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our next question. And the questions come from the line of Omar Nocta from Jefferies. Please ask your question.

Hi there. Hi, guys. Good afternoon. Hi, Omar. Hi. Yeah, I just wanted to ask, you know, obviously you highlighted the overall the strong sort of quality of the Golden Ocean Fleet. I wanted to ask, obviously, 3Q was supposed to be generally or had been a pretty soft quarter when we look at just spot market averages and looking at what companies in this sector have reported. But you guys generally kind of came in sort of flattish or maybe even cash flow generation was a bit better. So I just wanted to ask kind of what drove that improvement, that sequential sort of modest improvement? Was that sort of well-timed? time charters or some spot performance that was a bit beyond expectation? Any color you can give on that?

Yeah. No, I think entering into the quarter, we were quite covered on the Panamax front. We realized quite quickly that we needed to have some more exposure there to capture the market. So we turned every stone to be able to add on some more spot exposure on the Panamaxes, which yielded well. Same thing with the cape sizes, as we discussed in the previous quarter as well. We had fairly high confidence in the second half this year, simply because of the many drivers that we see on the coal and the bauxite, and also Brazil performing the way it should do.

So for us going into this quarter, it was quite clear that we want quite a bit of spot exposure. And luckily we got this one up.

Okay, got it. That makes sense. And then maybe just as a follow-up, you highlighted the, you know, looking to further invest in the fleet to capitalize or at least create excess earnings potential. You've got the, your order book program basically is close to wrapping up here with those four camps or maxes due in 2024. Recently, we've seen several of your competitors order ships on a dual fuel basis that deliver, you know, out in 26, 27, I think even we saw 28. How are you guys thinking about the new building order book as it is now in terms of obviously you mentioned the fleet sizes at 8% is relatively small. But in terms of Golden Ocean and looking forward, how do you think about where you stand with new buildings? Are you comfortable with these four taking delivery of them and then moving on? Or can we expect you to dive deeper into new buildings?

I think for our focus at the moment, we're very happy with the new building program that we had on and looking to complete next year. We're definitely there to grow in terms of vessels on the vault. If we can find modern tonnage, two, three, four years old, that fit well into our strategy and fleet, we think that is a better investment at the moment than to go to the yards and place a new building order. With respect to which fuel to attack, We haven't made up our mind there yet, and maybe it's not as clear as the other competitors, so we prefer to invest in our fleet, what we already have that already makes money, and grow the fleet that way. Yeah.

Yeah, very good. Well, thank you. That's it for me.

Thank you, Omar. Thanks, Omar.

Thank you. Once again, as a reminder, if you have a question, please press star 1 and 1 on your telephone and wait for your name to be announced. We have no further questions at this time. I will hand back to you for closing remarks.

Thanks a lot for dialing in. We'll see you next quarter. Thank you very much.