Ardmore Shipping Corporation

Good morning, everyone. Welcome to Ardmore Shipping 2024 Investor Day, during which we will also be covering the company's results for the fourth quarter and the full year 2023. I'm Brian Degnan with the IGB Group. Just a few administrative points before we get underway today. This event is being recorded and broadly distributed via live webcast, which along with today's slides is accessible at www.ardmoreshipping.com. An audio replay of the event will be available on the website from later today. The standard earnings press release was issued pre-market this morning and is also available on the website. I'll turn to slide two here. Later in the event, following the prepared remarks, there will be a Q&A session, at which point we will take questions from the people with us in the room today. For those joining remotely, please feel free to submit any questions that you might have at any time to ardmore at igbir.com. That's ardmore at indiagolfbravoindiaromeo.com. Throughout the event, and for the benefit of those joining remotely, we'd ask that all those with questions utilize the provided microphones. Turning to slide three, 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 the actual results to differ materially from those in the forward-looking statements is contained in the fourth quarter and full year 2023 earnings release. Moving to slide four, I'd like to introduce you to the members of the Ardmore leadership team, whom we will have the pleasure of hearing from today. We have with us Curtis McWilliams, Ardmore's chairman, Anthony Gurney, founder and chief executive officer, Bart Kelleher, chief financial officer, and Gernot Ruppelt, chief commercial officer. And with that, I would ask Curtis McWilliams, the chair of Ardmore Shipping Corporation, to please join us on stage to provide today's opening remarks.

Good morning, or good afternoon now, excuse me. On behalf of the Ardmore Board and its senior management team, let me welcome you to our annual now investor conference. To say that we live in interesting times would be an understatement. Wars in Europe and the Middle East and congestion caused by the deteriorating climate, drought-related conditions in the Panama Canal have resulted in profound changes to trade flows for our product tankers. Over the course of the next hour, you will hear how Ardmore's strict commitment to three guiding principles, those being one, performance and progress. We believe these are not mutually exclusive endeavors, but in the long run support Ardmore's ability to excel in both arenas. Two, our well-articulated capital allocation policy. And three, our ongoing efforts to ensure that we have best-in-class governance. We believe that these continue to position the company well to drive our financial performance both in the short term as well, and more importantly, in the long term. With that being said, I want to again thank you for your continued interest in Ardmore and your support of our company. We remain solidly committed to being good stewards of your investment. And with that, I'll ask Tony, our CEO, to come and begin his remarks. Thank you, Curtis.

What happened to your foot? Okay, good. Great. Okay, so firstly, I'd like to thank you, Curtis, for those kind remarks. I would like to outline the format for today's meeting. Bart and I are going to start off by presenting our results for the fourth quarter and full year 2023, and then we're then going to pivot to the Investor Day segment, which Bart and Gernot are going to lead. focusing on our strategy and how we're converting these strong markets into earnings. And then at the end, I'll offer some closing thoughts before opening up the meeting to questions, either from here at the floor or remotely. And again, for remote questions, please send them to ardmore at igbir.com. So turning first to slide six for highlights. We're pleased to report another successful year for Ardmore with earnings of $113 million or $2.71 a share, continuing what is now a multi-year trend. Our fourth quarter performance reflects robust product and chemical tanker market conditions with adjusted earnings of $26 million or $0.63 a share and with further strength building into the first quarter. Our MRs earned $32,500 per day for the fourth quarter and $35,400 per day so far in the first quarter with 60% booked. And our chemical tankers on a capital adjusted basis earned 29,300 per day for the fourth quarter and 30,100 per day so far for the first quarter with 70% booked. Our markets are clearly experiencing significant strength as a result of geopolitical and climate related trading restrictions. bolstering already tight supply-demand fundamentals, all of which are going to be the themes and focus of our presentation today. So meanwhile, we continue to execute on our longstanding capital allocation policy. Today we're declaring another quarterly cash dividend of 21 cents per share, consistent with our policy of paying out one-third of adjusted earnings. And as a part of a gradual fleet upgrade and modernization plan, we've acquired a 2017 built MR tanker while also simultaneously selling our 2010 built Ardmore Seafarer. In addition, we've opportunistically chartered out one of our chartered NMRs to realize a $7,500 a day spread and a profit of $2.7 million over the remaining one year period. And overall, we believe that Ardmore is in an excellent position to benefit from these ongoing strong market conditions. So turning to slide seven, near-term product and chemical tanker market outlook. I want to take the opportunity now to briefly introduce the geopolitical and climate-related trading restrictions that have been affecting our market. The disruptions in the Red Sea and the consequent rerouting of vessels around Africa are adding significantly to voyage lengths and therefore to ton-mile demand. But before we go further, we need to remember that numbers aside, we're dealing with real people with real world issues. And I'd like to acknowledge the key role of our seafarers in this increasingly dangerous world and to emphasize that their security is our top priority. But from a pure economic standpoint, as you can see from the graph on the upper right, refined product ton mile demand is up 11% year on year, with the Red Sea disruptions playing a substantial role. At the same time, the impact of the EU refined product embargo persists, further exacerbated by European diesel inventories approaching historical lows. And in addition, restrictions in the Panama Canal have reduced traffic by up to 30 percent overall and quite a bit more for MRs. This bottleneck is resulting in prolonged voyages and a reduced effective supply of all ships, including product tankers. The aggregate impact of all these disruptions are illustrated on the graph in the lower right. Meanwhile, demand fundamentals remain compelling. And not just the demand side, but on the supply side, we see very low levels of scheduled new building deliveries for at least the next two, three years, which should really limit fleet growth. And with that, I'm happy to hand the call back to Bart. The meeting, not the call.

Thanks, Tony. Moving to slide eight. There we go. Our board continues to build upon its financial strength. As a result of our effective cost control, reduced debt levels, and access to revolving credit facilities, we've managed to lower our breakeven level to $13,900 per day. This is a noteworthy achievement during a period of elevated interest rates and high inflation. In addition, we have a strong liquidity position with nearly $50 million of cash on hand at the end of the quarter, and we have a total debt of just over $125 million, representing a leverage level of approximately 20 percent. Ardmore's focus on optimizing performance, closely managing costs in this inflationary environment, while preserving a strong balance sheet. Turning to slide nine for financial highlights. Just want to reiterate how pleased we are with the continued strong performance with adjusted earnings of $2.71 per share for the full year and 63 cents per share for the fourth quarter. We're correspondingly reporting strong EBITDA for the year and the quarter and continue to frame EBITDA as an important comparable valuation metric against our IFRS reporting peers. Well, I won't go into all the details here. There's a full reconciliation of this presented in the appendix on slide 43. Our significant revolving debt capacity has allowed us to manage our leverage levels and reduce our interest expense even in this elevated rate environment. And also, please refer to slide 48 in the appendix for our first quarter guidance numbers. Moving to slide 10. In accordance with our energy transition plan and as part of our ongoing dry dockings program, we've made some significant investments in our fleet to further improve operating performance, reduce emissions, and enhance earnings. In 2023, we completed seven dry dockings with a total capital expenditure of nearly $40 million. of which 25 million was spent on scrubber installations and a number of other energy efficiency technologies, which we'll discuss in more detail later in this presentation. As we complete these dry dockings, we'll have more than half of our MR fleet outfitted with carbon capture ready scrubbers. And importantly, as you can see from the chart in the upper right, the majority of our remaining dry dockings are in the first quarter. So we'll have the benefit of our full fleet and its earnings power for the balance of the year. Also noteworthy, we had very strong on-hire availability for the fourth quarter at practically 100% as a result of the close coordination of our teams at sea and onshore. Moving to slide 11. Here we're highlighting our significant operating leverage. As you can see in the chart, for every $10,000 per day increase in TCE rates, earnings per share is expected to increase by approximately $2.30 annually, with free cash flow generation nearly $100 million over the same time period. Given the range of TCE rates shown on the slide, and it's important to note that we've recently been booking at the upper end of this scale, if these rates were to take hold more widely, it would naturally have a material impact on our earnings. This is why we're really excited about the market outlook, and we find Ardmore's position compelling. With that, I'm going to hand it back to Tony to sum up the earnings portion of our presentation before we transition to the investor day section.

Mr. Yeah, so just briefly in summary, first regarding the market, we're seeing already robust conditions strengthening into the first quarter on the back of geopolitical and other climate-related disruptions and with supply-demand fundamentals remaining very favorable. And then with regard to the company, we continue to perform well on both an absolute and relative basis. Our strengthening balance sheet gives us the ability to execute on all of our capital allocation priorities simultaneously, including paying a dividend representing one-third of earnings. We're investing in our fleet to improve efficiency and reduce emissions, which has the added virtue of simultaneously improving earnings. And regardless of market conditions, as always, Our efforts are focused on driving performance today while positioning Ardmore for long-term success. So that concludes the earnings portion of the presentation today. And we're going to move now to more of the Investor Day content. And Bart's going to give a more in-depth view of the company and our strategy. And then Gernot's going to provide his insights on how we're translating these strong market conditions into earnings.

Thanks again, Tony. Turning to slide 14. When it comes to strategy, Ardmore has been very consistent over the years with a focus on MR product tankers and chemical tankers and the overlap that these ships trade in. Furthermore, the company's development has been marked by a gradual increase in scale while building organizational capability. Today, our global platform, with our shoreside teams strategically located across key regions, working closely with our seafaring colleagues on board our modern, fuel-efficient fleet, give us the scale to service a diverse customer base. We also find ourselves at a juncture where our nimbleness and agility will take on even more significance. With the changing market conditions, driven primarily by the energy transition, which we'll discuss in detail, we are well positioned to take advantage of opportunities in these dynamic times. Turning to slide 15. At Ardmore, our guiding principle, which we frequently discuss, can be captured as a combination of performance and progress. We've highlighted just a few notable examples on this slide of how we do this. Both absolute and relative performance are very important to us. We place a significant emphasis on our performance relative to our peer group across a key number of metrics. Our entire staff is collectively measured this way, leading to an exceptional degree of performance focus and team effort. And there's a powerful flywheel effect between this performance and our company's progress. Performance today allows us to invest in progress, which further enhances our future performance. And with a diverse and talented team and strong collaboration between our seafarers and shore, we're driving progress at Ardmore and across the shipping industry, uncovering and executing opportunities that might otherwise be missed. Moving to slide 16, where we turn our attention to governance. A longstanding and key part of Ardmore's philosophy and approach since our inception in 2010, through our IPO in 2013, and well before the industry recognized Weber rankings were even created. And this is a cornerstone of our business today. We are very pleased that our principled approach to corporate governance continues to set a leading standard within the industry. And we're proud of the recognition that we are once again the number one ranked publicly traded company, tanker company in the Weber ESG scorecard. Essentially, when you invest in Ardmore, you invest in a company committed to both excellence and integrity. Turning to slide 17. Here we'll discuss how we balance the energy transition with what can be termed energy reality. This challenge entails increasing our fleet's efficiency and reducing emissions while continuing to meet the ongoing demand for the transportation of refined products and chemicals. At Ardmore, we recognize that this energy transition will take time. It's an evolution, not a revolution. With this in mind, we introduced the Energy Transition Plan in early 2021 as a natural extension of our strategy with a focus on seizing opportunity, decarbonizing, and continuing to build value in a changing market environment. This plan is rooted in a sound commitment to deliver tangible results today in terms of efficiency gains and carbon reduction while strategically positioning Ardmore for the future. Most importantly, it fosters a forward-looking mindset rooted in performance reality. Central to this approach was the establishment of an internal team dedicated to the energy transition. This team possesses marine engineering and naval architecture expertise and operational experience and is led by our Director of Innovation, Gary Noonan. The ETP team is focused on working collaboratively with customers, technology providers, and our broader organization to develop valuable projects and investments for our fleet. A crucial aspect of their work involves true experimentation, which supports the development of novel as well as practical solutions to execute across our fleet. Additionally, I'd like to emphasize the valuable support and guidance provided by our newly formed sustainability committee of our board, which is chaired by Dr. Kersi Tika, who holds a PhD in naval architecture and has extensive experience in the design and classification of vessels. And she's joined by Helen Tivton, head of Clarisbrook Shipping, and Mats Berglund, the former CEO of Pacific Basin Shipping. In summary, this dynamic plan aligns seamlessly with our overarching principles of performance and progress. I'm turning to slide 18. Here we focus on some of the key initiatives outlined within the energy transition plan. As we just discussed, we're active in deploying energy efficiency technologies across our fleet. In addition, with the expected increase in demand for the chemical and specialized product trades, including renewable fuels, we expect to gradually shift our fleet composition and revenue mix more toward these cargoes. And furthermore, we emphasize our commitment to collaboration through energy transition projects, which involves partnering with customers as we aim to address their specific energy transition priorities. Since introducing this plan in 2021, we've really come a long way. And these initiatives are fully embedded in Ardmore's culture today. As we turn to the next slide, we'll examine some key ETP technologies. So moving to slide 19. This slide highlights some of the latest technologies we have implemented last year and are piloting this year. Notably, since the inception of our energy transition plan less than three years ago, we've truly embraced the spirit of experimentation, conducting diligence on over 200 potential solutions, and successfully implementing 14 of them to date, with returns ranging from 40% to well over 100%. And as you can see in the image, our team has examined a wide range of efficiency projects across all areas of our ships, from the propeller, to the engine room, to the bridge, and beyond. And this also extends ashore to cutting edge software utilized to optimize performance. On the next slide, we'll drill down into a case study for one of the solutions in more detail. So turning now to slide 20. The installation of microboilers on our vessel is a great example of one of these very practical investments. This modest cash outlay of $225,000 per ship yields a strong return of 40%. This unit creates tremendous efficiency when our vessels are in port, enabling us to reduce the level of fuel typically consumed by the ship's larger main boiler by harnessing the heat naturally emitted from the operation of our generators. By the end of the first quarter, 50% of our fleet will have these units installed. Importantly, when we undertake multiple projects of this nature, the cumulative impact to our performance is significant. And moving to slide 21, where we highlight our longstanding capital allocation policy, which remains our guidepost and one we know that we frequently discuss with all of you. Given our strong financial position and low breakeven, we have the ability to pursue all of our capital allocation priorities simultaneously. And with this strong earnings environment and a robust financial position, we are pleased to declare another dividend. And since the reinitiation of our quarterly dividend policy in the fourth quarter of 2022, Ardmore has paid $50 million of total dividends to our shareholders, which represents nearly 10% of our market capitalization. As discussed earlier, we've invested significantly in our fleet's efficiency, improving performance, and ultimately the quality of earnings. In addition to these investments, as Tony describes, we have recently taken advantage of some selective transactions to modernize our fleet by acquiring a 2017 Korean-built eco-designed MR tanker while concurrently executing an agreement to sell our 2010-built Ardmore Seafarer. To put this into perspective, when considering the increased fuel efficiency of the new vessel and avoiding the expense of upcoming dry docking for the seafarer, we see this as an interesting investment, effectively buying seven vessel years at a cost equivalent to the current average annual depreciation rate. Examining our balance sheet, we aim to sustain leverage through market cycles supporting a resilient financial position and a high quality of earnings while giving us the foundation needed to opportunistically execute well-timed investments. Turning now to slide 22. As we just discussed, Ardmore's team is focused on leveraging our platform and consistently creating value through shipping cycles. In an industry challenged by technological and regulatory uncertainty, we recognize the volatile and dynamic nature of the shipping landscape. At Ardmore, we're built to thrive in such conditions. To conclude, I want to emphasize that our purposeful strategy, energy transition plan, capital allocation plan, and dedicated team at sea and ashore are all aligned and focused on generating long-term value for our shareholders. With that, I'm very excited to hand it over to Gernot and hear what he has to say about the volatile tanker markets and how Ardmore is delivering industry-leading performance.

Thank you, Bart, and good afternoon. It's good to be back in New York and to present to you on another successful year and on why we believe there is more to come. Over the next 15 minutes, I will take you through main drivers on the demand side, touch on supply fundamentals, and then I will provide some real-life examples of how Artmore continues to capture the full benefit of these extraordinary markets. Turning to... Turning to... Here we go. Slide 25. This is the world today. This slide highlights some of the key changes in cargo movements over the past two years. In green, you see how cargoes move today. Contrasted in red is how they used to move before. The difference in voyage length, red versus green, represents the increase in the demand picture in product tankers. What is behind these very long-distance trades? To begin with, Europe is structurally short refined products, in particular diesel and jet fuel. And it has been like that for a while. Europe has been increasingly sourcing its refined products from overseas. That was purely for economic reasons and largely on the account of Europe's aging refinery system. Add on top of that the EU refined products embargo. No more diesel from Russia. European product inventories are around historical lows. To cover those shortfalls, long-haul imports from the U.S. and from east of Suez markets are replacing short-haul voyages. What used to be a one-week voyage Baltic-Russian ports to Northern Europe or the Black Sea to the Mediterranean, and that now takes three to five weeks. That is a significant jump in itself. On top of that, you add substantial disruption in the Red Sea, which all of us see and read about in the news every day. Vessels are navigating around the Cape of Good Hope to avoid the Red Sea. This adds another 30% to 70% in voyage length, depending on origin, and that is on top of what is already a very long voyage to begin with. then in the West, completely unrelated to any geopolitical events, the Panama Canal has essentially run out of water. MR traffic through the canal has reduced substantially. Here you can see what used to be a very typical trade on the left, in red, from Houston to places like Ecuador or Peru on the west coast of South America. Sourcing the same products from Asia is about three times the voyage length, and we're seeing exactly this play out. For the past 150 years, the world has relied on the Suez Canal and later the Panama Canal to connect global trade at significantly shorter distances. Well, today, once again, merchant ships are going around the Cape. So to summarize what are the factors in play, long-term demand drivers, Europe structurally short diesel, two separate yet concurrent geopolitical events, Russia, Ukraine, and the recent events in the Red Sea, and third, climate-related changes and water shortages in Panama. This confluence has resulted in a substantial increase in ton miles and a remarkably tight supply in product anchor markets. Slide 26 is providing more detail on the points I just made, and I will not run through them one by one, but the charts on the right paint a clear picture. The number of product tanker transits to the Suez Canal is down by 60% and decreasing further. The number of Panama Canal transits is down by 40%. It is an evolving situation, and the trend line continues to point down. Turning to slide 27, where we continue on the theme of demand drivers. As Bart alluded to earlier, the energy transition is unfolding as an evolution, not a revolution. Demand for oil remains a steadfast factor. Reflected in the upper right graph, the International Energy Agency, aligning with industry projections, foresees continued growth in oil demand. Beyond the persisting demand for oil, there is a consistent pattern of refinery expansion in the east, strategically located near points of production. This expansion results in heightened ton miles for product tankers, meeting the consumptuous demand in the west. Adding another layer, the chemical sector, a market we actively participate in, is poised for substantial growth as well. This is attributed to the significant petrochemical capacity set to come online in Asia over the coming years. In summary then, these robust long-term demand drivers point to continued strength in the product and chemical tanker markets. Moving to slide 28, supply. The matrix on the left provides a visual of the evolution, indeed the tightening, of tonnage supply in our industry. The two dimensions are average age of the fleet, size of the order book. If you look at the top left, the quadrant in red, about 15 years ago we were looking at a fleet that was already very modern, plus a very large order book. As the years progressed, as you can follow the progression there, the order book declined and fleet age increased. Today, we are on the opposite side of the matrix, in the green quadrant on the bottom right. A low order book and the fleet on the water is the oldest it has been in two decades. Looking at the graph on the right, the current product tanker order book stands at 13% of the existing fleet. The MR order book is under 8% of the existing fleet. In five years, nearly half of the global fleet will be older than 20 years of age. And yes, there are some niche markets for older ships to operate in. However, the capacity of these niche markets is far too limited to absorb what is essentially 50% of today's Amur market. There are only 8 million deadweight tons on order for MRs. 55 million deadweight tons will be within the scrapping age profile in the next five years. So by order of magnitude, seven times the amount of deadweight capacity could potentially be scrapped compared to what is on order today. As we mentioned on our last earnings call, it is important to point out the impact that Afromax crew tankers have on the overall product tanker order book. Currently, Afromax crew tankers, their net fleet growth is forecast at near zero. This implies that an increasing proportion of LR2s, most likely older vessels, will naturally transition to trading crude to cover the shortfall in Afromax tankers. And we are already seeing a clear trend today of LR2s shifting into dirty trades. Turning to slide 29, this pulls it all together. We can see from the green bars in this chart the strong forecast on ton-mile growth. Long-term demand fundamentals in 2024, enhanced by the full-year impact of the EU embargo, and then the further uplift from the Red Sea disruptions. In contrast, we can see the limited net fleet growth across product and chemical tankers, as indicated by the gray and blue bars. Closing out, then, I want to reemphasize the clear contrast of low net fleet growth with the escalating ton mile projections. This gap... setting the stage for continued market strength and resilience turning to slide 31 i will now demonstrate how some of these market drivers are reflected in the way we trade our ships essentially what we do evolves around three key themes one fully capturing these very firm markets two embracing the increasingly complex nature of our business environment, and unlocking the opportunities this creates for a company like Artmore. And finally, building value through creative spread plays, adding incremental profitability on top of prevailing market levels. Turning to slide 32, this is a snapshot of our global setup across time zones covering our key markets in the Americas, in Europe, and in Asia. This enables us to engage a broad and diverse range of high quality customers. A selection of them can be found here. Importantly, we are also engaging with and trading with an increasing number of chemical, agricultural, and other non-petroleum focused companies. Ultimately, this is about having lots of trading options for Ardmore to ensure we can capture these strong markets in the most optimal way, both in terms of timing and voyage combinations. Turning to slide 33, here are now some examples of what is achievable in these markets. These are actual voyages we have undertaken in recent months. Starting on the right-hand side, you can see a long-haul Asia to Europe voyage. The original routing is shown as the red dotted line. As repeated ship attacks unfolded in the Red Sea last December, we negotiated a Cape routing option, which we subsequently exercised. The incremental fuel cost and time was fully priced in to maintain our TCE despite the longer route. At the same time, we can see an example on the left of how we are servicing the Pacific markets from Asia. In addition to the original voyage leg from Asia to Mexico, we found lucrative onward employment options that were combined in a creative way. We achieved a strong TCE of $36,000 a day over four and a half months, and the vessel was laden much of the time. As you can see in both examples, duration of voyages originating in Asia is extended drastically, both due to the disruption of the Panama Canal and in the Red Sea. The impact this has had on Asia Pacific freight is notable. The box at the bottom right there shows freight movements since the start of the attacks in the Red Sea and the following escalation. Realized TCEs on these routes essentially doubled from seasonally already high levels, around $30,000 a day, to now $60,000 a day. Just to mention, about 65% of our fleet is trading currently in the eastern regions. Turning to slide 34, idle days and ballast days, or you could say empty voyage legs, are expensive, especially in this market. Let's look at an interesting combination we have done on one of our chemical tankers, essentially reducing all ballast over half a year. These ships are half the size of our MRs, but they are more versatile in terms of carrying non-petroleum cargoes, and they can then be combined in lucrative ways. Starting at the bottom left of the map in Argentina, with a long-laden leg into South Korea, followed by a China run into Europe, followed by Europe to the U.S. Then from there, back to South America. A full circle earning close to $30,000 a day over six months with only negligible ballasts and 95% laden days. Again, these ships have half the intake of an MR. Turning to slide 35, once more, this slide shows what is possible in this market. As Bart mentioned earlier, we had a large number of dockings this past year. Typically, the way we trade our ships is all about maximizing flexibility and maximizing optionality. When you are positioning for dry dock, you're working towards a very defined place and time. Doing this in a sensible way is both an art and a science. In this example, we're looking at a vessel that was opened in Northern Europe earlier last year. As you can see, we wanted to bring it to China for dry dock. We put together a repositioning plan and combined a transatlantic voyage with a U.S. Gulf to South America run. This was followed by a South America export cargo that brought the ship within a stone's throw of her dry dock location. Also here, we see a four-to-one laden-to-ballast ratio, and more importantly, a TCE close to $40,000 a day over four months. These are incredible earnings in their own merit and truly remarkable when you consider these were really repositioning voyages. Now, the examples I've just shown you were only three examples of a much larger data set, yet we hope they demonstrate to you some of the key themes we have been dealing with commercially. And of course, in aggregate, all this will show up positively in our TCE results. Turning to page 36. Here I would like to show you one important way of how we have created additional value on top of a strong market. In this case, through a high performing time charter book and spread place. Allow me to explain what we are looking at here. The green line is the spot market. The bars in blue are the number of ships we have on time charter out. The bars in gray are the number of ships we have time chartered in. While the world was still in lockdown during the COVID pandemic, the need for mobility was limited. Product tanker markets were weak. During that time, we benefited from strong time charter coverage, at one point up to seven ships. At the same time, we started to execute some attractive time charters in with forward optionality. When markets started to recover, the number of ships we had on time charter increased, the number of ships we had on time charter in increased, and we let our time charters out expire. This was near perfect timing, as you can see. We pivoted from a more defensive stance in 2021 when times were bad to really opening up our charter portfolio in 2022 to fully capture the market strength that has ensued since. For another example, this past summer, we extended one of our chartered-in vessels for min-12, max 18 months in our option. We continued to trade our spot for about half a year to capture the strength of the past winter market. Then we recently locked in for a 12-month period to cover the remaining charter period, including the optional period. The guaranteed profit spread on these 12 months alone was $2.7 million, so on top of the previous high spot earnings. We also want to mention that we hold in the money call options for time charter extensions, specifically time charter in extensions. Those are declarable later this year on three ships for charter periods until mid 2025. The option rates are at less than half of today's actual spot earnings. Therefore, we believe these options will still be very much in the money by the time they're due. At the current market levels, these three options would create additional value of $17 million. So do stay tuned. It is important to note that we were able to create these structures in both weak and strong markets. Slide 37, this is the team. Strong markets are great, but you need the right team and the right platform to capture them. A very diverse team, as Bart pointed out, and it's diverse by design, because we know that diverse teams create stronger performance. Diverse in terms of cultural background, professional background, personality, and diverse along other dimensions. This enables better decision-making and better access to our global markets, hence better performance. Our trading mantra is rooted in a nimble yet methodical approach to our ever-changing markets, leveraging both experience factors as well as a suite of digital intel tools and AI-supported performance optimization systems. We believe that any market, or any voyage for that matter, offers infinite opportunities for incremental performance gains. in our whole system and how we are approaching things philosophically is set up to capture that. This concludes my section. Thank you for your attention, and I look forward to answering your questions later. Back to Tony.

Thanks, Garnad. That lunch really looks and smells good. All we got was a ham sandwich. Great. Well, listen, we've gone through a lot of detail now. And what I want to do actually is kind of zoom out quite a ways and think a little bit about where we are in the cycle. So forgive the really dumb imagery here, but it's a serious question. I think it's one of the most important questions as investors that you face looking at the sector. So I started in this business in the late 80s as a banker. And since then, anybody that's been around that long, and I think some in the room have, will count it up and think, yeah, actually we've been through six cycles. When I started as a banker, it was, you know, back when banks actually lent money. And so we were taking real risk, and we were looking back a couple cycles. So altogether, I feel like I've got sort of in, you know, in my bones about eight cycles. And thinking about where we are today and kind of looking at all that experience, it does feel like there's some patterns that are important. So I think the first pattern is that of those eight, half were relatively, in hindsight now, fairly short upturns. They felt very important and exciting at the time, but they didn't last long. But the other four, and I would include this one in that, and we can discuss that in Q&A, are fundamentally different. They are longer and more persistent. And they share some common characteristics. So one, and forgive me, but we're going back to 1957. But the truth is that the dynamics in our business in terms of supply and demand haven't really changed, at least since World War II, maybe even further back. So... So the first thing they all have in common is that they were preceded by 10, 11, 12, maybe even 13 years of fundamentally bad markets. And in that period, fleets got older. Order books shrank. Maybe there were some bumps along the way of activity. But fundamentally, yard capacity shut down. So when was the last time we were in a strong market? I think shipyard capacity is substantially lower today. than it was then. So that's the setup. And then what they all have in common is that some unexpected positive demand event occurs, usually geopolitical, that kind of lights the fire. And it's usually not just one event. It's several things that happen. Now, I mean, each of these upturns is different and unique, but there are some similarities, right? And I don't want to do this now, but if you want Q&A, we can think back to what were the specifics in each of these upturns. But you kind of ignite this unexpected jump in demand through not just one event but a series of events. And then it becomes clear that supply is not going to be able to catch up. And that's really the foundation of one of these strong markets. They last anywhere from four to six years. And they all end the same way. which is when a really deep economic crisis hits the global economy. So I'm going to leave it at that. I think the questions are, where are we in the cycle? And what is Ardmore doing to position itself for different probabilities of outcomes here? So happy to engage in that discussion with you and anything else. Just last thing I want to do, though, is thank you all for joining us today. And in particular, thanking Curtis for coming up all the way from Florida in spite of the weather and in spite of his gammy leg there. So that's an Irish expression. And happy to open up the floor for questions. Jim. I'll sit.

Yeah. So for the benefit of the people on the webcast, we do have microphones that will be circulated. So we'll take one up here. And for those, again, on the webcast, if you want to ask a question, please email ardmore at igbir.com. I'll feed those into the mix here. But for the time being, please go ahead.

Thank you. Thank you. Within the chemical and product segments, what percentage of the fleet, the global fleet, can make it around Africa without refueling?

That's an easy question. Every ship can. However, operationally, they may not want to do that. So, in fact, South Africa is becoming a bit of a bottleneck. Because if you have to carry more bunkers, you're shutting out cargo. And there may be other reasons. I don't know if Gernot...

Yeah, there's a, we didn't touch on, so we didn't touch on this, but, you know, bunker planning becomes definitely one of those operational elements you need to be very aware of to, you know, to essentially make sure you don't, you bunker where you're intending to bunker and not, you know, squeezed into a last minute situation.

I have three questions, but when you said South Africa, do you mean labor in South Africa or are they short of fuel?

Right. I think whenever you move away from the main bunkering ports and the main refining regions, you might find yourself exposed to scarcity of bunker supply, higher pricing, infrastructural bottlenecks like barge availability, and then potentially longer waiting time. And, of course, every time we either pay more for our bunkers or extend our voyage length without any revenue to put towards it, that has a negative impact on our TCE. So it's less labor shortages. It's just pricing and availability issues. of fuel and the infrastructure. And, of course, by being very proactive and forward-looking in your voyage planning, you can avoid to find yourself in those messy situations. But it's just one of many examples where, and I think it's a great example, as the world changes trade patterns, there's always a lot of things to consider. And in itself, that creates, of course, volatility around some of those bunker supply lines with a further knock-on effect on the entire oil system.

My three original questions are, you mentioned China. Please expand on that. Two, can the Russians sell refined products to, say, a middleman in Persia who will sell it to an Indian and change the label and deliver it into the market? And three, when you calculate a return on capital for those environmental savings, what was the price of fuel that you saved? So China, Russia, and price.

Can you repeat that third question?

He showed a return on capital.

Yes.

of 40, excuse me, 40 to 140%. So that means you saved money to get that 40 to 140%. At what price of fuel did you save it? Okay, I think it was $500 a ton, which is kind of where we are relatively, but $500 a ton, which would be like, you know, 70 bucks a barrel. Yeah, 72 bucks a barrel.

But I think for the other two questions, Garnot, would you like to?

Russia and China.

Yeah, I think there's certainly been some concern around to what extent does essentially Russian origin crude or products find their way back into the supply chain in the West. Yeah. Essentially, if you sell crude oil from Russia into refineries anywhere in the world, particularly in the East, at some point, will they be refined and blended and find their way back into the refined chain in the West? I wish I could give you a definitive answer. We, of course, we don't track, you know, we don't have the ability to blockchain the oil train in that sense, but I think that's a concern, and I'm not sure anybody has a really good and exhaustive answer. Yeah, yeah.

And you said that China is restricting exports?

So there has been, for the earlier part of last year, a significant drop in crude throughput in China, pretty much on the back of just weaker domestic demand, because there has been some counter-currents in the Chinese economy. And as a part of that, we have seen the general trend towards declining Chinese exports That being said, we know that a lot of the teapot refineries, the independent non-state-owned refineries, also operate with the main purpose to export their products overseas. And we are now actually seeing towards the later part of last year and into this year that crude throughput in China is very much on the rise. New export quotas have been issued. Export quotas aren't a perfect predictor of actual export volumes, but everything points towards a likely increase of Chinese product exports again.

Thank you.

Since we're here, Tony, you just sort of left the last bit wide open, saying this could be a four- to six-year bull market. We're two years in, roughly. And, you know... How does Ardmore respond to that? So I take it to mean that you think this is going to be a longer cycle. Are you thinking about your strategy on that basis any differently than you were, say, a year ago at this time? Or what are you looking to do against that backdrop? And again, you never see a cliff coming, right? So how do you prepare for that side of it?

Yeah, so I think it was Mark Twain that said that history doesn't repeat itself, but sometimes it rhymes. So, you know, there's no certainty. But there really is some interesting parallels and commonalities of the periods that I mentioned. And, you know, I think there's a general view that this feels like it could go on for another couple years. Nobody knows how it's going to end. But I think we all do know how it's going to end. It's how all your portfolios are going to end. So... And this could have another two, three, even four years in it. It's also interesting when you look at those prior periods, there were spikes within those, right? But they were overall at just much higher levels, right? So who knows? But it seems like a really good setup. And the geopolitical issues feel fairly persistent. you know, at the moment. So in terms of what are we doing about it, we like where we are. You know, we don't have the fleet replacement problem, not for another four or five years. Our fleet is highly fuel efficient. The investments we're making, as Bart described, are terrific. You know, we just kind of top graded the fleet a little bit by selling the 2010. We weren't planning to, but we just saw the opportunity because in particular the value of that older ship had gone up a lot. And we're just intently focused on performance. And so if we see opportunities to grow, we will. We could have engaged in a lot of growth in the last 10 years, and none of you would have liked it. So we're definitely big enough to play on a global stage. We're nimble. And what that really means is that we're able to really focus on each ship and the voyage and optimizing the voyage and trading it out, but also having optionality in the way you position your fleet, which is difficult. And then I think the other thing is people don't quite, you know, even if you hear it over and over again, it doesn't quite register, but the biggest fleets in our sector are only 5% of the market, okay? So it's a very, very fragmented trading business. And what really matters is how you're able to trade your ships, not necessarily... at least on the market side, you know, any kind of market cloud. So that's a bit of a ramble, but go ahead and ask me.

Well, no, I mean, just sort of coming back to it. So is that, are you thinking about your position and the way that you approach the market in the same way that you were a year ago at this time? Is that kind of the answer?

I think a year ago we were really excited. Now we're settling in and getting used to 35,000 a day. You know, so... You know, joking aside, I think a year ago we were thinking, right, this is a blip, you know, and it's going to be over. And when it's over, we're going to be in a much better position financially. And we know what to do, you know, in terms of acquiring assets. Now it's a little more difficult. But, again, we just don't feel compelled to do anything other than what we think just makes sense, you know, in terms of long-term value. Yeah. Yes, sir.

So if we could just... Yeah, you got just there?

Go ahead.

Yeah, yeah. One first... Yeah.

One first survey. Oh, thank you. Do you hedge any of your fuel costs actively? And second, do you lease new ships coming on as they are built rather than purchase them outright?

Do you want to address fuel and maybe you can address these things? Sure.

Generally, we don't really hedge our fuel needs. There could be certain specific examples if we had a corresponding long or short exposure on a particular freight element, and if we wanted to then lock in the corresponding TCE, we could, in theory, lock in the fuel as well, but we generally don't do that. Essentially not really our market to play the oil markets and such.

And then a question on vessels and financing. So I guess, one, we don't have any new bills on order coming in that we would potentially put on leasing structures or draw down debt. But the company, the last year and a half, has really focused on the balance sheet and the shifting of debt back to the traditional shipping banks, predominantly European-based. and where they've been able to provide us 100% coverage in some cases of revolving credit facilities, which gives us tremendous flexibility even within a quarter to manage debt levels and decrease interest expense. And so through that de-levering, we've been able to pull our break even down. If we hadn't done that, it would be probably $3,500 a day, more than $17,000 a day, and it's below $14,000 today. And so I think the key thing for us is always maintaining a really wide network and relationship of financial capital providers. And we've had significant leasing structures in the past. We still have a few, but much more focused on the traditional shipping banks today. Thank you.

And if I could just say, if everybody could please make sure you speak into the microphones. I appreciate that we took a moment to get to you, but in general, speak into them. And if we could, if we turn up the volume on the mics here on the webcast, it's a bit tough to hear. All right. Where's the mic?

Thank you very much, guys. Wow. Tony, you mentioned the past four or six cycles. One thing that seems a little different this time around is that a lot of the companies have less leverage. If you think back to kind of those previous cycles, it's been a real scramble for cash flow and equity issuance. Now it feels like very different, and certainly your balance sheet is remarkably healthy. What difference do you think that will make on this particular market in terms of the behavior of owners?

Good question. I'm trying to think. The last strong market we had was in the 2000s. People were very busy ordering ships at that point for incredible prices. And when it all came off, there was a lot of carnage. So it feels like... companies are a lot more sensible now. They may also be held back by considerations around the energy transition, alternative fuels, et cetera. So if you look at the dry bulk sector, they've been at this longer now. And there's been remarkable restraint in ordering activity there. So I think it's just a different mindset. Maybe it's the result of social media. This is an idea, a question of a new market that may be arising in California.

They've displaced 53% of their diesel with renewable diesel So you have, and refineries are shutting down. They're not connected by pipeline. So with each barrel of gasoline that you produce, you produce a certain amount of diesel, which may not have a home. What type of market could that be for the product tanker industry?

Okay. Yeah, I think you're touching on a few really interesting points. I mean, one, something we certainly see right now, how the conversations are changing with our also petroleum-based customers. Some of the sort of really large and main commodity traders are now quite actively engaging in trading and certainly also more forward-looking discussion on biofuels, renewable aviation fuels, lending components for biofuels. And with that just comes more complexity. As you're saying, we need different components, different feedstocks to generate those biofuels. We need different blending components for that. We need different ships and different onshore capabilities and organizational capabilities to handle those in a, first of all, a safe, but most importantly, also an economic way. And this mismatch that you described where any refinery already today has a given product slate. And, of course, you can do things to adjust that product slate, but it will never be perfectly matching a regional market. As a matter of fact, that will continue to change, and that creates product overhang that essentially then gets discounted in terms of price and that will get exported somewhere else. So for us, this is kind of part of this really exciting story where driven through the energy transition needs and some focus on renewable fuels, but also just an increase in complexity. Look, conversely, imagine a world where there was only one fuel that fits everything that moves. That would be a far less complex world and probably would be a lot less interesting in terms of tanker demand. And as you're moving away from that towards more complexity, more product grades, that creates different trade lanes and more interesting ways for us to also arbitrage that. And, yeah, but it's very much happening. I mean, some of those conversations two or three years ago just simply didn't take place. And just recently we had one of the... one of the European refiners approach us and basically ask us for, you could almost argue like a tutorial, like a walkthrough on some of these newer cargoes and what to observe when shipping those cargoes from an operational and commercial standpoint. And, you know, we find that is a nice validation of the reputation we have created in those markets to be well beyond just, you know, diesel and gasoline, which of course still today is a bulk of what we do, but we can do a lot more than that.

All right, we've got one up here, and then Chris subsequently.

Thank you. It was also the philosopher Heraclitus who said the only constant in life is change. So maybe if I could ask some questions regarding some waves that are on the horizon. I was looking at your presentation and the routes, and is your baseline the Suez Canal blockage I'm wondering, you know, that's just happening right now. When things normalize, how is that going to affect your business when you have to return to your normal routes? How is that going to benefit your competitors, and how is it going to affect the financials of revenues for the company, please?

Do you want to talk? Yeah, I can take a stab at this. So I think just maybe a comment on timing. And the quote that you just mentioned is very much highlighted in various internal and external debates we have. And I think it's very much of what, as I said, our trading mantra is based on. We are in a very changing environment. And for us to trade well in this, we just have to really embrace that. I don't think that unfortunately the situation in the Red Sea is going to solve itself overnight, and I believe that even some other factors like the situation in Russia and Ukraine, even if there was a peace that were to find a peaceful solution to the conflict, I think some of those traits that we're seeing now that have changed as a result of this will be quite sticky. I don't necessarily foresee the world going back to just how things used to be before then overnight. I think that's a really good and valid question and a question we ask ourselves all the time. If we took some of those components out of the equation, where would the market be today? What is the baseline? And that's a tough one to answer, but I think what we certainly shouldn't take as a baseline is 2021, which is COVID. I think it's really important to remember that just before the world went into this lockdown and the subsequent terrible tanker market that ensued, A lot of positive things were actually happening. The fuel switch created a lot of complexity around diesel shortages. Europe is already structurally short of diesel. All of a sudden, there was a higher demand for marine diesel fuels, low sulfur fuels. So there was actually a lot of interesting things happening in the winter of 2019 to 2020 that were just starting to emerge. And then coming out of COVID, before the Russian invasion of Ukraine, the market was actually really already on an upswing, which is what we were able to kind of anticipate and predict. We didn't see... that we didn't see the outbreak of war coming when we opened up our time shutter portfolio. We saw the world normalizing in terms of its mobility needs. And I think that is already a fairly healthy and substantial baseline. And returning back to that, I think would not be a terrible thing. At the same time, How quickly would that happen considering the stickiness of new trades, new trading relationships, new trade patterns? And the relatively cheap cost of freight still and the overall profit margin on what it takes to move a product from A to B, I think will stay in this elevated environment for a bit while.

When it comes to your dividends, the dividend yield right now is a little bit high. How are you going to sustain your dividends in the future as well as buy new products? fleet, modernize your fleet in the future.

Come back to our capital allocation policy and the great thing about Arbor is that that has been in place for a number of years and before the current market increase. And if we think back, the policy has always been one where in the past it was to maintain the fleet, to have modest leverage, always be looking for potential accrued growth, and then have the ability to return capital to shareholders. And then in this upturn, we have the ability to actually do that simultaneously. So that was a key part of reinstituting the dividend and paying one third of adjusted earnings, starting with Q4 2022. I think when we think about capital allocation broadly, we still have runway to further invest in the current fleet and make that more efficient. We have further runway to reduce leverage. And then always very prudent about the current market conditions, the need of the underlying business, and also the fleet and the fleet's longevity, all while balancing the the important aspect of returning capital to shareholders. But I think we have a guidepost, but we take a dynamic approach based on the conditions at the time.

Thank you. My final question is about interest rates. The company came around when interest rates were near zero. Now we're having higher for longer normalized interest rates. Can you talk about your debt and how you're going to, again, sustain a dividend, invest, and operate in a higher cost of capital environment? Thank you.

Sure. And that's one where the company really took a very deliberate approach a year and a half ago. And we shifted and got revolving bank capacity from the traditional European lenders as we bought back and exercised purchase options on the lease vessels. So that actually... was one where coming into a stronger market and knowing that we could actually manage the debt levels within the quarters to keep it lower as the interest rates were increasing. And then we've been very deliberate as we've had this increase in earnings that a key part of that has been to de-lever. So we're now at break-even of $13,900 per day. If we hadn't de-levered and in these rising interest rates environments, we would be north of $17,000 per day. And now I think we have that luxury position with the much lower debt level that we can – be confronted with a range of different higher for longer scenarios, but it doesn't impact our ability to actually execute our capital allocation policy in all four parameters.

Great. So we're going to go to Chris next. I would ask again, though, if everyone could please make a point at the front table as well to speak directly into the microphones. They're having some difficulty on the webcast. If we could raise the volume on the mics at all, you guys can see what you can do, but

Yeah, thanks, guys. Let me just follow up on that question with regards to the debt levels and leverage. Assuming the market continues to remain strong for the next coming years, are you happy with the current leverage ratio? How low could that go? And what's the ultimate bottoming, let's say, of the cash break-even level in your minds that you could get to?

Sure. Thanks, Chris. I mean, dynamic situation, I think the way that we think about it is we're looking at the market today. There's the full range of scenarios of how it could evolve and develop. But, again, it comes back to having the capital allocation policy in that guidepost. We like the current leverage levels. It really has increased the quality of earnings, lowered the break-even. I think we still have some runway on the break-even. I mean, certainly, you know, we've tackled the interest expense side of it very, very tight when it comes to cost management internally on both the OPEX front and G&A front. And I think we have to remind ourselves that we were very early managing the balance sheet and arranging the revolving credit facilities. I think we have actually some further ability to work with our banks to get even more revolving facilities as opposed to term. So that's something that we're working on as well. And look, we take a longer-term approach through the cycle, so you don't know exactly how it may play out. But it's important to de-lever and have your dry powder available should a cycle play out or interesting opportunities emerge. And we think that we can then plant the flag for future forward value. But I think it's just very much a conversation that the team has on a daily basis.

Actually, just in the interim, I'm going to have a couple of these from the webcast, so please do keep sending those in. Art Moore at igbir.com. I'll try not to take yours, though. But just on scrubbers, how are you thinking about that? Why does it make sense now? It didn't make sense then. Broadly, scrubbers. Apologies, Omar, if that was yours.

Let me start with that. Yeah, so we've now begun to install scrubbers on our ships. These scrubbers are lower cost, better technology. They're modular. And the installation time is a fraction of the traditional scrubber installation time. So we're very pleased with those investments. In particular, they can be upgraded to carbon capture. So it fits really well into our business model. Why didn't we do scrubbers three, four years ago? We were in a very financially strained situation at the time. Everybody was. And the cost of the capital needed to do those installations would have been very high. We, in fact, instead of doing scrubbers, you know, we bought a ship at a really good price. And I did calculate what the scrubber spread would have had to have been to equal the returns we got on the ship that we just sold, and it's $6,000 a day. So, you know, so that, you know, that, you know, so, but every company is, has their own specific set of conditions and decision points and we're comfortable with the decision we made back then and we're really happy with what we're doing now.

Thank you. Just wanted to, Tony, follow up on, I think, Ben's line of questioning early on in the Q&A about strategy. And, you know, he was asking you about how you thought of things today versus a year ago. I wanted to ask, given, you know, Gurnath, you went through the different choke points that we've been seeing in a lot of the disruption, the Black Sea, the Baltic, Panama Canal, Red Sea recently. Given what's been going on geopolitically recently, Has that at all changed how you are thinking about strategy? Has it caused you to pivot or think about capital allocation differently or just strategy differently given what's going on right now in the Red Sea?

Good question. Hard to answer. So I don't think it's really affecting our strategic thinking. Our thinking there has been mostly operational and safety related. So it was very clear when the shooting, one of our ships was attacked and we were very lucky in getting away without being hit. Others haven't been so lucky. So it was an easy decision to avoid the Red Sea. Let's see how things unfold and how that solves itself, how long that takes, and how long it takes for ships to return to that route. Just generally, I think geopolitically, these events, as long as you're kind of smart and safety conscious in the way you operate, they just add to aggregate tunnel out demand, and they just boost the market. And then it's just a matter of very tactically, which is kind of what Kermit and his team do, looking to basically maximize returns in that highly volatile market.

Yeah, maybe just the only point I can add is that you asked about strategy. I'm not sure if being agile really qualifies as a strategy. It probably doesn't, but I think it's just part of more of who we are, part of our DNA. And if you then just... Consider that there will always be these kind of events, high-impact events that you have to adjust to very quickly. I think that is just a testament that as an organization, in terms of our balance sheet and in terms of our capabilities financially, but also just in terms of how we approach things strategically at every level of the company, just to preserve that culture. If somebody told me a year ago that we're going to be going around the Cape by the end of By the end of last year, I probably would have called that person crazy, yet here we are, right? And I think it was to say that we won't see something completely different in a year from now. So again, not really strategy, but I think agility will continue to play a really big role in terms of how Artmore approaches things.

Thank you.

Yes, thank you for your time today. You were very explicit in sharing your mindset and how you view the market. Can you give us a little bit of your insight about how your customers view this market and if there is any discrepancy in how ship owners forecast the next few years versus charters? Where your discussions about long-term charter stand, have you seen any more appetite, increased appetite for charters to take longer positions than what we have seen so far?

Yeah, I thought it was a great, great point. And I might just respond with a little anecdote. I was in Singapore during the last APEC conference, which I believe was around sometime in the fall. So, you know, we were in a strong market and freight was pretty high. And I sat in with a room which was really more sort of the refining side of the business. I think I was one of the only ship owners that really came from the Western side to attend. And they took a survey in terms of what the room was considering the biggest risk for them at the moment. And the top three on top of that was upside volatility in freight. So I think from a customer standpoint, there's still really strong concern that freight might move up further, given everything that's what's happening here. Time shadow markets have adjusted as a result of this. And I guess I am really surprised by how, you know, positively surprised by how there is a much more latter way of approaching some of these security situations around the Red Sea where we have been able to really negotiate, you know, fairly amicably all these Cape rooting options at no detrimental commercial impact. And I think that's a positive surprise, and I think probably also indicative of how strong demand or how inelastic demand is at the moment. Again, Europe is structurally so short at the moment that these products just have to move, and even though you price in an increase that essentially offsets 30, 40, up to 70 percent longer voyage distances, that is not leading to a point where those cargo movements get choked off. If anything, they continue to move at quite strong volumes. If that answers your question. Thank you.

Okay, so we have one here, and then Chris, you have to follow up, and then we'll come back to the top table.

Yeah, hi. Thanks for all this. Maybe just to hear what your strategic thinking is on the dividend versus a buyback and how you guys thought about it in the beginning starting last year Q4 2022 and knowing where the strength is today. Obviously, I think 2019, you guys had about 30 to 35 in the stack. Today, you're about 42. So I'm just going to hear some of your thinking on that and why you thought a dividend was the best route.

Sure, sure. So I think, I mean, one, I think coming back to the capital allocation policy and the fact that with the changing market backdrop and cash flow generation that we could pursue all those priorities together Return of capital to shareholders was an important priority that then we had waited a long time to be able to actually put into place. And I think we studied when we put the capital allocation policy in place, other industrial companies and well outside the shipping sphere, And it looked to and felt that a level that was one third of earnings and in a cyclical business where you're going to have fluctuations both seasonally and cyclically was actually quite significant within the industrial realm and sphere. And then when we think about that versus, for example, a buyback, and when we instituted the policy and kind of thinking today as well, we like the liquidity and the average daily trading volume for our share and the 100% free float. And we felt that continuing to promote that while using the dividend as a tool for returning capital to shareholders was appropriate.

Appreciate the comments. Thank you.

I'd be remiss if I didn't ask about the E1 Marine investment. As you guys look at that, are you thinking more of licensing that technology in the future? Would you manufacture the units for sale to others? How are you looking to monetize that?

You guys could ask, just for the benefit of the wider audience, maybe what E1 Marine is? Sure.

I'll give some backdrop. So as a reminder, back a few years ago in 2021, the company made an investment in Element One, which has proprietary technology to take methanol and produce pure hydrogen, which then can be used in a wide range of fuel cell applications. And important to remember that that was actually a – a multifaceted deal that also put $40 million on the balance sheet in the terms of our preferred, and that was a time when capital was really needed to bolster the company. It also coincided with the company's energy transition plan and rollout. And so very early and important part of the company's ETP plan. And then as we've broadened that with, you know, examining this full range of technologies that we talked about that we've installed on our vessels, element one remains one component to that. Like other industrial companies where you have proprietary technology and then you're looking to monetize that and achieve value on a global scale, they've been really active now in terms of their scaling, looking at different – licenses across geographies and across verticals. So it's actually not just marine. And in fact, some of the other markets are accelerating more rapidly. So everything from aerospace, off highway, on highway, charging stations. So yes, so definitely significant progress there. I think we have to remind ourselves from our overall context that that was a $10 million investment. So certainly when we think about our asset base, you know, our fleet and our core competency in the fleet, but that happened to be a unique investment that, you know, met other criteria for the company. But again, I think our ETP focus today and go forward is it's much more on testing and piloting technologies that then we can deploy on our fleet and improve from an operational perspective, but not necessarily making direct equity investments.

Come to the front table here.

Thank you. I too have been wondering and struggling with demand. Every dollar chases away a customer. Make it $1,000. How have you seen customers economizing? Because obviously they want to save money and they're being squeezed too. Can you give us some examples?

Can I just start and then just mention that the transport cost is roughly 5% of the delivered cost of fuel. And I think the real question is when oil traders are trading and they're making a spread, you know, what's the impact on their decisions?

Yeah, I think that almost answers the question entirely. I mean, I think as of yesterday, the 321 cracks, you know, the – refining margins, we're still at roughly $30 a barrel. So I guess they're still making good money both in terms of refining and trading those commodities. And again, the fact that even though those higher freight levels are quite sticky, product is still moving. We are down So we're in peak U.S. Gulf refinery turnaround right now. U.S. Gulf Pad 3 rates are down to 77%, which is exceptionally low. Normal run rates would be 92% to 95% maybe. And it's not notable. I mean, U.S. Gulf rate is as high as mid-30s on certain routes and as low as, I think, high 20s. So those are really good rates still. And again... We're not at this point where we're meeting inelastic demand for the transport of those goods. And, you know, again, at $30 a barrel at crack spreads, I think everybody still has a chance to make a lot of money.

All right. I'm going to have one more from the webcast here. So I'm going to have one from the webcast, and then we'll have one more question up here. All right. So this has been posed in a couple of different ways, and Ben from in the room addressed this earlier as well. But Tony, insofar as you said that you closed the presentation by saying that cycles inevitably end, I guess the through line for the various questions I'm getting is what do you do in the interim to make it worthwhile? What's the point if it all eventually ends? How do you get there without it?

I mean, not the bigger question that sounded like.

How do you start the next cycle not at square one?

Okay, so if I understand the question, the end of the cycle is not the end of Ardmore Shipping. In fact, I get really excited in downturns because that's where you build for the future and make your money. You make your money when you buy. And if you asked me a year ago, what were we thinking? Well, if this ends, we're going to be in a great position to build up the fleet with cheap assets. So I think from an investor standpoint, it's really important to understand this concept of potentially, if we're in a long cycle, how long it's going to last. For us, we're playing the infinite game. And we're going to keep playing it. And our objective is to build a great platform, perform every day, but build long-term value by making really good decisions on capital allocation.

Hi, Tony, Tim. I look at everything you've talked about today. There's been a lot of focus on demand, a lot of questions about demand, but you're in a business where it's the supply that matters. And also, interestingly, I think the variables determining future supply are much more predictable. So I want to focus on those variables. The first one is a year ago I think you mentioned that the order book was particularly light because of uncertainty about what the environmental requirements of future vessels are going to have to be. Given that they have such a long life, that's a big variable. So an update on that would be helpful. Second thing is I look at a lot of other assets and equipment that moved around and In every category I can think of, the useful life has been increasing. And so why might that be the case or might not be the case in your industry? Then you also mentioned today just a lack of capacity, production capacity. How serious is that? And then my final question is what would it take you to order a new ship?

Okay, I'll try to answer that stack of questions. So I think the question on fuel is an interesting one. There are ships, a lot of ships are being ordered that are methanol dual fuel. Nothing ammonia yet because the technology is not perfected. But they're all either in sectors that are very front-facing to retail-type customers, so car carriers, container ships, et cetera, or they are more bulk-type businesses where a customer is prepared to give them a long-term time charter to kind of make it worth their while because it is a substantial increase in cost. So that is happening. Nobody is building dual-fuel ships for spot trading because the market won't pay for it. So that's not happening yet. Ships are being built with engines that can be upgraded. So the incremental cost now is not that much, but they can be retrofitted. So that is happening. But there still is a lot of uncertainty. You know, so I think that definitely is a component of holding people back. Let me answer the last question first and then try to remember the ones in between. So would we order ships? Yeah, possibly. You know, it depends on when they deliver a price, if they're really, you know, connected to a project, if there are other strategic advantages, you know, to doing it. So it's, you know, I guess there was a question around shipyard capacity. You know, Clarkson tracks this, but I think the yard capacity from 2008 to today is down at least 50%. And it didn't all disappear in 2008. It took a while for yards to keep building and overpopulating the fleet and the yards going bankrupt, et cetera. So, you know, there are... I think there's yard capacity there for orderly renewal and replacement. I think there is this wave of older ships that is not addressed, and that's still to come, but it's potentially a big issue. So I think I've missed at least two questions. Oh, yeah, that's a good one, because I got really frustrated with, like, dishwashers and things like that. So... There's a long answer, but a short answer maybe we'll do here, which is that I think in terms of the structural technology of ships and the way they're being built and the way the steel is being coated, et cetera, hasn't really changed. And I think that means that for our ships, they're going to last 20 to 25 years. And I don't think there's any initiative, and there should be, to be honest. I'm not sure it would help our economics all that much, but You know, we should find ways to extend the life, you know, to build ships that have a longer life, you know, anticipated life by way of modularity, upgrades, maybe better treatment of the steel, et cetera. But am I missing anything in terms of ship construction technology that's...

Or maybe also just that I think the cycle matters in terms of the useful life, and I think that that side of it is separate from the technology. So as we were studying the product anchor fleet and you see this large component of the fleet, 40% that the next five years is going to be over the age of 20, that if a cycle plays out, those are natural scrapping candidates. But if the market remains strong, the owner is trying to keep the incremental ending. Yeah.

They'll go out very fast. The other thing also to keep in mind is those older ships are really, really inefficient. I mean, they might burn eight tons a day more than the newer ships do, right? So, yeah.

Tony, you asked me before we started something along the lines that you really wanted me to give you the zinger or something like that.

I was only joking.

Yeah, I know. You said that something along the lines of the key to making money in shipping or cyclical business is buying low. I would argue the key is selling high. We're kind of high now. Right.

Good question. And it's not a zinger. It's logical. Why don't we just sell half the fleet? Well, we do run a really high quality platform that needs a certain amount of scale to be able to generate the returns it does. And we think it's got a lot of future value as well. We don't need to sell ships for investors to be able to sell their position, right? So, you know, we're not in a position where we need to sell down ships and distribute capital. That's my own view, okay? We're gradually, you know, what we've not done is grown a lot. And again, I want to emphasize we've had plenty of opportunities to buy a lot of ships, but we haven't done that. So I think we're just focused on continuing to improve the performance and the cash flow that we're generating from the kind of scale that we have today and waiting for opportunities. But I think that if we were to scale back through vessel sales now, I think that would impair our ability to deliver value in the future. What's that? Good question. So again, the great thing about having a lot of liquidity and 100% free float is that anytime an investor wants to sell the whole thing, they can sell the whole thing, right? You know, and get out, right? So it's, you know, we don't have to do that for them.

Got another question here? Yeah, he's coming.

How flexible has the regular ship that you have become over the years in terms of dry cargo versus wet cargo? Can you change the mode of shipment pretty quickly with newer technology?

So I think we work in a world of liquid bulk. You know, so there are ship types that can switch back and forth dry to wet. But one of the aspects of our ship type and our business in particular is the wide range of liquid bulk cargos we carry. And, you know, theoretically you'd never want to do it, but you could carry crude oil, all the refined products, petrochemicals, inorganics, et cetera. So, you know, I'll actually hand this over to Gernot to answer a little bit because I think one of our, one of our underlying, you know, components of our strategy is to maximize our trading options by looking at as many different types of cargoes as possible.

Follow-up on a different subject. What about insurance costs given what's going on in the world today? How much have they risen?

Our DNO just went down by a lot, but that's your next meeting. But, yeah, do you? Do you want to talk about machinery?

Yeah. I mean, with regard to war risk premiums and Red Sea transits, to the extent that anybody would still engage in those trades, obviously, as I showed, we have just negotiated options around the Cape, so we don't really need to worry about war risk premiums. Typically, those would be a voyage cost and is either priced in or absorbed by the chart. But yeah, they have gone up, no doubt.

But would say that the standard insurance package that's in OPEX in terms of whole machinery and P&I, that's renewed on typically an annual basis, more at regular market levels, and remains a highly competitive process and hasn't been impacted.

If the world gets more peaceful, will those insurance costs drop and give you a better margin?

So it would be more of a voyage expense impact, but in terms of the hauling machinery and P&I, I think that's not as much so.

Yeah, that market is driven more by kind of non-kinetic type of events, big oil spills, catastrophes, asbestos claims, that kind of stuff. And it's amazing how shipping, like our you know, slip would be absorbed through reinsurance and shipping absorbed into the whole, you know, Lloyd's, you know, the world of reinsurance. And we get impacted by things that you'd never imagine would impact us that have nothing to do with shipping.

And maybe just to add, the way we conduct our business, our track record with the insurers, our safety standards, and how we've been able to, you know, avoid incidents where we would have to call into insurance coverage That certainly has an impact in terms of how you can do in terms of relative renewal rates, and that's been quite favorable to the company.

Okay, I'm seeing no further questions here in the room, and we're good on the webcast. So, Tony, I'll turn it to you if anything you want to say in closing.

No, just again, thank you all for coming, and good questions. I feel worked over, so.