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spk04: Welcome to the Dorian LPG third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Additionally, a live audio webcast of today's conference call is available on Dorian LPG's website, which is www.dorianlpg.com. I would now like to turn the conference over to Ted Young, Chief Financial Officer. Thank you, Mr. Young. Please go ahead.
spk00: Thank you, Daryl. Good morning, everyone, and thank you all for joining us for our third quarter 2023 results conference call. With me today are John Hajbateras, Chairman, President, and CEO of Dorian LPG Limited, and Tim Hanson, Chief Commercial Officer. As a reminder, this conference call webcast and a replay of this call will be available through February 8, 2023. Many of our remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe, or similar indications of future expectations. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors as well as general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove to be incorrect, actual results may vary materially from those we expressed today. Additionally, let me refer you to our unaudited results for the period ended December 31, 2022 that were filed this morning on Form 10-Q. In addition, please refer to our filings on Form 10-K where you'll find risk factors that cause actual results to differ materially from those forward-looking statements. Finally, you may find it useful to refer to the investor highlight slides posted this morning on our website. With that, I'll turn over the call to John Adjabateris.
spk05: Thank you, Ted. Good morning, and thank you for joining Ted, Tim, and me to discuss our third quarter financial year 2023 results. John LaCouris isn't with us this morning because he's having knee surgery. John LaCouris has contributed a slide you will find in the deck. with much interesting information which i think you will um may want to note and take and and we will follow with we will have some remarks read for by from him at the end of our presentation and and feel for any questions you may have after me tim will present and then um sorry after me ted will present and then uh tim Including the $1 irregular dividend announced today, we will have returned over $500 million to shareholders since our IPO. Our board has focused on returns to shareholders while retaining commercial flexibility and ensuring a strong balance sheet. We are still investing in our business, as evidenced by the four vessels joining our fleet in this calendar year, and our commitment to the installation of three additional scrubbers. For the quarter, our EBITDA was 76.2 million and net income was 51.3 million. The net income is the second highest in our corporate history. Our net debt to capitalization was about 34%. Ted will give you details and, of course, answer any questions you may have on our quarter's financial results. Global LPG market fundamentals strengthened in 2022. with increased volumes from both major export basins and more frequent cargo routes to Europe. Global exports increased 4% this past quarter and are up 6% for the year with support primarily from North America. Total exports for 2022 increased to 117.5 million from 110.9 million tons in 2021. U.S. exports increased 6% or 700,000 metric tons from the third calendar quarter, supported by favorable arbitrage economics which persist today. 2022 U.S. volumes were up 3%, an increase of 1.3 million tons from 2021. Middle East export volume showed continued growth despite maintenance in some terminals in the beginning of December. Annual volumes out of the region are up 18%, increasing by 6.4 million tons from 35.9 million tons in 2021 to 42.3 in 2022, driven by reversals to OPEC plus production cuts. Freight rates were this past quarter underpinned by a strong arbitrage and increased waiting time in Panama. Rates fell in early December as canal weighting eased, and some terminals in the Middle East underwent maintenance, and demand in Asia was subdued. We're now seeing a rapid reversal and an increase in freight rates in both basins. On the shore side, during its operation, we continue to work hard to ensure the well-being of our crew, especially our Ukrainian and Russian seafarers and their families. On the performance side, we have been very focused on our strategy to comply with the 2023 IMO emission regulations, the EXI, and the CII. We have built out dashboards and forecasting tools that assist our commercial team in optimizing our utilization and achieve a solid CII score for each vessel in the pool. Our team has spent the past two years preparing for these regulations and see this year as a turning point in the journey to decarbonize shipping. We will continue our research efforts and installations of various energy saving devices and premium paints to reduce consumption costs and carbon footprint. Looking ahead at the market estimates for US exports point to further growth in 23 and 24 and it's January short term outlook report. The EIA said it now estimates a US LPG exports will grow 15.9% in 2023 year over year. This is up from their October estimate of 11.3 in 2023. The U.S. is now producing well over 100 million tons of LPG a year, with 2022 numbers coming in at about 106 million tons. I'll hand you over to Ted now for his remarks.
spk00: Thanks, John. My comments today will focus on the recent capital allocation events, our financial position and liquidity, and our unaudited third quarter results. At December 31, 2022, we reported $129.8 million of cash, which was net of the $40 million dividend payment made at the beginning of the month. On January 30, 2023, we had roughly $165 million in cash, with the increase from December 31 reflecting the January distribution from the Helios pool. Also, as John mentioned, we will pay another $1 per share as an irregular dividend, or roughly $40.3 million in total of dividends on or about February 28, 2023, to shareholders of record as of February 15, 2023. The irregular dividend announced this morning reflects the strong rate environment and our resulting cash flow. Once paid at the end of February, Dorian will have paid over $300 million in dividends and have repurchased nearly $229 million in stock, representing 18.8 million shares, which together totals nearly $530 million in capital returned to our investors since our IPO in 2014. Our board continues to take a pragmatic quarter-by-quarter review of the company's performance, the LPG chartering market environment, and other macroeconomic and industry factors to determine whether to pay, and if so, how much in dividends. With a debt balance at quarter end of $635.6 million, Our debt to total capitalization stood at 43.2%, and our net debt to total cap is, of course, even lower given our large cash balance. Moving into this calendar year, we will take delivery of our dual-fuel new building from Kawasaki at the end of March, as well as three long-term time-chartered in dual-fuel ships, representing nearly 20% growth in our commercially managed fleet. With these additional vessels, our cash cost per day will increase to $24,000 to $25,000 a day, but I would also note that these vessels offer higher earnings potential given their size, fuel efficiency, and dual fuel optionality. For the discussion of our third quarter results, you may also find it useful to refer to the investor highlight slides posted this morning on our website. Turning to our third quarter chartering results, we achieved the total utilization of 97.8% for the quarter with a daily TCE per operating day, as those terms are defined in our filings, of $52,768, yielding a utilization adjusted TCE of about $51,630. That, again, is TCE per available day. Spot TCE per available day, which reflects our portion of the net profits of the Helios pool for the quarter, was about $52,583. Also, the overall Helios pool reported a spot TCE, including COAs, of approximately $57,000 per available day for the quarter. You will note that these results are somewhat correlated with the average Baltic rate recorded on a two-month lag. As many investors and analysts look to model the business, we would note that a two-month lag Baltic is more in line with the actual cycle of the business. Our team book's voyage is about 30 days out, and the average load-to-discharge voyage, i.e., a one-way voyage, is about 30 days. It is also worth reminding the investment community that the published Baltic rate assumes 100% utilization and is based only on the Rastanur-Achiba route. Turning to the cost side, Our daily OPEX for the quarter was $9,739, which is up marginally from the quarter end in September 30, 2022. Crew costs, which include crew travel, appear to have found a new normal, as crew cost per day has been relatively stable over the last three quarters, and spares and stores were actually down sequentially. Repairs and maintenance and lubricant costs drove the increase this quarter. Our time charter in expense for the two TCN vessels remained stable at $5.2 million. Total G&A for the quarter was $6.9 million, and cash G&A, that's G&A excluding non-cash compensation expense, was $5.9 million. Included in the $5.9 million is approximately $200,000 that we spent to provide accommodation and food to the families of our seafarers affected by the war in Ukraine and We also recognized about $250,000 of performance-based bonuses for some employees in the quarter. Thus, our core G&A for the quarter was about $5.5 million, which is consistent with our expectations. Our reported adjusted EBITDA for the quarter was $76.2 million, up sharply from the prior quarter's $46.2 million. We look at cash interest expense. on our debt as the sum of the line items, interest expense, excluding deferred financing fees and other loan expenses, and realize gain loss on interest rate swap derivatives. On that basis, total cash interest expense for the quarter was $6.6 million. Our hedges saved us $1.4 million in cash interest this period, and we recently extended our existing hedge profile to ensure that the 2022 debt facility is 80% hedged until its maturity in 2029. Although we currently hold an 87.5% economic interest in Helios, we do not consolidate its P&L or balance sheet accounts, which has the effect of understating our cash and working capital. Thus, we believe it's useful to provide some additional data in order to give a more complete picture. As of Monday, January 30, 2023, the Helios pool held $20.5 million of cash on hand. Page 5 of the Investor Highlights materials outlines the economics of our scrubber investments, and clearly, this investment has been valuable for our shareholders. Of note, the total scrubber cost savings have now paid back the entire initial investment. In addition, as John noted, we have committed to three additional scrubbers, and I would note that the installed cost of these three scrubbers will be roughly two-thirds the cost that we incurred on the first 10 retrofits. You also note that our investments in performance monitoring have also proven their value, as both our AER and EEOI have, on the basis of unaudited figures for calendar year 2022, fallen by mid-single digit percentages versus the prior year. Thus, Dorian's contribution to a cleaner environment continues unabated. The significant irregular dividends in the last 12 months underscore our Board's commitment to a sensible capital allocation policy that balances market outlook, operating and capital needs of the business, and an appropriate level of risk tolerance given the volatility in shipping. We also continue to evaluate potentially interesting investment opportunities that may represent attractive risk-adjusted returns. With a continuing solid freight market backdrop, we remain cautiously optimistic about our cash flow generation over the coming months. With that, I'll pass it over to Tim Hanson.
spk06: Thank you, Jeff, and good day, everyone. Thanks for inviting me. The October to December 2022 quarter saw increased LPG export as well as import demand, which translated into a firm trade market. North American export was buoyed by relatively mild winter, dampening domestic LPG consumption and continued record-setting production levels. The quarter is often characterized by seasonality, as Asian importers tend to stockpile for the winter, 2022 was no exception. North American exports set a record for exports for the quarter, while South Korea and Japan posed a strong impulse level, also helped by demand for the G-spiking to navigate the cold winter. Middle East export volumes were slightly down compared to previous quarter, but nonetheless, it was a record high fourth quarter exports. The east of Suez market saw the BLPG-1, which is a benchmark for 80 cheaper rate, continue the upward trend from the quarter prior, despite a brief lull during the golden week holidays in the Far East. Several delays at key discharge ports in India and in the Far East absorbed considerable tonnage during October and November. Meantime, market players also had to plan with long lead times because the West market was seeing fixing windows five to six weeks in advance of the loading lake hands. The result of a favorite product market absorbing tonnage at discharge port and navigating long lead times was a bulleted market in October and November. On the 21st of November, we saw a record high BG1 posted at $148 per metric tons. December was relatively quiet as the seasonal backwardation in the market impacted the product market and a significant downward correction was seen in the second half of December. But the rest of the US market, it was likewise, the rest of the US market likewise saw a rising market during October and November with a downward correction in December. The west of Suez market was also impacted by delays at discharge port, but also had to contend with increasing delays for transiting the Panama Canal. These delay factors to vessels resulted in market players having to secure tunnels well in advance of the lay cans. The west of Suez market did not climb at the same pace as the east market, partly due to the fact that ship owners being enticed to lock in firm earnings on longer voyages which increased the competition for cargoes known to be destined for the Far East discharge ranges. By September, a vegan and arbitrage, as you can see on our investor deck online, due to the forward delivery prices of product in the Far East eased the activity levels in the last few trading days of calendar 2022. This resulted in a significant freight market reductions. The east and west market trades indicated a well-balanced shipping market supported by strong fundamentals. Whereas in the summer the balanced shipping market demonstrated that the VLTC market could weather seasonal summer doldrums, the early winter demonstrated how strongly the market could rise when shipping demand increased. The positive fundamentals of the market has been the theme over the quarters. Risk do remain, however, with market players attempting to understand the impact of the new COVID-19 normal in China and whether a world recession is looming in the horizon. Despite the present external risk, propane inventories continue to build in North America, and demand for LPG remains robust. Also, there is reasonable optimism of increasing demand for LPG in China once a hard landing of sudden opening uh is handled with more pdh truly coming on stream and industry operating on most and the industry operating on more stable basis without now hinted back to uh john yeah thank you um as as i said in the beginning i think well and we'll have um the the uh remarks uh briefly that john licorice had prepared um
spk05: briefly read now, and then we'll go back for questions. Thank you. Peter? Thank you.
spk01: In John's absence, I'll give everyone a brief on our scrubber operation results and our near-term ESG strategy. Starting with our scrubbers, Fuel spreads for calendar fourth quarter 22, our third quarter 23 widened between LSFO and HFO, benefiting our scrubber vessels with improved voyage economics, averaging about $5,831 per day net of our scrubber OPEX costs. The realized average were about $246 per metric ton of HFO consumed by our scrubber vessels versus the cost of LSFO. The hybrid features of our scrubbers provided additional upside for all ECA and SICA areas of trading. In addition, scrubbers reduced not only SOX, but also significantly reduced particulate matter and black carbon, and we feel are a necessary precursor for putting future carbon capture systems on our vessels. Pivoting to our ESG strategy, our immediate focus is on our fleet's IMO-mandated EXI and CII ratings. which will come into effect in stages in 2023. We are reducing emissions and improving commercial performance by installing various energy-saving devices or ESDs. We have also implemented real-time data monitoring, as we mentioned before, with sensors that track performance and optimize onboard operations and voyage completion. We combine this with robust crew training efforts, which we feel are paramount to getting this done. In addition, we have contracted three additional scrubbers, which will be installed in the next two quarters on three of our vessels, which have upcoming dry docks. Looking ahead, we are investigating the potential for carbon capture and storage onboard our vessels. We're continuing to improve our energy efficiency onboard our vessels with a focus in vessel performance and emissions improvement. And we're continuing to study technological innovations and advances as they mature and implementing them as soon as we can. With that, I'll pass it back to our chairman.
spk05: Thank you. Thank you. And Daryl, we can go to questions now. Thank you very much.
spk04: Thank you. With the prepared remarks completed, we will now open the line for questions. If you would like to ask a question, please press star 1 on your telephone keypad. Again, that was star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Omar Nocta with Jefferies. Please proceed with your questions.
spk03: Thank you. Hey, guys, good morning. Hi, Omar. It's a nice solid quarter, obviously, and it looks like more is on the way here, especially given what we've seen in the spot market here the past week or so. From your mouth to God's ear.
spk05: Sorry, John, what was that? I said from your mouth to God's ear. I'm sure God is listening to the analysts, all right? He's looking happily on you.
spk03: Thank you. I would say that the dollar dividend you declared, I think clearly you're conditioning us to or I think I'm being conditioned to expect these payments. And I know you're still viewing them as irregular. And you mentioned on your opening remarks that the board takes a more pragmatic approach to the payout each quarter. But how should we think of Dorian's use of cash here as we think about the near to medium term? Are dividends the number one priority?
spk05: No, they're not. Capital allocation is our number one priority. And the way we think about the dividends as part of a whole, which includes the It has included in the past buybacks, and now it could include them again. Dividends, obviously, and reserves for rainy day and for investment, including renewal. So up until now, as you know, we've invested only in one new ship, We feel that we're covered with the three double fuel ships that we've chartered in, plus the new building that we're taking in for ourselves. We're investing a little more in the scrubber because we feel that that has given us good returns and we think the prospects are good. So while dividends are right up there, I think you asked specifically, are they the first priority? And I think we should say that they are equal weight. That's how we view them, equal weight within every quarter's capital decision allocation, which is kind of long-term and medium-term.
spk03: Okay, that's fair. I appreciate that color and You know, maybe you did mention, you know, the investment, and you've got the one new bill, the three charter in. And at this point, it looks like you're deploying capital on those three scrubbers. Just out of curiosity, you mentioned that those will carry a cost that's about two-thirds of the initial program a few years ago. I think generally people have just assumed that it would be more costly today. And so I just want to get a sense of, you know, what makes it cheaper this time around?
spk05: I think the production, really, because you're right, it should be more expensive. But if you compare it to the first time we put scrubbers on board, which was in our initial two new buildings, it's not only a third, it's probably a third of the cost, not just a third off of. So they keep coming down. I'm sure they will level off somewhere. But they're more efficient. They're, you know, more compact, easier to install. And that's it, really. I think, Ted, do you want to add anything?
spk00: I mean, I think the other thing, if there was some cost when we initially did the first retrofit, some basically, I'm not a technical guy, but like high-tech MRIs of the structure to see exactly where to put stuff, Well, now we know the plan of the ship, so some of that we've avoided. And we've gotten better at installing them, you know, our piece of it. And the yards have gotten better, too. So it's all the learning curve, I think, like John said.
spk03: Okay. Yeah. And what do you think in terms of timing? It sounds like I think Peter had mentioned in the second and third quarters you expect to complete them. What's the expected sort of off-hire time for those ships?
spk00: But we've modeled for the time being 30 days. That's what it's worked out to historically. We've been a little bit better than that, you know, sort of 27, 28 days. But we've assumed 30 for our internal modeling purposes.
spk03: Okay. And that'll happen anyway, you know, with the surveys that are due?
spk00: It would, except it's worth remembering, Omar, that when we normally do our special surveys, we actually are only in dock for 15 days. So, it takes sort of an additional two weeks to install the scrubber. Um, so we, we, we normally do not have 30 day regular dry dockings.
spk03: Okay. Got it. And then maybe just one, one more, and I guess maybe a bit more bigger picture just on what we're seeing in the market. Uh, you referenced this early in the commentary and maybe for, you know, maybe Tim, um, you know, just what's been going on, I guess, with, with the, with the spot market here recently kind of came into the year. a bit softer, trended a little lower, looks like the first couple of weeks. And then here, maybe over the past week or so, we've seen a big jump. Just wondering, you know, what's driving that uptrend here recently?
spk05: Tim, do you want to try and take a stab at that?
spk06: Yeah, I think it's a combination of things that probably at the end of December, we came from a very high point. And as we closed in on Christmas and the arbitrage closed in a little bit, I think people got quite keen to take the cargoes that was there before the holidays, and that made the rates fall. Then you had kind of two weeks of quietness before people got back in their seat. And in that time, it's really, you can say, the broker setting the ball tick that the kind of dictates the market without any much actions. So probably the market probably felt more than it should have done from that perspective. But also at the same time, as we came back, we normally see the quiet of the Chinese New Year. But this year, due to the cold spell suddenly hitting Asia, we actually saw the Chinese coming back during the Chinese holidays, which normally they take a week or so to before they get back in their seats. So the demand really picked up due to the cold spell in Asia, and we saw them scrambling for tons even during the holidays, which we normally don't see. So that, of course, that demand opened the up and kicked back the action in the market. And actually, when when we then saw that there was actually not a length in the shipping market, which became apparent quite quickly. But as there was no demand the previous week, or activity at least, and then that kind of made the market drop quite quickly, and then it rebounded back to probably where it should have been. It was very tight.
spk03: Got it. Thank you. Thanks for that color. I appreciate the time, guys. Congrats again on a solid quarter, and I'll turn it over.
spk05: Thank you very much, Omar.
spk04: Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next questions come from the line of Sean Morgan with Evercore. Please proceed with your questions.
spk02: Hey, team. I want to wish John LaCourse speedy recovery from his knee surgery.
spk05: Thank you.
spk02: And, yeah, and just kind of a, I guess, sort of a macro question about the market. How do you sort of think about the current order book, you know, one in five, I guess, versus the existing fleet and And that's the delivery schedule in 23 versus kind of some of the pets can build out in Asia and, and sort of, um, the ability of, of the market to sort of absorb that new tonnage. Like how do you, how do you get comfortable, uh, with the sort of the rate outlook in that context?
spk05: Uh, we think about it a lot and, um, uh, and whenever we never get comfortable, we just, um, weigh the balance, the balance of, uh, probability and, and to the best of our ability. So I'll let Tim give you a benefit of some of the conclusions that we've reached on the projected equilibrium. We're generally, I think, a little bit more optimistic than some other people, and he'll tell you why. Tim?
spk06: Yeah. Yeah, so of course we... One thing that you can't hide, which is evident to everybody, is the 46 ships or so delivering in this year. But what we think or what we believe will balance this out is the additional production, especially from the U.S., which have surprised quite a lot on the upside. So we see that most of the, you can say, 80% of whatever is produced in the U.S., will go to the Far East, so the demand side is really in the Far East. So when we model that, we see kind of around 20 ships absorbed due to that increase of volume at least, and that's without any inefficiencies. On top of that, when we have more congestions in the port, as we see, more and more as a lot of places the infrastructure isn't built out for their increased volume, especially like India and other places. We're also seeing a lot more going into Europe due to the war in Ukraine. So here we also see more delays than usual as it's bigger volumes coming in. And then as I think we mentioned a few times, the Panama Canal delays we do see them increasing. You can say some of the delays have been due to the quite firm container market. But again, even though that is kind of eating off, you're going to have a significant amount of LNG carriers built for the next year or delivering in the next year. And we're also going to see more Panamax container ships delivering and the new regulations in the Panama also allowing other or larger container ships actually to go through as they do not have to take the tux into the locks anymore so we do see increased Panama Canal delays and then we have as Peter mentioned earlier the regulations on the EXI and CII which which will have an impact on the shipping fleet as VLTC normally goes very close to full speed, where you see the tanker markets and the dry markets previously has not been running on full steam. So for them, the EXI reduction is not so significant. But for VLTCs, this will have an impact on the... on the fleet, which is quite significant actually. So we see these factors as being able to absorb this shipping fleet coming in.
spk02: That's really interesting. So basically, I think you have a little bit of a natural head. The downside, I guess, of more VLGCs coming in the market and obviously a larger impact from the big container ship rate. But what you're saying is that There's still only one Panama Canal and you're just gonna have more congestion. So are you sort of now thinking that the new steady state is just just constant congestion and the Panama Canal that's effectively slowing down fleets for not just obviously VLGCs, but just global fleets and increasing kind of utilization based on wait times?
spk06: Yeah, that is our view. I mean, you have about 260 new Panamax container ships on order and about 250 LNG new Panamax ships on order. So this will... Not all of them will naturally use a canal, but there is more ships going in that way. And I think the LNG from the U.S. eventually, even though you've seen it lately due to the war going into... To Europe, there will be more going to the east as well. So I think the utilization of the Panama Canal will be more busy. And we have also seen LPG carriers probably being the harder hit of those because we are excluded from booking ahead where other liners and LNG carriers that can speculatively book slots a year ahead. LPG ships can only book 14 days ahead for the canal and due to the ranking that most companies have then that is an issue as the larger container lines have the higher rankings. So I see this increase continue and also the Panama Canal authorities have increased the cost of the LPG carriers passing. I guess the LPG Carriage is the smallest ship that can pass the old canal and thus giving the least revenue to the canal. So we see significant increases of the actual transit cost plus people most of the time having to bid for the auctions, which goes everything from $100,000 to $2 million on the auction fees. We're seeing more people also taking the longer route around the Cape or through the Suez Canal to ensure that they can actually meet their leg hands and have a firmer schedule. So also that longer route will give some more ton miles in the balance of things. And that consideration is done due to the delays and due to the uncertainties and the and the auction fees, of course, which also you don't know what will be. So these things, I think, is there to stay.
spk02: And then if I could just squeeze in one more on this. I think Ted in the prepared remarks said that the Baltic rate reflects Russian or the Chiba route, and If I'm hearing him correctly, it's almost sounding like he doesn't view that as maybe as central and important a route relative to the actual rates that you guys are seeing at your charter desks. So what routes do you think like now are kind of more indicative of how the trade is really happening for BLGCs on kind of a weekly basis?
spk05: Sean, let me take this as two questions, actually, and we'll give you two answers. Tim will answer you specifically on the part of your question, which says what kind of mix, the trade, how we should think of the mix, right? Because it's not just AG East. Obviously, it's a Western route. And even the West is both US Gulf East, but also US Gulf to the continent and other short term. So I'll let him give you that. But first, I want Ted... to address the reason why he said the lag and the 100%. Because I notice that most analysts now use a one-month lag on the VLGC rate, on the AG rate. And of course, it's still 100% utilization, which is fine. But I'd like Ted to explain to you why we think the one-month lag will not reflect the actual earnings because the lag in the receipt of freight is at least two months. Ted, do you want to?
spk00: Yeah, sure. Yeah, so, Sean, exactly what John said. So aside from there being a mix, it's really the business, it's really the cycle, right? You know, our guys are booking, you know, now, here at the beginning of February, you know, for voyages that won't complete until, you know, at the earliest, you know, sort of April and maybe even further out. And so as a result, when you're trying to, you know, undertake a modeling exercise, and given how the, you know, the loaded disk, or sorry, the revenue recognition accounting works, you really tend to find that a two-month lagged average is going to be a lot better. Tim will give you more on the, you know, on the specific trade lines. And there's some, the rates behave differently there. You know, particularly, you know, we've seen U.S. Gulf to Northwest Europe be a sweet spot. But Tim will comment on that. But it's really just simply a better, look, there's no perfect way to do this. And we acknowledge that. But we want to give a little guidance to the investment community about how to maybe narrow or make it somewhat more accurate. You know, and again, I mean, averages are tricky. You know, we book somewhere around nine to ten voyages a month. So, you know, and there are 20-some-odd working days in any given month. So it becomes quite tricky to strike broad averages, but we at least feel that looking at a two-month lag is going to give you a better indication of what we expect to see in per quarter and what you can expect to see when we deliver quarterly results.
spk02: Tim, you want to say anything?
spk05: You want to hear from Tim about the mix, actually, a little bit or not?
spk02: Yeah, that would be good, actually.
spk05: Okay, Sean. It was a great question. Tim, have a go and see if you can do it quickly.
spk06: Okay, I'll try to keep it short. But there, yeah, there's basically three routes. So the Rastanua Chiba, so east or middle east to far east. And then there's a route, U.S. Gulf to the Far East and U.S. Gulf to Europe. And there are actually indexes for these three routes. They are not used very much because they have been too illiquid, and you can say for trading purposes and others, which was really intended for these routes to be published. So they're not really used on a paper trading basis. And the market is not so big to have too many indexes, which then makes them adequate. But you can say our trading is probably 80% out of the US and 20% out of the AT. And the US East is the most active spot market route. of the route and it's also the longer route so you can say it will have a bigger impact fixing one voyage US to the east than 80 to the east or US to the west so it will employ the ship for 70 days instead of 30 to 40 days so that route is really the most significant route I would say to match it up and of course people will change from one basin to the other if if one of the routes is paying far less than the other ones, but it's a matter of how do you deploy your ships and which cargo do you go for and where do you come open. But I would say the most traded route is U.S. to the Far East. So I would kind of watch out for that as well to kind of judge your earnings. And there, like Ted said on the ATC, the index route doesn't take into account Panama waiting and it doesn't take into account, I think, time as well or auction fees for the Panama Canal. So again, when you calculate the TG returns on those, you would have to take that with a pinch of salt as well. Then you have like a premium market has been US to the West where that's a difficult market to operate in because you are open quite close to the low ports. And as I mentioned before, sometimes the fixtures are five to six weeks ahead when we fix a ship. So you're hardly open in the far east when you fix the ships, let alone open 14 days from the low ports. So a lot of people avoid ending up in the west due to these reasons. But they do pay a premium. So if you kind of figure out how to manage it, then it's an attractive market for some. But that also, again, when you then look at your earnings, it's really depending on where I come open on the previous voyage. If I'm open in the west and go to the far east, of course, that will give you a significantly higher return on a discharge to discharge versus ballasting from the east and then ending up on a short voyage in the west. So these are kind of The variances as we see and as we fix sometimes five to six weeks ahead if the market is tight. If the market is not so tight, then you will fix two to three weeks ahead in the West. But in the East, it will be more like 10 to 20 to 10 to 30 days ahead that you fix. So 30 days in a tight market, 10 days in a not so tight market. And that's, of course, again, kind of the lag that you would have to use would depend on how tight is the margin and how hard it is.
spk05: Thanks, Tim. I mean, Sean, does that give you more than you want?
spk02: Yeah, no, that's great, Tim. I think that's a lot of deep nuance on kind of how it works. We thought it would be useful. Yeah, that's great. Thank you.
spk05: Thanks, guys. Thanks, Sean. Thank you very much. Thank you. Daryl, I think we're done. Thank you very much, everyone, for joining us, and we look forward to our next quarter's call. Thanks again. Bye-bye.
spk04: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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