Avance Gas Holding Ltd

Thank you and welcome everybody to the full year result presentation for Arvans Gas. We very much appreciate you sharing your Valentine's Day with myself and Randi and I hope we will get you in the right mood for the rest of the night. So before we begin I just want to remind you on the disclaimer Randi. So this is not exact science so we will give some forward-looking statements. We use a couple of non-GAAP measures like time charter equivalent earnings and of course we cannot cover all the ground in this short presentation so we also recommend you read our quarterly report which we also published this morning. So with that I think we are ready to go. So let's review the highlights. Numbers came in slightly ahead of our guidance provided in November. Time charter equivalent rates or earnings per ship, this is the average sale-in rate, was 76,200 per day, slightly ahead of our guidance of 70 to 75,000 dollars per day. So please note that we are guiding on discharge to discharge numbers. That resulted in a very nice profit for the quarter, 61.5 million in total, translating into our earnings per share of 80 cents, which is actually the second best quarterly results we have delivered in the history of the company, only beaten by Q3 in 2015. All together, that also resulted in a very strong numbers for the full year. Full year profit of 164 million, translating into earnings per share, $2.14. Again, the second best year, only beaten by 2015. And actually, if we wanted, we could have beaten the 2015 numbers as we sold the ship, Iris Glory, which came off our two-year time charter with IoT in the end of November. We could have handed her to new owners at that time, but as we sent out in the press release, we managed to squeeze in one spot voyage prior to delivering this ship to new owners, where we made a profit of 3 million on that spot voyage, which is booked in the December and Q1 numbers, and we booked a profit on the sale. in January of 21 million, basis the sales price of 60 million. It also provided a cash release of 25 million. We have also sold the last remaining older vintage ship, Venus Glory, sales price of 66 million, which will then generate a profit of 27 million. Same strategy we have applied to Venus Glory, she came off our two year with IOC in December. We have been able to squeeze in a spot voyage on that ship also prior to delivering the ship to new owners with a net result from that spot voyage of $5 million. So that $5 million come on top of the $66 million and the profit of $27 million and now reflected in the Q1 numbers. So with those ships sold, we have sold all the 5, 2.8, 2.9 vintage ships. And we also made a more opportunistic tale of our two new buildings for delivery this year, Avant Castor and Avant Pollux. They are set for delivery in March and May, respectively. We have sold them and blocked to the same buyer. And we have about $72 million with a cash release of $120 million. So all of this will take place in Q1 and Q2, and we will cover some more ground on this later in the presentation. So hence, given the strong numbers, our good cash position and a lot of cash coming from these sales, which Randi will cover later in the presentation, we are happy to increase the dividend. We paid 50 cents per share the last four quarters. We are increasing it now to 65 cents, reflecting also the stronger earnings. And this takes the dividend for the year to $2.15. So we are paying out approximately 101% of the earnings for this year, which should give a quarterly dividend yield of 22%. But if you are applying the last four quarters, we have a running yield of about 18%. We put in these numbers last night. when our stock closed at 126. And I'm happy to see that the investors are liking what we are presenting today. And last time I checked, the stock was up at about 9% today. So the yield is slightly lower, but still at very elevated and attractive levels, we think. Given the substantial cash we will release from the asset sales, As we have communicated in the past, we do expect to utilize the proceeds from the sale of Iris and Venus Glory as equity for the four medium-sized gas carriers, which we contracted last year. However, in relation to Avans, Castor and Pollux, we raised $65 million in equity in April 2021 for these ships. So we raised $65 million, and we are now also selling them at a profit of $72 million, bringing that in total to $137 million. So we are planning, as we also communicated when we sold the ships, that we will seek authorization from the engines general meeting scheduled for early May. to pay back some of this capital, so we can distribute some of this surplus cash to our shareholders in a tax-efficient way, so it's being taxed as return of capital rather than return on capital. So once we come back with our Q1 numbers in May, we have done more AGM, and we will come back to the dividend situation in relation to these asset sales. In terms of the market, we had a fantastic market last year. It was the best market probably since 2015, reflecting also the strong results. This year, we ended up with a slump. Not that dissimilar from the slump we had in 2023 at the beginning of the year, but it's been a bigger fall. And it's been driven by the Arctic cold snap in the U.S. which reduced oil production from about 13 million barrels per day to 12 million barrels per day, and resulted in gas prices in the US, both natural gas and propane, really shooting up, making arbitrage less attractive. And I will cover more of this in the market section later in the presentation. However, rates have rebounded from the lows and are trending upwards. And if we look at the future price curve, we are at around $47,000 per day for Q2, Q3, and Q4 on average for a non-scrubber ship, which is still a pretty attractive level compared to our cash break even, which Randy will present later, of around $22,500 per day. Prior to the market slumping, we kind of focused on fixing long voyages at the end of the year. With the congestion in Panama, which has been an issue last year and not so much these days, we have been able to book very long voyages. So if you go in China via Cape, Suez is not really an alternative these days, which I will explain later. you're basically booking a quarter, 90 days. So we had good bookings coming into Q1 and we have booked 70% of the quarter already at an average rate of $70,000 per day. Of course, we have 30% of days still remaining to be booked. These will naturally be at lower levels given where the freight market is today. But, you know, if you apply the current rate, we should be once fully booked in line with... Then Q1 last year, where we delivered a TCE of $58,000 per day. And as you all know, last year ended up quite well for us. So just let us review the bookings in more detail. Q4, as I mentioned, very strong numbers, slightly above $100,000 on average on the spot chips. We had about 70% exposure to the spot market during the quarter. As I mentioned, we focused mostly on long voyages, Asia, Cape, US, back Cape, where you are locking in very good rates for longer duration. And that is also reflected in the bookings we have for Q1. Our TC ship ended up at around 49,000. As we have explained in the past, and as you will also see from the appendix slide, we have had home coverage, where we have utilized freight derivatives, or FFAs, to cover part of our fleet. In Q3 and Q4 last year, we had two ships covered on FFAs. In Q4, it was one scrubber ship at 47,500, and one ship on VLSFO. at, I believe, $63,000 per day. So, of course, when spot rates are much higher, that is dragging down our net results. So, after taking the FFA losses or the losses in relation to the hedges, we ended up at $76,200. For Q1, when the market slumped, we actually will generate slight profit on the freight hedges. We have covered one half ship. for Q1 at an average rate of 63,300. So that is contributing when spot rates are down. As mentioned, 80,000 on the 50% of spot days covered, 47,000 on the TC rates, and then we have 30% still to be booked. And I just want to highlight one thing. These numbers are on discharge-to-discharge, which is a round-trip economics, and which is the preferred way of calculating economics for voyages. In our accounts, the auditors, for some reason, have decided that you would have to book your earnings on a load-to-discharge, and these are creating some timing effects in our numbers. This was more of an issue in our Q3. So when the market took off in Q3, we delivered, I would say, just average numbers because of this time lag. So during Q3 and Q4, when the market was firing up, we had this IFRS or accounting effects negative by 16.3 million. And once the market now is normalizing and coming down, We expect to reverse most of these effects, so that will add further kind of earnings to the Q1 numbers on top of the bookings we have done. Let's look at the fleet. It's been an evolving story the last two years or so. We have been active renewing our fleet. We sold off all the five older ships with Irish Glory delivered to new owners in January. Venus Glory set for delivery to new owners end of February. We are left with 2015 EcoClass ships. These are more efficient in terms of fuel consumption. And six of them have installed exhaust gas cleaning system or scrubber. Chinook is on a variable higher TC until the summer of this year. Pampero, as we announced last autumn, we fixed her on a 21-month time charter until Q3 2025, where earnings is about $45,000 per day. And she will be on that time charter until she will be doing her 10-year special survey Q3 2025. So the six scrubber ships are all in the spot market where we do get the benefit of having a scrubber on the ship. Dual fuel class ships, we have Polaris, which is on a variable time charter for the remainder of February. The other three dual fuel class ships are in the spot market, where we get the benefit of having ships that can take bigger parcel sizes. So rather than taking about 46,000 tons, these can lift 51,000 tons, so where we can get paid for our ability to transport more products. They are also more eco, consume less fuel than older type of ships. And then they can also burn LPG with a dual fuel engine, which can give considerable cost savings in terms of price arbitrage versus very low sulfur oil. And then, as mentioned, we have sold the two new buildings for delivery this year. It wasn't really the plan to sell these ships. However, we got a very good price. We contracted the chips at $78 million. We have done upgrades to ammonia spec on the chips for about $2 million, so around $80 million, and then we are selling them for $120 million. So it just became too tempting to take some money off the table, and then having the ability to return this capital to our shareholders. We also bought some new ships during the summer and autumn last year, the MGC, so the MAX, so medium-sized gas carriers or medium-sized ammonia carriers. So these ships have a very high filling ratio, 98% of ammonia, which means that they are very ideal for this trade, where we also do think that when this trade starts up on the ammonia side, we'll probably be... In the beginning, at least, we do think that there will be a lot of interest for our parcel size of around 40,000 cubic, rather than the big size. So these ships gives us a lot of optionality. They are dual fuel, very efficient ships, come for delivery end of 25 into 26. And we already see people contracting ships for delivery in 27 at significantly higher prices than the 61.5 million we paid for these ships. So that's a fleet renewal for Dummies. We are utilizing the net proceeds from the sale of Venus and Iris Glory to utilize as equity for the four new MGCs and the cash release from the sale of Iris and Venus Glory is about $65 million. And then we have been able to top that off with about $8 million in spot earnings prior to delivery of the chips to new owners. Let's look at the dividend. We have been ramping up the dividend the last two years or so. We were at $0.05, we increased it to $0.20, last four quarters in $0.50 and now we increased it to $0.65, reflecting our earnings. We paid out slightly more than earnings in Q3 2023, reflecting the fact that these timing effects in terms of load to discharge is impacting the IFRS numbers. So while basically the time charter equivalent earnings on these ships were quite similar in Q1, Q2, Q3, we had an accounting effect in Q3 when the market took off. So we are paying out slightly below earnings for Q4, but on average for the year, we are paying out 101% of the earnings. In terms of the dividend decision criteria, earnings are strong. And market outlook, of course, given the slump in the rates, it's been a poor sentiment, which I will cover later. But the future freight rates are at very conductive levels for Q2, Q3, and Q4. Backlog, we have taken more export exposure this year. We have sold off some of, as I mentioned, two ships which were on time charters. We have not replaced that time charter coverage. We are structurally bull on the market 24 and 25. This year we will have delivery of ships half the numbers of last year and even fewer in 25. So we have a constructive view on the market and want to capture that upside by having ships in the spot market. Liquidity, 132 million yen, but this cash position will increase by a lot, which Randy will cover. Covenants, we are meeting with flying callers, and as Randy will also inform, we have also done some refinancing and pushed out maturity, so no maturities prior to 2028. We have some capex liabilities in relation to the MGCs, but we do feel that the equity is covered now by the sale of Iris and Venus Glory, and we already have a lot of banks willing to finance these ships. But for now, we are waiting a bit because the ships are not due for delivery in 2025-2026, and we don't want to pay too much commitment fees in order to have that financing in place, given our strong financial position. So with that, I think I hand it over to you, Randi, for our financial review and I come back on the market section.

Thank you, Eysen. Let's go to slide seven and have a look at the key financial figures for 2023. So our reported failed in rate or TCE per day for the quarter was 71,900 compared to 46,700 a day from previous quarter. As Aysen already commented, note that the reported figures are low to discharge in accordance with IFRS 15 accounting standards, while our commercial performance based on a round-trip voyage discharge to discharge was higher, 76,200, and in line with our guidance between 70 to 75,000 dollars a day. For the full year, we reported a TCE of 57,200, up from 38,200 in 2022, equalling an increase of 50%. We continue to hold a relatively low operating expenditure, or OPEX, which came in at 8,100 for the quarter and 8,200 for the year. And we also have a very low administrative expense of 1,200 for the quarter and 1,400 per shift day for the year. And that's the increase in TT earnings during the year is maintained in our reported EBTA or earnings before interest tax and depreciation and amortization, which is up 91 million or 84% from 2022. Net profit came in at 61.5 million for the quarter, up from 30 million in previous quarter. For the full year, net profit was 164 million, or earnings per share of $2.14 basic, compared to 89 million, or ups of $1.16 in 2022. And this is actually the second highest result ever, which is explained by a solid spot freight market driven by continued strong exports from the U.S., supported by a very favorable price arbitrage between the US and Far East, combined with inefficiencies in the Panama Canal. I think we'll cover this more in detail later on. Moving to slide eight, you can see that we have a clean balance sheet. 80% of our balance sheet consists of, consisted of 40 villages on water at year end, which currently is 13 as we sold Iris Glory mid-January. And it's soon to be 12 following the upcoming sale of VLGC Iris Glory, the 2008 build, which will be handed over to the new owner in a few weeks' time. Additionally, we have a few new buildings under construction, the VLGC Avant Castor and Pollux, which will also be de-recognized from our balance sheets and out of our books within May this year, in connection with the sale. Also, we have the four MTCs where we have capitalized 15% of the shipbuilding contract amounting to 37 million at year end. Looking at the credit side, we have a book net leverage ratio of 39% and we have maintained our solid shareholder equity of 52%. Return on the average shareholder book equity of 604 million was 27% during the year 23. Moving to slide nine, we have a very solid cash position of 132 million as of 31st of December 23, which was down 14 million from previous quarter. And it's explained by capital expenditure of 27 million in relation to our new buildings. of which 18 million relates to the MGCs and approximately 8 million relates to advanced Pollux for delivery and following sale in May. We have also paid 11 million in scheduled repayment of debts and 38 million in dividends, which is offset by net 62 million in cash generated from operations in the fourth quarter. However, the cash balance will grow boosted by cash generated from the four vessel sales as illustrated on slide 10. 15 of January, we successfully completed the sale of Iris Glory, one of the two last vintage ship 2008 built the vessel completed her two-year time charter and november and after complete completion of the time charter iris glory also carried out a single spot voyage as a net charter equivalent result of 3.1 million prior to delivery of the vessel to the new owner the sale price was 60 million less broker commission and will record a book gain on sale of in approximately 1 million, and net cash proceeds following repayment of the lead financing of 25 million in cash release in total. And also in January, we announced the sale of Venus Glovi, the last vintage ship. The vessel is currently about to finalize her last spot voyage at the net CTE result of 5.4 million. Delivery of the ship to the new owner will take place in a few weeks time and the sale price was 66 million less broker commission and thereby we expect to record a book gain of 27 million and net cash proceeds of 40 million after repayment of debt. In December, the company announced the agreement to sell the two remaining new buildings scheduled for delivery in March and May this year. The buyer has agreed to pay 240 million en bloc for the two new buildings. And they were intended to be named Avanze Castor and Avanze Pollux, expected to be delivered, as I said, in March and May and sold X yards. The new buildings were contracted in April 2021 at the price of 78 million each. They have since been upgraded with a capex of about 3 million each for the ships to be able to load ammonia cargoes as well as being ready to run on ammonia fuel. So we expect to book a profit of approximately 72 million from the sales of which 36 will be booked in the first quarter and 36 in the second quarter. The cash release from the sale is expected to be in total 120 million, 60 million per vessel, as we've already paid 24 or 48 in total in milestone payments to the yard. So to summarize, we will record approximately 120 million Gain on sale from the four vessel sales, of which 84 million will be recorded in the first quarter and the remaining 36 million in the second quarter. Total cash release from the sales is 185, of which 25 million has been released already and additionally 100 million to be released within March. The remaining 60 million will be released in May. In addition to the vessel sales, we will also increase the cash balance in connection with the refinancing that we've done, shown on slide 11. In January, we signed the 43 million bank facility to refinance Pampero, as previously announced. The facility will improve the margin from 325 basis points in the current sale leaseback agreement, which was signed in December 2020. And the new 43 million facility will bear a margin of 190 bps, that's lower interest expense. The sale leaseback has been terminated and will be fully repaid early March, where we will simultaneously draw on the 43 million facility, resulting in a cash release of 5 million. In February, or actually just last week, the company signed and drew on the amended 135 million sale leaseback arrangement. And as previously announced, the company agreed with the leasing houses from the two VLGC new buildings for delivery in March and May 24 to the sister ships, Avanze Polaris and Avanze Capella, both 2022 builds. The refinancing will extend maturity from 2022 to 2034 and resulted in a net cash release of 40 million last week. All in all, we have a total cash release of 230 million, where 45 comes from refinancing and 185 million comes from sales, which brings us up to a pro forma cash balance of 362 million. And with the refinancing, we don't have any maturity before 2028, shown on slide 12. Post refinancing and sale of vessels we will have an interest bearing debt of 511 million which will amortize down to the payments of 220 million in 28 and balloon payments of 73 million in 2034. A clean and easy financing portfolio consisting of 75% bank financing and 25% lease giving an industry-low cash breakeven of 22,500. And as we've hedged all our interest-bearing debt at about 3% in 2024 for the floating leg, we expect the cash breakeven to be maintained throughout the year. And that was it for me, and I hand the word over to you, Einstein, to cover the market section.

Thank you, Anneli. I guess you're going on vacation now until 28. Before you have to work a year on vacation until 2034. So we are well covered on the financing. We don't have any upcoming maturities. And Randy mentioned also, even if Ted now is postponing this pivot and cutting rates from May to June or whatever, it doesn't really matter to us. We already fixed 100% of our floating exposure at very nice levels of 3% compared to the, yeah, so far today of 5%. Let's review the spot market, how it performed in 2023. These are the three main routes. On the VLGC side, the US cargoes are close to 60% of the market to Asia, Middle East, around 30%, and then slightly below 10% for this Atlantic voyage going to the US. And you know, as you can see, rates have been fantastic. So if you knew this a year ago, of course you should be 100% spot covered. But as I will explain a bit later in the presentation, sentiment around the VGC market for 2023 at the start of last year was not very bullish. So we took some coverage in order to protect ourselves. On the US side, of course, that's the longest voyage. So the Baltic tree is a bit peculiar now with all the Panama congestion, because this round trip is about 60 days, where you assume one day of waiting on each way in Panama, both southbound and northbound. That has not really been the reality last year. So most of the players have been ballasting via Cape or Suez until that closed down. And then doing Leiden, Ida, Panama, Cape, Suez without the distance, dragging out the duration of the voyage, but then also reducing your achieved TC because of longer sailing distances. But regardless of that, rates have been fantastic levels. Average spread, you know, the spread between LPG prices in the U.S. as measured by Montpelier prices compared to the Far East import prices has been $257 per metric ton. So even when deducting an average rate of $172 per metric ton, it's not only been a good year for ship owners, it's been also a great year for terminal owners and traders, which have been netting them $85 per metric ton in trading or terminal fee profits. And the main drivers of growth are US and China, so despite all the disagreements and And conflicts surrounding this bilateral relationship, it's certainly chimerica when it comes to the LPG market in terms of flows. So let's have a more look into the U.S. fundamentals. As we have said also in the past, very strong fundamentals. The fields in the U.S. are getting more gaseous, which we covered in more detail in our Q3 presentation, and that is driving up LPG production, even a lot faster growth than oil production, which is a bit more stagnant. And then it helps that the US consumption is flat, which means a lot of these volumes are being exported. Inventories in the US were record high last year. As I mentioned, the cold snap at the beginning of the year have driven up demand, driven and then also reduce the inventories. But still after this huge drawdown on inventories, we are still at average inventory levels in the US. And given where the production is going, this inventory situation in the US is quite comfortable. And if we look at the natural gas side, we are at four-year lows on natural gas prices in the US. So certainly the US is flowing over with NGL, LPG, and natural gas. So let's look at the seaborne volumes. US being the main driver as they are producing more, consuming flat. A lot of the volumes are being exported and exported by ship. So 17% growth in US LPG export from 23 to 21. Middle East, despite the OPEC cuts, production are good. Iran, they are not cutting back. It's mostly Saudi where export growth has been below par recently. So let's see what the summer will bring. If there is a reversal in the OPEC policy in terms of barrels being produced, we will also probably have an effect on the LPG side from Saudi Arabia. On the import side, as I mentioned, China is growing very rapidly. China is ramping up a lot of PDH plants. And this rapid growth in capacity, these are basically refineries. So for oil, you have a refinery cracking the oil hydrocarbons. On the LPG, you have a refinery cracking the LPG. So you can utilize it for other products like plastics. and the big ramp up in capacity in China resulted in lower utilization, lower margins. So that has also reduced the prices in China. So that has kind of, on one side you have this in US, which have driven up domestic prices, and then you have had over capacity on the BDA plants in China, which has kind of eaten on the arbitrage from both sides recently. But where we are now seeing normalization given where gas prices in EU is heading. India, and not surprisingly also, our growth market and Europe have also taken benefit of cheap LPG prices compared to, let's say, substitutes like LNG. Arbitrage is a super important driver for the theoretical price you can pay for freight. And we had a very conductive market last year, as mentioned, our average at healthy levels, and we saw the arbitrage going all the way up to close to $400 per metric ton. When you had the cold snap, prices in the US came up. The overcapacity in China on the PDA plans resulted in lower prices there, so the up really fell down very quickly from end of the year into the new year, and that drove down the freight rate. The market is now kind of rebalanced, driven by lower domestic prices in the US. And if we look at the right-hand side here, which the dotted line represents the future curve for freight, it's in contango, meaning it's trending upwards as the market is absorbing the available shipping capacity that came open when a lot of these cargoes were lost. So if we look at the current status of the VLDC fleet, so I took this out from my Kepler platform yesterday, so this shows all the VLDC ships in the world with the AIS transponder. So what's interesting to see is, of course, the flow now has halted via Red Sea and Suez. There are still a couple of ships there because Saudi, they do have export plans in the Red Sea, the Yanbu, so somebody has to pick up these cargoes, even though export volumes from Yanbu have also suffered recently. In January. But there are still some ships picking up these cargoes, and it's feasible to use the route from the Mediterranean via Suez to Saudi, pick up those cargoes and go back via Suez to the Mediterranean without taking a lot of risk in terms of the hooties. Then we do see for the other ships, mostly routing via Cape of Good Hope, is adding seven, eight days on a ballast voyage from Asia to US on a round trip basis. But the most important driver lately has been less congestion issues in Panama, where we do see more ships now ballasting from Asia to Panama in order to shorten the route from Asia to US. On a round trip basis, you can shorten down your voyage by around 30 days. So people are taking the chances again that they get a slot in Panama, and this has resulted in shorter sailing distances and more vessel availability. Kepler Air has open ships in yellow. Some of these ships are probably on subs and not open, but at least it gives a good picture of the current flows. More routing via Cape of Good Hope, more routing via Panama, very few ships in Red Sea. And just for the new people to the VLGC space, Russia is a minor player in LPG exports. They don't export any cargoes on VLGC, so there are no VLGCs in the Black Sea. Just to dig a bit more into the Suez and Panama situation, as you can see here, it's a round trip on the three different route alternatives, Suez, Cape of Good Hope, and Panama. So 60 days, Panama, China, via US, if you add one day of waiting on each passing through the Panama Canal. So it really means you can save time. About 30 days taking this route rather than via Cape of Good Hope, which is the alternative today. As U.S. cargo is being exported from U.S., none are going via Suez today, as you can see on the graph on the right. But Panama routing has bounced back. Even though water levels in Panama are still very low, it's a long time before we get into the rainy season. Rainy season typically starts end of May, June. So the water levels in Panama will continue to be reduced. There will be curtailments on traffic, and we could have situations where, in terms of higher traffic through the Panama Canal, we could suddenly see congestion issues popping up, similar to what we saw last year, when actually water levels were very high in Panama prior to El Nino situation. So this is something we monitor closely, but lately, the kind of less congestion in Panama has opened up more ships in the market than was the case prior to New Year. In terms of the fleet, we have been through a situation with very high fleet growth. For this year, when we talked about a year ago or so, it was scheduled around 45 ships for delivery in 2023. In our webcast, we said we expected the number, the real number, to be between 35 and 40. We also did on our basis that actually two out of our four ships were delayed. So we had four ships for delivery last year. We ended up with two. And the two ships not being delivered are now being delivered in March and May this year. So all the people have faced the same problem. However, given the very strong market at the end, of the year of course it made a lot of sense for owners to take delivery as quickly as they could so we ended up with 40 ships for delivery in 2023 and as you can see here now fleet growth will taper off so for this year we expect around 20 ships going down all the way to 13 ships in 25 before bouncing back to 20 something low 20s in 26 and of course if you are contracting a vlgc today You are quite lucky if you get the 27 slots. We are already starting to book ships for delivery in 28, given the scarce yard capacity. So we will have a period here with muted fleet growth. And also the fact that we have had extremely low levels of scrapping in this industry. A lot of ships being more than 20 years old, actually 15% of the fleet. So we do expect some further scrapping in this period as well. So we've been lucky in the sense that the year we had very high fleet growth last year. We also had very high export growth from US, strong demand from China, congestion issues in Panama, which kind of made the market very tight despite the high fleet growth. Structurally, the balance of the market looks better for this year, and certainly even more so for next year. Something maybe also to consider here, most people now contracting ships are contracting what they call the VLAT, very large amount. These ships are quite similar to the new buildings we have. VLAC have a filling ratio on ammonia of 98%. The two ones we have sold for delivery this year had a filling ratio of 86%. The MDCs or MAX we have invested in have a filling ratio of 98%. So it's meaning you can basically load a full ammonia cargo and we are a bit more bullish on the smaller size ships for ammonia trade than the big size of ships. We do expect most of the VLACs coming here for delivery. will trade LPG. But if the ammonia trade takes off, especially Japan and Germany are very keen on utilizing ammonia as blending in the coal plants in order to reduce emissions. So if that takes off, you could see some of these ammonia-enabled chips leaving the LPG space and rather trading as ammonia. But it's a bit too early to say how this will develop. And it will also really depend on the price of carbons. So, as I mentioned or alluded to in the beginning of the presentation, one year ago, we had a lot of worried people about supply-demand balance for the VLDC sector for 2023 with these 46 ships scheduled for delivery ended up at 40. And that people thought that the order book was too big, that the LPG market was mature with limited growth. the VGC rates were crazy volatile that in case LPG prices went too high you could use the substitute being NAFTA and that would kill the economics and then lastly our stock rallied a bit from January to February when we presented our Q4 last year and some people said okay we lost this window, it's too late to buy the stock now so let's see how those So number one, order book too big. Well, certainly not the case. We had slippage as expected, but as I mentioned, we did have more deliveries in Q4, given the very strong market. People had a big monetary incentive to take their ships on the water and start trading them. But the market was super tight. basically throughout the year with the best rates we've seen since 2015. So that's the worry didn't come to fruition for sure. That the market's mature, not really. We had very high growth from US as mentioned, supporting C bond LPG trade. Volatility for sure, it persisted and we do see it today with a market gone from basically close to all time high to very low levels. But we had a volatile freight market last year as well. But every month we were above cash break even level. So as we presented last year, you know, yes, there is volatility. But in relation to the tankers and the dry bulk space, there's a lot less months in the VLDC space where you are below cash break even levels. So while we have been in a situation here in middle of January until recently where we have been below cash break even level, Actually, if you look at the average for January, we are above cash break even. Let's see where it's going now. I'm not sure we're going to be very much below cash break even levels for February either. One thing is volatility. Volatility also gives you the opportunity to rake in very good rates. Volatility is not necessarily negative. It can be very positive because you can make some very good rates. You should more focus on How volatile is it, and how often do you go below cash break even levels, which has, if you look back 10 years, it's been very rare. Then the last two months, NAFTA didn't kill the economics. When LPG prices really piled up at the end of the year last year, we did have two months where NAFTA was cheaper, but that's not the case any longer. Last one, no, it wasn't too late to buy the stock. We started the stock at 55 kroner beginning of the year. When we did this Midwest special edition in February, stock was around 80. We closed the year at 170. We are close to 137 kroners today. And then on top of that, you have had a lot of dividends. And actually, if you held the stock, Last year, from beginning of the year to end of the year, reinvested your dividends, you would generate a 208% return, which made it the best stock in the Oslo Stock Exchange All Share Index. So, I managed to squeeze in a Warren Buffett quote in our Flex LNG presentation last week, and I saw the opportunity to also add that to the advanced presentation. So from the documentary of Warren Buffett on HBO, he tells you that maybe you shouldn't worry too much. So if you are a worry what, maybe reading the book from Dale Carnegie is a good option. So with that, I think we conclude. I'm not going to spend too much time running through the highlights. Numbers slightly ahead of guidance, strong numbers, second best quarterly results ever with 61.5 million, 80 cents of earnings per share. Second best year, 164 million of profits, $2.14 of earnings. We are paying out the dividends of $2.15. We have been selling off ships at a very good timing. Two older ships and two new buildings where we'll generate substantial profits, substantial cash release, especially when you combine it with the refinancing we carried out. We hiked the dividends 65 cents. We will propose on the AGM that we can return some capital to shareholders, which we will come back to when we have the AGM and the Q1 report in May. Rates have fallen off from the peaks before New Year's, but they are now rebounding and the market looks conductive for the rest of the year. And fleet growth will be muted this year and even more so next year. And we are good booked for Q1. So regardless... of the market Q1 will be a very good quarter for us and on top of that we will have a reversal of this accounting effect also in Q1 which will boost our numbers on top of the bookings. So with that I think we conclude and we open up for some questions.

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OK, I can take a question from the chat maybe before while you're doing the telephone conference. So we have a question about the E10. We have a remark here about E10 carriers. E10 carriers can, in theory, carry LPG. However, E10 carriers are more like LNG chips, and they are a lot more costly than VLGC. The price of a VLEC is around 170, 180 million dollars, so it doesn't really make sense to trade it as a LPG chip. And also, all the chips that have been contracted are on long-term contracts. Most of these ships are taking ethane out of U.S. to China or India, where, yes, they can be a substitute for propane. Ethane, if you review our Q3 presentation, we had some more details on the NGL space, or natural gas liquids, which compose of not only LPG, but also ethane. This is also a very fast-growing market in the US. If you have ethane, you can either consume it in the US, you can do what we call ethane rejection, where you are flowing the ethane into natural gas and spiking that, or you can export it. And if you export it, you could have crackers, cracking ethane for ethylene. which, yes, could be a substitute for LPG, depending a bit on prices and depending a bit on whether that plant is a flexi-cracker, which can crack not only LPG or propane, but also ethane. But we don't see it as a big threat. We do see that it's marketable for both hydrocarbons. So that was the question from Jon Nicolai Skåland, and then we have a new question here from Kevin Whelan, whether the US decision on moratorium on LNG export will have big effects for propane? Yeah, it's actually a good question. It could have some indirect effect, because if you're building a lot of LNG export plants, you need to have access to feedstock and the feedstock being natural gas. So when you are drilling in shale basins, some basins are drilling for dry gas. And actually it's very nice to have dry gas because then the treatment of that gas on the LNG export plant is minimal. However, most people when drilling are drilling for oil where they do get associated gas. consisting of maybe methane or NGL. So you could have an indirect effect that if the US is not exporting more LNG, that could result in lower domestic prices. Lower domestic prices will result in less drilling activity, less drilling activity will result in less associated gas production, and less associated gas production could result in less propane exports. So yeah, could have an effect. I do think a lot of the drilling players will kind of target those basins where they can recover resources, which could be exported. So if you are done, then I do think a lot of the shale players will rather target oil wells. where you can export that oil, and then the associated gas will consist of NGLs where LPG will be part of it, and that can be exported. So it will probably mean less drilling of dry gas. So to summarize, it can have an indirect negative effect, but it could be mitigated by people rather electing to drill more oil-rich wells. Yeah, I think that's it. So let's just before we say goodbye, maybe we can check if we have somebody on the telephone conference.

We have. Yes, we have one question on the phone lines. Please stay with us. This is from the line of Plymouth Mullins from Value Investors Edge. Please go ahead.

Good morning, Royston and Randy. Thank you for taking my questions.

I want to hear from you again.

Yeah. I wanted to start by asking about your market outlook. You've been clear on your structural bullishness on the overall market, and I was wondering, would you provide some further commentary on your expectations for US exports throughout 2024?

Sorry, we have some technical issues. Could you maybe repeat the question?

Oh, yeah. Sorry. I wanted to start by asking about your market outlook. I mean, you've been really clear on your structural bullishness on the overall market, and I was wondering, Could you expand a bit on your expectations for U.S. exports throughout 2024? And secondly, the question is more about the capacity for the U.S. to continue increasing exports if production continues to increase and consumption remains steady.

Yeah, it's a lot of questions there. Let's start with one I think is the most interesting, and that's U.S. export capacity. And you are right. U.S. exports have been ramping up quickly. We are getting kind of close to nameplate capacity. There's not any near-term big expansion in the U.S., so from the graph we have shown as well and from the graph we've shown in Q3, we don't expect similar growth factor for U.S. in 2024. We do see more export capacity being brought online from 25, but on export side it will be probably a bit more muted on the US side. So we are a bit also dependent on sailing distances. In terms of the freight market, it's been more a bit of a shakeout. When we had this cold snap, people have been losing cargoes. Less cargoes from Janbu as well. Suddenly you have more ships open and then you typically get these kind of shakeouts in the market and people just have to fix the ship because they are already way on their ballast leg and need to secure it. So we're walking through the book of unfixed ships. And we have cleared out a lot of chips, and that's why also rates rebounded from, let's say, around $10,000 maybe at the bottom to now somewhere around $25,000 to $30,000. And as mentioned, cashback even is around $22,000 for us. So it's weaker. However, the ARP is holding up fairly well. And sometimes I disagree with the SFA curve. But I think the FFA curve looks fairly reasonable. It's reasonable to think that the market will continue to tighten a bit and that we will get gradually better rates. And it will depend a bit on how the situation in Panama progresses. Are the water levels running down? How will the rainy season be once we're getting into the summer? I think those will be important factors for how the market will behave in the second half of the year running into the winter season.

Makes sense. Thanks for the call. I actually wanted to follow up on the FFAs. You mentioned they are quoted at about 47k for the remainder of the year. How are they looking in 2025? And secondly, in the physical market, could you give us an indication of what is available for a medium term charter, say like two to three years?

Yeah. To be honest, I think, you know, the FFA curves are pretty good at predicting the market near term. Once you're getting out on the curve, they have fairly limited predictable I would say. And also, of course, these are not super liquid. So if you want to start trading FFAs for 25, you would have a hard time kind of filling up your position. But, you know, in general, they are kind of trending upwards and then plateauing. With the calendar, 25 is around 50,000. So you have a curve here trending up and then plateauing at around $50,000 per day. So that's where the market is today. Q4 is at $48,000 and then $50,000 for the full year 2025. But we don't plan to hedge on FFA on these rates. We are probably a bit more bullish on the market than FFA curves for 2025. know given you know how few ships there are for delivery in 25. in terms of the terminal deals there's not really been a lot of terms deals lately so i don't really have very good data points on it make sense that's all for me thank you for taking my questions and congratulations for the quarter okay thank you i think we take one more question before we conclude and it's from last year plot What are our expectations about the Middle East volumes in 2024? Well, it really depends on MBS and his friends in OPEC. Will they start pulling more cargoes into the market? How will Russian oil production develop and will that leave more room for OPEC? I think most people at one time think that OPEC will provide more barrels to the market. So we could see some upside, especially on Saudi. But it's entirely up to politics. I'm not sure if MBS really wants to add a lot of barrels to the market prior to the election in US. He's not very friendly of Biden. He probably rather prefer Trump winning that election. adding barrels to the market with everything equal reduce the price the pump price in us can be a swing factor in the election so i think you know mbs will look at this and and and make a decision i don't think they will let flow the market with oil unless there are supply disruptions all the place in the world okay thank you everybody and thank you for listening in i hope you had a great uh valentine's day and we will be back as mentioned in may with our q1 report and i hope to see you then thank you thank you