NYSE:ASC Ardmore Shipping Q1 2024 Earnings Report $9.66 -0.24 (-2.37%) As of 11:23 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Ardmore Shipping EPS ResultsActual EPS$0.92Consensus EPS $0.87Beat/MissBeat by +$0.05One Year Ago EPS$1.04Ardmore Shipping Revenue ResultsActual Revenue$106.30 millionExpected Revenue$72.46 millionBeat/MissBeat by +$33.84 millionYoY Revenue Growth-10.10%Ardmore Shipping Announcement DetailsQuarterQ1 2024Date5/8/2024TimeBefore Market OpensConference Call DateWednesday, May 8, 2024Conference Call Time10:00AM ETUpcoming EarningsArdmore Shipping's Q2 2025 earnings is scheduled for Wednesday, May 7, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Ardmore Shipping Q1 2024 Earnings Call TranscriptProvided by QuartrMay 8, 2024 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to Ardmore Shipping's First Quarter 2024 Earnings Conference Call. Today's call is being recorded and an audio webcast and presentation are available in the Investor Relations section of the company's website, ardmoreshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A replay of the conference will be available anytime during the next 2 weeks by dialing 1-eight eighty eight-six sixty-six Speaker 100:00:31thousand three Operator00:00:31hundred and forty five or 1646-517-4150 and entering the passcode 95017. At this time, I will turn the call over to Anthony Gurney, Chief Executive Officer of Ardmore Shipping. Speaker 200:00:55Good morning, and welcome to Ardmore Shipping's Q1 2024 Earnings Call. First, let me ask our CFO, Bart Kelleher to discuss forward looking statements. Thanks, Tony. Speaker 300:01:06Turning to Slide 2. 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 Q1 2024 earnings release, which is available on our website. And now, I will turn the call back over to Tony. Speaker 200:01:34Thanks Bart. So first, let me outline the format for today's call. To begin with, I'll discuss highlights, the near term market outlook and our capital allocation policy, after which Bart will provide an update on product and chemical tanker fundamentals and our financial performance, and then I'll conclude the presentation and open up the call for questions. So turning first to slide 4 for highlights. We're seeing strong momentum continuing well into 2024, reflecting positive fundamentals along with ongoing geopolitical impacts. Speaker 200:02:07Our first quarter performance reflects robust market conditions with adjusted earnings of $38,000,000 or $0.92 per share and with further strength building into the 2nd quarter. Our MRs earned $38,400 per day for the Q1 and $40,500 per day so far in the 2nd quarter with 60% booked. And our chemical tankers on a capital adjusted basis earned $29,100 per day for the 1st quarter and are now up to 39,000 per day for the 2nd quarter with 60% booked so far. As you can see from the chart on the upper right, the strength of the market is evident. TCE rates are showing a sequential increase, which is notable given that we're coming out of the stronger winter period. Speaker 200:02:51Meanwhile, we continue to execute on our long standing capital allocation policy. Today, we're declaring another quarterly cash dividend of $0.31 per share, consistent with our policy of paying out 1 third of adjusted earnings. And we also continue to invest in the fleet to improve performance and reduce carbon emissions, while also taking a gradual and opportunistic approach to fleet modernization. And as a final point on this slide, it's important to note that our scheduled dry dockings and upgrades are already largely complete for this year. This means it will have increased revenue days and a more productive fleet, which will boost earnings and allow us to fully capture these strong market conditions. Speaker 200:03:29Moving to Slide 5. The near term outlook continues to be very positive as a result of geopolitical events and other disruptions, but of course it's underpinned by very strong supply demand fundamentals. The eRefined Products embargo responsible for splitting the global tanker fleet continues to drive higher ton mile demand. In addition, the routing of vessels away from the Red Sea and around the Cape of Good Hope is significantly extending those voyage lengths. But it's worth noting that for product tankers, the Red Sea is largely an LR story. Speaker 200:04:02Prior to the Red Sea disruption, 20% of the LR fleet transited the Suez Canal in contrast to just 5% of the MR fleet. So while this is positive from a demand standpoint overall, it's not nearly significant a factor for MRs as it is for LRs. Furthermore, while Panama Canal congestion shows some signs of easing, daily product tanker transits remained 20% below the prior year, further contributing to ton mile demand. But similar to the Red Sea impact, this is not the major driver for MRs, Russia, Ukraine is. Meanwhile, underlying oil consumption continues to grow. Speaker 200:04:37The global economy remains resilient and with potential for further upside in the second half. As you can see from the chart on the lower right, global refinery runs are projected to increase by 5% in 2024 to an all time high of 85,000,000 barrels a day, driven by activity in Asia and the Middle East. And increases in Chinese refined product export quotas as compared to the prior year adds to this constructive outlook. Moving now to Slide 6, where we highlight our longstanding capital allocation policy. Given our strong financial position, we're now able to pursue all of our priorities simultaneously as shown on this slide. Speaker 200:05:16To this end, we're pleased to declare another dividend of $0.31 per share. And it's also worth noting that since the resumption of our quarterly dividend in the Q4 of 2022, we've now paid $70,000,000 in total dividends, representing about 10% of our market cap, a substantial return of capital in just over 1 year. At the same time, we continue to invest in our fleet to improve performance and reduce emissions, while also gradually modernizing over time. As already reported, but now executed, in April, we completed the sale of our 2010 built Ardmore Seafarer and the acquisition of the Ardmore Gibraltar, a 2017 Korean built Eco Design MR, which has much better fuel efficiency and also greater cargo flexibility than the outgoing Seafarer. I'm also pleased to say that we more than doubled our money on the Seafarer, which we had purchased at a low point in the market in September 2020. Speaker 200:06:09And with that, I'm happy to hand the call back over to Bart. Speaker 300:06:13Thanks, Tony. Building upon Tony's comments on the market outlook, we'll further examine the industry fundamentals. As we've been discussing, the supply demand dynamics remain highly favorable. On slide 8, we highlight the significant supply demand gap and I'll address each component in more detail in subsequent slides. We can see from the green bars in this chart the strong forecasted ton mile growth, which is a result of the positive underlying demand fundamentals and ongoing market dislocation. Speaker 300:06:46In contrast, we can see the limited net fleet growth across both product and chemical tankers and in particular MRs as indicated in the gray and blue bars. So overall, we believe the limited net fleet growth across these sectors combined with increasing ton miles supports ongoing market strength. Moving to Slide 9, where we highlight how the low MR Tanker order book contrasts sharply with a rapidly aging fleet. The chart on the left provides a visual representation of the changes in the MR fleet. 15 years ago, as highlighted in the red quadrant, we observed a modern fleet with a large order book. Speaker 300:07:31However, over time, the order book has declined while the fleet has aged. Currently, as highlighted in the green quadrant, we have a low order book in the oldest fleet in 2 decades with an average age of greater than 13 years. Looking at the graph on the right side, the current MR order book is at 9% of the existing fleet. And as we have previously mentioned, it is important to point out the impact that Aframax crude tankers have on the overall product tanker order book, which stands at 14%. Currently, the Aframax crude tanker fleet is shrinking, while still experiencing demand growth. Speaker 300:08:12This implies that an increasing proportion of LR2s most likely older vessels will naturally transition to the crude trades to cover the shortfall in the Aframax fleet. In addition, as vessels reach 15 to 18 years of age, their trading capabilities typically become restricted further contributing to the supply tightness in the younger modern global fleet where Ardmore's vessels operate. In fact, within the next 5 years, close to half of the MR fleet will surpass the 20 year age mark and enter the scrapping zone. The current order book at 9,000,000 deadweight tons is just a fraction of the 50,000,000 deadweight tons that will fall within the scrapping age profile in the next 5 years. Slide 22 in the appendix highlights this phenomenon. Speaker 300:09:05Turning to Slide 10, where we address demand drivers in greater detail. As we have discussed earlier, the Russia Ukraine conflict and the EU refined products embargo has led to a persistent reordering of global product trades, boosting overall ton miles. Concurrently, the energy transition is being tempered by energy reality and market projections continue to show year on year growth in oil demand. Meanwhile, the long term trend of refinery dislocation between East and West supported by forecasts for increasing consumption will continue to drive incremental ton miles. Please reference Slide 21 in the appendix for additional details. Speaker 300:09:51In summary, these robust long term demand drivers point to continued strength in the product and chemical tankers markets. Moving to Slide 12. Ardmore continues to build upon its financial strength. As a reminder, the chart on the bottom left highlights our achievement of reducing our cash breakeven levels by over $3,000 per day in an elevated interest rate environment. This accomplishment is a result of our effective cost control, lower debt levels and access to revolving credit facilities. Speaker 300:10:26Looking ahead, we see a potential pathway to further reduce our breakeven to a level below $11,500 per day. With this aim, we provided notice to execute purchase options on 2 leased vessels for a total of $41,000,000 and expect to close this transaction in June and further reduce our debt cost. And as always, Ardmore is focused on optimizing performance, closely managing cost and preserving a strong balance sheet. Turning to slide 13 for financial highlights. As noted, we are very pleased with our performance as we report results of $0.92 per share for the Q1. Speaker 300:11:11We are correspondingly reporting strong EBITDAR for the quarter and continue to frame EBITDAR as an important comparable valuation metric against our IFRS reporting peers. While I won't go into the detail here, there is a full reconciliation of this presented in the appendix on slide 25. Also please refer to Slide 26 in the appendix for our Q2 guidance numbers. Moving to slide 14. As Tony mentioned earlier, our drydocking schedule for this year is largely complete. Speaker 300:11:47And as highlighted by the chart in the upper right, this will lead to increased revenue days and enhanced earnings power for the rest of the year. In accordance with our energy transition plan, we have made some significant investments in our fleet during the recent dry dockings to further improve operating performance, reduce emissions and enhance earnings. Total CapEx for 2024 is anticipated to be $17,000,000 including $11,000,000 related to scrubber installations and other efficiency upgrades as well as ballast water treatment systems. It's worth noting that we now have more than half of our MR fleet outfitted with 2nd generation carbon capture ready scrubbers, which are set to further enhance our earnings power. Moving to slide 15. Speaker 300:12:37Here 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 would increase by approximately $2.30 annually with free cash flow generation increasing by nearly $100,000,000 over the same time period. This is why the current market outlook is so exciting and Ardmore's position is very compelling. With that, I'm happy to hand the call back to Tony and look forward to answering questions at the end. Speaker 200:13:12Thank you, Bart. So to summarize, first regarding the market. TCE rates remain elevated through the Q1 and have strengthened further into the Q2 boding well for the full year. These rates are being supported by the geopolitical events we've discussed, most notably for MRs being the persistent reordering of the product tanker trade as a result of the EU refined products embargo. And of course, underlying supply demand fundamentals remain highly supportive. Speaker 200:13:40And regarding the company, we're continuing to achieve strong TCE performance and effective cost control, generating excellent returns and continuing to bolster our financial position. This enables us to pursue all of our capital allocation priorities simultaneously, In particular, returning capital to shareholders in the form of our quarterly dividend, now accumulated to 10% of market cap in just over 1 year, while also gradually and opportunistically investing in fleet modernization. And with that, we're pleased to open up the call for questions. Operator00:14:39Your first question comes from the line of Omar Nochta from Jefferies. Please go ahead. Speaker 100:14:46Thank you, operator. Hey, guys. Good afternoon, Bart, Tony. I mean, looks like a lot of good stuff happening here. Congrats on a really good quarter and kind of getting the company to where it's at today. Speaker 100:14:59I guess I had a couple of questions for you. Maybe just first on the Handys in particular. It looks like there's a pretty good step up here in your averages thus far into the Q2. You've got 60% book now at 32.5%. I believe that would be a record for you if it holds. Speaker 100:15:18What's sort of driving that, if you don't mind giving us some color on what's driving the chemical market there? And any color you can give on how that spot market is looking today? Speaker 200:15:28Yes. Hey Omar, thanks for that. The chemicals are doing well at the moment. It's not a big fleet. We do trade them in and out of products and into chemicals. Speaker 200:15:37I think it's just reflective of just good chartering practice and good market conditions and sometimes things go really well and it seems like we're hitting our stride now with those ships. Speaker 100:15:52Okay. Yes. All right. And then just maybe on Bart, you mentioned the leaseback financing, you're going to exercise or you're exercising the options on the 2, the Seahawk and Seawolf, dollars 41,000,000 outlay. Is it planned to use cash or you plan to draw bank debt against those? Speaker 300:16:13Thanks, Omar. Good question. So plan to draw on our revolvers for that. I mean, certainly incremental cash generation could be used, but kind of the default going in is that we draw down on the revolvers. And we've been able to actually expand the revolving capacity so that we have 100% capacity with all of our banks now. Speaker 300:16:38So we've got tremendous flexibility. Speaker 100:16:41Okay. Yes. And makes sense. And maybe just kind of on that and final question for me is, clearly you guys have had a balanced capital allocation policy for several years. You're now at this point where the balance sheet is evolving into potentially a net cash position here in the next few months. Speaker 100:17:00Does that in any way change how you're viewing big picture capital allocation? Speaker 300:17:08Thanks, Omar. Again, I think the way we think about it is that it's situational. I mean, we know we're in a cyclical business. It is dynamic. Today, we still see that we have some additional runway on the debt reduction. Speaker 300:17:24We still have $100,000,000 of debt. And really chipping away at that breakeven has been the key thing in terms of our earnings quality and incremental cash flow and then incremental capacity for the dividend. So just to put it into perspective, at the $13,250 level today, if we hadn't delevered, we would be north of $17,000 per day cash breakeven. So that delta represents 35,000,000 dollars more in cash flow generation per year or approximately $0.83 And then we also see runway to continue investing in our fleet and the energy transition projects. And they're typically short payback periods, significant return levels. Speaker 300:18:14And we certainly don't have a problem returning additional capital to shareholders at the right time. I think we just see that like right now in the immediate future where we have opportunities to deploy the capital internally, that's what's in focus. Speaker 100:18:32Okay. Thanks, Bart. That's very helpful and good points and interesting. Here we are, you're obviously earning very strong rates, but yet you're keeping it very close focus on that breakeven and lowering it. So good to see that and well done again guys. Speaker 100:18:47Thank you. Speaker 200:18:49Thanks, Omar. Operator00:18:59Your next question comes from the line of Jon Chappell from Evercore. Please go ahead. Speaker 400:19:06Thank you. Good afternoon. Bart, I'm going to stick with you for a second. This path to $11,500,000 on the cash breakeven, is that strictly the sale and leasebacks on these two vessels and the $41,000,000 or are there other either sale and leasebacks or other cost initiatives that takes you from that just over $13,000,000 to sub $11,500,000 over time? Speaker 300:19:28Sure, John. No, thanks. No, the sale leasebacks is a component of it, but we're always actually looking at additional cost reductions and have achieved some through this year already on the expense side. And then also further reduction of debt, reducing the interest expense beyond the sale leaseback. So kind of multifaceted, but something that we just see is really boosting the quality of earnings and then really setting up Ardmore kind of for any market scenario well into the future. Speaker 400:20:10Okay. And then over 50% of the MRs with scrubbers now or planned for scrubbers, is the ultimate target to get the entire fleet there? Or are there a couple maybe older vessels that you'd be holding back and not want to put that capital into? Speaker 300:20:26Yes. Thanks, John. We're really happy with the scrubbers thus far and getting half of the fleet installed on the MR side has been great. We've done it during the regular dry docking period, so we don't incur an incremental cost to do so. So really looking ahead, it would be more our 2015 built vessels next year for dry docking, something that we likely continue to roll out. Speaker 300:20:55And they have good returns. We like the scrubber 2.0 technology and also the carbon capture readiness for potential future applications. Speaker 400:21:09Okay. Just finally, is there any way to quantify the either returns or the rate differential of the ships that have already had the scrubbers put in. I'm not sure if this is coincidental or it's something to read into, but the eco design versus the eco mod, there was a $6,500 spread in the Q1 of 'twenty three and they're basically right on top of each other in the Q1 of 'twenty four. Was that more just kind of the market strength or some of the eco mods getting the scrubbers and that's really narrowed the gap? Speaker 200:21:41Well, the eco mods at this point would just be the charters in and the ones that we sold chartered back as well as another market charter in. So if you strip away everything, essentially these scrubbers will generate the same benefit as any other scrubber. Okay. On any other companies MRs. Speaker 300:22:04Yes. Speaker 400:22:05Yes. Got it. Speaker 100:22:05Thanks guys. Operator00:22:19Your next question comes from the line of Klinen Molins from Value Investors Edge. Please go ahead. Speaker 300:22:29Good morning. Thank you for taking my questions. Omer and John have already hammered some of the key points, but I was wondering, could you provide an update on your investment in E1 Marine? Sure. And as a reminder for the listeners, a few years ago in 2021, the company made an investment in Element 1, which has proprietary technology to take methanol and produce pure hydrogen and that can be used in a wide range of fuel cell applications. Speaker 300:23:04And I think also important to remind that it was a multifaceted deal. So that was also when we put $40,000,000 of preferred on our balance sheet at a time when the company really needed the capital. And so now today, Element 1, like other industrial companies, when you have this proprietary technology and you're looking to monetize it, they're expanding their global scale in terms of license agreements across geographies and across verticals. So marine included, but really other verticals off highway, on highway, charging stations, aerospace. So significant momentum with licensing revenue. Speaker 300:23:50And I think just also important to note though, like for us, that's a $10,000,000 investment. So a small portion of our overall asset base and the one that's outside of our own fleet of actual vessels, but certainly part of our energy transition plan and team today.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallArdmore Shipping Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Ardmore Shipping Earnings HeadlinesArdmore Shipping Reports Q1 2025 Financial Results and Leadership ChangesMay 7 at 8:42 AM | tipranks.comArdmore Shipping Releases Q1 2025 Financial ResultsMay 7 at 8:42 AM | tipranks.comSilicon Valley Gold RushA new technology has sparked a modern-day gold rush in Silicon Valley. OpenAI’s Sam Altman invested $375M. Bill Gates has backed four companies in this space. The World Economic Forum calls it “the most exciting human discovery since fire.” Whitney Tilson believes this trend could mint a new class of wealthy investors—and he’s sharing one stock to watch now, for free.May 7, 2025 | Stansberry Research (Ad)Ardmore Shipping Corporation Announces Financial Results For The Three Months Ended March 31, 2025May 7 at 8:00 AM | prnewswire.comArdmore Shipping Announces First Quarter 2025 Conference Call and WebcastApril 23, 2025 | prnewswire.comJim Cramer Dismisses Ardmore Shipping (ASC): “Don’t Get Caught in the Tariff Crossfire”April 18, 2025 | msn.comSee More Ardmore Shipping Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Ardmore Shipping? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Ardmore Shipping and other key companies, straight to your email. Email Address About Ardmore ShippingArdmore Shipping (NYSE:ASC) engages in the seaborne transportation of petroleum products and chemicals worldwide. The company's fleet consists of 22 owned vessels including 21 Eco-design and 1 Eco-mod vessel, and four chartered-in vessels. It serves oil majors, oil companies, oil and chemical traders, chemical companies, and pooling service providers. Ardmore Shipping Corporation was founded in 2010 and is headquartered in Pembroke, Bermuda.View Ardmore Shipping ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's Earnings Upcoming Earnings Monster Beverage (5/8/2025)Coinbase Global (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Shopify (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 5 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to Ardmore Shipping's First Quarter 2024 Earnings Conference Call. Today's call is being recorded and an audio webcast and presentation are available in the Investor Relations section of the company's website, ardmoreshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A replay of the conference will be available anytime during the next 2 weeks by dialing 1-eight eighty eight-six sixty-six Speaker 100:00:31thousand three Operator00:00:31hundred and forty five or 1646-517-4150 and entering the passcode 95017. At this time, I will turn the call over to Anthony Gurney, Chief Executive Officer of Ardmore Shipping. Speaker 200:00:55Good morning, and welcome to Ardmore Shipping's Q1 2024 Earnings Call. First, let me ask our CFO, Bart Kelleher to discuss forward looking statements. Thanks, Tony. Speaker 300:01:06Turning to Slide 2. 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 Q1 2024 earnings release, which is available on our website. And now, I will turn the call back over to Tony. Speaker 200:01:34Thanks Bart. So first, let me outline the format for today's call. To begin with, I'll discuss highlights, the near term market outlook and our capital allocation policy, after which Bart will provide an update on product and chemical tanker fundamentals and our financial performance, and then I'll conclude the presentation and open up the call for questions. So turning first to slide 4 for highlights. We're seeing strong momentum continuing well into 2024, reflecting positive fundamentals along with ongoing geopolitical impacts. Speaker 200:02:07Our first quarter performance reflects robust market conditions with adjusted earnings of $38,000,000 or $0.92 per share and with further strength building into the 2nd quarter. Our MRs earned $38,400 per day for the Q1 and $40,500 per day so far in the 2nd quarter with 60% booked. And our chemical tankers on a capital adjusted basis earned $29,100 per day for the 1st quarter and are now up to 39,000 per day for the 2nd quarter with 60% booked so far. As you can see from the chart on the upper right, the strength of the market is evident. TCE rates are showing a sequential increase, which is notable given that we're coming out of the stronger winter period. Speaker 200:02:51Meanwhile, we continue to execute on our long standing capital allocation policy. Today, we're declaring another quarterly cash dividend of $0.31 per share, consistent with our policy of paying out 1 third of adjusted earnings. And we also continue to invest in the fleet to improve performance and reduce carbon emissions, while also taking a gradual and opportunistic approach to fleet modernization. And as a final point on this slide, it's important to note that our scheduled dry dockings and upgrades are already largely complete for this year. This means it will have increased revenue days and a more productive fleet, which will boost earnings and allow us to fully capture these strong market conditions. Speaker 200:03:29Moving to Slide 5. The near term outlook continues to be very positive as a result of geopolitical events and other disruptions, but of course it's underpinned by very strong supply demand fundamentals. The eRefined Products embargo responsible for splitting the global tanker fleet continues to drive higher ton mile demand. In addition, the routing of vessels away from the Red Sea and around the Cape of Good Hope is significantly extending those voyage lengths. But it's worth noting that for product tankers, the Red Sea is largely an LR story. Speaker 200:04:02Prior to the Red Sea disruption, 20% of the LR fleet transited the Suez Canal in contrast to just 5% of the MR fleet. So while this is positive from a demand standpoint overall, it's not nearly significant a factor for MRs as it is for LRs. Furthermore, while Panama Canal congestion shows some signs of easing, daily product tanker transits remained 20% below the prior year, further contributing to ton mile demand. But similar to the Red Sea impact, this is not the major driver for MRs, Russia, Ukraine is. Meanwhile, underlying oil consumption continues to grow. Speaker 200:04:37The global economy remains resilient and with potential for further upside in the second half. As you can see from the chart on the lower right, global refinery runs are projected to increase by 5% in 2024 to an all time high of 85,000,000 barrels a day, driven by activity in Asia and the Middle East. And increases in Chinese refined product export quotas as compared to the prior year adds to this constructive outlook. Moving now to Slide 6, where we highlight our longstanding capital allocation policy. Given our strong financial position, we're now able to pursue all of our priorities simultaneously as shown on this slide. Speaker 200:05:16To this end, we're pleased to declare another dividend of $0.31 per share. And it's also worth noting that since the resumption of our quarterly dividend in the Q4 of 2022, we've now paid $70,000,000 in total dividends, representing about 10% of our market cap, a substantial return of capital in just over 1 year. At the same time, we continue to invest in our fleet to improve performance and reduce emissions, while also gradually modernizing over time. As already reported, but now executed, in April, we completed the sale of our 2010 built Ardmore Seafarer and the acquisition of the Ardmore Gibraltar, a 2017 Korean built Eco Design MR, which has much better fuel efficiency and also greater cargo flexibility than the outgoing Seafarer. I'm also pleased to say that we more than doubled our money on the Seafarer, which we had purchased at a low point in the market in September 2020. Speaker 200:06:09And with that, I'm happy to hand the call back over to Bart. Speaker 300:06:13Thanks, Tony. Building upon Tony's comments on the market outlook, we'll further examine the industry fundamentals. As we've been discussing, the supply demand dynamics remain highly favorable. On slide 8, we highlight the significant supply demand gap and I'll address each component in more detail in subsequent slides. We can see from the green bars in this chart the strong forecasted ton mile growth, which is a result of the positive underlying demand fundamentals and ongoing market dislocation. Speaker 300:06:46In contrast, we can see the limited net fleet growth across both product and chemical tankers and in particular MRs as indicated in the gray and blue bars. So overall, we believe the limited net fleet growth across these sectors combined with increasing ton miles supports ongoing market strength. Moving to Slide 9, where we highlight how the low MR Tanker order book contrasts sharply with a rapidly aging fleet. The chart on the left provides a visual representation of the changes in the MR fleet. 15 years ago, as highlighted in the red quadrant, we observed a modern fleet with a large order book. Speaker 300:07:31However, over time, the order book has declined while the fleet has aged. Currently, as highlighted in the green quadrant, we have a low order book in the oldest fleet in 2 decades with an average age of greater than 13 years. Looking at the graph on the right side, the current MR order book is at 9% of the existing fleet. And as we have previously mentioned, it is important to point out the impact that Aframax crude tankers have on the overall product tanker order book, which stands at 14%. Currently, the Aframax crude tanker fleet is shrinking, while still experiencing demand growth. Speaker 300:08:12This implies that an increasing proportion of LR2s most likely older vessels will naturally transition to the crude trades to cover the shortfall in the Aframax fleet. In addition, as vessels reach 15 to 18 years of age, their trading capabilities typically become restricted further contributing to the supply tightness in the younger modern global fleet where Ardmore's vessels operate. In fact, within the next 5 years, close to half of the MR fleet will surpass the 20 year age mark and enter the scrapping zone. The current order book at 9,000,000 deadweight tons is just a fraction of the 50,000,000 deadweight tons that will fall within the scrapping age profile in the next 5 years. Slide 22 in the appendix highlights this phenomenon. Speaker 300:09:05Turning to Slide 10, where we address demand drivers in greater detail. As we have discussed earlier, the Russia Ukraine conflict and the EU refined products embargo has led to a persistent reordering of global product trades, boosting overall ton miles. Concurrently, the energy transition is being tempered by energy reality and market projections continue to show year on year growth in oil demand. Meanwhile, the long term trend of refinery dislocation between East and West supported by forecasts for increasing consumption will continue to drive incremental ton miles. Please reference Slide 21 in the appendix for additional details. Speaker 300:09:51In summary, these robust long term demand drivers point to continued strength in the product and chemical tankers markets. Moving to Slide 12. Ardmore continues to build upon its financial strength. As a reminder, the chart on the bottom left highlights our achievement of reducing our cash breakeven levels by over $3,000 per day in an elevated interest rate environment. This accomplishment is a result of our effective cost control, lower debt levels and access to revolving credit facilities. Speaker 300:10:26Looking ahead, we see a potential pathway to further reduce our breakeven to a level below $11,500 per day. With this aim, we provided notice to execute purchase options on 2 leased vessels for a total of $41,000,000 and expect to close this transaction in June and further reduce our debt cost. And as always, Ardmore is focused on optimizing performance, closely managing cost and preserving a strong balance sheet. Turning to slide 13 for financial highlights. As noted, we are very pleased with our performance as we report results of $0.92 per share for the Q1. Speaker 300:11:11We are correspondingly reporting strong EBITDAR for the quarter and continue to frame EBITDAR as an important comparable valuation metric against our IFRS reporting peers. While I won't go into the detail here, there is a full reconciliation of this presented in the appendix on slide 25. Also please refer to Slide 26 in the appendix for our Q2 guidance numbers. Moving to slide 14. As Tony mentioned earlier, our drydocking schedule for this year is largely complete. Speaker 300:11:47And as highlighted by the chart in the upper right, this will lead to increased revenue days and enhanced earnings power for the rest of the year. In accordance with our energy transition plan, we have made some significant investments in our fleet during the recent dry dockings to further improve operating performance, reduce emissions and enhance earnings. Total CapEx for 2024 is anticipated to be $17,000,000 including $11,000,000 related to scrubber installations and other efficiency upgrades as well as ballast water treatment systems. It's worth noting that we now have more than half of our MR fleet outfitted with 2nd generation carbon capture ready scrubbers, which are set to further enhance our earnings power. Moving to slide 15. Speaker 300:12:37Here 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 would increase by approximately $2.30 annually with free cash flow generation increasing by nearly $100,000,000 over the same time period. This is why the current market outlook is so exciting and Ardmore's position is very compelling. With that, I'm happy to hand the call back to Tony and look forward to answering questions at the end. Speaker 200:13:12Thank you, Bart. So to summarize, first regarding the market. TCE rates remain elevated through the Q1 and have strengthened further into the Q2 boding well for the full year. These rates are being supported by the geopolitical events we've discussed, most notably for MRs being the persistent reordering of the product tanker trade as a result of the EU refined products embargo. And of course, underlying supply demand fundamentals remain highly supportive. Speaker 200:13:40And regarding the company, we're continuing to achieve strong TCE performance and effective cost control, generating excellent returns and continuing to bolster our financial position. This enables us to pursue all of our capital allocation priorities simultaneously, In particular, returning capital to shareholders in the form of our quarterly dividend, now accumulated to 10% of market cap in just over 1 year, while also gradually and opportunistically investing in fleet modernization. And with that, we're pleased to open up the call for questions. Operator00:14:39Your first question comes from the line of Omar Nochta from Jefferies. Please go ahead. Speaker 100:14:46Thank you, operator. Hey, guys. Good afternoon, Bart, Tony. I mean, looks like a lot of good stuff happening here. Congrats on a really good quarter and kind of getting the company to where it's at today. Speaker 100:14:59I guess I had a couple of questions for you. Maybe just first on the Handys in particular. It looks like there's a pretty good step up here in your averages thus far into the Q2. You've got 60% book now at 32.5%. I believe that would be a record for you if it holds. Speaker 100:15:18What's sort of driving that, if you don't mind giving us some color on what's driving the chemical market there? And any color you can give on how that spot market is looking today? Speaker 200:15:28Yes. Hey Omar, thanks for that. The chemicals are doing well at the moment. It's not a big fleet. We do trade them in and out of products and into chemicals. Speaker 200:15:37I think it's just reflective of just good chartering practice and good market conditions and sometimes things go really well and it seems like we're hitting our stride now with those ships. Speaker 100:15:52Okay. Yes. All right. And then just maybe on Bart, you mentioned the leaseback financing, you're going to exercise or you're exercising the options on the 2, the Seahawk and Seawolf, dollars 41,000,000 outlay. Is it planned to use cash or you plan to draw bank debt against those? Speaker 300:16:13Thanks, Omar. Good question. So plan to draw on our revolvers for that. I mean, certainly incremental cash generation could be used, but kind of the default going in is that we draw down on the revolvers. And we've been able to actually expand the revolving capacity so that we have 100% capacity with all of our banks now. Speaker 300:16:38So we've got tremendous flexibility. Speaker 100:16:41Okay. Yes. And makes sense. And maybe just kind of on that and final question for me is, clearly you guys have had a balanced capital allocation policy for several years. You're now at this point where the balance sheet is evolving into potentially a net cash position here in the next few months. Speaker 100:17:00Does that in any way change how you're viewing big picture capital allocation? Speaker 300:17:08Thanks, Omar. Again, I think the way we think about it is that it's situational. I mean, we know we're in a cyclical business. It is dynamic. Today, we still see that we have some additional runway on the debt reduction. Speaker 300:17:24We still have $100,000,000 of debt. And really chipping away at that breakeven has been the key thing in terms of our earnings quality and incremental cash flow and then incremental capacity for the dividend. So just to put it into perspective, at the $13,250 level today, if we hadn't delevered, we would be north of $17,000 per day cash breakeven. So that delta represents 35,000,000 dollars more in cash flow generation per year or approximately $0.83 And then we also see runway to continue investing in our fleet and the energy transition projects. And they're typically short payback periods, significant return levels. Speaker 300:18:14And we certainly don't have a problem returning additional capital to shareholders at the right time. I think we just see that like right now in the immediate future where we have opportunities to deploy the capital internally, that's what's in focus. Speaker 100:18:32Okay. Thanks, Bart. That's very helpful and good points and interesting. Here we are, you're obviously earning very strong rates, but yet you're keeping it very close focus on that breakeven and lowering it. So good to see that and well done again guys. Speaker 100:18:47Thank you. Speaker 200:18:49Thanks, Omar. Operator00:18:59Your next question comes from the line of Jon Chappell from Evercore. Please go ahead. Speaker 400:19:06Thank you. Good afternoon. Bart, I'm going to stick with you for a second. This path to $11,500,000 on the cash breakeven, is that strictly the sale and leasebacks on these two vessels and the $41,000,000 or are there other either sale and leasebacks or other cost initiatives that takes you from that just over $13,000,000 to sub $11,500,000 over time? Speaker 300:19:28Sure, John. No, thanks. No, the sale leasebacks is a component of it, but we're always actually looking at additional cost reductions and have achieved some through this year already on the expense side. And then also further reduction of debt, reducing the interest expense beyond the sale leaseback. So kind of multifaceted, but something that we just see is really boosting the quality of earnings and then really setting up Ardmore kind of for any market scenario well into the future. Speaker 400:20:10Okay. And then over 50% of the MRs with scrubbers now or planned for scrubbers, is the ultimate target to get the entire fleet there? Or are there a couple maybe older vessels that you'd be holding back and not want to put that capital into? Speaker 300:20:26Yes. Thanks, John. We're really happy with the scrubbers thus far and getting half of the fleet installed on the MR side has been great. We've done it during the regular dry docking period, so we don't incur an incremental cost to do so. So really looking ahead, it would be more our 2015 built vessels next year for dry docking, something that we likely continue to roll out. Speaker 300:20:55And they have good returns. We like the scrubber 2.0 technology and also the carbon capture readiness for potential future applications. Speaker 400:21:09Okay. Just finally, is there any way to quantify the either returns or the rate differential of the ships that have already had the scrubbers put in. I'm not sure if this is coincidental or it's something to read into, but the eco design versus the eco mod, there was a $6,500 spread in the Q1 of 'twenty three and they're basically right on top of each other in the Q1 of 'twenty four. Was that more just kind of the market strength or some of the eco mods getting the scrubbers and that's really narrowed the gap? Speaker 200:21:41Well, the eco mods at this point would just be the charters in and the ones that we sold chartered back as well as another market charter in. So if you strip away everything, essentially these scrubbers will generate the same benefit as any other scrubber. Okay. On any other companies MRs. Speaker 300:22:04Yes. Speaker 400:22:05Yes. Got it. Speaker 100:22:05Thanks guys. Operator00:22:19Your next question comes from the line of Klinen Molins from Value Investors Edge. Please go ahead. Speaker 300:22:29Good morning. Thank you for taking my questions. Omer and John have already hammered some of the key points, but I was wondering, could you provide an update on your investment in E1 Marine? Sure. And as a reminder for the listeners, a few years ago in 2021, the company made an investment in Element 1, which has proprietary technology to take methanol and produce pure hydrogen and that can be used in a wide range of fuel cell applications. Speaker 300:23:04And I think also important to remind that it was a multifaceted deal. So that was also when we put $40,000,000 of preferred on our balance sheet at a time when the company really needed the capital. And so now today, Element 1, like other industrial companies, when you have this proprietary technology and you're looking to monetize it, they're expanding their global scale in terms of license agreements across geographies and across verticals. So marine included, but really other verticals off highway, on highway, charging stations, aerospace. So significant momentum with licensing revenue. Speaker 300:23:50And I think just also important to note though, like for us, that's a $10,000,000 investment. So a small portion of our overall asset base and the one that's outside of our own fleet of actual vessels, but certainly part of our energy transition plan and team today.Read morePowered by