d'Amico International Shipping SA

MIL:DIS

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the d'Amico International Shipping First Quarter 2022 Results. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Paolo d'Amico, Chairman and CEO. Please go ahead, sir.

[Paolo d'Amico, executive]

Thank you. Hello to everybody. Good afternoon, and welcome to our first quarter 2022 presentation.

Going straight to the presentation itself, I would skip the executive summary because it's just a repeat of what we are going to say afterwards. And I would go straight to the first session on this overview, leaving the floor to Carlos Balestra, our CFO. Carlos, the floor is yours.

[Antonio Carlos Balestra Mottola, executive]

Thank you, Paolo. Good afternoon to everyone. As usual, we start with this slide just for a quick overview of our fleet. And as at the end of March, we control the 36 vessels, of which 26 either owned or bareboat chartered in and the 10 time chartered-in, 9 of which long-term.

Mostly MRs, as usual, 24, and same number of LR1s and Handys. We did announce recently the sale of one of our oldest -- our oldest vessel in the fleet, the High Priority, 17-year-old vessel. It will be delivered to the new owners around the 12th to the 15th of May, we expect. So it's still included in our fleet as of 31st of March, but it will be leaving us soon.

We have a very modern fleet, average age of 7 years, which actually falls, following the disposal of the High Priority, to 6.6 years. And we mentioned here, 81% of our owned and bareboat fleets -- and bareboat vessels are Eco following the disposal of the High Priority, this percentage actually rises to 84%. As you know well, we renewed our fleet through an important newbuilding program, with vessels which we started ordering in 2012 and which were delivered to us between 2014 and '19.

Going on to the following page, we don't have any newbuilding CapEx commitments left. We do have maintenance CapEx planned. But also in this respect, the amounts have been falling from $12 million in 2020 to $6.8 million in 2021, and it falls further to just below $4 million in 2022. And then it stays at around the same level in '23 and '24.

On the bank debt side, as previously discussed, we have refinanced all the debt maturing in 2022, mostly at the end of last year. One of the facilities was drawn in Q1 this year. And we are currently working on refinancing the debt maturing in 2023, and we are making good progress in that respect. We're seeing good appetite at very competitive terms from the banks we work with. And we expect to finalize this before the summer, if not all the refinancing, the large majority.

In terms of bank debt repayments, we finished reimbursing some facilities which had quite a fast amortization profile. That is why the daily bank loan repayments has been falling and is expected to continue falling. There are a few of these facilities, which -- with faster amortization that -- where we are going to either refinance or finish reimbursing in the course of this year and next year.

So going forward, the purchase options on our lease vessels, we already exercised one of these, and then we sold the vessel, the High Priority, as we just discussed. There are still 8 left. The LTVs on these vessels are around 80% today, some slightly higher. Given the very strong markets we are currently experiencing, and we are going to discuss this in greater detail later, but we expect markets to stay at strong levels throughout the year and then also in the following years.

We expect [ owners ] to be able to start exercising these options. Vessel values are also moving in the right direction in this respect. They started rising in the second half of last year and continued this trend also in the first part of this year. So these LTVs should be falling and we will, if needed, also have the additional liquidity to invest at the right time to exercise these options, and therefore lower our cost of funding.

Going on to the following page in terms of TC coverage. We are -- TC coverage is part of our strategy, our core strategy, of course. However, we do look at the prevailing market conditions and at the expected future market conditions when we decide how much coverage to take. So we intentionally, given the very positive outlook which we anticipated for the second half of 2022, kept our coverage quite short when we did take coverage starting from the end of last year. We did so usually for not longer than 12 months and often also for a shorter period, around 6 months. That explains why our coverage falls quite rapidly throughout 2022. Already in Q2, we are at 38%. And then it falls even faster thereafter. And in 2023, our residual -- our current coverage represents only 6% of our available vessel days.

This coverage which is falling is, however, at increasing rates. The blue line includes also the bareboat charter contract. And we see that the lowest level was reached in Q4 '21, and this line starts rising quite fast. It's also very positive, especially in the current very high fuel oil price environment we're experiencing. And given the regulations that we are going to have, we're going to be facing from next year that we have an increasing proportion of Eco vessels. This is for all our fleet, including the time chartered-in vessels. And for 2022, 80% of our fleet will be composed of Eco vessels, and this should continue rising over the course of the next 2 years.

This is the fleet evolution. We also included here in dark gray the optional TC-in vessels. These are vessels which we TC in and which we have extension options for these TCs. And they start -- some of these firm periods terminate in 2023, one at the end of 2023 and the other -- and a few others in 2024. And of course, in a very strong market, as the one we anticipate we will have over the course of the next few years, we will be looking to exercise these extension options, which will allow us to keep -- to control a larger fleet going forward.

And we include also the sensitivity at the bottom for every $1,000 per day change in the TC equivalent earnings. And we see that we still have a $6.6 million sensitivity for the last 3 quarters of 2022 and of $11 million for 2023 and 2024.

Going on to the following page. Also on the cost side, we have been achieving some good results. We did experience an increase in Q1 last year. And then we experienced a further contraction in the Q1 of this year. But the trend has been one of falling direct operating costs. Of course, the fleet renewal program played an important role here. Also the investments in technology which allows us to better determine when to replace spare parts has helped. And in particular, in the first quarter of this year, we were helped by the strong U.S. dollar.

This is even more important for our G&A since 75% of our G&A costs are in currency other than the U.S. dollar, and most of which are in euros, so -- where we are currently benefiting from the very strong U.S. dollar in that respect.

Going on to the following page, the ratio of net financial position to fleet market value improved relative to the year-end figure from a decrease from 60.4 to 58.5 despite the small loss we did in the quarter. This is, of course, because of the positive dynamics we discussed regarding vessel prices. Mostly, the valuations of our vessels as of the 31st of March were confirmed to be in line with those we had been provided as at year-end. Of course, the vessels aged since. Formally, they are 1 year older. So it does imply an increase in prices. And this trend is continuing also in April, has continued also in April.

Of course, our liquidity position also improved slightly despite the loss we made. This is thanks to the sale of the High Valor, which was delivered to a new owner in January. And it will improve further also thanks to the disposal of the High Priority, which I previously mentioned.

The net result, we have here the key P&L line items. It was a loss of $6.5 million. But excluding nonrecurring items, the loss was of $4.2 million, the main nonrecurring item being the asset impairment on the sale of the High Priority.

And in terms of daily results on the employment of our vessels, on the vessels employed on the spot market, the average daily result obtained in the first quarter of the year was of around $12,900, including the TC coverage at almost $15,000 per day, that led us to a blended rate of $13,800, which was much better than the market -- than the prevailing market in Q1.

And if we look inside the quarter, we had quite a good January, a very weak February and then a stronger March where we started benefiting from the effects of the war in Ukraine and the increase in the average distances over which these refined products are being transported, and which Paolo is going to be discussing in greater detail soon.

So I pass it over to Paolo now for the market overview.

[Paolo d'Amico, executive]

Thank you, Carlos.

Let's go to Page 17. This is the slide for those one who follow us in the past know very well. The only thing I would say here is look at the peaks which are in the graph, on both graphs, those one on the spot and the 1-year time charter rate and those one on values of 5- and 10-year old vessels. But I think we can go back to those peaks easily the way the market is looking today, the fundamentals are very strong.

One thing I would like to say is we [ focus ] already in January, and this we were saying that. But the fundamentals were right. And we were expecting a better market in the second half of the year. Certainly, nobody was forecasting the Ukrainian crisis, but the Ukrainian crisis arrived and accelerate that process, which was anyhow due. So here, again, we use a graph that we showed in the past, we did that because we believe that we were going back to certain values. Today, this is more and more likely.

Going to the next page on the Ukrainian war and trade flows. What's happening today is that due to the war, and mostly due to sanction and to the fact that more and more owners and more and more charters and more and more countries now, we have to see what happens with Europe. I'm not going to touch the Russian oil. You have a double element. One, Europe, which relies for something like around 40% on Russia for oil and oil products. Europe is going to look for its supply far away. It's going to United States, West Africa, Middle East and South America.

We -- the most -- the best crude oil for us, funny enough, it comes from Iran, but we cannot touch that because it's under a previous sanction, and from Saudi Arabia. The diesel is heavily lifted out of the U.S. Gulf from Houston and Louisiana. And this is substituting with a long lag very short lives, because usually, these products and this crude was coming out either from the Baltic to Rotterdam mostly or to the Black Sea to the Mediterranean countries, European countries. And as far as the Far East, okay, fine. That was supplying mostly China and is still supplying it.

And now what's happening? We are buying from sources which are by far on a longer distance. And Russia has to sell its oil to mostly China and India and some other places in the Far East. And to do that, they have a longer trip. China can be supplied easily from the Russian Far East. But the rest would go from Baltic and the Black Sea.

So all these equates in tonne-miles. Tonne-miles is a parameter for us to measure the demand. And this will strengthen the demand very much. Now to taper a little bit the situation on oil prices, as you know, United States decide to release part of its strategic reserves. And we should expect, of course, more oil coming from non-OPEC countries and OPEC countries, too, excluding, of course, Russia.

From OPEC, it is not too much to expect because they have the increases of 400,000 barrels per month, but we are not managing to supply them because they have production problems. From non-OPEC countries, we will see certainly an increase of oil coming out of Canada and coming out of United States, of course, and Brazil.

On Page 20, we look at COVID because we forgot COVID basically, thanks to the war. But COVID is still there. Now most of the countries have been through vaccination programs. And we have less and less cases in hospital. And even if we have an increase of people getting infected, but thanks to the vaccinations, they are not going to hospital. They are not going to be recovered on ventilators and all this.

So the world is coming back more and more to its normal life. And we see that page 21 as a result, on oil demand and refining throughput, the recovery as well and is going to be accelerated more and more, especially now going to the summer period. The inventories on refined products are very low. We are draining down not only the U.S. inventories on diesel, and I don't know what the Americans are going to do because for the moment, the American oil companies are very much focused in exporting the barrel when using it for themselves, but for the moment, a lot of diesel is coming out of the U.S. Gulf and from the Middle East.

And this demand is -- should be even stronger in the near future because with the vacation period coming in, I'm talking mostly about United States, but you can see that everywhere, I mean, in all the continents, more and more vehicles rolling out. And you know that in U.S., we have this driving season which starts more or less after Memorial Day, which is the end of May, and is where the American, they go for vacation and a lot of them, they go by car.

Now the gallon this year is quite expensive. But it looks like for the moment, we are driving around as usual. So we must expect a stronger demand on products for this. Another element which is coming out, is showing back again, is jet fuel. As you know, due to COVID, the flights were heavily affected. And -- but now planes are flying back, still at 20% lower than what they used to in 2019, but they are still -- but by far better on what it was in 2020 and 2021.

So on top of that, we have to remember that due to the war, airlines cannot fly anymore over Russia and over Siberia, which is the shorter way from Europe to the Far East. I'm talking about many flights. So a flight from London to Japan is 3 hours longer and so on, all the Far Eastern destination, which means more jet fuel burned, and we should see an increase out of this, and it's already going on.

On the longer-term demand, this is an old slide of ours, but we keep putting it here because we keep saying it's going to be healthy. We are going to see a healthy growth in the future with a stronger participation of the refined products as a share of the total oil moved on sea.

The changes of the refined landscape is another element known. Most of these changes, the new refinery are coming out mostly in the Middle East and the Far East, i.e. China. And Europe is losing some capacity, old capacity and inefficient. And Australia and New Zealand, they are losing a lot of -- New Zealand basically closed down the only refinery they had. Also, this is an element of increase for the tonne-mile and a strengthening of demand.

Always on the supply, U.S. shale oil is coming back, is coming back at a slower rate, but is coming back. So we expect -- and as you know, shale oil is the fastest one to put in production. So we see it with -- as a fast element to the Russian shortage of oil.

And let's go at this point to the supply side of the equation. Demolition is very much pushed because the price of steel is very high. We are talking on demolition price of $700 per tonne for demolition, which is extremely high price. It's the highest I've seen in my life, frankly. And this is a big inducement for those one who have old ships that have to face high maintenance costs, to sell their ship. I mean, today, VLCC, a 2 million-barrel ship, can easily make $22-23 million, which is a big price for a 20-, 21-, 22-year-old ship.

Another element which is going to push out old ships is the fact that banks and insurance are not -- banks are not going to finance old vessel, and insurance are going to be more and more refrain of giving coverage on older vessel. So we have a fleet which is aging rapidly, and this contributes very much to keep the growth curve of the supply very low. We have more and more candidates overtaking the 20 years of age, which is, let's say, the area where you start thinking of scrapping your ship. And you have more and more candidates overtaking the 15-year of age. It's where you lose interest from the major oil companies and major oil charters on chartering your ship, because it's becoming commercially too old.

All this is evident. We are seeing a strong pickup in demolition numbers. And the yards are working quite a lot because they are coming out of a period of the COVID where they have been closed due to the COVID itself. And we are seeing more and more ships going to be dismantled. Of course, this will be -- will take a slower phase due to the fact that the market is getting stronger and stronger. And of course, we owners are trying to get as much as we can out of the trading market.

Always on the supply side, we have a very limited newbuilding orders, and we expect they will be limited for quite a while. Number 1, due to the price structure because due to the steel cost and all the other inflationary elements, new ships are costing you more and more. It's very difficult that the yard can keep a price for a longer period of time. They are always renewing their numbers. And this is creating a stronger second-hand market. And still, the second-hand price are cheaper against newbuilding and newbuilding price. The newbuilding parity is still in favor for older ship than the new ones.

All this is, at the end, showing up in a very slow fleet growth. We are talking for this year a growth which is not going to exceed the 1.2%. And for next year, we are saying it's 0.5. For me, it's basically 0. It will be -- the fleet will be flat out. So we have a very slow fleet growth, close to none, and the demand coming up due to all these elements and dynamics of the market, which is not only -- they are not only related to oil demand, but also where this oil is going to be pick up because longer is the route and battery is for us our demand.

And here, I finish on the market. I'll leave it to Carlos if he wants to do some consideration on the evolution of our net asset value. Thank you.

[Antonio Carlos Balestra Mottola, executive]

Thank you, Paolo. Yes, moving on to the slide where we cover the NAV. Well, the overall NAV rose slightly between December '21 and March '22, from $288 million to $297 million, almost [ $300 ] million. And on a per share basis, we are almost at the same level. We were trading at a quite a big discount to NAV at the end of March. Share price has traded up since, quite a bit. But today, it wasn't performing that well a few minutes ago. I haven't checked the latest one. But we do expect that this discount will continue falling, in addition to the fact that the NAV should continue rising as we expect to be profitable in Q2.

And there are very good chances that we will continue being profitable, and hopefully very profitable also for several quarters after that, given the very strong fundamentals which we just discussed for our sector.

I believe we covered the key points of the presentation. So I pass it over to you for the Q&A session.

[Operator]

[Operator Instructions] The first question is from Matteo Bonizzoni of Kepler.

[Matteo Bonizzoni, analyst]

I have 2 questions. So the drivers which are generating the strengthening of your market are pretty clear. You explained quite well both on the demand and supply side. My question is just to know if you can provide some figure as regards the rates which you enjoyed in March, which were included in the Q1 results, just to understand the sequential strengthening compared to January and February. And the April and currently, just if you can mention some figures for the spot rate which your fleet is experiencing.

The second question is as regards -- so you say clearly that you are approaching the exercise of some option on the VRBO fleet than the 8 vessel, which are -- which you can buy, basically buy back in the future. Can you provide also, in this case, some figure as regards the total cash-out which you could experience to exercise these options?

[Paolo d'Amico, executive]

As far as the market, it didn't move the same way everywhere. The first one to react has been the U.S. Gulf because at a certain point, it was clear that diesel, which is a big consuming commodity in this moment in Europe, and Europe was already short before, had to come from United States. So we had a reaction there. And these things start moving to the Far East and then all the Atlantic Basin.

To give it a number is difficult because it's difficult and it's dangerous because every segment had its own story, not only of demand but of supplier ships. So there are basically some routes which they had less ship available and they paid more. And other ones that they had bigger crowd, so rates were a little bit more discounted.

If I have to put a value on what is going on today, I would say we are talking of something around in excess of $20,000 to $25,000 a day up to, in some cases, to $50,000, $60,000 a day, on a reasonable evaluation, let's say. Of course, there have been spikes which are ridiculous. I'm not even naming them. And if we have to look where we were, and you see the average, Carlos told us about the average in the first quarter, and we were talking of just over 13 -- close to $14,000 a day. So already, if you take the bottom rate at $20,000, you can add another $6,000 a day on spot ships.

Now please don't use that in your models because it wouldn't be fair. Let's see where the market goes. It just started its way up in its recovery. So we would like to understand more how -- what is going on.

[Antonio Carlos Balestra Mottola, executive]

Yes, go ahead, Paolo.

[Paolo d'Amico, executive]

No, no, no, no. We are up to you for the options and everything else.

[Antonio Carlos Balestra Mottola, executive]

No, just on the figures for March, I mean I think they are not, as Paolo was mentioning, that significant since we only started benefiting from the surge in rates that was much more pronounced than and strengthened much more in April -- or in the last few days of March, I mean for a few of our fixtures. But we were, I would say, substantially at breakeven, I would say, that is overall, including the TC contracts in March.

And if you look by vessel type, our MRs, the spot average was above $14,000 and around $14,600. The results were not very strong on the Handys in March. They are the vessels that suffered most. The other ones we had on the spot, but there were not that many vessels that did almost $20,000. They did quite well. But as Paolo was mentioning, it's not that significant to look at that particular month.

The trend, of course, is that of strengthening, and the figures for April are going to be much, much stronger than in March. And on the spot days, we are well above $20,000 for Q2. So -- and since the market has been continuing to strengthen, this average is only -- it's most likely going to increase going forward as we continue fixing vessels at higher and higher rates.

So what is also very positive that we are seeing is that we are seeing the market is strong currently in all regions. There is a lot of volatility. So we did experience a big spike, for example, in -- for shipments out of the U.S. Gulf a few weeks ago, then the market came down to very low levels again. And then a few days later, it was back up at very attractive levels. The TC2 route from Europe to the U.S. cont was very weak to start off with, and then it strengthened a lot as a lot of vessels moved -- which would usually have sailed back to Europe -- moved to the U.S. Gulf to chase the strong market there.

And so this is a market which seems to me characterized more by inefficiencies associated with these very long voyages than still by very big volume. So -- and there is a good -- and this could be interpreted as a positive aspect because it means that when also the volumes come back, then the market can go even higher, right? What we are seeing, what is benefiting us is that this average sailing distances are increasing. There's also all the dislocation of the traditional routes with new routes which are longer. But the fact that the VLCCs are so depressed, of course, has to do with their own supply dynamics. It is a segment which was very overbuilt.

But it's also an indication that there is still not that much oil moving. So the market is short oil, and that's why we have been drawing down inventories. And if we are able to supply this market with more oil, then given the current scenario, the market can go even higher and it can become really, really strong.

Regarding the purchase options, it will -- a lot will depend on -- it's very hard to forecast because a lot will depend on how the vessel prices evolve over the course of the next few months. We will not be looking to invest a lot of equity into this. So we will most likely only exercise these options when the additional equity we have to put in is in the region of around $5 million, maybe not much more.

We are seeing here, for example, 5-year-old vessels today are valued around $33 million. And assuming we have to put 15% equity to exercise these options, we would be putting in around $5 million per vessel. So for to exercise for vessels which are 5-year-old. So assuming that is the average age of the purchase of the vessels on which we have purchase options, for the 8 vessels, that would equate to around $40 million in investments.

It's -- some of the vessels are more expensive than that. There's a 1 LR1 also in -- for which we did a sale leaseback transaction, the Cielo di Houston. But yes, that is a very rough estimate of how much liquidity we might have to invest to exercise these options.

Also, one thing we were looking at today is that there are also some vessels which we charter in long term, which unexpectedly, given the vessel price movements and also the yen-dollar exchange rate movements, these -- we have purchase options on these vessels, and some of them are at the money now, where they were well out of the money before, but they are starting to move into the money. And so that is also one potential use of funds going forward, but which we still have to further analyze. But there might be some opportunities there, too.

[Operator]

The next question is from Daniele Alibrandi of Stifel.

[Daniele Alibrandi, analyst]

So the first question is given that we are seeing a clear [ ruble ] market and especially the market environment for MR is very favorable, I was wondering what would be your opinion? And sorry for coming back to Matteo's question, a fair assumption on rates, spot rates for the remainder of the year. I understood -- did understood correctly that $20,000 that you were mentioning before should be a fair assumption being at the lower end of the range that you were guiding?

And the second question, what should we expect in terms of coverage for 2022? You provided us the current levels. But looking ahead, should we expect this to remain skewed to the lower bound of 30%, 60% range?

[Paolo d'Amico, executive]

I would say, to put a number on the remainder of the year is always a big bet because still, there are elements of, let's say, not danger, but can cap the market somehow. One element is, as Carlos said rightly before, due to still a low flow of crude, VLs are suffering. And so you know that we suffered in the past this. New VLs on their maiden voyage can easily load diesel or middle distillates and carry them from the Far East where they are normally built, because the ships are coming out normally from China and Korea. And they can easily load middle distillates and bring it over to West Africa and North Europe.

So they can cap our markets on middle distillates, which are the commodity very much in demand today. So I can tell you that I expect the $20,000 to be there, certainly. But for whatever it is on top of this, frankly, I would like to wait at least this quarter to give a better view with the end of the first half, because it wouldn't be correct to give a number like that now. As said, we are just on the beginning of the -- of this recovery.

Excuse me, the second question was?

[Daniele Alibrandi, analyst]

Was on the coverage level that we should expect for the remainder of the full year. I guess, probably we can give -- that you will take advantage of the very strong underlying market. Probably I was wondering if it's a good assumption to stay at least in the lower bound of the range, let's say, around 40%, 45%, but still below 50%.

[Paolo d'Amico, executive]

No, no. Certainly, that is going to be our strategy for the coming quarters, and we probably go into the next -- as you know, the last quarter for us is the strongest one and is normally where you try to work out what you think for the future recoveries you want to take. So I would say, yes, I mean, it can always happen that something stupid comes up, and we are very happy to pick it up. But I mean, otherwise, as a ballpark, I mean we certainly go ahead keeping a very low coverage for a while and wait to cover later on.

[Operator]

The next question is from Massimo Bonisoli of Equita.

[Massimo Bonisoli, analyst]

Just a couple of questions from my side. Back on the question of Matteo, just to understand the underlying net value for you of the purchase options on the vessel which you mentioned now are well in the money.

The second question is just on the market structure for your current oil tanker ships. If I got correctly, Russian products cannot be transported by many carriers because of the restrictions. So is there a market for shipping Russia products? And how many players are out there to work with the Russian crudes? I mean there are 2 completely different markets, 1 for Russian crude and 1 for low Russian crude right now with different day rates and spot freight rates.

[Paolo d'Amico, executive]

And let me take the second question, I'll leave the first one to Carlos. We are not obliged of avoiding Russian crude or Russian products. We can load them. But we, like many other owners, are avoiding it on a voluntary basis also because there are some risk element to go to Russia to load, and you don't know what can happen. But besides that, we are doing well and very well somewhere else. So we don't need to get there. So for the moment, the shipping fleet can, the tanker fleet, the oil tanker fleet can load the Russian crude and can load Russian products.

What is going to happen is if the oil is going to be sanctioned, then it's a different story. You have a situation like Iran where you cannot touch it at all. What is going to happen afterwards? There is a fleet, and there is a fleet since the Iranian sanction are in force, and it's not a small fleet. We are talking of many -- tens and tens of ships, which at least 20 VLCCs, so also big ships, were trading on smuggling basically because it's unlawful now to trade Iranian oil. And these ships are loading and carrying Iranian oil and Venezuelan oil. And they did this for the last years.

Now one of the possibility in the near future is that U.S. is coming to an agreement with Iran and Venezuela. It's possible. I wouldn't give it for done because it's far from done. But if this happens, this fleet is certainly going to move on for whatever -- I mean for the dimension which are feasible for the Russian trade are going to move on, on Russian oil because we are not going to be, it's not going to be possible for us to trade on them.

So you have basically 2 fleets, but we have this already since the Venezuelan and Iranian offer is up. And it's going to move on, on -- I expect this, at least, it's going to move on, on the Russian thing. Carlos?

[Antonio Carlos Balestra Mottola, executive]

Yes. No, on the options, I'm not too sure I understood the question. I mean, but the reason we would exercise such options would be we see these leases as basically an alternative form of financing, right? I mean these are vessels which are, to all extent, ours. I mean we have purchase obligations on all these contracts. And one, it's a purchase option, but it's well in the money. I mean, in most cases, so it's effectively a purchase obligation.

And -- but of course, since these transactions when we close them, they were at very high LTVs. The costs of the transactions reflect this. They were still very competitive costs, I would say, given the high LTVs at the time, but they are, in most cases, between -- all-in cost between 6.5% and 7.5%, and one is slightly lower. The other one cost the [ Jokal ].

But -- so the idea of refinancing is basically that of deleveraging and benefiting from lower cost financing bank -- traditional bank financing basically. So that is where the value of the -- of exercising this option lies. We will do so if we have, as I mentioned, a very comfortable liquidity position that allows us to do that. And of course, as already discussed previously, when our LTV on mid-cycle vessel prices overall falls below 50%, we will also start looking at alternatives to reward our shareholders, as share buybacks or eventually also dividends.

And last but not least, just last in order that I'm mentioning it, but not in our consideration, of course, we keep our eyes open for new investment opportunities when attractive ones do materialize. As Paolo was mentioning, newbuilding prices are extremely high now. So we don't expect to be ordering newbuilding product tankers at this point. Also, deliveries are very far in the future. But we continue monitoring the market and looking for new opportunities. And at the right moment, when these materialize, we might decide to seize them.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered for this time. I'll turn the call back to you for any closing remarks.

[Paolo d'Amico, executive]

So thank you very much. Thank you very much for being with us. I hope we -- I mean, we are certainly going to meet again on the next quarter results. And I hope that after many meetings we had with a lot of frustration, at least this time, things are looking by far in a more positive way. And I hope we are going to satisfy your expectations.

Thank you very much, and bye-bye.