Star Bulk Carriers Corp
NASDAQ:SBLK
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Star Bulk Carriers Corp
Earnings Call Analysis
Q3-2023 Analysis
Star Bulk Carriers Corp
The company reported a net fleet growth of 25.8 million deadweight or 2.8% year-to-date and 3% year-over-year. The order book stands at 8.1% of the fleet with firm orders, indicating moderate supply, and high shipbuilding costs along with limited shipyard capacity are likely to keep new orders in check. Additionally, older vessels are expected to be phased out due to elevated scrap prices, increasing the attractiveness of demolishing outdated tonnage.
Total dry bulk trade for 2023 is projected to grow by 4.6% in ton-miles. Despite global economic challenges, China's dry bulk imports rose by 13.7% during the first nine months of 2023, while the rest of the world saw a decline due to geopolitical tensions and economic pressures. In 2024, dry bulk demand is expected to see a 1.8% increase in ton-miles. Notable highlights for trade growth prospects include iron ore, which is expected to increase by 4.7% in 2023 and coal trade projected to rise by 6.9% in the same period. Minor bulk trade is also expected to grow by 3.9% in 2023 followed by an estimation of 3.8% for 2024.
Star Bulk is characterized by a robust fleet equipped with scrubbers to ensure compliance with environmental regulations and diversification to leverage market opportunities. The company emphasizes actively managing its fleet to generate shareholder value and is considered well-positioned to capitalize on various market conditions.
Management believes that prudent asset sales, coupled with debt and equity, funded the buyback of shares beneficially for the shareholders. The company targeted the repurchase of 20 million shares and balanced the funding aspects to achieve these buybacks, demonstrating a commitment to enhancing shareholder value.
The company is receptive to strategic acquisitions and mergers to rejuvenate its fleet and enrich its commercial opportunities. This proactive stance is expected to help Star Bulk in maintaining a competitive and modern fleet, further contributing to its strategic advantages in the marketplace.
The outlook for 2024 is cautiously optimistic, with expectations of a market environment similar to 2023, barring unforeseen geopolitical events. Iron ore trade is anticipated to maintain its levels, with incremental improvements in economies bolstering demand. Coal trade may see a decrease due to environmental efforts and potential El Niño effects. Nonetheless, trades like bauxite and grains are expected to perform better, indicating varied prospects for different segments of the bulk shipping market.
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Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the third quarter 2023 financial results.
We have with us Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou, Mr. Christos Begleris, Co-Chief Financial Officers; Mr. Nicos Rescos, Chief Operating Officer; and Mrs. Charis Plakantonaki, Chief Strategy Officer of the company. [Operator Instructions] I must advise you that this conference is being recorded today.
We now pass the floor to one of your speakers today, Mr. Spyrou. Please go ahead.
Thank you, operator. I'm Simos Spyrou, Co-Chief Financial Officer of Star Bulk Carriers, and I would like to welcome you to our conference call for our financial results for the third quarter of 2023.
Before we begin, I kindly ask you to take a moment to read the safe harbor statement on Slide #2 of our presentation.
In today's presentation, we will go through our Q3 results, financings and share buybacks, an update on fleet and operations, the latest on the ESG front and our views on industry fundamentals before opening up for questions.
Let us now turn to Slide #3 of the presentation for a summary of our third quarter 2023 highlights. Net income for the third quarter amounted to $44 million or $0.46 per share and adjusted net income of $33 million or $0.34 adjusted earnings per share. Adjusted EBITDA was $84 million for the quarter.
For the third quarter, as per our existing dividend policy, we declared a dividend per share of $0.22 with record date as of December 5, 2023. Since 2021, dividend distributions and share buybacks exceed $1 billion or $10.7 per share.
Our total cash today stands at $268 million pro forma for the delivery of our 4 remaining sold vessels and share buyback from Oaktree. Meanwhile, our total debt stands at approximately $1.26 billion.
On the top right of the page, you will see our daily figures per vessel for the quarter. Our time charter equivalent rate was $15,068 per vessel per day. Our combined daily operating expenses and net cash G&A expenses per vessel per day amounted to $4,851. Therefore, our TCE less OpEx, less G&A is approximately $9,200 per day per vessel.
Looking towards fleet renewal, we have agreed to sell 5 of our vessels with an average age of 15.6 years. During the 9 months of 2023, we have sold 12 vessels and received insurance proceeds from one vessel, which had a combined average age of 12.4 years. Total gross proceeds from these sales were $272.5 million. This additional cash has been used for share buyback at a discount to NAV.
On October 2023, we entered into 2 firm and 2 optional shipbuilding contracts for the construction of up to 4 82,000 deadweight ton Kamsarmax newbuilding vessels with delivery dates in Q4 2025 and Q2, Q3 2026.
Slide 4 illustrates a summary of the recently announced strategic repurchase that was agreed with Oaktree Capital. We believe we have utilized a variety of tools to drive shareholder value, and we expect these transactions to be accretive to NAV per share, EPS and DPS.
As of today, we have agreed to repurchase 20 million shares at an average price of $19 per share from affiliates of Oaktree Capital. Given that the share repurchase have been mostly financed by vessel sales at attractive prices, we are creating significant shareholder value as the implied NAV from these historical sales is higher than current NAV.
During this quarter, we have issued and sold 678,282 common shares under our effective ATM offering program at an average price of $19.81 per share, resulting in gross proceeds of $13.43 million unlocking a favorable arbitrage. As of the date of this release, we have 93,861,792 shares outstanding or 83,861,792 as adjusted for the closing of the second block repurchased by Oaktree.
At the bottom of the page, you will see an illustration of our share repurchase and the sources of financing that allowed us to complete the buyback.
I will now pass the floor to our COO, Nicos Rescos, to talk about our operational performance, update us on our fleet renewal efforts.
Thank you, Simos. Let me turn to Slide 5, where we provide an operational update. Operating expenses, excluding nonrecurring expenses, was $4,851 for Q3 2023.
Net cash G&A expenses were $1,024 per vessel per day for the same period. In addition, we will continue to rate at the top amongst our list of peers in terms of Rightship safety score.
Slide 6 provides a fleet update and some guidance around our future dry dock and vessel efficiency operating expenses and the relevant total offhire days. Our expected dry bulk expense for the next quarter in 2024 is estimated at $39.7 million for the dry docking of 33 vessels, with another $8.6 million towards our vessel upgrade CapEx.
In total, we expect to have approximately 1,000 offhire days for the same period. In line with the EEXI and CII regulations, we will continue investing and upgrading our fleet with the latest operational technologies available, aimed in improving our fuel consumption and reducing our environmental footprint, further enhancing the commercial attractiveness of the Star Bulk fleet.
Regarding our energy saving devices program, we have completed and tested retrofits on 26 vessels with 7 more vessels to be retrofitted by the end of this year. The above numbers are based on current estimates around dry dock and retrofit planning, vessel employment and yard capacity.
During the second quarter -- during the third quarter, we have progressed further with onboard testing of carbon capture technology with a capability to retain up to 30% in net CO2 emissions. We will continue working on carbon capture technology with our industrial partners, aiming developing our cost-effective solution, which can be selectively retrofitted in the future on vessels of our fleet.
We are actively working on the demand, supply and bunkering of carbon-neutral fuels together with safety consideration and vessel design developments.
Please turn to Slide 7. I have an update around the recent newbuilding order. We have decided to take further steps towards our Kamsarmax fleet renewal. Having designed and subsequently ordered 2 latest generation Eco Kamsarmax vessels will be delivered in Q4 2025 and Q2 2026, including options. The vessels are to be built in China to a high specification, fitted with the latest fuel-efficient engine coming into production in 2024, a shaft generator using energy requirement while at sea and now turns marine power provisions aimed at offering our charters the optionality to connect to a land-based power grid to support the vessels, entire loading and discharging operations. The above measures ensure best-in-class fuel consumption and emissions.
On the sales front, we continue disposing of vessels opportunistically, having agreed to sell 5 vessels at historically attractive prices, reduced our average fleet age and improving overall fleet efficiency.
I will now pass the floor to our Chief Strategy Officer, Charis Plakantonaki, for an ESG update.
Thank you, Nicos. Please turn to Slide 8, where we highlight our continued leadership on the ESG front. For the fifth consecutive year, Star Bulk has published its annual ESG report, which provides a transparent and comprehensive account of the company's ESG performance, strategy and objectives.
The report has been prepared in accordance with the latest 2021 GRI standards and has received limited external assurance from Ernst & Young on specific GRI disclosures and SASB indicators.
Among other key performance indicators, we report a reduction of 4.6% in total CO2 equivalent emissions as well as an improved average fleet annual efficiency ratio compared to the previous year, as a result of operational and technical initiatives.
The report also discloses the company's Scope 3 emissions, a first among Greek-based dry bulk shipping companies. Having engaged the company holders represent an impact analysis towards environment, people and economy, paving the way for double materiality to be implemented next year.
Following this development, Star Bulk has improved its Sustainalytics ESG risk smart score from 23.2 in 2022 to 21.3 today, achieving the highest score among our U.S.-listed peers. On the societal front, we have improved the company's employee retention rates following the implementation of well-being and engagement programs. And we have contributed to the Union of Greek Shipowners' efforts to support the local communities in Greece, which have suffered severe damages from floods.
We continue our active involvement in the development of an Iron Ore Green Corridor between West Australia and East Asia.
I will now pass the floor to our CEO, Petros Pappas, for a market update and his closing remarks.
Thank you, Charis. Please turn to Slide 9 for a brief update of supply. During the first 10 months of 2022, a total of 30.7 million deadweight was delivered, and 4.9 million deadweight was sent to demolition for a net fleet growth of 25.8 million deadweight or 2.8% year-to-date and 3% year-over-year.
The supply outlook continues to be close to the best we have seen in the recent history of dry bulk shipping with an order book of 8.1% of the fleet and 29.6 million deadweight firm orders year-to-date. Uncertainty on future propulsion, high shipbuilding costs and limited CPR capacity until the end of 2026 have helped keep new orders under control.
Furthermore, vessels above 20 years of age stand at 8.2% of the fleet, while scrap prices have stabilized at elevated levels and should make demolition of overaged and fuel-inefficient tonnage an attractive option during seasonal downturns over the next years.
The average steaming speed of the dry bulk fleet decreased to a new low of 10.95 knots during Q3 as a result of higher bunker costs, lower freight rates and new environmental regulations. We expect the EEXI, CII regulations to increasingly incentivize slow steaming and help moderate supply over the next years.
Global port congestion adjusted significantly lower during the last 2 years and inflated supply by approximately 5% with a negative effect on earnings throughout 2023.
Nevertheless, changes in trading patterns and inefficiencies related to the war in Ukraine have normalized congestion slightly above pre-COVID levels during the third quarter and from now on, should follow seasonal patterns. As a result of the above trends, net fleet growth is unlikely to average above 2% per annum during '24 -- 2024 and 2025.
Let's now turn to Slide 10 for a brief update of demand. According to Clarksons, total dry bulk trade during 2023 is projected to expand by 4.6% in ton-miles.
During the first 3 quarters of 2023, total dry bulk trade volumes increased by 3.1% year-over-year supported by record coal and minor bulk trade and a recovery of iron ore exports. Despite weak macro sentiment and a struggling property sector, China dry bulk imports have increased by 13.7% during the first 9 months.
On the other hand, imports to the rest of the world have declined by 3.7% as demand was affected by the war in Ukraine, increased food and energy costs and tightening monetary policy by Western economies in the effort to fight inflation.
During 2024, dry bulk demand is projected to increase by 1.8% in ton-miles with the IMF forecast for global GDP growth presently standing at 2.9%.
A series of government stimulus measures over the last year are expected to support Chinese demand for raw materials during 2024. Moreover, dry bulk demand from the rest of the world, and especially India and the Middle East, is experiencing a recovery.
Iron ore trade is expected to expand by 4.7% during 2023 and to marginally contract by 0.2% in 2024. China steel production increased by 2.4% year-over-year during the first 3 quarters, supported by infrastructure projects, manufacturing and strong exports. At the same time, domestic iron ore output contracted by 5.5%, while stockpiles decreased to a 3-year low.
Steel production from the rest of the world declined by 3.8% over the same period, affected by high energy costs and weak steel margins. But a noticeable rebound in output is taking place, supported by rising steel prices in the Atlantic.
Coal trade is expected to expand by 6.9% during 2023 and to contract by 0.9% in 2024. Global focus on energy security has inflated coal trade, while the reshuffling of European and Russian trades has benefited ton-miles.
Moreover, the unofficial ban by China on Australian coal has been lifted and is providing support to Capesize and Panamax vessels. During the first 9 months of 2023, Chinese imports surged compared to last year as thermal electricity increased by 6.1% whilst hydropower contracted, and domestic coal production growth was limited to 4.2%.
India is emerging as a leading coal importer as electricity demand is currently outpacing domestic oil production growth while stocks at power plants stand at very low levels. Grain and soybean trade is expected to expand by 3.4% during 2023 and 3.6% in 2024. During the first 3 quarters of the year, grain trade was affected by the decrease of exports from Argentina, the U.S. and Ukraine.
Brazil experienced record soybean and corn seasons that have helped fill the gap of crop losses. Increasing constraints in Panama Canal crossings are likely to benefit ton-miles during the U.S. export season this year.
Grain supply in 2024 is projected to remain high, but the El Niño weather conditions might affect Latin American and Australian crops. Nevertheless, Chinese demand and increased global focus on food security is expected to inflate grain trade over the next years.
Minor bulk trade is expected to expand by 3.9% during 2023 and 3.8% in 2024. Minor bulk trade has the highest correlation to global GDP growth and is supported by improving global macroeconomic fundamentals. The war in Ukraine and the subsequent sanctions on Russian industries have disrupted the Atlantic fertilizer and steel industry and have created shortages to support backhaul trades. Moreover, expanding West Africa bauxite exports, continue to generate strong ton-miles for Capesize vessels with exports up by approximately 30% year-to-date.
Finally, outlook for dry bulk market remains positive due to increasingly favorable supply dynamics, improving macro sentiment and large global infrastructure investment needs for the world's green transition. Star Bulk is well positioned due to its scrubber-fitted and diverse fleet to take advantage of market opportunities and remain focused on actively managing its fleet and continuing to create value for its shareholders.
Without taking any more of your time, I will now pass the floor over to the operator for any questions you may have.
[Operator Instructions] Our first question comes from the line of Amit Mehrotra with Deutsche Bank.
This is Chris Robertson on for Amit. Just looking at the rates booked quarter-to-date, it looks so far to be sequentially stronger than 3Q. But just looking forward for the remainder of the quarter, do you think that we'll see a bit of a pullback on normal seasonality? Or are there any short-term factors like now congestion or anything else going on that might keep the rates a little bit more robust than usual as we enter into the end of the year?
Chris, we think that this Q4 is going to be a normal Q4, better than the rest of the year as it always has -- almost always has been because the second part of the year usually carries about 54% of trade versus the first part. I don't think anything will change to that. Also, the holidays are coming. We believe that Q4 will be better than the rest of the quarters as usual.
Okay. Yes. Got that. Just looking at the dividend policy moving forward here, is the minimum liquidity threshold going to be -- continue to be calculated off the 128 vessels? Or will that be adjusted at some point to reflect the recently concluded and announced special sales?
Chris, we have announced today that we have released the 2.1 million for the 13 vessels that have been sold or are committed to be sold. So in reality, the threshold is now 115 remaining vessels times 2.1 million.
Got it. That's helpful. Okay. And last question for me, just on the newbuilding vessels, looks like they'll be built with conventional but very efficient engines. Are there any design aspects to it that would enable future retrofitting of different technologies? And can you explain a little bit more what AMP is?
Chris, this is Nicos. Thank you for the question. Well, first of all, the ships have been upgraded with the latest engine from MAN B&W that is coming out next year. And these are some of the first ships that are ordered with engine, which automatically brings the consumption down compared to other vessels currently built by about 2 to 3 tons a day. So that's pretty significant.
AMP is a piece of equipment, which allows you to use a real -- basically import and connect to port that do have a power grid on dock so that you can shut off generators. You can actually operate the entire vessel using shore power, basically a plug-in facility. We believe that apart from the U.S., which is already available in certain ports, this is going to be adopted worldwide in the next few years, and we'd prefer to offer this option to [indiscernible].
Got it. Yes. It sounds good....
Well, we have made the study for methanol, geofuel methanol. We will wait to see developments on the supply side of green methanol before we make any firm decision to upgrade the vessels.
Any idea on the CapEx that might be required on that in the future?
[indiscernible]?
You mean the methanol?
Yes.
That's estimated on account so much roughly around 5 million.
Our next question comes from the line of Omar Nokta with Jefferies.
Yes, just first question I have is maybe kind of following up on Petros talking about the market a bit in the 4Q or fourth quarter being the strongest of the year. Obviously, we've seen rates improve and strength thus far into the quarter and average out the best across the board.
I guess in terms of this improvement, is this basically just -- would you characterize this as purely seasonal? Or are there other sort of demand factors or fundamental factors in the background that have caused us to improve accordingly?
Well, during the second part of the year, there is more iron ore trades. There's more production from Brazil, which also improves ton-miles. I think this time around coal in -- coal imports in India will also be strong because India is -- has very low stocks.
And the rest of the trade, bauxite and grains, will continue to -- as usual. So I think iron ore ton-miles and coal imports in India will be the major reasons why this market is going to be stronger during Q4.
Okay. Yes. Just kind of wondering if you -- by seeing this market, gets, "strength," not necessarily saying it's strong, but it's definitely much better than it has been. Has that maybe given you a bit more conviction on perhaps next year or the medium-term outlook being better?
Or do you not look at this as a shift? And that you maybe characterize this as just much more of a seasonal thing, and so let's not get too excited. Just wanted to get maybe kind of how Star Bulk is generally viewing this market strength we've seen over the past couple of months?
Well, my personal opinion is that 2024 is going to be similar to 2023 unless if there are any geopolitical developments that are difficult to foresee. I think that iron ore, for example, will be about the same mainly because the rest of the world is going to start improving their economies and also because China has very low stocks.
On the coal front, I think that we may see lesser trade actually to a certain degree mainly because of the El Niño effect. And of course, the world is trying to reduce coal consumption.
I think bauxite to China will improve and will -- as every year. And I think that grains are going to be doing better. The El Nino is actually positive for grains. So overall, I would say a similar market, perhaps a bit better.
Okay. And then maybe just kind of a follow-up perhaps with the newbuilding. As Chris was asking, you've obviously disposed of the 13 ships this year. You raised a good amount of capital doing so. You used it to buy the big chunk of the Oaktree position.
I guess in terms of where Star Bulk is today, in your market footprint, you're down to 115 ships, still substantial critical mass. But how do you think about the fleet footprint as it is as we kind of think about where you're going into next year?
You have the Kamsarmax newbuilding that you just announced. Should we be thinking of Star Bulk continuing to be a seller in this market of older tonnage and then perhaps replacing them over time with more of these newbuildings?
I think we'll do the right commercial thing. Obviously, our fleet is getting older every year, and it can't get old indefinitely. So we will look at the right opportunities to sell ships that are not going to have a long life and get ships that will have a long life.
And as always, we also continue to look at merger possibilities, and we see -- we're seeing opportunities all the time. As we've said in the past, these are always hard to close.
And just to add, Omar, this is Christos. We also have the 7 charter-in vessels, which effectively are young vessels and further renew the fleet.
And of course, those vessels give us a lot of optionality.
Yes, and they are all delivering this year, right? Yes.
Our next question comes from the line of Ben Nolan with Stifel.
I'm a little bit curious on the newbuilds. Obviously, you're selling assets. They're historically a little bit higher priced. And I appreciate the need to replenish the fleet and so forth. The newbuilds are a bit more expensive than they normally would be, too.
Do you view this as just sort of a necessary evil in terms of paying a little bit of a higher price in order to make sure that your fleet is new? Or do you think maybe we're in a new paradigm where just asset prices are higher and the price that you're paying for the newbuilds is reasonable on that basis?
Well, Ben, first of all, we're buying these -- these vessels are actually -- the speed and consumption is actually similar to that of the best Japanese vessels. And we made sure that this would be the case, otherwise we wouldn't have gone forward.
And Japanese vessels are similar. Japanese vessels are being sold like $6 million or $7 million more expensive than these ones. So we do not consider them that expensive.
Secondly, vessels like that, that burn like 7, 8 tons less fuel than the other Kamsarmaxes actually save you almost $4,000 a day, a sailing day. So you recoup the differential very, very quickly.
And at the end of the day, we do not think that newbuilding prices are going to go down. There's very little availability right now. And if one so wanted, I'm pretty sure the closer to the day, the delivery dates, one could sell these vessels even more expensive.
And also since the beginning of the COVID pandemic, U.S. dollar inflation has not been small. It's over 10% change in prices. So you have to expect that nominal dollar prices of newbuildings will go up.
Plus we are seeing that decarbonization will probably take longer than what we initially thought it would. And that will mean that best-in-class vessels will have the chance to trade for a lifetime.
Got it. That all makes sense. And then my next question was around the buyback and then also the ATM activity. And I appreciate that you're buying at a lower price than you're selling with respect to the share price. Although again, at least according to my math, the shares are still trading below NAV that you slice it. Just curious this thinking may be behind not just selling a few extra ships in order to help fund the share repurchase versus being active on the ATM below NAV.
Ben, basically, if you have a shareholder coming to you and saying, "I'm afraid that when Oaktree sells, the overhang is keeping your share price down. When Oaktree sells, the price is going to collapse. Can you do something about it?" And then we sell shares at $0.81 above where we buy them in, obviously, the shareholder is better off.
It would have been even better if we could sell more ships at a very high price. But what we did basically was we wanted to buy 20 million shares. And we funded that with debt, equity and proceeds from ship sales, and we did what we could do in each of those areas. And in each case, we think it was beneficial for the shareholders.
The ATM was like 3.5% of the buyback.
Yes. But basically, we sold the ships we could sell. We issued the equity that we could issue at prices that we knew would be profitable. And we try to limit the borrowings to the extent we could, but all of it was good for the shareholders, we think.
[Operator Instructions] Our next question comes from the line of [ Nathan Ho ] with Bank of America.
Great. I think I would just want to continue a little bit on Ben's train of thought there. And I guess I'll just ask this question a little differently.
I mean you spoke a little bit about buying back shares from Oaktree, the discount to -- a significant discount to NAV and right with the share issuance. And now I think like with the disposal vessels that all seems to align with the same framework.
But now with this newbuild, I'm just kind of curious on how the team is thinking about capital strategy in context of where you're currently seeing your net asset value. Like how are you deciding what to do with your cash, given where your asset value is relative to your share price?
Well, thanks for the question, Nathan. I think we looked at these newbuildings, frankly, as being a chance -- an opportunity that we would not have the chance to duplicate. We think these are -- this was an exceptional situation where the shipyard wanted us specifically as a client and offered us slots that were not going to be available anywhere else for a ship that has a quality that we couldn't get, frankly, in other shipyards.
They worked with us to put an engine on that isn't available yet generally and to put a shaft generator on and generally tweak their design to our needs. So we're not planning to go out and replace our fleet with newbuildings if that's sort of the point of the question. This we thought was, frankly, an opportunity that was too good to let go.
Got it. Just to follow up on that. For a like-for-like vessel, what would the lead times look at -- look like in, say, a Japanese or Korean yard?
Lead times.
For Korean yards.
For Korean or Japanese. Well, basically, we are about a year later. I mean Japan is presently offering mid-2027. For vessels in Korea doesn't build bulk carriers because they're occupied with LNG and container and tanker vessels.
And I guess China, there are no slots offered for 2025. You can only find slots for 2026. And those are very few and not this quality.
And I think second half not 26, actually not -- yes, as you said, very few.
Okay. That's helpful. And Hamish, I think you brought up earlier about the possibility of potentially using mergers as another way of renewing the fleet. Maybe if you wouldn't mind just expanding a little bit about that, what kind of opportunities you're seeing and how you're seeing the market currently?
Well, we always see opportunities to buy fleets and much of the time we see the opportunity to use our shares. We only do these transactions if we can use our shares at or above NAV. And frankly, we're not looking to increase our leverage by any significant amount if we can avoid it.
So we're a bit sticky. The sellers have been until recently a bit sticky. And it's been hard to get these things done since the COVID pandemic. Although before COVID, we did about 8 of them, I think. The market seems to be turning around a little bit and maybe making it easier to close these transactions. So I'm hopeful.
Our next question comes from the line of Bendik Folden Nyttingnes with Clarksons Securities.
Yes. I think I just wanted to touch [indiscernible] the market and touch upon some of the ESG aspects. Do you see any impact from factors such as the carbon intensity indicator or the EU ETS system? Do you see that affecting the dry bulk market going into 2024 and beyond with regards to stuff like slow steaming?
Well, we think that vessels will probably among the means to have a better CII. I think that vessels will probably also reduce the speed. So I think that this is going to be beneficial because there's going to be basically less supply of vessels. So we consider in this company the environmental regulations as only positive for the shipping industry.
Okay. And just a little technical detail at the end, the price point for the options, are those the same as for the firm vessels? And also can you elaborate some on what you would expect the financing to look like if you decide to...
The option price is exactly the same as the firm vessels. That's the first part. And we don't have a lot of cash to pay for the near term. It's like $7 million for the 2 firm vessels, and it would be $7 million for the 2 optional vessels, and that holds us for a while. So we're -- we can finance it, frankly, with debt to begin with. It's not a big deal, and then closer to delivery, we'll figure out the best way to finance it from the shareholders' point of view.
Just to clarify, this plus $7 million will not affect our cash balance for the distributable cash for dividends.
Yes, exactly. We're not planning to finance these out of operating cash flow.
There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.
No further remarks, operator. Thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
You, too. Thank you very much.