Avance Gas Holding Ltd

OSE:AGAS

Earnings Call Transcript 2022-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Avance Gas Holding Limited Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Oystein Kalleklev, Executive Chairman of the company. Please go ahead.

[Oystein Kalleklev, executive]

Okay. Thank you, and thank you, everybody, for joining this third quarter webcast for Avance Gas. I'm an Oystein Kalleklev, Executive Chairman of the company, and I'm joined here today by Randi, who is the CFO of the company, and she will be presenting the financials a bit later in the presentation.

Before we begin, I think I just want to make you aware of our disclaimer. We will provide some forward-looking statements and some non-GAAP measures. So please, we advise you to view the presentation together with the earnings release, which we published also today -- earlier today.

So let's begin Q3 highlights. TCE revenues for the quarter was $39.1 million, which is slightly lower than the $44 million we delivered in Q2. This is reflecting somewhat a weaker spot market with our time charter equivalent earnings coming in at $33,000 per day, which was in line with our guidance of around $32,000 per day. Net profit came in at $11.6 million, which equals to our earnings per share of $0.15. Please also note that we have had considerable gains on our interest rate swaps during the year, in total $25 million of gains so far this year, and Randi will tell more about this a bit later.

The freight market has turned from very soft during the start of Q3 to now the strongest spot market we have seen since 2015 and actually, the Baltic LPG Index 1 from AG to Japan this week hit its all-time high. During the quarter, we also have sold one of our older ships, 2009-built Promise. During Q2, we sold the sister vessel Providence. The sale of Promise is giving us a book gain of $7.5 million, and the cash proceeds from the transaction is around $20 million, and we expect the transaction to be finalized by end of November, and this profit will then be booked in Q4.

We have also recently entered into a 12-month time charter for the non-scrubber ship Pampero 2015 built, which then basically replaced the time charter equivalent we had on Promise until November next year. And then we are replacing this with slightly better numbers for the time charter we have agreed with Pampero for our different clients.

We are now booked 93% for Q4 with our estimated TCE of around $50,000 -- $50,000 to $55,000 on a discharge-to-discharge basis and then $45,000 to $50,000 on a low-to-discharge basis. The market has been moving very quickly up and then sometimes you can have a bit difference in whether it's on a low-to-discharge basis, which is the basis for the IFRS numbers, and then discharge-to-discharge, which is what we usually focus on commercially wise.

For the quarter, we are also declaring our dividend once again of $0.20 per share, similar to the one we have provided in Q1 and Q2. And this gives our year-to-date payout ratio of 85%. The stock has been performing pretty bad today. So actually, today, you get a total of 11% of annualized yield, it's somewhere closer to 12%, 13%. So that should give our investors attractive direct yield for by being invested in the company.

Let's head for the next slide and the fleet renewal, which is good for the environment, but also very good for our profit and loss statement. We have now, during the year, sold 3 for older ships. We sold Thetis Glory in Q1, Providence in Q2 and now in Q4, we are selling Promise. So that means we have divested 3 of the older ships in our fleet. So in total, this has contributed with a book gain of $18 million and cash release of $67 million.

So today, given the stock price, we are priced around price book [ 0 85 ], and we are selling our older ships at considerably higher prices than our book value. And also, we invested in 6 new ships there as we have also in the slide, which were bought at around $80 million, while newbuilding prices for similar assets today are $95 million.

So with this renewal, we are selling off the older ships, getting ready for IMO 2023 and then delivering new dual-fuel LPG ships, all with A rating on the CII. These ships are then reducing sulfur emissions by close to 196%, particle matter around 90% and then CO2, 40%. And this is a combination of the fact the ship is bigger. It's consume less fuel than our 2010 built VLGC. And then in addition, we can use LPG as maritime bunkering fuel, that's also shaving off 20% of the emissions compared to a regular fuel load.

So let's head for the next slide, then we can give an update on the current fleet structure. As you can see, Promise sold, so she will be out of the fleet, and we started the year with five 2008, 2009 built ships and then we are left with 2 ships, both on time charters until end of next year. So we are fully mitigated by more expensive bunkers cost today as these ships are then on time charter and fuel is for the [ charters ] account.

So today, we have 17 ships; very shortly, this will be 16. As you can see here, there are some different specs on some of the ships. So we have the wind class, the [ 2015 ] class, 6 of the 8 ships are fitted with the scrubber, which is providing very good economics in today's market. The 2 ships, which is not fitted with our scrubber, is Chinook and Pampero. Chinook is on our variable time charter until the middle of next year. So we are not exposed to fuel cost for this ship either and the same goes with Pampero, which we recently covered on our contract now from November to November next year, replacing the time charter coverage we lost on Promise.

The 2 newbuildings, Polaris and Capella also on a variable index time charter. They are, as you can see here, fitted with LPG fuel. They are dual-fuel. And then the 4 next ships Rigel, Avior, Castor and Pollux, we also have this ammonia ready. So ship #3 and 4 are ammonia ready, in the sense they can burn ammonia as maritime fuel. And then we recently also made a change order on Pollux. So both Castor and Pollux today are fully ammonia ready also for having ammonia as a cargo. Of course, these are very big ships. So the parcel size for ammonia is not really at this level today, but there's a lot of focus on blue ammonia, green ammonia. So this market is developing, and we have 4 ships there, which are very well fitted for this trade and also fitted for being [ fuel ] emission ships.

Yes. And in general, we have a balanced portfolio. We have also taken out some FFA coverage. This is forward contracts basically on freight. And we have recently covered 63% of next year for one ship. And then we had our [ legacy ] 33% coverage for Q1. So the new 63% coverage we have done for the 2023 is at $47,000 per day, and the coverage we had from preexisting deals done about a year ago is at around $30,000 for the Q1. So well covered, and then we have a lot of market exposures and all the new ships coming for delivery, we are fully open and can benefit from a much stronger freight market today.

We have 2 ships coming up in early next year, and then you will probably notice [indiscernible] in slip. Castor and Pollux were originally intended for delivery in '23 due to delays at yards due to various reasons, including labor strikes. These ships might very well both of them end up in 2024, and that's a general theme for the industry, which I will come back to later in the market section.

So last slide before handing over to Randi for our financial review is the dividend. We have just included a bit more color on the dividend. And we're kind of -- to be frank, we just copied some of the concepts from Flex just to give you some color on how we are thinking about the dividend. The dividend is -- it's not really something you only consider the quarter you are in, but you are also looking at how is the outlook for the next quarter, how is our financial position?

So in terms of Q3 this year, it's a bit on the soft side. That's why we have a yellow light. The market outlook has significantly improved from what we had when we were reporting in August. So it's green light on that. The only reason why it's not dark green, given the fact that spot market is on fire is, of course, the fact that there are more ships for delivery next year. So that's why I'm a bit cautious on the market outlook. Backlog and visibility will never be ultra green for Avance Gas. This is commodity shipping, but we do have some backlog as I mentioned on the last slide.

Liquidity position is super strong. Covenant compliance, we have done a mistake, this should be dark green. We are passing the compliance of financial covenants with flying colors. Debt maturities, nothing before 2027. CapEx liabilities, yes, we do have $242 million of remaining newbuilding CapEx. However, this is covered entirely plus some with the $250 million of debt facilities, which will be drawn on delivery of the ships.

So we will actually be cash positive on taking deliveries of the remaining 4 newbuildings and then other considerations is likely. So all in all, a bit softer quarter, but we are keeping the dividend of $0.20, and then earnings for next quarter is going to be a lot better than for this quarter.

So with that, I give it back to you, Randi.

[Randi Bekkelund, executive]

Thank you, Oystein. Let's go to Slide 7 and have a look at our results.

The third quarter was, as Oystein already touched upon, softer than the first and the second quarter due to a slower freight market. The time charter equivalent or TCE earnings for the third quarter was $39 million or TCE per day of $33,000, which is ahead of our guidance of $32,000 and is explained basically by more favorable positions than anticipated. Operating expenses were $9.8 million, fairly in line with the previous quarter, equaling a daily average OpEx of $8,200. As commented in the second quarter, airfare is making crew changes more expensive, having a negative impact on our OpEx and represents about $300 per day for the third quarter. When that said, the OpEx per day is down from $9,000 a day level we saw in 2020 and 2021. And the rollout of the vaccine are having a positive effect combined with a lower OpEx on our newbuildings.

Administrative and general expense, or A&G for the quarter were down to $1.5 million compared to $1.9 million and represents a normalized A&G expense, which is approximately $1,200 a day and has been and still is the lowest A&G compared to our peers. Net profit for the quarter was $11.6 million or $0.15 per share. Looking at the year-to-date profits, we have $54.3 million and is the strongest 9 months since the glory days in 2015 and is basically explained by a stronger freight market.

As we are reporting in accordance with IFRS, we have an estimate or an extended P&L, also called other comprehensive income, where we recognize our derivative portfolio consisting of our interest hedges. As commented in the second quarter presentation in July, we blended and extended an existing $50 million LIBOR interest rate swaps and converted into a software-based swap and increase our hedging with another $100 million, resulting in a software-based hedge of $150 million at 1.87% maturing in 2030 and 2031.

Additionally, at quarter end, we had a LIBOR hedge with a notional amount of $202 million at an average rate of [ 2.82% ] maturing in 2025. We have benefited quite well on these positions, resulting in a gain of $7.8 million for the quarter, bringing the total gains for the year about $25 million. Subsequently, we have terminated $100 million notional worth of interest swaps during the fourth quarter as the interest rate peaked. So of the $100 million $75 million was cash settled, which resulted in a cash receipt of $6 million, while the remaining $25 million was converted into a 30-month swap to take more coverage in the short end. For next year, we have -- 50% of our debt is hedged at a sulfur equivalent rate of 2.6% and in addition, we have a cash reserve of $6 million from the terminated swaps. This compares to a 1-year sulfur rate of 4.9% today.

A few comments to the fourth quarter results before we move on. As Oystein commented, we have booked 93% of the vessel days, that's [ 50% ]. And as we have seen before, the IFRS 15 or low-to-discharge adjustment will have a significant effect as the market has moved upwards by the end of the quarter in our books. And we expect a negative effect of about $5,000 a day, and this results in the TCE expectation per day between $45,000 to $50,000 a day on a load-to-discharge basis, which is our reporting figures in accordance with the accounting standards. We also have some effects on the sale of Promise. The gain, of course, of $7.5 million and a lower depreciation expense of $300,000.

So moving to Slide 8. On the balance sheet, we can see that we have 77% of our balance sheet are vessels, consisting of 13 VLGCs, becoming 12 very soon as Promise is sold, and the remaining 4 newbuildings currently under construction and scheduled for delivery in '23 and '24. The new buildings were contracted in 2019 and 2021 at the bottom of the cycle at an average price of $80 million per vessel and is valued at mid-high $90 million today. This adds up to excess book values of $90 million to our books. Now it would be very nice to add this into our balance sheet. So this is not allowed in accordance with the accounting standard, as our fleet is carried at cost less depreciation and any impairment, which is the most used accounting model within the shipping space.

Our cash position has been significantly improved this year as we have sold 3 older ladies, generating approximate $67 million in net cash proceeds, and we have refinanced the fleet, resulting in a cash release of $83 million, combined with a strong freight market contributing $88 million in cash flow from operations, we recorded a cash balance of $188 million. Looking at the right-hand side of our balance sheet, we have maintained our solid shareholder equity above 50%. At quarter end, we have a shareholder equity of $583 million, corresponding to an equity ratio of 54%. And the total interest-bearing debt of just below $500 million, equaling a debt to total asset ratio of 45%. The share has moved a bit down from yesterday, but it's still supporting our book value somewhat, and it's priced as committed by $0.08 at $0.85 today.

The next slide illustrates the quarterly cash movement. We started up with a cash balance of $199 million at the beginning of the quarter. And as the freight market is above our cash breakeven level, we generated $60 million in free cash flow or net of cash from operations of $26 million and scheduled debt repayment of $10 million. We also paid predelivery CapEx of $9 million in relation to the third dual-fuel VLGC Avance Avior scheduled for delivery in Q1 '23, just a few months ahead. Furthermore, we have distributed $0.20 per share or $15 million in dividend for the second quarter.

Other cash layout of $3 million relates to primarily transaction costs, in relation to the recent sale leaseback agreement and exchange rate effect as the U.S. dollar currency has strengthened against the [ NOK balance ], which we have for primarily administrative costs only. This adds up to a negative cash movement of $11 million and a cash balance of $188 million at the end of the quarter. For the fourth quarter, we expect the cash position to grow and to be well above $200 million as we will receive $20 million in net cash proceeds from the sale of Promise and receive freight from a very supportive freight market.

Moving to the next slide. Looking at our newbuilding CapEx, we have now paid about 50% of the total capital expenditure and $242 million remains to be paid. The total expenditure includes upgrade for preparing the vessel to sail on ammonia fuel for all remaining newbuildings and carry ammonia cargo for newbuilding 5 and 6, which results in a 0 carbon solution from a well-to-wake thinking. The 2 first dual-fuel VLGCs, Avance Polaris and Avance Capella, are financed by banks in the $104 million facility, which was drawn at delivery in January and February this year. The financing for the 2 next dual-fuel, Avance Avior and Avance Rigel, to be delivered in a few months, are secured in $115 million bank loan facility as a part of the fleet refinancing that we completed in May this year. And the 2 last vessels, Avance Castor and Avance Pollux scheduled for delivery in Q3 '23 and Q1 '24, are secured in $135 million sale leaseback agreement as announced in August this year.

So this means that we have no unfunded CapEx, except of the scheduled drydockings, and the financing of our newbuilding program is now completed. 75% of our financing portfolio has been significantly improved this year, and we have achieved longer repayment profile, now between 20 to 22 years. We have achieved longer channel closer to 6 years, with the first maturity in February 2027. We have increased our revolver capacity to utilize the flexibility to manage and optimize cash and avoid associated interest costs, and we have lower margins. So -- and thereby, we have actually improved our cash breakeven by approximately $1,000 a day compared to previous years.

So today's cash breakeven is about $21,800 and assuming today's freight market environment at $90,000 a day on scrubber vessel on a U.S. Asia voyage. The Avance fleet has the potential to generate about $50 million in free cash flow in quarter -- on a quarterly basis.

And with that, I hand the word back to you, Oystein, for the market update.

[Oystein Kalleklev, executive]

Okay. Thanks, Randi. Let's do a short review of the recent market developments. Let's start just with looking at the LPG market, because LPG is a very versatile fuel. You can use it for a lot of different stuff. If you look at the world on a global basis, it's basically 40% of residential and commercial heating and cooking and then another 40% for the petchem industry and also a fairly big stake for the refining. But depending on the region to what the LPG is utilized for really depends on a lot. You will see that in more developing countries. It's mostly for rescomm. In U.S., it's -- LPG is mostly a petchem product, is a petchem or refinery blending.

And then if you look at Asia, it really depends on a lot on the different countries. The biggest importer is China, where rescomm is only 40% in line with the world aggregate. While in India, it's 90% is for this use. And then the [indiscernible] about Europe with a fairly big auto gas market, where LPG is also utilized as fuel for vehicles.

Let's head into the market and the recent trends. On the export side, it's a fairly simple market. The 2 big markets are North America and the Middle East. And we have seen a very strong growth of the exports this year, 11% up first 10 months of the year, driven primarily then by Arabian Gulf countries like Saudi, Iran, UAE, all having 30%-plus growth, despite less oil volumes from [ OPEC ].

On the import side, it's healthy growth everywhere, basically China. China has been reducing their LNG imports 10 first month of the year by 22%. This is not the same in LPG. LPG is also, as I mentioned on the previous slide, very affordable. So Chinese imports are actually up 9% so far this year. Europe, with energy crisis, are also substituting in more LPG and has been growing 67% this year, although from a much lower level than the Chinese demand.

If we're looking at the spot earnings, good times are back for sure. We are now at the highest level since we've been in the period 2013, '15. And as I mentioned, AG China -- AG Japan index, the Baltic 1 has been on the highest level ever this week. And this is represented by this smiling guy with some cool shades because last time it was good, then we were back in 2015 and he quite always had a good smile [indiscernible]. If we look at the 1-year time charter rate, it's, of course, a bit more stable than the volatile spot earnings, but still at pretty healthy levels.

If we're looking at the next slide on the arbitrage. So okay, why is the rates moving this quickly up? It's, of course, a conductive environment for the arbitrage. So we do see the prices between Mont Belvieu, U.S. propane and then the Far East Index in Asia were 4.5 star. And then if you're looking at the arbitrage, which is then becoming basically the limit or feeling for what you can pay on the shipping freight rates, it's still keeping us theoretical earnings level for our scrubber ship of $60,000 next year, $56,000 in '24 and then, of course, somewhat lower for our non-scrubber ships. And of course, these are not only theoretical numbers, we have secured 63% of our ship in the FFA market recently at $47,000 per day for the AG to Japan route. So not truly the arbitrage for shipowners, but still a very conductive shipping market given these arbitrages.

If we're looking at what's happening in the market, it's a bit similar to what we've seen in LNG, where ton-mile is on the weak side because you have more imports into Europe, not on the same scale in LPG as in LNG. But on the other hand, we do see ton time mitigating the slow pace of ton mileage growth, and the average speed is down -- for the ships are down 4%. And of course, this is also driven by the congestion in Panama, where waiting time is above 20 days these days, both on the north and the south bound. This is also the unpredictability of the Panama canal when you're trying to schedule a ship. Also means that more and more ship owners are taking the ships longer routes through Cape of Good Hope or alternatively to Suez in order to have a [indiscernible] on the ship, which makes it easier to fix it because if you have an unpredictable date, it's hard to fix the ship.

So this is also driving up ton time and ton mile eventually. And of course, with the Panama Canal now increasing the tolling fees by basically doubling it in the next couple of years. So we do expect more of the LPG trade to be squeezed out of the Panama Canal resulting in longer [ sailing ] distances than in the past.

So attrition. Of course, now we are in a very good market and people generally don't talk about attrition and scrapping of ships. But we have been in the market now even in our weak market for many years where we've still not seen any scrapping. And of course, this has been good in the sense that secondhand prices for all the ships have been very firm, and this is one of the reasons why we have also been selling 3 ships this year.

But the last time you had scrapping here was back in 2018. So you have had very muted scrapping for a long time, while next year we will have the new IMO 2023 rules, EXXI (sic) [ EEXI ] and the CII. And of course, this will put more pressure on the compliance of the fleet, and we have kind of illustrated this by the CII rating today, expected next year and then the development. So you will see a lot of the ships there will have struggle complying with the new IMO rules.

So we do think this will eventually impact scrapping and [ capping ], which has been holding back for a long time now, will eventually [ increase ]. There is one reason, which I will come back to shortly, why we also see less scrapping and that is related to the fact that more and more ships in the VLGC is leaving the traditional international shipping market and going into captive Iran, China side instead.

So let's just highlight the order book first. I mentioned this, the order book for next year is 45, 46, 47 ships, depending a bit on how you count, although we do see slippage, we have already seen it from the Avance ship, where 1 or possibly 2 of our newbuildings will slip from '23 to '24. We have seen issues on the Chinese yards where because of the COVID lockdowns, this has delayed the construction of new VLGCs. So with 12 VLGCs scheduled for Q4 delivery next year, we would expect some of this to bump into '24 and some of the Q1 ships to bump into later in the year and thus balancing the order book a bit better than what it looks today.

At the same time, we do see a lot of deferred maintenance. So our numbers are around 70 VLGCs, which we'll be doing the scheduled maintenance next year. With the scrubber economics today very favorable, I wouldn't rule out that some of the owners will also utilize the opportunity to put in a scrubber in the ship to benefit from the cost savings. And of course, that will result in the period that drydock typically doubling. So you will have 2 effects there. There's just a regular maintenance and then possibly some scrubber installations as well.

So if we look at the fleet balance then for '23, it's a big order book, as mentioned. However, U.S. is importing -- exporting at healthy levels. EIA is expecting this to continue with around 10% export costs. And of course, U.S. cargoes tend to be sailing the longest. So this is good for ton mileage, especially when the Panama Canal is congested. And then we have had a speed reduction trend, which I also pointed out earlier. You could have a reversal of the speed reduction trend, but then you probably would have higher ton mileage because instead of waiting in the queue in Panama, you are sailing a longer distance and avoiding the Panama Canal entirely.

Then we do see the drydock off-hire, which I mentioned on last slide, and then the potential slippage. So this market can balance out pretty well. And I think more and more people are realizing this, and that's why the sentiment around '23, which was pretty dire this summer, has now turned to be actually quite good. If we look at the forward freight rates, freight market should be pretty good next year, but let's see, we will find out soon.

Then looking at the order book, this is a slide we have added a couple of times because we have seen this spike of deliveries next year. But again, order book to fleet is 20% and then as I said, there's a pent-up scrapping demand in this sector with a lot of ships above 20 years and even 25 years. And then also, you do have a market which is growing quite rapidly on the volume side in terms of exports as well.

Last slide then before going to the highlights, I mentioned is I alluded to this, a lot of ships are leaving the international trade and ending up during the kind of captive Iran, China trade. My numbers checking last night is 44 ships now. This has grown from 30 to 44 ships. So that's also why you see less scrapping.

So it's a World Cup now in Qatar. The last time U.S. and Iran met each other was in '98 and Iran won 2:1. So we'll let see next week, whether what the results will be of the new match.

So with that, I think we conclude with the highlights, revenues [ $39 ] million, somewhat weaker than Q2 due to our softer spot market. We are generating $0.15 of earnings and paying out $0.20. Freight market has, however, turned the corner and gone from soft in Q3 to super strong now during Q4. We have sold another ship. We are continuing to renew the fleet by selling the older ships and taking the delivery of our new dual-fuel ships. We are 93% already covered for Q4. The ships we are generally fixing now is for late December loadings, meaning that those bookings will be turning up in our numbers in Q1 next year. So we are also then today booking very good numbers for Q1 next year. And earnings depending a bit on how you calculate is around $50,000 expected for next quarter, meaning that we should make a lot more money for Q4 when we are presenting that in February next year.

So with that, I think I conclude, and I thank you all for participating. I wish you all a good Thanksgiving. And then you can wake up tomorrow and it's Black Friday, and you can buy our stock, which has been tumbling today. So with that, Heidi, the operator, maybe you can open up for some questions.

[Operator]

[Operator Instructions] We will take our first question.

[Oystein Kalleklev, executive]

Somebody is driving into a tunnel. Okay. Okay. I think while we are waiting, you can check out whether that connection is good. We have had a chat question. This is a question I get every quarter on the Flex, of course, as well. It's basically, you have a lot of cash, how to spend it? Liquidity with cash balance, $188 million, it's huge. It's inefficient to have so much capital tied off since your newbuilding program is already fully financed. What do you intend to use the cash for? Will we see special dividends like [indiscernible]?

So it's a good question, a fair question. I think we are paying out 135% of earnings in this quarter. For the year it is at 86% or so. We have had some asset sales, which is more like one-off earnings, which has contributed to our earnings. What we did when we start was -- this spring was the kind of we saw that we could get better financing terms in the banks. So when banks are keen to lend you money, you should try to borrow. And so we refinanced basically in almost all of the fleet.

And then during this refinancing, we have added a lot of cash to our company. How we have structured that is to add a significant revolver capacity, which at end of the quarter is fully drawn. So -- but how we manage this is to usually draw it at end of the quarter, and then we can repay this. So it's a flexible loan. And then when we are not utilizing the revolver facility, we are only paying a commitment fee of 0.75%. So the cost of having that revolver capacity is very low. So I can understand you think it's very inefficient, but actually, we are using this revolver to flex down the cash. So we are maintaining a much lower cash balance on a regular basis.

And then one of the reasons why we also did this was, of course, the financing market was good, but also there was a lot of concerns about 2023 outlook with a lot of analysts putting in numbers where people were bleeding. And then the last thing you want to have is a situation where people are starting to calculate your runway. How long does the money last? Because then you're going to destroy equity value, and we have seen this in this same company in the past when people are calculating how long are you going to last.

So what we are doing then is add a lot of cash, which is a flexible cash, so that nobody needs to make such calculations. Of course, now the outlook for '23 have turned during the last 6 months from being very dire to be very positive. So nobody is making this kind of calculations again, but I think it's wise for the company to have ample access to liquidity, to alleviate any concerns if there is a certain change in market sentiment that people will think that, well, I can sleep safe at night. The Avance people, they have sorted out the financing wisely, and we'll be able to withstand even a tough market for 1 year or 2 years or even 3 years. So that's why we have a lot of financial flexibility in the company.

That said, I think we have sufficient cash. We probably have more than we need, as we are now fully financed on the newbuildings. That's why we're paying up 135% on payout ratio for the quarter, and we intend not to -- some of the shipping companies, they brag, they're going to pay 50% of their earnings in dividends. We are not going to brag about that because we're going to pay 100%. We have more than sufficient cash, so we intend to generate all the earnings we are generating, we will send back to you, investors, in dividends.

We have been thinking about doing buybacks given where the stock is being priced compared to NAV. However, we already have exemption from the Oslo Stock Exchange to be listed because the requirement there is no shareholders should have more than 75%. Our biggest shareholder, Hemen Holding, controlled by John Fredriksen Family owns 77% of this company. So that makes it a bit difficult for us to buy back the stock. But instead, we are going to pay you handsomely in dividends today and going forward.

So -- and then, Heidi, did we manage to track that guy who is driving into a tunnel or no?

[Operator]

We have one question from the phone line. So this one is from the line of Climent Molins from Value Investor's Edge.

[Climent Molins, analyst]

Thank you for this very comprehensive presentation. We will see a lot of deliveries in 2023, but the supply side outlook for '24 and '25 seem significantly more attractive. You've taken advantage of high secondhand asset pricing by disposing of some of your robust assets. Is there any appetite to potentially order more newbuilds? Or is price unattractive at current levels?

[Oystein Kalleklev, executive]

Okay. Thank you. Good question. Yes, as Randi said, we contracted 6 newbuildings that, I would say, call it, the bottom of the market, $80 million. So they are $95 million today on our balance sheet. They will be -- have a historical cost of $80 million, not $95 million, which is the price today. So it's basically almost 20% above book values in kind of asset values for these ships. And then we have been selling ships at around 12%, 13% uplift to book values as well on the older ships. That's on cost. So it doesn't really affect our view in terms of making new investments.

I think one of the challenging things for us is that we have a stock price, which is trading well below book value, and the book value is well below NAV value. And then if you need to raise equity, you are diluting shareholders. So it's not really accretive growth for the company. However, we do have some surplus cash we could probably put to work. However, we also like to pay the surplus cash as dividends. So that's -- it's a fine balance for public listed shipping company. It's very hard to be contrarian when you are in the public market because most shipping investors are not really contrarian, they are more [ cyclical ]. So that means that a lot of the shipping companies, they will have a good stock price when the markets are red hot. And usually, when the market is red hot, newbuilding prices are also pretty firm. That means the public shipping companies, like my colleague, [indiscernible] has said in the past, they are [indiscernible] and wise investment decisions because they are investing at the top of the market that caused the stock prices at the peak then.

So we try to be a bit smarter in this group of companies. We will consider it. I think we have had the order book 20% of fleet. Newbuilding prices have been picking up. Deliveries lots now are more '26. So, yes, we have looked into it. But so far, we have considered that the best alternative for our shareholders is that we focus on chartering our existing ships, taking delivery of our existing ships and maximizing dividends for our shareholders rather than building more ships.

[Climent Molins, analyst]

That's very helpful. And indeed when trading below NAV, issuing equity does not seem like the best option. And turning towards Pampero, you fixed it on a 1-year contract. Could you provide some insight on the rate you locked it in? And you also mentioned the 2023 FFAs implied this year of around $40,000 per day, whereas freight rate from the arbitrage is even higher. How is the 2024 FFA curve looking at like at the moment?

[Oystein Kalleklev, executive]

Okay. A couple of questions there, so I think I need to start with the first one. Yes, we did the Pampero, it's reported to be mid-30s. So we fixed this a while back before the market took off. So today, that might sound a bit cheap when you can do the FFA at $47,000. However, you're comparing a bit apples and bananas there because the scrubber spread is $10,000, $12,000. So the Pampero fixed is a nonscrubber ship, and when we are doing the FFA, we are entering the FFA, and then we are hedging the IFO 380 heavy fuel oil because our last spot ships are scrubber fitted. So that if you're making mid-30s on a 1-year time charter nonscrubber, you should be making mid-40s on a scrubber ship. So that was question #1.

And then you had something about the FFA for '24. Yes, it's around $45,000 for scrubber ship in '23. Next '24 is lower. So for scrubber, I don't have the number in front of me, but I would -- my guesstimate today is somewhere around $35,000 to $40,000, but please don't shoot me down on that, but it's softer and that's why we haven't fixed anything for that calendar year. And keep in mind, the FFA market is also really illiquid. But if you are in the market for a time, you can get some deals done.

Yes, was there any more questions? I think there was a third one, was it?

[Climent Molins, analyst]

Yes, that was it. That's all from me.

[Oystein Kalleklev, executive]

Okay. Thanks. Okay. Then I think we conclude. Thank you again, everybody, also for contributing questions. That's always the most pleasant part of doing this webcast. So thanks again, everybody, and have a good Thanksgiving, and we'll talk to each other again in February when we are reporting super strong Q4 numbers. Thank you.

[Operator]

Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect.