Odfjell SE

OSE:ODF

Earnings Call Transcript 2018-Q1

[Kristian Verner Morch, Chief Executive Officer]

Good morning, and welcome to the first quarter conference call from Odfjell SE. We have decided this time to make it a conference call since we are also having a Capital Market Day in Oslo on June 5. So this is -- as is the conference call. Today present is Terje Iversen, CFO of Odfjell SE; Bjorn Kristian Roed, Head of IR and myself, Kristian Morch, CEO of Odfjell SE. We are going to take you through the presentation and towards the end of the presentation, there's going to be a Q&A. I will, as usual, take you through the highlights of the presentation then Terje will come on and talk about the financials and then I'm going to come back and speak about the operational review and the market update. If I start with the highlights, the chemical tanker market during first quarter remain challenging. We say that has actually quite good underlying activity for the chemical tanker markets, but if you look at what's happening in our neighboring segments, the product tankers and also the crude segments, of course, they are severely depressed. So that means, we do get competition from swing tonnage and that was certainly the case in the first quarter. The market for the tank terminals were stable compared to fourth quarter of 2017 and that means that we are also still suffering from a backward dated oil market. EBITDA for the quarter came out of $34 million compared to $41 million in the fourth quarter, but you have to remember that in the fourth quarter, we sold our terminal in Singapore. So on a comparative basis, that is $39 million instead of $41 million. So you have to compare $34 million to $39 million. The net result of the quarter came in at minus $12 million compared to USD 104 million last quarter. But the fourth quarter, last year, was impacted by the sale of Singapore and other one-off adjustment, so it's not directly comparable. From Odfjell Tankers, we had an EBITDA of $27 million compared to $31 million in the previous quarter, it was especially costs and operational disturbances related to all the deliveries and redeliveries that we have done during the first quarter. And also, as we will show you a little bit later, less revenue days for Odfjell SE. For Odfjell Terminals, the EBITDA came out of $6 million compared to $10 million in the previous quarter and -- so that's a difference of $4 million, but half of that is relating to Singapore. And then finally, yesterday at the AGM, the AGM approved a dividend of NOK 1.5 per share. In terms of subsequent events. Most of you, might have seen that yesterday, we announced that Lindsay Goldberg, our partners in our terminal division is considering a sale of 49% of its shareholding and we also said that Odfjell SE as part of that process will -- may consider to sell its 51% shareholding of the Odfjell Terminals in Rotterdam. I'm sure, there are going to be questions, later, but I think, maybe this is a good time for me to just make a few comments regarding that announcement. The first point, I want to make is that this is not a timing that Odfjell has picked. We have a lot of respect for Lindsay Goldberg's decision. They have been very good partners for us. But it was always clear that we were approaching a time where they had to seek their exit, so whatever we can do to help their exit and facilitate, that we will help them. They have been good partners, but the point I wanted to make was that this is not a timing, we have picked. That being said, when a partner like that decides to exit, it's a natural step for also Odfjell SE to stop and think, are there things that we should think about as we are bringing in new partners into our terminal division.The second point, I wanted to make is, I want to make it clear that we are not sellers of our terminal business. We believe that the terminal business is core to Odfjell. It allows us to have access to infrastructure and it allows us to have synergies between the 2 businesses. When you look at the past couple of years, we have first sold Oman, then we sold the terminal in Singapore and now there is a possibility, we might sell OTR. So it's natural that people might put 2 and 2 together and get more than 4 and assume that we are exiting terminals and I want to make the point that we are not. Oman and Singapore were sold for different reasons. And in terms of OTR, it's really a quite different reason why we may be considering to sell that. OTR is at a crossroad. We have since shut down in 2012 been spending a lot of effort and a lot of capital to rebuild the terminal and we are now at a point where the terminal is operating at 1.1 million cubic meter. And I would say, state-of-the-art terminal, but it has around 500,000 cubic meter of capacity that is not yet online. And we have a great team in place. We have a great plan in place, but the CapEx needed to make that final step into rebuilding the terminals to its true potential are quite significant. We are talking about somewhere between $200 million and $300 million. And given the balance sheet of Odfjell and the risks involved, we are thinking that there might be a better shareholder to take Rotterdam to its full potential and that's why we are keeping our options open in terms of potentially checking it [ in sale for ] Rotterdam. And as I said, the final thing I want to make in terms of that release is that we have been stopping and thinking, since Lindsay Goldberg made that decision. And I think, there is an opportunity also for Odfjell SE to rethink our operating and holding structure for the terminals to ensure that we have a more flexible setup going forward. But the key point, I wanted to make in terms of yesterday's announcement is that we are not sellers out of terminals, but the comment relating to Rotterdam is really isolated to Rotterdam. At this point, I'm going to hand it over to Terje to take you through the financials.

[Terje Iversen]

Thank you. I will start with income statement for the first quarter. Starting with gross revenue. The gross revenue decreased slightly in the first quarter compared to last quarter. Also, I've to mention in that regard that due to changes in IFRS accounting standards, we have to now also include gross revenue for vessels that are owned by external owners but are managed by Odfjell in pool arrangements. So actually in the gross revenue this quarter, around USD 6 million is related to external owned vessels that are in pools arranged or managed by Odfjell SE. Voyage expenses increased slightly in this quarter, [ USD 87 million ] also we have included voyage expenses for external owned vessels includes managed by Odfjell at around USD 3 million. Timecharter expenses decreased from [ USD 48.9 million to USD 40.6 million ] this quarter and that is in accordance with what we have guided. But we have redelivered some of the timecharter fleet and then naturally, we are also decreasing the total timecharter expenses this quarter. Pool distribution is the new headline in our P&L, that is the net results for the external ships that are in pools managed by Odfjell, but that is USD 3.3 million this quarter. So actually, if you summarize voyage expenses, timecharter expenses, and pool distribution, this quarter with the same figures, last quarter is very much unchanged, and also reflecting that the results also are quite comparable this quarter compared to the fourth quarter [ 2017 ]. Looking to OpEx and the G&A, we see a slight increase in costs. The OpEx part is related to -- that we have had kind of takeover cost related to the new vessels that have been entered into the fleets. We are not seeing a cost creep on average for our fleet, but the total this quarter and its somewhat higher because of changes in the fleet. G&A expenses, [ USD 17.9 million compared to USD 16.5 million ]. It was actually somewhat lower last quarter than in normal. So I would say, it affected normal levels for the G&A this quarter. Then we ended up with an EBITDA of [ USD 26.9 million compared to USD 30.6 million ] in fourth quarter. Depreciation gone down from [ USD 27.1 million to USD 22.6 million ] And the reason for that, one is that we have adjusted for the [ residual ] values estimated due to increase in steel values that has been decreased and that also means -- that increased -- and that also means that depreciation is slightly decreased this quarter. In addition, also we had one-off -- positive one-offs of [ USD 1.3 million ], that is also impacting the figures this quarter. Then, we didn't have any impairment or capital gains of any material size this quarter, and we ended a EBIT of [ USD 4.4 million compared to minus USD 18.3 million ] last quarter but that was then heavily impacted by the impairments that we did on the [ joint owned ] vessels in the fourth quarter. Net finance for tankers under that [ USD 14 million ] that is increased compared to last quarter. There are 2 reasons, 1 is that we see an increase in the interest expenses, but also we have some negative valuation for MTM for the derivatives that we have on our balance sheet in this quarter. Other taxes, we ended with a result of minus [ USD 10.4 million compared to USD 28.5 million ] in the fourth quarter.If you look at the terminals, we see that we have a decrease in gross revenue. That is mostly related to the fact that we have divested Singapore which was included in the fourth quarter. OpEx is increasing somewhat. You should expect it to decrease due to the sale of Singapore, but we have some one-offs this quarter that is leading to that small increase in the total OpEx this quarter. G&A very much at the same level and then we ended an EBITDA of [ USD 6.3 million compared to USD 9.9 million ] in the fourth quarter. We didn't have any impairments or capital gains this quarter, as we had substantial amounts in the last quarter. So we ended at minus [ USD 2.1 million ] in EBIT compared to [ USD 115.5 million ] plus in the fourth quarter. Of the net finance and taxes, we ended then with a net result of minus [ USD 2.1 million ] in this quarter. And the total -- the total revenue for terminals and tankers went down USD 4 million to [ USD 238.9 million ] compared to [ USD 42 million ] and we ended EBITDA of [ USD 33.9 million compared to USD 40.7 million ], but as Kristian mentioned, we should also then take into account that we divested Singapore in the fourth quarter. Of the depreciation and capital gains, we ended then with an EBIT of USD 3 million and a net result of net finance and taxes minus USD 12.1 million.If you then look at the balance sheet, [ quite then ] on the main changes. We see that ships and newbuilding contracts is increasing and of course, that has to do with the new deliveries. We took 2 newbuildings from AVIC shipyard this quarter and we also paid some installments on the newbuildings from Hudong. Cash and cash equivalents decreased a bit around USD 30 million, main reason is regular debt repayments decreasing our leverage and then we have a total asset increasing slightly from USD 2 billion to [ USD 2.53 billion ]. Total equity, actually very much unchanged even though we had a net result of minus [ USD 12 million ] and that has to do with positive other comprehensive income in this quarter. So we are still saving -- we having the same equity ratio of last time around 39.7 percentage.If we then look at the cash flow this quarter, we see that we are able to maintain a positive cash flow from operating activities ended at [ USD 10.5 million ]. Looking at investment activities, that is most impacted by the 2 newbuildings we took delivery and also the installment with Hudong vessels, in total we then paid USD 83.4 million in installments and final installments on AVIC vessels. Interest bearing debts was increased due to the financing of the 2 AVIC vessels and then repaid around USD 30 million on existing debt and we then had positive -- or positive cash flow from finance activities at [ USD 47.8 million ] and that as I said, that would decrease totally for this quarter of USD 25.3 million in net cash flow.One of our main cost compared to salaries and for the [ accrued ] is the bunker expenses. We have some graphs showing bunker expenses this quarter compared to the preceding quarters. We see that the total actually increased slightly from [ 41.0 to 41.6 ], but then we also include actually [ 1.2 ] of the bunker cost for the external pools, that I mentioned are now included on our P&L. So if you deduct that, you have [ USD 40.4 million ] and actually very much the comparable level as we have [ indicated ] in many quarters. And what this really shows is that we have to the bunker adjustment clauses in our contracts, we have a good hedge kind of buffering off the changes we see in the bunker price in the market. We going forward, we have around 60% bunker exposure covered through the bunker adjustment clauses in the contracts.We have this quarter included also figures from the South American fleets, so it's slightly increased figures compared to last time, but that is [ likely ] comparable, we have also adjusted the previous -- the historical figures. And we see that the bunker price has increased through the last few quarters. At the same time, we see that, the bunker adjustment clauses is actually effective hedge for Odfjell SE. If you then look at the balance sheet and the debt developments. We have at the right, we have columns showing debt repayments in the coming 5 years. We see that in 2018, we are talking about loan of USD 25 million we repaid for remainder of the year. And that is a mixture of balloons on existing mortgage financing and installments on the mortgage financing and also a bond that is maturing in December, this year. At the left, we show what is the expected development or balance sheet going forward for external debts. We included what we are going to repay and also what we expect to refinance of existing debt. What is not included in the graph to the left is that we also plan to refinance the bond that is maturing in December. How do we do that in the [ bond ] market, if we find the right -- the market is offering the right terms or we could alternatively also use other leverage possibilities that we have in our fleet for today. We are actually looking at some refinancing [ decision ] to what we are showing here, that potentially could increase the liquidity with additional USD 40 million, USD 50 million based on what we have ongoing discussions with our banks. Then we have the CapEx overview on the next slide. There we see that on the tankers, it's the same figures that we showed last time, deductible installments being paid this quarter. And the picture is the same that they are coming [ previous ] to take deliveries of the new newbuildings from Hudong and also remaining vessels from AVIC. All of that has been financed through existing financial structures and our remaining equity installments for all the newbuildings is USD 12 million this year and also USD 12 million in 2019. Then we also included an update on the tank terminals and expected CapEx, Odfjell's share going forward that is USD 31 million this year and then it's declining in the coming years, that is consisting of approved investment project in the terminals and also expect that maintenance CapEx for the terminals. And as we have said before, the plan is that this CapEx will be financed by the joint venture that we have together with Lindsay Goldberg and the balance sheet for the terminals which has a solid equity around 50% of property.And then, I will leave it over to you again, Kristian.

[Kristian Verner Morch, Chief Executive Officer]

Thank you. In terms of operational review, I'll start with tankers and a few points I want to make on this slide is that if you look at the top left-hand corner, you'll see the development in terms of voyage days and our footprint -- our growth is if you look at actual days available to Odfjell Tankers, it continues to grow. We are at [ 1100 ] in the first quarter, but as you also see from the graph, actually when you are looking at the red line, it's the Odjfell owned days is actually declining and that's part of the strategy we have had where we are redelivering timecharter ships and we are replacing them with ships also from the pool. That means that we are actually reducing our exposure and our downside in terms of those ships, whereas on the pool ships and the managed ships, we have a -- we continue to have an upside. So that's an important point to make. If you look at the development in terms of volume below, it is -- it continues to grow as well as a natural part of -- of also the fleet is growing.On the top right-hand corner, we continue to be helped in this market by our high contract portfolio. And as you've seen -- as you can see actually for the last four quarter between first quarter '17 and first quarter '18, we have managed to increase the contract coverage compared -- at the same time as the fleet was increased. There is a little bit of dip towards Q1, but as you look at 2 years back, there is some seasonal swings in the beginning of the year. So this is not a sign that our contract portfolio is being diluted. Maybe a few comments also on the Odfix and as I've mentioned a couple of times, we are actually comparing a little bit apples to oranges because the Clarksons spot index is a market index that does not take operational inefficiencies into it and whereas the Odfix index is a operational timecharter equivalent TCE index, but -- what we do believe it make sense to continue to track the development between the 2 and in the first quarter, actually the Odfix went up by 2.3% while the Clarksons index went down by 1.4%. So -- but we do continue to outperform the general market in terms of our earnings.On this slide, we are taking a little bit closer look at our fleet development because we have said before that our target of 100 ships have been reached and that's actually not entirely true but because a part of that assumes that we replace all the existing timecharter ships. So what you're actually looking at is, and this is a composition of our fleet between first quarter of 2018 on to 2020, is that we are increasing our own ship's fleet and -- but we are actually decreasing our exposure to the TC in tonnage. We had therefore 18 vessels on TC as of first quarter and we have actually redelivered 4 and those have been replaced by the pool ships, as I mentioned before where we continue to have a part of the upside, but we do not have the TC cost and the full downside, as you would normally have under TC cost.The second TC ship, the second point I want to make with this slide is, at the moment, we are at the bottom of the TC cycle, so to speak. The checkout or the top bars as you're seeing is actually assuming that the current growth path that we replaced some of the TC ships and if we should choose to do so, we can do that at levels that are way below what they have been in the past couple of years. I'm not saying, that we will, but I'm just saying that, we can. And I think looking at the market, as it is today, with the uncertainties and so on, it's not a bad thing to have that flexibility, so. But likelihood is that we will probably replace some of the ships going forward.On terminals, this is all related to -- or the top 2 bars are relating to Rotterdam. I made the point last time on the top left-hand side that Odfjell Terminals in Rotterdam is really suffering from the backward-dated oil market and as you can see, the utilization drop we've had in Rotterdam is mainly related to the mineral storage, which is down to 76% in the first quarter whereas the chemical storage remains high at 91%. But it's really middle distillates and the crude storage that is the difficult market we're looking at.On the right-hand side, you are seeing that OTR performance of Rotterdam, performance that the PID continues to perform well. We did have a planned shutdown on 1 of the towers in first quarter, which impacts the results, but the PID is an important part of the Rotterdam story.Then I want to spend just a little bit of time talking about our operational performance. We have talked a lot about process excellence and operational excellence and so on and those are -- those can be elusive and fancy words, but in our mind, I want to show you that there are meaningful improvements and real efficiency gains in the way that we trade our ships. So there are 2 specific things we're looking at when we measure operational efficiencies. On the left-hand side, we are looking at ETA performance. Traditional shipowners worry a lot about arriving at the [ lake end ] when the ship -- when the cargo is loaded, but there is not a lot of focus going into actually predicting when the ship will be discharging. Now we feel, because we are participating in the more logistic part of the shipping business, that there's a value for our customers to understand when we are going to be there. It's also to be able to have accuracy in predicting where the ships -- when the ships are arriving at the discharge port is very important. And it has the added benefit for Odfjell, if we are able to schedule and predict where the fleet is in a better way, we can also plan better and used it with the assets more than -- better than we have in the past.And if you compare first quarter of 2017 to fourth quarter of 2017, we have improved that by 23%. On the right-hand side, what you're looking at is port efficiency. So when the ships arrive at port, how quickly do we turn them around and get them out of port again. And we have developed a historic baseline and we had an -- a target to reduce the -- to improve the historic baseline by 6 percentage points. And between '16 and '17, we have reduced that now by 7%. So what does all that mean? Well in 2017, it means that we have saved a total of around 900 ship days. And that means, 900 ship days is equivalent to 2.5 ships and it means that we have been transporting the same amount of volume over the same distances with 2.5 ships less than we have done in the past. And that is a meaningful improvement in terms of efficiencies, and that's also a key part of our strategy going forward to continue to make improvements operationally.Now I'll talk a little bit about prospects and the market. We picked here the U.S. Gulf Far East rate because that -- we get quite a lot of questions about the trade-war tensions and what impact it has. So there 2 points I want to make on this slide. First of all, if you look at the products mentioned in the trade -- in the ongoing discussion about a trade war, it's really limited to around 400,000 tonnes. So on a big scale that is around what 0.1% of all the products moving in the chemical trade, worldwide. So if it really limited to these products, in this trade, then it's -- the impact will be quite limited and the way that the markets normally react is that they will find a way to, to then trade and transship and so on. So we don't think that the trade-war in its current form and the way that it's currently listed will have a major impact on the chemical tanker market, but it will probably also be a mistake to be overconfident that it will not be expanding. So the second point I want to make is, if you look at where the market is today, you look at the top graph, we -- what we are looking at here is the freight weight for 10,000 tonnes for U.S. Gulf Far East. And as you can see on the dotted line, we are at the bottom of the 5-year range. Of course, the market itself is depressed, but I want to make the point that the U.S. Gulf Far East is trade really in the fourth quarter was very busy because of the -- when the market was trying to pick up after Hurricane Harvey. And so there's a lot of push of product out in the fourth quarter and then what we're seeing is a little bit the opposite effect in the first quarter. So yes, it is at the bottom of the 5-year range, but there is an impact of Harvey in there as well.I have 1 more slide in terms of specifics on methanol because we are seeing quite a lot of -- we are seeing quite a lot of swing tonnage in [ IMOIIMAX ] trading in easy chemicals these days. But the methanol story in terms of export from the U.S. and also from the Middle East to some extent is real. During 2018 and 2019 that would be a total of around 5 million tonnes of new methanol capacity coming on stream in the U.S. Gulf alone. Now if you assume that half of that goes to Asia and half of it goes to other destinations that's an equivalent of full time employment for around 12 IMOIIMAX and that's only looking at the U.S. So there is quite a lot of activity going on and if you will join us on our Capital Market Day in Houston, you'll see much of the same picture from any other organic chemicals coming out of the U.S. and the Middle East. So demand is certainly growing also for the demand that will absorb the swing tonnage which will have a knock on effect on our super-segregators.In terms of supply of ships, this is a slide we haven't shown before. This actually shows the number of new orders, not new deliveries. And what you're seeing here is, if you go back to 1996, there was of course a wave of orders leading up pre-credit crunch 2009 crisis. And then the new number of orders were very quiet for a number of years after that and then you had the, what we call here new money, but really financially driven investors who -- many of them have never been in chemical tankers before who saw the positive supply dynamics in this market and started ordering ships. But I think, many of those have been waking up to a reality where if you have own big-complicated stainless steel ships and you don't have a platform to operate them, then it's not a very nice place to be. So what we're seeing now is actually that the number of new orders in '16 and '17 are largely driven by people like ourselves, who order ships for placement needs. And we don't see -- and we don't -- at the moment, we don't see a huge risk that a lot of financially driven owners and newcomers will start investing heavily in this space, but time will show, but at least what we are saying here is that, at least for the next 3 years, we have very good visibility on the supply curve and the compounded growth in supply over the next couple of years will be around 2%, which from historic perspective is quite modest.If you then look at the supply and demand balance, this is actually the same slide we showed last time, just in a little bit of different way of showing the same figures. And what we're showing here is that 2018 is going to be the first year since 2012 where demand will outgrow supply. The demand numbers we're using in this slide 4% for '18 and '19, and 3% for '20 are actually fundamental total volumes moving on sea. And on top of that, you have to add your own assumptions in terms of tonne miles. So as chemicals will be traveling all greater distances, the example I had on methanol before and that goes for other organic chemicals out of U.S. Gulf, you can actually a demand -- call it booster -- a demand effect of tonne mile on top of the 4%. So when we say that we think that the chemical tanker market is fairly well balanced going forward, this is the picture that we're referring to and at least for the next 3 years, we think that there is going to be solid growth in demand and limited growth in supply. Last thing, I want to make -- the point I want to what on make on this slide is, if you look at the 2016 and 2017, they were years of really big deliveries. So and that makes it quite difficult to pick the exact point in time when the markets will turn. We are saying that we think it's going to gradually improve towards the end of 2018, other people think it's going to be '19, but I don't think that you will find a lot of people saying that it will not come, but the timing itself can illusive and, of course, that it also depends on what happens in the CPP market.I think that's what I had on the market. And in terms of prospects, we expect that the second quarter will in terms of timecharter results will be largely in line with the first quarter. And as I said, the chemical tanker market continues to be challenging, but we do expect a gradual improvement to materialize during 2018 and in terms of Odfjell Terminals, the results are -- expected to be stable throughout 2018. And then we will see what happens in terms of Rotterdam, that will, of course, impact Odfjell in many different ways, but at least operationally, we expect it to be stable. Before I turn to -- or we turn to Q&A, I just want to repeat that we are having a Capital Market Day in Oslo on 5th of June, in the morning followed by lunch. The 3 main themes we're going to have is, we are going to talk about our ambitions to have industry-leading EBITDA margins and Terje is going to take you that in terms of returns, how we think about that and how we are going to go about achieving it. Then Harald Fotland is going to come -- the COO of Odfjell is going to be there talking about a smarter Odfjell, how we are going to use, how we are using data and digital tools to improve our decision-making and our operations, and then Bjorn Kristian is going to talk about chemical tanker fundamentals where we are especially going to spent time on organic chemicals and the main drivers for deep-sea transportation. And I hope as many of you as possible, can be there. So at this point, that was the presentation itself. I think, we will be taking Q&A from now on.

[Unknown Executive]

Yes, so we go off with 3 questions from the webcast. At least the two first are from Mr. Eirik Haavaldsen from Pareto Securities. Number one, regarding the Lindsay sale. How involved is Odfjell in finding a right buyer? Are you potentially looking at the stake? Can you elaborate a bit, what you mean when you say that Odfjell is looking at the operating structure? And what can possibly happen here?

[Kristian Verner Morch, Chief Executive Officer]

Sure. Three questions. First of all, is Odfjell involved in the process? Very much so. I think as I said, there is absolutely no drama. We have a very good relationship with Lindsay Goldberg and I think both Lindsay Goldberg and Odfjell understands that only by having a joint run process, where we get good results for Lindsay Goldberg in terms of their exit but also in terms of Odfjell to have the right partners involved. So we are very much involved and it's a very collaborative process. Secondly -- second question was, are we looking at buying the stake. And I will say, no. I don't think, it would make sense. I don't think it's -- we have the balance sheet to do it. It wouldn't do anything for us operationally. So I think, we will be looking for new partners for the remaining terminlas and for the growth of the footprint. Last part was, I was asked to expand on what we're looking at in terms of the structure. And I think the -- what I mean there is at the moment, Lindsay Goldberg, they are our 49% partner in both the holding and the operating company. And that has benefits, but it also has operational issues in terms of actually achieving synergies without fail. So what we are trying to achieve here is that the operating company becomes a 100% Odfjell entity and then we will have partners on terminal levels which will also give us more flexibility in terms of potentially adding new terminals in our investments or diluting in others. And that's the way that many of the other big terminal operators in the world, the oil-tanking [ OpEx ] of this world, that's the way they're operating. So lifting the operational part out of the JV and that will become fully controlled by Odfjell, is what I meant.

[Unknown Executive]

And then also, can you please confirm the book value, Odfjell's share in the book values of OTR, and related debt and cash.

[Terje Iversen]

In OTR, we have total asset at the balance sheet over share around USD 200 million.

[Kristian Verner Morch, Chief Executive Officer]

And that includes the shareholder loans.

[Terje Iversen]

That includes the invested capital , both equity and the shareholder loans that [ Odfjell ] provided the last 2 years.

[Unknown Executive]

And the debt levels?

[Terje Iversen]

The debt is around USD 25 million over share.

[Unknown Executive]

And then the next question it comes from [indiscernible] from ABN AMRO. Can you quantify the synergies reached by Odfjell in combining tankers with storage. And how much of that synergy is realized in Rotterdam, except for synergies, why hold on to the terminals in the U.S.?

[Kristian Verner Morch, Chief Executive Officer]

I think, it's a very good question and a question we get quite often. And I think, the frustration with the question is that actually, it is very hard to quantify the synergies because a lot of the synergies come from sharing sales leads and getting kind of access to person -- quicker berthing and then very -- some of a lot of small operational efficiency gains and the problem is when you try to quantify that, it's impossible to know what the alternative is. So we are absolutely convinced that the synergies are there. We see that it often makes the difference in terms of operating the ships, and as I said, there is a lot of sharing of sales leads and customer service and so on but it's very hard to actually quantify and -- but it is something we have to become better at. I think, the second question was, why I hold on to U.S. if...

[Unknown Executive]

How much of the synergies realized in Odfjell?

[Kristian Verner Morch, Chief Executive Officer]

Yes, actually Rotterdam is -- that's an interesting question because Rotterdam is really an oil terminal and the PID terminal. So of all the terminals we have, it's actually the terminal with -- we're quite limited. I mean, we do call Rotterdam, but it's not the terminal where the synergies are the highest. So the terminals where the synergies are currently the highest is actually Houston and Korea.

[Unknown Executive]

Then except for the synergies, the last question here, why hold on to the terminals in the U.S.?

[Kristian Verner Morch, Chief Executive Officer]

I think if you -- we have at any given time, I actually saw an e-mail this morning. I think, right at this moment, we have around 10 ships operating in the Houston area. And anyone who's been in the Houston area, and seeing the growth coming out of the U.S. Gulf. I mean, having access to water front and an infrastructure is really the difference between operating well and not operating well. So we think that especially for Houston, that's very, very strong operational synergies.

[Unknown Executive]

That concludes the questions from the audiocasts.Nancy, the operator, we are now ready for the Q&A session on the conference call.

[Operator]

[Operator Instructions ] We are going to open our first question from DNB, [ Nicolay Dyvik ].

[Unknown Analyst]

I just want to -- if you could walk me through the pool contribution to net profit once more, in terms of the quarterly results for first quarter '18, what's the net results from pool?

[Kristian Verner Morch, Chief Executive Officer]

Yes, I think, we've highlighted that quite well in that presentation on Slide 5. As I said, in the gross revenue this quarter around USD 6 million out of USD 211.6 million is the gross revenue for external owned ships that we are managing in the Odfjell SE [ fleet ].And the same time, around [ USD 2.7 million ] of the voyage expenses is -- voyage expenses for the same vessels and the net results from that is [ USD 3.3 million ] and that we show as pool distributions, meaning that will be distributed with owners of the vessels, external owners. We have some earnings related to that of course, management fees and we also have [ profit specs ] but we really don't want to disclose exact figures related to that. But it is also adding to all our net results, the management fees and [ profit spec ]. Was that clear or...

[Unknown Analyst]

That's clear, thank you.

[Operator]

There is no further questions.

[Kristian Verner Morch, Chief Executive Officer]

Then, I want to thank everyone for listening. As I said, we hope that many of you will attend our Capital Market Day in Oslo on June 5. In the meantime, if there are any further questions or details then please don't hesitate to reach out. So have a nice day.