Ardmore Shipping Corporation (ASC) on Q1 2022 Results - Earnings Call Transcript
Operator: Good morning, ladies and gentlemen. And welcome to the Ardmore Shipping's First Quarter 2022 Earnings Conference Call. Today's call is being recorded and an audio webcast and presentation are available in the investor relations section of the company's website at ardmoreshipping.com. We will conduct a question-and-answer session after the opening remarks. Instructions will follow at that time. A replay of the conference call will be accessible any time during the next 2 weeks At this time, I will turn the call over to Anthony Gurnee, Chief Executive Officer of Ardmore Shipping.
Anthony Gurnee: Thank you. Good morning and welcome everyone to Ardmore Shipping's first quarter of 2022 earnings call. Let me first ask our CFO, Paul Tivnan, to describe the format for the call and forward-looking statements.
Paul Tivnan: Thanks, Tony, and welcome, everyone. Before we begin our conference call, I would like to direct all participants to our website at ardmoreshipping.com, where you'll find a link to this morning's first quarter earnings release and presentation. Tony and I will take about 15 minutes to go through the presentation and then open up the call to questions. Turning to Slide 2, please allow me to remind you that our discussion today contains forward-looking statements. Additional results may differ materially from the results projected from those forward-looking statements. And additional information concerning factors that could cause the actual results to differ materially from those in the forward-looking statements is contained in the first quarter earnings release, which is available on our website. And now I'll turn the call back over to Tony.
Anthony Gurnee: Thanks, Paul. So in terms of the format for today's call, to begin with, I'll discuss highlights and recent market developments after which Paul will provide an update on product and chemical tanker fundamentals and financial performance. And then we'll conclude the presentation and open up the call for questions. Turning first to Slide 4, over the past two months, the product and chemical tanker markets have changed completely. The first quarter was only partially impacted by these conditions. For the second quarter, we'll show the full effect. Ardmore's MRTCE for the first quarter averaged 15,600 per day, whereas for the second quarter with 50% fixed so far, the result is 25,500, and actually rising as evidenced by the last two weeks fixtures now averaging 34,400 per day. In anticipation of an improving market based on strong fundamentals, we had already gone to full spot exposure as of February, thus are well-positioned to capture the benefits of a strong market for our shareholders. The impact on our financial performance was significant. Using the second quarter of TCE to-date, with 50% complete, our net income would be $22 million or at $0.63 per share for the quarter, an annualized 30% return on book equity, with every additional $1,000 per day generating another $0.28 per share, or 3.4% incremental ROE. Asset values are also rising with five-year-old MRs now valued at $32.5 million, representing a year-on-year increase of 18%. Taking advantage of rising values, Ardmore has sold its three 2008-built MRs with time charter back for two years plus options at attractive rates, which maintains our commercial scale and earnings power. Ardmore has not undertaken any voyages from Russia since the outbreak of the conflict. In the current market, our focus is on optimizing our commercial performance elsewhere while making every effort to support our seafarers and engaging in other measures to assist those in need. Moving next to Slide 5. On our last call, we discussed improving fundamentals offset by adverse oil market dynamics. Since then, the oil market has changed completely and it's in fact turbo charged the product tanker sector and MRs in particular, given their versatility. The oil market is now characterized by dislocation in fiscal supply and demand, record-high refining margins, wide price RPs, and a shift in sentiment regarding inventories. These factors are driving up both volume shift in distance traveled, thus resulting in a significant boost to product tanker ton mile demand. The chemical tanker market is being driven by similar factors, exacerbated by urgent buying of liquid fertilizer and various types of veg oils to substitute for volumes lost out of Russia and the Ukraine. As a result, the commodity end of the chemical tanker sector is also experiencing very high spot rates, which are clearly reflected in their own fleet performance. How high rates can go in for how long is unclear, but with MR transport cost still only run 5% of the value of the cargo onboard, we don't see rates alone capable of destroying demand and thus there's no practical upper limit. Similarly, with the dislocation of cargo flows and its steady stream of oil market events continuing to disrupt, there is a sense that these conditions could persist for quite some time even after cessation of possibilities. Meanwhile, OBA fundamentals have taken a back seat to the oil market. We believe there's still improving and are providing underlying strength to our sectors, which Paul will discuss later in more detail. Next on to Slide 6. The next few slides are normally further back in the deck. However, we thought it would be useful to discuss them now as they highlight what's currently happening in the market and the impact on Ardmore 's earnings. On this slide, Slide 6, you can see the progression of rates over the past six quarters, which covers the depth of the pandemic last year to this new market environment that we're in. We had a slight uptick in rates in the first quarter. However, as you can see clearly with the green bars, there's a dramatic impact the market is having on our charter rate performance for the second quarter to-date. I'm moving next to Slide 7. On this slide, we showed the resulting annualized earnings in EPS for the full range of market conditions we've seen over the past six quarters, and where at least some people think that it could go towards the upper end. Looking at the red dotted box, you can see that at current levels our annualized earnings would be $88 million or $2.52 per share. On that note, I'll hand the call over to Paul.
Paul Tivnan: Thanks, Tony. I will take a look at the fundamentals and then move to review of our financial performance. So starting with Slide 9 for demand fundamentals, all of the focus in recent weeks has been on the current market activity and volatility. At the same time the fact remains the fundamentals are solid, despite pretty evident cross-currents in the global economy. On the demand side, the for product and chemical tankers is very positive, driven by increased refinery throughput and on-market disruption in the near-term and continued on demand growth and refinery dislocation over the medium-term. Oil demand growth has not gone away and based on the most recent estimates from rise set on the AI overall build more demand is expected increased by $1.9 million part of the day this year to crossing pre-Covid levels in the third quarter. And looking to the medium-term as you can see on the graph on the upper rice, the demand outlook remains firm. Global refinery activity continues to be a significant driver of product tanker ton mile demand. Global refunding through product third quarter is expected to be 5% higher year-on-year. Notably, there's significant increases in through puts in the U.S. Gulf and the Middle East with corresponding reductions in Russian through puts. At the same time, the ongoing trend to refinery dislocation, which we've been talked about for some time. We continue to have a positive impact on product tanker demand, providing an additional layer of growth. Over the next few years, there are significant increases in capacity in the Middle East and Asia, while at the same time closures of refineries in the U.S., Europe, China, Australia which is increasing seaborne volumes of refined products. And significantly the Al-Zour refinery in Kuwait to is expected to open in the next few weeks, approximately two years behind the original schedule. Overall product tanker tonne-mile demand is expected to be 3% to 4% annually to 2026, which is well above supply growth. And based on recent market activity, tonne-mile demand for product tankers is potentially much higher this year. Chemical tanker demand outlook is also positive driven by GDP growth, petrochemical outposts, and supported by an improving product tanker market, resulting in these vessels staying more on their core CPP trades. In April, global GDP was revised down by 0.8%, but from -- by the IMF from January's estimates, but it's still expected to be 3.6% in 2022 and 2023. Chemical tanker demand is highly correlated to global GDP, with chemical tanker trade expected to grow by 3% this year and 5% year-on-year in 2023 and 2024. Moving to Slide 10, we'll take a closer look at supply fundamentals. Supply outlook for product and chemical tankers is very favorable, driven by lower bulk and increase scrapping levels. Net fleet growth, which is deliveries less scrapping, is expected to be well below demand growth for the coming years. In 2022, estimated net fleet growth for product tankers is 1.2% and for chemical tankers it is 1%. has increased significantly in 2021 and we expect scrapping to be have similarly elevated levels in the years ahead with an aging fleet and increasing pressure on efficiency and carbon reduction. And finally, consistent with our comments on prior calls, the order book for product and chemical tankers remains low, and this is expected to remain the case for the foreseeable future for two reasons. Firstly, there continues to be lack of clarity on future shift designs to beat the industry's emission targets. And secondly, display engine parts availability for MRs because of significant ordering and other sectors, particularly container ships. Turning to Slide 12 for financial highlights. We're reporting an adjusted loss as $900,003 per share representing a significant improvement year-on-year. MRs average $15,600 a day for the first quarter versus $11,400 per day in the prior quarter while chemical time presumes TC of $13,600 per day in the first quarter, compared to $11,300 per day in the fourth quarter of '21. As Tony announced, these rates have subsequently increased a great deal. Charter rate improvements reflect the ongoing recovery in oil demand postcode on the onset of the Ukraine and Russia conflicts towards the end of the first quarter. Next to and take a closer look at our cost line items and provide some guidance for the coming quarter. Wage costs increased significantly quarter-on-quarter due to higher bunker costs and operating expenses were $16.4 million in the quarter, slight increase mostly relates to timing of crude charges. And let the head OpEx for the second quarter, we expect to be approximately $15.6 million. Chartering expense was $2.1 million for the quarter, and we expect it to be $9 million in the second quarter. Depreciation and amortization totaled $9 million for the first quarter, and we expect depreciation and amortization of the second quarter to be $8.5 million. Total overhead costs were $4.8 million for the first quarter in line with prior periods, and for the second quarter, we expect overhead, incorporating corporate and commercial, to be approximately $5 million. Interest expense was $4.1 million for the first quarter, and we expect it to be in line in the second quarter, and we're currently benefiting from slow to fixed interest rate swaps entered into in mid 2020. Currently $250 million of our debts is fixed at a margin of plus 32 basis points through June 23, and overall, 88% of our debt is fixed. Our interest rate swaps entered into in 2020 are currently in the money by $5 million at the end of March. And overall, we believe our cost structure is among the lowest of our peer group, and in particular, internal commercial overhead costs are approximately 50% of prevailing market rate pool fees. Moving to Slide 13 for Fleet and Operational highlights. We're continuing to invest in the fleet to optimize performance. We expect to complete two dry dockings and two ballast water system installations in the fourth quarter of this year, with CapEx of $3.2 million. We have some flexibility in term of the precise timing of these dry dockings depending on market conditions at the time. Our forecasted revenue days for 2022 are approximately 9,500 with chemical tankers representing 23% of total fleet days. And for the second quarter, 96% of total days are stocked or 105% on an ownership basis. No grow at operationally, the fleet continues to perform very well. And finally, from eight we will turn to Slide 14 for capital allocation and balance sheets. We're continuing to prioritize financial strength of the means to good value and cash flows has really starts to improve in the past few weeks. At sustained strong charter market at current levels, we'll provide more options for capital allocation over time, and for now our focus remains unchanged on the priority that we've been highlighting for some time. In the meantime, we're maintaining a strong balance sheet and healthy liquidity and relatively low leverage. Looking at working capital last year, we had five shifts employed on time charter routs at competitive rates, which supported earnings. And we've since returned all of our one shift to spot trading and taken to more shifting on time charter in anticipation of strong charter market conditions. As a result, working capital increased in the first quarter, partially, remainder to more ships trading spots, and also higher bunker prices. increasing and boosting net asset values are up 18% year-on-year on the back of rising new building costs, , new supply and a positive outlook. And then the back of the strong market, we agree terms for the sale of 3 ships, and in a separate transaction are more time chartered in the ships at market rates for 2 years plus options, maintaining our scale and earnings power. And sale was consistent with our policy on capital allocation and and a regenerate net cash flow seeds of $50 million after prepayment of debt. These factors were financed through a fixed rate lease structure and our overall cost of debt will reduce following the transaction. And with that, I'd like to turn the call over to Tony.
Anthony Gurnee: Thank you, Paul. So to sum up, then, the market environment has changed completely as a consequence of the war and its impact on the oil market, for which there is no clear end in sight. Even after the cessation of hostilities, we believe the resulting dislocations will persist until sanctions have been lifted and any repairs required are completed. While the disruptive oil market has taken center stage for now, fundamentals shouldn't be ignored. Overall, the world is continuing its postcode recovery despite some cross-currents at the moment. While it's unclear how far this market can go, it is clear that there's a renewed appreciation for the role that oil products play in energy security, and in providing a bridge to a full energy transition. So there is logic to the view that we've reached turning point in product and chemical tanker sectors. The impact on Ardmore, its financial performance is clear. Assuming the second half performance continues, we would earn $22 million or $0.63 per share in the second quarter. And each incremental $1000 per day is another $0.28 per share. As a final point, our capital allocation policy as Paul just described, still prioritizes financial strength, but our targets could be met rapidly in this new market, which could allow us to pursue other means to build value -- to build and deliver value to our shareholders, including well-timed growth opportunities and return of capital to shareholders. And with that, we'll open the call for questions.
Operator: We will now begin the question-and-answer session. If you are using a speaker phone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. Our first question will come from Jon Chapelle with Evercore. You may now go ahead.
Jon Chapelle: Thank you. Good morning or good afternoon. Tony, my two questions are going to be on to the points you made in your summary, one company-specific, one industry-specific. I think we've been talking for a long time about this market, hopefully recovering based on fundamentals, and it seemed like things got really tight, really fast. I think there's this misinformed view that this is strictly a war outcome. And you've talked about even after the cessation of hostilities using your term, you believe these dislocations could last a little bit. To that regard, can you talk a little bit about what has exactly transpired in your markets since the invasion that's kind of been the catalyst to these tightening fundamentals. And I know this is really hard to answer, but even post a peace environment hopefully sooner rather than later, what are some of the long-lasting effects on trade flows on our opportunities, on maybe even the impact of commodity trading houses that you think can have a much longer tail to this cycle than just a war-related impact.
Anthony Gurnee: Good, we'll start with that. I think you had another question; we can answer that. So those are very thoughtful questions, and it -- we do really believe that the fundamentals are slightly diminished because of the evident slowdown in global economic growth and also the COVID situation in China. But overall, for any of us who had to travel, we're seeing the -- it seems like air travel is coming back strong and in particular long-haul international, and that was really the big chunk that was missing. So I think that's just been important on kind of underlay, if you will, to what's happening. And so you -- while we're going through this very disruptive period, we think that's continuing to build underneath. That's a really good question in terms of what will change permanently once we get out of this. I do think that there's a view that inventory has got to very low levels, and I think that a re-stocking process could actually take a very long time. And so I think that's something that would persist. I think the -- especially in the chemical sector, you have a lot of UAN or liquid fertilizer and veg oils, sunflower oil that moves out of the Black Sea. And that -- those crops and that production has really been disrupted and how LNG it takes for that to come back on is unclear, but then that has to be replaced by other substitute products further away. In terms of petroleum flows, I think it's interesting, I'm in the U.S. right now, but I spend most of my time in Europe and we're very close to what's happening. And there's a real sense of alarm around the dependence that Europe has allowed itself to finds itself in today. This will be Russia for energy supply, whether it's gas or oil. And I think that's going to change. There's no doubt that the EU is not going to -- it's going to take a while. It'll be a messy process to get a consensus within the EU, but I don't think there's any going back to that level of dependence. And of course, that directly gains substitute product coming in from further away.
Jon Chapelle: Got it. Okay, that's really helpful and I understand that was a difficult, somewhat hypothetical question to answer, so thank you for that. The other one is hopefully a bit easier. It's amazing during your last conference call, we were still facing investor questions about liquidity and measures you can take if this market stayed for even longer than anyone expected and now the tone of questions has shifted to use of capital, which you've touched on a little bit there. But are you in the -- at this, maybe early stages of recovery, is it strictly a focus on getting the balance sheet to a position of strength, so maybe further sale and leasebacks are off the table? Or because of the formulaic nature of your dividend policy, does it kind of become a capital return story immediately, like as soon as the second quarter, just given the strength in the quarter-to-date rates that you pointed out?
Anthony Gurnee: I think it's amazing how quickly things change in this business. It's also amazing how quickly people can forget the fact that last year was a really, really tough year, we lost $38 million. We weren't alone, others lost a lot more. So I think for those companies, I think the priority has to remain and it is for us in essentially balance sheet repair for a period of time. We've been very clear with our capital allocation policy, what our financial strength targets are. Happy to talk about that more. But the fact is that with rates where they are today, that can happen very quickly. And then we have to see what the opportunities are at the time. And we've always, we've had -- granted we haven't had a dividend policy in place for the past to, two, two-and-a-half years. But prior to that we we're very, very focused on shareholder value and high-quality corporate governance. And we understand that investors expect a return capital from their investees.
Jon Chapelle: Got it. Thank you, Tony.
Operator: Our next question will come from Ben Nolan with Stifel. You may now go ahead.
Benjamin Nolan: Yes. Thanks. Actually, just -- if I could follow-on where John was there, maybe Paul or Tony either. You did mention your -- as part of that capital allocation policy that you do have targets. Could -- and then, Tony, you just mentioned that you could elaborate on this. Could you elaborate on this, what do you think you're shooting for with respect to leverage?
Anthony Gurnee: I'll ask Paul to comment on that.
Paul Tivnan: Yeah, sure. Ben, our capital allocation policy has been fairly clear that we wanted to get to a target still below 40% debt-to-capital. We're currently around 50%, so we raised to go on that. But as Tony mentioned, given the current rate environment, we could get there very, very quickly at these levels.
Benjamin Nolan: Okay. Helpful. And then, just for my second question, and you talked a little bit about this, that the low order book and how incremental fleet cross can be somewhat limited. One of the things that we've seen a little bit more on the larger ship classes, although not pervasive yet, is oil majors generally subsidizing shipping companies to go out and build typically LNG fuel, but other types of propulsion systems on new ships and that has sort of been seemingly where most of the incremental new buildings are coming. Two questions. First is, is that happening at all in the MR market, doesn't seem like it. And then is that something that you guys would consider if it was a big company came to you and said, hey, we want you to build some ships. Will you do it?
Anthony Gurnee: Yes. I think that it's -- there have been projects in the past involving oil majors for construction of MRs. They usually go out on long-term time charter at very low rates, so that's not something we've ever been very excited about. But we do as part of our Energy Transition Plan intend to engage in conversations and really develop a collaborative dialogue and relationship with customers where we can help them meet their own energy transition needs on the back of long-term charter business, but with acceptable returns on capital. I don't think -- I don't imagine that anything like that is going to result in a meaningful boost in shipbuilding in our sectors anytime soon. I think the real transition is still quite far ahead and we're also dealing with the reality that yards are very full at the moment. I think if we worry about oversupply in the near-term. I think that's off the table because of the long lead through ordering new ships and the lower to book and the fact that mainly containerships, but also gas carriers, etc. have taken up all the slots.
Benjamin Nolan: And you're not seeing oil majors pushing for their subsidizing it in a market in the way that there's been a little bit ?
Anthony Gurnee: I take exception to the word subsidized, because if you can ask any of the people have done these deals, they probably don't feel like they're being subsidized. very attractive rates. And that's a prerogative of an oil major. But I don't -- it's not something that's evident in our sectors at the moment.
Benjamin Nolan: Okay. Perfect. I appreciate it. Thanks, guys.
Operator: Our next question will come from Magnus Fyhr with H.C. Wainright. You may now go head.
Magnus Fyhr: Yes. Hi, Tony, Paul. Thanks for the presentation. Just a question on your chartering strategy going forward. You went spots ahead of the recovery. Do you see that changing? I mean, you pain ta very positive forward picture. Would you see securing tonnage are staying spots for the remainder of the year or do you have ongoing discussions now? I mean, how the -- some of the trading houses looking to secure tonnage for the second half of the year
Anthony Gurnee: Yes, I think there's probably a scramble at the moment. But I think great. Like a one-year MR Eco-Design MRs might be up to around 20,000 a day now. That's not appealing given the spot market performance. But I think it's -- we always keep a close eye on what's happening in the time charter market, both chartering in and chartering out. And we kind of got -- we got luckier smart last year with our timing on both. At the moment, we have two ships ton chartered in at a little under 12,000 a day. And we have one remaining time chartered out at 15,500. So we'd like to spread there and we like we like the incremental spot exposure. But we're not averse to putting more ships out and TC. Generally, they are one-year deals and it's really just a position you take against the view you have on the spot market. And kind of just managing exposure and looking for relative value chartering in and out. So that's a rambling answer to a good question which is yes, we are keeping an eye on the time charter market, and it probably begins to look attractive into the mid-twenties.
Magnus Fyhr: And that would be longer-term 24, 36 months or?
Anthony Gurnee: That gets pretty thin down into the market unless you're in a really hot market, so we haven't really seen that yet. I know that's been some discussion in other forums. But maybe we're not aware of what's happening, but it does feel like it's building in that direction. This is a very typical kind of cyclical trend that we're experiencing right now with spot rates leaving than time charter rates and asset values.
Magnus Fyhr: All right, thank you. Just one more question. The chemical tanker market, we're very familiar with the MR market, but maybe, the chemical tanker market very leveraged to global GDP. From -- looking at the market now, it looks like GDP is going to be revised further down. Can you talk a little bit about some points where there's the resilience on the chemical demand versus GDP?
Anthony Gurnee: Yeah, I think typically under normal circumstances, there is a very tight correlation and that's good. At the moment it's being heavily affected by disruption from the conflict, just like the MR sector is. You see really interesting trades going on, for example, we put a ship on, one of our 25s on a voyage from Trinidad to the UK with UAN, which is liquid fertilizer at $32,000 a day. And that's essentially, you almost call that panic buying to cover springtime fertilizer needs that were expected to be covered out of Russia. Another interesting one is voyage with styrene monomer, which is used to make polystyrene from China all the way to Rotterdam at a very, very high rate, and obviously that's based on price RPs. So I think there's -- I think that market is also very disrupted at the moment, and rates are very, very spiky there as well. So I think that when we get completely past the disruptive phase of what we're dealing with here, we'll have to see what the nature of GDP growth is at that time to have any view on what the effect would be on the chemical market. But at the moment, it feels -- the chemical market is never quite a spiky as products, but we've heard averages of up to 50,000 a day, we haven't seen that yet in ours. We did one voyage with an MR at 95,0000, but the averages are what we described on the call.
Magnus Fyhr: Alright, very good. That's it from me. Thank you.
Operator: Our next question will come from Chris Robertson with Jefferies. You may now go ahead.
Christopher Robertson: Hey, good morning, Tony and Paul. Thanks for taking my questions.
Anthony Gurnee: Good to hear from you.
Christopher Robertson: Tony, I guess, given the low product inventory levels, how long do you think seaborne transport will simply meet immediate demand versus when inventories will actually begin to be restocked, given kind of the key theme here for energy and national security.
Anthony Gurnee: There has been outright panic buying of diesel, and that's had a knock-on effect. So we wouldn't go to too much detail, but like South American countries, we've had to go very, very far afield to cover their requirements. We've done some very back of the envelope analysis and it seems like you could add at least a few percent MR demand over -- upwards of a year as people reset their stocks to a little bit higher, not back to high levels. So we think it's additive. We don't think it's transformative, but we think it's additive. I think another thing, if I can just throw in, it's important to just mention that LR2s have begun to trade out of clean into dirty, and so far, I think about 15 ships this year have done that transition and that's taking supply out. So I just forgot to mention that earlier on, I just threw it in there for the record. But we think that it's unclear today whether there's any meaningful restocking taking place or if it's all just covering immediate requirements, but we think restocking will come.
Christopher Robertson: Okay. Thank you. I guess the second question here. So you mentioned last year was pretty tough in terms of rates. I think that's reflected in the scrapping that took place in 2021. So how might rising rates during this year impact the scrapping thesis? Do you think it pushes at least a few of those ships at the tail end of the age spectrum out even further, or have they come to kind of the end of the road here?
Anthony Gurnee: So the average age of scrapping for MRs is typically around 25 years. And that -- we saw a big run of scrapping last year. If you go back to earlier strong markets, definitely those drop-offs, we would expect that to happen, to be honest with you. But because there's not a big swing in age and so the ships are -- you're going to have to go pretty immediately anyway. So yes, I think it will probably negatively impact scrapping, but it's not like it'll disappear. And it's not the kind of dynamic that you find in the VLCCs at the moment.
Christopher Robertson: Okay. And if I could sneak one last question, then, how are the current lockdowns in China impacting refined products into demand? And do you think it'll be a tailwind into 3Q once the lockdowns end?
Anthony Gurnee: Yes, I hesitate to say because it sounds like we're just positive on everything. But the fact is that slower -- could be lower consumption levels in China in that area has resulted in more exports. So.
Christopher Robertson: Alright, thanks.
Operator: Our next question will come from Climent Molins with Value Investor's Edge. You may now go ahead.
Climent Molins: Good morning, gentlemen. Thank you for taking my questions. Following up on the capital allocation question. You have a generally young fleet, and I was wondering, how do you currently think of fleet renewal? You provided some commentary regarding potential new will ordering, but how do you think of middle age best on values, especially after the recent running rates?
Anthony Gurnee: Well, I think -- I'll start and then maybe if anything, that Paul wants to add to that. That's a good question. I look into inherently middle age ships are usually very good investments. Especially before they really get to certain age, they are -- sounds like I'm talking about people but I'm not, talking about ships. But so when ships are between 10 and 15 years of age, it's in many respects, it's their -- in terms of current returns on investment that's their best point because there's a lower amount of capital invested, but the earnings are about the same. We're not -- I don't think we have a hyper modern fleet anymore. That's also okay because it's a written down fleet and it provides us good returns on investment. We were going to sell our 08s anyway, really pleased we can find the high-quality partner to charter them back from, because that keeps our earnings power intact in our commercial scale. And the charter back rate I think gives them a decent return on investment, but it's an attractive level. I don't know if there's anything, Paul, you want to add to that.
Paul Tivnan: No. I think that's pretty well covered.
Climent Molins: That's helpful. Regarding the agreed to sell and charter back for minimum rate of 2 years, will you call that purchase option when the charters come to an end?
Anthony Gurnee: No, we have -- we have options to extend, but not repurchase options.
Climent Molins: That's helpful. And final question from me, an offer recently emerged as a simple shareholder in Ardmore, and I was wondering if you could provide any commentary regarding whether he has approached you over the past few months?
Anthony Gurnee: Good question. Look, the filing they made was a 13G passive filing. We're very pleased to have Quantum as an Ardmore investor, and I imagine they're pretty pleased with the returns they've gotten so far on the investment. We've -- we have a regular investor outreach program and we talked to all of our share holders, big and small, and they're no different I assume.
Climent Molins: That's very helpful. Thanks for taking my questions.
Anthony Gurnee: You're welcome.
Operator: This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
