Euroseas Ltd. (ESEA) Q2 2021 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Second Quarter 2021 Financial Results. We have with us, Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the company. [Operator Instructions] I must advise you that this conference is being recorded today. Forward-looking statements. Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide #2 of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to pass the floor to Mr. Pittas. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to our scheduled conference call for today. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 and 6-month periods ended June 30, 2021. Let us turn to Slide 3. Our income statement highlights are shown here. For the second quarter of 2021, we reported total net revenues of $18.3 million and net income of $7.9 million. Adjusted net income attributable to common shareholders for the period was $7.6 million or $1.12 per share basic and diluted. Adjusted EBITDA for the period stood at $10.3 million. Tasos will go over our financial highlights in more detail later on in the presentation. Please turn to Slide 4, where we discuss our recent operating developments. As previously announced, on June 30, we placed orders for 2 new building vessels of 2,800 TEU at the South Korean yard, Hyundai Mipo, at approximately $38 million each, to be financed with about 60%, 65% at the time of delivery. The 2 new buildings are scheduled to be delivered during the first and second quarter of 2023, respectively. It is worth noting that these vessels are 30% more fuel efficient than our ships of the same type. We expect to be able to charter them in about a year's time. During the second quarter of 2021, the shareholders of the company Series B preferred shares converted all the remaining Series B shares into shares of common stock at the conversion price of $14.05 per share. As a result of the conversion, Euroseas issued 453,044 common sales to the holders of the Series B preferred sales. Following the conversion of the Series B sales into common stock, the company's Director, Mr. Christian Donohue, originally appointed to the Board by Tennenbaum Capital Partners LLC, now BlackRock, Inc., a Series B Director and recently reelected as Director, resigned from the Board in accordance to BlackRock, Inc. policy. We thank Christian for his contribution during all these years in our Board. On the chartering front, EM Hydra was fixed in late April for a period of 23 to 25 months at $20,000 per day, starting from mid-May. We recently fixed the EM Spetses, assist the vessel to EM Hydra for a minimum of 36 to a maximum of 40 months at $29,500 per day, starting from August 5, which is about 3.5x higher than the previous employment. This picture clearly demonstrates the magnitude of the improvement in the market during the last 3 months. We have also just announced a new time charter contract where our container vessel motor vessel Diamantis P and 2008 TEU vessels built in 1998 for a period between a minimum of 36 to a maximum of 40 months at a daily rate of $27,000 per day. The new rate, which is more than 4x higher than the vessel's current charter rate will commence on or about October 5, 2021 to October 15, 2021, after the vessel completes its upcoming drydocking. On the operations front, we would also like to highlight that we received the process of a claim award related to the sale of our motor vessel Manolis P for scrap in March 2020 that initially failed due to the COVID-19-related restrictions, which resulted in net receipts of about $1 million. The vessel, of course, was subsequently sold to another buyer within Q2 2020. There were no drydocks during the second quarter. Please turn to Slide 5, where you can see our current fleet profile. Euroseas' fleet currently consists of 14 vessels, including 9 feeders and 5 intermediate container carriers with approximately 540,000 deadweight tons and 42,000 TEU capacity. The weighted average age of the fleet currently is about 16.2 years in TEU terms. After the delivery of the latter 2 vessels that we ordered last month, Euroseas fleet will grow to a total of 16 containerships with approximate 614,000 deadweight and 48,000 TEU capacity. Slide 6 shows our vessel employment chart. As you may see, coverage for the second half of 2021 stands at 92%, and the contracted EBITDA is $28.2 million. For 2022, we have already covered 62% of our vessel days at a contracted EBITDA level of about $41.5 million. Whilst in 2023, our coverage stands at 33% and contracted EBITDA at $29.4 million. We also have 3 vessels opening up for charter within the remaining of the year and we intend to gradually fix them as they open up, always with a focus on staggered time charter renewals. Our booked average time charter equivalent rate for the next 2 quarters stands at about $20,000 per day and around $20,000 -- $21,000 and $24,400 per day for 2022 and 2023, respectively. We expect the 3 vessels coming up for only charter within the year to be fixed at still higher prices and thus push these averages higher still. Please turn to Slide 8 for a review of how the market fared during the second quarter to date. What can be inferred from the chart is that containership charter rates have continued unabated and more fiercefully their upward path that started in the fall of last year, and have reached all-time highs. This slide speaks for itself. In the midst of last year, the spike of seaborne trade rates was initially viewed as a short-term reaction to a historic demand shock caused by the early stages of the pandemic and the ensuing restocking. However, this increased demand and the logistical bottlenecks that resulted from these sudden shifts have exaggerated the problem and led to this apparent lack of capacity and consequential rate increases. The market has continued to strengthen. And for the last year, the twice-weekly context index has risen on every single reading. This is clearly reflected, as we turn to Slide 9, where we give a bird's-eye view of the general container market for the second quarter to date, starting with the freight market. As shown in the table, time charter rates across all segments, skyrocketed over the past 12 months and reached the all-time highs just described. But on vessel sizes, 1-year time charter rates as of August 2021, have at least doubled from the figures seen in Q1 2021 just a few months ago. The average secondhand price index rose on average by about 52% in the second quarter of 2021 over the first quarter of 2021. Price increases varied across different age groups with the elder vessels increasing by up to 300%. During the second quarter, newbuilding prices increased by approximately 10% in Q2 2021, on the back of steel prices being on the rise and fresh interest for new buildings on the back of the containership market strength. The inactive containership fleet, currently as of the end of July 2021, stands at about 120,000 TEU, approximating 0.5% of the fleet. The majority of which is Iranian-controlled still sanctioned vessels and vessels that will never reactivate. Let me remind you that just a year ago in mid-May 2020, the inactive fleet stood at 2.4 million TEU such are the reversals of fortune. The number of vessels scrapped decreased in Q2 to only 3 ships of 1,840 TEU despite scrap prices that increased to about $600 per lightweight ton due to the high demand for steel. Total number of vessels scrapped year-to-date amount to just 13 ships or approximately 10,000 TEU. On the whole, in Q2 2021, the fleet grew by 1.8% without, of course, accounting for idle reactivations or -- idling, et cetera. Worryingly, but perhaps reasonably as apparently, there is a lack of ships in the water, the order book has significantly increased, with many large containers with new orders having been placed. The order book currently stands at 21.3% from about 11% just 6 months ago. Please turn to Slide 10. Global recovery continues at a solid pace, but new variants of COVID-19 have created some further uncertainty. The latest forecast indicates down revision in the Asian developing economies and an increase for advanced economies, reflecting the diverse economic prospects across countries. On the one hand, we have the developed countries with improved health metrics and additional fiscal support that have access to vaccines and can look forward to more normalized economic activities, while developing countries are still lagging behind with a worsening pandemic dynamic and tighter financial conditions that may set back their recovery. According to the latest IMF forecast of July, the global economy is still tipped to climb at 6% in 2021, unchanged from April 2021 with offsetting revisions though. Prospects for emerging markets and developing economies have been marked down for 2021, especially for emerging Asia. By contrast, the forecast for advanced economies is revised upwards. Global growth for 2022 was unrated by 0.5% to 4.9%, deriving largely from the focused upgrade of the advanced economies and particularly the United States, which is expected to grow by 4.9%. China and India are expected to grow at a reasonable pace of 5.7% and 8.5%, respectively. For 2023, global growth is expected to be around 3.5%, which represents a still healthy level. Looking at containerized trade and based on Clarksons projections for 2021, we expect a significant uptick in demand growth of 6.6% for this year. For '22 and '23, Clarksons expects containerized rate to grow at a moderate pace of 3.3% and 3.5%, respectively. Personally, I think the figures for 2022 are on the low side if global GDP growth is to run at the IMF projected pace of 4.9%. Of course, on the above forecast, should be taken with a grain of salt, as predicting the future is always difficult. It is perhaps even harder now due to the disruptions caused by COVID-19, which is vastly changing established life and trade patterns. It's a long duration, interacts with the uncertainty of the geopolitical developments and global financial climate to make forecasting even more tricky. Please turn to Slide 11 to review the containership age profile and delivery strategy. As you can see, in the containership age profile chart on the left side of the slide, overall, the containerized fleet is a young fleet with a mere 6% of ships being above 20 years old. However, the older vessels are mainly concentrated in the smaller size classes where our ships operate. Therefore, the growth of the fleet in the segments in which we operate should be minimal in the next couple of years, as very few vessels have been ordered in this size range. The right side chart shows delivery schedule of the current containership order book, which is expressed as a percentage of the fleet. Certain figures for 2021 to 2025 reflect the order book before any scrapping and slippages. Currently, the total containership order book stands at 21.3% of the fleet. Nevertheless, this is still a historically low figure despite the recent raise. Please turn to Slide 12, where we discuss our outlook summary. It is evident that global recovery continues at a solid pace despite new variants of COVID-19 emerging, which may delay, but would likely not stop economic growth. The drivers that enable this economic growth are inventory restocking and shifts in consumer spending towards goods, combined with adequate fiscal support and progress on vaccine rollouts. In 2021, overall containership trade is expected to remain positive with moderate supply growth of 4.3% and 2.9% in 2021 and 2022, respectively. However, the recent surge in ordering is likely to lead to accelerated supply growth in 2023. However, we believe that new regulatory requirements effective from 2023 onwards will likely restrict the effective supply of vessels and assist in absorbing increased new deliveries in the latter part of 2023, as a result of the recently placed newbuilding orders. Both congestion and operating inefficiencies have continued to significantly impact the container shipping markets, leading to excessive wait times and disrupting operating schedules. These logistical bottlenecks have resulted in new highs in container freight rates, which are expected to at least remain throughout the second half of 2021. The short to medium-term outlook seems strongly optimistic to reinforce by logistical disruptions and the firm trade demand. Additionally, limited supply growth in 2022 should provide some rate support before any possible excess delivered capacity comes in, in 2023. The long term, beyond 2023 fundamentals, are quite complex with a range of factors likely to have an impact, including: one, the uncertainty over a potential sharp drop in rates on today's record highs in the event that the demand starts trailing back once disruptions is up; two, material supply pressure from 2023 onwards, which may overtake demand growth; and lastly, three, the new environmental regulations, which will probably result in even slower steaming by 2023, 2024, effectively removing capacity from the market. Let's turn to Slide 13. The left side of the slide shows the evolution of the 1-year time charter rates for containers of 2,500 TEU since 2000. As you can see, we are witnessing the highest charter rates in the last 20 years. According to Clarksons, last week, 1-year daily time charter rates for 2,500 TEU containership stood at $52,000 per day. The right-hand side of the slide shows vessel values in relation to historical prices since 2011. As we can see, current containership values have significantly increased above meeting an average levels and are now the highest they have been over the last decade. In this current market environment and with container rates at present levels or perhaps continuing to rise, we expect our profitability to rise strongly as well. Additionally, with the increased visibility of our earnings, which now extends into next year and well into 2023, we are able to better formulate our growth strategy. Our growth strategy remains to become a key long-term participant in the Feeder, Intermediate containership segment, as evidenced by our recent newbuilding orders. In addition, we continue to evaluate additional uses of any accumulated earnings for the benefit of our shareholders, such as expanding in a risk measured and accretive matter, via buying vessels and securing them with charters, using our listing as a potential platform to consolidate privately-owned vessels of leads as done in 2019, or rewarding our shareholders by the -- reinstating common stock dividends or buying back shares. And with that, I will now pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. I will now take you through the next 5 slides, to give you an overview of our financial results for the second quarter and first half of 2021 and compare them to the same periods of last year. For that, let's turn to Slide 15. For the second quarter of 2021, the company reported total net revenues of $18.3 million, representing a 35.4% increase over total net revenues of $13.5 million during the second quarter of 2020, which was the result, primarily of the increased market charter rates or vessel churn in the second quarter of this year. On others, 14 vessels were owned and operated during the second quarter of 2021 compared to 19 vessels operated in the same quarter of last year. The company reported a net income for the period of $7.9 million and a net income attributable to common shareholders of $7.6 million as compared to a net income of $1.3 million and the net income attributable to common shareholders of $1.1 million, respectively, for the same period of 2020. Interest and other financing costs for the second quarter of this year amounted to $0.7 million compared to $1.1 million for the same period of last year. This decrease is due to the decreased amount of debt we carry and the decrease to some extent in the weighted average LIBOR rate in the current period compared to last years. Depreciation expenses for the second quarter of 2021 amounted to $1.6 million compared to $1.7 million for the same period of last year and adjusted EBITDA for the second quarter of 2021 was $10.3 million, a significant increase over the $4.4 million we recorded during the second quarter of 2020. Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2021 were $1.12 and $1.11, respectively, for as basic and diluted, calculated on 6.78 million basic shares and 6.83 million diluted weighted average number of shares outstanding. Compared to basic diluted earnings per share of $0.20 for the second quarter of 2020, calculated on 5.58 million basic diluted weighted average number of shares outstanding. Excluding the effect on the income attributable to common shareholders for the quarter, of the unrealized loss on derivatives, the adjusted earnings attributable to common shareholders for the quarter, the second quarter of this year, which have been $1.12, basic and diluted compared to adjusted earnings of $0.25 per share, basic and diluted for the same period of last year, a period during which we excluded a realized loss of derivatives, the amortization of below market time charters acquired and a loss on the write-down for vessel held for sale. Usually, security analysts do not include the above items and publish, as a matter of earnings per share. If we look now at our numbers for the first half of 2021, we can see that for that period, the company reported total net revenues of $32.6 million, representing a 12.6% increase over total net revenues of $28.9 million during the first half of 2020 as a result of higher average charter rates our vessels served during the period -- of this year despite the fact that during the first half of 2021, we operated 14 vessels compared to 19 vessels in the same period of 2020. The company reported net income for the period of $11.7 million and net income attributable to common shareholders of $11.1 million as compared to a net income of $3.2 million and net income attributable to common shareholders of $2.9 million for the first half of 2020. Interest and other financing costs for the first half of 2021 amounted to $1.4 million compared to $2.4 million for the first half of 2020. Again, this decrease is due to the decreased amount of debt we carry and the decrease of the LIBOR -- of the average LIBOR, our bank loans in the period as compared to the same period of last year. Depreciation expenses for the first half of 2021 were $3.2 million compared to $3.4 million during the same period of last year. Adjusted EBITDA for the first half of 2021 was $15.9 million compared to $8.4 million recorded during the first half of 2020, showing a significant increase of the EBITDA year-over-year. Basic and diluted earnings per share attributable to common shareholders for the first half of 2021 were $1.65, calculated on 6.75 million basic and 6.79 million diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $0.52 for the first half of 2020. Excluding the effect on the income attributable to common shareholders for the first half of the year of the unrealized gain on derivatives, the adjusted earnings per share attributable to common shareholders for the first 6 months of this year, which have been $1.58 basic and $12.57 diluted compared to adjusted earnings per share of $0.42 basic and diluted for the same period of last year. Period, during which we excluded the same things that I mentioned earlier, the loss on derivative -- the realized loss on derivatives, the amortization of the below-market charters and the loss on the write-down of a vessel held for sale. Again, as I mentioned before, security analysts do not include these figures. That's why we are providing you with an adjusted earnings per share result. Let's now move to Slide 16 to review our performance in greater detail. Our fleet performance. As usual, we'll start our review by looking first at our utilization rates for the second quarter of 2021 and compare them to the same quarter of last year. Our fleet utilization rate is broken down, as always, into commercial and operational. Starting first with our commercial utilization rate, it was 100% during the second quarter of 2021 as compared to 94.6% for the same period of last year. Our operational utilization rate for the second quarter of 2021 was 99.9% compared to 97.7% for the same quarter of last year. I should remind you here that our utilization rate calculation does not include vessels in drydock or scheduled repairs, if any such events occurred during the period. As I mentioned earlier, on average, 14 vessels were owned and operated during the second quarter of this year, earning an average time charter equivalent rate of $14,853 per day compared to 19 vessels for the same period of 2020 earnings on average $9,458 per day. Our total daily operating expenses include the management fees, general and administrative expenses, but excluding drydocking costs, averaged $6,860 per vessel per day in the second quarter of this year compared to $6,120 per vessel per day for the same period of 2020. And this is was partly attributable to increases in insurance premiums and increased crewing costs for our vessels resulting from difficulties in crew rotation due to the pandemic. Let's now look at the bottom of the table to our daily cash flow breakeven levels presented here on a per vessel per day basis. For the second quarter of 2021, our cash flow breakeven level was $10,030 per vessel per day compared to $8,512 per vessel per day during the same period of 2020 with the biggest part of the increase attributed to increased loan repayments. Let's now review our utilization rate and the remaining of the figures for the first half of this year. During the first half of 2021, our commercial utilization rate was again at 100% and the operational utilization rate 19.3% compared to 96.9% commercial and 97.9% operational for the same period of last year. On average, we owned and operated 14 vessels in the first half of 2021, earning a time charter equivalent rate on average of $13,523 per vessel per day compared to 19 vessels that we operated in the first half of last year, earnings on average $9,541 per vessel per day. Our total day operating expenses, again, including management fees, G&A, but excluding direct working costs for the first 6 months of this year amounted to $6,887 per vessel per day compared to $6,003 per vessel per day for the same period of 2020. Looking again at the bottom of the table, we can see our cash flow breakeven level for the 6 months of this year, which stood at $9,702 per vessel per day and that can be compared to $8,558 for the same period of last year, again, part of the increase -- being the increase in loan repayments. Let's now move to Slide 17. This slide, as in the last earnings discussion, is included to provide our shareholders and investors with a tool to assess the earning potential of our fleet in the remainder of 2021 and in the full year of 2022 and 2023. The table shown in this slide is 2 parts. The first refers to our already in-place contracts. This part of the table shows the available days for hire, making assumptions for the scheduled drydockings, the number of contracted days in each period as well as the difference of the 2, which is the remaining open days of our fleet, the days that our fleet will be available for hire. As you can see, almost all of our vessels are contracted out for the third quarter of this year, while 96% of the available days for the fourth quarter of this year are contracted out as well. Similarly, 62% of our available days in 2022 are contracted and 33% of our available days in 2023 are contracted. Over contracted days, the table shows the average contracted rate, which allows you by making an assumption for the operating expenses and the G&A expenses per day to estimate their likely EBITDA contribution. For the open days, the user of this calculator, just to make an assumption for the daily rate to be earned, which would allow him or her to estimate the EBITDA contribution of the open days. To provide an indicative calculation, if one used the same rate as the one of the contracted days, one can see the effect on the total EBITDA for the remainder of 2021, 2022 and 2023. I would like here to mention that based on the current rates, as indicated by the various market sources and specifically by the new context index, our open days would turn an average rate of about $40,000 per day, significantly higher than what our contracted days are earned. This overall exercise is meant to provide a tool to calculate our EBITDA by entering once on assumption. However, it's hard not to observe that even if we just assume that our open days will earn the rates shown in the table, which, as I just mentioned, are about half of what the current market rates are. Our EBITDA for the second half of 2021 would be double than the EBITDA more than doubling the EBITDA for the first half of 2021. While in 2022 and 2023, we'll see year-on-year EBITDA increases of the order of 40% each year. Of course, if one assumes the current market rates as earnings for the open days, the resulting EBITDA would be significantly higher. Let's now move to Slide 18 to review our debt profile. This slide shows in the bottom part of the graph, our cash flow breakeven level expectation for the next 12 months, And on the top part of the slide, we can see our scheduled debt repayments over the next several years. As you can see, our loan repayments during 2021 are about $4.37 million. This is for the second half of 2021, we can see that in the dark shaded part of the chart. And we also can see that we -- what is scheduled to be repaid in 2022 and 2023. In 2021, we also have a balloon payment of about $12.15 million to make, collateralized -- that loan being collateralized by 4 of our vessels. We're in the process of finalizing the refinancing of this balloon payment, and we expect the process to be concluded soon. In fact, loan repayment schedule that we saw here on this slide reflects such refinance. Looking further out, in 2022, there is a smaller balloon payment of about $2 million to be made, again, collateralized by young vessels. And in 2023, we have a balloon payment of about $33 million, collateralized by the remaining of our vessels. And so which will shift to refinance all of the latter 2 balloon payments when they come due in line with our past practice. And in all of the previous instances, we were able to finance our balloon payments and extend the maturity for our launch. A further quick note here on the cost of our funding before we move to review the cash flow breakeven leverage at the bottom of the table. As Aristides mentioned earlier, we have no preferred debt equity outstanding anymore. Thus, the cost of our non-equity funding reflects only the cost of our bank debt. As we pay another margin of our bank debt of about 3.6% and assuming the LIBOR rate of 0.3%, our senior debt cost average is about 3.9%. Let's now look at the bottom of this table, where we can see our cash flow breakeven level expectation for the next 12 months in dollars per vessel per day. From our discussion about the loan repayments, we can -- we said that our loan repayments are to make $1,750 contribution to our vessel per day breakeven level. If we make similar assumptions for the remaining components of our cash flow breakeven level, that is operating expenses, general and administrative expenses, interest payments, drydocking costs, we come up with a cash flow breakeven level for the next 12 months of just around $96,000 per vessel per day. Let's now move to the final slide, Slide 19. This slide provides highlights from our balance sheet, both on the base of the book value of our vessels and adjusted also for the market value of the fleet. As of June 30, 2021, we had cash and other assets of about $17.4 million, while the book value of our vessels was about $95.6 million, giving us a total book assets of $113 million. On the liability side, we had an outstanding bank debt of $62 million and other liabilities of about $5.3 million. If we replace the book value of our vessels with the market value of them adjusted for the charters, we can calculate the net asset value for our fleet to being around $275 million or about $37.5 per share. Reporting for such a level are also our earnings and EBITDA multiples, price earnings and enterprise value to EBITDA, if indeed they approach those of our other containership operators. Recently, our shares have been taken in the range of $19 to $22 per share. Although, this price reflects a significant increase in the beginning of the year, it still represents a significant discount to our net asset value per share, as I mentioned earlier, thus offering good appreciation potential for our shareholders and good investment opportunities for other investors. And with that comment, I would like to return the floor back to Aristides to continue the call.

Thank you, Tasos. Let me now open up the floor for any questions that you may have.

[Operator Instructions] Your first question today comes from the line of Tate Sullivan from Maxim Group.

If I can start with the newbuilds and you announced the newbuilds on June 30, and you gave some additional information today, but will -- based on the -- will you have a deposit for those newbuilds in the current quarter?

Yes, we will provide a 10% deposit within the current quarter.

Okay. And Tasos, can you talk a little bit about the targeted debt-to-capital or targeted debt ratios post the newbuild acquisitions in 1Q and 2Q? I mean, it still seems like with all the current rates in your EBITDA projection and the EBITDA current forward rates, you'll still be -- maybe a little bit below where you are currently. But can you talk a little bit of targeted debt ratios, please?

We are -- the newbuildings we are assuming, we haven't started any inquires with banks, but we're assuming that we're going to finance the acquisition price by about 2/3, 65% debt, which will draw on delivery. So we expect to make all the initial deposits and payments using our -- funds from our balance sheet. Right now, our leverage ratio is very low. If you use the adjusted market values, we are just about 20% loan-to-value ratio. Even if we have the 65% that we intend to finance the newbuild vessels, I don't think that our loan-to-value ratio will go above 35%.

And you mentioned the contracts for the newbuilds may be secured in about a year, do you base that statement on the current market or your experience historically when you like to secure the contracts before receiving delivery. Can you talk about that timing, please?

Yes. I mean deliveries in about what 20 months, we would need if we wanted to fix them now, we would fix a lower rate than the going rates today. So our intention is to wait and maybe around this time next year to fix the ships out. But we will see. I mean, we will play the market. This is one additional item where we can play the market and decide to fix when we think is the optimal time.

Okay. Last one for me before I turn it over. If you order -- did over -- decide to order additional boats now, would I -- do you have -- well, you can talk about ongoing just -- when would that be into 2024 for delivery? Or maybe just can you talk about the general sector delivery timelines currently, please?

I think generally for Feeder ships the deliveries could still be found within 2023, but second half of 2023. And if you talk about a little bit larger ships, I think you're probably in 2024.

Your next question comes from the line of Poe Fratt from NOBLE Capital Markets.

I had a couple of questions. The first, which is you talked about the charter potentially getting secured a year out on the newbuilds. Do you have a target capital recovery over the initial term of that charter? Can you just sort of talk about what you might be looking for as far as terms on that charter?

I don't think so, Poe. I don't think I'd like to make any predictions now about where the market will be in a year's time. I am hopeful, but I don't want to make any calls.

But would you look to recover, say, 40% to 50% of the capital cost over the initial term irrespective of what the rate would be? Or are you thinking along those lines? Or is it just you have so much...

Not really, not really. I'm thinking that I will have 20 to 25 years of life from the project to recover the project. If I can make it in 3, 4, 5, 6 years, whatever it is, we will be tremendously happy. So -- but I don't know what it will be, and I don't want to say something.

Okay. Sounds good. And you went through sort of your focus and your strategic sort of goals over the next couple of quarters or maybe a year. Can you talk about the expansion potential and what potentially are the hurdles to seeing consolidation right now? Is the bid ask -- seller expectations have to move up. Can you just give us an idea of sort of how you're thinking about consolidation right now?

This can happen in 2 ways, right? One, we use our liquidity to buy new vessels. Of course, we would have to pay more to buy the ships, but we would be able to charter the loss at a higher price. And we are looking into such projects continuously and even now as we speak. That is one way to grow. The other way to grow is by leveraging on the stock price and buying ships using our stock price as a currency, that we also feel is still quite low compared to what our NAV is or our EBIT to EBITDA would result in. So I think we're not ready yet to move on that line. But we are certainly looking at vessels where we think that we can find charter coverage to support buying at these elevated prices of today.

Okay. And then when you look at your fleet, like you've been very successful in locking up longer-term charters on -- the latest one is the Diamantis, that's a 1998 vessel, with 3 -- more than 3 years of charter coverage right now, would you think about monetizing that to reinvest into newer assets? Or is that something that you might consider?

Well, obviously, and as you saw by the newbuild order that we placed, we are looking to gradually take this opportunity and make the age of the fleet younger. However, we have, for quite some time, being same during the last couple of years that we have a length of fleet to it's -- is however, technically very well maintained and can trade everywhere. And that represented an option value in the company. We've been lucky that this option value has been realized as the Diamantis case shows us. So indeed, I think that a few of our vessels that will open up in the next 6 months will also be chartered at extremely high levels.

And how do you weigh the trade-offs of doing longer term versus playing the near-term market and having the upside if rates continue to move. Can you just talk about the process that you'll be looking at like, say, the Oakland and then the 3 other Feeders that are coming up over the next 6 months?

Yes. That is always a consideration that we have to make. Do we want to go for 1 year or 3 years or 4 or 5 years out in the charter. Obviously, the longer period, the lower the rate, but still rates are so high that overall, we have decided to go for longer durations between 2 and 3 years, avoiding the extreme 4 or 5, but not even at 1 year. And I think we will continue somehow like that. You should expect to see us doing deals 2 to 3 years.

Okay. Great. And then you highlighted potentially reinstating the dividend or potentially buying stock. Can you prioritize that as we sit right here. And today, what would be more attractive for you?

Right now, we still feel very confident on the market development, and we are targeting growth more than thinking that this will give a better return to our shareholders than reinstating the dividend today or maybe even the next quarter. But this is something that we consider every quarter, we evaluate and we decide what to do. So if we decide to pay dividend, I think we will want to have a dividend that continues over time, as we have done in the past. But up to now, we are mainly still looking into growing the company further. We think the prospects are quite good to utilize our earnings in this way.

Okay. Great. And then Tasos, if I could just talk to you about the outlook for OpEx. You said you put out the next 12 months. Is that -- are you -- do you think there's any potential for additional cost -- operating cost inflation over the next couple of quarters? Or are you comfortable with the number -- with where you stand right now as far as being able to control OpEx?

I think this is -- the OpEx estimate is based on our budget for the rest of the year, a reasonable increase of expenses for the first 6 months of next year. So I don't have any basis to suggest that I would expect more higher OpEx. We do see that the insurance market being a bit tight and we have fully evaluated how the repercussions of the pandemic will affect growing another mobility cost et cetera, but that is the basis of the estimates put out there. Part of the OpEx are affected a little bit by where the vessels trade. And depending on where the vessels trade, we might see some influence, but it's hard to predict that.

Okay. Great. And then I'm coming up on your EBITDA calculator with just a little bit higher numbers for us as contract cover for 2022. And I was just wondering, do you -- given that the option on [ Aegean ] is well in the money. Is that something you have in full cover? Or if you still -- are you excluding that until it's the options exercised?

I think if it's well in the money, we should have included it or we have included into the coverage portion of the fleet. So I hope the numbers are close with what you estimate, but -- yes. Whatever rate below market is assumed to be exercised.

Okay. Yes. it's just a little bit higher, and I was thinking that might be the difference. Great. And we look forward to seeing what happens over the rest of the year.

One thing that will be significant, Poe, hopefully, will be the assumed rate for the open days, which we're trying to avoid making at least assumption, I just saw here the existing contracted rates as a reference point. But clearly, present market levels are almost twice as high. So that should provide significant higher upside.

Your next question comes from Tate Sullivan from Maxim Group.

Just a couple of follow-ups, if I may. Maybe what the current contracts that you've announced and with the cash build, at least in my forecast, you mentioned at the newbuild announcement potentially using both debt and equity. But is your intention to use cash in addition to the debt to buy the newbuilds?

Yes. I mean we target to finance, let's say, 60% to 65% of the acquisition price with debt. Typically, withdraw the debt at delivery of the vessel. So we have to make 3 payments before -- 3, 10% payments before delivery. And those will be done, will be covered by funds that we have in our balance sheet.

And then looking -- yes, and then looking at the ships, please go ahead -- looking at the remaining ships that have contracts expiring before the end of this year, specifically the core through just getting -- I mean, I apologize if I missed it. I think the core through already had a drydock period in the last year or do you expect some gap between the current contract end in September and a new contract?

In the core through situation drydock this year, not last year. I mean I need to double check that and get back to you. So it's this year.

Thank you. I will now hand the call back for closing remarks.

Thank you very much, everybody, for attending our conference call today. We will be with you again in 3 months' time. Thank you.

Thank you, everybody.

Thank you. That does conclude our conference call for today. Thank you for participating. You may all disconnect.