Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the Fourth Quarter 2019 Financial Results. We have with us Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou and Mr. Christos Begleris, Co-Chief Financial Officers; Nicos Rescos, Chief Operating Officer of the company. [Operator Instructions]. I must advise you that this conference is being recorded today. We now pass the floor to one of your speakers, Mr. Begleris. Please go ahead, sir.

Thank you, Operator. I'm Christos Begleris, Co-Chief Financial Officer of Star Bulk Carriers, and I would like to welcome you to the Star Bulk Carriers conference call regarding our financial results for the fourth quarter of 2019. Before we begin, I kindly ask you to take a moment to read the safe harbor statement on Slide 2 of our presentation. Let us now turn to Slide 3 of the presentation for a summary of our fourth quarter 2019 financial highlights. In the 3 months ending December 31, 2019, TCE revenues amounted to $148 million, 8.2% higher than $136.8 million for the same period in 2018. Adjusted EBITDA for the fourth quarter 2019 was $88.5 million versus $82.4 million in the fourth quarter 2018. Adjusted net income for the fourth quarter amounted to $34.5 million or $0.36 earnings per share versus $30.3 million adjusted net income or $0.33 earnings per share for the fourth quarter of 2018. Our adjusted EBITDA and adjusted net income figures for the fourth quarter of 2019 included an adjustment of $4.1 million for the accelerated dry docking expenses brought forward from 2020 to 2019. Our TCE rate during this quarter was $15,535 per vessel per day. Total cash today stands at $110 million with total debt at approximately $1.6 billion. In terms of financing, we have two new finance facilities to report. We are refinancing two Newcastlemax vessels with up to $55 million with a European lender at very competitive terms. We have agreed with another European lender a working capital facility of $30 million to support our commercial operations and increased working capital needs related to trading our vessels in the voyage market. In December 2019, we hedged approximately 12% of our estimated annual fuel consumption by selling the 2020 VLSFO, HSFO spread at a…

Thank you, Christos. Please turn to Slide 13 for a brief update of supply. During 2019, 41.3 million deadweight were delivered and 7.8 million deadweight were sent for demolition for a net fleet growth of 32.2 million deadweight or 3.9%. A total of 24.7 million deadweight was reported by Clarksons as firm orders, the lowest since 2016. The order book currently stands at 9% of the fleet, the lowest level since 2002 and only 1 million tons deadweight has been ordered in the initial 50 days of this year. This, we believe, is not just due to the slow market, but also due to the fact that we do not know what the fuel of the future will be 5 to 10 years down the road. During the second half, scrubber retrofits are estimated to have absorbed 2% of the total fleet and 4% of the Capesize fleet. Current scrubber penetration is estimated to have crossed 14% of the total dry bulk fleet in deadweight terms, expected to reach 23% at the end of 2020. The average steaming speed of the dry bulk fleet during 2019 was 11.5 knots and has currency decreased to 11.2 knots following the recent freight market correction and increase in bunker costs. Year-on-year, the drop in speed is to the tune of 0.5 knot. During 2020, the dry bulk fleet is projected to expand at the pace of approximately 3.5%. However, this could be revised lower as we're currently observing a high rate of demolition of Capesize and operates VLOC vessels and Chinese shipyards are currently experiencing delays related to the coronavirus. We expect 44 million deadweight of newbuildings and 13 million deadweight of scrubbing for a net influx of 31 million tons deadweight. Let's now turn to Slide 14 for a brief update of…

[Operator Instructions]. Our first question is coming through a caller.

It's Randall Giveans from Jefferies. All right. So yes, obviously, pretty strong performance here in the fourth quarter. Your 1Q kind of quarter-to-date rates are quite impressive as well, especially the 65% at almost $20,000 for your Capesizes. So looking into that, how much of this outperformance is due to your scrubbers? And then kind of for the next, let's call it, 35% in the quarter, current Capesize benchmark rates are 3,000 a day. Using a spread of maybe 200 a ton, what is your current rate on a scrubber-fitted Capesizes? Is it 8,000, 10,000, 12,000? I just want to try to get a run rate from here.

Randy, this is Petros. First of all, we -- you know we're members of the CCL pool of Capes. There are 4 companies in that pool and about 130 vessels. Therefore, we have some muscle. But the reason the rates are as good as they are is, a, because we fixed early in December, and we try to fix longer duration charters, so that we -- they spillover into January and February. So partly, this is the reason and the scrubber benefit for January has been on average somewhere around $6,500. Now going forward, I think we will retain roughly the same scrubber benefit for Q1. And as for the market, we intend to fix better than the spot market, but it all depends where this will be going. So I can't give you a forecast about the balance 3.5% -- 35%, but you can add to whatever you think it is, about $6,000 of scrubber benefits perhaps, a bit higher than that.

All right. Well, that covers that. Now looking at the off-hire days scheduled for the first quarter. It looks like you have 1,208, but only 10 scrubbers set to be installed. You also have, I know, 36 scrubbers set to be, I guess, certified during the quarter. So can you help breakdown the 1,200 days into dry docking versus scrubber retrofits for the 10 versus the certification process for the other, I guess, 36?

Andy, this is Nicos. We have 18 vessels at the seashores now. We took a conscious decision not to move ships out of their slot positions simply because more people will come back once the coronavirus is subdued, hopefully. We are definitely experiencing delays. We have about 5 ships performing dry dock at the moment. But what's important is that people have come back to the shipyards as of February 10. And every day that goes by, more people are employed onboard the vessel. So we have a realistic expectation to have 13 vessels to go out by the end of March -- actually about 5 within -- still within February and the remainder, which is basically late arrivals due to some legacy charters to be completed by the end of April. The remaining vessels which we have at sea, they have been already retrofitted and just completing the riding teams, and they will be done very shortly. So we have an extended downtime at the shipyards because of the virus. But what's important is there is activity and things are finally moving.

I should add here that we had the 11 Delphin vessels that we took delivery halfway down the year, and we had to order the scrubbers for them at that time. And therefore, the delay in installing the scrubbers on those vessels.

And just the correction on the numbers, Randy. This is Christos. We have certified 90 vessels out of a total of 114. Therefore, the remaining are essentially 24. And as Nicos said, 6 -- certification for the 6 are -- is basically going to be completed by -- in the next few days. Therefore, we'll be down to 18, which are essentially the vessels that are currently in Chinese shipyards.

Got it. And then just to clarify, the riding teams you mentioned for the at sea, that is just for certification? Or are they doing some installation as well?

They completed installations at the yards last year and the ships left to complete at sea with riding teams. So they're only pending certification in the next few days.

[Indiscernible] but the riding teams are doing what is essentially installation work?

Correct. Yes.

Got it. Yes. Perfect. Well, yes, congrats again. I have a few more questions, but I won't monopolize the call. So I'll hop off. Thanks so much.

Thanks, Randy.

[Operator Instructions]. Our next question has come through a caller.

It's Amit Mehrotra here from Deutsche Bank. First question, I just wanted to ask about the fuel spread hedge that you guys entered into the quarter. I saw there was a nominal, I guess, noncash realized gain in the quarter, but I also want to understand, I don't think there's any benefit to the TCE or revenue from that contract, but I just want to make sure that that's the case. And I don't know, Hamish, maybe if you want to expand a little bit on the rationale behind that trade?

Okay. So first, to answer your direct question, I think we do not get hedge accounting for that hedge. Therefore, it does not go into the TCE calculation. It's basically accounted for as a separate asset. It will go -- sorry, it will go to the TCE next quarter a realized portion. So anything that -- because up until December 31, it was unrealized. It was just a mark-to-market. Next quarter, the realized parts of the first three months are going to be included in the TCE.

And is that -- sorry, just -- let's just focus on that for a second. So there was a $333,000 gain in the first quarter. What is -- I assume the gain is going to be quite a bit larger in the second quarter. Any way to kind of sensitize us to that number and -- so we can think about what the benefit will be to the 2Q TCE -- sorry, the Q1 TCE, I apologize?

So Amit, we have fixed a number of tons per month, essentially. So it's month that passes, we are realizing a gain or a loss. So the realized portion that we have for January, February and March is going to be included in the TCE result of the first quarter.

So is it linear? So I know you guys talked about booking 10% of your fuel consumption? I think you said it's 1.2 million tons in total.

Yes. Yes. We have booked 84,000 tons for the year, so...

7,000 tons per month.

7,000 tons per each month.

So we take the $266 -- whatever the mark-to-market is against the $266, and that's the gain on the number of tons?

Correct.

And just to clarify, Amit. Just to clarify -- this is Christos. The guidance figures that we provided for Q1, obviously, do not include any of the benefit from the hedges that we have done.

Yes. I mean, it's pretty small, right? I mean, you're talking about -- it's a pretty small number, right? Anyways, just given how much you guys have hedged?

Yes. I mean, it's 12%. And I guess, you had a question about the rationale for the trade, and the rationale basically is that if you assume a constant charter rate for a ship without a scrubber, which of course is not necessarily an assumption that holds all the time, then the charter rate for a ship with a scrubber is determined by that fuel price spread. So we're basically just hedging 12% of the return on our scrubber investment for 2020.

Right. No. I get it. That makes sense. And then, obviously, that's a good trade given what's happened with oil prices and the spread over the last couple of months. I wanted to understand the step down that we should expect, at least, if you can help us calibrate expectations for the second quarter. And I'm really talking about second quarter here in terms of bookings, which is what you're going to announce 3 months from now because a lot of the strength in the first quarter TCE just reflects voyages that may have started in December when the spot market was much stronger. And so is it your expectation when you guys report bookings or what you're doing today, let's just say it like that, what you're doing today prospectively, are you around breakeven levels of that $11,000 on a blended basis? Or when you guys report bookings in the second -- in the first quarter for the first -- for the second quarter, should we expect maybe something in the $6,000, $7000, $8,000 on a blended basis because the spot market is just so low. I just want to make sure the expectations are calibrated -- our expectations are calibrated.

Amit, it's Petros. We have only booked about 14% of our Q2 days at around $13,500. But I think most of it is actually -- let me see. Half of that -- of those fixtures are Capes. And as I said, they average about $13,500 for 15% -- 14%.

Was that -- Petros, was that 14% booked in January? Or is it still booked in December on longer-term voyages?

That was booked on average December and January. And we're actually also looking at contracts for our Capes for the whole year, so -- because you see if you fixed for Q2, Q3, Q4, now off the top of my head, this would be about $15,500. And you add to that, let's say, $6,000 for the scrubber benefits, that would end up being $21,500. So it doesn't hurt to fix a bit through the year and at $21,500.

So you're going to -- so you're thinking there's a market right now to time charter Capesize vessels that are scrubber-fitted for 2020?

With the fixed vessels FFA at $15,500 on the 3 quarters plus the scrubber differential.

And then the last one for me. I guess, obviously, the fuel spread expectations have come in. If you look at the spreads today for 2020, it's kind of $160, $165. In 2021, it's $150. And that's quite a bit down. Obviously, fuel prices or oil prices have come down significantly. So I guess, Hamish or anyone that wants to answer this, how do you think about that curve? There's obviously been a lot of developments in the energy markets and especially demand outlook with respect to China. Is that a transitory impact? Or it's just the very low sulphur fuel is just more available than it used to be than maybe people expected a few months ago. Any -- Hamish, any thoughts on like how you expect to spread? What's driving the spread to contract? And actually, right now, if you're -- what is the spread in Rotterdam or Singapore relative to that $160 average for the full year?

Okay. So Amit, a lot of what's driving the spread is the lack of demand for refined product right now. And in particular, gasoline and diesel demand is way down. And we recently heard that the highest crack spread -- the most profitable product a refinery can make right now is 0.5% sulphur fuel for ships, which is a very unusual state of affairs. And what that doing is it's leading the refineries to maximize their output of 0.5% sulphur fuel. At the same time, there's substantially reduced demand for 0.5% sulphur fuel for ships because the fact is shipping traffic is way down. All of this is basically due to the virus. So if the virus were magically to go away tomorrow and economic activity were to snapback, we would expect to see the spread between the price of high sulphur and low sulphur fuel expand quite sharply, primarily due to the -- to an increase in the price of low sulphur fuel. And then you asked -- can you repeat your question about...

What was the current spread right now that you're getting?

So it's about -- it's close to $180 levels. Amit, for calendar '20, we see sort of the spread being at $170 levels. For calendar '21, it's at the $160 levels that you mentioned before.

I think I've spoken, Singapore was at $190-something, actually.

[Operator Instructions]. We have -- please go ahead, caller.

Randy Giveans at Jefferies. One follow-up question. Rates are obviously below OpEx. Asset values have fallen a little bit as a result. As such, I'm sure there are and maybe will be some incremental owners looking to sell some assets soon. So with that, what are your thoughts on maybe further ships for shares acquisitions? Is that kind of additional kind of consolidation likely here in the coming months? Or are you kind of offset with your current fleet?

Well, Randy, as always, to the extent we can grow the company in a way that is beneficial to our dividend per share and keeps our leverage at the same or lower levels and allows us to issue our shares at net asset value to buy ships, we're always looking at that. And obviously, the lower the share price, the more challenging those deals are to get done. But as you've seen, sometimes, we've managed to surprise ourselves and get these deals done despite any headwinds from the share price. We'll see is the answer.

There are no further questions waiting, so I'll hand the call back to Mr. Pappas.

No further comments, operator. Thank you very much for attending this call.

Thank you very much. Ladies and gentlemen, that does conclude the call for today. Thank you all for participating. You may now disconnect.