Avance Gasoline Holding Ltd (OTCPK:AVACF) Q2 2024 Earnings Convention Name August 28, 2024 8:00 AM ET
Firm Contributors
Oystein Kalleklev – Chief Govt Officer
Randi Bekkelund – Chief Monetary Officer
Convention Name Contributors
Operator
Good day and thanks for standing by. Welcome to the Avance Gasoline Holding Restricted Second Quarter 2024 Earnings Convention Name. Right now, all contributors are in a listen-only mode. After the audio system’ presentation, there will likely be a question-and-answer session. [Operator Instructions]
Please be suggested that in the present day’s convention is being recorded. I might now like handy the convention over to your speaker in the present day, Oystein Kalleklev, please go forward.
Oystein Kalleklev
Thanks, and thanks, everyone, for becoming a member of this second quarter outcomes presentation for Avance Gasoline. I am Oystein Kalleklev as talked about, CEO of Avance Gasoline, and I will likely be joined right here in the present day, as regular, by our CFO, Randi Navdal Bekkelund, who will run you thru the numbers.
As talked about within the introduction, we are going to shut the presentation in the present day with a Q&A session the place you possibly can both ask a query by the convention name or by the chat perform.
In order you possibly can see from our entrance web page, we now have discovered some inspiration within the Japanese icon, The Nice Wave off Kanagawa by Hokusai. This image was offered at Christie’s final yr for $2.7 million. So we made our personal addition, which we name the Nice Wave of Dividend by Avance Gasoline and we paid out near then $270 million of dividends for the primary half yr of 2024, which implies that our shareholders should purchase near a whole bunch of this image.
So let’s start with the disclaimer. In the course of the presentation, we will likely be giving some forward-looking statements [via] non-GAAP measures like TCE and people stage. There is a restrict to how a lot particulars we will present on this quick presentation. So we advocate that you just additionally learn the presentation along with the earnings launch, which we revealed in the present day.
So let’s kick off with the highlights. Numbers got here in as anticipated. We delivered our Time Constitution Equal earnings on a discharge-to-discharge foundation, which is the premise for our steering of $50,100 per day. The load-to-discharge quantity, we mentioned could be $3,000 to $5,000 decrease given the place the market was buying and selling and we have been additionally consistent with that steering measure with $46,700 on the load-to-discharge quantity.
This resulted in robust numbers for the second quarter as properly. In the course of the quarter, we offered one ship, our final newbuilding, VLGC dual-fuel newbuilding quantity six. That ship was offered in Could at $120 million, giving us a revenue of $36 million. So all collectively for the second quarter, we delivered internet revenue of $61 million. Meaning for the primary half of the yr, as you may recall, we had improbable numbers for Q1, pushed additionally by the sale of three ships.
So first half of yr internet revenue is $207 million. This isn’t solely the best ever half yr end result, it is really greater than any full-year outcomes we ever ship. This resulted in our earnings per share of $2.7. And as we are going to contact upon, it is also plenty of money launch giving us ample room to pay a really enticing dividend.
Subsequent to quarter finish and previous to us reporting, we introduced the sale of the remaining 12 VLGC in our fleet to BW LPG for a sum of $1,050 million. This supplied us with a acquire of roughly $315 million. So we will likely be buying and selling now the ships till finish of the yr. Some ships could be delivered to BW earlier. So we even have some room to make a buying and selling revenue on the ships, greater to supply of the ship to BW, the place we will even then grow to be the second greatest shareholder of BW LPG.
Money proceeds from the transaction is $585 million, and we are going to novate $132 million of debt. After we are concluding the transaction, we will even pay down all debt of Avance Gasoline. So this provides us a professional forma money Q2, adjusting for the sale of $485 million, which we do suppose, after all, we will even be making some free money movement in Q3 given our bookings and This autumn given the place we see the FFA charges for that quarter.
In the course of the summer time, we had a bit mushy market. Q1 [Technical Difficulty] Q2 sure, an honest quarter with $50,000 in TCE. Given the development within the site visitors by Panama Canal with extra slots coming out there, there’s been extra ships available in the market, dragging down the freight economics. So at the moment, we now have booked 79% of third quarter at $41,000 additionally on a discharge-to-discharge quantity. We do not anticipate a lot deviation this quarter or the third quarter for low-to-discharge and discharge-to-discharge.
This autumn appears to be like higher, which is often the case. You are stepping into the winter season, extra site visitors, extra climate, and often extra crude to Asia. So FFA fee or the freight ahead fee are at the moment at round $55,000 per day for the fourth quarter.
So with robust numbers, a really massive money steadiness, and even greater on a professional forma foundation adjusted for the transaction we lately introduced the dividend for Q2 will likely be $1.35 per share, bringing the dividend for the primary half of the yr to $3.50. That interprets to $268 million of dividend being paid within the first half of the yr or equal to about 30% of our market cap.
And there will likely be extra dividends there as we’re closing the transaction with BW throughout Q3 and This autumn, delivering these ships to BW, we will likely be paid money and share which is able to give us ample room to proceed paying out dividends – very excessive dividends for the remainder of the yr.
So let’s examine what we have achieved within the final couple of years turnover in Avance Gasoline on Slide 4. We have offered all our VLGCs. We began off in 2002 by renewing the fleet. We offered three older 2008/2009 constructed ships for a revenue of roughly $20 million. This was in connection that we took supply of recent buildings. So we took supply of Polaris and Capella in 2022, Rigel and Avior the yr after. So our plan then was to unload the older ships and take renew the fleet with the dual-fuel vessel ships.
We proceed doing so. Final yr, we introduced the sale of Iris and Venus Glory. Iris at $60 million, Venus at $66 million, which gave us a revenue on these two gross sales of near $50 million. Nevertheless, at the moment, these ships have been traded by us till Q1 final yr. So these ships have been closed in Q1 and we booked the revenue from the gross sales in Q1. At the moment, we additionally received an excellent supply on our newbuilding being Castor and Pollux, which was scheduled for supply in 2024.
We contracted these ships at $78 million upgraded than with ammonia spec for about [$23] million, and we offered them previous to supply for $120 million. So, with these gross sales, we had a improbable Q1. And naturally, the Pollux sale was booked then in Q2 as that ship was delivered from shipyards to the brand new homeowners, [indiscernible] in Could.
So, we have been left with 12 ships – a slightly new fleet then as we now have achieved the fleet renewal, eight 2015 eco class ships, of which six fitted with our exhaust fuel scrubber after which 4 dual-fuel 91,000 cubic bigger VLGCs.
We then discovered it in the most effective curiosity of the shareholders given the place the constructing costs are, the place secondhand costs are to promote them and block to BW for this $1,050 million. And we concluded that sale on August 15, and I’ll present extra coloration on the sale.
So altogether right here, we now have offered ships for $1,559 million, with positive aspects of $455 million, of which $436 million has been achieved this yr and with a money launch of round $474 million, plus we will even obtain a 12.8% stake in BW LPG as soon as the transaction is closed, the place we have put a worth on that on the transaction of $333 million.
So, we calculated the NAV of the BW share in that transaction to $17.25. It is barely greater than the inventory value in the present day, however we expect they’re properly positioned with these ships with a completely built-in worth chain with additionally product companies. So, I believe that will likely be deal for the Avance Gasoline shareholders.
That leaves us with 4 newbuilds. These ships have been contracted final summer time, 4 of them. These are medium-sized fuel service or medium-sized ammonia carriers. They’ll carry each. And these ships are set for supply in This autumn 2025 till This autumn 2026, and I’ll come again a bit extra on what we’re planning on doing with the ships later within the presentation.
So only a look on the transaction with BW. We had money at quarter finish $268 million. We’ll obtain a money settlement from BW, the place we will likely be repaying all of the debt in Avance Gasoline, the place we could have a remaining money steadiness of $217 million. That offers us a professional forma money, as I discussed within the introduction right here of $485 million. Then we are going to obtain 19.3 million shares in BW the place we paid the worth at $333 million. As soon as we obtain these shares, we are going to deal with them as honest worth assessments and principally take them to market-to-market in [indiscernible].
The MGC fleet has a worth the place we have taken the Clarksons quantity, Clarksons newbuilding value for related ships is round $70 million per ship. Nevertheless, these are for supply 2027. We’ve got supply of our ships earlier, 2025 and 2026. At the moment, enter charges are fairly excessive, so it has a worth of getting the ships earlier. Additionally given the truth that really, as I’ll check with, time constitution charges for MGCs are fairly enticing nowadays.
So, we packed these at $288 million or about $72.5 million every – or $72 million every. We then deduct the remaining CapEx on these ships, we paid in $43 million to the yard in charge supply installments. So, we deduct the duty to the yard of $203 million.
After which we now have to – as soon as we’re closing down the financing, we must terminate our rate of interest swaps. As a few of you may recall, we hedged our rate of interest at a really enticing stage, principally, roughly all our debt this yr at about 3% and in addition protection properly into subsequent yr, market-to-market on these swaps at finish of Q2 was $89 million. So that we’ll additionally launch. After which on prime of that, buying and selling ships within the freight market additionally entailed having working capital. We had $27 million of internet working capital at finish of Q2, which we are going to launch.
After which lastly, relying a bit on the place the freight market is, we do anticipate our free money movement throughout Q3 and This autumn, buying and selling the ships available in the market given our steering and ahead evaluation of someplace round to $30 million to $60 million, the place we then ending up at NAV – a debt-free NAV of near $1 billion, which ought to translate into a worth per share of near $13 or about NOK135 per share. So that’s the worth we intend to ship again to the shareholders within the coming quarters.
Only a bit extra on the transaction on Web page 6. It’s kind of repeating right here, $585 million money, BW shares. We’ll novate the 2 leases we now have. That provides as much as $1,050 million. We’ve got a $350 million acquire on the sale. And as soon as we’re paying down the debt, the web proceeds is $217 million of money, $333 million of BW shares, after which we will add prime off with some buying and selling earnings in Q3 and This autumn.
Trying on the timing of the gross sales, we sort of crystalized the returns for our shareholders. Right here, we now have the curve of Clarksons newbuilding costs. As you possibly can see, we hit the underside fairly properly on contracting ships in 2019 and 2021. We ordered altogether six dual-fuel VLGCs on the value of $78 million every.
We did some upgrades on quantity three and 4, the place these may very well be fitted for burning ammonia at our later stage as soon as that combustion engine or the combustion of gasoline fuel system is prepared. And we additionally added a specification on quantity 5 and 6, the place they may carry ammonia, which price about $2 million. So altogether, round – barely lower than $80 million common on the ships. We offered the 5 and 6 for $120 million. We introduced that final yr they usually have been delivered to new patrons in March and Could, and now we offered the remaining 4 dual-fuel newbuilds.
If we then look down on the curve, these are quoted five-year resale costs. After which we now have adjusted the curve for depreciation to additionally arrive at a ten and 15-years curve. We see that we offered Thetis and Windfall above the 15 years curve.
After which Venus Glory, we received a very good value on her for $66 million, however principally, we’re getting near a 10-year value for a 15-year outdated ship. After which the eight 2015 ships are actually offered at a mean of about $73 million, which is spot on sort of the 10-year resale value.
So we have been capable of promote in ships at very enticing costs, each traditionally and in relation to the resale curve, which has resulted in fairly good shareholders returns. We’ve got shares 1st of August, previous to COVID, inventory was doing fairly properly in 2019 after which COVID occurred. And principally, all shares on the earth had a tough time earlier than the world recovered. So in case you had invested within the inventory 1st of August and you’ve got it in the present day, you’ll have an 800% return in U.S. {dollars}. For those who have been Norwegian, purchased them in Norwegian kroner, your return could be 1,000%. So you’ll be doing our 10 bagger the final 5 years by being invested in Avance Gasoline and now we principally crystallize that return for you as a result of we’re promoting the fleet, and we’re receiving money and shares in BW as proceeds on that gross sales, and we now have a remaining funding in full MGC.
So let’s speak a bit concerning the numbers for the quarter. As talked about, our numbers are consistent with steering. We guided 83% at $48,000. We delivered all-in $50,100, the place our numbers have been pushed up barely by our FFA hedges. We’ve got some hedging by utilizing ahead freight agreements ending up on the $50,100 once we embody this. We additionally anticipate to make some revenue on our FFA hedges in Q3 given the mushy market.
As talked about, we’re 79% coated, anticipate to reach at round $41,000 per day for Q3, together with the FFA hedges that are contributing $1,300 on common for that quarter. And as I discussed, we do not anticipate a lot mismatch between the discharge-to-discharge and the load-to-discharge quantity, plus/minus $1,000.
So then earlier than giving the phrase to Randi only a bit on the dividend. So we had this big hike in dividends in Q1 the place we paid out $2.15 per share in only one quarter, the identical quantity we paid out in the entire of 2023. This translate to $165 million.
For Q1, that was $0.99 was return of capital as a result of we returned the capital for newbuilding 5 and 6, the place we raised $65 million in April 2021 to finance that transaction after which the return on the earnings.
In Q2 now, we’re paying $1.35, $103 million for this quarter. After which as we’re releasing cash from the transaction within the coming quarters, we are going to proceed to pay out the web proceeds as money dividends to our shareholders. The dividend resolution standards are fairly simple this time. We’ve got good earnings. We’ve got pretty good bookings. Visibility could be very clear as a result of all of the ships will likely be delivered to BW earlier than year-end. We’ve got ample liquidity, $268 million plus if the professional forma money is greater. We’ll repay all of the debt, however we’re making use of [indiscernible] after all, on the debt covenant. After which we are going to preserve some money for the CapEx liabilities for the MGCs. We paid in $43 million.
As I discussed within the earnings launch within the CEO assertion, we are going to protect someplace round $50 million to $70 million for the remaining fairness for these ships, however we’re additionally assessing strategic various for these ships. So it may very well be that additionally these ships will likely be offered. After which if that’s the case, the proceeds from such a sale will even be distributed as dividends to our shareholders.
So with that, I hand it over to Randi.
Randi Bekkelund
Thanks, Oystein. I believe you’ve already addressed and summarized all of my slides. However I’ll go over then.
Let’s go to Slide 10 and take a look at our revenue assertion and key monetary figures for the second quarter. Our TCE per day for the quarter was $50,000 on discharge-to-discharge foundation, which is consistent with the steering of $48,000 a day for 83% of vessel days.
Because the market was stronger by the tip of the quarter in comparison with the earlier quarter, we had [indiscernible] impact and adjustment in accordance with the accounting commonplace IFRS 15, leading to a reported TCE per day of $46,700 which was additionally consistent with the steering.
We efficiently accomplished the sale of Avance Pollux in the course of the second quarter for a money consideration of $120 million. The sale resulted in a acquire of $36 million and a internet money proceeds of $62 million. And this was the fourth vessel gross sales accomplished this yr. Really, first, sure – for the primary half, bringing the overall acquire from vessel gross sales to $121 million and internet money proceeds of $189 million for the primary half.
Web finance expense was $1.5 million for the quarter and consists of internet curiosity expense of $5 million, comparatively low in comparison with the floating rates of interest as we now have hedged most of our excellent debt at 3% [floater] in comparison with the floating floater of 5.3%.
Moreover, we acknowledged the finance revenue of $3.5 million coming from curiosity revenue on money to revenue. Web revenue of $61 million for the primary quarter, $0.79 per share and with the primary quarter outcomes of $146 million. Web revenue for the primary half $24 million got here in at $207 million, $2.70 per share, which is the best half yr outcomes and as I discussed, exceeds any full-year outcomes recorded ever.
Let’s go to Slide 11 and take a look on the key monetary results of the completion of the transaction with BW LPG. The sale of the VLGC fleet at $1,058 million will end in a derecognition of VLGC fleet, bps at $750 million at quarter finish and $745 million on the announcement date, August 15. The supply window is between September 15 till December 31, and we estimate a complete acquire on sale of $350 million, of which $305 million will likely be recorded as acquire on sale and $10 million in decrease depreciation expense.
Only a few feedback on the IFRS commonplace. A reminder, the VLGC fleet will likely be reclassified from long-term property to present property offered as ‘Belongings held for Sale’ with impact from the announcement made August 15. And with the overall acquire recorded for the primary half, $121 million for the 4 vessel gross sales. Within the first half, we estimate a complete acquire on sale of $426 million and as well as, $10 million in decrease depreciation expense for the total yr 2024.
We additionally estimate a constructive impact of $4 million on internet finance expense as we purpose to terminate the rate of interest for hedges with a market-to-market worth of $8 million as of June. That is most likely going to be offset by roughly $4 million in expense debt issuance prices following the popularity of the excellent debt.
For the steadiness sheet, the settlement in BW LPG shares of $333 million will likely be booked at price initially and subsequently measured at honest worth with modifications acknowledged in revenue or loss. And this will likely be labeled as present property within the steadiness sheet.
Additional, we now have – or we are going to derecognize $500 million following compensation of debt and novation of sale leaseback agreements at supply, leaving us with a internet money impact of $270 million, which supplies a professional forma money of $485 million, which I’ll come again to.
We’ll now transfer to Slide 12 to the expense of the quarter. We began the quarter with a money steadiness of $360 million, which was added by money movement from operations of $25 million, sale of Avance Pollux in Could of $62 million, and we additionally settled some rate of interest swaps of $1 million. This was offset by some CapEx associated to the primary MGC of $6 million, the place we now have paid 25% of the shipbuilding contract. We additionally paid out on debt, scheduled debt compensation of $10 million.
And lastly, as you may recall, we had a really excessive distribution to shareholders in Could of $165 million, which was cut up right into a return of capital, representing $79 million or $0.99 per share and dividend of $86 million or $1.16 per share. And by including these actions, we now have a discount of $92 million in money over the quarter and offers us a money place of $268 million at quarter finish.
On Slide 13, you will note that the money movement elevated considerably after conclusion of the transaction and sale of the 12 VLGCs. We anticipate a money launch of $270 million as commented already, after supply of all of the vessels throughout the supply window in December 31.
Moreover, we purpose to terminate curiosity swaps of $8 million and a few FFA place of $1 million in addition to buying and selling earnings generated in the course of the third and the fourth quarter within the vary between $30 million and $60 million relying on the spot freight market.
We’ve got already booked 79% at $41,000 a day and by making use of the FFA curve for the fourth quarter, which is at the moment at $55,000 a day. This counsel the money movement from operations of about midpoint $45 million. So foundation the money quarter finish and the money movement following the transaction offers us a professional forma money of $539 million.
Transferring to Slide 14. There’s an outline, some extra particulars on the excellent debt as of June. We’ve got, in complete, $500 million in interest-bearing debt, of which $368 million is financial institution time period mortgage amenities cut up in two. Line vessels are financed by a financial institution syndicate, focusing of seven banks and one vessel is Pampero is financed by a financial institution bilateral. So the remaining two vessels are financed in a sale leaseback association with BoComm, which at the moment is $132 million and excellent debt will likely be novated to BW LPG.
And with that, I depart the phrase over to you, Oystein, for the market feedback and the sport plan forward.
Oystein Kalleklev
Thanks, Randi. Additionally value mentioning, I believe once we introduced the take care of BW, we had some topics right here to credit score approval of the novation of the sale and leaseback and that has been authorized. So we’re progressing with all of the paper work in order that we will shut that transaction prior year-end.
However let’s take a look at the general marketplace for the Seaborne LPG exports. We’ve got had continued development in U.S., which is by far the largest exporter and by far, the largest raise of VLGC.
OPEC has sort of stagnated the expansion within the Center East, the place we now have seen flat markets. After which on the import facet, its continued development in China, which is ramping up plenty of PDH for our capability.
India is a rising market, which we proceed to develop. And LPG value has been fairly elevated. So we have seen extra change again to LNG in Europe the place LNG has been buying and selling at a reduction to LPG, so 5% down on the European imports. Value mentioning right here, and I’ll come again to that, we see very robust development on MGCs in comparison with VLGCs nowadays, which bodes properly for our newbuilds.
Digging a bit extra into U.S. LPG manufacturing its actually the identical story. Consumption within the U.S. is comparatively flat whereas we carry on rising volumes. There’s plenty of NGLs when you’re drilling for oil. Plenty of the NGL is being recovered. Plenty of the NGLs are actually situated in Texas, the place it is simpler to construct all of the infrastructure required to get these volumes on ships, and that is driving the expansion of the market.
U.S. inventories was down by the chilly winter season in U.S. firstly of the yr the place we really hit down to 5 years common on inventories, which actually killed off the arbitrage at first of the yr, which resulted in fee going from $140,000 per day, greater new yr and all the way in which right down to $10,000 initially of the yr.
Nevertheless, with this good manufacturing profile in U.S. inventories have bounced again and are actually on the excessive finish of the upper common, which implies that additionally costs in U.S. are very low. And when they’re low in U.S., the arbitrage improves, which I’ll come again to. So we see a really conductive marketplace for arbitrage now, however really, freight charges are artificially low in comparison with the place arbitrage ranges are.
So wanting in U.S., a bit going ahead, we now have had scenario now the place we have been near the sealing of exports, nevertheless it’s good to see then that our extra capability being added, that is a stream of bulletins from the massive gamers that they are including capability.
And as I discussed, plenty of the manufacturing now situated at Texas or the New Mexico border the place you’ve easy accessibility to getting the permits required to construct the infrastructure to get the LPG on ships. So we do see a ramp-up in LPG exports, which bodes properly for market steadiness 2025, 2026. So we expect having additionally a number of the settlements in BW LPG shares may very well be useful to us.
Spot market, as I discussed, it has been up and down. As regular, we now have this massive drop available in the market. For those who take a look at the graph on the left-hand facet there from $120,000 we have been at greater ranges than that additionally prior new yr, right down to $10,000. So money breakeven is about $20,000.
We had a bounce again as soon as the chilly climate within the U.S. dissipated and had a fairly good market till summer time the place sort of the glut of ships coming open, dragged down freight charges once more right down to about $20,000 finish of July, early August earlier than they now bounce again buying and selling now at round $40,000, $50,000 per day, and the dotted line exhibits the freight ahead fee for the rest of the yr the place we mentioned that is at about $55,000 for This autumn.
In order that’s on the low facet in comparison with historic common. You see this grey shaded space is the historic common. Normally, This autumn tends to be by far the most effective quarter, and we’re under the common on the FFA in the present day. So there are some upside on freight, we expect. And as we now have alluded to right here this time final yr, we’re hitting all-time excessive freight charges.
Freight charges are very a lot impacted by arbitrage economics. So arbitrage economics sort of places a ceiling on what you possibly can pay for freight. If arbitrage is $300, you should not be paying greater than $300 per ton of freight. Proper now, arbitrage is near $250 per ton.
On this graph, freight is at round $100 per ton. It has been choosing up lately. We are actually at near $120 per ton, however nonetheless sort of the arbitrage is sort of as a lot because the freight. So there are – as we put in our thoughts, the hole, the flurry of obtainable ship. There was additionally ships coming out there available in the market due to Hurricane Beryl, which disrupted exports. So when there are too many ships available in the market, they’re dragging down the freight fee. If transport market turns into tighter, there may be plenty of upside on freight given the arbitrage that is sort of our message right here.
If we take a look at the order ebook, we now have additionally mentioned previously, we had a interval now the place we now have had excessive fleet development by 2023. Plenty of the traders have been so frightened concerning the fleet development for 2023 that we even made our mid-business VLGC addition for this in 2022, the place we advised individuals should not be too frightened as a result of additionally export development could be very excessive in U.S.
So export development has been excessive. We have been additionally final yr in the truth that we had the drought season in Panama, which actually minimize down on slots. So plenty of ships need to say longer routes. So really, we ended up with the most effective market in 2023 since 2014.
This yr, congestion in Panama has loosened up, and this has resulted in additional ships available in the market, which has put some dents on the speed. However nonetheless, if we take a look at our common TCE for the primary half of the yr, it is fairly good. So we’re fairly happy with the buying and selling earnings.
Going ahead, we are going to see much less development available in the market for ships for 2025 earlier than we now have this new wave of ships hitting the market from finish of 2026 and these are bigger ships, usually both $88,000 or $93,000 ships, which we name the VLAC, Very Giant Ammonia Service.
So these are LPG ships, which might carry full ammonia cargo, 98% filling ratio. And people ships are coming from 2026, 2027, 2028 and that principally everyone who’s contracting a ship in the present day are contracting these ships as a result of they aren’t that rather more costly than our VLGC.
On the similar time, as we now have identified previously, there’s ageing fleet. Nevertheless, there is not a lot scrapping as a result of plenty of the older ships are being became the shadow fleet of VLGCs, which is principally ships buying and selling from Iran to China.
In order that has been holding again scrapping exercise, however we do see numerous ships now turning greater than 25 years, the place we’d anticipate at one time, usually, when market is a bit mushy, that a few of these ships will depart the market, however not often ships are being saved in an excellent market.
Sport plan then. Okay, what are we going to do right here, apart from accounting cash, paying out dividends. We’re left with 4 MGCs or we may additionally name them MACs as a result of these, as I discussed, just like the VLACs, they’ll carry full ammonia cargo. So we sort of – some individuals have been stunned once we contracted this final June. So we did that contract with CIMC SOE Chinese language yard for 2 plus two ships at an excellent value. We exercised the 2 first ships in June after which the 2 choices in finish of August final yr, and we are actually having 4 ships for supply 2025, 2026.
So there are three alternate options. The straightforward various would simply be promoting these ships and shipbuilding costs have gone up. So we will likely be doing all of those three alternate options in parallel. We are able to shoot gun and stroll on the similar time. So whereas we’re exploring S&P alternatives for the ships, we will even be – we’re additionally in dialogue about longer-term charters and constitution charges are good in the mean time, as I’ll contact upon.
After which we do have some dialogue with different homeowners of comparable property the place we’re open to the concept that individuals are placing in ships of some related high quality and receiving shares in Avance Gasoline, so you possibly can construct adequate scale as a result of having a public listed firm with 4 MGCs is just not actually a viable technique in our view.
So we will likely be engaged on this stuff within the coming months and hopefully conclude with a positive consequence for our shareholders. We’re fairly assured about that given the place the market is for MGCs and the place secondhand costs are as properly, which I’ll cowl.
Subsequent slide. So the 2 dots there may be once we contracted the ships at what we mentioned was the very favorable level of time. Since then, newbuild value has gone up round 13%, so we’re at round $70 million loss for the same ship now. However as I discussed, for supply, 2027, we do suppose there may be worth in having ships earlier.
We paid down $43 million in pre-delivery installment. All of the ships have installment profile of 15% cost at signing, then 10%, 10%, 10% and 55% at supply. So the massive money define right here is just not earlier than This autumn 2025 once we take the primary supply, then Q1 2026 second, Q2 2026 the third ship, and the ultimate ship anticipated This autumn 2026. Up to now, we now have good progress on the yard, very proud of the standard, and really all of the ships are barely forward of schedule.
Then the marketplace for MGCs. That is actually a rising phase. So we have seen this excessive development on the LPG seaborne transportation, however the place we see the best stage of development is on the MGCs. So the MGC is grabbing market share. And if we take a look at this CAGR, a development issue from 25% – 2015 to now, it is about 30% U.S. development. And it is plenty of development in additionally the completely different import nations, being Europe, Mexico, Morocco, Chile and the remainder of the world. So we expect it is a horny market, and that is additionally why we contracted the ship final yr.
So in case you take a look at charges, so we now have good fundamentals. You additionally usually then have good fundamentals for charges, has been doubling within the final 5 years from low of $15,000 per day to now near $35,000 per day. OpEx on these ships are fairly related, barely decrease. They’re all fitted with shaft turbines. So $35,000 ought to equate to an annual EBITDA of about $10 million per ship.
So in case you put the worth of the ship of $70 million, that offers you an EV EBITDA of seven million, which is the low quantity. I believe with the contract, the ships could be value extra, in order that’s why we’re that in parallel. And the order ebook profile appears to be like properly. It isn’t that many for supply and in addition the actual fact, which I identified within the final [indiscernible] is the truth that usually, this market has consisted of three asset sorts. It is the MGC, the medium-sized, massive fuel service, which is often 60,000 cubic, after which the VLGCs from 80,000 plus.
And what we now have seen in the present day is that individuals are chopping up their cargoes and using MGCs and VLGCs and LGCs are dropping floor, which we expect is favorable as a result of this phase goes to proceed to eat market share. So with that, I believe we conclude numbers, as talked about, consistent with steering, $50,000 on TCE for the quarter, Q2 numbers are additionally inflated by our sale of VLGC newbuild quantity six, giving us $61 million of revenue. In complete, $207 million of revenue for the primary half of the yr.
After which we have hopefully defined the rationale for promoting the remaining VLGCs to BW, the place we acquired substantial money and shares in BW turning into the second greatest shareholder. And we’re dedicated to paying that dividend this money again to you as dividend, and that is why we’re additionally paying a dividend of $1.35 per share for Q2 the place this provides as much as $3.50 for the primary half of the yr.
We’ve got honest bookings for Q3. So we do anticipate to generate some money movement in Q3. And hopefully, with the FFA curve, we will likely be making a bit extra in This autumn. And as soon as we shut the transaction with BW, you possibly can anticipate us to return the excess money to you in a well timed method.
So with that, I believe we simply head over for the Q&A with the chat, however perhaps we will begin with the cellphone.
Query-and-Reply Session
Operator
Thanks. [Operator Instructions]
Randi Bekkelund
We’ve got just a few questions from the webcast. The questions are fairly related. So we attempt to mix all of them. However beginning off with what’s the intention with the inventory place in BW and can Avance shareholder worth be affected?
Oystein Kalleklev
Sure. So how we now have organized this transaction is 12 ships. So 10 ships will likely be offered on the usual memorandum settlement. That is only a gross sales contract, which is a normal type of contract NSS 2012 [indiscernible]. So as soon as we promote the ship, BW will shut collateral or [indiscernible] for that quantity in reference to the transaction with BW will take over the ship. The cash will go to the financial institution, repaying the mortgage on the ship and the mortgage will then be launched and the remaining residual quantity will likely be paid to us. In reference to every supply, we are going to obtain a set variety of shares. And when all of the 12 ships have been delivered to BW, that can add as much as 19.282 million shares.
There’s a lockup as we mentioned within the press launch of 40 days. So we do anticipate many of the ships to be delivered to BW round November. So as soon as we get that ship – these shares, there will likely be a lockup, which 40 days is handy. We’ll come again with our This autumn presentation in February, the place we are going to current our numbers for This autumn. After which hopefully, we now have been capable of ship our free money movement in in accordance with the waterfall we now have proven in the present day. And all of the shares in BW, the lockup could have expired. So then, after all, we aren’t planning to grow to be like there is a share in Oslo known as [indiscernible] the place you should buy a share to grow to be an oblique proprietor in one other firm.
So what we’re planning on doing is both if we discover a keen purchaser, we would promote the shares and distribute the money to the Avance Gasoline shareholders. If not, we are going to merely simply dividend out the shares to our shareholders in Avance Gasoline. And in case you add up the quantity, that implies that for each share you’ve in Avance, you’re going to get a 1/4 of our share in BW. And we discover that inventory very fairly excessive, and with the pretty muted fiscal 2025 into [indiscernible] companies, we expect that, that may very well be additionally funding for you guys to have. So we aren’t planning to sit down on these shares and we sort of a by-product of BW LPG. Our intention is to return that sort of asset, both by money or share to you. And this we are going to know by once we are reporting This autumn in February, however we are going to do no matter is finest for the shareholders.
Randi Bekkelund
Superb. After which we now have fairly just a few questions in relation to the corporate’s plans relating to the ammonia market. Can we intend to maintain the MGC?
Oystein Kalleklev
No. As I mentioned, we now have three plant in our head. We’re pursuing all of them in parallel, promoting them, charging them or discovering anyone else who has related property and mix with these. We don’t intend to usually sitting with an enormous pile of money. So, we’re not aspiring to run round and contract plenty of new MGCs. We’re dedicated to paying out the proceeds we now have acquired from the VLGCs to our shareholders. If we’re to do one thing consolidation, both then we elevate cash for that enterprise, for many who have an interest or we discover different individuals who have ships who can take shares in Avance Gasoline.
So, we discover it market. As you have seen, the basics for that market, is nice. We did not actually dig an excessive amount of into ammonia [indiscernible]. We’ve got achieved that previously. Ammonia market is predicted to additionally develop fairly closely within the subsequent couple of years, each by ammonia mixing into coal crops, usually in Korea and Japan and in addition the final ammonia market. There are extra individuals who need to have gasoline. So after which there are additionally the blue and inexperienced ammonia, which may additionally pay out relying a bit on the subsidies and the value of carbon. It is a costlier gasoline than hydrocarbons.
So, we’re open to that concept. We’re doing every thing concurrently. And what our purpose is, is simply to maximise the worth of these property. And we now have acquired fairly a little bit of curiosity on the ships, given the announcement on the sale of the VLGC fleet. Individuals do see that it is attainable to do a transaction with us. We’ve got demonstrated that we now have offered 16 ships this yr, 19 VLGCs in complete the final two years or so. So, let’s examine. I hope I’ve some extra solutions to you once we are reporting Q3 in November. However we’re in no rush. These ships are usually not going to be delivered earlier than This autumn 2025 onwards, and that is very restricted money outlay earlier than supply of the ship.
Randi Bekkelund
After which we now have a query available on the market. Might you please clarify why the arbitrage is just not going by the ship-owners within the type of greater charges? Is it remaining with the exporters?
Oystein Kalleklev
Sure, that is provide and demand. So Alfred Marshall, he defined this, I consider it was in Ideas of Economics. So, if there may be plenty of ships available in the market, giving provide and demand is sort of the identical, what’s going to occur if everyone desires to have the freight, having a ship idle and value some huge cash by way of OpEx and gasoline? So, you’ll take the value the market units and the market value is determined by the provision and demand. And through this summer time, when you’ve seen a big improve in slots being out there in Panama, meaning if a ship is crusing from U.S. Gulf Coast to China to Panama, each methods, going there [laden in Ballast] its 10,000 nautical miles. It goes by Cape of Good Hope as a result of it isn’t actually a viable choice. It is like 15,000, 15,500 nautical miles.
So even plenty of ships are switching buying and selling sample from going Cape after which we now have had seen Cape after which Panama all laden and positively additionally ships doing the Ballast leg on the Panama. It actually sees up plenty of ships available in the market. And when there are extra ships, charges will likely be low. That is simply the regulation of economics. And that explains why the arbitrage and freight has disconnected, which isn’t that good for us as ship-owners. It is extra – it is a lot better for the terminal homeowners or the individuals who have a time period contract for his or her time period.
Usually, you enter into, to illustrate, a 5 years settlement with the terminal that you’ll be taking offtake of LPG and also you’re paying a terminal charge then for that five-year interval, which may very well be $0.05 or $0.06 or $0.07 per gallon. However actually now, you’ve been within the place the place you as a purchaser of that cargo can flip round and promote it FOB, free on board for $0.27 per gallon. And you then’re making a $0.20 revenue on having the contract to raise that cargo. So, this goes in ups and down. It actually relies on the steadiness. So as soon as the freight market is tighter, then ship-owners will be capable to take out extra of the arbitrage. And as we noticed final yr and seen in interval the place this freight market is tremendous tight. A lot of the economics will find yourself with the ship-owners. However when the freight market is unfastened, extra of the economics will find yourself with the Pollux proprietor.
Randi Bekkelund
We even have a query referring to the inventory value. It has dropped 30% after saying the gross sales?
Oystein Kalleklev
Sure, that as properly a bit. Sure, we had a inventory value, we sort of had a rally in the course of the summer time regardless of freights at fairly low ranges. And once we did the announcement, relying on what analysts you’ll speak to our highest NAV was someplace round 1.2, 1.3x. After all, it hurts them to sort of agree a value the place sort of the proceeds on that [indiscernible] is decrease than what’s implied within the inventory market. However we do know that the inventory market is sort of risky. In order Warren Buffett says the inventory market is [indiscernible] one that involves your door each day and provide you with a value. Some days, that value is simply too low, generally it is too excessive.
We’ve got seen that the value we will obtain on promoting the property and as I demonstrated on the curve its actually very excessive asset costs, and that is additionally affected within the internet revenue of $315 million, the place we even have some upside on the buying and selling. So, in that sense, sort of its laborious to do one thing which is decrease than the inventory costs, however we will not have the inventory value deciding the technique of an organization as a result of then the technique of the corporate will likely be completely bipolar and risky.
We must be sort of long-term considering by way of our strategy. And what we see now’s that, okay, in case you invested in Avance Gasoline the final 5 years, we’re principally crystallizing our 800% acquire for our traders in {dollars}, in NOK its 1,000% and that is a fairly good end result. In order that’s why we did the transaction. It additionally helps that it makes 100% industrial strategically sense along with monetary sense. So, it is – after all, we just like the inventory solely to go up. Sadly, that is not possible.
Randi Bekkelund
Sure. I believe we now have concluded the questions from the webcast as properly.
Oystein Kalleklev
Sure. Okay. Thanks, Randi for studying the questions and presenting the financials. Thanks, everyone, for becoming a member of in on the decision. We will likely be again in November with Q3. I believe then we all know extra particulars concerning the closing course of with BW. I might think about fairly just a few of the ships has already then been delivered to BW and we now have visibility on the remaining deliveries to BW.
After which we would most likely even have some thought concerning the remaining bookings for the yr and the money movement we could have made on the buying and selling of the ships, and we are going to then come again with the numbers and provide you with replace on all that. Hopefully, we even have some thought on the technique for the MGCs. So, thanks, everyone, and speak to you guys again then in November.
Operator
This concludes in the present day’s convention name. Thanks for collaborating. You might now disconnect.
