Feb 5, 2018
Executives
Hugh Baker - CFO Emanuele Lauro - Chairman and CEO Robert Bugbee - President Cameron Mackey - COO
Analysts
Herman Hildan - Clarksons Fotis Giannakoulis - Morgan Stanley Poe Fratt - Noble Capital Markets Jon Chappell - Evercore Magnus Fyhr - Seaport Global Randy Giveans - Jefferies Gregory Lewis - Credit Suisse Ben Nolan - Stifel Noah Parquette - JP Morgan
Operator
Hello. And welcome to the Scorpio Bulkers Incorporated Fourth Quarter 2017 Conference Call.
I would now like to turn the call over to Hugh Baker, Chief Financial Officer. Please go ahead, sir.
Hugh Baker
Thank you, Operator. Thank you all for joining us today.
On the call with me are Emanuele Lauro, Chairman and Chief Executive Officer; Robert Bugbee, our President; and Cameron Mackey, our Chief Operating Officer. The information discussed on this call is based on information as of today, February 5, 2018 and may contain forward-looking statements that involve risk and uncertainty.
Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release that we issued today, as well as Scorpio Bulkers' SEC filings, which are available at www.scorpiobulkers.com.
Call participants are advised that the audio of this conference call is being broadcast live on the web and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days.
Now, I’d like to hand over to Emanuele Lauro.
Emanuele Lauro
Thank you, Hugh, and good morning, everybody. Thanks for being with us today.
I'll start with a few introductory comments and then turn the call back to Hugh who is going to go through a couple of slides. So, we are at the early stages of the dry bulk market recovery.
The continuous, measured, but steady improvement of the freight environment over the past eight quarters has allowed us to consolidate our steps in providing financial flexibility, both to the Company and its balance sheet. This reaffirms a greater potential for shareholders’ returns and value creation going forward.
In the latter part of last year, we were reinstating principal repayments to their original form on the debt front. This was over the summer, July or August.
We have been introducing a dividend distribution of $0.02 per share in October for the third quarter. We have been acquiring 10 vessels at attractive prices during the fourth quarter using cash and shares.
And we have also repurchased 1.5 million shares under our buyback program. Now, at the beginning of 2018, we are watching the improved market conditions in what is usually the weaker quarter of the year from a rate perspective.
We have a share price higher than our purchases and we are in no rush to increase that buyback position. We have maintained $0.02 per share dividend distribution as per the previous quarter, which as I have mentioned in the past, we are looking at making a sustainable one.
We have taken delivery of 9 out of the 10 new acquisitions, which at current rates are generating positive cash flows. We have one delivery of a Kamsarmax vessel over the coming summer, and we expect to be fully financed very, very shortly.
We have a good cash position and are ready for what we expect to be a continued improving market environment and the transition into profitability. With this, I'd like to turn the call back to Hugh.
Hugh Baker
Thank you, Emanuele. I'd like to refer all of you to the presentation that we have uploaded to our website in respect of today's earnings release.
This presentation supplements the earnings, the information already provided by the earnings press release, and it's definitely worth you reading. In the fourth quarter, it was a positive quarter for the quarter and we saw material increase in rates, which was the seventh consecutive sequential quarterly increase in rates since the first quarter of 2016.
In that quarter, we earned rates of $12,605 per day and $10,886 per day respectively for our Kamsarmax and Ultramax vessels. And as of 30th of January, we've booked and guided you in our earnings press release that we booked 74% and 63% of the first quarter at $13,300 per day and $9,800 per day for our Kamsarmax and Ultramax vessels, respectively.
During the fourth quarter, we made a net loss of $1.1 million, which is a loss of 1% per share. However, EBITDA was $22.9 million, which is an increase from Q3 2017, which was just $12.4 million and just $1 million in Q4 2016.
As of last Friday, the Company had $69 million in cash and that is one of the reasons why we’re comfortable that we can sustain and meet the dividend that Emanuele just talked about of $0.02 per share. During the quarter, we purchased 10 vessels for a total consideration of $232.5 million, of which partial payment was made in stock.
We currently have no further CapEx planned. Of the nine vessels purchased in Q4, we've delivered -- of the 10 vessels purchased in Q4, nine of them were delivered and nine of them have been financed.
We have one more vessel to deliver, which should deliver in early -- in the second quarter of 2018. And that vessel is going to have finance put in place for it shortly.
During the fourth quarter, we also purchased 1.5 million of our shares for a total consideration of around $11 million. Incidentally, I'd like to disclose something that is not closed in the earnings press release, but it will be disclosed in 20-F, which is that during the fourth quarter, we were concerned about rising interest rates.
So, we actually purchased three interest rate caps which have capped $300 million worth of our debt until December 30, 2020 at LIBOR rates of 3.5%. As a result of these caps, 51% of our debt for the next 12 months is now fixed.
With that said, I pass the call to Robert.
Robert Bugbee
Hi. Good morning, everybody.
I'd just like to stress that we're really confident in this market recovery, but we're not cavalier. As Hugh and Emanuele pointed out, we've managed to -- the discipline that we've shown during the second and third quarter, allowed us to do what we did in the fourth quarter.
This quarter is very much a transitional quarter; it’s the worst quarter that we expect in a year, traditionally the worst quarter. Once Chinese New Year finished within two or three weeks, we and the rest of the industry expect things to move upwards.
At the same time, we just see it as transitional, we’re not raising the dividend at the moment, we’re not buying anything; we’re just sitting in a great position as where we are. We think we’re at very early innings of a dry bulk market recovery.
And most important now, we can see the dry bulk now is in a whole of a shipping market, the entire shipping market we think is due for a great recovery. We’ve seen the -- following the dry bulk, normal perception of the container market as being next market to do very well, gas is doing better and the fact across all shipping, values are up in every sector.
And this is very important, because it means as the company, primarily company’s balance sheets are doing so badly at the moment. It means across shipping that even in a sector such as the products market, even though rates aren’t very high, they are well above OpEx and interest.
So, this means that despite earnings not being very strong probably for most of the product tanker companies. It means net asset values improved substantially in the last three months as a result of prices going up.
And this another thing that’s happening in the dry cargo market too, as you’ve got double thing happening of cash generation plus asset prices are rising, and that’s really exciting. And as Hugh pointed out, we’re not afraid of inflation.
Inflation is great for us. SALT’s really, really in a fantastic position going forward here.
Inflation as a result of demand for the commodities we carry and increased world GDP is fantastic. Steel values are being improved by inflation.
The other part of the things is that we’re really well-placed. We don’t have much CapEx here.
Brand new fleet, low operating CapEx, and we’re already very well prepared for the water ballast. And by definition, we have lower fuel consumption.
So, we’re in a great position for the high sulfur ores [ph] too. So, we really look forward to later in the year.
The curves are all in nicely placed, the forward freight futures are in Contango 2 today, the time charter markets are in Contango 2 today. And with that, we’d just like to open it up for questions.
Operator
[Operator Instructions] Our first question comes from Herman Hildan of Clarksons. Your line is now open.
Herman Hildan
Just kind of -- I mean, there’s no secret that you’ve been fairly active off the yards for the last couple of years. And then, Robert, you mentioned, call it higher asset prices.
Could you give some color on the dynamics for the yards performance and then kind of how you see position of the yards at this time?
Robert Bugbee
Well, I’ll just and Cam or Emanuele free to add. But the yards have, first of all, less capacity; they’ve done some kind of cutbacks in a big downturn.
Secondly, they’ve done different financings. And thirdly, their input costs are moving upwards, whether that’s labor or the actual commodities to buy things.
Plus they’ve been starting to get over the change, the shock of the market is being lower. So, consequently, prices have moved upwards and they’ve moved up quite a lot, probably anywhere -- I'd leave that up to Emanuele and Cameron, but I mean what I’m reading is up to 10% or so in the bigger ship sizes too.
Herman Hildan
Yes. Because that’s -- I mean, I’m not sure whether you have kind of…
Robert Bugbee
This is across the board, this is whether -- but we’re hearing it in generic sets. I mean, we’re not actually as active as we once were in the shipyards and so.
So, we’re hearing this in terms of reading what you’re reading and generally just talking to yards. And you can see what people have been declaring, ordering the newer vessels more recently.
Herman Hildan
And kind of -- if you look at your order book [ph] today and you compare to the part of the fleet that’s 28 and older, it’s quite low fleet growth over the next couple of years. Have you kind of entertained the thought of ordering more ships or you’re going to be more focused on having more transactions [ph] in the years ahead?
Robert Bugbee
No. I mean, we really have a -- look, we have a great fleet, fantastic fleet.
In the quarter, we’ve worked really hard to do this. Insiders in the Company bought stock in the last quarter.
We have a very strong equity position. We want to make a great return out to this.
We’ve taken -- we’ve taken the risk. There is no need for SALT to go out and take new orders.
If we could have done that and if we had that intention, we would have done in the third quarter or fourth quarter as opposed to buying assets that were effectively in the water or soon to be in the water, because we’re seeing this market --this market, the consistent message of all our conference calls the last six quarters is the market has done better than what even we have expected, and we’ve been bulls. So, I think you really want to have assets in the water for the rest of this year after Chinese New Year, which is basically from March.
And you want it definitely in 2019 and definitely in 2020. You want it on the water, because you’ve just got a demand side that’s really accelerating now in its growth and its supply side that is slowing very quickly in its growth curve.
We have not that much on order with a number of serious regulations that are going to affect it even further.
Herman Hildan
And kind of -- I mean, just talking of what seems to be a more recovery dry bulk with the net fully invested leverage below 50%. Can you kind of give some comments on what you’ve debated, more dynamic dividend policy or kind of...
Robert Bugbee
Look, I think that it’s pretty clear -- it’s pretty clear that as we expect every day as you have this underlying strength under assets and positive cash flows that every day you get stronger. And yes, you pointed out that the recent rising values in the last three months probably put us in an even stronger position than we thought we’d be in three months ago, and our total average is being coming down.
But, as we said earlier, we are just not anxious; we’ve made the big risks. We can have this quarter as a nice transactional period.
We can have a delay of gratification, everything is good. There is no need I think -- we just want to be confident.
Really, we’re confident. So, we don’t have to be cavalier and we can wait.
And remember, in July, we got a lot of criticism going back on to normal amortization schedules from some analysts. We got even more criticism in October for reinstating a dividend.
I think, it’d be lovely to have those analysts begging for shareholder return. That would be great.
Herman Hildan
I'll pass the question on to them then, I guess. Thank you very much.
Robert Bugbee
Thank you.
Operator
Thank you. And our next question comes from Fotis Giannakoulis of Morgan Stanley.
Your line is now open.
Fotis Giannakoulis
Hi, Robert. You talked about your confidence about the improvement in the market and I heard the same confidence from a number of other ship owners.
I was wondering what is the view of the charterers and if you see this positive outlook for the dry bulk market to be shared by your customers and to be willing to sign period contracts?
Robert Bugbee
Sure. We are not out there to sign -- we really believe in improvement of this market.
So, we are not out there to negotiate longer term charters, but we found in the last, I don’t know, 10 days, two weeks, three, fixtures, two in the Kamsarmaxes, basically delivering from March onwards, four to five months with that summer period at $15,000 today for both ships; that’s the substantial tick up. I would think we would all agree on the present rates and the present published rates in Clarksons or whatever.
And we’ve just done one Ultramax that is delivering in Far East for five to six months, and the Far East in a very weak area. And that’s fixed to 13.5, again a substantial pick up, almost 30%, 40% above the guidance we’ve given for this quarter to date.
So, the customers are clearly showing in those physical fixtures that they expect the rates to improve. And as I said, we haven’t been out there to either time charter in long term or to time charter out long term.
But I can see the paper curve is up and I would imagine the forward two-year, three-year charter rates too. I can’t imagine any owner would want to give their ships away right now.
Fotis Giannakoulis
Thank you, Robert.
Robert Bugbee
Also, if we look at key customers, look at what’s out there, if you look at the rhetoric we are hearing from the public markets is, I think what’s happening, Cliffs Resources is talking about the inventories that the docks in China not being the iron ore that is actually a value. We see what's happening with customers on the coal side, the grain; we’re seeing potential acquisitions, merger and acquisitions involving people like [indiscernible].
I mean the customers are by and large here saying in their reporting or showing in their actions that they are very confident in the growing demand for their commodities and therefore, the transportation by sea of their commodities. I mean, if you take Caterpillar, I mean it's extraordinary to me that people can understand that Caterpillar has used more to take stuff out of the ground, but it's not like the stuff is left right there after Caterpillar dug it up.
I mean you have then actually ship it. So, again, this is what the customers are doing.
Fotis Giannakoulis
Thank you, Robert. Can you comment, if possible, about the reports that China is maybe encouraging electric arc furnace capacity?
If you think that this is a real concern for the dry bulk market or it's something that has been overplayed the last few weeks because of the seasonal weakness?
Robert Bugbee
I think a lot’s been overplayed in China. I mean, in October, we were told Wall Street freaked out about the Bloomberg article about how China was going to close steel capacity because of pollution et cetera, et cetera.
And it started selling stocks, selling paper only for the physical markets just to continue higher and higher and be stronger than they were before. So generally, I think that we just have to except that China's economy is growing; they are using the stuff; and tell real physical notice.
We're still very bullish on China.
Operator
Thank you. And our next question comes from Poe Fratt of Noble Capital Markets.
Your line is now open.
Poe Fratt
Hey. Good morning.
Robert, you've sort of answered my question little bit on Ultramax lag versus the Kamsarmax. But, can you give us a little more color on the divergence in rates in the fourth quarter and sort of how you're looking over the rest of the year Ultramaxes versus Kamsarmaxes?
Robert Bugbee
I think Ultramaxes are going to -- they have some special things happening to them very shortly in the Atlantic with the grain and vegetable seasons in South America coming soon. And they will benefit from their different routes and different triangulations et cetera.
So, I think that from time-to-time whether they are Capes, whether they are Panamaxes, whether they are Ultramaxes, from time-to-time, one might be trading at a better position than the others. Capes right now are a little bit depressed over Kamsarmaxes over Panamaxes.
But overall, we just see strength going forward into this. So, we don't want to be very enthusiastic about one sector that might be momentarily doing great, and we don't want to be overly negative about one sector that might be doing relatively worse than the other one for that moment.
Poe Fratt
Great, thank you. And then, on the sale leaseback you did in the fourth quarter, should we view that as a one-off or sort of what's -- are there additional sale leaseback opportunities out there that you think might be attractive?
Hugh Baker
Poe, it's Hugh. There are additional opportunities out there.
I think, it remains to be seen, whether they will be attractive. That specific certain leaseback was very much driven by very low cost of capital that was given to us by the Japanese financiers.
We ended up getting 10-year money at 4.25%. And if you adjust that, also a floating rate basis, it works out about LIBOR plus 185.
So, we did that because it was a high advance rate, very, very low cost financing and it also diversifies our funding group away from the traditional western European banks. But we are -- the traditional western European banks are definitely open for us.
And we’re finding as a general point that the cost of financing is going down slightly. We will announce the financing for our 10th, the last vessel, our only unfinanced vessel special, and the terms for that will be certainly an improvement on last time.
So, we’re generally very positive about the financing markets, but quite frankly, we don’t a lot to finance now. So, it’s not a huge interest to us.
We’ll keep watching it. If good opportunities come out of Japan, then, we’ll take them.
But otherwise, I wouldn’t expect anything.
Poe Fratt
And then, Hugh, did I hear it correctly that you capped -- you said LIBOR cap at 350 until December 2020?
Hugh Baker
That is absolutely correct. And again, on $300 million of our debt, and that was simply because I think the Company felt that interest rates are rising and have been rising in the last, certainly in the last month or so.
And it’s not a material amount in terms of what we’re in the money at, but we’re obviously very slightly in the money on those derivatives which are mark-to-market. But, I think the key thing is that it emphasizes the fact that we are really trying to make sure that we’re ready for the road ahead and we are ready for whatever the market has for us.
Robert Bugbee
I mean, in general, shipping goes really well in terms of inflation. And in general, you’d be very happy to sacrifice 2 or 3 interest percentage points for a good dose of inflation, just like you’ve seen with asset values across all the shipping in the last three months.
So, you may have had a little drift up in LIBOR rates, but that’s been more than compensated by the -- across shipping, the underlying inflation under the assets. But, this is -- you’re just doing something that’s financially you’re able to do.
And I think that’s great.
Operator
Our next question comes from Jon Chappell of Evercore. Your line is now open.
Jon Chappell
Robert, Emanuele, just one strategic question for you. I’d say we’re kind of in line with the way that we think about the market optimistic about the rest of the year, early innings of a recovery.
But, I really appreciate the commentary about not being cavalier about it. I’d say the one criticism we get in shipping sometimes is that the early signs of recovery, there is either influx of orders at the shipyards or maybe very aggressive uses of capital structure to buy assets before the prices rise.
Sometimes that works, sometimes it doesn’t. So, as you kind of balance your views on the market with trying to be I think balanced as well with how you manage your balance sheet and your fleet.
If we think about how you’re approaching 2018, would it be fair to say that this is going to be a year where you continue to kind of maximize your current fleet, maybe march at the dividend, delever the balance sheet and keep that fleet right around the 56 give or take or is this is a year where you feel that you need to be aggressive and accumulate assets in the early innings for the longer term?
Robert Bugbee
I think we’ve done a lot of -- last quarter, we did a lot of accumulation of assets. And as we pointed out that we are not working on that right now.
So, as I said, this is a transitional position to see what’s happening out there. And the job -- we have a large holding in the Company.
And the idea is to maximize the -- over time the value of the shares. And I don’t think it would be prudent to maximize that value by discussing in detail how we’re going to do that over a conference call.
Jon Chappell
That’s fair. You’ve shown willingness before to use shares for ships.
And as we’ve seen with some recent filings, those people may not be long for the stocks, tends to drive some volatility as well. Obviously, it depends on the trading prices of the shares and obviously people’s used NAV think it’s still at a consolidated discount, maybe someone have different views.
As you think about going out there and adding to the fleet whatever the case may be, slowly quickly, is shares for ships still a priority to do that or…?
Robert Bugbee
Well, I think, you have to look at in the context of everything, because we were able to basically, at that time, issue, if you got back into the record, we could conversely issue shares at a price that was higher than what we were buying shares. So, it’s okay.
So, it’s also good just to pick up the dimes and cents that are on the pavement. So, again, it depends in pricing point, this particular -- right now, everything depends on the relative prices to do anything.
So, there is no urgency to grow. We did a lot of growth.
We have a great fleet. So, if you come across something that is going to be accretive, you are not going to rule out that opportunity, if you think the thing is a right thing to do.
Now, that’s both sides of the trade; that’s whether you’re buying or you’re selling.
Jon Chappell
Okay. I understand.
It’s very helpful. That’s all I have.
Robert Bugbee
Right now, it’s like -- as Emanuele pointed out, as I pointed out, this is possibly the laziest quarter that Hugh has had to date.
Jon Chappell
Maybe that’s not a bad thing.
Robert Bugbee
Maybe not a bad thing; exactly.
Jon Chappell
Keep it. All right.
Thanks, Robert.
Robert Bugbee
Thank you.
Operator
Thank you. Our next question comes from Magnus Fyhr of Seaport Global.
Your line is now open.
Magnus Fyhr
Thank you. Hi, guys.
Just one question, a macro question. Coal was a big surprise in 2017 with China increasing their imports.
What, I mean, it’s pretty big commodity shift for your Kamsarmaxes. What are your thoughts on coal in 2018?
What could surprise on the upside there? I mean, India seems to have some issues in reaching their goals, but also interesting to hear your thoughts on China?
Hugh Baker
Magnus, I think I'll start that by saying I think we see Chinese coal stockpiles at record lows at the moment. We shouldn’t necessarily read too much into them.
But, we were pleasantly surprised in 2017. I think there is always a very good chance that we’ll be pleasantly surprised again in 2018.
The key numbers you need to be aware of is that under 10% of China’s coal consumption comes from imported foreign coal. So, for the Chinese to use more foreign coal is not necessarily a big decision for them, but it’s a very, very impactful decision for the shipping industry.
So, obviously, they’re dealing with the different competing dynamics supporting their domestic coal industry, but also trying to reduce appellation levels in China. And certainly that latter dynamic favors more foreign coal, which is obviously of higher quality.
So, I think that we expect Chinese coal imports to grow. And we do actually think there is room for upside, but we are not signing on it.
Magnus Fyhr
Okay. And what about India?
I think there is some upside there.
Hugh Baker
There is upside there.
Operator
Thank you. Our next question comes from Randy Giveans of Jefferies.
Your line is now open.
Randy Giveans
Hey, guys. Thanks for the time.
One quick question is looking at your fleet, it seems like recent acquisitions have been focused more on the Ultramax versus Kamsarmax class. So, why is that?
Is that just opportunistic or do you all have kind of preference for that fleet type?
Robert Bugbee
That was opportunity. It was the opportunity, not frank.
So, as we said before, we think that it’s difficult -- no, I am not going to going down future acquisitions; there may not be future acquisitions. So, we have remained -- we believe fundamentally that you shouldn’t get too cute between Handys, Ultramaxes and Panamaxes.
Okay? You shouldn’t get too cute between Safe Bulkers and Star Bulkers and Scorpio Bulkers.
All the ships will rise in the tide; all the stocks will rise in the tide.
Randy Giveans
Sure. Okay.
Well, how do you decide between growing to additional time charter-ins versus second hand acquisitions?
Robert Bugbee
It depends on the rates. Right now, we don’t have to do anything.
We’ve got a tremendous amount of leverage. The time charter-in rates of new up substantially.
They may not to be showing up in the front end but the back end, you can see that. And sometimes you just don’t decide.
It is like the message that you should really get is we are really not doing much thinking right now. We are having real rest doing hardly any thinking at all just transitioning through from hopefully what has been, losses to breakeven to profitability.
The Company is obviously undervalued in our opinion and that’s it. We just do nothing; it’s really okay sometimes.
We’re zoning...
Randy Giveans
Fair enough. Well, good luck.
And thanks, again.
Robert Bugbee
Thanks.
Operator
Thank you. Our next question comes from Gregory Lewis of Credit Suisse.
Your line is now open.
Gregory Lewis
So, I guess, in Q1, your bookings versus Q4, it looks like the Kamsarmax market is improving; the Ultramax market has sort of weakened. Could you talk a little bit about why there was that divergence?
Was that a function of location or any kind of color around why…
Robert Bugbee
I would say Ultramax earnings have been understated relative to our Kamsarmax earnings, primarily because of the delivery of the ships we purchased, which were mostly delivered in Asia. So, I wouldn't look in too much detail.
We've got a very small dataset over a small set of time and a company taking 10 -- one type that we’re in not great positions.
Gregory Lewis
Okay, great. And then, Robert, just since you mentioned that -- we're talking about transactions and deals being accretive.
Could you just talk a little bit about how you think about capital allocation and sort of what -- how do you view transactions? Is it on a NAV basis?
Is it on a cash flow basis? And just really, I'm trying to understand as we think about 2018, and I believe people have been trying to ask it for a lot of different ways previously on this call.
How should we be thinking about the willingness of the Company to plough those potential cash flows into the buyback?
Robert Bugbee
Well, as started Emanuele off, we're not too urgent to do anything. As I've stressed, we're kind of zoning right now.
The company was brought back from the dead. We had a pretty good recovery last year.
We then pressed down hard on the accelerator just before Christmas before you had this big rise in asset values, bought a little stock back where it was massively depressed. And we have this first quarter which traditionally is your weakest quarter.
And we are genuinely, I mean, there are not many times where a company's executive says we are being idle, being lazy, doing nothing, not thinking just chilling and letting some time pass during this transitional period. At some point, we will start to sit down later maybe in a month or two and start answering those questions ourselves with the Board or having discussions with the Board about that.
Operator
Thank you. Our next question comes from Ben Nolan of Stifel.
Your line is now open.
Ben Nolan
So, I actually, have a couple of questions, and the first one maybe for you Robert or Cam. But, we’ve seen oil prices rising, I think 380 is close to $400.
You guys -- it used to be a big deal a few years ago that your ships were a lot more fuel efficient. And obviously when oil prices fell, it didn't -- it was less important or not as much of the talking point.
But prices are a lot higher now. Any sense of sort of your earnings potential relative to less fuel efficient assets at these levels?
And are you seeing a strong level of inquiry from charters for your assets relative to things that might be two years older?
Robert Bugbee
Cameron?
Cameron Mackey
Thanks, Ben. There is a couple of different ways to answer that.
I think, absolutely, our answer remains the same, which is any price point of fuel, our ships will be somewhere between 5% and 7% more efficient than legacy or older generation tonnage out there. Simply translating that into our TCE is a bit of a trick however, because there are so many factors which go into your TCE generation.
So, I guess, one way to look at it is, at any position, we will get the benefit of a first phone call, and that helps not only in raw revenue on a laden passage, but also in, as importantly in getting those good positioning cargos and being able to bring ships back from the East to the West or having a shorter ballast leg at any point in time. And that’s were heck of a lot of additional value comes, partly fuel efficiency, which we in theory, share with the customer, partly from other attributes of having a modern fleet.
It’s more desirable to first class charters gets us where we can earn the most money, the greatest returns at any point in the cycle. So, the answer is yes, but not as easy to break out in the detailed way.
Ben Nolan
And when I’m thinking about that, is it fair to assume that the bigger impact would perhaps to be on the Kamsarmaxes as they -- bigger ships consume more fuel and the delta is for meaningful?
Cameron Mackey
Yes, in generally longer passages as well. So, yes.
Ben Nolan
And then switching gears a little bit, maybe for you Robert. And I appreciate that having done the acquisitions in the fourth quarter, you’re kind of stepping off the accelerator at least.
But, I’m curious just in the market, because I’m curious that you get a look at things that are being done or offered. Is there much in a way of, call it, sellers, block sellers of modern assets today relative to what was in the fourth quarter or third quarter when you are looking at them?
I mean, are there still deals to be done right now comparatively?
Robert Bugbee
I think, clearly, the stressed opportunities have gone. I mean, even in the fourth quarter, we were able to --- especially early on in the fourth quarter, we were able to look at a few potentially stressed opportunities.
And I think that there are always going to be some infections there will be one or two I’m sure somewhere around, maybe that weaker tonnage or whatever. But, the stressed opportunities have now gone.
So, it’s a big market. So, you’re going to see in a very -- dry cargo is a huge market.
So, you will see data points where every week -- every two weeks, you’re going to see ships bought and sold. But that’s much more in terms of the ready course of business.
So, the question really will swing to what the people want to do, how will companies with all tonnage work out how to acquire newer tonnage to be relevant for the future, how will -- whether it’s in the public companies, whether people will move to increase their market caps, whether the privately controlled tonnage will do different things. But, the idea of distressed in terms of large fleets is now pretty much disappeared.
Ben Nolan
And just out of curiosity, structurally, as you’re mentioning kind of how things might change, any prognostications as to sort of how that limited availability of capital or however you might want to think of it, will eventually change the landscape of the market, if at all?
Robert Bugbee
Well, I think what’s changing is, it was interesting here and again this is across shipping, is this things that we haven’t had for a bunch of years now, which is asset values going upwards. So, when asset values are going upwards, yes, of course, we’ve been talking ourselves on conference calls about less bank debt or equity markets not willing to fund speculation.
But as asset values drift upwards supported by rates that are above operating cost and interest, obviously, the value of companies, and as I said, that’s even happening in tanker companies and product tankers, go move upwards. And if you then have markets that improve significantly, which is where we think the dry cargo is going to go, they start to get self generated positions then because the gaps open up.
There is one commentator -- we’re not being sarcastic; we’re being genuine that we are resting, we’re transitioning, we will ourselves start look at different opportunities as times goes by. But we’re very conscious right now of this dynamic where by our own freedom of our own balance sheet has increased dramatically, simply by virtue of asset values moving upwards.
When these companies were -- if you look at some of these shipping companies that are 70%, 60%, 50% in terms of debt or long-term values of debt to value, a 10% movement up in asset values is -- it’s huge, it’s anywhere between 20% and 35% on their freedom, their real equity in the company.
Ben Nolan
So, does that slow down to push for consolidation do you think?
Robert Bugbee
It might not, it might not, it may enable certain people to do deals that previously they couldn’t because there is bank debt there. It takes away the crisis.
I mean the first stage people consolidate because like they have to. Then, they can consolidate -- and we’ve seen parallel in dry bulk last year.
I don’t think in the Golden Ocean case that anybody had to do that consolidation. They just chose that that was a pretty smart thing to do.
So, you then get to the second stage where you can do the consolidation because you want to.
Operator
Thank you. Our next question comes from Noah Parquette of JP Morgan.
Your line is now open.
Noah Parquette
Thanks. Good morning.
Just one question. Can you guys just -- maybe for Cameron, give us a bit update on when you guys are planning to check out for the sulfur regulations, I assume given your fuel efficiency voyage scrubber but along there.
And how you think the lighter dry bulk market will respond? Thanks.
Cameron Mackey
Thanks for that question. Let’s see, I think, regulators are understandably responding to global sensitivity and thoughtfulness to the environment.
It is ironic therefore that decarbonization can be left up to a ship that is out of sight and out of the reach of many regulators. So, in other words, I think it is only a matter of time before these regulators revisit scrubber solution and realize that a scrubber takes emissions and instead of putting them into air, actually puts them into the sea.
So, we have a healthy skepticism that regulations, as they are now, will not be changed or modified, and that’s one of the greatest risks that any ship owner, not just us has in undertaking an expensive capital project against things, as they now appear; it’s the risk that regulations change, either in implementation or around the technology. And this, by the way is proven to be true with the recent misadventures in ballast water treatment regulation.
So number one is we and most ship owners would be naturally quite skeptical that the regulations don’t change. The second part of skepticism or cynicism is that the technology is actually adequately designed and resilient and there are tales and case studies of those who have installed scrubbers already in the cruise industry and some of the short sea shipping industry that indicate that this technology, even as it is currently, may not be adequate to address the objectives that the regulators are putting out there.
And then, there are other questions in our minds. So, we are not foreclosing on the possibility that we might entertain scrubbers at some point, but these risks are so great that it would be really full hardy to undertake that type of investment now.
The final big risk of course is relative pricing and availability of the different fuels once you get to 2020. So, these three things really stand in the way of making any mature long-term decision right now.
I think that probably describes the way most ship owners are looking at this at the moment. It may change as 2020 gets closer, but that’s the way is now.
Now, we are in a privileged position, simply as you pointed out because of the nature and fuel efficiency of our fleet. So, again, going back to what I said earlier, at any price point for fuel, we will be earning a greater share or greater TCE than most of our competitors.
So, we’re not relaxed, but I would say we are skeptical and we’re taking our time to make sure that any decisions we might make, and that includes do nothing by the way. Any decision we make is thoughtful and takes into consideration these various risks and how they might change.
Noah Parquette
Okay. That's interesting what you said about transferring into water surveyor, which seems strange to me.
Do you know of any formal study or any appeal around that? And can you remind me like how far long can we be before an extension is no longer an option?
Cameron Mackey
It's a great question. I don't have a good answer to that.
What I would say is there is technology that involves keeping affluent onboard the ship. But the amount of water and chemicals that this entails is a very different solution and one being talked about in industry now.
So, it's a difference between an open loop scrubber, which takes -- again takes most of that carbon and other emissions, puts them into a fluid state and pumps them into the sea, and a closed loop scrubber that keeps it all along the ship for some time to then be discharged to shore to a facility, which by the way doesn't exist at the moment. We don't really have a clear picture of how or whether this could change.
We just feel that the theme of or the trend in regulations will take us in that direction -- inevitably in that direction. We're waiting to see.
Operator
Thank you. And our next question comes from Amit Mehrotra of Deutsche Bank.
Your line is now open.
Amit Mehrotra
Thank you. I guess, all other questions have pretty much answered, but maybe just a couple of quick ones for me.
One is on the recent equity offering that was contemplated or pulled. Any -- I joined the call a little bit late, so I don't know if someone already asked this.
But, any color on the thinking there in terms of issuing equity for ships or acquisitions, just given where we are in the cycle, the balance sheet and the fact that the Company itself is buying back stocks, just any thoughts there in terms of what the thinking was and why that make sense? Thanks.
Robert Bugbee
I think that's been answered earlier, Amit and it’s been a long call. So, I think we'll leave it at that.
Amit Mehrotra
Okay. Well, I’ll ask a couple of more.
I'll go back to the…
Robert Bugbee
We appreciate you holding your -- I think it was useful what you were doing earlier on your dry bulk things.
Amit Mehrotra
Okay. Well, let me -- can I ask one more, I mean, it's under an, so it hasn’t been that long.
So, Robert, you talked about rising tide lifts all boats, and the distinction between companies I guess is not as relevant. But, I mean, I do think like over the last year, year and half, there has been dry bulk companies that have outperformed and underperformed relative to other companies.
And I think that just reflects to some degree the asset classes and the leverage that they have to the volatility of the market. So, with that being said, if I look at your fleet profile, the company's fleet profile with the Ultramaxes, Kamsarmaxes, you're not as exposed maybe to the upside and volatility, and the trading range is both in asset values and rates is relatively more narrow, which is obviously great in bad times but maybe not where you want to be exclusively in multiyear periods of strong markets.
So, can you just talk about that in terms of -- I know you're happy probably with your fleet profile today, but maybe the company is leaving some money on the table by not being exposed a little bit more to the places where you do see that upside volatility in stronger markets.
Emanuele Lauro
I think, Amit, it’s Emanuele here. We’ll be delighted to have the problems or will be delighted to see a market that puts us in a position where we’re thinking, oh, damn it, we’re missing out on a Cape rate that’s $50,000 a day.
Because I can guarantee you that if the Capes are at 50, Kamsarmaxes would be giving us extreme satisfaction in the rate environment, in the same rate environment. So, it’s very difficult depict and decide and be always at the right point, have the perfect fleet et cetera.
I think that where the Company’s today, we have the most modern fleet out there in the segments in which we operate. We are in the Ultramaxes and Kamsarmaxes, which are the workhorses of the dry cargo markets, and happy to be where we are.
And we’re not so concerned of the miss-out opportunity, I mean for the volatility that the Capes bring. Because then, I think, once we would be enjoying that opportunity or volatility, your question probably would be how are you going to cater for the downside.
Now, you’re making 50 a day, but you could actually be stretching it and are you thinking about protecting your side, because the Capes are the most volatile to the downside as well. So, you cannot always win -- we feel we’re well-positioned and hope actually we’re going to, in inverted commas, miss out on the great results of the Capes.
Operator
And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Hugh Baker for any closing remarks.
Hugh Baker
Thank you, operator. We have no closing remarks.
Thank you all for your time on this call. And we look forward to speaking to you all soon.
Thank you very much.
Operator
Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program.
You may all disconnect. Everyone have a great day.