Q1 2016 Golden Ocean Group Ltd Earnings Call

May 24, 2016 AM EDT
GOGL - Golden Ocean Group Ltd
Q1 2016 Golden Ocean Group Ltd Earnings Call
May 24, 2016 / 01:00PM GMT 

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Corporate Participants
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   *  Birgitte Vartdal
      Golden Ocean Group Ltd - CEO
   *  Per Heiberg
      Golden Ocean Group Ltd - CFO

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Conference Call Participants
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   *  Herman Hildan
      Clarksons Platou Securities - Analyst
   *  Eirik Haavaldsen
      Pareto Securities - Analyst
   *  Jonathan Staubo
      Fearnley Securities - Analyst
   *  Erik Stavseth
      Arctic Securities - Analyst
   *  Fotis Giannakoulis
      Morgan Stanley - Analyst

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Presentation
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Operator   [1]
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 Good day, and welcome to the Q1 2016 Golden Ocean earnings conference call.

 Today's conference is being recorded.

 At this time, I would like to turn the conference over to Birgitte Vartdal, CEO of Golden Ocean. Please go ahead.

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [2]
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 Thank you, and welcome to those listening to our Q1 earnings call.

 Following the management changes in April, I would also like to welcome Per Heiberg as CFO in the Company. We would like to thank Herman Billung for his 11 years with the Company, building it from a four-vessel venture at the time in 2005, and up to what the Company is today.

 Today's agenda will be as earlier. Per will go through the highlights, financials, status on fleet and newbuildings. And I will go through a macro update, before we open up for Q&A.

 Before Per starts, I would like to say that the refinancing the Company went through in February has created a long runway for the Company. We have supportive banks and shareholders, and we managed to create the solution that took down our cash break even and extended the runway. And at the same time, we managed to keep the upside to drive both markets. Discussion with the yards are still ongoing, and Per will come back to that.

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [3]
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 Can I take over? I go straight ahead to the highlights for Q1, which is much related to the restructuring, of course. But before that, we reported today our net loss of $68.2 million for the quarter. It is worthwhile mentioning there, that although the loss of $26.7 million is mark-to-market losses on impairments, and other one-offs, so the net loss is $41.5 million. Since I've have taken large impairments, both in this quarter and also in the previous quarter, we see limited downside on those assets going forward.

 So to the restructuring that we put in place in February or we started in February, by entering into amendments with, from all of our loan facilities, that included no repayments until the end of Q3 2018. This implies a deferred repayments of around $140 million on existing debts, and also up to at the maximum of $50 million of Q2 drawings on newbuildings.

 This amount is likely to be lower, since we are postponing a few of the delivery of newbuildings, and we'll come back to that. It also includes, or we have to pay out a likely hike on the margin, on the loan agreement, but only on the deferred amounts.

 We have put in place a cash sweep, which is actually capped at the repaid or the postponed repayments, but it will give us the opportunity to repay if, or leverage the vessel if the market improves. Other, our covenants were amended, where we waived the value of the adjusted equity, and reduced the minimum value covenant on the facility basis to 100%.

 We also pre-agreed with the banks on the loan facility, that we will have a fixed amount of loan on the remaining newbuildings, that will -- when we take delivery of them. In order to give this concession, the banks or we should raise equity, which we managed to do also in February and March.

 So we had a private placement, and a subsequent repair issue that generated a net proceeds of $205.4 million, issuing 357.1 million shares. These shares are currently, or for a six-month period, restricted from trading in the US, but we expect that period to end at the end of September this year. And they will then become tradable, or possible to move into the US, and trade under the regular ticker. Current shareholders do not need to do any action in that respect.

 The restructuring gave us a lower cash break even, especially on the capes, where cash break even were reduced to around $3,500. And for the fleet in total, it was reduced down to $9,200. If you exclude the capes, then the average cash break even for the remaining fleet is less than $7,000 today, for the period, up until end of Q3 2018.

 To the P&L, you see that, basically due to the lower markets, the net revenue is down by $14.7 million, if you compare it to Q4. We had a small gain on sale of asset, that was the vessel delivered and previously sold, and then delivered in February to the new owner. If you look at the ship operating expenses, they are more or less in line with Q4, and as expected. We docked one vessel in Q1 2016, which was the same as in Q4 2015.

 Going down to the financials, we took $10 million in impairments on financial assets. And as I said earlier, we now see limited downside on those assets. We also had to book a mark-to-market loss -- sorry. Yes, sorry about that. We had a negative mark to market loss on interest rate swaps, since the long-term forward interest rate in dollars has dropped quite significantly during Q1. The net result of $68.2 million, if you then adjust for all the nonrecurring items, it's $41.5 million, compared to a similar result in Q4 for $29.4 million.

 If you look at the balance sheets, the cash at the end of the quarter was, including restricted cash was $314.4 million, which is an increase of $151 million. And the reason is, of course, the -- mainly the share issue, and then adjusted for investment activities, new debt, and the installment paid during the quarter. The vessel net increased since we took deliver of four capesized newbuildings, the vessel net increased $240 million during the quarter. And in addition, we had one, took delivery of one vessel that was immediately sold.

 In the balance sheet, currently due to the waiver period of the amendment, we have no part of the bank debt that is classified as short-term, that's all long-term debt. And the long-term debt increased, with the debt on delivered newbuildings. That's ordinary repayment on debt. After March 31, we are in line with all repayment schedules, and we also paid $4.2 million according to minimum value clauses in January, in order to be in line with all covenants. Equity increased during the quarter to $137.1 million, which is the share issue net the loss for the quarter.

 And then more details on the fleet, in January, took then delivery of, first, we took delivery of two newbuildings from Daehan. We paid in total $52.2 million in delivery installments, and draw $56.7 million in debt on those vessels. Later in January, we took delivery of the two Newcastlemaxes from Bohai in China, and paid in total $60.4 million, and draw $60.5 million in debt on the vessels.

 And then, in early February, we took delivery of Front Caribbean, and immediately sold it to the new owner. That vessel had been taken in, on a one-year time charter, according to previously agreed agreements for one year at $14,000 a day.

 Later in February, we also agreed with the lessor of Golden Hawk to reduce the charter rate, with $2,000 a day for a period of two years. But the amount will be repaid to the lessor, over the remaining part of the charter period, also linked to the index. If that increases about to all-time prevailing rates paid. In January, we also entered into an extended agreement with Capesize Chartering Limited, for a revenue sharing agreement. So that vessel's trade, handled by Capsize Charter are now equally, or share their income equally according to specifications of each vessel.

 So the current fleet as per now, is then as seen from the table, is some 71 vessels, of which one of the capesize newbuildings are sold, and with 58 vessels currently trading. Of these vessels, we are now in early May, and we delivered the two last vessels under the RWE contact, to RWE. So all the10 vessels under that contract is traded by them.

 Then we have, as earlier, the four Kamsarmaxes trading on long-term TC, and two Panamaxes on long-term TC out. The remaining part of the fleet is trading in spot markets where the capes, are then into -- the capes are chartering revenue sharing agreements.

 For newbuildings, or the 13 of them, it's important to say that after the release on the share issue in February, we are not paid any CapEx on the vessels. We have managed to postpone delivery of two of the capesizes from Q1 until Q4 2016. And if you look at the graph, there are -- it's a little bit less than $100 million in recourse installments left, and those are related to capesizes, of which half, approximately the half is related to the one that is sold, and the other is for a vessel that we will take delivery on later in Q2.

 The Company is currently working hard in order to achieve further postponements on the remaining part of the newbuildings. All the remaining capesizes are financed, but the three supermaxes are currently not financed.

 Just a small comment on the OpEx: it's pretty stable, actually at 1 tick down, maybe have an OpEx of around $5,000 a day on all the segments. We had one vessel docking in Q1, and we expect two more to be docked during 2016.

 And then, I will leave the floor to Birgitte for her macro presentation.

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [4]
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 Thank you.

 Looking back, the first quarter of 2016 was the worst in the Baltic dry index history. And all segments that we are operating in had earnings below operating expenses for the quarter as a whole. This is the '80s again: too much delivered in an already over-supplied market, and with demand dropping at the same time. Looking at the GDP growth, the growth in 2015 was around 3% globally, and the projections for 2016 is more or less the same, with still a positive outlook for 2017 and onwards.

 World GDP growth is relevant for us, as for instance, the steel consumption is highly correlated with the global GDP growth. In 2015, there was flat steel consumption on around 3% GDP growth, but as can be seen from the left graph, around 3% growth can be from slightly negative up to 4% to 5% positive steel consumption. As can be seen from the right-hand graph, steel consumption, or steel production was flat towards the end of 2015 and into 2016. And in this period, the cut in steel projection was worse since the financial crisis.

 This can also be seen on the transportation of iron ore, which had a sharp drop towards the end of the year. The bad rate environment at the start of the year can be explained by these factors, in addition to a lot of deliveries which normally occurs in the beginning of the year. As can be seen from the graph, the trade has picked up again in the last months, due to a spike in iron ore prices, and an increase in steel prices, as well.

 Cape rates were hit in Q1, and there was also an oversupply of mid-sized vessels that competed with the capes. For instance, in Richards Bay, normally a cape loading port, the number of geared vessels was higher than the number of capes, and this was the coal trade, which where smaller sizes could offer optionality. With backwardation in commodity curves, there is no incentive to push imports now, if you believe that you can buy the commodity cheaper tomorrow, as well.

 Looking ahead, most analysts expect steel production to be flat or slightly down in the coming years. However, due to lower iron ore prices in the global market, Chinese quality on their domestic iron ore, and environmental issues, there is still a good possibility imports will substitute local production, as have been seen over the last years. This slide is from Lorentz & Stemoco, that has an assumed local production of around 300 million tons this year. Some other analysts have seen somewhat slightly lower numbers, but the trend for the values analysts is typically that you see still a drop in the domestic production going forward. In the presentation, in addition to graphs from Lorentzen & Stemoco, I used data from Clarkson & Platou and Grieg Shipbroking.

 Although China wants to move to a consumer-driven economy, Chinese authorities stated in their latest five-year plan in March, that no goals should jeopardize social stability or economical prosperity. For the latest months, the statistics have seen an increase, both on the infrastructure investment and fixed asset investment. But many analysts view that there is an uncertainty on the long-term fundamentals, and it will be exciting to see the next months how this is developing.

 China clearly produces more steel than what is consumed internally, and the surplus has been exported with a significant increase in export over the last few years. As can be seen, most of the export is to other Asian countries. China is also investing abroad, and transporting steel to build up on these investments.

 Although as have been pointed out lately, US has imported a new import duty of more than 500%, the volumes exported to US is small, relatively here. Europe has also become a net importer of steel, but there is limited volumes from China on this trade. Another indicator on the Chinese economy is electricity consumption. And you can see the same pattern here, as you saw on steel and iron ore, with the drop towards the end of 2015, and into the start of 2016.

 This can also tie in with the Chinese New Year, but you see that the trend that has earlier been upward, has now flattened out for the last years, and with larger volatility. The growth in terms of percentage on various renewable energy sources are significant, but thermal is still the major source for electricity, and coal has around 63% of that. At the moment, there are some restrictions on new development on hydropower plants, as they are worried about the effects in terms of water flows and earthquakes that large dams may have.

 Again with coal, it's worth to remind that imported coal is around 5% to 6% of the total production in China. Although previously there have been more -- or earlier there had been support for domestic production, but lately mines have been closing down. Although the long-term outlook for coal is negative, after a very low transportation in January and February, there was an increase in March. And it looks at the moment that it has been stabilizing around 200 million ton of yearly imports. Coal is obviously very sensitive in terms of the hydropower output, as well as temperature and the need for cooling in the summer.

 India, where a lot of analyst was very positive earlier, here the projections for growth has been reduced somewhat. At the moment, there are very high stockpiles, and there has been less imports. India also has a strategy and ambition to be self-sufficient, but production is located in one part of the country, and the consumption, and many of the coal-fired power plants are located in another part of the country.

 But there is -- many analysts still view an expected increase in volumes into India, but lower than earlier. It is also worth mentioning that as the rates pick up, there has also been more coal transported from Columbia to India, as there has been a coal arbitrage in terms of pricing, and that has taken some [mile] in the market.

 The more positive commodity, in terms of the demand side is the grain and the agribox. There has been strong growth from Brazil and Argentina, and also a lot of vessels tied up, first in Brazil and now in Argentina, in terms of congestion. They also had good crops and low exchange rates, and they have sold a lot of volumes, in order to get US dollars. Brazil, it's likely to ease off, but Argentina there is still congestion, and we expect there to be a long season. Grain is the commodity where there is positive -- highest positive fundamentals in the more long-term.

 A smaller commodity, in terms of volume, but where there have been increase in transportation is bauxite. After Indonesia closed down their export, Malaysia has replaced a lot of the volumes, and there is expected only to be two years left of resources for Malaysia to export. A new market that is opening up is Guinea, where the export has started, and there's also a port expanding into a cape trade. So although small in volume, there can be small new trade for the cape.

 US is closing down their aluminium production, and therefore some of the tons that have been transported from Jamaica to the US could go to the Far East in the future. There are also new projects in Australia, starting in 2017 to replace the volumes from Malaysia.

 Looking at the demand side as whole, there is expectations for a slight increase in the various commodities. Coal will be more or less flat, and most analysts predict around 2%, give and take growth on the seaborne trade. Although it is positive, it's obviously a lot less than what we have seen in the history of the last 10 years.

 What is more exciting from a shipowner's perspective at the moment is that fleet growth, or the lack of such. As always, there is a lot of deliveries in January. As of May 1, the net fleet growth for the year was 2.9 million deadweight ton, and April alone, saw negative fleet growth. Scrapping has slowed down slightly, when rates picked up above OpEx towards the end of April, but if the rates continue to hover around where they are today, we should still see significant scrapping, and negative fleet growth for the year as a whole is very much possible.

 If you look at the actual deliveries so far this year relative to what was scheduled, there is 47% slippage so far this year. In the current market environment, all owners are doing their best to delay deliveries. And it is very likely that the final delivery, for this year will be well below the gross order book of $83 million, and we believe that it will be less than 50 million deadweight ton delivered for the year.

 On the ordering side, the [volumaxes] were ordered in February and March added volume, but except for that, there have been very limited new orders. And that is exactly what the market need at the moment.

 Looking at the slippage, if you break down the order book by the status of the various vessels, as can be seen in this graph from HIS Fairplay, more than 40% of vessels are going to be delivered this year, have a status that is under construction, or on order and not commenced. The situation for the yards are even worse than for the owners. A few examples, in 2015, 100 yards have delivered dry bulk vessels, relative to 200 yards in 2012. And 40 yards received new building orders in 2015, relative to more than 200 yards in 2008. So the new activity is limited. And while the construction progress is lagging behind, this will also delay later projects due to their construction schedule.

 The most interesting area is, of course, the part that are not commenced. If you look at Chinese orders for delivery this year, the numbers show that the progress is between 0% and 10%. Gross order book at the moment is around 15% of the fleet. HIS has a bit lower numbers. But various analysts believe that the correct data are more in line of 10%. And if that is so, that is in par with the number of vessels [as low as] 20 years. Looking ahead, assuming slippage, with partly that are later delivered, and partly never delivered, we could, in this low rate environment, see negative fleet growth, both this year's and in the next years to come.

 Another interesting observation, looking at monthly data and comparing 12 months back, we are now in a territory whereby the year-over-year fleet growth is lower than the year-over-year trade growth. We should therefore, see a bottom in the market as the incremental growth, due to demand seems to exceed the incremental growth in supply.

 However, should we see any healthy return of the market, it is likely better that the markets are continuing at low levels, so we keep the scrapping up, and keeping the delay and the cancellations. Q1 2016 may well have been the bottom of the market, and based on zero to slightly negative fleet growth, and the slightly positive demand in growth, utilization should slowly increase in the years to come.

 If you look at asset values, also in a historic perspective, they're almost at the low level since -- in the light of 30 years. From the bottom that was observed in Q1, values have picked up slightly, maybe 10% to 15%. There are several vessels for sale at the moment, but there is also decent tension in terms of inspections and buying. But at the moment there seems to be good support on the downside, but with the right environment and the number of available vessels, we do not expect to see any sharp increase in pricing either.

 With this in mind, the refinancing we did put us in a strong position, and we should be able to wait for the market to recover. In terms of strategy, we have some limitations on investments at the moment, but we are always looking at opportunities, ideally with optionality. And we believe we do have some time, as the market looks on. It's also important, in today's market with [counterpart] day rates, charterers see the risk of arrest of vessels with their cargos. And lately, there has actually been questionnaires circulating, where the charterer asks for the debts outstanding on the vessels. So being a strong counterpart in this market should hopefully be positive, and contribute to our earnings going forward.

 With this, I would like to conclude the presentation. And if there are any questions, please go ahead.

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Questions and Answers
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Operator   [1]
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 Thank you.

 (Operator Instructions)

 Our first question today comes from Herman Hildan of Clarksons Platou Securities.

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 Herman Hildan,  Clarksons Platou Securities - Analyst   [2]
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 Good afternoon, Per and Birgitte.

 My first question relates to the nonrecourse part of your CapEx. In Q1, you had $78 million that you didn't pay. Could you give some color on -- I guess, you won't pay the $100 million in Q2, either. Can you give some color on what stage, you will start paying the CapEx, and how the dialog with the yards are on the non-recourse CapEx?

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [3]
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 As I said in the presentation, the larger part of the non -- or on the recourse is related to two Capesizes that will be delivered, one that we have sold, and one that we will take delivery of. The remaining part of the CapEx -- most of it, it's actually delivery installments. So it's a very limited amount that will be paid on any of the vessels, until delivery. So the timing of the CapEx very much depends on what we have [seen] with the yards. And given the current state of the markets, it's quite obvious for everybody, that we are not very happy to take delivery at this stage. So we do whatever we can, in order to postpone deliveries.

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 Herman Hildan,  Clarksons Platou Securities - Analyst   [4]
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 So is there any dialog, in terms of call it, at what stage you'd need to make some sort of capital commitments to keep those orders? Or will you walk away from them at one stage? Or how's that looking going forward?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [5]
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 I don't think we can say more at this point in time; that we have good and constructive dialogues with our yards. And that we will need to report to the market, whenever we have more information that we can share.

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 Herman Hildan,  Clarksons Platou Securities - Analyst   [6]
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 Okay, thank you.

 And also, Birgitte, you mentioned that you have some limitations on further investments. Does that -- is it possible to give some color on that? Would you be able to, for example, do additional sale leasebacks, and then pursue new investments? Or could you give some color on what kind of limitations you have on that side?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [7]
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 It's fully disclosed in our 20-Fs, and now -- we need approval from banks, if we are going to do significant investments. And obviously, when you have debt deferral, it need to make sense from a commercial perspective to do things.

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [8]
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 You also must remember that entering into sale leasebacks, the bareboat trade contain, at least a certain element of repayments. So, and you actually end up with a quite significant cash breakeven. So it's not, given in this market, that it's favorable with a sale leaseback, even if we could --

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 Herman Hildan,  Clarksons Platou Securities - Analyst   [9]
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 Okay. Thank you very much.

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Operator   [10]
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 We will now take a question from Eirik Haavaldsen of Pareto Securities.

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 Eirik Haavaldsen,  Pareto Securities - Analyst   [11]
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 Yes hello; thank you.

 Just a follow-up on that: do those CapEx restrictions stretch through the whole amortization? Or are they [beginning] from the banks? So does this mean, that you can't really invest in anything until Q3 of 2018?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [12]
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 As long as we have the waivers in place.

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 Eirik Haavaldsen,  Pareto Securities - Analyst   [13]
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 Okay. Secondly, can you give an update on the funding situation for the three Supramaxes? Are you pushing back those as well now? And what kind of funding do you expect there?

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [14]
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 Our main priority is to agree with the yard on deliveries. Final thing, it's second on the agenda. And as we said in the restructuring, in our current plans and current forecasts, it doesn't assume financing on those but it's, of course, possible to finance them.

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 Eirik Haavaldsen,  Pareto Securities - Analyst   [15]
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 Okay, and just a final one.

 Your Group recently made an order for VLCCs at quite low level. Can you give an update on what kind of levels the yards are marketing Capesize newbuilds these days, if they market anything at all?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [16]
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 I don't think there is too much interest, but you do see levels on very low [40s] on Chinese yards.

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 Eirik Haavaldsen,  Pareto Securities - Analyst   [17]
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 Okay. Thank you.

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Operator   [18]
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 We will now take a question from Jonathan Staubo of Fearnley Securities.

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 Jonathan Staubo,  Fearnley Securities - Analyst   [19]
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 Thank you.

 Just a quick one on your strategy going forward, with regards to this chartering mix. Are you looking to [6,000] more vessels on either time charters or index-linked charters, as you have for RWE vessels?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [20]
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 For the Capesizes they are now either on index-linked, or they are trading via the Capesize chartering. For the smaller sizes, we are continuing to trade them in the spot markets, or short time charters can be. At the current levels, we would keep the exposure of the majority of the fleet to the spot market.

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 Jonathan Staubo,  Fearnley Securities - Analyst   [21]
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 Fair enough. Thanks a lot.

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Operator   [22]
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 We will now move to a question from Erik Stavseth of Arctic Securities.

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 Erik Stavseth,  Arctic Securities - Analyst   [23]
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 Hello, guys. Two quick ones for me.

 First of all, you mentioned that you have the Front Caribbean on a TC-backed at $14,000. Is that the same level for the three other vessels that you have done the sale of TC-backed on?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [24]
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 Two others. (multiple speakers)

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [25]
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 It's the same level on all vessels, but remember that one of them are already re-delivered early in January. So it's only two on charter right now, and the last vessel will not be taken back. That goes directly to the owner or to the buyer.

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 Erik Stavseth,  Arctic Securities - Analyst   [26]
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 Okay, thanks.

 And then, you mentioned that your R shares will be listed in the US by September. Could you just quickly walk us through the points that needs to be completed to make sure that, that happens? And, yes.

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [27]
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 It's actually not much steps to do. It's a six-month holding period after the last shares in the subsequent offering was listed. So it ends, in end of September. And then, it's no need for anybody to do anything. Actually, they will just -- the GOGL R shares will just be swapped into regular GOGL shares. They will not be transferred to the US later, but they can be by the shareholder, and then they are free to do whatever they want, as with the regular GOGL shares.

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 Erik Stavseth,  Arctic Securities - Analyst   [28]
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 Right. So there is no restrictions from the SEC or anything? I mean, that's -- there is no risk of that happening?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [29]
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 No, we changed the ISN number and --

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 Per Heiberg,  Golden Ocean Group Ltd - CFO   [30]
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 No, there is no risk, and it will not happen, no. No. It's just a holding period, need to end in six month. It [wasn't] a six month holding period.

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 Erik Stavseth,  Arctic Securities - Analyst   [31]
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 Okay, thanks.

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Operator   [32]
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 (Operator Instructions)

 We one now take a question from Fotis Giannakoulis of Morgan Stanley.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [33]
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 Yes, hello, and thank you for taking my question.

 Birgitte, I want to understand about the nonrecourse vessels that you mentioned, what is the -- at what stage these vessels are right now? Have they started being built? And if they have not started being built, what is the reason that you do not decide to cancel completely with the vessels?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [34]
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 Many of these vessels have already been delayed once. So they are either close to final or completed at the yard, most of them.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [35]
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 Okay. And do you have other vessels with the same yard, that prevent us from taking unilateral action and cancel these vessels?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [36]
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 No, but looking at the final installments, relative to the where the market is, we see it's beneficial to delay delivery.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [37]
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 Okay, that's very clear.

 And I saw that you have used the charter rate for one of the chartering vessels. Are there any thoughts of doing the same with [capital] leased vessels, or with the vessels with [ship fees announced], and finding a different arrangement?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [38]
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 No, not any thoughts on that. We did the refinancing at [One Go]. And at the moment, we have a good runway, and that's (inaudible) for now.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [39]
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 Thank you. And regarding the market, I see that from your market outlook presentation, that the group seems to be quite conservative right now. I am trying to craft what is the bull or the positive case for the dry bulk market, looking two or three years forward? You talked about the fact the steel demand is stagnant, if not declining. And at the same time, especially for Capes, you made a reference on the Valemaxes, that they were ordered in the middle of the worst dry bulk market ever? How do you put all this together, and try to do -- have a more optimistic picture for the future?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [40]
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 First, when it comes to the Valemaxes, of course, there are other old VLOCs that will be taken out of the market. All these numbers are part of the order book, of course, both on the new side and the old side, but that will be taken out of the order book, around more or less the same time. Then, in the longer perspective, other [areas] still have growth. They are building new coal-fired power plants in that time frame, that you are talking. And new coal-fired power plants, in that area, so you can see some increase there. Grain, I think, has a good positive in the longer term. But this has to be solved also by reducing the supply side.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [41]
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 And you mentioned that you see very possibly in this year to have a negative fleet growth. If I remember well, you said that the deliveries should be around 50 million deadweight. Can you give us also your estimate for scrapping? And there are some people talking about the limitations of the scrapping industry. What is the maximum amount that it can be scrapped in each year? And what do you expect that it will be scrapping this year?

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [42]
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 That was many questions at once.

 If the market keeps on being at the levels, I said deliveries could be less than 50; and estimates of scrapping could be around the same levels or slightly higher. Steel prices have picked up a bit lately, and it seems like there is demand for scrapping. Of course, now we get into the monsoon season, so there will be some lower volume. But it all depends on the rates, and at what level those are.

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 Fotis Giannakoulis,  Morgan Stanley - Analyst   [43]
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 Okay. Thank you very much, Birgitte.

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Operator   [44]
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 We currently have no further questions.

 (Operator Instructions)

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 Birgitte Vartdal,  Golden Ocean Group Ltd - CEO   [45]
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 Okay, many thanks for listening in to our call today, and have a nice day.

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Operator   [46]
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 That will conclude today's conference call. Thank you for your participation. You may now disconnect.




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