Euroseas - Q4 2023

Transcript

Operator (participant)

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas conference call on the fourth quarter 2023 financial results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer, and Mr. Tasos Aslidis, Chief Financial Officer of the company. At this time, our participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. At which time, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. Please be reminded that the company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements.

These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements which are based on current management expectations that involve risk and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide 2 of the webcast presentation, which has the forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. Now I would like to pass the floor to Mr. Pittas. Please go ahead, sir.

Aristides Pittas (Chairman and CEO)

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me, Tasos Aslidis is our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 and 12-month period ended December 31st, 2023. Let us turn to Slide 3 of the presentation to go over our financial results. We have had another strong quarter, having reported total net revenues of $49.1 million and a net income of $24.7 million, or $3.56 per share for basic and diluted shares for the fourth quarter of 2023. Adjusted net income for the quarter was $25 million, or $3.61 per diluted share. Adjusted EBITDA for the period was $32.4 million. Please refer to the press release for a full reconciliation of adjusted net income and adjusted EBITDA to net income.

Our CFO, Tasos Aslidis, will go over our financial highlights in more detail later on in the presentation. We are very pleased to announce that our board of directors have declared a quarterly dividend of $0.60 per common share for the fourth quarter of 2023, reflecting a 20% increase from the prior quarterly dividend of $0.50 per share. The dividend, which is payable on or about March 11, 2024, to shareholders of record on March 4th, 2024, reinforces our durable growth business model, which is supported by strong cash generation and financial strength, and further demonstrates our commitment to delivering shareholder returns. The annualized dividend yield, based on the current share price, is about 7%. This is the eighth consecutive quarter of paying meaningful dividends.

As of February 21, 2024, we had repurchased 400,000 shares in the open market for a total of about $8.2 million under our share repurchase plan of up to $20 million announced in May 2022 and extended for another year. Thus, about 5.5% of our outstanding shares have been repurchased and withdrawn. We will continue to use our share repurchase program at management's discretion, depending on our stock price, to enhance our ability to drive long-term shareholder value. Please turn to Slide 4, where we discuss our recent sales and purchases after new operational developments. The delivery of our third vessel from our nine-vessel newbuilding program took place on February 6th. Motor Vessel Tender Soul is an ECO EEDI Phase III vessel, 2,800 TEU container ship, newbuilding, from HD Hyundai Mipo in South Korea.

The vessel is equipped with a Tier III engine and other sustainability-linked features, including an installation of an AMP, an alternative maritime power system. The vessel is financed through retained earnings and a sale and leaseback agreement with the Japanese owner and leasing house. Following its delivery, Motor Vessel Tender Soul commenced an 8-10-month charter at a rate of $17,000 a day. On the chartering side, Motor Vessel Aegean Express, our eldest and smallest vessel, was fixed for a minimum period of 10 to maximum 15 days at $7,000 per day, then extended with the same charters for 1-2 months at the same level of $7,000 a day, and thereafter fixed again for a minimum of 35 to maximum 55 days, again at $7,000 per day.

Motor Vessel Synergy Antwerp charter was extended for approximately 40-60 days at $18,250 per day until February 2024, and subsequently fixed at a nominal $2 per day for a trip with empty containers to the shipyard to have a scheduled dry dock performed. The other vessel that we fixed during the quarter was Motor Vessel Joanna, whose charter was extended for a minimum between 25th April to maximum 25th May at $10,250 per day. Regarding dry dockings, Motor Vessel Synergy Busan underwent its scheduled special survey for approximately 25 days in the month of December. During this period, retrofits valued at around $1.6 million were conducted. They were partially funded by the charterers. This resulted in a performance improvement of over 25% for the vessel. Meanwhile, Motor Vessel Synergy Oakland was also dry docked for approximately 18.5 days to pass its scheduled special survey.

There was no commercial or technical off-hire time during the quarter. Next, please turn to Slide 5 for an update on our current fleet profile. Our current fleet is comprised of 20 vessels in the water, including 13 feeder container ships and 7 intermediate container carriers, with a total carrying capacity of just under 61,700 TEU and an average age of 16.1 years. Turn to Slide 6, where we show our 6 remaining vessels under construction, with deliveries expected throughout 2024. The 6 new buildings have a total carrying capacity of 13,800 TEU, including 3 with a carrying capacity of 2,800 TEU each and 3 with a carrying capacity of 1,800 TEU each. On a fully delivered basis, the company's fleet will increase to 26 vessels, with a total cargo capacity in excess of 75,000 TEU. Let's now turn to Slide 7 for a vessel employment update.

As you may see, we have very strong charter coverage throughout the next two years, with about 71% of our fleet being fixed for 2024 and almost 23% for 2025. Our significant charter coverage at profitable rates for the remainder of the year suggests highly profitable quarters that will further enhance our free liquidity throughout 2024 into 2025. Due to disruptions in trade patterns caused by the attacks on vessels in the Red Sea, charter rates have increased from their low levels in December 2023. Certain of our vessels whose charters expired during this time have benefited from these disruptions, and we anticipate our vessels opening up soon, as well as our upcoming new buildings, will likely benefit from the same trend. Let's turn to Slide 9 to review how the 6-12 month time charter rates have developed over the last 10 years.

During the fourth quarter of 2023, container ship markets were down across all segments, but the trend has reversed since December, primarily due to the disruptions in the Red Sea as vessels are rerouted from the region. For the sectors we primarily operate in, charter rates are about 30%-35% higher in February from the lows seen at the end of 2023. As of February 16th, the 6-12 month charter rate for a 2,500-TEU container ship stood at $15,500 per day, approximately, which is higher than the historical median of $9,200 per day, but at similar levels to the 10-year average rate of $15,386 per day. The trends and comparisons to median and average rate are similar across the sizes of 17,000- 4,400 TEU vessels. Moving on to Slide 10, we go over some further market highlights.

During the fourth quarter of 2023, as mentioned, rates were down across all segments. The current increase is mainly attributed to the Red Sea crisis, which is still evolving, and its full impact is yet to be seen. It's quite clear, however, that these events will shape the way charter rates develop, at least in the near future. Average rates per day during the fourth quarter of 2023 decreased by 21% compared to the third quarter of 2023. The average second-hand price index saw a decrease of around 7.7% during the fourth quarter of 2023 compared to the third quarter of 2023, but we have already seen a reversal of this trend during January and February. While prices continue to lag significantly behind the peak levels seen in 2022, they are above the average levels observed before the COVID-19 pandemic.

The newbuilding price index maintained stability in the fourth quarter of 2023 compared to the third quarter. Newbuilding prices continue to stay elevated due to cost inflation and extended yard orders. Although there has been some easing in newbuild contracting from the exceptionally firm levels witnessed during 2022, it remains relatively strong, driven by ongoing interest from financially robust line of companies seeking to renew their fleets with relatively fewer vessels. As of January 29, 2024, the idle fleet, excluding vessels under repair, stands at 0.23 million TEU, accounting for 0.8% of the total fleet. This marks a decline from its peak of 0.8 million TEU just one year ago, with a downward trend observed since then. In 2023, 83 vessels totaling 160,000 TEU approximately were scrapped. Because of historically healthy charter rates, demolition activity remained moderate compared to historical standards in 2023.

However, it is anticipated to notably increase in the coming years due to factors such as weaker markets, supply growth, and environmental regulations adding pressure. In the fourth quarter of 2023, scrapping prices softened slightly to approximately $535 per lightweight tonne, although they remained about 30% higher than the average observed in 2019. Finally, the fleet expanded by a strong 8.1% in 2023, without accounting for idle vessel reactivation. Please now turn to Slide 11. With its latest update in January 2024, the IMF raised its forecast for global growth compared to the October 2023 outlook from 2.9% to 3.1% for 2024 and from 3.1% to 3.2% for 2025 as a result of greater than expected resilience in the United States and fiscal support in China. We expect to see this recovery, although the IMF also warns of risks from wars and inflation.

Risks surrounding COVID-19 have declined in much of the world. The forecast for 2024 and 2025 is, however, still below the historical average of 3.8%, as elevated central bank policy rates to fight inflation and the withdrawal of fiscal support amid high debt weigh on economic activity. Low underlying productivity growth also accentuates this slow trend. As per the analysts, global growth is likely to recover from 2025 onwards, supported by the unwinding of supply-side issues and interest rate cuts starting in 2024. Global inflation is forecast by the IMF to decline steadily starting from 2024 due to tighter monetary policy aided by lower international commodity prices. It is expected to fall to 5.8% in 2024 and 4.4% in 2025, with the 2025 forecast having been revised down.

However, new commodity price spikes from geopolitical shocks, including continued attacks in the Red Sea and supply disruptions, or persistent underlying inflation could perhaps prolong tight monetary conditions. China's growth forecast of 5.2% in 2024 and 4.6% in 2025 has been revised upwards even after having had major headwinds due to lower confidence and underwhelming boost to economic activity following its reopening and persistent property sector issues. Similarly, growth in other emerging and developing countries, including India and the ASEAN 5, is projected to continue quite strongly for the next couple of years. India's growth is expected to be 6.5% in both 2024 and 2025.

Container ship trade demand was forecast to increase quite significantly in 2024 by Clarksons in their January report, as tonnage demand will be affected by disruptions in the Red Sea and restrictions from the Suez Canal and Panama Canal, as well as the slower speeds necessitated by the IMO environmental rules and the introduction of the EU ETS. We anticipate that Clarksons' apparent demand estimate will further rise in February as the effects of the Red Sea near closure are appearing more severe than originally assumed. Please turn to Slide 12, where you can see the total fleet age profile and container ship order books. The container ship fleet is relatively young, with most vessels under 15 years old and only 10% of the fleet over 20 years old. The largest percentage of which, though, lies within feeder vessels, suggesting high potential recycling for this type of ships.

As of February 2024, the order book as a percentage of total fleet stands at 23.9%, down from nearly 30% six months ago. Turning to Slide 13, we also go over the fleet age profile and order books for ships in the 1,000-3,000 TEU range. These sizes of vessels are the backbone of our operations and the primary focus of our newbuilding program. The order book here stands at 8.9% as of February 2024, half the rate a year ago. According to Clarksons, new deliveries are projected at an estimated 8% in 2024 and a very modest 1.9% in 2025. Furthermore, with over 50% of the fleet aged over 15 years, these are very favorable fundamentals for this sector.

New environmental regulations suggesting lower speeds and increased recycling in the segment in the coming years augments the positivity of the thesis in favor of vessels of the sizes we operate. Let's move to Slide 14, where we discuss our outlook summary for the container ship market. Container shipping faces pressure due to the influx of new capacity into the fleet, especially during this year where deliveries are expected to amount to about 11% of the fleet measured in TEU. However, recent events, primarily in the Red Sea but also the Panama Canal and the implementation of the EU ETS, have led to a doubling of shipping freight rates and reversing the drop in charter rates. The container index has surged by 33% since December 21st, 2023. In 2024, significant challenges were initially expected.

However, the balancing of supply and demand by the situations in the Suez Canal, Red Sea, and the Panama Canal are casting doubts on this unfavorable scenario. Following recent vessel attacks in the Red Sea and the Gulf of Aden, major container ship operators have announced a pause in transits through the area. This rerouting via the Cape of Good Hope impacts capacity supply and demand very positively. If the situations in the Panama Canal and the Red Sea are resolved, a further softening in container freight and charter markets is anticipated, driven by the accelerated capacity growth. However, an extended period of vessel rerouting away from the Suez Canal would probably lead to further increased charter rates. In 2025, in the absence of the Suez Canal, Red Sea, and Panama Canal issues, supply and demand dynamics suggest a continued softening of the market.

Market conditions are very difficult to predict, as sensitivity to factors such as geopolitical developments, capacity management, vessel speed, and various other inefficiencies like congestion are crucial and can't be easily forecast. If, however, normalization occurs and both the Suez and the Panama Canals operate efficiently, the softening in 2025 could be significant due to the substantial fleet expansion. The transition towards cleaner energy sources is gaining momentum in the container ship sector. While there is a clear shift underway, the long-term outcome remains highly uncertain. The gap between charter rates achieved by eco-friendly vessels is expected to widen further as charterers increasingly prioritize environmentally friendly transportation options. Moving on to Slide 15. The left chart shows the evolution of one-year time charter rates for containers with a capacity of 2,500 TEU since 2013.

One-year time charter rates are far below their peak in early 2022, but as previously mentioned, have recovered to $15,500 per day, which is similar to the historical average and higher than the historical median. The right-hand chart shows the historical range for new buildings and 10-year-old second-hand container ships with a capacity of 2,500 TEU. Values are rebounding from their end of the year prices and remain stubbornly high compared to both historical average and median levels. At these price levels, we are reluctant to pursue further acquisitions unless they can be combined with charters that will reduce residual values at their expiration to levels below historical median. We feel very well protected against market volatility with a high concentrated contracted revenue coverage throughout 2024 and 2025, having already covered 70% and 25% of our operating days, respectively, at very healthy rates.

Our strong balance sheet will allow us to take delivery of the remainder of the container ship newbuildings while keeping leverage low at around 60%. It will also allow us to now pay an increased dividend and execute on our stock repurchase program to continue rewarding our shareholders. Even after these actions, our liquidity will have further increased. We, therefore, continue to evaluate investment opportunities that may incrementally increase our revenues and growth potential. With that, I will pass the floor to Tasos Aslidis.

Tasos Aslidis (CFO)

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Over the next four slides, as usual, I will give you an overview of our financial highlights for the fourth quarter and full year of 2023 and compare those to the same periods of last year. For that, let's turn to Slide 17.

For the fourth quarter of 2023, the company reported total net revenues of $49.7 million, representing a 15.8% increase over total net revenues of $42.9 million during the fourth quarter of 2022. That was mainly the result of the increased average number of vessels we operated in the fourth quarter of 2023 compared to the corresponding period of the year before. The company reported a net income for the period of $25.3 million as compared to a net income of $20.3 million for the fourth quarter of 2022.

Interest, another financing cost for the fourth quarter of 2023, amounted to $2.8 million before deducting capitalized interest income of $0.3 million earned from the self-financing of the pre-delivery payments for our newbuilding program for a total net interest and financing costs of $2.5 million for the period compared to $1.6 million in the same period of 2022 after deducting capitalized imputed interest income for that period of $0.4 million. This increase in our interest expenses is due to the increased amount of debt we carried and increasing the weighted average rate, SOFR rate that our bank loans paid in the most recent period compared to the period of the previous year. Adjusted EBITDA for the fourth quarter of 2023 increased to $33 million compared to $22.9 million for the corresponding period, the fourth quarter of 2022.

Basic and diluted earnings per share for the fourth quarter of 2023 were $3.58 and $3.56, respectively, calculated on about 6.9 million basic and diluted weighted average number of shares outstanding as compared to basic and diluted earnings per share of $2.87 and $2.86, respectively, for the fourth quarter of 2022. Excluding the effect on the net income for the quarter of the unrealized loss and derivatives, the amortization of fair value of below-market time charters acquired, and the vessel depreciation on the portion of the consideration of vessels acquired with attached time charters allocated to the below-market time charter part, the adjusted earnings for the quarter ended December 31st, 2023, would have been $3.62 basic and $3.61 diluted as compared to adjusted earnings of $2.50 basic and diluted for the quarter ended December 31st, 2022.

Usually, security analysts do not include the above items in their published estimates of earnings per share. Let's now look to the right part of the slide and review the numbers for the corresponding 12-month period ending December 31st, 2023, and December 31st, 2022. For the full year of 2023, the company reported total net revenues of $190 million, representing a 4% increase over total net revenues of $182.7 million during 2022, again, mainly the result of the increased number of vessels we own and operated in 2023 compared to the year before. The company reported net income for the year of $115.2 million as compared to a net income of $106.2 million for 2022.

Interest, another financing cost for 2023, amounted to $9.8 million, again, before deducting capitalized imputed interest income of $3.4 million earned, as I mentioned earlier, from self-financing the pre-delivery payments of our newbuilding program for a total interest and other financing costs of $6.4 million compared to $5.1 million for the same period of 2022, which was derived after deducting capitalized imputed interest income for 2022 of $0.5 million. Again, this increase is due to the increased amount of debt that we had and the higher SOFR rates that our bank loans had to pay as compared to the year before. Moving to the EBITDA figures, Adjusted EBITDA for the 12 months of 2023 were $124 million compared to $114.4 million during 2022, primarily the result of higher revenues, as I mentioned earlier.

Basic and diluted earnings per share for 2023 were $16.53 basic and $16.52 diluted, calculated on about 6.9 million basic and diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $14.79 and $14.78 per share, respectively, for 2022. Excluding the effect on net income for the year of the unrealized loss and derivatives, impairment loss, amortization of the below-market time charters acquired, the vessel depreciation attributed to the below-market charters acquired, and gain on time charter agreement termination, as well as gain on sale of vessel, the adjusted earnings for the year ended December 31st, 2023, would have been $14.99 basic and $14.98 diluted compared to earnings of $13.23 basic and $13.21 diluted for the year before. As I mentioned before, analysts do not include those adjustments that we subtracted in their estimates of earnings per share.

That's why we are making the adjustments. Let's now turn to Slide 18 to review our fleet performance. We'll start our review by looking at our utilization rates first for the fourth quarter and then the full year of 2023 and compare it to the same periods of 2022. Starting with the fourth quarter of 2023, our commercial utilization rate was 100%, while our operational utilization rate was 99.5% compared to 100% commercial and 95.1% operational for the fourth quarter of 2022. On average, 19 vessels were owned and operated during the fourth quarter of 2023, earning an average time charter equivalent rate of $29,704 per day compared to 18 vessels in the same period of 2022, earning on average $29,399 per day.

Total operating expenses, including vessel running expenses, management fees, and other G&A expenses, but excluding the drydocking costs, were $7,923 per vessel per day for the fourth quarter of 2023 compared to $7,937 for the same period of 2022. If we move further down on this table, we can see the cash flow break-even rate, which takes also into account drydocking expenses, interest expenses, and loan repayments. Thus, for the fourth quarter of 2023, our daily cash flow break-even rate was $15,000 per vessel per day compared to $15,801 per vessel per day for the same period in the fourth quarter of 2022. Let's now look on the right part of the slide to review the same figures for the full year. During the entire 2023, our commercial utilization rate was 99.6%, while our operational utilization rate was 99.1% compared to 99.9% commercial and 98.4% operational for 2022.

On average, 18.25 vessels were owned and operated during 2023, earning an average time charter equivalent rate of $29,807 per day compared to 17.1 vessels owned and operated during 2022, earning on average $31,964 per vessel per day. Total operating expenses, again, including vessel running expenses, management fees, and other G&A expenses, but excluding the drydocking cost, were $7,906 for 2023 as compared to $7,548 per vessel per day for 2022. Again, looking at the bottom of this table, we can see the cash flow break-even rate for the year, including drydocking expenses, interest expenses, and loan repayments, which for 2023 amounted to $14,186 per vessel per day compared to $14,508 per vessel per day for 2022. Finally, if we look at the very last line on this slide, we can see the common dividend that we paid expressed in dollars per day.

For the fourth quarter of 2023, that amounted to about $2,015 per vessel per day, while for the full year, amounted to $2,104 per vessel per day. Let's now move to Slide 19 to review our debt profile and our forward cash flow break-even level. As of December 31st, 2023, our total debt amounted to about $131 million. The chart shows our current debt repayment schedule for the next three years. In 2023, we made loan repayments totaling $68.98 million, a figure which includes a payment of $27 million that was refinanced and balloons totaling $13.3 million for five of our vessels, which remain unencumbered, raising the number of unencumbered vessels in our fleet to seven. In 2024 and 2025, our projected loan payments decreased to around $31.2 million and $18.1 million, respectively, with balloons due in 2024 of $1.8 million and in 2025 of $18.3 million.

The point here regarding the cost of our debt, which carries an average margin of 2.31%. Assuming a SOFR of around 5.31, the cost of our senior debt stands as of December 31st of 7.62%, but including the cost of certain interest rate swaps that we have, this figure gets reduced to about 7.32% on average as about 15% of our debt is hedged at a SOFR of around 3.4%. I'd like to draw your attention now at the bottom of this slide where we present the level and components of our expected cash flow break-even for the next 12 months, and we'll show the break-even cash flow at various levels. First, our EBITDA break-even level is $8,643 per vessel per day, a bar that you see somewhere in the middle of the slide.

In total, including interest and loan repayments, our projected cash flow break-even level over the next 12 months is expected to be around $14,658 per vessel per day. To sum up our presentation, let's move to Slide 20 to review certain highlights from our balance sheet. As of December 31st, 2023, our assets include cash and other current assets, which amount to about $71.7 million. Advances that we paid for our newbuilding program currently stand at about $85.4 million as of December 31st, 2023, and the book value of our vessels was $267.7 million, resulting in a total book value of our assets of about $224.7 million. On the liability side, as I previously mentioned, we had debt standing at $131 million, equivalent to about 31% of the book value of our assets.

The fair value of below-market charters acquired is approximately $7.6 million, representing about 1.2% of our assets, and other liabilities stand at about $11 million, accounting for another 2.6% of our total book value of our assets. Regarding shareholders' equity, I would like to highlight two points. First, that as of December 31st, 2023, our retained earnings turned positive, reflecting the profitability of the last four years, which erased the losses of the previous decade, and this happened even after payment of almost $25 million of dividends during 2022 and 2023. And second, that the market value of our fleet surpasses its book value significantly. Utilizing the charter adjusted values for both our fleet and our new building contracts, our estimated value of our fleet is about $337 million, thus about $70 million more than its book value.

This translates to a net asset value of about $352.5 million for our company, which is equivalent to approximately $50.9 per share. Our share price yesterday closed at $34, which compared to our net asset value represents a substantial discount, suggesting considerable appreciation potential for our shareholders and investors. With those remarks, I would like to pass the floor back to Aristides to continue the call.

Aristides Pittas (Chairman and CEO)

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

Operator (participant)

Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we pull for our first question. Our first question comes from Tate Sullivan with Maxim Group. Please proceed.

Tate Sullivan (Senior Research Analyst)

Hi. Thank you. Good morning. First, on the 20% dividend increase and, I mean, 2023 having a payout ratio of about 12%, can you talk about how you evaluated increasing the 20% dividend? Did you look across the shipping sector at payout ratios, and what made you comfortable given, I mean, the ability to get contracts on your six future new builds?

Aristides Pittas (Chairman and CEO)

I think the primary concern was that we want to offer our shareholders significant dividend yields. So we want to satisfy our shareholders. We thought with the increase in the share price going down to 5%-6% dividend yield was not at the level that we like to see. We know that our payout ratio even today is low. We are keeping the excess liquidity in order to find opportunities to invest when the time is right. But at the same time, we really want our shareholders to be satisfied and to be getting more than they would be getting in conservative investments, bonds, stuff like that. So that was really the reason we did it.

As we've said many times, we have ample liquidity that we are collecting through the charters that we have secured during the strong time of the markets, and we're trying to make optimal use of that.

Tate Sullivan (Senior Research Analyst)

Great. Thanks, [guys]. It was great to see. And then on the Aegean Express and coupled with your comment of maybe holding off on acquisitions for now given where asset values are, particularly with the increase in rates due to the Red Sea situation, how are you evaluating Aegean Express, the $7,000 rate versus break-even EBITDA level of about $8,600, scrapping versus future contractability?

Aristides Pittas (Chairman and CEO)

Well, last year in our model, we were assuming that we would be scrapping the Aegean Express at the completion of the charter because we thought the market would be soft. But with this strengthening market, the $7,000 level, which is just above break-even for this particular vessel that has no debt assigned and low operating expenses, we felt it is best to keep it because really, we don't know how this market will develop. So we want to have the option of earning significantly more than what we can earn by selling the vessel today at scrap value plus a little bit. So that's the reason we are keeping it. It has a positive option value for us, and it's contributing just a little bit because the $7,000 is above the break-even.

Tate Sullivan (Senior Research Analyst)

Okay. Thank you. And last one for me Tasos is on the capital commitments for the new builds, including the ship delivered this current quarter. Can you give an update on the outflow for this current quarter and then the total capital commitments for all the new builds, please, if you can?

Tasos Aslidis (CFO)

I think the remaining six newbuildings has, I believe, on the top of my head, some like $220 million that we need to total contract price, of which about $65 million, give or take, has been already paid. And we expect to finance 60% of the contracted price, that about $130 million. So we have about, I believe, $30 million of additional equity contributions to make. I made this calculation on the top of my head trying to subtract the vessel we took delivery already.

Tate Sullivan (Senior Research Analyst)

Okay. Cool. Thank you for that. Okay. Thank you very much.

Aristides Pittas (Chairman and CEO)

Thank you, Tate.

Operator (participant)

Thank you. Our next question comes from Kristoffer Skeie with Arctic Securities. Please proceed.

Kristoffer Skeie (Equity Research Analyst)

Oh, congrats on another good quarter and definitely positive with the dividend hike. And it's Kristoffer Skeie in Arctic, I believe it was a different name that was told. Anyway, can you elaborate a bit on chartering discussions, both with regards to vessels coming open now and on the new builds, sort of how long durations can you get now, and how do you sort of evaluate duration compared to rate level?

Aristides Pittas (Chairman and CEO)

Sure. Yes. We are already discussing the charter of our first newbuilding vessel to be delivered in April. Duration is between one and two years. One and two years. We are looking at the various offers that we have and will decide depending on the level of if we go for one or two years' time. So there are discussions there. There are discussions about a couple of ships that open up within the next month or two months or so for periods of up to a year. We will see. I mean, there is interest in the vessels that are coming up within the next couple of months, and we are focusing on these vessels for the time being, but nothing to report yet.

Kristoffer Skeie (Equity Research Analyst)

Okay. Great. And with regards to the comment you made in the report on potential accretive investment opportunities, is this something sort of asset transactions, or is it company or M&A, or what are you seeing here?

Aristides Pittas (Chairman and CEO)

No, to be honest, it's individual vessel acquisitions at this stage primarily that we are looking at. We're looking at quite a few things, but there is, again, nothing to report. We need to feel comfortable about the deal before advancing.

Kristoffer Skeie (Equity Research Analyst)

Okay. Thanks. That's all from me. Have a good day.

Aristides Pittas (Chairman and CEO)

Thank you. Bye.

Kristoffer Skeie (Equity Research Analyst)

Thank you. Thank you [for yur time].

Operator (participant)

Once again, ladies and gentlemen, to ask any question, please press star one on your telephone keypad. Our next question comes from Climent Molins with Value Investors Edge. Please proceed.

Climent Molins (Research Analyst)

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the upgrades on the Synergy Busan. You mentioned it will improve the vessel's performance by about 20%. I was wondering, relative to the $1.6 million price tag of the upgrades, could you provide some further insight on the expected ROI?

Aristides Pittas (Chairman and CEO)

We have taken delivery I mean, the ship has completed its dry dock, and we have data on the first month after the delivery of the vessel and after the ship after the retrofit. The indications are that we are talking about 25% improvement in the performance. On our budgeted figures, we estimated that within two years, we would have recovered the whole investment. It might be even sooner.

Climent Molins (Research Analyst)

That's very helpful. Thank you. My second question is market-related. No one knows when disruption in the Red Sea will be over, but I was wondering, should that happen, how fast do you think the market would readjust once again?

Aristides Pittas (Chairman and CEO)

It takes a long time for markets to readjust on changes. So I think that even if things were to end tomorrow, it will take at least six months before we go back to normality. And I don't see it ending tomorrow, but generally, it takes time for the markets to readjust.

Climent Molins (Research Analyst)

Makes sense. That's all from me. Thank you for taking my questions.

Aristides Pittas (Chairman and CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes from Poe Fratt with Alliance Global Partners. Please proceed.

Poe Fratt (Equity Research Analyst)

Yes. Hi, Aristides. Hi, Tasos. You've covered a lot of ground, but just, I'm not sure you mentioned it, but could you just highlight whether on the dividend increase, will this be reviewed annually? Is that sort of something we should expect?

Aristides Pittas (Chairman and CEO)

I mean, dividends are reviewed quarterly by our board, but the expectation, obviously, when we announced it is that this will continue throughout the year. I am not committing 100% that that will be the case, but we feel very comfortable that we will be able to continue for at least another year.

Poe Fratt (Equity Research Analyst)

Great. Thank you.

Aristides Pittas (Chairman and CEO)

Thanks.

Operator (participant)

Thank you. We have a follow-up question from Tate Sullivan with Maxim Group. Please proceed.

Tate Sullivan (Senior Research Analyst)

Oh, thank you for taking the call. May I apologize if I missed it earlier, but the Akinada Bridge and the hull damage from last year is the $1.1 million expense this fourth quarter on hire insurance related to that. And do you still have outstanding insurance claims related to the hull damage for the Akinada?

Aristides Pittas (Chairman and CEO)

Tasos, will you take that?

Tasos Aslidis (CFO)

Yeah. I think we have collected a good number of the outstanding claims on Akinada. That's why our receivables, other receivables, if you look at our balance sheet, have come down significantly this quarter. There might be some small things, but by and large, we have collected most of the insurance claims.

Tate Sullivan (Senior Research Analyst)

Was that $1.1 million charged, Tasos, in 4Q for hire insurance related to the Akinada claims, or is something separate?

Aristides Pittas (Chairman and CEO)

No, we indeed go ahead, Tasos.

Tasos Aslidis (CFO)

No, no, no. I cannot relate to such a charge in Q4. Some other—sorry, Aristides. Some other operating income that you probably see in Q4 relates to some recoveries from Aegean Express.

Tate Sullivan (Senior Research Analyst)

Okay. Understood. Okay. Thank you very much.

Tasos Aslidis (CFO)

Indeed, on Aegean Express again, sorry, Aristides. On Aegean Express, we collected a bit more than what we had assumed before, and that's why you see that increase. We would try to be conservative in our estimates of what would be paid from the insurance, and we did get a little more on the Aegean Express claims, which is reflected on our Q4 figure.

Aristides Pittas (Chairman and CEO)

Yes. Exactly. That's what I wanted to say. I think we got about $1 million more than what we thought we would get from the insurance process because, as always, we are very conservative when we budget such things.

Operator (participant)

Thank you. At this time, I would like to turn the floor back over to the CEO, Mr. Pittas, for closing comments.

Aristides Pittas (Chairman and CEO)

Thank you all for participating in today's conference call, and we will be back to you with our Q1 results in three months' time. Goodbye.

Tasos Aslidis (CFO)

Thank you. Thanks, everybody. Thank you for your questions. Thanks.

Operator (participant)

That concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.