Global Ship Lease - Q1 2024

Transcript

Operator (participant)

Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Ship Lease Q1 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Tom Lister, Chief Executive Officer. Please go ahead.

Tom Lister (CEO)

Thank you, Alex. Hello, everyone, and welcome to the Global Ship Lease First Quarter 2024 Earnings Conference Call. You can find the slides that accompany today's call on our website at www.globalshiplease.com. As usual, slides two and three remind you that today's call may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the company's control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the Safe Harbor section of the slide presentation. We would also like to direct your attention to the Risk Factors section of our most recent annual report on our 2023 Form 20-F, which was filed in March of this year. You can find the form on our website or on that of the SEC.

All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements, and the reconciliation of non-GAAP financial measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP usually refer to the earnings release that we issued this morning, which is also available on our website. I'm joined today by our Executive Chairman, George Youroukos, and our Chief Financial Officer, Tassos Psaropoulos. George will begin the call with a high-level commentary on GSL and on our industry, and then Tassos and I will take you through our recent activity, quarterly results and financials, and the current market environment. After that, we'll be pleased to answer your questions. So turning now to slide four, I'll pass the call over to George. George?

George Youroukos (Executive Chairman)

Thank you, Tom. Good morning, afternoon, or evening to all of you joining us today. Macro and geopolitical uncertainty have remained heightened in early 2024, but our industry has started the year with positive earnings momentum. In part, this is due to an uptick in containerized freight demand, but the pause and reversal of 2023's downward market normalization of charter rates and asset values have mainly been driven by most liner operators avoiding the Red Sea and Suez Canal, thereby tightening effective supply until the security situation has improved. Nobody knows when this will happen, of course, but we're working hard to grow our contract cover and cash flows while market conditions are supportive. Our continuing efforts to delever and lower cost of debt have made our balance sheet more robust, and we have no refinancing needs before 2026.

Also, our floating interest rate exposure to SOFR is capped at 0.64% through 2026. Now, we remain focused on our disciplined capital allocation policy that prioritizes returning capital to shareholders via our sustainable quarterly dividend and opportunistic buybacks. Our continued efforts to strengthen our financial position have boosted GSL's resilience and positioned us to move quickly on the right acquisition opportunities when they arise, whether that happens next week or next year, all towards the goal of protecting and building shareholder value through the cycle. With that, I'll turn the call back to Tom.

Tom Lister (CEO)

Thanks, George. Please turn to slide five. Here, we highlight our well-diversified charter portfolio. As of March 31, we had $1.6 billion in contracted revenues over a TEU-weighted average contract duration of 1.9 years. We signed nine new charters in the first quarter, adding $54.6 million of contract cover. Including ships with charter extension options and based on median redeliveries, we have about 20 ships coming open in a firming market by the end of 2024. We will continue to work hard to capitalize on the current market conditions, to grow contract cover on both a prompt and forward basis and very much look forward to updating you on progress next quarter. And by the way, our liner customers remain well-capitalized and financially strong. Turning to slide six, please.

So slide six illustrates our future earnings under different rate scenarios, and it's important to note these are not forecasts, but as you can see, implied 2024 results under all three scenarios remain in line with or even marginally improved relative to our record performance in 2023. While we still have a meaningful number of ships up for recharter in 2024, the extent of our contracted coverage nevertheless means that the majority of our revenue for this year is already fixed. On to slide seven, where we recap our capital allocation strategy, which is value driven, risk adjusted, under constant review, and guides everything we do. The first thing to keep in mind is that we operate in a cyclical and volatile industry. And that cyclicality is key as it contains risks to be managed, but also, very importantly, value-generating opportunities to capture.

So what does this mean in capital allocation terms? Well, stating the obvious, for which apologies, in order to allocate capital, we first need to generate capital. So running through the main points. First, ours is a leasing business, and so the main driver of capital generation is our contract cover, which we're always working on building and extending. Second, we free up capital to allocate by reducing costs. The biggest gains here are to be had from reducing debt service costs, not only by way of very competitively priced debt, which Tassos will talk about shortly, but also by reducing over time the debt principal that needs to be serviced. Delevering also has the significant benefits of reducing balance sheet risk and building equity value.

Third, we need to ensure that our value-generating assets, our ships, in other words, remain economically relevant, so we need to allocate capital to CapEx in order to meet evolving regulatory and commercial demands of decarbonization. Fourth, taking a longer view and coming back to the cyclicality point I made at the outset, which is one of the reasons to be exposed to shipping in the first place, it means having cash liquidity both for resilience, including to support asset-based covenants in case of need, and to have the optionality to buy ships on a selective, disciplined, and value-accretive basis.

As George likes to say, "If you want to keep milking the cow, you also have to feed the cow." And the right time to buy ships, to feed the cow in this analogy, is often towards the bottom of the cycle, when access to capital can be challenging and sellers, while sellers are often exceptionally motivated. And finally, it means being in a position to return capital to shareholders, which we do via our $1.50 per share annualized dividend, which is sized to be sustainable through the cycle, and also via our opportunistic buyback of shares, including the $5 million worth of shares we repurchased in Q1, which means that over time, our share count is around 9% lower than it would otherwise be.

Slide eight builds on this point, showing both the cycle itself and our approach to value-generative acquisitions. Our approach is a disciplined one. You'll notice that in the orange section of the chart, when container ship prices skyrocketed, GSL did not purchase a single vessel, opting instead to buy back shares. When prices were lower, we capitalized on that opportunity. In May 2023, when prices had normalized, we purchased four 8,500 TEU ships with attractive charters. We're happy to buy ships when the terms are right, but we've absolutely no interest in doing so unless our strict criteria are met and the acquisition genuinely adds value on a risk-adjusted basis. With that, I'll pass the call to Tassos to discuss our financials. Tassos?

Tassos Psaropoulos (CFO)

Thank you, Tom. Slide nine is an overview for first quarter financials and highlights. While I won't go into every item, I would like to highlight a few key takeaways. Earnings and cash flow were up in first quarter of 2024, with Adjusted EBITDA up to $125 million, a 20% increase year-over-year. We have continued to lower our gross debt and financial leverage, and we still have headroom under our 64 basis points SOFR interest rate caps that mature in 2026, allowing us to supercharge levered returns on any acquisitions we might make. Our cash position remains strong at $317 million, even though $134 million of that being restricted.

The balance covers working capital needs, CapEx investments, and covenant requirements, also providing balanced resilience and some space to act selectively on the right purchase opportunities. As Tom and George have remarked, we have continued to return capital to shareholders through our sustainable quarter dividend and share buybacks. We continue to delever and build equity value, and our corporate credit ratings of Ba3 stable, BB stable, and BB positive reflect both a success we have had in de-risking the business to date and our continued risk-averse approach going forward. Now, turning to slide 10 illustrates our progress in delevering our balance sheet, minimizing our cost of debt, and capping our interest rate risk.

Even as interest rates in the market have risen, with our interest rate caps, we have managed to reduce our cost of debt to 4.5, and we remain on track to reduce our debt outstanding by a third from the end of 2022 to the end of 2024. Our financial lever has dropped significantly as well, from 8.4 times at year end 2018 to 1.1x at the end of Q1 2024. These efforts and progress made so far have all combined to make GSL robust, resilient, and well-positioned to respond quickly and effectively to opportunities or changing circumstances. Tom will now discuss our market focus and ship deployment.

Tom Lister (CEO)

Thanks, Tassos. Moving to slide 11, we reemphasize our focus on mid-size and smaller container ships, ranging from 2,000 TEU to about 10,000 TEU. We see these assets as the backbone of global trade with their flexibility and widespread reach, highlighted in the top map that shows the deployment of these ships. The lower map shows the deployment of larger ships at 10,000 TEU and higher, which require deepwater port infrastructure, which can limit where they can go. Both maps, incidentally, show, quote, unquote, "normal trade patterns" before Red Sea transits were disrupted. Moving to slide 12. This slide shows idle capacity and ship recycling. Idle capacity trended down to 0.8% by the end of Q1, due primarily to disruptions in the Red Sea.

This was a reversal from the normalizing trajectory that we saw in 2023, when both idle capacity and scrapping activity were edging up. Currently, the market is in a wait-and-see mode, with earnings and option value attached to hanging on to ships that might otherwise be sent to the breakers. We anticipate that when market normalization does resume, whenever that might be, there will be an uptick in scrapping and potentially a sizable uptick. slide 13 shows the order book, which remains heavily skewed towards the larger container ship sizes, where GSL does not participate. However, for the mid-size segments, where GSL does compete, the order book to fleet ratio is 12%, 1%-2%, which is smaller, but still meaningful. It is also important to highlight the older age profile of the ships in our market peer group.

To illustrate, if we were to assume that all ships over 25 years old were to be scrapped, and we set that number against the order book delivering for mid-sized and smaller container ships through 2027, our peer group fleet segments would actually shrink by over 3%. Moving to slide 14. This slide showcases the impact on the industry of disruptions to the Red Sea. Before these disruptions, around 20% of global containerized trade volumes, in other words, the boxes themselves, went through the Suez Canal at the northern end of the Red Sea. Furthermore, much of this trade is long haul in nature, meaning that over a third of global container ship fleet capacity, by which I mean the ships themselves, transited the Suez Canal.

The majority of this traffic is now being forced to take a much longer route around the Cape of Good Hope, effectively tightening vessel supply by as much as 10%, which is, in turn, driving up charter rates. This brings us to slide 15, where we take a closer look at the charter market itself. We saw COVID-driven cyclical highs in 2021 and much of 2022, before a sharp downward normalization through late 2023. That downward pressure has now shifted into positive momentum so far in 2024, with market rates trending up and charter durations extending as charterers work to ensure that they will have access to the tonnage that they need. We can't say how long these trends will last, but we are working hard to lock in charter cover and grow cash flows as much as we can while conditions remain favorable.

As I said earlier, we look forward to updating you on progress on this front on our Q2 call. With that, I'll turn the call back to George to conclude our prepared remarks on slides 16 and 17. George?

George Youroukos (Executive Chairman)

Thank you, Tom. On slides 16 and 17, we provide a summary of key points. We have $1.6 billion of contracted revenue over an average of 1.9 years, which fully covers our debt service and CapEx through at least 2025, without relying upon contributions from any future charter signing or extensions. We have a robust balance sheet and strong credit ratings, including an investment grade rating for our senior secured notes due July 2027. We have $317 million of cash on the balance sheet, though much of it is restricted, and no refinancing risk before 2026. Our financial leverage is down to 1.1x. Our floating rate debt is fully hedged, and our all-in debt cost is 4.56%.

Now, macro and geopolitical uncertainties remain, with the Red Sea playing a particularly significant role in extending voyage lengths, tightening the supply-demand balance, and pushing up market charter rates and asset values, effectively placing on hold the normalization of market conditions. However, just as quickly and unprecedentedly as such issues can flare up, they can also go into remission, expand, or change in unexpected ways, as we have all seen, and we have to manage our business accordingly. Meantime, our liner company customers remain generally cautious in outlook, although the tone of their Q1 earnings calls to date is more positive than for Q4, 2023, with momentum helped not only by the Red Sea situation, but also by an increase in containerized demand. And their balance sheets are exceptionally strong, shaped after record earnings in 2021 and 2022.

So to sum up, Global Ship Lease is well-placed to continue generating strong earnings, returning capital to shareholders, fortifying our balance sheet, and positioning ourselves to maximize shareholder value by acting quickly when the right opportunities arise and demonstrating strategic patience until they do. Now, before moving to Q&A, I would like also to take a moment to welcome George Giannopoulos as our new Chief Compliance Officer. George has headed up internal audit for several years and knows our organization inside and out, and we look forward to his participation, influence, and insight as a member of the senior management team. Now, we're ready to take your questions.

Operator (participant)

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue, and your first question comes from the line of Omar Nokta with Jefferies. Please go ahead.

Omar Nokta (Managing Director)

Thank you. Hey, guys. Good afternoon.

Tom Lister (CEO)

Hi, Omar.

Omar Nokta (Managing Director)

Hi. Hi, Tom. Just wanted to ask maybe just on your comments, you know, we've clearly seen a reversal to the upside in the container market these past few months. You've been able to secure some charters and extensions, and you mentioned working very hard and diligently in securing more of your open capacity. There's clearly, I'd say, you know, a big earnings swing in 2025 based off of where rates were, say, three months ago and where they are today for GSL. Clearly, you know, charters are. It sounds like they're forward-booking more than they had been.

Just wanted to ask if you could maybe give a bit more sense about how much capacity do you think you could put away here in the next few months, just given what's going on in the market?

Tom Lister (CEO)

Sure. Well, first of all, I agree with all of your observations. Containerized volumes have indeed, I think, surprised to the upside, and have surprised the upside for everyone, including the liner operators, not only tonnage providers like us. So that's obviously a very positive sign. Now, I mentioned in the prepared remarks that if you assume median redelivery under all of the charters that are potentially coming open within the course of 2024, that's roughly 20 ships. You know, so between the end of Q1 and the end of Q4 of this year, it's roughly 20 ships taking the median.

And I would say, directionally, at least, larger ships, by which I mean those above 5,500 TEU or so, are beginning to attract forward fixture scope, which is something that we haven't seen since, I would say, late in the second quarter of 2022. So for larger vessels, particularly interestingly specified larger vessels, it is viable to fix forward by a number of months, and we're seeing that. For the smaller ships, I would say there's less appetite in the market to forward fix, but we are seeing the duration of charters, even for ships, call it in the, you know, sort of 2,500-4,500 TEU range, stretch up to potentially as long as a couple of years.

So it's a complete change in tone, and I think the willingness that liner operators have to lock in, tonnage for longer, exhibits a confidence, from their side that this strength in the market is not just a flash in the pan, and they just genuinely need the capacity in order to accommodate both the Red Sea and the increase in demand, and indeed, also the inefficiencies, such as port congestion, that we're beginning to see in the market as well. And just, you know, to remind listeners, from a very general perspective, if there is an inefficiency in the supply chain, counterintuitively, that tends to be good news for tonnage providers like us, supplying capacity into the supply chain, because inefficiencies suck up capacity. So sorry, longer answer you, than you were probably expecting, Omar.

I hope I covered most of your points, but by all means, follow up with other questions if I missed anything.

Omar Nokta (Managing Director)

Not at all, Tom. That was very helpful and quite detailed. I think, yeah, so just to make sure I understood it, you know, the larger vessels, clearly, you're, there's more and more forward fixing opportunities in terms of months ahead of deployment, and then the smaller ships in that 2,500-4,500, you may not be seeing forward fixing, but there are potential contracts up to two years now.

Tom Lister (CEO)

Yep. Good summary.

Omar Nokta (Managing Director)

Okay. Okay. Thank you. And then more kind of sticking with you, perhaps, Tom, you mentioned milking the cow and feeding the cow, you know, that analogy. And looking at slide eight, you have the current dynamic circled in which secondhand values have just started to lift off the bottom. What would you say the deal dynamic looks like now? The market had clearly gone quiet back at the end of 2022 and for most of last year. What's the sale and purchase market looking like now? Is anything looking compelling? I know, you know, at GSL, you have very, you know, strict return hurdles, but just in general, are things thawing out? Do things look more interesting? Is there stuff that's transacting, or is it still too early?

George Youroukos (Executive Chairman)

Omar, let me take this, and I can be quite specific. When the market is strong, we do not look at charter-free ships, as we think the prices are too high and the risk is asymmetrical. When the market is low, we look at charter-free ships because we buy them cheaply and then wait for the market to improve and milk them away, as we said. Now, during stronger times, like today, like better markets, we look at deals which are charter attached, so ships that have a charter, so then we're not exposed to market risk, and it's a calculation of, you know, returns versus residual value, then, and so on, so forth. So it's these deals are isolated, let's say, from market risk. So that's how we have been doing all along.

When the market was, you know, improved, we were looking at deals that have charter attached, and when the market was low, we're looking at charter-free deals. This is more or less the mix we follow. So we are always looking at the risk very carefully.

Tom Lister (CEO)

Yeah, and Omar, just to add to that comment, I would say that we see just as many potential deals cross our desks at pretty much all times in the cycle. But as I hope we made clear in the prepared remarks, we don't move on deals unless we like the numbers, unless, as George says, we like the combination of risk and economics. So just because you're not seeing us making acquisitions, it's not reflective of us not seeing deals, it's reflective of us seeing deals and either choosing not to move on them or being outbid. And in either case, we're absolutely sticking to our disciplined approach, because that's how you protect value and build value over time in our business.

Omar Nokta (Managing Director)

Makes plenty of sense. Thank, thank you, Tom. Thanks, George, for that. I'll turn it over.

Operator (participant)

Your next question comes from the line of Amit Mehrotra with Deutsche Bank. Please go ahead.

Chris Robertson (Equity Research Analyst and VP)

Hi, Tom and George. This is Chris Robertson on for Amit. Thanks for taking our questions.

Tom Lister (CEO)

Hi, Chris.

Chris Robertson (Equity Research Analyst and VP)

This might be a simple question, but it kind of relates to the discussion you were just having with Omar. How do you guys think about the present value of the contracted revenues of the $1.6 billion, I guess, on a discounted basis, whatever rate you're using, what is the present value of that?

Tom Lister (CEO)

That's a very good question, and I think it's a very reasonable one, because we look very much at the value of our business is continuing to generate forward visibility on cash flows. So I guess different observers will attribute a different risk and thus a different discount rate to the cash flows. I think typically, and although this varies obviously through the cycle, typically, roughly an 8% discount rate, I think, is looked at by most analysts. But I'd flip the question back to you, Chris. What do you consider to be an appropriate discount rate for risk-averse container ship lessors like us?

Chris Robertson (Equity Research Analyst and VP)

Sure. I probably won't be answering the questions on this particular call.

Tom Lister (CEO)

But yes, I mean, I've given you a sort of an 8%, but it's up to everyone, obviously, to decide on their own discount rate, and as a result, take that approach to applying it to our contracted cash flows. And fortunately, I think our business is comparatively easy to model. We're very transparent in terms of contracted rates, so people can model out our charter profiles and then figure out how to value those cash flows.

Chris Robertson (Equity Research Analyst and VP)

Sure. Okay. Yeah, it was, it was more a question about how you might look at it internally. But, let me go to the next question. This is just as it relates to the share repurchase program. I guess now that shares are trading up into the mid-20s, how are you thinking about the repurchase program? Is it still just as a compelling point that there'll be maybe steady repurchases in the coming quarters, or is the analysis a bit different now?

Tom Lister (CEO)

I think the analysis changes at every point in the cycle, Chris. So, you know, wherever we are in the cycle, we look at all alternatives open to us from a capital allocation perspective and evaluate each one on its merits. Clearly, you know, when asset values were superheated during 2021 and 2022, we didn't buy ships, and instead, we redirected our capital to buying back shares. But it's... I can't give you a neat answer to that. I would just say that we look at the way we allocate capital all the time on both a disciplined basis and a dynamic basis, and we figure out what's the best use at any given point in time. And share buybacks will certainly remain part of our toolbox going forward.

Chris Robertson (Equity Research Analyst and VP)

Okay. Yeah, that's fair. Last question from me, I guess. I mean, obviously, you guys have noted a couple of times now with regards to port congestion and then some increasing demand around containerized volume. So I'm just trying to maybe dive into the specifics of that, into specific regions that you're seeing a pickup in import demand, specific ports that might be having congestion issues. If you have any details around that, it would be great to hear.

Tom Lister (CEO)

In terms of specific ports, I think that's getting a little bit too granular for me. Apologies for that. In terms of regions that are seeing demand pick up, I would say the U.S. consumer is proving as reliable as ever. So there's a lot of demand being driven, particularly by the U.S. And from what we understand, there has been an element of restocking taking place, not just in the U.S., but primarily in the U.S., and it's been going on, probably kicking off from the fourth quarter of last year and progressing through year to date.

George Youroukos (Executive Chairman)

Let me also add to that Tom said that we also see now a lack of empty boxes, of containers. When I say containers, you understand the boxes. Naturally, once you prolong the duration of the voyage, so you suck up a portion of the fleet of the container ships, at the same time, you're sucking up a portion of the container fleet, you know, the boxes themselves. So right now, we start to see the clear signs of, you know, shortages of boxes, which is in combination with the COVID situation, you know, was in combination with the port congestion, reminds us of the COVID years. So we're not, we're not there yet as when COVID was, but we start to see the first clear signs of both, congestion and books, you know, being not enough.

Chris Robertson (Equity Research Analyst and VP)

Right. I guess, related to that, this is my final kind of follow-up question. As voyage distances have lengthened, we've also seen an increase in voyage speeds, but is that being capped, I guess, by the environmental regulations and the carbon intensity regulations? In other words, have we seen the speeding up the fleet hit a maximum at this point in time, or can it speed up further, do you think?

Tom Lister (CEO)

Yeah, that's a simple question, but actually a very complex one to analyze. There's probably more upside in the speed potential, but at the same time, as you accelerate, particularly within the E.U., you're gonna be hit, or at least the charterers are gonna be hit by incremental costs by way of the E.U. Emissions Trading Scheme. So everyone, I think, is trying to balance out their network, and by this, I mean, everyone, in terms of liner operators, are trying to balance their network, stabilize their speeds, and also stabilize their port calls. Because if you introduce higher unpredictability by changing some of the variables, such as speed, and you start impacting port schedules, that adds to the congestion issue.

So, yes, I think there is probably more scope for vessels to accelerate in case of absolute need, but I would say economically and logistically, there are incentives for the liners to to keep speeds down to the extent that they possibly can.

George Youroukos (Executive Chairman)

I want to add to that, the fact that new regulations have, we all have installed on the ships, EPLs, engine power limiters, which we cannot get the ship to operate at higher than these restrictors, because then, we are completely, off the chart. I mean, we cannot do that. So the, let's say, the power that the ships used to have, they don't have any more available because of that regulation. This is a, you know, a regulation on, EXI. So, the ships are capped by nature now on speeds, and as we see ships trading, they're more or less trading very close to this limit, as we speak.

So I would not imagine that ships can speed up more and suck up, you know, the or create more capacity, you know? So now we have a lack of capacity, which I don't think can be corrected or eased by speeding up more. They are trading at the speed that the EXI number is not gonna be destroyed, you know, go to E&D, and the speed and the power limiters allow them to go.

Chris Robertson (Equity Research Analyst and VP)

That's really helpful, George. Thank you, guys. I'll turn it over.

Operator (participant)

Your next question comes. Your next question comes from the line of Liam Burke with B. Riley Securities. Please go ahead.

Liam Burke (Managing Director and Equity Research Analyst)

Thank you. Good afternoon, George, Tom, Tassos.

Tassos Psaropoulos (CFO)

Hi, Liam.

George Youroukos (Executive Chairman)

Hi. Hi.

Tom Lister (CEO)

Hi.

Liam Burke (Managing Director and Equity Research Analyst)

I guess, well, your debt or net debt declined 16% from the end of the year. Your debt levels are steadily declining. Do you have, in your mind an ideal, cap rate in term- or, debt rate, in relation to, where you want to manage the business?

Tassos Psaropoulos (CFO)

Hi, Liam, again. Regarding leverage, it always has to do where we are in the cycle, the age of the fleet. We are currently at a very good level of 1.1, and we want to continue to be in a very good position regarding being in a situation to weather any fall down of the market, cash flow-wise and value-wise, and also take advantage of any leverage in order to create value for our investors. Yes, in general, we are at a point that we're feeling comfortable both with the amortization that is already in place and the leverage that we put on every acquisition that we actually make.

Liam Burke (Managing Director and Equity Research Analyst)

Great, and on,

George Youroukos (Executive Chairman)

If I may add to that.

Liam Burke (Managing Director and Equity Research Analyst)

Oh, sure. Go ahead.

George Youroukos (Executive Chairman)

Yeah. When we, when we set up our financings, and our refinancings that we have done recently, you know, we have created a repayment schedule, which is fixed, and which is in line with, the age of the fleet at any given time, and our ability to refinance whatever is needed at the end of the. And so on and so forth. So, you know, it's more or less fixed our prepayment schedules, completely.

Liam Burke (Managing Director and Equity Research Analyst)

Okay. If we can flip over to returning cash to shareholders, your stock yields a healthy, we'll call it 6%. I don't think there's a lot of benefit to raising the dividend, so how are you looking at buybacks? Are you just gonna steadily just move through that process on a quarter-over-quarter basis?

Tom Lister (CEO)

Hi, Liam. Again, I don't mean to be dodging the question here at all, but I will return to the answer I gave earlier, which is, as far as capital allocation is concerned, we view it dynamically, and we view it in context, and that context will include capital market dynamics, what's happening in the shipping market itself, forward visibility on charters, et cetera, et cetera, et cetera. The rest of the list goes on. We try to decide how to allocate capital, depending upon the capital that's at our disposal, how we're getting on in terms of fixing additional contracts, et cetera. So I won't give you a neat answer as to, you know, whether we're going to buy back X number of shares or pay this dividend or that dividend.

We'll keep everything under review and allocate capital as we see, as building most value through the cycle and in the context of the overall market.

Liam Burke (Managing Director and Equity Research Analyst)

Great. Thank you, Tom.

Tom Lister (CEO)

If I just had to do. Okay.

Operator (participant)

Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Ward Bloom with UBS. Please go ahead.

Ward Bloom (Equity Research Analyst)

Thank you. You know, you sort of teased us a little bit about expecting contract extensions as the year goes on, and that prices have remained firm or even better than the first quarter. Are we to expect or assume that, you know, so far we're halfway through the quarter, that you've already completed some extensions and not just announced them yet?

Tom Lister (CEO)

We didn't mean to tease you, Ward. Thanks for the question. But I think, let's put it this way. We look forward to providing an update on our 2Q earnings call in due course, and we wouldn't want to put the cart before the horse. So we've provided, I hope, constructive guidance, but we'll come back to you, to everyone, when we've managed to, let's say, execute on the expectations that we've penciled out for you.

Ward Bloom (Equity Research Analyst)

Okay, thank you.

Operator (participant)

That concludes our Q&A session. I will now turn the conference back over to Tom Lister for closing remarks.

Tom Lister (CEO)

Okay. Well, thank you very much to everyone for joining today. To echo what I've just said to Ward, we very much look forward to talking to you again on our next earnings call for 2Q. Many thanks.

Operator (participant)

Gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.