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Edited Transcript of EGLE earnings conference call or presentation 5-Mar-20 1:00pm GMT

Q4 2019 Eagle Bulk Shipping Inc Earnings Call

New York Mar 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Eagle Bulk Shipping Inc earnings conference call or presentation Thursday, March 5, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Frank C. De Costanzo

Eagle Bulk Shipping Inc. - CFO & Secretary

* Gary S. Vogel

Eagle Bulk Shipping Inc. - CEO & Director

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Conference Call Participants

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* Christopher M. Snyder

Deutsche Bank AG, Research Division - Research Associate

* Jonathan B. Chappell

Evercore ISI Institutional Equities, Research Division - Senior MD

* Randall Giveans

Jefferies LLC, Research Division - VP,Senior Analyst & Group Head of Energy Maritime Shipping

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Presentation

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Operator [1]

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Greetings, and welcome to the Eagle Bulk Shipping Fourth Quarter 2019 Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the call over to Gary Vogel, Chief Executive Officer; and Frank De Costanzo, Chief Financial Officer, of Eagle Bulk Shipping. Mr. Vogel, you may begin.

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [2]

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Thank you, and good morning. I'd like to welcome everyone to Eagle Bulk's Fourth Quarter 2019 Earnings Call. To supplement our remarks today, I would encourage participants to access the slide presentation that is available on our website at eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition.

Our discussion today also includes certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and TCE. Please refer to the appendix in the presentation and our earnings release filed with the Securities and Exchange Commission for more information concerning non-GAAP financial measures and a reconciliation to the most comparable GAAP financial measures. Also note that the Baltic Supramax Index, or BSI, that we will reference in this presentation is basis to BSI-58 index.

Please turn to Slide 5. The fourth quarter was a dynamic period for the shipping markets and one of transition for the company. Having reached the 6-year quarterly high in Q3, the BSI traded off in the fourth quarter to average approximately $10,500. As we indicated in our earnings call in November, market weakness in Q4 was due to a number of factors, including Indonesia's ban on nickel ore exports coming into effect, import quotas on Chinese coal imports being met and a lack of U.S. soybean shipments. In addition, we believe the year-end market was negatively impacted due to some factors related to IMO 2020 coming into effect on January 1.

Eagle achieved a net TCE for the fourth quarter of $11,292 per day, equating to a market outperformance of $1,430 or 15%. Looking back, we've now outperformed in 11 out of the last 12 quarters.

For the full year 2019, Eagle achieved a net TCE of $10,385 per day, equating to a market outperformance of 15% or $1,319. This translates to an annualized value creation of $24 million basis our current owned fleet of 50 ships, our highest year yet. It's also noteworthy that we achieved this while positioning 34 ships into and out of yards in the Pacific for scrubber retrofits.

Moving into Q1. Market weakness intensified on the back of traditional seasonal weakness relating to increased newbuilding deliveries and Chinese New Year and was further exacerbated by higher fuel costs due to IMO 2020 fuel switchover and now, more recently, the significant impact to trade demand as a result of the coronavirus. We will address this in more detail later, but our first and foremost concern is for the well-being of those who have been affected and, as a company, for the safety and wellness of our employees, including the crews onboard our vessels. In this regard, we're taking precautions in line with guidance from relevant organizations and authorities and stand ready to adjust our actions as the environment dictates.

Quarter-to-date, the BSI has averaged approximately $6,000 per day, representing a drop of 44% as compared with Q4. As of today, we fixed about 85% of our available days for the first quarter with a net TCE of $10,300 per day, representing our current total outperformance of around $4,000 per day when compared to the index. This figure is inclusive of approximately a $2,800 TCE benefit generated on our scrubber-fitted fleet from fuel spread savings.

Please turn to Slide 6. Fuel cost for the majority of the industry, which is operating nonscrubber-fitted ships, increased dramatically with the inception of IMO 2020, while at the same time, fuel costs for those operating scrubber-fitted ships like Eagle are benefiting from lower fuel pricing.

Fuel spread between HSFO and VLSFO have been quite volatile since January with the actual fuel spread year-to-date close to $200 and the balance of the year now averaging around $150 per ton. This has come in since the outbreak of the coronavirus, but forwards have been widening over the past few days, and we believe spreads will continue to move up as and when oil demand normalizes. In order to start crystallizing part of our scrubber investment returns, we've entered into hedges for approximately 25% of our scrubber-related fuel spread exposure for 2020 and 2021. These are at average prices of $240 and $150, respectively. And as of today, those hedges have a mark-to-market positive value of around $5 million.

Please turn to Slide 7. EBITDA, adjusted for certain noncash items, totaled $9.8 million for the fourth quarter, down around 25% as compared to Q3. While our TCE performance increased in Q4, EBITDA was negatively impacted by significant off-hire days as we work to complete our scrubber retrofit program ahead of IMO 2020.

We incurred a total of 740 days off-hire during Q4, the largest in our history, as 18 ships, or more than 35% of our fleet, were in a Chinese shipyard at some point during the quarter. This had a material impact to our earnings, which Frank will discuss in more detail.

In order to be able to maximize the potential fuel spread benefit, our objective from the beginning had been to complete the scrubber retrofit program by January 2020, and we achieved just that. As of the end of January, we have 38 scrubbers fitted with just 3 units, which we ordered last summer, remaining to be installed during Q1. This scrubber retrofit program has been a monumental task for our company, and its successful and timely execution is a result of great teamwork and dedication across the Eagle organization. Once our program is fully complete, we'll have a total of 41 vessels or 82% of our own fleet fitted with exhaust gas cleaning systems. This makes Eagle the largest owner of scrubber-fitted Supramax/Ultramax vessels, and we believe this provides us with a competitive advantage as only about 7% of the mid-size dry bulk fleet has been fitted.

Although it's early days, our IMO 2020 compliance strategy is delivering value. Since implementation on January 1, we estimate our scrubber investment has yielded roughly $9.5 million in incremental revenue for the company. And based on our expectations for a continued positive forward fuel spread environment between HSFO and VLSFO, we believe the contribution from our investment in scrubbers will continue to be meaningful.

With that, I'd like to turn the call over to Frank, who will review our financial performance.

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Frank C. De Costanzo, Eagle Bulk Shipping Inc. - CFO & Secretary [3]

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Thank you, Gary. Please turn to Slide 9 for a summary of our fourth quarter 2019 financial results. Revenue, net of both voyage and charter hire expenses, totaled $41.9 million for the fourth quarter, 3% lower than the prior quarter. The company reported a net loss of $11.2 million for the fourth quarter or a loss per share of $0.16. Adjusted EBITDA came in at $9.8 million. Operating performance for Q4 was negatively impacted by several factors, including lower available days due to scrubber installation offhire, higher vessel expenses due to onetime startup costs relating to our ship acquisitions, higher operating expenses driven by the previously disclosed OFAC settlement and onetime legal charges.

It is noteworthy that taking into account scrubber offhire, along with the onetime events mentioned above, our earnings were impacted by approximately $12.1 million or $0.17 per share in the quarter.

Let's now turn to Slide 10 for an overview of our balance sheet and liquidity. Total cash, inclusive of $5.5 million of restricted cash, was $59.1 million at December 31, 2019, which represents a decrease of roughly $42 million from prior quarter end. The decrease in cash was primarily driven by dry docking expenditures, the installation of scrubber and ballast water treatment systems and the purchase of the last 3 Ultramaxes we acquired, in part offset by the draw from our new Ultraco debt facility.

The company's total liquidity as of December 31, 2019, was $129.1 million, comprised of total cash of $59.1 million and $70 million of undrawn revolving credit facilities. In the fourth quarter, net cash provided by operating activities came in at $2.7 million. For the full year, net cash provided by operating activities was $21.7 million. Total gross debt, excluding debt issuance costs as of December 31, 2019, was $474.7 million, an increase of $25.3 million from the prior quarter. The increase in debt is primarily due to incremental borrowings related to vessel acquisitions under the new Ultraco debt facility, in part offset by debt principal repayments.

Please turn to Slide 11 for a cash walk for Q4 and full year 2019. The chart at the top of the slide lays out the changes in the company's cash balance in Q4 2019. The 2 large bars on the left, revenue and operating expenditures, are a simple look at the operations. The net of the 2 bars is positive $9 million, which comes in very close to our Q4 adjusted EBITDA number. To the right, you will find a bar covering the $6 million of drydocking costs; CapEx of $8 million for scrubbers and ballast water treatment systems, along with a vessel S&P bar totaling $62 million, covering the purchase of 3 Ultramax vessels. The $33 million bar represents the net proceeds from the new Ultraco debt facility accordion draw, and finally, the bar totaling $18 million for debt principal and interests we paid in Q4 2019.

Let's now discuss the chart at the bottom half of the slide, which displays the changes in the company's full year cash balance. The net of revenue and operating expenditure bars is positive $49 million, which is very close to our full year adjusted EBITDA number. To the right, you will find a bar covering the $12 million for drydocking, a bar totaling $58 million for CapEx on scrubbers and ballast water treatment systems; a bar totaling $114 million for the 7 Ultramax vessels we purchased during the year, in part offset by the 4 Supramax vessels we sold; a bar totaling $152 million representing the cash proceeds we received from the convertible bond debt offering, new Ultraco debt facility accordion draw and the debt refinancing in January 2019. The final bar on the right totaling $46 million covers the debt principal and interest paid for the full year 2019 on our existing debt facilities.

Let's now review Slide 12 for our cash breakeven per ship per day. For the full year 2019, cash breakeven per ship per day came in at $10,080, $1,722 higher than the prior year. The year-on-year increase is primarily a result of the increase in debt principal payments related to the new Ultraco debt facility, along with an increase in our operating expenses.

Full year 2019 vessel expenses or OpEx came in at $4,859 per ship per day, $134 higher than prior year. As I previously indicated, OpEx was impacted by onetime vessel acquisition costs. In 2019, drydocking came in at $702 per ship per day, $218 higher than 2018. Please note that drydocking costs are a function of the age of the vessels drydocked as well as the additional upgrades performed to improve the long-term fleet performance. That being said, the average age of ships drydocked in 2019 was older than the age of those performed in the prior year.

Cash G&A in 2019, excluding certain nonrecurring items, came in at $1,681 per ship per day, up $115 from prior year. It is worth noting that our G&A per ship calculation is based only on our owned vessels. In this regard, if we were to include the chartered-in days in our calculation, 2019 G&A per ship per day would be $1,388.

Cash interest expense for the full year 2019 came in at $1,471 per ship per day, which is $120 higher than full year 2018. The increase is primarily due to increased debt relating to our vessel acquisitions and less ownership days, which will normalize in 2020, as the 50 vessels in our fleet will be fully counted for the year.

Cash debt principal payments in 2019 came in at $1,366 per ship per day, which is $1,134 higher than prior year. The increase is attributable to our principal repayments on the new Ultraco debt facility.

Looking forward to Q1 2020 breakevens. We see OpEx and debt principal repayment around their 2019 levels, G&A to move down to circa $1,550 per ship per day, interest expense to increase slightly due to the full year impact of the additional debt in dry docks, which will come in as per the CapEx slide in the appendix of our presentation.

This concludes my comments. I will now turn the call back to Gary.

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [4]

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Thank you, Frank. Please turn to Slide 14. As indicated earlier on the call, apart from the seasonal factors, which traditionally affect the first quarter, the dry bulk market has been negatively impacted in Q1 by both IMO 2020 coming into effect, particularly for owners that do not have scrubber-fitted fleet and the coronavirus.

In terms of IMO 2020, unfortunately, given weak demand dynamics in early Jan, owners of nonscrubber-fitted ships were essentially unable to pass on extra fuel cost to charters, and this, in turn, has pushed time charter equivalent rates down significantly. While we had expected this to moderate post Chinese New Year, the coronavirus has led to major trade impacts particularly for cargoes into China. This is clearly evident in the number of Chinese port calls, which actually decreased post Chinese New Year by about 30% from pre-holiday levels when normally we would have seen an increase. Positively, we've seen a rebound in this metric over recent weeks, and we're now back around pre-Chinese New Year volumes. Notwithstanding the weak market, the BSI bottomed at $51, $52 per day on February 13 and is now trading back over 7,000, with the forward curve indicating rates for Q3, Q4 in the mid-$10,000 range.

Given the erratic supply-demand dynamics, I also think it's noteworthy to look at the extreme differential, which currently exists between the Atlantic and Pacific markets.

Please turn to Slide 15 for a look at this graphically. Here, we depict the Atlantic versus the Pacific BSI premium. We added this slide to the deck due to the extreme disparity. While the overall market is averaging $7,000, the Atlantic BSI is close to $10,000 while the Pacific is hovering around $4,000. Although this differential ebbs and flows around seasonal factors, it's been exacerbated this year due to the significant falloff in demand into China. As we have mentioned in prior calls, the Atlantic market tends to trade at a historical premium, averaging around 30% due to structural supply-demand dynamics. As you can see, the Atlantic premium skyrocketed to a 15-year monthly high in January, reaching 180%. This volatility presents challenges but opportunities as well, given that we operate our ships between the Atlantic and Pacific basins, in part to capture arbitrage opportunities. Looking forward, we expect the mean reversion will occur with Pacific rates rebounding and narrowing the gap as and when trade normalizes.

Please turn to Slide 16. Vessel supply growth remained elevated in Q4 despite a drop in newbuilding deliveries, a total of 108 vessels amounting to 11.8 million deadweight tons delivered during the quarter. For the full year, a total of 432 new ships hit the water in 2019. It's noteworthy that there was very little slippage in 2019, whereas most ships in the order book delivered as scheduled.

Demolition of older tonnage totaled 26 vessels during the fourth quarter, amounting to 2.5 million deadweight tons. For the full year of 2019, scrapping increased year-over-year to total 7.8 million deadweight tons or 82 vessels. It's worth noting that only 18 ships or just 0.5% of the Handymax fleet was scrapped in 2019. This figure portends that there's a growing backlog of potential scrap candidates in the midsize segment. And given current fuel pricing and market dynamics, we believe scrapping is likely to increase. Given the above, net fleet growth came in at 3.9% in 2019 for the total dry bulk fleet, about 1 point higher than was widely expected earlier in the year.

In terms of forward supply growth, things look more positive, whereas the dry bulk order book currently stands at 9% and for the Supramax/Ultramax segment just 6.5%, the lowest level in over 20 years.

In 2020, dry bulk net fleet growth is forecasted to be around 3.4%, but within Supramax/Ultramax segment, 1 percentage point lower at 2.4%, although we believe it's likely the number will be even lower due to the potential for increased scrapping due to weak market conditions as well as productivity issues at Chinese shipyards due to the coronavirus. A total of 256 dry bulk ships were ordered in 2019. To put this in context, there's only been one other time in the past 15 years when so few vessels were ordered. Within the midsize segment, 77 ships were ordered in 2019 or 2% of the fleet.

As we indicated on our last earnings call, due to a number of factors, including the price advantage of secondhand ships versus newbuildings as well as the uncertainty surrounding future propulsion technology, we remain optimistic we will not see a material pickup in ordering for the foreseeable future without a very significant pickup in rates.

Please turn to Slide 17. Global growth expectations for 2020, as forecasted by the IMF, were revised down in January to 3.3%. This was on the back of weaker prospects for some of the emerging markets, including India, which is experiencing weakness in domestic demand. With the onset of the coronavirus, there has been a severe shock to economic activity in China. The Chinese Purchasing Managers Index for manufacturing, which came out a few days ago, tumbled in February to 35.7 from 50 the month prior. To put this in perspective, this has been the sharpest drop in manufacturing activity since the 2008 financial crisis and I think underscores the massive impact the virus has had on this country.

In terms of the rest of the world, it's impossible to know how the coronavirus will ultimately impact activity, either directly or via supply chain disruptions. However, given the correlation between global GDP growth and dry bulk demand, our industry has clearly been impacted. While we don't know exactly when, we're confident that our return to normalization will be supported by both the restocking of inventories as well as stimulus from central banks and governments as we saw earlier this week when the Fed cut its benchmark interest rate.

Additionally, China typically relies on infrastructure spend to stimulate economic growth, and dry bulk is a direct beneficiary of such policies given the importance of the commodities we carry. Notwithstanding the current uncertainty with the macroeconomic environment, we believe Eagle is uniquely positioned to navigate through this period and then capitalize on the expected recovery given our strong balance sheet, our active owner-operator model as well as our industry-leading position with scrubbers.

With that, I'd like to turn the call over to the operator and answer any questions you may have. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Jon Chappell from Evercore ISI.

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Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [2]

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Gary, just three hopefully quick ones for you. First one is more of a clarification. As you read through the earnings release in the revenue section, it says that the decrease in revenue was due to a decrease in charter high rates year-over-year. And if you read the charter higher expense, it says that was partially offset by higher charter rates year-over-year. So can you just help us kind of clarify, why were the rates of maybe the core fleet lower year-over-year in 4Q, but in the charter-in fleet higher year-over-year? Was it just a great 4Q '18 result in a tough comp? Or how did that kind of play out?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [3]

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Yes. Sorry, Jon. I think the charter-in rates were higher of the vessels that we chartered in, although year-over-year, the market was lower. The overall BSI market was sub-10 last year, down about $1,000 year-over-year. But potentially chartering in, in the Ultramax, I don't have the specific figures. We definitely can get back to you on that. What was the second one?

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Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [4]

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Well, I mean, that was the first question actually. Maybe it segues into the second one then. You spoke on Slide 15 about the massive premium of the Atlantic TCE versus the Pacific. So you said you expect mean reversion. Have you positioned your fleet, maybe aggressively is the wrong word, but maybe with a bias towards the mean reversion that you've spoken about? Or are you still trying to maybe balance between the 2 basins, especially now that the majority of the scrubbers have been fitted and you're not kind of tied to the Pacific as you may have been in the recent past?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [5]

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Yes. It's a great question. I mean we're actually now majority back in the Atlantic, and we worked hard to do that, which clearly impacts rates. The backhaul market today for a Supramax is just above 0, on Ultra is probably around 1,500, given the -- obviously, the earning capacity. So that's been costly on our performance in order to get it back to a premium there. I mean at the moment, as you would imagine, with a weak Pacific market, ships are paid significantly more to go out to an area. But we're definitely looking at the potential with that mean reversion to take some of that Atlantic position and more balance into Pacific taking that over the next, say, number of months. And then, of course, it's a contrarian type position, but we don't do things in the extreme. You'll never see us put our entire or even a vast majority of our fleet in 1 basin or the other, but it -- I think it's worth showing because there's a huge discrepancy, obviously, if you have a ship sitting in the Pacific right now versus the Atlantic.

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Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [6]

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All right. That makes sense. And the final one. You mentioned on Slide 17 the IMF taking their forecast on an obviously incredibly fluid situation. But you guys are on the ground, so to speak, by all the different commodities that you move in the Far East. Have you seen any kind of verification of an uptick in industrial production or demand in China as it feels like the cases there have maybe peaked and people are returning back to work after the extended holiday?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [7]

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Yes. I mean there's no question we see much more in courier and cargoes, and it's showing in the market. I mean the -- while I was just handed the index, which came out while we're doing our call here, and it's up -- BSI's up 277 today, and part of that is $300 in Southeast Asia. We're definitely seeing more cargo. We have ships that are doing the last 3 -- we're doing the last 3 scrubber retrofits this quarter. And labor is there and working, and it feels quite good. But as you said, it's a fluid situation, right? And so we don't want to get ahead of ourselves here that this has passed, but it definitely feels much more positive and much more activity. Whereas 4 weeks ago, there were ships that were sitting, fortunately not scrubber-fitted ships, but they were definitely older Supramaxes that were sitting, not being able to get any business at all. And I think that's completely mitigated at this point.

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Operator [8]

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And our next question comes from Randy Giveans from Jefferies.

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Randall Giveans, Jefferies LLC, Research Division - VP,Senior Analyst & Group Head of Energy Maritime Shipping [9]

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Say, I'm just looking on the 1Q guidance. You said it's about a $4,000 premium compared to the benchmark. I think you said $2,800 was scrubber related. So I guess, the overall just Atlantic over Pacific or are there other things there ascribing to that kind of premium?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [10]

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Yes. I mean first of all, and I appreciate the question in order to clarify. So $2,800 is what the scrubber-fitted ships have been able to generate as a premium. Having said that, with -- we now have 38 ships. But overall, for the quarter, slightly less than 38, about 75% of our fleet. So if you take the $2,800 on those ships and netted out over the entire fleet, you get down to about a $2,100 benefit spread out, amortized over the whole fleet. So about half of the $4,000 comes from that and the other half from -- outperformance comes from various aspects. Of course, where you position your ships is important, but it's also arbitrage. It's chartering other vessels, right? It's what we call creating asymmetric optionality between chartering ships, optional periods using derivatives, dynamically hedging and things like that. So it's absolutely not just being in the -- in 1 basin versus the other, but it's a multi-strategy approach. And that's, I think -- speaks to the fact of why we've been able to outperform 11 of the last 12 quarters and Q1 looks quite strong. So I think pretty confident that you can make that 12 out of 13.

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Randall Giveans, Jefferies LLC, Research Division - VP,Senior Analyst & Group Head of Energy Maritime Shipping [11]

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Okay. And then kind of following up on that. The $2,000 a day premium likely falling here as the spread has been tightening, how has your kind of forward hedge position changed here in the last few weeks? I know you gave an update on your IMO call, I guess, a month or so ago. I was just trying to get update currently where that stands.

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [12]

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Yes. I believe we've mentioned we're about 25% covered on our hedge position for both 2020 and 2021, and those hedges averaged $240 fuel spread for 2020 and $150 for 2021. So if you take that with the blended, you're, right now, based on the spot, I know you're probably looking at about $175 for 2020 on a blended basis. And actually the hedge position for 2021 is very much in line with the forward market, which has moved up from sub-140 just a week ago to about $150 now.

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Operator [13]

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(Operator Instructions) Our next question comes from Amit Mehrotra from Deutsche Bank.

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Christopher M. Snyder, Deutsche Bank AG, Research Division - Research Associate [14]

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This is Chris Snyder on for Amit. So you guys -- it sounds like you continue to kind of outperform the broader benchmark in the Q and bookings guidance, but you also had a significant number of vessels coming out of the yard in Q4 following scrubber installations. And as you guys have talked about already, the rates in the Atlantic are coming in at a pretty significant premium to the Pacific. So could we have -- I'm assuming the kind of the fleet positioning there was a bit of a headwind to the outperformance like we have seen an even more significant outperformance. Have we kind of adjusted for that?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [15]

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There is no question that our outperformance was impacted significantly by the need to position 37 ships in and out of yards, of which 35 of them were into China, especially given the fact that the majority of our fleet, more than 50%, typically is in the Atlantic in every given time. And any time you don't have a free hand to trade, it's going to impact that. So there's no question in our minds.

And in Q4, those ships coming out put us in a position to move other ships out of Asia, knowing that these ships would be coming out of the yard. So yes, we feel confident that we would have done better in 2019 in terms of outperformance. It was still our best one. And as mentioned on the call, we -- about $24 million of value creation, but no question about it. If you were to speak to our commercial team, I think they'd say they had one hand tied behind their back for a significant number of the positions.

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Christopher M. Snyder, Deutsche Bank AG, Research Division - Research Associate [16]

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Yes, because this kind of feel like the headwind was almost a double whammy in some sense because not only was it impacting the flexibility in trading, but you're also having to put them all into the basin that is significantly weaker. So it does -- unfortunately, it feels like a onetime kind of event or just is a onetime event?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [17]

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Yes. I mean that's a good point also. Yes, a onetime event in that we could have spread out our scrubber installs over a greater period. We made a concerted effort as things backed up to push hard to get this done by January 1. Because if we had 10 of these ships ready on July 1 instead of January 1, we would forgo about 5 -- what we calculate to be about $5 million on 0.5 year on 10 ships of scrubber premium. And it doesn't come back, right? I mean that is just effectively money against the project. So yes, Q4 was tough in that regard. We had 18 ships in a yard at one given -- at least part of the quarter. Never had it before. Don't expect we ever will. But as you said, onetime event, that's behind us. We have 3 ships that we're working to get done within this water, and then we'll be completely -- have this completely behind us and just looking on the revenue side.

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Christopher M. Snyder, Deutsche Bank AG, Research Division - Research Associate [18]

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Yes, for sure. And then just next, so China stimulus is becoming a pretty major narrative in the entire equity market. Has -- dry bulk, of course, is a big beneficiary of that. Iron ore gets a lot of attention, but can you maybe talk about which mineable cargoes will benefit here? And would also just assume China ramping up has to carry positive implications for scrubber spreads as well.

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [19]

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Yes. I mean, first of all, you're right. Iron ore does and -- but of course, you also have -- I mean coal is a huge commodity as well that we move. And as you have stimulus and steel production and infrastructure spend, there's energy consumption around that. And the other thing is we expect steel -- it's expected that steel movements this year will be higher than in the past 2 years, where it was negative in the last 2 years, so first year. And that's one of the largest -- or is the largest minor bulk in terms of volume. So on a weighted basis, that's really important.

But you also have various cargo -- other cargoes, ores, limestone, gypsum, things like that, that are all part of construction and building. And we move a considerable amount of those cargoes as well. And then in metals, we move things like manganese ore from West Africa into China. That's a significant trade for us as well as bauxite. So it really is the kitchen sink, and that's one of the benefits of minor bulks is it's very diverse in both in terms of commodity as well as sourcing in terms of geography.

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Christopher M. Snyder, Deutsche Bank AG, Research Division - Research Associate [20]

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Yes. And then just one more, if I could. Grain activity out of Brazil seems to be ramping up. Can you just kind of remind us of the grain seasonality here, first, South America, and then kind of how that leads into the North American grain season? And any kind of outlooks or anything you guys are hearing about how the grain season is shaping up, I guess, particularly South America just because it's the -- more near?

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [21]

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Sure. So -- and you're absolutely right. I mean grain is the seasonal driver overall. And if you think about it, it's -- Southern Hemisphere is spring into summer and the Northern Hemisphere is fall into winter. So it's starting to ramp up now, March, but it really typically -- it seems to take a while to get going usually, and it really hits normally in May. And it's been longer over years -- 10 years ago, it used to be maybe a 6- to 8-week season. It's definitely become longer for a number of reasons, storage capacity, hedging capabilities of farmers, things like that. But now it typically goes into September. And what we've seen in the last few years with the absence of U.S. soybeans moving, it's gone even longer. And then typically, the North American grain season gets ramped up kind of end October, November and carries on into January. I mean we haven't seen -- and the data shows that we haven't seen buying -- Chinese buying of soybeans in any meaningful way. And unfortunately, there was a lot of optimism on the back of the Phase 1 trade deal, but now we have the coronavirus. So it's going to be interesting.

Brazil crop is going to be strong this year, but we obviously -- we expect there will be competition from the U.S. market given the trade deal I just mentioned.

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Operator [22]

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And I am showing no further questions from our phone lines. And I'd like to turn the conference back over to Gary Vogel for any closing remarks.

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Gary S. Vogel, Eagle Bulk Shipping Inc. - CEO & Director [23]

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Thank you, operator. We have no further remarks. So I'd like to thank everyone for joining us today on our quarterly earnings call and wish everyone a great day.

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Operator [24]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.