Capital Product Partners L.P.
Q3 2018 Earnings Call Transcript

Published: 31 Oct 2018

[Operator:]

Thank you for standing by, and welcome to the Capital Product Partners' on the Third Quarter 2018 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, the 31, October, 2018. The statements in today's conference call that are not historical facts, including our expectations regarding cash generation, future debt levels and repayments, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings, and our expectations regarding employment of our vessels, redelivery dates and charter rates, fleet growth, and market and charter rates maybe forward-looking statements as such defined in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise. We assume no responsibility for the accuracy and completeness of the forward-looking statements. We make no prediction or statement about the performance of our common units. I would now like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

[Jerry Kalogiratos:]

Thank you, Sophie. And thank you all for joining us today. As a reminder, we will be referring to the supporting slides available in our website as we go through today's presentation. On October 18th, our Board of Directors declared a cash distribution of $0.08 per common unit. The third quarter common unit cash distribution will be paid on November 14th to common unitholders of record on November 5th. In addition, our Board of Directors declared a cash distribution of $0.21375 per class B unit for the third quarter of 2018. The third quarter class B cash distribution will be paid on November 12th to class B unitholders of record on November 5th. The partnership’s net income for the third quarter excluding a non-cash impairment charge of $28.8 million stood at $6.2 million compared to $4 million in the previous quarter. Including the impairment charge, the partnership's net loss for the quarter was $22.6 million. Common unit coverage for the third quarter 2018 stood at 1.1 times, the partnership’s operating surplus for the quarter prior to the revised capital reserve on the class B unit distributions amounted $27.4 million compared to $24.9 million in the previous quarter and $30.3 million for the third quarter of 2017. In view of the IMO 2020 Fuel Sulphur Regulation, the partnership plans to install scrubbers on up to 14 of its larger vessels. In connection with the agreement to equip our 5,000 TEU container vessels with scrubbers, we have agreed with the charterer of the vessels to increase the charter rate by $4,900 per day for its vessel until the end of the respective charters in 2024 and 2025. During the quarter, the partnership went into an agreement with an affiliated party for the sale of the Amore Mio II, one of our Suezmaxes for a total consideration of $11.2 million. The sale was concluded on October 15th. In another fleet development, we secured an extension to the employment of the motor tanker Aktoras, handy tanker [Aristaios] [ph] for an additional year starting in January 2019. As a result of the new charter and as at the end of the quarter the remaining charter duration of our charter stood at 4.7 years with approximate charter coverage of 78% for 2018 and 63% for 2019. Turn to slide three, revenues for the quarter increased by 17.1% to $73.4 million compared to the third quarter of 2017. The increase was primarily a result of the acquisition of the motor tanker Aristaios and the higher number of voyage charters performed by our vessels during the quarter compared to the third quarter of 2017. The rise in revenues was partially offset by the lower average TCE rates earned by certain of our vessels during the quarter and by an increasing off hire days in connection with passing special surveys for certain of our vessels. Moving on, total expense for the quarter were $89.3 million compared to $45.8 million in the third quarter of 2017. Voyage expenses for the third quarter were $14.7 million compared to $4.3 million in the third quarter of last year. The increase was mainly attributable to the increase in number of voyage charters performed by certain of our vessels in the third quarter of 2018 compared to the same period in 2017. As due to the depressed tanker market and the limited liquidity of the period market we have chosen to trade certain of our vessels in the spot market. Total vessel operating expenses during the quarter amounted to $25.9 million compared to $21.4 million during the third quarter of 2017. The increase in operating expenses mainly reflects the increase in the number of vessels in our fleet in carrying operating expenses following the redelivery of three vessels previously employed under bareboat charters and the acquisition of the motor tanker Aristaios in January 2018, as well as increased operating expenses incurred during the third quarter of 2018 in connection with the special surveys of two of our MR product tankers the Aristotelis II and Aris II. Total expenses for the third quarter also include vessel depreciation and amortization of $18.6 million and an impairment charge of $28.8 million related to the sale of the Amore Mio II. As a result of the aforementioned development, the partnership recorded a net loss for the third quarter of 2018 of $22.6 million or net income of $6.2 million excluding the impairment charge. Turning to slide four, you can see the details of our operating surplus calculations that determine the distribution to our unitholders compared to the previous quarter. Operating surplus is a non-GAAP financial measure, which is defined fully in our press release. We have generated approximately $27.4 million in cash from operations before accounting for the class B preferred unit distributions and the capital reserve. We allocated $13.6 million to the capital reserve, an increase of $0.4 million compared to the previous quarter. The Board has decided to revise the capital reserve going forward to better reflect the total amortization payments across all our current credit facilities over the next five years. After adjusting for the revised capital reserve and the class B unit distributions, the adjusted operating surplus amounted to $11 million, which translates into approximately 1.1 times common unit coverage. On slide five, you can see the details of our balance sheet. As of the end of the third quarter, the partner’s capital amounted to $881.2 million, while total debt decreased by $10.7 million to $465.1 compared to $475.8 million as of year-end 2017, which can be attributed to the scheduled loan principal payments during the first nine months of this year and mandatory debt repayments previously made under the 2017 credit facility. The decrease in the partnership's total debt was partially offset by the assumption of $43.9 million in debt related to the acquisition of the tankers Aristaios and Anikitos in the first half of 2018. Total cash as of quarter end amounted to $47.3 million. Overall our balance sheet as of the end of the quarter remains strong with a net debt to capitalization of 31% and with Partners Capital representing 62.6% of our total assets. Moving to slide six, we review the IMO’s low sulphur regulations and the potential impact on the shipping industry. The new regulation aims at limiting the sulphur in fuel used on board ships operating outside the designated emissions control areas to 0.5% from 3.5%. According to the IMO, this is expected to significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world. The new limit comes into force from January 1, 2020. For ship owners, there are two ways to meet the new regulatory requirements. Using compliant fuel or installing exhaust gas cleaning systems also known as scrubbers. In general terms, we believe that the shipping industry will be affected in a number of ways. Firstly, we expect to see an increase in bunker prices as it is still widely debated whether compliant fuels will be readily available thus forcing many owners to use marine gas oil. Secondly, even when they become widely available, compliant fuels are expected to be materially more expensive than high sulphur fuel oil. Concurrently tonnage availability is expected to be reduced across all segments of varying degree as the number of vessels are expected to be off hire for several days in order to be retrofitted with scrubbers predominantly in 2019 and 2020. The scrubber retrofit is estimated to take 30 to 40 days depending on the type of the vessel, the preparation done in advance and the efficiency of installation. While in percentage terms, this expect to be relatively small percentage of the fleet, it could affect markets which have high vessel utilization or [indiscernible] recovery such as the crude and product tanker market. Moreover, in view of the higher bunker prices, owners of older less efficient vessels or with lesser financial and technical resources may opt for slow steaming and/or scrapping of their vessels. This would be partly determined by the ability of ship-owners to pass on the increased bunker cost to charterers in the form of increased freight or higher rates, which of course will be dependent in turn on market conditions. Now moving to slide seven, CPLP as an MLP aims at securing steady and predictable cash flows, backed by long-term period charters. To this end, we are focused on the period market where bunker costs are borne by the charters. Given the uncertainty around the impact of IMO 2020 on shipping markets and the cost of fuel to charters, we are planning to install scrubbers on our larger higher consuming vessels in order to maintain the appeal of these vessels to our charters post January 2020. In addition by retrofitting our vessels with scrubbers we may be able to capture part of the bunker savings delivered to our customers. And last but not least potentially secure attractive returns on the scrubber CapEx investment. In view of the above, we have booked with an established Asian maker up to 14 scrubbers for our vessels comprising our 10 container ships, three Suezmax tankers and one bulk carrier. Our final scrubber installation decision will depend on the charter profile and type of vessel. The installation of the scrubbers are expected to be completed throughout 2019 and 2020 and importantly for six of our vessels retrofitting can be scheduled to occur during special surveys therefore reducing off hire days. We are delighted that the connection with the scrubbers installation on our 5,000 TEU container vessels, we agreed with HMM to increase the charter rate by $4,900 per day to $34,250 per day. The increase will be effective from January 1, 2020, or the installation date of the scrubbers should this occur post January 1st. And until the respective expiry of its charter in 2024 and 2025. At this point I would like to remind you that the vessels are currently earning $23,400 gross per day under restructuring agreement with HMM, dated July 15, 2016. As per the restructuring agreement the charter rate is set to be restored to the original daily gross rate of $29,350 from January 1, 2020 and will increase further to $34,250 once scrubbers are installed. This implies repayment in less than two years for the scrubber installation. Turn to slide eight, we have entered an agreement for the sale of the Amore Mio to a third party for the amount $11.2 million. The vessel was delivered to its buyer on October 15, 2018. In connection with the sale we made a mandatory prepayment of $5.9 million under the $460 million credit facility. As a result the quarterly installment under this facility will be reduced by $0.3 million from the first quarter of 2019. The sale of the Amore Mio was opportunistic in view of the age of the vessel as it is increasingly difficult to lock in period coverage for tankers above 15 years of age. But also due to its forthcoming dry docking survey next year and the changing regulatory environment, which would require significant CapEx to maintain reasonable vessel utilization going forward. Another fleet development we recently secured a time charter extension for the Aktoras we sell for one year at the gross daily rate of $12,000 per day. The new charter is expected to commence in January 2019. The vessel is currently earning $13,500 gross per day under a one year time charter we sell. Moving to slide nine and taking into account the new charter, the average remaining charter duration of our fleet is 4.7 years. We have five product tankers and three Suezmax tankers and we will be looking to recharter until year end. On slide ten we review the product tanker market development in the third quarter of 2018. Product tanker spot rates recorded lower rates on most routes maintaining the negative momentum from the previous quarters. High tonnage constituted a major factor behind the protracted weakness in the market. While supply growth has slowed down considerably this year, the market remained oversupply following net fleet growth of 6.2% and 4.2% in 2016 and 2017 respectively. On the demand side, fundamentals have been mixed. In the U.S. Gulf refinery utilization rates increased during the three month period and reached a record high in the beginning of August. However this positive development was offset by regional high domestic consumption of refined fuels and by a low distillate inventories which combined to limit product exports and subsequently demand for product tankers in the region. Sentiment was also negative use of Suez as higher oil prices adversely affect demand while crude tanker new buildings bode traditional product tanker trades, due to the very depressed current tanker market. Analyst estimate that since the beginning of this year new limited VLCCs have moved nine clean cargos, Suezmaxes have moved 17 clean cargos and crude Aframaxes have moved 33 clean cargos, with some of these vessels doing more than one CPP run. On the bright side the market in the Atlantic experienced increasing gasoline imports of the U.S. [ph] for a third consecutive quarter. Nonetheless this was outweighed by ample supply of tonnage and lower imports in West Africa due to inventories draws in Nigeria. And there’s a consequence rates on the benchmark Trans Atlantic trade hovered at below operating expenses levels for the most of the quarter. In the period market the number of new fixtures reported was relatively high, but the majority was for short-term periods of up to one year. Simultaneously period rates were by and large weaker compared to the previous quarter. Despite the persisting weakness in the market we believe that favorable demand and supply dynamics will support MR product tankers going forward. According to the IEA refinery capacity additions will surge between now and 2019 mainly [indiscernible] increasing competition in the industry are potentially leading to lower refinery throughputs or even refinery closures of vintage refineries at OECD countries. The shortfall could be fueled by higher product volumes for mist of Suez which would in turn have a positive impact on ton miles product tankers. In addition the preparation and implementation of the IMO 2020 regulation is expected to bring on a major dislocation for tankers including shorter term and longer term storage as HFO tanks are emptied, moving of major quantities on middle distillates and other additives needed for complying fuels and potentially slow steaming and/or scrapping of older inefficient ships. On the supply side the MR product tanker book stands at 8.1% as a percentage of the fleet, close to record low levels. In addition slippage remained high as approximately 21% of the expected new builds were not delivered on schedule during the first nine months of the year. Moreover shipyard capacity to product tankers has shrunk over the last few years that’s limiting the number of new vessels that can be ordered in the short to medium term. In particular MR product tanker new building capacity has been hit the hardest as the number of specialized Korean ship builders have either closed down, reduced capacity or are targeting larger more profitable vessel types. Overall, analysts estimate that product tanker deadweight demand will grow by 3.3% in 2019 versus supply growth of 2.7%. Moving to slide 11, the Suezmax crude tanker market experienced higher earnings for the second consecutive quarter, but rates still wandered at depressed levels. The market was plagued by high vessel supply and seasonally weaker demand with a refinery maintenance season in Europe limiting cargo volumes from Suezmaxes. Despite the negative sentiment, spot rates slowly improved from late August onwards on the back of increasing inquiry, which was attributable to higher OPEC production; increased U.S. crude exports and solid Chinese crude oil imports. It is worth noting that the outward trend in the Suezmax market has accelerated in October. In the period market, we saw little demand for Suezmax tankers for long-term charters of 12 months or longer with period rates remaining soft at historically low levels. Altogether, Suezmax deadweight demand is expected to grow by 2.2% in 2019, outstripping supply growth of 1.9%. Looking at the supply side, the Suezmax tanker order book stands at 9.5% as a percentage of the fleet with only four vessels ordered in the first nine months of 2018. It’s also worth adding here that while the hefty vessels delivered over last quarters have exerted pressure on rates, the number of Suezmax new builds that are expected to enter the market decreases to 22 for 2019. Adding to the positive outlook, we have seen 17 Suezmaxes sold in the demo market in the first nine months of 2018 on top of 13 ships scrapped in 2017. On aggregate and turning to slide 12, demolition activity has significantly accelerated in 2018 compared to the already high demolition activity registered last year when 11.1 million deadweight of wet tonnage was scrapped. In particular, total tanker demolition amounted to 18.1 million deadweight during the first nine months of 2018, which represents the highest demolition levels since 1985 for this period of time. Turning to slide 13, as you can see there is a long list of potential dropdown vessels as our sponsor currently controls a number of container and tanker assets with long-term charters of three to five years, which are well suited for our business model. However, at the same time, we’re mindful of the equity value our ordinary unit price has experienced over the last few quarters. That is despite the relatively steady cash flows generated from certain of our vessels and the deleveraging achieved through our refinancing last year and the current debt amortization schedule. In view of this, we will continue to focus on how we can restore our equity valuation going forward, which for an MLP is an important currency for growth. And with that, I’m happy to answer any questions you may have.

[Operator:]

Thank you. [Operator Instructions] We will now take our first question from Jon Chappell from Evercore. Please go ahead, your line is now open.

[Jon Chappell:]

Hi Jerry.

[Jerry Kalogiratos:]

Hi, Jon.

[Jon Chappell:]

This is Jon Chappel, Evercore ISI. How are you? Couple of quick questions for you. So, first of all, if we go back to slide nine, a lot of ships exposed to the market, which isn’t the worse thing given what’s happened in the crude and the product tanker markets in the last couple of weeks or so. But just trying to balance the fact that you’re still an MLP structure and transparency around TCE and earnings is at a premium, but the fact that the market is still coming off the bottom, seems like the spot markets have been much stronger, but it hasn’t really translated into time charter rates yet even for years. So, how do you think about the next couple of months or even quarters with these ships that are either off contract today or will be rolling off of contract in the next couple of months. How are you balancing maybe a strong spot versus the security of knowing the revenue?

[Jerry Kalogiratos:]

Thank you, Jon. That’s a good question. Our business model remains one of a providing long-term cash flow visibility to our unitholders. And we are always in the market discussing period opportunities. Last quarter alone we announced a number of fixtures for our older MR tankers to Petrobras and Total as you might recall. And we recently renewed one of our older handy tankers [indiscernible]. But it has been mostly because of the challenging market conditions in the product tanker market and the age of the vessels that made it a little more difficult this time around. And given the fact also that we have strong cash flows underpinning our common unit distribution on the back of the fixed tankers, but also the containers we thought that it would be -- it was worthwhile waiting. And as you say as you look at the market today, it seems that this bet is in a way being off as the markets especially on the crude side have been recovering from the lows that we saw during the first half or even of the year or even the third quarter. Now we have 11 product tankers that will be -- are currently trading spot or will be coming off charter until the end of 2019. And I think as the market recovers and as we see more liquidity into the period market, again we will be looking to gradually start fixing away. The IMO 2020 regulation impact could also be a good tailwind, but overall the idea is that we will continue to put away ships on period when and if we -- and as we can, if we think that is the right time to do it.

[Jon Chappell:]

I appreciate that, Jerry. Second one, a bit of a two parter and bear with me here for a minute. So, I appreciate your final comments on the dropdown opportunities, but maybe being difficult today with the unit price and the 12 plus percent yield. So two questions are I feel like a 12 plus percent yield is showing you that some people maybe are worried about the distribution coverage just being maintained let alone growth. So the first part is how do you feel about the sustainability of the $0.08 quarterly distribution? And then the second part would be is there any other unique way or outside the box way you're thinking that maybe you can execute dropdowns even with a yield where it is right now, or maybe you can kind of solve those two problems. I don't know if it's chicken or the egg thing, but a way to get some dropdowns, better coverage so the yield corrects itself after it dropdowns?

[Jerry Kalogiratos:]

With regard to let's say our expectations going forward and I think we have discussed this also in the previous couple of quarters. We went through a more difficult path, if you want because of the performance of our tankers predominantly our Suezmaxes, but also some of our product tankers that were trading in the spot market and had to bear the brunt of the market. But we also had if you want the impact of the redelivery of a number of ships from the respective bareboats with international seaways. Not only the redelivery from the bareboats involve prolonged hires, but it also involved long and expensive dry docks as we had to take delivery of the vessels and bring them up to our standard. So if you want there was also over the last couple of quarters, over the last I would say three quarters you have seen a little exaggerated impact of that as well. But now looking forward, first of all for example the next quarter we don't have any dry docks and assuming that we don't bring forward any of the other dry docks because of scrubber installation we only have one dry dock in the whole of 2019 so that should work in our favor. Moreover, we now during the third quarter we delivered all of the newly fixed MRs into Petrobras charters. It was mostly towards the end of the quarter. Even once it was at the beginning of this quarter because as they were delayed because of vetting inspections. And together with a recovery of the crude tanker market you would expect that coverage is going to increase going forward. So we feel quite constructive on that. Now to your question -- to your second part of the question is, do we have -- can we right now think of a way to raise capital with this type of common equity yield. Well the question -- we continue to have discussions to see whether we can find suitable capital to put together a credit transactions it’s not necessarily easy, but it’s something that has been in our minds. But I think the easy if you want solution for accretive dropdowns would be to use internal generated cash flows as the distribution coverage grows going forward. So I know that this is more difficult to accept after two quarters of below one times coverage, but I think given what we see going forward we feel quite optimistic provided of course that tanker markets hold up.

[Jon Chappell:]

Okay, understood. Thanks, thanks Jerry.

[Jerry Kalogiratos:]

Thanks, Jon.

[Operator:]

Thank you. We will now take our next question from Ben Brownlow of Raymond James. Please go ahead your line is now open.

[Jerry Kalogiratos:]

Hi, Ben.

[Benjamin Brownlow:]

Hi, Jerry, can you hear me?

[Jerry Kalogiratos:]

Yes, sure how are you?

[Benjamin Brownlow:]

Great thanks. Good. Just on the scrubbers, I know the financing is on a review, but can you talk about just kind of the top financing options that you’re under consideration at this point. And I guess the CapEx for scrubber cost is around $3 million for the containers, is that sort of similar for the tankers and the bulk as well?

[Jerry Kalogiratos:]

So I think given the nature of our activity that is in the period market side of the business the installation of scrubbers will be often a question of coming to arrangements with our charterers, such as the one we announced with HMM. And that’s before doing the scrubbers. Of course we don’t expect this to be possible for all of our larger vessels, but the final decision will be taken over the next few months. And then if you want we can talk in more concrete terms as to exactly what are the capital requirements and how we’re going to fund them. The important thing here is that a number of these discussions with the charterers are ongoing and again for vessels that for example redeliver from their current charters in mid-2020 or early 2021 or what not. There it is we have to think hard whether it makes sense for us to install scrubbers without getting let’s say a premium or an extension and/or both. For the vessels that are redelivered from their current charters are spot before 2020 then again this makes the decision a little easier in terms of actually going ahead with ordering scrubbers. So your estimate is not wrong as you have inferred from the prepared remarks, but I would like to hold back on discussing financing and the magnitude of the program until we have had a clear understanding with our charterers as to where we will go with this.

[Benjamin Brownlow:]

That’s fair. And I guess as you think about those vessels that are going to come off their charter and after IMO 2020 goes into effect. If the charter rates are justified or if it’s justified how quickly and I know this is a kind of a difficult question with the ramp and demand for scrubber installations and all the moving parts. But how quickly do you think you could retrofit the remaining fleet if those rates are justified?

[Jerry Kalogiratos:]

For the vessels what we are doing our plan is we have either contracted or booked the scrubbers for all ships. So it’s not a question of equipment procurement. But overall if you ask me I don’t think this is going to be a major issue for the industry in any case. But we are also in the process of booking dry dock capacity, which I think is going to be the bottleneck in this process. So that depending on special survey positions and dry docking availability we can be done with installations between let’s say 2019 and the first half of 2020.

[Benjamin Brownlow:]

Great. That’s helpful. And just one last one for me on the -- what was the special survey expense in this quarter? And then number of days of off hire with the special surveys?

[Jerry Kalogiratos:]

Ben, if you want we can take this off hires, as I don’t have the exact numbers in front of me, but it has been for two of our ships that went into dry dock, but happy to give you a call later on.

[Benjamin Brownlow:]

Perfect. Great. Thanks, Jerry.

[Operator:]

Thank you. And we will now take our next question from the line of Hillary Cacanando from Wells Fargo. Please go ahead, your line is now open.

[Jerry Kalogiratos:]

Hi, Hillary.

[Hillary Cacanando:]

Hi, Jerry. I’m sorry, I wasn’t sure if I was on. Just as a longer term solution, wanted to get your thoughts around maybe using LNG as a fuel, like do you see that as like a longer term solution or do you think people will just stick with scrubbers longer term as well?

[Jerry Kalogiratos:]

No, that’s a great question of course. This is the third wave you want -- if you want to be compliant, right? So compliant fuels or scrubbers or burning LNG. The problem is that retrofitting for burning LNG in main engines is a very expensive exercise right now and does not seem to have as good economics as scrubbers. And secondly, I think while we will get there and I hope we will get there quite fast, the infrastructure for LNG bunkering is only now being developed. There is a lot of work around it and I think it’s going to be one of the main themes over the next five years. But it will be premature for let’s say trump owners like us to install LNG, to retrofit LNG fueling for our ships given the lack of infrastructure at this point.

[Hillary Cacanando:]

Yes, that makes sense. And I think all my other questions have been answered. So, thank you so much, Jerry.

[Jerry Kalogiratos:]

Thank you, Hillary.

[Operator:]

Thank you. And we will now take our next question from the line of Randy Giveans from Jefferies. Please go ahead, your line is now open.

[Randy Giveans:]

Thanks, operator. Hey Jerry, how is it going?

[Jerry Kalogiratos:]

Hi, Randy, I’m well. Yourself?

[Randy Giveans:]

Excellent, excellent. Two quick questions for me. So, looking at those scrubbers, what is the daily fuel burn for 5,000 TEU containership and what’s your expected spread for USFO and HSFO just trying to back into how you count that 5,000 premium?

[Jerry Kalogiratos:]

So, as we discussed, this is the charterers’ expense. So, it was -- the discussion was mostly focused on two things, the projections of the charters when it comes to the spread and you can -- you might have better visibility as to what liners are expecting. And our desired return on our CapEx investment taking into account that we in any case have these vessels chartered until 2025. So, I know that it does not answer your question, but you see from where we are sitting being active on the period side. While we need to understand the math that the charters does, in the end our decision will depend on what we expect to be the appeal of the asset in a post-IMO 2020 world, and what return we can achieve at any point -- given point in time. So, it’s slightly different that whether we see it from your average spot, let’s say operator.

[Randy Giveans:]

Okay. And do you know the kind of daily fuel burn on a 5,000 TEU containership.

[Jerry Kalogiratos:]

If I'm not mistaken it's around 70 tons, has been about 70 tons on average per day over the last year.

[Randy Giveans:]

Got it okay.

[Jerry Kalogiratos:]

That's the thing about containers that small Panamax container has a bigger engine than a VLCC. So for containers it is where you will see the most return for your back when it comes to scrubbers.

[Randy Giveans:]

Got it. Okay. And then you had no proceeds from the issuance of any new units this year. I think there is still about $27 million in your ATM issuance authorization. Do you expect any new units to be issued in the fourth quarter or alternatively have you thought about unit repurchases at these attractive prices?

[Jerry Kalogiratos:]

So you're right to point out that we have not printed any shares. Actually we haven't sold any units under the ATM for more than a year at this point. And the reason is of course the trading the unit price, we don't see it as the right time to be printing units. The ATM is still there, but I think we will need to see a more of a sustained recovery in unit prices. With regard to the second part of your question. As I said, we do recognize that has been a significant equity erosion over the last few quarters in a way it does feel that we have gone through a very challenging tanker market. We saw all the capitulation of the product tanker market on the back of the depressed crude tanker market. We have seen MLPs remaining quite challenging despite the rise of oil prices. I mean, the lerian [ph] has picked up again yielding now excess 8.3% and underperforming equity markets. So it feels that from time-to-time we're getting the worst of both worlds. So being negatively affected by both the malaise of the MLP market, but also because of our spot or short-term period exposure to crude and product tanker markets. So this is a long answer to say that we haven't thought of specific measures, but we do recognize that there has been -- we're not trading where we should be, that's for sure.

[Randy Giveans:]

Okay. And then I guess lastly for the remaining Suezmaxes in your fleet. Are those kind of open for sale, or are you planning to keeping those for a while, what are you plans for those three?

[Jerry Kalogiratos:]

So the -- that's a good question. The sale of the Amore Mio was more opportunistic. Because it was an older ship. She was 17 years of age. And it makes it very difficult for vessels like that to secure attractive longer term period employment, which is our business model. Then as you know older vessels have increased maintenance requirements and the vessel had to pass an intermediate dry docking survey next year. So passed the 15th year of age, vessels have to pass dry docks every 2.5 years. So increased maintenance CapEx. And then there is also the increased CapEx associated with complying with the ballast water treatment system. If the vessel went into dry dock so it would have to install a ballast water treatment system if she wanted to trade in the U.S. And for a vessel that's already 17 years of age are not being suitable for period. We thought it was better to dispose off the vessel. Not to mentioned its ability to complete in a post-January 2020 world. But the rest of our Suezmaxes there of younger vintage. So no, this is not -- this was not strategic decision to exit the sector.

[Randy Giveans:]

All right, that's it for me. Thank you so much.

[Jerry Kalogiratos:]

Thanks, Randy.

[Operator:]

Thank you. And we will now take our next question from Ben Nolan of Stifel. Please go ahead. Your line is now open.

[Unidentified Analyst:]

Yes, hi Jerry, this is Frank Guanti [ph] on for Ben. How are you doing?

[Jerry Kalogiratos:]

Hi, Frank, how about yourself?

[Unidentified Analyst:]

Good. So given the parent company has been pretty active last couple of months and obviously the cost of capital for the partnership is pretty high. Just wanted to get some thoughts on kind of strategically how do you think about where the partnership fits in right now in terms of participating in any of those kind of deals?

[Jerry Kalogiratos:]

Well, the sponsor has been always very supportive of the Partnership it has done numerous transactions over the years we have grown from 8 ships to 36 now, and with exception of one addition it was from the sponsor. The sponsor has also provided from time to time support of the chartering side. But that is assuming that accretive transactions can be completed as we discussed earlier on and as you correctly point out, it is difficult to complete accretive transactions with this type of cost of capital, while at the same time the -- this quite unfortunate while at the same time the sponsor has a very long list of suitable assets. The support is there, it's a question of finding a way to bridge this. Don't forget that not too long ago, earlier in the year we used internally generated cash flows to dropdown an Aframax with five year charter to Tesoro at a very what I think it was a very attractive multiple. So there are solutions, but I think given what the cost of capital is maybe it will be slower growth, but there is no easy answer at this point and I don't think there are easy answers for many MLPs and for many shipping companies at this point.

[Unidentified Analyst:]

Okay, that makes sense. Have you -- so you had mentioned using internally generated funds to effectively finance the equity portion of any dropdowns. And obviously that's just a function of vessel in the spot market. And then see -- effectively have you considered adjusting the distribution strategy at all, if the product tanker market doesn't continue its strength from here?

[Jerry Kalogiratos:]

Well, when we reset the distribution some time ago it was reset to a point where it could let's say with also very depressed markets. And we went through on we are going through a very depressed tanker market and we saw our coverage deep for a couple of quarters below one also take into account of course some off hires and dry dockings that we have to go through. But now has picked up above one. So the distribution policy currently I don't think is dependent on the -- on what the tanker market does and what I can tell you is that the Board just confirmed yet another quarterly distribution for this quarter. So that's where we are at.

[Unidentified Analyst:]

Okay, that's helpful. That's all I had. Thank you.

[Jerry Kalogiratos:]

Thank you.

[Operator:]

Thank you. There are no further questions at this time. Please continue.

[Jerry Kalogiratos:]

Thank you all for joining us today.

[Operator:]

Thank you. Ladies and gentlemen that does conclude your presentation for this afternoon. Thank you all for participating. You may now disconnect. Speakers please standby.