Navios Maritime Acquisition Corporation
Q3 2016 Earnings Call Transcript

Published: 8 Nov 2016

[Operator:]

Thank you for joining us for Navios Maritime Acquisition Corporation’s Third Quarter 2016 Earnings Conference Call. With us today from the Company are Chairman and CEO, Mrs. Angeliki Frangou; Vice Chairman, Mr. Ted Petrone; and Chief Financial Officer, Mr. Leonidas Korres. As a reminder, this conference call is being webcast. To access the webcast, please visit the Investor section of Navios Acquisition’s website at www.navios-acquisition.com. You’ll see the webcast link in the middle of the page and a copy of the presentation referenced in today’s earnings conference call will also be found there. Now, I’ll review the Safe-Harbor statement. This conference call could contain forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Acquisition. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Acquisition’s management and are subject to risks and uncertainties which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Acquisition’s filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Acquisition does not assume any obligation to update the information contained in this conference call. The agenda for today’s conference call is as follows. First, Mrs. Frangou will offer opening remarks. Then, Mr. Petrone will give an operational update and industry overview. Next, Mr. Korres will review Navios Acquisition’s financial results and finally we will open the call to take questions. Now, I’ll turn the call over to Navios Acquisition’s Chairman and CEO, Mrs. Angeliki Frangou. Angeliki?

[Angeliki Frangou:]

Thank you, Laura, and good morning to all of you joining us on today's call. For the third quarter of 2016 Navios Acquisition reported EBITDA of $41.7 million and net income of $8.8 million or $0.06 per share which included $300,000 of profit sharing. We also declared a dividend of $0.05 per share for the quarter resulting in a dividend yield of about 16%. Our chartering policy of seeking long-term charters provided above market earnings during the third quarter, a period during which the spot charter rates were correcting. NNA’s average charter rate for its combined fleet was about 54% higher than the market average. This result speaks to the strength of our business model, particularly when coupled with our costs management. Slide 3, has our company highlights. NNA has 37 modern high quality vessels with an average age of 5.7 years diversified between crude product and chemical tankers. All our vessels are generating cash flow. Our fleet is effectively fixed for the balance of 2016 and 60.4% fixed for 2017 among the diverse group of quality charter counterparties. More than half of our 2016 fixed days of profit sharing arrangement. Our cost side, operating costs are fixed through mid-2019, at the range of about 11% below industry average Please now turn to Slide 4. We are a leading tanker company and a sponsor of Navios Midstream Partners. We expect to receive $21.3 million in distributions from Navios Midstream in 2016 and our common equity interest in Navios Midstream is worth about $122 million or $0.81 to NNA’s per share NAV. This represents about 65% of NNA’s current share trading value. Slide 5 details Navios Acquisition key developments. NNA reported net income of $44.8 million or $0.28 per share for the first nine months of 2016 of which $8.8 million were recorded on the third quarter. EBITDA for the first nine months of 2016 was $144.7 million of which $41.7 million was recorded in the third quarter. NNA’s 2016 EBITDA run rate is $193 million. As mentioned earlier profit sharing on a contract captures market upside and then the $7.7 million during the first nine months of 2016. During the quarter Navios Acquisition provided $70 million secured loan to Navios Holdings. The loan was advance on market terms as determined by an independent committee along with the independent advisors. The loan has strong collateral coverage of one all NNA shares held by NM and second a majority of Navios South America Logistics shares held by NM. I would like to remind you of the importance of Navios Holdings to NNA through the management agreement with Navios Holdings, NNA benefits from significant economies of scale. These economies are a competitive advantage and we estimate these cost savings exceeds $30 million in each of the past two years compared to market rate. As of September 30, 2016, $50 million was drawn under the loan facility. We are updating S&P activities discussed in the prior quarter. The Nave Universe at 2013 built chemical tanker was sold in October 2016 for a sale price net of commissions of $36.4 million. Of these proceeds $16.4 million was used to repay debt and $20 million balance was obtained as cash on the balance sheet. Additionally, the sale of the Nave Constellation in 2013 built chemical tanker for $36.4 million net is expected to close in Q4 of 2016. Finally, as part of our continued commitment to Navios Midstream Partners, NNA extended a purchase option for three VLCCs for an additional two years from their current expiration date in November. Slide 6, details our chartering strategy by which we balance market opportunity with long-term employment. The strategy is designed to provide protection from market volatility through period charter coverage 99.7% and 60.4% of our fleet is contracted out for 2016 and 2017 respectively. And in market improvement we recapture through the following three mechanism; open days, days fixed on floating rates, or days with base rate and profit sharing. Slide 7 details our chartering strategy that focus on creating stable cash flow. Our long-term charters provide protection [indiscernible] market through stable cash flow associated with period charters. As you can see for the third quarter during which period the spot market corrected it NNA’s average charter rate for the combined fleet was 54% higher than the market average coupled with the disciplined cost management we are outperforming peers in market averages. Slide 8, demonstrates our strong liquidity position. We have $89.2 million in cash as of September 30, 2016 pro forma for the sale of the two chemical tankers. On a pro forma basis, our net debt capitalization improved by 350 basis points or almost 5.5%. We have now committed growth CapEx and significant debt maturities in the fourth quarter of 2021. Slide 9, shows our low breakeven for 2017 under current conditions. In 2017 60.4% of our fleet was contracted at an average rate of $20,356 per day compared to a fully loaded cost of $17,213 per day. As a result our breakeven for our open days is only $11,500. For 2016 the fleet is effectively completed contracted, so we expect to add an average contracted daily charter out rate of $20,574 compared to 2016 average total cost of $17,191 per day. Our daily cost includes operating expenses, dry docking, general and administrative expense, interest expense and capital repayment. At this point, I would like to turn the call over to Mr. Ted Petrone. Ted?

[Ted Petrone:]

Thank you, Angeliki. Please turn to Slide 11, with the completion of our new building program last year we have no growth CapEx requirements can accumulate cash from our fleet of 37 vessels on the water. As previously announced, we sold two 2013 built chemical tankers one of which delivered in October. The sale of the second vessel is expected to close this quarter following the completion of the vessels chartering commitments. Navios Acquisition continues with Navios Group policy of locking in secured cash flow with creditworthy counterparties. In 2016, we extended the coverage of our fleet for 14.5 total years of coverage via new fixtures continuations and exercise optional periods at higher levels of profit sharing. Please turn to Slide 12. Navios Acquisition diversified fleet consists of 37 vessels on the water with an average age of 5.7 years totaling 4 million deadweight. The fleet consists of 8 VLCC 18 MR2 product tankers, 8 LR1 product tankers and 3 chemical tankers. Turning to Slide 13. We have fixed practically all of our capacity for 2016 and what should be continuing healthy environment we have fixed over 60% in 2017 and about 15% of revenue days for 2018. About 54% of the contracted fleet has profit sharing in 2016. The average contracted daily charter-out rate for our fleet is $20,574. For 2016 the rates were - 2017 and 2018 or $20,356 and $17,874. Please turn to Slide 14. Our chartering strategy revolves around capturing market opportunity while also developing dependable cash flow from a diverse group of first class charters. As a result, the average duration or all charters is about one-year. We earned $7.7 million of profit sharing in the first nine months of 2016. Turning to Slide 15. Navios Acquisition enjoyed special operating expenses significantly below the industry average. Currently, Navios Acquisitions daily OpEx is about 11% below the industry average. We achieved this operational savings to a management agreement with Navios Holdings. The operating cost under this management agreement are in force until mid-year 2018. Please note that the operating costs shown here include all estimated dry docking cost. Please turn to Slide 17. Navios Midstream brings Navios Acquisition flexibility and liquidity while providing a new platform in the West sector for dividend seeking investors and then they owned 59.9% of Navios Midstream Partners including 2% GP interest with a market value of approximately $136 million as of yesterday’s closing price. Turning to Slide 18. Navios Midstream Partners fleet of 6 VLCCs is fixed with average charter duration of 4.6 years and it is expected to provide approximately $500 million in long-term revenue with top-tier counterparties. Through Q3 of 2016 Navios Midstream earned $49.8 million of EBITDA including $4.9 million of profit sharing. In all 2015, Navios Midstream earned $62.2 million of EBITDA including $8 million of profit sharing. Navios Midstream declared a cash dividend of $0.4225 per unit. This distribution provides NNA with approximately $21.1 million in annualized distributions. Turning to Slide 20, according to the IEA refiner capacity is expected to increase by 11.8 million barrels per day from 2016 to 2021 including all additions, expenses, and upgrades. About 65% of this capacity will be added in Asia and the Middle East with the IEA projecting China and other non-OECD Asia to increase refinery capacity by 3.3 million barrels per day and 1.5 million barrels per day respectively. New low capacity in Asia is forcing rationalization of old high cost capacity in OECD. We see refinery closes in Europe and the Caribbean as well as closes in Australia and Japan can be partly attributed to age and inefficiencies of these facilities. Because of this structural shift the growth in ton miles of refined oil products is expected to continue outpace the general demand for refined oil products. Turning to Slide 21, as expected refineries have opened or expanded in Saudi Arabia and China. These refineries are now contributing significant volumes of product export through August Saudi Arabia exported average of 1.4 million barrels per day of products in order to capture higher revenue per barrel while crude prices remain relatively low. This is 38% higher than the same period last year. Chinese exports through May are up 43% from 2015 led by diesel exports of about 9.2 million tons which was 184% higher than the same period last year. India's oil demand continues to grow and is forecast to increase demand by 3,000 barrels for 2016 and about the same for 2017. India's increased demand has led to a 42% increase in product imports to about 411,000 barrels per day through August. Turning to Slide 22, U.S. crude production has increased by 75% since the end of 2008 reaching about 8.7 million barrels per day in August. The U.S. has increased its total product exports by over 400% to about 4.5 million barrels per day since 2004. U.S. Gulf refineries has benefited from inexpensive domestic crude and natural gas supplies we find in national export market to neighboring Mexico and Latin America, as well as Africa. U.S. product imports have declined over the past couple of years, but continue to come from farther away and into product tanker ton miles. Recent events such as the Colonial Pipeline closes this month and last month have increased U.S. product imports on a temporary basis. There has been little to no effect on U.S. product export after the lifting of the ban of exporting U.S. crude, but this development bears watching. The fundamentals of product tanker trading patterns continue to adjust in relation to these changes. Turning to Slide 23, oil refineries vary greatly in their quantity, variety, and specification of products that they produce. As depicted in this slide, regional surpluses and deficits combine with a relatively low cost of transportation drive, arbitrage trades, and increased product ton miles. Increasing worldwide product imbalances point to increased ton mile development. This global, multicultural, directional trade pattern enables product tankers to triangulate thereby minimizing balance time and maximizing revenue. Please turn to Slide 24. Through September we have seen a 27% non-delivery figure, 7.7 million deadweight delivered versus 10.6 million deadweight projected and scrapping 0.6 million deadweight giving net fleet growth of 7.1 million deadweight or about 5%. About 5.2% of the product tanker fleet is 20 years of age or older. As of the beginning of October the order book totaled 18.7 million deadweight or about 12% of the fleet. A level usually considered adequate for regular replacement of an existing fleet but little or no demand growth. The current order book for 2017 onwards is only 14.2 million deadweight. Turning to Slide 26, world crude oil consumption as generally growing for 30 years with declines in 2008 and 2009 due to the global financial crisis. Starting in 2010, world crude oil and refined product consumption returned to this pattern of growth. The main structural drivers going forward are moderate VLCC fleet growth increasing demand from the Asian economies particularly China and India as well as growth in the U.S. and the Arizona. The IMF projected global GDP growth for 2016 and 2017 at 3.1% and 3.4% respectively led by emerging and developing markets, growth of 4.2% in 2016, and 4.6% in 2017. We know that the IMF increased 2016 growth forecast for emerging markets a key driver in future oil demand and left 2017 forecast unchanged in its recent revisions. Increases in world GDP growth year-on-year have generally led to higher time charter rates for VLCCs. The IEA raised the forecast of global oil demand for 2015 nine times to 95 million barrels per day or an increase of 1.8 million barrels per day, the largest yearly increase in five years. The IEA raised its projects 2016 demand five times this year to 96.3 million barrels per day or an increase of 1.2 million barrels or 1.3%. Projected 2017 demand is 97.5 million barrels per day, an increase of 1.2 million barrels per day or 1.3% over 2016. Please turn to Slide 27, according to BP’s latest worldwide oil demand projections to 2035 more than half of the increasing demand will come from China and India. Demand growth in the Middle East should remove some barrels that were previously have been exported. Supply increases of projected to come the Atlantic Basin in particular North America, the North Sea, Brazil, Kazakhstan and West Africa. The net results there will be more crude going on long haul wages from West to East. Please turn to Slide 28, as noted a top half of Slide 28 in terms of ton miles to move an crude from West Africa and South America to China uses as many VLCCs is moving from Arabian Gulf shift about two times more oil to China. The growth in VLCC ton miles will continuous China imports more crude from Venezuela, Brazil and West Africa as it diversifies it sources of oil. Giving current demand in the U.S. and in declining crude production should lead to increased imports and to ton miles. The expansion in West to East crude movements can be seen in the bottom part of the slide which shows the percentage of spot VLCC fixtures from load towards West of Suez headed to the East have grown significantly in the past three years increasing ton miles. Please turn to Slide 29. China is the world's second largest consumer of oil importing more than half of its requirements. Chinese imports have more than doubled since January 2009 representing a 14% CAGR. Chinese Crude imports remain healthy through September averaging 7.6 million barrels per day with represented almost 1 million barrel increase of 14% over Q3 of 2015. Crude imports reached all-time record 8.1 million barrels per day in September. Additional refinery openings going forward will add about 370,000 barrels per day in crude demand this year. As you can see in the upper right and in the table below on a per capita basis U.S. oil usage is 6.9 times that of China, European usage is just 3.1 times, and world usage is 1.5 times. If China goes to world per capita consumption levels, China will require an additional 271 VLCCs. Assuming all crude is imported by sea this represents an expansion of the existing fleet by about 40%. Please turn to Slide 30. So October a 11.9 million deadweight delivered against 16.5 million deadweight projected giving fleet growth of 5.8%. One VLCC is scrapped in October the first one this year. 137 VLCCs or 20% of the VLCC fleet is 15 years old - or older compared with the current management order book of 107 VLCCs on order. As of the beginning of October, the order book totaled 33 million deadweight or about 16% of the fleet, a level usually considered adequate for regular replacement of an existing fleet with little or no demand growth. Thank you. This concludes my review and I would like to turn the call over to Leonidas Korres for the Q3 financial results. Leo?

[Leonidas Korres:]

Thank you, Ted. I’ll discuss the financial results for the third quarter and the nine-month period in September 30, 2016. Please turn to Slide 32, revenue for Q3 2016 decreased by 12.4% to $68.1 million from $77.7 million in Q3 of 2015. With almost a 100% fleet utilization we achieved a time charter equivalent of $19,159 per day, reduced from the $22,551 per day achieved in the third quarter of 2015 reflecting the softening of the tanker market. Operating and voyage related expenses were $26.2 million and G&A expenses were $3.3 million reflecting our low cost structure given our relationship with Navios Holdings. Equity and net earnings from affiliated companies was $3.2 million mainly reflecting our equity portion in Navios Midstream Partners earnings. EBITDA for Q3 2016 decreased by 23.5% to $41.7 million from $4.5 million EBITDA in Q3 2015. Other expenses include depreciation and amortization of $15 million and interest expense and finance cost of $19 million. Net income decreased to $8.8 million or $0.06 per share from a net income of $23.2 million in Q3 of 2015. Turning to the financial results for the nine-month period ended September 30, 2016, revenue decreased by 5.8% to $223 million from $256.7 million last year reflecting a time charter equivalent of $21,082 per day and 99.8% utilization. During the nine months period we earned $7.7 million through profit sharing. Operating and voyage related expenses were $77.1 million and G&A expenses were $12.8 million. Equity net earnings from affiliated companies for the nine-month period was $11.8 million, EBITDA for the nine-month period of 2016 decreased by 14% to $144.7 million from $168.1 million respected period of 2015. Depreciation and amortization was $46.2 million and net interest expense and finance cost was $57 million. As a result we reported net income of $44.8 million or $0.28 per share. Slide 33, provides selected balance sheet data as of September 30, 2016. Cash and cash equivalents including restricted cash were $49 million. Pro forma for the sale of Nave Universe, chemical tanker completed in October and group sale of nave constellation chemical tanker expected to closing Q4 2016, cash increases to $89.2 million. Vessels net of depreciation was $1.38 billion, investments and affiliates of $199 million mainly reflect Navios Acquisition interest in Navios Midstream Partners. Long-term receivable from related parties increase to $78.3 million reflect the amount of $50 million drawn under the loan facility were extended Navios Holdings. Total assets amounted to $1.8 billion. Total debt as of September 30, 2016 was $1.16 billion resulting in net debt to capitalization ratio of 64.4%. Pro forma for the sale of the two chemical tankers net debt to capitalization ratio is expected to decrease to 60.9%. As of September 30, 2016 Navios Acquisition was in compliance with all of the covenants of its debt facilities and [indiscernible]. Turning to Slide 34, our financial strength has enabled us to announce a dividend of $0.05 per share for the third quarter equivalent to $0.20 per share on an annualized basis providing a yield of about 16%. The dividend will be paid on December 21, 2016 to shareholders on record as of September 14, 2016. At this point, I would like to highlight that given our 59.9% ownership in Navios mix in partners we expect to receive on an annual basis $21.3 million in dividends from NAP of the current distribution of $1.69 per unit. And now, I will pass the call back to Angeliki.

[Angeliki Frangou:]

Thank you, Leo. This concludes formal presentation and we’ll open the call to questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Noah Parquette with JPMorgan.

[Noah Parquette:]

Thanks. I want to ask in the past couple of quarters you talked a little bit about deleveraging as the focus use of cash flow. I want to know how that's changed at all with the intercompany loan if you still see room for deleveraging or is that kind of on pause for time?

[Angeliki Frangou:]

If you are assuming we already have delevered, I mean if you compare on a pro forma for the sale of the vessels we went from 64.4% to about 60% net debt to capitalization. And that is a process that will continue with the cash generation we are seeing and maturities we are having we will delevered paying these maturities.

[Noah Parquette:]

Okay. And then I wanted to ask about the dropdown strategy. You extended the options for three vessels in order from really have those long-term charters are ideal. And we all know that the market environment does not allow a lot of those charters available at least at the rates you want. So how do you view dropdown right now? I mean is there - does it viable in the near-term or you guys just going to wait until the market comes back and you could - with some of those long-term charters…

[Angeliki Frangou:]

These were options of NAP that will expire in November, so some of that was adequate and we extended this option for two years. The environment as you see especially on the real changes is very dramatic going forward. One quarter you may have markets drop into 13,000 on real earnings, you can have - today it’s going to 48,000. So there is a great volatility in between, but it provides growth path for MLP, when they I said decide, when they see the conditions that makes sense of dropping down.

[Noah Parquette:]

Okay. I just wanted to quickly ask the ballast water treatment regulations. What effect do you see there for you guys how many vessels you bet still - what's your expectations for the industry?

[Angeliki Frangou:]

This depends on drydocking schedule and vessels design. In lot of our new buildings there are already systems there. So I don’t think is going to be at the market as people believe and I'm talking as an engineer because if you have a day that it will be effective and then it takes different days over the five years that there will be - four years that they will be reiterated. And as you know technology started at a very high level and as vessels will be introduced to the system, the cost is substantially reduced. So it is an important issue, but I don’t think it’s a game changer as people like to put all these things.

[Noah Parquette:]

Okay. That’s all I have. Thank you.

[Angeliki Frangou:]

Thanks.

[Operator:]

Your next question comes from the line of Chris Wetherbee with Citigroup.

[Prashant Rao:]

Good morning, this is Prashant in for Chris. I wanted to dig in a little bit more on your thoughts and what you're seeing in the rate environment and the spot environment and how supportive the charter environment like looking out over the next few quarters. You’ve gotten some seasonality here on the VLCC on the crude tanker side off of the lows in 3Q into 4Q and sort of maybe looking past 4Q since your days are mostly completely booked for the year for 2016. If you look into 2017, how do you expect to see typical seasonality to play out in 1Q and 1H 2017? And then also on the product tanker side we’ve seen some mix seasonality coming in from 3Q to 4Q. So kind of wanted to get your thoughts around that as we look towards sort of 2017 and then maybe what that means in terms of how the support for longer-term chartering rates plays out.

[Angeliki Frangou:]

I will let Ted speak. The only thing I will say that it’s interesting about is Q4, is that you have to see the rate environment strengthen mostly seasonal. But you had also a net feet growth of about 6%. So I think that is up, meaning you had 6% up and it will on Q4. But I let Ted take you through the rate environment.

[Ted Petrone:]

Starting with the crude question you’ve had, essentially you said Q3 has been lower, but there was a lot of issues, right. Not only there are some volume issues, but you had long haul trades that were taken out, right end of Q2 beginning of Q3. You had Canada and West Africa and Libya, all that long hauls come back. So as Angeliki said, think about it on the [V’s] you're going to have over 6% net fleet growth maybe close to 7% by the end of the year and you're going to average the same as you did in 2014 probably low 40s. So I think that speaks well going forward. On the products, I think the products take a little bit more time to get back to seasonality here you've got a lot of stocks, right. Everybody filled up on the crude and they did the refineries, so the arbitrage has been taken out between us with Europe and the U.S. Gulf and out in the Far East. So I think you’ve had some stock drawdowns. I think your refinery maintenance is now coming to an end. I expect the products to follow the crude sort of going back up, but not to the extent that the crude is going. I think everybody is worried about the new buildings going forward. They really haven't affected on the crude side you’re past the peak on the product. So we're expecting a healthy rate to next year. Let see how the new buildings come in. I think that's obviously held back some of the time charter, a long-term time charters, if you get through the winter the normal seasonality is very good to Q1, Q2 is usually over the last 15 years has been about 10% below the yearly average where else Q1 has been about 10% above it. I don't expect and I think there's going to be some variation to that, but we're going to be close to those numbers. Just looks healthy going forward.

[Prashant Rao:]

All right. Thank you. That's really helpful and makes sense. I wanted to turn back to the balance sheet sort of following up on those question a little bit. You guys have made progress throughout the year just above 60% on a pro forma basis after the sale of the two tankers. Angeliki, you'd spoken earlier in the year and obviously it’s a different environment of a targeted 55% or mid 50’s I think. Is that sort of still targeted maybe just pushed out given how the market has developed over the past six to nine months? And then also quickly just wanted to note the second the consolation sale would be similar cash in after you pay off that on a vessel in four or five years?

[Angeliki Frangou:]

I mean the target is the same is just - because of the rate environment and we are getting from the second vessel the similar amount that we got for the first one. This is going to be delivering later in November and we will have this effect of cash.

[Prashant Rao:]

So it’s fair to say then the mid-50 target, we could see some time maybe next year provided that there's no other change?

[Angeliki Frangou:]

Exactly. It hasn’t changed [indiscernible] moved a little bit in the 2017.

[Prashant Rao:]

Okay. Thank you very much for the time. Appreciated.

[Angeliki Frangou:]

Thank you.

[Operator:]

Your next question comes from the line of [Donald Bodkin of Wells Fargo].

[Unidentified Analyst:]

Good morning and thank you for taking my question. I’m hearing some chatter on the market that the contango for floating storage has opened back up. Are you seeing any increase for maybe overseas along those lines?

[Leonidas Korres:]

Remember we put our ships out to others who direct the money on yearly basis, but yes we've heard time charter rates were down and your contango is where you're getting very close now. I think there's been some vessels that have been on a short-term basis both I think three months, six months is getting very close. Oppose to that I think the variance have actually let some ships out of the floating storage so maybe we're at a push here, but I think you will see at this point some continued discussions and negotiations for some shorter term floating storage.

[Unidentified Analyst:]

Thanks for that. And just to follow-up on last week the IMO passed legislation for the 2020 lower fuel stack, do you have a thorough review on water back due to product trade flows I mean is the refining system as it stands Cap Bull or the regionally Cap Bull supplying that low self-respect or do you think that enhances product trade flows moving forward?

[Leonidas Korres:]

I think the first thing that happens is ships will burn low gas or oil. As the refineries react I think some of the older refineries, some of them in the Atlantic, Venezuela and Brazil may have some problems with it. But going forward I think it will do a few things that and was the ballast water treatment. I do think that can help take out some of the older tonnage with some weaker owners, smaller owners. I do think that’s the writing mechanism going forward and essentially if that technology moves forward and we get hold of things the costs are going around, but overall I think it's actually good, it's good for the world and I think it's good for the market going forward.

[Unidentified Analyst:]

Great. Well thank you for the marketing color guys.

[Leonidas Korres:]

Thank you.

[Operator:]

Ladies and gentlemen, we've reached the allotted time for questions. I would now like to turn the call over to Angeliki Frangou for any additional or closing remarks.

[Angeliki Frangou:]

Thank you. This completes our Q3 results.

[Operator:]

Thank you for participating in today's conference call. You may now disconnect your lines at this time.