Seanergy Maritime Holdings Corp.
Q4 2021 Earnings Call Transcript

Published: 10 Mar 2022

[Operator:]

Thank you for standing by. Welcome to the Seanergy Maritime Holdings Corp Fourth Quarter 2021 and Full Year Financial Results Presentation. Many of the remarks today contain forward-looking statements based on current expectations. These statements may often be identified with words such as expect, anticipate, believe, or similar indications of future expectations. Although such forward-looking statements are considered to be reasonable, the company cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements are subject to known and unknown risks and uncertainties and other factors, many of which are beyond the company's ability to control or predict. Please refer to the company's annual report on form 20-F and other filings with the Securities and Exchange Commission, which discussed many of these risks and uncertainties. Should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates proved to be incorrect, actual results may vary materially from those the company expresses today. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned to not place undue reliance on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. In the earnings presentation today, the company may reference non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income and TCE rate. For full reconciliation of the non-GAAP measures to GAAP measures, please see the company's earnings released posted to the new section of their website earlier today. Finally, the financial results presentation to be discussed today is available on the investor relations section of the company's website. I'd now like to hand the conference over to our speaker today, Stamatis Tsantanis. Please go ahead.

[Stamatis Tsantanis:]

Hello, everyone, and welcome to our conference call for the fourth quarter and full year 2021. Today we are presenting a great earnings release with record financial figures and initiation of dividends. I must say, however, that we would prefer this release to have happened during a period of global peace and stability. Seizing the opportunity, I want to express our wish for a quick ceasefire of additional military operations in Ukraine. In the fourth quarter of 2021, Seanergy had another exceptional financial performance, ending with a record year for the company. The main drivers for this record results were our increased fleet capacity and improved capital structure, and of course, a favorable Capesize market. On this note, I'm very pleased to also announce that payment of a quarterly dividend of $0.05 per share, consisting of a regular dividend and a special dividend, as I will describe later. Moreover, we are repurchasing $5 million more of the remaining convertible note, which completes a program of approximately $26.7 million of securities buybacks since Q4 2021. We are, therefore, delivering on our commitment to reward and return capital to our shareholders. As mentioned in my introduction, 2021 has been a record year for Seanergy in terms of operational and financial results. More specifically, in the quarter ended December 31, 2021, we generated net revenue of $56.7 million with the respective full year figure reaching $153.1 million, an increase of 142% versus the full year of 2020. An even more pronounced increase was marked on our adjusted EBITDA with $38.8 million recorded in Q4 and $90.1 million on a full year basis. And that represents 478% higher than the 2020 respective figure. Our fleet achieved a daily Time Charter Equivalent of $36,600 in Q4, with a daily PCE standing at $27,400 for the full year of 2021. Over the last 18 months, we increased our fleet capacity by 70% going from 10 to 17 Capesize vessels to total investments of about $205 million. Needless to say, that the timing of our acquisitions has been impeccable and Seanergy has the lowest fleet book value per that way among its listed dry peers. Despite the substantial growth, we reduced the loan to value over fleet from 80% to around 42% as of the end of 2021 and we expect this to continue to use sharply in 2022. Our new financing transactions have totaled more than $170 million, while the weighted average interest cost has been reduced by approximately 130 basis points year over year. All of our fleet operates in period employment with some of the world's largest travel charters. Our unique agreements allow the ships to increase market rates, while we had some of the downside risk with fixed time charters and conversions from floating to fixed rates. We have built a great cooperation with our clients and in many cases, we are investing on our ships for installation of scrubbers and energy saving devices together with our clients. We have been pioneers in improving the energy efficiency index of our existing fleet since 2018. And we continue to make progress on installation of energy saving devices at every vessel scheduled driver. With regards to our ESG program, this energy saving projects are undertaken in cooperation with our charters and they're usually underpinned by agreements to increase daily earnings to reflect improve performance of our vessels. We have also initiated testings of biofuels on our capesizes since last August with two of our charters. We will continue to be at the forefront of initiatives to reduce the environmental footprint of the ships in cooperation with our clients. Additionally, we have also employed a pilot solution to measure the carbon savings achieved by the improvements made on our vessels and of course to monetize from that, as well as artificial intelligence on all of our vessels. Our company’s ESG report will be released within 2022 and will provide more details on the initiatives that Seanergy has successfully completed date, as well as our targets going forward. As I mentioned earlier, we're delivering on our commitment to reward our shareholders with tangible returns. So today, we're declaring a quarterly dividend of $0.05 per share. These $0.05 consists of initiation of a regular quarterly dividend of $0.025 per share, as well as a special dividend of $0.025 per share for our performance in Q4 2021. The total dividend of $0.05 per share will be paid on April 5, 2022 to shareholders recorded at closing of March 25, 2022. Given the positive dynamics of the dry bulk market and our improved balance sheet, I'm confident in the sustainability of such capital returns. In addition to the dividend, we have also scheduled another buyback of $5 million of our outstanding convertible notes, which will be completed concurrently with a dividend payment. First we complete a program of approximately $26.7 million of securities buybacks since Q4, 2021, which is very impressive. Going forward, I expect the mix of capital returns between dividends and buybacks to depend mainly on the dynamics of our share price. Moving to an update on commercial development in Q4, 2021. Our Capesizes made an average time charter equivalent exceeding $36,600 per day, which was our highest in 12 years. In addition, we have concluded 11 new time charter agreements with leading charterers and we have 15 or 17 vessels employed on time charters linked to the Baltic Capesize Index. Two of our vessels are employed on fixed rates, at daily levels exceeding $30,000 a day. This strategy ensures a very high fleet utilization, where we’ll track the Capesize index closely as charter rates rise. In many cases, we have embedded options to fix the daily earnings from floating to fixed and we have exercised our option constructively in order to hedge a portion of earnings from time to time. Our estimated time charter equivalent rate for the first quarter of 2022 is approximately $19,500 a day, which is 47% higher than the average BCI index year-to-date. This assumes the remaining operating days of our index-linked TCEs will be equal to the current FFA rate. Another point I want to make is that the FFA average for the remaining of the year stands at around $32,200 per day. And if this materializes for the full year, our annual EBITDA may exceed $130 million, as our CFO, Stavros Gyftakis will explain shortly. Stavros will now offer more details on our financial reports and financing activities. And it's now time to pass the floor to him. I will come back towards the end of the call for the market update. So, Stavros, please go ahead.

[Stavros Gyftakis:]

Thank you, Stamatis. Let me first welcome everyone to our fourth quarter and full year earnings call for 2021. We will start by reviewing the main highlights of our financial statements. In the fourth quarter, the continued strength in the dry bulk market resulted in record financial performance for our company. Net vessel revenue was equal to $56.7 million, marking an increase of 166% from the fourth quarter of 2020. As mentioned earlier by Stamatis, our daily time charter equivalent for the quarter was $36,600 increased by 122% when compared to $16,500 for the fourth quarter of 2020. Adjusted EBITDA in the fourth quarter was approximately $39 million, up from $8.3 million in the same quarter of 2020 and net income for the quarter was a record $20.6 million compared to a net loss of $2.3 million in the same quarter last year. During the quarter, we recorded a one-time non-cash loss associated with a buyback of the convertible notes, which amounted to $6.9 million. Adjusted for this item, net income for the quarter was equal to $27.9 million. For the 12 months period that ended December 31, 2021. We recorded a daily time charter equivalent of $27,400 compared to $11,950 in the corresponding period of 2020. Net Revenue was equal to $153.1 million, an increase of 142% from $63.3 million in the last year's corresponding interim period. Adjusted EBITDA for 2021 was $90.1 million up through $15.6 million in 2020. I would like to also point out that the adjustment in the full-year period also includes a 5.1 million non-cash charge for stock based compensation under our G&A expenses. Lastly, net income recorded in the period was equal to $41.3 million as compared to a net loss of 18.4 million in 2020. The year-over-year percentage increase in adjusted EBITDA for about 478% over a 129% increase in our TCE is a good demonstration of our company's significant operating leverage. Other daily operating expenses, excluding predelivery expenses rose to $6,211 up by 9% compared to full year 2020. As discussed previously, we will take a full year approach on changes in our OpEx avoiding the volatility from quarter-to-quarter, which may be associated with various factors, such as timing of purchases, or the timing of crew changes. Leaving aside the increased costs having to do with integrating a number of new vessels in our operating and technical management platforms and for upgrading of course, the technical condition of these new units to our and our clients standards, we have identified three main factors behind the increasing daily OpEx versus last year. Firstly, who have incurred total of tax expenses for certain vessels whose technical management has been transitioned in-house from a third-party technical manager. Secondly, several of our vessels incurred additional insurance expenses due to supplementary calls from the respective P&I clubs, which were outside their control and expect to be known recurrent. Lastly, crew related expenses have gone up due to the pandemic and associated hurdles in timing crew changes, additional crew traveling and accommodation expenses due to quarantine measures and -- restrictions in the virus protocol. Moving on to our debt and financial expenses. We have managed to decrease our interest expense both in the fourth quarter of 2021 entered the full-year period versus the previous year. Focusing on the cash interest expense, which excludes non-cash charges in the fourth quarter of 2021, the company incurred approximately 2.9 million of cash interest and finance costs down from 4.1 million in the fourth quarter of 2020. To highlight the positive impact of our increased scale, the interest expense per operating day in the fourth quarter of 2021 was $1,900 as compared to $4,060 in the fourth quarter of 2020. For the 12 month period that ended on December 31, 2021 interest and finance expense, excluding non-cash items was equal to $11 million, when compared to $15.8 million in the last year. We are very pleased to see the significant reduction, which is tangible demonstration of the benefits of the recent debt repayments and refinancings. Given that these transactions have taken place within 2021, we expect to see further reductions in interest expenses in 2022, as we lap a full year with a new financing arrangements in place. Moving on to illustrate the improvements in our balance sheet position, the debt outstanding per vessel has been decreasing consistently over the past three years, a trend which accelerated in 2021. Total debt outstanding was approximately $214 million as of the end of 2021 on a fleet of 17 vessels with a total scrap value of approximately $240 million. This compares with $212 million outstanding debt at the end of 2020 on a fleet of 11 vessels with a total scrap value of $156 million, adjusted for today's scrap prices. Debt outstanding per vessel at the end of 2021 was $14.1 million, against $19.3 million at the end of 2020. At the same time, however, its market value per vessel as of December 31, 2021 was approximately $30.4 million, up from about $17.7 million at the end of 2020. Furthermore, Seanergy has cash and cash equivalents of approximately $47 million at the end of 2021 compared to about $24 million at the end of 2020. Total shareholders equity has increased to $245 million as of December 31, 2021 from $95.7 million at the end of 2020. The increase in vessel values since the start of the year means that the market value for fleet is higher than the book value as of the latest balance sheet date. The market value adjusted equity is therefore higher than what is reflected on our balance sheet. Based on third-party broker valuations as of the end of December, the market value of the seven vessels that were acquired this year has already appreciated by approximately $30 million, since their acquisition. I view this as a clear demonstration of the successful timing in our move to rapidly expand the fleet in 2021, as highlighted previously by our CEO. Based on the market values for our fleet, as per December 31, our corporate leverage is estimated at approximately 43%. It is encouraging to see the improvement in our balance sheet metrics during a time when the company has expanded aggressively and this constructive development has played an important role in determining our capital returns policy. As an update on our convertible notes, since the fourth quarter of 2021, we have retired $19 million, while we have scheduled to retire an additional $5 million imminently. As of the balance sheet date, approximately $1.85 million remains outstanding under our junior loans, which were fully repaid recently. I will now move on to discuss the financing transactions that have taken place since our last update in November. Within November, we'll close the sustainability-linked loan with Piraeus Bank, which was utilized to refinance part of the acquisition cost of the Worldship. The already competitive pricing of 3.05% can be reduced depending on the CO2 emissions of our vessel. It is good to see that our commitment in reducing the carbon footprint of our operations is being recognized and leads to potentially lower interest expenses. In December of last year, we executed on the financing of the Seanergy ship with a prominent Taiwanese lender, whereby we replaced a 10.5% coupon loan with a new five year facility priced at 3.5% over LIBOR. Looking forward, as mentioned in our third quarter update, we are currently in the process of addressing the two loan maturities that are secured by three of our vessels and during the fourth quarter of 2022. We recently announced the financing of the face of these facilities, which is secured by the partnership. Again here a senior secured loan price of 4.65% over LIBOR in the junior loan price of 5.5% were replaced with a synthetic loan structured price at 2.9% over The last two transactions have also an important strategic angle for our company. Through financing in Taiwan and Japan, next to our sale and leaseback activities in China, we have further expanded our strong footing in the prominent AGMC financing market. Given our discussions without existing and prospect lenders to-date, I'm very optimistic that the 22.4 million balloon during December of 2022 which is secured by two of our Capesize vessels will be easily refined in a timely fashion. Lastly, I would like to take the time here to talk about a company's operating scale. When compared to 2021, Seanergy has increased fleet size, reduced interest expenses and the potential for lowered daily vessel operating expenses when factoring in the pre-delivery expenses incurred last year. As a result, there is a clear potential for higher EBITDA then in 2021 and this is something we have illustrated by sensitizing our 2022 EBITDA projection on the average level of the BCI in 2022. As a reminder, 2021 EBITDA was approximately 79 million at an average daily BCI level of about 33,000. If the Capesize market in 2022 reached a similar level Seanergy EBITDA would reach approximately 155 million. At this early point in the year, these projections are obviously subject to significant uncertainty, but the potential for increased profitability is clear. By this, I would like to conclude my review. I would now turn the call back to Stamatis who will discuss the market and industry fundamentals. Stamatis?

[Stamatis Tsantanis:]

Thank you, Stavros. Once again, I want to express our deep regret for the ongoing war in Ukraine and it’s just our sincere hope for this situation to be resolved soon and with the fewest human casualties as possible. Having said this, the initial assessment of the impact of the sanctions imposed on Russia, they appear to be quite positive. Historically, any disruptions in the established trade patterns usually create significant benefits from a ton mile perspective, which is favoring vessel demand. In this case, for example, millions of tons of coal for the global energy needs will have to be imported from longer distances. This we expect to increase the distance travel of our ships quite substantially. Going back to 2021. It was a remarkable year for the Capesize market as robust demand recovery was combined with a limited fleet growth. During Q4 2021, the Capesize market experienced significant volatility as it reached a peak of $86,000 a day in October, 2021, before closing the year at $19,000 a day. Following this period, the volatility and the typical seasonal market slowdown that took place this February both the spot market and the futures curve are now trending quite higher. As of day, the futures curve for the remaining of 2022 is trading in excess of $33,000 a day on average, and we expect that these levels will be exceeded. We remain very optimistic about the Capesize market prospects as we're seeing the lowest level of lead growth over the past decades, combined with healthy demand globally for iron ore and coal. Beginning with iron ore, seaborne trade total miles expanded by 1.6% in 2021, and are expected to rise at a similar pace in 2022. With a significant rise, noted an extra from Brazil. Volume in Brazil, once again reiterated their annual guidance for about 350 million tonnes in 2022, which means that they will have to ramp up their exports considerably in the next three quarters to meet the targets, given that their exports a year-to-date were at one of the lowest points of the recent years. This is a usual pattern we have seen many times. Although this time, we expect the upswing to be much, much bigger. It is also encouraging to note that China's credit impulse has been expanding recently and policy support has been announced for infrastructure and additional projects. Beyond China, I'm glad to see that world steel production ex-China rose at a very fast pace in 2021 as year-over-year growth exceeded 10%. Steel make a profit margins also remain high, which support further case for a healthy end market. Looking beyond 2022, the five-year extension granted to steel mills from the Chinese government for achieving mission goals is expected to result in another boost to the market as steel makers will be able to ramp up production. Meanwhile, seaborne coal trade was very supportive in 2021 as the increase in tonne miles exceeded 7%. A further rise is anticipated for 2022 and this is not just because of the recent war. Global economic growth resumes -- has resumed after COVID and power generation demand remains very high. As Braemar research notes, coal is forecast to remain more profitable for European power utilities until 2024. As coal to gas switching prices now indicate that it will not be profitable to switch from coal to gas before 2024 exiting out from Q2 2023 last month. The gas supply crunch experienced by Europe this winter has been compounded by Russia's invasion in Ukraine. Demand is not the only positive aspect for the market though. We have one of the lowest net fleet growth rates over the last 20 plus years, and the new building order book is also at historical low levels. Please note that the net fleet growth for 2022 is expected at less than 1.5% while vessels above 15 years old make up for about 17% of the global fleet. It is evident that the supply dynamics are quite favorable at this point. There are two additional factors that are expected to have another significant impact on the supply side of the market. The new EXI and CII regulations starting in 2023 will impose emission limits and slow steaming of the global fleet. Bearing in mind that two-thirds of the global fleet has been built prior to 2012, we expect in some cases that speed reduction could be substantial. These regulations are having implications in the new-building and the demolition markets as well. The uncertainty regarding the new standards of new-building vessels in respect to engine and fuel type is returning new vessel orders. At the same time, efficient vintage vessels are likely to be sent to scrap yards as their competitiveness is expected to be compromised. As a result of the above demand-supply dynamics, we're likely to see massive freight rate options in the near future. I would like to conclude by saying, that in the last years, we have positioned synergy in a very favorable position to benefit from these opportunities. Our homogeneous fleet and the improvements we're making the energy efficiency of our vessels will retain our contagious place in the super cycle for years to come. Thank you very much. And on that note, I will pass the call to the operator, to receive questions. Thank you.

[Operator:]

Thank you. Your first question today is from the line of Magnus Fyhr from H.C. Wainwright. Please go ahead.

[Magnus Fyhr:]

Yes. Good afternoon and congrats to a great quarter. Just some questions on, on the capital allocation. I mean, you institute a new dividend policy and, buying back, some of the converts. How should we think about that going forward with the uncertainties in the market currently?

[Stavros Gyftakis:]

Hello, Magnus. Good morning. Thank you. So we generally expect to continue our regular dividend as we have announced and depending quarter-on-quarter, depending on the financial results, we expect to increase the special dividend as well. So this is pretty much the capital allocation. As far as other repurchases are concerned then, it all depends on where the stock is trading. I don't know whether we're going to do any additional convertible repurchases, we've already reduced that down to a very small number. So we will just monitor the stock price and may we might do a combination of repurchases and dividends -- specifically dividends or something like that. So it's going to be on a quarter-to-quarter or quarter-by-quarter basis, depending on the rates.

[Magnus Fyhr:]

Okay. And just on the chartering, I mean the first quarter has been weak on a seasonal basis. You said that you're seeing strength now. How should we think about seasonality going forward, 2Q versus 1Q? I mean, and the second half of 2022, do you see that playing out differently this year?

[Stavros Gyftakis:]

Right. So Q1 has been quite weak, but we have managed to over perform that by about more than 40%. If I remember, well. We -- I think we're going to close the quarter in excess of 19,500 a day, where the quarter the day is at 13,000 or 14,000. So we've done a very good work to over perform Q1 index. In respect of Q2, Q3 and Q4 right now the futures say that the rates will be around $30,000 to $33,000. We are taking some cover in the future, either in Q2 or some Q2, Q3, and Q4 as well. We don't want to be greedy and wait to make 50 or 100,000 whatever, so we're fixing some of the base. And we'll – we will continue doing so when we see fixed in the curve in the contracts that we are able to convert from floating to fix.

[Magnus Fyhr:]

Okay. Very good. That's it from me. Thank you.

[Stamatis Tsantanis:]

Thank you, Magnus. Have a great day.

[Operator:]

Thank you. The next question is from the line of Tate Sullivan from Maxim Group. Please go ahead.

[Tate Sullivan:]

Hi. Good day all, and wow! a lot of developments to go over and great dividend announcement. And so I guess starting with the buybacks subsequent to 4Q, can you talk just about the use of cash versus adding cheaper debt to pay down the convertible notes? I mean 19 plus the five that additional and then warrants so will you will you use mostly cash to do that or replace for debt? Can you go into somewhat other pro forma balance sheet will look like, please?

[Stavros Gyftakis:]

Hi, Tate, good morning. Thank you for your question. We are generally not planning to – take more debt in order to reduce the convertible or of course pay dividends. So what we're doing now in a respect financings has been in the normal course of business to refinance the assets that were up for refinancing. So any excess costs arising from his finances is financing is quite coincidental. We expect to use cash flow from operations, which appears to be quite strong in order to continue with a dividend payments and neither any buybacks in the future we will use cash flow from operations.

[Tate Sullivan:]

And I think in the impact of this quarter as well, in the fourth quarter, the convertible note buybacks lead to a non-cash expense. Can you give that estimate given this – given the scale of what you're buying back in the first quarter, or is there any?

[Stavros Gyftakis:]

Right. Now in Q4, yes, we did have an impact, which is a non-cash impact, which we had to take. In Q1, there is strengthening because the accounting rules may change, and whatever we have bought back might not even hit the P&L believe it or not, because there's a new accounting standard, which comes into effect from the 1st of January of 2022. However, there might still be a charge, which we don't know yet we expect to make this assessment. If that happens, it's going to be in the region of $3 million for Q1. But again, it might happen it might not happen depending on how the new rules, new accounting standards are being interpreted. So we cannot really give a guidance yet. On the conservative side, I would say $3 million SKU – non-cash.

[Tate Sullivan:]

Thank you. And I'll turn – last one before I turn it over to some other questions. Have you and it's great with the dividend, I mean, most of the dry bulk public companies now have the dividend, I mean, change from four months ago. Are you targeting a payout ratio going forward, or how are you looking at that?

[Stamatis Tsantanis:]

Well for the time being, unless until the dust settles, to be honest with all this volatility. We expect to have a mix of regular and special dividend the way that we practice so far. So depending on its quarter, the Board will assess, the company's prospects, the cash flows, the financial results, and we will, do as the previous quarter, tells us. When we have a bigger clarity about the future and we're able to fix some more long-term business, then of course, there's going to be a more substantial payout. But so far, we're very comfortable with the way that we have approached this policy. Regular plus special and, it's going to take a few quarters to see how that's going to play out.

[Tate Sullivan:]

Okay, thank you very much. Have a great day.

[Stamatis Tsantanis:]

Thanks Tate. Have a great day.

[Operator:]

Thank you. The next question is from the line of Randy Giveans from Jefferies. Please go ahead.

[Randy Giveans:]

Howdy team Seanergy, how's it going?

[Stamatis Tsantanis:]

Hey, Randy. Hi. Good morning.

[Randy Giveans:]

Good Morning. Morning. I guess just following up on a few things here. On the chartering side, you have a handful -- these kind of index linked charters that expire between -- looks like April and December of this year, maybe a few into next year. Is the plan to kind of continue those index-linked charters, switch them to spot, do a longer term time charter. We've seen some -- two plus year time charters in the market. So, any appetite for any of those?

[Stamatis Tsantanis:]

Well, first of all, our ships are in great demand. So, all the charter is want to renew the charter that we have in place. So, most likely all of these vessels will be renewed at pretty much the same terms or better. We are negotiating with the charters with the installation of energy saving devices, another investment we do on the ships and we usually achieve a higher index rate, index multiple compared to the previous. So, chances are that we will likely continue on the same commercial strategy. I don't think we will shift back to sport. We like the way we are because it offers the flexibility of employment and converting from floating to fixed, so we like the way it is when we want to. So, it will most likely remain the same and if the opportunity arises, we will fix more and more tonnage for longer periods. If we two, three, four years above $6,000 a day.

[Randy Giveans:]

Got it. Okay. And then is there a percentage or ratio, is it earnings linked on the kind of floating, kind of, component of the dividend going forward, or how is that assessed?

[Stamatis Tsantanis:]

Not really, we actually do it on the available cash of the company. So, it's a combination of the earnings, the net income as well as the available cash. So, we will not give the formula yet because we don't feel comfortable in giving a formula for the specialty within -- with all this volatility happening. When we have more stability around the world and on the rates, we would like to give a more concrete dividend formula for a special dividend.

[Randy Giveans:]

Sure. All right. That's it really. And then I guess just last question you touched on briefly there in terms of China extending steel emission targets and other things. Any big impacts you're seeing on the iron ore coal trade in the near-term related to any of these environmental issues?

[Stamatis Tsantanis:]

Well, there are two super major events happening right now that are not necessarily associated with the environmental drives. The first one is the war in Ukraine, where Russia is exporting 50 million tons of coal to Europe with all the sanctions, as you understand 50 million tones or up to 50 million tons will need to be imported from longer distances and we're talking about much bigger distances here, we're talking about Australia, South Africa, Central America, North America. So, Europe needs coal, a lot coal and Russia right now is in sanction. So, up to 50 million tons a year might be diverted from much, much longer distances. The second is the guidance from Vale in Brazil, where it appears that the Brazilian exports need to effectively double up from now until year end in order to meet the target. So, they have been exporting around 500,000 to 600,000 tons a day. And that needs to be 1.002 million in order for them to reach the target. So we expect a massive increase of long-term miles. We're not seeing that yet. But the market has surely picked up from last month. And in our opinion, these two super important events will have a major role on the bigger dry bulk ships.

[Randy Giveans:]

Got it. Yep. Yep. Good to hear. Hey, that's it for me. Thanks for having me.

[Stamatis Tsantanis:]

Take care. Thanks, Randy.

[Operator:]

Thank you. The next question is from the line of J Mintzmyer from Value Investor's Edge. Please go ahead.

[J Mintzmyer:]

Hi. Good afternoon, gentlemen. Congrats on a fantastic breakout quarter for you guys.

[Stamatis Tsantanis:]

Thanks, J. Good morning.

[J Mintzmyer:]

Yes, it's great to be on the call here. As an investor have been following Seanergy for a long time. Lots of great questions. I'm glad to see the call has been well populated. Don't have too much to add. I did want to ask, what's the exact balance of the remaining convertible notes? Exactly how much nominally is still out there for you guys?

[Stavros Gyftakis:]

Hi, J. It’s Stavros. The remaining balance is $11.6 million.

[J Mintzmyer:]

Copy, $11.6 million and is that owned exclusively by Jelco?

[Stavros Gyftakis:]

Yes. Indeed. Indeed.

[J Mintzmyer:]

Okay. Now that the stock is trading above 120, is there any potential to repurchase those or is it basically just they're just going to sit out there until Jelco exercises them?

[Stavros Gyftakis:]

Well, we’re not sure, to be honest about Jelco’s intentions. They might exercise some of that. They might continue making the coupon. So at this level now, it's really less than 5% of our total indebtedness. So it doesn't really make any significant role either on the capital structure or on the balance sheet altogether.

[J Mintzmyer:]

Yes. It's a pretty small number at this point. I know that dividends already been discussed a little bit, but I've been receiving a lot of questions on my end, is the intention that the $0.25 cents or $0.10 a year is kind of a base. Obviously, you can't guarantee it, but that's kind of a base and then each quarter is going to be different?

[Stavros Gyftakis:]

Yes. This is the base and we expect a little bit up every quarter, depending on the available cost, and earnings of the company.

[J Mintzmyer:]

Certainly makes sense. And then just looking at the share price today, you still trade at a meaningful discount to NAV. It seems like you have an unencumbered Capesize vessel left. Is there any appetite to finance that Capesize and do some repurchases, or do you want to just keep that Capesize unencumbered?

[Stavros Gyftakis:]

Well, we're just going to remain the way that we are right now. We have this leverage if we want to exercise that at the future stage. We expect to see how the volatility in the market is going to play out, because the stock has had a good run from $0.85 to $1.35. So, you know we are quite content with the way that the stock has run the last few weeks, and we're pretty sure that we will eventually catch up and exceed the NAV target. So we'll see how that goes. But so far, we're not going to make any actions to go. So when you have strings for the Dow Jones and the S&P of 2% or 3% day, it's kind of hard to try to predict how the stock is going to react.

[J Mintzmyer:]

Yes, certainly. That's fair. Well, you guys have been doing a great job. So I'm looking forward to next quarter.

[Stavros Gyftakis:]

Thank you, J. Very nice talking to you.

[Operator:]

Thank you. We have a follow-up from the line of Tate Sullivan of Maxim Group. Please go ahead.

[- Tate Sullivan:]

Good. Thank you for taking my follow-up. So with the cost of debt I see in your slide deck for the fiscal year 2021 was 4.8%, but after paying down the convertible notes, after taking account the refinancing, can you give a rough estimate of where that could be for fiscal year 2022? Thanks.

[Stavros Gyftakis:]

Sure. The weighted average cost of debt at 4.8% in 2021 is a bit skewed, because the prepayment of the most expensive facilities were done towards the fourth quarter. At the same time, I mean, we took out also voyage expenses for ship in the beginning of the 2022. So, in 2022, we expect the weighted average cost of capital be around -- of that to be around 4% or even slightly higher, 375 all-in.

[Tate Sullivan:]

Thank you for that. And then, you also on that slide provided indicative debt ratio going down from 45% to 36%. Is that based on your assumptions on the market value for the vessels in a year? How are you running that?

[Stavros Gyftakis:]

No, no, no, no, no.

[Tate Sullivan:]

Additional debt paid downs.

[Stavros Gyftakis:]

No, no, no, no, no. This is debt to total assets on a book value basis. So it's just debt repayment, what you see.

[Tate Sullivan:]

Just the repayments. Okay, great. And just last one for me, Stavros. I mean, very positive market commentary for rates going forward, and then the -- I mean, your presentations indicating the average FFA for 2022 at $28,900 need. But I think I heard you say, I mean, the potential for rates to be back up to 50 to 100. I mean, can you just -- can you put some more context around there and how much you keep floating?

[Stavros Gyftakis:]

Well, I certainly believe that 2022 has much stronger fundamentals than 2021. Some of them were expected. Then, some of them were unexpected due to the war in Ukraine. So if last year with worse fundamentals will show $85,000 in Q3, then one can assume that you will see stronger rates in 2022. But I don't want to give a figure. Once again, demand/supply fundamentals appear to be super strong, especially for the larger Capesizes, for the larger ships like Capesizes that are now appear to start to break upwards. So it remains to see how that is going to play out in the next three quarters of the year.

[Tate Sullivan:]

Okay. Thank you. And then, with that outlook, just a quick follow up, if I may. I mean, is it still a favorable scenario to continue to evaluate buying additional ships?

[Stavros Gyftakis:]

Well, I think we have other priorities with a very strong fleet increase last year. We expect to remain at these fleet levels. I mean, we have plenty of liquidity right now to continue rewarding our shareholders and possibly, look to buy one or two ships sometime in 2022. But there's absolutely nothing right on the horizon. I mean, we focus in rewarding our shareholders right now.

[Tate Sullivan:]

Okay, great. Well, thank you for all the detail. Great to hear.

[Stavros Gyftakis:]

You're very welcome. Thank you.

[Tate Sullivan:]

Understood. Yes.

[Operator:]

Thank you. The next question is from the line of Poe Fratt from NOBLE Capital. Please go ahead.

[Poe Fratt:]

Afternoon. Can you be a little more specific on your second -- or what you blocked up in the second quarter as far as FFAs and then time charters?

[Stamatis Tsantanis:]

Of course. Hi, Poe. Good morning. Stavros, will give you this information.

[Stavros Gyftakis:]

All right. Hi, Poe.

[Poe Fratt:]

Hi, Stavros. Good afternoon.

[Stavros Gyftakis:]

So we have four ships right now which we have converted from floating rates to fixed. Two have been converted at an average of $22,500. Two have been converted on an average of $30,000. And then we have the two ones that are running on fixed rate which are at $31,500 on average. So in total, we have six ships on fixed rates and another it's a TCE of around 28,000 as market stands now.

[Poe Fratt:]

Okay, great. And Stavros, can you just talk about your forward looking cost structure? You highlighted some of the one-time items, whether it’s pre-delivery costs through taxes or insurance. But how should we be looking at your costs going forward?

[Stavros Gyftakis:]

Look, I think on basically the G&A and the OpEx front, what you've seen in the fourth quarter is basically a bit higher versus what you should expect going forward. So, on OpEx, I would expect average of OpEx between $6,200 and $6,500 and on the G&A front, I would expect around $8 million to $8.5 million cash and around $12 million to $12.5 million including the non-cash items so the G&A front. Now in terms of debt, you know our amortization was of around $8 million repayments per quarter, which are going down to around $7 million in 2023 when the front loading in most of our facilities will be over. And then our interest expense, it's around $2.5 million per quarter, which is expected to reduce to around $2 million per quarter in 2023 and onwards.

[Poe Fratt:]

Great. That's helpful. And then, Stamatis, can you just go back -- I hate to beat the dead horse, but can you just talk about your dividend, paying a dividend versus buying stocks back. Most of January, your stock was under a $1. But you didn't buy any stock back. Now we hear your stock up a little bit, but you're -- and you’re paying the cash dividend. Can you just talk about just that trade-off between buying stock back and paying the dividend?

[Stamatis Tsantanis:]

Of course, yes. First of all, we did actually buyback securities and that was the convertible securities. So, Q1 and thus Q1 so far, we will have paid -- we will have repurchased $10 million of convertible securities and that means that we are averting a dilution for our shareholders. So, it's quite significant. For us the priority was to reduce this interest bearing node that not only reduce the cash expense of the company by reducing the interest expense of this $10 million, but also we are averting the dilution arising from the conversion of this convertible securities. So, in my opinion, I think that eliminating this out of the capital structure comes as a first priority. Second priority was dividend, which of course, we have been looking into that for quite some time. We have been discussing about it, if you remember, since August, September last year, and we now pay a substantial dividend, which if you annualize that we're talking about 16%, 17% of a dividend yield. I think that these two elements, I mean eliminating the dilution and the payment of dividends will have help the stock price rise on its own at higher levels. This is our estimate, of course, without any commitment. We think that this was going to affect the stock price positively. It's going to bring in investors that are seeking to get some dividend returns from the market and not only speculators willing to do the quick up and down to the stock price. So having said all that, we will continue to monitor the situation. And if the opportunity arises, comparing buybacks, common stock buybacks and anything else we will consider that other type.

[Poe Fratt:]

Great. And then just one last one. Stavros, can you just talk about working capital on the fourth quarter, they get to cash, year-end cash of $47 million, working capital seems like it went up a lot in the fourth quarter. Can you talk about how much it might have gone up and then also what's going to happen in 2022, as far as working capital?

[Stavros Gyftakis:]

Okay. So we expect the change in working capital to be around $30 million. You will see in our balance sheet, I mean with our current -- in the current portion of long-term debt, the upcoming balance, so the balance sheet picture may be a bit different than compared to what you see. But cash continues to be strong. I mean, we close the year with $47 million, we have currently after having repaid the convertibles around $45 million. At the TCE that Stamatis discussed before for the first quarter, we're making money, we're not burning money. So even after the dividend distribution, we expect our cash position to be higher than 2 million per vessel. So we're pretty comfortable with our working capital.

[Poe Fratt:]

Okay. Great. And then, I don't think your debt exposed just because of the way your charts work. But can you just talk about the spike in fuel spreads or bunker fuels, and how you're potentially managing that, whether you have an exposure to higher bunker fuel?

[Stamatis Tsantanis:]

That's actually one of the great things that we have managed to achieve, when we converted all the ships into period with on an index basis. We don't have the risk of bunkering and we have -- we don't have the risk of bunker fluctuations for the rates, sorry for the price per tonne moving from $500, $600 up to $1,000. So that’s one of the great, great things that have happened to us by switching into these index related employment agreements. So it doesn't really affect it. I think that a lot of ships will be slowing down altogether, which is going to help supply going down. I mean, 10 times a day if you slow down at the $1,000, it's really very significant number and we expect with bunker also. This actually adds up significantly into the market fundamentals for a better -- for a much higher rates.

[Poe Fratt:]

Great. Thanks for your time.

[Stamatis Tsantanis:]

Thank you, Poe. Have a great day.

[Operator:]

Thank you. And there are no further questions at this time. So I hand back to the speakers.

[Stamatis Tsantanis:]

Thank you very much. Thank you for listening in to our call. And we will be providing other updates, corporate updates of the company in the next few weeks. Thank you very much. Have a great day everyone.

[Operator:]

Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.