Capital Clean Energy Carriers Corp (CCEC) 2015 Q3 法說會逐字稿

Thank you for standing by and welcome to the Capital Product Partners conference call on the third-quarter 2015 financial results. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer and Chief Financial Officer of the Company. (Operator Instructions). I must advise you the conference is being recorded today, Friday, October 30, 2015.

The statements in today's conference call that are not historical facts, including our expectations regarding developments in the markets, our expected charter coverage ratio for 2014 and 2015 and expectations regarding our quarterly distribution may be forward-looking statements as such as defined in Section 21A 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.

Thank you all for joining us today. As a reminder, we will be referring to the supporting slides available on our website as we go through today's presentation. On October 21, 2015, our Board Of Directors declared a cash distribution of $0.2385 and $0.21975 per Class B unit for the third quarter of 2015, which represents an increase of $0.02 compared to the common and Class B unit distribution for the second quarter 2015 and a total increase of $0.06 since the beginning of the year.

The third-quarter common unit cash distribution will be paid on November 13 to unitholders of record on November 6. The third-quarter Class B unit cash distribution will be paid on November 10 to Class B unitholders of record on November 3. The partnership's net income for the third quarter stood at $13.8 million, a $2.5 million improvement on the $11.3 million net income recorded in the third quarter of 2014.

The partnership's operating surplus for the quarter amounted to $33 million, which is $3.2 million higher than the $29.8 million in the third quarter of 2014. Common unit coverage for the third quarter stood at 1.04 times, partly due to the drydocking and related off-hire for two of our vessels during the quarter and as the fourth dropdown vessel was delivered to us towards the end of the quarter. In particular, on September 18, we took delivery of the Eco-Flex, Wide Beam 9000 TEU containership, CMA CGM Uruguay, which represents the fourth vessel in a series of five dropdown vessels we agreed to acquire in 2014.

Upon delivery, the vessel commenced its five-year charter with CMA CGM. Moreover, during the quarter, the partnership's secured [period] enrollment and extended time charter contracts for five of its vessels all at decreased rates. As a result of the new charters and as at the end of the third quarter 2015, the average remaining charter duration of our charters stood at 6.7 years with approximate charter coverage of approximately 94% for 2015 and 79% for 2016. As most of our remaining charter expirations in 2015 and early 2016 relate to product and crude tankers, we expect to be well-positioned to take advantage of the improving market conditions in these segments.

Turning to slide 2, revenues for the third quarter of 2015 were $57.6 million compared to $48.2 million in the third quarter of 2014. The increase is mainly a result of improving employment day rates for certain of the partnership's vessels and decreased size of the partnership's fleet. Please note that we had a total of approximately 38 days of off-hire in the third quarter of 2015 due to the drydocking of two of our vessels. We expect another three drydockings during the fourth quarter of 2015. This includes the drydocking of the M/V Agamemnon, as previously announced, as well as the drydocking of two product tankers in view of certain employment opportunities.

Total expenses for the third quarter of 2015 were $58.9 million compared to $32.8 million in the third quarter of 2014. Vessel operating expenses for the third quarter amounted to $18.6 million, $3.4 million higher than the $15.2 million in the third quarter of 2014. The increase reflects primarily the increased fleet size of the partnership and expenses related to the drydocking of the motor tanker, Atrotos and motor vessel, Cape Agamemnon.

General administrative expense for the third quarter amounted to $2.2 million compared to $1.9 million for the respective quarter in 2014. Total other expense net for the third quarter amounted to $4.9 million compared to $4.1 million for the third quarter of last year. The increase reflects the higher interest costs incurred in the third quarter and again, recognized during the third quarter of 2014 from currency exchange differences. The partnership's net income for the quarter of 2015 was $13.8 million, or $10.7 million after taking into account the preferred interest in net income attributable to Class B unitholders and their GP Interest. That is $0.09 per common unit.

Moving on to slide 3, you can see the details of our operating surplus calculations that determine distributions 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 $33 million in cash from operations before accounting for the Class B preferred units distribution. After adjusting for the Class B units, the adjusted operating surplus amounted to $30.1 million, which means common unit coverage for the third quarter at 1.04 times as two of our vessels went into drydocking during the quarter and the fourth dropdown vessel was delivered to us towards the end of the quarter.

On slide 4, you can see the details of our balance sheet. As of the end of the third quarter, the partner's capital amounted to $954.4 million, which is $81.8 million higher than the partner's capital at year-end 2014, which amounted to $872.6 million. This increase primarily reflects the [entrance] of 14.6 million common units in April this year, which raised net proceeds before operating expenses of $133.3 million and the net income for the nine-month period ended September 30, partially offset by the payment of $90.8 million in distributions since the end of 2014.

As of September 30, the partnership's total debt decreased by $4.9 million to $573 million compared to total debt of $577.9 million as of year-end 2014. The decrease was due to the prepayment of $115.9 million of principal amount under three of our credit facilities, in addition to $4 million in scheduled debt amortization, partially offset by $115 million in drawdowns under our senior secured credit facility with ING Bank. That was to fund the acquisition of four dropdown vessels already delivered to the partnership. Overall, our balance sheet remains strong with a net debt to cap of 30.5% and with partner's capital representing 60.5% of our total assets.

Turning to slide 5, we are pleased to have secured new time charter employment and extended period contracts for a total of five of our product and crude tankers during the quarter at an average increase of circa $2700 per day, as the partnership continues to take advantage of the current favorable rate environment in the product and crude tanker markets. In particular, the employment of two of our product tankers to Petrobras for three years is a further important step in securing cash flow visibility at decreased rates and further underpins our distribution growth objective.

I would also like to note here that we are in discussions to secure similar employment for other product tankers in our fleet as we find the combination of tender and charter rate attractive. Furthermore and as previously announced, the CMA CGM Uruguay, the fourth dropdown vessel, was delivered to the partnership on September 18 and commenced its five-year charter with CMA CGM. The vessel is earning $39,250 per day over the period.

It is important to note that for 8 out of the 13 vessels [fixed] year to date, we have secured deployment for two years longer. In addition, by the time that all vessels have commenced their new employment, the number of vessels employed to Capital Maritime & Trading will have decreased substantially compared to the end of third quarter of 2014 from 13 out of a total fleet of 30 vessels on September 30, 2014 to 7 out of 34 vessels currently in our fleet thereby reducing our exposure to Capital Maritime, our sponsor and further diversifying our customer portfolio.

While the partnership's exposure to Capital Maritime as a charterer has been reduced, Capital Maritime continues to be one of our more important charterers and as a courtesy, it has provided us with certain balancing information for the six months ended June 30 to help investors assess the financial profile.

Capital Maritime is a diversified profitable shipping company, which owns four VLCCs, one Suezmax crude tanker, two MR product tankers, 200 bulk carriers and one 1700 TEU container vessel in the water. The average age of its fleet rated by deadweight is approximately 5.6 years. It [goes] over strong balance sheet with low leverage and with a net debt to the market value of its assets today of below 20%.

At the end of the first half of 2015, total assets amounted to approximately $980 million and the stockholders' equity stood at approximately 73.3% of the total assets. Capital Maritime has an extensive newbuilding program comprising two Eco-VLCCs, four Eco-Aframax crude tankers, seven Eco-MR product tankers and one 1700 TEU container vessel. All newbuilds are expected to be delivered between the fourth quarter 2015 and the first quarter of 2017. Capital Maritime intends to finance this newbuilding program with cash from its balance sheet and has arranged for a substantial part of this program debt from commercial banks. For the eight Eco-MRs, CPLP already has been granted the right of first refusal.

Now moving to slide 6, I've taken into account the new charters. The average remaining charter duration is 6.7 years. We have six product tankers, two Suezmax tankers and one container that we see the present charters expire over the next 12 months. We expect to continue to take advantage of the attractive fundamentals of the product and crude tanker market to secure favorable period employment for a number of these vessels.

Turning to slide 7, we review the product tanker market developments in the third quarter of 2015. MR product tanker spot rates maintained the positive momentum of the first half of the year into the third quarter of 2015 and overall spot earnings climbed to the highest level since the second quarter of 2007. The market experienced particularly strong rates in the first part of the quarter with low oil prices and the US driving season resulting in surging US gasoline demand, while high refinery utilization rates in the US Gulf generated high export volumes from the region.

In addition, firm European refinery margins and increased refining capacity in the Middle East and Gulf led to increased product rate. The market lost some steam in the second half of the quarter due to the onset of refinery maintenance and the end of the year's driving season, but rates are still solid and well above last year's levels. The product tanker period market remained active during the third quarter with rates at the highest level since the first quarter of 2009 in response to the strong spot freight rates. Favorable demand and supply dynamics are expected to support period rates and activity going forward as product tanker deadweight demand is projected to grow by 5.7% in 2015 while contracted activity has been limited. The order book for MR tankers has declined notably from the start of the year and currently stands at 13.6% as a percentage of the fleet. Concurrently, the order book continues to experience substantial slippage during the first nine months of 2015 as approximately 38% of the expected MR and Handysize tanker newbuilds were not delivered on schedule.

Now turning to slide 8, the Suezmax spot market experienced solid rates, albeit weaker than the second quarter of 2015. Overall, though, it was the strongest third quarter since 2009 as high oil production, robust European and Chinese imports, and delays in certain ports in Northern Asia (inaudible) rates at unseasonably high levels. As a result of the firm spot markets, period rates further improved in the third quarter and presently stand at the highest levels since the first quarter of 2009.

According to the IEA, world oil demand is set to grow by 1.8 million barrels in 2015, which represents an upward revision compared to its previous forecast and by 1.2 million barrels in 2016. Industry analysts expect Suezmax tanker deadweight demand to expand by 4.9% for 2015 on the back of the low oil price environment and high refinery throughputs. On the supply side, the Suezmax fleet is projected to grow by 1.6%. The Suezmax tanker order book through 2018 corresponds to just short of 20% of the current fleet while slippage until the end of the third quarter was substantial and amounted to 35%.

Moving to slide 9, while the container market saw positive activity during the early part of the third quarter, the container charter market and in particular the post-Panamax market experienced a marked decrease in activity and rates from August onwards. The key driver behind the drop of the charter market has been the [ceasing] demands on the demand side as supply fundamentals have remained relatively unchanged.

Notably, the weaker volume growth experienced in the Far East Europe trade on the back of the weaker Euro, lower Russian imports and the subdued economic sentiment in Europe weighed on the charter market, while slowing Chinese economic growth negatively affected the North/South and inter-Asian trades. The increased supply of new ultra-large container vessels deployed primarily in the Far East/Europe lane have also had a negative impact on rates.

Supply/demand balance looks to gradually improve in 2016. Specifically, container vessel demand is forecast to grow by 5.5% in 2016, surpassing expected container fleet growth of 4.5%. Furthermore, the container order book corresponds to 19.6% as a percentage of the fleet, the lowest since 2003 while slippage for the first nine months amounted to approximately 20%.

Catalysts for a sustained market recovery in the short to medium-term for the post-Panamax sector includes improvement in European demand and to a lesser extent inter-Asia trade, cascading for post-Panamaxes into the sub-6000 TEU range, increased demolition of order vessels and the opening of the new Panama Canal that could generate additional demand for post-Panamaxes in the Trans-Pacific trade.

Turning to the final slide, we are pleased to have increased the partnership's common and Class B distributions for the third quarter of 2015 by $0.20 after having increased the first and second-quarter distributions by the same amount earlier in the year. Looking ahead, we aim to fulfill our stated distribution growth objective of 2% to 3% per annum for the foreseeable future by raising the goal on preferred distribution by the same amount every quarter as in the past three quarters.

Our distribution guidance is supported by the positive effect of the full-year contribution of the contracted dropdown vessels and it is important to note that it does not take into account any further acquisitions. We hold, as described earlier, the right of first refusal on eight MRs currently under construction by Capital Maritime, in addition to other accretive transactions that we can source from our sponsor or the wider shipping markets.

While the container charter market has hit a soft patch, our exposure to this market is limited as we have only two container vessels currently rolling off their present deployment. We are pleased to see, however, the continuously improving market backdrop for the product and crude tanker markets, as both segments benefit from the lower oil price environment, incremental oil demand and solid (inaudible) growth.

As we re-charter our tanker vessels that come off their current employment under these favorable market conditions, we expect to see increased cash flow generated from our fleet, which should support our distribution coverage going forward and will further underpin our distribution growth objective. And with that, I am happy to answer any questions you may have.

Thank you very much indeed, sir. (Operator Instructions). Jon Chapell, Evercore.

First question has to do with the containerships. It's a market somewhat unfamiliar to us. What's the realistic employment opportunity for those vessels as (inaudible) delivers them and kind of a couple parts there? First of all, how quickly do you think you could employ them? Second, is there any liquidity whatsoever in contracts of three years or more? And then third, is it possible that Capital Maritime as the sponsor could take them on to kind of bridge any gap in the softness in the market?

Thank you, Jon. Currently, the Agamemnon and the Archimedes, the charter is as follows. The Agamemnon is completing its drydock as we speak and the Archimedes is expected to be redelivered from those clients in mid-November. The chartering prospects for both vessels are being evaluated as the various operators need to readjust their own fleets to the revised growth expectations before they start looking to take [interments]. Now we are in dialogue with various operators about potential employment as we believe that in the near to medium-term some of them will take advantage of the opportunity to charter in large and modern quality tonnage such as the Archimedes and the Agamemnon and replace other more expensive, smaller capacity vessels such as the 6500 TEUs.

In addition, I think it's important to note that the specification of both vessels, the Archimedes and the Agamemnon, should give our customers flexibility as they can be employed in many different trades. The fall in oil bunker prices allows both vessels to compete effectively also with the 9000 TEU Eco-vessels that have appeared as of late.

Now in the medium to long term, what we will be be looking as catalysts for marked improvement would be as previously discussed an improvement in European demand, which should boost the Far East/Europe volumes, which are very important for the post-Panamax trade, cascading for post-Panamaxes into the sub, let's say, 6000, 6500 TEU range, increased demolition of the older vessels and of course, the new Panama Canal locks.

Now with regard to the charter duration, it very much depends on the liner's appetite going forward, as well as in the end what's on offer and what we want to take. Traditionally, these type of vessels, when they first appeared in the market, they were long-term contract type of vessels, 5 to 10 years or even longer in certain cases. As more of them come open in the spot market, you will find that the period is more flexible.

Again, we will decide when and if we have an offer depending on the rate as we would prefer to go shorter when there is a lower rate on the table and longer when there is a higher rate or closer to the average. So I think it's still premature to answer any questions until we get more insight as to how this market will develop.

Can you just give us a sense of where the market stands today, not necessarily what you're negotiating, but if we were to look at some type of industry average of what a one-year contract might be on a just under 8000 TEU containership? Where is the market for that today?

Well, this is a quite illiquid market, so there are not many vessels like that that are -- it's not unlike the dry bulk of the tanker market, you don't see many of them being fixed every week. The last [time] is closer to the high 20s, but it's not necessarily representative of where the market is going to end up. I think the next fixture is going to be important.

Okay. And then I guess the one part I missed before, is this something -- I know you can't really speak for them -- but could you foresee a situation where maybe the operators aren't ready to take in tonnage from anybody right now? Could Capital Maritime backstop this for a short period of time to bridge the gap until the market improves?

Well, unlike the tanker market where Capital Maritime has a substantial spot presence, it does not have any links to the liner market. So this is not something where Capital Maritime could step in. There the market is much, as you know, is dominated by the liner companies. There's no room for operators.

Okay. I'll just ask one more housekeeping one and then I will turn it over. You mentioned the containership doing the drydock, but you also said two product tankers. Which product tankers are doing the drydock and what's the estimated time of off-hire for those?

Well, that will depend on certain employment opportunities. As you know, we have a number of sister vessels and the reason that we would not like to name specific vessels at this point is because we might, depending on the employment opportunities, we might drydock one vessel or the other if they are in place for the delivery under these employment opportunities.

I cannot say more at this point, but I think you heard earlier that we like fixtures like the one that we announced on the Petrobras side and we hopefully can do more of them.

Okay, sounds good. Thank you, Jerry.

Amit Mehrotra, Deutsche Bank.

First question is just on the coverage outlook. I don't have to tell you we've seen some encouraging movements in the product tanker time charter market and I'm just trying to understand what that could mean for prospective coverage if we look in 2016. So if we sort of extrapolate the recent inflection over the expirations over the next 6 to 12 months, the number I get to is 1.2 times on coverage as you exit 2016. Is that in the neighborhood of where you see it, if not exactly, but maybe directionally from where we are today?

Amit, that's a good question. Ultimately, unit coverage will also be dependent on the employment of the two 8000 TEU vessels and as discussed, we have little visibility at this point. As there was the sudden drop in demand I think caught everybody in the market by surprise, so we need to wait for a better understanding given the employment prospects and rate.

Now what I think is important to highlight is that our distribution and distribution growth objective remains firmly in place. The recent weakness in the container market affects only these two out of the 35 vessels as you correctly pointed out, having a number of other vessels coming off charter in the very strong product in crude tanker markets. So given the positive outlook of the tanker market, the recent fixtures for a number of our vessels all at increased rates as we discussed, as well as the contracted dropdown vessels, we expect that we can deliver on the distribution/distribution growth of $0.02 per quarter and provide adequate unit coverage.

Right. No, that's very clear. Just one question with respect to that distribution growth strategy, if I may. You've said essentially that you want enough cushion in the coverage to save for a rainy day and that certainly makes sense given especially what we've seen in the recent containership charter rates. But I'm just hoping you can give us some I guess quantitative metrics around what you mean by cushion.

And what I mean by that is, if you do get direction or at least some improvement in the coverage as we move over the next 12 months and we get to that 1.2 times level, is that what you consider to be enough cushion and at that point could the partnership decide to pivot the strategy and pass through some of those incremental cash flow, if there are any, beyond that 1.2 coverage to the distribution growth? Because one of the problems I think people have had with the partnership is the fact that the distribution growth, while you guys are doing it steady, has been a little bit lackluster. So any indication on when you do get to that cushion, will more of it flow to the unitholder?

Amit, I think we have said in the past that we feel comfortable with our distribution and distribution growth basis of 1.1 times coverage and this is what we are going to aim for. And given our current deployment and given what we have seen today, that's something that we continue to have in mind.

29:08

Okay. One last question, Jerry. A quick one on financing. The leverage, the that leverage profile looks great and it sort of implies I guess the opportunity for some disproportionate debt financing when you look at additional acquisitions down the line. Can you do sort of talk about how you think about that? Is the partnership willing to go to 60%, 70% LTVs, or is 50% I guess where you guys want to max out at to sort of access the non-advertising debt terms?

We will continue to aim for a 50/50 debt equity mix. It is also -- it's not only a choice that we have consciously communicated, but also if you are looking for this type of financing with a certain non-amortizing period banks will not -- a mean the commercial banks -- will not usually advance a lot more than that when it comes to (inaudible) finance.

Yes. Okay, Jerry. Thanks so much. Happy Halloween. Thanks.

Michael Webber, Wells Fargo

I just wanted to -- a couple of questions here. First, I wanted to go back and revisit the to container ships one more time because it's worth covering again. I guess within the context -- and you touched on it briefly -- within the context of your distribution guidance of 2% to 3%, can you maybe walk us through what scenarios -- which I'm sure you guys ran before instituting the guidance -- what scenarios you guys ran in terms of employment prospects for those vessels, in terms of how much insulation there is to that guidance from even a worst-case scenario for a short-term period with those two ships?

Mike, it is still early on to have more visibility into the post-Panamax charter rates going forward. But what I can tell you is that even if the vessels were to remain idle, the two vessels, for the full year 2016, and that would be unprecedented. If you look back into thousand nine when demand for containers contracted by more than 9% after a severe global GDP shock there was limited idle time for container vessels. But even in that remote scenario where both vessels were to be idle for the full year, we expect that our distribution coverage to be above 1.0 times and our distribution growth objective will be maintained. So that's what I can tell you today.

Got you. No, that's what we were hoping to hear. Just real quickly, you went through the delivery schedule, which is very helpful for the Capital fleet. I guess to specifically on the them MRs that you guys have -- the eight MRs you have the ROFR on, they are coming into play relatively quickly as they deliver over the next call it I guess 18 months. Aside from your alls leverage looking like it's 30%. Net debt to cap is among the lowest of mature marine MLPs. Can you talk a bit to what are the levers you could look at the on common equity given where yields are to facilitate that growth be it prefs or some combination with the parent, or maybe just talk through what arrows are in your quiver when it comes to facilitating those drops?

Well, currently we are in the process of taking delivery of let's say to finish the delivery of the five contracted dropdowns. As you know we have by now acquired four out of the five with the next one in January 2016, so we still have some if you want contracted growth left in. As you say there are the eight MRs where we have the right of first refusal on and other assets that Capital Maritime (inaudible) from the secondhand market. We have common yielding today closer to [15.5%]. It's something that we will need to see improving before we consider a common issue, for sure. Now with regard to alternative means, of course we will look at that if it makes sense and we can put together in accretive deal, but I think it's important first to complete our contracted dropdowns.

Got you. Okay. That's helpful. Appreciate the time, Jerry. Thank you.

Ben Nolan, Stifel

So I first wanted to follow up a little bit on Mike's last question as it related to the potential dropdowns. Was curious if any of those eight MRs have already been contracted on longer-term basis such that they would make ideal drop-down candidates from a cash flow perspective?

It has been reported in the market that one of these MRs has been fixed on a two-year deal and that's the only vessel that has been fixed. There are of course other assets that Capital Maritime is developing as we speak can is talking to a number of traders. There's more no detail that I can share with you at this point that expect to have over the coming months.

Okay, that's helpful. And along those same lines, obviously there's the ROFR in place for the eight MRs, but there's not for the two VLCCs. Is that something that we should not consider necessary as part of the potential pool of assets for dropdown, or would you expect that you might have a shot at those as well?

Well, traditionally we have grown from with assets dropdown from Capital Maritime and we have a diversified fleet, crude products and containers, so if you want to be a bit agnostic in terms of the the asset as long as we have -- as we believe in the prospects going forward. But the most important criterion of whether we will look look at those vessels or not is whether Capital Maritime will find appropriate employment that would make them accretive to us. At this point no such employment is in place I would say long charter, so it hasn't really come up.

Okay. And remind me, if there were a long-term charter in place, is there a criterion at which they would have to be offered to the partnership, or there's no such requirement?

No, for the crude vessels there is no such requirement. There is such a requirement. There is an omnibus agreement when it comes to the product tankers.

Okay. That's helpful. And then lastly for me, and this isn't a big deal, but was just curious there was the one Suezmax that was returned early off of its charter and that Capital Maritime picked up sort of the remainder of the charter at a better rate, was just curious what the circumstances of that situation were?

Well, there was a certain charter party dispute. We took advantage of terminating the charter and we fixed at a higher rate, so it was in the end a better outcome.

Okay. But there's -- there shouldn't be any readthroughs with respect to the fourth quarter P&L or any other potential situations like this on any of the other vessels?

I, at this point, would not expect any such effect could as you know we have fixed in the past with (inaudible) and its affiliate another three vessels, so it's somebody that we know quite well.

Right. Okay. And there are is the readthrough on any of the other contracts at spot rate?

No.

Okay. All right, that does it for me. Appreciated. Thanks, Jerry.

Spiro Dounis, UBS

Just had a quick question on drydocks; I guess you had a few that happened in the third quarter and some are coming up in the fourth quarter. And sorry if I missed it but could you quantify it is from a cash flow perspective for in EBITDA perspective baby how much the impacted results this last quarter and what the expedition would be, if any, in fourth quarter?

Sure, Spiro. Two vessels drydocked during the third quarter in addition to another five vessels in the first half of 2015. That's mainly because of the position of the vessels, the future regulatory requirements as well as employment prospects favored drydocking earlier then initially scheduled. The impact of the expense drydocks costs on the related off-hire for the third quarter, so the cash cost together with the off-hire amounted approximately to $2.2 million, which effectively would if implied the unit coverage of 1.1 times for the quarter. Needless to say drydockings that take place within 2015 been fewer drydocks in the future, so with regard to the fourth quarter we expect another three vessels to be drydocked namely the one container, the motor vessel Agamemnon and to product tankers in view of certain employment opportunities. Now the average cost of a product tanker total cost that is deferred as well as OpEx costs for been MR product tanker is let's say between $750,000 to $1 million.

Got it. Okay, that's helpful. And then just in terms of I think Amit was trying to touch on this before; Scorpio recently signed some three-year traders on MRs for over $20,000 a day and I realize that there's some one off I guess circumstances around some of these MRs, but I got to think that's encouraging to you especially when you've got eight eco-MRs in the hopper. Is that a number of that you going to be looking or gunning after? Is that an expectation in your head, or do you land closer to maybe $17,000 or $18,000?

Well, I think there is if you want a slightly differentiated market for eco- and non-eco-MRs, today (inaudible), for example, would call one year rate for [MR 2s], so eco-MR 2s at around $19,000 to $20,000 and a 2 to 3 year deal between call it $17,000 to $18,000. Now in the end the actual rate depends on position, especially for the one-year deal -- a good position that would give charterers some income onto the front end of the curve would of course command a better premium when it comes to the period rates, but also in terms of the trade I think the Scorpio fixed results included some element of [ice] trading but of course if I understand correctly with the exact rate is. So but all in all, yes, I think you'll find that for modern eco-vessels you can fix in the very high teens and for the older vessels between $18,000 to $19,000 for a year, slightly less for a longer period.

Okay. Great. And then just last one, you kind of touched on this before but I know 2% to 3% distribution guidance, just wondering when you give the guidance earlier this year obviously you knew about the containers and when they would be RE-delivering, no expectation necessarily on what would happen but what was the base case when you gave the 2% to 3% (inaudible) guidance as to what would happen to those containers? Was at off-hire for six months and then some sort of lower rate, or just try to get a sense of if you do and to retire during those quickly in retarder and then at something in the [30s], is that it's a situation where you could actually lift the distribution guidance because you are conservative?

Well, to be perfectly frank, I think nobody expected the slow down and its magnitude in the container market. He so they could biggest lender in the world come up with a profit warning just a few days ago on the back of this unexpected slowdown, so I wouldn't say that we were expecting this kind of market don't think anybody was, actually. If anything the market was improving in the second quarter of 2015. So the base case -- don't forget that Maersk, before they delivered the vessels, they had a number of options and given the flexibility and our discussions with them previously, we were expecting babies a good chance that they could continue with the vessels. Well, they haven't. And that once again I think underlines how important it is to be conservative when it comes to distribution growth objective and what I can see that despite this slow down and despite much weaker rates that the market is expecting for post-Panamax today, we feel very comfortable with distribution growth and the distribution coverage going forward.

Got it. Appreciate the color. Thanks, Jerry. Have a great weekend.

Ben Brownlow, Raymond James

Congrats on the recent Tinker re-charterers. Just to follow up on the container ships, what's the shortest contract duration you would consider for those vessels and is given the rate pressures that you are seeing in the container market, are there any discussions to enter vessels in the spot market just to capture a higher rate in the short term until the market improves?

Ben, in the container market there's no such thing as the spot market that we have in the dry bulk or the tanker market. What we call spot market on the container side is 3 to 6 months trade, which is probably what would be the shorter end of employment. At this point we will be looking firstly to see what is on offer because as previously discussed the liners given the sudden slowdown are readjusting their own fleets before they look at new tonnage. And secondly, I think if we have a choice we would of course try to go shorter if the rate on offer is on the lower side compared to historical earnings, or if we cannot see the better rate and closer to the meeting by going longer, of course we would look at that as well.

Thank you. And then on the tanker side, Capital Maritime has been very supportive and I think you have roughly 4 tanker renewals over in the next 12 months that have great upside based on one year time charterers. Are there discussions with Capital Maritime for an early termination, or I guess another way to ask, are there any charter interests or discussions with third parties for those tankers?

We have a total of six product tankers and two Suezmaxes coming off charter over the next 12 months. I think to answer your question I can point out to what happened with these two vessels that went to Petrobras that where effectively Capital Maritime agreed to we deliver the vessels earlier so that the vessels can commence these attractive charter and you saw a similar thing happening with the Amore Mio II* when the capital maritime effectively terminated its charter early at $27,000 and let CPLP have the benefit of the new charter with (inaudible) effectively [750]. So until now, as you say, Capital Maritime has been very supportive and I expect that if similar opportunities are found it could well be that they could do the same.

Thank you.

(Operator Instructions) Sunil Subal, Seaport Global Securities

Good afternoon, Jerry. Most of my questions have been actually answered, just one quick one. When you think about the product tanker market, especially with regard to the duration of contract, are you seeing any change in terms of the customer mindset there, or could we see that market gets more longer duration contracts then where market has been typically; and if that's the case, how do you look at that scenario?

That is a difficult question, Sunil. We have seen charterers coming to the market for fixtures for longer periods compared to a year, two years ago. That's mostly I think a result of two things. First of all expectations changing going forward with the spot market being well $10,000 above year to date where it was last year. A number of charterers are trying to take cover for longer. Secondly, as owners very much benefit from these very same spot market in order to be attracted to give up if you want the more lucrative spot voyages they need, they require charterers to go longer, so we have seen a number of deals going longer compared to a year, two years ago. And

And then as you look at your re-contracting book over the next year or so, is that something direction-wise that you intend to pursue? Duration-wise?

For sure. As discussed, out of the 13 vessels that we have fixed year to date the 8 were for two years or longer. If you were to rewind two 2012 or 2013 you would see that we were fixing back then for 6, 12 months or whereabouts. Now that we find this longer employment opportunities as well as now that rates have recovered closer to the mean, we are taking advantage of that.

Okay. That's very helpful; thanks. One more follow-up on eco-MR dropdowns. In terms of the timelines that you have, could you walk us through timelines on those drops and how should it be thinking about if there is an opportunity which comes up for you guys to acquire a dropdown candidate.

Well, the opportunities are there with the right of first refusal on the MRs, other assets Capital Maritime has or even potentially from the secondhand market but I think the issue is more the financing side and especially the equity side, so first of all I think we need to see if our unit price improves and then if we can complete accretive deals, or secondly, at a later stage look at alternative sources of financing such acquisitions. But there is no specific timeline for that at this point.

Okay, that's all I had. Thanks.

Shawn Collins, Bank of America Merrill Lynch

So my first question is a bit esoteric but given that you operate ships all around the globe I thought it would give a try with this. This year the El Nino weather pattern has in is expected to have a particularly pronounced impact, not so severe -- very severe not since 1997, 1998. I was just curious to ask if you or any of your customers had seen any disruptions from this with any of your tankers or container ships? Thank you.

So, not as far as I know. Of course in the past similar phenomenon have been very beneficial to the trade and -- but especially for it means refinery outages as this tends to boost trade; But not to my knowledge as of recently.

Okay, understand. Thank you. Just turning to the balance sheet, two of four of your credit facilities are with HSH. I think you recently restructured those to push the amortization out from 2016 two 2017. Can you just briefly outline your near-term debt maturity schedule?

Sure. So for 2015 there is a remaining repayment of $1.4 million under one of the HSH facilities, and then we have four 2016 $15 million under the ING facility. That is assuming that the ING facility will be fully drawn by January 2016 as we take delivery of the fifth vessel. Now there is the same $15 million we will have to repay in 2017 for the ING facility until the fourth quarter of 2017 when we have another combined -- so that would be $25 million -- that's the fourth quarter of 2017 from the two HSH facilities and our Credit Agricole* facility. I would be happy to give you a detailed breakdown if you want over the phone?

No -- yes, I can circle up with you off-line. That's helpful. That's great. That's all for me. Thank you for the time and insight.

(Operator Instructions) as there are no further questions, sir, I shall pass the floor back to you for closing remarks.

I would like to thank you all for joining us today.

And with many thanks to our speaker today, that does conclude the conference. Thank you all for participating. You may now disconnect. Thank you Mr. Kalogiratos.