Golden Ocean Group Ltd (GOGL) 2018 Q1 法說會逐字稿

Good day, and welcome to the Golden Ocean Group Q1 2018 Earnings Conference Call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Birgitte Vartdal, CEO.

Please go ahead, madam.

Thank you.

Good morning, or good afternoon, and welcome to the first quarter of 2018 earnings release for Golden Ocean Group Limited.

My name is Birgitte Vartdal, CEO of Golden Ocean Management.

And together with me, I have Per Heiberg, CFO of Golden Ocean Management.

With a large fleet of modern vessels and a strong balance sheet covering all near-term liquidity requirements, the company is in a position to generate significant cash flows if market conditions continue to improve.

We are focused on maintaining our competitive cash breakeven levels and pursuing a strategy that allows us to deleverage on our balance sheet and ultimately return value to our shareholders.

Per will take you through the company update, and I will comment on the macro environment and our outlook after.

And in the end, we will open up for questions.

Thank you, Birgitte.

I will then just briefly run through the highlights for the quarter.

Golden Ocean reports a net income of $16.7 million and earnings per share of $0.12 for the first quarter of 2018, compared to $27.1 million in the fourth quarter of 2017.

Adjusted EBITDA ended at $53.3 million, down from $65.3 million in the previous quarter.

During first quarter, the company completed its newbuilding program by taking delivery of 5 Capesize vessels.

The company also took delivery of Golden Monterrey, the last vessel bought in connection with the equity offering in October of last year.

In May, the company agreed a new $120 million loan facility, refinancing 6 vessels currently financed with regular bank debt and 4 vessels currently financed with seller credits.

In April, the company agreed to sell Golden Eminence for $14.7 million to an unrelated third party.

We expect to deliver the vessel to its new owner during third quarter of this year.

The company also announces a dividend of $0.10 per share for the first quarter of 2018.

This is the second consecutive quarter the company has paid a dividend.

Moving on to the P&L.

The time charter equivalent or TCE revenue decreased by $4.7 million compared to the previous quarter.

In particular, results for the company's Capesize vessels came down compared to the strong fourth quarter of 2017, the resulting drop in revenue was offset by more vessels taken in on short-term periods, increasing both TCE revenue and charter hire expenses, but without -- or but with minor impact on the net results.

The Panamax or Supramax vessels kept their earnings at comparable levels to the previous quarter in dollar per day terms.

Ship operating expenses increased by $0.9 million compared to last quarter.

One vessel was dry docked in the quarter.

And operating expenses, net of dry docking, was flat compared to the fourth quarter.

Depreciation increased by $1.2 million compared to last quarter, as we took delivery of 6 new vessels in the first quarter.

The company also booked $6.2 million in gain on derivatives and other financial items for the quarter; most of this relates to gain on U.S. interest rate swaps, somewhat offset by minor loss on bunker hedges, FFA hedges and other financial items.

The company achieved a TCE per day of $15,593 for the quarter, which is down from $16,400 in the previous quarter.

This is above the company's long-term cash breakeven levels, including full debt service on both the recourse and nonrecourse debts.

Adjusted EBITDA was $53.3 million for the quarter.

Moving on to the cash flow for the quarter.

The company started the year with $372 million in cash and generated $28.5 million in positive cash from operating -- operation during the quarter.

The company paid $144.6 million in final installment payments for the 5 new buildings delivered in the first quarter and drew down $150 million in related debt.

Additionally, we paid $7.5 million in cash for Golden Monterrey and other cost related to delivery of all 6 vessels.

The company paid down $24.8 million in debt during the quarter, of which $9.2 million was for $9.4 million on the nominal value of the company's convertible bond.

The remainder relates to ordinary amortization of debt.

Net of these transactions, the cash outflow after paying $14.4 million in dividend were $13.6 million.

In the balance sheet, we see that the company has $358 million in cash, including cash with debt restricted at the end of the quarter.

The book value of the company's vessel increased by $169.1 million, following delivery of 5 Capesize newbuildings and Golden Monterrey in February, offset by ordinary depreciation.

The current portion of the company's long-term debt increased by $191.7 million over the quarter, as the company's convertible bond, with $172.4 million in carrying value, became current as it matures in the first quarter of 2019.

In addition, we will repay $11.6 million in deferred debt related to the nonrecourse debt, representing the full deferred amount under the cash sweep mechanism agreed for those facilities.

At the end of the quarter, the company's book equity was approximately 50% and value adjusted equity almost 45%.

Looking at the OpEx.

It shows the first quarter average for each vessel, included fully burdened cost for dry dock.

OpEx was slightly above $5,000 per day on average for all vessel classes, which is consistent with the level from previous quarters.

During first quarter, the company dry docked one vessel and installed Ballast Water Treatment System on the vessel.

The cost of the Ballast Water Treatment System was approximately $1.2 million, which will be capitalized and amortized over the remaining period of the lease of the vessel.

We expect 5 more vessels to be dry docked during the year.

The graph to the right side of this slide shows an overview of our vessels with and without Ballast Water Treatment Systems installed.

As you can see, more than 50% of the company's vessels already have systems installed, and the cost of the remaining installations is spread out from the year -- from this year until 2023, with a total estimated cost over around $40 million.

These costs are only estimates and are subject to change, and we expect the cost to go slightly down based on the experience from our first installation.

Looking at the fleet.

The company's fleet currently consists of 78 sailing vessels, of which 46 are Capes, 17 are Panamax/Kamsarmaxes, 12 are ice class Panamaxes and 3 Ultramaxes.

In April, the company decided to sell the Kamsarmax Golden Eminence to an unrelated third party for $14.7 million.

We expect the vessel to be delivered to a new owner during third quarter, and the sale will generate approximately $5.4 million in positive cash flow.

In the second quarter, we will book a loss of approximately $700,000 in relation to the sale.

We have taken some additional cover for our Capesize fleet since our last report at increasing rates, and have fixed rates for equivalent of 12 vessels at an average rate of approximately $7,950 per day, up from $7,400 in the previous report.

6 Panamax vessels are fixed on time charter contract that expires during the first half of 2019, and 4 on time charters that expires between January '20 and December '21.

For 2018, the average rate for our Panamax vessels on time charter is approximately $20,750 per day.

Despite this cover, the company is heavily exposed to the spot market, as our remaining fleet is trading spot -- in spot pools on index linked contracts or on short-term charters.

In addition, we have entered into some index linked contracts with floors and ceilings, one of which has a duration of close to 2 years.

Looking a bit on our credit facilities.

We have updated the debt profile to reflect the company's new $120 million facility that we expect to draw towards the end of the second quarter.

The facility financed 10 vessels in total, 6 of which were previously financed by 2 bank facilities that matures in the fourth quarter of 2018, and 4 of which was currently financed with seller's credits.

The new facility has a 7-year tenure based on a 20-year age profile and bears interest of LIBOR with a margin of 2.25.

Due to these favorable terms, the running interest cost for the company will come down following this refinancing.

The new facility is fully guaranteed by Golden Ocean Group Limited and is cash-neutral for the company after all.

The facility includes regular quarterly amortization.

Following the refinancing, recourse debt amounts to approximately $1 billion, in addition to the $180.8 million nominal outstanding under the convertible bond.

Nonrecourse debt is reduced to $245 million and only relates to the fleet acquired from Quintana in 2017.

Our cash position at the end of first quarter was $358 million, and the company has no further CapEx related to newbuilding or acquired vessels.

Going forward, the regular quarterly amortization of the recourse debt is $16.8 million.

And by that, I hand over the word to Birgitte to take a dry bulk market update.

Thank you, Per.

We start as previous presentation with looking at the overall utilization for the markets.

The utilization dropped from almost 87% in the fourth quarter to close to 85% in the first quarter of this year.

Despite a drop from the previous quarter, looking year-over-year, there is a clear improvement from the first quarter of '17.

The drop is partly expected, as Q1 is normally the seasonally weaker quarter.

However, the pattern was a bit unusual this quarter as market rates started stronger than expected, carrying over from the fourth quarter, with a lot of congestion in ports before quickly declining down.

I think there was expectations for a quick rebound towards the end of the quarter following Chinese New Year.

However, due to various weather-related issues and strikes and force majeure, this impacted the volumes that could be transported.

At the same time, vessels that previously had been in port tied up with congestion, was freed up towards the end of the quarter, giving a lot of available tonnage.

Moving on to demand, numbers continue to improve in Q1 '18.

That is also of the same explanation that vessels that were tied up in port where vessels loaded in the fourth quarter were discharged in the first quarter and these volumes represent the import numbers.

Year-over-year, demand was up around 3% in the first quarter of '18 compared with the first quarter of '17.

And as you can see, most of the commodities were up or flat in the quarter.

As always, one of the most important factors for the dry bulk market is steel consumption and steel production.

And year-over-year growth in steel production was positive in the first quarter, both inside and outside of China.

This is the second consecutive year with growth, which reflects strong production numbers.

At the same time, export numbers of steel from China are low, hence, the steel produced is mainly consumed in the domestic market.

This ties in with strong steel margins, both based on Chinese coking coal or Australian-imported coking coal, which remains close to record levels, as well as high steel prices itself.

This is a positive factor indicating the good demand for steel.

In addition, the positive spread, as we talked about last time, on the various grades of iron ore is continuing.

And this is -- with the high steel price, it's an incentive to use quality iron ore to get the most steel out of the ore.

Moving on to the sourcing of the iron ore.

Looking at the first quarter, volumes increased from Australia and decreased from Brazil.

This is -- the reason for this is partly a weaker market at the beginning of the year, weather-related issues that came into effect with heavy rain and wind, and also the pipeline of the Anglo's Minas-Rio impacted the volumes from Brazil at the start of the year.

Despite lower production year-to-date, Vale has reiterated its guidance for the year of 390 million tonnes, which would mean that Brazilian exports would have to pick up significantly towards the end of the year.

They should be able to do so based on capacity, but this is a key factor going forward and critical for the market development for the rest of the year.

Moving on to coal.

Imports of coal kept up in the first quarter of '18, driven by seasonal heating requirements.

In particular, India, but also China, have relatively low stock price of coal, creating the possibility for further imports.

While the Chinese likely have tried to reduce purchase of coal, with low stock price and the possibility of a warmer and drier summer, imports may well be required to fill the requirements in the short term.

Coal import into China can be more volatile as seaborne transportation demand is the residual requirement of the domestic market, in contrast to iron ore where the seaborne volume is the majority of the volume.

Another factor indicating strong consumption at the moment is the electricity consumption.

This continues to grow in China.

And although numbers are down from last summer, year-over-year growth, until April, is 8.3% higher consumption.

Coal is, by far, the largest source of Chinese electricity output, and so far has accounted for 76% of the production this year.

Hydropower generation is normally increasing in the spring, while thermal power has managed to remain fairly constant lately, based on the total increase in production.

Moving on to grain.

There was a good deal of focus last quarter on the potential trade war and tariffs for the agriproducts, in particular, in the U.S. to China soybean trade.

This has also been seen in the numbers.

The normal upswing in soybean export was observed, with Brazil almost taking a bigger share than the U.S., also related to seasonal pattern of production.

There are still uncertainties on whether a trade war will materialize or not, and the story can be rewritten every day.

But ahead of the U.S. grain season, we can hope that the trade has normalized.

Should it not, we believe that Brazil will be able to take off some of the volumes, and you could do a replacement of various trade so that you can change the importer and exporter -- swap between Europe and China, for instance -- so the impact in -- on this should not be very, very important on the dry bulk market as a whole.

Moving on to the supply side.

As normal, fleet growth is at its higher in the year in the first quarter.

Comparing with the same period last year, however, deliveries are down around 50%, reflecting the consequences of a lower order book this year compared to last year.

At the same time, scrapping has been close to nonexistent at the beginning of this year, which is normally the peak season for scrapping in the market.

This is probably due to owner's expectations of a better market and the vessels that dry docked now are docking prior to most of the new regulations coming into force, thus, buying time.

On some vessels, we have seen that U.S. Coast Guard regulations on Ballast Water Treatment Systems require early installations, while on other, depending on timing of dockings, et cetera, you are able to delay it.

And it comes into force next year for the whole market.

Still, the longer vessels sail now, the larger the pool of vessels for dry dock with upgrade expenses will become, and we can at least say that there is very limited downside to the scrapping we have seen lately.

Although slippage is lower now than previously, as orders that didn't materialize already have been cleared out of the order book earlier, there is still $5.4 million deadweight scheduled for delivery in 2018 that has not commenced construction as of 1st of April, and there is a further $4.6 million deadweight scheduled for delivery in Q2 that was not launched at the start of the quarter.

Based on normal construction time, we can still expect some delay in delivery, but probably not as much cancellations as have been seen in the past.

Also, we believe that most of the Tier 2 slots occupied by vessels with key lane before 1st of January 2016 have now been sold.

Gross fleet growth is expected to be between 4% and 5% in both '18 and '19, assuming no scrapping.

As scrapping has come down, net fleet growth will probably be higher than the 2% we previously expected, but with some slippages and delays, maybe close to 2%, 3% fleet growth for this year.

Some orders with 2019 deliveries have been added.

But from here on, we expect new orders to only come in 2020 onwards.

Ordering has also come down lately as yard prices have picked up a bit.

We monitor this closely, as significant ordering from where we are today would be adjusted to improve longer-term fundamentals of the market.

Activity in the S&P markets picked up a bit in the first quarter of the year, although prices have more or less moved sideways.

Asset prices for our 5-year-old Cape have been adjusted upwards, but this is simply a reflection of vessels with newer designs turning 5 years of age.

Going forward, we expect a further lift in asset prices if better rate environments materialize and in the second half of the year as we expect.

So summarizing the markets outlook, we continue to support the view we have communicated earlier.

Improvements are expected, but with inherent volatility in the market as we have seen in the last month.

What I think is comforting when looking at the commodity side: The demand side of the commodities seems to be strong.

Steel prices and steel margins are high, steel inventories are falling rapidly, electricity production based on thermal is keeping up and coal stockpiles are at relatively low levels.

Grain trade also seems to be supported.

So all the issues we have seen so far this year is mainly related to the supply side of the commodities.

Weather-related issues, crackdown of the pipeline of Anglo, strikes in Canada, Guinea and truck strike in Brazil, the latest development.

The fact that the market rates can move up very quickly, as we saw a few weeks back, is positive, but we still need several factors to move together in the right direction, and the risk always exists for unanticipated force majeure events -- strikes, weather-related issues and breakdowns.

For the balance of the year, delivery should decline and transported volumes should go up in line with guidance from various miners.

We know approximately how the supply side will develop, so the key here is that demand continues to grow as expected.

On the upside, growth in iron ore from Brazil specifically, and also continued demand for coal for thermal power plant is vital and the most important factors in the short term.

On the downside, there has not been a change in the relevant risk either.

The ever-high iron ore stockpile may be a stress for a period.

And of course, that the general economic climate provides stimuli for continued consumption of steel is the most important.

So Golden Ocean, in terms of our strategy going forward, we are happy with the fleet that we have on the water and the ability to generate good cash flow in the strong market.

With our strategy to focus on a young modern fleet, we found the opportunity right to sell the Golden Eminence.

Looking back at our significant growth over the last few years, prices are up 40% since the bottom and 25% to 30% since we bought the Quintana Fleet last March.

Based on the regulatory changes coming up, we are continuing our strategy to focus on modern and fuel-efficient assets.

We have been able to deleverage through ordinary debt repayments and by purchasing a portion of our convertible bond.

And we have also managed to reduce the average margin on our bank financing from 2.5% to 2.3%, based on the last transaction.

The board has declared a dividend for the first quarter of this year, the second consecutive quarter of $0.10 per share.

Going forward, we aim to find the right balance between returning value to shareholders and other uses of cash flow, including further deleveraging, mostly through our ordinary repayments and the convertible bond, and looking for potential investments if we find the right modern tonnage, as we believe this is key in an ever-changing regulatory economic environment.

And this ends our presentation for today.

We are open to answer any questions you may have.

Thank you.

(Operator Instructions) We can now take our first question from Espen Landmark from Fearnley.

Birgitte, I wanted to start with the comments you had regarding Brazilian ore exports.

I mean, as you said, they're down for the year, but the producer has reaffirmed guidance for the full year.

So I'm just wondering if you're seeing any signs of rebound in volumes now that we're nearing the start of the second half of the year.

No, the last few weeks have been relatively quiet, so it's not something that we have seen as of yet.

But if they are able to -- if they are going to deliver, they have to pick up relatively soon.

Okay.

And then, kind of, continuing on the Capes, the asset prices have been, we think, a bit surprisingly flat last few quarters, even though the period charter rates are still relatively high.

And I guess, the last time you saw 20,000 of period charters, the 5-year-old was worth a lot more than what it is today.

So just wondering, do you think the values have kind of been lagging the fundamentals in recent quarters?

Sorry, if I think the values have been lagging?

Yes, so the period market is essentially up now 10,000 days at the bottom, but values are -- they haven't been risen that much.

I think if you look at the longer term, forward term, although you could, on a very modern vessel, do 20,000 now for a year.

I mean, if you look at '17, it's at 17,500 -- and now '19 -- cal '19 and cal '20 is at 16,500 almost.

So I think if you look a bit further ahead, the market doesn't price in that short-term market.

Maybe it's lagging a bit behind, but then you could also say that newbuilding prices is an anchor and newbuilding prices has moved up a bit, so that can help secondhand values slightly on the upside, I think.

Yes, that make sense.

And final one, I mean, looking at -- the contracting activity has been relatively muted, at least compared to what it was last time rates were at this level.

Have you been surprised that there hasn't been more orders made in '18 so far?

No, not that surprised.

I think those are sort of, we earlier outdid the trends last year.

And as we have seen, S&P prices haven't been coming up; and also ordering in other shipping segments keeping the yard a bit more busy, I think it's a normal development.

In a way, you could say that the muted cape market is helpful in that retrospect so we don't get too much ordering too soon.

We can now take our next question from Fotis Giannakoulis from Morgan Stanley.

Birgitte, there is a lot of discussion about the new regulations, the 220 regulations and the Capesize vessels where your fleet is skewed -- seem to be more suitable compared to any other type of vessels.

Is this something that you have spent a lot of time?

And if you can give us your views over how many Capesize vessels or even Valemax and Newcastlemax vessels will install scrubbers, and what would be the impact of the higher fuel prices for the majority of the fleet on the speed of the vessels?

If you would have to optimize your vessels today at $200 to $250 per tonne higher fuel cost, what would be the difference in speed that you would run your vessels?

Yes, I think to take the last part first, clearly if the price of the fuel goes up, it will way reduce the speed from where we are today.

And maybe -- I mean, if you look at the average speed of the fleets on the data providers that you see in the market, that also includes like 4x, et cetera, and it's gone up a bit, but it's not gone crazy where we are today.

Maybe go down like 1 knot or something on when you are sailing, but that doesn't mean the average will go down as much.

But I think the good thing about that is that you kind of make sure that there is support on the downside in terms of rates if fuel prices are high.

And secondly, you also -- which hopefully will be more important, you raise the ceiling for, sort of, where vessels will start to speed up or -- yes, so that the time charter rates can move more on the upside before you see a significant speed increase.

So that's the -- in retrospect, I think the regulations are positive.

In terms of how many vessels in the market will be fitted, I would say, in the beginning it will probably be -- it's impossible to, sort of, give a number, but a small part.

I think if it's 15%, 20% or something would be -- may be able to do it in the beginning.

I think if the spreads continue to stay high and the scrubbers are seen to be the solution then probably over some years, you would see more and more owners installing.

But there is a variety of strategies out there, both on newbuildings, there are different strategies and also on secondhand vessels.

And not to forget, this is a costly investment, and it's not everyone that has the money available, but it's the hot topic of the year.

And can you talk a little bit about the compliance?

People talk about very high compliance expectations, but I was wondering if -- how is this compliance can be achieved if you think that there are going to be any issues with the insurance of vessels that they are not compliant, or if there are going to be any ports that they still will accept vessels with high sulfur?

Can you discuss a little bit about that?

Yes.

Unfortunately, up to my understanding, the regulation part of this is not set in stone yet, so it's a bit specular -- or it has to be a bit of speculation.

I think when you get there, you will find solutions to sort of make sure that you can document compliance.

And hopefully, the regulators will come out with clear guidance, the sooner the better.

Probably, in the beginning, it will be a bit tough.

But there have been regulatory changes before as well, like the SECA zones and other things, and the whole market was very concerned upfront.

And then when you get there, there are solutions.

But clearly, it's an issue.

And for us, which fully intend to comply with it, it's also, of course, a concern if there is cheating and there is noncompliance because then there will not be a fair, level playing field.

So -- but I think all this are, kind of, shorter-term issues, I would believe and hope.

I want to switch a little bit about the unusual situation that we've seen, the Atlantic versus the Pacific market.

Usually, we saw the Atlantic market being significantly stronger this time of the year.

What is the reason that we have seen this weakness in the Atlantic market this quarter, and if you see lately any signs of normalization, the Atlantic regaining this premium versus the Pacific market, which, of course, will tighten further the overall market.

Yes.

I think what we see more and more is that Pacific is, sort of, the -- if you focus on the capes for now, the Pacific is, sort of, the base load, where the iron ore goes onstream, sort of, from Australia all the time.

The Atlantic market is a smaller market in terms of number of vessels.

And there is more volatility in terms of the tightness: Either it gets very weak or it also gets very strong when the timing is right.

I think there have been various issues like the strike in Canada stopping iron ore exports there.

You have the -- of course, the lower volumes from Vale, you have the pipeline from Anglo.

You have also, in Guinea, you have the short strike on the bauxite side.

So there have been various elements that mainly are affecting the Atlantic markets.

And then you need to see us look at the -- sort of, the number of vessels, if owners are willing to do a front haul because they think that pay more or they are willing to stay in the market.

So it's -- how should I say, a smaller market and more volatile.

But that's also, as you say, when rate turn up or when it's getting tighter, that will also be the market that will probably drag the whole index upwards.

One last question about one of the risk factors that you mentioned in your presentation on the high inventories in iron ores or inventories in China.

Is this something that you consider as notable risk because the headline number looks high.

But again, we do not have a clear view, the grade of the iron ore that is being stockpiled.

Do you view that Vale, probably, is building up inventories in China that can have any adverse effect in the volatility of the market going forward?

Based on the volumes we have seen out of Brazil, I don't think that's the case.

Having said that, there is a lot of people speculating on why these stockpiles are building up and no clear answers to it.

I'm a bit surprised that it hasn't changed over time, sort of when you see iron ore price fluctuating.

So -- but to see -- I think based on the volumes, I don't think it is Vale building up a big stock.

We can now take our next question from Magnus Fyhr from Seaport Global.

Just a question on your -- I guess, the comments you made on the Ballast Water Treatment System installation.

Was the $1.2 million for one vessel?

And was there any -- it looks like the cost is lower for the rest of the vessels, but was there anything unusual with that price of the first vessel?

No, it was not totally unusual, but this was related to our Capesize vessel, and the cost for installing on a Capesize is higher than on the Panamax or on a Kamsarmax.

So the reason for, kind of, the sum being lower than this is that we have a lot of Kamsarmax and Panamax that we need to install on and the estimates for those are around based on $800,000, $900,000, so yes, they are lower.

Most of our Capesize already has it inside the vessel.

Okay.

Moving over to the balance sheet.

I mean, you have a very strong cash position, also expect strong cash flow from operations going forward that will probably cover some of the normal amortization payments.

But you do have to convert to in the first quarter next year, and I guess, $210 million balloon payment in the fourth quarter of 2019.

How do you think about those 2 events and the cash that you currently have on the balance sheet?

We, kind of, call it plan A, is to use the cash we have currently to date to repay the convertible bond.

So part of the cash will go to that.

For the remaining -- or the other material we see is regular asset-backed bank loans that we intend to refinance prior to maturity.

Okay.

And great.

Then one last...

And the leverage on those -- on the assets are within, kind of our target limits, so it's now expected cash outlets for that, given that the banks are there to support us.

And just one last question on the -- you look at the Capesize average for the quarter, I mean, the outperformance to the BCI, I mean, it was about 20%.

I guess, much of that due to your modern fleet.

Can you talk a little bit about the second quarter so far?

I mean, there's been a lot of volatility in the BCI.

I mean, do you expect continued outperformance?

Can you comment anything what you booked so far in the spot market during the second quarter?

Yes, I think what we wrote in the report is in the first quarter, we obviously also had some positive impact from, sort of, rate from the fourth quarter, while in the second quarter, you may have some more negative effect from the end of the first quarter, so there is a lagging there.

But of course, now we have 12 vessels on fixed rate charter as well.

And with the fleet, as you say, it should help, sort of, if you compare to the general spot market.

Yes.

And with the market being currently soft, I mean -- and we're seeing increasing iron ore production in the second half of the year, I mean, have you seen Vale at all maybe going out and securing some of the tonnage here ahead of a pickup and may be ahead of the strength in rates?

A bit, but they typically operate with some shorter-term contracts as well.

But I think if the volumes are going to pick up, they would need to also source vessels from the spot market in addition.

We can now take our next question from Noah Parquette from JP Morgan.

I just want to ask about the ship you sold, the Eminence, that doesn't stand out as a particularly older vessel.

What kind of led to that?

And about valuation, I think a little below, kind of, what Clarkson's would indicate for that ship.

So maybe some color on that.

Yes, I think another analyst was referring to -- depends what Clarkson series you're looking at, because there is Clarkson Kamsarmax series and the Clarkson Panamax series.

And these vessels have lower intake and our older relatively.

So I would say the price is more or less in line with the market on such a vessel.

For us, we see that the more modern tonnage gets a better return in the market, and that was the basis for the decision.

(Operator Instructions)

Okay.

Then we would like to thank you for listening in today on our Golden Ocean earnings call.

Ladies and gentlemen, that will conclude the Golden Ocean Group Earnings Q1 2018 Conference Call.

Thank you very much for your participation.

You may now disconnect.