EuroDry, Ltd. (NASDAQ:EDRY) Q2 2022 Earnings Conference Call August 9, 2022 10:00 AM ET
Company Participants
Aristides Pittas – Chairman & CEO
Tasos Aslidis – CFO
Conference Call Participants
Tate Sullivan – Maxim Group
Poe Fratt – Alliance Global Partners
Operator
Thank you for standing by, ladies and gentlemen, and welcome to the EuroDry Conference Call on the Second Quarter 2022 Financial Results.
We have with us today Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the company. [Operator Instructions] I must advise you that this conference is being recorded today. Please be reminded that the company announced its results with a press release that has been publicly distributed.
Before passing the floor over to Mr. Pittas, I would like to remind everyone that in today’s presentation and conference call, EuroDry will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management’s expectation that involves risks and uncertainties that may result in such expectations not being realized.
I kindly draw your attention to Slide 02 of the webcast presentation, which has the full forward-looking statement and the same statement was also included in the press release.
Please take a moment to go through the whole statement and read it.
And I would now like to pass the floor over to Mr. Pittas. Thank you, Sir. Please go ahead.
Aristides Pittas
Hello, ladies and gentlemen, good morning, and thank you for joining us for the scheduled conference call. I have with me Tasos Aslidis, our Chief Financial Officer. The purpose of today’s call is to discuss our financial results for the six months period and quarter ended March 30, 2022.
Please turn to Slide 3. Our income statement highlights are shown here. For the second quarter of 2022, we reported total net revenues of $21 million and the net income of $10.6 million or $3.61 per diluted share. Adjusted net income attributable to the common shareholders was $9.9 million or $3.38 per diluted share. Adjusted net income attributable to common shareholders was $9.9 million, a $3.38 per diluted share. Adjusted EBITDA for the period was $13.7 million. With positive release in the drybulk market that is still anticipated to remain firm for the second half of the year. We believe our stocks will be trading at much higher levels given the net asset value of the company as well.
We believe these factors creates cultivating opportunities for us and therefore the Company’s Board of Directors has approved the share repurchase program there up to a total of $10 million of the Company’s common stock to be used with managements discretion. The Board will review the program after a period of 12 months. Share repurchases will be made from time-to-time for cash local market transactions with prevailing market prices all in drybulk negotiated transactions.
Combining an amount of purchases and the program will be determined by management based at the market conditions and other factors. The program does not require the Company to purchase any specific number of or amount of shares and may be suspended during stated at any time and the Company discretion will be well noticed.
Our CFO, Tasos Aslidis will go over our financial highlights in more detail later on in the presentation. Please turn to Slide 04 for our operational highlights. Motor vessel Ekaterini charter was extended for a minimum period until February 2023 till maximum period until April 20, 2023 at a 105% of the average Baltic Kamsarmax Index. While sister vessel, motor vessel Xenia charter was also extended for a minimum period until March 1, 2024 to a maximum period until May 15, 2024, also at an annual 5% of the average Baltic Kamsarmax Index.
Motor vessel Eirini was fixed for a trip of approximately 20 to 30 days at $14,000 per day and the both operational this trip will undertake it’s scheduled dry-dock. Motor vessel Blessed Luck was fixed for a trip of approximately 20 to 25 days as well at $15,750 per day after completing its dry-dock for approximately 23 days during the second quarter. Furthermore, motor vessel Santa Cruz was fixed again for a small trip of about 15 to 25 days at $11,500 per day.
And motor vessel Pantelis for a trip of 55 to 65 days at $13,000 per day. Our motor vessel Alexandros was fixed for a trip of about 55 to 65 days at $28,000 a day earlier in the quarter which was followed by scheduled dry-dock from where it sailed yesterday. The vessel is now fixed for a trip that will nearly at a minimum of $15,000 per day to 65 days.
Finally, motor vessel Tasos was fixed for about 80 to a 100 days at $20,600 per day and is also currently undergoing scheduled dry-dock. The idle commercial offhire motor vessel Pantelis and Alexandros P were idle for 2.2 days and 3.9 days respectively during this quarter while waiting to commence their next employment due to complications that arose from dealing with the COVID issues.
We are very pleased to announce that we have completed our 2021 sustainability report which is available on our website. Our commitment towards all aspects of ESG is steadfast. Please turn to Slide 05 to review our current fleet. Our current fleet consists of 11 vessels including six Panamaxes, Supramax’s and Supramax and two Kamsarmaxes with an average age of 13.5 years of carrying capacity of approximately 800,000 deadweight tons.
Moving on Slide 6, we review the current vessel employment schedule. As you can see, fixed rate coverage for the remaining quarters of 2022 stands at around 31%. This figure excludes the three ships on index charters which are open to market fluctuations but have secured employment.
Moving to Slide 7, we’ll go over the market highlights for the quarter ended June 30, 2022 and does its current expense. The market continues to withdrawal by a safety supply and demand balance which is reflected in a very strength in lower and in recent weeks due to the ongoing geopolitical conflicts with volatility surrounding the greater economy. This is high commodity prices and inflation. As seen here, the average spot market rate for Panamax’s was approximately $25,400 a day in the second quarter. By July 1, the price lifted low to about $21,500 per day and currently spends at around $17,000 per day.
Similarly, the one year bank charter rate for Panamax’s was about $26,000 per day dropping to $20,150 per day by July 1, and currently stands at $16,750 per day. Despite the drop, the BPI index strength has been relatively strong especially considering it comes against a fairly muted diagonal market which have seen flat type of volumes in the back of more restrained Chinese steel production and either low demand.
Please turn Slide 9. The global GDP growth forecast have been further reduced for 2022 by the IMF in its latest report as several additional events complete the world economy already we can through the pandemic. While going to a political conflict between Russia and Ukraine added to existing inflationary pressures that had already mounting due to the economic stimuli provided during the pandemic. The stringent type of financial policies including a series of aggressive interest rate hikes in order to address it.
The elevated energy prices mainly due to the Russia Ukraine conflict and lingering supply chain issues as well as additional slowdowns in China due to regional COVID-19 lockdowns and the total disabled crisis need further separate Chinese growth, the IMF has lowered its local GDP estimate a 3.6% in April to 3.2% to-date and to 2.9% for 2023. GDP growth for the United States was revised downwards to 2.3% for 2022, a 1.4%’age point low for many quarters. Due to lower growth and tight monitory policies.
Similarly European growth has brought 2.6% resulting from the Russia Ukraine conflict and tighter monetary policies. Due to major global spill overs, COVID ties values and regional issues, China’s growth was very focused to down to 3.3% for 2022 a 1.1%’age point decrease from April’s forecast.
Growth in emerging markets and developing economy is also expected to sharply decelerate. In this focus, has been revised down to 7.4% for ‘22 and 61% for 2023. While we only calculated with better forecast in this quarter seems to be Brazil with an anticipated growth of 1.7% in 2022, 1.8% previously due to a robust recovery in Latin America. And with the robust economies, Japan and the Asian sides have also been revised values for 2022 and 2023 due to concerns about slowing economies following the U.S. interest rate hike and ongoing inflation. Looking at the dry bulk trade and the COVID Clarksons research, demand growth is expected to decrease to just 1.2% in 2022 compared to 3.8% for the previous year. For 2023, dry bulk rate is expected to grow by 2.1%.
Trade and growth projections are being continuously revised as the effects of geopolitical tensions between Russia and Ukraine on world growth and trade are being continuously assessed.
Please turn to Slide 10. Lack of rebuilding orderbooks in recent years face a favorable mix for the drybulk sector. The orderbook remains at just 7.2% of the existing fleet which has mostly been unchanged over the past 18 months despite the strongest in more than a decade charter age.
Now, please turn to Slide 11 for our drybulk fleet overview. Clarksons expecting deliveries of a 90.5% of the current fleet to be delivered in 2022 and 3.2% in 2023, addresses a fleet growth of around 2.4% in 2022 and below 1% in 2023 as the orderbook to fleet ratio remains at a record low and contracting circuit.
Please turn to Slide 12, where we summarize our outlook in the drybulk market. Bulker market remains firm, with earnings still above historical averages despite demand-side concerns around the Russia Ukraine conflict and macroeconomic headwinds. Severe port congestion continues to provide major “disruption upside,” with the short-term market outlook still positive in anticipati0on of the traditional second half market seasonality. Beyond the overall risk to the global economy final demand in the bulk sector is likely to be impacted by a complex mix of upsides and downsides: increasing commodity prices, inflation and interest rates putting a strain on businesses and consumers, while a shift in trading patterns and slowest speeding due to environmental concerns could increase average sailing distances.
Congestion remains an issue and so far this year, more ships have consistently been stuck for longer than in 2021. This naturally adds inefficiency to the supply chain and reduces effective supply, thereby tightening the supply/demand balance in favor of owners and operators.
Demolition slowed significantly in 2021 as high freight rates encouraged continued trading and we expect it to remain at about the same level throughout the year. A few scrapings in the Capesize sector have only materialized this year.
Ordering of new ships for 2023 and 2024 deliveries are expected to be non-existent due to lack of available slots in shipyards. In addition, the lack of clarity for the fuel of the future remains an unknown, something that makes placing a new order a very risky option. On the other hand, normalization of trade routes and congestion easing will probably increase effective supply.
Overall, the direction of the market will be determined by the outcome of the war between Russia and Ukraine and beyond the efforts of the global economy to fight inflation with the least possible negative consequences on the world growth.
Please turn to Slide 13. The left side of the slide shows the evolution of one-year time charter rates of Panamex drybulk vessels since 2002. As of August 5, the one-year time charter rate for Panamex seeds the capacity of 75,000 deadweight tons sold at 16,750 dollars per day [Indiscernible] with still significant levels.
On the other hand side of the slide, you can see the historical price range for a 10-year old Panamax vessel, which has a current price of around $26.5 million. Over the past year, drybulk prices have gradually been increasing, exceeding the historical medium and average levels and the growth is the highest levels of the decade, but still considerably lower than the peaks of 2009.
Whilst, we are overall quite bullish that in the medium-term the drybulk market will remain strong and perhaps strengthen further geopolitical problems will dissolve. But current, drybulk prices we reluctant to make further acquisitions. We will be monitoring the market though for any opportunities that may arise as our strong balance sheet provides us with 25 above.
And with that, let me now pass the floor over to CFO Tasos Aslidis to go over the various financial highlights in more detail. Thank you.
Tasos Aslidis
Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen.
Over the next 5 slides, I will give you an overview of our financial highlights for the second quarter and first half of 2022 and compare them to the same periods of last year. For that, let’s turn to Slide 15.
In the first second quarter of 2022, the company reported total net revenues of $21 million, representing a 48.8% increase. The total net revenues of $14.1 million during the second quarter of 2021, and that was the result on the higher charter time to operate our vessels during the second quarter of this year compared to the last year, but mainly because of the increase with the highest number of vessels we owned and operated second quarter of 2022 compared to the second quarter of last year. It’s worth noting compared to the second quarter of 2021, our fleet in the second quarter of this year is about 45% larger.
The company reported net income and net income attributable to common shareholders for the second quarter of this year was $10.6 million as compared to net income of $2.2 million net income attributable to common shareholders for $4.5 million for the same period the second quarter of the 2021.
Interest and other financing costs including interest income and loss on debt extinguishment for the second quarter of 2022 amounted to $0.8 million compared to $0.5 million at the same period of 2021 not including of $1.7 million loss on debt extinguishment that we reported last year.
Interest expenses for the second quarter of 2022 was higher mainly due to the increased amount of debt that we said during the period as compared to the same period of last year and the higher underlying LIBOR costs.
Adjusted EBITDA for the second quarter of 2022 was $13.7 million compared to $9.2 million achieved during the second quarter of 2021. Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2022 were $3.66 basic $3.61 diluted calculated on about $2.9 million weighted average number of shares outstanding compared to $0.83 basic in and $0.81 diluted calculated about $2.4 million weighted average number of shares outstanding for the second quarter of 2021.
Excluding the effect on the income attributable to common shareholders will be unrealized gain on derivatives. The adjusted earnings attributable to common shareholders for the second quarter of this year, which have been $3 and 43% and $3 and 38% basic diluted respectively. For the second quarter of last year, excluding the gains the unrealized loss in this case on derivatives and the loss on debt extinguishment, the adjusted earnings attributable to common shareholders would have been $2.81 and $2.76 basic dilutive respectively. Usually, security analysts do not include the above items in their published estimates of earnings per share.
Let us now look at the numbers for this corresponding six month periods ended June 30 for 2022 and 2021. In the first half of this year, the company reported total net revenues of $39.3 million, representing the 73.1% increase over total net revenues of $22.7 million during the first half of 2021. And that was a result of both high time charter rates per vessels during the first half of this year. And the increased other number of vessels we owned and operate.
We reported net income and net income attributable to common shareholders for the first six months was $21.1 million as compared to net income of $3.1 million and net income attributable to common shareholders of $2.4 million for the first half of last year.
Interest and other financing costs include this interest income for the first half of 2022 amounted to $1.4 million compared to $1.1 million for the same period of 2021 non-inclusive again of the $1.7 million charged on debt extinguishment, we registered last year. This increase is mainly due again to the increased amount of debt in the current period as compared to the same period of 2021 and the underlying LIBOR cost increase.
Again the adjusted EBITDA for the first half of 2022 was $26.4 million compared to $13.2 million achieved during the first half of 2021. Basic and diluted earnings per share attributable to common shareholders for the first half of 2022 were $7.35 basic and $7.25 diluted calculated on $2.9 million weighted average number of shares outstanding compared to $1.03 basic and $1.01 diluted over the same period of last year calculated on $2.2 million and $2.4 million weighted average number of shares outstanding respectively.
Excluding the effect of the end attributable to common shareholders for the first half of the year with the unrealized gain on derivatives. The adjusted earnings for the six month period would have be $6 37% basic and $6.60 diluted.
For the six month period ended June 30, 2021, again, excluding the unrealized loss on derivatives and the loss of debt extinguishment the adjusted earnings attributable to common shareholders would have been $3.40 basic and $3.33 diluted.
Let’s now turn to Slide 16 to review our fleet performance. As usual, we will start our review by looking first at our fleet utilization rates for the second quarter of 2022 and 2021. As we do all the time our utilization rate is broken down to commercial and operational. During the second quarter of 2022, our commercial deterioration rate was 99.4%, while our operational utilization rate was 99% compared to 100% commercial and 99.4% operational for the second quarter of last year.
Our overall utilization rate was 98.3% in the second quarter of 2022 compared to 99.4% in the second quarter of last year. On average, we owned and operated 10.79 vessels in the second quarter of this year and another expense charter equivalent rate was $23,409 per vessel per day, compared to 7.37 vessels in the same period of 2021. Earnings were $22,613 per day.
As I mentioned earlier, our average fleet during the second quarter this year was up about 45% compared to the second quarter of 2021. Our total operating expenses, including management fees, general administrative expenses, but excluding the total cost with the cost of drydocking $6,462 per vessel per day in the second quarter of this year compared to $6,467 per vessel per day for the second quarter of 2021.
If we move further down in this table, we can see the cash flow breakeven rate for the second quarter of 2022, which also takes into account drydocking expenses, interest expenses and payments and loan repayments preferred dividends to be paid in cash it’s also excludes any balloon payments.
Thus during the second quarter of 2022, our daily cash flow breakeven rate was $11,986 per vessel per day, compared to $10,614 per vessel per day to the safety as of last year, the increase mainly due to the higher loan repayments that we did during the second quarter of 2022.
Let’s now go over our utilization rate and the remaining of the figures for the first half of this year compared to the first half of 2021. During the first half of 2022, our commercial utilization rate was 99.7% and our operational utilization rate was 99.3%, compared to 100% commercial and 99.7% of operational utilization rate for the same period of last year. On average [Indiscernible] vessels were owned and operated during the first half of this year and another expansion rate was $24,025 per vessel per day compared to 7.19 vessels owned and operated in the same period, the first six months of 2021 and on average $18,879 per vessel per day.
Our total operating expenses, again, including management fees, G&A expenses, but excluding drydocking costs were $6,584 per vessel per day in the first half of this year compared to $6,518 per vessel per day for the same period of 2021.
Looking at the bottom of this table, we can see again the cash flow breakeven rate for the first half of 2022 which takes into account also drybulk expenses, interest expense and loan repayments and preferred dividends, if any if they were paid in cash.
In the first half of 2022 our daily cash flow breakeven rate was $12,393 per vessel per day compared to 10,688 per vessel per day for the same period of last year the reason again being that we said how we are — this year.
Let’s now move to Slide 17, our EBITDA calculator. As we noted in previous earnings presentations, we use the slide as a calculation tool, which enables our shareholders and investors to assess the earnings potential of our fleet in the current year and under the current environment. And to allow them also to make their own assumptions and assess the impact of their profits.
As you can see here from the table, our contract coverage in fixed rate contracts is about 47% in the first quarter of this year declining to about 13% in the first quarter of this year. Our calculated indicatively shows in the second part of the table the Supramax and Panamax, Baltic forward rates as of August 1st and shows this index levels get translated to average rates to other blended rates for our ships. Based on these assumptions and assumptions for OPEX and G&A cost and assuming a 5% commission rate one can estimate the EBITDA contribution of the presentation for fleet get to be fixed.
The usual risk calculator as I mentioned earlier can make usual shareholder assumptions about the average rate earnings that open days might earn during the third and fourth quarter and assess our EBITDA for the remaining quarters and full year 2022.
Let’s now move to Slide 18 review our debt profile. As of June 30, 2022, we take an outstanding bank debt of about $71.8 million. Looking at missing the chart, we can see that our debt repayments over the next three years range between $10 million and about $14 million per year and then drop to $2.8 million and $3.6 in 2025 and 2026. Our next balloon payment is towards the end of 2023 for a balloon of about $11.3 million or one for Kamsarmax vessels. We expect to be able to be able to refinance this payment, if we choose so, as we have done in numerous situations in the past. A quick note here on about the cost of our debt. The average margin for debt is about 2.7% and assuming the LIBOR rate of about 2.8% and top of it we can estimate the total cost of our senior debt as of the end of the second quarter to be about 5.7%.
At the bottom of the slide, you can also see debt projected cash flow breakeven rates for the next 12 months broken down which components. We can see here that our expected cash flow breakeven for the next 12 months is about $30,100 per vessel per day.
Let’s now move to Slide 19, where we can see some highlights from our balance sheet in a simplified way. This slide shows a snapshot of our assets and our liabilities. Our assets consists of our cash and other short-term assets and the cost of our vessels. As of June 30, 2022 with cash and another assets of about $17 million and the book value for vessels was approximately $860 million resulting in total book value of assets of about $177 million.
On the liability side, our debt as of June 30 as I mentioned was about $71.8 million representing about 40.5% of the book value of our assets. Additionally, other liabilities amounted to $2.9 million or 1.6% of our total assets resulting in shareholders’ equity of about $102.5 million now relating to approximately $30 of net book value per share.
However, based on our own estimates and on market transactions as of the end of June, the market value for our vessels was around $235 million to $236 million or about 48% higher than the respective book value suggesting and then the NAV per share in excess of $59 per share. With our share price recently trading in the high teens, it closed yesterday just below $18 per share, there appears to be a sizable gap to our NAV suggesting significant appreciation potential for our shareholders and investors.
And with that, I’d like to turn the floor back to Aristides to continue the call.
Aristides Pittas
Thank you, Tasos. May I now open up the floor for any questions that you may have.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And we’ll pause briefly to allow everyone to signal for questions. And we do take our first question from Tate Sullivan of Maxim Group. Please go ahead.
Tate Sullivan
Thank you. Good day. For summer repurchase plan how did you decide on the size, initial size of the repurchase plan at $10 million, we’re looking at what you recently generated in free cash flow every quarter just to start there please.
Aristides Pittas
I think we’ve mostly decided on the sizes looking at looking at our current liquidity and wanting to put an initial size on it. We will see how things develop and we can anytime make it bigger if we want smaller or whatever. We thought it was just a reasonable amount to start with appropriate to the size of the company.
Tate Sullivan
And then can you just review, is this in your history with public shipping companies and shipping sector, I mean, is this the first repurchase plan and 15 years forever, can you just review the repurchase history?
Aristides Pittas
Yes, we had never done that in the past. But looking at how low our share price is, we felt compelled to do something to help support the price and make it a good return for our shareholders.
Tasos Aslidis
Yes, at this time to buy a new version is quite expensive as asset prices are extremely high compared to where we are trading. So it makes more sense to buy back our stock rather than to buy a new vessel.
Aristides Pittas
Especially it trade 30% or 35% of —
Tasos Aslidis
Exactly, because of that.
Tate Sullivan
And that was related to it. That’s related to one of my other questions you mentioned reluctant to make more acquisitions in this environment, even though you’re positive for the medium-term, is it mainly because asset prices are still high?
Tasos Aslidis
Yes, prices are still high since the correction of rates, we think that it’s the seasonal. But things are definitely uncertain. And at these prices, we don’t want to be making a new investment but a 30% of the price, which is when our stock price is trading it becomes interesting.
Tate Sullivan
And then can you, the refinancing tussles, you mentioned as a debt I mean, what facility is due this year and when do you usually wait till three months when it matures? And what is the maturity on that facility and will it probably be at a higher interest rate or maybe even a lower still five years ago or so?
Aristides Pittas
I think these years are no precedes maturity. The balloon dimension was one of our [Indiscernible] much better specific, so it is a loan, it was five-year loan is expired. It matures in the fourth quarter I believe for 2023 and we believe we can find out the balloon routinely as we did in the past. In addition, we have two vessels that are covering and encumbered. So we set the option to never have those vessels as well.
Operator
Next we move on to the line of Poe Fratt with Alliance Global Partners. Please go ahead.
Poe Fratt
Yes, good morning, Aristides. Good morning, Tasos. Good move seems like on the stock buyback program. Quick question on it, how quickly can you become active on the program?
Aristides Pittas
We are set up and we can, I think over the next couple of days we’ll be ready to use it.
Poe Fratt
And then Tasos looking at the — there was — looks like an increase in the share count over the second quarter. And then looking at the cash flow statement, it looks like you might have issued a little bit of equity under your ATM the average price that I calculated was a little bit over 40 bucks. So that was probably done in late April. Can you just confirm those numbers or just give me an idea what happened under the ATM in the second quarter?
Tasos Aslidis
Look those are quite right we can use our ATM adding in the second quarter now share price goes above 40. So that will show, reflect this in the accounts really increase share counts for this quarter and significantly higher price and much closer to NAV. At this time I think it was very close to NAV.
Poe Fratt
Yes, understood. And then, as you mentioned is April 23 it looks like the outstanding balance. I think it’s what that 12-month unit or it’s going to be about $12 million at that point in time, would you look it during a more comprehensive refinancing and encumbering the two other vessels or can you just sort of talk about your a little more on finance terms, sort of what you’re refinancing plan is at that point in time, because after the renamed looking at what I have is the next tranche of debt would be the best of luck in April 24. And everything else would be turned out into pretty much 26 or 27 or beyond?
Aristides Pittas
Yes, I think we’re going to race and decide whether to extend and refinance as we approach the time it is due I think, we’re looking to potentially put some debt on some of our encumbered vessels again by trying to find competitive price debt clearly prepared to little bit of higher [Indiscernible] the limitation of opportunity appears, and we need to move immediately liquidity, we cannot without waiting for banks to provide a loan. So we are flexible in our financial plan, we are looking to increase our cash balance a bit, but we are not in a current to do it a bigger all encompassing finance at this stage.
Poe Fratt
And I apologize I was probably not paying as much attention as I should have when you talked about operating expenses. Two other companies in the drybulk sector have had higher operating costs, whether it’s travel expenses, accrued changes or other things, can you talk about your OpEx a little bit more looking at the next 12 months?
Tasos Aslidis
I think we expect to see, increase but no dramatic increase in our operating expenses. I think compared to our 2022 balance we are actually right on target, maybe slightly below budget. Basically higher fuel cost and maybe higher double [Indiscernible] lubricant service higher because the — the cost of the oil and related products is higher. But I don’t think — is dramatic shift on our cost structure at this point. I mean, the marginal increases amounting roughly to up to 5% at least budget wise compared to the actual last year.
Poe Fratt
And you highlighted the three drydocking this quarter, can you just talk about end of the fourth quarter drydock activity, and then maybe lay out plans for 2023?
Aristides Pittas
I think we don’t have anything for Q4 this year, as not too much next year, it’s very seldom that we have a quarter with three drydock, right with 10 sheets, one would anticipate that you have one drydock a quarter on average. So this is going to be a heavy quarter on drydock. It’s by coincidences it’s not so much by planning. It’s linked with a period, have been reduced. So the impact on earnings is not that significant. So it kind of helps us that we’re doing the drydocks right now that we’ve seen the reduction in the charter rates, as we do believe that in Q4, it would be better than it will be good to have the newly drydock fast vessels out of the drydocks.
Tasos Aslidis
In 2023, we said we believe about three or four drydocks that might be within the year. The next one is pandemic I believe.
Aristides Pittas
In the first quarter earnings call. ‘23 first quarter.
Tasos Aslidis
It’s as I say, normally it’s about one drydock quarter.
Poe Fratt
There’s silver lining. I guess so the other drydocks is the lower opportunity cost. Thank you, Aristides. Thank you Tasos.
Aristides Pittas
Thank you, Poe.
Tasos Aslidis
Thank very much, Poe.
Operator
[Operator Instruction] And we will return to the line of Tate Sullivan with Maxim Group for additional follow-up.
Tate Sullivan
Thank you for taking the call. You mentioned the Pantelis drawing drydock in the 1Q ’23 and then also you mentioned some repositioning days for the ship in the second quarter and I think some other drybulk companies and other shipping companies in other sectors has mentioned repositioning. Is this due mostly to the congestion that’s still taking place imports from China. What would that, please tell.
Aristides Pittas
Sure. It’s due to the congestion that was some more importantly to the COVID related issues because where you spoke in order to be able to go to the port and take on new crew and all that stuff, you have to wait to pass the COVID test and all that stuff. So, the delays are mainly due to the COVID related issues on the congestion.
Tate Sullivan
And then you mentioned in the market commentary on the congestion consideration. The congestion is in China, is that mainly the positive the 0.5 dynamic that can offset that in the medium term?
Aristides Pittas
Well, congestion easy will mean more supplier issues. So, it’s not a positive the congestion easing.
Tate Sullivan
Right. But in terms of no additional limited number of new build the — or is there other offsets to the congestion leaving perhaps –?
Aristides Pittas
Exactly. Very limited altering and delivering during the next couple of years. Last we will see some further slow steaming especially as over next year with new regulations. So, these are positives of course.
Tate Sullivan
Great, okay. Well, thank you. Have a great day.
Aristides Pittas
Thanks, Tate.
Tasos Aslidis
Thanks, Tate.
Operator
At this time, there are no further signals. We return to Mr. Pittas for closing remarks.
Aristides Pittas
Thank you all for listening to us today. And we’ll be with you again with the next quarters result. Enjoy the rest of the summer. Good bye.
Tasos Aslidis
Thanks everybody. Good bye.
Operator
Thank you. This concludes today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.
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