Birgitte Vartdal - Chief Executive Officer Per Heiberg - Chief Financial Officer

Fotis Giannakoulis - Morgan Stanley Lukas Daul - ABG Magnus Fyhr - Seaport Global Jay Maher - Espen Landmark - Fearnley Dennis Anghelopoulos - ABG

Good day and welcome to the third quarter 2018 Golden Ocean Group Limited 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, ma’am

Thank you. Good morning and good afternoon. Welcome to the third quarter 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. We are pleased with our results for the third quarter. The results reflect the strong rate environment in the quarter and our significant operating leverage through periods of market strength. Following the third quarter, however, the market in the fourth quarter has obviously been a bit more challenging so far, and the reasons for that I will discuss later on the call when I comment on the macro environment and our outlook. Per will first take you through the company update.

Thank you, Birgitte. Third quarter was not that eventful in corporate transactions for Golden Ocean. We report net income of $35.3 million and earnings per share of $0.24 for the third quarter. This is compared to $9 million and $0.06 in the second quarter of 2018. The adjusted EBITDA ended at $78.8 million, up from $54 million in the previous quarter. The company has in November declared four options to install scrubbers on Capesize vessels which come in addition to the 16 contracts previously announced. In August, we completed the sale of Golden Eminence and received net cash proceeds of $5.8 million. Average TCE for the entire fleet was $17,730 per day in third quarter compared to $15,215 per day in the second quarter of 2018. The company also utilized the strong Q3 market to add some extra cover for 2019. The company announced a dividend of $0.15 per share for the third quarter, up from $0.10 in the previous three quarters. Moving onto the P&L, the time charter equivalent revenue increased by $4.1 million compared to the previous quarter. This increase is mainly due to stronger achieved rates by our fleet of Capesize vessels. It also reflects a good contribution from short term fiscal trading activity. The increased trading activity is also reflected in the $2 million higher charter hire expenses. Ship operating expenses decreased by $2.5 million compared to last quarter. The reduction is primarily the result of fewer dry dockings as we only had one docking in the quarter compared to three in the previous quarter, and the company expenses all costs related to these regular dry dockings. We also had slightly lower running operational costs in the quarter. Apart from the impairment of $1.1 million booked in the second quarter in relation to the sales of Golden Eminence, depreciation is at the same level in the quarter compared to previous quarters due to no further fleet changes in this quarter. Net financial expenses were stable quarter over the quarter and the company booked $1.7 million in gain on derivatives and other financial items for the quarter. The gain mostly relates to further profits on interest rate swaps and bunker hedges somewhat offset by losses on FFA hedges. The company achieved TCE per day of $17,730 for the quarter, significantly up from $15,250 in the previous quarter mainly due to the increase in Capesize rate, as mentioned earlier. This TCE was significantly above the company’s long-term cash breakeven levels, including full debt service on both recourse and non-recourse debt resulting in a strong positive cash generation for the quarter. Adjusted EBITDA came in at $78.8 million for the quarter. Cash flow is illustrated by the graph on the slide, and the company ended the quarter with $321.7 million in cash and generated positive cash flow from operations of $63.6 million. We drew down the last $17 million on the new $120 million loan facility in July and delivered Golden Eminence in August, generating a net cash after debt repayment of $5.8 million. In addition to debt paid on Golden Eminence, the company paid down a further $21.9 million in debt in the quarter. Of this, $4.8 million relates to buyback of the company’s convertible bond. As for the two previous quarters, the company paid $14.4 million in dividends during third quarter, and that ends the quarter with $368 million in total. For the balance sheet, the company ended the quarter, as I said, with a strong cash position, and we include short and long-term restricted cash in this number. The book value of the company’s vessels decreased by $37.5 million due to delivery of Golden Eminence and ordinary depreciation of the entire fleet. The current portion of the company’s long-term debt increased by $13.5 million over the quarter as we expect to pay down the full cash sweep of $11.6 million related to the Quintana debt during fourth quarter of 2018. The full outstanding amount of the convertible bond is also booked as short term since it matures at the end of January 2019. At the end of the quarter, the company’s book equity was close to 51% and the value-adjusted equity is around 45%. The graph for opex shows year-to-date average daily opex for the remaining two vessels classes as we have merged the Supras into the Panamaxes since there are only two of them left. The cost includes fully burdened cost of dry dock and shows that opex is stable at around $5, 200 per day on average, and this goes across both the remaining vessel classes. During third quarter, the company dry docked only one Panamax vessel and we expect to dry dock one more vessel in fourth quarter, and this will also be equipped with ballast water treatment systems in order to be compliant with U.S. regulations. The graph on the right side of this slide shows an overview of our vessels with and without ballast water treatment systems, and as you can see, more than 50% of our vessels already have these systems installed. The cost of the remaining installations is spread out from this year until 2023 with a total estimated cost of around $35 million. In the third quarter, the company exercised options to install four scrubbers. This follows the prior agreement to install 16, and in total the company has committed to install 20 scrubbers on its Capesize vessels and maintain options to purchase an additional five scrubbers. We believe we will derive significant economic benefit from the scrubber installations, specifically using fuel spreads based on the current forward curve. A modern vessel with scrubber is expected to consume approximately $5,700 less of fuel on a daily basis compared to a vessel without a scrubber. The scrubber installation schedule on our fleet is shown in the graph to the right, and all committed scrubber installations will coincide with scheduled vessel dry docks in 2019 and 2020. Moving on to the fleet deployment, the company’s fleet consists of 77 sailing vessels of which 46 are Capes, 16 are Panamaxes or Kamsarmaxes, 12 are ice-class Panamaxes, and three are Ultramaxes. We took advantage of the market strength and volatility in the third quarter and entered into some additional cover through the winter season for the ice-class Panamax fleet and some longer term cover for the Capesize fleet. Current fixed rate cover for our Capesize fleet for 2019 is the equivalent of three vessels at a gross rate of $20,965. This has been achieved by converting one of the index-linked vessels to fixed rate and selling some FFA contracts. In addition, we have entered into five floor and ceiling contracts for 2019 and two for 2020. This secures the downside at approximately $15,000 a day by giving away the upside approximately $29,500. The settlement on these options are based on monthly averages. On the Panamax fleet, 13 vessels are chartered out on fixed term contracts for the winter, securing the majority of first half of 2019 at an average rate of $17,220. Six of these contracts last for a longer period and expire during 2020 and 2021 at an average rate of $20,500 per day. The company continues to employ a dynamic commercial strategy that provides both strong operations and downside protection in certain cases. Looking at our credit facilities on Slide 11, this shows the current debt profile for the company. Regular asset-based recourse debt amounts to $980 million in addition to the $170 million nominal outstanding under our convertible bond at quarter end. Non-recourse debt relates to the fleet acquired from Quintana in 2017, and as said earlier we expect to pay the full outstanding amount of deferred installments of $11.6 million on this debt during the fourth quarter. The convertible bonds mature late January 2019 and the going plan is to repay the debt in full at maturity using cash already at hand. Total debt at the end of the quarter was $1.4 billion and with a cash position of $368.4 million. The company has no further capital commitments than those related to scrubber investments, ballast water treatment systems, and regular dry dockings. Going forward, the regular quarterly amortization of the recourse debt is around $16.6 million, while the non-recourse debt [indiscernible] until June 2019 is $5.8 million if you look at it on an ongoing or regular basis. That ends my presentation. I hand over to Birgitte to take you through the most recent market developments.

Thank you, Per. During the third quarter, we saw strong Capesize rates which coincides well with an estimated utilization of 87% in the quarter. Normally, the summer can be a slow period, but this year utilization improved by 2% from the second quarter, resulting in a stronger than expected third quarter. Going into the fourth quarter, which normally is a seasonal high, rates continue to improve for Panamaxes early in the quarter but declined sharply for Capes and down to levels I would say that no one in the dry bulk market expected ahead of the quarter. Still, if you look at average rates over time, we see that we remain on the same improving trend and average rates for this year will likely end up better than the average rates for last year. Demand numbers continue to improve in the third quarter and reached the highest numbers observed in any prior quarter. Among the various commodities, imports of iron ore and coal were both up quite strongly quarter over quarter while the bulk and agri-bulk were both slightly down but relatively stable from the previous quarter. Moving on to steel, steel production continued to increase also during the third quarter, showing strong year over year growth in China in particular. The rest of the world also had growth in steel production, although the growth pace has slowed down. The growth trend in steel production has held up well and stockpiles of steel are at modest levels in China, which is an indication that the steel that is being produced is also being consumed. Moving on to steel margins and iron ore prices, steel margins were strong in the third quarter, but over the last few weeks we have seen a significant drop due to drop in steel prices without the corresponding drop in iron ore prices; in fact, the iron ore price is moving upwards currently. Due to the decline in margin and also the weakening Chinese yuan versus the U.S. dollar, we have seen a draw down on stockpiles of lower quality iron ore as the steel mills try to reduce their input costs to improve margin. The winter push to reduce pollution from steel production has also been less pronounced this year than last year, and it looks like the use of higher quality iron ore to reduce pollution has not been prioritized. That can also be seen on the air quality around the big cities, so the question is whether that will be a change in policy later on. The use of lower quality ore can also be seen on the price spread between the higher quality ore from Brazil and good quality ore from Australia as the spread is narrowing at the moment, and we also see that port stockpiles that come from Australia are lower than port stockpiles from Brazil. Looking at the export numbers, the third quarter saw an increase from Brazil versus Australia, which helps to explain the strong rates in the quarter. For the fourth quarter volumes, we still expect to see a push towards the end of the year from Brazil based on [indiscernible] latest guidance. The BHP train derailment did not significantly impact exported volumes in the fourth quarter but was a headline that added to an existing negative sentiment currently. Looking at 2019, Anglo’s Rio Minas should come back into the market as well as continued ramp-up of S11D, which would be positive for ton miles and the market competition for vessels out of Brazil. If you combine the growth in steel production at around 6% in China with the flat to slight declining iron ore volume year over year, there is an indication that the additional demand for iron ore in China based on 50 million tons of steel production should be around 75 million to 80 million tons of iron ore. We believe that part of this has been taken from the stockpiles in port, where we also have data. Another important source is probably the stockpiles at the mills where there are no official data and it has to be estimated, and then the last part is an increased use of scrap based on old furnaces that have been closed down. If you see that these elements turn around with restocking, that should be positive for the seaborne demand of iron ore. Moving on to coal, the coal volumes were also strong in the third quarter, and in particular imports into China improved. Part of this has led to an increase in Chinese stockpiles, which are now back at healthy levels. This increase may have been in anticipation of the recently announced import restrictions for the rest of the year and cargoes may have been taken earlier than usual. India, on the other hand, has also kept a good pace on the imports but does not have the same level of stockpiles, and currently we see good volumes on Capes into India. For the balance of 2018, we expect to see muted coal imports into China before import restrictions are likely to be removed at the start of 2019. This will probably have a negative impact on rates in the short term, particularly on the Panamax vessels, although import restrictions can also add to congestion. Looking at the Chinese electricity production, the third quarter is seasonally lower than the summer and winter periods but still up 6% from the third quarter of last year. This is also a period of high hydro power production, which is expected to slow going forward. Thermal power has therefore also been a lower part of the energy mix in the latest months, but this should increase from here and into the winter. Domestic coal production is also up in the last few months, and as opposed to earlier quarters, the growth has outpaced the growth in consumption for the last month. Moving on to grain, which is one of the commodities that have been more directly impacted by the trade war. Soybean volumes were strong out of South America for longer than what is normal this year. The Chinese imported as much soybean as possible ahead of the implementation of tariffs and before the grain season commenced in the U.S. As expected, volumes out of the U.S. have dropped significantly now that the season is starting, and the latest numbers indicate a year-on-year decline of 42% for the first 10 weeks. There are also rumors that the crops are still in the fields and that they are not even harvested for part of it, and that the silos are filling up. We can expect that if the tariff issue is not solved, the soybean trade will be weak until South America starts up again in late Q1 next year. Moving on to the supply side, the pace of deliveries in the third quarter was almost at par as with the second quarter. This is an unusual pattern which we have seen this year where the delivery schedule has been more or less the same in all three quarters. Scrapping was almost non-existent, hence the fleet growth kept up in the quarter. Looking ahead, vessels due for scrap are slightly up as of now and deliveries are expected to slow down towards the end of the year, thus we expect fleet growth of around 3% for 2018. Looking to 2019, the numbers for fleet growth are on the high side in this slide compared to some other estimates. It represents gross fleet growth before any scrapping, delay or cancellation. The total order book is stable at around 11% of the fleet, so deliveries in the quarter are more or less on par with new orders currently. Next year, we also expect the impact by the preparations for 2020 as part of the fleet, and particularly in the Capesize segment, is expected to install scrubbers both in ordinary dry dock and outside of scheduling. This will add two to three weeks to each affected dry dock in addition to switching of fuel will add some congestion and delays around bunkering hubs. These factors combined with an expected increase in scrapping from where we are today should help to reduce the fleet growth next year. New orders placed now at yards which are not a declaration of order options will likely end in the 2021 order book. Also worth noting is the distribution around delivery times for the order book now varies a bit more between providers of data, although most agree that the total order book is equal to around 11%. Looking at the Viamar data, deliveries for 2019 are forecasted to be lower, and as you can see as well, there are still orders due for delivery in 2018 that have not commenced construction, and there are also orders which will be delivered behind schedule. Also, orders with scheduled delivery before July 2019 that have not commenced will likely be delayed. Moving onto the S&P markets, the S&P activity picked up a bit in the autumn after a relatively quiet summer. Values on average have been flat during the quarter and also into the fourth quarter, but we see a slight premium for modern vessels increasing and we saw spread in valuation between modern assets and older assets. It’s also modern assets that attract most interest in the market, but there are more older assets available for sale. To summarize, looking at the market development this year, each quarter has ended up better than expected. The third quarter was stronger than anticipated due to increased volumes ahead of tariffs and uncertainty, and the fourth quarter has therefore disappointed strongly. We believe there is a combination of factors that explain the latest drop. First, due to the global trade picture, there is clearly some uncertainty spreading across industries and the demand outlook is therefore slightly weaker. Secondly, short-term negative factors are present, as previously described. These include draw-downs of iron ore stockpiles due to lower steel margins, decreased imports of high quality iron ore, import restrictions on coal, the effect of trade tensions on grain volumes out of the U.S., and fluctuations in exchange rates. These are all factors that are expected to diminish at some point and are more temporary factors. The third factor and the one that causes the greatest degree of volatility is the market sentiment that intensifies any change in rates. We, like almost everyone else, had expectations for a good Q4. When that did not materialize, the rate downturn intensified to a degree greater than what the underlying fleet utilization would otherwise reflect. The risk factor remains almost the same as in earlier quarters, and looking through the current weak and volatile markets, the fundamentals have not changed that much and we still expect the market will continue to gradually improve on average rates. Additionally, upcoming regulations to sulfur emissions are expected to have a positive impact on the market as older, less fuel efficient vessels are disadvantaged and may ultimately be phased out. We believe we are very well positioned in that regard. Setting aside the market volatility, we believe that our continued focus on low cash breakeven levels and a strong balance sheet provide us with good downside support during periods of market weakness. We are also pleased with how we have executed our commercial strategy which has secured some cash flow through a combination of time charter cover and floor-ceiling structures while maintaining significant exposure to market upside. Our modern fleet improves our earnings potential and our spot exposure provides strong leverage to the market. Despite the short term volatility and uncertainty created by the political climate, I would underscore that the longer trend is still gradually improving. All factors considered, we believe the upside potential outweighs the downside risk and maintain our cautiously optimistic outlook. We continue to focus on returning value to shareholders through dividends, and for this quarter the board has declared a dividend of $0.15 per share, a reflection on the strong third quarter results and good cash flow from operations. We aim to find the right balance between returning value to shareholders and other uses of cash flow, including deleveraging and potential investments. This ends our presentation for today. Operator, we are open to answer any questions that the audience may have.

[Operator instructions] We’ll now take our first question from Fotis Giannakoulis from Morgan Stanley. Please go ahead, your line is open.

Yes, hello, and thank you. Birgitte, you mentioned about all these factors that have put the Capesize market in particular under pressure, expressing your view that this is going to turn around next year. I want to ask you about any concern that you might have on the Chinese growth. What is the scenario that you envision as your base case about Chinese steel demand? If Chinese steel demand and steel production actually stops growing, can the dry bulk market remain stable and at profitable levels?

If steel production is flat in China, I don’t think you will see a lot of growth in import volumes, but you have a potential from the temporary factors of stock draw, etc. Of course, the downside risk to our market if China stops growing or--and the question is how they approach the current issues around the trade war and whether there will be additional stimulus coming back into the economy if they are not able to grow. But I think we will definitely see a rebound from the levels we are observing currently, the question is how large an upturn it will be.

Thank you, Birgitte. What I’m trying to understand is there is a--the outlook about the major commodities, about coal and steel, are very uncertain. I was wondering if the minor commodities - you mentioned bauxite, you mentioned other small commodities, grain that is growing, if the minor commodities are sufficient given where the fleet growth is and the order book is to help us have a profitable market, and if you see any changes in the trade in terms of ton mile expansion that, despite a lack of growth in major commodities, we can still see the market tighten.

I think on coal, for instance, you see more volumes going long haul already, like from the U.S. to India is one example, so I think what we see in China now is more of a swing factor. You’ve seen it in the past - they build up stockpiles, then they eat up the stockpiles and then they import again, and don’t forget that Chinese coal is less than 10% of their--or Chinese coal imports are less than 10% of their production. Then, I also think there is some upside to India. Bauxite is an interesting trade, particularly with the investments that the Chinese have done in Guinea and the increase in volume. This is just--it’s almost a longer trade than Brazil round, so it’s very supportive, and the difference from before is that they have built a Cape port so the volumes are increasingly going on Cape. That’s an interesting positive trade, and then on top of that you have the minor bulk and grain, as you say. I think dry bulk is growing with GDP growth and particularly on the minor bulks as well, which are linked in that, so it depends on how you view the world going forward. If you believe in a meltdown in global GDP growth, then of course dry bulk is also challenging; but then, don’t forget that there has hardly been any scrapping for a good while, then you will not see much new ordering and you will have--2020 will come anyway, so.

Talking about 2020, is there a way that you can help us quantify the impact of 2020? A lot of people are talking about vessels staying out of the market and even starting from next year for scrubber installations or logistical problems with supply of the vessels and slow steaming. Is there a way that you can give us your estimate of how much the supply-demand can be impacted by the [indiscernible] 2020 factors?

Well, it’s a bit of a circular reference, some of these elements; but if you just take the Cape fleet and you assume that around 300 Capes will install the scrubber next year, then maybe you can assume 20 to 30 days off-hire. Of course, part of this is done through ordinary dry dock, partly it’s done outside, but then you are, let’s say, at one-fifth or one-sixth of the fleet, and not to forget that a lot of the larger vessels like the Valumaxes, etc. are also installing scrubbers, so it’s more on a capacity than on a number of vessels. So let’s say one-fifth of the fleet is out one month - it’s probably not totally correct, but then it’s 1.8% on the supply for next year give or take for the dry dock. Then you can add probably some delays and concerns around bunkering and congestion, etc. so that there will be less efficiency ahead of 2020 - I think it’s pretty likely, but this is my best estimate.

Thank you, Birgitte. One last question about the fuel cost impact on speeds of the vessels. You already have models that they are optimizing the speed of the vessels, especially on the ballast leg. I was wondering if fuel increases for the majority of the fleet, let’s say $200, $300 per ton, what would be the impact on the average speed of the fleet? What would be the optimal point that the vessel will operate?

Well in theory, the average speeds should almost be lower today than what it is, but I think you would see part of the fleet potentially speeding up, you will see part of the fleet potentially speeding down, so due to the weighting I would guess that you see slightly slower speeds on average for the fleet, depending a bit which segment you are in and how much the scrubber uptake is. But also remember if you get different pricing on various vessels types due to the pricing of the fuel, you can have shifts of commodities between vessel classes to a certain extent. The fact that you are speeding down is optimizing your revenue, which again you will speed up, so there are--again, it’s not one easy number, but you can talk to the direction.

Thank you very much, Birgitte.

Thank you.

Ladies and gentlemen, if you find that your question has been answered, you may remove yourself from the queue by pressing star, two. Our next question comes from Lukas Daul from ABG. Please go ahead, your line is open.

Thank you, good afternoon Birgitte and Per. Regarding the dry dockings in 2019 for scrubber installation, can you say how much time you estimate you will spend in the dry dock for each particular vessel?

For one vessel, we estimate our regular dry dock takes approximately 14, 15 days. I think the estimate now is that it will maybe double, or let’s say 25 to 30 days of out of service for one vessel.

Okay, so 35 to 40 all-in?

No, no, it’s 25 to 30 all-in. You can do--part of the work you do in parallel in the regular docking and then you extend the period, so it’s 25 to 30 in total.

Okay.

Ten to 15 days extra.

Okay, thanks. Then you entered into some TCE coverage for ’19 and some even beyond that. Is that something you have done very recently, or how should we read into that? Do you want to sort of hedge the downside, or was it just to take advantage of the high rates?

This was done a bit earlier when the rates were higher, so it kind of follows the strategy to add some cover when we find that opportunistic and good price, but then to keep the majority of the fleet in the spot market. Then I think the floor-ceiling structure, I think it’s a good structure for us, five vessels on that. It’s the average index of the month that is compared to the rate, and as they are just around or above cash breakeven levels on the floor, it provides good protection against the downside. Then if the market on average is $30,000, I think we can live with giving away part of the upside.

Okay. You increased the dividend in the quarter - obviously you had strong cash flow and good earnings, but how do you think about that going forward? Is that a new floor, or are you going to consider that on a separate basis for every quarter going forward?

I think it’s important to say that the dividend policy is quarter by quarter, and you look at the results in the quarter and cash flow in the quarter, but you also look ahead at what is coming ahead of you. We can reduce the dividend as well if we find that correct, so I think you can expect it more to be floating with how the result is developing than that we aim at a fixed dividend policy. We don’t think that works very well in our business when you have high spot exposure, as we have.

Okay, thank you.

Our next question comes from Magnus Fyhr from Seaport Global. Please go ahead, your line is open.

Yes, hi. Just a question regarding the recent weakness that you’re seeing in the market. Has your game plan changed at all, or is it too early regarding your priorities as far as returning cash to shareholders versus potentially taking advantage of opportunities in the market? You mentioned that activity has picked up in the S&P market but asset values have been relatively flat.

Well, we haven’t seen any drop in asset prices yet, so I think for the moment we will remain with our strategy. We obviously consider various projects, but we are cautious to see that it fits into our portfolio. I think our strategy remains. Obviously we have to see going forward how the cash flow develops and if the market rates return as we expect, but I think our strategy balancing the various aspects will remain. We are pretty happy with the leverage that we have at the moment, so I think from that point of view, ordinary repayments and convertible bond down payments are sort of taking care of the deleveraging part.

On the upcoming convertible, you’re just going to use cash on hand to pay that down, or any recent developments there?

That’s the base case, yes.

Yes, that’s the plan.

Okay. All right, just one more question then on the time charter market. The spot market has been very volatile. Has there been increasing interest from some of your customers on taking on vessels longer term? I guess the time charter market is a better indication of where the real market is.

Yes, well the FFA curve has also dropped along with the spot. It’s partly of course because of the spot, but I also think there has been some sell-off there and stop losses during the drop. That is a good indicator for where the time charter market is. Currently, we are not that interested in fixing out a lot from our side, but there is some interest in the market. But then if you do a time charter--if you charter in a vessel now, you have to pay a lot of carry on the first voyage, so that’s often when we see more a flat relationship between the spot and the curve, or a premium, than the activity is higher than when we see the discount on the first voyage, as we do now.

Okay, all right. Just one clarification on the downtime for the dry docking, what is the repositioning ahead and after your dry docking? Is that typically five, 10 days, or what should we project there?

Well, we are looking--the Capes in general often go through China, so it’s not necessarily a lot of repositioning, we just have to time it between voyages. A few days it can be, but not likely a significant part.

Okay, all right. Thank you.

Our next question comes from Jay Maher [ph] from 1953. Please go ahead, your line is open.

Yes, hi. Thanks for taking my call. I’m just concerned a little bit about the debt that you people take all the time. You seem very comfortable with debt of a billion dollars, and I was just wondering if you plan to bring that down maybe by $200 million to $300 million, which would really increase the price of the stock if you brought that debt down. I just want to know if you have a plan for that, okay? Thank you.

I don’t think the nominal value of the debt has that much of an impact, but we target a leverage of 50 to 55%, which in the historical perspective is relatively low but we think that’s a level which is sustainable, given the market that we’re in, a volatile market. We also have a long profile on our debt with 20-year amortization, so we focus on having a very low cash breakeven and that gives us an advantage, so that we can survive in a bad market and we can benefit cash-wise in good markets and then return value to shareholders. With that perspective, we think the debt as it is now, compared to the fleet and the value of the underlying fleet, is actually where it should be.

Over the course of next year, we will pay down the convertible bond, which is currently around $170 million, and then over a year we have ordinary debt repayments of around $80 million approximately, so that together will reduce the debt by $250 million next year at least. Thank you.

Thank you. Our next question comes from Espen Landmark from Fearnley. Please go ahead, your line is open.

Hi, just a question on--I mean, it’s always tricky to explain the short term movements in the Capes, and as you say, inventory draws, increased scrap usage, and the steel margins, but those have been quite a sell-off in the paper market with seemingly quite a few traders sitting long freight and then getting stopped out. Do you think in any way this has been amplifying the sell-off in the physical market?

I think it has an effect on the sentiment in a way, although not the underlying flows of commodity but it can enhance the effect, adding to the negative sentiment to some extent, yes. I agree with your analysis of how the FFA market has tried it.

Okay, thank you.

Our next question comes from Dennis Anghelopoulos from ABG. Please go ahead, your line is open.

Hi. Looking at some of your fixtures that you’ve done, just paying attention to this Golden Bexley, when was she fixed at the rate that she’s currently at? She was fixed at around $15,800, $15,900 per day through ’19 - is that sort of your expectation for ’19?

Golden Bexley?

That’s her name.

Through ’18 I guess--

No, it says November ’19 on your website - sorry.

Okay, then that’s an error - apologies. It should be around November ’18, because that was one of the first vessels that we fixed for a one-year period, so we will check into that.

Okay, that was my only question. Thank you very much.

Thank you.

Our next question comes from Fotis Giannakoulis from Morgan Stanley. Please go ahead, your line is open.

Yes, hi. I wanted to ask about the scrubbers and if you have already secured slots, given the fact that you have given a detailed schedule, and if you know the companies, if they have announced scrubbers or they are willing to put scrubbers if they have the ability to find slots within 2020. Thank you.

Are you talking about scrubber slots or yard slots?

I’m talking about yard slots to install scrubbers, and if there is plenty of availability at the shipyards.

Yes, we have secured slots for our installations. My impression is that so far, there is availability around yards. Maybe we should hope for some shipyards going into scrubber retrofit yards instead of building more vessels, but--I mean, it requires more planning. We are much more upfront than we were normally on dry dock, where you just go to the repair yard with shorter lead times. I think if you prepare for it, you will find the solution, is my impression. I can’t speak for the whole market.

Thank you.

As a reminder ladies and gentlemen, if you would like to ask a question on today’s call, please press star, one on your telephone keypad.

Okay, I would like to thank you for listening in today and also thank you for all the questions. I wish you a nice afternoon.

Ladies and gentlemen, this concludes today’s call. Thank you for your participation. You may now disconnect.