Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 Golden Ocean Group Ltd. Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. I must advise you the call is being recorded today, Thursday, November 19, 2020. I would now like to hand the conference over to your first speaker today, CEO, Ulrik Andersen. Please go ahead.

Good afternoon, and a warm welcome to Golden Ocean's Q3 release presentation. My name is Ulrik Andersen. I'm the CEO of Golden Ocean. I'm delighted to present our results today together with Peder Simonsen, the company's CFO. We will keep the presentation short and focused.

Thank you, Ulrik. We'll start by going through the profit and loss on Slide 5. Our time charter equivalent revenue came in at $143 million for the third quarter, which compares to $67 million in the second quarter. This is a reflection of achieved TCE rates for the Capesize ships of 19,950 and 13,500 for Panamaxes, which compares to $8,300 per ship per day for the Capes in Q2 and $8,100 for the Panamaxes in Q2. Our total time charter equivalent rate across the fleet was $17,900 in Q3. We had no dry dockings this quarter, which compares to nine ships in the previous quarter and this obviously also impact the time charter revenue.

Thank you, Peder. Now turning the attention to the market review and outlook. On page 10, you can see slides showing the market developments since Q3 2019. What we can see is that the strong rebound of the market, which began in Q2 and was driven primarily by the lifting of the lockdown in China and the unprecedented stimulus package released by the Beijing government lost some of its momentum coming into Q3. This was perhaps not surprisingly that the market took a breather having reached rates above $30,000 per day. However, as we move through the third quarter, we saw China's I want to say almost insatiable appetite for iron ore. The import rose to 13% over the same quarter last year and it was in fact the highest quarterly iron import ever to China standing at 321 million tonnes. Worth noticing in this connection is that the increased share of imports -- or increasing share of imports came from Brazil instead of Australia naturally increasing tonne mile. All-in-all this aided the market in rebounding once again in the second half of the quarter. Looking at the outlook and turning to Slide #11 and starting with the supply side. We can see that the supply picture is very clearly improving. The order book is at historical lows. The growth slows down significantly next year and the year after and right now the order book stands at a mere 2.7% and 1.6%, respectively. Mind you this is before scrapping and delays.

Thank you very much. The first question we have today comes from the line of Gregory Lewis from BTIG. Please go ahead.

Yes, thank you, and good afternoon and thanks for taking my questions. I guess, I'd start off just wondering, I mean, clearly, walking through the slides and just like listening to your comments about the market, it sounds to me -- my takeaway is that you're constructive on the outlook for 2021 and even beyond that. And so just as I think about that and the potential for -- clearly, you guys already have a sizable fleet, but it does seem like there's opportunities to expand your footprint right now. There's always vessels for sale in the dry bulk market, but there's -- let's maybe say there's more vessels for sale today.

Thank you for your question. We are constantly monitoring all opportunities. I think we have to remember that we had a good quarter this quarter, but we had Q1 and Q2, which was -- which were more challenging. So, our focus right now is to positive the balance sheet to ensure that we have what can you say a sort of a buffer should any unforeseen circumstances arise. When that is said, of course, we are looking at our capital allocation constantly and addressing that. And if we are seeing good opportunities we're also not afraid to pounce on them. But there would be a question of whether this goes to dividends, go to, say, the balance sheet or we reinvest. Generally speaking, I can say on investment opportunities most of what we see at the moment is tonnage off an older age being pushed around and we are not so keen on investing in tonnage that is not modern. So, that is a comment I'd just like to make in connection with this. Does that answer your question?

Yes, absolutely. That was super helpful. Thank you. And then just as I think about this knowing that there's -- I guess, congratulations on you guys, I guess, now running Golden Ocean. But as I think about Golden Ocean over time historically, there's – clearly, the company has been able -- has been willing to lever up its balance sheet. And I think you kind of touched on it with the comments around, yes, key banks are still there. But, I guess, as you think bigger picture as the -- maybe the ship lending market is evolving or changing, does that kind of change the way you think about leverage through the cycle, i.e., if I was thinking about maybe how Golden Ocean was managed a handful of years ago? Is peak leverage -- do you envision peak leverage being lower over the next couple of years versus what it might have been a handful of years ago? Just kind of curious if things in the markets -- or has anything changed in the way we think about Golden Ocean being managed from a balance sheet perspective? Has that evolved at all over the last couple of years?

Hi, Greg. I think that we are in a very fortunate situation in that market, specifically, which has contracted. And a lot of banks have disappeared out of the market, but we have ample capacity and are one of the fortunate companies to be very much an attractive customer among the biggest shipping brands. So we are -- in that sense, we have not changed our view. We have been vocal on previously that we have targeted a leverage ratio of around 55%. I think that, currently, the -- there is so much lower risk appetite in the equity markets. So I don't think that an excessive leverage will benefit you in the long-term. But we definitely have the capacity in our balance sheet to lever up to enter into interesting transactions. But we are very much focused on cash break-even, keeping our costs low. And I think that it's sensible to be able to have -- and to be able to have a low cash break-even, you need to manage your leverage for sure. So, I think, it's -- we are not afraid of levering up if the transaction to be done is right. But I don't think we will lever up for its own sake.

Okay, great. Thank you. That was super helpful. Have a nice day, guys.

Thank you.

Thank you.

Thank you very much. We have a follow-up question here from Gregory Lewis from BTIG. Please go ahead.

Hey, guys. Sorry about that, I was going to -- I was trying to be polite and let other people get in. But I guess, what I was kind of wondering is -- and you kind of touched on it. Clearly, iron ore is what's going to drive the dry bulk market and we can kind of watch that and see how it's developing as China has restarted. But you did kind of mention coal and it's interesting to me because, we've been doing a lot of work and while -- from a news perspective, it sounds like coal is not going to be around yesterday, let alone in the years to come. But I'm just kind of curious, realizing that coal is still a big part of the dry bulk market, how are you guys thinking about -- and you have vessels across the spectrum, the small vessels move coal and large vessels move coal. So just kind of curious, how you're thinking about the coal market developing over the next couple of years? Thanks.

Yeah. Thank you. We still -- I’m sorry, as we also spoke about on the last call, I believe it's too early to declare coal as a dry bulk commodity there. We think definitely it's going to have a diminishing, and I think that's a good thing place in the energy mix going forward. But we still have the advanced economies to a large extent still being dependent on coal and they cannot outpace the coal in a few years. So, what we see happening is that whilst coal has been basically non-existent for this year, we expect that -- as we see a rebound of GDP growth in both India and China, and laxing presumably of the import quotas in China on coal, we expect to see coal flows next year help the dry bulk market. We don't think it's going to be the main driver, but we think it can assist in making the supply-demand balance more attractive in the longer run. And by that, I mean, five, 10, 15 years down the line, yes, of course, it's going to be phased out eventually of that, I have no doubt. But for the shorter-term, we don't have any expectations that coal will not continue to be an important commodity in dry cargo.

Okay, great. Thanks. Super helpful, guys, once again have a great day.

All right. Thank you.

Sure.

Thank you. Thank you very much. There are no further questions coming through over the phone at this stage.

Okay. Thank you for joining.

Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect.