US-based shipowner Eagle Bulk Shipping has completed its scrubber installation program in early April, fitting exhaust cleaning systems on 41 ships, the equivalent of 82 percent of the company’s fleet.
As such, the company expects its off-hire days to be historically low as ships continue trading without obstruction.
Eagle Bulk has assigned a total of $29..6 million over the past two years for the purchase and installation of scrubbers and ballast water management systems on its bulkers.
The dry bulk shipping sector has been faced with a challenging period, with the Baltic Supramax Index dropping by almost 40% in Q1.
However, the company said that it has been able to maintain its trading momentum with a time charter equivalent (TCE) rate of over $10,000 per day, which equates to a 62% beat of market performance.
Looking ahead into the second quarter of 2020, the company has attained a TCE of $8,110 with approximately 67% of the available days fixed for the period thus far.
“We were able to achieve this result by successfully executing on our active management approach to trading and by benefiting from operating scrubbers on the majority of our fleet. While the short-term dynamics are challenging, we believe Eagle is well-positioned to navigate through this uncertain period given the quality of our team, our active owner-operator model, and our solid balance sheet,” Gary Vogel , Eagle Bulk’s CEO, said.
Commenting on the plunging disparity between the prices of heavy fuel oil (HFO) and very low-sulfur fuel oil (VLSFO), which is the main driver behind scrubber-related revenue, Vogel said that the company hedged about 25% of its scrubber fuel spread exposure for both 2020 and 2021, prior to the impacts of the oil price crash and dwindling demand for oil due to the pandemic.
“These hedges are now well in the money representing a current mark-to-market value of almost $10 million including about $600,000 realized in the first quarter and providing a significant contribution to the bottom line. It is also worth noting that while fuel spreads are currently at depressed levels of around $70 per ton, Eagle should still be able to generate roughly $15 million in incremental cash flow per annum on this figure,” he said in a conference call on the company’s Q1 2020 results.
For the first quarter of the year, Eagle Bulk reported a net loss of $3.5 million, against a net income of $29 thousand booked in the Q1, 2019.
Net time and voyage charter revenues for the three months ended March 31, 2020 were $74.4 million compared with $77.4 million recorded in the comparable quarter in 2019.
The decrease in revenue was primarily attributable to a decrease in available days, due to lower chartered-in activity offset by an increase in owned days due to the acquisition of six Ultramax vessels in the second half of 2019.
Moving forward, Vogel said Eagle maintains a strong liquidity position with cash and undrawn revolvers worth almost $95 million. In addition to this, the company owns two unencumbered scrubber-fitted Ultramaxes.