Time charter equivalent by segment
The time charter equivalent (or TCE) is a standard shipping industry performance measure used to compare period-to-period changes in a company’s performance.
DryShips, Inc.’s (DRYS) dry bulk fleet recorded a TCE of $10,875 per day per vessel in the three-month period ended September 30, 2014. TCE was $10,796 per day per vessel in the corresponding period of 2013. Meanwhile, TCE for the company’s tanker fleet stood at $20,901 per day per vessel. That’s a significant improvement from the $15,802 per day per vessel TCE in the same period a year ago.
Fleet and spot days
For the remainder of 2014 and for 2015, DryShips has 2,974 and 12,617 spot fleet capacity days, respectively. The Panamax fleet represents approximately 60% of the spot days. Basically, a $20,000 per day increase in average charter rates will add another $59 million, and $0.25 billion of additional EBITDA, in the last quarters of 2014 and 2015, respectively.
For the fourth quarter, DryShips has 41% fixed-rate coverage at an average daily TCE of approximately $25,600 per day. Meanwhile, fixed coverage falls to 35% for 2015, and then to 29% for 2016. However, these two years are forecast to have average daily TCE of anywhere between $28,000 and $29,000.
DryShips notes that it has significant leverage in the dry bulk and tanker spot markets. So, positive developments in these sectors will result in substantial cash flow to its bottom line. The company remains committed to its strategy of operating all vessels, both dry and wet, on the spot market to take advantage of what’s anticipated to be a sustained recovery in these markets, beginning in late 2014 or early 2015.
This recovery is likely to benefit peers including Safe Bulkers, Inc. (SB), Navios Maritime Holdings Inc. (NM), Diana Shipping Inc. (DSX), and Navios Maritime Partners L.P. (NMM), and also the Guggenheim Shipping ETF (SEA).