Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Capital Product Partners’ on the Fourth Quarter 2018 Financial Results Conference Call. We have with us Mr. Jerry Kalogiratos, Chief Executive Officer of the company. At this time, all participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, January 31, 2019. The statements in today’s conference call that are not historical facts, including our expectations regarding cash generation, future debt levels and repayments, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, capital reserve amounts, distribution coverage, future earnings, and our expectations regarding employment of our vessels, redelivery dates and charter rates, fleet growth, and market and charter rates maybe forward-looking statements as such defined in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise. We assume no responsibility for the accuracy and completeness of the forward-looking statements. We make no prediction or statement about the performance of our common units. I would now like to hand over to your speaker today, Mr. Kalogiratos. Please go ahead, sir.

Thank you, Laura. And thank you all for joining us today. As a reminder, we will be referring to the supporting slides available in our website as we go through today’s presentation. As announced on November 27, the partnership entered into an agreement with DSS Holdings L.P., one of the world’s largest owners and operators of medium-range product and Suezmax crude tankers, pursuant to which CPLP with the spin off its crude and product tanker business separate publicly listed the company, which will merge with Diamond S businesses and operations in a share-for-share transaction. Total, the new company Diamond S will be a highly scaled the tanker company with 68 vessels, combined NAV of approximately $700 million estimated as of the end of the third quarter of 2018. Merger was negotiated on an NAV for NAV basis. However, facilitating the public listing of merger CPLP unitholders will receive closed on 11% premium. This transaction, our Board of Directors has decided to set the common unit distribution at $0.18 per annum or $4.05 per quarter at a level that we believe is highly sustainable through a wide variety of market conditions. Fourth quarter common unit cash distribution will be paid on February 14th to common unitholders of record on February 5th. In addition, our Board of Directors declared a cash distribution of $0.21375 per Class B unit for the fourth quarter of 2018. Fourth quarter Class B cash distribution will be paid on February 8th to Class B unitholders of record on February 1st. The partnership’s net income for the fourth quarter improved to $13.2 million compared to $6.8 million in the fourth quarter of 2017. Common unit coverage for the fourth quarter 2018 stood at 2.9 times, the partnership’s operating surplus for the quarter prior to the capital reserve on…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Thank you. We will now take our first question. Please go ahead. Your line is now open.

Hi, there. This is Greg Tuttle on for Randy Giveans. Thank you, operator, and good morning.

Hi, Greg.

Hey. I just wanted to first figure out what do you want the company to look like post the DSSI spin off? Do you wanted to be a pure play containership company? Do you want to add drybulk? Or do you want to take LNG dropdown from the parent company? What does that look like to you guys?

That’s a great question, Greg. So this transaction with DSS was a one-off as you won an opportunistic transaction as we wanted to unlock value for CPLP unitholders and especially with some of our older assets and at same time realigned the partnership with more modern assets with longer-term charters attached, which are more suitable for our business model. In the process, we have generated significant premium for CPLP unitholders. And I think we are also merging our tanker assets into larger platform with proven management. So I think that’s good and it should work workout well for that part of the business. Now, but your question, we aimed to rebuild and grow CPLP by acquiring assets with medium to long-term chapters and cash flow visibility, accretion and duration of contract are going to be the main criteria. So as we used to be in the past, we will continue to be a little asset agnostic, although this does not mean that we do not have a view with regards to different markets, but we are going to grow with assets that fulfill this criteria. Now, having said that, larger containers tends to command longer term employment. And as a result, we will continue to look for accretive transactions with that segment. But it’s not the only segment that will be open to look at. As we said, tankers potentially drybulk, but I don’t see many opportunities there. And importantly also LNG is on our radar and subject to availability of capital, we will continue to grow in a disciplined manner and always taking into account a long-term accretion to our distributable cash flow. So at the same time if you look…

Got you.

But if you look at what we have let’s say at the sponsor level, we see that there’s quite a bit. I mean we have in excess of $800 million in value of assets that have long-term charters with VLCCs with 5% a year bareboat charters and large containers with three to five year charters and other assets that could be a good fit for CPLP. And in addition to that an affiliate of our sponsor has ordered a number of XDF LNG carriers at once. We all consider a very exciting turn for the LNG market. Of course these vessels are due for delivery late in 2020 and early 2021, so it is very early to discuss those assets. But there is no lack if you want of drop down opportunities. The question is how do we put together accretive transactions and how we fare after the transaction is completed.

Okay, that makes a whole sense. So I have one more question that’s unrelated. But just looking forward to IMO 2020, on the last conference call we had talked about these smaller containerships and how much fuel they burn. But we were curious as to what the fuel burn is for the 9,000 plus to EU ships. And also maybe any thoughts you have around the LSFO and HSFO spreads?

So as far as containers are concerned, if we are – let’s say just stick to that part of the fleet 11 part, the trade is a relatively high speed trade compared to others. So you’ll find that all containers and especially the bigger ones have large intentions and consumption in comparison to say dry bulk and tankers. So a small carrier vessel might have a similar main engine to a Capesize and VLCCs output might be less than a panamax container. I can give you our top line the statistics with regard to what consumption are 9,000 TEU ships have logged. But in a way that we think about things that is being at a peered market and wanting to fix long-term charters, it’s not so much what our view is in terms of the other spread. It’s more what the charters are willing to pay. So, nowadays when it comes to liners picking up containers with scrubbers, say 9,000 to 11,000 – 8,000 to 11,000 TEU ships, let’s say, you will see that the spread is between $4,000 to $5,000 per day and mostly for three-year deals, sometimes even longer. So you get – let’s say, an idea as to what charters are willing to pay for the savings of a scrubber over the duration of a charter. So this is also what we are aiming at as we have discussed the plan is to install scrubbers on all our 11 ships and we expect that we will retrofit five to six ships in 2019 and the rest in 2020 and one in early 2021. But also the plan is to continue the discussions and throughout 2019 mostly to try to logging longer term charters against fitting the scrubbers. So we are – we don’t necessarily want to take a bet on what the spread is going to be from one day to the next.

Okay, okay. That’s totally fair. And then last question from me and then I’ll hop off the line here. So with shares trading at such a deep discount to NAV, as well as what is accretive transaction with DSSI, kind of what’s the thought process or maybe doing share buybacks?

I think we want to – that’s a great question actually. I think we want to see the transaction completed and how the respective fair trade after that. But if CPLP does not trade in a satisfactory manner, we will of course need to discuss our board the best use of the cash that we have build up and we were building up on the back of the new distribution guidance including unit buybacks. But let us see where we are in a few months.

Okay, sounds good. Well, I’ll hop off the line and let others take the line here.

Thanks Greg.

Thanks.

Thank you. We will now take our next question. Please go ahead. Your line is now open.

Hello.

Hello?

Hi, I wasn’t sure if my line was open. This is Hillary from Wells Fargo. Could you talk about why there’s a divergence between rates for larger container vessels which are showing signs of strength versus rates for some of the smaller container vessels. What’s driving that and you see that trend going forward – to continue going forward?

Yes, that’s actually quite interesting. So as you know, towards the end of the year, there’s always seasonal weakness for FR containers, it comes to the same certainty, comes also for tankers. And you always see fleet utilization during the – towards the end of the third quarter and in the fourth quarter then started picking up really from the end of the first quarter onwards. So we have the same effect this year, but as you say, it was interesting that as – towards the end of the year we saw larger post-panamax access 8,000 TEU and higher showed signs of strength with our rates moving from the mid-low things to the mid-high things in a very unseasonal pattern. So we think that there might be many reasons for that. The one reason might be that the liners are securing tolerance of higher expected as a number of these liners have chosen with different degrees of, let’s say, weapons, will adopt the scrubbers. So, in this annum, we expect between 1%, 1.5% of the fleet to be of higher during 2019 and the same in 2020. And if you see, for example, as you might have seen, has decided to install scrubbers on the majority of its larger vessels. Others have chosen to install scrubbers in certain of their ships. But all in all the impact is expected to quite high and it seems these are larger vessels. The liners according to the market gradually to pick up the slack in order to replace the tonnage. So I think that’s one effect and probably we will see that coming even stronger over the next few months and we continue to see rates increasing right now for, let’s say, 8,000 TEU or above. And at the same time, I think there might have been also stock filing ahead of the potential increased tariffs as we saw quite a bit of activity on the Transpacific trade. And it’s certainly or how much it was caused by the increased tariffs and how much it was increased by simply – but there was definitely a little unseasonal trading there. So I think this has driven the strength of the larger post-panamax ships and if anything we expect this to continue going forward.

Okay, thank you. And help us with the new CPLP entity, the containership your counterparty – your containership counterparties. Are they all signing to install scrubbers, I guess regulate for your CMA, the larger containers and how about for some of the small ones that you have on your fleet?

So, for the smallest ships that we have in our fleet are the 5,000 TEU ships, which we have announced last quarter that we will install scrubbers and we will pay a rate of $4,900 per day from the moment that we install scrubbers or January 1, 2020 whichever is later until charter expires at the very end of 2024 and 2025. So for smaller ships it’s already secured and done. For the 8,000 TEU, 9,000 TEU ships, we will be in discussions throughout this year. It doesn’t have to be necessarily the same charters. We will have the same charters that we had with others and we will see what we can do and what is an offer in terms of extending employment against installing scrubbers and premium weight.

Okay, great. Thanks, Jerry. That’s it from me.

Thanks, Hillary.

Thank you. [Operator Instructions] We have no further questions at this time. Please continue.

Thank you, Lara. And of course, thank you all for listening in today.

That does conclude the conference for today. Thank you for participating. You may all disconnect. Speakers, please standby.