Operating expenses

12 Months Ended

Dec. 31, 2022

Note 11 – Operating expenses

Voyage expenses

(Dollars in thousands)	2022		2021		2020
Bunkers	$	154,182	$	72,925	$	106,104
Other voyage related expenses		31,320		19,480		34,460
Total voyage expenses	$	185,502	$	92,405	$	140,564

Voyage expenses relate to bunkers consumption and other voyage related expenses, such as broker commissions and port costs. Voyage expenses for time charter contracts are paid by the charterer, whereas voyage expenses for vessels operating in the spot market are paid by the Company. In 2022, the Company had more vessels operating in the spot market than in 2021, thereby driving an increase in voyage expenses. In 2021, the Company had fewer vessels operating in the spot market than in 2020, thereby driving a reduction in voyage expenses.

Vessel operating expenses

(Dollars in thousands)	2022		2021		2020
Operating expenses	$	67,846	$	71,609	$	75,944
Insurance		5,963		6,198		6,244
Total vessel operating expenses	$	73,809	$	77,807	$	82,188

Vessel operating expenses relate to crewing, maintenance, stores and spares and other technical costs to operate our vessels.

General and administrative expenses

(Dollars in thousands)	2022		2021		2020
Total compensation to employees and Directors	$	11,763	$	11,890	$	14,163
Office and administrative expenses		3,818		3,351		2,413
Audit, legal and consultancy		1,308		1,325		1,313
Total general and administrative expenses	$	16,889	$	16,565	$	17,890

Stock compensation

The Company currently maintains the 2022 Incentive Compensation Plan (the “2022 Plan”) for the benefit of directors and senior management. Different awards may be granted under the 2022 Plan, including stock options, restricted shares/restricted stock units and cash incentive awards.

Restricted shares

Restricted shares can neither be transferred nor assigned by the participant.

Vesting conditions

Awards issued vest subject to continued employment or office, except in the event that a member of the board of directors ceases service on the board of directors prior to the applicable vesting date for any reason, in which case his or her restricted stock would immediately vest in full. The awards have graded vesting. For some of the awards there is an additional vesting condition requiring certain market conditions to be met.

The 2022 Plan may allow for different criteria for new grants.

Stock compensation series

	Number of	Vesting	Fair value
	shares/ options	Period	at grant date
(1) Granted January 2019, restricted shares	360,000	3 years	$	4.25
(2) Granted January 2019, restricted shares	200,000	3 years		3.04
(3) Granted March 2019, restricted shares	210,000	1 year		4.60
(4) Granted January 2020, restricted shares	460,000	3 years		8.22
(5) Granted January 2020, restricted shares	150,000	1 year		8.22
(6) Granted January 2020, restricted shares	200,000	1 year		3.56
(7) Granted January 2021, restricted shares	579,100	3 years		5.52
(8) Granted January 2021, restricted shares	175,000	1 year		5.52
(9) Granted January 2021, restricted shares	119,900	3 years		3.22
(10) Granted January 2022, restricted shares	175,000	1 year		5.38
(11) Granted January 2022, restricted shares	573,359	3 years		5.30
(12) Granted January 2022, restricted shares	124,594	3 years	$	4.29

The following reconciles the number of outstanding restricted common stock:

	Restricted common stock
Outstanding at December 31, 2019		560,000
Granted		810,000
Exercised¹		550,002
Forfeited		-
Outstanding at December 31, 2020		819,998

Outstanding at December 31, 2020		819,998
Granted		874,000
Exercised¹		733,133
Forfeited		-
Outstanding at December 31, 2021		960,865

Outstanding at December 31, 2021		960,865
Granted		872,953
Exercised¹		800,723
Forfeited		149,400
Outstanding at December 31, 2022		883,695

¹ Does not include shares in lieu of dividends

Stock compensation expenses

(Dollars in thousands)	2022				2021				2020
Expense recognized from stock compensation		$	4,211			$	4,371			$	4,792

The fair value on the vesting date for shares that vested in 2022 was $8.22 for 122,057 shares, $5.52 for 388,412 shares, $5.30 for 175,048 shares and $4.25 for 167,431 shares. The fair value on the vesting date for shares that vested in 2021 was $8.22 for 435,960 shares, $4.25 for 163,764 shares, $5.52 for 120,986 shares and $3.22 for 120,986 shares. The fair value on the vesting date for shares that vested in 2020 was $4.25 for 125,649 shares, $3.56 for 207,786 shares, $4.60 for 235,650 shares and $8.22 for 32,445 shares. All share-based compensation is equity-settled and no payments were made for the vested shares. The average contractual life for the outstanding stock compensation series was 1.09 years as of December 31, 2022.

Valuation of stock compensation

The fair value at grant date for the shares subject to market conditions is independently determined using a Monte Carlo simulation model that takes into account the grant date, the share price at grant date, the risk-free interest rate, the expected volatility, the expected dividends and the correlation coefficients. The expected price volatility is based on the historic volatility (based on the daily share price logarithmic returns for the contractual life of the restricted stock) adjusted for any expected changes to future volatility due to publicly available information.

In January 2022, a total of 697,953 shares of restricted stock were awarded to management for the year 2021. Of these shares, 174,394 shares vested in March 2022, 99,788 shares vested in January 2023, 99,788 shares will vest in January 2024, 99,789 shares will vest in January 2025, subject to continued employment or office, as applicable, and 174,331 shares are forfeited. The fair value at grant date was equal to the share price at grant date. The remaining 49,863 shares will vest subject to certain market conditions prior to December 2024 and the calculated fair value was $4.29 per share. In January 2021, a total of 699,000 shares of restricted stock were awarded to management for the year 2020. Of these shares, 239,800 vested in March 2021, 153,066 shares vested in January 2022, 50,000 shares vested in March 2022, 103,067 shares vested in January 2023, 103,067 shares will vest in January 2024, subject to continued employment or office, as applicable, and 50,000 shares are forfeited. The fair value at grant date was equal to the share price at grant date.

In January 2022, a total of 175,000 shares of restricted stock were awarded to the board of directors for the year 2021. The fair value at grant date was equal to the share price at grant date and the shares will vest in June 2023. In January 2021, a total of 175,000 shares of restricted stock were awarded to the board of directors in for the year 2020. The fair value at grant date was equal to the share price at grant date and the shares vested in June 2022.

Compensation of Directors and Executives

Remuneration of Directors and Executives as a group:

(Dollars in thousands)	2022		2021		2020
Cash compensation	$	2,648	$	5,050	$	3,897
Pension cost		165		219		206
Share compensation ¹		3,316		3,508		4,364
Total remuneration	$	6,129	$	8,776	$	8,466

¹ Share compensation reflects the expense recognized.

Shares held by Directors and Executives

	2022				2021				2020
Directors and Executives as a group ¹			1,908,331				2,958,894				2,303,011

¹ Includes 595,832 (2021: 725,665, 2020: 619,998) shares of restricted stock subject to vesting conditions.

In connection with termination of an Executive’s employment, the Executives of the Company may be entitled to an amount equal to 18 months’ base salary and any unvested equity awards may become fully vested in certain circumstances.

Prepaid expenses

(Dollars in thousands)	2022		2021
Prepaid voyage expenses	$	5,678	$	2,959
Prepaid vessel operating expenses		2,216		1,828
Other		2,655		1,375
Total prepaid expenses	$	10,550	$	6,162