TCE — Time-Charter Equivalent
The standard revenue metric in the shipping industry. TCE is calculated by taking total voyage revenue, subtracting voyage expenses (fuel, port charges, canal tolls), and dividing by the number of operating days. It allows apples-to-apples comparison between vessels on spot voyages and time charters. For example, a VLCC earning $65,000/day TCE after deducting $12,000/day in OPEX and $8,000/day in debt service generates $45,000/day in pre-tax cashflow. Investors use TCE to model distributable income under different rate scenarios.
AISC — All-In Sustaining Costs
The mining industry's standard measure of production cost per unit of output (typically per ounce for gold, per pound for copper). AISC includes direct mining costs, processing, on-site general and administrative expenses, sustaining capital expenditure required to maintain current production levels, and reclamation costs. It excludes growth capital, taxes, and financing costs. A gold miner with an AISC of $1,100/oz and gold at $2,800/oz generates $1,700/oz in margin — the higher this margin, the more cashflow available for dividends and debt reduction.
MLP — Master Limited Partnership
A publicly traded partnership structure commonly used by midstream energy companies (pipeline operators, storage facilities, processing plants). MLPs pass through virtually all income to unitholders, avoiding corporate-level taxation. In exchange, they must distribute the majority of their cashflow. Investors receive a K-1 tax form instead of a 1099, and distributions are typically classified as return of capital, deferring taxes until units are sold. MLPs offer some of the highest yields in the equity market but come with added tax complexity, particularly for investors holding them in retirement accounts.
BDC — Business Development Company
A type of closed-end investment company that provides debt and equity financing to small and mid-sized private businesses. BDCs are regulated under the Investment Company Act of 1940 and must distribute at least 90% of taxable income to shareholders to maintain their tax-advantaged status. They typically invest in first-lien senior secured loans, second-lien debt, and mezzanine financing, earning yields of 10-14% on their portfolios. Key metrics include net investment income (NII) per share, NAV per share, non-accrual rate, and leverage ratio.
REIT — Real Estate Investment Trust
A company that owns, operates, or finances income-producing real estate. REITs must distribute at least 90% of taxable income as dividends and in return pay little or no corporate income tax. While traditionally associated with office buildings and apartments, REITs also encompass cell towers, data centers, timberland, and infrastructure. For hard-asset income investors, infrastructure REITs and specialty REITs that own energy-related real estate can complement a portfolio of shipping, pipeline, and mining positions.
DCF — Discounted Cashflow
A valuation method that estimates the present value of a company by projecting its future free cashflows and discounting them back to today using a required rate of return (the discount rate). For midstream companies with long-term contracted revenues, DCF analysis is particularly useful because cashflows are relatively predictable. The key inputs are projected cashflows (typically 5-10 years), the discount rate (often 8-12% for energy infrastructure), and the terminal value assumption. DCF also refers to Distributable Cashflow in the MLP context — the cash available to pay distributions after maintenance capital expenditures.
DRIP — Dividend Reinvestment Plan
A program that automatically reinvests cash dividends into additional shares of the paying company, often at no commission. DRIPs harness the power of compounding: each reinvested dividend buys more shares, which then generate their own dividends, which buy more shares. Over decades, this snowball effect can dramatically increase total returns. For a stock yielding 8% with 5% annual dividend growth, a DRIP investor would more than triple their share count over 15 years. Most brokerages offer synthetic DRIPs, and some companies offer direct DRIPs with discounted purchase prices.
YOC — Yield on Cost
The current annualized dividend divided by the original purchase price per share. Unlike current yield (which uses the current market price), YOC reflects the actual income return on your invested capital. If you bought a pipeline stock at $20/share and it now pays $3.00/year in distributions, your YOC is 15% — even if the current yield based on today's price of $40 is only 7.5%. YOC is the metric that demonstrates the long-term power of buying quality dividend growers and holding them through market cycles. It is the reward for patience and conviction.
Take-or-Pay
A contractual provision in which the buyer agrees to either take delivery of a specified minimum volume of a commodity (or service) or pay for it regardless. In the midstream energy sector, take-or-pay contracts underpin pipeline revenue: a producer commits to ship a minimum volume through the pipeline, and if actual throughput falls below that commitment, they still pay the contracted fee. This provides the pipeline operator with a floor on revenue that is largely independent of commodity prices or production volumes. Take-or-pay contracts are a key reason midstream companies can sustain distributions even during energy downturns.
Distribution Coverage Ratio
The ratio of distributable cashflow (DCF) to the total distribution paid to unitholders. A coverage ratio of 1.0x means the company is paying out exactly what it earns — leaving no margin of safety. Healthy MLPs and pipeline corporations typically target 1.2x to 1.6x coverage, meaning they retain 20-60% of DCF as a buffer for maintenance capital, debt repayment, or small growth projects. A ratio below 1.0x is a red flag: the company is funding its distribution from debt or asset sales, which is unsustainable. Investors should track coverage trends over multiple quarters, not just a single snapshot.
OPEX — Operating Expenses
In shipping, OPEX refers to the daily cost of running a vessel, including crew wages, insurance, maintenance and repairs, lubrication oils, spare parts, and management fees. OPEX excludes voyage costs (fuel, port charges) and capital costs (debt service, depreciation). Typical OPEX for a modern VLCC runs $7,000-$9,000/day, while smaller product tankers may run $6,000-$7,500/day. Low OPEX operators have a structural advantage because their break-even rate is lower, allowing them to profit at rate levels where higher-cost competitors struggle. OPEX in mining refers to the ongoing costs of extraction and processing, distinct from capital expenditure.
Dayrate
The daily rate a charterer pays to hire a vessel (in shipping) or a drilling rig (in offshore energy). Dayrates are the primary revenue driver for asset owners in these industries and fluctuate based on supply and demand. In a strong tanker market, VLCC dayrates can exceed $80,000/day; in weak markets, they may fall below $20,000/day. Dayrates can be locked in via time-charter contracts (providing revenue certainty) or earned on the spot market (providing upside when rates spike). The spread between dayrate and operating costs determines the cashflow available for dividends.
Break-even Rate
The minimum TCE (time-charter equivalent) rate at which a shipping company covers all of its costs — OPEX, debt service (principal and interest), general and administrative overhead, and drydocking reserves. A company with a break-even rate of $18,000/day is profitable at any TCE above that level. Break-even rates vary enormously depending on leverage: a highly leveraged fleet might need $25,000/day to break even, while a debt-free fleet might need only $9,000/day. This metric is the single best indicator of financial resilience in shipping. In mining, the analogous concept is the break-even commodity price (the price per ounce or pound at which the mine is profitable).
Commodity Supercycle
A prolonged period (typically 15-25 years) during which broad commodity prices rise in real terms, driven by structural demand growth that outpaces the industry's ability to bring new supply online. Historical supercycles were triggered by industrialization waves: the US in the late 1800s, post-war reconstruction in the 1950s-60s, and China's industrial boom from 2000-2011. Supercycles end when high prices eventually incentivize enough new supply (new mines, new oil fields, new farmland) to overwhelm demand growth. The current debate centers on whether electrification, reshoring, and energy transition are creating conditions for a new supercycle in metals and energy commodities.
This glossary is for educational reference. Definitions are simplified for clarity and may not capture every technical nuance.