Q1 2020 Earnings Call
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Ladies and gentlemen, today's conference is scheduled to start in a moment and so that's on your lines will be placed on Oh. Thank you.
[music].
I'd now like to go to go over to Brian Lee Chief Financial Officer. Please go ahead Sir.
Thank you operator, thank everyone for joining us today welcome to Scorpio tankers, 2021st quarter earnings Conference call on the call with me or my door, our Chief Executive Officer, Robert Bugbee President.
Cameron Mackey, Chief operating Officer, Lars Circuit, Nelson commercial director, David Mann, Managing director Dreams, Doyle seasonal senior financial analyst.
Earlier today, we issued our 2021st quarter earnings press release, which is available on our website. The information discussed in this call is based on information as of today May 620, 20 and may contain forward looking statements involve risks and uncertainties actual results may differ materially from those set forth in such statements for a discussion of these risks.
Certainly uncertainties you should review the forward looking statement disclosure in the earnings for press release that we issued today as well as Scorpio tankers, SEC filings, which are real what Scorpio tankers dot com.
And let's see Si dot Gov.
[noise] if you have any specific modeling questions. You can contact me later in discuss off line as a reminder, in the variance.
Well nation section of the press release me you gave guidance on future depreciation Jane I entered her experience and now I'd like to turn the call over to a manual work.
[music].
Thank you Brian.
Good afternoon, and welcome to our first quarter earnings call. Thanks for your time today.
Firstly I would like to express our solidarity with all affected negatively by the Cobiz 19, and its impact worldwide.
The human toll in lives and on both physical and mental health is truly shocking.
We stand with our employees, our customers, our shareholders and broader stakeholders in expressing our condolences sympathies and support to first responders and health workers as well as.
Anybody as soon as being affected.
As far as the business is concerned this quarter, we report our best quarter since 2015.
With the fleet, averaging nearly $23000 per day.
On top of these we believed that the disclosed second quarter bookings to date. We result in consensus is moving meaningfully higher.
We have recently welcomed many new investors to our register.
We see the opportunity in the company's ownership of the world's largest beat of modern modern product tankers.
Why is the global economic backdrop ease gloomy our company's prepared.
Operationally financially as well as commercially.
Our leadership in DLR segment is bearing fruit, we completed the acquisition of the modern Tropic, what our fleet as recently as September last year started the reinforcing this leadership.
The president spot market on L.R. twos is now in excess of $800000 per day.
Since August of last year.
Many of our twos.
Decided to trading crude oil.
As we know once these best says dirty up they cannot easily returned to carry clean products.
The shift of best shows a significantly Titan supply for modern that our twos and our fleets.
He is now earning significant significant premium.
In respect to their counterparts in the crew trades.
Furthermore.
Amidst the current strong rate environment, we must remind you of the long term trends that front in our favor and if anything has been further reinforced by recent events.
Supply of new tonnage remains dynamic against the backdrop of a rapidly aging fleet.
Simply put we have never seen an order book solo we'd the rate so high.
Many new refineries, particularly in the middle East are yet to come online, we did transformative positive impact on product tanker its own mines.
Do you foresee a of January surrounding scrubber installation has been replaced with almost universal Bloom.
By Q4, we expect the middle ground to prevail and have taken the opportunity to deferred some of our installations.
Thereby freeing up around 500 revenue days between the second quarter and the fourth quarter piece here.
For the rest of Twentytwenty, we're comfortable that towers tighten supply and increased floating storage provides solid market fundamentals, even while the underlying economic picture needs time to improve.
Every day, our cash accumulates.
Furthermore, we are expecting our forward Colbert to increase as our customers require best says for storage.
In due course, we would provide an update on discover as we capitalized on the current environment.
My opening remarks are concluded and I would like to turn the call to Robert Bugbee.
Hi, Thank you my a good morning, everybody.
But these oh, let's see the west the times, but for us at the moment no they're the best of times as well.
As a manual said, we're accumulating cash these a great rates the with taking we expect.
The actual the actual present market rights is significantly higher than in oak losses in the guidance, we've given for the second quarter that that's the coolest for great optimism, we have starting at the end where you ended the second quarter really the third quarter. We've got a quite a substantial charter book already have a full would cover that.
The millennial says, we'll give we won't give any details on today, but you know <unk> in the short time, we will come out and give a.
Separate a disclosure and details on that so the company is.
I want to a better but a phrase I mean, it's enjoying it is pleasant position at the moment I mean, it sequentially and earning more money.
It's very profitable the cashes generating very fast and today, we're going to stick on things that we really know it going on so I think we'd like to start with a with a update bring you guys from wherever you. All you know right into our trading floor at the moment. So you can see you can get somewhere.
Idea from ahead I'm trying to last thing can Nielsen, what's actually happening right now today and why I can say with great confidence that our president markets, a significantly higher than than those averages that we've we've put in the book to date, so far which is really a trailing position.
And.
The laws, if you'd like to tell us what's going on right now that would be right.
Thanks, Robert and good morning.
Let me give everyone a quick sense of the market today.
Enjoying historically strong market underpinned by very low cost fuel prices for vessels.
Not a lot two vessels, let's see any benchmark earnings right now it seems to be able to see.
This morning insight, we concluded typically a lot to spot more than a normal trade lane for almost 40 days at 170000 newest almost for doing.
This isn't an outlier anymore.
We've been trading from incident levels. This is a tight market.
The lack of vessels is enhanced by storage.
Also congestion and operational constraints and according vessels to take longer routes from for example vessel sealing around the Kate Good hope you seldom transiting to Suez Canal.
A significant increase to voyage distances and time limiting towing supply.
Storage is reinforcing disgusted see at the margin.
Currently the 250 product vessels I believed to be story.
200 of these public carries identified some contracted period of employment more than 30 days.
An old larger units tend to be minimum four months longer.
Oh, please keep in mind the public storage on the contango here is helpful. Entice them tonnage, but is only part of the picture.
Products in transit and refined products on the water, which include lessons and storage on long bin laden passages waiting to your tank tops and Congestions in general have increased according to market research 75 million barrel since mid March and there's about 400 million $480 million and products.
Finally on the water.
It is not only the yellow to settle facing very strong levels. The Arabian Gulf yellow one market is very tightly they're looking out to market today trading around 80 to $90000 per day.
Indeed, we concluded a great going from the message and $100000 per day, well over six days last Friday.
Likewise on the M. ours, the middle East market has been strong.
Thank you fix three ships yesterday from the middle East very destination with each vessel, making between 50 and 65000 U.S. dollars per day.
Now as you would expect there's a lot to become a rate volatility.
Two weeks ago, Andy rates in Europe were no 200 wells can points went from you asked on the 25000 to 72000, you must always per day, where we managed to fix.
When the markets true to form dropped back to on the points again this week.
However, we still plan good pockets of strength and yesterday, we concluded handy cogs comfortable to to them at U.S.. Another 35000 Boes per day.
This development is not the similar to the breather taken last weekend amar's into work.
And as the market stabilize personal conkers read into it and we managed to fix in margin rates in the high Twentys.
We also now seeing other cars get pulled into the market strength.
For instance, we concluded the NIM on yesterday and vegetable oils from Argentina to India at U.S. done a $35000 per day.
For someone like myself who's been in the public sector industry for close to 30 years diesel professionally very exciting times.
Especially with the largest and most modern luxury suite in the world.
We are continuously driving performance.
But this should give you a good picture interesting developments life in the market right now.
And I'll now hand back to Robert.
Oh, Thanks, all of you for your time, we're going to leave and get back to treating the ships. Thank you bye bye.
Last thank you laws, Unfortunately wont be to join us anymore for the rest of the cool because he's pretty busy I think it's safe to say that if everyone's honest on this school they'd love to be doing exactly what loves is doing now I mean, it's a it really is.
Great fun for every anybody trading product tankers.
I think that you know I would like to Echo one thing that in many old said earlier in the Oak thing part of the cool and that is that one of the great things here is the is it the long term here the longtime dynamics look fantastic [laughter] fleet is aging there are many many vessels turning 15 years.
Which is the critical age in the product tanker market over the next two to three years.
The order book is extremely low yards, a consolidating and financing is becoming extremely skus.
And that leads us to position, where when we actually get through to a full world recovery here combined with the fact that they're all you know more refineries coming up in the Arabian Gulf and longer haul routes. This could well set date time, and we would expect it would actually FA.
You know most probably a new super cycle in the product tanker industry. So I think on that note.
Well just open it up to a questions. This morning.
Ladies and gentlemen on the phone lines, if you'd like to ask a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the Q may press the pound key.
And your first question comes from Jon Chappell from Evercore ISI. Your line is now open.
Thank you very good morning, everybody and good afternoon, now I'm not it sounds like your dog.
During certain times [laughter], yeah. He loves loss is getting to love laws. His voice because he knows it's always good news.
Hi, Good question warn you heard the time multipart or so understanding you don't want you a telecom the charter cover book right now, but there we go back to the last time, Richard can remotely close to this good and the predecessor company you guys really I'm well locking in terms.
Coverage, which seem to be especially important right now given your strategic focus of our capital structure.
Robert So right now that's led what's the market liquidity for charters granular one hour to segment with any type of duration and what's your appetite or to lock lift ships understandably move people in a little bit of the juice as it stands today.
To me that castle visibility that enable deliberate quicker.
I'll answer the second question in a in a different way well the first thing is that.
The appetite as across customers won't see different things cuss customers. Some customers want to do one year charters. Some nine some six some three some fall and some to spot.
And you know in all book, there's a there's a case for every one of them.
You want to have some security of charters, but on the other hand, you know I think we have to look at things realistically. The vessel that you know <unk> the last two or three.
For a lot twos that we've been fixing.
You know you could do the voids and then lay the ship up for their balance of a year.
And still be profitable so you're not in a situation where you want to your rushing to do you know even one you chart is just for the sake of doing it too. If you. If you are putting a lot to away yet.
100, and study $280000 today, that's a pretty pretty significant cash straight up contribution.
So you're not doing everything you can to desperately get every single chart to you can but we across the board and that's all of the vessels whether they are.
A lot twos, all the way through two handys have fixed already a a reasonably significant amount of vessels food, which.
They will really start to that they a lot of many of them just get delivered later so they get delivered from right at the end of the second quarter early said quota.
And.
We think that the combination of it's all about the balance sheet. This is all about try answering the debt risk that the company has with its brand new fleet.
To equity value because as we.
Pay down net debt as a combination of accumulating the cash that we're getting from top five fantastic spot market.
Combined with securitizing cash flow above all in Breakevens for late.
We are you know, we're ensuring the enterprise and really creating equity value.
I'd like to leave it that it from a John.
Yeah, that's that's completely clear.
My question is.
Enable to free up over 500 operating days in this type of market is coming up I mean, it's almost like that intersects for free. So every every thinking out just how that transpired, what's your ability to or personal care or any kind of penalties.
Second of all.
We commit to 21 windows, the weighted scrubber and coincidence or persistence breaks Garland.
Economic hard of hearing what you're doing.
Just move forward without going forward that process and then third of all maybe just an update on and premium you're going to procure to wear or whats cover compliant or work with scrubber fitted chips or is that are IMO 2020 premium completely.
Okay I'll, let Cameron obviously onto that that question then maybe before he does you know I'd like to say that overall, we remain confident in the future.
If the scrubbers, we would expect the spread to somebody else says to start to regain itself.
You know from from later in the year, even as early as the fourth quarter and going into the longer future 2021, 22, we'd expect significant spread to develop as the way that oil and.
Oil pricing could develop.
Again before <unk> Cameron offices, I mean, I think it's fair to say that.
Yes laws and the trading department can get to get a lot of the claim right now, but the operations and technical Department I.
I mean, we should really you know singing the praises in this company to dealt and keep the.
Make the but keep the vessels so efficient keep the downtime going keep the ships running and being at a put us in this great position. So we should think those is the shareholders and.
And Cameron if you'd like to onto the rest that'd be great.
Sure.
Thank you.
John.
We've managed to negotiate the deferral of our scrubber program as we announce.
It would be.
Impossible for me to cover every what if scenarios going forward.
It was just in our mutual interest ours and those are suppliers.
And the repair yards to postpone this capex and this work for the time being.
There are no penalties involved.
We will come back and later in the year, probably third fourth quarter and assess between the development of the spreads.
And of course the market itself.
How weather when.
In what sequence to reestablish that program.
But for right now, it's basically a no penalty a deferral and I think Robert covered the other part of your question just just having to do with our view on the underlying price of bunkers. The spreads in the payback on the scrubber investment obviously that has changed.
Significantly in the last two months, but we still confident over the long term that is the right decision for the vessels and for the shareholders.
Got it.
All right. Thanks, a lot count Thank you Robert.
Thank you.
Thank you and our next question comes from Amit Malhotra from Deutsche Bank. Your line is now open.
Thanks, everybody.
I want to understand a bit better, though the lag effect of the spot rate.
And the time charter equivalent.
Obviously getting the weight to the voyages, which I think you're getting longer and just hub model. The market is the 40, 50% of the days that aren't booked are not booked for the second quarter.
Have you an obvious question, but do you expect those those time charter equivalent rate on that remaining on book case to be higher than what do you book, So far and I guess the voyages are your booking today I kind of bleeding into the third quarter as well. So what you can just talk about whether that's correct and and maybe you know talk at a high level about what that project.
<unk> will be kind of going into the third quarter before you're seeing today.
So I think we we made the statement there right now all of what you're booking that that for 40% would be.
You know really almost reflective of what you're doing now unless we do it to add charters, whether Leslie would be delivered let's say in June so part of it could be.
You know could be at a more of a charter right, but if you have fixing a ship right now on today's rates that would take up part of that 40%. Today is is it is there.
The as a as.
As it relates to June.
I mean, the third quota, yes, very shortly I mean, you know that fixing way out now on some of the a lot to fixed is way you're almost starting now to fix them.
That quota dates I will give a clue that some of all.
Time charter is actually rolled spot voyages, where you have a spot voyage then tons into a time charter in that time charter would start in.
The said quota.
And then the lag effect is quite interesting in the sense that the lag effect of bookings so at the beginning when a market moves up. The index is obviously are ahead of what that two vessels, earning because the vessel will get fixed it won't load and tell a month forward. So always the actual reported numbers.
The company's reporting in estimates et cetera will lag and index.
But you actually get the benefit later because.
You know you keep building and later you know if if you would have put in a backwardated curve.
Then you all reported numbers are likely to be higher than the Backwardated coast. Because you reported numbers would would hold the trailing pod.
So that I think is an important question that you know by definition the way that the accounting is done that youre underestimating the future.
Backwardated give you a overestimating the president and accelerating curve.
Right and so yes, it's a quick follow up to that point, just given the scale of your fleet.
To assume that in any given day you got a couple ships that are open to be FICC exactly right number is a great.
I'm just trying to stand because obviously it depends on the bleaching for if you assume 60 90 day voyage days, depending on the vessel class you know, it's kind of like it's difficult that's way that's way too granular I I, just think that the it's very but you've got a very hard job as analysts right now to try and get.
You know these accurate predictions et cetera, et cetera, So I wouldn't let Saturday fixate about that and I would would just take the general position that the right. So high that throwing off terrific cash flow you know that the de leveraging.
This company.
And I will decline I would ask <unk> I would give the guidance. We gave at the end of the first quarter, which is the company is running its operations conservatively. We are doing all of a full cost conservatively and we of course, hoping for the best but we're running the company conservatively and we're just trying to manage what we can manage.
And you know the end of the day might turn out all right just like the first quarter turned out all right.
Right I wanted to ask my second question Brian.
And that's really understanding how the numbers that you're putting off.
<unk> talked about is actually translating into net debt reduction and obviously breakevens are reported in this regard.
Brian.
Correct me, if I'm wrong, but if the right way to think about it is that.
Revenue.
He see above 10000 or sell dollars per day, which is of course, your opex and your interests.
That's the right way to think about.
[noise] available for net debt reduction and then the moving pieces you have to think about that is obviously the $52 million going out the door for dry docking its robertson $6 million dividends, but are those all the major moving pieces or am I missing anything.
No I'm at that that's right and well one of the other ones, which I'm sure you're looking out to with the repayment of the baby bond coming up here and a few days, maybe 15, yet but that's the that's already included in the net debt calculation right. So.
You're right Yep.
Yeah and merger.
Yeah Okay.
I was just gonna say you know we had oh.
Our receivables increased $70 million between the December in March.
While net income on increased $34 million. So the big driver of that where the increased rates at the end of March because as you were pointing out before we have we have voyages that were done in February that are rolling over into Q2, So and they will as Robert was saying, they're going to be replaced by higher rates now so.
Cashes is coming out later, so it's 45 to 60 days on a voyage to get that cash coming in and that's after the voyage begins so to take right. After the <unk>, that's a great point, but that.
He was a favor by providing.
<unk> cash balance right. So that made cash balance in the release reflects the on wind at the receivables right. Okay.
Excellent thanks that great job congrats on the quarter appreciate it thank you.
Thank you and our next question comes from Greg Lewis from BTI G. Your line is now open.
Yes, Thank you and good morning, good afternoon.
Yeah, I just had a I just had more of a general question. So you know we've been hearing a lot about them your age and what that.
And how that is impacting the market you know just kind of curious if you guys could provide some color around all around the waiting times on vessels and really what you're seeing in market any kind of color you could give around that would be super helpful.
Yeah.
I mean, we're generally saying is laws pointed out lot of this is you know congestion and a lot of this was the I think people have to understand that the product market is different from the crude in the sense that in the product market. We do a lot. It's many distribution, especially for the smaller vessels and it's not about contango, it's not about storage.
And is one of the reason that historically when you've had the sort of situations like stories before it's why product stories jinri last longer than the product market generally remained tight to them the crude market.
And.
And that's because even if you think even if am AWS WAF and average voyage length for an M.R. is 24 25 days.
And you have as few as five days just waiting to go into port because you've got to congestion or you've got short tanks and some of these places that we take products too.
Brazil, Argentina No Africa.
You and Australia, New Zealand places like this you know the mute I just don't have huge amounts of storage facilities. So the ship itself.
Sits offshore waiting to go into port So even if you had five days on average you've now reduced the fleet by 20% just through congestion nothing to do with a carry trade.
Okay, Perfect Hey, that's super helpful. Thanks, guys right.
Thank you and our next question comes from Omar Nokta from Clarksons. Your line is now open.
Hi, Thank you.
You gave you obviously guidance that leaves plenty of upside and given Lars commentary and where spot rates are.
And then also the term activity that you just need going I guess will give us later and you may have just already answered this robert but when you think of what's happening across the product space, especially given the softer VR rates recently.
Are you surprised but just help from the product market is.
And and maybe could you give us a reason or perspective, why it has been from relative to its accrued.
Oh, we're not surprised I mean with which you.
It's a weird would surprise of course, we would not have stopped back we know didn't have a crystal ball that said Wow you know laws is going to fix and nearly made 107 8000 on they'll all too well.
Well, we would've been really surprised is something that told us that in January but once the dynamic could being set up.
And no we're not surprised that the brought up market is strong I mean, it first of all its a.
No in the big classes, the a lot twos and allow ones, it's far more consolidated as more consolidated than any other.
Made a crude oil product market itself. You know there are few vessels with few players.
The second aspect is that you know, it's getting driven by.
You know this this this increasing.
Refinery capacity in the Middle East. So it has a good position that the the middle Eastern countries have every reason to continue their product exports, you know, it's better than selling crude or the discount.
You it that youre vessels do trade a lot to the east where those countries off and especially China is being opening up Australia as well et cetera. So that's good.
Then we have this dynamic where.
The market is spread everywhere. So it's not so important for us that.
What do you at night It States does United States is not a we've never really taken much product to the United States.
As far more important FA congestion et cetera that.
You know what it's like in terms of distributing products around the rest of the world.
So.
Yeah, I mean, you know there there's no other way of saying at the right. So what they are I mean, the market at the what may be surprising in school system is the is the rights of forward rates to remain in backwardation Alpha 910 weeks.
<unk>.
Yeah. The product market is still just continued moving from strength to strength I mean, it may have periods a weakness it has done in before but.
It's very hard to see that all this goes away just in a moment rates may go lower at certain times, but that's still going to be on a historical basis very high.
And even if we look at the most pessimistic view of forward curves in any reports from any analysis.
For the third quarter, that's a seasonally super hub I mean, absolutely suppose I mean the.
I think the era that people could be if that surprises when they.
Look at the curve itself and they focus on the fact that Oh, it's a drop steep drop in rights and they don't have a reference point because they're in experienced on new to the space.
Where they are dropping to fall better off looking at the average of the earnings that those that curve will throw off to a ship owner rather than saying Oh my God the rate through 100, they're going to full to 40.
Because the average of 100 straight line into 40 is a huge positive cash flow.
So what I would suggest people could do is.
The fund just take the curve say fine Yeah, you know the Cubs right.
You'll find that.
The company owns a lot of money just stuff that basis.
Yeah, that's a good point, Robert and thanks for that and when we think how do we go out when it comes it Wouldnt surprise I mean, you know we will be in humbled and a good way or a bad way by what's happened in the last two months. So you know we shouldn't be surprised if anything right now.
And.
Right Yeah.
And just on the on the on the term the term market you mentioned the dynamic of the spot charter that rolls into a T.C. you know it seems like maybe two three weeks ago. The entire tanker market was just in a frenzy or the charters were going to scramble to look for any shifts it seems to have abated a bit optically outside looking in.
At least not comes to the crude tanker space.
On the product are you is it still fairly active charters coming to you with inquiry for T. sees.
As before well.
As I said without looking at it in detail I mean.
The market has all sorts in it for the spot market to be wed laws is saying he's fixing ships these aren't fantasies.
This isn't you know as is referred on one conference call yesterday fairy dust. This is reality fixtures.
Yeah that would indicate that there are also people that who are willing to take a discount to the spot rate by doing time charters too.
That's that's what happens in the strong market.
You know the crude oil it's much more volatile to actually crude oil pricing.
Pro we know in two weeks time, the Saudis in the Russians might say well you know the Americans looks like we're looking like Patsies to the Americans the Americans on cutting back on what they said they would cut back and the sale people are producing more in Texas didn't end up agreeing to doing cuts. So maybe we'll just increase exports but.
Two or 3 million barrels and Wyoming.
You know back to back comes the crude oil play again.
Yeah, the product market is slightly different to that market.
Yep.
Robert maybe just one more you know there you mentioned this in her opening remarks or think wasn't any well, but no. There. There's a lot of pressure on scorpio going back six eight months ago on converting or pushing her LR to send to the dirty crude trade. Obviously, it's a smart decision you know hanging back sticking with product.
And what do you think about it now there is there has been some talk I'm not sure how prevalent that does but that some of those $30 LR twos would come back to clean up are you seeing that is that happening and is that something to be concerned about here in the near term of not having a.
Supply effect on the market.
It's not easy to bring back from 30 to clean.
I mean, and I think that some of those articles were misprints is still being corrected and they were actually referring to the other way.
This is going from cleaned that they've got the woods wrong from an Asian publication.
So that that really is and you know there currently is be one or two somewhere <unk> residual anticipating and so they would have started six months ago.
And maybe one or two done it but it's really not easy to.
To do that at this particular point, but yes, I think that you know the.
You know the the people that I think caught you off charter and department made a very strong bold and obviously a decision that paid off.
On the spread.
Oh, absolutely okay.
Yep.
Okay. Robert will appreciate it thanks, Thank kids for everything.
Thank you and our next question comes from Randy convenience from Jefferies. Your line is now open.
Holiday Gentleman, who has gone.
Good thank you.
All right. So yeah, obviously solid quarter setting up could be a record quarter and you are you'll have preclinical free pass here in the next few months in quarters.
You remain focused on those debt repayments, so with that what are your kind of target leverage ratios for for strengthening the balance sheet or <unk> for perfectly looking at the $3.2 billion in debt do you have to year end goal isn't there.
No I think that you know we think that does explain said earlier that were trying to shift the the value creation is shifting the debt and paying down debt and de leveraging and.
And I think is not.
Not worthwhile in having a goal right now are indicating even if we even if we had that goal, indicating what it is I think we'll know.
When we get a what that what it should be well know at the point, where you know we've not having such a steep discount to the navy because if perhaps the fear that there is in the balance sheet.
We'll we'll know from our shareholders and we'll know from the market more or less you know where that appropriate leverage should be.
David if if.
If you are still on I'd love you to to add to this if you can.
Yes, very happy to evolve it. Thank you I mean, I think Randy John to your question, it's very clear that as we paid on that it's accretive to our XT and I think implicitly as we increased the XT mix and the capital structure. We think we believe our cost of capital will trend Lola. So many ways, we filled bodies that best thesis the cash that we expect to generate over the coming quarters.
And certainly as Robert said I think we'll know we all.
In terms of our optimal capital structure, we'll see that country underwriting of the stock.
On the back to your [noise].
Okay. Thanks.
All right and then my but as you mentioned.
We have a pretty hard job that's moving rates. So just to kind of cost track headline rates were seen with current rate booked one or some of those levels and the you mentioned in a 101 off I like to at 170000, whatever can you give an average for last couple of days for like two I want anymore.
I've I can't really done it averages for the last couple of days I mean, obviously the averages for the last.
Two weeks off significantly higher than what they were the two weeks before and the two weeks before significantly high that way I mean is being up would have only on the bookings and if you would have put in.
No the fixes I've seen for the last two three days on M&A has ranged from 30.
T through to though.
75000, a day that's Ah this week and you know the yellow ones are ranging from.
63, 200 and.
To somewhere around there.
And.
Huh.
Yeah laws are almost I just huge.
This huge.
Okay.
All right well those are pretty large ranges so yeah, but that's it that's actually et cetera, that's what it is so no yeah.
Understandable I'll just ask another question that shouldn't alter how have kind of net asset values or.
Just acidizing general kind of been impacted by the current market strength, you know 20 seconds ago, you mentioned, a steep discount to NAV. So just trying to get a better sense for kind of updated not estimates or decide that means.
No idea, we haven't thought we have done a calculation a proper calculation ourselves I mean its a.
You know that's changing every day with the actual cash generation. So the cash generation is positive.
I can't imagine that any product tanker that you know less than five years is is.
Not at least maintaining if I'm not going up in value in this rate environment, especially against the forward book is virtually nonexistent I can you know obviously is right now once you get vessel product tankers over 10 years old then yeah, then because they've already got like three or four more years of useful life in products.
And it could materially hurt their values, if the markets week for a year or two then yeah, maybe that values, a little bit softer or or whatever but we don't have any of those so we don't refocus much on that.
And so we don't know what they are exactly the you know we're not out there looking to buy more ships and robust seem not to sell any.
Got it okay.
Right there to get to give you some idea I mean.
You know that think how much that LR designing in that short period. I mean, there was no way either the value that ship is declining right now.
Sure I'll take the same for the MRC.
Well that's it for me thank you.
Thank you and your next question comes from Ken Hoexter from Bank of America. Your line is now one thing.
Hey, good morning, Robert Brian can Larsen Emilio so.
Robert the cost per day was up 1.8% year over year, but but down sequentially can you maybe just talk about the moves you're making on that on the cost side, because that that look to actually improve as well I know the rates are the big focus, but I just wanted to ask on the on the cost side real quick.
Cameron Brian.
Hi, Ken well does a few things going on obviously the biggest part of that is the deferral of the capex for the scrubbers.
No bear in mind, there's already a regulated regulatory drydocking schedule that we cannot avoid but all that marginal or say optional capex on top of that we've now pushed back at least until 2021, maybe further.
And now when it comes to normal operating expense.
In this environment, obviously, the logistics around supporting vessels in the personal on those vessels becomes much more complicated.
But thankfully it hasn't been a terribly costly exercise, but you can imagine the job of getting people to and from vessels getting spare parts Vicki equals a other essential services surveys for those vessels becomes challenging and sometimes the cost will creep up but we think thats a short term phenomenon, particularly.
Asia starts to reopen are losing some of the.
The more stringent restrictions they've had in place.
So the of the effect on Opex hasn't been large very material.
As far as the other cost maybe I'll hand, it over to Brian Chavez gives anything else to add.
Thank you and your next question comes from Ben Nolan from Stifel. Your line is now open.
All right well I'm not Brian, but I do have a few question.
The first is as it relates to a inc. and maybe actually this for years. It relates to there's 19 scrubbers that are delayed you kinda talk through earlier that you ultimately it's a decision that you might make that to not have them installed at all depending on the market dynamics.
Great that you can delay them without any fee, but would there be any fee. If you were to choose to cancel those that right.
Thanks, Ben you know I'm, just gonna take a pass on that because we have a an ongoing dialogue with our supplier.
Who's been very understanding there are lot of levers in place a there's a small amount of advance payments that had been made up for the manufacturer in delivery of some parts and not a huge portion of the overall spend.
So it's just not some question I'm able or in a position to answer right now.
Okay perfect completely understand.
And then just.
They sort of modeling, but not really a handful of I think a three a handys.
That are chartered and that we're coming off contract looks like there was a short term I extension of that or should we expect that beyond may those are likely to remain in fleet or probably not.
Topic.
Well. It then we will deliver those ships by the end of.
June latest so those three vescos, you're referring to are going to are going to exit the the fleet.
Okay perfect. Thanks.
And then a and then lastly, just sort of a capital allocation question. Obviously clearly are using all of the excess cash flow that you're getting ready to strengthen the balance sheet.
Hoping that you might be able to died down a little bit more deeply into exactly how you envision that happening in this kind of a market.
Are you, obviously, you're making your required debt repayments and everything else do you think you anticipated just sitting in cash or you think about maybe prepaying.
Some of the unsecured debt or maybe.
Buying back some of the convert I would just trading below par here.
Any thinking about sort of how your staging that or <unk> that.
Entity with respect to sort of capital allocation.
No right now you said you know you just focusing on booking it and as Brian said, there's a lag before we get the cash.
So you know, we'll get the cash and then look at the set of opportunities at that point.
Okay.
Alright, well that doesn't for me thanks, guys.
Thank you.
Thank you and your next question comes from Liam Burke from B. Riley FBR. Your line is now open.
Yes. Thank you Brian you discussed earlier in the a call about the receivable spiking based on the higher rates et cetera.
With the marriage or you seeing any extension of terms with your customers or being paid on time or would you anticipate any extended terms on on the receivables.
We were no we're getting paid on time to the pools in the pools are collecting on time as well. So you know there will be some delays what portion maybe Cameron manual could say a little bit more what's going on with that but we're getting paid on time.
Yep.
Just to reiterate what Brian saying.
Freight the payment of freight hasn't changed the payment of demerge hasn't changed the amounts have gone up so our.
Counterparties and their credit worthiness.
Has not where their performance has not been a question.
Demurrage that portion for those that don't know is a.
Reflects weight extra waiting time.
I'm in his separately negotiated.
Great.
Waiting time, but the price we charge for that waiting time has gone up but the payment of demerge hasn't changed or we haven't seen it change since.
Starting the first quarter.
And just to follow on or is there are there any rumblings aren't changing those terms of didn't yards.
There have not been at that maybe a.
You could refer back to what Robert in large said, which is.
Not changing the terms for voyage, that's already been contracted.
But for new voyages, many customers our pricing in storage options on the back of a completed voyage.
Which is one way to say that some customers are widening up to be expense. They are incurring from all this to merge and negotiating a storage contract upfront.
And we've seen a fair bit of thank you.
Okay. Thank you very much.
Yes.
Thank you.
Concludes our question and answer session for today I'd like to turn the conference back over to Brian Lee for closing remarks.
Good thank everyone for joining us, saying, we will speak to you soon thank you bye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect.
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