Q1 2020 Earnings Call
Good day, everyone welcome to today's Teekay tankers limited first quarter 2020 earnings results conference during the call all participants will be in listen only mode. After work it will be invited to participate in a question and answer session.
Time, if you have a question participants will be asked to press Star One to register question first assistance during the call. Please press Star zero.
This call is being recorded at this time I'd like to turn things over to the company.
Kevin begins I'd like to direct all purchase inventory website at www Dot Teekay tankers dot com, where you'll find a copy of the first quarter 2020 earnings presentation can minister movie. This presentation during today's conference call.
Allow me to remind you that discussion today contains forward looking statement actual results may differ materially from results projected by those forward looking statements additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements.
During the first quarter 2020, <unk> earnings release and earnings presentation available on our website.
I will now turn the call over to Kevin Mci, Teekay tankers, and president and CEO to begin.
Thank you Ryan Hello, everyone. Thank you very much for joining us today for Teekay tankers first quarter 2020 earnings conference call.
I hope that you and your families are all safe and healthy.
Joining me on the call today are sure I'm trying to Teekay tankers CFO.
Chris you want the great director of research for Teekay tankers.
Before we review our results I would like to say, thank you to all of our seafarers and shore based style printer extraordinary efforts continue to bring energy to the world Teekay spirit.
Well Cobiz 19 is having an unprecedented impact on the world.
And he's clearly your major focus for us.
We are truly probably to power seekers I'm sure colleagues, who responded to covert 19.
Commencing you standards.
Focused on the health and wellbeing, everyone involved in our organization.
Especially our colleagues it see.
Well, maintaining consistently safe and efficient operations for our customers.
Additionally, we are fortunate the tanker market and our financial results have been strong so far in 2020.
We have had minimal impact on our operations related to cope with 90.
Moving to a recent highlights on slide three of the presentation.
Teekay tankers generated total adjusted EBITDA.
Looks maybe $155 million during the first quarter.
The increase is 17% and 145% <unk> fourth quarter of 2019 in the first quarter 2019, respectively.
Reported adjusted net income of $110 million, what $3.27 per share in the first quarter up from adjusted net income $83 million $2.47 per share in the fourth quarter of 2019.
And $15 million were 44 cents per share in first quarter of 2019.
[noise] Teekay tankers first quarter earnings per share was the highest more than 10 years, resulting in an industry, leading 20% earnings per share yield for the quarter.
Based on our closing share price yesterday, and annualized EPS yield, 80% clearly demonstrating the earnings car my business.
We have continued to strengthen our balance sheet with strong free cash flow from operations $140 million completions, three vessel sales totaling $60 million during the first quarter.
Just in light of Teekay tankers to reduce its net debt right $200 million well over 20%.
We increased our liquidity position to $368 million during the quarter.
Our net debt to total capitalization declined to 40% the end March compared to 48% in the fourth quarter of 2019.
And it remains our intention to continue reducing this leverage and increasing our long term financial flexibility and resilience.
Subsequent to the first quarter, we're continuing to generate significant free cash flow.
No so close to $27 million sale non U.S. portion of our ship to ship transfer business.
Approximately $14 million cash payment.
So you can closing there's a balanced you know there's.
Crude tanker spot rates with the highest in more than 10 years during the first quarter.
Second quarter rates are also expected to be very positive based on from quarters. They bookings.
In addition, we were once again take advantage of the robust tanker market fixed nine additional vessels on time charter, which will generate significant forward fixed rate revenue and lower our breakevens, which we will touch on in more detail later in presentation.
Turning to slide four I want to provide an update on our current operations. During this unprecedented global pandemic.
[noise] health and safety of our crew and shortstop is paramount for Teekay tankers.
Implementing district managers on all the bar ships to protect their seafarers Oh, the vast majority of our shortstop are working remotely from home.
Crew changes we remain meet your challenge for the industry most countries a place restrictions on travel visa applications cruise gets embarking from chips.
We're working hard with both industry inter governmental organizations to tackle. This challenge we remain in close continuous communication or colleagues at sea to provide support during a challenging period in which they are truly stepped up to that challenge.
I'm pleased to report that was the result, the team's dedication to health and safety and their professionalism. During this time.
No covert cases on board any of our vessels further our vessel availability remains unaffected with no impact on our vessel days.
Well prepared to manage any potential spares shortages.
Team identified critical items made advanced purchases early in the outbreak were given our experiences through 2003 Sars epidemic, we anticipated challenges released first manufacturing and logistics.
Additionally, the team has obtained class I'm slightly extensions for two vessels that reducing dry dock in second quarter, ensuring minimal interruption roughly operations.
Overall, the fleet has performed exceptionally well in first quarter and second quarter to date, we expect this to continue.
Turning to slide side, we look at recent developments spot tanker market.
Crude spot tanker market started the year on a relatively firm note strong supply demand fundamentals see fourth quarter of 2019 carried over into the first quarter of this year.
However rates gradually soften during the course of January and February due to lower demand over the Chinese new year period. The cobot 19 outbreak began impact Asian crude oil inventories.
The tanker market improved quickly during March we the collapse plus agreement.
Certainly the low price war, but you margins in Saudi Arabia in Russia.
By April Saudi Arabia push the total production to a record high of just under 12 million Boes per day, creating significant additional tanker demand.
The same time global oil demand plummeted from March one merck's as large proportion of the walls population became subject to low band orders in an effort to slow the spread of Cobiz 19.
According to the I'd, a global oil demand declined by around 25 million barrels per day year on year in April as demand for fuel transportation fuel collapse.
This led to a huge mismatch between global oil supply.
On the historic build in global oil inventories.
The rapid build in inventory is true oil prices to multiyear lows.
First the crude oil futures curve into the steep contango, which encouraged oil companies and traders to book church for floating storage.
We're also seeing a large number of ships titled.
Due to delays at Port, which is further tying up available fleet supply.
As shown by the chart on slide around 100 crude tankers are currently being used for floating storage, which we define as being in storage for at least 30 days.
It's over 100 additional ships sitting imports on demurrage for periods of between seven to 30 days.
All told around 10% crude tanker fleet is currently being used for some form of floating storage, thereby reducing the number of ships available for transporting cargo.
It's tightening of available fleet supply.
Bank with healthy cargo supply caused a significant increase in tankage utilization during the first quarter.
As a result insights tanker spot rates during the first quarter with the highest in over 10 years.
In the near term, we expect the ongoing stories demand port delays.
Ladies and tie up tonnage and provide support to crude tanker spot rates, even as cargo volumes start to decline due to oil supply cuts.
Albeit at lower rate levels, the exceptional rates so during March and April.
Turning to slide six we give the somewhere of our spot fixtures in second quarter of 2020 to date.
Based on approximately 69%, 64% spot revenue days booked teekay tankers second quarter to date, Suezmax and Aframax bookings have averaged approximately $52100 $33200 per day, respectively.
Prior to segment were approximately 58% in spot revenue days booked second quarter is a bookings have averaged approximately $34300.
As discussed in the previous slide while the freight market is still relatively firm rates have come off from the exceptional Heinz seen during April we expect spot rates during the balance Q2 to be at lower levels than those booked in the quarter to date.
Turning to slide seven we outline our recent tanker chartered time chartering activity.
Over the past eight months Teekay tankers has taken advantage and strong spot tanker market spikes and opportunistic leaf secured fixed time charter coverage 10 suezmaxes.
Aframax size vessels attractive rates.
One suezmaxes chartered for six months, so remaining nine suezmaxes being charter for one year.
The optimizes were fixed for periods of between one and two years.
As can be seen on the chart. The time viewed deals with spikes in the time charter market. During October December more recently in March and April.
Good luck in rates and forward revenue well above the average spot market levels seen over the last several years.
A few deals have resulted in approximately $170 million fixed over time charter revenue and accounted for approximately 20% total ship days over the next 12 months significantly reducing our cash Breakevens, which Stuart will cover later in the presentation.
Turning to slide eight discuss some of the factors, which we anticipate will impact tanker market.
Over the medium term.
Given the unprecedented in passive cobot 19, we woke economy is extremely difficult to predict with any certainty how oil fundamentals will develop the term.
How exactly this woman tanker demand in coming months.
Well floating storage in port congestion remain strong supportive elements tanker demand.
We acknowledge that at some point during the second half of this year period of oil inventory de stocking is likely to occur and this may weigh negatively impacted demand for a period of time as has been case in previous market cycles.
However on the positive side is important to highlight the unlike past cycles Orderbook. This time around is very small.
And owners have for the most car held off from ordering despite strong earnings in recent quarters.
The current tanker order book measured as a proportion of the existing fleet is the lowest we have seen at 23 years just under 8%.
This is significantly lower than the almost 50% of the fleet size in 2008, the 20% seen in 2015.
Proportion as which meaningfully read on the ability of the tanker market to recover the demand returns.
It's also important to keep in mind main reasons for lower ordering during the current cycle.
Lack of available finance and uncertainty over which propulsion and fuel systems to order, given new technology development and upcoming environmental legislation.
Neither of which is currently anticipated to be resolved in the near term.
Given this we expect contracting for new tankers to remain low in the months ahead.
In addition to a small order book given the World tanker fleet age profile large number of ships at least the likelihood of scrapping in coming years.
Looking at the mid size tanker fleet, specifically around 370 vessels are aged between 15 20 years old compared to our current order book for just a 140 ships.
As such we anticipate very low fleet growth for at least the next two years, particularly during periods of if we could tanker rates. This may provide impetus for owners to scrap these older vessels.
In summary, the tanker market faces uncertainty over the second half of the year.
Positive tanker supply outlook may lead to a faster rebalancing in previous market cycles.
Teekay tankers I'm confident that our focus on debt reduction strengthening of our balance sheet.
Puts us in a strong position to weather any periods of market softness while looking for opportunities to further increase long term shareholder value.
I'll now turn call over to secure to cover the next couple of finance lights.
Thanks, Kevin turning to slide nine we highlight our continued focus on increasing financial strength.
We ended Q3 2019, utilizing very strong cash flows from operations and proceeds from asset sales, we have transformed our balance sheet.
Thing net debt by approximately 270 million or 27%, an increasing our liquidity position by almost four times to $368 million.
In Q1 alone, we reduced our debt by approximately $200 million or over 20%.
And more than doubled our liquidity position.
I'm pleased to report that the strong cash flows achieved in April further reduced our net debt by approximately $60 million and increased our liquidity position to $420 million.
In addition to 13 fixed rate contracts that Kevin touched on earlier have lowered our cash breakeven by over $4000 per day for the next 12 months further increasing our resilience to potential medium term market market weakness.
With the reduction in net debt, our strong liquidity position and no significant debt maturities until 2024 as shown on slide 13 in the appendix to them to the presentation, we continue to increase our financial strength and flexibility.
Turning to slide 10, we discuss how teekay tankers continues to create value for shareholders, a generating significant free cash flow.
Starting with the graph on the left side of the page Kincaid's free cash flow increase from a very high 102 million in Q4 2019 to 141 million in the first quarter of Twentytwenty for a total of over $240 million in just two quarters.
The protein cage free cash flow during the first quarter into perspective on an annualized basis. It equates to a free cash flow yield of approximately 100% based on our closing share price yesterday a $16.05.
Referring to the graph on the Rightside TNK continues to maintain significant operating leverage with approximately 80% of spot exposure over the next 12 months, while reducing its free cash flow breakeven by locking in time charters at significantly higher rates.
TNK is expected to generate strong free cash flow in the second quarter and generate positive free cash flow at average midsize tanker spot rates above approximately $10500 per day. Therefore, we expect to continue creating shareholder value through positive free cash flow in almost any tanker market.
With that I will now turn the call over to Kevin to conclude.
Texture.
Turning to slide 11, this is familiar slide which summarizes our strategic priorities for 2020.
We laid out at our Investor Day last November.
I'm proud of our team for continuing to execute on these priorities. Despite the unprecedented global events. We are currently experiencing.
The capitalized on the strong market was the majority of our fleet trading spot.
While opportunistically fixing our 13 vessels on time charter peaks as the time charter market.
Financially, we have bolstered our balance sheet the significant delevering.
Building, a robust liquidity position.
Despite the majority of our employees working from home and facing logistical challenges related to changes, we're able to complete three vessel sales and the sale of non us ship to ship transfer business.
Lastly, we believe Teekay tankers made the right choice and switching to low so fuels, which was asleep seamless low cost transition compared to others have invested in scrubbers lunch or speculated on fuel spreads incurring additional capex debt or losses.
Our focus on debt reduction create shareholder value directly through increased net asset value.
And also increases financial flexibility and resilience, which is important in all tanker markets.
With a low free cash flow breakeven.
Strong liquidity position.
Lower balance sheet leverage no significant debt maturities until 2024, and our mid size fleet profile. We believe that Teekay tankers continues to be one of the best position companies in our sector to continue creating shareholder value over the long term.
With that operator, we are now available to take questions.
Thank you at this time, if you do have a question that will be star one once again star one for questions.
Your first today from John Shapell with Evercore.
Okay.
Thank you regarding pattern there.
Right.
Pretty clear presentation on executing the strategy certainly wanted to focus our capital structure.
Obviously, the net debt is coming down pretty significantly not that it does that answer. So can you talk about the ability to repay debt quicker than the amortization schedule and especially as it relates.
I think you gave in the Investor day back in November.
There are some time greater wouldn't start to creep into leases. There obviously, the most expensive that we're going to start fixing some of that cash flow.
Finally, there.
Capital structure.
Hi, John Thanks for the question. So as you can see on the balance sheet, we have approximately 200 million cash and cash equivalents at the moment, which is.
More than we typically more than we typically have on the balance sheet.
Our first purchase option on the more expensive leases came up in Q1 of this year.
Those came up right at the beginning or the outside of the of the cobot pandemic and we decided to be a bit more conservative and not exercise those initial options just as we saw how things played out.
Within those auction those options do come up annually.
Bonnie bundles first set and we have another set of options, which come up in Q4 this year. So.
As we.
Market stabilizes and things are are looking.
I'm a little more certainly we would expect to exercise those purchase options toward the end of year as early as recently as we had initially planned and then also look too.
Exercise further options into next year, so just for order of magnitude.
The options coming up in Q4 that we can exercise have a balance of approximately 60 million and the ones into into next year of about 140 million. So theres significant amount of more expensive debt that we can pay down.
Okay.
And then just wondered imply that understanding of that.
On the way it likely at the earliest.
Could you pay downs grains that or do you just keep to cash on the balance sheet given the uncertainty in the market.
And then kind of saviour firepower for rent.
With the high single digit that comes down.
Yes, what how things have gone over the last couple of months and now the bank markets looking we anticipate that we will reduce those cash balances and pay down.
Some of our revolver debt in the meantime.
So I wouldnt expect to see that balances come down by the end of Q2.
Okay.
That's what we all had to get back suicides okay.
Great. Thank you. Thanks.
Well hear next from Ken Hoexter with Bank of America.
Hey, good good afternoon.
Even store right.
Can you maybe just go through I know you talked a bit about it at the analyst day, but what gets you to lock in more or do you want to stay spot in this kind of market, where you get some of these extreme moves on on pricing do you can you kind of want to keep playing those balances are you'd say I know you did the 13, but would you look to lock in more if we got another.
Turning in the market.
Yes, I think of described this should at Investor day, It's it is opportunistic.
Also.
A balance between where we think the.
The forward revenue is going to look like versus locking in an opportunity.
As we see it so if we do get another spike which she is possible.
The next few weeks and months.
Yes, the right opportunity comes along at.
Rates that we believe our worst looking for.
Six months when you two years.
You may see us execute on some more certainly we don't have a fixed percentage in terms of.
What we wanted to spot market is something that we evaluate on a continuous basis.
As the world evolves.
Especially during this time when that from week to week.
Picture can be materially different.
Thanks, Ken I think given how rates have started to decline and that they saw the last few weeks what your thoughts here.
Obviously, given the oversupply in the pullback and just general demand from coal that the now as the world starts to open up again.
You look at what your thoughts as we move forward here on them.
Demand side of the equation.
Maybe chewing up some of that excess capacity that's out there and then relating to your thoughts on rates.
Well I think.
Overall, and as I said in my prepared remarks.
It is a very highly uncertain environment, we're trying to operate in at this point in time and although we haven't seen some weakness coming to the market is.
Unprecedented heights.
We're sitting here in.
In late May and my Aframaxes in Asia are still making over 30000, those hey, rich relative to most maze is a pretty healthy market.
But I think going forward as we said, we do anticipate a period of Destocking.
But at the same time, we also have the question are unfolding storage and is.
Slide show there.
Previous periods of floating storage its not necessarily something that's going to unwind overnight.
And if it does take longer to to unwind that is something that could be very supportive.
To conclude tanker demand.
So our our view on where the spot market goes to be honest today is uncertain.
We're watching a lot of different variables very confusing market.
No ranging too.
What the floating storage situation is where which economies around the world are coming back strongly.
I think at a 50000 foot level, if we look towards China and see how quickly their demands as ramp back up in transportation fuels and.
General oil demand.
I think if the rest of the world can follow that caught early bodes quite well for the future.
But.
We'll have to see.
And we'll we'll take a day by day.
Right.
One more I guess off on the process endpoint asset sales given you were able to get that done in the quarter.
Was that something you've seen a lot of activity or or interest in acquiring vessels, we got more just storage and kind of.
Significant demand need maybe you could just walk us through that process to understand how quickly the market developed for for acquisitions or was that just looking to the.
Capitalize on an opportunity.
No I might be.
The S&P market as we sort of been two third over the last.
Six to nine months.
I think as we we entered the fourth quarter last year.
Fundamentals across the tanker space.
We're improving quite rapidly.
That was being reflected an uptick in spot market rich.
Was helped by the Costco situation.
So I think the the demand on the S&P site for assets early in his recent cycle has been driven basically on on strong supply demand fundamentals for tankers generally.
I think as we've moved into.
The coded era as I call it from sort of February own words.
The demand for assets is really being around taking advantage of current spot market and.
Finally, the time charter market.
Where we stand today I think the.
It has has gone relatively quieter in some segments.
H. concepts, but we're still getting inquiries for some of our older units.
Something we will continue to look back in relation to where we.
Even market moving or whether the pricing and we're being offered is worse, taking that solves the table.
Wonderful and if I could just throw one more ed.
Kevin and you're in your past experience how long does the storage take the on why you kind of throughout before that.
On this if it if it if it's not going on what overnight, but if they might take longer that supportive and was it just based on whatever those individuals for signing whether it was six months nine months a year.
Or or is there kind of a trend that you've seen based on your past experience.
No I think every market is different every trader is different than every deal that trader has done is different.
It's important to understand though that.
Well todays contango doesn't support.
Floating storage over the long term a lot of the deals that were done early in this process.
When oil prices were far cheaper than Merck, where they are today.
Well in the money and.
How long that takes on wind will depend on has for a particular trade or may want to hold up position.
So I think thats why its it's important to understand that.
Close todays contango is no longer supported it doesn't mean floating storage is going to go away overnight.
I think the points take away is that we don't know see how it plays out.
But.
We wouldn't be surprised if it weren't to to linger for awhile.
And possibly return if oil prices do do come off and get contango banking.
It is surprising how quick that jumped up appreciate the thoughts thanks.
Thanks, Ken.
Well hear next from home or not.
Since I took a security.
Hi, guys. Thank you.
Kevin adjustments already in the spot for Kens question, but wanted to follow up on the ideal for ships all the last year outlined the strategy of focusing on de leveraging.
And big piece to that was going to be also from older assets.
If I kind of cleaning from from your comments that with especially with the liquidity position as the cash division that asset sales right now a more of an option, but it's not something we're focusing on going forward.
Well, we've always said, we're going to look good.
Sales opportunistically.
I think selling selling assets into a stronger market.
Yes.
Sometimes it makes most sense, if you're getting the right price and sometimes it doesnt we felt good taking some of the older units off.
When we did was the prudent decision.
But going forwards.
We don't have a set plan that we've got to get rid of five more or three more.
It's.
It's a lot about what we can see being offered in the market and comparing against where we think asset will learn over the remaining life that we have.
Shipping companies.
But it would be our liquidity position and our strengthen our balance sheet.
These is extremely nice to have an its has transformed the company and we.
We will help and when you look at things I think our S&P strategy will continue to be opportunistic and depends on pricing.
Yes that makes sense.
I guess, one when we think that Bill fleet age. It. It's obviously not all that don dependent than that that'll period.
Are you concerned with the age generally.
The thinking about the opportunistic selling of the vessel what the thoughts of selling shifting replacing older ones, so maintaining im sorry.
In Europe, we're basically been forming their critical mass and not necessarily change in the five people just going up in age that's something that you can see ourselves doing here once the talent purchase market volatile but.
Well first of all over the category can stay there is nothing wrong with an older assets.
Generally the that's been paid down and in markets that we've seen over the last eight months. They are cash codes that any owner will be proud to it.
So in terms of our.
Our fleet age profile on more than happy with where we sit today.
I certainly wouldn't want to be sitting in the Brian.
Hi capital cost so.
As we as we move forward.
We stated in our Investor day presentation in November we would not be looking at asset purchases during this cycle and we stick by that.
Whether we further prudently fleet.
Again, we'll be opportunistic goods.
Eventually over time, we'll have to to replace ships.
But that's not on our radar today.
And.
Our.
As I said in our presentation, our focus will remain.
Generating the cash flows we get from the market and.
Putting all of that comparable to to work reducing our debt.
Okay, that's fair.
I got it.
And then maybe just one more question then it's just on that.
Claim versus 30.
Obviously, if I recall here most of your LLC does not all of our trade Guardian and that obviously improve there over the past couple of quarters. This quarter, obviously, the queen market. When does work just want to ask.
Coronation on your part to want to try to bring some of those entered the clean trade are you happy uncomfortable sticking with curve.
No we note.
Again, I think I've said this on previous calls the beauty of DLR two is flexibility.
So.
If we if we can find an opportunity to clean ships out.
Where the returns are maintained and still good and certainly we've got.
No barrier to doing that.
It's obviously.
Current flip overnight and have to find the right cargo in the right position.
So it does take a little bit of time, but.
We've got no objection to it to flipping them shift back into the clean trade sickly market can hold up.
I think we've seen.
The last couple of days that.
That market is starting to soften as well.
And returns are fairly comparable with what we're getting today.
Certainly in Asia, so on and on the Dirty sites. So.
It's something that we just we watch on a weekly basis and meet the termination based on ship availability to using when the next open positions are.
Okay. Thank you Thats helpful. Appreciate it.
No worries thanks Omar.
And we'll go onto value investors, it's James Meyer.
Hi, good morning, gentlemen, congrats on an excellent quarter.
Thanks Jay.
Thank you Jay.
Yes, it's pretty phenomenal they'll look at your slide there and see the transformation you guys have done in seven months I had a pretty pretty impressive going from very risky to arguably quite stable with that said what is kind of forward goal for leverage I know, we've been talking around it a little bit.
Safer looking into 21, no dividends, so why but is there a target leverage specifically say, 30% or something we can nail down.
No there isn't a.
Specific numbers that we will prove out there.
We ended last year by building a strategy that.
Laser focused on.
Retaining the earnings and paying down our debt.
And I think.
Regardless of what the margin given us in the first half.
The goal is to stick to the plan to go through 2020, and maintaining that de levering and.
At the ended the year, we'll take a look at where we land than what we've been able to accomplish.
And working with our board. We will then look at our capital allocation strategy for 2021.
But at this point in time, it's not on our mission critical list.
We're much more focused on how we're handling cope with 19 and what we do over the course in second half of this year.
Definitely reasonable hopefully the trajectory will fuel savings of on the leverage coming down I had some good discussions earlier with Omar about asset sales I know you haven't identified specifically, it's tough to sell in this environment. I've noted you had eight ships that are over 15 years are there was considered I know they're profitable now what are those consider.
Not specifically for sale, but are there was kind of non core or do you consider those longer term.
Every ship is core when it's making money.
You know as I said the older ones of the pay down a fair bit of the debt. So.
We don't sign.
Specific ships to specific targets look at it based on on what we can offer do market.
Right now, though in the S&P market.
Doesn't seem to be any appetite for for anything younger than.
In 12 years old so.
It may be that we get offers on the older ships more than the younger ship.
Yes, definitely makes sense I know, it's going to get spraying and so far decent summer.
Looking at your valuations Lucky traded a large discount to anybody and that's even use in quarter one financials within this quarter to financials, even worse, it's like a 40% discount.
I know you said dividends are off the table to 21, I think thats prudent. It's the same thing true for repurchases is that something we just need to wait until they can say January 21, and wake up or is there potential for some sort of program that way to close the gap.
No I think the share buyback is the same the dividend its moment table floor for now we're focused on delivering the nuts. That's what we came into this year focused on doing and thats going to envy, you're doing we'll reevaluate and take a look of next year.
Sure when when we need to in the life at that point.
Understandable final question for me at one of the biggest inquiries I get from a lot of fellow investors and folks interested in the company is everybody is terrified that shipping companies like yourselves are going to de lever filled up all this cash I do a good job, but then take all of that cash and below all of it on newbuilds well the stock is trading at these huge.
Discounts anybody can you offer some sort of pledge or guarantee that youre not going to spend money on newbuilds, where asset acquisitions. If your stock is still trades at a discount anyway.
No.
Where we're not in the game of Empire building, we're in the game of making money and we'll evaluate.
What we do with our capital allocation.
Whether it's new buildings or or share buybacks or dividends.
At a point when we feel that.
Other than Delevering, we can add value to shareholders.
I have never been a big proponent for wanting to ship yards in ordering a slew of the.
50 ships.
[music].
Good.
We look at the second hand market, we look at new build market.
Our share price valuation.
And we have a little a detailed discussions with our board about all those aspects.
In terms of what we do with our capital allocation.
And hopefully other than that are doing things.
Keep their money in pockets and I don't personally I don't think we'll see a lot of ordering I think the the access to finance.
And the the questions around future regulatory requirements and fuel technologies.
Is going to keep people on the sidelines.
The majority.
For quite some time.
There will be ordering it will happen.
I don't think we'll see it in the same.
Quantum's in the same mass that maybe the scene in past cycles for those reasons I think though.
I understand well, thanks for taking my questions and aggregate shop, the last few quarters.
Thank you Jay I appreciate it.
Your next from Randy given this with Jefferies.
[noise] added downturn has gone.
Well thanks Randy.
Gogo acquired dropped off on medical times, there, but got him back so your quarter to date rates pretty solid we can control fixtures.
Obviously pretty prudent here.
<unk> weeks rate.
Paul obviously from the remarkable levels to pretty good levels right can you quantify the recurring reduction in rate.
The level of spot rates that you book, maybe this week and then with that how at the time Charter has responded for example, what the current one year time problem for us to look lots that off among the though.
Yes.
Sports side, it's a very bucket.
As we said earlier.
From access there are still fairly healthy in the far east.
Or above 30000 a day.
Suezmaxes likewise in.
Same sort of rate region.
As you move over towards the made that is a little bit softer we are seeing a reduction of black sea exports, we met market softened.
Hello further goods, so it's a moving target.
And then some in.
That moves every day constantly frozen fund.
In terms of time charter markets. It is quieter this week and we've seen in recent weeks. There is a couple of inquiries still out there.
But nothing could be the rate levels.
And pull the market that is uncertain, because obviously the spot market.
Hopefully a little bit owners ideas and they could come off a little bit so we'll have to see what the.
Well the sentiment actually does when somebody puts a ship on subjects and we'll pay too much from there.
Got it okay.
And then.
Kind of your balance sheet liquidity, obviously, improving rapidly congrats on that right now looking at your.
In terms of profitable growth.
ROE.
Their preference for Suezmax birth, Aframax and are you kind of run coming together midsize asset.
But can you differentiate birth report.
Two point, so make and answering your question on that Randy.
First we were mid sized tanker companies that is our core that is our specialty.
Thing.
You'll see us deviate from the into other segments. So.
From Axis Suezmaxes arteries.
We'll take a look at our fleet profile looks like and we do arrive at a time. When you include reviews were the use of capital.
Well, we'll allocated between those three segments.
Good point I'd make is as we said in November.
We're not in the market to review our fleet at this point in time.
And that remains so.
Very much for the rest of this year.
Hi.
For me, Thanks again for the time.
Thanks Wendy.
And at this time I'd like to turn things back to Mr. Mci for any closing remarks.
Oh.
Thank you for joining us today and please.
Yeah, and all of the families they say.
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And that will conclude today's conference again, thank you all for joining us.
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