Q2 2020 Euronav NV Earnings Call
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At this time I'd like turn the conference call over to Mr., Brian Gallagher head of IR Sir.
You may begin.
Thank you good morning, everyone joining <unk> future.
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My presentation, he goes I could see it.
Thank you, Brian well come to our coal to the.
In terms of the agenda I will first be run through the Q1 highlights before passing on to leave the logo. She who will provide a few financial review of the income statement and the balance sheet.
And Brian or head of Investor relation market research and communication, we look at the current themes in the tanker market and your thoughts out.
Before we take questions.
So turning to slide four and the hard like speech.
Thank you markets continued to be very strong during Q2, even stronger than in Q1, which is surprising is usually the second and third quarter seasonally weaker.
What is remarkable is that we have already enjoyed three consecutive quarters. All deals you see rates over 60000 Boes a day in the spot market.
And this for the first time since 2000.
These robust freight market has continued into Q3 with nearly half of or you will see see.
Covered at rates just over 60000 barrels a day. The Suezmax also performed very well with just under $40000, but the so far to treat.
It was solid foundation to answer the second half, but admittedly with far less visibility than usual.
We told you a year that Q2 would bring the strong and sustained storage market opportunity. This was not really the keys, yes, a number of you'll see she wear and all still the use of storage units, but fathers then what many of these and ourselves had predicted.
Nevertheless, as the figures industry. This has been one of the strongest markets for over a de Kate.
The Super strong cash generation Euronav has been able and very keen to return a lot of cash to our shareholders.
We started to distribute a total of one point 57.
Dollar per share in cash dividend since lately and more recently, we have executed 75 million share buybacks over the past two bonds and we will do.
This brings me to slides five and capital allocation that you're down which remains an important key focus for the board and management.
Indeed, you're not remains committed to returning capital and create value for stakeholders and LP is a strong freight market as giving has given us the opportunity to demonstrate this.
Given the lower acreage evaluation as illustrated borrow share price and the last few buttons, we've started to buyback or launches. So far we abuse 75 million from the Q2 earnings to buy or shares at an average Friday, which is very accretive to existing shareholders.
In addition to date, we announced that we will use stood at $25 million to buy or shares using proceeds from the idea of Q2, and we will duties by the end of September.
That's you're now we always try to balance to be balance been consistent ignore allocation. We do have some mandatory debt repayment as well as some revolving credit facilities predictions, which on the cash, but given where our cover current leverage is we do not need to be more dates for the time be.
We have design or return to shareholders policy pizza, many aspects of the business into account and indeed, we're very pleased to beat it position to be a cash dividend of 47 cents per share relates to the second quarter. In addition to the hundred million or did you spoke about on the share buyback program that will be returned almost from tours.
Sure.
So overall.
The shareholders will receive 196 million in cash from your NAV.
As they relate to the Q2.
Roughly half of it in cash dividends and whole foods and share repurchase at the same time during the balance sheet is improved by 60 million cash to reduce our net debt position.
Well repurchasing shares we were always try to create long term shareholder value rather than giving support two a share price, which indeed has been very very qualified during the quarter.
This concludes my remarks, I don't know pass on to see if we need a lot less even longer to run through the fund niches leave over to you.
Thank you as you mentioned, the first half year olds, twentytwenty and more specifically to second quarter.
Very strong in terms of performance, reflecting the strong tanker market [laughter] revenues generated or $535 million, while EBITDA generated was $355 million, resulting in a net income of minus $260 million.
Well navigating to cope with Nike crisis, the company's clear priority has been the safety and those are being over all cohesive and to provide support to the extent to required in the community in which we operate.
Despite the extra cost to support or Q over Q combines in Moscow, an older surgical material strong cost control of the from school more than offset the impact ended you need line.
There was the first thought there was including positive impact all strategic fuel spoken to doesn't 19 compares to the market. We noticed a negative impact in Q2, we won't do mention how that's where does this do you still actively managed as more than 85000 metric tons were both putting tomorrow.
$72.1 million for the Oceania [laughter] this represents more or less the consumption of the second quarter [laughter] you do the strong cash management, resulting in a reduced debt level and you do a beneficial interest rate environment also interest cost reduced significantly in the first semester compares to last.
Yeah.
Moving now to slide seven and the balance sheet.
The company remains in a solid position.
Strong financial balance sheets, I referred to the leverage ratio of 38 going to be persons.
That's about as the liquidity in excess of $1.1 billion.
We have kept a strong level of gosh, I don't disposal for an amount of $280 million, which is more or less inline with last year [noise].
Even though we were active during the first semester in purchasing for VLCC resale [laughter], requiring a down payment of more than $100 million disguise shows well, but she'll that's why the proceeds of the sale of the vessels. The Phoenix it can be a month and the T I tell us.
Moreover, the business requires more working capital because of increased outstanding gosh to be received from the customers due to the high mortgage rates.
Also clear focus has been on the cash collection in order to create value for all stakeholders.
The good performance combined with the Gosh focus allows you enough to keep 20% over the net income to further de leverage with high cash returns to the shareholders.
I don't know handover to our head of Investor Relations brine Hallador for the market size slide right over to you.
Thank you lever, we now look at football things in the presentation before moving on to our outlook commentary on slide nine you can see how the constructing a VLCC is actually being a positive so the water tanker market.
This provides a medium and long term posted backdrop, the tanker sector and for investors, what's your nose bleed structural in nature.
Yeah, you show the order books fleet ratio, which study reduced over the past decade, and now stands at 20 year lows. The blue bars indicate a quotes a new deals you see what does not anticipate there was a strong correlation with the Green line, which is guilty see earnings the interesting feature there for the development over the past three quarters, because you guys said.
Earlier this has been the best three quarters, but I know these perspective, the VLCC since 2000, a night and yet this is not triggered a roster the shipyards an order and give me vessels. This is very encouraging reflects you know view that as a potent mix of structural regulatory financial and environmental factors, which will continue to keep new ordering at low.
Levels going forward moving to slide 10 Global fleet itself, which is also providing positive messages.
Well to be able to stay in Suezmax Global fleet average age and now back to levels not seen in 18 years I think in agencies is one thing digging a little deeper we see around 20%. The VLCC fleet fleet alone, which is now not only over 15 years of age Crucially, we'll have to undergo a special survey in the next seven quarters.
These critical having the best another 15 years of age means a low addressable market for that Tangguh as most charters will not take such means that just what I call goes.
But equally there's no incentive for vessel to leave the market only though.
Special survey cost and up with a $4 million depending on the agent ship condition at that age. Therefore provides an important catalyst behind that so effectively stickle twist.
Sure the September period of low freight rates as we saw in 2018 for instance, when 50 VLCC equivalents were scrapped then we will see pressure with his catalyst for this to take their ships out.
Slide 10, almost certainly underestimate the mountain deals he sees any situation I just unclear how many undertook special surveys during the first half of 2020 due to the Cobiz 19 restrictions.
Slide 11.
Disruption during this first off of the yet and in particular in Q2 has actually been a positive development for the VLCC market.
So I live in illustrates the positive live in a disruption we've seen with around 115 or 18% of the global fleet to be Ulccs, having some fourth disruption.
But only Paula this is related to the contango and the latest storage trade.
The busy season with my importantly on the sidelines covering Iranian sanctions vessels on them. So those in longer term storage and relates to Comed contango.
Around 40, or so well find trading difficult as we highlighted lime green because I have been engaged in Venezuela and trade over the past 12 months.
Well it takes about 100 deals he sees out of the marketplace.
This leaves a number of categories in Blue doesn't show on Slide 11, which have also help underpin quite rights because they've also been largely missing from trading.
The three categories, most notably the 35 or so whatever might you know what weve, it's a market storage driven by the contango <unk> or need still well 18 from a suspected full pacing, Singapore interesting that fleet more or less idols during the Oh most of Q2 and another 20 will say, which have been held up over the last three months.
Congestion at the Chinese pools, we would expect this congestion at Chinese ports to remain for another couple of months. So we won't see somebody's categories coming in the Blue returning to the world trading fleet totaling around about 60 to 80 deals. He sees but this will be progressive will not happen immediately and we'll take some time, we've done that nonetheless does provide a head.
Following us.
As we move towards the latter part of this Ah financial in calendar year.
Moving on to the final market slide on slide 12, I'm watching happened in Q2.
Due to its either said earlier, we're just story of the old market and in particular oil supply substantially reducing the potential storage opportunity for the tanker sector that we envisage that stopped at night.
Rapid reduction all demand during March and April.
It was restrictions because you're pointing kicked in prompted an increase in inventory in both onshore and floating storage.
Slide 12, this reached a peak run about 200 million Boes, a floating storage during night.
During the last earnings call in early May for Q1.
Just a baseball cells are most commentators this figure will be substantially higher that's driving a very considerable the positive disruption for the tanker market I was just mccormick stores would be acute this didn't materialize to the scale. We envisage as we saw opaque plus cuts kicking in very quickly Saudi apartment, so reducing volatility.
Another level of Oh supply cuts towards the end of Knight, our newest production switching off quicker than expected as well.
The tanker market only benefited from an additional $70 million are still with your comment about half of which went on suezmax and aframax.
This is important because they should be taken because.
He writes during April we are especially high on this helps to explain some of the rate differential between they tend to categories during Q2.
But before the E. All right well costs continued recovery at them on towards 97 million Boes per day in September before the rights of recovery eases off in Q4, but crude supply is expected to remain below these levels, implying fill the inventory drawdowns.
Taking all your assumptions of chalk well shows most of the inventory will then have been drilled by Q3 of next year towards the five year average floating storage will still needing to be reduced on deals you see another ticket categories. These will provide headwinds will take a 16 to 2021, along with the demand uncertainty with regard to cope with 19.
Talk 12 does not assume deliberately any floating storage will cost you on July but did you can see floating storage has already come off the peak, but remains high and some to the definition, there's no doubt that some congested bottles. We spoke about earlier in the Chinese coast or included in this definition of storage.
Ill now move to slide 13, and the return of all traffic lights, giving our outlook view the tanker market.
We didn't used to traffic lights system give an extreme volatility in the oil tanker markets during March and April when we lost spike in early May.
And there's no change than usual supply all of them on fuel oil moves from Green Street Green on both the boasting right. This reflects not only the opex cost production costs, but also opex moved amongst the meeting, suggesting they will be flexible in managing supply.
The mom is clearly going to take some time for its own to previous levels. As recent spikes in totaled 19 cases globally and accompanying looked ounces made clear.
Hi, Mark news from Green to Greens, and don't reflecting the lower U.S. crude export potential as you will show production was lower than before.
Little Bad news.
That's the supply is moving in a positive direction I moved to a full green on traffic lights, reflecting as we spoke about earlier the lack of ordering despite very very high fight rights over the last three quarters.
But this was we mentioned before we continue to believe this is a positive structural feature which provides a strong medium terms of poor tanker market.
Our balance sheet with liquidity over $1 billion remains one of the strongest in the sector and this remains on the full green.
In conclusion, there are clearly more negative moves the positive we're fixing the more challenging.
Outlook for tanker markets and as he just said earlier a lack of visibility we haven't had for quite a period of time.
But the key drivers of demand oil supply and ton miles will continue to be subject to uncertainty I, how quickly GDP growth will return to more normalized levels.
In the meantime, how quick crude inventory, both onshore and offshore is drawn down so much that return at the moment.
However, you were enough has very little control over these macro drivers what we can control, it's all on balance sheet and all positioning.
Which is what we will continue to do on a pro active basis.
As we mentioned before we have $1 billion plus of liquidity to manage our business should we have to appeal to a staying challenge quite rights or leverage remains amongst the lowest in the sector.
[laughter] proactively I'll get to summer months in our capital allocation.
Already repurchased in $74 million the cheapest that's it that's available to us.
Mainly our own shares.
We've also added today the capacity to bought another $25 million.
Oh share buybacks derived from Q twos earnings.
With that Oh popped up the operator I'm a poll for questions. Thank you for your attention.
[noise], ladies and gentlemen, with that will begin today's question and answer session.
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At this time, we'll pause momentarily to assemble the roster.
And our first question today comes from a mission to hold true from Deutsche Bank. Please go ahead with your question.
Thanks, operator.
Hi team.
The fair and balanced approach in the presentation I mean, the fact doesn't matter is a weak markets could actually be quite good.
For shipping company with a good balance sheet and you're not obviously as bill.
Definitely through counter cyclical investing.
You can generate kind of earlier several years ago, you know what the balance sheet, obviously getting better and better every quarter, even despite the big payouts, you know where there any opportunities you know for and block transactions. You go there obviously, many private tanker fleets out there that maybe there's not as much transparency.
Visibility on in terms of what's for sale and what's not are the bid ask spreads maybe are still wide.
Comment on you know opportunities for growth.
And in a market that uncertain and a little bit.
Given.
The the legacy of the company and how they feel fleet.
Yeah, Hi, a I mean.
Well it very good question you know that when you talk about two transaction that you mentioned the most one in the end to generate one I'm sure remember.
It's something that came up.
And we act upon its very quickly the keys of but let's call. It seems you did it over Christmas holiday, which would be to reach [noise].
And the keys of generally.
We are talking about Ah, yes, I agree with that we'd be with the board and the shareholders with certain Jed something like this in a bunch of negotiation.
And I guess, what I'm trying to see that you don't have a shopping is you don't have targets or threed.
Because that's all told the market works I mean, she that some people suddenly change their position in side to it you said that.
And then he comes on Geo Derisking and when you have to capacity that is obviously balance sheet to be pretty cheap, but also the management time Actable buttons could you just broke the then you can see items with the trees.
And so we're not going to change or that risk nothing that's really how it's going to happen when it relates to your question all they're already.
Small deals to be adult I don't think or at least I haven't heard anything and I think that the reason is that we are on the back of Threed Super strong quarters, Q4, Q1, Q2, what we have boots and I believe that I've also.
Pretty good numbers in Q3 is very very healthy I mean, no matter what environment. We're in right now the quarterly but to be a very good quarter.
And then it they've been Christian bucket as I mentioned it Brian the to the news broke a more uncertainty about what's comps in the future than.
Okay.
Well it appeared fund that we've seen in the Pos, but I just think that its two wouldn't hold people sort of.
All of those sorts of that feed all we'll do something like that because the cash to did generate a very very recently had nothing to exchange phenomenal.
Right, Okay, I feel so I guess.
Cash flow.
That you know obviously the capital allocation it just keeping on the balance sheet paying the dividend or buying back stock I mean on the stock buyback you just keep on buying back stock as long as the equity is below any [laughter], obviously, some load and liquidity concerns and I think the age.
Ability to kind of purchased 10% of the stock every year, if I understand that correctly can you just talk about one year limitations kind of your.
How do you think about the buyback in terms of balancing the financial positiveness.
Buying at below now.
The limitations if that gives you in terms of many of liquidity.
Yeah.
It's too to very critical points, yes, we believe that we buy.
A significant discount blue and heavy but that's not how we measure in that said you know how we trigger its we'd be trigger despite translating the current share price into price of appeal since youre choose actual does better and I'd be surprised we buy the cheapest vessel that we can buy a into bucket because you only luca.
Any view of the discount to any V.
Then I'll just do you think you picture.
Of something that is moving target if the markets or it continues to be like it is to be it's a 25 or be it lets say between 20 and 30000 go to big I've got to devalue going to come off the value come off then day movie comes off and then.
But then should be youre, improving your share price with the end of season did you go back to anybody so fundamentally you'd be preferreds, we have a long term perspective, we'd suky today at the parent surprise me body to shoot the bugs systems and distributed he's done a good value adult yesterdays.
Let's go back to a they enjoy five.
That does maybe come to the immediate tomorrow and there would be a this reason we would be mesquite to buyback or shows on the second phone that that you touched a which was the liquidity honestly I think that we're very very very small sub decreasing the liquidity the did because maybe yes.
Bill by degree or over the two exchange you've seen that whereby over to change the 30 balance I mean, what I've, 60% of the trees foods deal was 40% of the European one and not the we are adding a sort of a it's a good volume the of the comedians share exchange.
Itself, because you old Foxtel capstone, Dick so to be a you're doing enjoyed very strong liquidity, which many this is changed because that's the only way for them to make sure that they can buy and sell out or other times that UGI result should close.
That's maybe that all sports, which we have said already the.
The remarks earlier, we're not buying proved the share price you're buying because it makes a lot of since we went to create long term value for shareholders. So you're not buying you know chaperones higher in order to make introduction to the after a news on that program, we are buying because it makes sense that's it.
[music].
Got it okay, that's very clear thanks to all of them I do appreciate it.
Thank you.
Our next question comes from Jon Chappell from Evercore ISI. Please go ahead with your question.
Thank you everybody right yeah.
He was the.
First question kind of shorter term that number you put up for the third quarter and both fleets, but especially the suezmax fleet not substantially above what I would that be market values. Since the start of the bird border kind of a two parter here first of all was there any kind of a legacy carryover from the strength of the second quarter or whether it was short term charters.
Or just extended voyages that had to that I looked at that got you that elevated level and as we think about the rest of the quarters you rethink about benchmarks or do you have and an elevated or kind of starting point for the back half of the quarter as well.
Did you.
So no there's no let gift.
That's for sure but it is true that's when you take the Q1, the Q2 and no half of the Q3.
And certainly she could that clarksons or even to some of or P. Is why do I get to announce the reserves, but at the some trading update you can see the situation be got a mongers or larger than usual a a t. everywhere.
We are ahead of or fees in Q1, this quarter would be slugs, new and then you treated we are again or maybe the ahead of that but on average.
It seems that we are all thing to see the territories and that explain to me that maybe the surprises market. If you do you are very good numbers fall for Q3 simply do that voyages full view so.
Well, we've been talking about supposed to be still buys for the last 510 years well they get.
That's what forge a seems to increase the number of days and very often we are very close to bite you do the Nike this quarter. So depending on the positioning of you'll see a you may be kept some sort of bad voltage, but they're very very good for your positioning a and then you will enjoy better rates.
Or the 40 quarters, but just with your baby lower rates.
The current quarter, that's that's a baby to would be needed happening here. So it's no legacy, but it's definitely part of it positioning.
Also I would say by George you see in order to benefit from rates that are higher.
In some bought up a the geography than others.
Understood.
And then for the follow up liquidity situation is obviously incredibly robust and something that really helps you stand apart.
However, you you've shifted to the veered stoplights to ride and there's a ton of uncertainty your inventory chart. If we just follow that to the island's like mid 21 before things get better with the revolving credit facility rolling off with the new bank financing coming on for the fleet renewal or growth are there any other measures you foresee taking too.
Kind of establish a greater war chest.
Given the jeep levels at that right now.
[noise] or no.
It's true that we are Oh, geez, you refinancing sold with that students and the that they expire next year because we've either today's better times do that then the next year, so, but I I wouldn't say that's a major programs. That's that's probably your decisions that we have to take any way and whether we do we sell in six litigation matters are we prefer.
2000, <unk> it would probably be so some additional subs that we can and those next quarter, but it's true that when when you're buying back your own shares and your mom destroyed and Youre also adding a little bit of ammunitions into your two books, a ensue rather than a dividend which is.
One off events and then when the cash the cash note.
Here, we are buying it some sort of but that's just something that so liquidity and we are talking he told the balance sheet.
Okay. Thank you very much either.
Thank you John.
Our next question comes from Ben Nolan from Stifel. Please go ahead with your question.
Yeah, Thanks, and good morning nationally and so I wanted to circle back to the question that I met had or or or really I guess the answer that you gave you go about sort of the state of the market an asset values and how people are you know, perhaps a little bit more insulated now than in previous.
Down cycles, given three really really good corridors.
I totally though less cash flows probably do many more sellers.
How are you thinking about sort of the the cadence <unk> do you think that ultimately this down cycle will be substantially less severe from an asset value perspective, even if it does scratch or eating out.
What would you think about a sort of the tipping point, if you have any color there.
Well, it's a it's a little bit that are the same as when when you guys Oscars or two predicts the market's freight rates.
It's it's very very this will be that the other day. It's a slide you then or make it is.
And then I guess people can can dropped a pause or whats whatever they want you said that this that depending on the whole disparate bill.
If you see after a strong beautiful restoration people tend not to be desperate, but at the same time. They don't want to see Oh, you said to me the cash.
Are being used to compensate for full potential loss and if they'll close so to me as Brian mentioned for further catch that investment into a very extensive dry docks and let's all remember those already expense you would divest indoors, but they are more extensive this time around because most of the ships that.
Thank you both in trouble to 50 years VGE don't have a ballast water treatment system yet.
And that's something that costs 1.2 to 1.5 minutes. So it's going to be very expensive bill ER and people facing that sort of decision.
I think about it and we'll say, okay I've generator of cash in the last three quarters do I want to sort of wasted or reinvest in my best and so that told you all the policy holder younger part of T. I think that there are a number of challenges are coming.
We have smaller she gold isn't you know how fragmented the market is.
And that is relates to many readmissions.
Hi, Marty the regulations around to you to missions.
I don't know, Tony I mean tools Lexus <unk> banks today.
The percentage rents rose to a public company with a good cope with governments and loved transparency that too small player. So I think it's small plays all our facing a severe challenges, which why bother to our bond can only be addressed with size or size of a bit company. Like you are now I would like.
Some of the other a public companies and so that gives us a real hope that's when the market with soft and the value will will come off a people really realize that my.
Very good opportunity to to exit the market and the becoming shareholders or bigger a NTT all seem to get the cash and then read something else.
Nothing that again the reason why we like the strict Joe Giordano, we're very flexible.
We can do mergers like we do you could generate we can do acquisition like we did with most or by a buybuy baby caching and region sums of money.
Marketed risk that we are very very flexible when you're ready to seasons opportunities with the right between soon enough desperate to be.
Too much money for us for assets that.
<unk>.
Ginger.
Future when the market is not as strong as with GE, the last three or four quarters.
Right.
To that end and to that.
Well actually I.
I'll I'll leave that one for somebody else unlimited on my question the a I'm curious.
On that something that probably is not very topical at the moment, but something that you guys had hinted that you might be interested and specifically scrubbers are obviously right now it's cover investment made at the beginning of year last year have not paid out very well, but I imagine that.
The prices are coming down you guys said now maybe we would look at it if you know.
And the future have you changed at all sort of where you're thinking on that or or.
Or our thinking about sort of longer term at the spreads widening where do you want to be and EM and or is that just sort of the.
Not a path that you would.
I want to go down.
No. So are we only repeat what I said in the past <unk> absolutely notebook matched about so you have.
We remain habit opinion about weather skouries, good or bad for the environment, but I think thats what the regulators.
Joel.
As far as the economy collagen said, which is which is very much what we're trying to study.
At the moment she's looking forward curve.
Still looks very good investment you sure looking out a retrofit.
When you're looking at a new building.
Then it's a it's it's relatively less expensive to move is what I would too cheap and that's also the reason why did four vessels that we talked earlier. This year reaches the we're very happy about the fact that they are equipped with a with the scrubbers are because it means if we can enjoy.
The spread but when you look at defaults the curve and the spread you may find good reason to.
Has the option on the Strober on duty, but as I mentioned earlier, we look to review exceeds.
Or two older ships at the moment.
But certainly adults are terrific, which will feed your steel picky about to north of 3 billion and I know that a lot of due to people not cheaper.
That is not very expensive, but very extensive fault is the job you are you going to be true that its properties story, we've seen no no horror stories on.
The boost keeps functional most and a and b off our time, but.
With the box, usually good or bad boots.
Consistency of the market means a monkey king.
As much as can be done. So once you have committed to something you have to take a a an average rate of loss of higher and you have to take that into account. When you make your confusion on the economics of whether it's a good investment although so far to tie being we continue to believe that it's not a good investment.
Therefore, we duct and every square feet any year vessel, but if we were to buy a new busy it's early adoption of the too.
Alright very helpful. I appreciate it thanks here.
Thank you.
Our next question comes from Michael Webber from Weber Research. Please go ahead with your question.
Hi, Good morning, guys how are you.
Hey, great New Mark.
Good.
Most of the the near term market stuff already been handled it because I wanted to touch base on when they want even at about last quarter just in terms of propulsion and some of it's just we're sitting in some trepidation in terms of building out the order book for lack of out of fear of obsolescence risk.
In terms of.
Do you see a handful of LNG powered VLP. He had ordered I'm here today easily back and sort of long term business. They have begs the question of.
What do you think the right makes it for you when we we think about your NAV longer term.
Maybe fast forward five years, what do you think the fleet looks like and you think or we are we getting closer to the point, where you guys could realistically pull the trigger on on.
Some sort of.
Differentiated culture and that that.
Right got more work closely fit with some of the Oh, Yes, you mandates and renewable sources were saying or the next on the next couple of years.
Yeah, it's it's a very competencies question because there's a lot of the moving parts. It's if you love the uncertainty so we've seen so far all need to my mind.
One called for a full two vessels.
You will shoot energy and that was done indeed on the back over time charter contract with the one of your major major [laughter] and and and we before for that contract and we didn't get it becomes.
It's this quarter, we believe that the premium that you have to pay in order to get a duo through vessel still requires a contract to be compensated for them because otherwise you'll get an unseen trades in the market and you may P. O N a G and they'd be cheaper, but that's again I'm moving cause I mean cheaper than it is it for that's a.
A movie bought and are we trying but with find ways to to look that's discounts in order to justify the premium but so far we love managing are we not seeing it could return on on best friend and just cream and that is V. Yassky roughly speeds in 15 minutes compared to convince sugar.
Having said that we also have money for the yard and we see that the yard they'll be coming allergic more desperate by the D on getting orders and they understand very well, but they end up getting oldest for two reasons I mean first of all be choosing the market is as you told uncertainties, but secondly, and more important B E T T.
There's a lack of certain D on the oldest side of what technology.
It'll be the one to adopt fold a mountain future medium for the only looking at a transition periods foggiest potentially 10 years. That's on behalf of the logging shoot. So are you going to buy it yeah not a G for half of life. Then it's not a female 50 medium that you'll be secret to premium or $50 million. So that'd be comes with.
So you can see that there's there's a lot of things movies that lets me and also a lot of announce them being made recently around I'd, Virginia people. So that this was a get you for the future be with all the arrive 15 or 20 is down the road.
I need that as as we are moving people are making this well, let's grilled few more accessible maybe within the next five years. So once we project or so up to the next five years I think that we will continue to have maybe a a certain T which was.
Three zero, none of you'd be the orders.
We will see whether this I just jumped potential is a real I need to materialize into real real life, Yeah, and I think that if that's the case and people installed ordering hydrogen vessels that I understand that and the other market still reading the keys.
And and and then we will see whether the LNG through a few bathroom that has a future because of calls yet and you can also be produce synthetically any decades any started supposed to choose.
And then take care of a cheeseburger.
So.
We we we are watching absolutely everything I need a lot of orders all doing the same the benefits. You said, we may have is because of our large D E C where to order two verses with a specific technology will not bitching default doing that N y E S.
Alright, a fleet again, we'll we'll get more of the form is the order to shapes on fever, but isn't that chocolate shake.
Gotcha, well there there's a good corollary. They just take off one and there was a blending I'm gonna be natural gas and instead of a bunkering infrastructure needed, but I guess, it's interesting to hear that you've participated in that.
And that tender.
Maybe maybe you can I'm thinking about it more more specifically into your point, there's a lack of bunkering infrastructure to support.
You know LNG.
Blue water repulsion for for for merchant chips, I mean, you couldn't even really feel new golf right now if you wanted to but.
And it says that could provide an opportunity and you guys have always you know, we're not always but you're certainly not averse if they're taking interesting.
Angles on bunkers and some of your some of your supply needs I'm wondering if it is there a realistic scenario that combo.
But the vertically and a great. The navy provide some of the infrastructure that might be needed to that myself like that correct.
Or is that too far field.
It's it's not too far, but it's never gonna become you know a business loan I'll tell you know you seem to bridge something then we might do so we would prefer to your work and joint venture with people.
Of course issue order, if she's gonna back a a contract itself really your appointment. So why should you solve it'd be just good. Thank you that'll being paid by your customer and so the customer will be responsible to fly the place where you can <unk> <unk>.
It might also be the reason why are we still talking about do a few and they'll single few religion, because all yeah that'd be all those window turning to head towards sheep's at all would be single single she would N a G.
Today that would be way too risky indeed, because of the infrastructure not be zero sorry.
If we went to order a sticky that'd be a shake or two usually you get in there and it would be <unk> and speak that's V. So there wouldn't be a contract attached that's because we would you would've been able to secure.
N N G at a discount to give us a food also to justify the premium there again, you should do that I'd, probably be the physical delivery and again, it's no longer you'll probably it's more of a problem of the off the the the the Burger provider, which yeah I seem to be at all major so I I don't let me see that happening.
D N a G.
The I'd, Virginia.
It's it's a very different picture because obviously the <unk> it's prediction so brown.
This did you say my mom's you to yourself more that's what you need Green I, Virginia and agree hydrogen I don't see a lot of you should <unk>. So you can even do in Europe. Some some of those I'll be supported by you. So if we get government of money to do something.
Then it becomes very attractive including for shoulders, because we are building an acid. We're building knowledge Ah we are.
Potentially using it for old burgers, and all of that has been since valuable I saved which is always very interesting. So.
You can see that as a business like probably nuts, but there are a lot of things that could be interesting first to do that could be beneficial for sure.
Gotcha, and just it'd be great you're talking about hydrogen.
P O as opposed to moving how're you doing them on bulk with a a specialized carrier.
<unk> I I can hear.
Yeah, No I <unk>, obviously, both I mean.
You can help you open a you'll be newspaper or you said it kind of make a newspaper that doesn't told about I did.
Hydrogen project, well at least <unk> pushing hydrogen order you a fishing fried region. So it's absolutely do everything it's about your position of each suburbs transportation and it's about the debit knavery off the project and most of the time, we're talking about a media rather than yep I got him because it's just easier to handle.
But again I mean, we wanted to see how long did the milkshake with it but again I mean, it sounds good Bergen sounds very very pinterest. So.
Yeah, and I don't think deviation because then it then it would mean that it becomes to she was the future.
Sure Okay, great I appreciate time Guy's name.
Thank you.
Our next question comes from Randy Givens from Jeffries LLC. Please go ahead with your question.
Alrighty, Jonathan How's it going to put.
Hi, Randy.
Good good yeah, I'll take congrats on a strong second quarter and the impressive three Q rates here, obviously above kind of on break even levels and the seasonal chopped period with that how has tying charter ray how is that market responded in terms of right. Then also liquidity and his ear and I've signed any.
Time charters over the past couple of weeks here in the summer.
No. We haven't side anything you is in the last couple of weeks I think that there was a frenzy fulltime child, which were bowl relates to storage or T. T S or he was a combination of the trading and storage, but that's four of I need a story of for the month of me rather than the <unk>.
<unk> I'll tell you it's gonna be we've seen the the the rates wanting off they came back with did you strongly for a few weeks there are off again.
And so on tobacco that I don't see as you can do hold for a very strong rates and anytime charter. So even if there were there I'm not sure that we would be interested to decide ignore the sort of a longterm time childhood modem a year how to read that would not be.
Very interesting unless you would have a coffee pediment mixed into it or something like that it's a little Kitty we haven't done anything we are not seeing a loss of your choosing the market and even if we received something in the market I seem to even where the spot market is those which may not be interesting your first to clear.
<unk> put some cheese.
Got it alright that makes sense and then currently you know your V. L. S. F O prices are well below the I guess $440 a ton of your B O S. F O inventory that you're storing so with that what's happening to the fuel on the oceana have you been drawing from it or maybe taking advantage of the <unk>.
Week V. A S F O market and restocking that inventory.
Yeah, So N D.
Proprietary remarks, that's a relief mentioned so yes, indeed, we.
In fact, we <unk>, we can talk about phases. So the beginning of the year when what we had an stuck with cheaper than the market <unk>, obviously used gonna be that you've been using swapping.
Let me bring in Singapore, and getting back into the into the imagery skull.
So we have that was spot stays one wednesdays too was all fries collapse in with that too long fries collapsed as well and we completely stopped using the shoe that we had <unk> and we only board from the Monkees send you all of a fries and with the few large.
Started to recover window at $45 and and you would probably be around 350 dollar for quite a few hours or you just afford that it's too.
Cheaper than what we have on both your Shannon, but but it's not speak of a difference as we once had and said you want for your balance at the end of do you want.
Just the other thing that we've done so that was fish to the other thing there'll be done now and what we flew faith Street east using the volume discount that we can benefit from you know use that issue of a place to stole D. All like <unk>.
And buying.
Some some Tom sounds in the markets I mean lots of $30000 with 40 doesn't dogs.
And mixing them mixing them I don't mean physically mixing replacing them into the Oceania and have a averaging down your cost of living century. So we had a mouse or cups of inventory to be around 454 of them as well in two four or you're going into one.
And today, we would be below 400, thanks to this policy of by more mixing down or averaging down the cost, but we're doing that meticulously N and not even one girls are we not buying another 200000 tonnes, we're really by I would see twin.
Per cent more of our Oh neat.
Dental consumption in order to mix down the.
The drink I'll send that that explains why the doctor markets are significantly decreased from the last time, we reported on it.
We will continue doing that and we believe that by the end of the year <unk> E. D. D. A N T O will be food of two dogs are the fries that is identical to the market.
Got it alright, well that makes sense and my shop again I'm sure every purchases. Thanks.
Thank you.
Our next question it comes from Greg Louis from D. C. I G. Please go ahead with your question.
Yes, Thank you and get good afternoon, good morning, everybody.
You know I I guess, just get going back to the slides.
And the the <unk>, what was that 13, where you're talking about 10 miles.
Downgrading upon miles you know it's interesting that seems like 10 miles that had been expanding for you know at least a few years.
So I guess, what I'm wondering it is you know kind of what drove this downgrade in <unk> and really <unk>, how should we think about you know what what's it gonna take to get this down what's gonna take to get 10 miles growing again in a tanker Margaret.
HM.
My it's it's it tells you see the the reason why it has some good in the past.
Was very much on the back of G U S <unk>.
I seem to this this crisis <unk> two settings and similar to the Christ that we shouldn't 14 15.
Two <unk> conviction down, but the minute you go over $40 for and we have no at $45.
See that some of those views I'll be exposed to begin that's even if you went through at 50 build a sweet tea you even more so it's a little bit difficult to predict.
What's the predictions is gonna be in the U S and that is a big driver optimize.
But it's also true that people tend to forget that in the meantime, Virginia prediction has gone up tremendous certainly more discreet this year on year, adding old barrels to be delivered.
And that is also a provider of of the line, which is much more stable and says me Oh, let's see some asking <unk> to the far east because delfonics, but it took a benches.
And that leads me to the second boys about so it's very hard to predict with him I as I was gonna go because it seems that's put a ticket with decisions trade walls.
Election, I mean, you name it has a big infants, where the far east in general in China in particular.
<unk> until at some point it with the large is by or from <unk>. Then there was a beautiful where did you buy anything and then he came to lodge is by of does Zealand old and I paid with Korea in Japan took the balance coming from the U S.
So it was seen this issue which was good.
But again to so many put into your factor screen name that it's difficult to predict what went on mine. So I'm Gonna go [noise].
Three is the big word and he's sort of the name of the game and as long as people continue to tree dog.
To send it to different distributions onto you'll be going to continue to.
<unk> I don't see able you'll see a message increase of it but I I I do need that it's it's going to $7 with Tomatoes, where we all.
Okay, Great and then just one more for me I mean, you talked a lot about the potential for that's all retirement.
You know just obviously you guys have.
Modern.
Fish and flee, but but I mean, you do have it you know you a couple of Suezmax is that are plus 15 years old.
And as you think about what's going to end in <unk>, maybe it's for your or not but maybe it's broader fleet. I mean is it gonna be kind of that five year special survey or I mean could.
Do you see in terms surveys for 15, plus year old vessels I guess, one on their 17 18, your potentially being a catalyst to retire vessels, where we are or do you think it's more he wants a vessel get that's five years survey.
It's pretty much good tell it's 20.
Just kind of curious if you have any <unk>, alright, and maybe yeah in the in N out that and yeah, and I think we well we need to differentiate zero and then maybe some of the other place with the rest of the world feet and the reason is.
Issue build a sheep and your trade the shake for for the better part of it Street life can be fraudulent knife <unk>.
Do surveys not gonna be as expensive as.
The ones with the buying do she told me maybe we should just changed hands. Many times, but also in very bold witty vessels in the hands of which is sick into your orders.
Don't maintain their vessels at the same level is as a zero novel, maybe another puppy company with too. So <unk>. That's why you need to differentiate zero now would be able to the speaker is when we feed fish and do the those bills and those decisions.
First of all is you'd see if we tend to so this was when they're around 15, and we go with them to do the 20th that's due to the fact that he tried to mark as well it says.
The type of times, that's don't Wanna trade. This is more than 58.
But sometimes I, we do have in the the last five years old I think that we.
He kept chips until they were 20 years old.
Oh medium in 20 years old so 19 and that was because again the medium will so good that the where all the time childhood pet's name and two vanilla.
And there was no reason for us to send them.
So you Wanna, usually use an a T T unexceptional sweet tea been 20 minutes Moontime children spot.
And then Tuesday, only very good conditions, where you're going to sell them and you see what we've done this year at a premium and usually those people try to trade them again, so not send them to let me check the yard for at least a number two and a half is from their anniversary beat 17 at Harper will be 21.
When you look at the market, which is abuse the a much bigger population of shoes.
Most of those ships with not being the hands on the same order seems to be and they're E. G.
Very immature relate in relation to the way they've maintained and wanting to see because.
Can see the root beer.
<unk> when they pass the survey that they will have to spend more money.
And that is reading the question and the Dilemna that those orders will have.
Do you want to spend three and a half a $4 million, including the bus window treatments system.
For only a number two and a half yeah. If he's at that point in time, it's every two and a coffee with that used to go to to the dry dog.
Would you throw the double N C O P. I prefer I prefer to receive money I prefer to receive between seven and 10 million for Suezmax and maybe 15 to 24 Vlccs being aware of this crap is described.
<unk> Oh.
And we've seen no no later than in 2019, that's most of the ties.
People facing Luther Linda we'll take a shih-tzu scruffy always because D. D V D. They still have good investments.
Off the survey and then to hold for the best in in the freezer environment that is at the time of that decision.
Not very attractive.
That's the reason why we see so much on this H four O five because we didn't pass that feature for nearly 10 minutes since we swapped single code to double huh.
Fishing rejuvenated to feed them to win win though this is 12 years old.
Or even 50 years old.
That's not really G decision 170, Hollywood, It's 20 dollar even definitely of 22 and half you know salt.
It's it's much easier to to take but you need a milkshake monkey.
Okay perfect aren't hey, thank you everybody from the time.
Thank you.
[noise]. Our next question comes from Chris whether it be from city. Please go ahead with your question.
Yeah, Hey, thanks for taking the question I'll I'll leave it at one it's been a long call I wanted to talk a little bit about the vessel supply slide in and understand maybe how the 60 to 80 vessels that are tied up in and have the potential to come back into the market kind of factor into that thought process. It would seem that.
You know while the order book is kind of come in a bit those vessels do presents some what of an overhang. So I know the crystal ball is particularly cloudy at this point, but if you could help us maybe better understand how you would anticipate those vessels re entering the market maybe the timing of that over the next several quarters that would be very helpful.
Maybe I was stopped but then I would like to Brian for Brian to jump in and.
And they stopped would be indeed, it stopped an exact size. There was a lot of control about 50 Vlccs comes with just a storage and with the six months of one should.
Believes that do first of all I'm going to come back.
October November of this year, and that's certainly not gonna be due to the market it should put.
Pressure on to the market.
But then when you look at previews contango situations and how the seat that was that had been using stoneridge was really believes it to the trading feet.
It's true that.
It's happened over a much longer P O five and the reason why it happened over alone Michelle with two sides.
You seem to get us at the end of the contract you usually have a bunch of maybe more of options.
You guys will see you can do this Utah trader. So they may want to deliver diesel Tuesday is very different from where the ship is idea of of the contract.
You can have a situation where you have a contango again and it's interesting Oh, sorry pulled this morning talking about any contango situations very much in China, because a lot of do this is all.
Your story or you can just your own China. When you look at it affords curve off the C. D E and that's no onions <unk>.
<unk>.
There isn't really $11 of contango over the next 12 months and so that just for that matter. It was incentivize people to store all outside China just for that matter. So.
You can see that it's southern exact sides and you don't know window first of all gonna be too, but it is true that used to be would be sent to the market.
So grilled onion, you said to him not to tend to the market.
And the more concentration there will be around the pretense the more pressure there will be on the month, if it's over a lump it I'm sorry hold longer zero cents and it seems to create less problems. Brian do do you have anything to them to add to it.
Medium root.
Ooh.
How can you help meet me not.
Yeah.
Can I in N out.
Yep Yep Yep Okay.
Yeah, <unk>, Kentucky, we had into things <unk> <unk>, we didn't get the peak in the amount of ships that room held on contango for another nine months off of that so you can set so when we can put a a log in with tonight. It might be some lumpiness round the appointment of Brenda when we get these sitcoms control coming back, but it took so very difficult let's see.
Saving ocean tanker situation when she was being wanted to get one two weeks didn't mentioned you're gonna need peace now so let's get into headwind, we'll there'll be some happiness. We believe around October November what we do believe this will be out of a reasonably prolonged period I smoked, Pennsylvania thousands of shakes a root beer you at the same time.
Okay. That's very helpful. I appreciate the commentary.
Thanks Christopher.
[noise] Internet question comes from Omar knocked off from Clarksons. Please go ahead with your question.
Hi, there I hate to go Brian <unk>, you guys get a fairly realistic overview of what's happening in the oil markets today and what to be on the come.
It's kind of helpful and sobering at the same time with the Red Chocolate lights in your presentation for both oil supply and demand.
The market did you say as in transition with with Destocking now and play and the last week. The rest reported a 10 plus million barrel draw and crude stocks and yesterday. It reported another 7 million, but I'll draw. So clearly we're in this heavy portion of the destock at least stateside and potentially we can extrapolate that the same may be happening globally.
Are you encouraged with these recent declines in stockpiles and and that perhaps maybe this tells us at the market or at least the oil mark it may be getting into balance much earlier, then we might otherwise thank.
Well, let's see I think that's almost effect, let's see it none of box, let's keep it should be taken by surprise them. So if you we will also taken by surprise.
Of how much.
That'd be drawn from do search and yes, we.
I'm glad that it's with the future all set with you you should be countries, probably also in the middle East.
They're quicker it goes back to the five year sort of average.
The better it's gonna be too to rebalance do on market and therefore didn't neutral or transportation services. So yes. It's it's quite good is happening at the moment because at the moment, we have number of sheep's that that are not buttons <unk> as we just discussed.
That's where the more we can draw or tomorrow. The world control do stocks why we have do is there's this was <unk> betteridge whoopee.
For for the Strawberry.
That is.
Hope that is a wish.
That is not something that we can control. The afternoon, we're very pleased to see the read it which is it's T V. Please.
Okay, Yeah that that's fair and and Brian address this just in the last question, but you know with respect of what we're seeing in China. Clearly congestion has been it's been significant and it's really made the floating storage figures.
Even larger but that <unk> those that congestion is an ongoing now I think basically since March April not earlier.
From your perspective, <unk>, what is what I name address it a bit in the opening remarks and throughout the Q&A, what really is been driving that congestion because it has been going for a long time that the strategic reserve building.
And also.
You know.
When does that start that's been out because it seems to have gone on a bit longer than we'd anticipated.
Brian you you wanted to take that's one of them, so yeah, and I'm, sorry, I apologize yeah I've ever seen all I'm all has been and I'll just sit some of the reason I'm thinking just you know harmful might in fact.
Hello. Thank you so true remembering lost so the sandwiches and one very very good leave them awesome [laughter] congestion is there's been a huge amount of heavy lifting all you're fine Oh grilled bunk channel, we simultaneous needs to be cool Sweet presentation Tonight put some I'm I'm I'm thinking invested deck 50 slides a vanilla.
Look at the the Chinese who'd been burning center Fries brought our own government an apartment. So I took the Bible I'm, $40, Peru, which isn't it possible down and I got my like my mother holders an episode mechanism on methodology delivery is bar Vlccs and it seems to go to one.
To put I have the congestion.
Is very soon and so that's why you can't even look what can I get them off. So you said, we do believe there's a little bit more to call me She's gonna take some more time can just a online. It's just simply a questionnaire a lot of volume going through a relatively small deliberately channel I'm gonna <unk>, we've seen from the data you know like normal reached.
<unk> <unk> chocolate <unk> three months or something so yeah. I think there are so I'm gonna to specific factors, but not really just explain to me. It's been a small G. D. O C tried which is added to that can just get an angle where does she can sit down here. It's just can continue cause most convenient for me to a three months when we get you would you be taken away from <unk> I don't smoke.
Storage Angela I'm sure, they're not so I'm gonna add two I'll quickly like Librium chocolate <unk> Doctor short arms, you wanted <unk> just been simply a big rhodium appointment last two to three months.
Got it.
Okay. Thanks, Thanks, Brian and he was thanks for that I'll leave it there.
What time.
Okay.
And our next question comes from Luke banner out from Dallas Private Bank. Please go with your question.
Yes, Hello, everybody you will in the personally you mentioned again, the difficulties that you're facing to to move the the cruise from the ships them to bring into new cruise is that actually taking part of the capacity after the market.
For yourself and for the the whole second.
[noise] no I'm not at all in the sense, that's people with our own both continue to work.
And and therefore those new.
There's no ship out there they stansfield due to lack of cool the problems really changing the crew to get new people on board with what else do you see.
If we can't get new people on board.
And then the people that are currently on <unk> not decent bug and we have as many distribute T. S. A decent box people as we have difficulties send the new <unk> two places where does she because gonna cool reported with wedges location.
We'll take please.
But it's I mean, yeah. Thank you for your question because.
Is this is a real problem and it's going problem.
At your own the statistics started to go go down in July and that was b choose some of the <unk> the pit Bulls like Singapore, Hong Kong, We're open up.
We are able to change some can you put them in such as the ones that have been very.
19 months on board, but at the moment. Unfortunately, it seems that there's second wave.
<unk> none of those countries.
And so it's Mendoza Ah going again, and when I speak a bunch of another I wish I knew that it is the case for the rest of of the World West.
Shaping world.
N N people don't realize that you know at some point something will happen.
And it will create a big description.
You don't want our lives here.
<unk> <unk> <unk>, that's what a primary focus.
Very quickly after that you also need to realize if you're talking about human beings and everybody has two minutes. So today, let's upgrade the name your description, but I'm afraid if we continue not recognized me musky workers it will create C V restrictions.
So it does not create an illegal that problem for the moment.
What do you mean by leave your problem. So we know what everybody well how long can you give <unk> how long can you keep it grew on on on the vessel.
But.
Do you do it at home milk agreement of the menu you go to to stay on board.
Oh of cool well I didn't stay on both if they can help using bug, it's not in the hands of zero now you know you like to report any today's world, it's very different and 50 or 100 years ago, where seafarers would just embarking visiting the balls of of the city's today, it's heaviness restricted.
V neat controlled you need to have visa and please you will be a school to to.
Airports and at the moment that is exactly what is not happening.
People cannot leave the shake.
Tried to leave you should be going be arrested that's how bad situations. Please.
So how long can keep people on both we keep the Super Bowl because they've nowhere else to go and then D continue to work because that's a very good way to a living and send that money to their families.
We're trying to resolve so hollow can it can be E D D.
Can be a lot longer but then you have the mental health.
And and that did you get more important than the physical health because quite frankly any working we all work.
All year round.
Combo the sheets you work six months and then you go off six months with.
Three months and the last few months, but.
But if if you I'll be off work longer than you work longer so the physical fatigue yourself, a really problems. The mento, 15th and what is really creating the problem is not to be able to fill this vehicle you will be able to eat it all off by the state <unk>.
Let's do two two business people are we are very very transparent with them also with a success that we had because that's important that we don't know we don't know when we arrive to Singapore for instance.
The rules that wasn't rude to reschedule was can do please because wanted to change that will be changed overnight and that's because the the number of coffee pieces, increasing and send them to be looked on the the C. T O the poodle or the country.
And keep new longer able to be within the old enough.
So it's it's a very very complex situation any D. Only solution that sounds really concerned E. D. F. C fares, the state and statues and snatches E. S. T work is because the the amount of people to continue to travel rude over the world actually have to <unk> <unk>.
You need next.
Shipping World is provided an essential service to the blue and for that reason, we should three days, you mean do with consideration and give them the savings or T with us.
Okay. That's good thank you.
Thank you.
And ladies and gentlemen, with that will conclude today's question and answer session in today's conference call.
We do thank you for joining today's presentation.
You may know disconnect your life.
Thank you.