Q3 2020 Euronav NV Earnings Call
Hello, and welcome to the yard House Q3, Twentytwenty earnings Conference call.
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Now I'll turn the call.
Your host today, Brian Gallagher. Please go ahead.
Thank you. Good morning. It also makes everyone. Its actually joined here in apps to Threeq was supposed to go to school sports golf I'd like to say if you want.
The information discussed on this call and thanks, so much another today, so if I just pick up.
That's true.
Forward looking statements that involve risks uncertainties.
<unk>.
Let's call it needs with respect because that's a functional foods may include statements concerning plans objectives goals strategies exhibits performance underlying assumptions and other statements, which are not statements of historical facts.
Well Oh looks like.
The company multiples.
Well, it's supposed to go to 40 million sorry.
Well that's the that's that's what's.
No that's it.
The company's body with the FCC.
Quick charge on this it looks like.
Okay.
Scott.
On the company's website at <unk> you were in optical.
You should not place undue reliance on forward looking statements.
Each forward looking statement.
Thanks.
The company undertakes no obligation to publicly update or revise any forward looking statements.
Actual results may differ materially.
Forward looking statements.
Please take a moment to read our safe Harbor statement on page two of the slide presentation.
With that I'll now since that you could just give us the spot.
He didn't like slightly.
<unk>.
Thank you Brian welcome to our call today wherever you are.
That's up the agenda I will first be went through to Q2 highlights before passing onto legal <unk>, who will provide a full financial review of the net income statement and the balance sheet.
Then Brian or head of Investor Relations market research in communication, we look at the current market themes in the tanker market before I return to discuss if it's through contracts and you're not out before we took we take questions.
So, let's turn to slide four and the high like speech.
<unk> performance was mixed during Q3 to say that.
The first half of Q3 as we update nobody argues was robust with early freight rates refund like what had been at that point in time, two positive factors the strong recovery trajectory of all the demand and a positive disruption, we think get past the hell out of the Bakken black congestion or.
Storage requirements.
Both of these factors have won over the past three months with free trade and a fairly constant pressure since late August.
We stated in early August that there was that there was Poland is visibility than usual and this has proven to be the case and remain so as we enter Q4 did.
As usual seasonal effect of improving demand for oil into the key winter period has not gained traction as vessel supply remained elevated cog moves on limited with little visibility on cargo programs and sentiment amongst the owners remain weak when setting freight rates given spectrum.
Nevertheless, during this period, we returned to our shareholders, 80% overall net income during Q2, two three $200 million street, 50% in cash dividends and 50% by share buybacks.
Brings me to slide five and the capital allocation that you are down which remains an important and key focus for the board and management.
Let's turn now we always try to be balanced and consistent nor on occasion, we do have some mandatory debt repayment as well as some revolving credit facility reductions, which are noncash, but given where <unk>, where our current leverage yes, we do not need to read the mold that for the time being.
We remain committed to or to a return target that is 80% of net income to shareholders.
Third quarter that is the equivalent of 37 million that we will speak again.
50% of the available.
Cash dividend of nine cents per share and 50% of the buyback that we intend to compete before the end of Q4.
When repurchasing shares we will always try to create long term shareholder value rather than giving support to a share price, which has been anyway very volatile during the quarter.
There is one small change to be no to ignore featuring your program given where the market is we have pushed for what the Twentytwenty. One one of the full VLCC newbuilding get acquired by receipt of contract.
He is that we will take delivery of all four vlccs in the first quarter of 2021.
I know Tony do over to leave a log or seafood for more detail on the financials.
Thank you Hugh.
If you don't for the third quarter of Twentytwenty amounts to $145 million or 71 cents per share.
Net income decreased to $46.2 million or 52 cents per share.
Strong cost control remains a focus.
Okay, that's not only on shifting expenses, but also on G D. Nick.
Negatively affected by a softer dollar.
Furthermore, the financing expenses or lower decks to reduce the debt level adelbert reference interest rate.
This brings me to the next slide being do you have enough balance sheet position after September stuff gets 2020.
The company remains in a solid position but.
It's a very strong financial balance sheet.
The book leverage ratio is 35.8%.
And our liquidity position is excess $1.2 billion.
Okay, which one did the $61 billion in cash.
And the remainder is spark to under revolving credit facilities in order not to burden our pockets.
Drunk focus has been to reduce working capital requirements.
By collecting outstanding receivables gena.
Generated from the high Q2 market environment.
Disgust spoke with.
Combined with the operational results support that you were not enough to further reduce net financial debt by $62 million in Q2, we.
This financing is indeed constantly evolving and that has impacted you don't have already this move.
A major portion of our lending.
On the $750 million into sustainability loan, which we cover in the next slide.
What's the baseline.
This shows how we took to existing facilities that we have matured in the next 18 months.
And have you find its them into one larger sustainability facilities.
This is the first major financing overlay suite to be happy with the specific emission requirements.
The loans include clear targets to reduce our greenhouse gas emissions over its entire duration.
These targets store immediately with compliance over the first 12 months.
Being rewarded for it to be used interest coupon.
Five basis points.
This will be independently bakery and savvy fight.
The targets that are over and above what people say that Britt principles are looking for.
We believe this is the shape of things to come.
And we are delighted to be one of the only adult obesity.
I don't know hand over to Brian Gallagher over head of Investor Relations.
To sum carbon markets.
Thank you Lisa.
Just three quick things he wanted a couple of before handing back to do going some concluding remarks.
On slide nine we pick out those shares since launching nights you wouldn't be able to see likes to be below you know like human rights over the calendar year, perhaps.
Observed that definitely slots enjoy.
On average five to send somebody else thinks is the policy when might you be such a cool several courses, but recent skirts and slightly lower than that.
The message is clear lower rights sparkly, that's more recycling.
It is now on slide 10.
I'd say that this is the purpose of the different sites, but whats important initiative examples attached to it.
What we want to do here is fine.
Right about the challenge the oldest some places.
The purposes of this slide and to find sweet.
That's a good launch.
More 60.
And your old or older you'll see.
Secondly, I deals you see what you said, so cool market, which is in the mid range of mid age upon the kuzbass shipped.
Sure.
It's a well, but it's not the older tonnage that you know when we found that investors often dismissed.
However.
Public feeling about your remarks on admissions and then want it's religion funding or something.
Actually some additions coming from the personal consumption no central Michigan banks novel investors and this will not have the FLEXCEL older tonnage.
As I said I, certainly don't think you'll see some tactical fronts.
Shows.
Variables that we are focusing on which all reduced utilization on an older vessel will house.
Simply any best of luck with this new device will find it very difficult to take them.
Punch also bought oil majors and traders.
Combined <unk> costs.
Just from.
Please consumption mogul engines, but also in coupons all costs, including legal fees.
Of course get more costly the older vessel gets.
We can see that this will add further pressure.
So I know what you see.
The snow returns magnified when not if.
No I.
Uh huh.
We will see this part show.
But the most.
Yes.
And that's the reason we want to focus on this.
This is not a sustainable peering Oh Titan Eddie Plank go up like that when you're having PC games, although the opex costs.
Well now move on to Slide 11, and this is why discounts because you can see on slide 11, there are bound to be able to see what 7% the global fleet, which is or where do you start to 17 and a half years old which will have to go through a special survey I know myself out of products. It looks like the system as part of that sounds like over the next <unk>.
Yes.
It's coupled with the fact that on a wider basis some parts of the world like Bugs do you see the city.
Yes, that's.
Page you can see that there were some significant challenges ahead of us.
The older tonnage that's sure like to mine under pressure put aside for it.
That's a good thing.
Well I can sum I don't.
Change in terms of the vessel supply picture.
With that I'll now pass on to the final couple of sites and some summary remarks.
Okay.
Thank you Brian.
Yesterday, we were delighted to announce we've agreed a 10 year contract extension for the towards the schools, we operate into Qatar always feel cool and chain and we own those units jointly with our partner internationals he wins.
This vindicates the high quality service and operation we've had so far with zero downtime since the start of the contract 10 years ago.
The extension will mean that two units will continue to operate on the same field and two twinkies, Turkey too.
This provides your NAV with additional long term visible cash flows.
Indeed, these new contracts will generate for you and I've already more than $322 million and the contract will start when do those units or between.
Just as a reminder, these episodes on not seen p. storage storage vessels.
Yeah, I'll sophisticated units that convert that's from fluid into marketable high quality crude dog.
This also demonstrates the capacity of your NAV to create value outside the traditional crude transportation segment.
Moving on to slide 14 integral crude.
There is no change to our traffic lights demand recovery remains muted, especially with the increased recent coffee restrictions and only supply is tight because of the agreed opie plus cuts.
But the lack of the ordering is a bright note.
Is the U.S crude exports picture, where over the past 10 years Hilton, we sorry explosive average just be new treatment in bars to the right in line with levels seen this time last year.
Contract extension one this week on or episode joint venture further strengthened our financial position with visible cash schools until 2032 or.
Our balance sheet is something we can control. Unlike many other elements with our <unk> met coal market.
The strong financial position is constructed to withstand a sustained period of challenging free trade and to certain extent, we understand at your dad that these challenging periods are helpful to clean up the market with excess capacity.
The same time, we hope the dispute will provide us with opportunities to continue to develop our platform.
With that I will pass it back to the operator to receive your questions. Thank.
Thank you for your attention.
Thank you.
Now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
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That's currencies any others. Please limit yourself to one question and a follow up if you have an additional questions you may react or the question queue just.
This time, we will pause momentarily to assemble roster.
And the first question comes from Chris song with Webber Research and advisory.
Hi, good afternoon, he's going to eat how are you.
Hi, Gary when you.
Good good thanks I want.
I wanted to just kind of ask about the two suezmaxes that you're targeting for two years.
In the press release, you guys said that it was to enhance strategic relationships can you, perhaps expand on that a little bit and also ER.
Are you able to share the rates of the time charter and if there was any profit sharing.
Yeah very good question, we took the ships from the Trafigura.
And Ah I see that.
As you know the traders are very important days normal it so.
So we are happy.
Hi, Peter <unk> countries do you have with them in the Lps treatments in both directions, we have chalked it up to your TC today and the policy given continued to explore.
So the opportunity so it doesn't give them direction. They all just conceding on the core logic, so just keep going and in the challenging markets. It's very important to get access to the causes because in fact, you can you can waste a lot of money by city I do not find it causes a institution.
And I think that that's your job and so did the pool level and we are trying to maybe buy some things.
As far as the the wage is concerned he was reported in the market to a it's what I can tell you. It's a 25000 and in fact two years because one of the options.
Okay, Yeah, great in days when they make profit say there is no sorry, there's no profit sharing in them into on top of that.
Okay. All right. Thank you, though and I just want to.
Switch over to the Oceana I think you guys mentioned last quarter that you guys are purchasing about 20% above consumption.
Average down the cost of this you are you guys still in claim hey.
Hey, Matt It was like that was a phase three of your plan.
Kind of purchase volume discounts or is that is.
Is that still going on and what are the plans for radio shack.
Yeah, absolutely I mean, the you know the story. So you beat the border to 19, when the price was a much higher benefits a into a rush to do you have a fairly oh, how did the cheap stock or two to see to older vessels.
Then the old price collapse into carry a old petroleum products price down with it.
And at the time, we compete you stop using it.
To be sold the first like a recovery and then we decide to do a sort of a blending.
ER, which she is purchasing a and it's a full from the market but also.
So more vessel I believe which help.
Outposts minimizing the negative mark to market another words.
We all buying.
For the boxes in volume so it's not a 1500 2000 tons at a time as we would do otherwise.
By a 35 or $40000.
On a in one girl, we benefit from a a rent if you be discounted that discount is applied to minimize the mark to market and you can see the evolution. That's at a oh the worst born free workplace 55 didn't we didn't take any impairment because we said that we can manage the situation and so through this program.
Well lots of improvement Opportunistically pricing we.
Yeah, No doubt 15, you didn't ask about effect tried you couldn't today. He told me 9 million. So we are very hopeful that between now and the end of the year or whatever we have on onboard the vessel will be a market price and.
I hope you see than before and a dramatic can go down.
Market prices go up and we will continue to operate under the current program that I just explained.
Okay perfect all right. Thank you. Thank you guys for your time every day.
Thank you and the next question comes from Randy Gibbons with Jefferies LLC.
Hi, Good morning. This is Chad on for Andy how are you guys doing.
Hi, Chad very well.
So you guys reported much better than expected quarter date rates well above the benchmark rates can you talk about what drove that performance and what rates are you currently booking on the VLCC and Suezmax Kinda this week.
[laughter].
Uh huh.
To answer the first part of the question I really believe that it's a matter of a number of days, where you're busy on either utilization.
And as you know, we don't be Portuguese nation separate these suits its really blended into the TCV agreed that we are publishing today.
I I cannot explain that but any other difference from the market.
As far as the VLCC market is concerned it is quite good.
Dread, depending on what you're doing she moved from the carbs and good China Uh Huh.
Going to be about above 20.
You showed me, a EG, China or Europe, or it's more going to be like between 12 and $15000. A day. So obviously you try to do more of a look see voyage. Good. So you cannot always.
Oh, you cannot only doing sort of tyco barges. So.
So on average the market must be between 15 and 24.
For the time being a SaaS is she is like talking soon.
I'm afraid and slower than that so it's more between eight and 12 or so on average 10 and yeah. It's a it's very similar to what we should be booked so far we are a little bit older who are about to go to school safety another mobile.
Winter season, but.
But obviously there will be more activity.
No it will depend on the Covance restrictions you have seen that most of European countries went back to look though a this was almost love the kids in Asia. So from what we receive from Asia is a is relatively positive news because there's no decrease in consumption.
And we need to see or what how it's going to play out in the state.
But if we were to have a normal winter where volumes were increasing.
We believe that we would see a marginal entries into the rates up.
Develops a beat and we don't believe that it's going to be extraordinary but seemed to buy seasoning effect it should improve from what it used to be.
Perfect. Thank you.
So moving on congrats on the episode contract extension car based on our math the new EBITDAR contribution for your 50% is more than about 20 million per year for the 10 years I'm not since that's correct clearly a non core assets do you have any thoughts on selling your portion of the JV or kind of the opposite and buying the other 50% from minus W.
Oh, I think the discomfort gives us options and it's certainly something that we would think about Islam cold, but nevertheless seem to go to clients is very happy with the services, we provide so I think <unk> or selling.
<unk> or selling the entire.
You need to go with the international Seaways.
Automobiles has to remain the operator, which is not a bad place to be.
There's a lot of options on the table, but there's definitely no plan to do anything at this point in time and lets not forget that it's 10 years or in country nation to the current contract which is not finished because it's only going to be finished in 22. So we have a little bit of starting to think about it and make sure that these.
Similar to pull into new markets, where we can get the best value for a buck and so we don't get that but even be better off keeping it.
Perfect well, thank you I'll turn it over.
Okay. Thank you and the next question comes from Chris Wetherbee with Citigroup.
Hey, Thanks for taking the question.
I wanted to touch on the U.S.G. loan I think its kind of interesting.
In terms of the direction financing in the industry is moving so maybe can you talk a little bit more in detail about you know.
The targets that you guys can.
Sort of of your question if you choose all we need to affect the industry I think that the mall banks are scientists those principles or part of that club the mortgage would be applicable for everyone and shipping and let's not forget that's E. I D E as to be transparent to calculate so that you <unk> instead of a mission.
You do and then for the banks to civic the clients with all the best in class because Dayton turn have committed to publish D emissions all day and time I put food not on the on the name by name basis, which would they want to look good about the kind of essence that they find it. So it's it's it's.
Glen at your dream to have seen it too.
Definitely with you a starting point I'm sure they're the principles <unk> all the time, but at the moment, it's more questions reporting and then look some good for the investors of the banks themselves.
And and there's no way around it I mean, if there is one bank was involved in a fight empty and you know most financing she can them as club deals or syndicate, then there would be a close forcing you to publish that.
As far as we're concerned because we have a relatively your feet and because we have invested in a number of initiatives and that includes you know digital tools to to help decrease the the consumption and therefore the emissions. It was about a big program of using the most efficient sitting C campaigns.
When we reached dried or can these kind of initiatives received that we should be a little bit more ambitious and so the the trajectory that we have agreed with the bank is more ambitious than the one on the procedure and principles and according to a cancellation, we gotta get there I wouldn't say, it's easy, but we definitely do.
Get there the last one that I want to mention you heard Lee, saying the issue don't move the target. It's only five baseball. So it's honestly not much. It's it's it's very little but you need to start somewhere and you should wait for <unk>, all those regulations to be perfect.
Then you don't do anything and and you dry your feet, which is getting to know the keys that you're an absolutely prepared to start with this kind of initiative with this kind of.
I would say minor incentive and nevertheless demonstrated that we are ambitious and then hopefully moving forward it will be more generous for what I would do at school. The good guys location in terms of the environment. The good guys and it would be more of a tendency for the bad guys. A combination of maybe loans that would be <unk>.
As well as not finding banks to financial assets, because they are outside to stretch it too tragic threes that I just discussed.
Sure Okay that that's helpful and I guess.
Yeah that sort of ties into the outlook for free grow with for you out of yourself as well as the industry I guess, there's an argument to be made it the financing is not as readily available for older tonnage over time, you know it could either choke off that could potentially drive capacity out of the market that way. It also fatah.
Actually incentivize people to look for newer tonnage or potentially new build tonnage because of the three eco standards of new vessels relative to secondhand that so so how do you think about sort of the you know there there's probably a couple of different angles of this could go where they're unintended consequences of sort of moving in this direction, where you couldn't theoretically stimulate more new build orders.
And you might necessarily want for the industry to maintain some form of balance going forward or is that reading too much into it and you should just assume that he is ultimately begins to sort of start out capital for older less efficient tonnage.
It's definitely complex is very complex you Jewish and be choose if you buy a conventional sheep today you know for sure that if you don't retrofitting she won't change anything to the vessel 20th on the road, it's probably gonna be the wrong asset.
And maybe it's gonna be the as long as it's 10 years down the road. So what are you gonna be looking choose do a few the N G. But unfortunately, the cost a lot more the cost probably fishing for some more than the conventional vessels.
And there is a second question behind that'd be choose LNG use it for some shoe, yes in a new nephew too, but there's Newton <unk> both on both vessels, but also in the supply chain and the new thing is formal detrimental towards the environment and the C. O two until you should combine that.
There's a number of studies done all the same cage marginally better. It is worse, it's a lot better. So there's a lot of confusion I think that as long as there's that sort of confusion out there people are gonna be reluctant to let's do the tools into one direction, which is okay. We can continue by conventional vessels open that.
We will be able to retrofit than the other needs to stage, all we need to move to sort of a long transition because if it's shogun southwest it in to do a few energy visit.
And and you can pay me see that this is a debate that probably every single tanker shipowners, having at the moment, maybe not a sickness as well be choose the older books is very soon I think that that that will continue to be the case. Despite the fact that.
The cost of them Ah stroked dramatic you wanted to read it back to almost back to levels that we should be the previous cycle. So normally it should attract in a number of people the people sniffing around but when you look at the firm order or the real older. You can believe it it's still very soon and I'll just need that's that's very good I think that.
We may see a few more orders and we'll see if they are <unk> double do a few sorry or is it all to conventional vessels. Once you see vessels be strapped. Okay. If people are gonna be very reluctant to to order ships and just kind of market. If you don't see any.
Signs of scrapping because the market is over supplied today and despite the age profile will seat you need to have the proof putting before it <unk>.
Okay. That's very helpful. I appreciate your your it that's all thank you.
Thank you.
Thank you and the next question I got some John Sherpao whichever horn.
Thank you good afternoon, he'd I'm, Brian Uhm I tell you cause I wanted to ask about the F. S. O's Ah differently, that's telling them, but that free by July 22 first of all how much that is left on there and what's the the pace of the cash outflows as you repay that and get that that for you and then second of all with a 10 year car.
Track with a good counterparty what are your plans an availability too drawdown existing finding our additional financing on the F. S to maybe help you you know with the core business expansion.
So as I will answer the second part of your question in the new time I'm sure. The niche can Dick for the members of where we are doing some day today, yeah, and what is the repayment uhm. So the second part is it well I will answer is exactly the same way I mean literally so.
His contract the day before yesterday about over the weekend in fact, he can go open on Sunday.
And you can bill would be working on this renewed for a long time, we were expecting to come there'll be later because after all we are two two years ahead I'll try the maturity of the contract. So we will explore old and every kind of options and.
Put them I'm, Dave I mean, there's we can <unk> one is W. This will wish we can buy them refund plus attractive we can both sound to a another policy, we can refinance and keep the assets and part of the cash flows. So the there's a number of options what is important for you.
Need to know is that indeed, the sheep would be <unk> at the end of the current contract. So in July 2022, full boost units. So it will be free cash flow and and there will be possibilities to refinance you, let's see which where we are at that point in time or maybe you guys know, but she did arise.
Before then but I think that when we are I was sort of a crossroads like we are you know sector, where you don't.
You need to think about what is the wide she called the future we need to write about two to think about what is the watch a few of the future maybe we want to a deep part of the consortium that is looking into the prediction of those shoes. So these kind of things.
The fact that we have visible cashflows and you will admit with me it sounds very frequent that's we have this amount of cash flow and this this visibility set the new message, but we would be able to use in the future.
Mhm.
I mean do you can let me add Joan <unk> never know that you have on to do it as Oh say currently I'm Gonna ask.
For each episode, we have about no end of Q3 $50 million outstanding and as I mentioned by you will be there'll be that 32223 2022, <unk>. So did we use each year 11 of $25 million model I sent an order of magnitude.
Great. Thank you that is for sure.
That'd be is that correct.
And then he though uhm I think we talked about this a recorder, but things I'd become a bit more maybe uncertain in the world, but attractive in the asset values. You know these charter ins are not in your typical method of adding leverage, especially giving you a liquidity. So how are you balancing this.
Drop an asset values and you know the potential opportunity that year and have is done in prior downturns versus you know maybe some of the uncertainty out there you do it a little bit more of a charter and method.
It's a very good question. It's a it's it's one that we ask you know sofa almost every day and despite the the the depth of the market's type of dog.
More than 800 G O T. She's an over from 600 Suezmax you don't find deals as easily as you wish and on top of that as you know or shape is not doing very well and we have never issue.
One sure Uhm that was destroyed show the value and so I've just one time, we mobilize within the check and then the use of the chairs to do a deal.
As I just mentioned bill to remove it so is out of the question because we don't know yet what the to come as you can imagine. So we had this opportunity off chartering too stripper modem vessels. They will give there's been a year ago. They are super equal tied the scarf. Those if you want to use them.
And so we thought it was very good do you. It was very important forest with some sort of joke govt. So that's two years plus one year option and we've seen that they will they will create value for your whenever that's.
Probably outside's I would say that the the natural we have to wait and find you or not but I think that'll be all moving to exceptional times, we continue to be frustrated with the sure and that explains why would be absurd to take them on time charter you'd rather than trying to buy something uhm, given where we are today.
Okay very helpful. Thank you he'd go thank you leave.
Thank you.
Thank you and then ask questions I saw that made my whole trial Deutsche Bank.
Hi, guys. This is Kevin on from it I had a question on the U S election, and the implications on the crew tanker market is increasing a look like a bite and when Republican Senate, but I guess, we'll see obviously, there's like no real tax implications, but we're spec too implications for you as production exports is there anything notable.
You would go out.
[laughter].
I was afraid you would ask to put it to do question is the one that I hate the most to be honest with Ya [laughter] I'd say, a very few people that very few people that have a clue and I think we have to be patient until you guys have the president, but I need to do.
Almost like busy it has an impact for the rest of the world.
The way we seat is.
Vitam was was gonna win the election, and if you would have a majority in in the Senate.
And then the gender T M. He will try to be a little more forceful on on the the talk to <unk>.
<unk> the the blue ways that was predicted is not really the one that we see even if she has a majority is gonna be a very very seem majority.
And given that's a fact I assume that you're not gonna have a revolution I think we're gonna have a naval you should I think that to even be very mindful if not.
Getting the economy.
We have announced which we plan to do next and then we will reevaluate and see if we if we need to do more for the time being the the question was only hold of the state 80% of all things that we have committed to return to investors and we've decided to go 50 50 like we need to.
The last quarter, and we were very happy about what would be the last quarter by the way.
Do we can buy up to 10% of I Wanna catch, though but that is only into the next the G. M, which is may if we want to do more before that we can call a new G. M. So next ordinary general Nietzsche and usually if you do that you get you get to know.
<unk> to to go uhm with such a program. So I I would not be to focus on the authorization that we have today because if we are more ambitious than this authorization that'd be all for naught and as I said to my recollection of you'd never received a negative dancing with that.
Gotcha Gotcha very helpful. Thanks for the questions.
Thank you.
And the next question comes from Mendola Stifel.
17 or 18 in.
In order to have dual ships already breakeven and thats simply by.
The fact that they are consuming far less.
Then whatever is represented in the market.
So they're very very big vessels.
The strategic thought I would say is.
Is two fold.
First we have sold a number of suezmaxes, so weve decrease or exposure to the quality of its a market that we like and in fact.
Sure so you're not losing a lot by doing that but obviously, we are always very mindful of what type of market.
There is out there, where we perform drydock because when you're in dry those you're not hurting anybody youre, telling the story of a of those guys installing or retrofitting scrubbers.
In a market that was absolutely fantastic work here, it's exactly the opposite market is ships are equal by French higher and so we take advantage if we take advantage.
Two.
To take as many ships as possible.
In in the dark speakers.
Frankly, none of US none of the operators is good at predicting the rates. So you could have certainly for an event that we had not foreseen a market that is weeping.
In two months on the road. So you want to do that when you know that the market is not very good we want to do.
As many ships as possible, but I wouldn't say is moving the needle from your perspective as analysis that ship is five year old that chip is 10 years old and so I need to forecast that amount of money in those number of days.
It's just moving by a few months, we had to take a few ships before year end, we had to take a few ships. After the year end, we have decided to take them all.
Mmm no.
The episode contract highlighting you won't have the ability to generate cashflow outside of crew transportation and you know you don't have over its history has been acquisitive all generally within large crude tankers. So when we think about the the next step when we think about the next acquisition is that still include tankers.
Yeah, I think that we not gonna Dizzy from local business. So if you're talking about a big do you it would definitely be on the crude side and on the large. Thank you slide so at the moment. We continue to believe that this is gonna be a great market.
Gonna continue Jamie cyclical, but it's gonna be a great market for the foreseeable future and as I mentioned I believe was lost cool, we're not afraid of P called as a matter of fact, we may even be quite excited about Detroit.
It up the curve and always those investment should pay off by reduction of.
The few that you consume or something equivalent to that and has an effect will reduce our emissions, which is where people are folks you see.
Okay.
Yes, yes, yes. Thanks for that that's helpful. I just wanted to maybe just a follow up touching back on the episodes. It's a bit there was a bit of a surprise I guess for us to see the this contract renewal.
Extension and that was there maybe.
Was there may be a mechanism or a timing clause that causes charters to get negotiated now or and Thats why they you have announced it or is it simply you know and discussions with.
Northern oil.
Planned and and I think we can be very proud of that because.
It had required at the time the conversion a little bit the vision of spending maybe more money that some other plays would've spent.
Oh Daddy staying off right now you don't need to reinvest any money and you can continue to operate these with some very safely in the same to you with all the equipment in in working function.
It will end their lives at a point, where commercially we are going to be very difficult.
Two markets you should peak 10, a year order, maybe eight year war, which is not an eco ship. So it is still burning quarters on a few.
And youre sort of stuck within two weeks.
End of life natural end of life.
You may find yourself on the wrong side of the of your bets at.
And later stage and so that that is as far as we're concerned it's one of the explanation that there will be fine.
And we wish those vessels could look that might not be a bad debt obviously.
Turning to market those units to to the right people to the people.
Blue, especially because that is right now attractive. So that's one side, where you Don involved you ubiquity or you don't see too much. The the other side is if you are offering us January deal and people I'm not accepting <unk>.
There at the N a G. So they'll only accept any price of as as what they see on the screen that's gonna be a lot more difficult for us.
Good volume of ships being taken to give recycling docs everyone's instructional just some people call that.
So yes definitely there was a big shut down and the major delays in the most with Chinese yards was some of them specialized.
In the in providing Drydocking surveys service.
And so yes, there was defensive flexibility simply because otherwise people would have had to stop their ships.
The that flexibility is not given these up given the blindly. So the contribution, citing we'll be very careful before.
Before the extended certificate and that would certainly want to inspect a number of things.
Onboard to ships even remotely.
But definitely and we were in that camp. That's also maybe why we have concentrated sort of the ships in such a short period. So we did benefit from it.
Extension from distribution societies, and hopefully that explains why we havent cdx a failure of ships being taken to the recycling yards because the you.
We received the allowance to to continue to trade.
Thank you for that you put out an excellent chart.
On the.
It's.
Potential catalyst for from a 186 surveys next two years and is broken down by quarter. It.
So it was on a I guess page 25 of your September presentation on in Q2, you list 20 ships.
It gives you a perfect answer.
Yes.
Yeah in terms of like she goes answers I mean, yeah, we think there's about maybe 30 vlccs that.
Got it got it come out of storage and that's been very stubborn over the last two or three months, but we think the number on the Aframax and Suezmax is holding a long way from the peak we saw in May and June where we sold 70 and 80 of those vessels being taken up for storage at down to about 15 or 20, now we think which is going to come back so still a bit more to go just more of an overhang which is.
Okay, and mixed Monday or or maybe on the first of January when he says woman, you're saying well mind my top priorities to do is to find to deal with your reunions, because that's not possible.
Which is which is in a way very good maybe not for the reasons, but as far as I want to market is concerned which is it's likely to take several months hooked up to a year or two and at that time the situation.
That would be going through today, certainly would be covered restriction having impact on on demand he's gonna be completely different.
Well as far as they are free ice concerned I've <unk> I've been yeah, sorry, Brian.
That's not caught me off guard.
Yeah, so as far as the the the city is concerned I have the impression that maybe the the ground <unk>. This movie where every morning, you wake up with the same day that starts again, we were in exactly the same situation. When do you by now the administration the missed it the sanctions or stroke deal.
Tom we talked that was still on a relatively short term storage contracts, but I think those expiring here in October so any update around that.