Q4 2020 Euronav NV Earnings Call
Good day and welcome to the Euro enough Q for 2020 earnings Conference call all participants will be at Watson on Windows.
If you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions and ask your question. You May Press Star then one on your Touchtone phone.
All of your question, Please press star and chip.
Please note. This event is being recorded on now.
Let's turn the conference over to Brian Gallagher.
Please go ahead.
Thank you good morning, and afternoon to everyone and thanks for joining you announced Q4 'twenty 'twenty on the school before and stop I would like to say a few words.
The information discussed on this call is based on information as of today Thursday February 'twenty 'twenty, one and may contain forward looking statements that involve risks and uncertainties forward looking statements reflect current views with respect to future events and financial performance and May include statements concerning plans objectives goals strategies future events performance underlying this.
<unk> and other statements.
And not statements of historical facts.
All forward looking statements attributable to the company with the persons acting on its behalf are expressly qualified in rheumatology my reference to the risks uncertainties and other factors.
And the company's filings with the SEC.
The available free of charge on the SEC's website at Www Dot FCC don't go and.
And on the water and websites and that's a double www drops you are enough to call and.
You should not place undue reliance on forward looking statements.
Each forward looking statement speaks only as of the day to particular statement and the company undertakes no obligation to publicly update or revise any forward looking statements.
Actual results may differ materially from those forward looking statements.
Please take the amendments of we don't play called the state and the page two of the slide presentation.
I'll now pass on to the Chief Executive Hugo Stoop to start with the agenda Slide you go over to you.
Thank you Brian.
Come to our call today wherever you are in.
In terms of the agenda I will first for and through to Q4 highlights and some comments on our continued commitment to active capital allocation during the cycle before passing on to Lisa Our CFO, who will provide a full financial review of the net income statement and the balance sheet.
Brian or head of Investor Relations research and communication, we looked at the current themes in the tanker market before I return to contribute all of our remarks and be ready to take your questions.
So turning to slide four and the highlights page.
The last quarter of 2020 was undoubtedly a challenging one for the large crude tanker market.
The major dislocation, we saw and crude markets during Q3, and Q, sorry, Q2, and Q3, which resulted in strong demand and requirements for tonnage dissipates and as consumption of all remained largely flat and supply of food was artificially depressed by the OPEC plus prediction cost augmented with voluntary reductions.
These headwinds produced low freight rates below our P&L breakeven throughout the quarter generating the loss on slide four.
While it's disappointing we have to admit that this is the nature of the think of markets. The market is cyclical and volatile.
On a more positive note, we have previously announced or FSU contract extension agreed and Q4 and which further strengthen our business model with visible cash flow for the next 12 years.
The key and used from all of our results. However is the management's confidence in our business, reflecting the the commitment to repurchase adult of 50 million of our own shares. Despite the current challenging freight market and the likelihood that this market. This market structure continues for much of 2021.
Why do we deploy capital now well there are two reasons firstly, because we can of Lee will show you our balance sheet remains very strong and all of the leverage is in the mid 30 per cent compared with target limit of 50%.
Secondly, we continue to be active and looking for the most attractive means to generate shareholder value one of the most attractively priced assets available twist is on the equity today all of a share price of indicates and accrued of new build VLCC at 70 billion dollar share.
Share buyback or long term investment as David Berman and positive impact on earnings per share.
But it doesn't mean that we will not be active and the S&P market itself. Indeed, we believe that the lowest bottom of cycle also providing opportunities yesterday, we announced the acquisition of two eco suezmax, which would be delivered the in the early 2022, and what we hope and believe will be a much stronger market.
This brings me to the slide five and the allocation of capital allocation at your NAV, which remains an important and key focus for the board and management the strong.
And maybe coming a bit repetitive, but the message behind it is critical.
Sure and FTE sketch of allocation and its entirety balance.
The balance sheet strength means little unless it is deployed correctly and the best counter cyclically.
We have this potential and with the challenging market comes opportunities, taking all of our leverage to 50% would provide $700 million capability to expense.
The strength is there even though we returned to our shareholders over $350 billion and cash dividends during 2020.
The strength of the balance sheet enables us to do a number of things did enables us to continue to be a nominal dividend of <unk> 10 per share and cash yearly.
To continue to buyback our shares when we believe it is appropriate and you will have noticed that we buy at the during 2020 towards more return of value via share buybacks the <unk>.
Reasonable simple when we decided to engage and share buyback, we take or share price and translate into a VLCC equivalents. We can directly see if debt represents good value on all this is about long term investing and Brian will cover. This later in more detail finally, our balance sheet means that we can look at fleet renewal of free tax.
Pension and more importantly act swiftly on those opportunities, which in shipping is very important.
Past two years, we of recycle of around 300 million in the older vessel sales and deployed 380 billion and new VLCC capacity and yet our retained earnings of kept the balance sheet leverage very low.
Do you have in Africa, and look to be opportunistic and growing but we shall remain disciplined.
With that I will know parcel of the to leave a lager or a CFO for more details on the financials and leave it over to you.
Thank you Hugo.
Moving to the operating results for the fourth quarter.
EBITDA for Q4, <unk> was 36 million or 18 cents per share.
Net loss for the quarter to be reported this minus $58 $7 million.
This result reflects the weak markets.
Notwithstanding this negative result for.
Was able to achieve a cash breakeven.
The significant efforts and surge of working capital reductions.
Additionally, you had enough of Heath.
Majority of two shuttle around 27, dry dockings did take place and the fourth quarter of 2020, and during 2021 of which the majority during this winter season.
Moving to the balance sheet the company remains and the solid position with a very strong balance sheet. The book leverage ratio is 37, 3%.
The strong balance sheet was achieved thanks to an exceptional level of cash flow generated in 2020, although the euro enough also to further execute and a consistent way the capital allocation priority by returning cash to shareholders.
In line with our policy and especially considering the uncertain economic times you have enough continues to have no leverage amongst the lowest and our sector.
I don't know hand over to Brian Gallagher, our head of Investor relations to read through some current market themes.
Thank you Lisa.
And you guys spoke earlier on capital allocation on how central of the swap strategy here on that.
Slide eight illustrates the space.
And with evidence of us doing what we say we will do.
The Blue line shows the needle the OCC price with the <unk>.
Green line conduct and the euro and our share price into the implied newbuild price equivalents. So when you take the two lines should be equal.
But they have not tried and as such.
This has given us the opportunity to repurchase shares and particular, joining the Q3 and Q4 period of 2020. So early.
Earlier in 2019.
Buybacks are afflicted and adults on slide eight.
And we view this as a longer term investment in the tank.
And the cycle.
What is also interesting because of the recent movement and part of the toxic proxies and the availability of those assets is that with moving indicating maybe Mike you said and the early signs from asset prices about the direction of the tanker cycle.
And important parts of the cycle is the recycling of all of the tonnage and this is now covered on the following slide in slide nine.
Conditions for recycling are currently strong.
This is a very busy slide if we look back to previous periods. When we had one recycling values of the VLCC $18 million of better.
Two freight rates were low on the the challenging outlook.
We got the affirmative action in terms of the fleet size reduction.
2019, and particular, so 42, VLCC equivalents exit the fleet and looking for.
Forward there wasn't the sort of catalyst the decision point Botanic gardens and the <unk>.
The two vlccs and <unk> 17, and the whole piece or more will have to go through special surveys during 2020 volume.
How the fleet size will be shaped is always very difficult to predict the conditions are favorable and some re sizing with.
And with future funding and compliance on the incoming emission standards also parts of the puzzle for owners of older tonnage.
But we do need consumption of crude to return to more normalized levels of unusual net funds continues to disappoint on slide 10 on the exam.
On slide 10, as I'm sure we of all experienced over the 2020 and return to more normal activity and our lives has been constantly differed.
Slide 10 shows that in the form of the E E and a global demand for costs from last summer and.
And also generally of recent updates and trajectory.
It looks like consumption will only return for the 2019 peak levels that we saw from 2022 at the earliest and.
And this assumes of course, the most elements and this consumption returned to normal.
There was no way to sugarcoat, this, especially lockdowns, the recent become more or less aggressive.
However.
The secret demonstrated earlier that is why we have always strokes of joined up with the very strong balance sheets of all center.
This provide us provides us with the opportunity to be opportunistic and fleet and the new.
The capability to look and act on potential expansion as we have done with the Suezmax acquisitions.
And longer term.
Invest and attractive assets such as the loan stopped when it is price discounts.
But more importantly, we're in a position to navigate the cycle, even if this would be driven.
Driven by a prolonged period of low rates for multiple quarters on balance sheet allows us to do this.
With that I'll now pass it back to some concluding remarks with regard to sleep on Chief Executive and you go back to you.
Thank you Brian So to conclude there is a small change tour of traffic lights, and the restriction and all the supply I mean that we downgrade and take of a tonne mine life from Green Amber to full amber.
Reflecting a challenging market, which will most likely continue into the second half of 2021 at least.
At first thought our traffic light summary may look a little negative but at your NAV, we prefer to have or a glass half full and the challenging freight market was difficult to manage is the feature our team and I used to navigating and of our balance sheet strength will support us during such periods.
They're all waiver two overriding factors driving our optimism for the medium term.
Firstly of difficult freight market brings laser focus on fleet age globally, the tanker market free to H is the oldest.
It's been since 2002 and yet the order book is at the 25 year low.
Lottery and financing pressure is also increasing on all of the tonnage and is here to stay lower freight rates will be of key catalyst and resizing and reshaping the global fleet size.
And secondly, challenging periods and freight markets provides the opportunity to act on cyclically.
Our balance sheet provides us with optionality to ask but only in the disciplined way 2021 promise to bring further test, but your NAV is and a robust health and looking for what to navigating such challenges with that I will pass it back to the operator to receive your questions. Thank you very much for your attention.
We will now begin the question and answer session.
Ask your question and you May Press Star then one on your Touchtone phone.
And if they're using a speakerphone please pick up your handset before pressing on the key.
Withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
We ask that you limit yourself to one question and one follow up thanks.
Our first question today and will come from.
Chris Wetherbee.
With city.
Please go ahead.
Hey, thanks, Thanks for taking the question.
I guess, maybe going to the capital allocation discussion I think is probably the best place to start so you've made some moves here and the last few days and so kind of curious about your perspective on opportunities and the market. So have we seen.
How attractive I guess our assets at this point how much capital do you think you could deploy through what hopefully and sort of the current trough of the market before we potentially see of rebound.
Hi, Chris Thank you for the question.
I think of we indicated.
What we are prepared to do now and I think it depends on the opportunities, but if you look at how much potential we hedged knowing debt.
The dog at the maximum leverage of around 50% debt should equates to 700 million debt, we could deploy without breaching debt sort of self imposed target.
But again, we need to remain extremely disciplined with what we do and we've demonstrated debt in the boss.
And two of certain extend we will deploy debt either and share buyback orient opportunities of the machine in the market and.
And as recently demonstrated yesterday and we can do both we can buy assets that are attractive the price.
And we can also grow and further capital into the share buybacks to the extent of the share price does not present the.
And the value that the that we believe should be yes.
Okay. Okay. No. That's helpful of that 700 and wanted to get a good number to kind of think about and then I guess kind of curious about trying to be optimistic and thinking about the potential for a recovery here.
When you think from a macro perspective about a potential recovery maybe it's in the back half of 2021, how quickly do you think sort of the demand dynamic and respond to that do you think it's sort of a one for one relatively concurrent type of dynamic or has there been a shift at all in terms of you know.
And better utilization from an energy perspective, but just kind of curious how you think the tanker market could track of potential economic recovery.
Well.
It's a it's always very hard to predict the future of especially the market debt is influenced by so many factors such as the tanker market.
The all geopolitical events influencing it.
We know for sure that we have lost a couple of minutes of dwell a few million barrels six of seven and meter.
On the barrels of demands and debt is very much due to COVID-19, how much will we recover.
This year and potentially next year as the question Mark.
So that's the first part of the equation I think and once we are there and provided that the inventory levels are and will have returned to the five year average and I think that the cuts will be lifted and people will start to produce again as they were before that we provide a number of additional cargos into the market and.
The <unk> would be picked up by the then Ivy the bill of fleet and when I say that then available for <unk> simply because we expect the fleet to shrink.
Between now and that time.
I was the owner of an old vessel and I was looking at.
A special survey 17, and a half of a 20 year old survey, that's a lot of capital that you need to inject into the vessel debt.
And then first of all for which the utilization will be questionable.
And as opposed to that you can receive 18 $19 million for recycling youll ship in and of recycling yards.
So we do hope that there will there will be of a shrinkage of the fleet before we arrive to the point where the demand.
Is back to where it should be because.
You can see that there are many.
The pieces of of the equation.
And so as we have said and breast release.
We believe the 'twenty, one is going to be challenging of course.
Those areas of winter when will the winter start this year.
Would it be October November December and at that point of time.
How will the world look like and is difficult to predict so we can only assume debt.
On a certain number of ships would have disappeared. That's a number of cargoes would've come back and then and return to equilibrium before seeing much better prospect tour of market.
Okay. That's very helpful color for you. Thanks very much thanks, everybody appreciate it.
Thank you.
Our next question will come from Jon Chapell with Evercore. Please go ahead.
Thank you good afternoon.
You go back to the capital allocation and then tying it into the announcement that you made yesterday.
Your shares are trading at such a huge discount to the equivalent VLCC I understand you need to keep modernizing the fleet and take advantage of opportunities, but it seems like that GAAP is still pretty wide. So understanding the $50 million buyback why are you still buying ships today was there anything special about that specific transaction and.
And we expect more towards capital return that asset purchases and these next six months during peak uncertainty.
And it's a very good question and so question that we ask ourselves every time, we of Tomatoes decisions and I think that the key word here is a balancing or act on.
And we are and operator for the long term and sort of fleet rejuvenation is very important.
At this point our fleet rejuvenation comes with a cherry on the key because the vessels that we are buying are far more economical than the vessels, we sold last year and so.
And trying to balance what we sold last year with what we are buying and what the board last year and what we buy and currently.
And that would be part of sort of one side of the equation, whereas the other side of the equation is purely looking at share price and seeing a disconnect. So I don't think and we can stop rejuvenating our feet simply because the equity represents better value debt.
Swing.
The business all the time to a point, where we may have to buy.
Assets to renew the fleet when the oil price at a much higher price and remember only last year.
She was Max works and exchange for 67, 60 Sevens, while $67 million. So here, we are buying at 57 of hub.
Which is a significant discount to what we have seen only recently so we do believe that bolt on and needed.
And then let's hope that the share price recovers to territories, where we don't need to act on those and then complete the concentrate on buying of for rejuvenation of or even buying for growing the platform, which is our ultimate ambition of course.
Yes that makes sense, thanks, Hugo and then for my follow up.
About the Suezmax is yesterday as being LNG capable, but also potentially ammonia capable. So as we think about that latter part.
Can you talk about the capital investment that may need to.
Participating and shifting those to ammonia and would you need to have a charter associated with that to have the charter of potentially.
And that's the alongside of that new propulsion technology.
Yes, it's a very good question and but it's a difficult one to and so you will agree with me because all of those technologies are evolving of making very fast progress.
And the more people and looking at then the cheaper it becomes.
In a nutshell those vessels are already to be equipped with tanks that can hold the LNG and what we're looking at.
Is to make the structural arrangement on those vessels to the sort of day can have additional tanks to hold ammonia simply because the ammonia is taking more space.
For Bruce was the kilowatt equivalent.
For the engine.
That's very much the focus is to make sure that if we arrive to a point where it makes sense to retrofit them, we can do that without changing the <unk>.
Structure off the ship, which is the most difficult bought two to change the rest of the retrofit.
But I would say would be what it will be.
But it's a question of piping and it's the question of.
Adapting the engine for this new type of fuel that we still talking about and internal combustion engine. So we're not we're not looking at changing the engine itself. It's really retrofitting. The engine. So once you understand what needs to be done on.
You can.
Put of.
Some sort of a number on it.
But it's probably the wrong number of disappointing time I mean, you can talk about maybe a 12 to 15 million for retrofits and I think it will be the same number whether you use for LNG or ammonia, but chances are that by the time of fatigue. The decision to do that the market would have shifted and those costs.
Would have shrunk to a point, where it may not be necessary to attach it to a contract.
If it stays in the numbers that I mentioned, then I would strongly prefer to of a contract attached to it.
Otherwise, we may not recover you'll retrofit costs.
That makes complete sense. Thanks, so much for the insight for you guys.
Thank you Joe.
Our next question will come from on the mature.
With Georgetown.
Please go ahead.
Thanks, Operator, Hi, Hugo.
I guess my first question is just.
And observation and the industry.
And half is in a very unique position.
We're the largest.
For crude tanker you have enormous scale, you've got a great balance sheet that low cash and cash breakeven costs.
There is one other company like that and in the.
A different vertical and that the company is star bulk and the <unk>.
Dry bulk space.
Very similar kind of financial characteristics and.
And more recently they've done several ships for share deals that.
Explicitly value their equity contribution out of 20, 25% premium to what the public equity market is prescribing to them and that of course makes sense because the seller is prescribing of value to the liquidity that they receive and the market as a result of echo.
The participation of the company.
And your 700 million if I'm understanding you correctly.
It's just basically marking the balance sheet, it's really debt capacity or incremental debt capacity, if I understand it but why not all of their opportunities like what star bulk is doing for ship for share deals that explicitly or implicitly value of your your mark your equity higher than what the public market.
Doing and and you can absolutely grow quite a bit more.
If you pursue that path.
It's a very good analysis and the I have to admit that I don't spend too much time on on what's on the shipping companies are doing but I'm sure they're doing the right thing for their.
For the old company.
And as far as your NAV is concern.
If we could acquire of ships for shares.
And we would be able to price on a share of any of your potentially of the slight premium to any of you look we didn't the Pos on Timna, we would accelerate the consolidation and we would accelerate the growth of this company without a doubt.
On the fact that the share price has not been performing.
Very well probe and the last sort of 18 months of certainly not at the level of where we want the share price to be somehow.
Somehow prevent us from.
I would say continue what we have started 15 years ago. You may remember that 15 years ago, we were a fleet of eight vessels and today, we stand on 75, and we have used from time to time.
The equity of uncertainty on three occasions to buy much bigger fleets. So I don't think that we need to create of confusion between the 700 million debt. We can deploy that could be for vehicle acquisition debt could be for a buyback debt to be for many other things.
And the capacity to grow the platform using the equity.
As far as we're concerned we make a very much of distinction between.
Using debt to acquire ships and using equity and I guess debt has to do with the size of the deal. So if tomorrow you or your colleagues of Deutsche Bank.
From a with the fleet that is of substantial size and a very good quality modern ships and say that the the seller.
We'd like to exchange the chips.
Against Euro NAV equity priced.
And EV and hopefully at the NTV plus a small premium we would be the first one to look at the tile and engaging conversation with you and the people that you represent.
Yeah, Yeah and well.
That's great to hear.
And I know those deals are few and far between but we have three for examples of this happening for the first time of real platform within a certain vertical is absolutely getting credit for that platform and the form of being able to do a deal and NAV relative to public equity market. So just.
It is encouraging that obviously you are open to that but maybe.
You know, maybe that's something where stars have to align and the seller has to feel the need to do it just one last question for me if I could the spread between the.
The high and we will sell for fuel has bounced pretty nicely off the bottom I think late September early October is when it when it kind of reached its bottom how does that impact the TCE dynamics for the company, obviously I know youre, adding some vessels were scrapped.
But one one I just want to understand you made a big buy and VLSI flow. This time last year, obviously I think that was just protection against disruption of supply, which may be not be an issue right now, but just talk to us of as does that strike continues to expand what are the TCE dynamics that we should consider for <unk>.
It's a very good question.
And so I wouldn't take maybe two and a two answers of first of all on the thing that the current spreads is the.
The to justify.
Scrubber on a new building, which is far less expensive than of retrofit and when you look at of retrofit it continues to be to.
And to our minds too expensive compared to the potential returns you can extract from debt spread which is anywhere between 90 and and maybe 110. When you look of the forward curve for the next two or three years. So that's the first part of the equation and the second part is when you translate and and TCE.
You can translate debt very superficially and very superficially means that you will take into account of VLCC consuming.
And maybe 55 of 60 tonnes per day, and then you multiply by debt spread and you say, okay and I am at 5000 of 6000 difference and D C.
I would like to take this opportunity to point of two all of you on the school that last year. Despite the fact that the.
The spread was maybe a little bit lower than what it is today it was.
For the first quarter will and exists on 100 for the second quarter and the third quarter maybe at around.
40, or 50 dollar and then in the last quarter and currently bounce back to around 100. So it represents on average about the same spread for the year, despite that and at that time Union NAV did not have one scrubber puts on any of its vessels. We had the series similar if not superior.
<unk> to the competition that hat and put a scrubber and please.
It tells you one thing.
And that thing is there is the way you operate your vessel.
Equally important to the equipment you have on your vessel. So if you find ways to decrease your consumption because you have very good people on board and very good people of Shaw, sending instructions. The vessels you may at the phone people, who have installed kits, but maybe can less about the quantity.
And the deconcini and let's not forget that we are entering to a world where the consumption is directly linked to the emissions and so we should all be more attention to whatever we consume beat each as a food or NSE for Sony to have taken a little bit more time to and some simple that's interesting and thats interesting and helpful. Thank you you go talk to you later thanks.
Thank you.
Our next question will come from Omar and Docker with Clarksons. Please go ahead.
Hi, Thank you Hi, Hugo I, just wanted to circle back on the LNG ammonia.
The future capabilities potentially on the two suezmax of and just wanted to make sure I understand.
And response to the when you were talking with John and the sponsor. His question I wanted to understand if you were to go down the path of retrofitting the chip saye with LNG after delivery does that effectively still make a dual fuel as if it were a new building constructed that way or is it different.
No that's correct.
And that's growing but it could be of choice you could retrofit into a dual fuel, which would certainly be all of our preference.
Because you would then be a more flexible I would say.
But he can also retrofit into a single view of.
The cost will be very similar and therefore percentage remains linked to withhold the flexibility and and re convert into a deal with you.
Okay got it thank you and and do you think.
Sort of that this whole kind of become an industry standard across all ship owners I think look the place orders and the future of that maybe the technology isn't there or the long term contracts on there for say the LNG component do you think the industry standard is going to be ordering of ships, but with component potential of compartment of potential for LNG and the ammonia.
I wouldn't be surprised that they do it.
We have seen and number of ships are being so called LNG ready being produced and and already for some years.
I think the the price to retrofit the ships is still.
Relatively expensive and as I mentioned absent of the contract I don't see people doing debt on the voluntary basis.
As far as the two technology of concern today, you can build already knew.
Dual fuel conventional fuel plus LNG vessel. So some people may choose the option and you've seen the there was and order placed the two vlccs last year and there is rumor in the market debt and on the 10 VLCC will be.
With the order with that technology the dual fuel.
The conventional fuel oil and LNG as far as the ammonia is concerned we don't believe debt will be.
Possible before tweet tweet potentially 24, so don't expect to see that hitting the water before that time and so in the meantime people will continue the scratched their head.
And and and have to make the decision between okay do on order of conventional ship with the possibility to retrofit. The later, but today it is clearly more expensive than.
Or do we need immediate the of the yard and ordering of dual from vessel do I wait for the dual fuel capability to be dual shoe with the ammonia and kits and and you've seen that the IGN and pneumonia has gained some traction and certainly in 'twenty and 'twenty.
So there is still of lot of.
Unanswered questions out there and we feel and we said the net camp as well we feel that the from that point of view of the order book will continue to be restrained as long as our technology is not the T and E beam.
Selected by our sectors, such as the think of sector.
Thanks for you guys Thats helpful and and maybe just one quick follow up on <unk>.
Hopefully quick the Bryan touched on this a bit when it came to the discussion on the asset value and just wanted to see from maybe your perspective is the tanker owner of leading tanker owner, who has been active in buying and selling ships over the past several months and not the history.
The history, but maybe just could you give us a sense from you know right now how you see the sell and purchase market via your eyes relative to say, how it had been say three months ago or six months ago.
And the much more active.
And when we bought the Jupiter two.
I mean, it was not really a tender, but we had to bid for those two vessels.
I'll think of we had the six or seven contenders.
On which.
If you look at as well similar event.
The three months ago, we may have seen.
Two to three so I think the people.
Really the <unk>.
Believing in the in the the tune of the market into a positive market for some time into 'twenty two.
And it seems that the all the fundamental saw the two to demonstrate age should be the case.
So it's a much more active market now.
That doesn't mean that it's going to be more difficult for us because when you see the price that we.
And the and paid for it and it is still very attractive from a historical point of view for vessels debt out of debt quality.
Thanks for you though.
Sorry to just ask one more on that day.
You mentioned six per.
Assistance and this tender versus say two to three on a similar deal three months ago. When you did the for Vlccs just for context, a year ago can you recall, how that one looked.
We did three and then one on the three Vlccs.
And had to come down the contenders and and then there were not ship owners for one on the on the reasons will be aware of.
Of funds or a special purpose vehicle set of bi.
And investors.
And and that was the critical element of meters are win the deal and then on the force one it was a private transaction between two ship owners.
So there was a.
Literally no one and pools and.
So we could we could drop down and and its very short periods of time and that's really because we're trying to express also in this presentation debt.
The fact that you of a strong balance sheet and the good reputation and instead of a good reputation to execute on the deal.
Fast ease and advantage in this market and we certainly not unique piece of play.
Lease there.
But it's not a very crowded seen either.
Got it.
Okay. That's it for me, Thanks, Hugo and that's very insightful.
Thank you Omar.
Our next question will come from Greg Lewis from <unk>. Please go ahead.
Sure.
Hey, Thank you and good afternoon everybody.
Hi, Greg.
Hum.
So I guess I wanted to ask I guess like last week are and the last two weeks.
There was talk about the carbon.
Carbon neutral.
L C C that moved from.
I guess it was that oxy cargo from the Gulf of Mexico and the.
Just as you know realizing that there's a lot of offsets and and et cetera is that pumps is that something that your NAV and the.
Companies like yourselves or are those discussions now picking up where we're talking to existing oil suppliers about trying to figure out ways to.
Delivery of these the start to deliver carbon neutral cargoes and and really I guess, what I'm wondering is whether I.
And I guess is this something that is happening or was this something that was really just.
Don at the oil major level and just trying to figure out if there's any way you got the company and the industry can get involved and kind of delivering those types of cargos.
Yes, we are seeing the debt.
Beginning of this kind of conversation.
It is very discrete and very unique.
At the moment.
Believe and we hope to sort of extend that.
It will it will be more popular going for.
We are studying the specific case that you're mentioning which iPhone and very very interesting.
We had been proposed.
And the pause by Occidental.
To the transport cargo and and some sort of a neutral way because occidental and you may have seen the C U.
Very recently, claiming that Occidental will do even more to the planet and Tesla.
Because of the the carbon capture.
And that they have and I'm not going to comment on that but.
It was a it was an interesting declaration I would say.
And the Occidental is relatively unique because they are using the carbon that the of capturing to re inject into the all of the fields.
In order to maximize pressure and extract more and so there is obviously the debate around.
The purpose of of capturing carbon and then using it to produce even more force and fuel.
I'm not going to enter and debt into the debate I will just say that one of the carbon you capture.
And you reject and it's not going to the atmosphere for me is a good thing.
So if we have the possibility to service customers who are interested in debt.
And joined forces to try to minimize the emissions I think that we will definitely be interested in doing so.
And at the end of the day it will always be a question on the economics.
Which I believe will go down overtime.
There is a lot of technologies that are being studied out there and I suppose that some of them will be very successful and I really hope that some of them will be the successful some.
It will be part of the equation going forward.
And then and then realizing that the debt cargo is it hasnt been around I mean, it was it's only been like a week or two it was there any way for for the company for for you to understand the have you been able to track what do we have any sense for whether the vessel maybe was going a little bit slower to be more fuel efficient and or we don't.
And I don't have that type of granular detail on the cargo.
I don't have for and we don't have that type of grant on details around the cargo, but we are enjoying very good relationship with both the Occidental.
The two which we have one ship on TC and has done numerous spot voyages and for them. We also have a very good relationship with ignore.
So we will certainly take the time to analyze and the live with more detail on that.
And I said in my previous comment on the earlier comments.
And you can decrease the amount of emissions and then.
And therefore the amount of.
Consumption that you me.
If you really pay attention to what Youre doing in terms of operating the ship and that goes from slowing down.
Two investing.
Across the fleet and to.
Some of it.
And the royalties systems current systems, even systems, using some sort of artificial intelligence.
And we are very much invest and to do systems in the last two three years and they are paying off at the moment and the Best example, and I can share with you is what I said of India, which is the despite effect and we didn't have scrubbers and we had some sort of of handicapped compared to the guys. Using scrubbers. We have achieved very similar if not superior from a TCE. So.
Very happy about that.
For the long race, we've certainly not finished with.
Our efforts to operate the ships are the best we can and I think the next step for peace is going to be about collaborating with our clients and with the terminals because too often.
Do we see that the ship is arriving.
Assuming a way too early and asked to spend days at the Anchorage.
Still with some ocean and reengineer running but more importantly.
Having accelerated of having had a speed that did not corresponds to the real time at which the vessel was needed on the cargo was needed and so I think of the industry.
Has so many opportunities to decrease the consumption of the emissions.
And I really would like to see and effort, but it has to be.
Collaborative efforts between all the parties involved in the mortgage.
Understood. Thank you very much.
Thank you.
Our next question will come from Randy <unk> with Jefferies. Please go ahead.
Oh, the team year and a half are you.
They're well run the of new How's the loss pick of going.
Great.
And the the recent Newbuild is performing well above expectations. So are doing great. Thanks, so much and we say behavior not performing and Yorkies, then [laughter] behavior and there you go exactly I think good so last year around this time you know obviously the focus was on VLCC expansion on those.
For the ALS that Youre getting this month next month.
The recent focus has been on Suezmax is with the two time charter ends and the two resale acquisitions. So is that solely to better balance the fleet or is there a reason you're more bullish on the suezmax is as of late.
No very.
Very clearly it's a question of of synergies a week before we did the Suezmax we were bidding on two vlccs.
We had to be the price debt, we sold was creating.
Creating the most value.
We didn't get those the of winter to someone else at a price that we are not the database. So it demonstrates that it is not a question of which size its more a question of the.
And what makes more sense in terms of a return.
Sure Okay.
And then I guess one other question looking at your peso you know that day.
And that extension there the EBITDA contribution kind of the return on that.
Again, not necessarily of core asset for you nor for the W. So any thoughts or updated thoughts there on it.
And they are selling that portion of the JV or the opposite right buying it from I N S. W.
It's certainly something that we are studying and we are studying jointly with our partner.
It's a it's obviously a very good extension given 12 years of visibility.
And we recently signed it and.
And we had two years to go into the old contract before moving to the new contract.
So those things on.
And these are attention needs us to analyze the market now and then.
What is possible.
Whether it's the refinancing whether it's the buyout of our partner whether it's the partner of buying is out.
On whether it's the sale.
All of that is being analyzed at the moment and I do not believe the doosan and imminent and so too is.
And because we want to be careful of into what we're doing and I guess and every option as its pros and cons.
And that's what we need to make sure we have and life and death, and there would be some arbitrage and the market as well the between the different the type of instrument.
Certainly for the financing of side. So we will we will report and do calls.
But we're not in a hurry to take the the wrong decision, we said and the patient to make sure that we take the right decision.
Perfect.
Good deal well yeah. That's it for me, obviously, you know great job on the buybacks pulling forward the dry dockings and so keep up the the prudent work. Thanks again.
Yeah. Thank you very much for pointing out the the dry dockings and no. One has asked that question, but if you realize that we've pushed back a lot of dry docks and then the boroughs early some dry docks and if you believe that last year. The TCE average was 54000 today, we are around 15000, and that's a difference of 40.
And then times 27 vessels times, probably 25 days and Drydock.
And that's what the 27 million.
We are saving so that should not go.
Unnoticed. Thank you.
Our next question will come from the on with Stifel. Please go ahead.
Yeah, Hi, this is Frank galanti on for Ben.
I wanted to follow up on the Suezmax new buildings.
And new builds in general.
And I appreciate this is somewhat and the future but with.
Useful life of over 20 years and Newbuild.
And secondly, splitting that useful life before and after I am of 2030.
And how do you think about the risk of premature obsolescence on that vessel.
And I guess, another way of asking that.
How do you think about having to make an investment the only half of portion of its life of the asset to amortize debt.
And then.
It's well, it's a good question, but to a certain extend and we were hoping.
And to have partially answered it by the fact that we are preparing to ship for retrofits.
When you think about that possibility and.
And I've mentioned, how much it would cost today and so you can very well the matching the tomorrow or at the time, where it may become obsolete it will cost far less.
I think debt is not completely correct to see that we have purchased the vessel that will become obsolete it sort of the midlife point.
And so that's the that's the first part of the answer the second part of the answer is that there will be of transition. So when you look at 'twenty 30, you.
You're not looking at individual ships you on <unk>.
Looking at fleet, and so you're all fleet needs too.
Yeah.
And have on average a day.
Decrease of emissions of 40 per cent compared to 2008 now if you compare 2008 and what we are.
Votes already for some period of time, because all of the eco ships.
And we're already.
The big gift and won't.
Big progress in terms of emissions, we are already at probably 30 to 35 per cent.
When I started at zero NAV of VLCC would easily consume 80 to 90 tonnes, a day and two deal and most economical and Vlccs would consume 50 253 tons of day. So you can clearly see that there was the progress.
On top of that.
We are investing in technology and most of it is the digital technologies.
That will enable the ships to to consume even less.
And when I compare when we compare the vessels that we are buying today and we can see the type of of retrofits, which is not engine retrofits, but the simply.
Looking at the rather looking at the propane and are looking at the type of paint we put on the vessels that are going to drydock.
And there is a significant decrease of the of the consumption and I believe that we will not stop progress in Europe, and I was prepared to even participate too.
The most progress and the research and development of some of those things that can decrease the consumption.
If you look on it today of course, you May you may see it as the static world, but the fact is it's we live in a dynamic world. We live in the world, where human beings are capable of reinventing themselves, they're capable of looking at different.
Different solutions.
And then the price of them will depend on how many people adopted but you've done on enough people adopting the chances are the cost will not be too expensive and we have seen that happening many times and shipping where the retrofit was being used in order not to let ships becoming obsolescence. So.
That's a little bit the philosophy that we have of student NAV, we will simply bunch of bids and the new technologies and as I said.
The our vessels, which today can be using to sort of fuels and that is LNG and and is it for two more ROI of couple of years it will be.
Few loan and and ammonia and and between now and then the market may have shifted towards the one all of the other fuel technologies.
But we will always be the to try to invest and style as flexible and has future proof as possible.
That's really helpful. Thanks and kind.
Kind of.
The following up on that last part of you made.
The point you made.
And specifically on the ammonia.
Ed.
And how is that decision made.
Try and add that as of <unk>.
Future proofing fuel technology.
Can you kind of go more into that decision.
Where are you looking at any other options outside of the LNG.
And then.
And secondarily to that and this is.
And I understand it for them.
Hard question to answer, but looking for more of a range of.
For the cost of ammonia of relative to fuel today.
How much more expensive is that is that like a two acts of five X.
What are you anticipating from a fuel cost increase if you switch to ammonia.
So first of all I mean, it was many question and one question. So how is our dishes and decision making going about it.
I think this is this has and tiny to do with future proof today clearly the only two technologies available to us for the future and that is either LNG and and usually combined as of dual fuel of course.
Either LNG or ammonia and and Gs ready today I'm on.
And is being developed is being developed as a for the new buildings with jazz.
And for retrofits and the.
Most of the Onstar are capable of building at the type of vessels that we operate as well as the two only engine manufacturers and declared that they will be ready.
And probably by 'twenty four 'twenty five.
Maximum.
So that's the first part so if today you are you on.
Of the chance to buy of contract because let's not forget that this is also very important for us not to add.
<unk> tonnage and necessarily to the market. So we bought into it and existing contract doses, we're going to be built.
And so we looked at and so we are ready for the LNG.
Brady for the energy means ready to retrofit on.
And so we have we vertically integrate we have the chance and the luxury of having many engineers working of the company because we're on ship management, that's what I mean by vertically integrated and so those people on constantly thinking about improvements.
And but also the future of tanker shipping. So we have been studying the ammonia and capability for for quite some time now and so it was a natural and rethink to go into the yard and Suki. We've had the conversation is boss now what can we do to best prepare to ship full of that potential.
Option in the future and that's what we are doing so it's not very complicated and I don't think will cost a lot of money at this point. So it's definitely an option that we want to take.
As far as the price of the fuel is concern.
It's little bit too early to decide because on the LNG today, it seems to be slightly cheaper than municipal.
On the infrastructure is being put in place.
But obviously, we are talking about it for some fuel.
The type of a few and so it doesn't solve the entire of equation of zero emission the.
And might be carbon capture system and the future of solving.
Or reduce it further.
And we can netted off but quite frankly, it's still of being called the fossil fuel and so I think that you have a.
And on people, praising it and the lump of people criticizing it and that's why it's not clear whether it's going to be the winning technology or not but we continue to be interested and looking at it and as far as the ammonia is concerned today. If you on green ammonia because if you took them on Brown ammonia then it's a it's a zero sum game of its even worse and would we have today.
Youre talking about probably three times the price of and.
And is it for today.
Now that's to the first of all and that's because producing ammonia and today's fair the expenses are green ammonia.
As the price of an extra mises for instance, a very expensive, especially when you're talking about.
Eugenic fertilizers and two of settings and crews.
And it reminds us that have not the had been produced again.
The more the.
The cheaper it will be so if suddenly you have the industry. The decides on the right type of fuel and then there will be a number of infrastructure project.
That will be put in place to produce green ammonia and we can expect that the price of electrode prices will go down and then if it's green the electricity has to come from renewable sources.
And that's another part of the equation, which means that the the price of a two day is three times now there's been a lot of talks around.
And our carbon levy and the carbon levy is supposed to compensate for.
And for the success surprise, so today it doesn't exist and it simply three times as expensive and I don't anticipate many of them of clients willing to pay three times more for the few tomorrow.
Tomorrow It may be exactly the same if there is of carbon levy.
And God knows that.
It's something that has been discussed in the industry for a long time, it's something that the European may put in place in one way shape or form.
But it's also a discussion that is being held on the IMU, which would cover the entire of world, which is for us much better than just talking around the European continent.
That was extremely helpful. Thanks very much.
Thank you.
Our next question will come from Chris The song with Weber Research and Advisory. Please go ahead.
And let's try again.
Yes, you bet.
Hello, and your mind.
Yes, we can.
Yes.
And you can go get up and how are you.
I'm very well, Chris how are you.
Good thanks.
And on a long call and most of the good question on Laguardia the cap allocation for the competition I guess, that's probably the ROE and a quick one look on the spread that you touched on earlier.
With the amount of flow that you guys have slowed up and the.
<unk>.
But the spreads widen a bit outside of the change and there is there like the target spread that you guys. The only thing and on the percentage of drawn down more.
Or.
And thank you.
I think that from this point on wallet is going to be business as usual.
With a touch of.
Zero NAV, our overseas strategy all of trying to always improve things what I mean by that is we've learned a lot of lessons and certainly one of the lessons that we've learned is of buying in bulk.
And lots of 40 of 50000 tons instead of 1500 and the here and there to just re shoot of ship here of ship. There has a great advantage in terms of pricing, but also in terms of quantity control.
And so you can expect it.
You can expect of us not to report anymore on it debt.
And that project is now closed and as we said in the press release has been overall profitable and I'm very proud of the team that did that because of.
Year of Google when we were reporting.
Q4, and more particularly Q1.
We were at minus 55 million Mark to market and so overall of the project. The project has been profitable with new inbound and whatsoever and I think that's.
That's very much the humanness style.
But going forward you cannot expect us to report on it because it could be integrated into the procurement of the field in general, but we do hope to continue to benefit from what we have learned which is very much discount to what the market is pricing.
Fantastic.
Yes, perhaps to the team congratulations on debt and just one quick follow up on a mall and modeling type question. You guys said that there is 27 dry dockings for Q4 Q1.
How many of them already.
And how many vessels and the already tried out of Q4 and and how many more for Q1.
And so indeed.
And he had the six completed in Q4.
Of which two started and to be completed in Q1.
And then we have eight and Mr. Shang from Q1, 'twenty 'twenty, one and then the rest of for demand.
Okay.
Okay Alright. Thanks, that's it for me thank you.
Thank you Chris.
This concludes our question and answer session and the conference has now concluded.
Thank you for attending today's presentation you may now disconnect.
Thank you all.