Q1 2021 Euronav NV Earnings Call

Good morning, and welcome to the other enough first quarter 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist surface of the store key followed by zero on your telephone keypad.

Well the the opportunity later for questions I would now like to turn the conference over to Brian Gallagher head of Investor Relations. Please go ahead.

Thank you good morning, and afternoon to everyone and thanks for joining <unk> Q1, 2021 earnings cool the.

Force thought we'd like to say a few words.

The information discussed on this call is based on information as of today. So I'd say the sixth of May 2021. The may contain forward looking statements that involve risks and uncertainties forward.

Looking statements reflect current views with respect to future events on financial performance of May include statements concerning plans objectives goals strategies future events performance underlying assumptions on other statements, which are not statements of historical facts.

All forward looking statements attributable to the company also of course is at some other stuff.

Half are expressly qualified in their entirety by reference to the risks uncertainties and other factors discussed in the company's filings with the SEC, which are available free of charge on the SEC's website at Www adult CIC Seagull Gov I dunno on the company's website at Www Dot your NAV.

Cool.

You should not place undue reliance on forward looking statements. Each forward looking statement speaks only as of the guidance of the sickness statements on the cash.

<unk> undertakes no obligation to publicly update or revise any forward looking statements actual results might differ materially from these forward looking statements. Please take a moment to read our safe Harbor statement on page two of the slide presentation.

I will now pass on to the Chief Executive Hugo Stoop to start with the agenda slide on slide three Hugo.

Thank you Brian welcome to our call today.

As usual I will first of the run through the Q1 highlights and some comments on all of our active capital allocation during the cycle before policy on two vivo the CFO, who will provide a review of the financial statements.

Brian are ahead of where the of the Investor relation will then look at the current themes in the market before we turn again to discuss our outlook and traffic slides before we take questions.

So turning to slide four and the highlights page.

Q1 was the admittedly one of the toughest freight market. We have had in recent years market recovery has yet to gain traction as either barrels were repeatedly kept out of the market or the men rise has failed to materialize the coverage related to the restrictions.

Were applied again.

As we have seen our press release today available tonnage is abundant.

Simply too many ships and not enough cargos.

There are however, encouraging signs with the tapering of OPEC plus production, which we hope will translate into more excellent Barnes.

This is encouraging but the our visibility on this recovery remains slow.

Well the sector of cyclical and when it is bad times to be an operator, you need to think about the future. Hence we have taken the opportunity to invest counter cyclically of what we believe is the low point in terms of value and have invested in the latest VLCC and suezmax vessels and I'll close the cooperating with the shipyards to ensure they can maximize.

The potential role in the energy transition and emissions reductions.

I will now pass over to our CFO Levered to walk through the financial highlights leave of over to you.

Thank you Hugo.

On slide five I wanted to cover a number of points when looking at the financials for Q1.

All of the P&L of both clearly challenging the sustained free trade pressure that true who spoke of earlier.

This slide gives the details on how challenging it has been.

Well, our leverage has risen to just under 42% that remains well below our self imposed limit of 50%.

Liquidity remains the strongest in the sector with over $1 billion available for all of funding facilities and cash.

Finally, we have been very active during the quarter and will be during 'twenty, 'twenty, one and utilizing a challenging free trade market to undertake and even accelerate oh dry docking program. This will ensure that when the cycle returns the.

The stability you enough will be optimally placed.

Looking now in more detail at the underlying cash generation on slide six.

You had enough remains focused on cash generation.

We have driven sort of improvements in our working capital to the tune of 36 million.

<unk> six in the streets.

This was improved further from the sale on leaseback of VLCC Newton during Q1, releasing for the cash thus, allowing the payment of our fixed cash dividend commitment of 6 million for Q1.

The underlying cash generation has assisted in the old wide the fleet renewal program.

Which all of our balance sheet has the capability to manage.

Our funding sources remain key to driving our business forward and flight chicken looks at how we continue to diversify our funding sources.

The increase during the quarter or activity on all of them.

Ability financing.

We signed an extension and upsize the unsecured facility to include a number of other banks.

At the slide shows it has a number of features including reduced the interest rates if emission targets of beaten.

On additional features specific to us if the facility is priced in euros not dollars, which is helpful. As 80 million of all of course are euro denominated.

The third of our funding sources are no sustainability linked and important milestone for you well enough.

I will now hand over to Brian Gallagher all of our head of Investor Relations the run.

On to a couple of current market themes.

Thank you Lisa.

Capital allocation has remained active with you on all counts of cyclical investments.

With two suezmax and so they will see the contracts that we announced during Q1 the.

This complements the full of Vlccs, we took delivery of during this quarter.

Part of the coordinated approach the fleet renewal.

In the past the 18 months of so we have sold a range of older tonnage on the directly into the rising steel values or force selling blocks sale on leaseback structures.

We slightly missed capital into a more operationally efficient vessels will significantly improve our emissions profile in terms of C. O two emissions.

We remain on a trajectory with all commitments to the presort and principles on additional recycling.

We have just execute the join the cyclical mode you know free.

Market will allow year enough to remain on course the simple.

So obviously improved the earnings power of our fleet, whilst maintaining a strong balance sheet.

And the meets all of emissions goals and targets.

Turning now to slide nine on ensuring all capital allocation of that Youre enough meets those strategic goals.

Slide nine shows the E. All of the annual efficiency ratio record of the global VLCC fleets on a very simplistic way, but also of shows the trajectory that your NAV is on target to meet its 40% reduction of obligation.

Part of the C O two emissions targets set by the I'm on for 2030.

And all of you this is a realistic and achievable targets.

Our recycling of capital and selling nine older vessels in the past 20 months of sorry.

And recycling of capital into sort of a new vessels.

A key part of our compliance, which we're looking to accelerate.

Now turning to two key things we expect so.

And in place for the rest of the year on.

On slide 10, plus the Iran.

The Iranian situation in terms of tankers remains cost moving commentary earlier. This week suggested that some timetable of of returns around the deal.

The market could be of great very soon.

This will be of positive we believe for all market sort of rule as it should bring some much needed borrowers back into the commercial fleet on.

At the same time reduce the need for the so called the illicit trade of large the older tankers, which has taken up the sanction trades over the last 12 to 18 months.

Is that what's the happen we believe as many commentators agree. The we would then start to see this older tonnage moved to the recycled yachts.

Finally from me we were turns with the aim of the OPEC barrels, which have been missing from the marketplace. The last so we'll use of selling we believe this will continue to be a key feature on slide 11 for the rest of this calendar year.

As the slide shows other pets.

Plus production cuts all scheduled to start tightening like the best months on <unk>.

Well into July, bringing potentially $2 1 million barrels per day back into the crude transit.

Really the very difficult circumstances with COVID-19 in key markets like India like it's difficult to predict how much of this tapering.

The impacts of crude export markets.

As a rule of thumb every 1 million barrels per day production tuning into exports requires.

The need of a roundabout two vlccs on an annualized basis.

So we leave with a tangible and encouraging signs on signal the finish with I don't.

Now Paul some of the heat goes to sum up where all the traffic lots of currently sitting at the end of Q1, you got back to you.

Thank you Brian.

So as Brian just alluded to the schedule the tapering of OPEC plus predictions cuts is sufficient for us to push through of mild upgrading of our traffic light.

Provided additional of prelaunch COVID-19 restrictions do not deferred ladies rising output than this move by OPEC could start to reduce surplus amount of tonnage in the large crude tanker fleet.

This is the first positive change you know of traffic Claude since Q2 last year, but it does reflect the start of the recovery process in order of markets.

This is likely to take some time, but we continue to remain confident in the medium term prospects for the tanker market and that is reflected in the fleet renewal. We have engaged in not just during Q1, but also over the past 12 to 18 months.

With that I will pass it back to the operator to receive questions. Thank you very much for your attention.

Thank you and we will now begin the question and answer session.

To ask a question you May press the Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys.

Some of your question has been interest and you would like to withdraw. Your question. Please press Star then two please limit yourself to one question and one follow up.

And at this time, we will pause momentarily to assemble the roster.

Our first question today will come from Randy given the <unk> with Jefferies. Please go ahead.

At 18 year on half How's it going.

Yeah, very well on yearend.

Oh Haynes Jong handful of.

Alright, So I guess first question around the acquisitions right. So you bought some of the Suezmax day, It's a couple of new building on Vlccs.

LNG ready made the ammonia ready I guess why you kind of go with that route instead of participating in some of the longer term LNG fueled vlccs that some of the oil majors had put out there and then when it comes to expanding the fleet from here is it further new builds or are modern.

<unk> hands more attractive.

Thank you for your question.

First of all of us be very accurate the suezmax, where resale. So you can consider them as the second hand, the fact that.

We grab them.

Think of that we grab them before the are you and bill is probably better because then we can the slightly changed the specification, which we hope all of you need to your NAV and can bring further advantages to us as far the the VLCC youre right. Its a new building, but those were the sort of abandoned the slots when the 10 VLT.

<unk> cancelled earlier this year. So I think if you go to the yard today.

The timing may be very well be different than me be already in 2024. So we see that also was the some sort of an advantage.

The resale, we had no option, but to take what had been ordered by the previous.

Buyer.

And the VLCC that was obviously a little bit more on respect.

Even though the yard.

Sort of the pre conceived idea of what they wanted to build in building of LNG.

On fuel.

Well, it's from dual fuel LNG vessel.

We will take more time and so on desktop what's the program not available because the RBC as you know with the many of the other sectors.

Having said that we are very happy with what we have because it gives us maximum flexibility and in previous call. We said that we were ready to build dual fuel LNG vessel provided that we get a contract against it because as you know the LNG as the transition fuel and so you better make your return on the LNG path during the duration of the contract in hand.

The vessel for the.

That Paul is fully amortized we have participated to the.

On the tender all of the exercise that we put out there by respectively total and shell.

The reason why we are not part of the ones.

I would say one debt tenders because of all right of return with different.

So it didnt meet our expectation and we thought it was we were better off doing what we are doing today.

As part of the future is concern at the end of <unk> will continue to scrutinize what is available of secondhand and in order not to add to the order book, but it's also true that when you are in the transition and we are very much of the.

The proportion of fuel transition whatever you want to call it the.

The flexibility may be the best choice that you have and decide later on.

When you have the opportunity to charter the ships out and if it's two bleeding on the spot market.

The lead to when the infrastructure will be in place and what will be the best return for your investors.

Wow, Yeah that all makes sense, thanks for the color there.

And then I guess one more question just on fleet management right. There in terms of the numerous dry dockings. You have this year are you are you willing enable to maybe pull those forward to today right of her June the sooner the better right before the market turns and then with that.

Market strength likely later this year, how do you look at time charters at kind of current levels.

Yeah.

On program of 27 dry dock, that's almost one third of the fees. We did already quite a lot of management around the timeframe that you can do on dry dock, which is roughly speaking of 18 months of year on half.

We've put many of those early.

Because we didn't have very high expectation in 'twenty. One we have done already a number of vessels. We are indicators of how many vessels remains to be done and let's not forget that is true.

Full optimization that you need to do.

What I guess, what I mean by that is you need to find the voyage that will take you need the dry dock at the time, where you have the slow and that will play a big role in the economics, because if you have to take Youll ship.

With the.

Let's see no cargoes on the on the list, but just to go through the dry dock, you'll also leaving a lot of money.

On the side, even if it's in the low market because obviously any contribution is better than nothing so.

You can rest assured that this is an analysis that we do permanent the when we lock of slots in the dry dock. There is the degree of flexibility and we will always of comedy that with all of the circumstance on or around the dry dock, including the positioning voyage and potentially the <unk> debt. We have when the ship is leading the dry dock and does not.

The vetting, which is another consideration that we need to take into account.

Got it and then quickly on time charter appetite.

Time charter.

They are interesting and maybe we don't advertise it too much but we have a number of ships on time charter at the moment.

And some of them are long term time charter 234 years.

Some of them much shorter the time charter.

On a policy that we always look at what the best employer for the vessels on the first time charter with the full one stop the at all concerned and we've seen a number of those being done in the market.

When you look at those levels.

Against the type of vessel is the most modern most equal type of vessels.

These are levels that are compared to historical levels not very interesting starting in 'twenty three.

<unk>.

For the delivery of the modern cheap and then having a fixed time charter in the low seventies.

Compared to what we hope we can do in the market, that's not specific deal and that's not particularly attractive to us.

Continuing on the short term.

A very different picture as I said I mean, we don't consider the 'twenty one will be of great, Yes, who we are.

We've taken some of those and we continue to weaken in the market of what is available.

You may have seen in the press debt for instance are.

New building deliveries, we've taken four ships, we acquire the receipt of last year and those are particularly attractive to some people and of.

At the moment they are all on the short term on charter, which are paying more than the spot market. So we are doing your fair share.

Perfect. Okay. Thanks.

Thanks, so much for the time.

Welcome.

And our next question will come from a more of Doctor with Corrections. Please go ahead.

Thank you Hi, Hugo just maybe wanted to follow up on the on the new buildings can you, maybe just give us a sense of.

What the process would entail for those deals the have the LNG and the ammonia ready structural notation and it sounds like these will deliver with conventional fuel and then afterwards go back for installation depending on how things are playing out is there any sort of estimate you can give on what the cost or the timeline is for.

Installation of such a system.

On the LNG.

It's probably been a new one because of those ships exist and you can retrofit ships already today.

If the our level one ready in the down three levels.

The higher the level of the more sort of the specification northern edge of the law of the modification would be but the fatigue the.

The most important one which is the level one we are talking here about the structural.

On the readiness, what do we mean by that.

Of the tankers, the VLCC and Suezmax.

We'll need to be equipped with banks that can hold either of the LNG of the ammonia to strength has a certain weight and they will be put on the day, if you need to touch the structure of a ship in order to accommodate those heavy equipment than you are opening the ship and as you can understand that's never a very good day.

The priority is really to make sure that from the structural point of view the ship is ready and the second thing that you can do is already prepared for some of the piping debt will lead the fuel to the engine. The speed and then of course, you need to think about what type of gas will be liquid what type of the molecule youre going to do.

Five to the engine.

And some of them on more corrosive than others and that will define the type of fighting that you will do.

Last but not least you will need to prepare the engine and thats, probably way too early because as far as the ammonia is concerned that doesn't exist yet for on a segment of followed the lng's consume we know what it is.

But it's probably.

Today too early to make.

Make those modifications for the ship and if you were to go to 11 treat and Youll better off doing.

The full dual fuel LNG today, but that will preclude you from converting into ammonia.

Because then the.

On the amount of modifications of the retrofit.

We will be far more expensive than you would of wasted quite of lot of capital.

That you are not sure you will use so if I can translate on in numbers the.

On the readiness is probably something that is in the region of 502 million. If you want of we'd be ready for both LNG and the ammonia then that's probably a little bit north of that so it is not.

Excessive and the advantage of you get on.

Quite enormous.

Especially when you look at the next 20 years, which is the normal life of the machine.

From debt level two day, if you need to modify the into LNG, you would probably spend another $12 million to $14 million and that will depend on the size of fuel tanks.

And some of our other bits and pieces that you may choose from on ammonia I cannot tell you what it will be I believe of we believe that it's going to be in the same region, but the classification society will come up with the notification and the notification. We'll tell you exactly what you need to foresee and of course on a mood.

Because it's more toxic than the LNG you also need to do a full 30 on the has it has the which is basically the safety around manipulating debt fuel.

And of course people get a little bit skeptical about it but let's not forget debt ammonia has been transported.

Chicago for more than 40 years, and so a lot of that is known and it's more of the question of <unk>.

How can we make sure that if we use it as a few of the safety concern of fully measured and fully expect in the near full prepared.

But so again, we're talking 10 to 15 million, but execution. After the event when that will happen really depends on when the market will be ready as you know LNG infrastructure is there for the more spot in the Americas and certainly in the U S.

The building it but we expect it to be in place in 'twenty three.

Ammonia is the more of the long term project, but you will also need to analyze what is the of the demand that you have from your customers. So some customers will want to have a zero emission fuel like ammonia from customer will prefer to use LNG because thats what they produce.

So the the demand and the interest from our customer base will get the mine when I would see if and when we convert those vessels.

Into a dual fuel a few conventional fuel plus ammonia of conventional food plus LNG I don't think that youre going to see ever in the market of Tri fuel.

Ship that can burn.

Ammonia LNG and conventional fuel. So you will have to make up your mind. When you decide that it's the right time to convert it into something else, but in terms of future prove that's very important because even if you got.

The relatively high amount of capital.

Not going to be of stranded assets and thats very very important.

Thanks Hugo.

It's quite clear there so just to summarize on my understanding it sounds like it's basically half the millions of $1 million just to have the structural flexibility and then.

Post delivery going back to install state of LNG.

The system, it's talked of its $10 million to $15 million, which is effectively kind of what it is now out of shipyard to be done during construction and so really the only differences.

At the yard post delivery.

Yeah.

So your understanding is absolutely correct with maybe a caveat, which is that if you build of dual fuel.

LNG VLCC vessel today, it's probably south of 14 minutes of 40 minute was the number we were given I would say last year.

Then the shell together with some owners, including us have done a fantastic job.

Working with the shipyards and trying to minimize the cost on when you see what the guys who of sort of one of the tender with shell being youll, probably more in the region of 10 to 11 million.

As of surplus to your conventional vessels.

Little bit cheaper, but not that much.

Yes got it and then just one one just quick follow up on.

Obviously, the shifts and you mentioned that theyre going to be.

And it's going to be more advantageous eco with carbon friendly.

Then the shifts of the going to replace and just wondering I think you made that comment in the release announcing the order.

Regarding net income.

Comparison to the shifts of Dell replace and just wanted to ask you are you, saying that these vessels as they deliver you will be scrapping some of your older ships on say a one to one basis or are you just making a general comment debt.

We're going to force out some of the older tonnage in general.

The.

I would say both.

Certain way as you know we tend to sell of our vessels before they reach the end of life and so that will depend.

On each vessel, but it's true the when you look at the sale and leaseback that we've done over the years and in total we have eight vessels on sale and leaseback. When you look at the time of re delivery and in those of very special sale and leaseback because theres no purchase obligation on the part of our view on that which means that at the end of the contract the one.

<unk>.

Takes the vessel back and then does whenever you once we did.

For us, it's no longer reliability, and it's sort of wave of.

Protecting the residual value.

We may call on residual value risk.

They will come at the same time as the new vessels arrive. So I was more talking about flow.

<unk> management not so much about the.

Scrapping because all of this is when they are re delivered to the owner there will be 15 years old, but there will be of each category and.

Sort of consumption categories definitely not on the Ecu, but also of bottom of the feed that used to consume a lot more so from all of ours perspective, It's definitely fleet management from a global fleet perspective, I cannot assure you that those ships will be scrapped at exactly the same time, the probably won't be scrubbed at the same time.

Understood.

I'll turn it over.

Thank you very much.

And our next question will come from Jon Chapell with Evercore. Please go ahead.

Thank you good afternoon.

Brian on slide nine.

You said, you would kind of accelerate your move down to the bottom right of this graph.

In addition to just ordering these new ships with better emissions is there any other strategic play that youre thinking about to move your NAV closer to that blue dot in a quicker manner.

It's a good question on we want to try and sort of highlight the the capabilities of the slide that sort of that shipping is generally the dose.

So on the progress is made already.

But the stylized.

So yes, the raw number of strategic things from since you guys talked about the third of all fleet undergoing.

On July but this year, we spent a lot of money on research and development last year with the it sounds of very simple.

The thing, but just on page on.

We had a selection process, which has identified that which we think is going to say flow at an investment of between three and $400000. We will say this.

Multiple of that with regards to the.

So the two emissions so theyre all of some things that we can do in terms of sales fell.

But of course citizen. So indulge me as you identified about the structure of the strength of the H. So it's just to try and get everybody sort of understanding the shipping can deliver on its 2013.

<unk>.

That does the kind of dovetailing with the Oman, but he would have just been discussing.

On the ultra low emission pressure on the older tonnage on of course, though if we get the O&M of vote to put direct fee mix amongst the net.

Based on the regulation with some royalties that will kick in in 2003. So the simple answer these questions Jonathan is that yes the.

Awesome things that you can do but it is all about largely about the age of the fleet.

On the focus on the on the most efficient fleet, which obviously can be lower mitchum Hum.

I don't know if I can.

John if I can just add complement for the what Brian said I mean, obviously when we take those ships on dry dock.

We do a lot of things that it goes beyond.

The.

The specific survey that the.

What we are doing the dry dock before.

For the last two years, we've been up software and hardware we have equipped our lot of our vessels already two third of the fleet with the sensors the sensors of sending a lot of data.

We of course developed without people.

On a system that can the principal of the details on the collaboration between the operation onshore and the people on deck.

It's never been better than today, because everybody has the same focus which is to reduce the consumption and therefore reduce the emissions. So theres a number of things that we will.

We will save you, 1%, 2%, there et cetera, et cetera, but the collection of the duals percentage is quite significant at the end of the so yes. There are a number of things that you can go strategic.

We call them, just part of the business, but one year running of large fleet all of those things get better returns on investment than when you are running a very small free then you have to spend the exact same amount of money on the software or even.

Brian was talking about things, we're obviously going to be 27 vessels. The discount that you can get from the supplier is quite significant.

Understood.

For my follow up I don't want to get too in the weeds here. So bear with me for one second.

By the time, they get to the delivery. So we have some that will be delivered the end of the year. Some next year and then the last for probably 23. So that's that's very much of the reason why we do the sales leasebacks you never know.

What holes in the future the values.

Which we saw them were pretty good.

The the right we got.

Taking them back knowing that there is no bush's obligations. So there is a little bit more risk on the.

Body side.

Means that it's still good value for us taking into account of everything that I just mentioned.

I got it alright, thank you hear the nice Bryant.

The next question will come from Greg Lewis with B T O G. Please go ahead.

Yeah. Thank you and the morning, good afternoon, everybody you the <unk>.

I had a couple of wanted to dig in a little debt around.

You know a ton of miles and volumes it seems like at the at least it was reported let off.

In late April the.

That U S crude exports really accelerated.

I mean, realizing the market's pretty you know pretty.

Pretty loose.

The <unk> was there any impact in in in the in that increase in the U S crew volumes in terms of activity around the Gulf of Mexico.

So yes, we saw an exploration of of use crude of export.

From that we have on them with what we see is that there's really no stability does expose of one month can be up the next month can be down so it's difficult to to see a trend. There as you may very well I understand it was quite a lot of geopolitical events driving the.

The the export of one country. This is another country and on here I'm alluding to going to China, which is a lot the longest voyage dependent on life, but of course, if all the Chinese friends decided to buy more of of Venezuelan or Iranian crude because they found the way to do that.

The <unk> from transporting the the U S virus, China so.

So I think that it's going to be very interesting in the next few months, what happens and what the bite and administration. The does in terms of the sanctions.

One of the trio of shakes that of.

Engage in that sort of behavior of turning signals of.

I'm monitoring the ship they all.

Have a very common.

Elements of that.

So you will tend to be over the 17 or 18 years of age of at least.

I know you've recently traded.

<unk> been sold to private elements.

It's not it's not immaterial because these are relatively large numbers on <unk>.

You would day, if youre going to legitimize the.

The trade and then you run the ground back into the bowl of fold than the ships don't have any any natural advantage most of them.

All of them have very little insurance coverage.

Class Society ratings sample of items. So I think it's a natural assumption, giving into the hallway scrap price as well, but some of the clearly engaged in the lucrative tried today, which will disappear tomorrow, if the Rollins bought back into the fold and we would expect the I think as most of them will take us with this even disappear, but they're not technically working if you like in the on a lot.

A lot basis against most of the month.

So there would be on it'll be a lack of effect, but it is so many of the surprising to us as well the <unk>.

Sanctions and the team in place for a long time.

Not really been tilly's store.

It can be controlled as we would've expected. So it is the disappointing but this is what you sort of developed.

Okay.

The million barrels coming from OPEC, releasing some of the cuts.

We'll have a positive impact on our market, it's not going to be enough, it's unlikely to be enough to go to positive territory 25000, plus.

But then you have the winter with more demands you have the COVID-19 restrictions being lifted.

Many parts of the world all of that needs to have an impact.

I cannot predict exactly when international travel will complete the resume I cannot predict when Europe will lift their restrictions like the U S is doing at the moment. So if you give me those dates and I can probably the gives you a more accurate picture, but absent of that I think we need to be patient, we know that it's going to happen.

That's for sure, but when exactly is going to happen that's very difficult to failure.

Okay, Great and my the second question was what are you seeing in the market in terms of being able to so like the fleet renewal efforts urinary in the fortunate position to of capital of deploy are you seeing more sellers in this market given the the more difficult operating environment.

We're not seeing we not seeing distress situation. That's for sure I mean, that's of forget that we are.

Just a few months after one of the best year shipping of think of shipping.

Gone through.

So you cannot go from that situation to the stress situation.

Over a few months I think of we have we have picked up some assets for which the value was still in what we call. The the lower part of the cycle.

We knew how high it can go.

We continue to be interested in all sorts of deals beat the secondhand the resale of contract et cetera.

And we get on with the other people have picked up pretty much everything that was there to pick up in the market. So you've seen those transactional of market be relatively transparent.

Some people were not distressed are interested in selling their of vessels simply because when they look at the time the both of them.

What day of earning the operating them and what the prospects are an unknown factor of when is going to turn better of return to better the territory.

They just don't want to get on the preferred to take the of profit and leaves the market the.

Problem. There is that the values are going up way ahead of the earnings.

And so it's difficult to.

And I want to keep the.

The floor to leave of the Gucci is coming from the steel industry.

And I think it of all sources are telling you that at some point capacity is coming back.

Amy.

The steel market is mainly now affected by indeed capacity.

Increasing but not the Boston on fulfilling the demand enhances the friction on the.

The pricing environment for steel, we see number right in front of highest 2008, so very very high.

Normally the turning point should come at the because more of capacity is going to come on lot of deeply but the probably of that in order to bring the capacity online. It takes several months I mean stopped like of tap that you opened and closed on it's even slower than the oil for instance.

The other element.

I think that the other elements of our more a few of them.

Oriented in.

People get the little bit carried away with the fact that the LNG is cheaper than the few lie at the moment, but that's.

I mean, they're not taking into account the.

Price of the delivered LNG onboard the vessel.

Because of LNG as the gas and.

On the liquids.

It needs to be refrigerated and obviously those are bank of bulge on far more expensive the price that we see on board very much the same as the fuel today. So you don't have any economic advantage if you switch to <unk>.

LNG, which is something that some people said.

In the.

On a few months ago of few maybe years ago that it was an advantage, but when we look at really what you have to pay.

That's not the case and who knows.

What it what it's going to be later on.

The other element is the all data we know more.

<unk> carbon tax carbon levy ETS system are going to come or are already in place.

Europe is definitely thinking about it we probably going to be affected by it in 'twenty three.

It will be limited to Europe of what it would be for all the ships call in Europe is still a question I think the bite on the administration is thinking about the scheme the Chinese of the scheme in place.

So all of that will affect the price of the fuel.

As as it related to the air emission zero two emissions and then the next question is is it going to be skewed to emission carbon.

Or is it going to be two equivalent and in that case, then it's all of the greenhouse gas, including meeting and as we all know LNG is far better on the Q2, but they suffer from meeting descriptions of methane is it's far more damaging to the environment on the on a per gram of per kilo per ton basis.

Other than what the <unk>. So there's a lot of uncertainty, which means that I guess really the question, but all of those are all the elements that you have to take into account and so again, yeah. The <unk>.

The ability that we bought into the ships and making sure that they can be prepared for any type of fuel that we can choose from in the future is for me of big advantage.

Yes.

The premise is that you get the immediate visceral reaction on inflation in the share price, but the forward curves are a little bit slower to react sort of near term notes of it of a headwind on the economics, but to your point you've got the opportunity you've kind of built in the optionality for yourself the pick and choose your timing for that.

Out of curiosity do you have a sense yet of that.

Of the kit required and that conversion process for lack of a better term of advanced more or less.

Commodity driven more sensitive than than the underlying ship itself.

The more service oriented are commodity oriented in terms of how you think about that price fluctuating say, if you didn't make that call ear of good from now relative to the ship.

No I mean and quite frankly, that's more of a question of are you going to put your ship on time charter or are you going to play it on the on the spot.

Because if you think about the future, let's say that we project ourselves 10 years down the road and there are still some conventional ship eco ship, obviously, but the <unk> conventional using fuel oil then you of LNG and probably of ammonia at the same time the.

The margin will probably still be a world scale market and so you will get a certain amount of freight.

And then the price of the fuel will be different and Youll return will therefore be very different the OTC would be doing it so it's very complex and debt.

That's also why not many people there too.

The tools into the new to the market because they don't know what the volume.

Yes, now its definitely can't be of tourists in that market for sure. Okay Thats all of that.

For the time guys. Thanks.

Thank you.

And our next question will come from Ben Nolan with Stifel. Please go ahead.

Hi, This is Frank go on to the on for Ben.

I wanted to follow up on <unk>.

We can lower emission targets.

How much can the vessel sailing speed affect the absolute level of the mission and I guess more importantly, the idea of efficiency ratio.

It feels like we're doing the fleet is going to be a big strategy the keep up with.

These ever lowering emission targets.

The older tonnage can those vessels simply go slower to meet I am all of 2013.

So, yes, I mean, the speed of definitely of role to play but in fact in our industry.

We prefer to speak about the load that you put on the engine. So it's a little bit like the round per minute of your car rather than the speed you do and of course, if you are in the defense with your car you don't need to push so much on the accelerator to arrive to a certain speed and when Youre uphill you will need to push far more on the accelerated to maintain yield.

So it's a little bit the same in the in the shipping space.

It depends on the currency it depends on the weather the wind.

And many other factors and in fact, Thats, where the digitalization and the efforts we're doing on the software hardware from.

Is going to pay off more and more going forward because you will adapt.

On your speed according to those elements, but also according to what you expect to have in the next couple of days. So you can go slower because you know that the currencies with you or you know that the current will be with you in a couple of days and still meet the lake and the Lincoln is the the.

Time at which you need to arrive at the port.

To be precise on your question.

Yes, if the put less load on the engine they will see a few.

But they will become relatively inefficient and also let's not forget that when you take of cargo you side of contract and that contract tells you the speed that you're supposed to as well as the debt upon which you have to arrive. So if you are putting yourself in the shoes of the client and he needs to transport the cargo and move.

Of the industry is a little bit of it's very close to what I would call of just in time.

Industry. So once the cargo to arrive within the certain window you cannot afford to take the all the sheet that will grow so much slower that it will arrive a week later.

Otherwise, it's going to be too complex for them to juggle of between <unk>.

<unk> that go out of normal speed and all of the ship that goes the slowest speed because the just in time doesn't work like that.

Hold on.

I heard of sleep.

Yes, yes definitely.

Net.

The good perspective.

And I guess.

My second question I wanted to ask about the Msos.

There is news out yesterday international Seaways was potentially interested in divesting at stake.

And the JV is that other half of the contract something youre on that would be interested in buying and then I guess longer term on the SSL business.

The other opportunities to grow that outside of those two vessels.

Before I answer those two questions I will first tell.

And God knows that I'm, not going to mine on a stable business, but when you are in the merger I guarantee you because we've been there with January I guarantee you that there will be a lot of conversation around the true value of those vessels.

And I think that the market underestimate the value zero on a cash flow basis, the underestimate the value so.

If you cant reach of value and what you do is well if I realize that value and it's higher than what you believe it is the let's make sure that my shareholders get that benefit and obviously that window stops when the merger is completed until we had exactly the same.

Mechanism.

When we did the merger with the with generate if we had sold those vessels to any party at the time and we would have realized a gain that is far in excess of the book value. Then we would of dispute of special dividend and we would've been the authorized students. So I think that the market is picking up a little bit too much.

Speculation on what is to my mind likely to happen certainly before the complete the merger, but that's my opinion.

It's maybe not the bilirubin.

Now talking about.

About that our interest in buying on a partner out.

If they give us the discount we are always interested in good deals.

But frankly speaking I think we are very happy with the partner.

And I think of both of US have very very similar ideas around value. So there is not really much we can gain from buying them out.

And if we do some things probably going to do something that we do together, but it's it's.

The stable stream of cash flow. So before we sell debt, we really need to see a full value and we also need to make sure that our customer is happy with whoever would be interested in buying those units. So it's very different than the vessel I mean, it's not sort of decision that you take overnight and you ask the broker to just market them.

Yes.

That makes a lot of sense. Thanks, very much out of the time I appreciate it.

<unk>.

So on our next call.

<unk> will come from Chris Wetherbee with Citigroup. Please go ahead.

Hey, Thanks for taking the question.

Yes.

I guess I wanted to ask the conceptual question around the.

On the financing capacity.

For yourself, specifically youre on that but maybe more industry wide as we think about sort of the need to rejuvenate the fleet kind of <unk>.

Rodley.

At a point where rates are obviously quite low and leverages arguably running quite high.

Even for yourself of Euro NAV.

Net net debt to Ebitdas is on the elevated side of the stands right now so I know you have liquidity here.

I'm kind of curious how you think the sort of financing market is available on open and how much liquidity. There really is in the market to be able to help support some of these pretty important financing needs that'll be occurring over the course of this year next year and beyond.

Yeah.

I may not the answer a questionnaire.

Say this.

Your net debt to EBITDA is not something that we use the sector because of the EBITDA is too volatile and so as you. If you look at the net debt to EBITDA based on one last quarter than it is ridiculously high if you base your.

Net debt to EBITDA last year, then it's ridiculous low.

And so we cannot change the leverage of the company every time, we go through the cycle.

That's a living the obvious the more important question that you're asking is are we going to be able to continue to finance the company going forward not so much because of the volatility because of the volatility has been there for quite a long period of time, if not forever, but more because.

The providers of capital are more and more scrutinizing.

On the oil industry and the.

On the oil service industry of which we are part of and I think that's a little bit the challenge and what we're seeing now and as the lever.

<unk>.

Comments prior to the the questions.

It's it's obvious that at least you need two of the proceed on principle as of closing Euro on agreement, which means that you can demonstrate to the banks that youre going to continue to follow the trajectory and you're going to meet the requirements of the IMO 2030, but many other requirement and believe me that jargon is becoming very complex piece of.

The so many people there are sort of trying to translate the Paris agreement into different set of Kpis.

I think thats.

Zero NAV is relatively well positioned if not very well positioned to continue to meet those targets. We are ahead of the curve.

We are very conscious of that.

We need to renew the fleet and we do that and you've seen that we were doing that from a basis of already having a very modern fleet because the majority of our vessels are equal time.

And the ones that are not going to leave the fleet and probably lead the world fleet.

Before we reach 2030.

We're also thinking about beyond 2030, as we commented earlier and we're buying type of assets that can be retrofit can be transformed into something that does not mean anything and I think that that path together with the rest of the ESG I E. The social part of the governance of what Youre going to play a key role in your ability.

The two finance company and that's why we've been relatively a focus on that but not because its a trend simply because it's in our DNA and we were always very aware of that those three elements. We're very important even even before the terminology was created like.

ESG. The immunology was created so we feel relatively comfortable where we are and when we look at the future. We feel that this represent the competitive advantage that we certainly are going to play out.

Our efforts to grow the company and consolidate the market.

Okay. Okay.

That's a really good answer I appreciate that insight and I guess when you think just taking that a step further and think about the potential competitive advantage for you.

Do you think that if we play this out over the course of the next couple of years that there would be.

Of material shortfall in capital available to finance the fleet for players who are not in the same position as you are from an eco perspective, and sort of are progressing from an emissions perspective, and just sort of generally an ESG perspective, do you think that will become the which.

<unk> talked for years and years about sort of the availability or lack thereof of financing that hasn't necessarily sort of really change the industry in terms of the ability to kind of.

Add vessels and ultimately add to the order book over time.

On the margins, but do you think it becomes a bigger story as we move forward.

Well first of all I, certainly hope so and.

And it is true that we've been talking about it.

In the past decade, and we've seen it but on the margin you're absolutely right.

I think that there will be a flight to quality.

Net fly to quality remains at the relatively cheap capital that is available.

It will be taken by the big companies, we can demonstrate that they are doing an effort in that it's not superficial it's really deep and you can measure it and as I said earlier I think it's a lot easier for big companies too.

Go into programs over multiple years to decrease the emissions of the feed so I don't believe that we will have so many problems.

Don't believe either of that people will not find the capital, but I think the the price of that capital on the spread.

Between what we pay and with DP is going to increase and it's going to materially increase compared to what we've seen in the past simply because of the providers of capital depends themselves on their investors and I think that their investors are demanding more and more to see where that capital is going and what is it funding.

So if you of scar city on that and then it will be reflected in the pricing.

I have no doubt and a lot of hope that that spread will increase and therefore will drive people out of the market because let's not forget that coupled with the volatility that we have the pricing of capital is very important capturing the.

The intensive industries, such as the tanker shipping.

Okay.

That's very helpful. I appreciate the insight thank you.

Thank you.

Yeah.

And our next question will come from Magnus <unk> with H C. Wainwright. Please go ahead.

Yeah. Good afternoon question for either <unk> or Brian.

Going back to slide nine.

The industry of set out some pretty aggressive.

Carbon emission goals by 2030.

But in order to get there I mean, the needs to start replacing some of these older Vlccs on.

I guess there of about 400 Vlccs built before 2010.

When you're talking to the oil companies, we've seen both shell on to Paul.

So.

It will be natural then next to them you have a number of clients.

May represent the in fact.

The majority of.

Who are much more focused on the emission of themselves and are sort of few neutral from the perspective, Aida not producer of LNG and are really of waiting what the.

Potential of of of Ammoniac in the can give and I think once the first shifts the Doc dual fuel ammonia will hit the water, we will really be able to assess whether there is of.

An interest into taking the sheets on time, chara and for which periods of time.

That will obviously depend on the pricing of the pricing difference between ammonia in LNG of ammonia in a few log energy and few road so opposite of carbon tax I don't think that ammonia.

Will be a big success, but as I said, there's more and more talks about different type of carbon tax on different type of mechanism to equalize.

The price of those different fuels.

Thank you I mean, I guess the longer the conversations going on the longer we wait to build day shifts the better it is for the industry well I mean, you have a couple of new belts on order as far as the yard capacity of what do you see now as far as ordering new ships the delivery times slots filling.

[noise] up with other from other it's on the container of industry.

Yeah, the on the Vlcc's from the.

Just a handful of yard that can build those ships and the auto southern accent interest in building those shifts and they are also the same yard that can be a container vessels.

And gas carrier.

We've seen that all of the all the shipping segments.

I've seen the profitability surge in recent months I mean, the particularly the container segment, where more than 10% of the world's feed has been ordered in the last five months.

Very very impressive and that means that the yards, we're going to order of our VLCC in the Sampsell day.

In fact this week is a 99 seven.

I cannot tell you what what the level of profitability is at the yard I mean, that's that's probably a very well kept secret.

But youre right I mean, the seal represent 35 per cent of the building cost of the ship. So you can make the math of that.

Windows 35 percentage going up by 20% well guess, what it's a couple of more millions and that gets translated into.

The price that they can offer you.

Great well, thanks for answering my questions.

Thank you.

This does conclude our question and answer session I would like to turn the conference back over to the management team for any closing remarks.

Building on remark would be thank you very much for you on interest I mean, it's always a pleasure to be on those earnings call.

And then the.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

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