Q4 2021 Scorpio Tankers Inc Earnings Call

Speaker 1: Today's conference will begin momentarily. Please continue to stand by. Thank you for your patience.

Today's conference will begin momentarily. Please continue to standby. Thank you for your patience.

Speaker 2: Music

[music].

Speaker 2: The.

Okay.

Speaker 1: Hello and welcome to the Scorpio Tankers Inc. fourth quarter 2021 conference call.

Hello, and welcome to the Scorpio Tankers, Inc. Fourth quarter 2021 conference call.

Speaker 1: I would now like to turn the call over to James Doyle, Head of Corporate Development and Investor Relations. Please go ahead.

I would now like to turn the call over to James Doyle head of corporate development Investor Relations. Please go ahead.

Thank you for joining us today welcome to the Scorpio tankers fourth quarter 2021 earnings conference call on the call with me today are <unk>, Chief Executive Officer, Robert Bugbee President.

Speaker 3: Thank you for joining us today. Welcome to the Scorpio Tankers fourth quarter 2021 earnings conference call. On the call with me today are Emmanuelle Arroyo, chief executive officer, Robert Bugbee, president, Cameron Mackey, chief operating officer, Brian Lee, chief financial officer.

Mackey, Chief operating Officer, Brian Lee Chief Financial Officer.

Speaker 3: Earlier today, we issued our fourth quarter earnings press release, which is available on our website, Scorpiotankers.com.

Earlier today, we issued our fourth quarter earnings press release, which is available on our website Scorpio tankers dot com.

Speaker 3: The information discussed on this call is based on information as of today, February 14, 2022, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such states.

The information discussed on this call is based on information as of today February 14th 2022 and May contain forward looking statements that involve risk and uncertainty actual results may differ materially from those set forth in such statements for a discussion of these risks and uncertainties you should review the forward looking statements disclosure in the earnings.

Speaker 3: For discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release issued today, as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com and sec.gov.

Yes release issued today as well as Scorpio tankers, SEC filings, which are available at Scorpio tankers dot com and SEC Gov.

Speaker 3: Call participants are advised that the audio of this conference call is being broadcasted live on the internet and is also being recorded for playback purposes.

Call participants are advised that the audio of this conference call is being broadcast live on the Internet and is also being recorded for playback purposes.

Speaker 3: An archive of the webcast will be made available on the investor relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpiotankers.com on the investor relations page under reports and presentations. The slides will also be available on the webcast.

Archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days, we will be giving a short presentation. Today. The presentation is available at Scorpio tankers dot com on the Investor Relations page under reports and presentations. The slides will also be available on the webcast.

Speaker 3: After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to two. We want all our analysts to have a chance to ask questions.

After the presentation, we will go to Q&A for those asking questions. Please limit the number of questions to two we want all our analysts to have a chance to ask a question.

Speaker 3: If you have an additional question, we are more than happy to answer it, but please rejoin the queue. Now, I'd like to introduce our Chief Executive Officer, Emmanuel Iora.

If you have an additional question, we're more than happy to answer it but please rejoin the queue now I'd like to introduce our Chief Executive officer of <unk>.

Speaker 4: Thank you, James. And good morning and good afternoon to everyone. Thank you for your time today.

Thank you James and good morning, and good afternoon to everyone. Thank you for your time today.

Speaker 4: For the last six quarters, product anchor rates have remained below our all-in cash breakeven levels. There is no sugar coating it. The weakness in the product anchor market and prolonged recovery has been frustrating.

For the last six quarters product tanker rates have remained below our all in cash breakeven levels.

There is no sugarcoating it.

The weakness in the product tanker market and prolonged recovery has been frustrating.

Speaker 4: I'd like to thank our shareholders for their support and patience during the past year, which unfortunately has been another COVID year.

I'd like to thank our shareholders for their support and patience during the past year, which unfortunately has been another COVID-19 here.

Speaker 4: Scorpio tankers finish 2021 with more cash on the balance sheet than in 2020.

Scorpio tankers finished 2021 with more cash on the balance sheet than in 2020.

Speaker 4: we continue to focus on what we can control. In January 2022, we agreed to sell 14 vessels. This savings incnmrew...

We continue to focus on what we can control in January 2022, we agreed to sell 14 vessels.

These savings increase liquidity.

Speaker 4: they reduce overall debt and highlight both a significant increase in asset values as well as the discount our shares trade to these higher asset values themselves

They reduce overall debt and highlight both a significant increase in asset values as well as the discount our shares trade to these higher asset values themselves.

Speaker 4: The decision to sell assets is consistent with our efforts to maintain a strong liquidity position and significant operating leverage in a challenging market.

The decision to sell assets is consistent with our efforts to maintain a strong liquidity position and significant operating leverage in a challenging market.

Speaker 4: our top priority remains the same, position the company to create shareholder value in an improving market and for the next...

Our top priority remains the same position the company to create shareholder value in an improving market.

And for the next tanker cycle we.

Speaker 4: we feel the recovery is close and the next tanker cycle not far behind.

We feel the recovery is close and the next tanker cycle not far behind.

As far as demand is concerned or demand increased by 19 million barrels a day since may 2020.

Speaker 4: As far as demand is concerned, oil demand increased by 19 million barrels a day since May 2020 and is expected to surpass pre-COVID levels this year.

<unk> is expected to surpass pre COVID-19 levels this year.

Speaker 4: At the same time, refined product inventories are at historically low levels and through 180 million borrowers from January through November 2021.

At the same time refined product inventories are at historically low levels.

And drew 180 million borrowers from January through November of 2021.

So the capital is the simple supply incremental oil demand within inventory draws is just not sustainable in the long term.

Speaker 4: So the catalyst is simple. Supplying incremental oil demand within inventory draws is just not sustainable in the long term.

Speaker 4: The timing is less simple to read, but the inflection point is near.

The timing is less simple to REIT.

The inflection point is near.

In December product tanker rates reached their highest level since the start of Covid.

Speaker 4: In December , product tanker rates reached their highest level since the start of COVID.

Speaker 4: While the spread of the omicron variant slowed the momentum, there is several reasons to suggest it will return this year.

While the spread of the omicron variant slowed the momentum there is several reasons to suggest it will return this year.

Speaker 4: I would like to now turn the call to James Doyle, who has been recently promoted to the position of Head of Corporate Development and Investor Relations. He will now walk you through a brief presentation as he discussed in his opening remarks. James, congratulations. Please go ahead.

I would like to now turn the call to James Doyle, who has been recently promoted to the position of head of corporate development and Investor Relations. He will now walk you through a brief presentation as you discussed in his opening remarks James Congratulations. Please go ahead.

Thank you Emmanuel.

Good morning, and afternoon everyone.

Speaker 3: At the end of the fourth quarter, we started to see a material improvement in rates, specifically in December , and it seemed as if the inflection point was finally here.

At the end of the fourth quarter, we started to see a material improvement in rates specifically in December and it seemed as if the inflection point was finally here even with significant inventory draws rates pushed higher however by early January the rapid spread of biomarker <unk> had impacted our markets and rates began to slow recently are small.

Speaker 3: Even with significant inventory draws, rates pushed higher. However, by early January , the rapid spread of Omicron variant had impacted our markets and rates began to slow. Recently, our smaller vessels, the Handymax and MRS, have shown more of an improvement because of the demand strength we're seeing in the US, Latin America, Africa, and Europe . On the other hand, the LR2s have been slower to recover and this is largely due to lower demand in Asia and a reduction in arbitrage opportunities.

All our vessels the handy Max and MYR, such that more of an improvement because of the demand strength, we're seeing in the U S. Latin America Africa and Europe .

On the other hand, the largest have been slower to recover and this was largely due to lower demand in Asia and a reduction in arbitrage opportunities. Since Q3, we have seen 19, LR twos with from trading clean to Dirty, which is the equivalent of about 8% fleet reduction and creates a favorable supply demand setup at Asian demand returns.

Speaker 3: Since Q3, we have seen 19 LR2s switch from trading clean to dirty, which is the equivalent of about 8% fleet reduction and creates a favorable supply-demand setup at Asian demand return.

Speaker 3: If there's any evidence of a demand recovery in refined products in 2021, it's the draws we saw in gasoline and distillate inventories. From January through November , we drew 181 million barrels of gasoline and distillate. Inventories are now at historically low levels and we feel the headwind is behind us. While Omicron delayed the first quarter recovery, we are optimistic for 2022. The question is, how close are we?

If there is any evidence of the demand recovery in refined products in 2021, it's the draws we saw in gasoline and distillate inventories from January through November we drew 181 million barrels of gasoline and distillate inventories are now at historically low levels and we feel the headwind is behind us while omicron delayed in the first quarter recovery.

Optimistic for 2022, so the question is how closer way.

Speaker 3: Well, in 2021, ton-mile demand exceeded pre-COVID levels, which may seem surprising when you look at rates. The driver behind the ton-mile demand growth has been refinery closures. Over the last two years, we've seen a significant number of closures. These are often older, less efficient, or poorly located refineries.

Well.

In 2021 ton mile demand exceeded pre COVID-19 levels, which may seem surprising when you look at rates the driver behind the ton mile demand growth has been refinery closures over the last two years, we've seen a significant number of closures. These are often older less efficient or poorly located refineries.

Speaker 3: The weak operating margins and maintenance cap-acts to keep these refineries operating doesn't make sense.

<unk> operating margins in maintenance Capex to keep these refineries operating does it makes sense for.

Speaker 3: For the first time in 30 years, refinery closures outweighed new capacity in 2020.

For the first time in 30 years refinery closures outweigh new capacity in 2021.

Speaker 3: After a refinery closes, in most cases, the loss output needs to be replaced.

After a refinery closes in most cases the loss at but needs to be replaced.

Speaker 3: The most favorable example is Australia, which closed two of its four refineries last year and has since increased its product exports by 200,000 barrels a day in November to make up for the swash production.

The most favorable example is Australia, which close two of its four refineries last year.

Has since increased its product exports by 200000 barrels a day in November to make up for this lost production.

Speaker 3: On the volume side, refined product exports were around 1 million barrels per day lower than pre-COVID levels. However, from a demand perspective, when you account for the inventory draws that occurred last year, it's about half that. In other words, without inventory draws, we're only about 500,000 barrels a day below 29.

On the volume side refined product exports were around 1 million barrels per day lower than pre COVID-19 levels. However from a demand perspective, when you account for the inventory draws that occurred last year to about half that in other words without inventory draws were only about 500000 barrels a day of 2019 levels.

Speaker 3: So will 2022 be the year refined product exports exceed pre-COVID-19 wellness?

Well 2020 to be the year refined product exports exceed pre COVID-19 levels.

Speaker 3: We think so. While jet fuel may take until 2022, 2023, 2024 to fully recover, the increase in gasoline, diesel, and napa have offset lower jet fuel.

We think so while jet fuel may take until 2022, 2023, and 2024 to fully recover the increase in gasoline diesel and naphtha have offset lower jet fuel demand crude oil and refined product demand is expected to increase by 4 million barrels a day. This year at 25% of this increase demand is export.

Speaker 3: Crude oil and refined product demand is expected to increase by 4 million barrels a day this

Speaker 3: If 25% of this increased demand is exported, seaborne exports of refined products will increase by 1 million barrels per day. Also, this excludes the additional demand of around half a million barrels that was supplied with inventory draws less.

Seaborne exports of refined products will increase by 1 million barrels per day also this excludes the additional demand of around <unk> 5 million barrels that were supplied with inventory draws last year timing.

Speaker 3: Timing is always challenging, but we expect a sequential improvement in demand each quarter throughout the year.

Timing is always challenging, but we expect a sequential improvement in demand each quarter throughout the year inventories are at historically low levels and have declined as refinery utilization has increased so the ability to draw from inventories has reduced substantially thus given the low inventory levels to meet the increased demand this year.

Speaker 3: Inventories are at historically low levels and have declined as refinery utilization has increased.

Speaker 3: So the ability to draw from inventories has reduced substantially. Thus, given the low inventory levels to meet the increased demand this year, we expect higher refinery runs, and consequently product access.

We expect high refinery runs and consequently product exports refined product exports in ton mile demand are expected to increase six 7% this year.

Speaker 3: Defined product exports in Tomahawk demand are expected to increase 6 and 7 percent this year. One could argue by the end of the year, the demand for exports will be increasing.

One could argue by the end of the year it will be higher.

Supply the product tanker order book is at a record level with five 3% of the existing fleet on order today by looking at the low order book, one might think that shipyards are desperate for orders, but it's quite the opposite other shipping segments. Other shipping segments have done so well such as container.

Speaker 3: supply. The product tanker order book is at a record low with 5.3 percent of the existing fleet on order today. By looking at the low order book, one might think that shipyards are desperate for orders, but it's quite the opposite. Other shipping segments have done so well, such as containers, that the yards are fully booked. We do expect more product tankers to be ordered, but if ordered today, these vessels would not be delivered until 2025.

The yards are fully booked we do expect more product tankers to be ordered but in order to de these vessels would not be delivered until 2025.

Speaker 3: While the order book is at an all-time low, scrapping is at an all-time high. This is due to higher steel and scrap prices, but also the age distribution of the fleet. Unlike other sectors, product tankers were not built in mass until the early 2000s, so scrapping has been minimal, and basically everything that's been delivered hasn't left the fleet. However, this will start to change, and we saw the start of this last year with 48 product extra scraps.

While the order book is at an all time low scrapping is at an all time high this is due to higher steel and scrap prices, but also the age distribution of the fleet.

Unlike other sectors product tankers were not Gulf masks until the early 2000, so scrapping has been minimal and basically everything thats been delivered Hasnt left the fleet. However, this will start to change and we saw the start of this last year with 48 product tanker scrapped today. There are 267 product tankers 20 years and all of their.

Speaker 3: Today, there are 267 product tankers, 20 years and older. By 2025, excluding scrapping, there will be 687 product tankers, 20 years and older.

By 2025, excluding scrapping there will be 687 product tankers 20 years older.

Speaker 3: And this is not including the roughly 1,000 product tankers that will be 15 to 19 years old. Without additional new building orders, more than half the fleet will be 15 years and older by 2025.

This is not including the roughly <unk> thousand product tankers that will be 15% to 19 years old without additional new building orders more than half the fleet will be 15 years and older by 2025 using.

Speaker 3: Using modest scrapping assumptions, product anchor net fleet growth is around 1.3% the next two years before going negative. However, if we use a scrap rate that reflects the age profile of the fleet, supply growth is essentially zero for the next two years before going negative in 2025.

Using modest scrapping assumptions product tanker net fleet growth is around one 3%. The next two years before.

Negative however, if we use the scrap rate that reflects the age profile of the fleet supply growth is essentially zero for the next two years before going negative in 2025.

Financial highlights.

Speaker 3: While everyone is focused on rates and liquidity, there's been a substantial increase in asset values. Rising steel and labor costs, as well as new building orders from other segments, have spilled available yard capacity, driving prices higher and delivery dates later. Since January 2021, five-year-old LR2s have increased $12.5 million per vessel. If we apply this increase to Scorpio Tankers 42 LR2 vessels, it would increase gross asset value alone of the LR2 fleet by $525 million.

Everyone is focused on rates and liquidity there has been a substantial increase in asset values rising steel and labor costs as well as new building orders from other segments, that's still available yard capacity driving prices higher and delivery dates later since January 2021, five year old LR twos have increased $12 $5 million per vessel.

We apply this increase to Scorpio tankers 42, LNG vessels that would increase gross asset value alone. The DLR two fleet by $525 million.

Speaker 3: It also means your LPV is decreasing. In January , we announced the sale of 14 vessels. These sales increase our liquidity, reduce our debt, and crystallize the steep discount our shares trade relative to our net asset value.

It also means your LTV is decreasing in January we announced the sale of 14 vessels E sales increase our liquidity reduce our debt and crystallize the steep discount our shares trade relative to our net asset value.

Speaker 3: After the completion of the sales, the company will have over $460 million in pro forma liquidity.

After the completion of the sale the company will have over $460 million of pro forma liquidity.

Speaker 3: As Emmanuel mentioned, to maintain liquidity with rates below all in cash break even levels, we have refinance vessels as opposed to raising equity and also so

As Emmanuel you mentioned to maintain liquidity with rates below all in cash breakeven levels, we have refinance vessels as opposed to raising equity and also sold some.

Speaker 3: If we look at the debt repayment schedule, which excludes amortization for the 14 vessels that will be sold, the company has two maturities in the next eight quarters. The convertible bond, which will be repaid in Q2, and a credit facility that matures in Q4 2022.

If we look at the debt repayment schedule, which excludes amortization for the 14 vessels that will be slow. So the company has two maturities in the next eight quarters.

Convertible bond, which will be repaid in Q2, and our credit facility that matures in Q4 2022.

Speaker 3: In the past, we've seen different comments and figures around the debt that's due in a given period.

In the past, we've seen different comments and figures around the debt thats due in a given period for the company. So for clarity if we use the credit facility. That's due in Q4 as an example, which is the blue box into repayment graph before this facility matures, we arrange to refinance the vessel.

Speaker 3: So for clarity, if we use the credit facility that's due in Q4 as an example, which is the blue box in the repayment graph, before this facility matures, we arrange to refinance the vessel in the facility with the new lender. Thus, when the facility matures in Q4, we repay the 16.9 million debt balance and then draw down on a new loan facility. Alternatively, we could sell the vessel, repay the debt, and collect the proceeds. This happens to be an LR2, so current prices would generate significantly quicker debt.

And the facility with a new lender thus when the facility matures in Q4, we repaid $16 $9 million debt balance and then draw down on a new loan facility. Alternatively, we could sell the vessel repay the debt and collect the proceeds.

Happens to be an LR twos current prices would generate significant liquidity.

Speaker 3: If you look at the company's balance sheet over the last six quarters, you will see a significant change. However, our view of the balance sheet is that after several challenging quarters, you will see a significant change.

If you look at the Companys balance sheet over the last six quarters, you will see a significant change however, our view of the balance sheet is that after several challenging quarters.

Speaker 3: LTVs have decreased. We have 600 million in pro-formal liquidity, which creates flexibility in the event of a longer market recovery. We have refinanced essentially all of our upcoming maturities and have minimal CAPEX.

Ltvs have decreased we have $600 million in pro forma liquidity, which creates flexibility in the event of a longer market recovery, we had refinance essentially all of our upcoming maturities and have minimal capex, we will repay $485 million of debt in the first half of this year from scheduled amortization associated with vessels.

Speaker 3: We will repay $485 million of debt in the first half of this year from scheduled amortization, debt associated with vessel sales, and the convertible bond maturity.

Sales in the convertible bond maturity, given these points and our positive outlook for the market, we feel well positioned.

Speaker 3: Given these points and our positive outlook for the market, we feel well positioned.

To wrap it up.

Speaker 3: The company has the largest product tanker fleet in the world, comprised entirely of eco vessels. We have significant operating leverage. $1,000 a day change in product tanker rates equates to $42.7 million in annual cash flow. We know rates don't usually move by $1,000 a day.

The company has the largest product tanker fleet in the world comprised entirely of eco vessels, we have significant operating leverage of $1000. A day change in product tanker rates equates to $42 7 million in annual cash flow, we know rates don't usually move by $1000 a day.

Speaker 3: We have positioned the balance sheet to provide flexibility with increased liquidity and a plan to de-lever. Our shares trade at a steep discount to our net asset value. The market inflection point is close and the long term supply demand fundamentals suggests we could have an extended tanker cycle not far after. With that, I will turn it over to Q&A.

Positioning the balance sheet to provide flexibility with increase liquidity in our plan to delever our shares traded at a steep discount to our net asset value. The market inflection point is close and the long term supply demand fundamentals suggest we could have an extended tanker cycle not far after with that I will turn it over to Q&A.

If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.

Speaker 1: If you'd like to ask a question at this time, please press the star, then the number one key on your touch tone telephone. To withdraw your question, press the pound key. Please stand by while we complete the question.

To withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Speaker 1: Our first question comes from Omar Nakta with Clarkson Securities. Thank you.

Our first question comes from Omar knockdown with Clarksons <unk> Securities.

Thank you Hey, guys. Good morning, good afternoon.

Speaker 3: James, thanks for that. I think a pretty good run through of things.

James Thanks for that.

Pretty good run through.

Thing.

Speaker 3: You know, clearly liquidity has been a focus, you know, for the past year and a half or so. And you manage really to continuously enhance your cash position with debt refinancing. You know, aside from sale leaseback, actual sales have not been something you've done in the past or recent past.

Clearly liquidity has been a focus for the past year and a half or so and managed really to continuously enhance our cash position with debt refinancing.

Aside from sale leaseback actual sales have not been something you've done in the past recent past so just regarding the LR one deal.

Speaker 3: So just regarding the LR1 deal, you know, we've gotten used to seeing when an owner still shifts in a tough earnings environment, especially an unblocked fleet...

We've gotten used to seeing when an owner self shifts in a tough earnings environment, especially on block fleet.

Speaker 3: in an all cash deal. They usually come at a discounted sale price. But your LR1 got a pretty hefty premium, I'd say. Can you talk a little bit about how that transaction came about and what really compelled you to move forward with it?

All cash deal they usually come at a discount on sale price, but <unk> got a pretty hefty premium let's say.

Can you talk a little bit about how that transaction came about and what really compelled you to move forward with it.

Sure.

Speaker 5: Okay, I think the easiest thing to

Okay, I think I think the.

You just think too.

Speaker 5: first understand is that, as James pointed out, prices have been moving up and moving up quite strongly.

First I understand as James pointed out prices have been moving up or moving up quite strongly.

Speaker 5: So, you know, you've got a quite a strong sale and purchase market to start with. So you may have had the vessel sold at a surprisingly high price to the market. And this change is inferring that, you know, we strongly believe even now that net said values have been adjusted up high enough.

So.

You've got a.

Quite a strong purchase market starwood.

You may have had the vessels sold.

Surprisingly high price in the market and it is changes in flooring.

We strongly believe even now that asset values have adjusted up.

Fair enough.

Speaker 5: And that doesn't just apply to us, that applies to other product banking companies with modern fleets.

And that doesn't just apply to us it applies to other product tanker companies with modern fleet.

Speaker 5: Now those rest of those those less than 10 years, seven, eight years old. So the first thing is you had a mock.

Those vessels.

Less than 10 years, seven eight years old.

So the first thing is you had a market that was very strong.

Speaker 5: It came about through a very competitive basis. I mean, we'd indicated in a couple of quite large conference calls and in the press that we would be willing to sell vessels as part of the liquidity position. But it's a win-win for us because first of all, it increases liquidity. Second.

It came about through a very competitive basis.

Indicated in a couple of.

Quite large conference calls and in the press that we would be willing to.

Sell vessels.

Probably the liquidity position, but it's a win win for us because.

First of all it increases liquidity, but second.

Speaker 5: I mean, it's a very rational thing for a management to do when you when they think when you think your NAV is trading above 30 and your your stock is trading, you know, below 50 percent of net asset value. And you believe that the fundamentals are very strong, but you have an uncertain point to recovery. You first get the sort of a knockout of you don't have to worry about liquidity.

It's a very rational thing for management to do when you when they say what do you think.

She is trading above 30.

Your stock is trading.

Below 50%.

Tests at value and you believe that the fundamentals are very strong.

But you have an uncertain point to recovery.

First get the sort of the knockout to you don't have to worry about liquidity anymore.

Speaker 5: The second thing you get is an offensive position where, you know, we've always said to the degree that, you know, we're that we're earning, you know, above our all in breakeven 17 a day, then we're going to start looking to buying stock back as an alternative. So in an offensive position.

The second thing you get is an offensive position well.

We've always said to the degree that.

But we are running above our all in breakeven in 2017 to date.

Start looking too.

Buying stock back as an alternative sort of an offensive position with <unk>.

Speaker 5: the strengthening and putting cash on that balance sheet and getting the situation where when that market turns the next question that analysts and I'm sure you yourself will ask is you've now probably got too much liquidity what are you going to do with it comes at a much earlier point in the cycle and we've had previous experience of the benefits of that so that's really

Strengthening and putting cash on the balance sheet and getting the situation where when that market turns. The next question that analysts and I am sure you itself philosophy.

You've now probably got too much liquidity, what are you going to do with it.

Comes at a much earlier point in the cycle when we've had previous experience through the benefits of that.

So that's really how it came about.

Speaker 3: Thanks, Robert. Good, good, good color there. I guess, yeah, just on the context of, you know, being offensive and having too much liquidity. Clearly now you perform a cash position is, you know, well over 400 million, which I think is the highest in many years. You know, the question obviously now is, how do you feel now with that position ahead of a recovery? And do you foresee future sales to maybe take advantage of that NAV arbitrage?

Thanks Robert.

Good color, there and I guess, just on the context of being offensive and having too much liquidity.

Now your pro forma cash position is well over $400 million, which I think is the highest in many years.

The question, obviously now.

How do you feel now with that position ahead of a recovery.

And do you foresee future sales to maybe take advantage of that.

The arbitrage.

Speaker 5: At the moment, what we see, especially as Omicron seems to be going away even faster than some people hope, and we're getting some analysis that actual headline demand for products and crude is much higher than people thought. So we look at this in the glass half full way, it's actually pretty incredible that you've had, you know,

Sure among with what we see especially.

<unk> seems to be going away.

Even cost through some people how can we are getting some analysis that shows.

Sure.

Headline demand for products and crude is much higher than people thought so we look at this in the glass half full way, it's actually a pretty incredible that you've had.

Yes.

Speaker 5: Apart from the United States, really not much flying going on in the world. You've had a, you know, some form of restrictions going on in the last four or five weeks, even in the freest Covid countries. And yet the demand for oil and its derivatives has been so very strong. And you've got, as James pointed out, multi-year levels of inventory turned down.

Apart from the United States really not much flying going on in the world.

<unk> had a.

Some form of restrictions going on in the last four five weeks, even in the freest COVID-19 countries and yet the demand.

Oil and its derivatives of being so strong and you've got as James pointed out multi year levels of inventory turn down.

Speaker 6: So that really sets up a situation where you've got this very long-term great market, and it's just a question of when that's going to happen.

So that really sets up a situation where you've got this very long great.

Great market and it's just a question of when that's going to happen.

Speaker 5: I think to your second part that we're really comfortable in the actual liquidity part. We would not sell further vessels because we have to for liquidity.

I think to your second part, but we're really comfortable in the actual liquidity part we would not sell further vessels because we have to for liquidity.

Bob.

Speaker 5: You know, I think it still holds true that, you know, maybe we would sell.

I think it still holds true.

Maybe we would sell.

Speaker 5: You know, some more vessels just simply again, because once you have an NAV over 30 into a rate rising market that you're able to establish over and over again with sales.

Some more vessels just simply again, because once you have an <unk> over 30 into a rising market.

You were able to establish over and over again with sales.

Speaker 5: You know, there's nothing wrong in actually, you know, let's say piling on the cash and the optionality.

There's nothing wrong in actually.

Piling on the cash and the Optionality.

Speaker 5: especially when with a company with the amount of vessels that we have.

Especially one with a company with the amount of vessels that we have.

Speaker 5: doesn't, it just doesn't affect our operating level at all. I mean we're not married to you know any particular any particular ship.

It doesn't.

It just doesn't affect our.

Operating level of tool I mean, we're not married to.

Any particular any particular ship.

Speaker 3: Understood. Thanks, Robert. Good color. And those are my two questions. I'll turn it over.

Understood. Thanks, Robert.

Good color and those are my two questions I'll turn it over.

Okay.

Our next question comes from Randy <unk> with Jefferies.

Howdy gentlemen, how's it going.

Speaker 5: Hi, Randy. Good, thank you, Andy. Hey, so first on your quarter to date rates, much stronger than the negative rates that the headline markets are showing. So with that, should we expect the rest of the quarter to be below these levels as most of that strength was from maybe December , let's call it, or are the actual current rates much stronger than the headline rates that we're seeing?

Hi, Randy good thank you Andy.

Hey, so first on your quarter to date rates much stronger than the negative rates.

The headline markets are showing so with that should we expect the rest of the quarter to be below. These levels is most of that strength was from maybe December let's call. It or are the actual current rates much stronger than the headline rates that we're seeing.

That's a great question.

Speaker 5: That's a great question. Question we ask ourselves is it because it's all over the place. I mean, you've got extreme volatility now you have you know, you actually had a lot of headway last week in last week in Mr's for example, which were starting to trade quite firmly and out of the US, you know side and West of sewage and was actually starting to pick up a bunch of

A question we ask ourselves.

Because it's all over the place I mean, you could extreme volatility that you have.

You actually had a lot of headway last weekend.

Last week in <unk> for example, which were.

Starting to try quite firmly in out of the U S side and west.

So it was actually starting to pick up a bunch of.

Speaker 5: you know, speeding in the East. You know, we're actually even starting to pick up a couple of jet fuel cargos. We even load a big jet fuel cargo for the first time in many, many weeks out of the AG on one of the big ships.

Speed and in the East we've got Stephen is going to pick up a couple of jet fuel cargoes, we even load a big jet fuel cargo for the first time in many weeks.

The AEG.

On one of the big ships.

And it's literally.

Speaker 5: You know, you've got this inventory situation, you've got, you know, a very turbulent market. So you you really don't know, to be honest, is the answer. You know, as to when the exact time this market is going to, you know, spin upwards, it's very tight. So to work out whether or not the next 50% is going to be

You've got this inventory situation you've got.

A very turbulent market.

You really don't know to be honest.

Answer.

As to when the exact time.

This market is going to spin upward it's very positive.

So to work out whether or not the next 50%.

Is going to be the same.

Speaker 5: You know, worse materially better than the last 50% is quite difficult.

Yes.

Materially better than the last 50% is quite difficult.

Speaker 5: I think that we can be confident that, you know, overall, you know, it's going to be our overall rates are going to be above, you know, let's say 10, you know, that's going to and that adds to our our, let's say, NAV value anyway to the degree that the prices of vessels are not going to go down. But we don't know is the absolute answer in this.

We can be confident that.

Overall.

Going to be our overall right, we're going to be above 10.

Can.

That's going to add to our.

Our let's say NAV value anyway to the degree the prices the vessels are not going to go down.

Bob.

We don't know is the absolute answer in that.

Got it.

It's just.

Speaker 5: We see it as just time now. These markets are tight as the winter has shown and those rates that we're showing are tight.

We see it is just time now these markets are tight because the winter is shown in those rates that we're showing the time.

Speaker 5: So by saying we don't know, I wouldn't take that as a negative position to the future.

So by saying, we don't know I wouldn't take that as a negative position for the future.

Yes, Thats fair hard to hard to prognosticate from here.

Speaker 7: No, that's fair. Hard to prognosticate from here. Second question, following the vessel sales, which would certainly be accretive if you use those for sheer buybacks, but your fleet, still massive, obviously a little bit of your operating exposure has been reduced.

Second question following the vessel sales.

We'll certainly be accretive if you use those for share buybacks, but your fleet still massive obviously a little bit of your operating exposure has been reduced so with that when you look to charter in vessels to maybe increase that spot exposure or on the other hand, our time charter rates too high and you're actually maybe looking to chew.

Speaker 7: So with that, will you look to charter in vessels to maybe increase that spot exposure, or on the other hand, are time charter rates too high? And you're actually maybe looking to charter out some tonnage to secure some of that.

Carter out some tonnage to secure some cash flow.

Speaker 5: We're not looking at each other out 100%. You know, we are, and I'll say it for the first time on this call today, even at the risk of being criticized, we are very bullish, extremely bullish.

We're not looking to charter out.

100 <unk>.

We are and I'll say it for the first time on this call today and even at the risk of being Criticised.

We are very bullish extremely bullish.

Speaker 5: know supremely bullish whichever bullish you know you want to want to put we're there right I could say a bullish 882 times over

Supremely bullish whichever.

You want to want to put with the right.

Foolish.

Two times over.

Speaker 5: Okay, and right, so no chartering out. We are always looking for chartering opportunities. So far, we kind of being disappointed in that sense, because rates as sale and purchase rates.

Okay.

Yes.

Right. So no chartering out we are.

Always looking for charter in opportunities so.

We kind of being disappointed in that sense, because rights AD sale and purchase right.

Speaker 5: for good quality ships are actually quite firm. There is a, you know, it's clearly not only us.

Good quality ships are actually quite firm there is a.

It's clearly not only us.

Speaker 5: that is bullish. You have a very strong S&P market and despite what you've had even through all of Omicron you've had a pretty strong forward market certainly in Contango to the spot market.

As bullish very strong S&P market.

Despite what we've had even through all of Omnicom, you've had a pretty strong forward market suddenly in contango to the spot market.

Speaker 7: Got it. All right. It's bold up. Noted. James, congrats on the promotion. Great role. Well deserved. Thanks again. Thank you, Randy.

Got it alright bold up noted.

James Congrats on the promotion great role well deserved thanks again.

Thank you Randy.

Our next question comes from Jon Chappell with Evercore.

Thank you good morning, Hey, Jim So you.

Speaker 8: Thank you. Good morning. Hey, James. So you laid out a good

Good.

Speaker 8: profile of what's going on with the inventories. I think Robert said something important, which was that the U.S. is basically the only country where you're seeing kind of normalized flying. Asia's been the big growth area for a long time now. What are you seeing there as it relates to, you know, inventories versus OECD, you know, flying activity, other modes of transportation? Is it possible that we're still focused on the Western world coming out of the virus, that Asia could continue to be a drag, and that's one of the reasons that the recovery continues to get pushed to the right?

Profile of what's going on with the inventories I think Robert said, something important which was that the U S is basically the only country, where you're seeing kind of normalized why it has been the big growth area for a long time now what are you seeing there as it relates to inventories versus OECD.

Flying activity other modes of transportation is it possible that we're still focused on the western world coming out of the desires that Asia to continue to be a drag and thats one of the reasons that the recovery continues to get pushed to the right.

Okay.

Speaker 9: No, you know, I think what's happened with Asia is obviously over the summer, the Delta variant, the Omicron variant this winter, they impose a lot stricter travel restrictions. And really, everything's tied to personal mobility, right? On the consumption side here, when you restrict that, you know, obviously demand goes down. And Asia, though, prior to Omicron, was actually starting to be quite strong again.

No.

I think what's happened with Asia.

Obviously over the summer and the Delta there and the Omicron variant. This winter they impose a lot stricter travel restrictions and really everything is tied to personal mobility right on the consumption side here when you restrict that obviously demand goes down in Asia.

Prior to <unk> was actually starting to be quite strong again.

Speaker 9: So I think for the current time, you've got obviously the impact of Omicron. You have winter, new year, you've got the Olympics. So I do think Asian demand is going to come back here. I also think there's probably a difficult component to factor in with rising natural gas prices that have affected refineries differently, which is leading to a lot of volatility. But I think looking at the demand side on Jet,

So I think for the current time you have got obviously the impact of omicron, yet winter new year, you've got the Olympics. So I do think Asian demand is going to come back here. I also think there is probably a difficult component to factor in with rising natural gas prices that have affected refineries differently.

Which is leading to a lot of volatility, but I think looking at the demand side on jet.

Speaker 9: We're probably a million and a half barrels away from where we were pre-COVID, but on the water it's probably only say 200,000 barrels.

Probably a $1 million and a half barrels away from where we were pre COVID-19 , but on the water, it's probably only say 200000 barrels.

Speaker 9: So I think we will see the return here. I just, it's hard, the timing is hard.

So I think I think we will see the return here I just.

The timing is hard.

Yes.

Speaker 5: I would add John to the...

I would add John .

<unk>.

Speaker 5: You yourself, I think, have a really interesting graph the other day.

You yourself I think have a really and tried to really interesting graph the other day.

Speaker 5: talking about what it showed, these real drawdowns that are going on, the inventories. I think that's something, while Ronan I'm highlighting you because you really did encapsulate it very well on this table, that there really has been a lot of missing barrels in the demand for tankers, whether it's products or crude, as a result of these inventory draws. And that's what you need to know about how you can fix this. That's what we're talking about. That's what we need to know about how you can pick by a slack shot and then attempt to buy one or two tonneau

Talking about the what it showed.

These real drawdowns that are going on the inventory if you think thats something.

<unk> run it I'm highlighting to you because you really did encapsulate it very well on this on the table.

There really has been a lot of missing barrels and the demand for tankers, whether it's products or crude.

As a result of these inventory draws and that just can't go on forever. If you simply went to adopting inventory growth forget about rebuilding multi decade lows you would.

Speaker 5: just can't go on forever. If you simply went to stopping inventory growth, forget about rebuilding multi-decade lows, you would...

Speaker 5: you know, you would expand even the Asian demand very very quickly straight away.

You would expand even the Asia demand very very quickly.

Right away.

Yes.

Yes, thanks for highlighting that I think the inventories and the most important thing to watch right now.

Speaker 8: Yeah, thanks for highlighting that. I think the inventory is the most important thing to watch right now and to see if there's any presentation. James, for my follow up, you get the promotion, you get the hard questions. I think there's this view that, you know, an Iranian sanctions lifting, positive for crude, maybe not a clear cut answer if it means anything to the product. Also, I think there's different from

Thank you for your presentation James for my follow up.

You get the promotion you get the hard questions.

There's this view that.

And Iranian sanctions lifting positive for crude maybe not a clear cut answer if it means anything with the product.

Also I think there has been some.

Speaker 10: little bit of publicity that if there were a geopolitical event with Russia and Ukraine, possibly good for tanker gun miles, but of course, that doesn't take into account what a rising oil price might do. Any work that you've done or thoughts on those two geopolitical events and what that could do to the timing of the recovery or the magnitude.

Little bit of publicity that.

Political event with Russia and Ukraine.

Possibly good for tanker ton miles, but of course that doesn't take into account a rising oil price might do any work that you've done or thoughts on those two geopolitical events and what that could do to the timing of the recovery of the magnitude.

Sure.

Speaker 9: When it comes to Iran, the benefit would be increased condensate exports.

When it comes to Iran. The benefit would be increased condensate exports.

Speaker 9: which would benefit the LRs. You know, it depends where sanctions would be, but certain LR2 vessels will carry that cargo. And actually, there are South Korean petrochemical plants designed to run that condensate as feedstock. So I think it's somewhere around 300 to 400,000 barrels a day of exports for the LR2 fleet, which would be beneficial.

Which would benefit the <unk>.

Depends where sanctions would be but certain LR two vessels will carry that that cargo and actually there are south Korean petrochemical plants designed to run that condensate as feedstock. So I think in somewhere around 300 to 400000 barrels a day of exports for the LR to fleet, which would be beneficial.

Speaker 9: When it comes to Russia and the Ukraine, it's hard to say what.

When it comes to.

Russia and the Ukraine.

It's it's hard to say what.

Speaker 9: Will happen, but what I can say is obviously Russia is a large exporter of crude oil at 4.2 million barrels a day and refined product exports probably around 1.5 million barrels a day. Most of this is trading are going to Europe and Asia, but but obviously if there were a conflict, we'd have to factor those numbers into our analysis. Got it. Thank you, James. Thanks Robert.

It will happen, but what I can say is obviously, Russia is a large exporter of crude oil at $4 2 million barrels a day and refined product exports, probably around one 5 million barrels a day.

Most of this is trading are going to Europe and Asia.

But obviously if there were a conflict.

We'd have to factor those numbers into our analysis.

Got it thank you James and thanks Robert.

Okay.

Yes.

Our next question comes from Greg Lewis with BTG.

Hey, Thank you. Thank you and good day everybody.

Speaker 9: Um, yeah, I guess my first question is around, um, you know, there was a lot of

I guess my first question is around.

There was a lot of them.

Speaker 9: news and reports about refinery closures, you know, really ongoing throughout the pandemic, whether it was in Australia, parts of Europe , a lot of refinery closures.

News and reports about refinery closures really ongoing throughout the pandemic, whether it was in Australia parts of Europe .

Lot of refinery closures happened.

Speaker 9: And that was expected to create dislocations, ton miles.

And that was expected to create dislocations ton miles.

Speaker 9: Is it possible or how should we think about just given the slow recovery in some of these parts of the world. I guess what I'm wondering is, has the full benefit of these refinery closures been realized do we think across global product, tanker, seaborne, ton-mile demand.

Is it possible or how should we think about just given the slow recovery.

In some of these parts of the World I guess, what I'm wondering is has the full benefit of these refinery closure has been realized due we think across <unk>.

Global product tanker seaborne ton mile demand.

Okay.

Speaker 11: Not yet. Part of it, yes. But when you draw 181 million barrels of global gasoline and distillate inventories, everything's a little bit muted. And then you factor in that just overall demand is, you know, slightly below pre-COVID level.

Not not yet.

Part of it yes, but when you draw of 181 million barrels of global gasoline and distillate inventories everything's a little bit muted and then you factor in that just overall demand is slightly below pre COVID-19 levels. So I think we've certainly seen it when we look at how much volumes going to Australia.

Speaker 11: So I think we've certainly seen it when we look at, you know, how much volume's gone to Australia. When you start and we've probably seen some of it with U.S. East Coast imports after the closure of the Canadian refinery. But I think we'll really start to see the impact as demand kind of gets back to pre-COVID levels. And it'll be essentially a multiplier to that.

When you start and we've probably seen some of it with U S East coast imports after the closure of the Canadian refinery.

But I think we'll really start to see the impact as demand kind of gets back to pre COVID-19 levels.

Essentially a multiplier to that.

Okay, Great and then just one more from me around the <unk>.

Speaker 9: Okay, great. And then just one more for me around the, you know, congrats on the vessel sales, you know, previously announced

Congrats on the vessel sales previously announced.

One of the questions. We always get is around the depth of the S&P market and really I think I'd be curious to hear.

Speaker 9: You know, one of the questions we always get is around the depth of the, you know, the S&P market. And really, I think I'd be curious to hear, you know, beyond the actual buyers, you know, how competitive was that process and any way to quantify how much interest there were from the broader industry for the vessels that were eventually sold.

Beyond beyond the actual buyers.

How competitive was was that process and.

Any way to quantify how much interest there where from the broader industry for the vessels that were eventually sold.

I'll take that Greg.

Speaker 4: I'll take that Greg. The comparative process was pretty vast.

The competitive process was pretty.

Vast in the sense that as Robert alluded to just a few minutes ago on this call. We were vocal about the fact that we were certainly were going to sell ships.

Speaker 4: in the sense that, as Robert alluded to just a few minutes ago on this call, we were vocal about the fact that we were selling, we were going to sell <expletive> .

Speaker 4: and this has created by itself a competitive process with all the interested parties coming in. There were pockets of buyers interested in MR's, LR2's.

And this has created by itself a competitive process with all the interested parties coming in.

There were.

Pockets of buyers interested in EMR as LR twos.

Speaker 4: one or two on the Handy's and more than we expected on the LR1's. The reason we chose to do the transaction we did is because it was a clean transaction with a natural buyer that had appetite for that specific fleet.

One or two on the <unk> and.

More than we expected on the LR ones. The reason we chose to do the transaction we did.

Did it is because it was a clean transaction with the natural buyer.

Head appetite for that specific fleet being a market leader in the <unk> segment, which I appreciated. The design features of our a lot of one fleet being modern eco wide beam and all of the features that they didn't have it.

Speaker 4: being a market leader in the LR1 segment, which appreciated the design features of our LR1 fleet being modern, eco, wide beam and all of the features that they didn't have in their fleet themselves. So when we...

In their fleets stem cells so when.

We.

Started.

Speaker 4: started negotiating with AFNIA, it became apparent that it was a good fit for both companies and we enjoy a good relationship and a good working relationship with them and decided that that was going to be our main transaction fairly early in the process once we saw that we could have executed on that. Okay, thank you Emmanuel.

Negotiating with.

It became apparent that it was a good fit for both companies and we enjoy a good relationship and a good working relationship with them and decided that that was going to be our main.

Transaction fairly early in the process once we saw that we could have.

Executed on that.

Okay. Thank you Emmanuel I'll have a great day everybody.

Thank you.

Speaker 1: Our next question comes from Ken Hexter with Bank of America.

Yeah.

Our next question comes from Ken <unk> with Bank of America.

Speaker 12: Hey, good morning and good afternoon. So, it looks like on the selling of vessels, you mentioned you get a few months runway of cash. You get through some of the repayments. Rates here are starting off a bit weaker than I guess you would have expected.

Hey, good morning, and good afternoon.

So it looks like on the on the selling of vessels. You mentioned you get a few months of runway of cash you get through some of the repayments rates here, starting off a bit weaker than than I guess.

Would've expected.

Emmanuel do you want more sanguine to start the call I know you or Robert Youre Super bullish I've been on these calls for years I don't think you've never not been over bullish. So is what is getting you that bullish here is it the setup of lower inventories it doesn't seem to have monetize for years right. We've been talking about James have been talking about the drawdown in inventory.

Speaker 12: Emmanuel, you were more sanguine to start the call. I know, Robert, you're super uber bullish. I've been on these calls for years. I don't think you've never not been uber bullish. So what is getting you that bullish here? Is it the setup of lower inventories? It doesn't seem to have monetized for years, right? We've been talking about, James has been talking about the drawdown of inventories, the setup of low fleet, low order book. So what needs to happen here in order to start seeing this?

<unk>.

Set up of low fleet and the order book, So what needs to happen here in order to start seeing this.

Speaker 12: to come to reality in terms of the rates and, you know, moving above cash costs and starting to not worry about the refinancing and debt pay down.

To come to reality in terms of the rates moving above cash cost and starting to not worry about the refinancing and debt paydown.

All of that.

Got it.

Speaker 4: I was just saying that I think James mentioned this a few minutes ago on this call. I think that mobility is affecting demand, product anchor demand, and that is the main catalyst on which we will be seeing.

I was just saying that I think James mentioned this on a few minutes ago on this call I think that mobility is affecting demand product tanker demand.

And.

And that is the main catalyst on which we will be we would be seeing a recovery I agree with what James said, a few minutes ago.

Speaker 4: a recovery. I agree with what James said a few minutes ago. Mobility is the one that we are, the main catalyst we're waiting for. Having said that,

Mobility is.

Is the one that we are the main catalyst, we're waiting for having said that all.

Speaker 4: all the fundamentals and I think you would agree with us are pointing in the right direction. So it's on the demand front things are looking okay, on the supply front things are looking okay, on the inventory side things are looking okay. So all the fundamentals are there, mobility needs to kick in for the market to rise.

All the fundamentals and I think you would agree with us are pointing in the right direction. So it's on the demand front things are looking okay on the.

Supply front things are looking okay.

Inventory side things are looking okay. So all the older holdup.

Fundamentals are their mobility needs to kick in for the market to it.

Speaker 5: I think also, Ken, I think we should remember that, you know, why, let's say I'm uber bullish is in your words, I think that's a great word or a great phrase, is that, you know, two years ago, the beginning of, you know, 2021.

I think also Ken I think we should remember the why let's say Uber bullish.

In other words, I think that's a great great.

Great.

Is.

<unk>.

Two years ago at the beginning of the.

2021.

Speaker 5: The stock was over $40. Rates were really moving strongly across every sector of the product market.

The stock was $40 rates were really moving strongly across every sector of the product market.

Speaker 5: And what James is indicating is we're going to get a return.

And what James is indicating is we're going to get a return.

So that demand level and in fact higher in terms of ton miles because.

Speaker 5: to that demand level and in fact higher in terms of ton miles because we expect demand headline to be higher and we expect these refinery changes to increase the ton mile position but supply itself partly because of regulation, partly because of a lack of order book and partly because of a...

We expect demand headline to be higher and we expect these refinery changes to increase the ton mile position, but.

Supply itself, partly because the regulation, partly because of a lack of order book, partly because of aging.

And scrapping.

Speaker 5: and scrapping, it's more or less going to be the same, not much different.

It's more of that's going to be the same not much different.

Speaker 5: So therefore we kind of know where that market is going to what's going to happen at that point. We know that in the dull market that we have with all the inventory draws against us all the demand head.

So therefore, we kind of know where that market is going to whats going to happen at that point, we know the dull market that we have with all the inventory draws against this all of the demand headwinds.

Speaker 13: that the rates are what they are that we put out today.

The rates are.

What they are that we put out today.

Speaker 5: And we have seen what that market is likely to be.

And we have seen what that market is likely to be.

Speaker 5: And on top of that, inflation and yard tightness at the moment and the lack of ability to order ships and the fact that yard prices have gone up since that period two years ago.

And on top of that inflation and yard.

Your tightness at the moment and the lack of ability to order ships and the fact that your prices have gone up.

Since that period two years ago.

Speaker 5: your actual asset values are higher than where they were two years ago too. So that I think is a very strong reason to be uber bullish as you put it.

Your actual asset values are higher than where they were two years ago.

So that I think is.

They very strongly to be Uber.

Super bullish since you put it.

Speaker 12: Yeah, it's just a setup, right? It always seems to be there. We just need to get your ability up. Yeah, but I don't think anybody predicted the Covid in January .

Yes.

Just to set up right. It always seems to be there, we just need to I guess your ability.

Yes, but I don't think anybody predicted.

Predicted the Covid in.

In January 2021.

So just a minor thanks, Robert and Emmanuel.

Speaker 12: So just a minor, thanks Robert and Emmanuel. A minor, I guess, balance sheet question if I can, Brian . Accounts payable seem to be going up significantly, accounts receivable, I think it only minorly changed. Is there any change in, is that seasonal? Is there something to be, highlight on the balance sheet?

Minor.

Some balance sheet question, if I can Brian .

Accounts payable seemed to be going up significantly accounts receivable I think it only minor Lee changed is there any change in.

Is that seasonal or is there something to be.

The highlight on the balance sheet.

There's timing differences nothing there.

Speaker 14: Timing differences, Ken, nothing there. I was just, you said our liquidity goes for a few months. It goes up for more than a few months if we look at it at the lowest rates as a company we ever had.

I would just point you said.

Liquidity for a few months it goes up for more than a few months. If we look at it at the lowest rates as a company we ever had.

Speaker 14: 10,100 in Q3 of 2020, we look at those rates compared to our break-evens.

10100 in Q3 of.

2020.

We look at those rates compare to.

Our breakeven.

Okay.

Speaker 14: eight months of time. If we look at it, what we're currently doing, we get almost 17 and a half months. So it's a little bit more than a few months. I know that's just a phrase you threw out, but I just want to make it clear to everybody on that.

Eight months of time, if we look at it what we're currently doing we get almost $17 five months. So it's a little bit more than a few months I know thats just.

Crazy throughout but I, just want to make it clear to everybody on that.

Speaker 12: Okay, you know, I was commenting on what you got. I thought you guys had said when when you did the vessel sales, it put us out a couple months on

Okay.

Commenting.

I thought you guys had said when when you did the vessel sales that put us out of couple of months.

Speaker 12: on cash flows. I get your math though. Right. It's the additional liquidity on top of what we have now. It goes up quite a bit. Great. Thanks for the time, guys. Thanks again.

On cash flows.

I get your math.

Alright, because the additional liquidity on top of what we have now it goes out.

Wait a bit so.

Yeah.

Great. Thanks for the time guys.

Thanks, Ken.

Our next question comes from Ben Nolan with Stifel.

Speaker 12: Hey guys. First, congrats James. It's quite a step up.

Hey, guys.

First congrats James.

Quite a step up so.

Speaker 12: Nicely done. Also nicely done on all of your presentations today. My first question goes back to, you discussed the LR1 sale a little bit and it seemed opportunistic. Just confirming...

Nicely done.

Also nicely done on the on all of your presentation today.

My first question goes back to you discussed the LR, one sale a little bit it seemed.

Opportunistic just just confirming.

Speaker 12: There was nothing structural about LR1s that you think, okay, well, you know, we prefer LR2s or MRs or something like that. It was just that's where the...

There was nothing structural about LR ones that you think okay well.

We prefer LR twos or <unk> or something like that it was just that's where the.

Speaker 12: the best buy interest is. Is that fair?

The best buy interest is that is that fair.

Speaker 5: No, no, no, no. I think that there was in terms of valuation, there was buy, first of all, there's buy-in across the board, across all the sites. And this is universally across modern tankers, modern product tankers, the prices have moved upward. I think what's so rational for us in the LR1.

No no no.

Think that.

In terms of valuation that was first of all those volume across the board.

Of course.

The call is slightly and this is universally across modern tankers modern product. Thank you.

Prices have moved upward.

I think what's so rational for us in the yellow one.

Speaker 5: was that here we could do the job on the balance sheet and giving us the strategic freedom later, hopefully to create some real value.

Here, we could we could do a good job on the balance sheet and giving us the strategic freedom late to hopefully to create some real value.

Bob.

Speaker 5: at the same time the LR1s is the one grouping, the one size range.

At the same time yellow ones is the one thing the one size range.

Speaker 5: that we ourselves don't have, let's say, the leadership position.

We ourselves.

Don't have let's say the leadership position.

Speaker 5: We have a leadership position in the Handys, the MRs and the LR2s. And the LR1s, we had a good position but not a leadership position. And the best dynamic for us overall.

We have a leadership position in the handy.

The malls and the yellow and yellow ones.

We had a good position, but not a leadership position and the best dynamic for us overall.

Not only was this a menu pointing out what was happening.

Speaker 5: Not only was, as Emmanuel pointing out, was Hasny as a vessel, you know, who was a solid buyer, it also became, as he didn't explain, the best alternative. It comes as an alternative at even prices across other vessels because here you were able to, we believe very much in consolidation, we've spoken about this before, and we were able to place those vessels into the hands of the numbers.

No.

Was it a solid buyer.

Also became if he didn't explain the best alternative.

Alternative even prices across other vessels because here you were able to we believe very much in consolidation. We've spoken about this before when we were able to place those vessels.

Into the hands of the number one.

Speaker 5: owner and operator of LR1.

Owner, operator of one, thereby consolidating as opposed to fragmenting that market and.

Speaker 5: thereby consolidating as opposed to fragmenting that market.

Speaker 5: and that market sits between, even though it's a smaller market than MRs and LR2s, it is important that it sits in between MRs.

In that market.

Between even though it's a smaller market in their models and their loyalty.

Putting in.

In between Maus, and LR twos, so anything we can do to help strengthen that dynamic of yellow one market will be beneficial to us.

Speaker 5: and LR2s. So anything that we can do to help strengthen that dynamic in the LR1 market will be beneficial to us in our MR and LR2 markets.

On the LTE market.

Speaker 15: Okay, that's very clear. Thanks, Robert. And then for my second question, notice that you guys are continuing to add scrubbers, especially on the MRs. Obviously, the fuel spreads have widened back out. I guess my question is, you talked about shipyard tightness on the new build. Obviously, there are supply chain issues. Are you running into, well, with

Okay, that's very clear thanks Robert.

And then for my second question.

Noticed that you guys are continuing to add scrubbers, especially on the EMR is obviously the fuel spreads.

Widened back out I guess my question is.

You talked about shipyard tightened some new builds obviously there are supply chain issues.

Is there or are you running into with <unk>.

Speaker 12: wider margins, I would imagine there's other people also out there looking to install scrubbers. At this point, is there how hard is that to do? Is it is it challenging to get shipyard space for for repairs and scrubber installations are hard to get the equipment itself? Any any chance of delays or inflation in that respect?

Wider margins I would imagine there is other people also out there looking to install scrubbers.

At this point is there.

How hard is that to do is it challenging to get shipyard space for.

For repairs and some scrubber installations are hard to get.

The equipment itself.

Any any chance of delays or.

Inflation.

In that respect.

Speaker 16: I could take that if you like Robert. As you know Ben, the yards that are in new construction and those that are in repair and retrofitting are fundamentally very different yards.

Kevin Thank you.

Take that if you like Robert.

As you know Ben.

<unk> that are in new construction and those that are in repair and retrofitting our.

Fundamentally very different.

And so theres not a lot of overlap in that capacity.

Speaker 16: And so there's not a lot of overlap in that capacity. With the tightness that we've seen in containers in dry bulk, there isn't a raft of inquiry coming from those sectors around retrofitting right now. So there is capacity available.

With the tightness that we've seen in containers and dry bulk there isn't a raft of ink.

Inquiry coming from those sectors around retrofitting right now so there is capacity available.

Speaker 16: And then when it comes to supply chain concerns or inflationary pressures, they are modest at best. There are always risks, of course, but right now given that the manufacturing of scrubbers is largely located in Asia and China specifically.

And then when it comes to.

Supply chain concerns.

Or inflationary pressures.

Yes.

They are modest at best there are always risks of course, but.

Now given that the manufacturing of scrubbers is largely located in Asia and China, specifically the.

Speaker 16: the same place where the shipyards reside, we don't ourselves see great risks in either the logistics or the inflationary pressure just now.

At the same place where the shipyards reside.

We don't ourselves see.

Great risks in either the logistics or the inflationary pressure just now.

Alright, Thanks, Tim.

Speaker 1: Our next question comes from Magnus Spheer with HC Wainwright.

Our next question comes from Magnus <unk> with HC Wainwright.

Yes, good morning, just.

Speaker 17: Yeah, good morning. Just a question, you know, on the overall market, you know, I agree with your bullish views, but is there something we're missing here? What, besides, you know, another Omicron variant, is there anything else that concerns you? I mean, oil prices have crept up here as of late, that seven year highs, I mean, could that eventually eat into refinery origins and end user demand?

<unk> on the.

Overall market.

I agree with your bullish views, but is there something we're missing here.

<unk>.

Another omicron variant.

Is there anything else that concerns you or prices have crept up here of late that seven year high. So I mean could that eventually get into refinery margins in end user demand.

Or is there something else we're missing.

Speaker 5: It could be, but there are lots of kids in this one. There's, you know, even the, you know, Ukraine-Russia situation. I mean, traditionally, war has always been good for the tanker market in the short term. But if that led to something wider and something extremely disruptive to, you know, to the tanker demand, then that would be a negative. But, you know.

What's the big lots.

Lots of good.

That's one.

Even the.

Ukraine, Russia situation I mean traditionally war has always been good for the tanker market in the short term.

That led to some.

Something wider than something extremely disruptive.

Tanker demand and then that would be a negative.

Thank you.

Speaker 5: We don't know, Magnus, is the answer to that thing that is...

We don't we don't know Magnus has the answer to that thing that is.

Speaker 5: that could knock this demand scenario away. Because what we're basing it on, as Emmanuel and James said, is what we see all around us, which is that when Omnicron passes, people become more mobile. And they want to get out there and spend their money and do things and travel to friends and spend time doing things again.

It did not demand scenario away.

Because what we're basing it on.

James.

What we see all around us which is the one on the current Pos as people become more mobile.

They want to get out there.

Spend their money and do things and traveled to cleanse and spend time with.

Doing things again.

Speaker 17: Thanks for that, Koller. Just on the near-term outlook, based on the graphs that you showed, the IAEA has demand picking up pretty nicely each quarter going forward. Is there any seasonal demand or the seasonality playing out different this year than other years?

Alright, thanks for that color and just on the near term outlook based on the graph that you showed the Iot has the demand picking up pretty nicely each quarter going forward is there any.

The seasonal.

Demand or the seasonality playing out different this year than other years.

Speaker 5: Well, it could do to the extent that you're going into... It would appear at the moment, unless something dramatic starts to happen very quickly. I mean, very quickly, you're going to go into increased jet fuel demand and increased gasoline demand.

Well it could.

To the extent that youre going to.

It would appear at the moment unless something dramatic to happen very quickly very.

Very quickly you're going to go into it.

Increased jet fuel demand.

Kris.

Gasoline demand.

After fed up of low inventory base.

Speaker 5: off the low inventory base. So you may not have, in a weird way, there's normally some form of weakening period as we go into the spring.

So you may not have.

Weird way.

Normally.

Some form of a weakening period as we go into the spring.

Speaker 5: that is likely to, we would anticipate that likely to be muted in an environment where the low-income trees already in turn increase their...

That is likely to.

We don't anticipate that's likely.

Muted in an environment, where the low inventories already into an increasing.

Speaker 5: seasonal demand aspects plus an omnicron coming out aspect for jet fuel.

Please no demand aspect.

Nicole I'm coming out.

That deal.

Speaker 17: Again, one area we haven't mentioned, I mean, the IEA took their numbers up. I mean, they adjusted 15 years of demand numbers. They partly said that petrochemical demand, especially NASA demand, is very strong. Is there anything you see in there that could surprise some upside?

Again, one area, we haven't mentioned.

They took their numbers up I mean.

Just the 15 year strip demand numbers that partly said that petrochemical demand, especially naphtha demand.

Very strong is there anything there that.

Could surprise on the upside.

Yes, I mean look it's always good to have that's great. That's encouraging their petrochemical demand is strong because.

Speaker 5: Yeah, I mean, look, it's always good to have. That's great. That's encouraging that petrochemical demand is strong. Because on the margin in the weak market, you don't want to have those chemical tankers coming into the product grade. So it's great if the petrochemical demand is going up and getting stronger. Thank you.

On the on the margin in a weak market you don't want to have both chemical tankers coming into.

Into the product grades so is greatest.

Chemical demand is going up and getting stronger.

Yes.

Yes.

Thank you Robert.

Okay.

Thanks.

Our next question comes from Liam Burke with B Riley.

Thank you.

Speaker 17: Thank you. The operating cash flow for the fourth quarter, Brian , was very strong in conjunction with the improving a sequential step up in rates. When you're looking to buy back shares, are you anticipating being able to generate internal cash through the course of 22? Or do you look to borrow to buy back the shares opportunistically?

The operating cash flow for the fourth quarter Bryan was very strong in conjunction with the improving a sequential step up in rates.

When youre looking to buy back shares.

Anticipating being able to generate internal cash through the course of 'twenty, two or do you look to borrow to buy back shares opportunistically.

I think the only statement we made on <unk>.

Speaker 5: I think the only statement that we've made on shares is that that would be considered, strongly considered once we see the visibility of rights at 70.

That would be considered strongly considered once we see the visibility right.

At 17000 or above.

Speaker 5: And we're not going to and we're going we would give very little information to the market on

Okay and went off and we knock on wood.

Would give very little inflammation to the market on.

Speaker 5: on buybacks or strategy etc etc in the same sense as we're going to give very little detailed information on

<unk>.

Buyback, so strategy et cetera, et cetera in the same sense as we're going to give very little detailed information on.

Speaker 5: you know, NAVs because, you know, we've been here, the management's been in another company, another cycle going through. That company had a huge buyback and we, and it was very successful because the priority was to buy the shares as low as we could. It was not to telegraph certain points at which we would buy or place restrictions on that buying.

Mtvs because we've been here that the management is being another.

Another company another cycle going through that company had a huge buyback.

It was very successful.

Because the priority was to buy the shares as low as we could.

<unk> telegraaf certain points at which we would buy or placed restrictions on that buying.

Speaker 18: or, you know, or expectations on that buy-in.

Four.

And our expectation is on that volume.

Speaker 17: Sure, fair enough. And James, you were mentioning an aging fleet, your obvious competitive advantage with the with your vessels. How does the percent of vessels over 15 years old that are not scrapped benefit you guys as well? Or is that just a neutral?

Sure Fair enough and James you were mentioning an aging fleet.

Do your obvious competitive advantage with the with your vessels how does.

Sure.

The percent of vessels over 15 years old that are not scrapped benefit you guys as well or is that just a neutral.

Speaker 11: Well, you know, certain customers of ours will have rules around 15 years, right? They won't take a ship old and it's not everybody. And structurally, the ships are fine. I think the older ships find themselves in tertiary markets. It could be cavitized trade, you know, and other places. Or one of the easiest things they can do is carry fuel oil and crude oil because there's no risk of contamination.

Well.

Certain certain customers of ours.

Rules around 15 years right they won't take a ship on that and it's not everybody and structurally the ships are fine I think the older ships find themselves in tertiary markets it could be cabotage trade.

In other places or one of the easiest things. They can do is carry fuel oil and crude oil because there is no risk of contamination.

Speaker 11: I think obviously the distribution of the fleet is massive, right? Because nothing was really scrapped, you know, and.

I think obviously.

Distribution of the fleet is massive right because nothing was really scrapped.

And.

Speaker 11: what was delivered. And so I think with a super low order book here as we kind of go forward this increase in scrapping will happen. These vessels moving over to dirty will increase and with the yards being backed up it's hard to materially change the supply at least to 2025. Great.

And what was delivered so I think with a super low order book here as we go forward. This this increase in scrapping will happen alright. These vessels moving over to parity will increase.

With the yards being backed up its hard to materially change the supply at least through 2025.

Great. Thanks James.

Speaker 1: That concludes today's question and answer session. I'd like to turn the call back to Robert Bugbee for closing remarks.

That concludes today's question and answer session I would like to turn the call back to Robert Bugbee for closing remarks.

Speaker 5: Thank you very much. I think we've covered everything that we've covered, we needed to cover and as Emmanuel says, we appreciate everybody's support and, and patience.

Thank you very much I think we've covered everything that we covered.

I need to cover and the manual says we appreciate at Liberty.

Support.

And patients as well.

Speaker 5: and you know just trust that management looks forward as much as

And just trusted management looks forward as much as <unk>.

Speaker 5: all of our shareholders out there to, you know, as early a recovery in these rates as possible, because that's really all that is required.

All of shareholders out there too.

As earlier recovery in these rates as possible because that's really all that is required to.

Speaker 5: to set this company and the valuation on this stock and the ability for us to really create some value here and a much significantly stronger share price by the end of the year. Away is just simply that opening up of mobility and the opening up of demand and thereby rates. Thank you very much again.

To set this company and the valuation on the stock and the ability for us to really create some value here in a much significantly stronger share price by the end of the year.

A way to just simply that opening up of mobility and the opening up the demand the buy rate. So thank you very much again.

Sure.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating you may now disconnect.

Sure.

Speaker 2: The.

Yes.

Yes.

Yes.

Okay.

Sure.

Okay.

Yes.

Yes.

Okay.

Yes.

Okay.

Okay.

Okay.

[music].

Okay.

Yes.

Yes.

[music].