Q4 2022 Euronav NV Earnings Call

Good day and welcome to the <unk> fourth quarter 2022 earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.

Please note. This event is being recorded I would now like to turn the conference over to Brian Gallagher head of Investor Relations. Please go ahead.

Thank you.

Morning, and afternoon to everyone and thanks for joining <unk> Q4, 'twenty to 'twenty two earnings call before starting we'd like to say a few words.

As discussed on this call is based on information as of today Thursday February 22 interest rate and may contain forward looking statements and involve risks and uncertainties forward looking statements reflect current views with respect to future events and financial performance May include statements concerning plans objectives goals strategies future events performance underlying assumptions and other statements which are.

Not statements of historical facts, all forward looking statements attributable to the company or close to that Phoenix behalf are expressly qualified in their it's hard to Barbara So the risks uncertainties and other factors discussed in the company's filings with SEC.

Which are available free of charge on the website.

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In order to Liberty's website at Www Dot Com, you should not place undue reliance on forward looking statements each forward looking statement.

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You can have a statement in the call.

Undertakes no obligation to publicly update or revise any forward looking statements actual results may differ materially from the pool statements. Please take a moment to read our safe Harbor statement on page two of the slide presentation.

With that I'll now pass over to Chief Executive Hugo Stoop to start with the complex market luxury.

Thank you, Brian and good morning, or afternoon to wherever you are and welcome to Oracle I.

I will run through the Q4 highlights before passing on to leave a log or CFO will then highlight key factors all the water and important work to finance team have done an increasing again, our liquidity crew sustainable financing after that Brian will run you through some current market trends before I return to summarize our strategy and where we.

We are in the current cycle.

Q4 was the breakthrough quarter, we've been pointing at you know our last two calls the strong demand for tankers reflected in the higher freight rates was created by treat taxes.

Israel Tutsan into the northern Hemisphere winter.

Animal supply of oil from OPEC and non OPEC and then finally, a repositioning of the world speed I head up the embargo on feed from Russia that was enacted on December the fifth P.

TCE rates actually squeeze materially higher into November and even though they have reset since they remain at very profitable levels and well above the medium term averages.

During that benefited from this upswing in from the feed rejuvenation, we've done the last 18 months in taking on new tonnage and reducing our older feed of higher consuming ships.

Given our current culprits deterioration in full respect the combination agreement with frontline we are unable at this stage to release dividends beyond the trees said minimum outlined in that agreement a waiver to give some guidance and reassurance to our investors we are indicating what level of returns could have been and this in line with our Pos.

Commitments future developments will that demand if how and when this can be returned to our shareholders.

I wouldn't know parcel lever to run through the financials leave it over to you.

Thanks, Hugo Q4, 10% it was indeed, a very busy quarter in terms of financial.

Our leverage has improved.

What was it.

240, Pakistan.

Boosted on one hand by income and cash from the higher freight market.

And on the other hand from sales proceeds of some older vessels.

The operational leverage it's clear.

Giving such period with net profit of nearly $235 million.

Generated in just one quarter.

This figure was clearly boosted by $62 $6 million.

Phil.

Our continuous fleet renewal program.

That's typical game or in order, if you correctly recall within the capital structure of the business Nook co distribution.

It is important the skeptical is recycled into new and more energy efficient.

Mitch we have built and they'll continue to see with seven vessels currently under construction.

I don't know Tom to an exciting and growing part of our funding sustainable financing on slide eight.

Nevertheless, it is on a journey.

Another significant step with.

Dedicated hard work from our finance team and our partners during Q4.

Overhauls or financing now comes from sustainability linked sources, making given that the leader in the sector and amongst shipping company globally.

The new facility the agreed totaling $377 million comes with some challenging objectives.

Including social targets for the first time.

But also with you hired some people often then hitting such targets.

This change in the incentive structure, we believe has further to run.

Given that motivation to increase its scale and penetration of our sustainable funding.

With that I don't know Paul feedback or all go to Brian Gallagher to get some thoughts on the current market cycle.

Thank you Lisa.

Thought with its like the loss that you did in Q3 illustrating the very real step change that we've seen when we've already moved on the water and in transit.

It causes the polar bottom quite rights, especially over the last second half of 'twenty two.

Historically as one would expect it's been a very positive correlation between parents, rather like some volumes of cargoes on the water, but the Russian that dislocation stocking, while small and subsequent increase in ton miles across the banking sector is giving us about cooper's to our markets.

This provides a strong base going forward for the sector along with the age of the World, which is a 22 year high and the order books or the food you love, giving a very very strong vessel supply signal.

The other key parts of short term for investors is also to look at China, which we now look to analyze on slide nine.

The tanker market recovery, we've seen over the last six to nine months, they've all been delivered with Devon.

China.

Covid restrictions will continue to remain very severe on a restricted economic activity. Consequently.

This does look to be stopped you could change that.

The cargo counts for February and March, particularly in the VLCC sector have been very very encouraging and positive.

Trying to like the drop in activity returns slide seven shows an illustrative path the recovery as we see it.

And as I mentioned, we're starting to see the early signs of this.

We believe will further underpin quite buckets willing until the second half of 2023.

And it really gets back to the level of consumption the loss creep on bidding and I'm done.

Turning now to the other side of the short term factors.

We're looking at I'm not sure we liked it activity on slide 12.

Much speculation centered in recent months.

Positive factors for the Russian situation like we spoke I should go would soon about anticipating the tanker market space.

We also have a lot of noise and clearly there was a lot of dislocation so michelle with refinery shutdowns.

Thousands of maintenance programs volumes are now back to levels, we saw pre December five.

We went public school.

Production levels were all sent back to November run rates and also the nature of the crude.

With more evidence of more ship to ship transfers occurring.

I'm carrying across Europe and in the Mediterranean once the larger vessels in particular.

With Suezmax and Aframax now are doing more shuttle type runs between Muslim pensions, rather the newpage entity themselves to their colleagues.

So in summary, our short term market continues to remain very very positive on the current trends very supportive as we move into Q2.

We do expect to see a sustained and strong winter period over the next few weeks or months.

I'll now pass over to our Chief Executive Hugo Stoop to give some more medium term thoughts about the cycle.

With Aqua College.

Hugo over to you.

Good.

Thank you Brian the recent firming in freight rates have been driven by short term factors and this was no gift, which very solid long longer term drivers to <unk>.

Global fleet is all by historical standards and yet the order book is at 40 gig loose, but no. One is ordering because of the high price regulations and time to delivery of shipyards are not able to deliver tankers until towards 25 2026.

New operational regulation will also bring curbs on older tonnage.

The vessel supply situations appears to be locked in.

On the demand side, we see China, returning to normal levels of demand are global economy, bringing back even modest levels of demand growth and all of that oil needed to be transported further distance that in the past.

These factors should drive a sustained period profitable freight rates, we at <unk> will continue to reward shareholders and invest in the energy transition indeed.

Indeed, your own NAV has delivered on its promise to be an energy transition leader in the past five years and accelerated that in the past 12 months and we'll continue to do so.

Now onto the traffic lights slide 15.

This one surprised Norwalk, where again upgrading one of our traffic lights degree.

This time demand is driven mainly by the prospects from China reopening.

The sharp eyed amongst you will notice most of the lights on greenough greenish that is true, but there still remains some upside in vessel supply is it now and also in demand you know a few.

There is more oil in the tank.

With that I would know like to pass it back to the operator, but with a final word.

You will appreciate the sensitivity of our culprits situation.

We have made public that the arbitration process will provide an initial decision next Tuesday, given the sensitivities and regulations around that process, we will not be in a position to take questions on that.

Now back to the operator to take the other questions. Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

In the interest of time, please limit yourself to one question and one follow up at this time, we will pause momentarily.

To assemble the roster.

Our first question comes from Omar and Doctor from Jefferies. Please go ahead.

Good afternoon Hugo.

First off I commend you you and the team for being able to continue really executing on the business here given all the distractions I can't imagine it's that easy to focus on the business, while dealing with it with all the noise.

You know what.

Appreciate the comments you made Hugo just before we started at the Q&A session are.

Especially you know regarding arbitration ruling and I, just maybe more float out. This question I know the February 7th as they expected ruling it seems a little sooner than I guess I would have assumed but maybe just are you able to give us maybe a sense of what the different outcomes could be when a ruling is made is there a certain series.

Series of parameters, that's being evaluated or.

Yeah any color you can give there or is it you prefer not to.

Okay.

Oh no.

No.

He is a very good question and it's difficult to clarify in writing I mean summary proceedings are dealing with aspects that require urgency.

So I I I I.

I May take an example, which is.

Unfortunately, a couple of divorce.

Husband has the title on the house.

He doesn't know what the judge will decide whether his wife can.

Stay in the house has a house or whatever.

And if he sells the house and there is nothing left to see India state, maybe the money, but he can spend it so an emergency judgment, we'll see you cannot sell the house until we have decided the outcome of the divorce and who gets what and that's what we're trying to to F. Here. So it's not on the merits its not.

Whether all nuts.

You know there was some damages created whether or not that there was a rights debbie needs et cetera, et cetera, it's really to see what should be sort of frozen.

Teal or for certain periods assignment, probably until there is a judgment on the fundamental last states, which are called the merits.

I hope this is a this is helpful.

Dennis. Thank you. Thank you I appreciate that that lays it out nicely and then maybe just as a follow up I know, there's a lot of sensitivities with what's happening and just wanted to maybe check with you if theres been any discussions that you've had with C. M b.

Regarding kind of the the have they have they tip their hat to you about the strategy that they are looking to take.

No.

Moving forward if they were to be successful with the with the board.

I I can really not comment on that and I've seen that.

It is for them to to express.

What they would do is if the if the outcome is favorable to them.

I can only repeat what we have said in our in the press release, which is that are we at your NAV continue to be constructed and try to find solutions to all.

All the problems and obviously the three parties around the table.

And so our our attitude is continues to be very constructive we're not the type of people, who say well, we're all enemies and let's go to war I think that we always have to look forward into the future and I think that every problem has a solution and.

As long as the three parties have to say Massachuset I'm sure that we will find a very positive outcome that would be beneficial for all the shareholders, which also means that bromine nobody will have the perfect solution that they want for themselves, but it would be a compromise and we very much hope that that will be the case.

When I don't know, how I don't know [laughter].

You first need to have that attitude.

Yes, no. Thanks.

You.

Obviously, a very complicated situation, but one that can be resolved. So I appreciate the.

Time, Hugo and I'll pass it over.

Thank you and thank you for the comments earlier on pretty much appreciate it.

Our next question comes from frozen Mark at all from Clarksons <unk> Securities. Please go ahead.

Uh huh.

Yeah. Thank you.

I'll skip all the question on the arbitrage.

I can go to the market.

You mentioned.

Both are in the report on now in the presentation.

On China.

Yes, we're seeing less U S crude exports to Asia.

Being one of the main reason for the dip in the VLCC rates.

Maybe you could.

Expand on that argument.

Maybe what you're looking for in order for this to change for the better.

It's a well the facts are correct everything that you said is correct.

She is a how will that'd be developed are going forward and that's always very difficult because it depends on the levels of are the volumes that people want to export.

Let's not forget that when we are talking the U S. It's very important for ton miles, but in fact, we are talking about the west coast of the Atlantic Basin to the U S. But it's also Brazil.

In the next well starting now but in the next two or three years. So we are now so theres a lot of our expansion into prediction of oil.

Coming from what we call long distance.

Positive tonne lives.

The second aspect is that there was a lot of exports from the U S. But they were mostly going to Europe .

And we see now that some of those cargoes are going to China. So in fact, if you see two cargoes going two or three cargoes going to Europe as the equivalent in ton miles in one geography going to China.

So it is complex and we are a little bit.

We have the same visibility that and then you guys have and as I said I mean, it depends on how many barrels how many cargoes are being released from different places and that has always been difficult market for costar.

Overall, we see that there are more restrictions and in the past due to the Russian situation and overall, we see that the east goggles at least have to compete much further distance than the than in the Boston and that's positive.

About China in particular.

Obviously, China is no reopening it seems that the government has made it very clear that they want to re boost.

The economy.

The first step is reopening the second step is to cope with Covid, let's not forget that we have had or waves, but they are having their first real wave now and so you do need to cope with that for a while.

A couple of months and once that is over.

Our.

Very optimistic about the fact that you can.

<unk> will grow.

If we compare to.

The previous quarter, which was which were hampered by the situation.

Where are all the cargo coming from well, we will see but chances are we will definitely need more cargo coming from from defense.

Perfect. That's that's great that's it for me.

Thank you very much for them.

Our next question comes from Jon Chapelle from Evercore ISI. Please go ahead.

Thank you good afternoon.

I think the illustrative example, in the press release on the capital allocation policy is very helpful.

A lot of uncertainty.

Our ability to distribute capital maybe to the same extended the prior cycle.

Super quick to partner to my first question.

First I just wanted to be clear in the last cycle. It was an 80% payout ratio and of course mixed with dividends and buybacks and that's what you're ideally are hoping for in this cycle and the second part of that is I do understand that February 7th there's only five days away from your divorced example, it sounds like that's all.

<unk> made any determination on whether the house can be sold or not.

When is the second arbitration roughly completed so we can start to think about distribution of the proceeds from the house sale.

Yeah.

Yeah. So on the on the first part that you're absolutely right. We will continue to have a balanced strategy between.

Dividends and share buyback when it comes to we tend to shoulders, and obviously the share price.

Would be a very important factor, what we take into account as much as the outlook.

And to a certain extent gift center location, but that's no different than what we did in the past.

On the second pause.

Ooh.

It's well, it's it's a it's very complicated but the I O.

Well, we certainly do not believe that we will need to wait until a judgment on the merits to be able to distribute capital I mean that there are many intermediary steps that can be taken.

And what will happen next week will be very important in terms of which close clauses of the combination of agreement needs to remain in place for the duration.

So until next Tuesday, it's difficult to give you an exact precise date, especially because even on the merits. We don't know how long it will be but.

Quite frankly, we were all businessmen so.

We focus on the business first I mean this is very important transaction as you can imagine, but not being able to return any capital to shoulders for prolonged period of time would not be ideal for the business. So.

Again that is a problem, we will find a solution.

Mhm Alright, that's very helpful. My second one kind of goes along the lines of how you decided that answer.

Now focusing on the business, but being businessmen.

I understand the sensitivities here again, but I'm just trying to understand like what's the ideal outcome here for Ya, Yeah, $2 25 per cent shareholders.

If the arbitration goes 100% in your favor.

I would think the next step would be a shareholder vote, but a shareholder vote would be on.

The merger, we had $2 25 per cent shareholders, who apparently don't want it. So it seems like it's almost impossible. So to the extent that you can say you know in your ideal world once the solution is.

That you know how do you move forward from there.

I'm not going to be able to answer that because it's too soon.

I appreciate that.

A lot of systems and we're all very impatient.

It's only a couple of days away and I really don't want to risk anything by my commentary on something that would be great. So I'm not going to be done.

Completely fair. Thank you use them for taking the questions.

Thank you very much.

The next question comes from face or caliber from a b M Amro.

Amro. Please go ahead.

Yep. Thank you.

That's back elder ABN amro or there'll be a chip.

Our first question H operationally.

Hey, Nate your reported breakeven.

The breakeven for the P&L, let's call them.

Quite a lot can you maybe explain what can be expected there on loopnet to our strengths.

23 also given the strong rising inflation and wages.

And the second question.

Yeah.

[laughter] Angel corporate governance how.

How you agreed with the future marriage with frontline and suddenly your has been smashed wife's no longer wants to marry you without giving any reason adult and really stepping you and your team and the BEC why where U S.

And as you all know Madison Board Slash Supervisory board still seek a marriage if the partner has proven show and reliable.

And how is it possible you in the luminary agreement did not have a class defining.

Defining a penalty payment for breaking the agreement.

Sure.

The Sky here with your friends.

And then maybe finally, what kind of financial compensation should we be looking for issues.

Surely legal cost or more.

Can we assume a more financial compensation could come in.

That's another question, so youre very smart because you're allowed to ask one question in one sentence you asked three or four congratulations for that I think the first one I'm going to give the word to leave about oh pension inflation, if I understand well.

Knowing that it has come down year after year certainly in the last four or five years and that was due to an exercise in trying to use economies of scale.

And that does take time, but it is as you've seen paying off very very well.

We are proud of the work that we've done obviously now we are inefficient Tuesday, so I give the word to leave yes.

Yes, Wendy thanks good.

Good afternoon, and so in D. C has to take into consideration and we have purchased it for non inflation increase between four.

<unk>, 5% and the main topics there are indeed, crewing costs, because theyre in D. P. We still can optimize it because as Susan mentioned, we did step down over the two or three last years, but know this because of inflation every there are popping up.

Topic, Richard will hit negatively but to a smaller amount of all of our opex.

Opex and then combined with the fact that also for technical and a nephew will loop oils, Steven I'll have a bit of a negative impact our inflation kicking in and also in the environment of a 45% so globally looking to our budget. We are speaking here, 454% to 5%.

Okay clear.

The second part of your question, it's a complex one and I'm not sure as to the appropriate forum, but maybe I can explain in theory.

So in some contracts you have termination clause and then each party is at aviation that can be well financially compensated or nothing here. The termination clause is pretty clear, but you know.

On Tuesday, we will see whether there was any rights to Germany to northern let's wait until.

Tuesday to see indeed.

The reasons for which front.

Frontline has two needed to valid or not I'm not a judge so I cannot help you there.

On the financial side, I think that we first need to see what comes out.

Choose to even though that's felt on the merits and the minutes he's very much there.

Leading to the financial thought, but that's also a relatively complicated calculation that is being done as we speak and I think that's where the.

Agree with me that in this kind of transaction, where you're not simply buying something that is of value in the market, but where you are.

Exchanging shares and the competition becomes.

A little bit more complicated and each side will have to make his own and then again someone else called an arbitrator that will decide what is the right or wrong a financial compensation.

The fundamental question that you've asked a very interesting one.

And it's almost a philosophical one.

The person that you want to marry suddenly doesn't want to marry.

Does that mean that you should start.

Patriots relationship does that mean that you should dislike or even.

Profoundly dislike dispersal.

And I've seen many.

Any occasions, where.

Our marriage wording is canceled and three months later people getting married Anyhow, maybe there was a misunderstanding maybe there was something that they were not ready for and again, we are always talking about there is a problem.

And to find the problem and let's see if we can find a solution to the problem.

Maybe the solutions that we don't Mary maybe the solutions that we married maybe we should we change the place of the way maybe we change the orchestra, maybe we don't invite the monitoring.

But.

I'd E that because you no longer want to marry at a certain point in time, it's forever and that's dispersion that you were in love with.

Becomes an enemy is something that is not part of.

Or if he knows the future.

Yeah, maybe one short follow up let's say looking at trading of.

Within your shares by buying your Norwegian shareholders.

They're all saying new region to investigate.

And is there any reason to.

Yeah look at market manipulation or something like that.

A legal standpoint.

Oh, that's not sort of a jump there.

Judah Nab, we transferred crude oil I think that there is enough authorities and regulators and.

Many people are looking at that and honestly I only have 24 hours in a day, so I'm not even going to opine on it I have so many others better things to focus on.

So that means that you are not having indications that investigation is ongoing.

Yeah.

Come on.

Sorry.

It gives you didn't hear me I don't have any comment on that specific question.

Our next question comes from Amit Malhotra from Deutsche Bank. Please go ahead.

Thank you everyone. This is Chris Robertson on for Amit, Thanks for taking our questions.

Hey, Chris.

So given the structurally higher rate environment, we kind of expect here given the regulatory uncertainty around future fuel technologies et cetera.

It seems like owners will have a pretty big incentive to hang onto older tonnage for as long as possible over the next few years. So this seems to me like it'll create a real need for fleet renewal as we get further along towards 2030, not only in the tanker segment, but also other segments as well. So if you could think about what do you think the response by the.

Building industry might be to absorb the large number of quarters as we get further along here is there enough space at the yards to take on what looks to be a real renewal need.

That's a very good question and I like it because youre looking at are at the long term.

This industry.

Boston, we are focused on the short term.

As you know, they're all different technologies.

The green shoots that are being investigated.

Some people believe that LNG is already better and we will be transforming to a green shoe when it can be oh produced synthetically.

Some people believe that the meta know is a very good shoe as long as you can obviously produce the hydrogen in greenway and capture the Q2 and then some people believe that ammonia would be better because there's no skew to emission, but this technology does not exist today, it's being worked on.

And we have the promise from the shipyards and the engine manufacturer that it will be done.

Before the end of the decade.

Obviously, starting with smaller engine and because of the size of our ships we have the biggest engine in them.

<unk> been told that this was would be developed by the law.

At this stage.

On the shipyard themselves I think that it's true that there is a sort of some sort of a set of capacity at the moment.

Which is spread between three countries, we cannot identify relatively precisely.

There are some efficiency efficiency, so regains that can be done.

I'm simply going from two shifts to three shifts which they used to do.

We think the same space could increase marginally the capacities with marginally Navy yard means a few more ships when you see everybody.

In the shipping industry will have the same near the same time.

I tend to slightly disagree if you allow me.

Because we've seen that the guy carrying gas, but obviously theyre using guests to as a few in there.

We'll probably bet, that's a green metal sort of green methane.

We will be produced when you look at the container guys.

I think at the moment, we see we've seen a lot of orders also dual shoe LNG, so they're making the same bad but now more recently, we're seeing a lot of people betting on methanol. So that's certainly a fuel that has now a future because you've seen enough orders to the infrastructure will will be developed.

And then maybe in the future that it would be useful orders.

On ammonia and we certainly a party that is interested in that development.

Part of the industry the gas carrier the container guys, even some drybulk crews and some tankers have been already on some technologies and dose ecology will exist. The only problem is to produce the green shoes. So I'm not sure there's going to be a huge Richard at some point as far as our industry's concern there.

Reason, why we have such a thin order book.

Because we didn't have the markets, allowing people.

To go to the shipyards with the cash the debt early in the market now the picture is a little bit different but the yards have been populated with many orders coming from many segments.

And therefore, we see that for the next.

Two or three years.

The capacity is constrained.

So overall I think that.

As I wanted to see as always I think that the industry in general the shipyard capacity the shipyard industry compared to the owners.

We'll find a way to produce enough ships.

When they are required but it is true that what we are thinking of at your NAV is whether or not there is an advantage to be a leader I first time owner of a particular type of ships.

In our category I mean could be a meta know dual fuel you know that the last order that we placed for suezmax.

Both methanol and ammonia are ready and we are.

Continuously working with the yard than we ever joined development program with the <unk> in particular.

Add on to do ships as much technology as we can.

On the delivery so they are not completely dual fuel ready but.

Converting them is very likely in the future.

I think that's very prudently and at this point.

We don't want to make a bet on this specific issue because if you look at the last 18 months.

H well 12 months ago, everybody was saying its LNG is not going to be anything else then suddenly the wind shifted a bit and now you see more older and dual fuel methanol and I bet with you that in the future maybe.

Two or three years down the road, it's going to be able to do if you don't feel ammonia sorry.

So putting all your eggs in the same basket is not very prudent and that's exactly what we're not doing it two of them.

Yeah. Thanks for that really thorough and thoughtful response you go as a follow up I just wanted to focus on a few of the.

New building vessels that you have taken delivery up can you talk about the fuel efficiency compared to maybe the first gen of the eco vessels and kind of what rate premiums you would expect to see on the on the recent new builds versus maybe 2015 or 2016 vessel.

Yes, depending on where you are build your vessels are it's a I would say.

A minimum of five tonnes up to 12 tons.

<unk>.

And obviously, because our industry, we talk about TCE entity, she takes into account the consumption.

The improvement in the D. C is just a multiplier of the number of tons that you see today times the price of fuel at that time.

So you know.

At the moment I would say five tons, it's a three.

My previous six hundreds I suppose 600 Desert Street 3000 donors feed stent Dunson are obviously a lot more if it slows down things you make the math yourself.

Than there is.

In addition to that.

On the modern vessels and certainly to the amount of vessels that we take it's your now we have also invest quite a lot on the digitization of the platform.

Houses to improve the voyage.

Voyage optimization.

Which takes into account a number of our big data such as the weather the currents.

Sure.

Temperature of the sea I mean, all those little aspects of an impact on the consumption.

In the past, we cannot take all of them into account because we didn't have the technology now we have it and continue to develop it. So that's that's an addition, the good news is when it works on the Supermodel chips. Then we can also apply that same technology on the older ships. So we can also improve the consumption of older ships. Thanks des.

And maybe order of hardware equipment that we are constantly testing.

Got it Super helpful. Thank you very much I'll turn it over.

Thank you.

Our next question comes from Chris Tsung from Weber Research and Advisory. Please go ahead.

Hey, good afternoon, Hugo how are you.

Very well thank you for asking.

[laughter]. Thank you for sharing the analogy about it Meredith and her wedding stuff that was that that was very helpful.

Wanted to make sure I fully understand it with regards to the Pepsi arbitration thats the solely on.

Frontline's ability to terminate this combination that debt.

Or is that you're using as an analogy.

I don't know if it's if it's that I think that you look at the contract and you look at what close should continue to exist.

For the time being as I said, you know until there is a judgment on the fundamental right or wrong of terminating the contract and.

The damages that are that come with them. So it's really as I said, the guy cannot sell the house because if the church would award the house to the wife a year later.

The house is no longer there there is a new owner it is.

So it's very so he says don't sell the house until you have that.

That outcome.

I see and maybe better than kind of take that up.

Alright, I, just moving out past the arbitration on your traffic light.

Kind of a twist on the question that was previously yes, but on your vessel supply like what would it take for the like to tackle.

Gonna shallow too to fully gain.

Well the supply is the new buildings, but also the recycling and in order to turn it Green we would see a lot more recycling because when you look at the age profile, we should have seen it a lot more recycling now we all know we all know why that is that did not happen and we first of all.

The rate environment.

Improved so obviously now maybe less than last year should.

Should we expected secondly, and that was a reason pointed out.

Earlier in this call.

If everybody watch the order book and see is that very few orders will be placed for the reason that we already explained and it's likely that the ship will stay longer.

In in operation.

As you you're really going to have a squeeze.

And last but not least there was for a pretty long periods of time, there was a little bit of the cash squeeze into the cash buyers who are the recyclers of those vessels.

And obviously when you have a VLCC I mean, it's a lot of money that you need to.

Sort of in advance of.

Recycling, it and selling the scrap metal.

So that was an additional barrier that we.

You've seen the traffic light will continue to be green Amber as long as we don't see more recycling.

Understood Alright. Thank you for the color that's it for me I'll turn it over to take it.

Thank you you too.

Again, if you have a question. Please press Star then one.

Our next question comes from Matthew <unk> from Citigroup. Please go ahead.

Hey, guys, it's Chris Wetherbee, Thanks for taking the question.

You know Hugo.

And I think you've been really helpful kind of laying out your view here I guess, maybe what I don't know that we've heard this morning, though.

Sort of.

The earn out was management's view on what the future of the business should be I understand that you have the ruling coming up next week about damages and how things might ultimately play out.

I don't know that that necessarily.

I guess, maybe the question is.

What do you guys want to do with the business sort of thinking bigger picture, maybe taking a step back and you know from from this potential ruling I'm thinking about the direction of your own App from an M&A perspective, that's still something that is attractive to you understanding that maybe the deal that we've been talking about maybe can't get done I, just want to get a better sense of sort of where the heads are.

From management as opposed to some of the.

Technicalities that rulings and various things about this this past transaction our pending transaction.

The question is extremely refresh increase thank you very much philosophy.

Well first of all we continue to operate the business.

Very very thankful for the reminder was done in the first question that when you look at the performance we didn't forget to manage the business and as a matter of fact, we have split a little bit the management team and some people are entirely focused on.

On the business, because that's what matters and we want to continue to deliver good results as we can.

Oh, yes.

Yes continue to refocus on the current operation do we believe in consolidation absolutely. We believe in growth absolutely. We do believe that going forward market deserves to be honest. We did it can be consolidated there is a number of vantage to consolidate the market.

And to a certain extent.

<unk> been successful there I mean, not only because of what we've done in the past, but also more recently.

Because the pool has grown in the numbers and it's probably something that you guys do not monitor.

In much detail, but when you look at the evolution of the pool, we have at many owners with many vessels and those same owners has the capacity to add even more vessels. So there is a definitely a mandate for the pool to go out and get those feet or even <unk>.

<unk> one of the side too.

To put them into a pool, because we believe that that's fundamental.

The for the business and then as far as Euro NAV is concerned we definitely continue to believe that bigger is better.

We do believe that our economies of scale that can come with it we do believe that.

The way, we can service all clients, who themselves are becoming bigger and bigger.

We will be better.

If one day you can have a one stop shop for your needle for all transportation that would be a best in destiny beta, which we trained together with the pool continuing to be at.

So yes in short if you were to ask the management of this company and the current board because there is don't forget that the board is fitting the strategy.

With management.

<unk>.

Continue to grow find alternative in this one cannot if you're getting married this beautiful Lady.

Find someone else.

And that's let's make it a happy family.

Got it that's helpful. I appreciate your perspective, Thank you Bill.

Thank you.

The next question.

And as a follow up from <unk> <unk> from ABN Amro. Please go ahead.

Yeah.

Coming back.

And Oh, let's say.

Maybe in a REIT beach.

I also want to thank for great execution in Q4 of course.

And that really is basically you cannot distribute more dividends right now.

Coming back on your statements on the arbitration for my your enough perspective, I would say the main focus is on getting the U S.

We can control buying frozen for you.

Or is the main focus in in getting in frozen form.

Your dividend payments or ish.

Basically a combination of the two.

Yeah.

It's a combination of many things they used to be honest and that's why we cannot hear on this call in a public platform say much more about it and I apologize for it because I wish I could answer we need to be a little bit patient.

It seems that some people are looking at this I got like a Netflix and from time to time, you need to wait until the next day.

You'll be able to watch it.

[laughter] natural foods fully agree, but you started to mention the marriage, etc.

Nick I, just where I know that there hasn't been than the wide scale together again when they suddenly found out that there already was a baby created so [laughter].

So I've been next question H well.

Has there already been a baby being created but.

Nope.

Yeah.

But I I don't know what you mean by baby briefing that we will stop shows.

With no other than that of.

Otherwise people would get lost in translation.

I was trying to use a simple example, I understand that maybe it was not such a good idea.

[laughter] Okay. Thank you.

This is.

This concludes our question and answer session I would like to turn the conference back over to Hugo de Stoop for any closing remarks.

Well just wanted to thank everyone for attending our earnings call and yeah.

Hopefully we will all speeches soon together and swiftly excuses and importantly, so stay tuned thank you very much.

Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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Yes.

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Yeah.

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