Q1 2023 Euronav NV Earnings Call

Hello, and welcome to your Q1 'twenty earnings Conference call. All participants will be on 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.

Sorry. Your question. Please press Star then two please note today's event is being recorded I would now like to try to cross over to your host today, Brian Gallagher Mr. Gallagher. Please go ahead.

Thank you good morning, and afternoon to everyone and thanks for joining <unk> Q1, 2023 earnings call before I start I would like to say a few words before.

The information discussed on this call is based on information as of today Thursday, 11th of May 2023, and May contain forward looking statements that involve risks and uncertainties forward looking statements reflect current views with respect to future events and financial performance and May include statements concerning plans objectives goals strategies future events performance underlying assumptions and other statements, which are not statements of his.

Oracle facts.

All forward looking statements attributable to the company with the persons acting on its behalf are expressly qualified in their entirety by reference to the risks uncertainties and other factors discussed in the company's filings with the SEC, which are available free of charge on the SEC's website at Www SEC Gov and on our own company's website at www.

You would have to call you should not place undue reliance on forward looking statements. Each forward looking statement speaks only as of the particular statement and the company undertakes no obligation to publicly update or revise any forward looking statements actual results may differ materially from these forward looking statements. Please take a moment to read our safe Harbor statement on page two of the slide presentation.

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

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

It will run through the Q1 highlights before passing on to leave lager or a CFO to give you the key financial figures Brian .

Brian Gallagher, our head of IR and research will then run you through three key factors within the current tanker market trends before I return to summarize the outlook.

Moving on to the next slide it was a very good quarter for euro enough in one way or the freight market was especially strong.

Was unusual is that the market got stronger as the quarter developed which is counter seasonal drive compared to what we all used to see in the first quarter, where typically the market starts to a b has the spring is approaching <unk>.

Indeed, the month of March for the highest Suezmax and second highest <unk> rates.

Rates for Vlccs since 1990.

These combined to drive shoes, Max rates higher than VLCC rates underpinned by strong demand from China, and better tone miles across the tanker spectrum.

This situation is reserve somewhat in Q2 with rates softening now in VLCC rates appeared to dosing suezmax, but averages rates in Q2, our highly innovative in both absolute terms and for the time of the year. When we would have expected seasonality each pool rates downwards much earlier.

We then use supervisory board 14, please and look at both the strong company balance sheet and visibility on positive medium term fundamentals higher return to shareholders has been proposed which leads to your NAV investors benefiting from a final dividend for the full year 'twenty to 'twenty two of 1.1 dollar and a Q1 dividend.

70 cent both tables in Q2, which means that a total of 1.8 dollar per share will be distributed to our shareholders in the coming weeks.

I wouldn't know pass over to lever to run you through the financials.

Over to you.

Thanks Neil.

Taking these points further or do you get enough capital base very strong with over $900 million in cash liquidity.

Falling again in Q1 to just below 43%.

And the robust cash generation coming from our fleet.

Benefiting from the repositioning we have executed in the past two years.

We have again taken advantage of high values for older tonnage and the retained capacity for more should we decide to do so.

But that's I don't know pass it back to you Brian to give some thoughts on the current market cycle.

Thank you Lisa and order book has gained ample attention amongst investors in weeks or months, one of the key visible points a weapon.

The house is a very very low level historically, we would've probably sits at this is shown on the left hand side of slide nine.

Hello, even though we're priced placement level, 5%, assuming uniform build and I think a life of 20 years.

However, the husband some signs of life on some overdue contracted.

Crude tankers, mainly in the smaller segments, but including Suezmax in recent months.

This was to be expected given the strong fundamentals I missed that but practically no vessels have been ordered since Q3 2021.

The right hand chart on slide nine might look dramatic, but remember we're looking at around 10 unconfirmed oldest suezmax on a base of over 1500, Suezmax and VLCC units globally.

There was also the context that is required and we give them give us some slide 10 with two other points to make.

On slide 10, you can see the firstly suezmax cost inflation has not been as rapid as that we've seen in the VLCC sector and so on a relative basis, there's still a detraction from the Suezmax space.

With regulatory change coming in but it feels slower than expected owners are likely looking at vessels they have a longer useful life.

Secondly, the move toward a member who is ordering new ships. There are no speculative orders and the order book.

It is a sensible one of public companies like you went up.

Expected longer term private and Sky alone is largely in the Greek arena.

National owners, who are investing on a strategic basis.

It was unusual to see such a dearth of orders from Q3, 2021, but even with this waste an uptick if it is fulfilled these vessels will not hit the water until another 24 to 36 months.

So now turning to the mountain side of equation on slide 11.

Slide 11, you can see that China has reopened and you wouldn't have seen that was purchased for economic recovery and the stockpiling over the last six months.

Mine's bullets, all with a record month of March followed by a more fallow white pool. However, the trajectory of recovery, that's well established I know some of this growth has been stayed bought 90 barrels.

It is interesting to see the number of VLCC cargos, leaving the U S. Gulf Coast has continued to grow even after the strategic Petroleum reserve barrels were all moved earlier.

Earlier in 2022.

With that we were all very very positive medium term view on the sector and I'll now pass over to Chief Executive Hugo Stoop to give some more medium term thoughts on the cycle and the current traffic loss outlook Hugo over to you.

Thanks, Brian very good topics summing up then the fundamentals are supportive, but short term some headwind sorry emerging.

<unk> cost in incoming regulations are cutting supply. Despite recent contracting the global fleet age gives us some encouragement that either vessels will exit the mainstream feed by our recycling or exit via the shadow old dog food.

After five consecutive quarters of grading the sector owner with five key drivers, which they downgrade always supply on the back of your Opex cuts announced recently.

Once we do not believe that all of these cuts will be enacted or even delivered it provides a headwind at a seasonal point of the year. When we would expect refinery maintenance programs and move into summer month to reduce demand in any case.

That does happen and impact as freight rates in the very short term, but the fundamentals continue to remain supportive and freight rates remain profitable.

Our business is very solid shape supported by strong finance organic growth from our own order book of vessels due to be delivered and a strong shoulder focus to return the cash generated from our platform as quickly as possible.

With that I will hand, it back to the operator.

Yes. Thank you.

At this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Jana Speaker phone please pickup your handset before pressing the keys to withdraw your question. Please press Star then two.

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

Yeah.

And the first question comes from Jon Chapell with Evercore ISI.

Thank you good afternoon.

Do you do if I could start with something that's not fundamental just maybe clarification. The AGM next week I think there's some confusion from some of my conversations that there's still a question about the board construct just to be clear. The board is all sad part of the meeting in March correct and then the second part of that is that the.

Agenda for the AGM, which you laid out in the press release.

Regarding the strategic direction, what do you anticipate to come from that from a strategic direction of the company outside of the capital allocation.

Hi, John Thank you very much for your question.

Yes, it's a little bit confusing, maybe a little bit technical so the meeting that we had in March was a special general meeting of shareholders. So that's something that can be cooled for specific reasons and we all know where it came from <unk> and you saw some change to the board. The first change was that.

The two main shareholders are appointed him to each non independent directors and so the board win from a five to seven because at the same time are two of the then current our independent directors are.

Where are were dismissed a next week, we have our annual general meeting.

Which is a which to date is set in the in our article doses Association. So every year. It's a it's around the same date.

And that is usually when directors are appointed reappointed a newly appointed.

Et cetera, and there was no proposal to dismiss anyone obviously.

So when when you look a little bit more in detail. There is a proposal to appoint two new additional independence against switch two of the current independent or not asking to renew the mandate. So the board composition will.

Due to the seven members of which you had four representing the two are not ended well known independent therefore, representing a two cool shoulders and treat independent which is the minimum that the company needs to have I suppose the entrepreneurs Association, but also I suppose.

The Belgian corporate governance rules et cetera, et cetera, and after that I think that there's been there's going to be a lot of stability.

But also clarity I think we need to go through this meeting before being able to.

To to answer the second part of your question, but you can already see that.

The company is doing very well I think that performance is very good I think that the return to shareholders, which is very important for all the shareholders, Indiana that he's done all of the school.

It is unclear.

Unquestionably in the sense that we will continue to be very very generous.

When the cash generation is such as it was in the first quarter and likely to be in the second quarter and as you know we believe that he is gonna be a multiyear cycle a cycle so for.

That point of view everybody can be satisfied the dax bonds, which is a very important part follow at schools and it's a continuation of what we have done in the past.

Mhm, that's super helpful. I appreciate that.

Just a quick follow up.

Brian probably Hugo you mentioned the downgrade on the traffic lights on Neocart production, which makes complete sense, but in your in your press release, you noted that you know most of the growth is coming from Asia, and therefore, the substitution barrels from the Atlantic Basin, a ton mile impact of that may offset any quantity.

<unk> views on what the ton mile impact from that institution would have vis vis the $1 million or so million barrels are cut until the ton mile demand.

Hi, gentlemen, Brian Yeah, it's always difficult because it.

As we've been watching this obviously, there's been quite a dynamic background in terms of the OPEC announcements.

Obviously those are starting to sort of think through month to date. It's.

Talk of really kind of pull that number down, but we think the impact of that many borrowers would be.

50%.

Cause the ton miles will offset the difficulty we haven't giving sort of precise guidance on that but a lot of the middle east barrels, while still being very very difficult to attain.

Exactly where they're moving from them, where they're moving to we've been surprised that for instance, the middle.

There's not been more aggressive or assertive and exports into Europe to replace the mushroom barrels on the Russian barrels themselves continuing to be I'm, not seeing any production cuts or export cuts. So yeah, I would say to put a number on your own but you you've posed to us sort of 50% of that will be driven it will be.

Absorbed by ton miles, but as you know, it's a very dynamic backgrounds in the next three or four months will give us a lot more currency.

Yeah, absolutely I appreciate that thank you Brian Thanks, Peter.

Thank you.

Thank you and the next question comes from Chris Wetherbee of Citigroup.

Hey, Thanks, Good morning, guys, maybe we'd just was hoping to see if you could elaborate a little bit on sort of the the fleet plans.

As we start to see some of that board discussions.

And maybe even more focused strategically going forward I guess any thoughts as you think about the fleet in terms of.

Whether there's the opportunity for M&A large scale S&P activity or if it's just going to continue to be sort of your typical pattern through the cycle of buying strategically and selling them to.

It's it's a good question I think that's a clarity will probably come.

A little bit later and as I said, probably after the <unk> Jim wants to borders are finally composed of a stable for the next couple of years, having said that.

If it was business as usual.

I would say that we have done what we were supposed to do I E.

Waiting for the values to go up to sell the older part of seat and remember last year, we sold nine vessels in.

In the first quarter was selling another one in the second quarter. We are selling are the the VLCC to replace DFS, we'll see if it was we certainly not stand still standing steel I think I'm on the new building opportunities we've been very active in the last 18 months.

I guess that at this point in time, we feel that VLCC values, a new building at too high a they've gone higher than than the evolution is going higher than on the suezmax on.

On the Suezmax, we may still find some opportunities. Its obviously a category a vessel that has built a in many more yards in the VLCC and hence you may find from types of opportunities, we certainly scrutinized market and looking at every single deal possible.

So sort of bothers the speed that is a little bit older and that's why we've been more active than we are probably likely to be more active for those two reasons opportunities and also the fact that the average age is a little bit older than a VLCC side.

But as you know this is a cyclical market values are cyclical.

And we are slowly, but surely reaching values where we.

We don't believe that value that it would be value creative as far as M&A our concern.

I think it's fair to say that at the moment, we're not looking at any five specifically I mean, obviously very busy last year, but unfortunately.

We were not able to conclude.

And going forward I think that you need to be a little bit more patients and I'm sure that a we will be able to clarify sort of the longer term strategy of the company in the coming weeks or months.

That's helpful answer I appreciate that and then.

Yes, if I could go to that the Red Light Green Light chart, and just thinking about the demand for oil specifically as you think about sort of the macro dynamics playing out here no change there, which I think is understandable just wanted to get your sense of what you think the potential incremental changes that you might see.

China is sort of emerging a little bit from what has been a weaker period, but we do see some potential consumer led headwinds in a couple of the more developed markets like the U S and Europe is kind of curious as you think about the demand dynamics that plays out for 2023.

Hi, Chris It's Brian again, I think you've answered the question better than I can I think what you said there was a very fair I think the crucial swing factor as none of the banks and in particular to the agencies about the IEA and the EIA focused on it is really one about China I think we feel it a little.

More comfortable and confident in the China story and that we believe that by starting to buy and we've seen them Boeing for strategic reserve criteria well.

The oil price remains to call them that are low as we can.

I'm very actively in the last four or five years, the Chinese all the most aggressive in my society bias on lower prices. So we feel that that's reasonably well underpinned that is both strategic and cool.

Consumer recovery reasons that will underpin the Chinese side of things what is certain is that a lot of it.

Economic data is indicating that the western world in particular was a slowing in the consumption. Some of the recent data points in the U S sort of diesel in our refinery production Rosa quite concerning that's where the focus is I think we can join that we've been trying to more robust than I think a lot of the other parts of the market. All so it will depend on the developed world I think rather.

Then the developing.

Okay. That's helpful. I appreciate the time thank you.

Thank you.

Thank you and then last question Ghansham, we're not caught with Jefferies.

Thank you Hey, guys good afternoon.

To ask you about the market you, obviously referenced the near term risks and we've seen the vlccs coming off here in the past couple of weeks are fairly aggressively although suezmax is theyre moving in the opposite direction getting stronger I know its short term volatility, but just wanted to see you know from from from.

From your perspective, what what's been driving that divergence here recently and also do you think that divergence can continue like we've seen for the past year plus as opposed to what we've seen in prior cycles.

I think it was the toilet mentioned are in your question I would definitely agree that the sandy aggressive of a trend that we're seeing in the V. O. She she is part of the volatility of the market I mean are you.

We always try to look at the Boston and whenever we are on the way up in an up cycle, what we what we equaled multiyear upcycle you do have these kind of vote when a T V.

And it's not certainly not with the experience that we have in the house that we are panicking and send them equally mark at all but I think that we look at the fundamentals we look at the general trend and what we've seen so far this year since it leads us to believe.

We continue to be correct in our assessment of the next a couple of years.

So nothing strange I mean from time to time, you do have a you know a concentration of the Chinese coming into the market and then the Knoxville aggressive would be go up or exactly the opposite suddenly disappear.

And I think that they're trying and very awesome successfully being very clever about it.

As far as the the the difference between Suezmax and Vlccs concern well, obviously, the Russia, Ukraine conflict at and impact on those trades and continues to have an impact on the smaller size like we have rarely seen before there has been a rebalance because you were.

Remember we were in a place where she was Max we're running a lot more in two settings and in our two or three weeks.

And a lot more than that.

Then there are bigger brother and sisters. So there there is a rebalancing, but no doubt a it's not a straight line either so you do have a little bit of volatility.

I think that if you look at averages over a longer period of time.

We believe that the VLCC will earn more than the suezmax, but the differential between the two segments that we have observed in the past maybe narrowing because of this specific situation created by our Russia, Ukraine conflict.

Okay, and I guess that presumably that does that play a part then and as you mentioned earlier, the interest that you're seeing or that you're having.

Or is it more purely just the age factor you were referencing.

No. It's more the age factor I mean, you buy vessels for 20 years, and we don't believe that the current situation will last would yeah, we certainly hope that it will not.

So no the the major reason.

Why we are more looking into the Suezmax is two fold.

First because we believe that the price we're seeing at the yards is still sort of affordable I mean, its getting very expensive, but its not quite there yet.

And secondly, as far as your own NAV is concerned or.

Our average age on the Suezmax fleet is a little bit older than the VLCC. So it makes sense to continue to win new that's part of it.

Rather than the VLCC and by the way we continue to believe that.

So the two segments, where we want to be active.

Okay.

Thanks, Hugo and one just one tiny follow up because I wanted to ask about the Suezmax interest and it was going to ask if that was more focused on modern secondhand ships or a new building. It sounds like youre looking at new buildings, what kind of deliberately window or are we looking at it through the play something today.

So we saw one opportunity are for deliveries in 'twenty, five but everything else that we are seeing at the moment he says delivering 26.

We for one or another reason, we decided to pass on.

The opportunities in 'twenty five.

Not because of the delivery did but more because of the specification of the ships and all the factors.

The markets I mean the ship.

The shipyards that are we are interested in.

<unk> have announced that they are fully booked until 26 and the only reason why you would potentially find one or two slots here and there in 25 is because and owner doesn't least adoption probably in another segments will there be in another segment.

And do you have an opportunity that comes your way and I've seen that companies like you're neither we certainly not the only one there, but we have the ability to move very very fast. So we can be shown at the U S.

And take a decision in 48 72 hours.

Whereas maybe another type.

Type of companies smaller shops, or where the governments, who does a little bit more difficult theyre not able.

To pick up those opportunities because of the decision process is to to flu.

I think that this is something that we absolutely want to retain them, 100% sure that we will continue to be seen we though too strong shoulders. They all intrapreneur ontology and they are able and they've demonstrated that they can take decisions extremely quickly. So I'm very happy that this is the case because this is a.

Best way.

To grab the opportunities that will arise out there.

Yeah.

Great that sounds promising thanks, Hugo I'll turn it over.

Thank you.

Thank you and the next question comes from Friday, Mercantile with Clarksons <unk> Securities.

All right.

Hey, Brian .

Yeah, I'd like to talk about their risk appetite.

And I'll spend some large swings in oil prices recently.

The tanker equity jump up and down in much the same fashion I guess so.

Maybe you could give us an idea.

From your perspective of course.

Our people in the physical shifting market likely chartering sundowners how are they behaving right now.

Sentiment you know.

Just.

Yeah.

There's a bunch of them do.

You know how would you characterize the bulk of them.

Hey, guys actually buys and partnerships.

It's it's a good question, but it's a relatively complex question fundamentally I don't think that's the mentality has changed because you do have people who wish to buy deals you know they have a their programs there depending on all the major refinery.

What have you and they know what they can sell and therefore, they need to get the feedstock.

In place and so that will not change their their attitude their appetite.

And obviously as I've just described Oh, some part of this market is behaving they can be opportunistic and concentrate there.

Yeah.

Requirement for transportation or their feedstock and one on another fashion in order to take advantage of the volatile market and that's very small.

I think that the only part of the market, which maybe a little bit more sentimental or opportunistically driven by those high volatility we are seeing at the moment and I agree that it's more volatile than.

And it used to be on the traders and I think that the traders octennial Stratus I mean, they must be opportunistic they must spots the arbitrage.

And they are doing that very well and some of them are also active in trading ships for longer term.

We have put in our press release that that market.

It was more active than before and I I guess from the conversation that we're having.

That most of those opportunities are coming indeed from the trading hours.

Spotting a you know an opportunity for longer T C at a big discount to the spot market.

Spot market yesterday, maybe not today.

But because they see the same fundamentals that AR.

As the one we are seeing.

Sorry to repeat that for the third time in the school multiyear cycle, where the order book is extremely thin and that's a little bit the north star for us to ship owners.

And therefore, if you are there for the long run and you want to make.

Money, but do not want to ownership for 20 years I guess than it is natural that you're going to try to get something with two three years and then optional years, which is also always a very great way to play when a D. D. D is to have as many options as you can.

And that's very much what we see.

Yeah.

I guess I'm I guess the illness.

More on this.

Supply side the order book.

Investors are.

Overly focus on that.

On slide that are influenced by the temporary effects of those pumps.

Hum.

So what is it.

Sorry go ahead.

Go ahead.

No. It's always you know.

A little bit surprising I would say that the investors are so focused on the demand because after all.

The supply can be dynamic I mean, do we have enough old ships and as we said either they get recycled or you go into the laclede, knowing that the dog feet or whatever qualification you want to put there.

Has a limited capacity.

So if the rates come off and ended the period over which they come off is sufficiently long. Then obviously you do have a reaction and you do see older ships going.

To yeah, either the recycling yards.

Or that the adult D, which is a trend that has emerged in the last two years or something.

But that's also the reason why we're not particularly worried about the demand because you do have this sort of knock on effect and disposability. It sounds like if we if we had a very modern fleet I mean remember last time, we had a lead.

The same sentiment about a multi year cycle was 2003 2004.

But when when we came in towards the end of that cycle, and who doesn't need because of the financial crisis, obviously, a black Swan and predictable.

Order book was more than 50% what was an on the water.

Today, we are at the start of the cycle. We are seeing that there is a number of reasons why owners are not rushing themselves to the shipyards to order more.

It takes time, it's very expensive there is uncertainty about the technology.

So I think that's you.

The order book, where it is the ability for the order book to grow massively.

And the prospect that we have on oil demand.

That's yeah. It is looking good but obviously it is shipping it's gonna be volatile and there will be events that are totally unpredictable and in that we're not thinking about right now, but even even if they would cure there are remedies.

Okay.

Thank you.

Youre welcome.

Thank you and the next question comes from Ben Nolan with Stifel.

Yeah. Thanks, I guess I wanted to come back to you Hugo you talked about sort of looking at some she was backs new buildings in and deciding to to pass on it but at the the idea of ordering and you just were sort of talking about the risks behind it and there are many but.

I'm curious how you think about the residual value risk I mean, if you look at let's say a suezmax today.

You know it cost about 50% more than it ordinarily would.

And you don't get delivery of it until 'twenty 'twenty six and there is technological issues and all of these other things how do you how do you get comfortable because obviously, you're looking right at it a possible order how do you get comfortable that you can pay a price that is well in excess of where it normally would be and.

Taking undue risk with respect to the residual value of the asset.

I'm not sure.

I mean, thanks for your question I'm, not I'm not sure I agree with the fact that its 50% higher I think that you know.

A cheap Suezmax is probably 67 68 17 billion.

Today, if we order we are probably 80 182 or something like that so I don't think we're that far and this is absolutely on the same station VLCC space, where we probably have 230, where we as you know a good price would be a sort of 79 eight.

That wouldn't be the button, but we've seen last probably 10 years something like that so there is that discrepancy that I've described earlier.

That is one.

When you have a platform like you are now with many many ships you don't put all your eggs in the same basket.

And today, what we are trying and gradually doing and we've started that with all the new buildings.

We've seen the last close to 36 months.

Whoever degree of preparation for a potential retrofit.

And you've seen different trends I mean, there was the LNG dual fuel LNG trend, that's probably more completely to prepare because it is more costly to use LNG in the retrofit will certainly be far more expensive.

Then then if you if you build it as a dual fuel Ah, but then the next two trends out there that have emojis ammonia and it was a little bit high but it didn't exist and so people were.

I'm very excited that he was going to come probably a little bit faster than it does so that indeed.

We believe that he noticed segment, it's not going to be available before 26, potentially even 27 a M.

Then we have moved on to the next trend, which was methanol I think that that trend was very much launched by by Bruce a and now they have invest massively into the production of the fuel because there's not forget that there is the technology. The engine, but there is also the supply of the <unk>.

Q and has to be the green shoe.

If you want to to meet and be serious about the requirement just a few tend to reduction of carbon emissions.

Sure enough that's very much the stance that we're taking so we're not suddenly ordering you know 20 ships of a dual fuel certain technology and then be left a little bit in the dark we are.

Ordering ships one by one two by two and every time, we are trying to prepare them as much as possible for a potential retrofit and therefore, we are cautious about.

The potential residual value risk that you are describing.

Okay.

On to some more of a just dipping your toe in kind of a approach I understand that the.

The I, yeah, well, two hopefully pretty quick.

Quick questions, one just with respect to expenses and and you know obviously, it's been a whole lot going on I'm sure you know over the last.

Nine months, but how should we think about things like G&A going forward as it was a little bit elevated given.

Given everything that was going on in it should it should ease down or is this just sort of the impact of inflation and then and then also and I'll be done could you talk a little bit about the F. S O in Yemen and first of all I really do appreciate what you guys are doing as a citizen of the world, but or what needs to happen there and.

And just maybe outline that situation a little bit more.

Yeah. So.

First part of the question Yeah, it's definitely a very special year and obviously when you are busy with.

You're going to run them.

Legal fees and an investment bank fees.

Which are normal for this kind of transaction, but obviously are exceptional.

Hence the disappointment that we cannot go to the finish line because it's yeah, then it's a little bit wasted money, even though we have learned a great deal out of it.

M D.

The the G&A should go back to where it was before except that Youre absolutely right.

It is there there has been some some inflation.

Certainly in the salaries for the personnel and that that is true for our.

Onshore personnel, but also onboard the vessels.

Which by the way doesn't appear in G&A I mean, that's in the Opex obesity.

I think if you take a figure like 16, 16, and a half a million per quarter, you should be right.

With any exceptional expense that I just described but for this year were not foreseen muscles that so so that's the guidance that I can give you today.

So hopefully I answered that part of question then.

On the official CFO or better said the replacement of the episodes safer.

Hum.

So the U N is organized funding and there our ambition is to acquire a vessel that we are being able to provide we have also accepted to retrofit. The vessels. So that it is an FSU and not just a regular tanker we went to dry dock.

We did that.

We are selling the vessels at market value and we are adding the cost of the retrofit two weeks. So you will be beat for that I don't think that there's any loss.

For the shoulders and quite frankly, our today's values are quite attractive.

Hmm.

What we are doing are in addition to that as operating the vessels, who obesity redo of experiencing thing is we do have experienced an episode.

We do have experience in trans shipment, we are not the only one there because smithies Dave for for the delicate operation, which will take place. After we have transferred all the old onto the the vessel, we will continue to operate and train people.

In the months off so that has been transferred and local people in the local.

Oil company and after that the ship will be there is because the U N will give it to them if I understand the structural well and they will be operated by the local company.

In euro and that will have a finish its work and so it's a it's obviously a good operation from from both sides. I mean first of all I think it's financially a good deal.

But.

Where I, where we were a surprise is that we were the only operates are willing to do it.

And I think from that perspective, obviously, you need to have the experience the knowledge, but you also need to do.

Willingness you can choose from different opportunities and we feel that this one deserves to be picked up by a company that you're in now because we do believe that doing something for the company's great doing something for the company and at the same time.

For society at large if I can use that.

He's even better and we have received a huge degree of enthusiasm from the people working at your NAV and the volunteers of when the duty operation. We were very surprised because a lot of people wanted to contribute it wants it to be there to do it.

Alright, thank you.

Yeah.

Thank you and the next question comes from Chris song with all of our research.

Hey, good afternoon, Neil how are you.

Yeah, but it wasn't you.

Okay, great. Thank you.

Need to talk about your dividend for a second I believe your policies are 80% of net income.

Thinking about this at least one of your competitors have committed to paying out a higher ratio than net income.

You guys are.

Perhaps willing to entertain.

Two to be to be Frank with you. We don't very often look at what the competition is doing I think that that youre in a we look at our own. We are trying to do what is best of what we believe is best for the company and its stakeholders in general shareholder obviously primary concern when we think.

About returning cash.

The shoulders.

I think that our policy is very is very well written they should go to a website and 80% is a little bit the guidance. That's what we've tried to applied all the time last shored up cycle that we had in 2020.

We split that between dividends and share buyback are today, we are at the start of the cycle, we focus on the dividends.

You can you can every quarter will have its own sort of decision process.

I think we came out with a very strong outlook.

From 'twenty to 'twenty two so that's why we are adding a very generous layer of.

Dividends to 1.1 final dividend and I know that we are a little bit of a specific animal because in fact that you're now we have five opportunities to distribute dividends, whereas other companies usoniam quantity basis.

So there for opportunities, but okay. It is what it is and quite frankly, I suppose of the shareholders.

Happy about that.

And then indeed, when you look at the first quarter resumed it corresponds to 80% it could be more it could be less it depends you know what we are into capex. It depends where the leverage is deleverages is very very good position. So.

We have no problem paying those two divisions. It's a it's a couple of elements in N D. 80%. It's only there to sort of guide people are but we can deviate from it and more often than not have we deviated, though on the upside rather than downside.

If you ask me, whether we would go to a policy of paying out 100% I don't think that's reasonable in the sense that you need to check fact, and circumstance at the time of deciding what it is and that's the role of.

The supervisory board and the management.

To see where you apply your capital where you allocate your capital in and what creates what we believe creates the most value for shareholders.

Okay, no that makes sense, thanks for that color and maybe just a follow up to just the dividend.

A question for me.

Just trying to make it.

Make sense of this coupon 32, I think it was $1 10, and coupon 34 70 sites. So I'm just curious what what what coupon 32.

So indeed to answer your question. There is a split split has been need under one point.

To optimize the distribution to the shareholders and at one park is kind of closing dividend and then B has a link to what he called out of issuance premium which is a good tax friendly system for all shareholders and this is the distribution split we can make based on our balance sheet.

Hands a bit.

Different parts, which is mainly important Florida, Florida, the Belgian shareholder Joe the other retail in general along because.

D in Belgium to the withholding taxes of 30%.

Your page when you distribute the dividends you don't page when it's distribution on all of your share premium which is very much the same as our capital decrease.

Sort of maybe you are more familiar with that's a technique that's out of the shoe.

Shoulders is concerned they don't need to take any additional action they receive the money on the one system. They receive gross four gross and on deal of the system I E. The dividend they receive gross for net.

The institutional shareholders doesn't change much because they don't have to pay withholding tax of different tax systems. So it's very much to take care of the retail, but the retail is not insignificant at your enough. So.

Whenever we can use those mechanism we will.

Okay, Yeah, no that's helpful and perhaps if I can squeeze one final one in just hate to do is just better asked about the arbitration that opinion, one I think it wasn't labeling at during your last call any notable data on the horizon that we should be able to look out for.

Yes, it's it's a slow process I mean personally I was a bit disappointed that are sort of the private just doesn't go faster than that.

The the irregular justice, but are indeed are we talking about 'twenty 'twenty four and probably towards.

And in Q3, Q4, 'twenty 'twenty four and it's true that there is a number of steps that needs to be a D and it starts with the appointment of a you know 12, we treated one for each size and then dose will be treated will appoint a what they call the president of Oh for the arbitration office or desk.

After that you have to submit the five Sabine you claim you need to evaluate.

The damages or the D. The amount of claim that you are claiming to the other side.

I don't think we're going to speak much about it until we have something tangible to share with the market. As you know our philosophy is to really treat this arbitration is okay. Once I believe they had the right to do that the other side believes they didn't why don't we ask someone to arbitrate between the two.

Side and it would be a what it would be I don't want to dismiss it.

But I I also don't want to.

You know be talking about each quarter after quarter. It is what it is we will know unfortunately more than one year at a time.

And we will let you know.

If there are any development in between but likely not in and so be patient in.

Yeah major oil and gas about it.

Appreciate it thank you.

Thank you.

Thank you and the next question I'm, sorry, Greg Lewis with P. T I G.

Hey, Hey, Thank you and good afternoon, everybody and thanks for taking my questions Yugo.

I think you were touching on in a little bit around the divergence between.

Max's and the Vlccs.

Any thoughts around how much of that you know.

Basketball is trading in the dark fleet are helping Suezmax is.

Outperform I E.

I imagine, it's a lot harder for VLCC to trade in the dark sleep and maybe.

Suezmax, but I'm just kind of curious if you have any thoughts around that.

But maybe I can start and I'm sure Brian can complement me.

Let's let's go back a little bit in time and lets not forget that a doc feeds VLCC Y O y.

The VLCC side of dog food sorry.

<unk> was much bigger before the emergence of the Crane, Russia countries.

That's because they were busy trading in Iran, and busy trading in Venezuela, and so that was already what we with equal delisted fleet because the sanctions are very different there than they are in the in.

The sanctions that apply as well that will apply it against Russia.

If you look at Russia, and obviously, that's a place where a lot of Aframax and Suezmax were reading out and probably very little VLCC. That's because the distance was very short I mean, most of the year was it was going to Europe , a little bit to the to the states, but not very long distance.

And that does make sense and obviously now that they have to to do many more mas.

Going around the world delivered the yard to new clients and clients that are that are willing to to buy deal from the Russia. It would make sense to see more vlccs.

At the moment and you know you need to leave a lot to do to to go through it and and leave it leave it at the time for the market to completely of that at the moment. It is a suezmax and aframax, which are going into.

And I'm not sure we can call it Doc seat because it's another animal than the one we have seen in trading are Iranian crude oil. He was a cap if you will below the cap you can trade.

Our children that we had decided not to treat for a number of complications and also into the policy, but again, if you would be able to cap and quite frankly, when you look at the old price I don't think that we wherever.

Market, where we're the cap had to be applied there is always a discount on Russian crude in a further discount because now the freight.

It's a little bit more elevated so a lot of people are capable of doing that.

Once they do it generally speaking do stay in that specific trade AR.

Because of insurance because of finances, because of a number of people who don't want ships to go from one side of the market to the other side.

At the moment, that's that's what we are seeing many more suezmax and aframax they've been added to this particular.

Yeah darker side of our of the fleet.

But the VLCC that we're there remain there that probably continue to do Iran and Venezuela.

And going forward because of the distance you may see more Transshipment you may see more vlccs involved.

In that trade, but that's not the case yet.

Okay Super helpful. Thank you for the time.

Thank you.

Thank you and then that's why should I caution that there is a breakout or with a b M MRO.

Yeah.

Good afternoon.

Good morning to the U S. Congratulates waster results coming back on the dividend policy I thought your dividend.

Pre deal policy was 80% of net profit excluding one offs now it's.

Is there a special reason for 400% ex one offs and.

Although if there.

It's more than hundred percent allowance in in Belgium.

Second question is Hum.

Minimal almost total but.

Maybe it gave us a bit of explanation on Belgian.

Inflation impact on your Belgian golf space answered the question on the.

Shellfish operation and Jim can we expect.

Some kind of a book profits related to that project.

Yeah. Thank you Tait and thank you for our questions.

It's a little bit technical so on the on dividend, let's first start with what we can and cannot do in Belgium.

In Belgium, you need to look at the statutory balance sheet not the consolidated balance sheet and as long as you have the reserve to pay a dividend you can be up to Youll reserve. So are the statutory balance sheet because of our model.

Where are the vast majority of the vessels are on the statutory balance sheet. Belgium, then obviously when the market is generous we generate a lot of profit there and then for the few vessels that are in the subsidiaries are this is the case with you for so this is the case for the.

There, we need obviously to dividend a dividend stream from the subsidiaries to the statutory balance sheet. So overall when you look at the statutory balance sheet. The limit that we can be but this is dynamic because every quarter that our balance sheet will increase by a.

The net profits that are being accrued.

Oh, that's the remittance, it's the only limit.

The second part of the question is Okay are you had a specific we had specifically.

Our dividend policy, where we exclude the capital gains.

I think that that policy is still in place, but we can make exceptions and why did we make exceptions. This time around simply because when you look at the amount of kept of games that we have generated last year around 100 million.

What we are generating now.

It's because the values are.

No.

Literally exploded compared to the book values and so the reason why in the past we were completely excluding them is because that's the money that we wanted to reinvest into new building programs and or from time to time secondhand modern ships acquisition.

But now it's it's almost too much, especially at a time, where as you've heard at the beginning of this phone call. We believe that values have.

Gone through to as far as new building contracts are concerned.

Through numbers to amounts that's seems excessive definitely on the VLCC may be still a few opportunities on the suezmax, but there is no reason for us at this point in time.

Especially because we also have done quite a lot of activity in the new building programs. If you look at the last two three years and the values at which we bought there is definitely something that we could return to the shareholders. Then of course, the lost boys that we always state or.

Leverage in terms of our book value.

I just spoke about the market venue. So if you look at the leverage of the company compared to the market values or loan to value to market value.

Then we are definitely seeing a territory, where we can be generous and we can reward our shareholders. So all of these elements are all being looked at by the board.

And then a decision is taken in and and I think that everybody was very supportive of.

The decision that was made at that time.

Second question is inflation with here in Belgium core inflation was close to a dozen of hard maybe you haven't even 11% in 2022.

It's down to around 5% right now so oh, we have left the Pete and hopefully we can have a second year like that how does it affect our overhead well only only a portion of the offices are in Belgium. As you know we have offices in Greece, we have offices in London, and we have an office.

And in Singapore.

Et cetera, et cetera, So a D D N.

And that affects Belgium is indeed, the inflation in salaries because in Belgium, it's not automatic indexation of salaries to the core inflation number that is produced by the government So last year.

People, Indeed had a an increase of salary at the end of the year.

All of us of around 10%.

You can clearly see what our what the impact is is there.

I don't see that at the end of the day, it's much different than the rest of the world I think that's all over the place people will have to increase salaries anywhere between five and 10%.

So that's where we are let's also not forget that Belgium is not the most expensive fleet I'm pleased to operate a shipping company I think the people who live in London, New York Singapore.

Starting off a base that is already much more elevated than Belgium, but we are not a very worried.

Worried about that.

In terms of the episode safer can can you elaborate a little bit on your question was what exactly do you Wanna do you want to know you want to know the capital gain on that chip if im not mistaken the Isabela days. Indeed, I understood you were interested to understand the capital gain so to be called.

Finally seen from today and the price we have to talk with our mind, it should and again and the art of magnitude $20 million and you remember that ship was not and own shipyard was shipped.

Sheep that we'd sold under a sale and leaseback program. So we already sold the ship one time thankfully, we had put an option that option was in the money and so the capital gains generated as a difference between the option that we had in the market price at which we are.

Selling the vessel to to this program with the U N.

Okay clear.

Thanks.

Youre welcome.

Thank you and then as far as a consequent Yamato with I N G.

Yeah. Good morning, good afternoon, everyone two questions from my side.

I look at the graph you see let me say the price itself feels ashish have gone up materially.

And then for Suezmax still at the same level, maybe it relates to the low number of orders, but let me say Easter if someone is ordering an end in the suezmax it must be much higher than it was.

I missed some of the logic here because the demand for Suezmax is is higher than it has been for many many years I think so maybe you can explain the difference in price development between the new builds also feels she's against the Suezmax them up you can see now.

And the second question is about the spectrum, let me say, we have discussed D. M D.

The new builds but what is on euro and so I can't imagine that people are not willing to to scrap their vessels bits at certain day no vessels, all too old to handle and regulations are also playing a role. So maybe you can elaborate somewhat on the development in that market.

Well I'll go with the first part in terms of what we're just trying to show on the chart.

It was exactly what he goes thinking about earlier than that.

But the prices are for Vlccs.

Have accelerated higher and at a faster rate than those in Suezmax and so when we're looking at those opportunities.

Wherever they are we're much more focused on the suezmax space because the product development has been more existed in the VLCC space. That's what I tried to just showing them. They obviously correlate quite closely but the vlccs.

On a per unit basis have increased more than that the suezmax.

On the second part.

I think it's reasonably clear and obvious in the Suezmax.

What we're seeing within those ships going to they're getting over certain ages.

It's interesting we're now beginning to see.

There's a lot of the commentary was alluding to earlier this year is that they they stopped fleet is pretty unregulated.

In the last 10.

10 days, we've seen a an incident, where suezmax has caught fire in the far east, which.

Which is what he was doing a literally stopped.

Exclusive of doing this thoughtfully.

We're saying that thoughtfully growing because they those ships. It was a very strong partner and as you know the ships are in the older age spectrum until theres effectively a two tier market, where we're obviously operating in the legitimate market, where we're not seeing that supply pressure because the ships are leaving that particular segment.

And maybe just to add to what Brian is saying them.

Most.

A majority of the so called Dark fleet is unregulated so even classification societies.

It may not mean.

Issued a certificate, but it doesn't matter I mean, we certainly monitor that.

Even before the Russia, Ukraine conflict in the Treaty with Iran, and Venezuela. It. It is something that is also emerging dyschezia, even though you do have a number of legitimate orders we would decide to carry.

Carey Russian all under a specific sanction or the end of the price cap in.

Unable to them on the street. So you can see that it's less regulated if I may put it this way some of it is not regulated some of it is less related to attract less attention.

Maybe the standards are all different.

And just to come back on the question because it's it's facts that today, suezmax and not increasing value as much as VLCC and I don't think we do have the answer because we're not a shipyard and we are not.

Putting the Tac prize on it so.

So I suspect that it is a first and foremost a question of what the U R wants to build and the yards are definitely in the luxurious position today because the order book is food and obviously is full of many many different type of ships.

But particularly LNG carriers and containers.

Those are ships that are from added value perspective from.

From the shipyard is more interesting to build than a tanker so that they would like to make more money and secondly, it's really a question of space, who it takes less space and it takes less a little bit less time to build the suezmax and so if you want to.

Sort of a squeeze a suezmax between our two LNG cargo.

To a sort of a mid sized 13 14000 teu container ships.

I'm not going to see cheesy, but it's definitely possible.

She wanted certainly squeeze a VLCC then you need to move many more things around.

And and the fact is that the shipyards they want to maintain their Navajo on how to build ships and tankers and so they really wants to see a at least a few.

Tanker being built every year, so that people with specialized and that continued to keep their knowledge and continue to be busy so that's a little bit.

More specific to a shipyard desire and therefore, if they really want to to have this this type of ship built.

It will make sure that the price continues to be attractive and I think it's less the case with VLCC at the moment, that's why they've let it go to a level, where they can make as much money as they would on another type of ship.

Okay. Thank you, but my final question is then how large is the dark fleet in your view have you any idea.

But we you know our idea are simply the one that we read in the market. There are a number of our other analyst or even specific.

People specializing in monitoring that.

And they are talking about 150, or yes, I mean, there are a lot of numbers floating around here was always but if it takes them a vortex I hooked on the numbers.

Theres been in total number of tankers all sizes.

740, <unk>, that's all size in our hold sizes. So you guys said you're exactly right.

That's roughly 100 sort of territory, calling from segments in all categories, which is sort of getting old, but as we've said consistently I'm done presentations in the past, we end up somewhere between seven and 10% of both the Suezmax and VLCC fleets I'm sure. If you issue a want to send US an email we can send you some of the.

<unk> report that we've seen and certainly the ones that we believe are more serious than others.

I'm very happy to share that information offline with you.

Thank you thanks a lot.

Yes.

Thank you and just kind of curious about the question that session as well as the call.

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

Thank you everyone.