Q2 2023 Scorpio Tankers Inc Earnings Call
Hello, and welcome to the Scorpio Kangaroos, Inc.
<unk> 2023 conference call.
Now like to turn the call over to James Doyle head of corporate development, Iowa. Please go ahead Sir.
Thank you for joining us today welcome to the Scorpio Tinkers second quarter, 20th 20th Conference call.
On the call with me today or.
Chief Executive Officer, Robert Bugbee, President camera Lackey, Chief operating Officer, Brian <unk>, Chief Financial Officer, and Chris Isabella Chief Accounting Officer.
Earlier today, we issue our second quarter earnings press release, which is available on our website.
<unk> Dot com.
Information discussed on this call is based on information as of today August 2nd 2023, and they can pay for looking statements that involve risk and uncertainty.
Actual results may differ materially from those set forth in such statements.
For a discussion of these risks and uncertainties you should review the floor Lucky statement disclosure and Yearnings press release as well as Scorpio tankers S. E C filings, which are available at a scorpio tinkers dot com and S. A C dot gov.
Participants are advised that the audio of this conference call is being broadcast live on the Internet.
Also being recorded for playback purposes. The archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days.
A short presentation today. The presentation is available at Scorpion Tinkers Dot com on the Investor Relations page under reports and presentation.
[noise] slides will also be available on the webcast.
After the presentation, we will go to Q&A cause I was asking questions. Please one that the number of questions. It too.
Have an additional question. Please we joined the queue now I'd like to introduce a chief Executive Officer Manuela Laura.
Thank you James and thank you for joining us today everybody.
We're pleased to report another quote of strong financial results.
<unk> the company generated $235 million you need <unk>.
And how long did it take you through immediately and adjusted and I think.
The market.
<unk> has been and continues to remain strong and <unk>.
Could be seen two conflicts over the last <unk>. The company has generated $1.6 billion <unk>.
And $1 billion in adjusted net income.
During which.
Reduce that leverage by $1.3 billion and repurchase 582 medium of the company shares.
<unk> and returning copy they'll do several days has been our primary focus.
Second <unk> is $260 million of the company shares cause she's almost half of our total repurchases since July 2022.
The increase in share repurchases reflects the progress we have made him deleveraging and refinancing the balance sheets.
We view the repurchases is valuable for our shareholders Keven, that's the shares upgrading it to large discounts to the company <unk>.
Our balance sheet continues to improve.
Today, we have $683 million in liquidity in July we closed out with 1 billion dollar loan and revolving credit for <unk>.
We are in the process of closing a new $94 million could succeed.
These new facilities combined no what are the companies you introduce margin accelerate DB purchases, a more extensive lease financing and increase the financial flexibility of the company.
Looking for words, we expect no global inventories <unk> Unlimited Street <unk> to support strong proud of tanker fundamentals we.
We would like to thank you for your continued support and I would like now to turn the corner over to James what a brief presentation James.
Thank you manually.
<unk> please.
We've seen an elevated rate environment since Q1 of last year and is Emmanuel E highlighted over the last six quarters, we've generated a little over 1.6 billion in EBITDA.
Since July 2022, we have repurchased $582 million of the company shares and paying $49 million in dividends.
15 vessels on time trying it out contracts and the remaining 97 vessels operating in the spot market.
Five eight please.
We continue to repurchase vessels under extensively financing and I've started to refinance some of these vessels underneath bank facilities with lower interest margin.
To the right you can see the list of vessels that had been repurchased in our upcoming as of today, we have repurchased to repay the outstanding debt on 46 docile.
In July we closed our new 1 billion dollar term one facility and we're in the process of closing a new 94 million dollar facility.
<unk> of Lee's financing ranges from <unk>.
350 to 525 basis points in our new wanted facilities have a margin of silver plus 170 197 basis points.
By nine please.
We've made significant progress in reducing extensively financing from 2.2 billion to one to 1 billion today.
Timing differences between repurchasing vessels on refinancing and drawing down a new facility me that at times It appeared.
<unk>.
That sounds hopefully financing with periods in which they can be repurchased.
Majority of vessels under lease financing can be repurchase within the next 12 months and there are additional vessels that we expect to repurchase this year.
So we will continue to reduce our leverage like just wanted to highlight the timing.
Given the strong earnings and proceeds from new facilities, we expect to have an elevated cash balance, but keep in mind a portion of this will be used to repurchase more vessels suddenly financing.
Today is menu I mentioned, we have a $683 million in cash.
510 please.
Well gross that will include pre slightly in the third quarter net debt has remained around 1.5 to 1.6 billion over the last three quarters.
As of today. It has declined as currently at 1.4 billion with no new buildings on order, we have a mall capex and feel very well positioned.
11.
The company is significant operating leverage and cute and.
Q2, so far including time charter just averaging $26000 per day, but as you are aware rates have increased significantly over the last two weeks and Mr's are now at $34000 a day an hour north of 40.
At $30000, a day generate almost 800 million free cash flow per year and at 40000 close to 1.2 billion.
These are certainly exciting times.
513 please.
And the second quarter significant refinery maintenance lower refining margins and reduced arbitrage opportunities led to lower trading activity a decline in right now.
A R T S O Y for decor as Asian, with fiery maintenance limited naphtha arbitrage opportunities and competition from L. P. G. It would be a small call volumes going from the middle East Deja.
Alright, your main much more stable, reflecting a strong underlying global demand for consumer fuels, such as gasoline and jet fuel.
Fight these headwinds rates remained well above cashed breakeven levels and many of the headlines in the queue to or in the process of diversity.
Refining margins I've seen a large increase in July can remain at very sharp starkel basis.
The L. P. G spread has improved in the forward currency snap the substitution for L. P. G. Walker over the next several months, which is very constructive <unk> unplanned.
Unplanned refinery outages and historically low inventories create a scenario where any supply disruptions will need to will lead to increased volatility and higher rates and lastly rates of increase significantly over the last few weeks and we think they're going to remain strong through the rest of the year.
514 please.
Global inventories are level other five your average for gasoline and diesel it doesn't matter what region or or what product, they're they're extremely long and.
Typically diesel inventory spelled southern summer months ahead of the.
Winter demand season, and we have seen minimal bill today.
Very constructive tight market in the back half of this year.
How robust demand has been.
515 please.
Forecasts for refined product demand for the second half of this year and next year at the revised upwards second half 20 twenty-three demand is expected to be two to 3 million barrels a day higher this year than last.
In our view. This is one of the most bullish driver for strong freight rate two to 3 million barrels of additional demand year over year against historically low in Victoria.
Well diesel demand is expected to increase at a slower pace due to lower trucking activity the demand for gasoline jet feeling that that are expected to see large increase it.
We are seeing this demand on the water today seaborne volumes from my extremely high and are averaging one to 1.5 million barrels a day more than 2019 levels given low global inventory increased consumption will continue to be met through imports with product tankers reallocating girls around the world.
516 please.
While demand is above pre COVID-19 levels refining capacity is lower and more dislocated regional capacity changes are structural and will continue to drive 10 miles.
Rose for the coming years, the impact of new export oriented refineries coming online like Alice or in Kuwait have led to an increase in exports out in the middle East. We are also seeing the impact of European sanctions on Russia. Europe has increased its imports from the U S and middle East by 600000 to a million barrels a day.
All of these changes are driving an increase in 10 miles <unk> increases the capacity is reduced and supply Titans.
By 17 please.
Over the last few months Russian exports of the byproducts of decline to more normal levels. The great fleet of vessels that our service in Russian bottoms has increased significantly to 353 vessels today.
H 277, or handy Max Mara vessels.
That sounds such move into sanction trades reduce the supply of vessels and dance at two <unk>.
The impact of vessels servicing Russia is expected to have a significant impact on the capabilities of the global fleet going forward.
Any of the vessels, which a move in this trade are 13 to 15 years old and will likely not returned to the premium trade, it's giving their age and trading history.
Glad 18 please.
Do you recall in December Ray reached record levels, while the order book was near an all time, while and.
And over the last 18 months, we have experienced a strawberry environment evidenced by the volatile blue line in the graph.
From a cyclical perspective, hopefully, whereas you know July 2003, or even July 2004, but you know historically this product tanker rates increase so two orders for new vessels. Thus, it's not surprising that we have seen additional orders rationale for ordering a strong spot market healthy longterm time charter rates <unk>.
After demand outlook an agent fleet.
It's a good reason, it's also a good rationale for investing and product tanker company.
By 19 please.
The increase in the order book has largely been driven by L. R. Two orders 49 definitely here to date Wow L. R. Two orders are elevated M. R orders below their five year average this year well below stoical averages and up until this year L. R. One orders have basically been nonexistent with only 12 <unk>.
Ordered from 2016 to 2012.
So part of the increase in allergies.
Just to compensate for the agent L. R. One sleep similar to how Emaar simple actually replace Sandie Max vessel.
With an hour or two you have the option of Optionality to trade it in a crude market less than 50 per cent of the allergies on the water today are trading quaint products.
In addition, there are constraints to ordering new vessels or a long lead times for the delivery of the new build vessels orders place this year, where for the earliest slots at the shipyard B font. So now gone.
Those are expensive compared to historical levels and the cost of capital is higher surprising interest rate.
New build L or two to 71 million, what the 20th 26 or 2027 delivery date will require I breakeven right.
<unk> needs a constructive market.
Lastly, there are still concerns about different propulsion system, such a required to meet future environmental regulation.
All of these factors active so constrained by 20 please.
I'm thinking about new building orders and fleet growth the agent training profiles of food must be considered the product tanker fleet continues to get older in age and this is important because as a product tanker becomes older the coatings, which make them a product tanker develop issues.
Product tanker on the water is not trade in cleaning products only 60 per cent of the handy Max an hour or two fleets trading quaint products and 70 per cent of <unk>.
Older vessels, moving to trading dirty products or crude oil, although you do see L. R. Two vessels move into these trades earlier, it does need to be accounted for.
Given the age of the fleet, we expect more vessels to move into these crude oil trades as they get older while the increasing number of vessels.
20 years and older become scrap candidates by.
By 2026, the product tanker fleet <unk> 954 vessels that are 15 to 19 years old and $811 20 years and older and increase from 349 today. These changes will have a material impact on that please.
Scrapping is at an all time, while and we do expect scrapping to increase is definitely agent environmental regulations increase.
521 place.
Putting this all together despite an increase in order in order the order book roommates modest using minimal scrapping assumptions on average the fleet will grow less than 2% a year over the next three years using higher scrapping assumptions do the fleet age and upcoming regulation.
Will grow less than 1% per year.
Tibor exports ton-mile demand are expected to increase 4% and 11.9% this year and 3.4% and 6.3 per cent next year vastly outpacing supply. In addition, one entering your time charter rates remain at high levels evidence that our customers outlook is one of.
Increasing exports 10 miles against the constraints apply Kurt.
The confluence of factors in today's market or constructive individually.
<unk>, well inventories increasing demand exports and 10 miles structural dislocations in the refinery system rerouting of global product flows limited food gross and upcoming environmental regulation.
Collectively they are on Prescott with that I would like to turn it over to our President Robert Bug me.
Hi, good morning, everybody. Thanks, so much for joining the sea.
Some of the hospital management. This is a great time to do it.
Invest it interesting and you know a great time to be further invested in spring.
We're happy with all the boy back sleeping able to do I'd, just like to point out a couple of things I think.
Do we think is really important and focus on his festival the liquidity.
And the financing that's being done that gives a tremendous amount of flexibility going forward.
We've shown during this quota.
<unk> <unk>.
<unk> one thing too.
So oh, the vessels to them <unk>, the arbitrage as well hope to be between the Navy and the stock price.
And the other thing is the right.
Is.
I think I'm gonna borrow from John Chappelle to one of our analysts but.
No. It's most important where the market is going the investor as opposed to.
And the market right now is going up.
Collecting up goods from <unk>.
Very very.
Strong week period that we've had for a.
A couple of months I mean to average average.
I have a gmail booking and what is the weakest part.
The the year is fantastic many many many years that would be.
A high number.
But we've got.
The next part of it is we're already owning a very.
Large numbers James with pointed it out.
The third in mid thirties, and <unk> moving through into the 14th from yellow to.
Yellow teeth continue to go up today.
So that creates a lot of confidence for the company going forward with that I'd just like to know thank you all again and opened it up for questions.
We will now begin the question and answer session to ask a question.
Press Star one.
One on your Touchtone phone.
Using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
The first question comes from Omar knock that with Jeffries. Please go ahead.
Thank you Hey, guys morning, and good afternoon I.
I wanted to follow up a bit on just Robert your comments about where rates are and and also I know James you touched on this but you know it seemed that product tanker rates settled in here into the typical summer doldrums that <unk> that we've seen in the past and what we've actually seen over the past day two to three weeks is a real resurgence and it's real across all the <unk>.
Perfect segments, and this is happening while we've seen some weakness or further weakness in the crude tanker side of things. So I just wanted to ask you know maybe a bit more if you could just type a bit deeper into it you know what's been driving the market here recently, what's behind the the the latest jump in and and what can we expect going forward here.
Sure I'll go first on this I think that.
<unk> refinery margins.
Really wanting to the <unk>.
And we see let's say.
Change a big change in sentiment.
I think we moved from Oh, well, we <unk>, we really like the recession review on oil and consumer demand and products.
No S as expressed by the paper market into the physical market now overwhelming thing I mean, either futile that demand is going up now we're seeing this in this constant drool down and then as the as the prices of oil moved upwards.
And the prices of refined products moved up even higher than the bucks a loyal than.
People are starting to you know that they can't just sit there and do anything nothing at that point they have to start to engage in the market.
And so I think as usual Oh, these things except interior too no Hurricanes award this is being demand led and.
We had a market that was really tight anyway. He explained.
This week was still the doldrums was at very high levels with very high utilization.
So as soon as you put this demanded that was going to move.
Move the right time.
Thanks Robert.
That's helpful. And then maybe just cause my second question is a follow up you know given the market strengthen Scorpio you guys put a sizeable critical mass across the L. R. Excuse me <unk> you know you you <unk>.
Quarters were able to put away some of your shifts on on period contracts. How would you even think about it now I think it was 15 ships now that you've got on on T. C. What does it look what do you look like for for that market at the moment given this sort of run up we've been seeing in as her appetite for Scorpio to add more.
Well I think we've seen that the you know what are the other card encouraging thing within the support it <unk> the long term fundamentals here.
Three of food right is hardly changed.
Periods, so again, the physical market to just move through this period not referencing through the paper market.
And you know <unk>.
Right now is.
This is very very strong move and it's you know it's surprised us we've had <unk> very quickly to to to do this with we you know we need a monkey would go up you can never find that actually work out that exact inflection point and then inflection point started happening 10, 12 13 days ago.
Right now, it's just not the time to.
You know look to put chips out on punch auto you, let this come.
Because.
We were really Europe is exposed itself now <unk>, becoming you know exposed everywhere everywhere, we <unk>, we stopped seeing more movements from the middle East product and will movements from Chinese exports.
Then you know this mark it could really run as we start to move into the strongest suit. So right now is not the time too.
<unk>.
Thanks, Robert makes sense, that's all for me I'll turn it over.
Our next question comes from John Chappelle, Evercore I S. I. Please go ahead.
Good morning, James I wanted to tie together a couple of points that you brought up during the second half of the year both of low inventory starting point and then also the two to 3 million barrels is incremental demand.
We'd been early before with inventories drawing below historical levels, whereas the incremental two to 3 million barrels a supply gonna come from and when you think about that for a global map perspective does it continue to extend the 10 miles that we've seen over the last six quarters or is there a chance to to be a bit more regional just given the maybe pants.
Going into the winter to meet that demand.
[noise] well I I think you know we have this scenario now we're inventories are so low and we we saw it last year, where any type of supply disruptions. So there's been some impacts to some refineries in your skull. For example will have to be met within points from different places.
So I'd say, it's gonna be a combination of long haul in regional I think if you're looking at remaining places with capacity, it's really the middle East and China.
Uhm, Robert did mentioned that we could see Chinese exports increase here if the the issue a new batch of quotas, which seems likely and I. Thank you you do have some more capacity out in the middle East. We have seen for example, outdoor refinery, which has two out of the three C to use up and fully running have a material impact on the export market.
So, but I I do think you know given our strong demand is it's gonna have to be a collective effort.
Okay, but just to be clear I mean, you do expect that that incremental demand to be met with supplying not kind of further inventory draws below five year averages.
The projections were looking at it very close.
So okay.
<unk>. For example, you you know if you were to lose more Russian barrels or there were to be more disruptions in European or dressed refinery things can be very difficult you could see dry and we're seeing a lot of draws in a crude side right now as well.
Okay.
Second question relates to the fleet sold the vessel just recently as I look at the fleet age there's still a handful that are over or at or over 10 years old and then of course have a much greater canceled it become 10 next year, what do you think about the <unk> the current stock price and asset values right. Now you should we expect more maybe monetize.
<unk> a bit of the older vessels as we go to the back half of the <unk>.
Yes, but we we will yeah as we started doing the law school that <unk> and then.
We have evidence by the sale of the first one with.
With.
We're willing to do that.
Oh, no that would be described we're doing it slowly.
Yep, Alright, thanks, Robert makes sense.
Our next question comes from Ken <unk> with Bank of America. Please go ahead.
Hey, This is Nathan Lane for 10.
I I just wanted to follow up on on Mars original question on sort of a bifurcation between the crude and a product Tinker markets I mean over the quarter. We've we've heard of some tankers dirtying claim product muscles.
Maybe maybe if we could just get some comments on.
Which is the first one to economics are and how how we should think about the capacity tilman that represents for for the product tanker market.
<unk>.
Sure well Nathan a lot of the switching uhm from L. R. Twos was really started kind of in queue for last year, I'd say, you're probably seeing you know at least 20 vessels more Barbara into this trade and and you have had a strong aframax market I think.
For these smaller heard vessels, there's a lot of new capacity coming online from Latin America Africa, The U S, which benefit these vessels.
Ton-mile cause obviously increase I think on the queenside, what you've seen is obviously a challenging market due to kind of the NAFTA arbitrage.
And then obviously lowered his stomach volumes, but we see those things reversing and so I think as we look forward, we expect both markets to be tight, especially on the product side, which we know more about on a crude side, obviously you know what <unk>.
Got it okay, and and just as a follow up on on Capitol strategy, just wanted to get a sense on how the team is looking at deleveraging from here obviously.
<unk> being shot over the past year in the past few quarters is there <unk>.
Is there a target <unk> target leverage level or or is this more of a target by phone breakeven T. C goal that we're trying to treat here and maybe just also update us on where that's 17000 level could potentially trend Saint <unk> 2024.
So James wanted to do with the.
17000, and then I'll do with the <unk>.
<unk>.
Yeah. So we we expect the breakevens to come down there, probably a little bit higher than that 17, because of the timing there'll be three payments. So with the the leases we have to give notice and there is.
A specific period of time of the year, which you can repurchase the vessel so as much as we'd like to go off and repay those vessels today, we can't do that the good news is most of the least at around $1 billion can be associated with it can be repurchased over the next 12 months. So you will see you continue to announcements from us.
That will give you a better insight as to how many vessels and the timing on that but right now we haven't disclosed it yet, but obviously over the next 12 months, we do expect breakeven to decline and you have had higher interest rates as well during the spirit.
And then Robert <unk>, Yeah, <unk> with regards to the debt level, that's not a question that with.
I'm ready to answer no. We can see from the times, we got <unk> anyone can see from the terms of Linda historically would that level will ready is.
Is very low on a historical basis.
But you know we will the question of how you can reduce can can you introduce did that level is we've mentioned potential for the side of the vessels. We stood how confident we are in the.
The right environment going forward.
And I.
I think that those two combined combine things will will leak to b b.
T two.
<unk> lowered that plus do whatever else we want to do.
Got it Super helpful. Thanks, Robert Thanks. Thanks.
Right.
Our next question comes from Sam planned with J P. Morgan. Please go ahead.
I'm ordering thanks for taking the question I've got one question with Tupac first one is can we just touch on the disruption and market tightening from sort of the Russian sanctions impact is that whenever the impact is related to Russia does not know domino move sort of seen the full impact.
Or is there some.
For the market towards me right to Russia that might come through whether it's from the dark for each or anything else.
This is the second part was your rights values I see on slide 21, there's another 6.3 per cent <unk> 24, where why do you think that.
It comes from is it's a general.
Gross or is it related to Russia running out.
[laughter] okay.
The next year's forecast per ton miles of the 6.3 about 3.4% of that is just exports and the the difference 2.9% is 10 miles and that's really going to be driven by by middle eastern experts in that capacity coming online as well as some <unk> potential closures in Europe and emerging.
Market demand, so that is not including any displaced Russian volume.
I <unk> I still think there's more upside to the the dislocation as a result of the conflict in Russian Ukraine, but we have seen a majority of that impact I think the biggest contribution from from that will be what happens with the great <unk>.
Overtime. So there's a lot of vessels say 12 to 15 years old.
That I've moved in to service. These trades now these vessels are older and they'll have potentially a dark trading history. So I think as you look forward and with a complete I mean, we're talking you know 10 11 per cent of the M. R fleet servicing. This this train so it's it's gonna have a long standing.
Impact on for supplying trading dynamics and that part I don't think we've seen yet in terms of the volumes moving to the the Middle East Latin American Africa, I think we have seen us and obviously, we highlighted we've seen an increase in exports from the U S. In the middle East to Europe , So I'd say that <unk>.
Yep. Thank.
Thank you.
Our next question comes friends, Fred Mark It down with Clarkson Securities. Please go ahead.
Thank you I got.
Good presentation.
And so far.
Alright.
Yeah, I guess the keyboard so far is demond on you mentioned.
<unk>.
So I guess.
There's so many moving parts the d'amato's right.
You have the Chinese products exports Navy town.
Russian product like <unk>, how much is new refining capacity.
Refiner maintenance is not there.
What is the amount of course crack spreads Harper to Australia, no inventories done.
Oh no no that's many.
Then as a matter of fact, the question readiness, which one is.
Is the most important one which would have the greatest impact and then they're gonna need them too.
I would say a headline.
<unk>.
<unk> <unk> <unk>.
The headline demand the great comfort.
All of the players and create urgency.
The lowest plan to perhaps Shaw.
If we if we move continued to move from.
The first half recessions here <unk>, the headline oil demand product I'll do a full.
As a result of the recession.
And we move towards an understanding.
Nathan by various sort of.
Disciplines, whether the government so anything else that that's happening than.
<unk> creates an environment where.
If you are short.
If he was sure feasible for example in Europe going into winter.
While you you'd better come forward and stop buying.
And so that I think is the most important thing because.
It forces.
The market to sort of act.
In a in a sort of a <unk>.
And it's too difficult to estimate anyway, you know on a day today basis, whether that's gonna be coming from the Middle East China rule.
Or wherever.
But I would start the.
<unk>.
Nope I agree.
Okay. Okay.
My second question is on the Russian side.
Perez.
That's proved exports coming off the boys so to speak.
But how how else the situation for products now.
Mm you too similar to crude you've seen products I'm down to them more normalised levels part of that is probably due to OPEC, but I think part of it.
Increase we solved right after sanctions kind of them in March weren't exports at 2 million barrels a day was was kind of a build up it that day I've had in in trying to put more on the market. Obviously refineries have to go through maintenance and even in the U S golf or or other export regions you can't run that.
95 per cent in the high nineties.
For an extended period, which would suggest kind of the exports that they had so I think we're gonna see amount of more normalised level.
<unk>, what we've seen.
Starkly, maybe around a million barrels a day.
And unnecessarily unlimited in the market.
Yeah, It's Florida, I think will be interesting to read the approach.
Which.
He was watching Europe now.
<unk> <unk>.
Last year, they were able to let's say police dog head of rugs and sanctions.
And the and at the same time had a really mild winter.
So if you if.
If you go into the winter with lower inventory.
Let's say last year in October .
<unk> or more or less the same last year.
And you have the Russian situation that you you change to describe it it's.
It's going to be plus the sanctions are in place is going to be much harder.
T pre stuck to winter.
Thanks <unk>.
The question comes from Sherry Oh My garage.
P T I G. Please go ahead.
Yeah. Good morning, first drilling down a bit more on on what's going on with Russia, certainly there's potential for more upside, but with Russian oil crossing the price cap are you seeing some tankers return the other trades cause after me look like they've they've created in some places or or some L or two switching back to the Queen trade.
Or is it too soon for that kind of shift.
We haven't seen the list.
Yeah, sorry, Robert I think <unk> I think it's.
I think it's way too soon for that and.
You know, it's just not easy to.
It's not easy anyway to take a.
<unk> throw it into and cleaned it up.
You're not going to do it at the president spread the older. The shape is the more difficult to get some may be.
Really difficult and then some of these vessels that have traded to Russia.
You know.
They're almost certainly not going to be accepted.
By the charter is involved in the in the let's say the free market.
Queen.
Clean petroleum <unk>.
Mmm.
And then three things you Gotta you Gotta, you Gotta clean up and then you've got to be allowed to.
Detroit the actual product itself.
Mhm.
And then maybe to follow up on vessel fails and we've seen the pace of Newbuild orders really pick up with I'll pick up over the last few months.
How are you thinking about for renewal at this time, if you're thinking about it at all and I realized nubile prices are looking pretty fall.
Do you mean <unk> itself or.
General Yeah, Yeah, yeah.
Well you know what we could do both but I was meeting Sting specifically.
Oh, we're not thinking about new Bill <unk>.
<unk> B E.
You know very very low down on the on the.
Capital allocation list so.
So much better too.
By your own stock and to order a vessel.
Probably wouldn't come until it's 2026 or whatever anyway, and I think that's the thing you have to realize.
It's the way that the <unk>.
The building order book as being elongated and time too.
So yes, there are more orders with that you haven't shifted.
What's coming in twenty-three you haven't shifted what's coming in 24 and you haven't shipped it was the best off the 25.
So if you just do the simple math of take a dollar do I want to spend that dull room.
<unk> 2026, Oh would I take that dull put it in.
You know staying in the afternoon.
Oh <unk> for example.
All right that they are you getting any benefit to the cash flow right at the front.
Mulder comparison.
Especially with England, such a nuclear anyway.
The.
Okay. Thanks for thanks for taking my question.
No problem.
Our next question comes from Lindbergh with be Riley S. B R. Please go ahead.
Thank you back on capital allocation, you've been clear about debt reduction your buybacks earlier last corner you bumped your dividend from 10 to 25 cents.
Is this a dividend you anticipate paying through the cycle or are you going back and looking at that pay out is possibly bumping at orange or maintaining it.
I think a load of that depends on where the stock prices you know right now.
Again at this particular point.
You know.
I think can invest it.
<unk> as opposed to a spa.
<unk> or whatever it would be it would.
Would really want the company to use the cash flow.
Alright, we'll use the marginal dollar right now in stock buybacks then.
Paying out a dividend that everybody gets packed them.
So.
The dividend part can wait.
This this is a situation where the company has just had a fantastic quota.
Great Great cash flow, it's refinanced everything the market is is going upwards, we're going into a great future dynamic.
We just felt that it just wasn't right to increase the dividend at this point.
With the stock trading at such a dislocation to the fundamentals.
Fair enough. Thank you and I guess, that's for James things are getting a lot better at the macro we're looking at a creeping order book here somebody offset wouldn't be recycling, but what gets said activity going we haven't seen that in a few years.
No. It's a it's a great question I think just the number of vessel that will will turn.
20 to 25 years over the next three years is is so massive that you're you're gonna have vessels that kind of surge tertiary markets or trade.
And I noticed that sounds are gonna be scrapped I I really think you're gonna see first as a part of environmental regulations as well.
But just it's a staggering staggering number of vessels I think it was around 900.
Are 800 vessels will be 20 years and older by 2026 up from 350 today. So it's it's massive numbers, we do thank those will be scrapped.
And I I think you also have to factor in the age of the fleet.
There's a lot of vessels that are kind of 15 to 19 that are gonna move into the crude oil trade. So we still think the order books modest in Creek road is extremely low, especially in a store called basis.
Great and then just as a follow on as as your vessels agent into that category. I mean, it's been awhile do you ever think of a trade off between selling it to our V N a V versus just throwing it into the crude market.
That's what we are doing.
Have been doing and what we just said we will continue.
Okay.
Robert that congestion.
Our next question comes from Chris Robertson.
Bank. Please go ahead.
Good morning, everyone. Thanks for taking my questions. James You know you can.
Outline minimal capex this coming quarter as well as next and I'm wondering what does this translate into in terms of off our days.
And are there any utilization factors in terms of ships moving in and out of the pools in the coming quarters that could impact operating days.
Chris or or Brian would would you like to take that.
Sure we have on file.
<unk> broke go ahead Chris.
Uhm sure Brian Yeah, the all parties are minimal.
Having any dry dock from the next.
Next half of the year in the next few corners, we energy and the table in the press release physical 24, it's more escalated because of just the number of vessels coming due for their special survey.
You know so for that reason the Catholic is minimal you know when they're coming quarters.
Okay, and then in terms of the utilization any impact there with regards to ships moving in and out of pools.
I wouldn't say that's material.
Okay.
My second question is just around the the step up in vessel Opex from wants you to two Q did you guys see any further cost inflation or pressure is expected for the remainder of the year.
Thank you to is gonna be a more normal iPhone right cause the remainder of the year.
As opposed to Q1.
Okay, great Yeah, that's it for me thank you.
Thanks, Chris.
This concludes that question and answer session I would like to turn it in conference back over to Robert Lucky for any closing remarks.
Thank you everybody really appreciate your support and your interests and.
Everybody enjoy the summer we look forward to speaking to you again in the autumn.
Thanks very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.