Q2 2023 Frontline PLC Earnings Call
Okay.
Good day and thank you for standing by welcome to the second quarter of 'twenty, two 'twenty three frontline plc conference call.
This time, all participants are in listen only mode.
After the speaker's presentation, there will be the <unk>.
<unk> and answer session.
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I'd like to hand, the conference over to speak of today, That's why Scott. Please go ahead.
Thank you Daryl Thank you for listening into Frontline's second quarter earnings call.
In the second quarter, we held a very untypical spike for VLCC and suezmax towards them.
It's puts us in a position to make some extra cash and also to carry into the third quarter.
Most interestingly this spike was caused by minor weather delays, telling a tale of how narrowly balanced our marketplace.
The macroeconomic headwinds seem to have a very muted impact on our little part of the global macro puzzle.
And we'll get to that later in the presentation I think it's worth mentioning that in the markets like this from clients efficient and transparent platform comes to shine and effectively turning revenues to shareholder returns our running costs remained fairly stable as expressed in our cash breakeven levels.
All the incremental income go straight to the bottom line and back to your shareholders.
Before I give the word tenure.
When I look at our T cell numbers on slide three in the deck.
Okay.
In the second quarter from Glen achieved $64000 today on our VLCC fleet $61700 per day on our Suezmax fleet of $52900 per day, but not a lot to slash aframax fleets.
I hope you're all fairly comfortable.
Comfortable with these numbers and we are back to somewhat reverted earnings relationship between our segments, whereas the VLCC makes the most.
We have secured quite a firm numbers as it progressed into Q3 with the 74% of our VLCC days booked at $53200 per day.
67% of our Suezmax days.
Fixed up $48800 per day.
Kevin Farr.
I'm sorry, our partner LR twos starts after they are up $40500 per day.
And again to remind you all these numbers are on the load to discharge basis, and they will be affected by the month of ballast days at the end up having towards the end of Q3.
Now I'll, let <unk> take you through the financial highlights.
Thanks and good.
Good morning, and good afternoon, ladies and gentlemen.
Let's turn to slide four profit statement trying to get some highlights.
I think in the second quarter, our country, we recorded the highest second quarter profit.
Since 2008.
237 million or 1.4 cents per share.
Our adjusted profit came in at 210 million or zero point 35 at the end.
Sure.
Revenues came in at 510 13 medium.
We declared a cash dividend of 80 cents a share.
Yeah.
Okay.
I will mention that following the sufficient to address.
Drydocking cost would it be capitalized and subsequently to take it over the period to the next scheduled Drydocking, which is two to five years.
In the second quarter Drydocking cost of 1 million have been capitalized and one vessel dry docks in this quarter.
In addition, I Havent mentioned that the company revised the estimated useful life of its vessels from 25 years to 20 years effective January 1st 2023.
Let's then look at some balance sheet highlights on slide five.
And the company has no remaining newbuild commitments of the company took delivery of the two loss needs to see new buildings from Florida sometime in January 2023.
The company has strong liquidity of $719 million in cash and cash equivalents, including undrawn amount of unsecured facility.
Marketable securities and minimum cash requirements, if a bank as part of the study the June 2023.
And we have a healthy leverage ratio of 51%.
Their platelets.
Platelets.
Yeah.
Our flow pension on slide six.
Yeah.
We estimate industry, leading cash break even rates of 22700 feet average, including dry dock cost eight suezmax tankers in 2023.
In the third quarter.
In the fourth quarter.
It did Q2 'twenty three feet Avi spoke to excluding tied up for $7300 per day.
We know this from this.
Graph on the right hand side.
Free cash flow indicates strong potential return.
If we.
D C TCE rates of $75000 per day at five and a half year historic spend today, what you see for Suezmax and that extra tankers.
Free cash flow potential is for $1 4 billion or $6.34 per share, which translates into a free cash flow.
Six or seven.
With this I leave the word to Lars again.
Thank you Inger.
That's our goal.
Slide seven and look at it.
So going on to the current market.
So we've just been through a very volatile summer markets hopefully coming to them.
The key themes have been Asia Pacific continues to pull volume.
We're seeing increased supply from what I refer to as new export truth as you can see on the bottom right. Tom Fudge trucks. This is United States, and Brazil, and Theyre, not really new but that are kind of growing at least among Guiana, which is like the spice.
Spice two two to the mixed here.
US OPEC cuts the cuts.
Cut production predominantly around the middle East.
With the continuous pull from Asia Pacific we are seeing.
Talking about increase.
Benefiting veeva.
We also see a tonne miles in particular.
Hum.
Year on year or quarter in Q2 last year versus Q2. This year demand in the Asia Pacific region, and it's actually up to one 8 million barrels per day, that's quite significant considering most of that oil is being afraid on tankers.
This represents about a 5% increase in in a commensurate with volume.
For going on shipping.
And that's those 5% this is not taking into account.
Talking about the effect.
We started to see that the Russian price cap started to bite into two outcome.
Back to that later.
We are also seeing refinery margins improving.
Towards the end of ultra maintain the system.
And we have their back.
Crown music of basically every analyst's under the Sun expecting oil demand to grow by about 2 million barrels per day for the second half.
Okay.
Let's go to slide eight.
I'll go through the restaurant.
While the effect that has had on our markets.
G seven oil price cap came in to effect in the December 2010 to two.
After $60 per barrel for <unk> crude.
Where are you seeing on the bottom left hand side, the euro soccer efforts the oil price and it's predominantly the quality you won't discuss this around restaurant supply.
When the prices moving above the price caps, it's become increasingly complex to frame gross margin.
We've seen various kind of policies amongst owners, whether if they're willing.
Linked to service, the Russian market or not.
Year to date.
But what.
What we have seen now recently is that some of these owners are less lenient to lift truck barrels basically because it is.
Very hard to argue you're doing it inside the framework of the current sanctions.
These vessels are then returning to the moment in Russian market or the plain vanilla Suezmax and Aframax market and this has put pressure on rates.
Obviously the capacity them has increased particularly in these prices.
Product exports has been left.
Yes.
Kind of traded above the price cap is actually flirting with a price cap now where the price cap is actually over $100 for gasoline gasoline is a big project for us.
Exports.
It's kind of a firm.
It's a product.
Two represents where products where it is.
Gasoline in Singapore is now trading very close to $100 per barrel.
We've seen the Russian exports costs falling quite rapidly due to this.
Last one 7 million barrels per day ultra Russian exports since the peak in April .
400000 barrels abaxis products.
The full there is less pronounced but one 3 million barrels of.
Today of crudes or fuel oil has been lost.
During the last five six months.
It's going to be very interesting to see how this develops further.
Starting to see.
Analysts are getting for the Russian controlled free for the Russian owned fleet.
<unk> to maintain volumes, which is evident so looking at the export statistics.
The only way they can kind of replace the capacity there now will be to actually go into the home.
Russian trading fleet and purchase more assets.
There are actually in fact slightly.
Higher numbers of vessels that is needed in order for them to maintain their export levels.
Should they want to do so.
They're part of OPEC plus so the official arguments will always be that theyre working in line with with the OPEC strategy, where the voluntary hiccups, but.
Because we believe that they can be very interesting to see what happens in <unk>.
Both the market for older purchased the older.
Vessels.
And that's the causes we tried pretty clear them from accessories Max.
This progresses.
Let's move to slide nine.
What's going on in the refinery world.
I think it's important we almost forget because it has so many black Swan.
And the tanker industry for the last few years, but the seasonal summer.
Good.
Slowness or softness is in fact caused by the scheduling of refinery maintain us on the bottom left hand side. There, we see kind of global refinery out suggests these are basically.
Bartlett at refining volume that's been taken out due to maintain this work how many states very distinct.
Have a highest in April and.
Likewise, there is also a distinct high in September October where refineries are shut in basically taught to do maintain this work so that they can effectively either for the summer season.
Or for the for the winter season.
Lisa.
Fairly fairly significant effect on demand for oil and also demand for for punish them.
What we see now is that's where we're heading in towards kind of on a refinery turnaround side were actually fairly low.
We are going to go into the high turnaround season in September October .
We are actually looking at it on face value it looks fairly.
Libraries for tactical them, all but one has to remember that the tankers are fixed.
As you'll see now is being fixed four four mid September .
And then the oil will land in the various refining regions.
September if it worked out well.
African crudes, that's investing fixed today will actually land in the beginning of October and any U S. Gulf were actually already fixing for oil that will land in the mid October .
So basically it's over the next few weeks we.
We will start to see kind of the purchasing managers on behalf of the refineries starting.
<unk>.
<unk> planned to bring more oil into the refinery as they come out of China.
Looking at the refinery margins. They are affirming. This is obviously a result of refinery outages such as also.
Fairly strong signal of demand kind of expect it to look fairly okay.
The diesel margins are leading the pace and this is typical for the season the winter season.
Predominantly in the markets.
At least historically due to two <unk>.
As the summer markets asked this already.
Yeah. The summer market is more gasoline market due to driving.
We had a very mild winter last year in the northern hemisphere.
The jury's still out, but we'll be half that.
Occurring again.
Yes.
Let's move to slide 10.
We are known to everyone has been on a phone call before.
Basically the fleet some order books.
It's kind of notable.
Thing to comment on in a in this quarter, it's actually the increase in ordering for LR twos.
We've seen 15 U S luxury orders being placed in the first half of this year and Thats, bringing up the order book close to 20%.
We also look to use a mixture of.
A 20 year effective lifetime for trading tanker.
This 20 area is actually more like a 15 year four and our luxury seller.
Alcohol to tanks on a coating in these tanks will kind of.
News.
Quality over years so.
So I'm very hesitant to clean.
Clean that luxury above 15, yes, if you use that as a measure about 22, 9% of the <unk>.
Fifth is above its going to be about 15 years this year than in the order book actually doesn't really really looking back.
What is worrying is the lack of order books for Vlccs and Suezmax.
We have the highest system pitch.
Offer of kind of the population above the 20 years, we've ever seen.
108, Vlccs will be our there'll be above our past 20 years this year.
Suezmax this will be above or past 20 years this year.
On the order book side, if you go into the market to book.
Now in particular on the VLCC Youre looking at the.
Second half 'twenty to 'twenty six delivery.
That's three years from now and it doesn't really add up to.
The overall expectations of oil demand remaining fairly firm for the next three years.
Four years.
So with that.
I'm going to move into the summary slide.
Got it.
So we are very happy to report the highest second quarter profits since 2008 $210 million on a cash dividend of <unk> <unk> per share.
In the last four quarters. If my record is correct in Europe , we've paid out $2.72.
That's correct Sir.
With an average share price during that period of $13 $9 subset of 20% yield.
So quite quite impressive I believe.
Asia demand continues to be supportive and the OPEC cuts are driving ton miles.
The price cap on Russia, clearly starting to bite and what's going to happen next there.
Seasonal refinery maintenance coming to an end and margins are improving and this is what we're going to kind of see reflected in the particularly the VLCC amongst that can lead the suezmax markets over the next few weeks.
<unk> is still muted for the bigger vessels for the 1 million barrel in the 2 million barrel vessel LR curious, we've seen a lot of activity.
The last couple of months.
The Big question is obviously, how the winter will play out this year, but then I think kind of in the background music on the absolute biggest question in the tanker industry going forward is represented by the shocked at the bottom here.
Tanker order book as a percent.
Per fleet.
Taking it from 96 to show kind of a little bit of the history behind us.
We see we see the dark kind of.
New line, which is the product tankers that started to react but not to any extent so far.
Then we see the gray one being the VLCC, which is supposed to be the pipeline of the world.
Crude oil.
Virtually nothing on order.
That.
I think we.
Two questions.
Thank you Dear participants as a reminder, if you wish to ask a question. Please press star one one on your telephone keypad and wait for an aim to be announced to withdraw. Your question. Please press star one again, please Jim Barber will compile the Q&A narrow studies will take a few moments.
And now well go and take our first question.
And the question comes from the line of Jon Chappell from Evercore. Your line is open. Please ask your question.
Thank you and good afternoon excuse me.
Lawrence you mentioned in this closing slide the question about the winter everything seems queued up pretty well from the inventories to the refinery maintenance coming to an end to the <unk> outlook for the second half sequential recovery what can go wrong. This winter.
Is it just a macro event, where oil demand continues to disappoint as theirs.
Something related to Russia.
Saudi has become more emboldened and keep more oil off the market. So there is a bigger inventory draw, but the tankers don't see the demand where can we miss the typical seasonal recovery that seems set up so well.
I think there are two key factors that needs to be watched.
One is obviously China.
There's mixed signals coming from so in our little part of the World as I mentioned, which is transport of oil.
China looks to to run on all sit.
Cylinders.
They're important numbers are kind of a record high at risk.
Every month.
And that doesn't tally up with kind of all the other macro economical data coming out of China. So if they are building a issue building a lot of inventories into the winter here.
They have at least historically, they've been able to kind of.
Kind of take the foot off the gas pedal.
Suddenly disappoint.
By Walmart 2 million barrels per day in their input program.
If that happens.
That's obviously not going to be.
We're very bullish so so I think that's the big question.
They are they're running in preparation for other stimulus that will stimulate their economy to need basically all this oil.
Are they importing in order to to the.
The ability to exports into the winter season or are they basically trying to hoard crude oil before unexpected.
Yes.
Increase in crude oil or others, it's very difficult to know, but I think that's that's the thing to watch.
With the imports next to old economical news, we're getting out of China.
One tends to become a little bit worried secondly, it's the weather and the weather we control the control.
Whether it's a.
We're going to have a repeat of last year, which was fairly warm or if we're going to have a proper full on winter, which which is going to affect demand on the positive side.
Those two are the key factors that at this time, a little bit concerned about.
Okay that makes sense.
Just a follow up question on strategy I thought it was interesting you noted the Derrick I mean, we all know that there is not much of an order book, but you said, that's even a concern.
But theres not enough ships to offset some of the older ships.
Rare to see frontline without anything on your new building plan, given that give and take of not getting a shift for three years or the economics of it versus maybe a need at some point in the back of the decade, how do we think about your capital investment on new builds or secondhand ships going forward.
Well I think on the new build we are definitely sitting on the fence.
We've been kind of commenting on that before you need flat out to north of $50000 per day in <unk>.
Every day for 20 years in order to make sense of going and ordering them.
Newbuild at this at this levels.
And then obviously you have the technology discussion kind of adding to that so we don't see that as.
So you know a good proposition.
On the secondhand markets, Yes, we will always be looking.
But I think as you all.
So now that's been extremely little modern tonnage out.
Offered.
There has been a couple of deals done but it has been.
Very very slow so it hasnt really been the big option.
So this is where I was kind of alluded to in previous call steps.
Maybe we are in the harvest period.
It's difficult to say.
Would you harvest by selling any more older tonnage or are you just happy with what the fleet as it stands today.
I think we're fairly content with the composition of the fleet of course, we have some units that kind of further down the line.
We'll probably look to them to let go of that but we.
We.
Really comfortable.
Some of the older vessels, we hold are our modified the day rates and so forth. So so so they are actually holding pretty well into the two.
The things to come on the regulatory side.
So we're fairly content.
Great. Thank you very much Lars.
Thank you John Thank you.
And now we'll go and take our next question.
Just give us some amendments.
And the next question comes from the line of Amit Mehrotra from Deutsche Bank. Your line is open. Please ask your question.
Hi, Good morning. Good afternoon. This is Chris Robertson on for Nick.
Hi, Chris.
Lawrence I just wanted to go back to the discussion around the supply coming back into the market from the Russia trade.
So as these ships come back in or are they in the penalty box at all in terms of returning to the quote unquote vanilla market are they.
Trading normally how much of that supply just won't ever come back.
Can you talk about that a bit more.
Yes.
We've been kind of previously you're talking about the dark fleet business, I would say that and sell them on the Iranian trading vessels and they are.
Kind of in the penalty box forever.
And then we have the gray fleet, which.
Maybe kind of how questionable trading history.
And we will struggle to get accepted bye bye.
Kind of a compliance infrastructure.
And then.
We have the non trading Russian fleet toward the just touching the Russian.
Oil you know on a few occasions fleet.
Marks on it.
Uh huh.
Shades of Gray if that makes sense.
Our observed when some of these units come back to say the pain and the lowest African 20 market is that.
They might have to discount a little bit in order to get going but we haven't seen the huge assistance from charterers to too.
As long as as long as that don't have kind of say, the Sds history and they're in there.
And there I'm kind of.
The papers or have them kind of activity that that comp explain are there.
They're actually trying to get back and I think we need to remind everyone of <unk>.
Transport of Russian crude.
Legal as long as it's within the sanctions.
Right, Yes that was good color.
My follow up question is related to your comments around the.
The order book and then the lack of scrapping.
As you think about 20 year old vessels could you give some commentary around how much of a discount.
Vessels are currently earning.
In the market compared to the average because if it's at a shallow discount it would imply the shifts might stick around for a longer.
Yes, I think it's a question of that portion of the fleet is.
Not really engaged in.
Normal freight market that we at least compete in it's been a long while since we've seen.
20 vessels fixed by on a commercial part I think the last almost all youll see last fall.
So so.
I think the way we measure it is not the discounts they have two two to accept but it's more the efficiency. They are able to offer. So so this is why we kind of in our SMB model tends to try to cut their efficiencies and half of them in the past 20 years.
Got it.
I think.
Just two to that question is probably coming to.
Put that in there as.
As we proceed there I think yes, there is a scenario where ships will have to actually service the market for a longer period of time.
Although not not.
What we want.
But we will.
We see more and more charterers, having to accept <unk>.
<unk> plus vessels as a part of their.
It's to service them and to get one mood, but that can only happen when we have a firm pricing.
Needless earnings to get to a level where.
The charters like Chevron BP shell to tell and all these guys.
And they're vetting departments say hey, okay.
Well maintained a 22 year old vessels, we can use that but they're not going to use stock until the rates up in the 100 150 to 200000 Boes per day I believe.
Okay, yes, thanks for that color I'll turn it over.
Thank you. Thank you.
And now we're going to take over next question.
And our next question comes from the line of Omar <unk> from Jefferies. Your line is open. Please ask your question.
Thank you Hey, good afternoon guys.
Hello, Mark.
Sure.
A couple of questions just as a follow up I think to John's questions at the beginning in your comments, maybe first just on the order book and your thoughts about that.
Your disinterest I guess in ordering vlccs.
Given the timeframe.
The cost is that is that commentary just based on the vlccs or is that also holds for the Suezmax is an LR twos.
I think for the Vlccs.
That's more us because.
Sure.
We are quite competitive from the on the Suezmax size, we carry them.
And we also have very modern Suezmax fleet.
Dominantly very modern Suezmax fleet. So so for us it's been looking into the VLCC space and I think also we've communicated quite clearly that that we believe that the vlccs overtime.
Basically due to two two.
The benefit of the size.
The kind of offers our investors some more bang for the Buck.
But I.
I think you can say, it's the same for the Suezmax is as well.
The challenge we have actually in this market. If you. If you look further into the shipyard industry is that.
One thing is that the owners are not really interested in ordering them, but yards. So I'm not really interested in taking the orders either.
As long as there are higher margin.
Kind of ships to build they will prefer that so so.
I guess, it's kind of a little bit twofold.
I had a look at.
Kind of the overall yard capacity in the world.
It's probably anybody's guess, but it's somewhere between 100 system 200 shipyards in the world servicing.
Kind of commercial segments up so that we care about.
<unk>.
You have I think currently more than 100 yards building <unk> dry bulk vessels you have more than 80 yards building.
Building container vessels.
You have 13 yards I believe that currently has a tanker in the order book.
It's quite securely and also you have the the other thing is that if you take off those 13 yards to build that anchor.
Actually it very skewed accountability VLCC, so if it's a structural kind of.
Issue, we have at hand here as long as the Koreans are complete gaps from from the VLCC.
Building silence.
Thanks, Lars Yes interesting something has to give at some point.
Just one.
One follow up.
Also kind of what John was talking about in maybe the inverse of that.
Question.
What could go wrong, maybe what could go right in terms of this market over the next few months clearly you laid it out in your opening remarks, but just in general we've seen as you mentioned the refining margins have gone up we've seen LR twos pushed higher.
And so when we think about both crude and products here over the next few months should we think that LR twos will outperform for now and then what what are you looking for in terms of.
Laying the groundwork for crude tankers to start to get a bounce.
Well I think.
At the end of today, we need.
If we get oil demand.
Anywhere near where EIA or IEA OPEC or whoever you ask perhaps that's been going on a consumed $103 $3 5 million barrels per day in December I think that's basically all we need.
Is that trajectory is true.
We're going to kind of gradually.
Come out of her and also.
Gross sales of its the Big X factor in addition to China.
It's quite likely that that will that demand project.
<unk> oil prices will behave fairly okay, and then I think.
There will be initiatives from.
Sorry from two to start to get hold of assets that can actually transport their product products.
That's all kind of be the reverse of what we've seen just malware a lot of the Russian former.
Former recent trading vessels have started to compete with us in the Suezmax center for markets.
They're basically going to go back.
I saw some headline from a broker that this fall if that plays out is going to be.
Good for four S&P brokers stopped the deal with the kind of tonnage going in that direction to put it that way.
And this is obviously going to be the older.
Tonnage in both the Suezmax and Aframax fleets.
So so.
There is also an alternative story is starting to develop on all the kind of headwinds coming out to China because.
You can you can speculate what will they actually do now will they allow the country to to.
To run that half steam until they get to some sort of natural recovery or will they actually start to two to stimulate in order to carry.
Kind of their economy over this.
Yeah.
And if they do so I think we will get the same result, we will have the 2 million barrels of extra demand.
And we will have a healthy and a continued healthy import into China. So I think its very fairly easy to.
Paint a bullish picture here.
But I think it's more important to try and look for the cracks because it's almost too good to be true.
Yes.
Currently it looks like the script is written and we just have to follow through on it.
Great.
Well, thanks, Laurence I'll pass it over.
Thank you.
Now ill go and take our next question.
And the question comes from the line of Chris.
Frank from Baird Research. Your line is open please ask a question.
Excuse me. Please your line is open please ask your question.
Well you say Chris.
Yes Christian your line is okay sorry.
Sorry about that hey, Lars hitting here how are you hi, Chris if I am good.
Okay.
Quick question on on your fleet what are your clients for the to 2010 built vlccs without scrubbers would you look to install scrubbers or could do.
Those vessels will be sold and what would the timing for those decisions.
Fairly specific question.
I think it's very likely that they will have scrubbers.
In accordance with.
The dry docking schedule.
But we don't have any.
Apart from that.
It's funny, how some ships are lucky ships, so they actually make money and it's really around every corner and this I've been very very good.
The operators so so for now there in our fleets aren't going to remain there.
Okay fair enough and one for you sorry.
Sorry, I missed.
The part earlier, we provided tried asking.
Can you repeat how many vessels do you plan on Drydock for the rest of the year.
Our next year.
For the rest of the year.
For this study and we plan to Drydock, Inc.
Excellent.
Paul.
Third quarter.
Or in the fourth quarter.
Okay.
Is it for me I'll turn it over thank you guys. Thank you. Thank you. Thank you.
Yeah participants as a reminder, if you wish to ask a question. Please press star one on your telephone keypad.
Now we're going to take our next question.
And the next question comes from the line from <unk>.
You might get from trunk.
Your line is open please ask your question.
Okay.
Hi, two questions. The first is when you went from 25 to 20 years on your depreciation.
How much did that reduce the earnings per share.
Okay.
It's about the same.
Totals about $60 million.
So that means yes.
Yes.
Thanks divided five tenants entertainment and chess.
Okay.
Yes.
Just a moment.
Excuse me, though do you have any further questions.
Yes, the second question.
This deals with the.
Sorry, David.
Okay.
Okay. Thank you, it's a conservative mood and I applaud you for <unk>.
Taking that.
The.
The premium on the modern vessels. So I was wondering if you could discuss that and in particular, the <unk> guideline the regulatory side that you've mentioned when does the next major change kick in and I was curious what makes up the premium that frontline gets such a benefit on because it has the world's youngest fleet.
Yes.
It's.
Yes.
That's like five questions in one.
Five ounces at least now.
First of all I think kind of the biggest.
<unk>.
I was actually in Montreal and Emil.
The change that's going to happen, it's the EU ETS.
That's the next in line for Us.
For everyone in the industry, it's basically.
We need to start to pay a carbon tax in Europe trading.
Trading in Europe are trading into Europe , or trading out of Europe with with the carbon emissions related to those wages.
That comes in it comes into effect next year.
And I think he is going to maybe not so much for the bigger ships because they say.
They're not as frequent inside the EU so but.
For Suezmax and Aframax.
And there are two six it's going to have an impact and there we.
We do believe that having efficient.
<unk> help a lot.
Also I think kind of the.
The discussion around alternative fuels is going to become more and more.
The importance right now you wouldn't really willingly.
Could you use.
Partially biofuel in your fuel mix basically because it costs more but obviously if you put it against the buying carbon credits.
Good.
Then it becomes kind of economically.
Economically effective to do so.
So I think thats kind of the biggest headline on almost at the regulatory framework going forward.
I think your question was around the premium we achieve on our vessels.
Due to the.
Having the modern ships.
Correct.
Yes in particular.
I was curious if interest rates have an effect because on a shorter vessel, it's less costly to hold.
A couple of hundred million partial to oil.
And also the insurance rates, how that would've affected because your shorter timeframe.
Okay. So thats more like the trading side of it so so.
If kind of our charterers are being limited by the high interest rates, because they're the ones who owned the cargo and they're the ones, who really basic Amsterdam finance themselves from H B.
We haven't really seen that having an impact.
Kind of in the in.
In the stock market to be quite honest I think it's more a discussion for.
Had we been in the carrier market, so meaning that oil was going to be stored on ships. It should about the huge effect the difference between having a 0.5 interest on the per day on the 7% interest per day.
It's a huge impact on the economics of storing oil.
But I think.
In general.
The kind of the financing cost has affected.
The world in general willingness to keep inventory and I think that's.
Probably the partly why we see inventory levels fairly low across the globe.
Yes.
Okay. One final comment what percentage of your business is European that would be affected by the regulatory change.
Yes.
It's a virus.
So it's and it also varies a lot amongst.
And asset classes.
But I think our kind of a headline number would be 10% to 15%.
Our voyage days would be.
By the EBA tests.
Thank you and I congratulate you both for running the most efficient.
Tanker fleet in the World.
Thank you very much.
Thank you.
Today's speakers there are no further questions and I would now like to hand, the conference over to Scott for any closing remarks.
Thank you very much.
Thank you so much for listening in.
<unk>.
The markets are a little bit kind of in the doldrums right now but.
I'm hearing bottoming.
From from various sides of.
<unk>.
If the marketplace.
Over the next few weeks with them.
Hopefully start to chew into the winter season.
We're looking forward to see what comes.
Thank you.
That does conclude our conference for today. Thank you for participating you may now all disconnect have a nice day.
Thank you.
Okay.
[music].
Okay.
Yes.
[music].