Q1 2024 Scorpio Tankers Inc Earnings Call
[music].
Hello, and welcome to the Scorpio Tankers, Inc. First quarter 2024 earnings conference call, all participants will be and listen only mode.
So do you need assistance, please taken a little conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then too.
Please note this event is being recorded.
I would now like to turn the conference over to James Doyle head of corporate development and I are please go ahead Sir.
James Doyle: Thank you for joining us today welcome to the Scorpio tankers first quarter 2024 earnings conference call.
James Doyle: The call with me today or.
James Doyle: <unk> Chief Executive Officer, Robert Bugbee precedent, Cameron Mackey, Chief operating Officer, Chris Adela, Chief Financial Officer Wire, Stinker Nielsen Chief Commercial officer.
James Doyle: Earlier today, we issued our first quarter earnings press release, which is available on our website Scorpio tankers dot com. The information discussed on this call is based on information as of today.
James Doyle: Ninth 2024 and may contain forward looking statements that involve risk and uncertainty.
James Doyle: Actual results may differ materially from those set forth in such statements for discussion of these risks and uncertainties you should review the forward looking statement disclosure any earnings press release as well as tankers S. E C filings, which are available at Scorpio tankers, Dotcom and S. E C Dot Gov.
James Doyle: Call participants are advised that the audio of this conference call is being broadcast and wide on the Internet and is also being recorded for playback purposes.
James Doyle: An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days we.
James Doyle: It will be giving a short presentation today.
James Doyle: Presentation is available at Scorpio tankers dot com on the Investor Relations page under reports and presentation.
James Doyle: <unk> will also be available on the webcast. After the presentation. We will go to Q&A for those asking questions. Please limit the number of questions to too.
James Doyle: You have an additional question. Please rejoin the queue now I'd like to introduce our Chief Executive Officer of Manuela Laura.
Emanuele A. Lauro: Thank you James and good morning to everyone and thank you for joining us today.
Emanuele A. Lauro: We are pleased to announce another strong court, they're all financial results.
Emanuele A. Lauro: In the first quarter the company generate a good $293 million you know adjusted EBITDA.
Emanuele A. Lauro: 207 in adjusted net income.
Emanuele A. Lauro: The market dynamics that could've been driving the favorable raping vitamin continue.
Emanuele A. Lauro: Global demand for they find products, whose robust refining capacity remains dislocated.
Emanuele A. Lauro: And the maritime supply chain is feel constrained.
Emanuele A. Lauro: In addition, geopolitical disruptions have tightened the supply curve further and the resulting cash flows from a heightened the right environment have been significant as well as transformational <unk> over the past few quarters.
Emanuele A. Lauro: And two one we continue to focus on reducing our leverage we made $262 million you've done the scheduled repayments on our deck and are set to repay an additional 118 during the second quarter.
Emanuele A. Lauro: As previously mentioned the balance sheets and quality of Scorpio as an investment improves each day.
Emanuele A. Lauro: Today, our mid day, then at $811 billion, which represents the lower end of our target that's level.
Emanuele A. Lauro: We anticipate significant reduction in our cash breakeven starting in the third quarter of this year.
Emanuele A. Lauro: In fact, we are working without lenders to prepay existing debt.
Emanuele A. Lauro: Which will decrease our daily fleet operating breakevens to $12500 per day.
Emanuele A. Lauro: <unk> near the lowest.
P C: P C right and during the Kobe period and in the company's history. These breakeven ones that cheap would be amongst the lowest in the industry. Despite corporate <unk> actually still owning the most modern proud of conquer freak out there.
Emanuele A. Lauro: With Ned beds near scrub value, our modern fleet no anticipated cash breakevens, we have positioned ourselves to October two needs quickly.
Emanuele A. Lauro: To increase shuttled the returns and further reduce debt.
Emanuele A. Lauro: If things were to remain the same even though <unk>, we would be by Beck, we would favor by Beck says, we see them more accreted to shareholders. Then started that increases in regular D V D.
Emanuele A. Lauro: As we look forward, we remain optimistic with low global inventories robust demand and limited food growth Waddled supportive factors for the continued strength in the product tanker rates.
Emanuele A. Lauro: We remain committed to delivering value to a lot of shareholders and appreciate your continued support and confidence in Scorpio bankers.
Emanuele A. Lauro: I would like now to turn to cold to James for a brief presentation James.
James Doyle: Thank you and manually.
James Doyle: Five seven place.
James Doyle: Never had there been so many factors driving our business individually. These factors are positive collectively their unprecedented increasing global demand low inventories in shifts and refining capacity have increase seaborne exports and 10 miles at the same time the fleet has become bifurcated.
Emanuele A. Lauro: And supply growth has been limited <unk>.
Emanuele A. Lauro: The result product tanker rates have remained at high levels for the last two years today spot rates for Emr's are almost $40000 per day and 50000 for L. R. Twos.
Emanuele A. Lauro: L. R two's have captured headlines because of their higher volatility and impact from disruptions in the Red Sea our rates have shown remarkable consistency and serve as a clear indicator of the robust underlying global demand for refined products.
Emanuele A. Lauro: This continues today.
Emanuele A. Lauro: Five eight please.
Emanuele A. Lauro: Refined product demand has been extremely strong we expect an increase of 1.5 million barrels per day, three year and driven by increases in diesel gasoline jet fuel and NAFTA and.
Emanuele A. Lauro: And yes as global demand has increased so have seaborne exports.
Emanuele A. Lauro: Five nine please.
Emanuele A. Lauro: The increase in demand has led to record levels of seaborne exports in March exports reached 21.1 million barrels a day, an increase of 1.1 million compared to last 2019 levels and 500000 barrels a day you're over here.
Emanuele A. Lauro: The increase has been primarily fueled by heightened demand for diesel gasoline and jet fuel. Moreover, not only of export growth exports ground, but the distance east barrels are travelling has awesome significantly increased.
Emanuele A. Lauro: 510 please.
Emanuele A. Lauro: As refineries have moved further away from the consumer the distance the cargo needs to travel has increased refinery closures in Europe U S. In Australia Asia, a decrease local output increasing the need for imports Conversely, new refining capacity in places like the middle East has boosted production.
Emanuele A. Lauro: [noise] to an increase in exports the.
Emanuele A. Lauro: The structural changes in capacity has and continues to reshape plus.
Emanuele A. Lauro: As ton-mile demand increases the capacity is reduced and supply Titans.
Emanuele A. Lauro: Flight 11 please.
Emanuele A. Lauro: And demand for ton-mile has notably increased.
Emanuele A. Lauro: Excluding Russia Ton-mile demand has increased by 21%. It's 2019. If you include Russia ton-mile demand increases an additional 6%.
Emanuele A. Lauro: This suggests that it's not only geopolitical events, driving 10 miles, but changes and refining capacity and increasing export.
Emanuele A. Lauro: That said geopolitical events have required to rerouting of vessels, leading to a less efficient fleet that must cover longer distances.
Emanuele A. Lauro: Instance, attacks and the Red Sea ever do this product Tinker volumes through the Suez Canal by 75% and increased volumes riding around the Cape of good hope by 400 per cent.
Emanuele A. Lauro: Disruptions have exacerbated the strong supply and demand fundamentals in our markets.
Emanuele A. Lauro: By 12 place.
Emanuele A. Lauro: Strong spot in time charter rights, coupled with an ageing fleet is.
Emanuele A. Lauro: Led to an increase in new building waters, apparently the order book set to deliver over the next three years represents 14.8% of the existing fleet. Meanwhile, the fleet continues to age with the average age of the product tanker fleet now at 13 years.
Emanuele A. Lauro: So what will the fleet look like in 2026, including Nubile well by then 50 per cent of the fleet will be older than 15 years, and 21% Lxi 20 years and older positioning them as potential candidates for scrapping thus using conservative scrapping assumptions <unk> looks modest over the next three years.
Emanuele A. Lauro: <unk>.
Emanuele A. Lauro: 513 please.
Emanuele A. Lauro: This year's fleet growth is expected to be about 1.4%.
Emanuele A. Lauro: And what seaborne exports and ton-mile is expected to increase 2.67%. This year, it's vastly outpacing supply.
Emanuele A. Lauro: Looking for we're very constructive on the supply demand balance.
Emanuele A. Lauro: Confluence of factors in today's market are constructed individually historically low inventories increasing demand exports and ton-mile structural dislocations in the refinery system rerouting of global product plus unlimited sweet growth collectively their unprecedented.
Emanuele A. Lauro: That I would like to turn it over to Chris.
Christopher Avella: Thank you James Good morning, good afternoon, everyone.
Christopher Avella: 515 please.
Christopher Avella: The first quarter of 2024 combined another strong seasonal quarter with the dramatic expansion of ton-mile demand that was triggered by the conditions in the redfin.
Christopher Avella: Over the past five quarters, we have generated $1.3 billion, an adjusted EBITDA and $777 million and adjusted net income.
Christopher Avella: These results have enabled us to reduce our debt by $557 billion.
Christopher Avella: $79 billion in dividends and purchase $490 million of the company stock in the open market at an average price of about $50 per share.
Speaker Change: But 16 please.
Emanuele A. Lauro: Deleveraging has been our primary focus and as of today, we have reached our net debt target.
Emanuele A. Lauro: We've not only reduced started leverage but we have also simplified our balance sheet through more traditional forms of financing at lower cost and more flexible terms.
Emanuele A. Lauro: We have successfully refinance almost all of our legacy lease obligations into more traditional and lower cost secure bank debt, which carries margins of less than 200 basis points.
Emanuele A. Lauro: As shown in <unk> in the chart on the right our gross and net debt as of today stands at $1.4 billion and $811 million respectively.
Emanuele A. Lauro: Well I've 17 please.
Emanuele A. Lauro: We are currently in discussions with the lenders on our 1 billion dollar credit facility to make a prepayment of up to $223 million on the term portion of this loan.
Emanuele A. Lauro: This amount represents up to two years of term loan amortization.
Emanuele A. Lauro: Which is for the period commencing in the third quarter of 2024 through and including the second quarter of 2026.
Emanuele A. Lauro: This prepayment remains subject to lender credit committee approval in the execution of definitive documentation.
Emanuele A. Lauro: If approved repayments would not be scheduled to resume again until September 2026.
Emanuele A. Lauro: You're taking this step in an effort to affect a significant and immediate reduction in our cash breakeven cost.
Emanuele A. Lauro: Accordingly, we projected the company's daily cash breakeven cost which include vessel operating expenses <unk>.
Emanuele A. Lauro: <unk> interest payments and regularly scheduled <unk> loan amortization will come down to about $12500 per day on a pro forma basis after giving effect to this prepayment.
Emanuele A. Lauro: We expect to continue to pursue ways to reduce our daily cashback, even reach the additional that unleashed repayments.
Emanuele A. Lauro: By pursuing a longterm reduction in our cash breakeven rates, we a physician to accompany two opportunities opportunistically increase shareholder returns.
Emanuele A. Lauro: Slide 18 please.
Emanuele A. Lauro: Our second quarter of 2024 coverage across the fleet, including time charters is averaging close to $38600 per day.
Emanuele A. Lauro: These reached demonstrate the company's operating leverage.
Emanuele A. Lauro: At $30000 per day, the company can generate $547 billion in cash flow per year and.
Emanuele A. Lauro: And at $40000 per day, the company can generate $937 million per year.
Emanuele A. Lauro: It is important to note that these estimates do not include any potential impact of the prepayment <unk>.
Emanuele A. Lauro: On our 1 billion dollar credit facility.
Emanuele A. Lauro: And with that I'd like to turn the call over to Robert.
Emanuele A. Lauro: If progress is not available I dunno, Robert if you on mute or something but I I'm sorry.
Robert L. Bugbee: <unk> <unk> <unk> <unk> <unk> <unk>.
Robert L. Bugbee: Thank you very much Chris that's.
Robert L. Bugbee: Yeah, It's fantastic I just wanted to <unk> you know all of this here and still be a group is you know we know we'd been clogging gets bumped info.
Robert L. Bugbee: A long time, many years and we finally got to the you know incredible.
Robert L. Bugbee: Incredible stage, where we generally get a lot of things going for us with the largest mall keep kept company.
Robert L. Bugbee: To your product. Thank you companies, they're the highest liquidity.
Robert L. Bugbee: And dollars per day tried any <unk>, we have the newest fleet you have the least need for fleet renewal and a sustainable dividend policy.
Robert L. Bugbee: And now.
Robert L. Bugbee: <unk>, we're ready to go where do you go to the next place as Chris pointed out with but even gonna be by the end of next week, we're gonna be below on that date bridge that <unk> that we set out.
Robert L. Bugbee: Emanuel stated right from the beginning that without stock trading well below in a in a V up priority for return a capsule will be shared by bags.
Robert L. Bugbee: Finally.
Robert L. Bugbee: No we're expecting now through all this hard work.
Robert L. Bugbee: You know the delayed gratification that the shareholders have had in the last six months, we understand that that can be frustrating.
Robert L. Bugbee: It's been worth it because these operating cash breakevens.
Robert L. Bugbee: Ah really low right now the 12 and a half thousand dollars a day, that's like trough earnings it's even lower if we actually looked at the breakeven related to the spot parts of asleep, but at 12 and a half.
Robert L. Bugbee: <unk> almost withstand anything that was <unk>.
Robert L. Bugbee: Covid terrible code with you the terrible six months, so the worst periods of the code with Ya.
Robert L. Bugbee: And.
Robert L. Bugbee: You know we're about to have all set.
Robert L. Bugbee: Chair of luck because right now.
Robert L. Bugbee: Mark it as a <unk>, it's moving upwards strongly across all sectors.
Robert L. Bugbee: It's James pointed out the the fact is out there was super site favorable.
Robert L. Bugbee: And it's really not I'll need for us to feel anything other than bullish.
Speaker Change: We observe that.
Speaker Change: There is.
Robert L. Bugbee: Kind of fear stock trades down all the tank is Stokes a week.
Speaker Change: Whenever there's a mention of the ceasefire in Israel Gaza cause I guess, it's because of the fear of opening up <unk> <unk>.
Speaker Change: But.
Speaker Change: Festival, a ceasefire in and Gaza does not necessarily mean, you open the red sea straight away.
Speaker Change: Secondly, let's look at that for Ya.
Speaker Change: If we look into 20 twenty-three, where there was no disruption to the Red Sea.
Speaker Change: The.
Speaker Change: M O market as being more or less the same.
Speaker Change: In this first cool with his first five months it's 2023.
Speaker Change: <unk> to market.
Speaker Change: You know depending on what quarter is maybe five to $10000 stronger than 2023.
Speaker Change: But let's remember 2023, what's <unk>.
Speaker Change: So it's not really something we should be afraid of especially as the company's breakeven levels have dropped so much because of that renewal.
Speaker Change: So it's arguable if we look at the data historical day to gear notwithstanding the fact that the market itself is fundamentally stronger today than it was 2023.
Speaker Change: The the company could still <unk>.
Speaker Change: Pretty much we would earn more.
Speaker Change: More than what it did in 2023, just because the debt reduction so.
Speaker Change: So I think that some of the fee is out there overblown either cases, the manual put said strike straight away is the company is in great shape, you can face anything now and look at that situation as a great opportunity.
Speaker Change: With that we're really excited we really bullish and dislike to open that over to questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speaker phone please pick up your handset before pressing the keys.
Speaker Change: Anytime your question has been addressed and you would like to withdraw your question. Please press Star then.
Speaker Change: N two.
Speaker Change: At this time, we will pass momentarily to assemble our roster.
Speaker Change: Our first question comes from our Doctor.
Speaker Change: Of Clarkson Plateau Securities go ahead. Please.
Speaker Change: [laughter]. Thank you operator, I've since moved to Jeffrey I got good morning, and good afternoon.
Doctor: First off congrats on reaching your debt target and Robert as you mentioned you've been Communist Mountain now your now you're here and every available place is there for Ya novelist strategically and financially I guess, maybe first thing now that you have reached this target threshold does this change anything how ya doing.
Speaker Change: Business It sounds clearly that the buyback is now back in focus and you know the pause that we've seen for the past maybe six to nine months as you focused on debt reduction and well worth it.
Speaker Change: General is there any kind of changes now that you've reached this target regarding the business and accounting.
General: No I mean, if you're asking.
General: Do we think it's worthwhile going out mode of new buildings now <unk> do we think it's worthwhile.
General: Uhm buying ships no are we willing to.
General: <unk> right to do so.
General: <unk> older ships Shaw.
General: You see it's not like a drastic situation, we're just doing it one at a time or whatever it is.
General: Great advantages strong prices.
General: I think that there was you know it's like.
Speaker Change: One thing that may not really a change because it was just an extension of where we were before is that you are.
Speaker Change: Seeing the three year right.
Speaker Change: Quite strongly the two year right quite strongly in one of those things that.
Speaker Change: I will you know a reduction in debt reduction of cough interest.
Speaker Change: <unk>.
Speaker Change: It makes now some of the you know.
Speaker Change: Levels Super compelling and just putting in some.
Speaker Change: <unk>, knowing where we are you know if we if we knew a little bit more revenue line. It allows us to be more even more aggressive elsewhere. So if there was one thing I think that it's.
Speaker Change: Lowering the cost structure has changed if you think of it this way if it.
Speaker Change: Basically the third quarter last year.
Speaker Change: Those numbers that we're talking about 12 and after awesome.
Speaker Change: Pretty close to 20, an effective.
Speaker Change: That delta.
Speaker Change: Huge that means that if you fixing a ship.
Speaker Change: Out to $40000 today.
Speaker Change: You the the cost you 18, you've changed your 19, you change your free Castro from 21.
Speaker Change: 29.
Speaker Change: That's enormous.
Speaker Change: That's the <unk> the.
Speaker Change: The real benefit to lowering these calls.
Speaker Change: And that would be the only change, but there's no rush to look very comfortable spot market too.
Speaker Change: Rushed it.
Speaker Change: Go out to the room could pile pile on the time Charles.
Charles: Thanks, Robert Yeah, that's nice rising interest rates and lower breakeven very very different times.
Robert L. Bugbee: I have a follow up and just a bit more market related obviously L or two that have been strong and and they've really established a higher floor a higher ceiling. This year at least definitely relative to other segments. In this whether it's crude a product rerouting is obviously played a role but I guess on that front any color you can give on how.
Robert L. Bugbee: Much say L. R. Two capacity that had previously been trading Dirty has come back into the Queen tried to take advantage of this and then.
Speaker Change: Asking just simply because.
Speaker Change: We now have also a lot of discussion on the T. M X pipeline coming on and does that perhaps change any of that cleaning up a dirty L or two then and perhaps.
Speaker Change: Do <unk> want to migrate into the Dirty trade take advantage of that T. M X opportunity any color you can get on that.
Speaker Change: Plus.
Speaker Change: Yeah.
Speaker Change: I'll I'll take it.
Speaker Change: I mean, a lot to clean Dirty trading has obviously taken place for years right I mean, it. It oscillates you know I I I looked at this the other day.
Speaker Change: Can you hear me.
Speaker Change: Yes, yes, we can.
Speaker Change: Yeah, sorry.
Speaker Change: And it has oscillated you know up and down between 220 units of 250 units trading cleaned over the last three or four years. So there hasn't been a number of ships have gone into claimed him.
Speaker Change: From the Dirty tradeoffs, they clean up then.
Speaker Change: I recall him or that it takes a little bit of time to to do that so it's obviously a big decision. If you look at a more strategically in terms of number of vessels.
Speaker Change: From a trading history perspective, it has kind of.
Speaker Change: [laughter] plateaued, there's not something that is a big issue for a Ella two O not to look at these things from an overall perspective.
Speaker Change: Because clearly you know, it's very decent and I'm very constructive market. You know I think it's fair to say before answering your question on T. M X, which I think is a really important one is when I look at it holistically on the market, it's close to firing on all cylinders.
Speaker Change: I'm not understanding what goes on with the Barber Monday, but on the other.
Speaker Change: Not going through Suez.
Speaker Change: Because we still have a lot of refunding kind of output that is gonna increase over the next couple of months in June July as we go out of this kind of a big turnaround season.
Speaker Change: From the first quarter.
Speaker Change: We still had a very strong first quarter and now we're going into the second quarter or would you start seeing that there's more <unk>.
Speaker Change: <unk> being built up which is great. So you know you look at Asia.
Speaker Change: There had been trading and I think if if James was singularly on around 40000 per day, you know those rates have been increasing transpac has been good rates as well China exports is gonna be a big thing as we move into the second and third quarter.
Speaker Change: And again <unk>.
Speaker Change: You know we've seen rates now moving up strongly I think 50 points today trading 225 to 30.
Speaker Change: You know probably be gainfully brown $60000, a day for ultra long haul business.
Speaker Change: Same time Middle East has been good for EM ours, as well trading probably $45000 a round voyage. The west has been a little bit slow a little bit on the back up this refining turnaround we've seen good activity. This week as well <unk> rates have ramped up very much in in the U S golf a couple of other $100000 for cross Carbs that's awesome.
Speaker Change: Trending up towards $30000 a day. So you know all of this is good stuff James also talked about the new refineries and we we see this every single day now we live this everyday and we can see how utilization levels have moved up on on that and also the disparity of the car.
Speaker Change: <unk> selection that we can do the triangulation availability not only on M. Osborn also now certainly on <unk>.
Speaker Change: Have impacted the way, we do our business that certainly the tongue miles.
Speaker Change: When you talk about T M X.
Speaker Change: I called that like one of the of the new dynamics, which is like <unk>, which is a big thing task focus in Mexico, which is coming up at the end of the year and then.
Speaker Change: <unk> now.
Speaker Change: Now G. M X is a big thing for after matches and because of <unk> will also have a big thing for <unk>.
Speaker Change: <unk> they they say that I think it's about 30 aframax lifting per month out of you know.
Speaker Change: Vancouver.
Speaker Change:
Speaker Change: And that that's a lot of Ephraim access and you know we've seen a couple of Congress now they've gone to Asia. If it goes a long haul you know it could be more than that if it goes to california to be less than that.
Speaker Change: Whatever way you look at it it's gonna have a big impact on behalf of Mac's market and and through that also on the <unk>.
Speaker Change: Because there will be additional bottlenecking around these things and when you talk about.
Speaker Change: Four two supply.
Speaker Change: You need to look at the.
Speaker Change: The overall context and you have to include the after Max's So you know.
Speaker Change: <unk> order book today is extremely low when you combine it with the a lot too. So you know you put all of this together together with the fact that you know B L. A two and half of them actually will reach.
Speaker Change: 20 years of age it doesn't equate to that so you know I see this is a really strong kind of input or the one of the new dynamics that really is gonna.
Speaker Change: Prove the overall.
Speaker Change: Demand for after Mac stroke, Ella twos, as we move into into 24 and beyond.
Speaker Change: Great. Thank you Lord that's not very very obviously detailed and helpful colors, I appreciate that and and Robert Thank you as well I'll turn it over.
Speaker Change: Our next question comes from John <unk> of Evercore ISI go ahead. Please.
John: Thank you good morning.
John: Could follow up on strategy as it relates to vessels sales. It seems like the pace of disposals has been picking up a little bit through some of the announcements you've made today by my account 620, 12, and 2013 vessels lap clearly you already have a lot of operating leverage and you know for your commentary about your own any be there seems to be an art there of.
John: Potential sale, so should we expect those tax at the fleet at some point and this year clearly you don't need it from a deleveraging perspective, but could only just add to the balance for the second half by back.
Speaker Change: I think that the best way to describe it.
Speaker Change: <unk> <unk> <unk> <unk> <unk>, along the way.
Speaker Change: I don't think.
Speaker Change: <unk> <unk> I don't think it's useful to.
Speaker Change: To discuss.
Speaker Change: So.
Speaker Change: Actual types of <unk>.
Speaker Change: Lines would be I think it's much.
Speaker Change: Much better for us to <unk>.
Speaker Change: Shareholders too just to accept it will will carry on if we if we see your vessels but.
Speaker Change: <unk> attractive too it's been you know, we we might engage.
Speaker Change: And do that.
Speaker Change: We don't we.
Speaker Change: We might want to.
Speaker Change: Then for a follow up to go back to I think James is first chart. You know I think the <unk> get a lot of focus because of the volatility there, but as you noted the M or has it been pretty consistent through out.
Speaker Change: Be fair to characterize the L. R twos to be more of the you know disrupted Lee impacted sector, but what's been happening in the amateurs kind of slow and steady grinds higher is more structural and related to demand in the refinery dislocation and therefore, if there will be some perceived I guess piece.
Speaker Change: Across impacted Regents it would seem that the M ours would still have more of structural boost and maybe the L. R twos would be the ones at risk.
Speaker Change: <unk> two seconds, but I think we just could we go back into the starkly you still had a I just think you do at a distance widespread between M. <unk>, whilst the Suez Canal is.
Speaker Change: We know trends thing that the Zip the zip.
Speaker Change: The only group.
Speaker Change: And.
Speaker Change: You know, but you still had <unk>.
Speaker Change: 2023 quite a.
Speaker Change: Quite a wide.
Speaker Change: I'm still quite a widespread to the L. A P as in a trailer.
Speaker Change: You also on the time charter market is difficult time, and as I remember the time charter market itself is saying.
Speaker Change: There is a.
Speaker Change: Quite a widespread again <unk>.
Speaker Change: <unk>, we're not saying that the market thinks that the red sea will be trying to <unk>. It is just saying look some of it so the <unk> really isn't that much of a word.
Speaker Change: Lost Wanna add to that.
Speaker Change: I think what we're seeing today also is that the <unk> is becoming more of a fungible unit.
Speaker Change: There is a lot more arbitrage that takes place on I'm allowed to today.
Speaker Change: I'm going to be the the whole concept of what's going on I'm going back to the T. M. X thing has meant that the crossover between them two and Aframax is evident but you can see that on the on the time charter market. You can also see it in the the ordering market for new bills wherever you know most owners considering where the price point is today will.
Speaker Change: Be willing to pay the marginal increase <unk>, two which is limited now to have that optionalities. So when you look at a lot too Aframax you Gotta look them together holistically.
Speaker Change: Think that due to your second point, Robert where you talked about you know these factors of of <unk>.
Speaker Change: Bob on Monday, I have been so one obviously impacts the longer whole business, which of course impacts <unk> by virtue of its size and therefore, you have an outside I think on a normal market conditions, there will be that spread but.
Speaker Change: But I do think that they both are very.
Speaker Change: A very viable fungible tradable assets.
Speaker Change: Yeah.
Speaker Change: If you you've seen some recent.
Speaker Change: Clarification named <unk>.
Speaker Change: Results yesterday with Blair fix them on that it fixed in their loyalty.
Speaker Change: And the the you can see that Oh, sweet spread quite a wide posed to spread to be allowed to ya.
Speaker Change: Mmm, Okay. That's all clear thank you large thanks Robert.
Speaker Change: Okay.
Speaker Change: Our next question comes from Crank Lewis F. B T. I T. Go ahead. Please.
Speaker Change: Yes, Thank you and good morning afternoon. Thanks for taking my question I guess my first one Robert James or are Larges around the the time charter market. I mean, you you called out the the the the pick up and I guess rates in in the more longer term two three years time charter market. You know just kind of curious at a high level.
Speaker Change: You know what types of customers are looking for those is a kind of the usual suspects and N as as we think about.
Speaker Change: You know the appetite from from those charters is is the is.
Speaker Change: Is the impediment and on getting deals done like how why do we think these bid asks are at this point.
Speaker Change: First of all I'll tell you that the bid ask is not very wide because deals are being concluded quite regularly at the at this moment at levels that dog gainful, both on <unk> and also in Amherst.
Speaker Change: And there's quite a few out there looking consistently for for longer term Charles Charles between 234, or five years and basically the the client base is is a wide. It is national oil companies as traders it's end users.
Speaker Change: And it spans the globe.
Speaker Change: And just a real quick on it is there a preference for scrubbers.
Speaker Change: There tends to be a square preference prescribed is but it's it's not a complete I mean, there are definite but there are some who do not want but I'll, probably say 80 per cent prescribers.
Speaker Change: Great. Thanks, and then just one I wanted to touch a little bit on Dan Goatee, you know kind of where where you know that that seems like it has the potential as the year progresses, and I guess really even in the 25 to be a major driver volumes any kind of update you can share there at all you know kind of what's been happening there as you see it develop as that you know as soon as we think about.
Speaker Change: The the the differences between M. R. As in L. R. Is is that you know do we expect that the kind of evolve into more of an L. R. Two market is it gonna be mixed kinda just any high level thoughts around that would be super helpful.
Speaker Change: So it's very early days. So Greg you know <unk> has just recently started up and I think it's currently around 300000 barrels a day and I think there's a second distillation unit that's coming on stream in six weeks or something like that and that's gonna starts wrapping up and then suddenly the product just gonna become.
Speaker Change: Finished grade which is not the case right now we have seen exports. We have done a couple of ourselves that there has been exports Donald choose a long hold there's been a lot of it must be done as well.
Speaker Change: Which primarily has been going through some of the other west African countries, all very interesting from my apart a tinker around a perspective.
Speaker Change: This startup has taken place it almost seems right now.
Speaker Change: At the start up stage that we've.
Speaker Change: Third export market has been created in the Western Atlantic together with the continent and the minute you have to bid the vessels or you have to start looking at pricing somewhat differently, rather than being a backwater West Africa, where you tended to only have gone in with your imports.
Speaker Change: Obviously, you would anticipate some reduction of imports over time from the continent.
Speaker Change: But I I think we talked about this before but you know there was a logical valued trade because the premium finished product that's coming out of it and go to is is high grade high value stuff. That's ultra low salt with diesel you know won't be pm gasoline and stuff for that which obviously goes and fetches a premium in the states or in Europe and other.
Speaker Change: Oh, you said the markets.
Speaker Change: Whereas the products that you normally you would choose not you're off of lower grade.
Speaker Change: So it obviously remains to be determined if you know what are the political pressures around that and what what that's going to be and I think that remains to be determined.
Speaker Change: Some way or form.
Speaker Change: You know the other issue as well when it comes to bingo, which is also something we need to find out is the the whole supply infrastructure is also a big question and I think there's gonna be some issues around bottlenecking, a double handling that's gonna post you know we can see that some of these things.
Speaker Change: Things will need to have double handler, you need a bigger ships into work is S. T S. As they do already today.
Speaker Change: So it's gonna be really interesting thing to say and to see how that is going to develop over the next year I think the final thing also that's quite interesting is that.
Speaker Change: Where it's placed on Cody has excellent potential swing refinery you can go east West you can do all these things and I think I would imagine as this thing starts developing as a as a real up and running we're finding with the size that had have it would have a lot of potential because they will have a lot of NAFTA that could be.
Speaker Change: [noise] exported I will have a lot of jet fuel as well that they would not requiring the local market. So it's an interesting one you know.
Speaker Change: Had wings in terms of a product coming from the continent going down to West Africa, you could assume that but I think there's a lot of other staff considering the size of this refinery and the quality of product that it's gonna produce that will kind of come up with some interesting determinants for the market.
Speaker Change: Super helpful. Thank you very much have a great day everybody.
Speaker Change: Our next question comes from Ken <unk> of Bank of America go ahead. Please.
Ken: Alright, great. Good morning manual I, Robert James and Lars Thanks for the for the update and Chris.
Ken: So congrats on meeting me then that that in a target what a ride to get here just a minor one to start that did you have fewer vessels in dry dock or or where the plan dry docking quicker move through the quarter. It looked like it was a bit lower than than what you talked about last quarter. But then my question is is rates for the <unk> have improved on your <unk>.
Speaker Change: Her date with a lower on LRT are you seeing any seasonal cooling off if we're looking at second quarter is there is there are just bigger demand near term just want to understand that the the very near term market, where we normally get that for you I'll pull back a large if you have any thoughts on that.
Speaker Change: The short answer to the to the second part of your question is I do not see seasonal pullback.
Speaker Change: She seasonal ramp up and I don't think that what we have seen in the past in terms of what we both historically look at the macro seasonality you know going back to pre 2019 being the case I do see that we probably gonna have a stronger some of them. We have anticipated before one of course is because of the <unk> the the refineries.
Speaker Change: We can see from the output that's gonna happen over June July.
Speaker Change: The thing also which is a key variable.
Speaker Change: Market perspective, as an ingredient is China exports you know we've talked about this in the past as well you know.
Speaker Change: That's been the second quota was issued is higher than it was last year. The thing that I find quite interesting in that context is that before we were kind of being cannibalize some somewhat by by the new bills, you know, but I can see that there's only one VLCC that's put delivery in 24. This is only.
Speaker Change: Seven suicide X as I think that's been scheduled for the rest of the year. So you know there's limited competition for this kind of China long haul stuff that before we would talk about it's not even something that I think about anymore. It's just it's another thing that just comes in and we're looking at a at some really kind of constructive stuff does it go into the second quarter.
Speaker Change: Great Christian thoughts on.
Speaker Change: <unk>.
Christian: Yeah. Thanks for the question there were slightly fewer dry docks I'd also emphasize there there were slightly fewer days of the dry docks that we had planned which is good.
Christian: There's dry doctor always gonna move around.
Christian: Especially in this market, there's muscle positioning we've had some get pushed back from <unk> and some get pushed back from two to Q3. So we'll just keep updating that but short answer is yeah.
Speaker Change: Perfect just looked a little different and then.
Christian: Robert I guess, maybe just bigger picture or manually you know thoughts on cash right. You know you you've noted you're gonna refocus on buybacks.
Christian: But what's your vision for the fleet right out you need he's got some opportunities you mentioned on potentially selling some of the older vessels.
Speaker Change: Do you look at they say this is an ongoing entity for the next 2030 years do you look at it as we kind of run it to the end of the fleet life and add monetize that I just Wanna understand your your vision for what what comes next I mean, obviously, it's been a long ride to get here and and to be able to have the optionality you know have but just want to understand how you think about the the next phase of.
Speaker Change: Of the company structure.
Speaker Change: I think he said it is an ongoing thing cause I know that we say it is an ongoing.
Speaker Change: Empty.
Speaker Change: I don't think that <unk> I don't think the running running running at all nothing is.
Speaker Change: Not a.
Speaker Change: Something that's being discussed obviously the.
Speaker Change: <unk>.
Speaker Change: Obviously, there's always a public company the alternative Oh.
Speaker Change: Someone wanting to buy the company, but other than that too.
Speaker Change: He looked a carry the company forward.
Speaker Change: Well, that's just because I don't understand the timing of then when you'd have to start reinvesting to to replace the vessels.
Speaker Change: I think.
Speaker Change: If I.
Speaker Change: I think we act I mean, the management team is.
Speaker Change: I think shown that we often leave as if it was forever and we are opportunistic and reactive when when you have to be on up markets and on down markets. So as far as Fleetwood.
Speaker Change: New well I I think that we have quite a bit of time to think about that we steal our sitting on the most modern fleet that any public company out there owns.
Speaker Change: We now have the lowest leverage our actually the lowest breakeven good we've seen.
Speaker Change:
Speaker Change: In our company history, and we Ah the beauty of where we are isn't that we did not have to take a decision today Robert was saying before yes. If we are receiving offers on existing vessels.
Speaker Change: That God attracted enough we will.
Speaker Change: <unk> consider them and maybe continued training the fleet. However, we are enjoying this market they thought improving and as you know we will hard large these comments on what the markets are doing as we speak so we are very relaxed.
Speaker Change: Aware and open to opportunities going forward, knowing that we do not have to do anything for the coming quarters as a half too but as it can do yes, we we have an amount of options ahead of us.
Speaker Change: Great I appreciate the thought stinker.
Speaker Change: Thank you.
Speaker Change: Our next question comes from fried market out of Clarkston Securities go ahead. Please.
Fried Market: Yeah. Thank you.
Speaker Change: It's.
Fried Market: Just a quick question on that.
Fried Market: The market.
Fried Market: Discussion you just had.
Fried Market: Interesting to note that.
Speaker Change: Rates have been sadness.
Speaker Change: 23, the spy visit Redfin disruption right you would've thought.
Speaker Change: Perhaps a bigger impact on rates.
Speaker Change: Because of the <unk> so.
Speaker Change: So just if you have an <unk>.
Speaker Change: I D S why rates haven't been higher I guess.
Speaker Change: <unk>, Oh, I'm, sorry, it's related to the refinery around but.
Speaker Change: Just curious if you have any other comments.
Speaker Change: Comments to that that's the first part of it.
Speaker Change: I gotta be honest I'm pretty happy with the kind of the rate structure as things are right now I mean, they're obviously has been kind of the the refining.
Speaker Change: The maintenance and the state's earlier and then obviously the middle East now in China also a couple of months ago. So all of that has been kind of front loaded to some extent.
Speaker Change: Four first quarter I think it's been absolutely fantastic if I had to say if there's something that I think probably would change it would be to see some of the ops opening up from the west to the east I mean, the the NAFTA has been somewhat shot.
Speaker Change: I think a lot because of the distance of you have to go all the way around and the cost of opening up that <unk> was too Dear and therefore that has been somewhat less.
Speaker Change: Kicked up for example, just looking out if I'm a very micro perspective is is down for maintenance right. Now. So you know that refinery, which is very much NAFTA related is is not is not producing.
Speaker Change: So you know there are some other factors that you say well could there have been a bit more otherwise.
Speaker Change: I don't think it's a big thing to be honest I think that rates generally have had.
Speaker Change: From a very high point, great volatility has been oscillating you know widely in some markets the U S golf.
Speaker Change: And point, where you've seen rates move up 20, $30000 a day.
Speaker Change: Within a week the second one that has also been a funky ride has been the middle East on M. Ours has also moved up you know could move up 100 works. Good points also within a couple of days you know, creating this kind of uncertainty how'd you purger market.
Speaker Change: So one thing I think it's fair to say is that the underlying utilization level across the product tanker fleets is that a much higher level than we've seen before so you know it doesn't take very much we have seen now and the the sentiment generally with the owners as well is that it doesn't take them very long time to turn into.
Speaker Change: <unk>, which you know we don't have to go back that many years, where you know we were flatlining a lot and sentiment took a much longer time for it to kind of react to the fundamental prompt market dynamics.
Speaker Change: Yeah, that's interesting I mean, I was looking at the I a Q.
Speaker Change: <unk> refining runs globally was down year on year.
Speaker Change: Roughly about 81 million barrels per day, and then they predict huge ramp up to.
Speaker Change: 85 minutes in August.
Speaker Change: I was thinking like.
Speaker Change: Have you been.
Speaker Change: <unk> you should have it inspected and what's happened.
Speaker Change: <unk> when you have this wrap up if if it happens that's going to be very.
Speaker Change: Very interesting right.
Speaker Change: That's I think you hit the nail on the head there, Florida, that's how I look at it too it's quite interesting with all the things that took place in terms of maintenance and the pullback.
Speaker Change: You would have in previous markets going back the number of years seemed a lot more disruption oh and destruction and rates, whereas you know we have been hovering very nicely of some very decent numbers and what tends to be you know a situation where rates would have.
Speaker Change: <unk> negatively so if you add on all these elements in the you know the the stuff that you just talked about and also you know.
Speaker Change: The stuff around China that I, just mentioned earlier and so on you know we are so close to this capacity utilization, where you know north of 90 per cent of whatever that you just add a little bit to it and you start seeing you know extraordinary kind of increases that the outsize the element of that because you are not.
Speaker Change: Trading at the margin.
Speaker Change: And it.
Speaker Change: Thanks <unk>.
Speaker Change: Thanks, Florida.
Speaker Change: Our next question comes from Chris Robertson of Deutsche Bank Go ahead. Please.
Christopher Warren Robertson: Good morning, everybody. Thanks for taking our questions I'm really excited to see the the Breakevens here fantastic job everybody just wanted to pass that along.
Christopher Warren Robertson: But yeah. My question is related to that so.
Christopher Warren Robertson: If you're engaged in the prepayment as you said that you'd get to the 12 five level just curious what is the breakeven level today before that prepayments.
Speaker Change: Hi, Chris it's about 16000.
Chris: Okay, Yeah, I Gotcha, I I'm glad that it has that.
Speaker Change: That potential of an impact here. So that's what we were trying to get my second question is kind of the often overlooked handy Max segment I'm, just noticing quarter to date rates have.
Speaker Change: Have gone down a bit there and it seems to be a case, where there's I dunno consistent mismatch between what some of the the brokers provide in terms of the global averages versus what you guys actually put up so I wanted to better understand the dynamic in that particular segment.
Speaker Change: I'll I'll start with that I mean.
Speaker Change: I think they're handy.
Speaker Change: Max vessel handy market is it like a secret weapon you know, it's it's a it's a small market very agent market. It has the potential to ramp up extremely quickly.
Speaker Change: You have a certain size and experience you also have the ability to triangulate extremely well in terms of trading or the continental demetria, which is the primary market. It also has to markets within that one is clean and one is dirty. So you kind of like a four market's going on and.
Speaker Change: In an area, where you can opt.
Speaker Change: Optimize around that.
Speaker Change: It is certainly a very intensive business.
Christopher Warren Robertson: So you need a lot of.
Christopher Warren Robertson: Kind of a focus around it you need to have a number of ships to be able to optimize it is not a market that all would suggest that you go in with two or three ships.
Christopher Warren Robertson: But you need to have kind of critical mass.
Christopher Warren Robertson: And that also has a market, which I didn't talk about it earlier when was asked about the spot market, but you know that is also picked up a lot over the last couple of weeks.
Christopher Warren Robertson: Last week actually that's also trading probably are those for my cause that I mentioned somewhere around $30000 a day today.
Christopher Warren Robertson: 25 to 30.
Speaker Change: Okay, great yeah. Thanks for that color. That's it for me. Thank you very much of the time.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to them annually, Laura Chief Executive Officer for any closing remarks.
Laura: Thank you up right or no closing remarks from our side just thanking you all for your time and attention today and looking forward to speaking very soon thanks a lot.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.