Q1 2024 Frontline PLC Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by when it come to the Q1 'twenty to 'twenty four frontline plc earnings conference call and webcast.
Operator: At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 and 1 again. Please note that today's conference is being recorded. I would now like to turn the conference over to your CEO, Mr. Lars Barstad. Please go ahead.
Speaker Change: At this time all participants are in listen only mode. After the speaker's presentation there'll be a question answer session to ask a question. During the session you will need to press star one and one on your telephone.
Speaker Change: And he and automated message advising you hadn't he's raised to withdraw your question. Please press star one and one again.
Speaker Change: Please note that today's conference is being recorded.
Speaker Change: I'd now like to the conference over to your CEO. Mr. Losh Pasta. Please go ahead.
Speaker Change: Thank you very much they're all thank you for dialing in.
Lars H. Barstad: Thank you very much. They're all thank you for dialing in to. Frontline Voter Earnings Call, The first quarter of 2024 was to a large degree tainted by the security situation for the passage between the Red Sea and the Gulf of Yemen, the Gulf of Aden, in fact. However, there are still charters insisting on and owners willing to collect in the region, ignoring the security for the seafarers. But we, as Frontline, we simply The highlight of Q1 of 2024 was that all the Urana vessels are now sailing under the Frontline flag.
Speaker Change: Quarter earnings call.
Speaker Change: The first quarter of transparency forest to a large degree handsets by the security situation for the passage between the Red Sea on the Gulf of BMO.
Speaker Change: Sorry, the Gulf of Aden inside there are still charterers interesting nursing building.
Speaker Change: Collateral region, ignoring the security for the seafarers, but we asked from Congress in Pudong.
Speaker Change: The highlights of Q1 of 'twenty 'twenty four once that's all that you were not vessels are now selling under the contract flying and asked me progress intertwined and therefore, we will take the full advantage of having a fleet of 41 modern low consuming.
Lars H. Barstad: And as we progress into 2024, we will take full advantage of having a fleet of 41 modern, low-consuming VLCCs, in addition to our efficient SUSE MAX and LRT. Utilization seems to be edging higher on all asset classes, but again, the LR2s are the ones to shine. Before I give the word to Inge,
Speaker Change: This is in addition to our education Suezmax on electric fleets.
Speaker Change: Utilization seems to be edging higher on all asset classes.
Speaker Change: Again, the luxuries are the ones to shine.
Inger Marie Klemp: They're TC numbers on slide three in the deck. So, in the first quarter of 2074, Frontline achieved $41,100 per day on our VLC fleet. $45,800 per day on our SUSE-MAG fleet and $54,300 per day on our LR2-SLASH-FR fleet. LA2s have been yielding VLC numbers in the quarter, as this segment has been affected the most by the disruptions in the Suez Canal Passage. The Suzmax is actually called that for a reason; hence the change in flows has forced this sector to adopt new trading patterns during the pandemic.
Speaker Change: Before I give the Virgin.
Speaker Change: There you see numbers on slide three in the deck.
Speaker Change: So in the first quarter of transfer Sunday for frontline achieved $41100 a day on Army C. Smith.
Speaker Change: $45800 per day on our Suezmax Smith and $54300 per day on our epilepsy Slash Aframax fleet.
Speaker Change: A lot twos have been yielding VLCC numbers during the quarter. As this segment has been affected the most by the disruptions in the Suez Canal.
Speaker Change: The Suezmax has actually called out for a reason and hence the change in flows as force.
Speaker Change: The new trading patterns during the quarter.
Inger Marie Klemp: So far, in the second quarter of 2024, 78% of our VO2C days are booked at $60,400 per day. 73% of our SUSE max days look at $46,400 per day, and 72% of our LO2 slash AFROMAX days at a very firm $64,700 per day. Again, all these numbers in the table are on a load-to-discharge basis, and they will be affected by the amount of ballast we end up having at the end. Now, let's check in with the financial hires.
Speaker Change: So far in the second quarter Swanson chunky for 78% of our VLCC days booked at $60400 per day.
Speaker Change: 73% of our Suezmax space.
Speaker Change: Mixed up $46400 per day, and 72% of our L to slash Aframax days.
Speaker Change: I'm very firm $64700 per day.
Speaker Change: Again, all these numbers in the table, our envelope of discharge basis.
Speaker Change: Will be affected by the amount of ballast days, we end up having at the end of Q2.
Speaker Change: I'll now.
Speaker Change: The financial highlights.
Inger Marie Klemp: Thank you, Lars. Good morning and good afternoon, ladies and gentlemen.
Speaker Change: Thank you and I am not good morning, and good afternoon, ladies and gentlemen.
Inger Marie Klemp: Let's then turn to slide four and look at the profit statement. In the first quarter, we reported a profit of $180.8 million, or $0.81 per share. We also report an adjusted profit of $137.9 million, or $0.62 per share. Adjusted profits in this quarter increased by $35.8 million compared with the previous quarter. And that was primarily due to an increase in our TCE earnings. But that was also, again, due to the delivery of the 24-week lease from Euronav in the previous quarter and also in this quarter. And also to higher TCE rates.
Speaker Change: Turn to slide four.
Speaker Change: And look at the profit statement.
Speaker Change: In the first quarter report profit of $188 million.
Speaker Change: Or eight cents per share annually.
And we also report adjusted profit of 137 nine.
Speaker Change: 9 million or 62 cents per share.
Speaker Change: I just a profit in this quarter increased by 35 8 million compared with the previous quarter.
Speaker Change: First primarily due to an increase in our TCE earnings that those also again due to delivery of the 10 to 40 is from you we're not in the previous quarter and also in this quarter and also due to higher TCE rates.
Speaker Change: Again, this was partially offset by an increase in ship operating expenses depreciation and finance expense are sort of sell to really be able to 24, 8% from year ago.
Inger Marie Klemp: Again, this is partially offset by increased ship operating expenses, depreciation, and finance expense as a result of delivery of the 24 wheeled disease from Urinal. Let's then look at some balance sheet highlights in slide 5. The balance sheet movements this quarter are related to taking delivery of the remaining 13 of the 24 VCCs acquired from Euronav last year. Frontline has strong liquidity of $404 million in cash and cash equivalents, including undrawn amounts of the senior and secured revolving credit facility and also the marketable securities and minimum cash requirements to the bank as of March 31, 2024. We have no remaining new building commitments and no meaningful debt maturities until 2027. If we then look at slide 6. Let's move to that one.
Speaker Change: Let's look at some balance sheet highlights.
No it's fine.
Speaker Change: Okay.
Speaker Change: The balance sheet and then this quarter all related to taking delivery of the remaining 13 of the 20 acquired from last.
Speaker Change: Last year.
Speaker Change: Frontline has.
Speaker Change: With liquidity of 404 million in cash and cash equivalents, including Undrawn amounts under our senior unsecured revolving credit facility and also the marketable securities and minimum cash requirements for the bank as of March 31st 2024.
Speaker Change: We have no remaining new building commitments and no meaningful debt maturities until 2027.
Speaker Change: If we then just yet.
Speaker Change: I think that's clear.
Speaker Change: So that's one.
Inger Marie Klemp: Following the delivery of all the 24 VCCs that we acquired from Euronav and also the sale of the seven older vessels in the first and second quarter of 2024, our fleet consists of 41 VLCs, 23 Suez F-16s, and 18 LR2 tankers. The fleet has an average age of 5.9 years and consists of 99% eco-vessels, where 56% are scrubber-fitted.
Speaker Change: Full living in the delivery of all the 24 of these assays that they acquired from you and others and also the sale of this sudden older vessels in the first and second quarter of 2024.
Speaker Change: Our fleet consists of 41, 623, Sears boxes, and 18 <unk> tankers.
Speaker Change: The fleet has an average age of five nine years and consisted of 19, 9% equals our first well.
Speaker Change: 6% is scrubber fitted.
Inger Marie Klemp: We estimate average cash costs per day break-even rates for the remainder of 2024 were approximately $31,200 per day for the UCCs, $23,500 per day for Su-Spec tankers, and $22,200 per day for LR2 tankers. And the fleet's average SMS is about $27,100 per day. This is slightly up from the previous quarter as a result of the financing and refinancing schemes. The fleet average SMF includes the drydock of two Su-25 tankers and five VCCs in 2024.
Speaker Change: Sure.
Speaker Change: The estimated average cash cost for the bank.
Speaker Change: The rates for the remainder of 2024.
Speaker Change: Slightly $31200 per day for the East coast.
Speaker Change: <unk> $3500 per day for Suezmax tankers, and $22200 per day for <unk> tankers and the fleet average estimates its about $27100 per day.
Speaker Change: This is slightly up from the previous quarter I sort of felt that the financings or refinancings done.
Speaker Change: The fleet average estimates increased dry dock of Chi Suezmax tankers and try these proceeds in 2024.
Inger Marie Klemp: Where two SUSE Maxes and two VLCCs will be docked in the second quarter, one VLCC in the third quarter, and two VLCCs in the fourth quarter. We recorded OPEC expenses including Dryadoc in the first quarter of $8,100 per day for VLCs, $8,800 per day for Suismax tankers, and $7,400 per day for LR2 tankers, and this includes the start-up The first quarter fleet average of OPEX, excluding GARDOC, was $7,700. Then we can move to slide seven.
Speaker Change: The two suezmax us and to the interface.
Speaker Change: We talked in the second quarter when did you see in the third quarter entry that you see in the fourth quarter.
Speaker Change: We recorded Opex expenses, including dry docks in the first quarter of $8100 per day for the DS $8800 per day for Suezmax tankers and $7400 per day for all of two tankers.
This includes startup of two Suezmax tankers.
Speaker Change: The first quarter fleet, a ratio of Opex, excluding dry dock was $7700.
Speaker Change: Now, let me move to slide seven.
Speaker Change: Okay.
Inger Marie Klemp: Frontline has about 30,000 earning days annually and is of about 28,000 R-spot base. The cash generation potential at current fleet and spot market earnings from Clarkson's research, as of May 29, of $55,900 per day for VCCs and $50,000 per day for SUSMAX tankers and $55,500 for LI2 tankers is $835 million a year, or $3.75 per share. If you look at this slide on the right-hand side, you can see that a 10% increase from the current spot market will increase the potential cash generation by about 19%.
Speaker Change: Yeah.
Frontline.
Speaker Change: That's about 30000 the earnings base annually.
Speaker Change: We're all about 28000.
Speaker Change: Our spot base.
Speaker Change: The cash generation potential.
Speaker Change: Current fleet and spot market earnings from Clarksons research as of May 29.
Speaker Change: All $55900 per day for Vlccs, Some 50000 <unk> per day for Suezmax tankers and $65500 for LNG tankers is $835 million, a year or $3.75 per share.
Speaker Change: If you look at this slide to the right.
Speaker Change: On slide you can see that 10% increase from the current stock market will increase the potential cash generation with about 19%.
Lars H. Barstad: And with this, I leave the world to Lars again.
Speaker Change: And with this I leave the word to Lars again.
Lars H. Barstad: Thank you very much, Inger. Let's move to slide eight and have a look at the current market narrative. We're still in a situation where the situation between Israel and Hamas and between Israel and Iran. We are in an environment with growing political We're also seeing increased sanction evasion scrutiny from the U.S. and EU, and this causes what I refer to formally as the Grey Fleet to move further into the Exarchment, which is growing as we move forward.
Speaker Change: Thank you very much senior.
Speaker Change: Yes.
Lars: That's what I move to slide eight and have a look at the current market with marathon.
We're still in a situation where the situation between Israel and them all.
Lars:
Lars: But inventory in Israel and Iran.
Speaker Change: Now, Nevada mentioned growing political risk.
Speaker Change: We are also seeing increased sanction innovation scrutiny from the U S and EU on this course is kind of what I refer to formally as in Gray fleet to move further into that.
Speaker Change: The document which is growing.
Lars H. Barstad: On the very positive side, global oil demand is now estimated, according to EIA, to reach an all-time high in June at 103.76 million barrels per day. I think we need to recognize that although we are in a transition mode into greener fuels, and we are part of the green transition, but as the overall energy demand globally is growing, oil and hydrocarbons play a part and will continue to grow. What's kind of very interesting in Q1 and following into Q2 has been that the period markets have really started to show some, On the chart on the right-hand side, I've basically used the Krausen indices to show... issues. We're looking now that a VLCC, a three-year time shutter for an ECOSCOBRA VLCC, is closing in on $55,000 per day.
Speaker Change: As we move forward.
Speaker Change: Oh on the very positive side global demand.
Speaker Change: It's now estimated according to EIA to reach all time high in June.
Speaker Change: The $3 76 million barrels per day.
Speaker Change: I think we need to recognize.
Speaker Change: Recognize that.
Speaker Change: Although.
Speaker Change: We are in a transition mode.
Speaker Change: Greener fuels.
Speaker Change: We're part of the green transition, but.
Speaker Change: But as the overall energy demand globally is growing.
Speaker Change: Oil hydrocarbons place of parks.
Speaker Change: Continuous to grow.
Speaker Change: What's very interesting and.
Speaker Change: In Q1 on a full.
Paul: Paul Let me into Q2 has been that the period markets have really started to show some strength on the chart on the right hand side.
Paul: It could be used trucks and this is true.
Lars H. Barstad: This puts the time shutter market actually in almost like a contango, where one-year, two-year, and three-year time shutters for VLCC are actually that different. We also should note that the LR2 and the SUSE MAX market are more or less priced equal.
Paul: We're looking now that.
Paul: We also see a three year time charter for an airport Scarborough VLCC is closing in long 65000 barrels per day. This puts the time charter market actually in almost like a contango, where a one year two year or three year time charters for Nielsen.
Or should that differently.
Paul: Also you should note that.
Paul: <unk> on the Suezmax market is more or less priced equally.
Lars H. Barstad: Another exciting kind of development is that the TMX pipeline is now in some kind of expansion. It's coming into reality, and we're starting to see, or will start to learn how that oil will move. We're talking about 650,000 barrels per day when the expansion is finished into the Pacific basin, and that will have an effect on basically utilization in that region. The port where the TMX pipeline comes out can only cater for AFROMAXXIS, it cannot cater for STS operations, and there is virtually no storage.
Paul: Another exciting development is that the Tms pipeline right now kind of like Spanish nice is coming into reality.
Paul: And we're starting to see or we'll start to learn how that oil we're talking about 650000 barrels per day. When the expansion is finished into the Pacific Basin.
Paul: And that will have an effect on basically.
Paul: Utilization in that region.
Paul: And they took the porch, where the <unk> pipeline comes out kind of only Cathy for Aframax.
Paul: It cannot cater for Sps operation and there is virtually no storage there. So we'll see trading patents, where depending on where the oil is a day, where you either have aframax is taking down the coast just suitable Sts.
Lars H. Barstad: So we'll see trading patterns where, depending on where the oil is heading, where you'd either have Afromaxxis taking it down the coast to a suitable SDS location or going into US refining. And lastly, on that note, the Dangote refinery, which I know that the market has kind of speculated how that will affect Tonma going forward. It's a significant refinery starting up in Nigeria, finally, after 16. It's quite interesting to see that they are also taking feedstock from the U.S. Gulf, which is not expected, sitting next door to Nigerian crude supplies.
Paul: Location or going into the U S refining system.
Paul: And lastly on that note.
Speaker Change: <unk> got the refinery in which I know that the market has kind of speculated how that will affect Hamas going forward. Its a significant refinery starting up in Nigeria. Finally after 16.
Paul: Yes.
Paul: As coffee answers to be interesting to see that they are also down taking feedstock from the U S Gulf, which is not expected sitting next door to you.
Paul: Nigerian crude supply.
Lars H. Barstad: The order books continue to grow, but as the order books grow, the delivery of new orders, and I'll get back to that in a minute. We see that on the charts at the bottom of the slide. You see that the VLCC, I've said it many times now, we seem to be in this kind of grind, positive grind, where the bottoms are higher for every cycle we go. And that still seems to hold.
Paul: The order books continue to grow but the.
Paul: The order books grow the denim.
The other option time and ill get back to Appalachia.
Brian: We see that on the short shaft bottom on the slide you see that the VLCC I've said it many times now we seem to be in this kind of grind positive, Brian where the bottoms are higher for every cycle. We go.
Brian: The but still.
Lars H. Barstad: The SUSE MAX, I mentioned in the introduction, SUSE MAX and SUSE CANAL are connected. So SUSE MAX seems to be very range-bound, around $40,000 per Mach, and doesn't really seem to have legs to go anywhere.
Brian: Still seems to hold.
The Suezmax I mentioned it.
Brian: And the introduction Suezmax and Suez Canal are connected to suezmax and seem to be very range bound around $40000 to mark.
Brian: Not really seem to have legs to go anywhere.
Lars H. Barstad: But the LR2 are the ones to shine, and they're most affected by the disruptions in the Suez Canal passage, and we see the volatility is increasing. We're also seeing examples, and Frontline has participated in, Suez Maxis cleaning up in order to kind of compete in the particular gas soil going from the Middle East Gulf to the west westbound. So let's move to slide nine and look at some of the kind of developments in flows. I have kind of talked about this earlier.
Brian: But the <unk> are the ones to shine most affected by the disruptions in the Suez Canal assets.
Brian: And we see that volatility is increasing we're also seeing examples from panel has participated in suezmax is cleaning up in order to.
Brian: Kind of compete.
Brian: The particular gasoline going from the middle East Gulf too.
Brian: Westbound.
Brian: Okay.
Brian: So let's move to slide.
Speaker Change: <unk> mine.
Speaker Change: Okay.
Speaker Change: Look at some of the developments in flows.
Speaker Change: I have kind of talked about this earlier.
Lars H. Barstad: OPEC is maintaining its cuts, which are predominantly located around the Middle East Gulf. Non-OPEC supply has been given the opportunity to grow, and this growth continues. So, on the left-hand side, you can see tons of oil generated from America's oil exports. America is basically the whole continent included, and we see that continuing at a very, very high level. And we also see VLCCs are starting to get favored, particularly so in May.
Speaker Change: OPEC is maintaining its cuts which is predominantly located around the middle East Gulf.
Speaker Change: Our non-GAAP Opex supply has been given the kind of the opportunity to grow and this growth continues.
Speaker Change: So on the top left hand side, you can see time in March generated from Americas oil exports America is basically the whole continent are included and we see that continuing at a very very high level.
Speaker Change: And we also see VLCC are studying gets saved in particular so in may.
Lars H. Barstad: And this basically is an indication that a lot of this volume is going along. We also see that Europe continues to draw oil from a kind of longer distances on the bottom left-hand chart. So the tonne-mile generation by Europe of avoiding Russian crude is continuing. But I think lastly, and very interestingly, we're seeing... Thank you very much.
Speaker Change: And this basically is an indication that a lot of this volume is going wrong.
Speaker Change: We also see that Europe continues to draw oil from a kind of longer distances on the bottom left hand chart.
Speaker Change: Ton mile generation by you're avoiding Russian crude is continuing but I think lastly, and very interestingly we're seeing.
Speaker Change: That's close.
Speaker Change: <unk> is fortunate.
Speaker Change: Yes.
Speaker Change: Of course growth.
Speaker Change: Our.
Speaker Change: And much larger pulling oil.
Speaker Change: So basically with students.
Speaker Change: Moving to slide.
Lars H. Barstad: The board looks at some issues that continue to grow. Again, this data is based on a registered responsibility for an IMO numbers issue. So I think that this will grow, and it's more important to confirm. We now have an award look to feed ratio of 4.5-6% on policy-based. [inaudible] What we've all done in the last couple of years, having called the tankers, is now reach a level of 26.
Speaker Change: Yeah.
Speaker Change: Thanks.
Speaker Change: They continue to grow.
Speaker Change: Good now.
Speaker Change: Okay.
Speaker Change: When somebody.
Speaker Change: All numbers issue.
Speaker Change: So I think.
Speaker Change: These numbers even more.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: 6%.
Speaker Change: Hello.
Speaker Change: Thank you.
Speaker Change: Across the system.
Speaker Change: 12%.
Speaker Change: Yes.
Speaker Change: Interestingly.
Speaker Change: In this in the last couple of years have been called to tankers is now.
Speaker Change: Reached a level of 26, 6% of the existing electric fleets, but I think one has to take into the consideration that.
Lars H. Barstad: But I think one has to take into consideration here that as LR2s pass 15 years, they tend to turn into Afromaxes, and I think to truly reflect the picture in the Afromax size class, one should actually include the overall Afromax number, which would drastically reduce this percentage. But anyway, we continue to see these order books grow, but to a lesser and lesser degree in 2027, and actually now we're talking about 2028. And let's move on to slide 11.
Speaker Change: As a law choose path 15 years, they tend to turn into from axis.
Speaker Change: I think kind of.
Speaker Change: Truly reflect the picture in the Aframax.
Speaker Change: Site costs on should actually include the overall aframax number which would drastically reduce this percentage, but anyway. We continue to see these order books grow but to a lesser and lesser degree in 2007 and actually now we're taught.
Speaker Change: The thing about 2028.
Lars H. Barstad: And I think if there is one slide that's important in our quarterly presentation this time, it's this one. And, you know, have a look at the bottom left-hand chart. So from 2024 onwards, we're in fact, hitting a wall of replacement, based on tonnage that has to be phased out at the age of between 20 or 25 years, depending on acid class. There is a monster of vessels, or dead weight, that were built between 2004 and 2011 that have basically come of age.
Speaker Change: And let's move then to slide 11, and I think if there is one slide that's important in our quarterly presentation. This time at this one.
Speaker Change: And have a look at the bottom left hand shot so from 'twenty to 'twenty four onwards, where in fact, hitting a wall of replacement needs.
Speaker Change: Based on tonnage that has to be phased out.
Speaker Change: The ache between 2025 years, depending on asset class.
Speaker Change: There is a monster off.
Speaker Change: The vessels are deadweight tons.
Speaker Change: That was built between 2004 and 2011.
Lars H. Barstad: 2011 was the absolute peak year of new building, and this is again all asset classes included, and at that point in time, we had 519 shipyards in the world. Now we have 247 shipyards in the world. So, in terms of the number of shipyards globally, the number of yards has been reduced by 52%. However, Robertson's capacity, as some of these yards are bigger, the reduction is somewhat less, being 40%.
Speaker Change: Basically come to H.
Speaker Change: 2011 was the absolute peak year of new building.
Speaker Change: Again, all less across is included.
Speaker Change: And at that point in time, we had 590 in shipyards in the world.
Speaker Change: Now we have 247 shipyards in the world.
Speaker Change: No.
Speaker Change: In amount of shipyards globally.
Speaker Change: The math of the number of yards has been reduced by 52%.
Speaker Change: Best tons capacity at some of these yards are bigger.
Speaker Change: The reduction is somewhat.
Speaker Change: Less being 40%.
Lars H. Barstad: We're seeing that in South Korea and in Japan, they're struggling basically to be able to expand this existing yard capacity, basically due to demographics, you know, being able to attract workers and so. I've said it in a few presentations. In South Korea, they actually need to take in workers from the Philippines to get basically the capacity needed. In Japan, they are saying that the average age of a welder is 56 years. So this is a demographic challenge.
Speaker Change: We're seeing that in South Korea, and in Japan, They are struggling basically to be able to expand this.
Speaker Change: The existing.
Speaker Change: Yard capacity basically due to demographics.
Speaker Change: Being able to attract workers and so forth.
Speaker Change: It's on a few presentations in South Korea.
Speaker Change: They actually need to take in number of brokers from upfront in the Philippines 222 to get basically the capacity need.
Speaker Change: In Japan.
Speaker Change: One was saying about the average age of a welder is 66 years. So this is the demographic challenge there's not that many kids in South Korea, and Japan, and really really wants to work in the shipyard, China has potentially lots of capacity.
Lars H. Barstad: There are not that many kids in South Korea and Japan that really, really want to work in a shipyard. China has potentially a lot of capacity. This is a structural supply story, you know, in order to replace all this tonnage that needs to be replaced over the next 10 years, we have an issue. If you look at the tanker replacement alone. We're actually, you know, if you put the long goggles, the big goggles on, you know, from now until the end of the year, we need more than close to 400 VLCCs built, we need 300 SUSE MAXs built, we need 187 LR2s built, and close to 400. So this is kind of massive, and it's a structural problem. So it's not easily sold.
Speaker Change: But it is a structural surprise story you know in order to replace all of this tonnage that needs to be replaced over the next 10 years, we have an issue.
Speaker Change: If you look at on the tanker replacement alone.
Speaker Change: We're actually.
Speaker Change: If you put the long ago was the big Global song.
Speaker Change: From now on.
Speaker Change: Til therapies, we need more than close to 400 Vlccs built we need 300 Suezmax is built we need 187, the luxury spilt and close to 400 Aframax size. So this is kind of a massive and it's a structural problem.
Lars H. Barstad: And as all market intelligence agrees on oil demand continuing to grow, although tonnemiles may contract in the short to medium term if Ukraine-Russia is resolved and if the Red Sea passage is opened up, one cannot escape the fact that shipping supply growth looks to be challenging. With that, let's move to slide 12 and go through the summary.
Speaker Change: So it's not easily sold and as all market intelligence agree on oil demand to continue to grow.
Speaker Change: You know all the ton miles may contract short to medium term.
Ukraine, Russia is resolved and if the Red Sea passage is opened up.
Speaker Change: One can lock escape the fact that shipping supply growth looks to be a child.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Without Atlas.
Speaker Change: Let's move to slide 12, and go through the summer.
Lars H. Barstad: So again, the highlight of Q1 for Frontline is that we have a fully delivered VST fleet sailing under the Frontline flag. We have concluded the sale of, and it's given Frontline one of the most fuel-efficient fleets in the market. We finalized and inked the expansion in financing, completing our strategy of re-leveraging the existing. However, the security situation in the Red Sea, the Gulf of Aden, and the Middle East, in general, remains. There's continued contracting in the tank markets, but building capacity is coming into question as delivery dates now move into 2020.
Speaker Change: So again, the highlight of Q1 for frontline and stuff, we have a fully delivered VLCC fleet selling onto the.
Speaker Change: <unk>.
Speaker Change: With the conclusion of the sale of <unk>.
Speaker Change: And it's given frontline one of the most fuel efficient fleets in the market.
Speaker Change: We finalized and ink the expansion.
Speaker Change: And finally, I think completing our strategy of re leveraging the existing fleet.
Speaker Change: The security situation in Red Sea Gulf of Aden, Amit Lee.
Speaker Change: In general remains.
Speaker Change: There's continued contraction in the tanker market's been building capacity is coming into question of deliberate data now move into 2020.
Lars H. Barstad: Short and medium term Oldeman, picture romantic term. And we're also kind of being alerted by the market that OPEC plus, There is increased liquidity in the period markets with long-term time shot rates moving up. And this is, in all fairness, intelligent money coming into the market. So with that, I would like to open up for questions. Thank you.
Sort of medium term all demand picture remains true.
And we're also.
Speaker Change: Being alerted by the markets that the OPEC plus.
Speaker Change: Chemistry in second half of 'twenty 'twenty four.
Speaker Change: There is increased liquidity in the period market with long term time charter rates moving up and this is in all fairness, the intelligent money coming into the market.
Speaker Change: So with that.
Speaker Change: I would like to open up for questions.
Operator: Thank you, sir. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our first question. The questions come from the line of Omar Nokta from Jefferies. Please ask a question.
Speaker Change: Thank you saw how as a reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced until we grow. Your question. Please press star one and one again once again, please press star one and one on your telephone and wait for your name to be announced thank you.
Speaker Change: We are now going to proceed with our first question.
Speaker Change: A question come from the line of Omar knocked off from Jefferies. Please ask your question.
Omar Mostafa Nokta: Thank you. Hi Lars and Inger. Good afternoon.
Speaker Change: Thank you hi, Laura as an anchor a good afternoon. Thanks for the presentation I was very detailed and informative across different <unk> different elements of the story and in the market.
Lars H. Barstad: Thanks for the presentation, always very detailed and informative on different elements of the story and the market. I guess I have a couple of questions for you, maybe just first on the financing. As you just highlighted, you finalized an inked expansion financing. You've unlocked a good amount of cash here recently. And it looks like, just tallying the numbers, $417 million has been unlocked, and that's going to basically repay the human holding borrowings of $395 million, which was used initially on the Uranav deal.
Speaker Change: A couple of questions for me, maybe just first on the financing you just highlighted to finalize the ink the expansion financing.
Speaker Change: You've unlocked a good amount of cash here recently and it looks if I'm just telling the number is $417 million has been unlocked and that's going to basically repay the human holding borrowings of $3 95, which was used initially on a year and a half deal.
Lars H. Barstad: But what about the seven tankers, the seven older ships you just sold? Those unlocked $275 million after you paid down the debt. Is that cash, is that earmarked for anything in particular, or will it go into further debt reduction?
Speaker Change: What about the seven tankers seven older ships, you just sold those unlocked $275 million. After you pay down the debt is that cash is that earmarked for anything in particular or will these go into a further debt reduction.
Lars H. Barstad: You have to remember that we used more to finance the urinal vessels than the 395 million that we drew under the Sterna facility and also the Hammond shareholder loan. We spent some cash from operations until we sold the vessels, the older vessels. So that's the answer to your question.
Speaker Change: You have to remember is that our leaders are more finance data analysis and the key on the 95 million under the facility and also be again channels alone.
Speaker Change: Then some cursory observation Oh.
Until these fills the vessels that the older vessel. So that's the answer.
Speaker Change: The answer to your question.
Lars H. Barstad: Okay. Yep. So just as simple as that then. Okay? And I guess just more kind of sticking with, you know, Lars, you talked quite a bit about the market and the LR2s being the sector that's shining. And you've also, you also talked about TMX. How are you thinking about the LR2 fleet in the way it's trading currently? Or how are you balancing, say, the LR2s between dirty and clean, given the strength outside the Suez market and then also the potential pull into Vancouver?
Speaker Change: Okay.
Speaker Change: Okay, Yeah, so just a simple as that okay and.
Speaker Change: I guess, just more kind of sticking with.
Lars you talked quite a bit about the market and the LR twos being the factor that shining and <unk> also you also talked about <unk>. How are you thinking about the LR to fleet and the way it is trading currently.
Speaker Change:
Speaker Change: Or how are you balancing say the LR twos.
Speaker Change: Between 30, and and clean given the strength in and.
Speaker Change: Outside the Suez market and then also the potential pull into Vancouver.
Lars H. Barstad: Yeah, no, it's a good question. This is a time where we probably would have wanted some Afro Maxis in our fleet, to be quite honest, you know, uncoated. But the, So basically, the question in regards to the LR2 shining is obviously related to the fact that, you know, with the Suez Canal virtually closed, products, you know, from east to west, the ARBs work periodically, but west to east, there is very little material.
Speaker Change: Yeah, no it's a it's.
Speaker Change: Good question. This is a car where we probably would have wanted to have some offer them access in our fleet to cut on us.
Speaker Change: Uncoated, but.
Speaker Change: The so basically.
Speaker Change: Okay.
Speaker Change: So the question in regards to the luxury shining now this is obviously related to the fact that with the Suez Canal virtually closed.
Speaker Change: Products from.
Speaker Change: East to west the Arps work periodically, but west to east there is a material.
Lars H. Barstad: You need to incentivize an owner to actually balance the ship going east, and that means that the rates actually have to go up. So the utilization of the LR2 fleet is simply increasing quite a lot, basically because of this inefficiency. And also to the point where, you know, great efforts have been made in order to clean up Suess Maxis for this trade. And clean Suess Maxis can obviously, clean Suess Maxis can obviously not cater for all the cargoes; basically, you know, gas oil is probably as far as it goes.
Okay.
Speaker Change: Incentivize on owner to actually balance the ship going east and that means that their rates actually have to go up.
Speaker Change: So the utilization of their luxury places simply increasing quite a lot basically by this inefficiency.
Speaker Change: The.
Speaker Change: Also to the point where.
Speaker Change: Great efforts have been done in order to clean up a suezmax is the core for this trade.
Speaker Change: Suezmax has come up with a clean suezmax accomplishing a precursor for all the cargos basically tough to gasoline as strongly as far as it goes.
Lars H. Barstad: But, you know, this is basically what's driving this market. Tanguta, I don't think we've, sorry, TMX, I don't think we've seen that fully affecting the Afro Max market. But, you know, at least as we can see now, as the market is developing or evolving, it looks like a lot of these barrels are actually going west. Sorry. It's the other side of the world
Speaker Change: But.
Speaker Change: This is the thing that's driving this market don't go I don't think it's necessary TNX I don't think we've seen that fully affecting the aframax market that's at.
Speaker Change: At least as we can see now.
Speaker Change: The market is developing.
Speaker Change: Our evolving.
Speaker Change: It looks like a lot of these barrels are actually growing.
Speaker Change: Sorry.
Lars H. Barstad: And so basically, what we see is a trade emerging where Afro Maxis will go up and down the coast. You have certain SDS locations in, you have some in the US, you have Mexico, and you have Ecuador. In Ecuador, you also have tankage.
Speaker Change: The other side of the world and.
Speaker Change: So basically what we see the trade emerging where after Maximus will go up and down the coast you'd have surplus dislocations in.
Speaker Change: So many of you have Mexico and you have Ecuador.
Lars H. Barstad: And we see this to be where you collect the oil from TMX on Afris, so increasing utilization on Afris to some extent, but not necessarily to the extent as if the Afro Maxis were going all the way west to China. And then SDS activity and then put into the LTCs that take it over to, or to clients there. So, I think we still need to look at this trade for a few more months until we understand how it's going to work, but you could say that the worst-case scenario, which is obviously the best case scenario for a ship owner, is that all this, you know, you need to load an Afromax every day.
Speaker Change: Corridor, Yasar tankage and we see.
Speaker Change: Taking this to be where you collect the oil from from Tms on office, so increasing utilization on factor on our president to some extent, but not necessarily to the extent. They staff productions were going all the way over to China, and then assess activity and then put into the analysis that takes it over two two or.
Speaker Change: Two two clients there. So so I think we still need to have in our cabinets trade for them for a few more months until we understand how it's going to work, but you could say that the worst case scenario, which is obviously the best case scenario for a ship owner is that all this you need to load and aframax everyday so.
Lars H. Barstad: So, and if they need to travel for 40 days before the discharge, you have 80 days until they're, But as far as we can see, initially, it doesn't, you know, you don't use that amount of days because you're basically just going down the coast to a possible STS location. And that is a larger vessel. And so far, it looks like it's going into a building.
Speaker Change: You talked ships and if they need to travel for 14 days before the discharge. So you have eight today's until they're back.
Omar Mostafa Nokta: Okay. Thanks, Lars. That's helpful.
Speaker Change: Take a lot of vessels, but as far as we see.
Speaker Change: Initially is that it doesn't mean, you don't use that come up today, because you're basically just going down the coast.
Speaker Change: Possible less dislocation.
Speaker Change: And then there's a large addressable.
Speaker Change: So far it looks that go into Vlccs.
Lars H. Barstad: And just a final one for me, just kind of on the VLCC performance in the first quarter, the repositioning of the URNAV ships is obviously, there's a big divergence between what your initial fleet earned and what those ships have done. Should we think about further repositioning dynamics in the second quarter? And then is 3Q really the first kind of true quarter of ongoing operations on the VLCC?
Speaker Change: Okay.
Laura: Okay. Thanks, Thanks, Laura So that's helpful. And then just a final one for me just kind of on the VLCC performance in the first quarter are the repositioning of the <unk> ships is there's obviously, there's a big divergence between what your initial fleet earned and what those ships have done them should we think about further repositioning diner.
Laura: Mix in the second quarter.
Laura: And then is <unk> really the first kind of true quarter of ongoing operations on the B L.
Lars H. Barstad: Yeah, I think you have a good point, but there are a few points I want to make. Number one is that the Uranium fleet has a lower scrubber penetration than the former, you know, the existing Frontline fleet prior to the transaction. So that obviously affects the earnings you can get. Secondly, you know, initially, all the vessels were delivered on, and basically all the vessels were delivered around Singapore. So we have, you know, an introduction trade that maybe didn't yield what we would have wanted.
Speaker Change: Yeah. Thank you yeah.
Speaker Change: Wherever there are few points I want to make a number one.
Speaker Change: One has to remember that youre not fleet costs lower scrubber penetration.
Speaker Change: The former.
Speaker Change: The existing four car fleet prior to the transaction, but not always the effect.
Speaker Change: The earnings you can get.
Speaker Change: Secondly.
Speaker Change: Initially all the vessels are delivered on basically all the vessels are delivered around Singapore. So we have coffee introduction trade that are that maybe didn't yield what we wanted.
Lars H. Barstad: It's also a timing issue; when these enter the market, we got them very concentrated in time. So it meant that, you know, we hit basically a very narrow window in the Middle East, which, you know, just to top it was the weak spot in Q1. But anyway, I think you're absolutely right, as we move forward here, we'll spread the fleet more evenly around the globe.
Speaker Change: So it's a timing issue when they entered the market. We got some very concentrated in time. So it meant that we hit basically a very narrow window.
Speaker Change: In the Middle East, which.
Speaker Change: Just to top it was the weak spot in Q1, but anyway, I think youre absolutely right as we move forward here, we'll spread the fleets more evenly around the globe.
Speaker Change: And on the <unk>.
Speaker Change: You will see that the euro on our vessels and just blending and we're probably not going to comment on on.
Speaker Change: Okay.
Speaker Change: English between the two fleets going forward as we report, but also you have a very good point and you know these are these ships have done on long wages. So it takes a bit of time before everything is constantly.
Speaker Change: Fully.
Speaker Change: Ah climatized or whatever the awareness into two the total flip. So so Q2 will maybe to some extent be affected the Q3, we should be running at normal Shaw.
Lars H. Barstad: Okay, very good, but obviously to a lesser degree in Q2 than in Q1. Okay. All right. So two Qs will be better, and then three Qs full on.
Speaker Change: Okay very good.
Speaker Change: Led to a lesser degree in Q2 than Q1, obviously.
Speaker Change: Okay, Alright, Thats <unk>.
Better and then <unk> a full on okay excellent.
Lars H. Barstad: Okay. Yeah. Excellent. Thanks, Lars. Thanks, Inger.
Speaker Change: Excellent. Thanks, Lars Thanks Inger.
Speaker Change: Hi, good morning.
Operator: Once again, another reminder to ask a question: please press star 1 and 1 on your telephone and wait for your name to be announced. Once again, it's star 1 and 1 to register for questions. Thank you. We are now going to proceed with our next question. The questions come from the line of Craig Lewis from BTIG. Please ask a question.
Speaker Change: Once again as a reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced once again is still one and want to register for questions. Thank you.
Speaker Change: We're going to proceed with our next question.
Speaker Change: No questions coming from that add up quickly from BPI. Please ask your question.
Gregory Robert Lewis: Yeah, hey, thank you, and good afternoon, and thanks for taking my questions. Lars, you know, it looks like the depth of the time charter market's picking up. I mean, obviously, you're taking advantage of that. You know, as we look at the back half of the year and the outlook for rates, and the spread between, I guess, the curve and the spot market, I'm kind of curious what you're seeing and how you're thinking about the opportunities to continue to put some vessels on some term charters.
Speaker Change: Yeah, Hey, Thank you and good afternoon, and thanks for taking my questions Lars.
Speaker Change: It looks like you know the depth of the time charter market is picking up I mean, obviously youre taking advantage of that.
Speaker Change: As we look at the back half of the year and the outlook for rates.
Speaker Change: And the spread between I guess the curve in spot market.
Speaker Change: I guess kind of curious what youre seeing and how you're thinking about the opportunities to continue to put some vessels on term charters.
Lars H. Barstad: We're constantly kind of, but I think, you know, keep in mind that, you know, our view is that, you know, we're in for a longer one here. I hate saying it because we used the expression stronger for longer back in 2020, and that was absolutely not right.
Speaker Change: We are a we're constantly.
Speaker Change: But I think.
Speaker Change: Keep in mind, that's a R.
Speaker Change: Our view is that.
Speaker Change: We were in for for longer wrong here.
Speaker Change: I I hate, saying, it's because.
Speaker Change: We use the expression stronger for longer reduction so it is fine with us.
Lars H. Barstad: But there, we were actually quite aggressively chasing cash out of coverage. But now we are watching it, and we want to kind of, you know, it makes sense, we want to lean into the market, but we're not going to kind of, you know, we have a rule of thumb in Frontline that we try to cover 30% of our, you know, largest exposure, you know, being revenues, interest rates, and bunkers. So that's kind of the rule of thumb. We're very close to that or fairly close to that on interest rates. Oops, fantastic timing.
Speaker Change: And we'll try it but there we were actually quite aggressive chasing car charter coverage.
Speaker Change: But.
Speaker Change: Now we are watching it and we wanted to.
Speaker Change: It makes sense, we want to lean into the market, but we're not going to cut off.
Speaker Change: We have to have like a rule of thumb there product line that we try to cover.
30% of our.
Speaker Change: Largest exposure.
Speaker Change: Being revenues interest rates on the bunkers. So so so that's causing a rule of thumb.
Speaker Change: We are very close to that or fairly close to that on interest rate swaps.
Speaker Change: As the economy.
Lars H. Barstad: On the bunker side, we're a bit below. On the revenue side, we have virtually, you know, apart from the LR2s, we have virtually zero revenue kind of secured going forward. But we will lean into this, but we are absolutely in no hurry because we believe this. [inaudible] You know, when or well, it's always when we get out of this cycle, we want to have some proper coverage, but we're not aggressively pursuing this right Now, great. And then just
Speaker Change: On the bunker side than we were a bit below.
Speaker Change: On the on the revenue side the way we have births.
Speaker Change: From on the luxuries we have.
Speaker Change: Especially with zero revenue cutoff secured going forward, because we will lean into this but we are absolutely in a hurry because we believe this.
Speaker Change: Right.
Speaker Change: Gradually getting into here.
Speaker Change: And back to the you know I mentioned is structural issue would have been one surprise side on oil demand looking to be very very resilient.
Speaker Change: It's going to take us a little bit of time, so so so but.
Speaker Change: Want to ask me.
Speaker Change: When or well, it's always when we get out of the cycle, we want to have some proper coverage, but we are not aggressively pursuing this right now.
Gregory Robert Lewis: Okay, great. And then just I wanted to ask a little bit about, you know, you had those asset sales, you know, I guess looking at the, you know, maybe you have two more SUEZ maxes that are in that 2010-2011 range. You know, like, we kind of agree with the outlook for the market where, you know, generally in previous cycles, older vessels have outperformed or, you know, the spread is converged for older vessels versus modern tonnage.
Speaker Change: Okay, Great and then just I did want to ask a little bit about.
Speaker Change: You had those asset sales.
Speaker Change: I guess looking at the.
Speaker Change: Maybe add.
Speaker Change: Two more suezmax has that are in that 2010 2011 range.
Gregory Robert Lewis: And it's typically made sense to own the older vessels in bull markets. Um, and just kind of curious, I mean, I guess since the Frontline acquisition was announced. We've sold 16 vessels, and so, you know, I guess my question is, do you see this cycle playing out differently where there's that much more discrimination against older vessels that maybe the spread that traditionally converges, you know, during these multi-year up cycles doesn't play out the way it has historically played out?
Speaker Change:
Speaker Change: Yeah, like we kind of agree with the outlook for the market were generally in previous cycles older vessels have outperformed our spread is converge for older vessels versus modern tonnage and it's typically made sense on the older vessels in bull markets.
Speaker Change: Sure.
Speaker Change: And just kind of curious I mean, I guess since the frontline acquisition was announced.
Speaker Change: Well solve 16 vessels and so I guess my question is do you see this cycle playing out differently, where there is that much more discrimination against older vessels that may be that.
Fred: Fred that traditionally converges.
Fred: During these multiyear up cycle doesn't.
Fred: Play out the way it has historically has.
Fred:
Lars H. Barstad: That's a big question. I think in our analysis and looking at this market, you know, we have said numerous times to subscribe to this kind of notion about the revenge of the old economy. So the way this is going to play out is, which obviously it hasn't yet, but you know, oil prices and everything is going to kind of go, the commodities movement that we're facing going forward, and with that, we'd rather have the most efficient tools.
Speaker Change: That's a good question I think kind of in our analysis and we're looking at this market.
Speaker Change: As I've said numerous times.
Speaker Change: Subscribe to this kind of notion about the events of the old economy. So that's the way this is going to play out.
Speaker Change: Which is obviously it hasn't yet, but the oil prices and everything has been critical.
Speaker Change: Commodities mean that that's what we're facing going forward and with that we'd rather have the most efficient tools. We are seeing some scrutiny preference from clients or for more efficient tonnage.
Lars H. Barstad: We are seeing some scrutiny, and preference from clients for more efficient tonnage. But we cannot forget the regulatory framework we're facing. Even if it's kind of disappeared a little bit in the narrative over the last year, year and a half, there's still this thing about CII, and there's still this thing about kind of energy efficiency and so forth. And we basically, we subscribe to that a lot. And that's a part of our strategy.
We cannot forget the regulatory framework, we are facing.
Speaker Change: I will have enough, it's gone off the disappeared a little bit.
Speaker Change: Narrative over the last year year and off there.
Speaker Change: There is still this thing about the tiara I and there is still this thing about.
Speaker Change: Energy efficiency and so forth.
Lars H. Barstad: So, so, I think kind of, It could be that looking back in 2-3 years' time, that what you should have done is focus on 12-15 year-old vessels and where you get the most bang for the buck, but we continue to kind of build long-term, you know, to wiggle, be implemented in 30 years, and that's basically the plan we're aiming for. Okay, super helpful.
Speaker Change: We basically we subscribe to that a lot.
Speaker Change: And that's a part of our strategy. So so so I think kind of.
Speaker Change: You could have it could be end up looking back in two or three years' time that are what you should have done. This focus on 12 to 15 year old vessels, where you get more bang for the Buck.
Speaker Change: But we continue to kind of build.
Speaker Change: Long term.
Speaker Change: To wait or.
It can be an advantage for 30 years.
Speaker Change: And that's basically the power we're aiming for.
Gregory Robert Lewis: Okay, this is super helpful. Thank you very much.
Speaker Change: Okay Super helpful. Thank you very much.
Speaker Change: Okay.
Operator: We are now going to proceed with our next question. The questions come from the line of Peter Hodgen from ABG Central Collier. Please ask your question.
Speaker Change: Thank you.
Speaker Change: We are not going to proceed with our next question.
Speaker Change: The question has come from the line of Pizza Hogan from a BG central cornea. Please ask your question.
Peter Hodgen: Yes, good afternoon, guys. Thank you for taking my question.
Lars H. Barstad: Just on the final sentence in the summary here, Lars, you talk about the longer-term time-chart markets, and I guess the question is part of two. Firstly, in terms of the requirements, are it the traders, or is it sort of the fundamental cargo owners which are asking for a longer period? And the second part of the question, have we seen an interest in sort of five to seven years charters for new builds with the 27-28 delivery?
Pizza Hogan: Yes. Good afternoon, guys. Thank you for taking my question just on.
Speaker Change: On the final summary, her Lawrence you talk about the.
Speaker Change: So longer term time charter markets on the I guess the question is has popped into.
Speaker Change: Firstly in terms of requirements as it is.
Speaker Change: Is it the traders or is it.
Speaker Change: Sort of the fundamental cargo owners, which are asking for longer period.
Speaker Change: Second part of the question I was seen on interest for sort of five to seven years.
Speaker Change: Chances for new boats with 27 28 deliveries as of now.
Lars H. Barstad: Thank you, Petter. First one, absolutely yes. This is the oil majors, you know, the guys who have transportation needs. So this is basically the big boys entering the market, oil majors, national oil companies, and so forth. Secondly, yes, there is interest in longer-term business in the market. So maybe not 10 years, but five to seven years, definitively, and seven-year charters. So, but you know, this is kind of a little bit different market than, you know, just to remind everybody, our proposition to our investors is to give you spot exposure.
Beth: Thank you Beth.
Speaker Change: The first one absolutely, yes, Oh, sorry this is the.
Speaker Change: Oil majors.
Speaker Change: The the Guy she have transportation needs.
Speaker Change: So this is the best thing that the Big boys are entering the market Gordon majors national oil companies and so forth.
Speaker Change: Secondly, yes.
Speaker Change: There is interest for longer term.
Speaker Change: This and the market so maybe not 10 years, but five to seven years definitively on seven they are softer and subsequently.
Speaker Change: So.
Speaker Change: Cut off a little bit different market.
Speaker Change: Just to remind everybody our our proposition to our investors is to give you a spot exposure.
Lars H. Barstad: These kind of deals, we might, you know, we're very likely to pass on; we don't have an order book either. So, but, but it is absolutely, you know, starting to emerge, you know, a market around this longer term.
Speaker Change: These kind of deals.
Speaker Change: We're very likely to pass on we don't have an order book, either so, but but it is absolutely.
Speaker Change: Starting to emerge.
Speaker Change: Our market around this longer term deals themselves.
Lars H. Barstad: If I could just follow up on that, what sort of rates would you expect, let's say that if you had a new build with 727 delivery, what sort of rate would you expect to get for a five-year time charted deal from there?
Speaker Change: Yeah.
Speaker Change: And if I could just Hello Hello.
Speaker Change: What sort of rates would you expect let's say that if you had the.
Speaker Change: 727, deliberate what sort of rate would you expect to get for a five year.
Speaker Change: Time charter deal from from there.
Lars H. Barstad: That's a big question. It's a very difficult question to answer, actually, but it looks like, you know, the curve is pretty flat to support what gives the owner a decent return on equity. So you're talking somewhere around $50,000 per day, regardless, only be able to see that. [inaudible] Okay, but that doesn't really mean that, sorry, the $50,000 per day doesn't really make, you know, it makes some excited, but others maybe not.
Speaker Change: That's a big question.
Speaker Change: Hum.
Speaker Change: Difficult question to answer actually but it looks like.
Speaker Change: The curve is pretty flat.
Speaker Change: She took her books gives the owner.
Speaker Change: Return on equity so so you're talking somewhere around $60000 per day, regardless only Nielsen seed assets.
Speaker Change: Hum.
Speaker Change: Okay.
Speaker Change: And really that sorry, the $50000 per day doesn't really make.
Lars H. Barstad: It's, you know, the 2027 delivery, depending on when you order it, setting you back $110, $215, $220 million. So it's a big number. But, but, you know, I think, at least for now, that's where this price is.
Speaker Change: It makes so I'm excited with others maybe not.
Speaker Change: <unk> thousand 77 delivery, depending on when they ordered it.
Speaker Change: Thinking about 110610 $220 million. So so so it's a big number but that's.
Speaker Change: At least for now that's where these prices are.
Peter Hodgen: Okay, thank you. I guess the final one from me, in terms of dividends going forward here, I know that you have this discretionary policy, but this time you pay out everything, which I think is appreciated by, well, most. How should we think about the payout ratio going forward here? And I'm thinking, perhaps, in particular, next quarter because of Escorts and potentially Q3 with a summer market, it could be, well, less.
Speaker Change: Okay. Thank you and just the final one from me in terms of dividends going forward I know that you have this discretionary policy, but.
Lars H. Barstad: I think the rule of thumb, which is again not a policy, is 80% of just net income. I think that's what you should have in the back of your head if that's what happened.
Speaker Change: This time.
Speaker Change: You pay out separate thing, which I think gets appreciates it boy.
Speaker Change: Well.
Speaker Change: Most.
Speaker Change: How should we how should we think about the payout.
Speaker Change: Ratio going forward here.
And I'm thinking perhaps in particular in Mexico also because that's.
Speaker Change: Next quarter and potentially Q3.
With a summer markets it could be less I suppose.
Speaker Change: Yeah.
Speaker Change: I think you should.
You know kind of the rule of thumb.
Speaker Change: Again lots of policy, it's 80% of adjusted net income and I think that's what you should have in the back of your head.
Lars H. Barstad: But I think also, you know, why we chose to go for 100% this time is that we have good visibility, and we are in a good kind of liquidity position. And our job is to give our shareholders the money we make. So, but, you know, obviously, depending on how the markets evolve forward, you can speculate whether we're gonna do 100% again or if it's gonna be 80%. But I think it's gonna be linked to kind of the general market temperature.
Speaker Change: If that's what happens, but I think also.
Speaker Change: Why we chose to go for 100% of assignments that we have good visibility.
Speaker Change: We're in a in a in a good liquidity position.
Speaker Change: And our job is to give our shareholders the money we make.
Speaker Change: So, but you know obviously, depending on how the markets evolve going forward you can speculate whether it's going to be 100% again or if it's going to be 80%, but I think it's gonna be linked to kind of the general.
Lars H. Barstad: And this is, this is what we've tried to do all along is, you know, when the market correctes sharply downwards, we're not going to drain the company of cash. But then again, if the market stays firm and maybe even improves, you know, we have room to grow unless we're doing something structurally where we rather reinvest the cash on behalf of our shareholders, and then you should be handsomely rewarded.
Speaker Change: Temperature and this is this is what we've tried to do all along.
Speaker Change: Long is kind.
Speaker Change: Kind of when the market correct sharply downwards, and we're not going to drain the companys cash.
Speaker Change: But then again, if the market stays Herman maybe even improves.
Speaker Change: We have room to unless we are doing something structurally that are that.
Speaker Change: Where we rather reinvest the cash.
Speaker Change: On behalf of our shareholders.
Speaker Change: Yeah.
Speaker Change: You should be handsomely rewarded.
Peter Hodgen: Thank you for that, Lars. That was all from me.
Speaker Change: Yeah.
Speaker Change: Thank you for that.
Speaker Change: It was all from me.
Lars H. Barstad: We have no further questions at this time. I will now hand it back to you, Mr. Barstad, for closing remarks. Thank you.
Speaker Change: We have no further questions at this time I'll now hand back to you Mr. Boston for closing remarks. Thank you.
Lars H. Barstad: Thank you very much. And thank you all for listening in. You know, these are exciting times still, although we're still missing some of the volatility we wish for. But, you know, let's just monitor how these markets develop. Thank you very much.
Mr. Boston: Thank you very much.
Mr. Boston: Thank you all for listening in and you know these are exciting times still below.
Speaker Change: It's still missing some of the let's say, let's say we wish pork.
Mr. Boston: But.
Mr. Boston: So just to monitor how those markets develop.
Mr. Boston:
Mr. Boston: Yeah.
Speaker Change: Thank you very much.
Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Speaker Change: Yeah.
Speaker Change: This concludes today's conference call. Thank you all for participating you may now disconnect your lines. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Yeah.
Speaker Change: [music].