Q1 2024 Teekay Tankers Ltd Earnings Call
Ladies and gentlemen, please standby were about to begin.
Unknown Executive: Ladies and gentlemen, please stand by. We're about to begin. Welcome to Teekay Tankers Limited's first quarter 2024 earnings results conference call.
Welcome to Teekay tankers Limited's first quarter 'twenty 'twenty four earnings results conference call.
Unknown Executive: During the call all participants will be in a listen only mode. Afterwards, you will be invited to participate in a question and answer session.
Unknown Executive: At that time, if you have a question participants will be asked to press star One to register for a question.
Unknown Executive: For assistance during the call. Please press star zero on your Touchtone phone.
Unknown Executive: As a reminder, this call is being recorded.
Unknown Executive: During the call, all participants will be in a listen-only mode. Afterward, you will be invited to participate in a question and answer session. At that time, if you have a question, participants will be asked to press star one to register for a question. For assistance during the call, please press star zero on your touchtone phone. As a reminder, this call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead.
Speaker Change: Now for opening remarks, and introductions I would like to turn the call over to the company. Please go ahead.
Unknown Executive: Before we begin, I would like to direct all participants to our website at www.tk.com, where you will find a copy of the first quarter 2024 earnings presentation. Kevin and Stewart will review this presentation during today's conference call.
Speaker Change: Before we begin I would like to direct all participants to our website at www Dot T K dot com, where you'll find a copy of the first quarter of 2024 earnings presentation.
Speaker Change: Evidence Stuart will review this presentation during today's conference call.
Unknown Executive: Please allow me to remind you that our discussion today contains forward-looking statements, and actual results may differ materially from those projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the first quarter 2024 earnings release and earnings presentation available on our website. I will now turn the call over to Kevin Mackay, Teekay Tankers president and CEO, to begin.
Speaker Change: Please allow me to remind you that our discussion today contains forward looking statements.
Kevin J. Mackay: Actual results may differ materially from results projected by those forward looking statements.
Kevin J. Mackay: Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the first quarter of 2024 earnings release and earnings presentation available on our website.
Unknown Executive: Now I'll turn the call over to Kevin Mackay, Teekay tankers, president and CEO to begin.
Kevin J. Mackay: Thank you, Ed. Hello, everyone, and thank you very much for joining us today for Teekay Tankers' first quarter 2024 earnings conference call. Joining me on the call today is Stewart Andrade, Teekay Tankers' CFO, and Christian Waldegrave, our Director of Research. Moving to our recent highlights, on slide three of the presentation.
Kevin J. Mackay: Thank you Red Hello, everyone and thank you very much for joining us today for Teekay tankers first quarter 2024 earnings conference call.
Kevin J. Mackay: Teekay Tankers generated total adjusted EBITDA of $151 million, up from the $127 million we generated last quarter. The company reported adjusted net income of $132 million, or $3.86 per share, an increase from $100 million or $2.91 per share in the fourth quarter of 2023. With our fleet of mid-sized tankers trading almost entirely in the strong spot market, Teekay Tankers' high operating leverage enabled us to continue generating significant earnings. As a reminder, for every $5,000 increase in tanker rates above our free cash flow break even of $16,000 per day. We expect to generate approximately $2.40 of annual free cash flow per share. Stewart will provide further information on this later in the presentation.
Speaker Change: Joining me on the call today is undrawn, a teekay tankers, CFO and Christian Waldegrave director of research.
Kevin J. Mackay: Moving to our recent highlights on slide three of the presentation.
Kevin J. Mackay: Teekay tankers generated total adjusted EBITDA of $151 million up from the $127 million, we generated last quarter.
Kevin J. Mackay: The company reported adjusted net income of $132 million or $3.86 per share.
Kevin J. Mackay: An increase from $100 million or $2 91 per share in the fourth quarter of 2023.
Kevin J. Mackay: With our fleet of mid size tankers trading almost entirely in the strong spot market Teekay tankers high operating leverage enabled us to continue generating significant earnings.
Kevin J. Mackay: As a reminder, for every $5000 increase in tanker rates above our free cash flow breakeven of $16000 per day.
Kevin J. Mackay: We expect to generate approximately $2.40 of annual free cash flow per share.
Kevin J. Mackay: Stuart will provide further information on this later in the presentation.
Kevin J. Mackay: In March, we completed the repurchase of the remaining eight vessels on sale leaseback arrangements for $137 million, reaching the major milestone of being debt free. With our balance sheet strength, recent financial performance, and the positive market outlook, we continue to take a balanced approach to capital allocation. In line with our capital allocation plan, we have declared a fixed quarterly cash dividend of 25 cents per share for the first quarter of 2024. In addition, we have declared a special dividend of $2 per share.
Stewart: In March we completed the repurchase of the remaining eight vessels on sale leaseback arrangements for $137 million.
Kevin J. Mackay: Reaching the major milestone of being debt free.
Kevin J. Mackay: With our balance sheet strength recent financial performance and the positive market outlook, we continue to take a balanced approach to capital allocation.
Kevin J. Mackay: In line with our capital allocation plan, we have declared a fixed quarterly cash dividend of 25 cents per share for the first quarter of 2024.
Kevin J. Mackay: In addition, we have declared a special dividend of $2 per share.
Kevin J. Mackay: Including these dividends, Teekay Tankers has declared cash dividends of $4.25 per share since updating our capital allocation plan last year. Teekay Tankers midsize spot rates for the first quarter of 2024 are the second highest in the company's history, second only to last year's spot rate. These firm spot rates have continued through the first half of the second quarter as well. The recent expansion of the Trans Mountain Pipeline to Vancouver, with first cargoes planned for this month, will create a new source of AFROMAX demand, which is expected to support AFROMAX spot tanker rates as volumes ramp up over the coming months. I will talk more about this important development later in the presentation.
Kevin J. Mackay: Including these dividends Teekay tankers has declared cash dividends of $4.25 per share since updating our capital allocation plan last year.
Kevin J. Mackay: Teekay tankers midsized spot rates for the first quarter of 'twenty 'twenty four with the SEC.
Kevin J. Mackay: And highest in the company's history second only to last year's spot rates.
Kevin J. Mackay: These firms spot rates have continued to the first half of the second quarter as well.
Kevin J. Mackay: The recent expansion of the Trans mountain pipeline to Vancouver, with first cargos plan for this month will create a new source of Aframax demand, which is expected to support aframax spot tanker rates as volumes ramp up over the coming months.
Kevin J. Mackay: I will talk more about these important developments later in the presentation.
Kevin J. Mackay: Looking ahead, tanker supply and demand fundamentals remain positive and point toward continued tanker market strength in the medium term. Finally, we completed the previously announced sale of one 2004 built Afromax during the first quarter for total proceeds of $23.5 million, recording a gain on sale of $11.6 million. Turning to slide four, we look at the dynamics in the spot tanker market. As mentioned in the highlights, Q1 saw the second highest midsize tanker spot rates for a first quarter in Teekay Tankers history, second only to the exceptional rates recorded in Q1 of last year.
Kevin J. Mackay: Looking ahead tanker supply and demand fundamentals remain positive and point toward continued tanker market strengths in the medium term.
Kevin J. Mackay: Finally, we completed the previously announced sale of one 2000 and for Bill Aframax. During the first quarter for total proceeds of $23 $5 million recording a gain on sale of $11 $6 million.
Kevin J. Mackay: Turning to slide four we look at the dynamics in the spot tanker market.
Kevin J. Mackay: As mentioned in the highlights Q1 saw the second highest midsized tanker spot rates for a first quarter in Teekay tankers history second only to the exceptional rates recorded in Q1 of last year.
Kevin J. Mackay: Rates were supported by a combination of factors, including firm tanker ton mile demand, limited fleet supply growth, normal seasonality, and trade route disruptions due to geopolitical events, which led to an increase in average voyage distances. These factors have continued to support spot tanker rates during the second quarter, with rates remaining at firm levels.
Kevin J. Mackay: Grace was supported by a combination of factors, including firm tanker ton mile demand.
Kevin J. Mackay: <unk> fleet supply growth normal seasonality and trade route disruptions due to geopolitical events, which led to an increase in average voyage distances.
Kevin J. Mackay: These factors have continued to support spot tanker rates during the second quarter with rates remaining at firm levels.
Kevin J. Mackay: Looking to the second half of the year, we expect the rates will remain well supported by rising oil demand, an expected increase in crude oil supply from non-OPEC countries, predominantly in the Atlantic Basin, and the start of exports from the newly expanded Trans Mountain Pipeline. Turning to slide five, we provide an update on our Suez Max and AFROMAX size spot rates for the first quarter.
Kevin J. Mackay: Looking to the second half of the year, we expect the rates will remain well supported by rising oil demand and expected increase in crude oil supply from non OPEC countries.
Kevin J. Mackay: Dominantly in the Atlantic Basin.
Kevin J. Mackay: And the start of exports from the newly expanded Trans Mountain pipeline.
Kevin J. Mackay: Turning to slide five we provide an update on our suezmax and aframax size spot rates.
Kevin J. Mackay: In the first quarter in the second quarter to date.
Kevin J. Mackay: Based on approximately 59% and 54% of Revenue Day's book, Teekay Tankers' first quarter to date SUIZMAX and AFRIMAX-sized vessel bookings have averaged approximately $45,100 per day and $43,900 per day, respectively. Importantly, I would once again highlight the value being created by Teekay Tankers' eight-vessel chartered in-fleet, of which seven are trading in the strong spot market. With an average in-charter rate level of $25,400 per day, the chartered in-fleet has a current mark-to-market value of approximately $54 million.
Kevin J. Mackay: Based on approximately 59% and 45, 54% of revenue days booked teekay tankers first quarter to date, Suezmax and aframax sized vessel bookings have averaged approximately $45100 per day and $43900 per day, respectively.
Kevin J. Mackay: Yeah.
Kevin J. Mackay: Importantly, I would once again highlight the value being created by Teekay tankers eight vessel chartered in fleet.
Kevin J. Mackay: Of which seven are trading in the strong spot market.
Kevin J. Mackay: With an average and tried to a right level of $25400 per day. The chartered in fleet has a current mark to market value of approximately $54 million.
Kevin J. Mackay: Turning to slide six, we look at the impact of the Trans Mountain Pipeline Expansion, or TMX, which we believe will provide a significant boost to AFROMAC-specific demand going forward. On May 1st, the TMX expansion commenced commercial operations, with first cargos expected later this month. The new pipeline has a capacity to carry 590,000 barrels of crude oil per day of Canadian crude for loading onto Afromax tankers, which is the maximum size of vessel that can load from the terminal due to draft restrictions. Given that the first Cogras have yet to load, there is still uncertainty regarding the ultimate destinations of the crews exported from TMX.
Kevin J. Mackay: Turning to slide six we look at the impact to the Trans Mountain pipeline expansion, where T. M X, which we believe will provide a significant boost to aframax specific demand going forward.
Kevin J. Mackay: On may 1st the Trans Mountain pipeline expansion commenced commercial operations with first cargoes expected later this month.
Kevin J. Mackay: The new pipeline has a capacity to carry 590000 barrels per day of Canadian crude oil for loading onto Aframax tankers, which is the maximum size of vessel that can load from the terminal due to draft restrictions.
Kevin J. Mackay: Given that the first cargos have yet to load there is still uncertainty regarding the ultimate destinations of the cruise exported from T. M X.
Kevin J. Mackay: However, we have identified four potential trades which could develop to bring this oil to market. First, given the characteristics of Canadian crude, we believe that the barrels are well suited to refineries on the U.S. West Coast, particularly in California, where cargoes would be transported directly on Afromax. Secondly, we expect that Asian buyers will look to acquire Canadian oil, given its price discount to equivalent grades from other sources. This oil could be transported directly to Asia on Afromaxx vessels, and we've already seen one customer booking an Afromaxx for May loading dates with discharge in China.
Kevin J. Mackay: However, we have identified for potential trades, which could develop to bring this oil to market.
Kevin J. Mackay: First given the characteristics of Canadian crude we believe that the barrels are well suited to refineries in the U S West coast, particularly in California, where cargoes, we'd be transported directly one aframax.
Kevin J. Mackay: Secondly, we expect the Asian buyers will look to acquire Canadian oil given this price discount to equivalent grades from other sources.
Kevin J. Mackay: This oil could be transported directly to Asia on Aframax is and we've already seen one customer booking an aframax for may loading dates with discharge in China.
Kevin J. Mackay: Alternatively, Asian buyers may find that their economies of scale are gained from parceling up Afromax cargoes to a larger VLCC or Suezmax. The most likely locations for these reverse light rings are in the Pacific Area Light Ring Zone off the coast of Southern California or off Panama, where other grades of Latin American crude may be co-loaded.
Kevin J. Mackay: Alternatively Asian buyers may find that there are economies of scale to be gained from parceling up aframax cargos to a larger VLCC or a suezmax.
Kevin J. Mackay: He most likely locations for these reverse light rings or in the Pacific area Lightroom zone off the coast of Southern California.
Kevin J. Mackay: Oral Panama, where other grades of Latin American crude maybe co loaded.
Kevin J. Mackay: Again, we have already seen a customer taking this latter option, with reports that a major refiner has booked Afromaxxis from TMX for parceling up to a VLCC off Panama for onward delivery to India. These new trade routes are expected to increase AFROMAX demand going forward, particularly as Vancouver is relatively far from the main AFROMAX trade lanes in Asia and the US Gulf, meaning that vessels will have to be pulled in from these regions to meet demand.
Kevin J. Mackay: Again, we have already seen a customer taking this latter option with reports that a major refiner, who is booked aframax is from T. M X for parceling up to a VLCC of Panama for onward delivery to India.
Kevin J. Mackay: These new trade routes are expected to increase aframax demand going forward, particularly as Vancouver is relatively far from the main aframax trade lanes in Asia and the U S. Gulf me that vessels will have to be pulled in from these regions to meet demand.
Kevin J. Mackay: To give some context, the distance from Vancouver to Southern California is around 1,200 nautical miles, or 12 voyage days on a round-trip basis, including load and discharge time, while the distance from Vancouver to China is around 6,000 nautical miles, or 44 voyage days.
Kevin J. Mackay: To give some context the distance from Vancouver to Southern California is around 1200 nautical miles or 12 voyage days on a round trip basis, including load and discharge time, while the distance from Vancouver to China is around 6000 nautical miles or 44 voyage days.
Kevin J. Mackay: Assuming a 50-50 split between these two destinations, we estimate that the Trans Mountain expansion could create incremental demand for around 25 to 30 AFROMAXes once the pipeline is at full capacity. Turning to slide 7, we look at supply and demand factors, which we believe will support continued tanker market strength over at least the medium term. Fleet supply fundamentals continue to look positive. Despite an increase in the pace of new tanker orders in recent months, the tanker order book is small by historic standards at 9% of the fleet delivering over the next three years.
Kevin J. Mackay: Assuming a 50 50 split between these two destinations we estimate that the trans mountain expansion could create incremental demand for around 25 to 30 Aframax is once the pipeline is at full capacity.
Kevin J. Mackay: Turning to slide seven we look at supply and demand factors, which we believe support continued tanker market strengths over at least the medium term.
Kevin J. Mackay: Please supply fundamentals continue to look positive.
Kevin J. Mackay: Despite an increase in the pace of new tanker orders in recent months. The tanker order book is small by historic standards at 9% of the fleet delivering over the next three years.
Kevin J. Mackay: The order book is particularly small this year, with just 2.4 million deadweight tons of new tankers delivering into the fleet during the first quarter of 2024, which is the lowest delivery total for a first quarter since 1989. Furthermore, the tanker fleet is aging, with the average age of the global fleet at its highest point since 2003, coming in at 13.2 years. While ships are not being scrapped in the current high spot rate environment, vessels that trade beyond age 20 are seeing a significant drop in utilization compared to vessels below 20 years of age, thereby reducing effective fleet supply.
Kevin J. Mackay: The order book is particularly small this year with just $2 4 million deadweight tons of new tankers delivering into the fleet. During the first quarter of 2024, which is the lowest delivery total for first quarter since 1989.
Kevin J. Mackay: Furthermore, the tanker fleet is aging with the average age of the global fleet at its highest point since 2003.
Kevin J. Mackay: Coming in at 13.2 years.
Kevin J. Mackay: While ships are not being scrapped and the current high spot rate environment vessels that trade beyond H 'twenty are seeing a significant drop in utilization compared to the vessels below 20 years of age, thereby reducing effective fleet supply.
Kevin J. Mackay: As a result, we project close to zero tanker fleet growth in 2024 with modest growth of around 1% in 2025. Looking at demand, the average forecast for the major oil agencies projects healthy oil demand growth of 1.5 million barrels per day in both 2004, 2024, and 2025. The majority of this demand growth is expected to be met by increasing oil supply from non-OPEC countries, particularly from producers in the Atlantic Basin, which suggests that tanker-ton-mile demand will continue to benefit from an increase in long-haul movements from the Atlantic Basin to Asia.
Kevin J. Mackay: As a result.
Kevin J. Mackay: We project close to zero tanker fleet growth in 2024 with modest growth of around 1% in 2025.
Kevin J. Mackay: Looking at demand the average forecast for the major oil agencies projects healthy oil demand growth of 1.5 million barrels per day in both 2000 and for 2024 and 2025.
Kevin J. Mackay: The majority of this demand growth is expected to be met by increasing oil supply from the non OPEC countries, particularly from producers in the Atlantic Basin.
Kevin J. Mackay: Suggests that tanker ton mile demand will continue to benefit from an increase in long haul movements from the Atlantic Basin to Asia.
Kevin J. Mackay: As shown by the chart on the right of the slide, tanker tonne mile demand growth is expected to outstrip fleet supply growth both this year and next, continuing the trend that started in 2022. This compounding impact of demand growth exceeding supply growth should continue to support high levels of tanker fleet utilization and firm tanker rates through at least the medium term. I'll now turn the call over to Stewart to cover the next slide.
Kevin J. Mackay: As shown by the chart on the right of the slide tanker ton mile demand growth is expected to outstrip fleet supply growth. Both this year and next continued a trend that started in 2022.
Stewart: This compounding impact of demand growth exceeding supply growth should continue to support high levels of tanker fleet utilization and firm tanker rates through at least the medium term.
Stewart Andrade: Turning to slide eight, we highlight how well Teekay Tankers is positioned to continue creating significant shareholder value in 2024, a year that we expect to be another strong tanker market. With 98% of our 51 vessel fleet operating in the strong spot tanker market that is being supported by the various factors we have talked about today, we feel confident in our ability to continue creating significant shareholder value. In the first quarter, TNK generated $156 million, or $4.54 per share, of free cash flow.
Kevin J. Mackay: I'll now turn the call over to Stewart to cover the next slide.
Stewart Andrade: Turning to slide eight we highlight how well teekay tankers is positioned to continue creating significant shareholder value in 2024, a year that we expect to be another strong tanker market.
Stewart Andrade: 98% of our 51 vessel fleet operating in the strong spot tanker market that is being supported by the various factors. We have talked about today, we feel confident in our ability to continue creating significant shareholder value.
Stewart Andrade: In the first quarter, TNK generated $156 million or $4 54 per share of free cash flow.
Stewart Andrade: If we use the trailing 12 month average of TNK is realized spot rates and project that forward, our annualized free cash flow would be approximately $14 per share or a free cash flow yield of approximately 22%.
Stewart Andrade: If we use the trailing 12 month average of TNK's realized spot rates and project that forward, our annualized free cash flow would be approximately $14 per share, or a free cash flow yield of approximately 22%. As Kevin mentioned in his opening remarks, Teekay Tankers has reached a milestone by becoming debt-free after repurchasing our eight vessels on sale leaseback arrangements during the first quarter. Based on a holistic assessment of the company's position, including being debt-free, continuing strong operating results, our desire to retain capital for fleet rejuvenation, and a very positive market outlook, the board has declared a special dividend of $2 per share for a combined dividend of $2.25 per share, including a regular quarterly dividend of $0.25 per share. With these dividends, Teekay Tankers has returned capital to shareholders totaling $4.25 per share I will now turn the call back to Kevin to conclude.
Stewart Andrade: Kevin mentioned in his opening remarks, Teekay tankers has reached a milestone by becoming debt free after repurchasing our eight vessels on sale leaseback arrangements during.
Kevin: The first quarter.
Stewart Andrade: Based on a holistic assessment of the company's position, including being debt free continuing strong operating results.
Stewart Andrade: XI or to return capital fleet rejuvenation, and the very positive market outlook. The board has declared a special dividend of $2 per share for a combined dividend of $2 25 per share, including a regular quarterly dividend of <unk> 25 cents per share.
Stewart Andrade: With these dividends Teekay tankers has returned capital to shareholders totaling $4 25 per share since announcing our revised capital allocation plan in may of last year.
Stewart Andrade: I'll now turn the call back to Kevin to conclude.
Kevin J. Mackay: Thanks, Stewart. In summary, the key drivers of the strong markets for midsize tankers remain firmly in place. As we look ahead at both supply and demand, we are increasingly upbeat on the prospects over a multi-year period. In this environment, our high operating leverage continues to create significant value for Teekay Tankers shareholders. Our Board of Directors' decision to declare a special dividend reflects our balanced approach to capital allocation. While we continue to prioritize building capacity for fleet rejuvenation, the special dividend reflects our optimism about what lies ahead for our industry segment and our company. With that, Operator, we're now available to take questions.
Kevin: Thanks Jerry.
Kevin: In summary, the key drivers of the strong markets for mid sized tankers remains firmly in place.
Kevin J. Mackay: As we look ahead at both supply and demand we are increasingly upbeat on the prospects over a multiyear period.
Kevin J. Mackay: In this environment, our high operating leverage continues to create significant value for teekay tankers shareholders.
Kevin J. Mackay: Our board of directors decision to declare a special dividend reflects our balanced approach to capital allocation.
Kevin J. Mackay: While we continue to prioritize building capacity for fleet rejuvenation.
Kevin J. Mackay: Special dividend reflects our optimism, but what lies ahead for our industry segment and our company.
Kevin J. Mackay: With that operator, we're now available to take questions.
Unknown Executive: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Kevin J. Mackay: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Unknown Executive: Again, use Star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll go first to Jon Chappell with Evercore ISI.
Unknown Executive: Again star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal.
Jonathan B. Chappell: We'll go first to Jon Chapell with Evercore ISI. Your line is open. Please go ahead.
Unknown Executive: Your line is open. Please go ahead. Thank you.
Jonathan B. Chappell: Thank you good morning.
Jonathan B. Chappell: I'm starting with a market one, Jon, maybe for Chris. Good morning, Kevin.
Unknown Executive:
Jonathan B. Chappell: With a market one John maybe for Christian Good morning, Kevin.
Christian Waldegrave: Maybe Christian, Kevin, you could answer as well, but I think slide 4 on the right-hand side is pretty interesting. I mean, there's a lot going on in this industry right now and a lot of geopolitical upheaval. Yet, when I look at the Suez and AfriMax rates that you put in slide 4, they're in a super tight range for the last 6 months, obviously at elevated levels, but within a pretty tight range, conceptually, I think would be even elevated in this day and age, resulting in such stable yet strong rates in the two asset classes where you're primarily involved.
Jonathan B. Chappell: Maybe for question, Kevin you could answered as well, but I think the slide four on the right hand side pretty interesting I mean, there's a lot going on in this industry right now and a lot of geopolitical.
Christian Waldegrave: Upheaval, yet when I look at the Suez and Aframax rates that you put in slide four.
Christian Waldegrave: Super tight range for the last six months, obviously at elevated levels, but within a pretty tight range. So just any commentary on why maybe some of the volatility.
Christian Waldegrave: That's usually in this sector and one would conceptually think would be even elevated.
Christian Waldegrave: In this day and age is resulting in such stable yet strong rates and the two asset classes, where you're primarily involved.
Christian Waldegrave: Yeah, hi John Christian here. Yeah, I think that was our kind of takeaway as well. Well, given everything that's going on in the world and all the events, it is interesting to see that spots and crazes, at least in our sectors, have been quite consistent since the winter. And normally, during this part of the year, we would expect rates to fall seasonally, going into kind of the shoulder season as refineries go into maintenance.
Christian Waldegrave: Yeah, Hi, Christian here.
Speaker Change: Yes, I think that was a kind of takeaways what well in that.
Christian Waldegrave: Given everything that's going on in the world and all the events today's.
Christian Waldegrave: And to see that spot tanker rates at least in our sectors have been quite consistent.
Christian Waldegrave: The winter.
Christian Waldegrave: Normally during this part of it and we would expect rates to fall seasonally.
Christian Waldegrave: Getting into kind of the shoulder season as refineries get into maintenance and I think what's the why I cannot say that since the beginning at the year is a couple of days event in fact as it would have been positive for ton mile demand. So you've obviously had disruptions in the red sea because of the attacks on merchant shipping which is.
Christian Waldegrave: And I think what's worked in our favor since the beginning of the year is that a couple of those event factors have been positive for time-mild demand. So you've obviously had disruptions in the Red Sea because of the attacks on merchant shipping, which has sent tankers going on longer voyages around the Cape of Good Hope, which has affected both crude and products. It's probably been more pronounced on the product side in the LRTs, but certainly, we've seen some crude diverted as well.
Christian Waldegrave: Set in tengiz, guys on longer voyages around the Cape of good hype.
Christian Waldegrave: Which has affected both crude and product has probably been more pronounced on the product side and there are lots of areas, but certainly we've seen some pretty diverse as well.
Christian Waldegrave: And then with Ukrainian attacks on Russian refineries, we've also seen that Russian exports have stayed elevated as well. So I think there have been some factors there that have supported tanker rates during what would ordinarily be a seasonally weaker part of the year. And that probably bodes well for the second half as well, because as Kevin said in his prepared remarks, we now have the Trans-Mountain Pipeline coming online and ramping up into the second half of Q2.
Christian Waldegrave: And then with your trading attacks sudden Russian refineries and hope they seem that Russian exports has stayed elevated.
Christian Waldegrave: As well so I think there's been some factors there that are supported.
Christian Waldegrave: Tanker rates during what would ordinarily be.
Christian Waldegrave: Seasonally weaker parts of the year.
Christian Waldegrave: And that probably bodes well for the second half as well because.
Christian Waldegrave: Kevin said in his prepared remarks, we now have the trans mountain pipeline coming online and ramping up.
Christian Waldegrave: See the second half Q2 here.
Christian Waldegrave: And we certainly expect bonds there to be supportive of that from max demand as we go into the second half of the year. And we should see more oil volume come online in the second half as well. So, it's been a positive development that rates have stayed elevated through Q2, and it gives us some confidence for the rest of the year here as well.
Christian Waldegrave: We certainly expect volumes there to be.
Christian Waldegrave: Supportive of Aframax demand into the second half of the year, we should see more volume come on line in the second half as well say, yes, I'd say, it's been a positive development rates to stay down that makes three in Q2 and that it gives us some confidence for the rest of the year here as well.
Kevin J. Mackay: Okay, that's helpful. Thanks, Christian. And then just for my follow-up, in the interest of playing the hits, Kevin, I think the special dividends being widely applauded today put you down to a net cash position. So, I'm not completely asking you to completely show your hand, but maybe just a clarification on the path from here. If you could just prioritize kind of how you think about this massive cash flow that Stewart pointed out in the coming quarters, how would you prioritize the uses of capital, let's call it, through the rest of 24 and through 25?
Speaker Change: Okay. That's helpful. Thanks, Christian and then just for my follow up in the interest of playing the heads.
Kevin J. Mackay: Kevin I think the the special dividends being widely applauded today or you don't do it net cash position.
Kevin J. Mackay: So I'm just not asking you to completely show your hand, but maybe just a clarification on path from here. If you could just prioritize kind of how you think about this.
Kevin J. Mackay: Massive cash flow that Stuart pointed out in the coming quarters, how would you prioritize the uses of capital let's call. It through the rest of the 24 and through 25.
Kevin J. Mackay: Yeah, it's obviously a fantastic situation to be in after the markets that we've had to come through over the last few years. But it's something that, you know, as a management team, and in conjunction with our board, we're always looking at and always trying to discuss.
Speaker Change: Yeah, It's a it's obviously a fantastic situation to be enough to the.
Kevin J. Mackay: The markets that we've had to come through over the last few years, but it's something that.
Kevin J. Mackay: As a management team and in conjunction with our board, we're always looking at and always trying to discuss.
Kevin J. Mackay: We do have fleet renewal to look at, and, you know, although pricing today is elevated on both new builds and secondhand, there is a need for us to replenish as we sell ships. We still want to keep exposure to the spot market because of the confidence we have in the underlying fundamentals of the market. So, you know, as we roll off some of the older ships, you may see us use some of that capital to reinvest and keep our spot exposure at a high level.
Kevin J. Mackay: We do have fleet renewal to look at and you know although pricing today is.
Kevin J. Mackay: Elevated on both new builds and second hand.
Kevin J. Mackay: There is a need for us to to replenish as we sell ships, we still want to keep exposure to spot market.
Kevin J. Mackay: Because of the confidence we have in the underlying fundamentals of the market. So.
Kevin J. Mackay: As we roll off some of the older ships.
Kevin J. Mackay: You may see us use some of that capital to to reinvest in and keep our spot exposure.
Kevin J. Mackay: At a high level. So some of the cash may be used for for that.
Kevin J. Mackay: So some of the cash may be used for that. But we also have to look beyond that and look to the future as to, you know, doing larger fleet rejuvenation exercises, which we're not advocating doing now. But we are cognizant of the cyclicality of our market, and keeping that powder dry for that use is important for us to be able to provide long-term value to shareholders. And then, obviously, we understand and fully respect that, you know, shareholders would like a yield.
Kevin J. Mackay: We also have to look beyond that and look to the future is to.
Kevin J. Mackay: Doing larger fleet rejuvenation exercises, which we're not advocating to do now.
Kevin J. Mackay: But we are cognizant of the cyclicality of our market and keeping that powder dry.
Kevin J. Mackay: For that use.
Kevin J. Mackay: It's important to for us to be able to provide long term value to shareholders.
Kevin J. Mackay: And then obviously, we understand and fully respect that shareholders.
Kevin J. Mackay: We'd like a yield and in that respect our capital allocation plan that we came up with last year. We felt was a a prudent long term oriented tasted.
Kevin J. Mackay: And in that respect, our capital allocation plan that we came up with last year, we felt was a prudent, long-term-oriented plan that satisfied both the rebuilding of the fleet as well as You know, we're punishing some capital back to shareholders in the meantime. Okay.
Kevin J. Mackay: Plan that satisfied both the rebuilding of the fleet as well as.
Kevin J. Mackay:
Kevin J. Mackay: Replenishing some capital back to shareholders in the meantime.
Jonathan B. Chappell: Okay, yeah, that's very clear. Thank you, Kevin. Thanks, Christian.
Speaker Change: Okay, Yeah, that's very clear thank you Kevin Thanks Christian.
Jonathan B. Chappell: Okay.
Speaker Change: Thanks, Sean.
Unknown Executive: We'll go next to Omar Nokta with Jeffreys. Your line is open. Please go ahead.
Speaker Change: We will go next to Omar <unk> with Jefferies. Your line is open. Please go ahead.
Omar Mostafa Nokta: Thank you. Hey guys,
Omar Mostafa Nokta: Thank you Hey, guys. Yeah, just wanted to follow up maybe on John's question and I know, it's something that we.
Omar Mostafa Nokta: Yeah, I just wanted to follow up on John's question. I know it's something that, you know, we kind of constantly come up with, but, you know, clearly now you're in a net cash position, completely debt-free. So, you know, congrats, obviously, on that. It's been a long time coming.
Omar Mostafa Nokta: Constantly comes up.
Omar Mostafa Nokta: Clearly now youre in a net cash position completely debt free so congrats obviously on that it's been a long time coming but did notice.
Kevin J. Mackay: But I did notice, you know, you've put in, you've accounted for two ships that will be available for sale at the end of the quarter. So, it looks like you're going to continue to scale, as we were just talking about. Kevin, you've got 42 tankers in the fleet. You know, after those two, there's going to be 40. You mentioned looking to, you know, replace ships as you sell them. I guess I've been kind of just thinking about that.
Omar Mostafa Nokta: U E.
Kevin J. Mackay: But you've accounted for two shifts as available for sale as of the end of the quarter. So it looks like youre going to continue to scale as you were just talking about.
Kevin J. Mackay: Kevin You got 42 tankers in the fleet.
Kevin J. Mackay: After those two there's going to be 40.
Kevin J. Mackay: You mentioned looking to replace.
Kevin J. Mackay: Replace ships as you sell them I guess kind of just thinking about that.
Kevin J. Mackay: If we think about the fleet size today, if they post those sails, we'll have 40 vessels. Is there a certain critical mass or a certain number that you're comfortable wanting to stay above in order to continue to achieve these types of rates? Um, and should we expect, sort of like, a faster replacement of vessels versus what we've seen here over the past few years?
Speaker Change: If we think about the fleet place today say post those sales will have 40 vessels is there a certain.
Kevin J. Mackay: Critical mass or certain number that you're comfortable wanting to stay above in order to continue to achieve these types of rates.
Kevin J. Mackay:
Kevin J. Mackay: And should we expect.
Kevin J. Mackay: Sort of like a sooner replacement of vessels.
Kevin J. Mackay: Uh huh.
Kevin J. Mackay: Versus what we've seen here over the past few years.
Kevin J. Mackay: Yeah, no, I think, you know, obviously, scale provides us with a lot of optionality to trade in different markets and be able to be in different places as the volatility that is inherent in strong markets plays out. And we want to have enough scale to be able to play across several markets. So as we look at some of the older ships that we sold at the end of last year, you know, we do currently hold a Suez Max and an Afro Max for sale, looking just to take value off the table for that older class of ship.
Speaker Change: Yeah, No I think you know obviously scale provides us a lot of optionality to trade in different markets and be able to be in.
Kevin J. Mackay: Different places us as the volatility that is inherent in strong markets plays out and we want to have enough scale to be able to play across several markets.
Kevin J. Mackay: So as we as we look at some of the older ships that we sold at the end of last year.
Kevin J. Mackay: We do currently holds a suezmax and Aframax for sale.
Kevin J. Mackay: You know looking just to take value off the table or that older class of ship.
Kevin J. Mackay: You know, if there is an opportunity to find a newer, more modern vessel, yes, we would redeploy that capital to keep the exposure on. But we're not looking at a set number or anything of that nature. It's more around being able to distribute a large enough fleet across several markets to make sure that we can capitalize on the volatility that we expect to continue to see. So that's really how we think about it, Omar.
Kevin J. Mackay: If there is an.
Kevin J. Mackay: Opportunity to to find a newer more modern vessel.
Kevin J. Mackay: Yes, we would redeploy that capital to keep the exposure on but we're not looking at a set number or anything of that nature, it's more around being able to distribute a large enough fleet across several markets to make sure that we can capitalize on the volatility that we.
Kevin J. Mackay: We expect to continue to see.
Kevin J. Mackay: <unk>.
Kevin J. Mackay: So that's that's really how we think about it Omar.
Kevin J. Mackay: Okay, thanks. And how do TCNs play into that? Several quarters ago, you brought in a good chunk of ships to take advantage of and have that spot exposure that's stabilized, and that fleet hasn't really grown. Is that an option, or do you prefer to do it via ownership?
Omar: Okay. Thanks, and then how does he see N play into that you know clearly.
Kevin J. Mackay: Several quarters ago, you brought in a good chunk of ships to take advantage and have that spot exposure that's stabilized.
Kevin J. Mackay: It hasn't really grown is that an option or is that you prefer to do it via ownership.
Kevin J. Mackay: No, we, you know, we have a lot of options. We've got a lot of tools in the toolkit. We can, we've built a good charter book. We got in early before the market really took off, and we've really enjoyed the added profit that that fleet has been able to provide. But, you know, we're at a point in the market where there is a bid-ask spread, and it's rather large at the moment, between what other owners want for their ships and what we're willing to pay. So you have That is the natural effect of the market reaching the sort of levels that we're seeing.
Kevin J. Mackay: No. We you know we have a lot of options to go little tools in the toolkit.
Kevin J. Mackay: Can.
Kevin J. Mackay: We've built a good in charter book, we go in early before the.
Kevin J. Mackay: The you know the market really took off and we've really enjoyed the added profit that fleets being able to provide.
Kevin J. Mackay: But you know we're at a point in the market, where there is a bid ask spread and its rather large at the moment between what other owners want for their ships and what we're willing to pay.
Kevin J. Mackay: So you have seen a slowdown that is you know.
Kevin J. Mackay: Natural effect of the market, reaching the sort of levels that we're seeing but that doesn't preclude us from adding additional ships. It's just finding the right shape at the right price often in the right location, which which has a massive impact on your overall earnings.
Kevin J. Mackay: But that doesn't preclude us from adding additional ships. It's just finding the right ship at the right price, often in the right location, which has a massive impact on your overall We have several ships that will be coming off later as their charters roll off, and we've already started discussions with the owners to see if we can find a number that's equitable to both sides to keep those ships on, is definitely a toolkit or a tool that we've got in the toolkit that we expect and are always looking to try and utilize.
Kevin J. Mackay: We have several ships that that will be coming off later as their charters roll off and we've already started discussions with the owners to see if we can find the number that's equitable to both sides to keep those ships all of them. So it's it's definitely a tool kit.
Kevin J. Mackay: Our tool that we've got in the toolkit that we expect and are always looking to try and utilize similarly, you know as ive been asked on previous calls as to whether we looking our own ships.
Kevin J. Mackay: Similarly, you know, I've been asked on previous calls as to whether we'd lock in our own ships at these kind of levels and put them out. And the answer is the same there. If we can find the right opportunity that pays the right price, we'll certainly execute on it and be able to report on it.
Kevin J. Mackay: These kind of levels and put them out.
Kevin J. Mackay: And the answer is the same there if we can find the right opportunity that pays the right price, we will certainly execute on it and be able to report on it.
Kevin J. Mackay: Thank you for that, Kevin. And maybe just one more for me, you know, regarding TMXs, you've been highlighting that in the past couple of quarters, we're getting closer and closer to that having an impact, and you mentioned the different potential trade lanes and reverse lighting and whatnot. Are you able to give us maybe some perspective on how you think about that market developing? You highlighted how it's in somewhat of a remote location relative to the normal trade lanes that AFRIMAXs will traffic in.
Speaker Change: Thanks, Thank you for that Kevin and then maybe just one more for me you know regarding TM actually you've been highlighting that the past couple of quarters that we're getting closer and closer to that having an impact and you mentioned the different potential trade lanes and reverse lighting and whatnot.
Speaker Change: Are you able to get at maybe some perspective on how you think about that market developing.
Kevin J. Mackay: A lot of it how it is in somewhat of a remote location relative to the normal trade lanes that aframax is with traffic and you know how do you think that spot market develops for cargoes. There in terms of kind of maybe enticing shifts to stay there.
Kevin J. Mackay: How do you think that the spot market develops for cargoes there in terms of kind of maybe enticing ships to stay there since it's kind of an isolated area, at least relative to other areas? So I guess maybe how does the spot market play out there? And I know that's kind of trying to give some sort of crystal ball approach, but if you're not able to do that, maybe just in terms of what you're seeing now, in terms of what the rates offered in that region are versus where they are globally on average. Any kind of color you can give on pricing in that region?
Kevin J. Mackay: Since it's kind of an isolated area at least relative to other areas.
Kevin J. Mackay: So I guess, maybe how does the spot market play out there and I know thats kind of trying to yeah.
Kevin J. Mackay: Do you have some sort of crystal ball approach, but if not able to do that maybe just in terms of what youre seeing now in terms of what the rates offered in that region are versus where they are globally on average any kind of color you can give on pricing in that region.
Kevin J. Mackay: Well, first, I think we've got to be honest, as we laid out in our presentation, it's early days yet, and the cargoes are starting to come in. We've seen a couple of fixtures in the market.
Kevin J. Mackay: Well first I think we've got to be honest, we as we laid out in our presentation.
Kevin J. Mackay: It's early days, yet the cargos or are starting to come we've seen a couple of fixtures in the market.
Kevin J. Mackay: You know from a positive standpoint for us there they seem to be long haul boast to China, and then down to 15.
Kevin J. Mackay: You know, from a positive standpoint for us, they seem to be long haul, both to China and then down to, you know, 15 days down to Panama. So where do the cargoes go? At this point, we don't know.
Kevin J. Mackay: 15 days down to Panama.
Kevin J. Mackay: So.
Kevin J. Mackay: Where where the cargos go at this point, we don't know.
Kevin J. Mackay: We have to wait and see. We think that there are four main options that the customers will take. A lot will depend on oil prices and the differences between oil prices in different regions, which I'm not going to stand here and in any way try and predict. What I do think will happen, though, is oil will have to move, and it will be priced into, you know, the right market. And that will include shipping costs.
Kevin J. Mackay: We have to wait and see.
Kevin J. Mackay: We think that there's four main options that the customers will take.
Kevin J. Mackay: A lot will depend on oil pricing and the differences between oil prices and different regions, which again I'm not going to.
Kevin J. Mackay: Stand here in in any way try and predict that.
Kevin J. Mackay: What I do think it will happen, though is the oil will have to move and it will be priced into.
Kevin J. Mackay: The REIT market.
Kevin J. Mackay: And that will include shipping cost and if that means that ships in the far east.
Kevin J. Mackay: And if that means that ships in the Far East have an option as they come into North Asia for discharge, they now have an option to look to Ballast across to Vancouver and pick up a nice long haul voyage from there. Similarly, ships that do end up trading into the West Coast or through Panama now have that option to go up. So I think it's something that owners will have to wait and see as the trades develop. I don't think necessarily that it will mean that you will have ships that will station themselves there. I think they will move in from other regions as and when the requirements pick up.
Kevin J. Mackay: We have an option as they come into North Asia for discharge. They now have an option to look to ballast across to Vancouver and pick up a nice long haul voyage from there similarly.
Kevin J. Mackay: Chips that do end up trading into the West coast are more through Panama.
Kevin J. Mackay: They now have the option to go up so I think it's something that owners will we will have to.
Kevin J. Mackay: Wait and see as the trades develop.
Kevin J. Mackay: I don't think necessarily it will mean that you will have ships that will station themselves. There I think they will.
Kevin J. Mackay: They will move in from other regions as and when the requirements pick up.
Kevin J. Mackay: And from the freight standpoint, it will be priced according to the earnings that the owners expect relative to what they can do in other markets. But I think that the real benefit we're going to see is the additional ton miles specific to the Afromax because the Afromax is the largest ship you could move into Vancouver. You know, you can put in a smaller PanaMax, but the stem sizes are too big for it, and you don't have a lot of storage up in Vancouver.
Kevin J. Mackay: And from a freight standpoint, it will be priced according to the.
Kevin J. Mackay: The earnings that the owners expect versa relative to what they can do it in other markets.
Kevin J. Mackay: Because I think that the real benefit we're going to see is as the additional ton miles specific to the aframax is because.
Kevin J. Mackay: You know the Aframax is the largest ship you could move into Vancouver.
Kevin J. Mackay:
Kevin J. Mackay: You can put in a smaller panamax bit stem sizes or are too big for.
Kevin J. Mackay: For our Panamax and you don't have a lot of storage up in Vancouver. So the Aframax really is that the vessel that this port needs to use.
Kevin J. Mackay: And I think whether it, you know, whether it does go into the West Coast or to Light Ridge or Panama, or to Asia, The Afromax is going to be the ship that's going to have to service that. And, you know, it's going to cause dislocation. It's going to pull ships from from the U.S. Gulf. It's going to pull ships from Asia, and that's going to benefit, you know, possibly Suez Maxis and other Afromaxis in those regions as as the supply diminishes. Yeah.
Kevin J. Mackay: And I think whether it whether it does go into the west coast or to lighterage or Panama or to Asia.
Kevin J. Mackay: The Aframax is gonna be the shift that's going to have to service that and.
Kevin J. Mackay: It's going to cause dislocation is going to pull ships from from the U S. Gulf is going to pull ships from Asia, and that's going to benefit.
Kevin J. Mackay: Possibly suezmax is in other aframax is in those regions as the supply diminishes.
Omar Mostafa Nokta: Yes, it will be very interesting to see how it how it starts to develop here in the next few months. Well, thanks, Kevin. I really appreciate that perspective.
Speaker Change: Yes, it will be very interesting to see how it how it starts to develop here in the next few months well. Thanks, Kevin I really appreciate that perspective.
Speaker Change: My wife's thanks.
Unknown Executive: We'll move next to Ken Hoexter with Bank of America. Your line is open. Please go ahead. Hey.
Omar Mostafa Nokta: We'll move next to Ken <unk> with Bank of America. Your line is open. Please go ahead.
Kenneth Scott Hoexter: Hey, great morning.
Kenneth Scott Hoexter: Hey, great good morning.
Kenneth Scott Hoexter: Kevin I guess just to follow on that thought.
Kenneth Scott Hoexter: And Kevin, I guess just to follow on that thought process, right, if we get those moving down into California, I guess then you'll still have a product that needs to move that longer haul that replaces that, right? The product that California would have been pulled in, you'd make up with even longer hauls?
Kenneth Scott Hoexter: Thought process right. If we get those that was moving down into into California. I guess, then you'll you'll still have.
Kenneth Scott Hoexter: Product that needs to move that longer haul that replaces that rite aid is the product that California would have been building you you'd make up with with even longer hauls.
Kenneth Scott Hoexter: Yeah.
Kevin J. Mackay: Yeah, I think you'll, at the moment, you could see Canadian crude backing out, you know, some of the long-haul Arab barrels, which will, you know, they'll displace those barrels, and they'll have to go somewhere else. So that's what's really exciting about this development is it's going to impact, you know, primarily and initially, afromax, but it could have knock-on effects into other areas as well, which will be interesting to see how it develops and to be able to react to that.
Kevin: Yeah, I think ill.
Kenneth Scott Hoexter: At the moment, you could see Canadian crude backing out some of the long haul our barrels which will displace.
Kevin J. Mackay: Displace those barrels and they'll have to go somewhere else. So.
Kevin J. Mackay:
Kevin J. Mackay: That's what's really exciting about this development and it's going to impact you know.
Kevin J. Mackay: Primarily and initially the Aframax is but it could have knock on effects into other areas as well, which is going to be interesting to see how it develops them too to be able to react to that.
Kevin J. Mackay: So to follow up, thanks for that, Kevin. So I guess to follow up, Christian talked about rates earlier in John's question, but AFRAs seem to be getting hit, I guess, relative to your quarterly date rates that are booked, right? So going from quote $48,000 to $44,000 a day while SUA's maxes are flatter at $47,000 to $45,000. I guess just is the market not anticipating or adjusting for that potential AFRMAX tightening yet? Or is it just too early to react to TMX at this stage?
Speaker Change: So thanks for that Kevin So I guess, the follow up Christian talked about rates earlier.
Kevin J. Mackay: To John's question, but that <unk> seem to be getting hit I guess relative to your quarter day rates that are booked right. So going from call it 48% to $44000 a day well, while suezmax as a flatter.
Kevin J. Mackay: At 47% 45, I guess, just is the market not anticipating or adjusting for that.
Kevin J. Mackay: Potential aframax tightening yet or is it just too early to react to <unk> at this stage.
Kevin J. Mackay: I wouldn't, I wouldn't read into such a small differentiation in the rate, especially at rates, you know, in the mid 40s. We haven't seen these rates in 20 years.
Kevin J. Mackay: I wouldn't I wouldn't read into you know such a small differentiation on the on the rate, especially at our rates in the mid Forty's.
Kevin J. Mackay: We haven't seen these rates in 20 years so.
Kevin J. Mackay: I think it's a function of, you know, the elasticity of the fleet moving up and down. And I think, you know, the US Gulf market is probably one of the most volatile. You can have rates dropping to $30,000 a day, and within a week's time, they could be back up at 65. So I think we've got to look at, or if we are trying to look at what patterns develop, we've got to look at it over a much longer period.
Kevin J. Mackay: I think it's it's a function of the elasticity of the fleet moving up and down.
Kevin J. Mackay: And I think you know.
Kevin J. Mackay: U S Gulf market.
Kevin J. Mackay: Probably one of the most volatile.
Kevin J. Mackay: You can never rates dropping to $30000 a day and within a week's time they could be back up at 65. So.
Kevin J. Mackay: We've got to look at or if we are trying to look at what patterns develop I think we've got to look at it over a much longer period.
Speaker Change: It's not.
Kevin J. Mackay: It's not. I wouldn't read into it too much in the short term. And I think the market can't, the market isn't going to front run the rate in anticipation of the cargoes. We have to wait until the TMX volumes come in, and they come in at the levels that they, the pipeline owners have indicated, and when we see the volume, that's when I think you'll start to see the impact on the offers.
Kevin J. Mackay: I wouldn't read into it too much in the short term.
Kevin J. Mackay: And I think the debt.
Kevin J. Mackay: The market can't the market isn't going to front run.
Kevin J. Mackay: The rates in anticipation of the cargoes, we have to wait until the T. M X volumes come in and they come in at the levels that the.
Kevin J. Mackay: The pipeline owners have indicated and when we see the volume that's when I think you'll start to see the impact.
Kevin J. Mackay: On the offers.
Kevin J. Mackay: Yes.
Kevin J. Mackay:
Kevin J. Mackay: So gradually, right? Even though it's not all just, you know, once you open up in May, as you get those volumes coming online through the year. So you noted tougher discussions on charter in rates or even your thoughts on charter outs. How about the purchase price of new vessels? And, you know, Kevin talked about, or I'm sorry, Stewart talked about the fleet renewal process. What are your thoughts on entering that low order book, or are rates just uneconomical, given where? I mean, I guess if you're talking mid-40s, when does it become economical?
Kevin J. Mackay: So gradually right, even though let's say, it's not all just.
Kevin J. Mackay: Once you open up and then I had to make as you get those volumes coming online through the year.
Kevin J. Mackay: So you you noted tougher discussions on on charter in rates or even your thoughts on charter outs, how about the purchase price of new vessels.
Kevin J. Mackay: And Kevin talked about.
Kevin J. Mackay: I'm, sorry, Stuart talked about the fleet renewal process.
Kevin J. Mackay: What are your thoughts on entering that low order book tour or a rates just uneconomical, given where I mean, I guess, if youre talking mid forties when does it become economical.
Kevin J. Mackay: Yeah, it's certainly an interesting challenge to think through because, you know, we have to acknowledge that both secondhand pricing and new build pricing is high. But as you said, so are rates. So, I think, you know, all I can speak to our thoughts on that, Ken, is that, as of today, we haven't ordered any new ships at these prices levels. And, you know, if we were going to do anything, I think you'd probably see us chipping away at the secondhand market first, just to replenish the lost spot exposure from the sale of the two ships that we had in December and January.
Kevin J. Mackay: Yeah. It's.
Kevin J. Mackay: It's certainly an interesting.
Kevin J. Mackay: Challenge to to think through.
Kevin J. Mackay: Because you know we have to acknowledge that both secondhand pricing in Newbuild pricing is high.
Kevin J. Mackay: But as you said so as rates so.
Kevin J. Mackay: I think.
Kevin J. Mackay: All I can speak to our thoughts on that Ken is that you know.
Kevin J. Mackay: As of today, we Havent ordered any new ships at these pricing levels.
Kevin J. Mackay:
Kevin J. Mackay: And then if.
Kevin J. Mackay: If we are going to do anything I think you'd probably see us chipping away at the secondhand market first.
Kevin J. Mackay: Just to to replenish the lost spot exposure from the sale of the two ships that we had in December and January.
Kevin J. Mackay: And if we do sell two more, you'll probably see us on the secondhand market trying to replace those. Because if you're paying these kinds of prices, you want those ships earning from day one. And you want them earning $40,000, $45,000 a day like we are today. So it would be more prompt purchasing than looking towards more of the longer-term replenishment. Great.
Kevin J. Mackay: And if we do sell two more.
Kevin J. Mackay: You'll.
Kevin J. Mackay: Probably see us in the secondhand market trying to replace those because you really if you are paying these kind of prices you want to have those ships, earning from day one.
Kevin J. Mackay: And you want them, earning 40 $45000 a day.
Kevin J. Mackay: Like we are today so.
Kevin J. Mackay: It would be more prompt purchasing then then you know looking towards more of the longer term replenishment.
Kenneth Scott Hoexter: Great. Appreciate the thoughts. Thanks, Kevin.
Speaker Change: Great I appreciate the thoughts thanks, Kevin.
Speaker Change: Thanks, Ken.
Unknown Executive: And with no other questions remaining, I would like to turn the conference back to the company for any additional or closing comments.
Speaker Change: And with no other questions holding I'd like to turn the conference back to the company for any additional or closing comments.
Unknown Executive: Thank you for joining us, and we will speak to you next quarter.
Speaker Change: Thank you for joining us and we will speak to you next quarter.
Unknown Executive: Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.
Speaker Change: Thank you, ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time.
Unknown Executive: Thanks for watching!
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Unknown Executive: Okay.
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