Q4 2024 Frontline PLC Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the fourth quarter 2024 Frontline PLC earnings conference call. At this time, all participants are in listen-only mode.
Speaker Change: Before I give the word to treating your I'll run through the T seen numbers on slide three in the deck.
Speaker Change: In the fourth quarter of transfer for frontline achieved $35900 per day on our VLCC fleet 33003, sorry, $400000 per day on our Suezmax fleet.
Speaker Change:
Speaker Change: <unk> $6100 per day.
Speaker Change: Not a lot to slash Aframax fleet.
Speaker Change: Okay.
Speaker Change: So far in the third quarter, a supercenter far VLCC days booked at $43700 per day.
Speaker Change: 77% of our Suezmax days booked.
Speaker Change: That 35400 Boes per day, 64% of our a lot too slash I from my space.
Speaker Change: But at 29007 hurdles.
Speaker Change: Again, all these numbers in the table on the load to discharge basis with implications ballast days at the end of the quarter.
Speaker Change: This increase.
Inger: With that I'll give the word to inger.
Speaker Change: I may have moved to page three of the deck.
Inger: Thank you Lars and good morning, and good afternoon.
Inger: We are now on slide four.
Inger: Our purpose statement.
Inger: We Ah report profit of $66 7 million.
Inger: This quarter or 30 cents per share and adjusted profit of $45 one.
Inger: 1 million or 20 defense for sure.
Inger: Adjusted profits in this quarter decreased by about 70 million compared with the previous quarter.
Inger: And that's those are mainly due to a decrease in other key E learning.
Inger: But it was partly offset by a reduction in expenses as well.
Then they can move to slide five balance sheet.
Inger: The battleship to movements in this quarter odd to say, although the sun.
Inger: Payments of debt refinancing in addition to ordinary items.
Inger: Frontline has a solid balance sheet and strong liquidity of $693 million million dollars in cash and cash equivalents.
Inger: That's including the Undrawn amount on the senior unsecured revolving credit facility marketable securities and minimum cash requirements.
Inger: But it just hasn't been the 31st 24.
Inger: In the first quarter of 'twenty five we have further strengthened our very strong liquidity with the revolver capacity of up to 119, one $9 million.
Inger: We have no new building commitment.
Inger: No meaningful debt maturities until she.
Inger: Yourself.
Inger: Eight.
Inger: Shannon you can.
Inger: Slide six.
Inger: Okay.
Inger:
Inger: Our fleet consists of 41 is the shift to 'twenty, two suezmax tankers and eight P. M. L O two tankers.
Also the average age of six six years and consisted of 19, 9% eco vessels.
Inger: They're all 56 per cent scrubber fitted.
Inger: We estimate the average cash cost breakeven rates for 2025, approximately $29200 per day for the interface.
Inger: $24000 per day for Suezmax tankers, and $22200 per day for <unk> tankers with a fleet of your estimate of about $26200 per day.
Inger: This includes dried up all the two vlccs one suezmax tanker in 2025.
Inger: We recorded a big expense.
Inger: In the fourth quarter of $7600 per day for VLCC $9100 per day for Suezmax tankers and $7600 per day for two tankers.
Inger: This includes startup of one VLCC and Suezmax tankers.
Inger: The Q4, 'twenty four fleet average opex, excluding dry dock was $7400 okay.
Inger: Then we can move to slide seven.
Inger: Excellent.
Inger: Okay.
Inger: Well I guess I was from about 30000 earnings days, unless something happens that comes to the cash generation potential.
Inger: As you can see from the graph on the right hand side of this slide.
Inger: The cash generation potential that the current fleet and spot market earnings from Cross research.
Inger: Page 28.
Inger: <unk> is $447 million or $2, one one cents per share.
Inger: The 30% increase from current spot markets will increase to potentially test in nature with about 80%.
Inger: We decided to give them extra last year.
Inger: Okay.
Inger: Thank you very much inger.
Inger: Move to slide eight.
Inger: With them the presentation a little bit.
Inger: This time basically.
Inger: Hum.
Inger: Kind of trying to focus a little bit on will be regarded as more and more markets.
Inger: Wishes basically everything.
Inger: Besides what's going on in the in the media on the on the round tariffs sanctions war and whatnot.
Inger: So global oil consumption averaged $103 4 million barrels in Q4.
Inger: Have a good number one.
Inger: 1 million barrels per day year on year.
Inger: This is expected to reach almost four 5 million barrels by year round.
Inger: And then more and more mark gifts. This shouldnt be looked upon as a very kind of firm development within the calendar year.
Inger: Global supply.
Inger: What's up with 600.
Inger: Barrels per day.
Inger: OPEC maintain their production cuts in December 24.
Inger: Uh huh.
Inger: We actually are expecting inventory to start building in 2025 at least according to IEA.
Inger: As our EIA.
Inger: On supply to reach $105 5 million barrels in Q4 25.
Inger:
Inger: For Q4 on this kind of the two large degree explains some of the disappointments we've seen in rates.
Inger: Global oil exports were actually down 700000 barrels per day compared to Q4 2003.
Inger: <unk> was down one half million barrels per day.
Inger: This.
Inger: Camber explained partially by what is expected to be seeing us as the inventory draws during the period you also need to remember that.
Inger: We saw it in particular around hiking their exports in October.
King basically gradation markets quite well supplied with molecules.
Inger: Q4.
Inger: This is obviously material not benefiting the compliant thank you Felipe.
Inger: We continue to see.
Inger: Tinian to see in Q4, two new ordering.
Inger: But we also saw that the delivery window for any kind of asset you want to to build.
Inger: <unk> firmly into 2028.
Inger: The maintaining of the three year lead times in order to get the vessel on Volcker.
Inger: Okay.
Inger: The average fleet age for tankers.
At this day 13 seven years this was the highest since 2001.
Inger: The regulatory framework compliant ship owners are actually facing.
Inger: If you look at the asset classes from client operates in the VLCC Suezmax Aframax.
Inger: After remarks.
Inger: 46% of the vessels are over 15 years now, meaning that they will be up for replacement over the next five years.
Inger: And as we speak 20% are above 20 years.
Inger: And then kind of shows us that an order book of 15%.
Inger: Is manageable kind of in this scenario.
Inger: Basically able to trying to argue that if you see me or in the northeast the tariffs and sanctions narrative and all the unrest around us, we don't which we don't expect to to to her to demand that materially.
Inger: The only effect, we may see is that the trade efficiency will be reduced in the umbrella basically have kind of a more or or even an increased inefficiency in how this how the ship sale.
Inger: And then longer trade lanes.
Inger: The backdrop remains quite good for tankers.
Inger: I think it was a good reminder of our listeners that in a.
Inger: Beyond everything else.
Inger:
Inger: There is actually a normal markets functioning.
Inger: So we also going to spend an entire slides on talking about sanctions on tariffs. These are questions that we received.
Inger: Every day from from various investors journalists and whatnot.
Inger: Basically all the headlines that are coming out as we speak.
So, let's first have looked at tariffs on Mexico, Canada, China and EU.
Inger: Depending on the outcomes and this is always a big question, what will actually be kind.
Inger: Kind of come to effect in the end.
Inger: These tariffs also incur a material energy exposure.
Inger: Our U S important around 4 million barrels of crude oil from Canada every day shy.
Inger: China only on imports of very modest volume from U S, which may come as a surprise to some.
Inger: This is around 200 barrels 200000 barrels per day.
Inger: Mexico export in total 800000 barrels per day half goes to U S. So around 400000 barrels per day than again, the U S exports to Mexico 600000 barrels per day, so meaning that if.
Inger: Oil and energy gets recognized in this tariff discussion between these countries. It can actually become quite interesting to see how that plays out for the tanker industry.
Inger: Then we have the more recent U S trade representative or U S. T R. One and a half million dollar fee on Chinese built tonnage.
Inger: So 22% of global tanker fleet is built in China.
Speaker Change: Frontline are exposed so serious LR trailer trucks, but all our vlccs are built either in Korea, and Japan, and we have no vessels on order in China.
Speaker Change: This is yes kind of out being incurred it's not been been put in low or no legislation. That's been created yet it will be interesting to watch.
Speaker Change: But again, it's kind of.
Speaker Change: The only outcome here.
Speaker Change: B for altering trade lanes.
Speaker Change: More inefficiencies on the hardship stripe.
Speaker Change: Then you have maximum pressure on Iran, or a solution on their own.
Speaker Change: So let's look at those two scenarios here the first one maximum pressure with potentially remove oil from.
Speaker Change: Iranian oil <unk> access to the markets. This means in this oil needs to replace be replaced.
Speaker Change: Likely potentially from OPEC.
Speaker Change: But that would be compliant oil that needs comprised ships.
Speaker Change: And again beneficial for us that operate in the compliant market.
Speaker Change: If a solution is found and suddenly Iranian barrels stops to be sanctioned.
Speaker Change: That will well sorry.
Speaker Change: Previous one would also incur floating storage needs as Iranian oil with backup.
Speaker Change: Look at the other side of this the removal of sanctions altogether would even be potentially more bullish for tankers or for compliance actors as Iranian oil would become compliant and compliant oil new component tankers.
Speaker Change: Then you have Russian sanctions, whether it's their increased while the pressures heightened or the other side of it if it's removed.
Speaker Change: So the increased sanction pressure I think we're already seeing the beginning or the results of that we see.
Speaker Change: I'm not an expert sites, because we actually see the barrels still move but on the import side, we already see in the statistics.
Speaker Change: Not only Russia also.
Speaker Change: And to some degree of inner stellar oil imports globally are falling so basically floating storage must be built.
Speaker Change: But anyway I'm increased sanction pressure.
Speaker Change: Further makes.
Speaker Change: The trade around those barrels more complicated and it's tying up more Thomas basically taking so much out of the coke market into the gray or the dark markets.
Speaker Change: If you turn up around and say that you remove all the sanctions overnights.
Speaker Change: You also have to bear in mind than that.
Speaker Change: It's very easy to remove sanctions on oil that could probably be done by about the stroke of a pen, but removing all the sanctions vessels from all fucking EU lifts its potentially a bit more complicated.
But even if that could happen bear in mind, and we've indicated that on the on the on the chart on the bottom right hand corner more than or close to 50% of the Russian trading fleet is about 20 years and if you remove sanctions that does not change the policy.
Speaker Change: <unk> hub on this 20 year cap.
Speaker Change: And as we previously stated.
Speaker Change: It's probably to remain firm until the market becomes so expensive labs or freight become so expensive that the charterers are incentivized to Ulster vetting departments.
Speaker Change: <unk> moved beyond the 20 year H cap.
Speaker Change: Also a very important part in kind of this narrative is our U S treasury or facts.
Speaker Change: And EU gonna be aligned.
Speaker Change: If the sanctions are lifted.
Speaker Change: Or sort of lifted on Russell.
Speaker Change: Then we have also recently Venezuela exemptions.
Speaker Change: So U S seems to be having a new position of Venezuela on the exemptions given four four for lifting and sell in crude.
Speaker Change: This is poised to put pressure on production expansions and exports.
Minnesota, Venezuela has actually made me to this a surprise to some.
Speaker Change: Rone there there are exports from 550000 barrels to 800000 barrels.
Speaker Change: Year on year, and actually on preliminary tracking data, they're able to churn out a million barrels per day in December.
Speaker Change: Yeah.
Speaker Change: But then we have another <unk>.
Speaker Change: <unk>, which is this Shandong port authority basically aligning themselves with ofer.
Speaker Change: Allowing old forklifts that vessels to discharge in that province.
Speaker Change: This might change.
Speaker Change: This happened also small almost simultaneously as all <expletive> expanded their list of fashion vessels by by close to 168 tankers.
Speaker Change: And obviously <unk> expansion on that off a cliff will hit this directly.
Speaker Change: But it is a game changer, because it's when they can't actually.
Speaker Change: For sanctions the only hope is that somebody will south sanctions and this is effectively what the Shandong prevent province, and I'm very important import hub in China has done.
Further to that India has at least so far it seemingly follow suit and also kind of preventing or forecasted associated sauce in exports.
Speaker Change: One small side comment therefore, China for China. This might have an alternative motive.
Speaker Change: China hasn't interests in the evening, the playground between states and private loan refineries people, which are very present in this province in which to a large degree.
Speaker Change: Taken advantage of cheap feedstock coming from IRA.
And then lastly in this kind of a fairly extensive list of moving parts that we asked the tanker owners are exposed to the Red Sea is Israel and Hamas.
Speaker Change: Saturation and of course in relation to the whole test and their actions in the Red Sea.
Speaker Change: We believe the risk continues it ebb and flow with the developments in Gaza, but its still so that is the tanker owner, we're not necessarily incentivized to go through we don't mind, taking the long way around and also we don't see currently any massive pressure from charterers to move through the region either.
Speaker Change: And the situation is still higher risk we would with.
Speaker Change: Not necessarily because ships have been attacked in the Red Sea, which they haven't.
Speaker Change: Something might go wrong in the peace process in the cease fire and dancing things kind of escalate extremely quickly.
Speaker Change: And I also wanted to make a note on this or kind of focus here on on this slide and look at the top right hand.
Speaker Change: Shocked.
The Blue line is how the fleet development actually has been.
Speaker Change: The Orange line is if we leave it in the normal world, where ships did not trade sanctioned oil and ships got recycled.
Speaker Change: Omar around their 20 year anniversary.
Speaker Change: Looking at this the conventional tanker fleet.
Speaker Change: Look at the VLCC, Suezmax and Aframax actually stopped growing in 'twenty to 'twenty two.
Speaker Change: Have you done that exercise for VLCC alone. It's stopped growing in September October 2021, So it works out and they can get their fleet growth in the compliant or below 20 air markets.
Speaker Change: Four.
Speaker Change: Close to three years now.
Speaker Change: Keep in mind.
Speaker Change: Let's move to slide 10.
Speaker Change: It's a show how much is in this.
Speaker Change: How much is exposed to all these political moves.
Speaker Change: And what's going on in the world around us.
Speaker Change: So let's move back to pre rationalization and I'll go back to 2019, Europe imported around 10 million barrels per day airport.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: The war broke out and Europe loss.
Speaker Change: 1 million barrels of Rushmore.
Speaker Change: Just a little bit from that.
Speaker Change: But the Atlantic Basin.
Speaker Change: U S, Brazil, West Africa, and so forth increased its supply into Europe by one 2 million barrels.
Speaker Change: 388 incremental barrels were sold from the North sea and others amounted to 208.
Speaker Change: Allison barrels per day.
Speaker Change: At the end or in 2024, Europe has consumed 10 8 million barrels per day. This is not like some growth. It's a small incremental growth, but if you look at the volume change, they're they're they're quite remarkable.
Speaker Change: And for a shipper, we don't necessarily want to Europe to source it toward from Atlantic Basin that oil we want to move east.
Speaker Change: Oil has traditionally moved east, but always as Russia has taken market share in the eastern market Atlantic Basin has been locked inside the Atlantic Basin.
Speaker Change: And then moved to Asia pre emulation Asia had turned to one 7 million barrels per oil of imports.
Speaker Change: The war broke out the lost 600000 barrels from Atlantic Basin.
Speaker Change: Further loss almost all that went into ore stayed in Europe 300000 barrels from the North Sea. The lost 170000 barrels from the med.
Speaker Change: <unk>, one 4 million barrels per day from Russia, Iran, and managed to increase their exports by almost half a million barrels.
Speaker Change: At least contributed with half a million barrels.
Speaker Change: And as we came into or finish off trying to learn before <unk> importing 'twenty three.
Speaker Change: Midland barrels.
Speaker Change: And it's interesting to see that that growth in that two year period has predominantly come from Russia and Iran.
Speaker Change: Obviously oil that is not available to a compliant ship owner to the frontline fleet or two too and it's basically get benefited the growth of this dark trade.
Speaker Change: A reverse so of this trading pattern.
Speaker Change: The huge slip beneficial for the markets we operate in.
Speaker Change: Further change the trade lanes back to the more normal Russian state local where it's supposed to go.
Speaker Change: <unk> Bay Sim replaces the lack of Russian oil going along east.
Speaker Change: Yeah.
Speaker Change: So let's move to page 11 look at the order books.
Speaker Change: So we are actually.
Speaker Change: Column here, which recall all truck and it's quite interesting. So some basically let's say you get a measure of how many ships are actually on the off market.
Speaker Change: And I'll tell you.
Speaker Change: People say quite kind of cashless, where this ship is on Novartis are these companies small practices.
Speaker Change: Don't want to be on and off artists ebay.
Speaker Change: They basically gave us the U S.
Speaker Change: Free card to go and grab your money.
Speaker Change: If you have any U S dominated accounts. They can just go and take it and people don't necessarily want to have that hanging over them.
Speaker Change: But basically the VLCC fleet now is estimated to be around 884 vessels.
Speaker Change: 40% of that is about 15 years and 18% is above 20 years.
Speaker Change: Order book stands at $9 eight of the present of the existing fleet and there is 100 or very close to 100 ships from our pockets.
Speaker Change: Suezmax again, the praetor 614 ourselves 44, 3% of those vessels are about 15. This is why I previously mentioned that the overall average age of the fleet is $13 seven it starts to kind of make sense.
Speaker Change: You go up to 21, 2% of that fleet above 20 years currently and our order book stands at 97 or <unk> 15 per state.
Speaker Change: And then we have the luxury on the Aframax on the luxury side as we mentioned before the order book looks very chunky, but then again with the modest Aframax order book and the way these trade kind of interact on the way they trade.
Speaker Change: Or switch between clean and dirty.
Speaker Change: We're not about that order book either.
Speaker Change: Quite interesting to see that the seats.
Speaker Change: 60% of the Aframax fleet is about 15 years and 30% is about 20 years currently that kind of put some perspective into that.
Speaker Change: First glance looking quite a chunky order book.
Speaker Change: So let's move to 12 slide 12, and see if we can sum it up a bit that headline fare pending bull markets and know that our investors and ourselves of course would like kind of any action happening out on the headline oriented political world too quick.
Speaker Change: Clear translate into $100000 per day on the Vlccs regretfully, that's not always the way it happens.
Speaker Change: It takes them at this time.
Speaker Change: Oil supply and demand. We are you remains stable with trade patterns patterns are being challenged.
But we see that demand for compliant partners is growing we see key a sum.
Speaker Change: Importers.
Speaker Change: <unk> of their supply predominantly then West Africa, and Brazil and to some extent the U S.
Speaker Change:
Speaker Change: Sale tanker fleet growth will remain muted also for 2025.
Speaker Change: Especially if you consider the ageing of the fleet.
Speaker Change: Sure.
Speaker Change: Right now policy changes creates more questions than answers and outcomes are difficult to analyze we admit that.
Speaker Change: World oil trade and this is an interesting kind of discussion to have real low trade is now serviced by the oldest fleet in more than two decades.
Speaker Change: From glioma, we retain our Mckee, we mean, we retain our material upside with our modern spot exports.
Speaker Change: And with that we open up for questions.
Speaker Change: Thank you Dear participants as a reminder, if you wish to ask a question. Please press star one on your telephone keypad and wait for NIM to be announced to withdraw your question. Please press star one again.
Nathan: Nathan will compile the Q&A narrow studies will take a few moments.
Nathan: Once again, if you wish to ask a question. Please press star one one.
Nathan: And now we're going to take our first question.
Speaker Change: And it comes from the line of Jonathan Chappell from Evercore ISI. Your line is open. Please ask your question.
Jonathan Chappell: Thank you good afternoon.
Speaker Change: Lawrence I hate to ask a somewhat open ended question I understand that Theres, a lot of moving parts and no one really knows the outcomes, which you said at the start and then you gave us a super thorough.
Speaker Change: Different set of all the different moving parts geopolitically, but instead of kind of speculating on what could happen. Maybe you can just kind of catch us up on what has happened all of these events have come out some of them are headlines some of them are real as far as sanctions are concerned we saw a spike in the market.
Speaker Change: And as the Chinese sanctions were announced it seems to have pulled back. Since then has there been real change in chartering have you seen a reluctance to use ships that may be on sanctioned list that you feel that some of these moves have real teeth to them and could be sustainable in the market.
Speaker Change: Yes.
Speaker Change: I think it's the short answer.
Speaker Change: I'm kind of a win.
Speaker Change: You know the game changer was there Shandong province, I'm kind of message.
Speaker Change: That created a huge spike in the Aframax this up a rail link to lift Russian barrels out and.
Speaker Change: And we're not Oh forklifts that two to two.
Speaker Change: To lift the oil out of.
Speaker Change: Spoke crude coming out.
Speaker Change: Kind of North East of Russia.
Speaker Change: For those vessels that were willing to do that trade because they they saw rates north of half a million dollars per day for a short period of time.
Speaker Change: We have seen Iranian crude backing up so basically.
Speaker Change: Iranian crude is now being exported simulation staying there.
Speaker Change: Instead of being.
Speaker Change: Being rebranded I'm going elsewhere.
Speaker Change: So.
Speaker Change: I still don't have the number right here with me, but we have seen is it 30 million barrels per day of array than we last saw.
Speaker Change: 25 to 30 million barrels of Iranian oil.
Speaker Change: Switching on ships in that area, which is normally this yes region for for this material.
Speaker Change: We also see them.
Speaker Change: Very kind of.
Speaker Change: Big move, particularly around them at least tread wear.
Speaker Change: Uh huh.
We're also West Africa of course Ware.
Speaker Change: It's the western charterers that chartering vessels. So this basically for selling compliant oil into the Asian refiners.
Speaker Change: It's been a complete step move or a step change.
Speaker Change: But then again, it's like it is in our industry. You know this moves in waves. We've seen rates. Appreciate then pulled back and appreciate the again pulling back.
Speaker Change: We hope that we are in some sort of pattern that will kind of grind.
Speaker Change: North bound gradually.
Speaker Change: I think kind of the overall complex is too big and also the market has become a bit more efficient over the years with everybody and their mother or having a has an ability to track and whatnot.
Speaker Change: So so basically you well regretfully for US you avoid this panic moves where rates moved to $100000.
Speaker Change: Today in a in an instant and it's more like a kind of a steady grind until sentiments on the realization of the change kind of comes into play.
Speaker Change: But I would say, yes that we haven't seen material changes and also mind you. We also sense.
Yeah.
Speaker Change: Much larger interests from from from Russian or Russian Russian trade enablers to buy.
Speaker Change: Older tonnage, particularly so on Aframax side.
Speaker Change: Uh huh.
Speaker Change: Okay, that's very helpful.
Speaker Change: Second question is just two areas of clarification for Inger.
Speaker Change: And the Powerpoint presentation on the breakeven as you said two dry docks for Vlccs and one for Suezmax is that it for the year just three ships and then the other thing is yes, Okay and then the other thing is that the only thing to quantify this.
Speaker Change: Okay, Great and then the other one is the administrative expenses.
Speaker Change: Obviously, it was kind of inflated it looks like in 'twenty three in the first half of 'twenty four took a step down in <unk>.
Speaker Change: <unk> took a massive step down in <unk> $1 7 million I think thats the lowest quarterly number in history can.
Speaker Change: Can you just give us a sense for what administrative expenses may look like on a more normalized basis for 25 and going forward.
Speaker Change: Yeah. So this quarter you saw that admin expenses was $1 7 million recorded.
Speaker Change: And the reason for that was that we recorded a gain on our synthetic options.
<unk> program, that's a kind of a reevaluation gain that you have to do with me in the balance sheet, which we then.
Speaker Change: Adjusted away from the results this quarter due to that.
Speaker Change: Program has fully vested during the quarter.
Speaker Change: So and that's the cost plus about $8 million.
Speaker Change: Back to the one seven you would come to.
Speaker Change: To that about close to 10 million cells.
Speaker Change: So normalized DNA going forward would be about $9 million to $10 million a quarter.
Speaker Change: Great. Thank.
Inger: Thanks, Inger Thanks Lars.
Speaker Change: Hi, thank.
Speaker Change: Thank you and I will go and take our next question.
Speaker Change: Give us a moment.
Speaker Change: And the question comes from the line of Omar knocked out from Jefferies. Your line is open. Please ask your question.
Speaker Change: Thank you.
Speaker Change: Lars and eager I appreciate the comments and as John said, it's a nice thorough kind of deep dive into the kind of the.
Speaker Change: The macro landscape and it seems that the floodgates at some point.
Speaker Change: Are there to be opened.
Speaker Change: I did.
Speaker Change: Maybe just a couple of maybe frontline specific questions, maybe just first though.
Speaker Change: As we look at the <unk> figures, they are decent and above what we.
Speaker Change: What the final <unk> numbers, where we know that discharge accounting as you were saying earlier in the call maybe overstated a book due to the end quarter ballast days, but I guess just on their own.
Speaker Change: Final portion.
Speaker Change: 80% of the Vlccs booked 77 of the Suez and 64% for the LR twos just on that what portion can we assume for the remainder of the quarter is going to be basically balanced and non earnings.
Speaker Change: Yeah.
Speaker Change: Well I think.
Speaker Change: I think it's difficult anyway to be absolutely.
Speaker Change: Besides on the Wolfcamp B the remaining part of the quarter, we don't really know anyway, so that sorry.
Speaker Change: Sorry, sorry to say, but.
Speaker Change: I guess, what it Ken.
Speaker Change: In a way is that if you look at the.
Speaker Change: The pattern is what we called in that FX silicon back to what the guy that.
Speaker Change: For the quarter.
Speaker Change: That can be a.
Speaker Change: NOI for this quarter as well.
Speaker Change: If you get what I mean.
Speaker Change: Okay. So it seems perhaps than that and maybe the final portion of the Vlccs are.
Speaker Change: Are probably Alessandro but then there is a bit more on the suezmax launches.
Speaker Change: Because if you look at let's say.
Speaker Change: Initially.
Speaker Change: How about actual rate compared to what the guide for that quarter.
Speaker Change: And it is probably around <unk>.
Speaker Change: 285% of the guiding in a way, that's more or less where we end and anyway.
Speaker Change: <unk>, that's why I say, it's 85, depending upon how large, forcing her closet and the guidance that we're giving away because the guidance that they gave now is about 80% of that.
Speaker Change: While waiting for the previous quarter I think we had a 77 something so dominion Matheson away. How many days can have callback in your guidance, then obviously and the reduction is less for the rest of the quarter in a way if you have high percentage correlation of what you can see what I mean.
Also Martin when somebody gets further complicates it it does actually.
Speaker Change: Get affected by the trading patterns at the time so.
Speaker Change: Some quarters.
Speaker Change: We do a lot of long voyages on particularly the Vlccs and then I would say there since we account for load to discharge them for those listening and not understanding that this up we can only account for income being generated after the ship is loaded so it means that the ballast leg, we'll actually be zero.
Speaker Change:
Speaker Change: Yes.
Speaker Change: But a large portion of your fleet into kind of China. The U S. Gulf trading them, then suddenly this ballast legs become quite material for us.
Speaker Change: Suezmax is while those trading patterns change.
Speaker Change: Quite a lot from month to month.
Speaker Change: Sure.
Speaker Change: Our.
Speaker Change: Predominant visual torches. So so so that has a tendency to be more stable.
Speaker Change: Yes.
Speaker Change: Okay and I appreciate you explaining it.
Speaker Change: That's helpful. And then just second question just following up on <unk>.
Speaker Change: Just a bit of a widespread between the frontline ships in the year not vessels was over $11000 per day this quarter that converged much closer levels. The prior two quarters, what drove that that separation.
Speaker Change: Well, yes.
Speaker Change: Try to trade are less so.
Speaker Change: Kind of the best way.
Speaker Change: We think theyre going to move what's happened was in Q4, we were just as bullish as investors.
Speaker Change: If around us.
Speaker Change: Expecting a spike towards the end of the quarter.
Speaker Change: In order to commit to this long voyages.
Speaker Change: Brazil East U S. Gulf is north sea, if you'd rather do that from them at close cover that fits the vessel doesn't give us the best Bang for the Buck for these languages and then you keep the non scrubber fitted vessels in the middle East for these 42 to 46 day voyages, where you can capture a lot more.
Speaker Change: Of a spike.
Speaker Change: This obviously proved wrong.
Speaker Change: But this explains a large part of that spread I think it's also important to note that there is a limit to the amount of cargos to come.
Speaker Change: Kind of take out of the U S. Gulf from client is probably one of the largest there is.
Speaker Change: So for U S crude.
Speaker Change: We're also amongst the top tiers on the Brazilian crude but with a 41.
Speaker Change: Fleet 41 vessel fleet on the VLCC.
Speaker Change: We're actually taking out kind of a probably a big market share. So we can get so so.
Speaker Change: But what I said initially is is why this as spreads widen we basically tried to keep the powder dry for a swing towards the end of the quarter.
Never came about.
Speaker Change: Got it thank you.
Speaker Change: Alright, I appreciate that Lars and anger. Thank you.
Speaker Change: Thank you Martin.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you wish to ask a question. Please press star one on your telephone keypad.
Speaker Change: And now we'll go and take our next question.
Speaker Change: And the question comes from the line of Sharon among Kabi from <unk>. Your line is open. Please ask your question.
Speaker Change: Hi, joining late so I apologize. If this has been asked before but you built up a pretty substantial amount of dry powder.
Speaker Change:
Speaker Change: But.
Speaker Change: A chunk of the fleet is aging out.
Speaker Change: While.
Speaker Change: The order book or your Newbuild deliveries are happening kind of at a slow rate, which combined you might say speak to a decreasing scarcity in sale and purchase activity.
Speaker Change: Are there any other ways you see that you can deploy capital as opportunities for on the water tonnage dry up.
Speaker Change: Not really at this moment to be quite honest.
Speaker Change: Yeah.
Speaker Change: We.
Speaker Change: We still want this conviction.
Speaker Change: The why our order book is empty.
Speaker Change: Basically because we want to.
Speaker Change: To see the proof in the pudding.
Speaker Change: We have commissioned but we haven't seen the proof in the pudding yet.
Resale new building prices have not really correct to the internet.
Speaker Change: Kind of a way.
Speaker Change:
Speaker Change: Kind of the capacity that's out there has been engaged for bi.
Speaker Change: By container orders.
Speaker Change: Other asset classes.
Speaker Change: Particularly <unk> accelerating in second half last year.
Speaker Change: So facing $125 million tickets for VLCC.
Speaker Change: We need to consistently 50 to $55000 per day for 20 years in order to have any sensible return.
Speaker Change: We'd rather see a $50000 plus.
Speaker Change: Before we get the confidence to make that investment. So that's why we decided to basically.
Speaker Change: The little Monet, we have monopoly Lakshmi.
Speaker Change: We do churn out a fair bit on dividends.
Speaker Change: Honda to you as an investor and then you could choose to reinvest and deployed are there in frontline or elsewhere.
Speaker Change: Yeah.
Speaker Change: Thanks.
Speaker Change: And then.
Speaker Change: Because you touched on it when it comes to Newbuild ordering.
Speaker Change:
Speaker Change: If if and when that happens does blacklisting and sanction activity by the U S on Chinese yards do anything to constrained where you consider new builds or not really.
Speaker Change: I think it is a mixture early two two.
Speaker Change: If you read the headlines.
Speaker Change: Obviously, I'm not even consider ordering I'm trying to assess the right now.
Speaker Change: Not that we are <unk>, but so I think kind of for the market in general it probably puts everything a bit on the wait until we get some clarity on what the outcome will eventually be.
Speaker Change: We do question, whether this is at all possible.
Speaker Change: So so so I'm kind of building capacity.
Speaker Change: It's an issue for the for the for the Globe.
Speaker Change: Hum.
Speaker Change: The amount of goods some of them are material.
Speaker Change: That transports.
Speaker Change: Or is that sales on the seven seas.
A material part of our global economy.
Speaker Change: And we know that.
Speaker Change: Japan. This is kind of losing its ability to effectively or efficiently build ships Korea to become like high costs of building country, China, the only ones that offer kind of a capacity.
Speaker Change: So it's.
Speaker Change: It's going to be interesting to see how this plays out but Uh huh.
Speaker Change: So we're basically sit there sit and watch mode.
Speaker Change: Alright, thanks for taking my questions.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Now I will go and take our next question.
Speaker Change: And the question comes from the line of Devin from going from Pecs investments. Your line is open. Please ask your question.
Speaker Change: Hi, I just wanted to ask you need Verizon has become very volatile what's the strategy with you soon at all move forward booking onboard. The study because you mentioned that you expect something in Q4 and the market deal completely differently.
Speaker Change: Yeah.
Speaker Change: This is the challenge you have is a ship owner is that you know the market as we move in this is not efficient you can say so a it's not a you know.
Speaker Change: You don't have all the hull.
Speaker Change: Formation in front of you when you when you make.
Speaker Change: Physicians.
Speaker Change: Why we have the belief that you would get the spirit activity towards the end of Q4 is basically a years of seasonality patterns.
Speaker Change: And it has to do with the kind of the cold season, and normally in the northern Hemisphere, where most people live.
Speaker Change: So, but there is no kind of specific strategy, how could I mentioned to you.
Speaker Change: We have the ability we have is is to try and tilt our fleet from from doing very long distances to short distances.
Speaker Change: Obviously, you want to do the long distances and a high paying market and are in a in a struggling.
Speaker Change: Struggling or or or a market that is challenged we would rather.
Speaker Change: I'll just go the shortest way too.
Speaker Change: Or have the opportunity to re fix up at the higher level, so, but but theres nothing theres no more science behind it but that's what we are not engaging in so it's actually a very good question is taking time charter cover here.
Speaker Change: We are we believe that we're better off keeping our vessels in the spot markets in the current market environment.
Speaker Change: We would.
Speaker Change: Kris our time charter cover materially if we came to a situation where where the market was willing to pay us a kind of what we feel is a reasonable return on equity. We don't think that is the case right now so so so it's.
Speaker Change: In that strategy discussion wellness, how we conduct our asphalt business with visuals.
Speaker Change: <unk> I'll answer earlier on Q4.
Speaker Change: The wellness, obviously, how we act.
Speaker Change: Taking cover.
Speaker Change: The second thing is how do you, especially in this.
Speaker Change: <unk>, Russia the need for that is a truce between then and the sanctions on Russia lift.
Speaker Change: Does that mean that more oil conclude too.
Speaker Change: Our I would say the black ships will be digging tonnage.
Production.
Speaker Change: Yeah, if I got your question correctly. So if sanctions are lifted on Russia.
Speaker Change: We think we would reverse does that mean that the compliance yeah compliance.
Speaker Change: Compliance need will have a higher market share.
Speaker Change: Yes, well kind of both.
Speaker Change: What we initially thought about half of the fleet currently servicing the Russian market will probably become compliance still be there.
Speaker Change: But the market dynamics will be that Russian oil.
Speaker Change: With would stay local Russian oil its natural home is in Europe.
Speaker Change: And.
Speaker Change: And that's really kind of alter or if youre seeing the trading patterns to two in Russia oil going into Europe.
Speaker Change: Some to the U S. Some in Latin America.
Speaker Change: Then the rest of the London based in oils woods revert to going into the east.
Speaker Change: And that's long term marks so we think it couldnt be a temporarily negative four four aframax and suezmax, but.
Speaker Change: But we need to unit.
Speaker Change: File of this fleet, but for the Vlccs.
Speaker Change: It's natural to think that it would be beneficial.
Speaker Change: Okay.
Speaker Change: Indeed pump one zero he made sure that either on exports what it means to close to like one.
Speaker Change: Less than 1 million barrel or whatnot.
Speaker Change: Thanks Buddy.
Speaker Change: If that has to go through again income to legal then how does it impact the demand for Vlccs.
Speaker Change: We changed the dynamics.
Speaker Change: You're saying if if.
Speaker Change: If I round random.
Speaker Change: And oil is fashion or if it's the export is just reduced.
Speaker Change: No no.
Speaker Change: Exporting because of that.
Speaker Change: Yes at some point zero they made sure that there is no export more or less yes.
Speaker Change: Yeah, no. So so.
Speaker Change: Kind of.
Speaker Change: Second half last year.
Speaker Change: Around represented about a 10% to 15% of Chinese oil imports.
Speaker Change: So.
Speaker Change: China with them need to replace that crude and that would likely be compliant crude I would assume from from OPEC or middle east, but that oil would have to be transported on compliant vessels. So it actually be an incremental demand for somewhere between 30 and 45 Vlccs an anomaly obey.
<unk>.
Speaker Change: So so so that would be.
Every benefit dominantly for Vlccs I would assume.
Speaker Change: Okay.
Speaker Change: But do you have seen that happening or is it still in the cockpit.
Speaker Change: We have seen that happening to some degree.
Basically the interesting thing to watch is that Youll see.
Speaker Change: Iranian and Russian Omnicell unexplored hasn't really tapered off quite clear.
Speaker Change: If you look at the other side of the equation and I look at the imports of Iranian restaurant I'm in southern crude that has fallen quite dramatically.
Speaker Change: Okay.
Speaker Change: Thanks, a lot.
Speaker Change: So youre talking to.
Speaker Change: Thank you.
Speaker Change: Thank you.
Boston: There are no further speakers there are no further questions for today I would now like to hand, the conference over to your speaker large Boston for any closing remarks.
Speaker Change: Yeah. Thank you very much and thank you very much for calling in.
Speaker Change: Well, it's extremely exciting times I'd, rather like to reiterate that the upfront runway, we continue to fix ships everyday.
Speaker Change: We have acquired well functioning tanker market out there despite all the noise.
Speaker Change: And we're always excited to see how this outcomes play out, but it's extremely difficult to analyze.
Speaker Change: And put a lot of value in it.
Speaker Change: Thank you.
Speaker Change: This.
Speaker Change: Today's conference call. Thank you for participating you may now all disconnect have a nice day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: [music].