Q2 2025 Scorpio Tankers Inc Earnings Call

Operator: Welcome to the Scorpio Tankers' second quarter 2025 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the call over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir.

Hello and welcome to the Scorpio. Tankers second quarter 2025 conference call.

All participants will be in a listen-only mode.

Should you need assistance, please signal a conference specialist by pressing the star key, followed by 0.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone to withdraw your question. Please press star, then 2.

please note this event is being recorded.

I would now like to turn the call over to James Doyle head of corporate development and IR. Please go ahead sir.

James Doyle: Thank you for joining us today. Welcome to the Scorpio Tankers' second quarter 2025 earnings conference call. On the call with me today are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Chris Avila, Chief Financial Officer. Earlier today, we issued our second quarter earnings press release, which is available on our website, scorpio tankers.com. The information discussed on this call is based on information as of today, July 30th, 2025, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release, as well as Scorpio Tankers' SEC filings, which are available at scorpio tankers.com and sec.gov.

Thank you for joining us today. Welcome to the Scorpio tanker, second quarter 2025 earnings conference. Call on the call with me today are Emmanuel auro, chief executive officer, Robert, bugby president Cameron, Mackey Chief Operating Officer, Chris aella Chief Financial Officer,

James Doyle: Call participants are advised that the audio of this conference call is being broadcasted live on the internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the investor relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpio tankers.com on the investor relations page under Reports and Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to two. If you have an additional question, please rejoin the queue. Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro.

Earlier today we issued our second quarter earnings press release which is available on our website Scorpio Tankers cam. The information discussed on this call is based on information as of today, July 30th 2025 and may contain forward-looking statements that involve risk and uncertainty actual results May differ materially from those set forth and such statements for discussion of these risks. And uncertainties, you should review the forward-looking statement disclosure in the earnings press release as well. As Scorpio Tankers SEC filings which are available at Scorpio Tankers calm and secc.org. Advised that the audio of this conference call is being broadcasted live on the internet and is also being recorded for playback purposes. And Archive of the webcast will be a made available in the investor relations page of our website. For approximately 14 days, we will be giving a short presentation today. The presentation is available at Scorpio Tankers cam on the investor relations page under reports and presentations. The slides will also be available on the webcast

After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to 2. If you have an additional question, please rejoin the queue. Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro.

Robert Bugbee: Thank you, James, and good morning or good afternoon to everyone. Thank you for joining us. We are pleased to report another quarter of strong financial results. In the second quarter, the company generated $144.5 million in adjusted EBITDA and $67.8 million in adjusted net income. When we last spoke in May, markets were dealing with rising concerns over trade policy, tariffs, and geopolitical instability, factors that pointed to the potential for an economic slowdown. As few major issues have been resolved regarding trade, tariffs, and geopolitics, the likelihood of a recession seems lower today than it was last time we spoke. We see two narratives unfolding. The first is one of strength. The product anchor market continues to benefit from strong demand for refined products and long-term structural changes in global refining that are extending trade routes and increasing ton miles. The second is one of caution.

Thank you, James, and good morning or good afternoon to everyone. Thank you for joining us.

We are pleased to report another quarter of strong financial results, uh, in the second quarter, The company generated 144.5 million in adjusted DBA.

And 67.8 million dollars in adjusted. Net income.

When we last spoke in May markets were dealing with Rising concerns over trade policy, tariffs and geopolitical instability factors that pointed to the potential for an economic slowdown.

As few major issues have been resolved regarding trade tariffs, and geopolitics, the likelihood of recession seems lower today than it was last time we spoke.

Strength, the product, anchor Market continues to benefit from strong demand for refined, products, and long-term structural changes in global refining that are extending trade routes and increasing tone miles.

Robert Bugbee: The policy landscape remains uncertain, and geopolitical risks continue to create noise, clouding visibility. Scorpio Tankers is stronger today financially, operationally, and commercially than it was just one quarter ago. We've continued to fortify our balance sheet, expanding revolving credit capacity, maintaining a cash break-even of $12,500 per day, and giving notice to repurchase our final three vessels under sale lease-back financing. At the start of 2022, our lease obligations totaled $2.2 billion. Today, that figure is below $70 million, and in just a few months, it will be zero. To date, our liquidity is approximately $1.4 billion, including cash, undrawn revolving credits, and our investment in DHT. Operationally, we completed drydocks for eight vessels in the second quarter and 71 vessels over the last seven quarters, enhancing fleet efficiency and positioning us well for the quarters ahead.

The second is 1 of caution the policy. Landscape remains uncertain and geopolitical risks continue to create noise clouding visibility

Scorpio Tankers stronger today, financially operationally and Commercial than it was just 1 quarter ago.

We've continued to fortify our balance sheets, expanding revolving, credit capacity, maintaining a cash Break Even of 12,500 per day.

And giving notice to repurchase our final 3 vessels under sale, the spec financing.

The start of 2022. Our lease obligations totaled, 2.2 billion today that figure is below 70 million and in just a few months, it will be zero.

Today, our liquidity is approximately 1.4 billion dollars, including cash.

And their own revolving credits, and our investment in the HD.

Robert Bugbee: Commercially, we added one vessel on a 12-year bareboat charter with a time charter equivalent rate in excess of $21,000 per day. Our approach to capital allocation remains measured, not because of our view on the product anchor market, which remains constructive, but due to the broader global uncertainty that continues to persist. This quarter, we trimmed our investment in DHT, selling 2.7 million shares at over $12 per share, realizing a 16% return. Looking ahead, we remain optimistic. OPEX recent production increase should provide a tailwind to tanker demand. Our view on both crude and refined products remains positive. With a modern fleet, robust liquidity, and a strong balance sheet, Scorpio Tankers is well-positioned to navigate uncertainty and continues delivering long-term value to our shareholders. Thank you, and I will pass the call to James for a brief presentation. James.

Operationally, we completed the dry docks for 8 vessels in the second quarter and 71 vessels over the last 7 quarters, enhancing fleet efficiency and positioning as well for the quarters ahead.

Commercially we added 1 vessel on a 12-year Barbeau Charter with a Time Charter equivalent rate in excess of 21,000 per day.

Our approach to Capital, allocation remains measured not because our view on the product tanker Market, which remains constructed. But due to the broader Global uncertainty that continues to persist

This quarter, we trimmed our investment in the HT selling 2.7 million shares at over 12 dollars per share realizing a 16% return.

Looking ahead. We remain optimistic Opex. Recent production increase should provide a Tailwind to tanker. Demand, our view on both crude and refined products remains positive.

With a modern Fleet robust liquidity and the strong balance sheet. Scorpio Tankers is well positioned to navigate uncertainty and continuous delivering long-term value to our shareholders.

Thank you. I will now pass the call to James for a brief presentation. James.

James Doyle: Thank you, Emanuel. Slide seven, please. In the second quarter, strong demand, low global inventories, and improving refining margins supported a steady rise in product anchor rates. That strength has carried into the start of the third quarter, with bookings to date averaging approximately 22,000 per day for MRs and 31,000 per day for OR2s, levels at which the company continues to generate significant free cash flow. While tensions between Israel and Iran did not disrupt flows through the Strait of Hormuz, the return of Houthi attacks in the Red Sea and the ongoing conflict in Ukraine serve as reminders of how fragile the geopolitical backdrop remains. That said, several near-term catalysts, including the unwinding of OPEC Plus production cuts and increasing sanctions, could further tighten supply-demand balance heading into year-end. And looking beyond the near term, the long-term story remains intact.

Thank you. Emmanuel. 57 please.

In the second quarter, strong demand, low Global inventories and improving refining. Margins supported a steady Rising product, anchor rates.

That strength is carried into the start of the third quarter with bookings to date averaging approximately 22,000 per day for Mrs. And 31,000 per day for LR 2s levels at which the company continues to generate significant free cash flow while tensions between Israel and Iran did not disrupt flows through the straight of Hormuz, the return of who the attacks in the Red Sea, and the ongoing conflict in Ukraine. Serve as reminders, of how fragile the geopolitical backdrop remains

James Doyle: Structural shifts in refining, longer trade routes, and an aging fleet all support a positive outlook. We view the setup, both near and long term, as increasingly constructive. Slide eight, please. Strong demand and low global inventories have led to higher exports, and we expect this to continue. Excluding fuel oil, refined product demand will grow 900,000 barrels per day higher in the second half of this year compared to last. In July, seaborne product exports averaged 21.1 million barrels per day, about 400,000 barrels per day higher than the same month last year. Slide nine, please. Since April, OPEC Plus has committed to restore 1.9 million barrels per day of production. While these barrels have been slow to appear, partly due to seasonal power demand in the Middle East, we expect them to come, supporting crude tanker demand, which can spill over to products.

That said, several near-term catalysts including the unwinding of OPEC plus production cuts and increasing. Sanctions could further tighten Supply demand balance heading into year end and looking beyond the near-term. The long-term story remains intact structural shifts and refining longer trade routes. And an aging Fleet all support a positive outlook. We view the setup both near and long term as increasingly constructive.

slide 8, please

Strong demand and low Global inventories have led to higher exports and we expect this to continue excluding fuel oil. Refined product, demand will grow 900,000 barrels per day higher. In the second half of this year compared to last

in July seabourne product, exports average 21.1 million barrels per day, about 400,000 barrels, per day, hiring in the same same month last year,

Slide 9, please.

James Doyle: Last year, in a weaker crude market, some crude tankers shifted into clean trades, moving 50 million barrels of refined products between May and July. This year, that figure is just 20 million barrels in the same period. With current earnings spreads offering little incentive for crossover, we see limited crude cannibalization on products, further tightening the product tanker balance. Slide 10, please. Two weeks ago, the EU introduced its 18th sanctions package on Russia, lowering the crude price cap, banning imports of products from refined Russian oil, and sanctioning 101 additional tankers. While transition periods may delay immediate effects, the longer-term impact could be meaningful. Vessels operating under the price cap or swing capacity will be challenged by a lower price cap, likely pushing more ships into the shadow fleet to maintain Russian exports.

Since April, OPEC Plus has been committed to restoring 1.9 million barrels per day of production. While these barrels have been slow to appear, partly due to seasonal power demand in the Middle East, we expect them to come. Supporting crude tanker demand, with some still leaning towards products from last year and a weaker crude market, some crude tankers shifted into clean trades, moving 50 million barrels of refined products between May and July this year. That figure is just 20 million barrels in the same period.

Further tightening the product tanker balance.

slide 10, please

2 weeks ago, the EU introduced introduced its 18th sanctions package on Russia, lowering the crude price cap. Banning Imports of products from refined Russian oil and sanctioning 101 additional tankers.

James Doyle: Many of the vessels doing strictly Russian trades will struggle to re-enter Western markets because of their age, operating history, and insurance or maintenance shortcomings. For example, 89% of the MR vessels sanctioned by the EU and UK are older than 18 years. Additionally, banning imports of products refined from Russian crude could lengthen trade routes, as Europe would need to replace diesel from countries that are importing Russian crude. The result: increasing inefficiencies, tightening effective supply, and potentially longer ton miles. Slide 11, please. Over the medium term, refinery rationalization is arguably one of the most important drivers of refined product trade flows. We continue to see closures in global refining capacity. Planned shutdowns, such as Valero's Benicia refinery in California, are unplanned, like the Lindsay refinery in the UK. At the same time, the lack of new capacity is being developed in emerging markets.

While transition periods, May delay. Immediate effects. The longer-term impact could be meaningful vessels operating under the price Gap or swing capacity will be challenged by lower price Gap. Like pushing more ships into the shadow Fleet to maintain Russian exports. Many of the vessels doing strictly Russian trades, will struggle to re-enter Western markets because of their age operating history and insurance or maintenance shortcomings. For example, 89% of the Mr, vessel sanctioned by the EU and UK are older than 18 years. Additionally, Banning Imports of products, refined from Russian crude could lengthen trade routes as Europe would need to replace Diesel from countries that are importing Russian crude the result increasing inefficiencies tightening effective Supply and potentially longer ten miles.

Flying above you, please.

Over the medium-term refinery of rationalization is arguably 1 of the most important drivers of refined product train flows. We continue to see closures in global refining, capacity. Plants, shut down such as a refiner in California are unplanned like the Lindsay refinery in the UK.

James Doyle: Over the last five years, global net refining capacity growth has only been 500,000 barrels. Refineries face steep capital outlays to stay compliant with tightening regulations, and for older refineries, the economics may no longer work. As we have seen, refinery closures don't eliminate demand; they simply reroute it, and often across oceans and longer distances. This has been a key driver in ton mile demand, which has increased 20% since 2019. Slide 12, please. The product tanker order book currently stands at 20% of the existing fleet, a figure that may appear elevated at first glance, but as always, context matters. A wave of fleet renewal was inevitable. Between 2001 and 2008, nearly 1,500 product tankers were ordered. Many of those are now reaching 20 years of age, with a growing share approaching the end of their commercial lives. Meanwhile, new build activity has slowed considerably.

At the same time, the lack of new capacity is being developed in Emerging Markets. Over The Last 5 Years global, net refining capacity, growth has only been 500,000 barrels.

Refineries face steep, Capital outlays to stay compliant with tightening regulations and for older refineries the economics May no longer work.

As we have seen Refinery closures, don't eliminate demand. They simply reroute it and often across oceans and longer distances. This has been a key driver in tan mild demand, which is increased 20%, since 2019 by 12, please.

The product tanker or order book currently stands at 20% of the existing Fleet a figure that may appear elevated at first glance. But as of

Context matters. A wave of Fleet renewal was inevitable between 2001 and 2008. Nearly 1500 product tankers were ordered.

James Doyle: Year to date, only 23 product tankers have been ordered. As we discussed on the last call, LR2s now make up half the current order book. However, it's important to note that 51% of LR2s on the water today are trading in crude oil, and we expect this to continue. In short, the effective growth in clean product capacity looks far more modest than it appears, especially when you consider utilization. Slide 13, please. One of the less visible, but no less important contributors to market tightness is the lower utilization of older tonnage. We often speak about supply in binary terms: new build deliveries and vessel scrapping. But the reality is more nuanced. As ships age, their utilization gradually declines.

Many of those are now. Reaching 20 years of age with a growing share approaching the end of their commercial lives. Meanwhile, new build activity has slowed considerably year to date only 23 product, tankers have been ordered

As we discussed in the last call, LR2 is now make up half the current order book. However, it's important to note that 51% of LR2 is on the water today. Are trading in crude oil and we expect this to continue.

In short, the effective growth in clean product capacity. Looks far more modest than it appears when you consider utilization.

July 13th, please.

1 of the less visible. But no less important contributors to Market. Tightness is the lower utilization of older tonnage

James Doyle: As shown in the left-hand chart, the ton mile demand of a 20-year-old vessel is 45% less than a modern vessel today, reflecting limitations in trading opportunities, efficiency, and regulatory access. That drop-off could be even steeper, closer to 70% without the Russian trade. This isn't a short-term story. Between 2003 and 2010, we saw significant growth in the product tanker fleet. The result: a large cohort of vessels now approaching or surpassing 20 years of age. The chart on the right makes this clear. Including the current order book, 17.5% of the fleet is older than 20 years today. By 2028, that figure climbs to 30%. The implications are structural. The fleet is aging, utilization is falling, and effective supply is tightening, even without a dramatic increase in scrapping. Slide 14, please.

We often speak about Supply and binary terms, new build, deliveries and vessel scrapping, but the reality is more nuanced as ships age. Their utilization gradually decline as shown in the left hand chart. The 10-mile demand of a 20 year old vessel is 45% less than a modern vessel today.

Reflecting limitations in trading opportunities, efficiency and Regulatory access.

That drop-off could be even steeper, closer to 70%, without the Russian trade. This is a short-term story between 2003 and 2010. We saw significant growth in the product tanker fleet, the result of a large cohort of vessels now approaching or surpassing 20 years of age.

The chart on the right makes this clear, including the current order books 17.5% of the fleet is older than 20 years today by 2028 that figure climbs to 30%.

The implications are structural. The fleet is aging, utilization is falling and effective Supply is tightening even without a dramatic increase in scrapping.

James Doyle: Given the lower utilization and the likelihood of LR2 vessels trading crude oil, fleet growth could be lower than expected. In scenario two, we assume 40% of LR new builds carry crude oil, and scrapping remains minimal. The product tanker fleet would increase by 2.8% per year over the next three years. In scenario three, using the same LR2 crossover and carrying capacity declines for vessels 21 to 27 years old, effective fleet growth drops to less than 1% per year. And we think effective fleet growth is likely to be somewhere in the middle of that range. By contrast, ton mile demand has compounded at 3.6% annually since 2000. Strong demand, modest supply growth, and structural shifts in refining capacity continue to add ton miles to every barrel.

Slide 14, please.

Given the lower utilization and likelihood of LR2 vessels trading crude oil, Fleet growth could be lower than expected.

In scenario 2, we assume 40% of LR new builds carry crude oil, and scrapping remains minimal. The product tanker fleet would increase by 2.8% per year over the next three years.

In scenario 3, using the same LR2 crossover and carrying capacity. Declines for vessels 21 to 27 years old, effectively growth drops to less than 1% per year.

3.6% annually, since 2000.

James Doyle: In our view, the growing gap between demand and effective supply sets the stage for a sustained, favorable rate environment in both the near and long term. With that, I will turn it over to Chris.

Strong demand the amount of Supply growth and structural shifts in refining capacity, continue to add 10 miles to every Barrel. In our view, the growing gap between demand and effective Supply sets, the sage for sustained favorable rate environment in both the near and long term with that, I will turn it over to Chris.

Chris Avila: Thank you, James. Good morning. Good afternoon, everyone. Slide 16, please. This quarter, we generated $144.5 million in adjusted EBITDA and $57.8 million, or $1.41 per diluted share in adjusted net income. Our operating cash flow, excluding changes in working capital, was over $130 million this quarter and approximately $240 million on a year-to-date basis. In April, we prepaid $50 million into our $225 million revolving credit facility, covering all remaining quarterly principal repayments through the maturity date of January of 2028, with the exception of the balloon payment. These amounts can be reborrowed in the future, subject to the facility's amortization profile. We were recently opportunistic with our investment in DHT, having sold 2.7 million shares at over $12 per share. This is an almost 16% return on investment in less than a year when factoring in dividends received.

Hey James.

Good morning. Good afternoon, everyone.

Slide 16, please.

This quarter, we generated 144.5 million in adjusted ibaa and 67.8 million or 1.41 cents per diluted share in adjusted net income.

Our operating cash flow, excluding changes in working capital was over 130 million this quarter.

And approximately 240 million dollars on a year-to-date basis.

In April, we prepaid $50 million into our $225 million revolving credit facility.

Covering all remaining quarterly principal repayments through the maturity date of January 2028, with the exception of the balloon payment.

These amounts can be rebar in the future subject to the facilities. Amortization profile.

We were recently opportunistic with our investment in DHT, having sold 2.7 million shares at over $12 per share.

Chris Avila: We still retain a 5.5% ownership interest in DHT and continue to highlight that this investment has the dual benefit of having meaningful exposure to the VLCC market while also having the liquidity to move in and out of the position as opportunities arise. The chart on the right shows our liquidity profile. As you can see, we have access to over $1.3 billion in liquidity as of today. This is $1.4 billion if our investment in DHT is included. Our liquidity consists of cash of $472 million, along with approximately $834 million of drawdown availability under three revolving credit facilities. Slide 17, please. The chart on the left shows the progression of our net debt since December 31, 2021, which has declined $2.5 billion to a net debt balance of $438 million as of today. The chart on the right breaks down our outstanding debt by type.

This is an almost 16% return on investment in less than a year when factoring in dividends received.

We still retain a 5 and a half percent ownership interest in DHT. And continue to highlight that this investment has the Dual benefit of having meaningful exposure to the vlcc market. While also having the liquidity to move in and out of the position as opportunities arise

The chart on the right, shows our liquidity profile.

As you can see, we have access to over 1.3 billion dollars in liquidity as of today.

This is 1.4 billion dollars, if our investment in DHT is included.

Our liquidity consists of cash of 472 million along with approximately 834 million of draw down, availability under 3 Revolt facilities.

Slide 17, please.

The chart on the left shows the progression of our net debt since December 31st 2021 which has declined 2 and a half billion dollars to a net debt. Balance of 438 million as of today.

Chris Avila: In uncertain times such as these, we believe that it is important to maintain a diverse capital structure with multiple sources of low-cost funding and maximum flexibility. Starting at the bottom is our $69 million of legacy lease financing obligations on three vessels. In June and July, we submitted notices to exercise purchase options on these vessels. These leases are the most expensive financing in our debt structure, with margins of over 400 basis points. Two of the purchases are scheduled for December for $23.4 million each, and one purchase is scheduled for February for $18.9 million. In the middle is our secured bank debt, with a lending group dominated by experienced European shipping lenders whom we have strong relationships with. All of this debt matures in 2028 and bears interest at margins below 200 basis points. These facilities are flexible and can be repaid at any time without penalty.

The chart on the right, breaks down our outstanding debt by type.

In uncertain times such as these, we believe that it is important to maintain a diverse capital structure with multiple sources of low-cost funding and maximum flexibility.

Starting at the bottom is our $69 million of legacy lease financing obligations on three vessels.

In June and July, we submitted notices to exercise purchase options on these vessels.

The leases are the most expensive financing in our debt structure with margins of over 400 basis points.

Two of the purchases are scheduled for December for $23.4 million each, and one purchase is scheduled for February for $18.9 million.

In the middle is our secured Bank debt with a Lending Group. Dominated by experienced European shipping lenders who we have strong relationships with,

All of this debt matures in 2028 and bears interest at margins below. 200 basis points.

These facilities are flexible and can be repaid at any time without penalty.

Chris Avila: Further to this, $290 million of our $642 million of secured borrowings is drawn revolving debt, an important tool that we can use if we want to repay the debt yet maintain access to the liquidity in the future. At the top is our recently issued $200 million, five-year senior unsecured notes, which were issued in an oversubscribed offering in the Nordic bond market in January of this year at a 7.5% coupon rate. Slide 18, please. The chart on the left shows our debt repayment obligations through the end of 2026. Our scheduled quarterly obligations are modest, and we also have $78 million of voluntary unscheduled payments, which includes the early repurchase of three lease-financed vessels from Ocean Yield and a $12.7 million repayment for one vessel on our $1 billion credit facility, which was made earlier this month.

Further to this 290 million of our 642 million of secured, borrowing is drawn revolving debt, an important tool that we can use. If we want to repay the debt yet maintain access to the liquidity in the future.

At the top, we have our recently issued million dollar, 5-year senior unsecured notes, which were issued in an oversubscribed offering in the Nordic bond market in January of this year at a 7.5% coupon rate.

By 18, please.

The chart on the left shows our debt repayment obligations through the end of 2026.

Chris Avila: This repayment was triggered by the entrance of this vessel into a long-term bareboat charter-out arrangement to the US government's Tanker Security Program, which is expected to commence in August. Additionally, since the beginning of last year, the company has recently completed the periodic special surveys on 67% of the fleet. The work performed during these drydocks has enhanced the operating efficiency of each vessel, as can be seen by the continued quarter-over-quarter improvement in vessel operating costs. Our forward drydock schedule is light as we come to the end of the year, with far fewer off-hire days as compared to last year. Slide 19, please. The strength of our balance sheet positions us to continue to generate excess cash flow, even in challenging rate environments, given our low cash break-even levels.

Our scheduled quarterly obligations are modest and we also have 78 million of voluntary unscheduled payments which includes the early repurchase of 3 lease Finance vessels from Ocean yield and a 12.7 million repayment for 1 vessel on our 1 billion credit facility, which was made earlier this month.

Additionally, since the beginning of last year, the company has recently completed the periodic special surveys on 67% of the fleet.

The work performed during these 2. I docks has enhanced the operating efficiency of each vessel as can be seen by the continued quarter-over-quarter Improvement in vessel operating costs.

Our for forward, dry. Dock schedule is light as we come to the end of the year with far fewer off higher days as compared to last year.

July 19, please.

The strength of our balance sheet positions us to continue to generate excess cash flow, even in challenging rate environments, given our low cash Break Even levels.

Chris Avila: Further to this, our operating leverage positions us to benefit from spikes in spot market rates that have become commonplace over the past three years. To illustrate our cash generation potential, at $20,000 per day, the company can generate up to $271 million in cash flow per year. At $30,000 per day, the company can generate up to $632 million in cash flow per year. And at $40,000 per day, the company can generate up to $994 million in cash flow per year. This concludes our presentation for today. Now I'd like to turn the call over to Q&A.

Further to this our operating leverage positions us to benefit from spikes in spot Market rates that have become commonplace over the past 3 years.

To illustrate our cash generation potential at $20,000 per day, the company can generate up to $271 million in cash flow per year.

At $30,000 per day, the company can generate up to 632 million in cash flow per year.

And at $40,000 per day, the company can generate up to $9,994 million in cash flow per year.

This concludes our presentation for today. Uh, now I'd like to turn the call over to Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. The first question comes from John Chappelle from Evercore ISI. Please go ahead.

We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone,

If you are using a speaker-phone, please pick up your handset before pressing the keys.

If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2.

John Chappelle: Thank you. Good morning. James, great presentation on the market. I think there's been a lot of starts and stops to the product tanker market, and there's a lot of optimism now, whether it's between what you booked quarter to date or even the recent activity in the spot market. Between now and when we speak to you again in 90 days, what's going to happen that's going to make either your quarter-to-date number look higher or your quarter-to-date number look lower? I just want you to think about the risk-reward from here over the coming 45 to 60 days.

The first question comes from John Chappelle from evercore isi, please go ahead.

Thank you. Good morning. Um, James, great presentation on the market. I think there's been a lot of starts and stops to the product anchor market, and there's a lot of optimism now, whether it's between what you booked quarter to date or even the recent activity in the spot market.

Between now, and when we speak to you again, in 90 days, what's going to happen, that's going to make either your quarter to date number look higher, or your quarter to date. Number look lower. I just want you to think about the the risk reward from here over the, you know, coming 45 to 60 days.

James Doyle: It's a good question. I mean, look, I think the European next round of sanctions have a transition period, right? So it's 90 days on the price cap. It's 180 days on the Russian refined crude product export. So I think that's a little bit later, but it does seem like OPEC barrels are going to be coming back in September. And last summer, we did obviously have some cannibalization, which is down over 50% of these crude vessels' product. That said, it's also a seasonally slower period as we get to the end of August and you go into the summer maintenance season. So I think there's some catalysts there, kind of short term, but it's always difficult to make a call. But we've basically seen a market that's been steady as she goes.

It's a it's a good question. I mean look I think the the European next round of sanctions have a transition period, right? So it's 90 days on the price cap. It's 180 days on the uh Russian refined uh, crude product exports. So I

James Doyle: You know, MR rates have been 20 to 25,000, and LR2 rates have been, you know, high 20s to low 30s. And we think there's a good reason that that continues. So maybe you don't see an immediate uplift, but things remain positive.

Robert Bugbee: Yeah, so John, I'd just clarify to that that just listening to what James has been saying is that, you know, even the OPEC thing coming back in September, you know, is not really going to affect much of the third quarter because, you know, even if you have two, three more fixings now, weeks of fixing now, the majority of the third quarter is done with. But it's a, you know, we agree with James, there is, you know, tends to do with Russia, other structural things that can lead to, as usual, seasonally stronger in the fourth quarter, as well as.

I think that's a little bit later, but it does seem like OPEC girls are going to be coming back in September. And last summer, we did obviously have some cannibalization, which is down over. 50% of these crew vessels sharing product that said, it's also a seasonally slower period as we get to the end of August and you go into the summer maintenance season. So I think there's some Catalyst their kind of short term, but it's always difficult to make a call. Uh, but we, we basically seen a market that that's been Steady As She Goes, you know, Mr. Rates have been 20 to 25,000 in. LR2 rates have been, you know, high 20s to low 30s. And we think there's a good reason that that continues. So maybe you don't see an immediate uplift, but things remain positive.

So, John, I just like to add to that, that, you know, listen to what James has been saying, is that, you know, even the OPEC thing coming back in September, no, it is not really going to affect much of the third quarter. Because, you know, even if you have 2 or 3 more fixed things now, weeks of fixing, now the majority of the third quarter is done with.

but it's a, you know, we agree with James. There is

things to do with Russia other structures, things that can lead to

is usually stronger as well as

John Chappelle: Got it. Chris, for you, you've de-risked this corporate capital structure significantly over the last three years. All these slides that you've just laid out showing tremendous liquidity, very little repayments, very little capital commitments, and then all the cash flow potential that you can generate. And, you know, James just laid out, I think, a more favorable outlook than maybe three months ago, as Emanuel said, maybe less recession risk. I know that you never want to pin yourself to a priority use of capital, but we've gotten to the point now where there's a lot of cash flow, it continues to accelerate, and there's really nothing identifiable to spend it on. So prepare for black swans, I get it.

Got it. Um, Chris, for you, you've de-risked this corporate...

Capital structure significantly over the last 3 years. All these slides that you've just laid out showing.

Uh tremendous liquidity, very little retainment, very little Capital commitments and then all the cash flow potential that you can generate and you know James just laid out. I think a more favorable Outlook um than maybe 3 months ago Emanuel said maybe less recession risk.

I know that you never want to pin yourself to a priority use of capital, but we've gotten to the point now where

John Chappelle: But if this market plays out the way that, you know, James has just laid out, how do we think about capital allocation shifting in '26 versus call it the last three years?

Accelerate, and there's really not anything identifiable to spend it on. So, prepare for black swans. I get it.

But if this Market plays out the way that, you know, the James is just laid out. How do we think about Capital allocation shifting in 26 versus called the last 3 years?

Chris Avila: Hi John, thanks for the question. I guess the first thing I just want to point out is, you know, while things look better today, the issues we were highlighting in May are still unresolved. There's still a lot of uncertainty. And that's how we look at it on a point-in-time basis. We don't have, we're not going to set out a long-term capital allocation strategy in the midst of this uncertainty. And for now, I think conservative is our approach. I don't know, Robert, if you have anything to add to that, but that's my view on that.

Hey John, thanks for the question. Um, I guess the first thing I just want to point out is, you know, while things look better today, the

Are still unresolved.

Um, there's still a lot of uncertainty.

Um, and that's how we look at it on a point in time basis.

Uh, we don't have, we're not going to set out a long-term capital, allocation strategy in the midst of this uncertainty.

Um, and for now I think conservative is our approach.

Robert Bugbee: Yeah, I would totally agree with Chris. I mean, we've lost, you know, we're literally just trying to, nothing has changed as far as we're concerned, fundamentally. I mean, you know, the tariffs are still there, very much there. The, you know, the two big economic blocs, of Europe and China, nothing's been resolved yet. I mean, there's an agreement that was just made in Europe to be ratified. So there's no absolute certainty over the next 30, 40 days that that's going to happen. Still dealing with China, which just seems to be postponed out. The actual geopolitical things of Russia, Ukraine, Gaza, Israel, you know, nothing has actually been, you know, resolved either way. So we will certainly spend the next part of the summer just doing what we've done before, which is just, you know, adding to cash and adding to liquidity.

I don't know. Robert, do you have anything to add to that? But that's, that's my view on that. Yeah, I would, I would, I would totally agree with Chris and we would

You know, we're literally just trying, nothing has changed as far as we're concerned. Fundamentally

I mean, you the, you know, the Tariff, the tariffs is still there very much there. Um,

The, you know, the two big economic blocs, Europe and China, nothing's being resolved yet. I mean, there's an agreement that was just made in Europe too.

The ratified.

So there's no absolute uncertainty over the next 30 to 40 days that's going to happen.

John Chappelle: Okay. Thanks, Chris, James, and Robert.

Still dealing with China. It's just keen to be postponed out of the actual geopolitical things of Russia, Ukraine, Gaza, and Israel.

you know, nothing is is actually being

Operator: The next question comes from Omar Nakda from Clarkson Sato Security. Please go ahead.

in a resolved either way. So we will certainly spend the next part of the summer just doing what we've done before, which is just.

You know, adding to cash and adding to it and adding to liquidity.

Okay, thanks for asking Robert.

John Chappelle: Hi, hey guys. Thank you. Good morning, good afternoon. Yeah, maybe just wanted to follow up, obviously, on this topic that you were just discussing in terms of, you know, capital allocation in this, you know, market backdrop. Obviously, it sounds like, you know, the fundamental outlook on product tankers remains fairly solid. It's really just the geo macro, as Robert, you were just outlining. I guess maybe just in terms of the buyback itself, is there anything that's changed in your view on that as a tool? Or is it just really, it's simply about the uncertainty and all of the just angst that's going on in the geo macro?

The next question comes from, oh, from Omar nocta from Clarkson's Plateau security. Please go ahead.

Robert Bugbee: Yeah, with maintaining the position that we're having, otherwise nothing else has changed. It's a, you know, the stock itself has, you know, sort of performed better in the last month or two. We're hoping that some of the signs could happen that we have a, you know, a more benign risk environment. And, you know, then we can see where we are. But we're unlikely to, I can't imagine that we're going to sort of make some announcement and say, okay, this is now our capital strategy. I cannot imagine that that will happen. We're much more likely to act rather than say what we are now going to do.

Has remained fairly solid. It's really just a Geo macros Robert. You were just outlining. Um I guess maybe just in terms of the buyback itself. Is there anything that's changed in your, in your view on that as a tool? Um, or is it just really it's simply about the uncertainty in all of the Just angst that's going on in the Geo macro?

Yeah, we're maintaining that that the position that we're having otherwise, nothing else has changed.

Its a, you know, the the the stock itself is, you know, the form better in the last

um month or 2, the we're hoping that some of the signs could happen that we we have a

You know, a more benign, um, risk environment and you know, then we can see where we are.

But we're we're unlikely to I I can't imagine that we're going to sort of make some announcement and say, okay this is now our Capital strategy. I I cannot imagine that that will happen. We we're much more likely to act

rather than say what we are now going to do,

John Chappelle: Okay. And I guess maybe just in terms of, you know, thinking about the fleet from here, obviously, you still have a very young fleet under 10 years of age. You've been a bit on, say, cruise control, harvesting the cash, paying down the debt, building up the, you know, the, you know, the, I guess, the balance sheet strength. When does it make sense to start thinking about buying ships again? Your modern ships to replace some of your older ones. Not talking perhaps about, say, expansion, but maybe just rejuvenation. Is that in the cards here near term?

Robert Bugbee: Nothing right now is on the cards, other than, you know, we're operating the company and we're continuing what we're doing. The company is monitoring the S&P market, monitoring the new building market, you know, whether it's for sales or for purchases. That's what we're doing.

Okay. And and I guess maybe just in terms of, you know, thinking about the fleet from here, obviously, you still have a very young Fleet under 10 years of age. Um, you've been a bit on say cruise control, harvesting the cash paint on the debt building up the, you know, the um, you know, the I guess the balance sheet strength. When does it make sense to start thinking about buying ships again? Uh, you know, modern shifts to replace some of your older ones not talking perhaps about the expansion but maybe just Rejuvenation. Is that in the cards here? Um near term? No no no, no nothing right now is the cards other than, you know, we're operating the company and we're continuing what we're doing.

The companies monitoring the smpp market monitoring the new building Market, but you know, whether it's for sales or for purchases and that's what we're doing.

John Chappelle: Okay. All right. Got it. Thank you. I'll pass it back.

All right, got it. Thank you.

I'll pass it back.

Operator: The next question comes from Greg Lewis from BTIG. Please go ahead.

John Chappelle: Hey, thank you, and good morning, and good afternoon, and thanks for taking my questions. You know, I wanted to touch on real quick the TSP program. You know, it looks like a great contract. Kind of curious if you could talk a little bit more about that program. And then the comments around the subject annual renewal. Is that ongoing where the TSP renews that annually, or is that at a later date?

The next question comes from Greg Lewis from BT. Please go ahead.

Hey, thank you and good morning and good afternoon, and thanks for taking my questions. Um, you know, I I wanted to touch on real quick the, um, the tsp program, um, you know, looks like a great contract, um, kind of curious if you could talk a little bit more about that program. Um, and then the comments around the subject annual renewal is, is that is that ongoing where

Where the tsp renews that annually or is that at a later date?

Chris Avila: Greg, it's Kim. Thanks. You know, we're not at liberty to discuss our transaction or our contract to put a ship as a substitute vessel into TSP, but on a general basis, I'll make a few observations. The annual renewal is subject to funding by the federal government, which there has never been a case of this funding not being renewed. So I would say the renewal risk is quite low, but in today's day and age, who knows? But we expect, our expectation is that the bareboat runs for the full 12 years. And obviously, what it does is, you know, the government has an interest in having a strong US flag fleet that resonates, I think, with other initiatives the current administration is taking by way of shipbuilding and preference for US operators.

Greg, it's uh it's cam, thanks. Um, you know, I'm we're not at Liberty to discuss the the uh our transaction, or our contract to put a ship as a substitute vessel into tsp, but on a general basis,

I'll, I'll make a few observations. The, the annual renewal is subject to funding by the federal government. Um, which there is never been a case of this funding not being renewed. Uh, so I would say, the renewal risk is quite low, but in today's day and age who, who knows, but we expect our expectation. Is that the bare boat, runs the full 12 years

Chris Avila: So, you know, this deal came to us at the right time, of course, but I think it's an indicator that we'll look to do further transactions like this to the extent that they're available and offer really good returns.

Um and obviously what it does is I, you know, the government has an interest in having uh a strong us Flag, fleet that resonates, I think with other initiatives, the current Administration is taking it by way of ship building and preference for us operators.

So, you know, this deal came to us, uh, at the right at the right time, of course. But I think it's an indicator that we'll look to do, further transactions like this to the extent that they're available and offer really good returns.

John Chappelle: Okay, great. Super helpful. And then, James, you know, in the presentation, you kind of walked through, you know, maybe some crude vessels cannibalizing, you know, some product volumes. You know, and you laid out, you know, the OPEC ramp and any kind of, you know, realizing that it's hard to pinpoint numbers, but any kind of view on how many vessels we could see shift back to trading crude from product, kind of as OPEC spare capacity finishes that, you know, initial unwind that is, you know, expected to happen, I guess, pretty much in the next month or two.

Okay, great, super helpful. And then, and then James, um, you know, in the presentation you kind of walked through, uh, you know, maybe some, some crude crude vessels cannibalizing, you know, some product volumes, you know, and you laid out, you know, the, the OPEC ramp and any kind of, um, you know, realizing that it's, it's hard to pinpoint numbers. But but any kind of view on on how many vessels we could see shifts back to trading crude from product kind of as OPEC, spare capacity finishes that, you know, initial online that is, you know, expected to happen. I, I guess pretty much in the next in the next month or 2,

James Doyle: Yeah. Well, look, on the on the crude vessels carrying product, it's really the Suezmax and DLCCs that we were comparing to last summer. So there's been, there's been obviously switching on the smaller segments, but when we talk about the cannibalization, it's really those those vessels. And of the 17 crude vessels that have been delivered this year, 11 of them loaded clean product on their first voyage. And on the next voyage, eight of them have already loaded crude oil. So I think speaking to the larger segments, that looks constructive. On the Afromax LR2 side, what we've seen is 34 LR2s dirty up this year. But I think this goes back to the kind of the order book being LR2s and people building LR2s more than building Afromaxes, because the Afromax volumes are four times as large as clean products. But we keep building LR2s.

Carrying uh, product. It's really the the sewage Max and dlcc is that we were comparing to last summer so there's been um

There's been obviously switching on the smaller segments, but when we talk about the cannibalization, it's really those those vessels and of the 17s that have been delivered this year, 11 of them loaded Queen product on their first voyage, and on the next Voyage, 8 of them have already loaded crude oil. So I think speaking to the larger segments that looks constructive, um, on the afro maxl or 2 side, but we've seen is 34. Um, LR2 is dirty up this year, but I think this goes back to the kind of fast, the order book, being able to and people building LR2 is more than building afro Maxes because the afrox

James Doyle: So, for example, by the time all these LR2s deliver, 46% of the Afromax LR2 fleet will be LR2s, but the crude market's four times as large. So this is actually a trend we think that's going to continue for the foreseeable future, because also on the Afromax side, the vessels are quite old, and a lot of them are also tied up in Russian trade.

Volumes are 4 times as large as clean products, but we keep building LR2. So, for example, by the time, all these LR2 is delivered 46% of the afrox Alert 2, Fleet will be will be

John Chappelle: Okay. Super helpful. Thank you, everybody.

Large. So this is actually a trend. We think that's going to continue for the facility of the future because, also on the Afrox side, the vessels are quite old, and a lot of them are also tied up in Russian trade.

Robert Bugbee: I think just a mention on that, you know, the crude market, I think it's, you know, I think the crude oil market continues to disappoint everybody. It's, you know, it's been the same story for three years at the moment. Yes, everything's going to be great. Next quarter, things are going to be, you know, stronger. And it hasn't happened so far. And I think that the product market itself is acting, I think, extremely well in the light of that, you know, that disappointment, that uncertainty. I think we do see very strong, you know, very strong reasons why that crude market coming into, you know, September with the OPEC increases and, you know, the continued low inventories and people having to move.

Super helpful. Thank you, everybody.

I think, I think just a mention on that the crude market, I think it's.

No, I think the crude oil Market continues to this point, everybody is, you know, it's been the same story for 3 years at the moment is yes, everything's going to be great. Next quarter. Things are going to be, you know, stronger

and it it hasn't happened so far and I think that the the product Market itself is

acting acting extremely well, in, in the light of, you know, that, you know, that disappointment that uncertainty, I think we do see very strong, um,

You know, there are very strong reasons why the crude market is coming into September with the OPEC increases and the continued low inventory.

Robert Bugbee: We do see very strong signs that that market could get significantly stronger coming into the back end of the year, which, just like the product market, we think the same, and, you know, that would be beneficial to the product market.

And people were having to move. Um, we see very strong signs that that market.

could get significantly stronger coming into the back end of the year, which just like the product Market, we think the same and, um, you know, that would be beneficial to the product Market.

Operator: The next question comes from Tim Chang from Bank of America. Please go ahead.

John Chappelle: Hi, this is Tim Chang on for Ken Hexter. Thanks for taking my question. Saw that vessel OPEX stepped down sequentially and year over year, somewhat materially normalizing to 2023 levels. So do you see the run rate OPEX going forward stepping down a bit, particularly for LR2s, or would you still advise us to look at kind of a last four-quarter running average? Thanks.

The next question comes from Tim Chang from Bank of America, please go ahead.

Hi, this is Tim Chang on for Ken hexter. Thanks for taking my question, it's all that vessel Opex step down, sequentially and year-over-year. Somewhat materially normalizing the 2023 levels, so do you see the Run rate Opex going forward? Stepping down a bit, particularly for LR2 or would you still advise us to look at kind of a last 4 quarter running average. Thanks,

Chris Avila: Kevin, this is Chris. Thanks for the question. Yeah, I would step it down a little bit, but also, yes, use the trailing four-quarter average. So if you do that, it does step down about $200 a day from what we guided last quarter. And just to be specific, that would bring the LR2s down to about $8,800 per day on a run rate basis. The MRs at about $7,800 on a run rate basis, and the Handys at about $7,600 on a run rate basis.

Um, this is Chris. Thanks for the question. Um, yeah, I would step it down a little bit. Um, but also yes, use the trailing four-quarter average. So if you do that, it does step down about $200 a day from what we guided last quarter.

Um, and just to be specific, that would bring the LR2 down to about 8,800 per day on a run-rate basis.

The MRs are at about $7,800 on a run rate basis, and the handies are at about $7,600 on a run rate basis.

Operator: The next question comes from Chris Robertson from Deutsche Bank. Please go ahead.

The next question comes from Chris Robertson from Deutsche Bank, please go ahead.

John Chappelle: Hey, good morning. Thank you for taking my questions. Just to follow up on Tim's question on OPEX, Chris, you know, you mentioned that vessel OPEX benefits here from ships that have been in for special survey. So I was wondering if you could talk about how long do those efficiencies last, you know, post those surveys? Do they step down over time, or does that create kind of a permanent structure there?

Hey, good morning. Thank you for taking my questions. Uh, just to follow up on on Tim's question on Opex, Chris. Uh, you know, you mentioned that vessel Opex benefits here from ships that have been in for for special survey. So I was wondering if you could talk about how long do those efficiencies last? You know, post those surveys did they step down over time or does that create uh kind of a permanent structure there?

Chris Avila: Thanks, Chris. I would say there, as you get closer to drydock, vessel OPEX tends to tick up. That's natural. These are depreciating assets that require more work as they age. So, you know, we're reaping the benefits of the recent drydocks, but I would caution to use a low run rate through the rest of the useful life of the vessel just because of natural sort of wear and tear.

Um, thanks, Chris. Uh, I would say...

As you get closer to dry dock, vessel OPEX tends to go up; that's natural. These are depreciating assets that require more work as they age.

Because of natural sort of wear and tear.

John Chappelle: Dan, do you have anything to add to that?

Sam, do you have anything to add to that?

Chris Avila: No, I think that's right, Chris. I'd say it's a combination of things. It's, you know, special survey, you address equipment that needs to be replaced. So in some areas, the vessel is operating as if it were new. In other areas, you are providing temporary maintenance that is temporary. And you'd expect that to, you know, to reset to, you know, some increased costs over a period of time. So it's a very, very mixed picture that doesn't lend well to a simple answer, unfortunately.

No, I think that's I think that's right, Chris I'd say It's a combination of things it's you know.

Special survey you address um uh equipment that needs to be replaced. So in some areas the vessel is operating as if it were new uh in other areas, you are uh providing temporary maintenance that is

John Chappelle: Got it. Yeah, no problem. Understandable. Just shifting focus to the market, do you guys have any current color or thoughts around Chinese export quotas for the remainder of the year?

Temporary and you'd expect that to, you know, to reset to, you know, some increased costs over a period of time. So it's a very, very mixed Pit picture that doesn't uh, lend well to a simple answer unfortunately.

Got it. Yeah, no problem, understandable. Um, just shifting focus to the market. Do you guys have any current color or thoughts around Chinese export quotas for the remainder of the year?

James Doyle: Hey, Chris, it's James. Look, you know, in the past, they've granted the quotas, and you see an uptick over the summer. We have seen that so far this year. July exports were up around 900,000, up to 900,000 barrels, up from around 600, which is their kind of standard, but it's very in line with what we saw last summer. That said, we have seen strong refining margins globally, but particularly in China. So we'll see, but it is very much controlled at the top level.

Hey Chris, it's James. Um, look, you know, in the past they they granted the quotas and you see an uptick over the summer. Uh, we have seen that so far this year, uh, July exports were up around 900,000 up to 900,000 barrels, uh, up from around 600, which is their kind of standard, but it's very in line with what we saw last summer. Uh, that said we have seen strong, uh, refining, margins globally, but particularly in China. Um, so, so, we'll

See, but it is very much controlled, uh, at the top level.

John Chappelle: Got it. Appreciate it. I'll turn it over. Thank you.

Got it. Appreciate it. I'll turn it over. Thank you.

Operator: The next question comes from Liam Burke from B. Riley Securities. Please go ahead.

Liam Burke: Yes, thank you. You announced a deployment of a carbon capture system on one of your vessels. Is this a significant capital investment on your part, and is there any sense on how effective this technology might be?

Next question, comes from Liam Burke from B, Riley Securities. Please go ahead. Yes, thank you. Uh, you announced a, uh,

Deployment of a carbon capture system on 1 of your vessels. Um is this a significant uh capital investment on your part and

Is there any sense on how, uh, effective this technology might be?

Chris Avila: Liam, thanks for the question. What we're trying to do in a period of uncertainty, not just uncertainty about revenues, but also uncertainty about technology and emissions and, you know, future propulsion, is we're trying to be curious while also staying thrifty. So the answer to your question is this is not a significant investment by the company. It is part of an ongoing effort to understand the potential of onboard carbon capture, which can be, or is promoted to be, a very powerful tool to meet emission standards for vessels operating under fossil fuels for years to come. Where you will find us skeptical is in this transition period of jumping to technologies or fuels that don't yet have the infrastructure or the maturity to provide for the type of commercial deployment which we have, i.e., tram trading.

Uh, Liam thanks for the question.

Um, what we're trying to do in a period of uncertainty, not just uncertainty about revenues, but also uncertainty about technology and emissions. And, you know, future propulsion is we're trying to be curious while also staying Thrifty. So the answer to your question is this is not a significant investment by the company.

Um it is part of an ongoing effort to understand the potential of onboard carbon capture which can be uh, or is promoted to be a very powerful tool, um, to meet emission standards for vessels operating under fossil fuels for years to come, uh, where you will find a skeptical is in this transition period of jumping to, uh, Technologies or fuels.

Don't yet have the, uh, infrastructure or the maturity?

Chris Avila: So whether it's methanol or ammonia or other fuels, we just feel that this transition is going to take a little longer than regulators and other sort of onlookers have promised. And so we are trying to get the most out of our traditional vessels, and that includes finding ways like carbon capture to keep them cost-efficient and energy-efficient. The pilot will be running for several months, and only then after the results are analyzed do we get to see whether this really has the potential that we think it does. But in the meantime, it's really a cooperative effort. We're not putting in a lot of capital, but we are providing, obviously, one of our LR2s as a platform to run this pilot.

Uh to provide for the type of commercial deployment, which we have IE, Tramp Trading.

Uh, so whether it's methanol or ammonia, or other fuels, we just feel that this transition is going to take a little longer than, uh, regulators and other, uh, sort of onlookers have have, uh, have promised. And so we are trying to get the most out of our, uh, traditional vessels. And that includes finding ways like carbon capture to keep them, uh, cost efficient and energy efficient.

Liam Burke: Great, thank you. And James, refinery redistribution or refinery capacity globally has been a theme for several years now. Where are we on this redistribution? Do you see any, you know, continued benefit here, or have things sort of equalized?

Uh, the pilot will be running for several months, and only then, after the results are analyzed, do we get to see whether this really has the potential that we think it does. But in the meantime, it's really a cooperative effort. We're not putting in a lot of capital, but we are providing, obviously, one of our LRTs is the platform to run this pilot.

Great. Thank you. And uh, James Refinery redistribution or Refinery capacity. Globally has been a theme for several years now, where are we on this redistribution? Uh, do you see any, you know, continued benefit here or have things sort of equalized?

James Doyle: Continued benefit. So this year, we're expecting net capacity growth of actually on the line of 600,000 barrels. And we expect older refineries to continue to close. What is interesting is demand has remained strong. So you see today, obviously, refining margins have continued to rebound. Underlying demand continues to surprise to the upside. And I think that's very encouraging for the long term because on average, it takes seven years to build a refinery. And a lot of refineries that have recently developed in emerging markets have had delays, cost overruns, and taken a while to come to market. So if you're not building your refinery today, there's very little kind of change in the near term as we go forward. And I think that's extremely positive for our business.

Liam Burke: Great. Thank you, James.

Cost overruns and taken a while to come to Market. So if you're not building your refineries today there's very little kind of change in the near term as we go forward and I think that's extremely positive for our business.

Great. Thank you, James.

Operator: As a reminder, if you have a question, please press star one. The next question comes from Froda Morgadell from Clarkson Securities. Please go ahead.

As a reminder, if you have a question, please press star 1.

The next question comes from Froda Morad from Clarkson Securities. Please go ahead.

Frode Morkedal: Thank you. Hey guys, I wanted to discuss oil demand. It seems to be coming in stronger than expected. I guess you see it in the crack spreads are quite strong. The shape of the future curve, you know, still in backwardation, so there is no large inventory builds happening, which have been forecasted for some time. And even the freight route market, right? So the summer lows have been pretty good, I guess. Rates have been holding up quite well, right? So are you seeing anything from your side that points to this underlying demand? Is better than expected? I don't know, maybe in chartering activity, the level of time charter opportunities, arbitrage flows, and stuff like that.

Thank you.

Thank you guys. Um,

I want to discuss oil demand. It seems to be coming in stronger than expected.

I guess you see it in the crack spreads are quite strong. Uh, the shape of the future curve, you know, still in back foundations. So there's no

large inventory, builds happening, which have been forecasted for some time.

Um, and even the street market, right? So this summer lows uh, has been

Pretty good, I guess. Uh, rates have been holding up quite well, right?

So are you seeing anything from your side that points to this underlying demand is uh, better than expected? I don't know. Maybe in

Talk to an activity, the level of time charter opportunities.

Uh, Arbitrage flows and stuff like that.

Chris Avila: Hi, Froda Emanuele. I think we agree with your views. The lows have been, I think you said, pretty good. We agree. The seasonal lows are okay compared to others, a seasonal low that we've experienced in the past. The time charter appetite from oil major companies and major traders remains quite healthy. There is a little bit of caution in going longer periods. So you find yourself with owners pushing for longer-term charters and charters wanting to still maintain shorter periods with optionality, of course, as you expect.Which,

Hi Manuel, I think we agree with your views. The lows have been, um, I think you said, pretty good. We agree. The seasonal lows are, um,

Are we okay compared to others, uh, seasonal lows that we've experienced in the past?

Uh, the time charter rate from, uh, oil major companies and major trade remains quite healthy. Uh, there is a little bit of um, caution in, uh, going longer periods. Uh, so you find yourself with owners pushing for longer-term charters and charters wanting to still maintain. Um,

Operator: for the time being, not many owners are, caving in for. but it is understandable that charters want this because the uncertainty and the cloud, clouded, visibility that we are all experiencing, is what they are seeing as well. So, as we, as we said, we remain, optimistic, cautiously optimistic, but, but certainly optimistic about, what the future has, lies ahead for, for the product anchor market. So, that's where we are.

Shorter periods with optionality. Of course as you expect which uh for the time being not many owners are uh, caving in for uh, but it is understandable that Charter has won this because the uncertainty and the cloud clouded visibility that we are all experiencing, um is what they are seeing as well. So uh, as we as we said, we remain uh, optimistic, uh, cautiously optimistic. But, uh, but certainly optimistic about, uh, what the future has, uh,

Liza had for, for the product tanker market so uh, that's where we are.

Conference Specialist: Great. what about ship values? I just noticed that the ship brokers have, lifted the estimated, by a few million dollars, like a prompt resale and more above 50 million, which I thought was quite interesting, right? Like, given there's still big discounts to the NAV in the sector, you know, stability and even increase in ship values are, positive. So any insights into that? what's driving second-hand values?

Great. Uh, what about ship values? I just noticed that the ship brokers have...

Uh, listed the estimated, uh, by by a few million dollars, uh, like a prompt resale, and more about 50 million.

Which I thought was quite interesting, right? Given the same big discounts anyway in the sector, you know?

Stability and even an increase in Japan are...

Uh, positive. So, any insights into that, uh, was driving.

Second values.

Operator: We've seen, we've seen the correction in second-hand values. So, as you know, we've been, capturing the opportunities on the sale side for the last, 24 months. we stopped as the market has dropped, a little bit faster than expected. and levels that, the S&P market has reached were, lower than we, expected. And, I think that it was a factor of, people just, chasing and rushing for the next deal and, and the market has got, gotten a little bit out of hand, without real reason. So we see this adjustment as justified, this adjustment upwards, I'm saying, as justified. and we, of course, welcome it. And, we are, you know, always, remain open to any S&P activity, but we are selective and focused on maintaining, the right strategic balance for our fleet. so, we are not in, in, in any, specific trend at the moment.

Uh, we've seen the correction in secondhand values. So, as you know, we've been, uh, uh,

Capturing the opportunities on the sales side for the last, uh, 24 months.

Uh, we stopped as the market has dropped a little bit faster than expected.

Uh, uh, levels that uh, uh, the S&P market has reached were uh lower than we expected. And um, I think that it was a factor of.

um,

People just, uh, chasing and rushing for the next deal. And and the market has got gotten a little bit out of hand uh, without real reasons. So we see this adjustment as Justified, this adjustment upwards I'm saying as Justified, um, and we of course, welcome it. And uh, we are, you know, always, um, remain open to any S&P activity. But we are selective and

Focused on maintaining the right strategic balance for our fleet. Um, so, uh, we are not in, in, in any um,

Operator: We are watching, what lies ahead, summer period, as we just discussed in the previous question. Usually, this is the low, season. and the fact that the market has been higher than, expected is probably what is also driving the S&P values up.

Um, this is the low season. Um, and the fact that the market has been.

Higher than, uh, expected is probably what is also driving the S&P values up.

Conference Specialist: Yeah. All right. Thanks, Emanuele. That's good insights.

Yeah, yeah. Thanks. That's good insight.

Operator: Sure.

Sure.

David Brown: sorry, just one thing. You know, as you know, if you get sort of a real sort of crunching down on, on Russia sanctioning, you know, and/or changes, significant changes in Iran, then, you know, that that's another reason. It's just becoming more and more risky to hold the, let's say the very older tonnage that's, you know, being traded in those areas in the tanker market. So in that sense, you know, you could start to get a market or continue to have a market where, you know, the newer vessels, whether they are, you know, 10, 12-year-old MRs and upwards do, or LRTs, Afromaxes, whatever, move in one direction and, and the older assets either stay the same or move in in the other direction.

Uh, Florida, just one thing. Yeah, as

you know, if you get sort of a real sort of crunching down on, um,

uh on Russia sanctioning um you know and or changes significant changes in Iran then you know that that's another reason it's just becoming more and more risky to hold the

Uh, let's say the very older tonnage that, you know, is being traded in those areas, in the tank market.

so, in that sense,

You know, you could start to get a market, or continue to have a market where, you know, the newer vessels, whether they are 10 or 12 years old, MRIs, and upwards to or LRTs, have some actors moving in one direction.

And the older assets.

Either stay the same or move in the other direction.

James Doyle: This concludes our question and answer session. I would like to turn the conference back over to Emanuele Lauro for closing remarks.

This concludes our question-and-answer session. I would like to turn the conference back over to Emmanuel Lauro for closing remarks.

Operator: Thank you, operator. I do not have any further remarks. Just, thanking everybody for their time, and questions, and looking forward to speaking with everybody soon. Thanks a lot.

Thank you, operator. I do not have any further remarks, just, uh, thanking everybody for their time, uh, and questions, and looking forward to speaking with everybody soon. Thanks a lot.

James Doyle: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

I'll conclude. Thank you for attending today's presentation. You may now disconnect.