Q3 2025 Frontline Ltd Earnings Call

November 21, 2025

Lars Barstad: It's noticeable how everyone at Frontline and in the general tanker industry, for that sake, walks with an energetic spring in their steps these days. We have previously argued that this market owes us money, and we have finally started to collect some of it. I'll try not to jinx it by using caps lock on absolutely everything, but it is a mild understatement that we are positively excited by the developments in this market that started to materialize during Q3 of the year. Before I give the word to Inger, I'll run through our TC numbers on slide three in the deck. In Q3 of 2025, Frontline achieved $34,300 per day on our VLCC fleet, $35,100 per day on our Suezmax fleet, and $31,400 per day on our LR2/Aframax fleet.

Lars Barstad: In Q3 2025, we have booked 75% of our VLCC days at $83,300 per day, 75% of our Suezmax days at $60,600 per day, and 51% of our LR2/Aframax days at $42,200 per day. Again, all numbers in this table are on a load-to-discharge basis, with the implication of ballast days at the end of the quarter this incurs. This means that although we continue to fix extraordinary freight rates every day, we are dependent on the cargo being loaded before New Year's Eve to account for that income in Q4. I'll now let Inger take you through the financial highlights. Thanks, Lars. Good morning and good afternoon, ladies and gentlemen. Let's then turn to slide four, profit statement, and we can look at some highlights.

Lars Barstad: We report profit of $40.3 million, or $0.18 per share, and adjusted profit of $42.5 million, or $0.19 per share in Q3. The adjusted profit in Q3 decreased by $37.8 million compared with the previous quarter, and that was primarily due to a decrease in our time charter earnings from $283 million in the previous quarter to $248 million in Q3. That was a result of lower TCE rates, in addition to fluctuations in other income and expenses. With respect to ship operating expenses, they increased $3.1 million from the previous quarter, and that was due to a decrease in supply rebates of $2.5 million, and cost of $1.1 million due to change of ship management for seven LR2 tankers. This was partially offset by a decrease in general running cost of $0.5 million.

The adjusted profit in the third quarter decreased by $37.8 million compared with the previous quarters, primarily due to a decrease in our time charter earnings, which fell from $283 million in the previous quarter to $248 million in the third quarter. This decline was a result of turnover, TCE rates, in addition to practitioner and other income expenses.

Lars Barstad: The administrative expenses, excluding synthetic option revaluation loss of $5.7 million this quarter and $1.7 million the previous quarter, decreased by $0.2 million from the previous quarter. Let's then look at the balance sheets on slide five. The balance sheet movements this quarter are mainly related to ordinary items, the sale of one Suezmax tanker, and also the prepayment of debt under revolving reducing credit facilities. Frontline has a solid balance sheet and strong liquidity of $819 million in cash and cash equivalent, including earned drawn amounts of revolving capacity, marketable securities, and minimum cash requirements bank as of 30 September 2025. We have no meaningful debt maturities until 2030 and no new building commitments. Let's then look at slide six, that is the fleet composition, cash-based even rates, and FX. Our fleet consists of 41 VLCCs, 21 Suezmax tankers, and 18 LR2 tankers.

Lars Barstad: The administrative expenses, excluding synthetic option revaluation loss of $5.7 million this quarter and $1.7 million the previous quarter, decreased by $0.2 million from the previous quarter. Let's then look at the balance sheets on slide five. The balance sheet movements this quarter are mainly related to ordinary items, the sale of one Suezmax tanker, and also the prepayment of debt under revolving reducing credit facilities. Frontline has a solid balance sheet and strong liquidity of $819 million in cash and cash e quivalent, including earned drawn amounts of revolving capacity, marketable securities, and minimum cash requirements bank as of 30 September 2025. We have no meaningful debt maturities until 2030 and no new building commitments. Let's then look at slide six, that is the fleet composition, cash-based even rates, and FX. Our fleet consists of 41 VLCCs, 21 Suezmax tankers, and 18 LR2 tankers.

With respect to shift operating expenses, they increased $3.1 million from the previous, previous, previous quarters. This was due to a decrease in supply rebates of $2.5 million and cost of $1.1 million due to a change in ship management for 7 Latta 2 tankers. This was partially offset by a decrease in general running costs of $0.5 million.

The administrative.

Excluding things.

Statistic option reevaluation loss of 5.7 million. This quarter and 1.7 million. The previous quarter decreased by 2 or 0.2 million dollars from previous quarter.

Let's then look at the balance sheets on slide 5.

The balance sheet movements this quarter are mainly related to ordinary items.

Uh, the sale of one suspect tanker, and also the prepayment of depth and revolving reducing credit facilities.

Jump Line has a solid balance sheet and strong liquidity of $819 million in cash and cash equivalents, including owner amounts of your bills, the capacity marketable securities, and minimum cash requirements bank, as of September 30th, 2025.

We have no meaningful debt maturities until 2030.

And no new billing commitments.

Less than lift up slide 6.

That is to, please composition.

Cash Break Even Base and Effect.

Lars Barstad: It has an average age of seven years and consists of 100% eco vessels, whereof 56% are scrubber-fitted. We converted seven existing credit facilities with aggregate outstanding term loan balances of $405.5 million and undrawn revolving credit capacity of $87.8 million into revolving reducing credit facilities of up to $493.4 million in September 2025. We subsequently prepaid a total of $374.2 million in September, October, and November 2025, leading to a reduction in fleet average cash-based even rates of approximately $1,300 per day for the next 12 months. We estimate average cash-based even rates for the next 12 months of approximately $26,000 per day for VLCCs, $23,300 per day for Suezmax tankers, and $23,600 per day for LR2 tankers, with a fleet average estimate of about $24,700 per day. This includes dry dock cost for 14 VLCCs, two Suezmax tankers, and 10 LR2 tankers.

Uh, I received a report that consists of 41 vessels, uh, 21 Suezmax tankers and 18 electric tankers.

Uh, it has an average age of 7 years and consists of 100%, where 56% are scrambly fitted.

We converted 7, existing current facilities with aggregate outstanding Term, Loan balances of 4505.5 million and and from the evolving credit capacity of 87.8 million in 2 revolutions in reducing credit facilities.

Of up to 493.4 million in September 2025. We subsequently pre-paid a total of 374.2 million in September, October and November 25th to a reduction in Street, average cash Break Even days of approximately 1,300 per day for the next 12 months.

We estimate average cash break-even rates for the next 12 months of approximately $26,000 per day for VCC.

23300 per day for 2 secs, tankers

Average estimates of about 24,700 per day.

Lars Barstad: The fleet average estimate, excluding dry dock cost, is about $23,100, or $1,600 per day less. We recorded OPEX, including dry dock, in Q3 of $9,000 per day for VLCCs, $8,100 per day for Suezmax tankers, and $9,100 per day for LR2 tankers. This includes dry dock of one VLCC and finalization of dry dock for one Suezmax tanker, which ended dry dock in the second quarter. The Q3 2025 average OPEX, excluding dry dock, was $8,500 per day. Lastly, let's look at slide seven and cash generation. Frontline has a substantial cash generation potential with 30,000 earnings days annually. As you can see from the slide, the cash generation potential base is currently.

This includes door cost for 14 V to suspect tankers and 102 tankers.

The fleet average estimate, excluding driver cost, is about $23,100, or $1,600 per day less.

We recorded Opex including Dry Dock. In the third quarter of 9,000 a day for vcc's, 8,100 per day for suspected tankers and 9,100 per day for electric tankers.

This includes Dry Dock of 1 with the sea and finalization of product performance, suspect tanker, which ends the dry dock in the second quarter.

The Q3 2025 average of net, excluding product, was $8,500 per day.

Then lastly, let me just write $7.

And cash generation.

If Frontline has substantial cash generation potential with the $30,000 earning states annually.

Lars Barstad: TCE rates for TD3C for VLCC, TD20 for Suezmax tankers, and average of TD25 and TC1 for Aframax LR2 tankers from the Baltic Exchange as of 18 November 2025 is $1.8 billion, or $8.15 per share, providing a cash flow yield of 33% based on current share price. A 30% increase from current spot market will increase the cash generation potential to $2.6 billion, or $11.53 per share. With this, I leave the word to Lars again. Thank you, Inger. Let's move to slide eight and have a look at what's going on in our markets. As many of you have noticed, oil in transit has become kind of a more mainstream measure for investors that focus on shipping. It's now at record highs. This happens as export volumes grow, especially the Americas or around the Atlantic Basin, and we see a positive development in how oil trades.

As you can see from the slide, the cash generation potential date is currently, and TCE rates for T3C, for V to C, T T T years, and an average of TV25 and TC1 for Aframax and that you tankers from the BIC exchange as one of them. But the 18th of 2025 is.

To $1.8 billion or 8.15 cents per share.

Providing a cash flow yield of 33% basis, current share price.

A 30% increase from the current stock market. Within 3 to 6 generations, there is potential to reach $2.6 billion or $11.50 per share with this. I leave the word to you.

Thank you.

Um, so let's move to slide 8 and have a look at what's going on in in our markets.

Lars Barstad: Policy does affect behavior, and it has opened the arbitrage between the Atlantic Basin and Asia. The OPEC voluntary production cuts reversals are starting to express themselves in real export volume gains. Year on year, for October, we're up 1.2 to 1.3 million barrels per day, looking at the Middle Eastern producers, excluding Iran. There are increasingly logistical challenges around the trade of sanctioned export oil, and this was further amplified as Lukoil and Rosneft were put under sanctions. We have a picture where we see very firm refinery margin environments supporting refineries' crude runs. It begs the question, when are we going to see this perform? Resale asset values are starting to reflect the hike in freight rates as order books for tankers are near full through 2028. Let's move to slide nine.

Uh, as many of you have moved this oil in transit has become, um, kind of a more mainstream measure out for investors that focus on shipping. It's now at the record Heights. Um, this happens at like 4 volumes grow um, from especially, um, the Americas or around the country Basin and we see a positive development in how oil trades.

Policy does affect behavior, and it has opened the arbitrage between the Atlantic Basin and Asia.

The OPEC voluntary production cuts reversals are starting to express themselves in real export volume gains year on year for October. We're up to 1.2 to 1.3 million barrels per day, looking at the Middle East and producers, excluding around.

There are increasingly logistical challenges around the trade of sanctions-exposed oil, and this was further amplified as Blue Coil and Lars Barstad were put on the sanctions.

We have a picture where we see a very firm refinery margin environment supporting refineries' crew drugs.

So it makes the question. When are we going to see?

Resale asset values are starting to reflect the high infrastructure as all the books for calculus are near full through 2028.

Lars Barstad: The heading is, "The Arb is Back." The behavior of especially India, but also China, is yielding an increased demand for compliant crudes, especially in the Middle East. This raises the crude price level for local crudes in the Middle East, causing Atlantic Basin grades to price their way into Asia. Since 2022 and Russia's invasion of Ukraine, the long-haul trade has suffered. We've seen Russian oil taking Asian market share, and Europe relying more on Atlantic Basin barrels. This looks to reverse to some degree and could be a sustainable development going forward, and means that we are back to the old-school tanker market where the VLCC, with its economies of scale, leads the pack. This VLCC-centric trade pattern change has also been driven by very positive export numbers from Brazil, our new producer Guyana, Canada through the TMX pipeline, and more recently, also US.

Let's move to slide 9.

The Heading is, the orb is back. Um, the behavior of specially India but also China is, is the leading and increased demand for compliance Crews, especially in the Middle East.

This raises the crude price level for locals, Croods in the Middle East.

Causing Atlantic Basin grades to price their way into Asia.

Since 2022 and Russia's invasion of Ukraine, the long-haul trade has suffered.

We've seen Russian oil taking market share in Asia, and Europe relying more on Atlantic-based barrels.

It looks to reverse to some degree and could be a sustainable development going forward. This means that we are back to the old school. Thank you, Market, where the VCC, with its economies of scale, leads the pack.

This, we also see, Centric trade path and change has also been driven by very positive export numbers from Brazil.

Our new producer, Gamma Canada, through the TMX pipeline.

Lars Barstad: The incremental barrel to the market now is compliant oil, and compliant oil needs compliant vessels. That means unsanctioned vessels, and predominantly below 20 years of age. If this supply trend continues on the oil side, we're likely to see a sustained contango structure in the oil market developing. This will imply inventory builds. We are low on inventories in most regions of the world. It's unlikely to imply floating storage due to the financing cost, which is much higher now than it was in the last cycle we had this effect to the market. There is an equally interesting trading pattern that may develop, and it's called time. When you can load a barrel in the US and sell it two months after in Asia, you're actually having a tailwind on that trade as the price of crude is increasing over time. Let's move to slide ten.

The incremental Barrel to the market. Now, is compliant oil and compliant. Oil needs compliant vessels. That means unsanctioned vessels and predominantly below. 20 years of age.

If this supply trend continues on the oil side, we're likely to see a sustained contango structure in the oil market developing.

this will imply inventory bills. Uh we are low on inventories in most regions of the world.

It's unlikely to imply floating storage due to the financing costs, which are much higher now than they were in the last cycle. We had this effect on the market.

But there is an equally interesting trading pattern that may develop.

And it's called.

When you can load the barrel in the U.S. and sell it in Asia two months later, you're actually having, uh, tailwinds on that trail as the price of crude is increasing, uh, over time.

Let's move to slide 10.

Lars Barstad: The net fleet development, and this is a kind of a recurring discussion I have with investors when we are out presenting our company. We have virtually zero recycling or scrapping, but we have actually a substantial order book, not a scarily big one, but there are still vessels to come, and that order book has been increasing. What we've tried to do here is to put forward a couple of scenarios just to explain why we are so constructive on this market. The order book continues to grow, and this is mainly due to limited offering of available modern tonnage on the water.

So the next Fleet developments and this is a kind of a recurring discussion. I have within the third uh when we are out to representing our company

Uh, you know, we have virtually zero recycling or scrapping, but we have actually a substantial order book. Not a scarily big one, but there is still that to come, and that order book has been increasing.

So what we've tried to do here is to to put forward a couple of scenarios just to explain why we are so constructive on this Market.

Lars Barstad: This basically means that if you are a ship owner or an investor that wants to buy a ship, the best way to get access of tonnage is actually to go to the yard, and you're not penalized by missing out on freight, even though the ship is being delivered in 18 to 24 months. This looks to change now. Now that you have spot rates that can give you $5 to $6 million on the bottom line for a 50-day voyage, you start to think, should I go and access the resale market and get a ship that I can fix in the next cycle, or do I go to the yard and order a ship that will be delivered in more than 24 months?

As the order book continues to grow, this is mainly due to the limited offering of available modern Cornish on the water. This basically means.

If you are a ship owner or an investor who wants to buy a ship,

Uh, the best way to get access to Thomas is actually to go to the yard. You're not paying in the light by missing out on freight, even though the ship is being delivered in 18 to 24 months.

But this looks to change now.

Now that you have spot traits that can give you $5 to $6 million on the bottom line for a 60-day voyage.

Lars Barstad: This means that the owners can actually now start to pay up for a resale, and it makes economical sense to do so, assuming these rates stay around for a while. We continue to see the trend that other asset classes are populating the yard's order books. There is now limited capacity left in 2028. If you look at the overall age profile of the global tanker market, and this is basically the key fundamental part of at least how we see this tanker market develop going forward, or as I've said previously, the revenge of the old economy due to lack of investment in particularly tanker tonnage over a long period of time, we are in a situation where we will every year have a new batch of ships that are crossing this magical age cap, which we put at 20 years.

You start to think, should I go and access the resale market and get the ship that I can fix in the next cycle? Or do I go to the yard and Order ship that will be delivered in more than 24 months?

This means that the owners can actually now start to pay off for a reason, and it makes economical sense to do so. So, assuming these rates stay around for a while,

We continue to see the trend that other asset classes are populating the Arts order books. There's now limited capacity left in 2028.

If you look at overall age profile of the global tanking market, and this is basically the key, uh, fundamental part of, of at least how we see this tanky Market develops going forward. Or as I've said previously, uh, the Revenge of the old economy due to lack of investment in in particularly, thank you so much for a long period of time.

Lars Barstad: If you look at the VLCC chart here on the top right-hand side, just to explain how we're thinking, if you assume absolutely no scrapping, no ships disappearing into the dark, and basically every new ship being delivered on top of the existing fleet, we will have around 15% fleet growth towards 2029. If you assume that VLCCs at least stop effectively trading when they turn 20, that growth will only be 3.4% through 2029. What is actually the more realistic case is that VLCCs are either scrapped, start to trade sanctioned oil, or for other reasons, no longer part of the effective fleet at 20 years, will have a negative fleet growth with the existing order book, a negative fleet growth of 2% towards 2029. The other charts are basically showing more or less the same.

Uh, we are in a situation where we will, every year, have a new Bachelor of ships that are crossing this magical age cap, which is we put at 20 years.

If you look at the VCC short here on the top right-hand side, just to explain how we're thinking. If you assume absolutely no scrapping, no ships disappearing into the dark, and basically every new ship being delivered on top of the existing fees.

We will have around 15% free growth, uh, towards 2029. Sorry.

But if you assume that the LCC is at least stopped effectively trading when they turn 2022.

That growth will only be 3.4%.

To 2021.

But what is actually the more realistic case?

Is that VLCC or I described, starting to change, functioned oil, or, um, for other reasons? No longer part of the effectively, uh, at 20 years.

Growth of 2%.

Towards 2029.

The oldest sharks.

Lars Barstad: I think this is kind of the key reason why we believe that there is some longevity in the market we have in front of us. Move to slide 11, order books, and I've been quite repetitive of this. The order book on the asset classes that we are exposed to is in total 16.5% of the existing fleet, 19.5% above 20 years. If you put the threshold at 15 years, 44.3% of that fleet is above 15, and 21.6% of that fleet is sanctioned by either OFAC, UK, AU, and so it goes on. We also have the highest average age in the tanker fleet for more than 20 years. Let's move to slide 12 and the summary.

They are basically, um, showing more or less the same.

I think this is kind of the key reason why we believe that there is some longevity in the market we have in front of us.

Move to slide slide 11 or the books. And uh it's I've been quite quite repetitive on this. Uh, the order book on the asset classes that we are exposed to is in total 16 and a half percent of the existing Fleet.

Uh, 19.

Is it about 20 years?

If you put the Threshold at 15 years 44.3% of of that Fleet is is is about 15.

And 21.6% of that fleet is sanctioned by either or both of the UK, and so we go. So.

We also have the highest average age in the country, fit for more than 20 years.

So, let's move.

Lars Barstad: I've called it old-school bull market because some of the characteristics we see in this market, and I've been in this market for quite a while, meaning that I was actually around in the period from 2002 until 2008, we are actually seeing some of the same characteristics where there is a proper trade going on between a charterer and an owner, and the brokers actually need to do some proper work to find the right ship, and cargo struggle to get offers, basically. We have high utilization, we have strong oil exports, and we have a positive change in trade rates. As I've gone through, limited growth in the compliant tanker fleet, and with compliant, I also add under 20 years. We also see the sanctioned trade sucking more tonnage in due to logistical challenges.

To slide 12 and the summary.

And I've called it an old school bull market because some of the characteristics we see in this market, and I've been in this market for quite a while, meaning that I was actually around in the period from 2002 until 2008. We are actually seeing some of the same characteristics, whether it's a proper trade going on between a shocker and an owner. And the brokers actually need to do some proper work to find the right ship.

And cargo struggle to get offers, basically.

So, we have high utilization.

We have strong oil exports, and we have a positive change in trade leads.

As I've gone through limited growth in compliance, thank you, Fleet. And with compliance, I also have on the 20th.

Lars Barstad: The overall age profile is key, as I just mentioned, and despite the populated order books, effective fleet growth remains muted. We have firm refining margins, and the winter market has actually already started. We are in a situation kind of on global S&E that we might come into a prolonged period of oversupply, which may yield interesting trading developments, firstly for oil, but also for shipping. I can assure you, Frontline are prepared to offer outside shareholder returns with our efficient spot export fleet. Thank you very much, and we'll open for questions. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one, one on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star one and one again. Please then bow or compile the Q&A queue.

And we also see the function of trade sucking more tonnage in due to logistical challenges.

The overall age profile is key, as I just mentioned, and despite the populated order books, effective growth remains muted.

We have a referral and refining margins, and the Winter Market has actually already started.

We are in a situation globally that we might, uh, come into a prolonged period of oversupply.

And this may yield interesting trading developments.

Firstly, for oil, but also for shipping.

And I can assure you.

Frontline is prepared to offer outside shareholder returns with our efficiency.

Thank you very much, and we’ll open for questions.

Thank you. Dear participants. As a reminder, if you wish

Lars Barstad: This will take a few moments. Now we're going to take our first question. It comes to the line of Jonathan Chappell from Evercore ISI. Your line is open. Please ask your question. Thank you. Good afternoon. Lars, to your last point about the outside shareholder returns and then tying it into this financing update that you provided today, completely understand. I think the dividend policy will remain as robust as it's been since the start of 2024. Are we looking at a new era now where you're looking at deleveraging the balance sheet as well? You're clearly in a strong enough market where the dividends can be strong, but you're still generating enough cash where you can deleverage, and you've done quite a bit of it in the last three months.

1 on your telephone keypad and wait for a name to be announced. Do with your question. Please press *1 and 1. Again, please tell our compiler. The Q&A session will take a few moments.

And now we're going to take our first question.

And it comes to line of Jonathan Chapel from Evercore ISI. Your line is open. Please ask your question.

Lars Barstad: Are we looking at a new Frontline where the balance sheet becomes as strong as maybe some of your public peers without violating your dividend policy? No. We are different from our peers. We're actually not particularly comfortable working with this kind of fairly low LTVs. I think it's a result of we being hesitant to invest in this market for reasons I actually described a little bit in the presentation. We've had values moving ahead, so resale values moving ahead of the market. We've had, kind of, since we are very, we want our assets to generate cash as quickly as possible. We've been hesitant to stretch kind of far out in time, tying a CapEx on assets that will come in a year or two years' time. We basically found ourselves, and timeshark rates haven't really defended this either.

Thank you, good afternoon. Um, Lawrence, to your last point about the outside shareholder returns and then tying it into this financing update that you provided today, um, I completely understand. I think the dividend policy will remain as robust as it has been since the start of 2024. But are we looking at a new era now? Where you're looking at, uh, deleveraging the balance sheet as well? You're clearly in a strong enough market where the dividends can be strong, but you're still generating enough cash where you can delever, and you've done quite a bit of it in the last...

Three months. So, are we looking at a new front line where the balance sheet becomes as strong as maybe some of your public peers without, you know, violating your dividend policy?

Um, no. Um, we are, um, you know, different from our peers. We're actually not particularly comfortable, uh, working with this kind of a fairly low LTVs.

A year or a year old, 2 years' time.

Lars Barstad: We kind of just by pure being quite conservative on our financial analysis, we haven't really been kind of up for doing any massive moves since we did the Euronav transaction. I think that's more a result of it, or that's more the reason for us being in this position rather than actively trying to reduce our debt. Okay. Just to follow up, I want to push back a little bit on slide 10, but then offer an opportunity for you to push back to that. I think the premise of scrapping ships at 22 years and at 20 years, given the rate outlook that you just laid out in the prior slides, is a bit misleading. I mean, people don't scrap ships when they're making that much money.

Um, and so so we basically found out and and, you know, time chart rates haven't really defended this either. So so we we we kind of just by pure, uh, being um, quite conservative on our, our financial analysis. Uh, we haven't really been uh, kind of up for for doing any massive moves since we did the Euro now transaction,

So, so, so I think, kind of, that's more a result of it, or that's more the reason for us being in the position rather than, uh, actively trying to reduce our debt.

Lars Barstad: Maybe could you explain to us how those ships become less efficient, or they don't have full utilization, and they still kind of come out of the net fleet supply without them being actually scrapped? If investors are waiting to see big scrapping numbers over the coming years with rates as strong as you think they are, and I think they are, they may be disappointed. How do those ships become less efficient and still kind of help utilization without actual scrapping? Well, as you know, I was going to push back on that. No, the thing is that why we haven't seen scrapping or recycling, to be more politically correct, is the fact that you have an alternative use of these vessels, right? The alternative use in the old days, it could be conversion into floating storage or production units.

Okay. Um, and then just to follow up, I want to push back a little bit on slide 10, but then uh, offer an opportunity for you to push back to that. I think the premise of, you know, scrapping ships at 22 years, and at 20 years, given the rate Outlook that you just laid out in the prior slides is a bit misleading. I mean, people don't scrap ships when they're making that much money. So maybe uh, could you explain to us how those ships become less efficient? Or they don't have full utilization. And there's still kind of like come out of the net Fleet Supply without the knee actually scrapped because of investors are waiting to see big swapping numbers over the next over the coming years with rates as strong as as you think they are. And I think they are um you know they may be disappointed. So how do those ships become you know, less efficient and still kind of help you utilization without actual scrapping?

Lars Barstad: There could be kind of other, it could be floating tanks or whatever. The alternative use that's been going on ever since 2019 or 2018, 2019, is the trade of sanctioned oil. That has obviously paid a lot of money to the owners that have been willing to engage in this trade. The thing is that we circle around the compliant markets, and we relate ourselves to the compliant oil market. In the compliant oil market, even if you're Exxon, or even if you're Shell, or Glencore, or whoever you are, you trade on the margin. If you're going to trade on the margin and you're trying to insure 2 million barrels of oil on a plus 20-year ship, that price of that insurance is going to be so high that you will struggle to actually make the ends meet.

Um, well, I'm I'm, you know, as, as you know, I was going to push back on that know, the, the thing is that, that, um, you know, why we haven't seen scrapping, uh, or recycling to be more politically correct. Um, is, uh, the fact that you have an alternative, uh, use of these vessels, right? And the alternative use, uh, you know, in the old days, it could be conversion into to, you know, floating storage or production units. Um, you know, there could be kind of other, you know, it could be, be be be, uh, you know, floating tanks or whatever, but alternative use that's been going on ever since 2019 or 1819, uh, is the trade of sanctioned oil? And that's, that's obviously paid a lot of money to to the owners that have been willing to engage in this trade. Uh, the the thing is that, you know, we circle around the compliance markets and we relate ourselves to the compliant oil market and in the compliant oil Market, you know, even if you're

Or even if you're Shell or Glenor or whatever you are, you know, you trade on the margin.

Uh, if you're going to trade on the margin and you're trying to ensure 2 million barrels of oil on a plus 20-year ship,

Lars Barstad: It means that it also limits your optionality on how you can trade that oil because you'll have to take away kind of 80% of the terminals that just have a blanket ban on vessels that are older than 20 years of age. Effectively, and we actually see this, you don't really need to look up which ships are sanctioned by OFAC. You can just draw a line at 20 years. The vessels on the Suez and the VLCC side that are above 20 years and not sanctioned, you can literally count on one hand. We actually see a big efficiency loss in the tanker space when the ship reaches 18 years.

That, uh, price of that insurance is going to be so high that you will struggle to actually make ends meet.

So so it means that and it also limits your optionality to on on how you you. Um, you can trade that oil because you will, you'll have to take away kind of 80% to the terminals. That just have a blanket done on vessels that are older than 20 years old of age. So so effectively. And and we actually see this, you know, you don't really need to look up which ships are sanctioned by. Oh, f***. You can just draw a line at 20 years, you know, the vessels and the sails that are above 20 years. And not sanctioned, you can literally count on 1 hand.

Lars Barstad: I think kind of the little bit of the proof in the pudding here is that the compliant oil market has actually had a terrible development in volume for a sustained period of time. Still, we've had poor rates, but we haven't had car crash kind of rates. This is basically due to the fact that ships become less tradable, less efficient, limited use, actually starting from the year from the term 17 and a half years. There could be that we'll have a wall of scrapping, but I actually don't think that's going to happen. I think kind of the alternative use is going to be around for a long time, unless, of course, the sanctions are lifted all around.

And we actually see, you know, a big efficiency loss in the tanker space when the ship reaches 18 years.

So, so so, so and I think kind of, you know, the, the little bit of a proof in the pudding here is that the compliant oil Market has actually have a terrible development in volume for a sustained period of time. But still, we have, we have poor rates but we have haven't had like car, crash kind of rates. And this is basically due to the fact that ships become less tradable, less efficient, uh, you know, limited use, uh, actually starting from from the year, the from the turn 17 and a half years,

Lars Barstad: Now we also have another problem here. A sanctioned vessel is not easily recycled because the recycling industry is actually a real business, and they access financing, and they deal in many ways in dollars. Where you are right, where ships can easily live kind of past the 20-year age kind of ceiling is if it's for specific use. Let's use India as an example. If you're India flagged and it's for an Indian refinery, you, of course, control the entire value chain on that oil trade. That ship can easily kind of trade until it's 25 years. It will only be for the purpose of transporting feedstock to an Indian refinery. That is only a small portion of the market.

So so, um, so I, I, um, you know, there could be that, we'll, we'll have a warlock scrapping, but I actually don't think that's going to happen. I, I think kind of the, the alternative use is going to be around for, for a long time. Uh, unless of course, the sanctions are lifted, uh, you know, all around,

But uh, but now we also have another problem here is that a sanctioned vessel is not easily, uh, recycled because the recycling industry is is is actually a really business and they access financing and and they deal in in, in many, in many ways in dollars.

Where you are right, where ships can easily live, kind of past the 20-year age, uh, HH, um, kind of ceiling is,

Now, let's use India as an example.

If you're in the flag.

Lars Barstad: Even Indian refiners realize that they can't have too much of an exposure in that market because basically you have virtually no other options than to do exactly that back and forth between the Middle East and India. Great. Thanks for the answers. Thank you. Now we're going to take our next question. The next question comes to the line of Sharif El Maghrabi from BTIG. Your line is open. Please ask your question. Hey, good afternoon. Thanks for taking my questions. Lars, maybe first to just follow up on that line of thought about the sanctioned fleet, India and China are lifting more compliant barrels, as you said, and so there's more non-compliant vessels that maybe have less work.

For an Indian Refinery. You, of course, control the entire value chain on that oil trade, that ship can easily, uh, kind of trade until it's 25 years, uh, but it will only be for the purpose of transporting field stock to a Indian Refinery, but that is only small portion of the market. And even in the end, refiners realized that, you know, they they can't have too much of an exposure in that market because basically, you have virtually no other options than to do exactly that back and forth between the Middle East and India.

Great, thanks for the answers.

Thank you.

Now, we're going to take our next question.

And the next question comes from the line of Sheriff Al Magrabi from BTIG. Your line is open; please ask your question.

Lars Barstad: I'm wondering what you see happening to the dark fleet right now, given there's less work, and also maybe in the next six, 12 months, if that's a different picture. Yeah. No, there is actually, so for once, there are an increasing amount of vessels just sitting at anchor with no crew on and keys left in the ignition. These are kind of the first-generation sanctioned fleet that came out of Iran and Venezuela kind of five, six years ago. You will probably never be able to locate who was the owner. Then you have kind of what's in between. There are actually initiatives or also commercially things that are being worked on where you basically can buy sanctioned vessels, but you need a license from the most important licenses from the US.

Hey, good afternoon, thanks for taking my questions. Uh, Loris, maybe first to just follow up on that. Line of thought about the uh sanctions Fleet, Indian China, lifting more compliant barrels, um, as you said. And so there's more non-compliant there uh, vessels that maybe have less work and I'm wondering what you see happening to the dark Fleet right now. Given there's less work and also maybe in the next 6 to 12 months, if that's a different place.

Picture.

Yeah, no, it's, uh, there is actually, so, so, you know, for once, there are, um, an increasing amount of vessels just sitting at anchor with no crew on and keys left in the ignition. Uh, these are kind of the first generation, uh, sanction Fleet that came out of aranna and Sela, kind of 5 6 years ago.

Um, and there you will probably never be able to locate, but you will still own it. Um, but then you have kind of...

Lars Barstad: There is actually some motion in that work now where, of course, since the federal state in the US was closed for a while here, it's not been particularly efficient for the last couple of months. There is a discussion ongoing if one can kind of set up some sort of mechanism where, against a fine, you can actually access the recycling market, but only the recycling market alone. I think that could be a solution as we proceed here. One side being that local governments actually need to take action to avoid environmental damage for those vessels left with a key in. Secondly, a growing industry around this kind of licensed, but also fined, recycling work being done. Because kind of if you're going to buy a sanctioned vessel, it's actually worth zero.

What's in between? There are actually initiatives, or, uh, also commercially, um, things that are being worked on where, uh, you basically can buy, uh, an assumption that solves, but you need a license from, uh, the most important license is from the U.S.

And there is actually some motion in that work now where, uh, of course, you know, since the federal state in the U.S. was closed for a while here. Uh, it's been particularly efficient for the last couple of months. But, uh, there is a discussion ongoing to see if one can kind of set up some sort of mechanism.

Lars Barstad: If it's worth half the normal recycling price, there is actually still money in it. I don't know if that's going to be the solution, but at least that is something that is being discussed. It's still so that the sanctions are different countries kind of respect them to various degrees. Oil has a tendency to move anyway. I have no illusions as to the vast amount of Iranian oil, which is currently kind of being clogged up a little bit, the vast amount of Russian oil, which struggles to find a home. I'm pretty sure it's going to find a home, and it's probably going to find a home one way or another on ships that are either fully sanctioned, halfway sanctioned, or whatever. I think kind of that industry, that parallel industry, we're probably stuck with for a while.

Where, uh, again a fine, uh, you can actually access the recycling Market, but only the recycling Market alone. So so, um, so so I I think that could be a solution as we proceed there. Um, you know, 1, uh side being that, uh uh, local governments actually need to take action to avoid um, to avoid uh, environmental damage for for those that just left the key in. But secondly a growing industry around this kind of licensed licensed. But also find um recycling um uh work being done uh because you know, it kind of if you have a, if you, if you're going to buy a function, that's also, it's actually worth zero. But then, of course, if it's worth half the normal recycling price there is actually still money in it,

So, but but, you know, I don't know if that's going to be the solution, but, but at least uh, that that is something that that is being discussed.

But it's still so that.

You know, the sanctions are, uh, you know, different countries, um, kind of respect them to various degrees.

Oil has a tendency to move anyway, so I, you know,

Lars Barstad: The incremental barrel now does not come from the sanctioned nations. It actually comes from the compliant fleet, and that's the only part of the market we really care about. It's very interesting. Thank you. Sticking with the compliant barrels now, you highlighted the tailwind the futures curve gives cargoes lifted from the Middle East to Asia. That's not floating storage, like you said. I'm wondering how that affects vessel demand, given it sounds like the contango in the curve lines up nicely with normal voyage timelines anyway. Yeah. No, currently, we don't really have the contango. Actually, I'm no expert on oil pricing, but I'm actually quite surprised at the firmness in the oil price considering the oil-in-transit numbers that we have. Mind you, that oil-in-transit is a combination, of course, of backing up sanctioned oil.

I have no Illusions as to, you know, the the vast amount of Iranian oil which is currently kind of being clogged up a little bit, the vast amount of Russian oil which struggles to find a home. I'm pretty sure it's going to find the home and it's probably going to find the Home on all 1 way or another on on the on the on ships that are either fully sanctioned halfway sanctioned or whatever. So society and kind of that industry that parallel. In Industry you're probably stuck with for a while but the incremental Barrel Now does not come from the sanction Nations. It it actually comes from the compliance Fleet and that's you know the only part of the market we really care about

Curved U.H. gives cargos lifted from the Middle East to Asia.

That's not floating storage, like you said. So I'm wondering how that affects vessel demand. Given it sounds like the contango in the curved lines up nicely with normal voyage timelines anyway.

Yeah, no. So, so, um, you know, currently we, we, we don't really have the contango, and actually, I, I know an expert on oil pricing, but I'm actually quite surprised by the firmness in the oil price, considering.

Uh, the oil and transit numbers that we have.

Lars Barstad: It's also backing up oil that was supposed to go to sanctioned terminals. It's also commercial oil, which is backing up due to weather as well. That's a really old-school winter market kind of thing, that there is actually some severe weather around key ports. We're actually seeing extended kind of waiting time to discharge basically due to that. With that kind of pile of oil sitting or being kind of in the logistical chain, I'm surprised that we can have kind of front oil having at these levels. Anyway, if you believe in EIA or IEA or all the kind of market experts, we are actually going to be in an inventory build environment for the next six months or so. In order to get there, in order for that to be even feasible, we can't have a steep accreditation on oil.

And mind you that oil and Transit is a combination of course, of backing up sanctioned oil. It's um, also backing up oil. That was supposed to go to sanction terminals. Uh, and it's, uh, also, uh, but it's also Commercial Oil, uh, which is backing up due to weather as well. You know, this, that's a really old school Winter Market kind of thing is that there is actually some severe weather uh, around key ports. So so we are actually seeing extended kind of waiting time to discharge basically due to that.

but with that kind of a pile of oil sitting or being kind of in the logistical chain, I'm surprised that we can have kind of front oil, uh, having you know, at at, at, at these levels but anyway,

Uh, if you, if you believe in eia, or iea, or or, or all the kind of Market experts, we are actually going to be in a inventory, build environment. Uh, for the next 6 months is

Lars Barstad: You get into this contango kind of shape of the curve. That is interesting, as I mentioned in the presentation, because we tend to see trade lanes extend when you have some sort of carry in the oil curve. It does not need to be supportive of floating storage because then you need like $2 to $2.50 per month in order for that to make sense. Only a modest $0.50 contango helps or greases the trading system basically because you get a little bit of tailwind as you try to position a cargo. Got it. Thanks again for taking my questions. You're welcome. Thank you. Now we are going to take our next question. The question comes from the line of Omar Nokta from Jefferies. Your line is open, please ask your question. Thank you. Hi, Lars and Inger.

But in order to get there in order for that to be even feasible, um, you know, we we can't have a steep acquisition on some oil. So so so then you get into this contango, uh, kind of, uh, shape of the Curve.

Uh, and that is interesting, as I mentioned, in the presentation because we, we, we tend to see, uh, trade lines extend when you have some sort of carry in the oil curve. And it doesn't need to be supportive of of, uh, of floating storage because then you need like 2 2 and a half bucks per month in order for that to, to make sense.

But, uh, only a modest 50%—sorry, 50 cents. Uh, compo, uh, helps or greases the trading system, basically, because you get a little bit of tailwind, uh, as you try to position a cargo.

Got it. Thanks again for taking my questions.

You're welcome.

Thank you.

Now, we're going to take our next question.

And the question comes from the line of Omar Nocta from Jeffrey. Your line is open; please ask your question.

Lars Barstad: Good afternoon. A couple of questions. I wanted to ask just about the LR2s. Obviously, there's a bit of a big gap between what's going on in the dirty and clean markets. I just wanted to, if you can, just remind us how you're trading those. Also, do you have any comment regarding some of the chatter from last month that you had sold or were in the process of selling that entire LR2 fleet? Yeah. Let's do the last one first, and that's no. Then, to the first one, this spread right now surprises us a little bit as well. You're an expert analyst too, and you know that the kind of high refinery margins, a lot of oil going through the system, normally yields a lot of product exports. We haven't seen that yet.

Thank you. Hi, Lars and Inger, good afternoon. A couple of questions I wanted to ask just about the LR2. Obviously, there is a bit of a big gap between what's going on in the dirty and clean markets, and I just wanted to, if you can, remind us how you're trading those. And then also, do you have any comment regarding some of the chatter from last month that you had sold or are in the process of selling that entire LR2 fleet?

Lars Barstad: I'd say that the setup for the LR2s looks increasingly exciting because, number one, due to the relatively stronger crude markets, a lot of LR2s are actually trading dirty. It means that there is a kind of limited amount of LR2s that are clean and ready to do a clean cargo at this minute. Secondly, the Suezmax, in particular, are making so much money in crude that there is no economics in cleaning up to do a clean cargo at these levels at all. My point is, I don't think you need much in that market to flip it. It can actually be quite good, or you can get these kind of exponential rate developments basically because you don't have the lid of a Suezmax cleanup or a VLCC cleanup on top of the LR2 market as it is right now.

Yeah, so so let's do the last 1 first and, and let us know. Uh, and then do the first 1, um, the, um, um, you know, kind of this spread right now surprises us a little bit, uh, as well. Um, you know, you're an expert analyst 2. I'm I'm I'm you, you know, that the kind of the high Refinery margins. A lot of oil going through the system, normally yields a lot of process product exports and we we we, we haven't seen that yet. Uh, but but I'd say that the the setup for the Lotus uh look increasingly uh exciting because number 1, due to the relatively stronger crude markets. A lot of LR2 are actually trading dirty. So it means that there there's an kind of limited amount of of LR2 that are clean and ready to do a clean cargo after

This minute, secondly, the service Max is in particular, I'm making so much money in crude that there is no economics in cleaning up to do uh to do a clean cargo at at this uh, levels at all.

Lars Barstad: I don't have a very good kind of factual answer to you on why we are in this situation. I think we've already seen some kind of small signals. The LR2s have run up $5,000 to 10,000 per day just in the last week. Now we're probably around the $35,000 per day mark, maybe a bit above. It doesn't need much to take it further. Let's see. Yeah, maybe some convergence is happening at the moment. I understand, Lars, that it sounds like you said no comment regarding the sale of the LR2s, but humor me perhaps. If you were to potentially, or if you were to consider selling those LR2s, what do you envision the use of proceeds would be?

To 10,000 dollars per day just in the last week. Uh, you know, now we're probably around the 35,000 dollars per day, Mark, maybe a bit above, uh, you know, it doesn't need much to to, to, to take it further. So, so, um, let's see.

Okay. Yeah, so maybe some convergence is uh, is happening uh, at the moment, okay? And, and I understand large uh, you know, the it sounds like you said, no comment regarding the the sale of the LR2. But, you know, humor, me, perhaps, uh, uh,

Lars Barstad: Kind of maybe along John's question, would it be more towards debt repayment, which it sounds like perhaps you don't want to do? Would it be a special payout, or would you consider rolling into the Suezmax and VLCC classes? I think we've kind of between the lines, we're probably answering that in this presentation. We've been very patient since we started to expand our VLCC part of the fleet. That's grown 33% in the last five years. We've doubled the kind of amount of ships. Regretfully, the trading pattern that developed after Russia-Ukraine did not really support the VLCCs at all. Now that is, I don't want to jinx it, but it looks like at least right now it's coming together. It's the economies of scale that then gets into play.

If you were to potentially or, you know, if you were to consider selling those LR2, what do you envision? The use of proceeds, would be kind of maybe a Long John's question. Would it be more towards debt repayment? Which it sounds like perhaps, you don't want to do, uh, would it be a special, uh, payout or would you consider rolling into, uh, you know, the Sue's Max and dlcc classes?

uh, I I

I think we've kind of read between the lines, you probably.

In this presentation and it's, uh, you know, we are you kind of we've been very patient. Uh, since we started to expand our Wheels to see, uh, part of the fit. Uh, that's grown, uh, 33% uh, in The Last 5 Years. Um, you know, we've doubled for kind of the amount of ships uh, regressively the trading pattern that developed after Russia Ukraine. Uh, but did not really support the

Lars Barstad: Kind of long term, if we were to divest off the LR2s, I think we also think that this market has some runway, just showing you the fairly modest, in our model at least, the fairly modest growth total in supply of tankers, and actually particularly so on the VLCCs. Also, our belief that the oil demand is probably going to grow for a few more years. I think it would be natural for us to focus on the big guns, on the VLCCs. Thanks, Lars. I feel like that's fairly clear between the lines. Just a last one, just in terms of performance to date here in the fourth quarter, clearly a nice big increase in your earnings power coming here across all three segments.

At all. Now that is and I don't want to jinx it but it looks like at least right now it's coming together. Uh, and uh, you know, it's the economy to scale that then gets into play. So so kind of long term if we were to divest of the lqs. I think we, we also think that this Market has, um, some Runway, uh, you know, just showing you kind of the, the, the fairly modest in our model. At least, the fairy models, the growth total in in, in, in supply of of tankers and actually particularly, so, on the wheels of the Seas, uh, and also our beliefs that the oil demand is, is probably going to grow for a few more years.

Um, I think it will be natural for us to focus on the big guns on the wheel CCS.

Starts. Uh,

It's fairly clear between the lines. Uh,

Lars Barstad: This is one of those few times where there's such a gap in terms of what you're showing as a realized average to date in the fourth quarter and where spot rates are. You've covered, say, just looking at the VLCCs, 75% of Q4 is at $83,000. The spot markets say well over $100,000. Load-to-discharge accounting makes things a bit tricky here as we think about the realized average for the full quarter. Do you think, based off of where things are, that there's upside to that $83,000 figure in this quarter, or are we looking at basically these $100,000-plus rates becoming much more of a January item? I think I'll answer that question by saying that in kind of the load dates that are being worked.

and then just, uh, a last 1, just in terms of the performance today, here in the fourth quarter, uh, clearly a nice big increase in your earnings power coming here across all the all 3 segments. Um, but this is 1 of those few times where there's such a gap in terms of what you're showing as a realized average to date in the fourth quarter and we're spot rates are um and so you've covered say, just looking at the dlc's 75% of 4 q is is at 83,000 you know the spot Market say well over a hundred, you know, low to discharge accounting makes things a bit tricky here. As we think about the realized average for the full quarter. Um,

Do you think, based on where things are, that there's upside to that 83,000 figure in this quarter? Or are we looking at basically these 100,000-plus rates becoming much more of a January item?

Um,

Lars Barstad: Say you do a fixture today on the VLCC in the Middle East that has the rates there around $130,000 per day right now. That's for loading on 10 to 11 December. There, you have only 20 days that you would account for then in Q4 when you load that cargo. Half of it will actually come into January. If you go to Brazil, for instance, you're already fixing kind of around the 20 mark, if not further out, on loading. You only have 5 to 10 days to account for that will actually affect Q4. For US Gulf loading, it will be more or less the same. I'm not going to say no, we won't get more money into the chest before we close the year, but I can't categorically say yes either.

I think I'll I'll answer that question by by uh, saying that, um, you know, in the kind of the load dates that are being worked. So so say you do, uh, a picture today on the VCC, uh, in the Middle East, that has, uh, and and, you know, the rates there around, you know, 130,000 dollars per day right now. Um,

Lars Barstad: We'll just have to see. Okay. Thanks, Lars. I appreciate it. I'll turn it over. Thank you. Thank you. Now we're going to take our next question. The question comes from Lion of Devonsand Gulf from Tech Investments. Your line is open. Please ask a question. Thanks for giving me the opportunity to ask a question, Lars. I just wanted to ask more about the floating storage, and we've seen that during COVID. How do you see this floating storage, and how sustainable is this demand? If I understood you correctly, yes, we had very high floating storage during COVID. That was, of course, more due to the fact that the demand disappeared overnight, and supply could not follow. We were also in a zero interest rate environment, which meant that capital was basically free.

You know, that's for loading on the 11th uh, 10th to 11th of December. So so. So they're kind of, you know, you have only 20 days, uh, that you would account for them in Q4 when you load that cargo. Uh, so so, you know, so half of it will actually come into January, but if you go to Brazil, for instance, you know, you you, you you already fixing kind of around the 200, not further out, on, on on loading. So then you only have like, you know, 5 to 10 days to account for that will actually affect Q4 and for us, golf loading, you know, it will be more or less the same. So so I'm not going to say no we won't get more money into the chest before we close the year but I can't you know categorically say yes either I'm you know it will just have to see

Okay, thanks, Lars. I appreciate it. Um, I’ll turn it over.

Thank you. Thank you.

Now, we're going to take our next question.

Uh, the question comes from the line of Devon Saint at Touch Investments. Your line is open; please ask a question.

The opportunity to ask questions last, I just wanted to ask more about the floating storage, and we've seen that during COVID. How do you see this floating storage, and how sustainable is this demand?

Lars Barstad: That is an important part of this because if you're going to purchase or take position of 2 million barrels, it's a sizable kind of amount of money. You need to finance that, and that adds to the cost of storing on a vessel. This is why I mentioned that in order for floating storage to work commercially on ships, you basically need $2.50 per month or $2, $2.50 per month or thereabouts. That's a pretty steep contango. We're actually in slight accreditation right now, so it's nowhere near. The storage that we are seeing right now is more due to logistics, distress, or weather, so it's not commercial in that way. I don't know if that answered your question. Yes. Thank you.

Uh, if I understood you correctly. So yes, we have, you know, very high, uh, floating storage. During Co that was, of course, more due to the fact that the demand disappeared overnight, uh, and Supply could not follow. But we were also in a zero interest rates environment, which meant meant that the capital was was basically free. Um, and that is an important part of this, because if you're going to purchase or or take position of 2 million barrels, it's it's a, it's a sizable, uh, kind of amount of money.

And we need to finance that.

Uh, and that adds to the cost.

Of storing on a vessel.

So, it means – and this is why I mentioned that in order for floating storage to work commercially.

On on ships. You you you you you basically need 2 and a half dollars per month, uh or or 2 2 and a half dollars per month or thereabouts. And that's that's a pretty steep contango and we know where, you know, we're actually in Flight activation right now. So it's nowhere near

The storage at the area we are seeing right now is more, uh, due to, uh, you know, logistics or distress.

Uh, or whether, uh, so it's not, it's not commercial, uh, in that way.

I don't know if that answers your question.

Lars Barstad: The second thing is that I've seen that US has different part of sanction for black dark fleet. UK has different, EU has different. If you put, is there anything which has gone that that total dark fleet under different sanctions are now getting tighter? What's your view on that? Yeah, no, you're right. It's actually a very high degree of correlation between these sanctions. Normally, it's just a question of time. If EU sanctions one vessel, then OFAC will do it two weeks after, and UK will do it more or less at the same time. There's actually a lot of overlap between these various kind of regulatory entity or regulatory bodies. It's for sure getting tighter. This is global politics, right?

Yeah, thank you. The second thing is that I've seen that different us has different part of sanction for black uh, dark Fleet, uh UK has different EU has different and if you put so, is there anything which is gone that that total dark Fleet, under a different sanctions are now getting Tighter. And what's your view on that?

Yeah, no, you're right. Uh, but it's actually a very high degree of correlation between these sanctions. Uh, so, so, um, you know, normally it's just a question of time. You know, if the EU sanctions one vessel, then all f*** will do it two weeks after, and then the UK will do it, you know, more or less at the same time. So, there's actually a lot of overlap between these various, uh, kinds of regulatory entities, or regulatory, um, bodies. So, so, so, um, uh, but for sure it's getting tighter.

Lars Barstad: I think one doesn't need to be a rocket scientist to understand that particularly the US is putting a lot of pressure on Russia right now, basically to prime them for negotiations. I think this Rosneft, Lukoil sanction was a direct kind of hit on creating a lot of trouble for this industry and for Russia's export. You're talking about half their exporting volumes that were serviced by Rosneft and Lukoil. For sure, these molecules will, at the end of the day, find their way somewhere. I think we're probably going to see this pressure continue until we have some sort of resolve on the whole situation. Last year, Q4 was not great, the signal reading kind of. This year, if I see Q4 is good, how do you see Q1?

And, uh, you know, this is, uh, global politics, right? Uh, I think, uh, one doesn't need to be a rocket scientist to understand that particularly the U.S. is putting a lot of pressure on Russia right now, uh, you know, basically to provide them for negotiations.

I think this is the Rosnet blue coil.

Uh sanction was uh, you know that was a direct kind of hit on on creating a lot of trouble for this industry and for Russia's export you're talking about half their exporting volumes. That that were were serviced by by rosnet and Luke for sure. The, the, you know, these molecules will will at the end of the day, find their way somewhere. But but, um, but I think, um,

I think we're probably going to see this pressure continue until we have some sort of resolve on the whole situation.

Lars Barstad: Because Q1 is going to be as strong as last year or better than what we have seen looking at the current scenario? Well, you're asking me to give my view on one of the world's most volatile markets. Actually, the fact that it is this volatility tells you that this is not an efficient market. It's a market that's extremely difficult to predict. What I can say is that from what we're seeing right now, we're not seeing any kind of weakness in this market. We're seeing an old-school, extremely tight physical shipping market. Of course, who knows what can happen next week? Well, see, all the factors that the compliant crude producers have gaining market share, dark fleet is being targeted, the volumes of overall, at least as of today, there is no debacle of China on consumption side.

And that's still seen last year. Q4 was not great; the seasonality didn't come up. But this year, if I before is good. But how do you see Q1? Because Q1 is going to be as strong as last year or better than what we have seen, looking at the current scenario.

Well, you know, you you, you're asking me to to give my view on 1 of the world's most volatile markets, actually, the fact that it is, you know, this volatility, it tells you that this is not an efficient market, you know, it's uh, it's um, it's a, it's a, a market that's extremely difficult to predict. But what I can say is that, uh, you know, from what we're seeing right now, uh, we're not seeing any kind of weakness in, in, in this, uh, markets, we're seeing in Old School, extremely tight, physical shipping Market, uh, so so, but of course, you know, who knows what, what, what can happen next week.

Lars Barstad: In fact, China is buying all the commodities in order to put the extra reserves. Put all things together, Q1 can sustain this rate. I'm not asking you to predict, but looks like Q1 can be better or as good as Q4. Yeah. No, no. In these conditions, sustained. Yeah, yeah. 100%. We pointed to it in this report. There are some key fundamentals here that will not change short term. There are some key drivers to this market that we did not have Q4 last year, to put it that way. Thank you, Lars, and all the best. Thank you. Thank you. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. Now we are going to take our next question. The question comes from Louis McKibben from Retired. Your line is open.

In fact, China is buying all the commodities in order to, you know, put the extra reserves. So, put all things together, Q1.

Can we sustain these rates? I'm not asking you to predict, but it looks like you can be better or as good as you.

Yeah, no, no. In this condition 15. Yeah. Yeah, no 100%. And and and I we pointed it to to, we pointed to it in this report, you know, there are some some key from the fundamentals here that will not change, uh, short term, you know, it's uh, there are some key drivers to this Market that we didn't have uh, Q4 last year to put it that way.

Thank you. Last and all the best. Thank you.

Thank you.

Yeah. Participants, as a reminder, if you wish to ask a question, please press * 1 1 1 on your telephone keypad.

And now we're going to take our next question.

Lars Barstad: Please ask a question. Yes, Lars. I wanted to talk about frame 7, page 7, where you show the $11.50 of share generated with a $149,000 daily VLCC rate. You were in the business back in the good old days of 2006 and 2008, and also during COVID when they had the floating storage. I think the rates went up to like $240,000, $260,000, $280,000, $300,000 a day. Was that right? Yeah, that's right. If you were to get similar rates, your free cash flow would be in excess of $20 a share. Would that be correct? Yeah, if you do that for 365 days, yes. Well, it could happen. All right. The other thing was that I read somewhere where India will not accept a tanker in excess of 22 years old. I was wondering if China has a similar policy.

And the question comes to line of Louis McKibben from Retired. Your line is open; please ask a question.

Uh, yes. Large, I wanted to talk about frame 7, page 7, where you show the $1,150 a share generated with a $149,000 daily VLCC rate.

And, uh, having you—you were in the business back in the good old days of 2006 and 2008.

And also, during COVID, um, when they had the floating storage, I think the rates went up to like $240, $260, $280, $300 a day, was that right?

Yep, that's right.

So, if you were to get similar rates, your free cash flow would be in excess of $20 a share. Would that be correct?

Yeah, if you do that for 365 days, yes.

Lars Barstad: Well, China is not kind of uniform in that respect. They have kind of two different oil systems, one being what is referred to as the teapots, but these are big refineries that they're privately owned. They, of course, have a little bit of a different kind of requirement. The terminals are then also privately owned. If you look at the government system in China and Unipec, which is kind of the biggest, they actually normally have a 15-year kind of threshold. Of course, they have a maneuvering room between the 15 and the 20. You very rarely see them take a ship that is materially above 17 years old. It's a little bit fluid. On India, I haven't seen or heard what you're referring to.

Well, it could happen. All right. Um, the other thing was that I read somewhere that India will not accept tankers in excess of 22 years old, and I was wondering if China has a similar policy.

well, uh, China is not kind of uniform in, in, in that respect, you know, they have kind of 2 different, uh, you know, oil systems 1 being the what, what it, you know, referred to as the teapot's. Uh, but these are Big refineries the best of their products, they own, and they, of course, have a little bit of a different, uh, kind of, uh, uh, requirement. You know, the terminals are then also privately owned, but if you look at the government system in, in China and unitec, which is the kind of the biggest, they actually normally have a 15th year, uh, kind of threshold. But of course, as you know, they have a maneuvering room between, you know, the 15 and and and

On the, on the 20. But you very rarely, see them take a shift that is materially above 7, 17 years old. So so so it's a, it's a little bit fluid.

Lars Barstad: All I know is that if you sail under an Indian flag and you're an Indian ship owner, they have at least up till now accepted trading all the way until 25 years. Okay. Well, thanks for answering the questions. I appreciate it. Thank you. Bye. Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Lars Barstad, for any closing remarks. Yeah. No, thank you very much again for listening in. It's extremely exciting times indeed, and I wish you the best for the remainder of the year. Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

From India, I haven't seen or heard what you're referring to. All I know is that if you sail under an Indian flag and you're an Indian ship owner, they have, at least up till now, accepted the trading all the way until 25 years.

Okay.

Um, well, thanks for answering the questions. I appreciate it.

Thank you.

For the questions for today, I would now like to hand the conference over to our speaker, Lars Barstad, for any closing remarks.

Yeah, no. Thank you very much again for listening in. It's extremely exciting times indeed. Um, and um, you know,

I wish you the best for the remainder of the year.

Thank you.

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