NYSE:STNG Scorpio Tankers Q3 2023 Earnings Report $37.34 +1.35 (+3.75%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$36.92 -0.42 (-1.11%) As of 04/25/2025 07:59 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Scorpio Tankers EPS ResultsActual EPS$1.91Consensus EPS $1.60Beat/MissBeat by +$0.31One Year Ago EPS$4.29Scorpio Tankers Revenue ResultsActual Revenue$291.20 millionExpected Revenue$277.96 millionBeat/MissBeat by +$13.24 millionYoY Revenue Growth-40.60%Scorpio Tankers Announcement DetailsQuarterQ3 2023Date11/9/2023TimeBefore Market OpensConference Call DateThursday, November 9, 2023Conference Call Time9:00AM ETUpcoming EarningsScorpio Tankers' Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Scorpio Tankers Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 9, 2023 ShareLink copied to clipboard.There are 15 speakers on the call. Operator00:00:00Hello, and welcome to the Scorpio Tankers, Inc. 3rd Quarter 2023 Conference Call. I would now like to the call over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir. Speaker 100:00:15Thank you for joining us today. Over to the Scorpio Tankers Third Quarter 2023 Earnings Conference Call. On the call with me today are Emanuele Lauro, Chief Executive Officer over to Robert Bugbee, President Cameron Mackey, Chief Operating Officer Chris Avella, Chief Financial Officer Shawn Hager, Head of U. S. Chartering. Speaker 100:00:35To the operator to discuss our Q3 earnings press release, which is available on our website, scopiotankers.com. The information discussed on this call is based on to the operator to review our financial results. Thank you, and good morning everyone. I would now like to turn the call over to Mr. President of the to the operator. Speaker 100:00:53Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward looking statement disclosure in the the conference call over to today's press release as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.comandsec.gov. Over to Mr. President. All 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. Speaker 100:01:18Over to the operator. The 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. Over to the operator.com on the Investor Relations page under Reports and Presentation. The slides will also be available on webcast. Speaker 100:01:36The call Speaker 200:01:42over Speaker 100:01:45to Mr. Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro. Speaker 300:01:52Thank you, James, and Thanks everybody for joining us today. We are pleased to report another quarter of strong financial results. The Speaker 400:02:05call over to Mr. President. In the Speaker 300:02:05Q3, the company generated $200,000,000 in adjusted EBITDA. And despite the conclusion of the call over to the operator. Speaker 200:02:15Thank you, Speaker 300:02:16operator. Thank you, operator. Thank you, operator. Thank you, operator. Today, this increase continues and is driven by the same factors, which have led to an elevated rate environment for the last six Speaker 200:02:32to the next few quarters. Speaker 300:02:33These factors are strong global demand for refined products, dislocated refinery capacity turn the call over to the operator and a constrained maritime supply. The cash flows have been significant and transformative for the company. The call over to the operator. The quality of Scorpio Tankers as an investment is improving each day. Deleveraging and returning capital to shareholders Our balance sheet continues to improve and the company has today to a net debt of $1,300,000,000 We have reduced our sale leaseback financing from $2,300,000,000 in 2022 to $730,000,000 as of today. Speaker 300:03:18In the Q4, we expect to repay a further $460,000,000 in lease financings, of which $196,000,000 have already been repaid. We have more than $800,000,000 in liquidity consisting of to $520,000,000 in unrestricted cash and nearly $300,000,000 available under to our revolving credit facility. In the Q3, we repurchased close to 80,000,000 of company shares. Turn year to date, we have returned over $530,000,000 to shareholders. Of this, dollars 490,000,000 in share repurchases turn the Speaker 200:04:04call over to Mr. Chairman and Mr. Speaker 300:04:04Chairman. And $40,000,000 in dividends. Today, we have announced the renewal of our securities repurchase program for up to $250,000,000 And we have increased our quarterly dividend from $0.25 to $0.35 per share. Looking forward, We expect low global inventories, robust demand and limited fleet growth to support strong product tanker fundamentals. With this, I finished with my remarks, and I would like to turn the call to Robert. Speaker 300:04:36Thank you. Speaker 400:04:38Turn the call over to Mr. Antonio. Good morning everybody. It's really a fantastic start to the quarter. We're really happy with the way that the market has been shaping up. Speaker 400:04:47The call over to the operator for the potential substantial rate improvement when the winter season kicks off in 3 to 4 weeks' time. And that's exactly what we expect. Rates have steadily improved since early July. Neither the OPEC cuts nor the weaker season have halted this. To Slide 9. Speaker 400:05:06Headline demand for products has improved steadily as well. World demand for product crude is expected to continue to grow further. The call over to the operator at the moment as a result of fear, for example, in the Middle East or war escalation. This is just pure economic demand and activity. To the operator. Speaker 400:05:29Present spot markets in all our categories according to Clarksons and indeed our own trading desks are above the guidance we have given today for the start of 4th the call over to the operator. We are truly very optimistic for the developments through the next month as we enter this stronger season. This is a very consistent, strong and broad rate increase. That's very important to know. July has been better than June, When it comes to the stronger season coming, I am extremely confident that once again winter will come to the Northern Hemisphere. Speaker 400:06:11I base this confidence primarily on historical precedent. There is now quite a lot of data going back a few years showing to the next question. Winter has come every year. Furthermore, the scientific community, weather forecast, Druid priests, solstice worshipers and young children the call over to our operator for questions. Thank you, sir. Speaker 400:06:30Thank you, sir. Thank you, sir. Thank you, sir. Our first question comes from the line of There is much less certainty of product ton mile decline as a result of recession. If the weather turns, this fear of demand slowdown to the product tanker market on UtaSting. Speaker 400:06:57For those of you who may have forgotten as it's nearly the call over to the operator. The start of winter was nearly a year ago. Winter is good. It's really good for the product market and product rates. Thank you very much again for all of your support. Speaker 400:07:13And I'll turn it over to James. Speaker 100:07:17Over to Robert. Slide 7, please. As Emmanuel said, cash flows from a strong rate environment have been significant the call over to the company. Over the last 7 quarters, we've generated $2,500,000,000 in EBITDA, reduced outstanding debt by 1,300,000,000 the call over to our operator and return $710,000,000 on share repurchases and dividends. Slide 8 please. Speaker 100:07:41We continue to reduce our to the call over to the operator for the call. I would now like to turn the call over to the operator for the call over to the operator for the call. I would now like to turn the call Speaker 200:07:47over to the operator Speaker 100:07:48for the call over to the operator for the call over to the operator for the call. After repurchasing, these vessels are either encumbered or refinanced at lower interest margins in new facilities. Slide 9 please. While the year to date debt repayment has been slightly lower due to timing of lease repurchases, in the Q4, we will repay $527,000,000 in to the operator to review our financial results. As you can see from the graph on the left, our estimated December 31 debt balance is expected to be $1,550,000,000 on the right, we have refinanced a significant amount of lease financing, taking it down from $2,200,000,000 to $739,000,000 today. Speaker 100:08:26To Slide 10, please. Since the December 2021, our net debt has improved by $1,600,000,000 the call over to Mr. President. Today is at $1,300,000,000 With no new buildings on order, we have minimal CapEx. Today, we have $521,000,000 in unrestricted cash and 2 over to the operator to review our financial results. Speaker 100:08:49Slide 11, please. The company has significant operating leverage. In Q3 so far, including time charters, the fleet is averaging close to $33,000 per day. At $38,000 per day, the the call over to the operator. The company generates almost $800,000,000 in free cash flow per year and at $40,000,000 almost $1,200,000,000 This would equate to $14.22 per share and free cash flow, a 26% or 41% free cash flow yield. Speaker 100:09:16Slide 13 please. Over to the last 6 quarters, rates have defied seasonality, refinery maintenance and other short term headwinds. As refinery maintenance concludes this month, we expect fundamentals in to the operator to review our financial results. Over the last week, we have already started to see it. Today, spot LR2 rates are at $42,000 per day and MRs at $34,000 per day. Speaker 100:09:39To Slide 9. Global inventories remain extremely low, requiring an increase in product exports for more immediate consumption. In the U. S. And in the rest of the world, to Slide 14, please. Speaker 100:09:56To Slide 14, please. Year over year, we expect 4th quarter demand for refined products to be 2,600,000 barrels a day higher to the next question and answer session. And next year on average we expect demand to be 1,300,000 barrels above 2023. The call over to Mr. President. Speaker 100:10:13The increase in demand is leading to higher seaborne exports. Year to date CPP exports have averaged 1,400,000 barrels a day above 2019 levels to the operator. And September averaged 1,800,000 barrels. Given low global inventories, increased consumption will continue to be met to imports with product tankers reallocating barrels around the world, not only have exports increased, but barrels are traveling longer distances. Slide 15 please. Speaker 100:10:40While demand is above pre COVID levels, refining capacity is lower and more dislocated. The impact of new export oriented refineries to Slide 30, while ton miles have increased 78%. Refinery closures have also created the need to replace lost production in places like Australia, where product imports the call over to the operator to increase 48% since closing 2 large refineries in 2020. All of these changes are driving an increase in ton miles Speaker 200:11:17over to our next question. Speaker 100:11:17As tonnagelldemand increases, vessel capacity is reduced and supply tightens. Slide 16, please. To the operator. And it's not just about refining capacity closing and opening. In each region, there are different refinery configurations, domestic needs and regulatory requirements. Speaker 200:11:33To Slide 9. Product tankers Speaker 500:11:34are the conduit for rebalancing surplus Speaker 100:11:34naphtha in the Middle East to Asia or surplus gasoline from Europe to Asia. To the operator. And in many cases, some of the largest product exporters are also the largest importers like the U. S, UAE and South Korea. This dynamic creates increased triangulation of the fleet, which leads to higher utilization and rates. Speaker 100:11:51We expect this to continue. To Slide 17, please. Russian exports and refined products have declined to more normalized levels of around 1,400,000 barrels a day. The call over to Mr. President. Speaker 100:12:02The Gray Fleet or vessels that are servicing Russia currently stands at 4 53 vessels. Many of these vessels, which have moved into this to non sanctioned trade. Slide 18, please. Today, the order book is 10% of the current fleet, while the average age of the product tanker fleet is close to 13 years old. The call over to the operator. Speaker 100:12:32The strong spot market, healthy long term time charter rates, constructive demand outlook and aging fleet has led to more new building orders. But there are constraints to ordering. New builds are expensive. There are long lead times for delivery and uncertainty about propulsion systems to satisfy future environmental and regulation. That said, without newbuilding orders, this year the fleet was expected to shrink over the next few years. Speaker 100:12:54Starting next year, 8,000,000 deadweight tons per year of product tankers will turn 20 each year, the equivalent of 160 MRs. By 2026, 9.3 percent of the fleet will be 20 years and older. The age of the fleet and upcoming environmental regulations will have a material impact on the fleet going forward. To Slide 19, please. Next year's fleet growth is expected to be 0.5%, the lowest fleet growth since 2000. Speaker 100:13:21To Slide 9. Seaborne exports and tonne mile demand are expected to increase 3.5% 12.1% this year and 3.6% 6.3% next year, to the operator to discuss Speaker 200:13:35our financial results. Lastly outpacing supply, using minimal scrapping assumptions Speaker 100:13:35on average the fleet will grow less than 3% 2% in 2025 and 2026 to the call over to the operator for questions. In addition, 1 3 year charter rates remain at high levels, to construct as individually historically low inventories, increasing demand, exports and ton miles, dislocations in the refining system, the call over to the operator for questions. Thank you. Thank you. Operator00:14:42Our first question comes from Jon Chappell with Evercore ISI. Please go ahead. Speaker 200:14:49Turn the Speaker 600:14:50call over to James. Good morning. James, if I could pick up where you left off a little bit on the winter preparations and especially the inventories. I think a lot of people forget that the sanctions on Russian diesel didn't go into effect until February 5 this year, so they effectively had access. To the operator. Speaker 600:15:05Europe effectively had access to Russian diesel all through last winter, which was warm. It feels like the inventories are just as low entering this winter, Don't have access to Russia, and I'm not sure anyone can underwrite back to back warmer than normal winter. So have you started to see any Sense of urgency from Europe as a continent as a whole to prepare for winter or is there maybe a little bit of lacks expectations that have the potential to make the market incredibly tight if there's an early cold snap this winter. Speaker 400:15:36Turn James, I'll answer that if you don't mind. So John, thank you. But first of all, congratulations from all of us at Scorpio on your Award for being number one shipping analyst. Well done on that. Speaker 700:15:48Thank you. Speaker 400:15:48So Look, I think we look generally across the we sort of think there's quite a lot of complacency full stop, whether it's Europe, whether it's the rest of the world, despite the low inventories, despite the It doesn't matter whether you really believe in recession or not. Everyone is still saying that oil and product Demand is going to grow. It's just an argument as to what the rate of growth will be. And inventories, as you point out, Across the whole space are low and we're sensing a just a everyone's pretty relaxed right now. We think what will happen is they're acting as if it's like any other winter. Speaker 400:16:43And what normally happens is that the first post well comes and then people wake up and start to do things. So they're denying the risk they have in their inventories, the risk that's going on in the world, whether it's Russia, Ukraine, whether it's Israel, Palestine or the risk of that spreading. But I think it will come home everything comes home to roost the moment the weather turns cold. Speaker 200:17:13Turn the Speaker 500:17:13call over to Eric. Speaker 400:17:14Okay. In that sense, that's why we're very confident. We're very confident there's nothing in this market. This market has just Steadily got stronger and stronger and stronger without any kind of action or preemptive moves to the ship product. Speaker 500:17:30Turn the call back over to Scott. Speaker 600:17:31Got it. That makes complete sense. Just for my second one, shifting gears to Scorpio specifically, You have a lot of debt repayment coming up in the next couple of months. As we think about target leverage, I know it's Number that you haven't tried to identify in the past, but just watching the buyback activity accelerate, looking at the dividend moving up again this quarter, maybe unexpectedly, over to the operator. Do you feel that you have line of sight on over the next quarter or 2 puts you in a comfortable enough leverage position Where maybe the focus shifts a little bit more away from deleveraging to capital return at this point in the cycle? Speaker 400:18:10Turn Yes, I think so. And I think that we had said previously that once we'd cross September turn In this earnings call, we would elaborate a little bit more on leverage targets, etcetera. So I think our thinking is developed in the following way We'd like to get the leverage of the company pretty much down to around scrap value to the fleet. At that point, that's around $800,000,000 $850,000,000 $900,000,000 And at that point, I think it's unarguable that the company would have very low leverage and be in a really safe position. Whatever it does at that the call back to the operator for questions. Speaker 400:18:58Whether it's buying stock, whether it's increasing dividends, etcetera, etcetera, it would be really playing with to our shareholders' money, our money. We're not risking a bank loan, etcetera. The other thing is there are tremendous benefits going forward if we were to get there to the call back Speaker 500:19:25to the call for repayments. Our breakevens would collapse Speaker 400:19:26and we would end up being not only have the newest product fleet there is out there, So we'd always have also had the lowest operating cash. And I think that operating cash breakeven and I think that's great because now we're getting even more for us as shareholders going through. I think that's pretty achievable with very moderate positions. I mean, it's not too far to go to drop down another $400,000,000 by you could do that by March 31. And I think that we've already got $25,000,000 We're selling a ship. Speaker 400:20:05We'll get net $25,000,000 off that. So that's $375,000,000 to go. And we haven't certainly excluded selling 2 or 3 other ships. So between Earnings something like 35 to 40 a day. So the market doesn't even have to improve. Speaker 400:20:23If you ran your model and said, well, the market is going to continue just as it is, the call back over to the operator. That winter doesn't come and we carry on and we sell a couple of assets, we'll be there by that March 31. Now that can come earlier Depending on if and what we sold and if rates do what we think they will do, which would be to accelerate higher. Speaker 600:20:47Turn the call back over to you. Yes, that all makes some sense. Yes, big time. Thank you, Robert. Speaker 400:20:53Thank you. Operator00:20:55Turn our next question comes from Omar Khachta with Jefferies. Please go ahead. Speaker 700:21:02Thank you. Hey guys, good morning, good afternoon. Turn Speaker 400:21:05Yes. Just as a follow-up to that Speaker 700:21:07line of discussion regarding the debt reduction. It looks like that's obviously top of mind over to Steve here and perhaps the buyback takes a bit of a back seat. Robert, you mentioned perhaps $850,000,000 to $900,000,000 of leverage at the company. Just to the operator. To frame that just so I understand that it sounds just from your commentary with that March 31 target, is that a net debt target or is that just total debt outstanding Speaker 400:21:34That's a net debt target. Speaker 800:21:37Okay. And then On net debt, because Speaker 400:21:40I think that we would all agree that if that net debt is backed by the scrap value of a fleet That is still relatively new. That's we're pretty damn conservative at that point. And we also with the debt facilities we're putting turn That would be at a very efficient rate. And we would still have That would be well within our revolving credit lines. So you that would also imply turn Extra liquidity too. Speaker 400:22:21So you're not it's a net debt the call Speaker 200:22:23back over to the Speaker 400:22:23operator for the company that's got a lot of liquidity. Speaker 700:22:29Yes. And then Robert, you mentioned the breakevens come down. Are you able to venture sort of any kind of assuming you put down $400,000,000 or $500,000,000 from here, What kind of effect that will have on breakeven on a per day basis? Speaker 400:22:44Well, on the interest, it's a The interest itself is going to come down turn into a level, but I would think you'd be dropping the net cash breakeven between the debt between principal and interest Somewhere in the region of $4,000 $4,500 a day. Speaker 700:23:12Yes, that's significant. Speaker 400:23:14Turn the call Speaker 200:23:15over to Steve. Speaker 700:23:16Yes. So I guess maybe just one final one, just in terms of once you finally get there. So Let's say it's March 31 or perhaps in the spring. It definitely feels like it's sooner much sooner rather than later. What happens once you get to that point? Speaker 700:23:32How do we think of the strategy of deploying capital? Is it buybacks? Is it acquisitions? You've got obviously the share price looks very attractively priced relative Speaker 400:23:44to NAV. Just give me a sense if Speaker 700:23:46you don't mind kind of what happened? Speaker 400:23:48I don't think Look, we're not interested in speculative new buildings. We don't need to buy any ships turn to the call over to the operator. To earn enough money, we're making considerable cash flow, considerable earnings on the fleet we have. Turn We don't have because we don't have extraordinary maintenance CapEx or whatever. We've done all the to the scrubbers that we intend to put in, etcetera. Speaker 400:24:19So one way or other, it's the capital is going to go to us as shareholders at that point. And it's a pretty pointless activity to anticipate what will happen later. Turn the call over to Eric. I don't even think that an NAV calculation would be relevant for a company that is the call over to the operator. As a new fleet and very low leverage, you should be moving away from it's not a question of how do we close the NAV gap. Speaker 400:24:51The NAV gap is, let's say, the least of our valuation worries. Of that kind of structure, we should be Looking to close some form of free cash flow valuation gap, because you would expect that any Multiple you want to put on free cash flow would increase as you lower or improve the actual investment itself. We've got a lot of work to do in that regard. Speaker 700:25:23Yes. Well, Sounds like a very interesting setup as we get into the next few months. Great. Thanks, Robert. I'll turn it over. Speaker 400:25:31Thank you. Operator00:25:33Turn our next question comes from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:25:40Great. Good morning. So Robert, first, I wanted to check on the weather. The winter is going to come. Was that a scientific poll? Speaker 900:25:47I just want to check on the math there. But I just wanted to Understand the phenomenal rates, right? If you think about scrapping activity, still somewhat moderate, turn Anything that drives the scrapping or demolitions going forward just in this rate environment, maybe is anything different the call back over to the operator Speaker 200:26:11for questions. This cycle, do we see them just sticking Speaker 900:26:11around longer? And I'm setting that up in the backdrop of a rising order book that's gone from 2%, 3% now to to 10%, 11%. So I guess ultimately if maybe that's the winter that's kind of the overhang that is coming turn In a different kind of winter backdrop, just want to understand your thoughts there. Speaker 400:26:31I think the first thing you want to do is to look at the LR2s are going to end up trading as LR2s or even necessarily built as LR2s. The contract is the ability to build an LR2, to questions. Some may not be quoted and many are likely to go into the Aframax trade anyway. First of all, I don't think the order book is in product to the operator to review the financial results. And the order book is not 1 year. Speaker 400:27:04The order book is stretched over a period of 2,004, to 5 and now pretty much 3 quarters of 2,006. So the order book is still very contained Even if it's around 2%, 3% average through that period. The exact point at which turn We know that James is being very conservative talking about the number of ships that turn 20 and that's been turn The point of scrapping, that we also know that when these ships turn to 2016, 2017 That they're not able really to be competitive and trade properly in to the premium clean petroleum fleet. So we think the order book is very contained at the moment. The call over to the operator. Speaker 400:27:56And it's going to be because you just don't have the yard capacities. The question is whether or not owners want to do things. So that's our perspective and that's what's creating a the prospect for turn the call over to the operator. Okay. And the proof of people's expectation of what they're willing to pay for to secondhand modern ships, which have been rising a lot in the last month and the forward time charter book. Speaker 400:28:29So we're in a pretty good shape. We haven't had a bull market like this in the last sort of 30, 40 years where there's been so little yard capacity at this stage turn the call back to the call back to the call back Speaker 200:28:45to the call. Speaker 900:28:46So let's flip that around too then. Are you seeing Vessels may be actively leaving and going to dirty given the rates are even higher over there. Is that? Speaker 400:28:58Well, there are 2 things. They're not just if you've got an older product tanker, they're not just higher in certain cases there. It's easier to trade. The other reason we're seeing that is that the whole of this Russian, what we call the dark fleet, Russian trade, people like us can't participate in. The people who what they've been buying, they've been buying the older ships, Because they don't have the same criteria to carry dirty trade or sanction trade. Speaker 400:29:32So It's much of the fleet that's being bought and being removed from, let's say, the international market or free market It's gone into those things, but what's and that drove their prices up. But what's interesting in the recent developments the call over to the operator. In the last 3 months, there's been a lot of activity for more purchases, more modern product tankers as evidenced today by to the operator to take questions. Thank you. Thank you. Speaker 400:29:59Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:00Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:02Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:03Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:05Thank you. Thank you. Thank you. To longer time charters for 2, 3, 4 years and more confidence in the length of this stronger market, Along with their inability, of course, to order new shelves. Speaker 900:30:29So just to I guess for my second one, then you mentioned kind of selling Maybe talk about your philosophy on what gets you to do that versus in this kind of market maybe just locking those older vessels up for Longer time charters. Obviously, you still have stayed on the spot exposure. So is there a thought to shift and lock in at these levels with some of the older vessels and then Sell them off or it sounded like you have maybe thoughts on selling some in the near term? Speaker 400:30:58I think the older vessels Like an easier situation, you're getting enormous price, you're getting a record prices for these things and Speaker 200:31:12turn the call over to the operator. Speaker 400:31:15Your to the next question. I don't think we have any problem there to certain customers and you'll see us probably out of 2 or 3 time charters here. We do that fairly regularly. We like to keep a lot of spot vessels, but we're happy to keep turn Yes, 10% or so in the time charter market, but with the older vessel, it's Great. Off you go. Speaker 400:31:42If the ship's already 11 years old, 12 years old, Yes. Then fine, you're getting a great price and you can put the money to work brilliantly in either reaching that deleverage to Target or as we've been doing in before buying stock pretty cheaply. Speaker 1000:32:03Turn Speaker 900:32:06the call over Speaker 200:32:06to Eric. Great, Robert. Speaker 400:32:06Appreciate your thoughts as always. Speaker 900:32:06Congrats on a solid buildup of cash. Speaker 400:32:08Thank you. Operator00:32:11Turn our next question comes from Greg Lewis with BTIG. Please go ahead. Speaker 1100:32:18Good afternoon, good morning everybody and thanks for taking my questions. I guess I wanted to talk a little bit more about Slide 11 and the free cash turn Probably James, as we look at the I guess the right side of the slide in cash flow generation, What is kind of like drydocking off hires? Is that kind of all baked in for Are we looking at a slide for 2024 or just an illustrative slide? And if we are looking at 2024, like what does that assume in terms of turn Maintenance CapEx and just that kind of ongoing CapEx, is that kind of a number you can talk to? Speaker 100:33:04Yes. So it's just going to be an illustrative. So it's not going to factor in, for example, the time charters, right, which reduce breakevens or anything like that. It is going to take the next four quarters of debt, but it doesn't have the all prior in there. It is something that we could show or with the maintenance CapEx maybe next quarter. Speaker 100:33:28We do put it in the press release and in the presentation on a different slide though. Speaker 1100:33:32Okay. Yes, absolutely. Thank you for that. And then Robert, as you mentioned, thank you for the Q4 guidance as always. Turn And also you kind of highlighted where rates are today and it's interesting, right, because it's people talk about NAV, people talk about cash flow. Speaker 1100:33:51I mean just looking at where rates are right now, it looks like your cash flow yield is around 20%. And How do you balance that free cash flow yield that the stock is trading at? And I mean, turn it over to Steve. It seems like this is an attractive time to be buying back stock. Just thinking about that, is it Possible that we focus more on buying back stock as opposed to deleveraging just given where we are Right now? Speaker 400:34:24No, I said, look, we bought $490,000,000 worth of stock ahead, right? We said, great, we're going to anticipate the market is going to stay strong. And instead of paying down all that in debt, we said no, the valuation, we want to buy that stock early. So we We've been very heavily in buying stock back. In the last, whatever it is, months, interest rates have risen dramatically And quite high, the risk out there, the little box of product tanker to the line is really we've really got a great deal of confidence in. Speaker 400:35:00I mean, it's the fundamentals look fantastic. The market is fantastic Even before the season starts. But we'll be respectful and humble enough to understand that the big box the call over to the operator. World Economics, World Financial Markets, geopolitical events is less certain that there is risk out there. It's We have no interest in driving the stock up. Speaker 400:35:28We've been very disciplined in the way we bought the call back over to the stock. We're not there to buy in the top of the upper band, etcetera, etcetera. We're there to buy with great value. So the default position for us is to drive this debt down to around this net debt the call back over to Scott to discuss our operating cash breakeven The free cash flow, we should be able to get a better multiple on that free cash flow. The investment itself should have much higher quality. Speaker 400:36:14Turn And but at the same time, as we've shown all the year, if Wall Street sells STNG down, dislocating it for its own reasons, whether it's fear of recession and oil will never be used again And the fundamentals remain intact. We will be there to buy stock and create great value for our shareholders. And as soon as we've accomplished what we need to accomplish, then yes, we're going to it will be How do we return the capital to shareholders that we're generating at that point? Speaker 1100:36:56Super helpful. Thank you very much. Speaker 400:36:59Thanks. Operator00:37:01Our next question comes from Prada Morkendale with Clarkson Securities. Please go ahead. Speaker 1200:37:12Thank you. Hi, guys. Just a quick market question for me. The Panama Canal, does that have any impact on the Progress tankers at all? Or I guess, obviously, it's the larger ships in other segments that benefit directly, but I suppose Across Atlantic in general, what's your thought there? Speaker 400:37:46Sean, turn So to Sean, some of you have met him, some of you haven't. He's Head of our trading for the North America. So he's ideally the call over to the operator. Speaker 1300:37:58Yes. Thank you and thank you for the question. It's certainly interesting times in the Panama Canal and it's very dynamic and fluid as Things are evolving kind of every day. But to answer your question, is there an impact in the MR space? There absolutely will be, I think. Speaker 1300:38:15Turn So you're seeing a reduction in the number of transits that can happen and effectively like the economic impact in order to get an MR through It's going up substantially starting yesterday. So in the canal, there's a reduction of water in the reservoirs that feed the lock system to move the ships through. So traditionally you move kind of 36, 37 ships through the Panama Canal on any given day and that's any type of asset class of ship And that's already reduced to 24 today. Panama is ending the rainy season, which is what they need to replenish those reservoirs and to the next question. October is generally the rainiest month on record historically for them and this past October has been the driest month that they've had since they've been keeping records in the Panama Canal. Speaker 1300:39:02And so the expectation is for those 24 current transit slots to continue to reduce down to a low of 18 starting February 1. So what we're seeing is a couple of different factors. One is like the cost for a charter to ship the call back over to the Panama Canal. It's starting to rise quite a bit as the impact of this is being digested by the marketplace. And then second, the expectation for how long you wait to go through the canal either in Ballast or Leyden turn Is frankly a bit of a question mark and can be quite expensive to get through. Speaker 1300:39:39And so what you're looking at is ballast alternatives to get back to the next load port. So just some rough numbers, if you do like a Quintero, Chile and you ballast to Houston going through the Panama Canal with no delay, that's 14 days direct. And if you'd send that same boat down through the Magellan Straits, it's 30 days. So you got an incremental 16 days to get back into the Gulf. Or if you sent that boat to Jib to load in, to Med that'd be 26 days or if you ballast it transpacific, it would be 33 days. Speaker 1300:40:10So there's obviously a lot of different factors here. There's an economic factor of where the Chile, Peru, Ecuador, West Coast, Central America and West Coast, Mexico rely heavily on imports in order to stay supplied. So whether those imports come from Asia, whether they continue to come from the U. S. Gulf, those type of things and how flat price plays into it will the call over the coming days, weeks months, but there will be an impact to the MR fleet and the number of ships available will be less efficient than what we have today. Speaker 1200:40:45Perfect. That's great color. Thank you. That's it for me. Operator00:40:51Our next question comes from Liam Burke with B. Riley. Please go ahead. Speaker 1000:40:57Yes, thank you. Turn The EU is looking to enforce the Russian price cap. How do you expect that to affect turn Your vessels. Speaker 100:41:12Sam, you want to take that? Speaker 400:41:14John, whatever. Speaker 1300:41:16Sure. I can take it. Obviously, Liam, there has been some leakage in So far as sanctions have not been strictly enforced. So it's not a bright line between, say, our market and the dark fleet. Anything that creates a stronger fence or moat between the 2, obviously, will tighten up our market because you'll have less turn to the next question. Speaker 1300:41:46So we welcome stricter enforcement of sanctions and the price cap by the EU. Speaker 1000:41:53Great. Thank you. And there was during the prepared comments and during the Q and A, you talked about time chartering on typically smaller vessels. Why would you think that there is more interest by the shippers to lock in Smaller vessels on longer terms. Is that a scarcity problem? Speaker 1000:42:14Or is it just something that the call over to the operator's need to do based on the age of the fleet. Speaker 400:42:24Turn the call over to the operator. I just first of all, it looked optically, it looks that way because there are just many, many more smaller vessels than the larger LR2s. Turn And secondly, the LR2 owners are I'm not saying they're stronger, but they're just playing Speaker 200:42:49harder. Turn the call over to Eric. Speaker 400:42:53There's no they're not feeling the requirement. They see a lot of potential upside here between What they can do in the product market and what they can do trading in crude. They're probably more reluctant in the LRT market to fix out Speaker 200:43:12to the level Speaker 400:43:13and the lesser them to buy. So in the product, we're in MRs, we've seen a lot of people buy modern the ships and then turn around and fix it 2, 3 years for the cash flows on the purchase. Speaker 1000:43:27Great. Thank you, Robert. Operator00:43:32Our next question comes from Sam Bland with JPMorgan. Please go ahead. Speaker 800:43:38Turn Yes. Hi, thanks Speaker 1400:43:39for taking the question. I just have one, please. It's on Slide 18, you've got this 9% of ships to be more than to 20 years old by 2026. To what extent do those ships sort of fall out of the supply and demand balance Is that almost equivalent to those ships having been scrapped or not as far as the rate is concerned? Thank you. Speaker 100:44:13Yes, I think that's a good way to put it. We've done some work looking at older vessels and what we've seen is that A lot of the older tonnage kind of 20 years and older is carrying crude oil or dirty products like fuel oil, the call over to the operator. And then there's a fair bit of coastal trade. So Indonesia, India, where you We've got kind of a 21 year old product tanker that's carrying diesel from 1 refinery to another and just diesel. But you're right, in many Those vessels are not kind of competing with the Scorpio Tankers vessel or some of our peers kind of in these premium trades. Speaker 100:44:54So It's going to be pretty significant because while we're just focusing on that 20 year mark, it's probably a little bit earlier, turn somewhere between 2015 and 2017 too that these vessels start to move out. So on an effective basis, Even with the additional orders, the fleet is probably still going to shrink over the next few years. Speaker 1400:45:18Have you seen any willingness sorry. Speaker 400:45:20Turn Sorry, I was also going to add and Cameron, please elaborate if you wish, is that there is a lot of cost Going through maintenance drydocking more than it's not a straight line. It gets much deeper once you cross 20 years old. Speaker 1300:45:41Yes. Just to elaborate, the amount of steel that has to be replaced on a hull that gets turn the call back to the 3rd special survey starts to take your drydocking and maintenance costs not linearly up, but almost parabolically up. Speaker 1400:45:59Yes. And has there been have you seen any willingness by charterers to look at older ships as the rates Speaker 500:46:15turn I'm happy to take Speaker 1300:46:16a stab at that one. I mean, you will see some charters take a look at those boats. I mean, some of it depends on the rigors of their bedding system. Sometimes turn it back to the operator for questions. It depends on their internal policies, but they definitely become harder and harder to trade as you get to that point. Speaker 1300:46:31So the trade efficiency of those boats goes down Speaker 200:46:37Quite a bit. Speaker 800:46:38Okay, understood. Thank you. Operator00:46:43Turn our next question comes from Chris Robertson with Deutsche Bank. Speaker 400:46:49Just one thing, I'd like to add to this whole thing Go back to this the scrapping or the just understand that the new buildings are really spread over a large amount of time. And the supply side is very, very compelling. If you just take your asset test, just assume something is very, very unlikely There are no scrapping, 0 scrapping during that period and or there are no removals from the product trade Speaker 200:47:21back to the operator Speaker 400:47:23and still you're going to get to A pretty good supply and demand curve. Sorry, next question please. Operator00:47:37Turn the call over to Chris Robertson with Deutsche Bank. Please go ahead. Speaker 200:47:44Over to Mark. Speaker 800:47:44Hey, good morning, everyone. Thanks for taking my question. Guys, I just wanted to go back to a follow-up on Omar's question around the breakevens. If you could comment Where the breakeven is maybe today or at least at the end of the quarter? And then just to confirm that could come down by another 4,000 to 4,000 1,000 per day, should you be able to deleverage down to the targets that you talked about earlier? Speaker 800:48:12Turn Speaker 200:48:14the Speaker 500:48:17call over to Rob, do Speaker 200:48:18you want Speaker 800:48:18to take that one? Speaker 400:48:19Yes, please, Chris. Speaker 800:48:23Turn Yes, Chris, the breakevens today, probably in the 17%, a little bit higher range per day. Turn We're as Robert's been saying, we're still in the middle of this deleveraging cycle. And so we have a Big amount of debt to be repaid between now and say the middle of the first quarter. And there's still some expensive leases We're working on it, but incrementally. Sure. Speaker 800:49:03Yes. But it sounds like a pretty compelling inflection point for the company over the next few quarters here. So I think it is definitely an important point. Speaker 400:49:13It is. But what Chris is telling you turn Is that you're looking at I'm looking at what I'm saying is an end position once it's finished. And there the math is real simple, right? You've got You were taking $1,300,000,000 worth of debt and you're chopping that down to 500. And what I said was the combination between the principal and the interest. Speaker 400:49:39And at the same time, turn You're knocking out debt that is much more than what debt is coming in at. You have 2 things working. So I don't really you'll be able to give proper even better cut downs coming down to January, but you can just take the number and just the call back over to the operator for questions. And it's not too hard to get to that approximate figure that I'm giving at the end of the process. The most important thing is not the accuracy of it because that's sometime in the future. Speaker 400:50:17No way you can create a model for this quarter Well, the start of next quarter because I gave so many caveats to how we get to that level turn the call over to Jay. Speaker 800:50:37Yes. Thanks for that, Robert. Speaker 400:50:38You're going to significantly drop your daily the call back to the call back Speaker 200:50:47to the call back to the call back to the Speaker 400:50:47call back to the call back to the call back to the call back Speaker 200:50:50to the call back to the call back to the call back to the Speaker 400:50:50call back to the to Lisa's Speaker 800:50:58as well. Yes, makes a lot of sense. I guess final question for me just turning back, turn Sorry to belabor the point on the older ships here. But I mean, it just sounds like It's really going to have more of an impact on the dirty trade on the crude fleet more than anything. But just to drill down a little bit more, is there the Speaker 400:51:19call over to Eric. That's just the way that James framed his slide about the ships turning 20. You could also frame a slide that talks about chips turning 15 years old over the next months, years too. Speaker 800:51:39Sure. And that goes to my question, Robert. Is there anything owners can do today turn Or at least with the cash available they have today at these rates that they can better maintain ships past that traditional 15 years of age? Or has Technology not really changed or the landscape not really changed too much and it's kind of like that's still a good hard and fast rule So look, I'd leave that to Kevin. Speaker 200:52:03Robert, do Speaker 400:52:03you want to take that? Yes, please. Yes, please. Speaker 1300:52:07Yes. So just simplistically, a vessel is a steel box girder subjected to corrosion and fatigue. And turn the call over to the operator. The customers, our clients, the oil majors don't count the dollars they spend on a time charter over to our particular spot fixture, they count the liability in the case of an existential event the call over to Ericsson, like the Erika or the Exxon Valdez. And this type of enterprise risk has established an enormous the call over to our operator for questions. Speaker 1300:52:50And there is very little that an owner can do to preemptively strengthen the steel or protect the steel from that type of wear and tear. The the call over to the operator Speaker 200:53:04for questions. Technology around Speaker 700:53:04coatings, around surveys, around intermediate surveys, Speaker 1300:53:05all of that is advancing, but it the call back over to the operator for questions. It doesn't do a material or make a material difference to the overall life expectancy of a vessel, Particularly given the type of conditions the vessel faces in service. Operator00:53:31The conference back over to Emmanuel Lauro for any closing remarks. Speaker 300:53:42Thank you, operator. We do not have any closing remarks apart from thanking everybody for your time today and looking forward to to speaking with you all soon. Have a good day. Operator00:53:53Turn the call over Speaker 200:53:59to Mr.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallScorpio Tankers Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Scorpio Tankers Earnings Headlines3 Reasons STNG is Risky and 1 Stock to Buy InsteadApril 24 at 6:00 PM | finance.yahoo.comScorpio Tankers (NYSE:STNG) Price Target Cut to $60.00 by Analysts at Evercore ISIApril 24 at 3:23 AM | americanbankingnews.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 27, 2025 | Crypto Swap Profits (Ad)Scorpio Tankers price target lowered to $60 from $64 at Evercore ISIApril 23, 2025 | markets.businessinsider.comDoes Scorpio Tankers (NYSE:STNG) Deserve A Spot On Your Watchlist?April 20, 2025 | finance.yahoo.comScorpio Tankers Inc. (NYSE:STNG) Receives Consensus Recommendation of "Hold" from AnalystsApril 19, 2025 | americanbankingnews.comSee More Scorpio Tankers Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Scorpio Tankers? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Scorpio Tankers and other key companies, straight to your email. Email Address About Scorpio TankersScorpio Tankers (NYSE:STNG), together with its subsidiaries, engages in the seaborne transportation of crude oi and refined petroleum products in the shipping markets worldwide. As of March 21, 2024, its fleet consisted of 110 owned and leases financed tanker, including 39 LR2, 57 MR, and 14 Handymax with a weighted average age of approximately 8.1 years. Scorpio Tankers Inc. was incorporated in 2009 and is headquartered in Monaco.View Scorpio Tankers ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 15 speakers on the call. Operator00:00:00Hello, and welcome to the Scorpio Tankers, Inc. 3rd Quarter 2023 Conference Call. I would now like to the call over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir. Speaker 100:00:15Thank you for joining us today. Over to the Scorpio Tankers Third Quarter 2023 Earnings Conference Call. On the call with me today are Emanuele Lauro, Chief Executive Officer over to Robert Bugbee, President Cameron Mackey, Chief Operating Officer Chris Avella, Chief Financial Officer Shawn Hager, Head of U. S. Chartering. Speaker 100:00:35To the operator to discuss our Q3 earnings press release, which is available on our website, scopiotankers.com. The information discussed on this call is based on to the operator to review our financial results. Thank you, and good morning everyone. I would now like to turn the call over to Mr. President of the to the operator. Speaker 100:00:53Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward looking statement disclosure in the the conference call over to today's press release as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.comandsec.gov. Over to Mr. President. All 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. Speaker 100:01:18Over to the operator. The 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. Over to the operator.com on the Investor Relations page under Reports and Presentation. The slides will also be available on webcast. Speaker 100:01:36The call Speaker 200:01:42over Speaker 100:01:45to Mr. Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro. Speaker 300:01:52Thank you, James, and Thanks everybody for joining us today. We are pleased to report another quarter of strong financial results. The Speaker 400:02:05call over to Mr. President. In the Speaker 300:02:05Q3, the company generated $200,000,000 in adjusted EBITDA. And despite the conclusion of the call over to the operator. Speaker 200:02:15Thank you, Speaker 300:02:16operator. Thank you, operator. Thank you, operator. Thank you, operator. Today, this increase continues and is driven by the same factors, which have led to an elevated rate environment for the last six Speaker 200:02:32to the next few quarters. Speaker 300:02:33These factors are strong global demand for refined products, dislocated refinery capacity turn the call over to the operator and a constrained maritime supply. The cash flows have been significant and transformative for the company. The call over to the operator. The quality of Scorpio Tankers as an investment is improving each day. Deleveraging and returning capital to shareholders Our balance sheet continues to improve and the company has today to a net debt of $1,300,000,000 We have reduced our sale leaseback financing from $2,300,000,000 in 2022 to $730,000,000 as of today. Speaker 300:03:18In the Q4, we expect to repay a further $460,000,000 in lease financings, of which $196,000,000 have already been repaid. We have more than $800,000,000 in liquidity consisting of to $520,000,000 in unrestricted cash and nearly $300,000,000 available under to our revolving credit facility. In the Q3, we repurchased close to 80,000,000 of company shares. Turn year to date, we have returned over $530,000,000 to shareholders. Of this, dollars 490,000,000 in share repurchases turn the Speaker 200:04:04call over to Mr. Chairman and Mr. Speaker 300:04:04Chairman. And $40,000,000 in dividends. Today, we have announced the renewal of our securities repurchase program for up to $250,000,000 And we have increased our quarterly dividend from $0.25 to $0.35 per share. Looking forward, We expect low global inventories, robust demand and limited fleet growth to support strong product tanker fundamentals. With this, I finished with my remarks, and I would like to turn the call to Robert. Speaker 300:04:36Thank you. Speaker 400:04:38Turn the call over to Mr. Antonio. Good morning everybody. It's really a fantastic start to the quarter. We're really happy with the way that the market has been shaping up. Speaker 400:04:47The call over to the operator for the potential substantial rate improvement when the winter season kicks off in 3 to 4 weeks' time. And that's exactly what we expect. Rates have steadily improved since early July. Neither the OPEC cuts nor the weaker season have halted this. To Slide 9. Speaker 400:05:06Headline demand for products has improved steadily as well. World demand for product crude is expected to continue to grow further. The call over to the operator at the moment as a result of fear, for example, in the Middle East or war escalation. This is just pure economic demand and activity. To the operator. Speaker 400:05:29Present spot markets in all our categories according to Clarksons and indeed our own trading desks are above the guidance we have given today for the start of 4th the call over to the operator. We are truly very optimistic for the developments through the next month as we enter this stronger season. This is a very consistent, strong and broad rate increase. That's very important to know. July has been better than June, When it comes to the stronger season coming, I am extremely confident that once again winter will come to the Northern Hemisphere. Speaker 400:06:11I base this confidence primarily on historical precedent. There is now quite a lot of data going back a few years showing to the next question. Winter has come every year. Furthermore, the scientific community, weather forecast, Druid priests, solstice worshipers and young children the call over to our operator for questions. Thank you, sir. Speaker 400:06:30Thank you, sir. Thank you, sir. Thank you, sir. Our first question comes from the line of There is much less certainty of product ton mile decline as a result of recession. If the weather turns, this fear of demand slowdown to the product tanker market on UtaSting. Speaker 400:06:57For those of you who may have forgotten as it's nearly the call over to the operator. The start of winter was nearly a year ago. Winter is good. It's really good for the product market and product rates. Thank you very much again for all of your support. Speaker 400:07:13And I'll turn it over to James. Speaker 100:07:17Over to Robert. Slide 7, please. As Emmanuel said, cash flows from a strong rate environment have been significant the call over to the company. Over the last 7 quarters, we've generated $2,500,000,000 in EBITDA, reduced outstanding debt by 1,300,000,000 the call over to our operator and return $710,000,000 on share repurchases and dividends. Slide 8 please. Speaker 100:07:41We continue to reduce our to the call over to the operator for the call. I would now like to turn the call over to the operator for the call over to the operator for the call. I would now like to turn the call Speaker 200:07:47over to the operator Speaker 100:07:48for the call over to the operator for the call over to the operator for the call. After repurchasing, these vessels are either encumbered or refinanced at lower interest margins in new facilities. Slide 9 please. While the year to date debt repayment has been slightly lower due to timing of lease repurchases, in the Q4, we will repay $527,000,000 in to the operator to review our financial results. As you can see from the graph on the left, our estimated December 31 debt balance is expected to be $1,550,000,000 on the right, we have refinanced a significant amount of lease financing, taking it down from $2,200,000,000 to $739,000,000 today. Speaker 100:08:26To Slide 10, please. Since the December 2021, our net debt has improved by $1,600,000,000 the call over to Mr. President. Today is at $1,300,000,000 With no new buildings on order, we have minimal CapEx. Today, we have $521,000,000 in unrestricted cash and 2 over to the operator to review our financial results. Speaker 100:08:49Slide 11, please. The company has significant operating leverage. In Q3 so far, including time charters, the fleet is averaging close to $33,000 per day. At $38,000 per day, the the call over to the operator. The company generates almost $800,000,000 in free cash flow per year and at $40,000,000 almost $1,200,000,000 This would equate to $14.22 per share and free cash flow, a 26% or 41% free cash flow yield. Speaker 100:09:16Slide 13 please. Over to the last 6 quarters, rates have defied seasonality, refinery maintenance and other short term headwinds. As refinery maintenance concludes this month, we expect fundamentals in to the operator to review our financial results. Over the last week, we have already started to see it. Today, spot LR2 rates are at $42,000 per day and MRs at $34,000 per day. Speaker 100:09:39To Slide 9. Global inventories remain extremely low, requiring an increase in product exports for more immediate consumption. In the U. S. And in the rest of the world, to Slide 14, please. Speaker 100:09:56To Slide 14, please. Year over year, we expect 4th quarter demand for refined products to be 2,600,000 barrels a day higher to the next question and answer session. And next year on average we expect demand to be 1,300,000 barrels above 2023. The call over to Mr. President. Speaker 100:10:13The increase in demand is leading to higher seaborne exports. Year to date CPP exports have averaged 1,400,000 barrels a day above 2019 levels to the operator. And September averaged 1,800,000 barrels. Given low global inventories, increased consumption will continue to be met to imports with product tankers reallocating barrels around the world, not only have exports increased, but barrels are traveling longer distances. Slide 15 please. Speaker 100:10:40While demand is above pre COVID levels, refining capacity is lower and more dislocated. The impact of new export oriented refineries to Slide 30, while ton miles have increased 78%. Refinery closures have also created the need to replace lost production in places like Australia, where product imports the call over to the operator to increase 48% since closing 2 large refineries in 2020. All of these changes are driving an increase in ton miles Speaker 200:11:17over to our next question. Speaker 100:11:17As tonnagelldemand increases, vessel capacity is reduced and supply tightens. Slide 16, please. To the operator. And it's not just about refining capacity closing and opening. In each region, there are different refinery configurations, domestic needs and regulatory requirements. Speaker 200:11:33To Slide 9. Product tankers Speaker 500:11:34are the conduit for rebalancing surplus Speaker 100:11:34naphtha in the Middle East to Asia or surplus gasoline from Europe to Asia. To the operator. And in many cases, some of the largest product exporters are also the largest importers like the U. S, UAE and South Korea. This dynamic creates increased triangulation of the fleet, which leads to higher utilization and rates. Speaker 100:11:51We expect this to continue. To Slide 17, please. Russian exports and refined products have declined to more normalized levels of around 1,400,000 barrels a day. The call over to Mr. President. Speaker 100:12:02The Gray Fleet or vessels that are servicing Russia currently stands at 4 53 vessels. Many of these vessels, which have moved into this to non sanctioned trade. Slide 18, please. Today, the order book is 10% of the current fleet, while the average age of the product tanker fleet is close to 13 years old. The call over to the operator. Speaker 100:12:32The strong spot market, healthy long term time charter rates, constructive demand outlook and aging fleet has led to more new building orders. But there are constraints to ordering. New builds are expensive. There are long lead times for delivery and uncertainty about propulsion systems to satisfy future environmental and regulation. That said, without newbuilding orders, this year the fleet was expected to shrink over the next few years. Speaker 100:12:54Starting next year, 8,000,000 deadweight tons per year of product tankers will turn 20 each year, the equivalent of 160 MRs. By 2026, 9.3 percent of the fleet will be 20 years and older. The age of the fleet and upcoming environmental regulations will have a material impact on the fleet going forward. To Slide 19, please. Next year's fleet growth is expected to be 0.5%, the lowest fleet growth since 2000. Speaker 100:13:21To Slide 9. Seaborne exports and tonne mile demand are expected to increase 3.5% 12.1% this year and 3.6% 6.3% next year, to the operator to discuss Speaker 200:13:35our financial results. Lastly outpacing supply, using minimal scrapping assumptions Speaker 100:13:35on average the fleet will grow less than 3% 2% in 2025 and 2026 to the call over to the operator for questions. In addition, 1 3 year charter rates remain at high levels, to construct as individually historically low inventories, increasing demand, exports and ton miles, dislocations in the refining system, the call over to the operator for questions. Thank you. Thank you. Operator00:14:42Our first question comes from Jon Chappell with Evercore ISI. Please go ahead. Speaker 200:14:49Turn the Speaker 600:14:50call over to James. Good morning. James, if I could pick up where you left off a little bit on the winter preparations and especially the inventories. I think a lot of people forget that the sanctions on Russian diesel didn't go into effect until February 5 this year, so they effectively had access. To the operator. Speaker 600:15:05Europe effectively had access to Russian diesel all through last winter, which was warm. It feels like the inventories are just as low entering this winter, Don't have access to Russia, and I'm not sure anyone can underwrite back to back warmer than normal winter. So have you started to see any Sense of urgency from Europe as a continent as a whole to prepare for winter or is there maybe a little bit of lacks expectations that have the potential to make the market incredibly tight if there's an early cold snap this winter. Speaker 400:15:36Turn James, I'll answer that if you don't mind. So John, thank you. But first of all, congratulations from all of us at Scorpio on your Award for being number one shipping analyst. Well done on that. Speaker 700:15:48Thank you. Speaker 400:15:48So Look, I think we look generally across the we sort of think there's quite a lot of complacency full stop, whether it's Europe, whether it's the rest of the world, despite the low inventories, despite the It doesn't matter whether you really believe in recession or not. Everyone is still saying that oil and product Demand is going to grow. It's just an argument as to what the rate of growth will be. And inventories, as you point out, Across the whole space are low and we're sensing a just a everyone's pretty relaxed right now. We think what will happen is they're acting as if it's like any other winter. Speaker 400:16:43And what normally happens is that the first post well comes and then people wake up and start to do things. So they're denying the risk they have in their inventories, the risk that's going on in the world, whether it's Russia, Ukraine, whether it's Israel, Palestine or the risk of that spreading. But I think it will come home everything comes home to roost the moment the weather turns cold. Speaker 200:17:13Turn the Speaker 500:17:13call over to Eric. Speaker 400:17:14Okay. In that sense, that's why we're very confident. We're very confident there's nothing in this market. This market has just Steadily got stronger and stronger and stronger without any kind of action or preemptive moves to the ship product. Speaker 500:17:30Turn the call back over to Scott. Speaker 600:17:31Got it. That makes complete sense. Just for my second one, shifting gears to Scorpio specifically, You have a lot of debt repayment coming up in the next couple of months. As we think about target leverage, I know it's Number that you haven't tried to identify in the past, but just watching the buyback activity accelerate, looking at the dividend moving up again this quarter, maybe unexpectedly, over to the operator. Do you feel that you have line of sight on over the next quarter or 2 puts you in a comfortable enough leverage position Where maybe the focus shifts a little bit more away from deleveraging to capital return at this point in the cycle? Speaker 400:18:10Turn Yes, I think so. And I think that we had said previously that once we'd cross September turn In this earnings call, we would elaborate a little bit more on leverage targets, etcetera. So I think our thinking is developed in the following way We'd like to get the leverage of the company pretty much down to around scrap value to the fleet. At that point, that's around $800,000,000 $850,000,000 $900,000,000 And at that point, I think it's unarguable that the company would have very low leverage and be in a really safe position. Whatever it does at that the call back to the operator for questions. Speaker 400:18:58Whether it's buying stock, whether it's increasing dividends, etcetera, etcetera, it would be really playing with to our shareholders' money, our money. We're not risking a bank loan, etcetera. The other thing is there are tremendous benefits going forward if we were to get there to the call back Speaker 500:19:25to the call for repayments. Our breakevens would collapse Speaker 400:19:26and we would end up being not only have the newest product fleet there is out there, So we'd always have also had the lowest operating cash. And I think that operating cash breakeven and I think that's great because now we're getting even more for us as shareholders going through. I think that's pretty achievable with very moderate positions. I mean, it's not too far to go to drop down another $400,000,000 by you could do that by March 31. And I think that we've already got $25,000,000 We're selling a ship. Speaker 400:20:05We'll get net $25,000,000 off that. So that's $375,000,000 to go. And we haven't certainly excluded selling 2 or 3 other ships. So between Earnings something like 35 to 40 a day. So the market doesn't even have to improve. Speaker 400:20:23If you ran your model and said, well, the market is going to continue just as it is, the call back over to the operator. That winter doesn't come and we carry on and we sell a couple of assets, we'll be there by that March 31. Now that can come earlier Depending on if and what we sold and if rates do what we think they will do, which would be to accelerate higher. Speaker 600:20:47Turn the call back over to you. Yes, that all makes some sense. Yes, big time. Thank you, Robert. Speaker 400:20:53Thank you. Operator00:20:55Turn our next question comes from Omar Khachta with Jefferies. Please go ahead. Speaker 700:21:02Thank you. Hey guys, good morning, good afternoon. Turn Speaker 400:21:05Yes. Just as a follow-up to that Speaker 700:21:07line of discussion regarding the debt reduction. It looks like that's obviously top of mind over to Steve here and perhaps the buyback takes a bit of a back seat. Robert, you mentioned perhaps $850,000,000 to $900,000,000 of leverage at the company. Just to the operator. To frame that just so I understand that it sounds just from your commentary with that March 31 target, is that a net debt target or is that just total debt outstanding Speaker 400:21:34That's a net debt target. Speaker 800:21:37Okay. And then On net debt, because Speaker 400:21:40I think that we would all agree that if that net debt is backed by the scrap value of a fleet That is still relatively new. That's we're pretty damn conservative at that point. And we also with the debt facilities we're putting turn That would be at a very efficient rate. And we would still have That would be well within our revolving credit lines. So you that would also imply turn Extra liquidity too. Speaker 400:22:21So you're not it's a net debt the call Speaker 200:22:23back over to the Speaker 400:22:23operator for the company that's got a lot of liquidity. Speaker 700:22:29Yes. And then Robert, you mentioned the breakevens come down. Are you able to venture sort of any kind of assuming you put down $400,000,000 or $500,000,000 from here, What kind of effect that will have on breakeven on a per day basis? Speaker 400:22:44Well, on the interest, it's a The interest itself is going to come down turn into a level, but I would think you'd be dropping the net cash breakeven between the debt between principal and interest Somewhere in the region of $4,000 $4,500 a day. Speaker 700:23:12Yes, that's significant. Speaker 400:23:14Turn the call Speaker 200:23:15over to Steve. Speaker 700:23:16Yes. So I guess maybe just one final one, just in terms of once you finally get there. So Let's say it's March 31 or perhaps in the spring. It definitely feels like it's sooner much sooner rather than later. What happens once you get to that point? Speaker 700:23:32How do we think of the strategy of deploying capital? Is it buybacks? Is it acquisitions? You've got obviously the share price looks very attractively priced relative Speaker 400:23:44to NAV. Just give me a sense if Speaker 700:23:46you don't mind kind of what happened? Speaker 400:23:48I don't think Look, we're not interested in speculative new buildings. We don't need to buy any ships turn to the call over to the operator. To earn enough money, we're making considerable cash flow, considerable earnings on the fleet we have. Turn We don't have because we don't have extraordinary maintenance CapEx or whatever. We've done all the to the scrubbers that we intend to put in, etcetera. Speaker 400:24:19So one way or other, it's the capital is going to go to us as shareholders at that point. And it's a pretty pointless activity to anticipate what will happen later. Turn the call over to Eric. I don't even think that an NAV calculation would be relevant for a company that is the call over to the operator. As a new fleet and very low leverage, you should be moving away from it's not a question of how do we close the NAV gap. Speaker 400:24:51The NAV gap is, let's say, the least of our valuation worries. Of that kind of structure, we should be Looking to close some form of free cash flow valuation gap, because you would expect that any Multiple you want to put on free cash flow would increase as you lower or improve the actual investment itself. We've got a lot of work to do in that regard. Speaker 700:25:23Yes. Well, Sounds like a very interesting setup as we get into the next few months. Great. Thanks, Robert. I'll turn it over. Speaker 400:25:31Thank you. Operator00:25:33Turn our next question comes from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:25:40Great. Good morning. So Robert, first, I wanted to check on the weather. The winter is going to come. Was that a scientific poll? Speaker 900:25:47I just want to check on the math there. But I just wanted to Understand the phenomenal rates, right? If you think about scrapping activity, still somewhat moderate, turn Anything that drives the scrapping or demolitions going forward just in this rate environment, maybe is anything different the call back over to the operator Speaker 200:26:11for questions. This cycle, do we see them just sticking Speaker 900:26:11around longer? And I'm setting that up in the backdrop of a rising order book that's gone from 2%, 3% now to to 10%, 11%. So I guess ultimately if maybe that's the winter that's kind of the overhang that is coming turn In a different kind of winter backdrop, just want to understand your thoughts there. Speaker 400:26:31I think the first thing you want to do is to look at the LR2s are going to end up trading as LR2s or even necessarily built as LR2s. The contract is the ability to build an LR2, to questions. Some may not be quoted and many are likely to go into the Aframax trade anyway. First of all, I don't think the order book is in product to the operator to review the financial results. And the order book is not 1 year. Speaker 400:27:04The order book is stretched over a period of 2,004, to 5 and now pretty much 3 quarters of 2,006. So the order book is still very contained Even if it's around 2%, 3% average through that period. The exact point at which turn We know that James is being very conservative talking about the number of ships that turn 20 and that's been turn The point of scrapping, that we also know that when these ships turn to 2016, 2017 That they're not able really to be competitive and trade properly in to the premium clean petroleum fleet. So we think the order book is very contained at the moment. The call over to the operator. Speaker 400:27:56And it's going to be because you just don't have the yard capacities. The question is whether or not owners want to do things. So that's our perspective and that's what's creating a the prospect for turn the call over to the operator. Okay. And the proof of people's expectation of what they're willing to pay for to secondhand modern ships, which have been rising a lot in the last month and the forward time charter book. Speaker 400:28:29So we're in a pretty good shape. We haven't had a bull market like this in the last sort of 30, 40 years where there's been so little yard capacity at this stage turn the call back to the call back to the call back Speaker 200:28:45to the call. Speaker 900:28:46So let's flip that around too then. Are you seeing Vessels may be actively leaving and going to dirty given the rates are even higher over there. Is that? Speaker 400:28:58Well, there are 2 things. They're not just if you've got an older product tanker, they're not just higher in certain cases there. It's easier to trade. The other reason we're seeing that is that the whole of this Russian, what we call the dark fleet, Russian trade, people like us can't participate in. The people who what they've been buying, they've been buying the older ships, Because they don't have the same criteria to carry dirty trade or sanction trade. Speaker 400:29:32So It's much of the fleet that's being bought and being removed from, let's say, the international market or free market It's gone into those things, but what's and that drove their prices up. But what's interesting in the recent developments the call over to the operator. In the last 3 months, there's been a lot of activity for more purchases, more modern product tankers as evidenced today by to the operator to take questions. Thank you. Thank you. Speaker 400:29:59Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:00Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:02Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:03Thank you. Thank you. Thank you. Thank you. Thank you. Speaker 400:30:05Thank you. Thank you. Thank you. To longer time charters for 2, 3, 4 years and more confidence in the length of this stronger market, Along with their inability, of course, to order new shelves. Speaker 900:30:29So just to I guess for my second one, then you mentioned kind of selling Maybe talk about your philosophy on what gets you to do that versus in this kind of market maybe just locking those older vessels up for Longer time charters. Obviously, you still have stayed on the spot exposure. So is there a thought to shift and lock in at these levels with some of the older vessels and then Sell them off or it sounded like you have maybe thoughts on selling some in the near term? Speaker 400:30:58I think the older vessels Like an easier situation, you're getting enormous price, you're getting a record prices for these things and Speaker 200:31:12turn the call over to the operator. Speaker 400:31:15Your to the next question. I don't think we have any problem there to certain customers and you'll see us probably out of 2 or 3 time charters here. We do that fairly regularly. We like to keep a lot of spot vessels, but we're happy to keep turn Yes, 10% or so in the time charter market, but with the older vessel, it's Great. Off you go. Speaker 400:31:42If the ship's already 11 years old, 12 years old, Yes. Then fine, you're getting a great price and you can put the money to work brilliantly in either reaching that deleverage to Target or as we've been doing in before buying stock pretty cheaply. Speaker 1000:32:03Turn Speaker 900:32:06the call over Speaker 200:32:06to Eric. Great, Robert. Speaker 400:32:06Appreciate your thoughts as always. Speaker 900:32:06Congrats on a solid buildup of cash. Speaker 400:32:08Thank you. Operator00:32:11Turn our next question comes from Greg Lewis with BTIG. Please go ahead. Speaker 1100:32:18Good afternoon, good morning everybody and thanks for taking my questions. I guess I wanted to talk a little bit more about Slide 11 and the free cash turn Probably James, as we look at the I guess the right side of the slide in cash flow generation, What is kind of like drydocking off hires? Is that kind of all baked in for Are we looking at a slide for 2024 or just an illustrative slide? And if we are looking at 2024, like what does that assume in terms of turn Maintenance CapEx and just that kind of ongoing CapEx, is that kind of a number you can talk to? Speaker 100:33:04Yes. So it's just going to be an illustrative. So it's not going to factor in, for example, the time charters, right, which reduce breakevens or anything like that. It is going to take the next four quarters of debt, but it doesn't have the all prior in there. It is something that we could show or with the maintenance CapEx maybe next quarter. Speaker 100:33:28We do put it in the press release and in the presentation on a different slide though. Speaker 1100:33:32Okay. Yes, absolutely. Thank you for that. And then Robert, as you mentioned, thank you for the Q4 guidance as always. Turn And also you kind of highlighted where rates are today and it's interesting, right, because it's people talk about NAV, people talk about cash flow. Speaker 1100:33:51I mean just looking at where rates are right now, it looks like your cash flow yield is around 20%. And How do you balance that free cash flow yield that the stock is trading at? And I mean, turn it over to Steve. It seems like this is an attractive time to be buying back stock. Just thinking about that, is it Possible that we focus more on buying back stock as opposed to deleveraging just given where we are Right now? Speaker 400:34:24No, I said, look, we bought $490,000,000 worth of stock ahead, right? We said, great, we're going to anticipate the market is going to stay strong. And instead of paying down all that in debt, we said no, the valuation, we want to buy that stock early. So we We've been very heavily in buying stock back. In the last, whatever it is, months, interest rates have risen dramatically And quite high, the risk out there, the little box of product tanker to the line is really we've really got a great deal of confidence in. Speaker 400:35:00I mean, it's the fundamentals look fantastic. The market is fantastic Even before the season starts. But we'll be respectful and humble enough to understand that the big box the call over to the operator. World Economics, World Financial Markets, geopolitical events is less certain that there is risk out there. It's We have no interest in driving the stock up. Speaker 400:35:28We've been very disciplined in the way we bought the call back over to the stock. We're not there to buy in the top of the upper band, etcetera, etcetera. We're there to buy with great value. So the default position for us is to drive this debt down to around this net debt the call back over to Scott to discuss our operating cash breakeven The free cash flow, we should be able to get a better multiple on that free cash flow. The investment itself should have much higher quality. Speaker 400:36:14Turn And but at the same time, as we've shown all the year, if Wall Street sells STNG down, dislocating it for its own reasons, whether it's fear of recession and oil will never be used again And the fundamentals remain intact. We will be there to buy stock and create great value for our shareholders. And as soon as we've accomplished what we need to accomplish, then yes, we're going to it will be How do we return the capital to shareholders that we're generating at that point? Speaker 1100:36:56Super helpful. Thank you very much. Speaker 400:36:59Thanks. Operator00:37:01Our next question comes from Prada Morkendale with Clarkson Securities. Please go ahead. Speaker 1200:37:12Thank you. Hi, guys. Just a quick market question for me. The Panama Canal, does that have any impact on the Progress tankers at all? Or I guess, obviously, it's the larger ships in other segments that benefit directly, but I suppose Across Atlantic in general, what's your thought there? Speaker 400:37:46Sean, turn So to Sean, some of you have met him, some of you haven't. He's Head of our trading for the North America. So he's ideally the call over to the operator. Speaker 1300:37:58Yes. Thank you and thank you for the question. It's certainly interesting times in the Panama Canal and it's very dynamic and fluid as Things are evolving kind of every day. But to answer your question, is there an impact in the MR space? There absolutely will be, I think. Speaker 1300:38:15Turn So you're seeing a reduction in the number of transits that can happen and effectively like the economic impact in order to get an MR through It's going up substantially starting yesterday. So in the canal, there's a reduction of water in the reservoirs that feed the lock system to move the ships through. So traditionally you move kind of 36, 37 ships through the Panama Canal on any given day and that's any type of asset class of ship And that's already reduced to 24 today. Panama is ending the rainy season, which is what they need to replenish those reservoirs and to the next question. October is generally the rainiest month on record historically for them and this past October has been the driest month that they've had since they've been keeping records in the Panama Canal. Speaker 1300:39:02And so the expectation is for those 24 current transit slots to continue to reduce down to a low of 18 starting February 1. So what we're seeing is a couple of different factors. One is like the cost for a charter to ship the call back over to the Panama Canal. It's starting to rise quite a bit as the impact of this is being digested by the marketplace. And then second, the expectation for how long you wait to go through the canal either in Ballast or Leyden turn Is frankly a bit of a question mark and can be quite expensive to get through. Speaker 1300:39:39And so what you're looking at is ballast alternatives to get back to the next load port. So just some rough numbers, if you do like a Quintero, Chile and you ballast to Houston going through the Panama Canal with no delay, that's 14 days direct. And if you'd send that same boat down through the Magellan Straits, it's 30 days. So you got an incremental 16 days to get back into the Gulf. Or if you sent that boat to Jib to load in, to Med that'd be 26 days or if you ballast it transpacific, it would be 33 days. Speaker 1300:40:10So there's obviously a lot of different factors here. There's an economic factor of where the Chile, Peru, Ecuador, West Coast, Central America and West Coast, Mexico rely heavily on imports in order to stay supplied. So whether those imports come from Asia, whether they continue to come from the U. S. Gulf, those type of things and how flat price plays into it will the call over the coming days, weeks months, but there will be an impact to the MR fleet and the number of ships available will be less efficient than what we have today. Speaker 1200:40:45Perfect. That's great color. Thank you. That's it for me. Operator00:40:51Our next question comes from Liam Burke with B. Riley. Please go ahead. Speaker 1000:40:57Yes, thank you. Turn The EU is looking to enforce the Russian price cap. How do you expect that to affect turn Your vessels. Speaker 100:41:12Sam, you want to take that? Speaker 400:41:14John, whatever. Speaker 1300:41:16Sure. I can take it. Obviously, Liam, there has been some leakage in So far as sanctions have not been strictly enforced. So it's not a bright line between, say, our market and the dark fleet. Anything that creates a stronger fence or moat between the 2, obviously, will tighten up our market because you'll have less turn to the next question. Speaker 1300:41:46So we welcome stricter enforcement of sanctions and the price cap by the EU. Speaker 1000:41:53Great. Thank you. And there was during the prepared comments and during the Q and A, you talked about time chartering on typically smaller vessels. Why would you think that there is more interest by the shippers to lock in Smaller vessels on longer terms. Is that a scarcity problem? Speaker 1000:42:14Or is it just something that the call over to the operator's need to do based on the age of the fleet. Speaker 400:42:24Turn the call over to the operator. I just first of all, it looked optically, it looks that way because there are just many, many more smaller vessels than the larger LR2s. Turn And secondly, the LR2 owners are I'm not saying they're stronger, but they're just playing Speaker 200:42:49harder. Turn the call over to Eric. Speaker 400:42:53There's no they're not feeling the requirement. They see a lot of potential upside here between What they can do in the product market and what they can do trading in crude. They're probably more reluctant in the LRT market to fix out Speaker 200:43:12to the level Speaker 400:43:13and the lesser them to buy. So in the product, we're in MRs, we've seen a lot of people buy modern the ships and then turn around and fix it 2, 3 years for the cash flows on the purchase. Speaker 1000:43:27Great. Thank you, Robert. Operator00:43:32Our next question comes from Sam Bland with JPMorgan. Please go ahead. Speaker 800:43:38Turn Yes. Hi, thanks Speaker 1400:43:39for taking the question. I just have one, please. It's on Slide 18, you've got this 9% of ships to be more than to 20 years old by 2026. To what extent do those ships sort of fall out of the supply and demand balance Is that almost equivalent to those ships having been scrapped or not as far as the rate is concerned? Thank you. Speaker 100:44:13Yes, I think that's a good way to put it. We've done some work looking at older vessels and what we've seen is that A lot of the older tonnage kind of 20 years and older is carrying crude oil or dirty products like fuel oil, the call over to the operator. And then there's a fair bit of coastal trade. So Indonesia, India, where you We've got kind of a 21 year old product tanker that's carrying diesel from 1 refinery to another and just diesel. But you're right, in many Those vessels are not kind of competing with the Scorpio Tankers vessel or some of our peers kind of in these premium trades. Speaker 100:44:54So It's going to be pretty significant because while we're just focusing on that 20 year mark, it's probably a little bit earlier, turn somewhere between 2015 and 2017 too that these vessels start to move out. So on an effective basis, Even with the additional orders, the fleet is probably still going to shrink over the next few years. Speaker 1400:45:18Have you seen any willingness sorry. Speaker 400:45:20Turn Sorry, I was also going to add and Cameron, please elaborate if you wish, is that there is a lot of cost Going through maintenance drydocking more than it's not a straight line. It gets much deeper once you cross 20 years old. Speaker 1300:45:41Yes. Just to elaborate, the amount of steel that has to be replaced on a hull that gets turn the call back to the 3rd special survey starts to take your drydocking and maintenance costs not linearly up, but almost parabolically up. Speaker 1400:45:59Yes. And has there been have you seen any willingness by charterers to look at older ships as the rates Speaker 500:46:15turn I'm happy to take Speaker 1300:46:16a stab at that one. I mean, you will see some charters take a look at those boats. I mean, some of it depends on the rigors of their bedding system. Sometimes turn it back to the operator for questions. It depends on their internal policies, but they definitely become harder and harder to trade as you get to that point. Speaker 1300:46:31So the trade efficiency of those boats goes down Speaker 200:46:37Quite a bit. Speaker 800:46:38Okay, understood. Thank you. Operator00:46:43Turn our next question comes from Chris Robertson with Deutsche Bank. Speaker 400:46:49Just one thing, I'd like to add to this whole thing Go back to this the scrapping or the just understand that the new buildings are really spread over a large amount of time. And the supply side is very, very compelling. If you just take your asset test, just assume something is very, very unlikely There are no scrapping, 0 scrapping during that period and or there are no removals from the product trade Speaker 200:47:21back to the operator Speaker 400:47:23and still you're going to get to A pretty good supply and demand curve. Sorry, next question please. Operator00:47:37Turn the call over to Chris Robertson with Deutsche Bank. Please go ahead. Speaker 200:47:44Over to Mark. Speaker 800:47:44Hey, good morning, everyone. Thanks for taking my question. Guys, I just wanted to go back to a follow-up on Omar's question around the breakevens. If you could comment Where the breakeven is maybe today or at least at the end of the quarter? And then just to confirm that could come down by another 4,000 to 4,000 1,000 per day, should you be able to deleverage down to the targets that you talked about earlier? Speaker 800:48:12Turn Speaker 200:48:14the Speaker 500:48:17call over to Rob, do Speaker 200:48:18you want Speaker 800:48:18to take that one? Speaker 400:48:19Yes, please, Chris. Speaker 800:48:23Turn Yes, Chris, the breakevens today, probably in the 17%, a little bit higher range per day. Turn We're as Robert's been saying, we're still in the middle of this deleveraging cycle. And so we have a Big amount of debt to be repaid between now and say the middle of the first quarter. And there's still some expensive leases We're working on it, but incrementally. Sure. Speaker 800:49:03Yes. But it sounds like a pretty compelling inflection point for the company over the next few quarters here. So I think it is definitely an important point. Speaker 400:49:13It is. But what Chris is telling you turn Is that you're looking at I'm looking at what I'm saying is an end position once it's finished. And there the math is real simple, right? You've got You were taking $1,300,000,000 worth of debt and you're chopping that down to 500. And what I said was the combination between the principal and the interest. Speaker 400:49:39And at the same time, turn You're knocking out debt that is much more than what debt is coming in at. You have 2 things working. So I don't really you'll be able to give proper even better cut downs coming down to January, but you can just take the number and just the call back over to the operator for questions. And it's not too hard to get to that approximate figure that I'm giving at the end of the process. The most important thing is not the accuracy of it because that's sometime in the future. Speaker 400:50:17No way you can create a model for this quarter Well, the start of next quarter because I gave so many caveats to how we get to that level turn the call over to Jay. Speaker 800:50:37Yes. Thanks for that, Robert. Speaker 400:50:38You're going to significantly drop your daily the call back to the call back Speaker 200:50:47to the call back to the call back to the Speaker 400:50:47call back to the call back to the call back to the call back Speaker 200:50:50to the call back to the call back to the call back to the Speaker 400:50:50call back to the to Lisa's Speaker 800:50:58as well. Yes, makes a lot of sense. I guess final question for me just turning back, turn Sorry to belabor the point on the older ships here. But I mean, it just sounds like It's really going to have more of an impact on the dirty trade on the crude fleet more than anything. But just to drill down a little bit more, is there the Speaker 400:51:19call over to Eric. That's just the way that James framed his slide about the ships turning 20. You could also frame a slide that talks about chips turning 15 years old over the next months, years too. Speaker 800:51:39Sure. And that goes to my question, Robert. Is there anything owners can do today turn Or at least with the cash available they have today at these rates that they can better maintain ships past that traditional 15 years of age? Or has Technology not really changed or the landscape not really changed too much and it's kind of like that's still a good hard and fast rule So look, I'd leave that to Kevin. Speaker 200:52:03Robert, do Speaker 400:52:03you want to take that? Yes, please. Yes, please. Speaker 1300:52:07Yes. So just simplistically, a vessel is a steel box girder subjected to corrosion and fatigue. And turn the call over to the operator. The customers, our clients, the oil majors don't count the dollars they spend on a time charter over to our particular spot fixture, they count the liability in the case of an existential event the call over to Ericsson, like the Erika or the Exxon Valdez. And this type of enterprise risk has established an enormous the call over to our operator for questions. Speaker 1300:52:50And there is very little that an owner can do to preemptively strengthen the steel or protect the steel from that type of wear and tear. The the call over to the operator Speaker 200:53:04for questions. Technology around Speaker 700:53:04coatings, around surveys, around intermediate surveys, Speaker 1300:53:05all of that is advancing, but it the call back over to the operator for questions. It doesn't do a material or make a material difference to the overall life expectancy of a vessel, Particularly given the type of conditions the vessel faces in service. Operator00:53:31The conference back over to Emmanuel Lauro for any closing remarks. Speaker 300:53:42Thank you, operator. We do not have any closing remarks apart from thanking everybody for your time today and looking forward to to speaking with you all soon. Have a good day. Operator00:53:53Turn the call over Speaker 200:53:59to Mr.Read morePowered by