NYSE:STNG Scorpio Tankers Q3 2024 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$1.75Consensus EPS $1.61Beat/MissBeat by +$0.14One Year Ago EPS$1.91Scorpio Tankers Revenue ResultsActual Revenue$267.99 millionExpected Revenue$267.91 millionBeat/MissBeat by +$80.00 thousandYoY Revenue Growth-8.00%Scorpio Tankers Announcement DetailsQuarterQ3 2024Date10/29/2024TimeBefore Market OpensConference Call DateTuesday, October 29, 2024Conference 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 2024 Earnings Call TranscriptProvided by QuartrOctober 29, 2024 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Hello, and welcome to the Scorpio Tankers Third Quarter 20 24 Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the call over to James Doyle, Head of Corporate Development and IR. Operator00:00:36Please go ahead, sir. Speaker 100:00:38Thank you for joining us today. Welcome to the Scorpio Tankers Third Quarter 2024 Earnings Conference Call. On the call with me today are Emanuele Lauro, Chief Executive Officer Robert Bugbee, President Cameron Mackey, Chief Operating Officer Chris Avella, Chief Financial Officer Lars Denker Nielsen, Chief Commercial Officer. Earlier today, we issued our Q3 earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, October 29, 2024, and may contain forward looking statements that involve risk and uncertainty. Speaker 100:01:18Actual 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 earnings press release as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.comandsec.gov. Call participants are advised that the audio of this conference call is being broadcasted live on the Internet and is also being recorded for playback purposes. An archive of this 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. Speaker 100:01:54The presentation is available at scorpiotankers.com on the Investor Relations page under Reports and Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q and A. For those asking questions, please limit the number of questions to 2. Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro. Speaker 200:02:18Thank you, James. Hello, everyone, and thank you for joining us today. We are pleased to report another strong quarter of financial results. In the Q3, the company generated $166,000,000 in adjusted EBITDA $87,700,000 in adjusted net income. While rates experienced a seasonal dip during the quarter, they remain above historical averages. Speaker 200:02:47Thanks to significant improvement in our balance sheet and lower daily breakeven costs, With the rates we have booked in Q4 so far, our LR2s generate $18,000 in cash per day and our MR fleet generates $8,000 per day. And rates have already started to improve particularly on our LR2 segments. Throughout the Q3, we continue our strategy of reducing debt. We've been acting opportunistically and returning capital to shareholders. Since July, we have reduced our debt further by $115,000,000 and significantly decreased our share count. Speaker 200:03:35We have also reduced our daily cash breakevens to $12,500 per day, strategically positioning the company to generate more cash even at lower rates and improve per share earnings. During the quarter, we capitalized on opportunities to sell assets at attractive prices, while also repurchasing our own shares at a discount to net asset value, thereby creating and crystallizing value. We completed the sale of 6 vessels and announced the sale of another 3 vessels expected to close in the Q4. On a pro form a basis, which assumes the closing of the 3 remaining vessel sales and marketable securities, the company has liquidity today of $463,000,000 From April 1, we have repurchased over $300,000,000 of our own shares, representing over 7% of the company. Of these, 3,400,000 shares or around $240,000,000 were purchased since July 1. Speaker 200:04:44Including share buybacks and dividends, we have returned $7.13 per share to shareholders in 2024 so far. Additionally, today, we declared a quarterly dividend of $0.40 per share. In the Q3, we acquired a 4.9% stake in the crude tanker company DHT, a passive but liquid investment that positions us to capitalize on the upside of an improving crude tanker sector. Our outlook for both crude oil and refined products remains positive. And for the first time in several months, we anticipate that improvements in the crude oil market will also positively impact refined products. Speaker 200:05:30With low leverage, strong liquidity and a young fleet, we are exceptionally well positioned. We remain committed to delivering value to our shareholders and we do appreciate your continued support and confidence in Scorpio Tankers. With this, I would like to turn the call to James for a presentation, please. Speaker 100:05:54Thank you, Emanuele. Slide 7, please. Just a few years ago, many would not have believed that MR and LR2 rates could reach $20,000 $30,000 per day, especially during the seasonally weakest part of the year. Product tanker rates remain well above historical averages and are at levels which the company generates significant cash flow. We expect this to continue. Speaker 100:06:20The ongoing strength in the product tanker market is the result of 1, demand consistently outpacing supply 2, increased ton miles as changes in refinery capacity have reshaped global trade flows and 3, geopolitical events exacerbating points 12. Despite facing several challenges in the Q3, including the end of summer driving season, elevated refinery maintenance and competition from crude tankers, the fleet still averaged over $28,000 per day. Notably, these rates have been achieved while undergoing a significant dry docking program. By the end of this year, we will have drydocked almost 60% of the fleet, increasing the efficiency and earnings days for next year. Looking forward, our outlook remains constructive. Speaker 100:07:06Rates have bottomed at very high levels. The market headwinds are becoming tailwinds and it will not require much for rates to increase further. The risk is to the upside. Slide 8 please. From August through October, we saw significant refinery maintenance. Speaker 100:07:26Over the next month, 3,500,000 barrels of capacity will come back online, increasing refinery runs and seaborne exports to meet growing winter demand. We are entering the seasonally strongest period of the year. Q4 and Q1 tanker earnings have consistently exceeded Q3 over the last 30 years. We expect this to continue. Additionally, seasonal improvements in crude tanker rates are also expected to be a tailwind for product tankers. Speaker 100:07:51Slide 9 please. The crude vessels which entered the clean product trade are moving back to carrying crude oil. Of the 45 crude tanker vessels which moved into this trade and excluding the vessels which have recently loaded clean, 32 are expected or have already moved back to carrying crude oil. We do not expect additional vessels to clean up and carry refined products as the off hire time, cleaning costs and trading limitations make this unattractive at current rate levels. The improving crude oil market and exit of these vessels from the clean trade will provide a positive tailwind for LR2s. Speaker 100:08:27Slide 10, please. Diesel and gasoline inventories in the U. S. Are well below the 5 year average. Thus, future demand will rely on refinery production and seaborne exports as opposed to inventory draws. Speaker 100:08:40Slide 11, please. Demand continues to grow. Yes, grow. And we expect demand for refined product to increase by close to 1,000,000 barrels per day next year. We are seeing this demand strength in seaborne exports, which averaged 20,500,000 barrels per day in September, near record highs. Speaker 100:08:59Furthermore, it's not just the volume of products that has grown, the distances these barrels are traveling has also significantly increased. Slide 12, please. Ton mile demand has increased by 17% compared to 2019 levels, excluding Russia and 20% when including Russia. Last week, Phillips 66 announced the closure of its 139,000 barrel per day refinery in Los Angeles. In total, we are tracking closures that could reduce refining capacity by 1,000,000 barrels per day next year. Speaker 100:09:30Many older refineries require significant capital investment to remain operational or meet new regulatory standards. This makes it hard to compete with newer refineries in regions like the Middle East that have lower operating costs and more complex refinery configurations. As a result, we expect more refining capacity to close, which will add incremental ton miles as lost production is replaced with imports. Slide 13, please. Our 2 vessels continue to transit around the Cape of Good Hope. Speaker 100:10:01This has increased voyage distances, ton mile demand and tightened supply. We have not seen any disruption to flows going through the Strait of Hormuz, which accounts for 16,500,000,000 barrels of crude and refined products per day. But the biggest benefit we expect to see on the LR2s is the exit of crude tanker vessels from the clean trade. From June through September, crude tanker vessels carried 65,000,000 barrels of refined product, the equivalent of 87 LR2 cargoes. Slide 14, please. Speaker 100:10:30Year to date, the combined Aframax and LR2 fleet has carried 16,500,000 barrels a day of crude oil and refined products. Of this, over 13,000,000 barrels consist of crude oil and dirty products, while the remaining 3,300,000 barrels has been clean product. However, within the Aframax LR2 fleet today, 39% of the fleet comprises LR2 vessels. Put differently, 39% of the combined fleet is LR2s, but the clean product trade accounts for only 20% of the total cargo volume. Slide 15, please. Speaker 100:11:06This requires the use of LR2 vessels to service the crude oil trade. Currently, 44% of LR2s on the water are engaged in the crude oil and dirty products trade. We expect this ratio to hold, if not grow over time given the age of the Aframax fleet and new orders being predominantly LR2s. Of the 263 Aframax and LR2s that have been ordered since 2021, 203 are LR2s, roughly 77%. This has also inflated the product tanker order book. Speaker 100:11:38Slide 16. While the order book now accounts for 20% of the fleet, half of the order book is LR2s. As we highlighted on the previous slide, we expect a significant portion of the LR2 fleet to continue servicing the crude oil trade. Furthermore, this does not reflect the age challenges facing the fleet today. Today, the fleet is 14 years old. Speaker 100:11:59By 2027, including newbuilding deliveries, 25% of the fleet will be older than 20 years. Therefore, the effective fleet growth is likely to be less than what the order book suggests. Slide 17, please. The total addressable market diminishes as vessels age. The trading patterns of MR vessels built in 2004 observed over the last 8 years clearly demonstrates this decline. Speaker 100:12:24At age 12, these vessels carried 3,200,000 barrels of refined product per year. By the time they reached 16 to 18 years old, they carried 2,100,000 barrels per year, a decline of 33%. As these vessels approach 20 years, their capacity declines even further to 1,800,000 barrels, translating to a total reduction of over 40% in volume compared to age 12. One might argue this could have declined even further without the additional demand from sanctioned Russian trades. By 2027, more than 1,000 ships will be older than 20 years and the number of MRs over 20 years will increase from 261 today to 525 by 2027. Speaker 100:13:07Many are underestimating the impacts of an aging fleet and overestimating the capacity of the current order book. Year to date, seaborne refined product exports and ton miles have grown by 0.7% and 7.8%, respectively, far exceeding this year's fleet growth of 1.5%. As highlighted earlier, we anticipate that fleet growth will be more modest than the order book implies. If all newbuild LR2s were to operate in the clean market, fleet growth would average around 3.9% annually over the next 3 years. However, the effective fleet growth could be closer to 2.5% per year during this period when factoring LR2s trading in the crude oil market and mild scrapping. Speaker 100:13:50Looking forward, we are very constructive on the supply demand balance. The confluence of factors in today's market are constructive individually, increasing demand, exports and ton miles, structural dislocations in the refinery system, rerouting of global product flows and modest fleet growth. Collectively, they are unprecedented. With that, I will turn it over to Chris. Speaker 300:14:15Thank you, James. Good morning, good afternoon, everyone. Slide 20, please. Over the past 7 quarters, we've generated $1,700,000,000 in adjusted EBITDA and $1,100,000,000 in adjusted net income. These results have enabled us to reduce our debt by $1,000,000,000 pay $121,000,000 in dividends and purchase $786,000,000 of the company's stock in the open market at an average price of about $56 per share. Speaker 300:14:51Our approach to shareholder returns has been to combine the accretive effect of deleveraging along with opportunistic share repurchases and a sustainable dividend. On a year to date basis through September of 2024, we've reduced our debt by over $700,000,000 and returned $365,000,000 or $7.13 per share to shareholders in the form of dividends and stock repurchases. As an additional point of emphasis, the company expects to have completed the 5 year special surveys on almost 60% of the fleet by the end of this year. Not only does this set the company up for a lighter drydock schedule for the next couple of years, but the work performed during these drydocks is expected to enhance the operating efficiency of each vessel going forward. Slide 21, please. Speaker 300:15:46The charts on this slide demonstrate the complete transformation of the company's capital structure over the past 3 years. Less than 3 years ago, the company was highly levered and vulnerable to even mild contractions in the spot market. With the low leverage of the company's balance sheet today, not only can it withstand a contraction in the spot market, but it can thrive due to its cash generation potential driven by low breakeven rates. Our debt reduction efforts continued during the Q3 as we repaid our $64,000,000 term loan with BNP Paribas and Cynosure. This facility was the most expensive bank financing on our balance sheet bearing interest at SOFR plus a margin of 2.91 basis points. Speaker 300:16:30We also executed an agreement with the lenders on our $225,000,000 credit facility to convert this facility into a revolving credit facility. This amendment gives the company the flexibility to make unscheduled repayments that can be redrawn in the future. A full repayment of this facility could potentially reduce our daily cash breakeven costs, which include vessel operating costs, cash G and A, interest payments and regularly scheduled loan amortization by almost $8.50 per day. As shown in the table on the right, our gross and net debt as of today stands at $896,000,000 $675,000,000 respectively. On a pro form a basis, which assumes the closing of 3 remaining vessel sales, which are expected to close within the Q4 of 2024, our net debt would be below $520,000,000 This compares to net debt of $1,300,000,000 at the same time last year. Speaker 300:17:32Slide 22 please. Through the end of 2025, our ongoing quarterly scheduled principal repayment obligations on our secured debt are less than $20,000,000 per quarter. This illustrates the company's low leverage and cash generation potential. With a daily cash breakeven rate of approximately $12,500 per day, these debt service obligations are highly manageable and position the company to generate cash flow and sustain shareholder returns even in the most challenging rate environments. Slide 23 please. Speaker 300:18:10We are currently exiting the seasonal low point of the year and are now seeing positive signs of momentum in the spot market. Our quarter to date coverage on our LR2s and MRs, which incorporate the effect of this seasonality, still reflect cash generation of over $18,000 per day $8,000 per day respectively on these vessels. To further illustrate the company's cash generation potential, at $20,000 per day, the company can generate up to $271,000,000 in cash flow per year. At $30,000 per day, the company can generate up to $632,000,000 in cash flow per year. And at $40,000 per day, the company can generate up to $994,000,000 in cash flow per year. Speaker 300:18:57With that, I'd like to turn the call over to Q and A. Operator00:19:03We'll now begin the question and answer And our first question comes from Omar Nakda with Jefferies. Please go ahead. Speaker 400:19:36Thank you. Hey guys, good morning, good afternoon. Obviously, a lot going on. I just wanted to ask, obviously, on DHT being the big news today. You put $89,000,000 to work there. Speaker 400:19:49It sounds from Emanuele's comments in the beginning of the call that you're bullish on crude. I wanted to just ask, how do you view this playing out in terms of the longevity of the trade? Is this a short term trade to take advantage of potential winter strength? Or is this more of a long term holding given the dynamics of the limited supply in VLCC? Speaker 500:20:14Thanks, Omar. I think that there are a couple of things. First of all, we can see that we can afford to do this. We have a lot of liquidity and the liquidity is $463,000,000 doesn't even include the liquidity we could use with unassuming, dollars So there's no way that this investment in DHT is at all restricting our ability to buy our own stock. We really wished that the rules related to buybacks have been a little bit different. Speaker 500:21:03Now we've been quite severely restricted during these last weeks. We haven't been able to buy for a number of days now. And even during the period where we could not buy because of the drop in volume, even though we were doing the maximum we could buy in many days, that was inadequate to us. We wish we could have bought more. But even if we could have just bought all the time, all the way through this, we would still have enough money to do what we see with the DHT trade, which is to take advantage of something that is pretty unusual. Speaker 500:21:41For a few years now, the VLCC market has underperformed itself, has been a potential negative for the product market because its weakness and along with the crude market has drawn vessels from the crude into the product at time. And now we're seeing that this is going to change that we see for the first time that this winter is lining up to be a very strong winter for the crude side and that's going to be additive to our product tankers. We're seeing it already starting to happen in the LR2s. And that setting, we think DHT is very undervalued and we that's just setting up for a great investment for the company. It's proven to be a liquid stock. Speaker 500:22:34We don't have we don't foresee having the need to access the capital to help buy our own stock, but we could do if we had to. And it's like any other investment. You watch how it goes. We think that this could be a very good long term position. The company is returning a lot of capital during its week period. Speaker 500:23:07So we've already received one dividend of our purchase price. As you point out, the supply demand balance looks very attractive for VLCCs. So I don't think you use a public company as a short term trading vehicle in the onset when you go in. So the intention here would be for because you've got great fundamentals for a period in the VLCC market. Speaker 400:23:46Thanks, Robert. Got it. That's very helpful. I appreciate the context. And maybe just as a follow-up, and I'll turn it over, the 4.9%, clearly there's a I'm guessing that's by design, but is that the extent of it? Speaker 400:24:01Would you like would you look to add to it? And then would you want to add either VLCC or crude exposure in any other way? Speaker 500:24:10I think this is a it was an exceptional opportunity. The markets the stock markets have been going just like we see in products. I mean the actual Q3, if we look at the reality of the generation, the cash generation for STNG has been fantastic. The rates during that period for any of us who've been in the industry for a reasonable while are absolutely fantastic. The rates as we're coming out of this Q3 right now today in the LR2s and the MRs are you could take the rate from 30 to 50 in one trading week in the LR2s as you approach this winter position. Speaker 500:24:54I'm sure Lars will talk about it later. But the that opportunity arose the same in crude, where the crude was consistently improving despite very low exports during particularly September, October. And so we were able to take this opportunity is by design that we stopped at 4.9%. We wanted to make it clear to the market. I think it would have been a mixed message if we had gone from 4.9% filing to a filer of 6%, 7%, 8%. Speaker 500:25:39I think that would be, let's say, too aggressive movement could lead to the thought that we weren't a passive investor, that there was going to be Act 2 or Act 3 or something. There's so by design, we're stopping at that position. We do not see ourselves acquiring VLCCs. There's no really no thought at all to do that. We managed to acquire, if you want to put it that way, VLCCs, if you were to put finance on them, we managed to buy 2, 3, 4, 5 VLCC equivalents, but we happen to have bought it at 20% below the sale price. Speaker 500:26:31So we're happy and content with what we got. Speaker 400:26:38Yes, yes, certainly. Okay. Well, thanks, Robert. That's it for me. I'll pass it over. Operator00:26:46And our next question comes from Jon Chappell with Evercore ISI. Please go ahead. Speaker 600:26:53Thank you. James, as it relates to the bigger ships encroaching on the product trades, I understand that they're leaving now, which makes complete sense from a seasonal basis. We also kind of were led to understand over the years that these are kind of new build VLCCs or Suezmaxes never carried a crude cargo before, kind of made it easy to trade in the product on their maiden voyage. But it seems like a lot of what's happened in the last couple of months are actually established ships who had moved crude before. So can you kind of help us understand the process and how they were able to switch so quickly between crude and product? Speaker 600:27:27And is this going to be a risk for seasonal kind of shoulder periods going forward, the ability to move back and forth that quickly, especially of ships of that size? Speaker 700:27:37Lars, do you want me Speaker 100:27:38to take this or would you like to? Speaker 700:27:41No, I'll give it a stab. Thanks. Hi, John. I mean, first of all, the ships we're talking about right now are basically ships that are dirty and have cleaned up at great expense. The spread between the clean and the dirty market had to be that great to be able to take the risk in terms of spec and degradation of spec, the time that it would take to clean up the vessels, also the type of cargo that you have to load also has to be able to manage an uncoated vessel. Speaker 700:28:16So we had a huge market on LR2s in the middle of the year around June, July. The crude market at that point in time was languishing and there was a massive spread where traders could say, well, we're willing to take that particular risk. And we saw about, I don't know, 65,000,000 barrels of product moving on we count 32 or 35 Suezmaxes and 14 VLCCs, which is about 86 to 90 LR2 equivalents. This impacted, of course, the LR2 market and the MR market to some extent also the LR1 market. What we can see now is that since then, and this is looking back to June and to where we are now, on the VLs of the 14, 7 have gone back to 30. Speaker 700:29:07There's still 3 of those that are on a clean voyage. They're all trading off as we can see it off West Africa. They could have spec issues. They could be storages because they're cheap and so on. But in terms of Suezmaxes, we counted 35. Speaker 700:29:24We can see that 23 of those have gone back. There are still about 10 on those voyages. And then you think about, well, where are we now in terms of number of ships being fixed in that segment? And we can see for October, that's only one ship, one VL that has gone into this thing and there's only a small handful of Suezmaxes. So there's a huge change in terms of that volume. Speaker 700:29:52And if you say it's given that the volume in the Middle East and West Coast of India is constant or relative constant despite the large turnarounds that are taking place, in particular in Yanbu and also in Azura has 2 trains under that are just about to start on some of their maintenance. You are really talking about huge amount of volume that suddenly is going to go back into the CPP trade. And the reason for that is that the spread between the CPP and the crude has now drawn in and it doesn't now make it at the margin beneficial to kind of expense yourself with cleaning up vessels. So we have seen now a huge amount of VLCCs and the Suezmaxes going back into dirty. So when the market was trading $8,000,000 $9,000,000 for a LR2 and it was trading at $3,000,000 or something like that for a VLCC, you could see that you could load 3 LR2 cargoes in and you had a big spread. Speaker 700:30:54That no longer is the case. And therefore, we believe that we have a lot more cargo coming in once we get through the markets as we see it right now. Speaker 600:31:05Okay. I'll just keep my follow-up somewhat on the same thematic. Between that kind of variability of older ships or not older ships, bigger ships coming in and out and also the order book picking up a little bit for product tankers in 25 relative to the last few years. Do you envision more volatility in the segments that you operate in, especially the LR2s as the bigger ships than we've seen over the last couple of years, maybe a wider spread of highs and lows? And if not, why? Speaker 700:31:35I think we have seen immense volatility over the last couple of years, which we embrace. I think the volatility kind of is a telling tale about how strong the markets are underlying, where suddenly you can see these big jumps that Robert also alluded to. And we've seen those jumps throughout this year as well. And we've seen them on in the West, in particular, in the U. S. Speaker 700:31:59Gulf on numerous occasions as well this year on the MRs. When it comes to, I think, the first point you made, which I didn't really answer properly, John, was the fact of having new buildings coming into the market, be it Suezmax or VLCCs has been something that has been going on for years, right? When you have a completely virgin tanks, people will be able to load the gas oils and the ULSDs, etcetera. And we anticipate that to happen going forward as well. But that's just par for the course. Speaker 700:32:30That's normal. So we don't consider that to be a big issue. I think there's a number of Suezmaxes that are coming out next year, very few sorry, very few VLCCs. So on balance, that is something that's just kind of normal. When it comes into the fact of these huge immense spreads that we saw in the middle of the year between VLCC and LR2, that could happen again. Speaker 700:32:55Then you would have to have a stronger view on where you think that the VLCC market is going to go as we move into the Q4 and the Q1. And there we are a lot more constructive now than we were, let's say, a year ago. Speaker 600:33:08Got it. Thanks Lars. Operator00:33:12And our next question comes from Greg Lewis with BTIG. Please go ahead. Speaker 800:33:17Yes. Hi. Thank you and good morning and thanks for taking my questions. I was hoping you could kind of talk a little bit about what you're seeing in the sales and purchase market? I mean, clearly, you guys have sold a couple of vessels. Speaker 800:33:33It seems like maybe not on the in the MR side on the older vessels, you don't have many of those, but we're hearing reports of those kind of assets kind of selling off. Kind of any color what you're seeing? Is it been a lack of buyer interest, more sellers coming to market? Any kind of color there would be helpful. Speaker 200:33:58I'll take this. Thanks for the question. I think the market has remained quite stable on the levels from an S and P standpoint. As you have seen as far as we are concerned, we try to always sell the next chip at a higher level than we were selling the previous one. And we've been riding that wave, looking for quality rather than quantity, not needing to sell and wanting to always capture the best price to date. Speaker 200:34:35This has as far as we are concerned limited the quantity, but went with always an increasing price level as I just described. Market wise on the bigger ships there has been less appetite than on the MRs. This is why we've been selling less LR2s than MRs. MRs by definition are the workhorse of the product space and it is an easier vessel to trade for a bigger spectrum of buyers or operators. So we found more depth into that market. Speaker 200:35:16And bear in mind that, of course, we've stayed far away from any doubtful potential buyer on the gray fleet or anything like it by definition not even entertaining discussions on people that we didn't have a clarity of without even having to conduct the KYC. So we've been we are satisfied with what we have done and we are also satisfied of how the market is holding up. Of course, people are trying, right? There is it's normal. There has been a dip in seasonality on the rate side and people have been trying to throw lower numbers to see the reactions. Speaker 200:36:01And they so far didn't get very far. So I'm not talking with us, which they would go nowhere, but more broadly from a market perspective. So it remains to see how the next couple of weeks boil out pan out and see whether the winter market, which we are expecting to come, will come. And then I expect the S and P market to stabilize as well. Speaker 800:36:26Okay, great. Super helpful. And then in the prepared remarks, you guys highlighted the Phillips closure out on the West Coast. Any kind of thoughts around how that impacts the market in terms of those volume replacements, whether that's U. S. Speaker 800:36:45Golf on pipe U. S. In the U. S. Golf on pipelines, does it impact exports? Speaker 800:36:50Any kind of high level views on that closure and what that could mean for U. S. Exports imports on the product side? Speaker 100:37:00Sure. Greg, it's James and Lars, feel free to add. But I think this closure is going to require imports to come from Asia. You're going need gasoline and distillate to replace that, probably 70,000, 80,000 barrels. But I think what's more important is it sets the tone for some of these regions that are going to have a difficult time with their older capacity. Speaker 100:37:24So we don't think it's, for example, the only refinery that could close in California. Valero kind of highlighted some of the challenges that they have there. And it's probably something we'll see or have seen in Europe. So we expect this to continue. I think you had a really high crack spread environment for 2 years as cracks have come in. Speaker 100:37:44There's a lot of costs that need to go into maintaining these refineries and the economics don't make sense. So we view this as not only constructive in the short term, but definitely in the long term for flows. Speaker 800:37:57Okay, great. Super helpful. Thank you. Operator00:38:02And our next question comes from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:38:08Hey, great. Good morning. So I guess if we look at the 35% bookings for quarter to date, a deceleration in rates as you mentioned, but market rates you noted are starting to drive. I don't know if Cameron or Lars, I don't know if you want to give maybe a little historical perspective. How do you think how do you see this shaping up seasonally? Speaker 900:38:28Is this an early start or late start? I don't know if you want to put it in perspective of given the excess new builds in terms of capacity or if given the timing of the shutdowns, maybe just give some perspective on how we should think about the seasonality of rates as we head into the Thanksgiving that Robert always talks about as the key startup? Speaker 700:38:52I was just going to say exactly that the old school kind of thought process is that the market always starts around Thanksgiving. Obviously, that's been a very different game over the game over the last couple of years in terms of the seasonality and where we expect the market to come in. I think the most important thing is that when you look at the refining capacity that's offline for September October, we're trending at 7.7 for September and 8,500,000 barrels per day for October. That kind of rapidly draws down in November to 5 1,000,000 and then suddenly for December, it's down at 3.5. And then for Q1, we're trending around 2,200,000 barrels offline globally. Speaker 700:39:35So there's a huge amount of oil that's going to have to come to market from that perspective. The question, of course, is that when you want to go into the macro or the micro of that is that short haul, long haul? Is that ARB related? What's going to happen? That's always the defining factor. Speaker 700:39:52But the thing that's always interesting when it comes to Q4 drivers, the refining runs that we're going to see that's going to come online in Asia, the Middle East, but also for Europe and North America, right? We've got, I think, for October November September, October, sorry, I'm just looking at the numbers here. That's about $3,000,000 put together. That's $1,400,000,000 in North America and Europe is $1,300,000,000 $1,700,000 North America and $1,800,000 So in October, we've got $3,500,000 barrels offline in the Atlantic basin that comes back on stream. So obviously, refining runs is a big ticket item. Speaker 700:40:31The thing as well is the Northern Hemisphere weather delays. We've talked about that years gone by. That also always plays a small role as well. But the thing as well that's important is the fungibility of these different types of vessels. We talked about before the issues around the cannibalization of the 65,000,000 barrels that we saw over June to September. Speaker 700:40:57I mean, that's a huge amount of LR2 equivalents, but that also impacted the MRs. We have a perpetual open market in terms of arms from the U. S. Gulf going to Europe in terms of distillate that has always been there. And then we've had a very weak TC2 market over the last couple of months, which probably is going to be prolonged because of the turnarounds that we're seeing in Europe at the moment. Speaker 700:41:21But the fact of the matter is that on balance, you've got a lot of more product that is going to come to the market that needs to be shipped. Speaker 900:41:27Yes. Just to put in perspective, when you look at the barrel numbers you threw out the $7,700,000 in September 8.5 in October, is that seasonally I'm just trying to understand the rate of change potential. Is that normal level? Is that higher than normal in terms of what's offline? When you I'm just trying to understand the potential acceleration as we move toward November. Speaker 700:41:50I'm probably going to ask James. He probably has the numbers for the previous years. But the only thing I do recall is over the last couple of years we've seen before because of the very high margin environments, people were pushing refining maintenance forward and backwards to fit into their kind of profile in terms of where they want to be. So it is quite normal to see these type of turnarounds when it comes to the Middle East and into Asia. North America, I think, has been a little bit different over the years because of refining margins, particularly in the U. Speaker 700:42:23S. Gulf being so high. But I'll see if James has anything to add. Speaker 100:42:28Yes. No, I agree with Lars. I'd say it's been above average this year. Ken, if you look historically what happens in certain years where it looks really high is because of a hurricane that will impact specifically the U. S. Speaker 100:42:41Gulf. But we were projecting to give you an idea maybe about 5,000,000 barrels a day of capacity offline for September October and it came in about 3,000,000, 3,500,000 more. But keep in mind, refiners keep this close to their chest. A lot of the refineries have trading arms and things like that. So we do find this out a little bit later, but it was above average, which means we should get a bigger boost as it comes back online. Speaker 900:43:08Appreciate that. And if I can get my second question on your cost per day, your operating cost per day, it looked like the MRs really took a jump up about 8% sequentially, the others kind of more in line with kind of a normal step up. I just want to understand, was there anything going on that kind of changes those cost per days as we start to think about kind of running forward? Is it inflation? Was it labor costs? Speaker 900:43:30I don't know if there's anything particular to the MRs that you'd highlight. Speaker 300:43:36Hey, Ken, it's Chris. I'll take that one. Nothing in particular. You have to look at the running costs more on a year to date basis. They tend to be lumpy throughout the year. Speaker 300:43:49There we're still seeing inflationary pressures. And yes, there's still slight upward cost movements in our running costs. But I wouldn't if you're looking for a forward run rate, I would look more at the year to date figure than just Q3 in isolation. Speaker 900:44:10Okay. But I guess when you have a 1% increase in LR2 cost per day on your sheet, but an 8% MR, is there Speaker 300:44:19Right. That starts quarter over that you're comparing a quarter to another quarter. It's not as pronounced when you compare it on a year to date basis. And there's no if you look at the numbers and there's it's a high volume of data, there's nothing that huge that stands out. It's just data, it's just normal operating repairs and maintenance, spares and stores purchases, things like that. Speaker 1000:44:47Got it. All right. Thanks guys. Appreciate the time. Operator00:44:52Next question comes from Chris Robertson with Deutsche Bank. Please go ahead. Speaker 1100:44:58Hey, good morning everybody and thanks for taking my questions. This kind of harkens back to Sean's question around volatility, but it relates to the 1 3 year time charter market. So just wanted to get a sense if you're getting healthy levels of incoming inquiries around the 1 3 year time charter market, how would you characterize the bid ask spread in the market at the moment? And given your positive commentary around supply and demand dynamics, would you be looking to put away additional tonnage on time charter or are you leaning more into the spot market at this point? Speaker 500:45:33I'll just take the last part of the question. We'll just continue what our policy is on time charter, which is if we have a customer, a good strategic partner who wants to do a 3 or 5 year charter, then I think we'll engage with that discussion. Otherwise, we are very constructive on the market at this point, the spot market. Speaker 1100:46:06Okay. Yes, thanks, Robert. And I guess any color on level of incomings? Or is there a narrow or wide bid ask spread in that market at the moment? Or how would you characterize Speaker 200:46:18it? I think it reflects a little bit my answer on the S and P side, where with the dip that there has been over the last month and a half in rates, Of course, charters are trying to get better rates for them before the winter starts. Having said that, there hasn't been a lot of volume of deals done because we wouldn't fix below what we've done, for example, to echo what Robert just said. And so people are on a wait and see situation here for the next couple of weeks, I guess, before the winter market shows up. Speaker 1100:47:06Yes, makes perfect sense. I appreciate it. Thanks for answering the question. Speaker 500:47:12I think Chris, everything is rather like traditionally in stock prices. As soon as the winter market starts to move up, then the bid gets firmer on the time charter market just in the same way as stocks get firmer. But people have to wait to see Speaker 1100:47:30it. That's a fair comparison. Thanks, Robert. Operator00:47:37And our next question comes from Frode Morkedal with Clarkson Securities. Please go ahead. Speaker 1200:47:44Thank you. Hi, guys. Yes, considering the fleet growth figures you mentioned, I agree that it's clearly important to account for the LR2s trading there. But do you also think that there is a need for product tankers to slow steam or reduce speed more to comply with the carbon regulations despite the strong markets you're seeing, right? If so, how significant could this be? Speaker 100:48:15Frode, absolutely. I think you probably have a better number than I do on that. But what I would say is, I still think that impact is going to be less than the MRs, for example, going from 250 today over 20 years to 550 by 2027. And that carrying capacity and the vessels that trade in those markets completely changing on a basis we've never seen before. Because if you go back from 2004 to 2010, the fleet grew 11% per year, 70%, 80% fleet growth. Speaker 100:48:51All those vessels are now hitting each year that 20 year age mark. And we can debate maybe how many vessels a customer will take at 16 or 17 years old, but at 20 plus, we all know that's a tertiary market limiting trading patterns. So I think that's where we focus most of our analysis to say this will be the biggest impact on fleet growth. But we do definitely think that the environmental impacts will also be significant. Speaker 1200:49:18That's good to hear. Next question is on the Handymax. Earnings there seem to be relatively weak compared to MRs. Anything what's driving that market weakness? Speaker 700:49:36I'll take that. So over the last 2 years, we have seen unbelievable handy markets, primarily because of the issues around the supply of distillate with Russia being taken out of the market. But there's been some couple of trends that we've seen lately. 1, of course, is very much down to the refineries going through their maintenance, the MR market capping the Handy market as well. So even though that there is a Handy market that is about to go, the MR weakness because of the TC2 being weak has capped that market as well. Speaker 700:50:14I also think that smaller things like the fire that we saw in Agio Theodori in Greece, the force majeurs in Libya has not helped with the overall cargo count. We had anticipated that with the VLs and Suezmaxes coming up to Northwest Europe that because of the size of these vessels that there will be a lot of STS to take place that didn't really take place didn't really happen. And then the third thing that I think is also important to understand the handy market is that there is a big difference between the dirty handy market, the clean handy market, the difference between the Northwest Europe handy market and the Mediterranean handy market. So there are markets right now that are trading reasonably well, dollars 18,000, dollars 19,000 dollars 20,000 a day. And then you've got other markets in the short term that have kind of sitting there and trading water. Speaker 700:51:06One thing is for certain that every time that we have seen a Handy market going into the Q4, it suddenly has a lot to be said to these ships in terms of what their earning potential is as we move into November December and into the Q1. Overall, for the year of the Handys, I think it's been fantastic. It's only of late that we've seen this. I think it's primarily due to the reasons that I just mentioned. But at the same time, as people probably are aware, that the aging fleet of the Handys is probably more prevalent than it is in any other segment. Speaker 700:51:41We are blessed with the younger fleet of the Handys and we can see that we are still kind of the vessel of choice. Speaker 1200:51:50That's good to hear. Good color. Thank you. Operator00:51:56Our next question comes from Liam Burke with B. Riley FBR. Please go ahead. Speaker 1300:52:01Yes, thank you. On asset sales, you sold the 2019 Built LR2 and you published the price on it. And Emanuele earlier in his discussion said that you'd be hesitate to ever sell assets at unless it was at a higher level from the previous sale. Is there interest if prices on assets remain higher, would you be interested or would you think about selling more LR2s or do you have to balance that against the return the fleet can provide you? Speaker 500:52:36No, I think we've been very consistent over this now for 2 or 3 quarters that we don't see a we see this beneficial to the extent that you have such a wide spread on the price to NAV to always look at opportunistically at selling an asset at a very high price. That's just common sense. This is not any more complicated than that. And we have certainly have enough assets. And remember, our assets are in pools too where we can continue to do that without affecting our operating platform. Speaker 1300:53:24Okay. Fair enough. And on the debt side, Chris highlighted some nice leverage on cash costs with the debt reduction. It now the objective to be at net debt 0? Or is there any thought about what Speaker 1100:53:40a prudent level of debt would be? Speaker 500:53:43Well, the only thing that we've made comment on that and we want to remain that is to say that we've obviously reached our targets, which is to have debt net debt to be around the scrap value of the fleet. Speaker 1100:54:01Fair enough. Thank you, Robert. Speaker 500:54:04Not to our advantage to give details on where we're willing to go on our leverage exactly. Speaker 1300:54:12Fair enough. Thank you. Operator00:54:16And the next question comes from Ben Nolan with Stifel. Please go ahead. Speaker 1000:54:21I appreciate it. If I could go back a little bit maybe to the MR markets, I mean, I think a seasonal uplift is a function of the return of crude tankers to the crude trade impacting the LR2 market makes perfect sense. But with crack spread still low, as you mentioned, James, is there is that do you think going to be a drag on some of the normal trading that would typically enhance what would otherwise be an MR and maybe handy recovery? Speaker 100:54:59So the question is how do we see the MR market with crack spreads where they are in kind of the outlook? Is that more Yes. Speaker 1000:55:07Right, right. In terms of that seasonality because I think it's more obvious on the margins. Speaker 500:55:13Maybe I can answer it. What we've also had also been in this last few weeks is you've had an affecting spread. You've had a price premium put into crude oil because of the uncertainty related to the Middle East. And that's compounded by a weak season and a turnaround too and people not feeling anxious to buy stocks ahead of it. So I Speaker 200:55:44think a lot of this Speaker 500:55:45gets sorted out now that oil price is coming down and they can't delay the ship starting the shipments for the next season much longer. Lars, do you Speaker 700:56:02want to Speaker 500:56:02add to that or not? Speaker 100:56:12I would just also add, Robert. I think there's so much negative sentiment, Ben, in kind of the outlook for next year on crude oil and that there's going to be this oversupply. But if you look, the incremental supply from non OPEC regions, mainly the U. S. And Latin Americas, underperformed this year. Speaker 100:56:30And if it underperforms next year, we're going to have a much tighter crude oil market. I think you're going to see a lot of that negative sentiment reverse. I think you'll also see that happen in crack spreads as well because underlying demand has actually been quite good. Speaker 1000:56:45Okay. That's helpful. And if I could go back to, Emmanuele, you were discussing sort of the S and P market, which I appreciate. I was curious if you can maybe frame in the type of buyer for assets in the market. I mean, is there a specific geography or is it traders or who are sort of out there to buy at the moment? Speaker 1000:57:16Is there any pattern? Speaker 200:57:18Very vast. It's a good question, Ben. Very vast. We don't usually disclose our buyers, but I can tell you we've sold in the last 3 months, we've sold ships to a traditional Greek owner, to an oil company based in Asia and to an operator based in South America. So as I said, geographically, only in the last 3 months we went through the world and types or nature of businesses completely different from traditional ship owners to end users to operators. Speaker 200:58:04So the best examples is or the quick answer is extremely vast on both fronts. Speaker 100:58:11Got it. Speaker 500:58:12I think I would also add Ben, I would also add to that. So I think it's quite interesting when I was talking about advancements. It extends also to the charters. You saw us do a charter to out to Brazil earlier a month or so ago. And you're also seeing I think this is something that's perhaps understated in the demand situation because it will it's quite fragmented to the demand side, so it will lead to greater requirements of vessel per ton mile is the growth of those areas in Asia outside of China's demand for products as their economies have grown. Speaker 500:58:57And those countries are not blessed with a whole bunch of refinery capacity. So they're going to be increasing their imports, which is going to which is reflected both in what Emmanuel was talking about in the S and P market as well as what's going to become more apparent on the charter market, both spot and time charter. Speaker 1000:59:20Interesting. All right. Well, I appreciate you guys taking the questions. Speaker 300:59:25Sure. Operator00:59:28This concludes our question and answer session. I would like to turn the conference back over to Emmanuel Alvaro for any closing remarks. Speaker 200:59:37Thank you, operator. There are no closing remarks, rather than thanking everybody for their time today and looking forward to being in touch going forward. Thank you. Operator00:59:49The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallScorpio Tankers Q3 202400:00 / 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.comWarning: “DOGE Collapse” imminentElon Strikes Back You may already sense that the tide is turning against Elon Musk and DOGE. Just this week, President Trump promised to buy a Tesla to help support Musk in the face of a boycott against his company. But according to one research group, with connections to the Pentagon and the U.S. government, Elon's preparing to strike back in a much bigger way in the days ahead.April 27, 2025 | Altimetry (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. 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There are 14 speakers on the call. Operator00:00:00Hello, and welcome to the Scorpio Tankers Third Quarter 20 24 Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the call over to James Doyle, Head of Corporate Development and IR. Operator00:00:36Please go ahead, sir. Speaker 100:00:38Thank you for joining us today. Welcome to the Scorpio Tankers Third Quarter 2024 Earnings Conference Call. On the call with me today are Emanuele Lauro, Chief Executive Officer Robert Bugbee, President Cameron Mackey, Chief Operating Officer Chris Avella, Chief Financial Officer Lars Denker Nielsen, Chief Commercial Officer. Earlier today, we issued our Q3 earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, October 29, 2024, and may contain forward looking statements that involve risk and uncertainty. Speaker 100:01:18Actual 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 earnings press release as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.comandsec.gov. Call participants are advised that the audio of this conference call is being broadcasted live on the Internet and is also being recorded for playback purposes. An archive of this 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. Speaker 100:01:54The presentation is available at scorpiotankers.com on the Investor Relations page under Reports and Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q and A. For those asking questions, please limit the number of questions to 2. Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro. Speaker 200:02:18Thank you, James. Hello, everyone, and thank you for joining us today. We are pleased to report another strong quarter of financial results. In the Q3, the company generated $166,000,000 in adjusted EBITDA $87,700,000 in adjusted net income. While rates experienced a seasonal dip during the quarter, they remain above historical averages. Speaker 200:02:47Thanks to significant improvement in our balance sheet and lower daily breakeven costs, With the rates we have booked in Q4 so far, our LR2s generate $18,000 in cash per day and our MR fleet generates $8,000 per day. And rates have already started to improve particularly on our LR2 segments. Throughout the Q3, we continue our strategy of reducing debt. We've been acting opportunistically and returning capital to shareholders. Since July, we have reduced our debt further by $115,000,000 and significantly decreased our share count. Speaker 200:03:35We have also reduced our daily cash breakevens to $12,500 per day, strategically positioning the company to generate more cash even at lower rates and improve per share earnings. During the quarter, we capitalized on opportunities to sell assets at attractive prices, while also repurchasing our own shares at a discount to net asset value, thereby creating and crystallizing value. We completed the sale of 6 vessels and announced the sale of another 3 vessels expected to close in the Q4. On a pro form a basis, which assumes the closing of the 3 remaining vessel sales and marketable securities, the company has liquidity today of $463,000,000 From April 1, we have repurchased over $300,000,000 of our own shares, representing over 7% of the company. Of these, 3,400,000 shares or around $240,000,000 were purchased since July 1. Speaker 200:04:44Including share buybacks and dividends, we have returned $7.13 per share to shareholders in 2024 so far. Additionally, today, we declared a quarterly dividend of $0.40 per share. In the Q3, we acquired a 4.9% stake in the crude tanker company DHT, a passive but liquid investment that positions us to capitalize on the upside of an improving crude tanker sector. Our outlook for both crude oil and refined products remains positive. And for the first time in several months, we anticipate that improvements in the crude oil market will also positively impact refined products. Speaker 200:05:30With low leverage, strong liquidity and a young fleet, we are exceptionally well positioned. We remain committed to delivering value to our shareholders and we do appreciate your continued support and confidence in Scorpio Tankers. With this, I would like to turn the call to James for a presentation, please. Speaker 100:05:54Thank you, Emanuele. Slide 7, please. Just a few years ago, many would not have believed that MR and LR2 rates could reach $20,000 $30,000 per day, especially during the seasonally weakest part of the year. Product tanker rates remain well above historical averages and are at levels which the company generates significant cash flow. We expect this to continue. Speaker 100:06:20The ongoing strength in the product tanker market is the result of 1, demand consistently outpacing supply 2, increased ton miles as changes in refinery capacity have reshaped global trade flows and 3, geopolitical events exacerbating points 12. Despite facing several challenges in the Q3, including the end of summer driving season, elevated refinery maintenance and competition from crude tankers, the fleet still averaged over $28,000 per day. Notably, these rates have been achieved while undergoing a significant dry docking program. By the end of this year, we will have drydocked almost 60% of the fleet, increasing the efficiency and earnings days for next year. Looking forward, our outlook remains constructive. Speaker 100:07:06Rates have bottomed at very high levels. The market headwinds are becoming tailwinds and it will not require much for rates to increase further. The risk is to the upside. Slide 8 please. From August through October, we saw significant refinery maintenance. Speaker 100:07:26Over the next month, 3,500,000 barrels of capacity will come back online, increasing refinery runs and seaborne exports to meet growing winter demand. We are entering the seasonally strongest period of the year. Q4 and Q1 tanker earnings have consistently exceeded Q3 over the last 30 years. We expect this to continue. Additionally, seasonal improvements in crude tanker rates are also expected to be a tailwind for product tankers. Speaker 100:07:51Slide 9 please. The crude vessels which entered the clean product trade are moving back to carrying crude oil. Of the 45 crude tanker vessels which moved into this trade and excluding the vessels which have recently loaded clean, 32 are expected or have already moved back to carrying crude oil. We do not expect additional vessels to clean up and carry refined products as the off hire time, cleaning costs and trading limitations make this unattractive at current rate levels. The improving crude oil market and exit of these vessels from the clean trade will provide a positive tailwind for LR2s. Speaker 100:08:27Slide 10, please. Diesel and gasoline inventories in the U. S. Are well below the 5 year average. Thus, future demand will rely on refinery production and seaborne exports as opposed to inventory draws. Speaker 100:08:40Slide 11, please. Demand continues to grow. Yes, grow. And we expect demand for refined product to increase by close to 1,000,000 barrels per day next year. We are seeing this demand strength in seaborne exports, which averaged 20,500,000 barrels per day in September, near record highs. Speaker 100:08:59Furthermore, it's not just the volume of products that has grown, the distances these barrels are traveling has also significantly increased. Slide 12, please. Ton mile demand has increased by 17% compared to 2019 levels, excluding Russia and 20% when including Russia. Last week, Phillips 66 announced the closure of its 139,000 barrel per day refinery in Los Angeles. In total, we are tracking closures that could reduce refining capacity by 1,000,000 barrels per day next year. Speaker 100:09:30Many older refineries require significant capital investment to remain operational or meet new regulatory standards. This makes it hard to compete with newer refineries in regions like the Middle East that have lower operating costs and more complex refinery configurations. As a result, we expect more refining capacity to close, which will add incremental ton miles as lost production is replaced with imports. Slide 13, please. Our 2 vessels continue to transit around the Cape of Good Hope. Speaker 100:10:01This has increased voyage distances, ton mile demand and tightened supply. We have not seen any disruption to flows going through the Strait of Hormuz, which accounts for 16,500,000,000 barrels of crude and refined products per day. But the biggest benefit we expect to see on the LR2s is the exit of crude tanker vessels from the clean trade. From June through September, crude tanker vessels carried 65,000,000 barrels of refined product, the equivalent of 87 LR2 cargoes. Slide 14, please. Speaker 100:10:30Year to date, the combined Aframax and LR2 fleet has carried 16,500,000 barrels a day of crude oil and refined products. Of this, over 13,000,000 barrels consist of crude oil and dirty products, while the remaining 3,300,000 barrels has been clean product. However, within the Aframax LR2 fleet today, 39% of the fleet comprises LR2 vessels. Put differently, 39% of the combined fleet is LR2s, but the clean product trade accounts for only 20% of the total cargo volume. Slide 15, please. Speaker 100:11:06This requires the use of LR2 vessels to service the crude oil trade. Currently, 44% of LR2s on the water are engaged in the crude oil and dirty products trade. We expect this ratio to hold, if not grow over time given the age of the Aframax fleet and new orders being predominantly LR2s. Of the 263 Aframax and LR2s that have been ordered since 2021, 203 are LR2s, roughly 77%. This has also inflated the product tanker order book. Speaker 100:11:38Slide 16. While the order book now accounts for 20% of the fleet, half of the order book is LR2s. As we highlighted on the previous slide, we expect a significant portion of the LR2 fleet to continue servicing the crude oil trade. Furthermore, this does not reflect the age challenges facing the fleet today. Today, the fleet is 14 years old. Speaker 100:11:59By 2027, including newbuilding deliveries, 25% of the fleet will be older than 20 years. Therefore, the effective fleet growth is likely to be less than what the order book suggests. Slide 17, please. The total addressable market diminishes as vessels age. The trading patterns of MR vessels built in 2004 observed over the last 8 years clearly demonstrates this decline. Speaker 100:12:24At age 12, these vessels carried 3,200,000 barrels of refined product per year. By the time they reached 16 to 18 years old, they carried 2,100,000 barrels per year, a decline of 33%. As these vessels approach 20 years, their capacity declines even further to 1,800,000 barrels, translating to a total reduction of over 40% in volume compared to age 12. One might argue this could have declined even further without the additional demand from sanctioned Russian trades. By 2027, more than 1,000 ships will be older than 20 years and the number of MRs over 20 years will increase from 261 today to 525 by 2027. Speaker 100:13:07Many are underestimating the impacts of an aging fleet and overestimating the capacity of the current order book. Year to date, seaborne refined product exports and ton miles have grown by 0.7% and 7.8%, respectively, far exceeding this year's fleet growth of 1.5%. As highlighted earlier, we anticipate that fleet growth will be more modest than the order book implies. If all newbuild LR2s were to operate in the clean market, fleet growth would average around 3.9% annually over the next 3 years. However, the effective fleet growth could be closer to 2.5% per year during this period when factoring LR2s trading in the crude oil market and mild scrapping. Speaker 100:13:50Looking forward, we are very constructive on the supply demand balance. The confluence of factors in today's market are constructive individually, increasing demand, exports and ton miles, structural dislocations in the refinery system, rerouting of global product flows and modest fleet growth. Collectively, they are unprecedented. With that, I will turn it over to Chris. Speaker 300:14:15Thank you, James. Good morning, good afternoon, everyone. Slide 20, please. Over the past 7 quarters, we've generated $1,700,000,000 in adjusted EBITDA and $1,100,000,000 in adjusted net income. These results have enabled us to reduce our debt by $1,000,000,000 pay $121,000,000 in dividends and purchase $786,000,000 of the company's stock in the open market at an average price of about $56 per share. Speaker 300:14:51Our approach to shareholder returns has been to combine the accretive effect of deleveraging along with opportunistic share repurchases and a sustainable dividend. On a year to date basis through September of 2024, we've reduced our debt by over $700,000,000 and returned $365,000,000 or $7.13 per share to shareholders in the form of dividends and stock repurchases. As an additional point of emphasis, the company expects to have completed the 5 year special surveys on almost 60% of the fleet by the end of this year. Not only does this set the company up for a lighter drydock schedule for the next couple of years, but the work performed during these drydocks is expected to enhance the operating efficiency of each vessel going forward. Slide 21, please. Speaker 300:15:46The charts on this slide demonstrate the complete transformation of the company's capital structure over the past 3 years. Less than 3 years ago, the company was highly levered and vulnerable to even mild contractions in the spot market. With the low leverage of the company's balance sheet today, not only can it withstand a contraction in the spot market, but it can thrive due to its cash generation potential driven by low breakeven rates. Our debt reduction efforts continued during the Q3 as we repaid our $64,000,000 term loan with BNP Paribas and Cynosure. This facility was the most expensive bank financing on our balance sheet bearing interest at SOFR plus a margin of 2.91 basis points. Speaker 300:16:30We also executed an agreement with the lenders on our $225,000,000 credit facility to convert this facility into a revolving credit facility. This amendment gives the company the flexibility to make unscheduled repayments that can be redrawn in the future. A full repayment of this facility could potentially reduce our daily cash breakeven costs, which include vessel operating costs, cash G and A, interest payments and regularly scheduled loan amortization by almost $8.50 per day. As shown in the table on the right, our gross and net debt as of today stands at $896,000,000 $675,000,000 respectively. On a pro form a basis, which assumes the closing of 3 remaining vessel sales, which are expected to close within the Q4 of 2024, our net debt would be below $520,000,000 This compares to net debt of $1,300,000,000 at the same time last year. Speaker 300:17:32Slide 22 please. Through the end of 2025, our ongoing quarterly scheduled principal repayment obligations on our secured debt are less than $20,000,000 per quarter. This illustrates the company's low leverage and cash generation potential. With a daily cash breakeven rate of approximately $12,500 per day, these debt service obligations are highly manageable and position the company to generate cash flow and sustain shareholder returns even in the most challenging rate environments. Slide 23 please. Speaker 300:18:10We are currently exiting the seasonal low point of the year and are now seeing positive signs of momentum in the spot market. Our quarter to date coverage on our LR2s and MRs, which incorporate the effect of this seasonality, still reflect cash generation of over $18,000 per day $8,000 per day respectively on these vessels. To further illustrate the company's cash generation potential, at $20,000 per day, the company can generate up to $271,000,000 in cash flow per year. At $30,000 per day, the company can generate up to $632,000,000 in cash flow per year. And at $40,000 per day, the company can generate up to $994,000,000 in cash flow per year. Speaker 300:18:57With that, I'd like to turn the call over to Q and A. Operator00:19:03We'll now begin the question and answer And our first question comes from Omar Nakda with Jefferies. Please go ahead. Speaker 400:19:36Thank you. Hey guys, good morning, good afternoon. Obviously, a lot going on. I just wanted to ask, obviously, on DHT being the big news today. You put $89,000,000 to work there. Speaker 400:19:49It sounds from Emanuele's comments in the beginning of the call that you're bullish on crude. I wanted to just ask, how do you view this playing out in terms of the longevity of the trade? Is this a short term trade to take advantage of potential winter strength? Or is this more of a long term holding given the dynamics of the limited supply in VLCC? Speaker 500:20:14Thanks, Omar. I think that there are a couple of things. First of all, we can see that we can afford to do this. We have a lot of liquidity and the liquidity is $463,000,000 doesn't even include the liquidity we could use with unassuming, dollars So there's no way that this investment in DHT is at all restricting our ability to buy our own stock. We really wished that the rules related to buybacks have been a little bit different. Speaker 500:21:03Now we've been quite severely restricted during these last weeks. We haven't been able to buy for a number of days now. And even during the period where we could not buy because of the drop in volume, even though we were doing the maximum we could buy in many days, that was inadequate to us. We wish we could have bought more. But even if we could have just bought all the time, all the way through this, we would still have enough money to do what we see with the DHT trade, which is to take advantage of something that is pretty unusual. Speaker 500:21:41For a few years now, the VLCC market has underperformed itself, has been a potential negative for the product market because its weakness and along with the crude market has drawn vessels from the crude into the product at time. And now we're seeing that this is going to change that we see for the first time that this winter is lining up to be a very strong winter for the crude side and that's going to be additive to our product tankers. We're seeing it already starting to happen in the LR2s. And that setting, we think DHT is very undervalued and we that's just setting up for a great investment for the company. It's proven to be a liquid stock. Speaker 500:22:34We don't have we don't foresee having the need to access the capital to help buy our own stock, but we could do if we had to. And it's like any other investment. You watch how it goes. We think that this could be a very good long term position. The company is returning a lot of capital during its week period. Speaker 500:23:07So we've already received one dividend of our purchase price. As you point out, the supply demand balance looks very attractive for VLCCs. So I don't think you use a public company as a short term trading vehicle in the onset when you go in. So the intention here would be for because you've got great fundamentals for a period in the VLCC market. Speaker 400:23:46Thanks, Robert. Got it. That's very helpful. I appreciate the context. And maybe just as a follow-up, and I'll turn it over, the 4.9%, clearly there's a I'm guessing that's by design, but is that the extent of it? Speaker 400:24:01Would you like would you look to add to it? And then would you want to add either VLCC or crude exposure in any other way? Speaker 500:24:10I think this is a it was an exceptional opportunity. The markets the stock markets have been going just like we see in products. I mean the actual Q3, if we look at the reality of the generation, the cash generation for STNG has been fantastic. The rates during that period for any of us who've been in the industry for a reasonable while are absolutely fantastic. The rates as we're coming out of this Q3 right now today in the LR2s and the MRs are you could take the rate from 30 to 50 in one trading week in the LR2s as you approach this winter position. Speaker 500:24:54I'm sure Lars will talk about it later. But the that opportunity arose the same in crude, where the crude was consistently improving despite very low exports during particularly September, October. And so we were able to take this opportunity is by design that we stopped at 4.9%. We wanted to make it clear to the market. I think it would have been a mixed message if we had gone from 4.9% filing to a filer of 6%, 7%, 8%. Speaker 500:25:39I think that would be, let's say, too aggressive movement could lead to the thought that we weren't a passive investor, that there was going to be Act 2 or Act 3 or something. There's so by design, we're stopping at that position. We do not see ourselves acquiring VLCCs. There's no really no thought at all to do that. We managed to acquire, if you want to put it that way, VLCCs, if you were to put finance on them, we managed to buy 2, 3, 4, 5 VLCC equivalents, but we happen to have bought it at 20% below the sale price. Speaker 500:26:31So we're happy and content with what we got. Speaker 400:26:38Yes, yes, certainly. Okay. Well, thanks, Robert. That's it for me. I'll pass it over. Operator00:26:46And our next question comes from Jon Chappell with Evercore ISI. Please go ahead. Speaker 600:26:53Thank you. James, as it relates to the bigger ships encroaching on the product trades, I understand that they're leaving now, which makes complete sense from a seasonal basis. We also kind of were led to understand over the years that these are kind of new build VLCCs or Suezmaxes never carried a crude cargo before, kind of made it easy to trade in the product on their maiden voyage. But it seems like a lot of what's happened in the last couple of months are actually established ships who had moved crude before. So can you kind of help us understand the process and how they were able to switch so quickly between crude and product? Speaker 600:27:27And is this going to be a risk for seasonal kind of shoulder periods going forward, the ability to move back and forth that quickly, especially of ships of that size? Speaker 700:27:37Lars, do you want me Speaker 100:27:38to take this or would you like to? Speaker 700:27:41No, I'll give it a stab. Thanks. Hi, John. I mean, first of all, the ships we're talking about right now are basically ships that are dirty and have cleaned up at great expense. The spread between the clean and the dirty market had to be that great to be able to take the risk in terms of spec and degradation of spec, the time that it would take to clean up the vessels, also the type of cargo that you have to load also has to be able to manage an uncoated vessel. Speaker 700:28:16So we had a huge market on LR2s in the middle of the year around June, July. The crude market at that point in time was languishing and there was a massive spread where traders could say, well, we're willing to take that particular risk. And we saw about, I don't know, 65,000,000 barrels of product moving on we count 32 or 35 Suezmaxes and 14 VLCCs, which is about 86 to 90 LR2 equivalents. This impacted, of course, the LR2 market and the MR market to some extent also the LR1 market. What we can see now is that since then, and this is looking back to June and to where we are now, on the VLs of the 14, 7 have gone back to 30. Speaker 700:29:07There's still 3 of those that are on a clean voyage. They're all trading off as we can see it off West Africa. They could have spec issues. They could be storages because they're cheap and so on. But in terms of Suezmaxes, we counted 35. Speaker 700:29:24We can see that 23 of those have gone back. There are still about 10 on those voyages. And then you think about, well, where are we now in terms of number of ships being fixed in that segment? And we can see for October, that's only one ship, one VL that has gone into this thing and there's only a small handful of Suezmaxes. So there's a huge change in terms of that volume. Speaker 700:29:52And if you say it's given that the volume in the Middle East and West Coast of India is constant or relative constant despite the large turnarounds that are taking place, in particular in Yanbu and also in Azura has 2 trains under that are just about to start on some of their maintenance. You are really talking about huge amount of volume that suddenly is going to go back into the CPP trade. And the reason for that is that the spread between the CPP and the crude has now drawn in and it doesn't now make it at the margin beneficial to kind of expense yourself with cleaning up vessels. So we have seen now a huge amount of VLCCs and the Suezmaxes going back into dirty. So when the market was trading $8,000,000 $9,000,000 for a LR2 and it was trading at $3,000,000 or something like that for a VLCC, you could see that you could load 3 LR2 cargoes in and you had a big spread. Speaker 700:30:54That no longer is the case. And therefore, we believe that we have a lot more cargo coming in once we get through the markets as we see it right now. Speaker 600:31:05Okay. I'll just keep my follow-up somewhat on the same thematic. Between that kind of variability of older ships or not older ships, bigger ships coming in and out and also the order book picking up a little bit for product tankers in 25 relative to the last few years. Do you envision more volatility in the segments that you operate in, especially the LR2s as the bigger ships than we've seen over the last couple of years, maybe a wider spread of highs and lows? And if not, why? Speaker 700:31:35I think we have seen immense volatility over the last couple of years, which we embrace. I think the volatility kind of is a telling tale about how strong the markets are underlying, where suddenly you can see these big jumps that Robert also alluded to. And we've seen those jumps throughout this year as well. And we've seen them on in the West, in particular, in the U. S. Speaker 700:31:59Gulf on numerous occasions as well this year on the MRs. When it comes to, I think, the first point you made, which I didn't really answer properly, John, was the fact of having new buildings coming into the market, be it Suezmax or VLCCs has been something that has been going on for years, right? When you have a completely virgin tanks, people will be able to load the gas oils and the ULSDs, etcetera. And we anticipate that to happen going forward as well. But that's just par for the course. Speaker 700:32:30That's normal. So we don't consider that to be a big issue. I think there's a number of Suezmaxes that are coming out next year, very few sorry, very few VLCCs. So on balance, that is something that's just kind of normal. When it comes into the fact of these huge immense spreads that we saw in the middle of the year between VLCC and LR2, that could happen again. Speaker 700:32:55Then you would have to have a stronger view on where you think that the VLCC market is going to go as we move into the Q4 and the Q1. And there we are a lot more constructive now than we were, let's say, a year ago. Speaker 600:33:08Got it. Thanks Lars. Operator00:33:12And our next question comes from Greg Lewis with BTIG. Please go ahead. Speaker 800:33:17Yes. Hi. Thank you and good morning and thanks for taking my questions. I was hoping you could kind of talk a little bit about what you're seeing in the sales and purchase market? I mean, clearly, you guys have sold a couple of vessels. Speaker 800:33:33It seems like maybe not on the in the MR side on the older vessels, you don't have many of those, but we're hearing reports of those kind of assets kind of selling off. Kind of any color what you're seeing? Is it been a lack of buyer interest, more sellers coming to market? Any kind of color there would be helpful. Speaker 200:33:58I'll take this. Thanks for the question. I think the market has remained quite stable on the levels from an S and P standpoint. As you have seen as far as we are concerned, we try to always sell the next chip at a higher level than we were selling the previous one. And we've been riding that wave, looking for quality rather than quantity, not needing to sell and wanting to always capture the best price to date. Speaker 200:34:35This has as far as we are concerned limited the quantity, but went with always an increasing price level as I just described. Market wise on the bigger ships there has been less appetite than on the MRs. This is why we've been selling less LR2s than MRs. MRs by definition are the workhorse of the product space and it is an easier vessel to trade for a bigger spectrum of buyers or operators. So we found more depth into that market. Speaker 200:35:16And bear in mind that, of course, we've stayed far away from any doubtful potential buyer on the gray fleet or anything like it by definition not even entertaining discussions on people that we didn't have a clarity of without even having to conduct the KYC. So we've been we are satisfied with what we have done and we are also satisfied of how the market is holding up. Of course, people are trying, right? There is it's normal. There has been a dip in seasonality on the rate side and people have been trying to throw lower numbers to see the reactions. Speaker 200:36:01And they so far didn't get very far. So I'm not talking with us, which they would go nowhere, but more broadly from a market perspective. So it remains to see how the next couple of weeks boil out pan out and see whether the winter market, which we are expecting to come, will come. And then I expect the S and P market to stabilize as well. Speaker 800:36:26Okay, great. Super helpful. And then in the prepared remarks, you guys highlighted the Phillips closure out on the West Coast. Any kind of thoughts around how that impacts the market in terms of those volume replacements, whether that's U. S. Speaker 800:36:45Golf on pipe U. S. In the U. S. Golf on pipelines, does it impact exports? Speaker 800:36:50Any kind of high level views on that closure and what that could mean for U. S. Exports imports on the product side? Speaker 100:37:00Sure. Greg, it's James and Lars, feel free to add. But I think this closure is going to require imports to come from Asia. You're going need gasoline and distillate to replace that, probably 70,000, 80,000 barrels. But I think what's more important is it sets the tone for some of these regions that are going to have a difficult time with their older capacity. Speaker 100:37:24So we don't think it's, for example, the only refinery that could close in California. Valero kind of highlighted some of the challenges that they have there. And it's probably something we'll see or have seen in Europe. So we expect this to continue. I think you had a really high crack spread environment for 2 years as cracks have come in. Speaker 100:37:44There's a lot of costs that need to go into maintaining these refineries and the economics don't make sense. So we view this as not only constructive in the short term, but definitely in the long term for flows. Speaker 800:37:57Okay, great. Super helpful. Thank you. Operator00:38:02And our next question comes from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:38:08Hey, great. Good morning. So I guess if we look at the 35% bookings for quarter to date, a deceleration in rates as you mentioned, but market rates you noted are starting to drive. I don't know if Cameron or Lars, I don't know if you want to give maybe a little historical perspective. How do you think how do you see this shaping up seasonally? Speaker 900:38:28Is this an early start or late start? I don't know if you want to put it in perspective of given the excess new builds in terms of capacity or if given the timing of the shutdowns, maybe just give some perspective on how we should think about the seasonality of rates as we head into the Thanksgiving that Robert always talks about as the key startup? Speaker 700:38:52I was just going to say exactly that the old school kind of thought process is that the market always starts around Thanksgiving. Obviously, that's been a very different game over the game over the last couple of years in terms of the seasonality and where we expect the market to come in. I think the most important thing is that when you look at the refining capacity that's offline for September October, we're trending at 7.7 for September and 8,500,000 barrels per day for October. That kind of rapidly draws down in November to 5 1,000,000 and then suddenly for December, it's down at 3.5. And then for Q1, we're trending around 2,200,000 barrels offline globally. Speaker 700:39:35So there's a huge amount of oil that's going to have to come to market from that perspective. The question, of course, is that when you want to go into the macro or the micro of that is that short haul, long haul? Is that ARB related? What's going to happen? That's always the defining factor. Speaker 700:39:52But the thing that's always interesting when it comes to Q4 drivers, the refining runs that we're going to see that's going to come online in Asia, the Middle East, but also for Europe and North America, right? We've got, I think, for October November September, October, sorry, I'm just looking at the numbers here. That's about $3,000,000 put together. That's $1,400,000,000 in North America and Europe is $1,300,000,000 $1,700,000 North America and $1,800,000 So in October, we've got $3,500,000 barrels offline in the Atlantic basin that comes back on stream. So obviously, refining runs is a big ticket item. Speaker 700:40:31The thing as well is the Northern Hemisphere weather delays. We've talked about that years gone by. That also always plays a small role as well. But the thing as well that's important is the fungibility of these different types of vessels. We talked about before the issues around the cannibalization of the 65,000,000 barrels that we saw over June to September. Speaker 700:40:57I mean, that's a huge amount of LR2 equivalents, but that also impacted the MRs. We have a perpetual open market in terms of arms from the U. S. Gulf going to Europe in terms of distillate that has always been there. And then we've had a very weak TC2 market over the last couple of months, which probably is going to be prolonged because of the turnarounds that we're seeing in Europe at the moment. Speaker 700:41:21But the fact of the matter is that on balance, you've got a lot of more product that is going to come to the market that needs to be shipped. Speaker 900:41:27Yes. Just to put in perspective, when you look at the barrel numbers you threw out the $7,700,000 in September 8.5 in October, is that seasonally I'm just trying to understand the rate of change potential. Is that normal level? Is that higher than normal in terms of what's offline? When you I'm just trying to understand the potential acceleration as we move toward November. Speaker 700:41:50I'm probably going to ask James. He probably has the numbers for the previous years. But the only thing I do recall is over the last couple of years we've seen before because of the very high margin environments, people were pushing refining maintenance forward and backwards to fit into their kind of profile in terms of where they want to be. So it is quite normal to see these type of turnarounds when it comes to the Middle East and into Asia. North America, I think, has been a little bit different over the years because of refining margins, particularly in the U. Speaker 700:42:23S. Gulf being so high. But I'll see if James has anything to add. Speaker 100:42:28Yes. No, I agree with Lars. I'd say it's been above average this year. Ken, if you look historically what happens in certain years where it looks really high is because of a hurricane that will impact specifically the U. S. Speaker 100:42:41Gulf. But we were projecting to give you an idea maybe about 5,000,000 barrels a day of capacity offline for September October and it came in about 3,000,000, 3,500,000 more. But keep in mind, refiners keep this close to their chest. A lot of the refineries have trading arms and things like that. So we do find this out a little bit later, but it was above average, which means we should get a bigger boost as it comes back online. Speaker 900:43:08Appreciate that. And if I can get my second question on your cost per day, your operating cost per day, it looked like the MRs really took a jump up about 8% sequentially, the others kind of more in line with kind of a normal step up. I just want to understand, was there anything going on that kind of changes those cost per days as we start to think about kind of running forward? Is it inflation? Was it labor costs? Speaker 900:43:30I don't know if there's anything particular to the MRs that you'd highlight. Speaker 300:43:36Hey, Ken, it's Chris. I'll take that one. Nothing in particular. You have to look at the running costs more on a year to date basis. They tend to be lumpy throughout the year. Speaker 300:43:49There we're still seeing inflationary pressures. And yes, there's still slight upward cost movements in our running costs. But I wouldn't if you're looking for a forward run rate, I would look more at the year to date figure than just Q3 in isolation. Speaker 900:44:10Okay. But I guess when you have a 1% increase in LR2 cost per day on your sheet, but an 8% MR, is there Speaker 300:44:19Right. That starts quarter over that you're comparing a quarter to another quarter. It's not as pronounced when you compare it on a year to date basis. And there's no if you look at the numbers and there's it's a high volume of data, there's nothing that huge that stands out. It's just data, it's just normal operating repairs and maintenance, spares and stores purchases, things like that. Speaker 1000:44:47Got it. All right. Thanks guys. Appreciate the time. Operator00:44:52Next question comes from Chris Robertson with Deutsche Bank. Please go ahead. Speaker 1100:44:58Hey, good morning everybody and thanks for taking my questions. This kind of harkens back to Sean's question around volatility, but it relates to the 1 3 year time charter market. So just wanted to get a sense if you're getting healthy levels of incoming inquiries around the 1 3 year time charter market, how would you characterize the bid ask spread in the market at the moment? And given your positive commentary around supply and demand dynamics, would you be looking to put away additional tonnage on time charter or are you leaning more into the spot market at this point? Speaker 500:45:33I'll just take the last part of the question. We'll just continue what our policy is on time charter, which is if we have a customer, a good strategic partner who wants to do a 3 or 5 year charter, then I think we'll engage with that discussion. Otherwise, we are very constructive on the market at this point, the spot market. Speaker 1100:46:06Okay. Yes, thanks, Robert. And I guess any color on level of incomings? Or is there a narrow or wide bid ask spread in that market at the moment? Or how would you characterize Speaker 200:46:18it? I think it reflects a little bit my answer on the S and P side, where with the dip that there has been over the last month and a half in rates, Of course, charters are trying to get better rates for them before the winter starts. Having said that, there hasn't been a lot of volume of deals done because we wouldn't fix below what we've done, for example, to echo what Robert just said. And so people are on a wait and see situation here for the next couple of weeks, I guess, before the winter market shows up. Speaker 1100:47:06Yes, makes perfect sense. I appreciate it. Thanks for answering the question. Speaker 500:47:12I think Chris, everything is rather like traditionally in stock prices. As soon as the winter market starts to move up, then the bid gets firmer on the time charter market just in the same way as stocks get firmer. But people have to wait to see Speaker 1100:47:30it. That's a fair comparison. Thanks, Robert. Operator00:47:37And our next question comes from Frode Morkedal with Clarkson Securities. Please go ahead. Speaker 1200:47:44Thank you. Hi, guys. Yes, considering the fleet growth figures you mentioned, I agree that it's clearly important to account for the LR2s trading there. But do you also think that there is a need for product tankers to slow steam or reduce speed more to comply with the carbon regulations despite the strong markets you're seeing, right? If so, how significant could this be? Speaker 100:48:15Frode, absolutely. I think you probably have a better number than I do on that. But what I would say is, I still think that impact is going to be less than the MRs, for example, going from 250 today over 20 years to 550 by 2027. And that carrying capacity and the vessels that trade in those markets completely changing on a basis we've never seen before. Because if you go back from 2004 to 2010, the fleet grew 11% per year, 70%, 80% fleet growth. Speaker 100:48:51All those vessels are now hitting each year that 20 year age mark. And we can debate maybe how many vessels a customer will take at 16 or 17 years old, but at 20 plus, we all know that's a tertiary market limiting trading patterns. So I think that's where we focus most of our analysis to say this will be the biggest impact on fleet growth. But we do definitely think that the environmental impacts will also be significant. Speaker 1200:49:18That's good to hear. Next question is on the Handymax. Earnings there seem to be relatively weak compared to MRs. Anything what's driving that market weakness? Speaker 700:49:36I'll take that. So over the last 2 years, we have seen unbelievable handy markets, primarily because of the issues around the supply of distillate with Russia being taken out of the market. But there's been some couple of trends that we've seen lately. 1, of course, is very much down to the refineries going through their maintenance, the MR market capping the Handy market as well. So even though that there is a Handy market that is about to go, the MR weakness because of the TC2 being weak has capped that market as well. Speaker 700:50:14I also think that smaller things like the fire that we saw in Agio Theodori in Greece, the force majeurs in Libya has not helped with the overall cargo count. We had anticipated that with the VLs and Suezmaxes coming up to Northwest Europe that because of the size of these vessels that there will be a lot of STS to take place that didn't really take place didn't really happen. And then the third thing that I think is also important to understand the handy market is that there is a big difference between the dirty handy market, the clean handy market, the difference between the Northwest Europe handy market and the Mediterranean handy market. So there are markets right now that are trading reasonably well, dollars 18,000, dollars 19,000 dollars 20,000 a day. And then you've got other markets in the short term that have kind of sitting there and trading water. Speaker 700:51:06One thing is for certain that every time that we have seen a Handy market going into the Q4, it suddenly has a lot to be said to these ships in terms of what their earning potential is as we move into November December and into the Q1. Overall, for the year of the Handys, I think it's been fantastic. It's only of late that we've seen this. I think it's primarily due to the reasons that I just mentioned. But at the same time, as people probably are aware, that the aging fleet of the Handys is probably more prevalent than it is in any other segment. Speaker 700:51:41We are blessed with the younger fleet of the Handys and we can see that we are still kind of the vessel of choice. Speaker 1200:51:50That's good to hear. Good color. Thank you. Operator00:51:56Our next question comes from Liam Burke with B. Riley FBR. Please go ahead. Speaker 1300:52:01Yes, thank you. On asset sales, you sold the 2019 Built LR2 and you published the price on it. And Emanuele earlier in his discussion said that you'd be hesitate to ever sell assets at unless it was at a higher level from the previous sale. Is there interest if prices on assets remain higher, would you be interested or would you think about selling more LR2s or do you have to balance that against the return the fleet can provide you? Speaker 500:52:36No, I think we've been very consistent over this now for 2 or 3 quarters that we don't see a we see this beneficial to the extent that you have such a wide spread on the price to NAV to always look at opportunistically at selling an asset at a very high price. That's just common sense. This is not any more complicated than that. And we have certainly have enough assets. And remember, our assets are in pools too where we can continue to do that without affecting our operating platform. Speaker 1300:53:24Okay. Fair enough. And on the debt side, Chris highlighted some nice leverage on cash costs with the debt reduction. It now the objective to be at net debt 0? Or is there any thought about what Speaker 1100:53:40a prudent level of debt would be? Speaker 500:53:43Well, the only thing that we've made comment on that and we want to remain that is to say that we've obviously reached our targets, which is to have debt net debt to be around the scrap value of the fleet. Speaker 1100:54:01Fair enough. Thank you, Robert. Speaker 500:54:04Not to our advantage to give details on where we're willing to go on our leverage exactly. Speaker 1300:54:12Fair enough. Thank you. Operator00:54:16And the next question comes from Ben Nolan with Stifel. Please go ahead. Speaker 1000:54:21I appreciate it. If I could go back a little bit maybe to the MR markets, I mean, I think a seasonal uplift is a function of the return of crude tankers to the crude trade impacting the LR2 market makes perfect sense. But with crack spread still low, as you mentioned, James, is there is that do you think going to be a drag on some of the normal trading that would typically enhance what would otherwise be an MR and maybe handy recovery? Speaker 100:54:59So the question is how do we see the MR market with crack spreads where they are in kind of the outlook? Is that more Yes. Speaker 1000:55:07Right, right. In terms of that seasonality because I think it's more obvious on the margins. Speaker 500:55:13Maybe I can answer it. What we've also had also been in this last few weeks is you've had an affecting spread. You've had a price premium put into crude oil because of the uncertainty related to the Middle East. And that's compounded by a weak season and a turnaround too and people not feeling anxious to buy stocks ahead of it. So I Speaker 200:55:44think a lot of this Speaker 500:55:45gets sorted out now that oil price is coming down and they can't delay the ship starting the shipments for the next season much longer. Lars, do you Speaker 700:56:02want to Speaker 500:56:02add to that or not? Speaker 100:56:12I would just also add, Robert. I think there's so much negative sentiment, Ben, in kind of the outlook for next year on crude oil and that there's going to be this oversupply. But if you look, the incremental supply from non OPEC regions, mainly the U. S. And Latin Americas, underperformed this year. Speaker 100:56:30And if it underperforms next year, we're going to have a much tighter crude oil market. I think you're going to see a lot of that negative sentiment reverse. I think you'll also see that happen in crack spreads as well because underlying demand has actually been quite good. Speaker 1000:56:45Okay. That's helpful. And if I could go back to, Emmanuele, you were discussing sort of the S and P market, which I appreciate. I was curious if you can maybe frame in the type of buyer for assets in the market. I mean, is there a specific geography or is it traders or who are sort of out there to buy at the moment? Speaker 1000:57:16Is there any pattern? Speaker 200:57:18Very vast. It's a good question, Ben. Very vast. We don't usually disclose our buyers, but I can tell you we've sold in the last 3 months, we've sold ships to a traditional Greek owner, to an oil company based in Asia and to an operator based in South America. So as I said, geographically, only in the last 3 months we went through the world and types or nature of businesses completely different from traditional ship owners to end users to operators. Speaker 200:58:04So the best examples is or the quick answer is extremely vast on both fronts. Speaker 100:58:11Got it. Speaker 500:58:12I think I would also add Ben, I would also add to that. So I think it's quite interesting when I was talking about advancements. It extends also to the charters. You saw us do a charter to out to Brazil earlier a month or so ago. And you're also seeing I think this is something that's perhaps understated in the demand situation because it will it's quite fragmented to the demand side, so it will lead to greater requirements of vessel per ton mile is the growth of those areas in Asia outside of China's demand for products as their economies have grown. Speaker 500:58:57And those countries are not blessed with a whole bunch of refinery capacity. So they're going to be increasing their imports, which is going to which is reflected both in what Emmanuel was talking about in the S and P market as well as what's going to become more apparent on the charter market, both spot and time charter. Speaker 1000:59:20Interesting. All right. Well, I appreciate you guys taking the questions. Speaker 300:59:25Sure. Operator00:59:28This concludes our question and answer session. I would like to turn the conference back over to Emmanuel Alvaro for any closing remarks. Speaker 200:59:37Thank you, operator. There are no closing remarks, rather than thanking everybody for their time today and looking forward to being in touch going forward. Thank you. Operator00:59:49The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by