Frontline Plc (FRO) 2007 Q3 法說會逐字稿

Thank you for standing by, and welcome to the Frontline Q3 2007 result presentation. At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer at which time you will need to press *1 on your telephone. I must advise you that this conference is being recorded today, Thursday the 15th of November, 2007. I would now like to turn the conference over to your first speaker today, Bjorn Sjaastad. Please go ahead, sir.

Good afternoon or good morning to you all, and welcome to this presentation of third-quarter results for Frontline 2007. Of course we are a little bit disappointed with the figures that we are presenting with you today, due to the weakening of the spot market for the vessels that we operate in the third quarter. Present together with me here is our CFO, Inger Klemp, who will go through the figures a little bit later on and so more information on ITC and the KG vessels and also Stephen Elgin, our person responsible for chartering will be there also to help answering questions and give comments.

I think that we just start with the slides that you also have, and hopefully you have those in front of you and start to turn to page 3, we will look at the agenda and this time we go straight from the highlights and then financial review to give a further update on ITC and the KG vessels. We go to the market outlook section, the market update section outlook and then questions and answers. And then more specific information about the Company and the fleet and the new building programs and so on that is found in the appendix which I do not intend to go through here today.

If you then turn to slide number 4, I said that the results were disappointing and net income for Frontline for Q3 were $24.2 million, including a gain of sale of assets of $4.8 million, which primarily is the sale of the Front Horizon, the single hull Suezmax vessel. We have experienced a weaker tanker spot market in this quarter, and that is to say that one thing is that the world scale level is lower but we also have experienced very high bunker costs in this quarter, for the whole year in fact. And also when the market has been bad as it has, we experience more waiting time that really reduces the times of the results. Earnings per share for the quarter came in at $0.32. And we have, the Board has decided the dividend per share of $1.50.

If you then turn to the next slide, number 5, we have an overview of the major transactions which in fact is not 2007 -- third quarter 2007 but more into the fourth quarter. And as we reported before, we have sold the Front Duchess, the single hull VLCC for a sales price of about $54.5 million net which will give Frontline a compensation of $25.5 million. That will have a Q1 '08 effect. This is really caused by the very strong market or values for single hull VLCC's for the purpose of converting to dry cargo vessels.

Then in the fourth quarter we also sold our remaining shares in Dockwise, previously Sealift, at NOK25 per share giving us a net proceed of NOK157 million which gave a gain of NOK45 million. That will have an effect in Q4 this year. And then we just recently announced we have also sold our shareholding in Imarex at NOK160 per share which gives us a total proceeds of $51 million or a gain of $43 million, which will also have effect in the fourth quarter. So that is the kind of major transactions that we have done in the last period. But which will have P&L effect into the future, but cash flow effect primarily in this quarter. And then I leave to Inger to go through the P&L and the other figures.

Thanks. Good morning to you all. I will go quickly through the third quarter 2007 results. Frontline reports net income of $24.2 million, as Bjorn just said, and earnings per share of $0.32 in the third quarter of 2007. This includes a gain on sale of vessel in the amount of $4.8 million which mainly related to the sale of Front Horizon. Previously we have announced that the gain on Front Horizon would be approximately $6 million, and the reason for the reduction is that we have now made an adjustment in the gain recorded for delivery of [Simva] in the second quarter with $1.4 million as a consequence of higher conversion costs for the vessel than we anticipated.

Net income excluding gains was $90 million in the third quarter compared to $79 million in the second quarter. And net income done from operations is $60 million below the second quarter. The main reason for the reduced result is a weaker spot market, which have just written a [reduction] then in (inaudible) contractor basis with $66 million. And as a result of the weak market we have also recorded a profit share expense for ship finance, which is $10 million lower than in the second quarter.

Total operating expenses in the third quarter compared to the second quarter have increased approximately with $7 million. And that is mainly related to increased charter hire expenses. Due to that we have chartered in more vessels in this quarter than the second quarter. The Company has recorded interest expense in the quarter of $67.5 million, of which just below $40 million related to [out to sea]. $46 million relates to the capital leases in Frontline. This is compared to $64 million in the second quarter.

The decrease is a consequence of that interest expense decrease over time as the lease obligations are reduced. But also as a consequence of their strong play in the second quarter, recorded an adjustment for earlier periods, thereby increasing the interest cost in this quarter. For the whole period Frontline reported net income of $372 million and earnings per share of $4.97.

Then moving to slide 7, the VLCC fleet earned in the spot market approximately $36,000 a day for doubles and $10,600 a day for singles with an average spot earning of $35,700 per day. The earnings for the VLCC singles relate to only one vessel. That is the Edinburgh, which had a drydocking during the quarter with 70 days offhire. She was then fixed on October 9th after drydock and as a result the balance [consumption] concluded without any freight recorded. The earnings for the VLCC in total is $36,000 a day in the quarter.

The Suezmax fleet earned in the spot market approximately $28,000 a day for doubles and $17,000 a day for singles. And this gives an average of $23,000 a day and the average for the whole fleet is about $25,000 per day. The OBOs earned approximately $41,000 a day in the quarter. In these numbers we have not included the ITC vessels. The time charter numbers show that Frontline has outperformed the market and traded in line with our competitors in the third quarter of 2007.

Then moving to the slide 8, the total balances is in line with the second quarter 2007. There are, however, a few items worth mentioning. Free cash has increased in the third quarter compared to the second quarter. And that is mainly due to the payment of dividends based on the second quarter earnings were paid in the beginning of the [fourth] quarter. Due to the same reason other current liabilities have increased in the third quarter compared to the second quarter, with dividend payments accrued for the quarter.

New buildings and purchase options show an increase of $26 million in the quarter which is explained by new building installments and heavy lift conversion costs paid in the quarter. The Frontline share trades today at a share price of close to $40 and has a market capital of $3 billion (sic - see slides) and an enterprise value of $5.3 billion (sic - see slides).

Moving on to slide 9, we have drydocked five vessels in the third quarter 2007 which is one less than in the second quarter of 2007. The vessels in question are Front Ardenne, Front Brabant, Edinburgh, Front Champion and Front Tina. As you can see, we have average OpEx of approximately $9,800 a day in the third quarter 2007 compared to $9,300 a day in the third quarter of 2006. OpEx per day has not increased compared to the second quarter of 2007 mainly as a consequence of an expensive 15 year drydocking on Front Brabant in this quarter and a weak dollar has also contributed to the increasing OpEx as most of machinery and equipment originates from non U.S.-based countries. The number excludes the container vessels (inaudible) the ITC vessels. We have also more offhire days in the third quarter than in the second quarter, but that is mainly related to the drydocking.

Then moving to slide 10. The cash breakeven base are approximately $30,000 a day for the VLCC, $22,000 for the Suezmaxes and $22,400 for the OBOs. And the average for the whole fleet is about $26,700 a day. This cash cost breakeven rates does not allow for the contract coverage that the Company has. Assuming that the contract coverage is reduced, subsidized (inaudible) spot vessels we will need a lower breakeven rate for the spot vessels.

Then moving to slide 11, we have at this time included some information on the ITC structure and also on the KG vessels since we had a lot of questions from you guys. Slide 11 shows the corporate structure of the ITC group, Frontline Ltd., owns the ITC structure with Independent Tanker Corporation Inc. in the Cayman Islands as the holding company. Owning the three different companies in the structure which is Calpetro, Golden State and Windsor.

Then moving to slide 12 to 14, the Windsor structure consists of four companies owning four double-hull VLCC vessels which is built in the period 1999 to 2000. And the vessels are on a twenty-year bareboat to British Petroleum from delivery. The bareboat rate is around $25,000 a day in the first 10 years. Then it is a market related dayboat by the minimum bareboat rate of $20,000 a day for the next four years. Then the market rate is to (inaudible) for the last six years. There are charter termination options after 10 years, outstanding bonded debt after the 30th of September is $256.2 million which matures then in 2021. Restricted cash as per the 30th of September 2007 is $8 million. That excludes the $352 million which is restricted to the UK tax lease. The net debt is then $248 million. The net estimated result as per the 30th of September is $2.5 million for that part of the structure.

The Golden State structure consists of two companies owning 2 double-hull VLCCs built in 1998 and 1999. The vessels are on an 18 year bareboat with Chevron from delivery at $28,500 a day. There are charter termination options every second year starting 2008 and 2009. Outstanding bonds as per the 30th of September is $126 million, and it matures in 2019. Restricted cash in the structure as per the 30th of September is $25 million and net debt is about $100 million. The net estimated result as per the 30th of September is $4 million.

Then moving to the Calpetro structure, that consists of three companies owning three double-hull Suezmaxes vessels built in 1993 and 1994. These vessels are on a 20 years bareboat with Chevron from delivery at $16,000 a day down to $9000 a day. There are charter termination options every second year starting 2009 to 2010 and charter purchase options in the first quarter 2015 at $1.00 per vessel. Outstanding bond debt as of 30th of September is $76 million, and matures in 2015. Restricted cash as per the 30th of September is then $1.4 million and this debt is $74.8 million. We also say that the net estimated result as per the 30th of September is $100,000 for that structure. These vessels are included in the balance sheet of Frontline as investments in FSL.

Further, the structure includes one company owning one single-hull vessel built in 1992, and that vessel trades on spot and is on a bareboat to Frontline at $6,900 a day until the first quarter 2008. Then on a bareboat rate of $1,000 a day. Chevron terminated their charter for Front Voyager in April 2006, but it was replaced with Frontline. Outstanding bond debts as per the 30th of September was $11.3 million which matures then in 2015. Restricted cash in the structure is $8.4 million, and the net debt is $2.9 million. And again, the net estimated result as per 30th of September is $1.4 million in that structure.

Then moving to slide 15, Frontline lease in six double-hull VLCCs built in 1999 to 2003 and three double-hull Suezmax vessels built in 1998 to 2000 from German KG companies. We have purchase options of all the vessels in the leasing period. And on the slide you can see the date and price for the first purchase options on the different vessels. You can also see the average bareboat rates 2008 to 2014 to 2015 for the vessels. The vessels are operated by Frontline and they follow the same operating expenses as for the rest of the Frontline fleet.

Then I will leave a word to Bjorn again.

Thank you very much. Just to summarize a few points on the ITC, it really shows that the imminent and the major value to Frontline is the Windsor structure whereby we get market rates as from 2010 onwards. And when it comes to Golden State the two ships there, they have a long-term charter with Chevron. And basically Calpetro vessels, the three Suezmaxes they have more limited value to Frontline, as Chevron has the purchase option for those. And the Voyageur is a single-hull ship that really goes straight into Frontline today based upon the bareboat charter with a very low rate.

And as we have previously said that we are working on ways to enhance the value of ITC, our ITC investments, and we are looking at the bond structure because that is limiting our options as of today. But as we have said in the past that one way is to list the company and to dividend part of that company out to our shareholders, whilst we are working on enhancing the value in the structure itself. But we will come back to that later on.

Then turning to slide 16, I want to spend some time on the market. Here we have shown an overview of the earnings both for VLCC and Suezmaxes for the respective years, and you will see from the blue line in 2007 that we have had a seasonal downturn in there -- should I say in the third quarter in a way. But it has lasted longer if you compare to for instance 2005, that experienced a little bit of the same kind of pattern, that market improved let's sat at week 36, 37 but right now we are still here in 46 and the market is still as weak as it has been for the last few months. The reasons why the way we see it is that we have lower activities, lower US imports caused by stock [costs] and also caused by the oil price being in backwardation. Also again caused by low refinery margins in the US. And hopefully we will see more demand coming up more (inaudible) back and also that stock levels has been depleted to such a level that one would have to import the oil that is being consumed. We see the similar pattern for the Suezmaxes, the only difference is that a few weeks back we saw rapid and big upturn in the market before it fell back somewhat a few weeks later on. So it is a very volatile and erratic market for those vessels.

If you look at slide 17, we have just listed up the factors driving demand both long-term and short-term factors. And to start with some of those on slide 18 is the GDP growth that is basically driving long-term demand and even though the IMF has reduced global growth and estimates for next year from 5.2 to 4.8 still it is an overall. it is a healthy level. And also IEA, they maintain an estimate for about a 2% growth in world oil demand in the years to come. And historically there is a strong correlation between GDP growth and world oil demand.

If you look at the next slide, you see that the oil price has been going up and going up and going up despite of course the last few days, it has been sliding down but from an extremely high level. Bunker prices have also followed suit. And as I said, has had a very negative impact on our results particularly when the (inaudible) rates are so low. So a big, big push. And the growth rate is then being spent on Bunker. And as you will see the sensitivity for Frontline is that a $10 difference in the Bunker price on average means $9 million on our bottom line for a full-year. And that is a lot. More importantly, we think for the development in the market for us has also been the price spread between the short-term and or the medium-term prices of oil. And then as we have said before, you can see also from this graph that we came into -- the oil price came into backwardation around July, and that really does give very limited incentive in buying, shipping and storing of oil, and that historically also is negative for the tanker markets.

The next slide, number 20 shows basically the development in the world oil production which if we really even out a little bit the part of the curve, the ups and the highs and the low, there has been a kind of gradual increase until let's say early 2006 where it has been flat and basically somewhat, maybe from here declining, until just in the last weeks where it starts to go up again the final part of this period. So really then the production climate for the last year or so has not been very favored for us because we know that there has been new tonnage entering in and adding capacity into the markets.

If you look at slide number 21, we have a graph of the crude oil stocks in the US and also the US refinery utilization. And what we think is that in the first half of this year we benefited from increases in stock levels in the US, which again hurts us now in the second quarter because volumes imported has been less because there has been growing from stocks. We also see that refinery utilization has been on the low side all the time basically and still low. And we also, we have only shown the US side here, but the oil stock trends in Europe and the Pacific is also following the same pattern. I think it is even lower overall stocks in Asia.

Slide 22 is the similar one that we've used in the past showing the VLCC fleet, and there is no big changes to that. The orderbook is 158 vessels compared to the 144 single-hull tonnage and the biggest deliveries coming in 2009. On the Suezmaxes on the next page, 23, it is a slightly different picture, an orderbook which is as high as 133 and only 55 singles. And of those the orderbook is really coming into the market in 2009, based upon the delivery schedule as we have see it today. Today you will have a worse balance between the orderbook and the price in single-hull fleet.

On slide number 24 we have looked at the conversions from tankers primarily what has been very active the last few months is the conversion of single hull VLCCs into VLOCs. But you will see that already now there has been converted 10 ships in 2007 to VLOCs and there has been converted 16 single-hull Suezmaxes. For the balance of 2007 there are planned converting another 10 VLCCs and one Suezmax. And in 2008 there is planned 28 VLCCs to be converted primarily into VLOCs and 8 Suezmaxes now also into MINI CAPEs. These are round estimates based upon discussions with various shipbrokers and when we said planned, it is planned where the ships have been sold or reported sold for conversion purposes, but also we have seen reports that the ships have been fixed to shipyards.

So when we talk about possible, that is where it has been informed that these vessels will be, they have been acquired for conversion purposes but we can't find the corresponding report that a yard contract has been basically fixed. But all in all this will, if you look at a total then including the possible, it is quite a few ships that also are planned for conversion for the balance of this year and for next year.

On the next slide, 25, we are trying to see that a little bit more simplistic how will this impact the tonnage balance over the next five quarters. And for the VLs there are 43 ships that is scheduled to be delivered, of which and there are 38 scheduled to be deleted, so that the next fleet here is only 5 ships with Suezmaxes 22 scheduled to be delivered, 9 for deletions and then 13 as a net. So that really is the way we see it very positive for the type of market and from at least a supply side for the period ahead of us. And also from the kind of demand when we know that, I think that a lot of things that were in our favor in the first half of this year seems to have gone against us in the second half. And eventually that will also stop. And there are many factors then leading to a better market in the first half of 2008.

If you look at slide number 26 we have given an overview of VLCCs the prices on the last graph and the time charter rates on the right and we see there are very stable price levels both on newbuildings and for resale or sales of modern tonnage and the same applies to the time charter rate. But it is fair to say that the volume is very thin or very few transactions. But what is special is that the values of single-hull VLCCs have gone up a lot and exemplified by when we sold the Duchess that we just reported at $55 million for conversion purposes. But earlier but that is longer back, six months back there was a resale of a newbuilding at 137.5 and as you know that our newbuilding VLCCs are just above 100 million. You see that is a big difference from that. On the time charter there are also very few transactions but in October there were a few ships fixed to TMT, three years at $51,000 a day and to Reliance two years at $50,000 a day. And that is, I would say, pretty strong levels and comparable to what was fixed a year ago.

If you then turn to the next slide, that really shows the same picture for the Suezmaxes and still the, yes, the same developments there. The last done is just that is a resale of some Suezmaxes from to be delivered from China in '09 and '10 at $90 million. And you know that our newbuilding prices in China is set around $70 million. And also in September there was 2000 and 2001 built vessels sold for $90 million, so still very strong values. Very few transactions on the time charter in the time charter market, but there was one vessel fixed for two years at 37,750 Trafigura in October.

So basically then the spot market has been weak in the third quarter, continues to be weak into the fourth quarter. We had an upturn on Suezmaxes which held back again. The last few days we have seen an increase an improvement on the deal rate. And it's fair to say that it is more activity and better terms going eastbound these days than going west. And for Frontline the way we see it from the -- we don't guide because we are presenting you with figures every quarter, but based upon the spot market which is very similar to in Q4 so far Q3 if that continues, then we could expect a somewhat similar result from operation as in Q3. But since we have made the sales of the shares in Imarex and in Dockwise, we will only on those two transactions record a sales profit of some $92 million. So the net bottom line results for Frontline will be much better in the fourth quarter and also for the full-year results as a consequence of that; we will be approaching I think $0.5 billion in total. And of course that is all in all positive.

And then we also have -- we close off this presentation by just showing that the way Imarex and the other market really looks at the next immediate future whereby you see that there is an increase in the TD3 into the first quarter of next year, as well. And also for TD5. Well, I think we open up for questions and comments. And as I just said in the appendices you will find an update of some of the slides that we have used to more explain about our Company in the past, that will not focus on (inaudible) right now. Thank you.

(OPERATOR INSTRUCTIONS) Jon Chappell, JPMorgan.

Thank you. Good afternoon. Bjorn, you said in the past that after 2007 you see dividend payouts matching earnings going forward. I just wanted to make sure we're still on the same page with that. If I looked at your balance sheet after the third quarter and make the adjustments for Dockwise, Duchess and Imarex sales and also the last three quarter dividends, plus your newbuilding requirements through 1Q '08, looks like you have less than $100 million cash notwithstanding operating cash flow you generate in the fourth quarter. So basically is most of the financial engineering behind us? Have you sold pretty much everything you can, and do you expect the dividends to equal the earnings in the next few quarters?

I think that yes, we have -- I wouldn't say we have sold all we had because still we have a few ships there. But you know that yes, from the kind of noncore business that we have tried to sell and develop and dividend out, a lot of that is being done when we pay out the dividend for this quarter now, and going forward basically there are some elements left from these financial transactions in the first quarter and the second quarter. There are some cash coming in from the heavy lift vessels. But that is on the kind of decline basis. So I would say maybe more into for the second quarter onwards then it would be more normal dividends compared to the earnings of the Company. And of course we have ITC that we are working on to see what can be done there.

Right, and I was going to ask about that. You just mentioned briefly there is some bond restrictions. Can you just give us a little bit more detail about what the restrictions are and your comfort that something can be rectified there, so it can open up the opportunities for ITC?

I think that for ITC the question is really that there is interest rates of about 8.5% on those bonds and that really means that there could be a prepayment penalty cost that we would have to look into to see what can be done there.

You mentioned a couple times both in your planned remarks and also in the press release that the newbuild prices that you received in China are much below the current market prices. Would you be interested in selling those assets, or are they part of your core growth strategy of growing your double-hull fleet?

They are really part of our core assets, I would say.

Okay.

And still also the kind of prices for newbuilding to be delivered in the future is lower than the value of the price in ships, you can say. So then if you should sell you should rather sell one of your existing ships.

Right.

But primarily we are not (inaudible) to basically divest the core part of the business because we want to continue to be in this business.

My last question before I turn it over is about the charter in. Inger said that you chartered in a couple more vessels in the third quarter and that is why the charter hire expenses were up. Where those very short-term charters, or do you have some existing charter in that maybe isn't in your appendix on the current structure that we should model in?

They are in for four and five years. But we have fixed them out again also. And then we have one time charter ship that has been in for the last year or so that will expire coming January, I would say.

Okay. All right. Thank you.

Doug Mavrinac, Jefferies & Co.

Just had a few questions for you guys. One, we've seen the increase in VLCC rates in the Arabian Gulf over the last couple of days. Bjorn, can you express your view on what realistic OPEC production capacity is right now? And do you have any views on what OPEC could potentially increase production capacity by next year, as well as any views on non OPEC growth next year?

It is a very hard question. We are shipping people, and there are political things and there are real factors behind OPEC production. I think there is oil there. And I think that this will increase. But the stock level has been so high in the past that really there hasn't been the incentive to buy. But some school says that it is a lack of oil and some says that it is because they take from storage there is a lack of demand. I think there is oil there.

And looking at say current spot rates and some of the time charter rates we've seen done recently, and given Frontline's 40% time charter coverage, given the relative attractiveness of those time charter rates right now to the spot market, is that something that you would consider maybe increasing? Or do you expect to remain as exposed to the spot market in the coming years given the type of outlook that you have?

It depends upon the rate that you could achieve and for what period; because as I said it is a very thin market and I doubt that we could go out and fix 10 VLCCs $50,000 a day for three years. That would definitely have an impact in the market. And Frontline basically also we like to be -- we think that long-term to be on the spot curve will yield higher returns.

(multiple speakers) I thought that was going to be maybe a switch in strategy or what not.

And last year, as you know, we fixed one ship for three years. So we might do a few more if the opportunity comes up, but I think you should look at us as basically for the doubles, we would have a big part of that fleet in the spot market in the coming years.

Okay, so no change in strategy anticipated?

No.

And final question, can you venture an opinion on -- are we still on ship finance, sell a vessel during the quarter for which you received a termination payment? Do you have any views on any future anticipated ship finance sales for which you may receive additional termination payments?

That is an ongoing. There is money there, and for the single-hull fleet basically we have said that our strategy is to really divest from that. And for some, and this year we've done a lot of the single-hull Suezmaxes into the [sea lift] and so on. And of course we fixed the single-hull VLCCs. But that was what we did there and then. But of course, we can if we are able to release ships and sell, we might do more of those, yes.

Okay, great. Thank you very much.

That is the kind of combined deal between ship finance and Frontline then.

Great. Thank you very much, Bjorn.

Not at all.

Justine Fisher, Goldman Sachs.

My first question is about the conversion of -- I think you guys mentioned that you had taken I guess a lower gain on the sale of a vessel because of higher conversion costs. And I was wondering if you could talk about which costs for conversion ended up being higher than you thought. And then second of all if you think those higher costs for conversions are something that may occur with other conversions and may hold off some of the conversions that you spoke in the latter slides in your presentation.

What we mentioned here was only $1 million that we had into high profit in Q3 compared to Q4. And that was related to one of the conversions on one of the single-hull Suezmaxes that we converted to heavy lift ship. But that was more an accounting issue then it was a real issue.

So it wasn't as if you thought you were going to pay X amount for the conversion and then the cost --

No, no.

Okay, and then I just wanted to again -- not to repeat Jon's question but to clarify what sorts of alternatives you may be looking for for the ITC entities. Would you sell those outright and then would you undertake an action that might require you to tender for those bonds? Is that what you were talking about as far as the premium for the Windsor petroleum bond?

Yes, we are considering really what options and what opportunities we have there, and that is one of the alternatives, for instance.

Can you list some of the other alternatives? I mean, I guess would you sell part of it or sell all of it? Is there anything else that you can do?

Some actions require the flexibility. For instance, if we should require to sell, if we should want to sell some of the ships, then we would need to make a deal with the charters and with the bondholders for those. So that really -- and that could be the option if there was a deal to be made between those two third parties. Apart from that what we could also do with the Company as it is today is to list it separately. And let's say like we did with ship finance in the past, dividend part of it to our shareholders. Having that company in a way having its own listing and its own price development. And the reason for that is really that there are different drivers. The structure and the nature of that company as it is today is different from that of Frontline.

But when you look at the various components of ITC, the Windsor deal is more similar because in 2010 basically those are in the spot market for us, even though they are on the charter to (inaudible) but they are from an economic point of view we are getting variable rate based upon the spot rates.

Okay. Thanks very much.

John Kartsonas, Citigroup.

On the chart, on the time charter on the Front Duchess, what happened to that? That was a three-year time charter if I'm not mistaken, correct?

Yes, it wasn't three years; it was initially that, but it was a little bit shorter and there was one year remaining and we substituted that with the Edinburgh, which is a ship with double sides, but single bottom.

Okay, so you switched it. Also I think on the interest expense if I had the figures from the press release that you reported I think you said 13.7, 45.9; I get like 59.6 and you report 57.5. What is the difference there?

As we say in the press release it is [naked] for capitalized interest cost.

Okay.

The 57.5 million.

That is $2 million?

Sorry? I didn't get that.

That is the only difference there?

Yes.

Okay.

And also some interest related to the loan on (inaudible)which is the book balance came from (inaudible) limited.

Okay, and also the figures you gave on net profit for the ITC, that is for the current quarter or is it year-to-date?

That is year-to-date.

Okay.

(multiple speakers)

Okay, so that is year-to-date.

Yes.

And finally, Bjorn, on the vessels you have with the time charters with the Chinese, have you experienced any pushback given that the rates for single hulls are much lower today?

If we have experienced any --

I mean, have they come back to you and say, listen, we pay 35 and the market is at 50, is there any issue with that?

No, but you know that it is today those charters are good for us.

Okay.

Yes, they are good for us, and that was a part of what we also foresaw when we did that, that we wanted to fix those out. But of course, if there should be opportunities to further sell ships, it is a better climate if we want to try to do something with the charters, win the relationship in that way.

Okay do you expect them to remain solid for the next three years or so?

Yes. Yes.

Okay. Thank you very much.

(OPERATOR INSTRUCTIONS) There are no further questions at this time. Please continue.

Okay. Thank you very much for attending and looking forward to meeting you again in about three months time, if we don't meet you before. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may all disconnect.