Star Bulk Carriers Corp (SBLK) 2018 Q3 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the Third Quarter 2018 Financial Results. We have with us Mr. Pertos Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou and Mr. Christos Begleris, Co-Chief Financial Officers of the company. (Operator Instructions) I must advise you that this conference is being recorded today. And we now pass the floor to one of your speakers, Mr. Pertos Pappas. Please go ahead.

Thank you, operator. I'm Pertos Pappas, Chief Executive Officer of Star Bulk Carriers, and I would like to welcome you to the Star Bulk Carriers conference call regarding our financial results for the third quarter of 2018.

Before we begin, I kindly ask you to take a moment to read the safe harbor statement on Slide #2 of our presentation.

Let us now turn to Slide #3 of the presentation for a summary of our third quarter 2018 financial highlights. In the 3 months ending September 30, 2018, TCE revenues amounted to $128.7 million, 105.8% higher than the $62.6 million for the same period in 2017. Adjusted EBITDA for the third quarter 2018 was $80.1 million versus $28.6 million in the third quarter 2017. Adjusted net income for the third quarter amounted to $30.5 million or $0.35 gain per share versus $5.3 million adjusted net loss or $0.08 loss per share in Q3 2017.

Our Time Charter Equivalent Rate during this quarter was $14,521 per day compared to $9,621 per day in the same quarter last year. During Q3 2018, our average daily operating expenses were $4,054 per vessel per day. During the third quarter, we closed the Songa Bulk and Augustea acquisitions, adding quality vessels to our fleet.

On the financing side, we have been very active in refinancing loans of approximately $617 million, eliminating maturities in 2018 and 2019 and improving our interest cost by 70 basis points.

Finally, having repaid all our deferred debt amounts originating from our 2016 restructuring, the company now has no restrictions on vessel acquisitions, new debt or share buybacks. I will now pass the floor to our Co-CFO, Simos Spyrou, for an update on our operational performance for the quarter.

Thank you, Pertos. Slide 4 graphically illustrates the changes in the company's cash balance during the third quarter of 2018. The fleet generated free cash flow of $19.6 million. After including debt proceeds and repayments from the -- from our refinancings, CapEx payments for our acquisitions, new buildings and scrubber installments and cash repayments, we arrived at a cash balance of $238.2 million at the end of the third quarter.

Slide 5 highlights Star Bulk's strong liquidity position. Our linked cost structure with a breakeven of approximately $11,600 per day per vessel enables us to deleverage our balance sheet and create value for our shareholders even at relatively low average charter rates. On the right-hand side, we provide a breakdown of the net debt position of Star Bulk, which is currently close to $1.25 billion. Star Bulk has 0 equity CapEx for the 3 remaining Newcastlemax new building vessels, as there's committed financing in place for the remaining CapEx payments. We expect to take delivery of these vessels during the first half of 2019.

On the bottom right-hand side, we show the positive trend in our adjusted EBITDA and adjusted net income, illustrating 4 consecutive quarters of positive profitability.

Please turn now to Slide #6 where we summarize our operational performance for the third quarter 2018. The combination of our in-house management and the scale of the group provide us significant cost and quality benefits. OpEx was at $4,054 per day per vessel for the quarter and at $4,018 per vessel per day for the 9-month period of 2018. Net cash G&A expenses were at $918 per vessel per day for the quarter, a 16.5% year-on-year decrease compared to the same period last year, primarily attributed to synergies from the increase in the size of our fleet. Our low-cost structure is complemented by excellent ship management capabilities, as Star Bulk is ranked in the top 3 among managers evaluated by Rightship.

Slide 7 illustrates that Star Bulk is one of the lowest cost operators among U.S. listed dry bulk peers based on latest publicly available information. Star Bulk is one of the leaders in cost efficiencies, with OpEx approximately 15% below the industry average. In addition to our emphasis of cost control, we are very focused on having the highest standards of vessel safety and maintenance to meet the requirements of our most demanding clients.

In Slide 8, we are providing an update on our scrubber program, which is proceeding as scheduled. Total expected CapEx as of November 2018 is at $152.2 million. The graph below illustrates the estimated breakdown of the payments by quarter based on current forward FX rates and expected milestones. Note that we have secured approximately 70% debt financing for the scrubber program, which we will be drawing down gradually within 2019.

By the end of the year, we will have completed the installation of scrubbers on 3 vessels, 2 Newcastlemaxes and 1 Capesize. We have already started preparatory work with riding teams in numerous vessels while at sea, thereby reducing off hire time and increasing our optionality for the timing and location of the final scrubber installation. We expect to have the entire fleet scrubber fitted by the end of 2019, and we estimate about 5% off hires across our fleet for 2019 for scrubber installations.

I will now pass the floor to Hamish for a discussion on our scrubbers program.

Yes, thank you, Simos. So I have a look at Slides 9 and 10. Given the recent discussions in the press on scrubbers, which I'm sure had entertained many of you, we would like to lay out a few relevant facts based on actual research. Sulfur is not a pollutant in the ocean. It's a pollutant in the air, but not in the ocean. It's a natural component of seawater, and it already exists in very large quantities in the sea in the form of sulfate. According to 2 of the papers that are referenced in that slide, Nyman and Tokerud and Kohl and Nielsen, if you basically create a layer of sulfur that's already in the ocean, it would form a layer of 5-feet thick, or for those of you in Europe, about 1.5 meters. Adding on top of that 1.5 meters of sulfur, all of the sulfur that exists in known oil and coal reserves, you would add a paper-thin layer, actually thinner than most paper, 30 microns.

So several studies, and of course, field testing that scrubber owners that we've spoken with have done indicate that the sulfate increase from scrubbers is completely insignificant when compared with the quantity already in the seas. Now CO2 emissions have been mentioned by some. And according to a 2012 paper by the Danish Environmental Protection Agency, they estimated that the refining of heavy fuel oil into distillates creates 400 kilograms of CO2 per ton of refined heavy fuel oil, essentially wasting that fuel creating excess CO2, whereas the use of scrubbers allows heavy fuel oil to be used with almost no excess CO2.

Scrubbers not only remove sulfur, but they also remove inhalable particulate matter emissions and reduce those by approximately 80%, being most effective with the smaller particulates as well as the black carbon. Particulates in the air are hazardous to human health. And if you don't use a scrubber, they then end up falling in the oceans. Moreover, if somebody without a scrubber burns compliant fuel, they emit harmful heavy metals and polycyclic aromatic hydrocarbons into the air, which then fall into the sea. With a scrubber, you take those heavy metals and polycyclic aromatic hydrocarbon and wash them directly into the water without going into the air, where they can be breathed, and the concentrations in the washed water are waters of magnitude below the levels of concern, as expressed by the IMO and also in -- according to European Union water surface quality standards. So scrubbers are one of the options on hand to meet the IMO's regulatory requirements, alleviating the air pollution caused by sulfur without having any proven negative effect on seawater.

I will now pass the floor back to Pertos for a market update and his closing remarks.

Thank you, Hamish. Please turn to Slide 11 for a brief update of supply.

During the first 3 quarters of 2018, a total of 22.8 million deadweight has been delivered and 3.1 million deadweight was sent to demolition for a 19.7 million deadweight net inflow. By the end of 2018, the dry bulk fleet is projected to increase by 2.5%. A total of 22.1 million deadweight has been reported by Clarkson as firm orders up to now, and an additional 8 million deadweight have been identified as LOIs or options. The order book currently stands between 10% and 12% of the fleet depending on how many identified LOIs and options will be exercised.

During 2019-'20, deliveries are projected to expand at a similar pace to that of 2018. However, due to projected scrubber installations and tanks cleaning off hires during 2019 and slow steaming and increased scrapping during 2020, effective supply is unlikely to expand by more than 1% to 1.5% per annum. As a result of 15% average increase in 2018 bunker prices, the steaming speed of the dry bulk fleet has overall decreased to approximately 11.5 knots, which should in effect translate the equivalent of a 2% decrease in tonnage supply.

Let's now turn to Slide 12 for a brief update on demand. According to Clarkson's, the 2018 dry bulk trade is projected to grow by 2.5% in tons and 2.9% in ton-miles. Strong steel prices and profit margins have supported the 7% year-on-year increase in global steel production during Q3. This was led by China, which registered a double-digit growth of 10%. China's environmental restrictions have also led to a 42% year-on-year decline of domestic iron ore production during the initial 10 months of 2018.

Despite a combination of strong steel production and lower domestic iron ore production, Chinese imports of iron ore have experienced a decrease of 0.5% till the end of October 2018 as a result of increased use of scrap and a draw in iron ore stockpiles.

Despite the increased production of the new SD11 mine, Brazil iron ore exports have to date only expended by 1.9% due to poor weather conditions, political unrest and the Anglo American pipe leakage incident in the first half of the year.

In the third quarter, Brazilian exports expansion recovered by 8.54% versus the same quarter of 2017. The positive ton-mile effect created an unusually strong Capesize market during July and August. However, as of last September, a wave of VLOCs in the Atlantic and the delivery of 9 VLOC new buildings pushed the Atlantic Capesize market to oversupply. Australian iron ore exports increased by 2.2% in the first 9 months of the year. But during the last couple of months, they have contracted year-on-year basis. While the seasonal rebound of Australian iron ore exports was anticipated for Q4 ,the BHP train derailment on the 5th of November proved to be a major setback to such expectations.

China coal imports increased by 11.4% during the first 9 months of the year, with strength seen in both thermal coals and coking coal. Thermal coal import demand has been supported by 7.5% growth in electricity generation, a sluggish rise in hydropower generation growth and flat domestic coal production. At the same time, Indian coal imports have increased by 8% between April and October 2018, while coal stocks continue to stand at critically low levels.

China's National Development and Reform Commission announced last week that it will tighten coal imports until the end of 2018. This appears to be an effort to support the domestic coal industry and put downward pressure on international coal prices. However, it is still unclear if the import restrictions will apply to all Chinese provinces, and we find it unlikely but the regulation will remain in place beyond Christmas.

The U.S.-China trade dispute and the imposition of 25% tariffs on U.S. imports by China has had a significant impact on soybean trade this year. During the first 10 months of the year, Brazil soybean exports increased by 15.8%. The U.S. soybean season on the other hand is experiencing a very weak start, with volumes down by approximately 40% compared to last year. Chinese imports of soybeans are down 0.5% year-to-date. And in mid-October, the Ministry of Agriculture of China issued new standards of protein content in animal feed, which could help trim soybean requirements if adopted by farmers.

Finally, we do not believe that the extent of recent market selloff is justified by underlying fundamentals and we expect cargo supply during 2019 to recover lost 2018 volumes. Furthermore, the IMO sulfur regulation is now only 13 months away, and we expect it will lead to a decrease in overall supply of vessels to a slow steaming and accelerated scrapping, affecting markets positively.

Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have.

(Operator Instructions) And we'll now take your first question from Jefferies from the line of Randy Giveans.

This is Randy Giveans from Jefferies. All right. Well, first to Professor Norton. Really appreciate the scrubber science lesson there. Hopefully, it clarifies some of the scuttle about the impact to marine life. Now with that, what are the plans for scrubber installations throughout 2019? Should we expect any...

We are going to put them all on in 2019 except for the ones we've already put on in 2018.

But in terms of how many days of downtime to install each and will you pull forward dry dockings or do most of them kind of...

Well, maybe Nicos Rescos should address that question.

I expect full installations to take place in about 18 days. We're still doing a little work at (inaudible) teams, where we expect the time for full installation at the yards to be around 11 to 12 days.

So on evidence, Randy, you should expect, as we said, 5% of our days in 2018 off hires across the fleet. But also, Randy, according to latest presentation that we have uploaded, we have a page with the remaining CapEx on the scrubbers, that's Page 8 of the presentation, which shows you how much we expect an outflow for the quarter in 2019. So you see that the major outflows are in Q1 and Q2 2019, which coincides with the majority of the scrubber installations in our fleet.

Perfect. Yes, I wasn't sure if that was a kind of front-leading CapEx before the installations later in the year and whatnot, but that clarifies. And then looking at your short-term charters, you have about 25-or-so vessels expiring in the next few months, what are your plans on those? Do you have the kind of good mix for spot versus charter?

Well, first of all, a couple of months ago when we were looking at the trade war, although we didn't think that it was going to affect that much the market and as we were thinking that it would affect more of the smaller sizes, we took a decision to start fixing as vessels were coming out free, mostly through the first quarter of next year and a bit into the second quarter. So right now, we have fixed a number of vessels, actually probably more than 25 or much more than 25 of our vessels. And as they come free, depending on how things move, we may continue to charter for certain periods. And the smaller vessels, we're not actually installing scrubbers first. We're installing the scrubbers on the bigger vessels, the Newcastlemaxes and Capes. And therefore January and -- I mean, Q1 and Q2 are mostly dedicated to bigger vessels and then Q3, Q4 to smaller vessels. And for that reason, we have the flexibility to fix out. Now if the spot market is low where vessel opens and we have much better income on short period, we'll probably take the short period, because if we take the lower spot rates, we may never recover. So we'll continue with a similar policy to what we had up to now.

Perfect. And then one more quick question. Congrats on the debt refinancing. Now you can pay a dividend and so forth. But with your shares trading at a 40% discount to NAV, are share repurchases an option?

Yes. Yes. Share repurchases are an option. We are looking into share repurchases and the primary areas of thinking are how to finance the share buyback and how many shares to buy back. And we'll get back to you when we figured it out.

We will now take our next question from Deutsche Bank from the line of Amit Mehrotra.

Amit Mehrotra with Deutsche Bank. Hey, so let me just push back on you on the share repurchase for a quick second. I mean, one of the biggest problems with shipping companies is there's not enough float and -- for the stocks to trade liquidities and issue. Why would you buy back stock, because that would just exacerbate the -- especially the Star Bulk, just given the consolidation of the share capital base already?

Yes, well, you make a good point, and liquidity is important. But it just seems so stupid not to buy back shares at the discount to NAV that we're seeing right now that we're strongly considering it. No disagreement that it has cost in terms of liquidity and so on. But it's like the proverbial $20 bill on the sidewalk, The Economist says it can't be there, because if that was really a $20 bill, somebody would have picked it up. And we see like we have to pick it up.

I guess. I mean, we could take it offline as you think further decapitalizing the company is not necessarily the right strategy. But I understand what you're saying. Let me just ask one follow-up on the scrubber installations. I understand the time -- I think, that was really helpful. But the question I have is, you have to install like 2 per week or something like that next year. And it just seems like -- the question I have is, you're prewelding all the pipes and stuff when the ship is at sea. You've done 3 already. But what are the risks around this type of scale of installation? And if you could just help us talk about your experience on the installations of the 3 that you already have and how that's going, because if everything goes well, that's great. But what are the risks around this type of installation and the pace in which you're doing it?

Well, probably Nicos Rescos should answer that question.

Well, addressing the question, it goes back to the planning we've been doing for 1.5 years. And it goes to the engineering, which remains the (inaudible) owners at the moment. Some we've been taking care of for quite a while. Owner supplies without our PP wire materials like the special piping that does not require welding, glass-reinforced epoxy. We have secured all the supplies in position. And we have multiple riding teams with expertise on scrubber installing from other industries, taking care of what takes place at sea, all of it certified by class. So none of the steps before or during the final installation of the CPR takes place without having all the necessary approvals. We expect by the end of the year to have completed a total of 9 installations. 3 of them will be fully operational, the other ones waiting to be switched on later into 2019.

Yes, okay. But how about the 2 that are already operational? Any issues there in terms of the installation? I think there are 2, if I'm not mistaken. Are there any issues that cropped up?

Yes, you are correct. We are very happy with the results. We've been operating our first scrubber since the early April. We've been doing all the kinds of tests to the system. We are very happy with the operation, very happy with the consumptions than the results. And it's a learning curve for everyone. But most importantly, the equipment is reliable. And that's why our choice is something that selected measures on the scrubbers have been based on their track record and materials and their relevant warranties.

And these were a little bit too early orders as a test case.

Yes. The decision was not to scrub operating throughout the year, even if we do not need to run them, just to gain experience on exactly what to expect going forward with future installations. So we are very happy with the initial phasing period.

Okay, that's helpful. And then just last question from me on the scrubbers. I think in addition to the 115-or-so that you're going to install, you've got options for 70-plus more scrubbers. I would assume you have to take a decision on that pretty soon, just given the lead times. So can you just update us on that and what you guys are thinking about doing there?

Well, we are looking at -- yes.

Yes, we have arranged our options to be able to go ahead with them even in the first few months of next year. And we are talking to various -- well, we have already discussed that we are considering whether we should be taking vessels on charter at some point. And also we're considering in doing cooperations with other companies that might need assistance or procurement of such equipment, potential tools. So we have them on the side, and we can declare them anytime we like. And this is a great advantage for our company.

Great. But would your CapEx budget next year change if you declare those options?

It would change if we declare the options under most scenarios. We're looking at some potential scenarios where the CapEx budgets would not change, but where the scrubbers might benefit us more indirectly.

Okay. One quick one from me on the dividend question Randy asked -- started asking it, but just want to follow up. Number one, do you want to pay a dividend? And if so, what's the timing around that decision with respect to the board? And then third point, which is maybe the most important point, I know, Hamish, you've probably been thinking a lot about this as well, is the philosophy around how to structure a payout, because there's many different ways for shipping companies to structure a dividend payout, some more sustainable than the others. Can you just talk about that?

Well. Okay. So the answer is we love to be paying a dividend. We think given the share price right at this moment that a share repurchase may be a better way to return cash to the shareholders than a dividend right at this moment. But over the medium term, assuming the market does a bit better, as we expect it will, then we would certainly be looking at dividend. And if we can pay a large dividend, we'd love to be able to pay a large dividend.

And the philosophy around the payout structure?

Well, look, as we have said many times, our goal is to deleverage Star Bulk as much as possible and potentially completely, which would allow us to pay out almost everything if we succeed in doing that. And that's our long-term goal.

(Operator Instructions) And we'll now take our question from Stifel, the line of Ben Nolan.

This is Ben Nolan from Stifel. I had -- well, this sort of ties into the dividend or buyback question or whatever. You guys have options for several more of those E.R. Vessels, E.R. Capital vessels that come due early next year. With the shares trading where they are relative to NAV, how do you think about your use of capital whether to move forward on those options or not?

Well, look, the beautiful thing about options is that you don't have to decide what to do with an option until it expires. And we're going to get as much information about the market as we can before exercising the option to buy those ships. Now of course, Rickmers has an option that is not quite a mirror image of our call option to put the ships, and of course, that's his option, not ours. But 1/3 of that purchase price is payable by us in common shares at NAV.

And that we expect the remaining 2/3 to be in cash, which are going to be financed by regular debt financing. So in essence, when options are going to be exercised, we do not expect to use our existing cash.

Okay. Well, that's helpful, and I appreciate that there is the put on the other side. Just thinking through thematically how many of you're feeling about your -- what are you doing with your capital relative to either spending it organically on shares or buying more obviously low-hanging vessels. And I understand the option value there and just closing it out. But my next question relates to something that Randy brought up in terms of renewing the charters on some of the vessels. And there -- I didn't see the slide in there this time kind of outlining which vessels have charters. Was just curious, Pertos, if you can frame in where on average you have rechartered vessels relative to where rates are now or maybe the rates that you indicated that you booked so far in 4Q?

Well, we have charted mostly our smaller vessels, and we have chartered them, I would say, around 15% to 25% higher than where they presently are.

Okay. That's very helpful. All right. Well, and that -- I think you kind of covered a lot of what I would have asked with. So I'll turn it over there, but I appreciate the time, guys.

And we will now take our next question from JPMorgan the line of Noah Parquette.

Yes, I just wanted to -- I mean, most of the things have been addressed. But on IMO 2020, I wanted to know what your views were on compliance initially and then maybe over time?

Well, so I think the ability of ship owners to not comply has been exaggerated by a lot of commentators. So in particular, as of March 1, 2020, it will be illegal to carry high sulfur fuel unless you have a scrubber. And that opens up easy enforcement by port state control. And so any port state that chooses to apply penalties to people who show up with high sulfur fuel oil with no scrubber can do so. And based on the history in ecozones, we expect the punishments to be pretty severe in most civilized places. And the United States, the European Union, Australia, China, we all expect to enforce this pretty rigorously. And if you look at those places, almost all corridors -- well, certainly the vast majority of corridors either begin or end at those ports. So by sometime in March of 2020, we expect compliance to be pretty thorough one way or another.

And the penalties will not just be monetary. The penalties will be -- for example, a vessel goes to a port and has heavy fuel onboard or a blend that doesn't comply, the vessel might be obliged to discharge all this fuel oil, and that would be an extremely expensive exercise and a lot of loss of time. So that would probably be worse than just a monetary penalty.

Okay. That's very helpful. And I guess, just to follow up on the capital structure dividend question, I think in the past you said, debt place in a shipping company is limited, given there's no tax benefits. And I think you said your capital structure has 0 net debt at the market peak. I think you mentioned that was your long-term goal. Can you talk a little bit about -- a little bit more detail about the way to get to that goal and what your time frame is?

Well, if you can tell us how the market will evolve over the next 2 or 3 years, we can tell you how we'll do it. But we are constrained by the dry bulk charter market in terms of how we're going to get there and how long it's going to take us. In an ideal world, we'd have Capes earning $60,000 a day, our share trading at 2.5x NAV, and then I would tell you we would get there pretty quickly. But in a market where charter rates are much lower and the share is at a fraction of NAV, it's much harder. So it's one of these things where knowledge of the future would be a great asset.

We'll now take our next question from Morgan Stanley, the line of Max Yaras.

This is Max Yaras from Morgan Stanley. A couple of questions on slow steaming, and I apologize if I missed it. But what is your expectation for kind of what percentage of the fleet that it takes out of capacity? What percentage of the fleet do you expect to install scrubbers? And where is your fleet optimized speed-wise with a scrubber and without a scrubber?

Pertos, you want to take that or do you want me to take that?

Take the scrubber part, then I will take the rest.

Okay. So with a scrubber, assuming that heavy fuel oil is inexpensive relative to its price today, the optimum commercial speed of the fleet will be pretty high. And so we would expect ships to go in the dry bulk fleet with scrubbers to go on the order of 40 knots, if they can. Now we would, by the way, be all in favor of regulating speeds in dry bulk and other forms of shipping in order to reduce CO2 emissions. So I'm not talking about what we think is the right thing to do, but simply what the commercial optimum speed would be in the absence of regulation. And of course, ships without scrubbers would go slower. And maybe Pertos wants to talk about that.

Yes, about 1.5 years ago, every such call I was finishing advocating that vessels should actually -- there should be a mandatory speed limit on vessels, because if you, for example, decrease speed by 10%, the emissions decreased by 20% or thereabouts. And that would be a very quick and efficient way, short-term way until we find other ways to be able to reduce emissions. So I was doing it every time. Now it has -- a lot of people has caught on it. And of course, as Hamish said, we are in favor of it if it's ever going to take place. Now if -- vessels presently on the dry side are going at about 11.5 knots speed. So if speed -- speed is a function of the charter rates and the price of bunkers. So if bunkers are very expensive, then speed goes down. But if charter rates go up, then speed will go up again. So if a vessel is going at 11.5 knots and you reduce speed by, let's say, 1.5 knots down to 10, this would be -- this would actually mean a reduction of supply to the tune of about 10%. So of course, that would lead to a reduction of emissions by 30%, and it would lead to a much stronger market as well.

Okay, that's helpful. And then, I guess, it's becoming a little bit more clear that the larger vessels, Capesize vessels will be able to find heavy sulfur fuel at major ports. But what's your view on smaller vessels being able to find that fuel maybe at smaller ports, not at major ports?

Well, what one has to do is we'll have to be organized. A few months ago, people were worried about whether they would find distillates. Now it seems that this point has been settled. Now our vessels go through small and big ports. So one thing one would have to do would be to supply heavy fuel oil to the smaller vessels whenever the opportunity arises and basically run the vessels with higher heavy fuel content than they would run them today. So I do not think there's going to be a major problem in that. I think there's going to be a number of major ports that we will be able to find heavy fuel oil land. Sometimes we may need to balance for a day or 2. Or even in extreme circumstances, we might need to get distillate. But do not forget that the smaller vessels usually fill up in volume, not in deadweight. And therefore, it is easy to fill up a vessel's tank up to 100% and you're not going to use lose cargo because of that. So we don't see -- foresee much of a problem here.

Just to put some numbers on that, the smaller ships have in excess of 60 days' range when they fill their tanks full. When people think of this as a problem, they think about filling the tanks the way they do it today, which is very seldom filling the tanks all the way full. But I think in 2020, at least until we see what the situation is, our practice would be when we find heavy fuel oil to fill the tanks all the way.

Yes. And for example, Kamsarmax takes 2,000 tons of fuel oil, and especially if you go at a lower speed, you can -- you burn 20 tons, you can actually sail for 100 days. That's going to -- from China to Brazil and back to China and then almost back to Brazil. So I don't think there's going to be a problem there. I was just reading the other day that there are refineries in South Africa, for example,, which is not really a major bunkering port, that will have a problem, because they will have additional heavy fuel oil capacity. I don't think there's going to be an issue, but one has to be organized and never let the vessel go with half empty tanks.

And we will now take our next question from Deutsche Bank the line of Amit Mehrotra.

It's Amit here from Deutsche again. So obviously, just one on scrubbers, the big bet that you're making on scrubbers. I think -- I mean, correct me if I'm wrong, but effectively, it's just a bet on the price differential between high and low sulfur fuels. And I wanted to understand, Hamish, how confident you are in that aspect of that investment, because Paddy Rodgers and Euronav, their objection to scrubbers is not just environmentally driven, it's also their belief that the spread may not be as wide as what's implied by intermediate fuel...

Well, first of all -- yes, I mean, we have an argument with anybody who says that scrubbers are not as environmentally friendly as burning other sorts of compliant fuel. We actually think that scrubbers are more environmentally friendly than burning compliant fuel without a scrubber. But in terms of the business case, the more people who think that scrubbers are stupid from a commercial point of view, the happier we are. So we really don't want to convince anybody that scrubbers are a good business decision, and I'm happy that as many people think that scrubbers are stupid as possible.

I get it. But the question -- I mean, you're not really answering the question. The question is, I think you sat on a board of a refinery a while ago, so you really know about the oil company's ability to make compliant fuel enough of...

Well, let's put it this way. Do you think the price of heavy fuel is going up or down? And do you think the price of low sulfur fuel is going up or down? So keep those answers to yourself. But I'll tell you that at the current spread between heavy fuel oil and low sulfur fuel, we're happy.

Okay, that's fair. Let me just ask one quick one nuance question on the buybacks. So is your view that you could just simply go to the open market and buy shares? Or could the company actually be able to become a liquidity provider for one of the large shareholders that's been in the capital base for a while? And the answer I think is important, because...

Well, we have no intention of buying back Oaktree's shares

We have no further questions at this time. So I'll hand back for closing remarks.

No closing remarks, operator. Happy Thanksgiving to everyone, and thank you for attending.

Thank you. Ladies and gentlemen, that does conclude your presentation for today. Thank you all for participating. You may now disconnect.