Scorpio Tankers Inc (STNG) 2016 Q4 法說會逐字稿

Hello and welcome to the Scorpio Tankers Inc. fourth-quarter 2016 conference call. Today's conference is being recorded. I would now like to turn the call over to Brian Lee, Chief Financial Officer. Please go ahead, sir.

Thank you and thank, everyone, for joining us today. On the call with me are Emanuele Lauro, our CEO; Robert Bugbee, President; and Cameron Mackey, our COO.

The information discussed on this call is based on information as of today, February 13, 2017 and may contain forward-looking statements that involve risk and uncertainty. Actual 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 that we issued today, as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com.

All participants are advised that the audio of this conference call is being broadcast live on the Internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days.

Before I begin, if you have any modeling questions, we will take those offline and do those separately, so you can call me and we will get back to that. Now I would like to turn the call over to Emanuele.

Thank you, Brian and good morning to all. As highlighted in our fourth-quarter results, which we announced a short while ago, we've seen a softness in the product tanker rate environment throughout the second half of 2016. We think this is mainly due by the reduced oil trading activity that we have experienced since the summer of last year, which is negatively impacting key petroleum products (inaudible) demand.

Inventories remain high, refinery throughputs are slow and this is impacting the drawdown of those inventories. Whilst the rate environment has improved during the first quarter of 2017, the fundamental drivers for the product tanker market have remained largely unchanged. And although we remain optimistic for the product tanker market medium-term outlook, the Company has taken the decision to scale down its dividend and pay a quarterly dividend of $0.01 per share for the current quarter.

On a relative basis, we are pleased with our booked TC earnings from the first quarter so far, which compare very favorably with the last quarter of 2016. We are also pleased with completing our bank financing requirements for 2017 and we remain as always grateful for our lenders' support on this.

On the supply side, things are stable and actually close to unchanged compared to the last time we've been speaking to you in November last year, which is good news as the activity is close to none. Though the outlook is increasingly favorable with MRs order book being close to its 20 years low, we expect this to result in demand growth actually overtaking supply growth in the second half of 2017.

The shipbuilding industry situation continues to struggle. It struggles to attract new orders in a meaningful way. The yards, which are capable of building product tankers of any acceptable quality, are less than a handful now on a worldwide basis. This is helping to maintain a rather bullish scenario on the supply side for the product tanker market on a medium-term perspective.

With this, I would like to turn the call to Robert Bugbee.

Good morning, everybody. As Emanuele said on the call, the first thing the Company has done in the last two, three months is increase its liquidity and increase its work on its transparency going forward with the balance sheet. So we don't have any more debt due for 2017 on the bank side and we are working, as you can see, on the sale-leasebacks, which are pretty efficient borrowing to increase the [front-up] liquidity. We have announced the transactions that are imminent and I think it's reasonable to say that we are working on others that would lead to further liquidity. That gives us a tremendous amount of flexibility from the balance sheet side and doesn't really put us under any pressure as to when the recovery will come, whether it's second half, third quarter or early 2018.

As Emanuele intimated, the combination with the increase to liquidity combined with -- I think everybody on this call would be favorable to that first-quarter guidance we've given. We had some very strong relative performance in the handymaxes and the chartering guys did very well in a difficult LR2 market, but it's a market like this that really shows our commercial platform and our customer relationships and the fleet quality.

We are seeing -- despite the fact that inventories are still high, we are seeing those inventories coming down. There's been a decline from the peak to the 2014 level of something like 50% in the OECD industries and that's maybe a little bit more advanced than we think because where we are getting remaining stockbuilding is in the United States. In a way, that is a good thing because it's the United States that exports. We want to see the rest of the world's inventories come down. Five months ago, we had lots of ships in the world that were storing products. That's no longer the case and it's a good dynamic that the US is creating its export potential while the rest of the world's inventories are coming down.

We do not have a forward view of when these two lines are going to meet, to when enough will be enough and you get that demand and supply coming into line. The fundamentals for certainly from the end of this year into 2018 are really pretty incredible. I think that the standard fleet distribution understates what is happening on the supply side. We have various combinations of environmental legislation this year come into effect, plus we get the first year, especially once we get into the second half, of aging in the MR and the handy fleet. The handy fleet itself really understates the crisis that's in. There's hardly anything on order in that fleet and there are a number of fleet ships coming to the end of the period.

So we have this situation where we've set the Company up so that it can deal with whatever time period it takes here for the recovery to great earnings. It can also take advantage of things either way in whatever it wants to do with various instruments or opportunities.

I think it's worth reminding that the way this is setting up with refinery anticipated growth if the world keeps together and you continue to get demand, once those inventories run down, there is really no reason why this Company can't get back to certainly earning what it was earning in the 2000s. It's not a big step to get back to earning what it earned in 2015 and with the incremental vessels that would've been delivered, that's more like $2 a share than the $1 something we earned in 2015 and that's the way we are looking at it. We're looking at this as little -- we are playing cautiously, allowing ourselves optionality for the next nine months or so. Then there is argument that the market could strengthen before there. It is still relatively in balance and it's really not, if you do your analysis, much of a step to get back into really fantastic cash flows and earnings. With that, I think we will open the discussion.

(Operator Instructions). Doug Mavrinac, Jefferies.

Robert, I just had a few follow-ups and my first one was on the topic that you just ended your comments on and that is just how the market fundamentals remain intact. So Friday, the IA came out and said that 2016 global oil demand grew by 1.6 million barrels a day and if we see at least that pace of growth in 2017 and maybe more depending upon what happens in the US and we know that there is virtually zero fleet growth in 2018, can you remind us how seasonal factors play out in the product tanker market?

You mentioned -- we know about the inventory overhang, but how that could potentially play out heading into a very strong 2018 because second half of this year is only a few months away? So can you give us some of your thoughts on how this year could play out even just seasonally and then maybe fundamentally as well?

Well, look, in the short term, you are playing this very difficult game. You have very little visibility on the short term while we are going through this destocking. I don't think you need that market balanced; you just need the signs that things are going to be there and then the traders get in and get active and we have seen what happens. A dry cargo market was thought to be blown away and it is still a cyclical industry. Coal prices were expected to be blown away. Iron ore prices were expected to be blown away. The product market itself is actually much more balanced than any of those three markets we've described. Of course, we are not happy with what we are guarding for first quarter or did in fourth quarter, but that is significantly above OpEx, G&A and interest. So it's not like the product market itself is in crisis. It means that as soon as you get any change in this position, the rates will really move and move very high upwards.

And that's the thing and that could happen forgetting the seasons. That could happen regardless of which season where. It's just that you have a -- you are uncertain. You kind of create models that you could have this happen in three months. It could happen in six months, but your probability doesn't become overwhelming as you start to get into the end of 2018 -- 2017; sorry, the end of 2017, end of this year.

Yes, I know what you meant. Very helpful. Robert, my second question is -- and this is the thing that actually first jumped out at me on the earnings release was the guidance for 1Q and it was the strength in the LR2, LR1, MR and handy markets. And so my question for you there is when you look at that relative strength both as it relates to 4Q, but also as it relates to some of the broker-provided rates for the quarter, when you look at that relative outperformance, how much of that is just your Eco ships doing better in a rising fuel price environment. How much of it is pull performance. How much of it is just the brokers not still providing representative rates, or is it some combination of all of the above?

So I think it's four things. Obviously, with the higher fuel, that benefits the modern ships. Second, the quality and the operation of those ships off the big platform. In weak markets, it's where the strong pulls actually do their jobs because, if they are right, they should be getting the first calls from the customers, etc.

And then the other third part of it is, yes, the indexes just don't reflect what's going on. I doubt actually if any of you have a handymax -- handysizing, ice-class handysize index at all that most of you look at. I would really doubt whether more than 10% of the analysts actually have any idea at all what ice-class handys have been doing.

The second thing is that we have commented many times that the one way LR2 index is not reflective. And then, finally, the fourth thing is that it's the stuff that frankly you guys are never going to work out and we are not going to reveal and that is that we do have very strong relationships with certain key customers and routes that allow for the utilization and [Roid's] choice to be better than any of those indexes in a weak market.

Right. Got you. Very helpful. And then just final question as it pertains to you guys in particular. Obviously, you've got that new $172 million credit facility; you've got $92 million of cash on the balance sheet. So when you look at your upcoming CapEx commitments, you've got all of that covered and then you throw in the sale-leaseback that you all did, it gives you a bit of extra cushion.

So when we think about -- we see an inflection point coming. We don't know exactly when it's going to be, so when we think about additional levers that you have to pull, how should we think about maybe additional sale-leaseback opportunities or targets in terms of generating even additional cushion if, for whatever reason, the inflection point is a little bit more prolonged than people expect?

Well, I think there is one thing covering -- you are covering for a lot of these eventualities. We are already covering for a little bit longer than expected and I've also alluded that what you are seeing today is not actually where we are going to end up. We have an expectation over the next week that we would do some more similar activity to what we have seen at pretty efficient positions to release even more liquidity and -- but there is no -- we are not expecting an implosion of the rates because they are still reasonable okay and we've got the wherewithal going forward to handle that.

Yes, yes. All very helpful. Once again thanks for the time, Robert.

Greg Lewis, Credit Suisse.

So just following up on Doug's question on the sale-leasebacks, clearly, this is something that is more in the market. It's more companies are talking about building it. What do we think is driving this new appetite from I guess not even from your position, but who are these suppliers of this capital and is this a group of new investors that are looking to do sale and leasebacks and just any color you can provide there because it seems like the appetite is pretty strong for additional sale-leasebacks really across the tanker industry?

Well, I think you've got two things going on. First of all, if we look at the commercial lending side, across shipping, the commercial lenders, even though capital is tight even though they are constrained, where they are seeing good quality companies, good quality balance sheets and good quality assets, they are still willing to lend. We can see that in the bank announcements we've said.

Well, now, those guys -- look at what those guys are lending out in their margins. There is a huge arbitrage between what the commercial lenders who see our balance sheets every day and they, of course, weren't surprised with our first-quarter guidance and what for example our convertible paper is trading at or for that matter our baby bonds are trading at and then there are a group of people in the middle who are saying, look, if I can get asset-backed securities somewhere between what the commercial lenders are charging and what the paper is, well, that's a pretty good deal. So first of all, the dynamic is there with this big arbitrage.

Then the third aspect of it is this is again a -- there are non-American diverse institutions willing to make that play. In fact, there are American institutions willing to make that play; they are just a little bit more expensive than the overseas ones and that's really what you are seeing being played out.

Okay, great. And then just one follow-up on the -- you mentioned the ice-class handymax performance, which was pretty strong. What is that driving? Is that just winter weather driving that? Is it the delays and where should we be looking for -- where are those vessels trading that are getting those better rates?

Well, the first thing, they are primarily trading Northwest Europe, Europe, Mediterranean and the first thing you should look at is that they are not actually many ships that have been ordered in that area, not many ships that delivered. So you've got a buy side that is pretty constrained. They are also working almost every day exclusively in very highly environmentally-sensitive and regulated areas. Even some of the existing fleet has moved away and you do have aging in that fleet and also, we have something like 18% in our pulls of the entire market itself. I'm not talking about the high-quality ice-class ships; I'm just talking about the entire market on the water itself.

So yes, of course, the pilot and [association] of ice-class, they are benefiting from a cold European winter. Against that, they could have done a lot better again if you hadn't had the OPEC sanctions and if you hadn't had Russia sanctions and if you hadn't had Russia cutting down on their exports. So they've done particularly well I think because of their own dynamic. It's fine. We are happy with them.

Okay, perfect, guys. Thank you for the time.

We are happy to keep them nice, quiet and silent at the moment.

Amit Mehrotra, Deutsche Bank.

The first one is I guess obviously on the dividend. I'm sure it was a difficult decision, but, Robert, Brian, if you could just offer some color in terms of what happened in the last three months? Because I think on the last conference call, Robert, you were pretty bullish and pretty adamant that the turn was coming and you haven't really had a significant reduction in asset values. They've been weak. The rate profile has been lackluster, but it hasn't really been scary bad.

And so the question I had is what made you guys wake up one morning, I guess, over the last three months and say, oh, God, we've got to cut the dividend 92%? If you could just offer some color on that so we can glean what's going on in the organization maybe from an asset value standpoint that maybe we are not fully appreciating outside? Thank you.

Sure. There is nothing going on on the asset value side. I think the values in a market like this at the moment are an almost so what. I really don't think I could ring up Anthony Gurnee at Ardmore and say to him, hey, vessel value or Amit Mehrotra's value matrix? I will offer you that price and he is going to sell me a ship. This isn't going to happen. They are not being priced off. They are being priced off distress at the lower end of the market, the older ships, the 204s, 205s, which they are obviously facing issues with the regulations and priced off the fact that, well, if nobody is ordering ships then newbuilding prices must below so then they are discounting that way.

But in practical terms, I just don't think you can buy good quality ships for the prices that are being used in the calculations. So we are not seeing the same asset stress. The lenders aren't seeing the asset stress. We've got proof of that in the refinancings, but what happened -- it actually wasn't a very difficult decision by the end of the day. You are not being paid for the dividend. You have amazing confidence and real excitement about the prospects of this industry going forward as we approach the end of this year. You have risk to the upside anyway during this year and you've had your own experience where it's the classic point at the moment.

If we go back to -- our sister company sold this time last year. Everybody was lent over hard and, oh, my God, you've got to sell the Company, the stock is going down, sell rating, sell rating, dry cargo is coming to the end. We've just about got that point now in the product side and you are not being paid for the position. I think that you've got -- I don't want -- I'm a shareholder in STNG. Why on earth do I want to be paid a dividend at the moment when the opportunity, a little bit of delayed gratification, tells me there are just so many better uses of that capital than just paying myself back a dividend?

Okay. Let me just ask you a couple more follow-ups, Robert, to that. One is that the Company raised successfully a bunch of really critical financings during the quarter over the last couple months. Did the banks at all maybe talk about their reservation about --?

No, there is nothing in any -- we could have paid the dividend today. There is nothing (multiple speakers). We have an obligation. I think we announced our -- what did we announce -- we announced the [KX] in finance and the [SSH] finance way back in January 10. Had the bank put a stipulation in the terms to do that or the Board had met and said we have to do X, we would've had to announce the decision on the dividend at that point. So everybody did this based off what was going on back at the time in the models. So the actual dividend meeting, the management proposal to the Board literally came very, very shortly before the earnings release.

All right. Let me just ask a couple quick (multiple speakers).

At the same time, we didn't wake up one morning, Amit -- you don't wake up one morning. We've had shareholders suggesting to us, top shareholders suggesting to us for months that they would prefer, because they see how great the fundamentals are, a better allocation of proceeds by cutting the dividend. We've had marginal buyers who are looking at the Company saying, look, we are new to shipping. We trust this. We see this, but we would be much more happier if we saw this. This is not a wake up one morning.

We've had a change of government in the United States, if you haven't noticed. In our last conference call, I think the odds were 99 to 1 that Hillary Clinton would win the election and now the environment is such that it is better to make sure we first put ourselves in a flexible position to gain from what we think is going to be industrial growth and allocate capital towards that.

Okay, fair enough. Brian, let me just ask you one housekeeping. I know the available financing wasn't listed in the table, but I guess that's because you are just finalizing those two facilities. Can you just give us, out of that $230 million or $228 million that's left over in terms of what needs to be paid, how much of that will be new debt and how much of it will actually just come from the cash balance of the Company? Thank you.

$258 million left to pay and then $230 million of debt, from the start of the year and as you said, a portion of that was already paid. So that's it from January 1 if you look at it from that point of view.

So from January 1, there's $30 million of incremental equity from the cash balance that needs to be funded. The rest will be debt. Is that right?

So it's $258 million to be paid, $230 million of debt, so $28 million will be from cash.

Got you. Okay, very helpful. Thank you, guys, for taking my questions.

Jon Chapelle, Evercore ISI.

Just a couple follow-ups to the prior ones. First, on the liquidity side, so now with the sale-leaseback, the other levers, the nearly $80 million you are saving from the new dividend run rate, how conservative are you going to be? You talked about you don't need to do anything drastic, whether the recovery is second quarter, third quarter, early next year. How conservative do you want to be with retaining that new found liquidity versus stock that's trading arguably at a significant discount to NAV, bonds that I think are below par? Is there a better use of capital in the form of other returns of capital to shareholders than the dividend and was that part of the thought process?

I think the thought process was to first recognize that by cutting the dividend, it would give us an incredible amount of optionality. Everybody your side would like to have a clear roadmap, but so much of what you are asking is dependent upon the pricing of the various alternatives combined with also opportunity or run rate. So obviously we are going to sit there and count the days down and every day, we are going to go was today a positive day. Well, today is going to be a positive day. The rate structures are such that it is going to be a positive day. You are one day forward.

What you don't know of is you just don't know what your securities are going to be priced at. But at the pre-open, obviously, we are trading below NAV. Obviously, the convert is trading at a ridiculous spread to what the lenders who know the balance sheet best is, but we just have to watch. Today, unfortunately, we are not allowed to buy anything.

What I want to be clear about is, like you said, you could have paid the dividend this quarter if you wanted to. You weren't getting paid for it.

We are not going to go and order newbuildings if that's what you are worried about.

No, no, of course not. Well, of course, I am always worried about that, but no, not in this particular case. What I wanted more clarity on was that this wasn't so much out of a position of weakness, it was a position out of -- there were other opportunities and here we sit with these other securities that probably look even better than (multiple speakers).

Look, I think people just have to be fair with themselves that the naysayers may have underestimated the potential liquidity. I read some of the reports and it was -- first of all, they were saying some of them we would lose $0.05 to $0.10 of cash in the fourth quarter more than we have. Second, it was questioning whether or not we would actually get the finance in place for even the newbuildings, not alone rolling debt from 2017 to 2021. And there was no idea of the flexibility we could obtain through the sale-leasebacks. But this is a want to. Nobody has pushed us to have to.

Yes, understand. The other follow-up I had was on the handys. As you mentioned, you want to keep them silent and quiet or whatever you said it was, but difficult now when you've chartered in seven of them. So can you just talk to the thought process behind chartering those in? It seemed that as the fleet was growing on a known basis, there was a little bit less reliance on charter-in. How unique of an opportunity was this and how do you see it vis-a-vis the market fundamentals you just laid out?

I think this is a really interesting opportunity because, of those seven ships, we already had three in on time charter at a rate about $3000 a day higher than what we've now done and we had a situation where somebody -- we are clearly a better credit -- without going into details, the original owner was not as strong as STNG and we had the opportunity to not just renegotiate downwards the vessels that we had, but take on these other four in a market -- that are great quality vessels -- in a market that, as we pointed out, it is becoming more and more supply-challenged and most of all, it's not just your normal time charter or whatever. We hold purchase options over these vessels.

Yes, I noticed that. Up until the end of 2018, correct?

Yes.

Okay, great. It's very helpful. Thanks, Robert.

Fotis Giannakoulis, Morgan Stanley.

Robert, I want to ask you about how do you view this capital allocation that you mentioned and at what point should we expect and if we shall expect the dividend to return? Obviously, you mentioned about the low order book, the falling inventories. At some point, the market will get better. I'm just trying to understand how do you view the capital that is going to come in will be allocated between restoration of a dividend policy and the acquisitions that you are contemplating?

I think that is a great question, Fotis. Clearly, by keeping a nominal dividend, the Board is basically reaffirming that the Company would like to pay a dividend. Now, at that point where we are through this, we have visibility or whatever. Again, it becomes a little bit -- the easy one is, okay, the stock is trading above net asset value. The market is strong. Yes, of course, I think you would go to the Board and ask to raise the dividend.

The less easy one is market is strong, like, for example, what happened at OMI. The market is strong; the company still isn't really trading above net asset value. Your forward bookings are really strong. The market is accelerating. Well, we kept a fairly nominal dividend there of 2%, 3%, 4% or whatever, but we didn't really march it up, but what we did was buy 32% of the Company back in 14 months.

So it really depends when you get to that point of cash flow recoveries at each point where is the stock trading at the different points, that you would want to -- obviously, it would be great to have your cake and eat it and we would like to be able to do that.

And just a follow-up. First of all, if you would pretty fair to maintain your discretionary dividend policy or you might consider linking your dividend to earnings like many of your peers in the tanker sector have already done? Second, how do you view this higher dividend when the market strengthens, vis-a-vis the excess size of the options of the deals that you already signed with [boating] vessels?

Again, the exercising of options would depend on the time. What you hope is that we get to the middle of 2018 or the end of 2018 and the markets are where we think they're going to be strong. The ice-classes are a much more in demand beast and, wow, you are in the money and you exercise the options and it doesn't actually take you much equity to exercise those options at that time because your strike price will be lower than where the value is. So that's a [low one sophomore] incidental position.

I think the question related to your floating dividends, we will consider that going forward, all types going forward later, but I can honestly say that was not part of the discussion recently with the Board. When you come to later having surplus cash, obviously, you will make all forms a discussion with the Board.

Thank you, Robert. (multiple speakers)

And we'd be happy to have you in if you have strong preferences to discuss it with us.

Happy to do that; although this is clearly your decision. One last question about the differences that you might see between MRs and LR tankers. How much of the current weakness that we have seen the last few months is also attributed to the start of the deliveries on the crude tanker space, particularly for the MRs and for the LR vessels in the Middle East and also how do you view the exports from the US developing? People are talking about a steeper drop in refinery turnarounds going forward.

Yes. Again, it's very, very hard in the short term to work it out, but it's a reasonably good dynamic that the US overall has the export capacity. It's good that South America's demand is going up. It's good that Asia's demand is going up. I think that it would be nice to blame every part of the weakness on the LRT market on the crude oil deliveries, but we are also getting some bonuses at the moment because many of the older LR2s have been shifting into crude oil markets. They've been unable to compete in the LR2 market and they've been moving out of the LR2s into the crude and that's going to make it very difficult if not impossible for them to come back.

Clearly, yes, LR2s are being affected by some of the deliveries at the moment, but I don't think that's something to complain about. We've been through that issue before. I think, overall, I've listened to a lot of conversations as to whether the MRs will outperform the LR2s or whatever, but over time, you may have one size outperforming the other for a few weeks, but over time, they will just get arbitrage. You just cannot have a strong MR market and a weak LR2 market for very long, or a strong LR2 market and a weak MR market for very long.

Thank you very much, Robert.

John Humphreys, Bank of America Merrill Lynch.

I just wanted to touch on the chartered-in and looking out to 2018 and 2019 and the new deliveries you have. It seems the expectation is to have some of the chartered-in vessels in 2017 roll off and have the newbuilds replaced so the fleet would be where it is today, or is the expectation to maintain those chartered-in, add in the newbuild and really see the fleet continue to grow?

We don't really use the word replacement because the fleet is really new. So every single one of our chartering strategies is do we think overall we are going to make money on time chartering the ship in. So we really do think that the curve could move up very sharply in 2018, 2019, like really sharply. So therefore, we are willing to tolerate either a loss or a breakeven on taking a time chatter that is either two or three-year Charter from 2017, 2018, 2019 or four years 2020 or even five years 2021. And we are also willing to just tolerate that by chartering in ships one option, one option, one.

So right now, the chartering policy is not an expression of where we want to be in 2018, 2019 in terms of any particular number. It is we believe this is the time to put risk on. It's the same as a shareholder needs to buy the stock. You can't hang around and wait until November or December. Once the markets start to recover, this earnings and cash flow of this Company is really going to rip. So you cannot hang around and wait to buy the stock. In the same way as if you are going to put risk on in terms of time charters, you can't hang around and wait until everything is fine. You have to start now while people are nervous.

Got it. Thank you. That leads into the next one, Robert, and I appreciate what you talked about in second-half 2017, what you expected. When I was looking at regulation and refinery adjustments, really saw a stronger recovery a little bit later in 2018 and 2019. If you could walk me through where maybe I am wrong and why it's not a 2018, 2019 firming story and it's more a second-half 2017, early 2018?

I cannot do that. I will do it offline. There was so much wrong in your guy's last piece that I just -- we don't have time. But I am happy for you to talk to James, our analyst, offline, to go through the differences if that is okay?

You touched on it a little bit earlier in your commentary. (multiple speakers).

We will go over it offline. We are seeing it now. You guys published -- (multiple speakers).

No, not what we said. I'm saying what you see in second-half (multiple speakers).

We will go over that offline. Okay?

Okay, yes. And then if you could later in the -- is the -- what key -- if you could just reiterate those key drivers later in the year, where you really see this pickup (multiple speakers)?

It's simple. At the end of the year, you've got a lot of things going for you. A, you've got the regulations that are coming in August. B, you've got one more year of demand growth. C, you've got a real slowing of the delivery book. In a twofold mechanism at the end of the year, one, the newbuilding order book in certain categories just diminishes materially. Second, you don't actually have many ships that want to deliver in November, December because of age. Third, you are turning again into a seasonal stronger period. So that's why.

Got it. That's it for me. Thank you.

Noah Parquette, JPMorgan.

Thanks. All my questions have been answered.

Spiro Dounis, UBS Securities.

It might be a tough one to answer here, but just wonder if you could share any initial thoughts you've got on the border adjustment tax, to the extent that becomes law and how that impacts imports and exports of refined products here out of the US?

No. No comment.

No comment. Got it.

There are financial geniuses well more qualified than us trying to work out what the policy is going to be. No, we are not going to comment on hypotheticals.

Okay. Maybe we will do it this way. If the US was incentivized to export more product, where do you think it goes? What are the most likely markets; where are the biggest deficits right now as you see them given our refining footprint?

I will make it even simpler. If the US is incentivized to export products, it would be a good thing because to export, it has to take it by sea.

Okay. That's all I was looking for. The second one is just around the MR sale-leaseback negotiation. I think it is still underway, so I'm not sure how much you can disclose here, but just wondering is there any purchase obligation that we should expect in there?

I think we have disclosed what we can disclose as a courtesy to everybody so they can see what is really going on. And then I'm sure we will give a fully transparent detailed position when we are able.

Understood. Thanks for the time.

Magnus Fyhr, Seaport Global.

Just one question left. Will you be able to quantify the impact of the fire at the [Rouias] and do you have any update there on the status currently? I'm sure it took a little bit away on the LR2 market in the quarter -- in the guidance for the first quarter.

Yes, it's clearly taking a little bit away from the LR2 market at present and to the extent that that comes back, it will be very positive for the LR2 market. We haven't really stressed it on the call very much because we don't want to make excuses for what's going on now; rather we want to guide people to the longer-term fundamentals as we see it. But, yes, it will be great when that comes back up.

And do you have any -- quantify how much was done? I think it was 400,000 barrels? Any (multiple speakers)?

We've got about the same type of information as you have. Timing is literally whoever you talk to on any given day. We haven't got a good handle on that.

Okay. All right. Thank you.

With no questions left in the queue, I would like to turn the call back to Brian Lee for any additional remarks.

We want to thank everyone for joining us today and we look forward to speaking to you soon. Thank you very much. Have a good day.

This concludes today's call. Thank you for your participation. You may now disconnect.