Scorpio Tankers Inc (STNG) 2025 Q4 法說會逐字稿

Hello, and welcome to the Scorpio Tankers' fourth-quarter 2025 conference call. I would now like to turn the call over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir.

Thank you for joining us today. Welcome to the Scorpio Tankers fourth-quarter 2025 earnings call. On the call with me today are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Chris Avella, Chief Financial Officer; Lars Dencker Nielsen, Chief Commercial Officer.

Earlier today, we issued our fourth quarter earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, February 12, 2026, 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 as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com and sec.gov.

Call participants are advised that the audio of this conference call is being broadcasted live on the Internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpiotankers.com on the Investor Relations page under Reports & Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. (Operator Instructions)

Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro.

Thank you, James. Good morning, everybody, and thank you for being with us today. Scorpio Tankers delivered another strong quarter and a transformative year. In Q4, we generated $152 million of adjusted EBITDA. And for the full year, adjusted EBITDA reached $568 million.

But the real story is not just earnings. The real story is structural strength. Since 2021, we have reduced net debt from $3.1 billion to a net cash position of $309 million today. This net cash position is increasing by the day and has accelerated sharply in Q1. We have fundamentally reset the company.

Today, we hold approximately $1.7 billion of liquidity and growing. Our daily cash breakeven is $11,000 per day per vessel. In the current rate environment, this translates into powerful free cash flow generation. Even under stress conditions similar to the COVID levels, we remain around cash breakeven.

We are structurally resilient with significant operating leverage. We have upgraded the fleet with discipline. We've sold 10 older vessels at a strong valuation, and we've been reinvesting in 10 modern newbuildings. The fleet is younger, more efficient and positioned for higher earnings power. At the same time, we are increasing the quarterly dividend to $0.45 per share, up 12.5% year-over-year. We're growing the dividend because we can, because we have the balance sheet, because the payout is supported by structural cash generation, not temporary conditions.

Turning to fundamentals. Rates have improved for five consecutive quarters with momentum continuing into Q1 2026. Refinery closures are lengthening trade routes, ton-mile demand is expanding, unprecedented strength in the crude market is tightening effective vessel supply in the product tanker space. These are structural drivers and not cyclical noise.

We cannot control the market cycle, but we can control our preparedness. Today, we operate a modern fleet. We have substantial liquidity. We have structurally low breakevens. We have a net cash balance sheet. This combination creates downside protection and upside torque. Scorpio Tankers is positioned to generate significant free cash flow and deliver durable shareholder returns across the cycle. We're stronger than we've ever been, and we're positioned to capitalize on what comes our way.

With that, I'd like to turn the call to Robert.

Thank you very much, Emanuele. Let me first begin with the broader context of the industry, especially for those new to the company. We operate in a cyclical capital-intensive industry during a period of elevated inflation, constrained supply and shifting global trade patterns.

In that environment, asset quality, balance sheet strength and disciplined capital allocation matter more than ever. We also operate the youngest fleet in our peer group. That really matters. Younger vessels are more efficient, more commercially flexible and increasingly advantaged as regulatory standards evolve. Shipping will always be volatile. That is not new. And it is not avoidable, what can be controlled as financial structure.

Today, we have done that by materially derisking the company. Today, we operate with a net cash position and low cash breakevens, that provides resilience in weaker markets and meaningful operating leverage in stronger ones.

For investors, the case is straightforward, hard asset-backed conservative financial structure and a platform capable of generating substantial cash flow across the cycle. In uncertain environments, preparation and discipline create opportunity. We believe we are well prepared for both the good and the bad.

Just one thing just to sort of be very clear on. As Emanuele pointed out, our newbuildings and dispose of older assets for renewal is being done in a very measured and conservative way. We will continue to ensure that if and when we order vessels that we are generating more cash through operations and sale of older vessels than that of the total outlay of the vessel that we are buying.

For those of you concerned about the high amount and building amount of cash on the balance sheet that we expect to continue to happen, you should not worry that we have no absolutely zero acquisition thoughts of other companies or competitors or large fleets at all. And you're not going to wake up one day in the morning and find that we've made a 10-ship order. This is a very disciplined approach, balancing the arbitrage of selling the older vessels at steep prices and ordering newer vessels when we see an advantaged price to be arbitraged.

And with that, I'd like to pass it over to James. Thank you.

Thanks, Robert. If we could go to slide 7, please. The past 12 months have brought no shortage of headlines and yet quietly, the product tanker market has strengthened for five consecutive quarters. Today, spot rates for LR2s and MRs are approximately $46,000 and $38,000 per day, respectively, rates at which the company generates meaningful free cash flow. And the near-term setup is positive with a lighter refinery maintenance schedule, refinery runs should increase, supporting continued growth in export volumes.

For the first time in several years, the crude market is also providing tailwinds. Elevated crude rates are pulling product tankers into crude trades tightening effective clean supply. When we step back, three structural forces are driving this market. First, demand remains strong and refining capacity has shifted farther away from end consumers.

Second, effective supply growth is constrained. The fleet is aging faster than it's being replaced. And in a capital-intensive industry, that matters. Third, sanctions and geopolitics are reinforcing both dynamics, reshaping trade flows and tightening supply. Taken together, these forces support a constructive outlook, both near term and longer.

Slide 8, please. Global refined product demand is expected to increase by nearly 1 million barrels per day this year, and that growth is translating directly into seaborne exports. In January, seaborne refined product exports averaged 22.1 million barrels per day, up roughly 1 million barrels per day year-over-year. Not only have volumes increased, distances have increased as well.

Slide 9, please. Over the last five years, export-oriented refineries in the Middle East have added capacity while closures in the US, Europe and parts of Asia have removed it. When refining moves farther away from the consumer, products must travel farther. That increases ton-mile demand. This is not cyclical demand growth. This is structural. Since 2019, product tanker ton miles have increased roughly 20%.

Slide 10, please. Aframax and LR2 demand in the Atlantic Basin has strengthened meaningfully with volumes from the US to Europe nearly doubling over the last year. That alone has tightened vessel availability across the region. At the same time, developments in Venezuela present additional upside. Last year, Venezuelan crude exports averaged roughly 800,000 barrels per day, much of it directed towards China on sanctioned tonnage.

Any redirection of those barrels toward the US or increases in production would further increase loading activity in the Atlantic Basin. Importantly, this comes at a time when the Aframax LR2 market is already operating from a position of strength.

Slide 11, please. Today, approximately 54% of the LR2 fleet is trading crude oil. Part of the increase is due to soaring crude rates and the other part is structural. The Aframax LR2 crude market is roughly 14 million barrels per day compared to about 3 million barrels per day for clean products.

The crude market is simply much larger. The decision to build LR2s instead of Aframaxes is structurally changing the fleet. By 2028, nearly half of the Aframax LR2 fleet will be LR2s. Given that crude accounts for roughly 80% of cargo volumes in this segment, LR2 crossover into dirty trades will persist.

Slide 12, please. Since the EU ban on diesel refined with Russian crude to effect in early January, European imports from Turkey and India have already declined 300,000 barrels per day. Russian refined product exports are still moving, but are traveling farther to find buyers. Before the invasion, roughly 10% of Russian exports went to Africa, South America, the Middle East and Turkey. Today, that figure exceeds 70%.

Russian crude has had a more difficult time finding buyers, especially with recent sanctions and retaliatory tariffs. Since July, Russian crude on water has increased from 121 million barrels to 164 million barrels in January. Much of the Russian trade has shifted towards older vessels. As you can see on the bottom right, nearly 50% of Russian crude and product exports now move on ships older than 19 years old, tonnage that is unlikely to reenter the mainstream market.

Slide 13. Today, the product tanker order book is almost 19% of the existing fleet, which may seem high, but context matters. As you can see on the left, 21% of the product tanker fleet is already over 20 years old. By 2028, it will be 30%. Sanctions also further tighten effective supply. Roughly 26% of the Aframax LR2 fleet and 9% of the MR Handy fleet are sanctioned with an average age of 20 to 21 years old. In a normal market, much of this tonnage would have likely already exited.

Slide 14. When you adjust for aging vessels sanctioned capacity and LR2 crossover, effective clean product supply growth is materially lower than the headline order book implies. We expect fleet growth to average roughly 3% over the next three years and potentially lower. Putting this together, demand remains strong and refinery shifts are structurally lengthening trade routes. Supply growth is constrained as the fleet ages at a faster rate than it's replaced and sanctions and geopolitics are tightening both points one and two.

In both the near term and long term, the market's fundamentals remain supportive. With that, I would like to turn it over to Chris.

Thank you, James. Good morning, good afternoon, everyone. Slide 16, please. This past year, we generated $568 million in adjusted EBITDA and $344 million in net income on an IFRS basis. We've also made $450 million in debt repayments this year, culminating with the fourth quarter prepayment of $154.6 million of secured debt across four different credit facilities.

This prepaid all of the scheduled principal amortization on our existing bank debt for 2026 and 2027. The principal and interest savings resulting from this prepayment have further reduced our cash breakeven levels, which include vessel operating costs, cash G&A, interest payments and commitment fees and regularly scheduled loan amortization to approximately $11,000 per day over this period. We also entered into contracts to sell 10 vessels at substantial gains and exited our position in DHT.

The cash gain on our investment in DHT was almost $30 million or a 24% return on investment when factoring in dividends received. The chart on the right shows the progression of our net debt since December 31, 2021, which declined $3 billion to a net cash position of $124 million by the end of 2025.

As of today, the net cash position is $308 million, and we are still pending the closing of the sales of two LR2 vessels for $109.8 million in aggregate. As Emanuele emphasized, achieving this milestone has given us the confidence to raise our quarterly dividend to $0.45 per share.

Slide 17, please. The chart on the left breaks down our outstanding debt by type. Starting at the bottom is our last remaining lease financing obligation on one vessel with Ocean Yield. This obligation is expected to be repaid before the end of this month, thereby leaving us with a debt stack consisting of secured bank debt with the lending group dominated by experienced European shipping lenders and our $200 million five-year senior unsecured notes, which were issued in the Nordic bond market in January of 2025 and are currently trading at around $103 to par.

Further to this, $240 million of our $428 million of secured borrowings is drawn revolving debt, an important tool that we can use if we want to repay the debt but maintain access to the liquidity in the future. The chart on the right is our debt repayment profile. With the exception of the final settlement of our last remaining lease obligation, we have no principal repayment obligations on our existing debt until 2028.

Slide 18, please. As of today, we have $937 million in cash and an additional $767 million in availability under revolving credit facilities for a total of $1.7 billion in available liquidity. Since November of last year, we have signed contracts to purchase 10 newbuilding vessels. The charts on the right reflect our forward payment obligations on these contracts, along with our estimated dry dock schedule through the end of 2027.

Note that the timing of the installment payments on our newbuilding vessels and the timing of our dry docks are estimates only and subject to change. Our capital allocation decisions over the past three years have afforded us the financial flexibility to meet the obligations under our newbuilding contracts, which total slightly over $700 million.

Hypothetically speaking, we could pay for all of these vessels today in cash without incurring any new debt. But nevertheless, 70% of these installment payments are not due until the years 2027, '28 and '29. With a cash breakeven rate of $11,000 per day, we are in a position to continue to build cash over the construction period.

Moreover, the age and specifications of these vessels make them attractive financing candidates, which has the potential to open up opportunities for us to further optimize our capital structure and lower our cost of capital. On top of this, our forward dry dock schedule is light, having undergone the special surveys on over 70% of our fleet in the past two years.

Slide 19, please. Our cash breakeven rates are at the lowest levels in the company's history. The chart on the left shows that these expected cash breakeven rates are lower than the company's achieved daily TCE rates dating all the way back to 2013, with the closest point being the aftermath of the COVID-19 pandemic when global oil consumption was at lows not seen in decades.

To illustrate our cash generation potential at these breakeven levels, at $20,000 per day, the company can generate up to $292 million in cash flow per year. At $30,000 per day, the company can generate up to $617 million in cash flow per year. And at $40,000 per day, the company can generate up to $942 million in cash flow per year.

This concludes our presentation for today. Thank you, everyone, for your time and attention.

And now I'd like to turn the call over to Q&A.

(Operator Instructions)

Omar Nokta, Clarksons Platou Securities.

Congratulations on officially reaching the net cash milestone. I wanted to ask about the dividend. You bumped it here after having bumped it also last quarter. Understanding your aim is really to keep the payout sustainable through the cycles. You've got plenty of free cash flow in today's market.

You got a fortress balance sheet. How are you thinking about the dividend in the future? Is the aim to do a bump regularly as in maybe once every couple of quarters or maybe revisit on an annual basis? Any color you're willing to share?

Yes. Thank you very much, Omar. So the dividend, first of all, the main premise is to see if we can -- what we'd like to do is to grow the dividend through the cycle, pay the dividend through the cycle. The actual momentum of that is dependent on a lot of things. I think you've seen our, let's say, goodwill in the sense that immediately following the implementation of an increased dividend after the third quarter results, we immediately stepped up now. As Emanuele point out, really is a reward for all of us for the strength and finish of the fourth quarter. So apart from that, I'd like to keep that undetailed. We're in a -- we will review everything regularly.

All right. That's fair, Robert. And maybe just a follow-up. You exercised the option on the LR2s. I wanted to ask about the VLCCs. There's definitely been a lot of interest lately in that segment, whether it's from the equity markets, charters themselves or owners placing orders. You sort of got ahead of it a bit last year with those two orders you put in. I think it was back in October, November. I wanted to ask how you're thinking about those right now and whether you have options that came with those that you could potentially add to your tally?

Sure. We had options. The VLCC market was, as we all know, is like a very hot commodity. Those options were very short-lived. They were options that were valued only until the end of December.

At that time in December, we were in the middle of the holidays, we didn't have complete visibility of how we felt the cash flows were moving in the market at the time, and we didn't have a strong visibility because of the holidays as well related to potential sale of our own assets, et cetera. So we felt on balance that we could pass that, remain disciplined, especially as we had the LR2 options still, let's say, up our sleeve. So those VLCC options have gone, they've expired. That's the answer, Omar.

Okay. That's very good. I'll have pass it back.

I think as a statement, I think that's a point of proof that we're not hell bent on spending money because we have to feel any urge to do that or as fast as we can. As we pointed out at the beginning, we're just going to do this in a very measured way.

Greg Lewis, BTIG.

Robert, a lot of cash. I'm not going to ask you about that. I did want to talk a little bit about the crude market, though, as it relates to LR2s. Scorpio since its founding has been pretty steadfast that the LR2s are going to primarily focus on the product side. I guess it seems like the market is kind of merging as older crude Afras are getting retired and everyone's -- if you're ordering an Aframax, you're going to quote it.

Does that at all change how maybe Scorpio would think about its LR2 fleet, i.e., do we see a path or could we see opportunities for STNG to potentially bounce those LR2s back and forth between the crude market? Or should we just assume they're going to stay in the products?

Lars?

Greg, I think it's fair to say that the Scorpio approach in terms of LR2 clean or dirty switching has always remained opportunistic. I mean we have a number of our ships in crude already. I think it's important that considering that the global approach that we have is to remain disciplined on these things. So we don't just dirty up ships unless the economics clearly justify it on a sustained basis. There has been the recent dirty outperformance, particularly in the Atlantic Basin, which, of course, we follow.

We trade that element as well, and we can also see that the ability to kind of cross-trade has increased between the LR2s and the Aframaxes. The case in point is I think there's about 515 LR2s trading globally in the world today. And you only got 220-odd trading clean today, which is probably the lowest we've seen since 2020 or 2021. Now that can then give you kind of a thing, do you go dirty or not dirty is always a tactical question. And we obviously follow all these markets.

And if you normalize the period, it has a little bit of a different picture than if you just look at quarter. But the short answer to your question really is that, of course, we look at it and we trade it as well.

Okay. Great. And then just as -- I just -- that's funny. I forgot what I was going to ask you. Just I feel like I ask you all the time.

I feel like every time I talk to you, I talk about this. But I guess I'll word it this way. Rates continue to be strong. The winter market looks like it has legs. Is there any kind of expectations in December, you fixed a couple of multiyear time charters.

Has the appetite from customers increased for multiyear term, i.e. are we seeing more opportunities over the last month or 2? Or is that something where really just thinking about previous cycles or previous periods of time, summer is coming. Does that have any impact on the opportunity for term charters to pick up, i.e., hey, if this strength in market continues, I imagine customers will be more apt to fix multiyear deals because they know next winter is already around the corner.

I'll take that as well. I mean we're certainly seeing improving time charter rates. The liquidity in time charters overall is improving as well. It's very strong. There's depth in it, and particularly on the LR2 Aframax market.

We see also markets increasing on MRs. But there's for sure an increased demand for longer-term periods. So it's for sure that the momentum is there for multiyear charter rates, and it's very interesting at the moment with that demand.

Okay. Super helpful.

Ken Hoexter, Bank of America.

This is Tim Chang on for Ken Hoexter. A lot of momentum for STNG and net cash. Congrats guys with breakevens coming down and raising the dividend. But perhaps a question for Lars. How do you see rates progressing over the next few months or 40 to 60 days?

It's been a very firm start to the year. Do you perhaps see counter seasonal increases continuing into 2Q, pushing you further over levels booked to date with all the tailwinds from ton-mile demand, some of the geopolitical uncertainty and just your view there would be great.

Yes, I think -- sorry, go ahead.

I was just going to start off, Lars just saying things. Look, I think you very well summarized all of the factors that are almost certainly going to lead to a relatively strong second quarter. Lars, would you like to add on to that?

Yes, absolutely. I mean, first of all, the clean market, if we look at that first, right, is operating with very little slack at the moment. So you could say, well, you've got some headlines on geopolitical stuff. You've got headlines around ton miles, you've got headlines around all these things. But structurally, I think we've got a very positive product market in front of us.

You've got some things around some turnarounds taking place, but that's already started in the Atlantic Basin and so on. And still, you've got a lot of product moving. And you've got open arbs from the West to the East, perpetually on the light end, you've got the ton miles we talked about. So it's not just a cyclical spike in my view.

I think we've got a refining system that is operating at a very high level, and we can see that in terms of the structural support that lends itself to LRs and to MRs in multiple regions. So you've had very strong Asian markets. You've had, of course, the Atlantic Basin, and that's been reported widely in terms of -- we've seen multiyear highs in TC14, et cetera, over the last couple of weeks.

So today, it's not really about short-term spikes in my view. I think we're seeing a kind of a longer wavelength coming in. And the market for sure, has proven itself a lot more resilient than probably one initially had anticipated as we moved into 2026.

Got it. That's very helpful. And just another quick follow-up, and then I'll pass it on. But more of an opportunity longer term, nevertheless, seeing any incremental uplift yet in Afra LR2 demand from Venezuelan exports. I know you've spoken in the past that some just kind of illustrative numbers, like an additional 1 million barrels per day equating to roughly 23 incremental vessels, but any update there would be great.

I mean I think -- yes, why don't you go for it, and then I can follow up afterwards.

Yes, Tim, as you highlight, that's the math. I think so far, we've seen about 300,000 barrels a day go to the US. The US Gulf refining system is well designed for Venezuelan crude. We have the coking capacity that can turn this heavy stuff into distillate, which is good for margins and for exports.

It's unclear whether all of this volume will go to the US and how long production will take to increase in Venezuela. It varies. But I'd say on the margin, it's very positive. Lars?

No, that's exactly what I would say as well. I mean, the margin is going to be very positive with the ships that would have need to move that are not in the sanctioned fleet.

I appreciate it.

Chris Robertson, Deutsche Bank.

Just as a follow-up on the topic of Venezuela, we talked a bit about exports here, but what's the view around naphtha imports in terms of it being a diluent for the crude? Is that market picking up? Kind of how does that look right now with increased use of the mainstream fleet? And what did it look like beforehand in terms of those deliveries into the country? Was that on sanctioned vessels? Or what's the dynamic there now?

To be honest, I think at the margin, it is not the thing that really is going to change the Atlantic Basin product market on MRs in particular, which, of course, is the way that you would normally transport your naphtha into Venezuela. I think there's other things in the Atlantic Basin that has a lot greater kind of impact in terms of why the market is so strong. It just adds to the fire in the sense that it just is an additional positive.

Got it. Okay. Turning towards just global inventory levels at the moment on the product side, James, I think you've talked about this in the past. Any update around our inventories kind of remaining low and flat? Are they starting to pick up here and grow in OECD? What's the current status there?

Sure. Thanks, Chris. Look, you always have a buildup of inventories ahead of maintenance. So we've seen that. And the most up-to-date numbers we have are the US distillate is still below the five-year average. It's been declining in the last few weeks. We've had cold weather, right, more heating oil demand and maintenance in the US Gulf is just picking up. So we expect inventories to come in.

OECD looks to be relatively in line. So I think from a product perspective, we haven't seen huge builds, which is great as you go into maintenance. So we think things are going to be tight. And so I think that's constructive. And then on the crude side, we were anticipating kind of large builds in the overall market that haven't happened. A lot of that is due to a lot of the crude on water that's built up is really sanctioned. And if you recall, there's been these forecasts of up to 4 million barrels of crude oversupply.

We haven't seen that yet. There have been disruptions in Kazakhstan. But overall, we think that the crude oversupply is going to be less than anticipated. And I think that's very constructive because it speaks to how strong demand is in the global system.

James, really helpful. I'll turn it over. I appreciate the time.

Liam Burke, B. Riley Securities.

One of the macro lifts in the product tanker side has been the redistribution of global refinery capacity, and it's been a multiyear lift. Do you anticipate that continuing? Or is that sort of bottomed out now?

Thanks, Liam. Well, look, we anticipate it to continue in the sense that there's about 300,000 barrels that are closing or part of that has closed in the West Coast United States, for example, a Valero refinery and a Phillips 66 refinery.

And as those refineries wind down in the next few months, that's 300,000 barrels, for example, that the California market needs. And if you speak to those oil and refining companies, they highlighted they're going to import it from foreign markets. So in many ways, we haven't seen the benefit of those flows largely coming from Asia.

And we still think there's going to be more closures in developed markets as well, replacing that lost production. So this is going to continue to go on for the foreseeable future. And then at the same time, as you kind of highlight with your question, emerging markets are not building much refining capacity. It takes a minimum of five, but probably seven years to build a refinery, and that hasn't started yet. So I think going forward, that's very constructive from a ton-mile demand perspective for us as well.

Great. And on the fleet management, you've had a lot of activity in 2025, both on new builds and divestitures. You've got $1 billion liquidity position. Is there any -- and rates seem to be in a good place here. Is there any additional tweaking you need to do with the fleet? Or you're happy with the assets in place and your new build and your liquidity?

We are, at present, engaged in the secondhand market, and you should fully expect that we would sell assets single or plural over a reasonably short time. And that sale and purchase market is super strong. I mean, perhaps, Emanuele, you might like to talk a little bit about that.

Sure. We -- as you said, we continue to engage opportunistically on inbound inquiry on the existing fleet we have. And as we've done in 2025 and before that, we positively reply to inbound requests and engage in potentially selling further assets opportunistically. We are not working at anything specifically on the buy side at present, but we don't exclude substituting and renewing in a conservative way as we have done in the past quarters, as you have seen. The S&P market is very, very hot.

There is a lot of interest for tankers. What has happened in the last six to eight weeks in the crude tanker space has definitely attracted a lot of interest into the LR2s as well as trickled down to the smaller sized vessels up to MRs, I would say.

And this is proven by the fact, as Lars has mentioned, I think, in his remarks earlier, there are about 220 LR2s trading clean today, which in order to see that little vessels, number of vessels trading in the cleaning market, we have to go back at least five years, right, to 2021. So this shows the level of interest and the hype that the crude market has the long-awaited crude market momentum has captured in the last eight weeks and continues to do so. I mean it's -- the level of interest is super high.

Great.

Sure.

[Christopher Shea, Arctic Securities].

Just first with regards to Q1 bookings. Can you elaborate a bit more on how your LR2s are trading dirty versus clean? And how would you think about bookings on open days there? I mean there's a $40,000 difference now on LR2s and Afra. So how do we think about that spread?

Well, I think I'll go back to what I said initially is that we look at these things opportunistically on every single day. But to look at it in a very kind of short backdrop is probably not the right thing to do. I think when we look at these things, considering the size and the number of ships that we have, we have to look at how we want to deploy these things.

And one of the things we like to see is that as many owners have moved into dirty and we were talking about the number of clean ships back, I think constructively, that volatility will be an opportunity that we would want to control and take advantage of. And when you say that there's a $40,000 difference, I think that $40,000 difference is in a very kind of insular market on a particular week.

We do not see $40,000 being the case over time. So if we look at it on a normalized period, I think that if you look over the quarter, it's been around maybe $10,000 a day, which does not necessarily justify large-scale switching quarter-on-quarter. So that outperformance that you referred to is probably something we should look at on a longer perspective.

So I'll just say that our approach is always opportunistic when it comes to this. But considering the ships that we have, the contracts that we have as well with some of our key clients, we have to remain disciplined in terms of this. So I guess the key point is we dirty out when the COGS clearly justify it.

Okay. I understand. And just on term rates, we see now VLCCs, VLCCs being done for one year at $90,000 a day. And it seems like LR2s are more or less flat recent months. But if VLCC rates stay at $900, what would you say is a fair level that LR2 should be at? Do you see any upside potentially here?

If I may, and then Lars, please jump in. But I think that LR2s have not -- or Aframaxes for the matter have not remained flat. I think that today, you can fix an Aframax/LR2 for one year in the high 40s. And there are the rates for three and five years and the demand for three- and five-year deals, which has come in strong and has been reconfirmed, we've fixed a couple of ships for five years in Q4 last year.

And today, those rates would be starting with a three for a five-year deal or comfortably with the three for a five-year deal. So definitely, the interest is there and the rates have increased for our classes of vessels as well.

I would just add that the market on LR2 Aframax has kind of relatively outperformed VLCCs. It's taking a while for the VLCCs to come. We're very happy to see that the VLCC market finally is coming really to its own and good for that, and it's going to be great for the overall market. So we're happy to see that we are firing on all cylinders now.

Perfect. That's it for me.

Yes, I would also do. It's quite interesting. If you did a cash-on-cash return valuation between either where the product stocks are valuing the vessels or even where the vessels are valued, their return on equity at the moment is every bit as strong as the VLCCs and if you in physical side. And in terms of stock side, obviously, the returns for the product tankers are higher as their stocks are selling at less of a premium to NAV than the crude is.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Lauro for any closing remarks.

Thank you very much, operator. No closing remarks other than thanking everybody for your time and attention today and look forward to being in touch going forward. Thank you.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.