Teekay Tankers Ltd (TNK) 2011 Q2 法說會逐字稿

Welcome to Teekay Tankers Ltd second-quarter 2011 earnings results conference call. During the call, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded. Now, for opening remarks and introductions, I would like to turn this call over to Mr. Bruce Chan, Teekay Tankers Ltd.'s Chief Executive Officer. Please go ahead.

Before Mr. Chan begins, I would like to direct all participants to our website at www.TeekayTankers.com, where you will find a copy of the second quarter of 2011 earnings presentation. Mr. Chan will review this presentation during today's conference call. Please allow me to remind you our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the second quarter of 2011 earnings release and earnings presentation, available on our website. I will now turn the call over to Mr. Chan to begin.

Thanks Kent. Hello everyone and thank you very much for joining us. With me here in Vancouver is Vince Lok, Teekay Tankers' Chief Financial Officer, Brian Fortier, Corporate Controller of Teekay Corporation, and Peter Evenson, Teekay Corporation's CEO.

I would like to now discuss Teekay Tankers' results for the second quarter of 2011. The associated presentation can be found on our website. I will begin on slide 3 of the presentation by reaffirming what we believe are a few of TNK's key attributes and how, during the second quarter of 2011, these continue to be strong, despite current weakness in spot tanker rates and the volatility in the financial markets.

For the quarter, and excluding the impact of non-cash items that have been summarized in Appendix A to the earnings release, we earned adjusted net income of $4.3 million or $0.07 per share. Interestingly, Teekay Tankers is one of the only companies in the tanker space to have not changed our dividend policy during the past few years. We continue to pay out essentially all of our cash flow in the form of dividends, and in the second quarter, we generated $13.2 million of cash available for distribution after reserves, for debt payments and dry docking, which translates into a second quarter dividend of $0.21 per share, to be paid out to shareholders on August 26th. I stress that this dividend is paid out from cash generated and after debt payments, so it is liquidity neutral.

We are in a strong financial position with total liquidity of almost $295 million, that provides us with the financial flexibility to take advantage of growth opportunities that may be presented in the future. We believe the tactical management of our fleet continues to benefit shareholders. Our fixed rate fleet earned an average of $24,941 per day, compared with our spot rate fleet that earned significantly less at $16,899 per day. While our spot fleet earned less than our fixed rate fleet, our spot earnings still well outperformed our peers and indices, thanks in large part to our sponsor, Teekay's Corporation size and scale, through its commercial tonnage pools. As I will detail on the following two slides, our fixed rate coverage for the rest of 2011 is estimated to be a healthy 60%, and for the next 12 months to be 55%, thanks in part to a number of charter agreements entered into over the past few weeks.

Turning to slide 4 of the presentation, you will see the details for 2 charters out and 2 charters in. Which, when combined into one transaction, provide TNK with a locked-in profit of $6,000 per day for the next 4 to 6 months with the flexibility to take advantage of any potential upside in the markets. Starting with the top box, we have time charted out 2 of our own Aframaxes fixed time charter rates at $17,200 and $17,250 per day, well in excess of current spot rates, for a fixed period of 12 months each. These 2 out charters provide additional certainty in generating positive cash flow in order to maintain our dividend in a weak tanker market.

Concurrently, we have time chartered in or leased from other owners, 2 Aframaxes at $14,000 per day. 1 for the next 4 months and the other for the next 6 months. Importantly as I will detail on the next slide, each charter-in comes with options to extend for an additional 16 or 18 months. These are the first charter-ins Teekay Tankers has completed, so I want to take a moment to discuss the benefits of chartering ships at this time. Firstly, no capital is required to gain tanker market exposure, thus preserving our balance sheet for possible growth opportunities that may appear in the near to medium term. And the second benefit is, with multiple short tenured options to extend the charters in, we can actively manage our exposure to the spot market, depending on our outlook.

The graph on slide 6 illustrates the transactions detailed on the previous slide. The solid blue line represents the average charter rates earned on our 2 charters out, at $17,000 per day and the solid red line represents the average charter in rates we have to pay for the firm period of the charters, approximately $14,000 per day. The result is that we have essentially locked in $3,000 per day, fixed profit for 2 ships. Or $6,000 per day for the initial 4 to 6 month firm period of the in charters.

After the firm period of the charters in, we will be able to choose what is the best, given the tanker market outlook at that time. The dotted red lane depicts what the rate would be to extend the in-chartered vessel. If we believe tanker rates will be above the dotted red line, then we may decide to exercise the option and earn a positive spread above our charter-in rate. Or should we expect tanker rates to be weak, we can let the options lapse and return the vessels to the owners.

So in summary, this charter arrangement provides us with a fixed profit or spread of $6,000 per day for the next 4 to 6 months, and thereafter provides us with flexibility to tactically manage our fleet to take advantage of any upside in tanker rates, or to continue with the higher percentage of fixed revenues, should the tanker market remain weak.

On slide number 6, we have updated the profile of our fleet for this transaction, as you can see in the red boxes. Our fixed coverage for the remainder of 2011 is approximately 60%, and for the next 12 months, is estimated to be 55%. The matrix on slide number 7 provides our actual Q3 2011 guidance on dividends. For the quarter to date we have booked approximately 45% of our Aframax and Suezmax spot revenue days at $11,000 and $10,000 per day respectively, which reflects the weak markets we are currently experiencing. While rates have been volatile during the quarter, with approximately 65% fixed coverage, we do not anticipate significant fluctuation from these levels as we move toward the end of the quarter.

Slide number 8 takes a look at the current tanker spot rate environment. A combination of weak tanker market fundamentals and seasonal factors had a negative impact on spot tanker rates during the course of the second quarter and this weakness has extended into the third quarter. In terms of the fundamentals, the market continues to be impacted by an oversupply of vessels relative to demand. In the first half of 2011, a total of $22 million dead weight of new ships delivered into the global fleet, leading to net tanker fleet growth of approximately 3.4%. We estimate that tanker demand growth over the same period was in the range of 1% to 2%, with the Fukushima earthquake in Japan having a negative impact during the second quarter. As a result, tanker fleet utilization has declined through the first half of 2011, putting downward pressure on spot tanker rates.

The spot market was further impacted by the onset of spring refinery maintenance programs in the second quarter, and the resultant drop in global oil demand, which is usual for this time of year, and explains why spot tanker rates in Q2 are usually lower than in Q1. In addition, a number of one-off events had a negative impact on spot tanker rates during the quarter, particularly in the Atlantic basin. Firstly, the absence of Libyan crude oil exports due to the ongoing civil war proved detrimental for tanker demand in the Mediterranean, and with no resolution to the conflict in sight, we expect the situation to persist for some time.

Secondly, oil production in the North Sea has been affected by a heavier than usual field maintenance program, coupled with production problems on certain fields. Finally, the recent IEA emergency stock release has had a negative, albeit temporary, impact on crude oil imports and therefore tanker demand, particularly into the United States. Looking ahead, we expect fleet supply to continue to impact spot tanker rates through the second half of the year. Though as we move toward the fourth quarter, we expect that normal winter seasonality patterns, such as weather delays and higher oil demand, compared to summer months, will start to emerge.

Turning to slide 9, we take a look at the longer term outlook, and in particular, at tanker fleet supply. We believe that the seeds of the tanker market recovery are being sewn by the current low level of tanker ordering, with just 3.5 million dead weight of new orders placed since the start of 2011, which is less than 1% of the total tanker fleet. If this pace of ordering carries on for the rest of the year, it will be the lowest annual level of new tanker ordering since 1985. Tanker owners are being deterred from ordering by the relatively high price of new buildings, compared to the current spot and time charter rates. With new building prices being supported by rising shipyard construction costs, including steel plate and labor.

As a result, new building prices have remained relatively stable in recent months, while secondhand values have declined, making new buildings a less attractive proposition, compared to quality, on the water assets. Looking at the chart on the bottom left of the slide, we can see that the tanker order book, as represented by the green bars, has shrunk considerably over the past 2 to 3 years and now stands at approximately 102 million dead weight, the lowest level since March 2006. When measured as a percentage of the fleet, as represented by the line on the chart, the order book is at its lowest point since 2002, at just 22%. In the Aframax segment, the order book as a proportion of the fleet is even smaller, at just 12%.

The lack of ordering in recent months means the tanker order book for 2013 delivery is just 25 million dead weight, considerably smaller than the 40 million dead weight which we expect to deliver in both 2011 and 2012. Furthermore, most ship yards already have full order books through 2013, thanks to a large increase in orders for LNG carriers, container ships and offshore vessels since the start of the year. We, therefore, do not expect many more new tanker orders to be placed for 2013 delivery, which should ensure that fleet growth in that year is relatively low, in the order of 3 to 4%.

Slide 10 brings together our outlook on tanker demand and supply growth and indicates that depending on world economic growth and demand for oil, we expect tanker market fundamentals should start to improve toward the end of 2012. On the chart, the green bars represent tanker demand growth, and the orange bars represent fleet growth, while the vertical lines for the years 2011 to 2013 show the range of values which could arise, depending on various up and downside factors. For 2011, we expect that tanker fleet growth will exceed demand growth, and this view is being borne out by what we have seen so far this year. We anticipate that the fleet will grow by around 6% this year, while demand growth will be in the order of 4.5%. Depending on the extent to which oil demand, and therefore tanker ton mile demand grows through the second half of the year.

Looking ahead to 2012, we expect a relatively balanced market, with both tanker fleet and demand growth of around 6%. We calculate tanker fleet growth using third party fleet data, along with internal assumptions along the level of order book slippage and vessel scrapping. While for demand, we take a range of external oil market forecasts and apply assumptions to translate these forecasts into tanker demand. For 2012, we anticipate that fleet growth will fall within the range of 5% to 6.5%, but on the demand side, we acknowledge there is more uncertainty, particularly with regards to the global economy and how this will affect oil demand.

Within the 2012 forecast, we expect that fleet growth will begin to slow during the second half of the year, while demand growth would be more even, meaning that the market should start to move back in ship owners' favor toward the end of the year. Looking further ahead to 2013, fleet supply growth for the reasons outlined in the previous slide, is expected to slow considerably, to just 3% to 4%, while demand is expected to remain in the 5% to 6% range, driven by oil demand growth in the non-OECD countries. In summary, given our outlook on the market, we believe TNK is well positioned to take advantage of the potential tanker market recovery from end of 2012 by increasing our exposure to the spot market as out charters expire.

Lastly, I wanted to take a moment to review Teekay Tankers' strong position on slide 11, which we view as a competitive advantage, due primarily to the contribution from our fixed rate tanker fleet, our cash flow, or dividend break even, is currently below zero, and we expect this to be maintained throughout the rest of this year. This means that even if our spot ships earn $0 per day in cash flow, we would still generate positive cash flow in order to pay a dividend. At the end of June, we had roughly $295 million of total liquidity and we have a conservative net debt to capitalization of approximately 39% with minimal debt repayments through to 2015.

And new this quarter, we have a committed term sheet to finance the VLCC new building we own through a 50% joint venture with Wah Kwong of China, that has a 5-year charter when it is delivered in 2013. We believe this financial strength is a hallmark for Teekay Tankers and will allow us to acquire assets at an optimal point in the cycle, which will give us increased operating leverage to an eventual recovery in tanker rates.

Operator, we are now available to take questions.

(Operator instructions) The first question comes from [Ainsley Musen] from Price Waterhouse. Please go ahead. Mr. Musen, please go ahead. (Operator Instructions) The next question comes from [Al Teal from Teal Investments]. Please go ahead. Pardon me, the next question comes from Michael Webber from Wells Fargo. Please go ahead.

Hey, good morning, guys. How are you?

Good morning Michael, how are you?

Doing all right. A couple of questions for you here. First on the charter-in deal, specifically you guys are the only ones that hold those options right? Those vessels can't be put to -- you are the holder of the options on the assets?

That's correct.

Can you talk a little bit about how you guys kind of found that kind of dislocation is that maybe the timing of the charter-ins versus the charter-outs? If I remember correctly, the Everest was chartered out during the first quarter on the first quarter call. Can you talk about the mechanics, how that worked, and how you were able to find that in the market?

The timing was pretty close and we did pair that transaction specifically. It's largely in part, again, due to our sponsor's ability to find relationships with customers that are looking for ships operated by Teekay and other owners that don't have that capability or scale and trying to de-risk their exposure to the market and they are willing to take shorter period fixed rates cover as they don't have the ability to effectively charter those as larger fleets like Teekay can. So, that just leads to this period in time in weak markets, this natural kind of spread ability for us to take advantage of.

Fair enough. If I think about maybe the charter-in deal I guess maybe in a bit of a different way. If you just kind of isolate the charter-outs as kind of part of your normal business operation, and isolate the charter-ins versus where the market is, you guys are kind of paying around $3,000 a day, basically for the optionality for the next, 12 to 18 months. It certainly looks like it could pay off if we get a big move in rates.

You mentioned a little bit in your commentary, earlier in terms of what you are expecting for fourth quarter in 2012, can you give us a little bit more detail on what you are expecting specifically for the next maybe 6 months in terms of whether or not we do get a seasonal move. If we do, to what degree? I mean, obviously we are pretty far away from historical peaks or any degree of that kind of strength. Do we see rates for Aframax move back closer to $20,000 a day is that something that you guys think will happen towards the back half of the year?

In answering the first part of your question, in terms of looking at them in isolation, I think that's right if you look at it from today's current spot rates, that is kind of the absolute lowest seasonal low rates.

Right.

As well as those in-charters have just started. So, hopefully that's going to be further through this seasonal period and they'll have more of the winter period to pick up on. I don't know if it is a whole $3,000. If you look at more average rates we have earned this year, it is almost at the money.

Okay.

Then terms of going forward, you are right. The seasonal factors will emerge as usual and you'll get weak periods due to weather or increased demand. Will it hit those higher, longer periods of strength? That is tougher to predict, given the higher amount of supply that's on the water as compared to previous years. I think what it does provide for TNK is, again, that fixed -- we take out the low lows by having the fixed rate and just provides us with the optionality of taking that exposure, if there is surprises, unexpected surprises on the positive side for the winter.

Got you. Now that is helpful. If I just think about your all's pure play performance during the quarter, and this is most of the Teekay pool, you guys out performed a couple of your competitors here both on the Aframaxes and Suezmaxes. Can you talk a little about what went into that and some of the details, I guess, in terms of anything special in the quarter in terms of triangulation what you are able to do from a cargo perspective?

We have our sponsor as a host of reasons why we've done well. It's been a combination of well timed fleet positioning into the markets have out performed, as well as the combination of having contracts in those markets, allowing to triangulate, as well as the continual focus on bunker consumption and speeds, which all add up to more net earnings per day. I think our sponsor through the scale and contracts has been hugely successful through the first half of 2011.

Fair enough. One more and I'll turn it over. Just in terms of acquisitions, and you guys have said the last couple of quarters, you guys are a buyer and it still appears Teekay isn't a seller down here which would make sense. What are you guys saying in terms of acquisitions right now, and then in terms of your leverage specifically, to what point would you be comfortable getting that number up to, I guess from a net debt perspective, as we look out the next 12 to 18 months?

I think there are going to be opportunities. We have been very patient at Teekay Tankers. I still think we are going to see, given our current spot and time charter rates and the amount of cash flow that companies are in negative territory with, we are going to see a downward correction and secondhand asset prices again, with not a lot of risks that we are going to have a spike up in asset prices. So, we are just waiting for the right opportunities, there hasn't been a lot. There's been more activity this last quarter, but there is not a significant liquid market in secondhand resales, but we think they will come. So, being patient is our view right now, and using debt as a low cost is going to be the right thing, as we head toward the stronger market. We are not in a huge rush to do that right now.

If I think about some of the larger assets, it still seems like we are still 5% to 7% away from the last mini trough in term of asset values. Is that the kind of downside you think we have in asset values or do you think it is more than that?

Right now, that is what we are seeing. Then we will have to see how that plays out just see how long this weak market lasts for.

One more housekeeping question. I think within your deck you guys had an initial term sheet on the VLCC. Just as reminder what kind of leverage were you guys looking at on that asset?

We've been looking at advanced ratio of about 70% on the contract value. That is going to be in the JV, on a 50-50 basis. So, it's going to be off balance sheet.

Great. Alright. I appreciate the time guys, thanks.

Thank you.

The next question comes from Ken Hoexter from Merrill Lynch. Please go ahead.

Great thanks. It is Scott Weber, in for Ken. Hey Bruce, when you think about the recent charter signed and the charter-in of vessels, it is effectively neutral to the charter coverage, at least for the next 6 months. So, with 45% of spot days already assigned this quarter at very low rates, around $10,000 or $11,000 a day, why not reduce market exposure further? Can you just talk about the thinking behind that decision to keep such high exposure? At least in the very near term?

Right. When you look at the spread between the 2, I guess, if you had just done the out-charter and the in-charter, that spread of $3000, it kind of brings those in-charters to a neutral level for the quarter. Then, it just gives Teekay Tankers that optionality of then extending going forward, if the market looks like it is going to rebound. Or as you say correctly, if the market continues to be weak, just take the fixed cover and don't pair it up with the in-charter. So, to gain that optionality, for having one quarter of being neutral on the revenue, we thought was the right value.

Taking that a step further, I mean, it assumes that you anticipate the market strengthening, at least in the fourth quarter then, substantially from where we are today. I mean, you don't anticipate the market remaining flat at all from third quarter?

Right. This is the absolute seasonal lowest part of the year. If you look at, the first 2 quarters, which weren't high by any stretch of historical basis, we earned $15,000 a day on Aframaxes. So, even if you just got back up to what the market did earlier this year, there is $4,000 or $5,000 a day right there.

Sure. Then can you talk a little bit about the liquidity of the charter market today? Is it a lot harder to lock up even short-term charters? And how does that vary, between Suezmaxes and Aframaxes?

Yes, there has been, on the Aframax side, a little bit more liquidity than on Suezmaxes. That is traditionally the case. Having said that, people who are wanting to out-charter are having a very hard time doing that. So, rates for out chartering are much lower and the oil companies and traders know this is the low part of the market and are trying to get ships in at very low rates. So, the terms are shorter because people don't want to lock in at the low rates for too long, so you are seeing very little liquidity on longer-term charters, except for those that are absolutely desperate to take cash flow in at lower rates.

And your view is that it is really a seasonal effect as to where we are right now, and not more of a -- not driven by more of a macro-view of the tanker market over longer time period?

Yes. I mean the spot rates, right now are definitely in terms of seasonality. The longer term time charters are shaded by the current earnings and trying to get some cash flow immediately. And not only is it seasonal factors, but we are also just in the last quarter, we faced a lot of one off-head winds from the IEA release to the Libya crisis and Japan. So, there is a whole conflux of factors that have come into play right now.

Okay. Terrific. Well, thanks for all the color.

Thank you.

Thank you. The next question comes from Justin Yagerman from Deutsche Bank.

Good morning, it is Josh Katzeff on for Justin.

Hey Josh.

Just continuing along the lines of the chartering-in transaction. Would you consider opportunistically chartering in tonnage without time charter-out coverage? And kind of further to your point on the illiquidity of the long term time charter market, would you guys ever look to step in and maybe be a liquidity provider, and maybe take short-term negative cash flow in exchange for attractive longer term charter-in rates?

I think those are good questions. When it comes to the shorter term in charters with options, that's something that we would look at, again because of our ability to trade in a system with contracts and access to cargoes, we have less waiting time and our earnings on our spot Aframaxes are well above our indices and peers. We have the ability to take in on-short charter, without pairing it to the out-charter, if we think we can get low enough rates with sufficient opportunity for optionality to extend.

And in terms of being a liquidity provider, again, based on the market fundamentals, we view that as another way of adding to our length and creating a spot exposure. With the options -- you can also, with other owners, as the market gets weak in historical times -- you have been able to in charter for periods with options to purchase ships, again creating additional ways to create more exposure to the eventual return on the tanker market.

Got it. Thanks for that. With regard to the 3 ships that are coming off hire, which looks like the Nassau, the Kareela, and the Kyeema, any thoughts on employment? I know they're not coming off charter in the next month or so, but I guess at the end of 2011, they roll?

It is still too early to say. Obviously, as we get closer to those dates you start talking to the existing charter about their requirements. But usually those types of charters don't work this early and that is in our favor, because this is, as we said, this is a seasonally low part of the market.

Got it. And you guys provided some fixture rates for Q3 to date with the Aframaxes out performing the Suezmaxes. I guess when I look at rates and where they have been, I guess they have been pretty close to parity. Do you expect that trend to continue at least? Where we see Aframaxes out performing?

That is hard to say. I think it's been a variety of factors. The US imports because of the IEA release has taken more impact on Suezmaxes from West Africa to the US. But in the long-term the fundamentals have traditionally had Suezmaxes higher, so I don't know that we could make a call that they are not going to be in-sync like that. The other thing is in terms of the market in general, the Suezmaxes tend to trade more in the west or the Atlantic and Aframaxes trade worldwide and we have had more of ours in the Pacific where the markets have been stronger, again due to factors in the Pacific, China, and Japan. I don't know if those factors are sustainable over the long run.

That's all I had. Thanks for the time.

Thank you.

The next question comes from Justin Yagerman Deutsche Bank again.

I asked my questions.

Yes, I'm sorry about that. The next question comes from Martin Roher from MSR Capital Management. Please go ahead.

Thank you, operator. Teekay has certainly been more creative in the range of ways you have allocated capital compared to the other shipping companies. The 2 charter-in transactions you just discussed. The first mortgage loans you did a while back. The question I have as you look at the opportunities being created in the current downturn, do you have a preference for the type of transactions that you are looking to do or hoping to do? You are looking to buy a fleet, is it one-off deals? Or is it hard to say?

I think our preference is, given the weak markets, to create dividend stability in the short term and create the ability to have the optionality or increased exposure more in the future as we get closer to the period where we think tanker rates will expand. Right now, ultimately, we will own more assets. But right now, it is more of an opportunistic optionality way of bridging that gap between a weak market and being able to pay a dividend and then more upside opportunity as we get closer to the eventual recovery.

Thank you very much. Good luck.

Thank you.

Next question comes from Jon Chappell from Evercore Partners. Please go ahead.

There has obviously been a lot of pain in the tanker market, and I think people are anticipating distress in asset prices and you have talked about the potential for that and the ability for TNK to move on that, but is there any distress in liquidity that you or Teekay is seeing from other owners, whether they be private owners or public owners, where you have the potential to do the type of debt deals you did with the VLCC mortgages?

We haven't seen a lot more of that. It's -- I think owners are just looking to make enough cash to make it through to the next quarter and hope rates improve. We haven't seen a lot more of those types of debt deals in the recent past.

Okay. And then another cost or a first cost question. I noticed in your dividend matrix that the reserve for dry docking is now $2 million a quarter for the third quarter as opposed to the $1.2 million in the matrix in the last quarter. Without taking addition of any new owned ships, what is the reason for the increase? And is that the type of run rate we should look at going forward?

Yes, I think that is a good run rate per quarter going forward. We decided to change the reserve for dry docking more on a sort of longer term outlook for the next 5 years on a rolling basis, and so, that's reflecting that $2 million reserve starting in the third quarter. So, that is a good run rate I think for now.

Okay, makes sense. Finally, talking to some other public owners and private owners, it seems that cost efficiencies are really in focus now. I know there is really little you can do as far as maintenance or crew or whatever. If rates continue to stay this poor, are there any cost savings you could potentially have? I mean your G&A was down a little bit quarter over quarter. You're clearly trying to save money with the new conference call system here. Any other cost savings or efficiencies you can see that can improve the margin in a weak rate environment?

Good question. In terms of cost savings, I think, the number 1 saving we are focused on is bunkers which doesn't show up in below the line but in the net revenues. Because bunkers is just such a huge proportion of our costs right now. I think, where that shows up is in our earnings, everyone can talk about bunker savings but it shows up in the net CCE, it doesn't show up on any line item. So, it's really how did you earn relative to indices and peers and that's where your bunker savings comes in. I think, we are done a pretty good job of being focused on that and we continue to be focused on that, even as bunker prices have come down a little bit recently, which is still good news. It is still the number 1 area where we can move the needle on the bottom line.

How are you saving on those? Is it where you are buying, how you're buying? Teekay's global fleet scale?

It is all of that. Also, just vigilance on the right speeds to make sure you get to the places you need to, but not early or late. It is new technologies on the way we coat the bottoms, the propellers, monitoring the fuel on the ships to know when the ships maybe are underperforming or things are wrong with the engines. It is everything from slowing down to better maintenance to innovative things on the ships that enables us to burn less [tonnes] per miles traveled.

It is clearly limits on your slow steaming in the laden part of the voyage but are you accelerating slow steaming on the ballast legs?

Yes absolutely. I think everyone out there is going slow, when they can. But it's also, there is differing slows, depending on the ship's capabilities and how you have modified engines, and things. So, if people have invested in the technologies to do it right, you can save even more money.

Thanks Bruce. And thanks Vince.

Thank you.

(Operator Instructions) We have a question from Daniel Goldsmith from Merrill Lynch. Please go ahead.

Merrill Lynch. Yes, my question is based on the slides, it appears that you are projecting a dividend for the third quarter of between $0.14 and $0.16, is that correct? Or did I miss something there?

Based on the current rates of what we fixed to date, that would be the range of dividend, if those were to stay the same for the rest of the quarter.

And are you expecting those rates to stay the same? Or is there a reason to expect they might change?

That is hard to say. So far this quarter, that's what it is, and we don't see a lot of other factors that may change in terms of variability around that. But in such a short-term, it is very hard to predict.

Okay, thank you.

Thank you.

There are no further questions at this time. Please continue.

Thanks everyone for your support and look forward to talking to you next quarter.

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.