Teekay Tankers Ltd (TNK) 2013 Q1 法說會逐字稿

Welcome to Teekay Tankers Limited's first-quarter 2013 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 the call over to Mr. Bruce Chan, Teekay Tankers Limited's Chief Executive Officer. Please go ahead, sir.

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 first quarter 2013 earnings presentation. Mr. Chan will review this presentation during today's conference call.

Please allow me to remind you that 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 first-quarter 2013 earnings release and earnings presentation available on our website.

I will now turn the call over to Mr. Chan to begin.

Thank you, Ryan. Good day, everyone, and thank you for joining us. With me here in Vancouver is Vince Lok, Teekay Tankers' Chief Financial Officer; Brian Fortier, Corporate Controller of TK Corporation, and Peter Evensen, TK Corporation's Chief Executive Officer. During today's call, I will be taking you through Teekay Tankers' first-quarter earnings results presentation which can be found on our website.

Beginning with our recent highlights on slide 3 of the presentation, Teekay Tankers generated cash available for distribution of $0.10 per share in the first quarter, down slightly from the $0.13 per share generated in the fourth quarter, mainly due to the change in employment of certain vessels from fixed rates to lower spot rates upon expiry of their time-charter out contracts. We reported an adjusted net loss of $0.04 per share, an improvement from our adjusted net loss of $0.09 per share reported in the fourth quarter of 2012.

Although the spot tanker market remains at challenging cyclically low levels, our spot fleet successfully outperformed industry benchmarks during the quarter, supported by TK Corporation's Commercial Pools, namely Taurus tankers Gemini and the TK Aframax RSA. The beneficial relationship we enjoy with our sponsor has enabled us to utilize TK's extensive customer and chartering relationships to secure favorable spot rate employment for our vessels, allowing us to outperform the market.

The Company declared a dividend of $0.03 per share for the first quarter, Teekay Tankers 22nd consecutive quarterly dividend, which will be paid out on May 28 to all shareholders of record on May 20. This quarter marks the commencement of the fixed dividend policy change we announced last quarter. Teekay Tankers dividend is currently set an annual dividend of $0.12, payable quarterly. We believe this dividend policy allows Teekay Tankers to retain operating cash flow in a recovering tanker market to find attractive growth opportunities.

Given the challenging rate environment, we continue to be focused on managing our fleet employment mix to ensure we preserve cover from fixed-rate charters to support and provide stability for our cash available for distribution and our dividend as we enter the seasonally weaker summer months. In addition, by extending our time-charter end of the Star Lady for another six months, at a below market rate, we successfully gain short-term spot exposure at a favorable spread while limiting the risk associated with a longer charter commitment.

Finally, as announced in April, Teekay Tankers entered into an agreement with STX Offshore & Shipbuilding of Korea to order four fuel-efficient Long Range, or LR2 product tanker newbuildings. This order is a reflection of our positive view of the developing long-haul product tanker market fundamentals. In addition, because LR2s are essentially Aframax-sized tankers with epoxy coated tanks, they will have the flexibility to trade in both refined products or crude oil cargoes. At an attractive fully built-up cost of approximately $47 million per vessel, these newbuildings will provide good value for Teekay Tankers as they deliver into an expected improving tanker market in late 2015 and into early 2016.

Turning to slide four, we have provided an updated overview of Teekay Tankers' fleet employment mix and fixed rate coverage. Including our recent LR2 newbuilding order, the current fleet consists of 31 owned vessels as well as 2 time-chartered in Aframax, and one 50% owned VLCC newbuilding to be named the Hong Kong Spirit, scheduled to be delivered in the second quarter onto a five-year charter.

As I noted a moment ago, in the current weak spot tanker rate environment, locking in fixed cover continues to be a focus as we expect the current spot market weakness and volatility to continue for at least the near term. Recently, we successfully time chartered out the Aframax tanker, Everest Spirit, for a three-year period at a rate of $15,500 per day, increasing our fixed cover percentage to 40% for the 12-month period from March 31, 2013.

Turning to slide 5, I want to take a moment to review Teekay Tankers' performance against the challenging first-quarter market backdrop. Demand for crude oil tankers has been weak through the early part of 2013, particularly for the larger vessel classes. A steady increase in non-OPEC oil production primarily due to the ramp-up in US shale oil production has led to a reduction in OPEC crude supply. This is negative for large tankers as OPEC barrels are generally tonne-mile intensive.

In addition, a heavy spring refinery maintenance schedule, particularly in Asia, has impacted demand for crude tankers in recent weeks. So this will likely improve as refineries come back online in the coming months.

The Aframax sector, which is less influenced by long-haul oil trades and more by regional factors, has also been weak since the start of the year. However, at times, seasonal factors have resulted in short-lived rate spikes. This was particularly evident in the Atlantic where some late-season ice in northern Europe and bad weather in the US Gulf region led to an increase in rate volatility during March and April.

Aside from these one-off events, Aframax rates remain under pressure from a relatively weak demand environment though unexpected contraction in the Aframax fleet size should offer some relief during the second half of the year. In the LR2 sector, rates felt during the early part of Q1, having rates three-year highs of approximately $20,000 per day during December 2012.

In recent weeks, rates have steadily improved, aided by high levels of NAFTA arbitrage movements from Europe to Asia to make up for our shortfall in local supply. In fact, NAFTA movements from the West into Asia have averaged around 1 million tons per month this year, more than 60% higher than the 2012 monthly average.

As noted in the table on the slide, Teekay Tankers outperformed industry benchmarks across all its major vessel classes during the first quarter. This highlights the benefits of our participation in the Teekay managed commercial tonnage pools, including greater scale economies and fleet utilization that enables Teekay Tankers to earn relatively stronger rates even in a challenging rate environment.

Turning to slide 6, we have provided our medium-term outlook for the tanker market. On the chart on the slide, the dark blue bars show tanker demand growth while the light blue bars show tanker supply growth. The green area shows overall tanker fleet utilization, which is simply total tanker supply divided by total tanker demand.

As shown on the chart, tanker demand and supply growth, at approximately 3.5% each, are expected to offset each other during 2013, meaning little change in expected tanker fleet utilization this year. However, in 2014, the outlook is for an improvement in utilization based on reduced tanker supply growth and improved demand fundamentals.

On the supply side, the tanker order book has shrunk to a current level of just 54 million deadweight, the lowest level since 2001. Put another way, the tanker order book currently equates to just 11% of the size of the existing fleet, the lowest level since the second quarter of 1997.

For 2014, we expect the tanker fleet will grow by less than 3%, the lowest rate of fleet growth since 2002. The majority of the growth will be in the VLCC and MR segments, with low fleet growth expected in the Suezmax, Aframax, and LR2 segments. For Suezmaxes, this marks the end of a long period of aggressive fleet expansion which should enable fleet utilization to recover as tonne-mile demand improves.

Looking at demand, most international forecasting agencies are expecting an improvement in the global economy during 2014 and therefore, an improvement in oil demand. Although overall health of the global economy remains an uncertain part of the equation. We have assumed that global oil demand will return to growth of between 1.0 million and 1.5 million barrels per day in 2014, spurred by demand growth in the non-OECD and China, in particular. This is expected to translate into tanker demand growth of between 4% and 5%, similar to or slightly better than demand growth seen in 2012. When taken together, we expect an improvement in tanker fleet utilization of around 2 percentage points during 2014, bringing with it improved spot market rates and an expected accelerated recovery through 2015 and beyond.

Moving to slide 7, we have provided a summary of our recent LR2 newbuilding order, with STX Offshore & Shipbuilding. In April, we announced our firm order for four fuel-efficient, LR2 product tanker newbuildings at an attractive fully built-up cost of approximately $47 million per vessel. These vessels will deliver in late 2015 through early 2016, which we believe is well-timed to benefit from an improving rate environment for refined product shipping, which I will talk about more in a moment.

With fuel-efficient design features, including a hydrodynamic hull profile, new generation G-type type engine, and propeller efficiencies, these vessels are expected to save between 20% and 30%, or roughly $7,000 per day in fuel consumption when laden compared to vessels in the existing global LR2 fleet and will be especially attractive to our customers. In addition, with epoxy-coated tanks, we have the ability to trade these vessels clean or dirty, which provides us with the greater flexibility in a recovering tanker market.

In addition to the four firm newbuildings, the order with STX includes an attractive fixed-price option stream which provides further upside potential in a recovering tanker market. These options allow us to order up to four additional LR2 product tankers at each six-month interval over the next 18 months for a potential total of 12 additional vessels. Importantly, the option stream is non-contingent, which means we still maintain the subsequent options in the event market conditions are not favorable to declaring the earlier options. This effectively preserves our optionality for as long as possible as we monitor market developments into late 2014.

Lastly, we have negotiated a favorable tail-weighted payment profile with STX, which will result in the majority of the purchase price being paid on delivery. This will limit the near-term impact on Teekay Tankers' liquidity and provide sufficient time to arrange longer-term financing.

Slide 8 provides an overview of the outlook for the LR2 product tanker market and supports our view that the sector has some of the best fundamentals in the tanker space. The global refining industry is currently undergoing some significant changes, which are expected to result in considerable changes to the way in which refined products are traded. In the OECD, refining capacity has been shrinking rapidly as old, relatively unsophisticated refinery capacity has been unable to maintain competitiveness, given high crude feedstock prices and increasing competition from cheaper refineries in the East.

This is particularly evident in places like Europe, which has seen 1.8 million barrels per day of refining capacity shut since 2009. And Australia, which plans to close approximately 40% of its refining capacity by the end of 2014.

At the same time, refining capacity in the Middle East and Asia is expanding rapidly to meet both domestic demand and the export market. As this occurs, the net result is that refined products will start to move longer haul on larger vessels, creating significant demand for LR2 tankers, which are the largest class of tanker currently carrying refined products.

On the supply side, the LR2 sector has favorable fleet fundamentals, with just 26 vessels on order out to 2015. When combined with a positive demand outlook, we expect LR2 fleet utilization to recover from the 2012 low of just under 80% towards 90% by 2015. As a reminder, 90% is considered to be full fleet utilization. With this positive outlook, the option stream on our new LR2 order could provide significant upside should vessel values begin to rise over the next 18 months.

In the table at the bottom of the slide, we have provided an illustrative calculation of the intrinsic value that these newbuilding options would provide on a per-share basis for each $1 million increase in the market value of vessels above our fixed option price with STX. As you can see, with up to 12 vessel options available, this option stream could provide significant upside in a rising newbuilding price environment.

Turning to slide 9, I will take a moment to provide an update on our investment in two term loans. In July 2010, we invested in two $57.5 million, three-year first priority mortgages, secured by two 2010 built VLCC tankers. Since our initial investment, these ship mortgage investments have generated approximately $30 million of income for Teekay Tankers. Unfortunately, the borrower is currently facing financial difficulty and has defaulted on its interest payment obligations since January 2013.

However, we estimate that the current value of our security interests in the two VLCCs are still sufficient to cover all amounts currently owed by the borrower, including our original principal amount and accrued interest to the expiry of the loan agreement in mid-July 2013. To protect our security interest in the vessels, we have agreed to taking over technical and commercial management of the two vessels. By taking control of chartering and having Teekay crews operate these vessels, we will be in a better position to work with the borrower to realize the full value of our investments.

Turning to slide 10, Teekay Tankers remains financially strong and well-positioned for growth in the tanker market recovery. With total current liquidity of approximately $294 million, we are more than capable of servicing the shipyard installments on our four LR2 newbuildings without the need to issue additional equity. In addition, our move to a fixed dividend policy will allow us to retain additional cash from operations for future growth as the tanker market improves, while still enabling us to pay a sustainable dividend based on our existing fleet size and employment mix.

Realizing the value of the term loans discussed on the previous slide will also add to Teekay Tankers' available liquidity. Teekay Tankers' covenant light debt facilities mean we have no financial covenant concerns like many of our shipping peers. And, lastly, our favorable debt amortization profile requires low principal repayments through 2016, enabling us to retain a greater portion of our operating cash flow for future growth.

Wrapping up on slide 11, we provide a cash available for distribution outlook matrix for the second quarter of 2013 based on our expected fleet employment profile. Based on a weighted average of approximately 40% of spot revenue days booked, for Suezmaxes and Aframaxes, and two-thirds of spot revenue days booked for LR2 our second-quarter spot rates have averaged approximately $12,300 per day, $13,800 per day, and $14, 900 dollars per day, respectively.

We have continued to include our cash available for distribution matrix in the earnings presentation, as we believe this measure continues to reflect Teekay Tankers' cash equity return even though the Company has moved to a fixed dividend policy. Even in a low spot rate environment, Teekay Tankers generates positive cash available for distribution, allowing us to pay fixed quarterly dividend from vessel earnings, while retaining operating cash flow for future growth opportunities.

With that, operator, we are now available to take questions.

(Operator Instructions)

Justin Yagerman, Deutsche Bank. Excuse me, please stand by, Justin Yagerman? Ken Hoexter, BofA Merrill Lynch.

This is actually Wilson Chen sitting in for Ken. I had a couple of questions to follow-up about the VLCC loan notes.

Could you give us a little bit of color around who the borrower was and maybe indication for how long you'll be managing the two VLCCs. If I recall correctly, the loan comes off in 2Q 2013 so how exactly does that process work if you're in the process of managing the shipping? Anything along those lines would be great.

Sure, the VLCC loans were made to a Taiwanese-based Company and who is in some financial difficulty. So we have been able to take over commercial and technical, again, allowing us to have full control making sure the assets are being maintained and that we can maximize the revenues during this period. The cash flow breakeven number is pretty low. We've just got to cover OpEx and anything above that is going to go towards paying off us as the first priority mortgager.

And so we will continue that through to the right time and then, the best way forward is to realize on that security. And it'll just be a trade-off of the marketed availability of being able to sell that ship versus the incremental cash flow that we can earn during the period. But we're not intending on trading those over the long term. It is really to protect our interest and ensure that we are able to recover all amounts owed to us.

And there was a common view that Teekay could make more money trading the ship so that's why it was agreed we should take over commercial and technical management.

Got you. If you could remind me, about the parent, are there typically VLCCs are managed there as well because I know that in Tankers, you've traditionally operated mostly in the Suezmax and Aframax.

That is right. We have and operated VLCC recently but we have owned and commercially managed spot VLCCs in the past.

And the customer base and the contacts are the same. So, our desk is fully capable of finding employment for those vessels.

Sure, and then if I could switch over to the LR2 side. Can I get a sense for how -- well, at least have you had any initial indications from counter parties looking to perhaps charter the vessels out even if it's three years out? It sounds like the backdrop for the LR2 sector seems much more conducive to demand feeding supply over the next couple years?

So, have you have had initial conversations around that? And if not, when would you expect some of them to begin or would you have to actively market for vessels like this?

We are certainly been in discussions with customers, especially after the announcement of the ships. From their perspective, customers are looking to potentially charter, although as you say, three years out is a little bit out there for them to commit to some fixed cover, although it is certainly interesting for them. So, we are in discussion although as shown on our various slides, our outlook is for improved utilization, as you say, improved demand for those ships. And therefore, it's a trade-off of locking in rates today or using the next little while to see how that market develops and if it improves, as we expect it to, be in a position to take advantage of the spot rates more than locking in.

Understood, and if I just -- the last question on the options, I'm not as familiar with how some of the ship options work, but are you able to monetize that in some way if you were to sell it or is the deal structure so that only you can have access to that price for the ships?

No, those are real asset options. It is not as easy, obviously, as a financial options to sell on, but there are ways in which you can monetize those.

Justin Yagerman, Deutsche Bank.

It's Josh on for Justin. Not sure what happened earlier. Maybe starting with the VLCCs, is there any concern about other creditors from this borrower who is clearly in a -- I guess reportedly not having many of their ships trade at all. Are there concerns about -- are there people trying to arrest these ships?

Well, first of all, they are ring-fenced from -- in separate entities so their creditor protected from other people and that's -- from other aspects of the Company. Having said that, obviously, each ship has its own trade creditors, but given the ships have been having a tough time to trade, most trade creditors have been pretty conservative in extending a lot. So we are optimistic that there won't be too much of that.

And as we start trading them out ourselves, we will soon find out what kind of small amounts the trade creditors might be out there but that's not a very large number in terms of the overall situation. And again, the loans are $57.5 million per ship. So there is buffer in there for that type of interim payments that need to be made.

Got it. And then sticking on those loans -- sorry, just there hasn't really been much sale and purchase activity for some of these modern VLCCs out there. So, can you talk about maybe how you come up with current values and securities? I think there is there's only been one ship -- one new five-year old VLCC loan sold in past couple of years.

Yes, obviously in the liquidity in the sale and purchase market and tankers, in general, is never a perfect science. As you say, there's been some recent -- there's that one that you mentioned. There was a more recent one, I think it was a shipyard sold a newbuilding for $74 million. So, you can triangulate around the few of them and take an estimate, but clearly, liquidity is not there to be as robust as in the financial asset but that's how we've estimated the value.

Got it. And then proceeds from the -- from any potential sale later this year from those ships would just be used to pay down your revolver?

That is right. That is right.

Maybe switching topics to the product tanker market. We saw a couple of spikes in the LR2 market and LR1s, too, going AG East or earlier. Can you talk about maybe near-term seasonality expectations?

We've seen a big drive crude going into Asia in the past couple weeks. Do you expect to see similar flows for maybe NAFTA at some of the LR2 cargoes?

Yes, that's really what's driven the current strength in the market is that NAFTA going east and we're averaging much higher volumes than we had been last year. And so I think that's what why you're seeing the rates being stronger so far this year and continuing to be pretty good with two-thirds of our LR2 days booked at close to $15,000 a day.

Got it. Got it. All right, well, I appreciate the time. I think I'll follow up off-line with a couple of other items.

Jon Chappell, Evercore Partners.

Bruce, I hate to belabor this term loan question or issue, but I think we probably need just a little more clarity around it, because I think it's clearly impacting the stock today. So, just first to be completely clear, on the financial impact, you have the full interest income come into the first quarter of $2.9 million roughly, despite your comments that they've defaulted since January 2013. So, how's that working and is that still going to be in the second quarter numbers, too? Or are you taking an assumption that something is going to happen with the vessels and it's going to be made up at some point?

Hi, Jon. You're right; so we did accrue the interest in the first quarter and that's because we are entitled to that interest under the term loans. And given that there's sufficient buffer still between our loan balance and accrued interest compared to the vessel values, we continue to accrue that. It's just really more of a timing issue as to when we'll collect that when we monetize the asset. So for the second quarter, given that there's probably still sufficient buffer and if there is, we will continue to accrue that interest in the second quarter.

Okay, and as you prioritize over the next couple of months, you shifted to the technical and operational management, but should we think that your goal is to ultimately rid yourself of the residual risk? If we get to mid-January, you still have the issues with TMP, you're just going to try to liquidate these assets? Or would you try to hold onto them and maybe add to your leverage in an eventual recovery?

I think you mean mid-July --

Yes, mid-July.

Yes, right now, the cash breakeven because it's drawn on the revolver and the OpEx on those ships, it's $11,000, $12,000 a day. So, if we're earning more than that, that's going to be closing the GAAP and essentially repaying us for amounts owed. And then it will come down to a trade-off of the employment prospects for the short-term versus the ability to sell it.

But we will be marketing the ships. But we don't want to be put in a situation where you have to sell it in the next month or two. So it will be a trade-off of an orderly sale versus generating what we hope is still some positive cash flow in the interim.

Okay so it's possible you can operate them for awhile. And then if we look past July, how would that impact your finances? First of all, you've already taken technical and commercial management. So in the second quarter, is that going to change the impact of these ships on your GAAP financials?

And then if we assume you're going to keep them going forward, we would just keep at that and then add operating expenses in the same spot market employment?

That's essentially right. The only thing that -- I mean, there's upside and downside in terms of the estimate. I mean, clearly, if something were to dramatically change in vessel values or there's some unknown costs that were to appear, then the accounting calculations could change. But barring that, what you said is exactly what would happen.

Okay. And then just regarding your liquidity and how you think about it, relative to your ideal capital structure. I mean, obviously, you've done some things with the dividend payout and now you've made some orders. You still have the 2017 big bullet payment.

How much of that nearly $300 million of liquidity would you consider available today, whether it's renewed builds or maybe potential secondhand ships given what you know about the four-year road map on the capital structure?

Yes, I think with the liquidity, it's certainly nice to have and with the options, what we want to be able to use that liquidity for us if we needed to monetize them. But I think what the real value here in those options is not having to commit all-in right now but still have the upside potential as the market improves. So that liquidity is there to be used if needed, but then it's because we have that greater visibility in the future when those options are needed to be exercised, whether they're actually in the money or not. And so the bet of using that liquidity is a little bit safer if those options are in the money.

Okay. And then just finally, when you think about the next stages for TNK, obviously retaining some cash, countercyclically investing, should we just think that the next step is going to be exercise of the options? Or are there other things you're looking for in your traditional mid-size crude, whether it is other new builds or potential on-the-water vessels that you aspire to add to the fleet?

Yes, there's certain other -- I mean, obviously the options create a huge amount of upside without creating a use of liquidity now. But, whether it's in charter opportunities, as other owners are looking for low fixed cover because they need the cash flow but then provides us greater optionality to create earnings potential if the market improves is -- we'll certainly be looking at those types of opportunities. But the new fuel-efficient options without having to commit is, but still providing the upside, is the preferred path that we're looking at.

Michael Webber, Wells Fargo.

A couple of my questions have already been answered. Around the new builds and STX, they've been in the news a lot recently, around looking to restructure. I know that was the case when you guys placed the orders.

But maybe some color around how secure those orders are? And then specifically around those options, any risk they could come back and change those to float? I mean, if you're counting on option value from a Company that's restructuring, it seems you need to have a pretty good basis to do that.

Yes, I think there have been obviously a lot of passed about STX and their situation in general and while it looks like they're liquidating or selling certain parts of their operations, I think that's positive. Because what they're really doing is focusing on their core Korean shipyard -- shipbuilding activities supported by the domestic Korean banks.

And so that's why we were focused when we placed that order on doing it with the Korean part of their business. So as they strengthen their balance sheet by selling some of their non-core operations, that's all positive in terms of where they're focusing. And as we know, they do have a pretty good high-class order book from names -- their customer book pretty good so we're confident that, that's the area they're going to focus on.

Got you. So I mean, I understand today and then again, things can evolve, but their situation does not impact your decision to exercise those options?

No, no.

Fair enough. Just related to the options and to the mortgages at TMP. Just -- is it correct to assume that your long-term priority is getting that back from a liquidity perspective before you would look to exercise those options? I mean there does seem to be -- it's just going to fall within that window, is it more easy to roll-off before that first expiry of the first tranche of mortgages; is that the right way to think about it?

No, there's enough ceiling in our liquidity to be able to keep both, to be able to exercise options. And then really, we want to make sure that we're not in a position of having a fire sale of those assets, right? I mean, they are good-quality VLCCs, pretty modern. Now that we're trading them, we know they're going to be

maintained and we've already had some success in finding customers to employ them on voyages. So I think putting that all together, we have -- we want to make sure that we have the right time and the best way to realize on the security and not be forced into doing anything rash.

Chris Combe, JPMorgan.

It's actually Nish Mani on for Chris. Just wanted to ask you one quick follow-up question about the VLCCs. I apologize for belaboring it again but I just want to make sure that the -- both the revenue and the OpEx associated with it will not be consolidated into your results going forward until actual -- the vessels assumed? Is that correct?

That is correct. It's only the interest income as per the terms of the term loans that we recognize. So, although we're doing commercial management and technical management, that's on behalf of the owner still.

Right. Just an arrangement cover the interest and principal going forward?

That's correct.

Okay, got it. And then just turning to the spot market for the rest of the year for both the Afra -- on the crude segment for both Aframax and Suezmax. I wanted to get a sense of what you guys think explains the Suezmax rates coming off of lows at the beginning of this year and firming up a bit? And whether or not you think this will hold for the seasonally weak Q2 and Q3 periods?

Yes, I think Suezmax is an area where it has been hurt with the aggressive fleet supply, as we've said earlier and that should be better in 2014. I think what people have overly focused on potentially is the fact that US imports are down and therefore, they see the typical benchmark rate of being West Africa, US, East Coast being the rate that has come down. But what's not being seen is the fact that tonne-mile demand for Suezmax is actually up because the cargoes are going east and that's a longer voyage for Suezmax.

So while rates are -- have been low because of supply, tonne-miles demand, the longer-term outlook for Suezmax is, in terms of tonne-miles demand, is actually positive. And so we really do believe that when the supply ends and that doesn't end until the end of this year, there's still 25 Suezmaxes expected to deliver this year. But when that's through, the demand-side should increase the utilization for that sector.

Got it. That makes sense. And then just turning to the options again. Do you guys -- have you guys ever flipped an order book option in the past? And if so, looking at what kind of success was attained there?

I don't know if we've -- I'm just trying to go back in the memory bank, but there are ways, I know we have unsold shipbuilding slots before. I don't know if it was an option or one that we already had or built on behalf of other people, but there are certainly ways to enable that.

Right, and have you, I mean with the options already in your possession, have you had preliminary discussions with potential buyers or at least those in the market looking for new builds anyway?

We've had unsolicited offers or interest expressed potentially on whether we would be willing to unsell them. So they are at attractive prices and I wouldn't be surprised if people were -- would be interested in exercising them if we didn't.

Okay and can we expect in the medium term, the release of the specific prices in which they're set and the dates. I know you guys provided some preliminary dates for the first few, but --.

Well, there, it's 47 -- I mean, it's the same price, virtually it's up, for the last ones are up to $1 million more so virtually the same price. And they're on six-month intervals, anytime up to -- they expire in six-month intervals from this contract signing, three to 18 months.

Got it, okay, so it's just the three equal batches of four.

Exactly.

Thank you and there are no further questions at this time. Please continue.

Great. Thank you, everyone. We'll speak to you next quarter.

Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.