Cmb.Tech NV - Earnings Call - Q2 2020

Transcript

Speaker 0

Good morning, everyone, and welcome to the Euronav Q2 twenty twenty Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Mr.

Brian Gallagher, Head of IR. Sir, you may begin.

Speaker 1

Thank you. Good morning and afternoon to everyone, and thanks for joining Euronav's Q2 twenty twenty earnings call. Before I start, I would like to say a few words. The information discussed on this call is based on information as of today, Thursday, 08/06/2020, and may contain forward looking statements that involve risks and uncertainties. Forward looking statements reflect current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events, performance, underlying assumptions and other statements, which are not historical facts or statements.

All forward looking statements attributable to the company or to persons acting on its behalf are expressly qualified in their entirety by reference to the risks, uncertainties, and other factors discussed in the company's filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov and on our own company website at [email protected]. You should not place undue reliance on forward looking statements. Each forward looking statement speaks only as of the date of this particular statement, and the company undertakes no obligation to publicly update or revise any forward looking statements. Actual results may differ materially from these forward looking statements. Please take a moment to read our safe harbor statement on Page two of the presentation.

I will now pass to our Chief Executive, Hugo Stoop, to start with the main presentation. Hugo, over to you.

Speaker 2

Thank you, Brian. Welcome to our call today. In terms of the agenda, I will firstly run through the Q1 highlights before passing on to Lee Vil Lager, CFO, who will provide a full financial review of the income statement and the balance sheet. Then Brian, our Head of Investor Relations, Market Research and Communication, will look at the current themes in the tanker market and Euronav's outlook before we take questions. So turning to Slide four and the highlights page.

Anchor markets continued to be very strong during Q2, even stronger than in Q1, which is surprising as usually the second and third quarter are seasonally weaker. What is remarkable is that we have already enjoyed three consecutive quarters of VLCC rates over $60,000 a day in the spot market and this for the first time since 02/2008. This robust freight market has continued into Q3 with nearly half of our VLCC covered at rates just over $60,000 a day. The Suezmax also performed very well with just under $40,000 per day, so far in Q3. This is a solid foundation to enter the second half, but admittedly with far less visibility than usual.

We thought earlier in the year that Q2 would bring a strong and sustained storage market opportunity. This was not really the case. Yes, a number of ELCC were and are still being used as storage unit, but far less than what many analysts and ourselves had predicted. Nevertheless, as the figures illustrate, this has been one of the strongest markets for over a decade. With this super strong cash generation, Euronav has been able and very keen to return a lot of cash to our shareholders.

We started to distribute a total of $1.57 per share in cash dividends since late May. And more recently, we have executed $75,000,000 in share buybacks over the past two months and we will do more. This brings me to slide five and capital allocation at Euronav, which remains an important key focus for the board and management. Indeed, Euronav remains committed to returning capital and create value for our stakeholders and obviously, a strong freight market has given us the opportunity to demonstrate this. Given the lower equity valuation as illustrated by our share price in the last few months, we have started to buy back our own shares.

So far, we have used 75,000,000 from the Q2 earnings to buy our shares at an average value, which is very accretive to existing shareholders. In addition, today, we announced that we will use a further $25,000,000 to buy our shares using proceeds from the earnings of q two, and we will do this by the September. At Euronav, we always try to be balanced and consistent in our allocation. We do have some mandatory debt repayment as well as some revolving credit facilities reductions, which are in cash. But given where our current leverage is, we do not need to repay more debt for the time being.

We have designed our return to shareholders policy, taking many aspects of the business into account and indeed, we are very pleased to be in a position to pay a cash dividend of €0.47 per share related to the second quarter in addition to the 100,000,000 I just spoke about on the share buyback program that will be returned also to our shareholders. So overall, the shareholders will receive EUR €196,000,000 in cash from Euronav as they relate to the Q2 earnings, roughly half of it in cash dividends and half of it in share repurchase. At the same time, Euronav balance sheet is improved by €60,000,000 cash to reduce our net debt position. When repurchasing shares, we will always try to create long term shareholder value rather than giving support to a share price, which indeed has been very, very volatile during the quarter. This concludes my remarks, and I will now pass on to CFO, Liebe Lager to run through the financials.

Liebe, over to you.

Speaker 3

Thanks, Huwu. As you mentioned, the first half year of twenty twenty and more specifically, the second quarter was very strong in terms of performance, reflecting the strong tanker markets. Revenues generated are $535,000,000 while EBITDA generated was $355,000,000 resulting in a net income of more or less $260,000,000 Whilst navigating the COVID-nineteen crisis, the company's clear priority has been the safety and well-being of our employees and to provide support to the extent required in the communities in which we operate. Despite the extra costs to support our crew, combined with mask and other surgical material, strong cost control of the full scope more than offset the impact in the G and A line. Whereas the first quarter was including a positive impact of strategic fuel stock in 2019 compared to the market, we noticed a negative impact in Q2.

We want to mention, however, that this fuel stock was actively managed as more than 85,000 metric tons were bought for an amount of $22,100,000 for the Oceania. This represents more or less the consumption of the second quarter. Due to the strong cash management resulting in a reduced debt level and due to a beneficial interest rate environment, also interest cost reduced significantly in the first semester compared to last year. Moving now on to Slide seven and the balance sheet. The company remains in a solid position with a strong financial balance sheet.

I refer to the leverage ratio of 38.3% as well as the liquidity in excess of 1,100,000,000 We have kept a strong level of cash at our disposal for an amount of $280,000,000 which is more or less in line with last year. Even though we were active during the first semester in purchasing four VLCC resales, requiring a down payment of more than $100,000,000 this cash out was partially offset by the proceeds of the sale of the vessels, the Finesse, Capdiamond and the TI Hellas. Moreover, the business required more working capital because of increased outstanding cash to be received from the customers due to the high market rates. Also clear focus has been put on the cash collection in order to create value for our stakeholders. The good performance combined with the cash focus allows Euronav to keep 20% of the net income to further deleverage with high cash returns to the shareholders.

I will now hand over to our Head of Investor Relations, Brian Heliger for the market slides. Brian, over to you.

Speaker 1

Thank you, Lever. We now look at four broad themes in the presentation before moving on to our outlook commentary. On slide nine, you can see how the contracting VLCCs has actually been a positive for the wider tanker market. This provides a medium and long term positive backdrop for the tanker sector and for investors, which Euronav believes is structural in nature. The light blue areas show the order book to fleet ratio, which is steadily reduced over the past decade and now stands at twenty year lows.

The blue bars indicate per quarter new VLCC orders, it is clear that there is a strong correlation with the green line, which is VLCC earnings. The interesting feature, therefore, is the development over the past three quarters. As Hugo said earlier, this has been the the best three quarters for an earnings perspective, the VLCC since 02/2008, and yet this has not triggered a rush to the shipyards and ordering of new vessels. This is very encouraging and reflects in our view that there's a potent mix of structural, regulatory, financial, and environmental factors, which will continue to keep new ordering at low levels going forward. Moving to slide 10 and the global fleet itself, which is also providing positive messages.

Both the VLCC and Suezmax global fleet average age are now back to levels not seen in eighteen years. Having an aging fleet is one thing, but digging a little deeper, we see around 20% of the VLCC fleet fleet alone, which is now not only over fifteen years of age, but crucially, will have to undergo a special survey in the next seven quarters. This is critical. Having a vessel over 15 years of age means a low addressable market for that tanker as most charters will not take such vindices for their cargoes. But equally, there's no incentive for a vessel to leave the market either.

A special survey costing upwards of $4,000,000 depending on the age and ship condition at that age, therefore, provides an important catalyst for an owner to effectively stick or twist. Should the sector have a period of lower freight rates as we saw in 02/2018, for instance, when 50 VLCC equivalents were scrapped, then we will see pressure with this catalyst for owners to take their ships out. Slide 10 almost certainly underestimates the amount of VLCCs in this situation as it's unclear how many undertook special surveys during the February due to the COVID nineteen restrictions. On to slide 11. Disruption during this first half of the year and in particular in q two, has actually been a positive development for the VLCC market.

Slide 11 illustrates the positive level of disruption we have seen with around a 150 or 18% of the global fleet of VLCCs having some form of disruption, but only part of this is related to the contango and related storage trade. 60 VLCCs will remain permanently on the sidelines covering Iranian sanctions, vessels and also those in longer term storage unrelated to contango. Around 40 or so will find trading difficult as we highlight in in lime green because they have been engaged in Venezuelan trade over the past twelve months. That takes about a 100 VLCCs out of the marketplace. This leaves a number of categories in blue as we show on slide 11, which have also helped underpin freight rates because they've also been, largely missing from trading.

The three categories, most notably the 35 or so which remain on what we would term market storage driven by the contango or a need to store oil, 18 from a suspected four case in Singapore, which has seen that fleet more or less idled during the, most of q two, and another 20 or so which have been held up over the last three months via congestion at the Chinese ports. We would expect this congestion at Chinese ports to remain for another couple of months. So we will see some of these categories coming in the blue returning to the world trading fleet, totaling around about 60 to 80 VLCCs. But this will be progressive, will not happen immediately, and will take some time. But nonetheless, does provide a headwind for owners, as we move towards, the latter part of this, financial and calendar year.

Moving on to the final market slide on slide 12 and what actually happened in q two. Q two, as you guys said earlier, was a story of the oil market and in particular oil supply substantially reducing the potential storage opportunity for the tanker sector that we envisaged at the May. The rapid reduction in oil demand during March and April as restrictions for COVID nineteen kicked in prompted an increase in inventory on both onshore and floating storage. And on slide 12, this reached a peak of around about 200,000,000 barrels of floating storage during May. During our last earnings call in early May for q one, it was anticipated by ourselves and most commentators that this figure would be substantially higher, thus driving a very considerable but positive disruption for the tanker market as this requirement for storage would be acute.

This didn't materialize to the scale we envisaged as we saw OPEC plus cuts kicking in very quickly. Saudi and her partners also reducing voluntarily another level of, supply cuts towards the May and US production switching off quicker than expected as well. So the tanker market only benefited from an additional 200,000,000 barrels of storage requirement, around half of which went on Suezmax and Aframax. This is important because these ships were taken because VLCC rates during April were especially high, and this helps to explain some of the rate differential between the tanker categories during q two. Looking forward, the EIA forecast continued recovery of demand towards 97,000,000 barrels per day in September before the rate of recovery eases off in q four, but crude supply is expected to remain below these levels implying further inventory drawdowns.

Taking the EIA assumptions as chart 12 shows, most of the inventory will end up being drawn by q three of next year towards the five year average with floating storage also needing to be reduced on VLCC and other tanker categories. These will provide headwinds for the tanker sector into 2021 along with the demand uncertainty with regard to COVID nineteen. Chart 12 does not assume deliberately any floating storage forecast beyond July, but as you can see, floating storage has already come off the peak but remains high in terms of the definition. There is no doubt that some congested barrels we spoke about earlier in off the Chinese coast are included in this definition of storage. I'll now move to slide 13 and the return of our traffic lights giving our outlook view for the tanker market.

We didn't use the traffic light system given the extreme volatility in the oil and tanker markets during March and April when we last spoke in early May. Hence, there is more change than usual. Supply of and demand for oil moves from green, stroke, green amber to both being red. This reflects not only the OPEC plus production cuts, but also OPEC's move to monthly meetings suggesting they will be flexible in managing supply. Demand is clearly gonna take some time to return to previous levels as recent spikes in COVID nineteen cases globally and accompanying lockdowns have made clear.

Ton miles moves from green to green to amber, reflecting a lower US crude export potential as US shale production is lower than before, but it's not all bad news. Vessel supply is moving in a positive direction and moves to a full green on our traffic lights reflecting, as we spoke about earlier, the lack of ordering despite very, very high freight rates over the last three quarters. As as we mentioned before, we continue to believe this is a positive structural feature which provides a strong medium term support for the tanker market. Our balance sheet with liquidity over $1,000,000,000 remains one of the strongest in the sector, and this remains on the full green. So in conclusion, there are clearly more negative moves than positive reflecting the more challenging outlook for tanker markets.

And as Hugo said earlier, a lack of visibility that we haven't had for quite a period of time. But the key drivers of demand, oil supply, and ton miles will continue to be subject to uncertainty on how quickly GDP growth will return to more normalized levels. And in the meantime, how crude crude inventory both onshore and offshore is drawn down to match that returning demand. However, Euronav has very little control over these macro drivers, but what we can control is our own balance sheet and our positioning, which is what we will continue to do on a proactive basis. As we mentioned before, we have $1,000,000,000 plus of liquidity to manage our business should we enter a period of, sustained challenge with freight rates.

Our leverage remains amongst the lowest in the sector, and we have acted proactively over the summer months in our capital allocation by already repurchasing $75,000,000 of the cheapest asset that's available to us, namely our own shares. We've also added today the capacity to buy another $25,000,000 of share buybacks derived from q two's earnings. With that, I'll pass back to the operator and prepare for questions. Thank you for your attention.

Speaker 0

Ladies and gentlemen, with that, we'll begin today's question and answer session. If you are using a speakerphone, we do ask you please pick up your handset before pressing the keys. To withdraw your question, you may press star and then 2. In the interest of time, we do ask you please limit yourselves to one question and a single follow-up. And our first question today comes from Amit Mehrotra from Deutsche Bank.

Please go ahead with your question.

Speaker 4

Thanks, operator. Hi, Hugo. Hi, team. I appreciate the fair and balanced approach in the presentation. I mean the fact of the matter is a weak market could actually be quite good for a shipping company with a good balance sheet.

And Euronav obviously has built the fleet through countercyclical investing we immersed in Generate kind of earlier several years ago. With the balance sheet obviously getting better and better every quarter, even despite the big payouts, are there any opportunities for en bloc transactions, Hugo? There are obviously many private tanker fleets out there that maybe there's not as much transparency or visibility on in terms of what's for sale and what's not. Are the bid ask spreads maybe are still wide? But if you can just comment on opportunities for growth in a market that's uncertain and a little bit weaker given the legacy of the company and how they've built the fleet?

Speaker 2

Amit, well, very good question. Know that when you talk about the two transactions that you mentioned, the first one and the generate one, if you remember, it's something that came up and we act upon it very quickly. In the case of Maersk, I think we did it over a Christmas holiday in in literally two weeks. And in the case of Generated, if we really are talking about the agreement that we made with the board and the shareholders, it was certainly something like less than a month of negotiation. And I guess what I'm trying to say is that you don't have a shopping list.

You don't have, you know, a target fleet because that's not how the market works. I mean, it seems that some people suddenly change their position and then decide to to sell their fleet, and then it comes onto your desk. And and when you have the capacity, and and that is obviously balance sheet, the liquidity, but also the management time to act upon those opportunities properly, then you can see those opportunities. And and so we're not gonna change that recipe, and I think that's really how it's gonna happen. When it relates to your question, are there already, you know, small deals to be done?

I I don't think so, or at least I haven't heard any. And and I think that the reason is that we are, on the back of three super strong quarters, q four, q one, q two. What we have booked, and I believe the others have also booked fairly good numbers in Q3, is very, very healthy. I mean, no matter what environment we are in right now, the quarter will end up to be a very good quarter. And then there's a big question mark, and as I mentioned and Brian did too, there there is probably more uncertainty about what comes in the future than in other other periods of time that we have seen in the past.

But I just think that it's too early for people to sort of throw the towel or decide to sell their feet or or do something like that because the cash that they have generated very, very recently and up until today is phenomenal.

Speaker 4

Right. Okay. So I guess as you accrue cash flows or reduce net debt, obviously, the capital allocation is just keeping balance sheet, paying the dividend or buying back stock. I mean on the stock buyback, do you just keep on buying back stock as long as the equity is below NAV? I mean there's obviously some float and liquidity concerns.

And I think the AGM gave you the ability to kind of purchase 10% of the stock every year, if I understand that correctly. Can you just talk about, one, your limitations, kind of your how you think about the buyback in terms of balancing the financial positiveness of buying it below NAV, but also kind of the limitations that, that gives you in terms of any liquidity and flow?

Speaker 2

Yes. It's two very critical points. Yes, we believe that we are buying at a significant discount below NAV, but that's not how we measure it, and that's certainly not how we trigger it. The way we trigger it is by translating the current share price into a price of a VLCC or Suezmax for that matter. And at this price, we buy the cheapest vessel that we can buy in the market.

Because if you only look at the NAV and the discount to NAV, then obviously you're taking a picture of something that is moving target. If the market continues to be like it is today at, you know, 25 or, let's say, between 20 and $30,000 a day, I have no doubt that the values are gonna come off. And if the value come off, then the NAV comes off. And and and then, potentially, you're improving your share price with the NAV decreasing and you go back to NAV. So, fundamentally, we prefer to have a a long term perspective, and we say, okay.

Today, at the current share price, we're buying a ship at probably $7,273,000,000. Is that good value or not? Yes. It is. If we were to go back to maybe 80 or 85, that that may become the the energy of tomorrow, and there would be less reason.

We would be less keen to buy back our shares. On the second point that that you touched, which was the liquidity, honestly, I think that we are very, very, very far from decreasing the liquidity that that it took us many years to build, by the way, over the two exchange. You've seen that we are buying over the two exchange. They are fairly balanced. I mean, one has 60% of the trade flows.

The other one has 40%, the the European one. And and and I think we are adding sort of to the to the current volume of liquidity that we see in share exchange. And it's not because you hold 5% of your capital that suddenly you don't enjoy very strong liquidity, which many investors cherish because that's the only way for them to make sure that they can buy in and sell out at the time of their choosing without moving the share price. And that's maybe the last point, which we have said already in the in the in the the remarks earlier. We're not buying to improve the share price.

We are buying because it makes a lot of sense if we want to create long term value for our shareholders. So we're not buying in order to push the share price higher in order to make a transaction the day after we've done that program. We are buying because it makes sense. That's it.

Speaker 4

Got it. Okay. That's very clear. Thanks. Those are my two.

Appreciate it.

Speaker 2

Thank you.

Speaker 0

Our next question comes from John Chappell from Evercore ISI. Please go ahead with your

Speaker 5

Hugo, so the first question, kind of shorter term. The numbers you've put up for the third quarter in both fleets, but especially the Suezmax fleet substantially above what I would say have been market values since the start of the third quarter. So kind of a two parter here. First of all, was there any kind of legacy carryover from the strength of the second quarter, whether it was short term charters or just extended voyages that had you that that got you to that elevated level? And as we think about the rest of the quarter, should we think about benchmarks?

Or do you have an elevated kind of starting point for the back half of the quarter as well?

Speaker 2

So no, there's no legacy. That's for sure. But it is true that when you take the q one, the q two, and now half of the q three, and certainly, if you compare to Clarksons or even to some of our peers, who I know have yet to announce the results, but at least in some trading update, you can see that the fluctuations among us are larger than usual. I think that we were way ahead of our peers in Q1. This quarter, we may be slightly below.

And and then in q three, it seems that we are again little bit ahead of that. But on average, it seems that we are all playing the same territories. And that explains a little bit maybe the surprise of the market that we booked, you know, very good numbers for for q three. It's simply that voyages for VLCC, you know, we've been talking about positive ton miles for the last five or even ten years, but they get the an average voyage seems to increase in number of days. And very often, we are very close to ninety days and ninety days in the quarter.

So depending on the positioning of your fleet, you may pick up some sort of bad voyage, but they are very, very good for your positioning. And then you will enjoy better rates the the following quarters, but you have to endure maybe lower rates in the current quarter. And that's that's a little bit what we believe is happening here. So it's no legacy, but it's definitely part of a positioning of, I would say, majority of the fee in order to benefit from rates that are higher in some part of the geographies than others.

Speaker 5

Understood. And then for the follow-up, the liquidity situation is obviously incredibly robust and something that really helps you stand apart. However, you shifted two of your stoplights to red. There's a ton of uncertainty. Your inventory chart, if we just follow that to the eye, looks like mid 'twenty one before things get better.

With the revolving credit facility rolling off with the new bank financing coming on for the the fleet renewal or growth. Are there any other measures you foresee taking to kind of establish a a greater war chest, you know, given the cheap levels of debt right now?

Speaker 2

No. It's true that we are obviously refinancing some of the facilities that that may expire next year because we believe that today is a better time to do that than than next year. So but I I I wouldn't say that's a major program. Mean, that's that's probably, you know, decisions that we have to take anyway. And whether we do it now in six months doesn't matter, so we prefer to do it now.

So there will probably be some some additional stuff that we can announce next quarter. But it's true that when when you're buying back your own shares and you're not destroying them, you're also adding a little bit of ammunitions into your toolbox. And so rather than a dividend, which is a one off event, and then when the cash is out, the cash is out. Here we are buying some sort of an asset. I mean, that's our own equity and we're parking it on the balance sheet.

Speaker 5

Okay. Thank you very much, Guido.

Speaker 2

Thank you, Joe.

Speaker 0

Our next question comes from Ben Nolan from Stifel. Please go ahead with your question.

Speaker 6

Thanks and good morning or afternoon. So I want to circle back to the question that Amit had or really, I guess, the answer that you gave, Hugo, about sort of the state of the market and asset values and how people are perhaps a little bit more insulated now than in previous down cycles given three really, really good quarters. Actually though, less cash flows probably do mean you have more sellers. How are you thinking about sort of the cadence? Do you think that ultimately this down cycle will be substantially less severe from an asset value perspective even if it does stretch?

Or what would you think about as sort of the tipping point, if you have any color there?

Speaker 2

Well, it's a little bit the same as when you guys ask us to predict the market's trade I mean, it's it's it's very, very difficult because at the end of the day, it's a supply demand mechanism. And then, I guess, people can can drop their price or what whatever they want to serve their vessels at depending on how desperate they are. Obviously, after a strong period of cash generation, people tend not to be desperate. But at the same time, they don't wanna see, all the accumulated cash, being used, to compensate for for potential loss. And and if not loss, certainly, as as Brian mentioned, for further capital investment to a a very expensive dry docks.

And let's all remember, those are already expensive when the vessel is old, but they are even more expensive this time around because most of the ships that we're talking about, which are more than 15 years of age, don't have a ballast water treatment system yet, and and and that's something that costs 1.2 to 1,500,000.0. So it's gonna be a very expensive bill, and and and people facing that sort of decision will think about it and will say, okay. I've generated a lot of cash in the in the last three quarters. Do I wanna sort of waste it, reinvesting my investment? So that's for the older part of fee.

For the younger part of three, I think that there are a number of challenges coming in the way of smaller ship owners, and you know how fragmented the market is. And and that is related to many regulations and and and primarily, the regulations around c o two emissions. But not only, I mean, it's also access to capital. Banks today, they prefer to lend to a to a public company with a good corporate governance and a lot of transparency than to small players. So I think the small players are are facing severe challenges, which to my mind, to our mind, only be addressed with size, size of a of a big company like Euronav or like some of the other public companies.

And so that gives us real hope that when the market will soften and the value will come off, people will realize that it might be a very good opportunity to to exit the market and either becoming shareholders or a bigger entity or simply take the cash and then reinvest something else. And I think that, again, the the reason why we like the structure at Jira now is that we are very flexible. We can do mergers like we did with Generate. We can do acquisition like we did with Merge by by by paying in cash and and raising some of that money in equity markets and the rest in debt. We are very, very flexible and we are ready to seize those opportunities when they arrive, but we're certainly not desperate to pay too much money for assets that we believe are going to become cheaper in the future when the market is not as strong as what we've seen in the last three or four quarters.

Speaker 6

Right. And to that end and to the well, actually, I I'll I'll leave that one for somebody else. I'm limited on my questions. The the I'm curious on something that probably is not very topical at the moment, but something that you guys had hinted that you might be interested in, specifically scrubbers. Obviously, right now, scrubber investments made at the beginning of the year last year have not paid off very well.

But I imagine that, you know, the prices are coming down. You guys said, you know, maybe we would look at it if, you know, in the future. Have you changed at all sort of where you're thinking on that or or or are thinking about sort of longer term if the spreads widen, where do you wanna be? And and and or is that just sort of a not a path that you would want to go down?

Speaker 2

No. So I will only repeat what I said in in the past. I mean, we are absolutely not dogmatic about it. So we have we we may have an opinion about whether a scurvy is good or bad for the environment, but I think that's for the regulators job. As far as the economics are concerned, which is which is very much what we're trying to study, at the moment, if you look at the forward curve, it is still not a very good investment if you're looking at a retrofit.

When you're looking at a new building, then it's it's it's relatively less expensive. It's it's almost what I would call cheap. And that's also the reason why the four vessels that that we took earlier this year in resales, we're very happy about the fact that they are equipped with the with the scrubbers because it means that we can enjoy the spread. But when you look at the false curve and the spread, you may find good reason to have the option of the scrubber on a new building. But as I mentioned earlier, we're not really a key to all to order ships at the moment.

But certainly not to retrofit. Mean, to retrofit, you're still talking about north of 3,000,000. And I know that a lot of those equipment are cheaper, but that that is not the very expensive part. Very expensive part is the yard bill, and you're gonna make sure that it's properly installed. I mean, we have seen enough now horror stories on on whether those kits function or not.

And and we offer our time that will obviously depend on whether the market is good or bad, but, you know, with uncertainty on the market means that the market can be good as much as it can be bad. So once you have committed to something, you have to take an average rate of loss of hire, and you have to take that into account when you make your computation on the economics of whether it's a good investment or not. So for the time being, we continue to believe that it's not a good investment, and therefore, we're not gonna retrofit any vessel. But if we were to buy a new building, it's certainly an option that we would take.

Speaker 0

Alright. Very helpful. I appreciate

Speaker 7

it. Thanks to you.

Speaker 8

Thank you.

Speaker 0

Our next question comes from Mike Weber from Weber Research. Please go ahead with your question.

Speaker 9

Hey. Good morning, guys. How are you?

Speaker 2

Hey. Great. And you, Mike?

Speaker 9

Good. Most of the the near term market stuff has already been handled, anyway, I

Speaker 2

wanted to touch base on

Speaker 9

I think something I might even ask about last quarter just in terms of propulsion, and some of the shifts we're seeing and some trepidation in terms of building out the order book for lack of better fear of obsolescence risk. In terms of we've seen we've seen a handful of of LNG powered VLCCs get ordered year to date, usually, 25, like, some sort of long term business, but it kinda begs the question of of of what what you think the right mix is for the future. So when we when we think about Euronav longer term, know, if we maybe fast forward five years, what do you think the fleet looks like? And do you think are we are we getting closer to the point where you guys could realistically pull the trigger on on some sort of some sort of differentiated propulsion that that, might get a more more closely fit with some

Speaker 2

of the, some of

Speaker 9

the ESG mandates and and renewables pushes we're seeing over the next, the next couple years?

Speaker 2

Yeah. Well, it's it's a very complicated question because there's a lot of moving parts and and certainly a lot of uncertainty. So we've seen so far only, to my mind, one contract for two vessels, dual fuel LNG, and that was done indeed on the back of a time charter contract with one of the old major main retailers. And and and we bid for for that contract, and we didn't get it because when we offer our service, we also want to have some sort of a return, and and the return that the owner got is not something that we can we can appreciate or we can tolerate in in Europe or not. So what we had said last quarter is still very valid this quarter.

We believe that the premium that you have to pay in order to get a dual fuel vessel still requires a contract to be compensated from. Because otherwise, you're getting the same freight in the market, and you may pay your energy a little bit cheaper, but that's again a moving part, I mean, than LSFO. That's again a moving part, and and we're trying, by the way, to find ways to to lock that discount in order to justify the premium. But so far, we're not managing or we're not seeing a good return on on investment. And the premium that is in Yard is roughly speaking 15,000,000 compared to a conventional vessel.

Having said that, we also monitor the Yard, and we see that the Yard are becoming a little bit more desperate by the day on getting orders. And they understand very well that they are not getting orders for two reasons. I mean, first of all, because the market is has its own uncertainty. But secondly and more importantly, it's because there is a lack of certainty on the owner side of what technology will be the one to adapt for the long term future. Because if we are only looking at transition period, five years, potentially ten years, that's only half of the livelihood ship.

So are you gonna buy a technology for half of the life? Then then it's not a premium of 15,000,000 that you're paying. It's it's a premium of 50,000,000. So that becomes very expensive. So so you can see that there's there's a lot of things moving.

There has been also a lot of announcement being made recently around hydrogen. I mean, people thought that this was a good fuel for the future. They would only arrive fifteen or twenty years down the road, but it seems that as as we are moving, people are making this theoretical fuel more accessible maybe within the next five years. So once we project ourselves to the next five years, I think that we will continue to have maybe of uncertainty, which would not trigger a lot of new building orders. We will see whether this hydrogen potential is is a real I mean, can materialize into real real life.

Yeah. And and I think that if that's the case, then people will start ordering hydrogen vessels. And I understand that on in other markets, it's already the case. And and and then we will see whether the LNG to a fuel vessel has a future because, of course, the LNG can also be produced synthetically. And in that case, then it's not a fossil fuel, and and then technology is ready.

So we we we are watching absolutely everything. I think a lot of orders are doing the same. The benefits, I would say, that we may have is because of our large fee, If we were to order two vessels with a specific technology, we're not betting the farm doing that. Mhmm. Whereas smaller fleet again will will bet more of the farm if they order two ships on the feet of a net and 10 ship, let's say.

Gotcha. Well, there there's

Speaker 9

a a good a good corollary there to take offline in terms of blending hydrogen and natural gas and some of the bunkering infrastructure needed. But I guess it's interesting here that you participated in in in that in that tender. Maybe maybe kind of thinking about it more more specifically into into your point, there's a lack of bunkering infrastructure to support, you know, LNG as a as a a a blue water propulsion for for for merchant ships. I mean, you can even really feel in The US Gulf right now if you wanted to. But in in in in a sense, that could provide an opportunity, and you guys have always you know, well, not always, but you're certainly not averse to to taking interesting angles on bunkers and some of your, you know, some of your supply needs.

I'm wondering, is there a realistic scenario that could look to you guys could look to vertically integrate to maybe provide some of the infrastructure that might be needed to to facilitate that trade, or is that too far afield?

Speaker 2

It's it's not too far, but it's never gonna become a a, you know, business line. I think if we have to bridge something, then then we might do so. We would preferably work in joint venture with people. Of course, if you order a ship on the back of a contract, it's not really your problem. So why should you solve it?

Because the banks are being paid by your customer, and so the customer will be responsible to find a place where it can bank it. It it might also be the reason why we're still talking about dual fuel and not single fuel LNG because I know that the yards are also now turning their heads towards ships that are would be single single fuel LNG. Today, that would be way too risky indeed because of the infrastructure not being there for remote. If we were to order, specifically, a ship or two, usually, we we get a pair, and they would be dual fuel LNG vessels and specifically so there wouldn't be a contract attached. That's because we would we would have been able to secure the LNG at a discount to the LSFO in order to justify that premium.

There again, if you can do that, it's probably with a physical delivery. And, it's no longer your problem. It's more the problem of the of the the the the bunker provider, which is likely to be an oil major. So I I don't really see that happening on the LNG. On the hydrogen, it's it's a very different picture because, obviously, the hydrogen is only as good as as its production.

So brown hydrogen is producing amount of c o two, if not more. So you need green hydrogen. And on green hydrogen, I don't see a lot of initiative being taken even though in Europe, some some of those are being supported by the EU. So if we get governmental money to do something, then it becomes very attractive, including for our shareholders because we are building an asset. We're building knowledge.

We are potentially using it for our own purpose, and all of that is being subsidized by the state, which is always very interesting. So you can see that as a business line, probably not, but there are a lot of things that could be interesting for us to do that could be beneficial for our shareholders.

Speaker 9

Gotcha. And just to be clear, you're talking about hydrogen as a as a propulsion as as a fuel as opposed to moving hydrogen on bulk with a with a specialized carrier?

Speaker 6

Well, you're you're right. I would see both.

Speaker 2

Yeah. No. I I would say both. I mean, you cannot open a a European newspaper or at least an economic newspaper Yeah. That doesn't talk about either hydrogen project or at least a government pushing for hydrogen or the EU pushing for hydrogen.

So it it's absolutely everything. It's about the position of it. It's about transportation of it, and it's about the deli the delivery of that product. And most of the time, we're talking about ammonia rather than hydrogen because it's just easier to handle. But, again, I mean, we we want to see how it develops.

But but, again, I mean, some of those programs are very, very generous. So yeah. And I don't think it would give a deviation because then it then it would mean that it becomes the fuel of the future.

Speaker 9

Sure. Okay. Great. I appreciate the time, guys. Thanks.

Speaker 10

Thank you.

Speaker 0

Our next question comes from Randy Yibins from Jefferies LLC. Please go ahead with your question.

Speaker 9

Howdy gentlemen, how's it going?

Speaker 8

Fine, Randy.

Speaker 7

Good. Good. Well, yes, obviously, congrats on the strong second quarter and the impressive 3Q rates here, obviously, above kind of all in breakeven levels in the seasonal trough period. With that, how has time charter rates how has that market responded in terms of rates and also liquidity? And has Euronav signed any time charters over the past couple weeks here in the summer?

Speaker 2

No. We haven't signed anything new in in the last couple of weeks. I think that there was a frenzy for time charter, which were more related to storage activities or at least a combination of trading and and and storage. But that's more of a I mean, a story of the for the month of May rather than June or July. I think it's currently we've seen the the the rates running off.

They came back relatively strongly for a few weeks. They are off again. And so on the back of that, I don't think you could hope for very strong rates in a in any time charter. So even if they were there, I'm not sure that we would be interested to sign, you know, sort of a long term time charter more than a year at a rate that would not be very interesting unless we have a profit element mixed into it or something like that. And so, clearly, we haven't done anything.

We are not seeing a loss of liquidity in the market. And even if we were seeing something in the market, I think that given where the spot market is, those rates may not be interesting enough for us to clear and to and to put some chips in it.

Speaker 7

Got it. Alright. That makes sense. And then currently, you know, your VLSFO prices are well below the, I guess, $440 a ton of your VLSFO inventory that you're storing. So with that, what's happening to the fuel on the Oceania?

Have you been drawing from it or maybe taking advantage of the weak VLSFO market and restocking that inventory?

Speaker 2

Yes. So in the in the in the proprietary remark that the leave mentioned, so, yes, indeed, we well, in fact in fact, we can we can talk about phases. So at the beginning of the year, when what we had in stock was cheaper than the market, we obviously used only that, even using swapping, delivering in Singapore and getting back in The U. S. Gulf.

So we have used that was part of phase one. Then phase two was oil price collapse and with that fuel oil price collapse as well. And we completely stopped using the fuel that we had onboard the Oceania, and we only bought from the market. Then the oil price and with it, the fuel oil started to recover, and we're now at $45, and and and and we're probably around $350 for for the fuel oil for the UELSFO, and that is still cheaper than what we have onboard the Oceania, but but it's not as big of a difference as, we once had and certainly what we announced at the end of q one. This the other thing that we have done so that was phase two.

The other thing that we have done now in, what we call phase three is using the volume discount that we can benefit from. And, you know, use that if you have a place to store the oil, like on Bolivia Oceania, and buying some some ton tons in the market. I mean, lots of 30,000 tons or 40,000 tons and mixing them mixing them. I don't mean physical mixing, but placing them into the Oceania and having averaging down your cost of inventory. So we had announced our cost of inventory to be around $4.50, if I remember well, in Q4 or even in Q1.

And today, we would be below 400, thanks to this policy of buying more, mixing down or averaging down the cost. But we are doing that meticulously and not in one go. So we're not buying another 200,000 tons. We are really buying, I would say, 20% more of our own needs in terms of consumption in order to mix down the inventory cost. And that explains why the mark to market has significantly decreased from the last time we reported on it.

And we we will continue doing that, and we believe that by the end of the year, the Oceania will either be empty or will be full of fuel oil at a price that is identical to the market.

Speaker 7

Got it. All right. Well, makes sense and nice job again on the share repurchases. Thanks.

Speaker 2

Thank you.

Speaker 0

Our next question comes from Greg Lewis from BTIG.

Speaker 10

Hugo, I guess just going back to the slides, you know, in the the slide, what was that, 13 where you talk about ton miles and and the downgrading of ton miles. You know, it's interesting. It seems like ton miles that had been expanding for, you know, at least a few years. So, you know, I guess what I'm wondering is, you know, kinda what drove this downgrade and and and really how should we think about, you know, what what's it gonna take to get this down what's gonna take to get ton miles growing again in the tanker market?

Speaker 2

Well, it's it's it's obviously the the reason why it has been growing in the past was very much on the back of The US production. I think that this this crisis, to to a certain extent, similar to the crisis that we saw in 1415, took part of the production down. But the minute you go over $40 for and and we are now at $45, you see that some of those fields are being, exploded again. And I think if you were to go at $50, you would see even more. So it's a little bit difficult to predict, what's the production is gonna be in The US, and that is a big driver of ton miles.

But it's also true that people tend to forget that in the meantime, the Brazilian production has gone up, tremendously, certainly more discreetly, but year on year adding more barrels to be delivered. And that is also a provider of the mine, which is much more stable and and and certainly systematically testing to the Far East because there are far less political tensions. And that leads me to the second point about well, it's very hard to predict where the lines are gonna go because it seems that political decisions, trade wars, election, I mean, you name it, has a big influence on where the Far East in general and China in particular is sourcing its oil. And so at some point, they were the largest buyer from US oil. Then there was a period where they didn't buy anything, and and they became the largest buyer of Brazilian oil.

And I think it was Korea and Japan who took the the balance coming from The US. So it was same destination, which was good. But again, there are so many political factors playing in that it's difficult to predict what where timelines are gonna go. Trade is the big word and is sort of the name of the game. As long as people continue to trade oil to send it to different destinations, I think that we're gonna continue to to have good ton miles.

I don't think that we will see a massive increase of it, but I I I believe that it's it's gonna stabilize at the levels where we are.

Speaker 10

Okay. Great. And then just one more for me. I mean, you talked a lot about the potential for vessel retirements. You know, just obviously, you guys have a, you know, modern, efficient fleet.

But but, I mean,

Speaker 0

you do have, you know, you

Speaker 10

got couple Suezmaxes that are plus 15 years old. You know, as as you think about what's gonna and and not maybe it's for Euronet, but maybe it's broader fleet. I mean, is it gonna be kind of that five year special survey? Or, I mean, could do do you see interim surveys for 15 year old vessels? I guess, one in their seventeen, eighteen year potentially being a catalyst to to retire vessels where we are, or do you think it's more, hey.

You know, once a vessel gets its five year survey, you know, it's pretty much good till it's 20. Just kinda curious if you have any or and maybe, you know, how you think

Speaker 2

about that. And, yeah, and I think we well, we need to differentiate Euronav and maybe some of the other players with with the rest of the the the world fleet. And and the reason is if you build a ship and you trade the ship for for the the the better part of its twenty year life, twenty five year life, those surveys are not gonna be as expensive as the ones who have been buying those ships or the ships has changed hands many times. But also, and and very importantly, vessels in the hands of, I would say, second tier owners who don't maintain their vessels at the same level as as a Euronav or maybe another public company would do. So that that's where you need to differentiate Euronav with the others because when we are facing those those bills and those decisions, And first of all, as you have seen, we tend to sell the vessels when they are around 15.

We don't wait until they 20. That's due to the fact that we try to market our services to the type of clients that don't wanna trade vessels that are more than fifteen years. But from time to time, we do. I mean, the the last five years, I think that we we we kept ships until they were 20 years old or or nearly 20 years old, so 19. And and that was because, again, the maintenance was so good that they they were on time charter mainly to Valero, and there was no reason for us to sell them.

Speaker 8

So Euronav,

Speaker 2

usually, we sell at 15. On exceptions, we keep them at 20, but that's more on time charter on spot. And and and then because they are in very good conditions, we're able to sell them, and you've seen what we've done this year at a premium. And usually, those people try to trade them again, so not send them to the the recycling yard for at least another two and a half years from their anniversary, be it seventeen and a half or be it twenty. When you look at the market, which is obviously a much bigger population of ships, most of those ships have not been in the hands of the same owner since the beginning, and their aging is very much a relate in relation to the way they've been maintained.

And one can clearly say, because you can see the the bill that they are facing when they pass the survey, that they will have to spend more money. And that is really the the question and and the dilemma that those owners will have. Do you want to spend three and a half or $4,000,000 including the ballast water treatment system for only another two and a Because at that point in time, it's every two and a half years that you have to go to to the dry dock. Or do you throw the towel and say, okay.

I prefer I prefer to receive money. I prefer to receive between 7 and 10,000,000 for a Suezmax and and maybe 15 to 24 depending on where the scrap is, the scrap price are. And we have seen no no later than in 2018 that most of the time, people facing those dilemma will take their ships to the scrapyard because they they believe they started investments to pass a survey and then to hope for the best in the in the freight environment that is, at the time of that decision, not very attractive. That's the reason why we insist so much on this age profile because we didn't have that feature for nearly ten years. I mean, since we swapped single hull to double hull, we have artificially rejuvenated the feed.

And so when when your vessel is twelve years old or or even 15 years old, that's not really an easy decision. When it's 17 and a half, when it's 20, there are even vessels of 22 and a half in our side. It's much easier to take, but you need a low freight market.

Speaker 10

Okay. Perfect. All right. Hey, thank you everybody for the time.

Speaker 2

Thank you.

Speaker 0

Our next question comes from Chris Wetherbee from Citi. Please go ahead with your question.

Speaker 7

Hey, thanks for taking the question. I'll leave it at one. It's been a long call. I wanted to talk a little bit about the vessel supply slide and understand maybe how the 60 to 80 vessels that are tied up and have the potential to come back into the market kind of factor into that thought process. It would seem that while the order book has kind of come in a bit, those vessels do present somewhat of an overhang.

So I know the crystal ball is particularly cloudy at this point, but if you could help us maybe better understand how you would anticipate those vessels reentering the market, maybe the timing of that over the next several quarters, that would be very helpful.

Speaker 2

Maybe I will start, but then I would like to Brian for Brian to jump in. And the start will be indeed it's not an exact science. There was a lot of contract, about 50 VLCCs contract just for storage, and that was for six months. So one should believe that those vessels are going to come back in October, November of this year. And that's certainly not gonna be good for the market.

It should put pressure onto the market. But then when you look at previous contango situations and how the feed that was that had been used in storage was redelivered to the trading fleet, it's true that it's it happened over a much longer period of time. And the reason why it happened over a long much longer period of time is simply because at the end of the contract, you usually have a month and maybe more of options. The guys who have taken those ships are traders, so they may want to deliver the oil in a in a place that is very different from where the ship is at the end of the contract. You can have a situation where you have a a contango again.

And it's interesting. I saw a report this morning talking about a contango situation very much in China because a lot of those vessels are either storing or in congestion around China. But when you look at the forward curve of this new the new index new oil index called Shanghai oil index, there is nearly $11 of contango over the next twelve months. And and so that just for that matter, it would incentivize a lot of people to store oil outside China just for that matter. So you you can see that it's not an exact science, and you don't know those vessels are gonna return.

But it is true that if they would return to the market, it's not it's not good. I mean, we've said them not to return to the market. And the the more constant patient there will be around the returns, the more pressure there will be on the market. If it's over a long period of time or longer period of time, then it seems to create less problems. Brian, do do you have anything to to add to that?

You may be on mute.

Speaker 1

Oh, can you unmute me? No. Yeah. Can you unmute me? Can you hear me now?

Speaker 2

Yep. Yep.

Speaker 8

Yep. Okay. Yeah. Two things. The contango we had in 1516, peaked.

We didn't get the peak in the amount of ships that were, held on contango for another nine months after that, as you guys said. So there is a bit of a lag and a delay. There may be some lumpiness around October, November when we get these six month contracts coming back. But it's also very difficult to see, say, the ocean tanker situation or the ships being released at once. We expect them to be gone in a piece now.

So, look, it is a headwind. Will There be some lumpiness, we believe, around October, November, but we do believe this will be over a reasonably prolonged period. It's not going to be, dozens of ships all appearing at the same time.

Speaker 7

Okay. That's very helpful. I appreciate the commentary.

Speaker 8

Thanks, Chris. Thank you.

Speaker 0

And our next question comes from Omar Nokta from Clarksons. Please go ahead with your question.

Speaker 7

Hi, there. Hi, Hugo, Brian. You guys gave a fairly realistic overview of what's happening in the oil markets today and and what's beyond the come. It's kind of hopeful and sobering at the same time with the red traffic lights in your presentation for both, oil supply and demand. You know, the market, as you say, is in transition with with destocking now in play.

You know, last week, The US reported a 10 plus million barrel draw in crude stocks. And yesterday, it reported another 7,000,000 barrel draw. So, clearly, we're in this heavy portion of the destock, at least stateside, and potentially, we can extrapolate that the same may be happening globally. Are you encouraged with these recent declines in stockpiles and and that perhaps maybe this tells us that the market or at least the oil market may be getting into balance much earlier than we might otherwise think?

Speaker 2

Well, I think I think that's almost a fact. I think a lot of, market participants have been taken by surprise, and and, certainly, we were also taken by surprise, of how much, oil has been drawn from those storage. And, yes, we we we believe that it's a it's a feature of certainly the OECD countries, but but probably also in The Middle East. The quicker it goes back to the five year sort of average, the better it will be to to rebalance the on market and therefore, the need for our transportation services. So, yes, it's it's quite good that it's happening at the moment because at the moment, we have a number of ships that that are not part of the trading feed at least as we just discussed.

And so the more we can draw or the more the world can draw on those stocks while we have those those vessels outside of trading feed, the better it will be, for, for the recovery. But that is hope. That is a wish. That is not something that we can control. But at the moment, we are very pleased to see, the rate at which it's, it's taking place.

Speaker 7

Okay. Yeah. That that's fair. And and Brian addressed this just in the last, question. But, you know, with respect to what we're seeing in China, clearly, congestion has been it's been significant, and it's really made the floating storage figures even larger.

But that, you know, those that congestion has been ongoing now, I think, basically, since March, April, if not earlier. From from your perspective, what is what I know you addressed it a bit in the opening remarks and and throughout the q and a. You know, what really is been driving that congestion? Because it has been going for a long time. It's a strategic reserve building.

And also, you know, when does that start to thin out? Because it seems to have gone on a bit longer than we'd anticipated.

Speaker 8

Brian, you you wanna take that one? Sure. Yeah. No. Sorry.

Apologies. Yeah. You're obviously right, Omar. It has been. I mean, obviously, some of the recent congestion have had a an added factor of of weather, But I think you also have to remember in the last, sort of ten weeks, there's been one very, very good reason, for that congestion is there's been a huge amount of heavy lifting, I.

Buying of crude by China. We've simultaneously, to the quarterly presentation today, put some, an updated investor deck, 50 slides up there. And we look at the, the Chinese who have been very incentivized by their own government, from the private sector to buy below $40 per oil in terms of of a surprise per barrel. And they've, they've they've made a lot of orders, and their preferred, mechanism or methodology of of delivery is via VLCCs. And it tends to go to one or two ports, And I've had the congestion, so the the the funnel is is very thin at at that end.

So, that's why, again, in the prepared remarks, we said we do believe there's a little bit more to come. This is gonna take some more time for this to unwind. It's just simply a question of a lot of volume going through a relatively, small delivery channel. And, of course, as we've seen from the data, you know, they've they've reached the record imports over the last, three months so. So, yeah, I think there are some one or two specific factors, but that really just explains it.

It's been a largely VLCC trade, which is added to that con congested angle. But as Hugo said earlier, if this can continue if this does continue for the next two or three months and we get inventory taken away from both other floating storage and from onshore, then that's, gonna, you know, add to a quicker equilibrium for for the tanker markets. But that's the short answer on the Chinese. It's just been simply a a big volume play over the last two to three months.

Speaker 7

Got it. Okay. Thanks, Brian. And Hugo, thanks for that. I'll leave it there.

Speaker 8

Thanks, Omar. Thank you.

Speaker 0

And our next question comes from Luke Vanderhoof from DELEN Private Bank. Please go ahead with your question.

Speaker 11

Hello, In the press release, you mentioned again the difficulties that you are facing to to move the the crews from the ships and to bring in the new crews. Is that actually taking part of the capacity out of the market for yourself and for the the whole sector?

Speaker 2

No. Not at all, in the sense that, people that are on board continue to work, and and and, therefore, there is no there is no ship out there that is standstill due to lack of crew. The problem is really changing the crew to get new people on board. But but, obviously, if if we if we can't get new people on board, then the people that are currently on board do not disembark. And we have as many difficulties disembark people as we have difficulties sending new crew to places where the ship is gonna call the port and where where the rotation would take place.

But it's I mean, I thank you for your question because this is this is a a real problem and it's a growing problem. Actually, on that, the statistics started to go go down in July, and that was because some of the the big hubs, the big ports like Singapore and Hong Kong were opening up, and we are able to change some of our people and certainly the ones that have been very nineteen months on board. But at the moment, unfortunately, it seems that there's second wave hitting a lot of those countries, and so the numbers are are growing again. And when I speak about urinal, I also know that, it is the case for, the rest of the the world, the rest of of the the shipping world. And and people don't realize that, you know, at some point, something will happen, and it will create a big disruption.

And and we certainly don't wanna arrive there. We need to think about our colleagues on on border ships. That's our primary focus. But very quickly after that, you also need to realize that we're talking about human beings and everybody has its own limit. So today, it's not creating any disruption, but I'm afraid if we continue not to recognize them as key workers, it will create severe disruptions.

Speaker 11

So it does not create any legal problems for the moment?

Speaker 2

What do you mean by legal problems? I mean, everybody Well,

Speaker 11

how long can you keep how long can you keep a crew on on on a vessel? Do you do you need

Speaker 2

to How long? Agreement of the landing

Speaker 11

crew to to stay on board?

Speaker 2

Oh, of course. Well, I mean, stay on board. If they cannot disembark, it's not in in the hands of Euronav. It's you know, you arrive to a port, and in today's world, it's very different than fifty or hundred years ago where seafarers were disembarking and visiting the bar of of those cities. Today, it's heavily restricted, heavily controlled.

You need to have visa in place. You will be escorted to nearby airports. And at the moment, that is exactly what is not happening. People cannot leave the ship. I mean, if if they try to leave the ship, they will be arrested.

That's how bad the situation is. So how long can you keep people on board? We keep those people on board because they have nowhere else to go, and then they continue to work because that's a very good way to earn a living and send that money to their families wherever families are. So how long can it can be? It it it can be a lot longer.

But then you have the mental health, and and that is even more important than the physical health because quite frankly, I mean, working, we all work all year round. On board ships, you work six months and then you go off six months or you you you work three months and then you go off three months. But but if if you are being asked to work longer, then you work longer. So the physical fatigue is not really a problem. It's the mental fatigue.

And what is really creating the problem is not to be able to tell those people, you will be rotated on or off by this state. You have to to to tell those people, and we are very, very transparent with them, Also, with the success that we have because that's important, that we don't know. We don't know it when we arrive to Singapore, for instance. The rules that was ruled two weeks ago will still be in place. Because when they change the rule, they change it overnight.

And that's because the the number of COVID cases are increasing and suddenly they they locked down the the the the city or the port or or the country, and and people are no longer able to be rotated on and off. So it's a it's a very, very complex situation. And the only solution, as far as we are concerned, is to give the seafarers a state status, and the status is key workers because there's a lot of people that continue to travel all over the world as they have this status. And we believe that, the shipping world is providing an essential, service to the world. And for that reason, we should treat those human beings with consideration and give them the status of key workers.

Speaker 11

Okay. That's clear. Thank you.

Speaker 7

Thank you.

Speaker 0

And ladies and gentlemen, with that, we'll conclude today's question and answer session and today's conference call. We do thank you for joining today's presentation.

Speaker 5

You

Speaker 0

may now disconnect your lines.