Hello, and welcome to the Scorpio Tankers Incorporated Q1 2022 Conference Call. I would now like to turn the call over to James Doyle, Head of Corporate Development and Investor Relations. Please go ahead, sir. Thank you for joining us today. Welcome to the Scorpio Tankers Q1 2022 Earnings Conference Call. On the call with me today are Emanuele Lauro, Chief Executive Officer, Robert Bugbee, President, Cameron Mackey, Chief Operating Officer, Brian Lee, Chief Financial Officer. Earlier today, we issued our Q1 Earnings Press Release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, April 28, 2022, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review our forward-looking statement disclosure in the earnings press release issued today, as well as Scorpio Tankers'; and SEC filings, which are available at scorpiotankers.com and sec.gov. Call participants are advised that the audio of this conference call is being broadcasted live on the Internet, and it's also being recorded for playback purposes. An archive of the webcast will be made available on the investor relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpiotankers.com on the investor relations page under Reports and Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to two. We want all our analysts to have a chance to ask a question. If you have an additional question, we are more than happy to answer it, but please rejoin the queue. Now, I'd like to introduce our Chief Executive Officer, Emanuele Lauro. Thank you, James. Good morning and afternoon to everyone. I'd like to start by saying that our sympathies and thoughts go out to all those impacted by conflicts around the world. The times in which we live are particularly uncertain, and the level of tragedy that the world is experiencing is far beyond anybody's imagination. As far as our business is concerned, when we last spoke, I said that our top priority was to position the company to create shareholder value in an improving market and for the next tanker cycle. This remains very much the case, and we felt that the best way to do this is through improving our balance sheet. In order to do that, since January, we have announced the sale of 18 vessels. These sales increase liquidity, reduce overall debt, and are a demonstration of the discount our shares trade relative to an ever-improving NAV. In H1, we will reduce our debt by more than $500 million through vessel sales and scheduled amortization. With a fleet potentially averaging $25,000 a day TCE in Q2, should that be the TCE for Q2, the company could finish the quarter with $450 million in liquidity. This would result in a reduction in debt of over $730 million in H1. Last quarter, we said that the catalyst is simple: supplying incremental oil demand with inventory growth is not sustainable in the long term. The timing was less so, but the inflection point was near. This became apparent at the end of Q1 when the reopening of the global economy from the COVID-19 pandemic increased the demand for refined products for seaborne exports, and rates on our vessels have reflected that. The mismatch between the supply and demand of refined products and the improving rate environment was apparent prior to as well, but further exacerbated by the conflict in Ukraine. Our thesis has not changed, but we're certainly more optimistic given the growing demand and increasing dislocation between producers and consumers. Refined products demand is expected to increase each quarter as the pandemic eases, and given the historical low inventories, refinery runs, and seaborne exports will need to increase to meet demand. This will provide a constructive environment for product tanker rates. Product tanker rates increased significantly at the end of the quarter and remain at elevated levels today. We're pleased with our Q2 Guidance and excited that the thesis is finally starting to play out. Given our positive outlook, we have no plans to sell additional vessels, but we will continue to reduce our leverage naturally through scheduled amortization and opportunistically through vessel refinancing. That said, with a healthy liquidity position and significant operating leverage of the company, in a sustained rate environment, we would be looking to return capital to shareholders in the most value-creating way. For example, by looking to employ our $250 million share repurchase program. There are several reasons to suggest that a sustained rate environment will continue, and I would like to ask James to tell us why through our slides. James? Thanks, Emanuele. Good morning and afternoon, everyone. Over the last two years, the recovery in oil demand has been quite resilient, especially when considering that widespread vaccinations only started at this time last year. That said, the recovery has also been bumpy, varied by region, impacted by new COVID variants, restrictive measures, and any time demand exceeded supply, there were available inventories to draw. Thus, the improving demand, refinery rationalization, and increasing ton-miles that we have talked about so much did not have a material impact on rates; until it did. In January, we started to see a steady improvement in MR rates, which was prior to Russia's invasion of Ukraine and driven by increasing demand in Latin America, Europe, the U.S., and Africa. After Russia's invasion of Ukraine, we saw a significant increase in product tanker rates. As you can see, it did not have a lasting impact on the LR2s, which increased for two weeks before declining. For the MRs, the highest rate increase was for our vessels that were going from the US Gulf to Latin America, which has less to do with Russia and Ukraine and more to do with increasing demand. While MR rates in the US Gulf declined from their record levels, they have increased in Europe and substantially in the Middle East and Asia. We have seen a steady increase in LR2 rates over the last few weeks as Asian demand has increased. As of today, spot rates are higher than currently presented in this graph, with ECO, MR, and LR2 rates in the Middle East and Asia trading well above $40,000 a day. The question then is, how did we get here? Slide eight. Diesel demand has been robust and is already above pre-pandemic levels. Despite an increase in refinery runs last year, demand has continually outpaced supply, creating an extremely tight diesel market. As you can see by the graph on the lower right, the diesel shortage is not new to Europe, and by the graph on the top right, the shortage extends beyond Europe to Latin America and Africa, which have similar diesel deficits. We expect the market to tighten further with increased competition for distillate molecules as jet fuel demand returns. It is also having an impact on gasoline. With refiners running in max distillate mode, we're not building significant gasoline inventories ahead of peak driving season. This is very constructive for product tankers. As demand grows and inventories remain low, product tankers will need to be the conduit for filling the global supply-demand imbalance of refined products. Slide nine, please. The situation in Russia and Ukraine has exacerbated the global diesel shortage. Prior to the invasion, Russia exported around 1.5 million barrels per day of clean petroleum products, and the majority of this was one million barrels per day of diesel going to Europe. It's unclear how sanctions will play out, but it's hard to see a scenario where it doesn't increase ton-mile demand. If European countries were to ban Russian product imports, it's likely that these imports would go to Africa, Asia, and Latin America. To replace the lost Russian imports, Europe will have to source barrels from the US, the Middle East, India, and Asia. If this happens, there will be a substantial increase in ton-miles because in every scenario, you are replacing a barrel from a location that's farther away. Are we seeing this yet? Slide eleven. Well, we have seen an increase in ton-miles, but much of this has to do with refinery rationalization. When you factor in the refinery closures over the last few years, it compounds the supply-demand balance in today's market. After a refinery closes, in most cases, the lost output needs to be replaced with imports. For years, we have seen export-oriented refinery capacity additions in the Middle East come online, while older and less efficient refining capacity has been closing in Europe. In addition, we saw significant refinery closures in the last two years in places like Australia, the Philippines, Japan, U.S., and Canada. As demand returns with the global reopening from COVID-19, these barrels need to be replaced. This lost production needs to be replaced. Over the last few weeks, we've seen record refined product exports out of the Middle East and close to record levels of diesel exports out of the US Gulf. This has supported the strong increases we are seeing in MR and LR2 rates today, a demand-driven recovery. Is this sustainable? Slide 12. Yes, but we do think the supply and demand balance for refined products is going to be extremely tight throughout this year. In 2021, seaborne CPP exports were around 700,000 barrels per day lower than 2019 levels. In addition, there were roughly 500,000 barrels a day of refined product inventory draws. Thus, we were very close. In April, CPP exports exceeded pre-COVID levels by 700,000 barrels per day. Our thesis hasn't changed. Looking forward, refined product demand is expected to increase by four million barrels a day through the remainder of this year. If 25% of this increased demand is exported, seaborne exports of refined product will increase by an additional one million barrels a day. With inventories at historically low levels, there is a limited ability to supply demand from draws, and refinery runs will need to increase as well as product exports. This is extremely constructive, and it's expected that product exports and ton-mile demand will increase by 5% and 14% this year. Slide 13, please. The product tanker order book is at a record low, with 5% of the existing fleet on order today. By looking at the order book, you would think that shipyards are desperate for orders, but it's quite the opposite. Other shipping segments have done so well, such as containers, that the yards are fully booked. We do expect more product tankers or more product tanker orders, but if ordered today, these vessels would not be delivered until 2025. While the order book is at an all-time low, scrapping last year was at an all-time high, and we expect this to continue throughout 2022. Unlike other sectors, product tankers were not built en masse until the early 2000s, so scrapping has been minimal and basically everything that's been delivered hasn't left the fleet. Today, there are 255 product tankers 20 years and older. By 2025, excluding scrapping, there will be 687 product tankers 20 years and older. Without additional newbuilding orders, more than half the fleet will be 15 years and older by 2025. Using modest scrapping assumptions, product tanker fleet growth, net fleet growth is a little over 1% over the next two years before going negative. However, when we use a scrap rate that reflects the age profile of the fleet, supply growth is essentially zero the next two years before going negative in 2025. Financial highlights. Slide 14, please. To maintain liquidity during the challenging rate environment as a result of the COVID-19 pandemic, we increased our leverage as opposed to raising equity. Prior to the increase in spot rates, our focus has been to improve the balance sheet, which as you can imagine, is difficult to do in a weak freight market. Since the start of the year, we have announced the sale of 18 vessels. These vessels increase our liquidity, reduce overall debt and are accretive transactions given the discount our shares trade relative to the vessel sale prices. As Emanuele mentioned, we have no plans to sell additional assets. Through debt repayment related to vessel sales, scheduled amortization, and our convertible bond, we will reduce our debt by over $500 million in the first half of this year. Given the improving rate environment, if the fleet averages $25,000 per day in Q2, we could have $450 million in pro forma liquidity by the end of June. This would reduce net debt by over $700 million. In addition, we have refinanced all the upcoming loan maturities through 2023, aside from one. Given these points and our positive outlook for the market, we feel very well-positioned. Next slide, please. Slide 15. Scorpio Tankers has tremendous operating leverage. Every increase in spot rates above our all-in breakeven goes directly to the bottom line. So far in Q2, the fleet has booked an average TCE rate of close to $28,000 per day, close to double the prior quarter. Assuming rates would average $25,000 a day for the year, the company would generate almost $600 million in free cash flow before debt repayment, or $10 a share, a 40%-45% free cash flow yield. If you include debt repayment, the company would repay $4.50 a share in debt and then generate $330 million or $5.60 a share in free cash, adding $10 a share to the company's NAV. Next slide, conclusion and investment highlights, slide 17, please. The company owns and operates one of the world's largest product tanker fleets comprised entirely of eco vessels. We have significant operating leverage. A $1,000 a day change in product tanker rates equates to $41.2 million in annual cash flow. As you are aware, rates don't usually move by just a thousand dollars. We are in the process of de-leveraging the balance sheet and positioning the company to create value and improve the quality of the investment. We will reduce our debt by over $500 million in the first half of this year. Our shares trade at a steep discount to our net asset value, and we have a $250 million share repurchase program. The market inflection point has arrived and the long-term supply-demand fundamentals suggest we could have an extended tanker cycle as well. With that, I will turn it over to Robert. James, thank you very much. Firstly, thank you very much to all those analysts who supported us in these months that we've been through and those who've been supporting us in the really dark times, such as last November. First, I'd like to thank all, you know, the blog chat rooms, especially Tanker Data. All you people have been really helpful in, you know, providing encouragement and providing constructive criticism, and some of it we've followed. Now, I think James has laid out a pretty conservative but very reasonable position in his notes, and we can see that even if that were obtained, there'd be substantial value derived in the stock. Emanuele has been very clear that we want to improve the quality of the investment by continuing to deleverage, and also being clear that we have the capacity with the stock authorization of $250 million to make significant inroads into the cash into the stock. Now, what we don't know is, you know, just how much. We don't quite know what the rates are going to be. We know that there are huge differences and huge changes. We know that cash flow is huge even now. We know that cash flow is instantaneously dynamic and transforming. We know what's going to happen if a company gets cash flow. We can look across and see the container market time last year, some companies that went up more than seven to eight times from February through to January. Some even went up more. We've seen in the dry cargo market, companies like Eagle, Star Bulk, and Genco, all having substantial rises in the value of their stock as the cash flows came in and their options came to either increase dividends or buy back stock. For us, while this huge difference in the NAV continues, at the moment, we would rate our NAV, you know, pretty much around 35, 36, maybe even 37 level. It's very difficult to tell when things are marching up very quickly. T here's no question that buying back stock would be the best use of excess capital. I would counsel everyone to look at the cash flow now. Its long-term fundamentals are fantastic. The cash flow at the moment has dynamics in it with changing trade routes that are unlikely to change. Every time we look at it and say or answer the question, last two months, can it be sustained? The answer has really resulted as the market has got stronger. This last week, the market has moved into a new stage, moved into a more world stage, moved into a stage where Asia is really driving rates right now in a huge way. You have the LR2s, the top of the pack. That is the most industrial demand sensitive, that's driving and driving higher into record rates. In just this last week, those rates have moved up, you know, in the range of $30,000 a day or so. MR is also strengthening as well during that period from Asia. Don't just, don't get sort of fooled by the headlines that, oh, the US Gulf is weakening. Even the U.S. Gulf is starting to re-strengthen again. It's a much healthier market to have the natural order of events, which is LR2s, the highest rate, MR second, and Handys underneath that. We're going to see some relative weakness in the Handys, most probably going forward, partly because, you know, the heating season is ending. We're moving into summer. The Handys, those Handys that are trading dirty are likely to be trading on a relatively weaker rate than those Handys that are trading in clean. Really, that's what I'd like to say to open up with. I'm sure you have many, many questions, and so I'd like to open up for questions. Thank you once again. Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Greg Lewis with BTIG. Your line is now open. Yeah. Thank you. Thank you, and good morning, everybody, and thanks for taking my question. You know, I did wanna talk a little bit about the market, but before that, I did wanna kinda ask about, I guess it was about a month ago, you did sell off another couple vessels. You know, just kinda curious, any color you can give around that. Clearly, asset values have been rising, but just kind of if you could talk a little about how you're thinking about, you know, the fleet management of your assets, kinda how you're thinking about that, you know, given where we are today. Thanks for the question. I think, as we stated, we're done with the sales. The market has moved quickly, whether the fundamentals were pointing in the direction in which we are now, this has happened quicker than we expected, triggered maybe by the geopolitical aspects that we are experiencing. However, as you know, selling a ship doesn't happen overnight. The process of selling a number of vessels started months ago and sort of concluded with the last one vessel that you're probably referring to, Greg, at a time where, you know, we decided to proceed and go on with that transaction because it was the right thing to do, and the discussions were already well advanced in order for us to withdraw from it. We basically executed on what the view or the vision was, selling one more, selling one less, didn't change a whole lot from a balance sheet perspective, but we decided to carry on and now stop and look at the incredible cash flows that are coming in. As we said, should they be sustained, which we expect them to be, then go on to the other discussion, which is how to return capital to shareholders. I think also, Greg. Okay. Just Greg, one more thing I'd like to add to what Emanuele is saying is that it's a case of accelerating that position where we know we're really strong. Accelerating that position to where we got to now. By adding those two ships and that ability to drop the debt down by that much. You kind of clear the watershed line just a little bit clearer. You can just totally focus, as Emanuele says, on one thing, driving the company and driving the shareholder value. Okay. No, that's great to hear. You know, I did want to talk a little bit about the market, realizing that it's fluid and it's kind of, you know, evolving on a daily basis. You know, if you could provide a little bit of color, a little more color around, you know, what is happening in the LR2s. I mean, like, you know, the recent forward leading edge scrubber rates for LR2s are, you know, it seems like they're the highest they've been in quite some time. Realizing it's never just one thing, but if you talk a little bit about that strength in the LR2 market, as James alluded to on the call at the start of the year, they were kinda lagging MRs. Sure. Well, I think the first thing is that, you know, Lars is really busy, and he's too busy to be on this call. Normally, it'd be very important for us to have him on the call. He's out in Asia trying to make sure he's right on top of that position and this new change that we're having in the LR2 market. It really is very, very strong. You know, we've had fixes just in this last week. I mean, it strengthened into the end of last week, and has now just moved up virtually every single day. We still have a wide disparity. We have a market, you know, that's giving you returns anywhere between 25 and 75. It will start to spill into the different parts as we go through this week and then find its level, which is almost certainly gonna be higher again next week. The MRs. Sorry, Emanuele. No, no. Robert, I was just echoing what you were saying. I think that the market has started pumping on all cylinders, really, in the US Gulf on the MR side. This has then triggered an interest in vessels that were located in the Mediterranean and in Northern Europe to actually look at repositioning themselves in the US Gulf. Of course, as you would expect, this has actually raised the European market, let's call it, and then adjusted with the influx of vessels from Europe into the US Gulf, adjusted the US Gulf market downwards, and raised the European market. We balance things a little bit. When I say downwards, I mean, there are still, I mean, MRs are still fixing at extremely healthy levels. Most of the time, TCEs numbers that are starting with a three in front. At the same time, what was lagging behind was the Middle East, the long runs between the Middle East and Asia. The Arabian Gulf and Japan or Arabian Gulf and Singapore. In conjunction with that were the Southeast Asia to Australia runs that were not kicking in or have lagged a little bit behind. As Robert has mentioned, this has actually been a constant trigger or a daily increase in the last 10 days, where you've seen that the structural, more industrial demand for LR2s has come in and suddenly the increase has been extremely apparent and felt. This has not only come through a Middle East to Asia trade, but also actually a lot of the US West Coast imports. From Asia into California, for instance, we've seen a lot of runs going that way, which is quite symptomatic when MRs or LRs are going from Asia into the West Coast rather than coming back to pick up cargo in the Middle East, taking tonnage out for 50 days really. This creates the opening or the balance that we need to see in the increase in the Middle East. That has been a little bit the dynamic. A lot of California runs, Australia, New Zealand as well, have played a big role, and this has helped a lot lifting what seems to be a sustainable upward trend. I mean. Okay. As Emanuele's been saying, the latest MR fix to this is what was lifted, subjects were lifted this morning, which was from North Asia to Los Angeles. As Emanuele pointed out, it's a very long route. It's on MR at $72,000 a day. Now, you know, that's why it's very, very difficult for us to guess ourselves, you know, what cash flows are. All we know is we are in a strong market, and it's hard to see the dynamics that would stop this market from being generally firm. You may not have market averages of 72, but there's not much there that we see changing the dynamic. We don't see the Russia-Ukraine situation changing very much in the next few months. We are coming into the gasoline season with inventories in diesel and gasoline. They're just in a mess. Yeah. No, absolutely. Definitely a good time to be a product tanker owner. Hey, guys, thanks for the call there as always. Thank you. Have a great rest of the day. Thank you. Our next question comes from Ken Hoexter with Bank of America. Your line is open. Hey, great. Good morning. Robert, I just want to understand there, we're supposed to take what $72,000 and put that in our MRs for our model now? Just, you know- No. I said. Let me stick on that. I said no. I mean, you can take. You can put 25. As we suggested, put 25,000 in the model and the model is great, right? Um, so- Give us an easy hurdle, Ken. Easy hurdle. Nice. Walk me through this part, right? We've got excited over time that rates are finally here, and you're on the cusp, and you've kinda walked us through, hey, things are improving. What is it in three months that we come back and you know, I guess either what goes wrong from here or what's the postmortem that you come back and say, "Oh, we should have seen that?" You know, what, I mean, I've heard James's story, right? In terms of we don't have much of an order book for a while, you know, things are looking good. What is it that you think can go wrong from here? You know, that you're more confident that this is finally that trigger point. First of all, from your base position. You know, a market that simply just supports that the stock should be trading, you know, toward its NAV toward the mid-30s. It's quite difficult unless you see some really weird event that probably no one has thought to have happened or some crazy escalation in geopolitical events. It's really hard because that scenario can sustain quite a large drop in demand or something. What could go wrong? I don't know. Perhaps people aren't allowed to use their cars in the United States or Europe except on odd days or they're not allowed to fly or go on holiday. Something has to happen to jolt the headline demand so much. It doesn't matter that the headline demand comes off a little bit because everyone was using way more product, even with our product demand increasing than they were before, hence running down inventories. What you've got here is a real genuine change in the ton-mile situation. That coming at the same time as the long-term fundamentals of refinery change, where the refineries are opening up, where the refineries are closing. That base level to get to, you know, trading at 20-25 thousand a day with a balance sheet that's got, you know, $400-$600 million of cash sitting on it to not trade towards the NAV, it's pretty hard to see. We have to take, you know, my months after that. Every month it gets safer. I mean, the leverage is very high off this. I mean, it's nearly $40 million for every $10,000 improvement. You get safer and safer literally every week that you're going along. The answer is I can't think of anything except something extraordinary that would take down virtually every single stock that there is in the world for that to happen. Let's go to a different subject, which then is, you know, I like Greg's question on the asset sale because, you know, Emanuele saying, "Okay, we're done." That, you know, it certainly showed your NAV, you know, capabilities to the market, right? Yeah. When you're selling assets at the market level. Maybe the issue in terms of the stock then, I don't know, do you ever think of M&A like you did with your prior firm in terms of you gaining scale or recognizing it for bringing investors back in to be able to get that increased liquidity? What's your thought within the sector? Are there discussions at all? I think. you're just saying, "Hey, we were finally at the point of making money. No. We're at the point of making money, man. We got the newest fleet there is out there. We've got the largest fleet there is out there. We're number one in all the three remaining categories we're in right now. The Handys, the MRs, and the LR2s. We have no reason for information or customer service to acquire more assets or buy another company. Every purchase of any other company would create an inferior fleet profile. Buying one or two ships. There's really no point. It's not even being discussed. Okay. Well, great. I know. I appreciate the detailed walkthrough. I think that's the other thing. It does bring up another point that we haven't really mentioned yet, which I think is good, is that that's the beauty of where we are now. That's what's making it easier to manage, more predictable, is we don't have the CapEx. We have no new buildings on order. We've done our scrubbers, and we have very little capital expense out there for the maintenance because the fleet is so new and we've done so many dry dockings already in preparation. No, agree. It's just sitting and waiting for the rate inflection, which, you know, you're grabbing a hold of. I think as you partly started with, you know, we've disappointed a lot of people in, you know, fits and starts over the years, and none more so frankly than ourselves. I mean, we are vested quite heavily as insiders, as management in the success through the stock of this company, as is the board. We are seeing you know, we would like payback this time, too. Yep. Thanks, Rob. Appreciate the time. Thank you. Our next question comes from Ben Nolan with Stifel. Your line is open. Yeah. I've got a couple. I'll start maybe on a little bit of a macro side. I think, James, you'd mentioned that you expect at some point that people are going to be ordering some more product tankers. I appreciate that that might be a very sort of long-sighted, long view type profile. When I look at where current prices are, where current new building prices are versus existing assets, you know, you can buy a brand-new ship in the water for less than it would cost you to order something and get it two and a half years from now. I can't think of any reason in the world why anybody would be ordering a product tanker right now unless the secondhand values come up materially or the new building prices come down materially, which doesn't seem like it's very likely. Am I off on that, or how do you think about that dynamic? No, I think you're right on that. I think you're right on that, Ben. The only thing I would add is you could see, for example, certain owners look to order vessels with dual-fuel technology and long-term time charters, similar to what INSW has done. That might make sense as you try to navigate, you know, what the next fuel will be. That's the only caveat, but I do agree with you. Well, just to sort of follow on to that quickly. Sure. Are you seeing, you know, I guess there's been a few of those on the Aframax or the LR2 side, but. Is there an appetite from charterers to do that for, let's say, a Handy or an MR to go? It just seems like it's being done on bigger ships, but it's much more of a reach for smaller ships. I'd say most of the interest so far from charterers has really been for vessels on the water in the next few years here because they, like us, think that, you know, maybe this inflection point now will lead to this, you know, this longer term extended tanker cycle recovery given the supply-demand fundamentals. We haven't. It doesn't mean they haven't reached out to other people, but as you point out, it would make more sense on an Aframax. An MR with dual fuel, you know, if it was dual fuel LNG, it's hard to figure out where you would load LNG bunkers for an MR in Latin America, Africa, you know, certain parts of Asia. I think, you know, that's one of the challenges we see, you know, even for our own fleet in terms of meeting the new fuel types. Right. Okay. For my follow-up, just switch gears. You know, you talk about the market being a lot better. You now have a lot of liquidity, which is great, and have been able to monetize some assets. You know, a few times now, there's been part of the conversation, you know, looking to return capital to shareholders. I can't help but think, I mean, we just came through a pretty hard time here where it became somewhat necessary to sell assets to maintain liquidity. Is it maybe not unreasonable to think that the better thing to do is to just spend some time and serious capital to deliver the balance sheet and just make sure that you're never in a place that could happen again? I think that's exactly right, Ben. Ben, I think that's correct. Remember, we've caveated everything with, you know, sustained superior earnings. You know, you're not sitting there saying, "Okay, you know, at $17 a day, you're gonna buy a load of stock." You are sitting there saying, you know, at superior earnings, you'll have—you're gonna have room to pay down a reasonable amount of extra debt along with amortization, as well as, you know, take advantage at points along the way to buy back stock. If you break into a sustained period of really crazy earnings, then obviously that's going to determine it. What's going to determine it is the actual rate levels you're going to get. I mean, we've already, you know, beyond what we've. We're already. We haven't even got paid for what we've already guided. April has been the first 33%. We're already the fixtures we've done in all our categories this week have been higher than the average that we actually used for the guidance because the guidance we stopped after, you know, Friday's fixture. It's not going to be a hell for leather, okay, let's go. It's exactly going to prioritize making the quality of the investment better, 90% safer, more sustainable, as it were, you know, responsibly taking advantage of what is an enormous spread in NAV. Yeah. No, I mean, I get you. Although, again, it's an unpredictable market, right? It seems like- Of course. Better safe than sorry. I agree that there becomes a point where, if you remember, your assets themselves are liquid. You know, if you had something that was in the market that was gonna suddenly some big event that was gonna take down your confidence in the long-term fundamentals for some reason that was clearly there, you can. Doesn't mean that you can't change your mind then, and you can sell two or three ships. Sure. All right. Sounds good. I appreciate it. Bye. Thanks. Thanks. Thank you. Our next question comes from Magnus Fyhr with H.C. Wainwright & Co. Your line is open. Yeah. Thank you for taking my question. Just, you know, most of my question's been answered, but, you know, kind of following up on Ken's question about the risk going forward. I mean, you're painting a very strong demand picture, limited supply growth going forward, also that the ton-mile demand should offset reduced volumes. Do you think the biggest risk is that the refineries can't supply or that the volumes will offset the ton-mile? I mean, where's the additional supply from the refineries coming from, given that they're already running at pretty high levels? Magnus, you're correct, not at least in H1, but certainly in H2, we're looking at a very tight refined product market. We do expect refineries to increase, you know, capacity two to three million barrels a day, and that adjusts for a loss in Russian production. We do expect increases out of Asia, out of the Middle East, which have been in maintenance. You've seen them come off maintenance. That's why you've seen also another factor as to why the LR2s have improved. We could have a, and are likely to have a very tight market. That being said, most of this incremental supply is going to need to go to places with deficits, so it should benefit product tankers. I would say a super high oil price is a concern for us. As we get through this year, there's towards the end of the year and through next year, about one million or so barrels of refining capacity coming online in the Middle East, which is fantastic and much needed in the market. You might have a different picture in Russia at that point. I do think at least for H2, things could be extremely tight but would benefit product tankers. Then next year, I think the refining system will figure out a way to make it a little bit less tight. All right. Thank you for that answer. Just on the, I mean, rates have picked up quite a bit. What are the conversations you're having now with some of the charters as far as securing tonnage and given that it looks like the rates are gonna stay very high here? Is there an appetite from your side or, I mean, more so from the other side to secure tonnage? Just curious to see if there's any conversation of longer term charters here. We're starting to see that. Thanks, Magnus, for the question. We're starting to see that, you know, increasing quite substantially and what was the interest for 12 months period has now shifted to actually, started to shift into the 24- to 36 months. So, you know, these are conversations that usually or signals that usually show, the durable view of, oil companies and oil traders. So we expect actually to see, some action in the long term fixing, going forward in the product tanker space. You know, over the summer, for sure, we're gonna see that, end users are gonna start covering their books for, I would say, probably 36 months ahead, or at least part of their books for 36 months ahead. I wouldn't be surprised if, you know, we will see a number of these fixtures going forward. From your point. I'm not referring necessarily to spotting your tankers only. I'm saying in the product tanker space. Right. From your point of view, you know, would you prefer to stay at the spot or, I mean, is there a preference in the duration of the charter? I mean, a 12-month charter doesn't really do much. You know, how do you look at that? I think there is always a magic number which we're not gonna disclose here because it would not help in negotiations. Probably, you know, a minimum of 36 months would be required to attract our attention, and we're getting there from on demand side, as I just discussed. You know, yes, you know, when you start seeing those magic numbers being mentioned and the period of 36+ months, I think that it's wise to, you know, start looking at covering a portion of the fleet. By the way, for the first three, four, five fixtures, we would hope to have been too conservative and fixed at few numbers, right? Because it would mean that the season is coming as strongly than expected. Yeah. I don't know if Robert has anything to add to this, but that would be my view. All right. Thank you, Emanuele. I'm just- Congrats on the good quarter. Okay. Go ahead, Robert. I'm just waiting to Emanuele to watch the discussion when one of the chartering guys is discussing with you to take a ship off a high rate and put it on a lower rate charter. All right. Thank you, Robert. Thank you. Our next question comes from Liam Burke with B. Riley. Your line is open. Yes. Thank you. You have paid a dividend pretty consistently through the cycle, even through, you know, the last six quarters, which have been rough. You're very clear about the $250 million repurchase authorization. Is there any thought at, with the business getting stronger, that the dividend through the cycle could come up from its current levels? Maybe. I'll take a shot at it, Liam. I think that with what we were discussing with Ben or what Ben has stated, I think that is a little premature to look at this now. You know, in the cycle, for sure. If it's specifically we are looking at the tanker cycle, which we think we have ahead of us, for sure, it's part of the capital allocation of the company and returning capital to shareholders. We will look at the dividend adjustment upward. This is not something that we are discussing at present for the reason that we've touched upon in terms of we need to see this market to be sustainable. We expect it to be sustainable at this stage, but we need to have a few months of sustainable markets before we look into increasing or upping the dividends. Yeah. That's very clear. Also just right now, it's not even being thought of because of the gap between the NAV and the stock prices. It's just too massive. Fair enough. In the previous company I was in, the last cycle, we had the same situation. What happened was, at this point, we did not increase the dividend. At a later point when we were buying back stock, but even still buying back stock, but the gap to NAV had started to close, we then increased the dividend by a minimum of the proportion of the stock we had bought back because you weren't then increasing your cost. Then you added a little bit for the improvement in the market. It looks- Uh- It looks, as Emanuele is pointing out, that same case would start to apply. Great. Thank you. This is probably a James question, but you're getting the full benefit, the full economics of your scrubber investment with the current spreads here. In some of the ports, are you having difficulty getting high sulfur fuel? Cam, would you like to take that one actually? Sure. No, we're not. Great. Thank you. No problem, William. Thank you. Our next question comes from Chris Robertson with Jefferies. Your line is now open. Hey, guys. Thanks for taking my questions here. Robert, you had mentioned Genco and Star Bulk. I know that you've spent some time, you know, talking about the dividend, that it'd be premature to increase. I'm fully clear on that. Priority seems to be balance sheet strengthening and then maybe some opportunistic repurchases. You did mention Genco and Star Bulk early on. You know, they were able to come up with a dividend strategy that's a little bit more formulaic and articulated. Is that something that Scorpio would look at in the future in terms of a dividend policy versus kind of more ad hoc increases? That's. I mean, we've already said it's a long time in the future. The actual dividend increase or dividend policy is not being discussed at all right now. What could happen in the future? Maybe, I don't know. We'll get to that in the future. Okay, fair enough. James, this is a question for you. You had highlighted that the fleet TCE is currently around 28,000 a day. Can you talk about and contrast that with the current, kinda average fleet cash break even and OpEx levels? Sure. The average fleet all-in cash breakeven is $17,000, including debt. If you were to do it without debt, it'd be around $11,000 per day. Well above- All right. Well above that. Definitely. I guess last question on our end. When looking at the vessels that are on sale leaseback, how many of those have purchase options or obligations? How are you thinking about fleet management in the context of reacquiring these vessels versus looking elsewhere in the secondhand market? We wouldn't be looking to buy any ships right now. We're constantly trying to say we're not looking at buying companies, we're not looking at buying ships, we're not looking to order ships. We're looking at as low as CapEx as we can maintain so that we have as much cash flow for debt repayment and, you know, and stock purchases. That's the way to go as possible. Buying other people's ships is off the table. What we're going to do, though, is there are, as you pointed out quite correctly, purchase options in some of the leases or all of the leases, really. But some of the leases are more expensive than others. One thing we're going to be able to do anyway is to make our financing more efficient by exercising some of those purchase options and replacing them with you know conventional bank debt. We'll be able to take benefits there because we can afford to pay less leverage now to those banks, so therefore we should be getting less spreads and better terms. Yeah, that's very clear. Start to lower our break-even. Got it. Thank you, Robert. Thank you. Thank you. Our next question comes from, Frode Morkedal with Clarksons Securities. Your line is open. Thank you for taking my question. I had one market question. If you look at the Russian-owned vessels, they are apparently increasingly being sanctioned. You know, this should be tightening vessel supply. The question is really, can you see the effect today, or is that something that is going to happen, or has it already happened in the market? In products or just generally? Yeah, for products, of course. You know, the James, you wanna go on that one? The Russian-owned. Yeah, sure. Emanuele, you wanna take it or you want me to go? No, it's fine. I'll start. First of all, specifically on what you mentioned, Frode, and thanks for the question. You know, the product tanker fleet per se has not been affected a great deal on the sanctions simply because there are not that many Russian product tankers out there. So this is more affecting crude starting from the Aframaxes upwards. The impact in the market for those sanctioned vessels has already trickled down because, of course, there is an immediate effect on it. Whether this is going to impact the crude market more going forward, yeah, of course, that's the expectation. You know, there are a whole number of geopolitical or political aspects around it that are difficult to read at this point. I wouldn't know how to elaborate further rather than on a very simplistic view. Of course, if you take Aframaxes and Suezmaxes off the market, you know, this will benefit the crude tanker space. Yeah, sure. I think it also should affect the product market. At least if I look at the statistics, there are around 2% of the product fleet above 25,000 deadweight. That is directly owned by Russian companies. Anyway, it seems to be something that is going to happen and probably not yet have. Yeah, I think the important thing, Frode, is, look, you're correct on the margin is going to be helpful anyway. Combine that with the lack of deliveries and the removal of product tankers from the premium trades once they get to the 15, along with, ironically, we're starting to get scrapping in product. All this is just creating a very, you know, almost no growth in supply scenario going forward at the moment. As you say, there'll be times when maybe it'll be negative too. I think that- Yeah. Your point in general, supply of ships is probably the most underlooked fundamental that's there, is lack of supply and lack of ability to replace in a short term. Exactly. Thank you. As far as I know, it's only two MRs for delivery in 2024, and only six LR2s. I mean, it's very few. Thank you. That's all I had. Thank you. Thank you, Frode. This concludes the Q&A portion. I'd like to hand the conference back over to Mr. Lauro for any closing remarks. No particular remarks. Thanks very much for being with us, today, and look forward to speaking to you all in the next days and months. Thanks a lot. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Everyone, have a wonderful day.