Hello, and welcome to the Scorpio Tankers Inc. third quarter 2023 conference call. I would now like to turn the call over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir. Thank you for joining us today. Welcome to the Scorpio Tankers third quarter 2023 earnings conference call. On the call with me today are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Chris Avella, Chief Financial Officer; Sean Hager, Head of U.S. Chartering. Earlier today, we issued our third quarter earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, November 9, 2023, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release, as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com and sec.gov. All participants are advised that the audio of this conference call is being broadcast live on the Internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpiotankers.com on the Investor Relations page under Reports and Presentation. 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. If you have an additional question, please rejoin the queue. Now, I'd like to introduce our Chief Executive Officer, Emanuele Lauro. Thank you, James, and thanks, everybody, for joining us today. We are pleased to report another quarter of strong financial results. In the third quarter, the company generated $200 million in Adjusted EBITDA, and despite the conclusion of summer driving season and elevated refinery maintenance, rate experienced a steady and sequential increase throughout the quarter. Today, this increase continues and is driven by the same factors which have led to an elevated rate environment for the last six quarters. These factors are strong global demand for refined products, dislocated refinery capacity, and a constrained maritime supply. The cash flows have been significant and transformative for the company. The quality of Scorpio Tankers as an investment is improving each day. Deleveraging and returning capital to shareholders is our primary focus. Our balance sheet continues to improve, and the company has today a net debt of $1.3 billion. We have reduced our sale-leaseback financing from $2.3 billion in 2022 to $730 million, as of today. In the fourth quarter, we expect to repay a further $460 million in lease financings, of which $196 million have already been repaid. We have more than $800 million in liquidity, consisting of $520 million in unrestricted cash and nearly $300 million available under our revolving credit facility. In the third quarter, we repurchased close to $80 million of company shares. Year to date, we have returned over $530 million to shareholders. Of these, $490 million in share repurchases and $40 million in dividends. Today, we have announced the renewal of our securities repurchase program for up to $250 million, and we have increased our quarterly dividend from $0.25 to $0.35 per share. Looking forward, we expect low global inventories, robust demand, and limited fleet growth to support strong product tanker fundamentals. With this, I finish with my remarks, and I would like to turn the call to Robert. Thank you. Hi. Thank you, Emanuele. Good morning, everybody. It's really a fantastic start to the quarter. We're really happy with the way that the market has been shaping up. It's a really great springboard for the potential substantial rate improvement when the winter season kicks off in three to four weeks' time, and that's exactly what we expect. Rates have steadily improved since early July. Neither the OPEC cuts nor the weaker season have halted this. Headline demand for products has improved steadily as well. World demand for product crude is expected to continue to grow further, and this is a result of post-COVID economic activity, low inventories, and is not, at the moment, as a result of fear, for example, in the Middle East, or war escalation. This is just pure economic demand and activity. Present spot markets in all our categories, according to Clarksons and indeed our own trading desks, are above the guidance we have given today for the start of fourth quarter. We're truly very optimistic for the developments through the next months as we enter this stronger season. This is a very consistent, strong, and broad rate increase. That's very important to know. July has been better than June, August better than July, September better than August, October better than September, and November better than October. When it comes to the stronger season coming, I am extremely confident that once again, winter will come to the Northern Hemisphere. I base this confidence primarily on historical precedents, but there is now quite a lot of data going back a few years showing that winter has come every year. Furthermore, the scientific community, weather forecasts, Druid priests, solstice worshipers, and young children are in general agreement with the scientific community that winter will come, therefore increasing the rate of demand growth. There is much less certainty of product ton-mile decline as a result of recession. As the weather turns, this fear of demand slowdown will, we believe, be but a candle in the winter wind. Just for those people who are new to the product tanker market or new to STNG, or those of you who may have forgotten, as it's nearly a year ago when the start of winter was nearly a year ago, winter is good. It's really good for the product market and product rates. Thank you very much again for all of your support, and I'll turn it over to James. Thank you, Robert. Slide seven, please. As Emanuele said, cash flows from a strong rate environment have been significant and transformative to the company. Over the last seven quarters, we've generated $2.5 billion in EBITDA, reduced outstanding debt by $1.3 billion, and returned $710 million on share repurchases and dividends. Slide eight, please. We continue to reduce our expensive lease financing and have given notice to repurchase 76 vessels, of which 56 have been repurchased as of today. After repurchasing, these vessels are either encumbered or refinanced at lower interest margins in new facilities. Slide nine, please. While the year-to-date debt repayment has been slightly lower due to timing of lease repurchases, in the fourth quarter, we will repay $527 million in outstanding debt. As you can see from the graph on the left, our estimated December 31st debt balance is expected to be $1.55 billion. On the right, we have refinanced a significant amount of lease financing, taking it down from $2.2 billion to $739 million today. Slide 10, please. Since December 2021, our net debt has improved by $1.6 billion, and today is at $1.3 billion. With no new buildings on order, we have minimal CapEx. Today, we have $521 million in unrestricted cash and $280 million available under our revolver. The company is well positioned. Slide 11, please. The company has significant operating leverage. In Q3 so far, including time charters, the fleet is averaging close to $33,000 per day. At $30,000 per day, the company generates almost $800 million in free cash flow per year, and at $40,000, almost $1.2 billion. This would equate to 14 and 22 dollars per share in free cash flow, a 26% or 41% free cash flow yield. Slide 13, please. For the last six quarters, rates have defied seasonality, refinery maintenance, and other short-term headwinds. As refinery maintenance concludes this month, we expect fundamentals and rates to improve. Over the last week, we have already started to see it. Today, spot LR2 rates are at $42,000 per day, and MRs at $34,000 per day. Global inventories remain extremely low, requiring an increase in product exports for more immediate consumption. In the U.S. and in the rest of the world, distillate inventories are well below their five-year average, which could create a very tight market as heating oil and jet fuel demand increase in Q4 and Q1. Slide 14, please. Year-over-year, we expect fourth quarter demand for refined products to be 2.6 million barrels a day higher than last year, and next year, on average, we expect demand to be 1.3 million barrels above 2023. The increase in demand is leading to higher seaborne exports. Year to date, CPP exports have averaged 1.4 million barrels a day above 2019 levels, and in September, averaged 1.8 million barrels. Given low global inventories, increased consumption will continue to be met through imports, with product tankers reallocating barrels around the world. Not only have exports increased, but barrels are traveling longer distances. Slide 15, please. While demand is above pre-COVID levels, refining capacity is lower and more dislocated. The impact of new export-oriented refineries coming online has led to an increase in exports and ton- miles. Since 2017, Middle East product exports have increased 30%, while ton- miles have increased 78%. Refinery closures have also created the need to replace lost production in places like Australia, where product imports have increased 48% since closing two large refineries in 2020. All of these changes are driving an increase in ton- miles. As ton- mile demand increases, vessel capacity is reduced and supply tightens. Slide 16, please. It's not just about refining capacity, closing and opening. In each region, there are different refinery configurations, domestic needs, and regulatory requirements. Product tankers are the conduit for rebalancing surplus naphtha in the Middle East to Asia or surplus gasoline from Europe to Asia. In many cases, some of the largest product exporters are also the largest importers, like the U.S., UAE, and South Korea. This dynamic creates increased triangulation of the fleet, which leads to higher utilization and rates. We expect this to continue. Slide 17, please. Russian exports of refined products have declined to more normalized levels of around 1.4 million barrels a day. The gray fleet, or vessels that are servicing Russia, currently stands at 453 vessels. Many of these vessels, which have moved into this trade, are 13 years and older and will likely not return to the premium trades given their age and trading history. This has and will continue to benefit the supply of vessels servicing non-sanctioned trade. Slide 18, please. Today, the order book is 10% of the current fleet, while the average age of the product tanker fleet is close to 13 years old. The strong spot market, healthy long-term time charter rates, constructive demand outlook, and aging fleet has led to more new building orders. But there are constraints to ordering. New builds are expensive, there are long lead times for delivery and uncertainty about propulsion systems to satisfy future environmental and regulation. That said, without new building orders this year, the fleet was expected to shrink over the next few years. Starting next year, 8 million deadweight tons per year of product tankers will turn 20 each year, the equivalent of 160 MRs. By 2026, 9.3% of the fleet will be 20 years and older. The age of the fleet and upcoming environmental regulations will have a material impact on the fleet going forward. Slide 19, please. Next year's fleet growth is expected to be 0.5%, the lowest fleet growth since 2000. Seaborne exports and ton- mile demand are expected to increase 3.5% and 12.1% this year, and 3.6% and 6.3% next year, vastly outpacing supply. Using minimal scrapping assumptions, on average, the fleet will grow less than 3% and 2% in 2025 and 2026, and less than 2% per year using higher scrapping assumption. In addition, one- and three-year charter rates remain at high levels, evidence that our customers' outlook is one of increasing exports and ton- miles against the constrained supply curve. The confluence of factors in today's market are constructive individually, historically low inventories, increasing demand, exports and ton- miles, dislocations in the refining system, rerouting of global flows, limited fleet growth and environmental regulation. Collectively, they are unprecedented. With that, I would like to turn it over to Q&A. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before passing the keys. Before pressing the keys. To withdraw your question, please press star, then two. Our first question comes from Jon Chappell with Evercore ISI. Please go ahead. Good morning. James, if I could pick up where you left off, a little bit on the winter preparations and especially the inventories. I think a lot of people forget that the sanctions on Russian diesel didn't go into effect until February fifth of this year, so they effectively had access. Europe effectively had access to Russian diesel all through last winter, which was warm. It feels like the inventories are just as low entering this winter, don't have access to Russia, and I'm not sure anyone can underwrite back-to-back warmer than normal winter. So have you started to see any sense of urgency from Europe as a continent as a whole to prepare for winter? Or is there maybe a little bit of lax expectations that have the potential to make the market incredibly tight if there's an early cold snap this winter? James, I'll answer that if you don't mind. So, John, thank you. But first of all, congratulations from all of us at Scorpio on your award for being the number one shipping analyst. Well done on that. Thank you. So- Thank you. I think if we look generally across the, we sort of think there's quite a lot of complacency, full stop. Whether it's Europe, whether it's, you know, the rest of the world, there's sort of this, you know, despite the low entry inventories, despite the, you know, it doesn't matter whether you really believe in recession or, or not, everyone is still saying that oil and product tanker demand is going to grow. It's just an argument as to what the rate of growth will be. And inventories, as you point out, across the whole space are low. And we're sensing a, you know, just a everyone's pretty relaxed right now. Now, we think what will happen is the, you know, that they're acting as if it's like any other winter. What normally happens is that the first cold swell comes, and then people wake up and start to do things. So they're denying the risk they have in their inventories, the risk that's going on in the world, whether it's Russia, Ukraine, whether it's, you know, Israel, Palestine, or the risk of that spreading. But I think it will come. Everything comes home to roost the moment the weather turns cold. Okay. So in that sense- Thank you for that. That's why we're very confident. We're very confident there's nothing in this market. This market has just steadily got stronger and stronger and stronger without any kind of action or preemptive moves to ship product. Got it. That makes complete sense. Just for my second one, shifting gears to Scorpio specifically, you have a lot of debt repayment coming up in the next couple of months. As we think about target leverage, I know it's a number that you haven't tried to identify in the past, but just watching the buyback activity accelerate, looking at the dividend moving up again this quarter, maybe unexpectedly, do you feel that what you have line of sight on over the next quarter or two puts you in a comfortable enough leverage position where maybe the focus shifts a little bit more away from deleveraging to capital return at this point in the cycle? Yeah, I think so. And I think that, you know, we had, we had said previously that once we'd crossed September and, you know, in this earnings call, we, we would elaborate a little bit more on leverage targets, et cetera. So I think our thinking has developed in the following way, is we'd like to get the leverage of the company pretty much down to around scrap value of the fleet. At that point, you know, that's around $800, you know, $850 million-$900 million. And at that point, I think it's inarguable that the company have-- would have very low leverage and be in a really safe position. Whatever it does at that point, whether it, you know, whether it's buying stock, whether it's increasing dividends, et cetera, et cetera, it would be really playing with our shareholders' money, our money. We're not risking a bank loan, et cetera. The other thing is the tremendous benefits going forward if we were to get there, because at these interest rates, you know, if we were to halve our interest and principal repayments, our breakevens would, would collapse. And we would end up being, you know, not only have the newest product fleet there is out there, but we'd always have also have the lowest operating cash. And I think that operating cash breakeven, and I think that's great because now we're getting even more for, for us as shareholders going through. I think that's pretty, you know, achievable with very moderate positions. I mean, it's not too far to go to you know drop down another $400 million by March 31st. You know, you could do that by March 31st. And, you know, I think that we've already got $25 million. We're selling a ship. We'll get net $25 million off that, so that's a $375 million to go. And, you know, we haven't certainly excluded selling, you know, two or three other ships. So between earning something like $35,000-$40,000 a day, so the market doesn't even have to improve. If you ran your model and said, well, the market's gonna continue just as it is, that winter doesn't come, and we carry on, and we sell a couple of assets, we'll be there by that March 31st. Now, that can come earlier, depending on if and what we sold and if rates do what we think they will do, which would be to accelerate higher. Yeah, that all makes a lot of sense. Yeah, big time. Thank you, Robert. Thank you. Our next question comes from Omar Nokta with Jefferies. Please go ahead. Thank you. Hey, guys. Good morning, good afternoon. Yeah, just as a follow-up to that line of discussion regarding you know, the debt reduction. It looks like that's obviously top of mind here, and perhaps the buyback takes a bit of a backseat. Robert, you mentioned perhaps $850-$900 of leverage at the company. Just to frame that, just so I understand, and it sounds just from your commentary with that March 31st target, is that a net debt target or is that just total debt outstanding to get down to that $850? That, that's a net debt target. Okay. And then, It's a net debt because I think that we would all agree that if that net debt is backed by the scrap value of a fleet that is still relatively new, that that's... You know, we're pretty damn conservative at that point. And we also, with the debt facilities we're putting in, you know, that would be at a very efficient rate. And we would- Yeah. ... still have, that would be well within our, our revolving credit line. So you would—that would also imply, you know, extra, you know, liquidity, too. So you're not— It's a net debt target with a company that's got a lot of liquidity. Yeah. And then, Robert, you mentioned the breakevens come down. Are you able to venture sort of any kind of... You know, assuming you put down $400 million-$500 million from here, what kind of effect that will have on the breakeven on a per-day basis? Well, on the interest, it's a... You know, the interest itself is going to come down, you know, into a level. But I would think you'd be dropping the net cash breakeven between the debt, between principal and interest, you know, somewhere in the region of, you know, $4,000-$4,500 a day. Yeah, that, that's significant. Huge. Yeah. So I guess maybe just one final one. You know, just in terms of once you finally get there, so let's say it's March 31st or, you know, perhaps in the spring, it definitely feels like it's sooner, much sooner rather than later. You know, what happens once you get to that point? How do we think of, you know, the strategy of deploying capital? Is it buybacks? Is it acquisitions? Is... You know, you've got obviously the share price looks very attractively priced relative to NAV. Just give me a sense- Right. ... if you don't mind, kind of what happens when you get to that point? I don't think... Look, we're not interested in speculative new buildings. We don't need to buy any ships to earn enough money. We're making considerable cash flow, considerable earnings on the fleet we have. We don't have, you know, because we don't have extraordinary maintenance, CapEx or whatever, we've done all the scrubbers that we intend to put in, et cetera. So one way or other, it's, you know, the capital is going to go to us, as shareholders at that point, and it's a pretty pointless activity to anticipate what will happen later. It's— You know, I don't even think that an NAV calculation would be relevant for a company that is, has a new fleet and very low leverage. You should be moving away from, you know. It's not a question of how do we close the NAV gap. The NAV gap is, you know, let's say, the least of our valuation worries. Of that kind of structure, we should be looking to close some form of free cash flow valuation gap, because you would expect that any multiple you want to put on free cash flow would increase as you lower or improve the actual investment itself. So we've got a lot of work to do in that regard. Yeah. Well, sounds like a very interesting setup as we get into, you know, into the next few months. Great. Thanks, Robert. I'll turn it over. Thank you. Our next question comes from Ken Hoexter with Bank of America. Please go ahead. Great. Good morning. So, Robert, first I wanted to check on where the winter is going to come. Was that a scientific poll? I just want to check on the math there. But I just wanted to understand the phenomenal rates, right? If you think about scrapping activity, still somewhat moderate, you know, what anything that drives the scrapping or demolitions going forward, just in this rate environment, maybe is anything different this cycle? Do we see them just sticking around longer? And I'm setting that up in the backdrop of a rising order book that's gone from 2%-3% now to 10%-11%. So I guess ultimately, if maybe that's the winter, that's kind of the overhang that is coming, you know, in a different kind of winter backdrop. Just want to understand your thoughts there. I think the first thing you want to do is to look at the order book in perspective of, you know, first of all, not all these orders that are, you know, LR2 are going to end up trading as LR2 or even necessarily built as LR2. The contract is the ability to build an LR2, but some may not be coded, and many are likely to go into the Aframax trade anyway. But first of all, I don't think the order book is in products as high as 10, 11, and the order book is not one year. The order book is stretched over a period of, you know, 2004, 2005, and now, you know, pretty much three quarters of 2006. So the order book is still very contained, even if it's around a 2%-3% average through that period. The exact point at which, you know, we know that, you know, James is being very conservative, talking about the number of ships that turn 20, and that's been, you know, the point of scrapping. But we also know that when these ships turn to 16, 17, that they're not able really to be competitive and trade properly in the premium clean petroleum fleet. So we think the order book is very contained at the moment, and it's going to be, because you just don't have the yard capacity. The question is whether or not owners want to do things. So that's our perspective, and that's what's creating the prospect for, you know, multiple years of a good market and the proof of people's expectation of what they're willing to pay for secondhand modern ships, which have been rising a lot in the last months, and the forward time charter book. So we're, you know, we're in pretty good shape. We haven't had a bull market like this in the last sort of 30, 40 years, where there's been so little yard capacity at this stage in the prompt in the curve. So let's flip that around too then. Are you seeing vessels maybe actively leaving and going to dirty, given the rates are- Oh, yeah. Even higher over there? Is that- Well, there's two things. They're not just if you've got an older product tanker, they're not just higher, but in certain cases there, the... You know, it's easier to trade. The other reason we're seeing that is that the whole of this Russian, what we call the Dark Fleet, the Russian trade, that, you know, people like us can't participate in. The people who-- what they've been buying, they've been buying the older ships because they don't have the same criteria to carry dirty trade or sanction trade. So it's much of the fleet that's being bought and being removed from, let's say, the international, you know, market or free market, has gone into those things. But what's-- and that drove their prices up. But what's interesting in the recent developments in the last three months is there's been a lot of activity for more purchases, more modern product tankers, as evidenced today by Torm's acquisition of their LR2 and evidenced in the last three, four months of many vessels built 12, 13, 14, 15, 16 have been changing hands because buyers in the non-Russian trade have had more confidence in securing longer time charters for two, three, four years and more confidence in the length of this stronger market, along with their inability, of course, to order new ships. So just to, I guess, for my second one, then, you mentioned kind of selling vessels. Maybe talk about your philosophy on what gets you to do that versus in this kind of market, maybe just locking those older vessels up for longer time charters. Obviously, you still have stayed on the spot exposure, so is there a thought to shift and lock in at these levels, you know, with some of the older vessels and then sell them off? Or it sounded like you have maybe thoughts on selling some in the near term. I think the older vessels is like an easier situation. You're just getting an enormous price. You're getting a record, you know, prices for these things, and your ships that you are, you know, your modern ships or whatever, don't think we have any problem there to certain customers, and you'll see us probably out of two or three time charters here. We do that fairly regularly. We like to keep a lot of spot vessels, but we're happy to keep, you know, 10% or so in the time charter market. But with the older vessels, it's great. Off you go. If the ship's already, you know, 11 years old, 12 years old, or, yeah, then fine, you're getting a great price, and you can put the money to work brilliantly in either reaching that deleverage target or, as we've been doing in before, buying stock pretty cheaply. Great, Robert. Appreciate your thoughts, as always. Congrats on a solid build up of cash. Thank you. Our next question comes from Greg Lewis with BTIG. Please go ahead. G ood afternoon, good morning, everybody, and thanks for taking my questions. You know, I guess I wanted to talk a little bit more about slide 11 and the free cash flow. You know, probably James, as we look at the, you know, I guess, the right side of the slide in cash flow generation, what is kind of, like, dry docking off-hires, is that kind of all baked in for... Are we looking at a slide for 2024 or just an illustrative slide? And if we are looking at 2024, like, what does that assume in terms of, you know, maintenance CapEx and, and, and, and just, you know, that kind of ongoing CapEx? Is there kind of a number you can talk to? Yeah. So it's just gonna be an illustrative... So it's not gonna factor in, for example, the time charters, right? Which would reduce breakevens or anything like that. It is gonna take the next four quarters of debt, but it doesn't have the off-hire in there. It is something that we could show or with the maintenance CapEx, maybe next quarter. We do put it in the press release and in the presentation on a different slide, though. Okay, yeah, absolutely. Thank you for that. And then so but Robert, is you know, you mentioned. Thank you for the Q4 guidance, as always, or, you know, and also, you know, you kinda highlighted where rates are today. And it's interesting, right? Because you're. You know, it's people talk about NAV, people talk about cash flow. I mean, just looking at where rates are right now, it looks like your cash flow yield is around 20%. And so, you know, how do you balance that free cash flow yield that the stock is trading at? And I mean, it seems like this is an attractive time to be buying back stock. Is. You know, just thinking about that, is it possible that we focus more on buying back stock as opposed to deleveraging, just given, you know, where we are right now? No, I said, look, look, we... Look, we bought $490 million worth of stock ahead, right? We said, "Great, we're gonna anticipate the market's gonna stay strong." And instead of paying down all that in debt, we said, "No, the valuation, we want to buy that stock early." So we've been very heavy in buying stock back. In the last, whatever it is, months, interest rates have risen dramatically and, you know, quite high. The risk out there, the little box of product tanker land is really... We've really got a great, great deal of confidence in. I mean, it's the fundamentals look fantastic. The market's fantastic, even before the season starts. But, you know, we'll, we'll be respectful and humble enough to understand that the big box world economics, world financial markets, geopolitical events is less certain, that there is risk out there. It's- we have no interest in driving the stock up. We've, we've been very disciplined in the way we bought stock. We're not there to buy in the top of the upper band, et cetera, et cetera. We're there to buy with great value. So the default position for us is to drive this debt down to around this net debt scrap value as fast as we can, because that's gonna permanently reduce our operating cash breakeven at any point going forward. And therefore, that's going to create better free cash flow. We should be able to get a better multiple on that free cash flow. The investment itself should have much higher quality. And, you know, but at the same time, as we've shown all the year, if Wall Street sells this thing down, dislocating it for its own reasons, whether it's fear of recession and or oil will never be used again, and the fundamentals remain intact, we'll be there to buy stock at, and create great value for our shareholders. And if we—as soon as we've accomplished what we need to accomplish, you know, then, you know, yes, we're, we're gonna—it will be, how do we return the capital to shareholders that we're generating at that point? Super helpful. Thank you very much. Thanks. Our next question comes from Frode Mørkedal with Clarkson Securities. Please go ahead. Thank you. Hi, guys. Just a quick market question for me. You know, the Panama Canal, does that have any impact on the product tankers at all? Or I guess obviously, it's the larger ships in other segments that benefit directly, but, I suppose that, you know, canal delays could impact the MR market in the U.S. Gulf and possibly the across the Atlantic, in general. What's your thought there? Sean, I spoke to you- Yeah. Sean, some of you have met him, some of you haven't. He's head of our trading for the North Americas. He's ideally based to answer this question. Yeah, thank you, and thank you for the question. It's certainly interesting times in the Panama Canal, and it's very dynamic and fluid as things are evolving, kind of every day. But, to answer your question, is there an impact in the MR space? There absolutely will be, I think. So you're seeing a reduction in the number of transits that can happen, and effectively, like, the economic impact in order to get an MR through is going up substantially starting yesterday. So in the canal, there's a reduction of water in the reservoirs that feed the lock system to move the ships through. So traditionally, you move kind of 36, 37 ships through the Panama Canal on any given day, and that's any type of asset class of ship, and that's already reduced to 24 today. You know, Panama is ending the rainy season, which is what they need to replenish those reservoirs, and October is generally the rainiest month on record historically for them. This past October has been the driest month that they've had since they've been keeping records in the Panama Canal. So the expectation is for those 24 current transit slots to continue to reduce down to a low of 18, starting February first. So what we're seeing is a couple different factors. One is like the cost to, for a charter to ship a vessel through the Panama Canal is starting to rise quite a bit as the impact of this is being digested by the marketplace. And then second, the expectation for how long you wait to go through the canal, either in ballast or laden, it is frankly a bit of a question mark and can be quite expensive to get through. So what you're looking at is ballast alternatives to get back to the next load port. Just some rough numbers. If you do like a Quintero, Chile, and you ballast to Houston, going through the Panama Canal with no delay, that's 14 days direct. And if you send that same boat down through the Magellan Strait, it's 30 days, so you got an incremental 16 days to get back into the Gulf. Or if you sent that boat to Gib to load in the Med, that'd be 26 days, or if you ballasted it transpacific, it would be 33 days. So there's obviously a lot of different factors here. There's an economic factor of where the, you know, Chile, Peru, Ecuador, West Coast Central America, and West Coast Mexico rely heavily on imports in order to stay supplied. So whether those imports come from Asia, whether they continue to come from the U.S. Gulf, you know, those type of things and how flat price plays into it, will play out over the coming days, weeks and months. But there will be an impact to the MR fleet, and the number of ships available will be less efficient than what we have today. Perfect. That's great, color. Thank you. That's it for me. Our next question comes from Liam Burke with B. Riley. Please go ahead. Yes, thank you. The E.U. is looking to enforce the Russian Price Cap. How do you expect that to affect your vessels? Sean, you want to take that? John? Whatever. Sure, I can take it. Obviously, Liam, there has been some leakage in, so far as sanctions have not been strictly enforced, so it's not a bright line between, say, our market and the dark fleet. Anything that creates a stronger fence or, or moat between the two obviously will tighten up our market because you'll have less tonnage, toggling back and forth. So we welcome stricter enforcement of sanctions and, the price cap by the E.U. Great. Thank you. And there was, during the prepared comments and during the Q&A, you talked about time chartering on the small, on typically smaller vessels. Why would you think that there is more interest by the shippers to lock in smaller vessels on longer terms? Is that a scarcity problem, or is it just something that the operators need to do based on the age of the fleet? First of all, optically it looks that way because there are just many, many more smaller vessels than the larger LR2s... many more. And secondly, the LR2 owners are, you know, the- I'm not saying they're stronger, but they're, they're just playing, you know, they're just playing harder. They're not feeling the requirement. They see a lot of potential upside here between what they can do in the product market and what they can do trading in crude. But they're probably more reluctant in the LR2 market to fix out at these levels. And there are less of them to buy. So in the product, when MRs, we've seen a lot of people buy modern ships and then turn around and fix them to 2-3 years for the cash flows on the purchase. Great. Thank you, Robert. Our next question comes from Sam Bland with J.P. Morgan. Please go ahead. Yeah. Hi, thanks for taking the question. I just have one, please. It's on slide 18, you've got this 9% of ships to be more than 20 years old by 2026. To what extent do those ships sort of fall out of the supply and demand balance as far as Scorpio is concerned, once they sort of get over that 20 years limit year? Is that almost equivalent to those ships having been scrapped or not, as far as the rate is concerned? Thank you. Yeah, I think that's a good way to put it. We've done some work looking at older vessels, and what we've seen is that a lot of the older tonnage, kind of 20 years and older, is carrying crude oil or dirty products like fuel oil, where there's not as strict of requirements around coatings and things like that. And then there's a fair bit of coastal trade, so Indonesia, India, where you've got kind of a 21-year-old product tanker that's carrying diesel from one refinery to another, and just diesel. But you're right, in many ways, those vessels are not kind of competing with the Scorpio Tankers vessel or some of our peers kind of in these premium trades. So, it's gonna be pretty significant because while we're just focusing on that 20-year mark, it's probably a little bit earlier, you know, somewhere between 15 and 17, too, that these vessels start to move out. So, on an effective basis, even with the additional orders, the fleet's probably still gonna shrink over the next few years. Have you seen any willingness... Sorry. Yeah, go ahead. Sorry, I was also gonna add, and, you know, Cameron, please, please, elaborate if you wish, is that there is just, there's a lot of cost involved, too, going through maintenance, dry dockings, more than... You know, it's not a straight line. It gets much steeper once you cross 20 years old. Yeah, just to elaborate, the amount of steel that has to be replaced on a hull that gets past its third Special Survey starts to take your dry docking and maintenance costs not linearly up, but almost parabolically up. Yeah. Have you seen any willingness by charters to look at older ships, as the rates have moved up, sort of artificially increased supply? Happy to take a stab at that one. I mean, you, you will see some charters take a look at those boats. I mean, some of it depends on the rigors of their vetting system. Sometimes it depends on, their internal policies, but they definitely become harder and harder to trade as you get to that point. So the trade efficiency of those boats goes down quite a bit. Okay. Understood. Thank you. Our next question comes from Chris Robertson with Deutsche- Oh, sorry, just one thing. I'd like to add to this whole thing, to go back to this, you know, the scrapping or the... You know, just understand that the new buildings are really spread over a large amount of time. And this, the supply side is very, very compelling. If we, if you just take your acid test, just assume something that's very, very unlikely, that there are no scrapping, zero scrapping during that period, and/or there are no removals from the product trade during that period. And still, you're going to get to a pretty good supply and demand curve. Okay, sorry. Next question, please. Our next question comes from Chris Robertson with Deutsche Bank. Please go ahead. Hey, good morning, everyone. Thanks for taking my question. Guys, I just wanted to go back to a follow-up on Omar's question around the breakevens. If you could comment where the breakeven is, maybe today or at least at the end of the quarter. And then just to confirm, that could come down by another $4,000-$4,500 per day, should you be able to deleverage down to the targets that you talked about earlier? Robert, do you want to take that one? Yeah, please, Chris. Yeah, Chris, the breakevens today, you know, probably in the $17, a little bit higher range per day. You know, we're, as Robert's been saying, we're still in the middle of this deleveraging cycle. And so we have, big amount of debt to be repaid between now and, say, the middle of the first quarter. And there's still some expensive leases on our books that we can target to bring down that number further. So, you know, right now it's a bit of a moving target, and, you know, we're working on it, but incrementally. Sure. Yeah, but it sounds like a pretty compelling inflection point for the company over the next few quarters here. So I think it is definitely an important point. It is. But what Chris is telling you is that you're looking at... What I'm saying is an end position, once it's finished. And there, the math is real simple, right? You've got—you were taking $1.3 billion worth of debt, and you're chopping that down to $500 million. And what I was—what I said was the combination between the principal and the interest. And at the same time, you're knocking out debt that is much more than what debt is coming in at. So you have two things working. So I don't really... He'll be able to give proper, you know, even better cut dates coming down to January. But you can just take the number and just reduce the actual principal by the halves, and it's not too hard to get to that, you know, approximate figure that I'm giving at the end of the process. But the most important thing is not the accuracy of it, because that's sometime in the future. There's no way you can create a model for this quarter or the start of next quarter, because I gave so many caveats to how we get to that level at around 800, 900 by the end of March next year. Right. Yeah, thanks for that, Robert. You're going to significantly drop your daily dollars per day breakeven because your debt is quite significant at the moment, and interest rates are very high with the legacy leases as well. Yeah, makes a lot of sense. I guess final, final question for me, just turning back, sorry, to belabor the point on the, on the older ships here. But, I mean, it just sounds like, it, it's really gonna have more of an impact on the dirty trade, on the, on the crude fleet more than anything. But, just to drill down a little bit more, is there anything that- Wait, wait, wait, wait, wait, wait, wait. That's just the way that James framed his slide about the ships turning 20. He could also frame a slide that talks about ships turning 15 years old over the next months, years too. Sure. And that goes to my question, Robert. Is there anything owners can do today, or at least with the cash available they have today at these rates, that they can better maintain ships past that traditional 15 years of age? Or has technology not really changed or the landscape not really changed too much, and it's kind of like that's still a good, hard, and fast rule to look at? I'd leave that to- Robert, you want to take that? Yes, please. Yes, please. Yes. So, so just simplistically, a vessel is a steel box girder, subjected to corrosion and fatigue. And, the, the customers, our, our clients, the oil majors, don't count the dollars they spend on a time charter or a, or a particular spot fixture. They count the liability in the case of a, of an existential event, like the Erika or the Exxon Valdez. And this type of enterprise risk has established an enormous structure around vetting and compliance within our customers, and there is very little that an owner can do to preemptively strengthen the steel or protect the steel from that type of wear and tear. The technology around coatings, around surveys, around intermediate surveys, all of that is advancing, but it doesn't do a material or make a material difference to the overall life expectancy of a vessel, particularly given the type of conditions a vessel faces in service. Okay. Yeah, that's really helpful. Thank you for the clarification on that. I'll turn it over. This concludes the question and answer session. I would like to turn the conference back over to Emanuele Lauro for any closing remarks. Thank you, operator. We do not have any closing remarks, apart from thanking everybody for your time today, and looking forward to speaking with you all soon. Have a good day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.