Note: This is an earnings call transcript. Content may contain errors.

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Date

Thursday, Oct. 30, 2025, at 9 a.m. ET

Call participants

  • Chairman and Chief Executive Officer — Emanuele A. Lauro
  • President — Robert Bugbee
  • Chief Financial Officer — Chris Avella
  • Head of Corporate Development and Investor Relations — James Doyle
  • Commercial Director — Lars Dencker Nielsen

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Takeaways

  • Adjusted EBITDA -- $148.1 million in adjusted EBITDA in Q3 2025, reflecting continued robust operational performance.
  • Adjusted Net Income -- $72.7 million in adjusted net income in Q3 2025, equating to $1.49 per diluted share for the quarter.
  • Operating Cash Flow -- Approximately $375 million year-to-date prior to working capital adjustments.
  • Total Liquidity -- $1.4 billion in total liquidity as of October 30, 2025, comprised of $627 million in cash and $788 million in available revolving credit.
  • Net Debt -- Declining to a pro forma $34 million pending imminent inflows and vessel sale closings.
  • Dividend Policy -- The quarterly dividend increased by 5% in Q3 2025, management intends to review the dividend at least annually with a goal of maintaining a sustainable and growing payout.
  • Cash Breakeven Rate -- Management projects a reduction to approximately $11,000 per day, following a prepayment of $154.6 million in debt, with no scheduled principal payments due in 2026 or 2027.
  • MR and LR2 Spot Earnings -- MR tankers are earning around $28,000 per day; LR2s are at approximately $35,000 per day, both supporting significant free cash flow generation.
  • Sanctioned Fleet Impact -- Sanctioned vessels account for nearly 8% of the MR fleet, 14% of the LR2 fleet, and 34% of the Aframax fleet, and are, on average, nearly twenty years old.
  • Refined Product Export Trends -- Non-Russian seaborne product exports averaged 20 million barrels per day in September 2025, up 600,000 barrels per day from the prior September.
  • Russian Export Decline -- Refined product exports from Russia fell 30%, from 1.5 million barrels per day to about 1 million, as a result of increased drone attacks and new sanctions.
  • DHT investment realization -- 5.3 million shares of DHT Holdings (DHT 1.81%) were sold in September and October above $12.50 per share, resulting in an almost 20% return when including dividends received.
  • Debt Structure and Prepayment -- $234 million in unscheduled debt prepayments are planned by the end of 2026; $14 million was paid in advance, with the rest scheduled to eliminate 2026 and 2027 principal amortization and purchase options on three lease-financed vessels, with prepayments expected in 2025.
  • Order Book and Fleet Age Profile -- The order book is 18% of the current fleet, but effective product tanker fleet growth is moderated by slower newbuild orders, with 49% of new LR2s trading crude, rising to 31% by 2028.
  • Fleet Drydock Cycle -- Over 70% of the fleet underwent special surveys and drydock in the past two years, resulting in a light forward drydock schedule through 2026.

Summary

Scorpio Tankers (STNG 0.13%) demonstrated accelerating deleveraging, announcing a net debt reduced to $255 million as of Q3 2025 and a pro forma level of $34 million pending near-term cash events. Management disclosed a $154.6 million prepayment agreement in 2025 to eliminate all scheduled principal amortization in 2026 and 2027, further lowering breakeven costs. The company highlighted positive structural trends in the product tanker market, including shrinking effective vessel supply due to fleet aging, increased sanctions, and trade route shifts that are increasing ton-miles. Management stated that spot charter rates for MR and LR2 vessels are currently generating free cash flow well in excess of cash breakeven. A 5% dividend increase was implemented in Q3 2025, supported by the company's position of with over $1.4 billion in liquidity as of Oct. 30, 2025, and an intent to maintain durable shareholder returns even at cyclical lows. The company emphasized the ongoing optionality created by a strong balance sheet, with no immediate plans for large vessel acquisitions or share buybacks.

  • Robert Bugbee stated, "We're very convinced that the right thing we should do is to maintain a regular dividend and have a dividend that is clearly sustainable."
  • Customers seeking alternatives to Russian supply have led to substitution by U.S. products, which contributed to raised Atlantic Basin MR spot rates.
  • Chief Financial Officer Avella provided detail on $154.6 million in debt prepayments across four credit facilities, specifying that $7 million of the amount is revolving debt and the rest term debt without redraw capability.
  • Commercial Director Nielsen indicated that additional LR2 and Aframax vessels are shifting to crude trades, further tightening clean product tanker supply.
  • Recent drydock activity focused on maintenance and vessel condition reset, not major fuel-efficiency upgrades or speculative CapEx.
  • Management described the balance sheet strength as creating significant "optionality," enabling fleet renewal or investments if attractive market opportunities emerge.

Industry glossary

  • MR: Medium Range product tanker, typically 45,000–54,999 deadweight tons, used for refined petroleum product shipping.
  • LR2: Long Range 2 product tanker, typically 80,000–119,999 deadweight tons, used in both clean and dirty (crude) trades.
  • Aframax: Crude oil or product tanker with a deadweight between 80,000 and 119,999 tons, often used for regional shipments.
  • Ton Mile: A measure of transport demand, calculated as the volume of cargo multiplied by the distance shipped.
  • DHT Holdings: DHT Holdings, an NYSE-listed independent crude oil tanker company, referenced here as an equity investment by Scorpio Tankers.
  • OFAC: U.S. Office of Foreign Assets Control, responsible for administering and enforcing economic and trade sanctions.

Full Conference Call Transcript

Emanuele A. Lauro: We are pleased to report another quarter of strong financial results. In the third quarter, the company generated $87.7 million in adjusted EBITDA and $72.7 million in adjusted net income. The product tanker market continues to benefit from enduring structural trends like strong demand for refined products, evolving trade patterns, and long-term shifts in global refining that are lengthening voyages and increasing ton miles. Those dynamics have been reflected in trade rates, which have strengthened over the past quarters. The company is financially, operationally, and commercially strong. Our focus is clear, building a shipping company that is investable through the cycle. Today, our liquidity stands at approximately $1.4 billion, including cash, undrawn revolving credit, and our investment in DHT.

Over the past four years, we've reduced our daily breakeven from roughly $17,500 today to $12,500 per day. And with our recent decision to repay amortizing debt, we expect that figure to fall further to around $11,000 per day. Today, we will also announce a 5% increase in the quarterly dividend. And going forward, we'll continue to review the dividend at least annually. Our goal, as mentioned, is to make the dividend sustainable, durable, and steadily growing over time. Rewarding shareholders while building a company that remains investable through the cycle. Shipping will always be volatile; that's its nature. But through our efforts of strengthening the balance sheet, lowering our breakeven, and increasing charter coverage, we've meaningfully reduced that volatility.

Looking ahead, we remain optimistic as our outlook for both crude and refined products remains constructive. With a modern fleet, robust liquidity, and a conservative balance sheet, Scorpio Tankers is well-positioned to navigate uncertainty and continue creating long-term value for shareholders. With that, I'll turn the call to James for a brief presentation.

James Doyle: Thanks, Emanuele. Slide seven, please. Product tanker rates remain firm and have increased over the last week with MRs earning around $28,000 per day and LR2s about $35,000 per day. Levels that continue to generate substantial free cash flow for the company. Refining margins have strengthened, inventories remain low, and fourth-quarter demand excluding fuel oil is expected to be nearly 900,000 barrels per day higher than last year. With seasonality turning in our favor, a strong crude market, and several near-term catalysts emerging, the backdrop for product tankers looks increasingly constructive as we move through year-end. Slide eight, please.

Despite significant refinery maintenance, over 8 million barrels per day offline in September and 10 million in October, seaborne exports have continued to rise. In September, excluding Russian volumes, product exports averaged 20 million barrels per day, approximately 600,000 barrels per day higher than the same month last year. Slide nine, please. A rise in drone attacks on Russian refinery capacity has reduced refined product exports from 1.5 million barrels per day to about 1 million, a decline of 30%. At the same time, OFAC's new sanctions on Rosneft and Lukoil are expected to further disrupt Russian exports.

Even before these measures took effect, Brazil's imports of Russian barrels had fallen sharply from 250,000 barrels per day to just 50,000 with much of the shortfall replaced by U.S. supply. A shift that lifted MR rates across the Atlantic Basin. In addition, importers of Russian products begin seeking alternative sources, product tanker rates could tighten further. Slide 10, please. Increasing sanctions from OFAC to EU and UK have made exports more challenging. The rise in crude on the water has been driven primarily by sanctioned countries. Iran, Venezuela, and Russia, which together accounted for roughly 70% of the increase. The number of sanctioned vessels continues to grow.

Now representing nearly 8% of the MR fleet, 14% of the LR2 fleet, and 34% of the Aframax fleet. These vessels are, on average, almost twenty years old and are unlikely to return to non-sanctioned trades. As sanctions expand and enforcement tightens, additional vessels will likely be absorbed into these trades, further limiting available tonnage for legitimate cargoes. In short, the sanction fleet is large, old, and increasingly isolated. Effectively shrinking the number of ships competing in the mainstream market. Slide 11, please. We continue to see closures in global refining capacity.

Over the past five years, net capacity growth has been only 300,000 barrels per day, driven by additions in The Middle East, and offset by closures in Europe and North America. In California alone, 250,000 barrels per day of capacity is scheduled to close this year and in Q2 next year. Which could effectively double U.S. West Coast product imports largely coming from Asia. These refinery closures and changes have been a key driver in ton mile demand growth for product tankers. Slide 12, please. In October, China announced new fees on vessels calling at U.S. Ports.

As of this morning, it appears that Presidents Trump and Xi have agreed to postpone both the USTR tariffs and the Chinese port fees for up to a year. If these measures were to return, China accounts for only about 3% to 4% of the global seaborne refined product market, and we would not expect any material impact on the overall market. We will continue to monitor this situation closely. Slide 13, please. The product tanker order book currently stands at 18% of the existing fleet. A figure that may appear elevated at first glance, but context matters. Newbuilding activity has slowed considerably. Year to date, only 44 product tankers have been ordered.

LR2s now make up almost half the current order book. However, 49% of LR2s currently on the water are trading crude oil, a trend we expect to continue. In short, effective fleet growth in clean products looks far more modest than headline numbers suggest. Slide 14, please. As shown in the left-hand chart, a twenty-year-old vessel generates 50% fewer ton miles than a modern one. Reflecting limitations in trading opportunities, efficiency, and regulatory access. The drop-off is even steeper. Over 75%, if the vessel was not involved in Russian trade. This isn't a short-term story between 2003 and 2010, we saw significant expansion of the product tanker fleet.

The result is a large cohort of vessels now approaching or surpassing 20 years of age. The chart on the right makes this clear. Including the order book, 17.8% of the fleet is over 20 years old. By 2028, that figure climbs to 31%. The implications are structural. The fleet is aging, utilization is falling, and effective supply is tightening. Even without a dramatic increase in scrapping. Slide 15, please. Given the age profile of the fleet, and the high share, of LR2's trading crude, actual fleet growth could prove lower than headline expectations.

Assuming no decline in utilization for vessels older than twenty years, and a portion of LR2 newbuilds trading crude, effective fleet growth could average around 35% a year. However, adjusting for lower utilization on older ships, effective fleet growth could fall closer to 1% per 20% since 2019, driven by refinery rationalization, shifting trade routes, and ongoing dislocation of global energy flows. We expect ton miles to continue to outpace supply. In both the short and long term the market fundamentals remain strong driven by structural shifts in global refining, longer trade routes, and an aging fleet. With that, I'd like to turn it over to Chris. Thank you, James, and good morning or good afternoon, everyone.

Chris Avella: Slide 17, please. This quarter, we generated $148.1 million in adjusted EBITDA and $72.7 million or $1.49 per diluted share in adjusted net income. Our operating cash flow excluding changes in working capital was over $135 million this quarter, and approximately $375 million on a year-to-date basis. We are pleased to announce both an increase in our quarterly dividend in addition to new agreements with our lenders to prepay the principal amortization on certain of our loans for a $154.6 million in aggregate. This prepayment is expected to take place in 2025 and represents all of our scheduled loan amortization for 2026 and 2027. The principal and interest savings resulting from this prepayment will further reduce our cash breakeven levels.

Which include vessel operating costs, cash G&A, interest payments, and commitment fees and regularly scheduled loan amortization, to approximately $11,000 per day over this period. In addition to this, we continue to be opportunistic with our investment in DHT. Having sold 5.3 million shares in September and October at over $12.5 per share. This is an almost 20% return on investment when factoring in dividends received. The chart on the right shows our liquidity profile. As you can see, we have access to over $1.4 billion in liquidity as of today. Our liquidity consists of cash of $627 million along with $788 million of drawdown availability under three revolving credit facilities.

James Doyle: Slide 18, please. The chart on the left shows the progression of our net debt since 12/31/2021, which has declined $2.7 billion to a net debt balance of $255 million. On a pro forma basis, our net debt position is $34 million which takes into account the expected receipt of the October higher payment from the Scorpio pools, which are expected within the next two weeks. And the net proceeds from the sales of three vessels, which are expected to close in the fourth quarter.

Chris Avella: The chart on the right breaks down our outstanding debt by type. Starting at the bottom is our $69 million of legacy lease financing obligations on three vessels with Ocean Yield. These leases are the most expensive financing in our debt structure with margins of over 400 basis points. In June and July, we submitted notice to exercise the purchase options on these vessels. Two of the purchases are scheduled for December for $23.4 million each and one purchase is scheduled for February for $18.9 million. In the middle is our secured bank debt, with a lending group dominated by experienced European shipping lenders whom we have strong relationships with.

As I mentioned, we expect to prepay a $154.6 million of this debt in 2025. As a result of this prepayment, we will have no scheduled principal amortization on our existing debt for all of 2026 and 2027. Further to this, $290 million of our $15 million of secured borrowings is drawn revolving debt. An important tool that we can use if we want to repay the debt yet maintain access to the liquidity in the future. At the top is our $200 million five-year senior unsecured notes which were issued in an oversubscribed offering in the Nordic bond market in January at a 7.5% coupon rate. Slide 19, please.

By the end of 2026, we expect to make a total of $234 million in unscheduled prepayments on our debt. $14 million of this amount has already been paid in advance of pending sales of two vessels. And as I mentioned, we have committed to prepay $65.7 million to exercise the purchase options on three lease finance vessels along with $154.6 million across four different credit facilities to cover our scheduled loan amortization for 2026 and 2027. The chart on the right is our drydock estimates through the end of 2026. Our forward drydock schedule is light after having undergone the special surveys on over 70% of our fleet in the last two years. Slide 20, please.

Once we complete our unscheduled debt prepayments, our cash breakeven rates are expected to be at the lowest levels in the company's history. The chart on the left shows that these expected cash breakeven rates are lower than the company's achieved daily TCE rates dating all the way back to 2013. With the closest point being the aftermath of the COVID-19 pandemic. When oil consumption was at lows not seen in decades. To illustrate our cash generation potential at these cash breakeven levels, at $20,000 per day, the company can generate up to $315 million in cash flow per year. At $30,000 per day, the company can generate up to $666 million in cash flow per year.

And at $40,000 per day, the company can generate up to $1 billion in cash flow per year. This concludes our presentation for today. And now I'd like to turn the call over to Q&A.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. You are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, at this time, we will pause momentarily to assemble a roster. First question comes from Omar Nokta with Jefferies. Please go ahead. Thank you.

Omar Nokta: Hey, guys. Good morning. Good afternoon. Thanks for the update. Obviously, very, very good detail and clearly Scorpio is in a very strong financial position as kind of outlined throughout the call here and with Chris here on the breakevens. Just as we kind of think about Scorpio here, you've been building cash, paying down the debt. Breakeven is obviously coming down. You're putting Scorpio in the strongest financial position in its history. And preparing for, say, the unknown given, you know, the geopolitical environment. Just maybe kind of thinking about the platform and how it is at the moment. Do you feel like you're building something here, something more significant?

For this balance sheet to be put to use at some point down the line? Or do you think this is a bit more of a new normal for Scorpio to be in a net cash position long term with an eye on, you know, keeping that dividend sustainable throughout the cycles?

Robert Bugbee: It's a great question, Omar. So I think that you can answer the last bit first. That's the easy one. We're very convinced that the right thing we should do is to maintain a regular dividend and have a dividend that is clearly sustainable. And so to do that, you know, by default, a strong balance sheet, and we have to be able to show like we can do. And as Chris has gone through that we can clearly, you know, go through the absolute bottom of the cycle and still maintain that dividend. The second aspect is to whether we are building things for long term, etcetera, etcetera.

The honest answer is that we've been focused on getting the debt down, getting the cash breakeven down, getting ourselves into the position that we're in right now. Chris is indicating that very soon we'll start to move to, you know, net debt negative or building cash. And that simply by definition gives you, you know, while you maintain overall discipline, gives you tremendous options. It allows you to go into, at any different point in the market. It allows you to properly, you know, if you wanted to renew your fleet, for example, without changing your leverage very much. As, you know, Chris is pointing out that even at very low rates, we'd still be generating tremendous cash flow.

But it so I think that's the best way to answer it.

Omar Nokta: Thanks, Robert. That clearly no. That's helpful. And I guess maybe just a follow-up and I'll pass it on, is a question that's come up in the past, and you know, when does it make sense you think to start buying ships? To offset perhaps some of the sales? Of the older ones. You clearly got critical mass. But are you content to keep kind of scaling back a bit, selling some more of the older ones without replacing?

Robert Bugbee: I think we have a different situation right now. You know, we're very soon. We're getting that primary objective where, you know, we get we able to create that balance sheet, take the debt right down, and, you know, Vic and Chris are showing outlines whereby we can prepay principal, etcetera, lowering that cash down. So that part is kind of finished. So now you're really left to mathematics. You know, mathematics would be I'll give you an example is you don't we don't need to renew for renewal's sake. There's no point in that. We also have consistently said that we are confident in the product market.

Our last call was we are confident that the, you know, latter half of the year will be very strong. And that the fundamentals are there. And that's playing out. Lars will probably go into later. The market is, as we expected, strengthening quite significantly now across the tanker space. So we have no necessities. It's a question of choice. So, unless the easiest position one could look at is, you know, let's say you could get a great it's where the curve is.

You might be able to get a great price for older vessels in your fleet, for example, and you know, then maybe you get a place in line with somebody, you know, you're not necessarily ordering yourself, but you may be able to get a prompt new vessel or a delivery or something like that, where mathematically, the curve is such that your newer vessel has far greater value both in its operational specification and age compared to, you know, the older vessel. Which older vessels, if they start to move towards 15, we haven't got many loads left. But as they do, you know, they start to depreciate like options do much more rapidly. But that's a mathematical example.

So you know, I think now that I don't think you but at the same time, we were if someone offered us a great price, for, you know, our older vessel, sure. We would sell them because that's the smart thing to do to maintain the optionality. I think the optionality for a company in shipping anybody, whether it's investors or it's companies is value that optionality is underrated. Strategically.

Omar Nokta: Yeah. Certainly. No. Good. That's all. Very good. Thanks, Robert. Thanks, guys. I'll pass it back.

Operator: The next question comes from Ken Hoexter with Bank of America. Please go ahead.

Tim Chang: Hey. This is Tim Chang on for Ken Hoexter. Thanks for taking my question. Obviously, it's a very constructive market for product tankers fundamentally recently with record levels of seaborne exports. How do you see rates progress? Is there a way you see rates progressing higher than levels with little under half of the days booked quarter to date? And maybe just a little bit more color on what pushes them there over the next forty to sixty days? Now you know you've spoken to the pro OPEC production cut unwind, increased sanctions, seasonally stronger period. Maybe some more detail on how importers of Russian product would be seeking alternative products.

Robert Bugbee: No. I just wanna take that.

Lars Dencker Nielsen: Yeah. Sure. I mean, it's just like a step has, you know, kind of surprised the upside. To step back first. You know, Q3, we hadn't seen as much of a seasonal summer low as you normally would do. You know, there were a lot of refineries that were kind of in turnarounds. And we anticipated a drop in rates across the board. We did see that drop in rates, and we're at the tail end of those refinery turnarounds now. And I think we have another 5 million barrels of capacity that's coming on stream in November. That's gonna supercharge the clean market. But there's a combination of factors to why I'm quite constructive with the product tanker market.

First of all, you know, OPEC has played a role in starting to come to market with opening up the taps. The whole issue around Russia has become a real important thing as you look at now the Americans have also come in to sanction the barrels. And those sanctioning barrels have certainly had a market follow-through on the crude markets. If you look at the crude markets first before going to products, the VLCC markets today have ramped up to a very high level. So have the Suezmaxes and the Aframaxes as well. Have also seen a sudden change in interest from LR2 owners to move into Aframax's account from September, probably around 18 ships have already dirtied up.

Surprise me that there's gonna be another five or 10 ships in short order that's gonna start moving into the Atlantic Basin into dirty. This obviously will kind of tighten the product market as well. So you've got more product coming into the market. You've got a tightening of supply. And the market where the product is coming is primarily the AG and also the U.S. Gulf, where we're to start seeing a lot of ton mile movements because of the sanctioning of barrels that people are not gonna start securing supply, from further afield. I mean, Brazil is not taking more product out of the U.S. Gulf rather than the Russian barrel and so on.

It is clear to me that we are just on the cusp of the bottom of that market. The LR2 market has moved up tremendously. And will continue to do so. I envisage over the next couple of weeks that's both from The Middle East going West, and that's Middle East going East TC1, but it's also certainly the West moving to the East, has also moved up aggressively over the last week. The same thing goes also with a very strong but volatile market in The U.S. Gulf, and we can see underlying strength as the utilization level of the refineries are starting to creep up after their turnarounds in The U.S.

Gulf and then underpinned by this longer haul business. So there is all the ingredients for the market as we move properly into Q4 to see a certain rebound. And it's now firing on all cylinders. It's not only on the crude which has been the headline over the last forty-eight hours, but it certainly I can see on the market as well, we're gonna see a strong ramp-up into Q4 proper.

At the same time, I would also just add, this is an interesting combination because you know, what we have seen in years gone by as we move into January and February, people talk about cannibalization of newbuilding with virgin tanks, from Versus Maxes, Appomattoxes that are not coded, which have to be honest, is very few today because everybody's building Appomattoxes with coated tanks due to the price. But those vessels probably with the market trading TD three at Worldscale one twenty-five, we'll probably think twice to take on a clean call at a discount. At a lower demurrage rate than trading, you know, $1.40, $130,000, a $130,000 on Pure Round voyage.

So, you know, I also envisage a lesser degree of cannibalization. Which will also underpin a very strong follow-through as we move into Q1.

Robert Bugbee: Got it. That's very helpful. If I could just add to that. So I think what Lars on behalf of the company is saying. So we now he's now moving or we are moving as a group from, you know, the last, let's say, public discussion that we were that the market would strengthen into the end of the year, Lars is now creating a position where you know, we see that there's a strong chance now of the market being very strong into the first quarter as well. And through that first quarter. Because of the dynamics he's outlined.

Tim Chang: Thank you both. Appreciate the insight.

Operator: The next question comes from Chris Robertson with Deutsche Bank. Please go ahead.

Chris Robertson: Hi. Good morning, everybody. Thank you for taking my questions. I just wanted to turn towards you guys mentioned that, you know, you had an extensive number of dry docks completed during 2025. I wanted to touch on that just in terms of asking what types of uplifts and efficiency that you've realized from those dry docks this year, and is that translating into slightly higher rate premiums? Or can you speak to the details around that?

Lars Dencker Nielsen: Sure. I'm happy to take that. You know, the dry docks themselves did not economical, fuel-efficient, etcetera. Really, it's much more about general maintenance, the coatings of the vessels, the friction not only exogenous but endogenous to the hull, and getting that back to a place where you're really resetting the vessel back to something similar to what it was five years before. The effect and the bottom line, impact is immediate, like I said, because you're basically resetting the ship to a condition it was five years before. But until we have line of sight on the return of a host of additional CapEx possibilities and what their returns actually mean.

There's a lot of hyperbole smoke and mirrors about uplifts and other efficiency steps one could undertake, but until we really have line of sight and the benefit of more data in that area, we're not going to be spending shareholders' money on those types of gambles.

Chris Robertson: Got it. Interesting. Okay. Thank you. My next question is just related to Chinese export quotas for next year. If you guys have a view around, you know, the increasing amount of refining capacity in China, it doesn't seem to have kept pace with kind of the quotas being kept flattish this year, slightly down. Do you have a view around next year and what they might do? And do you think there's a possibility that we'll see increased quotas from China next year?

Lars Dencker Nielsen: I'll start and then maybe I'll jump by James.

James Doyle: Oh, thanks, Lars. Maybe, Lars, you can add. So we saw the last quota increase in September, which is, as you highlighted, Chris, pretty consistent with what's been announced in the past. I think the interesting part is if you look at when you look at the Chinese data, total crude imports and domestic production were around 15.9 million barrels in September and runs were 15.4. So the crude build was only about four to 500,000 barrels per day. So to answer your question, I think we would need to see it in the crude volumes first. But a lot of this production and quota system is really determined by the government.

And in previous periods where crack spreads two years ago were very, very high, they didn't export. So it's a tough one for us to kind of predict.

Chris Robertson: Okay. Fair enough. Thanks, James.

Operator: The next question comes from Liam Burke with B. Riley FBR. Please go ahead.

Liam Burke: Yes. Thank you. Good morning. You've been very clear about the benefits of deleveraging your plans to do so and the reasons why. But where do buybacks come into the capital allocation equation as you move forward here?

Robert Bugbee: We'd never say when the buybacks come into the equation. We know, we have the ability to act whenever we want to. I mean, we're not going to wave a flag and say, hey, guys. This is when we're gonna buy back, and you know, oh, let me remind you. We're, you know, $2 away from that, or we're a $100 million of cash away from that. That's not into we're not I think we'll pass on that question, if you don't mind.

Liam Burke: Okay. That's fair. And then as we go into the stronger period, sometime we have 30 tankers trading clean. Is that going to be just part of the everyday business? Or do you anticipate strength in the crude market to keep that part of the fleet dirty?

Lars Dencker Nielsen: Well, the short answer to that, Liam, is yes. We anticipate that. You know, it's quite expensive for a VLCC to clean up to trade clean. The last time we saw that, was, of course, when the LR2 market suddenly spiked to about $8 million. For an AG West run, and the VLCC market was languishing, at around $20,000 a day. Well, the spread was so wide that it was beneficial for a VLCC owner to clean up. That margin certainly has flipped. There is no VLCC owner or Aframax's owner that's gonna go and think about cleaning up at this point in time.

It certainly is gonna be the other way around, and we will start seeing, as I said earlier, probably a number of more ships going into the dirty market. Further restricting supply on LR2s.

Liam Burke: Great. Thank you, Lars. Thank you, Robert.

Robert Bugbee: Thank you.

Operator: Last question comes from Jonas Shum with Clarkson. Please go ahead.

Jonas Shum: Hey, guys. Good morning and good afternoon. Thank you for hosting the presentation and taking my question. So looking at the broader shipping space, there's been quite a bit of deleveraging across most segments, I would say. But you have been really kind of leading the way. You have been cutting that debt from around $3 billion in 2021 to less than $300 million today. And you include the transactions that are set to close, I guess, this quarter, it looks like it could be it's gonna be in a net cash position already by this year's end. And at the same time, you also have kind of a young fleet compared to the average.

So my question as you now reach this kind of very conservative leverage profile with still a young fleet, is there any kind of limits to how long leverage you want like leverage to go? And I guess that this is also kind of related to Omar's first question. How should we think about your considerations around fleet renewal versus growth and the shareholder returns? How will you balance this going forward?

Robert Bugbee: I think that, first of all, to echo what I said there oh, first, by the way, thank you very much for your credit report. It was I we thought it was very constructive and very well done. So I'd like to echo what I said to Omar earlier that or somebody earlier that I think people underestimate the value of optionality. And a strong balance sheet. An increasingly strong balance sheet, provides great optionality in different circumstances. You can always buy ships. You can always buy stock. But you know, sometimes people very rarely have deep public side of the shipping industry had the ability to take opportunities of geopolitical crisis. Almost never.

And many times, those crises themselves have resulted in bankruptcy of public shipping companies or severe stress. And right now, we have indicated over and over again that we considered that there is a high degree of geopolitical and economic uncertainty out there. Only yesterday, I mean, the Fed itself in The United States doesn't know whether it's coming or going. You know? It goes from, oh, we're gonna have two more interest cuts before you know, the end of the first quarter to, well, we have to warn you. We may not even have one in December. And they can't they're still trying to balance. Between inflation and potential recession.

And that's not to mention all the other things in the world that are worrying mean, we've got countries in Europe and a lot of crises. We are extremely confident in the actual product market itself. And we are uncertain in the geopolitical position. So at this particular point, you know, theoretically, there isn't much of a limit at the moment. You could just point out to buy other assets. But you have the ability to do both. Depending on what situations there are and how your whole view looks at the moment. There's no rush. I mean, it's not the bad. You know, we've only just achieved this position. It's pretty special.

So don't think there's any I don't think I've ever seen a public shipping company that's had too much cash. I really haven't.

Jonas Shum: No. That's a good point. Thank you.

Lars Dencker Nielsen: Yeah.

Jonas Shum: And then in terms of just more of a housekeeping question, I guess. You have agreed with your banks to prepay a $155 million of debt. Is that you kind of break that down in the different facilities and how much will then be available for free liquidity?

Chris Avella: Sure. I'm happy to do that. In terms of the facilities, we have our $94 million credit facility that's $19 million. Our billion-dollar credit facility that's $92 million, our $117 million credit facility, that's $34 million. And our $49 million credit facility, that's $9 million. Of that amount, $7 million is going to be revolving. So it'll be paid into part of the revolving facilities. The rest is term debt that we cannot redraw. Hope that answers your question.

Jonas Shum: Thank you. Highly appreciate it.

Operator: I return the call back to you.

Jonas Shum: Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Emanuele A. Lauro for any closing remarks.

Emanuele A. Lauro: Thank you. I don't have any closing remarks apart from thanking everybody for the time dedicated to us today and look forward to catching up soon. Thanks very much.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.