Scorpio Tankers (STNG) Q4 2025 Earnings Transcript

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DATE

Thursday, Feb. 12, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Emanuele A. Lauro
• President — Robert L. Bugbee
• Chief Operating Officer — Cameron Mackey
• Chief Financial Officer — Christopher Avella
• Head of Corporate Development and Investor Relations — James Doyle
• Chief Commercial Officer — Lars Dencker Nielsen

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TAKEAWAYS

• Adjusted EBITDA -- $152,000,000 was generated in the quarter, with $568,000,000 for the full year, reflecting heightened earnings generation.
• Net Cash Position -- Management reported a net cash position of $309,000,000 as of the call, up from a net debt of $3,100,000,000 in 2021.
• Liquidity -- Total available liquidity stands at $1,700,000,000, combining $937,000,000 in cash and $767,000,000 in unused revolving credit facilities.
• Debt Repayments -- $450,000,000 of debt was repaid during the year, including a Q4 prepayment of $154,600,000, eliminating all scheduled 2026 and 2027 bank principal amortization.
• Daily Cash Breakeven -- The company’s cash breakeven was reduced to approximately $11,000 per day per vessel, its lowest level in history.
• Dividend Increase -- The quarterly dividend was raised to $0.45 per share, a 12.5% increase year over year, justified by management as "supported by structural cash generation, not temporary conditions."
• Vessel Sales and Purchases -- The company sold 10 older vessels at strong valuations and contracted to purchase 10 newbuildings, with newbuilding obligations totaling slightly over $700,000,000, 70% payable in 2027 and beyond.
• Spot Rates -- LR2 spot rates were approximately $46,000 per day, and MR rates were around $38,000 per day, levels which management stated "generates meaningful free cash flow."
• Time Charter Demand -- Demand for multiyear charters has increased, with LR2/Aframax one-year rates in the high $40,000s per day, and "the demand for three- and five-year deals, which has come in strong and has been reconfirmed."
• Fleet Age and Structure -- The company maintains the youngest peer group fleet following the sale of older vessels and reinvestment in newbuildings.
• Orderbook and Fleet Aging -- The product tanker orderbook is at nearly 19% of the fleet, but 21% of the global product fleet is already over 20 years old, expected to rise to 30% by 2028.
• Payout Policy -- Management described its dividend growth approach as intended "to grow the dividend through the cycle," with regular reviews planned.
• Capital Allocation -- Management emphasized, absolutely zero acquisition thoughts of other companies or competitors or large fleets at all, signaling disciplined capital deployment.

SUMMARY

Scorpio Tankers (NYSE:STNG) emphasized its shift from a leveraged to net cash position, underpinned by rapid deleveraging and substantial liquidity accumulation. The company detailed that structurally low daily cash breakevens and disciplined capital allocation have created resilience regardless of market volatility. Management highlighted a focus on opportunistic asset sales and measured newbuilding investments, with no intent to pursue major acquisitions or bulk fleet orders. Investor returns remain a central priority, as evidenced by the raised dividend, supported by durable cash flow and favorable product tanker fundamentals.

• Management noted continued upside potential from refinery closures, shifting trade routes, and extended ton-miles, stating, "These are structural drivers and not cyclical noise."
• Speakers explained that roughly 54% of LR2s are now trading crude oil, with crossover expected to continue as fleet composition changes.
• The company said the market is operating with very little slack at the moment, pointing to tight supply aided by aging fleets, sanctions, and geopolitical disruptions.
• Management stressed that future capital commitments for newbuildings are staggered, with ample liquidity to meet forthcoming payments without raising debt.
• Executives made clear that decisions to switch LR2s between clean and dirty trades remain strictly opportunistic, with no plan for wholesale shifts absent justified economics.

INDUSTRY GLOSSARY

• LR2: Large Range 2 tankers, typically 105,000–115,000 DWT vessels mainly used to transport refined products and, increasingly, crude oil on certain trades.
• MR: Medium Range tankers, in the 45,000–55,000 DWT range, primarily used to carry refined petroleum products.
• Breakeven: The daily vessel operating cost (including interest, SG&A, and maintenance) required to cover expenses but not generate profit.
• TCE: Time Charter Equivalent, a measure that reflects net revenue per trading day, enabling direct comparison between voyage and time-charter employed vessels.
• Ton-mile demand: A shipping industry metric multiplying volume shipped by distance traveled, capturing the effect of route lengthening on transport demand.
• S&P market: Sale and Purchase market, referring to the secondary market for buying and selling ships between owners.

Full Conference Call Transcript

James Doyle: Hello and welcome to the Scorpio Tankers Inc. Fourth Quarter 2025 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 Inc. fourth quarter 2025 earnings call.

James Doyle: On the call with me today are Emanuele A. Lauro, Chief Executive Officer; Robert L. Bugbee, President; Cameron Mackey, Chief Operating Officer; Christopher Avella, Chief Financial Officer; and Lars Dencker Nielsen, Chief Commercial Officer. Earlier today, we issued our fourth 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, 02/12/2026, 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 Inc.’s SEC filings, which are available at scorpiotankers.com and sec.gov. Call 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 Presentations. These slides will also be available on the webcast.

After the presentation, we will go to Q&A. For those asking questions, please limit them to two. If you have an additional question, please rejoin the queue. Now I would like to introduce our Chief Executive Officer, Emanuele A. Lauro. Thank you, James.

Emanuele A. Lauro: Good morning, everybody, and thank you for being with us today.

Emanuele A. Lauro: Scorpio Tankers Inc. delivered another strong quarter and a transformative year. In Q4, we generated $152,000,000 of adjusted EBITDA and for the full year, adjusted EBITDA reached $568,000,000. But the real story is not just earnings. The real story is structural strength. Since 2021, we have reduced net debt from $3,100,000,000 to a net cash position of $309,000,000 today. This net cash position is increasing by the day, and has accelerated sharply in Q1. We have fundamentally reset the company. Today, we hold approximately $1,700,000,000 of liquidity and growing. Our daily cash breakeven is $11,000 per day per vessel. In the current rate environment, this translates into powerful free cash flow generation.

Even under stress conditions similar to the COVID levels, we remained around cash breakeven. We are structurally resilient with significant operating leverage. We have upgraded the fleet with discipline. We have sold 10 older vessels at a strong valuation, and we have been reinvesting in 10 modern newbuildings. The fleet is younger, more efficient, and positioned for higher earnings power. At the same time, we are increasing the quarterly dividend to $0.45 per share, up 12.5% year over year. We are growing the dividend because we can, because we have the balance sheet, because the payout is supported by structural cash generation, not temporary conditions. Turning to fundamentals.

Rates have improved for five consecutive quarters with momentum continuing into Q1 2026. Refinery closures are lengthening trade routes, ton-mile demand is expanding. Unprecedented strength in the crude market is tightening effective vessel supply in the product tanker space. These are structural drivers and not cyclical noise. We cannot control the market cycle but we can control our preparedness. Today, we operate a modern fleet, we have substantial liquidity, we have structurally low breakevens, we have a net cash balance sheet. This combination creates downside protection and upside torque. Scorpio Tankers Inc. is positioned to generate significant free cash flow and deliver durable shareholder returns across the cycle.

We are stronger than we have ever been, and we are positioned to capitalize on what comes our way. With that, I would like to turn the call to Robert. Thank you very much, Emanuele. Let me first begin with a broader context of the industry, especially for those new to the company. We operate in a cyclical, capital-intensive industry during a period of elevated inflation, constrained supply, and shifting global trade patterns. In that environment, asset quality, balance sheet strength, and disciplined capital allocation matter more than ever. We also operate the youngest fleet in our peer group. That really matters. Younger vessels are more efficient, more commercially flexible, and increasingly advantaged as regulatory standards evolve.

Shipping will always be volatile. That is not new, and it is not avoidable. What can be controlled is financial structure. Today, we have done that by materially derisking the company. Today, we operate with a net cash position and low cash breakevens. That provides resilience in weaker markets and meaningful operating leverage in stronger ones. For investors, the case is straightforward: hard-asset-backed, conservative financial structure and a platform capable of generating substantial cash flow across the cycle. In uncertain environments, preparation and discipline create opportunity. We believe we are well prepared for both the good and the bad. Just one thing, just to be very clear on.

As Emanuele pointed out, our newbuildings and disposal of older assets for renewal is being done in a very measured and conservative way. We will continue to ensure that

Emanuele A. Lauro: if and when we

Emanuele A. Lauro: order vessels, that we are generating more cash through operations and sale of older vessels than that would be total outlay of the vessel that we are buying. For those of you concerned about the high amount and building amount of cash on the balance sheet that we expect to continue to happen, you should not worry that we have absolutely zero acquisition thoughts of other companies or competitors or large fleets at all. And you are not going to wake up one day in the morning and find that we have made a 10-ship order.

This is a very disciplined approach, balancing the arbitrage of selling the older vessels at steep prices and ordering newer vessels when we see an advantage price to the arbitrage. And with that, I would like to pass it over to James. Thank you.

James Doyle: Thanks, Robert. If we could go to slide seven, please.

James Doyle: The past 12 months have brought no shortage of headlines.

James Doyle: And yet quietly the product tanker market has strengthened for five consecutive quarters. Today, spot rates for LR2s and MRs are approximately $46,000 and $38,000 per day, respectively, rates at which the company generates meaningful free cash flow. And the near-term setup is positive. With a lighter refinery maintenance schedule, refinery runs should increase, supporting continued growth in export volumes. For the first time in several years, the crude market is also providing tailwinds. Elevated crude rates are pulling product tankers into crude trades, tightening effective clean supply. When we step back, three structural forces are driving this market. First, demand remains strong and refining capacity has shifted farther away from end consumers. Second, effective supply growth is constrained.

The fleet is aging faster than it is being replaced. And in a capital-intensive industry, that matters. Third, sanctions and geopolitics are reinforcing both dynamics, reshaping trade flows and tightening supply. Taken together, these forces support a constructive outlook both near term and longer. Slide eight, please. Global refined product demand is expected to increase by nearly 1,000,000 barrels per day this year, and that growth is translating directly into seaborne exports. In January, seaborne refined product exports averaged 22,100,000 barrels per day, up roughly 1,000,000 barrels per day year over year. Not only have volumes increased, distances have increased as well. Slide nine, please.

Over the last five years, export-oriented refineries in the Middle East have added capacity, while closures in the U.S., Europe, and parts of Asia have removed it. When refining moves farther away from the consumer, products must travel farther. That increases ton-mile demand. This is not cyclical demand growth. This is structural. Since 2019, product tanker miles have increased roughly 20%. Slide 10, please. Aframax and LR2 demand in the Atlantic Basin has strengthened meaningfully, with volumes from the U.S. to Europe nearly doubling over the last year. That alone has tightened vessel availability across the region. At the same time, developments in Venezuela present additional upside.

Last year, Venezuelan crude exports averaged roughly 800,000 barrels per day, much of it directed towards China on sanctioned tonnage. Any redirection of those barrels toward the U.S. or increases in production would further increase loading activity in the Atlantic Basin. Importantly, this comes at a time when the Aframax/LR2 market is already operating from a position of strength. Slide 11, please. Today, approximately 54% of the LR2s are trading crude oil. Part of the increase is due to soaring crude rates and the other part is structural. The Aframax/LR2 crude market is roughly 14,000,000 barrels per day, compared to about 3,000,000 barrels per day for clean products. The crude market is simply much larger.

The decision to build LR2s instead of Aframaxes is structurally changing the fleet. By 2028, nearly half of the Aframax/LR2 fleet will be LR2s. Given that crude accounts for roughly 80% of cargo volumes in this segment, LR2 crossover into dirty trades will persist. Slide 12, please. Since the EU ban on diesel refined with Russian crude took effect in early January, European imports from Turkey and India have already declined 300,000 barrels per day. Russian refined product exports are still moving but are traveling farther to find buyers. Before the invasion, roughly 10% of Russian exports went to Africa, South America, the Middle East, and Turkey. Today, that figure exceeds 70%.

Russian crude has had a more difficult time finding buyers, especially with recent sanctions and retaliatory tariffs. Since July, Russian crude on water has increased from 121,000,000 barrels to 164,000,000 barrels in January. Much of the Russian trade has shifted towards older vessels. As you can see on the bottom right, nearly 50% of Russian crude and product exports now move on ships older than 19 years old, tonnage that is unlikely to reenter the mainstream market. Slide 13. Today, the product tanker orderbook is almost 19% of the existing fleet, which may seem high but context matters. As you can see on the left, 21% of the product tanker fleet is already over 20 years old.

By 2028, it will be 30%. Sanctions also further tighten effective supply. Roughly 26% of the Aframax/LR2 fleet and 9% of the MR/Handy fleet are sanctioned with an average age of 20 to 21 years old. In a normal market, much of this tonnage would have likely already exited. Slide 14. When you adjust for aging vessels, sanctioned capacity, and LR2 crossover, effective clean product supply growth is materially lower than the headline orderbook implies. We expect fleet growth to average roughly 3% over the next three years and potentially lower. Putting this together, demand remains strong and refinery shifts are structurally lengthening trade routes.

Supply growth is constrained, as the fleet ages at a faster rate than it is replaced. And sanctions and geopolitics are tightening both points one and two. In both the near term and long term, the market’s fundamentals remain supportive. With that, I would like to turn it over to Chris. Thank you, James. Good morning, good afternoon, everyone. Slide 16, please.

Emanuele A. Lauro: This past year, we generated

James Doyle: $568,000,000 in adjusted EBITDA,

Christopher Avella: and $344,000,000 in net income on an IFRS basis. We have also made $450,000,000 in debt repayments this year, culminating with the fourth quarter prepayment of $154,600,000 of secured debt across four different credit facilities. This prepaid all of the scheduled principal amortization on our existing bank debt for 2026 and 2027. The principal and interest savings resulting from this prepayment have further reduced 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. We also entered into contracts to sell 10 vessels at substantial gains and exited our position in DHT.

The cash gain on our investment in DHT was almost $30,000,000, or a 24% return on investment when factoring in dividends received. The chart on the right shows the progression of our net debt since 12/31/2021, which declined $3,000,000,000 to a net cash position of $124,000,000 by the 2025. As of today, the net cash position is $308,000,000, and we are still pending the closing of the sales of two LR2 vessels for $109,800,000 in aggregate. As Emanuele emphasized, achieving this milestone has given us the confidence to raise our quarterly dividend to $0.45 per share. Slide 17, please. The chart on the left breaks down our outstanding debt by type.

Starting at the bottom is our last remaining lease financing obligation on one vessel with Ocean Yield.

This obligation: This obligation

Christopher Avella: is expected to be repaid before the end of this month, thereby leaving us with a debt stack consisting of secured bank debt with the lending group dominated by experienced European shipping lenders and our $200,000,000 five-year senior unsecured notes, which were issued in the Nordic bond market in January 2025. They are currently trading at around 103% of par. Further to this, $240,000,000 of our $428,000,000 of secured borrowings is drawn revolving debt, an important tool that we can use if we want to repay the debt but maintain access to the liquidity in the future. The chart on the right is our debt repayment profile.

With the exception of the final settlement of our last remaining lease obligation, we have no principal repayment obligations on our existing debt until 2028. Slide 18, please. As of today, we have $937,000,000 in cash, and an additional $767,000,000 in availability under revolving credit facilities, for a total of $1,700,000,000 in available liquidity. Since November, we have signed contracts to purchase 10 newbuilding vessels. The charts on the right reflect our forward payment obligations on these contracts, along with our estimated dry dock schedule through 2027. Note that the timing of the installment payments on our newbuilding vessels and timing of our dry docks are estimates only and subject to change.

Our capital allocation decisions over the past three years have afforded us the financial flexibility to meet the obligations under our newbuilding contracts, which total slightly over $700,000,000. Hypothetically speaking, we could pay for all of these vessels today in cash without incurring any new debt. But nevertheless, 70% of these installment payments are not due until the years 2027, 2028, and 2029. With a cash breakeven rate of $11,000 per day, we are in a position to continue to build cash over the construction period.

Moreover, the age and specifications of these vessels make them attractive financing candidates, which has the potential to open up opportunities for us to further optimize our capital structure and lower our cost of capital. On top of this, our forward dry dock schedule is light, having undergone the special surveys on over 70% of our fleet in the past two years. Slide 19, please. Our cash breakeven rates are 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 global oil consumption was at lows not seen in decades. To illustrate our cash generation potential at these breakeven levels: at $20,000 per day, the company can generate up to $292,000,000 in cash flow per year; at $30,000 per day, the company can generate up to $617,000,000 in cash flow per year; and at $40,000 per day, the company can generate up to $942,000,000 in cash flow per year. This concludes our presentation for today.

Thank you, everyone, for your time and attention. And now I would like to turn the call over to Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star and one on your telephone. If 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, we will pause momentarily to assemble our roster. Our first question comes from Omar Nokta with Clarksons Platou Securities. Please go ahead. Thank you.

Omar Nokta: Hi, guys. Good morning. Good afternoon. Congratulations on officially reaching the net cash milestone.

Emanuele A. Lauro: I wanted to ask about the dividend. You have bumped it here

James Doyle: after having bumped it also last quarter. Understanding your is really to keep the payout sustainable through the cycles, you have got plenty of free cash flow in today's market. You have got a fortress balance sheet. How are you thinking about the dividend in the future? Is the aim to do a bump regularly as in maybe once every couple quarters or maybe revisit on an annual basis? Any color you are willing to share. Yes. Thank you very much, gentlemen.

Emanuele A. Lauro: So the dividend, first of the main premise is to see if we can—what we would like to do is to grow the dividend through the cycle, pay the dividend, you know, through the cycle. That is, you know, the actual momentum of that is dependent on a lot of things.

Christopher Avella: I think you have seen our

Emanuele A. Lauro: let us say, goodwill in the sense that, you know, immediately following the implementation of the increased dividend after the third quarter results, we immediately stepped up now. That is, as Emanuele pointed out, really a reward for all of us for the strength and finish of the fourth quarter. So apart from that, I would, you know, like to keep that on detailed. We will review everything regularly.

Operator: Alright.

Omar Nokta: That is fair, Robert. Thank you. And maybe just a follow-up. You know, you exercised the option on the LR2s. Wanted to ask about the VLCCs. Definitely been a lot of interest lately in that segment, whether it is from the equity markets, charters themselves, or owners placing orders. You sort of got ahead of it a bit last year with those two orders you put in. I think it was back in October, November. Wanted to ask how are you thinking about those right now and whether you have options that came with those that you could potentially add to your tally.

Emanuele A. Lauro: Sure. We had options. The VLCC market was, you know, as we all know, a very, very hot commodity. Those options were very short-lived. They were options that were valid only until December. At that time, in December, we were in the middle of the holidays, not complete. We did not have complete visibility of how we felt the cash flows were moving and in the market at the time, and we did not have strong visibility because of the holidays as well related to, you know, potential sale of our own assets, etcetera. So we felt on balance that we could pass, remain disciplined, especially as we had the LR2 options still, let us say, up our sleeve.

So those VLCC options have gone. They have expired.

Omar Nokta: That is the answer I am—okay. No. Thanks, Robert. That is very good. I will pass it back.

Emanuele A. Lauro: I think as a statement, I think that is, you know, that is a point of proof that we are not hell-bent on, you know, spending money because we have to, we feel any urge to do that or as fast as we can. We are, just as we pointed out at the beginning, going to do this in a very measured way.

Operator: Our next question comes from Greg Lewis with BTIG. Please go ahead.

Emanuele A. Lauro: Hey, thank you and good morning, good afternoon and thanks for taking my questions. Robert, a lot of cash, not going ask you about that. I did want to talk a little bit about

Christopher Avella: the crude market, though, as it relates to LR2s.

Emanuele A. Lauro: You know, Scorpio, since its founding, has been pretty—that the LR2s are going to primarily focus on the product side. You know, I guess it seems like the market is kind of merging as older crude AFRs are retired and some—you know, everyone is, if you are ordering an Aframax, you are going to coat it. Does that at all change how maybe Scorpio would think about its LR2 fleet, i.e., do we see a path, or could we see opportunities for STNG to potentially

Gregory Robert Lewis: bounce those LR2s back and forth between the crude market? Or should we just assume they are going to stay in the products?

Emanuele A. Lauro: Lars—yeah. Hi. Yeah. Hi, Greg. I think it is fair to say that the Scorpio approach in terms of LR2 clean or dirty switching has always remained opportunistic. I mean, we have a number of our ships in crude already. I think it is important that, considering the global approach that we have, is to remain disciplined on these things. So we do not just dirty up ships unless the economics clearly justify it on a sustained basis. There has been, you know, the recent dirty outperformance, particularly in the Atlantic Basin, which, of course, we follow.

We trade that element as well, and we can also see that the ability to kind of cross-trade has increased between the LR2s and the Aframaxes. The case in point is, I think there is about 515 LR2s trading globally in the world today, and you have only got 220-odd trading clean today, which is, you know, probably the lowest we have seen since 2020 or 2021. Now that can then give you kind of—do you go dirty or not dirty? It is always a tactical question. And we obviously follow all these markets. And if you normalize the periods, it has a little bit of a different picture than if you just look at one quarter.

But the short answer to your question really is that, of course, we look at it, and we trade it as well.

Gregory Robert Lewis: Okay. Great. Thank you for that. And then just as—oh, man. That is funny. I forgot what I was going to ask you. Just—oh, I feel like I ask you all the time. I feel like every time I talk to you, I talk about this. But I guess I will word it this way. You know, rates continue to be strong. The winter market looks like it has legs. Is there any kind of expectations—in December, you fixed a couple multiyear time charters. Has the appetite from customers increased for multiyear term? Are we seeing more opportunities over the last month or two?

Or is that something where, really, you know, just thinking about previous cycles or previous periods of time, you know, summer is coming. Does that have any impact on the opportunity for term charters to pick up, i.e., if this strength in market continues, I imagine customers will be more amped to fix multiyear deals because they know next winter is already around the corner.

Emanuele A. Lauro: I will take that as well. I mean, we are certainly seeing improving time charter rates. The liquidity in time charters overall is improving as well. It is very strong. There is depth in it, and particularly on the LR2/Aframax market. We see also markets increasing on MRs. But there is for sure an increased demand for longer-term periods. So, you know, it is for sure that the momentum is there for multiyear charter rates. And it is very interesting at the moment with that demand.

Gregory Robert Lewis: Super helpful. Thank you very much.

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

Tim Chang: Hi. This is Tim Chang on for Ken Hoexter.

Gregory Robert Lewis: Thank you for taking my question.

Christopher Avella: Lot of momentum for STNG and net cash. Congrats, guys, with

Tim Chang: breakevens coming down, raising a dividend. But perhaps a question for Lars, how do you see rates progressing over the next few months or 40–60 days? Been a very firm start to the year. Do you perhaps see counter-seasonal increases continuing into 2Q pushing you further over level booked to date, with all the tailwinds from ton-mile demand, some of the geopolitical uncertainty, and just your view there would be great. Thanks.

Emanuele A. Lauro: Yeah. I think—yeah. I mean—so—

Operator: Go ahead. I was just going to start off, Lars, just saying since that is in—look.

Cameron Mackey: I think you very well summarized all of the factors that are almost certainly going to lead to a relatively strong second quarter. Lars, would you like to add on to that?

Emanuele A. Lauro: Yeah. Absolutely. I mean, you know, first of all, the clean market, if we look at that first, is operating with very little slack at the moment. So, you know, you could say, well, you have got some headlines on geopolitical stuff, you have got headlines around miles, you have headlines around all these things. But structurally, I think we have got a very positive product market in front of us. You have got some things around some turnarounds taking place, but, you know, that has already started in the Atlantic Basin and so on.

And still, you have got a lot of product moving, and you have got open arms from the West to the East, perpetually on the light ends. You have got the ton miles we talked about. So it is not just a cyclical spike in my view. I think we have got a refining system that is operating at a very high level, and we can see that in terms of the structural support that lends itself to LRs and to MRs in multiple regions. So, you know, you have had very strong Asian markets.

You have had, of course, the Atlantic Basin, and that has been highly reported widely in terms of—we have seen multiyear highs in TC14, etcetera, over the last couple weeks. So, you know, today, it is not really about short-term spikes in my view. I think we are seeing a kind of a longer wavelength coming in. And the market, for sure, has proven itself a lot more resilient than probably one initially had anticipated as we moved into 2026.

Tim Chang: Got it. That is very helpful. And just another quick follow-up and then I will pass it on. But more of an opportunity longer term nevertheless, seeing any incremental uplift yet in Aframax/LR2 demand from Venezuelan exports? I know you have spoken in the past with some just kind of illustrative numbers, like an additional billion barrels per day equating to roughly 23 incremental vessels. Any update there would be great.

Emanuele A. Lauro: I mean, you know, I think it is—that is why—yeah. Yeah. Why do you not go forward? Then I can follow up afterwards. Yeah.

Tim Chang: Yep.

James Doyle: Tim, yeah. As you highlight, that is the math. I think so far we have seen about 300,000 barrels a day go to the U.S. The U.S. Gulf refining system is well designed for Venezuelan crude. We have the coking capacity that can turn this heavy stuff into distillate, which is good for margins and for exports. It is unclear whether all of this volume will go to the U.S. and how long production will take to increase in Venezuela. It varies, but I would say on the margin, it is very positive. Lars?

Emanuele A. Lauro: That is exactly what I would say as well. I mean, at the margins, it is going to be very positive with the ships that would not have need to move that are not in the sanctioned fleet.

Tim Chang: Appreciate it. Thanks, guys.

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

Christopher Avella: Just as a follow-up on the topic of Venezuela. We have talked a bit about exports here, but what is the view around naphtha imports in terms of it being a diluent for the crude? Is that market picking up? Kind of how does that look right now with increased use of the mainstream fleet? And what did it look like beforehand in terms of those deliveries into the country? Was that on sanctioned vessels? Or what is the dynamic there now?

Lars Dencker Nielsen: To be honest,

Emanuele A. Lauro: I think, at the margin, it is not the thing that really is going to change the Atlantic Basin product market on MRs in particular. Of course, it is the way that you would normally transport your naphtha into Venezuela. I think there are other things in the Atlantic Basin that have a lot greater kind of impact in terms of why the market is also strong. It just adds to the fire in the sense that it is just an additional positive.

Christopher Avella: Got it. Okay. Thank you, Lars. Turning towards just global inventory levels at the moment on the product side. James, I think you have talked about this in the past. Any update around are inventories kind of remaining low and flat? Are they starting to pick up here and grow in OECD? What is the current status there?

Lars Dencker Nielsen: Sure.

James Doyle: Thanks, Chris. Look, you always have a buildup of inventories ahead of maintenance. So we have seen that. And the most up-to-date numbers we have are the U.S. It is still below the five-year average. It has been declining the last few weeks. You know, we have had cold weather, more heating oil demand. And maintenance in the U.S. Gulf is just picking up. So we expect inventories to come in. OECD looks to be relatively in line. So I think from a product perspective, we have not seen huge builds, which is great as you go into maintenance. So things are going to be tight. And so I think that is constructive.

And then on the crude side, we were anticipating kind of large builds in the overall market that have not happened. A lot of that is due to a lot of the crude on water that has built up is really sanctioned. And if you recall, there have been these forecasts of up to 4,000,000 barrels crude oversupply. We have not seen that yet. There have been disruptions in Kazakhstan, but overall, we think that the crude oversupply is going to be less than anticipated. And I think that is very constructive because it speaks to how strong demand is in the global system.

Operator: The next question comes from Liam Burke with Rinne Securities. Please go ahead.

Christopher Avella: Yes. Thank you. One of the macro lifts in the product tanker

Liam Dalton Burke: side has been the redistribution of global refinery capacity. And it has been a multiyear lift. Do you anticipate that continuing? Or is that sort of bottomed out now?

James Doyle: Thanks, Liam. Well, look. We anticipate it to continue in the sense that about 300,000 barrels that are closing, or part of that has closed, in the West Coast United States, for example, a Valero refinery and Phillips 66 refinery. And as those refineries wind down in the next few months, it is 300,000 barrels, for example, that the California market needs. And if you speak to those oil and refining companies, they have highlighted they are going to import it from foreign markets. So in many ways, we have not seen the benefit of those flows largely coming from Asia. We still think there is going to be more closures in developed markets as well, replacing that lost production.

So this is going to continue to go on for the foreseeable future. And then at the same time, as you kind of highlight with the question, emerging markets are not building much refining capacity. It takes a minimum of five, but probably seven years to build a refinery. And that has not started yet. So I think going forward, that is very constructive from a ton-mile demand perspective for us as well.

Liam Dalton Burke: Great. Thanks, James. And on the fleet management, you have had a lot of activity in 2025, both on newbuilds, divestitures. You have got a billion-dollar liquidity position. Is there any—and rates seem to be in a good place here. Is there any additional tweaking you need to do with the fleet or you are happy with the assets in place? And your newbuild and your liquidity.

Tim Chang: We will

Cameron Mackey: we are at present engaged in the secondhand market, and you should fully expect that we would, you know,

Gregory Robert Lewis: sell

Cameron Mackey: asset singular or plural over, you know, a reasonably short time. And, you know, that sale and purchase market is super strong. I mean, perhaps, Emanuele, you might like to talk a little bit about that.

Gregory Robert Lewis: Sure. We—

Emanuele A. Lauro: as you said, we continue to engage opportunistically on inbound inquiry on the existing fleet we have. And as we have done in 2025 and before that, we positively reply to inbound request and engage in potentially selling further assets opportunistically. We are not working at anything specifically on the buy side at present, but, you know, we do not exclude substituting and renewing in a conservative way as we have done in the past quarters, as you have seen. The S&P market is very hot. There is a lot of interest for tankers.

What has happened in the last six to eight weeks in the crude tanker space has definitely attracted a lot of interest into the LR2s, as well as trickled down to the smaller sized vessels up to MR, I would say. And, you know, this is proven by the fact that Lars has mentioned, I think, in his remarks earlier, there are about 220 LR2s trading clean today, which, you know, in order to see that little number of vessels trading in the clean markets, we have to go back at least five years, to 2021.

So this shows the level of interest in the hype that the crude market has, the long-awaited crude market momentum has captured in the last eight weeks and continues to do so. I mean, the level of interest is super high.

Liam Dalton Burke: Great. Thank you very much.

James Doyle: Sure.

Lars Dencker Nielsen: Our last question

Operator: comes from Christopher Robertson with Arctic Securities. Please go ahead.

Emanuele A. Lauro: Hey, guys. Good morning. Good afternoon. Thank you for taking my question. Just first with regards to Q1 bookings. Can you elaborate a bit more on how your LR2s is relating? Dirty versus clean. How would you think about bookings on open days here? I mean, there is a $40,000

Operator: difference now on

Tim Chang: LR2s and Afro. So how do we think about that spread?

Emanuele A. Lauro: Well, I think I will go back to what I said initially, that we look at these things opportunistically on an every single day. But to look at it in a very kind of

Lars Dencker Nielsen: short backdrop is probably not the right thing to do. I think when we look at these things, considering the size and the number of ships that we have, we have to look at how we want to deploy these things. And one of the things that we would like to see is that as many owners have moved into dirty, and we were talking about the number of clean ships back, I think constructively that volatility will be an opportunity that we would want to control and take advantage of. And when you say that there is a $40,000 difference, I think $40,000 difference is in a very kind of insular market on a particular week.

We do not see $40,000 being the case over time. So, you know, if we look at it on a more normalized period, I think that if you look over the quarter, it has been around maybe $10,000 a day, which does not necessarily justify large-scale switching quarter on quarter. So that outperformance that you referred to is probably something we should look at on a longer perspective. So I will just say that our approach is always opportunistic when it comes to this. But considering the ships that we have, the contracts that we have as well with some of our key clients, we have to remain disciplined in terms of the—

Lars Dencker Nielsen: So

Lars Dencker Nielsen: I guess the key point is we dirty out when it is clearly justified.

Cameron Mackey: Okay. Understand. I—

Emanuele A. Lauro: I am just on term rates with you now.

Tim Chang: VLCCs, modern VLCCs being on two or one year at

Emanuele A. Lauro: $90,000 a day. And it seems like LR2s are more or less flat, recent bonds. So—but if VLCC rates stay at $90,000, what would you say is a fair level that LR2 should be at? Do you see any upside potential here? If I may, and then Lars, please jump in. I think the LR2s have not—or Aframaxes for that matter—have not remained flat. I think that today, you can fix an Aframax/LR2 for one year in the high forties.

And there are the rates for three and five years and the demand for three- and five-year deals, which has come in strong and has been reconfirmed, which we have fixed a couple of ships for five years in Q4 last year. And today, those rates would be starting with a three for a five-year deal, or comfortably with a three for a five-year deal. So definitely, the interest is there, and the rates have increased for our classes of vessels as well.

Lars Dencker Nielsen: I will just add that, you know, the market on LR2/Aframax has kind of relatively outperformed VLCCs. It is taking a while for the VLCCs to come, so we are very happy to see that the VLCC market finally is coming into its own. And good for that, and it is going to be great for the overall market. So, you know, we are happy to see that, you know, we are firing on all cylinders now.

Liam Dalton Burke: Perfect. Thank you. That is it for me.

Cameron Mackey: Yeah. I would also—it is quite interesting if you did a cash-on-cash return valuation between either, you know, where the product stocks are valuing the vessels or even where the crude are valued, their return on equity at the moment is, you know, every bit as strong as the VLCCs. And if you—in physical side, and in terms of stock side, obviously, you know, the returns for the product tanker are higher as their stocks are selling at less of a premium to NAVs than the crude is.

Operator: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Mr. Lauro for any closing remarks.

Emanuele A. Lauro: Thank you very much, operator. No closing remarks other than thanking everybody for your time and attention today, and look forward to being in touch going forward. Thank you.

Operator: Ladies and gentlemen, the conference call has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.

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