Hafnia (HAFN) Q1 2026 Earnings Transcript

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DATE

Wednesday, May 27, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Mikael Opstun Skov
• Chief Financial Officer — Perry Van Echtelt
• Vice President of Commercial — San Vinda
• Head of Investor Relations — Thomas Anderson

TAKEAWAYS

• Net Profit -- $179.7 million, nearly triple Q1 2025, attributed to higher freight rates and increased trading disruptions.
• Fleet Renewal Commitments -- Contracted 8 new Medium Range (MR) tanker newbuilds and exercised 2 additional options with Hyundai Heavy Industries, with delivery from Q3 2028 to 2029, furthering the company’s fleet modernization strategy.
• Net Asset Value -- Approximately $4 billion, up from $3.5 billion at year-end, equating to $8.09 per share, lifted by valuation upticks across all segments and robust earnings.
• Dividend Declaration -- 80% payout ratio, resulting in $143.8 million or $0.2877 per share, reflecting an annualized yield of 14%; 17 consecutive quarterly dividends paid.
• Total Shareholder Return -- 12-month total return exceeded 100%, due to a mix of strong earnings, dividend payouts, and share price appreciation.
• Return on Equity (ROE) -- 29.5% annualized, marking a five-quarter high.
• Return on Invested Capital (ROIC) -- 22.7%, the strongest level in more than a year.
• Net Debt Position -- Reduced from $932 million to $797 million as a result of operational cash flow and vessel dispositions.
• Loan-to-Value (LTV) Ratio -- Lowered to 20.2% from 24.9% at year-end, driven by rising vessel valuations and divestments.
• Total Liquidity -- Stands at approximately $660 million, comprised of $146 million cash and $550 million in undrawn credit.
• Time Charter Equivalent (TCE) Income -- $282.5 million, rising from $218.8 million in Q1 2025; fleet-wide average TCE reached $30,327 per day.
• Forward Rate Coverage -- 73% of Q2 earning days booked at $46,600 per day; 39% of Q2-Q4 days locked in at $38,281 per day.
• Segment Strategy -- Announced wind-down of Handy and LR2 pool operations; complete exit from Handy segment planned as sales finalize, with majority of fleet to transition to time charter arrangements.
• CapEx Outlook -- Approximately $80 million scheduled for Q2 2026 newbuild progress payments, with heavier expenditures anticipated in 2028.
• Operational Efficiency -- 214 dry-dock off-hire days in Q1, a decrease versus prior periods, with fewer off-hire days expected in the second half of 2026.
• Fleet Profile -- Owned and chartered 118 vessels at quarter-end, average fleet age 9.6 years, plus operation of around 60 third-party vessels across 8 pools.
• Sustainability Targets -- 40% reduction in fleet carbon intensity by 2028 and “net zero emissions by 2050”; commitment to 40% women in office roles by 2030.
• AI Platform Deployment -- Rolled out enterprise AI integrating workflow analytics and automation, with initial results indicating faster decision cycles in commercial and finance operations.
• Market Environment -- 200 million barrel global inventory drawdown between February and April 2026; IEA projects cumulative deficit could reach 900 million barrels by September.
• U.S. Export Surge -- U.S. clean product exports increased 40% from February to May, partially offsetting Middle East supply declines.
• LR2 Migration -- 72 LR2 vessels shifted to dirty trading, cutting the clean LR2 fleet by 28% year-to-date.

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RISKS

• CEO Skov stated, "The outlook nevertheless remains highly uncertain and depends largely on the duration of the Hormuz disruption and the time required for oil production and global refinery operations to recover."
• The Middle East refinery outages persisted, with "Around 2 million barrels per day of Middle East on refining capacity is currently offline due to war-related infrastructure damage," and full restoration not expected until at least Q1 2027.
• Mikael Opstun Skov described unprecedented geopolitical disruptions as the "closure of the Strait of Hormuz has fundamentally reshaped global oil trade flows," presenting ongoing operational uncertainty.

SUMMARY

Hafnia Limited (NYSE:HAFN) reported transformational quarterly performance amid unparalleled geopolitical disruption, nearly tripling net profit as the closure of the Strait of Hormuz redrew shipping routes and tightened supply. Management confirmed execution of a pivotal fleet modernization by contracting 10 new MR newbuilds to both support long-term earnings and address structural fleet aging. Significant progress was also made on capital structure, with operational cash flows and strategic vessel sales lowering net debt and LTV while maintaining robust liquidity. The freight environment remains exceptional, as verified by strong spot and forward rates, covering a substantial portion of upcoming earning days and feeding a 14% annualized dividend yield. While the company continues to benefit from constrained supply and elevated ton miles, management emphasized that the ability to sustain current earnings will depend on the highly uncertain resolution of Middle East disruptions and refinery restarts.

• "Return on equity for Q1 reached 29.5% on an annualized basis," the highest recorded in the trailing five quarters, reinforcing shareholder value creation.
• Fleet repositioning included complete exit from the Handy segment, increased time charter coverage, and continued third-party pool operation, reflecting a recalibrated commercial strategy.
• The integration of AI-driven workflow tools yielded initial improvements in commercial and finance response times, with management guiding toward expanded adoption through 2027.
• CapEx for newbuilds is front-loaded in the near term but heavily weighted toward 2028, aligning with management’s anticipation of a tightened vessel supply environment toward decade-end.

INDUSTRY GLOSSARY

• MR (Medium Range): Oil product tankers with a deadweight between 40,000 and 55,000 tons, primarily transporting refined products.
• LR2: Large product tankers with a deadweight of approximately 80,000-120,000 tons, typically used for long-range trading of refined petroleum products.
• TCE (Time Charter Equivalent): Standardized shipping industry metric that reflects average daily revenue earned per vessel, accounting for voyage costs including fuel, port fees, and canal tolls.
• Ton mile: The transport of one ton of cargo over one nautical mile, a shipping industry gauge of demand and logistical intensity.
• Handy: Smaller product tanker segment, usually 27,000-37,000 deadweight tons, known for regional and specialty trades.

Full Conference Call Transcript

Mikael Opstun Skov: Thank you, and hello, everyone and thanks for joining Hafner's First Quarter 2026 Earnings Call. I'm Michael Skol, CEO of Haffner. With me today are our CFO, Perianaktelt, our VP of Commercial, SonWinter, and our Head of Investor Relations, Thomas Anderson. We released our first quarter 2026 results earlier today, and you can find them on our website. On today's call, we will cover our Q1 highlights the latest market developments, including the significant geopolitical disruptions that have shaped the quarter and then give an update on our financial position. We will also talk on our sustainability initiatives before concluding the presentation. Let's move to the next slide.

Before we proceed, I would like to go through our safe harbor statement. The information discussed on this call is based on information we have today, which may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented in this call should be construed as an offer to buy or sell securities. Next slide. We now move to Slide #4, and let's begin with a review of our results for the quarter. The first quarter was a transformative quarter for the tanker industry largely defined by geopolitical disruption without modern precedent. The closure of the Strait of Hormuz has fundamentally reshaped global oil trade flows during the quarter.

Against this backdrop, we delivered a net profit of $179.7 million, nearly 3x our first quarter 2025 result supported by higher freight rates, which tightened tanker supply and disruptions of trading routes around the world. On our forward coverage, 73% of Q2 earnings days has been covered at $46,600 per day, supporting our expectation of a stronger second quarter. On the fleet activity side, we continue to divest older vessels during the quarter as per our fleet renewal strategy in maintaining a low average age modern fleet. Importantly, we have also announced the signing of a contract for 8 new MR newbuilds with Hundai Heavy Industries, with delivery is expected between Q3 2028 and second quarter 2029.

Further to that, we recently exercised 2 additional options with the same yard for delivery in 2029. This is a meaningful step in our fleet renewal strategy, locking in modern, efficient tonnage at an attractive point in the cycle, continuing our focus on modernizing the fleet and reducing average fleet age as well as strengthening our long-term earnings capacity. Let's move to the next slide. Hafnia remains the global leader in product and chemical tankers. At the end of the quarter, we owned and chartered in 118 vessels with an average fleet age of 9.6 years.

Our net asset value at the end of this quarter has increased to approximately $4 billion, equivalent to $8.09 per share or about NOK 78.81. That's up from the $3.5 billion at the end of fourth quarter, driven by higher valuations across all segments and strong earnings. We continue to operate around 60 third-party vessels across 8 pools. While our c-scale energy bunkering joint venture with Cargill continues to progress steadily and even more so with recent geopolitical events. Looking ahead in 2026, we intend to wind down our Handy and LR2 pool operations.

As our handy vessels are sold, we expect to exit the Handy segment entirely, while the majority of our fleet will transition to employment under time charter arrangements. Let's move to the next slide. Turning to shareholder returns. We have now paid dividends for 17 consecutive quarters. Our net loan-to-value improved to 20.2% at the end of the first quarter, down from 24.9% at the end of 2025 and primarily driven by strong cash flow generation from both operations and vessel sales. In line with our transparent dividend policy, we are declaring an 80% payout ratio. That translates to a total cash dividend of $143.8 million or $ 0.2877 per share. This represents an annualized yield of 14%.

For shareholders receiving dividends in Norwegian kroner, the exchange rate will be based on the value date which is 2 business days before payment. Over the last 4 quarters, our cumulative dividends totaled $365.3 million or $0.79 per share. Our total shareholder return over the last 12 months now exceeds 100%, which is a result of strong earnings, consistent dividends and meaningful share price appreciation. San Vinda, our VP of Commercial, will now take you through the industry review and market outlook.

Unknown Executive: Thanks, Michael. The next slide, please. Let me set the scene for the market environment we are navigating. This quarter has been unlike anything we have seen in modern shipping history. So I want to walk through the key dynamics shaping the market. The headline numbers tell the story. Global observed inventories has drawn down roughly 200 million barrels between February and April 2026. The with OECD on land stocks punching 146 million barrels in April alone. The IEA A cumulative deficit is projected to reach approximately 900 million barrels by September, requiring roughly 1 million barrels per day of incremental supply over a 3-year period to fully be built.

On the fleet side, year-to-date, around 72 LR2 vessels have migrated into Aframax DD trading, reducing the clean LR2 fleet by about 28%. This has effectively absorbed the bulk of 2026 newbuild deliveries. Meanwhile, and since the closure of the homes trade, U.S. clean product exports have surged approximately 40% and from February to May, partly filling the supply gap left by the Middle East disruption. The market remains backed by fundamentals supporting continued market resilience. Most important drivers are elevated ton miles, structural fleet tightness and a multi-quarter inventory rebuild ahead. Let me take you through the deeper detail. Next slide, please. Starting with global oil demand.

In the face of global oil shortages, government and companies are working to constrain the crisis by implementing demand-saving measures. As a result, the IEA is now projecting the first annual decline in global oil demand since 2020, with the sharpest dip coming in Q2 2026. However, projections for demand are to recover towards the year-end to approximately 106 million barrels per day, averaging around 104 million barrels per day for the full year. On the inventory levels, as mentioned, the IEA's cumulative drawdown could reach 900 million barrels by September 2026, which includes the 400 million barrels of coordinated SPR stock releases, of which only 164 million barrels have been released as of May 8. Next slide, please.

Importantly, the inventory drawdown is uneven across regions withdraws heavily focused in the East. The U.S. and China inventories remain balanced as the U.S. is supported by strong refinery runs for exports, while China adds to commercial stocks. The draws are concentrated in the Middle East, Asia and Europe. The Middle East is drawing heavily under direct Iranian impact, such as refinery damage and product diversion. The rest of Asia is growing as eastbound arbitrage flows pulled from regional stockpiles and Europe is growing as Atlantic supplies mobilized esports, tightening regional balance. Next slide, please. This slide puts the current situation into historical context and further shows the unique situation we are facing.

And you can observe historically, oil supply deficits have coincided with weaker freight rates due to lower cargo volumes. However, current conditions break that pattern. We have recorded supply deficits occurring alongside VLCC earnings near cycle highs. We see 2 possible outcomes, either freight rates correct sharply or supply rebound strongly to validate current freight levels. We expect the latter to happen. Supply recovery and continued freight resilience into 2027, supported by the Middle East refinery normalization, demand recovery and structural tanker market tightness from LR2 migration and sanctioned fleet attrition. The next slide, please. Apart from the closure of the home of trade, another key factor behind the market disruption is the extensive damage to regional refinery capacity.

Around 2 million barrels per day of Middle East on refining capacity is currently offline due to war-related infrastructure damage. This includes major facilities like Cato and Jubail, BAPCO in Citra and ADNOC. While Eastern refiners have indicated that even without further hostilities, full capacity won't return before Q1 2027. While consensus expect shipping to weaken post conflict, we see continued strength if demand rebounds as forecasted. With ongoing refinery disruptions supporting elevated product flows and ton mile demand into late 2026. The next slide, please. Looking at daily loadings. Global clean petroleum product departures are down approximately 15% heavily concentrated in the East of Suez, driven by the homes disruption and export restrictions and Far Eastern hubs.

This has partly been offset by a search investor exports, mainly from the U.S., but not enough to fully replace the lost Eastern volumes. On the dirt side, we see a similar pattern. Global dirty petroleum product departures are down about 17%, mainly due to the collapse in Arabian Gulf crude exports. And the next slide, please. We typically observed to mile data as a proxy for product tanker demand. However, reliable data is delayed due to prolonged voyage links. Instead, products on water serve as the most reliable proxy for transportation demand. It's important to note that while clean vetoleum product loadings are down by roughly 15%, floating cargo volume are only down about 6%.

This tells us that the actual impact on global transportation demand is milder than the headline figures suggest, meaning that vessels are spending more time on the water, effectively absorbing tonnage supply. Next slide, please. On ton miles, the reported data shows a decline of about 10% from February to April. But as mentioned, this may not paint the most accurate picture as it's distorted by data lag and ongoing voyages not yet fully captured. Once in transit, latent voyages are reflected, and we expect the gap to narrow. What is much more telling is the ballast voyage links hitting record highs of approximately 1,900 nautical miles in April.

This means vessels are sailing further to secure their next cargo a clear sign of repositioning inefficiency that support a tighter supply-demand balance. And the next slide, please. Turning to key exporting regions. China's anticipated 2026 export quota of 332 million barrels has had a remaining balance of about 1 million barrels per day through an year representing sustained refinery export capacity. U.S. export volumes increased roughly 40% from February to May, stepping in to fill the left gap by disrupted Eastern supply. Although elevated prices have since narrowed arbitrage spreads, export flows remain resilient and continue to sustain ton mile demand. Russian clean product exports remain constrained by ongoing refinery disruptions from Ukrainian drone strikes.

And the next slide, please. In the Arabian Gulf, exports have been partially offset by increased loadings via the reds, particularly proband supported by a greater utilization of the Saudi Gulf to Red Sea pipeline. However, this remains only a partial offset overall regional export capacity is still materially below historical levels. Clean petroleum product exports from the Red Sea remain resilient. And on to the next slide. Turning to Tanker Supply. Over the past years, the Taker Markets has faced 5 major shocks. COVID-19, the Russia-Ukraine war the Panama dot, the HuitiRedsea disruption and now the Hormuz blockade. Each chug has rerouted trade flows and added ton miles, while replacement capacity has consistently lagged.

The fleet aids 20 years and above has grown from 48 million deadweight tons in 2020 to 187 million deadweight today with DKK 251 million projected by 2028. The scrap potential, sanctions and operational restrictions on this expanding age cohort for a durable supply anchor through the end of the decade. And the next slide, please. The LR2 to Aframax migration continues to be 1 of the most important structural shifts in our markets. Global clean LR2 availability is now down approximately 28% year-to-date, with 72 vessels having migrated to dirty trading. This has effectively absorbed both 2026 newbuild deliveries and part of the existing clean trading tonnage. A reversal is unlikely while Aframax economics remain this strong.

This migration is materially tightening clean tanker supply and reinforcing the overall tonnage constraint. Next slide, please. On the order book and square landscape, the known newbuild program through 2029 for handy to LR2 consists of approximately 54 million deadweight tons with LR2s accounting for a large proportion. Against that, potential scrapping of older vessels and sanction tonnage totaled 79 million deadweight tonnes over 2026 to 2029. Here, we assume that the sanctioned fleet above 20 years is unlikely to reenter mainstream trading. Despite available yard slots for 2029 and 2030, any new order would arrive late in the cycle, structurally capping the net fleet growth. And on to the next slide.

When preparing this material, the home was trade remained closed and leaving 124 laden and 33 ballast tankers carrying approximately 96 million barrels worth of dirty petroleum products and 18 million barrels worth of clean petroleum products trapped within the region. Stranded tonnage is materially tighten global supply conditions and underscore the constrained state of the market. Moving on to the last slide. In summary, while the timing and trajectory of geopolitical developments in the Middle East remain difficult to predict, we remain constructive on the strength of the underlying market fundamentals.

As countries continue to draw down on inventories, the eventual reopening of the home was trade and recovery in Eastern refinery operations could trigger a meaningful multi-quarter inventory rebuilding cycle, providing strong underlying support for the tanker demand and resilient freight rates. I'm now handing over to Perry, our CFO, who will bring you through our financial developments.

Perry Van Echtelt: Thanks, Karen. Next slide, please. Q1 2026 was our strongest quarter since the end TCE income reached $282.5 million, up from $218.8 million in the first quarter of '25. Adjusted EBITDA came in at $198.6 million compared to $125.1 million again for Q1 2025. Fee-based business contributed $7.1 million and we've also earned $9.9 million in dividend income from our investment in Tor. Therefore, net profit was $179.7 million, nearly triple Q1 2025, and this quarter also included $32.5 million in gains on the vessels that we sold in the quarter. . Return on equity for Q1 reached 29.5% on an annualized basis.

And return on invested capital was 22.7%, both the highest levels we've recorded in the trailing 5 quarters. If we move to the balance sheet on the next page. Our net debt decreased from $932 million to $797 million driven by strong operational cash flow and the vessel sales, the proceeds from those vessel sales. Our net LTV ratio improved meaningfully from 24.9% at the end of last Q4 to 20.2% as vessel valuations continue to rise. Cash flow was steady, and we received proceeds from these vessel sales. We continue to maintain a strong liquidity profile with total liquidity standing at approximately $660 million, comprising of $146 million in cash and $550 million in undrawn credit facilities.

With our newbuild program consisting of 10 MRs, the chart on the bottom right reflects our expected CapEx commitments for these newbuilds. We expect to incur approximately $80 million in Q2 2026 on progress payments and most of the CapEx of the remaining CapEx is concentrated in 2028. We then move to the operating summary on the next page. The first quarter TCE rates showed significant improvement across most segments. Our fleet-wide average TCE reached $30,327 per day, while our average spot rates were $31,543 per day. The dry docking side, Q1 had 214 off-hire days, significantly less than those that we had experienced in 2025 overall.

And we still expect some dry docking in 2026, but the number of off-hire days will decrease meaningfully in the second half of this year. The strength of the current market is clearly visible in our forward coverage -- as you can see from the graph, our covered rates for Q2 are significant improvements from the previous quarters, supporting our expectation that Q2 will be significantly stronger than Q1. Then with that, let's move to the next slide. So as of May 13, we have secured 73% of Q2 earning days at an average rate of 46,600 per day. For Q2 through Q4 2026, we have 39% of earning days covered at $38,281 per day.

These rates are well above our operational cash flow breakeven and reflect the extraordinary rate environment that we're in. Based on these coverage levels, looking at the current earnings scenarios, as you can see on this page, for full year 2026, the range from $700 million to $1 billion in net income, depending on the scenario. Michael, over to you for the next slides.

Mikael Opstun Skov: Thank you for that. Move on to the next slide. Let me now turn to Hafner's sustainability strategy and targets. As a global leader in the product tanker segment, we take our role in shaping the maritime ecosystem seriously. We maintained the highest operational and environmental standards and are committed to making a positive impact. Our targets remain unchanged, a 40% reduction in fleet carbon intensity by 2028, and net sales growth on missions by 2050 and CeroHarm across our operations. We continue to invest in our people with a target of 40% women in our offices by 2030. Next slide, please. Here, we showcased some of our strategic initiatives.

On complex So, we have recently commenced the deployment of an enterprise AI platform that integrates conversational AI, workflow analytics, and automation to transform operational data into faster and more informed decision-making. Initial applications are very encouraging, having already improved response time across commercial and finance workflows. We believe the platform has significant potential to scale across Hafnia as adoption accelerates to 2026 and 2027. Next slide. Looking ahead, we remain encouraged by the fundamentals of the product tanker market. While periods of disruption and volatility often translate into stronger earnings for tanker companies, it is important that we do not lose sight of the human impact of these events.

At the end of the quarter, nearly 200 tankers and thousands of sea fares remain unable to transit the straight. The safety and well-being of our own crews as well as those across the industry remain our foremost priority. The outlook nevertheless remains highly uncertain and depends largely on the duration of the Hormuz disruption and the time required for oil production and global refinery operations to recover. Despite this backdrop, I remain highly confident in Hafner's commercial expertise and operational agility to respond to evolving market dynamics and capture opportunities as they arise. With that, our presentation concludes. I'd now like to open the call for questions.

Operator: [Operator Instructions] I see Friday, you have your hand up. Can I ask you to unmet yourself, please?

Unknown Analyst: My first question is to Michael, I guess, on the 10 MR newbuilds, I think this is the first time we've made a major newbuild investments. I can't recall at least 1 in a few years. So I guess in the prior discussions, we discussed newbuild investments. And in the past, of course, it was more about uncertainty about future fuels, long lead times at the yards. So the question is really about what's changed now? And what makes you feel this is the right time to take an order for new builds.

Mikael Opstun Skov: Thank you for that, Pat. And yes, it is true that we have previously said that we wanted to wait for more opportune timing when it came to new builds. But I think our conclusion on this has been that we've sold quite a lot of secondhand ships, older vessels. We sold them at very strong prices, which basically reflect the depreciated value of a new build today. So in other words, we have been selling older tonnage, and now we are taking on these 10 MR newbuilds. So we see this as kind of to say normal modernization of the fleet.

And the other issue that we've kind of noticed is that the shipyards order book seems to be full very, very far ahead. 29 is almost full. So we're looking at 2030. So we also wanted to make sure we didn't get caught up in a situation where your fleet gets older and older and older every year, and you still have 3 or 4 years until you can get a new ship. So it's really a combination of those. I mean, we would have loved to see prices being lower. But I think what justifies it, as I said, is that we sold a lot more of older vessels before we order the new ones at similar price levels.

Unknown Analyst: Yes. makes total sense, and this shouldn't affect the dividends, right, anyway. So yes, no course of actions. The second question I had is on the -- you mentioned that you're winding down the handy and moving some of the LR2s into time charter. Maybe you could elaborate about that. Is that about scale or risk reduction? Or what's the reason behind that.

Mikael Opstun Skov: Thank you for that. Well, the reason really when it comes to the hands is that -- we've seen a market that over the years actually have been shrinking rather than growing. That goes both from the demand side for handies but also on the supply side of vessels. We had a tremendous proposal for selling the handy ships that we had and the pricing was extremely interesting. I mean, we basically got the same price of the vessels as we bought them for is new builds back in 2015. And they were making a lot of money in between. So that was like a constant decision that made sense because of the price of the assets.

And then by selling that, we basically were coming down to a small amount that we decided to dissolve the pool because the whole idea of the pool is to have scale and to utilize scale to optimize on your earnings, that wasn't the case anymore. So it's a segment that's been shrinking, hence, again, why we also sold out of it. On the LR2 side, it's really a function of that Haftar doesn't have that many other 2 ships. And we decided to charter out a few of those. And because, again, we charted them out. It suddenly became a different scenario.

It didn't make any sense to have a pool when you don't have any vessels yourself in the spot market. So the fuel at we have become more of a hedging sector for us, and that's why we put them out on time charter. That, of course, contains in the future, but that's kind of the reason for the alerts and the fact that we were winding down the pool as well.

Operator: Thank you for here. May I ask you to meet yourself?

Unknown Analyst: Maybe sticking with the charter coverage. As you say, Handys and LR2 is a bit smaller part of your fleet. But when I look at your charter coverage on Slide 23, has it been a very significant increase compared to your Q4 report. So I'm just wondering what you're hearing from charters. Obviously, spot rates are very compelling at the moment. But just curious for your thoughts there.

Perry Van Echtelt: Well, you can say we have actually increased our coverage to some extent, you are sitting somewhere between 25% and 30% coverage for half year now. And well, yes, spot charter rates are compelling. But this is -- for us, is a hedge against geopolitical unrest really and a future that is very hard to predict or at least to set a timing on my [indiscernible

Unknown Analyst: Got it. And then zooming out a bit -- you mentioned migration of LR2s into the dirty trade. Do you see this state of Hermos putting pressure on LR2s to clean up or perhaps trade dirty on the 1 hand I'm thinking you have increased competition from larger tankers for some Atlantic routes, right? And then on the other, there's less export-oriented refining capacity, which you called out in the presentation.

Perry Van Echtelt: I think primarily the driver for the switch over has been the super strong Aframax market on a general note in the Western Hemisphere. You could say, combined -- that combined with the almost closure for now, meant that you have to balance very long on your alien to pick up next cargo where the natural home for Aframax is pretty much tested to us. So that has probably driven a large part of it. But I think, first and foremost, the aging part of the 2 Aframax combination segment is the Aframaxes getting owned. And I don't know if you saw -- I can't remember the slide number.

But looking at sanction tonnage and aging Aframax fleet, it looks like we will be able to build somewhere around 140 and 150 additional LR2s before you sort of catch up to the aging of the same segment. So in combination, to all seem natural that you will have Ms. Tan for that the LR1 segment go from 250 early '25 to 230 late '25 and now down to I think the last time we have is 179 clean trading LR2, which is a significant dent the deadweight available on the clean product segments that is probably market disruption and the scenarios that we are in now in a reopening of almost will that change things?

Well, to the extent that clean frame supersedes Aframax trade, then you are likely to see ships at least opportunistic trainers shutting back into team. The only caveat to that is that at the same time, right, it will take 1 or 2 quarters to do that meaningful.

Operator: I don't actually see any more raised hands. So I am going to move into a question in the chat that we have from Fausto regarding S&P. So the company has been doing a great job on the fleet renewal front. Should we expect divestitures to continue in the coming months? What is management's view of the current S&P markets. Recently, the company has expanded the fleet with new builds. Could management comment on the reasons for favoring new builds over secondhand tonnage. Does management currently see new builds as more attractive? Or are there a few opportunities in the secondhand market?

Mikael Opstun Skov: Yes. Thank you for that question. Well, I think the fleet renewal strategy that we have is kind of an ongoing thing. So we still have a couple of vessels in our fleet that at the right price, we'd consider to divest but we have done most of the cleanup, I would say, of the older tonne it has been done already. So we're kind of getting close to a point where what we have left is what we would like to have left. . The newbuild versus secondhand, yes, I mean, I think there's 2 things in it.

One is that we do believe that the secondhand vessels here and now are very highly priced for obvious reasons because you have a very strong spot market. We're not convinced maybe that, that is the right time to pay up for modern ships here and on the water with all the uncertainty. So the fleet renewal and the new build is first also about a new generation of vessels. So the vessels that we get in '29 is a new design, which will have a lot more fuel savings than the older designs.

So it's also kind of a way of making sure that we continue to be on the trajectory of having modern ships with less fuel consumption and less emissions. On top of that, they deliver in 2029. And if you look at the slide of the 2 slides that we have in the presentation, you can see how the aging fleet is coming under severe price already now. The current order book is nowhere near to cover the vessels that have to be scrapped within the next 4 to 5 years. So we're kind of also feeling that the timing of getting something in '29 could actually be at a time where there is a massive shortfall again of tonnage.

So that's another thing that we have kind of taken in or factored in when we made that decision.

Operator: Okay. Thank you, Michael, for that. And thank you, Faster for the question. I don't actually see any more questions in the chat, all the Q&A and I don't see any more raised hands. So which then means that we have come to the end of today's presentation. Thank you so much for attending apneas First Quarter 2020 financial results conference call. You can find more information available online at www.afnia.com. See you next time.

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